Get serious

TAT modified

Well, blog dogs, time to get serious again. Summer’s done. Get over it. There’s a historic Canadian election in six weeks. The bank rate thingy is Wednesday. The Fed will move the earth this autumn. The stock market correction is behind us. Or not. Beijing says the equity turmoil there is over. If so, oil’s way too low. Could it be that commodity prices at 1999 levels, when the world’s actually expanding, is just a big, temporary mistake? If so, the TSX sure looks cheap, too.

If nothing else, it’ll be an interesting ride between now and Christmas. Just imagine what happens to the dollar if the BoC cuts, or the Big Dipper wins? What happens if it’s Trump vs Sanders? How can Vancouver house maniacs carry on if mortgage rates swell? And how do you choose between a guy who re-mortgaged his house 11 times, a leader who’s ‘just not ready’ and a dude whose candidate pees in people’s mugs?

Oh, my head. It’s all too much. Let’s flee to Asia.

“Hi Garth,” says Brad. “Loved to read your stuff when I was in Canada, then moved to Asia 16 years ago. My wife and I are non-resident Canadians now in Hong Kong but still own a home (high taxes and maintenance costs, 30K a year) on the lake less than an hour from Toronto. Comfortable lifestyle for the summers, but when winter comes we head back to Asia, Thailand, where we bought and sold two villas – sold, as I was uncomfortable with the country’s politics as it affects fluctuating finances and currency exposure.

“Like many of your posts concerning couples with different opinions of what to do about finances, we are no different. Your Rule of 90 is what got me to post to you and I am wondering how to work out the numbers.”

He’s 69. She’s 68. Some dividend income, but their combined income of $38,000 is mostly CPP and OAS. Meanwhile the Ontario house is valued at over $1 million and they’re in a quandary because they may be returning to live in this quasi-socialist paradise.

“I am sure we are breaking your 90 Rule. But she is opposed to selling the house, (will be subject to capital gains hit according to CRA), while I prefer selling, investing and renting a high end home. I believe we can preserve the capital from the sale of the house with reasonable returns, support the cost of a rental and be close to the kids in Toronto. When winter comes, head overseas until it is no longer feasible. Preserving capital will provide support if old age costs increase and if not, provide an inheritance for the kids.

“How can I find support for the argument that holding such a large asset (our home) at our age is not reasonable from a dollar point of view and makes us vulnerable to shifting real estate markets? Appreciate any time you can afford to this given the 2015 economy.”

Well, Brad’s right – this couple is way offside when it comes to a balanced approach to net worth. My guideline is simple – deduct your age from 90 to determine the percentage of your net worth that should be sitting in the single asset of residential real estate. In other words, old farts should lighten up on a one-asset strategy because what they need more than bricks is a stable, life-long income. According to the formula, four-fifths of what they own should be liquid. Now it’s reversed.

Why change it up?

Simple. Risk. Residential real estate in the bubble regions of Canada is unsustainable. Even if commodity prices revive and the economy along with it, this will mean more inflation and the 100% certainty of higher interest rates. Since houses are dear only because money is cheap, this does not favour property values. Especially non-urban ones. That million-dollar house could turn into a $750,000 white elephant fairly quickly.

Beyond that, what kind of sucky life are a couple of 70-year-olds going to have trying to live in the orb of the GTA on just $38,000 a year in a house that costs $30,000 annually to own? Why not cash out, invest the million and enjoy a juiced-up income? Even at a modest 6% a year, that’s sixty thousand extra which can be taken as non-reportable return of capital – more than enough to rent an upscale house for three or four grand a month, avoid shopping at Costco, and still get a new Lexus plus a lifetime supply of thirsty underwear. What’s not to love?

So, Brad should prevail in this argument. And he shouldn’t doddle once he’s crushed his wife’s emotional objections with the unassailable logic this pathetic blog is so reknown for. List now to avoid regrets later, ex-pat buddy. You might not recognize Canada when you get back here.

155 comments ↓

#1 Steerage Bilge on 09.07.15 at 6:42 pm

Harpo might want to supply his candidates with thirsty underwear in the future.

#2 TurnerNation on 09.07.15 at 6:43 pm

Look at people buying junkers and reno’d junkers in a so-so area.

Like most of Toronto on-street parking, hordes of racoons, festering and fetid garbage bins in alleyways between abodes prevail here.

http://www.postcity.com/Eat-Shop-Do/Shop/August-2015/An-affordable-hood-on-the-way-up/

#3 Whitey on 09.07.15 at 6:47 pm

First?!?

#4 glen on 09.07.15 at 6:48 pm

Garth buddy. You are a wonderful writer and so dam interesting to read.

But have you not have taken an innocuous situation (Mulcair re-mortgaging his home) and turned it into something more negative and sensationalized then it really is?

I know tonnes of folks who have re-mortgaged their homes in the face of perpetual falling mortgage rates.

Sometimes that just makes for sound financial decision making no?

#5 Victoria Real Estate Update on 09.07.15 at 6:48 pm

. . . . . . . . . . . . House Prices. . . . . . . . . . . .
. . Percent Above/Below July 2008 Price Level. .
. . . . . . . . x = Canada, * = Victoria. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+30% . . . . . . . . . . . . . . . . . . . . . . . . . .x.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+25%. . . . . . . . . . . . . . . . . . . . x. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+20% . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+15%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*.
….0%. . . x*. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . *. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—————————————————————————–
. . . . . . .July. . . . . . . . . . . . . . Aug. . . .July. .
. . . . . . 2008. . . . . . . . . . . . . .2014. . . 2015. .

(source: Teranet’s index – most recent data)

UNDERPERFORMING HOUSING MARKET

Since August 2014:

* Victoria’s housing market has UNDERPERFORMED compared to the rest of Canada, in general.

* Housing prices across Canada, in general, have increased more than in Victoria.

Since 2008:

* Victoria‘s market has dramatically underperformed compared to the rest of Canada. The question realtors and mortgage holders in Victoria must be asking is: WHY???

NO EVIDENCE THAT WEALTHY BUYERS FROM CHINA HAVE RECENTLY DISCOVERED VICTORIA (see chart)

* Victoria’s housing market is UNDERPERFORMING compared to the rest of Canada and not over performing, which might be the case if the wealthy Asian claim was true.

* In 2014, foreign buyers accounted for ONLY 1.6% OF ALL SALES in Victoria (source: Victoria’s R/E board).

NO EVIDENCE OF RETURNING OILFIELD WORKERS HAVING A POSITIVE EFFECT ON HOUSE PRICES IN VICTORIA

* Realtors in Victoria have used the Alberta money idea for decades. Nothing new there.

* Again, Victoria’s market has underperformed compared to the rest of Canada, proving this claim false.

* Returning oilfield workers would be returning as a result of job losses. In general, unemployed applicants don‘t qualify for mortgages.

MORTGAGE RATES WILL BEGIN MOVING HIGHER THIS FALL

* The normalization of interest rates will begin soon as Canadian 5-year fixed mortgage rates follow (soon to be) rising American rates.

HOUSE PRICES FALL AS RATES RISE

* This has been proven worldwide, decade after decade.

THE BIG PICTURE (see chart)

* House prices in Victoria are currently at 2008 levels, despite the huge drop in interest rates that has taken place since that time.

* Without the enormous drop in rates since 2009, house prices in Victoria would be much lower than they are today.

* Emergency rates have prevented Victoria’s market from going through a deep price correction.

* Rates will rise. With the loss of the extreme stimulation of emergency rates, VICTORIA’S DEEP PRICE CORRECTION WILL BE REALIZED.

* As is the case with housing bubbles in general, Victoria’s bubble will likely deflate quickly rather than slowly (like realtors want you to think).

#6 FormerSaskie on 09.07.15 at 6:52 pm

How are they affording the house now?

#7 Estrella on 09.07.15 at 6:56 pm

If brads property is “to capital gains tax”, was that because he used it as rental property.? Or is it no longer considered his principal residence? How long would it take to reclaim principal residence, 3 years?

Also if rental was received, is 30k after rental income?

Inquiring minds want to know…..

#8 Jon on 09.07.15 at 6:58 pm

Good post Garth, but I’m still stuck on your post yesterday. The woman with the million plus dollars in the bank, calling herself homeless. So, insulting to those who are REALLY homeless.

#9 craig on 09.07.15 at 7:00 pm

This should be a no brain deal for these people. They have been through the good and seen the bad but yet still have house envy…. . Garth I think the only way it will make sense to anyone anymore is to watch our housing market blow up and listen to the “know it alls ” cry about their debts and problems. Liquidate and enjoy the rest of your life worry free, make house issues someone else’s problems and enjoy your freedom!

#10 For those about to flop... on 09.07.15 at 7:04 pm

Since I migrated here 13 years ago I have worked and paid my taxes ,holidayed mainly in Europe and the U.S.
Stayed out of debt ,rented and apartment .
I don’t own a credit card.
Apart from the paying my taxes part ,I don’t think I am the type of citizen that the Canadian goverment is looking for.
Maybe at the citizen test they should have questions like ” how much debt are you willing to swallow?”
” how many jobs are you willing to work?”
” what percentage of your savings are you going to spend in Canada?”
I’m sorry Canada I let you down.

#11 Mark on 09.07.15 at 7:06 pm

“A Fed rate hike will happen only because the insurance and pension companies are screaming.”

That’s some awfully misguided ‘screaming’. Rising rates will destroy the value of pension and insurance company assets, just as falling rates gave rise to excess returns particularly in the bond market. Would those organizations really seek Fed policy that accelerates their demise?

“That million-dollar house could turn into a $750,000 white elephant fairly quickly.”

That’s somewhat of a best-case scenario. The average Canadian house trades at 35X “earnings” calculated on an equivalent-to-corporate-GAAP basis. Only an 8-10X multiple is justifiable given the long-term low rate of growth in rents (ie: more closely resembling inflation). Throw in some overshoot to the downside (as inevitably happens), and an 60-80% rout becomes a serious possibility.

“My wife and I are non-resident Canadians now in Hong Kong but still own a home (high taxes and maintenance costs, 30K a year)”

They might not really be “non-resident Canadians” if they still own a Canadian home, in the eyes of the CRA. An CRA audit proper of their status as non-residents could be a financial land-mine.

#12 Chris on 09.07.15 at 7:17 pm

Why are we not loving Costco?

