Get a grip

UNICORN1

Two weeks ago – the last time this blog was overrun with doomers, hairshirters, desperados and milquetoasts telling you a stock market correction was actually the Apocalypse – I said chill. Corrections are just that; opportunities for markets to reset, blow off steam and avoid turning into bubbles. Nine times out of ten, they do not lead to long-term declines.

So the Dow and the S&P shed about 10%, the TSX plunged 16% from its high earlier this year, bank stocks sank along with oil, newspapers hauled out their trader-facepalm pictures and your mom strutted around the house feeling cocky about the condo she just bought you. Sigh. Some stuff is so predictable.

Since then, stock markets hit the wall and bounced off. US equities gained the better part of 10% in just six sessions. Oil’s been advancing faster than Tom Mulcair isn’t. Bank stocks have broken out of their funk and surged higher. Of course there will be more down sessions, but it’s hard to make the case that we’re not still in the midst of a bull market that has miles to go. Those who argue the US is in recession, debt will swamp the world or China implode aren’t paying attention. Even the dreary IMF says the global economy will grow over 3% this year, China by more than 6% and the US by 2.5%.

Where there’s growth, money’s being made. The trip from the depths of 2009 to this point has been long and tortuous, but it’s a safe bet central bankers and national governments won’t be tolerating a reversal after spending all that time and dough. In short, the positives (integration of monetary policy, coordinated stimulus programs, cheap money, trade liberalization, technological advance and cheapo commodity prices) all point to the next five years being like the last five. Or better.

Over that half-decade, by the way, a balanced (60/40), globally-diversified portfolio grew by just over 8% a year. In comparison, the price of real estate in the GTA increased by an average of 6% (from an average of $465,369 in the autumn of 20111 to $627,395 today). Hmm. Tell mom that.

As you know, with a financial portfolio, there are no closing costs, no land transfer charges and no property taxes to pay. There is no 5% non-deductible commission when you sell it, and no HST to shell out on that. Money you borrow to invest has tax-deductible interest, while a mortgage is paid from after-tax bucks. You don’t need to insure a portfolio, shovel it or clean its eavestroughs. There is no water bill, and no capital gains taxes if you invest inside a TFSA or an RRSP.  No dork can move in beside you or let his dog crap on your ETFs. You can liquidate your portfolio in five minutes or less, while houses take days, weeks, months or sometimes years to sell.

You can’t live in a portfolio, of course, but it can certainly pay your rent. Or your mortgage, if you want. And it gives you what everyone actually needs their whole life, which is cash flow. Houses suck money while portfolios are designed to give it. Both can yield tax-free capital gains, but direct comparisons between these two asset classes are specious. You should actually have both, in proper balance. But if you only have enough capital to acquire one, make it the portfolio first. After all, houses are anchors. They mentally, emotionally, physically and financially weigh you down, robbing a person of mobility and flexibility.

So, being a cowboy, I’ve a tough time understanding why any young person would choose to embrace real estate and debt, which go hand-in-hand. This is even a bigger question when you consider that in 416 or YVR the kid is probably ending up with a seriously-inflated concrete box in a building over which she has zero control. Strata fees, common spaces, neighbours and property taxes are out of your control, and there’s little you can do to improve the property or add value above market forces. Overarching, though, is the fact condo buyers get no dirt. No land. No essence of real estate – only the right to live in a building that’s owned by many, that will age and deteriorate, require hideously expensive repairs and face constant competition from newer, sexier structures.

Finally, (although nobody believes it) your chances of renewing a 2.5% mortgage at the same rate in five years are similar to those of seeing Stephen Harper in a cute niqab.

So why do 85% of Millennials think real estate is a great idea and will embrace it regardless of what some grumpy, pathetic, curmudgeonly irrelevant blogging guy says?

There are six reasons. None of them pretty. Tomorrow. Bring your folks.

194 comments ↓

#1 ApplePi on 10.07.15 at 5:08 pm

While all of that is true, even if the house appreciates at a lower rate than a portfolio… The house does have the advantage of having higher leverage.

6% of $1 million house is 60,000.
That would require a 200,000 portfolio to earn 30%.

Of course it’s more complicated than that because of the fees, but if you can, it is good to have both real estate and a portfolio as Garth says.

#2 broader mind on 10.07.15 at 5:10 pm

Nice to see you back on point Sir Garth.Of course you are 100% correct on this subject matter.Leave the politics to the lemmings.

#3 zedgt87 on 10.07.15 at 5:11 pm

Is it a bull or a bear?

Nobody knows yet.

>but it’s hard to make the case that we’re not still in the midst of a bull market that has miles to go.

I’d say based on recent action its just as hard to make this assertion as it is that a bear market is imminent.

#4 Lulu on 10.07.15 at 5:21 pm

RE for the young is like a status quo, you can’t stop them, just like luxury brand/items, also realtor keep saying why pay someone else’s mortgage instead of your own, this is the BEST time to buy (I kid you not)

Anyway we’ll see how it goes after the election, brace for some uncertainly and gonna be interesting.

#5 MoneyDriven on 10.07.15 at 5:24 pm

Thanks Garth. What is the net worth cut off point to transfer from one asset (portfolio) to two assets (portfolio and condo as real dirt is impossible in YVR). Other param two people working (75K and 60K) and both in 30s and no debt and 250K invested (our earning and not bank of mom and dad and its in TFSA, RRSP and non-reg)

#6 T.J.BONES on 10.07.15 at 5:27 pm

Sir Garth: I dont know why!

#7 jess on 10.07.15 at 5:31 pm

Describing currency manipulation

“The United States has run chronic trade deficits for well over a decade. For at least 15 years, these deficits have been largely driven by the decision made by several of our major trading partners to manage the value of their currency for competitive advantage in U.S. and global markets (Bergsten and Gagnon 2012;
…”

http://www.epi.org/publication/stop-currency-manipulation-in-the-trans-pacific-partnership-millions-of-jobs-at-stake/Bayoumi, Gagnon, and Saborowski 2014). They buy dollar-denominated financial assets to boost the value of the dollar and depress the value of their own currencies. This results in cheaper imports for the United States and makes U.S. exports more expensive in global markets. More than 20 countries, led by China, have been spending about $1 trillion per year buying foreign assets to artificially suppress the value of their currencies (Bergsten and Gagnon 2012). Ending this currency manipulation by our trading partners is thus crucially important for reducing U.S. trade deficits and stabilizing the global economy in coming years.”

#8 Millenial on 10.07.15 at 5:38 pm

“…but it’s a safe bet central bankers and national governments won’t be tolerating a reversal after spending all that time and dough.”

LOL.

#9 Tudor on 10.07.15 at 5:42 pm

The Greater Fool research department must be better staffed than the Vanguard research team.

Far from seeing a re-run of the last five years (or better!), Vanguard is a bit more cautious:
“Given the fragility of the global economy, Vanguard does not see interest rates being raised above 1% for the foreseeable future. End of the day, it estimates investors can earn 3-6% return next five year via a 60/40 balanced fund.”
http://awealthofcommonsense.com/6040-return-expectations/

In the same way that it does not make sense to assume the same high rate of return for housing in the next five years as in the past five years, it probably also doesn’t make sense to make a straight line extrapolation on the returns of a 60/40 portfolio in the near future.

Read harder. Vanguard is looking at a US-only portfolio. I said “globally diversified.” — Garth

#10 LazyJason on 10.07.15 at 5:42 pm

Garth,

My wife and I are considering buying my mother a condo/townhouse in London Ontario. Other than the real estate board, where can I get sales stats/trends?

Thank you and cheers!

#11 common sense on 10.07.15 at 5:43 pm

“Why do 85%…….?”

Because we ( I own a house and yes well under the 90 rule) are lemmings and have been conditioned by those before us and social pressure to buy, buy, buy…rather than learn from the past, think and have patience.

Only problem being those that taught us personally usually bought when wages could afford a home (actually 1 wage)…way back when…1960’s in my case….

Oh well GT and fellow bloggers, for the most part we can sit back and sadly watch the carnage not IF it comes but WHEN….sigh…I’m guessing late next year.

