The newbie

DOG WALK modified

Poor Aaron just found this blog. His life is now pooched. Or, perchance, it is saved. Let’s see what happens. This is the story thus far:

“My wife and I own a townhouse in Oakville that has appreciated in value by over $150K since we bought it for $409K in 2012. The townhouse has about $280K in mortgage left on it. We have been seriously considering using this equity to “climb the ladder” and buy a detached home for around $700K.

“My wife is of the opinion, however, that we should keep the townhouse and rent it, ultimately acquiring about $1 million in mortgage debt. She is confident it will continue to appreciate in value and our accountant has assured us of positive cash flow in a variety of scenarios, including apocalyptic interest rates in the next five years.

“I just found your blog today, and after reading your previous half-dozen posts,I would imagine you would find this plan absolutely insane. OK, so let’s say we are willing to sell the townhouse. Does your “don’t buy real estate” warning apply to second time home buyers as well?

“I think we are doing pretty well right now as far as Millennials go. Why ruin a good thing?”

Araon, dude, I’m not sure who you should replace first – the wife or the accountant. They’ve both got you on the path to perdition.

First, you’ve made nothing on the townhouse until you sell and realize the gain (less commission and whatever the market conditions may dictate). That could be a surprise. Even if you get your price and end up with over $200,000, you’ll have a mortgage of $500,000 after buying a detached house for seven large (good luck finding that in O’ville).

Of course, rates have bottomed so count on a renewal in five years at substantially higher levels. As we know, there’s an inverse relationship between rates and prices, so odds are your house may be worth less at the same time your loan costs more.

Does your wife and the bean-counting guy get that?

Anyway, that’s the best-case scenario. If you decide to keep the town house while buying a detached home, the mortgage debt rises to $1 million. Hopefully you make several hundred thousand dollars a year or have an investment portfolio worth seven figures, because otherwise these people have turned you into a synth. Owing a million on two residential units should scare the crap out of any sentient person.

Besides, the numbers don’t work. With a mortgage, insurance and property tax you can’t rent the townhouse (they fetch $1,800 there) for enough to carry it. Meanwhile the $200,000 in equity would earn nothing, while an equal amount was amortized within the new mortgage. Lose. Lose.

The whole dumb strategy rests on your wife believing real estate will always go up, because it has. Maybe you should tell her about plunging commodity values, the national economy, looming Ontario tax increases, runaway societal debt, expected rate hikes or real estate saturation. Why would you retain an asset with negative cash flow and an uncertain future capital value? Does your wife enjoy subsidizing tenants? Has she been sneaking into the prime minister’s campaign events?

“Nearly 70 per cent of Canadian households own their homes and friends, in this campaign,” he thundered in Ottawa two days ago, “we are pledging to build on this record to do even more to provide the personal and financial security that a home represents.” So far this includes a permanent reno tax credit, a 40% goose to the RRSP-buyers plan, relaxed CMHC landlord regs and get-tough talk on foreign buyers. I know this is arousing, but perhaps you should keep her less stimulated.

Face it, Aaron, we’re in the end stretch of this market, which was created by cheap money, greed and lax rules. With prices at historic highs, even as the economy wobbles, there’s never been this level of risk in residential real estate. My guess is you and she have a one-asset strategy like most people – especially if you’re a Millennial, too young to build up a stable of financial assets. Now, after seeing some paper gains on your modest house, you’re ready to jump into landlordship and bloated debt.

Well, go ahead. It’ll be instructive to see what happens. Sounds like you’re good for at least two more blogs.

By the way, tell her to let the PM know that the last (and only) time homeownership reached this level in the US was just before the market imploded. Mention as well economists have concluded when so many own houses it actually hurts the economy – since people stop moving around for better jobs and opportunities.

Well, Aaron, glad you joined us. That may yet show a glimmer of manhood. If you can change out your brake pads, you can stay.

174 comments ↓

#1 Baz on 08.18.15 at 5:44 pm

Aaron reminds me of myself 4 yrs back , I was lost until I found Garth lol

#2 Steerage Bilge on 08.18.15 at 5:50 pm

He needs to keep the brakes fully applied.

Can we stick with puppies and cars…. this endless RE crap is incredibly boring! The rest of the blog is a treat.

#3 Bert Angle on 08.18.15 at 5:52 pm

Aaron can always sell the house and buy CPD while it’s on sale! Use the distributions to pay for rent in a new place!

#4 Nick on 08.18.15 at 5:56 pm

“We have been seriously considering using this equity to “climb the ladder” and buy a detached home for around $700K.”

Instead of ‘climbing the ladder” of equity, perhaps we could instead call it, “descending into the dungeon of debt”. Reverse psychology? ;)

#5 NJS on 08.18.15 at 5:56 pm

“If you can change out your brake pads, you can stay”

I understood that reference

#6 Stuart on 08.18.15 at 5:58 pm

Garth has the manhood to tell the couple and the PM!

great post but do these people listen? it is a mania out there.

#7 Annek on 08.18.15 at 6:01 pm

What Aaron’s wife ( and Aaron) believe are so typical of most people out there. How many of my coworkers are not just buying up, but renting their previous condos. Then , they are upset because their car has extra maintenance expenses because they can’t afford those expenses at this point in time. What will they do in a few years time when rates go up and values of their homes go down, if they are struggling right now.
On top of all this, they are having pricey landscaping done to their assets . Does landscaping qualify for home renovation credits?

#8 Frank on 08.18.15 at 6:07 pm

Pffht, changing brake pads is like changing oil. Most people only do it to say they did and seem ‘manly’. Why bother when you can pay someone proficient who can do it in half the time and has the ability to dispose of the mess that comes from automotive work.

Unless you have a house with a big garage. In which case why are you on this blog when you should be toasting your neighbours about your wealth growth!

#9 Aaron - please show your math on 08.18.15 at 6:09 pm

Aaron, if you are reading this, we beg you – show us the math and let us rip it apart… I mean, analyze it. Best case scenario, you are right and you get to own both town home and house. Next best case, we show you the error of your ways and save your sorry ass.

#10 DJ on 08.18.15 at 6:18 pm

Please make these case studies a regular feature. The no nonsense neutral analysis is refreshing. In fact, that is what will help protect the “everyday” people who are ready to make such big decisions-mostly on the advice of a realtor and two hours of HGTV.

#11 Landscaping qualifies on 08.18.15 at 6:18 pm

#7 :
yes, it surely does, see e.g., http://landscapeontario.com/home-renovation-tax-credit

#12 MSM-Free Zone on 08.18.15 at 6:25 pm

“….By the way, tell her to let the PM know that the last (and only) time homeownership reached this level in the US was just before the market imploded…..”
_________________________

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

#13 james on 08.18.15 at 6:28 pm

I always find it funny to hear people say that they have made a ‘ton of money’ on their house, when their intent is to sell it and buy back into the same market.

You don’t reap your gains until you sell, and you don’t make gains if you buy back into the same market.

If you sold your vancouver hovel and went to Spain, sure. If you sold your Hong Kong apartment during the 90’s property bubble there and fled to Vancouver, you did well.

Garth is right. This entire plan smacks of taking on a ton of risk. This is a terrible time to buy a house.

Here’s a better plan. Ditch the wife, go on an exercise binge for 2 months, learn Spanish, and go to Colombia or some other South American country. You’ll find a much more sensible (and likely much better looking) woman, and your money will go farther down there.

#14 MSM-Free Zone on 08.18.15 at 6:31 pm

Other than those who cherish $10k TFSA annual allowances, income splitting, fake UCCB’s and tax-deductible hockey bags, I’ve always wondered who currently represents the staunch, stalwart Stephen Harper voter base.

Now I know:

http://www.cbc.ca/news/politics/canada-election-2015-harper-duffy-questions-1.3194754

#15 Victoria Real Estate Update on 08.18.15 at 6:31 pm

House prices in the US reached unsustainably high levels in 05-06 and prices corrected back to levels where the average American family could again afford the average home.

It was a natural, healthy process. It allowed the US economy to reset, paving the way for healthy economic growth. We do not have healthy economic growth in Canada. Instead we have a recession and bubble house prices.

Bubble house prices push the cost of manufacturing too high, resulting in large numbers of lost jobs. The Canadian economy is faltering due, in large part, to bubble house prices.

The cost of housing in the US is about half of that in Canada. As a result, the cost of manufacturing in the US is significantly lower.

The American economy continues to improve. house prices in the US are affordable based on rents and incomes.

The answer to the financial security of future generations of Canadians is not to further bloat house values but to start the process of bringing manufacturing jobs back, which would require not bringing in more measures to further bloat house values.

House prices in Canada will correct no matter what measures are taken to delay that inevitable process.

A major housing price correction in Canada would be a good thing for the economy in the long run. The sooner that happens, the better. The worst possible thing for Canada right now is even higher house prices.

#16 pro-business on 08.18.15 at 6:32 pm

#11 Landscaping qualifies on 08.18.15 at 6:18 pm
#7 :
yes, it surely does, see e.g., http://landscapeontario.com/home-renovation-tax-credit
– See more at: http://www.greaterfool.ca/2015/08/18/the-newbie/#comments

Home-reno tax credit is a pro- business move by Harper. Government subsidy for small business owners.

#17 For those about to flop... on 08.18.15 at 6:33 pm

A couple of posts ago you insinuated that the government was all over the permanent reno tax credit as a way to get people to raid their RRSP and TSFA’s
If this were true why would the conservatives double the limit on TSFA’s to give the average bum like myself an outside chance of a respectable retirement in the year 2045.

#18 Justin on 08.18.15 at 6:33 pm

You should really do a full blog post defending your position on why you think people should get into debt getting a new vehicle. They depreciate horribly and one a few years older is just as good. Vehicle debt is 10x worse than mortgage debt in my opinion.

#19 Westcoasters on 08.18.15 at 6:34 pm

My husband and are we’re just saying earlier today how happy we are that Garth talked us out of buying a fixer bung in a rural BC location (southern gulf islands) just 2 years ago. That market has suffered a correction and we would have been stuck with a losing investment. Thanks Garth, for telling us to control our emotions and keep renting. So glad we did.

#20 raisemyrent on 08.18.15 at 6:36 pm

burrrrrrn, nice one Garth. deaf ears until he can convince the wife though. my gf agrees with me on real estate, that’s got to be the sign of a good one eh.

just a note, if he bought for 409 and has 280 left, that means he has clawed back roughly 130 on what people like to call equity, which in 3 years since 2012 means about $3,600 per month of having lived there. of course we have no data on the down payment (incl where it might have all come from), but food for thought, Aaron, when you and your accountant run numbers on how much money you made or haven’t made on your current townhouse (townhouse = compromise btw, how actually buys those?), i.e. think about how much you put down and how much your monthly costs were and add it all up and then compare to how much you think you would end up with in your pocket after the realturds are through. more often than not it’s less, a lot less. try to envision how lucky you got that real estate has gone up since you bought.
now, opportunity cost, do you know how to do a site specific keyword search? try greaterfool and opportunity cost because I am not touching that one now.

btw cheers to all blog dawgs as I’ve been away and haven’t read the comments for a while, let alone commented

#21 Nigel Wrong on 08.18.15 at 6:41 pm

And friends, if I can still be clear, let me say clearly to you again.

