Scary

SCARY modified

Sarah is 36, lives on the coast, and is confused. Scared, even.

“As a woman in a terrifying investment world, living in a ridiculous city I am finding that I need to educate myself in how to deal with the money that I have. I’m starting to look at my choices and am overwhelmed with confusion on where I am going with finances,” she writes me. “I know that now is the time to get things sorted. I’ve approached my bank twice and have not felt properly guided or any more knowledgeable. Unfortunately my parents are entirely financially illiterate, actually I would say 99% of those in my life have that problem.”

Sarah may not be totally cognizant of the reasons, but she sure gets the vibes. It’s a time of change. As usual, that brings danger and opportunity. Old beliefs break down. Conventional wisdom’s proven wrong. What looked safe, isn’t. A hallmark of changing times is when everyone looks back and says together, ‘how did I not see that coming?’

One of the biggest changes in 2015 will be the beginning of the end of cheap money. For almost a decade now it has fueled asset bubbles that have come to look normal. Beater houses in the shadow of a Toronto sewage treatment planning selling for a million. Stock markets recording record highs month after month. Household debt bloating even as the economy and jobs shrink. Detached properties in urban YVR averaging over $2 million.

Just as Sarah becomes aware she needs to manage her savings, the landscape is shifting. As the cost of money rises over the next few years, amid economic torpor, logic tells us the bubbles cannot last. Those who peddle cheap debt or a one-asset strategy (like the people at the bank) will end as merchants of failure.

So, how will this unfold?

Here’s what we know. The US central bank’s chair, Janet Yellen, has said as clearly as she’s allowed that rates will rise this year. A big deal. It’s been ten years since this happened. No wonder she has telegraphed it so often and so clearly, because so many just don’t want to believe it.

When will this ascent begin? The Fed has its next rate-review meeting this week, on Tuesday and Wednesday, and while there’s an outside change the trigger could be pulled then, it’s doubtful. Here’s why:

FED1

This is the schedule of Fed meetings remaining in 2015. You will note only two end in media conferences (September 17 and December 16) and the release of an economic statement. Given the global significance of this rate increase, and the impact it’ll have on at least the next five years, it’s hard to imagine it will be made without a full explanation and briefing. That makes the third week in September the likely go-date.

(Remember what a higher Fed rate will do to our already-pummelled currency, after the Bank of Canada moved in the opposite direction earlier this month. This event will happen just five weeks prior to the scheduled Canadian federal election. Would you, as prime minister, want to spend a month explaining the currency collapse? Or would you call the election for the week after Labour Day? Be ready.)

We also know this: a few days ago there was a Fed leak, which made public the projections for the US economy and rate increases that had been prepared for Yellen by her bureaucrats. There is no guarantee this will come to pass, but it paints a likely scenario of what to expect:

FED PROJECTIONS

Hmm. What does this tell us? First, US central bankers expect slow-growth and low-inflation with to dominate for the next half-decade. Not great news for Canada, since we flog 80% of our stuff to Americans. Second, these guys are expecting one rate increase this year (a quarter point), then a jump of almost 1% next year, another 1% (almost) in 2017, and for rates to be 3% higher by 2020 – five years hence. Meanwhile you can expect that the bond market will follow a similar path, on both sides of the border. Plus the Bank of Canada has aped Fed rate decisions 97% of the time over the past 25 years, so we assume similar.

Bottom line: a five-year mortgage on a crap Vancouver Special secured at 2.4% in 2015 could easily face renewal  north of 5%. So if house prices are perfectly (negatively) correlated to interest rates – as we have seen proven since 2009 – it means Canadian real estate has only one direction in which to travel. Meanwhile the oil price collapse, fallout from tumbling commodity prices in general, poor job prospects and the debt orgy among your colleagues and relatives are engendering economic fear. This is what sea change is made of.

So Sarah can (a) ignore it and buy a condo, (b) go to the bank and be sold a dangerous Canadian equity fund and a market-linked GIC, (c) huddle in cash and make nothing or (d) embrace a balanced and diversified approach. Not too many eggs in any basket. Not too much exposure to Canada. Defensive and offensive. Global. Rational.

She’s right. It is scary. If the little hairs on the back of your neck aren’t stiff, you’re not paying attention. But you soon will.

167 comments ↓

#1 janet yelling on 07.26.15 at 2:55 pm

fuurst

#2 Broke Dick on 07.26.15 at 3:06 pm

Beater houses in the shadow of a Toronto sewage treatment planning selling for a million. -G

Hey Smokey, Longbranch got a plug!

#3 Herf on 07.26.15 at 3:06 pm

Garth,

I’m confused – the Fed projections chart shows forecast increasing U.S. inflation, yet you state the following:

“First, US central bankers expect slow-growth and low-inflation with to dominate for the next half-decade.”

Please clarify.

#4 Sanj on 07.26.15 at 3:07 pm

Great post today.

I live in Vancouver and my sister-in-law is moving out of her Olympic Village condo that she was renting for $1400 for the last two years (One Bedroom, 480 Sq feet). Her neighbor told her that there was a rent bidding war on her place when it became active and the winning rental bid was $1750/month.

The crazy folk are starting to act in a ridiculous manner towards rentals now…

#5 Jack Stall on 07.26.15 at 3:11 pm

Don’t count on rates following the US rate hikes….even if they come. Our Clown Prince Poloz is determined to turn a generation of Canadian youth into prostitutes, strippers and shoe shine boys. He keep his boot on the neck of the Canadian dollar until we’re at par with the Mexican Peso. There will be no increase in Canadian rates.

Last night I heard the BC politicians say they’ll do nothing to stand off the real estate bubble. The low dollar will encourage foreigners to out bid Canadian families out of their dream of homeownership. Wouldn’t it be nice to hold Chinese Yuan and USD when the CDN Peso is worthless? You’ll get 40% off what any Canadian has to pay.

Remember last time we say a 60 cent dollar….kids started pushing rickshaws….drug crime skyrocketed….we saw an explosion of unemployment and homelessness that has become a fixture of our society today….a cheap dollar doesn’t make our country more competitive…it cheapens our national pride.

“As a woman in a terrifying investment world, living in a ridiculous city I am finding that I need to educate myself in how to deal with the money that I have. I’m starting to look at my choices and am overwhelmed with confusion on where I am going with finances,”

Honey…you certainly don’t want to start paying ‘advisor fee’s that increase faster than your net worth. You got it right in the first sentence…”educate yourself”….keep your money in cash until you’ve read every book in the business section of local library.

Suggesting a young person stay frozen in the headlights is bizarre advice. — Garth

#6 mitzerboy aka queencity kid on 07.26.15 at 3:24 pm

another puppy story

If you pick up a starving dog and make him prosperous,
he will not bite you.
That is the difference between dog and man.

– Mark Twain

#7 sam on 07.26.15 at 3:25 pm

http://online.barrons.com/articles/canadian-subprime-lender-comes-up-short-1437805136

#8 TurnerNation on 07.26.15 at 3:34 pm

Bark to the future.

#9 Brydle604 on 07.26.15 at 3:35 pm

On the other hand, some say Ostriches are the happiest birds on the planet…..

Avoid Garth s advice at your own peril!

#10 pinstripe on 07.26.15 at 3:38 pm

the policies of free money is a total failure, not pnly in Canada but worldwide.

harpo will do anything to win the next election so that he can cover his tracks ands blame someone else for his actions for betraying Canadians. even if harpo has to count the ballots himself, he demands a WIN.

the debt load created by harpo, his buddy polozie, and the master carnage, will make most Canadians poorer than they ever dreamed. the debt that was created by harpo and his free money policies will force a massive increase in tax. everyone will pay maore and get less.

OTOH, those with NO debt and money in the jar will be picking up bargains like never before.

nothing has changed from the depression of the ’30s. rinse and repeat.

#11 Retired Boomer - WI on 07.26.15 at 3:38 pm

One thing about 5 year projections I CAN tell you with certainty. They never reflect reality 5 years later. Ask the old Soviet Union. Look at inflation / deflation, economic booms AND economic busts. Never believe a 5 year plan.

While we are at it, I never expect to see the same returns for 5 years, either. Sure, you might a year or three of above average returns, then oil goes to hell… and regression to the mean for the portfolio. Like, I was expecting something different?? Every year is different.

Yeah a BIG .25 goose in 2015 rates. Devastating? Nope…

#12 cd on 07.26.15 at 3:41 pm

for Sarah there is always option e) move far away from Vancouver. There are places out there in Canada and US that one can live very well and for a fraction of the cost of van city. Also, in these places since you aren’t spending all of their money on housing, you can spend it on other stuff or even save it.

#13 Chris on 07.26.15 at 3:51 pm

The only thing worse than a devalued national currency is a volatile national currency. Just like inflation is bad. Because when currency exchabge rate changes too much too fast nobody waNTS to hold assets in that currency. It will destroy the economy. Who would buy something at $1.00 when it may be only worth 80 cents tomorrow.

#14 Freedom First on 07.26.15 at 3:52 pm

Sarah. Your fear is understandable. You are not alone, as many feel the same way.

A suggestion. Do your research to find an independent financial adviser, one not linked to selling you anything but their knowledge. Start off by letting them invest half of your cash for you in a liquid, diversified, and balanced portfolio. When you are relaxed and confident, you will be able to go deeper. This method has helped many people overcome the fear that really acts as a paralysis.
Good luck, and good on you for being able to drown out the noise of the illiterates who surround you.

#15 jeb on 07.26.15 at 4:09 pm

$500 trillion in interest rates derivatives…

All with claims on the same collateral.

When rates go up, somethings gotta give.

#16 Love my Kia on 07.26.15 at 4:10 pm

This conspiracy theorist is willing to bet on an early election as well.

Post secondary students are fresh from their moves from home to school and in many cases to another city, and may not have the required documentation yet needed to vote. This obviously boosts Harper’s chances at re-election.

Thanks a lot Fair Elections Act.