#12 Freedom First on 10.07.15 at 5:43 pm

Holy smokes! Today and tomorrow’s RE blasphemic Posts should give Garth another volume of hate mail from the RE pushers and financial freedom destroyers.

I have been thinking, again. I believe that our consumer society is addicted to spending money. This involves either buying houses they cannot afford, cars they cannot afford, meals out they cannot afford, vacations they cannot afford, entertainment they cannot afford. The list is infinite. Bottom line, people lack creativity, care about what others think and want to fit in or impress, have egos out of control, lack control of their emotions and live in either fear or greed, or are pu$$y whipped. Of course let’s not forget the ignorance/brainwashing of the dickheads, idiots, and nuts. This disease/insanity is not only Canadian. It is world wide. Smoking Man is right. Our education system is very very bad. The majority of people cannot think/reason. Look at the housing and consumer debt levels in Canada right now. There is your proof. Trust me. I am here to help.

#13 saskatoon on 10.07.15 at 5:46 pm

1. public schools
2. vaccines
3. sodium fluoride
4. ssris
5. h.a.a.r.p.
6. gmos

#14 RayofLight on 10.07.15 at 6:00 pm

#1 ApplePi on 10.07.15 at 5:08 pm
While all of that is true, even if the house appreciates at a lower rate than a portfolio… The house does have the advantage of having higher leverage.
6% of $1 million house is 60,000.
That would require a 200,000 portfolio to earn 30%.

———————————————————
As with any leveraged investment, the reverse is also true. A loss of a few % on $ 1 million is a large amount in actual $s.

#15 Charles Ponzi on 10.07.15 at 6:07 pm

Janet Yellen reminds me of Charlie Brown’s sister who always takes the football away at the last second just before Charlie is about to kick it.

The game is rigged Charlie Brown and the only way you are going to stop being a sucker is to walk away and refuse to play.

Why keep playing with psychopaths?

I have lost all trust in Janet Yellen and the Central Bank.

#16 common sense on 10.07.15 at 6:09 pm

Just re-read the post and am laughing about the line…

“They (Houses) mentally, emotionally, physically and financially weigh you down..”

A good friend used to say the EXACT line when talking about his 2 kids….and I am sure FREEDOM FIRST will say the same thing about the other half sooner than later…

It’s all about choices….

#17 Tony on 10.07.15 at 6:17 pm

To reiterate earnings season must really be a disaster waiting to happen if the FED and bankers have to pump the DOW up almost a thousand points in such a short period of time. Against all odds Alcoa will have a stellar report. Not so for the rest so Thursday will be an up day and the next 2 weeks will be down days. Will DOW 16,000 hold we’ll see. The U.S. dollar should noticeably weaken starting this Friday.

#18 Alberta wing-nuts on 10.07.15 at 6:20 pm

Toronto homes earn you $8,500 a month tax free…..

http://www.huffingtonpost.ca/2015/10/06/toronto-house-prices-wealth_n_8252214.html?utm_hp_ref=canada-business

Probably the greatest abuse of reportage I have seen in a long time. — Garth

#19 ROCKK BEATS PAPER on 10.07.15 at 6:26 pm

Garth,
I agree with you that the markets have been a good buying opportunity (except for Pref ETFs) and I said as much on Sept 28th where I commented that the market “panic” was an excellent buying opportunity.

However, you seem to be tacitly encouraging government intervention at the expense of free markets, where you say,

“…but it’s a safe bet central bankers and national governments won’t be tolerating a reversal after spending all that time and dough.”

The economy is doing well despite the government, and markets are doing well due to QE and ZIRP which is supposedly being removed. ZIRP and QE were only meant to deal with the emergency situation of the financial crisis.

#20 Nemesis on 10.07.15 at 6:27 pm

#NotEveryoneLikesUnicorns,Or… #What’sItReallyLikeToServeInThePMO?…

https://youtu.be/X7futPJdeOg

#21 Alberta wing-nuts on 10.07.15 at 6:30 pm

Toronto,,,,,, Is it time to sell your rental property??????
Or time to buy another??????
Donald Trump & Co have an opinion….

http://business.financialpost.com/personal-finance/mortgages-real-estate/is-it-time-to-sell-your-rental-property-or-time-to-buy-another

#22 conan on 10.07.15 at 6:33 pm

That unicorn looks familiar.

#23 Prairieboy43 on 10.07.15 at 6:34 pm

Welcome Cowboy!! We have a city for You.
Fall is great. Combines harvesting crops. One Hundred twenty dollar hay bales. Clean Air. Ten thousand plus flocks geese heading south. Rocky Mountains. Grizzly Bears. Wayne Gretzky, Mark Messier, Stanley Cups. Connor Mcdavid. The list goes on and on. No stop lights or parking meters. Rocky Mountains.
Oil rigs idling.
Love the West.
PB43
PB43

#24 Mark on 10.07.15 at 6:44 pm

“While all of that is true, even if the house appreciates at a lower rate than a portfolio… The house does have the advantage of having higher leverage.”

Leverage, over the long term, actually hurts homeowners, not helps them. As the cost of debt financing (ie: a mortgage) usually exceeds the total return of a house. In other words, there’s no free lunch.

Over the long term, there however is an equity risk premium. Thus borrowing to invest in the equity of a business, over time, provides a higher return than merely lending to business.

Hence, short term trades excepted, borrowing to invest in real estate is rarely rational. I don’t know why people would do it. And it is insane for the government to be encouraging people to take out credit against such a low returning asset class through its implied subsidy of the CMHC and its subprime mortgage insurance operations.

#25 Jimmy on 10.07.15 at 6:51 pm

Pink fluffy unicorns dancing on rainbows…

#26 Mark in Guelph on 10.07.15 at 7:06 pm

So central planners the world over stimulate like never before and there’s absolutely no downside? Why are there poor people in the world? Can’t they just borrow and spend their way to prosperity? Hey, just print up money and watch everyone get fat and happy.

How can any of this be taken seriously when Garth’s best friend can’t even keep her word and hike rates 25 basis points this year? 0% for SEVEN years and this “boom” can’t sustain rates at a quarter point.

Imagine if rates went to historic norms tomorrow, 5% or so, what happens to this economy then? That’s all you need to know about this phony “recovery”.

It’s a bubble, just like dot com and houses before. And just like then, few saw it and most were caught up in it.

This time isn’t different.

#27 2 Reasons on 10.07.15 at 7:08 pm

TPP is dead if Clinton is elected. Sorry Garth.

NAFTA is to be renogotiated if Trump is elected.

#28 John on 10.07.15 at 7:09 pm

Hi Garth,
What about preferred shares you were saying will go up? They are still going doing, which means market doesn’t expect overnight rates to increase any time soon.

Patience. Meantime enjoy the tasty yield. — Garth

#29 Mike in the Okanagan on 10.07.15 at 7:13 pm

I thought for sure you were going to comment on the Xenophobe real estate article today in the G&M:

http://www.theglobeandmail.com/news/british-columbia/foreign-investors-avoid-taxes-by-
buying-real-estate-in-canada/article26683767/?click=sf_globe&service=mobile

Done. Non-event journalism. — Garth

#30 Smoking Man on 10.07.15 at 7:16 pm

Kiss your TFSA good bye.

Millennials got it figured out.

‘Sluts Against Harper’ Will Send You Nudes for Voting
Written by JORDAN PEARSON
October 7, 2015 // 02:04 PM EST
The upcoming federal election is shaping up to be a real sweepstakes for a certain kind of voter: free weed is on offer, courtesy of a marijuana dispensary in BC, and now there’s the promise of nude pics, thanks to a group of young Canadians calling themselves “Sluts Against Harper.”

On Tuesday, the group of young men and women launched a campaign on Instagram offering to send personalized nude pics to anyone who messages them and proves they’ve voted. Although the “VOTES4NUDES” campaign has only been around for a day, the Instagram account already has hundreds of followers and a lot of bare (yet tastefully censored) skin to show for it.

