“In your twisted world,” asks Jeremy, “is there never a good time to buy a house?”
I get that a lot, being the tragic and misunderstood person that I am. Some media weenies call me a ‘housing permabear.’ Others on this pathetic blog accuse me of being a stock market groupie or an America-lover. Realtors nation-wide would enjoy seeing Audi A7 tire tracks etched across my shapely bottom. CREA has a contract out on me.
This is what happens when you write about a balanced life in an unbalanced country. Being misunderstood is an occupational hazard. So many of us, especially the impressionable young, have an unhealthy relationship with money, finances and investments. They don’t get risk.
Here’s my thesis: far less risk exists in financial markets today than the Canadian housing market. In a low-growth, low-inflation, low-rate, almost-deflationary, high-debt world people should expect scant income growth, job insecurity and a high vulnerability to shocks (like oil, terrorism, measles or Beyoncé). Without question, houses here are inflated – 66% more expensive than in the US – while the economy is torpid and stress increasing. How is that not dangerous?
As for financial markets, the US is surging ahead, cheap energy will help Europe, Japan and China, central banks are more stimulating than Dakota Johnson, corporate profits are robust and stock markets are, in general, fairly valued. There will be no bank failures, currency collapse, 2008 rerun, hyperinflation, depression or locusts in North America. In short, there is more balance, diversity and safety in the financial world than that of real estate – which is built on leverage and hormones.
Having said that, owning property is fine. I do. Just be reasonable. As I’ve told you in the past, I rent my Toronto house, paying less than four grand a month for a $2 million pile I could purchase with cash. But with a portfolio making over 8%, why would I? The landlord’s subsidizing me bigtime. So I escape on weekends to my owned property in a bucolic town where houses cost what they should. In fact, you might have noticed that outside of the GTA and YVR, real estate’s fading, no matter how cheap mortgages get.
Keith kind of gets this.
“I know your Rule of 90 by heart,” he says. “I’m 35 and so 55% of my net worth should be in the house, which exactly where we are right now.”
He lives in a city to the east of Toronto, where real estate’s gone comatose. And his house is reasonable – about $350,000 with a $102,000 mortgage at 2.25%. But the father of two (and a border collie) still wrestles with a too-common emotional issue.
“I have ‘declared war’ on my mortgage with a newly devised principle prepayment plan,” he says. “This 18-month plan would bring my balance to $55k at the end the present term, equal to the current sum of our TFSA’s, with idea of using them to pay off the mortgage. This plan would make us mortgage free in the 10th year of our 25yr am, on our 10th wedding anniversary, well before we are 40. If we get ‘er done, I promised my wife hot exotic travels, and she in!
“Now I am trying to rationally weigh the emotional benefits of being debt free sooner than I thought possible with the practical financial trade off of keeping the TFSAs invested and pay off the house about 5 years later. As for the opportunity cost on a rate basis, balance or equity investments within my TFSA are quite likely to outperform my mortgage rate but that is not a risk-equivalent, apples-to-apples comparison, right? Paying down the 2.25% mortgage is guaranteed, and safest investment like a high quality government bond or GIC is paying less interest. So if we go with risk-equivalent, foregoing higher returns for higher risk, and assuming the market does not tank in 18 months when cashing out, paying down the mortgage comes out on top. Is my thinking on track?”
Paying off mortgage debt, no matter how cheap it might be, is the Holy Grail for many people, like Keith. But when the cost of borrowing’s roughly equal to prevailing inflation, the money is virtually free. Worse, why pile more of your net worth into an asset that isn’t appreciating and likely to lose value over the years ahead? Would it not benefit the family more to be earning three or four times as much within tax-free investment accounts?
In fact, given 2.25% loans, the only time paying one off might be logical is to then remortgage a property for investment purposes, creating a tax-deductible mortgage.
What do Keith and his four dependents need? Right. Income. Cash flow. Money for the kids’ education in fifteen years. A big pile of dough to create a retirement pension in thirty years when the OAS has been eliminated and corporate pensions are rare. A paid-for house will provide zero income, and may well be worth the same or less. The $102,000 Keith wants to plow into the place over the next 18 months could grow to $800,000 by age 65 if a portfolio yields the same in the future as it has in the tumultuous past.
Only emotion would lead to paying down a loan on a non-performing asset instead of renting the money for 2%. It’s fear of the wrong thing.
I expected more of a guy with a border collie.
211 comments ↓
Great pic!
First and proud of it.
So better to have a 7% return on a portfolio every year. Will it go up by 7% every year forever, because it always goes up? Or is it like housing, correcting here and there ?
Ah…so, there is a place where real estate “costs what it should”, and within driving distance of TO?! Pray tell, where is this mythical land?
I understand the concept fully, but the market (and housing) is susceptible to inevitable shocks. If you pay down your mortgage and wait for 15-20% correction then take out a heloc to invest, I think this could work out well also too.
#FearlessIsEasy… #WhenYouHave… #NuclearPowerPants
http://youtu.be/RHU6aqt08dA
Personally I like Keith’s plan. Get the mortgage off your back, remove the risk. Use the mortgage payment going forward to plow back into your TFSA the following year or whatever he wants. It permanently improves his cash flow having no mortgage payment.
Sure on paper Garth’s idea makes sense. The trouble is people panic with their investments when they have debts hanging over then and bail at the wrong times.
If he doesn’t like being debt-free he can always go back and get another mortgage which I doubt he would do.
Funny…even the B.C. Politicians can’t afford Lower Mainland housing any more….
“Press Pass: NDP MLA says she can’t afford to buy a house in her riding”
:-)
http://www.timescolonist.com/news/local/press-pass-ndp-mla-says-she-can-t-afford-to-buy-a-house-in-her-riding-1.1770816
“HOUSING BLUES — If NDP MLA Jane Shin ever moves out of her Burnaby-Lougheed riding, it won’t be for political reasons. It will be because she can’t afford to buy a house there. Speaking during debate on the budget last week, she told the house: “I’ve given up on Burnaby, as much as I’m a resident of Burnaby. I can’t find a house that I can occupy for anything less than $800,000.” Shin said she’s in her mid-30s and has a big greyhound she’d love to see running in a fenced backyard. “I might be the member for Burnaby-Lougheed, but I might need to get a place out in Mission or Maple Ridge or Chilliwack.” Shin said she has a friend who is a nurse and whose partner is an accountant and they’re moving back to Taiwan because “B.C. is a place where you make six figures and you live poor.” MLAs make $102,000 a year in base salary.”
Just realized today that this exists:
http://www.optionsforhomes.ca/why_options/
They are a non profit that loans low income home buyers the downpayment for Toronto condos.
Am I naive to be completely shocked by this?
Hey Garth,
I imagine your feelings on mortgage payments are the same as student loans? My student has an interest rate of 5.5%, while I just recently started putting money into a low fee balanced index fund.
I’m 22, and female (according to your post a few days ago, I’m one of the rare ones who care about my finances and is not house horny) and time is on my side.
My emotions are telling me to throw money at the loan. Should I pay the minimum loan payments and then put the rest of my savings into the index fund?
Mark has been getting heat lately for his comment that the cost of remediating oil tanks can make a property essentially worthless. Extreme costs are rare but the risk should give pause to those in a rush to buy an older property.
I have no knowledge of the properties Mark referred to but we had to deal with the issue as sellers of an older property in West Van. We had to agree that we would be responsible for any remediation costs if a tank were found on site within two years after the sale.
We were quoted around $10K to remove a dry tank. After that all bets were off. These tanks were made of steel but they were not designed to last fifty years underground. In the worst cases, they were left full and the steel would rust and perforate leaving oil to spread invisibly under neighbouring yards. We heard of cases around Vancouver costing $135,000.
We concluded that we didn’t have a problem as there was no sign of an oil filler pipe in the exterior wall. We were also fortunate that the local fire department had no record of a tank being installed on the property as had been required at the time.
However for anyone who thinks oil tanks are a minor detail, read this current real life example.
http://www.timescolonist.com/news/local/former-homeowners-must-pay-for-oil-tank-leak-in-saanich-1.1770366
high vulnerability to shocks (like oil, terrorism, measles or Beyoncé).
================
Well, OK, but surely the list should also include Kim Largeassian.
Ralph Cramdown on 02.22.15 at 11:32 am
And they show off an exceedingly short general officer in an exceedingly tall hat and an excessive amount of gold braid.
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I’m sorry, Ralph, you have just gone too far this time. The word is that a highly incensed Napoleon is returning from the grave to take you on at the Human Rights Commission.
When will people like you learn that this is Canada, a thoroughly modern and exquisitely sensitive country, where you can’t go round saying things just because they are factual.
Quote: (“In a low-growth, low-inflation, low-rate, almost-deflationary, high-debt world people should expect scant income growth, job insecurity”)
Oh yeah, now that’s the truth !
1 – Jobs = hard to find, very hard to get, hard to keep.
2 – Inflation: Food inflation is massive, but wage inflation is zero, unless you work for the government.
3 – High Debt World: Yes, that’s what is fueling the current stock market boom. You see, with all of the huge amounts of government debt out there, central bankers world wide are doing Quantitative Easing like crazy just to try to keep the economy from sinking, and they do this so they can have income to keep paying the interest on their debt.
If the economies ever slow down enough that they cannot pay their debt, then the whole house of cards comes crashing down. We are talking financial Armageddon here, so they will do everything and anything to avoid that. And what they are doing is ramping up the printing presses and throwing cash at the problem, with the net result being that most of this new found cash is going into the stock markets, mostly the American market.
Now eventually what’s going to happen is even the American economy will crash due to the massive amounts of debt, but so far it looks like that won’t be for another few more years, so until then the stock market boom continues and that’s why investors in the U.S. stock market are getting incredibly rich.
Now back to houses: Yes, low interest rates are fueling speculative fever in houses, but eventually one reaches the point when the cost of the monthly mortgage payments is MORE than what you earn. That leads back to point #2 above: WAGE INFLATION IS ZERO. So if your wages are not rising, then you cannot afford a house once the monthly payments on that house rises to more than you are earning. When that happens people cannot keep paying more and more for that house, and that’s about where we are now.
Meanwhile, the government printing presses roll on and on and the stock market keeps rising higher and higher, and that will continue for at least another 2 more years, probably a lot more.
So you can buy that house now, and pay 2-times in monthly fees compared to what you would pay if you rent the same place, all in the hopes that the house will continue to rise in price, and then find out that your house is NOT RISING anymore in value,
OR you can rent a similar house and take what you save and put it to work in the ever-rising U.S. stock market for the next 5 to 10 years, and enjoy life that way instead. I’m doing the second option and life is good. Just made an extra 1.75% yesterday alone with SPXL.
Want to see a 3 year chart of SPXL ? take a look:
http://stockcharts.com/h-sc/ui?s=SPXL&p=D&yr=3&mn=0&dy=0&id=p95696037966
From 27 to 94, that’s 3.5 times the starting price, or a gain of 250% Has houses gained 250% in the past 3 years? Nope. That’s why the smart money is in the U.S. stock market, at least for now.
Yes, but there is a dark side to everything and here it is: Remember the tech crash of 2000? Yes, stocks go up, then they come crashing down, so these gains will probably be evaporated when we get the next bear market in a few years, you when you see the market start to turn you have to have the guts to get out and stay our for a very long time. When this stock market party is over it will be dead for a good 20 to 30 years due to the massive debt overhang that will crush the world’s economies. So enjoy the stock market party now while it lasts because it won’t last for much longer.
Okanagan observer with boots on the ground gives his assessment of the market in that neck of the woods and it is not good. That region will suffer with Alberta.
I enjoyed the whole video but the good stuff starts at 6 minutes when he takes us on a drive to show the explosion in listings provides a grim forecast.
https://www.youtube.com/watch?v=Hqa0DLHwdSs
If you can consistently get 7% return in your portfolio then you should work on Wall Street, where majority of hedge funds made much less than that last year.
In general I think your view of financial markets is way to sanguine. I think we are in the midst of another financial bubble generated by central bankers.
Nobody gets a consistent annual number. As I have said, a 60/40 balanced portfolio has averaged 7.4% over the last decade, which was the most tumultuous since the 1930s. Seems reasonable the next decade or two would deliver similar. — Garth
http://www.businessinsider.com/r-investors-sour-on-canadian-banks-ahead-of-earnings-2015-2
From Reuters: Canada’s three largest banks Royal Bank of Canada , Toronto-Dominion Bank and Bank of Nova Scotia , are among the top 20 most shorted stocks in Canada based on the latest Toronto Stock Exchange data released mid-February. Bank of Montreal , the No. 4 player, saw short positions in its stock jump significantly in the first two weeks of February.
U.S. short interest data on the banks paints a similar picture with short interest positions in Canada’s largest bank, RBC having risen 47.5 percent over year-ago levels. In that same period, short interest positions in its rivals TD, Scotia, BMO and CIBC , have risen 82 percent, 42 percent, 41 percent, and 62 percent, respectively.
Garth,
The problem with warning people about housing falls short in places like Vancouver where a 33 foot lot is pushing $2 Million these days, up from about 40K during the days of Expo 86.
It’s made tens of thousands rich beyond their dreams by simply buying RE. Many bought prior to the boom of the last 10 years so a correction (as you forecast) won’t harm them as the longer term trend is up.