#17 TRT on 07.26.15 at 4:43 pm

‘Inversely’ correlated. Not perfectly (negative)

#18 Nora Lenderby on 07.26.15 at 4:58 pm

#5 Jack Stall on 07.26.15 at 3:11 pm
“…
Honey…you certainly don’t want to start paying ‘advisor fee’s that increase faster than your net worth. You got it right in the first sentence…”educate yourself”….keep your money in cash until you’ve read every book in the business section of local library.”

That sounds a bit patronizing. And it could take a while. Although the delay will keep her in cash for a bit longer.

Also there are quite a few popular “Make Money from Real-estate” and “Wealthy Barber” type books that aren’t really much use except as entertainment (firelighters, anyway – although the Librarian might have your innards as festive garlands if you do this).

How about “A Random Walk Down Wall Street” for a start? It’s been around a while and has been updated in many editions. Or “Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School.”

#19 omg the original on 07.26.15 at 4:59 pm

For almost a decade now it has fueled asset bubbles that have come to look normal.
——————-

And since the early 1990s we have had steadily decreasing interest rates.

This has resulted in a “once in a lifetime” appreciation of houses all over the developed world – be it the UK, US or Australia.

The price of real estate in the early 2000s was excessive given long-run income to house price averages. Now in places like Canada its into mega-delusional bubble territory.

I, nor anyone else can say when, but we will be seeing a long-term decline in RE across the country – even in markets that seem well priced now. 10, 15, 20 years from now you will be buying a house for 30, 40 or 50 cents on the dollar versus today (in real dollar terms).

Oh, except you say, thing are different this time.

OK – then go for it – load up on mortgage debt and ignore history.

#20 omg the original on 07.26.15 at 5:03 pm

Her neighbor told her that there was a rent bidding war on her place when it became active and the winning rental bid was $1750/month.
————————

Anyone remember “key money” in Toronto in the late 1980s.

People would sell the right to rent the apartment they were moving out of – some of the payments were serious money – $10 to $15K.

#21 Terrifying? on 07.26.15 at 5:04 pm

“As a woman in a terrifying investment world, living in a ridiculous city …..

Being chased by a lion or bear is terrifying, choosing a basket of ETFs though? Come now, surely you jest. I’m not sure how gender or the financial literacy of family and friends enters the equation either if the submission is from someone with any sense of personal responsibility.

Educate yourself and roll the bones, pay someone else to do it, or leave the money in a “high interest savings account” aka your mattress. There you go, terror dispelled and all for free. I’m sure that Freedom First might have more to say on the topic.

As for the 5% interest rates, one can only hope. The “monthly” will be the same for all of the saps waiting to buy in YVR but it might silence the wailing and gnashing of teeth from the savers.

#22 JO on 07.26.15 at 5:07 pm

The Fed is the WORST economic forecaster out there. They are in a class of their own. Completely useless.

The U.S. Economy is the only economy holding up the world for now. If the Fed raises, and I think they will eventually, it will be due to 2 reasons: they are scared of having no room to cut and know the next battle will be much worse than 08, and they will be blamed by politicians and I increasingly the public for a U.S. Stock bubble that will probably get much bigger into h1 2017 before it too collapses and succumbs to the bond market crash that will overtake the world over the next 3-5 yes
RE will be wiped
JO

#23 S.Bby on 07.26.15 at 5:08 pm

#4 Sanj
More realtor propaganda.

#24 omg the original on 07.26.15 at 5:10 pm

Herf on 07.26.15 at 3:06 pm

Garth,

I’m confused – the Fed projections chart shows forecast increasing U.S. inflation, yet you state the following:

“First, US central bankers expect slow-growth and low-inflation with to dominate for the next half-decade.”
————————————–

First of all – remember the only thing you can bank on with a forecast is that it will be wrong and if it is by chance correct………..its exactly that, correct simply by chance.

The fed is banking on sub 2% inflation – that’s about what its been for the last 20 years………so lets expect that into the future they say.

If the inflation rate goes above that they will change their forecast to be higher and everyone will forget they were wrong on the previous forecast.

That’s how we economist roll.

And thank god people are so short memoried to realize it.

#25 Obvious Truth on 07.26.15 at 5:14 pm

Way to go Sarah. It’s as good a time to start as any. Read lots. Ask dozens.

Garth has outlined the model. Don’t settle for anything less!

#26 Cyclist on 07.26.15 at 5:23 pm

Now that’s a kitty!

#27 Londoner on 07.26.15 at 5:23 pm

(d) embrace a balanced and diversified approach. Not too many eggs in any basket.

I couldn’t agree with this statement more.

I can’t say much about real estate as I was too young to remember the 80’s/90’s corrections. I hear what you’re saying about prices. It seems logical but I just don’t know. All I can see is what happened with real estate prices in London and how many SFHs have been converted into multi-family dwellings (flats). Yeah, yeah – I know Toronto isn’t London and all that but maybe it doesn’t have to be. Maybe it just has to represent the same thing: concentration of jobs, wealth and opportunities. Time will tell I suppose.

#28 Flamen Lupanares on 07.26.15 at 5:47 pm

Smoking Man is John McAfee of McAfee antivirus fame. I just had to desconspire him…

#29 no inflation on 07.26.15 at 5:48 pm

I buy organic food, mainly because I love my kids. Today one gallon of milk 9$; 3pounds apples 7.49$; 375 grams of bacon 6.49$. Compared to last year: 8.29$ milk, 6$ apples and 5$ bacon. All organic or free run from loblaw/superstore. Plus the packaging is smaller. Even regular bacon is packed in 375 gm and not 500 gm but the price is the same. No inflation my a$$.

#30 ILoveCharts on 07.26.15 at 5:51 pm

Will US utility company stocks go down with higher interest rates?

#31 Tim on 07.26.15 at 5:58 pm

Which stocks do well at this point in the cycle? I don’t want to buy the banks because of the real estate risk and the drop in deal in the oil industry.

Unless you have a big pile of money, don’t buy any individual stocks. Buy the indices. I have given suggested weightings and exposures. — Garth

#32 xman on 07.26.15 at 6:15 pm

Put everything into USD$ and hold steady for the coming crash.

The crash you made up? — Garth

#33 Frank on 07.26.15 at 6:18 pm

Buy the indices. I have given suggested weightings and exposures.

You should sticky a link to a separate article off your main blog for this portfolio. Newcomers to the blog ask it a lot (I did too). You don’t have to list specific funds, just some possible portfolio mixes for different investor profiles.

#34 nonplused on 07.26.15 at 6:34 pm

“Our Clown Prince Poloz is determined to turn a generation of Canadian youth into prostitutes, strippers and shoe shine boys.”

What’s wrong with shoe shine boys? And I’d rather do business with a prostitute than a politician any day! Either way you get screwed out of all your money but one industry is much more concerned about customer satisfaction than the other.

#35 sideline sitter on 07.26.15 at 6:35 pm

I have a balanced and diversified portfolio, but I think it’s done nothing this year…

If it protected you, that’s something. — Garth

#36 Randy Randerson on 07.26.15 at 6:43 pm

Easy portfolio weighing is 60/40 equities/bonds split. VCN, VXC and VAB are all you really need. KEEP IT SIMPLE STUPID.

#37 Nagraj on 07.26.15 at 6:47 pm

Hot diggity dog! Everybody’s jes so friggin smart, knowledgable, well-informed, savant, savvy and clever EXCEPT me an’ ANOTHERSTABBINGINSASKATOON [blogdog what got bit in the balls by a mastiff, he says].

Especially them there governators is especially with it. “We budgeted fer ninety dollar oil.” Hoo haw. “We’s budgetin fer sixty dollar oil.” Double hoo haw. And “It’s only a technical Recession.” And “The worst is over.” OMG.
Big honkin’ pension fund mgr to his boy Friday: “Mary, how many o’ them there junk sands tar bonds we got?” “Lots, sir.”
Toll lanes. Toll LANES? One thing to have a toll hiway inna Tronna, quite another to split the 401 and Gardiner into 1st class and 2nd class lanes. Granny Wynne’s already put the NDP in first place in Ont polls, oh so with it, eh?

Best of all tho, CENTRAL PLANNERS at the central banks, FORECASTING the future with confidence right up to Judgment Day for which no doubt they have a fixed date in mind. Hokus pokus vidibus/ hokus pokus Hexenschuss.

Beatles: “All the lonely people, where do they all come from?”
Canadian governance: “All the stupid people, where do they all come from?”

#38 Smoking Man on 07.26.15 at 6:48 pm

One of my partners from Nectonite, RIP Ashman….

Tail whites got him….

https://youtu.be/jOE2ptqOjVo

#39 Steve French on 07.26.15 at 6:49 pm

#21 Terrifying?

Go out in the world and take your chances…

“…and roll the bones”

Yesssssss sweet RUSH RULEZ!

https://www.youtube.com/watch?v=v9P6SFp_BFE

#40 John on 07.26.15 at 6:59 pm

And, then there is Ben Bernanke who observed that interest rates would not normalize in his lifetime. And, then there’s Christine LaGarde, IMF head, who recently suggested that interest rates should not go up as economies were too weak. And, then there’s the folk swho have lines of credit on their houses with variable rates looking like sitting ducks. And, then will the Canadian twonie be worth a loonie? And all of that pile of paper in whatever file might be looking @ basically, .50$ on the dollar. Food and gas prices up; net worth crunched. Ontario government debt payments will spike and their sticky palms will empty our wallets. Dunno, maybe we need more puppy stories.

Rates can, and will, increase without spiking. Too many people think in extremes. Fogs the brain. – Garth

#41 crowdedelevatorfartz on 07.26.15 at 7:12 pm

@#38 Smoking man

Yo smokey!
Where do i get me one of them “underwater 4wd trucks”?

#42 MSM-Free Zone on 07.26.15 at 7:14 pm

“….Would you, as prime minister, want to spend a month explaining the currency collapse?……”
_________________________

Given his track record of snubbing the media, snubbing first ministers conferences, snubbing question period, snubbing the Supreme Court, snubbing televised election debates, muzzling Chief Electoral Officer investigations, muzzling Canadian scientists and shredding truckloads of documents, muzzling Access to Information requests, and muzzling his own backbenchers, I seriously doubt there will be any ‘explaining’ to Canadians about anything.

Stephen Harper……just not ready (to tell the truth).

