Harbingers

BIKER modified

Harbingers. Things that hint of what’s to come. Like the first robin. Or, in this case, the first Re/Max agent turning in the keys to his Audi A7.

Mull the following, and tell me where we’re headed:

  • One in five people owning houses in Toronto will be up the creek if mortgage rates rise by just 2%. In other words, TD economists say people are poorer than they think. They might live in houses that have doubled in value thanks to societal house lust and dirt-cheap loans, but they’ve also taken on so much debt that even a modest rate hike would whack them. The average GTA family has about $410,000 in debt. The bank also figures all those downtown one-bedder concrete boxes won’t be easy sells when the current population of hipsters outgrows them. Half of them say they plan to move in five years. But who will buy?
  • By the way, Scotiabank economists have recently poured into the Je Suis Greater Fool compound to lend their support to a controversial call this pathetic blog recently made, riling house-horny terrorists. The US central bank, they confirm, will in fact start raising interest rates by the middle of 2015. In other words, if you think bond yields are going to stay put, well, good luck.
  • Also of interest: the average first-time homebuyer in the GTA is now 37 years old, mostly because real estate has drifted beyond the means of the normal person. This tromps on the romantic notion that most of these newbies are dewey young kids. I’m starting to think some may not even be virgins.
  • Cowtown Death Watch: Well, the numbers so far this month has been relentlessly consistent. So much for the local realtors who came here to rip me a new one for telling you in early January that things looked dire. So far this month overall sales are down a rattling 37%, while listings have now swollen 64% from the same month last year. The average price is down just under 2%, but it’s a fair assumption there’s worse to come.
  • So, is our house fetish likely to bite Boomer bottom in the years ahead? A new survey by HSBC suggests exactly that. The global banker polled 16,000 people in various countries and found only 24% of Canadians saved – anything – for their retirements last year. In the rest of the world, 40% of people managed to salt something away. Why? Pfft. You know. The majority of Canadians surveyed (52%) said they were too pickled in mortgage debt.
  • That TD report I mentioned also highlights the fact Toronto tenants, on average, are paying monthly rents equivalent to 50% of their paycheques – vastly more than is considered reasonable or sustainable, which shows you being downtown-hip ain’t cheap. Realtors love feasting on their folks, telling them they might as well use 95% or 100% leverage to buy the same soul-sucking 700-foot box they currently lease.
  • Why on earth would they do so, then face condo fees, property taxes and immobility? Here’s why, from an angst-drenched Millennial blog: “The heart of the matter is that if you’re only paying half your income on housing, the landlord hasn’t left you without heat for weeks at a time, and you don’t have bed bugs, congratulations, you’re doing okay in Toronto. For now. Do you dedicate 50% of your working life to funneling money into the pockets of someone who will one day callously serve you an eviction notice claiming their grand niece is taking over the lease in two months?” To solve that, they swallow $400,000 in debt.
  • And consider Canada’s top two real estate markets’ recent performance. In the GTA’s heartland of 416 the average detached house price dipped 4.2% from this time last year (over the whole region that average loss was 3.4%). And in Montreal the appreciation of the average single-family home was a big zero. Meanwhile in Calgary, well, the death watch continues. Do we now have a one-city housing bubble? What kind of harbinger is that?
  • Most poignant of all: the Globe ran a personal finance sob story two days ago about a Van couple (one a doctor) making $450,000, who bought a $1.1 million building lot (with a mortgage of $800,000) and now can’t afford the million needed to build (maybe because they have five screamers and a nanny). Praise be to Allah that her parents will borrow $1 million against the Vancouver house to give the kids the dough to proceed. And so will rise a $2 million house, with a foundation of $1.8 million in debt. We are so screwed.

237 comments ↓

#1 Derek R on 01.19.15 at 7:42 pm

If you’re paying 50% of your income in rent, it’s time rent somewhere else. The Maritimes possibly.

#2 DickVANdyke on 01.19.15 at 7:44 pm

C’mon Garth where is the shocking news/numbers out of vancouver ? I’ve been waiting 10 years are they ever going to come?

#3 vb on 01.19.15 at 7:46 pm

Bring it on ! It’s going to get exciting for those in massive debt for sure.

#4 Sponge Rob on 01.19.15 at 7:47 pm

Scotiabank economists…those silly guys. They have been saying the same thing for 4 years. They have been wrong 4 times. They are wrong again. Guess what? They will be wrong next year too. Do they even look at the bond market?

#5 rk usa on 01.19.15 at 7:48 pm

re: Realtors love feasting on their folks, telling them they might as well use 95% or 100% leverage to buy the same soul-sucking 700-foot box they currently lease.

you are too generous

more like 500 to 550 square feet

#6 villagemoron on 01.19.15 at 7:48 pm

http://www.moneysense.ca/must-read/more-canadians-living-paycheque-to-paycheque

#7 Mike on 01.19.15 at 7:48 pm

That doctor story is unbelievable.
Doctor’s suck at anything financial in general.

#8 Adam on 01.19.15 at 7:50 pm

You forgot to mention that the doctor only had $6,000 cash in the bank (as well as $150k or so in RRSPs).

#9 S. Bby on 01.19.15 at 7:51 pm

Was listening to some tripe on the radio last week while driving to work: “Parents to the Rescue” and somebody called in to say they had put a non-refundable deposit down on a townhouse and then after discovered their bank would not grant them a mortgage! So her good old mom stepped up to the plate and mortgaged her own house to get the mortgage money for the kids. Yikes.

#10 ILoveCharts on 01.19.15 at 7:51 pm

What do you all make of this?
http://www.cbc.ca/news/business/morgan-stanley-canada-has-1-in-3-chance-of-interest-rate-cut-in-2015-1.2912834

“A major U.S. investment bank says there’s little chance that the Bank of Canada hikes interest rates in the next two or three years, and says there’s a one in three chance of a rate cut by the end of the year.”

#11 Shawn Allen on 01.19.15 at 7:52 pm

Sounds like real estate investors and landlords in Toronto have done very well. Especially those who bought in some years ago at much cheaper prices.

#12 silverfan on 01.19.15 at 7:52 pm

Watch the CAD.. if you are getting a housing correction it could easily decline another 20 cents to the USD.. come to think of it who is the fool calling their national currency the Loonie.

#13 RunningWithScissors on 01.19.15 at 7:52 pm

The Globe has now corrected its story. Twice. It’s still just as absurd, however.

#14 North Burnaby on 01.19.15 at 7:53 pm

Interest rates will stay low, the Central Bank might even print more money this year… Our CDN$ is weak, so our real estate will be perceived as bargain by foreign investors. Gonna be a great year for YVR RE!

#15 John Doe doe on 01.19.15 at 7:54 pm

Hi Garth,
If you own a triplex in a good midtown neighborhood do I need to worry about high vacancies in the future?

#16 Forzudo on 01.19.15 at 7:55 pm

Will there be any further surprise regulation tightening coming from the People’s Republic?

Recent surprise announcements from Switzerland and China only add to the questions about US Federal Reserve and Bank of Canada rate policies.

#17 kommykim on 01.19.15 at 7:55 pm

That railing looks like a future GF graph of house prices.

#18 Bulls eye on 01.19.15 at 7:56 pm

And you have Jimbo in Alberta using scare tacktics to win votes. We’ve been throught downturns before. Painful. But we’re proud to have the lowest tax bracket in the country. Adding a new tax is the easy way out. Not my idea of a good leader.

#19 RentingInCowtown on 01.19.15 at 7:57 pm

So glad I have been reading this blog for the last year! I am currently a young professional renting in Cowtown and I must admit the future looks grim.

#20 Marco on 01.19.15 at 8:04 pm

Thanks Garth.

I’m really undecided on whether that Globe story on the Doctor and Dentist pulling in 450,000 is even real or a made up piece of advertisement drivel, pushing the importance of borrowing from house rich baby boomer parents. To keep the good times rolling. Also to not forget to take out a $800/month life insurance policy. Who the heck has 5 kids these days? One Nanny for 5 kids, not enough haha.
Reckless and oblivious living standards. Even if it is true it still advertises HELOCS and insurance, both profitable to the banks and the Realestate industry.
Cheers.

#21 crowdedelevatorfartz on 01.19.15 at 8:06 pm

Yeah, some of the Globe and mail financial sob stories are a tad hard to take.
Stupid “rich” people that STILL spend/borrow waaaaaay more than they earn.
And they need financial advice from the Globe to tell them they are idiots.

#22 Smoking Man on 01.19.15 at 8:08 pm

We are so screwed.-Garth

Of course we are, just not yet.. One or two more amazing spring markets…..

I’m calling for Wend, BOC talk very gloomy, with all the surprise with central banks lowering recently, I’m ready for anything.

Currency wars is on.

#23 Jimmy on 01.19.15 at 8:08 pm

Jimmy first to say Costco in Calgary still crazy busy as always.
No job loses, divorces, suicides, fires, etc. to report in the SW. Grey Eagle CasIno business as usual. Backpage prices same as before.

#24 Mishuko on 01.19.15 at 8:15 pm

So I did question getting into a condo of such last year but instead decided to get a sports car.

I think of it like a stepping stone. Both are high maintenance and require upkeep. But the difference is about 10x. If I can’t take care of something worth 10% of the value then what part of me can take care of something worth 10x.

Oh at least this year will be a fun year for me. Time to visit the East Coast on my 10-day road trip with no constraints… except for how long I can drive!

#25 Happy Renting on 01.19.15 at 8:15 pm

Fifty percent of income for rent? That suggests people are renting nicer digs than they can truly afford.

I had a young coworker whose fancy condo rented for what my spouse and I paid for our more basic, larger place. We had two incomes to carry the rent, each income larger than my coworker’s single income. None of which is a problem, except the coworker couldn’t really afford the place and so was squeezed for money all the time. Being younger and not so advanced in his career he could have made do with a roommate or less lavish place, but nope. Downgrading wasn’t an option and so he continued to be rent-poor and constantly worried about money.

#26 Jeff on 01.19.15 at 8:16 pm

Will the recent drop in oil prices affect how soon the prime rate is raised in Canada?

#27 WHY PAY MORE on 01.19.15 at 8:16 pm

Still not convinced on the interest rates. Maybe in the US, in 2016.

In Canada, rates have only one way to go, and that is down. We will have a cut this year, as the term premium disappears and the long end dips below the overnight rate. Our stock markets have completely decoupled, why shouldn’t our bond markets? All it will take is the sacrifice of the loonie.

#28 Big English on 01.19.15 at 8:16 pm

My landlord has informed me they’d like a realtor to come over to assess selling the house were living in, in Vancouver. Little unsettling.
This has also occurred to friends renting condos.
Allegedly, the theme/feedback is that the owners are wanting to take there gains…ahead of the crowd.

#29 Craig Listor on 01.19.15 at 8:17 pm

When are interest rates going up? They go up and down but go lower year after year.

#30 Partying like it is 1999 on 01.19.15 at 8:17 pm

Garth,

You keep saying that the Fed will raise interest rates this year. You can forget about that. What you will see is QE4, and that is when the music stops as countries could lose confidence in the USD. What will happen if China decides to do the same as Switzerland? We are due for Big Bang in the bond market, and that could be the trigger.

Housing in Canada will go down, definitely. But it will be via Big bang.

#31 Markham Renter on 01.19.15 at 8:18 pm

‘Praise to Allah’ that we’ve got Garth while he enlightens us so we can surely avoid the 72 virgins in Paradise ;-))

#32 nonplused on 01.19.15 at 8:19 pm

I wonder why the doctor can’t get the building loan? $450,000 a year vs. $2,000,0000 seems like a lot better ratio than the rest of Vancouver! It’s less than 4! The average buyer in the city is closer to 10! Must be because he can’t get CMHC so he needs $600,000 in equity and only has $200,000.

If I were the parents and did choose to help out, I think I’d only borrow the $400,000 he probably needs to get bank financing on the rest. That way the parents cut their risk by 60% compared to what is proposed now.

Boy it sure does suck to be rich these days. You can earn 7 times the national average but because you can’t get CMHC assistance you can’t buy a house that is just 4.5 times your earnings. Poor sucker is going to end up renting a palace for $3500 a month like Garth because he can’t afford to buy.

I suppose he could also sell the lot and use the $200,000 on something he can get CMHC on. That might give him $1.2 million to play with in Vancouver, which at about 2.5 times earning should be really affordable for this fellow. Of course it’ll also be a crack shack. This is crazy.

#33 nonplused on 01.19.15 at 8:20 pm

Ack! “less than 4” should be “less than 5”.

#34 Kuato Lives on 01.19.15 at 8:21 pm

” The average price is down just under 2%, but it’s a fair assumption there’s worse to come.”

From October, the number (single family average) is closer to a 9% decline. Median is down closer to 6% from late 2014 peaks. Remember Dec to Dec is year over year, so while the 2% decline doesn’t seem like much, measuring it from the peak of 2014 (or at least late 2014), the decline is much sharper.

#35 pinstripe on 01.19.15 at 8:26 pm

the debt load is massive held by many people, municipalities, provinces, et al, that a rise in interest rates is political suicide. the policy makers will do as many QEs needed to keep the interest rates hovering at zero if need be.

the financial institutions are most interested in paying zero interest to people with any savings but on the other hand charging up to 20+% interest on any credit card use is ok.

savers will be punished. people borrowing money will be rewarded. this is the modern business model.

it would be interesting to get more information on the bail-in policy. Many people are getting nervous about that policy.

#36 nonplused on 01.19.15 at 8:27 pm

PS, though, I think this guy is still over reaching. Even though it looks like he’s only proposing a house that’s 4.5 times (or so) his income, I think the rule of thumb (price to income) doesn’t work as well at those kinds of incomes. He is going to be in the top bracket (which is crushing in BC) for 75% of those earnings so I think the target ratio should be closer to 3. Still, that would give him $1,350,000 or so to play with, enough to move out of the crack-shack hood, but he still has to save up another $150,000 or so before he could get financing.