Of course there will be no crash (reversion to the mean) as you and I and almost everyone agrees).
@Andrew Wolborn,
Tanks pause for thought?
Maybe people in Vancouver should never purchase due to the possibility of the Big Earthquake.
Let’s get back to reality dude.
[…] Source: http://www.greaterfool.ca/2015/02/22/fearless-2/ […]
Keith, dude. Pay off the mortgage then take out a secured line of credit for investment purposes. Average into a balanced portfolio from the LoC. Deduct the interest for investment purposes. Refill the TFSA ASAP from non LoC money.
” So many of us, especially the impressionable young, have an unhealthy relationship with money, finances and investments. They don’t get risk.” Garth
So true. So many of us… How do you get through to people?
I think I may have found one way. Please bear with me, I hate long winded shit more than most.
I was having a conversation with my daughter and son in law who are both well educated, have made successful starts to their careers, two kids and renting. They didn’t think the picture was complete due to the renting part.
There was a startled look in both their eyes when I told them that the incomplete part was in the area of their education.
I pointed out that most people spend about sixteen years (give or take a couple years) getting an education. That is grade school, high school and some form of post secondary. The main purpose of which is to garner the ability to EARN INCOME.
Would it not make sense to put some effort into learning how to properly handle that income?
I pointed out that two smart kids like them could educate themselves over the course of a year quite easily and even find new common ground in their relationship as an added benefit.
I advised them that it is of paramount importance that they have enough knowledge to be in charge of their own financial lives even/especially if they choose to use a financial advisor.
I suggested that they read seven or eight books on various aspects of personal finance.
I ran the big picture by them. Use ETF’s, balance , diversify ,rebalance think long term, ignore the noise, use of risk, etc.
My main point was that there are a couple dozen key points about personal finance that can save a person’s ass over the long term.
Reading a diverse cross section of books will take them from the inadequate state of being able to just regurgitate things as opposed to true comprehension. An example of which is investor psychology.(buy low sell high…easy to say ,hard to do)
I told them to avoid the minutiae of detailed books about stocks and bonds and stick to the big picture stuff, that isn’t necessary and would just turn them off.
I have been gratified to see that they are displaying that all important comprehension I spoke of.
I feel that the key was posing the challenge that learning a way to earn income is only half the battle. Handling the income is the other half.
You may get 7% or 8% a year return but may lose more than 20% or 30% on your principle if we have even a 10% correction or more in this over extended market.It may not happen now with Europe qe but can we have qe and low rates forever?I think we’ll extend and pretend just like Japan to keep everyone happy except the pensioners and savers.
Some day you will learn about long-term investing. Only fools who get scared and sell in down markets lose money in a correction. Confident people stay invested. The track record is there to observe. — Garth
#6 Mike in the Okanagan
I think you have good intention but you should consider the issue a little deeper. Yes, paying down debt is the goal but there is some debt that can be feathered along as you manage other more valuable vehicles/situations.
If Keith vapourizes his TFSA holdings to get rid of his mortgage, isn’t he starting from square on to rebuild his TFSA’s? If so, he has lost the most important piece of the compounding equation that makes these TFSA investments so valuable to us: TIME!
He can max out the TFSA’s, work hard at paying down the mortgage, and I’m pretty sure he will have a pseudo Plan B in place that will still give him a reasonable outcome.
Why spend years contributing to something just to zero it out and have to start over? The goal is to retire earlier and enjoy the fruits of your labours.
Garth,
What are the optics of buying a house on central Vancouver Island, Nanaimo (with a reasonable down payment)? My investment portfolio is good; TFSAs full and working plus other investments. Average house prices are about 350,000; certainly higher year/year but affordable on my salary (130,000).
When will people like you learn that this is Canada, a thoroughly modern and exquisitely sensitive country, where you can’t go round saying things just because they are factual.
————————————
say it again , brother!
too funny.
………………….
#3 library karen on 02.22.15 at 2:52 pm
Ah…so, there is a place where real estate “costs what it should”, and within driving distance of TO?! Pray tell, where is this mythical land?
————
driving, as in to yyz, then not driving, to the atlantic coast. then driving again.
if only the west coast was as close to the Cntr.Of.Univ. as the east is, then garth wouldn’t have to settle for the second best coast :O
Good title today after yesterday’s posts. There is no question the world can be both an interesting and unpredictable place. But paying down a 2% loan and forgoing tax free growth is predictable. You just have to do the calculation. Fear and risk have more to do with emotional responses from most. Or they are based on what they have heard before. And what they perceive to be true.
As a rule I’ve grown to always as myself the question, “What if the opposite was true?” And “Where along the spectrum of the two extremes does the likely outcome lie?
Works with finances and many other things including measles and war.
So for Brutus and others in his war camp. Where does the truth between a squaky Ukrainian foreign minister and Putin lie?
Will merkel and Hollande really ask their elected representatives to approve a war against Russia? Or would that make them the laughing stocks of the world?
And to #9 smc. I believe one is tax deductible. The other tax free growth. But you have to find where your truth lies. What do you fear? The loan or the opportunity cost? Way to go for asking the question. I wish you great luck going forward. What an opportunity for a great learning experience. Perhaps Start with the long term math. There are compound interest calculators online. Let us know what you figure out.
And for our poster I think garth gave you the answer.
Keith, take Garth’s advice. In addition to his points, having investments in your TFSA will reduce any impact from the unexpected (job loss, sick kid, better job opportunities requiring a move). You can’t eat the house. We aggressively paid down our mortgage for years and when a great opportunity came up in a dream location, we jumped. If our house had not sold we would have been hooped (fort mac last spring).
Much happier now with balance and diversity. Best of luck!
the answer to the cheap place close to toronto is north hamilton.
sure it is an ugly old factories closed down, but bamb right on the 403, withot traffic i can be on the queensway door to door in 30 minutes, most days 45 minutes.
houses are cheap, sure they are junk but 150grand is a rounding area for toronto real estate prices. and you own it. our parents and grandparents lived their.
in the 60ths when the steel mills wore still around families were around, nice safe place, not so nice or safe now, but hay. you own it outright.
have a friend who spends 1900 month rent to live in milton, sure nice house, but for 600 month you own something at the end.
? My student has an interest rate of 5.5%
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5.5% Guaranteed after taxes/costs/time – no question, pay off the student loan.
take a small amount and put half on google and half on a new tech idea(s) for fun.
when the loan is paid start the ‘garth plan’
you’ll still be under 25, time is on your side.
Way to go Keith! Paying off debt before jumping into the risk pool of financials is a very wise decision. Doing this exact same strategy the wife and I were able to save and invest even bigger thereafter. Add this up 10 years later and my risk tolerance and financial growth has grown to the point that I now have a Diploma in Finance with distinction.
Paying off debt will always lower your risk exposure and for many, risk is what keeps them from making good future decisions.
Never invest money you can’t afford to lose. Never take on more risk than you can be happy with. Profits are never counted till you close on a trade.
Garth,
I’m just outside 2 open houses in Surrey at 144 St and 91A Ave. 2 basic detached starter homes.
There is a traffic jam here. At least 70 cars.
Anyone doubting that please drive by and confirm.
Detached prices in Surrey will go up by at least $100,000 in the next few months. Mark my words.
Doubt it? Drive by.
great article. remember, the #1 rule is pay yourself! people say blindly. it’s like level 1 is getting a stupid mortgage and level 2 of common wisdom is paying it as fast as you can.
even better punchline; I literally laughed out loud. We just watched Pick a Puppy on the PVR haha (Sunday morning) and they had a border collie.
more realtor porn disguised as news here. fear mongering and misdirection (read the comments)
http://www.cbc.ca/news/canada/british-columbia/vancouver-housing-s-latest-trend-fully-furnished-homes-1.2966421
I had a Smoking Man moment yesterday in North Vancouver (it happens), watching people trying to parallel park. It’s the only thing they ask you to do, and it’s the thing stupid people are literally scared of having to do, and are shit at. It’s also super low-risk; they should teach how to control a spin, ideal breaking distances, driving on ice/snow, multi-tasking, defensive driving, etc… but I digress.
I said to my squeeze that I almost want to raise my future kid dumb enough to blend into the herd and not know any better yet smart enough to out-stand a bit, like, say be the foreman or something.
I am no longer surprised that the majority of people cannot grasp the concept of balance diversity and liquidity. But I do see them grasp the concept quickly when their 1 asset drops in value so as to put them underwater at the exact same time their job disappears and then they realize there is no cash flow at the same time their net worth is vaporized. So, hope for the best and plan for the worst. I stay balanced diversified liquid and debt free. Freedom First. Priceless.
“My emotions are telling me to throw money at the loan. Should I pay the minimum loan payments and then put the rest of my savings into the index fund?”
At a 5.5% rate of interest the risk/reward is different from the e-mail Garth was replying to. Paying down a loan can be compared to having a bond with a guaranteed rate of return equal to the interest rate on the loan. It is true that many financial models assume that a portfolio will grow at more than 5.5% a year on average, but that doesn’t mean it will grow at more than 5.5% NOW.
I think the answer depends on your tolerance for risk and the expected stability of your income stream. A loan at 2% or a credit card at 19.9% would have an easy answer. Suppose the market falls 25% this year for some reason we can’t yet anticipate; are you ok or are you screwed?
I think your “early” interest in investing will serve you well, but in your shoes I would be taking a look at that debt. One idea would be to consider debt repayment as the “safe” part of your portfolio; instead of a 60-40 split between stocks and “safe”, you could invest 60% into stocks and use the other 40% against your debt for a “guaranteed” 5.5% return.
Garth, people don’t fear risk, they fear volatility. Your house value never moves on a day to day basis but every time Putin or ISIS get an itch, the stock market rolls like dingy and then sanity resumes and it all gets washed away.
Maybe the stock exchange should only be open for 1 hour a day.
And the other day you bemoaned the market distortions of the HBP, but its nothing compared to what QE did. All of these overblown assets should be allowed to correct naturally but we never allow any to do so because people aren’t prepared for the pain so we pump it up again and it carries a bigger risk next time.
Garth ,I don’t believe the the CREA has a contract out on you. Last I heard from a realtor, they had a “sales pool” with a huge prize for the one that sells you. I think it was a monster tequila bottle or such.
As to your other house that you retreat to, “we at Buffalo Narrows SK.,would like to keep this little oasis to ourselves” if its not to much to ask.Cheers
basically, if you can earn more from putting your money to work than you can save by paying off a cheap loan, put it to work. if interest rates rise to where this is not true, pay off the house
who is Dakota Johnson?
bless my TeeVee free existence!!
I haven’t even bothered with that new Saul show…..
#9 SMC
It depends… If your income is higher in the future then just make the minimum payments until it increases. This will give you the maximum tax deduction on your student loan.
Tricks realtors use to sell homes
https://ca.finance.yahoo.com/news/tricks-realtors-sell-homes-140000039.html
Thanks for the post Garth. Rational, good advice.
Once you own more than 30% of your home you should look at diversification…Rule of 90 is a as good as any…
Keith’s 5-6year outlook is fine but it wanes with a 15 year outlook.
No harm in paying your mortgage down faster, but balance it with other investments.
We still have a $250K mortgage…but at 2.4% why pay it off? The cash we could have used to pay it off made 8% last year.
It’s a bit of a gamble, but a measured one. You can always sell the investments.
Mike, I had to google dakota johnson too haha don’t bother with saul, cool cinematography and good laughs. perhaps better than breaking bad (I never bought into cranston’s character), perhaps because it’s not trying to be super serious. but typical network tv, hook line and sinker story always keeps going and random plot twists kind of deal.
VOTE ONLINE: Do you think it’s a good time to buy a house in the GTA?
http://www.thestar.com/business/personal_finance/2015/02/18/if-gta-housing-unravels-how-it-might-unfold-mayers.html
So far 57% have voted “no” to the question.
Keith,
If your TFSA is invested wisely and diversified you should gain 7-9% every year over the next 5-10 years. Don’t touch it, just max it out every January 2. This will also account for the potential of a 20% or more gain, and the possibility of a 15% or more loss. Why would anyone sane person want to pay off a VRM of 2.15%? In fact, you should make the lowest payments possible, and plow as much as possible into 1) TFSA 2) RSP 3) Non-Registered account.
Why do people think the stock market is risky, but their house is a gold mine?
Remember that if you own your principal residence it is an “expense”, not an asset. Think about it.
A big pile of dough to create a retirement pension in thirty years when the OAS has been eliminated and corporate pensions are rare.
**************************************
[email protected] do you mean eliminated….for whom …?
Everybody. If you think it will be there in three decades you’re not paying attention to public finances. — Garth
Keith, congrats on having your letter featured while not being a total cock-up. Most letters Garth puts up, I am convinced, are simply so his readers will do a giant face-palm.
You have a decent enough grasp of things and are trying to rationalize your choice with some logic and some emotion, but no quantitative analysis. So along that vein, consider this: no one knows the future, so if you cash in your TFSA portfolio (i.e. exit the asset classes you were invested in with that money), you’ve lost your diversification and have to hope RE continues to do all right. Keep the TFSA and you’ll have winners to counterbalance the losers.
