Stunned

BLINKY modified

Welcome to the Little Lost Lambs Week here at GreaterFool.

Seems like a good time to catalogue, analyze and – of course – mock and mercilessly belittle other sheeple in order to make us feel superior. I mean, what else are blogs for? Besides, with the new Alberta leftie government showing its hand, the big Fed meeting this week, scary Greeks and the latest housing stats, lost lambs abound.

Yesterday it was a tale of the Bewildered Boomers – a sixtysomething couple with two homes, cars, jobs, an inheritance, yet oblivious to the fact they’ll run out of money. In the days to come this week we will visit the Clueless (Wednesday) and my favourite, the Dogmatic (Thursday). But first, let’s spend a few minutes with the Stunned.

(Note to readers: I do not make these letters up. Oh, that it were so.)

“I gave been reading your blog two to three times a week for a few months now,” says Larry. “I am 30, married with a 2 year old. I grew up in Ontario and currently live in Fort McMurray AB. My wife and I bought our first house in Oshawa a couple years before we left for Alberta and then we bought a house in Fort McMurray two years ago.”

Talk about timing. As you may know, sales in the near-tundra have collapsed by about half, apparently tracking the cost of hookers. But Larry thinks he’s okay. Here’s his story:

“We are at somewhat of a decision making time. Fort McMurray is getting old and we would like to move. We are on the fence about going to Vancouver Island in a more rural setting maybe within an hour from Nanaimo or Ontario within an hour and a half from Toronto, Kawartha lakes area maybe.

“We currently owe approximately 165,000 on the Oshawa house and market value I think is conservatively 260,000. We have renters there now that keep the house in good condition, pay on time and cover the costs. In fort Mac we owe about 635,000 and through a work retention programme are guaranteed to sell for 725,000, regardless of what it sells for my company will top it up to the 725. We have about 40,000 in a TFSA and our only debt is our SUV, about 35,000.

“A lot of what you say about renting makes perfect sense and that real estate is way over priced. My worry is that it is quite difficult to find what we are looking for in a place to live in these areas. We want a half an acre or more of land with a house and a nice sized shop (I like to tinker). We also may want to make changes to what we find and it is not easy to find landlords who would allow it and if we do it is money down the drain. We are on the fence for a few of these decisions so any insight you may have would be greatly appreciated.”

Did you notice Larry mentioned “our only debt” is a $35,000 car loan? So much for $800,000 in mortgages – which underscores recent surveys showing people under 35 actually think home loans are just like rent. You never fuss over paying them back because, like, who the hell can?

Also the fact he’s ready to depart Fort Mac suggests the eternally-fat paycheque is gone. And the corporate topping-up of his house proceeds? Good luck with that, because first you have to find a buyer – presumably at market value.

More significantly, here’s a young family with no liquidity (the TFSA is obliterated by the truck loan), two houses in secondary markets, big moving costs on the horizon, employment uncertainty and the better part of a million in adjustable-cost debt, just 90 days prior to the new world of rising interest rates.

And what’s he worried about? Finding a half-acre property with a shop to dick around in, then wasting his money on rent (as opposed to eight hundred grand in mortgages and two sets of property tax and insurance bills). Maybe Larry should worry more about income. Or preparing for his kid’s future. Or what happens if his Ontario tenants split or sublet to my biker friends.

But he’s not alone in being stunned, as a new survey just out from Manulife Bank shows.

The company surveyed a mess of people with mortgages and found that four in ten are trying to accelerate debt repayment. That’s cool, except it means they’re shovelling more money into equity at a time when debt has never been cheaper, and at the expense of saving or investing. In short, they’re getting less diversified, putting every last egg in the same basket (like Larry), and becoming far more susceptible to any economic shock that may arise. Poor lambs.

Scarier still:

  • A third of homeowners surveyed said they’d be in financial difficulty if their mortgage payment increased by just 10%. Seriously. That would happen with a renewal at just 1% above current rates. And another 15% said they can’t handle any increase at all. So, it sounds like almost half of everybody with a mortgage is headed for the wall.
  • As far as job loss goes, close to 20% said this would be a disaster within one month and another 27% believe they could not handle the mortgage payment after three months. Why? Simple. We’ve become a nation of slave-homeowners who have diverted all of our cash flow into debt servicing. So long as rates stay low forever and houses go up every year, this gamble might work. But that ain’t going to happen.
  • “While household debt to GDP has fallen significantly in the US since the onset of the financial crisis, it has been on a constant march upward in Canada,” said Megan Greene, Manulife’s Chief Economist. “This private debt overhang poses a risk to Canadian growth. It is positive news indeed that Canadians are finally looking to deleverage.”

Not exactly. Every dollar going into equity is coming out of liquidity. It’s a dollar less for saving, investing, growing, insuring against the unforeseen and the future needs of your family. Paying off debt is cool. Avoiding it in the first place is divine. And carrying two houses with $800,000 in loans, no savings plus a paycheque from a dying sector is the road to lamb chops.

171 comments ↓

#1 Heather McCann on 06.16.15 at 6:40 pm

“A third of homeowners surveyed said they’d be in financial difficulty if their mortgage payment increased by just 10%. ”

That is utterly disgusting!

#2 David O'Shea on 06.16.15 at 6:45 pm

“Also the fact he’s ready to depart Fort Mac suggests the eternally-fat paycheque is gone.”

That is utterly disgusting!

#3 PM on 06.16.15 at 6:48 pm

For almost a decade they’ve been winning. It’s only a problem if rates rise. Let’s watch shall we?

#4 S.Bby on 06.16.15 at 6:53 pm

Garth said: “So much for $800,000 in mortgages – which underscores recent surveys showing people under 35 actually think home loans are just like rent. You never fuss over paying them back because, like, who the hell can?”

And this in a nutshell is why Canadian real estate has turned into a giant ponzi scheme. Impossible to pay off mortgages but it doesn’t matter when prices will go up forever and we can all sell to greater fools.

#5 raisemyrent on 06.16.15 at 6:57 pm

I suspect ex-pat from his wording. I guess he’s Canadian now. (cue the xenos).

Just another example of people who want it all. tapped into the oil flow and it dried, leaving them in the red and nomadic, but they still deserve half an acre and a shop, because why not?
I remember when I served my time up there. everyone thinks that going to Ft Crack is the road to riches. most people come back with more debt, older, with no assets to speak for, and with a lesser salary to adjust to.
emotions rule, and reality sucks, boys and girls.

#6 Llewelyn on 06.16.15 at 6:59 pm

Lots of comments lately about families living beyond their means in the belief that future increases in the value of their primary asset and their wages will be sufficient to retire debt obligations.

Confidence in the future expressed by the general population of Canada pales in comparison to the confidence game being played by the Federal government in the United States.

Between 2009 and 2014 the United States government spent $6.5 trillion more than they received in revenue from all sources.

Expressed in simple terms 30% of all expenditures incurred by the Federal government in the United States between 2009 and 2014 were covered by long-term debt in the belief that future revenues will be sufficient to retire all debt obligations.

Considering that over 57% of Federal government revenues in the United States are collected as income taxes their employment participation rate would have to increase from 62% to 75% and the average wage of their labour force would have to increase from $10.54/hour to $18.00/hour to balance their current budget. Does this scenario look likely?

While annual deficits have been slashed in recent years the projected shortfall in 2015 will still exceed $580 billion or 15.5% of projected expenditures. Given that pension obligations and health care costs in the United States are increasing by more than 4.0% per year any hope of returning to a balanced budget in the foreseeable future seems very faint. Even the Congressional Budget Office has conceded that Federal government deficits will probably start increasing again in 2018.

If interest rates for future government debt increase any hope of ever reducing the debt compiled by the Federal government fades into oblivion.

When dozens of economic pundits explain that government debt is necessary to stimulate the economy and that future growth will cover 100% of debt obligations it should come as no surprise when the general population follows suit.

Clearly Joe Oliver’s statement that Stephen Harpers grandchildren will become responsible for the $600 billion in debt incurred by the Government of Canada was one of the few snippets of truth escaping from Ottawa.

Trying not to be too facetious if our Federal government had the same confidence in the future of our economy as the Federal government in the United States has in theirs they should have compiled a current debt of $1.98 trillion instead of a paltry $600 billion.

Come on boys show a little faith and start showering us with goodies.

Time to sing along with Old Blues Eyes.

Let’s forget about tomorrow
Let’s forget about tomorrow
Let’s forget about tomorrow for
Tomorrow never comes

#7 Andrewski on 06.16.15 at 6:59 pm

Here is more from the survey Garth is quoting:

http://www.banquemanuvie.ca/wps/wcm/connect/d96abe3b-e6d3-4d03-892d-931ce22e61ed/Spring+2015+Debt+Survey+News+Release+-+FINAL.pdf?MOD=AJPERES&CACHEID=d96abe3b-e6d3-4d03-892d-931ce22e61ed

#8 Comb Over on 06.16.15 at 7:01 pm

Donald Trump announced his bid for the US Presidency today and stated that the US stock market is significantly overvalued and warned of impending doom. Does he really believe this or is he just mad that he sold all of his stocks last fall ?

#9 Palebird on 06.16.15 at 7:01 pm

Larry, all I can say is “wow”.

#10 FormerSaskie on 06.16.15 at 7:02 pm

Good! You’re back on stride Garth.

#11 Obvious Truth on 06.16.15 at 7:03 pm

Larry. You are young. U can fix all this. But it seems like you will likely need a pro like garth to get and keep you on track.

A shift in mentality can be tough.

Don’t be the biggest tool in the shed.

A workbench will likely do just fine.

#12 jess on 06.16.15 at 7:08 pm

inclusionary zoning
By Rachael Myrow
June 15, 2015
Share

The California Supreme Court has sided with the city of San Jose in a case that could affect affordable housing rules all over the state.
Silicon Valley House Builders Just Lost Their Attempt To Wriggle Out Of Affordable Housing Law

by Alan Pyke Posted on June 16, 2015

A lawsuit that set affordable housing development back by six years in Silicon Valley’s largest city has come to an end. San Jose and 170 other California towns that use zoning laws to stop developers from exacerbating the state’s housing crisis can breathe easier after Monday’s ruling.
http://thinkprogress.org/economy/2015/06/16/3670347/affordable-housing-zoning-fight-california/

The League of California Cities and California State Association of Counties estimate more than 170 municipalities have some kind of ordinance on the books to tackle the fact that real estate, especially in coastal markets, has become increasingly unaffordable for many renters and would-be homeowners. Both groups backed San Jose in the case.

Five years ago, San Jose tried to require that all new residential developments of 20 units or more set aside 15 percent of those units for sale below the market rate. Developers could opt out of building affordable units by paying a fee. That’s pretty common, a tactic that goes by the name “inclusionary zoning,” but the city side-stepped the usual study showing a relationship between the development of for-sale housing and the city’s need for affordable housing.

…“We were the largest city that was applying inclusionary housing citywide,” explains San Jose’s interim Housing Director Jacky Morales-Ferrand. “In addition to that, we used our legislative powers to impose inclusionary on developers. What we said was that because affordable housing is such a priority of the highest order, cities should have the power to legislate this requirement.”