Keep your comments on the topic at hand!!!

Clearly, my friends.

#22 raisemyrent on 08.18.15 at 6:41 pm

what Frank #7 said

never mind the space to change the pads, my own man hours are valuable, especially to myself. plus don’t we all drive leases that include maintenance? paying the mechanics is so last century… lol

#23 MoneyDriven on 08.18.15 at 6:42 pm

Not that I ever doubt Grath but here is US home ownership chart and what happens before and during recession. Thanks Grath.

https://upload.wikimedia.org/wikipedia/commons/thumb/d/de/Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg/640px-Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg.png

#24 bdysktrn on 08.18.15 at 6:43 pm

#190 Dean on 08.18.15 at 5:35 pm
……replace the tie rod ends on my Pontiac Aztec.

——————-
All of those words are waaaay too good for anybody who dares to drive an Aztec.

Talk about visual pollution!

At least I can look down on SOMEBODY while out in my slightly dented, near vintage, worst possible color choice, chevy beater (The ecotec is running fine, albiet noisily.)

The vortec , perfectly, with no real mtce for 220k. runs like day1.

Looks like G has seen the ‘brake’ light ;)
us wrench pullers can stay!

#25 zee on 08.18.15 at 6:45 pm

hi

Harper continues to show that he will support housing market, not stocks.

it would appear that he would take steps to stop any significant correction.

so why should we not listen to him. why the govt when they are pushing this asset class.

#26 White Crock BC on 08.18.15 at 6:46 pm

A combination finance, real estate and automotive repair blog. Cool!

Doing brakes isn’t for everyone but it can be satisfying knowing you beat the dealership out of some coin, not to mention the accompanying tax.

I watched a “pro” do mine once. The list of things he did wrong was incredible. From contaminating the pads to not using a torque wrench and everything in between.

If you want something done right, you do it yourself.

#27 talking about how to lose money on 08.18.15 at 6:51 pm

#10 DJ on 08.18.15 at 6:18 pm

Please make these case studies a regular feature
– See more at: http://www.greaterfool.ca/2015/08/18/the-newbie/#comments

Please no.

Let’s stop wasting most of the time talking about how to lose money. How one can’t make money.

Pointless like debating whether other people should have kids or should they maintain their own car. It’s their business.

For others it is a total waste of time. Losers entertainment.

Can you imagine Warren B. as reader or poster here?
I can’t. There is a good reason for that. When was the last time you heard him discussing how other people can lose their money?

Never. He is too busy of thinking how he can make money.

#28 Mean Gene on 08.18.15 at 6:55 pm

List the townhouse and see what happens, as Garth mentioned before don’t sign a BRA.

http://www.torontorealestateboard.com/buying/buying_&_selling/buyer_agency.htm

#29 Bill Gable on 08.18.15 at 6:57 pm

I say it again > we need a high school course called > MONEY.
Once a week the teacher brings in a guest like our bearded host and he tells it like it is.

What credit REALLY is.
What is a MORT GAGE (yes it’s two french words – look ’em up) and more.

Hopefully then we have a whole echelon of money smart Canadians who won’t get led down the garden path, by [email protected]

#30 Fred on 08.18.15 at 6:57 pm

People only hear what they want to hear. Maybe they were hoping for validation.

#31 Josh Hinden on 08.18.15 at 7:09 pm

Tell all the politicians, bankers, lenders, real estate agents, mortgage brokers, real estate lawyers etc. etc. that low interest rates is not good for the economy.

#32 Granite_counters on 08.18.15 at 7:16 pm

I went to a house today where a mother was in the process of getting estimates on a fireplace insert for her daughters new home that she had just help finance. She kept talking about different upgrades she was trying to convince her daughter and SIN to get although they have no money.This mother is the perfect example of how parents are getting their kids in financial trouble and are having fun in the process !! Garth speaks the truth

#33 LH on 08.18.15 at 7:18 pm

The U.S. situation was very different. They got to 70% by well meaning but misguided government policies (under Clinton and Dubya alike) that goaded banks into lending to historically underrepresented groups which were in turn done in by usurious terms wrapped with teaser rates.

Houses and mortgage debt are held by stronger hands here (similar story in the other three members of the “five eyes”, the U.K., Australia, and New Zealand)

We have 0%-down financing, liar loans, teaser rates, mortgage fraud and a fast-growing subprime market. I wouldn’t get too puffy. — Garth

#34 LH on 08.18.15 at 7:20 pm

Re 27 bill gable

As a bank shareholder I disagree.
Financial illiteracy in the hoi polloi = higher profit$

#35 down and out on 08.18.15 at 7:20 pm

Aaron do yourself a favor and drive 3 or 4 hours west and while having lunch or dinner check out prices of homes in deep southwestern Ontario auto capital and think does Oakville build autos could this happen there .Best locations on lakefront will bring cries of I could buy that and still have enough left over to invest .

#36 Nigel Wrong on 08.18.15 at 7:24 pm

Aaron, friends, I want to be clear with all of you.

Aaron, what you need to do is quietly and privately sell your home, but don’t tell your wife. Consider her as sort of the Prime Minister, who is too busy to know all the details, even thought nothing interests her as much as the details of real estate.

Then, rent the house back from the buyer, and sublet it to a newbie renter. At the same time, rent a nice detached house somewhere in Oakville, and tell your wife you’ve bought it. Send her on a vacation, maybe renting a cottage in PEI (I can help you find one of those that are vacant right now) while you do all this, so she is none the wiser.

Voila, she returns home, and your property lust has been satisfied, but at much lower risk.

When the market crashes, as is inevitable now, make up a story of how you have used your financial acumen shorting the Canadian petroleum industry to wrangle yourselves out of all those losses of equity. It should set you up for spectacular back rubs (and more!) for a good year or two, then you can start all over again with the real equity, I figure about $90,000 after transaction costs, you have stowed away safely offshore (I can give you some pointers on that, too)

The key is, as is said in Matthew 6, you should do these things quietly and not let your left hand know what the right hand is doing.

Friend, clearly, this will work.

#37 Josh Hinden on 08.18.15 at 7:25 pm

Another factor that many do forget is the reverse mortgage wave of millions already signed up in the U.S. and hundreds of thousands in Canada.

This will over the next 10, 15 years reduce home ownership in Canada, U.S. as these millions of primary residences will be transferred to lenders, banks.

#38 Prairieboy43 on 08.18.15 at 7:40 pm

If you can change the brake pads on a car. Then you are qualified to work on a drill rig (Alberta, Sask, Manitoba, everywhere). The Drum on the rig has larger pads, same design.
Plus if you can change your brake pads. Might as well improve them with Larger Rotors, new braided lines. You can stop on a dime. No need for ABS. However today’s modern vehicles have good disc brakes.
When is this real estate market about to implode? Have not seen much yet (Edmonton Area)?

#39 Retired Boomer - WI on 08.18.15 at 7:42 pm

Today went on a look see at various stocks. Boy, some screaming (looking) buys out there!

I dunno, although Garth is not a fan of owning individual stocks, the stock market is nothing more than a collection of individual stocks.

Do I know what I am doing? Probably not. I “think” I might have a clue, but then I are me after all, and not immune of error.

None the less, put in several limit orders at lower prices on several good dividend payers that have been pretty beat down. Commodities don’t ya know.

I’ll let you know how it all turns out. I know I sure don’t need RE even at American prices, let alone Canadian “looney tunes’ prices…

I could use some good dividend payers at decent prices.
Maybe the fairy tales do come true? We shall see…

#40 New Babblemaster on 08.18.15 at 7:47 pm

Rates will not rise unless something really unusual happens. Considering how things are going, there is just no reason for rates to rise. If anything, rates will go negative.

#41 palebird on 08.18.15 at 8:00 pm

#8 Pffht, changing brake pads is like changing oil. Most people only do it to say they did and seem ‘manly’. Why bother when you can pay someone proficient who can do it in half the time and has the ability to dispose of the mess that comes from automotive work.

Frankly Frank proficient is a big word and it is a key word. That is why someone would do it themselves.

#42 palebird on 08.18.15 at 8:04 pm

#22 what Frank #7 said
never mind the space to change the pads, my own man hours are valuable, especially to myself. plus don’t we all drive leases that include maintenance? paying the mechanics is so last century… lol

Nope…

#43 Bytor the Snow Dog on 08.18.15 at 8:07 pm

What’d I do?

#44 Tony on 08.18.15 at 8:08 pm

Aaron must be in dreamland, if he tried to sell that townhouse he’d end up losing money on it. The Canadian taxpayers are going to be on the hook for a king’s ransom when this real estate market implodes.

#45 rar on 08.18.15 at 8:16 pm

buy a house with an economy for housing that is set to plummet? silence the realturd, the accountant is trying to please your wife, your wife is trying to appease her ego, which is bigger than your wallets! stick around with garth’s blog, shut up and learn!!

#46 Tony on 08.18.15 at 8:20 pm

Re: #27 Bill Gable on 08.18.15 at 6:57 pm

They do have courses in high school called business and finance but what worked in the old business models of yesteryear seem to have a converse effect nowadays that is losing you a lot of money instead of making money. Something known as ‘all the rules have changed”.

#47 anotherstabbinginsaskatoon on 08.18.15 at 8:24 pm

It is educated people that ought to know better. Did they all study german existentialist philosophy? Are we merely the superfluous? Ours is a fate dictated to us from on high? By iron hands(vaccines and real estate) we are kneaded and stretched to evolutionary limits. All for the enjoyment of a few illuminated anglo-saxons. What a waste. Unless your name is Amanda Lang and Mark Carney. Things couldn’t be better for those two validictorians. Word.

#48 Julia on 08.18.15 at 8:26 pm

So familiar. We recently realized that we are the last of our group of University friends to still be in our 1st house here in Toronto (we all bought between 2002 and 2005). Some are on their 3rd. “House values will keep going up, you have to cash in the gains and move up the real estate ladder!”. Just doing the math on real estate and land transfer costs on 3 houses in 10-12 years makes me choke.

We used to look at our friends moving up to these million $ houses and sigh, then wonder how they do it and do our own math. Now we don’t care. Whatevs as our child would say.

Our millennial neighbours bought about 3 years ago thanks to the bank of mom and dad. Parents are really nice and we see them every week when they come to mow the kids lawn and weed their gardens. The kids work really hard and need get away to the family cottage to enjoy themselves. Parents tell us kids need to change their windows but have no money.
Talking to the kids a few weeks ago, they are deciding to sell and move up, they need bigger and houses will keep increasing in value. Tried talking this through, got blank stares.
Seems to be quite a common way of thinking.

#49 fourturns on 08.18.15 at 8:29 pm

First thing Aaron should do is fire his numerically challenged accountant. Next climb up the ladder and get a new wife.

#50 Kan on 08.18.15 at 8:32 pm

Last year in October, we were planning to buy condo for our Daughter for $300K in Vancouver. But we thought it is too expensive and did not buy. Now the same condo builder is selling for $350K. We are so struck with this situation. I am reading your blogs daily and waiting for the market to calm down. Am I on a right track?

