Lessons

DOG SHOT modified

Some things worth knowing as we head into a weekend federal election call, a slagging Canadian economy and the biggest vacation period of the entire year. So slide on those flip-flops, grease up with SPF 30 and throw a tofu burger on the barbie. Here we go:

THURSDAY SEPTEMBER 17th: That’s the day US interest rates will rise for the first time in a decade. This is a big deal, with global implications – not to mention for your mortgage and our dollar. There’s now little doubt the Fed will pull the trigger that day, after this week’s economic report.

The American economy grew at 2.6% in the second quarter – more than forecast – and growth in the first three months of the year (plagued by snow and strikes) was revised higher. Job creation has stayed impressive while corporate profits are running higher than anticipated and we’re heading into a Presidential election year. Even legendary bond guru Bill Gross has thrown his cards on the table, saying cheap rates are bad for the world – creating asset bubbles, distorting capital flows and turning people into porcine debt-snorflers.

So, up she goes. And down goes the loonie. Then, in 2016, the Bank of Canada eats a giant crow and follows suit. Unless, of course, we’re in the throes of a scary recession. In which case we are will have a helluva lot of real estate news to share.

DINKY DIVIDENDS: Here are three headlines which splashed across the MSM this week as we settle into what’s looking like a long and serious commodities rout…

Cenovus looking to cut jobs, slashing dividend by 40 per cent
Goldcorp slashes dividend 60 per cent as price of gold tumbles
Shell to axe 6,500 jobs, cut spending to cope with lower oil prices

It’s been ages – almost seven years, in fact – since we’ve seen news like that. Trust me, the last thing CEOs want to do is cut dividend payments to stockholders. This makes the shares inherently less attractive, drops the capitalization of the entire company, torpedoes the market price and signals that the company’s entering survival mode and needs cash that normally would be distributed.

This also throws more cold water on the belief many amateur investors have that they should load up on dividend-paying stocks and eschew diversification. Bad idea. See why?

COWTOWN CARNAGE: Well, not exactly, but it may be coming. What does it tell you when a local real estate board tries to get out in front of public opinion, and issues a warning? Yup, crapstorm coming.

That just happened in poor Calgary. The realtors, who seven months ago predicted prices would rise 1.58% this year are now forecasting a slight decline in values and a big drop in sales – 22%. The effects of cheap oil are just starting to be felt, they say, and the city’s economy “continues to be plagued with a level of uncertainty.” You think? Just take a look at the headlines above – the big job cuts may only be starting. About 12,000 positions have been cut – a whack of them highly-paid engineers or execs – and the Conference Board is predicting twice as many will get the axe in the next five months.

“Employment conditions are expected to worsen and put increased downward pressure on wages. When combined with lower levels of migration, it’s expected that these conditions will cause further impacts on the housing sector.” So far this year detached homes sales have dropped by a quarter, luxury-home sales are a disaster and the rental vacancy rate has doubled. Commercial space for lease? Don’t even ask.

Only a year ago Cowtown was a swaggering mass of bidding wars, cowboy testo and realtors leasing Audis. If you can’t see a lesson in here, I give up.

CANADIAN SUBPRIME: Remember how we loved to make fun of Americans with their insane borrowing, their zero down payments, adjustable mortgages with teaser rates, subprime lending market and liar loans? Well, those days are gone.

Now we borrow far more than they, with banks giving 100% financing. There are 1.99% home loans, while subprime lending is the fastest-growing segment of the mortgage market as people finance down payments for million-dollar homes. And, yes, lender fraud. Apparently almost a billion in diddled loans from one company alone, Home Capital.

The largest ‘alternative mortgage lender’ in the land, as the result of an OSC investigation, was forced this week to reveal that 45 brokers were punted from its network for falsifying the incomes of borrowers. Yup, liar loans. In order to secure larger loans, brokers purposefully inflated the earnings of clients. Collectively, these bad seed brokers wrote about 12% of Home Capital’s 2014 loans, representing 5.3% of its outstanding assets.

This raises serious questions about how often this practice goes on among the nation’s tens of thousands of mortgage brokers. Besides, all of these falsely-obtained mortgages were insured by CMHC, and apparently still are. Worse, Home Capital (in its defence) said it did not verify the incomes of applicants, because it doesn’t have to. Apparently CMHC guidelines don’t require such a bothersome detail. “The practice met the standards of mortgage insurance companies, including the federal government’s Canada Mortgage and Housing Corporation,” it explained.

Still feel smug?

This doesn’t end well.

174 comments ↓

#1 Goldie on 07.30.15 at 6:42 pm

On a local AM radio station here in greater Vancouver, I heard a commercial for a MB which claimed that he could get you approved with no proof of income. It might been CKNW 980 or News 1130.

#2 Victoria Real Estate Update on 07.30.15 at 6:42 pm

. . . . . . . . . . . . . . . . CMHC. . . . . . . . . . . . . . . . .
Percent Increase – Total Mortgage Insurance In Force
. . . . . . . . . . . . Compared To 2006 . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . *. . .*. . . . . . .
+90%. . . . . . . . . . . . . . . . . . . . . . . . . .*. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*
+80%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . .
+70%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+60%. . . . . . . . . . . . . *. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+50%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+40% . . . . . . . . . *. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+30%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+20%. . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
…0%. . . . *. . . . . . . . . . . . . . . . . . . . . . . . . .
——————————————————————————
. . . . . . . 06. .07. .08. .09. .10. .11. .12. .13. .14

(source: CMHC)

From 2006 to 2011, CMHC’s total mortgage insurance in force almost doubled.

Until 2006, housing price parity existed between Canada and the US. Both countries had housing bubbles in 2006 as a result of the introduction of lax lending standards (starting in 2000).

That year, house prices peaked in the US and began to decline. In November of 2006, mortgage lending standards were loosened significantly more in Canada with the introduction of zero-down / 40 year mortgages.

This action added maximum fuel to the Canadian housing market and prevented any price correction. The two charts I posted today show the dramatic increase in total Canadian mortgage insurance in force since 2006. This allows us to understand the amount of market intervention that has taken place since that time.

Canada’s housing bubble has inflated dramatically since 2006 as a result of lax lending standards and emergency interest rates. High-risk, high-ratio home loans have allowed those with no money and poor credit ratings to bid up (already bubble level) house prices in Canada since 2006. Canadian taxpayers assume all of the risk. Canadian banks assume no risk at all.

CMHC’s total mortgage insurance in force has decreased since 2011, however, Genworth Canada and Canada Guaranty have picked up the slack (see next chart).

Note that CMHC is 100% backstopped by the government (taxpayers) and Genworth Canada and Canada Guaranty are 90% backstopped by the government (taxpayers).

Note that CMHC was bailed out in the 1980s and 1990s.

This week more action was taken to loosen mortgage lending standards in Canada.

#3 Fred on 07.30.15 at 6:43 pm

CMHC. ..incompetent. Time for the Auditor General to give it a review. Would love to see the results.

#4 Victoria Real Estate Update on 07.30.15 at 6:44 pm

. . . . . . . . . . . . Genworth Canada. . . . . . . . . . . . .
Percent Increase – Total Mortgage Insurance In Force
. . . . . . . . . . . . Compared To 2006 . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+90%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*
+80%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+70%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+60%. . . . . . . . . . . . . . . . . . . . . . . . . *. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . . . .
+50%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+40% . . . . . . . . . . . . . . . . . . .*. . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+30%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . .
+20%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . .
+10%. . . . . . . . . .*. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . . .
…0%. . . . *. . . . . . . . . . . . . . . . . . . . . . . . . .
——————————————————————————-
. . . . . . . 06. .07. .08. .09. .10. .11. .12. .13. .14

(Source: Genworth Canada)

Canada’s other private mortgage insurer, Canada Guaranty, has also increased its market share since 2011.

Those who argue that there is less risk for Canadian taxpayers now that CMHC has reduced its insurance in force are simply wrong.

Genwroth Canada and Canada Guaranty have picked up the slack. Taxpayers will be on the hook if (when?) they encounter problems.

Many international observers have concluded that Canada’s housing bubble is a train wreck waiting to happen. The recent action to loosen mortgage lending standards even more can only make things worse.

#5 JimH on 07.30.15 at 6:48 pm

Great post, Garth!
Looks like the writing is on the wall. As far the American economy growing at “2.6% in the second quarter – more than forecast – and growth in the first three months of the year (plagued by snow and strikes) was revised higher”, is concerned, what impressed me most was that US exports of goods & services is up 5.3% for the period, federal government consumption expenditures and gross investment actually DECREASED 1.1% while personal consumption expenditures INCREASED 2.9%.

The modest growth of the US economy is most certainly not driven by government stimulus.

Personally, I’d prefer to postpone the rate hike to December or early 2016 for personal reasons, but facts are facts, and we ignore them at our peril!

#6 Catalyst on 07.30.15 at 6:50 pm

We’ve known CMHC has been a problem for years. Instead, they just recently expanded what you can count for income, not that they even bothered to verify whatever you claim anyway.

The real question is, what are the regulators/government doing about it???

#7 Gay in Metro Van on 07.30.15 at 6:52 pm

Man, it’s déjà vu of the yesteryear US of A. The Metro Van market is on fire. It’s amazing how fast single-family detached homes are moving north of the Fraser. Most of the joints are dumps / teardowns. Yeah, this is going to end swell and dandy.

#8 Nosty, etc. on 07.30.15 at 7:00 pm

#115 BC Guy on 07.30.15 at 1:50 am — “Time for regime change.”
— and —
#169 TurnerNation on 07.30.15 at 2:16 pm — “Sure check brain at door. And instantly get your own file at CSE.”

Fool all of the people some of the time by having regime change and chaos in the world, then carry on as if nothing has changed (sheeples) — Harper wants to split the vote so he can ram through this quirky little piece of TPP legislation, then the EU-US TTiP. After that come further secretive deals that none of us will know little, if anything about.

And now — MIG 29 Near vertical takeoff.

Sideshow: “If these pieces do turn out to be from MH370, it means that all those surveillance satellites up in orbit are no more effective at finding things than the NSA is at finding real terrorists and criminals (not to mention Lois Lerner’s and Hilary Clinton’s missing emails)!” (wrh.com.)

#9 Mark on 07.30.15 at 7:00 pm

How much of the US propaganda and Fed jawboning is actually to be believed though?

Every year, this whole ‘rate hike imminent’ discussion comes up. But without evidence of the economy improving for the average “man in the street”, or for the hoardes of new grads over the past decade who have been locked out of the labour market, such talk rings hollow.

And then we have energy sector defaults. And a tech bubble which is starting to deflate. And the contemporary US housing bubble. Maybe even some emerging markets debt goes bad. And eventually the long-end of the US bond curve will join in. Doesn’t strike me as an environment which can sustain any meaningful amount of rate increases.

#10 Smoking Man on 07.30.15 at 7:02 pm

THURSDAY SEPTEMBER 17th: That’s the day US interest rates will rise for the first time in a decade.

I hope you’re right. Every cent adds 100k to my book..
I can’t see it happening this year. Sorry.

It’s not often I bet against my gut, but plan B is BOC cuts. USDCAD will go to 1.35 with a FED spike, if BOC cuts. 1.4

And that’s another million from where I sit now. .

PS Retiring tomorrow..

WooWho freedom 56..actually retired in 2011. But I got board. I might work again once book is published.

Hitting the book hard. No more distractions.

#11 Zorba on 07.30.15 at 7:02 pm

“Tsunami” is coming, big time !