#37 ShawnG in TO on 01.19.15 at 8:30 pm

wow, the haters are out in force today.
no matter, the denialers will feel as much pain as the rest.

the rate will go up this year. fed will not uave a choice.

#38 devore on 01.19.15 at 8:32 pm

#225 Kris

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.

Misses the point, which is that governments are not omnipotent. US banks failing is not what trashed real estate prices 30%+ nationally, or tanked middle class wealth. Excessive debt did that, even as rates went to 0. The point has nothing to do with real estate itself, only as a coincidental participant.

The story is about debt, and the government can’t bail everyone out. At the end of the day, the debt needs to be paid, by someone, in some form. Which means there will be less money available for other things, either consumer spending, business investment, or government services. This is how the middle class in America shrunk, and how the rich got richer.

The “runaway housing train” is already stopped, because it run out of juice. To believe otherwise is to believe we can all become fabulously wealthy by selling houses to each other at ever-increasing prices indefinitely. Or more to the point, that we can generate real, sustainable wealth by adding a couple of zeros to everyone’s savings account.

#39 chapter 9 on 01.19.15 at 8:35 pm

#15 Bull eye

After Ralph Klein left the political scene in 2005 Alberta had a balanced budget and no debt. If the spendaholics which followed him hadn’t increased spending by 59% between 2005-2012 we would not be in the jam we are to-day. The blame is always on low oil prices which is just another cop out and a reason to bring in new taxes.
Government’s never have a revenue problem just a spending problem.

#40 Author Unknown on 01.19.15 at 8:35 pm

Hey Garth; A girl at work bought a million + dollar home in the Vancouver area, say about 5 years ago…its now worth about 3 million.(according to the assessment) Since then, she took the equity out of it, and bought 3 other homes…was this a smart move?
Any comments ?

#41 Rexx Rock on 01.19.15 at 8:35 pm

We all know interest rates won’t go up for many years to come.The fed will come up and say we’ll have to delay a rate increase until the world economy recovers some more.Let the media spew their lies and propaganda.Why would rates go up,look at Japan over 20 years and we’re following their playbook.Its so funny when people actually really believe rates will go up.

#42 Habs76-79 on 01.19.15 at 8:35 pm

Re: The $450,000 income doctors.

It’s this simple, in life once you earn enough money to be able to subsist, ie: roof over your head, basic utilities, food, clothing etc. it does not matter how much money you earn as to being responsible or sufficient of means to not get into a financial mess.

If you and yours are incapable of having any sense of monetary and financial abilities then whether you earn $30,000-$90,000-$300,000-$500,000 income you stand a very good chance of in time being up $hit creek.

Earn more money=spend more money. To a household that lives ably off say $40,000 income they may read, hear about $100,000-$200,000-$400,000 etc households not making ends meet and they then just ROLL THEIR EYES!

Unless you know how to budget, save, invest and live within your means be it on $40,000 income, $400,000 income or even $4,000,000 income etc. you are likely to screw yourself and family.

Wealthy people GO BROKE TOO! Odds are on a per capita basis the well to do go bust probably as much as lower income groups. Many of the well off do have one advantage over lower classes, they often have connections to better help them get back up on their feet.

Now, many folks/households are more responsible, they make fewer money mistakes. They’d be so living a modest and within means life if they earned say only $40,000 and they will be so if they earn $100,000 or $1,000,000 or more. THEY GET IT! THEY KNOW WHAT MONEY IS! They set credible budgets to living within means. It’s not really about how much money you earn above subsistence but how you use and utilize your money. How you use its power to your advantage and make less mistakes.

So a well to do 6 figures or more household going bust does not surprise me. They may have fell into money, they may have earned it via connections or at best through hard and/or better work. But if they cannot see what money can do pro and con, cannot set up a realistic budget to a lifestyle of being within their means they WILL PROBABLY SOON ENOUGH GO BUST!

It ain’t rocket science but it is about being realistic and more logical with how you live to your financial means.

#43 Retired Boomer - WI on 01.19.15 at 8:38 pm

While I believe the U.S. should begin raising rates, I will bet Chick’n Yellin is not going to do it!

She will use the Europe QE debacle, the ‘still not fully recovered economy’ the weather, and whatever other bullshit might fit the need.

Would I like to see interest rates “normal” sure. What, in a flat to deflationary environment might be considered normal, and this rant is from a retired fool, who has no debt, and a balanced portfolio. What the HELL do I know?

That said, bring on the RATE RISE already.

Sorry, to the indebted businesses (think oil) and recent buyers of “too much” at the recent low rates. Should rates rise, where is the next Greater Fool?

#44 Nottarealtor on 01.19.15 at 8:38 pm

The biggest fools are the ones thinking 416 will be exempt.

Bad news everywhere will take the steam out of Toronto’s market by mid spring.

Toronto will correct back to 2005-6 prices within three years. Maybe worse. Houses 40-60%, condos 50-70%.

If you bought after then, or are holding on for more gains having bought earlier, you are a greater fool.

#45 Nemesis on 01.19.15 at 8:39 pm

#ConfuciousSay… #”Today’sPiggyIsTomorrow’sBacon”…

http://tinyurl.com/kukufd6

#46 pathcontrolmonk on 01.19.15 at 8:39 pm

What is even more pathetic is that Gawker ran the impoverished YVR doctor story mocking rich / poor, entitled Canadians

http://gawker.com/rich-people-insisting-they-cant-afford-to-live-vol-66-1680391281?utm_campaign=socialflow_gawker_facebook&utm_source=gawker_facebook&utm_medium=socialflow

#47 Vanecdotal on 01.19.15 at 8:40 pm

I also believe that Globe story is a hoax, Garth you may want to dig a little deeper on that one. While there are hints of fact in referencing current affordability extremes relative to owning a home in Van, it absolutely reeks of advertorial. The Mrs. is a 30-somthing dentist and has FIVE kids already?! My bs detector spiked on that one alone.

If so, I’d say the MSM has reached new heights of douchebaggery! Buyer beware more so than ever.

#48 Mark on 01.19.15 at 8:40 pm

“•One in five people owning houses in Toronto will be up the creek if mortgage rates rise by just 2%.”

It should be pointed out that 2% doesn’t even need to be a BoC-led increase, but rather, just the market deciding it wants a more historically normal risk premium for mortgage lending. After all, mortgages in a declining house price environment are no longer minimally risky as they formerly were.

I personally don’t think that there will be widescale defaults, but rather, just a lot of people feeling an awful lot of pain, and the bank stockholders getting rich off of the pain. Bankers long ago learned that if they crush the debtors, they get nothing, or even worse, have a revolution on their hands. But if they give people enough reason to continue making their payments, they’ll gladly pay in chase of their dream. Needless to say, over the next few decades, owning a house isn’t going to be a way of making a lot of money.

#49 Harbingers | Realties.ca on 01.19.15 at 8:43 pm

[…] Source: http://www.greaterfool.ca/2015/01/19/harbingers-2/ […]

#50 Van City Buzz on 01.19.15 at 8:43 pm

This was in the Vancitybuzz today. It blows me away.
In a city where complaints on affordability sound off almost every wall, homelessness is a major unsolved issue and home prices keep booming, the last thing we’d expect to read in a financial help column would be a plea from a couple earning a combined income of $450,000 while working two days a week.

But alas, the woes of the wealthy are indeed serious enough to warrant professional help. In case you were wondering, we’re referring to a recent “Financial Facelift” advice column published in the Globe and Mail on Friday.

The article, titled “Debt doubts cast shadow for professional couple with five kids,” shares the predicament of Eric, a doctor, and Ilsa, a dentist, and their five children, a Vancouver-area family afraid of going into debt to maintain their lifestyle.

According to the Globe and Mail, the couple is “living rent free in a relative’s house (they pay taxes, utilities and upkeep)” while Eric works one day a week in a medical clinic and one day a week teaching at a university. Isla is currently on maternity leave. They are currently making $360,000 a year income, but when Isla returns to work that will increase to $450,000. All their children will go to private school and the family hopes to hire a live-in nanny.

However, in an edit to the Globe’s column, the author notes that though Eric works two days a week, “the doctor has clarified in saying he works up to 80 hours many weeks through longer working hours and extra days and hours both in medicine and teaching.”

They own a $1.1 million lot which they are hoping to build on, but worry they cannot afford to build a house “large enough for their family and a live-in nanny.” They have a $800,000 mortgage on this property with 2.5 per cent interest.

Fortunately for them, their parents are willing to offer a home equity line of credit for $1 million to help them build the home, but the couple still risks living beyond their means.

The Globe’s financial expert, Warren MacKenzie, principal at HighView Financial Group in Toronto, suggests Eric make the sacrifice and work one more day a week. “If Eric is willing to work one more day a week in the clinic, they can live within their means and still afford to build the new home using a HELOC with the parents’ home as security,” he says.

This would increase his yearly take to $500,000, plus Isla’s annual income of $150,000.

The couple has $6,000 in the bank, an RRSP of $180,000 and a $1.1 million property asset, totalling $1,286,000 in assets.

While the family earns about $25,000 a month, they spend more than that. The Globe lists their biggest monthly expenses as $3,800 for mortgage, $5,450 for private school tuition, $2,800 for child care, $2,000 for travel or vacation and $3,000 into their RRSP. In total, they spend $25,660 per month.

If you’re perplexed by this couple’s financial situation, you’re not the only one. This just makes us think, if this family can’t make ends meet in Vancouver, who can?

Do have any financial tips for this struggling family?

#51 Mark on 01.19.15 at 8:44 pm

“Watch the CAD.. if you are getting a housing correction it could easily decline another 20 cents to the USD.. come to think of it who is the fool calling their national currency the Loonie.”

Yes, watch the CAD$ indeed. There’s a pretty significant risk of the “Switzerland” thing happening to it, as it is severely suppressed relative to the fundamentals (ie: domestic deflation, excess export capacity, etc.)

How many Canadian exporters could cope with a $1.5 USD = $1 CAD$ loonie? Very few. The loonie must rise to make the development of long-term exports uneconomic, as Canada has run a chronic trade surplus for so long now, with only a domestic housing-led consumption binge being responsible for its weakening over the past few years. When that stops, well, all hell will break loose sooner or later.

#52 Happity on 01.19.15 at 8:46 pm

Where are we headed?

Ever since the FED stopped QE ….. it’s gonna be all downhill like it is beginning to show already.

#53 Mark on 01.19.15 at 8:48 pm

“Will the recent drop in oil prices affect how soon the prime rate is raised in Canada?”

Sure, since Canada is heading towards significant deflation, “Prime” is likely to be on hold for many years. Might even end up dropping. Inflationary pressures in the Canadian economy are practically non-existent, and the significant risk is that of deflation.

#54 Babblemaster on 01.19.15 at 8:50 pm

#10 ILoveCharts

What do you all make of this?

—————————————

Anyone that thinks interest rates are going up should have their head examined.

#55 barnz0rz on 01.19.15 at 8:57 pm

Garth, you forgot on that Globe story that the doctor only works 2 days a week…. And if he mustered up the energy to work another day a week they could probably pull it all off…..

#56 gut check on 01.19.15 at 9:00 pm

I am only part way through this recent post but have to say before I forget that it is hilarious that the implication of point #3 is that once someone reaches 37 years of age they are no longer a ‘normal person.’ I lol’d. it’s so true. I got MUCH weirder around that time.

#57 olderthanaboomer on 01.19.15 at 9:00 pm

#20 Marco
Did you read the comments on that Financial Facelift….
a lot of deep skepticism there!
Thing is, the FP Warren Mackenzie has been around longer than I have, so I am baffled. Giving up on the MSM.

#58 Porsche on 01.19.15 at 9:03 pm

I wish interest rates would move up 2% but that’s going to take a long long time when/if they move less than a 1/4% at a time

#59 Observer on 01.19.15 at 9:04 pm

Something is wrong with Central Bank and/or Government monitary policy when real estate agents are on billboards and doctors can’t afford to build.

#60 Karma on 01.19.15 at 9:05 pm

#9 S. Bby on 01.19.15 at 7:51 pm
“Was listening to some tripe on the radio last week while driving to work: “Parents to the Rescue” and somebody called in to say they had put a non-refundable deposit down on a townhouse and then after discovered their bank would not grant them a mortgage! So her good old mom stepped up to the plate and mortgaged her own house to get the mortgage money for the kids. Yikes.”

Let them all burn in Burnaby!

#61 Karma on 01.19.15 at 9:06 pm

The HSBC Retirement Survey mentioned by Garth:

http://www.hsbc.ca/1/PA_ES_Content_Mgmt/content/canada4/assets/pdf/FoR_Report_Canada.pdf

#62 waiting on the westcoast on 01.19.15 at 9:12 pm

Custom trimmed beard – $30
Commuter bicycle – $2000
Morning custom espresso drink – $5
Car2go membership – $100
Rent for cool studio in Gastown – $2000
Lunch and dinner with equally indebted and cool friends – $60

Hipster lifestyle… Priceful

#63 Freedom First on 01.19.15 at 9:13 pm

Garth says mull the following, and tell me where we’re headed.

I will keep it short. The United States right now is drunk, however, the rest of the world is drunker than the United States while Canada is absolutely plastered.

I like how I am sitting, personally. I am comfortable watching the chaos happening world wide with oil, debt, all currencies, possible European QE this week, and the ongoing geopolitical $hitstorms. Liquidity is King right now.

#64 Red Deer Rob on 01.19.15 at 9:15 pm

If I’m not mistaken, the picture looks like the steps of the New Westminster court house. That area has improved many times over in the past few years. But it’s still overpriced.

#65 Sarah on 01.19.15 at 9:17 pm

Spotted in Edmonton Sub-Reddit:

http://www.reddit.com/r/Edmonton/comments/2sskgg/oil_prices_what_effect_on_the_edmonton_housing/

Oil Prices – What effect on the Edmonton housing market?

