Remember all those doomers on the weekend telling you stocks would tank on Monday after one aberrant US jobs report? What happened? The market went up. About 120 points. So much for the Zero guy and his moaning sackcloth disciples. Wrong again.
Of course, markets could shed as much tomorrow, and it would be no more consequential. The US Fed could raise rates a quarter point in June, or September. Or not. It wouldn’t actually matter. The next labour market report could be another stinker. Corporate profits could fall in the coming quarter (and are expected to). But it won’t mean much.
There’s no financial crisis ahead. No 2008 rerun. No currency crisis. No debt bomb. No bank bail-ins. No systemic collapse. Greece can slide into the ocean. Oil can go to twenty bucks. None of it will matter unless you’re a short-term trader trying to make money on volatility, or a nutbar convinced he needs gold nuggets to bribe guards at a FEMA camp after military rule is imposed.
For people investing with their retirement in mind, or their kid’s education in fifteen years, it’s just noise. Ignore it. Build a portfolio, rebalance it once a year, invest what you can routinely, rinse and repeat. There are just three things demanding your attention.
The first was the subject of yesterday’s pathetic offering. Balance.
Every portfolio should have safe stuff as well as growth assets. That means mixing in bonds, preferreds and cash with REITs and equity-based ETFs. In a 60/40 account the forty percent allocated to fixed income should be half bonds (government, corporate and high-yield, for example) and half preferreds (a basket of them is good, and rate resets are best). You can mix in a little cash in a high-yield account – maybe 5%. The rest (growth assets) should be overweighted to US and international and underweighted to Canada. If your portfolio’s big enough, have ETFs for large caps, medium and small companies. And the real estate trusts should be held at 8% or so of the total.
That constitutes balance between fixed income and growth. It also shows the second major principle to guide you – diversification. For example, US small caps have shown the best long-term performance, but because they’re volatile and inconsistent the weighting should be low. Mix in the major indices, like the S&P and the TSX 60, for more predictability and dividend yield. Add the REITs for growth and income not related to the stock market’s performance. And ensure you have the geography right. Canada’s weak now and likely to stay that way. Fight the home-country bias that is bleeding so many portfolios. And you can invest in US or international equity ETFs which are hedged in Canadian dollarettes. No need for a currency hit.
The third element is tax. Bonds pay interest. Preferreds pay dividends. Equities yield capital gains. All three are taxed differently, at varying rates. TFSAs shelter asset growth from tax, but are funded with after-tax dollars. RRSPs do the same, give a tax break when you contribute, but the proceeds are taxed as income. GICs are taxed similarly – fully, at your marginal rate.
So, put the bonds in the RSP. Put the lowly-taxed stuff in your non-registered account. Have the volatile, higher-potential assets in your TFSA. And remember that interest on money borrowed to invest is deductible. Money borrowed to buy a house is not. Money borrowed against a house to invest is a tax write-off. Rent received from an investment property is taxed as income, heaped on top of your salary or wages. Mutual fund fees are not deductible. Investment fees are. You can earn $50,000 in dividends and pay no tax. Earn $50,000 at your job and pay $8,700 in tax. Earn $50,000 in capital gains and pay half that. As I’ve told you before, the tax system is skewed in favour of people who earn money from investments, not from working.
So where are we?
On Monday the Bank of Canada tried to warn people the oil thing is getting worse. Spreading. “Lower oil prices continue to dampen overall sale outlook of firms, weighing on investment and hiring intentions,” it said. Economic growth was probably negative in the first quarter of the year, which means we are going in reverse. The coming jobs reports in this country will likely be grim. That’s bad for real estate.
But all this should bounce off a balanced and globally-diversified portfolio. If rates go down a little more, bonds will pop, as they did in January. US expansion will continue. Companies will pay their rents to the REITs owning their buildings. Life will inch ahead. If you’re 35 and stick with you, you’ll be one happy dude at 55.
Today I’d actually intended to write about the 57% decline in house sales in April this week in Calgary, the collapse of the oil fields in southern Saskatchewan, and the juxtaposition with $1.9-million average detached houses in urban Van. But I’ll leave that lesson for another day.
If you want snuff journalism, you know where to go.
263 comments ↓
Dear Lord,
Canadians are truly foolish. That is why your “loonie,” as you like to call it, has been crushed in the last year. $0.80? Get used to $0.60.
I don’t even know what to say about your debt-to-income levels. Or your unemployment rate. Or your weather.
God bless the U.S. of A.!!! Woo hoo! AmeriCUH!!!
Garth,
thanks for the road map.
It’ll help.
The old saying “Put your nose to the grind stone and save, save, save…” always applies.
stay away from bonds in a declining near zero rate environment, you will get creamed in long run. The big exodus from bonds into stocks is still to happen.
Bad advice. But consistent. — Garth
Thanks for this helpful explanation of how different types of income are taxed.
Thanks, Garth! Balance, diversification, taxes and where to put assets for best overall return; you covered a lot of territory in just a few words!
After the weekend’s troll-orgy, I’m looking forward to the comments on today’s post!
Please keep up the good work!
First!
“a nutbar convinced he needs gold nuggets to bribe guards at a FEMA camp after military rule is imposed.”
I wonder where the nuggets will come from… LOL
Garth,
Do you recommend canadian or US REITs in a portfolio. Any particular ones?
Yes, I’ve talked to people in southern Saskatchewan. Gotten awfully quiet down there. No problem finding a place to rent… or buy. No longer getting frustrated with having to follow oil trucks on the highways going 80 klm/hr. Easy to find a seat any any restaurant now. Most contracted employees have been laid off and trucking companies are selling off assets.
Times have changed. For now, the party is over.
Exactly what I said would happen, Garth claims a 100 point gain in DJIA is evidence everything is awesome.
No different then a realtor pointing at housing increasing last month in toronto and vancouver as evidence that everything is awesome.
All that said completely agree on everything else. Just do not share the same sentiment as Garth on the state/future of the global economy.
Learn to read, Zero disciple. I said the gain was as inconsequential as the loss you predicted. — Garth
Is the currency hedging a must-do? A big part of my US and EAFE performance has been the weak CAD (and I realize it cuts both ways, but aren’t currency moves part of the geographic diversification we are aiming for?)
“So, put the bonds in the RSP. Put the lowly-taxed stuff in your non-registered account”
At this point. should the bonds really go into RRSP? The yield is low. so the bond part is used more for balancing.
If interest rates are going to rise
Isn’t it better to hold bonds in taxable account, and only move them to RRSP after the yield becomes higher (claiming a capital loss in the process)?
Stop overthinking it. The bonds are there to calm and hedge the portfolio, not to generate capital gains or losses. — Garth
I continue to disagree with Garth on investment strategies somewhat beyond differences depending on peoples situations.
Don’t need to invest in preferreds. A good quality standard dividend paying stock is fine. Also because of different tax rates Canadian dividend stocks are tax advantageous for holding outside of a registered account. US dividend stocks are good for inside an RSP to avoid witholding tax on those. REITs are good inside a TFSA to avoid the tax on the interest portion of their dividend payments and well as the tax on the dividends themselves of course.
Here is were many may disagree with me but other than maybe 1 good Bond index fund I don’t believe anyone should be buying bonds right now with interest rates set to rise. If you are buy short term bond index funds such as Vanguard Short Term Bond fund (TSE:VSB)
One other thing:
“US expansion will continue”
Clearly your ignoring the hard economic data. Its pointing towards zero growth, many other indicators are pointing towards contraction in freedom-land. Just mystifies me how someone who purports to be knowledgeable on finance can ignore all the data that shows he is wrong (about expansion) and parade a single day of market gain as evidence he is correct.
Fortunately, if your balanced and diversified as Garth suggests you are insulated from your own emotion/speculation (wrong) about the direction of the markets.
US growth will not be zero this year. But even if it were, this would be inconsequential to anyone investing with a reasonable time horizon. Yours appears to be about four hours out. — Garth
Garth on youtube:
https://www.youtube.com/watch?v=TPnfaCeogz4
Four years old, done as a favour to a blog dog who spent $2.89 on production values. — Garth
“Today I’d actually intended to write about the 57% decline in house sales in April this week in Calgary, the collapse of the oil fields in southern Saskatchewan, and the juxtaposition with $1.9-million average detached houses in urban Van. But I’ll leave that lesson for another day.”
tomorrow?
It matters if I want to go to Florida for vacation. Guess I’ll go to Manitoba this year.
First
again.
“And remember that interest on money borrowed to invest is deductible.”
That’s only true if there is reasonable expectation that the stock/ETF will generate income. If it’s something like HXT or HXS where the the total-return-swap structure removes dividend and generates an increase in share price, I don’t think CRA will allow interest to be deductible.
http://www.jamiegolombek.com/articledetail.php?article_id=1376
Now why would you buy that? To build the portfolio I described, interest is deductible. — Garth
Also, possibly for HBB as well, as in interest not deductible if you borrow to invest in HBB.
Of course it is. — Garth
On skype with the MiL yesterday, live from Northern BC. She told us she heard some guy saying that the US banking system was going to fall over etc etc.
She agreed with him. So that pretty much reassured me the world was safe.
balance and diversity is the only way the human species will survive …
look at canines they knew what do to
Well that was very sensible, simple and upbeat.
I just got my last T3 slip for my preferreds. I thought that my tax software was wrong when it charged me only an additional $40 of income tax on several thousand of preferred share income.
Thanks for the tips Garth! I can now take my babe out to White Spot for a burger with the tax hit I avoided :)
She will never forget the moment. — Garth
#11 Johnny Montreal on 04.06.15 at 6:34 pm
Garth on youtube:
https://www.youtube.com/watch?v=TPnfaCeogz4
Four years old, done as a favour to a blog dog who spent $2.89 on production values. — Garth
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And that’s back when $2.89 was real money.
Seems to me that everything bubbles up when cheap money if flying everywhere…
Cheap money does not discriminate against any asset class.
It’s all good…
Thanks for the more detailed portfolio description… it’s a thin line to walk to describe what you sell without telling too much and giving it all away for free.
Now if we could get Smoking Man to release his long waited FX trading manual with all the small prints.
We may just have to wait longer, now that he has fallen in love with reverse-selfie photography. He even cheats on JD with cheap blond wine lately.
Hi Garth, I’m just wondering if you(opinions, articles, references, formulas from all are welcome) have an opinion on securing a loan with an investment portfolio to buy more investments?
That 4% differential is screaming at me!
Imagine if the internet and this blog existed say in the 1930’s when the great depression was on, or 1970 when nixon closed the gold window, or 1987 when the big stock market collapse occurred. I wonder if the doomers and gold lickers, would have been saying the same thing today as back then or even worse!
Stocks.
Bonds
Vancouver & Toronto real estate.
Or you could diversify a portion of your book and look to make actual positive cash flow in Memphis RE
I checked Zillow.
Zestimated rents and craigslist agrees that positive cash flow is very abundant there.
Balance Portfolio, Rule of 90, US real estate at mortgage rates you kids will never again see in your life.
7 Memphis house for the price of 1 studio apartment in Vancouver.
No brainer
Cheap money does not discriminate against any asset class.
I disagree here. “Cheap money” is extremely bad for asset classes which take a significant amount of investment to produce.
For instance, in a cheap money environment, it is cheap for firms to borrow to make long-term investments. Hence, margins of such firms are squeezed on account of more competition. Increase interest rates, and margins in such industries actually expand.
If you believe that a rising rate environment is in the future, which seems pretty logical (although disagreements about timeframes abound!), there are plenty of inversely correlated investments that can be bought. Typically these investments are in very capital intensive industries, for which high cost of capital actually represents a ‘moat’ against formation of new competition.
Examples of industries that benefit from higher rates include railways, pipelines, utilities, capital intensive advanced manufacturing (ie: semiconductor fabs), telecom infrastructure owners, mining companies with producing assets. Examples of industries that suffer from higher rates include the FIRE sector, marketing companies, companies depending heavily on consumer consumption, healthcare and defense. The latter being largely on account of government austerity that would typically be part of a high rate environment.
Further to my previous post, the fact that some investments do well in a falling rate, and some do well in a rising rate environment is precisely why a person wants to be diversified. Because if you have it mostly tied up in assets that have outperformed over the past few decades (ie: houses, US stocks, bonds/GICs, etc.), the next few decades could very well be a giant surprise to the downside. Logically (and mathematically), no single sector or asset class can perpetually outperform in the economy. Every asset class that is productive eventually sees its day in the sun! And most of us aren’t smart enough to time such with any level of predictability.
#25
Thanks for the tips Garth! I can now take my babe out to White Spot for a burger with the tax hit I avoided :)
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Really impress her. Go to the Keg instead.
So….a senior economist at the BOC said this morning on BNN that ‘there was anecdotal evidence’ that ‘foreign buyers’…( note to Garth…not Chinese Canadians…and not any other Canadians either) are influencing that markets in Vancouver and Toronto.
Now Garth…you have been strident that no HAM exists to influence the markets. Are you still going to continue to call all comments providing evidence of HAM…’racist’ etc as you have been doing? Does this mean the staff at the BOC are ‘rascist’?
Of course foreign buyers exist in major cities. But they do not set overall market levels. Their influence is greatly exaggerated and used as an excuse by those who feel entitled to what they cannot afford. — Garth
Balance without a Margin Account?
So, put the bonds in the RSP. Put the lowly-taxed stuff in your non-registered account. Have the volatile, higher-potential assets in your TFSA.
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I would think that much of the population would struggle to max out a TFSA at $5,500 per adult per year.
Another huge chunk would struggle to do that and then max out their RRSP. (I believe very few people without a pension plan manage to max the RRSP at 18% of earned income to a maximum of $24,270.)
Another chunk of people have RESPs to invest in.
So, I would imagine that a huge proportion of the working population would have no additional funds for a taxable account because they were unable to use up all the tax-advantaged investment room.
So, if one has only a TSFA one can put all the balanced assets there?
If one has TSFA and RRSP one could balance across those two with no taxable account and favor the TSFA for the more heavily taxed categories?
Or should everyone have a taxable account even if they have not maxed their registered accounts?
This blog is not for the huge proportion of the population. In any case, everyone should have a non-registered investment account. — Garth
Hi Garth,
most banks are offering investment LOCs type loans. are these the same as investment loans for which i can deduct the interest?
Thanks
Yes. — Garth
Yes, maybe someday there will be Fema camps, or World War lll, even a nuclear holocaust. However, in the meantime I will continue to enjoy my life while also trying to help others as much as I can, without enabling insane behavior. Looking after ones finances with prudent stewardship serves me well in aiding my living a Freedom First lifestyle, but all areas of life require the same diligence to keep living life a pleasure and not a burden.
Great picture today. Looks like the boy is being husband trained already, learning his place in the family of the 21st century. My worst nightmare. Someone having me on a leash.
There’s no financial crisis ahead.