#12 Smartalox on 07.30.15 at 7:02 pm

Garth mentions all the high-paid energy executives and engineers that are getting laid off in Calgary, but he doesn’t have data on all the owner/operator contractors that supplied labour for these oilpatch companies. They are casualties of the slowdown, but their numbers aren’t mentioned in the press releases detailing the layoffs. Better to look at EI claims and insolvency filings.

#13 Frank on 07.30.15 at 7:05 pm

Ugh, I’m looking to move up in housing in Vancouver but the supply is painfully low. Purchasing isn’t a good bet right now and rental stock is dreadfully low. The few rentals on the market are slammed with people. There’s just not enough stock.

#14 mitzerboy aka queencity kid on 07.30.15 at 7:08 pm

pooro saskatchewan

#15 GB on 07.30.15 at 7:10 pm

Question Garth,

I’ve read repeatedly on your blog what seems to be a dislike of any NDP government. Okay…

But hasn’t the current conservative government overseen Canada’s worst economic record in the post war era? Would you say the current economic policies have lead to this sort of “subprime” environment. That corporate welfare has not improved the lives of the average working Canadian?

I cannot tell what your political stripe is but I am left to assume you see Justin Trudeau as the best option to lead Canada out of this mess?

I’m not suggesting you lay out your political leanings but I am admittedly confused by your apparent dislike of the current economic direction…yet the current front running alternative for change you also appear to dislike.

Sometimes I get the sense you actually DO like the current economic policies but think the average Canadian is too stupid to do the right things (gorging on too much debt…not maximizing investments etc).

Nonetheless, like it or not, governments need to keep their fingers on the pulse of behavior and given where the Canadian economy is heading…it seems to me this is a huge oversight on the part of the current government. Taking us ALL down regardless of whether or not you have made intelligent financial decisions.

Thoughts…

#16 mitzerboy aka queencity kid on 07.30.15 at 7:10 pm

nice picture garth I love it

pooro Saskatchewan

#17 Smartalox on 07.30.15 at 7:11 pm

Re: Home Capital, here’s some additional detail from my post on yesterday’s column:

http://www.theglobeandmail.com/report-on-business/economy/housing/home-capital-suspended-mortgage-brokers-after-anonymous-tip-last-fall-company-officials/article25776197/

In many cases, the borrowers actually worked at the companies listed in their employment letters, but earned less than they claimed. “Some of the letters had been altered, where an employee who actually made $64,000 a year reported making $84,000,” Home Capital CEO Gerald Soloway told a conference call with analysts.

Home Capital said in the past it had simply checked whether the name on the letterhead matched the name of the employer listed on the borrower’s credit bureau and then accepted the documents without contacting the employer to verify the income. The practice met the standards of mortgage insurance companies, including the federal government’s Canada Mortgage and Housing Corporation, the company said. It now takes extra steps to verify a borrower’s income, including calling a company’s human resources department and senior executives.

Makes me feel like a fool for being upfront and honest with my application, accurately reporting my family income and dutifully forking over pay stubs as evidence.

Come to think of it, I doubt that the nice lady at the mortgage brokerage would even have been capable of calculating my gross income based on a few pay stubs. But I guess that’s why they all use computers.

#18 crowdedelevatorfartz on 07.30.15 at 7:11 pm

@#1 Goldie
It was probably ‘NW.
They have been prostituting themselves to the highest bidder for years.
Ozzie Jurocks incessant real estate pumping on Saturday am was almost funny if it wasnt so pathetic. When he shifted his “real estate deal of the week” to such real estate hotspots like Princeton, you knew the “affordable” Vancouver jig was up.
And then there was talk show boast, Bill “Good” wheezing through another lick spittle fest with whatever incumbant political party paid for that mornings advertisements and demand he drop his pants and say “ahhhhhh”.
You must be one of their few, last, dwindling listeners….come over to the dark side. Its far more enjoyable.

#19 David on 07.30.15 at 7:25 pm

The housing bubble market needed this shadow banking system to keep the game going. It is way late in the day to try and reign in this industry through regulation.Big haircuts on the horizon.

http://wolfstreet.com/2015/07/30/canadas-highly-touted-conservative-mortgage-standards-sink-into-liar-loan-scandal/

#20 saskatoon on 07.30.15 at 7:32 pm

#6 Catalyst

that’s like asking a thief what he is doing about the money he’s stolen.

what is he DOING about it!?!?

#21 Jake Hannington on 07.30.15 at 7:33 pm

I agree with many that said the Fed will raise interest rates so it can lower them later.

So to speak ammunition for the Fed to look like it has some normal monetary policy.

It will probably raise them to 1.5% to 2.00% over the next 2 years and then drop them back to 0.75% to 0.50%.

This is if there is not some financial, economic, global crash, collapse, downturn etc. carp hitting the fan……

As for Home Capital, it is up almost 17.5% in 2 days and the short sellers are getting killed.

Canadian housing will never see a 30% downturn price like in the U.S. It is all fiction.

#22 Former Fool on 07.30.15 at 7:33 pm

Only a year ago Cowtown was a swaggering mass of bidding wars, cowboy testo and realtors leasing Audis. If you can’t see a lesson in here, I give up.

I thank my lucky stars that I sold my house almost 1 year ago today and randomly found Garth’s blog. If I were trying to sell today, I would have to ask for $50k less (I am not exaggerating!).

A year ago, I was trapped in a mortgage, in a house I hated, in a crappy location, that was consuming my expendable income in maintenance, property taxes, and mortgage payments.

Now, I have freedom, liquidity, security, and investments that pay me to own them rather than costing me money every month.

Garth, keep up the great work! Your blog is my addiction. Have a great long weekend.

#23 Curious George on 07.30.15 at 7:34 pm

Assuming rates climb on/near Sep 17, USA aggregate bond capital value lessens while yields rise. Correct?

I know that we follow the USA over 90% of the time but I’m confused about what would generally happen to CAD aggregate bonds during Canada’s stage of inertia.

Underground and MSM all seem to agree that our economy is in the pooper. I’m assuming no hike before election and poor future PM who has to devastate the masses within his first few months.

Anybody care to hypothesize what happens in the in-between?

#24 Robert on 07.30.15 at 7:35 pm

Hi Garth,

27 Rockcastle ended up going for 1,030,000, just thought you might want to know.

Is it weird that I can’t wait for interest rates to normalize?

I was just on the phone today with a well known mortgage broker in the GTA big discrepancy in what they pre-approved us for a max mortgage of $990,000 vs. The green bank pre-approving us for a max mortgage of $840,000 why the spread if both companies were given the exact same information?

Robert

#25 nonplused on 07.30.15 at 7:50 pm

This is the biggest train wreck to hit Alberta since the 80’s, and we all remember how that went.

Fortunately I did not piss it all away during the boom so I can survive a couple more years of this. And I did make some steps to diversification following Garth’s advice so there is more US exposure now than I used to have, and banking.

However I am still long gold (ok so far in CAD but as Garth says not the best performing asset out there), and real estate, which I think will get killed.

In my adult lifetime I have never seen so many skilled professionals get shown the door in such a short time frame. Even my CEO neighbor got shown the door. Both my former bosses, my son’s friends dads, people at my wife’s work. Calgary is a mess of unemployment right now.

And they seem in my opinion to be taking out “the best” first. Maybe because they make more money, but I think more because these are the people that question authority. They won’t fudge the numbers to save the stock price.

#26 Leo Trollstoy on 07.30.15 at 7:52 pm

I’m looking forward to the Fed hike.

Also looking forward to a hike from the BoC but that seems like a pipe dream at this point.

Inflation to continue rising just like stupid RE prices.

Oil stays low for a long time and gold continues to circle the toilet.

Flush.

#27 David Lee on 07.30.15 at 7:55 pm

Garth,

I bet this young man brings tears to your eyes:

http://www.theglobeandmail.com/globe-investor/personal-finance/smart-savers-keep-their-housing-options-open/article25786383/

#28 VICTORIA TEA PARTY on 07.30.15 at 8:04 pm

IT’S AWFULLY LATE IN THIS ECONOMIC DAY, Y’KNOW…

(#1 Goldie on 07.30.15 at 6:42 pm
On a local AM radio station here in greater Vancouver, I heard a commercial for a MB (mortgage broker) which claimed that he could get you approved with no proof of income. It might been CKNW 980 or News 1130.)

…GOLDIE

Your offering is something all of us Gartherites should be noting and remembering, even hoping for?!

If some nitwit flogs the “something for nothing” play-book at this stage, when the world’s economy is not doing well, then someone at that radio station should have his collar yanked.

For that radio commercial is indicative of money-trouble throughout Canuckistan, a veritable sack’s worth of Canaries in the Mineshaft of economic what-the-Hell; which is to say you SHOULD HAVE taken care of your financial business by now because it’s well nigh too damn late…otherwise.

Fact is, the US Fed ALSO HAS to raise rates because it needs a cushion beneath it with which to drop rates in the future if something “real bad”, like another 2008, happens.

Rates are headed for one percent plus over the next 12 months because right now dropping a quarter point to ZERO won’t cut it; credibility and all that.

So, all of us who’ve paid our debts, saved some money and diversified even SOME of our soon-to-be-depleting wealth will be the so-called “winners.”

The stock/bond/currencies/commodities markets will ALL be roiled, at some point, by these upcoming monumental monetary events.

If the US Fed rate goes up so will the rest of ’em, eventually. For a while some central bankers might try to keep THEIR rates low, and suffer currency debauchery and economic dross in the process, in the competition for more delusional trade opportunities.

But one day all major countries will follow the Yanks on that yellow brick road to higher rate nirvana. Whatever the result, either planned by the elites or more likely not, it will land upon all of us.

#29 Mmmm on 07.30.15 at 8:06 pm

Mmmmm tofu burgers… You give great advice.

#30 Leo Trollstoy on 07.30.15 at 8:11 pm

Underground and MSM all seem to agree that our economy is in the pooper. I’m assuming no hike before election and poor future PM who has to devastate the masses within his first few months.

I hope it’s the NDP in power when this happens :)

#31 White Crock BC on 07.30.15 at 8:21 pm

Why should the Loonie plunge even more on Sept 17?

Have the currency markets (who are these people anyway?) not already priced in a Fed increase and at least a 50% chance of a BoC cut?

Let’ get it over with. If we’re headed for 62c, 58c or even 30c lets get on with it for God’s sake.

It’s like death by a thousand cuts (ok… two cuts)

#32 Mark on 07.30.15 at 8:33 pm

“Assuming rates climb on/near Sep 17, USA aggregate bond capital value lessens while yields rise. Correct?”

Correct, if the hike is done, in the view of the markets, for the right reason. However, if it is done for the wrong reasons, then I would expect government bond yields to actually go lower in anticipation of the sort of calamity that the hike would bring.

A lot of this stuff tends to get priced in before the fact as well. And as it stands, the (US bond) market really isn’t even pricing in a hike. The 30-year is back beneath 3%, and even the 3 year is at 1%. Just based on government bond yields alone, the market doesn’t appear to be implying any sort of policy rate hike. Inflation is non-existent as well, with the economy teetering on explicit deflation.


I know that we follow the USA over 90% of the time but I’m confused about what would generally happen to CAD aggregate bonds during Canada’s stage of inertia. Underground and MSM all seem to agree that our economy is in the pooper. I’m assuming no hike before election and poor future PM who has to devastate the masses within his first few months. Anybody care to hypothesize what happens in the in-between?