Q: “The wifey and I are looking at building a house this summer but we are hesitant with the uncertainty of the market. Any suggestions? We don’t want to get stuck with a mortgage worth way more than the house.”

A: “If you can afford the mortgage payments, neither the present or future value of the house are very important when purchasing a home that meets the needs and wants of your family, […]”

Sigh.

#66 Here there on 01.19.15 at 9:19 pm

Talking about poignant. Don’t be surprised, if you get a realtor’s comment regarding the doctor subject of the Globe item. To the effect that the good doctor’s mortgage is only four times his annual income. And as luck will have it, the mortgage is not on U.S. dollars. So, the good doctor is saving 20 per cent, to live on where everybody, ham included, want to live. And, if by an abort of nature, the rates go up, the good karma will help, perhaps, to increase the doctor’s income, if he is a proctologist, due to an increase in patients. Yup Garth, Je suis a believer, pass the kool aid.

#67 Fred on 01.19.15 at 9:21 pm

Maybe what we are seeing these last little while and what is to come, is now the new norm?

#68 Smartalox on 01.19.15 at 9:22 pm

I saw that article about the doctor who worked one day a week, and supported 5 kids, a stay at home wife and a nanny. Apparently he also lived rent free in a property owned by one of his family members.

On the same web page, there was a letter to the Globe’s advice columnist, a woman writing that her surgeon husband got ‘no respect’ from the other members of his family.

It struck me at the time that the two situations might be one and the same: a surgeon who works once a week making $350k, and completely mismanaging money, and a ‘life saving surgeon’ who got no respect from his own family.

#69 Totalchaos on 01.19.15 at 9:23 pm

That Globe story cannot be true. He makes 200K/year working one day/week as a doctor? Unless he is an ophthalmologist working a private practice doing laser correction surgery, but even then, expenses are high so he wouldn’t be netting near that. And what on earth is he teaching one day per week for 100K/year? Med students from UBC are farmed out to family docs for a semester for a thank you and a bottle of wine (I know this first hand).

True, Van prices are stupid and even well paid professionals cannot reasonably afford a house.

True, doctors and dentists are unbelievably stupid with money.

False, this particular story.

#70 For those about to flop... on 01.19.15 at 9:28 pm

O.k so how much rent % is your level .
Anyone?

#71 JimH on 01.19.15 at 9:33 pm

#31 Markham Renter on 01.19.15 at 8:18 pm
“‘Praise to Allah’ that we’ve got Garth while he enlightens us so we can surely avoid the 72 virgins in Paradise ;-))”
===================================
Wait just a second! 72 virgins in Paradise??? 72 virgins? 72???
Crap, I was SURE they said ONE 72 year-old virgin!!!

#72 Brent Dingman on 01.19.15 at 9:34 pm

Might be a silly question, but with deflation and things getting cheaper, might that bring upon a buying rally of real Estate as prices become more affordable?

#73 Obvious Truth on 01.19.15 at 9:36 pm

I think our financial institutions will have to report the truth this quarter. No choice left. The risk analysts have to do their jobs. Markets will see through the boc and push hard.

Job cuts will come with the truth.

And may be only the beginning.

The housing story is already dead. Perhaps you haven’t noticed but Garth has moved on the what happens next.

#74 Nerf Herder on 01.19.15 at 9:39 pm

For all those who poke thst somebody paying 50% for rent is ridiculous…. That’s exactly what suckered poor buyers in Calgary.

With low rates, it was simply cheaper to purchase than rent. It’s hard to live in a boom town…. Although now even harder to live in a bust town, owning a house worth less than you paid.

#75 millennial cowbow on 01.19.15 at 9:39 pm

lol @ 12. what do you suppose that does to the relative value of the metals? :)

housing for me must drop ~ 30% in Edmonton for me to consider buying.

otherwise i will just pick up international property, rent it (while not enjoying it), and then rent here. single man no kids, freedom40.

#76 Andrew Woburn on 01.19.15 at 9:42 pm

160 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.
————————-
If I actually understood what a “blockchain” was I would probably agree with you. To me, the question is, who is the Sheriff of Blockchain County and how do I get him to chase down the bitcoin hackers for me? I can’t see the RCMP getting very interested.

#77 prairie person on 01.19.15 at 9:48 pm

Broker called today. Said time to sell those bonds. You’ve a 22% gain. Hang onto them and it will disappear. He thinks rates are going up. I always believe in taking a profit so I said “Sell.” Moving a bunch of that money to a mortgage company that specializes in nothing but commercial mortgages. No sfh’s A good move? A bad move? I have no idea. I’ve never invested in real estate outside of my buying my home and some of the early REITs.

#78 Terrier on 01.19.15 at 9:49 pm

#10 ILoveCharts
What do you all make of this?

http://www.cbc.ca/news/business/morgan-stanley-canada-has-1-in-3-chance-of-interest-rate-cut-in-2015-1.2912834

“A major U.S. investment bank says there’s little chance that the Bank of Canada hikes interest rates in the next two or three years, and says there’s a one in three chance of a rate cut by the end of the year.”

———————————————–

I thought for a second you’re serious …

#79 TorontoBull on 01.19.15 at 9:58 pm

damn those racist at bloomberg!:)
http://www.bloomberg.com/news/2015-01-19/chinese-hunt-for-trophy-properties-pushing-up-nyc-london-prices.html

#80 Linda on 01.19.15 at 10:03 pm

‘only 24% of Canadians saved anything for their retirements last year’. One wonders if that is ‘just’ last year or whether that is ‘the norm’ for Canadians. If so, yikes. Given that something like 25% of Canada’s population is made up of baby boomers, the youngest of which is going to be 49 this year that does not auger well for the future retirement population of Canada. Unless of course the entire 24% of Canadians who DID save for retirement last year were all of them baby boomers…..

#81 Tom from Mississauga on 01.19.15 at 10:08 pm

“I’m starting to think some may not even be virgins.”
Oh god, my ribs are aching from laughter!

#82 Shawn Allen on 01.19.15 at 10:10 pm

50% of income going to rent

•That TD report I mentioned also highlights the fact Toronto tenants, on average, are paying monthly rents equivalent to 50% of their paycheques

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

Should we congratulate owners of rental property on achieving this?

The rules of supply and demand would suggest that builders would rush in and build units pushing down rents until there is no ability to squeeze out abnormal profits.

So does 50% of paycheque represent the amount that NEEDS to be charged given the cost to build new apartments?

If so, what is wrong with the costs? What makes them so high?

Other manufactured goods tend to go down in price over time with automation. Why not construction prices?

Why is it abnormally expensive to construct a house or shoe box condo?

Is it just the land costs?

The laws of economics have not been repealed so what is up here?

#83 Smoking Man on 01.19.15 at 10:10 pm

#35 Nottarealtor on 01.19.15 at 8:38 pm
The biggest fools are the ones thinking 416 will be exempt.

Bad news everywhere will take the steam out of Toronto’s market by mid spring.

Toronto will correct back to 2005-6 prices within three years. Maybe worse. Houses 40-60%, condos 50-70%.

If you bought after then, or are holding on for more gains having bought earlier, you are a greater fool.
…….

Supply and Demand dude… 2000 people a week settle in the GTA.

Think the only fools are the ones that can’t tell the difference between positive population growth, vs negative population growth..

#84 MJH on 01.19.15 at 10:13 pm

There has been doom and gloom here for many years. If the negative forecasts continue eventually they will be correct.

#85 VICTORIA TEA PARTY on 01.19.15 at 10:14 pm

LOW GASOLINE PRICES… A BAD BAD THING

Canada’s real estate disaster, while on tap for this date, I’m revisiting the ALSO done-like-dinner Canadian/US energy sector.

My what a glorious set of gifts comes a-knocking when the great credit unwind starts ramping up big time.

Getting all excited about collapsing oil and natural gas prices having a good long-term effect on Canadian and American gasoline purchasers is utter folly.

Perhaps only 6 or 7 per cent of the Canadian and US work force is directly involved in the extraction of those irreplaceable hydrocarbons. Fine. So what?

BUT it is that much larger cohort of workers, toiling in affected service industries, who are ALSO in danger of either losing their jobs or being offered fewer hours and/or lower pay. And THAT is where the rubber will hit the road leading to a mass migration right over there into yonder economic ditch. This outcome will also be a nightmare for indebted governments.

Looking south American writer James Kunstler’s column this week outline the fall-out should fracking be seriously curtailed:

“…In short, enjoy the $2.50-a-gallon fill-ups while you can, grasshoppers, because when the current crop of fast-depleting shale oil wells dries up, that will be all she wrote. When all those bonds held up on their skyhook derivative hedges go south, there will be no more financing available for the entire shale oil project. No more high-yield bonds will be issued because the previous issues defaulted. Very few new wells (if any) will be drilled. American oil production will not return to its secondary highs (after the 1970 all-time high) of 2014-15. The wish of American energy independence will be steaming over the horizon on the garbage barge of broken promises. And all, that, of course, is only one part of the story, because there is the social and political fallout to follow…”

ROOT CAUSES, ETC.

It would be helpful to remember, right now, the roots of the collapse of commodity prices, including and especially copper: it’s part of the long-term effects of the great world-wide credit unwind (as mentioned above) and the concomitant currencies wars. So, while we remain fixated over cheap gasoline, in Europe there is considerable worry over the larger issue of ultimate economic ruin for the EU, thanks to that unwind, regardless of energy prices.

A decision by the European central bank chief later this week to MAYBE launch an EU QE program, to offset deflation now extant over there, is extremely risky and if not successful will have disastrous consequences for us all. How could it be otherwise?

Was the US QE program successful in making out economic problems go away, printing trillions of dollars in exchange for mediocre growth (albeit the higher stock prices and millions more crappy paying service jobs created) between 2009-2014? Not really.

But central banks’ biggest legacy must be the reckless consumer borrowing at low rates that ensued from their policies in obviously vain efforts to try to “patch things up”. But patching up isn’t happening is it? There is only a downside: further economic instability.

NOW, TO SAUDI ARABIA

I also want to note that OPEC producer Saudi Arabia, Iraq, and other Mideast producers are pumping oil like mad right now, to try and kill the US fracking and Canadian oil sands industries (this, also viewed as a major reason for lower energy prices but just a sideshow).

Mr. Kunstler has also written this week about those Saudi rulers and their possible future:

“…The table is set for the banquet of consequences. The next chapter in the oil story is more likely to be scarcity rather than just a boomerang back to higher prices. The tipping point for that will come with the inevitable destabilizing of Saudi Arabia, which I believe will happen this year when King Abdullah ibn Abdilaziz, 91, son of Ibn Saud, departs his intensive care throne for the glorious Jannah of virgins and feasts. Speaking of feasts, just imagine how the Islamic State (or ISIS) must be licking its chops at the prospect of sweeping over an Arabia no longer defined as Saudi! The Saudis are so spooked that they announced plans last week for a kind of super Berlin-type wall to be constructed along the northern border with Iraq. But that brings to mind a laughable Maginot Line scenario in which the masked invaders just make an end run around the darn thing. In any case, Saudi Arabia will already be disintegrating internally as competing clans and princes vie for control. And then, what will the US do? Rush in there shock-and-awe style? Bust up the joint? That’ll make things better, won’t it?
(See American Sniper.)

Stay tuned…this will, as always, be interesting.

#86 New England Deflate-riots on 01.19.15 at 10:18 pm

There’s nothing wrong with deflation, Garth.

People should view this as an opportunity to get a grip on their financial lives, sort of like handling a softer football in the rain.

It worked wonders for us ; )

http://ftw.usatoday.com/2015/01/seattle-seahawks-will-lose-super-bowl

#87 Outsider Advisor on 01.19.15 at 10:19 pm

Mortgage broker called me on Friday to see if i could arrange an RRSP loan of $11.5 k for his client to use as a down payment on a first time home purchase of $230,00 in Hamilton. Client makes $30,000 and boyfriend has credit issues so Dad would be co signing. They have no money down. Not interested in the home buyers RRSP plan – just a straight RRSP withdrawal in small increments so only 10 % withholding tax.
Had to explain to mortgage broker the cash crunch client would face when taxes come due in 2016 on top of mortgage and high interest RRSP loan amortized over 5 years at 5.25%. Told him I couldn’t assist. Won’t take his phone call again. Had me fuming all night.
As a financial advisor I work in a tarnished industry as well. I can only control my own actions. My value as I see it is to stretch clients to save more in a diversified portfolio. Some don’t need my services, some do. Treat every client interaction as if it would be published on front page news.

#88 kommykim on 01.19.15 at 10:20 pm

RE:#51 prairie person on 01.19.15 at 9:48 pm
Broker called today. Said time to sell those bonds. You’ve a 22% gain. Hang onto them and it will disappear. He thinks rates are going up. I always believe in taking a profit so I said “Sell.”

Personally, I wouldn’t sell them all. At the start of last year people were saying to sell bonds but the DEX Universe Bond Index rose by 5.5% in 2014. I would lower the duration of my bond holdings maybe, but not dump them entirely.

#89 Smoking Man on 01.19.15 at 10:24 pm

#73 Obvious Truth on 01.19.15 at 9:36 pm
I think our financial institutions will have to report the truth this quarter. No choice left. The risk analysts have to do their jobs. Markets will see through the boc and push hard.

Job cuts will come with the truth.

And may be only the beginning.

The housing story is already dead. Perhaps you haven’t noticed but Garth has moved on the what happens next.
……….

Job cuts will come with the truth.. Baha, so true, but no one’s going tell it.

Change you handle to Obviously Naive

You so need a lesson in the art of lying.
At the next Gartho Show, I’m sensing one is near, as always when it looks like the fat lady will be signing.

I will set up a kiosk at the bar, giving lessons on bull sitting, hot ladies get priority.

#90 Nottarealtor on 01.19.15 at 10:24 pm

Smoking Man #82

Supply and Demand dude… 2000 people a week settle in the GTA.

Think the only fools are the ones that can’t tell the difference between positive population growth, vs negative population growth..

