Different here?

DIFFERENT1

First, no rate cut. As promised yesterday. And I’m now thinkin’ the Fed will go next Thursday.

Okay, so Elise has a good question. First she has to suck up a little, thinking that flattery, adulation and some genuflecting matters to me (it does):  “Thanks for all the help you’ve offered to so many of us – we’re very lucky you’ve bothered month after month!”

“But please bear with me for needing some clarification of today’s  blog; I’m more than a little confused. You say that if oil prices start to rise, the current TSX will seem cheap. But what about current levels of debt in Canada, and the housing bubble? Won’t a correction in the housing market, and the problem of debt mean significant problems for the economy? Are a correction, and bringing down the debt, necessarily going to happen? I’d always assumed that if the economy began to falter, so would the market. I am befuddled by the relationship between the two. Can you explain?”

Sure, Elise. Lots of people think this way, based largely on what happened in the US when the housing market popped. As we now know, real estate values nationally in the States declined by 32%, and within a year or two unemployment was at 10%, gold was reaching for $2,000 an ounce, Wall Street banks were toppling and the TSX gave up 55% of its value. In fact, what started as a Yankee housing mess turned into a global credit crisis. Six years later we’re just emerging from the detritus.

Would it be the same here if housing crumbles, maybe from a lousy economy, higher rates or the shock of a Dipper-led Parliament?

True enough, real estate and related activities have come to represent way too much of the Canadian economy – a far higher share than the US back in 2005 or even house-mad California at the home ownership peak (CA is about the size of Canuckistan). Also true that household and personal debt in Canada now exceed the highest levels ever hit in the States before the financial crisis hit. And, yes, it’s correct that we now have liar loans, mortgage fraud, zero downs and adjustable-rate teaser mortgages in Canada. Finally, you bet, house prices here as a multiple of incomes or rents are off the chart, running about 60% higher than in the US.

Bad. It looks bad. But it’s not exactly the same.

The good news is that virtually all of the high-ratio, high-risk mortgages the banks have lavished on the moist virgins and move-up trophy hunters are insured. Such was not the case in the States where loads of them were securitized and sold in tranches to unwary investors. Of course, this just transfers risk from the private sector to the taxpayers through CMHC but, like I said, it’s different.

Second, we have fewer and stronger, massively-profitable banks who together just earned $9 billion in 90 days. They may well be part of the larger problem, cutting mortgage rates in a race to the bottom and lending to anyone with glands, but when was the last time this decade you heard about federal regulators here shutting down a bank and making terrified depositors whole? You’re right. Never.

Third, a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners, but not necessarily for the banks, equity markets or the larger economy. Why? For the same reason Alberta’s in deep trouble but house prices in Calgary have barely fallen. Homeowners would rather eat drywall than sell their houses for less than they paid. It therefore takes a long time for lower prices to ripple through the economy, and meanwhile people continue to pay their mortgages even if they’re sliding underwater.

That’s why mortgage default rates in Canada are irrelevant. They indicate nothing. Canadians have no history of walking away from their declining houses or their epic debts. They just quietly, respectfully, painfully get poorer. So low defaults mean the banks continue to get paid and tons of dough carries on being transferred from homeowners to stockholders through fat, ever-increasing dividends.

Having said this, Elise, houses are going down. There will be a correction.

Lots of people will be wounded by this, and for years now this pathetic blog has piddled into the wind trying to stress the importance of balance, plus the inherent danger of a one-asset strategy. The situation many people find themselves in today is truly scary. Look at the stats released on Wednesday. Yikes.

The Canadian Payroll Association found 48% of Canadians could not survive missing a single paycheque. A quarter of us couldn’t find two grand for an emergency. Three-quarters are massively behind in saving for retirement. Even half of all people over 50 are missing 80% of what they’ll need to get by after working.

This is what house lust does. It blinds and steals. Seems like enough.

188 comments ↓

#1 FitBitKid on 09.09.15 at 5:28 pm

“The Canadian Payroll Association found 48% of Canadians could not survive missing a single paycheque.”

And yet nobody died in Alberta……That’s what “Line of Credit” is for.

#2 lala on 09.09.15 at 5:28 pm

lala the first king of GF.

#3 LJ on 09.09.15 at 5:28 pm

Those payroll stats that they have presented today should scare the pants off of everyone!

And, apparently Alberta won the prize for “most screwed” of the bunch.

#4 david on 09.09.15 at 5:29 pm

Nice explanation, Garth.

#5 Balmuto on 09.09.15 at 5:33 pm

“So low defaults mean the banks continue to get paid and tons of dough carries on being transferred from homeowners to stockholders through fat, ever-increasing dividends.” – Garth

I don’t think the big impact on the banks of a housing correction will be the rise in defaults. Even when you account for all that suspicious, uninsured HELOC debt they will be able to weather the storm.

I think the bigger impact will be the slowdown in mortgage origination revenue, which is a huge part of their business. Revenue misses are generally not a positive for the stock of a company. And that could happen even without a correction – just hitting a plateau in new sales, and a burnout in refinancings.

But I must admit those bank dividend yields are looking pretty tasty right now.

#6 Millmech on 09.09.15 at 5:36 pm

NDP supporting more housing dept through CMHC renter tax breaks,bigoted candidates,hard to tell them from the PC

#7 Freedom First on 09.09.15 at 5:37 pm

Garth has a knack for being able to put forward the truth to the masses in such a tactful, kind, delicate and witty manner. Me, well, let’s just say that I am a restrained a$$hole and not that kind.

I was just thinking, if someone took all of the interest they would ever pay in a lifetime, and put it into income producing assets, they would do very well in just doing that. Plus, they would have the money to drive a nice car, live in a nice place, travel every year, ski regularly every year, and be able to enjoy a stress free enjoyable life on a daily basis. Just by staying away from paying interest, avoiding alimony and child support payments(divorce deballs men), and following a few simple principles(taught on this free Blog), a Freedom First lifestyle is possible for all healthy people. Good odds. Anything else, bad odds. No exception.

#8 Sheane Wallace on 09.09.15 at 5:38 pm

Real estate in Ireland declined between 50 and 70 % in the last decade. Was that a crash or a correction? As our bubble and credit compared to income is much larger + our total debt is much higher than the Irish debt before their implosion.

I said 100 times and I will repeat myself again: Anything short of 50-60 % decline will be accompanied by destruction of the currency.

Just remove CMHC and we will have guaranteed implosion north of 50 %, Keep it in one form or another and we will sure bankrupt the country (some provinces are already technically bankrupt),

Any rate ‘normalization’ will in addition absolutely kill the housing market. If we get normal rates and CMHC ‘insurance’ removed we are looking at 350-400 k houses max in Toronto and Vancouver. Half of that elsewhere.

The banks make money due to mispriced risk and in absence of CMHC they would not be making even quarter of their current profits. Mortgages and capital markets sales of mortgages based securities are 70-80 % of the banks businesses and profits, with some losses in commercial banking (energy sector), very little profitability in P&CB and some insurance profits (for certain banks).

Political correctness won’t help us at this point and we can not afford to continue to be ignorant of the predicament that we are in (we could try but it won’t help us from the hard fall), we have far passed already (and that long time ago) the point where the things could have been fixed somehow (with the cost of severe recession or depression in 2008). Now the whole economy is literally gone with the energy sector down and the biggest housing credit bubble in history. What is left? Bombardier, Blackberry and some services?

#9 Smoking Man on 09.09.15 at 5:42 pm

Third, a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners, but not necessarily for the banks, equity markets or the larger economy. Why? For the same reason Alberta’s in deep trouble but house prices in Calgary have barely fallen. Homeowners would rather eat drywall than sell their houses for less than they paid. -Garth

………

With that, on behalf of all the Phds in Herdonomics, I hereby appoint you a Masters Degree in Herdonomics.

Dr Smoking Man
Phd Herdonomics.

#10 Bob Santarossa on 09.09.15 at 5:48 pm

Not exactly Garth, about 95% correct (+/- 2 standard deviations).

Early 80s in Calgary the saying was “Last person out, please turn the lights off.” People fled their underwater mortgages in droves. There were many dollar down dealers that would “buy” your property but never transfer title (they would rent it out in the mean time) knowing the courts were backlogged in Calgary for 6 months with foreclosures.

All else true.

Also, you are dichotomous with half of Canadians living cheque to cheque or that they would rather eat drywall than sell at a loss.

You cannot have both in the same blog. Polar opposites.

Either they crater under the debt load or they do not.

Having said that, you rock, period…

#11 Mr. Reality on 09.09.15 at 5:49 pm

The trick is to do the opposite of everyone else.

Unfortunately that also includes ignoring the views of your friends, family and coworkers because THEY ARE WRONG.

This whole topic of generating wealth through diversification is quite simple really. The problem is people in general are seriously lacking in the math and patience departments, especially when emotions get involved.

Mr. Reality

#12 TurnerNation on 09.09.15 at 5:53 pm

CBC news website has Calgary pawn shop owners reporting fielding high end merch from bourgeois homes.

Who is left to buy.

#13 Romeo Jordan on 09.09.15 at 6:01 pm

New listings skyrocketing in Van.

Interesting.

Rush for the exits? If so, are they locals or HAM?

Romeo Jordan

#14 common sense on 09.09.15 at 6:02 pm

Gartho:

When is the “101 ways to make economical meals with Dry wall” cook book coming out?

Canadian Growth industries? Dollarama, Thrift stores, auction houses, home gardening supplies and anything to do with Stay vacations….

#15 Prairieboy43 on 09.09.15 at 6:02 pm

“Homeowners would rather eat Drywall”. LOL! How true.
PB43

#16 WholikeShortShorts on 09.09.15 at 6:06 pm

Luxury items line shelves in Calgary pawn shops as recession deepens

http://www.cbc.ca/news/canada/calgary/pawn-calgary-recession-rolex-louis-vuitton-1.3220591

Funny people I know in Calgary didn’t get the memo yet. Still spending money like it’s no tomorrow buying $2000 Shoes, newest gadgets and saving nothing. All the while knowing that their jobs are in jeopardy and now complaining about the NDP. There will be more pain to come to Oilville.

#17 Freedom First on 09.09.15 at 6:07 pm

#11 Mr. Reality

Well said. Very succinct and very true.

#18 young & foolish on 09.09.15 at 6:11 pm

“I was just thinking, if someone took all of the interest they would ever pay in a lifetime, and put it into income producing assets, they would do very well in just doing that.”

Yeah, like why pay interest when you could pay rent? Makes sense to me.

#19 TCContrarian on 09.09.15 at 6:13 pm

I have a different view on at least 3 of your points, Garth:

1. “ when was the last time this decade you heard about federal regulators here shutting down a bank and making terrified depositors whole? You’re right. Never.”