The California Building Industry Association sued, calling the new ordinance an unconstitutional taking of property.

http://ww2.kqed.org/news/2015/06/15/california-supreme-court-upholds-san-joses-affordable-housing-rules

#13 Panhead on 06.16.15 at 7:13 pm

The “stunned” should be “scared.” Incredible to think they’re not … are they blind?

#14 long dong on 06.16.15 at 7:20 pm

No posts yet from Victoria RE? Guess she’s feeding her 14 cats.

#15 Mark on 06.16.15 at 7:21 pm

Anyone want to speculate what the value of a housing “put option” issued by an employer is, in the case of employer bankruptcy/insolvency/CCAA reorganization?

I honestly don’t know the answer, and don’t even know where to begin on the basis of speculating an answer. Anyone care to comment? Obviously such an option would be at least partially “in-the-money” if the house’s FMV is less than the strike price, but it might be a real uphill (read: expensive) battle convincing a bankruptcy court of that. Assuming there’s anything to recover as an unsecured creditor from the employer.

Also, I would presume that taxes would be owing on the exercise of such an option, and the option grant itself. I wonder how many people in possession of such a guarantee/option issued by their employer truly understand the tax implications of such?

#16 Butch on 06.16.15 at 7:23 pm

I keep hearing no interest rate rise by the fed until 10 yr notes start yielding 4%.

Any truth to this?

#17 8102 on 06.16.15 at 7:23 pm

I don’t know what everyone is worried about, the BOC Governor says the chance of a “Sharp Correction” in the Canadian Real Estate Market is remote and the Fraser Institute says “Canadians Can Manage Their Debt”.

These guys must be making regular trips to Washington State and Colorado, it’s the only explanation!

#18 ShawnG in TO on 06.16.15 at 7:24 pm

what kind of work does Larry expect to find on the island or rural Ontario where he expects to pay for his family needs, the truck, another mortgage, and time to tinker?

#19 8102 on 06.16.15 at 7:25 pm

#14 long dong on 06.16.15 at 7:20 pm

No posts yet from Victoria RE? Guess she’s feeding her 14 cats.

Now now long dong, don’t be a “dong”

#20 Mark on 06.16.15 at 7:27 pm

“just 90 days prior to the new world of rising interest rates.”

Oh please… That schtick is getting pretty old now. Rising interest rates when the economy is teetering closer to deflation, if not explicitly in deflation?

Rising risk premia perhaps, which could be a concern especially for the most indebted. But policy rates ain’t going higher at least until Canada goes through the totality of the RE correction and a new source of non-RE-industry related demand emerges in the Canadian economy.

There is no deflation. Repeat after me. No deflation. And the Fed pops this year. — Garth

#21 Justin on 06.16.15 at 7:27 pm

I am reading this post from Ulukhaktok, NWT on Victoria Island and can tell you first hand that calling Fort McMurray near tundra is like calling Toronto near everglades or on the cusp of winning a Stanley Cup for that matter. If you are educating people on personal finance you could throw in a little Canadian geography while you are at it.

You have the Internet there? And you’ve heard of Toronto? — Garth

#22 Mr. White on 06.16.15 at 7:28 pm

Larry, sell it all now. Pay down all of your debt and start investing. Talk to John Degoey at Bergeonvest Bick in Toronto. He will make you lots of money over the rest of your life.

Rent.

Interest rates will revert to mean. This means that an 8% mortgage is in your future. You can’t afford an 8% mortgage. When mortgage rates revert to norm, all mortgage holders are going to see their assets diminish in value until they are worth the mean price/income for the past, what 100 years. It is going to be a very bad time.

But, you will have lots of available cash to buy a nice home on the backs of people stupider than you who did not get out in time.

#23 Jane Diaz on 06.16.15 at 7:29 pm

We currently have a financial plan that we stick with at most discipline and have been doing for 15 years now.

We have $2,400 a month left over after paying all mortgage, property taxes, utilities, food, gas, car expenses, medical, misc. etc.

We divide this is 3 parts. We put $16,000 in our RRSP’s maxing that out, $11,000 in TFSA’s and $7,400 to mortgage repayment, principal.

Our RRSP’s are now $400,000, TFSA’s are $92,000 and dividend paying ETF’s are $200,000. We have a liquid account of $20,000 for just in case.

We will be debt free in about 4 months as we already have a $100,000, 3.5% GIC maturing on September-12-2015.

Our mortgage balance of $92,000 matures on October-18-2015 and is at a rate of 3.00%.

Rates can shoot up, we don’t care, we are done being in debt.

#24 Mr. White on 06.16.15 at 7:29 pm

Garth, where do you source your photo’s. They are consistently as brilliant as your blog.

#25 Dee on 06.16.15 at 7:35 pm

“Ontario within an hour and a half from Toronto”

GOOD NEWS! You already own a house in that range!

Kick the tenants out and move back in. Or better yet, sell the thing.

#26 Freedom First on 06.16.15 at 7:39 pm

Larry and his wife are much like the majority of people. The majority of people are fairly intelligent, and able to regurgitate what they are taught in our education system from kindergarten through university. However, the majority of people have not learned how to activate the skill of critical thinking. That would make them dangerous to the system designed to fleece them.

I am ok with that, as I always put my own freedom first. Also, I enjoy helping others, and I mean truly helping, not just enabling idiocy. And I am not just talking about the enabling Bank of Mom, that is only one of the enablers. There is many of them, and no, they are not trying to help you. They lie. Only I have my best interest at heart, and I like it that way.

#27 Joe on 06.16.15 at 7:41 pm

Sheeple getting run over by debt = lambchops.
Can’t fault them as they are just practicing what the system preaches and teaches.

Crack of the ages, cheap cash + self entitlement and anyone can be a rockstar.
Until the facade teeters and falls.

Starting Sept the markets going down, and in a year much weeping and disbelief.
Perhaps triggered when the FED hikes and the derivatives noose tightens.
Time to get silver in the next few weeks.

If I’m wrong I’ll gladly eat my words.

#28 Sueds on 06.16.15 at 7:44 pm

#23 Jane Diaz

That’s it?

What kind of house do you live in and what cars do you drive though?

That’s all we care about.

#29 earthboundmisfit on 06.16.15 at 7:45 pm

Good luck finding lamb chops at the food bank.

#30 Big English on 06.16.15 at 7:46 pm

The wife has been requesting we buy a home.

Older sister-in-law was over on the weekend for brunch. She’s a home owner with grown kids. She brought up RE and went onto say ‘now is not the time to buy in Vancouver.

You should have seen the wife’s face.

#31 Macrath on 06.16.15 at 7:47 pm

Larry’s obviously an extreme case of sour gas poisoning.

Symptoms of acute exposure include delirium, disturbed equilibrium, tremors, convulsions.

#32 Leo Trollstoy on 06.16.15 at 7:47 pm

Oh please… That schtick is getting pretty old now. Rising interest rates when the economy is teetering closer to deflation, if not explicitly in deflation?

Sorry to hear that you’re still disillusioned.

Despite your past failed calls on gold, miners, interest rates, Toronto real estate prices, the Canadian dollar, pand the rest of it, I hope you will be able to get your investments back on track.

#33 jess on 06.16.15 at 7:52 pm

Canada’s biggest foreign bribery scandals in years
http://business.financialpost.com/news/mining/magindustries-reveals-evidence-that-company-paid-major-bribes-in-republic-of-congo

read more @https://www.globalwitness.org/
=============
…”According to the World Bank’s chief procurement officer, it is developing a new on line system that could include information about the real owners of companies (also called “beneficial owners”) that bid for its contracts. This is important because anonymously owned companies, or those whose owners are hidden, have proven to be a common facilitator of fraud in public procurement.

While the World Bank has forged a global identity for itself lending to governments around the world for more than 70 years, its private sector arm, the International Finance Corporation (IFC), remains less well known.

With the growing push for private investment in developing countries, the IFC has expanded rapidly in recent years, lending to companies and private sector projects around the world. Human rights groups and former bank officials say the IFC takes greater risks and is less accountable than its higher profile counterpart.

Many of its controversial investments involve loans to middlemen, such as banks, hedge funds and private equity firms, where the final recipient of the money remains unknown.
http://www.icij.org/blog/2015/06/numbers-world-banks-lesser-known-arm-ifc

========

#34 Julia on 06.16.15 at 7:54 pm

#15 Mark
“Anyone want to speculate what the value of a housing “put option” issued by an employer is, in the case of employer bankruptcy/insolvency/CCAA reorganization?”

Insolvency counsel would be in a better position to answer. My take is that depending on the type of proceeding and the content of the contract, it would either be
1) voided by the court if deemed not commercial reasonable (in a CCAA or Receivership); or
2) In a bankruptcy would fall away entirely if the sale of the property has not yet occurred or if it has the employee’s claim would become an unsecured claim along with the rest of the unsecured creditors.

I am sure there are many more grey areas here, happy to hear other opinions.

#35 PM on 06.16.15 at 7:55 pm

Oh please… That schtick is getting pretty old now. Rising interest rates when the economy is teetering closer to deflation, if not explicitly in deflation?

YoY, sure, because of the oil drop.
Last 3 months have a 2.4% run rate.
All depends on your frame of reference, what does the Fed use?

#36 the Jaguar on 06.16.15 at 7:57 pm

http://www.countercurrents.org/zuesse100615.htm

Above is a link to some very sobering thoughts about where the world economy is going and who we are presently aligned with (thanks to our double agent PM who bleats yes to the every whim of the us state department. (not USA bashing, Garth.)
Folker Hellmeyer is no lightweight, and the growth numbers he outlines for the BRIC nations are very interesting.

#37 Smoking Man on 06.16.15 at 8:03 pm

After leaving the land of the living dead. , the nearly dead. And a few dead we headed north, checked into the Cromwell.

Wow luxury and service..after we check in I zoom up to the world famous pool to check out the eye candy.. After 3 days in what could easly be mistakenly a nursing home I’m ampped.

Up to the roof pool.. Wow.. This is millennial heaven.

The second I start heading to the pool all eyes befall me.

You could see it in their ajitated faces. Who’s friken dad is that. Please turn around you old creep..

Ha, not a chance..I take of my designer Van Heusen short sleeve shirt. I’ve shaved off the 25 or so grey hairs
on my chest. Not much I can do about the gigantic wine belly other that use it as a bear stand.

All in all, after cracking a few jokes, telling them im a soon to be world famous fiction writer. and letting a few
hottes read chapter 1…

I’m in.mostly cause everyone is two fisting drinks..

Would not dare come here if they where all sobar.

#38 Alberta Ed on 06.16.15 at 8:05 pm

Fort Mac is somewhere south of the tundra. It is in the boreal forest, home to the world’s largest blackfly herd (in the summer), and a frigid wasteland in the winter. Take your pick…

#39 Millmech on 06.16.15 at 8:06 pm

Don’t forget the IRD on his mortgage that the bank will charge him,could be 3%+ over the remaining term.Also the house price top up is a taxable benefit which could cost him another $15,000 at tax time,legal fees,commissions etc could be another $15,000.He could exit this deal still owing the bank,with car loan on top of that.

