While normal people were hunting bunnies and chasing chicks this Easter weekend, some blog dogaholics were rushing here to post about the latest US non-farm payroll statistics. Seriously. Get a life.
Not only is this aberrant behaviour, deserving of pity, but the latest numbers are probably irrelevant. Here’s why – and why US interest rates will still be going up.
About 126,000 new jobs were created last month in the States, when most economists expected the tally would be closer to 200,000. After all, the monthly job count has been above that level for almost a year and a half, with more three million new paycheques issued in the twelve months. That’s dropped the jobless rate to just 5.5%, close to half what it was in the dark days of winter, 2009.
Impressive as hell. That convinced the US central bank to taper away its massive bond-buying program and then plan for the end of emergency rates. But does this abrupt plop in job creation show the economy’s floundering, and higher rates are an impossibility?
Doubtful. March was a weather bomb in most of the US, certainly the industrious eastern half of the country. It was more miserable in Boston, for example, than in Yellowknife. Two major industries snowed in were construction and hospitality. Fewer buildings were up, and people stayed home to drink instead of mushing it to the restaurant. The estimated jobs toll there was 90,000 – which would have put the overall number right on track.
The feds also say the weather was bad enough to keep 41,000 people from working – the worst situation in many years. The number of new jobs created in the food and beverage trade was the lowest in three years. And here’s why…
So, I hope those who believe rates will stay where they are forever don’t get too excited. They won’t. This year the US begins a process which will move the cost of money slowly but relentlessly higher. The Bank of Canada (even if it lowers rates again by a quarter point) will resist following suit for a while, but inevitably will follow. The absurdly low rates we have today will not be with us in a year, so I sure hope you’re not pigging out on them.
And this brings us to the odd little story of Spin Mortgage. It’s a tiny two-guy Vancouver bucket loan shop making headlines a few days ago when it was kicked off a web site that tabulates rates for consumers. Mortgage brokers pay the site for all the clicks, leads and referrals generated.
Spin came on board with a five-year, fixed-rate offering of 2.44%, about ten bips below everyone else. (A ‘bip’ is industry talk for a ‘basis point’ – which is one-hundredth of one per cent. Now you can impress your babe with arousing insider lingo.) Worse, Spin would join the site for just a few hours a day until it generated enough leads to keep the lads busy. In other words, it would show up with the cheapest loan, Hoover off a bunch of business, and vamoose. The other mortgage guys weren’t impressed. They complained to RateHub, as (allegedly) did some consumers. So Spin was spun.
RateHub argued that the broker’s cheap rate was too restrictive to satisfy many borrowers and therefore probably a bait-and-switch tactic, meant to garner leads and create a competitive disadvantage for others. Spin said get stuffed. Its bargain rate (achieved by giving up part of the commission) was great for anyone buying a home, rather than refinancing, who could close in 30 days and didn’t need CHMC insurance.
Sure, the cheapo loan didn’t have as generous prepayment privileges as the banks and others offer and could only be used for owner-occupied houses (no rentals), but whaddya expect? You don’t get Mercedes fit-‘n-finish when you buy a Kia. And these days, with real estate prices in YVR and the GTA going ballistic, all most people care about is a low, low, low rate.
Of course, they’ll come to regret that. As mortgage rates creep higher over the next few years, house values will thud lower. Remember that real estate doesn’t cost more today because incomes are higher, the economy’s on fire, inflation abounds, rich Chinese are invading or housing’s intrinsically more valuable. It only costs what it does because rates are in the ditch. When five-year loans cost less than 2.5%, buyers can carry more debt for the same monthly payment. So up she goes.
As you will see, the reverse is also true.
So if you have an inflated house and a deflated mortgage, best spend the next five years fattening up the TFSA and feeding your ETFs. You’ll sure need that cash, come 2020.
238 comments ↓
Too cheap? Is that a real thing?
US is not in such great shape to justify the euphoria. But they are in far better shape then us, the brainwashed.
They will survive somehow. We? Not so sure.
Not Sure as in Idiocracy.
BTW any drop in house prices less then 60 % will be only possible at the cost of complete destruction of the loonie.
DELETED
Wow, 2.44%. That is some cheap money. I remember when F laid the smack down on 2.99% with the major banks. As we are wont to say, this won’t end well.
People have jobs, and they have money! How else can you explain a 60 minute wait for a table at the damn Texas Roadhouse, hardly a bastion of fine dining. Bust at the Ground Round as well. Are these all retired geezers? Hardly, business class at lunch, families and the mixed crowd standing ’round for dinner.
Rates had better start heading upward pretty fast! Will Janet finally add a .5 pt or more? Film at 11.
Actually was reading the local rag on Real Estate prices here today. I was quite surprised that the average that WAS $125,000 just a few years ago was now closing in on the high 190’s. Want new? 1500 sq ft ranch with crab grass will set you back in the low 200’s. I shudder to think what my shit-box might bring. Higher taxes based on valuation I suspect. Anyway, we aren’t TO or VAN prices, but here you use the US greenback (add 20%).
Markets closed for the Good Friday holiday. Checked values they are holding steady, that’s good news.
Each week brings its own panics, and problems, but we grizzled ones ignore the bullshit. It never matters.
All, have a great Easter, Passover, or Eastore weekend.
We are doing “better” than we deserve!
Why is it that when real estate boards explain away weak sales in the period January to March by referring to bad weather, it is discounted as nonsense but bad weather accounting for poor job creation is reliable analysis?
Bust should have read “busy” gram auto reject.
Idiocracy is a visionary movie. Almost as entertaining as this blog.
Thanks Garth for this blog.
I’m on vacation with the fam in Texas. It’s warm, sub-tropical, and cheap. Enjoying it here.
Could canada hold the line on our low rates even if the US raises theirs?
Irrelevant really. Who cares about interest rates when you are paying cash?
There is another country with 3 times the number of millionaires as canada, and doubling every year. these people will pay any price to, say, send their kids to a good english speaking high school. we can’t compete with them, other than to borrow our brains out trying. And eventually, that too will end.
[…] Source: http://www.greaterfool.ca/2015/04/03/too-cheap/ […]
http://business.financialpost.com/news/energy/sombre-oilpatch-braces-for-a-spring-breakup-that-could-stretch-into-fall?__lsa=4967-c1c4
With oil prices significantly below those levels, a further drop in drilling is likely, said Mark Scholz, president of CAODC, which represents Canada’s drilling and service rig contractors.
“The thing that has caught people off guard is how fast this has happened,” he said. “It’s unprecedented. And unfortunately I don’t see the upside of this going nearly as fast. The longer we’re in this, the longer it’s going to take to get out of it.”
Chief among drilling companies’ concerns is the loss of rig hands, which before the downturn were hard to find. The slowdown is expected to result in at least 23,000 people losing their jobs among those working directly and indirectly on rigs.
The numbers don’t include layoffs in other parts of the energy sector, from oil and gas companies to those who provide other services to the industry.
The States are going to eventually be hooped with the Chinese starting up the new (worldbank) for infrastructure loans…
Something like 38 Countries on board, the UK being one of them.
Countries sick of the US petro dollar scim job.
My prediction sticks.
Starting around this Oct the great USOfA’s economy begins it’s death spiral.
Fini
Canadian home owners should forget about fixed rates for at least another 10 to 15 years.Just look at Japan and you will see the future for Canadians.So in the next few years we’ll see the prime rate less than 1.5% and below 1 %.End of story,get used to it.
Fantasy. But believe what you wish. And good luck. — Garth
so by my calculations there are 115,000 chinese millionaires set to arrive in canada in next 5 years. interesting. nothing to do with real estate. carry on.
Remember that real estate doesn’t cost more today because incomes are higher, the economy’s on fire, inflation abounds, rich Chinese are invading or housing’s intrinsically more valuable.
It only costs what it does because rates are in the ditch. When five-year loans cost less than 2.5%, buyers can carry more debt for the same monthly payment. So up she goes.
——————
What else cost as much more as real estate because rates are in the ditch?
Stocks, ETFs?
Corporate profits are a much more significant factor. — Garth
Rich foreign Chinese don’t need to invade every house in YVR to prop up the value. Just keep buying maybe 10% of the most expensive houses will be enough to bring ‘confidence’ to the mass.
#2 Sheane Wallace
“US is not in such great shape to justify the euphoria. But they are in far better shape then us, the brainwashed.”
State by state, really.
I was just back in the Bay area. It seems pretty obvious that there is a bubble (a massive allocation of resources in the absence of compelling returns) in housing in some areas, and in ‘tech’. There was, if you look at charts of investments in US oil and gas fields, a bubble in energy exploration and extraction.
However, it is different than the previous bubbles. The same euphoria around housing is not present. The same euphoria around tech is not present. Maybe it will get there, but I don’t count on either boom continuing to a feverish pitch this time. I am just glad I work for a major ‘tech’ firm that has billions and billions in revenue, as opposed to one of the numerous startups dotting the Bay area.
US job stuff is pathetic no matter how anyone fluffs it; but, Garth’s revelations yesterday…….. NOW that is serious bite….
“Meanwhile there’s some tough news for the virgins from CMHC. Anyone putting down less than 10% of the price of a property (which includes most first-timers) will soon be paying a higher premium for mortgage insurance – about 15% more. The increase comes into effect this summer.”
That is no poodlette move and may go down as the pit-bull-leg-locking-garden-furniture-shredding-getting-serious-dog-house-buying-moment. Meaning, house financing just got monkey by hammered by a pack of poodles with attitude… End game is on.
Even better CMHC can pretend-blame the US for the up coming housing sledge event.
I listed my home in Richmond Hill last week. 4 days, 50 showings and three offers (my agent thought three offers were a little disappointing however that was caused by absence of offers from any Chinese buyers because the entry door and stairs being in the straight line did not comply with Feng Shui). It sold 90K over asking. I was wondering what a euphoria. Seven years ago the same house was 400K less and would take over a month to find a buyer. Part of me feels relieved in selling the top of the cycle (I hope) however part of me is feeling a sellers’ remorse (call it social pressure) when everyone around asks where are you planning to buy. Guess what, I sold to rent for a while until market corrects, but people here think it is never going to happen. In the meanwhile, I am shopping for a beefy GIC (3% plus) or short term bond ETF (don’t want to get killed by raising rates) or Garth’s favourite balanced mutual fund, so I am ready to park my money come closing in June.
Speaking of balanced mutual fund, is there a risk the long term bond portion of the fund may get bitten by sudden rise in interest rate – a few economists including Robert Shiller are already talking about bond bubble.
#5 Retired Boomer – WI
The euphoria in WI that you are seeing is due only to tomorrow’s game in the NCAA March Madness.
Go Badgers!
Super Bowl and Final Four in one year. Bungalows should skyrocket.
“Irrelevant really. Who cares about interest rates when you are paying cash?”
No evidence of any meaningful amount of ‘cash’ coming to Canada to purchase RE. Leverage, however, is off the charts, particularly in places like Vancouver.
If it were truly a market characterized by cash, then leverage would be stable if not falling. Yet this is not happening.
As explained by Garth and others many times, there is no statistically relevant amount of investment in Canadian RE by foreigners, or even new immigrants with cash. I know it might make for good sales fodder, to claim that the “Chinese” are buying up Canada/Vancouver with cash, not credit, but it simply is not happening.
#6 Retired: “People have jobs, and they have money! How else can you explain a 60 minute wait for a table at the damn Texas Roadhouse, hardly a bastion of fine dining….”
****************
They have credit….that hasn’t yet been maxed out.
http://www.autonews.com/article/20140618/RETAIL/140619860/hyundai-kia-tops-j.d.-powers-initial-quality-study-for-1st-time
No question rates will go up in the south this year. A lot of doomers believe that the US economy is going to self destruct. Not a chance. They create their own money, which is the worlds reserve currency, and can carry on that scene almost indefinitely. If you don’t believe in it or like it the men in black will probably show up to reign their peace on you.
Best bet is to use them up. The US has some clear forces in place. Cheap oil, kick ass technology, very efficient just in time transport systems and the ability to leave cheap Chinese knocķ off counterfeit parts back on the mainland.
Some actual quality goods are being manufactured in previously shut down factories that are not only competitive in price but are high tech.in both the goods as well as the factories making them.
Take natural gas ship and truck motors for example there are some huge retrofit, new and used replacement projects going on. Just to name a few ways to capitalize on our southern neighbours.
“Canadian home owners should forget about fixed rates for at least another 10 to 15 years.Just look at Japan and you will see the future for Canadians.So in the next few years we’ll see the prime rate less than 1.5% and below 1 %.End of story,get used to it.”
I agree — that’s how its likely to play out. But if housing loses, say 5%/year for the next 10 years (ie: a -40% total), and rates are 1.5%/year, that’s still a pretty substantial annualized loss (ie: figure that net imputed rent yield is good for 3%, so that’s a net return of approximately -3.5%/annum).
Leverage/credit only helps the borrower if the asset purchased with the borrowing has a return greater than the cost of the borrowing. Which seems quite unlikely with housing going forward, and certainly has not been the case over the long term. I personally believe the BoC will have a big fight on its hands keeping policy rates low enough especially with the strong likelihood of a significantly strengthened CAD$ over the next 10-20 years.
#24 Daisy Mae
Bingo.
#27 Mark
strong likelihood of a significantly strengthened CAD$ over the next 10-20 years.
——————————-
Like the yen is strengthening now
We can never erase debt by deflating, we need to inflate or die.
Japan housing declined 70 % from top despite low rates.
If BOC maintains 0 interest rates in the next few years Ca dollar will be obliterated.
Ca dollar at 0.35-0.40 max. Imagine bread at $ 10, coffee at 6.
Today’s BLS jobs report sports a U-6 number which reads 10.9%
Jobs data is a lagging indicator, subject to revision (and methodological criticism).
US macro ec data, of late, has been consistently poor.