The deflationary forces in the Canadian economy are so strong that bonds are likely to be bid as a sort of preservation of capital trade. Additionally, as consumer debt expansion is stopped dead in its tracks on account of the falling housing market, bonds should have a fairly strong bid as people race to repay debt as risk premia rises.

Canadian yields have been higher than US yields for the past 30-35 years, so I would expect the opposite for the next 30-35 years, along with a strengthening CAD$ as deflation takes hold. In reflection of the superior metrics of the Canadian economy particularly lower per capita debt to GDP.

I suppose a future NDP government (??) could royally mess things up fiscally, but that seems hard to imagine they’d do any worse than the sort of damage done by the Tories/Liberals, particularly with reckless CMHC policy and government spending.

#33 sockeye sam on 07.30.15 at 8:34 pm

94 Million Americans not working and the ones who can are squeezing mustard on a bun.That interest thingy will be changed back to zero in about four weeks around Oct/17/2015. The Americans have one of the lowest home ownerships in history.Listen to Trump He’ll tell you what’s wrong. To much to list. Q.E. four here we come.

#34 Freedom First on 07.30.15 at 8:36 pm

Yes. Individual stocks are for people with a high net worth, or, people who need to be taught a lesson. Any one asset strategy is for people who need to be taught a lesson. There is investing, and there is gambling. There is sound financial principles, and there is financial lunacy. This Blog is about learning the financial lessons the easy way. The [email protected], the RE people, the msm, the mil, the bil, the co-worker, all one asset hawkers, well, you’re going to learn financial lessons from them, but you are sure going to end up being pi$$ed off, and on.

#35 Paul on 07.30.15 at 8:36 pm

Liar loans I am shocked shocked I tell you!

The shocking part is now it’s news,
It’s been almost standard operating procedure Always.
Weather it’s liar stated income,credit card down payments, Phoney employment letters,
Parent gifted down payments, Seller take back hidden second mortgages, Shadow buyers, Just to name a few.

When the music stops make sure you have a chair!!

#36 Dominoes Lining Up on 07.30.15 at 8:40 pm

Ads from this company are all over Ontario radio and cable channels lately. They boast that they have almost no lending standards whatsoever.

Sort of explains what stage of the game we are in, sadly.

“Need to borrow money? Own your home? You’re Approved!”

https://www.youtube.com/watch?v=nsU3cA3BIO4

“Your income and credit not an issue”

http://alpinecredits.ca/

#37 Lukas on 07.30.15 at 8:45 pm

You make it sound like a US rate hike is a sure thing while the market is pricing a 50% chance…i, on the other hand, believe is less than a 50%…perhaps 20%. With respect to Home Capital…the guys shorting it is wrong…my first trade tmr is buy HCG and expect at least 20% return by year end…

#38 Julia on 07.30.15 at 9:02 pm

What makes anyone think that there is nothing like this with brokers dealing with major Banks? There is.

Anytime people are paid a commission or a success fee, there is the incentive or temptation to be creative in order to get more business. You will for sure find some bad apples in there.

#39 Musty Basement Dweller on 07.30.15 at 9:07 pm

No not feeling at all smug as a tax payer who is indirectly sponsoring the debt orgy courtesy of CMHC policies.

#40 Ronaldo on 07.30.15 at 9:12 pm

Congratulation Garth on touching the HCG subject, it’s funny it is an american that is exposing them and fighting their shorting squeeze. Well they are the canary in the coal mine, one the size of an turkey that doesn’t fly. Problem for canadians is that they are not the only ones, credit unions backed by provincial government are even worse. Look no further than 201/ when the housing market dropped 5% in BC Cristy Clark gave 10.000 incentive for buying a new house, droppings prices are just not acceptable here.
I am lay to check HCG exposure to the western provinces, 1/3 laid off oil workers are from BC 1/3 from SK rest from AB and eastern CanadA. Now the total number is debatable but can be north of 30.000… Think about when EI is running out and cannot pay for all the toys bought last year. Nobody saves, “fools” that are visiting this blog are A minority. Invest accordiny, too bad we cannot short CMHC

#41 anotherstabbinginsaskatoon on 07.30.15 at 9:17 pm

A biker war is brewing. The FN gangs are jacked. The electorate are clueless. We will need Judge Dredd to work this mess out. People think the Cartels are violent. This New World is a turning into the Old. Next step: Strife

#42 Investorz on 07.30.15 at 9:19 pm

Home Capital did not verify the incomes of applicants because it doesn’t have to?

Incredible story.

If the house bubble burst, this will be the beginning of the documentary made about it.

#43 Angel on 07.30.15 at 9:28 pm

Smoking Man do you remember me from the Seneca Casino? I hope to see you again real soon because you told me that I was your #1 lady and we can hook up in Stir Room. Do you remember what you promised me? I am looking forward to a trip on your rider craft to take me for a flight over Area 51.

#44 Randy Randerson on 07.30.15 at 9:29 pm

Surprise! HCG’s price actually shot up 13% today. I wonder why the negative news actually caused it, seems counter-intuitive.

#45 Nabatts on 07.30.15 at 9:29 pm

Garth – there is little chance the fed will move in September. Check out the fed futures. Oct or December…maybe. September…no chance.

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=b0741ed4-c711-4060-b9fa-e7e4b6b2a979

#46 Macrath on 07.30.15 at 9:38 pm

not verify the incomes of applicants, because it doesn’t have to.
——————–

Years ago while selling a property in the big smoke I mentioned to my Realtor® that it looked liked all these people viewing the property didn`t have any money.

His reply was “I can`t discriminate against people on account of they ain`t got no money”

Thats when I realized sooner or later this ship is going down.

#47 pinstripe on 07.30.15 at 9:39 pm

at the coffee shop today the excitement was about the fed election this fall.

No one cares what harpo and his lap dogs do anymore, because they have set policies to destroy Canada.

the main interest is whenthe advance polls start. everyone wants to be there at least a half hour before the doors open.

#48 CMHC a ponzi backed with taxpayers money on 07.30.15 at 9:48 pm

#19 David on 07.30.15 at 7:25 pm
The housing bubble market needed this shadow banking system to keep the game going. It is way late in the day to try and reign in this industry through regulation.Big haircuts on the horizon.

http://wolfstreet.com/2015/07/30/canadas-highly-touted-conservative-mortgage-standards-sink-into-liar-loan-scandal/
____________________________________

This is just a tiny tip of a massive iceberg and every realtor and mortgage broker knows it. Everyone knows if they open the books to see what mortgages CMHC is holding the ponzi scheme would be over. CMHC holding loans that will never and can never be paired back.

#49 bigtowne on 07.30.15 at 9:53 pm

Oil has a ways to go before it reaches a level of confidence. Anybody out there considering dipping into the oil patch…Caution advised…some turbulence is a given.

#50 CMHC a ponzi backed with taxpayers money on 07.30.15 at 9:54 pm

#44 Randy Randerson on 07.30.15 at 9:29 pm
Surprise! HCG’s price actually shot up 13% today. I wonder why the negative news actually caused it, seems counter-intuitive.
___________________________________

HCG is still down 43% when you include the 13% up day today which was short covering . You mortgage brokers love to lie with numbers. There needs to be an audit on all mortgage loans on the books with CMHC.

#51 Curious George on 07.30.15 at 10:12 pm

Appreciate your reply, Mark!

Re:

“I suppose a future NDP government (??) could royally mess things up fiscally, but that seems hard to imagine they’d do any worse than the sort of damage done by the Tories/Liberals, particularly with reckless CMHC policy and government spending.”

At this point, the question is, who’s the future Canadian version of Bush left holding the bag? ;-)
Economic hot potato.

#52 Nagraj on 07.30.15 at 10:14 pm

“The largest ‘alternative mortgage lender’ in the land” was a popular short – this I knew. What I did not know: that for some time it was the object of an OSC investigation.
Did YOU know about the OSC probe?
Well, did you?
Speak up.
Pussy got yer tongue?

MSM & friends were under what constraints to not even whisper that there might be a rumour that the OSC had targeted Cockroach Capital? Legal constraints? Unwritten club rules?

Seems to me that when the American SEC ocasionally yanks some dog’s chain we usually find out about it.

Of course I’m a country hermit and things do fly over – even so, even now it takes an American like Wolf Richter to call prevaricating Canadian establishment bastards prevaricating bastards.

Canadians resorting to LIAR LOANS? Oh, Joe, say it aint so!

Wonder whom the OSC isn’t investigating . . .

#53 Washed Up Lawyer on 07.30.15 at 10:16 pm

Hon. GT:

There are many elephants in the room but I think you have overlooked a biggie.

HWM!!! Hot Wisconsin Money.

When the TPP trade deal is crammed down our throats and the Canadian dairy industry collapses, those ill gotten gains of the Badgers will flood north like a tsunami.

HWM will not enter the real estate market in Toronto (with the exception of the vast wealth of retired Badgers). Generally they are smarter than that. It is more likely to show up in the price of Blue Jays season tickets, Bratwurst and beer sales. Buy now or forever be shut out of the market. Short Canadian skim milk now.

Those foreign investors are hard to spot. They wear plaid shirts and look just like us. Some clues. They do not say “aboot” or “eh” and they have faint Scandinavian accents.

#54 Apples N Oranges on 07.30.15 at 10:18 pm

#41 anotherstabbinginsaskatoon on 07.30.15 at 9:17 pm
A biker war is brewing. The FN gangs are jacked. The electorate are clueless. We will need Judge Dredd to work this mess out. People think the Cartels are violent. This New World is a turning into the Old. Next step: Strife”

Maybe the Feds can enlist one of the Motorbike Gangs to do income verification on mortgage verifications….the MGs do a pretty good job keeping the great unwashed under control at strip clubs, so maybe a bit of diversification is in order….

#55 Ret on 07.30.15 at 10:19 pm

Home Capital Group found a problem, took action, and went public on it. I don’t think that this makes them the poster boy for all of the liar loans in Canada.

The real story is in what is not being said by all of the other financial institutions who probably have used some of the very same brokers. Crickets.

Drive through a new survey of $5-800,000 homes and look at the people. When you see homes with not one bit of landscaping, uncut grass, old cars, taxi cabs and tow trucks in driveways, etc., you have to wonder how they qualified for the mortgage.

#56 Apples N Oranges on 07.30.15 at 10:23 pm

#8 Nosty, etc. on 07.30.15 at 7:00 pm

Sideshow: “If these pieces do turn out to be from MH370, it means that all those surveillance satellites up in orbit are no more effective at finding things than the NSA is at finding real terrorists and criminals (not to mention Lois Lerner’s and Hilary Clinton’s missing emails)!” (wrh.com.)”

Should have just hired Snowden or some other intern to investigate at $10/hour…..very cost effective and he would have found 370 already

#57 Paul on 07.30.15 at 10:34 pm

Seventy days or so for the campaign, doesn’t it seem kind of long . Any chance for a mid September Election Day?

Yes. — Garth

#58 IKnow on 07.30.15 at 10:34 pm

Garth: do you think YVR single family house price can drop more than 30%?
I tend to think not, as much as I would love to see better affordability, to restore a bit of those better bygone days, when lives were simpler and much less thought about real estates as speculation.

Many people had cashed out, and would become the source of that “pent up demand”.
As soon as price corrects by 20% or so, these buyers will jump back in fearlessly.

Don’t ever underestimate how much local ethnic Chinese lust about land.
Hong Kong type valuation is like a ghost hovering.
More than that, it’s more and more a status symbol, land barons vs. commoners.

