Undeniable

MOUSE modified

No surprise: Bank of Canada blinks

For a few months Steve has been trying to move his elderly parents from their place in Victoria to the Lower Mainland, where the Starbucks is better and the grandkids live. The target property is a generous condo someplace near the SkyTrain, walking distance to stuff. Something like Burnaby Metrotown, where all the swingers are moving.

“We’ve been relying on a realtor friend to keep us in the loop,” says Steve. “We are also getting her listings as they come up in our price range and areas of choice — and notifications for when they sell, for how much. This has been very interesting.”

Like almost everybody living in the most delusional part of Canada, this blog dog only really knew what the media told him – that it’s buy-now-or-buy-never. “With all the news about never-ending price increases, I figured if we really wanted a place we would have to engage in some bat$#!T crazy bidding war,” he says. “But to my surprise, one thing that is undeniable since December of last year: all our target properties sell BELOW asking, never above.”

To prove the point, our man fires off to me a bunch of solds. The average discount to listing price: 9%. “I admit I’m not up on modern statistical analysis, but it looks like prices are going DOWN. So what is up with all the news about prices still rising? Am i missing something?”

Well, what does the local real estate board say?

Sales in YVR, the realtors boast, were up 53% last month with the average benchmark property price ahead more than 7% to $660,000. As for condos, this was the official word:

“Sales of apartment properties reached 1,627 in March 2015, an increase of 47.1 per cent compared to the 1,106 sales in March 2014, and an increase of 65.7 per cent compared to the 982 sales in March 2013. The benchmark price of an apartment property increased 3.3 per cent from March 2014 to $390,200.”

This goes to the veracity of real estate data, of course. As this pathetic blog has pointed out often, realtors gather, sort, modify, revise and publish their own numbers. There is no audit function performed by any government body or regulatory agency. I’ve shown you on repeated occasions how the Toronto Real Estate Board, for example, adjusts year-ago numbers to make current sales and price stats look fat. So long as the Multiple Listing Service remains in realtor hands, unsupervised, Canadians will only know what the agents tell them.

Worse, that data gets regurgitated by others, and then those stats are open to wild interpretation. Like the Teranet-National Bank Composite House Price Index. The latest came out Tuesday, and here is how the Toronto Star reported it:

House prices were up in eight of 11 of Canada’s major housing markets in March over February and hit new records in the year-over-year price rise in the two biggest cities, Vancouver and Toronto. Year over year, national house prices were up about 4.7%, according to Teranet, while Toronto was up 7.6% and Vancouver up 5.3% Even beleaguered Calgary, where house sales were down more than 36% in March over a year ago in the wake of slumping oil, house prices held relatively steady, up 0.2% over February, according to the Teranet statistics.

Economist David Madani suggests this is bunk. The Teranet numbers, he says, prove no such thing. Any sales surge is temporary, he says, while the Teranet numbers were inflated and prices have actually risen by the smallest amount since last June.

“The breakdown shows that, with the exception of Toronto and, oddly enough, oil impacted Calgary, house prices either appreciated at a slower seasonally adjusted pace, or continued to decline outright. In Vancouver, price appreciation ground to almost a complete halt. In Montreal, prices continued to move sideways, after declining noticeably over the later half of last year.”

He also agrees with recent bank analyses showing most markets in Canada are in varying degrees of distress. “Among the 11 cities, house prices have peaked and appear to be declining in six: Victoria, Winnipeg, Ottawa, Montreal, Quebec City and Halifax. In addition, judging by the slump in home sales and rise in properties listed for sale in Calgary and Edmonton, it won’t be too long before house prices are falling in those markets as well.”

So, says this guy, “a housing correction is underway” with the GTA and YVR being “bubbles set to burst.” Moreover, how can you trust a report saying Calgary prices are rising and the market is firm when this is today’s scorecard:

Total sales –36.25%
Median price -0.70%
Days on market: +46.15%
Sales to date (April): 684
Active listings: 5,871

Well, you bet there are bidding wars in some areas of Toronto and Vancouver. Without a doubt the average sale price of houses even in soulless GTA burbs like Markham or Richmond Hill has hit the million-dollar mark. Yes, every time some rich dude overpays for a house on the Westside, you can bet Global BC’s on it like a wet fungus. And, of course, we have the never-ending faux ‘reports’ from Re/Max or Royal Lepage about the threat that the Chinese, Americans, Iranians or crazed, luxury-craving wrinklies pose to house prices.

But the greatest threat is a market built on rumour, anecdote, hype and realtor math, instead of jobs, growth and wage gains. You know I’m right. Now so does Steve.

210 comments ↓

#1 MSM-free Zone on 04.14.15 at 6:14 pm

“…..But the greatest threat is a market built on rumour, anecdote, hype and realtor math, instead of jobs, growth and wage gains. You know I’m right. Now so does Steve……
________________________

Kind of like oil.

Unfortunately for Canadians, the other Stephen is totally clueless.

#2 waiting on the westcoast on 04.14.15 at 6:18 pm

I am having a coffee in Langley (suburb of vancouver – where there actually is a swinger community – who knew) and overhearing three tables of people talk real estate. Classic time to exit the market…

#3 Happy in Kelowna on 04.14.15 at 6:20 pm

Wow – early today Garth. Great column. Here in Kelowna the same BS is being spun by the local RE cartel. We have friends with a 28 yr old married daughter that is contemplating taking the plunge with her hubby on a $4 to 5K house here in the central Okanagan. Her Dad(a good pal of mine) knows that this is a bad idea but doesn’t want to upset the princess!! What can you do?

#4 Mark on 04.14.15 at 6:24 pm

As usual, another great post. Its amazing how far the RE boards will go to twist the facts and attack those who point out that most of the alleged “price increases” are on account of a shifting sales mix (ie: a different sampling methodology), rather than the prices on individual properties appreciating. No wonder why so many properties are going significantly below asking in Vancouver and Toronto!

In fact, you should be using the average household income for that specific neighbourhood in Burlington. And you have no idea what that is since he didn’t specify his area code.

Very true, however, there’s enough information out there concerning average income and average house price in Burlington to know that those who responded to such were correct in their criticism of the ‘justification’ offered up by the poster of concerning Burlington prices. Its certainly possible that there’s some enclave of Burlington which has a Price to Income ratio of 3, but considering the averages for the overall city, such would seem highly unlikely.

#5 bigtown on 04.14.15 at 6:27 pm

Apparently in Europe with the negative interest rates lenders are now paying their borrowers…and/or reducing the principal of their mortgages. Our big five would lock the doors before any of that old world banking crossed the Atlantic….take that to the bank.

#6 Steve on 04.14.15 at 6:29 pm

Langley a Suburb of Vancouver? At 50km distance to Downtown, toll bridge to cross and countless trafic lights, this is a generous compliment.

#7 Mark on 04.14.15 at 6:29 pm

So BoC policy rate cut tomorrow or not?

I vote “yes”, rate cut.

If I am wrong, I’ll make a pact with y’all — I won’t post again till the weekend.

All right?

#8 matthew on 04.14.15 at 6:30 pm

Sounds like a new movie idea!

Boiler Room 2 – Housing in Canada
Wolf of Real Estate

#9 Kenchie on 04.14.15 at 6:38 pm

“Moreover, how can you trust a report saying Calgary prices are rising and the market is firm when this is today’s scorecard:”

Garth,

I work for one of Canada’s largest multi-fam residential owners. We got word that one of our Calgary buildings has gone double-digit vacancy for May from less than 2% at the end of December. I haven’t seen the data, as this was told to me verbally. But if you’re talking about “anecdotes”, that’s a troubling one.

#10 MF on 04.14.15 at 6:38 pm

#230 Retired Boomer – WI on 04.14.15 at 3:02 pm

-In response to yesterday’s post-

It feels great to finally join the party and the Freedom First fan club :)

Sorry for the onslaught of questions here!

1) I had no idea preferreds are a form of bond? If that is the case, then why have any bonds at all if preffereds are paying out handsome dividends AND are also safe?

2) With regards to bonds, in times of stock market volitility like 2008 or 2002, wouldn’t the value of my bonds increase because investors would seek safe havens?

During a rebalance, would you not just take gains in your bonds and move them to the equities that are falling in price?

Also, 80-100% equities seems really dangerous. Even though I plan on being in the game for the long haul it just seems to risky that some stocks would never recover.

MF

#11 Heisenberg on 04.14.15 at 6:40 pm

I can see condo prices in the 604 being the victims of a market correction in the very near future. Can’t disagree with that.
With the race to the bottom on construction quality, condos are popping up all over the 604 as these builders make huge profits.
Supply is ever increasing, so the natural balance will be for prices to drop.
I’ll never understand why people would want to buy or even live in a condo. Is it that they don’t have the intelligence or physical prowess to operate a lawnmower?
Always buy a house. That is still a great investment out there, no matter what people tell you. Just make sure it’s a crappy house in a good neighborhood, or a nice house in a crappy neighborhood. Never buy a nice house in a nice neighborhood – you’ll pay too much.

#12 Big English on 04.14.15 at 6:41 pm

Presently in Calgary on business. Between the pending election, the budget with Tax increases, the layoffs associated with the oil patch and the real estate market. Over beer/coffee conversation is apprehensive, nervous even.

#13 zedgt87 on 04.14.15 at 6:44 pm

Watching the Calgary housing statistics is like watching a slow motion train wreck. Condos are down over 5% YOY already. worst is yet to come.

#14 Freedom First on 04.14.15 at 6:47 pm

Thanks for your input Steve.

The Canadian economy is tanking and many liars are $$$$$$$hitting their pants about it. Undeniable. Right on.

#15 Annek on 04.14.15 at 6:50 pm

Re#2: waiting on the west coast
I remember being in Las Vegas at a conference overhearing the waitresses talking about buying real estate as if there was no tomorrow. Then the market crashed.
You are right. Classic time to get out of the market.

#16 S. Bby on 04.14.15 at 6:52 pm

There was a front page article in the local Burnaby free rag last week about lagging condo sales and the realtor interviewed said that sellers are not being realistic in their expectations. There is a glut of new condos especially in the Metrotown area and it is getting worse as there are many developments in the works now. Many units are bought by flippers who turn around and attempt to sell as soon as the units are finished. The agent said many units all have the same floor plan and it’s hard to sell these unless there is something to differentiate them.

#17 CalgaryRocks on 04.14.15 at 6:55 pm

That little mouse in the picture looks so sweet. In real life, I’ve seen rats that are bigger than squirrels behind the American Museum of Natural History.

There’s a Shake Shack across the street. Apparently rodents approve. Then there’s the Fairway supermarket a few blocks down. Known for rodent left overs. Yummy. NYC is so overrated.

#18 Mark on 04.14.15 at 6:59 pm

“Apparently in Europe with the negative interest rates lenders are now paying their borrowers…and/or reducing the principal of their mortgages. Our big five would lock the doors before any of that old world banking crossed the Atlantic….take that to the bank.”

Actually according to this WSJ article:

http://www.wsj.com/articles/as-interest-benchmarks-go-negative-banks-may-have-to-pay-borrowers-1428939338

Its not actually happening yet. But when it does happen, its my suggestion that a credit crisis would be precipitated as banks will simply, as you suggest, stop making loans and start hoarding physical currency.

When that happens, you really, really want to be owning the precious metals as the only realistic solution to currency hoarding is devaluation.

#19 JustMe on 04.14.15 at 7:03 pm

TERANET – NATIONAL BANK HOUSE PRICE INDEX

“The strong monthly price increases reported in March for Montreal, Quebec City and Halifax do not change the fact that prices have corrected downward recently in these areas, as well as in Ottawa-Gatineau, Calgary and Winnipeg. The charts on next page show that in March, prices returned at about their levels in mid-2011 in Ottawa-Gatineau, in mid-2012 in Montreal and Halifax, at the beginning of 2013 in Quebec City and in mid-2013 in Winnipeg.”

https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf

#20 JG on 04.14.15 at 7:04 pm

The acronym SNAFU really defines the housing market in Canada.

#21 Texas Rocks on 04.14.15 at 7:06 pm

The bottoms in the oil market…China is stockpiling.

http://www.marketwatch.com/story/china-goes-on-another-oil-buying-spree-2015-04-14

Panic in Cowtown…might be a bit premature. Oil up $10 bucks since the US election cycle began a couple weeks ago. Obama has been talking to third world cranks and inconsequential wacko’s now that his deal with Iran is sunk by his back room handlers in favor of a Hillary push in ’16.

Oil at $80 by years end and Calgary will continue to flourish…the Newfies will have left another bun in the oven and be back to drilling in no time. Buy buy buy baby. I love the smell of fstupid fear in the mornin’.

#22 everythingisterrible on 04.14.15 at 7:09 pm

Buying a condo in GVRD soon will be like buying a new car – never worth as much as the day you drive it off the lot. Burnaby’s master plan has condo tower’s & osb board townhouses going up left, right and centre. A constantly increasing supply. To me, it appears SFH supply is decreasing as older bungs are bulldozed and rezoned for duplexes or even other condo type arrangements.