Many people are still in one, whether self-inflicted by wrong/bad/stupid decisions. All economies are doing what their economy is supposed to do, push wealth upward. There is a financial crisis ahead for many more people to come, not for the economy.
No 2008 rerun.
Thanks! Mr. Profundity.
No currency crisis.
No, but their currency will afford them less. Maybe a gerneral or personal crisis, but not a currency crisis.
No debt bomb.
It already exploded, few times too. You too often speak of its casualites.
No bank bail-ins.
Well not explicitly, its’ just that it is implicity obvious.
Nobody, including you Garth, knows whether ir not the Fed will raise rates this year. I agree that we should invest, particularly inline with your recommendations. The financial/economic indices in the U.S do look better than everyone else’s, but it is not a reflection on what is happening on the ground level.
Sorry, I should’ve said balanced etf portfolio to buy more of the same.
Problem is that opinions are like a-holes, everyone has one. But that’s just my opinion.
“on Monday after one aberrant US jobs report? What happened? The market went up.”
And there’s the rub.
There is no reality or price discovery in the market anymore. There is just folks dumping their blood sweat and tears into it hoping for the best with no sell plan.
How RRSP Income Tax Works
http://www.michaeljamesonmoney.com/search?q=rrsp+myth
If you contribute $10,000 to an RRSP and get a $4000 refund, think of the RRSP as having a net $4000 of the government’s money and $6000 of your money. Think of the RRSP as being 60% yours and 40% the governments. (After all, that is in effect how it was funded)
You will find that if your marginal tax rate is lower in retirement than 40% that you will get to keep MORE than 60% of the RRSP. Your share of the RRSP has actually grown at a negative tax rate. Therefore feel free to keep a balanced portfolio in their. You have in no way lost the benefit of the dividend tax credit or the 50% rate on capital gains. This is because zero tax (or even negative tax if marginal tax rate is lower) on your 60% share of the RRSP is actually lower than the tax on dividends or the tax on capital gains.
This may sound strange but it is true.
(Yes, the marginal tax rate in retirement should also consider impacts on old age pension clawback)
#267 Shawn Allen on 04.06.15 at 7:10 pm
Government Worker Bashing?
Joe at 257 said:
The difference is that government worker gets paid from tax payers money.
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And the point is?
Yes the government has to pay when it needs employees.
Should the snow plow driver, the policeman, the teacher and the nurse feel guilty about where the government gets its money?
****************************************
It never fails. Always the cherry picking of the 8% of Public Sector employees who actually “work” and ALWAYS leaving out the 92% that push paper and get nothing done. Always. Never fails. Happens every time.
Well eventually all govt destroys itself……this will be no different.
requesting additional explanation on using the Cad hedged ETFs please… i think I had read on Couch potato that in the long run its always better to stick with non-hedged versions… i admit my ignorance and humbly request advice GT! Thanks!
Life as a balanced portfolio:
Paid off big house bought in YYZ at year 2000, mixed with a $M+ boring Turner-portfolio, spiced up with a $200K futures fun, practicing adrenalin-resitence, mastering stoic entry points and exits like a clockwork for oranges, pleasing random pussy cats, hedging luck from quarters to quarters.
#8 NoName on 04.06.15 at 6:25 pm
“a nutbar convinced he needs gold nuggets to bribe guards at a FEMA camp after military rule is imposed.”
I wonder where the nuggets will come from… LOL
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Lots of nuggets up in the Yukon.
Watch “Yukon Gold” on the History Channel.
Get sluicing!
Great post as usual Garth ..
Have you seen this article today :
Mohamed El-Erian: Should we be worried that one of the biggest names in investing has put most of his money in cash?
http://business.financialpost.com/investing/mohamed-el-erian-should-we-be-worried-that-one-of-the-biggest-names-in-investing-has-put-most-of-his-money-in-cash
Any thoughts from your side ?
A bell rang in my head with your voice saying: “keep investing” – am I right :)
zedgt87 on 04.06.15 at 6:30 pm
Exactly what I said would happen, Garth claims a 100 point gain in DJIA is evidence everything is awesome.
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But seriously are you day trading the indexes???
Whether the indexes are up or down 100, 200 or even 300 points in a day/week/month means nothing, absolutely nothing, to somebody invested long-term.
But if you really think things are going into the crapper, I hope you have the conviction to short the market.
Stop overthinking it. The bonds are there to calm and hedge the portfolio, not to generate capital gains or losses. — Garth
————
Good advice, Garth.
If I print and sell a t-shirt “Stay calm and buy bonds”,
do I you royalties?
#27 bubbles to babbles on 04.06.15 at 7:02 pm
Seems to me that everything bubbles up when cheap money if flying everywhere…
Cheap money does not discriminate against any asset class.
It’s all good…
Thanks for the more detailed portfolio description… it’s a thin line to walk to describe what you sell without telling too much and giving it all away for free.
Now if we could get Smoking Man to release his long waited FX trading manual with all the small prints.
We may just have to wait longer, now that he has fallen in love with reverse-selfie photography. He even cheats on JD with cheap blond wine lately.
…….
Ha, I should go back to JD, it hurt me bad last time. To much, in to little time, no puke refex, it was bad, perma damage for sure. Will save JD for big success or failure days.
Speaking of Failure I lost a cool Million last week, kid is down to 170k from 250. Not enough for JD.
You really want this. Fx thing.
Wait for bollanger bands to compresse, look for a strong move on one min chart, while looking at 60 min gage make sure RSI are going in same direction , hit it hard, make it to first base then out.
If you don’t get any parts of what I said, don’t do it..
In fact 99% of people , rookies who try this get wipped out.
My advantage , I have BBG terminal , and some very smart bloody people all around me..
Sure I kick there ass on the long term predictions, but short daily shit they rock.
So if you want to play, demo account only.
I fully expect my kid to get wiped out.. That’s why he started his boot camp code smithing cource today.
A plan B.
PS 16 students, all with degrees, all shit jobs or no jobs.
My kids already made two apps before the course has even started.. Apple don’t fall from the tree.
I’ll bet anyone he will be top in his class, why, he wants to be there to learn to make his own apps.. Others just want a better job. Schooling I tell you.
Hooray,
According to your not so balanced host, recessions are no longer a future possibility.
Why not? — Garth
#37 my fav balance on 04.06.15 at 7:41 pm
Life as a balanced portfolio:
Paid off big house bought in YYZ at year 2000, mixed with a $M+ boring Turner-portfolio, spiced up with a $200K futures fun, practicing adrenalin-resitence, mastering stoic entry points and exits like a clockwork for oranges, pleasing random pussy cats, hedging luck from quarters to quarters.
—————-
Missed the “cats” part on first read…
I’m no Warren Buffett but I feel safe in saying at 66 I’ll never miss a meal.
I have NO desire to “time the markets” however I’m convinced that we have a correction coming of at least 10%. Most likely more.
I’m all cash which goes against everything that this blog preaches. I believe that the US Fed will raise interest rates, maybe in September, maybe later. I think I understand that that will hurt the EU, JPY, Canada and the rest of the world. That alone will hurt the US. I believe the numbers put out by my government are sooo manipulated that it’s well past laughing about.
I’m not a doomer. I’m not a prepper. I’m not a gold licker. But I really believe Mr. Turner has a lot of “I told you so’s” to swallow.
I believe a balanced portfolio is the way to go. My only concern is when is the right time to jump into this balanced portfolio? I’m all cash. Paid for home (21%), no debt of any kind. 66% of my SS check that I will start taking next March will cover all my expenses. I just wish Mr. Turner would be a little more helpful when it comes to the “when” for people like me that has been controlled by fear for years. I don’t need or want more income. Your punished in America for preparing for retirement. Medicare is income tested. I’m sure it will get worse.
Higher interest rates causes higher interest payments causes more welfare debt causes higher interest payments causes more welfare debt etc.
I just want to leave more to my grand kids who will really need it.
Purpose of this 4 drink rant is I’m begging. HOW?
“As I’ve told you before, the tax system is skewed in favour of people who earn money from investments, not from working.”
So why is that? I’m guessing it’s because investing is “risky” compared to working and investors – especially a venture capitalist is rewarded with the tax advantage because he is benefiting society by making funds available. Anyone have any views on this?
HAM is not trend setting? Here is today’s Globe & Mail:
(just note …. 15 offers, non of them subject to financing…). Of course, Chinese are not the only one buying. Not even a majority among those who are buying in Vancouver, but they are definitely a trend setters:
“During the open house on March 29, Ms. Morris exhausted all of the 28 feature sheets she printed in anticipation of a typical turnout. By the end of the afternoon, more than 100 people toured the 52-year-old bungalow.
Ms. Morris began accepting bids one day after the open house, attracting 15 offers – none of them subject to financing.
“It has gone berserk,” she said. “Four of the offers were really close.”
The winning bid turned out to be $2.48-million, or nearly $2-million higher than the selling price 15 years ago. The house sold for $192,000 above the asking price of $2.288-million. The number eight, considered lucky in Chinese culture, is a common sight in Vancouver in real estate pricing for listings and sales
Thanks for posting over the holiday weekend, and thanks for tonight’s post…possibly the best-ever!
Government “Worker” Bashing
VanDoom at 43 responded:
It never fails. Always the cherry picking of the 8% of Public Sector employees who actually “work” and ALWAYS leaving out the 92% that push paper and get nothing done. Always. Never fails. Happens every time.
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VanDoom surely more than just 8% of government workers actually work?
I told you a million times not to exaggerate.
In any case if the government is willing to pay a non-productive worker in a position that adds no value, should we insult that government “worker” or instead focus on changing the way government acts?
Did Adam Smith not teach that the economy is best off when we all seek maximum gain for ourselves?
Would you have said allegedly idle government worker quit the job and put his family at risk? Would you? Really?
#170 Ralph Cramdown on 04.06.15 at 9:54 am
While the North American underclass slept, police forces have turned paramilitary. When I was a kid, police wore blue shirts and carried revolvers. The other day a Calgary officer had a police issue assault rifle and 2 28 round magazines stolen from his car. Civilians are on notice that police will use deadly force at the slightest provocation, with few consequences.
==========================
According to this website, 1,100 people were killed by US police last year, up from 763 in 2013.
“Let’s look at our immediate neighbors to the north, Canada. The total number of citizens killed by law enforcement officers in the year 2014, was 14; that is 78 times less people than the US.”
http://thefreethoughtproject.com/police-kill-citizens-70-times-rate-first-world-nations/#rBGD2LV7hvVi1tuh.99
Before we get too complacent, let’s note the growing number of cases in which mentally disturbed people are shot by Canadian police. The latest case:
http://www.timescolonist.com/victoria-mom-learned-over-police-car-radio-that-son-was-shot-dead-1.1807594
Neither of our otherwise data-crazed national governments seem to properly record these deaths. The BC Civil Liberties Association found data hard to come by.
“Coroner’s data from British Columbia and Ontario show that between 1992 and 2007, about one third of police-involved deaths occurred in police cells. Another quarter of all police-involved deaths in the two jurisdictions
involved an auto pursuit. The data provided from the two jurisdictions did not allow direct comparisons regarding other circumstances of death. The B.C. data revealed that a significant number of individuals died through a police shooting (n=35 or 13.1%).
https://bccla.org/wp-content/uploads/2012/03/2012-BCCLA-Report-Police-Involved-Deaths3.pdf (see page 8)
#4 Sheane Wallace on 04.06.15 at 6:20 pm
stay away from bonds in a declining near zero rate environment, you will get creamed in long run. The big exodus from bonds into stocks is still to happen.
Bad advice. But consistent. — Garth
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It depends on the time horizon. In short term due to declining interest rates bonds increase in market value. But the yield in nominal terms is ridiculously low. Less then inflation. Hence nirp – negative interest rates.
It can go for 2-3 years more. The carry trade. Due to central banks QE.
But then it will implode and with any increase in rates bonds will tank. The biggest bond bubble at times of max government debt.
To advocate buying bonds now is not different then advising on buying houses, the prices could still go up for a year or two.
Dividend aristocrats internationally are the best investment these days as well as… gold or derivatives (max 5 %)
In mid-long term.
Bond holders and savers will get creamed.
Should the REIT allocation be higher than 8% for those that personally rent?
No. — Garth
Garth,
My Financial Guy says everybody should have Real Return Bonds in their portfolio?
yay or nay?
Sure. A small weighting. — Garth
Why Investments are lightly Taxed
Will at 54:
“As I’ve told you before, the tax system is skewed in favour of people who earn money from investments, not from working.”
So why is that? I’m guessing it’s because investing is “risky” compared to working and investors – especially a venture capitalist is rewarded with the tax advantage because he is benefiting society by making funds available. Anyone have any views on this?
*******************************************
You’d almost think that the people who make these rules are part of the investor class instead of middle class wage slaves? Almost, right?
@Sheane Wallace, post #4:
Your timing is off by almost 4 years. The time to make the exodus from bonds into stocks was in August 2011, when bonds were expensive and stocks were cheap.
#40 baz
I laughed at that this morning. Without even reading it.
Two things come to mind when I see these headlines.
1. Editors save this stuff for volatile down days cause people will read it.
2. As the market chugs ahead they will have to chase.
The truth is that the market moves for many reasons. Most of them are quite forward looking. The media tries to find a story to suit short term moves.
Having said that I would say that it is generally good to be informed about what big money is doing. In this particular case I’ll be more interested when el erian sounds the all clear. For rebalancing purposes:)
He’s got nothing on you baz.
I don’t think there will be much bartering at camp FEMA, but I am not about to find out
Solid investment advice though
Thanks
Whoa, GT responded to my post, that’s a first!
A few reasons to use HXT and HXS. First, for those people who unfortunately ran out of room in TFSA/RRSP (or is it fortunately) and have to invest in taxable account, swap structure removes dividend/foreign dividend (which is taxed as regular income). This removes any annual taxable event, and allows them to compound tax free.
Second, I’m in mid-30 and still have 20+ years of working life left, I don’t need the income from dividend at this point, since all dividends are re-invested anyway, so why not HXT/HXS, right? When I retire I’ll start selling them in my taxable account to generate income.
Third, HXS removes US dividend, which is taxed as interest/regular income, and is atrociously tax inefficient. Swapping US dividend to capital gain removes the inefficiency.
A few cons with HXS are that its MER is higher, CRA might deny its existence later on just like forward-based ETF’s that were eliminated in the 2013 budget, and HXS only follows S&P500, not total market.
Higher MER is unavoidable, and crackdown by CRA, that’s a risk I’m willing to take, since it only means I’ll have to sell it when it happens, and in the mean time I’ll enjoy the tax advantage. If you want US total market, you can supplement HXS with VXF, 80/20 split should be the same as VTI/VUN.
#53 BobC
when the time comes with the cash short bonds and buy gold stock etfs, even some leveraged gold etfs (limited stake, if you have the guts), you will profit handsomely.