It is not a given that currently the Fed’s only motivation in raising rates is GDP or inflation considerations. [The SPX is dangerously overdue for a correction. (Not to mention, for example, that Spain bond yields are at a seven hundred year low.)]
I wouldn’t be too sure about anything right now.
[Is that Harper’s hair or is it a toupe?]
[As for normal people appropriately celebrating Easter and chasing chicks (or Chucks) I accidentally converted to Hinduism while researching a trip to India.]
Rates will rise so slowly that by 2020 we may be one whole percent higher.
72% higher sales of Sfh in 604.
Explosive strength in 604 beyond bob rennies wildest dreams. Buy dirt not condo.
“Like the yen is strengthening now”
The Yen strengthened from 250 Yen/USD$ (~1987) to a peak of roughly 75 Yen/USD$ on account of Japanese deflation and the long-term robustness of Japan’s export oriented economy.
http://bit.ly/1NHLa7p
Of course, the trend of Yen strengthening has largely run its course, but as you can see, such a cycle was able to persist in Japan, in the aftermath of the collapse of their RE/stock bubble for almost 30 years.
“If BOC maintains 0 interest rates in the next few years Ca dollar will be obliterated.”
Again, disagree. Look at Japan. Low rates were sustainable because of their robust export capability, and domestic deflation. A similar set of factors in place in contemporary Canada. Canada’s long-term structural trade surplus will be to a significant long-term benefit of the currency, much like Japan.
In the short term, the cyclicality of the resource sector is masking this, but even a sense of a return to normal long-term resource prices will burn those speculators out.
40 to 50 cents CAD$, not a chance!
What you are saying is that the high US dollar will make the world beat a path to their door to buy expensive goods?
Germany does it so I guess it is possible for our neighbours. Let’s hope so.
#27 Mark
So in the next few years we’ll see the prime rate less than 1.5% and below 1 %.End of story,get used to it.”
—-
That would be awesome.
The play was to buy the house 15 years ago, pay it off by now and use the asset appreciation as a LOC at heavenly low prime to load up on stocks, ETF, write off interest.
Leverage heaven, all the way, if the entry timing was right.
#5 Chinese millionaires
A million $ isn’t what it used to be, but let’s talk $5M.
If they had $5M, why would they come here when so many other countries have so much more to offer?
I’m not sure that Canada has much to attract the truly wealthy.
Even those Canadians who do make it big as athletes, movie stars or entrepreneurs, soon turn their back on the country that supported them and they leave.
They come back for awards ceremonies etc. as, “Great Canadians,” but they probably haven’t paid income taxes here for years.
“While normal people were hunting bunnies and chasing chicks this Easter weekend,”
We talkin Freedom First or Smoking Man here?
#21 Zee:
“Speaking of balanced mutual fund, is there a risk the long term bond portion of the fund may get bitten by sudden rise in interest rate…”
Yes. Big time. Take a look at what happened to bonds in 1994 for reference. It can get ugly. On the flip side, there’s still money to be made in bonds if our yield curve turns Japanese, but I wouldn’t bank on that happening. The fixed income portion of my portfolio is all short term. The extra bit of yield you get for going long term right now just isn’t worth the risk.
Bill Gross was on Bloomberg today. He’s bullish on US treasuries. Low rates for a long time. Don’t be surprised if the US raises rates as little as 0.25% every year.
Houses will get more expensive where good jobs are, starting with Toronto. You can kick and scream, but that’s the way it is.
What else cost as much more as real estate because rates are in the ditch?
Stocks, ETFs?
Corporate profits are a much more significant factor. — Garth
————
And low interest rate has nothing to do with record corporate profits?
Cheap money affects all investment class, inflates prices without discrimination.
You just pick one inflated asset over the other. All of them will see correction… but that’s all right, as long as you don’t need to sell, it’s all paper gain, paper loss.
Using EXTREME MONETARY POLICY near zero neutral real rates has as of yet created huge gains in all the global bond markets and more so with Euro QE buying spree and in the equity markets in the states and in Canada in the housing sector….Is our Bank Governor Mr. Poloz our guy to navigate the cruise ship CANADA out of these low inflation; slow growth; big debt waters?
My eyes get misty when I think how TARGET is shuttering next week….it was the high point of my retail therapy weekly and now I have nothing. Kay I can go to Shoppers but it’s not as good and I hate the Bay (too stodgey) so now my retail life is curtailed but the upside is I will have no credit card debt. Also Marshalls used to be I could find real deals but now they have cottoned on to the fact there is no real competition up here so they have put the screws to us with big CANADIAN pricing on tacky last year’s junk castoffs from Warren, Michigan. I sent my hubby to buy yogourt and he came back from Fortino’s with a four pack of Greek at close to $4. for one ounce servings…we will be slaughtered with food inflation.
If the rates will go higher, the amortization will go to 40y. The houses will not go down because the government will not let something like this happen….
Look at AB… instead to cut the costs ( gov jobs, salaries) the provincials borrow money even if they don’t have the oil revenue to cover…
You are using flawed logic, either deliberate to fool the blog dogs or you truly fail to see reality of the housing market and that by the time interest rates do rise it will be such a long time that adrop in housing if any will be minor.
Starting to re assess my annual charity donations.
Apparently there’s been a breakthrough in MS treatment. Not the Zamboni open up arteries.
It cost 80k. Its not official yet. So my sons benefit package will not cover it for his wife while its in the experimental stage.
So we give these people millions of dollars a year to develop research for these treatments. Our generosity foots the bill for the research, once they have something that works.
Boom it’s now a profit center.
Humans are so stupid, looks like I’ll be writing a check on Monday.
He’s wife quit her job, left him, all she wanted to do was sleep all day..I hated her, spoke with the doctors today, and that behavior was caused by the illnesses.
Do I feel like an idiot now after blasting her folks few months ago.
I tore off the mothers head, all your daughters are divorced, you know why , cause they witnessed you on a daily basis emasculate your husband, look at him, he doesn’t say boo.
Your daughters have no consept of give and take. They just emulate you. Your psychopath and you messed up all your kids.
Shit, now I got to see them again. Thought this was over when I open my mouth.
the Mess in alberta is bigger than first thought. the last two premiers did look after their friends quite well. To date prentice is looking the other way.
http://www.cbc.ca/news/canada/edmonton/luanne-sirdiak-abruptly-leaves-alberta-motor-vehicle-industry-council-1.3020906
The U.S. rates can only go up, they cannot get any lower, but they will rise very slowly and maybe by a 1/10 and not the usual quarter point.
Amazing. — Garth
Well I went skiing today because my particular religion doesn’t demand strict holiday observance. Conditions were actually pretty good and crowds were light. But I still checked in with the Garthman when I got home so I suppose I’m aberrant. Might go again Sunday! Skiing is always better on the days the Catholics have somewhere else they have to be. Not that I have anything against Catholics, it’s crowds I don’t like.
“The play was to buy the house 15 years ago, pay it off by now and use the asset appreciation as a LOC at heavenly low prime to load up on stocks, ETF, write off interest.”
Indeed. But most who bought houses 15 years ago didn’t pay them off. They used the appreciation to go into even more debt to buy rapidly depreciating cars and other consumer trinkets. Now they face the spectre of having to repay such debt in an environment of stagnant wages, rising risk premia on the debt, and falling house prices.
The future belongs to people with clean balance sheets who are able to, as you say, buy into the balanced portfolios. An equity risk premium is likely to appear in Canada as a reversal of its conspicuous absence over the past 35 years. With such low interest rates, its practically a mathematical certainty, especially with equities priced at below long-term average P/E, P/B, etc., that a strong equity risk premium will appear for the next 35 years.
#22 Washed Up Lawyer
#24 Daisy Mae
Your probably right on both counts.
That would also explain the extraordinary traffic today at the liquor store.
Friends in metal job shops have been working long hours though…. Frac Sand Co’s using this slower period to get deferred maint. done NOW before demands revive…not to worry they will…IF you have a working crystal ball you’ll already know WHEN that is going to happen.
By the way, anyone know the odds for the KY-WI game?
Good time to invade WI tomorrow night, -for cow tipping of course. Most of the state will be crocked and watching the Badgers.
#44 Smoking Man
—–
We all do damage. At least you can write a fat check to make it righter. (I know… there is no such word, there is no such thing… but you try.)
#33 Mark
————————————
Japan had huge trade surplus for decades, savings, manufacturing, their debt was internal so they could sustain zero rates.
We have NONE of these.
There should be someone to subsidise unproductive gains and the savers here are non-existent.
You theory is completely flawed and we will see the outcome pretty soon manifested in huge inflation.
If the way to riches was to pile huge debt and then keep interest rates at 0 everyone would be doing it. Germany and China are not.
Goldman Sachs starting to pump the FED rate hike being a bad idea. What a surprise.
We are rapidly approaching the end game of debt.
Any deflation will take down the financial system.
It won’t be allowed. So prepare accordingly for as I said and repeat: 10 $ bread, 6 $ coffee. Loonie in the sink.
If the absolutely horrid industrial data, the skyrocketing $US dollar, or collapsing corporate outlooks didn’t slam the nail into the thickest of “analysts” that US interest rates have a snowball’s chance in Hell of rising this year – then this employment data won’t do it either. Amazing how the guy in his underwear trading from home can figure it out, yet these clowns that get paid for a living professionally to do just that either have no clue or buy into the Fed’s rhetoric. What wasn’t mentioned on the blog today were the huge downside revisions to employment numbers from previous months, oops. Anyone trade bond markets? See any hints of a rate increase there? Nope. Nadda. In fact, they are going NEGATIVE now through parts of Euro-land. Don’t get me wrong – this ain’t good. This only pushes the diving board higher for when the global economy decides to take that leap face first onto the concrete below. The US will be heading into another recession over the next 12 months, book it.
Are you actually in your underwear? — Garth
I dont get why buying a house is considered expensive .. 700k 2600 sqft..good view and location in alberta.. rent will cost 3000 a month at least.. lived here for 3 years.. so thats almost 100k of rent .. thats pretty good return since rent you pay with taxed income
#16
What’s your source?
The Yen strengthened from 250 Yen/USD$ (~1987) to a peak of roughly 75 Yen/USD$ on account of Japanese deflation
——————————–
since most of the yen appreciation happened during the bubble INFLATING, not deflating (and with and rates moving up) you need to take a closer look at your conclusions.
1985
Japanese yen strengthened from 236.91¥/U$ (September) to 202.75¥/U$ (December).[7]
1986
Japanese yen touched a new high against the U$ (154.11¥/U$) in August before settling down at 162.13¥/U$ in December.
1987 Japanese yen continued to strengthened against U$, touched a new high 128.25¥/U$
1988 Japanese yen strengthened to 123.16¥/U$ by November before weakening slightly to 123.63¥/U$ in December.[7]
1989Japanese Yen fell against U$, falling as low as 145.06¥/U$ by September.[7]
1990Japanese yen weakened to as low as 158.50¥/U$ by April but began to strengthen in the second half of 1990; it touched as high 129.01¥/U$ by November.[7]
1991 Japanese yen resumed the upward trend against U$, strengthening back to 129.07¥/U$ by December.[7]
#7 Washed Up Lawyer on 04.03.15 at 6:17 pm…
If you want an answer, you better call Saul.
Minelli Vermillion, that was the voice typer,
I’ll try the thumb it..mellenials, the link was me and my wife’s wedding song..
Love , its all that counts. Screw fake statas . enjoy
The Grass Roots – Let’s Live For Today – [STEREO]:
https://youtu.be/G5NtzB-voZo
32 Mark
“The Yen strengthened from 250 Yen/USD$ (~1987) to a peak of roughly 75 Yen/USD$ on account of Japanese deflation and the long-term robustness of ‘Japan’s export oriented economy.”
The bulk of that strengthening took place between 1987 and 1995, when Japanese CPI rose from 88 to 102. No deflation there. From 1995 to the present it’s weakened significantly, during a period where the CPI basically stayed the same. Yes, the Yen had a dead-cat bounce to 75.77 in 2012 but that was short lived. The average USDJPY rate over the last 20 years is 107.23, significantly higher than 81.13 low it hit in 1995.
#39 Cookie — “Bill Gross was on Bloomberg today. He’s bullish on US treasuries. Low rates for a long time.”
Yeah, but read his latest investment outlook:
https://www.janus.com/bill-gross-investment-outlook
Here’s the bottom line:
“Cheap leverage is an alpha generating strategy as long as short rates stay low and mimic the 0% real new neutral. Of course if an investor borrows short term to invest longer and riskier, the potential alpha necessarily demands choosing the correct assets to lever. That is not easy these days since almost all assets are artificially priced. The challenge is to purchase the ones that might remain artificially priced over one’s investment horizon. For me, credit spreads are too tight and therefore expensive. Duration is more neutral but there is little to be gained from it in the U.S., Euroland, and the UK unless the global economy inches towards recession. The most attractive opportunity to me rests with the notion that Draghi’s 18 month QE, which roughly purchases 200% of sovereign net new issuance during that time, will keep yields low in Germany and therefore anchor U.S. Treasuries and UK Gilts in the process. I would not buy these clearly overvalued assets but sell “volatility” around them, such that much higher returns can be captured if say the German 10 year Bund at 20 basis points doesn’t move to –.05% or up to .50% over three months’ time. Draghi’s QE should place a high probability on staying within that range, much like Kentucky has a high probability of winning March Madness in early April. We shall see.”
As much as you’ve gotta respect Mr. Gross, collecting a small premium to bear a huge loss on an unlikely event is a strategy I hate. It has blown up so many lesser investors. It’s dated April 1, so maybe he’s pulling a funny?
As per Ross Kay’s numbers from the post the other day. Were the BoC to slowly raise rates, to follow the US rate increases beginning later this year, if every 1/4 point increase has the opposite effect ($5000 increase/decrease in valuation), as it does when lowering it, just raising the lending rate to 2% would probably take close to 10% off of the value of the current median home valuation.