#43 John on 07.26.15 at 7:20 pm

Rates will not spike. Agree. Lots of fog brains will head to the panic rooms and the taper tantrum will start spanking stuff.

#44 shawn on 07.26.15 at 7:21 pm

Canada’s Soft Labour Market?

Mark said (the other day):

Its in the obviously dramatically weakening (from an already chronically weak) labour market.

***************************************
Well if the labour market is weak (which I am not sure about) then yes, it is chronic. The unemployment rate among those of labour force age who are actually working or actively looking for a job is 6.8%. (You are not unemployed if you are not working but are not bothering to look for a job, you are just probably lazy)

I have been paying attention to that number since I was in high school circa 1975.

I don’t have the figures but I believe it may have been a somewhat lower than 6.8% in 1975. By about 1980 it was in double digits as I recall and stayed there a long time. It certainly stayed above 8% for a LONG time.

I would guess the average has been about 7 to 8% since 1980. In my experience 6.8% is on the low end of the official unemployment range for Canada.

So if anyone is holding their breath for 5%, forget it.

And yes people can natter on about the “real” figure and all that. But does anyone have actual Stats Canada data that suggests that 6.8% is weak by the standard’s of the last forty years?

#45 John on 07.26.15 at 7:25 pm

Likely our puny loonie will look a little defeathered. So how much is that family benefit cheque hike really going to help? $15/day daycare? How will that tab get paid? Joe O already took it in the ear with $1B deficit call before the ink was dry on the paper. Good post Garth. Gets folks thinking.

#46 Tim on 07.26.15 at 7:28 pm

Unless you have a big pile of money, don’t buy any individual stocks. Buy the indices. I have given suggested weightings and exposures. — Garth

Half a million should be enough for individual stocks.

I don’t want to buy the TSX with my cash account because it will be dragged down by oil stocks and bank stocks no?

#47 WallOfWorry on 07.26.15 at 7:30 pm

Garth….you must be smoking crack if you think that mortgage rates will be at 5% within the next 3 years.
With such low GDP and the US government debt, there is no shot that the US could absorb the rate increases. I thought that you had a little more on the ball??

I said five years, not three. And, yes, it will be so. — Garth

#48 Waterloo Resident on 07.26.15 at 7:34 pm

Here is a few hints to anyone who wants to save a bit of money:

1 – If you see something at the store and you want to buy it, first wait 3 or 4 days and think about it. After 4 days, if you still feel you want it or need it, then go ahead and buy it. Most ‘impulse’ buys are not really needed, and if you wait a few days before buying, that urge to buy goes away and you save thousands each year this way.

2 – If you want to buy a used car, you better buy one within the next few months because pickings are going to get real slim soon. You see; people buy NEW cars when they feel the economy is great. With the housing booming in Ontario everyone feels great. So there is quite a lot of new cars sold and lots of used cars available. When the recession starts to take hold and house prices start to fall with the increasing interest rates, very few new cars are going to be purchased and as a result there won’t be very many USED cars available for sale on the used car market. So if you want used for some odd reason, and don’t want to pick up a new car bargain (2015 Elantra’s are currently being given away for only $14,000 + taxes / fees.), then you better buy now because in 2 years people are going to be holding on to their old cars with a death grip.

As for buying a house? Are you nuts? Forget it.

————
Now here is some financial humor (this is a financial blog after all):

It is a slow day in the small Colorado town of Pumphandle and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.

The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.

No one produced anything.

No one earned anything…

However, the whole town is now out of debt and now looks to the future
with a lot more optimism.

And that, ladies and gentlemen, is how a “stimulus package” works.

#49 KW on 07.26.15 at 7:36 pm

Check out the top line in both of the following data tables from the Bank of Canada:

Latest household credit numbers for Canada (to the end of June, 2015):

http://credit.bankofcanada.ca/householdcredit

Latest business credit numbers for Canada (to the end of June, 2015):

http://credit.bankofcanada.ca/businesscredit

#50 Amanda Stainer on 07.26.15 at 7:41 pm

So if real estate will not appreciate much, fall probably, mortgage rates be 5%, interest rates on government bonds will be 4.00% then I will just continue renting, save my $2,000 a month, RRSP’s and TFSA’s and get higher rates on that money down the road.

It just seems strange though that interest will rise but inflation will be lower. This seems not likely.

#51 Rattatat on 07.26.15 at 7:56 pm

Is there too little upside and too much risk in VAB vs. VSB at this point? If the boc pull the miraculously stupid and cuts rates, it’ll only be .25% but the chart above shows the potential(likely) uptick.
Timing the markets is a losing game, I agree, but isn’t this point too obvious to dismiss?

#52 BS on 07.26.15 at 7:59 pm

I buy organic food, mainly because I love my kids. Today one gallon of milk 9$; 3pounds apples 7.49$; 375 grams of bacon 6.49$.

You are wasting your money. Organic does not mean healthy. You will not find a less healthy food to feed your kids than bacon organic or not. Zero nutritional value but full of fat, salt and processing chemicals. Organic just means they treat the pigs better. Doesn’t help your kids any. Milk is a little better but still not good for you unless it is skim. At least you got some apples. If it was about healthy eating you would be far better off with non-organic food but choose something healthier than bacon and milk.

#53 Mister Obvious on 07.26.15 at 8:07 pm

Assume the Fed rate announcement of Sept 17 is likely to be a bombshell and the PM wishes to have the Canadian election over by then.

In that case, Monday, Sept 14 is a likely election date. By law, the election campaign must last at least 37 days. To fulfill that requirement the writ must be dropped before Aug 8th.

But, the way I hear it, it’s in the conservative party’s best interests to have a longer campaign because then they can legally spend more money. Money which is sorely lacking in both the opposition camps. That suggests Harper must get on with it very quickly.

But even if he does wait until Aug 8th to visit the governor general he will succeed only in moving the existing ‘mandated’ election date about a month earlier.

That would be an extremely transparent action likely to unmask the fearful face behind it. It would be too little too late. If the PM was going to pull an early election, last May probably would have been the time.

That ship has now sailed.

#54 nonplused on 07.26.15 at 8:07 pm

“Too many people think in extremes. Fogs the brain. – Garth”

Yup. But I don’t think it’s preventable. Why are people afraid of little spiders or snakes? My cat will eat a small cobra, the cobra doesn’t have a chance once the cat gets on his back. Don’t believe me? Youtube it. Cats can kill sizeable snakes and hate them. Cats have something snakes don’t: bouncy legs with claws.

But anyway I digress. Our minds are one cloudy image after another. “Seeing through a glass, darkly”. The worst mistake every single one of you (and me) makes is we think upon seeing something darkly we understand it. Well guess what we don’t. The universe appears to be 13.5 billion light years across from our vantage point (and it’s probably bigger we just can’t see it) yet people read a book that says the world is only 6500 years old and conclude Adam and Eve road around on dinosaurs with saddles.

We see things very darkly indeed.

I like insects as an example. Yes a vicious and cruel lot, but they don’t have the brains to contemplate the morality of laying their eggs in another living creature. Some of them even manage to fly about with a brain the size of a pin head or smaller. Oh sure they hit the window now and again, but they are no worse for wear and off the go with their tiny brains.

Well, we are like that too. Our brains are way to tiny to understand the challenges we face, so we just bounce off the odd window and hopefully it all works out.

Some insects are so small it’s hard to imagine they have a brain. But yet there they go. They can walk and everything.

So back to my peeve of the day (week, month, year), creationists. Oh sure I can’t explain the big bang or really side with it maybe dog created the whole universe at once and it’s steady-state. But really? Every scientist since science agrees that the world is very old, and the universe even older. But you know better? Because you worship a book?

If people can’t even get that right how do we expect them to get economics?

The fact is people do and believe what their parents taught them to believe often at the point of violence.

There is no Santa, or Easter bunny, or free lunch.

Good luck out there my fellow fruit flies. You are bumping in to all sorts of things you don’t understand but hopefully you end up with a meal and a mate (who doesn’t make a meal out of you, although the Mantis, Black Widow, and Human Female all do.)

#55 Wall Of Worry on 07.26.15 at 8:09 pm

#47…Garth, if mortgage rates are at 2.5% for a five year fixed and rise by .25 this year, then another full 1 % over the next two years, that takes you pretty much to 5% in 2.5 years? You have been talking about the US raising rates for over a year now. I agree that they will be forced to raise rates by .25 this year but book mark this entry for I will guarantee you that you will see QE4 before you see a further 2% increase in interest rates.

#56 Smoking Man on 07.26.15 at 8:11 pm

#41 crowdedelevatorfartz on 07.26.15 at 7:12 pm
@#38 Smoking man

Yo smokey!
Where do i get me one of them “underwater 4wd trucks”?
…….

Same place you get an orange glow personal plasma flyer, sorry, it’s classified…

#57 Ret on 07.26.15 at 8:11 pm

#43
It just seems strange though that interest will rise but inflation will be lower. This seems not likely.

Perhaps the thinking is that as people have to pay more to service their debt, there will be fewer dollars to fuel inflation.

#58 Ret on 07.26.15 at 8:12 pm

sorry, #50 not #43

#59 Kreditanstalt on 07.26.15 at 8:17 pm

No “inflation”??

Isn’t this about HOUSE PRICES? Paper asset prices? And what about food, college costs, transportation, utilities, collectibles, bond prices, taxes, medical expenses…?

“No inflation”?

Puzzling how all these central planners are unable to see any inflation – or spot any bubbles. They even deny there ARE any bubbles.

Must be their Keynesian goggles.

#60 wazup on 07.26.15 at 8:22 pm

“The fed is banking on sub 2% inflation – that’s about what its been for the last 20 years………so lets expect that into the future they say.”

they practically need tweezers to pick up my croissant at the bakery but yeah it’s still the same price, haha

#61 Raj on 07.26.15 at 8:27 pm

everytime I have the urge to go surfing on MLS I always come here to break the urge.

Thanks Big G!

#62 Keith in Calgary on 07.26.15 at 8:47 pm

My sister who lives in Pembroke, Ontario finally sold her house after being on the market for almost two years.