#40 greyhound on 06.16.15 at 8:12 pm

Today’s post reminds me of an old story.
Two guys in their late 30s rent houses next door to each other. They each have a wife and one child and about the same net worth, rent and family income. One guy buys a mutual fund, the other buys a boat. Fast forward 30 years. Now one guy in his late 60s has a nest egg, the other an old boat. The boat owner (and 10 million others like him) writes to his MP, “my family is in trouble — you’ve got to tax the guy next door and raise my government payments or we’ll starve!”
Who’s winning here?

#41 Smoking Man on 06.16.15 at 8:14 pm

For a Tue; Vegas is packed. Already a traffic jamb on las Vegas Blvd and its only 5:10.

Us economy looks promising for some.

#42 The Daily F***kups Show on 06.16.15 at 8:19 pm

Why is the story always about F***kups?

As if there was a collective weird joy of “I told you so…” day after day, after a new daily F***kup is introduced.

The seasoned blogdogs are salivating around the daily F***kup, as if it was the daily Sunshine girl in the pre-Viagara times.

Ok, the F***kups don’t get it. Ok. Understood.

Why wasting time day after day to line them up for public virtual stoning?

Let’s talk about how to make money – much more exciting than the false happiness that others are bigger F***kups.

#43 Bby604 on 06.16.15 at 8:20 pm

Wtf are they gona do in nanaimo ? Basket weaving ?

#44 TurnerNation on 06.16.15 at 8:22 pm

For those who doubt a balanced portfolio (and I’m DIY):

Cut & paste tonight:

Since October 17, 2008 * 7.3%
* Annual compound rate of return.

#45 bigtown on 06.16.15 at 8:23 pm

Nanaimo on Vancouver Island is now a serious enclave for the retired so much so the biggest issue is how to keep the schools open due to very few little ones. The Kawarthas is a similar situation with the affluent Toronto seniors retiring there in droves so they can sit in the local Tim’s for hours just meditating for less than $2 a cup. A very good deal on a fixed budget.

If I was Larry… my mother always said THERE IS ALWAYS SOMEONE WITH WORSE TROUBLE THAN YOU. Mom was right.

SHOPPERS sells my favourite chewy bars made from dark chocolate and almonds now on sale for weeks and I picked them up again and noticed why they are ALWAYS on sale. Previously the box contained FIVE OR SIX tasty bars. Now the box has only four bars meaning I am paying the same price for more than 20% less product.

Hard to say why Bank of Canada Governor Mr. Poloz does not see INFLATION when it is at every turn.

#46 ANON on 06.16.15 at 8:31 pm

“…guaranteed to sell for 725,000, regardless of what it sells for my company will top it up to the 725”

Did you notice “shadow banking” flashing across the screen? ;)
Yes, Larry’s toast, just like most. But it sure was nice while it lasted.

#47 Gulf Breeze on 06.16.15 at 8:39 pm

@ #6 Llewelyn,

Thanks for the synopsis. The deep structural debt problems have literally been papered over, in the U.S.

The implicit understanding that the US will pulverize the cr** out of any country who tries to undercut its reserve currency status (ie Iraq accepting other currencies for oil, pre-occupation) has kept the dollar strong. People hate a bully but will place bets on him.

But, this appears to be changing. The chess board has been shaken and the chess pieces are still up in the air. Who knows how it will play out?

There is no guarantee that the US Anglo empire can maintain its dominant status forever.

And in Canada, speaking of dollar strength, did Poloz not mention something about an inflation target of 2% not being set in stone. Think he said something about 4% inflation being tolerable. The BOC is certainly paving the way for lowering interest rates, at least on a contingency basis.

#48 Andrew Woburn on 06.16.15 at 8:43 pm

#94 Brad in Van on 06.15.15 at 10:05 pm
Andrew Woburn that’s a bunch of rubbish. You also don’t believe our Canadian banks were bailed out, do you? The American consider the source of Andrew Woburn. When someone like Andrew asks why or uses words like probably then they having nothing. Andrew is only angry the cracks are starting to show.
======================

I tend to get my info from the Economist and the Financial Times. Yes I realize they are all really controlled by the Illuminati, but I’m a creature of habit.

The banks were indeed financially assisted by central banks but they were not insolvent, they were illiquid. Insolvent means you owe more than you own and can never pay. Illiquid means you don’t have cash till payday but your credit card has lots of room and you have cashable assets.

The banks are part of an immense international payments system. Every night, every bank has to clear its debts with every other bank or go out of business. Normally a bank that winds up with a net debt to other banks for that day can borrow money overnight from another bank. During the crisis, banks were afraid to lend to each other. The central banks stepped in as an overnight lender of last resort and took the banks’ short-term assets as security. This is the main reason we have central banks and it’s what they have done in financial panics since the Bank of England was founded.

#49 Ron on 06.16.15 at 8:50 pm

Corporations, individuals and the federal government continue to rack up debt at a rate that is far faster than the overall rate of economic growth. We are literally drowning in red ink from sea to shining sea, and yet we just can’t help ourselves.

We Might As Well Face It – America Is Addicted To Debt

http://www.zerohedge.com/news/2015-06-16/we-might-well-face-it-%E2%80%93-america-addicted-debt

#50 Buddha on 06.16.15 at 8:54 pm

Dude is nuts….

Anyways…It must be close to time for the annual “Buy recreational property” blitz…with a new twist!
Get it before it’s gone, ‘Mericans ‘n other’s buying it all up!
It’s HOT… Smoking hot near Lytton and a few other spots at the moment…

Oh…..and realtors suck .
Cheers.B

#51 Retired Boomer - WI on 06.16.15 at 8:57 pm

#40 Greyhound

Depends who my MP (or Senator or Congressman) listens to. Since I give political donations, I would hope he might listen to “WHO”supports his re-election bid.

I also never bought a boat, but DO own several Mutual Funds.

Yes, I am in the minority, but I also have money.

Any Questions? Stupidity is NOT contagious.

#52 joblo on 06.16.15 at 9:04 pm

#6 Llewelyn
“Clearly Joe Oliver’s statement that Stephen Harpers grandchildren will become responsible for the $600 billion in debt incurred by the Government of Canada was one of the few snippets of truth escaping from Ottawa.”

Those LUCKY kids.

MORE Economic Action Plans! Now!

#53 Dan Sampson on 06.16.15 at 9:05 pm

Cars are depreciating objects and so we don’t waste money on expensive cars. We run them to the ground.

We don’t buy cars with leases and credit for 72, 84 months like the typical, financially, clueless Canadian that stays in debt.

Our house is a $425,000 house which we paid $265,000 back in 2005.

When Canadian real estate prices fall and alot of people lose equity or maybe are under water like the 8 million still in the U.S., we don’t care what our house price drops down to.

Unlike most Canadians and Americans, we don’t see our house or Canadian real estate as a great investment. It is a place to live and that is its purpose.

We are shortly debt free and are financially sound. This is what is important.

#54 Mark on 06.16.15 at 9:09 pm

YoY, sure, because of the oil drop.
Last 3 months have a 2.4% run rate.
All depends on your frame of reference, what does the Fed use?

http://www.bls.gov/cpi/cpid1504.pdf

Medical and used cars are the only sectors experiencing any statistical relevant amounts of inflation in the US. Will higher interest rates really do squat to either? Will higher rates suppress demand for medical services or used cars?

#55 Johann on 06.16.15 at 9:13 pm

My parents came to Canada penniless in the early 1950’s. They met here and got married. They never had a single debt their entire lives, not even a mortgage. Payed cash for their first house. No car loans, nothing. All paid cash or not bought. No debt and a stress free life.

#56 devore on 06.16.15 at 9:19 pm

We also may want to make changes to what we find and it is not easy to find landlords who would allow it and if we do it is money down the drain.

Oh, please. Do you think anything you add to your house, that is not a major renovation, actually adds value to the house? How delusional are you? No one thinks new light fixtures, blinds, or shower knobs are worth paying a single penny for. They’ll put in their own anyways, they don’t want your crappy dirty ones. Just do whatever you believe is valuable and important to you, everything else either find as it already exists, or work with the landlord to put it in, or get over yourself and do without.

Even major renovations, like new kitchen, new floors, new bathroom, new appliances, rapidly approach zero value to potential buyers once they’re over a year old. No one cares how much you paid for the built-in red fridge. Oh, there’s a fridge? Checkmark.

I put in nice blinds in my south facing window, because the drapes weren’t cutting it at blocking out the evening sun enough. I don’t expect to get any money back for them, they’re custom sized to the window, so they’ll stay when I move out, and I didn’t quibble over spending the money, because it was worth to me. But I’m not gonna put in granite counter tops, because I don’t care for them, and if they were that important to me, I’d find a place that had them.

That’s the rent vs buy mentality in a nutshell. Renters have their priorities and wish list, they find what they need, get someone else to front the capital to build it, then just pay the depreciation/use value. Owners buy the whole kit, then give it away for free to the next buyer.

Obviously, if you have an intense desire to build your own house, you’re gonna do it on land you bought (and not leased, hopefully). That’s the price of your hobby. But it’s important to realize that’s all it is, a hobby.

#57 gladiator on 06.16.15 at 9:21 pm

Garth, weren’t you saying that low rates should be the time when people pay off their debts instead of borrowing more?
The ones who are paying off their mortgages on an accelerated basis afe doing just that.
I have no debt of any kind, but if I had a mortgage, I would calculate what my payments would have been in a 6% mortgage rate environment and would be paying semi-monthly that payment. I remember calculating the pay-off time to be under 15 years.

Why pay off a 2.5% debt with money that could be making 7% over the course of five years, giving you more net worth when you make a lump sum payment upon renewal? — Garth

#58 devore on 06.16.15 at 9:23 pm

Premature submit.

The point is, it’s not “money down the drain”, any more than rent is money down the drain. You need to live somewhere. The price you pay for things you do to your dwelling to make it more homey or whatever, that’s what it costs to get it, that’s the price of your enjoyment. And if you don’t think it’s worth it, then don’t buy it, because it’s clearly too expensive for you. It’s like saying “I don’t want to pay for a new computer, when I’ll just be replacing it 2 years from now”. It’s either worth it, and you pay the price it costs to get it, or you do not.

#59 Andrew Woburn on 06.16.15 at 9:34 pm

#121 DON on 06.15.15 at 11:59 pm
#45 Andrew Woburn on 06.15.15 at 7:41 pm

Not sure I agree with the rest of the island trending up. (Are we all still believing the data from the realtors – I guess I might if I had skin in the game). Once Vancouver corrects, Nanaimo will be done.
===============

I don’t disagree overall with your comments but I don’t see that Nanaimo’s market will necessarily drop along with Vancouver any more than Kingston, ON will follow the GTA. Most smaller Canadian cities follow their own trajectory.

However there are two markets on the Island, retirees and real people. Perhaps you meant that falling prices in Vancouver will cut the ability of retirees to buy on the Island in which case, I agree.

Qualicum is an interesting case. My wife goes to a chiropractor there who plays the local radio station in his waiting room. They still play Frank Sinatra and Rosemary Clooney. You can find Lawrence Welk LP’s at the thrift store. It’s a total time warp. Where are the next generation of buyers. My guess is that prices will have to fall until it becomes a bedroom community for millenials who commute to Parksville and Nanaimo.