#31 Mike in the Okanagan on 10.07.15 at 7:17 pm

Hmm..here’s the link to the G&M article on foreign investment in Vancouver’s smoking hot real estate market:

http://tinyurl.com/omw2w6j

#32 ANON on 10.07.15 at 7:28 pm

…and hold firmly.
Oh, look another unicorn! It looks cuter in real life, with lots of colors, and a rainbow too!

#33 Butch on 10.07.15 at 7:30 pm

Didn’t T.O real estate just gain another 10% this year compounded with the 10% from last year and 10% from the year before that?

OK I exaggerated a tad but you can see these greater fools are pretty far ahead at this point!

Would have to correct 50-60% to hit their prices when this blog started!

The average GTA property has seen exactly the return I mentioned in the past five years. The balanced portfolio return over this period is also accurate. Come to your own conclusions. — Garth

#34 Margin property on 10.07.15 at 7:30 pm

Who lends you money with 5% down, low interest rate for investing in a sizeable balanced portfolio that can pay your rent on 7% return?

Especially if it is black and white that an investment portfolio is so much safer, better, liquid than real estate?

Why are all the financial institutions, who’s business is lending, who are possibly the best experts of risk/reward assessment completely absent from this seemingly lucrative, safe business opportunity?

As I said, direct comparisons are specious. They get people like you excited. — Garth

#35 Joseph R. on 10.07.15 at 7:37 pm

Under Tory government, new parents to get 18 months of job protection:

http://www.huffingtonpost.ca/2015/10/07/conservatives-announce-new-parental-benefits-under-employment-insurance_n_8258492.html

Vote buying?

#36 Sluts against Harper on 10.07.15 at 7:38 pm

This is actually pretty slick: put your body where your mouth is. No old fart can compete on this platform.

Maybe Millenials are more sophisticated in politics than anyone thought.

#37 Doomer Gloomer on 10.07.15 at 7:40 pm

Garth,

You might very will be the very last guy standing expecting interest rates to go up. The sooner you give that notion up the sooner your audience can benefit from your analysis on how things will unfold if the next 2~5 FED meetings come and go without a rate hike and more importantly if the FED goes negative or starts QE4. Can you at least entertain this possibility in one of your posts?

#38 IKnow on 10.07.15 at 7:43 pm

House buyers are happy to see 6% annual gain for a 75% leveraged asset.
Plus that unmeasurable pride of being a land baron.

In a condo? Lord of the balcony and the storage locker. — Garth

#39 Vanman on 10.07.15 at 7:44 pm

“The study, by PricewaterhouseCoopers and the Urban Land Institute, is based on surveys of those involved in the real estate and development industries across the continent. It notes Vancouver, by far, is Canada’s most expensive housing market.”

That said, “Overall, respondents rank Vancouver as the top investment, development and housing market in Canada (in 2016).”

http://www.vancouversun.com/business/barbara+yaffe+flight+suburbs+future+real+estate/11419281/story.html#ixzz3nvdxzUmn

#40 Kreditanstalt on 10.07.15 at 7:52 pm

“Where there’s growth, money’s being made.”

Oh, come one…what a ridiculous statement.

There IS NO GROWTH, at least not in real terms. That’s what this whole “crisis” is about. They’re DESPERATE for growth. Fundholders. Retirees reliant on pension funds. All kinds of debtors. And most especially GOVERNMENTS.

The stock casino is rising, temporarily, because BETTING is all that’s left in the absence of any rationale for real investment.

But, GROWTH? Really…

Really. It’s the opposite of contraction. — Garth

#41 Smoking Man on 10.07.15 at 7:56 pm

Let’s face it Boomers, if we tried to send nude picks to save the TFSA.

It would be ugly…

These little commies are going to win.. Good for them.

At leased they got out of the basement and video games.

Bad news for them.

Their biggest liability was to fund boomer nursing homes, now they will also exchange labor credits for fake climate change.

Got to hand it to the Rothschilds, central bank model about to bight the dust..

Plan B Man made global warming.

And yes I’m hammered as usual.

#42 ROCK BEATS PAPER on 10.07.15 at 7:57 pm

“Those who argue the US is in recession, debt will swamp the world or China implode aren’t paying attention. Even the dreary IMF says the global economy will grow over 3% this year, China by more than 6% and the US by 2.5%.”

Garth, I am not sure if you are paying close attention. China is a black box, so that growth rate is the stuff of unicorns. Anyway, most economists are hacks who site the employment data when forcasting, even though it is a notorious lagging indicator.

The Atlanta FED actually has some of the best forcasting (and in real time). It is 1% growth, not 2.5%.

https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1

Interestingly, the St. Loius FED sees no evidence QE boosted the economy.

http://www.cnbc.com/2015/08/18/st-louis-fed-official-no-evidence-qe-boosted-economy.html

#9 Turner

The point is that you are suffering from recency bias about risk assets most of which have been pumped with the same liquidity that has pumped GTA and Van real estate.

#28 John,

Pref share ETFs are not likely to go up because they are chock full of rate resets of the old flavour. Recent new issues by Brookfield and others are rate reset with a FLOOR. So, why would anyone in their right mind pay up for rate resets without the floor?

#43 Mark on 10.07.15 at 7:59 pm

“Why are all the financial institutions, who’s business is lending, who are possibly the best experts of risk/reward assessment completely absent from this seemingly lucrative, safe business opportunity?”

The CMHC is largely behind the credit preference towards mortgages and RE-backed lending, as opposed to other forms of lending. ~$900B out of an approximate $1.2T residential RE lending marketplace in Canada falls under the guise of some form of CMHC credit enhancement. Effectively, for a small fee, CMHC turns fairly risky mortgage credit, into the equivalent of sovereign credit. Sovereign credit, of course, having very low risk weightings for the purposes of computing bank regulatory capital.

I agree with your premise, that lending secured by publicly traded equity in a business — margin accounts, are likely far safer lending prospects than residential real estate. But apparently the OSFI and the Canadian Securities regulators do not see it this way — as the minimum down-payment for Canadian equities is generally 30%, with very strict mark-to-market supervision of the value of the collateral with margin calls as necessary.

As investors, we can be very thankful that the “masses” are not very interested in stocks. Keeps them cheap for the rest of us. If you’ve followed some of my previous derivations, dollar for dollar, you can buy 3X as much value in the contemporary stock market, than you can buy in the housing market. In Toronto/Vancouver, these ratios become even more extreme. Over time, the excess speculation in the housing market will dissipate to excess pessimism. While the reverse will happen to the stock market. So sit back, hold tight, buy quality assets of Canadian firms, and wait. You will be handsomely rewarded for your efforts.

#44 Smoking Man on 10.07.15 at 8:01 pm

Having a drunkin fantasy.

Sluts for Smoking Man..

#45 Freeman on 10.07.15 at 8:02 pm

My feeling about the U.S. stock market is that it will continue to be the best place to park your cash until the U.S. dollar ends being the world’s ‘RESERVE CURRENCY’. Mostly that has to do with the fact that oil is generally priced in U.S. dollars so if you are a country and you need to buy oil then you have to use U.S. dollars to make your purchases.

But the main thing is this: What other country do you see as a better economic alternative to put your investments in compared to the U.S. right now??? I don’t see any other place better. As long as there is no better alternative to park your investments then the U.S. will remain the reserve currency. And as long as that continues to hold true then the U.S. stock market will probably continue to be the best place to put your investment savings.

Of course, that’s just my opinion, I could be totally wrong there.

#46 young & foolish on 10.07.15 at 8:02 pm

“I believe that our consumer society is addicted to spending money.”

Get off your soapbox and show some respect for the customers.

#47 Retired WI Curmudgeon on 10.07.15 at 8:04 pm

Everybody just loves a talking Unicorn. You have several running for office, as do we. No Drugs needed, they are self powered unlike the energizer bunny.

Yes, markets recovering after the usual correction burps, not a news paradigm shift. It really helps if one has a pair of dimes with which to buy on the dips. I took a dip into a few stocks which were terribly oversold, and the recovery as been good!