She started at $229K…..went down to $219K…….$209K…….$199K and they accepted an offer of $187K which got wound back to $180K due to the home inspection. It closes Thursday and she is packing as we speak.

Moral if the story, “if” you need to use a realtor to sell a property (and you don’t) don’t take the one who gives you the highest listing price like she did.

Price it below “ALL” the comps in your area on day one.

#63 gut check on 07.26.15 at 9:18 pm

@ Keith in Calgay –

Trouble with that theory is this: unless you ARE a realtor, you cannot POSSIBLY know the comps in your area.

You ask for them, you get a hand picked selection of SOME of them. I’ve been looking to buy but have decided to wait until people start choking to death on their own greed. Eff’em all. The realtors need to start handing over proper information.

I hope they all end up having to get real jobs. soon.

#64 Mister Obvious on 07.26.15 at 9:19 pm

#48 Waterloo Resident

“However, the whole town is now out of debt and now looks to the future with a lot more optimism.”
—————————-

Funny. It made me think a bit.

The $100 ‘stimulus’ wasn’t necessary. All that was necessary was for each party to ‘forgive’ the debt of the next. Unlike the real world, no one was ever in any debt that required the fruits of new production to repay.

I think maybe Greece was trying to pull off something like that. Of course, the difference is that nobody owes Greece anything.

#65 lee on 07.26.15 at 9:28 pm

I know you all can do math but if rates double and prices go in the opposite direction then someone with a million dollar home today with twenty percent down will see a 3750$ a month payment on their mortgage go to about 7000$ a month in five years if their mortgage goes from 800000$ to 700000$. My guess is the property won’t be worth 800000$ at those rates. Do people know what they are getting themselves into? This is in addition to increases in realty taxes, insurance, heat, hydro (did you see the hydro bill this month), cable. Etc. Enjoy it while it winds down. Ms Yellen is Yellen but noones listenin.

#66 Joe2.0 on 07.26.15 at 9:29 pm

The elephant in the room.
Derivitives.
When that word goes mainstream, sell.

#67 Yonder yearner on 07.26.15 at 9:56 pm

Garth thanks for the wonderful and touching puppy chow article the other day….however in order to be politically correct and not offend anyone, you will now have to write an article about cats, budgies, gerbils, Mike Tyson’s tiger and whatever other zany pet people might have.

On a more practical note, and given the plummeting loonie, it would be interesting to hear your views on retirement locations in Canada other than the usual Vancouver Island locales. Especially with you knowledge of the Maritimes, you may know some secret locations with affordable real estate…..let me get the discussion started, why does no one ever retire in Cape Breton????

#68 Ronaldo on 07.26.15 at 10:00 pm

#44 Shawn – re: labour market

See below link. The average unemployment rate from 1966 to 2015 has been 7.73% so it would seem that we are not doing so badly 6.8%.

http://www.tradingeconomics.com/canada/unemployment-rate

#69 Bottoms_Up on 07.26.15 at 10:09 pm

Good insight Garth on the meeting minutes and press release. I think you’re off on Harper calling the election early, he has been adamant it is a fixed election date, i think he’s confirmed this twice in the past year. To back pedal on it now would clearly show he lied. That is likely worse than having to discuss the CAN dollar.

#70 Smoking Man on 07.26.15 at 10:11 pm

One thing you should all know, wasn’t publicized that much, last week Obumer appointed a dude to the FED.

Very Concerned about the high dollar..

Watch magically Yellen to stop yelling.

You heard it first here…

From non other than Dr Smoking Man.

#71 WallOfWorry on 07.26.15 at 10:14 pm

#66…derivatives….totally agree! It is something that Garth would never open his mind to….however, as he has pointed out….the bond market will burst the bubble…but the Fed will do anything to protect the 19 Trillion in US debt, so something has to give?

#72 Bottoms_Up on 07.26.15 at 10:21 pm

#52 BS on 07.26.15 at 7:59 pm
———————————
Agreed, nutritional content of organic and non-organic food has been analyzed and it’s a mixed bag. If someone is trying to avoid pesticides, sure there are certain foods buying organic could help reduce exposure (grapes, apples etc.) but we have solid regulations on pesticides and food consumption is safe. Kinda like buying bottled water vs. drinking tap water. Hey, it’s your money.

#73 Leo Trollstoy on 07.26.15 at 10:21 pm

Exact date of Fed hike irrelevant. It’s coming. You’re either prepared, or it will run you over.

CAD, gold, miners, deflation are all in retreat. As has been correctly predicted by Garth for months.

What will be interesting entertainment is watching the BoC speak after the Fed starts hiking. Now THAT will be fun to watch.

#74 Bottoms_Up on 07.26.15 at 10:35 pm

#45 John on 07.26.15 at 7:25 pm
———————————–
The government spends 290 billion a year. 1 billion is a rounding error as they say.

15/day daycare would do wonders for the economy, young families would have more money to spend, and more parents could more easily chose to be part of the workforce.

#75 WileE on 07.26.15 at 10:36 pm

54 nonplused

Stick to economics , your animal examples are really off…

I’ll take the Cobra over the Cat in a heart beat.

And about the Book , Creation , and stupid people, why did Isaac Newton (scientist and Biblical Scholar) and Albert Eistein (who bumped into the theory of Relativity) both believe in God??

#76 Ms. E on 07.26.15 at 10:40 pm

How sad it is to see most of my friends and relatives own houses and are in debt so much more than they earn at this time of the economy. (some are new comers in Canada) and I don’t want to be in the same situation as them. I’m only 24 and people think of me as crazy for worrying about finances so much.

I am educating myself but I feel pressured already with all the news and I have no idea where to start. hehe

but I opened a self directed investing account. But knowing how to diversify and how to start is stressing me out (seriously I ‘m confused on how I would start) since I am just new here too. But I’m trying and reading so much as i can.

Any tips for NEWBIES?

#77 Shawn on 07.26.15 at 10:41 pm

Yep, 6.8% unemployment is an excellent Job Market

#68 Ronaldo on 07.26.15 at 10:00 pm said:

#44 Shawn – re: labour market

See below link. The average unemployment rate from 1966 to 2015 has been 7.73% so it would seem that we are not doing so badly 6.8%.

http://www.tradingeconomics.com/canada/unemployment-rate

******************************************
Thank you Ronaldo your link confirms my memory that anything below 8% is lower than average going back to 1980.

Post 1980, Unemployment only hit lower than 6.8% briefly around 2007.

An unemployment rate of 6.8% is a fairly strong job market if looked at in the context of the past 35 years.

But, yeah if you want to look at the 1950’s and 1960’s 6.8% in that context is weak.

#78 Balamut on 07.26.15 at 10:42 pm

Unfortunately… So far i chose the “c” option as I have no idea on where to begin searching on investing the money… Have no even the most basic idea on how this works… Is there an informational website to begin with, on how the option “d” works?….

#79 Bob Santarossa on 07.26.15 at 10:42 pm

Love your verve and tenacity Garth. I think this Friday (GDP Report) and the Friday after that (Labour Force Survey) will tell the truth of where we are headed. I believe you about interest rates headed up, that is a no brainer.

The economic shock that will make this an ugly recession will be the loss of jobs. We all know when companies see profits go down, jobs will start to disappear:

-May 2015 Operating Profits Report at -6%.
-End of July 2015 EI is up to 3%.
-May 2015 Wholesale Sales at -1%.
-May 2015 Building Permits at -14.5%.
-Mid July 2015 Investment in Non-Residential Building Construction at -0.8%.
-May 2015 Trade Balance at -$3.3 billion.

BTW Garth, someone is listening to you:

-May 2015 Canadian Investment in Foreign Securities at +$5.6 billion.
-May 2015 Foreign Investment in Canadian Securities at -$5.6 billion.

Job losses will do us in this fall/winter before interest rates do. When you have no money to make a mortgage payment, real estate will begin to devalue as people try to get out of their homes by selling at any price – just like they did in the early 1980s and is happening now as #62 Keith in Calgary gives an example of.

It will get much worse in Alberta and in the rest of Canada:

May 19, 2015 Globe & Mail, “Large job losses in Canada expected this year as energy sector shrinks: study” estimated at 185,000 direct/indirect job losses and not restricted to Alberta only.

It is job losses that will do us in. The rate increases to come will bury us.

#80 Bob Santarossa on 07.26.15 at 10:51 pm

My bad, -May 2015 Foreign Investment in Canadian Securities at -$5.4 billion not -$5.6 billion.

One more thing, the last GDP report was -0.1% for April 2015. The last Jobs report was -6,400 in June 2015, 2 months apart (GDP 2 months before Jobs report).

This tells you that May/June 2015 will probably be negative (slightly?). Most likely, we are in recession.

#81 Bottoms_Up on 07.26.15 at 10:52 pm

#16 Love my Kia on 07.26.15 at 4:10 pm
—————————————-
A recent poll showed students do vote in decent proportion for conservatives. The fair elections act essentially retains the ability to vouch for someone (must take an oath) but does remove the voter card. But shouldn’t people have ID anyway, so removing the ability to use the voting card is not that big a problem?

#82 Food Dude on 07.26.15 at 10:52 pm

@ #52+#72
Here’s an interesting read.

http://vegetablepharm.blogspot.ca

#83 Musty Basement Dweller on 07.26.15 at 11:11 pm

It seems very likely based on past history that Canadian interest rates will follow US ones.
But can anyone comment on what is the real reason Canadian rates have always followed the US?
I am wondering what the likelihood is of the past not equalling the future in this case.

#84 Frank on 07.26.15 at 11:13 pm

Exact date of Fed hike irrelevant. It’s coming. You’re either prepared, or it will run you over.

I think the thing some people take issue with is that it’s “been coming” for almost a decade now and the people that borrowed recklessly as, at this point, the ones ahead with a massively appreciated, highly-leveraged asset.

Incorrect. U.S. rates were not seriously anticipated to increase until quantitative easing ended – which was last October. — Garth

#85 Keith in Calgary on 07.26.15 at 11:20 pm

Going to our place in Rio de Janeiro next week for a holiday. Going to spend a week there, and then a week in Natal, which is a city of 1MM in the north east of Brasil, situated right at the very easternmost most point of the country.