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

I guess you just volunteered yourself as one of the greater fools I referred to, dude.

Do some homework, dummy. The population in the GTA also grew strongly in the 1990s, but that did nothing to stop a correction of over 30% that lasted for 15 years.

Truth hurts, eh, goof?

#91 Western Observer on 01.19.15 at 10:29 pm

Re: half of Hipsters plan to move in 5 years- but who will buy?

Is it not possible the Hipsters will sell their condos to the Boomers and the Boomers will sell their houses to the Hipsters ? Might just work out!

Interest rates are definitely not going up, if anything they are going down.

Spring will be a hot real estate market here in Vancouver, where there is big stigma if you rent.
You must own , costs be damned!

The “talk” of higher rates is just Bank & Real Estate industry strategy to get people to buy before the rates (supposedly) go up.

Was reading comments on an article about the pickle Alberta is in. Most comments were of the denial /anger variety. Denial that oil prices will affect Alberta and anger that the rest of Canada didn’t appreciate the transfer payments.

(a) Where do hipsters get the money to buy out their parents? (b) You think Boomers want 700 feet overlooking Robson? (c) Rates are not going down. But, if they do, we are in far deeper trouble. — Garth

#92 Victor V on 01.19.15 at 10:35 pm

#72 Brent Dingman on 01.19.15 at 9:34 pm

Might be a silly question, but with deflation and things getting cheaper, might that bring upon a buying rally of real Estate as prices become more affordable?

Would you buy a house if you felt prices were going to continue to drop? The danger of deflation is that consumers put off purchases because of the expectation of lower prices.

#93 Smoking Man on 01.19.15 at 10:36 pm

#90 Nottarealtor on 01.19.15 at 10:24 pm
Smoking Man #82

Supply and Demand dude… 2000 people a week settle in the GTA.

Think the only fools are the ones that can’t tell the difference between positive population growth, vs negative population growth..

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

I guess you just volunteered yourself as one of the greater fools I referred to, dude.

Do some homework, dummy. The population in the GTA also grew strongly in the 1990s, but that did nothing to stop a correction of over 30% that lasted for 15 years.

Truth hurts, eh, goof?
………..

I was there dude, seems your research skills need some improvement..

Rates went up to like 18% almost over night, ya that will do it..

Ahhhh The SCHOOLED? my work is never done..

#94 Raor on 01.19.15 at 10:36 pm

The 30 Year US Treasury has surged over the last couple of months bringing the yield and mortgage rates DOWN. That is the result of deflation as well. You would need 6 or 7 measly Fed quarter point hikes immediately to counter act that and that ain’t gonna happen soon.

Bond yields fell as prices rose due to cash leaving equities, looking for safety. This is not deflation. — Garth

#95 Marco on 01.19.15 at 10:39 pm

50, Vancity Buzz.

“If you’re perplexed by this couple’s financial situation, you’re not the only one. This just makes us think, if this family can’t make ends meet in Vancouver, who can?”

Exactly.
Inadvertently or not they have made it seem that anybody who makes less then them, have no choice but to get a HELOC provided by Mom and Dad if they have any chance of getting on the property ladder in Van. This story will probably influence many would be buyers to ask their parents for help with a downpayment.
Besides the couple should have written Garth, not the vested interest group. This story really is gaining traction and should be investigated.

#96 Stanley on 01.19.15 at 10:41 pm

As the commodity prices drop so sharply, it is highly unlikely that the Bank of Canada may raise the interest rate this year. Therefore, the 2% raise of interest rate are a beyond expectation.

Of course the BoC won’t move 200 bips this year. But most mortgages are not linked to the bank rate. — Garth

#97 Victor V on 01.19.15 at 10:42 pm

Target Canada’s 17,000 laid off workers face grim job prospects, labour experts say

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/2015/01/19/target-canadas-17000-laid-off-workers-face-grim-job-prospects-labour-experts-say&pubdate=2015-01-19

TORONTO — Laid off retail workers, including more than 17,000 hit by Target’s decision to pull out of Canada, face grim job prospects as they dust off their resumes and start looking for work, according to labour experts.

“I suspect they are feeling some anger and some very genuine fear,” said Brock University labour expert Kendra Coulter, noting that many retail sector staff work only part-time hours.

“Many of them will not be eligible for employment insurance and are facing a very scary future.”

#98 Stanley on 01.19.15 at 10:42 pm

In case the housing market drops 20-30% this year, the investment portfolio will encounter a drop as well. How on earth we counter this possibility?

No such direct correlation exists. — Garth

#99 Smoking Man on 01.19.15 at 10:46 pm

(a) Where do hipsters get the money to buy out their parents? (b) You think Boomers want 700 feet overlooking Robson? (c) Rates are not going down. But, if they do, we are in far deeper trouble. — Garth

Not likely this Wednesday, but not impossible.

Danes cut rate from -5bp to -20bp today, Swiss went full scale zombie last week.

Hell nothing will surprise me.

#100 Cow Man on 01.19.15 at 10:47 pm

#51 The broker was “harvesting profits” not the investor. No risk on the part of the broker. Wash and repeat.

#101 Mike on 01.19.15 at 10:49 pm

My comment to this blog post somehow loaded up in the old thread – or maybe the moderator just didn’t like what I had to say …in any case, you know it’s all good in the 416, so long as the morning Starbucks line is two-wide and at least a dozen deep – with a minimum of three fellow office dwellers starting their day with grand-non-fat-macchiato latte, or something of that variety going for $6- $7 a pop. Make that two, at lunch, as they interrupt the barista face-tweeting on his iphone7, packed with a 10Gig plan at $120+/month.

#102 Oakville Dood on 01.19.15 at 10:50 pm

Isn’t it even scarier that in January 2014 there was a polar vortex, theoretically keeping people away, so if sales have dropped again in January, there’s even bigger problems ahead…. It’s quite warm this year in January… I went to a few open houses in Oakville and not another soul to be found. I’m of course not buying, just bored on Sunday… Realtors are friendly…

#103 Mukadi on 01.19.15 at 10:56 pm

#8 thank you for the clarification. I was under the impression that the guy had invested tons of money and was going to use his dividends to pay for the house!!!

It seems to me now that he’s too stupid to be a doctor – anyway I won’t pay a visit to such a guy because I am afraid of his level of stupidity.

#104 gut check on 01.19.15 at 11:00 pm

“#51 Mark on 01.19.15 at 8:44 pm wrote:

How many Canadian exporters could cope with a $1.5 USD = $1 CAD$ loonie?”

well, I sell in USD and I’m happy. If it went to $1.50 I’d be even happier. Maybe you meant importers? or maybe I just can’t pay close attention to everything you write. (It’s a lot, man, face it.)

#105 gut check on 01.19.15 at 11:01 pm

the Fed cannot raise rates.
end of story.

#106 Washed Up Lawyer on 01.19.15 at 11:03 pm

Nothing of significance to report from the boreal forest here in Ft. McM today. Just an observation. The recent listings feature a photograph of very forlorn curb appeal with big snow drifts and a snowed in Dodge Ram in the driveway. Folks, take a good photo of your house in June with the Azaleas in bloom and the butterfly migration (not blackflies) flying over and tuck it away for future use.

#107 Andrew Woburn on 01.19.15 at 11:05 pm

Speaking of harbingers, the South China Morning Post has reported that Stanley Ho’s nephew, who runs one of his top casinos in Macau has been busted for running a house of prostitution there. The whole Macau gambling industry has been put on a short leash. This is the latest episode in the Chinese anti-corruption campaign.

Like Hong Kong, Macau is a former colony built on leased land that has now reverted to China. Although China prohibited gambling, Portugese-run Macau didn’t. Stanley Ho controlled gambling there and hordes of mainland gamblers made him very rich.

Many observers have wondered if this crackdown on corruption is real or just a cloak for a purge of rivals. To me it looks like the corruption focus is real. Premier Li is kicking serious ass if high profile Chinese oligarchs can’t save face and buy their way out of trouble.

The important point for us is that Macau has long been the leaky faucet through which wealthy Chinese have laundered cash to evaded capital controls. If Li has just turned off the laundry spigot, what does this mean for high priced real estate in Canada? Closing the Macau door won’t catch Chinese exporters who can skim invoice payments straight into tax havens but it should seriously cramp illicit money movements out of China.

Note also that Li Ka-Shing has acquired a Canadian passport and has reorganized more of his portfolio away from Hong Kong. Is he expecting a further crackdown in Hong Kong?

“How the Communist Party knocked down Macau’s house of cards in just six weeks”

http://www.scmp.com/news/china/article/1681571/party-knocked-down-macaus-house-cards-just-six-weeks?utm_source=The+Sinocism+China+Newsletter&utm_campaign=ed7e178b3d-Sinocism01_19_15&utm_medium=email&utm_term=0_171f237867-ed7e178b3d-29628021&mc_cid=ed7e178b3d&mc_eid=5038a6b4c4

#108 will on 01.19.15 at 11:12 pm

Seems to me that most Canadians are not conservative at all, having been guided to this obscene situation by the current liberal government occupying Ottawa.

#109 Capital One on 01.19.15 at 11:14 pm

#83 Smoking Man

Where are you getting your numbers?

GTA pop = 6,000,000.
Growth rate = 0.4%
Pop growth per year =24,000
Pop growth per week = About 500

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

CO

#110 Smoking Man on 01.19.15 at 11:20 pm

I should start a news letter, sell it to investors, I mean, look at Rosenberg, the guy makes millions, sort of but not committing to calls.

My calls direct, with risk on, blow his away..

But then, that would be job, I’d have to leave the tax farm, and then I’ll be hammered 24/7 which would make my sort term rental excursions, a bad deal on my part.

Screw it, I like things the way they are. Garth and some of his Bay street buddies scratching there heads.

Who is this guy…

I’m just drunk, who has an un accredited PhD in herdonomics. With a direct connection to the UCC, universal consciousness consolidator.

A man through drunkin, killing the brain, delusions I think I’m from the planet Nictonite. I beilive it now. How else can I read minds.

Ya I have issues… But have fun, every single day of my life..

Rosy, your safe till I decide to sobar up.. And that’s not happening anytime soon…

#111 waiting on the westcoast on 01.19.15 at 11:21 pm

#79 Toronto Bull re: Asian buying up luxury homes…

Everyone is looking for the bogeyman.

The best way to describe the market is to think of the segmentation at restaurants. If a lot of rich tourists go to a group of high end restaurants, it does not change the prices at mid tier or lower tier restaurants. Yes, maybe the prices will go up in the luxury segment but the reality is that the other segments have their own demand and supply curves. Pressure in a small part of the market does not mean the whole curve is shifted.

The reality is we have bought up our own segments and put some beautiful stainless accessories inside at the expense of major risk to ourselves…

#112 BlackDog on 01.19.15 at 11:22 pm

@ForThoseAboutToFlop, I’ll bite….35% of net family income (one income family of five) in Ottawa for a 3 + 1 bedroom, 1950’s bungalow.

#113 BlackDog on 01.19.15 at 11:28 pm

@ForThoseAboutToFlop, But we are ‘rich’ and about to get ‘richer’ with income splitting…whoohoo!

…Kidding, but it will be nice to pay a little less tax (2K) for the curse of having one income supporting five people.

#114 Henry Rearden on 01.19.15 at 11:36 pm

Things are very grim here in Nova Scotia in terms of house prices. Another day of heavy price drops. But then that’s why I live here. Beautiful province, good salary, liquid and free. The government wants to keep you up to your eyeballs in debt and immobile. Not my style. We live in a globalised world where I can hang up my hat and move to a job somewhere hot should I need to. Or maybe just retire, even though society tells me I must be old to do that. Take your own paths folks. The herd are on theirs, but it’s too badly trodden for my feet.

#115 devore on 01.19.15 at 11:39 pm

#76 Andrew Woburn

A bitcoin is not a “thing”, or an entity. It’s not really anything like a virtual dollar coin at all. A bitcoin is defined by and exists through virtue of the blockchain. The blockchain is a history of the bitcoin’s existance since it was “mined”. If your wallet is the last entry in the chain, it’s your coin (or fragment thereof). A transaction simply adds an entry to the chain, the chain is released to the network, and the network votes on its validity, which theoretically prevents things like “doublespend”. Everything should work pretty smoothly, as long as no one controls the majority of the network. Unfortunately, this has happened several times in bitcoin’s history, as recently as last year, so despite claims to the contrary, some amount of trust is required to commit your money to it.

To me, the question is, who is the Sheriff of Blockchain County and how do I get him to chase down the bitcoin hackers for me?

There is no blockchain sheriff. The network assures its own integrity. However, for the whole thing to work, it must be possible to download all the blockchains in existence, thus a third party can inspect them, and correlate the transactions with outside data to identify wallet owners, or visualize flows.

You have to identify the real life owner of a wallet, which can be difficult obviously, and even if you do, you cannot force the return of your bitcoins, unless a legal authority takes interest, seizes the wallets and passwords, and returns them to you, assuming they’re still there.

It’s a dubious proposition, and it’s not advisable to transfer any amount of bitcoins to a bitcoin bank or any third party for “holding”, because there is no legal requirement they return them to you; good luck getting anything back if someone absconds with the loot.

#116 Happy Renting on 01.19.15 at 11:41 pm

#70 For those about to flop… on 01.19.15 at 9:28 pm

My best estimate is around 15% gross. We started out as two singles renting our own 1-bdrm apartments. Shacked up in a 2-bdrm and made sure to save at least a couple of hundred off what we paid as individuals.

Instead of a shiny, newer condo (no rent control) we went with an apartment in an older (rent control) high-rise that’s all rentals. We got lucky in that we signed our initial lease during a period of depressed rental rates. I think we were frugal, too, as we resisted the temptation to upsize, even when higher incomes and a wedding+bambino would have made it socially acceptable (required?) to do so.

Our approach would be a little harder, right in the downtown core (more condo buildings, fewer purpose-built rentals), but do-able if one had a mind to.