But…when was the last time (ever – never mind ‘last decade’), when Canadians carried 165% debt/income ratio? Right, NEVER.

2… “a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners, but not necessarily for the banks, equity markets or the larger economy.”

Semantics? OK, we can agree to call a 50% drop in prices a “correction”…

3. “That’s why mortgage default rates in Canada are irrelevant. They indicate nothing. Canadians have no history of walking away from their declining houses or their epic debts. They just quietly, respectfully, painfully get poorer. So low defaults mean the banks continue to get paid and tons of dough carries on being transferred from homeowners to stockholders through fat, ever-increasing dividends.”

Since we have NO historical precedent for this situation (in RE mis-pricings and extreme debt levels), it’s logical (and prudent) to at least prepare for a different outcome. Banks are leveraged 30 to 1 so a mere 3% drop will put them at ‘risk’.

#20 young & foolish on 09.09.15 at 6:15 pm

“Now the whole economy is literally gone with the energy sector down and the biggest housing credit bubble in history. What is left? Bombardier, Blackberry and some services?”

Gosh, how dramatic … like any other country is running an economy without government assistance.

#21 RWM on 09.09.15 at 6:21 pm

“(we won’t have a crash, as I’ve always maintained)” – If we don’t have a so-called crash, then this blog has been wrong in its advice, through and through.

It would take a “crash” just to put housing prices back to the level they were a few years ago. Otherwise, the bottom line is that people who bought a handful of years ago (when this blog was running, and when it seemed prudent) ultimately will make money–much more money than the prudent among us–even after the burst.

Hardly. If a house doubles in value over a decade and then corrects by 30%, the gain from the moment of buying it is just 40%. Less commission and closing costs, the increase is barely 30%. Meanwhile a portfolio turning out 7% over the time will increase 100%, all of it tax-free if in TFSAs or RRSPs. — Garth

#22 TCContrarian on 09.09.15 at 6:22 pm

The situation in pictures and colour:

Mapping Affordability in the Epicenter of Canada’s Housing Bubble

http://www.visualcapitalist.com/mapping-affordability-in-the-epicenter-of-canadas-housing-bubble/?utm_source=Visual+Capitalist+Infographics+%28All%29&utm_campaign=49a04ad69f-Most_Valuable_Cash_Crop&utm_medium=email&utm_term=0_31b4d09e8a-49a04ad69f-43828397

#23 common sense on 09.09.15 at 6:24 pm

It’s interesting living in Canada and working in the US when talking about housing..

1)The looks of complete disbelief on Americans faces when I say my house is paid off. (Yea yea, I’m ok with the 90 rule).

2) When Americans say they have no debt, they NEVER include what’s owing on the house..

3)They cannot believe the look on MY FACE when they say, “I love my 30 year mortgage as I save sooooo much money deducting the interest on my taxes.”

C’est la vie…

#24 Blacksheep on 09.09.15 at 6:25 pm

Today’s blog could have been called: CAPITULATION

“Bad. It looks bad. But it’s not exactly the same.”

“The good news is that virtually all of the high-ratio, high-risk mortgages the banks have lavished on the moist virgins and move-up trophy hunters are insured. Such was not the case in the States where loads of them were securitized and sold in tranches to unwary investors. Of course, this just transfers risk from the private sector to the taxpayers through CMHC but, like I said, it’s different.”

“Third, a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners, but not necessarily for the banks, equity markets or the larger economy. Why? For the same reason”

“Alberta’s in deep trouble but house prices in Calgary have barely fallen.

“Homeowners would rather eat drywall than sell their houses for less than they paid. It therefore takes a long time for lower prices to ripple through the economy, and meanwhile people continue to pay their mortgages even if they’re sliding underwater.”

“Canadians have no history of walking away from their declining houses or their epic debts. They just quietly, respectfully, painfully get poorer. So low defaults mean the banks continue to get paid”
————————————————-
Garth, you could not be more clear.

Every body mark this day on your calendar as THE tuning point here at the Greater Fool blog. The Canadian RE disaster has been averted. The US IS BACK and we, will be hitching a ride to prosperity. A one or two point rise in rates, is not going to stop the government sanctioned juggernaut, that housing has become.

Did I mention I re-entered the RE market coming up two years ago December, anticipating this out come?

Sorry, all you Dogs waiting for cheaper RE are looking pretty screwed.

#25 Blacksheep on 09.09.15 at 6:27 pm

‘Turning’ point

#26 JG on 09.09.15 at 6:34 pm

Garth “Canadians have no history of walking away from their declining houses or their epic debts. They just quietly, respectfully, painfully get poorer. ”

This seems to be true as I have witnessed it myself many times, however there was one time they walked away. 1980 or 81 shortly after PET introduced the NEP, coinciding with a global recession. Many people in AB left their house keys on the kitchen table and packed the u-haul and headed back to where they came from ( like Ontario). It was regional, but it did happen. Only in AB (and maybe BC ) are they different. :)

#27 common sense on 09.09.15 at 6:34 pm

The US is back.

Please enlighten us Blacksheep…

#28 smartalox on 09.09.15 at 6:37 pm

I think that it’s time to end the RRSP.

The Conservatives have said that they’d up the limit from $25k per person, to $40k per person (i.e.: $80k for couples);

Are the Liberals saying that they’d allow Canadians to cash out their RRSPs multiple times, for any reason? Given Canadians’ ever-increasing levels of indebtedness, and their apparent inability to handle money, won’t this make the already-chronic problem of Canadians’ underfunded retirements worse, as Canadians raid their savings repeatedly?

Then there is the burden of monitoring withdrawals and having to re-assess taxes for those that don’t pay back in time. Ugh, more bureaucracy. And for what? If there’s no money left in the in RRSP accounts (you only live once, right?), then the whole concept of collecting higher taxes once the investments grow in a tax-sheltered RRSP is rendered moot, as is the lament about foregone tax revenue 50, 60, 70 years from now, if we raise the TFSA limits.

Why not just abolish RRSPs and transfer current balances to TFSAs instead? Add the RRSP limits to the TFSA limits, and then index them to inflation going forward. After-tax dollars, employer-matched contributions, everything.

Your savings, to do with whatever you please, (down payments, go to school, get divorced, pay for renovations, etc.) with no worry about ‘paying it back’ or forking out for taxes if you can’t pay it back down the road.

#29 Jerry Bance - Trickle Down Economist on 09.09.15 at 6:38 pm

“…for years now this pathetic blog has piddled into the wind trying to stress the importance of balance, plus the inherent danger of a one-asset strategy”

Try using a cup and throwing it next time – the water mass will go further.

#30 Sheane Wallace on 09.09.15 at 6:43 pm

#20 young & foolish

The devil is obviously in the details.

There is no other country in the world where housing marked is so bastardized by an equivalent of CMHC.

There is no other country in the world with cheaper and crappier oil that is the so expensive to produce.

And what else do we have? Dramatic? You have seen nothing yet. Dramatic will be when loonie hits 0.40 USD or houses decline by 70 % or both.

Was it dramatic in Ireland? You bet it was as I saw it first hand.

#31 Dee on 09.09.15 at 6:47 pm

I’m not normally one to celebrate others’ misery, but the warning signs have been there for years and years…

“So low defaults mean the banks continue to get paid and tons of dough carries on being transferred from homeowners to stockholders through fat, ever-increasing dividends.”

That’s right. Keep pawning your everything to make those mortgage payments rather than walk away. Me and my lower-tax dividends from bank preferred shares thank you.

#32 Sheane Wallace on 09.09.15 at 6:47 pm

#23 Blacksheep

If/when the fed increases the rate (expected 0.10-0.15 % increase in September with a chance of 60 %) it will be the biggest nail in the coffin of Canadian dollar and real estate.

Never in the next 40-50 years will a crappy shack in Toronto or Vancouver ‘worth’ north of the equivalent of 1 million USD.

#33 Mean Gene on 09.09.15 at 6:52 pm

It sounds like A LOT of people are expecting to cash in their houses to pay for retirement and eliminate their debt: Moron investing 101.

#34 Chris in Nanaimo on 09.09.15 at 6:53 pm

Actually many of us have eaten drywall….or at major component if it….Gypsum…..check out the ingedients of nutritious delicacies such as McDonalds Milkshakes or Mc flurries….

#35 Sheane Wallace on 09.09.15 at 6:57 pm

#19 TCContrarian on 09.09.15 at 6:13 pm
I have a different view on at least 3 of your points, Garth:

Since we have NO historical precedent for this situation (in RE mis-pricings and extreme debt levels), it’s logical (and prudent) to at least prepare for a different outcome. Banks are leveraged 30 to 1 so a mere 3% drop will put them at ‘risk’.

————————-

As the most prudent banks in the world – Canadian banks have not deposit reserve requirements (only capital reserve requirements according to Bazel 3) the stupid at BOC will provide ‘unlimited’ liquidity to ‘prevent meltdown in the financial sector due to unforeseen external factors that emerged from nowhere and could not be predicted by our advanced predictive models’ and the CAD will go to zero.

As simple as that.

#36 Porsche on 09.09.15 at 7:29 pm

#3 LJ on 09.09.15 at 5:28 pm
Those payroll stats that they have presented today should scare the pants off of everyone!

And, apparently Alberta won the prize for “most screwed” of the bunch.
……………………………………………………………………

Nope, Ontario won the prize

http://www.payroll.ca/cpadocs/media/npw2015/NPW_Living_Pay_Cheque_to_Pay_Cheque_News_Release.pdf

#37 Mark in Guelph on 09.09.15 at 7:31 pm

#32 Shane Wallace – If/when the fed increases the rate (expected 0.10-0.15 % increase in September with a chance of 60 %) it will be the biggest nail in the coffin of Canadian dollar and real estate.

Wow, what stunning confidence in the US economy, maybe .15%! This recovery really is the real deal. Imagine, 0% interest rates for 7 years and trillions in QE and the thinking is we MAY be ready for 15 basis points.

Actually, even that is far too optimistic. No rate hike coming next week, and none in October, or December. They are stimulating in Asia and Europe and it’s not different in America.

#38 Nora Lenderby on 09.09.15 at 7:35 pm

Closure of famous political watering hole:

Hy’s in Ottawa to close.

Not sure why. Although times are tough, everyone’s expenses are cut to the bone and perhaps the new government won’t be in a mood to party.

#39 Entrepreneur on 09.09.15 at 7:37 pm

“They just quietly, respectfully get poorer” and/or get divorced, depression, suicidal, homeless, alcoholism, drug addiction and so on.