#13 Kalergie on 09.07.15 at 7:19 pm

I love Costco…why avoid it?

#14 Jerry Bance - Trickle Down Economist on 09.07.15 at 7:21 pm

The saddest part of the end of summer for me, Garth, apart from losing my candidacy, is the closure of all the outdoor swimming pools.

Every summer day I go to the public pool four or five times, relieving myself at will. (If you were at Monarch Park Outdoor Pool today, that ‘warm spot’ sure wasn’t the pool heater vent, lol!)

I even got to do my business this summer in the pool at 24 Sussex at the candidates meet and greet, though Stephen would only go in waste deep….something about not wanting his hairpiece wet.

Now that the pools are closed, it’s back to coffee cups for my overactive bladder.

And no ladies in bikinis or Stephen H. man-boobs to distract me.

Autumn sucks :(

#15 TurnerNation on 09.07.15 at 7:21 pm

Bandit is better house trained than some of H’s candidates.

#16 Burnabysouthgardener on 09.07.15 at 7:21 pm

for those about to flop
How can you travel, ie book flights, book a room or apartment, without a credit card?

#17 TurnerNation on 09.07.15 at 7:27 pm

Libs launched an attack ad.
“Do you know where is your PC candidate? As pee’s just not ready.”

#18 Randy on 09.07.15 at 7:28 pm

I live in a small country hamlet on 17 acres. My town has no stop lights and only a few stop signs beside the lake and I can hardly see my neighbours houses. I made the mistake of driving to Toronto last week to see a concert at the Amphitheatre. Needless to say I couldn’t get within 5 miles of the concert venue due to traffic jams, construction and zero parking. I lived in Toronto and the GTA for over 40 years before vacating. I was shocked at how radically it has turned into a DUMP. It’s not likely that I’ll return to Toronto anytime in the future. You could not pay me to live in the Big Smoke.

#19 common sense on 09.07.15 at 7:30 pm

Brad.

SELL ALREADY. NOW.ASAP. IMMEDIATELY. ANY WAY POSSIBLE….

WHAT ARE YOU WAITING FOR?

#20 Sheane Wallace on 09.07.15 at 7:31 pm

He is conservative, currently in real estate and Harper’s buddy:

http://www.msn.com/en-ca/news/federalelection2015/tim-dutaud-2nd-conservative-candidate-dropped-over-embarrassing-videos/ar-AAe2dGl?ocid=mailsignoutmd

#21 Red Deer Rob on 09.07.15 at 7:34 pm

I’m pretty sure that picture was taken in Calgary by the SAIT campus.

We have a winner. — Garth

#22 Sheane Wallace on 09.07.15 at 7:36 pm

#11 Mark

I noticed recently condo for sale with maintenance and taxes of 900 $, rental income of 1300 $ monthly on a price of 240 k.

It is a ‘return’ of 2 % a year, P/E of 50!

With maintenance and taxes only going higher.

In addition to the permanent tax renovation credit and the 35 k RRSP down-payment per person Harper should be looking to ‘insure’ earnings of owners and commissions of real estate agents. Or insurance is only for his banker buddies?

#23 new normal? on 09.07.15 at 7:42 pm

Is this the new normal or the canary in the coal mine??

http://www.msn.com/en-ca/money/homeandproperty/got-dollar1-million-you-might-score-a-tear-down-home-in-a-hot-market/ar-AAdWt2z?li=AAacUQk&ocid=mailsignoutmd

#24 For those about to flop... on 09.07.15 at 7:43 pm

#16 Burnabysouthgardener on 09.07.15 at 7:21 pm
for those about to flop…
How can you travel, ie book flights, book a room or apartment, without a credit card?

———————————–
Easy ,my wife uses hers and I give her half the cash.
She likes to collect the points and I like having no debt.

#25 Steerage Bilge on 09.07.15 at 7:44 pm

Now look Peter, let me be clear, we all know who funds Marketplace….

#26 Renter's Revenge! on 09.07.15 at 7:46 pm

The overvaluation of Canadian residential real estate and associated risks is the main theme of this blog. They have been argued ad nauseam over the past 7-8 years and are well understood by the regular readers. New readers can gorge on the past posts until they are satiated with Garth’s wisdom. So to provide additional support for Brad’s side of the argument would be akin to mental masturbation at this point. Perhaps it would be instructive to consider arguments from the other side (i.e. from Brad’s unnamed wife), possibly giving us deeper insight into the psychology of the housing bubble. Unfortunately, we have not heard Brad’s wife’s argument, so at this point we can only guess what she is thinking, but let’s for a moment give her the benefit of the doubt and assume she’s not an idiot, as some us are probably inclined to do.

Why would she not want to sell the house and rent?

My guess is that since she’s almost 70, she doesn’t expect to travel much longer, and so she doesn’t foresee high expenses in the future. Another guess is that she doesn’t want to deal with landlords who might kick them out of their rental home at some point in the future, or not bother with essential repairs despite charging high rents.

A lack of professionally managed, purpose-built rental accommodations might drive people to buy or hold homes at bubble prices despite the financial drawbacks.

Government policies that encouraged well-built, safe, attractive, professionally-managed rental buildings and houses in our cities might help alleviate the issues associated with our housing market by providing adequate alternatives to “owning your home”.

#27 Daisy Mae on 09.07.15 at 7:47 pm

#13: “I love Costco…why avoid it?”

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

No reason….other than membership fees negate any potential savings buying in bulk. Unless you have a large family.

#28 Mark on 09.07.15 at 7:49 pm

“Why are we not loving Costco?”

Costco used to be cheap at least out west here. But now their pricing is mostly higher than what’s seen at the various Loblaws subsidiaries (Superstore, Extra Foods, etc.). There’s still a few products that are only found at Costco that I go in and buy (with gift cards; not worth keeping a membership anymore), but the increased landscape of retail competitiveness has stripped Costco of much of its advantage, at least for the smaller retail consumer.

Perhaps volume discounting for heavier buyers (heavy enough to still shop there, but not so heavy that buying from a wholesaler like Sysco) makes them competitive, but the place has otherwise lost much of its allure.

#29 David on 09.07.15 at 7:53 pm

This has come up before but does anyone know how to pull out the 6% as return of capital?

#30 Fed Speak on 09.07.15 at 7:56 pm

#11 Mark on 09.07.15 at 7:06 pm
“A Fed rate hike will happen only because the insurance and pension companies are screaming.”

That’s some awfully misguided ‘screaming’. Rising rates will destroy the value of pension and insurance company assets, just as falling rates gave rise to excess returns particularly in the bond market. Would those organizations really seek Fed policy that accelerates their demise?
—————————————————————
Do a little reading about duration matching. You don’t know what you are talking about.

#31 Nodebt on 09.07.15 at 7:57 pm

Hi Garth, you have said many times to build a balanced and diversified portfolio without stocks, unless you have over 1 million. Why does a person need so much to buy stocks ? Why not 200-500k
Thanks

#32 Paul on 09.07.15 at 7:57 pm

#4 glen on 09.07.15 at 6:48 pm

Garth buddy. You are a wonderful writer and so dam interesting to read.

But have you not have taken an innocuous situation (Mulcair re-mortgaging his home) and turned it into something more negative and sensationalized then it really is?

I know tonnes of folks who have re-mortgaged their homes in the face of perpetual falling mortgage rates.

Sometimes that just makes for sound financial decision making no?
———————————————————-Not when you keep increasing not PRINCIPLE!

#33 bigtown on 09.07.15 at 8:01 pm

The traffic in the GTA is a challenge. I get out after the rush around 10 a.m. and try to get back before 4. Today was perfect as the city was empty.

Our family is headed for the hills out of the BIG SMOKE in a little while. The airport is good in T.O The BEST library in Canada is TORONTO.

Had a great AMERICAN getaway….just my taste and they are more like me. God Bless America.

#34 Bottoms_Up on 09.07.15 at 8:03 pm

But Garth isn’t your suggestion a reverse breakage of your rule? They should keep roughly 20% equity in their house? So instead of selling and investing, perhaps a more balanced approach is keep the house, but borrow 800k against it and invest?

#35 Bottoms_Up on 09.07.15 at 8:07 pm

#8 Jon on 09.07.15 at 6:58 pm
——————————–
Actually she really is homeless. That 1 million is the banks money.

#36 Tony on 09.07.15 at 8:10 pm

The $64,000 question is can the FED and the bankers pull their magic off again like they did in 2011? Is the big crash just after the U.S. election or will there be many mini crashes in the next year or so and the big one is just after the U.S. election? Better put when will the U.S. stock indexes be closed for 2 weeks to a month before they reopen? The only correction is this bear market rally within a long bear market that originated with the dot-com crash.

#37 Paul on 09.07.15 at 8:17 pm

#20 Sheane Wallace on 09.07.15 at 7:31 pm

He is conservative, currently in real estate and Harper’s buddy:

————————————————————-
You think he has even met Harper,
He is more likely to have met you.

#38 Brian Ripley on 09.07.15 at 8:18 pm

My Labour Day Chart Mashup includes a Bloomberg series of charts and editorial on the Conservative “management” of Canada’s economy over the last 10 years:

http://www.chpc.biz/history-readings/working-class-hero

I have also included a link to a recent interview with Jim Chanos on China and if he is correct in his observations, Canadian resource exporters are going to have to figure out how to add more value to their exports.

Oh, and I included a link to John Lennon’s “Working Class Hero” Happy Labour Day comrades.

#39 Freedom First on 09.07.15 at 8:28 pm

Today’s Post brings up an interesting thought. The tattoos on today’s young will be the tattoos on tomorrow’s wrinklies.

Also brings up oil. Question for the dawgs. I am diversified but underweight oil, and hold only ZEO ETF/TSX, what is the best oil ETF to hold with this, Garth? Dawgs? Anyone? Thanks, Freedom First.

Welcome home Brad. Too bad about the wife.

#40 Tony on 09.07.15 at 8:35 pm

Unless Brad and the wife sell the house and move more than say an hour and a half from the city core the kids will end up with nothing. Unless interest rates rise a couple retiring in Toronto would need to amass around 4 million dollars today. The rate of burn would be about 20 years if they rented a 2 bedroom apartment in Toronto leaving the kids next to nothing.