#60 S.Bby on 06.16.15 at 9:35 pm

Strange. For a second there I thought I saw a second blog post for today. Gotta lay off the boozze.

#61 Investorz on 06.16.15 at 9:38 pm

“Why pay off a 2.5% debt with money that could be making 7% ”

Well, 7% is not after tax. It’s more like 4.5% after tax if you are hitting the top bracket. Still beats the 2.5% debt, but that’s if you really do make 7%.

The top tax rate on capital gains is 25%. Most people pay about half that. — Garth

#62 Smoking Man on 06.16.15 at 9:42 pm

It came to me in a drunkin stupper

Visualize this

The next big magazine..

Herdonomics Mag..

#63 Josè on 06.16.15 at 9:43 pm

“a paycheque from a dying sector”
————————-
Honeslty Garth, do you really think that the oil & gas industry is dying in Alberta? Or are is it just in a several year slowdown? Especially after the newly elected Gov’t craters (which shouldn’t be too long) the economy and oil recovers?

The oil sands appear to have an unstable future. As far as this guy is concerned, dying. — Garth

#64 Ray Skunk on 06.16.15 at 9:44 pm

Well, Larry certainly wasn’t first in line when they were giving out fiscal competence, but he’s still young and able to salvage the situation over the coming years.

Garth needs to pull something special out of the hat to top yesterday’s cusp-of-retirement “$40k credit card debt :-)” simpleton.

I await tomorrow’s installment with bated breath. Someone please email him with a cracker.

#65 Washed Up Lawyer on 06.16.15 at 9:46 pm

My goodness. The world is awash in oil and demand is faltering. Concrete and rebar producing companies in China are rebranding as high tech companies in order to trade at 240 P/E ratios. Illegal tree falling is taking place in Dunbar. Mulcair is promising to hand out Bombardier labeled pens at trade fairs in Bulgaria.

We are not exactly knee deep in clover here in Alberta. There might be some unpleasantness.

At least the blackfly population has migrated south from Fort McMurray to Westlock, Jarvie, Dapp and Fawcett because the air quality in the Taiga won’t let them survive.

Smoky’s humour brightens my day.

#66 Estrella on 06.16.15 at 9:47 pm

What makes me worried is that we have become a divided world of the “haves” and the “have-nots”. This widening gap will only grow greater as the economy begins its inevitable change in the coming years.

Robespierre is whispering a chant of revolution and it swirls around all of us. No one will escape the consequences. Let’s not be smug, because someone somewhere is sharpening the Guillotine. This is the stuff that wars are made of….

#67 ANON on 06.16.15 at 9:47 pm

#48 Andrew Woburn on 06.16.15 at 8:43 pm

By definition you always owe more than you own, and you can never pay (at least at the moment of your promise, you can’t) the extra. If the extra existed, you wouldn’t have to promise to pay it back, would you? A promise is only worth if that which you promise to pay extra is not present physically on the negotiating table, you don’t have it, but you seem a pretty determined fellow to go fetch it.

#68 BS on 06.16.15 at 9:51 pm

A third of homeowners surveyed said they’d be in financial difficulty if their mortgage payment increased by just 10%.

I bet a third of homeowners are already in financial difficulty. A 10% mortgage payment increase will only add to it and may be what puts them into bankruptcy.

#69 kommykim on 06.16.15 at 9:55 pm

RE: #42 The Daily F***kups Show on 06.16.15 at 8:19 pm
Ok, the F***kups don’t get it. Ok. Understood.
Why wasting time day after day to line them up for public virtual stoning?

Because the F***kups make the rest of us feel better about our own pathetic basement dwelling lives while we wait endlessly for the financial destruction of our over(land)lords’.

#70 Gary on 06.16.15 at 9:58 pm

What you left out was the stat that the average mortgage in Canada is under $300K

When the average house costs $450,000, that’s not so great, is it? BTW, the average Albertan is 36. In Ontario she’s 40. — Garth

#71 BS on 06.16.15 at 9:59 pm

Donald Trump announced his bid for the US Presidency today and stated that the US stock market is significantly overvalued and warned of impending doom. Does he really believe this or is he just mad that he sold all of his stocks last fall ?

If he sold all his stocks last fall that pretty much confirms he believes the market is overvalued. Or at least in his view he has better places to put his money.

#72 Renter's Revenge! on 06.16.15 at 10:02 pm

“Let’s talk about how to make money – much more exciting than the false happiness that others are bigger F***kups.”

Agreed. It gets boring quickly. On the other hand, CNR’s startin’ to look sexy again.

#73 Leo Trollstoy on 06.16.15 at 10:10 pm

Today’s post reminds me of an old story.
Two guys in their late 30s rent houses next door to each other. They each have a wife and one child and about the same net worth, rent and family income. One guy buys a mutual fund, the other buys a boat. Fast forward 30 years. Now one guy in his late 60s has a nest egg, the other an old boat. The boat owner (and 10 million others like him) writes to his MP, “my family is in trouble — you’ve got to tax the guy next door and raise my government payments or we’ll starve!”
Who’s winning here?

Depends if the MPs own old boats ;)

#74 Marco on 06.16.15 at 10:11 pm

So I presume if mortgage holders that are holding fixed 5 year mortgages start seeing interest rising will want to sell within that 5 year period, if they foresee the rise in interest payments being a problem.

More supply coming on line as soon as interest rates start rising.

Cheers.

#75 profligate on 06.16.15 at 10:13 pm

Can you do a story on #22 Mr. White ? If he thinks that rates are going back up to 8% it would certainly make for an interesting story. No wonder the savers come here to lament the state of the world. A 7% return minus fees, taxes and inflation leaves what, 2%? Rack the debt, have fun, walk away and start the same process 9 months later. What could be simpler?

#76 Leo Trollstoy on 06.16.15 at 10:13 pm

Will higher rates suppress demand for medical services or used cars?

No. Not in this economic climate.

Everybody knows where the puck has been. See where the puck is going.

No deflation. Now invest appropriately. You will reap the rewards that have eluded you thus far. Good luck!

#77 takla on 06.16.15 at 10:19 pm

B.C construction update from Burnaby b.c..just got word of looming layoffs today,told to stay home a few days and this came up out of the blue,others on crew layed off.Made sense tho as I walked by the condo sales office{crickets} as I was leaving the jobsite and seen the window plastered with “jobsite lean documents”…yup the sales of units have slowed substancially and the general contractor isn’t paying his bills……got the same sick feeling I remember from ’08/01’/’92/’84/’77……..here we go again…

#78 Bobs ur uncle on 06.16.15 at 10:32 pm

The oil sands appear to have an unstable future. As far as this guy is concerned, dying. — Garth

Bold statement – care to expand?

#79 Ronaldo on 06.16.15 at 10:51 pm

#55 Johann on 06.16.15 at 9:13 pm

”My parents came to Canada penniless in the early 1950’s. They met here and got married. They never had a single debt their entire lives, not even a mortgage. Payed cash for their first house. No car loans, nothing. All paid cash or not bought. No debt and a stress free life.”

Those were the days when banks would only lend you money when you could prove you didn’t need it.

#80 Randy Randerson on 06.16.15 at 10:55 pm

Are we supposed to be stunned by Larry, or are we so used to seeing this type of couple in our daily lives that we are completely desensitized? I’m in the later group.

#81 pacific portobello on 06.16.15 at 11:00 pm

You could see it in their ajitated faces. Who’s friken dad is that. Please turn around you old creep..

Ha, not a chance..I take of my designer Van Heusen short sleeve shirt. I’ve shaved off the 25 or so grey hairs
on my chest. Not much I can do about the gigantic wine belly other that use it as a bear stand.
……………………….

Van Heusen – ie sears special

#82 Drill Baby Drill on 06.16.15 at 11:17 pm

The story states that his employer will make good on his $750K home in Ft. Mac. I call big time BS !!
This guy is out to lunch !!
He wants to move to Van Isle on of the most un employable areas in Canada ??

I say ” Brain Dead”

#83 Let them eat cake on 06.16.15 at 11:31 pm

#171 4 AM Sunrise on 06.16.15 at 12:41 pm
#158 bdy sktrn on 06.16.15 at 11:23 am

“..Bread: I’ve watched the price of anything made by Canada Bread or Weston surge by some 50% over the past few years. ….”

Switching to rice will be one of the major lifestyle changes that take place in tough economic times. In developing countries it makes a great staple when accompanied by some meat/veg……will this be the future in Canada….

#84 Let them eat cake on 06.16.15 at 11:32 pm

#118 Leo Trollstoy on 06.15.15 at 11:41 pm
Just remember the famous quote by Wayne Gretzky: “skate to where the puck is going to be, not where it has been.”

Wasn’t it his father that coined this phrase? Gotta give credit to the wise elders when it is due!

#85 45north on 06.16.15 at 11:44 pm

Fort McMurray is getting old and we would like to move. We are on the fence about going to Vancouver Island in a more rural setting maybe within an hour from Nanaimo or Ontario within an hour and a half from Toronto, Kawartha lakes area maybe.

Larry doesn’t actually say he’s laid off. Maybe he’s still working?

Here’s a house near Peterborough:
http://www.realtor.ca/Residential/Single-Family/15619470/1719-6TH-LINE-SELWYN-Ontario-K9J6X5

nice garage, walking score of 5. Means that you have to drive everywhere. My bet is the buyers will have two vehicles. Or more. (at $10,000 a vehicle a year)

and what kind of work is Larry going to do on 6th line? Unlike Zillow, I cannot find out what the municipal taxes are? I’m betting $4000 a year. Anybody want to supply a better number? Anyway if Larry moves to this house, he’s going to have an income.

Since he already owns a house in Fort McMurray, i’m thinking he’s best off staying in Fort McMurray.

#86 4 AM Sunrise on 06.16.15 at 11:45 pm

Did anybody catch Joe Owe singing U2 the other day?

https://www.youtube.com/watch?v=b2HW3JLSKPI (he’s on at 0:16)

Somebody cue the karaoke machine for “Stuck In a Moment You Can’t Get Out Of” when he has to raise rates.

#87 Smoking Man on 06.16.15 at 11:53 pm

#81 pacific portobello on 06.16.15 at 11:00 pm
You could see it in their ajitated faces. Who’s friken dad is that. Please turn around you old creep..

Ha, not a chance..I take of my designer Van Heusen short sleeve shirt. I’ve shaved off the 25 or so grey hairs
on my chest. Not much I can do about the gigantic wine belly other that use it as a bear stand.
……………………….

Van Heusen – ie sears special

Shit, it was beer stand…obviously some form of sun stroke.

Its sad, but I can sit up straight with a very light slop back..

Beer sits perfectly balanced, its a conversation tactic at the pool.. I want to think.. Chic’s are going, Cool finally a pillow..this won’t hurt my neck.

But that’s just the writer in me.

What’s wrong with Van Heusen anyway.. I love those clothes.

#88 Chris in Nanaimo on 06.16.15 at 11:55 pm

More anecdotal evidence of the ongoing misery in Cowtown. Spoke to a Calgary resident yesterday. She’s survived 2 rounds of layoffs, doesn’t expect to survive a third. She mentioned that pretty much on a daily basis you can wander around the downtown core and see tearful folks filing out of their ‘previous’ employers building holding their sad box of belongings.