#23 Still rising on 04.14.15 at 7:10 pm

House prices in Markham still sell routinely 10% over asking. Have been since last summer. I can provide proof to. I’m not making this up.

So provide the stats. — Garth

#24 Toronto condo's crashing in price and glass on 04.14.15 at 7:17 pm

The price of condos in Toronto is falling like a rock and sales are stalling. All those floor to ceiling glass windows are already a problem and will be not only a huge liability problem when it come to insuring the condo building but huge special assessment for replacement costs a few years away. Toronto condos will lose 50% and more as forced landlords can’t find renters or rent it at break even. Tens of thousands of people borrowed from the equity from their homes to by these money losing investments. The house of cards is falling apart but the bandaid of 0.25 rate cut will hold for so long. Word is realtors are lying, cheating and doing whatever it takes to makes a sale before the house of cards crumbles under the weight of debt. two people in two separate incidences were hurt today from falling glass in toronto. Condos to crash at least 50-70% in value. I wonder what effect it will have on overvalued housing?

#25 Still rising on 04.14.15 at 7:24 pm

http://v3.torontomls.net/Live/Pages/Public/Link.aspx?Key=1e165be5035b4b56acb32064a2815bf0&App=TREB

Every house sold is at least 10% over asking. And that’s just for this week. It’s been like that since last summer. I don’t see any cooling in the GTA.

#26 Mark on 04.14.15 at 7:30 pm

“Condos to crash at least 50-70% in value. I wonder what effect it will have on overvalued housing?”

Make no mistake about it, SFH’s will go for the same ride. The whole idea that SFH’s are somehow less prone to catastrophic price drops is just sheer lunacy. At least condo units should ostensibly have demand from the masses who are forced into involuntary downsizing.

The bottoms in the oil market…China is stockpiling.

So when China’s stockpiles are full, then what? What exactly is supposed to revive demand in a deflationary world?

#27 the jaguar on 04.14.15 at 7:32 pm

Garth or other blog dogs:
Is there a percentage versus population for a city as it relates to listings that represents a danger sign for the city? How does one quantify “too many listings”?
This was probably covered in a previous blog, but it would be nice to know what it would look like…
Maybe Ross Kay covered this and I missed it.

#28 vancity604 on 04.14.15 at 7:39 pm

nice wolf richter article to go along with garths similar post today

http://wolfstreet.com/2015/04/14/canada-housing-bubble-gains-but-most-cities-stumble/

“nce 2000, home prices have jumped 140% in the survey’s 11 metropolitan markets. A number of years charted double-digit gains before the Financial Crisis and right afterwards. Before the Financial Crisis, Canada’s home prices had largely followed the US run-up. But when US housing went into a terrific tailspin, Canada’s home prices just dipped about 8% before re-soaring, fired up by easy money, a resource boom that has now crashed, and in certain metropolitan markets an influx of flush and motivated foreign buyers.”

#29 Ogopogo on 04.14.15 at 7:42 pm

#10 MF on 04.14.15 at 6:38 pm
#230 Retired Boomer – WI on 04.14.15 at 3:02 pm

Even though I plan on being in the game for the long haul it just seems to risky that some stocks would never recover.

MF

That’s why you buy ETFs that tracks whole markets, never individual stocks.

The same goes for preferreds. Look up CPD or ZPR. I own both and couldn’t be happier with my returns. Plus they’ve been on a major sale lately. Back up the truck!

#30 Bill Gable on 04.14.15 at 7:45 pm

Sales in our half empty Vancouver High Rise joint have ground to a total halt. Prices have seized.

IF Poloz is stupid enough to drop rates tomorrow, I wonder how long the poodles will line up to get fleeced, before they realize that they are playing a mug’s game.

Across the lane they are redoing an entire Apartment building – and they are RENTALS. Originally, the Canadian owner was thinking Condo.

Hmmmm.

Deflation?

Not in food. Check the prices!!!

The reason I bring this up = California.

What’s going to happen if this drought goes to the wall?

It is like a script from a Drive In Movie.

TAXI!!!!

#31 LazyJason on 04.14.15 at 7:46 pm

Garth,

How is CMHC MBS and bond pricing influenced by expectations of a softening of the housing market?

#32 Smoking Man on 04.14.15 at 7:48 pm

So my son promises not to trade till he’s done school.

This morning, I log into our account.. Holy Crap.

Its down to 44k. Idiot , I’m thinking till I analized what he did. I would have done the same thing last Friday if I was trading.

Long story short, I changed the password , he’s got to focus’s on Plan B.. For the next 3 months.

I hate losing , even if its not my fault. So I took over the account. I saw an amazing squize on the bollanger bands, the RSI started to dip.. I loaded up on my main account. Then went to his..sold 200 contracts. Took a photo pre trade to show you what I’m taking about.

Although my kid knows what to do, he won’t follow it. Hes not ready. Same as the rest of you. That’s why I won’t teach you. Stop emailing me.

67k later we are looking at an 11%/profit in three months.

Dogs, if your job is programming, supporting it.. When your name is called out, SM this is fn broken…

You walk up to it , and just will the problem away with your mind, and a hand gesture just for show , don’t attempt this mortals.

The evidence on my blog, click my name.

#33 james on 04.14.15 at 7:50 pm

Mark, no. 26

I agree with you about SFH’s – they will not be immune to the coming crash, and in some areas may do worse than even condos (in nice neighbourhoods where condos are not clustered together too much and are attractive to retirees)

In my family, two siblings got clobbered in the 1990s real estate crash in Toronto. They each bought nice homes near downtown for just over $450,000. They were both forced to move within six years, one for divorce and another for work, and neither was able to sell for more than $300,000. They also spent tens of thousands on renovations and repairs, plus taxes of course.

Took them each until about 2010 to pay off the losses.
No government help, either. So anyone jumping into this crazy market, don’t expect the rest of us to bail you out! You think it’s your gain? Fine. It will be your pain, too.

I fear the coming correction will be a painful, longterm life lesson that will affect many for the rest of their lives.

The clock is ticking……..

#34 vancity604 on 04.14.15 at 7:51 pm

still cant touch a sfh in van bby coq or pomo average selling time in 7 days and bidding wars are going nuts there is still a ton of demand and a small supply, what is gona stop this ? a sharp uptick in interest rates? lol

Link to stats? — Garth

#35 BottomsUp on 04.14.15 at 7:53 pm

Houses are sitting on the market in the GTA where I live as well. Some examples – people are waiting around to sell these properties.

Price: 619900
Days on market: 80 and counting
Price change: 640000

Price: 649900
Days on market: 92 and counting
Price change: 664900

Price: 659900
Days on market: 70 and counting
Price change: 679900

Price: 679900
Days on market: 90 and counting
Price change: 699900

Price: 769900
Days on market: 35 and counting
Price change: 779000

Price: 849900
Days on market: 55 and counting
Price change: 879900

Price: 964000
Days on market: 95 and counting
Price change: 979900

#36 bolling RSI on 04.14.15 at 8:04 pm

# 32 Smoking Man

This is smoking beautiful…

ETF is your wife, FX is your mistress… you need them both to maintain happiness.

#37 Alberta is FINISHED on 04.14.15 at 8:15 pm

“The bottoms in the oil market…China is stockpiling.”

ROTFLMFAO. Wow If you think this is a good thing then Alberta is more FINISHED then I thought.

#38 1990 on 04.14.15 at 8:16 pm

#33 james

In my family, two siblings got clobbered in the 1990s real estate crash in Toronto. They each bought nice homes near downtown for just over $450,000. They were both forced to move within six years, one for divorce and another for work, and neither was able to sell for more than $300,000.

………………

I wonder how much those houses are going for right now?

#39 David W #1 on 04.14.15 at 8:20 pm

Everything I’ve read here since I arrived is about the BS the RE cartels are feeding and manipulating us with. What a great scam! Which I had a job where I could fabricate my product and people buy at an inflated (by me) price.

Where’s government oversight? Ontario Premier Kathleen Wynne is busy on the campaign trail saying she’s going to price industrial carbon dioxide emissions through a cap-and-trade market. I would say an expletive right here but we are all adults here except for the ON government. God help us.

#40 North Burnaby on 04.14.15 at 8:26 pm

These foreign investors arent desperate to sell, they can just rent out their units

#41 Bradley Lambo - Surplus Helmets on 04.14.15 at 8:27 pm

Don’t forget to purchase one of these when you go downtown near the condos I sold. You will need them.

http://www.aasurplus.ca/surplus/category/188-helmets

Just so you know I am not kidding!

http://www.thestar.com/news/gta/2015/04/14/glass-falls-from-king-west-condo-building-injures-man.html

http://www.cp24.com/news/two-injured-after-glass-falls-from-2-separate-downtown-buildings-1.2326806

http://metronews.ca/news/toronto/1339750/glass-falls-from-king-west-condo-building-injures-man/

#42 David W #1 on 04.14.15 at 8:29 pm

Re #21 Texas Rocks. “The bottoms in the oil market…China is stockpiling.”

Not just them. “Gibson Energy (Alberta) plans to add 2 MMBO of storage over the next few years”

http://www.oilandgas360.com/gibson-energy-expands-canadian-storage/

#43 Smoking Man on 04.14.15 at 8:30 pm

#36 bolling RSI on 04.14.15 at 8:04 pm
# 32 Smoking Man

This is smoking beautiful…

ETF is your wife, FX is your mistress… you need them both to maintain happiness.
…..

Ha, need a few more pops to figure out what ETF means, dose E stand for Eating.

Today at tax farm, I get the urge, big urge… For Crab legs and craps, Senica , its 3:30 I slip out, I leave my jacket on my chair to fool the bastards at the tax farm . he’s got to still be here. look his Jacket is on the chair.

Don’t think I fooled anyone , but I know the pricks sort of love me, but not a gay way..

Altho there might be one, I’ve seen him google eye the dude at Starbucks.

I live life , drinking, and a bit of Craps.

#44 Porsche on 04.14.15 at 8:30 pm

#37 Alberta is FINISHED

I’m still waiting for the start of the finish

#45 Funky on 04.14.15 at 8:34 pm

Same old story…”Follow the yellow brick road”! We all know how that ends in the Emerald City.

#46 Dave Hester on 04.14.15 at 8:34 pm

‘ You know I’m right. Now so does Steve’

YEEEEEEEEEEEEEPPPPPP!!

#47 Retired Boomer - WI on 04.14.15 at 8:40 pm

#10 MF

In response-

1). At times when long term bonds, or intermediate term bonds are paying more than preferred’s (not just now) it may pay to own them in an ETF or fund.

2) Bonds generally move in the inverse direction to stocks, hence the tendency to cushion the stock markets sudden dips, and assist in portfolio recovery. Yes, in a time of panic when stocks lose say 10% in a few days, bonds might increase 3-4%. It is usually not a $ for $ loss / gain but there are always exceptions and interest rates are a big factor to add in the mix. interest rates rise bonds drop the long her the duration (time on the bond) the steeper the decline in the price, but your “interest earned” remains constant. (tough concept to get your head around).

During rebalance (I usually do it only once maybe twice a year) I sell what’s gained to buy what has lost to maintain my portfolio asset allocation.

Asset allocation (percentage stocks / bonds) is a highly individualistic number. Age, risk tolerance are the key factors here.
Age how old? You 31. me 63. At 31 you have plenty of time to recover from a 100% stock portfolio taking a huge dump.
Me not so much, and I spend a portion of my portfolio gains every year, you do not I assume. I have a larger portion of bonds due to my age, also the income stream of bond interest, REIT’s, and ETF mutual fund dividends.
At 31 I would likely be 100% to maybe 90% stocks.

When I say “stocks” I mean stock ETF’s or Index mutual funds. They have the lowest expenses delivering you the largest market gains. You don’t need to own individual stocks. You might say 20 years onward if you decide to buy shares of company A, or B. This should be essentially a wee tiny portion of your portfolio 1-2% kind of thing in my opinion.

I like to play there, but it is money I can afford to piss away.

hope this helps.

#48 james on 04.14.15 at 8:42 pm

1990, no. 38

You wondered about my siblings’ homes that were sold in the 1990s crash and what they might be worth now.

One we don’t know, but the other home was sold in 2014. It went for $778,000 according to records. It was bought by my brother in 1989 for $455,000, sold at $300,000 in `95.

I explained to him, not to feel too bad. The “gain” over all those years amounted to barely covering the cost of inflation – i.e. even in the recovery of the current bubble, the house has been a dead, unproductive asset overall, since 1989. That’s 26 years of no real gains, plus a likely crumble again up ahead.

For our family, this has been a great example of how real estate is almost never an “investment”.

Not even the SFH.

Not even close.

#49 GTA Observer on 04.14.15 at 8:47 pm

#25 – Every house sold is at least 10% over asking. And that’s just for this week.

