The dollar slipped back below eighty cents on Wednesday and, say some rock star economists, will be near seventy by the time 2015 is through. Oil dropped below fifty bucks again. As I mentioned two days ago, Citibank swears it could be twenty in a few months. The cheap loonie is inflationary. Cheap oil is deflationary. Caught in the middle is what’s left of the middle class.
Some months ago I published this chart. The column on the left represents rich people. The 1%ers. The one on the right is the bulk of society. It shows that the wealthier people become, the more diversified and liquid they grow. Regular schmucks, on the other hand, have most of their wealth in a single asset – a house – and borrowed massively to get it. The rich hold assets. The rest hold debt.
This is an American chart, prepared by respected New York academic Ed Wolff. Americans have a 64% homeownership rate, remember, while we’re at 70%. The average Canadian house costs 68% more than the average one down south. And families here have a 164% debt-to-income ratio, while it’s 60% lower for households in the States.
So, just imagine how much more extreme this charting of the difference between rich and poor would look for Canadian society. And now we have the oil crush to contend with – the value of our biggest export carved in half. If you don’t think this is consequential, you’re daft. Or you have a leased Audi and a Re/Max business card.
Here’s Matt, in Fort Mac:
I have been working in the patch since 2008 (few months in when she went belly-up). I am currently working up here now, however, that can end any day…as it has for 60% of my project’s workforce already. We were told before Christmas to ‘go home and enjoy ourselves’, they said we’d be working 20&8 until spring upon our return, it’d be fun they said…go spend $$$ they said. Well they lied.
By the way, Fort McMurray realtors have so far not been able – or willing – to release statistics on the local market for January. But today there are about 900 houses for sale in what was once the hottest market in the land – probably enough to last the next year, and more pile up daily.
In Calgary? Well, the local real estate board conveniently changed its reporting regimen in the past few weeks, so we’re blind to the whole story. But we do know the number of families desperate to sell has climbed by over 3,000 in the last six weeks, and that sales have dropped by a third. So far the average price is lower by almost 6%. Lots more to come.
“At lunch yesterday,” Simon tells me, “a friend gave me an estimated value of the escalation of available downtown commercial real estate that was just too excessive for me to quote. He was around for the 80’s and is not given to embellishment, he strongly believes his estimates will be confirmed when the first quarter report is issued. Attached is a message I just received from him.”
This is what Simon’s friend sent over:
To review –
Gasfrac – bankrupt last week
Southern Pacific – bankrupt this week
Laricina – in default
Connacher – for sale distressed
PWT ‘talking to bondholders’
In addition Sonde Resources filed for Bankruptcy and Gran Tierra terminated its CEO due to very significant cash problems and a need to attempt to pull the company out of the glue.
Across the board capex & prod guidance cuts ranging from modest to massive/surprising; news of large scale layoffs from majors. The sector is starting to sort itself out from the bottom up it would appear. Painful but necessary and ultimately positive.
The dollar was whacked again on Wednesday after the deputy at the Bank of Canada gave a talk, suggesting the Poloz poodles may cut rates again. Maybe next month. If it was meant to devalue the currency, it worked. In the meantime it added a little more burden to every family in the land that eats lettuce, buys a flatscreen or wants an iPhone.
In reality, we have just started to see the impacts of the current situation. A lot of people will lose their employment, many offices, shops and plants will empty, and millions of middle-class Canadians will have less net worth by the time this storm blows through. In a country where most people you know have adopted a one-asset strategy, lustily embraced debt, stopped saving and worship real estate, there’s one other certainty.
The rich will soon be richer.
255 comments ↓
Happy Birthday !
First
Say goodbye to the 17 year real estate bull market in Canada. RIP
Misc assets must mean gold and Bitcoin.
Gartho is shorting gold an asset class?
Btw…..1st!
More bad news for Calgary. Supposedly, the “safe” sector is also bleeding jobs.
http://calgaryherald.com/business/local-business/shaw-communications-relocating-customer-care-operations-1000-jobs-in-calgary-affected
I bought oil today. This blog tends to call bottoms..
Urgent!! 1086 listed on Ft. Mac Kijiji 45 minutes ago.
http://www.kijiji.ca/b-house-for-sale/fort-mcmurray/c35l1700232
The irony of all of this is that it is not rocket science at all, getting rich. Stocks are at a P/E of 15. Houses are at a P/E of 35. Stocks haven’t moved much in the past 15 years. Houses have doubled and tripled in most cases. Yet ask the ‘masses’, or worse, ask the Realtors, and they’ll tell you with a straight face that the “stock market”, the evil “stock market” is a bunch of garbage, while housing is the only long-term way to riches.
I guess as a shareholder, I should be thanking my lucky stars that the public is this stupid, as to be keeping stocks cheap so I have ample re-investment opportunities. But at some level, I feel a lot of sympathy for the real victims of this mess. Not the sophisticateds who can look at the numbers and realize the magnitude of the mess, but rather, the unsophisticateds who take their advice from their mothers-in-laws, random Realtors and trolls on RFD forums, etc., and come to some rather fantasy-filled conclusions about RE.
Shaw is shuttering call centres in Calgary, Edmonton:
“About 1,600 employees in Shaw’s customer care operations in Calgary, Edmonton and Kelowna will be offered the choice of:
…
All of the customer care roles will be relocated to Shaw’s operations in Victoria, Vancouver, Winnipeg and Montreal in the next year. As part of the moves, Shaw’s Edmonton contact centre operations and part of its Kelowna operations will be closed in June, and its Calgary contact centre operations will be closed in January, 2016. Shaw will also be consolidating six of its retail stores into neighbouring locations.”
Fiiiirrrrrrsssssstttt!
Relevant picture is relevant.
the housing crash will widen the gap between the rich and the poor. Goodbye middle class
Shaw just announced it’s ‘consolidating’ it’s call centres in Van/Vic, ‘peg & MTL. So sad for Calgary, Edm & Kelowna. ~1,000 gone in Calgary alone.
Rumor at spouse’s O&G field services company is 20% pay cut + unpaid days off biweekly.
It’s getting messy messy messy out there.
Chart above shows the top 1% have the most business equity. Does this mean that the bulk of the top 1% are business owners? Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?
#185 bdy sktrn on 02.11.15 at 3:08 pm
The Fed rate will rise a quarter point in June. Get over it. — Garth
———————————
the numbers say yes. 3 months ago i believed otherwise.
Mr T is right. One bump. then nothing for a long time. US economic flywheel has a little juice left in it.
#186 bdy sktrn on 02.11.15 at 3:26 pm
I’d be hard pressed to think of any item in my personal consumption basket that has gone up in price in the past few months, let alone over the past decade.
———————-
how about;
electricity, heat (even with low NatGas, we still pay more with fees+++)
eating out
apples (saw apples in a denman st produce stand 2bux each)
internet service
cell phone service
whistler lift tickets
road/bridge tolls
carbon tax (BC)
fast food
hotels
beef
seafood
car insurance
soon to come higher PST in 604 for transit.
this is somewhat balanced with many of the items you mention.
+++++++++++++++++++++++++++++++++++
Now see Mark’s rebuttal
electricity, heat (even with low NatGas, we still pay more with fees+++)-my landlord pays
eating out-that is for rich people not basement dwellers
apples (saw apples in a denman st produce stand 2bux each)-I’m allergic
internet service-landlord again
cell phone service- don’t have one, no one will talk to me :(
whistler lift tickets- don’t know what that is but it sounds dirty
road/bridge tolls- I thought you said trolls
carbon tax (BC)- I’m in God’s country
fast food- Mom says it’s not good for me
hotels- I’ve been banned
beef- I couldn’t afford it in the first place
seafood-allergic again
car insurance- Yeah right, they’ll let me drive
Screw this I,m loading up on bonds.
First!!
Who’s going to go see 50 shades of crap?
I was looking at a 2008 Toyota Corolla that was selling for – – HAVE A SEAT: $16,995. Yes, that’s right, about the same price as what a brand NEW Corolla costs !
The only difference is about $3,000 in price between really old and brand new.
That ad was posted in the AutoTrader 2 days ago and today it sold for $16,400 CASH to a guy from Toronto.
Listen; if there is so much cash floating around that old used cars are selling for top dollar, then the economy has no problems, none at all, and I think house prices will easily double over the next 12 months. Because if people are so full of cash and are buying anything that is for sale, then the economy is healthy as can be.
Check out the prices in fort Mac for 2008. If prices didn’t drop then they’re not dropping now.
Your chart doesn’t actually have a section for debt.
So business equity is okay (dominated in the 1%) even though many business’ go bankrupt but house debt is evil? Sure
It really has just started. An adjustment like this takes years to play out. And it’s happening to your neighbours right now at a speed nobody has witnessed before. But outside the numbers these are people. Let’s not forget that.
Mark is right about the turn in RE at least a year ago. The boc told us the economy hasn’t been good for a while. People were feeling it before the oil crash.
Oil is not coming back folks. Perhaps never. It will slowly decrease in its importance over time. There will be no new net investment. The writing is on the wall. Silicon Valley is going to help make it insignificant. Are you oil guys laughing at how dumb apple and first solar are? 300 megawatts and a power company is buying the other half with the lowest nat gas prices in history. (Disclosure on both of those) Heard that Cali’s gas consumption is dropping yearly. Cali is bigger than canada.
Most people think secular shifts refer to religion. Others can’t see a rotation at a volleyball game. This is not a geopolitical ploy. We need a new plan. Quickly.
SHAW just canned 1,600 people today……1,000 here in Calgary.
Shaw Communications just axed 1600 positions in Calgary, Edmonton and Kelowna. The bulk in Calgary 1000.
thanks for the pic garth…
thats the way my two canine friends sleep sometimes at my shack
Ole Doberman does it again!
clearly this shows the way to get rich is to start a successful business.
forestry equipment perhaps?
Keep up the good work Garth. I know of several people in Victoria who have put their buying plans on hold for the last 3 to 4 years and they all read your blog. It has paid off for each and every one of them.
Cheers!
Living on Vancouver Island and have heard of 2 local real estate deals suffering because of the Alberta crisis, also 4 job losses in Alberta and one in BC, these are relatives of friends and neighbours and are hoping for a rebound in a few months…..
The portion of our savings in 1 year term deposits has just gone from 1.9% to 1.5% and just had the last one at over 5% roll. Still getting dividends from TRP and Telus……happy not to have any debt.
You have term deposits? And an eight-track? — Garth
“Chart above shows the top 1% have the most business equity. Does this mean that the bulk of the top 1% are business owners? Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?”
Absolutely. The key thing is that business owners tend to, at least initially, have a higher degree of leverage than someone who just puts $$ aside. Especially when they are young and can most afford to be taking risks. No reason why an at-home ETF investor can’t replicate such, but most don’t/won’t, for various reasons.
It really doesn’t take a lot of assets to end up in Canada’s “1%”, but one does have to be relatively prudent in obtaining them, avoiding the various landmines that are out there that can destroy a lot of wealth.
RE:#13 JSS on 02.11.15 at 6:48 pm
Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?
No. You can do very well, but you’ll never make the 1% that way. The only way is to take a cut out of a large number of peoples’ labour by owning a bussiness. There is no way you can actually EARN that amount of money yourself by just WORKING for someone else.
#19 Waterloo Resident
Is that parody? Is this a form of performance art?
No sane person generalizes from a single automobile sale to the state of the economy as a whole. That would be beyond idiotic.
#15 JSS on 02.11.15 at 6:48 pm
Chart above shows the top 1% have the most business equity. Does this mean that the bulk of the top 1% are business owners? Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?
——————————————
almost impossible. secure? yes. rich? no.
how many 1M/yr salaries? not many.
Tons of businesses worth 2-5-20Million in private hands
DELETED
#9 Mark on 02.11.15 at 6:39 pm
A house has no earnings or cash flow and only has carrying costs, therefore no P/E. There is no P/E measure based on price speculation.
Housing is tied to individual earnings and interest rates – nothing less, nothing more.
The average house price in China is less then $30,000 and average house price in India is less then $20,000
Your Point ?
Comparing 30 million population against 330 million population is not the right comparison…
You should try comparable city comparison instead…
“Most people think secular shifts refer to religion. Others can’t see a rotation at a volleyball game. This is not a geopolitical ploy. We need a new plan. Quickly.”
The time for planning was about 1-2 years ago, perhaps even earlier than that. It is all way downward from here. When we meet the bottom this time need to carefully consider diversification for the years to come
#29 Mark on 02.11.15 at 7:14 pm
Absolutely.
—
Absolutely not. On your way into the 1% realm, you will start paying 45% of your wages in taxes. So start making $150-200k per year, and half of that starts going to Mr. Harper.
the 1% use incorporate businesses that pay 10% and they use tons of eligible deductions to get that to basically zero.
You cannot save yourself rich by being a wage slave.
#30. Totally not true. Savings matter.
Mark at 29.
“Chart above shows the top 1% have the most business equity. Does this mean that the bulk of the top 1% are business owners? Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?”
Absolutely. The key thing is that business owners tend to, at least initially, have a higher degree of leverage than someone who just puts $$ aside. Especially when they are young and can most afford to be taking risks. No reason why an at-home ETF investor can’t replicate such, but most don’t/won’t, for various reasons.
It really doesn’t take a lot of assets to end up in Canada’s “1%”, but one does have to be relatively prudent in obtaining them, avoiding the various landmines that are out there that can destroy a lot of wealth.
=====================================
C,mon man ,with statements like this you’re giving your haters ammunition .
Think before you type dude.
American workers are on average 20% more productive than Canadians. Even with our Looney being 20% down, it’s not enough to keep jobs here. On top of it, our workers demand higher wages to cope with high cost of living. It vacuums our jobs out and sends them to the South. This process has started years ago, accelerated in 2011 and steam-rolling now. There are a lot of inertia in this massive move, and even if Looney slides down even further, it would take years to change the trend. By then, Canada will turn into waste land.