Your contributions to this blog are becoming more and more detached from reality. Behave, or you will be sentenced to watch a 14-hour marathon of Love It or List It on W. — Garth

#41 Marketplace on 09.07.15 at 8:39 pm

24 Steerage Bilge on 09.07.15 at 7:44 pm

Now look Peter, let me be clear, we all know who funds Marketplace….

Tax dollars, administered by the Harper government?

#42 Bottoms_Up on 09.07.15 at 8:40 pm

Donald Sutherland holds only a Canadian passport, has a house in Canada, but is not allowed to vote.

Article: Donald Sutherland blasts ruling on long-term expats’ right to vote
http://www.cbc.ca/news/arts/donald-sutherland-blasts-ruling-on-long-term-expats-right-to-vote-1.3171242

#43 omg the original on 09.07.15 at 8:44 pm

Only an 8-10X multiple is justifiable given the long-term low rate of growth in rents (ie: more closely resembling inflation). Throw in some overshoot to the downside (as inevitably happens), and an 60-80% rout becomes a serious possibility.
———————————

60 to 80% is entirely reasonable – but we are Canadians and do nothing in the extreme.

So the correction back to long run multiples will be a correction mainly in real dollars terms and will occur over a couple of decades.

The run up in home prices has been a 35 year event on the coast so expecting it to unwind quickly will result in disappointment.

Trust me – the current experience in the resource provinces of Alberta and Sask. demonstrate that people will sell their granny into slavery before reducing the asking on their house.

#44 Mark on 09.07.15 at 8:47 pm

“Do a little reading about duration matching. You don’t know what you are talking about.”

I beg your pardon? Duration matching isn’t perfectly possible (after all, what’s the duration on a stock?? — duration is only a concept that applies to fixed cashflows), and the assumed return of most pension/insurance schemes is significantly higher than the current yields on most fixed income pension plan assets. Merely changing the Fed Funds rate won’t fix the insolvency that was caused due to long-term over-optimism towards returns (particularly in fixed income) and the inexplicable dichotomy between the quoted nominal returns available for fixed income investment, and assumed plan returns.

Additionally, in a deflationary world, negative CPI growth will be a problem in and of itself for pension payouts and insurers who assumed 2% inflation in their assumptions. Contributory inadequacy is the underlying problem — the economy simply cannot afford to provide high levels of salary replacement to those who only saved a relatively small fraction of their income without a significant amount of economic growth occurring (which is obviously not occurring as economists now consider 2% real GDP growth to be pretty decent for the ‘western’ economies!).

#45 Estrella on 09.07.15 at 8:51 pm

This just in, hold your money as cash. everything else at peak valuation…

http://www.businessinsider.com/deutsche-bank-stocks-bonds-housing-near-peak-valuation-2015-9

#46 dirty debtor on 09.07.15 at 9:08 pm

Brad

I spent the canadian winter, spring, and summer over in southeast Asia.

The only thing I’m wondering is why exactly you want to return to Canada for our “summer”

Those who think Canada has unmatched natural beauty, clearly haven’t been anywhere else…

#47 The Pee C Party of Canada on 09.07.15 at 9:09 pm

Urine a lot of trouble if you think the conservatives have your best interests. Anyone who votes For Harpers Pee C party need their heads examined. Mulcair is a conservative wolf in NDP clothing.

#48 Mister Obvious on 09.07.15 at 9:09 pm

#4 glen

“have you not have taken an innocuous situation (Mulcair re-mortgaging his home) and turned it into something more negative and sensationalized then it really is?”
——————————–

“To lose one parent may be regarded as a misfortune; to lose both looks like carelessness.”

– Oscar Wilde

But to re-mortgage 11 times?

The man doth extend too much, methinks.

#49 lala on 09.07.15 at 9:11 pm

Brad, why do you care for, you are 69 and life after 60 suck. Waste of bandwidth.

#50 dorlus gren on 09.07.15 at 9:22 pm

Garth

Just when it looked as though the stock market might have dampened Chinese ham, a new wave is coming….

http://money.cnn.com/2015/09/02/news/economy/china-stocks-global-real-estate/

I propose a new word for this phenomenon,

either tsuHAMi, of HAMzilla

#51 dorlus gren on 09.07.15 at 9:26 pm

“My wife and I are non-resident Canadians now in Hong Kong but still own a home (high taxes and maintenance costs, 30K a year) on the lake less than an hour from Toronto. ”

Not buying this….there are no lakes less than an hour from the Six…oh wait….lake Ontario…heaven forbid

#52 Leo Trollstoy on 09.07.15 at 9:31 pm

I feel badly for that couple.

Many are in a similar situation methinks.

#53 renamed on 09.07.15 at 9:39 pm

47 The Pee C Party of Canada

Priceless…

#54 betamax on 09.07.15 at 9:44 pm

I love Costco.

We don’t have kids, it’s just the two of us, neither are ‘big eaters’, and we still buy more than enough to make it worthwhile to shop there. Their points-back credit card pays for the annual fees and more, so membership costs us nothing.

I used to think Costco was ‘bulk only, for large families’, then I shopped there (used a friend’s card) and found out how wrong that was.

If you don’t like something, you can take it back months later, even without a receipt. Good luck doing that somewhere else.

#55 ben on 09.07.15 at 9:49 pm

UK update: govt are in the process of pulling the rug out from under buy to let (people borrow loads and then rent out the house and the renter pays down their mortgage).

They sucked ’em in. Everyone though it was “supply and demand”. Then the govt changed the (unfair) tax rule and now they are stuffed.

You can hear them moaning about it from miles away. And it’s hilarious.

Same can (and will) happen here.

#56 Vanecdotal on 09.07.15 at 9:52 pm

#47 The Pee C Party of Canada

Brilliant! Pisses me off that a Harpeer aporoved, Pee C candidate would ‘mug’ for the camera this way.

Freakn’ GOLDEN. Booya!

#57 Jordy on 09.07.15 at 9:57 pm

I understand the rational for the rule of 90, but if we set that aside for a moment. What would be the proper real estate component for a diversified portfolio if you are renting and don’t own any? Thanks

#58 Sheane Wallace on 09.07.15 at 10:03 pm

#37 Paul

He is running in Scarborough. Steve is there today.
You mean Steve does not know his PM candidates? It is his party, not mine.

#59 refi on 09.07.15 at 10:09 pm

48 Mister Obvious on 09.07.15 at 9:09 pm

#4 glen

“have you not have taken an innocuous situation (Mulcair re-mortgaging his home) and turned it into something more negative and sensationalized then it really is?”
——————————–

“To lose one parent may be regarded as a misfortune; to lose both looks like carelessness.”

– Oscar Wilde

But to re-mortgage 11 times?

The man doth extend too much, methinks.

—-

Losing a parent does not compare refinancing.

By the way, refinancing is a common financial tool.
If the guy refinanced 11 times, he must have been able to take handle the debt before. With the balanced budget out of the window, this skill may come handy.

Maybe he still remembers, my understanding is that last time he refinanced was three years ago.

#60 Mark on 09.07.15 at 10:18 pm

“I understand the rational for the rule of 90, but if we set that aside for a moment. What would be the proper real estate component for a diversified portfolio if you are renting and don’t own any? Thanks”

If you buy into the rationale and reasoning behind Garth’s ‘rule of 90’, then there’s no reason why replicating such, in term of notional exposure by way of REIT ownership, is unreasonable.

Keep in mind, of course, that most REITs are leveraged entities, so you would want to adjust accordingly.

For instance, RioCan, the largest component of the Canadian REIT index, is roughly 50% mortgaged (ie: $2 of assets for every $1 in debt). Therefore, if your portfolio allocation (according to the “rule of 90”) demanded 50% of your portfolio notionally exposed to real estate, then you would want to put 25% of your portfolio into such an investment, and the other 25% likely into some form of fixed income to provide a hedge against leverage used by the REIT.

However, at some level, there is a good argument to be made to deliberately under-weight RE of all types. REITs, even ones not in the residential sector, bear fairly high correlation to residential RE. Valuations are off the charts by most historic metrics for both REITs and discrete RE investments. That’s not to say that a balanced portfolio allocation to RE should be zero, but there is an extremely compelling argument at this time to underweight Canadian RE of all types.

#61 Sheane Wallace on 09.07.15 at 10:19 pm

#39 Freedom First

get rid of ZEO, I did the mistake of holding it for far too long, sold all when I disposed of ALL Canadian equities.

#62 Admirer on 09.07.15 at 10:25 pm

I dont quite understand:

Have they been renting out their home in Canada?

What happened to the proceeds from the 2 villas they sold in Thailand?

Forgive me if I’m wrong, but aren’t you disqualified from getting OAS if you’re a non resident?

How do they survive in Hong Kong on $38,000 a year?

#63 Admirer on 09.07.15 at 10:31 pm

Garth, I’ve noticed the last few posts that you are now stating a return on your portfolio of 6%. You used to always quote 7%.

What gives?

After one pays an advisor his/her fee, there’s not much left? Is this reflecting your belief of a new normal return or just because they are older and should have a more conservative portfolio mix?

Expected return on a 60% fixed/40% growth portfolio over time. — Garth

#64 kommykim on 09.07.15 at 10:33 pm

#56 Vanecdotal on 09.07.15 at 9:52 pm

#47 The Pee C Party of Canada

Brilliant! Pisses me off that a Harpeer aporoved, Pee C candidate would ‘mug’ for the camera this way.

Freakn’ GOLDEN. Booya!

I thought Harper liked trickle down economics?

#65 Mister Obvious on 09.07.15 at 10:37 pm

#43 omg the original

“The run up in home prices has been a 35 year event on the coast so expecting it to unwind quickly will result in disappointment.”
———————————-

Prices need not unwind quickly, they need only begin the unwinding process.

If today should be the first day of a 35-year unwind the future would be dim for every overextended schmo who bought in at the top of the market on the foolish assumption of benefit from perpetual increases.

It’s not absolute prices that should be of concern, its the derivative of prices. In other words: ‘the slope’. The heartache begins when that switches from positive to negative.

#66 For those about to flop... on 09.07.15 at 10:38 pm

refi#59

By the way, refinancing is a common financial tool.
If the guy refinanced 11 times, he must have been able to take handle the debt before. With the balanced budget out of the window, this skill may come handy.

——————————————-
Two different elections ,two different scenarios .
People can possibly vote for a guy supposedly worth 9 billion or they can vote for a guy who refinanced his house 11 times and might be able to relate to the plebes on main st.
Modern politics = modern problems.
Yes some people do have to much money, I once worked for Paul Allen and I still wake up with the cold sweats.