Not including any effect of market sentiment, or the emotions involved in RE purchases.
Historically 2% is still on the low side for lending rates.
Housing prices stable in Calgary in March
In Calgary, activity was down by 30 per cent in March, compared to March 2014. There are nearly twice as many homes on the market as there were a year ago. The average sale price was off just two per cent to $475,000.
-2%=stable?
http://www.cbc.ca/news/business/housing-prices-up-in-edmonton-stable-in-calgary-in-march-1.3019218
#49 Retired Boomer – WI
“Good time to invade WI tomorrow night.”
***********************************
We will take our direction from Field Marshall Garth. My unit is poised at Coutts/Sweetgrass with a focus on Butte, Montana.
Lillooett has gone AWOL.
A fellow Nectonite, the true father of modern rock. Everyone copyed him
Lead Belly – Where Did You Sleep Last Night? (1944) (TRUE STEREO): https://youtu.be/a6yCEsDsGx4
“The bulk of that strengthening took place between 1987 and 1995, when Japanese CPI rose from 88 to 102”
That’s less than 2%/annum. Not a big deal. The strengthening continued until 2011 however, despite ZIRP. Therefore, at least in the context of Japan, destroying the whole idea that low rates ostensibly to fight domestic deflation and falling domestic asset prices should lead to massive currency depreciation. It simply didn’t happen in Japan, and won’t happen in Canada over the long term as Canada’s rates remain structurally very low in response to Canadian asset deflation.
“since most of the yen appreciation happened during the bubble INFLATING, not deflating (and with and rates moving up) you need to take a closer look at your conclusions.”
Careful there. A smaller Yen number on that chart (ie: 75 Yen/dollar) means a stronger Yen, as you need fewer Yen to buy a USD$.
Peak of the Japanese stock, domestic investment, and RE bubble was ~1988/1989. As the RE/stock/investment bubble deflated, the currency surged, eventually tripling in value against the USD$ around 25 years later despite very low interest rates. In other words, what the Yen didn’t pay in interest on Yen deposits, was made up for in currency appreciation against the USD$ which paid fairly high interest, but suffered depreciation.
“As per Ross Kay’s numbers from the post the other day. Were the BoC to slowly raise rates, to follow the US rate increases beginning later this year, if every 1/4 point increase has the opposite effect ($5000 increase/decrease in valuation), as it does when lowering it, just raising the lending rate to 2% would probably take close to 10% off of the value of the current median home valuation.”
With housing already deflating along with the rest of the Canadian economy, just why would the BoC raise rates? Even Poloz has finally acknowledged that the output gap is wide enough to drive a bus through, and it is widely believed that unemployment is a lot worse than the mere “headline” number might imply.
And this is all before Canada has gone through a meaningful amount of house price declines (only minor to date). Imagine how much worse it will become in the coming quarters/years as momentum to the downside continues to accelerate!
The problem with Ross Kay’s comments are that he believes the Realtor’s easily debunked claims that house prices are still rising in Canada. Which couldn’t be anything further from the truth. The RE market in Canada has clearly hit a state of demand exhaustion, and even if rates were literally lowered another few percent, more demand would not magically appear. The phrase “pushing on a string” comes to mind in terms of central bank policy which will be unable to sustainably reflate the housing bubble as it continues to pop, but may very well inflate some other bubble.
#54 groovin123 on 04.03.15 at 9:31 pm
If the absolutely horrid industrial data, the skyrocketing $US dollar, or collapsing corporate outlooks didn’t slam the nail into the thickest of “analysts” that US interest rates have a snowball’s chance in Hell of rising this year – then this employment data won’t do it either. Amazing how the guy in his underwear trading from home can figure it out, yet these clowns that get paid for a living professionally to do just that either have no clue or buy into the Fed’s rhetoric. What wasn’t mentioned on the blog today were the huge downside revisions to employment numbers from previous months, oops. Anyone trade bond markets? See any hints of a rate increase there? Nope. Nadda. In fact, they are going NEGATIVE now through parts of Euro-land. Don’t get me wrong – this ain’t good. This only pushes the diving board higher for when the global economy decides to take that leap face first onto the concrete below. The US will be heading into another recession over the next 12 months, book it.
Are you actually in your underwear? — Garth
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Full camo gear all the way
Keep slathering those savers until there’s none left.
Would please anyone tell me why this isn’t true.
This is one miserable place to be if you’re not a public sector blood-sucker or rich.
Oh canada……………………..
There are about 15,000 equities on the North American stock markets. You only need about 15 of them to produce an excellent portfolio. Earnings are always the key. Buy good stocks in good current economic trends with good earnings growth and buy the growth at value prices. The really good stuff is recognized buy all the buyers in the market, not just the day traders, the swing traders, the technical traders, and/or the value investors. Measure your stock’s performance by using regression trend channels over the past year, and buy the dips (VIX > 25).Volatility is not the risk, opportunity costs of a sub performing portfolio is the risk.
Dear blog-people.
Can really anyone blame those zombie hipsters or millennials for thinking those 400k box in the sky condos is a good investment.
I was grocery shopping today and prices are eye-popping to say it politely.
These people don’t think twice about spending $10 for a sandwich and a pop.
400k condo….I’ll take two before they double in price as my sandwich did, must be their way of thinking.
The really disturbing thing is that they may actually be right.
RE: #54 groovin123 on 04.03.15 at 9:31 pm
Amazing how the guy in his underwear trading from home can figure it out, yet these clowns that get paid for a living……
Are you actually in your underwear? — Garth
It’s what he tells the wife went she catches him in his underwear in front of the computer. “Honest honey, I’m just trying to make us some money!”
#32 Mark on 04.03.15 at 8:12 pm
“Like the yen is strengthening now”
The Yen strengthened from 250 Yen/USD$ (~1987) to a peak of roughly 75 Yen/USD$ on account of Japanese deflation and the long-term robustness of Japan’s export oriented economy. ”
This is just nonsense…the rise of the yen and all of the other consequences such as asset bubbles, stagnation were precipitate by the Plaza Accord of 1985…
http://en.wikipedia.org/wiki/Plaza_Accord
#65 Mark
“Therefore, at least in the context of Japan, destroying the whole idea that low rates ostensibly to fight domestic deflation and falling domestic asset prices should lead to massive currency depreciation.”
I actually agree with this. The interest rate differential is a factor that affects any currency pair, but it is only one factor among many. I don’t believe the International Fisher Effect theory – that the currency of the lower-rate country will appreciate against the higher-rate country over time, but I don’t believe its opposite either. There are simply too many other factors to consider.
One of which, as you mentioned in the case of Japan, is the strength of a country’s exports. Well, in Canada’s case, oil represents 27% of our exports. Not to mention all the other commodities that we export which are also in the toilet. The loonie started its drop long before the Poloz rate cut, and it will continue to weaken as long as oil stays at these prices or goes lower. Just as the Aussie dollar, which also got slaughtered over the past year,
won’t recover until the price of iron ore recovers. Interest rates have very little to do with it.
If there were no border between US/Canada (think EU style), how many Canadians would actually choose to live in the Canadian tundra…..not many I am guessing….just shows that real estate has no intrinsic worth, just what people are willing/able to pay for….in this case spurred by low interest rates
From yesterday:
#132 Godth; I’d wondered about that; despite my smart-ass comment it did ring a bell, just didn’t think it was that (1725) old!
and…
Congratulations Mr. Wallace on a well-earned (& planned) retirement! As much as I’d like to join you, I either didn’t plan very well or just like what I do too much…harhar. Or simply take too many chances…
We’re the same age, so it’s instructive from my point of view; even if I did jump back into a mid-30’s mindset five years ago! Nothing ventured, nothing gained; I suppose.
I’m hoping (& am working toward over the next two years) NOT being on the ‘Freedom 95’ or Lotto 649 retirement plan…
Incidentally, my sister is a couple years younger than us, & will be able to retire next year due to that same ‘stickwithit-ness’
After reading todays column, I’m wondering if stupid weather will cause any more unemployment? Seasonal or otherwise, looks like the politicians have another crutch to lean on…
GT re #54 groovin123: “Are you actually in your underwear?”
The legendary Joe Kennedy Sr, father of a president and senators, routinely worked in his study, with the door locked, completely naked. The household was well aware of this, and governed itself accordingly.
(Let that be a lesson of sorts to both #54 and GT.)
– which for no reason at all reminds me of the legendary Jesse Livermore. He was the fifth husband of a lady whose four previous husbands had committed suicide. (No, I am not making this up, nobody could.) Jesse shot himself in the head.
As a matter of fact, biographies of almost all legendary traders have nothing to do with safe riskless returns, or conventional behaviour.
I’m in a mangy food-stained cat-haired bathrobe.
#65 Smoking Man
Respectfully DISAGREE…… Try Nirvana’s version.
I’ve seen the endgame. We’ve been set up.
Our future will be a la Mexico 1994 Peso Crisis. Look it up kiddies. Get used to working for peanuts, more so.
Garth,
You are blind to what is happening in the US economy. The indicators are there but your conformation bias is preventing you from seeing them. Stick to blogging on Canadian housing, you clearly don’t know what your speaking g of in America.
“One of which, as you mentioned in the case of Japan, is the strength of a country’s exports. Well, in Canada’s case, oil represents 27% of our exports. Not to mention all the other commodities that we export which are also in the toilet. The loonie started its drop long before the Poloz rate cut, and it will continue to weaken as long as oil stays at these prices or goes lower. Just as the Aussie dollar, which also got slaughtered over the past year,
won’t recover until the price of iron ore recovers. Interest rates have very little to do with it.”
Agree completely, there’s an element of cyclicality found in Canada’s resource exports which is overlaid upon everything — causing speculators to put on some pretty extreme trades in favour of, or against the CAD$, whatever the case may be. Japan’s exports do not have anywhere near the level of volatility, although they seem to be in a long-term state of decline along with the demographic situation in Japan.
I guess the point I’m trying to argue here is that if the BoC has to run long-term low interest rate policy, it should not be taken for granted that the CAD$ will crash as some would suggest. In the short term, it may appear as a simple binary relationship, “low rates = low CAD$”, but it is far more complex than that.
“This is just nonsense…the rise of the yen and all of the other consequences such as asset bubbles, stagnation were precipitate by the Plaza Accord of 1985…”
If the Plaza Accord were somehow unnatural and not based on the intrinsic relative productivity differences between the various nations, then speculators would have traded against the central banks and earned outsized arbitrage profits while defeating the effects of any policy action.
I’m not convinced that any sort of central bank intervention is truly effective for any period other than the short term (just ask John Crow how well currency intervention worked in the 1980s for the BoC!!). But your argument certainly has some validity, although whether it can define and be held responsible for a 25-year trend towards a higher JPY in what effectively was ZIRP for much of the interval is entirely open to question.
65 SM – never thought i would say this.
Thanks.
#37 tunanut
Any man living in Freedom only has 2 things to be wary of. 1) making sure you never give a woman your house key, and 2) keeping a ring off of your finger. Women are not blind. They can see a man who lives life Freedom First. I don’t chase, I choose. Always.
About today’s Post. Got me thinking. Buying an asset at the peak of a bubble or close to it is not smart, ever. Worse, buying an asset at the peak of a bubble or close to it using leverage is really really really not smart, ever.
The US will be heading into another recession over the next 12 months, book it.
Exactly, especially if the Fed goes so far as to bring the yield curve close to inversion. The only way the US economy can really grow is with a relatively steep yield curve.
How do they get a steep yield curve? Either by significant NIRP, or through the appearance of inflation that causes a significant bond market dislocation. NIRP creates problems of confidence (ie: lenders will just hoard currency and won’t make loans at negative rates of interest!). And a bond market dislocation damages confidence as well in a profound way. Either way, the outcome is not very palatable for owners of traditional interest rate sensitive assets.
Let’s just say, I’m glad that I own some assets which I believe are inversely correlated to the bond market and to investor confidence. Everyone should.
Too cheap?
U.S. stocks are about to get cheaper, a lot cheaper come Monday.
Here, look at the futures yourself:
DOW down 165 points just before the futures market was halted. As you can see from the chart, it was an almost vertical line straight down:
http://www.marketwatch.com/investing/future/ymm5?mod=MW_story_quote
My guess is that the DOW will open 300 to 400 points lower on Monday, followed by another 100 to 200 points on the downside before the day is over. OUCH !
That will be a drop of about 3% for the day, in just one day. Jikes, sure hope I’m wrong about that, hope Garth is right and that stocks will go up instead of crashing down.
You can be sure the ruling incumbent party in the upcoming election has an invisible hand over at CMHC and at BOC during rate setting time….
Just until the election.
Then reality will set in.
Watch for possible moderate to severe correction to occur.
#69 Our government is a prostitute on 04.03.15 at 10:42 pm
Keep slathering those savers until there’s none left.
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It is simply theft from the weakest of our society. The elderly who are getting 2% in their GIC’s.
Our good government must be suitably proud. Like Nelson the bully in the “Simpsons” They love to laugh at other peoples misfortunes.
Peak of the Japanese stock, domestic investment, and RE bubble was ~1988/1989
……………
The Japanese asset price bubble (バブル景気, baburu keiki, lit. “bubble economy”) was an economic bubble in Japan from 1986 to 1991 in which real estate and …..
See that the yen had already shot to 120s usd before the bubble popped. Tokyo was still booming in early 91, I was living and working in Tokyo/yokohama then.
No 50cent loon, nor 1.50 though.
Immigration anyone?
Meanwhile, the population estimate remains grim, indicating that the total Japanese population will shrink to 80 million by 2060, with one adult at productive age having to bear almost one elderly’s social welfare cost.
5 mil Westside sfh, 2.5 eastside, is next stop.
For the love of God, stop posting that the Canadian dollar is rising.
Look at the Fx stats. It’s down 20%.
Im amazed that anyone could be soooo wrong.