If your wife is a financial whiz, she’ll understand that you’re using cheap debt to hedge and make a long-term profit on the spread between the interest rate and your investment returns. If she’s more focused on being mortgage free and the exciting holidays, just tell her this way makes your family more money in the end, and you can go on hot, exotic travels NOW.
Good luck!
DELETED
O.k , so ever since I’ve been in Canada it was always explained to me that we put in money for the people who are retiring now and when I go to retire the generation behind me will assist my retirement .
So if the government ended Oas / Gis or cpp ,wouldn’t they have to do a wind down so people aren’t paying into something that won’t exsist in 30 years time.
I am planning on being self sufficient but if you have paid into something don’t you deserve your tiny slice of the pie?
Is my understanding right or have I been lied to ?
I thought Canadians didn’t lie!
#45 Jan on 02.22.15 at 6:57 pm
A big pile of dough to create a retirement pension in thirty years when the OAS has been eliminated and corporate pensions are rare.
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[email protected] do you mean eliminated….for whom …?
Everybody. If you think it will be there in three decades you’re not paying attention to public finances. — Garth
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So if i’ll have no pension of any kind because i never contributed ( due to my disability for which i never qualified ) i won’t get anything?.
If that is so then..I will have to eat the rich, and believe I will.
Yuo, you sure hate real estate.
And in the world of herdonomics. you get crashed in a stampede.
Listen to Garth.
plow away at those TFSAs. I have $80,000+ in TFSAs and only $100,000 left in my mortgage.
I’d go interest only on my mortgage before I pay it down quicker than I have to ( and I don’t even have near the sweet 2.25% interest rate that Keith does).
Can anybody photoshop a picture of Garth’s head on the Dos Equis Beer Man with the caption “Stay Liquid my friends”?
This needs to happen.
“…central banks are more stimulating than Dakota Johnson…”
For the metaphor’s sake, you could set that bar higher.
Garth, you are such an idiot… HAM = immigrants who made their money overseas
HAM actually means ‘hot Asian money.’ And immigrants are called ‘Canadians.’ — Garth
#45 Jan on 02.22.15 at 6:57 pm
—-
You must have been under a rock. Just the creation of the TFSA was a tacit admission by the govt that pensions are insolvent and you better start making up the shortfall yourself.
“As for financial markets, the US is surging ahead, cheap energy will help Europe, Japan and China, central banks are more stimulating than Dakota Johnson, corporate profits are robust and stock markets are, in general, fairly valued. There will be no bank failures, currency collapse, 2008 rerun, hyperinflation, depression or locusts in North America”
What a bold claim, that all is well. Funny depends on who you ask, A lot say that stocks are heavily inflated by stimulus, just the same as housing. Somehow in Garth’s mind though stimulated stocks are different than stimulated housing lol.
Sure. Equity values are based on corporate performance as much as demand, are 100% liquid and assets usually pay you to own them. House values are divorced from economics and require massive leverage. As for liquidity, ask the people in Calgary. — Garth
#31 TRT
Mmm Hmmm house humper?
If there’s a “traffic” jam, it’s the local bulder / speccer’s looking for a tear-down lot “lining up” to lowball the seller for lot value. Guessing you’re the agent or owner?
Lovely area by the way… / sarcasm off.
Funny I also live in Surrey and actual assessed SFH values are flat, only slightly up, or declining yoy adjusted for inflation across the region. Been actively tracking this for almost 5 years btw. Happy to dig up and post the stats if you like? You seem confused.
Some areas have seen major price declines in last 2 years.
So, ah – good luck with your + $100k prediction in a few months, pump pump pump!
#24 Ed on 02.22.15 at 5:14 pm
Garth,
What are the optics of buying a house on central Vancouver Island, Nanaimo
====================
I live in North Nanaimo. I have noticed houses in the $400-650K range in my area were selling well last year, many at $50-100K over assessment. I have just noticed a couple of recent sales at $30-50K below current assessment. Granted assessments have risen and this is hardly a trend yet. Still I would be watchful about pricing. It is hard to say how many people here work in the oil patch but there were enough for WestJet to bring in direct flights to Nanaimo. On the other hand Nanaimo continues to attract retirees so prices are unlikely to suddenly evaporate.
Manitoba is now Canada’s Roswell
Breaking….
http://earthweareone.com/ufo-crash-lands-in-canada-government-cover-up-as-we-speak/
@#206 (02/21/15) Oil is Sticky
“Apparently record cold is the new warm. 2015 will be recorded as the year “truth” is revealed”
++++++++++++++++++++++++++++++++++++
Dont be too quick to mock the Global Warmers’
This weeks Economist Science and Technology section : Apperently the well substantiated Northern Polar Ice cap thinning and melting(between 1953 and 1979 the average summer melt was 48000 sq km. From 1979 to 1996 the melt increased to 87,000 sq km. From 1996 to 2014 the summer melt has averaged 148,000 sq km).
These rapidly increasing melts have had unforseen side effects. Some good some bad. Multi year ice is thicker and reflects sunlight better than single year ice. as we lose multi year ice the dark seawater absorbs more heat causing more melt.
The good? Krill and other microscopic food sources are increasing their reproduction rates which has increased cod reproduction rates and larger species that feed upon them.
The bad? Species that require ice to live on or under are crashing( Harp seal pups drowning or the seals follow the ice north into polar bear hunting grounds ) Minke whales dont have zooplanton to feed upon as it has been replaced with warmer water species that are harder to catch or not as nutricious…
Other arctic species have evolved over millenia to spawn at certain times, the warmer water and extra sunlight due to less ice upsets a delicate balance of reproductive timing which causes species to be born too soon or too late.
The weather is affected by warm air at the equator and cold air at the poles. The jet stream is caused by the earths rotation and these different air masses interacting with each other. If the polar air warms then the “mixing” of air masses slows or the jet stream weakens creating pockets of air that “lock in” and dont move for weeks causing a “Siberian High” ( a huge build up of dry freezing air affecting the Northern Hemisphere)
Lets also not forget the Oceans ability to absorb carbon dioxide from the burning of fossil fuels (wood, coal, oil) thus causing the PH level of the ocean to turn more acidic.
Coral reefs, shellfish, are beginning to show signs of stress from the double whammy of warmer water and increased acidification( 1800’s PH was 8.2 todays PH is 8.1.
One wonders what the next 25, 50 and 100 years will bring to a planet of 7 Billion people?, 10 Billion? 20 Billion? With more carbon being produced/absorbed, ice melts increasing, diminishing food supplies, abberant weather and climate change deniers.
The good?
I wont be around to see the worst of it.
Linda, wow, fan fiction? I’m touched, even though it will take a bit of getting used to no longer being in complete control of my persona in the mind of my adoring groupies.
This one goes out to you:
https://www.youtube.com/watch?v=1NvgLkuEtkA
Wow finished reading the article. Its almost like Garth himself has become blind to the risk in the stock markets.
“The $102,000 Keith wants to plow into the place over the next 18 months could grow to $800,000 by age 65 if a portfolio yields the same in the future as it has in the tumultuous past.
Only emotion would lead to paying down a loan on a non-performing asset instead of renting the money for 2%. It’s fear of the wrong thing.
I expected more of a guy with a border collie.”
Or as your reader noted, the 2% is a sure fire risk free gain. Investing in the market COULD net him more money, or it could lose more money than he saves by paying off the debt. Risk DOES exist in the markets today, maybe more than ever. Ignore the risk at your own peril.
The 2% is only risk-free if the house is, which is clearly not the case. As for the long-term gains in a financial portfolio, let history be your guide. — Garth
@#56 Smoking Man
What were those aliens thinking! They should have crashed here!
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&uact=8&sqi=2&ved=0CB0QFjAA&url=http%3A%2F%2Fwww.townofvulcan.ca%2F&ei=v27qVIEFwbmhBOb7gMgO&usg=AFQjCNEDVxIHbi4_Agc3JAT73frzVyYsDQ&bvm=bv.86475890,d.cGU
They would have been welcomed with open fingers! May the peace be with you
For those who wonder how OAS and CPP will be eliminated, it’ll be close to how Unemployment Insurance was eliminated (or practically eliminated).
UI started off as its own fund, a pool of money created by taxpayer contributions specifically designated for the UI fund. Then the government purses got tighter and tighter, and that fat pool of money looked better and better.
So the government took that pool of money and used it, but kept the taxpayer contributions coming. If you need UI, they said, then your payouts will come from general tax revenues. Then they added rules and regulations so you now wouldn’t see as much, or any, money compared to yesteryear.
CPP has a fat pool of money that the Federal Liberals let slip they want to use towards infrastructure projects – you know, all those projects that the various governments over the years were supposed to be saving up for. Well, they didn’t and now the infrastructure is crumbling. Gotta pay for new bridges somehow …
But not to worry, you’ll still make your CPP payments, but those payments will go into general revenue. If the government decides you need your CPP monthly payment, that will come out of general revenue. But the rules for collecting OAS and CPP will get more and more strict – you make $18,000+ a year from your own investments or have a company pension, you rich bastard, how dare you look for money from the government – until it gets to the point where no one except 30 seniors across the country are eligible to collect and they just fold the scheme.
Me, like other Gen Xers, I want to quit paying CPP so I can add those contributions to my own retirement fund – a retirement fund I can rely on to support me in my old age.
@#48 Flop
“we put in money for the people who are retiring now and when I go to retire the generation behind me will assist my retirement .
So if the government ended Oas / Gis or cpp ,wouldn’t they have to do a wind down so people aren’t paying into something that won’t exsist in 30 years time….”
+++++++++++++++++++++++++++++++++++
Well it depends what retirement generation you’re in.
If you’re a Boomer then the generation behind you will struggle to pay into your pension.(less people in the work force than the Boomer generation).
The govt will probably nuke OAS because its paid for by general tax revenue… NOT you.
You contribute to CPP not OAS. CPP seems to be solvent these days but that can change too.
Nothing is garanteed in the future.
Try uncontrollably sneezing while driving on a busy highway………
Ralph Cramdown #60 – why so douchey today, Ralph?
I reread your analysis of Ukraine that you posted. You were way off, and quite ignorant of facts and history.
Maybe just better stick to the main topic, instead of getting personal, hmm?
Your posts are together with Cato’s for the most part – boring, way too long and self-indulgent, and thinking you’re about 100% smarter than you are.
Maybe you should take another six month hiatus, fella……
@#60 Ralph
Randy Neuman …..Classic song! Loved it when it was new! Still love it.
TS#51
Can anybody photoshop a picture of Garth’s head on the Dos Equis Beer Man with the caption “Stay Liquid my friends”?
This needs to happen.
———————————————-
I like your thinking,but the one that comes to my mind is the “Go Daddy” commercial where the lady goes around and tells all of her critics to ” STICK IT!”
I would like to see Garth in this ad.
P.S . DOS EQIUS lager in the green bottle is my favourite beer. Try it with some lime.
I disagree with you Garth. He should pay off his mortgage. Stock markets crash. They can lose 30% in a couple days. They can lose 50% in a month (just like they did in 2008 and 2000 and 2001).
Being “balanced” is no protection. When the US market crashes, it takes all other markets down with it. Even in 2008 when the Canadian economy was healthy, oil prices high, economy going gangbusters, lots of jobs and wealth across Canada, the TSX got whacked 40% because there was panic in the US due to Lehman and Bear Stearns. It’s happened before and it can happen again. P/E ratios of US equities are very high compared to historical averages.
Don’t try to label me a doomer. I’m a realist with many decades of investing experience under my belt and more than a few grey hairs (all earned) and I’ve seen many stock crashes. So I’m not a doomer saying that the stock market will crash in the future, crash up to 50% or more. Yes, I still invest in the stock market, but paying off my house always was my number 1 priority. Now I am mortgage free and have money to invest and spend.
Markets do not lose a third of their value in two days or half in a month. Exaggeration just makes you look more timorous. — Garth
Garth – Your Canadian housing thesis I understand, but I do not get how you can possibly suggest it is wise to buy US equities …
The US equity markets are furiously overbought. Valuations rank in the 99th percentile of both P/E and EV/EBITA multiples dating all the way back to 1976.
The Shiller PE ratio or the Cape (cyclically adjusted PE) has only been higher at one time in history, and that was in 1999/2000 just prior to the dot com bubble bursting.
Tobin’s Q is among the longest-lived and most respected long run valuation methodologies and it has just reached an extreme level over overvaluation only ever seen once before in history, during the 1999/2000 peak of the bubble exuberance.
Based on every historically reliable measure the US equity markets are strenuously over stretched, over bought and over bullish. For this reason the smart money is selling right now, not buying.
Enlighten us?
The US recovery is fully intact and markets will reflect this. I cannot imagine an investor not wanting to have a proxy for the American economy in a balanced portfolio, and the S&P provides that. However in a balanced portfolio, only 8% or so would be US large cap exposure. — Garth
DELETED
Warren Buffet on investment success:
“Charlie and I prefer a lumpy 15% to a smooth 12%” The portfolio Garth recommends is not 100% safe in the short term, but that kind of safety comes with laughably small returns that won’t pay the bills – in fact they guarantee poverty. The 7.4 percent average means that you won’t fully match the market when it crashes, but you will earn income continuously and capital gains over time.
The 7.4 percent return over time is better than the sub 3 percent return on paying down the mortgage. Psychologically, it’s great to be debt free. If your debt is manageable, focus on net worth. It’s the most meaningful number.