#117 Smoking Man on 01.19.15 at 11:43 pm

#105 Capital One on 01.19.15 at 11:14 pm
#83 Smoking Man

Where are you getting your numbers?

GTA pop = 6,000,000.
Growth rate = 0.4%
Pop growth per year =24,000
Pop growth per week = About 500

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

CO
…..

LaughingCon, hacked Wikipedia.

The bastard..

#118 meslippery on 01.19.15 at 11:51 pm

With your so called (fail to launch thirty somethings)
living with you, the need to sell your home to retire is
moot.Plus your need for retirement home also moot.
Works best with a paid off home.

Also#42 Habs76-79 well yeah.

#119 fleabitten monkey on 01.19.15 at 11:52 pm

This doc/dentist couple are the epitome of greaterfools, even before you factor in the real estate decisions. 60K plus per year in tuition for the kids in private school? Boy oh boy it must be important to them to maintain that. I would argue that those funds would be far better placed in RESPS.

#120 Andrew Woburn on 01.20.15 at 12:00 am

115 devore on 01.19.15 at 11:39 pm
#76 Andrew Woburn
A bitcoin is not a “thing”, or an entity.
———————-
Thanks for the info. Sounds like storing your “wallet” on your own thumb drive is the only way to go, sort of like hiding it under a digital mattress.

#121 BlackDog on 01.20.15 at 12:00 am

@HappyRenting #116, ..Gross…who thinks in gross terms. I always look at how much money goes in the bank every pay cheque and do the math based on that. Who cares about gross?

If I do the same calculation on gross, I’d have to look at the annual income which is about 110K. The monthly rent is 1850, so that would work out to be 20% of gross.

#122 Happy Renting on 01.20.15 at 12:02 am

#82 Shawn Allen on 01.19.15 at 10:10 pm

Downtown Toronto sprouts many condos, but I can’t remember the last time a high-rise of rental apartments was built. So the new rental stock is heavily made up of condos rented out by investors. No rent control on newer buildings (anything completed after Nov 1, 1991) so rents are the ongoing equilibrium of how much people will pay and investor carrying costs (though as Garth points out, those landlords are frequently subsidizing tenants). A few years back I was hearing anecdotes of $300-600/month rent increases on condos at the end of a 12 month lease because the market had heated up.

Any out-sized returns are probably in the pockets of the developer and whoever originally owned the land, since investors paid a pretty penny for their shoeboxes. I also think the 50% figure is skewed high because the young hipsters renting in 416 are early in their careers and thus earning less.

#123 Ray Skunk on 01.20.15 at 12:04 am

Re: Toronto growth demographics:
Realtors always bang on about the amount of immigrants arriving in the city, but people leaving or expiring is never taken into account. The narrative the RE industry likes to portray is that people keep pouring in through a one-way valve.

As for $60k a year in private school tuition… balls to that, you can make damn sure my kids are going to the public system I’m paying in to. If there was a refund if you went private, sure, but I’m not paying twice.

I may, however, pay for some top-up tuition on the side, from a nice right-wing, non-unionized tutor to balance out the Liberal indoctrination from the public system.

#124 joblo on 01.20.15 at 12:07 am

Time to start Kanuck Hedge fund, buy up the puked up properties across the land, gobble em up and convert to rentals AKA Blackstone during USA housing collapse.
SM u in?

#125 Blacksheep on 01.20.15 at 12:13 am

Ref: My post # 198 yesterday.

“It did not save individuals, only some institutions. There is no government ‘solution’ to epic personal debt. — Garth”
——————————————————-.
Garth, not talking about private parties or bailouts in any form. I’m taking about the systems intervention that postponed the RE crash in 2008-9 and the fact they are already doing it again, via continued low rates and a coming 80 cent dollar.

If the US continues to grow and we are able to hitch a ride on their wagon, the RE bubble thing is going to fade into history as hyperbole.

#126 CalgaryBoy on 01.20.15 at 12:14 am

Does anyone know the official decline in prices during the housing bust in the 1980’s in Calgary? Anyone have a peak price and bottom price and how long it took to get there???

#127 For those about to flop... on 01.20.15 at 12:16 am

BlackDog ….nice work !
You see the thing is I’d rather hear it from real people ,rather than some contrived media story.
Take care.

#128 For those about to flop... on 01.20.15 at 12:25 am

Happy Renting…Wow 15% is pretty efficient .
You got it goin on!

#129 Karma on 01.20.15 at 12:27 am

#91 Western Observer on 01.19.15 at 10:29 pm

“Spring will be a hot real estate market here in Vancouver, where there is big stigma if you rent.
You must own , costs be damned!”

A year ago, I would agree with you. However, my house-horniest friend and wife decided to rent a townhouse in E. Van rather than put more offers on various houses in N. West, S. Bby and E. Van. Furthermore, they are going to rent out their downtown Van condo (despite within a block and a half of their place are something like 70+ 1-beds and 2-beds for rent on Craigslist).

Several other of my friends + WAGs have put house-buying plans on hold for 2-3 years because they don’t see a point if they don’t have kids.

Obviously, these typical Vancouver millennials that I know aren’t a large sample size. But if it is an anecdotal microcosm of the Vancouver culture, then the winds may be shifting…

#130 bdy sktrn on 01.20.15 at 12:28 am

The best way to describe the market is to think of the segmentation at restaurants. If a lot of rich tourists go to a group of high end … Pressure in a small part of the market does not mean the whole curve is shifted
———————–
this could not be more wrong in a limited supply market.

if the high end place is full and grown very pricey you still need to eat. so you go to the next level.
JUST like all the 250k docs buying in ‘shitty’ east van

#131 Obvious Truth on 01.20.15 at 12:30 am

3years ago banks are falling over each other to lend the good doc money.

Rules have changed. Can’t build or buy a fixer easily. I’m hearing 60% LTV as the loc threshold.

Prices are coming down everywhere. The easy money has stopped flowing.

Everyone should be open to the fact that global yields may have bottomed during european quantitative teasing. Not to say they will rocket higher. Mario (whatever it takes ) draghi and his italian accent has everyone frothing.

The Swiss have definitely climaxed.

Money always shows the way. What people think doesn’t matter. It just lends itself to the news narrative which is always way too late.

#132 bdy sktrn on 01.20.15 at 12:41 am

60K plus per year in tuition for the kids in private school?
—————————
i went to a well respected univ in ont which was quite popular with the private school crowd from both ont an BC.

I knew all about brentwood school long before i heard of the mall.

What does private school mean to me?

Kids with very weak academic skills, wreckers of expensive cars, cocaine/substance problems, no work ethic nor much integrity but loooots of cash.
Be careful of who your kids are hanging out with .

#133 Setting the Record Straight on 01.20.15 at 12:41 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.

***
Prescient within ‘…’ did not signal what I thought?

#134 Happy Renting on 01.20.15 at 1:11 am

#232 Retired Boomer – WI on 01.19.15 at 11:17 pm
#210 HD 1/19 at 3:08pm

Based on your comment, RB, I scrolled back and clicked through on the link HD provided (below, for convenience):

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

Great little article. Reminds me of a point from a Motley Fool list (77 reasons why you’re awful at managing money):

“42. You surround yourself with 18 hours a day of live market TV in a game that requires decades of doing almost nothing but waiting.

I admit I pay attention to what’s going on and what experts predict, but mostly for entertainment. I try not to get too bent out of shape over any of it, because the investing plan (long-term, passive indexing, regular rebalancing) was chosen to work both when the going is good and when all hell breaks loose. The most reactive I get is buying on a perceived dip.

#135 Cici on 01.20.15 at 1:31 am

Hmmm Garth, if interest rates are set to rise mid-year, would now be a good time to underweight the bonds portion of our portfolios?

#136 Figmund Sreud on 01.20.15 at 1:53 am

… btw, in a meantime – as Alberta burns, our newly minted sheriff, … er, premier goes on a spending spree. Goes out and buys himself a ’56 T-bird that matches his birth year!

“Alberta Premier Jim Prentice gets a hug after buying a dream car at Barrett-Jackson in Scottsdale, AZ., on Sunday Jan. 15, 2015. Prentice had the winning bid on a 1956 Ford Thunderbird with an 8 cylinder, 312, 3-Speed automatic transmission. The car has been in the same family since new. Just finished the 22-year restoration less than 500 miles ago. Colonial white exterior with dark peacock interior. All the options with power seats, power windows and power steering. All new chrome and original Continental kit. The car was sold at auction for $54,000 plus a 10% buyers commission that Barrett-Jackson charges for a total of $59,400.00US.” Photo Courtesy Barrett-Jackson.com

#137 Ali Khan on 01.20.15 at 1:56 am

I’m A relatively newbie to Canada’s economy so can’t contribute much to the debate, but I am very curious about how locals refer to their cities.

Some call it 416 or 604 – which I know are telephone area codes – others call their city by the airport code like YVR (took me a while to figure that one out) is this ok with all cities or only the big 5.
Before coming here I thought Van was the way locals would abbreviate YVR or T.O was the cool way to let the locals know I’m also from 416
This is getting confusing – which other codes do I need to learn
Also is Cowtown for Calgary derogatory or is it ok to say it to the locals.

Thanks

#138 Patrick on 01.20.15 at 2:18 am

I read the doctor and dentist couple story I think there is some wrong key info here. 1. The doctor working one day in a week may not be making that much. He may have not report his business expenses in the equation. The reporter may are not doing their due diligence to check the facts. Here is a report on doctors salary: http://blogs.vancouversun.com/2013/09/26/bc-doctor-salaries/.
2. Private school is $5400 a month? do they have several young children or one or two who is going to Harvard?

3. Summer camp for $600 ( every month even in winter ? )

#139 Vangrrl on 01.20.15 at 2:52 am

Thanks for the ongoing laughs Garth, today’s post was good. I’ve been living in the Mediterranean now for a month and still read you every day (though now first thing in the morning :). Friends just sent me that link about the Vancouver couple. Interesting times indeed.

#140 nonplused on 01.20.15 at 2:54 am

#107 Andrew Woburn

The 2 saddest things about prostitution are 1) that it is illegal, and 2) being illegal it’s run by thugs.

In my opinion, I wouldn’t want my daughters ever to do it and I’ve never engaged a prostitute myself, but how different is it from women who try and marry rich so they don’t have to work? Not different at all.

Now seriously, if it’s ok to get a message why does it suddenly matter what they are messaging?

It’s all just crap. Women should be able to do what they want but also without government or pimp interference, both the same thing.

And the laws on this stuff are schizoid. Prostitution is not allowed but an “Escort Agency” can get a license to operate? Come on! The only reason for that is that the “Escort Agency” will pay some tax on the transaction. And what about porn???? You are telling me that a girl having sex in front of a camera for money is “acting”, whereas prostitution is all bad bad bad? It reeks of hypocrisy! The only possible difference is that porn companies pay taxes. The girl is still screwing for money and it’s big big business.

The difference is that we all watch porn, and the government gets a cut. But the line is so thin I would say honest hookers have the moral high ground to porn watchers.

#141 Mr Stats will tell you where we're heading.. on 01.20.15 at 3:08 am

The points made…and rebuttal..

1. “…if mortgage rates rise by just 2%.”

–> They won’t. BoC and the CONs won’t do it. Evidenced by our bond yields and CDN dollar heading lower.

2. “The US central bank, they confirm, will in fact start raising interest rates by the middle of 2015.”

–> Puts further pressure on CDN dollar…just like the BoC and CONs like it.

3. “the average first-time homebuyer in the GTA is now 37 years old”

–> Thats because Immigrant families that have arrived 5 years preceding vastly outnumber locals who need to buy. Most locals live with parents or extended families.

4. “Cowtown Death Watch:”

–> Listings don’t mean anything. Vancouver listings are at multi year lows. Does this mean prices are going to skyrocket?

5. “and found only 24% of Canadians saved – anything – for their retirements last year.”

–> The majority will make policy. Put out a platform to increase OAS and GIS and you will get elected. Go with the herd.

6. “tenants, on average, are paying monthly rents equivalent to 50% of their paycheques ”

–> Ever hear of the underground economy? Taxi licence plate holders who drive their own cabs make upwards of $8-10,000 cash per month while qualifying for child benefits. (Taxis don’t accept credit. )

7.8.

9. “Van couple (one a doctor) making $450,000, who bought a $1.1 million building lot (with a mortgage of $800,000)”

–> Really believe this? Doctors have to take a university level math course as a pre-req. I’m sure their number skills are far better than the majority.

#142 Mr Stats will tell you where we're heading.. on 01.20.15 at 3:15 am

@Smoking Man:

2000 people per week moving to GTA.

Boss, that info is not meant for the masses. It is a taboo. Be gone. Go to wikipedia.

#143 Mr Stats will tell you where we're heading.. on 01.20.15 at 3:19 am

@Mark

What is (was) your timeline for the CDN dollar rocketing higher?

Oct 2014?

Dec 2014?

Feb 2015?

Do you even realize what you’re saying?

Hedge funds have made a killing betting the exact opposite of what you say. If you are so sure, try FX…you’re guaranteed to hot the mega Jackpot. lol

#144 Londoner on 01.20.15 at 6:49 am

“The US central bank, they confirm, will in fact start raising interest rates by the middle of 2015. In other words, if you think bond yields are going to stay put, well, good luck.”

I would tend to agree that the earliest possibility of a rate hike in the US is mid year, versus calls for earlier this year. The BoE looks like it will sit on the side lines this year and we all know what the ECB is planning. As for the BoC, rather then hinting at a rake hike this year we may see some wording changes that allows for the possibility of a cut. Let’s see what it says in the monetary policy report on Wed. There’s a real chance that mortgage rates will be lower this spring before eventually edging back up when the Feds hike.

#145 maxx on 01.20.15 at 7:47 am

#6 villagemoron on 01.19.15 at 7:48 pm

http://www.moneysense.ca/must-read/more-canadians-living-paycheque-to-paycheque

“The online survey of 3,211 employees from a wide range of industry sectors across Canada was conducted between June 17 and Aug. 1….”