#8 thanks for that. I’ve never even looked at prices in ft Mac.
Wt?!$
I laughed so hard I almost fell off my chair. What are people thinking!
“No. You can do very well, but you’ll never make the 1% that way. The only way is to take a cut out of a large number of peoples’ labour by owning a bussiness. There is no way you can actually EARN that amount of money yourself by just WORKING for someone else.”
Why not? There are lot’s of people in high enough positions, that do make lot’s of money by working for someone else
Sometimes business ownership is more tax efficient
#20 Karl hungus on 02.11.15 at 6:51 pm
Check out the prices in fort Mac for 2008. If prices didn’t drop then they’re not dropping now.
This is not 2008. 1980 would be a better comparison. In 2008, Shale Oil was a non factor. Today, Shale Oil is THE factor.
Shale Oil cannot ramp down production quickly which is why we just saw yet another massive inventory build despite the rig count falling off a cliff. But Shale Oil can ramp up production quickly, as soon as oil is again profitable enough to drill. A significant chunk of the Shale Oil plays are still pushing profits at these prices. The majority of Shale Oil is profitable at prices well below the majority of oil sands production $80 profitability requirement.
Many oil sands and shale oil producers are significantly hedged at high prices as well, meaning the party (and production) will continue unabated leaving us in over-supply far, far longer. We are getting low on storage. Cheap storage is almost totally consumed, so more expensive storage is being used. Nobody stores oil for free. The cost of storage is going to come out of the spot price of oil as those who own the oil try to offload it storage fees eat into their capital.
Even if oil remains low enough and long enough to wipe out many of the over-leveraged Shale Oil plays out there right now, the oil is still there. Someone will scoop up mineral rights for pennies on the dollar and sit on them until they can yield a return, which is going to be well below the $80 per barrel the oil sands needs.
You will not see $100 per barrel oil based on supply/demand for a long, long time. It could happen for other reasons. There could be a new war in an oil producing state. There could be geopolitical oil games played by large producers such as Saudi Arabia. But based purely on supply and demand fundamentals this is not a repeat of 2008. It will be much, much worse. Prepare for pain, Alberta, prepare for pain.
Real Life Example
My wife and I sold our house in the West Side of Vancouver in 2012. Was this a good financial move for us?
I have been following your blog since the spring of 2012, when we decided to sell our house in the West Side and retire to a Gulf Island.
We invested the sales proceeds of $2 million. I have been working with a financial advisor, and my input has been along your themes of investing in the US and diversification.
The housing market in Vancouver has not collapsed.
How is this working out for myself and the purchaser so far?
These are my very quick calculations.
Purchaser was buying on spec – not sure what his plans are, but so far he has simply rented out my old house for about $4,000 per month. The taxes are about $8,000 per year. Assuming a borrowing cost of 4% on the $2 million price, he has been ‘subsidizing’ the renter by about $40,000 per year.
Interestingly, I sold at the assessed value, and the assessed value of the house has actually dropped slightly since 2012.
So far it has cost the purchaser about $100,000 to hold the property for 2 ½ years. Over that time the $2,000,000 in my investment portfolio has increased by over $500,000.
I am happy.
Thanks for your advice Garth.
Something people in Calgary won’t want to hear about. House in a mining town in Australia house goes from $1.3 million in 2011, to being passed in at auction for $360 grand.
http://www.idiottax.net/2015/02/the-west-coast-difference.html
Hey Karl H,
Your “Edmonton logic” will not wash here.
Please help explain Sheldon’s embarrassing “beautiful correction” comment instead. I am sure many of his past clients would like to know why their disappearing equity is good for them.
“Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?”
Nope.
1) You must have people working for you and make money for you.
2) You must be able to deduct your expenses from revenues. If you can’t do that, you will always have less money, time, connections to invest.
3) Most importantly, being employed you can’t have the mindset of a 1% -er.
You can still be well-off – just not that kind of wealthy.
The Conservatives are great stewards of the Canadian economy. They’ll see us through this. Yes, you naysayers, I know they’re responsible for having accumulated more national debt than any previous political party, but so what? OK, I also know they’re directly responsible for these insane and unsustainable RE prices and that they’ve set us up for real future correction pain, but is that a big deal? And yes, I know that they’ve made the taxpayer responsible for any future defaults through CMHC instead of their Bankster buddies, but is that so bad? Listening to Harper harp about the soundness of Canada’s economy makes me so happy. What’s really sad is the pathetic alternatives we have to Harper.
“The cheap loonie is inflationary. Cheap oil is deflationary”
Well, I haven’t seen any “oil related” prices go down, except for gas. i.e. roofing materials, cost for roads or construction using oil based products, transportation costs… Those producers maintain their price and reap the extra profits.
Meanwhile, other products continue to rise in price…and balanced with the lower fuel costs, keep inflation around 1 to 2 percent.
However…when oil price goes up…(and it will in time), we can see an exponential increase in inflation…all blamed on oil.
Manipulation continues…..by the 1 percent.
A wee bungalow in long branch just sold for 800k, a two story nothing fancy just popped for 1.1m
Insanity of supply and demand. Fundamentals out the window.
Speaking of oil, I let the kid drive the forex account today. He was up about 4k.
And that was early.. I said watch oil, you see it dropping fast, hammered the USDCAD hard. Buy it.
Well guess what, the morron with the oil chart up, buys it. 4000 down the drain when he realized his screw up. He’s down about 2k today. Not bad considering the screw up.
This is promising.
Now if you think CAD will lose another 10 cents. Open a Forex account. Use 100k
Buy USDCAD using only 7500. Buys you 30 contracts, You will be a millionare when cad loses 10 cents.
“In reality, we have just started to see the impacts of the current situation.” Garth
I copied the Bank of Canada chart of the percentage deviation from their Model Value of Housing midway down this post (the BoC staff think Cnd housing is 30% overvalued):
http://www.chpc.biz/history-readings/cycle-men
Arthur Schlesinger in his work on cycles noted that “Studies and surveys show that in the 20th century, this critical time period to develop discontent has decreased.”
The internet is is more widely accessed than in 2007-08. The discontent snowball is rolling downhill.
#30 kommykim on 02.11.15 at 7:17 pm
RE:#13 JSS on 02.11.15 at 6:48 pm
Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?
No. You can do very well, but you’ll never make the 1% that way. The only way is to take a cut out of a large number of peoples’ labour by owning a bussiness. There is no way you can actually EARN that amount of money yourself by just WORKING for someone else.
*********************
except some CEOs …
The rich hold assets. The rest hold debt.-Garth.
The above two sentences are music to my ears. Interesting to read about the bankruptcies today. Bankruptcies spread like wildfire once the SHTF. No exception.
My above post, he bought the dropping oil contract, not the USDCAD.
The only issue I have with those charts is that correlation does not equal causality. Are the rich wealthy because they hold diverse assets? Or do they hold diverse assets because they are wealthy? Likely the truth is a mix of both. As garth says, it’s unlikely that many of the 1% got there by buying one house. Conversely, pretty unlikely that a 1%er could have 70% of his net worth in a primary residence if he wanted to, unless he’s the king of England or something.
The dollar was whacked again on Wednesday after the deputy at the Bank of Canada gave a talk, suggesting the Poloz poodles may cut rates again. Maybe next month. If it was meant to devalue the currency, it worked. In the meantime it added a little more burden to every family in the land that eats lettuce, buys a flatscreen or wants an iPhone.
***************************
Make everything ,more expensive (i.e., food, cars, flatscreens, phones, etc)
*Joe/Sally concentrate on buying food and paying mortgage which is a burden. Loss of job… not good – but hopefully manageable for most – still paying morgage. If not the crack will grow wider one by one, pressure increases, couples divide. Wonder if this will start before or after the election. Timing is everything.
I sense the aura of the 1980s is returning. Human nature is a factor that repeats. Memories are short.
Hey let us vote for an independent and make a subtle point – real change, recognizable change is required.
Job description:
Don’t mind if you f%%CK up! Just base your assumptions on facts, have a realistic peer/public vetted business plan and take no donations or lobbying from special interest with limited public good. etc etc – No university degree required we have the best and the brighted at our collective disposal.
Required: Sound judgement, logical non biased reasoning. Bonus upcoming realization of benefits. Oh yah all legislation requires 75 percent of MPs/MLAs/Councillors. The details of course are to be worked on.
oh way.
Don’t enact legislation that infringes on our Charter etc. etc. etc.
The funny thing is I guarantee that most of the 1% got rich with real estate! How ironic eh basement dwellers?
Patently incorrect. — Garth
#8 Rosie.
You can buy million dollar homes on kijiji in Fort mac…. well that can’t be a good idea!
http://www.cpr.ca/en/investors
Kind of a neat website, showing what’s happening, almost in real time, with shipping on the CP Rail system, operating in both Canada and the US.
In short, volumes are collapsing. Weekly carloads down 4% in just weeks alone (53,092 in the week of Jan 24, down to 51,652 the next week, and 49,633 the week thereafter). If there is any doubt as to the nature of the industrial slowdown that is besetting both Canada and the USA at the moment, the railways’ traffic volume are excellent indications.
The wheels are clearly falling off of both North American economies, and any doubters of the need to cut BoC policy rates, and the high probability that the Fed will not raise should simply look to such.
The rich hold the debt. The poor hold the credit. :)
“Conversely, pretty unlikely that a 1%er could have 70% of his net worth in a primary residence if he wanted to, unless he’s the king of England or something.”
A 1%’er most certainly could put all of his wealth into a house. But keeping money in such a low-returning, low-performing (historically) asset class would eventually be a ticket to leaving the 1%. Real Estate is a wealth trap historically, and smart businesses (and people) rent lower-performing assets, and invest in higher-performing assets, so as to leverage their balance sheets.
Housing outperforming most other asset classes, as it has in the past 15 years, is quite an unusual situation. Which historically has always been rectified through significant long-term underperformance.
RE:#32 Mike S on 02.11.15 at 7:37 pm
Why not? There are lot’s of people in high enough positions, that do make lot’s of money by working for someone else
I guess you are right. I was thinking more about the average wage earner in Canada reaching the 1% level in net worth.
Now if you netted $100K+ and put half of it away over 50 years, you could reach that level. ie: Putting $2000 away bi-weekly will yield you $11 million over 50 years not accounting for taxes.
Anecdotally;
Friend of mine is from FLA. She’s been in ONT for the last 10 years (married — and divorced a canuck, what can I say). Former teacher, adult learning and training professional.
Out of work for the last six months. Thousands of resumes sent out, maybe 2 interviews. For contract jobs. Didn’t get those either.
Decided last week to bite the bullet and fly home for a week. Sent CV ahead of time. Five interviews and three job fairs booked before she left. She doesn’t fly back til Friday, and already has two very good job offers ($100k+).
She’s packing up and heading home. Screw ONT she says, you never did anything good for me anyway.
I may see if she’s onto something. This -20 for 8 months at a time is for the ….. polar bears.
So the Dutch, the people running the international criminal war crimes court.
Have just release a heavily censored report on MH17 stating they need to keep it secret as the truth will hurt it’s relationships with other Countries..
WHAT WHAT!!!!!!!! A war crime in front of there face..
This world deserves www3
Read it here..http://mobile.nytimes.com/aponline/2015/02/10/world/europe/ap-eu-netherlands-ukraine-plane.html?_r=0&referrer=
So much for the credibility of the Hauge.
The above assumes 7% return minus 2% inflation.
Garth
Hate to be too demanding on a free blog, but maybe you could ask one of the econ-geniuses here to produce that excellent chart for Canadians, and then update it here each quarter…..
The Rich Shall Inherit the Earth !
[…] Source: http://www.greaterfool.ca/2015/02/11/the-rich-the-rest/ […]
Garth
Do you advise your clients to ply the currency game in their investments? (Buying canadian hedged ETFs when dollar low and US dollar ones when the loonie is high)
Of course not. — Garth
“In Calgary? Well, the local real estate board conveniently changed its reporting regimen in the past few weeks, so we’re blind to the whole story.”
I posted about this a couple of days ago, CREB is now covering up what last year’s active listings to date were. The realty cartel at work, presenting the public with an information problem in executing the biggest purchase of their lives.
Can anybody comment as to what oil and the tanking dollar are going to do to XIU? I have a diversified portfolio right now in my RRSPs (in several ETFs) but am sitting in my TFSA with 15% in XSB and 20% in XPF. A little scared to jump into a TSX60 tracking index with oil so volatile and calls on it to hit $20. Understand that this is in a sense trying to time the market which is exactly what I shouldn’t be doing, but I don’t want to buy into an ETF right before it tanks, if it tanks, if oil should tank. Looking for some thoughts on this, I’m a novice investor and open to good advice. Thanks in advance!
Advice? Stop trying to time the market. Especially since you are young. XIU holds the TSX60. It ain’t crashing, and won’t. — Garth
#60 Mark on 02.11.15 at 8:01 pm
re: rail traffic volumes; you write;
“In short, volumes are collapsing….Weekly carloads down 4% in just weeks alone (53,092 in the week of Jan 24, down to 51,652 the next week, and 49,633 the week thereafter). If there is any doubt as to the nature of the industrial slowdown that is besetting both Canada and the USA at the moment, the railways’ traffic volume are excellent indications.
The wheels are clearly falling off of both North American economies, and any doubters of the need to cut BoC policy rates, and the high probability that the Fed will not raise should simply look to such.
================================
Give your head a shake, Mark! You are absolutely and completely more full of poop than a baby robin!
Intermodal rail traffic in the USA set a record for the month of January that is the highest in US rail traffic history.
http://www.truckinginfo.com/news/story/2015/02/intermodal-rail-traffic-sets-january-record.aspx
You really are getting to be one of the most insufferably tiresome windbags in blog history!