Garth, what do you think of Peter Schiff? He sees a big collapse in stock market for 2015. He got right the housing crash in USA. Do you think he is just a gold lunatic?
Basically. — Garth
Apparently record cold is the new warm. 2015 will be recorded as the year “truth” is revealed.
Global warming creates weather change. Colder in some areas, hotter in others. The science appears indisputable. — Garth
—–
Indisputably false. Due to the fact it’s not colder in some places. Its colder in MORE places and hotter in less places.
Indisputably false. Like the US economy. The EU. Trust in Govt/Bankers.
I have my charity picked out when the world turns down and 11.5 months have passed by.
Garth:
I have made some progress as a result of being an ardent reader of this blog over the last six months. As my wife and I approached the renewal of the mortgage on the shack in Cowtown this upcoming spring, she would ask if we should throw some cash at the principal outstanding. I explained to her that in retirement we will need an income more than we will need a fee simple estate (a tiny illiquid estate). She is buying in to the notion. She is a master at the alchemy that I have never been able to understand, namely
savings. We have a division of duties as a result. We load up my income with the monthly non-discretionary payments (mortgage, kids cell phones (an eternal mortgage) and the like) and she builds the nest egg. It works. Play to each other’s attributes.
Can I offer the younger dogs a recommendation? I will break with convention and use Caps. FOLLOW GARTH’S ADVICE.
Balmy here in Ft. McM today. The Real Estate Board still has the January stats buried after having posted them for a few hours the other day, as I commented on.
Smoking man:
Thats not an alien spaceship, thats the new CSIS mass surveillance wifi system being tested out. They wasted no time launching it after passing C51 in parliament last week. Apparently the trial run didn’t go so well.
Re: #69 Blocked and Deleted on 02.22.15 at 8:37 pm
You forgot accounting in America is total bullshit and the monthly unemployment figures are made up each month. The GDP is total lies to mask the real GDP to debt ratio.
Just amazing. — Garth
If I pull a glass back gig and go on compo just before I retire, can I keep my OAS or will I have to sit outside Jackson Square in Hamilton with a cup and sell pencils? Just wondering what the government’s plan is for me.
It all sounds like a bad Canadian movie that I have seen before!
#69 Blocked and Deleted
We got limited borrrrring equities this side of the border
I’m so sick of hearing them only talk oil and gas or mining on BNN… once in a while they’ll sprinkle in the banks or telecom.
U.S. equites makes our market look a kids sandbox
What do you want to play… it’s there.
That’s why the world plays the U.S. markets
Garth,
Can I invest too much into the markets @ age 40?
Online TD Calculator says I will have $4.2m by age 65 – this assumes I fill RRSP and TFSA every year for wife and I.
I carry no debt and own my own home.
TFSA, RRSP and RESP are full and there is additional cash flow I have for investing.
Is real estate a horrible portfolio diversification (I live in SW Ontario Windsor) or keep pushing the cash into the markets?
Your help is appreciated.
Pay down mortgage vs invest in TFSA?
Do both.
#75 Love my Kia on 02.22.15 at 9:21 pm
Smoking man:
Thats not an alien spaceship, thats the new CSIS mass surveillance wifi system being tested out. They wasted no time launching it after passing C51 in parliament last week. Apparently the trial run didn’t go so well.
………
Hum, it went down in Jack head Manitoba.
Jack Head… Lol My head is often Jacked
Coincidence?
I checked in with, Jones, Barrington, and Ashman, all fine..
So it’s not one of ours..
I’m probably wrong but I’m 65 and mtg free. I feel the difference between renting and owning is the same as between a girlfriend and a wife.
@Tony #76, Listen to Garth. Only realtors misrepresent numbers. The American government never does this, nor does the Canadian government, nor any other governing body.
“Can I invest too much into the markets @ age 40?”
At a certain point it may make sense to balance some non-registered investments against the RRSP. Eventually you must convert the RRSP to a RRIF, and if it is too large at that point, you will get killed on taxes. There are a lot of things you can potentially do about it but the easiest is probably to avoid the situation. I would be interested in Garth’s thoughts on the topic.
And to all those who who think women suck at math, we don’t. I suck at investing, yet got A’s in all my university math and comp sci courses. Its an ‘interest thing’, not an IQ thing. Make it interesting, like other things that can be boring or not depending on how it is presented to us, and we will surprise you with our acumen.
#HatTip:RaiseMyRent,Or… #MeanWhile… #BackIn
StepfordBritishPacificProperties…“We’re trying to develop a concierge service when we can actually, once a house is finished and completed, we can take over the maintenance.” – British Pacific Properties SeniorVP Mike Courtenay
http://youtu.be/yZvx9PF3NAU
I am also with Keith on this one.
Keep paying off the mortgage while waiting for a decent correction and only then using the available secured credit to jump into the market. 2.25 is guaranteed, with the markets on the tail end of a 7 year bull market you never know what comes next.
Who said it was a seven-year bull market? The U.S. recovery has just begun. — Garth
@BobC #82 That was deep. Can you share more?
http://m.theglobeandmail.com/news/toronto/crosstown-lrt-bringing-zoning-fights-to-eglinton/article22388848/?service=mobile
If you carefully choose the hotspots, such as the hoodsbaround avenue/eglington there is no way RE price would go down or stay flat.
As a matter of fact I can’t see RE not boom in Toronto. There may be edge cases but the majority will go up and up.
“Make it interesting, like other things that can be boring or not depending on how it is presented to us, and we will surprise you with our acumen.”
Taking this post at face value, surely the desire to not eat cat food in your twilight years would motivate you to master the material however it is presented. It’s your money and retirement… nobody else (beyond your closest) really cares.
#65 lawboy — “I reread your analysis of Ukraine that you posted. You were way off, and quite ignorant of facts and history. Maybe just better stick to the main topic”
EXACTLY!
In 2013, people here were arguing that the US was about to get dragged into a war against Syria’s Bashar Al Assad, backed by Russia. I said it wasn’t, and my analysis was probably way off and quite ignorant of facts and history.
People here have argued that China (with Russia’s help?) was going to crash the US dollar. No. US hyperinflation. No. Unemployment and inflation stats are cooked. No. Radiation from Fukushima was going to make the west coast uninhabitable and pacific seafood inedible. No. I can’t even think of all the other hare-brained theories for worldwide market meltdowns that have been spouted here over the past few years.
Last year, Brutus said we’d see war between Russia and the West over Ukraine, within weeks, and selling equities and buying precious metals was the move. I said no, based on an admittedly brief and superficial analysis.
Now Brutus is at it again, says liquidate equities and real estate. I say no.
The moral isn’t that Cramdown is willing to debate people who’ve spent far more time researching the topic, though that’s true.
The lesson is to ignore the people who keep showing up on this blog and saying “sell everything, the end is nigh.” I don’t know much about Brutus or his portfolio. but I do know that if I’d taken his advice instead of doing what I’m doing, it would have cost me hundreds of thousands of dollars. Listening to doomsayers for a few months probably won’t cost too much. But doing it for even a few years could well lose you a life changing amount of money.
I had to google who Dakota is. So happy I didn’t know this till now and totally happy to save my brain from such info in the future.
Garth: “The US recovery has just begun”
Really? I thought it has begun right after the GFC in 2009 and it’s well into its 6th year. Funny that it’s a recovery for the stock market investors, but not for the US citizens, whose labour market participation rate is at its 70’s level. And I don’t believe that people do not want/need to work: they “stopped looking for jobs” and are not considered unemployed, so the official unemployment rate is artificially low. Mind you, there are still plenty of juices in the US economy, but not enough for a robust recovery without record-low interest rates.
US unemployment was 10.2% and is now 5.5%. The federal deficit has plunged, real estate has regained 30% of its decline nationally, corporate profits are sustained and consumer confidence it at an 11-year high. I’d call that a robust recovery which, yes, is in its early stages. — Garth
Who said it was a seven-year bull market? The U.S. recovery has just begun. — Garth
Well considering the median length is 50 months and average is 67, we are approaching 84. I only presume this one doesn’t have much to stand on considering the FED potentially raising rates and mopping up excess liquidity.
Keep in mind the increase in value of the US currency will have a negative effect on earnings of most US companies.
Let’s wait and see but I would be taking some money off the table in the next month or so.
Here is the link
http://greenbackd.com/2013/04/17/bull-markets-since-1871-duration-and-magnitude/
Remember, paying mortgage might save you lots of money in the event interest goes up. If your mortgage interest is just 2.5% and latter goes to 3.5% you are saving money once balance is lower and mortgage needs to be renew. I am more into doing a bit of everything: pay yourself first and invest for retirement, paying faster the mortgage, keep expenses under control and have fun once in a while…..life is short and goes fast!
I can’t believe Garth would say that paying off a mortgage at current rates is foolish.
First Garth, he would need to earn a gross return of about 4 to 5 percent in a non registered account to equal his mtg interest rate of 2,5 percent.
Second even if the home did lose value you can’t walk away from the mortgage.
So while preaching a balanced portfolio is great the risk free rate of the mortgage is tempting and a sure thing.
A superior strategy is to invest carefully in a proper portfolio then to make a lump sum payment upon the mortgage renewal. Gets you there far quicker, as does a weekly-pay mortgage. — Garth
“There will be no bank failures, currency collapse, 2008 rerun, hyperinflation, depression or locusts in North America. ”
Although you advised me in reply to an earlier comment to leave worrying about global macroeconomics to central bankers (most of them ex-Goldman Sachs) who according to you has only our best interests in their mind, I still have my doubts when someone like the former chief economist at the International Monetary Fund, Raghuram Rajan has to say about their QE and how effective it will be in creating a sustainable economic recovery,
“The central bank chief also doubted the efficacy of the quantitative easing (QE) announced by the European Central Bank last month. ECB announced on January 29 that it was turning on the spigot to release more than a trillion euros over the next 18 months into the financial system to fight creeping deflation in the eurozone. ECB’s move heightened fears of a global currency war as many economists expect QE to largely work through a weakened Euro, boosting exports. The prospect has set off alarm bells among central bankers in emerging market countries.ECB’s QE coupled with Japan’s monetary easing is expected to increase flows into emerging markets, especially India, which has been one of the major recipients of foreign capital flows after the US Federal Reserve began its quantitative easing.
Rajan, who has often criticised unconventional monetary policies in the past including at international fora, reiterated his stance that these policies may appear to solve the problem without actually doing so. He said they create a wealth effect and boost demand in an unsustainable way. “Then you may get stuck in a ‘chakravyuha’. You can’t change policy because that would bring all asset prices down back to earth and that would reverse the wealth effect that contributed to growth. This is one of those policies which was meant to be a bridge that at the end of the bridge you can walk off and nothing happens. But if the bridge stops half way, you walk off and you plunge.”
http://articles.economictimes.indiatimes.com/2015-02-05/news/58838238_1_rbi-governor-raghuram-rajan-inflation-central-bank-governor
#31 TRT on 02.22.15 at 5:39 pm
Garth,
I’m just outside 2 open houses in Surrey at 144 St and 91A Ave. 2 basic detached starter homes.
There is a traffic jam here. At least 70 cars.
≠==========
I used to live near there in Fleetwood Park. You might find there is close 70 cars parked on those streets on every day. Please let us know how your +100k prediction works out a year from now, backed up by an actual sale of a property.
Garth, what if one has closer to 30k to invest with, instead of putting towards a mortgage? what would be your thoughts on a ideal spread of investment vehicles?
@Sean #90, Excellent point! No one cares. It is all up to me.
I was late commenting to a prior post of Garth’s which included discussions comparing the investment successes of men as compared to those of women.
Several dawgs expressed the opinion that ‘ women are not as good as men at math’, therefore cannot be expected to make good investment decisions. I was just refuting this.
I agree with you though, I can only blame myself for my less than stellar investment decisions despite a near genius IQ. On the other hand, my husband is even worse at both math and investing than I am.
Raid the TFSAs. Pay the mortgage. Replenish TFSAs with would be mortgage payment. Borrow against the house and use it in garths balanced portfolio in non registered investments. Write off the interest and make minimum payments while the interest is low and invest the rest of what would be a mortgage payment additonally invest the tax return each year.
When interest rates substantially rise reevaluate if the tax writeoff on the loan is helping and liquidate equities then (which should be higher as increased interest rates are an indicator of an improving economy….. Usually)
#61 zedgt87
Not sure why people continually mistake debt repayment as “making money”. Debt repayment is exactly that: an expense. When you’re paying off your 18% credit card tab, you’re not getting an 18% gain. Avoiding a loss (compounded interest) shouldn’t register as a gain on anyone’s balance sheet.
Unless you’re interested in double-speak.
Nice to see the people saying real estate can never go down.Takes me back to the good old days of Bre-X,Nortel and Ivanhoe.I remember my old neighbor taking out a second mortgage to buy more Bre-x,as everyone wanted a piece of it and he couldn’t lose,he told my Dad.Lost his house when it crashed and couldn’t pay the bank back,buyer beware.
@Sean, re: “Taking this post at face value, surely the desire to not eat cat food in your twilight years would motivate you to master the material however it is
Just because I never had an overwhelming desire to figure out how to be an ‘investor’, doesn’t mean I squandered the family budget, or neglected RRSPs, RESPs, or TFSA’s.