— Here’s the thing. Without better, more comprehensive data, it’s hard to tell what this means. It could be that the houses were priced more than 10% below market, with the result being sales of at least 10% “over asking.” It’s not hard to generate that boast — you just price too low and stimulate a bidding war. So maybe prices are going up and maybe they’re not; maybe they’re going up but not as fast as before and maybe they’re going down. We need more absolute numbers to get the true picture. Also needed: days on market, months inventory, and so on.

#50 H on 04.14.15 at 8:48 pm

Ok Garth,

So on the cooking the books for Realtors. I don’t get it. It this was true, the reality is market forces would easily take over.

Supply, demand, etc and the rising values of homes would stop.

Reality though is if I plunk a for sale sign in front of my house for example, we will have twice as much as we paid 10 years ago in about 4 hours flat.

Those are the facts.

#51 vancity604 on 04.14.15 at 8:53 pm

But the greatest threat is a market built on rumour, anecdote, hype and realtor math, instead of jobs, growth and wage gains. You know I’m right. Now so does Steve.
————————————-
its not rumors and bogus crea stats doing it here, in van real estate a religion and the same as talking about the weather, the masses are not wrong and you cant fight the trend, people fckn want houses here and there is enough money to go around, when does this change? not soon , calling a top just makes you look like an ass

Speaking of looking foolish, I’m still waiting for your link. — Garth

#52 Smoking Man on 04.14.15 at 8:59 pm

Oh man, Wyatt , my little autistic toy poodle.

He still craps inside the house, then runs around like he just discovered the secrets of the universe .

He’s got a bonifide cowboy walk.. I can’t bribe this rebellious beast. Wine gumbs, milk bones. Nothing works.

But when the little shit comes for loving, which is often, he just drops in your arms, weightless and happy. The shit i got to do to get to that place.

I love the shitter, best dog ever..

#53 Vancouverite on 04.14.15 at 9:05 pm

#50 H wrote:

“Reality though is if I plunk a for sale sign in front of my house for example, we will have twice as much as we paid 10 years ago in about 4 hours flat.

Those are the facts.”
——————————————-
H, you may be right. Perhaps double down and buy another house today and give us know periodic updates on the performance of the “investment”

#54 Mark on 04.14.15 at 9:05 pm

“Reality though is if I plunk a for sale sign in front of my house for example, we will have twice as much as we paid 10 years ago in about 4 hours flat.”

I don’t think anyone here disagrees with the fact that there has been a significant bull market in Canadian RE. The argument that Garth makes, as do many others, is simply that it has either ended, or is about to imminently come to an end, and that the significant rates of increase will soon turn to significant rates of decrease.

Maybe you could have gotten 2.2X what you paid 10 years ago had you sold 2 years ago, and now you would only be able to achieve 2X. In the long term, that’s a gain, but over the past 2 years, using those numbers, that’s a 10% loss.

#55 mdm on 04.14.15 at 9:10 pm

#48….lol. nicely put. true that the egomaniac likes to see the big selling number on their little house. not the reality they just got out barely over inflation for their 4 walls and shingles…very good point.

#56 Leo Trollstoy on 04.14.15 at 9:11 pm

I wonder how much those houses are going for right now?

Over $1m easy.

Last month I sold a late-60s built, cobweb-filled, mould-infested sardine shack and pocketed over half a mil in a 4 day bidding war.

Price of Toronto RE regardless of sales mix is unsustainably rising. Easy.

Low rates to blame.

#57 Mark on 04.14.15 at 9:13 pm

“These foreign investors arent desperate to sell, they can just rent out their units”

At ongoing capital losses and net income of practically zero?

Good one, you made me laugh….

#58 Diggstown on 04.14.15 at 9:14 pm

SFH seems to be the only residential real estate seeing major increases in YVR. Town homes and condos have been pretty flat from the stats I have seen.

Brian Ripley’s summaries are clear evidence of that. Supply appears to be matching demand in those areas. I wonder what will happen when interest rates rise?

#59 Tim on 04.14.15 at 9:20 pm

Tim Clark led TD Wealth just laid off large number of employees at its Toronto office citing bad economy ahead and the need to improve effecience. So much for those real estate gains…

#60 Karma on 04.14.15 at 9:21 pm

#78 Outtahere on 04.13.15 at 8:41 pm
“So hubby and I both have gold plated pensions and owe about $300k on a $1.3 mil house. We have no other savings or investments. Hubby refuses my pleas to sell now at the top of the market (because renting is throwing money away) so all extra $ are going into the mortgage. I can’t convince him otherwise and when I mention this blog, well he thinks he knows best! So I continue to read this blog and fondle my worry beads.”
————————————————————-
Why don’t you lead by example? You can open your own TFSA and trading account….

#61 Smoking Man on 04.14.15 at 9:27 pm

#57 Mark on 04.14.15 at 9:13 pm
“These foreign investors arent desperate to sell, they can just rent out their units”

At ongoing capital losses and net income of practically zero?

Good one, you made me laugh….
…..

I don’t think you laughed, you just said that.

#62 Cookie on 04.14.15 at 9:28 pm

BusinessInsider: “Canada’s housing bubble is bigger than anything the US was able to conjure up”

Extreme headlines. It sells.

I don’t think it’s bad. Our US friends are simply traumatized by 2008 and see bubbles everywhere. People want to put 90% of their savings in houses? Fine. People will simply work longer, or sell their houses when they actually need income.

Remember that in many European countries houses and paid over more than one generation.

Not all canadians put all their savings in their house. 2.2 billion has been spent by Canadian’s buying real-estate in Florida. Smart.

http://www.businessinsider.com/canadas-housing-bubble-is-bigger-than-anything-the-us-was-able-to-conjure-up-2015-4

#63 AK on 04.14.15 at 9:29 pm

Still rising on 04.14.15 at 7:10 pm
“House prices in Markham still sell routinely 10% over asking. Have been since last summer. I can provide proof to. I’m not making this up.”

So provide the stats. — Garth
====================================

LMFAO.

That’s why this Markham Home Has been on the market for 149 days.

#64 Undeniable | Realties.ca on 04.14.15 at 9:32 pm

[…] Source: http://www.greaterfool.ca/2015/04/14/undeniable/ […]

#65 Uncommon Sense on 04.14.15 at 9:32 pm

Hey Garth,
Proud female blog dog for a couple years now.
It was like the heavens opened up and the angels started to sing when I stumbled on your site.
I can attest to what I can only describe as sheer madness in Markham. I am living there temporarily with family and the 30+ year old 2,300 sf house next door that I would estimate requires at least $100K of repairs/reno after viewing it, was listed for $740K and sold for over $900K a few weeks ago in a bidding war. This past weekend there was a lot of noise coming from the backyard and low and behold, there’s a major leak in the basement and they have a crew digging and drilling into the foundation to repair the leak.
Thank you for being such a good samaritan by preaching “uncommon” sense!

#66 Alberta Boy on 04.14.15 at 9:35 pm

# 9 “I work for one of Canada’s largest multi-fam residential owners. We got word that one of our Calgary buildings has gone double-digit vacancy for May from less than 2% at the end of December. I haven’t seen the data, as this was told to me verbally. But if you’re talking about “anecdotes”, that’s a troubling one.”

There are many similar situations from every corner of Alberta. Another area, I’ve noticed is rural land. Quarters (160 acres) in central AB were going for 300-800k pending on buildings etc., and knew several people who sold last summer 2014 immediately at that price. Today, similar situations don’t even get a bid, but the price remains the same. I stress – don’t see oil going past 70 dollars for a couple of years, similar to the oil downturn where it stayed low from 98-01. In fact, personally I think it is worse. Anyways, the longer oil stays low, the correction will have more teeth and it will take a long time perhaps years to regain that price. On that note, some people actually need to sell properties immediately i.e. Divorce, Will Settlement, death, Sickness or Health issues, relocation of job, loss of job, or simply need money due an outstanding issue. I’ve seen some houses listed for years, and it comes down to – will sell a property if the price is right vs. must sell the property at what the market dictates immediately. ON another note, I recall talking to a guy that moved to Cochrane in 1986 after that oil collapse and bought a townhouse for 16000 (not a misprint), so corrections can be fierce.

#67 Mark on 04.14.15 at 9:37 pm

“1) I had no idea preferreds are a form of bond? If that is the case, then why have any bonds at all if preffereds are paying out handsome dividends AND are also safe?”

Part of the theory behind a balanced portfolio and rebalancing is that one has multiple asset classes which exhibit negative correlation to each other. Preferreds, while they can be part of a portfolio, have weak correlation to either bonds, or to equities, and thus, may not be the sort of diversifier that facilitates the creation of a ‘rebalancing bonus’.

Therefore, while they can be part of the non-registered/non-TFSA Canadian diversified portfolio, they may not bring a lot to the table in terms of augmenting returns.


2) With regards to bonds, in times of stock market volitility like 2008 or 2002, wouldn’t the value of my bonds increase because investors would seek safe havens?

Absolutely, although there are limits to such behaviour going forward, simply because a 0% interest rate is effectively the lower bound of what policy makers can set rates to without precipitating a deflationary credit crisis. (ie: lenders/savers decide simply to hoard cash instead of lending it out, and the economy thus grinds to a halt because loans are not available!).

#68 Mark on 04.14.15 at 9:43 pm

“Not all canadians put all their savings in their house. 2.2 billion has been spent by Canadian’s buying real-estate in Florida. Smart.”

But how much of it was bought using credit against Canadian houses?

When those Canadian houses drop in value enough, what happens when the proverbial “herd” tries to sell that Florida/Arizona RE, buys CAD$ with the proceeds, and puts it against their Canadian mortgage obligations?

Sure smells like they’ll be hit both ways. A much higher CAD$ (because of intense buying demand to repay CAD$ debt), and the selling stampede in the Florida/Arizona enclaves dominated by Canadians.

Now I know many will say, “but its paid-off RE and they have no Canadian mortgages”. Which is true. But their kids probably are in significant debt and they will face intense pressure to “help” them. Their fixed income assets probably won’t be performing very well either, and we know that fixed income and even REITs make up a disproportionate amount of the portfolio assets of Canadian retirees and their pension schemes. And as they get up in years, well, visiting Florida really loses its allure especially with the rapidly increasing cost of health insurance.

#69 Quebec is Great on 04.14.15 at 9:44 pm

Re Post #52…
Wyatt – the autistic toy poodle… that post got me laughin Bravo SM

#70 Smoking Man on 04.14.15 at 9:45 pm

DELETED (Harassment)

#71 Still rising on 04.14.15 at 9:45 pm

#63 AK on 04.14.15 at 9:29 pm
LMFAO.

That’s why this Markham Home Has been on the market for 149 days.
———————————————————————–

They’re holding out for more. I’ve seen it done before. I didn’t think it’d mean people would actually get more, but lately it’s been working.

#72 Leo Trollstoy on 04.14.15 at 9:49 pm

“But Toronto, oh my! Home prices rose 0.3% in March to a new record that is now a breathtaking 42% higher than the record set during the peak before the Financial Crisis.”
http://www.businessinsider.com/canadas-housing-bubble-is-bigger-than-anything-the-us-was-able-to-conjure-up-2015-4

Having had a very profitable 15 year experience flipping a number of properties in Toronto I have to say that my anecdotal observation agrees with the data showing prices across Toronto RE rising over the same time frame.

Oh my, indeed.

Today, it’s wait-and-see. Prices are currently unsustainably ridiculous and rising. Never good.

#73 Smoking Man on 04.14.15 at 9:49 pm

70 Smoking Man on 04.14.15 at 9:45 pm
DELETED (Harassment)

You soft bastard, time to trade the Harley in for a vocks wagonm

#74 Still rising on 04.14.15 at 9:52 pm

#65 Uncommon Sense on 04.14.15 at 9:32 pm

Hey Garth,
Proud female blog dog for a couple years now.
It was like the heavens opened up and the angels started to sing when I stumbled on your site.
I can attest to what I can only describe as sheer madness in Markham. I am living there temporarily with family and the 30+ year old 2,300 sf house next door that I would estimate requires at least $100K of repairs/reno after viewing it, was listed for $740K and sold for over $900K a few weeks ago in a bidding war. This past weekend there was a lot of noise coming from the backyard and low and behold, there’s a major leak in the basement and they have a crew digging and drilling into the foundation to repair the leak.
Thank you for being such a good samaritan by preaching “uncommon” sense!

——————————————————————–
Exactly! Houses routinely sell $80k-$100k over asking. It’s crazy.

#75 OttawaMike on 04.14.15 at 9:52 pm

How timely.

I just dropped off my friend at her west end home not far from Ikea. Ottawa had the biggest Ikea in the world for 14 months but then Montreal built a bigger one and took us off the map. Oh yeah, where were we?
My friend.
She had her house professionally appraised today and its value is exactly what she paid in 2009 even after a complete heating cooling system upgrade plus new hardwood on the main floor.

The local cartel has a mantra: Ottawa RE has never gone down. Especially with their “mathemagistics”.

#76 Mark on 04.14.15 at 9:53 pm

“Tim Clark led TD Wealth just laid off large number of employees at its Toronto office citing bad economy ahead and the need to improve effecience. So much for those real estate gains…”

And another few hundred once the dust clears at CanJet. Guess consumers are making it clear that they’re in austerity mode now, and jetting off to Europe just for the fun of it is increasingly less in the cards.