That statement can refer to small business. A small business “just quietly, respectfully get poorer” and/or until one of the above examples. A new small business comes along but stats show a owner is not likely to succeed and falls into “they just quietly, respectfully get poorer.”

The GST killed a lot of small businesses. I know many families that could not pay and had to close their door.
“They just quietly, respectfully get poorer” and/or ?.

Have respect for small business; have respect for families; have respect for the youth; have respect for the earth. Right now we have no respect, overall.

#40 Sheane Wallace on 09.09.15 at 8:01 pm

#37 Mark in Guelph

Not understanding how credit money work is a problem. Any rate increase might signal end of currency wars. Or not. But the real impact is irrelevant, the FEAR impart would be horrendous.

#41 joblo on 09.09.15 at 8:08 pm

“This is what house lust does. It blinds and steals. Seems like enough.”
Different here? Not until Canucks get a clue, which maybe wishful thinking.
I’m with SM, the machine ain’t gonna let it happen, the herd consumes, conforms and the collective is so misguided.
Where is the next Big Thing?

#42 apples to oranges on 09.09.15 at 8:13 pm

Hardly. If a house doubles in value over a decade and then corrects by 30%, the gain from the moment of buying it is just 40%. Less commission and closing costs, the increase is barely 30%. Meanwhile a portfolio turning out 7% over the time will increase 100%, all of it tax-free if in TFSAs or RRSPs. — Garth

Garth, this is based on how much investment start-up capital and how much monthly contribution?

Does your calculation include any borrowed money to invest?

Most importantly, banks do not lend investment capital for a balanced portfolio with 5% down.

#43 Mark in Guelph on 09.09.15 at 8:14 pm

#40-Sheane

Which one of us doesn’t understand “how credit money work?”

There is no way the US recovery is anything other than a debt fueled asset bubble, and the Fed clearly agrees given they have failed to raise interest rates at every prior opportunity even though the “experts”, including Garth, were so sure they would.

#44 Linda on 09.09.15 at 8:17 pm

About those stats – I’m presuming the quarter of the population who could not scrape $2,000 together is part of the 49% the payroll folks say could not survive missing even one pay cheque. And that the same 49% are also part of the 3/4’s of the population massively behind on saving for retirement.

The saving for retirement thing is important, but to the young it is so far off it isn’t registering on the radar. Plus they think CPP/OAS will be a LOT more money than it really is. Maybe by the time they are 65 their estimates will be correct, but I sure wouldn’t bet on it.

#45 crowdedelevatorfartz on 09.09.15 at 8:22 pm

@#38 Nora Lenderby
” Hy’s in Ottawa to close.
Not sure why…..”
++++++++++++++++++++++++++++++++++
Well if its anything like the Hy’s in Vancouver.
Old , decrepit, same staff for years, same furniture for even more years, its “golden days” behind it by at least 2 decades……….
I can understand why.

#46 for Fibonacci lovers on 09.09.15 at 8:22 pm

Interesting charts: It looks like the S&P 500 is going to fall another 26%

http://www.businessinsider.com/looks-like-the-sp-500-going-to-fall-26-2015-9

#47 Vundo on 09.09.15 at 8:43 pm

I don’t know a lot about Singapore, but this article was an interesting read: http://qz.com/497287/singapore-blogger-roy-ngerng-sued-by-prime-minister-lee/
Massively overpriced housing kept inflated by a secrecy-obsessed governing party with nothing but contempt of any dissent. Imagine that.

#48 Mister Obvious on 09.09.15 at 8:44 pm

#18 young & foolish

“Yeah, like why pay interest when you could pay rent? Makes sense to me.”
——————————-

Everyone pays rent, its just that on this blog we argue a lot about what to name to give it.

The goal is to collect as much (or more) rent than you pay. That’s getting almost impossible to do through ownership of residential real estate.

It’s as lot easier if you own things like dividend paying bank stock. When you are older and less foolish this will really begin to make sense.

#49 torontorocks on 09.09.15 at 8:45 pm

Garth, today, am, Scotia Plaza, I strolled down the escalator beside you and you did a sideways cut-eye at me as I said, “morning Mr Turner” and carried on purposefully to my leveraged finance desk.

Thanks.

You have a cute beard. — Garth

#50 bubu on 09.09.15 at 8:46 pm

Third, a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners, but not necessarily for the banks, equity markets or the larger economy. Why? For the same reason Alberta’s in deep trouble but house prices in Calgary have barely fallen. Homeowners would rather eat drywall than sell their houses for less than they paid. -Garth

So finally you recognize somehow the prices will not go down.. 3-5% correction means nothing… we had a correction for TSX which is bigger than that and nobody dies… Also 3-5% will be a correction for the guys who bought at the peak… few only…0.0x%

To talk about a real correction you need to see 25-30% down… it’s not happening in Calgary with the oil down now.. forget the other markets then…

Where did I say 5%? Oh, I didn’t. You made it up. — Garth

#51 Terrier on 09.09.15 at 8:58 pm

Correction? We have passed correction point 5-6 years ago … crash is likely to be a right word for what’s coming to town near you.

#52 Bottoms_Up on 09.09.15 at 9:00 pm

#32 Sheane Wallace on 09.09.15 at 6:47 pm
——————————-
A small usa rate increase will not impact canada that much. You must be joking.

We just decreased .5% over the past few months, surely we can withstand tightening IN CANADA of at least that.

#53 Daisy Mae on 09.09.15 at 9:02 pm

Google is wonderful! Definition of a ‘dipper’: a short-tailed songbird related to the wrens, frequenting fast-flowing streams and able to swim, dive, and walk under water to feed”….however, this doesn’t explain exactly WHAT is a ‘dipper-led government’? LOL

#54 bigtown on 09.09.15 at 9:03 pm

We can’t imagine immigrants actually taking their assets and moving back home leaving their underwater home in Oakville. If you have some ability to survive in another country better than Canada it would not be a moral disaster if you gave the bank the keys. It might be a financial issue but in reality it can be viewed more as a creation of the bank than the consumer.

#55 Sotiri on 09.09.15 at 9:22 pm

Garth for so many years you have told us that it’s not different here…now all of the sudden you are telling that it is, after all, different here in Canada. Which one should we trust?????

Stop being a drama queen. I have never maintained houses here would crash. They won’t, but the outcome will still be difficult. — Garth

#56 MGTOW on 09.09.15 at 9:41 pm

Garth: “The Canadian Payroll Association found 48% of Canadians could not survive missing a single paycheque. A quarter of us couldn’t find two grand for an emergency.”

Hey, who needs an economic downturn to get a month behind your mortgage payment, all you need to do is miss a week of work and BOOM, you won’t be able to make that months payment. And all you need to do is go out on a date and if that lady you go out with want to, all she has to do is make a false claim that you assaulted her and BOOM, you as a guy are going to jail instantly, with no proof of guilt or innocence needed until your court date comes up in a few weeks time.

Don’t believe me, well, listen to this counselor from Ryerson University tell you how it happening every week there:

‘MGTOW: Just because youre a dude’

https://www.youtube.com/watch?v=8ZtaN0FzDpo

Who needs an economic downturn or mortgage rates to mess us your life, these days just go out on a date and that’s all it takes.

#57 JSS on 09.09.15 at 9:47 pm

I’m pissed reading today’s blog.

For all these years, I was hoping that housing, income properties, etc. would drop in price by at least 20%.

Entirely possible. — Garth

#58 lala on 09.09.15 at 9:49 pm

No crash girls, Canadians have no life outside the house. The house is their life, so forget the crash unless we get crashed by a meteor or smth similiar. Loving the house over yourself, loving the dog over your kids, loving the money over your spouse, only in Canada. Weed is good though.

#59 OttawaMike on 09.09.15 at 9:56 pm

38 Nora Lenderby on 09.09.15 at 7:35 pm

Hy’s:
18 dollar glasses of wine and overpriced so-so food. Don’t let the door hit you in the ass when you turn out the lights.

Ottawa is not only the town fun forgot, it is also the town where restaurants go to die. Fortunately that is finally changing as some truly interesting new arrivals have charged the scene.

Albion rooms, El Caminos & Beer Bros. are some examples in the vicinity of Hy’s.

#60 lala on 09.09.15 at 9:58 pm

Sotiri re malaga, looking for a house crash!!! Wrong country, go back to eladha.

#61 TurnerNation on 09.09.15 at 10:08 pm

Hanging out in Yorkville this night. Smoking man would appreciate the per hour crowd here. Tax deductible?

#62 Granite_counters on 09.09.15 at 10:12 pm

And after reading this blog consistently, the same lingering thought keeps coming to mind…

If only we all had access to sweet government pensions like teachers I know. I doubt those people waste 2 seconds thinking about markets.

Guess you have to hope on winning the social class lottery

The average teacher pension in Ontario is $48,000, and results from 12% of each paycheque being devoted to the plan. Are you saving 12% of what you make? — Garth

#63 Frank on 09.09.15 at 10:13 pm

it’s not happening in Calgary with the oil down now

Well if it hasn’t happened yet I guess it never will!

Here’s how it plays out:

1)First big layoffs happened in spring (but everyone thought oil would be back up at $80 by fall so there wasn’t much panic) and more happened up till last week.

2) No panic but just in case lets list the house for $40K more than we paid for it 3 years ago. No one bites but we’ll leave it on the market despite sales being down 25%

3) EI runs an average of 9 months. That means that come the end of the year into spring 2016 the money runs out. Now EI isn’t very much so by this time the extra snowmobile or jet ski has been sold, if not those go.

4) Okay we’re seriously running low on cash reserves and oil is back up to $55 but the jobs aren’t all back and those that are don’t have the overtime available, salaries are down 15%. Mortgage payments are tight. We’re approaching summer.

5) Okay, this house has to go. We need to accept any reasonable offer.

This is how you’ll see 15-20% home price drops in Calgary within 6-9 months.

#64 Retired Boomer - WI on 09.09.15 at 10:14 pm

Interesting post tonight. Crash, or not? Melt or not? RE will do what demand vs cost dictate. “cost” = price + the interest or, the carry. As interest increases, prices tend to go the opposite way.

When many people carry heavy debt loads, it is making the payments that becomes paramount. If you lose a part of your income, or all of it, this is a problem. Where to replace the same level of income? Conversely, can we sell a debt? (the 2nd or 3rd car, or kid? Maybe the boat, or some other ‘stuff.’ Kill off the RRSP or TFSA contribution if any temporarily?

Best not to have to make those kinds of decisions if you can avoid them.

I wish I knew where the future was going, but I don’t, and neither does anybody else. We could be back to a growth mode in a start while, we could be impacted by externalities unseen and be in a major recession in the same amount of time.