Seriously, in most middle class family households, the women are the ones who hold it all together financially while their midlife crisis spouses have NO CLUE where the money is spent every month, don’t care as long as they have their debit and VISA cards, and give nary a thought as to how it is invested.
Garth
Is Bucolic a real place, or is a state of mind you escape too after a few wee drams of single malt?
@96 Musty Basemnt Dweller and #56 Vanecdotal
There was a massive bidding war today, regardless of what you believe.
The address of the property is 14365 – 91A Avenue. Look it up on Realtor.ca. Think it sold in one day, well above asking. Call the Realtor.
Some posters on this blog are just as delusional as the MSM pumping RE but polar opposites.
#10
re Oil Tank Removal, Vancouver
When having our Tank removed from our Dunbar property the Contractor set themselves up as an environmentalist when in fact they were not qualified. They would smell the soil around the tank and declare it was contaminated.
I employed two different environmental companies. One told me the oil had migrated underneath the basement of the house and he would have to drill to assess. The other Environmental Company turned out to be honest and had soil samples tested and it proved to be below the threshold of contamination, after the Contractor had removed many, many tons of soil without testing.
On top of that 5 ft from the tank a large bolder the size of a Volkswagen Beetle was discovered and we were told by the Contractor that oil contamination had almost certainly migrated under the rock.
I hired a Rock Splitting Company who broke up the bolder ($600.00) only to find no serious contamination. This was in the winter and the excavation wound up to be the size of an Olympic swimming pool, which filled up with ground water. The city of Vancouver inspected the property and flipped out over the size of the excavation and declared if we did not fill it in immediately they would do it at our costs. Ground water was to be pumped out by tanker truck and disposed of as bio waste at our expense although there was no sheen on the water.
Final costs over 50K, this cost would have been much higher if I had not threatened to sue the Contractor and hire our own Environmental Company, and Rock splitting Company.
Lesson learned, do your homework first, do not sign a Contractor contract, self manage it yourself.
There are a lot of dishonest people in the Tank Removal Business. It is a license to print money.
http://www.mikestewart.ca/vancouver-houses-and-underground-oil-storage-tanks-for-buyers
@Angus, don’t tell me what to do! :)
#95 Musty Basement Dweller
+ 1, lol.
“You might find there is close 70 cars parked on those streets on every day.”
I would add… and work trucks, “permanently” parked decaying vehicles, (overweight) commercial vehicles, etc.
When one needs to drive almost everywhere for almost everything due to lack of neighbourhood amenities, and most of the houses are illegally suited with multiple units indicating multiple vehicles per each “SFH” overflowing driveway, “Everyday is a traffic jam”!
RE: #102 devore on 02.22.15 at 11:22 pm
#61 zedgt87
Or as your reader noted, the 2% is a sure fire risk free gain.
Not sure why people continually mistake debt repayment as “making money”.
I think you’ve missed the point. If you have cash on hand, paying off a debt is the equivalent of investing the same amount of cash in an investment that returns the same after tax interest as that on the debt.
As the ol’ saying goes, “A penny saved is a penny earned”.
@106 TRT
eValue BC shows the 2014 assessment of this place is 522,520.
List price is 529,785. So it is already 7K over assessed value.
@Angus MacRory, it is really frustrating to think that I might be the only female with a spouse who pays no attention to money whatsoever, other than to complain he is not making enough. Let me have my fantasy that this is normal, OK.
@waterloo resident
Thank you for the suggestion of SPXL . Any thoughts on FRI, FBT, SNXT ? Have a small quantity of US $ and would like to have them working for my family but am not sure of the tax implications. Any information available?
Other thoughts:
Landlady is selling the house. Have to move. Nothing in the school district listed within a reasonable price range for a 3 bedroom home with enough room for us and our furniture.
Cheapest house in my neighborhood is listed at $1,700,000 and houses for sale are being snapped up by those who have earned their money outside of Canada (as they are “not considered HAM” according to this website) within days of listings. Many of these immigrants are buying more than one home. Older houses are being torn down, and new ones constructed within a few months. (Every second house across the street is a new house under construction). Those that have just been built are all sitting vacant. It appears they are waiting for the 1 year mark, after which time I am guessing they will be listed as a “tax free” primary residence. I have been asking if any of them are for rent but cannot find anyone who understands me. I hope the government and CRA monitors this website! I am really hoping someone cares enough about this country to put an end to this madness.
So tiring listening to all the scholars on QE, the US dollar, PE ratios, rising rates and market crashes. None of that stuff makes you money. Try thinking instead of where to out your money to work to take advantage of what happening n economies.
Bring back the ladies garth. They showed the way the other day.
Off topic but watchng the oscars. What can’t lady gaga do. First country now a fräulein. I’m a total fan. And now Julie on stage. Great stuff.
@96 Musty Basemnt Dweller and #56 Vanecdotal
There was a massive bidding war today, regardless of what you believe.
The address of the property is 14365 – 91A Avenue. Look it up on Realtor.ca. Think it sold in one day, well above asking. Call the Realtor.
Some posters on this blog are just as delusional as the MSM pumping RE but polar opposites.
==================
I would be very wary of basing an investment decision (which you are describing) on “asking prices” or “bidding wars”. Bud you have been seduced by the marketing hype and are in hook line and sinker if that is what you are going by. Look at clean stats first then investment options second with someone who understands grade 12 math then go from there.
#104 BlackDog on 02.22.15 at 11:30 pm
Seriously, in most middle class family households, the women are the ones who hold it all together financially while their midlife crisis spouses have NO CLUE where the money is spent every month, don’t care as long as they have their debit and VISA cards, and give nary a thought as to how it is invested.
That’s why they’re “middle class”.
rekt
You guys ‘taking money off the table’ when it comes to investing in U.S. equities are making a big mistake. Your loss is my gain.
#8 SMC
Been there, done that, and here’s what I’ve learned…pay off that student loan ASAP. If you only make the minimum payments, it’ll probably never go away. And 5.5% is a lot of interest.
Put the maximum monthly amount you can afford into that loan, and try to make it go away within three years (five absolute max). Do keep putting some money into the TFSA, but probably only 5% to 10% of your net monthly income. Try to put 20% or more towards the loan. When the loan is payed off, re-assign that 20% to the savings/investment fund.
The majority will try to tell you that student loan debt is good debt. Don’t believe them!
My dog is only part Collie which is why I only partly agree with Garth on the mortgage issue.
Yes, it is better to have the money making 7.4% than to pay down a 2.5% mortgage. Even after tax you are ahead.
But I don’t think the mortgage should be compared to the whole portfolio, only the bond portion. After all, a paid-off house provides “owners equivalent rent”. It’s not income per-say, but tax free savings of rent money. You don’t have to earn money at a job, pay taxes on it, and then pay the bank 2.5% on a mortgage you don’t have. Depending on your tax bracket not having a mortgage can be like earning 4% on a bond. Where are you going to find that right now?
So I would say have a diversified portfolio but include the equity in the house as part of the bond section of the portfolio. If you have a lot of equity in the house you can be higher weighted to stocks and such with the rest of the portfolio.
Can house prices go down? Well of course they can I wouldn’t be a blog dog if I didn’t agree with Garth on that. But bonds can go down to and will do so when interest rates rise (if they ever do, it’s been a long time). But like a long term bond, the coupon on a paid off house does not go down no mater what the price of the house does. You don’t have to pay rent, just maintenance and utilities (and taxes). But you usually have to pay all that anyway.
It’s still smart to rent if it’s cheaper than owning, and it’s still smart to have a mortgage if the money is making more than your mortgage interest (after considering taxes).
But I would contest that if you can’t make as much on the bond portion of your portfolio as you are paying on your mortgage (after taxes), substituting equity in your house for some of the bonds in your portfolio can make some sense. After all a mortgage is really very much like a short bond position.
Of course if you are renting then keep the bonds. Or if you can find bonds that pay more than 2.5% after taxes well then buy them instead.
*2.5% is an example interest rate on an example mortgage. I have no idea what you are paying.
Garth has called this one right.
Invest, forget the mortgage. I’m up 20% since the middle of December, and that is with riding oil into the toilet, and sitting on the most hated commodity today, uranium. I should add that 50% of my portfolio is sitting in cash.
The markets always comeback higher. Just look at refiners the last month.
Its like upside down gravity. What goes down must come up. When it pulls back for no reason, buy hard.
#109 Vanecdotal on 02.22.15 at 11:52 pm
#95 Musty Basement Dweller
+ 1, lol.
“You might find there is close 70 cars parked on those streets on every day.”
I would add… and work trucks, “permanently” parked decaying vehicles, (overweight) commercial vehicles, etc.
When one needs to drive almost everywhere for almost everything due to lack of neighbourhood amenities, and most of the houses are illegally suited with multiple units indicating multiple vehicles per each “SFH” overflowing driveway, “Everyday is a traffic jam”!
===============
Bingo, well said. I didn’t mind my 10 years in that part of Surrey but I have to admit it feels grey and grimy to go back there now. It seems to have all of the congestion and headaches of Vancouver, in fact more, with none of the benefits.
Like I said in the females blog post the other day, men are way way more likely to be some form of goldbug/anti central bank wackjob / peter shiff slurper. Just look at tonight’s comments – at least 20% of them are people claiming a collapse is coming and putting money in the markets is a bad idea.
It doesn’t matter how many times you repeat the average returns over the past 100 years of the markets, a certain segment will never listen or be persuaded. Data doesn’t matter. The next crash is always around the corner for them.
Being a permabear must be a really shitty way to live. I’m thinking there also has to be a correlation between being a goldbug and packing less than 5 inches … just saying.
The US recovery is fully intact and markets will reflect this. I cannot imagine an investor not wanting to have a proxy for the American economy in a balanced portfolio, and the S&P provides that. However in a balanced portfolio, only 8% or so would be US large cap exposure. — Garth
With all respect Garth, I’m kind of surprised at this statement, in particular, holding only 8% in your overall portfolio. In a previous post you mentioned the following:
“So divide the TFSA money into five piles, putting equal amounts into ETFs (exchange-traded funds) that mirror (a) the S&P 500, (b) the TSX 60, (c) a basket of preferred shares, (d) real estate investment trusts and (e) a Canadian bond index. You can use iShares products, or Vanguard, BMO exchange-traded funds or others. But these five will give you safe (preferreds and bonds) as well as growth (equities and commercial real estate).”
For example, using iShares, you’d buy XIU (Canadian stocks), XSP (US stocks), XPF (preferreds), XRE (real estate trusts) and XSB (short bonds). As your funds grow, you can add lesser weightings in XEM (emerging markets) or XCS (small-cap Canadian companies). When you get to $150,000 or so, it makes sense to pay someone 1% to manage this growing nestegg, rebalancing it, giving you tax avoidance advice and gaining further diversification.
As I undertand, XSP tracks 500 large cap US stocks. As I hold 20% of my RRSPs and TFSAs in XSP, just curious if your view has changed or if I am missing a significant piece of information in understanding your 8% comment. Thanks in advance, learning lots from your blog!
PS more on a mortgage being a “short bond position”.
First, yes it is. The key differences are:
1. With a mortgage, you pay the coupon so yes you are short a bond. You’ve sold a bond to get money to buy the house.
2. The principle on a mortgage (let’s call it face value) is paid off over the life of the mortgage. With a bond typically the face value is returned when the bond “matures”.
C. You pay the coupon on your mortgage with after tax money, where as you receive the coupon on a bond with before tax money.
This is why I consider a mortgage to be a “short” or “reverse” bond position. It doesn’t make sense to have a bunch of money in bonds and also a mortgage unless the bonds you hold pay more than the mortgage after tax. But on the other hand diversification is key so I wouldn’t swap all the bonds for my mortgage. Well, actually I would, I am a risk taker that way, but I wouldn’t advise someone else to do it.
So if you are at a point in your life where say your portfolio is 60/40 bonds being the 40, unless that 40% is making you more after tax than your mortgage is costing, go 60% growth and 40% house. Or 60/20/20. Something like that. Stay diversified but realize a mortgage is a bond with the primary difference being who pays and taxes.
This is why the older generations always thought paying off the mortgage was of primary importance. It’s one of the safest bonds you can hold outside of government, and you can live in it. And it is rarely the case you can borrow for less than say the Government of Canada if you are looking for security.
*Disclaimer: I hardly have any bonds but I don’t have a mortgage either. Other than that getting more diversified every day but my long gold position actually paid off pretty good in Canadian dollars this year, trounced the diversified portfolio. Oh well we are still selling to boost the “growth” assets.
#58 Smoking Man on 02.22.15 at 8:01 pm
Manitoba is now Canada’s Roswell
Or perhaps it was one of Bombardier’s planes that crash landed. Fill us in won’t you?
PPS, So if anyone can agree with me that taking a mortgage is equivalent to selling a bond you have to service with after tax dollars, here is another point to consider hopefully more brief:
In Canada, most people cannot lock their interest rate longer than 5 years and most people chose shorter terms than that. Do you really want to be short a huge bond position just when interest rates are at historical and unprecedented lows?