If you really want to help your daughter, put money in her balanced portfolio instead of shackling her to a high-rise. — Garth

#51 Linda on 08.18.15 at 8:34 pm

So the housing market is going to implode – maybe – & the price drop ranges from a ‘soft’ 5 to 10 percent to a hefty 40 percent for the ‘hard’ landing voters. So let us say the hard lot win – a 40% drop. If prices truly do drop would it then be at all wise to purchase at the depressed price? I’m talking 25% down etc. – not this borrow everything including the downpayment.

#52 Freedom First on 08.18.15 at 8:36 pm

Welcome aboard Aaron. Garth can help. Too bad about the accountant and the wife though.

Pleasure reading this Blog today. Makes me even more grateful I am single and don’t have to argue with any financial morons. Like I said a few weeks ago, found out my latest girlfriend of 7 months was financially clueless and had to let her go. I always live alone and I am not into trying to train a girlfriend. She must already be in a freedom first lifestyle in every way to have any staying power with me. My goal; “always put my Freedom First, keep a ring off of my finger, and never give out my house key.” Result=a happy life. I consider myself a Professional at looking after myself. I am a true Pioneer.

#53 Doomsday prepper on 08.18.15 at 8:38 pm

I want to be a case study. Do me! Do me!
Where di I email my happy story?

#54 For those about to flop... on 08.18.15 at 8:39 pm

#32 LH on 08.18.15 at 7:20 pm
Re 27 bill gable

As a bank shareholder I disagree.
Financial illiteracy in the hoi polloi = higher profit$

—————————————————
Yeah,great attitude .You bought a few bank shares whoopdie doo .
I know you have to look after number one but choosing to have a few extra dollars in your pocket over the wellbeing of a nation does not make since to me .
If you think you are immune to other people’s greed and stupidity you are wrong we all pay one way or another in the end unless you are a tax cheat.
What is about to happen in this country in the next two years is akin to clubbing seals.
It does not matter if the correction in real estate happens sooner or later a correction is a correction and over leveraged people ( the majority) will be crushed.

#55 OttawaMike on 08.18.15 at 8:41 pm

We have 0%-down financing, liar loans, teaser rates, mortgage fraud and a fast-growing subprime market. I wouldn’t get too puffy. — Garth
______________
Yeah we all know what happened to Puffy. He is up on fraud charges.

#56 For those about to flop... on 08.18.15 at 8:42 pm

Since should be sense.

#57 johnk on 08.18.15 at 8:42 pm

A realtor just offered me a free brake job if I bought a $500,000 500 sq. ft. condo. What should I do? My car needs brakes!

#58 My Wife Loves Garth on 08.18.15 at 8:46 pm

Aaron, I was you 5 months ago.
Almost exactly the same scenario. I convinced the wife to sell the townhouse and pocketed $200k. Paid off all debt then took the cash and invested the balance.

We now lease a beautiful 4 bedroom 3000 square foot detached rental for $2300.

The friends and family come over and think we are living the “lifestyles of the rich and famous”

Zero mortgage debt. Zero credit card debt. Zero stress.

Take Garth’s advice.

#59 Dirtdog on 08.18.15 at 9:08 pm

#27 Bill Gable
Dig a little deeper. Mortgage = Death Pledge
Anglo Saxon Middle Ages French Law

#60 dogman01 on 08.18.15 at 9:12 pm

For those of you struggling understand the intricacies of “herdenomics” this article lays out an interesting model of social class.
https://michaelochurch.wordpress.com/2012/09/09/the-3-ladder-system-of-social-class-in-the-u-s/

Most of the demographic on this blog are likely G3 and G4. The happiest – seemingly satisfied and set people I know are mainly the L2’s.

Let me be clear, this is clearly not on the topic, but well thought out.

#61 Vundo on 08.18.15 at 9:18 pm

Why is it that the excessive desire for money, financial assets, expensive jewelry, fancy cars, elaborate mansions in exclusive communities, etc. is all easily recognized as “materialistic” and “greedy” while scoffing at rented townhouses and madly lusting after a slightly smaller house than the country mansion, but still with multiple bathrooms in a trendy neighbourhood with those infamous granite counter tops is normal, mundane, and middle class? Look, I get that families need a little more space than a single university student, but what’s wrong with growing up in a townhouse? Even if Garth was dead wrong about the financial picture and house prices are heading to the moon for the next 50 years and taking proud owners along for the ride, still, why should anyone who doesn’t quite have the means to afford it be willing to give their soul for a chance to claw their way in? I don’t want to be owned by the things that I own. Being poor is not my first choice but compared to having a million dollars of debt over my head controlling my every move, I could live quite simply and be happier than I would be as a debt slave.

#62 Nora Lenderby on 08.18.15 at 9:32 pm

Good advice, Mr. T. While Mr. and Mrs. Aaron have a relatively modest place to live in at relatively modest expense, that is not so bad. They might survive an economic downturn, if their jobs remain secure.

But someone’s getting greedy. Their expertise is presumably in something completely different.

My suggestion is not to speculate in what you don’t understand, and unless you can stand to lose it, don’t speculate at all.

#63 cramar on 08.18.15 at 9:36 pm

Hey Aaron, you didn’t give your other financials. What is your total net worth? What is your income? What have you got invested?

Also Aaron, option C is not on your radar. That is sell the house, take the profit to build up your investment portfolio, then rent. No debt! A decent portfolio for a Millennial, putting you way ahead of other Gen M’s. A head start at being wealthy later in life. Reducing your risk from a RE bubble burst. Sound good?

Naw! Especially since the squeeze would say, “Renting is just throwing money away!

#64 Leo Trollstoy on 08.18.15 at 9:42 pm

Aaron sounds like a guy that knows nothing and believes anything his wife, accountant or anybody else tells him.

He’s screwed.

Ignorance is bliss.

At least for awhile.

#65 Leo Trollstoy on 08.18.15 at 9:51 pm

Aaron, if you are reading this, we beg you – show us the math…

Aaron can’t show you ‘the math’ for the simple reason that he doesn’t understand investing at all.

The story that Garth shared shows a guy who defers all financial decisions and remains ignorant.

‘His wife’ says so…

‘His accountant’ says so…

So it must be.

He doesn’t have the knowledge to refute anything.

My accountant can suggest ideas but I would never take the advice without having made a decision by myself already.

#66 TurnerNation on 08.18.15 at 9:52 pm

Bitcoiners are quiet. Maybe cause their chart is like gold’s:

http://finviz.com/forex_charts.ashx?t=BTCUSD&tf=w1

Bitcoin ATM at King/Spadina appears to be closed?

#67 Nora Lenderby on 08.18.15 at 10:03 pm

#14 MSM-Free Zone on 08.18.15 at 6:31 pm
Other than those who cherish $10k TFSA annual allowances, income splitting, fake UCCB’s and tax-deductible hockey bags, I’ve always wondered who currently represents the staunch, stalwart Stephen Harper voter base.

Now I know:

http://www.cbc.ca/news/politics/canada-election-2015-harper-duffy-questions-1.3194754

Oh dear. What luck for our gallant reporters to run into a ranty old gentleman with limited grasp of the facts!

I blame the Province of Ontario. Our mental health services are chronically underfunded. (Or it could be the heat.) Poor old man is going to be sorry.

Did you also note the reference case of the “sensible old gentleman” who has “decided not to vote Conservative” this time because he hasn’t been given enough treats?

They divide the electorate into multiple bribable communities then throw some delicious candy at one group (e.g. parents and first-time homebuyers) and another group (“Seniors!”) get all jealous. Sigh.

#68 Ronaldo on 08.18.15 at 10:04 pm

#3 Bert Angle on 08.18.15 at 5:52 pm

”Aaron can always sell the house and buy CPD while it’s on sale! Use the distributions to pay for rent in a new place!”

Looking at this etf and I see that it launched in mid April of 2007 at peak of the market at 20.00. By Nov. 27/08 it was down to 12.90, a 35.5% drop. It got back to 17.10 by Aug. 21/09 and pretty much stayed flat til May 21/13 where it was trading at 17.29 and started its decline to where it is now at 13.67…Anyone who bought in at the beginning is down 32% or looking at it another way, it would have to gain 46% to get back to its starting point. Ain’t math great? But what the heck, it pays 5.4% div.

This is much the same with a lot of the ETF’s out there.

CPD contains rate reset preferreds which will benefit consistently as rates normalize. It is cheap now and has significant upside potential. It also pays you 5.4% in a tax-efficient distribution while waiting. All good with me. — Garth

#69 Blair on 08.18.15 at 10:05 pm

Keep the townhouse, curb spending to save more dough and start maxing out TFSA’s to get to Garth’s rule of 90 which could probably be done in no time.

#70 Sydneysider on 08.18.15 at 10:06 pm

I may be mistaken here, but won’t he have to pay capital gains tax if he adopts the two house strategy? That wipes off $50K (two years rent) from his personal wealth straightaway.

#71 Smoking Man on 08.18.15 at 10:12 pm

Know this dogs.

Negative interest rates coming to a threater near you.

How do I know, I don’t.

But what I do know, all the major banks upgraded there systems of records in swaps and bonds to handle negative rates.

The asset orbital party is just starting..

Yellen is a sheep in wolf’s clothing.

#72 lee on 08.18.15 at 10:13 pm

How many contributors on this blog are realtors trying to puff the market?

#73 Carpe Diem on 08.18.15 at 10:22 pm

#47 Kan

Why are you buying a condo for your daughter? She should be working hard so she can!

I was in a situation once where when I married my girlfriend of the time, I’d get a paid condo in Yaletown. 2 Bedroom, top floor.

I ended up turning both opportunities down. She was a princess and I couldn’t match he dad’s cash.

I wasn’t going to be bounded by some rich dad and princess.

I’m now happily married with a demanding but budgetminded wife. I also work really hard to provide for my family and proud of it.

Do your girl a favor, let her fly with her own wings …. my ex-girlfriend got married to an idiot, got kids and dad is still paying for shit.

And don’t buy a condo in Vancouver. They are far cheaper to rent …

#74 Ronaldo on 08.18.15 at 10:23 pm

62 Leo Trollstoy on 08.18.15 at 9:51 pm

”My accountant can suggest ideas but I would never take the advice without having made a decision by myself already.”

Exactly. The last people you want to talk to about investing are accountants, bank managers, teachers, doctors, lawyers, (maybe your dentist), brother in law, mother in law, definately most parents, your neighbour, probably 99% of the population. This is why Garth has this blog.

#75 DON on 08.18.15 at 10:24 pm

#37 New Babblemaster on 08.18.15 at 7:47 pm

Rates will not rise unless something really unusual happens. Considering how things are going, there is just no reason for rates to rise. If anything, rates will go negative.
********************

Negative rates…no jobs…or lack of…decline in purchasing, the music stops.

#76 DON on 08.18.15 at 10:33 pm

#35 Prairieboy43 on 08.18.15 at 7:40 pm

If you can change the brake pads on a car. Then you are qualified to work on a drill rig (Alberta, Sask, Manitoba, everywhere). The Drum on the rig has larger pads, same design.
Plus if you can change your brake pads. Might as well improve them with Larger Rotors, new braided lines. You can stop on a dime. No need for ABS. However today’s modern vehicles have good disc brakes.
When is this real estate market about to implode? Have not seen much yet (Edmonton Area)?

***********************************
A couple of tools and the benefit of a youtube video and just about anyone can change brakes.