Looked at the portfolio to see what the yield is for the boomer is thinking of yield rather to supplement the income. Yeah, we are good there, never even gave that a thought! Gosh, almost better than “FREE” money, in fact some of it will be non taxed. Thank you Mr. Gummint, forgot about that one.

As an investor we get into a ‘growth’ mind set, and forget the income aspects of a portfolio. At least this dumb ass can forget. So, a mere tweak on investments, problem solved.

So, it does pay to talk to the smiling Unicorn once in a while.

#48 Margin property on 10.07.15 at 8:05 pm

#33 Margin property on 10.07.15 at 7:30 pm
Who lends you money with 5% down, low interest rate for investing in a sizeable balanced portfolio that can pay your rent on 7% return?

Especially if it is black and white that an investment portfolio is so much safer, better, liquid than real estate?

Why are all the financial institutions, who’s business is lending, who are possibly the best experts of risk/reward assessment completely absent from this seemingly lucrative, safe business opportunity?

As I said, direct comparisons are specious. They get people like you excited. — Garth

======

Feel free to make any indirect comparison – probably can’t be any more specious than “people like you”.

I did. — Garth

#49 common sense on 10.07.15 at 8:11 pm

This is interesting…

http://www.zerohedge.com/news/2015-10-06/how-developed-markets-become-banana-republics-debt-much-easier-way-gather-consensus

#50 gittlebug on 10.07.15 at 8:11 pm

“#167 MF on 10.07.15 at 12:43 pm
#159 Gulf Breeze on 10.07.15 at 11:51 am

Mostly correct, except that ISIS IS Al Quaeda. The same Al Quaeda but an even more extremist splinter of the original group. Still funded by the Saudi’s.

I wonder where these guys fit on the international branding recognition scale with the Apple, Coca-Colas, Sony……..may need to get toe Harvard b-school fellas to do a case study….imagine a Super Bowl sponsored by Budweiser, and Isis Light…..

#51 The American on 10.07.15 at 8:14 pm

At #17: Tony, you’re just so stupid. Really… stop. You make these crystal ball predictions that NEVER come to reality. Pathetic.

#52 TurnerNation on 10.07.15 at 8:18 pm

Wish I had more TFSA room this year.

I’d be buying:

T:USH.UN – U.S. HOUSING RECOVERY FUND CL A UNITS
Annual Dividend Yield 6.83 %

https://www.bmocm.com/investorsolutions/closed-end-funds/details/?id=2

– Let’s hope a majority dipper or rich kid doesn’t take my T-bird away.
Tag this #snivility

#53 Sluts for Smoking Man on 10.07.15 at 8:19 pm

They might not be the kind you imagined.

For what you probably have in your drunkin mind voting against Harper would be a safer bet at the slut machine.
I mean at the erection…. Darn Negraj… Election…

#54 Steve French on 10.07.15 at 8:25 pm

It’s interesting how our very own Sir GT blog host is censoring blog dog discussion of today’s Globe and Mail article on foreign tax avoidance into Canada’s real estate sector, while approving Smoking Man’s drunken ramblings about sluts.

So this is the type of blog zone we have now entered?

It’s been posted numerous times. And, yes, you’re right. I am trying to keep the bigots at bay. So, go away. — Garth

#55 bigtowne on 10.07.15 at 8:26 pm

Autotrader is a good tool for buying a car in the GTA. I tested a Toyota Camry in Vaughan today. At the corner of Martin Grove and Steeles Ave. which is a major bus stop an elderly South Asian grandfather begged for bus fare…had to give him 3 bucks. Bus fare in T.O. is high but who would allow a grandfather in distress down? I am concerned about my karma. If I died and showed up in front of our Great One it would be bad karma.

My Edward Jones broker ridiculed my enthusiasm for PREFERRED SHARES….that is a tell. God is very very good. Be kind friends. Canada is a civilized place. Our culture is capitalism…my kind of town.

#56 common sense on 10.07.15 at 8:28 pm

And this my friends is even better…with a great ending.

http://www.zerohedge.com/news/2015-10-07/first-crack-deutsche-bank-preannounces-massive-loss-may-cut-dividend

#57 Margin property on 10.07.15 at 8:31 pm

Feel free to make any indirect comparison – probably can’t be any more specious than “people like you”.

I did. — Garth

Harper might have been just explained.

#58 Tom on 10.07.15 at 8:32 pm

You left out a few “minor” details:
Leverage: if you bought a $400,000 house and had an annualized 6 percent return, you would have a lot more than leaving the money in an investment portfolo

Tax free return: real estate is the best tax shelter

So obviously one would be much further ahead investing in real estate for the given time frame.

Leverage is available to all investors, with tax-deductible interest (not available with your mortgage, which jacks the effective rate). All investment gains within TFSAs are free of tax. Gains in regular investment accounts give a 50% tax break. — Garth

#59 Ralph Cramdown on 10.07.15 at 8:33 pm

#34 Margin property — “Why are all the financial institutions, who’s business is lending, who are possibly the best experts of risk/reward assessment completely absent from this seemingly lucrative, safe business opportunity?”

They aren’t absent from it at all. Borrow what you can, lever it 3x in an equity margin account or 10x in a futures account, and you are controlling a very large amount of assets with zero down, merely on the strength of your credit. There’s a reason they don’t advertise such strategies to the rubes at their bank branches. Several, actually.

#60 Dr. Talc on 10.07.15 at 8:38 pm

…and when you are alone in that voting booth, remember, before you check that box, that no Prime Minister in Canadian history has created more jobs than Stephen Harper, for crisis actors.

#61 Heady McSack on 10.07.15 at 8:43 pm

NO Ham in Canaduh says our resident guru…..the Globe is also ablaze with the topic if you care to look.

http://business.financialpost.com/personal-finance/mortgages-real-estate/in-vancouver-north-americas-most-expensive-city-rich-chinese-take-the-blame-for-skyrocketing-home-prices

Just deny it and everything will go away. Problems are to be avoided at all costs by not talking about them….unless it’s the head sack for the liberals who don’t see any harm in women being harmed….but homeless….no problem…we’ll deny the crap out of that one.

This anti-Chinese topic is done for today. For obvious reasons. — Garth

#62 Daisy Mae on 10.07.15 at 8:47 pm

#35: “Vote buying?”

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

That is ALL Harper has been doing. I guess it’s all he’s got to offer at this point…

#63 TCContrarian on 10.07.15 at 8:55 pm

Garth, you say:
…”Of course there will be more down sessions, but it’s hard to make the case that we’re not still in the midst of a bull market that has miles to go….”

Although anything is possible I guess, I’d say that statistically speaking (from historical record), very very unlikely.
From 2009 to 2015 ie. ~6+ years, this has been one of the longest bull markets on record. So, please G.T., would you please qualify your statement (make your case) that it has “miles to go”.

Based on what? Perhaps QE4,5,…? Surely you’ve heard of a ‘dead-cat bounce’ as it relates to market action.

Thanks in advance!
tcc

#64 Ralph Cramdown on 10.07.15 at 8:55 pm

What I love about this bull is how hated, reviled and loathed it still is, years into it. Never before have so many crackpots had easy access to video, audio, graphics and text production, with a virtually free worldwide distribution network. Fear sells. So every morning, thousands of these crackpots get out of bed and produce another compelling story about how it’s all coming apart, undermined by vast conspiracies with limitless resources. Millions of their followers duly add comments in a self-reinforcing echo chamber of congratulatory insiderness. Never before have so many outsiders been convinced to their very cores that they knew more than the world’s top economic minds and policymakers, but also more than the everymen that surround them in real life. Truly, a mass delusion and paranoia the likes of which has rarely been seen.

Now if only they could spell.

#65 Arfmooocat on 10.07.15 at 8:55 pm

#58

Using margin to play the futures…. might as well be at a Craps table in Vegas. Pray you don’t lose and get a margin call in 3 days.