Vlad Nosty
http://m.disclose.tv/news/Russia_Orders_Obama_TELL_THE_WORLD_ABOUT_ALIENS_Or_We_Will/114053#DTV
Me and freinds are about to be outed… Time to find another planet.
Guess it was quite blatantly arrogant to write a book, tell the truth that no one in there mind would believe.
Good thing it’s published yet..
“This -20 for 8 months at a time is for the ….. polar bears.”
————————————————————-
In Calgary it’s not -20 for 8 months straight; it just seems like it. However, there is usually snow and ice on the ground for 8 months, or at least 6 months minimum. That’s good. It keeps down the homeless population.
Does the CAD go to 70 cents USD or 90 cents USD first? Weigh in.
“Cheap oil is deflationary”
And if Lefties win they’ll slap us with a carbon tax/price which will inflate the price oil/energy…
Maybe it could be a good thing. Maybe it could spur/stunt growth, but the Markets better be the instrument of the policy.
Smoking Man
Your reading comprehension is on par with your spelling re the MH17 article. It says nothing of the kind. It states that the report is heavily redacted as the International Court in The Hague is in charge of the criminal proceedings (not the Dutch Government who released the report), and to protect the security of Dutch personnel
Need to go back to school :)
DELETED
“Intermodal rail traffic in the USA set a record for the month of January that is the highest in US rail traffic history.
“
Go “Google” the definition of ‘intermodal’ before making comments like what you’re making. I’d submit that a good chunk of the growth there has been because firms’ margins have been subjected to an extreme amount of squeezing and trucking is too expensive. Just quoting a single segment of traffic as ‘proof’ that I’m wrong as opposed to aggregate traffic has so many pitfalls I don’t even know how to begin to explain it to you.
“Can anybody comment as to what oil and the tanking dollar are going to do to XIU? “
The majority of XIU components operate not only in Canada, but outside of Canada as well. XIU’s exposure to O&G is only around 20% of the portfolio, and the oil producers have already been significantly discounted. XIU, and the Canadian stock market generally, has spent much of the past 15 years relatively out of favour, so as Canadians get serious about retirement savings and are disabused of the delusion that houses can be retirement “plans”, relatively conservative and diversified equity investments like the XIU trust looks very attractive.
The P/E of XIU is currently around 12-15, depending on whether you use “present”, trailing, or future earnings. Contrast this with Canadian housing with an average equivalent P/E of 35, and you can see that XIU is quite a bargain.
#158 Ex-Cowtown on 02.11.15 at 12:34 pm
Like any other investment, you’ve really only made $$$ if you cashed out and took the profit, otherwise you’re just letting it ride at the casino. Nobody’s “won the lotto” until they cash out. They might just a have a risky ticket that looks good…. for now. What they do with that ticket is another matter.
I sold my house, took the $$ and rent a newer better house for a fraction of what my old house cost me. I also sold out all my O&G stocks in July and captured a multi-bagger before the wheels fell off.
Got rid of the risky business stuff and went into a balanced portfolio. Doing well this year again.
There’s a difference between being up and taking a profit. You might be up, but I took a profit.
No offense, but I’d rather be me than you.
++++++++++++++++++++++++++++++++++++
I am cashing out this spring, and taking my profits… of course I already bought another pre-build to move into later so it will soon be back in… doubling down as you might say. It’s everything I wanted in a house and more, and it’s all because of that initial investment… some of which even came from my RRSP. So the point is, even though house prices may crash… I’ll already be in the house I want, so it makes no difference to me. And that’s why I feel lucky. I feel ‘set’.
Wait… Gasfrac went bankrupt???? Well it was kind of experimental but that doesn’t seem right.
I was chatting with my financial advisor today and several topics came up.
First, although he has been diversifying my holdings, he congratulated my on having turned over my accounts so gold heavy. Gold hasn’t done much in USD terms but in Canadian dollars it’s had a huge short term run. I meant it to be a hedge against the USD but it turned out to be a good hedge against the CAD. Oh well we are still diversifying.
Second he wanted to know my opinion on oil. Well I don’t have an opinion of my own, but I read everything and I think this is the end of the “shale boom”. Sure, shale is now part of the mix and it always will be going forward but without near zero interest rates it wasn’t financeable at even $80/bbl. If rates normalize, it will need $100.
Third, why should the Saudis shut in to make prices rise? The shale oil is the expensive stuff. It doesn’t make sense to be drilling $80 – $100 oil to displace $20 – $30 oil.
And forth, he was getting word of a lot of layoffs in Calgary and having to change to status of many of his “high net worth” clients from employed to unemployed on the client profiles I guess they have to update every year now. What did I think about that and anyway what’s your status? (He knows I am consulting mostly in the US right now and that hasn’t changed.) He mentioned how everyone seems so calm, like nothing has changed and I mentioned that is the feel I get say talking to the parent’s on my kid’s sports team as well. But we both agreed the calm is really weird, like people just aren’t paying attention or can’t figure out what all this probably means.
US production went up again this week even despite the rig counts trending down at a huge loss rate (which means somebody is getting laid off). The service providers are dropping thousands at a time. Inventories rose again. This $hit is going to be bad news and I think anybody thinking about it should be thinking 2 – 5 years before it’s over.
And I didn’t even get in to Europe. Kaboom. Literally.
Hey Kommykim,I can’t believe you changed your mind so quickly.
I know your only talking about hypotheticals but if it was someone’s goal in life to be a one percenter ,think about all the stuff in life you would miss out on.
Raising a family
Travel
Buying what you want ,when you want.
Starting a business in a field you are passionate about .
Donating time and money to a worthwhile charity .
Sure I would like to have more money in the bank
But I am a human being first, a loving husband second , an avid traveller who has been to 35 countries third and so on .
Although I do have money invested being called an investor is very low on my list of my life’s goals.
P.S. I,m scared of kids !
I think some posters here have a very skewed idea of what it means to be in the top 1% in Canada.
The bottom end of the top 1% of income earners in Canada make about $191, 000/year. And that number includes investment income (http://www.cbc.ca/news/canada/who-are-canada-s-top-1-1.1703321 ).
In terms of net worth, one million dollars of liquid, investible assets puts you in the top 1% bracket.
One does not have to have $15 million in cash lying around to be in the top 1%. As such, it is absolutely possible to become a 1%er in both categories in this country through living within one’s means, saving, and investing.
#19 Waterloo Resident
10k corolas are easy find
http://haldimandmotors.com/vehicle.aspx?usedcars=TOYOTA~COROLLA~CE&stk=34-3888&page=1
Google like pro
http://lifehacker.com/5864111/the-get-more-out-of-google-infographic-summarizes-online-research-tricks-for-students
#15 JSS on 02.11.15 at 6:48 pm
Chart above shows the top 1% have the most business equity. Does this mean that the bulk of the top 1% are business owners? Can’t someone have a job, be frugal, continually invest in ETF’s/dividend stocks/bonds etc. and still end up in the top 1%?
+++++++++++++++++++++++++++++++++++
Certainly it can be done. Prudent investing is a skill and a discipline. However to get into the 0.5% or 0.1% you need the massive afterburner quality boost that only a big chunk of equity in a very successful business can provide.
But a lot of it is in timing. I know a few people back in Cowtown that happened to cash out of their oil companies at the perfect time and bid sayonara to the team that got them there, and call it a day. They are sitting pretty now. The rest of the team wanted MOAR!!! and went back to the well one too many times just got vaporized. Moral of the story? With equity stakes in start-ups leave early and leave often.
Same people, same skills, same industry, different timing and vastly different results. Yeah, luck is a big part of getting into the 0.1%
But into the 1%? Most people have the opportunity to do it at some point in their lives. They may not act on it, are scared of it or blow it, but 1%er opportunities abound.
Garth, saying the rich favor financial assets over real estate is misleading. There is only so much one can put into real estate. The rich put the rest of their wealth into investments and their own businesses. They have as little liquid assets as the poor. For the poor to have the same proportion of wealth in real estate as the rich, they would have to forgo home ownership. And if they did that, only the rich would own real estate. What would you say about a society where the top 1% own all the real estate, and the other 99% are “liberated” from the burden of land ownership, free to speculate in financial assets?
Still love your name. Can tell it’s working for you. — Garth
Mr.Turner and dwarfs i have a serious proposal. Please open an paypal account so we all can donate some $$$$. With that money we can buy media advertising, warning people for RE and markets. Other media it will jump for free. I am in $100.
#81 For those about to flop…
“Although I do have money invested being called an investor is very low on my list of my life’s goals.”
—————————
I agree. I haven’t the slightest interest in being “called” an investor but I’m happy to actually be one.
The reason I’m happy is because the things I love to do in this life pay nothing. Among other things, I am a musician. It was my sole source of income for 4 years in the 1970’s. It’s a terrible way to make a living. Pathetic, really.
But it was seriously rewarding in many other ways. Today I do lots of creative and artistic things for which no one is likely to pay me a single dime. I suppose that is as it should be.
Thus, I must finance my own frivolities. I did that by working at a real job and investing for 40 years. Now I have the income (read ‘freedom’) to pursue that which interests me personally on any day I choose.
Robert Bateman once said “You want to be an artist? Great! But you’re also going to need a job.”
I would go one step further and say “want to putz around doing whatever you wish in your so called ‘twilight years'”? Great! Get invested now.
And no, that’s not a condo in YVR.
That Bar Graph;
That might as well be a graph on income spent, with the dark blue (principal residence) representing money spent on food.
The poor spend way too much (percentage wise) on food relative to the rich.
Housing is a necessity. After 25 years (into retirement) you have a paid off asset and no more rent payments…and something to leave your kids. The only problem now is the prices have been inflated by gov policies.
So, that bar graph; i don’t like.
Shelter is a nevessity. Housing is not. — Garth
I just read the full earnings report from Genworth Canada, our biggest private mortgage insurer.
They see loan losses increasing by 5-10% in Alberta and areas outside big cities in Quebec. Sounds overly optimistic to me. SeekingAlpha has the report.
It demands some work to read it, but I think that’s the best way to see the real damage in real-estate and get an idea at what pace defaults will increase.
Oh, one more thing.
The Bank is not lowering rates at next meeting. They have a low dollar they wanted. The rate will be lowered in April.
Trust me.
March. April. Who cares? — Garth
So are we expecting REITs to start tanking at some point, with all the mall store closures, commercial bankruptices, and condo owners defaulting after losing their jobs?
Retail makes up 3% of the REIT index. No tanking. — Garth
Booyakasha! I’d love to be richer than I already am!
Only draw back now is I can’t buy my US ETF’s with our overvalued CAD when it was still 0.9 cents.
Hah, honeybooboo, #16
Haven’t been here long buttMark I can’t figure out if he is a tard or eloquent with the sarc a la MDB on ZH.
Probably should just stick with tard
#44
“So far it has cost the purchaser about $100,000 to hold the property for 2 ½ years. Over that time the $2,000,000 in my investment portfolio has increased by over $500,000.”
So you are retired and living on air? Doesn’t pass the smell test.
Ft. Mac million dollar shacks were all the bling of the hood 8 weeks or more ago. Those numb nuts were the stylin envy of their buds. If you bought it 3 years ago with $850 000 down hell you could still stand to make a buck or two even today.
However, spidey sense tells me that they likely used their good judgement, put next to nuttin down scooped up one of those killer deals the banksters were offering with cash back for the down and partied all the way from the bank. Talk about halving to change your shorts bi weekly now.
Gee I never saw this one comin’. Like Garth says, just use a little common sense. Funny part is, that if it were common, you would think there’d be more of it.
March. April. Who cares? — Garth
Just trying to save the FX traders here…
This is like saying the poor spend more of their money on food.
1%’er spends 2% of annual income on food versus
80%’er spend 30% of income on food.
You can’t make the assumption the less well off person just eats 15x the rich person on ramen noodles.
They have more assets in general and therefore have the luxury of diversity. Rich people are in the 1% because they have large salaries $500K+ and can afford to stick it more to than just a roof over your head. The rest of us focus on maslow’s heirarchial needs.
The implication posts like this give, that you can become a 1%’er by renting and investing, is hogwash.
It’s about diversification. If you have a one-asset strategy you will never make it. — Garth
The minus 9% ers…
http://www.calgarysun.com/2015/02/11/alberta-premier-jim-prentice-announced-9-cut-to-provincial-program-spending
I’m not a rich person with assets, i’m a poor person with no debt.
Where do I rate?
From all the bantering back and forth here tonight Garth, I would say its high time to explain Garth’s rule of 90 again.
Tell me if this investment makes sense
house i rent nice big 4 bedroom home,
550,000 value
property taxes $537 per month
maintenance ie new roof / grass cutting etc. 750 per month
Rent is 1300 per month.
expenses 1287 per month
13 dollars per month gross profit on a $550,000 asset….
Real Estate, can’t lose eh???
Something wrong with these numbers, I don’t have the heart to tell the owner of this place
#87 Mister Obvious .
I totally get what your saying,my favourite ever job was also the worst paying.
Still trying to find the balance between earning enough money and enjoying going to work.
Vancouver is not the most exciting job market on the planet.
We are so screwed.
Date Listed 11-Feb-15
Price $679,900.00
Address 104 Sierra Crescent, Fort McMurray T9H 2Z3 AB
I can’t believe the asking price? $680 BIG ONES! Should be worth $280K tops in the real world. Somebody and their Bank are seriously underwater…..
OUCH.
Good read for anyone wondering whats just gone wrong with our economies..
Preditor Nation by Charles H. Furguson
And fort mac doesn’t even have a hockey team!!!.. well neither does…. (ya know where this is going)
mr rate of return, crap I’m in a place that lost $550 000 in 5.5 years.