Automotive thread drift:
If you wish to continue living in a world where Mercedes is a byword for quality and reliability you must never do three things:
-drive a Mercedes
-try to maintain a Mercedes
-and most importantly never NEVER drive or look closely at a Hyundai Genesis
Garth, do you really believe these stories about the weather? It sounds too much like those “dog ate my homework” stories from the flunky at school. I get the bit about not as many people eating in restaurants but this plays into the argument about America’s miracle recovery being more about fast food jobs than proper employment. I’ll certainly take their job reports over Canada’s these days.
#44 Smoking Man
Funny how that goes with medical research becoming a profit center. When the profits do start rolling in a good portion goes towards protecting the patent which was so generously funded by the taxpayers.
Hold off with any apologies to the family until the dust settles. Our first instinct is usually correct and your daughter in law might be everything you said she is and might remain so after she is cured. Mom’s batting 1000 in the bad child rearing department so don’t feel bad for calling her on it.
#33 Mark on 04.03.15 at 8:15 pm
“If BOC maintains 0 interest rates in the next few years Ca dollar will be obliterated.”
Again, disagree. Look at Japan. Low rates were sustainable because of their robust export capability, and domestic deflation.
___________________________________________
First time in a very long time that I have even bothered to read your posts. They are mostly made up crap as is this explanation of why the Japanese have been able to keep rates low. I guess you just make it up. Rates have been low because Japanese debt is funded domestically. There are very few non-Japanese entities in the Japanese bond market, thus no pressure for higher yields. This is pretty well common knowledge. And, no, the same situation does not exist in the Canadian bond market. Go stand in the corner fool.
The CAD will continue to weaken against the USD because the Canadian economy sucks, new grads can’t find work and all our export commodities are in the toilet.
The HGTV house horniness continues.
http://www.hgtv.ca/photos/gallery/?gid=c0aafa81adf7632de7cf6143fbfa8b88#!/15
US Q1 GDP will be sub 2%; equities will continue to rally as soon as the markets realize there will be no rate hike in 2015, possibly until the second half of 2016. US 10 year at 1.5% by June of this year.
A rate increase in 2015 is simply wishful thinking. Sorry, not going to happen. Just my opinion of course.
“It was here that Goldman clearly stated two days ahead of today’s non-farm payroll number, that the US economy “may not be ready yet”, after nearly a decade of zero interest rates, for a rate hike.”
This might explain that sudden Poloz rate drop move in January. And, now Poloz, CMHC division, gets the flashing red signal and suddenly pushes its mortgage approval threshold up by 100%, from a 5% down to a 10% down payment. Poodlenomics with teeth!
The big signal for millennials and wrinklies both is that Millennials can’t afford the housing debt and wrinklies can’t expect higher interest rates on their musty, cash stash.
We know of several Ws cashing out of stuff (including houses) and passing chunks of cash to their Ms kiddies to lock into bricks and granite in the GTA watershed. And with that 10% CMHC up-tick this trend might even accelerate in the short term.
We’re yukered!! Fake. Finesse.
Last!
#52 Joe2.0 on 04.03.15 at 9:22 pm
Goldman Sachs starting to pump the FED rate hike being a bad idea. What a surprise.
Link??????
Some truly startling news has come out about global warming effects, and yet another nail in the coffin for Alberta’s out-of-touch-with-reality tar sands mentality.
Rapid melting of the polar ice is resulting in ocean currents already being reduced by up to 25%. Within as little as a couple of decades (!!!!!!!!!!!!!!!) major currents affecting the northern hemisphere may be effectively stopped.
This means death of our fisheries, and conditions similar to 12,000 years ago in North America. Imagine the last two winters, except everywhere is like the Maritimes and NWT, winter extending from September to June.
What about crops? What about real estate values – who would want to hoard property in 403/416/905/604 ?
See reports this last two weeks and on radio/tv today:
http://www.cbc.ca
http://www.ecowatch.com
http://www.nature.com
(Journal – Nature Climate Change)
The usual deniers are out, of course, spouting more nonsense than ever.
We are not talking centuries anymore, folks.
Not even about “the grandkids”.
Now it’s about your kids, and YOU, in the time you have left on this earth.
Maybe by the 2020s. Or 2030s.
In less time than when the pathetic Leafs last won a Cup.
Probably in less time than when the pathetic Oilers last won a Cup.
The Paris summit later this year will wipe out Alberta, and a great deal of Canada’s economy over-dependent on oil and real estate.
Global warming = death of the oil sands, frozen north, drought elsewhere, fish and food shortages, major conflicts over all of the above.
Coming to a subdivision near you, very soon.
Off-topic…
POINTS vs CASH savings on a spot
Yesterday I was in Buffalo at some grocery store buying some groceries, so we can have bbq at my uncle house shortly after. So long story short bill was 132.19$, girl at a register asked me for my lets call it savings card, I sad I don’t have it, and lady behind us offered us to use hers card, so we did. Total savings was 26.75 close to 20%.
Earlier I was looking at a receipt and it shows that that lady on her savings card saved over 600$ ytd.
Imagine that!
Now lets compare that to LOYALTY points, bill 161.30$, point earned 2600,
1000 points = 1$, total savings 2.6$ around 1.5%…
not so long time ago, phones were stupid, and people were smarter…
….”With housing prices across Canada seemingly on the constant rise, many Canadians feel left out of the “Canadian Dream” of owning their own home”….
http://www.rentseeker.ca/blog/index.php/the-salary-you-need-to-buy-a-home-in-cities-across-canada/1829
“Canadian dream”…How marketing can be strong!A “dream or a trap”?
As a dream, I would prefer to do a world tour then owning my salary to the banker!
#89 @Mark
For the love of God, stop posting that the Canadian dollar is rising.
Look at the Fx stats. It’s down 20%.
Im amazed that anyone could be soooo wrong.
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He’s not saying it is rising, but rather has the potential to. Big difference
I have been in the maufacturing and construction game for 20 years. I have worked in 3 provinces and a territory and a month of bad weather simply means that a few people will be late for work a few days. If there is demand on the construction or manufaturing side the snow will get moved to get or keep the machines turning and earning. There are plenty of abled body Americans who can move snow
Many people are still very delusional about the reality of the situation we all face here in North America
Remember what they were training for on that fall day that changed everything 13 plus years ago?
Coincidence?
Well there’s 3 months of training coming up in Southern US this summer
Garth, have you had a conversation with anyone in the big 5 regarding foreign real estaste purchases ? Check to see the risk levels, pretty sure none have made meaningful policy adjustments limiting overall exposure, in fact just the opposite.
Think of a boxing ring, on one side are the market risk people who run fancy models and get paid to worry, on the other side are the bean counters who focus on the bottom line (profits).
In the financial world lower sales volumes are hidden by the onward march of dollars sold. In such an environment the worry worts don’t stand a chance, especially when those who paid for the fight stand to gain if the bean counters win.
# 90
What’s wrong with a Hyundai Genesis? Me like them.
“You’ll sure need that cash, come 2020”.
Is that not supposed to be the peak year that boomers ride off into the retirement sunset? Sage advice for when about one third of the population peaks at exiting the workforce…
Out of curiosity, what is the data on how much Canadians actually owe on mortgages and how has that changed over the years? Although new home prices might be excessive in some regions, I think the actual number of people who would be in real trouble due to a slow and gentle increase in rates (what we will eventually get) will be minimal. Any real data?? Also, the Canadian economy will not drop off a cliff unless the US does – if that happens the markets are tanking as well. Diversification and living within your means folks, that’s really all you need to know.
The number of people ‘in trouble’ from rate increases is not the real issue. Rather it is the commensurate slow decline in real estate values that will have a major impact of those fools who have a one-asset financial strategy. — Garth
@Joe 2.0 #14
Canada is unfortunately, noticeably absent from the Asian Infrastructure Investment Bank (AIIB) initiative.
“The issue that has drawn intense scrutiny from the international press in recent weeks has been driven by U.S. resistance to the very existence of the bank, as was evident in the public rebuke to British Prime Minister David Cameron following his announcement that the U.K. would become a founding member.
Twenty countries from Asia and the Middle East signed up to be founding members in late 2014; India is the second-largest shareholder. South Korea, and Europeans including the U.K., Germany and France, followed in late March. As founding members they will participate in shaping the bank’s governance and operations.
The AIIB is a welcome Chinese initiative, in line with American calls for China to become a ‘responsible stakeholder’ in the international system. The AIIB will become a multilateral development bank that finances programs addressing huge infrastructure deficits in Asia. Myanmar, Cambodia and Laos are just of few of countries emerging from years of economic and political isolation to join the region’s economy. Connecting them to each other and their larger neighbors, including China and India, requires major investments to create modern transportation corridors and other infrastructure. Development is also essential to a shared vision of integration of the region’s economies as an engine of global growth.”
Source: http://www.theglobeandmail.com/globe-debate/why-canada-should-join-the-asian-infrastructure-bank/article23732853/
Re. Yesterday’s column. I too have a gossamar sheath!
I’m on the Least Coast this week. At least AC didn’t ditch me at the Fogport here.
#87 NEVER GIVE UP — “It is simply theft from the weakest of our society. The elderly who are getting 2% in their GIC’s.”
Maybe they shouldn’t be managing their own money. The big pension plans are still turning in annual returns in the high single digits or higher. There’s plenty of Canadian dividend stocks paying 3-4% which grows regularly and is taxed advantaged.
When did seniors lose their bottle, anyway? Income from stocks and rents have been respectable for hundreds of years, yet there’s a new attitude that old rich people are ENTITLED to decent returns on government guaranteed debt?
Maybe it’s a touch of money illusion. I’ve got an old receipt for an 89 day GIC that I use as a bookmark. 14 1/2%. In 1981. The Bank of Canada’s inflation calculator [which is probably lying! — ed.] says inflation was running at 11.4%. Would today’s seniors have been happy or sad at that state of affairs?
Goldman Sachs is saying they cannot support rate hikes at this time…………..and what the banksters want, the banksters get.
What you are seeing south of the border is the impact of oil. While many predicted this would only be a small impact, the reality is it effects way more than most understand.
for starters, the oil industry employees are among the highest income earners in all industries. They also have the most spending power. This is now being removed. And its not just those in the industry who lost the job, its the ones still in the industry who are going to hold back on the new TV, Truck, SUV, boat or dish washer.
And for those who are trying to box the oil industry into a small percentage you are flat out wrong.
Example? All the railroads are laying off now. Why? Oil
Steel. US Steel, Nucor, Sumitomo the list goes on. Laying off
Mines? Laying off-Iron ore
All of this is tied to oil. The problem is the average person has no clue how deep and far the reach if the industry is.
So hear on out the numbers will continue the revisions down. Next month when the jobs picture becomes worse, weather will no longer be the excuse. The true facts will come out.
Rates in the USA will be on hold and QE4 will soon be on the table.
The benefits of cheap energy far outweigh the negative job prospects in the US, where the O&G industry is a minor employer. — Garth
Would this work and make sense?
1) borrow cheap (HELOC, etc.) to invest in non-registered investment account, buy balanced portfilio of ETFs, etc. to the tune of the max TFSA contribution limit
2) hold on to it for a year, fingers crossed market does not correct
3) deduct borrowed money interest from income tax
4) liquidate the account – pay tax on cap. gain, etc.
5) invest back the money into TFSA
6) continue yearly max contribution, enjoy tax free growth moving forward
The benefits of cheap energy far outweigh the negative job prospects in the US, where the O&G industry is a minor employer. — Garth
There has been zero beneficial evidence of this theory showing up in the economy.
Zero.
That’s funny. Check out consumer confidence, or new home purchases. — Garth
Garth, this is where the average public is misguided. Are these jobs listed as O&G? No.
Two things causing this. Oil and the USDX.
_____________________________________–
United States Steel Corp announced it would be idling operations at the Granite City, Illinois, plant. And while it’s expected to be temporary, more than 2,000 workers will be laid off beginning May 28, according to the Chicago Tribune. It’s not known right now how long the layoffs will last.
It’s all part of US Steel’s plan to consolidate its North American flat-rolled steel operations, as the industry deals with falling prices, slowing demand and competition from other places like China. The industry has also been hit hard by falling oil prices that have drillers holding off on buying new equipment.
Ah, funny how winter comes every year but fail to predict the affects. Like the 0% GDP for Q1.
85 Waterloo Resident:
Too cheap?
U.S. stocks are about to get cheaper, a lot cheaper come Monday.
Here, look at the futures yourself:
DOW down 165 points just before the futures market was halted. As you can see from the chart, it was an almost vertical line straight down:
http://www.marketwatch.com/investing/future/ymm5?mod=MW_story_quote
My guess is that the DOW will open 300 to 400 points lower on Monday, followed by another 100 to 200 points on the downside before the day is over. OUCH !
That will be a drop of about 3% for the day, in just one day. Jikes, sure hope I’m wrong about that, hope Garth is right and that stocks will go up instead of crashing down.
Actually, if you looked at the chart on a one year time scale, you could argue it will bounce off a lower trend line established in Mid October, Beginning of Feb and now .I would see this as a bullish indicator by this chart, not a bearish one.
“Maybe it’s a touch of money illusion. I’ve got an old receipt for an 89 day GIC that I use as a bookmark. 14 1/2%. In 1981. The Bank of Canada’s inflation calculator [which is probably lying! — ed.] says inflation was running at 11.4%. Would today’s seniors have been happy or sad at that state of affairs?”
14.5% on a GIC with inflation at 11.4% is a terrible state of affairs, as, once you incorporate taxes (ie: let’s say, 40%), the rate of return is actually -2.7%/annum.
Low interest rates have benefitted seniors enormously through significant capital gains on fixed income investments and interest rate sensitive assets such as housing and certain stocks. Low interest rates have also facilitated large government social program spending on seniors benefit programs such as OAS, GIS, and health care. Seniors and fixed income owners more broadly should be terrified of a return to high interest rates such as you quote in 1981.