Sad but true, soon many Vancouverites will gladly hand over $2M to own a tiny lot, just to be in the club, the club of owning dirt in this singular corner of lower mainland.

#59 DON on 07.30.15 at 10:39 pm

#9 Mark

“Doesn’t strike me as an environment which can sustain any meaningful amount of rate increases”

***********************
Nothing they have done is logical. Perhaps its more about perception at this point. Raising rates to enforce the notion the US is beginning to emerge from the aftermath of the financial corruption. They definitely seem to be losing influence in the global community, especially with the BRICS and SCO ramping up.

Look at Malaysia the PM fired his deputy and the Attorney General who was investigating major 700M personal slush fund. BC Gov currently over there making a bad (for taxpayers) LNG deal with the state owned energy company which reports directly to the PM. Talk about Nutty. Especially as the price is going lower. (all about perception, just like the herd)

I believe in the ‘bad behavior trickle down effect’ though. If your leaders misbehave or our corrupt some of their followers continue the behavior and so on and so on and so…! The cycle of corruption.

Sanity and logic will come back as we revert to the mean. Human behavior complicates the best of theories.

On a lighter note: Saw a good bumper sticker the other day,

“Horn Broken”
“Wait for Finger!”

#60 Leo Trollstoy on 07.30.15 at 10:48 pm

At this point, the question is, who’s the future Canadian version of Bush left holding the bag? ;-)
Economic hot potato.

I’m looking forward to seeing what Mulclair can do with this bag :D

#61 DON on 07.30.15 at 10:50 pm

#30 Leo Trollstoy on 07.30.15 at 8:11 pm

Underground and MSM all seem to agree that our economy is in the pooper. I’m assuming no hike before election and poor future PM who has to devastate the masses within his first few months.

I hope it’s the NDP in power when this happens :)
– See more at: http://www.greaterfool.ca/2015/07/30/lessons-6/comment-page-2/#comment-387130

*************************
In that case I hope Harper gets the Minimum of seats for a MINORITY government and has to eat it while his stupid actions are blocked by the other two parties.

There is a good chance in this happening.

#62 Balmuto on 07.30.15 at 10:50 pm

“Surprise! HCG’s price actually shot up 13% today. I wonder why the negative news actually caused it, seems counter-intuitive.”

Sell the rumour, buy the news.

#63 Leo Trollstoy on 07.30.15 at 10:52 pm

Blog dogs are funny. They focus on the irrelevant. Like 20 and 30-somethings making a few hundred thousand and the perfect exact timing of the Fed rate hike.

Get a life.

Fed will hike soon enough. And Canada will follow shortly after. If you haven’t prepared by now, you’re hooped anyway.

And for those who invested in gold and only Canadian equities, I feel badly for you. Good luck. Hopefully the future NDP government will be able to help you out.

#64 Chef Derrick on 07.30.15 at 10:54 pm

If rates go up in September, Garth deserves fillet mignon. If rates do not go up in September it’s salisbury steak!

What will Garth be dining?

#65 Retired Boomer - WI on 07.30.15 at 10:57 pm

Nothing to say today

Sad to see the mortgage developments & disclosures.

We shall see IF interest rates get raised (EVER)!!!

In the meantime….

#66 no biggie on 07.30.15 at 11:04 pm

No biggie Garth.

You forgot to mention that our government in their dying months bought us Iron Dome, we are protected now.

#67 My Wife Loves Garth on 07.30.15 at 11:05 pm

Fake job letters, T4’s and paystubs are common place amongst
mortgage brokers in the GTA. Even fake Notice of Assessments can
be bought.

Hold tight…this Home Capital expose is just the tip of the iceburg.

#68 tundra pete on 07.30.15 at 11:12 pm

We all flock to this pathetic blog like a lawyer chasing an ambulance. Rubbing our meat hooks together just lusting for some blood. Will certainly not end well for many.

Truly sad part is many of us responsible and dilligent will be rudely awoken by a future groveling politico preaching the shortfall of the CMHC and that we will have to tighten our belts and cover the asses of the liar lone, house horny debt whores. This will be the shit eating grin of our new leader blaming the old one for their mess. Canadian eh?

#69 cramar on 07.30.15 at 11:12 pm

#27 David Lee on 07.30.15 at 7:55 pm
Garth,

I bet this young man brings tears to your eyes:

http://www.theglobeandmail.com/globe-investor/personal-finance/smart-savers-keep-their-housing-options-open/article25786383/

—————

He is doing a lot of things right, but it would be better if he had dug in his heels and stated, “There is no way I’m going to be suckered into buying a house in this bubble market!” Instead, he is not sure. With his salary, it is insane.

Maybe we should take bets on whether he will cave in due to his house-horny wife.

#70 Capt. Obvious on 07.30.15 at 11:14 pm

OMG why do blog dawg people think they know more about the state of the U.S. economy than the Fed? The arrogance is galling. Janet is TELLING you what they are going to do. Pay attention.

#71 Tim on 07.30.15 at 11:26 pm

Does this mean prices in Courtenay Comox will go down because all the Calgarians will sell their rec properties? Should I wait to buy there?

#72 bears left crucifixions right on 07.30.15 at 11:28 pm

Garth

These guys are forecasting 7-10 year bear market for stocks…..the couch potatoes could get scalloped if this happens….what’s yer view?

“http://www.businessinsider.com/investors-are-ignoring-bear-market-signs-2015-7?IR=T

Right now, stocks as a whole present very little in the way of potential reward. According to Grantham’s firm, investors should probably expect to lose money over the coming seven years in real terms (after inflation). Other measures (explained below), very highly correlated to future 10-year returns for stocks, suggest investors are likely to earn very little or no compensation at all over the coming decade for the risk they are assuming in owning stocks.

#73 Defrauded on 07.30.15 at 11:45 pm

Fed rate hike Garth? Creator of Reganomincs and ( former Deputy Secretary of the US Treasury, former Wall Street Journal Editor Dr. Paul Craig Roberts says it won’t happen, now or ever… ( in the foreseeable future )
His position on Gold… won’t soon recover… Plunge Protection Team will keep USA stocks up… For the foreseeable future too. All based on market manipulation i.e. fraud.

Here’s why…
https://youtu.be/Ru9mtz9-3ls

If you would rather read his words than watch him speak them then…

http://usawatchdog.com/fed-most-certainly-will-not-raise-interest-rates-paul-craig-roberts/#more-15977

Canada’s only hope is riding on the coat tails of the USA, and that appears to be a faint hope indeed.

#74 Greg on 07.30.15 at 11:49 pm

So if the “liar loan” brokers committed fraud why would CMHC continue to insure the mortgages? ie why are taxpayers on the hook for this behaviour?

There really is little incentive to be a “saver” in this economic environment.

#75 Guy Willoughby on 07.30.15 at 11:52 pm

I just finished reading an article by Casey Research that Deutsche Bank is saying that Canadian housing market is over priced by 63% and due to oil prices collapsing by about 52% and the consequent layoffs, there could be a major collapse in the housing market coming soon.

#76 beam me up scotty on 07.31.15 at 12:06 am

A sobering snap shot of Vancouver:

So – I walked out onto my balcony a week or so ago – early morning – and 29 stories below on the south east corner of False Creek a gaggle of twitterpated lemmings were camping out waiting for the doors to open so they could rush into Concord’s ‘Creek’ sales center and scoop up a condo at YVR’s insane prices.
(They’ll be finished in 2017 I think.)

The television ‘news’ vans were there, cameras trained, talking air heads doing sound checks and lip glossing – in breathless anticipation of the momentous event.

http://bc.ctvnews.ca/buyers-wait-in-line-for-days-for-false-creek-condo-presale-1.2487993

100 feet away a homeless couple was also camping out – sleeping under a tattered blanket on the gum encrusted concrete under the glass gazebo in the green space just beyond the parking lot.

You’re right Garth. This isn’t going end well – not well at all.

#77 liquidincalgary on 07.31.15 at 12:13 am

Weatherford (oil and gas services) is closing it’s Red Deer office. employees have been offered positions at other locations; however, were warned that those offices may soon be closed as well.

#78 whitehorn on 07.31.15 at 12:23 am

#44 Randy Randerson “Surprise! HCG’s price actually shot up 13% today. I wonder why the negative news actually caused it, seems counter-intuitive.”

Yes, will be interesting the direction of Home Capital in the next few months to a year out. It is correct, up 13 percent today at 32.18 (52 week low levels 26.98) from 55.84 (52 week high). This could simply be a strong blip up before this bursts. The direction “could” be a good indication of Canadian Housing going forward. Also, based on the media “justifying (always a bad sign)” continuance of higher house prices on a steady basis till your sick of reading it, tells me the top has been reached.

#79 Steve French on 07.31.15 at 12:28 am

It’s Friday down in ‘Straya. Beer me.

Property collapse will have to wait to tomorrow.

R-I-P Cecil the Lion.

We all got it comin’, kid.

#80 LA Transplants on 07.31.15 at 12:30 am

I do not comprehend what all the fuss is about with Vancouver prices being so “expensive.” Wifey and I currently reside in LA. We spent the last week and a half in Van to preview some nice places in downtown. Stanley Park was lovely. We are prepared for a move North to one of our three favorite places on the West Coast. Wifey has dual citizenship. Price per square foot Vancouver is exactly on par with Seattle. Vancouver is considerably less expensive than San Francisco. We checked out 12 high end pads over three days in the downtown core of Vancouver. All in we found it extensively less expensive in Vancouver than Seattle or San Francisco especially when you consider three things. Exchange rate conversion to the greenback which is an instant 25% discount, monthly HOAs are at minimum 40% to 50% less in Vancouver even in older buildings, and taxes are unquestionably 70% less or more than in Seatown or San Fran. Vancouver looks more like a bargain basement when everything is taken into account. Still we cannot bring ourselves to make the move back to her hometown. We are not prepared to live in a city that offers less experience overall. Granted we can afford just about any place we choose but we walked away disappointed. Prices in Vancouver compared to Seattle and San Francisco seem to be about where they should be. Van was missing something tangible although the experience was pleasant enough. We have concluded we will pay the price of admission and be content with higher dues and taxes to own either 230 km or 1,500km South of Vancouver.

-Topher

#81 Mark on 07.31.15 at 12:46 am

“Surprise! HCG’s price actually shot up 13% today. I wonder why the negative news actually caused it, seems counter-intuitive. “

Short squeeze most likely. Remember Air Canada shares in 2003? The company went into CCAA, implying the common shares would be rendered worthless, yet the shares still bounced up and down like crazy as traders played their games.

If the US subprime collapse circa 2007-2009 is any precedent, lenders with the model of Home Capital are basically dead meat. And rightly so — nobody would rationally take out a mortgage with them if they qualified for a much cheaper CMHC-guaranteed subprime mortgage.

#82 Mark on 07.31.15 at 12:53 am

“Many people had cashed out, and would become the source of that “pent up demand”. As soon as price corrects by 20% or so, these buyers will jump back in fearlessly.”

Those sellers are few and far between, and a great many of the sellers have their asset tied up in, you guessed it, assets that are intrinsically linked to value/performance of the housing market such as Credit Union-issued GICs. Ownership rates are at a record greater than 70%. There is no pent-up demand, and there is still a huge RE supply industry which is perfectly capable of satiating any further demand.

Additionally, nobody likes to buy assets when they’re going down in price. Psychology is that if something is 20% off, why not wait till its 30% or 40% off. Just as most never sell at the top of the market, people rarely buy at the bottom of the market either. Most of the sellers will likely just pat themselves on the back for selling at a decently high price, and stick to their other investments which, if selected to be decently counter-cyclical, should be performing very well at such point. Its just human nature!