‘But my mechanic does that… an my maid cleans the house and we eat out – who cooks anymore. Hell we don’t even pump our own gas. (best one) the nanny looks after the kids.’

Their was a time when men/women changed their own oil etc. Hell some people are stranded on the highways because they can’t even change a tire. Today’s braking systems are much easier to replace. Drum brakes on the other hand – a little harder (old car).

People can’t save money when they pay for everything.

The market is edmonton is on the cliff – when change happens it happens swiftly. One day everything is fine the next it isn’t. It is already under way, just because we don’t witness it doesn’t mean it is not happening.

#77 Spectacle (in Jest) on 08.18.15 at 10:37 pm

Aaron,

Realestate could be described similarly to that of chicken pox.
Only have to worry about getting hit by its effects the first time, like when you’re a newby!

So, that silly “don’t buy real estate” warning might not apply to second time home buyers like You.

Besides , you’ve already read 6 or so blog postings!
Oh, And we really could use some humour on this blog at times…..welcome now take one for the team.

#78 Smoking Man on 08.18.15 at 10:39 pm

#69 lee on 08.18.15 at 10:13 pm
How many contributors on this blog are realtors trying to puff the market?
….

No idea, just know there is no better Dr of Herdonomics than me.

Why is this not taught in university. Because they ain’t smart enough.

Many usa college’s are dropping the SAT tests.

High school has done such a great job dumbing them down they had to lower the bar to keep the party going.

Dr Smoking Man
PhD Herdonomics

#79 Carpe Diem on 08.18.15 at 10:40 pm

I was in Vancouver last month. Unpleasant reason.

I sure enjoyed a few Sushi places in Richmond (daily) and few Chinese restaurants with my Chinese-Canadian friends. I still think their driving sucks and they laughed about my deleted comments on this blog!!!

You know Richmond ain’t so bad. The Skytrain make a big difference!!!

While there, I was able to get into a few family friends’ financial pictures …

65 and 60 year old. 1.4 million asset. 600K mortgage debt.

Seriously?

I told them, sell the properties, invest the proceeds for income and plan for a retirement. Also move to an affordable place! These people were serial entrepreneurs and never paid in CPP ….

—-
The other, 57 years old. 1.6 worth of real estate. 1.2 debt. Passed away. The estate might be bankrupt considering a few more liabilities.

Seriously?


A couple married last year. Mid-30 and late 20’s.
Very nice.

He’s a scientist, she’s a HR person. Good cash flow.
He was renting this awesome pad in Yaletown for years. She now wants a home.

The cost … $1.2 million.

You can’t cure stupid. Even when the people are smart!!

You just have to go back home, in the forest and keeping for less than what my landlord is forking over.

Then log into your investment account and notice this year has not been inspiring, but whatever …. it’s time for Greekfest in Ottawa!

Tomorrow, I can sell it all and be in cash or maybe it’s time to top off those TSFA’s.

ancouver people …. Give your head a shake!

#80 cmhc on 08.18.15 at 10:49 pm

how can cmhc possibly claim that vancouver is facing a low risk of a correction in house prices? they must believe in the foreign money idea or they are scared to scare the sheep.

#81 DON on 08.18.15 at 10:56 pm

#49 Freedom First on 08.18.15 at 8:36 pm

Welcome aboard Aaron. Garth can help. Too bad about the accountant and the wife though.

Pleasure reading this Blog today. Makes me even more grateful I am single and don’t have to argue with any financial morons. Like I said a few weeks ago, found out my latest girlfriend of 7 months was financially clueless and had to let her go. I always live alone and I am not into trying to train a girlfriend. She must already be in a freedom first lifestyle in every way to have any staying power with me. My goal; “always put my Freedom First, keep a ring off of my finger, and never give out my house key.” Result=a happy life. I consider myself a Professional at looking after myself. I am a true Pioneer.
*********************************

True enough!

I chose wisely when I married – don’t have total freedom, but she is money wise and full of reasoning and common sense. This helps me keep and gain more freedom. Freedom to sleep well at night – not sweating bad debt…freedom to move for jobs…freedom to change my lifestyle. I live for freedom as well, only difference is I have children and love spending my freedom with them. It is not my legacy, life is a gift.

To all:
Everyone used to be a child and have parents. Kids aren’t the problem it’s the 2 – 3 billion jack asses that wreck it for everyone.

Duffy Trial:

Everyone in the office knew about my chief of staff paying the 90K except the leader of this once great nation.

#82 kommykim on 08.18.15 at 11:06 pm

RE:#74 Spectacle (in Jest) on 08.18.15 at 10:37 pm
Realestate could be described similarly to that of chicken pox.
Only have to worry about getting hit by its effects the first time, like when you’re a newby!

Just like RE, chickenpox can come back as shingles and be really painful in your old age.

#83 Vanecdotal on 08.18.15 at 11:17 pm

#47 Kan

The builder can “ask” whatever they want, does not mean Mr. Market will pay that price.

I’m sure you’ve already done your dd on local condo price trends since you’re actively looking, but just in case here’s the link: http://www.rebgv.org/sites/default/files/201507-REBGV-Stats-Package-for-Media_revised_0.pdf

These are REBGV’s own “proprietary” (favourably massaged) stats so you can imagine what the actual price trend reality may be.

Depending on what part of Van you’re looking at, 5 year trend condos are either down, flat, or just slightly outpacing inflation (in the most prime areas ONLY). Don’t enable, educate. Your daughter would be FAR better served by teaching her on the importance of paying herself first, diversification, and being financially liquid & mobile in the global job market.

#84 Canada in Receivership on 08.18.15 at 11:36 pm

Good article, one of these days as were in extra innings of a baseball game, would assume the housing markets will start it very noticeable downtrend. An analogy would be to oil, June 2014 oil was 100ish today August 40ish. House prices could be similar 1/2 price or even 25 percent off within a year.

#85 Smoking Man on 08.18.15 at 11:37 pm

To be an insider man, accepted and free in downtown Toronto.

Talk in a high ocative voice.

Be a Non Smoker, loath smokers.

Ride a bike. Hate cars.

Be a climate change alarmist crusader.

Wear Pink Shirts.

Moderate drinker of red wine. Never touch JD

Accept any naked Freeks at the Gay pride parade.

Spf 60 Sunscrean.

Whole foods only.

Hate rich boomers.

Live in 500 square foot condos convinced it’s for the climate, never admitting your a loser that never made it.

Inshrine your obidance certificate with candles and insence.

Hate sales men.

Love Kathleen Wynee.

Hate Harpo.

Salad vs burgers.

Gym membership.

Owner of a yoga mat.

Sailing rocks vs Donzzies are for losers.

Love to get bent over and taxed, over and over.

Despises F150 pick ups.

Understand Trans Genders, and why a man would chop it off.

Blue Jay caps, cowboy hats forbidden.

Go to fat femanazis rallys, learn to hate thin chics.

Dr Smoking Man
PhD Herdonomics.

#86 Rip Chordless on 08.18.15 at 11:51 pm

#19 Westcoasters on 08.18.15 at 6:34 pm
My husband and are we’re just saying earlier today how happy we are that Garth talked us out of buying a fixer bung in a rural BC location (southern gulf islands) just 2 years ago. That market has suffered a correction and we would have been stuck with a losing investment. Thanks Garth, for telling us to control our emotions and keep renting. So glad we did.”

What %age was the correction…maybe now is the time to buy?

#87 B Riding Dirty on 08.18.15 at 11:52 pm

Garth laid out a you know what slap down tonight. Back handed to this poor souls mouth! If he comes back for more tomorrow he for sure becomes a sucker who for some dumb purple kool aid reason loves to read this said depressing blog because at this point who else can we complain too!

Two years ago a mortgage broker buddy told me brentwood mall in burnaby (brentlawn area) houses will be 2 million for a tear down. I called bullshit. Last two years alone prices are up 600k now 1.5million for a tear down. I started reading this blog when i could of got in at 900k. Answer is the Herd moves up and we who read here are waiting for the herd to turn around. The question is when or will it really?

#88 Vanecdotal on 08.18.15 at 11:56 pm

#77 cmhc

I believe you are correct, they don’t want to scare the sheeple here. Our Premiere strangely silent since Harper announced his “let’s get some data on foreign $ influence in Cdn. RE campaign carrot. Think lemmings: cliff. Lots and lots of lemmings. BIG cliff – as in how much of BC’s “economy” (or lack thereof) by GDP source is FIRE (#1) and Construction. (#4) Ok… and weed. Not much else: http://credbc.ca/role-energy-sector-bcs-economy/

“…the sectors most responsible for creating jobs, funding social programs and contributing to the wealth of British Columbians are finance, real estate, manufacturing, construction, retail trade and tourism.”

Lots at stake to be rocking this duct taped Wet Coast Titanic. Fantastic economic stewardship we have here (rearranges more deck chairs). Dern blog cutting into my Wreck Beach drum circle time…

#89 Rip Chordless on 08.19.15 at 12:00 am

#47 anotherstabbinginsaskatoon on 08.18.15 at 8:24 pm
It is educated people that ought to know better. Did they all study german existentialist philosophy? ”

Better to stick with the French existentialist and the German nihilists………each country seems to have its own niche errr Nietzche…badabada bing!

#90 Frustrated Kiwi on 08.19.15 at 12:06 am

Aaron, Garth doesn’t say “don’t buy real estate” he says “don’t buy real estate you can’t afford.” He owns a place to escape to (but rents his city place because it’s much cheaper to do so). Look up his old articles on his rule of 90: if you can’t buy a place using less than (90 – your age)% of your net worth, then you shouldn’t buy. Think about the risk involved with $1mil of debt. Suppose there is a 10% chance of house prices going down by 30% and a 10% chance of them going up by 30%. Suppose someone offered you into a lottery where you could lose 300K with 10% probability – would you enter? Of course you wouldn’t. Even if it’s only 1% chance, would you enter? You must admit there is at least a 1% chance of a 30% fall. House prices do go down sometimes and sometimes a lot!

#91 Nosty, etc. on 08.19.15 at 12:08 am

#68 Smoking Man on 08.18.15 at 10:12 pm — “The asset orbital party is just starting.”We’re in for one helluva worldwide ride!

#152 Smoking Man on 08.16.15 at 10:41 pm — “Apparently he committed suicide by shooting himself in the head twice.”

Once from behind, then union regulations would have required a ten minute tea break between shootings, following which one from the side. After his orgasmic death-break, restroom visit. Makes perfect sense if one follows the m$m, but we don’t.

#92 Marco on 08.19.15 at 12:12 am

thanks Garth,

Mexico:

http://wolfstreet.com/2015/08/18/canada-getting-clocked-by-something-far-bigger-than-oil/

Cheers.

#93 DON on 08.19.15 at 12:31 am

The following is a cut and paste from the comments section of CBC Canada -Duffy Trial written by W. Muller. Just priceless — had to share.

******************************************
W. Muller

The evolution of a lie:
1. Let me be clear on that, Novak did not receive that e-mail.
2. Let me be very clear on that, Novak received the e-mail but did not open it.
3. Let me be extremely clear on that, Novak opened the e-mail but did not read it.
4. Let me be very extremely clear on that , Novak opened the e-mail, read it, but did not understand a word of it, so he deleted it.