You have a Federal election next month, we have one a year from November. The U.S. might raise interest rates tomorrow, or not. I can’t gauge where the sentiment is here, let alone in another country.

Only do I know what has worked for me over a lifetime. A hint: it hasn’t been the “new and improved” but rather, the calm plodding things that have served my world best over time. That has been NOT following the Jones’s (the herd) they’re broke, in debt, and scared.

Your life. Your choice. Make them wise Choices.

#65 For those about to flop... on 09.09.15 at 10:14 pm

If the banks made 9 billion in 90 days where does that money go?
Shareholders get some?
What about the rest?

#66 OttawaMike on 09.09.15 at 10:18 pm

Haper’s wife sells off entire stock portfolio to buyreal estate

That story was published in 2013 and refers to Mrs. Harper’s decision to cash out an investment account in 2012. There is no confirmation it held any stocks since we know only that it was “partly composed of publicly traded securities.” That could mean bonds, real estate trusts, preferred shares, mutual funds or ETFs. I can find no evidence she bought real estate, nor does the story contain that information. Provide a link so we know you didn’t fabricate it. — Garth

#67 45north on 09.09.15 at 10:18 pm

a housing correction ( we won’t have a crash )

if you bought with US dollars then there has already been a 20% correction

#68 Bill Gable on 09.09.15 at 10:20 pm

#38 Hy’s closing in Ottawa
In Vancouver, the old building on Hornby is being totally refurbished and will open in Mid September.
They still do a strong business here, I guess.

#69 Leo Trollstoy on 09.09.15 at 10:22 pm

#65 For those about to flop… on 09.09.15 at 10:14 pm

/facepalm

#70 Marco on 09.09.15 at 10:23 pm

Thanks Garth.

Who are we to believe the BOC or Deutsche Bank?

One says 30% over valued the other a whopping 63%

Cheers.

http://www.bloomberg.com/news/articles/2015-01-08/canada-home-prices-are-63-too-high-deutsche-bank

#71 Obvious Truth on 09.09.15 at 10:25 pm

Only read the comments today looking for the ‘fed will never hike doomers’.

They have disappeared along with the ‘oil pumpers’.

Could have used the entertainment and after the garth call tonight I expected more.

#72 Rich and Young on 09.09.15 at 10:30 pm

Garth

“and meanwhile people continue to pay their mortgages even if they’re sliding underwater.”

I’ve posted this before. A local lender is letting people pay nada on their mortgage! They are allowing it too simply accrue interest. This as a temporary fix to not flood the real estate market and put pressure on prices. However, if you house hunt here in Cow Town you will see a lot of freshly painted vacant homes for sale. These are investors bailing and pulling rentals off the market. All the banks are doing is helping the already rich bail on this market and those they gave a holiday will one day have to pay the piper. Sadly, this delay and allowing investors to get out first will lead to these holiday payment homeowners selling at a much worse time… when people start losing their EI

The favour that accidentally steals from those who can’t afford to pay the bills right now.

Cheers!

#73 iRent on 09.09.15 at 10:35 pm

Hi Garth,
What is the difference between crash and correction. Just that no one will lose their houses how about affordability for those waiting to buy. Should they move to US to buu while they can. Please advise.

#74 Granite_counters on 09.09.15 at 10:40 pm

#62

Thanks for putting the pension into perspective Garth. I guess I feel its different as their investment is guaranteed and they do not have to gamble as much.

Also, correct me if I’m wrong… Teachers are an easy target and just the tip of the iceberg when it comes to government supported pensions

#75 OttawaMike on 09.09.15 at 10:43 pm

#66 OttawaMike on 09.09.15 at 10:18 pm

That’s what, I believe, they call click bait Garth.

You are correct in your assertion that no real estate was purchased. I just want to provide some counter to the oft mentioned story around here of the orange, bearded guy’s 11x remortgaging of his house..

His actions are fact. You manufactured a smear. — Garth

#76 OttawaMike on 09.09.15 at 10:46 pm

Further to that cash out–if there was nothing in the account, why not disclose it? No rules require it but what are they hiding?

What specific mutual funds or securities her advisor bought for her is none of your business. — Garth

#77 bubu on 09.09.15 at 10:47 pm

Where did I say 5%? Oh, I didn’t. You made it up. — Garth

Correct, you didn’t say 5%… So how do you define ” no crash vs. correction” ? Correction is up to 5-10% to me.. Crash is 20-25%…

As I said.. if Calgary didn’t go down at least 10% in a situation like this why should we expect something else in Toronto or Edmonton or…

Calgary has not even started. ‘Correction’ vs ‘crash’ has more to do with velocity than volume. — Garth

#78 For those about to flop... on 09.09.15 at 10:55 pm

#69 Leo Trollstoy on 09.09.15 at 10:22 pm
#65 For those about to flop… on 09.09.15 at 10:14 pm

/facepalm

—————————-

I was thinking about giving you a backhand instead!
I know nothing about banking ,I don’t like their products and I don’t trust them.
If it was up to me each country would only have one bank.

#79 MF on 09.09.15 at 11:11 pm

#52 Bottoms_Up on 09.09.15 at 9:00 pm

It’s not the amount but the significance of the event that is important. it also looks like the Fed will raise a few times in the near future, not just once. I imagine after the 3rd rise or so, followed by the first by the BOC, people will start to panic as it dawns on them that this is for real.

Trust me when I say everyone under 35 expects rates will NEVER go up and that they never expect to pay off their mortgages. The only economics these idiots think they understand is 1) rates down = houses up and 2) Buy now or be priced out by “rich” immigrants. Should be a wake up call. Besides even a 1% rise amounts to a lot on the bloated mortgages here in the GTA. Rates rising = houses falling will be the water cooler talk. I wonder how those with hundreds of thousands of dollars left on their mortgages will feel with that new water cooler discussion?

MF

#80 L. Rowland on 09.09.15 at 11:12 pm

location, location, location

http://www.bloombergview.com/articles/2015-09-09/the-threat-coming-by-land

#81 BS on 09.09.15 at 11:25 pm

We already know Mulcair and the NDP want to expand CMHC to make investment housing tax free (tax break for the 1% in other words). Now it looks like the Liberals are doubling down on the housing bubble as well as they “vow to relax rules allowing Canadians to dip into RRSPs to buy homes”.

The federal Liberals are promising to let Canadians dip into their registered retirement savings more often to pay for a home, which Justin Trudeau said may be their best source of equity heading into their twilight years…

Current rules only allow Canadians to use their RRSPs to finance the purchase of their first home.

Under the Liberal plan, there would be no limit on how often Canadians could dip into their RRSPs to buy a home.

http://ottawacitizen.com/news/politics/liberals-vow-to-relax-rules-allowing-canadians-to-dip-into-rrsps-to-buy-homes

#82 common sense on 09.09.15 at 11:31 pm

Does this make any sense at all especially at this time?

Both NDP’s and LIB’S want to make raiding RRSP’s for home ownership at any cost a election platform???

Has everyone at the top lost their minds?

Garth: Do you ever see a day that a Net Worth assessment will be done to raise necessary taxes here in Canada?

#83 BS on 09.09.15 at 11:33 pm

The Liberals don’t stop there. They will throw 20 billion into housing. Part of the plan is to give developers (the 1%) tax breaks. That should make housing much more affordable.

The plan would provide $125 million per year in tax incentives for developers and landlords to build and renovate rental units

http://www.cbc.ca/news/politics/canada-election-2015-justin-trudeau-affordable-housing-1.3220479

#84 Tony on 09.09.15 at 11:48 pm

Re: #31 Dee on 09.09.15 at 6:47 pm

Wrong, if the housing market collapses here credit will dry up completely the same as what happened in America. Banking profits will be greatly diminished or they could turn negative. That’s why the rest of the world is short the Canadian banking sector.

Patently wrong. Like every other comment you post here. — Garth

#85 smear on 09.09.15 at 11:58 pm

#66 OttawaMike on 09.09.15 at 10:18 pm

That’s what, I believe, they call click bait Garth.

You are correct in your assertion that no real estate was purchased. I just want to provide some counter to the oft mentioned story around here of the orange, bearded guy’s 11x remortgaging of his house..

His actions are fact. You manufactured a smear. — Garth

That’s funny… accusing the PM’s family with buying RE is considered a smear in Canada :)

#86 omg the original on 09.10.15 at 12:02 am

Third, a housing correction (we won’t have a crash, as I’ve always maintained) is the worst news for homeowners
——————

I believe we will have the “Silent Crash” in RE over the next couple of decades.

Prices will stay pretty much where they are now – (maybe a 10 to 15% drop in some of the hotter markets)

But inflation will erode away the value of the home year after year.

Twenty years of moderate inflation can knock the real value of a house down by 40 to 50%.

For example – I sold a house in London Ontario in 1989 for $180,000. Similar houses in the same area today sell for $235,000 to $260,000. That’s about a 35% drop in real terms.

The best thing about it – nobody will have a clue its happening as people just don’t get the illusion of the value of money.

Then preto – we will wake up sometime off in the future with housing values that are again reflective of “normal”. Thats 2 to 4 time average income in smaller cities, 4 to 8 in giant cities.

A house will once again be a place to live and raise a family and not an investment vehicle

#87 bubu on 09.10.15 at 12:05 am

Calgary has not even started. ‘Correction’ vs ‘crash’ has more to do with velocity than volume. — Garth

If Calgary has not started, then it will never start… The oil price will recover in 2016 ( around $60-70USD) which is good enough to avoid a correction. Time will tell… As long as the Gov. is not willing to let the market to be free I don’t see a correction… I still see a 40y mortgage in case the rate goes up to compensate….

#88 Pica-choochoo on 09.10.15 at 12:08 am

Homeowners would rather eat drywall than sell their houses for less than they paid–Garth

Garth,

What’s the matter with eating drywall…seems to be a lot of people doing it, so maybe it could become the new poutine of the Canuckian sheeples once rates start to rise!

https://www.youtube.com/watch?v=MsKU-twd_pQ
http://www.experienceproject.com/stories/Have-Pica-Syndrome/1332971

#89 omg the original on 09.10.15 at 12:11 am

For the same reason Alberta’s in deep trouble but house prices in Calgary have barely fallen. Homeowners would rather eat drywall than sell their houses for less than they paid.
—————

People are resourceful when it comes to not selling at a loss (or perceived loss). There is so much fat that people can cut before the house gets discounted.