When the Pipeline News floats this article it must be tough in Saskatchewan.
http://www.pipelinenews.ca/features/production/get-that-ei-application-in-right-away-1.1815027
It is possible for a stay-at-home kidult with a crappy job and no student loans to max out their RRSP up to their $4000-6000 limit. If the kidult has intentions to invest, they can find the other $5500 to feed the TFSA.
I wonder what my portfolio would look like if TFSA’s existed when I was younger.
If you think Garth is wrong about foreign buyer influence you’re wrong.
If you think Garth is right about foreign buyer influence you’re wrong.
Fact is we simply don’t have enough data to accurately assess the impact suffice to say it does play a factor.
Flags to me are the diverging growth rate of detached homes vs condos/townhouses. Since 2010 attached housing has appreciated 4% per annum (still higher than normal) which detached is double digit. These prices are much higher, not eligible for CMHC insurance and well outside the affordability (even for the stupidest of the stupid) of the average resident. Banks simply won’t give you that much money. The money has to be coming from elsewhere. How much? I dunno.
Come 2025.
SFH in Vancouver at 5.2 million.
SFH in Toronto at 3.8 million
Looooonie at 48c US
Interest Rates at 0.5% negative.
Good evening all.
Garth, preferred have been down 7-8% this year. What is the main reason?
XPF is down 2% and pays 5%. Buy preferreds for yield, not capital gain. It will recover once the direction of rates clarifies. — Garth
#62 Doug in London
not really, bond yields are low again, hence bonds are expensive.
I posted an opinion that European and Chinese large cap ETFs are reasonably priced now then ever but is disappeared somehow. And they come with 4-5 % yield.
#14 Fred: “I continue to disagree with Garth on investment strategies somewhat beyond differences depending on peoples situations.”
**************
You go ahead and believe whatever you wish. Garth is doing wonders for me — a consistent rise — and I’m happy. I trust him completely and sleep soundly.
Reading book from John,bogle -little book of common sense investing
Once u read u will no what Garth is talking about
Please don’t ask who is john,bogle
#71 Rpert Pupkin and his prediction
bread (non GMO) at $ 30, coffee at $ 15?
Washed Up Lawyer on 04.06.15 at 4:42 pm
I continue to see the suggestion in the MSM that tech startups are locating to Vancouver. What a dumb thing to do. I would seriously doubt the acumen of a management team that would locate at Burrard and Georgia and try to staff up with employees that cannot afford to live within an hour of that location.
===================
You must be from Alberta where life is all about space to park your toys. This is about Vancouver where life is about Being Cool.
It’s an echo of the start-up scene in San Francisco where millennial techies will not join a company based in Silicon Valley. The Valley is not cool, it is totally suburban. You need (insert shudder) a car. You can’t find acceptable coffee there.
In SF they don’t complain about HAM, it’s all about rich techies driving up prices making it impossible for locals to buy property. Could be the same is happening in YVR condos.
I have a 30-something family member who has a well-paid incomprehensible tech job with a downtown software developer. He has two kids and they just bought an 800 sq ft condo in False Creek where he fondly imagines he can raise a family until they go to university. He was offered a better paying job in Surrey where he could have three times the space for the same money. Not happening. Ever.
At least, not yet.
“Thanks for the tips Garth! I can now take my babe out to White Spot for a burger with the tax hit I avoided :)
She will never forget the moment. — Garth”
***********************
So funny! It doesn’t take much to make some happy! :-)
#72 Ray on 04.06.15 at 8:50 pm
Garth, preferred have been down 7-8% this year. What is the main reason?
No QE for preferreds, only for bonds. In anticipation of interest rate increases, logical decline. A little too early.
#71 Rpert Pupkin and his prediction
consumers debt to GDP (real) – 500 %. But no bubble.
Will # 54,
“As I’ve told you before, the tax system is skewed in favour of people who earn money from investments, not from working.”
“So why is that? I’m guessing it’s because investing is “risky” compared to working and investors – especially a venture capitalist is rewarded with the tax advantage because he is benefiting society by making funds available. Anyone have any views on this?”
———————————————-
That what we want you to believe, but this is the truth.
People earning money via investments, have lobbyists.
People earning money via pay cheques, have debts.
Or you could diversify a portion of your book and look to make actual positive cash flow in Memphis RE
Funny you mention this because it’s spot on. Although I own 30 units in 2 separate apartment buildings in FL, I also own detached homes in Memphis/Arlington/Whitehaven. To net $400/mo rent on a $50k investment isn’t as plentiful as it was in 2009/2010 but it can still be done (albeit with less frequency).
My FL property manager deposits my $ at the end of every month and my TN property manager deposits at the beginning of the month (I coincidentally just got email notification of the deposit just before I read your post).
In short, the interviewee in the article will be friggin loaded by the time he turns 40. I wish I was 30 years old again. Hell I wish I was 40!
Garth’s diversified message is on the money for the masses. You may not get as rich as the go-getter in that interview, but you’ll do a lot less work and have a very comfortable retirement.
Doomers will continue to sit enviously on the sidelines. Poor as always. Hugging their worthless gold plated tin cans.
It is only natural to want to attack people who reject what you value and believe in. Name calling people attracted to this pathetic blog every day because you advocate a limit to the amount of debt a society can shoulder before the bubble bursts lessens your . These people you have called out in the last couple of days have something very much in common with you. They are thinkers. They may reject your values and what you consider wealth but they are thinking for themselves, something 95% of the population refuses to do.
The next time you point the finger in anger or pity at those who reject 3 collapsing buildings in a single day, perpetual war as normal or the inherent unfairness in the economic system remember your insecurities in the house of cards are showing.
‘Thinking’ and believing 9-11 was a conspiracy are mutually exclusive. — Garth
#77 Andrew Woburn on 04.06.15 at 9:01 pm
“This is about Vancouver where life is about Being Cool.”
Is being “cool” some kind of secret code for being a poor nerd?
I’m friendly with the owner of my 400 house, Memphis property management company and I forwarded your story along. I’m curious to see what they know about Azure LLC. It looks like Azure provided ‘cradle-to-grave’ RE investing opportunities in Memphis and Vegas.
Just to be clear, what this means is that the numbers and margins that are stated in that interview will NOT be what blog dogs will get if they hook up with Azure. It will be significantly lower. How low? Think about a relatively high dividend yield on a decent stock.
Lots of nerves in the championship game.
Does Bucky have enough game tonight?
Former BOC advisor David Wolf says Poloz will have to go to ZIRP because of oil shocks.
http://www.bloomberg.com/news/articles/2015-04-06/fidelity-s-wolf-says-zero-rate-inescapable-in-oil-shocked-canada
Also consider that anybody who wants to move significantly into Memphis RE or US RE in general, needs to get an ITIN, set up a local bank for their PM to deposit (eg BoA), file their 1040NR before April 15th (assuming you made a profit) and supply the CRA with their T1135 (again assuming criteria for # and/or value of properties criteria is met). Use cross-border accountant certified to file with the IRS/CRA.
‘Thinking’ and believing 9-11 was a conspiracy are mutually exclusive. — Garth
…
I’m intrigued, are we talking a Utopian or a Dystopian narrative .
God damn English is so hard.
Bastards keep distracting me from my fiction work.
Thanks Garth. Hmm, lots of great info. Will be reviewing holdings!
Also, saw this elsewhere… Reitman’s in trouble?
http://globalnews.ca/news/1918579/falling-traffic-to-malls-consumer-debt-fuel-retail-upheaval-reitmans/
Consumers may be paying down debt, or stashing the cash away, some suggest.
“What’s surprised us is the persistence of the weakness. We thought with lower gasoline prices, resulting in more discretionary income, we thought … [spending] would start moving up,” Paul Ferley, the assistant chief economist at Royal Bank of Canada said. “We haven’t seen it.”
…
Again.. in BC, what fuel savings??? Honestly, how much do they think one could possibly save? Probably affording those able to save with a couple extra lattes a week.
I think traders on the street operates in two modes… with and without a prior experience. All those issues you mentioned like greece, or jobs numbers, or oil, as long as the event is similar to a past experience they know how to deal with it (and make a profit at the same time). now if something new arises then you get a jolt of fear and a big sell off.
[…] Source: http://www.greaterfool.ca/2015/04/06/diversity/ […]
#38 Plex
Says who?
#41 Happity
Says who?
#53 BobC
“Medicare is income tested. I’m sure it will get worse.”
==================================
Bob, you’re as full of shit as a baby robin. SS is income tested: medicare is not! (Not counting the additional Medicare tax if your making over $250,000)
If you are making soooooo much money that you’re afraid of the personal income ceiling of the SS “test” for Medicare, then you’re a fraud and a troll. Get real! Better yet, tip the bartender and go home!
You also whine, “I just want to leave more to my grand kids who will really need it. Purpose of this 4 drink rant is I’m begging. HOW?”
Well, for the love of pot-roast and fried potatoes with bacon and green beans, put away the booze and get to work. I won’t even ask why you want to leave a red cent to your spoiled-rotten grandkids (who are no doubt anxiously awaiting your cirrhosis-induced demise), but that’s another story.
If you have so much cash that you’re worried about them, then you already subscribe to Forbes and they have all kinds of great ideas of how you can provide them with that cool Lamborghini.
Have you given a thought to a Trust for a needy straight-A student from that grubby little high-school that put you on the road to all this wealth and good fortune?
HOW? What a stupid question. From a guy who has everything?
More signs that the Ontario market is starting to collapse at the margins, towards the bigger centres.
Viceroy Homes, long-time pre-fab cottage builder, is about to go over the cliff. Haven’t paid workers for months, and online complaints over the last couple of years are horrendous. They gambled on the Asian market helping them from their Richmond BC office, and that venture has been a dud. Over 100 workers have not been paid since Christmas and their two plants (one in Port Hope) are already shuttered. Orders are collapsing, apparently.
Sadly this fits in with what some rural realtor friends told us, namely that Ontario (and likely elsewhere) cottage property values are about to suffer a prolonged crash, ahead of anything in major cities.
Looks like this will start this year.
VanDoom surely more than just 8% of government workers actually work?
I told you a million times not to exaggerate.
************ There are thousands and thousands of muni, prov and fed Govt buildings in Canada full of pencil pushers. Not police or nurses or teachers. This is not an exageration……
In any case if the government is willing to pay a non-productive worker in a position that adds no value, should we insult that government “worker” or instead focus on changing the way government acts?
************There currently exists no way to change this system of fat bloated inefficient govt. That is why Govt always destroys itself.
Did Adam Smith not teach that the economy is best off when we all seek maximum gain for ourselves?
Would you have said allegedly idle government worker quit the job and put his family at risk? Would you? Really?
**********So its okay for Finning or Suncor or a mom and pop to FIRE an employee (with a family) because business is slow AND they are being taxed into the stone age but NOT a taxpayer subsidized Govt worker? Really?
“To net $400/mo rent on a $50k investment isn’t as plentiful as it was in 2009/2010 but it can still be done (albeit with less frequency).”
At first glance, that might seem like a good return. However, $400/month net = $4800/year against $50k is 10.4X cashflow. Reserve even $500/year for depreciation (perhaps understated especially on a Florida property) and you’re at $4300/year. Tack on taxes at 35%, and that $4300 becomes $2795/year.
$2795/year against an up-front investment of $50k is a P/E of approximately 18X earnings. For an investment that sees rent growth, historically, of around inflation — that’s really not something to brag about. Although its dramatically better than what we see in Canada, with equivalent real estate trading at 35X earnings.
#53 BobC on 04.06.15 at 8:09 pm
Teach your grandkids about money and motivate them to be self-sufficient. Any inheritance you could possibly leave them will be finite. Ensuring they are skilled, adaptable, and resilient enough to be self-supporting is the real gift that keeps on giving.
#82 Leo Trollstoy
Shhhhhhh! Don’t discourage them!
Let’s start stock-piling dried pinto beans and beef jerky and 9mm, 45 ACP and 5.56mm ammo.
When the SHTF, we could exchange all of the above for their gold (99.99% pure only) on a Troy ounce/imperial ounce 1:1 ratio basis.
What say?
We blog dogs should somehow throw Garth an application day. In any case you have the best free blog and I sincerely thank you for your insights. I used to be a gold bug and had a more distorted view of the market. Without a doubt your blog has had a positive influence. Looking really forward to tomorrow’s blog. Garth for PM! A true blue conservative of the people.
#97 Interstellar Old Yeller on 04.06.15 at 9:54 pm
#53 BobC on 04.06.15 at 8:09 pm
Teach your grandkids about money and motivate them to be self-sufficient. Any inheritance you could possibly leave them will be finite. Ensuring they are skilled, adaptable, and resilient enough to be self-supporting is the real gift that keeps on giving.
…..
So true, you can’t do that living in a 5000 sqft house, with beamers and hummers in the driveway, golf and Yacht Club membership.
You’ll end up with, basment vidio gammers, drug addicted, and down right lazy kids.
Move to long branch if you really love your kids.
GT writes:
“Life will inch ahead. If you’re 35 and stick with [my program] you’ll be one happy dude at 55.
Today I’d actually intended to write about the 57% decline in house sales in April this week in Calgary, the collapse of the oil fields in southern Saskatchewan, and the juxtaposition . . . ”
MOI writes:
Life will lurch ahead. If you’re 95 and stick with [my program] you’ll be one happy dude at 96.
Earlier today I’d actually intended to write about April in Paris (the wife’s fave perfume is Evening in Southern Saskatchewan), the collapse of the Habsburg monarchy, and the juxtaposition (as vs the missionary position) . . .
– just to prove I read every GT post with care and Cointreau
“Of course foreign buyers exist in major cities. But they do not set overall market levels. Their influence is greatly exaggerated and used as an excuse by those who feel entitled to what they cannot afford. — Garth”
I live on the West side of Vancouver, and I can tell you that they most certainly are setting a trend. I see it with my own eyes, they are literally buying up every single house (or at least 90%) of the houses here. I also have a friend in Real Estate that specializes in the West Side, he says it insane, that it is completely dominated by foreign investment, which of course is starting to push up the outer areas like East Van and North Van.
I’m telling you, the neighbourhoods are being deconstructed like crazy with old houses bing taken down and new ones built. Just spend a day driving around here and you won’t believe your eyes.
I should clarify, that I don’t believe they are setting a trend for all of Canada, but Vancouver there is absolutely no question.
Larry Summers, Harvard economist, big man around Washington and former Treasury Secretary says:
“This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”
http://www.ft.com/intl/cms/s/2/a0a01306-d887-11e4-ba53-00144feab7de.html#axzz3WX4sXQ7O
Before gold bugs rush out to buy more tuna, he is not predicting the crash of the US dollar next week. He is lamenting the fact that the dysfunction of the US political system allowed China to sneak up the middle and start up its own international development bank and that the US couldn’t talk its allies out of joining in. Larry believes that a saner US would have welcomed China into the International Monetary Fund, nicely under US control.