In the US they can lock in for 30 years, life the mortgage, and deduct the interest so it’s tax free. Americans should “lever up”. On the other hand they have to pay property taxes that are not quite, but approaching an order of magnitude higher than we do. For example I pay about $4300 a year in property taxes. I have a friend in the US who pays about $30,000 and his house isn’t even twice as expensive as mine. And I live in Canada where there is a housing bubble. You wouldn’t visit both houses and then conclude mine was worth half what his is. His should be worth 3 – 4 times, but at present only 2 times. Yet the property taxes he pays are 6 times or more what I pay.
#106 TRT
Not delusional, just honest. Merely sharing information based on facts, not emotion.
Thanks for sharing the address, appreciated. Asking price: $529,785, which is $7785.00 over most recent assessed value, (which likely has not outpaced inflation in recent years), so I stand by my observations.
Per FVREB’s own (massaged) numbers: http://www.fvreb.bc.ca/statistics/Package%20201501.pdf
North Surrey yoy Detached SFH:
Frankenumber Benchmark Price: +3.6% Just barely outpacing inflation, (assuming 2%/yr.), that’s a 1.6% “gain” before factoring in all costs of ownership. (carrying cost of mortgage, maintenace, realtor fees, etc). Which turns that “gain” quickly negative.
Median Price: +6.3% So a hypothetical 4.3% “gain” before factoring above noted costs of ownership, which actually indicates a loss.
Average Price +13.2% So a hypothetical 11.2% “gain” before factoring above noted costs of ownership. If this number is to be believed, a 9.2% “gain” before adjusting for costs. One would perhaps be marginally ahead in this scenario.
I wonder which of the above statements is closest to the reality in this situation? No one knows as the raw data is not yet publicly available.
If these are outright cash purchases, or mostly cash with low ratio mortgage, then a modest price gain can be argued, but even in that scenario that amount of $ could be much better invested elsewhere for both FAR less risk exposure and higher rate of returns.
As prev. stated primary interest is most likely builder/speccers as this area is zoned Urban in the Surrey OCP and new owners can apply to densify the lots. From Surrey Official OCP: “Densities within the URBAN designation sup-port up to 36 units per hectare (15 units per acre) for development taking place within established or existing residential neighbourhoods, subject to neighbourhood compatibility”
From anecdotal experience not necessarily indicative of “smart” money in this present market environment.
http://www.surrey.ca/files/05_draft_PlanSurrey2013_Land_Uses_and_Densities.pdf
By all means, if this property rises another $100k in value this year, please DO let us know. We’ll be watching for an update.
Eliminate the student debt – the interest rate is high. Put enough for an emergency fund into a TFSA. Once you have the debt eliminated you can work on the TFSA/RRSP.
#112 BlackDog on 02.23.15 at 12:06 am
In traditional Asian culture – or at least, the one I grew up in – the husband’s job is to bring home the bacon while the wife is in charge of cooking, allocating and storing the bacon. I heard that in some families, the wife gives back a weekly “fun money” allowance to her husband. My dad had very little interest in investing, and gets away with it because any RRSP room he had was eaten up by the pension adjustment, and anything non-registered is handled by my mom, who is a fantastic saver (I said “saver”, not “investor”, but that’s a story for another day). He does have a small RRSP that he stubbornly keeps in cash. My mom hasn’t nagged him about it in years because it’s small enough relative to their net worth that it’s a battle not worth fighting.
Garth – ‘There will be no bank failures, currency collapse, 2008 rerun, hyperinflation’
__________________________
I dunno Garth.
Its pretty easy to look at the underlying issues of 2008 that resulted in one of the longest global recessions, caused a massive loss of wealth, and almost crashed the global financial system.
While the US has deleveraged, the rest of the world has not.
And many of the fundamental issues that helped precipitate the crash in 2008 still remain.
You make a very good case for the overvaluation of real estate in Canada.
However, you casually shrug off these other issues.
Its pretty easy to go back pre -2008 and look at the conditions of the period. No one was predicting a crash, markets were strong, employment was strong, life was great.
Invest in the markets, buy a home, spend more.
Most top economists (well except one or two – and regular doomers) did not predict the mess.
So here we are 7 years later, and now many mainstream economists have valid concerns that the same conditions exist for a similar or worse problem that took place in 2008.
It’s kind of disingenuous to just shrug these issues off, any more than it was acceptable for all the mainstream ‘experts’ to shrug off the conditions that precipitated the 2008 mess.
They were grossly wrong then.
What are your arguments that convince you that conditions now are of less concern than back in 2008?
#3 library karen on 02.22.15 at 2:52 pm
Ah…so, there is a place where real estate “costs what it should”, and within driving distance of TO?! Pray tell, where is this mythical land?
Karen, think ‘Bluenoser!’
Might retire out there myself someday, and winter in Florida…but I must say, Maui is awfully nice..Decisions, decisions..just got to wait until all my junior O&G’s payoff…
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#69 Blocked and Deleted
makes an excellent case that the SPX is extremely overpriced. Garth’s reply is to advocate only 8% exposure to US large caps. How about zero exposure to US large caps.
#76 Tony
completely distrusts BLS and other official US ec data. Garth finds this distrust amazing. I don’t.
#93 LifeXpert
rightly points out that historically the current US GDP recovery is long in the tooth. I wouldn’t be at all surprised to see very low US GDP numbers (and I suspect Canada is already in recession). In any case, GDP tells you nothing about social justice (the wealth gap) and quality of life.
#97 Koshy Alex
doesn’t share Garth’s general respect for central bankers and neither do I. Let me cite the Diefenbaker/Coyne debacle which ended with Diefenbaker going to the IMF on bended knee, cap in hand, begging for a bailout. Central banks act politically.
Garth, it seems to me, presumes no radical changes are in the cards . . . that “a prolonged bear mkt isn’t likely”. Well, who knows.
SMC @8
This ‘non profit’ Options for Homes rings alarm bells for me.
They only seem to sell homes from one builder, Deltera, so how can they be getting a good price? They might not get commissions, but their staff are still paid a salary.
I could be totally wrong, but I think Options for Homes may have been set up by Deltera to market condos to the segment who don’t like paying large commissions to intermediates or lavish presentations. Options for Homes could very easily be set up to not make a profit as a corporation, while profiteering can still be achieved by Deltera. I’m sure Option’s salaried staff are not without some kind of incentive, even if it is not a commission as such.
Has anyone here seen one of their ‘Info sessions’? Is their marketing any less hard sell that of commissioned agents?
As for liquidity, ask the people in Calgary. — Garth
============================================
landlord has my house up for sale, since the start of the new year. three open houses, three showings by other realtors…
NO SALE!!
There is only one scenario where it makes sense to buy real estate….when it’s going up. If it’s going sideways or down…..get the heck out of the way. There are always a lot of desperate sellers, death, divorce , transfer….to wait for a better deal. Every house I’ve bought has been timed that way…made out like a bandit. I’ve bought houses that made the neighbors crazy hate me for ‘uncutting’ their expectation of ‘average pricing’…..hahahahahahahahaha…let ’em hate. But seriously…I filmed neighbors stealing plants they were so tossed.
#15 Matt Gamon, (“If you can consistently get 7% return in your portfolio then you should work on Wall Street, where majority of hedge funds made much less than that last year.”)
As for your idea of me working on Wall Street: Imagine a guy similar to ‘Smoking Man’ working on Wall Street? Ain’t going to happen. Nope.
#22 Rexx Rock: (“You may get 7% or 8% a year return but may lose more than 20% or 30% on your principle if we have even a 10% correction.”)
EXACTLY ! That’s why you need a good market timing system that can spot when downturns are about to happen and when the market is about to start moving up again.
But then again, turning lead into gold would also be sort of cool too wouldn’t it ?
To me it appears that we are either at or very close to a near-term top in the markets, and things might start to fall for a few weeks once they start falling. Just a continuation of the yo-yo motion the markets have been having the past few months.
Of course, what do I know about ‘predicting’ things, I thought we had global warming going on and look at how cold its been this year. LOL.
hahahahaha….the oil haters were trumpeting Warren Buffets move out of two stocks…..it looks like he was doing it to raise cash to cover the losers in the rest of his portfolio….$2 Billion losers as a matter of fact. But the oil haters made it look like Warren was dumping because ‘oil is dead’. Fools
http://money.cnn.com/2014/10/21/investing/warren-buffett-berkshire-lost-2-billion/?iid=obinsite
Keith,
I’ma about in the EXACT same situation than yours. Here is how I sucessfully managed the risk vs best strategy thing. When up for renewal on your mortgage, just take a one-year fixed mortgage and amoraize it for the longest possible term. By doing so, you get the lowest possible monthly payments. Invest the balance in your TSFA (to max it), then education plans for the kids, then RRSP. Every year, look at the futures for inflation rates and Interest rates and if it ever goes up too much, take out the TFSA and clear your mortgage.
That way, you stay invested but keep your “clear mortgage” option.
At least this works for my risk profile…
thanks
#125 Pump and dump on 02.23.15 at 1:23 am
#58 Smoking Man on 02.22.15 at 8:01 pm
Manitoba is now Canada’s Roswell
Or perhaps it was one of Bombardier’s planes that crash landed. Fill us in won’t you?
….
You have no patients do you..
Talk to me in six months.. After flambourgh.
As mentioned I expected the newz to sell us a stream of ‘chilling theats’ against OurWayOfLife until H’s re-election. they just sold us another costly ‘mission’.
But we have ZeroTolerance here at home right? Wink wink.
At #126: Nonplused, BINGO!!! Americans are paying between 8-14 TIMES what Canadians pay in property taxes, depending on the taxing jurisdiction chosen to live. Believe me when I say Americans are spending what Canadians spend to live on this continent. Many Americans pay more. Why is this not-so-little secret of property taxes constantly overlooked? I know in Seattle, I pay $12,483 in 2014 for property taxes on a home that is appraised by the county assessor at $1,200,000. On top on my 9.85% sales tax and federal income tax at an effective rate of 24%. Hell, same property in Vancouver might have a property tax bill less than $1,500 a year. Tax-wise, dollar for dollar earned, I know of NO Canadian friends paying more in taxes than me or my American pals. Makes one wonder…
#127 Vanecdotal on 02.23.15 at 1:41 am
I believe you on this, even though all I have is an anecdote: I met a lady in Beijing who sold her place at the top of their housing bubble, and she was waving around a bunch of MLS printouts and cooing about how a SFH in Sullivan Heights is only $600k (or less?) compared to a $1 million East Van teardown. I don’t know what her status is in this country. She flies back and forth a lot and maybe she stays long enough to maintain permanent resident status.
#127 Vanecdotal on 02.23.15 at 1:41 am
Oh yeah, I had to explain Surrey’s geography to her because she didn’t really get how far out it actually is – what mattered to her more was that it was a SFH on freehold land.
#117 Leo Trollstoy on 02.23.15 at 12:45 am
You guys ‘taking money off the table’ when it comes to investing in U.S. equities are making a big mistake. Your loss is my gain.
Wondering if you can expand on your comment. If I already own U.S. $, why not invest them in the NYSE.
Currency wars continue.
Isreal just cut its rate to 0.1%
Whos next, will BOC go -0. 25 or why mess around, boom – 0.50 I’m thinking.
#126 Nonplused and #143 The American
US Property Taxes: $6,000 for our home in Texas valued at $350k and that’s with a Homestead discount. Plus $450/yr to FEMA for flood insurance as well.
No need to panic Calgary, a realtor says it is business as usual:
http://calgaryherald.com/business/real-estate/calgary-housing-prices-trend?__lsa=5587-d628
Re: Brent #149, No need to panic… Somehow I knew that was one of Mario’s RE screeds before I even read it. Sad; the Calgary Herald used to be a real newspaper.
Keith, as in all things, moderation. Continue to balance increased mortgage payments with increased investing.
1) Do not cash out the TFSA. Terrible idea, and means you’re going all in on a house. High risk, no liquidity and no diversification.
2) Don’t go all in on investments and do interest only mortgage payments. The debt would still be there then when rates start to climb.
Instead, do a blend of both and no matter what happens in the outside world, you can say that you planned for the future.
That was an interesting video that someone posted on all the property going up for sale in Silver Star resort near Vernon BC.
Makes me wonder what the overall impact of the oil slowdown will have on the Okanagan in general, since there’s always been such a heavy Alberta influence there.
Although it may still be a bit early to see impacts, any real life information posts from non Real Estate Agents in that area would be much appreciated .
Gone AWOL
http://calgaryherald.com/business/real-estate/homebuyers-in-calgary-have-gone-awol?__lsa=412e-f8dc
Alien moon landings….
https://www.facebook.com/IFeakingLoveScience/photos/a.456449604376056.98921.367116489976035/1044086275612383/?type=1&theater
The writing is on the wall for Alberta RE as buyer are no where to be found. Anyone buying RE anywhere in Alberta need to have their head examined. Alberta should lose minimum 50% of its RE value and the slowly grind down to 50K or less for a house.
U.S. Housing not doing so well it seems.
http://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=f13667&mobile=false
Keith,
Your plan to be mortgage free is certainly admirable. But, it’s not the best approach in a low interest rate environment. The wife and I paid off our mortgage as fast as possible. But that was in the early 90s and interest rates were about 10%. So, it was a no-brainer. Now, with 2.5% mortgage rates it’s not so simple. At 35 you have a lot of time ahead of you before you reach retirement. Make the most of it! Get busy investing and put that TFSA to work.