About the only people who believe the delusion of rising housing prices are delusional realtors themselves. And maybe random bank “economists” who go on TV insisting that the economy is fine, like BMO’s Doug Porter the other night. But the rest of us recognize that the circumstances are quite dire.

#77 Blacksheep on 04.14.15 at 10:02 pm

Derek R # 246,

“But the basic fact is that the banker has to eat, if nothing else, so he has to spend the interest on food which he buys from the farmer. If he doesn’t have the interest yet, then he has to run up a tab with the farmer which they settle at the end of the year either by calling it quits on the interest or by the banker using some of the principal to repay the farmer for the food, thus giving the farmer the $10 he needs to make the interest payment.”

“Otherwise the banker will starve to death before the loan becomes due.”

“Compound interest at a rate of 9.875 per month”

“This high interest rate does not allow Farmer or the Cook to make monetary profit.”

” ie a total of 840 coins of which 480 are principal and 360 are interest.”
———————————————————
What the hell are you talking about? Sorry man, but you are so far off the actual point being discussed, I don’t even know were to begin to correct you.

#78 Vicpaul on 04.14.15 at 10:02 pm

I had just logged on to read today’s post when, distracted by Connor McDavid’s wizardry on ice, I inadvertently touched May 31st 2012 in the archives….if you like tactile chimps, check it out – veery nice!

#79 young & foolish on 04.14.15 at 10:05 pm

“For our family, this has been a great example of how real estate is almost never an “investment”.”

RE is not an investment, unless somebody else is paying off your mortgage. Otherwise, it’s just shelter, and everybody has to pay for that in one form or another.

#80 Drill Baby Drill on 04.14.15 at 10:07 pm

How long before we get negative mortgages ?

Never. — Garth

#81 lee on 04.14.15 at 10:08 pm

I predict very shortly 2 bedroom condos in downtown Toronto will be renting for $900 a month because the competition appears to be getting pretty fierce for good tenants. This is practically living for free.

#82 tundra pete on 04.14.15 at 10:13 pm

#34 whats going to stop this? Only a sudden die off in stupid. Whats worse is wanting to buy in those places? Seriously you will more likely die from black mold before you will win a place! WTF.

#83 Leo Trollstoy on 04.14.15 at 10:17 pm

Tim Clark led TD Wealth just laid off large number of employees at its Toronto office citing bad economy ahead and the need to improve effecience. So much for those real estate gains…

The Canadian economy is going to hell in a handbasket. This will keep the CAD low (or push it lower).

Garth called it when the CAD was at parity with the USD and told the blog dogs to load up on US RE. Great call.

#84 Drill Baby Drill on 04.14.15 at 10:18 pm

#66 Alberta Boy
I was here in Calgary in the mid 80’s and house prices absolutely tanked. Over time they did regain their pricing.

#85 Ralph Cramdown on 04.14.15 at 10:23 pm

#77 Blacksheep — “What the hell are you talking about? Sorry man, but you are so far off the actual point being discussed, I don’t even know were to begin to correct you.”

He was talking about an economy, and building a model of one too see how it worked. One of the more impressive things I’ve seen on here. Simple models like this have been used by economists from Karl Marx to Steve Keen, to inform themselves and others as to how an economy works.

Also of interest, for those who wish always to be liquid:
http://en.wikipedia.org/wiki/MONIAC_Computer

#86 pwn3d on 04.14.15 at 10:26 pm

They’re holding out for more. I’ve seen it done before. I didn’t think it’d mean people would actually get more, but lately it’s been working.

——–

lol, hardly, the house is overpriced. The lot is bad, the pie shape wastes all the space in the front yard and gives you a small house and a smaller back yard. 3 bedroom, is that a joke? The interior is shite. I can’t even begin to describe how bad it is, total gut job required.

the market in GTA is crazy right now, but not that crazy.

#87 pwn3d on 04.14.15 at 10:28 pm

So BoC policy rate cut tomorrow or not?

I vote “yes”, rate cut.

If I am wrong, I’ll make a pact with y’all — I won’t post again till the weekend.

All right?
———–
I like scenarios where either way I win. deal.

#88 bubu on 04.14.15 at 10:29 pm

“In addition, judging by the slump in home sales and rise in properties listed for sale in Calgary and Edmonton, it won’t be too long before house prices are falling in those markets as well.”

The oil is recovering.. oil will be 65-70 by the end of Q3- Q4 and with the CAD at 0.8 USD, Edmonton and Calgary real estate will be back to normal… sales I mean because price will be higher than last year for sure… On top of this as we can already see the oil price doesn’t have any influence on real estate price in AB as in the past…

#89 statsfreak on 04.14.15 at 10:38 pm

#149 Lucy Fur on 04.11.15 at 1:48 am
The universe has been inflating since inception, and at an expanding rate. Why can’t the money supply?

In fact, we have been trying localized earth confined unbounded inflation for several hundred years now including population, food production, resource extraction, pollution, etc. No problems so far.

Look at California. The population has doubled since the 70’s and there aren’t any problems. I mean sure it’s expensive watering the almond groves with Nestle bottled water, but money is no object since it can inflate exponentially.

————————————–

Oh, yeah! You GO Girl!!!!!

#90 Someone from TO on 04.14.15 at 10:39 pm

Talk about layoffs.
I work for one of the big banks downtown TO in IT.
Today we lost somewhere between 10 and 20% of people (don’t have the exact numbers but from talking to people around me, it seems to be somewhere in this range). I’m part of a good size technology group.
They were pulling people from meetings, walking them from their desks, etc. this morning.
Not long ago (maybe two months or so) another technology group within the bank had a similar cut.

Not a pleasent day by any means. I know some of the people for many years.

2015 is the year of cutting costs in this place.

#91 Randy Randerson on 04.14.15 at 10:40 pm

My prediction for BOC’s announcement tomorrow? No change to rate.

#92 Blacksheep on 04.14.15 at 10:46 pm

To the collective of: Mark / Oot der Hoos / Derek R,

OK…I tried to make this as simple as possible, please try to stay with me:

1) Money, does not exist, anywhere.

2) John, opens the first commercial bank ever and is offering loans.

4) Bob, the banks first customer ever, borrows $ 100, from John’s bank.

5) Upon Bob signing the bank document and creating a new deposit of $ 100, John the banker reminds, Bob the customer, he will need to repay the principal amount of $ 100, PLUS the additional 10% interest due on the loan.

6) Here is the important part: Were does Bob, get the additional $ 10 he needs, to fully repay his debt with John’s bank?

Please review the parameters outlined above, before answering the question.

We are Borg?

#93 Mark on 04.14.15 at 10:48 pm

“Having had a very profitable 15 year experience flipping a number of properties in Toronto “

Good for you — you pretty much started at the bottom of the 1990s market (but news flash: prices are no longer rising!). Will you keep your gains by protecting them in some other asset class not correlated to the RE market, or will you go down with the ship?

Most of the public will go down with the ship. 70% of Canadians own. There are exceedingly few credit-worthy and interested buyers even left amongst the 30% who do not own.

#94 In other news on 04.14.15 at 10:51 pm

Toyota moves Corolla to Mexico, highlighting high costs in Canada

http://www.theglobeandmail.com/report-on-business/international-business/toyota-moves-corolla-to-mexico-highlighting-high-costs-in-canada/article23963034/

#95 jane 24 on 04.14.15 at 10:53 pm

I have never understood why the land transfer people (provincial govts) don’t release their stats every month, after all they know exactly what houses sold for. The land registry does in England although with a two month lag.

This public data then goes onto sites like http://www.zoopla.co.uk which allow you to access the latest and historical sales price of every house on your street or any other street for that matter.

It would be so easy for government there to do so why don’t they?

#96 Obvious Truth on 04.14.15 at 10:53 pm

Quick fact check tonight CNN style. In the keeping them honest file – realtor math edition.

This ones almost too glaring so I’m thinking I could be wrong. But that rarely happens.

Current creb site statistics on sales:
March 2014 total sales – 2481
March 2015 total sales – 1789

For a decline in sales of 27.89%. Pretty rough?

Digging into to archives of March 2014 shows sales of (dots are a drumroll) ………………….. 3233. Not 2481.

For a decline of ………………… 45%. That’s rough.

Even March 2013 shows 2675 sales.

April 2014 lists 3413 home sales. So far in April …… 684
We are half way through the month. Ouch. Thats painful.

Alberta is …………… ____________.

#97 Godth on 04.14.15 at 10:56 pm

#52 Smoking Man on 04.14.15 at 8:59 pm

Jaysus Smokie, they aren’t that hard to train. They evacuate about 20 min. after feeding, same as you in the morning (although his are probably solid). Feed the beast and dump him outside before he dumps inside.

#98 meslippery on 04.14.15 at 10:58 pm

Sorry I missed it YVR ??
Young Virgina Rebel?

#99 Marco on 04.14.15 at 11:04 pm

Thanks Garth.

From Ambrose/the telegraph:

“The United States is poised to raise rates much more sharply than markets expect, risking a potential storm for global asset prices and a dollar shock for much of the developing world, the International Monetary Fund has warned.”

http://www.telegraph.co.uk/finance/economics/11535849/IMF-fears-cascade-of-woes-as-Fed-crunch-nears.html

#100 Christopher Lackey on 04.14.15 at 11:18 pm

I watched several dozen properties in a central area of Montreal (Verdun) sit for all last year for weeks, and weeks, and months, and sometimes many months, all through this winter. Then in mid-march, all of a sudden, “VENDU” everywhere.

Without that rate cut I’m sure a lot of those would still be sitting there. And the fact remains that this city has seen 0% price appreciation since 2012.

#101 young & foolish on 04.14.15 at 11:32 pm

“I predict very shortly 2 bedroom condos in downtown Toronto will be renting for $900 a month because the competition appears to be getting pretty fierce for good tenants. This is practically living for free.”

Wow … imagine that! From 2200-2500 average rents down to 900! Can’t wait!

#102 Ontario's Left Coast on 04.14.15 at 11:36 pm

#32 Smokey – “So my son promises not to trade until he finishes school…”

Stop right there. I can’t believe your son is going for an obedience certificate. Certainly he can learn everything he needs on the almighty school of Google? Hypocrite is all I’m saying.

#103 Karma on 04.14.15 at 11:40 pm

#237 Blacksheep on 04.14.15 at 3:52 pm
Oot der Hoos # 170,

“I show the banker spending his earned interest as:

taking part of the excess production of the borrower”
——————————————
“Sorry, but you still cannot explain:

Were the ‘borrower’ gets $’s to pay the banker, (the bankers earned interest) in the first place. Did the ‘borrower’, borrow $’s from a different bank?”

1) The borrower has to provide a service or produce a good efficiently enough (i.e. revenue > expenses and debt service) to repay the loan. It’s not rocket science.
————————————————————-

“Did the ‘borrower’ exchange (sell) a good, service or labour to a third party, whom they had borrowed $’s from a bank?”

2) Not necessarily. The third party may have used their cash in their accounts, rather than taking out loans to spend. In a rudimentary financial system being described, banks don’t lend out money unless they have been given deposits first. You seem to think borrowing comes before deposits, but it’s the other way around.
————————————————————–

“Were does the money to pay the additional 10% interest (not, created by new deposit) come from, in the very beginning?”

3) It comes from increasing productivity of the firm. No increase in productivity enough to cover total costs leads to default and bankruptcy. Once again, not rocket science.
———————————————————–

“I think this why some people refer to commercial banking as Ponzi. $’s from future lending (deposit creation) are required to cover interest of the pre-existing debts.”

4) Wrong. People refer to commercial banking as “Ponzi” because they believe anything on the internet that confirms their biases, and they have a bias to be suspicious of things they don’t understand.
—————————————————————

“Constant expansion is required.”

5) Constant expansion is preferred to the alternative: defaults en masse, structurally higher interest rates, lack of liquidity when it’s needed most, rapid inflation quickly followed by rapid deflation in a boom/bust cycle not seen since the 19th century and long forgotten by 99.95% of humanity. But of course, you won’t believe me because you’re biased to believing in “Ponzi”.

#104 B Riding on 04.14.15 at 11:45 pm

#6 Steve on 04.14.15 at 6:29 pm
Langley a Suburb of Vancouver? At 50km distance to Downtown, toll bridge to cross and countless trafic lights, this is a generous compliment.
………………………………………………………………………….

My grandfather bought in Burnaby when it was called then boonies, back when brentwood mall was a field with apple tree’s and lougheed highway was a dirt road, when acre of land in abbotsford costed 10 bucks and the city was begging for takers.

My point is that Langley Surrey Coquitlam Pitt Meadows is the Suburb’s now pal.

If you don’t think so then you must be one of these pathetic young people who get there down payments from there parents because you have no idea on how to save your own money for a down payment.

I bet your father in law bought your engagement ring and paid for your wedding too.

Please tell me you at least paid for wedding ring?

My generation is full of little b…….