Larry may not agree but I think the rise of China will be a good thing for the US. America seems to need a credible rival and adversary to function well, as it did when the USSR was around. Since then, the US has become something of a schoolyard bully, especially since 9/11. Hopefully the rise of China will induce the US to rely more on diplomacy and less on bombs. Hopefully the middle powers will learn to play the giants off against each other.
Larry seems faintly surprised that the rest of the world may not really want big brother America to tell them how to tie their shoes. The reflex arrogance of US leaders seems to make them incapable of self-reflection. Perhaps he should ponder this quote I just read:
“The West won the world not by the superiority of its ideas or values or religion but rather by its superiority in applying organized violence. Westerners often forget this fact: non-Westerners never do.”
What’s the chance the 40 year mortgage will make a come back in the next year?
http://www.bloomberg.com/news/articles/2015-04-06/fidelity-s-wolf-says-zero-rate-inescapable-in-oil-shocked-canada
#96 Mark
OOPS!
You need to do a little research into rentals and tax-shelters in the USA.
You list all kinds of liabilities without a mention of the (endless) deductables.
Garth, I love your blog and want to take your advice but I don’t really understand a lot of it. Who should I go and see to help me understand what your advice is and walk me through all of this? I am worried I will be a sitting duck. I live in Vancouver and all I hear is buy a house before they cost over 2 million. But I want to invest properly. I have investments but I have always used a bank. Thoughts?
Wow. Had a look at those creb stats. Good news is that condo sales can only go 34% lower.
Wholly s$/?!
So….. Keep Calm and Balance on…..got it.
#1 Leroy Washington on 04.06.15 at 6:13 pm
I love you LeRoy, you beautiful troll.
! Leroy Washington:
Dear Lord,
Canadians are truly foolish. That is why your “loonie,” as you like to call it, has been crushed in the last year. $0.80? Get used to $0.60.
I don’t even know what to say about your debt-to-income levels. Or your unemployment rate. Or your weather.
God bless the U.S. of A.!!! Woo hoo! AmeriCUH!!!
——————————————————————
Leroy, act like you’ve been there before. You’re feeding the cliché. My wife and I travel some, usually cruising. When I hear some passenger being loud and obnoxious, making some petty bone head comment, or in general being an A$$ Hole, I make a bet with myself. So far I’m about 80% correct.
Don’t get me wrong, I spent 1/3 of my time in the US. The people I am friends with down here are kind, generous to a fault. You can do better.
The media in mainstream English Canada now sports proudly its DIVERSITY agenda and it took me like a decade to figure it out due to my trusting Canadian weaning. However I am able to overcome my low self esteem with my second language being French which allows me to watch the French CBC or RDI.
I love my French language station as it is all PURE LAINE except for the weather girl from Haiti. And their opinions would have shut them down like SUN NEWS NETWORK but because they refuse to be silenced like the rest of us sheeple…my French is so good.
#104 Andrew Woburn
Interesting post! It seems like Larry has experienced something of an epiphany of late, and that his views are (belatedly) coming around?
#77 Andrew Woburn
“You must be from Alberta where life is all about space to park your toys.”
*****************************
As usual you make a good point Andrew. I prefer a reasonable commute over a space to park toys. Then again, I am fairly deficient as Albertans go.
Garth, I’m on board and will diversify, however I can’t find anywhere on your past blogs on how to get into the market if you’ve just got a lump sum. It doesn’t seem smart to buy all my bonds/Reits/Equity etc on one random day. How much do you space it out? 3 months/6 months/1 year? thx.
Why? — Garth
Learn to read, Zero disciple. I said the gain was as inconsequential as the loss you predicted. — Garth
Garth is sharpening his pencil.
Some here might want to chew on this many will laugh and poke fun, haha go ahead, make some jokes and all is fine
But the real question you should ask yourself is what do people who research these topics have to gain by conveying their message?
Nothing.
Garth does this blog as a free service to the public, just like the ‘nutbars’ who research other fringe topics. Yes they might sell a few adds, but people have to eat
Not everyone is all about the money.
To :
#64 Obvious Truth
Thx for your response mate ..
Yes we come here to see lies revealed. To hear a bit of truth in times of extreme deceit.
The next time you run across Conrad Black please ask him if he would ever do business with Richard Pearl again.
diversified reits that are solid, great yield and Canada and US exposure or International:
Artis, Riocan, Dream Global
Also check out XRE.un for its holdings
Responding to Made Up Comments…
Me and Van Doom at 95:
Would you have said allegedly idle government worker quit the job and put his family at risk? Would you? Really?
**********So its okay for Finning or Suncor or a mom and pop to FIRE an employee (with a family) because business is slow AND they are being taxed into the stone age but NOT a taxpayer subsidized Govt worker? Really?
*****************************************
Well, I like it that Van Doom quoted exactly what I said, this makes it clear that his response is to counter a claim that I never made.
Why is it that when someone says “A” (in this case I asked should he quit?) that someone comes along and says you said “B” (in this case alleging that I said that idle government workers should not be fired when I said nothing of the sort).
Of course excess or otherwise idle workers of any kind should be fired. No company or government owes anyone a job. You work you get paid. No work to be done, then the job ends. Reasonable severance and then that is it.
As it is, it is too hard to fire employees, the unintended consequence of that is a reluctance to hire people. In the government it is certainly far too hard to get rid of workers. Why should a company or government risk hiring someone if they later can’t get rid of the person if they are a dud or simply no longer needed?
The U.S.A. is a lot harsher when it comes to letting employees go. They hire as needed and fire as not needed. That goes a long way to explaining why their unemployment rate is lower than in Canada. Their economy is simply more dynamic and more responsive.
This pathetic blog has really evolved , for two reasons.
Me, showing you bastards the way. And mostly our host, who is not afraid of debate, a soft bugger , who likes cowboy boots, and harleys , and loves a true democracy, where opinions and disagreements are allowed to flourish, participants alowed to punch each other out, exchange blows and put their programming on full display.
Opinions influenced by what side of the tracks your bread is buttered.
How can anyone, with half a brain not love this shit.
The Mathematics of Zero Interest Rates
As interest rates approach zero, to what value does ANY asset that produces perpetual annual cash flow approach?
If you said infinity, you are correct.
As interest rates approach zero, to what value does the amount of house you can finance on $1000 per month approach (assume you can get an interest-only loan).
If you said infinity, you are a winner.
As interest rates approach zero over what time frame should you target to pay off your debts?
(Perhaps infinity?)
The math of the matter is that zero interest rates change everything.
I don’t happen to think interest rates will stay so low forever.
Canadians should be SCREAMING for governments to facilitate banks to offer 30 year fixed rate mortgages.
If investors are willing to accept 30 year fixed savings rates (they are) then where are the intermediaries offering same to borrowers (who would definitely love this). Why are the law makers and regulators standing in the way?
Yes, 30 year fixed rate loans would push up housing prices even more. That ‘s the law of finance math.
Considering that Americans can get 30 year fixed rate mortgages at about 3.7%, it’s a sure bet that IF interest rates don’t start to rise then U.S. home prices are going to rise a lot more in the next few years.
If you bought a house in the U.S. in the past five years or so, you have almost certainly made a great investment.
Warren Buffett has been telling people since about 2009 that buying a house (that you could afford) was a no-brainer. What more do people need than the advice of the smartest investor in history?
#117 SWL1976 on 04.06.15 at 10:40 pm
Some here might want to chew on this many will laugh and poke fun, haha go ahead, make some jokes and all is fine.
————————————————————-
The Viking Pastor Joe.. says whoa hang on there a minute – I may be nutz but I ain’t that nutz
https://www.youtube.com/watch?v=36gR9a-Db90
#40 Trojan House on 04.06.15 at 7:30 pm
Daniel Patrick Moynihan — ‘Everyone is entitled to his own opinion, but not to his own facts.’
Borrowing money to invest is only tax deductible if the loaned money is in a non registered account.
If you borrow to invest in RRSP or TFSA – it is not tax deductible
Naturally. As I said earlier in this thread, everyone should have a non-registered account. If you have a partner, it should be joint. — Garth
117 SWL1976 on 04.06.15 at 10:40 pm
Some here might want to chew on this many will laugh and poke fun, haha go ahead, make some jokes and all is fine
But the real question you should ask yourself is what do people who research these topics have to gain by conveying their message?
Nothing.
Garth does this blog as a free service to the public, just like the ‘nutbars’ who research other fringe topics. Yes they might sell a few adds, but people have to eat
Not everyone is all about the money.
———————————————————-
It’s always about the money. Your so-called unbiased truth seeker… he’s hawking everything under the sun!!
http://www.stevequayle.com/
Garth, seems difficult to put most of my life savings in on one day when nearly all sectors are at all time highs. If a correction is in the next couple of months wouldn’t I be behind the eight ball basically as soon as I started (good take a few years just to get back to my starting point with a balance portfolio). The first time I ever invested a lump sum was Aug 2001, the second time was early 2008 when I finally had the guts to invest again. I’m not looking for a strike three but know I need to keep at it.
Why are you trusting your life savings to an unlicensed, untrained amateur who is full of uncertainty, tries to time the market and has failed spectacularly in the past? — Garth
#53 BobC on 04.06.15 at 8:09 pm
Sweet Jaysus that was a beau-ti-ful troll.
As it is, it is too hard to fire employees, the unintended consequence of that is a reluctance to hire people. In the government it is certainly far too hard to get rid of workers. Why should a company or government risk hiring someone if they later can’t get rid of the person if they are a dud or simply no longer needed?
The U.S.A. is a lot harsher when it comes to letting employees go. They hire as needed and fire as not needed. That goes a long way to explaining why their unemployment rate is lower than in Canada. Their economy is simply more dynamic and more responsive.
***************************************
Far to hard to fire someone in Govt? I rest my case. This is why govt always falls……
Canada has lower unemployment than the USA? Give your head a shake. Out system is just as phoney as theirs.
Employable welfare – not counted
Do not qualify for EI – not counted
Not looking/cant find work/EI ran out – not counted
Just like the USA our unemployment rate is way over 10% and if you subtract 30% of Govt Workers who produce nothing and do not produce taxable income that number jumps even higher…..
Please stop making things up Shawn because your a govt troll Shawn……
I would add:
– keep the bond portion at short duration (you are better rewarded for taking risk with equities)
– tilting towards value, even small value, for US equities (if you believe in Fama – French)
#107 Katherine on 04.06.15 at 10:23 pm
It’s like learning to sail. You have to pay attention and learn to adjust as the wind changes.
Unfortunately you have to support all sorts of nefarious shit that you learn to rationalize away.
Is XPF for example going to be redeemable at a certain price at the end of some time-period ?
In other words, is there a capital risk if someone holds it long enough ?
ETFs are marketable securities without par value. If you want that, buy a preferred issue itself. — Garth
The impact of HAM on house prices is debatable.
The impact of hysteria about HAM on house prices is very, very real, like $1M+ real in Vancouver.
Yep, labour market conditions worsen, stocks go up. Used to be bad news was bad news. Now bad news is good news, and good news is bad news. Thank Central Bankers for this paradigm shift Garth.
Ride the wave, right?
#112 bigtown on 04.06.15 at 10:30 pm
“Pure laine”, really? I’ve been watching French CBC for 23 years and there’s been a huge increase in visual diversity. Fifteen years ago, I played the diversity card to get through auditions for a game show. I told them that Canada is a diverse country and yet I don’t see myself – Asian, Anglophone, Westerner – represented. That argument wouldn’t fly today with Cuban characters (Latin accents included) on soap operas and Asian journalists popping up on RDI. Sure, some are the product of Quebec’s Chinese baby adoption craze of the 80’s and 90’s, but still. I do agree that there is a bravery in their journalism and their opinions.
Garth, I was flipping through the channels and came across the super hot blonde lady on BNN. She was interviewing some tax nerd giving advice-of course I stopped surfing and paid close attention. One of the background noises between her smiles was an a tax savings tip when it came to withdrawing your RRSPs. Apparently (not sure if I got this right) if you plan to withdraw you should first convert the RRSPs to retirement income (since there is no age restriction) and you can claim a 2k pension adjustment. Could you explain how this actually works?
My late illiterate Dad got caught smuggling potatoes into Vienna. (Not, nota bene, furs and jewels.) He got thrown in the klink. But the warden was not a Nazi, and in the face of the Ruski advance just let everybody out. Thank goodness.
My late illiterate Dad was a magnificent storehouse of various dicta, bon mots, and popular sayings of all sorts:
When men are marching in the streets for their rights, they’re marching for a right to your front yard cuz they can see it; a right to your house cuz it’s too big; a right to your job cuz you’re a f- foreigner; a right to your bank account cuz you’re a goddamn Jew; a right to your backyard cuz they’re horny; and a right to your life cuz you won’t shut up.
When the husband is out all night, the new bride weeps, the good wife sleeps, the clever wife takes the opportunity to go over the books.
Don’t marry your daughter to a man who has to ask directions to the whorehouse.
The first thing a man should do in the morning is get on his knees and thank God for not changing him into a woman overnight.
Sum total of your rights: insofar as you exercise it quietly yes you do have the right to starve to death.
Money is like fertilizer, it does stink.
Stealing beats begging.
Honest men stay out of politics.
The English are the most civilized people on the face of the earth, unfortunately they’re unattractive.
#96 Mark
OOPS!
You need to do a little research into rentals and tax-shelters in the USA.
You list all kinds of liabilities without a mention of the (endless) deductables.
Lol Mark doesn’t even know when he isn’t in the know.
It’s funny when he makes comments on things that he has no clue. Happens very often. Poor guy. Pun intended ;)
Question? Talisman Energy today closed @ $7.71 US in New York, up 0.01 cent.
In Toronto $9.61 CAD down 0.06 cents.
I am confused if the deal to sell @ $8.00 US soon, goes as planned.
If I buy TLM in Toronto and the CAD $ falls am I winning or losing on the currency ?
It dosnt look like it but $8.00 US should be way more CAD.
Garth, after that stinker US jobs report, Dow futures went from -200 on Friday to -130 this A.M. to +150 most of the day.
If you can’t see the manipulative hand of central planning at Fascist USA .gov you are one of “them”.
This is the last swirl around the bowl from 2008. It is just a long dark stinky hole all the way to the sewage plant from here.
I thought QE4 would happen after the one and done interest rate hike. Now I think I have that bass ackwards.
You are already faltering on your June Fed hike claim. Maybe before you fall on that sword, you could assist Smoking man with walking into the ocean…
home sales are down 94%, not 57%.
expected sales based on rate of ownership and number of homes is 3000 homes a month. until 2008 this is about how many homes were sold a month in calgary.
i guess people dont want to pay 70% more than 2005 for 1970 carpets, i know i don’t.
http://www.mybudget360.com/not-in-labor-force-record-93-million-march-growth/
Yup…..33% working. Looks like 4.5% unemployment or whatever phoney number is 100% totally accurate in Amerika…..