“For the love of God, stop posting that the Canadian dollar is rising. “
The Canadian dollar is in a long-term rising trend. But where did I post that it is actually rising at the moment? Its not. But it will rise as deflation increasingly sets into Canada for the next decade or two.
Manufacturers know this, and this is one of the reasons why they are not going to invest meaningfully into Canada only to have their legs chopped off when the current over-pessimism towards commodities dissipates and the dollar resumes its long-term up-trend as implied by Canada’s status as a chronic net exporter.
This may have been posted already but ICYMI. When all around you are losing their minds over real estate, some common sense applies ASAP. Canada is clearly on the world’s shit list when statements saying we are as bad as Greece via credible international sources.
Bursting Bubbles – Short Canada?
http://www.bnn.ca/Video/player.aspx?vid=582499
“Would this work and make sense?”
I don’t really understand why you would borrow the money, to invest in a non-registered account, only to liquidate such and then invest in the TFSA. What are you trying to achieve there?
The interest on the money is only deductible when the money is being used for the purpose of generating taxable income (or the prospect of generating taxable income). The moment you put the borrowed money into the TFSA, the interest on the loan is no longer deductible.
So, in essence, you are asking whether or not it is a good idea to borrow to invest in a TFSA. This is largely a function of your risk tolerance, and whether you believe the portfolio that you are investing in can achieve a return greater than your cost of borrowing.
Shorting the Canadian Housing Market
Several years ago this blog was abuzz with comments asking how to short the Canadian housing market. There was even talk of some investment fund being set up to do it.
Those commenters can thank god that there was no ability to financially short the Canadian housing market.
They would have lost their shirts on what looked like a sure bet.
Anyone care to fess up that they would have shorted Canadian houses three to five years ago if they could have?
Perhaps the lesson is that sure bets rarely are.
Shorting is Dangerous
I invest almost strictly in equities. That is risky. But I never sell anything short. Shorting is FAR riskier.
I learned the dangers years ago. I shorted Air Canada at $1.20 while it was in the process of restructuring and where the company had said that the old shares would be worth a very few pennies at most. For unknown reasons the stock refused to sink. After several months TD Waterhouse arbitrarily required all shorts to cover. I about broke even but should have made close to 100% of what I shorted.
I believe TD has allowed investors to naked short (which was legal in Canada) I suspect TD had never borrowed the shares on our behalf.
In any case something went wrong and a sure bet Short did not work out.
Also shorting is highly stressful and causes you to obsess about the shorted investment.
It’s orders of magnitude more risky than going long a solid company.
In another scenario, a shorted stock could rise 200% overnight (when markets are closed) on a take-over or some kind of unexpected news.
109 Keith in Calgary on 04.04.15 at 11:13 am
Goldman Sachs is saying they cannot support rate hikes at this time…………..and what the banksters want, the banksters get.
____________________________________
The same bankers are saying Canada is a housing bubble and these bankers placed a HUGE short Canada bet. What the bankers want the bankers get and oil is and will continue getting crushed. Alberta is finished and the rest of Canada is going to get pounded.
#63 JustMe
The average price does not mean what you think.
If what you’re saying is true…..you are surely missing what the market is saying.
Be wary of averages…..
US jobs report was weak but not concerning. The jobless claims over the last few weeks were solid so it is likely this was a one off. Still very likely we get us rates moving up this year. Will create a scare or two in the stock market but U.S. equities should be heavily overweighted. If he fed raises even once, it will draw massive inflows into the U.S. and the sp500 could easily reach 24-2500 by year end
The TSX on the otherhand will likely experience a nasty bear as gold and oil have another severe drop
This is likely between June and Year end. Canadian housing is likely in the early stages of what should be a sharp correction. Don’t be surprised if the BofC starts Qe in second half 2015
I expect to see housing drop 10-15% over the next 12-15 months and one should be able to get a 10 year at 3.25 or less. 5 year could be at 2.50 or less
#117 Mark on 04.04.15 at 1:35 pm
“For the love of God, stop posting that the Canadian dollar is rising. “
Well it’s lower now than it was 25 years ago and looks like it’s even headed lower so I don’t know where your going with the long term comment…. 50 years? lol
http://www.oanda.com/currency/historical-rates/
That’s funny. Check out consumer confidence, or new home purchases. — Garth
hmm how about:
Chicago PMI
CPI
US Factory orders (including the revisions down)
Employment (including the revisions down)
The 4th quarter GDP (revised down)
Or how about the Bloomberg surprise index. (not a good surprise)
Or would you care to make a friendly wager on the First quarter GDP?
My call -1.8%
2020 is a long way to go. Bottom line is there is limited supply of SFH in Toronto. Price wont be coming down even when rates go up.
Besides you’ve been preaching since 2009. Neither price nor rates are budging.
There are only two robust markets left in Canada. Suggests I was correct. — Garth
“The absurdly low rates we have today will not be with us in a year, so I sure hope you’re not pigging out on them.” – Garth
———————————————————-
I’m not, mostly because I just have a huge negative emotional issue with debt. However, I have to point out that this same seemingly prudent advice has been offered for years. Those that ignored this advice have been richly rewarded. Those that thought they were being financially responsible and did not load up on debt, have been left behind. I understand the logic of your arguments, but I do not see the BoC raising rates for a long time. No government will raise rates while Canadians are so indebted. It would be political suicide. The MSM would be rife with stories of struggling families with hungry children. No way it’s going to happen.
http://www.valuewalk.com/wp-content/uploads/2015/03/US-Economy-2.png
See USA. From the top left to the bottom right. This is the surprise index of reporting companies.
Beat, Meet, Miss.
USA is tanking.
Why?
USD has appreciated the fastest pace in 40 years.
To add, Oil is clobbering all supporting industrial industries.
That is why even Obama is now bringing up the dollar in speeches. Last one was in Kentucky on Thursday. jawboning the dollar.
So many people here who want the US to fail. What a petty, myopic people we are. – Garth
Predictions for Dollarama (now mulling $3 items): $5 items and begins acceptance of credit cards.
How else will tapped out consumers pay?
#118 coastal on 04.04.15 at 1:37 pm
Bursting Bubbles – Short Canada?
http://www.bnn.ca/Video/player.aspx?vid=582499
……
Thanks for the link.
I got the distinct impression he chuckled when mentioning our central banker’s strategy and the implication for the housing market.
” Although new home prices might be excessive in some regions, I think the actual number of people who would be in real trouble due to a slow and gentle increase in rates (what we will eventually get) will be minimal.”
I don’t see the rate increase thing playing out. What I do see playing out is that, as house prices continue to decline in the low-rate environment on account of demand exhaustion and over-capacity, the risky subprime loans will increasingly face higher costs of finance on account of lenders’ perceptions of poor credit-worthiness.
Effectively these individuals, if they’re paying 3% on a house that’s depreciating at 5%/annum and only providing an imputed return of 3%/annum (ie: an unlevered return of -2%/annum) — will have this albatross on their balance sheets which will prevent them from accumulating any meaningful wealth.
Practically speaking, this means no retirement funds. Vastly diminished RESPs for the kids. Little if any money available for vacations. For a while, many will even be “underwater” on their loans and face significant labour mobility issues.
Meanwhile, those with balanced portfolios, particularly in the inversely correlated components such as the Canadian stock market, will enjoy above average returns. Just like in the 1990s. The example I love to often give is that of the 1990s — someone who took their 25% Toronto housing downpayment in 1990, and instead of buying at the peak of the bubble, simply bought the TSE/TSX stock market index (or the TIPS) would have, by the time the decade was done, accumulated enough in their investment account to buy a similar Toronto house, outright, in cash. Meanwhile, their house-buying counterpart, by the time the decade was through, probably hadn’t even paid off half the mortgage and still had another decade of payments to go. Yes, the investor had to pay rent and pay/reserve for maintenance costs on the house, but rent was still significantly cheaper.
Garth, if I understand you correctly your biggest gripe is that people are investing everything they have in one type of asset, houses, and that his extreme level of non-diversification is very risky. So far, I am with you, especially when one buys near a peak instead of at a low. But, if we are to diversify our savings instead into investment instruments of all kinds in different markets and across different geographies, to diversfy, we get a different challenge. Namely, how to pick good-quality stocks, bonds, or even merely ETFs and such. For those who have significant assets, we would need a financial advisor, such as yourself. But how can we trust the advisor’s advise? When we buy a home we can inspect if for ourselves, we can touch and see it. Not so with the advise of an advisor, we can merely hope it is good advise. If it is not, we will only find out down the line. And, what’s more, we are saddled with the task of rebalancing, which most of us have no clue about. How to resolve this conundrum? I am sure many of us would love to follow your advise, but how to do that in a manner that does not make us feel completely like a fish out of the water?
It’s called trust. You trust the doctor, the dentist, the guy who fixes your brakes or your plumbing. Why can you not trust a competent financial person? — Garth
“Well it’s lower now than it was 25 years ago and looks like it’s even headed lower so I don’t know where your going with the long term comment…. 50 years? lol”
The lows are higher than they were previously, and the highs are higher. Sure smells like a long-term rising trend to me. There’s a lot of cyclicality on the CAD/USD$ pair because the two economies are, in many ways, quite opposite and inversely related.
“I invest almost strictly in equities. That is risky. But I never sell anything short. Shorting is FAR riskier.”
Precisely. Basically when a person shorts, they’re saying that its better to own currency issued by a government, than it is to own a stock. Unless a company truly destroys value at a rate faster than that of government, it seems unlikely that shorts can make money over the long term.
Besides, if you look at most of the self-made rich people throughout the world, almost none of them got to be rich by shorting anything but currency (or debt). Most of the world’s self-made wealthy became that way by either buying or building assets in out of favour sectors. Its not rocket science!
Observation.
I think a lot of these grotty job numbers etc. are as much to do with the fact that a ton of folks, that used to actually have money are now stone flat, broke; then add the crummy weather.
They are NOT going to ANY restaurants or Bars….and the tapped out consumer sure as heck are NOT going to buy Big Screen TV’s, in the same numbers. (Goodbye FutureShop).
The worst part is – this is just the Theme music – the Movie has just started.
I HOPE and PRAY that you pay attention to our Harley riding host.
DON’T PIG OUT at the lowest Interest rates since the Fall of Rome.
Pay down debt and be prudent.
I said it before, so I apologize – but the best analogy is one us crazed sailors use ” Put a Reef in Mainsail”, and rig for heavy weather.
Ras – Putin is seething in Moscow – and is taking over old Nato bases, in the Arctic, to keep his fans absorbed as Russia goes broke.
Greece is going to give the EU the shiv.
.78 cent Loonie = food prices and import prices are climbing – and quickly. We got NO break at the pump in BC and are paying big bucks for the high grade.
It sure is interesting, if a little terrifying.
So many people here who want the US to fail. What a petty, myopic people we are. – Garth
Not true. I am simply commenting on what is happening vs what many “want to happen”.
Big difference.
I see it first hand at work. We deal with massive companies in the US. Not companies who have an office tower of 80 people and have a market cap of $15 billion.
Companies with footprint. They have massive plants employing towns, and contributing to the economy in both direct and indirect impact.
ALL of these companies are in serious trouble; being masked by financial engineering. Share buy back to raise the EPS. That is how the S&P got to where it is today. Borrow cheap, buy back shares.
The underlying health of the US is very poor right now. If it were so great, the near zero rates for 6 years would have had the economy screaming on all 8 cylinders. Inflation would be everywhere, factories would be investing, and the Fed would be trying to tame the beast.
The reality is 125,000 jobs were created last month. Call it weather or you can pull a chart up and look at the last 9 months for direction.
This in a country of 330,000 million people, $16.7 trillion in GDP, with zero percent interest rates, 6 years after the crash.
You can sugar coat it Garth, but there are deeper problems ahead. Think Japan.
In reality the US created 3,000,000 jobs last year. Want to worry? Then fret about Canada. — Garth
If Willy puts forth an economic scenario I strongly disagree with, FIRST I ask: Who’s Willy?
If Willy is bright, honest, knowledgeable and experienced, I then ask: Could I be wrong?
If I conclude (rightly or wrongly) that Willy is grandly mistaken – I politely end that conversation – without further bothering Willy with my point of view.
Much, for me, depends on Willy’s place with respect to social consensus, if Willy’s “in” (as, for example, with the gov’t, the party, the media, the public, his peers) his case is considerably weakened.
Willy (if not Bandit who smartly buys bullion in hushed tones on his iphone6) may very well be totally out to lunch re – the weather . . . etc., but GT’s platform is nonetheless solid and deserves respect.
#130 TurnerNation on 04.04.15 at 4:05 pm
Predictions for Dollarama (now mulling $3 items): $5 items and begins acceptance of credit cards.
$3 items been there for a while
So many people here who want the US to fail. What a petty, myopic people we are. – Garth
I don’t think people want to see the US fail, I know I don’t.
I know personally that I would love to see the US, be once again, what it once stood for. See the declaration of independence. However, the US has been systematically dismantled from within and is now home to one of the most corrupt governments on earth.
If we the people are to find a solution, we the people must first identify and acknowledge that we do indeed have a problem
for every one person who gained “a job” in the U.S….
TWO people left the labour force.
labour force participation rate is currently VERY low.
this is not a recovery; these newly created “jobs” are a symptom of a much larger monetary problem–not the fruits of an economic revival.
Easter Chocolate or other edibles Warning!
Despite being warned, not to leave such things laying around for retarded canine who lives by the motto, “if no one was looking, it didn’t happen”, wannabe vet daughter left an MJ cookie on top of a set of drawers underneath her desk top, so not visible, but definitely accessible to someone of counter surfing height, keen sniffing ability, and a pen-chance for sweets.
Anyway, darling daughter got confused upon discovering the missing treat, thought maybe SHE had eaten it, but discovered shortly there afterwards that crazy canine got to it first.