#105 Blacksheep on 04.14.15 at 11:46 pm

Ralph # 85,

“He was talking about an economy, and building a model of one too see how it worked.”
——————————————-
I’m sure Derek’s glad you found it interesting…It looked like a lot of work.

I can only assume he (Derek) read a single, Oot der Hoos’s post, that was a response to me and misinterpreted the topic being discussed. See my post above for a simplified version of the actual topic.

#106 Uncommon Sense on 04.14.15 at 11:47 pm

Still rising #74

Why this may be true now it doesn’t make it sustainable.

The warning signs indicative of a troubled economy are rampant, as Garth laboriously explains each day.

People are blindly, and some knowingly, getting into absurd amounts of debt based on a toxic mix of emotion and ignorance.

Trouble is that people fail to distinguish between a house being a home vs an investment. The behaviour and logic that governs each are quite distinct and different. You simply cannot have your cake and eat it too.

Slow, steady and smart wins the race.

#107 Bcd on 04.15.15 at 12:07 am

I also predict a bo change in the rate tomorrow. BOC not stupid enough to throw more fuel on housing fire.

#108 Alberta is FINISHED on 04.15.15 at 12:11 am

bubu on 04.14.15 at 10:29 pm
“In addition, judging by the slump in home sales and rise in properties listed for sale in Calgary and Edmonton, it won’t be too long before house prices are falling in those markets as well.”

The oil is recovering.. oil will be 65-70 by the end of Q3- Q4 and with the CAD at 0.8 USD, Edmonton and Calgary real estate will be back to normal… sales I mean because price will be higher than last year for sure… On top of this as we can already see the oil price doesn’t have any influence on real estate price in AB as in the past…

____________________________________

Poor poor delusional head in the sand Alberta. Oh well reality will be telling a different story at the end of the year. Alberta is FINISHED.

#109 Yosemite S on 04.15.15 at 12:11 am

#182 Mark on 04.14.15 at 10:10 am
What happens in the unlikely event that all my assets have depreciated? ….. you would sell (or use the dividends from) the less severe losers, to buy more of the most severe losers. ”

Just a cotton picking minute, are you advocating chasing something to the bottom…what about a stock that goes into a death spiral like Nortel….doubling down like this is gambling, not investing and a recipe for disaster! It could also happen to a fund or an ETF. Imagine if you had just bought an index ETF just before the GFC, everything plummeted, and there was a threat of depression. Who in their right mind would double down, without knowing the future? I think some losses have to be written off and included in the overall portfolio return rather than chasing and racing to the bottom.

#110 Prairieboy43 on 04.15.15 at 12:21 am

DELETED

#111 PM on 04.15.15 at 12:24 am

>2015 is the year of cutting costs in this place.

Doomsayers said that last year when Bestbuy and a few other high profile retailers shed some jobs. It wasn’t a big deal. The Canadian job situation doesn’t have any strong outlook either way this year, you’re anecdote being true or not.

#112 Mountain Man on 04.15.15 at 12:46 am

Oil’s been slowly, quietly rising the past week. WTI is about $53 today.

Despite Saudia Arabia pumping to the max, lower gas prices have increased worldwide consumption. Layoffs and production cuts in North America are slowly turning off the taps, reducing supply. ISIS encroachment on Iraqi oil fields and the Yemen conflict create political and oil-supply uncertainy in those regions. There’s no guarantee Iran’s gonna sell their oil any time soon.

Canadian oil companies will survive:

– many have hedged their oil prices at the $80-$90 range for 2015 and even some into 2016
– layoffs and dividend cuts save money
– lower royalties paid to the Alberta government
– new technologies lead to greater efficiency
– companies like Husky, Imperial and Suncor sell retail which is a natural hedge

Oil will never go down to $20 again, despite what all the so-called experts on Wall Street claim. Probably be back up to $80 range later this year.

#113 Ontario is FINISHED - who's left? on 04.15.15 at 1:38 am

And another one goes south…

http://www.theglobeandmail.com/report-on-business/international-business/toyota-moves-corolla-to-mexico-highlighting-high-costs-in-canada/article23963034/

#114 Leo Trollstoy on 04.15.15 at 1:46 am

My prediction for BOC’s announcement tomorrow? No change to rate.

I concur.

#115 calling TOP in YVR market on 04.15.15 at 1:50 am

#51 604vancity

Call me an ass!

The YVR market peaked this year and its down from here. You can quote me on that.

Vancity (the credit union) calling for a doubling of RE values by 2030 is all the more confirmation of that.

Permits to build multi residential are up massively. SFH permits not so much. They’re overbuilding in Greater Van. Just drive around Langley off 200th Street South of HWY1. Absolute joke what’s going on there.

Owning any of these beaver barf boxes would be like a self inflicted gunshot wound.

#116 DisgustMadeMePost on 04.15.15 at 2:26 am

Spoke to a colleague today who moved in with her fiancé. She is going to sell her condo in one of the Van suburbs. I think she said she bought it 3 years ago. Her comment was that she knows she’ll lose a little. I didnt have the heart to remind her of all the mortgage payments, condo fees, property tax, sales tax and lost opportunity.

At least she’s getting out now.

#117 DisgustMadeMePost on 04.15.15 at 2:30 am

#88 bubu on 04.14.15 at 10:29 pm
“In addition, judging by the slump in home sales and rise in properties listed for sale in Calgary and Edmonton, it won’t be too long before house prices are falling in those markets as well.”

The oil is recovering.. oil will be 65-70 by the end of Q3- Q4 and with the CAD at 0.8 USD, Edmonton and Calgary real estate will be back to normal… sales I mean because price will be higher than last year for sure… On top of this as we can already see the oil price doesn’t have any influence on real estate price in AB as in the past…

………

Yikes!

Rename please …. To: BOOBOO

#118 Mac on 04.15.15 at 2:41 am

It’s pretty well known that this latest run-up in Van prices is for single family homes everywhere and for townhouses in the leafy-green pockets near downtown. No one thinks it’s for condos. Esp not condos outside the Vancouver municipality.

#119 April Fools on 04.15.15 at 3:01 am

What is this? April 1st?

Quoting Madani? Dude, RE is on fire in YVR. Prices swelling across the board! Lowest number of listings in almost a decade.

But lets continue to live in this make believe world we have here.

#120 Mark on 04.15.15 at 6:10 am

“Just a cotton picking minute, are you advocating chasing something to the bottom…what about a stock that goes into a death spiral like Nortel….doubling down like this is gambling, not investing and a recipe for disaster! It could also happen to a fund or an ETF. “

As Shawn Allen et al have argued in previous posts, the chances of relatively broadly diversified ETFs going down to zero or losing nominal value over the long run is minimal.

However, it could and actually has happened. For instance, Weimar Germany hyperinflation would have sent a hypothetical German bond fund to zero. And you’re right, such an event would destroy a lot of value. But I guess you could incorporate certain limitations on the magnitude of rebalancing to protect against such. For instance, gold and foreign stocks in the portfolio of a hypothetical Weimar balanced investor, and limiting the magnitude of rebalancing, would have preserved significant value.

Wow … imagine that! From 2200-2500 average rents down to 900! Can’t wait!

Nice try, but rents are far stickier than prices and I doubt it will get that bad in downtown Toronto. A P/E multiple reversion which truncates supply is probably in the cards, but widescale emigration from Toronto leaving oceans of units un-rented, not very likely.

I concur.

So I guess you will be very happy in just under 4 hours then, if the criterion for self-banishment is met.

#121 saskatoon on 04.15.15 at 7:05 am

#110 Ontario is FINISHED

but wait?

don’t increases in minimum wage help the economy and create jobs?

isn’t the cap and trade system good for the industrial employer’s bottom line?

#122 ANON on 04.15.15 at 7:06 am

Rates will only rise when borrowers suddenly look around and wonder :WTF had I done? Was I on drugs or something?
That will be the moment when the creditors will have their own epiphany: HTF did we lend all those money for THAT?!
That’s why it is a self reinforcing downward spiral or rising rates and disappearing promises (credit, money, whatever you call it).
Until then, rates wont rise. At all. However, The “then” gets closer by the day.

.

#123 Ralph Cramdown on 04.15.15 at 7:28 am

#92 Blacksheep —
“1) Money, does not exist, anywhere.
2) John, opens the first commercial bank ever and is offering loans.
4) Bob, the banks first customer ever, borrows $ 100, from John’s bank.”

Why? What useful thing could he possibly do with the money?

Banks existed before paper money did. They borrowed and lent physical gold, and things worked just fine. Lending at interest is mentioned in the bible, but paper currency is not. How did things work then?

Also, you forgot step three (which is, of course “Profit!!!” but I think you got the order mixed up).

It’s no good building a model about how you think banks work today without thinking about how they evolved and how they originally worked, even in times of specie.

#124 maxx on 04.15.15 at 7:30 am

When someone trawls the mls and finds a property listed multiple times (happens often), does that mean that when it sells, that sale is also counted multiple times?!

#125 Dividend Man on 04.15.15 at 8:01 am

This just in Negative Mortgage Interest Rates for Portugal and Spain…Is Canada Next???? Just kidding Garth….

#126 gladiator on 04.15.15 at 8:18 am

But in Steve’s case, it’s anecdotal evidence and we don’t trust that (right, Garth?). We get official numbers that are widely publicized – why not believe them? They are not anecdotal…

And regarding Mr. Madani – why don’t you mention that in the Bloomberg survey on BOC’s rate play he is forecasting a drop to 0.5% today? That alone will inflate the RE bubble to gargantuan proportions, so whatever he now suggests is bunk will become reality…

#127 TurnerNation on 04.15.15 at 8:18 am

#90 Someone from TO

I am unsurprised. When dealing with banks’ technology dept. there are dozens of people on calls, email chains and offering little to no value.

Me I got a usual 5% raise this week for the year. Some years it’s been higher.

#128 Keith on 04.15.15 at 8:28 am

Current mls listings East Vancouver single family houses :

One million or less: 91 listings
One million to two million: 218 listings

Want to make real money? Club up with the neighbours and get townhouse zoning:

http://www.vancourier.com/news/vancouver-realtor-groups-lots-for-big-profit-1.1818464

No price crash here yet for SFH.

#129 Nemesis on 04.15.15 at 8:39 am

#Undeniably,InBritishColumbia… #It’sAlwaysAbout… #TheRealEstate,Or… #It’sGoodToBeTheKing…

[TimesColonist] – Taxpayers ‘hosed’ in Coquitlam land sale to Liberal donor: NDP

…”Taxpayers got “hosed” last year when the B.C. government sold 14 parcels of land in Coquitlam to a Liberal donor for $43 million below the appraised value, the NDP alleged Tuesday.

Wesbild Holdings Ltd. purchased the properties on Burke Mountain for $85 million, even though an independent appraiser pegged their value at $128 million…

… NDP house leader Mike Farnworth was more blunt: “We got hosed.”

Farnworth, the MLA for Port Coquitlam, said one parcel of land was appraised at $5.6 million and sold for $100,000 in one of the hottest real estate markets in the country.

“Where in the Lower Mainland can you buy anything for $100,000?” he asked during question period in the B.C. legislature. “How is that getting good value for the taxpayer?”…

http://www.timescolonist.com/news/local/taxpayers-hosed-in-coquitlam-land-sale-to-liberal-donor-ndp-1.1823787

[G&M] – St. Paul’s Hospital headed for $1-billion relocation in Vancouver

…”The scenario announced Monday will see a new St. Paul’s built on a 7.5-hectare site at Station Street near the city’s current bus and train station and just south of the Downtown Eastside, Chinatown and Strathcona neighbourhoods.

There has long been talk about a St. Paul’s move, but proceeding with the plan will open massive development options on the hospital’s current 2.6-hectare location on Burrard Street, and also dramatically change the area around the new site, injecting hundreds of workers, patients and others into a now-desolate section.”…

http://www.theglobeandmail.com/news/british-columbia/vancouvers-st-pauls-hospital-headed-for-1-billion-relocation/article23901215/

#BonusHoserQuoteOfTheDay….

“In the end, a politicianparcel is worth what a buyer is willing to pay…” – ‘ServicingCitizens’ Minister Amrik Virk

#Meanwhile,BackAtCityHall…

https://youtu.be/8z8SpgmF0sA

#130 Smoking Man on 04.15.15 at 8:57 am

#102 Ontario’s Left Coast on 04.14.15 at 11:36 pm
#32 Smokey – “So my son promises not to trade until he finishes school…”

Stop right there. I can’t believe your son is going for an obedience certificate. Certainly he can learn everything he needs on the almighty school of Google? Hypocrite is all I’m saying.
…….

No certificate here , its a hands on boot camp to learn IOS in 3 months. 12k and its private. No T24

UOG would take him a year, I want keysme On phones yesterday . Only way to keep the algo a secret is to keep it in the family.

Buy the way, these intence hands on boot camps is were education is going..

Universits are to slow, to old, to expensive , and just redundant.