ROR is…Smmmokking
#97 SWL1976 on 02.11.15 at 12:09 am
#47 Andrew Woburn
Thanks for the insight. I know there are plenty of people who contribute to this blog who are considerably smarter than myself when it comes to international banking and finance. I’m the guy you want setting the clearance in your self aligning spherical roller bearings or designing one off custom tooling for your machine shop. That being said I am smart enough to know that something isn’t right in the world of finance.
============================
One of the things that is so wrong with this country is that guys who can do really useful things like design custom tooling are supposed to think they are not as “smart” as people who tell lies for a living while pushing bits of paper around.
You are absolutely right to feel worried. It’s called mountains of unrepayable debt and wild-ass gambles with other people’s money thinly veneered as financial sophistication. I try to sort out what is really scary as opposed to the endless twaddle on the blogs of doom which seem inevitably lead to today’s deal on precious metals.
I discussed yesterday why the Chinese accumulation of dollars is a mechanical process to do with exchange rate management and not a plot to destabilize the US. Everybody “knows” the US owes umpty trillion dollars and will therefore go bankrupt very soon. But the US has defaulted on its obligations in the past as has France and the UK but no one calls it that. It’s called devaluation or “going off the gold standard” or inflation but the result is always that debts that can’t be repaid, aren’t. There are consequences all round, like a drop in the purchasing power of pensions, but collapse or hyperinflation isn’t one of them.
It is hard to wrap your head around how the ability to print currency changes your economic perspective and also the simple fact that Tom’s expenditure is Fred’s income. Everybody “knows” that the Fed cannot raise interest rates because the US cannot afford the extra cost. Well the US will just print more money. What’s another trillion. Secondly, this extra money ends up mostly in the bank accounts of US investors who pay tax and buy more cars and hamburgers. Not exactly a pistol to the American forehead. Will Generation Z end up with the bill or will it be investors? I’d bet on investors. Lending to governments has always been a mug’s game.
I don’t worry a lot about petro-dollars (whatever they are) and global reserve currencies. I have never found a convincing explanation of why the US would invade a country to stop them selling oil for rubles. For the oil itself, yes. Even Russia sells oil for dollars because nobody wants to deal in a currency that could sail away overnight on some oligarch’s yacht. Few economists think the US benefits all that much from issuing the global reserve currency and right now, it is simply making the US less competitive. The internet is awash in informed comment from world class sources like the Economist, reports from research centres and blog sites of prominent economists and financial reporters. People shouldn’t waste time on crap like King World News written by fools to snare sheep.
What I worry about is another collapse in derivatives, the fact that major banks have derisory amounts of capital, that automation is coming at us like a bullet train, that growing inequality is strangling economies, that China is a financial house of cards, that Europe will drag on as it is for years and that the US hasn’t sent any senior banker to jail . I too worry that America and the UK are sliding into police surveillance states and we are following. I worry that the Middle East is full of young men with no hope.
103 Big leafs fan, I get that you think that is overpriced ,but would you feel comfortable paying even 280k to live in a one horse town surrounded by frozen tundra.
I wouldn’t pay over 100k oil money or not.
#86 @ Lala
Why? Seek and ye shall find. Information, like Garth so graciously gives us for free. Why do people need anymore warning? Most major economists and groups, including our own BoC has warned of Canadian house overvaluation.
#73 SM
I love this site. Did you see the weird pig from the UK. You and google are a great team.
http://m.disclose.tv/#DTV
One has to wonder, where is Calgary’s oracle of real estate wisdom, Bob Truman, these days?
There’s been no posts since October regarding Calgary’s real estate market on bobsrealestateblog.com.
Spring starts this year on March 20 Bob. You can cross country ski till then, but you can’t hide.
Hilarious…
You have a comment from some NATO guy saying $250 oil and a comment from CITI guy saying $20 oil
I think they’re both full of shit
Garth:
I carefully looked at the graph of investment classes or types that rich folk own and there is one left out.
Governments.
Macroman, that is a hot rate of return!!!! smmmokking hot!!!!
If we do the math and say the owner has to pay 13 dollars interest per month on his super cheap mortgage he breaks even!!!!!
I”m here in lovely Edmonton and things are looking bleak folks let me tell you. Shaw announced they are closing their call center – can’t really blame them as noone will work there for under $20. Sign of the times….well pre-bust that is. I work for an equipment rental company and if there is a leading indicator for an economy I don’t know about it. Rentals are down nearly 50% compared to this time last year. Modyards around the city are completely barren.
As for myself, I’m not sweating it. Paid my house off six years ago and have diligently invested for fifteen years so sitting on a very substantial portfolio. Part of me wishes I’d be ‘restructured’ so that I get a nice cheque to go away somewhere warm for a few months.
Meanwhile many of our equipment operators are on their last dollar and asking for ‘advances’ to get through the month. These are guys who have made 150 – 250K per year for many many years. They do have alot of toys and trucknutz to show for it though……..
#14 DM in C on 02.11.15 at 6:47 pm
Shaw just announced it’s ‘consolidating’ it’s call centres in Van/Vic, ‘peg & MTL. So sad for Calgary, Edm & Kelowna. ~1,000 gone in Calgary alone.
——
We are responsible for some of that. Since we cut the cord to crappy cable we have never watched such good tv. 60 dollar fast internet streaming every TV and Movie we like from the internet. We didn’t even know such shows even existed cuz crappy Kanada did not get such shows from monopolies like SHAW. RIP suckers…..
Large corps cutting…..will continue….and continue…..
So why exactly did GO fares increase? Because they can? Nobody complains? I did but no reply so far…
“…people live longer and outlive their savings”
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/mom-her-depleted-rrif-and-me/article22898285/?click=sf_globefb
#75 Leo Tolstoy on 02.11.15 at 8:52 pm
Does the CAD go to 70 cents USD or 90 cents USD first? Weigh in.
—–
Thanks to Canadian Govt policy – Canada has the laziest most unproductive people in the G20. Little or no industry. Dependance on HAM in Scamcouver and resources in the country in general.
CAD dollar? DOWN.
“Thanks to Canadian Govt policy – Canada has the laziest most unproductive people in the G20. Little or no industry. “
Are you kidding? Canada is a chronic net exporter. Canadians are amongst the most productive of the G20, when you strip out the effects of finance (which is a zero sum game anyways). In the 1990s, Canada managed to maintain a posture of net exports despite the resource industry falling off a cliff due to the ingenuity of Canada’s technology sector. The huge amount of deflation in the pipeline, particularly in the RE and consumer debt sector, is certain to place significant upwards pressure on the currency for years to come as Canadians dig in, start saving, and enter more austere times to repay debt.
Government policy may look bad on the surface (and it is), but we spend dramatically less of our GDP on unproductive sectors such as healthcare.
As for “HAM” in Vancouver, sheesh, haven’t we put that one to rest already?
99 Arfmooocat on 02.11.15 at 10:09 pm
“I’m not a rich person with assets, i’m a poor person with no debt.
Where do I rate?”
Where do you rate? Wiser than most.. probably better off financially than you admit.. and with a real future ahead of you.
Wading into the debate on whether a careful investor can crack the top 1% if only earning employment (and investment) income.
Well, what is the threshold to be among Canada’s 1% richest? The oft-referenced “$1M in financial assets” measure excludes principal residence, so it doesn’t tell the whole story. Obviously, with the same financial assets a person is wealthier if also owning some home equity (even if a house is an illiquid asset with potentially volatile market value.)
Statscan seems to only report on net worth divided into quintiles. The Broadbent Institute did a report using deciles, but the only reference I could get on the top 1%’s total net worth is embarrassingly old (1999): back then, a Canadian household in the top 1% of net worth had at least $1.9M in wealth.
http://www.statcan.gc.ca/pub/75-001-x/2007109/article/4096885-eng.htm
So what’s the cutoff for top 1% NW in recent years? I couldn’t find a figure, but if it’s under a few million I think it’s doable without business ownership, IF you a) make a very good living (say, both spouses in the top 10%) and b) if you are excellent at saving to invest (none of this “pay yourself 10%” business. With real discipline and frugality you could aim for 40% or higher.)
Simple? Yeah. Easy? No. And, likely, business ownership is a much more efficient way to get there.
Full disclosure…had no idea of meaning of some acronyms being thrown around this pathetic blog — until just a few minutes ago.
Specifically, HAM had me very curious.
Earlier today, I Googled it and here is what that monument to instant knowledge spat out:
Hard as a Mother F*&%er
Thought about it for a nano-second or two. Yeah, that definition might make sense in relation to some posts here on, say, 604 & 416 real estate situ, outcome of a diversified investment strategy, Canadian or US economies, even some of our Politicians — possibly even Garth’s physique.
But, I always trusts my gut and tonight the Google definition just wasn’t sitting right.
My thanks, and full credit, goes to Vancouver Peak for enlightening me.
Finally, real estate in Van & T.O. all makes (some) sense.
Stephen Harper as the MP for Calgary West has to be aware of the downturn in the price of oil
http://www.parl.gc.ca/Default.aspx?Language=E
if I were him I would double down, support Alberta through thick and thin, the Federal Government has said it would pay $160 million to twin the highway between Edmonton and Fort McMurray.
http://www.cbc.ca/news/canada/edmonton/feds-kick-in-to-help-twin-highway-63-1.586121
I would hold another presser and say the same thing again.
15 JSS – havent read all the comments yet, but there are different scenarios which can create the same stats. I know many business owners, some with one large business, others with a small business, or several
businesses and even some with regular jobs as well. It is more common for the richest though to own either a large business or several businesses. A problem that can happen with the former however is similar to the
RE of the less wealthy – not enough diversification, and not liquid. My breakdown is much more like the 19% with a skew towards investments and liquid (no pension). And yes I am a business owner.
#39 For those about to flop… on 02.11.15 at 7:31 pm
Mark at 29.
C,mon man ,with statements like this you’re giving your haters ammunition. Think before you type dude.
Hahaha I’m tellin ya, just read Mark’s stuff like you’re reading stuff written by an 8 year old and it’ll all make perfect sense. Lol
Speaking of the rich, according to this the sold price per square foot of Yorkville condos dropped 9.3% from Q3 2014 to Q4 2014 and year-over-year the drop was 10.3%. Cracks starting to show at the top?
http://yorkvillecondoblog.co/2015/02/11/yorkville-toronto-condos-2014-fourth-quarter-average-sold-price-per-square-foot-740/
Neta: American workers are on average 20% more productive than Canadians.
I think a lot of that is simply inefficiency of having a smaller population. That is efficiencies of warehousing, shipping and marketing to 350 million as opposed to 35 million. My guess is that is the reason Target failed.
Rich and getting richer: So far it has cost the purchaser about $100,000 to hold the property for 2 ½ years. Over that time the $2,000,000 in my investment portfolio has increased by over $500,000.
rich and getting richer: yes you are
Andrew Worburn#108, logged in to say you are a breath of fresh air…you get it fundamentally, your morals are steadfast and you probably are bankrupt like me…NOT
Cando is going lower than 70 because the cleanest dirty shirt, Uncle Buck gets the inflows for now…
That is part of the reason Garth is wrong on US rates going higher than a token quarter point to save face.
Oh and those that say oil won’t hit a yard again are fools…
Trouble is Calgary still ain’t gunna like it in the meantime.
oh yeah, here’s an article:
http://www.financialsense.com/contributors/sober-look/canadian-housing-market-charts
basically Deutsche Bank thinks we’re is serious trouble
“It is well known that China’s official growth statistics are highly unreliable. Premier Le Keqiang once told the American ambassador at the time that official statistics were ‘man made’ (read ‘made up’) and ‘therefore unreliable’, and that the only reliable indicators are electricity consumption, volume of rail cargo and loan disbursements.”
http://www.businessspectator.com.au/article/2014/7/2/china/truth-about-chinas-lies-and-statistics
If you’ve been hunting up recipes for squirrel it’s time to broaden your horizons.
“LA Health Officials Take Action After Local Supermarket Sells Raccoons As Food”
http://losangeles.cbslocal.com/2015/02/10/la-health-department-takes-action-after-local-supermarket-sells-raccoons-as-food/
Yes…sadly true….the battered loon will lead to increased layoffs of poor people ..who can’t afford food or flat screens. Rich people are leaving for greener pastures. I sure wouldn’t want to be a senior citizen with food on my mind. Salads,,,with lettuce at $4 bucks a head is ‘off the table’. And sadly more reports are coming out about kids going hungry. Thank you Mr Harper.
http://calgaryherald.com/category/business
Naturally the BOC has ill considered the knock on effect of a Peso Dollar. They seem to reflect an attitude of Canada in the 1940’s where the world was hungry for resource exports. “The good old days”.
But today’s international mess is stifling the export of trees and heavy things. We need hyper smart manufacturing to provide new jobs through efficiency. The low loon will kill the prospects of any business wanting buy the newest machinery because it is all manufactured in the EU and the USA. So…the BOC guys are way behind the curve on this point.
The oil patch is not the heartland of CDN misery….loads of people are being laid off across the board because the world isn’t buying our rocks and we can’t manufacture anything in a timely manner at competitive rates.
Someone turn the lights off please…..I’ve already left .
Being in a drunkin state of uselessness is far better than being in a world of belonging. Especially on a Wednesday night.
You pricks if lucky will figure it out
Southern Pacific – could be cut up for scrap. The subsurface liability is too great. Production is negligible. Will destroy about $1B in equity and debt. Poof.
Laracina – same thing. Poof.
Connacher – They announced last week a proposal for the debt holders to take over the company. Equity holders will be left with 2%. Essentially they are going private the hard way. The upside is that they are still producing 15000 bbl/day, so they have at least some basic cash flow.
The real kicker was announced in the news today, for those who saw it. Athabasca Oil (ATH) has a bunch of issues with its debt covenants, forcing them to have some hard discussions with the bond holders. Many were expecting them to be the consolidator of the junior SAGDs like the 3 mentioned above. This may now be a pipe dream.