Here are just a few;

1) the $120/m cell phone plans
2) the $170/m cable/internet/telephone plan
3) eating out lunch 5 times a week, and dinner 2 times/week
4) the two leased SUVs in the driveway
5) little Suzie’s $120/week ballet lessons
6) $120/b single malt scotch
7) Cuba/Mexico/Hawaii for 2 weeks every January
8) private school for the kids

And bank of Mom and Dad will help too – the only thing worse than losing your house is explaining that your kids are losing theirs.

#90 WeirdBeard Jr on 09.10.15 at 12:18 am

#49 torontorocks on 09.09.15 at 8:45 pm
Garth, today, am, Scotia Plaza, I strolled down the escalator beside you and you did a sideways cut-eye at me as I said, “morning Mr Turner” and carried on purposefully to my leveraged finance desk.

Thanks.

You have a cute beard. — Garth”

Garth would I be overstepping the bounds of puntastic acceptability by saying “beards of a feather, flock together”

#91 Gen X Confessions on 09.10.15 at 12:19 am

#8 Sheane Wallace on 09.09.15 at 5:38 pm
“Now the whole economy is literally gone with the energy sector down and the biggest housing credit bubble in history. What is left? Bombardier, Blackberry and some services?”

————————-

Potash, Uranium, Forestry, Agriculture, Hydroelectric, Tourism, Biotech, Pharmaceuticals, proximity/trade to the U.S. and East Asian markets, electronics… Canada has an embarrassment of riches.

That being said, I am less optimistic than Garth about the effect of a housing correction on the larger economy. Just so many people employed in RE and related construction right now. Even a slowdown could result in a lot of layoffs.
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labr67a-eng.htm

#92 Nosty, etc. on 09.10.15 at 12:21 am

“The Canadian Payroll Association found 48% of Canadians could not survive missing a single paycheque. A quarter of us couldn’t find two grand for an emergency. Three-quarters are massively behind in saving for retirement. Even half of all people over 50 are missing 80% of what they’ll need to get by after working.”

Sheeple are still fiscally illiterate, no common sense at all. Guess they have the ‘live for today, gone tomorrow’ psyche established in them.
*
SMan and others — Note the hypocritical (double) standards in the pic here (Gaza has its’ own ongoing holocaust); Communism by the backdoor (happening in Ont. and Alta.); Chart Some folks have lost US$12.5T in the markets, which means some have made the same amount in the same time. It sure as hell ain’t me! Immigration — Off the wall; Migrants and Gadaffi; Biden is geographically off his rocker.

#93 Whistler bubble boy on 09.10.15 at 12:26 am

#63 frank
You nailed it, we should not doubt the determination and ignorance of the house horny over indebted unbalanced sheeple of our country. 6-9 MONTH LAG for price drops.

#94 Tom from Mississauga on 09.10.15 at 12:26 am

BoC skipped this one but will cut rate again, maybe for the Spring. Back in January they said if WTI stays below $60 USD they’ll cut rate again and did. The oil sands capex cuts have only started to make their way through.

#95 I am the Babblemaster on 09.10.15 at 12:39 am

“Having said this, Elise, houses are going down. There will be a correction.” – Garth

——————————————————

Yeah. Maybe, but by how much? Maybe 5%?

#96 I am the Babblemaster on 09.10.15 at 12:52 am

“….or the shock of a Dipper-led Parliament?” – Garth

—————————————————-

I guess the Cons did such a great job that nobody could compare.

#97 KL on 09.10.15 at 12:53 am

#58 Lala

Ah, you describe Candians so well. Why did I marry a Canuck and move here?? At least my spouse doesn’t have a house (or a dog). Here’s to always putting my kids, spouse, and myself over other stuff.

#98 rich migration on 09.10.15 at 1:14 am

http://www.businessinsider.com/different-how-countries-handle-rich-and-poor-immigrants-2015-9

Canada was the first rich country to go after the wealthy. Under its Immigrant Investor Program, first introduced in 1989, foreign nationals could gain residency in Canada by loaning (Canadian) $800,000 interest-free to any of the provinces for five years. The program was very attractive first to wealthy people from Hong Kong and then mainland China, as it was a relatively cheap method to gain residence in a secure, safe country with generous social benefits. More than 130,000 individuals entered Canada through this program. Vancouver became such a popular destination that locals refer to it as Hongcouver.

While the program was a boon to wealthy Chinese, it was seen increasingly in Canada as a too-cheap selling of their citizenship with negative effects on property markets by raising prices. When the program was cancelled in February 2014, it had 59,000 pending applicants, 45,000 from mainland China. At its peak in 2005, the program was responsible for almost 11% of the roughly 250,000 immigrants allowed into the country each year.

#99 Tiger on 09.10.15 at 2:17 am

8 PERCENT RRSP OR TFSA EARN 8% RETURNS USING CASH OR REGISTERED FUNDS

http://8percentrrsp.com/

Garth is it even real ?

High-risk mortgage syndicate investing. Beware. — Garth

#100 Burnaby Guy on 09.10.15 at 2:45 am

Hardly. If a house doubles in value over a decade and then corrects by 30%, the gain from the moment of buying it is just 40%. Less commission and closing costs, the increase is barely 30%. Meanwhile a portfolio turning out 7% over the time will increase 100%, all of it tax-free if in TFSAs or RRSPs. — Garth

Garth in a real life situation you’re dead wrong. Most people don’t pay full price for a house. They make a down payment. I’ll base the calculation on your assumption – let’s say I paid 50 thou down on a 1/2 mil house 10 years ago in YVR. It doubled then crashed 30% in 10 years. My gain is 100 thou. Here is the maths – 1/2 mil doubles = 1 mil. 30% correction = 700 thou. Less 10% commission and closing = 600 thou. Minus 500 thou original house cost (ignore any principle pay down) = 100 thou.
The same 50 thou in a balance portfolio in 10 years only doubled so the gain is 50 thou.
I don’t care how you calculate the %. Everybody wants to have 100 thou instead of 50 thou. House wins and portfolio loses.
I know you’ll say what about the mortgage payment. Well the portfolio guy has to pay rent too. Also the portfolio has to go up 7% every year for 10 years with no correction. This has never happened in anybody’s lifetime. Also if the house is your own home tax free is automatic. The money has to be inside RRSP to be tax free. There was no TFSA 10 years ago. Conclusion – if people listen to your advice 10 years ago in YVR they lose big time.

#101 Freedom First on 09.10.15 at 3:35 am

#18 young & foolish

Taken out of context.

You forgot about the alimony and child care payments. (neither of which I have or ever will have to pay). I live alone.

I guess you don’t know who I am. Freedom First. Always. No exception.

#102 Confused millenial on 09.10.15 at 4:02 am

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. ” – Ben Bernanke, 2007.

“The good news is that virtually all of the high-ratio, high-risk mortgages the banks have lavished on the moist virgins and move-up trophy hunters are insured.” – Garth Turner, 2015.

You certainly are confused. — Garth

#103 pbrasseur on 09.10.15 at 7:34 am

«First, no rate cut. As promised yesterday. And I’m now thinkin’ the Fed will go next Thursday.»

I hope so, the US is already at near full employment, fast food chains have trouble hiring and are improving conditions, that means inflation is a real threat. The FED would be wise to take this seriously. There is no need for emergency rates anymore, time to end it. If not this month the next, but soon.

«Homeowners would rather eat drywall than sell their houses for less than they paid.»

Alberta is still in denial facing the current dip, at some point the harsh reality will sink in.

#104 The real Kip on 09.10.15 at 7:46 am

Tom Mulcair got my vote last night. Bring Canadian forces home. END THE WAR!

#105 Ret on 09.10.15 at 7:48 am

I continually read in the Toronto Sun one columnist’s almost daily rant about teachers, their jobs, and their pensions.

I look forward to the day that she does a full comparison of pensions and benefits of Toronto police and fire services, O.P.P., nurses, Ontario Hydro, Ministry of Environment, Correctional workers etc. to Ontario Teachers.

#106 jess on 09.10.15 at 7:57 am

sounds similar -Unlocking retirement savings for property purchases

A blogger dared to question the Singapore miracle, and now the prime minister is trying to bankrupt him
Quartz‎ – 23 hours ago
As he and other bloggers have brought the pension fund into the spotlight, Singaporeans .

http://qz.com/497287/singapore-blogger-roy-ngerng-sued-by-prime-minister-lee/

#107 jess on 09.10.15 at 8:02 am

98 rich migration on 09.10.15 at 1:1

digital citizenship?

Estonia offers e-residency to foreigners – The Guardian
http://www.theguardian.com › World › Estonia
The Guardian
Dec 26, 2014 – By the end of the year, people living anywhere in the world will be able to become ‘digital citizens’ without entering the physical country.

#108 OttawaMike on 09.10.15 at 8:03 am

I am going to need to check my router. It keeps making my comments disappear into the wifi nether world.

Here it is again:
How do we know that Laureen Harper was not holding sensitive equities such as Cominco or Nexen when crucial govt decisions were being made that ultimately could affect share prices?

Not saying she held these but how do we know?
No official ethics violations committed but why is this none of my business when her husband holds the highest office?

Maybe Harper or Trudeau were signed up with Ashley Madison? Gee, we don’t know that, but let’s raise the question (without any evidence) and smear them. Now do you see why you were deleted, and will be so again? — Garth

#109 OttawaMike on 09.10.15 at 8:05 am

PS Garth.

If the socialist form a govt., lay the blame at the Cons feet not the Canadian voter. This is all starting to feel like Ontario 1990 post Harris and the socialist win while the economy tanked.

#110 George S on 09.10.15 at 8:19 am

#82 Burnaby guy:
“Garth in a real life situation you’re dead wrong. Most people don’t pay full price for a house. They make a down payment. …. Conclusion – if people listen to your advice 10 years ago in YVR they lose big time.”

You are comparing a perfectly timed in the history of the earth 10X leveraged investment (real estate) to a non-leveraged investment (balanced portfolio). If you leverage your balanced portfolio to the same extent you will get a return of about $450,000 on your $50,000 investment, considerably better than real estate.

So there are Dippers, Crappers and ?? to choose from in the upcoming election?

#111 jerry on 09.10.15 at 8:29 am

Hi Garth

Does a balanced portfolio as you have previously described with less exposure in “Maple” etc, stll hold up against a potential NDP Win and its impact on the market and investment environment?

Why do you think there is less maple? — Garth

#112 Renter's Revenge! on 09.10.15 at 8:39 am

#65 For those about to flop… on 09.09.15 at 10:14 pm

“If the banks made 9 billion in 90 days where does that money go? Shareholders get some? What about the rest?”