#66 Vanman on 10.07.15 at 8:58 pm

Move over Vancouver, HAM’s coming to Saskatchewan…

http://t.thestar.com/#/article/business/real_estate/2015/10/07/foreign-investors-looking-at-montreal-and-saskatoon-real-estate.html

#67 Smoking Man on 10.07.15 at 9:00 pm

#54 Steve French on 10.07.15 at 8:25 pm
It’s interesting how our very own Sir GT blog host is censoring blog dog discussion of today’s Globe and Mail article on foreign tax avoidance into Canada’s real estate sector, while approving Smoking Man’s drunken ramblings about sluts.

So this is the type of blog zone we have now entered?

It’s been posted numerous times. And, yes, you’re right. I am trying to keep the bigots at bay. So, go away. — Garth.

..?.

French did they turf you out of Dudeist Priests.

What is with the aggression?

You’ve disappointed me, I’m about to turf you from the 50 plus fans club.

#68 Cashandgold4me on 10.07.15 at 9:07 pm

Garth

I wouldn’t get too excited about the recent bounceback in the market….these experts are saying it’s a dead cat bounce….

http://finance.yahoo.com/news/why-sell-rally-traders-215628385.html#

#69 Ronaldo on 10.07.15 at 9:08 pm

#45 Freeman

”Mostly that has to do with the fact that oil is generally priced in U.S. dollars so if you are a country and you need to buy oil then you have to use U.S. dollars to make your purchases.”

That may have been the case at one time.

http://www.theguardian.com/business/datablog/2015/jun/24/russia-overtakes-saudi-arabia-largest-supplier-oil-china

#70 Bigots? on 10.07.15 at 9:09 pm

It’s been posted numerous times. And, yes, you’re right. I am trying to keep the bigots at bay. So, go away. — Garth

Really? I for one am interested in this and no I’m not racist. I knew it wasn’t people going in debt to buy an average home worth $2 Million plus in Vancouver. Even CMHC doesn’t touch hoes over $1 Million.

#71 Freedom First on 10.07.15 at 9:14 pm

#46 young and foolish

Read my whole Post. I am here to help. You missed the message grasshopper.

#72 Ernie on 10.07.15 at 9:19 pm

#37 Doomer Gloomer on 10.07.15 at 7:40 pm

Garth,

You might very will be the very last guy standing expecting interest rates to go up. The sooner you give that notion up the sooner your audience can benefit from your analysis on how things will unfold if the next 2~5 FED meetings come and go without a rate hike and more importantly if the FED goes negative or starts QE4. Can you at least entertain this possibility in one of your posts?
……………………………………………………………………………
WTFU , low rates will not go on forever and when it goes up you and the rest of the delusional assholes will be burned . 95% of society by my observation are FU*&ED . When this ship goes down I won’t be shedding any tears for the wannabe rich losers. Go complain to the Jonses’ you have been trying to impress.

#73 John in mtl on 10.07.15 at 9:24 pm

@ Freedom First on 10.07.15 at 5:43 pm and young & foolish on 10.07.15 at 8:02 pm

“I believe that our consumer society is addicted to spending money.”

Its not a bug, its a feature!

We all know it is designed this way for a purpose…

#74 Freedom First on 10.07.15 at 9:27 pm

#52 Turner Nation

You can buy anything right now and transfer it into your TFSA on Jan 1st.

#75 learningfromyou on 10.07.15 at 9:28 pm

Thank Garth for this post.

I read it expecting to see a lot of comments about balanced portfolios and what people are doing on this regard.

Instead of that I keep reading comments about how bad is the decision of buying a property, Harper, etc, the same subjects we read on the daily basis.

I got the point long time ago, horny about investments, less real estate in my life.

Wondering where I could find real knowledge about how to create a balanced portfolio.

Investing in Questrade and taking long term decisions where I do not loose but at the same I do not win, these are the types of things that really bother me.

I went to the Canadian Couch Potato blog, but the indexes proposed on these portfolios sometimes have poor returns, maybe somebody could help me clarify it, one person with lack of financial knowledge like myself cannot say it’s right or wrong.

I’m just thirsty for knowledge, a real one!!!

#76 Millmech on 10.07.15 at 9:29 pm

Who cares about the foreign investors buying up real estate,good for them and guess who’s selling it to them?Yup Canadians,so to stop this obvious travesty lets put a law in that says you can only sell to Canadian residents at a price that only can go up a maximum of 2% a year.This will make real estate affordable for all Canadians,done,no more bitching and whining.

#77 joe on 10.07.15 at 9:34 pm

I have been holding off buying since 2009, now i cant even buy even if i wanted too.. everyone around me super duper leveraged (million dollar houses with 50k income) .. wife is mad and threatening to buy next year with or without me. I have an eye on this 4br house in Mississauga listed for both sale and rent, 1900/month rent or $750k buy. why would i pay $4500 mortgage when i can rent for half?

http://www.jameshodgins.com/14a_read.php?ltl=5586031

http://www.jameshodgins.com/14a_read.php?ltl=5586032

#78 Tom on 10.07.15 at 9:35 pm

“Leverage is available to all investors, with tax-deductible interest (not available with your mortgage, which jacks the effective rate). All investment gains within TFSAs are free of tax. Gains in regular investment accounts give a 50% tax break. — Garth”

Leverage is not advisable for most people and I doubt many investors would leverage their portfolios by 75-80 percent. Come on Garth, admit the homeowners are much further ahead for given time frame

#79 45north on 10.07.15 at 9:36 pm

G & M article: Foreign investors avoid taxes through Canadian real estate

here’s my comments from yesterday – it’s still good today:

For sure, if someone brings $2.3 million into Canada and buys a house, that is going to have an impact on home prices. If a hundred do it then it’s going to have a significant, disproportionate impact. This is capital flight which benefits Canada – $2.3 million was injected into the Canadian economy, the owner has to pay property taxes. Maybe maintenance. My concern is if he feels the heat around the corner he will sell for $1.5 million.

from your link: The subject became an election issue when Conservative Leader Stephen Harper promised to collect data on foreign ownership of Canadian real estate and to consider new taxes and regulations to keep housing affordable.

if he wanted to keep housing affordable he would tighten regulations at CMHC. the low cost of money is the primary cause for the high cost of housing. Notice the modifier “primary”. A secondary cause would be money from China but only for certain neighbourhoods.

A well managed housing market is the main attraction for foreign money. We need to manage it well for our own sake. We don’t need to make it easier or harder for foreign money.

http://www.greaterfool.ca/2015/10/06/spawn/#comment-402135

#80 learningfromyou on 10.07.15 at 9:39 pm

>Leverage is available to all investors, with tax-deductible interest (not available with your mortgage, which jacks the effective rate). All investment gains within TFSAs are free of tax. Gains in regular investment accounts give a 50% tax break. — Garth

I will try to use a kind of Smith maneuver with a secured credit line related to a property(meaning lower interest rate), the bank can increase the limit of the credit line the same moment you paid part of the principal of your mortgage, and you can take the money from the credit line and send it to a registered account, on these terms the interests paid on the credit line are tax deductible from your income.

Your debt (remaining mortgage + credit line debt) stays the same, meaning that you do not pay the principal of your debt and you transform a non tax deductible debt (your own property) into a tax deductible one.

By the way, I’m not an accountant, Garth you can grill me all the way you want, at least this way I will fix my investment algorithm.

I agree. You are no accountant. Interest on money borrowed for registered accounts is not deductible. — Garth

#81 Get a grip | Realties.ca on 10.07.15 at 9:40 pm

[…] Source: http://www.greaterfool.ca/2015/10/07/get-a-grip-2/ […]

#82 Washed Up Lawyer on 10.07.15 at 9:46 pm

If the Conservative Party of Canada had any grey matter, an emissary would be dispatched tomorrow to Garth’s rental accommodation to suss out his interest in becoming a leadership candidate in about 2017.

Alas, the party doesn’t.

Can you imagine a leadership race between Turner and Kennedy?

Much like the outcome of the Flames/Canucks match which starts in 15 minutes.

Kenney would turtle.

#83 Washed Up Lawyer on 10.07.15 at 9:47 pm

Ooops, not Kennedy, Kenney.