There are a good number of other owner-operators who are now being forced to consider “unorthodox” transactions in order to continue to fund operations. I can’t and won’t name these companies as the information I’m holding is proprietary. Just don’t be too surprised when/if some random press releases occur in the next few months. The rub is that these guys can’t even consummate basic land transactions and property swaps because even the small cash contributions that are typically required can’t be funded at the current time.
And if anyone was watching the intraday on oil this week, I still stand by my assertion that the market is being computer traded and the algorithms are trying to bully the market into moving.
Everyone else’s mileage may vary.
#61 ANON on 02.11.15 at 8:03 pm
The rich hold the debt. The poor hold the credit. :)
——————————————————————–
Or as the band Midnight Oil once said,
The rich get richer
The poor get the picture.
So I am going to state the obvious:
Start looking at all assets as investments. A house can be a great investment at the right price. Right now not so much. In 1999 buying was cheaper than renting. Not anymore and with huge downside risk.
During a long time I’ve followed the RE market and Garth’s blog. I’ve always been on the “soft landing/slow decline” side. However go on kijiji and type Fort Mcmurray houses, this is madness. Listing popping every minutes with “urgent” “reduced prices” everywhere. And when I look at the prices it is unbelievable.
610K for : 224 Warren Way, T9H 5H9, Fort McMurray
430K for : 172 Grenoble Crescent, Fort McMurray, AB T9H
480K for : Crescent Heights, Fort McMurray, AB T9H
560K for : 39 Paish Place, Fort McMurray, AB T9K, Canada
What – the – hell
Seriously I’m no longer in the soft landing/slow decline side, if oil prices stay down a long time (and I think they will), things will get really, really ugly.
In the coming months Albertians who urgently need to sell, may not find a willing buyer, now who wants to buy into an area where there is no work. They will unfortunately have to deal with underwater mortgages and foreclosure. The prices they are asking are absurd. Like Vancouver, the prices are really an insult to the average Joe who saves and invests his life saving income. I suppose the rooster has come home to roost or die, whichever comes first. Some people who are so indebted to be saturated in debt have lost their way to common reality and financial sense are going to have a huge shock. We cannot be concerned, they lived the life they chose.
Real interest rates
How unrealistic are sub 3% interest rates? I recently received a notice from TD Visa. Interest charged on money loaned by them to you for purchases was 19.99%. Cash advances were 22.99%. Interest rates will now increase to 24.99% for purchases and 27.99% for cash advances. The cost of a poor education lasts a life time. Many people I know cannot do percentages. One is what percent of 9? Nope. No idea. When they look at their credit card and a purchase, the only thing they want to know is “Can I make the payment?” These same people take on mortgages. A member of my family was a Credit Union manager. She told me more than once that when she tried to explain about how much a mortgage would cost over its lifetime most borrowers weren’t interested. All they wanted to know was how much a month will the payments be? Part of it is immaturity, part of it is greed, but part of it is that we have taken away the ability of our educational systems to insist that students learn basic information.
In my opinion it would be equally bullish for Canadian real estate (sans Alberta) if Poloz simply talks about lower for longer and makes comments on an eye towards a rate cut in a few months closer to the election. That’s what seems most likely at the next meeting.
#75 Leo Tolstoy
CDN dollar 75 cents by summer, 70 if BOC lowers prime, and US raises theirs. Ugly coming.
#99…
Debt free is the new rich…
Real Estate is the new pension…
“Advice? Stop trying to time the market. Especially since you are young. XIU holds the TSX60. It ain’t crashing, and won’t. — Garth”
Thanks for the reply Garth. Gonna do it. Rounding out my maxed out TFSA tomorrow. 20% XSB (currently 15), 20% XPF (already there), 20% XIU, 20% XUS, and the rest in XEF, XEC, and XRE. I’m not that young, but I have 30+ years until retirement, and I won’t scoff at 6 or 8% growth per year over that time. Keep up the great work, love your blog!
“The P/E of XIU is currently around 12-15, depending on whether you use “present”, trailing, or future earnings. Contrast this with Canadian housing with an average equivalent P/E of 35, and you can see that XIU is quite a bargain.
Thanks for the reply Mark. How do you compute 12-15 P/E for XIU? P/E as of Feb 10 is 17.74, from here:
https://www.blackrock.com/ca/individual/en-ca/products/239832/ishares-sptsx-60-index-etf
Do you have another way you’re computing that P/E? Not trying to troll you, I’m asking a genuine question. Ditto for P/E = 35 for CAD housing, how do you come up with that? Thanks in advance.
Damn, I could swear we’ve seen this story before…
It was 2006, and it was all wine and roses in the US housing market.
The crowd, e.g., every economist, media pundit, blogger, asset gatherer, housing expert, real-estate agent, homeowner and want-to-be homeowner …. they all shared a common belief and narrative. They were unanimous in their agreement that housing prices would continue to climb indefinitely.
Their argument was air tight. They emphasized a “shortage of houses,” a large number of “immigrants,” “scarcity of land,” “lack of building space,” “too many people,” “the desire to have it all,” that the city “is expensive and always will be.”
Sound familiar, Canadians?
18 months later …
#127 Leo Tolstoy et al
At least Mark actively attempts to offer something constructive in his posts to this pathetic blog… rather than the shallow putdowns and name calling that goes on when one’s opinions differs from another. Forget the financial inferences of that saying, “following the herd”– it’s alive and well here in some posters’ comments and is one of the ways they get perpetuated further.
Surely, we are adults here?? Is it necessary to make negative and insulting comments to prove a point on here?– whether it’s bashing Mark or some other flavour of the day?? why dumb down the conversation? … at last check, nobody’s perfect. Comments like yours (and your ilk) say more about you, than anyone or anything else. As well, being insulting is quite different than making a joke that hurts no one.
As with most things, it’s a choice to read these comments and if they’re not to your liking, prove them wrong with your own experiences, with links, etc. so to add value to the discussion. Or say nothing. That way, it can become a learning moment for other people and not just some personal vendetta which provides very little enlightenment for the rest of us. Thank you.
It is your choice to read or not read Mark’s comments or any other commenters posts– no one’s holding a gun to your head.
Finally, as with anything we read these days, it’s important to question underlying assumptions, to critically think, research, etc and do one’s due diligence. In the bigger picture, everything/everyone of us has some kind of agenda.
It’s about diversification. If you have a one-asset strategy you will never make it. — Garth
Agree with you, 100%
RE: #71 Former Fool on 02.11.15 at 8:38 pm
I have a diversified portfolio right now in my RRSPs (in several ETFs) but am sitting in my TFSA with 15% in XSB and 20% in XPF. A little scared to jump into a TSX60 tracking index with oil so volatile and calls on it to hit $20
As Garth says, don’t try to time the market. One thing you can do is choose an ETF that doesn’t have as many oil companies and banks in it as a plain index ETF. I chose ZLB for my Canadian portion and have been pleased with it’s performance so far.
Smoking Man
Re your comment about Long Branch, TO properties still moving up, you could consider that they are moving down fast, about 20% to date.
These houses are after all denominated in Canadian dollars!
Even the banks are suggesting that they will move down another 10% with the Canadian dollar.
Cheers
#15 JSS on 02.11.15 at 6:48 pm
————————————————-
Theoretically you could end up in the 1% if you had a good job, low expenses, and invested all your disposable income to generate income:
“As of 2009, all households with incomes less than $343,927 belonged to the lower 99% of the United States’ income distribution, according to IRS reports.”
#124 Julie K. on 02.11.15 at 11:35 pm
————————————————
If our dollar keeps sinking, ‘HAM’ will refer to Hot American Money.
RE: #82 For those about to flop… on 02.11.15 at 9:03 pm
Hey Kommykim,I can’t believe you changed your mind so quickly.
I quickly realized I was wrong. ;-)
I’ll try to be more stubborn the next time. LOL
I know your only talking about hypotheticals but if it was someone’s goal in life to be a one percenter ,think about all the stuff in life you would miss out on.
You could do it without much sacrifice if you earned a boat load of money but didn’t own a boat. But the average Canadian earning $48K would pretty hard pressed as you’ve said. Some people enjoy being cheap, so it wouldn’t be a hardship for them:
http://www.mrmoneymustache.com/
I am a retired engineer. I fully own two properties and I am within 5 % of Garths rule of 90 for liquid assets to real estate. I don’t really care what the property values are as a rule, I do not include them in my net worth calculations. I consider myself a “Long term trend trader” and focus mostly on quality companies with growing earnings in good trends. I can trade, or rotate, out of a position ($50k-$100k) and back into another during the duration of a TV commercial, and it would cost me $20 in trading fees. I sleep well at night because I have confidence the Future Earnings projections for the companies I select, and the rules I have generated for myself on company criteria’s acceptability. I do not consider the market particularly risky, but more as an opportunity .If I owned a house now in Ft Mac, AB with 5% down, I could never sleep, I would be scared $Hitless. To each their own I guess!
Actually you got it wrong. You should have said ” The rich have assets. The poor have nothing.”
Those with debt are just the cash poor living rich. Have you ever met a real poor person?
Forget everything you’ve read in the last 10 years regarding house prices.
Fact is prices in Vancouver and Toronto are today at RECORD HIGHS!!!
Who knows what the future holds. But if you were a bear 5 years ago, reevaluate your logic. If you were a bull, make sure your reasons for this boom make logical sense.
Anyways, this party is not close to being over. Watch and see over the course of this summer.
“The UK is not experiencing ‘deflation'”. What is happening is that inflation is expected to fall below zero. BigD ifference.
https://uk.finance.yahoo.com/news/bank-england-play-down-deflation-000737148.html
Rates won’t raise by choice. D will raise them when it thinks appropriate to spiral things up a bit.
All this talk about the 1%-ers. Wow, only $191k income, or $1M liquid assets. It’s almost like the 99%-ers are just plain F-ups! I think when people think 1%-er, they are really picturing 0.1%-er, or higher still.
Canada is at best an afterthought as far as world economies go. Low oil is giving all the major economies a huge boost. They have an interest in keeping it there.
What the boc does or doesn’t do really doesn’t matter. They can’t solve the problem. Its depressing to think about. But you do make your (dog) bed.
So let’s see if we can soon blow out the shorts that were waiting for ww3 and grexit all in the same week. Get your s and p rally caps on.
The rich will soon be richer indeed.
http://m.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/cenovus-to-slash-work-force-15-as-loss-balloons/article22940807/?service=mobile
Cenovus Energy Inc, Canada’s second-largest independent oil producer, reported a quarterly loss that ballooned eight times and said it would cut 15 per cent jobs, freeze salary hikes and cut discretionary spending as it adjusts to the slump in global crude prices.
Cenovus has already slashed its 2015 capital budget twice, which is expected to delay development of some of its tar sands properties, and on Thursday said further cuts were possible if oil prices continue to fall or remain low for an extended period.
http://m.theglobeandmail.com/globe-investor/inside-the-market/market-updates/premarket-swedish-qe-surprise-russia-ukraine-deal-lift-gloom/article22940634/?service=mobile
The Swedish crown slumped to a six-year low against the dollar after the country’s central bank cut interest rates below zero and announced it would launch quantitative easing by buying 10 billion crowns of government bonds.
Savers are doomed, my crystal ball told me.
Sweden just went negative interest rates.
Canada to follow the trend..
Buy stocks, buy real estate, buy assets..
Gartho was right, the machine is scared shitless of deflation..
#44 rich get richer WOW…….in 30 years, you will be a Bazillionair……
#87 lala on 02.11.15 at 9:29 pm
I like your idea. please open up the account in my name. A little disappointed with your nominal contribution but we can work on that.
perhaps we all move to a compound in Waco Texas, have a shrine of the living legend Garth erected, wear togas and eat off the land while we wait for the end. Smokin man will be in charge of the incense sticks and mushrooms. The Harley and the Amazons definitely come with.
last one out of the Toronto bunker, turn out the lights.
MSM is at it again:
http://www.thestar.com/business/personal_finance/2015/02/11/is-tapping-your-rrsp-to-buy-a-first-home-a-good-idea-mayers.html
“There’s never a good time to buy a first house or condo. It’s always too expensive and it’s always stressful. You end up house-rich and cash-poor. [but] unless you have a crystal ball, stop trying to time the market … there’s probably not much to be gained by waiting.”
Everything to be gained by BUYING NOW apparently.
This government-induced mess puts an enormous crimp in coffers at all official levels.
Betting the farm on a single strategy along with extreme preferential treatment of FIRE via ultra-low interest rates has destroyed the Canadian economy- we’re only starting to see this horror show unfold. To date, much has been on the QT and in slow motion with misinformed communications mouthpieces muddying MSM waters. Now, the real pain begins. Social program cutbacks and higher taxes on steroids, here we come. Strap yourself into excess re and you’re cooked. Perhaps for life.
Had the fools at the helm not been seduced by FIRE, nor engaged in suppressing interest rates to insanity, a solid, steady and predictable behemoth of boomer income would have been available to produce juicy tax revenue from:
-GIC and other fixed income sources;
-Annuity income: at normal rates, this would have been a very attractive option for seniors, thereby contributing a major stabilizing force in the economy. It would also have reduced dependence upon government largesse via much-reduced need for GIS and also resulted in very significant OAS claw-back;
-Improved health due to reduced stress levels, producing much less strain on medical resources.
The largest generation in history could have backstopped almost any economic hiccup with this huge fixed income component and much lower draw on social assistance.
No need for seniors to take on inordinate risk in their later years. The young have time to recover from risk.
Another enormous bonus would have been a lower tax burden on the young, lower re prices and superior opportunity to have a decent life.
Increased social stability.