#83 Ronaldo on 07.31.15 at 1:04 am

#40 Ronaldo –

I didn’t realize there were two of us. Are you new to this blog?

#84 kommykim on 07.31.15 at 1:14 am

RE: #45 Nabatts on 07.30.15 at 9:29 pm
Garth – there is little chance the fed will move in September. Check out the fed futures. Oct or December…maybe. September…no chance.

Just because traders place certain bets doesn’t mean that it’ll come to be.

#85 This hopefully ends well on 07.31.15 at 1:39 am

If we’ve been waiting for a real-estate crash
and if we are diversified, have cash
and manage to keep our jobs

this ends really well.
-Renter

#86 Jimmy on 07.31.15 at 1:40 am

Comments are sure low.
Everyone must be on vacation.

These numbers show the wealth migration story for Vancouver is far from over:

http://m.scmp.com/comment/blogs/article/1843069/millionaire-migration-canada-didnt-fall-after-investor-schemes-axing

#87 WhoLikeShortShorts on 07.31.15 at 2:53 am

Was at a dinner party tonight in YVR and of course the conversation turned to RE. Low interest rates and the bubble will never pop here where being thrown around. Everyone there is well educated and makes pretty good money. I bite my lips and went over and played with the young ones. We had a great conversation about cartoons and animals.

#88 BS on 07.31.15 at 2:58 am

Home Capital Group found a problem, took action, and went public on it. I don’t think that this makes them the poster boy for all of the liar loans in Canada.

LOL…HCG got told there was a problem so they had no choice but to ‘investigate’ and they then got told by regulators to report the problem publicly. Like they would have done this on their own. NO WAY.

HCG and others know how this thing works. Just follow the ‘CMHC rules’ and the mortgage is insured. CMHC rules and all checks and balances are by design there to approve anyone with a pulse. HCG and CMHC were not interested if people actually had any income at all. Just give the loan. As long as they could check the box ‘letter from employer viewed’ all is well.

Unless we see charges for fraud for both the brokers and people who presented the fake income letter, the CMHC insurance canceled on the basis it was fraudulently obtained and the actual recall of the loans by HCG you know this was one big scam from CMHC on down. You will not see any of this because that would mean people would need to testify under oath and the truth would come out. CMHC orchestrated this whole thing. HCG is just the beginning.

Anyone notice the coincidence on the this announcement and the new CMHC rental income policy? The recent CMHC rental income changes are the new scam now the cat is out of the bag on this income letter scam. No income? No problem, just give me a letter you can rent out each bedroom for $1000 per month. No need to fake an employment letter now. Even easier. Just sign your own income letter.

#89 Londoner on 07.31.15 at 5:14 am

From yesterday:

Saying what? That I know more than anonymous you? — Garth

Saying that if you want advice on how to avoid taxes you don’t call the CRA.

From today’s post:

“Home Capital (in its defence) said it did not verify the incomes of applicants, because it doesn’t have to”

From my own limited experience, any time a mortgage application qualified for default insurance, the underwriter used to fast track the approval – many times without any income verification. Applications for traditional mortgages, which did not require insurance, were subject to a lot more scrutiny.

#90 davikk on 07.31.15 at 6:09 am

Liar Loans Pop up in Canada’s Magnificent Housing Bubble

http://investmentwatchblog.com/liar-loans-pop-up-in-canadas-magnificent-housing-bubble/

#91 Keep Trying on 07.31.15 at 6:38 am

Here you go again with spreading false information. Your US GDP number is a little high and actually below expectations. The only reason the 1st quarter was revised higher was because they changed the way of calculating it AGAIN! Keep trying.

#92 jane 24 on 07.31.15 at 7:07 am

On the plus side Garth this blog, which I have read for years, was getting a bit ‘samey’ over the last few months. Now you will have enough material to keep you going and us reading for years.

It is a perfect storm for Canada with no way out. No-one not even the Red Prince Trudeau can keep these balls in the air. Sheer mismanagement on a massive scale. There is no other way to describe it.

Yet no-one is rioting in the streets yet. It is quite amazing what Canadians will just sit there and take.

#93 eddy on 07.31.15 at 7:48 am

re: unverified income or liar loans

Someone has to explain how the creditworthiness of a borrower in a collateral loan is in anyway a risk to the lender. If the borrower defaults, lender gets a house.
Notice the RBC startup screen at their ATMs has an add
for ‘newcomers’ with no credit history in Canada.
They say it’s no problem.

#94 Contrarian Coyote on 07.31.15 at 8:05 am

#55 Ret on 07.30.15 at 10:19 pm

Drive through a new survey of $5-800,000 homes and look at the people. When you see homes with not one bit of landscaping, uncut grass, old cars, taxi cabs and tow trucks in driveways, etc., you have to wonder how they qualified for the mortgage.

I saw a lot of this while renting a house in Calgary SW last year. Wife and I would walk around the neighbourhood in the evening and wonder how the hell some families were able to live in some houses. I suppose some were renters like us or made money up in Northern Alberta when times were good.

Now I’m seeing similar things where we live outside the GTA in cottage country. I’m meeting young couples working in retail buying homes in the low to mid 200K. Does Telus and Bell have some super secret profit sharing plan for retail sales reps? Maybe the couples read this blog?

Happily renting and working towards building a diversified portfolio. Love this blog!

#95 Turtle on 07.31.15 at 8:31 am

#86 Jimmy

Comments are sure low.
Everyone must be on vacation.

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

People are trying to figure out what kind of animal is “tofu”.

#96 Turtle on 07.31.15 at 8:41 am

#80 LA Transplants

I smell a RE agent in here. But anyways…

“Price per square foot Vancouver is exactly on par with Seattle.”

Seattle vs. Vancouver?? Give me a break…. 600K vs 2,200K??

#97 MessageInABottle on 07.31.15 at 8:54 am

Maybe the reality is that interest rates will hover near record lows for quite some time? US gdp 2.3, lower than expected. With 19 Trillion in debt, low GDP, disappointing corporate earnings, and today’s headline that wage growth falls to record slow pace the reality is the economy is as close to anemic as it is the juggernaut that Garth likes to suggest? We need a housing correction, as we also need a stock market correction? Perhaps we get both. With low inflation, if the Fed raises rates by .25% in September it is more likely that they will launch QE4 than it is that they will continually increase rates over the next 24 – 36 months as Garth advertised the other day.

#98 Llewelyn on 07.31.15 at 9:08 am

Several contributors to this blog have concluded that the economic recovery in the United States has been driven by the private sector. What they may be interested to know the percentage of private sector growth that is actually supported by government debt.

While nearly every country in the world has come to rely on borrowed funds to stimulate their economy the United States and Japan have taken Keynesian economics into the stratosphere.

Total government expenditures in the United States in 2015 are estimated at $6.23 trillion.

Of this total over $830.0 billion, or 13.3% of total expenditures, will be funded through the assumption of long-term debt. As large as this total deficit seems it pales in comparison to the deficits of $2.0+ trillion incurred in 2009 and 2010.

The hope of all governments in the USA is that priming the pump with over $6.0 trillion of long-term debt since 2008 will generate sufficient revenue to service total debt obligations and eventually begin to reduce the actual size of debt.

I would point out that increasing a GDP valued at $18.0 trillion in 2015 by 2.5% represents an annual increase of only $450 billion. Of this increase total government expenditures related to population growth, inflation and increased debt service are projected to consume a minimum of $210 billion. Not much GDP growth left to sprinkle among a population of 322 million

A substantial portion of government expenditures related to improved health care, supporting the military, social security, infrastructure, government employees, etc. end up on the balance sheets of private corporations and create employment opportunities and profits for shareholders.

I would really like to see a chart prepared by an independent source indicating the percentage of GDP growth actually being supported by long-term debt.

I am not an economist and I certainly do not consider myself a sophisticated investor but I can read.

Borrowing $830 billion in the hope of increasing GDP by $450 billion does not look like a super healthy economy to me. Financial institutions and shareholders in businesses benefitting from government debt might be cheering but at some point in time voodoo economics where going into debt is applauded must end.

This is one man’s opinion for what it is worth!!!

#99 Smoking Man on 07.31.15 at 9:13 am

Wow

GDP Y/Y 0.05 another cut by BOC on the way.

What’s so cool. Toronto GDP up.

Long Branch Bungs 1.5m next spring? Nah… Mabey.

#100 H on 07.31.15 at 9:18 am

Wow–look at what we have here. US wage pressure right?

Nope

Wage pressures reported were the LOWEST on record. One would surmise this number would be heading up with all this job creation right???

Don’t worry Garth. You were still right about the September increase.

You just made an error on the year. Should be September 2016. A full 10 years since the last hike.

#101 H on 07.31.15 at 9:25 am

The slowdown suggests that companies are still able to find the workers they need without boosting pay, a sign the job market is not yet back to full health. That could cause some Federal Reserve officials to push for a delay in any increase in the short-term interest rate they control.

“Despite a tighter labor market, and all of the stories about pay increases at various large firms, wage growth is not picking up meaningfully,” said Jennifer Lee, an economist at BMO Capital Markets. “This may not sit well with (Fed) policymakers.”

#102 Doppelgänger on 07.31.15 at 9:34 am

#83 Ronaldo on 07.31.15 at 1:04 am
#40 Ronaldo –
I didn’t realize there were two of us. Are you new to this blog?
—————————
Ronaldo, it’s probably Messi.

#103 CHERRY BLOSSOM on 07.31.15 at 9:34 am

If you have no money and want to buy a house the banks will lend you the down payment so that it is insured by CMHC. When the deal closes they then add the amount of that loan to your mortgage. I wonder if CMHC is still on the hook for a scam like this. CMHC should not be on the hook and teach these banks a lesson. Our Canadian Banks have LOST THIEIR ETHICS. They are not the banks of yesteryear that we used to trust.

#104 Steve French on 07.31.15 at 9:43 am

You’ll wind up in some factory
That’s full-time filth and nowhere left to go
Walk home to an empty house
Sit around all by yourself
I know it might sound strange but I believe
You’ll be coming back before too long

Don’t go back to Rockville, don’t go back to Rockville
Don’t go back to Rockville and waste another year !!

https://www.youtube.com/watch?v=E1lioyEbVCs

#105 pinstripe on 07.31.15 at 9:47 am

l went to early coffee this morning as the stories are getting better with the fed election coming up.

harpo is moving ahead to destroy Canada. the fear mongering about terrorism and senate reform is nothing but a mirage. most Canadians are being betrayed with the harpo policies.

the alberta pcs with apprentice as leader took the same path only to have most Albertans throw them out the door.

http://brentrathgeber.ca/if-the-senate-is-to-be-abolished-will-the-house-of-commons-be-next/

#106 gut check on 07.31.15 at 9:47 am

@ #70 Capt. Obvious on 07.30.15 at 11:14 pm
OMG why do blog dawg people think they know more about the state of the U.S. economy than the Fed? The arrogance is galling. Janet is TELLING you what they are going to do. Pay attention.

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

When I was in high school one of my friends became pregnant. Her belly grew and grew but she kept denying that it was a pregnancy, choosing to tell us that she had a rare condition. No one believed her. (except me, because she was my friend and I trusted her)

Well, her kid is 25 years old now.

Why do people like yourself rise up to defend the proven liars? You’re not even saying, “well, we’ll see what happens” you’re outright indignant that anyone would dare question the mixed message of an authority figure.