#84 ROCK BEATS PAPER on 10.07.15 at 9:53 pm

Even if Garth was incorrect (and he is not) and foreigners are responsible for GTA and Van prices, Canadians should be marketing aggressively to sell as much real estate as quickly as possible to these foreigners at these rarified prices. It would just be a massive wealth transfer to Canada. They would buy high and sell low once prices revert to the mean. Alas, it actually is all about the rates, and if this 35 year bond rally is over then down comes residential prices.

NIRP anyone?

#85 Joeyjojo on 10.07.15 at 9:54 pm

Anyone who bought in the past year is underwater. As the indexes approach the levels in August before the selloff people will try to unload at or near break-even. So that would be about 2040 on the S&P. The sharp nature of the August selloff and the quick snap back indicates that there will likely be another sharp selloff coming in short order.

#86 Nora Lenderby on 10.07.15 at 9:57 pm

#70 Bigots? on 10.07.15 at 9:09 pm
…Even CMHC doesn’t touch hoes over $1 Million.

Don’t you be coming around here trying to borrow money for your expensive sluts, now!

#87 Random Integer on 10.07.15 at 10:21 pm

Or, as someone else said: interest rates need not to go up to make Canadian real estate implode–if you look deeper, did higher interest rates cause the US bubble to burst? No.
https://research.stlouisfed.org/fred2/series/FEDFUNDS
There will come a point when real estate becomes so expensive that first time home buyers will stop entering the market–why did the Dot Com Bubble burst? The same causes are entirely possible.

#88 Nora Lenderby on 10.07.15 at 10:21 pm

#27 2 Reasons on 10.07.15 at 7:08 pm
TPP is dead if Clinton is elected. Sorry Garth.
NAFTA is to be renogotiated if Trump is elected.

Hehe. Not that I am an expert on American politics or anything, but I have learned that anything said by anyone running for office should be taken with a shipload of salt.

Once in office, after “examining the books” almost anything can be justified.

Pres. Clinton will make some very plausible excuses and get the TPP ratified with cosmetic changes.

#89 learningfromyou on 10.07.15 at 10:28 pm

#59
>They aren’t absent from it at all. Borrow what you can, >lever it 3x in an equity margin account or 10x in a >futures account, and you are controlling a very large >amount of assets with zero down, merely on the >strength of your credit. There’s a reason they don’t >advertise such strategies to the rubes at their bank >branches. Several, actually.

I do not have experience with these types of leverage.

What is the regular interest rate expected these types of loans?

I’ve invested my own money in TFSA and RSSP in equities and indexes that pay dividends, in some cases the current balance show certain looses in value but compensated with the return in dividends.
Bottom line, I do not feel comfortable using this leverage when I haven’t shown myself that I know enough to use leverage, pay the interests and make some extra money.

Ferrari is a dangerous car when you are not an skilled driver, doesn’t it?

#90 RayofLight on 10.07.15 at 10:31 pm

There are roughly 12,000 stocks available to investors in the North American exchanges. You only need about 15-20 of them to have a really good portfolio. Over time, equity prices will follow earnings. Therefore, look for equities that are priced low compared to their annual earning, and at the same time have strong projected earnings growth. With a low Price Earnings multiple, and with strong increases in projected earnings, the price will increase over time. Even in a bear market, there are companies that are projected to grow their earnings. This process is not a science, but it’s not a casino either. The ride is choppy, but keep your eye on the earnings profile, the rest is noise, or a perhaps trading opportunity.

Proper diversification is impossible with less than about 40 positions. Double that for international. — Garth

#91 MF on 10.07.15 at 10:36 pm

#64 Ralph Cramdown on 10.07.15 at 8:55 pm

Another awesome post from you.

Everyone and their brother is a modern day Nostradamus.

It probably has something to do with our evolution and the need to be prepared for anything nature throws at us.

300000 BC: Prepared for the next wooly mammoth that comes around wanting to eat you.
2015: Prepared for the next 2008 stock market crash that will erode your life savings.

Last month a someone posted a great comment on here during the “flash crash”. It was something along the lines of “there is lots of fear in the air. That means this bull still has room to run”.

I thought that was a great comment too. I forget who posted it.

As for tonight’s post.

1. Financial illiteracy
2. Numerical and mathematical illiteracy
3. Peer pressure/the need to conform
4. Fear of all markets other than RE
5. Manipulative RE industry propaganda
6. Individualism (I don’t want to pay someone else’s mortgage).

MF

#92 learningfromyou on 10.07.15 at 10:38 pm

#75
Thank Garth for fixing it, my bad, I meant money from the credit line to unregistered accounts.

Then you proved my point. Investment leverage gives tax-deductible interest. — Garth

#93 Doug in London on 10.07.15 at 10:41 pm

As I believe I’ve said many, many, many, many times before, stocks (as well as REITs) were ON SALE during the last 6 weeks. That’s when you should buy, is that right?

As I’ve also said many, many, many, many times before, invest the way a governor on an engine works. When the speed drops, the centrifugal flyweights drop which pulls on a linkage to open the throttle plate and gives the engine more fuel/air mixture. When the speed increases, the flyweights go up which closes the throttle so the engine gets less fuel/air mixture. Similarly, when stocks go on sale buy more and when they go up don’t buy or even sell if you ran up margin debt because those deals (when stocks were cheap) were so irresistible. What’s so hard about that idea?

#94 learningfromyou on 10.07.15 at 10:47 pm

>Proper diversification is impossible with less than >about >40 positions. Double that for international. — >Garth

It’s a bold statement Garth!!!

I think about those with thin skin wanting to have an investment strategy that makes sense.

Myself included.

Not bold. Fact. Use diversified ETFs. — Garth

#95 kommykim on 10.07.15 at 10:47 pm

RE: #75 learningfromyou on 10.07.15 at 9:28 pm
I went to the Canadian Couch Potato blog, but the indexes proposed on these portfolios sometimes have poor returns,

Which index funds had poor returns, how much, and over what period?

#96 Uncle Samlora on 10.07.15 at 11:03 pm

Garth

Not sure why all the fuss about the real estate and taxes rules for foreigners….as long as these people are following the law, then there is no room to complain.

The alternative is an American style system where every citizen is required to file regardless of residency……or make real estate purchases by foreigners illegal!

#97 My Life is a Pile of Shit on 10.07.15 at 11:08 pm

“Overarching, though, is the fact condo [apartment] buyers get no dirt. No land. No essence of real estate – only the right to live in a building that’s owned by many, that will age and deteriorate, require hideously expensive repairs and face constant competition from newer, sexier structures.”

If one has to choose between using all his capital (and perhaps a mortgage) to buy a detached house, or splitting his capital between a condo apartment (no mortgage needed) and a portfolio, then an apartment is the lesser of two evils.

The “essence of real estate” is not the dirt, it’s the location and the interior, and one gets both with apartments. What “essence of real estate” comes with a detached house if it looks like a crack shack?

“You can’t live in a portfolio, of course, but it can certainly pay your rent.”

A property doesn’t need to go up in value to benefit the owner with no mortgage. He benefits from all the rent it saves him. What are you going to pay rent with, preferred share dividends? CPD, the preferred share ETF, has a 3-year return of -17% (including dividends; went nowhere for 2 years, then dropped 21% in the last year). If you think you can afford $1200 rents with that, you are living in a fantasy. Even the mighty performance of the S&P 500 in the last few years belie the lost decade before. I’m not saying a portfolio doesn’t make money, but it does not profit consistently (and perhaps not even supposed to). If you tell a landlord you’re relying on your portfolio to pay the rent, how eager is he to rent to you?

“You can liquidate your portfolio in five minutes or less, while houses take days, weeks, months or sometimes years to sell.”

You may be able to liquidate your portfolio in one day, but not necessarily at the price you want. If you are not willing to take a loss, it may “take days, weeks, months or sometimes years to sell.”

Sounds like you could use some portfolio help. — Garth

#98 learningfromyou on 10.07.15 at 11:11 pm

#95
Thank you for showing interest in my questions. Appreciated.

For example in one of the model portfolios is proposed to include VAB.