#89 Hawk on 06.17.15 at 12:02 am

#66 Estrella on 06.16.15 at 9:47 pm

===================

Robespierre was a murdering ratbag criminal who when it suited his purpose murdered his own associates and a lot of revolutionaries as well.

In the end Robespierre himself was executed as he so richly deserved.

The reality is that the so called “poor”of the first world are nothing of the sort, when you actually see what poverty entails in the rest of the world that has minimal, if any, entitlements.

And just so you know, the peasantry of the French Revolution (rightfully) hated their nobility, not because the nobility were high income earners or high net worth individuals, but because the nobility stole from and oppressed the peasantry.

Instead of musing about murderous solutions, based on envy of what others have earned, why not channel energy into building one’s own wealth?

#90 Smoking Man on 06.17.15 at 12:05 am

Note to self, after 3 days of flip flops. Moisturizer on the balls of your feet. Ouch with every dry slap step.

The cure, two fisting JD on Las Vegas with the handsome family cranked past the warning message about volune on the ear buds, thanks Samsung for the heads up.. As close to heaven as one could get.

I love life this moment, its not perfect, a bit painful. But that’s life. I’m alive, I might not be that good the next day.

Life for today..the grass roots nailed it along time ago.

#91 Christopher Lackey on 06.17.15 at 12:08 am

Viceroy homes of port hope on the verge on bankruptcy. Not publicly traded but anyone recognize this canadian icon?…anyone? Funny stories fron the fallout on the star website

#92 Canadian Abroad on 06.17.15 at 12:27 am

We just had a very stressful move back to Canada from Texas. Larry has it easier, but it’s still incredibly unstable thing to do.

With O&G unstable right now I’d hate to be holding a house for sale in an O&G city… oh wait, we are. Anyone looking to buy a 2300 sq/ft bung with 1/3 acre in intercity Texas for $360k?

#93 Matt on 06.17.15 at 12:28 am

The Kawartha Lakes area is very nice but what are you gonna do for income? There aren’t many offices or factories there. I guess you could start some kind of business if you have any useful skills.

#94 tkid on 06.17.15 at 12:37 am

Yo Larry! Sell both homes. No more crowing about tenants or employer topups until the houses are sold and you have cash in hand.

Once you have cash in hand then start to make decisions about a new place.

#95 James on 06.17.15 at 1:09 am

@Mark – how is there deflation when ALL of my food costs way more?

#96 Brando on 06.17.15 at 1:09 am

What site/developer?

takla on 06.16.15 at 10:19 pm

B.C construction update from Burnaby b.c..just got word of looming layoffs today,told to stay home a few days and this came up out of the blue,others on crew layed off.Made sense tho as I walked by the condo sales office{crickets} as I was leaving the jobsite and seen the window plastered with “jobsite lean documents”…yup the sales of units have slowed substancially and the general contractor isn’t paying his bills……got the same sick feeling I remember from ’08/01’/’92/’84/’77……..here we go again…

#97 Nagraj on 06.17.15 at 1:23 am

Why is this “Larry” dude (what’s the fem version of dude, doodee?) so unlikeable? 30yrs old (husband and father – like “unique”, eh?) and a million in debt . . . “HAVE PRICK WILL BORROW” is a popular Canadian tv show. And he’s good with his hands, likes to tinker.

Well, Tinker Bell, you’re tinkering in the wrong century in the wrong place. [Please don’t nobody hold me to what follows, I’m not married to this idea, I’m speculating.] WORKING CLASS dudes in Europe understand their position in classist society, they know that upward mobility is a serious problem for them, and they appreciate the force of strength in numbers, unions.
In Canada we deny classism, and so when Joe Labour lucks onto a fat paycheck (for a while) he gets the idea that the sky’s the limit: meet Larry the Landlord!
Enter, stage right, Job Insecurity. Now what?
Gotta move, chase work, sell stuff, scream.

A strong back and a willingness to physically work hard is all well and good – but something else (as well as luck) is wanted to notably upgrade one’s station in life.

This Larry dude thinks he’s rich. And he’s ambitious. Ambitious people, of any class, are just not likeable. Wonder what Larry’s inquiry would’ve been like if the Larry doodee had written it?

The NDP surge in the polls tells me that Canadian society is in the process of reconfiguring its self-image
in a more European, rather than American way.

#98 wallflower on 06.17.15 at 1:34 am

Black flies go around in flocks, silly, not herds; since they are small birds.

#38 Alberta Ed on 06.16.15 at 8:05 pm
Fort Mac is somewhere south of the tundra. It is in the boreal forest, home to the world’s largest blackfly herd (in the summer), and a frigid wasteland in the winter. Take your pick…

#99 PM on 06.17.15 at 2:24 am

Medical and used cars are the only sectors experiencing any statistical relevant amounts of inflation in the US. Will higher interest rates really do squat to either? Will higher rates suppress demand for medical services or used cars?

The changes are small but that’s how it works, small monthly increments add up to a percentage point or two. Or are you doubting the accuracy of their numbers?

#100 juno on 06.17.15 at 3:25 am

That’s right garth, never thought about that. If he was employed, then the company might top it up. But unemployed, good luck with that.

If I had a company in FMac, and had to top up all my employees, Man I can go broke in several months if the market went south. Instead I would CAN everyone so I wouldn’t have to take a hit. That’s crazy to guarantee housing!

#101 Jeff B on 06.17.15 at 3:35 am

“A third of homeowners surveyed said they’d be in financial difficulty if their mortgage payment increased by just 10%.”

The question is too vague. Some people think financial difficulty is (1) not vacationing in Florida that year. Some think it’s (2) giving up their smartphone for a basic landline. Some think it’s (3) living on peanut butter and stale bread for a few months and daily scanning of the community papers for dates of church meals.

#102 Steve French on 06.17.15 at 4:22 am

So I’ve got $70 K just wasting in my savings account. No debt.

I keep waiting for the market correction, but it always seems to be pushed back by these delayed interest rate hikes.

Should I:

A) Keep waiting for the correction, coming in September when Yellen pulls her trigger
B) Shrug shoulders and get into the market through a balanced diversified portfolio as recommended by Sir GT.
C) Tune in, drop out, and head to Vegas to find Smoking Man

#103 Nemesis on 06.17.15 at 5:23 am

“No savings plus a paycheque from a dying sector is the road to lamb chops.”… – HonGT

https://youtu.be/HNTxr2NJHa0

[NoteToGT: Do you have any idea how long I’ve been waiting for an excuse to reference that?]

#104 jess on 06.17.15 at 7:35 am

shadow banking

“capital relief trades.”
http://wallstreetonparade.com/wp-content/uploads/2015/06/OFRbr-2015-04-bank-capital-reflief-trades.pdf

2012 London
Whale case were the result of CDS usage which was
undertaken to obtain regulatory capital relief on positions
in the trading book.
15
A “mismarking fact pattern, with the added gloss of it being done to affect ratios, is a very interesting one to us,” said Osnato,
http://www.bloomberg.com/news/articles/2015-02-18/sec-scrutinizing-bank-efforts-to-comply-with-capital-regulations

#105 TurnerNation on 06.17.15 at 8:30 am

Anyone noticed Shell and Sunoco gas stations seem to be shutting down in Ontario?
Leaving us with Esso and PetroCan?

Typically kontrolled kapitalist Kanadian economy.

Your “choices:”
Tim H or Starbucks
Esso or Petro
Loblaws/Shopper Drug or Sobeys
LCBO or Beer Store
Air Canada or Westjet

#106 Llewelyn on 06.17.15 at 8:41 am

I share Garth’s view on the future of the Canadian oil sands.

Last time I checked Canada’s major customer for all forms of hydrocarbons was under close scrutiny for injecting 5.5 billion metric tons of CO2 into our very fragile biosphere. Responsible governments around the world are introducing legislation to restrict CO2 emissions and there is very little doubt that this legislative trend will gain steam.

All the spin doctors in the world cannot disguise the fact the deliberate burning of hydrocarbons must be curtailed in the future. Technology found a way to create powerful computers the size of a dime do you really think a powerful battery that can be recharged in the time it takes to fill a gas tank is beyond reality.

Humans who change their diet to avoid consumption of minute quantities of chemicals that might affect their health will abandon CO2 generating engines the moment an affordable alternative is introduced.

Think how quickly we banned the use of substances that were proven to be having a short term impact on the ozone layer. Why have we been so slow to accept that a reduction in the injection of CO2 into the atmosphere is essential for the survival of future generations?

I hate to get preachy but there is a word for our current ambivalence about the world we are creating for future generations and that word is selfish.

“lacking consideration for others; concerned chiefly with one’s own personal profit or pleasure”.

#107 Tucker on 06.17.15 at 8:47 am

“You never fuss over paying them back because, like, who the hell can?”

… Impossible to pay off mortgages but it doesn’t matter when prices will go up forever and we can all sell to greater fools.”

Do people actually think this way? I am asking seriously.

#108 davikk on 06.17.15 at 8:55 am

Manufacturing in Canada Sags, Triggers Chilling References to Financial Crisis

http://investmentwatchblog.com/manufacturing-in-canada-sags-triggers-chilling-references-to-financial-crisis/

#109 Rick Smith on 06.17.15 at 9:00 am

To James #95

Food costs are just one of them jumping quite a bit. Our water, utility bill here in Toronto is up 9% to 10% per year since 2004.

Our water, utility bill has almost tripled and we use only 7% more water total in 11 years since then.

Hydro rates, electricity rates are up more than triple too and we only have 12% more consumption since then.

Car insurance is up 50% since 2004 and we don’t have a new car or any claims, accidents.

Our property taxes are up 40% since 2004 and our house insurance is up 38% since 2010.

This is not mention rising or new taxes like garbage fees, doubling of land transfer taxes, health taxes, 8% Ontario sales tax on everything now from gasoline, electricity, heating costs to vitamins, supplements.

Greenspan was talking about deflation since 2003 and it did not materialize but just the opposite, higher inflation and taxes.

#110 Daisy Mae on 06.17.15 at 9:35 am

#5 Raisemyrent: “I remember when I served my time up there. everyone thinks that going to Ft Crack is the road to riches. most people come back with more debt, older, with no assets to speak for, and with a lesser salary to adjust to.”

******************

My son and family spent five years in Fort Mac. He saw the writing on the wall and got out before he became a ‘lifer’.

#111 :):( Ying Yang on 06.17.15 at 9:38 am

#102 Steve French on 06.17.15 at 4:22 am
So I’ve got $70 K just wasting in my savings account. No debt.

I keep waiting for the market correction, but it always seems to be pushed back by these delayed interest rate hikes.

Should I:

A) Keep waiting for the correction, coming in September when Yellen pulls her trigger
B) Shrug shoulders and get into the market through a balanced diversified portfolio as recommended by Sir GT.
C) Tune in, drop out, and head to Vegas to find Smoking Man
…………………………………………….
Steve French you have to pay attention more often to Smoking Mans post. They are not all drunken stupors. He’s staying at the Cromwell at Ceasers, it’s a boutique hotel located on the strip. Small, extravagant, posh, flagrantly opulent. I stayed there once, very expesive, my Prada girlfriend just had to stay there and party upstairs at night. Great nightlift place on the rooftop at Drais. Smoking Man is correct though he is like a fish out of water there. It’s all millennialist, young, wealthy, single, come to Vegas to blow off steam and recharge for there real lives back in SoCal.