Any economy, large or small, personal or public, spinning at reasonable, let alone an optimal speed, is magic. To fast or too slow distorts and destroys: 1% snorfling pigs gobbling up most of the wealth, with the balance of society ranging anywhere from dissatisfied to extremely stressed and unhappy.
I wonder if the fools at the helm are even remotely capable of repairing the damage they’ve inflicted on the public.
We had a superb economy in the palms of our hands.
We know who the greater fools truly are, don’t we?
#7 TurnerNation on 02.11.15 at 6:36 pm
I bought oil today. This blog tends to call bottoms..
—————-
makes sense, this place is full of sound advice [insert whistling icon]
This weblog must rationalize its comments section. Shutter the Kelowna arm (DA) and offer generous re-location package to Fort McMac or Uranus. By dogsled.
the analysts at Citi are back on crack. oil will never get to $20 again. it will be $55-60 soon. with the weak canadian dollar, the oil patch will do just fine.
The more you have… to lose.
“Thanks for the reply Mark. How do you compute 12-15 P/E for XIU? P/E as of Feb 10 is 17.74, from here:”
If you look around the various brokers’ research, it was estimated that the 2014 earnings of the TSX Composite were in the 900-1000 range (against an index level of ~14,500). Rough numbers of course. Obviously true earnings aren’t known until in hindsight, and there may very well be an impairment to such this year, but if you do the ‘math’ on such, you get a P/E in the 15 range.
The key thing to note about TSX earnings is there’s a huge cyclical component, as opposed to the relative smoothness of what’s seen in, say, the S&P500. And with resource prices so depressed in the past few years (ex-oil), the argument could be made that cyclicality is dis-favouring, not favouring the TSX index’s earnings.
“I’m asking a genuine question. Ditto for P/E = 35 for CAD housing, how do you come up with that? Thanks in advance.”
I’m glad to explain that one. Take the average Canadian house price (~$400k), and 1/3rd of average Canadian household income ($76,000). You’re left with $25,308 ‘available’ to spend on housing.
Typical house will require 1% of its price just in long-term maintenance. So -$4000, now you’re down to $21,308 “available”. Property tax will consume an additional $2500 (roughly), so you’re left with $18,808. If you were to own a house as an investment, you would be subject to income on it at a tax rate of roughly 32%. So $18,808 * (1-32%) = $12,789. Figure an additional 10% deduction from such for management and vacancy, whether you DIY, or hire someone out, so you’re down to a net of $11,510.
$11,510 / $400k ~= 1/35, hence P/E ~= 35.
BTW, its not trolling to be asking these questions. If I make a claim, I’m always glad to explain myself. Nobody has to ‘buy’ the explanation, and it would be tragic if anyone took my explanations or my words in isolation, without doing their own independent research, to make any decision to buy or sell anything.
Hi Garth,
From reading your past comments I detect you are not a fan of the “Smith Manouver”.
For everyone’s benefit can you go over some of the pro’s and con’s of this strategy.
When the concept is introduced by a salesperson it always seems to be that the pros’ out weight the con’s the reason being they want to maximize their commission on the greater amount you will borrow.
Can the strategy EVER work for anyone? What type of circumstances would be necessary?
Thank you for your time.
Wise Old Owl.
The SM depends on obtaining a cash flow from investment assets sufficient to pay the cost of a leverage loan used to purchase those assets. Thus, it appeals to people who do not have the independent cash flow to service a leverage loan, and are therefore assuming too much risk. Worse, this is almost always ‘sold’ by mutual fund salesguys who are peddling high-MER products from which they will earn handsome trailer fees. Borrowing to invest can make perfect sense. But Mr. Smith is from another era – one now passed. — Garth
They’re not recessions, they’re corrections.
Fear and greed drive the markets.
SHIFT happens, just not as most anticipate or hope for. The gyrations are exaggerated by those market constituents who try to time it (the market shifts). Anyone who has owned real estate for seven years or more does not likely regret having acquired it. Those who got out of the market are probably not so happy just as neither are those trying to get into the market. There is, however, a safe zone in which to get in to the market provided you’re not speculating.
Bottom line; in this country you need a roof over your head be it bought, leased rented or borrowed and someone is paying today’s rate for that roof be it cash, mortgage or opportunity cost. Real estate, like any other investment, is a long term hold in which you should reduce your emotional steak. Let emotions get in the way of your financial decisions and your likely going to pay a premium.
“A man only needs so much money, the rest is just for showin’ off” – Mrs. Gump
#162 Smoking Man on 02.12.15 at 8:23 am
Savers are doomed, my crystal ball told me.
Sweden just went negative interest rates.
Canada to follow the trend..
Buy stocks, buy real estate, buy assets..
Gartho was right, the machine is scared shitless of deflation..
………………………………………………………………………
Smoking Man my crystal ball and my brother says Canadian dollar to jump up shortly. His crystal ball guys in Singapore play with about a billion US dollars every day. Brother says Canadian dollar is not the one to watch, he said USD is in for a hard time in the next year.
BTW I just got back from another trip to the UK and had booked Seneca for the girlfriend for this weekend. The pricks called me up and said I can’t have the centre suite as my play hasn’t been up to a high enough level. Would just give me a regular room. WTF! So I called Niagara and got a suite in Canada. Screw em! Whats going on at Seneca? I dropped over $150K when I checked my W/L statement.
Nice move oil today. Who’d have guessed it…
Ya ya it’s going to $20. Or 200. Move along now nothing to see here.
http://finviz.com/futures_charts.ashx?t=CL&p=h1
http://www.theglobeandmail.com/report-on-business/beaudoin-steps-down-as-bombardier-chief/article22940688/
In a dramatic shakeup at family controlled Bombardier Inc., Pierre Beaudoin is stepping down as president and chief executive officer while his father, Laurent, is retiring as chairman and there are plans afoot for the possible sale of some business units.
Former United Technologies Corp. executive Alain Bellemare is set to replace Pierre Beaudoin – who held the CEO position for 6 1/2 years – on Friday and Pierre Beaudoin will become executive chairman of Bombardier.
The troubled plane and train-maker is also suspending the dividend and looking to access the debt markets for up to $1.5-billion (U.S.) and to issue about $600-million of new equity.
The company also said on Thursday it will “explore other initiatives such as certain business activities’ potential participation in industry consolidation in order to reduce debt.”
=============================
Stock just fell off a cliff:
https://ca.finance.yahoo.com/q/bc?s=BBD-B.TO&t=5d&l=on&z=l&q=l&c=
Canadian dollar up nicely this morning. One thing about this blog is they get everything wrong! Everyone claiming canuck buck going to .70. Also everyone thinks deflation is a huge problem. Love this blog. I make a killing just doing the opposite! Garth gives great advice but the sheeple take everything to extremes.
Interesting Read – origins unknown
A professor of economics put this together to show how our current tax system works based on each segment of our population.
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it would go
something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day
and seemed quite happy with the arrangement, until one day, the owner threw
them a curve. ‘Since you are all such good customers, he said, ‘I’m going to
reduce the cost of your daily beer by $20.Drinks for the ten now cost just
$80.
The group still wanted to pay their bill the way we pay our taxes so the
first four men were unaffected. They would still drink for free. But what
about the other six men – the paying customers? How could they divide the
$20 windfall so that everyone would get his ‘fair share?’ They realized that
$20 divided by six is $3.33. But if they subtracted that from everybody’s
share, then the fifth man and the sixth man would each end up being paid to
drink his beer. So, the bar owner suggested that it would be fair to reduce
each man’s bill by roughly the same amount, and he proceeded to work out the
amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25%savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to
drink for free. But once outside the restaurant, the men began to compare
their savings.
‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to
the tenth man,’ but he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too.
It’s unfair that he got ten times more than I did!’
‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I
got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get
anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down
and had beers without him. But when it came time to pay the bill, they
discovered something important. They didn’t have enough money between all of
them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax
system works. The people who pay the highest taxes get the most benefit from
a tax reduction. Tax them too much, attack them for being wealthy, and they
just may not show up anymore. In fact, they might start drinking overseas
where the atmosphere is somewhat friendlier.
Still getting dividends from TRP and Telus……happy not to have any debt.
You have term deposits? And an eight-track? — Garth
++++++++++++++++++++++++++++++++++++++
No eight track but a balanced savings/retirement plan. No debt, stocks AND yes, some term deposits. Not good to have all your proverbial eggs in one basket.
#174 Ying Yang :):( on 02.12.15 at 10:39 am
I have a room booked at senica this weekend. And yes centre suite but canceling… Windsor bound for weekend.
Penthouse at Ceasars
Being a 1% er is cool..
Teaching my kid forex. He’s up 7k and he wants to quit his job. Lol..
Grasshopper has alot to learn. I said as soon as you get your balance up to 300k and give me my 100 back. Quit your job..
While a good number of the wealthy have indeed made a hefty chunk of change through their real estate investments, real estate investors (not speculators but ”investors” constitute a small part of the world’s wealthy or the means by which the wealthy got that way in the first place.
Speculating in real estate is no more or less fruitful than speculating in financials.
The way the wealthy get wealthy is they save first and then spend. Most spend first and then save and more often than not find, at the end of the day, they have to use those savings to pay off debt.
Like they say; if you took all the worlds money and divided it up evenly amongst the world’s population it would not be long before it redistributed back to where it was before you shared it.
It’s the habits of the poor that keeps them poor and the habits of the rich that make them rich.
“You must either modify your dreams or magnify your skills.” — Jim Rohn
http://www.theglobeandmail.com/report-on-business/long-list-of-small-businesses-wait-for-cash-as-targets-cheques-bounce/article22932872/
When Target Canada collapsed into bankruptcy protection last month, hundreds of suppliers like Tanya Vierhuis felt the fallout.
The 20-year veteran market researcher spent months working on a major customer-feedback project for the discount retailer. Just before Target was granted court protection from creditors, the company sent her a cheque for $18,000, the final payment for her work. The cheque was dated Jan. 13, two days before the court filing, but she didn’t get it until Jan. 26. When she went to the bank to cash it, the cheque bounced.
Now, she’s among nearly 2,000 unsecured creditors who are waiting to see if and when they’ll get any of the money they’re owed.
“That’s my mortgage payment for the next four months,” said Ms. Vierhuis, a 44-year-old single mother of a 12-year-old son.
#178 Vik on 02.12.15 at 11:03 am
Thanks for reminding me of that AWESOME!!! explanation. Sadly, some just won’t get it.
#178 Vik — “Interesting Read – origins unknown […] The next night the tenth man didn’t show up for drinks […]”
There, I’ve shortened it for you so you can see the likely origins of this allegory.
It isn’t like it’s terribly difficult to examine history and see whether the tenth man actually kept coming back. Was the bar a pleasant place to drink, or was it a violent, lawless shithole? Lists of billionaires and millionaires by country are ubiquitous in the internet.
#7 TurnerNation on 02.11.15 at 6:36 pm I bought oil today. This blog tends to call bottoms..
+++++++++++++++++++++++++++++++++
I made that observation just a week ago. I got deleted.
You however were not deleted.
You have seniority, I bow to you.
Calgary home prices fall again – BNN
http://www.bnn.ca/Video/player.aspx?vid=550067
RE:#162 Smoking Man on 02.12.15 at 8:23 am
Gartho was right, the machine is scared shitless of deflation..
Exactly! They were hoping to inflate away the sovereign debt they’ve piled up through their own fiscal mismanagement.
RE:#177 Rob on 02.12.15 at 11:00 am
Canadian dollar up nicely this morning. One thing about this blog is they get everything wrong! Everyone claiming canuck buck going to .70
Come on Rob. A one or two day move does not make a trend.
Kids, study hard in school – 4.0. Wag it hard and submit. Then one day you’ll be able to afford a Long Branch bung. Your reward.
SM as your neighbour.
@#177 Rob on 02.12.15 at 11:00 am
Hi Rob, details please on how you are making a killing doing the opposite of what this blog says?
Would love to hear your detailed explanation and how it’s resulted in money in the bank for you.
I can’t help with those that say this graph isn’t a good representation of reality.
Of course the 1% will have less real estate, because at some point, owning that much would become just too much work. There’s a saturation point for how much real estate one can own.
Other than that though, it’s very clear that the 99% crowd has too much invested into their own home – albeit, it is psychologically driven in to most Canadians that owning a house is part of the dream…. it defies logic and ROI, but it’s also understandable why they do it.
http://m.theglobeandmail.com/globe-investor/inside-the-market/market-updates/premarket-swedish-qe-surprise-russia-ukraine-deal-lift-gloom/article22940634/?service=mobile
The Swedish crown slumped to a six-year low against the dollar after the country’s central bank cut interest rates below zero and announced it would launch quantitative easing by buying 10 billion crowns of government bonds.
The Currency Wars are in full swing. I like how the Fed is warning other nations not to debase their currency after the Fed spent the last 7-8 years doing that on a larger scale than the world has ever seen (and proportionally larger than anyone else has done to date, except maybe China).
This will affect the US recovery. It’s hard to say how much given how little the US relies on competitive exports but it’s a headwind the Fed would rather not have to deal with.
Debt, debt , debt.. gimme lots of debt.
http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11407620/Whats-best-repaying-your-mortgage-vs-borrowing-even-more…-to-invest.html
Would Calgary or North of there in Alberta be a good place to vultch on a nice travel trailer yet? I will seriously be looking for one this spring and would travel there. With or without testicles on the back, doesn’t matter those can be removed.
They ain’t using roubles…
http://www.nytimes.com/2015/02/12/nyregion/russia-time-warner-center-andrey-vavilov.html?hp&action=click&pgtype=Homepage&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0
I’m glad to explain that one. Take the average Canadian house price (~$400k), and 1/3rd of average Canadian household income ($76,000). You’re left with $25,308 ‘available’ to spend on housing.