Do you think one day someone’s going to reach over, pat you on the head and tell you you’ve been a good dog? You certainly are well trained, after all.

#107 Steve French on 07.31.15 at 9:48 am

There’s the progress
We have found a way to talk around the problem
Building towers
Foresight isn’t anything at all

Buy the sky and sell the sky
And bleed the sky and tell the sky

Fall on me (what is it up in the air for)
Fall on me (if it’s there for long)
Fall on me (it’s over, it’s over me)
Fall on me

https://www.youtube.com/watch?v=lf6vCjtaV1k

Damn….

those were good tunes…

#108 Daisy Mae on 07.31.15 at 9:51 am

#1: “On a local AM radio station here in greater Vancouver, I heard a commercial for a MB which claimed that he could get you approved with no proof of income. It might been CKNW 980 or News 1130.”

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

And how about that singing guitar-playing dude on the TV commercial promoting payday loans….the answer to so many prayers?

#109 gut check on 07.31.15 at 9:57 am

@ #92 jane 24 on 07.31.15 at 7:07 am

It is a perfect storm for Canada with no way out. No-one not even the Red Prince Trudeau can keep these balls in the air. Sheer mismanagement on a massive scale. There is no other way to describe it.

Yet no-one is rioting in the streets yet. It is quite amazing what Canadians will just sit there and take.

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

It really is astounding. But as I’m learning the hard way most people are trained not to complain, not to doubt the talking heads, and to feel helpless. I was shocked to see how many people just believe whatever headlines roll across their screen, and choose NOT to pay attention to the fact that our governments are owned by the corporations and those small handful of corporations own the media.

Ergo what we are getting as ‘news’ is just a PR campaign.

If you add to that the fact that billions upon billions of dollars have been spent figuring out how to manipulate human behaviour (with more than just soft science – now with hard methods as well) you can see that the corporations have the perfect environment in which to grow the citizenry of their dreams! (did I say citizenry? I mean consumer base.)

Science is co-opted
Law is co-opted
Information is co-opted
Labour is co-opted

There is a way out, but people will NOT take it. Most people won’t, anyway. And, unfortunately, we need a critical mass to make it work.

LOCAL economies are the key.
Finding ways around the current paradigm is the key.

But hey, I still can’t even convince people that it’s quite safe to bank at PCfinancial so I think a lot of people are good and lost. They’ll keep paying their fees and complaining about them. smh

#110 H on 07.31.15 at 10:01 am

I believe this little chart will be on the opening screen at Jackson Hole.

http://www.bloomberg.com/news/articles/2015-07-31/worker-pay-in-u-s-rises-0-2-smallest-gain-in-records-to-1982#media-2

#111 Keith in Calgary on 07.31.15 at 10:13 am

We are now entering what I will call the “manufactured discovery phase” of the crisis……..this is where if all publicly unfolds and the rats scurry for cover amid the fog of denial, because said rats have realized the game is over.

This is where disclosure of all the issues which those of us bears knew already existed, but the RE advertising driven media deliberately chose to ignore, as did our politicians, and the “regulators”.

Once any economy enters this stage of “any” crisis it’s too late to turn back, for when the public statements about the approaching shit storm start to appear, it is to late to turn the bus around, for the highway it is on has no shoulder on either side, only a cliff to oblivion……………

#112 Smoking Man on 07.31.15 at 10:27 am

It’s git to be late in Australia. Friday night.

Steve French is hammered.

Takes a drunk to know one.

#113 gladiator on 07.31.15 at 10:36 am

WHOA!
I just discovered something really peculiar.

Garth is saying that a mid-September election is quite possibly in the cards. Now, pay attention to the timing of the Bank of Canada rate announcement dates – there is one scheduled for September 3rd ( http://www.bankofcanada.ca/2014/07/boc-2015-schedule-fad-mpr-releases/ ).

If I were in charge, I would throw this last bone to the masses in order to get elected, and you all know what I mean: another rate cut on the 3rd, so that in mid-month the electorate, who is 70% home owners) gladly votes for me. And I would hurry things a bit, because the economy is crumbling under my feet already.

#114 gladiator on 07.31.15 at 10:38 am

Continuation:

… thus the push for a September election.

#115 BT on 07.31.15 at 10:48 am

The Canadian economy must be in the sh*****. Harper is sweating his way to call an early election to try to get in before stupid Canadians finally realize that their jobs and houses are at risk.

#116 gladiator on 07.31.15 at 10:57 am

Correction – BOC rate announcement is Sep 9th.

Even better – people high on rate cut endorphins will go to vote for the crack provider :)

#117 Llewelyn on 07.31.15 at 11:10 am

#103 Cherry Blossom

All government guarantees do is reduce or eliminate the financial risk undertaken by private companies supporting the issue of mortgages and mortgage backed securities.

At the end of the day the GOC covers 100% of CMHC insured mortgages in default and 90% of mortgages insured by private companies.

Since the GOC is the collector of revenues and the distributor of benefits to Canadian homeowners who find themselves in default the only real risk to the GOC is if homeowners in default are so poor that there is nothing for the GOC to collect. If that happens Canada will have much larger problems to worry about.

I have previously commented that Canadian homeowners who cannot come up a 20% downpayment must pay a healthy insurance premium to protect the shareholders of financial institutions. At the end of the day the only ones really at risk are homeowners in default.

Would you buy car insurance that required you to pay the balance of car loan to the dealer after an accident.

Neither would I!!

And you wonder why the profits of financial institutions are so high and the dividends so juicy.

#118 Keith in Calgary on 07.31.15 at 11:13 am

Harper knew the moment Alberta went 95% NDP that his time as PM, and the PC’s time as a ruling party were over nationally.

By calling an early election he is giving the opposition a chance to put their feet in their mouth as much as they can publicly, and have it hopefully sway voters that might be sitting on the fence.

#119 Mike T. on 07.31.15 at 11:18 am

my vote in the election is going to an idea

I am voting for the Highest Good

there is a blog out there that has become quite popular in the alt world, let’s call it Ken’s blog

here is Ken’s solution to our problem with government, replace the standing government with a coalescent one….it’s a simple idea, so simple it might work….

http://redefininggod.com/2015/07/solutions-part-1-why-standing-government-must-be-replaced-by-coalescent-government/

#120 Londoner on 07.31.15 at 11:21 am

#99 Smoking Man

GDP Y/Y 0.05 another cut by BOC on the way.
________________________________________

… and England takes the lead in the Ashes series… woohoo!

#121 LA Transplants on 07.31.15 at 11:22 am

Turtle yeah give me a break. You obviously are not with the program or with the times.

Vancouver property. Fairmont Pacific Rim. One of the best addresses in downtown. 1,815 square feet. 24th floor. Water view. $1,888,888 Canadian or $1,449,000 greenbacks. Home owners dues are only $1,200/month Canadian or $920/month in greenbacks. Property taxes are a fraction of what we expect to pay in Seattle and San Francisco.
http://realtor.ca/Residential/Single-Family/15231622/-2402-1011-W-CORDOVA-ST-Vancouver-British-Columbia-V6C0B2

Also in Vancouver is 277 Thurlow St. 4th floor. Water view. 1,683 square feet. $2,598,000 Canadian or $1,993,000 in greenbacks. $693 Canadian for home owners dues or $531 in greenbacks.
http://realtor.ca/Residential/Single-Family/15903902/-402-277-THURLOW-ST-Vancouver-British-Columbia-V6C0C1

Seattle property. Four Seasons. Also one of the best address in downtown. 1,992 square feet. 14th floor. Water view. $3,800,000 greenbacks or $4,954,000 Canadian. Home owners dues are $2,490/month in greenbacks or $3,246/month Canadian. Property taxes are $36,000/year in greenbacks or $47,000/year Canadian.
http://www.zillow.com/homedetails/99-Union-St-UNIT-1406-Seattle-WA-98101/84755294_zpid/

Also in Seattle is 1521 2nd Avenue. 1,723 square feet. 24th floor. Water view. $2,650,000 in greenbacks or $3,455,000 Canadian. Home owners dues are $1,309/month in greenbacks or $1,706/month Canadian. Property taxes are $16,000/year in greenbacks or $21,000/year Canadian.
http://www.zillow.com/homedetails/1521-2nd-Ave-APT-2404-Seattle-WA-98101/88879106_zpid/

These are four very similar properties. Fairmont vs Four Seasons. 277 Thurlow St, Vancouver vs 1521 2nd Ave, Seattle. These are only a few examples but for like properties in like locations and like views and square feet the data proves otherwise. We spent 10 days in Vancouver and consistently found this to be the case. It costs a bundle more to buy similar properties in downtown Seattle and we have decided it is worth it.

-Topher

#122 Calgary Rip Off on 07.31.15 at 11:30 am

Nothing to get excited about. Things happen at strange speeds in Calgary.

Best thing to do is mentally disconnect. Dont have control over things such as housing costs, all housing in Calgary is a total ripoff. That goes for renting, mortgage owning, whatever.

Its like accepting that you will die. Not if, but when. The day will come. Will you be ready? Better to focus on that than all this nonsense outside your control.

Modern society is about domesticated rats. People have zero control. Say you have a million bucks. Can you just go out and buy the house. No. Where did you get the money they ask? Can you build your own place? Yes, but with costly regulations. Everything is micromanaged. The only freedom you have is what you choose to do and think. You cant control outcome. Better to not focus on economy because the “big” people in charge dont know what they are doing and they all are evil.

#123 Josh on 07.31.15 at 11:39 am

Hi Garth,
I’ve spent the past year or so sorting myself out financially. My wife and I have are in our early 30’s and have made many of the mistakes that you describe almost daily here. So far we have gotten rid of most of our debt, ditched the condo and now happily rent and now have room in the budget and want to invest in a self directed, invested tfsa as you suggest.
The trouble is that I am having difficulty finding a vehicle to set this up with. Everywhere I turn I find a commission based cousin who wants to sell me mutual funds and big banks that want to do similar. I’m just looking for a reputable, reliable, reasonably priced vehicle with which I can invest my $100/wk into a tfsa. Can you point me in a good direction?

Thanks,

#124 Sheane Wallace on 07.31.15 at 11:40 am

the geniuses in charge of the economy:

https://ca.finance.yahoo.com/news/canada-gdp-unexpectedly-shrinks-may-fifth-month-124454665–business.html

Note: despite the crazy credit expansion. Imagine the fundamentals.

#125 Mister Obvious on 07.31.15 at 11:40 am

Article Headline in Financial Post today:

“Woman wants to quit job and become an artist, but two mortgages stand in her way”
—————————

Seriously? That poor lady.

The fact that such an item can actually exist in the MSM says lot about why I read this blog.

#126 Trump on 07.31.15 at 11:42 am

If Banks/CMHC etc ever are legislated to obtain income verification directly from CRA, the bubble will pop!!

There is a reason why mortgage brokers exist.

#127 Mister Obvious on 07.31.15 at 11:55 am

#74 Greg

“There really is little incentive to be a “saver” in this economic environment.”
———————————-

Quite correct. You need to become an investor. The days of risk free growth are well behind us. Best to get with the new program.

#128 Bottoms_Up on 07.31.15 at 11:56 am

#89 Londoner on 07.31.15 at 5:14 am
———————————————-
And from my own limited experience, I had the opposite experience of you.

High ratio mortgage, fully scrutinized and turned down by the bank (2 different major banks in fact). Even with a 10% dp. From a 3rd bank, once I had a decent income, they even still wanted a co-signer.