#112 Grantmi on 06.17.15 at 9:49 am

Yup. Millennials… 1 year ago: Two brothers working up in Fort Mac.. living the high life with their wife and GF working in their own pluming biz’s. All I heard was – “WOW! Making all kinds of BIG $$$!!”. “Knocking it out of the park!”, “Have all kinds of toys!”, etc, etc.

Update: Just recently returned to Vancouver with their tails between their legs. No money.. back living a Hotel Mom and Dad. etc etc.

Yup! Fort Mac. … all Cotton Candy and Unicorns for anyone that goes!!

#113 gladiator on 06.17.15 at 9:51 am

Smoking Man:
“For a Tue; Vegas is packed. Already a traffic jamb on las Vegas Blvd and its only 5:10.
Us economy looks promising for some.”
———–

Smoking Man, I used to gauge the state of the economy by looking at the parking lot by Yorkdale mall in Toronto on my way home from work. Well, guess what – it’s always full. Does it mean that the economy’s booming? Not really – there is always a segment of population that has enough money to shop there. Better look at the number of small businesses/stores or even the number of “for lease” signs in industrial areas – that’s more indicative of what the economy is doing and right now it is not pretty at all.

#114 aizlynne on 06.17.15 at 10:03 am

Again, Yellen confirms what we already know. 7 years of ZIRP and the economy is barely keeping up. Raise rates = doomed market. Look for BOC to lower rates again once bond market turns. Buy silver / gold for insurance!

Your omedy is always welcome here. — Garth

#115 Prairieboy43 on 06.17.15 at 10:04 am

Calling people a “FOOL”, gets there attention. Who is the greatest fool? …..Anyone? Mike Tyson? Canadians in general?…….Anyone?

#116 Bob's your Uncle on 06.17.15 at 10:36 am

Don’t fret Bob Mugabe has the answer to this scary situation. He would just crash the CAD to over one trillion to the US thereby wiping out all debt. Houses will still hold real value. So just borrow as much as you can and buy property in Vancouver or Toronto. Bob’s your Uncle.

#117 Dup on 06.17.15 at 10:53 am

http://money.cnn.com/2015/06/17/retirement/retirement-run-out-of-money/

#118 Squirrel meat on 06.17.15 at 11:09 am

#63 Josè on 06.16.15 at 9:43 pm

“a paycheque from a dying sector”
————————-
Honeslty Garth, do you really think that the oil & gas industry is dying in Alberta? Or are is it just in a several year slowdown? Especially after the newly elected Gov’t craters (which shouldn’t be too long) the economy and oil recovers?

The oil sands appear to have an unstable future. As far as this guy is concerned, dying. — Garth
————————————————–
So how’s the Harley n Humvee running now that they are solar powered?

Does oil sands crude get refined and pumped in Ontario now? — Garth

#119 Nagraj on 06.17.15 at 11:15 am

#66 Estrella, and
#89 Hawk, mentioned Robespierre.
So here goes:
If he hadn’t executed the Commie atavus Jacques Hebert (Le Pere Duchesne) early on, Hebert could’ve helped him out at the end. The trial of Danton didn’t go well – Robespierre was never forgiven for executing the popular (but utterly venal) Danton. [Robespierre’s amanuensis, the very young and outrageously handsome, and viciously doctrinaire Saint Juste insisted that Desmoulins, whom Robespierre liked, also end up like Danton.] At his last attempt at yet another mass purge of traitors Robespierre was ill, and in the opinion of many, not quite sane anymore.
Robespierre is still an open question. Can I recommend Slavoj Zizek (who’s been mentioned twice before on this blogsite!) on Robespierre’s speeches, and the massive Simon Schama work with its many illustrations.

Those books would help you, Estrella, to avoid romanticizing – and help you, Hawk, to temper your vituperation.

. . . and now back to our regularly scheduled program, How The Trucknutz Fell Off.

#120 Squirrel meat on 06.17.15 at 11:20 am

83 Let them eat cake on 06.16.15 at 11:31 pm

#171 4 AM Sunrise on 06.16.15 at 12:41 pm
#158 bdy sktrn on 06.16.15 at 11:23 am

“..Bread: I’ve watched the price of anything made by Canada Bread or Weston surge by some 50% over the past few years. ….”

Switching to rice will be one of the major lifestyle changes that take place in tough economic times. In developing countries it makes a great staple when accompanied by some meat/veg……will this be the future in Canada….

——————————————-

Not working so well for this Dear Leader.

http://news.nationalpost.com/news/world/north-korea-suffering-worst-drought-in-a-century-as-30-per-cent-of-its-rice-paddies-dry-up

#121 box-in-sky-renter on 06.17.15 at 11:39 am

#57 – Gladiator & Garth’s comment

“…The company surveyed a mess of people with mortgages and found that four in ten are trying to accelerate debt repayment. That’s cool, except it means they’re shovelling more money into equity at a time when debt has never been cheaper, and at the expense of saving or investing…”
________________________________________

Garth, while your financial insight/advice is nothing less than outstanding, I also notice this trend of contradicting yourself with respect to this one point.
a) When the discussion is around NOT paying down debt, you trash people for not taking this low-rate environment opportunity to more quickly pay down debt.
b) When the discussion is about making extra payments on low cost loans you trash people for not investing it instead and earning higher returns.

Now, I realize there are many factors to consider and to balance effectively, such as a persons actual net worth vs age, rule of 90, liquid/non-liquid assets, income level, short/long term financial plans, interest rate spread between debt/investments, etc., but as a general rule which is it…..

Pay down low-cost debt and deleverage quicker, or pay nothing on low-cost debt and invest to take advantage of the rate spread?

It can’t be good one day, then bad the next. It’s not black or white, so how do you navigate the grey?

As I clearly stated, in this environment net worth is more quickly built by investing and making a lump sum payment upon renewing a mortgage rather than accelerating monthly payments, and investing nothing. This strategy also yields more diversification, hence less risk. — Garth

#122 sentry on 06.17.15 at 11:39 am

Johann #55 It was a much different world then.You could go to Canada Manpower and work a high paying job in any number of industries and quit the next day and go to get another,and another…… very different times then.New rules now ,including the “houses go up forever”myth,employee loyalty,12% interest for saving accounts and saving for purchases. I so miss those times.

#123 bdy sktrn on 06.17.15 at 11:42 am

Last time I checked Canada’s major customer for all forms of hydrocarbons was under close scrutiny for injecting 5.5 billion metric tons of CO2 into our very fragile biosphere. Responsible governments around the world are introducing legislation to restrict CO2 emissions and there is very little doubt that this legislative trend will gain steam.

All the spin doctors in the world cannot disguise the fact the deliberate burning of hydrocarbons must be curtailed in the future. Technology found a way to create powerful computers the size of a dime do you really think a powerful battery that can be recharged in the time it takes to fill a gas tank is beyond reality.

Humans who change their diet to avoid consumption of minute quantities of chemicals that might affect their health will abandon CO2 generating engines the moment an affordable alternative is introduced.

Think how quickly we banned the use of substances that were proven to be having a short term impact on the ozone layer. Why have we been so slow to accept that a reduction in the injection of CO2 into the atmosphere is essential for the survival of future generations? …

———————————–
i hope you feel guilty for your selfishness.

and even more so for suggesting batteries will make a difference. are they to be charged by hamster wheel?
do you understand anything about energy and where it comes from?

hydrocarbons oil will continue to be human’s primary energy source until long after we are all dead. fusion is the only source that will challenge this. period. it will take about 100 years.

germany has spent untold billions on alt power and since it can produce about 20% of rated capacity, coal use has shot back up, esp since nuclear is verboten.

the “survival of future gens” having anything to do with CO2 is a concept that exists in the minds of the ‘enviro doomers’ and has nothing to do with reality.

rest assured al gore and david suzuki will continue to fly around the globe regularly and keep their multilpe mansions heated and well lit. i hope you feel guilt for this too.

also ‘canada’s big customer’ is increasing it’s hc fuel use at a rapid pace (far greater than canada could supply, even if we shipped every last drop produced here), barring another gfc, this will continue.

#124 Drill Baby Drill on 06.17.15 at 11:45 am

” Oilsands are Dead”
Hardly, there is getting to be too much hyperbole on this blog. One of the largest technological investments upcoming for Alberta will be the measurement, analysis, treatment and control of emissions. Please remember Canada produces less than 2% of all global GHG emissions. This includes the enormous pollution of the great lakes and St. Lawrence seaway systems. Oh and do not forget the Grassy Narrows waterway.

#125 Mike on 06.17.15 at 11:54 am

If a private company decided to build airport in FtMac they’d be already bankrupt.

WHO IS THE PERSON THAT MADE DECISION TO BUILD IT?
IS HE/SHE PROMOTED?

Probably! Planing new government malinvestments.

#126 ed on 06.17.15 at 11:54 am

Vancouver Island, Nanaimo? Really?
Rural areas–Well, you could live in Errington (“Scarington”) and watch your neighbours drag stolen boats through your yard Or there is Cedar, where you can reminisce with your “retired” Hell’s Angels neighbours about the hits they were once part of. Then there’s Nanaimo. Just read the Times Colonist for a sample of the inbred, redneck base that ‘s still going strong–anti-Chinese racism, sexual assault, and a plethora of “gardeners” growing “completely natural, harmless, herbs that nature intended us to smoke.” The island makes Fort Mac look as cosmopolitan as New York.

#127 ponerology on 06.17.15 at 11:55 am

About the job loss thing: I’m surprised that more people don’t have job loss insurance which typically covers 6 months of mortgage payments to buy you time to either find a new job or get out the best you can.
Not sure the product great value, but banks sure like to sell it.

Of course the pre-stipulation is you have to qualify for and receive EI payments in order to collect it and that could be the problem…

#128 Holy Crap Wheres The Tylenol on 06.17.15 at 12:00 pm

#113 gladiator on 06.17.15 at 9:51 am

Smoking Man:
“For a Tue; Vegas is packed. Already a traffic jamb on las Vegas Blvd and its only 5:10.
Us economy looks promising for some.”
———–

Smoking Man, I used to gauge the state of the economy by looking at the parking lot by Yorkdale mall in Toronto on my way home from work. Well, guess what – it’s always full. Does it mean that the economy’s booming? Not really – there is always a segment of population that has enough money to shop there. Better look at the number of small businesses/stores or even the number of “for lease” signs in industrial areas – that’s more indicative of what the economy is doing and right now it is not pretty at all
_____________________________________________

Yep not a gauge at all. Lived in Florida when I was teenager and we were in the Greater St. Petersburg area. Always busy at malls and diners, old money! I mean old money, the place was rampant with the elderly retirees who always had money to spend. Recession, drought, war, apocalypse didn’t matter. That is where the sunset specials came from! Mind you they weren’t purchasing hot corvettes but more like Caddies and Lincolns. A new car every two years!