Right Shawn?
Garth
Methinks thou doth jest….according to this article from the G&M, there are is a booming high end condo market still at play in Alberta….
http://www.theglobeandmail.com/life/home-and-garden/real-estate/canmores-can-do-condo-boom/article23804359/
Attention K-mart shoppers, we have a flashing blue light special on real estate in Aisle 13, hurry, this offer is for a limited time only…..
If you didn’t see Karma’s interesting post on US unemployment yesterday I wanted to bring up some of its key points.
http://csen.tumblr.com/post/115570318269/racing-towards-full-employment
The MSM have done their usual thing of reporting headline numbers without analysis. In their view, the recent US payroll numbers were a disappointment so the entire US economy must be stalling and the Fed can’t raise rates this year. Stagnation forever.
Global employment figures are useful but they don’t tell you who is working and who isn’t. As this post shows, unemployment of Americans with post secondary education peaked at 5% and is now 2.5% and falling fast. It may hit the pre-GFC level of 2% by September which is effectively full employment for this category. Remember all the handwringing about how the “recovery” was only creating McJobs? Well maybe that’s because most postsec workers were already employed. These are the people with the real disposable incomes to power the economy. The post also points out that low wage unemployment is falling fast. It’s the high school grad foreman/supervisor that is still being squeezed.
The other very important point is that construction unemployment is down a lot and is now only about 1% higher than before the recession and it’s falling fast.
The author says:
“The pace in the decline in slack across nearly all employment segments remains robust. At current rates we should hit full employment for construction workers and college grads in 6 months, for teens by the end of the year, for peak age workers in about a year, and even for long-term and discouraged workers in 12-18 months.”
He point out that the leading edge of the huge wave of millennials are entering their thirties, the age of household formation, which will begin to fire up the economy and interest rates.
The moral of the story is don’t get all your financial information from ZH or from so-called financial TV channels featuring frenetic, foxy Asian ladies who don’t even let guests finish a sound bite.
Update on HAM would be developer. Bought 1 acre with house in Coquitlam for 1.4M 6 months ago. Said he had offers for 1.8M but wanted 2M and to develop himself.
Listed for 1.9M not 1.88M…..
http://www.realtor.ca/propertyDetails.aspx?PropertyId=15350375
Leaky septic field, creek through property. House was built by a builder, so it’s nice, but a tear down since value is in the land.
So even HAM is waiting for that greater fool.
I counted on my fingers and toes and I think your suggested asset mix is 20% preferreds. As a devout Garthist I cannot question this, but I wonder if you would give some insight into the size of that allocation? Most other places I read suggest that 10% is the maximum one should have there.
I am NOT considering changing my religion, i am just exploring its darker Gnostic corners.
Shawn # 57,
“In any case if the government is willing to pay a non-productive worker in a position that adds no value, should we insult that government “worker” or instead focus on changing the way government acts?
Did Adam Smith not teach that the economy is best off when we all seek maximum gain for ourselves?
Would you have said allegedly idle government worker quit the job and put his family at risk? Would you? Really?”“`
——————————————–
100% agree. Mr Smith got it right.
Each and every employee, should seek to maximise the compensation received for labour provided. Just as every employer, should attempt to compensate said employee’s, as little as possible, while keeping the employee happy (enough).
Demand VS supply regulates the above situations. And there in lies the problem. Government employers / employees, are not subject to open market pressures.
Are they (the employees) at fault for receiving 30% more compensation than the private sector?
Of course not.
Just as it is totally reasonable for the taxpayer (the employer) to expect to pay no more than necessary to secure the required labour.
Yes, change the way the gov acts:
A) Reduce the number of gov. employees by 10% in all locations nationwide, other than the Medical field.
B) Reduce the compensation of the remaining gov. employees by 25%, across the board.
C) Reduce the federal/provincial tax burden on those up to 150K, by the proportional amount saved in former gov. compensation
Thanks for the info Garth.
“Is XPF for example going to be redeemable at a certain price at the end of some time-period ?
In other words, is there a capital risk if someone holds it long enough ?”
ETFs are generally redeemable into shares of the underlying if one holds enough ETF units to constitute a ‘creation unit’. Providing the underlying securities of XPF remain liquid and viable, there is no reason to believe that you won’t be able to sell your units into the market for a price that reflects the value of the securities that are held by the trust for which you have purchased units.
“Canadians should be SCREAMING for governments to facilitate banks to offer 30 year fixed rate mortgages.”
I don’t think anyone in Canada should be ‘screaming’ for the Canadian government to get any more involved with mortgage finance than they already are by way of the CMHC. Fannie Mae and Freddie Mac are economic and financial disasters for the US economy, much in the same way that CMHC is horrible for the Canadian economy in terms of efficient capital allocation.
However, I would definitely support a repeal of the relevant sections of the Canada Interest Act that effectively makes >5 year mortgage loans in Canada not viable. Government should not be in the business of interfering with contracts made between willing lenders and willing borrowers.
“As interest rates approach zero, to what value does ANY asset that produces perpetual annual cash flow approach?
If you said infinity, you are correct.
“
In theory, yes, infinity. However, low interest rates over-stimulate the formation of interest rate sensitive assets, and ironically, cause a collapse in the price of such assets on account of oversupply.
We see this in Canada with the current spate of falling RE prices. Mortgage credit has been so cheap for so long that the buyer pool has simply been exhausted and default risk on the existing pool of debt is now a very serious issue defining the lending environment.
In other words, what we’re seeing is the sign of a classic deflationary trap, to which extraordinary measures and/or a significant passage of time will need to be applied to extricate the economy from such.
#121 Shawn Allen on 04.06.15 at 10:49 pm
Responding to Made Up Comments…
Me and Van Doom at 95:
Would you have said allegedly idle government worker quit the job and put his family at risk? Would you? Really?
**********************
He’s angry and has kids (one of his previous posts) most likely would like the union security, benefits and pension. Will half to take a pay cut though. I contract to the gov and the place I work is efficient, hardly any staff – not all retires are being replaced, not all pensions plans are remaining the same etc etc.
He may want to read up the efforts of workers before his time who fought for better working conditions and the healthy balance. Yes unions should keep their own houses in order and be efficient and effective.
Let’s move on Shawn…let Van Doom catch up later.
Anybody who ‘spent’ $50k CAD in 2009 per Memphis door now has a net profit of $400 USD per month per door as well as a property worth $90k USD.
Buy 10 of those for the equivalent down payment on a mouldy, rat infested, tear-down dog house in Van and that Canadian is sitting pretty.
Pretty good compared to cat food eating, thumb sucking Doomers and their gold plated tin foil hats.
#55 Neta
re HAM
HAM are the new Jones’ and ordinary Vancouverites trying to keep up with the new Jones’ won’t make it. Same as it ever was.
Vancouver has become unaffordable to live and work even with well over 100k household income.
As result, Vancouver is losing diversity and gets more boring with every real estate percentage point increase.
I like the outdoors but there are cheaper places in Canada and other parts of the world to enjoy that lifestyle.
#117 SWL1976 on 04.06.15 at 10:40 pm
No, it’s not really funny. The US military conducts extensive exercises and war games that frquently classify certain geographic regions as “hostile”. As a matter of fact, these exercises often include the armed forces of NATO allies; including those of Canada. This is nothing new.
The fringe right has had a field day with Operation Jade Helm which is scheduled for this summer, declaring all signs of nefarious motives. They are false.
As Carl Sagan once advised; “try to keep an open mind; but not so open that your brains fall out.”
“Four years old, done as a favour to a blog dog who spent $2.89 on production values.” — HonGarth
On your next BigScreenOuting I think it’s time you went FullRetro, AuldPol… and I’ve got just the vehicle for you…
https://youtu.be/39YUXIKrOFk
#102,#103 moloko
Having lived in Van West Side for 14 years until recently, and still regularly in the ol’ hood, I heartily agree. The neighbourhoods are becoming barely recognizable as vast swaths of character homes go under the excavator and monster luxury flips multiply unchecked like mushrooms.
Small business, especially retail is dying on the Westside and has been for quite a few years now. New businesses rarely make it past the first lease renewal. FOR LEASE signs litter storefronts along Broadway & 4th sometimes for years. Long established businesses are folding after decades of success. Chain stores have been moving in, but even some of those have failed in recent years due to lack of customers and high lease costs.
#134 4 AM Sunrise
Also completely agree, we just don’t really know the true extent of foreign buying influence, but it is absolutely affecting the market as you suggest.
We need better regulatory oversight of the RE industry and complete DATA TRANSPARENCY, asap so we can pressure govn’t to address what needs addressing, or I can’t even imagine what Van may look like 10-20 yrs. from now. Whistler circa early 90’s comes to mind, and empty, desolate, over-priced ghost town 10 months out of the year where so many businesses failed, there were few amenities left locally, for quite a while, and one had to make the drive just for reasonable priced groceries. (I know, I lived there). Why would any recent graduate stay in future Van? Where will the job opportunities be? Why would they want to if when they mature and want to settle down they have no hope of owning their own home here based on local incomes? Are none of our elected officials able to see past the 4 year election cycle? (rhetorical question).
This needs to be an election issue at all 3 levels (municipal, provincial and federal) going forward. Horse is out of the barn and the farmers are sharpening their pitchforks for whoever left the door open.
Garth is right–it is not all gloom and doom. We can all celebrate that Dean Clifford is at last a Free Man in Manitoba.
http://deanclifford.info
Re: prev. post meant meant to add, if others feel the same way fire off a letter or phone call to your local MP, Mayor & MLA and ask them what their plans are to address these concerns.
“If you bought a house in the U.S. in the past five years or so, you have almost certainly made a great investment. ”
What makes you feel that the issues in the US housing market that led to the collapse last time around, have actually been addressed?
All I see is that they threw a whole bunch of stimulus at an industry which already was in over-capacity. And now that the stimulus of QE has been at least partially withdrawn, and eventually, will be fully reversed — does that not leave housing as flying naked fundamental-wise as it was prior to the collapse?
As Leo Trollstoy‘s numbers point out, there’s nothing cheap about residential RE in the US. At 18X earnings, its right back in a bubble, albeit not anywhere near as severe as the previous one, but still a bubble nonetheless. If I punch US residential RE into the sort of valuation framework that your website uses for the S&P500, the TSX, the DJIA, with a justifiable P/E of around 10-12 (ie: a slow-growth asset) — I get a fair value of US RE dramatically less than its current pricing. Your comment, in bold, thus, really confuses me.
‘Thinking’ and believing 9-11 was a conspiracy are mutually exclusive. — Garth
You’re wrong, Garth. During the airplane attacks on the WTC, the US Air Force was absent for an hour and a half. Missing. Nowhere to be found. AWOL. The largest and most powerful military in the world was mysteriously out of action … hmmm.
I’m not a doomer, not a gold-licker, not a conspiracy theorist. But I can tell when I’m being lied to. Can you?
All of these bankers who think entrepreneurs and corporations will invest if we just get the dollar a little lower. People invest because the economy is getting stronger and leading.
I guess fruits, veggies and iPhones will be a little more expensive.
FP article on why Canada will lower interest rates…
http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/news/economy/former-bank-of-canada-adviser-says-zero-rate-inescapable-in-oil-shocked-canada&pubdate=2015-04-07
Garth – with respect to your comment at 126, that non-registered accounts should be joint with a spouse, please explain why. Wife and I have separate such accounts. Are we missing something?
Reading the comment section of this blog, it’s seems to me that most people who knock Garth don’t understand anything. How can you disagree with a guy whose message is balance? Garth is simply saying that no one knows where the economy is going or what economic shocks might occur in your lifetime so the best strategy is to have balance.
A one asset strategy has a far less likelihood of success than a balanced approach. Dont invest based on emotions and vanity because you’ll lose in the long run. Curb appeal doesn’t pay the bills, income does. If you’re financially balanced and a home makes sense, buy one. If it doesn’t don’t until it does. How can so many people screw up such simple logic?
tfsa goin’ nuclear!
http://www.thestar.com/news/canada/2015/04/07/tax-free-savings-plan-contribution-limit-to-double-oliver-suggests.html
@ Ponzius Pilatus
I was about to write reply differently at you 46 post, then it hits me,
thank you for making my already funny joke, funnier!
One-quarter of first-time home buyers had family help, survey finds
http://m.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/survey-finds-first-time-homebuyers-face-big-differences-across-canada/article23814335/?service=mobile
http://m.thestar.com/?referrer=#/article/news/canada/2015/04/07/tax-free-savings-plan-contribution-limit-to-double-oliver-suggests.html
OTTAWA—A confidential letter from Finance Minister Joe Oliver all but confirms that his April 21 budget will double the contribution limit for the government’s popular tax-free savings vehicle.
The current limit for cash going into a Tax-Free Savings Account (TFSA) is $5,500 a year, and Oliver indicated the Conservatives would fulfill Prime Minister Stephen Harper’s four-year-old pledge to allow Canadians to sock away more money.
“Canadians know that we stick to our commitments,” Oliver said pointedly in the April 6 letter to fellow caucus members.
Doubling the annual limit will boost it to $11,000 a year.
Calgary real estate is looking grim to me and prices will plunge eventually. Average incomes are falling – it is just a matter of time till the average Albertan must shed debt. I think this current oil price slump is going to last longer than happened in the past. I am planning on US$ 50 (+/- $10) WTI for the next five years. Therefore I think the Alberta Budget plans are sadly mistaken and I am tightening my belt.
I had to play my Mormon option card – give up smoking and drinking. The latest provincial charges made me mad enough to try. Day 12 and finally starting to feel better – I never want to do cold turkey again.
I was playing with my income tax program to see the amount of income tax I would pay as a resident of other provinces. Federal taxes don’t change but provincial taxes do vary. To my surprise, I would pay the least amount of provincial income tax as a Quebec resident – about $1,200 less than as an Albertan. Quebecers get a 16.5% abatement from Federal Income Tax on their provincial return.
When Alberta gets back on its feet, I think we had better take a closer look at the Equalization program.
Bonus: Why I don’t miss public commuting – I feel for Sasha.
https://twitter.com/JohnDonoghue64/status/562654178439598080/photo/1
But if you want it you have to vote for Harper. That’s a tough one.
http://www.thestar.com/news/canada/2015/04/07/tax-free-savings-plan-contribution-limit-to-double-oliver-suggests.html
As this pathetic blog forecast several months ago. — Garth
Garth, why so little canadian stocks in your model portfolio? Only oil stocks and their suppliers should be hit by low oil price.
With canadian dollar below 80 cents, exporters and most stocks should do well, except for Alberta.
Why don’t you like your own country?
Money has not national allegiance. In any case, 17% is exposed to Canadian equity, pus the lion’s share of the fixed-income assets. That’s plenty, even for a crazed beaver. — Garth
#107 Katherine
“Who should I go and see to help me…I am worried I will be a sitting duck. I have investments but I have always used a bank.”