Very interesting post and commentary. I agree that the us economy still has a way to go. War is always good for the us economy. (although bad for people). Makes the money move around, shakes things up. Then when its over its like party time, chinese new year and the 4th of july toss together. That’s why we have the boomer generation and we all have analysed that to death, haven’t we? Having said that I believe the us is using contraint this time and help some of the bordering nations fight amongst themselves a little (aka. Jordan). I think the us is trying to improve their image on the political front. Sort of like a leopard hiding behind the bushes waiting to pounce! Also to compound garths estimation, next election will probably bring us a Republican goverment, which mean $$$$. Think big business, and wall street cronies etc. Anyhow, too long winded, silly woman that i am…. Any comments about this video. I am just not too sure about the math as this young chap seems to whitewash the numbers a little. Interested on any comments as in the end the homeowner makes more money….
http://www.theglobeandmail.com/report-on-business/video/drawing-conclusions-is-renting-really-a-waste-of-money/article22832602/
Don Cherry and Sherry Cooper, together at last!
Advice to Keith:
Build your TFSA until it is enough to eliminate the mortgage. Make a written pact with your wife that you will NOT spend that money under any circumstances. It is your “paid off house”. Invest it wisely at anything that gains more than 2.25%. Tell your friends your house is “paid off”. The fine details of your financial situation is your private business. Stick to the rule of 90 and go on that vacation!
#72 peter on 02.22.15 at 8:54 pm
Garth, what do you think of Peter Schiff? He sees a big collapse in stock market for 2015. He got right the housing crash in USA. Do you think he is just a gold lunatic?
————————–
Peter Schiff has a company that sells gold. What’s that saying that Garth loves so much???? A broken clock is right twice a day…..
Sorry G-man but that saying actually applies to Schiff!
#141 Smoking Man on 02.23.15 at 8:18 am
#125 Pump and dump on 02.23.15 at 1:23 am
#58 Smoking Man on 02.22.15 at 8:01 pm
Manitoba is now Canada’s Roswell
Or perhaps it was one of Bombardier’s planes that crash landed. Fill us in won’t you?
….
You have no patients do you..
Talk to me in six months.. After flambourgh.
_____________________________________________
When will you ever learn Smoking Man, you cant talk about what doesn’t exist. If it did exist then it sure as hell won’t exist long here!
Do you understand?
Nobody gets a consistent annual number. As I have said, a 60/40 balanced portfolio has averaged 7.4% over the last decade, which was the most tumultuous since the 1930s. Seems reasonable the next decade or two would deliver similar. — Garth
_______________
While I agree with this generally, and I have invested accordingly, I must note that every investing company always states that “past performance does not guarantee future results”. This is a guarantee that there are no guarantees, although we do not always like to hear it.
On the other hand, that also applies to RE where there is also no guarantee that the interest rates are going to remain low, and the prices so high in certain geographic locations.
#38 Mike T:
who is Dakota Johnson?
bless my TeeVee free existence!!
I haven’t even bothered with that new Saul show…..
______________________________
Good for you!
I do wonder how Garth keeps on the up and up with popular culture. Maybe through Bandit…
In regards to RE in Alberta – I know Eastern Canada has been getting absolutely killed with snow and cold, but out here, I’ve never seen a winter more mild. Generally in Edmonton we might get a couple days a winter that are around 0deg C (or near)…. This winter thus far, we’ve had 4 big snow dumps, followed by I bet 20-25 days at or above freezing (Today is supposed to be +5!). A couple weeks ago it was +14 in Calgary and the restaurant patio’s were open (Same thing when I was in Canmore. +8 = Patio weather for most of Alberta!
All this warm weather sure isn’t helping RE sales though! In the last 2 weeks (Feb 9) listings have increased 7.3% in Calgary and Edmonton, and 6.1% in Fort McMurray. Ft Mac’s YoY listings have increased 28.4%, 31.4% from 2 years ago, and 39.9% from 3 years ago (keep in mind there’s a lot of city growth in that time though)
Tax is a big killer and it will get worse in the years to come.
I learned my lesson when retirement money was put into a rrsp. at rrif time I paid a hefty tax. PLUS, many social benefits were cut back or eliminated because of the added income from rrifs.
tfsa are ok, too little too late for wifey and me.
the rule of 90 might be ok at age 20 but not worth a darn at age 89.
the coffee talk this morning is foused on prentice possible jumping to fed PM job. The terror about WEM has spooked everyone. When the powers to be say it is safe, it is time to stay home and lay low.
There is nothing wrong in holding some US internationals. Their markets are abroad and the world economy is actually growing.
It might be a good time to get some Euro and China ETFs.
The ‘recovery’ will go for a while as confidence has to be maintained while currency wars intensify (just look at what Japan is doing),
One of the surprising winners could be the Canadian dollar going further significantly down in value but without much benefits to manufacturing (only 13 % of the Canadian economy, this can not change even with some delusional folks imaging Canadians competing with Bangladesh as ultra-cheap labour…)
Things will settle once debt of ‘developed’ nations is significantly reduced (at least 40-50 % of it eliminated) at much higher price levels while interest rates stay close to 0 in 5-6 more years.
Loonie at 30-40 cents US and bread at 8-10 $, coffee at $ 4-5 is not un-imaginable or impossible, on the contrary, it is very likely.
If you can’t get that fixed income (if you are that lucky to have one) INDEXED PROPERLY, then good luck.
#107 Brydle604 on 02.22.15 at 11:48 pm
#10
re Oil Tank Removal, Vancouver
———————————————————-
Had a 600 gallon tank removed from a house in East Van prior to selling. Insurance copanies are now asking if you have an underground oil tank when you go to renew your policy. If you say yes they “give” you a year to remove it. I know of the same thing happening to a friend in Bella Coola. Probably elsewhere too.
The worst case scenario is an underground tank and an above ground one. Usually means the underground tank has failed.
Our bill came to $10,000.00. A bud’s in Burnaby was just over $100,000.00. OUCH … but he made off like a bandit when he sold the house …
#ConnectTheDots… #Christy
Croupier’sClark’s… #CasinoColumbia…[TimesColonist] – High rollers, betting $100,000 a hand, boost revenue for B.C. casinos
…”The B.C. Lottery Corp. expects to improve its bottom line this year thanks to an influx of high-rolling gamblers from mainland China…
… The Crown corporation also expects to surpass its overall target of $1.2 billion in net income for the year ending March 31 “due to an increase in high-limit table revenue,” budget documents show.
Critics, however, warn that the government is “playing with fire” by promoting a type of gambling that has been linked to money laundering and organized crime in other parts of the world.”…
http://www.timescolonist.com/news/local/high-rollers-betting-100-000-a-hand-boost-revenue-for-b-c-casinos-1.1770814
#InOtherNews…
[G&M] – Vancouver schools lean on ‘shadow budget’ for additional funding
…Ms. Gelson said that she is incredibly grateful for the public’s response to her letter, but wishes people would become more politically aware and demand the provincial government take more concrete steps to tackle a child-poverty rate that has been the highest in the country for a decade.
“In schools like mine where there is concentrated poverty, 50 to 70 per cent of your [kindergarten] kids are already vulnerable, already behind.”…
http://www.theglobeandmail.com/news/british-columbia/vancouver-schools-lean-on-shadow-budget-for-additional-funding/article23147597/
#148 Mike L on 02.23.15 at 10:50 am and #126 Nonplused and #143 The American…
I guess we are just lucky, apparently property taxes are far lower in Arizona – probably because assessments are much lower than what a property would sell for.
Our annual tax bill is about half what we would pay for a similar property in Kelowna BC, and would be about 10% less if we were permanent residents.
As well, your Texas taxes are more than double what they are for a home valued at $ 350K in our neck of the woods.
No flood problems here, we checked the Maricopa county floodplain maps before buying.
Garth what you don’t seem to grasp is the gov lets in on average 250,000 immigrants every year who will sacrifice everything to own a home in Canada. The backlog is well over 2.5M. Anytime the economy weakens they just open the taps more. The Canadian economy is based on building condos and selling to immigrants.
Immigration is 0.8% of the population and has not changed in almost a decade. You’re full of it. — Garth
Are the Oscars over yet?
Don’t tell me who won what, I’ve just started watching the tape from last night.
Gotta love 9 hour VHS tapes.
#85 BlackDog on 02.22.15 at 10:18 pm
And to all those who who think women suck at math, we don’t. I suck at investing, yet got A’s in all my university math and comp sci courses. Its an ‘interest thing’, not an IQ thing. Make it interesting, like other things that can be boring or not depending on how it is presented to us, and we will surprise you with our acumen.
This right here sums up the entire problem. Your financial future isn’t interesting enough to be bothered?
This is why I don’t let women make financial decisions that impact my life, if I can help it.
#9 SMC,
Pay the student loan at 5.5% first. Garth’s target to beat is 7% … but those earnings are taxable at your marginal rate (captital gains and dividends at 50% of that). So depending on your income level and FI/equity split you’ll be paying around 20% on that. So really the target to beat is 5.6% in after tax dollars. So almost a wash … except there is risk associated with investing. Compare that to paying off debt, where once you’ve paid it off it’s gone. 100% gauranteed you won’t have to pay that 5.5%.
So at 5.5% it’s worth paying off debt. At 3% which some people have a mortgage at it’s better (as garth explains) to invest as you get an extra 2.5% to compensate you for the risk.
The Debtor is slave to the Lender. This is still true eve if the Debtor invests at a higher rate if return. Pay the damn debt to zero then watch your investing and liquidity take off. Psychologically it’s better too.
#9 SMC,
Further to my last comment … if you haven’t maxed out your TFSA then it flips the equation back to investing because the 7% would be non-taxable. Now your risk premium is 1.5%. I’d still tackle the debt personally, but you wouldn’t be wrong to max out the TFSA first. So you can see how maxing out your TFSA before paying down a 3% mortgage would be an absolute no brainer (as long as you’re not putting your TFSA bucks in a stupid GIC).
@ #22 Rexx Rock
Principal vs Principle.
Cheers
#174 Josh in Calgary
In most circumstances, interest paid on student loans are tax deductable.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/319-eng.html
Back of the napkin calculation means the 5.5% is effectively 4.5 – 4% depending on your annual income. The CRA has a nice note in there too… the benefit can be carried forward up to 5 years into years when you’re taxed at a higher rate.
Oh really? 35M x .8% is 280,000 – Per year. Target is 1% of population EACH YEAR. (I feel I now need to point this out – it increases each year due to compounding)
http://www.statcan.gc.ca/pub/11f0019m/11f0019m2014356-eng.htm#a5
Wrong. Immigration levels have been static. — Garth
Vanecdotal:
Here’s my anecdote… the 1959 teardown rancher on the street in North Delta where I used to live sold in less than a week. I don’t know for how much, but it was listed at $545,000 so I’d assume it sold for at least that. It sold previously in 2013 for $495,000 (asking was $465,000). I sold my same house type, same lot size two doors away for $419,000 in 2007. Another house on the same street (not a teardown) sold in a week or so and was listed at $570,000 and I’d think they got at least that based on the quick sale. Teardowns in North Delta as elsewhere bring a premium now as there are just not many more lots with old houses to be redeveloped and the developers have really driven up the prices of these beater houses.
As much as I’d like to believe things are slow, it just does not appear to be the case this spring, and prices have definitely taken a big leg up.
#72peter on 02.22.15 at 8:54 pm
Garth, what do you think of Peter Schiff? He sees a big collapse in stock market for 2015. He got right the housing crash in USA. Do you think he is just a gold lunatic?
Basically. — Garth
–
He sells gold, so he surely has some bias.
The chance of significant collapse in the US stock market is not big, there might be a correction but not large, the chance of a significant correction is probably slim.
Peter also recommends some European and Asian stocks which is a sound advice.
And while in short term currency collapse is unlikely, in long to mid term we could and most likely will experience some significant inflation so gold in some limited percentile might not be a bad idea after all.
Contrary to what I am reading here that useless rock somehow managed to retain persistent high value over very long time interval, so let’s not underestimate it.it.
Correct – 250,000-280,000 new “Canadians” each year for the last decade. Whats a real shocker is Chart 11 on the link from Stats Canada.
http://www.statcan.gc.ca/pub/11f0019m/11f0019m2014356-eng.htm#a5
Why do we need close to 300,000 temporary foreign workers when Canada’s overall employment is flat to down?
Oil is not coming back any time soon, at least according to Shell (and I do own it, RDC.B)
Shell Canada pulls regulatory application for Pierre River oilsands project
https://ca.finance.yahoo.com/news/shell-canada-pulls-regulatory-application-pierre-river-oilsands-190623046.html
RDS.B
#85 BlackDog
Is that so? Well, I lack interest in commuting to work, but I still do it. Cleaning the house doesn’t tickle my fancy either, but guess what.
This is for your benefit. You’re not the one doing us any favors. If you wish to stop working one day, and retire and age in dignity, you must invest. If you cannot find the motivation for yourself, no one else will either. You can always hire someone to do the things you don’t like doing, and investing is no different. But saving, that is up to you.
#106 TRT
Wow, another underpriced property attracting a bunch of people who think they’ll get a deal, and selling for over list price.
It’s not 2002, we’re not impressed anymore.