Into sweet, sweet retained earnings, just like any corporation. From there they can use it to buy back shares, pay off debt, back more loans, build new branches, buy smaller competitors, or give giant one-time dividends to their shareholders. Whatever they do, it contributes to shareholders’ returns. Even if the banks don’t increase their profits next year, holders of RY are currently getting about a 9% earnings yield on their shares…

… Sorry, I’d keep going but I have to wipe the drool from my face. It’s getting messy…

#113 Eddie on 09.10.15 at 8:44 am

“No Fed interest rate hike until 2017: Sri-Kumar”

http://www.cnbc.com/2015/09/10/no-fed-interest-rate-hike-until-2017-sri-kumar.html

#114 bigrider on 09.10.15 at 9:01 am

#104 Ret on 09.10.15 at 7:48 am
I continually read in the Toronto Sun one columnist’s almost daily rant about teachers, their jobs, and their pensions.

I look forward to the day that she does a full comparison of pensions and benefits of Toronto police and fire services, O.P.P., nurses, Ontario Hydro, Ministry of Environment, Correctional workers etc. to Ontario Teachers.
—–

The point you make does nothing to support your case as the salaries and pension benefits of all listed above are far to high and bankrupting the province.

None of the above compare with the whiney nature of the teachers and their militant union bosses however.

#115 Llewelyn on 09.10.15 at 9:31 am

“Canadians have no history of walking away from their declining houses or their epic debts. They just quietly, respectfully, painfully get poorer.” Garth

I guess I just dreamed that thousands of Alberta homeowners walked away from their homes in the early 1980’s.

The big difference today is that close to 100% of the risk associated with any correction in the market value of houses financed with high ratio mortgages has been placed squarely on the shoulders of Canadian homeowners. The Government of Canada, CMHC and financial institutions have collectively created an environment where the primary enforcer of mortgage obligations is the Government of Canada as the guarantor of mortgage backed securities.

Any outstanding balance after a house purchased with a high ratio mortgage is liquidated remains the full responsibility of the homeowner. This debt will be collected by a source with more than just a little bit of clout. Try getting a tax refund from the CRA if you still owe Big Daddy for a mortgage they guaranteed.

Yes my friends it certainly is different in Canada.

“we have fewer and stronger, massively-profitable banks who together just earned $9 billion in 90 days.” Garth

In Canada the only losers when the housing market corrects are homeowners who bought into to the squawk that the market value of housing may fluctuate from time to time but ‘always’ escalates over the long run. Sell all non essential assets and ride out that brief correction.

Sound like any other squawk heard on this blog lately?

Calgary prices eroded 31% between 1981 and 1985. This took four years, consistent with my statement of a sliding correction in Canada, but no quick crash. During the 1989-1994 period Toronto prices fell 32%, also supporting my premise. — Garth

#116 M_S on 09.10.15 at 9:44 am

“Homeowners would rather eat drywall than sell their houses for less than they paid”

Why reinforcing this myth? In the end of the day people sell for what they can get, and if the price is not right, it won’t sell

Besides, say 3 people buy a condo in same bulging:

Person A pays 200,000
Person B pays 250,000
Person C pays 300,000

After a while person A decides to sell for 240,000 and she is getting more then she payed, but essentially she leaves Persons B and C underwater

#117 M_S on 09.10.15 at 9:50 am

“Why? For the same reason Alberta’s in deep trouble but house prices in Calgary have barely fallen”

Not an expert on Alberta, but maybe we need to give it more time?

#118 M_S on 09.10.15 at 9:57 am

Third, a housing correction (we won’t have a crash, as I’ve always maintained)

You did maintain that but unlike before (when we had only mild to moderate overvaluations) we now have a big bad housing bubble (at least in GTA and Vancouver)

There will be no correction exactly because irrationality prevailed and it will go up as long as financially possible
until there is no other option left but a crush

#119 Keith in Calgary on 09.10.15 at 10:02 am

Actually Canadians (Here in Alberta at least) walked away from property en mass during the early 80’s downturn.

I was a banker then and had keys dropped on my desk on a daily basis it seemed. And the rest of the folk who didn’t walk away, just simply stopped paying and lived “mortgage free” for the 7-10 months it took to get the foreclosure finalized.

There are four million people in Alberta. I would be interested in knowing the number and scale of foreclosures between 1981 an 1985. Link anyone? — Garth

#120 Daisy Mae on 09.10.15 at 10:13 am

#20: “Gosh, how dramatic … like any other country is running an economy without government assistance.”

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

We’re not being ‘assisted’ — we’re being screwed.

#121 Eddie on 09.10.15 at 10:38 am

“Rate hike now doesn’t seem a prudent risk to take: Summers”

http://www.cnbc.com/2015/09/10/rate-hike-now-doesnt-seem-a-prudent-risk-to-take-summers.html

#122 Daisy Mae on 09.10.15 at 10:43 am

#78: “If it was up to me each country would only have one bank.”

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

A monopoly?

#123 Smoking Man on 09.10.15 at 11:00 am

Alberta goes fully retarded.

I see it coming, new legislation to ban trailer hitch balls on pick up trucks in Alberta. What the heck is happening over there.

http://www.cbc.ca/m/news/canada/edmonton/climate-change-denial-is-over-alberta-environment-minister-says-1.3220738

#124 Llewelyn on 09.10.15 at 11:18 am

If all is well a decline in the market value of any asset you own including a house or an ETF may not be a cause for concern. However when you lose your job or when debt-servicing costs become onerous it might become necessary to sell assets at a loss just to survive.

Cheerleaders supporting all asset classes point to the escalation of market value over the long run but tend to ignore the simple fact that a purchaser of any asset face the possibility of having to liquidate during a down cycle. Companies or individuals sitting on cash have the ability to purchase distressed assets during a down cycle and realize substantial profits by selling during an up cycle. Individuals who lose their source of income or exhaust avenues for additional credit have very few choices but to liquidate and certainly don’t view down cycles as an opportunity to double down.

The philosophy that nobody loses during in a bull market ignores the reality that somebody always buys at the top of an up cycle and that those without deep pockets cannot always ride out a down cycle.

The most valuable function of this blog has been to caution against using substantial leverage to purchase real estate at, or near, the top of an up cycle. Leverage will magnify any market correction and expose purchasers to substantial risk if economic circumstances change.

Why take a risk when other options to secure accommodation exist.

#125 Canadian on 09.10.15 at 11:43 am

#123 Smoking Man on 09.10.15 at 11:00 am

The environment minister was elected by Lethbridge West, one of the reddest places in the province surprisingly. Its the University campus and the surrounding environ + the low income downtown area.

#126 Leo Trollstoy on 09.10.15 at 11:46 am

Person A pays 200,000
Person B pays 250,000
Person C pays 300,000

After a while person A decides to sell for 240,000 and she is getting more then she payed, but essentially she leaves Persons B and C

In theory this may work but in reality it doesn’t.

The person who buys at $200k, but is willing to go on public record selling at $240k after being informed that comps are $300k is, nobody.

Unless there is financial distress, your scenario won’t happen. Ever.

#127 Nomad on 09.10.15 at 12:00 pm

CNQ cutting salaries.
Some mortgages just got harder to pay.

http://www.bnn.ca/Video/player.aspx?vid=701072

#128 Stop Yellin Fire on 09.10.15 at 12:01 pm

Garth…there is zero chance of rates going up ‘next week’…in the USA. Yellen has been to visit Obama 43 times in the past twelve months….the decision will be political…not economic. Obama is no economist.

LOL..”This is what house lust does. It blinds and steals. ”

That’s exactly what mortgage means….”Dead Pledge”

https://www.google.ca/?gws_rd=ssl#q=mortgage+origin+of+word.

#129 Pre-Retiree on 09.10.15 at 12:22 pm

#62 The average teacher pension in Ontario is $48,000, and results from 12% of each paycheque being devoted to the plan. Are you saving 12% of what you make? — Garth

____________________________
Thanks for stating this Garth. These sort of comments stem form envy obviously. Apparently, many do not realize that a pension is not a free gift but comes from deductions at the source.

#130 Pre-Retiree on 09.10.15 at 12:22 pm

“from” envy

#131 Drill Baby Drill on 09.10.15 at 12:42 pm

Dear Pathetic Blog ; your article today was very succinct and telling. Large mortgage holders are screwed.

#132 Tony on 09.10.15 at 12:44 pm

Re: #103 pbrasseur on 09.10.15 at 7:34 am

The talk now is the year 2017 for the first interest rate increase in America. Every year we get the same spiel about rates increasing next year.

Rates will rise this year. — Garth

#133 4 AM Sunrise on 09.10.15 at 12:48 pm

#7 Freedom First on 09.09.15 at 5:37 pm

This is how I know you’re not Asian – in our culture, when children are grown, they give YOU money…and love, and care, and companionship when you’re old. And possibly a couple of grandkids who gaze up at you with googly eyes like you’re the coolest thing in world. But that’s okay – with your freedom and money, you could probably buy some convincing facsimiles of all those things.

#134 Mister Obvious on 09.10.15 at 12:48 pm

Opportunities to comment anonymously on the Internet became slightly fewer as the National Post threw in the towel and handed over its costly moderation responsibilities to facebook.

Facebook needs more data, and by God, someone will provide it. Moderation will now be done by global micro-serfs for hundredths of a penny per post as facebook wraps its tentacles around yet another struggling news platform.

Henceforth you will need an account with a massive American corporation simply to comment on-line at a Canadian news service. Let that sink in a bit.

It would be more distressing if the on-line comments at
the National Post were actually worth the pixel energy it takes to display them.

Regardless, today the Garth moderated advertisement free greaterfool.ca becomes an even rarer bird.

Enjoy it while you can.

#135 M_S on 09.10.15 at 12:50 pm

“In theory this may work but in reality it doesn’t.

The person who buys at $200k, but is willing to go on public record selling at $240k after being informed that comps are $300k is, nobody.

Unless there is financial distress, your scenario won’t happen. Ever.”

comparable condo may be priced at 300K$ right now, but if you need to sell quickly you may care less if your actual profit would be 100K or just 95K

So you just put your condo for 295K to sell it faster than others. Recent buyers don’t have this option, as they need to price it for above 315K to just break-even after the commissions

Right now resale condos in GTA are moving slowly. some sellers are dropping the asking price, while others maintain original asking for months

#136 4 AM Sunrise on 09.10.15 at 12:56 pm

Point and laugh: the Beacon tower at Seylynn Village in North Vancouver is moving in its first residents this month. Sixteen (maybe more) of these units were bought for rental income. It’s a helluva rental crunch on the North Shore when people can get away with asking $1600 for a 1-bedroom next to a highway interchange, and facing 2 holes in the ground where the future towers will be:

http://vancouver.craigslist.ca/search/nvn/apa?query=seylynn

#137 Armando on 09.10.15 at 1:03 pm

I guess this is the Garth version of the “Goldilocks Economy” – not too much of a recession, just enough to kill house values, but not enough to sink the TSX. Sounds like a highly unlikely fantasy to me, but I guess anything is possible!