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

#94 For those about to flop... on 08.19.15 at 12:47 am

DELETED

#95 Rabbit One on 08.19.15 at 1:01 am

# 83 Vanecdotal

>Depending on what part of Van you’re looking at, 5 year trend condos are either down, flat, or just slightly outpacing inflation (in the most prime areas ONLY).

Yes, in deed. A couple I just met yesterday were not happy that their $500K Yaletown condo bought in 2005 ‘only’ appreciated $120K. Now $620K with still over $300K mortgage on it.
They have limited choice for upgrading, they say.
Two incomes, professionals, cannot afford more than condo after 10 years.

Vancouver SFH, always go up? Looks like it, but inventory is extremely tight, and also how many are sold for tear downs, and same property re-sold with hundreds of thousand of upgrade, rebuilt for more than 100~150% profit?

If you see the same SFH for last 5 years, if no upgrade, or tear-down for speculative investors, I don’t see value has risen much either.

#96 Torchwood1979 on 08.19.15 at 1:24 am

Greetings from Australia, the other former Imperial lackey with a mega housing bubble. Wow, you could write exactly the same post about scenarios in Australia at the moment. Our bubble has defied all the odds and plenty of Aussies are taking on millions of dollars in debt on the assumption that their investment properties will continue skyrocketing in value.

But our once in a century commodities boom has ground to a halt, our AAA credit rating (which backstops the enormous foreign debt held by our banks) is under threat and all the signs are that the game is up.

It’s only a matter of time now before TSHTF

#97 BC Guy on 08.19.15 at 2:49 am

So you have some money you want to invest but you’re worried because you keep hearing that the housing market is going to crash. Isn’t it better to wait until after that happens so you can buy in when it’s safer?

It’s true that the housing market will crash. In fact I guarantee it. The only problem is that no one knows when it will happen. It might be tomorrow, or it might be five years from now. That means it’s very hard to do anything about it.

It’s an understandable fear right now. We are just a few years past one of the biggest recessions any of us have seen. Expecting that to happen again just because that’s what we remember is the same mistake that caused the disaster in the first place.

Home buyers and real estate agents forgot that things could go wrong and didn’t protect themselves. Now many of them have forgotten that things can go well and won’t take good opportunities. Either mistake can cost you a lot of money.

Think about the countless millions of home owners who didn’t manage to avoid the crash, then got out of the market after losing a lot of money and missed the recovery! If they had simply done nothing they would have been back to even after a few years and making a profit after that. Instead they lost money while trying to protect themselves.

It seems so easy to avoid a crash, why is it that almost no one actually does? As the legendary investor Peter Lynch said:

“More money has been lost trying to anticipate and protect from real estate crashes than actually in them.”

Losing Even if You’re Right

Let’s say you did wait until after a big dip, correction, or crash to buy into the market. The first problem is that even if you get it right you can still lose money in the process. Wait, what? How could avoiding a drop in the real estate market cost you money?

Imagine two investors, Johnny and Jane, who both have $500,000 to invest at the start of this year.1

Johnny is worried about bad news and sits on his cash “until things get safer”. Jane knows that being invested in the real estate market for as long as possible will make her safer so she buys a starter home in the suburbs. It turns out that 2015 is a pretty good year as prices rise 9% on average.

Jane’s equity goes up 9% this year and she gets the privilege of owning her own home. Johnny gets a bit of interest on his savings account at the local bank and ends up with only 0.5% ahead. Then at the start of next year some bad news comes out and the real estate markets drop by 10%.

Now Johnny must be feeling good since he avoided that hit, right? Not so fast — after Jane loses 10% she still has all her equity, reduced her mortgage, while Johnny only has his 0.5% gain and lost all that money paid out in rent!

Johnny is smart enough to know that the market can keep going down even more. Will it be like last fall when markets rebounded the next month? Or is it the start of a global meltdown? No one knows, but he’s too scared to invest in a falling real estate market because the risk is always there.

That doesn’t sound like good protection. I’m not predicting what will happen this year or next year but examples like this are constantly happening in the real estate market. Most of the time the market is going up. If you are invested for a long enough time you will be making money before and after any crashes that come along, probably a lot more than you lose in those crashes.

#98 BC Guy on 08.19.15 at 2:50 am

I’m just messin’ with your mind.

#99 Freedom First on 08.19.15 at 3:14 am

#81 DON

You are blessed. I am happy for you.

However, your way is too high risk for me. I keep it simple, look at the risk/reward for men and decided I should just focus on enjoying my life. Women don’t seem to care, in fact, I believe they find me refreshing as I believe they know that my only goal is to enjoy them.

#100 Freedom First on 08.19.15 at 3:23 am

#85 Dr. Smoking Man

I needed that :>) …..laugh of the day……you nailed it.

#101 nubbers on 08.19.15 at 3:25 am

Since when did accountants offer investment advice? Is this a Canadian thing?

My experience of accountants is that they are all good at maths and some are good at tax optimisation, but they are generally as clueless as the rest of us on investing.

I think the assumptions behind behind Aaron’s accountant’s assurance of positive cash flow would make an excellent follow up blog post.

#102 Buy? Curious? on 08.19.15 at 3:54 am

I’ve never seen a comment section of a blog have so many nerds bragging that they’re single.

“Pleasure reading this Blog today. Makes me even more grateful I am single and don’t have to argue with any financial morons. Like I said a few weeks ago, found out my latest girlfriend of 7 months was financially clueless and had to let her go. I always live alone and I am not into trying to train a girlfriend. She must already be in a freedom first lifestyle in every way to have any staying power with me. My goal; “always put my Freedom First, keep a ring off of my finger, and never give out my house key.” Result=a happy life.”

Ok nerd. I think your microwave dinner for 1 is ready.

#103 Bob Santarossa on 08.19.15 at 4:03 am

Economy too high risk – too many negative indicators that matter.

Newbie should sell now to pocket equity then rent, wait the recession out, the election and the inevitable interest rate hikes next year.

If a recession, there will be a lot of deals out there to pick and choose from next year – maybe even a buyers market. Definitely so if this becomes a job loss recession.

In the meantime, invest in shorter term assets so Newbie can be quickly liquid to take advantage of the inevitable cheaper homes for sale next year.

Sell high, buy low.

#104 family beagle on 08.19.15 at 5:08 am

#52 Freedom First on 08.18.15 at 8:36 pm

Pleasure reading this Blog today. Makes me even more grateful I am single and don’t have to argue with any financial morons (…) My goal; “always put my Freedom First, keep a ring off of my finger, and never give out my house key.” Result=a happy life. I consider myself a Professional at looking after myself. I am a true Pioneer.

…….

There’s more than enough documentation from renowned explorers such as Thompson, Fraser, Champlain, Lewis and Clarke, that the guides and natives wouldn’t venture without women. Females meant the survival of the group. Pioneers were just as often women. Sorry kiddo, your attendance required an x chrom somewhere and society would crumble without ’em. Be a good boy, tuck your shirt in and say thank you, Mom. Don’t be so selfish, loosen up. There’ll be somebody for you. Love decides these things, and until then, not much we can do about it. In the meantime, maybe learn a recipe or two and clean the place up. Be more positive. Volunteer to walk puppies. Help at a shelter. The compassion you have misplaced will return. When you are living for others and not just yourself, you’ll see and experience wonders that money can only attempt to duplicate with cheap inflatable facsimiles. Sometimes love is moving landscaping rocks. Remember, the role of a male on earth is to serve and protect women. If you ever doubt that, lift your shirt. Mother Nature gave you a couple reminders.

#105 TheAwakenedOne on 08.19.15 at 5:40 am

I’m sure the people in Van here got way more aroused seeing PM Stephen Harpo here than watching Playboy babes…

He seems to touch their G-spots telepathically: I drove down Cambie street the other day after a while not driving around theere. What did I see? Many blocks of 4-5 detached have been cordoned off with “Sold” and condo development project permit signs. Looks like a @#$cking ghost town!

There’s even a 5-story WOODEN condo complex right on Cambie & 41st corner. Man, talk about insanity: I thought only 3-story or lower would be allowed as wooden building??

But Alas, in this moist mess, nothing else matters… and people would pay up to half a mil for one of those wooden cages.

Those who are willing to pay that much for a pigeon hole: they truly deserve to live in them! Meanwhile lemme rent a box and live free as a bird… while dropping a few surprises on the PM’s windshield… :>)

Folks here get horny when the price goes up
Or very moist whenever they see PM Stevie…
Oh yeah baby, very wet… pouring like this rain city
I’ll get horny when the price goes down,
Or to Wreck beach with naked babes, bring me now!

#106 Londoner on 08.19.15 at 5:47 am

Been a while since I was in Canada. Just had a look at mls for some house listings in the new development area of Oakville (the Preserve).

$2mil for this one:

http://www.realtor.ca/Residential/Single-Family/16020736/562-HIDDEN-TR-Oakville-Ontario-L6M0N3-Rural-Oakville

$1.4 mil for this:

http://www.realtor.ca/Residential/Single-Family/15991848/210-McWilliams-Crescent-Oakville-Ontario-L6M0W5-GO-Glenorchy

Just wondering who’s buying into these new suburbs?

#107 davikk on 08.19.15 at 7:23 am

Canada “Getting Clocked” by Something Far Bigger than Oil

http://investmentwatchblog.com/canada-getting-clocked-by-something-far-bigger-than-oil/

#108 ticker reader on 08.19.15 at 7:40 am

#39 Retired Boomer

Today went on a look see at various stocks. Boy, some screaming (looking) buys out there!

None the less, put in several limit orders at lower prices on several good dividend payers that have been pretty beat down.

Are you shy or selfish for sparing us from the tickers?

#109 Julia on 08.19.15 at 7:51 am

#106 Londoner
“Been a while since I was in Canada. Just had a look at mls for some house listings in the new development area of Oakville (the Preserve).
$2mil for this one:
http://www.realtor.ca/Residential/Single-Family/16020736/562-HIDDEN-TR-Oakville-Ontario-L6M0N3-Rural-Oakville
$1.4 mil for this:
http://www.realtor.ca/Residential/Single-Family/15991848/210-McWilliams-Crescent-Oakville-Ontario-L6M0W5-GO-Glenorchy
Just wondering who’s buying into these new suburbs?”

*****************
I have no clue but I needed to go to Oakville yesterday from downtown Toronto and noticed this:
1. These new neighbourhood? Houses look pretty much all the same. Zero character but large and shiny. Not much different than Vaughan though.
2. Most had 2 cars in the driveway, even with a garage.
3. The traffic. Oh my. A lot of single drivers – there was 2 of us in our car so we could use the temporary HOV which was awesome but still would hate to do that everyday.

#110 Llewelyn on 08.19.15 at 7:52 am

Total disposable income available in key markets is increasing at a much slower rate than the total market value of real estate. The percentage of total disposable income required to secure accommodation has increased to the point where it poses a serious threat to other sectors of our economy.

I am concerned that consumer credit limits have little room to expand in 2015 and without credit the impact of high accommodation costs on our economy will emerge from the shadows.

The percentage of disposable income devoted to all forms of debt, including mortgage debt, is spiralling out of control. Using debt to cover previous debt obligations is a very slippery slope that will only get more slippery if interest rates are increased.