I’d love to see what those stats would show today. And next month….

But, but, but, some are trying to save. Last week, a shiny black Mercedes was parked right in front of my favourite second-hand shop. I know everyone who works there and it does not belong to them.

Might it belong to a realtard?

Hope so, and perhaps this realtard is now just another overextended member of the enormous shackled underclass it helped create, that finally discovered salvation through saving. It certainly won’t get much sympathy, but it will be the subject of much schadenfreude, given its snot-nosed, supercilious and know-it-all attitude over the past decade and a half.

#146 maxx on 01.20.15 at 8:00 am

#12 silverfan on 01.19.15 at 7:52 pm

“…. come to think of it who is the fool calling their national currency the Loonie.”

Not sure about the other stuff, but on this point I agree….imho, this slimy, confetti-coloured stuff that passes for currency is pitiful….it doesn’t confer a confident, serious sense of legal tender, such as the greenback does. It is more like the stuff you pull out of a child’s toy box.

#147 maxx on 01.20.15 at 8:11 am

#35 pinstripe on 01.19.15 at 8:26 pm

“…….savers will be punished. people borrowing money will be rewarded. this is the modern business model.”

And just look at the resplendent economy this has produced.

blah, blah, blah, blah, blah……….zzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

#148 maxx on 01.20.15 at 8:37 am

#45 Nemesis on 01.19.15 at 8:39 pm

” #ConfuciousSay… #”Today’sPiggyIsTomorrow’sBacon”…”

Confucious also say: “The Piggy is serving up the Bull’s cojones to the Bear.”

#149 Smoking Man on 01.20.15 at 8:41 am

And Turkey joins the lower rates club, just slashed it’s rate by 0.5%

Let the currency war continues.

#150 maxx on 01.20.15 at 8:47 am

“Why bother saving, money’s worth so little?”
“Interest rates are so low, you get nothing on your money.”
“These interest rates are amazing!”
” WOW! Look at the returns on real estate!”
“Real estate always goes up…..”

Rinse and repeat, and voila! the perfect $torm.

#151 Renting Rules on 01.20.15 at 9:06 am

Conservatively speaking (not Harpertively speaking:

Rent Only (utilities not included)

12.5 % Gross

20.9 % Net

#152 Nottarealtor on 01.20.15 at 9:27 am

Smoking Man #93

I was there dude, seems your research skills need some improvement..

Rates went up to like 18% almost over night, ya that will do it..

Ahhhh The SCHOOLED? my work is never done..

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

What a lazy ignorant dolt you are, with no grasp of real estate cycles or history.

http://www.ratehub.ca/5-year-fixed-mortgage-rate-history

This is called ACTUAL research, goof. (Just a bit, too, though that seems all that is necessary to deal with you) Rates in the 1990s were steadily downward overall, never came close to “18%” and averaged below 10% for the decade, in a growing economy with a growing population in the GTA.

By your mentally defective realtor logic, that should have made for a housing boom, not a 15 year slide and stagnation.

What happened?

Aliens? The illuminati?

While I am ‘not a realtor’, I have been closely involved in that industry previously and have many good contacts there still.

I hear the GTA is looking very worrisome to my friends in the biz. General enquiries are way down for both prospective buyers and sellers, given the spring market is only weeks away. Most calls they do get are from people sounding worried.

It will be a flat, weak year in the GTA, with much worse to come.

Only greater fools would buy, hold or pump GTA real estate in the next years.

Guess that makes you a triple-threat goof.

#153 Mark on 01.20.15 at 9:32 am

“What is (was) your timeline for the CDN dollar rocketing higher? “

I’m not sure as to timelines. All that is apparent is that the CAD$ is quite undervalued and have laid out the case for such, namely Canada’s strong deflationary environment and excess export capacity featuring prominently. But without timelines, yes, you’re correct, I haven’t given you anything you can really trade on.

Same goes for housing. The case for Canadian housing going down has been laid out for years, but its only become reality in the past few quarters.


Do you even realize what you’re saying?
Hedge funds have made a killing betting the exact opposite of what you say. If you are so sure, try FX…you’re guaranteed to hot the mega Jackpot. lol”

Good for them, although they’re wrong, and if they cling to the trade too long, they’ll end up like the unfortunate fools who were short the Swiss franc. Remember, in forex, someone always is taking the ‘other’ side of the trade, so its not like opinions can be universally be on one side of the trade.

#154 Apocalypse2015 on 01.20.15 at 9:46 am

Is this what lies ahead for some Canadian malls that have Target as an anchor tenant?

The Randall Park Mall, once largest in the world and owned by the former owners of the SF 49ers.

http://money.cnn.com/2014/12/30/news/worlds-biggest-mall-randall-demolition/

Who will move into those Target spaces?

No one, it appears.

But Sears Canada (LOL!! – like they have a future) has some great discount offers for Target employees being fired.

http://www.citynews.ca/2015/01/16/sears-offering-jobs-discounts-to-workers-affected-by-target-exit-from-canada/

#155 Smoking Man on 01.20.15 at 9:56 am

CAN Manufacturing Sales down 1.4% survey said – 0.7%

Oh to be a fly on the wall at BOC, wonder what our export centric Governor is thinking, looking at this disappointing number, while reading the IMF wants all countries to be more accommodating and stimulating..

Should be an interesting day at 10am tomorrow.

…………
#152 Nottarealtor on 01.20.15 at 9:27 am

I sympathize with your frustration and hostilities, can’t be easy in that basement.

#156 Tony on 01.20.15 at 10:04 am

Re: #126 CalgaryBoy on 01.20.15 at 12:14 am

The difference this time is there’s nowhere for them to go as all the surrounding cities in the neighbouring provinces have seen large increases in real estate prices while most of Alberta saw no increase in prices in the last 7 years. Prices won’t see the huge fall circa 1980 and 2007 because of this reason.

#157 Kenchie on 01.20.15 at 10:05 am

Tiniest of violins for the Doctor/Dentist couple, lol!

https://storify.com/AthertonKD/the-tiniest-violin-for-the-least-necessary-debt-cr

#158 Je Suis on 01.20.15 at 10:47 am

“Je Suis Greater Fool” – priceless. Remove the “I” and we finally recognize Garth for who he is: “Jesus Greater Fool”

Bless you. — Garth

#159 TorontoBull on 01.20.15 at 10:47 am

@152you sound pretty rude buddy
here are some facts for you. According to the Census population in Toronto CMA in 2011 was 5,583,064 which was 9.2% higher than in 2006 (5,113,149), which makes the absolute difference between the two time periods of 469,915, which spread over five years equals 93,983 new residents annually to Toronto region.
Next, the average 5 year mortgage lending rate in 1990 fluctuated between 12 – 14%:
http://www.bankofcanada.ca/wp-content/uploads/2010/09/selected_historical_page57_58.pdf
Add to that that the 1990s recession was much tougher on Toronto’s economy that the 2008/09 one which can be seen here:
http://www.statcan.gc.ca/studies-etudes/75-001/archive/e-pdf/2524-eng.pdf
Add to that that in the 1990s there wer emuch more rentals being built than now
So I start wondering where did you live in the 1990s…
Now we have weak to moderate economic growth , low interest rate environment, robust population growth, and almost none purpose built rentals.

#160 honeybooboo on 01.20.15 at 10:56 am

One in five people owning houses in Toronto will be up the creek if mortgage rates rise by just 2%.
-why is this even a discussion point, it could take years for rates to rise 2%.
Might as well ask what will happen to the price of cheese if aliens land on the moon.

Seeing five-year mortgages rise from 3% to 5% is no stretch at all. Any reasonable person would prepare for the inevitable rather than denying it. — Garth

#161 Rational Optimist on 01.20.15 at 11:03 am

36 nonplused on 01.19.15 at 8:27 pm

“He is going to be in the top bracket (which is crushing in BC) for 75% of those earnings.”

You must be in Alberta to think BC’s tax rates are crushing. The top bracket in BC begins at $150,000, but it’s “only” (yeah, I know) 46%. In Ontario, that same level of income is taxed 48%, and income above $220,000 is almost exactly 50% (all combined rates).

In Quebec, the top bracket starts at less than $140,000 and the combined rate is fully half.

I bet that BC is probably in the middle of the pack in this regard.

#162 Mark on 01.20.15 at 11:15 am

“why is this even a discussion point, it could take years for rates to rise 2%.”

Or it could happen overnight. Especially as fear sets in, and bankers decide they simply don’t want to invest in mortgages in preference to investing in other things, including, but not limited to, share buybacks, etc.

Adding 2% to current mortgage rates would still be within the historical range of risk premia charged on loans. Especially as equity continues to recede and borrowers are increasingly trapped to a captive lender, why won’t the banks start playing hardball with their customers? All they need to do is simply only offer the ‘posted rate’ in the renewal offer letters. Which is the equivalent of a 2% increase for a large number of Canadian mortgage borrowers.

#163 Mark on 01.20.15 at 11:24 am

BTW, the TD “Posted Rate” is 4.79% today for a 5-year mortgage. The discounters are lending at 2.79% for the same term.

If one has minimal or negative equity, increasingly prevalent these days on account of declining prices, shopping around for a different mortgage lender really isn’t an option, as a new appraisal would be required — revealing the existence of the minimal or negative equity. Hence, when that letter from TD shows up offering 4.79% — that’s the equivalent of a 2% mortgage rate increase, without even so much as anything majorly bad happening in the economy or the BoC making an interest rate move.

#164 Nathan on 01.20.15 at 11:27 am

@Victor V

“Many of them will not be eligible for employment insurance and are facing a very scary future.”

I hope this news about Target closing in Canada helps put the spotlight on the unfairness of the EI system for part-time workers. EI is a relic from a time when most people in society had full time jobs so in order to qualify for EI someone has to have had full time hours (or close to) before being laid off.

Increasingly, and especially for younger generations, the Canadian job market is made up of part-time jobs. There should be EI for part-time workers too–or they shouldn’t have to pay EI premiums. It’s not fair to make part-time workers pay EI premiums even though they will never themselves qualify for EI if they get lose their job. I know what it’s like, I spent most of my twenties working part-time retail jobs. I contribute to EI with every pay cheque. But anytime I found myself unemployed, I never qualified for EI either because it was part time or I wasn’t laid off (quit/fired/contract expired–very rare for retail part-timers to be laid off due to lack of work, that’s not how retail operates, they cut your hours to a level you can’t afford to support yourself on until you are forced to quit for something better). It’s a massive injustice that part-time retail workers have to contribute to an EI program that they themselves will never be eligible for even when though they experience often bouts of unemployment and could benefit from an EI program. Instead, it’s the higher class workers and union workers and government workers who already make more money than part time retail workers who are the ones who get to collect EI when they get laid off. It’s another example of how Canada robs the poor and young to pay the old, well-off, and established.

#165 Happy Renting on 01.20.15 at 11:27 am

#121-Blackdog

I used gross to calculate, since CMHC’s guideline for affordable housing is 30% of gross household income.

http://www.cmhc-schl.gc.ca/en/inpr/afhoce/afhoce_021.cfm

#166 Saskatchewanite on 01.20.15 at 11:28 am

To: #87 Outside Advisor
Re: “Told him I couldn’t assist. Won’t take his phone call again. Had me fuming all night.
As a financial advisor I work in a tarnished industry as well. I can only control my own actions. My value as I see it is to stretch clients to save more in a diversified portfolio. Some don’t need my services, some do. Treat every client interaction as if it would be published on front page news.”

Good for you for sticking to your principles and thank-you for sharing. It is heart-warming to hear of sincere, knowledgeable and ethical advisers. Keep up the good work.

#167 Mark on 01.20.15 at 11:55 am

“EI is a relic from a time when most people in society had full time jobs so in order to qualify for EI someone has to have had full time hours (or close to) before being laid off.”

EI is also horrifically bad for new grads, as they’re not even considered to be ‘unemployed’. So they sit in a sort of limbo upon graduation, where they’re not really considered ‘unemployed’ and thus eligible for the various assistance programs. But they’re obviously not employed and making money.

The end result of such is that EI will shovel oodles of money to provide technical retraining of the unemployed. But they let the new grads, those who already invested their own money majorly in their education, to sit out there and die. In some fields, like IT, the EI-trained people actually are competing with the college/university grads for the same jobs. I agree, its a horrible system and the root of so many injustices including abuses of patronage.

#168 Toronto_CA on 01.20.15 at 11:57 am

The Loonie is down a full cent this morning relative to the US$.
Ouch.

#169 Saskatchewanite on 01.20.15 at 12:00 pm

To: #70 For Those about to Flop
Re: “O.k so how much rent % is your level . Anyone?”

Our rent takes 16% of our net income.
– 2 blocks from down town in a small SK city.
– we live in a tiny 2 bdrm house with a big yard for the 2 bambinos.

#170 Leo Tolstoy on 01.20.15 at 12:12 pm

#168 Toronto_CA on 01.20.15 at 11:57 am
The Loonie is down a full cent this morning relative to the US$.
Ouch.

The CAD is going to fall a lot further than that by the end of 2015.

The CAD going to be like the Euro collapsing against the Swiss franc. Or worse.

#171 CJK on 01.20.15 at 12:13 pm

I doubt the doctor + dentist couple story is true. I’m in medicine and there is no way a family doctor can make $200,000 working one day in a clinic. Doctors can make quite a bit, but they have to put in the hours (more than 60/week). I don’t know any med school that would pay a physician $100,000 to teach 1x/week either. To get that kind of pay a doctor would need to hold a major admin position (ex – assistant dean), and that is a job with lots of headache. Anyone think this story is a hoax?

#172 Sam Jancana on 01.20.15 at 12:26 pm

ca dollar in the .82 handle, oil down over 4%, Joe must be sweating big time, there are indications oil could be going bellow $ 30…

#173 Sam Jancana on 01.20.15 at 12:34 pm

Oil might even go bellow 25 $ according to some oil producers, shutting down effectively ALL tar sands projects.