Go ahead — walk into any big Canadian bank today and see if you can get a $300,000 morgage without showing income. Ain’t gunna happen.

#129 Alberta Ed on 07.31.15 at 12:00 pm

I referred your last post to my ‘Conservative’ MP, requesting a personal reply, but haven’t heard back. He’s probably been too busy handing out bundles of cash.

#130 Chris on 07.31.15 at 12:10 pm

I’m doubtful that the election will be called for mid-September. The Ontario teacher’s strike will hit shortly after Labour Day, and I think they’ll want the effects of that strike to fester for a few weeks, given the polling data showing that the unpopularity of the provincial Liberals is making people wary of the federal Liberals.

#131 Bottoms_Up on 07.31.15 at 12:14 pm

Top 15 Reasons not to vote for Harper:

15) Statistics Canada long form census.
14) Cutting environmental research.
13) Income Trusts.
12) Robocalls.
11) Dean Del Maestro.
10) Paul Calandra. (ignoring questions on ‘Iraqxit’)
9) Canada’s veterans.
8) F35’s.
7) “The Harper government”.
6) Media (un)appearances.
5) non-attendance at First Ministers’ Conferences.
4) non-attendance at important climate change talks.
3) Canadian peace-keeping missions(?!).
2) Mike Duffy and Nigel Wright.
1) Booting Garth out for engaging the public

#132 Londoner on 07.31.15 at 12:17 pm

#122 Bottoms_Up on 07.31.15 at 11:56 am

My experience was from working as a personal banker at one of the big 5 in T.O approx 15 years ago. Applicants would provide letters from employers, some without letterheads. That’s all that was required for high ratio mortgages. As long as the property valuation was in line with expectations then no phone call to the employer, T4 or NOA was necessary. Can’t say how it is now.

#133 Balmuto on 07.31.15 at 12:22 pm

#124 Sheane Wallace

I notice your link cites manufacturing down 1.7 percent. Poloz must still be “puzzled”:

https://ca.finance.yahoo.com/news/canada-gdp-unexpectedly-shrinks-may-fifth-month-124454665–business.html

#134 BS on 07.31.15 at 12:35 pm

High ratio mortgage, fully scrutinized and turned down by the bank (2 different major banks in fact). Even with a 10% dp. From a 3rd bank, once I had a decent income, they even still wanted a co-signer.

You must have both poor credit and low income. Starbucks barristas are getting $300k mortgages.

I guess the bank didn’t explain the part about writting your own employment letter?

#135 Sheane Wallace on 07.31.15 at 12:50 pm

#133 Balmuto

The comments on the link speak volume.

Manufacturing down with the cheap loonie.
I guess Poloz has to cut again. Loonie down the drain, manufacturing with it.

Manufacturing requires capital investment. When all the money goes to real estate and you have to maintain weak dollar to please you boss’ friend in big oil what do you expect? Shrinking manufacturing, correct.

Labour is constantly shrinking part of manufacturing expenses.

But what does Poloz know?

#136 Renter's Revenge! on 07.31.15 at 12:53 pm

#123 Josh:

“I’m just looking for a reputable, reliable, reasonably priced vehicle with which I can invest my $100/wk into a tfsa. Can you point me in a good direction?”

Sign up for a TD Direct Investing online brokerage account, and get the TFSA with paperless statements. Dump your $100/wk into TD e-series funds (TDB900, TDB902, TDB911 and TDB909). When the balance of each fund reaches about $3k, sell the units and put the proceeds into equivalent iShares or Vanguard ETFs (commissions are $10 per trade).

See their disclosure of rates and fees here:

http://www.tdwaterhouse.ca/document/PDF/forms/521778.pdf

I can think of no cheaper way to start investing on your own (mainly because I’m too lazy to look).

I’m not an employee of TD.

#137 Holy Crap Wheres The Tylenol on 07.31.15 at 1:13 pm

#43 Angel on 07.30.15 at 9:28 pm

Smoking Man do you remember me from the Seneca Casino? I hope to see you again real soon because you told me that I was your #1 lady and we can hook up in Stir Room. Do you remember what you promised me? I am looking forward to a trip on your rider craft to take me for a flight over Area 51.
___________________________________________
Jesus Smoking Man what the hell do you do over there at that Casino? Now your getting trolled by the Vamps that remember your name here. Rotting teeth and all you still picking up the ladies. Hopefully shes a she, nowadays you just can’t tell whats real and whats not! What the hell is a Stir Room? Is this something I missed? I guess I’m just too long in the tooth. Good luck with the retirement, I can tell you from my experience so far it sucks, only semi retired, just about to hand over the keys to junior, but………………………………..we’ll see. We are supposed to head down to the Bahamas after Oct 30th and ride out winter there. That will be the real test of retirement.

#138 Harry Stumbles Picks Stocks and Gets Rich Doing It on 07.31.15 at 1:14 pm

“Cenovus looking to cut jobs, slashing dividend by 40 per cent ”

Garth..you forgot to notice that CVE stock has gone up on the news.

The 6% ers also missed the juicy 4.5% jump on the TSX in the past week. Individual stocks ( that I listed here when I bought them) such as CP and AGU for ex….are all up 5% in a week rather than the paltry ‘safety in ETF’s’ and 6% p/a Prefs that your loyal pups struggle to defend.

Guaranteed CVE has a lot more than 6% in capital gains before the years out. No guts no glory Garth…no money either.

Sorry Pal…but with meat having gone up 30% in the past 6 months…6% is setting yourself up for a cat food diet. Just this morning I heard a Minister in Ontario talking about making Canada ‘competitive with Mexico’.

Todays suggestion to the unwashed is to run filters through the TSX 300 and find your companies that are trading below book value after this recent crashette. TA and U are on my books as of yesterday.

#139 bubu on 07.31.15 at 1:20 pm

“If you can’t see a lesson in here, I give up.”

Give up… if the price does go down by 2-3% this year it’s not a tragedy… Unless the unemployment goes up to 9-10% or the interest rate goes up more than 1.5-2% nothing is going to happen. Either option is out of the books in the next 1-2 years at least.

#140 Holy Crap Wheres The Tylenol on 07.31.15 at 1:27 pm

#131 Bottoms_Up on 07.31.15 at 12:14 pm

Top 15 Reasons not to vote for Harper:

15) Statistics Canada long form census.
14) Cutting environmental research.
13) Income Trusts.
12) Robocalls.
11) Dean Del Maestro.
10) Paul Calandra. (ignoring questions on ‘Iraqxit’)
9) Canada’s veterans.
8) F35’s.
7) “The Harper government”.
6) Media (un)appearances.
5) non-attendance at First Ministers’ Conferences.
4) non-attendance at important climate change talks.
3) Canadian peace-keeping missions(?!).
2) Mike Duffy and Nigel Wright.
1) Booting Garth out for engaging the public
___________________________________________
I always look at the lesser of two evils. What and vote in Trudeau? Mulcair? Whose-sit (Green Party) ha, ha, ha. Come on now people look at the field of beauties out there to choose from. Nada, you got nothing. Christ its like looking at a book of British Smiles in the Dentist office. You all seem to forget the Trudeau years, and there were many of them. The Libs, NDP, Torys are all the same. they all make the same mistakes always, all the time. History does repeat itself in politics. When was the last time you ran into an honest caring considerate politician? Like I said I vote for the person that’s going to do the least damage to me! Believe me Trudeau and his house of Libs did a lot of damage back in the day! Muclair? Come on he’s pure socialist tree hugger through and through.

#141 Holy Crap Wheres The Tylenol on 07.31.15 at 1:32 pm

Bo hoo Donald, move your god dam ass back here and help put some money into our economy. Then you can vote. Tired of this shit, people move away and expect to be able to vote back home. If your not here too bad.

http://www.thestar.com/news/canada/2015/07/30/why-donald-sutherland-cant-vote-and-why-the-fight-continues.html

#142 S.Bby on 07.31.15 at 1:37 pm

#80 LA Transplants
Realtor troll.
C’mon give us a break, we aren’t stupid.

#143 Mark on 07.31.15 at 1:37 pm

“By calling an early election he is giving the opposition a chance to put their feet in their mouth as much as they can publicly, and have it hopefully sway voters that might be sitting on the fence. ”

I personally think an early election call would basically facilitate putting the acceleration of the housing price decline/collapse onto a new government. What better thing to be able to do than to say, “you guys elected the NDP, and the price of Canadian RE proceeded to decline by 50%!!”. Even though it was actually Tory/Liberal policies that set the stage for the collapse by artificially driving down interest rates on subprime credit to the point of stimulation of excess oversupply.

Basically a sort of scorched Earth policy.

Long-time blog readers will recall Garth’s story of having enough integrity in the Tory caucus to refuse to go along with the scheme, as hatched at the time by Flaherty et al, to blow up a housing bubble by relaxing CMHC subprime mortgage standards. He suffered an incredible price in doing so. Just as I suffered a pretty significant price by insisting on the RFD forums, based on evidence, that housing prices were already into decline 2 years ago (proven to be correct in hindsight), and that the next BoC policy moves would be to the downside in response to a dramatically slowing Canadian economy.

#144 Holy Crap Wheres The Tylenol on 07.31.15 at 1:41 pm

Sept 17th cannot come quick enough to get off this god dam roller coaster of run-away house horny crazies. Watched City TV and Hot Properties the other night and they (the moderators & guests) are still in abjuration about the whole market situation. God they should have been politicians. Man they can look you right in face and blow steam back at you! I hope the freekin market crashes hard. Sorry Smoking Man your $1.5 M bung in Longbranch may have to wait for another twenty years after Sept 17th.

#145 Shawn on 07.31.15 at 1:42 pm

Energy Industry Capital Spending

The Capital spending by energy companies remains unfathomably large.

Suncor just announced a $400 million cut but will still have a capital spend of $5.8 to $6.4 billion this year.

Such numbers are meaningless without context = so here is some context. The Alberta government’s budget is to spend $48 billion this year. So here in one company with a capital budget that amounts to about 13% of what the Alberta government is spending. That is HUGE. Not all of that spending will be in Alberta, but still.

According to the Canadian Association of Petroleum Producers the cap ex in the Canadian oil sands in 2013 totaled $19 billion and total spending was $59 billion. That $59 billion is considerable larger than the entire Alberta government spent. It’s 3% as large as Canada’s entire GDP of about 2000 billion. (Not all of the $59 billion added to GDP since GDP is a valued add number not a spend number), but still…

The spending off the energy industry in Alberta in 2013 was $45 billion according to CAPP. Again, that is a bit bigger than the spending of the entire Alberta government.

CAPP’s estimate of industry capital spending for oil
sands development is C$23 billion for 2015, which is
C$10 billion lower from the estimated expenditure in
2014.

Again, $23 billion is about half as large as the entire Alberta budget and this is just the capital spending in just the oil sands (albeit not just Alberta)

I don’t know where that kind on money was coming from but I am pretty sure that capital spending of over $20 billion per year just for oil sands was NEVER a sustainable amount. It might have continued for a few years but it was never going to be sustained at that level.

What is the conclusion? I don’t know but I suggest the following:

Energy is still a HUGE economic driver in Alberta despite the reductions. It’s bigger than the entire government (schools, health care, highways and all the other government departments)

Alberta is not going to shrink all that much in jobs in the immediate term – because the spending is still so large.

There probably is going to be major shrinkage in a few years when we stop adding new oil sands developments and are just in production mode.