Maybe he still remembers, my understanding is that last time he refinanced was three years ago.

#67 Victoria - Up, Up, Up on 09.07.15 at 10:39 pm

#5 Victoria Real Estate

You come across as a naive millennial who thinks they have found the answer by virtue of looking at economic fundamentals. You have not experienced the seemingly never ending bull market and Victoria has largely been immune from it except for a 5 year period.

You never did try to explain why Victoria popped 6-8% this summer. Instead, you simply said that Victoria has not gone up as much as others.

So what is your explanation? Prices still went up. In my own community, north of Victoria, supply dried up overnight, much to my surprise.

The realty stands: many workers were commuting from Vancouver Island to Fort Mac to make cash for their families. They were laid off, but most came back with several 6 figures.

The reality stands: TO prices are now close to Vancouver’s, allowing many retires to actually cash out and move here. Before, that was not a reality as those from Ontario did not have enough equity to afford Victoria’s inflated prices. That has now changed.

The reality stands: BC has sought to double the number of ESL students. With the cancellation of the investor immigrant program, this is the cheapest and easiest back door route to residency. Victoria is at the centre of this. Walk down any street in Victoria and the demographics have changed within the last year. Many more asian students and the commensurate rise in sports cars. Students buy house for their soon to be here parents. That trend was established long ago on the mainland. Victoria is now tasting it.

You can keep repeating your wishful thoughts and dodging the question but the reality stands – prices went up.

By the way, you need to revise your graphs to now account or the 8% increase in prices :)

#68 JSS on 09.07.15 at 10:42 pm

Went to South Edmonton Common today. This is a powerhouse mall for suburbians – owned by RioCan. One of the biggest in Canada.

Place was packed like crazy. Traffic jams everywhere. Restaurants, bars, stores, you name it…all busy like you’d never believe.

No sign here whatsoever of a slow down in the Alberta economy. People are spending.

So don’t believe the “Alberta’s in recession” nonsense you might be hearing. Things are going well here, thank you.

#69 young $ foolish on 09.07.15 at 10:42 pm

Preferreds are bought for income, and they have been hammered. But you don’t care since they pay regular dividends. What can be said about income properties?

#70 Joe2.0 on 09.07.15 at 10:48 pm

Bejing says the equity turmoil is over?
You actually believe what the banksters say?
Really….something smells fishy.

#71 Mark on 09.07.15 at 10:48 pm

How do they survive in Hong Kong on $38,000 a year?

Probably just like everyone else in Hong Kong:

http://www.news.gov.hk/en/categories/finance/html/2013/05/20130527_142244.shtml

“Hong Kong’s overall median monthly household income is now $22,000, up from $21,100 in the fourth quarter of last year, the Census & Statistics Department says.”

$22,000HKD/month ~= $2800 USD/month

#72 joblo on 09.07.15 at 11:18 pm

Pee See party on the Pee see Pee network.
They must ReForrrrrrrrrm!

#73 joblo on 09.07.15 at 11:19 pm

or is it the See Pee See network Harpo hates so much?

#74 Smoking Man on 09.07.15 at 11:21 pm

Everyone has a rock star they worship..Hunter S Thompson would be mine..

Harpo has one too.. his name NutAndYahoo.

He won’t take in Syrians cauae lets face it. He doesn’t want to piss of his Hero..

He screwed up badly.. Im talking to you Harpo..

There is a thing called the internet…we all know ISIS is our creation.. Put in place to take out Assad…The refugees are your making. And they know it..you dont want them here.

Nothing wrong with Isreal…just its leaders..phycos.

And you support them with unwavering loyalty. The Herd dont like it one bit

Now that you’ve botched it….so badly.

Im screwed , commies will now rule canada.
They got my city, my province, and soon the country.

Thanks Idiot..

#75 Investx on 09.07.15 at 11:33 pm

“Even at a modest 6% a year, that’s sixty thousand extra which can be taken as non-reportable return of capital – more than enough to rent an upscale house for three or four grand a month…”

6% annualized return does not equal 6% return a year, with which to pay the monthly rent.

What part of ROC do you not understand? Besides, the rent would likely equate to 3%. — Garth

#76 whitehorn on 09.07.15 at 11:47 pm

#25 “So far in Alberta, house prices are still sky high, malls are still filled, and restaurants are still busy. And unemployment is still relatively low here.

So I call bullshit to what’s being said on this pathetic blog.

It’s not 1982 here in Alberta.”

I agree to many of your comments, however that can be very ambiguous description on the state of the economy. Most people go to stores to shop and eat, part of our existence, so in essence the malls/restaurants are full to a bystander. Also, going to sporting events/concerts/ may not be a good indicator when 4 million people live in the province. That being said, I’ve noticed less people at events this year. Garth mentioned on here couple of weeks ago, West Edmonton Mall retail is at noticeable lower levels, so yes lots of people out and about but maybe more are window shopping with less work hours. Vehicle sales are down as well. I would be more concerned of retail sales of non essential living items. Also, are hotels/motels being filled up to the Business sector in cities plus resource activity in rural towns (ghost towns in some oil rich areas). I’ve seen the crunch affecting peoples spending habits noticeably this year in Alberta.

#77 chapter 9 on 09.07.15 at 11:54 pm

#42 Bottoms_Up

Donald Sutherland holds only a Canadian passport,has a house In Canada, but is not allowed to vote.

On any given day there are approx. 38,000 offenders being held in federal, provincial or remand facility’s across Canada. Come Oct.19 they all get to vote. Donald’s problem, he’s not a criminal!!!

#78 Mark on 09.08.15 at 12:00 am

“So far in Alberta, house prices are still sky high, malls are still filled, and restaurants are still busy. And unemployment is still relatively low here”

Sure, and when I flew a half dozen times across Canada in the past few weeks, the planes were almost entirely full.

The problem is, however, that the amount of discounting required to make the planes full was tremendous. 40% off of last years’ prices on fares was typical compared to doing a similar trip last year (only 15% off is explainable through the drop in fuel prices). This might be a lot of what you’re seeing — heavy discounting, rather than the respective business owners deciding not to make sales. Classic liquidation behaviour heading into what is likely going to be years of consumer malaise characterized by austerity and debt repayment.

After all, in deflation, the name of the game in most kinds of business is converting your assets and inventory to cash before further loss is suffered.

#79 BS on 09.08.15 at 12:02 am

And how do you choose between a guy who re-mortgaged his house 11 times, a leader who’s ‘just not ready’ and a dude whose candidate pees in people’s mugs?

At least one party was smart enough to kick the misfit out of the party and prevent him from running. The other two parties have the misfits running as their leader.

#80 Nosty, etc. on 09.08.15 at 12:07 am

” You might not recognize Canada when you get back here.”

A decade or so ago, Harper said —

“You Won’t Recognize Canada When I’m Through With It”

He wuz right, at least with that. Not so much on economics or finance — F and Paul Martin were better.

#74 Smoking Man on 09.07.15 at 11:21 pm — “Im screwed , commies will now rule canada. They got my city, my province, and soon the country. Thanks Idiot..

Privatize the profits, socialize the losses. Fascism, dictatorship, call it what you will.
*
SMan — Is this normal? US – Russia Pot. Kettle. Black, because the US drops bombs while Europe becomes financially drained, picking up the pieces.

#81 Karl hungus on 09.08.15 at 12:10 am

You always talk about house prices going down when interest rates rise. Yet there are many times in history when rates have risen along with house prices. It’s not a direct correlation

#82 waiting on the westcoast on 09.08.15 at 12:21 am

#68 JSS on 09.07.15 at 10:42 pm
#76 whitehorn on 09.07.15 at 11:47 pm

The only thing I would add is that the business I am in was a great early indicator of the 08-09 recession in the US. We began having rapidly declining sales ~6 months prior to anyone saying there was a recession. In both Calgary and Edmonton and to a lessor extent, Regina/Saskatoon, our business units are getting hit hard with 20% declines in revenue YoY.

Alternatively – in the US – we are experiencing nearly 30% YoY growth.

#83 Costco Costs You Your Freedom on 09.08.15 at 12:59 am

Why You Should Avoid COSTCO like the BAD EXAMPLE That It Is

Costco requires people to apply for, pay for, and be granted, a Costco card just for the privilege (not the right) to enter the store. Where did such a crazy idea come from anyway? Communist China?

When Costco first started in Canada, they would go to a company and offer Costco cards to just some–not all–of the company’s employees to make it seem exclusive and desirable, and to get people non-thinking that they should compete for them. A company might then offer them to the more senior employees first, as if it were some sort of perk rather than a ridiculous scam.

The Costco card was a great way to make money off of people before they had ever even bought anything else there. Playing with their minds even further, Costco got people non-thinking that they should go there and spend to try to save back their Costco card cost, even though it might be much farther away than other stores. This kept these non-thinking people away from the incredible variety and good deals offered at all the other stores in the land. Furthermore, instead of buying only the portions that they needed, these same suckers also got tricked into non-thinking that they should buy in bulk and hoard it to try to “save” money by spending money they did not have. Maybe they had listened to Stomping Tom Connor’s song about The Consumer.

When I asked the top bean-counter at one company about it–who seemed to have fallen for it himself and gotten a Costco card–he told me that there were some deals at Costco, but that you had to watch out about the price of some of the other things there. This sounded like the exact same situation that one would find at just about every other store out there, except that you could freely enter all the other stores to check out their products and their prices.

The Costco card idea was a great way to know who their customers were and to track everything they bought. It also seemed like a great way for Costco to discriminate legally against the unemployed, the rif-raf, etc. and to keep them out, at least at the start. (I wonder if they also had the good sense to ask about home ownership, so they could keep out the renters too–those hopeless, truly homeless types who might tend to shoplift, since as mere renters they might not have learned respect for private property.)

There are MANY STORES out there in Canada, and in the rest of the world. They sell groceries, clothes, office supplies, books, jewelry, electronic junk, movie DVDs full of smut, music CDs full of rotten lyrics set to noise, and some totally useless stuff for people with money and/or melting plastic credit cards burning holes in their pockets. In fact, stores sell all the things that people might want to buy. Now ask yourself: How would you like it if every one of these other stores out there got the same crazy idea in their head that you had to apply for, pay for, and be granted, a membership card just to be allowed to enter the store? How would you like to have to pay to renew all those membership cards every year?