#131 Stat-Lies-Fix on 04.15.15 at 8:58 am

What’s the simplest and cheapest way to force the real estate industry to tell the truth about their statistical lies? To publish raw numbers (#sales per category – condos/SFH per region and average prices) in CHART format, onto a government website.

That’s it! Once it’s on a 3rd party government website they can’t go back and edit it. Further, by providing only the raw stats, and not “seasonally adjusted” and other creative ways to lie about the reality, 3rd party finance types can extrapolate other useful metrics and publish their own reports for consumers to compare.

Lastly, I think the main thing that confuses consumers is that monthly, quarterly and yearly reports from real estate boards are always showing just numbers, numbers and more numbers… that for most people are mostly meaningless and often deceitful cherry picked stats, unless you follow real estate closely. Charts give you an INSTANT understanding of where we are compared to history, and while one can also lie with charts by clipping it off at just the right time period on either end to showcase your point, if the charts had standardized intervals (i.e. 1 year, 2, 3, 5, and 10+) then it’d be easy to identify the cherry picked charts.

Any kind of 3rd party government audits on top of this would be the cherry on the cake, but this is a cheap, fast and easy start to truth and trustworthiness in a market jam packet with beamer driving realtors whose paycheques depend on the quality of their lies or ability to obfuscate the truth.

#132 TurnerNation on 04.15.15 at 9:14 am

What a life. Everyone walking around with headphones, plugged in listening to multi millionaire recording artists. Then at home watching multi millionaire sports athletes on teevee.
Our politicians simply awaiting their corporate board or plum overseas posting.

Yet we are sold Freedom 65. Life in the tax farm camps.

#133 Kris on 04.15.15 at 9:23 am

The Cdn economy is not exactly firing on all cylinders. And yet, we’re supposed to believe that rates will increase – not just token upticks like 0.25% or 0.5%, but significant increases over the next few years, so people feel the pinch/bite.

Garth’s answer to that – “The Govt does not set rates.” That’s a cop-out, a technicality, isn’t it. If the govt’s influence on rates was truly so unworthy of consideration, why are we hanging on every BoC announcement since they dropped rates in Jan?

The govt DOES set variable rates – which impact currency values.

Speaking of currency – I haven’t heard a convincing argument, why it’s bad to let our dollar fall. Or what’s the alternative – Raise rates so that millions of families can’t afford to pay mortgages any more – Is that a realistic choice any govt would make?

#134 David W #1 on 04.15.15 at 9:25 am

Very good read at Macleans in “The Vacant Truth About Rental Condos”. Talks about the disconnected between CMHC reported Vacancy Rates of 1.3% as opposed to real world observations. Rental buyers beware.

http://www.macleans.ca/economy/realestateeconomy/the-vacant-truth-about-rental-condos/

#135 Oot der Hoos on 04.15.15 at 9:34 am

Blacksheep: I think you did not understand or take enough time to study my proof and Derek’s proof.

If you did then you would have used our argument, like judo practice uses the opponent’s weight. Ask or answer this new better question:

What happens if the banker never spends his $10 earned interest?

#136 Alberta is FINISHED on 04.15.15 at 9:45 am

The cost of the O&G industry to the Alberta tax payers for cleanup could someday exceed the amount of revenue received from them……. especially from the tarsands. Oil prices haven’t even hit rock bottom yet. Alberta is FINISHED.

http://www.cbc.ca/news/canada/calgary/alberta-sees-huge-spike-in-abandoned-oil-and-gas-wells-1.3032434

#137 Ralph Cramdown on 04.15.15 at 9:49 am

It turns out that the Maclean’s article about Toronto vacancy is just the appetizer. Watch as Rachelle goes mano a mano with Benny Tal. “Likelihood of failure to rent” LOL.

http://landlordrescue.ca/the-truth-about-current-vacancy-rates/

#138 hamish42 on 04.15.15 at 9:50 am

Why is is bad to let the dollar fall???
Just look at Brazil, they complained their currency was too strong, but have now very successfully fixed that, however this has created far more problems than it has fixed, like high inflation, people unwilling to invest in assets denominated in their currency. Recently they have had riots in the streets.
If a weaker currency was a really good thing then Ukraine would be the most successful economy in the world right now.

#139 Gweilo on 04.15.15 at 9:59 am

Re Van real estate prices. We were going to move to YVR a year ago and looked at real estate. From the prices vs assessed (available on the next for the prior year) the prem/discount roughly worked out as follows:
All the data is based on median:
2.5 to 3.5 mil roughly 10-12% prem
2-2.5 mil 8-10% prem
1-2 mil 5-8%
Below 1 mil no prem .
This was based on West Van and a year ago. Numbers are from memory but roughly right. Agent kept saying assessed values are useless, statistically they work esp if you take median. Agent wasn’t great.
Instead of YVR we moved to the USA for a whole raft of reasons.

#140 fancy_pants on 04.15.15 at 10:19 am

haha. Toyota saying bye bye too..

Ontario is so screwed. Toronto can go to hell in a handbasket – they are the reason these godless fiberals keep getting voted in.

but look on the bright side, at least your kid is learning how to be a tranny in grade2.

#141 Squirrel meat on 04.15.15 at 10:21 am

#132 Alberta is FINISHED on 04.15.15 at 9:45 am

The cost of the O&G industry to the Alberta tax payers for cleanup could someday exceed the amount of revenue received from them……. especially from the tarsands. Oil prices haven’t even hit rock bottom yet. Alberta is FINISHED.

http://www.cbc.ca/news/canada/calgary/alberta-sees-huge-spike-in-abandoned-oil-and-gas-wells-1.3032434
————————————————————

So what part of our fair land does the brash loser hail from? Do tell where the confidence comes from.

#142 LP on 04.15.15 at 10:29 am

#126 Smoking Man on 04.15.15 at 8:57 am
Buy the way, these intence hands on boot camps is were education is going.. (sic)
***************************
I have never once thought to find something you post that I can agree with. But, finally, today you said something that rings a bell with me.

This past weekend we looked after two of our grandkids while our daughter (the teacher) attended a 2-day Google workshop in Kitchener. If I understood her correctly, the conference was one of 3 in the world being held simultaneously. There were about six hundred in attendance at the one she went to, some from as far away as California.

Anyway, one of the presenters remarked that teachers should no longer be teaching kids to calculate any figure that requires a formula. All that is necessary is for the student to “google” whatever it is they are seeking and, abbracadabra, there is the answer.

It was fun to watch her relate to us all that she had learned. She was so excited for her students (grade sixers), for herself and for the direction teaching is going. I wish we could afford to send her to the Star Fleet Academy; she’d be a shoe-in.

#143 Financial Freedom at 40 on 04.15.15 at 10:29 am

Enjoy the vacation Mark – you’ve earned the break.

#144 David W #1 on 04.15.15 at 10:30 am

More bad news “Toyota Motor Corp. announced Wednesday it will invest US$1 billion in the plant in Guanajuato, Mexico, creating 2,000 jobs, to make the Corolla subcompact — one of Toyota’s biggest sellers.
Production of the Corolla in Cambridge, Ont., will end but Toyota says it will continue to make other vehicles in that city and in Woodstock, Ont.”

http://www.ctvnews.ca/autos/corolla-production-leaving-canada-toyota-to-refocus-ontario-plants-1.2328061

#145 -=jwk=- on 04.15.15 at 10:31 am

@ #25 http://v3.torontomls.net/Live/Pages/Public/Link.aspx?Key=1e165be5035b4b56acb32064a2815bf0&App=TREB

Every house sold is at least 10% over asking. And that’s just for this week. It’s been like that since last summer. I don’t see any cooling in the GTA.
————-

Do you have the stats on the ones that did not sell? Without that, these numbers are meaningless.

My neighbourhood, w08, seems to be ‘paused’. Took 6 months to sell a backsplit, and now the bung across the street has been up for 2 months, no offers. The bung at $698 is over priced and needs to wait another 6 months+ for market to catchup – if it ever does.

#146 Dominoes Lining Up on 04.15.15 at 10:36 am

#133 Ralph Cramdown

Interesting exchange there, one that certainly undermines Mr. Tal’s credibility as the honest oracle he purports to be. Disappointing doublespeak from him, highlighting how bad the rental market really is now.

There are good reasons that major developers are now switching to building rental properties in Toronto for the first time in decades.

Including this one:

The Star today has a report that about 20% of all immigrants to Canada (many of whom come to the GTA)
come here with no money. (BMO source)

Zero $.

So even if the GTA gets 100,000 new people yearly, consider how many of them are broke or just financially too strapped to live in Toronto, as well as how many might simply prefer to live in the burgeoning new ethnic enclaves like Brampton, Ajax, Milton etc… rather than coming to the 416.

This lack of demand due to reduced financial resources is what will help sap the move-up strength needed by the Toronto SFH market that many delusional types see as never-ending.

Current prices for 416 detached as well as condos will be under assault soon enough.

#147 Ralph Cramdown on 04.15.15 at 10:39 am

More budget balancing. Canada sells Wheat Board for a song. No word on whether CMHC guaranteed the mortgage.

#148 Kris on 04.15.15 at 10:40 am

#134 hamish42.

If a country has resources and productivity, and CHOOSES to keep its currency low – That’s an entirely different story from countries (like 1930s Germany, or more recently, Argentina) where currencies free-fall because the international markets lose confidence in those economies.

Example – Europe/US have been complaining for a long time that China has kept its currency artifically LOW to gain a competitive advantage in exports. There’s a myth buster: Low currency is NOT bad!

Canada is an export-driven economy. The bulk of our GDP comes from exporting to our largest trading partner, the US. When our dollar falls, that makes our goods more attractive.

What gets more expensive are things we import (food), or buy outside Canada (e.g., Florida vacations). But lately oil prices have helped transportation costs, so even imported food hasn’t gone up.. not much.

Lots of people think “low currency = bad” because they’re thinking how much more that Florida getaway will cost, or confusing it with runaway inflation.

#149 Oceanside on 04.15.15 at 10:54 am

Interesting watching the different markets, sales in the first two weeks of April in the Parksville/Qualicum Beach area are up 13%, from 62 sales last year to 71 so far this month. Prices aren’t much different from last year. Some multiple offers but only a couple of thousand over asking.

#150 Ralph Cramdown on 04.15.15 at 10:57 am

Interesting that the Bank of Canada’s estimates for US growth are higher than the US Fed’s own. Wishful thinking?

#151 land transfer stats on 04.15.15 at 10:58 am

#95 jane 24 on 04.14.15 at 10:53 pm
I have never understood why the land transfer people (provincial govts) don’t release their stats every month, after all they know exactly what houses sold for. The land registry does in England although with a two month lag.

This public data then goes onto sites like http://www.zoopla.co.uk which allow you to access the latest and historical sales price of every house on your street or any other street for that matter.

It would be so easy for government there to do so why don’t they?

=======

You have to demand it – call your provincially elected MP.

You can tell him/her that the public pays for the operation, the public owns the data, the public should have access to the data.

It is a hard to refuse argument. Especially in election time.

#152 Oceanside on 04.15.15 at 11:03 am

Interest rate kept at .75%

#153 Obvious Truth on 04.15.15 at 11:04 am

Just me or is poloz sucking and blowing at the same time?

Did he read his own report before speaking.

#154 TurnerNation on 04.15.15 at 11:09 am

My Dollarama kaputs are finally moving well.

Don’t get foolish over recency effect.

#155 Calgary is AWESOME on 04.15.15 at 11:15 am

Tonight the Flames start kicking some Van butt – gonna be AWESOME.

Senators/Habs should be entertaining.

Jets are super.

Edmonton are a bunch of commies.

And man-o-man do the leafs suck – they fired everyone and they still suck.

Calgary is AWESOME.

#156 Squirrel Meat on 04.15.15 at 11:24 am

The Feds sell the farm to the Saudis!

http://www.calgaryherald.com/business/Government+privatizes+wheat+board+with+sale+Global+Grain+Group/10973965/story.html

#157 Mike T. on 04.15.15 at 11:26 am

The Leafs can simultaneously move un-employment numbers either way

lots of openings :)
lots of dismissals :(

#158 SWL1976 on 04.15.15 at 11:30 am

Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist – Kenneth E Boulding

Lift the veil folks.

We are being played by privatized Central banks, the IMF, and the Federal Reserve

#159 Squirrel Meat on 04.15.15 at 11:41 am

Heat from the commie left.. and heat from the lake of fire nutters…

Would be a good thing… if AB can get some real opposition then Prentice will have done a good thing!

http://news.nationalpost.com/news/canada/canadian-politics/alberta-election-polls-show-unexpected-left-right-squeeze-that-threatens-pc-dynasty

#160 HD on 04.15.15 at 11:46 am

Great story.

This guy started investing when he was 24 years old and became a millionaire before his 40th birthday. He started off on a 40K per year salary.

Sorry for the unilingual out there but it’s in French:

http://affaires.lapresse.ca/finances-personnelles/201504/01/01-4857285-millionaire-avant-40-ans.php

Best,

HD

#161 coastal on 04.15.15 at 11:49 am

Thank God Royal Lepage is there to tell us the soft landing was a success ! Problem is it’s never happened before in history….. shouldn’t they be telling us that and declaring a national holiday for over-leveraged home owners ? Corruption at it’s finest.