Canadian citizens are being encouraged to assume mortgage debt in the belief that value of accommodation acquired with debt will increase and will help cover their total debt obligations.

Using debt to purchase an asset with the hope that the asset will generate the revenue necessary to cover debt obligations is equivalent to believing in perpetual motion machines. At some point someone pulls back the curtain and the hidden battery is revealed.

The curtain has been pulled back. Take a peek at the fundamentals behind perpetual price increases. Oh Oh!!

#111 pbrasseur on 08.19.15 at 8:09 am

In the end the big question is :

Will the Canadian economy be productive and strong enough in the future to repay all that debt and liability (both private and public) that we have created?

If you think so then please tell us what sectors of the economy will provide that, I’m really curious to know.

If you don’t think it’s possible then you have to realize that we are about to get collectively a whole lot poorer. Think of what that means for you individually and what you can do to protect yourself or even profit from it. For example, if you’re older and own assets you might want to diminish your exposure to the Canadian markets, that may even mean downsizing your home. If you’re a young university graduate you may consider going to work in the US for a while.

Bottom line if you’re at risk or just want to stay ahead of the curve and control your destiny don’t just sit there with the other sheep waiting to be sheared (or slaughtered)!

#112 Smoking Man on 08.19.15 at 8:20 am

#91 Nosty, etc. on 08.19.15 at 12:08 am
#68 Smoking Man on 08.18.15 at 10:12 pm — “The asset orbital party is just starting.” — We’re in for one helluva worldwide ride!

#152 Smoking Man on 08.16.15 at 10:41 pm — “Apparently he committed suicide by shooting himself in the head twice.”

Once from behind, then union regulations would have required a ten minute tea break between shootings, following which one from the side. After his orgasmic death-break, restroom visit. Makes perfect sense if one follows the m$m, but we don’t.
………..

We live in a gigantic pit of bull shit all around us, I know this, I use it to my advantage. I’ve learned from the best. Takes one to know one.

A warning to newbees to the world of investing. MSM lies alot, in fact it’s coordinated and controlled and always in sync. Less you follow RT

You are sheep, they are the sheep dogs for master.

Who is the master. Not sure but I reserve the name Machine for this entity.

#113 Randy Tang on 08.19.15 at 8:28 am

The TSX is currently about 14,194 and a Scotia Bank analyst says is should be more like 12,500.

So far he is a little bit right, the TSX was around 14,280 when this call was made.

If this happens and the TSX goes down to the 12,500 level, this is another 12% down from here.

There clearly is value building in the TSX. Having said that, investors should probably be twice as invested in US and international equities as Canadian ones. — Garth

#114 Nagraj on 08.19.15 at 8:40 am

GT: ” … economists have concluded when so many own houses it actually hurts the economy … ”

What might, currently, be an optimal (and sane) national rate of home ownership for Canada?
Presently at ca 70%, how do you get that rate down? Is a Detroit-like future in the offing here? Condo slums? Why not?

Suppose Zacharias (pardon me, I mean Aaron) is trumped by his better half and in the end they lose both the house and the condo?
– “better jobs and opportunities” appears in the same GT sentence – dream on

The Canadian economy IS in Recession, and, perish the thought, suppose Q3 GDP comes in negative …

Chilly camembert. Icy camembert. Frozen camembert. No camembert. How about some cheesy national optimism instead? Hopefully that dog don’t get hit by some clunker whose driver couldn’t AFFORD new brake pads.

Still on “smart and successful” as a social values leitmotif, dear blogdogs? It’s ALREADY been replaced. By fair and caring.

#115 John on 08.19.15 at 8:50 am

“Face it, Aaron, we’re in the end stretch of this market, which was created by cheap money, greed and lax rule” Garth.
Indeed; it’s also the end stretch for more than home ownership………… Cheap money, greed and lax rules have created lots of Mnt. Everest bubbles looking for pins.
“Nobody Escapes”

#116 Steve on 08.19.15 at 8:57 am

#70 Sydneysider on 08.18.15 at 10:06 pm I may be mistaken here, but won’t he have to pay capital gains tax if he adopts the two house strategy? That wipes off $50K (two years rent) from his personal wealth straightaway.
_________________________________

The capital gain on the townhouse up until now is counted as their principal residence capital gain, so no tax. Of course, there needs to be ‘agreement’ regarding the house value at the time it changes from principal residence, but there are ways to do that.

If they kept it once they bought another house, capital gain/loss going forward would be taxable, when realized.

#117 John on 08.19.15 at 9:02 am

Walmarts new logo will likely read “Fallmart” as the new face of non-consumption punts granite, margin debt, 20 cheap T-shirts, his and her walk-in closets, Harley collections and other such consumptive crap into the history books. Such tired consumptive memes may even become vilified by some. The new paradigm goes with the new logo “minimalist” Google it. Dump the junk; reject the junk; enjoy freedom … you know, keep one coat ditch the other 12…. Factor that into your balanced portfolio..yesterday.

#118 John on 08.19.15 at 9:04 am

The ‘DOWNSIZING’ world is knocking on your door. Everything is going to be downsized or punted… Get a new hobby or life.

#119 Smoking Man on 08.19.15 at 9:23 am

Ashley Madison names are out.. Lots from ottawa
Ha, election year. Good thing I spelt that right, good thing the R and L are not close on keyboard.
……

Let’s see what politicians were dumb enough to use it.

http://themobilebay.org/torrent/12237184/The_Complete_Ashley_Madison_Dump_from_the_Impact_Team

The text below is from the female hackers, let’s face it, men don’t write like this. These are seriously screwed up women. My guess. Big fatsos that hate thin woman, this list will probably destroy some families. Kids left out to dry, cause daddy was being daddy.

Sorry ladies but meandering men almost all, have been at it at some point in there life for last 200000 years. That’s how we are wired. I apologize for all my fellow danglers.

Here is the hackers words.

Avid Life Media has failed to take down Ashley Madison and Established Men. We have explained the fraud, deceit, and stupidity of ALM and their members. Now everyone gets to see their data.

Find someone you know in here? Keep in mind the site is a scam with thousands of fake female profiles. See ashley madison fake profile lawsuit; 90-95% of actual users are male. Chances are your man signed up on the world’s biggest affair site, but never had one. He just tried to. If that distinction matters.

Find yourself in here? It was ALM that failed you and lied to you. Prosecute them and claim damages. Then move on with your life. Learn your lesson and make amends. Embarrassing now, but you’ll get over it.

#120 Smoking Man on 08.19.15 at 9:30 am

Wow the file is 9 gigs, expect a slow Internet today.

#121 Smoking Man on 08.19.15 at 9:39 am

Men if you do find your name on the list, here is your way out.

Honey, AM does not verify emails. Obviously someone punked my email.. Honey, I’m disappointed and hurt, I thought you knew me better than that . Guess I was wrong.

I need some alone time now. I just can’t beilive you would would think of me that way.

What’s happend to you?

#122 Shawn on 08.19.15 at 9:47 am

Can the Debt be Repaid?

#111 pbrasseur on 08.19.15 at 8:09 am
In the end the big question is :

Will the Canadian economy be productive and strong enough in the future to repay all that debt and liability (both private and public) that we have created?

***************************************
The strange, but true, reality is that strong credit-worthy entities like the Federal and Provincial government and the large Cities and most large corporations will always find it beneficial to have debt, and lenders will always find it beneficial to loan them money. The debt will be rolled over and will never be “paid off”.

Individuals however eventually die and their debts do need to be paid off. And this generally happens.

It may sound like a Ponzi scheme but it works well as long as their is enough money coming into governments and corporations to pay the interest return.

So, the implicit premise of your question that the debt needs to be repaid is false when it comes to public and corporate debts. As to individual debt, yes in most (but not all) cases that will be paid off.

Warren Buffett has always said he can’t predict the near future but always has confidence that the economy of the United States will grow over the long term. He would say the same of Canada. One of you is wrong. Guess which one I think that is.

#123 OttawaMike on 08.19.15 at 9:57 am

#85 Smokingman

Ha ha.

Here’s my question: Does my Donzi Offshore and turbo diesel F250 cancel out my salad eating and pride parade attendance or climate change worries?

#124 tkid on 08.19.15 at 10:11 am

Valid reply to “Honey, AM does not verify emails. ”

Gee, you seem to know a lot about AM. Hey, I know. Howsabout we check to see if your credit card information is on the site. Punks wouldn’t know your cc info …

#125 Julia on 08.19.15 at 10:12 am

#121 Smoking Man
“Men if you do find your name on the list, here is your way out.
Honey, AM does not verify emails. Obviously someone punked my email.. Honey, I’m disappointed and hurt, I thought you knew me better than that . Guess I was wrong.
I need some alone time now. I just can’t beilive you would would think of me that way.
What’s happend to you?”

********************
Hit Tiffany’s first.

#126 young & foolish on 08.19.15 at 10:33 am

“So, the implicit premise of your question that the debt needs to be repaid is false when it comes to public and corporate debts. As to individual debt, yes in most (but not all) cases that will be paid off.”

People do not seem to understand this. It’s why politicos always try to trick people with this apples to oranges comparison (the balanced budget meme).

BTW … TSX at 1300 soon?

#127 leslie on 08.19.15 at 10:33 am

Real Estate is pretty legit…This guy just made 150k from a down payment of let’s say 5% to 20% (20k to 80k) …his return was sick…for 3 years! and he had somewhere to live..

#128 Henry Danson on 08.19.15 at 11:00 am

Walmart stock’s price was over $90 in the beginning of 2015 and today its around 68+. An 23% drop in almost 8 months.

#129 Centurion on 08.19.15 at 11:01 am

What the…?

This hashtag is actually a thing now?

https://twitter.com/hashtag/NotYourMothersMortgage?src=hash

Ugh.

#130 A Canadian Abroad on 08.19.15 at 11:05 am

Araon, and any home owners who think Real estate means liquidity.

We have owned 3 homes, 2 in Calgary (’04, ’08), 1 in Houston (now). NONE were easy to sell, even in a bull RE market! Our Houston home, listed at $400k (1/3 acre, 2300sq/ft bung, renovated, great inner-city local) has so far been listed for 6 months and is now $339.

I cannot imagine what it is like to sell a home in a bear RE market!

So, my advice to Araon (et al.) is no matter what they tell you, Real Estate is not easily liquefiable!

#131 Shawn on 08.19.15 at 11:27 am

U.S. Houses were and are affordable

#15 Victoria Real Estate Update on 08.18.15 at 6:31 pm said:

House prices in the US reached unsustainably high levels in 05-06 and prices corrected back to levels where the average American family could again afford the average home.

***************************************
True and at that point several million average families with no house who could afford to buy one and could lock in a 30 year mortgage at historically low rates (and under U.S. rules refinance lower with no interest-differential penalty if rates fell) declined to buy because they were to scared and scarred by what had happened to people around them.

In fact the houses could not have stayed cheap if they all started buying.

Warren Buffett called buying an affordable home a no brainer for working Americans who were then renting. This is said several times about two of years ago. Many people then promptly demonstrated that they indeed had no brains.