#174 Balmuto on 01.20.15 at 12:35 pm

#51 Mark
“Yes, watch the CAD$ indeed. There’s a pretty significant risk of the “Switzerland” thing happening to it, as it is severely suppressed relative to the fundamentals (ie: domestic deflation, excess export capacity, etc.)”

All that matters now for the loonie right now is OIL, Mark. Down another penny today, tracking oil lower. Other factors become irrelevant when you have these big moves in oil. Whether it ought to or not, the CAD$ trades as a petro-currency. That’s just how it trades. When oil settles down those other factors you mention may come into play. Don’t expect a move back to parity any time soon, though.

#175 kothar on 01.20.15 at 12:43 pm

Who is attacking our dollar to make it so low? None of the bank forecasts showed the dollar going this low. They said our value ppp is 83 cents or so. Why are they allowed to attack us in this regard? How are supposed to travel and buy things now being more expensive. The BoC needs to stop this and revalue it higher!

#176 HD on 01.20.15 at 12:51 pm

#135 Cici on 01.20.15 at 1:31 am

Hmmm Garth, if interest rates are set to rise mid-year, would now be a good time to underweight the bonds portion of our portfolios?
—————————

Tsk Tsk Tsk, Christine…..are you trying to time the market? ;)

Let me offer my 2 cent for what it is worth. Not a good time to underweight the bond portion. Simply stick to your asset allocation. If it goes down….rebalance and buy more until the desired asset allocation is reached. No market timing required.

Best,

HD

#177 Shawn Allen on 01.20.15 at 12:58 pm

Best Comment Ever… Game Over…

Wealth gap and the 1%…having now almost 50% of the wealth and growing

Someone commented a few days ago.

In Monopoly, when one person ends up with all the money, the game is over.

One of the best comments ever because it sums up the unsustainable nature of a continually growing wealth gap in a single simple memorable sentence that will resonate with people.

Start a new movement? Call it the Game Over movement?

#178 6,000 years and counting... on 01.20.15 at 1:05 pm

Garth, 6000 years and counting….

The Loonie is down full cent and that Canadian manufacturing that will benefit greatly from the low dollar is falling faster than forecast.

And the icing on the cake is that in Ontario (the future economic engine of Canada with the lower dollar) – “Sales in Ontario fell 2.1% to $23.7 billion as 18 of 21 manufacturing industries, representing nearly 90% of the province’s manufacturing sector, posted lower sales. This was the third decline in four months. Sales of motor vehicles and chemicals were down 5.9% and 6.1% respectively.”

But do not worry – we will slap some “revenue neutral” carbon tax ASAP and then we will increase the TTC fare to compensate for the “Employment increased by 14,000 in public administration, mainly in both provincial and municipal public administration.” (latest LFS for Dec.2014)

#179 BlackDog on 01.20.15 at 1:06 pm

@HappyRenting #165,

So, at 35% gross (20% net) my rent is too high then. I will ask my landlord to lower it since she is obviously charging too much for an average house as compared to the income of the average family in Ottawa. Yeah right….

#180 Nuke on 01.20.15 at 1:08 pm

We were able to find a nice 3 bedroom TH on a quiet street next to the AGO and a large park for about $1,350 per month. It is a row of rental townhouses not condos so likely why the cost is reasonable.

Raised the family here and no real thought to buy. The landlord is great and gets us everything we need when asked; new hardwood kitchen with ceramic backsplash, new windows, new patio fencing, new fridge, stove, hot water heater etc.

Average rent has gone up less than 1% annually. So will miss the convenience and quality of life if I had to move.

#181 JSS on 01.20.15 at 1:12 pm

Looking back, if i had to pick another career, i’d pick either pharmacy or optometry over engineering. The ups and downs in employment in the engineering/project management field causes a lot of tummy ache. As they say…no money, no engineering.

#182 TurnerNation on 01.20.15 at 1:22 pm

I’m spending 20% of my take home pay on downtown rent in Toronto. Full amenities in building, managed by a Reit, can walk to work. Steps from King St W. Party strip and Dollarama.

#183 BlackDog on 01.20.15 at 1:24 pm

@Nuke, This is just a subjective observation, but it seems to me that rent in Ottawa is higher than rent in TO, which is interesting seeing that our house prices are significantly lower. I did a lot of looking around before moving recently, and could not find anything comparable for less than what I am paying now. Maybe there is a higher demand for rentals in Ottawa as compared to TO.

#184 Porsche on 01.20.15 at 1:28 pm

BNN… 40% chance of a rate cut this year

Not gonna happen. — Garth

#185 Mark on 01.20.15 at 1:28 pm

“Who is attacking our dollar to make it so low? None of the bank forecasts showed the dollar going this low. They said our value ppp is 83 cents or so. Why are they allowed to attack us in this regard? How are supposed to travel and buy things now being more expensive. The BoC needs to stop this and revalue it higher!”

Probably a bunch of dumb hedge funds who seem to think that lower interest rates would magically result in CAD$ devaluation (when quite the opposite is true, due to arbitrage pricing theory). We can look to Switzerland to see what happens when they’re proven…spectacularly wrong!

Even the Canadian investor psychology is, unfortunately, very anti-CAD$. Which is really unfortunate, and allows smart people to pick up CAD$ right now at an incredible bargain.

Remember, the same thing happened in the early 2000s. In 2009. And probably is happening again. The outcome, 2-3 years later was, in both prior cases, quite spectacular for the CAD$.

#186 SC on 01.20.15 at 1:34 pm

Garth,

One post you mention deflation, and how interest rate will decrease, leaving Canadians saddled with debt they can’t afford. The next post you talk about the Bank raising interest rate, using the US to prop up your case.

Which one is it?

I never said the central bank rate will decrease, because it won’t. — Garth

#187 Porsche on 01.20.15 at 1:35 pm

#184 Porsche on 01.20.15 at 1:28 pm
BNN… 40% chance of a rate cut this year

Not gonna happen. — Garth

…………………………………………………………………….

Maybe not, but there won’t be an interest rate rise that affects over indebted house numbnuts either.

Over time, you bet. Get ready now. — Garth

#188 Avoided TSX on 01.20.15 at 1:37 pm

TSX is flat over the last 5 years in US Dollars.

Imagine what would happen to the CDN dollar if housing crashed. Looks less likely though.

Canadian average housing prices went from $410,000 USD to $325,000USD. Another 6 cents down for the CND dollar will mean the average CND price will be $298K USD.

Close to the U.S. price. There you have it. The crash.

Hey, let’s convert everything to zlotys, and see where we stand. Just as relevant. — Garth

#189 bdy sktrn on 01.20.15 at 1:38 pm

#171 CJK on 01.20.15 at 12:13 pm
I doubt the doctor + dentist couple story is true. I’m in medicine and there is no way a family doctor can make $200,000 working one day in a clinic.
————————————————
waddaya talkin about?

my doctor works 15min once every two weeks and he makes 500k.

seems about as likely.

#190 @Mark on 01.20.15 at 1:40 pm

“Probably a bunch of dumb hedge funds who seem to think that lower interest rates would magically result in CAD$ devaluation”

You get the prize for the dumbest comment of the year. ‘Dumb hedge funds?’ Really. Check their bank account and compare with yours.

#191 straight six on 01.20.15 at 1:46 pm

Maybe the expert predicters should quit spinning their ears and admit they have no fuggin idea.. and then do something constructive, like shut up!

#192 bdy sktrn on 01.20.15 at 1:53 pm

#189 @Mark on 01.20.15 at 1:40
—————————-

take it easy there sparky, hedge funds don’t bat 1.000 either.
“Most hedge funds fail: their average life span is about five years. Out of an estimated seventy-two hundred hedge funds in existence at the end of 2010, seven hundred and seventy-five failed or closed in 2011, as did eight hundred and seventy-three in 2012, and nine hundred and four in 2013. This implies that, within three years, around a third of all funds disappeared. The over-all number did not decrease, however, because hope springs eternal, and new funds are constantly being launched.”

#193 footydiver on 01.20.15 at 1:53 pm

“You are richer than you think”

— Scotiabank

#194 Porsche on 01.20.15 at 1:55 pm

IMF cut’s Canada’s growth outlook for 2015 and 2016

#195 Mark on 01.20.15 at 1:55 pm

“You get the prize for the dumbest comment of the year. ‘Dumb hedge funds?’ Really. Check their bank account and compare with yours.”

Most hedge funds aren’t even beating the relevant market indicies and haven’t for years. My bank account is doing just fine, BTW, because at least I am matching the index.

And just remember, someone is taking the opposite position.

“Imagine what would happen to the CDN dollar if housing crashed. Looks less likely though. ”

Yeah CAD$ should surge because of deflation, ie: Canadians desperately trying to pay back their mortgage debt, selling their overseas assets and truncating foreign spending to deal with their debts at home. A housing crash is very CAD$ positive.

#196 Sheane Wallace on 01.20.15 at 1:59 pm

If gold goes down, which it seems is in the cards, in absence of new QE in US (not happening in 2015 anyway) and with oil going down, possibly to the $ 25 range, we might be looking soon at the Ca dollar in the sixty something range. Getting there really fast. Losing from tar sands and shutting them down are completely different outcomes in terms of revenue losses.

There might not be many buyers lining up for our bonds at this point and in the case of significant deficits we might see interest rates forced up with all the consequences, or additional money printing additionally sinking the Ca dollar.

I knew it was coming but did not have the guts to leverage short the loonie, could have made twice the gains (in reality not gain but prevented loss)
Mark is looking at additional potential losses, if he is shorting the US dollar, my condolences for the losses but stay strong Mark, some more to come. Thinking of it, Mark’s losses are my gains as I am on the other side of the trade so thank you, Mark, keep up the good work.

Does anyone notice deflation around? As I mostly see inflation everywhere, expect for oil.

#197 Sheane Wallace on 01.20.15 at 2:00 pm

except for oil,

#198 For those about to flop... on 01.20.15 at 2:08 pm

Thanks to all the people who answered to my question on rent %.
I thought to ask because I only pay 15% which is why I have stayed in the same place for the last decade.
I live in Van and although I’d like to buy the thought of shooting myself in the face with a double barrel shotgun brings tears to my eyes so I stay out of it.

#199 Xerglacia on 01.20.15 at 2:38 pm

Here Garth, this is for you to help people understand a little more clearly, though having read comments, I generally doubt it.

Hopefully it’ll make it clearer for people who say they made such and such from a buying their house at $XXX,XXX and selling at $XXX,XXX

https://www.youtube.com/watch?v=ze8BcQB_yAw

#200 mid20millenials on 01.20.15 at 2:40 pm

#198 For those about to flop…

Ours is about 20% of after tax income at a decent (but older) apartment building near a rich folk neighbourhood in Toronto. Couple with no kids.

Maybe we’ll buy someday, but for now it’s nice not being tied down to a square plot of dirt outside of the city, because we can’t afford to live in Toronto

#201 David on 01.20.15 at 2:48 pm

Calgary Boy, the real estate bottom in Calgary was September 1985. CCB and Northland Banks failed as did numerous small trust companies. The Alberta government got loaded up with plenty of troubled assests from bum investments and debt failures. In the context of those times don’t forget a high equity qualified mortgage had an interest rate of 13.25 % Emptied out commercial office towers in Calgary were fetching microscopic cap rates around 1%. These are different times, but history is always instructive.

#202 Nicolas on 01.20.15 at 2:49 pm

Love reading you Garth.
But Canadians banks didn’t survive on their own through the financial crisis, as you sometimes imply. We bailed them out. Not saying it will happen again, just that it happened.

Banks got $114B from governments during recession
http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

Not exactly. The bulk of that was through the purchase of mortgage assets from banks. Not the same as the US bail-outs and it is disingenuous to use the same terminology. Our banks remain rocks. — Garth

#203 Happy Renting on 01.20.15 at 2:50 pm

#179 BlackDog on 01.20.15 at 1:06 pm

From your previous comments your numbers are 20% gross, 35% net, so by the CMHC affordability measure you are doing awesome.

#204 Happy Renting on 01.20.15 at 2:51 pm

#180 – Nuke

Sounds awesome, which street?

#205 dickVandyke on 01.20.15 at 2:51 pm

with all this deflation in the world, and BoC well below its inflation target, how will raising rates help canada with its inflation targets? with all this cheap energy wont higher rates mean higher deflation and make things worse in canada ? Boc is in a bad situation here

#206 cramar on 01.20.15 at 2:56 pm

Maybe the Van doctor should consider relocating to a place that has a shortage of doctors and has RE at a fraction of the price in Vanland. Is it really worth living in Vancouver, if on a doctor’s wages you live like a slave in debt? Maybe he should read “The Millionaire Next Door.”

#207 HD on 01.20.15 at 3:07 pm

@ Nonpulse

I believe this blog entry should be of interest to you:

http://www.samharris.org/blog/item/can-we-avoid-a-digital-apocalypse

Best,

HD

#208 Nicolas on 01.20.15 at 3:10 pm

Our banks remain rocks. — Garth

I agreed (and I’m not a goldbug). But our biggest bank RBC got 8 billion from the U.S. federal reserve in 09. Scotiabank was “underwater” and took 12 billion from the same source. I don’t remember their CEOs talking about that at the time. Almost zero Canadians (and certainly not my brother in law) are aware of this. Must be the “Canadian” way of dealing with unpleasant news.

http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

#209 Paul - False Harbingers must say on 01.20.15 at 3:19 pm

Paul – False Harbingers must say. We all know the fundamentals do not bode well for massive appreciation of RE in Canada, a kindergarten kid would see that. But from here and the 30% drop renters are salivating at…. it’s a whole reality block.