#162 Randy Randerson on 04.15.15 at 11:57 am

No changes to BOC overnight rate. So that means Mark will have to take a break from responding to every single comment here. Buddy, go out, get some fresh air and drink a beer. Enjoy life.

#163 takla on 04.15.15 at 12:01 pm

re#151….if poloz’s body language is to be accepted as genuine then listening to whats comeing out of his mouth is meaningless…..this guy and his deputy are nervous, and definitely look to be in over their heads

#164 Panhead on 04.15.15 at 12:13 pm

#136 Alberta is FINISHED on 04.15.15 at 9:45 am
The cost of the O&G industry to the Alberta tax payers for cleanup could someday exceed the amount of revenue received from them……. especially from the tarsands.

————————————————————

Yeah, and I believe Vancouver sold the Expo lands to Li Ka $hing for less than their clean up costs too …

#165 Broke Dick on 04.15.15 at 12:18 pm

#145 -=jwk=- on 04.15.15 at 10:31 am

My neighbourhood, w08, seems to be ‘paused’. Took 6 months to sell a backsplit, and now the bung across the street has been up for 2 months, no offers. The bung at $698 is over priced and needs to wait another 6 months+ for market to catchup – if it ever does.
____________________________________________
I’m also in W8 and although we are not seeing the double digit increases y to y but one thing is for sure the prices are rising.
W7 has seen double digits and it’s coming our way.

#166 Derek R on 04.15.15 at 12:22 pm

#92 Blacksheep on 04.14.15 at 10:46 pm wrote:

1) Money, does not exist, anywhere.

Okay.

2) John, opens the first commercial bank ever and is offering loans.

Okay.

4) Bob, the banks first customer ever, borrows $ 100, from John’s bank.

Okay.

5) Upon Bob signing the bank document and creating a new deposit of $ 100, John the banker reminds, Bob the customer, he will need to repay the principal amount of $ 100, PLUS the additional 10% interest due on the loan.

Okay.

6) Here is the important part: Were does Bob, get the additional $ 10 he needs, to fully repay his debt with John’s bank?

Okay.

Please review the parameters outlined above, before answering the question.

The question is clear. You are asking “Where does Bob, get the additional $ 10 he needs, to fully repay his debt with John’s bank?” The answer is “He gets it from John’s bank or he doesn’t get it at all.”

According to (1) there is no money anywhere. So if Bob is going to pay the $10, he has to get it from John’s bank. If he doesn’t get it from John’s bank he can’t get it anywhere else.

The question then becomes, “Why would John’s bank give Bob the $ 10 he needs to repay the interest?”

The answer to that question is “that the bank has costs”. At the least it has one employee/owner, John, who must be paid enough to allow him to survive until the loan becomes due. If it is a 10 month loan and it is being repaid monthly at $ 10 principal + $ 1 interest, then the bank can pay John $ 1 per month.

John will then spend his money with Bob and no one else because Bob is the only person who needs money and will accept it in exchange for food, water, etc: no one else has a monetary debt because there is no money anywhere else according to (1) and no monetary loan anywhere else according to (2) and (4). So no one else will accept the money except Bob.

Of course that $ 1 per month is exactly what Bob needs to pay the interest. So it allows him to pay $ 11 per month until the end of the loan without running out of cash.

#167 bdy sktrn on 04.15.15 at 12:26 pm

Tonight the Flames start kicking some Van butt – gonna be AWESOME.
—————————
flames are 5W and 14L vs van since 2011

nucks got their number.

good luck!

#168 Smoking Man on 04.15.15 at 12:29 pm

#153 Obvious Truth on 04.15.15 at 11:04 am
Just me or is poloz sucking and blowing at the same time?

Did he read his own report before speaking.
….
rumor has it , he will be hiring a few female protesters for the next meeting

#169 Pre-Retiree on 04.15.15 at 12:31 pm

#52 Smoking Man

“…He just drops in your arms, weightless and happy…”

Not related to the topic at all. But as a dog owner, I thought this was the nicest sentence I have read in a long time. It made me smile and miss my dog while I am at work (lunch break).

#170 bdy sktrn on 04.15.15 at 12:32 pm

flames may suffer from a ‘Lack’ of scoring …
Lack had only 3 losses in last 10 starts only one in last 6.
he’s on a bit of a roll it seems.

#171 Derek R on 04.15.15 at 12:33 pm

Of course John, like Bob, might have his own farm and not need to spend any money with Bob. In which case Bob will not be able to pay the $ 10 interest.

But then you have to ask yourself why Bob bothered to take out a loan when he knew he wouldn’t be able to spend the money anywhere and which he knew he wouldn’t be able to pay back.

#172 Derek R on 04.15.15 at 12:35 pm

Also why John would make the loan, if he didn’t expect to spend the profit.

#173 Ontario is FINISHED on 04.15.15 at 12:40 pm

Brutal.

http://www.theglobeandmail.com/report-on-business/economy/canadian-manufacturers-take-big-hit/article23965236/

#174 TheLaughingCON on 04.15.15 at 12:49 pm

RE #95 jane 24 and #151 land transfer stats

You have to demand it – call your provincially elected MP.

You can tell him/her that the public pays for the operation, the public owns the data, the public should have access to the data.
=====================================

Except that in the bankrupt province of Ontario (bankrupt because they overpay their pampered public servants) they sold that right to a private company:

http://news.ontario.ca/mof/en/2010/12/teranet-transaction-reduces-debt-by-1-billion.html

#175 Karma on 04.15.15 at 12:57 pm

National embarrassment…

Foreigners buying the majority of Canadian Wheat Board. It was a chance for a homegrown champion to rise from it’s monopoly.

http://in.reuters.com/article/2015/04/15/canadian-wheat-ma-g-idINL2N0XC17Q20150415

#176 land transfer stats on 04.15.15 at 1:20 pm

#173 TheLaughingCON on 04.15.15 at 12:49 pm
RE #95 jane 24 and #151 land transfer stats

You have to demand it – call your provincially elected MP.

You can tell him/her that the public pays for the operation, the public owns the data, the public should have access to the data.
=====================================

Except that in the bankrupt province of Ontario (bankrupt because they overpay their pampered public servants) they sold that right to a private company:

http://news.ontario.ca/mof/en/2010/12/teranet-transaction-reduces-debt-by-1-billion.html

******

What a surprise! 50 year deal… that’s very liberal, indeed… spinned as “McGuinty Government Saves Ontarians $50 Million In Annual Interest Cost”…

There is one surprising piece though:

Borealis Infrastructure, a division of Ontario Municipal Employees Retirement System (OMERS), has been Teranet’s owner since 2008.

#177 Bottoms_Up on 04.15.15 at 1:25 pm

If this were the year 2005, our government would now be busy bringing in 40 year amortizations, plus reducing the 5% minimum down to 0%, allowing mortgage qualifications at the variable rate, and increasing CMHC’s budget.

#178 Bottoms_Up on 04.15.15 at 1:31 pm

#158 SWL1976 on 04.15.15 at 11:30 am
————————————————–
I’m confused, by ‘exponential’ growth does that mean growth that goes on forever, or does it mean actual exponential growth (as in the shape of the growth curve)?

Because economies can grow at 1-2% and that is in no way an exponential curve.

#179 jess on 04.15.15 at 1:33 pm

add to that the downside of intelligence?

http://www.bbc.com/future/story/20150413-the-downsides-of-being-clever

#180 Bottoms_Up on 04.15.15 at 1:37 pm

#146 Dominoes Lining Up on 04.15.15 at 10:36 am
—————————————————————-
Not sure that stat matters too much. Because the other side of the coin is that 20% of immigrants buy real estate within 5 years.

So if 500,000 people end up in Toronto over 5 years, 100,000 will be living in purchased accommodations (and your 100,000 will have no money).

#181 Calgary is AWESOME on 04.15.15 at 1:38 pm

#167 bdy sktrn on 04.15.15 at 12:26 pm

Tonight the Flames start kicking some Van butt – gonna be AWESOME.
—————————
flames are 5W and 14L vs van since 2011

nucks got their number.

good luck!

———————–

That was back before we got Johnny Hockey Gaudreau – his agent tried to trademark his name!! He’s 12 yo and fast!.

#182 H on 04.15.15 at 1:40 pm

I wonder if Citi Group and Goldman Sachs are hiring? Perhaps Energy Analyst position.

I can say “$20 oil” for a salary of a fraction of what they are paying.

My god.

Oil just busted through key resistance points. Contango for oil delivered 12 months from now is $5.56 premium or .46 cents a month. It costs $1.10 a month to store it.

So here we are, flattening of contango, guys with supertankers waiting to store are screwed, oil is being pumped full out, demand is rising soon to strip out supply.

Cue the next act. Inflation.

#183 Bottoms_Up on 04.15.15 at 1:41 pm

#142 LP on 04.15.15 at 10:29 am
————————————————
I disagree with that approach to teaching. Kids need to know the basics. What happens when the power goes out? How do they know that the answer they are getting on the computer screen is correct? Critical analysis skills are critically important, and knowing the basic formulas are imperative for this.

#184 Calgary is AWESOME on 04.15.15 at 1:41 pm

#170 bdy sktrn on 04.15.15 at 12:32 pm

flames may suffer from a ‘Lack’ of scoring …
Lack had only 3 losses in last 10 starts only one in last 6.
he’s on a bit of a roll it seems.

—————————————-
Ha! Johnny Hockey may actually reach up to Lack’s kneecaps on a good day.. he won’t be able to even see where the goals come from.

Should be an uptempo series

#185 Squirrel meat on 04.15.15 at 1:48 pm

Praise the Lord. Hallelujah.

http://www.theglobeandmail.com/news/national/quebec-town-cant-have-prayers-at-council-meetings-top-court-rules/article23966290/

#186 Sideshow Rob on 04.15.15 at 1:58 pm

Link that partially pertains to the Vancouver market.
http://www.newsweek.com/hidden-costs-ghost-apartments-322264

Money quote “Two years ago, Sotheby’s International Realty reported that people living outside Canada—primarily in China, Iran and the U.S.—had purchased 40 percent of Vancouver luxury housing.

David Eby, a British Columbia provincial legislator, said he represents “a very empowered group of wealthy individuals who feel totally helpless” to stop absentee purchasers in Vancouver’s priciest single-family neighborhood, where houses routinely sell for several million dollars. He said they object to teardowns to build what they consider oversized and tasteless mansions, as well as the loss of business to keep the area’s village-like commercial corridor vibrant. Many want a heavy tax levied on empty residences to discourage absentee owners.

“I am challenged,” Eby said. “How do I even talk about this issue without instigating racism against a large number of Mandarin-speaking people who come here?” “

#187 Bottoms_Up on 04.15.15 at 2:00 pm

#140 fancy_pants on 04.15.15 at 10:19 am
——————————————————-
Nice, ignorant comment….you know what they say about the dangers of having a little knowledge?

Now if you really want to read more about the health curriculum for Ontario elementary students:

http://www.edu.gov.on.ca/eng/curriculum/elementary/health1to8.pdf

Brief summary:

Grade 1 – they learn body parts and to use correct anatomical names.

Grade 2 – they learn about hygiene and how their body changes as they grow (ie, taller) and how to maintain health (ie, eating well).

Grade 3 – identifying characteristics of healthy and unhealthy (ie, bullying) relationships, and differences between people (ie, skills and talents, belief systems)

Grade 4 – understanding puberty changes and personal hygiene

Grade 5 – identify parts of reproductive system and personal stresses commonly associated with puberty

Grade 6 – self concept; building confidence; understanding physical, social and emotional changes during adolescence; assessing stereotypes and assumptions

LOOKS LIKE A CONSTRUCTIVE, INFORMATIVE AND USEFUL CURRICULUM TO ME.

#188 Blacksheep on 04.15.15 at 2:01 pm

Karma # 103,

You supplied many answers, to questions that were not asked (1-5) but could not answer the one question (6) that actually was, because you ignored the boundaries of the exercise.

Think of it as a comprehension test you just failed.
—————————-
“Blacksheep # 92”

“Please review the ‘parameters outlined above’ before answering the question.”
————-
But I appreciate the effort, I know it takes time to respond.

#189 Vancity604 on 04.15.15 at 2:06 pm

National embarrassment…

Foreigners buying the majority of Canadian Wheat Board. It was a chance for a homegrown champion to rise from it’s monopoly.

http://in.reuters.com/article/2015/04/15/canadian-wheat-ma-g-idINL2N0XC17Q20150415
—————-
It’s great actually for vancouver as bunge international is building a new export terminal grainelevator on the waterfront , that’s 100 permanent full time jobs paying 90k a year plus all the construction dollars, now we have site c dam,and a myriad of transit projects ( new patullo bridge, evergreen line., yvr airport is building a huge mall in Richmond te list goes on as does the money flowing in, this party ain’t slowing down 2 feet and a heartbeat you can find a job to pay that mortgage. Suck it doomers

#190 Vancity604 on 04.15.15 at 2:13 pm

http://www.biv.com/article/2015/2/bc-economy-see-canadas-strongest-growth-2015-confe/

Here’s a link we all know how Garth loves them

#191 Spaccone on 04.15.15 at 2:15 pm

So what’s the consensus here on hedged vs unhedged international holdings? Before the USDCAD thrashing of the past couple of days I looked at the chart and couldn’t help but think we could see an ~8% decline.