Meanwhile the likes of Toll Brothers stock was on sale…

#132 Axehead on 08.19.15 at 11:28 am

Aaron,

If you boil down the advice provided, it is this: Sell High, Buy Low. Housing is high now , you have 150k (or less) potential profit, so now is the time to sell and rent. Wait, and buy at a low time, coming soon or sooner if you choose to or have to move.

The brake pad comment is well deserved. Best get used to doing all your own maintenance if you choose to forgo Garth’s advice. You will be house poor and will have to cheap down everything.

#133 Julia on 08.19.15 at 11:30 am

#127 leslie
Real Estate is pretty legit…This guy just made 150k from a down payment of let’s say 5% to 20% (20k to 80k) …his return was sick…for 3 years! and he had somewhere to live..

*************
You are omitting all costs.

#134 Shawn on 08.19.15 at 11:41 am

Brake Jobs

A plug for Canadian Tire

For the past 20 years I have had most of my automotive repairs done at Canadian Tire in St. Albert, Alberta. The vehicles included Three bought new and owned for up to 16 years. And later two late model used cars bought and owned for four and seven years and counting. Dodge caravan (the least reliable of the lot). Two Hondas (Only problem with Hondas is they need to be replaced every 16 years or so), Two used European models.

These were mostly reliable vehicles so it was mostly maintenance but a few bigger repairs too.

I found the Canadian Tire service to be cheaper and far more convenient than going to the dealer. (Dealers want to change the “pollen filter” for $400 at least at Volvo). I tended to go to the dealer on new cars for the first couple of years only. I found the Canadian Tire service to be prompt and friendly.

A lot of people like to slag Canadian Tire but they are doing very well (because they deserve to).

Disclosure: I own some Canadian Tire shares and have since the share price was less than half what it is now (see August 2011). I sold most of my shares on the way up at good gains but still have some. I am not a buyer of the shares at this time.

#135 Shawn on 08.19.15 at 11:51 am

Walmart

#128 Henry Danson on 08.19.15 at 11:00 am said:

Walmart stock’s price was over $90 in the beginning of 2015 and today its around 68+. An 23% drop in almost 8 months.

*************************************
And what should we conclude from this? Here are a few possibilities.

The American economic recovery denier: See, the American economic recovery is a fat lie.

The technical analyst trader: SELL, it’s in a down-tend.

The contrarian: Buy because it is down

The value analyst: Buy because the price to earnings ratio is down and the earnings hit was caused by foreign exchange (Profits from Canada and rest of world hit in exchanging back to U.S. dollar figures) (and whatever other reasons an analyst sees)

The social change agent: Thank goodness people are wising up and stopping shopping at Walmart.

The Walmart worker: Will I lose my job?

The Walmart customer: Who cares and who knew?

The average person: Who cares and who knew?

One can make many, many conclusions from the same limited facts here. Some of the conclusions will contradict each other.

#136 Spectacle on 08.19.15 at 12:04 pm

Regarding:
#82 kommykim on 08.18.15 at 11:06 pm
RE:#74 Spectacle (in Jest) on 08.18.15 at 10:37 pm
Realestate could be described similarly to that of chicken pox.
Only have to worry about getting hit by its effects the first time, like when you’re a newby!

Kommykim: Just like RE, chickenpox can come back as shingles and be really painful in your old age.
———
And just like chicken pox/shingles….your real estate will require new roof shingles, right after you shell out for that expensive “drainage issue”….. And on it goes

#137 Westcoasters on 08.19.15 at 12:20 pm

#19 Westcoasters on 08.18.15 at 6:34 pm
My husband and are we’re just saying earlier today how happy we are that Garth talked us out of buying a fixer bung in a rural BC location (southern gulf islands) just 2 years ago. That market has suffered a correction and we would have been stuck with a losing investment. Thanks Garth, for telling us to control our emotions and keep renting. So glad we did.”

What %age was the correction…maybe now is the time to buy?
—————-
Are you kidding? With $175 return to Vancouver ferry travel that takes hours, no good healthcare, no employment, no police, terrible restaurants, bad roads, no good contractors to hire… I could go on.
Great place to visit though!!!!!!

#138 Ahmad on 08.19.15 at 12:23 pm

Hi Garth,
Trust all is well – long time reader and always enjoy the info here.

I’ve been brought up with anti-Interest mind set and try best to avoid but in current world system its not always easy to do so.

I understand most here agree with you on Aaron’s inquiry but no solution nor direction was given.

We all can point out the problem – but what is the solution?

#139 TurnerNation on 08.19.15 at 12:30 pm

I’m comparing SPY.us chart in 2008 vs today’s.

#140 pbrasseur on 08.19.15 at 12:41 pm

@Shawn #131

I said repay debt I should have sais overcome.
My point is simply that given the pace at which Canadians are accumulating debt a lot of growth will be necessary to justify those levels and replace that particular growth engine.

Americans could not follow up with growth after their debt binge. I don’t believe Canada can either.

BTW I’m pretty sure Buffet knows that the US is a better bet than Canada!

#141 Holy Crpa Wheres The Tylenol on 08.19.15 at 12:48 pm

#112 Smoking Man on 08.19.15 at 8:20 am
#91 Nosty, etc. on 08.19.15 at 12:08 am
#68 Smoking Man on 08.18.15 at 10:12 pm — “The asset orbital party is just starting.” — We’re in for one helluva worldwide ride!
#152 Smoking Man on 08.16.15 at 10:41 pm — “Apparently he committed suicide by shooting himself in the head twice.”
Once from behind, then union regulations would have required a ten minute tea break between shootings, following which one from the side. After his orgasmic death-break, restroom visit. Makes perfect sense if one follows the m$m, but we don’t.
………..
We live in a gigantic pit of bull shit all around us, I know this, I use it to my advantage. I’ve learned from the best. Takes one to know one.
A warning to newbees to the world of investing. MSM lies alot, in fact it’s coordinated and controlled and always in sync. Less you follow RT
You are sheep, they are the sheep dogs for master.
Who is the master. Not sure but I reserve the name Machine for this entity.
__________________________________________
Me thinks you are plagiarizing Pink Floyd too much there buddy! They coined the Machine many years ago and I don’t think you are worthy of Pink Floyd status.

#142 pinstripe on 08.19.15 at 12:48 pm

harpo will do anything to get elected.

http://www.cbc.ca/news/canada/edmonton/f-k-harper-sign-in-car-earns-edmonton-man-543-fine-1.3196099

#143 nubbers on 08.19.15 at 12:57 pm

Leslie @127
‘Real Estate is pretty legit…This guy just made 150k from a down payment of let’s say 5% to 20% (20k to 80k) …his return was sick…for 3 years! and he had somewhere to live..’

Leverage works both ways. On that basis, I calculate that I had a paper loss from my residence of about 1066% during the 90’s (no, I have not got the maths wrong). Although the price had improved by the time that I was rich enough to get rid of it, my ongoing losses from renting it out probably kept the overall loss about the same.

Judging by some of the comments, there are going to be a few here discovering the same.

#144 HEY Victoria Real Estate Update: READ THIS on 08.19.15 at 1:00 pm

http://www.cheknews.ca/vancouver-buyers-a-growing-trend-in-victoria-real-estate-market-112295/

#145 april on 08.19.15 at 1:00 pm

#80 CMHC – Isn’t this group all made up of ex realtors. If so no wonder things are the way they are.

#146 Life of the smart and the fast on 08.19.15 at 1:38 pm

Aaron….you could head to Texas where a mansion can be had ( by Oakville standards) for under $250,000. The work opportunities for anyone with a decent level of education are astounding!! Pay is double on average….and paid in USD ….Cost of living is half. Groceries half. Taxes half. Cars half. Insurance half. Girls twice as pretty.

I keep getting offers from multinationals to move to either Kuala Lumpur or Bangkok where professional wages are truly international and condo’s ( with full service and big swimming pools) start at $30,000.

Life in Canada……for the slow and dumb.

#147 Bill on 08.19.15 at 1:41 pm

Well I would own anywhere a oil hole is but Vancouver will not crash.
https://soundcloud.com/cknw/buyers-with-cash-are-spending-business-comment-aug-14

#148 -=jwk=- on 08.19.15 at 1:43 pm

You should really do a full blog post defending your position on why you think people should get into debt getting a new vehicle. They depreciate horribly and one a few years older is just as good.

Stop buying Chryslers and you wont have this problem…

This isn’t the 80’s. The “drive off the lot and lose 30%” thing is mostly a myth. For reliable brands it most definitely is a myth.

Would you pay $23,000 for a 2013 Camry with 57k on it, 43k or 6months of warranty left financed at 5.5% (used car finance rate)

OR

$25,000 for a brand new 2015 Camry with full warranty financed at 0.9%?

#149 Axehead on 08.19.15 at 1:59 pm

#131 Shawn

Take a look through the glass window between you and the garage in Canadian Tire and try to spot the ‘professional’ mechanic; most likely you’ll see 5 (or whatever the max allowed is) pimply faced apprentices just outta grade 10 for each licensed journeyman.

The example you gave was a Volvo dealership which I would put in the same ‘foreign’ category as all German car manufacturers – prepare to pay for what you get. Honda/Toyota are considered domestic now (Corolla’s are built in Canada, Tacoma’s are built in US, etc.) and their cost/service/parts are competative with GM/Ford/Chrysler and many times cheaper / better. And good luck with that ‘Fram’ filter and Canadian Tire oil vs OEM parts/service unless you specify otherwise.

The main point of Garth’s blog yesterday is that for most people cars are an ‘appliance’ and if you are so house poor because of horny investments in a bloated market and are forced to DIY now for car maintenance, then that certainly is an unsafe and unwise situation to be in.

#150 Greg on 08.19.15 at 2:00 pm

Things that make you hmmm…

http://m.scmp.com/comment/blogs/article/1851003/bizarro-vancouver-25000-households-declare-less-income-they-spend

#151 Shawn on 08.19.15 at 2:02 pm

Growth after Debt?

#140 pbrasseur on 08.19.15 at 12:41 pm said to me:

@Shawn #131

I said repay debt I should have sais overcome.
My point is simply that given the pace at which Canadians are accumulating debt a lot of growth will be necessary to justify those levels and replace that particular growth engine.

Americans could not follow up with growth after their debt binge. I don’t believe Canada can either.

BTW I’m pretty sure Buffet knows that the US is a better bet than Canada!

******************************************
Yes, some Canadians are accumulating debt. Often funded by other Canadians who have accumulated financial wealth.

America GDP has grown steadily after the down blip of 2008 / 2009.

Here is the data: (This is nominal GDP so growth is higher than the real GDP numbers that we hear more often)

http://bea.gov/national/xls/gdplev.xls

U.S. nominal dollars GDP is running at $17.8 trillion per year up from $14.5 trillion in 2007.

I have read and followed Buffett extensively for years.

Buffett does not invest in countries per se but in individual companies. He favors U.S. companies. But he looks favorably upon Canada.

Last year he paid top dollar to buy AltaLink a big electrical transmission utility in Alberta. He is looking to make more investment if he can find the right companies in Canada.

(Would that he would buy Bombardier but he requires competent management in place and also the thing might be hopeless and also it is not for sale. He could however buy it with his pocket change at this point. He’d love the products but hate the current margins)

He does not let government debt on the U.S. or Canada stop him from finding and making investments.