When I search for its performance I get
https://www.google.com/finance?q=TSE%3AVAB&ei=VNwVVqDgFIHZjAGBk66ACg

My concerns are the following

1-It does not grow in value over the time
2-Low return on dividends

I have to say that I have big problems understanding bonds. The model portfolios proposed tells you the components for each portfolio (%) and the gains of the portfolio as a whole, but I do not see in how much each portfolio’s component affected the final result.

Also on every final result (%) I always think about inflation, meaning that I consider the value of the money lower every year.

Once again, I just want to learn.

Why own bonds? Look at the beta. This is how you sleep at night when all the doomers here are wailing. Balance works to blunt losses and mitigate risk. — Garth

#99 learningfromyou on 10.07.15 at 11:35 pm

#98
>Why own bonds? Look at the beta. This is how you >sleep at night when all the doomers here are wailing. >Balance works to blunt losses and mitigate risk. — >Garth

Garth, I get your point, I see bonds as the part of the investment that you are willing to keep out of risk.

As example, let’s imaging one investor attached to the following model portfolio for 10 years.

http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf

rounding the number you make an average of 6% per year in those 10 years.
How much you want to consider the inflation per year ?. 2%?

In my way of looking at the things it leaves around real 4% gain per year to the investor (please forgive me if I’m wrong)

Now my question is the following.

How much money invested does he/she need in order to pay my rent from a portfolio?

#100 DON on 10.07.15 at 11:38 pm

Are rate increases the only solution to an unsustainable bubble?

Are not, over indebtedness coupled with (possible) job loss/divorce/death and other unforeseen circumstances, also factors that can spoke the herd and send sentiment in the opposite direction?

No rate increases thus far – and most housing markets have seen declines. Things that make you go hmmm! To bad googles not working tonight – would love to know how the US bubble burst – I wonder if rate increases were a factor.

Another thought,

Ah…the wizard of oz (Conservative election rainmaker) using racism in a polite country like Canada – imported straight from Australia. Ah yes the school yard strategy is being deployed. The hell with ethics, principles, leadership, appealing to all Canadians. Things must be on the wire to employ such tactics.

Trudeau seems to be coming up the middle. Trudeau appeals to a lot of women and harper is pissing them off. Tell a women she can’t where something especially armed with the knowledge the courts recently upheld the Charter of Rights and Freedoms. Maybe not such a good idea.

On another note, legalize marijuana and tax the $h”t out of it and export to pay for health care, day care, senior care and fund innovation. Or do more of the same and expect different results.

#101 Nagraj on 10.07.15 at 11:42 pm

#79 JOEYJOJO
“Anyone who bought in the past year is underwater.”
Check.

“… as the indices approach … 2040 on the SPX … ”
Well, they might, then again they might not get there.

We’ve just seen the third failed attempt of the SPX to break out of the post August crashette trading range.

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

I have considerable respect for our gracious host, who is also a political creature. Einstein and Jung used to dine together for a while in Switzerland – I’m certain they never discussed politics. Because Einstein took politics very seriously, whereas Jung’s attitude toward politics and politicians was one of complete contempt.

Drawing a distinction between outlaw and criminal, writer E.M.Forster lamented that after WWI outlaw life became practically impossible in England what with gov’t numbering and counting everybody and everything.

Our gracious host seems incapable of appreciating outlaw mentality (voting is without importance to the outlaw) and yet found himself sort of outlawed by his party of choice via its ugly little leader.

Many blogdogs rake GT over the coals for exhibiting too profound a faith in the good intentions and abilities of folks in positions of power (like Yellen, for example); those of us who think we’re over-governed (and misgoverned) should also admit to a lack of faith in the existing social order and, consequently, a certain pessimism.

#102 omg the original on 10.07.15 at 11:45 pm

Margin property on 10.07.15 at 7:30 pm
Who lends you money with 5% down, low interest rate for investing in a sizeable balanced portfolio that can pay your rent on 7% return?

Especially if it is black and white that an investment portfolio is so much safer, better, liquid than real estate?

Why are all the financial institutions, who’s business is lending, who are possibly the best experts of risk/reward assessment completely absent from this seemingly lucrative, safe business opportunity?
————————

Actually any broker will lend you up to 50% of the value of your stocks – they are not allowed to lend you anymore than that.

The banks I am sure would give you a personal loan of 100% of your portfolio if only the government would insure it like they do house mortgages.

#103 DON on 10.07.15 at 11:45 pm

#87 Random Integer on 10.07.15 at 10:21 pm

Or, as someone else said: interest rates need not to go up to make Canadian real estate implode–if you look deeper, did higher interest rates cause the US bubble to burst? No.
https://research.stlouisfed.org/fred2/series/FEDFUNDS
There will come a point when real estate becomes so expensive that first time home buyers will stop entering the market–why did the Dot Com Bubble burst? The same causes are entirely possible.
*********************************
If had read your post earlier – I wouldn’t have said anything about this subject in a previous post. Well… we think in a similar fashion.

#104 Ron Davidson on 10.07.15 at 11:58 pm

Garth, Garth, Garth……here we go again. The employment figures come out for the US and they are a complete disaster. The effects of QE/counterfeiting are beginning to wear off. The analogy is someone who a couple of years ago counterfeited lets say $50,000,000 in small town Canada. The money has been spent within the community and jobs were being created, house prices rebounded from a severe collapse and for all appearances the town has made a great recovery. No more counterfeit money has been created for a couple of years and that $50,000,000 injection has worked it’s way through the system. No factories were built or investment in infrastructure. It was just spent on stuff. All of a sudden the town is going downhill. This is where we are in the US. All they have left is QE4, 5, 6, 7, 8, 9……..until the world takes the printing press away. You cannot keep printing money to cover up the fact the US is broke. The stock markets can go up for silly reasons for a while but like all great empires the US is in a self inflicted downward spiral. Yes, 9 times out of 10 the stock market will recover but what happens on the 10th time…..we are watching major history in the making. It is going to be extremely ugly. Before I end I am not a doomer or gold licker but someone who does a lot of reading and research about depressions and the collapse of great empires. I am a realist and realize those that don’t learn from history are doomed to repeat it. It is not different this time.

#105 omg the original on 10.08.15 at 12:00 am

Joeyjojo on 10.07.15 at 9:54 pm
Anyone who bought in the past year is underwater.
———————–

Actually if you bought US equities you are way above water due to the declining Canadian dollar. But that’s just a cute aside – you should not rely upon changes in exchange rates for a return on your long-term investments.

But anyways, if you are looking at buying equities for what they will do over 1 year, then you are a trader, not an investor, and unless you are really, really smart and good at trading you will always lose money over the long run.

And being lucky is not being smart, because the market will eventually crush the luck out of you.

#106 John Prine on 10.08.15 at 12:05 am

Really? I for one am interested in this and no I’m not racist. I knew it wasn’t people going in debt to buy an average home worth $2 Million plus in Vancouver. Even CMHC doesn’t touch houses over $1 Million.

You are not a racist or a bigot, anybody paying attention living in Vancouver is aware of the problem, not sure what is up with Garth labelling everybody racist who mentions this subject.

That is not what I have done. If you want to dump on the Chinese there are lots of sites out there for you. This is not one of them. — Garth

#107 Ronaldo on 10.08.15 at 12:13 am

#75 Learning From You

If you are a DIYer and want help in learning about investing I highly recommend the Investors Aid Cooperative of Canada. See following article. Their website is loaded with information. Everything you need to know about which ETF’s to buy and various portofolio designs depending on your investment goals.

http://www.moneysense.ca/columns/a-helping-hand-for-canadian-investors/

#108 Financial Samurai on 10.08.15 at 12:16 am

Why not own property and stocks? It’s a good idea to stay neutral property by at least owning your primary residence.

Inflation is a killer!

Sam

#109 KT on 10.08.15 at 12:23 am

Real estate is a tangible asset, stocks and bonds are magic numbers in the matrix ..

#110 Chaddywack on 10.08.15 at 12:37 am

I love renting. When I have jerk neighbours I just move and give notice with really no extra cost.

#111 Jerry on 10.08.15 at 1:16 am

“Overarching, though, is the fact condo buyers get no dirt. No land. No essence of real estate – only the right to live in a building that’s owned by many, that will age and deteriorate, require hideously expensive repairs and face constant competition from newer, sexier structures.”