#129 Squirrel meat on 06.17.15 at 12:07 pm

#117 Squirrel meat on 06.17.15 at 11:09 am

#63 Josè on 06.16.15 at 9:43 pm

“a paycheque from a dying sector”
————————-
Honeslty Garth, do you really think that the oil & gas industry is dying in Alberta? Or are is it just in a several year slowdown? Especially after the newly elected Gov’t craters (which shouldn’t be too long) the economy and oil recovers?

The oil sands appear to have an unstable future. As far as this guy is concerned, dying. — Garth
————————————————–
So how’s the Harley n Humvee running now that they are solar powered?

Does oil sands crude get refined and pumped in Ontario now? — Garth
—————————————
Shame that it isn’t. How are yer electrical rates doing there?

#130 Apocalypse2015 on 06.17.15 at 12:11 pm

It’s shaping up to be a summer from hell.

Environmental crises are popping up everywhere and will soon trigger or coincide with political and military forces combined with the evident global economic chaos we are just barely staving off.

Drought in North Korea – will they attack the south?

Drought in California, Alberta and the Midwest – what will become of our food supply?

Greece about to default, maybe take up arms with Putin.

Manufacturing weakening across our continent.

More Russian aggression likely around Ukraine.

Xenophobia and racism stoked by people like Trump will undermine American domestic stability.

Renewed terrorist attacks highly likely this summer, including in Canada.

Real estate and general economic meltdown taking hold across Canada.

Epic weeks ahead folks.

Watch it all on cable (but you better install an HD antenna), in the basement, with your emergency kit and food at your side and a month’s supply of water.

What happened to the Epic Weeks you promised us six months ago? You tease. — Garth

#131 Squirrel meat on 06.17.15 at 12:24 pm

#130 Apocalypse2015 on 06.17.15 at 12:11 pm

It’s shaping up to be a summer from hell.

Environmental crises are popping up everywhere and will soon trigger or coincide with political and military forces combined with the evident global economic chaos we are just barely staving off.

Drought in North Korea – will they attack the south?

Drought in California, Alberta and the Midwest – what will become of our food supply?

Greece about to default, maybe take up arms with Putin.

Manufacturing weakening across our continent.

More Russian aggression likely around Ukraine.

Xenophobia and racism stoked by people like Trump will undermine American domestic stability.

Renewed terrorist attacks highly likely this summer, including in Canada.

Real estate and general economic meltdown taking hold across Canada.

Epic weeks ahead folks.

Watch it all on cable (but you better install an HD antenna), in the basement, with your emergency kit and food at your side and a month’s supply of water.

What happened to the Epic Weeks you promised us six months ago? You tease. — Garth
—————————————————–

One of these days you’ll get it right…

https://www.youtube.com/watch?v=izQB2-Kmiic

#132 bdy sktrn on 06.17.15 at 12:25 pm

FedEx (FDX) shares are lower in early trading. The package delivery company reported a slight miss on both its top and bottom lines in its fiscal fourth quarter.
—————————————-
this is about the only indicator you need.

next gdp print to be flat.

#133 millenial1982 on 06.17.15 at 12:30 pm

What’s your thoughts on the 0% financing loans for new vehicles Garth? How do they offer a loan like this….is it built into the purchase price? I’m sure that’s how this one was purchased.

#134 pinstripe on 06.17.15 at 12:33 pm

In the Alberta heartland industrial area, a contractor purchased additional heavy equipment in feb/15 in preparation for abig job starting mid may/15. Job was cancelled. Last week he was busy hauling all that equipment to the auction market. Sold everything.

Thetalk in the coffee shop brings the latest happening in the area. The best news is at the 7 AM sitting. the oldest news is at the 230 pm sitting. I miss that sitting due to my afternoon snooze.

#135 Squirrel meat on 06.17.15 at 12:38 pm

#106 Llewelyn on 06.17.15 at 8:41 am

I share Garth’s view on the future of the Canadian oil sands.

Last time I checked Canada’s major customer for all forms of hydrocarbons was under close scrutiny for injecting 5.5 billion metric tons of CO2 into our very fragile biosphere. Responsible governments around the world are introducing legislation to restrict CO2 emissions and there is very little doubt that this legislative trend will gain steam.

All the spin doctors in the world cannot disguise the fact the deliberate burning of hydrocarbons must be curtailed in the future. Technology found a way to create powerful computers the size of a dime do you really think a powerful battery that can be recharged in the time it takes to fill a gas tank is beyond reality.

Humans who change their diet to avoid consumption of minute quantities of chemicals that might affect their health will abandon CO2 generating engines the moment an affordable alternative is introduced.

Think how quickly we banned the use of substances that were proven to be having a short term impact on the ozone layer. Why have we been so slow to accept that a reduction in the injection of CO2 into the atmosphere is essential for the survival of future generations?

I hate to get preachy but there is a word for our current ambivalence about the world we are creating for future generations and that word is selfish.

“lacking consideration for others; concerned chiefly with one’s own personal profit or pleasure”.
—————————————————
Hydrocarbons have lifted millions upon millions upon millions from poverty. The world will need to find a path forward, but the power and wealth inherent to hydrocarbons is what will make that happen. Your selfish preachiness is silly.

Care to be the hamster powering your electric generator?

#136 bdy sktrn on 06.17.15 at 12:40 pm

Watch it all on cable (but you better install an HD antenna), in the basement, with your emergency kit and food at your side and a month’s supply of water.

What happened to the Epic Weeks you promised us six months ago? You tease. — Garth
—————————
now ‘THAT’ is a doomer.

FYI in many urban locations an unbent paper clip will pull in local hd channels for free. old rabbit ears work too as long as line of sight is clear.

#137 cowtown cowboy on 06.17.15 at 12:46 pm

Update…well both houses in my neighborhood sold within a week or two, one for 600k the other around 725k, can’t really explain the large discrepancy…another neighbor has just started a large reno, ~300k to rip off his roof and add another room as well as push the house out at the back..he’s got a great lot so it’s probably cheaper than buying new…

on that note, I looked at a showhome on the weekend, down the street in the Aspen neighborhood, basically the same house I have, but just with bigger rooms all around, but a smaller yard than mine…1.7mil…..unbelievable..and of course there was a couple with a young kid in tow having a look, and the wife was cooing away saying how she loved it, and was just what she wanted, and asking their little one if she thought it was ‘home’, to which of course she replied YES!..

#138 S.Bby on 06.17.15 at 12:59 pm

First there was the bike lanes and the mass yoga flop and now this…
They just can’t leave the Burrard Street bridge alone:

http://www.cbc.ca/news/canada/british-columbia/burrard-bridge-petition-would-turn-city-landmark-into-a-pride-rainbow-1.3116079?cmp=rss

#139 retired Boomer - WI on 06.17.15 at 1:11 pm

So, does all this “happy talk” mean the financial crisis is really in the rearview mirror, and that we can now look forward to the next financial crisis when bankers, or lawmakers go into full head-up-rearend mode?

Transport indices are down and trending that way – leading indicator of economic activity.

So, where comes the “reserve” in interest rates when the economy falters wide? We just sit back and let it run its course i guess. Maybe pick up a few good holdings when the sheep sell off in a panic! Always works!

This time it’s different….never true

#140 bdy sktrn on 06.17.15 at 1:16 pm

#108 davikk on 06.17.15 at 8:55 am
Manufacturing in Canada Sags, Triggers Chilling References to Financial Crisis

http://investmentwatchblog.com/manufacturing-in-canada-sags-triggers-chilling-references-to-financial-crisis/
————————
+1

pretty much screams out flat to weakening growth ahead.

auntie J remains ‘data dependent’ , the data could easily blow her sails to the lee side yet.

#141 Has anyone seen this? on 06.17.15 at 1:22 pm

http://www.theprovince.com/business/Reports+point+fingers+over+driving+Metro+Vancouver/11141419/story.html

#142 S.Bby on 06.17.15 at 1:24 pm

#77 takla
Condo construction around Metrotown is going gangbusters. Lots of SFH being built too. We are running out of teardowns, so now the good older houses are being bought by developers and are being torn down to make way for new mansions. A decent house about 25 years old was just sold and demolished up the street from me. There is way too much money around.

#143 Keith in Calgary on 06.17.15 at 1:41 pm

#133 millenial 1982

That is correct.

When you buy a new vehicle you are often given the choice of either receiving a REBATE for a cash purchase to lower the final price, or the option of zero %, or reduced rate financing, but at a higher purchase price as you then forgo the rebate, which is commonly valued at close to the potential total amount of the interest differential between the subvented rate and the actual cost of funds.

Having said that, there are many ways for zero percent financing to occur, and in some cases an auto maker will take an internal loss just to move dead inventory by offering this rate, and even stackable rebates, and special invoice prices, and free accessories, extended warranties, etc, etc…..to get you on the hook.

Part of the reason for the sales growth of Asian vehicles the last decade has been ZIRP in Japan. When Toyota Corp in Japan can get money at 0.25 % for example, and in Canada GM might have to pay 2.45%, they already have a huge competitive advantage in being able to undercut their competitor on financing terms, and the amount of the rebate they give, or loss they book.

#144 Bill Gable on 06.17.15 at 2:02 pm

Noted by a few of the Blog Dogs – FOOD price inflation – is exploding.

Steak at $34 a kilo – same size package, smaller contents, etc, etc. Wait until California drought really hits, – the state provides 25% of our food.
NOT GOOD, pal.

The other thing I have noticed is wage stagnation.
I have friends who are a few years away from hanging them up, and they have NOT seen a raise in a couple of years.

The common thread is DEBT.
Mr. Turner just showed us a stark example in today’s post, about what awaits the indebted.

Well – it might be tough on a thirty year old – but what if you are 63, and all the money is a “my million dollar house”?

#145 Van Island on 06.17.15 at 2:07 pm

If you’re thinking of moving here before you retire, bring money. This place isn’t cheap to buy in, and there are not a whole lot of high-paying jobs.
The ace card is climate. Most of this country is barely liveable 4 months ofthe year. My wife says, “You can do anything you want to outside just about every day of the year.” Want winter? Drive to it in a few hours, enjoy, go back home.
And btw, the rainfall is less than half of Vancouver despite what Toronto tv weather dweebs tell you.

#146 Joe2.0 on 06.17.15 at 2:10 pm

The FED can’t raise the rates without a serious derivitive meltdown.
To much debt connected through the wizardy of the financials.
But, one day it will happen.
Suggest a inverse hedge against Russell 1000.

Stocks down precious metals up.
Economic melt down starts this Sept.

#147 Matt Gamon on 06.17.15 at 2:13 pm

I know that Garth doesn’t make up these letters from blog readers, but I suspect the senders are just playing with him. These are hoax emails.

#148 TurnerNation on 06.17.15 at 2:33 pm

Yellen says conditions for first rate hike not yet met.
Will Blog Dog Poloz bark first?