#192 Incubus on 04.15.15 at 2:32 pm

“Inconceivable” Negative Interest Rates on Mortgages in Portugal and Spain, with Italy On Deck.

Will we see this in Canada ?

http://globaleconomicanalysis.blogspot.ca/2015/04/inconceivable-negative-interest-rates.html

#193 Waterloo Resident on 04.15.15 at 2:46 pm

Toyota’s sales are not sufficient to have manufacturing plants is Mexico, the US, and Canada all pumping out cars. Toyota is going to shut down at least one of their higher-cost plants, and you can guess which one that is going to be (Cambridge).

Over the next 2 years you will begin to get hints that Toyota is not moving any new production to the Cambridge facility, that’s one thing that’s perfectly clear. So when Corolla goes, that’s it, the factory will be mothballed.

#194 HD on 04.15.15 at 2:57 pm

#179 jess on 04.15.15 at 1:33 pm add to that the
downside of intelligence?

http://www.bbc.com/future/story/20150413-the-downsides-of-being-clever

—————-

Very interesting, thanks.

Best,

HD

#195 bdy sktrn on 04.15.15 at 3:04 pm

#181 Calgary is AWESOME on 04.15.15 at 1:38 pm
#167 bdy sktrn on 04.15.15 at 12:26 pm

That was back before we got Johnny Hockey Gaudreau – his agent tried to trademark his name!! He’s 12 yo and fast!.
———————
looked him up, he is the size of a 12yo!!!
football players have limbs heavier than this guy.

#196 Mike S on 04.15.15 at 3:08 pm

“So BoC policy rate cut tomorrow or not?

I vote “yes”, rate cut.

If I am wrong, I’ll make a pact with y’all — I won’t post again till the weekend.

All right?”

no rate cut today. CAD is up (but so is the WTI)

#197 Shawn Allen on 04.15.15 at 3:10 pm

Exponential Growth

Bottoms-up at 178 said:

Because economies can grow at 1-2% and that is in no way an exponential curve.

****************************************
Actually that is exponential growth in every way.

A cup of water growing at 1% per year will eventually grow larger in volume than the world’s ocean and will eventually weigh more than the earth.

But.. that does not means we ca.’t have some things grow for a very long time.

Money is an intangible so it can grow to infinity.

Wealth is partly tangible (food, clothing and shelter) and that part cannot grow at any annual rate forever. Wealth is partly intangible as in the value of a hunk of yellow metal or the value of a painting, or the value of listening to a song, or the value of reading a blog (priceless?), and that might grow pretty much without limit.

Anyhow, the fact that growth can’t go on forever or even for 1000 years is not very relevant to the next 100 years much less the next 20 years.

The economy will grow at some real rate per capita in the next 100 years. Notions that a real growth rate of 2% is too low are a bit silly. At 2% the economy doubles in real terms in 36 years. Quadruples in 72 years and is eight times larger in 144 years.

Population growth rate will slow (has slowed) and population (of the world) will stabilize and at that point a 2% real growth in the economy will be more than fast enough.

At that point it will be harder to get rich than it has been. But the baseline living standard per capita will be higher so getting richer will not be as important.

Everyone will be relatively rich compared to the average of 200 years earlier. This is the case in the Western world for most of not virtually all of the population. (Few people starve to death today in the western world)

#198 CalgaryRocks on 04.15.15 at 3:18 pm

Anyway, one of the presenters remarked that teachers should no longer be teaching kids to calculate any figure that requires a formula. All that is necessary is for the student to “google” whatever it is they are seeking and, abbracadabra, there is the answer.

“Let me just Google that!!” Even in an interview at Google this would not work.

On the contrary, you’re expected to know your basic algorithms and their complexity to start with. Teaching this stuff to young Google wannabees is a growing industry and you can get 100$+/hour in NYC.

So, not sure where that guys got that idea, but he’s not representing Google’s actual hiring practices.

#199 Holy Crap Wheres The Tylenol on 04.15.15 at 3:33 pm

#130 Smoking Man on 04.15.15 at 8:57 am
#102 Ontario’s Left Coast on 04.14.15 at 11:36 pm
#32 Smokey – “So my son promises not to trade until he finishes school…”

Stop right there. I can’t believe your son is going for an obedience certificate. Certainly he can learn everything he needs on the almighty school of Google? Hypocrite is all I’m saying.
…….
No certificate here , its a hands on boot camp to learn IOS in 3 months. 12k and its private. No T24
UOG would take him a year, I want keysme On phones yesterday . Only way to keep the algo a secret is to keep it in the family.
Buy the way, these intence hands on boot camps is were education is going..
Universits are to slow, to old, to expensive , and just redundant.
____________________________________________
Smoking Man is that T24 from Temenos? If so my oldest son ran their Treasury and Capitol Market Div in Geneva for 1-1/2 years. I recall him explaining what is did for banks and such, that was before he jumped ship for Oracle. Head hunters went after him and still pursue him to this day.

#200 Blacksheep on 04.15.15 at 3:37 pm

Derek # 166,

OK…Derek, IS the new smart guy on the blog. (sorry Shawn) First, he carefully reads and responds to the details of the exercise:
———————————–
“#92 Blacksheep on 04.14.15 at 10:46 pm wrote:

1) Money, does not exist, anywhere.

“Okay.”

2) John, opens the first commercial bank ever and is offering loans.

“Okay.”

4) Bob, the banks first customer ever, borrows $ 100, from John’s bank.

“Okay.”

5) Upon Bob signing the bank document and creating a new deposit of $ 100, John the banker reminds, Bob the customer, he will need to repay the principal amount of $ 100, PLUS the additional 10% interest due on the loan.

“Okay.”

6) Here is the important part: Were does Bob, get the additional $ 10 he needs, to fully repay his debt with John’s bank?

“Okay.”

Please review the parameters outlined above, before answering the question.

“The question is clear. You are asking “Where does Bob, get the additional $ 10 he needs, to fully repay his debt with John’s bank?”

“The answer is “He gets it from John’s bank or he doesn’t get it at all.” ”
———————————————
DING, DING, DING….we have a winner!!!!

You are of course, 100% correct. (I’m going to ignore everything else you said after that)

For the sake of the exercise, I’m going to tweak your answer a bit, Derek profoundly stated:

“He gets it from John’s bank or he doesn’t get it at all”

Let me guide you a bit:

10 months have passed, the one year loan is almost due and Bob realizes, he does not have the extra $ 10 required to clear his debt at John’s bank.

What could he possibly do?

What if YOUR answer reads, this way.

‘Bob creates new additional $(deposits) along with Johns bank, or he doesn’t get it all.’

He MUST borrow more $’s, from his future at John’s bank, in order to fully pay off, previously incurred debts from his past.

This is my understanding of a very basic version of how the banking system works. The commercial banking system (money creation) must keep expanding or it becomes impossible to clear previously incurred debts.

This infinite growth model, contrasts our finite resources. So there is no comfortable, zero growth Idle speed for the economy. Ever consider why the system targets, 2% annual inflation?

The expand or die axiom applies.

Good job Derek.

#201 Uncle Albert on 04.15.15 at 3:44 pm

My apartment in YVR just sold below asking. Also another report on global today about house prices increasing. To their credit they did mention that condos are going down. But then went on to say that there was a major shortage of single family homes up for sale. Anecdotally I can only say that there are no shortage of listings in my neighbourhood and elsewhere of these SFH. I think what there may be a shortage of however are brand new homes which are the covet of foreign investors particularly those from China who view the purchase of real estate here as a safe way to park their money. The reason for this is that there is a general distrust of their banking institutions in China where large funds have apparently been known to disappear.
I was told all this by a trusted realtor source. And from what I have witnessed it appears to be true.

#202 Blacksheep on 04.15.15 at 3:50 pm

Vancity604 # 189,

Suck it doomers.
——————————
Don’t hold back, tell us what you really think : )

#203 FrankyP on 04.15.15 at 3:54 pm

#178 Bottoms_Up
EVERY % growth rate is exponential!

http://www.albartlett.org/presentations/arithmetic_population_energy.html

That is WHY there must be a debt collapse.

#204 MF on 04.15.15 at 4:35 pm

#29 Ogopogo

Yeah I purchased CPD. Hopefully it will perform just as well for me as it did for you so far.

#47 Retired Boomer – WI

Yes it does help..I think. So the interest paid on bonds fluctuates differently than the interest paid from preffered shares does. Gotcha. I guess that’s the point of diversification.

Right now my bonds are in a Vanguard ETF. I know you said it may not be necessary to know all the ins and outs of the bond market, but how do I know what the maturities and interest rates the bonds in that fund are? I suppose the fund is laddered and I could read about all the holdings in the fund individually, but who gets the interest at maturity? I’ve only held the fund for 3 days so far so why would I be entitled to interest on a bond that is five years old? If the bonds are in the ETF and can be bought and sold at any time, than my money really is not “tied up” at all. Why would I be rewarded with interest payments?

2) I think I get it. The price of the bond goes down as the duration goes up BUT the interest paid is higher as the time of the bond goes up because your money is socked away for longer, and it stays constant regardless of any price fluctuations. I guess everyone is chasing a short term bond with a higher interest rate and with a good grading.

I am going to stick with the bond/stock allocation for the next few months but I might get a little more aggressive later on after I see how things go. I will always stay diversified though.

Thanks again,

MF

#205 MF on 04.15.15 at 4:43 pm

#67 Mark

So if pref’s are not good at augmenting returns, and they are not good for rebalancing, then why have them in your portfolio at all? Is it the dividend? A constant dividend can be reinvested into your equities that are down no?

Hmm.

So that deflationary credit crisis you talk about would be good for the bonds that I already own because they contain a higher interest rate than the newer 0% bonds entering the market?

MF

#206 MF on 04.15.15 at 4:47 pm

#109 Yosemite S

Scary situation. I don’t want to “write off” anything.

I suppose diversification protects you from that nightmarish scenario.

That in a nutshell is why real estate is so popular amongst my generation (i’m 31).

At least I can live in my real estate “investment”. If a stock goes down and never recovers I am screwed, especially since it took me years to scrimp up enough to actually invest.

MF

#207 Capt. Obvious on 04.15.15 at 5:25 pm

Comments like #109 and #205 reveal how truly terrible many people are at investing.

#208 Derek R on 04.15.15 at 5:31 pm

#200 Blacksheep on 04.15.15 at 3:37 pm wrote:

DING, DING, DING….we have a winner!!!!

You are of course, 100% correct. (I’m going to ignore everything else you said after that)

What. You mean the bit where I explained how Bob gets the money from John’s bank without doing any more borrowing? I’m disappointed. I wrote it especially for you.

For the sake of the exercise, I’m going to tweak your answer a bit, Derek profoundly stated:

“He gets it from John’s bank or he doesn’t get it at all”

Let me guide you a bit:

10 months have passed, the one year loan is almost due and Bob realizes, he does not have the extra $ 10 required to clear his debt at John’s bank.

What could he possibly do?

What if YOUR answer reads, this way.

‘Bob creates new additional $(deposits) along with Johns bank, or he doesn’t get it all.’

He MUST borrow more $’s, from his future at John’s bank, in order to fully pay off, previously incurred debts from his past.

Well, I’d be missing out on a couple of Bob’s options if i’d written that. He actually has more than one choice so there is no MUST about it. He MIGHT borrow the $ 10 from John’s bank; he MIGHT sell something to John’s bank (or John) for $ 10; or he MIGHT declare bankruptcy and pay nothing.

He’d be daft to take the first option but then again plenty of people are so it’s a possibility. I’ve already discussed the second option in my previous comment even if you didn’t bother to read it so I’m not going to do it again. He could always take the third option too. Plenty of people do. That would destroy the interest debt, halting the infinite expansion.

So it’s by no means a foregone conclusion that loans have to keep expanding to infinity. They have so far under the current system, no question, but that’s got more to do with people taking out loans for consumption instead of investment than it has to do with an inherent feature of the system.

#209 MF on 04.15.15 at 6:18 pm

#206 Capt. Obvious

Agreed. I’m one of them.

Which part though? The comment about selling off biggest losers and buying less losers, or my comment about real estate being simple and tangible?

MF

#210 Nelson on 04.15.15 at 7:20 pm

As with any investment, I’ve lived by one rule. Once the strippers start gloating about what they are invested in, I sell exactly at that point.

I don’t frequent the places at all, but was at very prominent one in Toronto a few weeks back for a bachelor party. Can you guess where these girls were all investing their money? Condos and houses lol

Luckily I left that “investment” over a year ago and feel amazing for it!! Cheers!