#146 Reddy on 07.31.15 at 1:43 pm

My condo purchase fell thru yesterday on a technicality and vendor wanted to renegotiate already finalized agreement. I’m disappointed , but there’ll be other opportunities.

#147 Holy Crap Wheres The Tylenol on 07.31.15 at 1:45 pm

Ello Britannia welcome to your southern border amigo!

http://www.thestar.com/news/world/2015/07/31/britain-offers-dogs-fencing-to-stop-flood-of-migrants-from-france.html

#148 Smoking Man on 07.31.15 at 2:43 pm

#144 Holy Crap Wheres The Tylenol on 07.31.15 at 1:41 pm
Sept 17th cannot come quick enough to get off this god dam roller coaster of run-away house horny crazies. Watched City TV and Hot Properties the other night and they (the moderators & guests) are still in abjuration about the whole market situation. God they should have been politicians. Man they can look you right in face and blow steam back at you! I hope the freekin market crashes hard. Sorry Smoking Man your $1.5 M bung in Longbranch may have to wait for another twenty years after Sept 17th.
…….

First off, Sep 17 is FOMC date not BOC has no affect on CAD borrowing rates.

Unfortunately for my fx book. Fed ain’t going to do squat…. In Sept or Dec.

#149 bdy sktn on 07.31.15 at 2:46 pm

#142 S.Bby on 07.31.15 at 1:37 pm
#80 LA Transplants
Realtor troll.
C’mon give us a break, we aren’t stupid.
………
If you are having trouble reading the clearly laid out numbers maybe you are a bit stupid.

Condo 2x
Taxes 4-6x
Fees 2-4x
Higher in SEA

Van is only higher in sfh because of land shortage in decent locations

#150 sep 17th on 07.31.15 at 2:49 pm

Sep 17th if interest rates rise will be the start of the seal broken on virtual synthetic digital financial instruments.

#151 Loonie Watcher on 07.31.15 at 2:52 pm

As of 14h52 ET, Friday, July 31, 2015, the Canadian dollar is trading at $0.7643. Only $0.1644 to go before the loonie breaks through $0.60.

#152 LA Transplants on 07.31.15 at 2:54 pm

S.bby I am not a realtor. We are retired. Worked 40 years in media and entertainment. Besides if you don’t believe me just read the links. It is right there for you to read in black and white. Your comments is commonplace behavior for what we have experienced with people who won’t let go that Vancouver is not as expensive as other places any longer. Maybe the world has passed it up.

-Topher

#153 Liar_Loans on 07.31.15 at 3:08 pm

DELETED (Anti-Chinese)

#154 S.Bby on 07.31.15 at 3:11 pm

#149 Bdy Sktn:
If you’re talking about those cherry picked listings LA provided, it’s a meaningless apples to oranges comparison; you should know that. And I still say real estate agent troll. I think you are one too.

#155 Victoria Real Estate Update on 07.31.15 at 3:12 pm

# 149 bdy sktrn

“Van is only higher in sfh because of land shortage in decent locations ”

SFHs in Van are bubble-priced due to Canada’s massive housing bubble which is a result of 15 years of lax lending standards, mortgage fraud, etc.

Condos and SFHs in Seattle are a lot cheaper than in Vancouver.

You obviously don’t pay attention to the facts that are clearly presented on Garth’s blog.

#156 Balmuto on 07.31.15 at 3:31 pm

#148 Smoking Man

“Unfortunately for my fx book. Fed ain’t going to do squat…. In Sept or Dec.”

Don’t worry, WTI will take care of you.

#157 Mike S on 07.31.15 at 3:55 pm

RioCan is selling US asset to bring money to Canada

Is Mark’s prediction is about to come true?

Don’t hold your breath. — Garth

#158 Obvious Truth on 07.31.15 at 3:57 pm

#123 Josh.

Every bank has a discount brokerage. Rbc has direct invest. Bmo has investorline. Scotia has itrade. They all have arms. There are other online brokerages too.

You can just go into your bank and ask to open a self directed brokerage account.

They may try to sell you products so just decline. Some branches have very helpful people that will actually be a big help.

Happy searching.

#159 jess on 07.31.15 at 4:02 pm

Saturday, January 29, 2011 7:10pm
lookback – re read robo signing
http://www.tampabay.com/news/scientology-founders-tenets-drive-pinellas-title-company-under-fire-for/1148529
———————
lessons learned?

Robo-Signing Firm Proclaims Supremacy In Title Clearing
Scientology founder’s tenets drive Pinellas title company, under fire for rapid document processing
By Susan Taylor Martin, Joe Childs and Thomas C. Tobin, Times Staff Writers

new and improved document scanning
http://mfi-miami.com/2015/07/robo-signing-firm-proclaims-supremacy-title-clearing/

#160 Nosty, etc. on 07.31.15 at 4:09 pm

#102 Doppelgänger on 07.31.15 at 9:34 am — “Ronaldo, it’s probably Messi.”

Good, but not as good as Pele and Gordon Banks — The Save (Guadalajara, Mexico 1970 World Cup).

#161 Holy Crap Wheres The Tylenol on 07.31.15 at 4:21 pm

Smoking Man happy retirement and welcome to day trading. If you got nothing else to do why not!

#162 BillyBob on 07.31.15 at 4:24 pm

#141 Holy Crap Wheres The Tylenol on 07.31.15 at 1:32 pm
Bo hoo Donald, move your god dam ass back here and help put some money into our economy. Then you can vote. Tired of this shit, people move away and expect to be able to vote back home. If your not here too bad.

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

Err…so money should be able to buy a vote, is that it?

Sorry, but the SCC will toss that decision out, while trying not to fall over laughing. The law states that citizens can vote. Period.

Not all of us left Canada voluntarily. And changes like this are precisely WHY expats will fight for the right to exercise their privilege of citizenship.

#163 Shawn on 07.31.15 at 4:36 pm

Money and Voting

BillBob asked (rhetorically):

Err…so money should be able to buy a vote, is that it?

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

Democracy: one vote per person

Capitalism: one vote per dollar

Both systems have their place its seems.

#164 Lorne on 07.31.15 at 4:40 pm

#140 Holy Crap Wheres The Tylenol on 07.31.15 at 1:27 pm
#131 Bottoms_Up on 07.31.15 at 12:14 pm

Top 15 Reasons not to vote for Harper:

15) Statistics Canada long form census.
14) Cutting environmental research.
13) Income Trusts.
12) Robocalls.
11) Dean Del Maestro.
10) Paul Calandra. (ignoring questions on ‘Iraqxit’)
9) Canada’s veterans.
8) F35’s.
7) “The Harper government”.
6) Media (un)appearances.
5) non-attendance at First Ministers’ Conferences.
4) non-attendance at important climate change talks.
3) Canadian peace-keeping missions(?!).
2) Mike Duffy and Nigel Wright.
1) Booting Garth out for engaging the public
___________________________________________
I always look at the lesser of two evils. What and vote in Trudeau? Mulcair? Whose-sit (Green Party) ha, ha, ha. Come on now people look at the field of beauties out there to choose from. Nada, you got nothing. Christ its like looking at a book of British Smiles in the Dentist office. You all seem to forget the Trudeau years, and there were many of them. The Libs, NDP, Torys are all the same. they all make the same mistakes always, all the time. History does repeat itself in politics. When was the last time you ran into an honest caring considerate politician? Like I said I vote for the person that’s going to do the least damage to me! Believe me Trudeau and his house of Libs did a lot of damage back in the day! Muclair? Come on he’s pure socialist tree hugger through and through.
…….
I guess you mean the “lesser of three or four evils” but surely, after reading the top 15 list, which could easily be added to, you can’t honestly say you believe the Cons deserve our support for another term???? Unbelievable!

#165 Mike on 07.31.15 at 4:56 pm

“Headlines”

As Mr. Turner is a former News Reporter, he must realize with financial news, the worst news hits when the market, or sector, has usually bottomed. For example, last week, there was a story out of the US referring to gold as “Pet Rocks.” The last few trading sessions have seen Canadian Oil stocks go up and the much maligned of this blog, gold, is also on the rise. So don’t sell out Canada so fast. You know this place, what do you really know about financial markets of the rest of the world?

#166 Capt. Obvious on 07.31.15 at 5:13 pm

“Manufacturing down with the cheap loonie.
I guess Poloz has to cut again. Loonie down the drain, manufacturing with it.”

We’re looking at data for May genius. There is a lag between a rate change and its impact on the economy. It certainly can’t go back in time and change what happened in May.

#167 Loonie Watcher on 07.31.15 at 5:25 pm

As of 17h25 ET, Friday, July 31, 2015, the Canadian dollar is trading at $0.7639. Only $0.1640 to go before the loonie breaks through $0.60.

#168 Leo Trollstoy on 07.31.15 at 5:37 pm

He suffered an incredible price in doing so. Just as I suffered a pretty significant price by insisting on the RFD forums

Did you just compare your banishment from trolling an online forum to be similar to what happened to Garth?

Seriously?

#169 Wavy Pudding on 07.31.15 at 5:40 pm

Here’s a good lesson for newbies jumping into the real estate market.

Think you’ve got a million dollar windfall all locked up and you’ve got ten years to make a decision….wrong.

http://business.financialpost.com/personal-finance/mortgages-real-estate/what-should-you-do-with-your-million-dollar-home

Hahahahaha….. I’ve lived through 4 housing crashes in Canada….Vancouver specifically…they’ve ranged from 50++% crashes where prices collapsed overnight and no one would buy a house at any price…81-84) …to other crashes like the slow motion slump lasting 10 years between ’90 and 2000…..where prices swooned like the death of a thousand cuts.

The crash in the 70’s lasted for an entire generation. And you think it can’t happen again….idiot….can and will.

#170 Leo Trollstoy on 07.31.15 at 5:41 pm

Harper and the Cons will leave Canada with a balanced budget, and all the masses will see is a new government take over and have the economy go into the crapper.

Genius.

#171 BS on 07.31.15 at 5:43 pm

121:

Also in Vancouver is 277 Thurlow St. 4th floor. Water view. 1,683 square feet. $2,598,000 Canadian or $1,993,000 in greenbacks. $693 Canadian for home owners dues or $531 in greenbacks.

Water view? You’re kidding right? It is on the 4th floor overlooking a busy intersection. The water you see in the photo you will need a camera to capture with your arm hanging off the balcony. Maybe just frame that photo in your living room. All for over $1500 a sq ft. I say buy it! Screaming deal.

#172 Shawn on 07.31.15 at 5:52 pm

Loonie, Watcher indeed.

#173 brett on 08.01.15 at 10:45 am

Still watching the Calgary market. 30 homes still in our
review. Same number for the past four-six months. 500K-750K range. One has been on since last Dec, others for at least 4 months. Two have been reduced but nothing is moving.
Attended an open house last weekend. The third weekend long open house. NO traffic and the agent said as much (rookie)

Us….going to Greece next month and will forget about real estate and that pathetic crew who is now governing us. Looks like we will have a winter vacation as well and remain as happy renters while the market sorts itself out. Back in time to vote them out. At least we do not have that sad excuse of an MP Rob Anders on the ballot this time around.

Or should I say Harper and his PMO staff because that is truly where we are governed from.

No recession?? Get your eyes checked. Food banks have record applicants. Take a look at the line ups at the cash in stores-not grocery stores. I would not want own a retail store this Christmas season.

#174 Tony on 08.01.15 at 11:14 pm

The U.S. yield curve will flatten out of zero, that being the two and thirty year yield. After that rates will turn negative right around the time QE4 comes in.