Costco is like a cancer that needs to be totally cut out, and the sooner the better.

#84 Mike T. on 09.08.15 at 1:17 am

I bet everyone will be surprised when Ron Paul becomes the next US president

…he’s not even running people will say

you’re not paying attention is my answer

#85 Steve French on 09.08.15 at 2:41 am

I like to scroll through my Greater Fool comment section from the bottom to top/ most recent to first.

I can tell Smoking Man’s comments and writing, before the name appears on the screen.

Smokey you have a distinctive voice!

Maybe it’s all those single sentence misspelled paragraphs.

#86 LowRent of Arabia on 09.08.15 at 3:07 am

“Might not recognize Canada when you get back here” – had to chuckle at that one because it is so true.

Been back 4 times in the last 10 years and I am saddened by the rampant materialism coupled to indebtedness I see my friends and families caught up in.

Helicopter parenting and racing around taking kids to far too many activities burning expensive gas doing so instead of kicking the little royals out into the street to play kick the can and telling them, “don’t come back until the street lights come on”.

I must confess that perhaps some of us expats that stay connected thru this blog may be getting warped enough to actually warrant having lost our voting privileges.

PeeCan Jerry is getting a bum wrap. Raise your hands blog dawgs, all those who have never tied one on and pissed somewhere inappropriately. I have a ticket from university days for ” depositing organic materials in the city of Vancouver without a permit”.

Guess I could never run for PM.

Besides PET,father of the drama queen, crapped all over the West for years. We probably would have preferred a Golden Shower. For expats, that’s “upnam thong” in Thai.

#87 Victoria Real Estate Update on 09.08.15 at 3:12 am

# 67 Victoria

I made it clear that Victoria’s market has underperformed compared to the rest of Canada, in general, and that has been the trend in 2015 as well.

From January 2015 to July 2015, prices in Canada increased 4.3%, outperforming Victoria which saw prices increase only 3.5% (source: Teranet’s index).

I assume you are quoting the local board’s index. I suggest you use caution when considering their claims. More on that in another post.

The difference between what I post and what you post is that I post factual information while you post claims that have nothing to back them.

For example:

“Many workers were commuting from Vancouver Island to Fort Mac… They were laid off, but most came back with several six figures.”

Where is the source for this claim? On the contrary, I know many people from Victoria who worked in Fort Mac. Most of them spent all of their money on the seedy lifestyle in Fort Mac and came back broke. They are currently living in basements of family members.

Another example:

“TO prices are now close to Vancouver’s, allowing many retires to actually cash out and move here.”

Again, where is the proof?

You may not be aware that house prices in the southern US are a lot cheaper than in any Canadian city.

There are dozens of realtor sites set up just for Canadians in Florida, Arizona, etc. because so many Canadians buy properties in those states.

Why would retired Canadians buy a property in rainy and cold Victoria (for 6 months of the year) when they can buy a similar property for a quarter of the price in a US city with summer-like weather year-round?

I know several retired people from Victoria who flee to these states to avoid Victoria’s nasty winter weather.

You must enjoy writing about your wishful thoughts.

Again, there is no evidence that wealthy Chinese buyers have suddenly discovered Victoria. That you think you saw more sports cars around town doesn’t mean that wealthy Chinese buyers are moving here in numbers to buy the local real estate.

Where is the proof to back your claim that there are a lot more Asian students in Victoria?

You are probably a realtor. It’s obvious that you don’t understand the big picture.

SFH sales in Greater Victoria are running below average in 2015 (2007 was an average year).

When making comparisons to recent years, you need to consider the following facts:

2012: lowest SFH sales total since 1984
2013: second lowest SFH sales total since 1984
2011: third lowest SFH sales total since 1984

(source: Victoria’s board)

On top of that, and most importantly, interest rates in 2007 were much higher than they are now.

We should be looking at much stronger SFH sales (twice that of 2007?) when taking into account the stimulus of today’s emergency rates. That sales are not a lot higher should be seen as a huge disappointment.

All of your (wishful) claims have been proven wrong.

#88 Victoria Real Estate Update on 09.08.15 at 3:57 am

Correction:

From Jan. 2015 to July 2015, prices in Canada increased 4.12% while prices in Victoria increased 4.99%. Not much of a difference there.

Nobody seems to be talking about wealthy Chinese buyers in Hamilton or Toronto, yet these markets have outperformed Victoria’s this year.

From Jan. to July of this year, prices in Hamilton increased by 5.80%, while in Toronto, prices increased by 5.86%.

6 months is a small amount of time compared to 7 years . Prices in Victoria are at 2008 levels, despite 6 years of emergency interest rates. That’s the big picture.

Overall, I’ve shown that the (price) performance of Victoria’s market in 2015 has been pretty much average for Canada. SFH sales have been below average for Victoria so far this year.

Overall, 2015 has been an average to below average year for Victoria when considering sales and price performance.

#89 Freedom First on 09.08.15 at 3:58 am

#61 Sheane Wallace

I just bought ZEO very recently. Yes, it dropped a lot before I bought it. My horizon is 40 years. Thanks anyways.

#90 Great Canadian Bubble Co. on 09.08.15 at 6:12 am

#62 Admirer he can still collect OAS as a non-resident, but it may be subject to a type of income tax. I believe he can get this back in some situations.

#91 Obvious Truth on 09.08.15 at 7:21 am

#39 Freedom First on 09.07.15 at 8:28 pm

Check out IYE and its holdings. US etf. Likely a vastly different top ten list than what you own.

Energy seems a tough place to earn a living right now. I often find myself asking ‘How many times can the bottom drop out?’ And it just keeps happening.

Have no skin other than maybe through broad indexes.

#92 Bottoms_Up on 09.08.15 at 7:27 am

#83 Costco Costs You Your Freedom on 09.08.15 at 12:59 am
———————————–
Costco offers high quality products at prices usually lower than discount walmart crap. You can also buy on-line, and get speedy and reliable delivery. Shopping there once or twice pays you back the membership fee in savings. Not much more to say.

#93 Smoking Man on 09.08.15 at 7:30 am

Nosty

This is what Harpo said to Mansbridge.

Two Canadian F-18 fighter jets sit in a hanger at Camp Patrice Vincent in Kuwait on Sunday, May 3, 2015. “We have to be in for the long haul,” Harper told Mansbridge.

“There’s no instant solution. But what we do know is that we cannot just withdraw, allow ISIS to spread the way it was spreading a year ago and use this as a staging area for international terrorist attacks against the world, including against us.
………….

Russia wants to lend a hand, drop a few bombs.Ha……good luck with that.

Every good tin foyler knows ISIS is a force created to take down Assad.

Our politicians dont get it..The machine, its tactics and methods ineffective , out dated, old as fk.

Example, The Machine came out with guns a blazing, using everything that worked before to take down Donald Trump….

Seems he’s leading everything now….Surprise!!!

Very few people trust, watch, or believe MSM anymore. Look what they say about real estate here.

Everyone knows about the Zero Guy, and sites like it. We have live twitter feeds from war zones.

Machine use to control 100% of the official, sanctioned narrative..

They are down to 50% is my best guess and losing huge market share with every passing day.

Hence Stuff like Bill C51 to shut us up…

Wont work….

The result, commies coming to power..

#94 gut check on 09.08.15 at 7:39 am

no picture!

This looks like an opportunity.

See here, blog dogs, for an image worthy of the opening paragraph.

http://sherrinelson.ca/

The pic was stolen overnight, possibly by a political candidate from Calgary. It has been restored. — Garth

#95 TurnerNation on 09.08.15 at 8:04 am

Bad news for the Elliott wave loons: futures up big last night then today. Putting a Dent into their plans.

#96 maxx on 09.08.15 at 8:06 am

#13 Kalergie on 09.07.15 at 7:19 pm

“I love Costco…why avoid it?”

Nothing- except for the membership fee. I’m totally and completely allergic to “club” concept$ and always find ways to shop better and cheaper.
Always.

Even if there are ways to obtain free membership, it’s yet another hassle to manage in a busy life where precious time is better spent protecting assets and growing them.

A zero subscription life that doesn’t constantly nip away at your bottom line is sheer bliss.

#97 Southeast Asian Expat on 09.08.15 at 8:14 am

#62 Admirer

You can own residential property in Canada as a non-resident as long as it is rented out at arms length (not to relatives).
You need to remit 25% of the gross income to CRA quarterly.
The property needs to be leased full time.

You are eligible for OAS as a non-resident. They even send the cheque overseas. To qualify for full OAS you need to have lived in Canada for 40 years after age 18. If not they are eligible for a reduced amount.

Hong Kong is great. No capital gains on sale of real estate nor on sale of stocks. Thats probable where the proceeds of the sale of the Thai Villas went. You can have lunch for $100 at a world class restaurant or for $5 at a hawker stand.

I’m a non-resident Canadian, currently living overseas and earning a tax free income. I’ve lived in Hong Kong, bought and sold real estate in Hong Kong, bought and sold stocks in Hong Kong, own a villa in Phuket in Thailand and have a home that is rented out full time in Canada.
When I’m travelled out and ready to settle down, I’ll move to Canada and begin to pay tax on my worldwide income… and sleep at night.

Living and working overseas is a wonderfully enriching experience, but Canada still beckons for at least part of the year.

My international account based in Canada told me that I wouldn’t recognize the place after 15 years away. He also recommended (for financial reasons) to remain non-resident as long as possible.

Hope this info helps.

#98 Smoking Man on 09.08.15 at 8:28 am

#94 gut check on 09.08.15 at 7:39 am
no picture!

This looks like an opportunity.

See here, blog dogs, for an image worthy of the opening paragraph.

http://sherrinelson.ca/

The pic was stolen overnight, possibly by a political candidate from Calgary. It has been restored. — Garth
…….

Brilliant!!
Nice job, you have everything covered….love the Tatoo.

You did your homework..

#99 gut check on 09.08.15 at 8:55 am

“The pic was stolen overnight, possibly by a political candidate from Calgary. It has been restored. — Garth”

ha ha ha! :)
The theft backfired and ended up serving two purposes: the link & your joke. All is well.