Really nice 900′ two bedroom beachfront condos there can be had for R$200,000 +/-…….about $80K CAD.

$80K CAD……….the thieves that work in the home building industry want that much for a parking pad and a nice two car garage here in YYC.

My ticket on United cost me $1,900 about 2 months ago…….so today I was searching for my next holiday (probably in January or Feb) and figured why not go to Greece ? I haven’t been there since the 80’s and the wife is just dying to go………….the airline ticket, and 3 weeks in a really nice hotel on the coast in Athens was $1,900…………..the ticket, and 3 weeks hotel accomodations.

I had to double check, so I logged out and back in again and sure enough $1,900 – $2,100 was the average.

Poor Newfies who work in Fort MacMurray have to ay that much just to fly back to St. Johns……….

I hope this entire country goes BK.

#86 Cici on 07.26.15 at 11:20 pm

#5 Jack Stall

I know you have good intentions, but the best way to learn about the market is to play in it. A few good reads is a good way to get down some theory, but you’ll never good a real grasp on how things work until you start trading.

I recommend she read a couple of good books or some good articles on the diversified approach, and if she has enough set aside to make it worthwhile, that she find an advisor that she can trust who will explain his/her investment approach and help educate her in the process.

If she only has a small amount in savings, she should go back and read Garth’s advice on a balanced approach, and start accumulating assets surely and steadily on a monthly or quarterly basis using a portion of those savings and a monthly amount calculated into her budget (say 15% of her take home). Once that amount has grown, she can find a successful and trustworthy adviser (a Garth type ;-) who has more knowledge about the economy and market, and will help her achieve better returns.

#87 Nosty, etc. on 07.26.15 at 11:24 pm

#70 Smoking Man on 07.26.15 at 10:11 pm — “Watch magically Yellen to stop yelling.”

And these — What Is The TTIP?, 23 mass murders under Obama and 53:02 clip Agenda 21 in China. Gotta start somewhere with a global dictatorship! Is there a similarity thread running through here?

#88 When will Canada post strike? on 07.26.15 at 11:41 pm

I’m sure we will be seeing Canada post workers striking and the teachers and government under worked employees. Low dollar costs go up they can’t manage they need more cash of course while small business like mine is screwed can’t raise my rates otherwise I loose the business I have, plus I will have to pay higher postage because Good grief if I used that new fangled thing called email I will get a 1,000,000 dollar fine!!!! So while my hands are tied and I got rules up the wazoo they got their hand out! Well sorry I got nothing left!!! screw canaduh I will give the advantages of my business to the modern world! And yeah when is Casl going to fine a non Canadian the ones we really are angry with over junk email! Yeah never because they are toothless and they know it!

#89 Josh in Calgary on 07.26.15 at 11:44 pm

#76 Ms. E on 07.26.15 at 10:40 pm,
I know the bank I have a self directed account has model portfolios that are pretty decent. You pick your risk tolerance and away you go. Make sure to go with the ETF portfolio.

If you listen to Garth you should have about 40% in fixed income (bonds and preferred shares). These have lower volatility and just pay you income or a dividend.

You can then have 60% in equities. 20 in Canada, 20 in USA and 20 in international. These are a rough starting point, you might want a little more U.S. And a little less canada at the moment.

#90 Lukas on 07.27.15 at 12:03 am

Guarantee won’t see 5% on 5 year fixed mortgages for at least years…

#91 Kreditanstalt on 07.27.15 at 12:11 am

“…Garth I think this Friday (GDP Report) and the Friday after that (Labour Force Survey) will tell the truth of where we are headed. I believe you about interest rates headed up, that is a no brainer. The economic shock that will make this an ugly recession will be the loss of jobs.”

Some incongruity there, not? How can rates rise in a recession?

We will see not only ZIRP for years but lower and lower credit standards…

#92 omg the original on 07.27.15 at 12:15 am

84 Frank

I think the thing some people take issue with is that it’s “been coming” for almost a decade now and the people that borrowed recklessly as, at this point, the ones ahead with a massively appreciated, highly-leveraged asset.

Incorrect. U.S. rates were not seriously anticipated to increase until quantitative easing ended – which was last October. — Garth

————-

Yep Frank, you are right, but its actually only been about 5 years.

For pretty much every forecaster of note the Fed would be “raising rates starting next year”.

That refrain started in 2010.

It goes to show that economists simply cannot forecast – its just pure chance when we get it right.

But now to say rates will stay at emergency levels forever is to ignore the only real forecasting tool we have – which is long-run history.

Whether the Fed starts raising rates in September, January 2016 or May 2017, is anyones’ guess (and guessing it is).

But for people think they will be paying 2.5% on your mortgage and 3.75% on their line of credit is just stupid.

#93 NOTHING SURPRISES on 07.27.15 at 12:44 am

The information put forth by Garth is well needed and some remarks from the blog dogs are relevant and informative.

I have been reading this blog for years watching real estate escalate beyond reason and agreeing with Garth’s diversification premise.

Perhaps we should also be aware of a very major fact that would put all these discussions into the realm of small stuff and that is the certainty that a breakdown of our electrical system and way of life is going to occur from an overdue solar flare (last major one was in 1859) or by a coordinated terrorist attack on the US electrical system.
Only nine(9) major substations destroyed at one time out of many thousands required could cause an 18 month shut-down of the US complete grid.

A station was shut down in California in April 2013 by terrorists who were never caught. The practice run.

Think about life without electricity for a very long period before you go to bed some night and you perhaps may not sleep soundly.

This event will happen.

Two or three years ago I stated major unrest in the middle east would complicate our lives and President Obama and the US. Do you think this may have happened?

Mark this blog on your calendar and my input of this date and let us see when the above comes to fruition.

Real estate may become less important along with the way we now invest and survive.

#94 Well actually on 07.27.15 at 12:49 am

“Albert Eistein (who bumped into the theory of Relativity) both believe in God??”

Einstein did not believe in God.

http://www.theguardian.com/science/2008/may/12/peopleinscience.religion

“The word god is for me nothing more than the expression and product of human weaknesses, the Bible a collection of honourable, but still primitive legends which are nevertheless pretty childish. No interpretation no matter how subtle can (for me) change this.”

[…]

“For me the Jewish religion like all others is an incarnation of the most childish superstitions.”

Believe whatever you like, but please stop defaming Einstein.

#95 kommykim on 07.27.15 at 12:54 am

RE: #41 crowdedelevatorfartz on 07.26.15 at 7:12 pm
Where do i get me one of them “underwater 4wd trucks”?

Off the end of a pier is a good place to look.

#96 kommykim on 07.27.15 at 1:10 am

RE: #75 WileE on 07.26.15 at 10:36 pm
Albert Eistein (who bumped into the theory of Relativity) both believe in God??

No he did NOT. He was at most an agnostic.

#97 BS on 07.27.15 at 2:12 am

CMHC loosening lending standards to allow for rental income to count at 100%. Are 40 year amortizations coming back next?

http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/rean/rean_057.cfm

#98 Frank on 07.27.15 at 3:20 am

Wow. Asian markets really shit the bed overnight. Should be an interesting week.

#99 Nagraj on 07.27.15 at 4:24 am

Zaoshang hao!
Good morning!

Shanghai closed down over 8%.
Wha happin? Run outta handcuffs and paddy wagons?
Ha ha ha.

Prize for prevarication goes to Bloomberg: ” … State-induced Calm Shatters”
State-induced calm. Ha ha ha. Shatters. Ha ha ha.

#100 old gringo on 07.27.15 at 4:47 am

I see the Chinese market is taking it in the gut once more.
Why are my “spider senses” telling me this is going to bring down a lot of trouble for our markets here?
Both real estate and stock!

#101 liquidincalgary on 07.27.15 at 6:00 am

# 74 says:

15/day daycare would do wonders for the economy, young families would have more money to spend

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

more money to spend??

who subsidizes this then?

#102 family beagle on 07.27.15 at 6:05 am

Diner napkin doodling….

2015 YVR SFH $1m CAD/ 830k US
Comparable asset: Pensecola FLA SFH $117k CAD/$90 US

2013 CAD/US parity,
2015 1.30 CAD/1 US

2013 YVR SFH $900k at parity
2015 YVR SFH $1m CAD/$830k USD

70k USD drop in two years.

Predicted quantum velocity spazz point based on momentum/time/%change/egotistical data:
25% drop in YVR RE by 2018 displayed as $1m CAD=675k USD

To maintain YVR price delusion, CAD $ will have to lose 19% more by 2018, to around $1.45 CAD/$1 USD, for the sticker price to look the same in the eyes of the beholder and continue to devalue in US real dollar terms at the current rate of dive bomb (since 2013).

If the earth tilts today, while $1m CAD = 90k USD for houses of comparable value, then, in a rebalanced world where oranges = blueberries, it would mean a 9 cent loonie, or a 0.90 US per hour min wage for canucks paid by drone monitoring foreign overlords.

Benefits to devaluing CAD $, an essay in four points…
– debt payable in CAD
– cost of goods in CAD
– increased taxes on USD imports
– maintains RE asset sticker price in CAD, even if butter is $27.

Random refs:
http://www.zillow.com/pensacola-fl/home-values/
cad us chart
http://www.chpc.biz/uploads/9/7/9/5/9795010/3750073_orig.png?719
http://vancouver.craigslist.ca/van/reb/5136944739.html
http://vancouver.craigslist.ca/van/reo/5134862513.html

#103 Bottoms_Up on 07.27.15 at 7:38 am

#101 liquidincalgary on 07.27.15 at 6:00 am
——————————————
Currently young families without the money subsidize this. And the banks that make billions per quarter, that do not want to subsidize any of this, getter richer off the loans they make to these families.

#104 neo on 07.27.15 at 8:32 am

Garth,

So the 30 yr US bond is under 3% again and going the wrong direction if a rate bump is going to happen in a little over a month from now?

Besides that, leaked or not what difference does it make about Fed projections. If you looked back from their 2010 to 2015 projections they were WAY off. Let’s be serious here. A recession occurs about every six years since the 40’s and you think that we will go 11 years and still not have one in a weak recovery environment?