Typical house will require 1% of its price just in long-term maintenance. So -$4000, now you’re down to $21,308 “available”. Property tax will consume an additional $2500 (roughly), so you’re left with $18,808. If you were to own a house as an investment, you would be subject to income on it at a tax rate of roughly 32%. So $18,808 * (1-32%) = $12,789. Figure an additional 10% deduction from such for management and vacancy, whether you DIY, or hire someone out, so you’re down to a net of $11,510.
$11,510 / $400k ~= 1/35, hence P/E ~= 35.
—————————
speechless
A lot of talk about the 1% above.
Just wanted to remind everyone that a household income of 180K puts you in the 1%.
Don’t confuse the 1% with a lifestyle of excess and luxury. The majority of 1%ers have a lifestyle that could easily be classified as middle class.
Wrong, actually. It’s not about income but investible assets. — Garth
Sean @ 158. All this talk about the 1%-ers. Wow, only $191k income, or $1M liquid assets. It’s almost like the 99%-ers are just plain F-ups! I think when people think 1%-er, they are really picturing 0.1%-er, or higher still.
=====================================
Spoken like a true prat.
Get a grip man.
Garth must read:
http://canonshows.com/Kini/2014MontrealConference/handouts/Sebastien_Lavoie.pdf
#171 Mark
“If you were to own a house as an investment, you would be subject to income on it at a tax rate of roughly 32%. So $18,808 * (1-32%) = $12,789. Figure an additional 10% deduction from such for management and vacancy, whether you DIY, or hire someone out, so you’re down to a net of $11,510.”
The tax burden for income properties isn’t so high because you can deduct your management expenses and maintinence from your property income… also the 1/3 annual income isn’t meaningful for investment properties.
#178 Vik on 02.12.15 at 11:03 am
———————————————
I think your parable has a very significant flaw as it doesn’t account for where the tax dollars come from in the first place.
The richest one earns their dollars off the hard work of the bottom 9 (exploiting their labour and time). Yet, doesn’t pay the bottom 9 living wages. Therefore, what happens when the bottom 9 can’t afford to chip in? The whole system falls apart.
The rich should pay a lot. And the rest should be paid good wages.
171 Mark
HI Mark, just wanted to comment on your P/E of 35 on an average house.
I know the numbers are general, but I do not think that those numbers are accurate.
I am not an accountant but I manage properties in Toronto.
1% is too high for maintenance every year but I can see how it can be. I do more than just maintenance for that amount every year. Upgrades (add value) , and maintenance on average cost me less than that.
10 % is not the management fee any more , or I need to raise my prices.
Taxes would be less, you subtracted the maintenance fees after taxes.
I would use rent as opposed to 1/3 income as the E part.
I know prices are bubbly and its hard to collect rents to earn income today, but I am not sure how you get 32% for taxes.
Enjoy your posts and this comment was to ask for clarity if I misunderstood your P/E.
Take Care
#50 Smoking Man on 02.11.15 at 7:46 pm
A wee bungalow in long branch just sold for 800k, a two story nothing fancy just popped for 1.1m
Insanity of supply and demand. Fundamentals out the window.
Speaking of oil, I let the kid drive the forex account today. He was up about 4k.
And that was early.. I said watch oil, you see it dropping fast, hammered the USDCAD hard. Buy it.
Well guess what, the morron with the oil chart up, buys it. 4000 down the drain when he realized his screw up. He’s down about 2k today. Not bad considering the screw up.
This is promising.
Now if you think CAD will lose another 10 cents. Open a Forex account. Use 100k
Buy USDCAD using only 7500. Buys you 30 contracts, You will be a millionare when cad loses 10 cents.
………………………………………………………………..
So now you call your son a moron, nice, nice call smoking d#$k. I’m sure he respects you and your very tactful method of addressing his learning skills of the market! Perhaps he is in the wrong business. Well at least we can surmise he achieved his grade 12 and can move on to better places than his father!
https://www.google.ca/search?q=luke+i%27m+your+father+scene&ie=utf-8&oe=utf-8&gws_rd=cr&ei=7-LcVISYN8inyATd3YCIBw
#177 Rob on 02.12.15 at 11:00 am
Canadian dollar up nicely this morning. One thing about this blog is they get everything wrong!
——————————————
Markets and the dollar are like a toddlers diaper, up and down all day and all night….. good to see you are doing well at least once a day.
#178 Vik on 02.12.15 at 11:03 am
Interesting Read – origins unknown
A professor of economics put this together to show how our current tax system works based on each segment of our population.
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it would go
something like this:
____________________________________________
Yep that pretty much sums it all up! I recall hearing that rendition of the story many years ago.
Great post!
“1% is too high for maintenance every year but I can see how it can be. I do more than just maintenance for that amount every year. Upgrades (add value) , and maintenance on average cost me less than that.”
1% is a good rule of thumb over the long term. Year to year, for a short-term owner, the numbers can be considerably less, but there will come a point at which a large amount of maintenance will need to be done (ie: a roof replaced) which can certainly can consume the accumulated surplus. Trees are another example, lots of properties go 20, 30, 50 years without any big expenses on their landscaping, but over time, its likely that there’s a big hit.
“The tax burden for income properties isn’t so high because you can deduct your management expenses and maintinence from your property income…
That’s exactly what I did in the calculation.
also the 1/3 annual income isn’t meaningful for investment properties.”
If you use a large cross-section of rents against actual prices, where the data is available, you’ll come to a similar conclusion, with the P/E of around 35. And actually considerably worse in Canada’s major cities (Toronto/Vancouver particularly) where we frequently hear anecdotes of the owners nearly subsidizing the renters simply on a pure cashflow basis (hence, no ‘earnings’).
“I know prices are bubbly and its hard to collect rents to earn income today, but I am not sure how you get 32% for taxes.”
That’s the typical corporate tax rate in Canada, and typical marginal tax rate on net personal income that a landlord would receive from rent.
Obviously there may be situations where a low-income person is better off with the direct cashflows of RE, or a flow-through entity such as a REIT (or one of the former Income Trusts until “F” et al changed the rules nearly a decade ago). But I suspect this doesn’t apply to most investors at the margin.
“Canadian dollar up nicely this morning. One thing about this blog is they get everything wrong!”
Its way too early for me (a CAD$ bull because of all the deflation likely in the Canadian economy) to declare any sort of victory, since I’ve been relatively wrong over the past while on the CAD$. But when the bearishness is overwhelming, its usually a great time to buy.
Guys, stop beating up on Mark or he won’t come back to pay for your drinks.
Mark, thanks for the followup, neat analysis. Not sure I agree with that methodology for deriving P/E of 35 on housing, but I see where you’re getting your data. I’ll chew on it. Understood regarding XIU though.
KommyKim: thanks for the tip, I’ll take a look.
Cheers all!
Does anyone know how much Smoking Man made by pumping and dumping BBD through this pathetic blog? Hope not too many of you dogs allowed him to “help” clean out your wallets.
Can we get that rationalization of the comment section going….the Kelowna part is awake and acting up again, using out of context quotes to look foolish again?
Dog sleds on loan from Whistler have been outfitted with floatation devices.
The 1% don’t pay taxes, as one of them said taxes are for little people, they incorporate offshore and have tax lawyers.
In regards to the graph, what is “business equity” vs investment? Thanks for the help. Love the blog!
@#178 Vik
“Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:”
____________________________________________
How about factoring in wages into that story. The fact that the 10th man takes home 10.6% of country’s income is something to consider. No one drinks for free, we all pay taxes, gst, hst, income, etc. The average income among the country’s elite earners is much higher. The top one percent earned an average of $381,000, more than 13 times the average income of Canada’s bottom 90%, who earned just $28,000.
So yeah, they have lots of disposable income to buy rounds and pay their share of taxes. Don’t forget that the bottom earners are barely scraping by on minimum wage of $10 / hr (laughable). They have a right to question tax breaks and demand higher wages.
Is the 10th drunk Smoking Man?
#210 Pump and Dump on 02.12.15 at 2:37 pm
Does anyone know how much Smoking Man made by pumping and dumping BBD through this pathetic blog? Hope not too many of you dogs allowed him to “help” clean out your wallets.
……..
I got hurt on that one two, who saw the CEO getting bounced..
Im buying more…
Agree with Vik. At #201 “Bottoms Up”. The other 9 do not have to work. It is their choice, to sell their labour at market rate. If overpriced, the labour (7 billion to choose from),can be replaced (Automation).
In short use your brain. Create Products, Services, that are faster, quicker, safer, efficient. This will always sell.
I get today’s photo. The small dog represents the minority who are asset rich. The small dog has an abundant asset. The big dog represents the majority who are asset poor. All his ass(ets) are in the one area, his house. The big dog is mostly debt. The little one is comfortable and sleeps well at night.
Just goes to show, what you can learn financially from dogs. Get plenty of exercise. Live simply. Have few possessions. Don’t go into debt. Conform to the Rule of 90%. And little dogs tend to live longer than big dogs anyway.
Mark – please keep on adding to this blog.
Don’t listen to the losers here who try to put you down.
http://www.brantfordexpositor.ca/2015/02/06/54-employees-laid-off-at-brantford-call-centre
One of Brantford’s call centre giants has been reduced to a skeletal staff after another round of layoffs this week.
Wipro Technologies, which at one time had a bustling office of between 300 and 350 employees, is now down to an estimated 30-50 workers.
“It was brutal,” said one employee, who asked not to be named.
Checkout the following two links:
Predatory lending practices: harming not helping financial recovery
http://jugglingdynamite.com/2015/02/12/predatory-lending-practices-harming-not-helping-financial-recovery/
Investment Riches Built on Subprime Auto Loans to Poor
http://dealbook.nytimes.com/2015/01/26/investment-riches-built-on-auto-loans-to-poor/?_r=2
#212 happity
“The 1% don’t pay taxes, as one of them said taxes are for little people, they incorporate offshore and have tax lawyers.”
Schedule an appointment with you favorite big bank’s wealth management adviser and talk about family trusts. Little people have ways to avoid tax as well.
“Mark, thanks for the followup, neat analysis. Not sure I agree with that methodology for deriving P/E of 35 on housing, but I see where you’re getting your data. I’ll chew on it. Understood regarding XIU though. ”
You’re welcome. Certainly its possible to do a much more rigorous analysis, but basically, the practical consequence of a P/E that’s so significantly elevated is that homeowners are setting themselves up for quite poor returns over the next few decades. Much like the elevated P/E ratios of technology stocks in the “dot-com” era have set the tech sector up for extremely poor returns in the decades that followed.
Now, if median house prices were 2X median income, ie: 2 x $76k ~= $150k, that would give us a P/E of around 12, which would make housing a far more viable investment that would at least be competitive with stocks.
In Canada, you can think of stocks and housing as being somewhat diametrically opposed. When housing does very well, stocks tend to do poorly. When stocks do extremely well, housing does poorly. The amount of wealth that can be attained merely by positioning oneself on the other end of the cycle, by being a contrarian, is considerable. Since the housing cycle has been unusually strong this time around, it logically follows that stocks may very well be in an unusually weak and suppressed position, ripe for excellent future relative returns.
Canada’s oil capitals are headed for their first housing correction since 2008, TD warns
http://business.financialpost.com/2015/02/12/canadas-oil-capitals-are-headed-for-their-first-housing-correction-since-2008-td-warns/
Home prices in Canada’s oil capitals will suffer a correction this year as plunging oil prices turn the nation’s housing market upside-down, say TD economists.
Prices are on track to fall as much as 10% in Calgary, Edmonton and St. John’s Newfoundland over 2015 and into 2016 as the collapsing oil industry hits growth, incomes and employment.
“A significant softening in job markets will set the stage for a second major housing correction in Calgary and Edmonton since 2008,” TD economists Derek Burleton and Diana Petramala write in their report Thursday.
#50 Smoking Man on 02.11.15 at 7:46 pm
A wee bungalow in long branch just sold for 800k, a two story nothing fancy just popped for 1.1m
Insanity of supply and demand. Fundamentals out the window.
_____________________________________________
Smoking Man whats with the wee this and wee that? You sound like your a haver! Perhaps Yer oot yer face!
My grandfather was from Scotland and he never even used wee as much as you. I thought you were Yugoslavian decent or something eastern European?
#207
Mark I am not trying to be mean spirited or “anti-Canadian” but the reality is all perception. And in the greater world out there the Canadian dollar is not perceived as a safe harbour or anything of the sort. It is a very small player in the greater scheme of currency wars as is Canada as a whole. Yes we have a large land mass (blow the horns) and we have this homespun “wholesome image”. But it is all pretty much an illusion that the so called leaders of this land mass use to incite the masses (the great unwashed, to steal a quote). To put it in a nutshell we are not a player on the world stage because we have no firepower. We have no firepower because we have no money. We have no money because we have such a small population for this huge land mass, which must be serviced, lest we lose some of it and become an even lesser entity. Viscious circle but I am ok with it, those are the cards dealt.
1% is a good rule of thumb over the long term.
————————————–
sure if you hire expensive engineers to change light bulbs and need yearly paint jobs.
if you are even slightly handy with a screwdriver that number is way off.
i bought a ‘tear down’ 20 yrs ago. it was neglected and unloved. today it’s worth a mil and in much better shape.
i estimate i have spent arounk 12k over 20 years on maintenance – new roof, check. ext paint 2x, check. water heater, check etc. as i did most of the labour myself(ex roof) i guess i have to add 2 weeks wages
also. call it 15k total.
so 0.75k/yr sustained long term rate
750 vs 10,000 – slight difference
honeybooboo it’s purely unemotional for me. I want to be the Chartist Guy in the room.
I have access to an institutional grade trading platform during the day so why not.
My short term ETF trading watch list is simply:
VIX, TRIN, US Bonds, Dow, Oil, Nat Gas, and the odd good trading stock of interest, eg. Dollarama, WestJet.