#100 Axehead on 09.08.15 at 9:05 am

Residents of Alberta know boom/bust cycles. During a bust, these are the things that go up on the auction block:

1) 800 hp diesel trucks with 6 inch lift kits, useless except to prevent the steel testicles from sparking on ashphalt

2) all terrain vehicles, quads, dirt bikes, snowmobiles, boats

3) travel trailers, toy trailers, motorhomes

4) real estate, especially recreational real estate

For Brad, 4 above is a real problem; I’d sell now and move to Guelph or some little town 1.5 hours from TO where they can be old and safe and where their kids can have a place to escape to.

#101 Transplant on 09.08.15 at 9:18 am

#62 Admirer he can still collect OAS as a non-resident, but it may be subject to a type of income tax. I believe he can get this back in some situations.

Non-residents can receive any OAS and CPP benefits that they are entitled to. In my case, the monthly disbursement is deposited electronically in $US to my bank account.

The US and Canada have a reciprocal arrangement whereby each country notifies the other of its payment made to the individual. So, the IRS is aware of my meager OAS and CPP benefits and the CRA is aware of my SS benefits. There may be some tax liability incurred depending on all other sources of income of course, but only the country of residence collects this tax. I only need to file a return in the US, the country of my residence.

I also have a small bank account in Canada and each year I receive a statement from that bank indicating the maximum balance in that account for that tax year and this information is submitted with my tax return.

#102 T.J.BONES on 09.08.15 at 9:30 am

Sir Garth: Its Tuesday, Is there going to be a meeting of the minds?

Of course. — Garth

#103 Paul on 09.08.15 at 9:54 am

Well it looks hell may freeze over. New poll puts N.D.P. In the lead people have short memories indeed.

#104 Daisy Mae on 09.08.15 at 9:56 am

#4: “I know tonnes of folks who have re-mortgaged their homes in the face of perpetual falling mortgage rates. Sometimes that just makes for sound financial decision making no?”

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

“Tonnes of folk who have re-mortgaged….”? So they said. All Mulcair needed was a variable rate mortgage.

Does anyone on this blog know of a friend, relative or colleague who remortgaged the same house 11 times? Especially someone with two government pensions? Please share. — Garth

#105 maxx on 09.08.15 at 10:26 am

#17 TurnerNation on 09.07.15 at 7:27 pm

“Libs launched an attack ad.
“Do you know where is your PC candidate? As pee’s just not ready.””

I can’t avoid thinking of PC as “Pee Cup” now.

#106 Daisy Mae on 09.08.15 at 10:40 am

#54: “Their points-back credit card pays for the annual fees and more, so membership costs us nothing.”

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

Hmmm….well, some of us don’t want to play games. LOL Just fair prices, thank you.

#107 Investorz on 09.08.15 at 10:42 am

On BNN this morning:

“Canada banks bend rules to move money out of China and into Vancouver real estate”

http://www.bnn.ca/Video/player.aspx?vid=698960

#108 Nagraj on 09.08.15 at 10:50 am

#95 TURNER NATION

I’m not familiar with the current Elliott Wave count, and I know nothing about “Dent”, but I can tell you that so far today’s 30pt rise in the SPX does not in any way dislodge the bearish pennant on the chart.
When a break-out does happen (tho nothing’s a given or we’d all be billonaires) odds, techncally, are overwhelming that the downtrend will resume.
When a break-out happens, bear in mind that the initial break-out from a symm triangle is often a false break-out. It’s too early to speak definitively about SPX trend, except to say that the resumption of the prior violent downtrend is most likely.

Nope. Look at the US economic fundamentals, not the chart. — Garth

#109 Ralph Cramdown on 09.08.15 at 11:03 am

“Does anyone on this blog know of a friend, relative or colleague who remortgaged the same house 11 times?”

Wrong question, and for shame.

Remortgaging 11 times since the early ’80s is an average of about once every three years. Shorter than the typical Canadian’s five year term? Yes. But more optimal in that declining rate environment, as long as he negotiated well, and didn’t break terms early and pay massive break fees. Likely cheaper than the HELOCs his neighbours undoubtedly have.

What did he do with the money he got from these cash out refinances? I don’t know. Maybe he invested well, or poorly, used it to fund his campaigns, helped the less fortunate, or gave it to a homeless donkey farmer. Maybe it went on hookers and blow. Maybe he’s paying a blackmailer.

I can see how the average Canadian — allergic to risk, debt and investing, except for houses — would automatically assume that this choice represents poor judgement about personal finances. But a financial planner ought to know better. And the two government pensions? That makes this a less risky strategy, as he has guaranteed income to make the payments even in retirement.

Absent evidence that the money was borrowed for a stupid reason, this is just a low, cheap political smear that invites the listener to assume the worst.

A fact is not a smear. The Mulcairs remortgaged their house in 1984, 1987, 1988, 1990, 1996, 1997, 2001, 2003, 2006 and 2009. Details on why would be helpful in understanding this individual’s financial competence. Or maybe he’s just not ready? — Garth

#110 meslippery on 09.08.15 at 11:09 am

Still 15 days of summer left.
Why do so many people want to short it?

#111 OttawaMike on 09.08.15 at 11:23 am

The GF Blog Dog explained in one short column:

http://mobile.nytimes.com/2014/09/12/opinion/paul-krugman-the-inflation-cult.html?referrer=

#112 david on 09.08.15 at 11:23 am

There’s absolutely no evidence of any Chinese using Vancouver real estate to launder money.

Until there’s plenty.

Way to go, putzes.

Where is the laundering evidence? I see only a media report about families transferring capital to Canada. — Garth

#113 kommykim on 09.08.15 at 11:24 am

RE:A fact is not a smear. The Mulcairs remortgaged their house in 1984, 1987, 1988, 1990, 1996, 1997, 2001, 2003, 2006 and 2009. Details on why would be helpful in understanding this individual’s financial competence. Or maybe he’s just not ready? — Garth

The majority of those dates are good entry points for the market. Maybe Mr Muclair is an astute investor.

#114 Daisy Mae on 09.08.15 at 11:25 am

#105: “I can’t avoid thinking of PC as “Pee Cup” now.”

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

When we start poking fun, it means we’ve lost respect. LOL

#115 Bottoms_Up on 09.08.15 at 11:31 am

A fact is not a smear. The Mulcairs remortgaged their house in 1984, 1987, 1988, 1990, 1996, 1997, 2001, 2003, 2006 and 2009. Details on why would be helpful in understanding this individual’s financial competence. Or maybe he’s just not ready? — Garth
————————————————————
Garth, do you really think he needs to explain this? Could have been taking advantage of lower interest rates. Could have been taking out money to help struggling family (doesn’t he have lots of siblings?). Could have taken money to help his wife start a business? Or put his kids through university?

Do you think you should have to explain why your rural house has a bunker with squirrel recipes, and why you drive a hummer?

You bet. I’m not running for prime minister, which allows me to be perfect. — Garth

#116 Daisy Mae on 09.08.15 at 11:36 am

#109: “Maybe he (Mulcair) invested well, or poorly, used it to fund his campaigns, helped the less fortunate, or gave it to a homeless donkey farmer. Maybe it went on hookers and blow. Maybe he’s paying a blackmailer….”

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

Yeah? Enquiring minds would like to know! Poor management would be my guess.

#117 RW_Z on 09.08.15 at 11:47 am

I saw this post when there was no picture on it last night, and I thought it was intentional. “Get serious” – like, no silly picture today. It gave me a good vibe.

#118 Nora Lenderby on 09.08.15 at 12:10 pm

Interesting story about the couple living in HK considering returning to Canada.

“You might not recognize Canada when you get back here.”

I take this as a tongue-in-cheek reference to our Socialist Paradise-to-Be, but it also implies the curse and blessing of the emigrant/immigrant, whether you change countries or just move from where you grew up.

Going back “home” isn’t always easy or possible – it’s different and you’ve changed. Sometimes you wonder, “How did I live with such people?”

#119 Paul on 09.08.15 at 12:11 pm

#117 RW_Z on 09.08.15 at 11:47 am

I saw this post when there was no picture on it last night, and I thought it was intentional. “Get serious” – like, no silly picture today. It gave me a good vibe
————————————————————-No Picture, Get Serious?
Made me afraid very afraid. lol

#120 Frank on 09.08.15 at 12:19 pm

If today should be the first day of a 35-year unwind the future

Never in history has there been a 35-year decline of real estate or any overall market. Things crash fast 1-3 years and stay there or slowly recover. Houses will not decline for 3 decades.

#121 Nomad on 09.08.15 at 12:26 pm

“forgers who are willing to alter pay stubs and switch names and amounts earned for a fee.”

Source: CanIndia.com

“But talking to some real estate agents and mortgage brokers, falsification of documents especially pay stubs is now a cottage industry. “It happens and there are any number of forgers who are willing to alter pay stubs and switch names and amounts earned for a fee.
“As banks have tightened their lending standards, they’ve forced investors and first time homebuyers to seek out mortgages from the secondary market often at usurious interest rates. Others find easier ways by simply paying a fee to get their pay stubs inflated in order to qualify for the ever increasing cost of owning a home.”

http://www.canindia.com/2015/09/falsifying-documents-to-qualify-for-home-loans-on-the-increase/#

#122 cramar on 09.08.15 at 12:54 pm

Does anyone on this blog know of a friend, relative or colleague who remortgaged the same house 11 times? Especially someone with two government pensions? Please share. — Garth

I’m with you on this issue. I would respect a man who had paid his mortgage off long before now instead of playing an endless game of refinancing. I certainly wouldn’t let this fellow anywhere near my finances, nor would trust him with leading the government and economy of the nation.

#123 young & foolish on 09.08.15 at 12:54 pm

“What part of ROC do you not understand?”

Is that not like eating your principal ?

Not in a portfolio with consistent long-term gains. — Garth

#124 Julia on 09.08.15 at 1:05 pm

Clarification on the rule of 90:
Do you factor in purchase price or value of the house?
With the run up in values in the last 10+ years, you can easily become overweight on real estate simply from increased market value. If using value, how do you rebalance (short of selling)?

By removing equity to diversify your holdings. — Garth

#125 Craig on 09.08.15 at 1:15 pm

Been enjoying your blog for a few years now.

You are included in a select group of financial bloggers/journalist that I read to get an unbiased and useful commentary on fiance and economics.

I wanted to ask, who else are good online advisers that blog that you would recommend?

People that have a similar financial view to yours.