Lastly, you always point out that one of the advantages of owning stocks over real estate is the freedom of movement of your capital. If that is the case I found it disingenuous to state that the Chinese market was “fixed” by the government doing exactly what you said would be detrimental to investors. Trapping investors in bad trades and giving new investors pause because they feel they might end up trapped inside of a trade is just irresponsible and as someone here who is giving financial advice you shouldn’t be encouraging that behaviour or stating it is acceptable and doesn’t result in an even worse outcome or collateral damage. We are seeing that now. All the Chinese establishment is doing is making a bad situation worse and the fall more violent, not orderly.

Exposure to China in a balanced portfolio is about 1%. Meanwhile the Chinese market is still up year/year 78.4% and 16.8% YTD. Exaggerate much? — Garth

#105 crowdedelevatorfartz on 07.27.15 at 8:33 am

@#85 Keith in Cowtown
“I had to double check, so I logged out and back in again and sure enough $1,900 – $2,100 was the average.

Poor Newfies who work in Fort MacMurray have to ay that much just to fly back to St. Johns……….”
+++++++++++++++++++++++++++++++++++

$1,900 to fly to Nfld from Ft.Mac…….
They have 1st class flights from Ft.Mac?

Hows that NDP govt workin for ya? Minimum wage up to $20/hr yet?

#106 John on 07.27.15 at 8:49 am

Morning. The Chinese stock market crashed again, last night. It’s on your screen. The collapse stopped when they shutdown trading on tons of stocks breaking through the 10% down level. Investments of any type bought on margin and thus gambling with margin calls might be just as foolish as drowning in mortgage debt. The Deutsche Bank is clocking over $100T in derviative contracts, more than the world economy’s GDPing. Makes you wonder which will slap Canadians silly first, our home baked housing crash or foreign crashes coming home to roost. Stay good.

#107 Londoner on 07.27.15 at 9:01 am

“A recent poll by CIBC finds that on average, Canadians expect to be debt free by the time they are 56 years old although some Canadians see themselves carrying debt well into their sixties. In addition, nearly a third (29 per cent) say they have no debt…”

http://www.newswire.ca/en/story/1575653/debt-freedom-canadians-expect-to-be-debt-free-by-age-56-cibc-poll

#108 Weedeater on 07.27.15 at 9:19 am

I wonder how many of your readers appreciate the value of this and your other insights on investing and the overall outlook for Canada/US. One of your best analyses. The real estate delusional may not agree with your take on housing prices but there’s no disputing the upcoming changes to the price of money and it’s impact on everything: housing, currency, imports/exports (i.e., food, jobs, energy), investments, etc.

#109 Hot Albertan Money on 07.27.15 at 9:38 am

As a woman in a terrifying investment world, living in a ridiculous city

Is someone forcing her to live in that “ridiculous” city?

#110 saskatoon on 07.27.15 at 9:39 am

#74 Bottoms_Up

ahh yes.

kinda like you get mugged in an alley, and the robber tells you it’s a “rounding error” and “don’t worry about it…”it’s good for you!”

more stealing is always good for an economy.

#111 saskatoon on 07.27.15 at 9:42 am

#103 Bottoms_Up

incidentally,

no one forces ANYONE to get loans (AKA banks).

government FORCES (through violence) taxation.

commie nonsense logic/propaganda.

#112 SteveVancouver on 07.27.15 at 9:49 am

DELETED

#113 Karma on 07.27.15 at 9:54 am

Shiller on irrational house market:

http://www.nytimes.com/2015/07/26/upshot/the-housing-market-still-isnt-rational.html?abt=0002&abg=0&_r=1

#114 WileE on 07.27.15 at 10:16 am

94 Well Actually

I read your link , thank you. You should read it again before clipping the parts you posted.

I agree with KommyKim, he was probably saying he was agnostic at best.

Look at the last paragraph and break it down. The bible is not a text book. He agrees with religious values but does not believe everything he read in it to be true. Neither do I.

I should not have said he believes in God , I was making reference to his “throwing darts” quote.

Good read anyway. My comment to “nonplused” was not about God. It was whether or not an intelligent person was able to believe in a higher power and can study the human understanding of it through the Book , or any other book. I believe both NEWTON and EINSTEIN did that. Neither one of them ever told me directly or may have had a different conclusion years later. I cannot say anything for sure, take care

#115 Jack Stall on 07.27.15 at 10:16 am

Suggesting prudence while markets crash is “bizarre advice”? The last thing you want to do is ‘put cash to work’ in a falling knife scenario….and to add advisor fee’s’ on top of those losses is a recipe for disaster.

“Suggesting a young person stay frozen in the headlights is bizarre advice. — Garth”

Global markets are taking a pounding and ever day losses are piling up.

http://www.bnn.ca/

The world has just fallen into a ‘W’ recession and losses up to 20% can be expected for at least 18 to 24 months. Internationally the scene for retail investors couldn’t be worse. This is a great time for a young investor to stay clam…keep their powder dry, and learn about ‘the markets’…before diving in. Prudence will be the biggest money making idea that this lady could have in the next two or three years.

Meanwhile…expect Canada to under perform every global market except in the area of youth prostitution and rick shaw pushers as BOC drives the $C down to $1.50 to boost ‘toooooorism’.

Those ‘foreign tourists’….will be outbidding Canadians right out of their homes with their USD linked currencies…while seniors starve and savers are ‘boinked’ by a triple whammy of ZIRP, BOC induced economic coma and the Great Recession of 2016/17. You ain’t hearing this for the first time folks. I can’t remember a better time to hunker down in the library.

#116 Michael on 07.27.15 at 10:17 am

Let’s not forgot she could also opt to start her own business. Its as reasonable an investment as any of those options and the upside is much greater, with the risk in some scenarios being much smaller.

#117 The Econoom on 07.27.15 at 10:38 am

#85 Keith in Calgary on 07.26.15 at 11:20 pm
Going to our place in Rio de Janeiro next week for a holiday. Going to spend a week there, and then a week in Natal, which is a city of 1MM in the north east of Brasil, situated right at the very easternmost most point of the country.

Really nice 900′ two bedroom beachfront condos there can be had for R$200,000 +/-…….about $80K CAD.

——————————————————————–

Your living standards must be absolute SHIT if you’re calling a $200K BRL condo “really nice”. We also have a place in Rio. Beach front. Paid $1.5M BRL (approximately $620k CAD at today’s rates). It’s “nice”, but not even “really nice”. Unless you’re living your days in Forest Lawn, I think your imagine for what is “really nice” might be broken.

#118 Shawn on 07.27.15 at 10:43 am

Shiller on house prices being irrationsal

Karma at 113 mentioned this. Here is Shiller’s conclusion:

The bottom line is that there is no reason to assume that the real estate market is even close to efficient. You may want to buy a house if you love it and can afford it. But remember that you cannot safely rely on “comparable sales” to judge that the price is fair. The market isn’t efficient enough for that.

********************************************
One interpretation of this is that those waiting for house prices to normalize to a rational price may be waiting a long time. Or not, who knows?

Speaking of Shiller, in my experience he has been a perma-bear for years. His bleating’s about his 10 year cyclically adjusted PE ratio have not stopped the U.S. stock markets from roaring ahead these past seven years. Similarly he seems to think U.S house prices are too high. His data may be good but his forecasting record is terrible, at least from 2009 until now.

#119 Incubus on 07.27.15 at 10:45 am

The Canadian dollar need to go down very big otherwise all private jobs will disappear and most companies will go bankrupt. Just see what is happening in Greece.

I guess a 50 US cents dollar would be good.

#120 joblo on 07.27.15 at 10:50 am

Hey G where’s the perf stuff?
next Sunday?

#121 Doug in London on 07.27.15 at 11:03 am

@old gringo, post #100 and John, post #106:
Chinese market taking it in the gut? I see FXI-NY is still at $40 and change, which is not exactly cheap. If it drops to the mid 30s, then we’ll be talking a buying opportunity. If you’re out looking for bargains, CPD is on a clear the inventory out NOW dirt cheap fire sale.

#122 Shawn on 07.27.15 at 11:25 am

Putting Money into Spouse’s TFSA

Many have suggested funding the spouse’s or even children’s TFSA.

Rules have changed. Bank now needs to see the cash come from the spouse’s account. This is due to Bank regulations. Can try converting it to cash and doing it. Good luck getting say $35,500 in actual cash these days.

Not so easy if you don’t run a joint a account.

#123 cmj on 07.27.15 at 11:28 am

#97 – new changes with CMHC regarding applying revenue from secondary suites starting Sept 2015.

Added information : Many municipalities have a service fees for secondary suite owners. In Surrey BC the rate is 526.42. For a one million dollar “Mc Mansion” this would be $526.42. The net revenue, when all expenses have been deducted, is then added to your income and therefore taxed at your highest tax bracket. There are also “snitch” lines for owners who have not declared suites. The fines are high if you have not declared your suite.

Consider these factors when purchasing a home with a secondary suite.

#124 Shawn on 07.27.15 at 11:30 am

Accessing Cash

Money in a bank account may not be easy to access from another part of the world if you ever need to for any reason.

Those with substantial assets should perhaps think about putting substantial cash into European and other “offshore” banks. Not to hide income or to hide assets. But just to have better world access to funds if ever needed.

It is just no longer easy to move cash around the world.

A guy in the U.S. is in jail for taking large traveler’s cheques or the equivalent out of the country without declaring it. The rules were unclear (at lest to him). He needed the money to do business in another country. This was documented on 60 minutes or one of those shows. It really was an innocent mistake. No matter.

#125 Shawn on 07.27.15 at 11:33 am

Access to Cash

I mean you can no longer even endorse a cheque payable to you by signing the bck. It used to be once you signed the back the holder of that cheque could deposit it into their own account.

It was called a third party cheque.

No longer legal.

Nor can you write a cheque out “cash” and give it to a person to be deposited like cash. This used to be allowed.

It’s getting harder to move “money” around. The government wants to track it all. And you thought it was “your” money.

#126 Renter's Revenge! on 07.27.15 at 12:08 pm

RE: efficient markets

How can anyone think that markets are efficient when it’s a struggle just for people to act rationally in their daily lives? For instance, I should be doing my job right now, but instead I’m commenting on this blog.