If your investments are in high MER mutual funds at a bank, then sorry to say, you have already been a sitting duck. An email to Garth might be a good place to start since geography isn’t a barrier to financial help.
#100 Smoking Man on 04.06.15 at 10:02 pm
#97 Interstellar Old Yeller on 04.06.15 at 9:54 pm
#53 BobC on 04.06.15 at 8:09 pm
Teach your grandkids about money and motivate them to be self-sufficient. Any inheritance you could possibly leave them will be finite. Ensuring they are skilled, adaptable, and resilient enough to be self-supporting is the real gift that keeps on giving.
………………………………………………………………….
So true, you can’t do that living in a 5000 sqft house, with beamers and hummers in the driveway, golf and Yacht Club membership.
You’ll end up with, basment vidio gammers, drug addicted, and down right lazy kids.
Move to long branch if you really love your kids
____________________________________________
Smoking Man are you talking from experience? I hope not! Could never live in Long Branch, it may be up and coming but its a long way up and a long way from coming. Last time I was along Lakeshore it was filled with roughhouse bars, tattoo parlors, dive diners, and massage parlors. Perhaps give it a few more years to move out the riffraff. By the way where is this book you are working on? It sounds as if you are parsing it ad nauseam!
Garth, please endeavour to improve the quality of the virtual appetizers and meals on this blog, or risk losing posters of any import.
We really should not have to be telling you this.
“As interest rates approach zero, to what value does ANY asset that produces perpetual annual cash flow approach? If you said infinity, you are correct.“
– In theory, yes, infinity.
Good grief, who let the pure math guys into the room? Any asset will have a risk premium attached to it — even a government guaranteed asset, if it has a long enough duration. And one needs to predict interest rates over the life of the asset, not just today or for the next ten years. Posit a world where interest rates stay at zero forever, yet which contains an asset that offers a guaranteed real return forever. Now give your head a shake, because such a world can’t exist.
For a practicum, surf over to Denmark, where 0% mortgages are available today, and houses are still changing hand at significantly less than infinity.
Do you people really manage your own investments?
#93 JimH
You seem so confident but your wrong. Penalty starts at $85,000 a year. You pay additional cost for part b &ad.
Interesting about the double super secret backround letter on TFSAs supposedly circulating from Joe Owe.
“In 2009, my predecessor Jim Flaherty introduced TFSAs to help Canadians to save for a down payment on a mortgage, their kids’ education and retirement. Today, nearly 11 million Canadians enjoy earning interest-free income in their TFSA account”
An inadvertent truth there, aye.
Cramdown is yearning for Officer Whistlin’ Smith’s time:
https://www.nfb.ca/film/whistling_smith
……………..
Yesterday’s blog comments verged on anarchy. But keep this in mind. 80% of what we’re shown on
tee-vee is mind control. Orange jumpsuits kneeling on a beach in a production quality movie. Burning pilots. Been going on for decades. They’ve used our trusted Hollyweird actors even as presidents (RR).
Online? Each govt and intel service has hordes of people posting, commenting daily to sway us. Much of it falsehoods. Our tax dollars at work? The question is, can you discern a fake newz article or blog comment? Or fake site (cough, inforwars).
You might say you have nothing to hide. Until one day you are leaving say Lilloet and are stopped, biometric scanned and the contents of your cell phone downloaded (they do this in USA). Govts have always been eager for our ‘collaborators’. Now they have facebook (which has full facial recognition technology deployed). Massive, mind boggling computer farms and sums of data are scraped and stored daily on us. Technology we cannot fathom yet. Wifi built into every computer chip. Networked. Don’t both turning off your cell phone or PC. I almost wonder if all the massive hacks of private consumer data we are told of are their work too.
Every portfolio should have safe stuff as well as growth assets. That means mixing in bonds, preferreds and cash with REITs and equity-based ETFs.-Garth
+++++++++++++++++++++++++++++++++
My plan with my soon to be $1.1M portfolio is to have a $250K home as some of my safe stuff. The home provides me with a place to live and thus I am not spending money on rent.
Eg. $250k home saves me $1600 rent/month. So $1600 per month less $3k property tax and $3k average maintenance is equivalent to a $13,200 tax free return on my $250k.
So the question is that in a situation similar to this can a home be considered some of the safe stuff?
The $250,000 sitting in your home is costing $19,000 in lost earnings. Add in property tax and maintenance, and this is a $26,000 drain on your net worth. Remove the $19,000 in rent you would pay if you did not own, and the true cost is $7,000, for a negative return of close to 3%. Thus the answer is, no. — Garth
#169 rosie “moving forward” in the knowledge that, “this won’t end well” on 04.07.15 at 7:55 am
But if you want it you have to vote for Harper. That’s a tough one.
http://www.thestar.com/news/canada/2015/04/07/tax-free-savings-plan-contribution-limit-to-double-oliver-suggests.html
As this pathetic blog forecast several months ago. — Garth
____________________________________________
Mr Harper is a very good salesman. Nothing wrong with that if he does deliver! At least he is throwing the masses a bone as opposed to the other two goofballs whom haven’t even figured out how to sell themselves whilst talking out of both sides of their mouths.
In spite of the ridicule our gracious host heaps on the AUTOMATIC earth principals, here is the latest Berman article on the whys and hows of the recent oil price crash:
http://www.nakedcapitalism.com/2015/04/oil-price-collapse-u-s-shales-fault.html
And, as the first commenter points out, his logic mirrors the logic elucidated by Nicole Foss five or so years ago:
“i hold stoneleigh in the highest regard because of analysis like this: (published in 2010, answering a reader’s questions)
Q: If we have $20 oil there will be no crisis, guaranteed. $20 oil and we have lots of credit/money expansion. Multipliers working and inflation/growth. We would have commerce. We would all be buying shit from (low- wage/cheap coal) China.
Stoneleigh: I disagree. I think we will see $20 oil, but only because of a massive fall in aggregate demand due to the evaporation of purchasing power. $20 oil will not be cheap oil. On the contrary, it will seem very expensive to most people.
(continuing)
Stoneleigh: I am not convinced we will see the dollar become a proxy for oil. I think the dollar will rise substantially as dollar-denominated debt deflates (creating demand for dollars), and people make a knee-jerk move into it on a flight to safety. However, I don’t think this will last more than a year or two at most.
I think we are headed into a chaotic currency regime where floating exchange rates are dropped, currency pegs instituted in an attempt to ‘beggar they neighbour’, and those currency pegs fail.
as late as q2/2014, people would have ridiculed her. since, we’re not at $20/barrel, but it’s certainly possible, given the 5/2015 land-based storage fill-up and the need for the shale operations to keep pumping. the swiss currency peg cut, the dollar’s strength, she made the call and backed it up.”
And she was wrong. Technology that allowed US oil production to doubt in just five years is the primary reason we have an oil collapse. It is supply, not demand. TAE and its deflationary drum beat is useless. — Garth
Have some friends who are fed up with Ontario winters and considering selling their house in Kitchener and moving to BC. I’m going to advise they consider Lillooet.
“And remember that interest on money borrowed to invest is deductible.”
Garth,
Are you implying that if we borrow from the line of credit and invest through a TFSA we can write off the line of credit interest?
No. I referenced non-registered accounts. — Garth
House prices will continue to go up as our fossils in gov’t keep bringing in 80,000 people from other countries. And they all want to live in Vancouver and Toronto.
You should be thankful people wish to live here. I am. — Garth
A diversified portfolio can bring us good returns, more importantly, it reduces the impact of drawdown.
Going back to history (70s-now): MAXDD (MAX DRAWDOWN)
S&P: 50.95%
US 10YR: 15.95%
60/40: 29.28%
It gives us similar returns in the long run comparing to just holding stock but a much smoother ride.
Generic Endowment Allocation is also doing very well.
40% stocks, 20% bonds, 40% real assets & REITS
For generic permanent portfolio is the other choice: 25% stocks, 50% bonds, 25% gold
For endowments, real estate is not terribly risky, if it is just a part of their balanced portfolio. For individuals putting most of their money on real estate, it is a whole different story.
Responsible economics and logic no longer makes sense in this age. So far impending RE collapse/deflation/soft landing has been Peter crying wolf the last half decade. Sure it smells more and more like wolf but be reminded the gov’t will fight this beast at all cost – the sheep may starve to death while he fights off the wolf, but damn it they wont die by the beast.
If they keep rates low and get QE frisky again, it’s over from a RE perspective, then you simply missed the boat all the while distracted by the lost crys of the few moral heads left. Too bad. The meek don’t inherit this earth, greed wins. When the reaper comes calling, the fiscally prudent will be bailing the fiscally immoral.
But as Trojan House indicates, opinions are free and often worth as much. Take my 2¢, listen to me 5 times and you’re still likely a dime short. But we can all proudly raise a glass to the great leaders. Long live the beast (RE)! cheers!
#156 & 158
I’ve lived close to 4th for 25 years, and I’ve never seen it as bad as it’s been the last few years, even the few stores (besides Apple Farm, Whole Foods and few others west of Yew) that have survived more than 2 years must be losing money, dead as a doornail during the week. And that poor guy that owns that space where that small book store was, that place has been for lease for I think 3 years now.
I will write a letter, but I think it would be better if they were approached by a massive group of people somehow, like a protest of sorts, or a poll that was widely circulated by MSM.
Ugh I don’t know, I just know I’m so frustrated and sad seeing what’s happening. Everyone just tells me to move, and I probably will, but that’s irritating in itself, I can actually afford to buy here (granted it would not be the nicest house on the block) but I refuse to be pressured into competing with folks that can pay cash, way over asking & with no contingencies, and I don’t want to buy into a neighbourhood that could change so drastically in the next 10 years. The hoods are already so much less appealing than they were.
But many of my friends have already split to North and East Van, and even Maple Ridge.
i hold stoneleigh in the highest regard because of analysis like this: (published in 2010, answering a reader’s questions)
Q: If we have $20 oil there will be no crisis, guaranteed. $20 oil and we have lots of credit/money expansion. Multipliers working and inflation/growth. We would have commerce. We would all be buying shit from (low- wage/cheap coal) China.
Stoneleigh: I disagree. I think we will see $20 oil, but only because of a massive fall in aggregate demand due to the evaporation of purchasing power. $20 oil will not be cheap oil. On the contrary, it will seem very expensive to most people.
(continuing)
Stoneleigh: I am not convinced we will see the dollar become a proxy for oil. I think the dollar will rise substantially as dollar-denominated debt deflates (creating demand for dollars), and people make a knee-jerk move into it on a flight to safety. However, I don’t think this will last more than a year or two at most.
I think we are headed into a chaotic currency regime where floating exchange rates are dropped, currency pegs instituted in an attempt to ‘beggar they neighbour’, and those currency pegs fail.
as late as q2/2014, people would have ridiculed her. since, we’re not at $20/barrel, but it’s certainly possible, given the 5/2015 land-based storage fill-up and the need for the shale operations to keep pumping. the swiss currency peg cut, the dollar’s strength, she made the call and backed it up.
Did you even read the Berman piece? Your explanation is only one element of his larger argument centring on demand destruction, an influx of central bank liquidity searching for yield financing a chronically uneconomic shale oil play. Technology used to extract the oil was was only employed at the behest of the yield hungry investing with their eyes closed.
Oops, I meant to post your comment:
And she was wrong. Technology that allowed US oil production to doubt in just five years is the primary reason we have an oil collapse. It is supply, not demand. TAE and its deflationary drum beat is useless. — Garth
Did you even read the Berman piece? Your explanation is only one element of his larger argument centring on demand destruction, an influx of central bank liquidity searching for yield financing a chronically uneconomic shale oil play. Technology used to extract the oil was was only employed at the behest of the yield hungry investing with their eyes closed.
I read it. Same reply. — Garth
#160 Mountain Man on 04.07.15 at 4:51 am
I recommend people just watch “911: In Plane Site” and “Loose Change 911”. Who can explain why building 7 fell? no plane hit the building and it was blocks away. There are many other facts that make you go hmm that are revealed. both worth a watch.
This is not a 9-11 tinfoil conspiracy nut blog. No more messages on this topic will be posted. If you attempt it, we will send an electromagnetic pulse to your IP address and fry your privates. — Garth
My plan with my soon to be $1.1M portfolio is to have a $250K home as some of my safe stuff. The home provides me with a place to live and thus I am not spending money on rent.
Eg. $250k home saves me $1600 rent/month. So $1600 per month less $3k property tax and $3k average maintenance is equivalent to a $13,200 tax free return on my $250k.
So the question is that in a situation similar to this can a home be considered some of the safe stuff?
The $250,000 sitting in your home is costing $19,000 in lost earnings. Add in property tax and maintenance, and this is a $26,000 drain on your net worth. Remove the $19,000 in rent you would pay if you did not own, and the true cost is $7,000, for a negative return of close to 3%. Thus the answer is, no. — Garth
________________________________________
Fine tuning the numbers.
-$250K at 7.4% is $18,500
-Maint. and prop tax add $6k, not $7
-Rent is $19,200 not $19,000 as expected to rise gradually albeit slowly
-Rent of $19,600 is after tax money
But most importantly and to my question. The $250K would replace the “safe” portion of my balanced portfolio which on it’s own would not return the often repeated 7.4%.
Owning the home would provide me with a place to live and a net saving of $13,200 of rent after tax. So an effective yield of 5.28% after tax. And since the plan is to live there 20+years I would certainly consider it as part of the “safe stuff” of my portfolio.
?????
You ‘save’ nothing by owning. Stop trying to give a financial justification to an emotional decision. — Garth
I have returned….
The long end of the market 10 year U.S. Treasuries and beyond WILL BE MOVING DOWN IN YIELD!
1. The coming rally will draw strength from steps that central banks in Europe and Japan are taking to boost exports by devaluing their currencies. They are buying U.S. Bonds.
2. The Fed’s dual mandate is to promote full employment and price stability. It hasn’t accomplished either (The U.S. is a long way away from FULL employment).
3. Households are putting away (paying down debt and/or adding to savings) rather than spending the savings from the recent drop in gasoline prices.
4. The gaps between their yields and those of most developed countries are astoundingly wide. Those gaps are ridiculous — unless you believe Spain and Italy issue higher-quality government obligations than the U.S.!
5. The Central Bank of Atlanta GA estimates 1st quarter of 2015 GDP growth to be flat (that’s zero).
6. Savings glut will continue as 1st world Baby Boomers save for retirement (U.S. Treasuries will be part of those savings)
The Dividend Yield Investor.
#170 Squatter on 04.07.15 at 9:11 am
Garth, why so little canadian stocks in your model portfolio? Only oil stocks and their suppliers should be hit by low oil price.
With canadian dollar below 80 cents, exporters and most stocks should do well, except for Alberta.
Why don’t you like your own country?
…………………………………………………………………….