Dopey dog is fine – got lots of TLC to go with her THC for the rest of the night, did not move off daughter’s bed, drooled a lot, is a bit quieter today than usual, but mostly bark to normal.
My call options aren’t the only things that are naked.
#120 Shawn Allen — “Anyone care to fess up that they would have shorted Canadian houses three to five years ago if they could have?”
Three to five years ago was way too early (for me), but I investigated it last year. It isn’t too hard to short Canadian housing using common stocks if you want to.
– Coast Wholesale Appliances got taken out
– Rona’s up, for reasons unfathomable
– Genworth MI tanked, but its US parent looks even worse
– The Canadian subprime lenders have done well
– The Canadian banks, not so much
I think the US based “short Canada housing” fund would likely have concentrated on the Canadian banks. Priced in US dollars, a basket looks breakeven-ish considering manufactured dividends from April 2013 (early G&M mention of the US fund). So depending on what they did with the cash proceeds from shorting…
There is a lot of smoke and mirrors going on in Vancouver where a lot of the population tries to mimic the 1%ers.
I personally have a friend who is in his mid 70’s, has a mortgage on his condo of over 200K (condo value 400K) has no savings and drives an AMG Mercedes, and lives paycheque to paycheque from his wives 40K a year job and his oap and cpp.
I care for the guy, try to do what friend’s do, make him aware of this blog for example and the potential dangers of a one asset strategy, but it’s like banging you head against the wall.
If you have a vested interest in things being a certain way, it seems our brains don’t allow us to make rational choices and instead we just blindly believe the things that suit us and discount all those that don’t.
Man, it’s the Easter long weekend, people. Go out and play, stop posting here about how US will fail, how interest rate will remain rock bottom for eternity.
Get drunk, meet chicks, get laid. Or failing that, just get drunk with the family!
#16 -=jwk=- on 04.03.15 at 6:55 pm
“so by my calculations there are 115,000 chinese millionaires set to arrive in canada in next 5 years. interesting. nothing to do with real estate. carry on.”
Please… indulge us with your crafty calculations. They sound splendidly plausible.
#136 H on 04.04.15 at 4:58 pm
You’re barking up the wrong tree mate. This blog will analyze CREA numbers all day long and expose them for what they are. When it comes to macro-economics, and the US hegemony in particular, just turn your brain off and capitalize on the awesomeness.
#134 Mark
Your just talking stupid so give it a rest on the upward loonie trend.
Everything is on an upward trend in Canada if you want to go back 180 years when we lived in wooden huts and traded with indians for beaver fur.
the coffee shop was open today, the house was full and everyone had an opinion.
Albertas Mess is getting bigger as each day rolls by. The system has got to a point that no one trusts anyone . all the politicians being the biggest Liars.
No one is willing to invest any of their cash. sitting on cash is better than taking advice from someone that no one trusts. There is no confidence whatsoever in the current jpoliticians. money flowing for purchases is mostly free loan money from the banks. The politicins do not want to tax Albertans but a levy is applied anyway. call it whatever they want but it is removing hard cash from peoples pocket.
in orderto bring trust and some confidence into the current mess, interest rates must go up. the sooner athe better. taxes musat go down. people know where and how to spend their own hard earned money.
;tax destroys trust and confidence.
“Your just talking stupid so give it a rest on the upward loonie trend.”
Why? I’m just pointing out what I’m seeing. Not talking stupid at all. Its actually pretty simple, chronic net exporters see their currencies rise. Chronic net importers see their currencies fall over time. As Canada goes into domestic debt deflation, the result of consumer austerity, the CAD$ once again should resume its long-term climb. And sooner or later, commodities will be a tailwind once again, especially as prices cannot indefinitely remain below the long-term all in sustaining cost of production.
“so by my calculations there are 115,000 chinese millionaires set to arrive in canada in next 5 years. interesting. nothing to do with real estate. carry on”
Realistically very few of those “Chinese millionaires” can actually convert their assets to Canadian dollars to buy Canadian housing. And even so, most “Chinese millionaires” did not become wealthy by buying at peak prices. Those folks, almost by definition, have a very keen eye for value, and there is practically no value in Canadian RE. Now if hyperinflation occurs in Greece over the next few months, you could see some incredible bargains in RE there (hyperinflation kills RE prices!!) and a lot of foreign buying, that’s for sure. That’s perhaps a more likely destination for the smart “Chinese” money than Canadian RE at the top of its cycle.
You can decide who is right or wrong.
http://howestreet.com/2015/04/even-the-bls-has-run-out-of-bullshit-recession-confirmed/
http://www.canadianbusiness.com/business-news/why-us-job-growth-isnt-boosting-the-economy-and-cheap-gas-isnt-powering-spending/
There is no right or wrong. The US is in the same recovery now that it experienced 12 months ago, which people like you denied. Get over it. — Garth
the snowbirds are coming home and they paint a rather bleak picture of the us economy in the south west states.
most garage businesses are going out of their way to rip-off snowbirds. a hundred buck fix could cost up to two grand. smaller retail ;businesses are selling out. some rv parks are maintained a bit where others don’t bother with any repair work.
otoh, these same snowbirds complain about roads and volume of traffic in Canada but paying a toll road fee of 25-50 cents per mile in mexico is ok and the roads are not any better. bribery is a way of life in mexico.
“No one is willing to invest any of their cash. sitting on cash is better than taking advice from someone that no one trusts. “
Then it seems that the logical course of action is for the central bankers to destroy any returns on cash as an asset class by going to ZIRP and NIRP. Instead of creating a situation, with higher interest rates, where people are incented to hoard cash merely to collect interest on it instead of investing.
Give it long enough, eventually something useful will rise out of the ashes. Just look for sectors with under-capacity and invest accordingly if you want to make money.
DELETED
#107 Mark
“The Canadian dollar is in a long-term rising trend. But where did I post that it is actually rising at the moment? Its not. But it will rise as deflation increasingly sets into Canada for the next decade or two.”
===================================
Long-term meaning what exactly?
Relative to what, exactly?
The CAD-USD rate peaked in 2007 and again in 2011, and since then the CAD has been in a down trend.
CAD-JPY has been all over the board since 2000; up and down and sideways.
CAD-GBP was in an uptrend until it peaked in 2010 and has been in a pronounced down trend ever since.
CAD-EUR up and down since 2000; certainly no long-term uptrend!
CAD-CHF shows a long-term (2000-present) clear downtrend.
CAD-AUD peaked 2001 and 2008 at over 1.30; now struggling at 1.0495
Ah! At last! The CAD did show a pronounced long-term uptrend against the INR (Indian Rupee), but that trend ended with the 2013 peak and is now in a sharp downward reversal.
This is easy poop, Mark! Is this why you consistently fail to give links and sources for your fantasies?
http://www.google.com/finance?q=CADUSD&ei=MGAgVYieA4yNigLquoDAAQ
Who in God’s green earth (besides you) would be silly enough to make FX forecasts and predictions 20 years out?
#62 X on 04.03.15 at 10:13 pm
“As per Ross Kay’s numbers from the post the other day. Were the BoC to slowly raise rates, to follow the US rate increases beginning later this year, if every 1/4 point increase has the opposite effect ($5000 increase/decrease in valuation), as it does when lowering it, just raising the lending rate to 2% would probably take close to 10% off of the value of the current median home valuation.
Not including any effect of market sentiment, or the emotions involved in RE purchases.
Historically 2% is still on the low side for lending rates.”
I’ve played around with the pre-approval calculator from RBC. At household income of $150,000, a 25 bps increase in interest rates, say 2.75% to 3.00%, leads to a drop in the amount of approved mortgage credit available of 2.15%. For each extra 25 bps, it declines by about 2.1% (until about 5.00% mortgage interest rate, in which it’s about 1.96% for each marginal 25 bps).
So going from 2.75% to 4.75% will be 15.5% less mortgage available at the same household income.
Ex: $175,000 income, 2.75% interest rate, 25 years amortization = $731,892 in approved mortgage availability.
$175,000 income, 4.75% interest rate, 25 years amortization = $618,452.
That’s exactly 15.5% less available credit. A whole lot of new equity would have to come from somewhere just to prop up the prices as interest rates rise…
Play around for yourself:
https://www.rbcroyalbank.com/cgi-bin/mortgage/tools/howmuch/afford.pl/start
Shorting Canadian Houses
Ralph Cramdown responded:
It isn’t too hard to short Canadian housing using common stocks if you want to.
************************************
Ralph you are talking indirect shorting.
I pointed out that many on this blog would have directly shorted houses over the past few years if they could. Many lamented that they could not do so. They would have been crushed.
So far, no one has fessed up that they would have eagerly shorted houses if there were short Canadian house price ETF. Some on this blog were begging for the ability to short houses five years ago and three years ago. Perhaps a bit before your time here as I don’t think you were here five years ago.
How, exactly, would anyone have been ‘crushed’ by shorting houses (if such a vehicle actually existed), when 80% of markets are now in stagnant or declining sales? — Garth
From Bloomberg
Hiring Boom Fizzles as Companies Adjust to Slower U.S. Growth
http://www.bloomberg.com/news/articles/2015-04-03/payrolls-in-u-s-rose-126-000-in-march-least-since-end-of-2013
haha you deleted a youtube video called:
PBS | Evolution: “Why Sex?” [Chimps vs. Bonobos]
I asked: What’s it all about?
Hilarious.
And a chimp sex vid belongs on this blog, why? — Garth
#133 questios questions.
You just made a start. But it’s just step one.
Like anything else (houses, cars, health) you have to start by reading. There will be lots of perspectives.
Einstein’s said that he doesn’t teach but merely provides students with the opportunity to learn. That’s what you have.
You need to take it.
Garth’s balanced portfolio that RE balances on occasion works. It’s almost beyond debate. Many here will attest to it. It’s a great place to start. Books for such portfolios are easy to read. From Garth’s to the potato and moustache guy.
Even guys like me and those trading in their underwear understand this method well and probably employ it in some fashion. It’s real money that’s hard earned and that needs to be respected. It’s not casino money.
And in the end you may learn to see, feel and love it like a Grohe water system, quiet close cabinets and a three car garage.
I wrote: Garth, if I understand you correctly your biggest gripe is that people are investing everything they have in one type of asset, houses, and that his extreme level of non-diversification is very risky. So far, I am with you, especially when one buys near a peak instead of at a low. But, if we are to diversify our savings instead into investment instruments of all kinds in different markets and across different geographies, to diversfy, we get a different challenge. Namely, how to pick good-quality stocks, bonds, or even merely ETFs and such. For those who have significant assets, we would need a financial advisor, such as yourself. But how can we trust the advisor’s advise? When we buy a home we can inspect if for ourselves, we can touch and see it. Not so with the advise of an advisor, we can merely hope it is good advise. If it is not, we will only find out down the line. And, what’s more, we are saddled with the task of rebalancing, which most of us have no clue about. How to resolve this conundrum? I am sure many of us would love to follow your advise, but how to do that in a manner that does not make us feel completely like a fish out of the water?
You responded: It’s called trust. You trust the doctor, the dentist, the guy who fixes your brakes or your plumbing. Why can you not trust a competent financial person? — Garth
How, then, to find a competent financial advisor, especially if one does not have a network of trusted friends who can refer? Also, if a dentist does a botch job, I have a reasonable claim to recourse, but if an advisor advises me to invest in a bunch of bad picks, there is no recourse at all, is there?
Of course there is recourse, as the financial advisory business is massively regulated and clients’ risk and return profiles are closely adhered to. Just don’t confuse a mutual fund flogger or a bank employee with an independent fee-based advisor who sells nothing and refuses to collect commissions. — Garth
“How, exactly, would anyone have been ‘crushed’ by shorting houses (if such a vehicle actually existed), when 80% of markets are now in stagnant or declining sales?”
The decline in RE prices has been a fairly recent (as in the past 2 years) phenomena. But prior to the “F” Budget 2013, it was pretty much up, up and away since the 2009 doldrums. Meanwhile, the other side of the equation in short selling, that of holding cash proceeds from the sale of the borrowed and sold asset, has paid practically nothing.
A brief history of the Canadian dollar
http://www.theglobeandmail.com/report-on-business/economy/a-brief-history-of-the-canadian-dollar/article1366590/
July 11, 1864: The greenback sinks to less than 36 cents (Canadian), an all-time peak for the Canadian dollar, from close to parity in early 1862.
Alright, Garth. Is there a registry online of “certified” financial advisors that one could search for candidates?
‘Certified’ means nothing compared to experience, performance and client referrals. Those things do not come out of text books. — Garth
And a chimp sex vid belongs on this blog, why? — Garth
House horniness, moist virgins, status, hierarchy, mind games, war…
Let’s cut to the chase. It’s all politics and power. People are going insane over it all.
There are only two robust markets left in Canada. Suggests I was correct. — Garth
You still don’t get it. The only cities that matter.
That was ignorant. — Garth
This,
Disappointing US job figures raise fears about recovery
http://www.telegraph.co.uk/finance/economics/11514610/Disappointing-US-job-figures-raise-fears-about-recovery.html
and this,
Get ready for another round of the foreclosure crisis
http://www.pbs.org/newshour/bb/get-ready-another-round-foreclosure-crisis/
If the Fed does raise rates, it will not be because of the great ascent of the US economy you’re stating Garth.
It will because they’ve been telling us, like you, the US economy is on the up-and-up when it is not really, and want to save their (rot) faces from the garbage that falls out their mouths.
Example,
Officials: See, the economy is pumping up good and hard, we must raise rates.
The Real Economy: [Scream back] Now we’re just been rooted double hard…. Again! There was nothing good in the first place.
#131 DisgustMadeMePost ,
No prob, the point I found interesting is that even if prices stay flat for a length of time, the financial plan by the lending markets eventually blows itself up, as it’s all geared for rising prices.
We don’t need rising rates as much, nor some catastrophic event. Just need the bozos to stop buying and the bidding wars to stop. This is what will kick start a credit crisis which is already showing up in the Canadian junk bond market.