Perhaps Shawn is right. Maybe I will never own a house. But I don’t care, because I make my financial decisions based on cash flow, not betting on things like “regression to the mean”.

#127 Mike T. on 07.27.15 at 12:20 pm

Dear people at this weblog

I shorted my Chinese stocks, come and get me!

This is bizarre

George Chen tweeted ‘China Securities Regulatory Commission urges everyone to report illegal trade and you can report malicious sellers at http://jubao.csrc.gov.cn

weird events are being staged to draw your attention away from the sun

the sun is the second mechanism involved in evolution, it provides the energy to ‘mutate’ DNA

this is an amazing time to be on Earth

#128 Reasonfirst on 07.27.15 at 12:21 pm

I missed commenting on my puppy yesterday so here it is:

We started out as “puppy-raisers” for the Pacific Assistance Dog Society (PADS). “Kimba” was destined to help a disabled person. She lived with us for a year where we took her to movies, restuarants, shopping malls, etc. as part of her training. After a year she went into full time training at the PADS facility with the occasional home-stay with us. 6 months in to this training, she was “released” from the program. Apparently she had the skills but didn’t have that “I want to please” mentality needed by service dogs. Once the treats were taken away, she stopped doing her stuff.

They offered her back to us…how could we say no? She is an aloof black lab (the small sporty kind that are called field labs) that loved the outdoors. She has gone on remote hikes with us that required a floatplane, floated 800 kilometers down the Yukon River in a canoe, swum in the Mackenzie River north of the Artic Circle and more.

On Saturday, she turned 16 – close to some kind of lab record I am sure. She is largely blind, mostly deaf, can only walk very slow and cannot swim any more. She is on a ridiculous regimen of pharms and is also surprised by her BMs (and us too).

She loves her food still and seems to enjoy sniffing around but we know the day is coming very soon where she won’t be able to stand up. We will have the vet come over.

She will be missed.

#129 Frank on 07.27.15 at 12:21 pm

So for those that subscribe to the Chinese money influencing Vancouver luxury real estate how does market uncertainty affect homes here? Do we see a dip in the high end of the market or a rush to buy more?

#130 Reasonfirst on 07.27.15 at 12:22 pm

Artic = Arctic

#131 Pre-Retiree on 07.27.15 at 12:27 pm

At #67 Yonder Yearner:

When looking for a retirement place, make sure to consider the availability of decent health care nearby. It will become a consideration then.

#132 Old talking points on 07.27.15 at 12:35 pm

Uh oh, Garth

>Amazon, Google, Apple and just a few other firms account for the bulk of Nasdaq Composite gains this year; that worries some analysts

Time to update your narrative?

Where did I tell anyone to load up on the Nasdaq? — Garth

#133 Harbin Loot on 07.27.15 at 12:46 pm

“Let’s not forgot she could also opt to start her own business. Its as reasonable an investment as any of those options and the upside is much greater, with the risk in some scenarios being much smaller.”

LOL….the magic black hole where all the unemployed 45 to 70 year old workers have gone….to sell computer services and management consulting to one another at Star Bux.

“So for those that subscribe to the Chinese money influencing Vancouver luxury real estate how does market uncertainty affect homes here? Do we see a dip in the high end of the market or a rush to buy more?”

The bulk of ‘Chinese Money’ in the high end market are money laundering crooks who’ve looted their ministries, banks, schools and social orgs..

Good example was Mayor Moonbeams almost mother in law who was recently arrested for looting her ministry in Harbin China. Her greed took to such an extreme that even after laundering millions into Vancouver real estate she went back for more…and was subsequently arrested by the Chinese authorities. her daughter is still here and very comfortable.

So don’t expect to see a market related drop in the amount of money flooding in….because it isn’t earned…..or at risk…it’s all been/being stolen and has to be laundered so that Canada will protect it when the Chinese authorities cry foul.

#134 Rexx Rock on 07.27.15 at 12:49 pm

I’m very surprised many couples in their 40’s and 50’s with huge profits in real estate just don’t sell and get out of dodge.Retire and live well in many countries on the cheap.Thats what I will do.This racket is just for people to be debt slaves.Its a no brainer not to conform to this way of life,high taxes and high cost of living.

#135 Jhao on 07.27.15 at 1:24 pm

In truth all she really needs to do is show a little leg at a handsome man at a bar and society will do the rest. With Childcare benefits, income supplements for mothers, subsidies for everything under the sun.

Swipe your EBT, its free! And all you have to do is….well…

#136 Holy Crap Wheres The Tylenol on 07.27.15 at 1:35 pm

#119 Incubus on 07.27.15 at 10:45 am

The Canadian dollar need to go down very big otherwise all private jobs will disappear and most companies will go bankrupt. Just see what is happening in Greece.

I guess a 50 US cents dollar would be good.
_____________________________________________
Strong dollar, competitive manufacturing and buying power to strengthen equipment procurement.
50 cent dollar…………Delusional (Epic Mike drop here)

#137 Bob Santarossa on 07.27.15 at 1:46 pm

#107 Londoner

That CIBC report is what people say but resembles little to reality.

2009 StatsCan Report of Proportion and average debt of those with debt, by age (50 to 64 yr olds with $90,000 average debt each):

http://www.statcan.gc.ca/pub/11-008-x/2011001/t/11430/tbl001-eng.htm

3 years later, 2012 Household Debt Report by StatsCan – Table 1, p. 6 (45 to 64 yr olds with $102,800 average debt each):

http://www.statcan.gc.ca/pub/75-001-x/2012002/article/11636-eng.pdf

True, age brackets do not quite match up but if what CIBC found was true, the average debt per person would have gone down; however, we all know that the debt load has increased to historical highs since 2012.

What is troubling is the ability to pay off debt at age 65 and older (2013 from StatsCan/Revenue Canada – Gross Income by Age Group, 5,286,520 people in this age group then):

$20,000 and over 65% or 3,460,620 people make more than this
$25,000 and over 51% or 2,670,120 people make more than this
$35,000 and over 34% or 1,822,970 people make more than this
$50,000 and over 19% or 1,008,090 people make more than this
$75,000 and over 8% or 400,790 people make more than this
$100,000 and over 4% or 206,890 people make more than this, etc. to:
$250,000 and over 0.6% or 34,270 people make more than this.

If you compare to the 50 to 64 yr old income distributions, the upper 4 brackets above halve in the number of people that make that gross income (i.e., half of them move to the lower income brackets; e.g., 50-64 yr olds in the $50,000 and over was 36% of the total or 1,550,840 people of the total 4,284,040).

This tells you that a large portion of gross income after age 65 for most Canadians will be CPP & OAS (about $19,000/year).

So, what people say they will do AND what they can actually do are 2 different things.

Probably CIBC is trying to, as they all do before a recession (just read Garth’s posts in 2008 and 2009), is not fan the flames of bad psychology by telling us that it is not as bad as we think.

Well, it is, if job losses (borrow more or burn nest egg to survive) and interest rates increase (debt cost goes up) – even in retirement.

#138 Keith in Calgary on 07.27.15 at 1:53 pm

#1217 Econoom…….

Reread my post.

That is what places in Natal are selling for…….which is almost 2,500 miles away and 14MM fewer people from Rio de Janeiro.

We do have a place in Posto 4 in Copacabana back in Rio……today it is worth……..oh +/-……..R$600,000……….if you have a beachfront condo in Rio for that price, in Copa, it is on the ground floor facing the inside of the building most likely, or near Leme.

And yes, our standards are simple, 65 square meters, one bedroom, one garage, 10 floor………….when you live in a tropical city that is like Rio or any other place down south, you don’t need anything fancy because all you do is sleep there. The rest of the time you are out in the street doing things……or at least we are.

#139 Keith in Calgary on 07.27.15 at 1:59 pm

Check out the Chinese stock market eh ?

All the commie QE begin thrown at it and the darn thing still crashes 8.5% today…….

This can never happen here, we’re different.

#140 Ronaldo on 07.27.15 at 2:11 pm

Interesting time in the markets. TSX back to where it was in mid May of 07. Gold was 1220 US (1345 CAD). Today Gold 1097 US and 1429 CAD up 6.2% over that time. However, if you take dividends at say 5% into account, the TSX would have returned around 50% over that time assuming you held on during the crash of 08/09.

#141 Mister Obvious on 07.27.15 at 2:15 pm

#126 Renter’s Revenge!

“I make my financial decisions based on cash flow, not betting on things like “regression to the mean””.
—————————-

I have some lifelong friends who had a similar attititude in their youth. They took pride in financial ignorance paying no heed to all that fancy highfalutin money talk. They spent each and every dime as it arrived.

Many, many moons have passed. Those folks aren’t so happy today. Age and health problems have caught up with them. They are tired and in debt. They find themselves stuck in a workplace unforgiving to their ‘needs’ and forever on the lookout for younger bucks willing to work longer hours and absorb more flack for less pay.

They know I am free of that loop. They consider me to have been ‘lucky’. Gifted of a charmed life. ‘Born with a silver spoon’ and so on.

It was not so. I paid attention to stuff like ‘regression to the mean’ and used that sort of metric to inform my decisions, financial and otherwise.

Somewhere in my late twenties I realized it was time to stop celebrating ignorance and start paying attention to the actual goings on in the world around me.

Now I’m posting to a blog on a Monday morning from my comfortable home while a financial engine it took forty years to build chugs away in the background.

At the end of the working day I might meet up with some of my old buddies and listen to them complain about their bosses, their heath and their dismal prospects.

But it may not be too late for you.

#142 Smoking Man on 07.27.15 at 2:21 pm

Still can’t see the FED spiking this year..

Ran the numbers through the Herdomoter….

It’s saying, talk up the market by promising rate hikes, , do whatever it takes so long as the accent of the USD dollar is capped.

Personally I’m up huge on USDCAD and holding.. A Fed hike will be a huge win fall. My bet is another BOC cut.

If I got both… Add another 7 figures to my tally.