The home page & watch lists and alerts at http://www.stockwatch.com has everything else I need, and as a mobile app. Finviz has overnight data.
The KISS method (no not the boomer era band).
And XLF.US on list as US Financials, a great barometer of these.
#50 Smoking Man on 02.11.15 at 7:46 pm
A wee bungalow in long branch just sold for 800k, a two story nothing fancy just popped for 1.1m
Insanity of supply and demand. Fundamentals out the window.
Speaking of oil, I let the kid drive the forex account today. He was up about 4k.
And that was early.. I said watch oil, you see it dropping fast, hammered the USDCAD hard. Buy it.
Well guess what, the morron with the oil chart up, buys it. 4000 down the drain when he realized his screw up. He’s down about 2k today. Not bad considering the screw up.
__________________________________________
Too bad he didn’t get an education and finish school. Maybe he would have been less of an “idiot” as you say.
#171 Mark
“E” in “P/E” refers to what the investment earns (rent in this case), not to what investor earns from unrelated employment income. It is simply shocking that you could post that wacko explanation with a straight face.
“it would be tragic if anyone took my explanations” – yes Mark, it would be.
#178 Vik on 02.12.15 at 11:03 am
The beer drinking story.
_______________________________________
What an idiotic example. It looks at the world as a consumption based “dream” without any thought as to how all this “beer” that everyone is drinking got created in the first place. If the richest guy drinking was the owner of the beer factory and the other 9 were his co-workers. . .and if equal and fair compensation for labour were taken into account this whole story would look decidedly different when it came time to “actually” see what the richest guy paid for.
Capitalist profiteers or the people who work to keep us healthy, our children educated, our roads maintained, our sewage treated, our fresh water supplied, our laws enforced, our justice dispensed, and our garbage collected?
All your gold, diamonds, and bitumen would be worthless if your population is not healthy enough, educated enough, and safe enough to demand those goods.
Make no mistake every private business is subsidized by public dollars. If a business had to provide for all the education, care, sanitation, and clean water for every employee they would go broke.
certain “rich”
To make an account “anonymous to the world,” the site suggests using a company, foundation or trust, which can use nominees to open and run the business. One sign: Hooczko and Cordaro identified a woman who was Sovereign’s corporate counsel and was listed on a website as a director of 147 companies and an agent for almost 900 companies.”…
http://www.woodllp.com/Publications/Articles/pdf/JohnDoesDeclaration.pdf
http://www.icij.org/project/swiss-leaks/prying-eyes-sovereign-has-you-covered
the IRS added Sovereign to its list of firms that trigger higher penalties — from 27.5 percent to 50 percent — for taxpayers who voluntarily disclose previously undeclared offshore accounts.
http://www.irs.gov/Businesses/International-Businesses/Foreign-Financial-Institutions-or-Facilitators
http://www.theglobeandmail.com/report-on-business/economy/genworth-warns-of-rising-losses-on-mortgages-from-oil-sensitive-alberta/article22942576/
The country’s largest private mortgage insurer says it expects rising losses on its portfolio of Alberta mortgages this year and is more heavily scrutinizing new applications from oil-sensitive regions of the province as low crude prices weigh on Western Canada’s housing market.
Genworth MI Canada Inc. is raising its target loss ratio, a measure of claims paid compared to premiums earned, from 20 per cent to 30 per cent on expectations of rising unemployment and a 3-5 per cent drop in Alberta home prices.
“Clearly, the current environment, specifically the low oil prices, will put some pressure on losses and potentially the size of the housing market in Alberta,” Stuart Levings, Genworth’s president and CEO, prices, told analysts during a conference call to report its fourth-quarter earnings Wednesday Alberta represents a fifth of the company’s mortgage insurance business, although the province accounted for 27 per cent of new insurance premiums written last year. The bulk of Genworth’s Alberta portfolio consists of insured mortgages dating back to 2012 and now average 20 per cent equity, offing a buffer against “a moderate downturn in house prices,” chief risk officer Craig Sweeney said.
#154 Rayofflight
Great post! This is exactly what I am doing and how I’m going about things. I’m not as far along in the process but I like the direction life is going. Very inspirational!
I may be misreading these posts but the real estate numbers look really off to me. I own two small 16 unit multi-unit apartments in FL (32 units total) and my maintenance costs has never (ever) been 1% of gross revenue.
Long story short, each 16 unit building generates $15-16k per month in gross rent when fully rented. My operating costs (which includes vacancies, insurance, maintenance, property management, banking, accounting, etc) are $8-$9k a month. An approximate 45% operating margin.
1% maintenance on $30k gross rent per month is $300 in maintenance expenses a month? No way. Never.
I don’t know what kind of real estate property only requires 1% in maintenance but I want it!
Sir Garth:
Thank you for your perfect and factual response to
#172 Wise Old Owl. You are bang on with that. It could be summarized by saying, ” a greedy fool and his/her money are soon parted”. Your balanced portfolio is the answer. Thank you for sharing your factual perspective.
#121 Mark on 02.11.15 at 11:23 pm
“Thanks to Canadian Govt policy – Canada has the laziest most unproductive people in the G20. Little or no industry. “
Are you kidding? Canada is a chronic net exporter.
—–
Exporter of what? Rocks, logs, dirt, coal. Not finished products like Germany, USA and Japan.
90s? Uh…dude. Wake up. It’s 2015. Our manufacturing was sent to Asia with the dictator of the day’s blessing many many years ago.
““E” in “P/E” refers to what the investment earns (rent in this case), not to what investor earns from unrelated employment income. It is simply shocking that you could post that wacko explanation with a straight face”
Not a whacko explanation, but rather, a macro analysis of pricing of the Canadian housing market. The assumption made is that an owner or a renter will only be able to devote 1/3rd of their income to shelter, the rest needed for other purposes (food, savings, etc.). Hence, using 1/3rd of average income is completely appropriate, and is typically in line with what Canadians spend on housing, roughly 1/3rd of their income.
So please, spare the baseless and completely uncalled for insults for others. Criticize me if you must, but insults belong somewhere else.
” estimate i have spent arounk 12k over 20 years on maintenance – new roof, check. ext paint 2x, check. water heater, check etc. as i did most of the labour myself(ex roof) i guess i have to add 2 weeks wages
also. call it 15k total.”
Well at some point in the future, you’ll have much larger expenses than just those items. Even the foundation on a house will need renewal/maintenance at some point in the future as will the water pipes. Big ticket items, I understand, but you need to account for them in the long-term analysis nonetheless.
#225 Holy Crap Wheres The Tylenol on 02.12.15 at 4:09 pm
#50 Smoking Man on 02.11.15 at 7:46 pm
A wee bungalow in long branch just sold for 800k, a two story nothing fancy just popped for 1.1m
Insanity of supply and demand. Fundamentals out the window.
_____________________________________________
Smoking Man whats with the wee this and wee that? You sound like your a haver! Perhaps Yer oot yer face!
My grandfather was from Scotland and he never even used wee as much as you. I thought you were Yugoslavian decent or something eastern European?
……..
Married to a Scottish lass. A highlander.
Picked up a bit of here lingo..
BDC
He’s still an idiot that made 9k today, when we could have made 26 if he listened too me.
” my maintenance costs has never (ever) been 1% of gross revenue.”
I’ll simply offer up a slight correction here, 1% is of the value of the property cited as the rule of thumb. Not on the net or gross rents. So a hypothetical landlord with a brand new $100M building should reserve, on average, $1M/year for long-term maintenance.
Obviously certain types of construction may in practice require more, or less. The ‘rule of thumb’ is not intended to be precise, but rather, a general ballpark figure.
The CRA allows 4%/annum on a declining balance basis for most residential rental properties for CCA. Assuming 3% long-term inflation, this works out to be roughly equivalent to the 1% “rule of thumb” cited as well if you calculate such deprecation on a current price basis, rather than on the declining “book value” balance basis (ie: 4% – 3% = 1%).
#234
That’s hilarious. Since 2012. 2 years. 20% equity. Dreamer.
“The country’s largest private mortgage insurer says it expects rising losses on its portfolio of Alberta mortgages this year and is more heavily scrutinizing new applications from oil-sensitive regions of the province as low crude prices weigh on Western Canada’s housing market.”
Funny (or not) isn’t it, that a publicly traded company in the business of subprime mortgage insurance comes out and says these things. Yet the CMHC CEO, in a nearly identical business with far more risk/exposure than Genworth MI Canada, basically was singing the tune, 2 weeks ago, that everything was going to be all right, and the CMHC was, at best, “on the lookout” for regions of the country going bad.
I don’t know who to vote for in this election, but I really, really dislike public officials when they aren’t fully forthcoming with the truth. And their appointers are just as bad for letting them persist in such.
Squirrels rule… if they can remember where they put their nutz.
http://business.financialpost.com/2015/02/10/this-woman-is-well-prepared-money-experts-reveal-three-ideal-retirement-plans/
““E” in “P/E” refers to what the investment earns (rent in this case)”
Yes, rent is the income, and nobody buys buildings outright (investors in RE use leverage, with interest as a tax deductible expense). Think dividends (but factor in the higher tax rate). At today’s asking prices, most rental RE in major cities is poor yield.
#228 TurnerNation:
The trouble with full fledge trading stations is they are excellent at providing thousands of searches using thousands of indicators. The trouble with these indicators is they are lagging indicators. Similarly, the use of Candle Stick patterns in the day trade and swing trade, to me, is like playing “Wack a Mole” The leading indicator that best forecasts a price gain is future earnings. Use weekly charts, and believe in reversal to the mean over an annual time span.
Well at some point in the future, you’ll have much larger expenses than just those items. Even the foundation on a house will need renewal/maintenance at some point in the future as will the water pipes.
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the house is 110 years old.
the foundation is 110 years old. it will last another 100+ years easy.
what the heck are you talking about?
(oh wait, i did do a new foundation drain tile about 10yrs ago – shovel 12$, gravel100$, pipe$100, 2 days to dig.)
the next 20 years will be half the mtce cost of the last 20 as the roof is now new(ish) and proper painting keeps the exterior protected and the drainage is clear.
and what is a larger mtce item than a new roof?
No names, no packdrill. All on the hush hush and QT. I met with an extractive industries analyst on Bay Street this afternoon who is predicting a “U” shaped recovery in oil prices but whoops a daisy not until late 2017/2018 and only up to $85/bbl even then. Which means two years of pain. Oh and he says the pain hasn’t started yet, because most firms have sought to mothball projects first then look at jobs etc second. Sorry to be the bringer of such good cheer….
#239 Mark on 02.12.15 at 6:24 pm
The assumption made is that an owner or a renter will only be able to devote 1/3rd of their income to shelter, the rest needed for other purposes (food, savings, etc.). Hence, using 1/3rd of average income is completely appropriate, and is typically in line with what Canadians spend on housing, roughly 1/3rd of their income.
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You offered to answer what “P/E” would mean in real estate context.
P/E = price to earnings ratio – obviously earnings of the thing you paid the price for – (rent – expenses) you are charging yourself or others.
Instead, you said that earnings= (1/3 of your salary – expenses). So, by your calculation, if a very rich person bought a 1 mil East Van shack, their investment would seem like a fantastic bargain with very low P/E. By this logic, rich people can expect prices will go up (because P/E would indicate RE is currently undervalued), but for same property poor people can expect it go down.
And now, instead of realizing this makes no sense, you claim that instead of answering P/E question, you were actually offering small treatise on realities of buying in Vancouver.
I am last, at last!
Great discussion today. Good issues to deal with.
I am in the 1%, i think.
#73 Smoking Man on 02.11.15 at 8:50 pm — ” Me and freinds are about to be outed… Time to find another planet. . . . tell the truth that no one in there mind would believe.”
Hey SMan, good to hear from you. Guess that’s why The X-Files was so popular, sheeple viewed it as sci-fi, nothing more. That’s why they’re sheeple and, we’re not!
It will be good to move on to the next worlds, and leave this sewage system of a planet behind once our numbers are called.
Cheers!
“Yes, rent is the income, and nobody buys buildings outright (investors in RE use leverage, with interest as a tax deductible expense). Think dividends (but factor in the higher tax rate). At today’s asking prices, most rental RE in major cities is poor yield.”
Leverage isn’t going to help you out on an asset which has an unlevered P/E of 35. Besides, the cost of finance is cyclical, with abnormally low periods of financing costs proceeded by abnormally high costs of finance, and vice versa.
The approach, of using the income available for the population to pay rent (whether imputed or actual), against the average price of Canadian housing is completely valid. And is just one of the various methods you can come to the conclusion that the P/E ratio averages in the region of the numbers specified.
From 2008
http://www.taxresearch.org.uk/Documents/CreatingTurmoil.pdf
.” In other words, the offshore financial centre is made up of the account ants, lawyers, bankers, plus their
associated trust companies and financial intermedia
ries who sell services to those who wish to exploit the mechanisms the tax haven has created.
Until now all attempts to regulate the offshore eco
nomy have been focussed on tax havens.
We argue that this has been a mistake. Tax havens are geographically located and have
fixed spheres of influence. OFC operators, many of
them multinational companies or banks,
and some like the Big 4 firms of accountants present in every major and most minor tax
haven jurisdictions around the world, can move their operations to wherever they want at
a moments notice. They have used this power to thre
aten to leave any jurisdiction that does not comply with their wish to secure the legislation they desire. This has recentlybeen used as a tactic in the UK, itself a tax haven…”
rinse lather repeat
http://www.taxresearch.org.uk/Blog/2015/02/12/private-banking-laundromats-for-the-rich/
Garth, you often give advice related to personal investing and tax efficiency.
It would be interesting to hear what you have to say on small businesses.
I’m sure many of us readers are incorporated.
party horns all around = sp500 new highs. whoop whoop!