Recently the Financial post ran a story that totally refuted the notion that Canadians are not saving like before. Some surely are accumulating debt. Many others are not. Net savings is misleading as it deducts money people take out of RRSPs in their old age.

It may seem strange but many people have a mortgage while at he same time they have a large pension or RRSP savings. We use intermediaries. We put money in a bank and our neighbor borrows it because we are not fool enough to lend to our neighbour. We even find it efficient to effectively save and borrow at the same time from the same mega bank rather than just using our own savings instead of borrowing. In part this is for tax reasons. Savings are often tax advantaged or even supplemented by government.

It CAN certainly make perfect sense to invest at 7% while having a mortgage at 3% certainly. This person does not necessarily have a debt problem.

The debt of Canadians is sometimes exaggerated though certainly some people are way over indebted. Extrapolating that to the think everyone is in debt is totally wrong. Even the average person is not as bad off as many commentators make out.

#152 Bottoms_Up on 08.19.15 at 2:21 pm

#143 nubbers on 08.19.15 at 12:57 pm
————————————————–
I dunno….there are always new paradigms. Sure we had decades of 8% mortgage rates, and several years of rates double that. BUT, we are in a new paradigm. The economy is on life support, or else the overnight rate wouldn’t be 0.5%. Not sure it will be going up much for quite some time.

This blog scared me into locking in a mortgage rate in 2009. Boy was that the wrong call. Fool me once…..

#153 NoName on 08.19.15 at 2:51 pm

Off topic

Holy moly 4 lightning jolts at same place (Google data center in Belgium). I wonder what this is: unluck, conspiracy or cover-up.

http://www.bbc.com/news/technology-33989384

Interesting read, how to sell derivatives.
http://www.bloombergview.com/articles/2015-08-19/cool-derivatives-and-bank-consultants

#154 NoName on 08.19.15 at 2:58 pm

And this

Man who got his priorities in order.

“Elderly man ‘calmly’ smokes pipe while ‘sinking’ in Loxley lake”

http://www.bbc.com/news/uk-england-coventry-warwickshire-33849863?post_id=862513307173212_865447070213169

#155 Mark in Guelph on 08.19.15 at 3:20 pm

Fed July minutes show no September rate hike. There’s always December, right Garth?

This “recovery”, seven years in the making, will be one for the record books. QE4 before rate hike, bet on it!

#156 BREAKING NEWS on 08.19.15 at 3:26 pm

Alberta Oil has just broken through the lows of the Financial Crisis of 2009.

Now at $22.37 USD.

Alberta RE is doomed.

#157 BREAKING NEWS on 08.19.15 at 3:31 pm

Expect Bank of Canada to CUT to help busses in the Oil sands.

#158 BREAKING NEWS on 08.19.15 at 3:31 pm

busses = Buddies

#159 Sponge on 08.19.15 at 3:42 pm

Reforms goose is cooked!

#160 Lillooet, BC on 08.19.15 at 4:05 pm

Shawn on 08.19.15 at 11:51 am
Walmart

#128 Henry Danson on 08.19.15 at 11:00 am said:

Walmart stock’s price was over $90 in the beginning of 2015 and today its around 68+. An 23% drop in almost 8 months.

*************************************
And what should we conclude from this? Here are a few possibilities.

The American economic recovery denier: See, the American economic recovery is a fat lie.

The technical analyst trader: SELL, it’s in a down-tend.

The contrarian: Buy because it is down

The value analyst: Buy because the price to earnings ratio is down and the earnings hit was caused by foreign exchange (Profits from Canada and rest of world hit in exchanging back to U.S. dollar figures) (and whatever other reasons an analyst sees)

The social change agent: Thank goodness people are wising up and stopping shopping at Walmart.

The Walmart worker: Will I lose my job?

The Walmart customer: Who cares and who knew?

The average person: Who cares and who knew?

One can make many, many conclusions from the same limited facts here. Some of the conclusions will contradict each other.
*************************
A important person’s view is missing — Bufett!

#161 Lillooet, BC on 08.19.15 at 4:05 pm

correction: it is Buffett

#162 Rosie on 08.19.15 at 4:15 pm

Garth,

I love your blog (most of the time) and the sensible financial and real estate wisdom that it provides. But not today. It really needs to chill out on the derogatory comments towards “wives,” who are more often than not framed as being so silly as to believe that real estate will always go up in value. And that they should be traded in if they force their husbands down the deluded path towards homeownership at historic rates. I’m a wife and I read this blog to help our family sound real estate and financial decisions, which is key because we currently live and rent in Vancouver. And I bet there are lots of other wives who read this blog too. So PLEASE start showing more tact and respect towards “wives”. You can still keep up the humour which is so much a fun part of this blog but without putting down a whole category of people. And I would recommend that those husbands that post to your blog do the same – or they may end up wealthy but without a wife!

#163 Smoking Man on 08.19.15 at 4:41 pm

FOMC leak….. Ops….

No spike in Sept…

Why does anybody question my insane mind. It’s seldom wrong……

#164 Shawn on 08.19.15 at 4:46 pm

Canadian Tire Mechanics

#149 Axehead on 08.19.15 at 1:59 pm said:
#131 Shawn

Take a look through the glass window between you and the garage in Canadian Tire and try to spot the ‘professional’ mechanic; most likely you’ll see 5 (or whatever the max allowed is) pimply faced apprentices just outta grade 10 for each licensed journeyman.

**************************************
Well, as I said I have over 20 years of positive experience.

Changing oil and brake pads is not rocket science. Neither is changing out gaskets. In fact changing out most parts in cars is not rocket science but requires tools and knowledge. Even changing light bulbs is a chore and I leave it Canadian Tire to do that.

Computers and chips do the diagnostic work.

I doubt many of these guys failed to complete high school, but anyhow not a lot of algebra or English literature is required to change a spark plug.

I have not looked too closely at the apprentice angle but did glance at the qualifications on the wall a few years ago and they are upfront that many of the mechanics are not Journeymen.

If one Journeymen and ten apprentices or (more likely) technicians are all that is needed then that is called efficiency.

My vehicles have been very reliable…

#165 Shawn on 08.19.15 at 4:54 pm

Buffett’s view on Walmart

Lilooette said: (as corrected) A important person’s view is missing — Buffett!

Thank you for the response. Berkshire has owned Walmart shares for a number of years.

Buffett’s view is covered in the slot for a fundamental analyst. He would have unique insights but they would be based on the fundamentals of the company, the competitiveness of the industry and the place of Walmart within that industry and his view of management. He would never (ever) tell anyone his view ahead of time if he was planning to make a buy or sell of Walmart.

I am not sure what Henry Danson at 128 concluded about Walmart. He did not tell us. Perhaps he thought it was obvious. Or he concluded only that: gee 23% is a big share price drop in eight months.

#166 raisemyrent on 08.19.15 at 5:04 pm

#162 Rosie on 08.19.15 at 4:15 pm
Garth,

I love your blog (most of the time) and the sensible financial and real estate…

here we go. garth posts submissions verbatim, I can attest to that. he can;t control what people send him. in the context of this blog, believing real estate just goes up is in fact silly, and it doesn’t matter if it’s a wife or someone else thinking it, they will be labelled as such. haven’t seen anyone complain about the also usual “idiot BIL(brother in law)”. yawn.

p.s. for the record I always have a go at “successful” MEN AND WOMEN who cannot have a relationship where both partners agree on something so big as buying real estate or renting, or at least have a rational talk about it.

#167 AlbertaGuy on 08.19.15 at 5:27 pm

and now a public service announcement from Granite

Granite: like ceaserstone, just older….

to all moist virgins hot for Ceaserstone?

NEW YORK, Aug 19, 2015 (BUSINESS WIRE) — The Rosen Law Firm, a global investor rights law firm, announces it is investigating potential securities claims on behalf of shareholders of CaesarStone Sdot-Yam Ltd. CSTE, -7.14% resulting from allegations that CaesarStone may have issued materially misleading business information to the investing public.

#168 bdy sktrn on 08.19.15 at 5:43 pm

I am not sure what Henry Danson at 128 concluded about Walmart. He did not tell us. Perhaps he thought it was obvious. Or he concluded only that: gee 23% is a big share price drop in eight months.
———————
maybe it was “buffett should have sold”

#169 amazon girl on 08.19.15 at 6:01 pm

Amazon girl
to smoking man #163

Why does anybody question my insane mind…

No need… you are gifted … insane man

#170 Rosie on 08.19.15 at 6:16 pm

In reference to #166 raisemyrent, post.

It wasn’t Aaron who posted today’s blog example that annoyed me (greatly) but rather Garth’s reply.

Garth writes….”Aaron, dude, I’m not sure who you should replace first – the wife or the accountant?” And then he concludes by going on to say that Aaron is showing a glimmer of manhood by reading this blog. I get the brake changing reference, sure. But what does reading this blog have to do with manhood, and why is this even necessary to say? Are you more of a man if you stand up to your wife? Is there something inherently manly about understanding investing and real estate trends? These are such cliches and they have nothing to do with the content of the blog which I like and learn a lot from.

Garth can choose to set a more respectful tone in this blog so that we can all enjoy it. If we want more wives and brothers-in-laws and millennials who are not currently “enlightened” to Garth’s views to “get it” then why start out by offending them?

I suggested that my millennial nanny read this blog but she won’t now because I showed her today’s entry and she was offended by it. Need I say more. It’s just not necessary. Those who have wisdom have some responsibility to impart it in manner that is not condescending or offensive. We’re all learning about something.

You have a Millennial nanny? Does she have a degree? — Garth

#171 Bytor the Snow Dog on 08.19.15 at 7:26 pm

Hey Rosie, try as I might I can’t figure out the drawbacks in this statement:

“I man might end up rich, but without a wife”.
Can you elaborate?

#172 Waterloo Resident on 08.19.15 at 9:06 pm

Garth’s Quote: ((( “Hopefully you make several hundred thousand dollars a year.” )))

And this guy is a ‘Millennial’ ???

What percentage of Millennial people these days make several hundred thousand dollars a year ????

#173 Rosie on 08.19.15 at 9:22 pm

#171 Bytor the Snow Dog – this is a blog about real estate and investing so I’ll leave you to figure out whether you choose to have a wife or not. Someone with similar views about money and real estate is obviously preferred – and, ideally, someone you love and whose company you enjoy easily but that’s the topic for another blog.

Garth, my nanny is a young millennial – 20 – who works part-time for me and goes to university part-time. I teach at two universities in Vancouver so I’m in contact with lots of millennials, most who are quite bummed about real estate – understandably. I suggest to them that they read your blog to get a sensible strategy in place and/or leave and start their lives somewhere more affordable when they graduate.

#174 takla on 08.20.15 at 1:45 pm

re # 66…TurnerNation

Gotta luv this guys calls on gold much like Leo troll and a few other anti gold fan boys,.
The market bubble has been pricked once again and You can hear the air comeing out of this bubble.
Seems like a flight to safety is building as gold gets a bid {who’s buying these ancient relics}and stocks correct.
The Realestates bubble will deflate along with many other bubbles all associated to the massive money printing we’ve witnessed over the past 7 yrs. once full correction has occurred this will present a spectacular buying opportunity in the markets