#126 Smoking Man on 09.08.15 at 1:15 pm

#114 Daisy Mae on 09.08.15 at 11:25 am
#105: “I can’t avoid thinking of PC as “Pee Cup” now.”

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

When we start poking fun, it means we’ve lost respect. LOL.

He should go to provey politics, he can qualify as an M Pee Pee

#127 Ralph Cramdown on 09.08.15 at 1:23 pm

“Details on why would be helpful in understanding this individual’s financial competence.”

Doubtless. But we don’t have them. All we know is that a couple of long standing, apparently successful in both public and private life, remortgaged their home a bunch of times when interest rates were falling, rather than trading up.

I don’t think you’d declare Mulcair the best man for the job even if we discovered that he’d invested the borrowed money wisely, averaging a return of 18% per year with a maximum drawdown of 7% and a Sharpe Ratio of 1.1. So repeating this ‘fact’ isn’t so much about the need to know more as the wish to plant doubts in the minds of the voters.

But enough about the opposition.

Here’s how the government has managed the nation’s mortgage:

http://www.fin.gc.ca/dtman/2013-2014/dmr-rgd1401-eng.asp

I direct your attention particularly to Chart 2, showing the change over time of the term structure of Canada’s debt. That’s right, with long rates at historic lows (the Canada 30 yields 2.2% today), the government has decided to borrow most of its new debt for terms of three years or less.

Also, in http://www.fin.gc.ca/dms-sgd/dms-sgd-15-eng.asp our fearless government financiers state:

“While auctions for 3-year bonds perform well, the 3-year sector is not a core component of the Government’s debt mix (i.e., 2-, 5-, 10- and 30-year nominal bonds). In this regard, market participants have expressed a preference for the cessation of issuance in the 3-year sector in favour of increased issuance in other sectors, specifically 2- and 5-year bonds.”

Translation: Let’s ask banks’ bond desks what would be most convenient for them, and screw future governments and taxpayers if (when?) rates rise.

I get the feeling Tom Mulcair would have an opinion on this.

Your choice of cure may be worse than the disease. — Garth

#128 Shawn on 09.08.15 at 1:25 pm

Imagine Starting Your Own Bank!

Well, that would be very difficult indeed.

But why bother when Canadian Western Bank is available at about 5% over book value?

If you start your own bank it will cost you book value and then there will likely be losses for at least several years.

With Canadian Western Bank you have the rare opportunity to buy in at very close to book value. The shares have more typically traded at closer to twice book value. They (very) briefly dipped under book value in late 2008 / early 2009 during the world-wide financial crisis.

Could the shares decline further? Of course. Will it recover and be a good investment? You be the judge.

Golden opportunities are rare. Is this one? You be the judge.

Disclosure: I own shares.

#129 Axehead on 09.08.15 at 1:41 pm

A direct federal financial responsibility is banking.

Indirect financial responsibilities include taxes and employment insurance.

All other federal responsibilities (especially defence) depend heavily on budgets and so are financial in nature.

If Mulcair is unable to manage his own personal finances, how are we to expect him to manage the finances of the whole country? FAIL.

#130 pbrasseur on 09.08.15 at 1:51 pm

#109 Ralph Cramdown

«Absent evidence that the money was borrowed for a stupid reason, this is just a low, cheap political smear that invites the listener to assume the worst.»

Remortgaging 11 times is not common. There may be valid reasons to use one’s house as an ATM but the man may also be reckless financialy, if so I’d like to know …

#131 fancy_pants on 09.08.15 at 2:11 pm

everyone can’t get a 6% return on their portfolio if the overall economies/markets are not growing by that amount.

Much of the markets have grown due to QE and bailouts, the markets are swelling in correlation with debts. QE needs QE, which needs QE…

with zero growth, for every person that makes 6%, someone else loses 6% (generalized).

Lots of cash/hot air in RE, stock markets etc but look at the vacuum (debts) on the other side. $ is no longer safe anywhere hence why so many people stuff it in the ‘orange guys shorts’

Let me guess. You have no investments. — Garth

#132 Retired Boomer - WI on 09.08.15 at 2:21 pm

Whew! Glad this weekend is done! Fun, and heartache in one long holiday weekend.

The fun – meeting up with old buddies from college out for dinner, time at the casino, catching up on life’s events.

the heartache – a friend from early post high school years passed away. Age 64. Brain cancer for 22 years the radiation finally did her in. Lead on dear Janet.

… So it goes… (Smoking Man read Kurt Vonnegan)

Tonight’s Post:

SELL!!, SELL!! SELL!! What ARE you waiting for, death??

Come on, $1 MIL even after some Long Term Cap Gains will buy you what you need without eating the principal, of which a portion might actually be growing, plus in a decade, or two when you’re gone give the kids a boost!

Don’t be a doddering old fool, which you might fit sooner than later. Listen to Garth, thirsty undies wait for no one.

#133 -=jwk=- on 09.08.15 at 2:23 pm

@#18 Randy. Lol. If you lived here, you would never have to drive….it’s only out of towners like you stuck in traffic!

#134 salonist on 09.08.15 at 2:26 pm

http://atlantic.ctvnews.ca/campus-food-bank-use-rising-along-with-tuition-costs-students-group-1.2532554

students turning to campus food banks as tuition, living costs rise: students group

#135 Kaganovich on 09.08.15 at 2:37 pm

Your choice of cure may be worse than the disease. — Garth
Worse for who?

Canada. — Garth

#136 Ralph Cramdown on 09.08.15 at 2:50 pm

“Your choice of cure may be worse than the disease.”

Not my choice, actually. But I’d like the political debate to be kept above the level of innuendo and insinuation.

Hey, remember how outraged some of the blog dogs were when I said a potential client should ask to see an investment advisor’s own account to gauge performance? Shoe, meet other foot.

“Remortgaging 11 times is not common. There may be valid reasons to use one’s house as an ATM but the man may also be reckless financialy, if so I’d like to know …”

Rather than assuming that the answer is unknowable, give it your best guess, using all the information available to you. Married 39 years. Owned the house for 32 years. Paid own way through law school. Bilingual, well-spoken, seems intelligent. Successful. No evidence of a flamboyant or expensive lifestyle. Bit of a temper, recently suppressed in favour of a more avuncular style. And you think he blew all the cash on something stupid or frivolous? Maybe, but I’d guess not.

One last point: Since the crisis, the countries/economies that have fared worst have been run by governments who pretended they were running a very big household, engaging in pro-cyclical policies (“the government must tighten its belt during the current downturn,” etcetera). Managing one’s own finances poorly is no virtue, but managing a country’s as one would manage a well-run household is a mistake.

#137 young & foolish on 09.08.15 at 2:54 pm

“Clarification on the rule of 90:
Do you factor in purchase price or value of the house?
With the run up in values in the last 10+ years, you can easily become overweight on real estate simply from increased market value. If using value, how do you rebalance (short of selling)?

By removing equity to diversify your holdings. — Garth”

So that means borrow against your house to invest … and in some cases (Toronto/Vancouver) that would be multiple 6 figures. Am I understanding this correctly?

#138 Smoking Man on 09.08.15 at 2:54 pm

#134 salonist on 09.08.15 at 2:26 pm
http://atlantic.ctvnews.ca/campus-food-bank-use-rising-along-with-tuition-costs-students-group-1.2532554

students turning to campus food banks as tuition, living costs rise: students group
………

The entire educational system is illogical these days.

Before the internet, yes it was necessary to memorize and Regurgitation on exam’s to prove it stuck. The human brain had to work like a hard drive does today…

That used up a ton of biological hard disk space.

Today, with free info on the world wide web, students should be taught search techniques.

Free up some real estate under the fedora for other things, hey fiction writing works for me.

I always I’m ahead of the curve.

I challenge any professor, on any topic to hit me up with a complex question that the students in the class would get after taking the course.

The sad reality is I would need no more than 5 minutes…

Fortunately for professors the Herd is dumb, they follow tradition’s and your classes will remain full, and you will make a handsome living off thier ignorance.

That’s capitalism.

#139 Llewelyn on 09.08.15 at 3:10 pm

I would be interested to know the percentage of corporate assets around the world that are owned by the 50 largest investment firms. It would appear to me that big league players like Goldman Sachs, Merrill Lynch, Blackstone, KKR, Riverstone, Carlyle, Apollo, TPG Capital, etc. have leveraged capital obtained from investors to purchase a large portion of revenue generating assets around the world at inflated market values.

There is no doubt that acquisitions by large investment firms have been very good for the stock market in the short term but I wonder how much longer premiums can be paid to acquire revenue generating assets before market fundamentals finally kick in.

To my logical mind large leveraged based firms function on the premise that demand for all commodities, consumer goods and services will continue to increase at historical rates. They are purchasing assets at inflated prices in the belief that their value will continue to increase. Real estate is not the only asset class where inflated market values create the potential for a bubble.

There is no indication that wages around the world will increase at the rate necessary to support the current rates of consumption or P/E ratios. Credit limits around the world, including government debt, are approaching their ceilings just as interest rates are poised to increase.

There is a fundamental relationship between wages, consumption and corporate profits. Expecting consumption and profits to be maintained at current levels without substantial increases in purchasing power seems optimistic at best. An increase in purchasing power will require an increase in wages and this will influence corporate profits.

Debt has certainly stimulated consumption since 2008 but debts have a way of coming home to roost. Recent history has shown us that when large investment firms ignore market fundamentals in their quest for profits a crisis is not far behind.

Let us all hope my concern remains in the Cassandra file forever.

#140 Shawn on 09.08.15 at 3:13 pm

Fancy Pants Needs a Kick in the Butt?

#131 fancy_pants on 09.08.15 at 2:11 pm

everyone can’t get a 6% return on their portfolio if the overall economies/markets are not growing by that amount.

with zero growth, for every person that makes 6%, someone else loses 6% (generalized).

***************************************
There is a some logic to your claim and I understand how you could fall for this claim. But it is not true for two reasons:

with zero growth, for every person that makes 6%, someone else loses 6% (generalized).

1. A company and a stock market can return a dividend yield and return over time even with zero growth.

2. The economy is not at zero growth as you imply. Canada’s economy GREW in the first half of 2015 in nominal dollars. It contracted slightly in REAL dollars after deducting inflation. GDP growth is virtually always quoted in real dollars. Furthermore it is expected that Canada’s economy will grow in the long term. Recessions are temporary.

There are two aspects to any stock market.