How is a quarter point increase a ‘spike’? — Garth

#143 Jane Goodhall on 07.27.15 at 2:25 pm

The TSX is almost 14,000 today, down 170 points! Ouch!

This is 1,000 point drop since June, almost 6.7%. At least we are not China 8.5% down!!!!!

#144 Leo Trollstoy on 07.27.15 at 2:46 pm

I’m very surprised many couples in their 40’s and 50’s with huge profits in real estate just don’t sell and get out of dodge.Retire and live well in many countries on the cheap.

They still have kids that #donthave1million

#145 Nagraj on 07.27.15 at 2:48 pm

I think I’d like to support #104 NEO

Any stock mkt that’s up about 80% in a year is nuts, and governance in the jurisdiction of that mkt looks at least questionable by any standard.
If the SPX were to jump 80% in a year . . .

Who the hell knows what’s going on in China. China’s a big place – I don’t know this but I suspect that China is fundamentally politically unstable.

#146 Jane Goodhall on 07.27.15 at 3:01 pm

Actually, if I remember correctly, the peak for the TSX was also 15,000 in 2007.

This means that besides maybe a total of 18% to 20% in dividends over 8 years, it did not work out well at all.

China’s Shanghai index, 8.5% steep drop today was that steep back in 2007. Hong Kong’s Hang Seng index was around 33,000 in 2007 but is now 24,351.

Taiwan Taiex was 10,000 back in 2007 and is now 8,556. No matter how you look at it, 8 years of 14% to 26% declines from out of China’s mainland stock markets.

#147 bdy sktrn on 07.27.15 at 3:57 pm

#63 gut check on 07.26.15 at 9:18 pm
@ Keith in Calgay –
Trouble with that theory is this: unless you ARE a realtor, you cannot POSSIBLY know the comps in your area.
You ask for them, you get a hand picked selection of SOME of them.
—————————
try this….

RING RING.. hello mr realtor? ..fine and you…good…. please provide all the sales in the last year for the area between x street and y avenue. you have until 4pm today or i get a new realtor (there are hundreds of very hungry ones)

easy as pie!

#148 bdy sktrn on 07.27.15 at 3:58 pm

even better, have him do it on a comp with you watching or else…. YOU”RE FIRED!

#149 Ronaldo on 07.27.15 at 4:01 pm

#146 Jane Goodhall on 07.27.15 at 3:01 pm

”Actually, if I remember correctly, the peak for the TSX was also 15,000 in 2007.”

TSX hit a high of 14625 on July 19/07
TSX peaked at 15128 on May 21/08
TSX hit bottom at 7567 on Mar 9/09

It never saw 14000 again until Feb. 2011 which was near the peak of gold and gold stocks.

You can get all the historical prices from here:

https://www.google.com/finance/historical?q=INDEXTSI:OSPTX&ei=hiFjU6irCYO9sQfQjQE

#150 bdy sktrn on 07.27.15 at 4:09 pm

#105 crowdedelevatorfartz on 07.27.15 at 8:33 am
@#85 Keith in Cowtown

+++++++++++++++++++++++++++++++++++

$1,900 to fly to Nfld from Ft.Mac…….
They have 1st class flights from Ft.Mac?
—————————–
priced air canada lately?

1900 doesn’t cover ft mac to vancouver (return) in 1st class!

#151 Ian - Ottawa on 07.27.15 at 4:14 pm

Insolvency filings by consumers have started to edge higher after a long decline that began after the last recession.

#152 bdy sktrn on 07.27.15 at 4:17 pm

#122 Shawn on 07.27.15 at 11:25 am
Putting Money into Spouse’s TFSA

Many have suggested funding the spouse’s or even children’s TFSA.

Rules have changed. Bank now needs to see the cash come from the spouse’s account. This is due to Bank regulations. Can try converting it to cash and doing it. Good luck getting say $35,500 in actual cash these days.

Not so easy if you don’t run a joint a account.
———————-
best to have joint AND individual accts.

from home you can put the money anywhere you like without the bank sticking their noses into it.

#153 Nora Lenderby on 07.27.15 at 4:25 pm

Article by Mr. Roubini saying why you should buy his (and Barclay’s) “new” funds:

http://www.project-syndicate.org/commentary/low-cost-approach-to-investing-smart-beta-by-nouriel-roubini-2015-07

#154 Smoking Man on 07.27.15 at 4:30 pm

How is a quarter point increase a ‘spike’? — Garth
……
Perhaps my English skills are not up to par.

I hope she does it… $$$$

I got to hope the Fed wants to test the markets, see what the fall out will be… Dollar be dammed.

But the High USD is crushing growth. Consumers (herd) are still on strike….. Inventorys are spiking.. :)

#155 TRT on 07.27.15 at 4:33 pm

US Dollar index down AND Oil down on SAME DAY!

Wow.

Down goes Alberta…

Interesting to see what will happen in Shanghai/Shenzen tonite!! Grab the popcorn.

Euro popped against USD.

#156 TRT on 07.27.15 at 4:35 pm

Oh, if you deal with a real currency, TSX is way down, way down.

At August 2009 levels in USD.

Two years ago when I told you to lighten up on Canadians exposure. Did you? — Garth

#157 Bottoms_Up on 07.27.15 at 4:53 pm

#135 Jhao on 07.27.15 at 1:24 pm
———————————–
Got news for you, childcare benefits are paltry at best (unless you are poor or live in quebec). “mothers income supplements” last one year at best and there are not ‘endless subsidies’ for children. My child takes music lessons to the tune of $1000 per yr, we get about $80 back.

#158 Mike on 07.27.15 at 5:01 pm

“Global”

Maybe Europe, US, too expensive, they will kill you now on the exchange, China, don’t think so, Brazil, well they are in the same commodity boat as us, Russia, could go either way but still mostly a commodity play.

Stick to Canada for now, safe dividend investing, they may depreciate further, but the good companies will increase their payouts, that is important for income.

I think it is too late to play the global market, you will never get your money back if the Canadian Currency makes a comeback.

#159 Nora Lenderby on 07.27.15 at 5:29 pm

Sad news about the death of Flora MacDonald.

#160 Josh in Calgary on 07.27.15 at 5:37 pm

#158 Mike,
That’s terrible advice. Maintaining a balanced portfolio is the way to go. You can not predict the future and neither can anyone else. Maybe you lighten your weighting in certain sectors or geographic locations for awhile to take advantage of current market conditions, but sticking all your eggs in canada is not a good strategy.

If you’ve been balanced all along then you should be up big time on your US and international compared to canadian. So rebalancing would see you sell some of that to buy canadian (sell high and buy low).

If you’re just getting into things for the first time then predicting a candian currency bounce is a fools game. From everything I’ve read it’s just as likely to test lows of $0.60 CAD/US as it is to rebount to $1.00. I don’t know and neither does anyone else, so just stay balanced unless you’re in to speculating.

#161 BS on 07.27.15 at 5:39 pm

Stick to Canada for now, safe dividend investing, they may depreciate further, but the good companies will increase their payouts, that is important for income.

There is nothing safe about dividends for resource or oil stocks right now. As prices tank dividends will be cut not increased. Many companies will even go under.

I think it is too late to play the global market, you will never get your money back if the Canadian Currency makes a comeback.

You can buy hedged global or US ETFs priced in CAD with zero currency risk. At least you can diversify away from banks and resources investing globally which is tough to do in Canada.

#162 Jhao on 07.27.15 at 5:54 pm

#157 Bottoms_Up on 07.27.15 at 4:53 pm

Which was just repaid by your 2K pogie cheque big daddy Harper signed over to you last week.

#163 jess on 07.27.15 at 6:34 pm

Ebay and Paypal users face ‘huge’ tax crackdown
HMRC will be given new powers to obtain details of millions of online transactions from companies including Paypal, Ebay and hotel comparison websites to target those failing to pay tax
Ebay and Paypal users face ‘huge’ tax crackdown (27 Jul 2015)
Internet companies face ‘tax crackdown’ (27 Jul 2015)

http://www.theregister.co.uk/2015/07/27/australia_to_tax_all_international_online_purchases/

=======
quant robots
alpha vs (roubini+barclays) = Indices for passive smart beta good – (bad +ugly)

====================
imagine one day when …rogue software caused the fail therefore, insurance declined

http://www.theregister.co.uk/2015/07/08/ford_car_software_recall_analysis/
http://www.theregister.co.uk/2015/07/20/fragmented_android_security_risk_report/

Musk, Wozniak and Hawking urge ban on warfare AI and autonomous weapons
the petition penned by the Future of Life Institute argues AI technology has reached a point where using autonomous weapons, like drones that kill using a facial-recognition algorithm, are feasible within years — and the stakes are high.
Wozniak voiced these concerns in an interview with the Australian Financial Review in March. “Computers are going to take over from humans, no question,” he told the publication.

#164 neo on 07.27.15 at 6:45 pm

Exposure to China in a balanced portfolio is about 1%. Meanwhile the Chinese market is still up year/year 78.4% and 16.8% YTD. Exaggerate much? — Garth

Let’s see what it is up by the end of the year for starters and what does that have to do with what I said. Markets are build on trust. You know this. Without TRUST that I can get my money back when I want or move it when I choose—what are you really left with? You can gloss over this all you want. It is called a free market for a reason. I guess you have forgotten that with what has occurred globally since 2009.

#165 crowdedelevatorfartz on 07.27.15 at 8:02 pm

@#150 bdy skytrn

AC from Ft mac to St John Nfld return during peak tourism times(mid summer or Christmas) $1600
Non peak times( sept ) $850

Only a fool would pay to fly 1st class to have either their ego stroked OR the company was paying.

Me thinks Keith was a tad over zealous in his estimates

#166 Sinful Man on 07.27.15 at 11:54 pm

#54 nonplussed ‘… Oh sure I can’t explain the big bang or really side with it maybe dog created the whole universe at once and it’s steady-state. But really?’

The fool says in his heart, ‘ there is no God ‘

#167 Herb on 07.28.15 at 7:22 am

Here is a nice doomer vision to start your day –

http://davidstockmanscontracorner.com/wall-street-still-didnt-get-the-memo-chinas-done-tops-in/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+TuesdayHere is a nice doomer vision –