Watching the Victoria core market buyers fall all over themselves bidding up the core properties while the Bear Mountain disaster and nearby “young families” type slap board boxes has limited sales in any of the quality properties, shows me that the bubble popping probabilities are at all time highs.
#99 NoName on 04.04.15 at 9:35 am
“Off-topic…
POINTS vs CASH savings on a spot
Yesterday I was in Buffalo at some grocery store buying some groceries, so we can have bbq at my uncle house shortly after. So long story short bill was 132.19$, girl at a register asked me for my lets call it savings card, I sad I don’t have it, and lady behind us offered us to use hers card, so we did. Total savings was 26.75 close to 20%.
Earlier I was looking at a receipt and it shows that that lady on her savings card saved over 600$ ytd.
Imagine that!
Now lets compare that to LOYALTY points, bill 161.30$, point earned 2600,
1000 points = 1$, total savings 2.6$ around 1.5%…
not so long time ago, phones were stupid, and people were smarter…”
Lovely soul, she is. First thing I do when shopping in the US is walk over to the customer service desk and apply for the store’s discount card. Takes a minute and you save BIG.
The shopping climate in the US is so easy, fun, user friendly and their customer service runs rings around what you generally find in Canukistan.
You have to be TRULY creative and a consummate planner to squeeze value up here in the frozen north.
On the whole, a miserable shopping experience, almost every single time.
ho in God’s green earth (besides you) would be silly enough to make FX forecasts and predictions 20 years out?
I’m glad somebody else also noticed this sign of ridiculous idiocy.
#152 pinstripe on 04.04.15 at 6:08 pm
“the snowbirds are coming home and they paint a rather bleak picture of the us economy in the south west states.”
==================================
Nonsense! Arizona has been experiencing slow but steady growth. Not as fast as we’d like to see, but growth it is! Job growth in Jan was 2.5% Y/Y and was better than the national rate.
Maybe you have some actual facts????
http://www.bls.gov/regions/west/arizona.htm#eag
http://azeconomy.org/2015/03/this-week/arizona-january-yy-job-2-5-faster-than-national-rate-2-3/
http://www.azcentral.com/story/money/2015/02/17/arizonas-economy-poised-warm-reports-say/23534985/
Free your mind, and your ass will probably follow!
This is easy poop, Mark! Is this why you consistently fail to give links and sources for your fantasies?
I’m glad someone else noticed this too.
No sources. Just wrong opinions.
coastal # 118,
“statements saying we are as bad as Greece via credible international sources.”
—————————————————————
Any body that compares the economic risks associated with the collective debts of a country that is a, currency issuer, to those of a country that is a, currency user, doesn’t display much credibility. The debts simply do not carry the same consequences, in the two, entirely different situations.
But of course the Cattle do not no this, so we get the desired emotional response.
Yes…I realize it’s a PR stunt to get some press and thus bolster his position.
If one believes Vik is correct in his assumptions, short the dollar, not housing.
Your just talking stupid so give it a rest on the upward loonie trend.
Everything is on an upward trend in Canada if you want to go back 180 years when we lived in wooden huts and traded with indians for beaver fur.
Rofl
Rekt
#140 saskatoon on 04.04.15 at 5:16 pm
“for every one person who gained “a job” in the U.S….
TWO people left the labour force.
labour force participation rate is currently VERY low.
this is not a recovery; these newly created “jobs” are a symptom of a much larger monetary problem–not the fruits of an economic revival.”
Between 240,000 and 300,000 baby boomers retire every month. Labour force participation will continue to decline in relevance as the boomers march towards senility…
Garth, perhaps it’s time to introduce your readers to services such as Wealthbar (similar to the US’s Wealthfront) where people can create a diverse investment portfolio without the need of a financial advisor.
I’m tired of listening to critics of this blog spout off about how a diversified portfolio is ‘too hard’ for them, or that it takes the mind of a savant to navigate the world of investing.
Just a thought.
Why would you not want a real person to assist you, rather than a robot? — Garth
#47 Nonplussed: “Well I went skiing today because my particular religion doesn’t demand strict holiday observance.”
******************
Here in BC 41% of us do have any religious affiliation as compared to 24% nationwide. People do hate to use the word ‘atheism’. ;-)
*sigh* Should read: “Do not”
This “waiter and bartender recovery” does not represent an improvement in finances, debt levels or living standards.
The only way today’s fake “interest rates” will ever rise is if the market balks at buying more US government debt.
The Fed is irrelevant.
Why do I bother
Mark at 162 seems to be disagreeing with me but then, bizarrely, answers his own question.
To review: This blog and many of its followers have predicted house price declines continuously since about 2009.
Commenters were so sure, they often lamented the lack of the ability to short Canadian house prices.
As I think Mark states, that would have crushed people financially if they had made that bet over the years since 2009.
How can someone argue against that? Did someone? It’s hard to tell with Mark.
My apologies to Mark, he was responding to Garth’s comment. It appears Mark and I are for once in agreement. Again, my apologies.
July 11, 1864: The greenback sinks to less than 36 cents (Canadian), an all-time peak for the Canadian dollar, from close to parity in early 1862.
Looks like the Loonie has been on a downward trend for 153 years Mark… if you want to talk long trends.
Crushed?
How, exactly, would anyone have been ‘crushed’ by shorting houses (if such a vehicle actually existed), when 80% of markets are now in stagnant or declining sales? — Garth
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I was referring to the period since this blog started and in particular to several (more than two) years ago.
And why do you mention “sales” the observation here is about shorting that is about “prices” not sales.
Is it not the case that shorting an index of average Canadian house prices (if such existed) would have worked out terribly in each of the years since this blog started with the possible exception of the past year?
Such an index would have been heavily influenced by the largest markets which have stubbornly risen. no?
From 157:
me then Garth
So far, no one has fessed up that they would have eagerly shorted houses if there were short Canadian house price ETF. Some on this blog were begging for the ability to short houses five years ago and three years ago. Perhaps a bit before your time here as I don’t think you were here five years ago.
How, exactly, would anyone have been ‘crushed’ by shorting houses (if such a vehicle actually existed), when 80% of markets are now in stagnant or declining sales? — Garth
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House prices are up a lot from three to five ears ago. Ergo shorts would be crushed. How can you argue with that? You give me “‘sales” are now declining when the topic at hand is prices have risen.
If this keeps up, I will take another hiatus. I warn you.
#176 Arthur — “Garth, perhaps it’s time to introduce your readers to services such as […]”
Only one robo-advisor service truly meets the needs of the blog dogs here:
http://goo.gl/8qJzfc
#152 pinstripe on 04.04.15 at 6:08 pm…
“…snowbirds are coming home and they paint a rather bleak picture of the us economy in the south west states…”
That’s a ridiculous generalization, the economy in Arizona has substantially sped up in the last year. From our recent travels to CA it’s also improving.
We haven’t had any business rip us off, in fact the dealership that maintains our luxury sedan offers prices that we only dream of in Kelowna.
In fact almost all the businesses we have dealt with since 2010 offer far better product and service at 2/3 of the cost in Canada.
Mexico? That may be true, but we’ve never paid a toll there.
What does Mexico have to do with the southwest states?
#121 Shawn Allen
Hey Shawn – If I recall correctly you were once in favour of Canadian Western Bank as a long term (?) hold. If so, are you still – considering they’re an Alberta-based bank?
#157 Shawn Allen — “I pointed out that many on this blog would have directly shorted houses over the past few years if they could. Many lamented that they could not do so. They would have been crushed.”
Yes, I remember the queries. I figured that the best way to help someone who wanted to put on a short but couldn’t figure out how was to ignore them.
sigh…
126,000 jobs vs 245,000 expectations (down from 295,000 expected). previous months were revised lower.
latest REAL GDP only 2.38% yoy
the US economy is on borrowed time. the average time between recessions post-WW2 is 5.3 years. the average time between recessions since 1980 7.5 years.
the next recession is around the corner.
Rob Ford appointed to hockey hall of fame board of directors.. hallelujah, praise the easter bunny.
http://www.cbc.ca/news/canada/toronto/rob-ford-appointed-to-hockey-hall-of-fame-board-of-directors-1.3021451
“Such an index would have been heavily influenced by the largest markets which have stubbornly risen. no?”
Construction of an index for housing that represents something that can actually be tracked and shorted with recourse to physical markets is incredibly difficult as housing is a heterogeneous asset class and the “sales mix” will always be a factor in determining prices. Even the Teranet approach, which is to track successive sales of individual properties, effectively acts as an integrating (ie: low-pass) filter, and hence, suffers a considerable lag when hit with an impulse input (ie: subprime lending standards being tightened as seen over the past few years!).
What is being seen in Vancouver/Toronto with the allegedly rising prices is mostly a matter of the sales mix in those cities being wide enough that the mix can actually ship upwards considerably. While in most other major Canadian centres, especially cities like Winnipeg, Regina, Edmonton, and Saskatoon, the difference between the top quartile of prices and the bottom quartile of prices is not nearly as wide.
Toronto/Vancouver/Calgary also have the significant immigration influx, hence there has been a need to construct considerable new supply. New un-depreciated supply, likewise, causes a shift to the sales mix that is not representative of pricing on depreciated resale properties. Significantly less of such in most other cities.
Previous to my further comments on the “sales mix”, individual owners of property in the economy behave according to what their individual circumstances represent. And not that of overall headline “house prices”. With individual properties losing value across Canada, even in Toronto/Vancouver, we are now seeing a significant contraction of consumer spending. Lending standards are tightening. Loans might be cheaper because of the bond market, but the “headline” mortgage rates are increasingly more exclusive. The CMHC is running scared and has increased premiums in recognition of a riskier market and their perception that funds need to be raised to pay higher claims.
This is a trend which will take years to run its course, and without a doubt, housing will not be the sector or the asset class that drives the eventual recovery in the Canadian economy. The past 15 years have been a pretty good run for RE owners and those involved with the FIRE industry, but its now time to pass the baton to something else.
…”It’s called trust. You trust the doctor, the dentist, the guy who fixes your brakes or your plumbing. Why can you not trust a competent financial person? — Garth
My husband and I, lost lots of money letting a brooker manage our $$ in the stock market.
Never again…(fool me once..fool me twice…)
You discover you can trust or not the financial person after the win or the lost.
You sound like the last people who should be dabbling in stocks. — Garth
Creative.
http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11510753/Buy-to-let-investors-get-mortgages-till-theyre-aged-105-while-ordinary-homebuyers-are-too-old-in-their-50s.html
#96 John on 04.04.15 at 7:51 am
We know of several Ws cashing out of stuff (including houses) and passing chunks of cash to their Ms kiddies to lock into bricks and granite in the GTA watershed. And with that 10% CMHC up-tick this trend might even accelerate in the short term.
————
Bricks? Come on, get with the times! It’s either stone or stucco these days!
#179 Kreditanstalt: “if the mkt balks at buying more gov’t debt”
– one question then becomes Can the Fed bloat its balance sheet even more
As for raising rates, the Fed may raise without a view to the economy right now, or without the intent to normalize, but simply to check the runaway SPX.
I see where MSM is yellin’ that the $US is too high, and that fiscal stimulus is what’s wanted. (Former PM Martin here in Canada just came out with a call for fiscal stimulus.)
The March BLS jobs report, and the Jan and Feb downward revisions, confirm those of us who think the US is headed for Recession. And nobody can credibly argue that ZIRP has been very good for Main Street.
Bad news is bad news, weather notwithstanding.
Your very moniker of course, mein lieber Herr Kreditanstalt, implies a sweeping view of ec history and an expectation of nasty surprises emanating from the most reputable quarters. Ja. “Doom and gloom” irks the comfortable and energizes those in the vanguard of change. The Zeitgeist is nervous. Nobody’s really very sure of anything. And death and taxes are not the only certainties in life . . .
There will be no US recession. — Garth
About trust: the doctor, the dentist, the mechanic or the plumber will not loose my money!
I don’t say you’re not good at it (balancing a portefolio) but i’ts not easy to trust financial person.
If you value your money more than your health you are a greater fool. — Garth
http://business.financialpost.com/personal-finance/mortgages-real-estate/how-the-falling-loonie-and-low-rates-could-lure-more-foreign-investors-to-canadian-housing
Foreign buyers and their position in the marketplace have been a concern for some market watchers, who fear these investors are inflating housing prices.
February article. No evidence. — Garth
Canadian Western Bank
JSS asks:
Hey Shawn – If I recall correctly you were once in favour of Canadian Western Bank as a long term (?) hold. If so, are you still – considering they’re an Alberta-based bank?
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I rarely mention specific stocks on this site, but yes I have often liked CWB and may have said so on this site.
Canadian Western Bank is up precisely 462% since I started tracking it on August 5, 1999. (That excludes dividends. During that time, oil has had its ups and downs and two major stock crashes have occurred.
CWB has soldiered on.
Yes, I consider Canadian Western bank to be a good long-term hold for investors willing to hold equities.
Barring a depression in Alberta, CWB will almost certainly do okay. But no guarantees.
CWB is mostly a commercial lender.
All banks are very highly leveraged and so can be quite risky in dire circumstances.
It turns out that last Summer was not a good time to buy CWB when it was trading at about 2.3 times book value. Now it is at about 1.4 times. I did not own it last Summer but started buying on the way down. I bought too early but then added more at lower prices.
Buying good companies low tends to work out well.
LL1: if you can’t trust someone to do it for you, learn to manage your investments yourself. You sound afraid. Confidence comes from demonstrating ability, so increase your ability in this area.
If you value your money more than your health you are a greater fool. — Garth
….Irrevelant. Pas rapport…….
February article. No evidence. — Garth
………Still actual.
New un-depreciated supply, likewise, causes a shift to the sales mix that is not representative of pricing on depreciated resale properties. Significantly less of such in most other cities.
Not on a per capita basis.