#149 raisemyrent on 06.17.15 at 2:39 pm

overheard a co-worker is going to go see houses in walnut grove near langley bc (near vancouver bc). 300-400k.
let’s go with 350k in a mortgage at 5 years 25 years amort 4%, some assumptions…
monthly would be 1800 as per rbc, with interest in the first 5 years of 62 ($1,000 a month!), and $200k throughout the mortgage.
he said he was looking there because ‘that’s what’s in their price range”.
I hope when he says price range he is allowing for 200k in interest for a 350k house in the bush. a small 2 bedroom in the area will go for less than 1,000 btw.

someone talks about real estate every day at work. I’m sure you can all relate.
he also mentioned less than a million in passing which implies mortgage insurance which implies less than 20% down. they moved here from nova scotia. was that really their dream? this is a young father of 3 just trying to do what he thinks is right.
if cmhc didn’t exist I wouldn’t care though…

#150 bdy sktrn on 06.17.15 at 2:50 pm

Just chatted w the neighbour I mentioned last week who is going to list his old timer unrenoed comm drive shack and float up the sunshine coast with his big bag ‘o loot.

the listing showed up a couple days ago online, no sign in front yet, tomorrow is realtors only open.

the drive-bys are already starting , he says.
ask is 1.1. he will get 1.25-1.3

last sale 1 bk away, ask 899, just sold 1.05 for a 50% smaller lot and small house.

you can count the days on market on one hand.

The infill guys can’t work fast enough.

#151 Godth on 06.17.15 at 3:02 pm

Letter To The Millennials
https://medium.com/@jonathantaplin/letter-to-the-millennials-f90a5fb3b366

Sleeping Through a Revolution
https://medium.com/@jonathantaplin/sleeping-through-a-revolution-8c4b147463e5

“Something is rotten in Michigan”
http://www.salon.com/2015/06/12/something_is_rotten_in_michigan_poisoned_water_supplied_dissolved_school_districts_and_a_massive_unraveling_of_american_democracy_partner/

We need more austerity in Canada…

#152 bdy sktrn on 06.17.15 at 3:04 pm

comparing 4 yrs ago to today’s solds in east van near the drive

a renoed nice house 33′; then 1.1 now 1.65+
a tired old timer 33′; then 900k now 1.25
smaller lot (25 and less); then sub 800 now 1.1

and this is before the new hospital moves in next door.

tax free just like 6/49.

#153 Iconoclast on 06.17.15 at 3:05 pm

#48 Andrew Woburn

The US banks were indeed insolvent, not just illiquid, under longstanding accounting rules. The assets they held were worth a fraction of their book value. Maybe, one day, they would have recovered some value, but at the time they were fooked.

Fortunately for them, they were able to change the longstanding mark-to-market rules and then sell off the impaired assets at more or less book value ultimately to the Fed. These are now part of the Fed’s many trillions in “assets”.

In Canada, the $150BN worth or mortgages were not impaired, but they were a risk and were taken off the books of the banks to keep them smelling nice.

#154 Julia on 06.17.15 at 3:06 pm

#133 millenial 1982
What’s your thoughts on the 0% financing loans for new vehicles Garth? How do they offer a loan like this….is it built into the purchase price? I’m sure that’s how this one was purchased.

—————————–

Usually are since you can get a cash discount when not financing.

#155 Mark on 06.17.15 at 3:14 pm

“What’s your thoughts on the 0% financing loans for new vehicles Garth? How do they offer a loan like this….is it built into the purchase price? I’m sure that’s how this one was purchased.”

There’s no such thing as “0% financing”. They simply charge you more for the vehicle up-front (ie: a significant discount is effectively fore-gone) in favour of the financing being made available. Its basically a salesman’s trick.

In a nutshell, a typical car loan for someone who qualifies for the “0%” costs between 4-6%/annum “at the bank”. So if you compute the NPV of the difference in interest expenses over the life of the car loan, you can compute the sort of discount you’re fore-going. This is a starting point for negotiating the cash price down at the dealer. Which is probably a good idea if you can obtain a HELOC @ prime (2.85%), or a margin loan against your portfolio for even less if you shop around (ie: one broker goes lower than prime – 1%!!).

#156 Mark on 06.17.15 at 3:20 pm

“The changes are small but that’s how it works, small monthly increments add up to a percentage point or two. Or are you doubting the accuracy of their numbers?”

I don’t have a problem with the BLS numbers. I was simply challenging the efficacy of trying to use monetary policy to fix a structural problem in the US economy, to wit: medical costs spiralling out of control in an industry which is characterized by conspiracy in restraint of trade, and excessive government interference/subsidy.

The rest of the US economy seems to be relatively comatose. Growth is elusive. If they raise policy rates into such an environment, they’ll have a real problem on their hands. Yet if they don’t get the inflation in those specific severely inflating sectors under control, they have a problem as well. The US economy needs structural reform, not monetary policy, to get it back on track, and evidence is scant that there was any meaningful reform in wake of the 2008-2009 disaster.

#157 Bottoms_Up on 06.17.15 at 3:34 pm

I’m cool with homeowners not including mortgage debt as ‘debt’ much like a renter doesn’t include monthly rent payments as debt, or property tax payments as debt.

These are all recurring expenses, there is no way to avoid these unless you live in an alley, or until that time you pay off the mortgage. Additionally, most people have positive equity, and therefore the house is an asset worth at least as much as the debt.

Someone that pays $1000/mo in rent still has a $420,000 ‘roof over my head’ debt to pay over the next 35 years. And there is no asset backing that, and it will be a forever debt (much like property tax).

#158 Bottoms_Up on 06.17.15 at 3:36 pm

#154 Julia on 06.17.15 at 3:06 pm
——————————————-
Someone worked out the numbers awhile ago on this blog regarding the cash purchase vs. 0% finance, and yes they make money on the purchase price differential between the two options.

#159 Millenial on 06.17.15 at 3:37 pm

hmm… the Fed didn’t raise interest rates. Not sure what they’re waiting for: unemployment rate in the US is 5.4%, right? If they hesitate to raise rates even a quarter percent what does that really mean?

Nobody expected a rate increase today. — Garth

#160 Tamsen on 06.17.15 at 3:39 pm

“Conditions for rate hike not yet achieved …” Watching Yellen dance around ever-elusive rate hike …

#161 vancouver Island is a dump on 06.17.15 at 3:47 pm

#126 Ed is correct

Nanaimo is a dump. Village people. Ruled by Hells Angels. On Vancouver Island, you will need help if you dont bring cash. People there hold onto any job for dear life. Chances are the persons at Burger King were given a high level interview just to get the job. And the culture. What culture? Let’s just say it is totally bizarre. I did anything and everything to get off that island. It should be renamed Alcatraz.

#162 zee on 06.17.15 at 3:58 pm

Hi
Feds not raising rates this year as you have been saying for the last few months.

Read this. — Garth

#163 May Tan on 06.17.15 at 4:02 pm

The Liberals have a Hate Harper ad running where the pretender Trudeau suggests doling out $2500 p/a to people who have ‘foregone paying down debt to pay for their children’s education fund’ . I have to ask why the Libs will support people so stupid to have dug themselves into unsupportable debt in the first place? Is this proposed policy another dig at savers and a play for votes among the greedy specuvestors who have piled into bubble zone real estate?

#164 waiting on the westcoast on 06.17.15 at 5:18 pm

#145 Van Island on 06.17.15 at 2:07 pm
“If you’re thinking of moving here before you retire, bring money. This place isn’t cheap to buy in, and there are not a whole lot of high-paying jobs.
The ace card is climate. Most of this country is barely liveable 4 months ofthe year. My wife says, “You can do anything you want to outside just about every day of the year.” Want winter? Drive to it in a few hours, enjoy, go back home.
And btw, the rainfall is less than half of Vancouver despite what Toronto tv weather dweebs tell you.”

Please never post this again. You have unwound months of effort brainwashing my house horny spouse from not buying in Victoria… ;-)

#165 saskatoon on 06.17.15 at 5:19 pm

#49 Ron

at least garth and the zeroguy agree on one thing in this article:

“There is no possible way that this is going to end well.”

– Tyler Durden

#166 waiting on the westcoast on 06.17.15 at 5:21 pm

#143 Keith in Calgary on 06.17.15 at 1:41 pm
“Part of the reason for the sales growth of Asian vehicles the last decade has been ZIRP in Japan. When Toyota Corp in Japan can get money at 0.25 % for example, and in Canada GM might have to pay 2.45%, they already have a huge competitive advantage in being able to undercut their competitor on financing terms, and the amount of the rebate they give, or loss they book.”

So why does it seem that most of the discounted deals are domestic vehicles….?

#167 Squirrel meat on 06.17.15 at 5:23 pm

#161 vancouver Island is a dump on 06.17.15 at 3:47 pm

#126 Ed is correct

Nanaimo is a dump. Village people. Ruled by Hells Angels. On Vancouver Island, you will need help if you dont bring cash. People there hold onto any job for dear life. Chances are the persons at Burger King were given a high level interview just to get the job. And the culture. What culture? Let’s just say it is totally bizarre. I did anything and everything to get off that island. It should be renamed Alcatraz.

——————————

Nanaimo has an annual bathtub race.. what more do you want.

http://bathtubbing.com/

#168 Josh in Calgary on 06.17.15 at 6:19 pm

#143 Keith in Calgary,
You’re absolutely right. I went to buy my last vehicle with their “low rate” financing. I asked the price of a cash deal and they immediately knocked off about 6%. The “low rate” financing is built into the cost.

#165 waiting on the westcoast,
Domestics are “discounted” the most because they just inflate their sticker price to match the imports (who have to pay transportation, duty, etc.). They can then offer huge “discounts” so the buyer feels they are getting a deal. Nobody likes to pay full price. So the dealers just mark up the MSRP so everyone can get a discount and brag about how they negotiated the dealership down. Meanwhile the sales person and the sales manager do a high five when you’re out the door.

#169 pacific portobello on 06.17.15 at 7:00 pm

But that’s just the writer in me.

What’s wrong with Van Heusen anyway.. I love those clothes.
————————————-

Nothing.

#170 Rainclouds on 06.18.15 at 11:54 am

“100 basis points per year………….., the general rule that Yellen offered us is this. Whatever the size of the principal amount you owe, multiply it by one per cent. And for every year until the U.S. economy and U.S. inflation get back to normal, add that amount to your yearly payment.”

http://www.cbc.ca/news/business/fed-chair-yellen-tells-canadian-homeowners-to-watch-out-don-pittis-1.3117599

#90 keith

Read a great article profiling Pattison CEO and former NDP Premier Glen Clarke.
” What advise would you give your friends in the NDP” ?

Clarke “learn MUCH more about business!

#171 Ram on 06.18.15 at 12:18 pm

Garth what do you say to this story – given ur stance that prop mkts are driven by domestic demand. I understand that this is a US story, however if this happens in US what prevents it from Canada?

http://www.ft.com/intl/cms/s/0/351606a8-159b-11e5-be54-00144feabdc0.html#axzz3dGJd7Zh2

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/351606a8-159b-11e5-be54-00144feabdc0.html#ixzz3dQnXLdAb

Chinese are now by far the biggest foreign buyers of US real estate in terms of units, dollar volume and price paid, according to a report from the National Association of Realtors, which tracks property purchases across the country.
In the 12 months to the end of March, Chinese buyers spent $28.6bn on mostly residential property in the US, a 30 per cent increase from the previous year and more than two and a half times the amount spent by Canadians, the next biggest group of foreign buyers.