There is no direct correlation between the Canadian equity market and the residential housing market. — Garth

#138 lee on 09.10.15 at 1:04 pm

You guys and gals aren’t reading Garth very well. He is not predicting a crash (which is a sudden collapse). He is not however discounting the possibility (real possibility) of a 30% slide over 4-5 years almost everywhere in Canada.

Me personally, I think people are crazy if they think Toronto will give an inch. Properties will cost as much as they do today over the next five years in T.O. wherever rates go (unless of course they rise 4%-5%). Then that would almost triple people’s mortgage payments (ouch!!!).

#139 MF on 09.10.15 at 1:04 pm

#126 Leo Trollstoy on 09.10.15 at 11:46 am

Sometimes it can. My parents bought their second house in 1992 in the GTA for 270k. The house was listed for 290. My parents initially went in with 265 and were flat out rejected. But after three weeks they were contacted by the seller’s agent asking for 270k. There were obviously no other offers in sight.

I’m guessing, in 1992 in the GTA, lots of people had been burned by the downturn in 89′. The job market was also not so great as well. I think it really depends on the mood of the market at the time.

MF

#140 Julia on 09.10.15 at 1:04 pm

Isn’t one of the reasons people in Alberta walked away from their houses in the 80’s are non recourse mortgages?
I believe Alberta was the only province that had those, now I believe new mortgages do not.

#141 Burnaby Guy on 09.10.15 at 1:06 pm

Reply to #110 George S –

I am not the one doing the comparing. Garth is. He set up the scenario first. Didn’t you read this? – ” Hardly. If a house doubles in value over a decade and then corrects by 30%, the gain from the moment of buying it is just 40%. Less commission and closing costs, the increase is barely 30%. Meanwhile a portfolio turning out 7% over the time will increase 100%, all of it tax-free if in TFSAs or RRSPs. — Garth “. I simply used his scenario and did the calculation.

Also your scenario is very unrealistic – The reason for a balance portfolio is try to mitigate risk and get a steady return over time. No sane person would use a 10X leverage on a balance portfolio. However people buy houses with 10% down everyday (or 5% or no money down).

#142 Calgary Rip Off on 09.10.15 at 1:09 pm

You still dont get it.

If your rent and the mortgage is the same, job is reasonably secure and working another 30 years at same job, are you going to rent or buy the mortgage?

Are you really going to say that you would rent for all this time while prices may decline and be reactive in your decision making?

Nonsense. I dont believe it.

#143 Nora Lenderby on 09.10.15 at 1:15 pm

#123 Smoking Man on 09.10.15 at 11:00 am
Alberta goes fully retarded. I see it coming, new legislation to ban trailer hitch balls on pick up trucks in Alberta. What the heck is happening over there.

Only one ball allowed per truck, people!

#144 Nora Lenderby on 09.10.15 at 1:21 pm

Interesting article about refugees bringing economic benefits:

https://www.project-syndicate.org/commentary/economic-benefits-europe-refugee-crisis-by-lucy-p–marcus-2015-09

Of course, we have the difficulty of selling this idea to a number of deeply suspicious populations. However, if you can make a case that ISIL is a real-life security threat to Canada, you can sell anything…

#145 MF on 09.10.15 at 1:22 pm

#114 bigrider on 09.10.15 at 9:01 am

I concur. My dad was a teacher. I would never go into that line of work. Whiny is an understatement. The politics were unbearable. Lots of cliques, groveling, pandering, sucking up with the principal/parents/etc.

There are many teachers who have the kids as their number one priority, but sadly they get swept away by this whiny majority. My dad would leave at 730, come back at 9. Mark early in the morning, mark at night, mark all weekend, prepare lessons, try to inspire etc. but it didn’t matter there was always some issue with an entitled parent/kid/principal. It really is pathetic a lot of the time.

MF

#146 Nora Lenderby on 09.10.15 at 1:25 pm

#90 WeirdBeard Jr on 09.10.15 at 12:18 am
#49 torontorocks on 09.09.15 at 8:45 pm
“You have a cute beard. — Garth”
Garth would I be overstepping the bounds of puntastic acceptability by saying “beards of a feather, flock together”

Flocking hell, my assumption was that torontorocks was a person of the female gender. Apologies all.

#147 Mr Realistic on 09.10.15 at 1:28 pm

People should quit complaining and buy a home they can actually afford, a small one: http://www.huffingtonpost.ca/ben-myers/canada-housing-market_b_8110246.html

#148 AB Boxster on 09.10.15 at 1:32 pm

The average teacher pension in Ontario is $48,000, and results from 12% of each pay cheque being devoted to the plan. Are you saving 12% of what you make? — Garth

——————————
Garth,

That’s such an unfair comment.
You should know that if a person were to contribute 12% of their base salary to their RRPS every year over 35 years that they would only have approximately 1 million dollars in their rrsp?

(assuming 40K base salary in year 1, 12% contribution each year, base salary rising 3% per year for 35 years, RRSP refund reinvested, max salary of 91K after 30 years, 6% compounded return over 35 years)

And then that pittance of 1 million dollars would only provide one with a measly $48,000 income annually.

(assuming 35 year drawdown to $0, 4% annual return, 15% tax rate)

Compare that to the the average of $48,000 that teachers get, and its obvious that, well, uh, umm……

never mind.

#149 Exilled on 09.10.15 at 1:38 pm

Sir Garth: I think Bandit wants in now! Or he wants you to come out and play!

#150 Nora Lenderby on 09.10.15 at 1:44 pm

#116 M_S on 09.10.15 at 9:44 am
Besides, say 3 people buy a condo in same bulging:
Person A pays 200,000
Person B pays 250,000
Person C pays 300,000
After a while person A decides to sell for 240,000 and she is getting more then she payed, but essentially she leaves Persons B and C underwater

This also assumes that all these condos are identical in all respects and that property of any type is, what is that word? Fungible.

Stuff wears out, people do upgrades, some people don’t like high views, or like views of the swampwetland.

#151 Paul on 09.10.15 at 1:57 pm

#129 Pre-Retiree on 09.10.15 at 12:22 pm

#62 The average teacher pension in Ontario is $48,000, and results from 12% of each paycheque being devoted to the plan. Are you saving 12% of what you make? — Garth

____________________________
Thanks for stating this Garth. These sort of comments stem form envy obviously. Apparently, many do not realize that a pension is not a free gift but comes from deductions at the source
———————————————————-
It’s great that teachers get a pension, but once they are eligible and start taking the benefit why don’t they quit and let the new teachers get a job. Instead of double dipping !

#152 Mister Obvious on 09.10.15 at 1:59 pm

I was planning to cross the line to the USA in the next few days so yesterday I went to my bank to buy $300 American. At the current exchange rate that was going to cost me $406 Canadian.

I counted the cash out in front of the teller. She said since this will be a cash transaction I’m going to have to ask you a few questions, such as, who is your present Canadian employer (I’m retired) and from where, exactly, did this money originate?

I said “Why do you need that information? I’ve had account at this bank for 30 years, I have a lot of money in your associated investment house as well as a healthy balance in my account. In other words, you know exactly who I am and probably more about me than my close friends”

“Rules are rules”, she said “and this is a brand new rule. We have serious money laundering problems and this is an attempt to curb some of that”

I complained that it was only a measly few hundred bucks. “No matter” she said “it applies to everyone for any amount, so… let’s get these pesky questions answered and out of the way.”

I asked if she could instead deduct the amount from my account and skip the interrogation.

“That would be no problem, sir”

WTF?

#153 Panhead on 09.10.15 at 2:03 pm

#123 Smoking Man

I see it coming, new legislation to ban trailer hitch balls on pick up trucks in Alberta. What the heck is happening over there.

———————————————————
Just returned from a bona fide redneck wedding in Boyne Lake Alta and never saw a single set of trucknutz on the trip. I was shocked but maybe just wasn’t far enough north. Lovely country up there though …

#154 JimH on 09.10.15 at 2:08 pm

#132 Tony on 09.10.15 at 12:44 pm
“… The talk now is the year 2017 for the first interest rate increase in America. Every year we get the same spiel about rates increasing next year.”
===============================
Tony, I know you’re full of BS, but this really is over the top. You are either plagued by overwhelming memory issues or you’re trapped in a time-warp somewhen…

Do you have any recollection of the great “Taper-Tantrum” of 2013; based on rumors the Fed would ease stimulus by tapering off the bond-buying swap? There was not a peep about raising rates, Tony!

To say that we have been hearing this “every year” is totally false and a figment of your overactive imagination!

As for “the talk” now being of the first rate hike not until 2017… because some obscure minion talking-head on teevee says so? Please? Get real!

#155 OXI in GREECE !! on 09.10.15 at 2:13 pm

Many contradictions in today’s post…….

#156 OXI in GREECE !! on 09.10.15 at 2:16 pm

I have this sign up in my home office that says “FED RATE HIKE TOMORROW”. Been there 9 years…..

#157 Smoking Man on 09.10.15 at 2:16 pm

Sept 17 cant come fast enough, I want to get out of my Long USDCAD Bet, They spike, take out a huge profit and roll it into Long Oil.

Anyone see whats going on in Syria..Russia, and USA.
Oil dogs, Oil…

#158 Keith in Calgary on 09.10.15 at 2:27 pm

I doubt you will find a link with stats for this time period.

Here is my perspective…….I was a manager for National Trust Company at 320-8 Ave SW in Calgary (it’s now a bar…….LOL) from 1981-83. Head office sent me from YVR to YYC to clean it up. I was responsible for a $100MM portfolio of second mortgages and a personal loan portfolio of some $30MM. Over the course of 24 months the second mortgage portfolio dropped down to $60MM due to foreclosures/quit claims/walk aways and the resultant write offs, which, when combined with a huge funds mismatch on the deposit side, resulted in our being bought out by Victoria and Grey Trust, which later got bought out by BNS.

On average, a second mortgage balance was $30K +/-. So, $40MMK divided by $30K, means that 1,300 properties over about 24 months went thru my hands……2 a day more or less. Had two law firms working for us non-stop to process everything. Paid people $1,000 for signing quit claims.

We were just one of several financial companies with this issue. Everyone had to deal with it. No one spoke about it. No one went after the dollar down dealers and tried to pierce to corporate veil. Lawyers were directors and partners in dollar down companies. Perfectly legal. Trust company association didn’t want to make public noise and embarrass everyone or sue anyone, felt it was better to stick their heads in the sand and pretend it wasn’t happening. Bankers and credit unions were the same.