There are no houses for sale in Toronto, Vaughan, Thornhill and 10 offers are now the norm looks like a bad start to the spring market. may god send some snow on the overheated sector. If we see a 30% price jump in GTA, don’t say we were lucky. A crash of 10% will soon follow.

the real harbinger: watch for a 40% price increase in one season! then prices are going to drop 50%

#210 Paul - False Harbingers must say on 01.20.15 at 3:21 pm

if RE drops … which will in 2017 – what will happen to bank shares when bankrupt owners cause power of sale to surge to American levels in Ontario???

just curious how banks will put off the fires….declaring bankruptcy is one option

No mass bankruptcies or defaults. — Garth

#211 Mark on 01.20.15 at 3:32 pm

“There might not be many buyers lining up for our bonds at this point and in the case of significant deficits we might see interest rates forced up with all the consequences, or additional money printing additionally sinking the Ca dollar.”

Canada is self-funding internally and historically is a net exporter of capital (ie: Canada acquires more overseas assets per year than foreigners acquire in Canada). So the ability to repay debts internally does exit in spades. Furthermore, with the demand to repay domestic debt existing, on account of falling housing prices, and the deflating economy, demand for CAD$ bonds shouldn’t be a problem. If you look at CAD$ bond prices, they are setting records at the moment (ie: XBB, XSB ETFs) — hardly what you would expect in the prelude to a sustainable devaluation. Also, repaying mortgage debt is economically equivalent to demand for bonds — and we know that Canadians have an awful lot of mortgage debt they need to repay!

Another way to think of why Canada will end up with a very high CAD$ is that in currency and trade wars, and make no mistake, we are in the midst of a global currency war. Historically, strength in such is derived through weakness. Net importers must restructure their economies to become net exporters. Net exporters must restructure their economies to become net importers. Canada has had a weak CAD$ for much of the past 30+ years, and in such a restructuring, will have the benefit of a higher CAD$ for much of the next 30 years as we have been a chronic net exporter.

The benefits of a high CAD$ are enormous. Canadians will be able to consume more than they earn as a nation. Interest rates will remain quite low for an extended period, with chronic importers (ie: the USA) forced to raise rates far earlier and more aggressively to control their domestic inflation. Professionals, who have seen their incomes destroyed over the past decade relative to tradespeople should also do well in such an environment.

#212 Rusty Venture on 01.20.15 at 3:34 pm

Garth; with respect to the mortgage assets, where are they reported in the budget?

http://www.budget.gc.ca/2014/docs/plan/anx1-eng.html

Not trying to be a smart ass.
Rusty

#213 Sponge Rob on 01.20.15 at 3:34 pm

#51 – Mark
I hate to break this to you but you are completely wrong about the Canadian dollar. The Swiss move was a currency peg being abandoned and therefore the Swiss Franc found it’s natural level.
Canada used to have a soft peg. It was allowed to float in an approved range between .96 and 1.02 US.
In June 2013 we got a new bank of Canada governor. He was hired for one reason: To make central bank policy more politically acceptable. The feds wanted a lower dollar and they hired the first guy to say “weak dollar” in the interview. The day of his hiring the soft peg was ditched and the loonie has been free to find it’s natural level ever since. What is the natural level? I have no idea but I do know it’s lower than what we have today.

#214 Derek R on 01.20.15 at 3:35 pm

#196 Sheane Wallace on 01.20.15 at 1:59 pm wrote:
Does anyone notice deflation around? As I mostly see inflation everywhere, expect for oil.

Well, let’s see…

1) Job losses occurring? Check.
2) Price of essentials rising? Check.
3) Price of non-essentials dropping? Check.
4) High level of private debt? Check.
5) People worried about the future? Check.

Yep, there seems to be deflation about. You just have to know what signs to look for.

#215 Mark on 01.20.15 at 3:40 pm

“if RE drops … which will in 2017 – what will happen to bank shares when bankrupt owners cause power of sale to surge to American levels in Ontario???”

The CMHC, which provides subprime mortgage insurance against basically everything that’s meaningfully at risk in Canada mortgage-wise, will be eating the losses.

The chief risk in Canada’s banks is political risk. If the politicians responsible for CMHC start sabre rattling, they could scare the bankers off from renewing mortgage loans, especially if the value of the CMHC subprime mortgage guarantee was somehow left in doubt. Which could set off a deflationary systemic crisis in Canada’s economy/banking system.

#216 Bottoms_Up on 01.20.15 at 3:42 pm

#20 Marco on 01.19.15 at 8:04 pm
+++++++++++++++++++++++++++++++
Interesting take on that article. I thought it was fishy they didn’t throw in the fact that if the family moves to a difference province they would instead be living like royalty rather than beholden to the lender(s).

#217 Mike T. on 01.20.15 at 3:46 pm

#182 TurnerNation

but but…..
all the people that live around you and bought will be paying 800K to bank 350K the whole while considering you a 2nd class citizen…

well played

SM

TO real estate is cooked, just like everywhere, because of the household debt – that is the missing factor from the 90s and now – debt cannot be increased infinitely

#218 Balmuto on 01.20.15 at 3:52 pm

#185 Mark

“Remember, the same thing happened in the early 2000s. In 2009. And probably is happening again. The outcome, 2-3 years later was, in both prior cases, quite spectacular for the CAD$.”

Because of oil. Have a look at the “CAD/USD versus Oil Futures Weekly” chart in the link below – it tells you all you need to know about why the loonie did what it did over those time periods:

http://www.blackswantrading.com/forex-charts/

No way do we go back to parity until oil recovers to at least $100 a barrel. Interest rate and inflation differentials have little meaning in this context.

#219 Bottoms_Up on 01.20.15 at 3:52 pm

#152 Nottarealtor on 01.20.15 at 9:27 am
—————————————————–
Forget about GTA real estate, he also thinks global warming is a hoax.

#220 Porsche on 01.20.15 at 4:00 pm

Nobody trashes real estate in this country except on this board.

Think we got enough influence to change the direction of that ever climbing lottery in Canada?

LOL

#221 Leo Tolstoy on 01.20.15 at 4:08 pm

#196 Sheane Wallace on 01.20.15 at 1:59 pm
Mark is looking at additional potential losses, if he is shorting the US dollar, my condolences for the losses but stay strong Mark, some more to come. Thinking of it, Mark’s losses are my gains as I am on the other side of the trade so thank you, Mark, keep up the good work.

Mark had lost a lot over the years. Nortel, Blackberry, gold, housing, and CAD/USD have been a number of his completely wrong predictions.

But as they say, you can’t lose much if you don’t have much. So it doesn’t really cost Mark anything from making these terrible predictions. That’s why he can make so many of them.

#222 hongcouver on 01.20.15 at 4:38 pm

http://www.cbc.ca/news/canada/british-columbia/vancouver-has-2nd-most-unaffordable-housing-market-in-the-world-after-hong-kong-1.2919593

We are second because a lot of people from Hong Kong and China buy here. Aside from easy credit, this has to be a strong contributing factor to the prices of homes in Honcouver.

#223 JSS on 01.20.15 at 4:52 pm

Should be buying Canadian bank shares (or ETF that carry them) these days. Look at the yields. And they’re cheap at the moment. Don’t think dividends will be cut, maybe stagnate for a bit of time, then whoom – dividend hikes…

#224 Mark on 01.20.15 at 5:00 pm

“Mark had lost a lot over the years. Nortel, Blackberry, gold, housing, and CAD/USD have been a number of his completely wrong predictions.”

Housing is going down in price. I admit, I thought it would fall apart a little earlier than it did, but a year and a half ago, prices started declining across Canada, and they’ve been declining ever since. As for Nortel, I was severely underweight it. Blackberry, well, it didn’t go bankrupt like everyone else said it would and they’re actually doing a decent job of repairing things.

Yes I have taken a short position against the USD/CAD$ pair, mostly to hedge long USD$ exposure in equities. Yes I am down on it, which is offset by gains elsewhere. But nothing ever moves in a straight line, and I’d be lying if I told you that I entered into a position and hit the exact top or bottom.

At some point, the speculation-induced hatred of the CAD$ will run its course, and up, up, and away we go. The rewards are far superior being a contrarian than going with the herd, although it can be painful in the short term.

#225 Mark on 01.20.15 at 5:02 pm

“Nobody trashes real estate in this country except on this board.”

Really? Banks do so every day in their offices, because they invest in mortgages (ie: debt against houses), instead of the houses themselves.

If bankers are typically the ‘smartest people in the room’ when it comes to investing and finance, and they’re investing in mortgages, even going so far as to make sure most of them are under CMHC insurance, rather than buying houses and becoming landlords — what does that tell us?

#226 DM in C on 01.20.15 at 5:06 pm

Was recently bought by Haliburton, now laying off 7,000

http://www.usatoday.com/story/money/2015/01/20/baker-hughes-latest-hit-by-oil-slump-to-lay-off-7000/22042433/

Anyone keeping a tally?

#227 TheRealTruth TRT on 01.20.15 at 5:06 pm

Home prices in Vancouver and Toronto are not going to drop come spring.

Why? Like I’ve been saying all along, the gov will sacrifice the currency. Take a look at what 1 canadian dollar buys vs the Indian Rupee and Chinese Yuan.

Canada is on sale for people of Indian and Chinese descent who have holdings back home.

You don’t have to believe me now. Just watch what happens in spring.

I will remind you guys and the author.

#228 Setting the Record Straight on 01.20.15 at 5:18 pm

#111 waiting on the westcoast on 01.19.15 at 11:21 pm
#79 Toronto Bull re: Asian buying up luxury homes…

Everyone is looking for the bogeyman.

The best way to describe the market is to think of the segmentation at restaurants. If a lot of rich tourists go to a group of high end restaurants, it does not change the prices at mid tier or lower tier restaurants. Yes, maybe the prices will go up in the luxury segment but the reality is that the other segments have their own demand and supply curves. Pressure in a small part of the market does not mean the whole curve is shifted.

The reality is we have bought up our own segments and put some beautiful stainless accessories inside at the expense of major risk to ourselves…

…,,,,
You can posit anything you like. In this case you are positing zero cross elasticities of demand.

Not likely

Evidence?

#229 Blacksheep on 01.20.15 at 5:24 pm

Avoided # 188,

“Canadian average housing prices went from $410,000 USD to $325,000USD. Another 6 cents down for the CND dollar will mean the average CND price will be $298K USD.

Close to the U.S. price. There you have it. The crash.”

“Hey, let’s convert everything to zlotys, and see where we stand. Just as relevant. — Garth”
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I predicted this a over a year ago, 80 cents US was my target. How could I be confident enough to re-enter the RE market?

Because it’s the only path the gov. could take, to deflate the Canadian RE bubble with out freaking out the Cattle.

Like you’ve reminded us over the years Garth, the US $ is the Global reserve currency. It’s also the benchmark by which all other currencies are measured.

Hey, I may just see my CAN $ target this week if they drop rates, did I mention I’m on an open mortgage : )

#230 BlackDog on 01.20.15 at 5:38 pm

#HappyRenting, #203, LOL…oh yeah, I got the net and gross backwards. Thanks for correcting me.

#231 espressobob on 01.20.15 at 6:10 pm

#223 JSS

Bank sector ETFs? Sounds like market timing, just like the energy bulls & goldbugs. Almost forgot the forex crowd.

The idea is to measure these plays against broader based indice ETF’s over the past 5 years and determine whether this is day trading or investing?

You might be surprised.

#232 Proud Poll on 01.20.15 at 6:39 pm

“Hey, let’s convert everything to zlotys, and see where we stand. Just as relevant. — Garth”

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Are you trying to rip on Polls my boy…lol
Btw – another big dump by the canadian loooonie.
It makes me wish i had my saving in zlotych.
Beats the shitty cdn any day of the week.

Proud Poll.

#233 Shawn Allen on 01.20.15 at 6:45 pm

Mark, is this just bait for a response:

At 225 Mark, reMarkably said:

If bankers are typically the ‘smartest people in the room’ when it comes to investing and finance, and they’re investing in mortgages, even going so far as to make sure most of them are under CMHC insurance, rather than buying houses and becoming landlords — what does that tell us?

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It ummm tells us that they are ummm banks?

Wow!!!!!

#234 Westcdn on 01.20.15 at 7:38 pm

Albertans won’t accept a provincial sales tax – period. Well that expresses Albertan’s attitude to Government – what they take will never be given back. History supports that view. So, Alberta will be borrowing money. Do you think lenders will give Alberta a break because Alberta has fallen on hard times? As Albertans allege they are tapped out, we have to borrow from friendly and understanding foreigners. I have no doubt they will give us preferred terms and Alberta will be better off in the future with more debt (sarc).
I have said before that I am against large government so maybe I will get what I wish but change in a short period is not good for most people. There are people counting on “free” government services and they are not going to like what is coming down the pipe. Further, since public employees are getting private sector or better remuneration, I expect their benefits to come under attack which I will support.
Despite wasteful government expenses, I really want to stop the elite from taking more than they deliver. Men are not equal (same for women) so yes, it is entirely reasonable to demand more for better service but don’t think heirs should be given a free pass through birth right – it retards human progress by making things too easy for the privileged. I note the graveyard is full of the “irreplaceable”.
I read an opinion about political life that 1/3 of voters will hate you no matter what you do, 1/3 will love you no matter what you do and 1/3 who don’t care. Therefore, to will an election, cater to the “don’t care” 1/3 by giving them empty promises which successfully kicks the can down the road. Also, make a few noises about taxing the 1%.
I am betting that Central Bankers want to avoid debt defaults therefore protecting asset values. IMO, good companies are worth their weight in gold. Stupid debt is on its own. Rant over.

#235 Brian on 01.21.15 at 11:59 am

Ask yourself what the USA gross domestic product (GDP) would be if hedonic adjustments and other flim-flam were eliminated from the calculation.

#236 M on 01.21.15 at 4:25 pm

by the mid 2015 all the US Fed will do is to come with QE4.
Canadian pesso though, is a different story, once it hits 75c US our guys WILL hike the rates !

#237 Whoo Whee! on 01.21.15 at 8:38 pm

#17 kommykim on 01.19.15 at 7:55 pm

That railing looks like a future GF graph of house prices.

And we hope there isn’t a crash landing when the railing hits bottom.