Neither a negative nor a positive factor. Opinion not based on any existing data sources.
Meaningless and pointless.
As always.
Toronto real estate prices continue to increase. In spite of red herring sales mix non factors.
#175 Karma
dude…
baby boomer retirees are not responsible for driving down the labour force participation rate.
check this out:
http://www.forbes.com/sites/realspin/2014/01/15/u-s-unemployment-retirees-are-not-the-labor-exodus-problem/
Kentucky’s undefeated season is OVER!
Spotted Cow tipping continues…
#167 Plex on 04.04.15 at 6:49 pm
This,
“Get ready for another round of the foreclosure crisis
http://www.pbs.org/newshour/bb/get-ready-another-round-foreclosure-crisis/
If the Fed does raise rates, it will not be because of the great ascent of the US economy you’re stating Garth.”
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This is really a story of bad mortgage lending practices screwing over low income people. It’s sad, no doubt. But not really about the current state of the US economy.
They are truly screwed by the extra fees and penalties being tacked on. Outlaw those punitive fees and the debtor would be in a better position to carry the mortgage. Furthermore, the first guy got screwed by healthcare costs. Perhaps Obamacare has made those situations less prevalent going forward.
#16
You still haven’t given me a source. If you are correct this is HUGE for real estate. I’m not taunting you. I’d like to know the facts. It could be useful to me.
I don’t believe Garth’s nebulous prediction of higher rates. A year from now? Two years? I doubt it. Sure, at some point it’ll happen but I’m not holding my breath.
In the meantime they aren’t needed to slow the housing market. Oil has done the job in Alberta. What, short of rising rates, could possibly deflate Toronto and Vancouver?
[…] Source:: http://www.greaterfool.ca/feed/ […]
For your perusal:
The author of BoomBustOlogy “Spotting Financial Bubbles Before They Burst”, explains why he’s shortselling Canadian Real Estate. Below are some bullet poiints from the compelling 9 minute BNN interview, worth listening to – Editor Money Talks
http://www.bnn.ca/Video/player.aspx?vid=582499
“Foreign buyers and their position in the marketplace have been a concern for some market watchers, who fear these investors are inflating housing prices.”
Foreigners mostly don’t have access to Canadian mortgage credit. So how exactly can they inflate houses (we know the foreigners aren’t bringing cash either!)?
Why are prices rocketing higher in Vancouver and staying stable in Victoria?
The same finance terms applies in both cities. Are people different in Vancouver? What is it?
Shane
California water troubles mean a much higher price for fresh foods…wait the impacts are barely felt yet.
This will make high RE prices meaningless, or worse.
Very dry in much of the US. What happens to food prices in general in the future? Can’t eat, then what?
Just asking
Garth,
Tuesday is going to be an interesting day.
http://s.wsj.net/public/resources/images/BN-HS471_10year_G_20150403083642.jpg
The associated pricing in if a rate increase looks the same.
Expect QE4 to be floated.
#211 Shane: Why are prices rocketing higher in Vancouver and staying stable in Victoria?
Go to Google Maps (satellite view) and watch Richmond, the city just South of Vancouver.
It is more than 50% farmland.
Even larger proportion of farmland further South in Delta.
Both Richmond and Delta are connected to Vancouver by high-speed highways.
Allow residential on this farmland and Vancouver RE prices will drop to normal values.
#133: “For those who have significant assets, we would need a financial advisor, such as yourself. But how can we trust the advisor’s advice?”
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You can trust Garth. How many advisors does any one person need?
#270 PM
“What, short of rising rates, could possibly deflate Toronto and Vancouver?”
You must be new here. As discussed many times over, higher interest rates are not necessary to bring down the housing market. Rates were at rock bottom in the US, Ireland, Spain when housing tanked.
The high cost of houses, over stretched owners making huge mortgage payments, along with over extended consumer credit, strangles the broader economy of spending. Retail, restaurants, business suffer which result in closure and layoffs. Job loss causes consumer confidence to fall. This is well under way.
Throw in a record high market saturation rate of 70% home ownership along with tanking oil and we now have 8 of 10 major housing markets in decline. Markets erode from the outside in.
Toronto and Vancouver are not immune to any of these factors. The erosion is on their doorstep.
#169 Maxx: “Now lets compare that to LOYALTY points, bill 161.30$, point earned 2600,
1000 points = 1$, total savings 2.6$ around 1.5%…”
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I just want to shop for groceries, not waste my time playing games. I simply check out specials, stock up if it’s feasible — and viola! Massive savings, no hassle.
….as a matter of fact, one large chain in BC deliberately inflates their prices only to then knock prices back down where they should be, IF you produce their very special discount card, that is. And consumers fall for it, time and again.
California water troubles mean a much higher price for fresh foods…wait the impacts are barely felt yet.
This will make high RE prices meaningless, or worse.
Very dry in much of the US. What happens to food prices in general in the future?
Can’t eat, then what?
——
Watch for the Keystone water pipe proposal and lobbying.
Will we hear Zoocasa ads offering to link us up with the best cardiologist in our neighbourhood for a cut of their fees?
#176 Arthur
Why would you not want a real person to assist you, rather than a robot? — Garth
———-
Robots are programmed by real persons to balance, leverage and automate the knowledge of real persons applied to big data at lower cost.
Picking investment products to achieve specific goals is a great target for automation, as it is based on analyzing large amount of publicly available data, large variety of investment products – with fairly standard formulas.
Robo-advisers do have the potential to excel in creating fully personalized balanced portfolios and fine tune them for optimized return, on very broad statistical basis.
Welcome to the future – affecting virtually all industries.
If people were even remotely identical, this would be great. But they’re not. Financial strategies have to be tailored to your age, risk tolerance, goals, relationships, tax status, family obligations and personality. Automate fast food and manufacturing. No money advice. — Garth
@#219 Alberta Water
“Watch for the Keystone water pipe proposal and lobbying…..”
++++++++++++++++++++++++++++++++++
Good one.
But I thought Alberta was running dry too?
Or are you thinking of sucking the last bit of water out of the Ogalala basin and pumping it north?
Nah. Lets go to Vegas and forget all about pesky things like water
Robo-advisers do have the potential to excel in creating fully personalized balanced portfolios and fine tune them for optimized return, on very broad statistical basis.
This is simply not possible. You can torture the numbers all you like to come up with a optimal portfolio using historical data, but it is very unlikely to be the optimal portfolio for the next 30 or 40 (or pick your time period) years. Also, the optimal portfolio is only useful if the client can execute it, that is, has the risk tolerance for it. There always will be some judgement in these decisions.
Garth, you did not answer my question as to how to find qualified financial advisors when one does not have a trusted source for referrals.
#220 Al — “Will we hear Zoocasa ads offering to link us up with the best cardiologist in our neighbourhood for a cut of their fees?”
I’m sure there’s somewhere on this great big Internet where failing cardiologists complain about their more successful peers’ lead generation practices, and the costs thereof.
If you close two solid deals this month, you can probably convince your broker to give you a few of those Glengarry leads. But it’s the start of the spring market, man. Get out there and start distributing doorknob hangers!
Ben Bernanke Just Started Blogging, and Already He’s in a Great Blog Fight With Larry Summers
http://www.bloomberg.com/news/articles/2015-04-01/ben-bernanke-just-started-blogging-and-already-he-s-in-a-great-blog-fight-with-larry-summers
DELETED (Anti-Chinese)
209 John said:
For your perusal:
The author of BoomBustOlogy “Spotting Financial Bubbles Before They Burst”, explains why he’s shortselling Canadian Real Estate. Below are some bullet poiints from the compelling 9 minute BNN interview, worth listening to – Editor Money Talks
http://www.bnn.ca/Video/player.aspx?vid=582499
******************************************
John, thank you for the link to the man who explains in a calm manner that Canadian house prices look over-valued and that a decline is very possible, even the potential of a 50% decline.
But the notion that he said that he is short-selling Canadian Real Estate is something you apparently imagined.
BNN did interview him under the topic of Short Selling Canada but he himself in this clip did not suggest anyone do so, did not indicate he would do it and did not address how it could be done.
I realize your bullet points were missing…
Declining to buy a house at today’s prices if FAR different than shorting.
Markets closed for the Good Friday holiday. Checked values they are holding steady, that’s good news.
Each week brings its own panics, and problems, but we grizzled ones ignore the bullshit. It never matters.
All, have a great Easter, Passover, or Eastore weekend.
We are doing “better” than we deserve!
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And if your a GOVT WORKER you also get Monday off with this phoney Easter Monday they have created while the taxpayer works. Govt is so brainwashed and stooooopid I called my MLA and actually talk to him……he thought Monday was a stat holiday for everyone.
Yup…..Govt cares only about itself…..and is doing a great job parasitically destroying everything it touches.
We all know Toronto and Vancouver are booming.The house prices reflect people have a lot money.
Another city that is selling houses quick is Dallas.My realtor sent me an email of a rental house for sale 2006 2150sft that rents for $1275 a month for $105,000.It sold in 10 minutes.That same house in Victoria would sell for over $600,000.Obviously wages must be low there compared to Victoria.
Rising house prices reflect rising debt, not rising incomes. — Garth
#221 Robo-adviser
If people were even remotely identical, this would be great. But they’re not. Financial strategies have to be tailored to your age, risk tolerance, goals, relationships, tax status, family obligations and personality.
Automate fast food and manufacturing. No money advice. — Garth
—-
Funny how everyone wants to automate other people’s industry.
Everyone feels that more and more human activity can be assisted by technology to a level which erodes the price of human labor.
The coming more advanced generations of robo-advisers will excel exactly at taking into account all the variables you mentioned.
The best money advice for money advisers might be to become owners while they can of the more and more sophisticated robo-advisers, instead of trying to fight them.
There is no good historical track-record for fighting emerging technologies.
Who’s fighting? If people want to save a marginal amount by trusting a computer program to give them the *new* version of a mutual fund, go for it. Time will prove this is a dumb thing to robotize, as it was in the past. — Garth
#20 John on 04.03.15 at 7:23 pm “Meanwhile there’s some tough news for the virgins from CMHC. Anyone putting down less than 10% of the price of a property (which includes most first-timers) will soon be paying a higher premium for mortgage insurance – about 15% more. The increase comes into effect this summer.”
The government is behind this move.
It stimulates panic buying in advance of the rate increase.
The timing is impeccable.
a couple of months before the election.
The stats will be coming in just nicely for them.
#215 #133: “But how can we trust the adviser’s advice.” “You can trust Garth. How many advisors does any one person need?”
People trusted Bernie Madoff. The only trust that is warranted when entering into a financial contract with someone is that which provides full recourse when contractual terms are broken. But last time I looked, the typical adviser contract explicitly waives any guarantees as to the quality of the advise, specifically rhe performance of the recommended investments. Imagine a dentist waives any guarantees as to the quality of the dental work he will be performing on you! So, trust is hard to come by in the financial advise business. Please correct me if I am wrong, but do use facts.
Actually Madoff held out unreasonable returns, and investors’ greed made them blind to the unrealistic nature of the relationship. If you want a guarantee, buy a GIC. And don’t ever get married or have kids. — Garth
@LL1
The way you verbalize your experience with financial advice and the markets makes it seem like the problem could have been your expectations, understanding, and perspective on investing.
For example, people that go to Vegas use terms like “win” or “lost”. Investing is a different game. It’s not zero sum like Vegas is. The ones who do it well are looking for growth, manage risk, take profit, rebalance, etc. There’s really no “winner, winner chicken dinner” moment. Nor should there be a moment when one has “lost”.
Wealth accumulation (or management) is a process, not an event.
So when I think of trusting my financial people, I don’t think of them actually saying the words “trust me”. I’d probably run and not look back!
I think of my financial person saying “Unless you are wanting to change your goals, risk tolerance, lifestyle, and age of retirement, that investment is outside of your strategy and risk level. I’m advising against it. Let’s see if we can find something more suitable that gives you the exposure you’re looking for, without abandoning your overall plan.” That’s the kind of thing I feel like I can trust.
Until you can understand and accept what I’ve said here, you might be right to stay away from the markets. History shows that over time they will reward prudence and steadfastness…
but will eviscerate fear and greed.
“Automate fast food and manufacturing. No money advice. — Garth’
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Hey wait a minute Garth….I’m in manufacturing.
We take raw materials and produce custom machined parts. But not for much longer. Three-D printing (or some variation) is going to completely replace our skill set, in the not to distance future.
When a young person asks me about entering my trade, I suggest they become plumbers.
Your field along with 100’s of others, are comparatively speaking, the low hanging fruit in the Robo / Nano everything future, that is on our doorstep.
It’s all good, just more time to get out on the bike, now I just need to find a longer riding season.
Investing in assets to make a decent return is but one part of the financial planning process. Equally important are tax strategies, income splitting, retirement and estate planning, plotting for your kids’ success and a web of other issues. Every life is unique, and anyone believing a robo approach will work for anything other than the most simplistic of investment tasks, is a fool. — Garth
“Every life is unique, and anyone believing a robo approach will work for anything other than the most simplistic of investment tasks, is a fool. — Garth”
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We can only command high value for our experience and services when said services are uncommon.
Technology will address and replicate every concern you voice.
Your only special, till you aren’t.
Hey Garth,
I’ve been following your blog off and on for the last 3 or so years.
Now it is my turn for advise.
I live in Edmonton and plan on buying in the fall but are unsure of the market.
Do you have any advise or predictions in regards to the Edmonton market? We are looking for a modest home, nothing special, but nothing too much to fix up. Likely something in the 300 – 400 K range.
Thanks
Dan
#237 Dan
“I live in Edmonton and plan on buying in the fall but are unsure of the market.”
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Why even consider a committment (it ain’t an “investment”, my friend!) of 300K-400K into a market you have no confidence in????
If you’re ‘unsure of the market’, why not rent until you have some level of confidence about committing a huge chunk of your financial future to an asset that makes you nervous?