Money has not national allegiance. In any case, 17% is exposed to Canadian equity, pus the lion’s share of the fixed-income assets. That’s plenty, even for a crazed beaver. — Garth
____________________________________________
Beavers are really just over-sized rodents aren’t they?
https://www.youtube.com/watch?v=s7Aqv7bn_9I&index=17&list=PLQ97mq_Lr7p9QEt8Yr_9jX1dTWBOidF_M
I thought this “story” was appropriate here:
http://www.thedailymash.co.uk/news/society/people-who-dont-care-about-houses-a-threat-to-society-2015040797085
Yes, it is the fake/funny news but there is that odd element of truth in it for the Canadian home owner!
Bubbles burst when Bears capitulate.
TO is up 10%. When Garth capitulates and tells us all to buy real estate from Winnipeg to Vancouver, then you will know the bubble is burst.
As long as Garth the Uber Bear says sell, you should buy.
My $0.02 CAD which is chicken ship in any other currency.
The Year over Year weekly selling price average for homes in Saskatoon fell $60,000 last week. From $380k in 2014 to $320k last week. OUCH.
4 week median and 6 week averages are also still down ~$20k. Sucks if you bought a home in Saskatoon in the past year.
The market popped because the FED hinted at no rate increase because of the dismissal job numbers + 94 million out of work.
On the topic of why Canada should not be weighted too high in a portfolio, consider that Canada makes up only 3.7% of the MSCI world index. We are small. The good ‘ol US of A on the other hand makes up 57%. To put that into perspective the next largest weighting is Japan at 8.6%. You need to have a lot of US equities in a global portfolio. Betting against the US has usually worked out to make one poorer.
Garth, thank you for an insightful post.
How does one rebalance with fund limitations in mind? My portfolio is broken up in four quarters- a lira, rrsp, tfsa and unregistered. My us+world ets are in the lira and the rrsp, canadian equity in unregistered, and short term bonds/reit in my tfsa.
How would i crystallize the gains of my us equity in the locked in accounts without moving funds in and out? I assume i would just have a smaller portion of the same bond fund in my two rrrsps.
Also, as per tfsa rules, i do not want to wait a calendar year to move money back into the tfsa. What is something i can start slowly replacing bonds with that makes full use of no taxation in this account?
I will have to do a fair bit of tinkering ony own time to get back to 60/40 from the 80/20 i am at right now, and i would appreciate any advice from more seasoned investors.
Thank you.
“Stop overthinking it. The bonds are there to calm and hedge the portfolio, not to generate capital gains or losses. — Garth”
Have no more RRSP room (At least until this tax return is back), but had some cash on hands …
Thought is was a good idea in the meantime, because the right time to decide on RRSP contribution would be close to end of the year anyway …
You do not need more room. Just swap assets. — Garth
In terms of super lazy way does anyone know of a single low-fee fund that hits this balanced objective?
Nagraj, thanks for the laugh.
My dad was caught trying to smuggle HIMSELF across the Austrian border… Same result!
“There’s no financial crisis ahead. No 2008 rerun. No currency crisis. No debt bomb. No bank bail-ins. No systemic collapse”
Bold and brave statements indeed.
I fear that about six monthes hence you may want a side order of fries to go with that.
Meanwhile here’s an amusing ditty: “Atlantis Won’t Sink, Experts Agree”
http://thearchdruidreport.blogspot.ca/
I said the same two years ago. People like you had the same retort. — Garth
Just saw the Property Brothers on the Marilyn Denis show. House horniness continues unabated based on their success. Most interesting, they showed off their own 5,500 sq. ft. house in Arizona, which they paid $400,000 for back in 2010. Thought I heard them say, “Try that in Toronto!”
#189 Broke Dick on 04.07.15 at 10:41 am
You ‘save’ nothing by owning. Stop trying to give a financial justification to an emotional decision. — Garth
++++++++++++++++++++++++++++++++++++
I do realize I’m not “saving” anything except for maybe my own peace of mind.
But since the numbers used show this not to be a bad financial decision then why, in this scenario, can the house not represent some of the “safe” 40% of the portfolio?
1.1M portfolio
60% equities- $660,000
40% safe- $440,000 =($250,000 house and $190,000 half bonds (government, corporate and high-yield, for example) and half preferreds (a basket of them is good, and rate resets are best)
The federal governments pledge to achieve a balanced budget should be easier now that they dumped the GM shares. Delay the budget until you close of your year end which was March 31, now they are in fiscal year 2015/16 add in the $3.4 billion and “presto”Joe O. looks like a hero!!
@107 Katherine: Garth, I love your blog and want to take your advice but I don’t really understand a lot of it. Who should I go and see to help me understand what your advice is and walk me through all of this? I am worried I will be a sitting duck. I live in Vancouver and all I hear is buy a house before they cost over 2 million. But I want to invest properly. I have investments but I have always used a bank. Thoughts?
______________
– This topic has been discussed before. Some have suggested reading:
– The Millionaire Teacher
– ETFs for Dummies (a bit outdated but the fundamental principles have not changed)
Worthy suggestion. But self-investing after reading a book is kinda like doing your own appendectomy after watching a documentary. Only one shot at getting it right. — Garth
He’s angry and has kids (one of his previous posts) most likely would like the union security, benefits and pension. Will half to take a pay cut though. I contract to the gov and the place I work is efficient, hardly any staff – not all retires are being replaced, not all pensions plans are remaining the same etc etc.
He may want to read up the efforts of workers before his time who fought for better working conditions and the healthy balance. Yes unions should keep their own houses in order and be efficient and effective.
Let’s move on Shawn…let Van Doom catch up later.
*****************************************
It’s always those in total dis-belief that call others names. Like the proxy Govt Worker (not counted as a public servant by the way but living off the public dime). These people just don’t seem to have passed a math class to save their lives. You can’t have 30 to 40% of the population work for the govt and expect the Govt to not collapse under its own weight.
But again Govt workers live in a land of golden parachutes and fairies.
And guess what Don? It aint 1912. Unions are not required today. You are worth what your merit says you are worth. That is what makes an economy strong. But again I’m talking to fairies and golden parachutes here……so what’s the point.
Rosie and ‘Tylenol’:
It’s not just about voting for the party that’s promising to hike the TFSA Limit, but also not voting for a party that would campaign AGAINST raising the limit.
The liberals may complain about income sharing, but I expect them to be silent on doubling TFSA Limits. The appeal is too great for the liberals’ target audience.
It’s a great issue to cleave support away from the Dippers and the other socialist parties.
GM..
Was that our rainy day fund ?
http://business.financialpost.com/personal-finance/mortgages-real-estate/toronto-detached-housing-prices-soar-well-past-1-million-in-sellers-market
Sucks to be a basement dweller in Toronto.
For anyone with optimism about Alberta real estate read this.
http://wolfstreet.com/2015/04/05/canada-housing-office-market-mauled-by-oil-layoffs-but-vancouver-bubble-still-soars/
#43 Van Doom on 04.06.15 at 7:39 pm
—————————————————
Please provide direct evidence that proves 92% of government employees ‘push paper’ and ‘get nothing done’. A direct link will work.
Here’s a link to all federal departments that essentially outlines priorities and accomplishments (ie, productivity). Seems to me it would take more than 8% of the government workforce to achieve all this.
http://www.tbs-sct.gc.ca/rpp/2014-2015/index-eng.asp
“You do not need more room. Just swap assets. — Garth”
Swap assets, as in placing some of the bond part outside RRSP?
#172 Holy Crap Wheres The Tylenol on 04.07.15 at 9:16
Smoking Man are you talking from experience? I hope not! Could never live in Long Branch, it may be up and coming but its a long way up and a long way from coming. Last time I was along Lakeshore it was filled with roughhouse bars, tattoo parlors, dive diners, and massage parlors. Perhaps give it a few more years to move out the riffraff. By the way where is this book you are working on? It sounds as if you are parsing it ad nauseam!
………..
Perfect description, that’s why I love it here, but its changing fast, Starbucks and Hipsters poping up faster than dandelions, after a thunderstorm.
Percentage wise in price growth it leads the 416 and will continue to do so for years to come
Hidden Gem.
Plus we got South Side Johnnys. , and George the Greek, best bacon and egg breakfast in the city.
#53 BobC on 04.06.15 at 8:09 pm
————————————————
You ask ‘when to jump into the markets’. The answer is simple…if you have enough money, give Garth a call. He will take your cash, which will then be under his management as part of a diversified portfolio earning 7% per year.
Hey, no guarantees. But at least you get access to my private Amazon Hotline service. — Garth
Sucks to be a basement dweller in Toronto.
You can sell any RE in Toronto.
Prices across all sales mixes have been going straight up for almost 20 years.
Nothing lasts forever.
Just saw the Property Brothers on the Marilyn Denis show. House horniness continues unabated based on their success. Most interesting, they showed off their own 5,500 sq. ft. house in Arizona, which they paid $400,000 for back in 2010. Thought I heard them say, “Try that in Toronto!”
Bam. And just like that, their AZ home is worth over $1m CAD. Easy.
#55 Neta on 04.06.15 at 8:21 pm
——————————————
The Canadian dollar has also plunged over the past 9 months (in July we had a 94 cent US dollar). So anyone who holds wealth in US dollars just gained almost 20% purchasing power toward Canadian real estate. Foreign investment in the high-end Vancouver housing market has been quoted at 40%, so it makes sense that we’re seeing deals go above asking, especially in bidding wars (ie, the houses are now effectively ‘on sale’).
#206 Van Doom — “You are worth what your merit says you are worth.”
If everyone is getting what they’re worth, why are you complaining?
#213 Smoking Man on 04.07.15 at 1:08 pm
#172 Holy Crap Wheres The Tylenol on 04.07.15 at 9:16
Smoking Man are you talking from experience? I hope not! Could never live in Long Branch, it may be up and coming but its a long way up and a long way from coming. Last time I was along Lakeshore it was filled with roughhouse bars, tattoo parlors, dive diners, and massage parlors. Perhaps give it a few more years to move out the riffraff. By the way where is this book you are working on? It sounds as if you are parsing it ad nauseam!
…………………………………………………………
Perfect description, that’s why I love it here, but its changing fast, Starbucks and Hipsters poping up faster than dandelions, after a thunderstorm.
Percentage wise in price growth it leads the 416 and will continue to do so for years to come
Hidden Gem.
Plus we got South Side Johnnys. , and George the Greek, best bacon and egg breakfast in the city.
___________________________________________
Ok cant pass up the best bacon and egg breakfast in the city, may have to try it next time I’m in the city on a weekend. That is one thing we lack out here in Oakville is a great little bacon and egg joint (if I may coin the term). We have upscale places like Paradiso up the Yin Yang here along Lakeshore. If your ever in town a favorite for myself and boating friends is The Moonshine Cafe. Its within walking distance of the Marina. Great live music, wings and stuff, cold beers.
Still have to say LongBranch is not Yorkville and that’s probably why it will be easier to develop cost wise.
Bank of Mom and Dad confirmed:
http://www.cbc.ca/news/business/genworth-homebuyer-survey-hints-many-new-owners-get-cash-from-family-1.3023404
Word is out, Canadian real estate is a quick way to get rich. My subdivision builders, all reporting that 75% of sales are going to international investors. This is a big change, because 5 years ago it was almost all locals.
It seems the world has taken note that you can make an easy $100k+ buying on spec.
Although I’m not too sure how long we can run an economy on debt and inflation?
#TheNameIsBond… #BrookeBond,Or… #Ooops…
[TimesColonist] – Oak Bay Beach Hotel bondholders scramble in bid to recover $45.6M
…” A group of bondholders facing a total loss of $45.6 million is trying to find out what happened to their money in the wake of the Oak Bay Beach Hotel entering receivership.
Bison Properties — developer and owner of the luxury waterfront hotel and spa on Beach Drive — owes $133.1 million to at least 200 creditors. It went into receivership in December, and business services company Ernst and Young took over management of the hotel.
Sales of strata-titled hotel units and condominiums were intended to finance the construction. But only 12 of 100 hotel units and six of the 20 condos ever sold.
The receiver plans to sell the unsold and common portions of the 120-unit hotel. No price has been announced.
However, sale prices do not always cover debts. For example, the Parkside Hotel and Spa, on Humboldt Street in Victoria, sold in 2013 for $23 million after its owner’s finances collapsed. It was built for $60 million. Like the Oak Bay hotel, its guest rooms were sold to individual owners.”…
http://www.timescolonist.com/news/local/oak-bay-beach-hotel-bondholders-scramble-in-bid-to-recover-45-6m-1.1815571
#BonusBrooke,Or… #WhyBeAChimp…
https://youtu.be/s9aSnj06bno
#WhenYouCanDiversify[BollyWoodRemix]…
https://youtu.be/-0bRer78kUg
“Sucks to be a basement dweller in Toronto.”
Agree with you there.
I think you should get out of that basement.
There are tons of condo rentals right now. All these completions from the recent months start to show on the MLS
#194 Mike
NOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!
#190 Dividend Man
Euro banks buying US bonds? Almost died out of laugher. So the Fed can finally dispose of these 3 something trillions of bonds in their balance sheet….
/sarcasm off
#174 BobC
“You seem so confident but your wrong. Penalty starts at $85,000 a year. You pay additional cost for part b &ad.”
===============================
So, you’re telling me that you’re earning OVER $85, 000 per year, and your whining about a penalty?????
Shame on you! Are you over 65?
Check your numbers!
Single is $125,000
Married filing jointly, the limit is $250,000
#218 Ralph Cramdown on 04.07.15 at 1:20 pm
#206 Van Doom — “You are worth what your merit says you are worth.”
If everyone is getting what they’re worth, why are you complaining?
*************************************
Really? I mean….REALLY? You’ve never heard of a union who threatens to strike even if the workers push paper and get nothing done? Merit means nothing in unions.
SWL1976 # 117,
“Some here might want to chew on this”
——————————————–
Now I enjoy a good conspiracy (if reasonable) as much as the next, critical thinker.
I also agree, the Jade Helm exercise is quite discomforting and a definite display of strength by the system.
But what Steve Q. is saying, is just utter bullshit.
I won’t get into why other than to say, it’s extreme rhetoric like his, that discredits those whom endeavour to apply simple logic and physics, to unreasonable events.
#211 Bottoms_Up on 04.07.15 at 1:01 pm
#43 Van Doom on 04.06.15 at 7:39 pm
—————————————————
Please provide direct evidence that proves 92% of government employees ‘push paper’ and ‘get nothing done’. A direct link will work.
Here’s a link to all federal departments that essentially outlines priorities and accomplishments (ie, productivity). Seems to me it would take more than 8% of the government workforce to achieve all this.
http://www.tbs-sct.gc.ca/rpp/2014-2015/index-eng.asp
*****************************************
Man you buried yourself here……
billions and billions and billions to dept of indian affairs – yet poverty abounds coast to coast.