#82 Bob C on 02.22.15 at 10:08 pm
I’m probably wrong but I’m 65 and mtg free. I feel the difference between renting and owning is the same as between a girlfriend and a wife.
————
Luv it! You are on to something! To me, more like being married to a trusted companion than being single with casual girlfriends. For Garth, renting a $2M home makes financial sense. For me, owning at this stage of my life is beyond just financial numbers. There is the extension of self thing.
1. I have to live someplace.
2. I have a need to customize my environment, to make it unique to me (I’ve done this with cars too).
I don’t need or even want to live in a $2M home, just a modest shelter that is thoroughly modern with everything I need and want—and the way I want it. You cannot customize a rental property, so if a person is content with renting for financial reasons, all the power to them. For me, I cannot put a financial number on a canvas used to create the environment I want to live in. My house is just perfect for me. I don’t recall what a mortgage looks like, and the house conforms exactly to the rule of 90. If I was in the situation with a mtg, being debt free, and a mortgage is the biggest debt, is worth a few percentage points.
+++++++++++
#166 pinstripe on 02.23.15 at 1:42 pm
the rule of 90 might be ok at age 20 but not worth a darn at age 89.
———
The way I take it, the rule tells me I should own no real estate at 89. Fine with me.
#150 Alberta Ed on 02.23.15 at 11:25 am
Re: Brent #149, No need to panic… Somehow I knew that was one of Mario’s RE screeds before I even read it. Sad; the Calgary Herald used to be a real newspaper.
========
Yes very sad. One thing this article didn’t mention is that even if the price of oil recovered quickly there will be lingering effects from this little surprise that a lot of newbies in Alberta and other places are getting. It will be an eye opener for these who learn for the first time that real estate doesn’t always go up. When you can see hundreds of for sale signs with in a few minutes drive, it makes a lasting impact. So do the many stories of hardship that will eventually rise up to be public, despite the previously successful attempts of the real estate agent cartel to keep those messages under wraps.
#178 Mike in Toronto,
Thanks for the addition. So that would push the decision a little more in favour of investing vs. paying back the student loan. It’s important to note that any after tax investment decisions will be based entirely on your individual situation.
Some new BC entrepreneurs…straight out of lotus land… humans.. ….. there are no words.
http://news.nationalpost.com/2015/02/23/is-human-breast-milk-may-the-new-energy-drink-fad-for-the-muscle-building-crowd/
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/shell-pulls-plug-on-long-delayed-oil-sands-mine/article23153131/
Royal Dutch Shell PLC has scrapped plans for a long-delayed oil sands mine, pulling the plug as oil prices skid to multi-year lows.
The European oil major said Monday that it is withdrawing its application with federal regulators for its 200,000 barrel-a-day Pierre River mine north of Fort McMurray, calling the project a “very long-term opportunity” that is not currently a priority.
#173 Yogi Bear on 02.23.15 at 2:20 pm
#85 BlackDog on 02.22.15 at 10:18 pm
And to all those who who think women suck at math, we don’t. I suck at investing, yet got A’s in all my university math and comp sci courses. Its an ‘interest thing’, not an IQ thing. Make it interesting, like other things that can be boring or not depending on how it is presented to us, and we will surprise you with our acumen.
This right here sums up the entire problem. Your financial future isn’t interesting enough to be bothered?
This is why I don’t let women make financial decisions that impact my life, if I can help it.
____________________________________________
My wife was a high school calculus teacher until she took an early retirement. She is a brilliant mathematician and I have always had her do our accounting books at my company. My forte was Electronics Engineering and while I can do math she lived an breaths it. Investing is a gender neutral issue, So go girl! Invest, learn craft and hone your skills.
Alberta is the next detroit. Alberta RE is so going to CRASH so hard that it will expose the RE ponzi in Canada.
Look Alberta you are finished
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/shell-pulls-plug-on-long-delayed-oil-sands-mine/article23153131/
Every day that oil is under $50 is just more losses and cancelled projects and such. THANKS to conservative stealing and wasting all that oil money Alberta is finished and will suffer economic ruin. Conservative times are hard times always have and always will be. Good choice Alberta
SeekingAlpha: Big Short II: Can Canada’s Largest Banks Absorb Increasing Defaults From A Real Estate Crash?
The author only has 32 followers so I don’t give him much weight, but it shows how our housing is being talked about out there.
http://seekingalpha.com/article/2938716-big-short-ii-can-canadas-largest-banks-absorb-increasing-defaults-from-a-real-estate-crash
That’s 31 more than he deserves. His mom can stay. — Garth
#193…
http://www.thestar.com/business/economy/2015/02/23/moodys-says-ontario-has-a-spending-problem.html
http://www.vancouversun.com/business/will+among+leaders+economic+growth+Conference+Board+Canada/10836107/story.html
35-ish
2kids – ages unknown
I promised my wife hot exotic travels, and she in!
rule of 90 by heart
no-mrtg vs investing
so Keith does vacation includes kids? if does, there is no such a hot exotic travel with any kids.
no-mrtg idea sound good, but mrtg free house wont generate 6k for airfare alone for 4 to another continent. so my advice to you is: cut you discretionary spending to the bare bone and fund trips with difference. work on your overhead first see how much money you can squeeze out of it. and get this anti-calculator it’ll help!
http://goo.gl/tH5Ccp
The math totally makes sense not to pay off the mortgage too soon.
But emotionally it could be worth a lot more.
YMMV. Choose your poison.
http://www.winnipegfreepress.com/local/rally-to-save-agassiz-ski-hill-293372761.html
You can travel, have a TFSA, pay down your mortgage and save for your children’s education. You just have to live the way the ancient Greeks advised – with moderation. Increase your mortgage payment $50 per month every couple of years, cover off the first $1000 in RESP contributions for each of your children every year, plow what you can in TFSA’s, and travel modestly within your remaining budget. It’s called “living within your means”, it’s so out of fashion these days. The notion of aggressively attacking your mortgage and blowing your wad on expensive cruises and trip to Tahiti is not going to get you anywhere fast, except of course, back into debt by the time your children reach college age.
Send the $$ back. Thanks.
http://www.freealberta.com/transfer_payments.html
#180 S.Bby
Thanks for the anecdote, interesting. That seems to be the same kind of buying / price action we’ve been seeing in our area and down towards White Rock in recent years as well. Speccer’s are still moderately active here in much the same way you indicate in N. Delta.
Thing is though, the densified post-flip product (single detached row houses on tiny lots, townhomes & condos) have been languishing on the market for several years in many cases out here, drifting down in price, there is currently so much oversupply, with more coming online for the foreseeable future. Ditto for the Luxury SFHs flips catering primarily to foreign buyers, lots of stagnant listings on their 2nd or longer year of re-lists in the $pendy areas.
This is what I mean re: builder/speccers buying in anticipation of a future gain in the phase of the market are not indicative of “smart” money, imho. The downside risk they are currently assuming is massive imho.
You have a valid point that is you are a seller, now might be a prudent time to exit the market so a (greater fool) builder can assume the risk of ownership. N. Delta appears to be lagging the cycle out here by a few years but using the assessment data and FVREB’s stats as a guide I sincerely doubt it will be immune from a substantial correction, especially with builder/speccers, and not new owner/occupiers now the primary driver in the present market for that category of housing.
It went down a giant rabbit hole…
http://www.dailymail.co.uk/sciencetech/article-2965385/Are-Siberia-s-mysterious-craters-caused-climate-change-Scientists-four-new-enormous-holes-northern-Russia.html
#192 Holy Crap Wheres The Tylenol on 02.23.15 at 5:21 pm
This right here sums up the entire problem. Your financial future isn’t interesting enough to be bothered?
This is why I don’t let women make financial decisions that impact my life, if I can help it.
____________________________________________
My wife was a high school calculus teacher until she took an early retirement. She is a brilliant mathematician and I have always had her do our accounting books at my company. My forte was Electronics Engineering and while I can do math she lived an breaths it. Investing is a gender neutral issue, So go girl! Invest, learn craft and hone your skills.
Obviously I’m not saying every woman has this “lack of interest”. But when it comes to my financial future her attitude is what I have seen as typical amongst the female cohort.
Some would call it misogyny. I call it risk management.
People like Keith understand the concept of low cost leveraging when they line up to buy the McMansion, but they throw away all the advantages of this type of financing when they aggressively buy-down their mortages sooner than they should. Even more astounding are the folks buying down their mortgages while the rack up credit card debt and borrow to travel!
That said, ten years ago, I had to explain to my wife (an MBA and accountant) that paying down our mortgage was the last thing we should do when rates are at historic lows and we are trying to build up a nest egg to educate our children and retire on. She is the daughter of a 1960’s immigrants from Europe. This wave of immigrants despised debt and they made one stupid financial decision after another to burn their mortgages as soon as possible. However this same generation just happened to live at a time when the standard of living doubled every 7 years up to the 1980’s. Their foolish short-term financial decisions were masked by a world economy on a post-war tear. We don’t live in those economic times anymore. Yet, old habits are hard to break. In the end we compromised and increased or mortgage payments slightly and began our journey down the long investment road. It’s a decision that has definitely paid off.
#180 S.Bby
Meant to add… presently, in the South-ish – South Surrey, Langley areas I follow, in general the values builder/speccers have been willing to pay for the hold-out (older home with good lot size) seller properties appear to have peaked in recent years, and are now flat or declining adjusted for inflation.
Sellers could have gotten more $ several years ago in many cases. It’s reasonable to think this could also indicate future price behaviour for N. Delta as well.
http://www.telegraph.co.uk/finance/economics/11430744/Tensions-high-as-Greece-scrambles-to-keep-rescue-deal-alive.html
#162 Holy Crap Wheres The Tylenol on 02.23.15 at 1:11 pm
#141 Smoking Man on 02.23.15 at 8:18 am
#125 Pump and dump on 02.23.15 at 1:23 am
#58 Smoking Man on 02.22.15 at 8:01 pm
Manitoba is now Canada’s Roswell
Or perhaps it was one of Bombardier’s planes that crash landed. Fill us in won’t you?
….
You have no patients do you..
Talk to me in six months.. After flambourgh.
_____________________________________________
When will you ever learn Smoking Man, you cant talk about what doesn’t exist. If it did exist then it sure as hell won’t exist long here!
Do you understand?
…….
Come on, give it up, how many spices are here , just a number man, post a cleaver cryptic post, Ill figure it out?
http://www.washingtonpost.com/blogs/style-blog/wp/2015/02/23/how-did-john-travolta-get-so-creepy-yet-another-weird-oscars-moment/?tid=pm_pop
#182 veej on 02.23.15 at 4:34 pm
Why do we need close to 300,000 temporary foreign workers? We don’t need them. The friend of the Conservative Party of Canada need them.
Fast food franchises, big box retailers and farmers refuse to pay their employees real Canadian wages so the Harper Government lets them import cheap labour.
Anytime you hear the term “Labour Market Opinion” (LMO), assume some working person is getting screwed.
Isn’t it funny. The fast food Barons and retail Kings can afford to buy houses where they fleece their imported labour for room and board but they can’t afford to pay locals a reasonable wage. It sure smells funny.
Have you noticed that most of these horror stories come out of Alberta? Just follow the stench of Harper Minions.
A rising tide should raise all boats. I guess not when there’s profits to be made screwing working people.
Earlier today, on the first day of my vacation, with my morning coffee in hand, my birthday cake for breakfast, I cracked open my favorite blog and I see Garth spot lighted my question, shared his wisdom, and all the blog dawgz offered much for me to consider, from what do in investing, mortgages or if heaven forbid, I find a leaky tank of oil buried in my yard. You’ve thought of it all. Such a nice gift -and I didn’t even tell anyone its my birthday [little tear forms]…
I was looking for factors to consider whether to pay off the mortgage early and you gave me many to consider. Every good engineer has a spreadsheet, I had already ran the numbers . As Garth said, there is emotion, personal preference, risk tolerance, and the need for balance/diversification as many of you echoed. I am still thinking through it all.
We have diversified our strategies in phases, as we find success with a focus. The first few years with dual incomes was our jump start on investments. We bought house on my income, set aside 10% for giving, 15% for savings, settled into a single income life style off the rest. So my wife’s income was 100% savings (RRPS’s, emergency fund, cash for vehicles). Now with 2 kids, my wife in home full time which has been a blessing to our family. Once we figured out that at our rate saving, continuing on the RRSP path would mean higher taxes in retirement, we switched gears and are now 4 years into “declared war on the mortgage” phase (but continuing 15% into RRSPs) and have the end in sight, hence the question to end it sooner (the mortgage).
Thanks for all the insights, especially the personal successes some of you shared, I will consider it all thoughtfully. In return I’d like to share the one thing that has kept our financial house in order, raising a family of 4 in the 905 (eastern GTA) on one 5-figure income. It is this, “live below your means and do it for a long time”. Its important to note I did not say “at” or “within”. The “below” part is important. It meant for us, 2 used cars instead of new, a 1900 sq.ft house instead of 2500, camping instead annual trips with airfare. However, it would not have been possible had we not lived in the mythical land of where houses cost what they should (#3 library karen), yes $350k buys a 2 storey, 3 bdrm SFH on a 46′ lot across from a good school in the magical land of Durham Region (Courtice), 45 min from downtown T.O. (but the commute sucks, I work local). Cheers.