1. Underlying profits of the company which provide returns over time to the owners of the companies (share holders, though I prefer the term share owners)

2. A trading place where owners exchange trades. This activity is indeed a zero sum game (negative after costs) as me buying shares from you does not change the profit the share will spit out long term.

There is a HUGE amount of misunderstanding about how investing works. Be careful who you believe.

Some advice is credible, some (most?) is not.

Extreme opinions are generally not credible.

I don’t really care is some people have misguided beliefs. But seeing them spread those false beliefs is something that should be corrected.

#141 Shawn on 09.08.15 at 3:14 pm

I meant to delete the second quote of

with zero growth, for every person that makes 6%, someone else loses 6% (generalized).

That is false.

my reasons are 1 and 2 above

#142 Mark on 09.08.15 at 4:09 pm

Re: Shawn’s post concerning growth, very true.

A lot has been made of the fact that “the stock market” hasn’t advanced since 2008, and therefore, it might be a bad idea to buy.

However, companies today, balance-sheet wise, are dramatically more robust than they were in 2007. The corporate retained earnings haven’t disappeared — they were used to retire debt, put additional assets on the balance sheet, and buy back shares.

As soon as the pessimism towards big Canadian business clears — look out, the TSX could easily double from current levels.

The RE promoting/pumping crowd would have you believe that Canadian stocks are a bad investment because they haven’t been handing out much of a yield. What they fail to tell you is that the businesses have been aggressively re-investing their profits. If there was an analogue in real estate, it would be a landlord that buys a fix-er-upper, and then proceeds to use 2/3rds of the next 8 years worth of net rents towards renovations/improvements. Just like with stocks that retain earnings, at the end of the day, the landlord is left with a more valuable asset that presumably should demand a higher market rent than would be the case otherwise.

#143 jess on 09.08.15 at 4:11 pm

“Scotland has the most concentrated land ownership in the developed world. Just 432 people own half of the private land.”

Protesters gathered at the failed Waterfront development in Leith, where the owner of the land is unknown.

The land was bought for over £3 million in 2008 and, following the financial crash, was sold to Sapphire Land Ltd, a company registered in the British Virgin Islands, for £327,916 in 2012. As the British Virgin Islands is designated a “secrecy jurisdiction” no information is available about who controls the company.

Because of the 100 per cent exemption on non-domestic rates on derelict land companies can sit on land without having to pay tax. The campaigners claim that offshore companies are often used to launder money and evade tax….”

https://www.commonspace.scot/articles/2346/land-reform-campaigners-scottish-government-must-act-on-land-owned-in-tax-havens
================
http://www.theaustralian.com.au/business/legal-affairs/ato-takes-ex-nudie-chief-andrew-binetter-to-court-for-alleged-scam/story-e6frg97x-1227505191821

#144 Smoking Man on 09.08.15 at 4:16 pm

Mid week, Mid day at Seneca, I’m use to seeing nearly dead geasers here.

I just witnessed something my creative brain never thought was possible.

Two Philippineo dwarf lesbians.. Introduced myself and had a chat..

More on that when Ive had a few, being stone cold sobar, don’t think Im brave enough to share..

Definitely book food…

#145 jess on 09.08.15 at 4:20 pm

The Offshore Wrapper is written by George Turner

Washington DC defines tax havens, then taxes them

The city of Washington DC has become the latest US government to take on tax havens. The city will now directly tax the income of companies made in a number of tax havens.

The legislation works by requiring companies that do business in the District to report how much income they make in tax havens outside of the United States. Washington DC will then add that money to the taxable income of that company.

Several US States have passed similar legislation but few have defined what they mean by a tax haven leading to concerns that the rules are ineffective.

The DC law requiring companies to report tax haven activity was first passed in 2012. Now a new law passed by the DC legislature a few weeks ago for the first time defines which countries are defined as tax havens. In total DC has put 39 countries on its blacklist.

For the list go to the below list
United States
Washington DC enacts statutory list of tax havens
27 August 2015
Report from Wooje Choi, Senior Research Associate, IBFD North America

http://online.ibfd.org/ifa-basel/data/tns/docs/html/tns_2015-08-27_us_3.html?WT.z_nav=rssfeed

#146 Nemesis on 09.08.15 at 4:44 pm

#GettingSerious,Or… #NothingToSeeHere?…

“The whole regime is a waste of money.” – Lawyer Christine Duhaime expounds on FINTRAC

[G&M] – Canadian banks helping clients bend rules to move money out of China

…Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver.

Financial institutions in the area have flagged more than 8,200 suspicious transactions since January, 2012, the year China began cracking down on citizens they suspect of corruption….

http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/canadian-banks-helping-clients-bend-rules-to-move-money-out-of-china/article26246404/

#BonusZen… #PrimeMinisterialAssessmentOf… #EastAsianCapitalForays… #IntoWestCoastRE…

http://tinyurl.com/nrnwbch

#147 Tom on 09.08.15 at 4:49 pm

Garth – love the blog. With respect to the inflated Toronto & Vancouver housing markets, it’s no surprise to many that Chinese money is artificially propping up prices. While I get under ‘normal’ market conditions a rise in interest rates (all things considered) would place pressure on real-estate values, what makes you confident that Chinese money will be in any swayed by this and not continue to scope up real-estate as it has over the last couple years, and keeping prices from tanking?

Your premise is wrong. Foreign buyers are influential only in a small market segment. Our domestic idiots take care of the rest. — Garth

#148 A Canadian Abroad on 09.08.15 at 4:50 pm

“So far in Alberta, house prices are still sky high, malls are still filled, and restaurants are still busy. And unemployment is still relatively low here”

Must be in a nice slice of Alberta heaven, as in Calgary, it’s pretty much doom and gloom as they just let go 1000 more O&G jobs with more cuts to come. Conoco to cut again.

I live DT Calgary and unfortunately it’s quite evident the cut backs around here.

#149 seeing it from both sides on 09.08.15 at 5:04 pm

#147
RE: Calgary real estate.
Friend listing house in Calgary…realtor is suggesting listing price as if still at top of market, based on ‘solds’ for last few months. Calgary ‘death watch’ was moot.

#150 Mark in Guelph on 09.08.15 at 5:11 pm

Your premise is wrong. Foreign buyers are influential only in a small market segment. Our domestic idiots take care of the rest. — Garth

What if a poster wrote “foreign idiots?” Deleted?

#151 A Canadian Abroad on 09.08.15 at 5:13 pm

#97 Southeast Asian Expat on 09.08.15 at 8:14 am
#62 Admirer

“You can own residential property in Canada as a non-resident as long as it is rented out at arms length (not to relatives).
You need to remit 25% of the gross income to CRA quarterly.
The property needs to be leased full time.”

I am not sure this is 100% true and you should check with CRA. E&Y told us that as a ex-pat and non-resident of Canada any property held within Canada anchors you down to being DENIED non-resident tax status. So does owning a vehicle in Canada in storage.

Just FYI, I would check with CRA.

#152 Nemesis on 09.08.15 at 6:31 pm

#GettingSerious,LondonStyle… #Or,”NoTaxPlease,We’reBritish”… #HowTheOffShoreWorldReallyWorks…

[PrivateEye] – Selling England by the offshore pound

…Using this data the Eye published a series of exposés of the companies, arms dealers, oligarchs, money launderers and others who use offshore companies, before David Cameron addressed the issue on a trip to the Far East in July. “There is no place in Britain for dirty money,” he said, promising to publish details of the property titles held by offshore companies. Even if this were to happen, however, it would fall far short of enabling offshore-owned property to be immediately identifiable, as the Eye can now make possible.

So what kind of operator might be found in this mine of information? The Eye’s quarrying so far has unearthed an eclectic cast of characters…

…Those taking advantage of the super-prime London property boom to develop luxury apartments also keep their companies clear of the UK tax net. When in 2006 Christian Candy’s CPC group acquired Bowater House in Knightsbridge for £480m in a joint venture with the Qatari prime minister, to create the plutocrats-only One Hyde Park apartments, they did so through Guernsey-based Project Grande (Guernsey) Ltd. The Candy brothers’ UK company simply “managed” the development, the real profits on the development heading to the Channel Islands (with the help of one of the Candys’ UK companies’ directors at the time, current HM Revenue & Customs board chairman Ian Barlow). Leaseholds sold on the apartments themselves are also owned through offshore companies…

http://www.private-eye.co.uk/registry

#BonusZen… #LiquorMayBeQuicker… #ButBillionaireCandyIsOhSoDandy…

http://tinyurl.com/o8t2gu4

#153 TCContrarian on 09.08.15 at 6:34 pm

#35 Bottoms_Up on 09.07.15 at 8:07 pm
#8 Jon on 09.07.15 at 6:58 pm
——————————–
Actually she really is homeless. That 1 million is the banks money.
***********************************************
:-)
Exactly what I was thinking! Depositors are, legally speaking, nothing more than “unsecured creditors”
Perhaps already posted before but, TPTB are already worried about the viability of the Canadian Banking system:

“The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. (Budget 2013 -page 145)”
http://www.canadiantimes.ca/ct2/index.php/columnists/dr-mcvety/537-bank-of-canada-governor-mark-carney-canadian-bail-in-may-include-customer-s-deposits

#154 BillyBob on 09.08.15 at 8:11 pm

A Canadian Abroad on 09.08.15 at 5:13 pm
#97 Southeast Asian Expat on 09.08.15 at 8:14 am
#62 Admirer

“You can own residential property in Canada as a non-resident as long as it is rented out at arms length (not to relatives). You need to remit 25% of the gross income to CRA quarterly. The property needs to be leased full time.”

I am not sure this is 100% true and you should check with CRA. E&Y told us that as a ex-pat and non-resident of Canada any property held within Canada anchors you down to being DENIED non-resident tax status. So does owning a vehicle in Canada in storage.

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Nope, as an expat myself I can assure you that Southeast Asian Expat is completely correct with regards to property ownership. If Ernst & Young is saying that property ownership makes you a deemed tax resident, they are at best ignorant, and at worst professionally negligent.

Property ownership has to be handled properly, as detailed above. But basically as long as you are a bona fide non-resident, income derived in Canada (including rental income) is taxed in Canada, income derived outside is not. Which kinda makes sense.

#155 OttawaMike on 09.09.15 at 6:49 am

Nikkei up 7.7% in one trading session. Everything is normal in equity markets, right Garth??