13 billion in Gas Tax collected 8 billion dispersed.
5 BILLION IN PENCIL PUSHING TO ADMINISTER THE GAS TAX? REALLY????????
ALL Govts grow like weeds displacing everything around them then finally collapse……the only reason Canada is still “alive” is because of resource royalties. Without oil, the govt would have been dead long ago…..
Ralph Gives me a Math lesson
Ralph Cramdown at 173 responded:
“As interest rates approach zero, to what value does ANY asset that produces perpetual annual cash flow approach? If you said infinity, you are correct.“
– In theory, yes, infinity.
Good grief, who let the pure math guys into the room? Any asset will have a risk premium attached to it — even a government guaranteed asset, if it has a long enough duration. And one needs to predict interest rates over the life of the asset, not just today or for the next ten years. Posit a world where interest rates stay at zero forever, yet which contains an asset that offers a guaranteed real return forever. Now give your head a shake, because such a world can’t exist.
****************************************
Thank you Ralph, I don’t disagree that it would never happen and never said it would.
In my example I assume the market risk premium is built into the market interest rate.
Consider a Perpetual government bond such the British Consols, which I believe still exists, and traces its history back a couple hundred years or more.
If they trade at a yield that approaches zero then their value approaches infinity.
I just point this out as a sort of “boundary condition”. It’s never going to happen but we are closer to zero than anyone in their wildest dreams ever expected back around 1980.
It’s just a bit of a thought experiment.
It suggests, among other things, that house prices can go even higher if interest rates inexplicably keep going down. Not my prediction, but that is the math.
Here’s another thought exercise. A perpetual annuity doubles in price every time its market yield (which of course includes a risk premium) falls by half. Now, if interest rates start at 4%, how many times can the rate fall by half, and the value double, in theory?
Yes, correct, an infinite number of times.
“The Year over Year weekly selling price average for homes in Saskatoon fell $60,000 last week. From $380k in 2014 to $320k last week. OUCH.
4 week median and 6 week averages are also still down ~$20k. Sucks if you bought a home in Saskatoon in the past year.”
May I ask for your source on these stats please?
#174 BobC
Unless of course, your still working? That $85,000 applies to wages and ‘earned income’. It does not apply to interest, dividends or capital gains.
But, Geez, Louise, man! If you’re just making a little over $85K the penalty is extremely modest!
see this!
http://www.ssa.gov/pubs/EN-05-10536.pdf
For the life of me, I cannot imagine what your complaint is! I have a very substantial income from dividends and Cap Gains, and pay no penalty. Then again, I have no wages or earned income and am not employed or self-employed.
Suburbs of Toronto are not much cheaper…
http://www.yorkregion.com/news-story/5544112-detached-home-price-tops-1m-in-markham-richmond-hill/
‘Government “Worker” Bashing
VanDoom at 43 responded:
It never fails. Always the cherry picking of the 8% of Public Sector employees who actually “work” and ALWAYS leaving out the 92% that push paper and get nothing done. Always. Never fails. Happens every time.
*******************************************
VanDoom surely more than just 8% of government workers actually work?
I told you a million times not to exaggerate.
In any case if the government is willing to pay a non-productive worker in a position that adds no value, should we insult that government “worker” or instead focus on changing the way government acts?
Did Adam Smith not teach that the economy is best off when we all seek maximum gain for ourselves?’
8888 No doubt 8 percent is an exaggeration.
Maybe 0.8 percent.
Change the way government operates? What planet are you from?
http://blog.australiaboomtobust.com/
…
Outside of Sydney and Melbourne, property prices have ‘stalled’. Not because these markets are taking (as the real estate pundits would say) a short breather, its because you probably have first time homebuyers in Adelaide thinking to themselves, ‘why the heck should I leverage my life away to live in this expensive shit-hole?’
I don’t care whether we are talking about Adelaide, Hobart, Alice Springs, Sydney or Melbourne. These property markets are as ridiculously expensive as they are today because they were fuelled by excessive sums of available credit which created an artificial sum of buyers in an Irish-style bubble myopia frenzy. And unless there is a ‘miracle’… it’s by all mathematical accounts, downhill from here.
…
Uh oh. Australia relied on iron ore and China’s hunger for it. Sounds too familiar.
#22 Yogi Bear,
Your link has a great link to an alternative real estate agency model. I don’t think people really realize they are giving up a year’s income to an agent when they see a house. Even with a $750000 house and a commission of 5 per cent plus taxes, a seller is dishing out about $40000 after taxes which is not deductible. That is very likely the after tax income of one of the spouses or partners who own the house. Given a max 35 year work life and this is 3 per cent of the person’s net worth. Do it 3 times and it’s 10 per cent. Something to think about.
“Prices across all sales mixes have been going straight up for almost 20 years.”
No they haven’t. And spouting such nonsense demonstrates that you don’t even have the faintest clue what the ‘sales mix’ really is.
#227 Van Doom — “Really? I mean….REALLY? You’ve never heard of a union who threatens to strike even if the workers push paper and get nothing done? Merit means nothing in unions.”
OK, so you’re getting what you’re worth, and some people are getting more than they’re worth. As long as you’re getting what you’re worth, aren’t you just being petty, begrudging others a windfall, much like being jealous of a lottery ticket winner?
I would add to Garth’s point of where to put assets, have your US dividend stocks in your RRSP or RRIF to avoid withholding tax.
Mark, you should stick to what you know: snow, ice, chainsaws, road rage, and ignorance.
http://www.carscoops.com/2015/04/canadian-takes-road-rage-to-next-level.html
#231 Vaughn on 04.07.15 at 2:44 pm – May I ask for your source on these stats please?
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From Norm Fisher’s (Saskatoon RE agent) site… http://teamfisher.com/blog
“You need to have a lot of US equities in a global portfolio. Betting against the US has usually worked out to make one poorer.”
There’s a time and place for everything. Betting against the US in the late 1990s made a lot of people, particularly in the emerging markets, incredibly wealthy. Dynasties are not forever. I’m not sure that anyone on this blog is saying to “bet against the US”, but simply realizing that in some sectors of the US economy (ie: FIRE, certain portions of the tech sector, etc.), the valuations are out of proportion to the future size of their industry can lead people to make vastly superior investment decisions.
“VanDoom surely more than just 8% of government workers actually work?”
There are some (sometimes many) workers in government who not only don’t produce anything positive, but they actually have negative productivity for the economy as they use their roles to harass those, either in government, or in organizations regulated or interacting with government, into lower productivity.
Probably the worst aspect possible in government employment is that the intransigent bureaucratic structures make it incredibly difficult to get rid of people who are a cancer on the productivity of an organization. In fact, many are actually promoted, on account of their seniority, to management positions, rather than booted into the streets as incompetents are in the private sector. The private sector has taken great strides in eliminating the “Peter Principle”, paying severance to quickly release the misbehavers. Government, on the other hand, lets them rise through the ranks.
My real disappointment with the current (federal) government is that they didn’t recognize this and undertake meaningful structural reform to clean out the layers of incompetent management that had been created through decades of bad government public service policy. Of course, bad managers tend to make bad hires, so unfortunately the cycle continues with the public service becoming an increasingly less efficient user of taxpayer resources.
“Mark, you should stick to what you know: snow, ice, chainsaws, road rage, and ignorance.”
Is there another Mark here, or have you a disagreement with something specific that I said?
Naturally. As I said earlier in this thread, everyone should have a non-registered account. If you have a partner, it should be joint. — Garth
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You’ve said this before Garth. I believe the reason you have cited in the past is not to have all your investments in registered accounts.
Is there a general rule here, if for example a person’s TFSA is maxed but they still have RRSP contribution room? Or is it as simple as keeping 100% of Canadian dividend tax credit eligible investments (that portion of your overall balanced portfolio) in a non-reg account regardless of room available in registered accounts?
Both valid points. I will address this shortly. — Garth
#107 Katherine
Investing in a global economy and making sure it is balanced and diversified is overwhelming not just for novices but seasoned investors as well. Then you need to figure out what type of account you should put it in…..RRSP. TFSA, non registered accounts
I don’t recommend going to the banks for their financial input because they many sell their own products or those that will benefit their profits. Bank financial advisors do not have advanced qualifications to recommend investments with low management expenses and are outside of Canada. Often they choose mutal funds instead of ETFs. The best advice to do it right is to email Garth and let him figure out the best portfolio for your personal needs. It’ll help you sleep at nights. What will give you nightmares is to buy real estate in Vancouver!
“Here’s another thought exercise. A perpetual annuity doubles in price every time its market yield (which of course includes a risk premium) falls by half. Now, if interest rates start at 4%, how many times can the rate fall by half, and the value double, in theory?
Yes, correct, an infinite number of times.
“
In theory, but nobody will ever bid an infinite amount of money for such a cash flow stream. In fact, if the economy is truly that bad that interest rates keep going down, you might find it quite difficult to get much of a bid at all on such annuity. Thus, paradoxically, the low rate environment effectively trans-mutes itself into a high rate and/or credit simply unavailable environment against specific asset classes.
I personally believe we’re now seeing that lower bound having been hit, where prices have been stimulated to such an extent that, despite the “math”, nobody believes that housing will remain a viable investment. A very dangerous time indeed, because the phrase “perception is reality” is quite apt here.
228 Blacksheep
I’ll admit that Steve Q is a bit of a bullshitter, but even if half of what he says is true than look out.
Really though at the end of the day this operation is just the next step, and step by step if they get no resistance the machine will become more brazen until finally the machine gets its way. And the funny things is, is that the establishment has been and is quite open with their plan for a NWO just no one will take them seriously.
Now I respect Garth and I respect this blog and feel that enough is enough already with this topic and we can just wait and see how things all unfold
#243 Mark on 04.07.15 at 4:10 pm
“Mark, you should stick to what you know: snow, ice, chainsaws, road rage, and ignorance.”
Is there another Mark here, or have you a disagreement with something specific that I said?
…..
Holy crap man, your a cyborg.
DELETED (Ad hominem)
No they haven’t. And spouting such nonsense demonstrates that you don’t even have the faintest clue what the ‘sales mix’ really is.
20 years. Trend is up. Across all sales mix.
Unless you have a source link that says otherwise?
I didn’t think so.
Feel free to ignore or deflect or refer to heresay ;)
doctrine of unjust enrichment?
Swaps to Get Rich at the Expense of Cities
synthetic fixed rate municipal bonds, pension obligation bond, Auction Rate Securities, Capital Appreciation Bond
http://www.truth-out.org/opinion/item/30072-how-wall-street-used-swaps-to-get-rich-at-the-expense-of-cities
Tuesday, 07 April 2015 00:00 By Ed Walker, Naked Capitalism | News Analysis
=======================
Mistake in Assumptions
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2467716
Waddams, Stephen Michael, Mistake in Assumptions (July 23, 2014). Waddams, S. (2014). Mistake in assumptions. Osgoode Hall Law Journal, 51(3), Forthcoming; Osgoode Legal Studies Research Paper No. 52/2014. Available at SSRN: http://ssrn.com/abstract=2467716
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snuffing?
http://fair.org/blog/2015/02/20/top-10-bogus-isis-stories/
#237 Mark on 04.07.15 at 3:52 pm
“Prices across all sales mixes have been going straight up for almost 20 years.”
No they haven’t. And spouting such nonsense demonstrates that you don’t even have the faintest clue what the ‘sales mix’ really is.
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You’re such a pos. You don’t know anything about the TO market . I called you out on this a week ago when you claimed prices are below 2013 levels.
Go ahead and name the neighbourhood where prices haven’t been going in a straight line for 20 years. Name them or stfu.
Which hood oh wise one? Leaside Leslieville Riverdale Riverside Junction Bellwoods Annex Rosedale etc etc
Mark you are a pure liar about TO housing
@ Mark & Leo Trollstoy, re: #250
Unfortunately, one claim is as good as the other without the data.
The sales-mix-masking-declines argument that Mark espouses makes sense to me (yes, I understand the statistical math) but without the data, it could just be wishful thinking.
#238 Ralph Cramdown on 04.07.15 at 3:54 pm
#227 Van Doom — “Really? I mean….REALLY? You’ve never heard of a union who threatens to strike even if the workers push paper and get nothing done? Merit means nothing in unions.”
OK, so you’re getting what you’re worth, and some people are getting more than they’re worth. As long as you’re getting what you’re worth, aren’t you just being petty, begrudging others a windfall, much like being jealous of a lottery ticket winner?
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I’m surprised. RC you are smarter than that. Nobody will put you in jail for not buying lottery tickets.
Tax revs are finite. Every dollar pissed away (5 bil for gas tax??? wow) is taken from a needy child, hospital, school etc.
Seems simple to me.
#238 Ralph Cramdown on 04.07.15 at 3:54 pm
#227 Van Doom — “Really? I mean….REALLY? You’ve never heard of a union who threatens to strike even if the workers push paper and get nothing done? Merit means nothing in unions.”
OK, so you’re getting what you’re worth, and some people are getting more than they’re worth. As long as you’re getting what you’re worth, aren’t you just being petty, begrudging others a windfall, much like being jealous of a lottery ticket winner?
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If it’s private money fine do what you want. But when its billions and billions of pissed away TAX DOLLARS – My Money – then yes….I and every private sector worker has the right to complain. Stop making shit up and trying to make people feel bad for wanting to keep more of THEIR OWN MONEY Ralph……
Mark’
nobody believes that housing will remain a viable investment.
—
better check the 416\604 herdometer on that one.
you nailed it with the govt mgmt and hiring situation though. so true.
and , exactly how many chainsaws of each bar length do you actually own? ;) I always saw you as more of a words guy.
Whose Money?
Van Doom
But when its billions and billions of pissed away TAX DOLLARS – My Money
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At best tax money once paid is “our” money, it’s definitely not “your” money once its paid.
Not your money dude…
Shall we set a meeting of all Canadians to decide how to spend “our” tax money.
Wait, that seems unwieldy, so maybe we elect some representatives to decide for us. We’ll call it a “legislature”. And they in turn can set up some departments and hire people to administer things. We’ll call it the administrative branch of government.
Thing is when you pay your taxes, as required, you as an individual don’t get to earmark where it goes. This ain’t the United Way.
#231 Vaughn on 04.07.15 at 2:44 pm – May I ask for your source on these stats please?
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From Norm Fisher’s (Saskatoon RE agent) site… http://teamfisher.com/blog
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Thank you Mike
Is this how Premier Wynne intends on paying for her cancelled Gas Generating Stations? I got roped in with my first lawyer experience ever when I had difficulties as Executor. The estate lost 10’s of thousands of dollars to her. It took 2 years to execute the will.
Sorry Garth. This should have gone to “Losing it”. My clumsiness
I would extend this to the first $11,000 income as fully,100% taxable income to dividends as well as other lower taxed income from REIT’s, etc.
This will be some give back for the $11,000 annual TFSA limit per individual.