#159 OXI in GREECE !! on 09.10.15 at 2:33 pm

#157 Smoking Man on 09.10.15 at 2:16 pm
Sept 17 cant come fast enough, I want to get out of my Long USDCAD Bet, They spike, take out a huge profit and roll it into Long Oil.

Anyone see whats going on in Syria..Russia, and USA.
Oil dogs, Oil…
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

So….how does the oil price go up when:

1. Everyone is broke
2. Every time a new car comes out it is 50, 60, 70 mpg
3. Electric cars are being released more and more.
4. There are 20 million holes in the ground and ocean floor pulling it out

They bitched here in Holecouver about how transit did not "collect enough gas tax" because people were not driving at the same time as they say "drive less" in order to save the world from fake global warming. Govt is insane.

Thanks for your answer in advance.

#160 Sheane Wallace on 09.10.15 at 2:38 pm

#157 Smoking Man

How do you do oil?

Integrated providers/ETFs, options/futures?

#161 cramar on 09.10.15 at 2:41 pm

Mulcair said last night he will repeal the TFSA increase.

http://www.cbc.ca/news/politics/canada-election-2015-tom-mulcair-interview-1.3221183

Therefore both Mulcair and Trudeau have stated this. Since it looks as if there will be at least a minority government with either one, the increased limit is toast. My financial guy is getting his clients to max their TFSA before the election. The increase can be repealed, but it doesn’t look like it can be rolled back for this year.

#162 jess on 09.10.15 at 2:48 pm

a worldwide crisis became a boom for alberta

http://www.cbc.ca/history/EPISCONTENTSE1EP17CH3PA1LE.html

Dome Petroleum, the country’s largest oil company, avoided collapse with a last-minute bailout package with Ottawa and the banks.
http://www.thecanadianencyclopedia.ca/en/article/dome-petroleum-limited/

#163 Conspiracy? on 09.10.15 at 2:55 pm

Just came back from visiting my best bud in Kelowna. Outside his one bedroom with a den condo were 18 lock boxes for condos for sale in his development. I checked MLS and not one is listed there? hmmmmmm trying to keep prices up????? by not listing?

#164 Mike from mtl on 09.10.15 at 2:59 pm

#126 Leo Trollstoy
In theory this may work but in reality it doesn’t.

The person who buys at $200k, but is willing to go on public record selling at $240k after being informed that comps are $300k is, nobody.

Unless there is financial distress, your scenario won’t happen. Ever.
====================================

Exactly. Within the (most manipulated ‘free’ market) vested interests are at work.

I’ve seen it over and over again, your average person would NEVER undersell unless they’re all out of ammo (i.e. money). Checking MLS on some interesting properties have been on the market for over a year!

Just like vintage collector markets, similar comps matter and with many parties interest in their %, human nature creates these ‘bubbles’. As always its worth is a strange non-logical argument.

You’ve only lost until it’s actually sold.

#165 Smoking Man on 09.10.15 at 3:12 pm

#160 Sheane Wallace on 09.10.15 at 2:38 pm
#157 Smoking Man

How do you do oil?

Integrated providers/ETFs, options/futures?
….

CFDs. AVA Trade..

#166 Vanecdotal on 09.10.15 at 3:19 pm

#126 Leo Trollstoy

Never say never. This is already happening in many Van ‘burbs right now with condos/townhomes. How many years are owners willing to lose $ every month as their unit value declines until they cut & run?

Been steadily sliding for the 6+ years I’ve been following the market here. Additionally, some builders are finally undercutting their own pricing on brand new units. Earlier this year a local builder slashed all (brand new) remaining unsold units by @ 20% to try and move them. None of this seems to be reported in the media. Ever.

Might have something to do with the RE pumpers being one of their largest adverti$er$.

#167 M_S on 09.10.15 at 3:24 pm

“This also assumes that all these condos are identical in all respects and that property of any type is, what is that word? Fungible.

Stuff wears out, people do upgrades, some people don’t like high views, or like views of the swampwetland.”

Doesn’t matter really. it comes down to money. If you have a good capital gain on your unit you will feel more relaxed about investing extra 5K to renovate your unit and sell for a better asking. If you underwater however, this is a different story

#168 Axehead on 09.10.15 at 3:24 pm

#153 Panhead (nice handle)

Truck nuts are still around; just saw a van (yes, an old chrysler minivan) with truck nutz. Bizarre. Only in Red Neck (sorry Red Deer) Alberta.

#169 Dazed and confused on 09.10.15 at 3:31 pm

Garth you state that the banks have ever increasing dividends. I was confused as to why CPD and XPF were dropping so much. I checked the preferred dividend payouts on the RBC site. The Series AJ dividend dropped 30%. Series AK and AL also dropped. I assume this is due to the rate reset but isn’t it still a dividend cut. You have always stated that the preferred shares were better than the common shares. CIBC Wood Gundy has a pdf chart showing all the upcoming dividend adjustments. Please elaborate.

#170 M_S on 09.10.15 at 3:32 pm

“I’ve seen it over and over again, your average person would NEVER undersell unless they’re all out of ammo (i.e. money). Checking MLS on some interesting properties have been on the market for over a year!”

Different experience here. I do see asking decreased on identical properties after a few months. About 5-10K. The interesting part is that after one unit drops the price several other follow withing a week or two, while other stay at their (now) unrealistic high price

Besides, each month you can’t sell you loose money, some people are quicker to learn that than others

#171 S.Bby on 09.10.15 at 3:51 pm

#126 Leo
The person who buys at $200k, but is willing to go on public record selling at $240k after being informed that comps are $300k is, nobody.
—————————————-
except of course if that $240K is all they can get from a buyer. Comps mean nothing if there is no buyer willing to pay it.

#172 The American on 09.10.15 at 4:08 pm

JimH, regarding Tony. I too share your frustrations with Tony, the ignorant and delusional fucktard who has never once been right about anything of his predictions, nor does he ever back his bullshit with supporting links or facts. Personally, I believe he may truly be I need of some of that so-called “free” mental care up there. Then again, from what I know of my doctor friends who live in Canada, he may very well already be one himself.

#173 Panhead on 09.10.15 at 4:14 pm

#168 Axehead (nice handle)
Shite … and I wanted to get a set of calvesnutz for my ride.

#174 Exurban on 09.10.15 at 4:27 pm

Keith #158

Thanks for your detailed and informative post. At the time I was a mortgage-holder in B.C. having a tough time keeping up payments on a high-interest mortgage (speaking of defunct companies, it was insured with MICC Mortgage Insurance Company of Canada). I heard about the sell-a-house-for-a-dollar operations in the Cowtown and couldn’t understand how they could be legal.

#166 Vanecdotal

Yep, you don’t ever read about falling condo prices and only very very rarely about any kind of trouble with condos, although there is lots — crazy strata councils, insane condo owners in court battles with strata councils, drug dealing and prostitution, structures falling apart, yadda. Media has always sucked but IMO it has never been as bad as it is today. That’s why I follow Garth in spite of some of his fixed ideas.

#175 S.Bby on 09.10.15 at 4:37 pm

#163 Conspiracy
Properties don’t have to show on MLS to be for sale. They could be listed by the realtor only. MLS costs extra 2% or so to list so some vendors try to save that expense. But that’s a false economy as far as I’m concerned.

#176 Smartalox on 09.10.15 at 4:56 pm

@ Conspiracy (#163):

If you’re looking at MLS, you’re looking at the wrong site. Try “Air B’n’B” or “VRBO” instead.

#177 MF on 09.10.15 at 5:10 pm

#172 The American on 09.10.15 at 4:08 pm

Haha.

Awesome. Missed you the last few days.

MF

#178 jess on 09.10.15 at 5:15 pm

Insolvency Statistics in Canada—June 2015

https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03452.html

#179 MF on 09.10.15 at 5:19 pm

#157 Smoking Man on 09.10.15 at 2:16 pm

Iran deal just passed the US senate.

Many saying the implications are a bit more of a prolonged oil glut.

MF

#180 John Prine on 09.10.15 at 5:25 pm

#175 S.Bby on 09.10.15 at 4:37 pm
#163 Conspiracy
Properties don’t have to show on MLS to be for sale. They could be listed by the realtor only. MLS costs extra 2% or so to list so some vendors try to save that expense. But that’s a false economy as far as I’m concerned.

Tried looking for property in Pemberton which is near Whistler, they don’t use MLS often which really restricts our ability to search..

#181 John Prine on 09.10.15 at 5:29 pm

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

So….how does the oil price go up when:

1. Everyone is broke
2. Every time a new car comes out it is 50, 60, 70 mpg
3. Electric cars are being released more and more.
4. There are 20 million holes in the ground and ocean floor pulling it out

They bitched here in Holecouver about how transit did not "collect enough gas tax" because people were not driving at the same time as they say "drive less" in order to save the world from fake global warming. Govt is insane.
____________________________________________
We have drought conditions on Vancouver Island, the districts are telling us not to use water and are now wanting to raise rates……..And they keep handing out development permits for more subdivisions. Same situation kind of…

#182 Freedom First on 09.10.15 at 5:34 pm

#133 4 AM Sunrise

Baloney. Japanese men are staying single and childless in record numbers. Japanese Government is in a panic as their population ages. Men have learned from society and are responding. Freedom First.

#183 me on 09.10.15 at 6:01 pm

Geez, people are really pissed off at you and your post Garth. You need to stop posting reasonable, logical and rational information. People want over the top drama and despair dammit.
Has anyone heard of ISIS or know whats going on in the rest of the world?

#184 M on 09.10.15 at 6:43 pm

Gartho baby,

U enumerated as many resons for which cnd will lower again the interest rates.
interest rates do not matter anymore: all canadian entities are so crushed in debt that the end can not be but a smoking whole in the ground.
Like in a crash. like in “pada-boom”. Like in “no time end to plummet”
A fantastic opportunity for investment: many fake the groth, harder to fake the orgy of pain coming.
As I said,,..a great opportunity for massive gains in the downturn.

#185 Tony on 09.10.15 at 8:09 pm

Re: #172 The American on 09.10.15 at 4:08 pm

Which Tony is that?

#186 Tony on 09.10.15 at 8:17 pm

#157 Smoking Man on 09.10.15 at 2:16 pm

You want to get out of that position before September the 17th as America may never raise rates for years to come. Short the Canadian dollar the last trading day of September 2015 and cover two business days after the Canadian election.

#187 The American on 09.10.15 at 11:58 pm

DELETED (language)

#188 The American on 09.11.15 at 12:40 am

At #185: Tony, why that would be you who I am referring to. The one and only. You’re pathetic.