Couldn’t agree more, but is your objection this emphatic when considering a townhouse or duplex? These have some advantages in my eyes yet (at least notionally) retain beneath them a small strip of mud that is one’s own.

#112 Great Canadian Bubble Co. on 10.08.15 at 1:16 am

I do get a kick out of those trader facepalm pics. I keep thinking that guy should find a different line of work.

#113 kommykim on 10.08.15 at 1:22 am

RE:For example in one of the model portfolios is proposed to include VAB.

When I search for its performance I get
https://www.google.com/finance?q=TSE%3AVAB&ei=VNwVVqDgFIHZjAGBk66ACg

My concerns are the following

1-It does not grow in value over the time
2-Low return on dividends

The bonds will increase in value slightly when the equity markets dip. This is when you sell some of the bonds to buy more equity ETFs so that your 60/40 ratio is back on track.
When your equity ETFs are doing really well (Say your portfolio is now UNbalanced at 65/35) you sell some of the equity ETFs so that your portfolio is back to the 60/40 ratio again.

While bonds do pay you very little to hold them, their real purpose is to reduce volatility and provide an opportunity to rebalance without adding new cash.

RE:Also on every final result (%) I always think about inflation, meaning that I consider the value of the money lower every year.

This is true. Your real return after inflation is always lower unless you are Mark. The goal is to beat inflation by the widest margin possible. So if inflation is 2% then your 7% return portfolio is giving you a 5% real return.

#114 Great Canadian Bubble Co. on 10.08.15 at 1:54 am

Sometimes I really wish the Vancouver money-parking situation was being taken advantage of by a variety of nationalities from a variety of countries. Then we could have an honest discussion about it without people accusing others of being against a certain ethnicity.

#115 Steve French on 10.08.15 at 2:28 am

Yo Smokey:

This aggression will not stand dude!

Nah, not being aggressive.

Just miffed that Sir GT has been censoring me but not you!

I call for equal rights.

(I posted a link to an Australian news media story on overseas Chinese property buyers but GT thought that the very topic was racist).

#116 Mark on 10.08.15 at 3:37 am

“A property doesn’t need to go up in value to benefit the owner with no mortgage. He benefits from all the rent it saves him. What are you going to pay rent with, preferred share dividends? “

The net imputed rent of Canadian properties relative to their market price is minimal. Net rent yields are less than 3%, given an average P/E of around 35. Worse in the GTA/GVR.

Compare and contrast against the average Canadian index portfolio which has a net yield of approximately 6.7% and much greater growth prospects.

Which of the two creates more value to the owner in the long run? The real estate at <3%, or the stock at 6.7%, and growing faster than the rate of inflation?

RE, in a nutshell, is where capital goes to die over the long term. Over the long term, most of the returns in the economy end up in the hands of business owners. America's so-called "1%" figured that out. Joining the top 5% is actually pretty easy these days for most working Canadians — simply avoid the RE bubble and buy a plethora of investments on the cheap!

#117 Ronaldo on 10.08.15 at 5:29 am

#75 Learning from you

”I’m just thirsty for knowledge, a real one!!!”

Having reread your posts I have to ask, are you for real?

#118 Chris on 10.08.15 at 7:43 am

Toronto does not have the most expensive houses. It has the most expensive crappy houses.

#119 TurnerNation on 10.08.15 at 8:08 am

For a laugh, go to MLS and search Toronto: Leslieville/riverdale areas for houses $950,000+
So many SFH owners now are “millionaires”.

Area is still “in transition” meaning your car will be rifled through by druggies and racoons.

Not so long ago, 1.2 to 1.4m would buy you an entry level mansion in Forest Hill area.

#120 waiting on the westcoast on 10.08.15 at 8:33 am

I think that the latest numbers were a bit of a dip. But I am still seeing healthy demand. Next week, I will have our systemwide numbers and report back on a couple of regions but my primary operation was up 15% in September and over 30% in August. Bloomberg has an article showing increased demand for talent… mainly by small businesses like mine due to the continued growth.

http://www.bloomberg.com/news/articles/2015-10-08/college-students-are-graduating-into-an-incredible-job-market

#121 Ralph Cramdown on 10.08.15 at 8:38 am

#109 KT — “Real estate is a tangible asset, stocks and bonds are magic numbers in the matrix”

You do know that the fee simple “title” to your property is just an entry in the computer at the Land Office, right?

#122 Ralph Cramdown on 10.08.15 at 8:51 am

#97 My Life is a Pile of Shit — “The “essence of real estate” is not the dirt, it’s the location and the interior, and one gets both with apartments. What “essence of real estate” comes with a detached house if it looks like a crack shack?”

The land appreciates, the structure depreciates. Over the decades, you keep maintaining and renovating the structure until, one day, it is worth more dead than alive. Then you either keep living in it yourself as gentrification or densification pass you by, redevelop it, or sell it to someone for land value so they can.

This is also true in a high rise condo, except that it is a complex, multimillion dollar structure whose maintenance is controlled by amateurs, some of whom think their divine purpose in life is to keep the condo fees as low as possible. End-of-life in these buildings will be like beetles fighting in a jar.

#123 Class J3a Super Hudson on 10.08.15 at 8:58 am

Garth – I am exceedingly curious about your upcoming article on the six reasons Millennials are so horny for real estate, especially condos. An astonishing number of condos going up in my area in the Big Lemon and an equally astonishing number of co-workers convinced real estate is a no-lose investment leave me just shaking my head.

I look forward to your enlightenment.

#124 Renter's Revenge! on 10.08.15 at 9:08 am

#91 MF on 10.07.15 at 10:36 pm
#64 Ralph Cramdown on 10.07.15 at 8:55 pm
Another awesome post from you.

Agreed. I especially liked the phrase “self-reinforcing echo chamber of congratulatory insiderness”. That’s some nice wordsmithing there!

#125 Renter's Revenge! on 10.08.15 at 9:21 am

#116 Mark on 10.08.15 at 3:37 am
RE, in a nutshell, is where capital goes to die over the long term.

Exactly. I’m starting to get the feeling that RE just oscillates between slightly overvalued and extremely overvalued over time. Most people are willing to pay way too much for “property” in exchange for the perceived safety and tangibility it brings compared to other types of investment. Like, what, Fortis’ assets aren’t tangible?

“Over the long term, most of the returns in the economy end up in the hands of business owners. America’s so-called “1%” figured that out.”

Well, all of them except Donald Trump.

As an aside, I sometimes wonder if the people on Canadian Business magazine’s Rich 100 list think of David Thompson as “the 1%”.

#126 CHERRYBLOSSOM on 10.08.15 at 9:43 am

So most countries have now imported THE HOLY WAR, centuries old. But now because if immigration and migration most countries have it. I wish politicians of the World would have had the far sight to put an end to Asad and Isis instead of spreading the pain.

And by the way Garth, foreigners started coming in droves to Vancouver just after EXPO 1967. I was there and still am and have watched the influx. It is not just Chinese, it is rich Koreans and Pakistani. It is people who are not brick layers and people who do not share Canadian philosophy, religions, manners or culture. They do not integrate. This is not racist just facts

#127 fancy_pants on 10.08.15 at 9:44 am

ah, but you forget about leverage Garth

Johnny buys a $500k house 5 years ago in Vancouver with 5% down ($25k). He sells it today for 30% more and walks away with over 100k after fees, etc. So a 400% return in 5 years

What stock market portfolio can you buy with 5% down?

Another example. I bought a condo in 2007 and sold a year later and pocketed $12k. not bad considering I put ZERO down. It was financed 3/4 mortgage and the other 1/4 was 2nd mortgage on my primary residence. So I made $12k out of thin air.

Could I have lost 12k. absolutely. I would never pull the same stunts today. but historically the last 10-15 years, one cannot knock RE as a bad investment from any angle

Financial investors may also leverage. And write off the interest. Such ignorance lately… — Garth

#128 learningfromyou on 10.08.15 at 9:48 am

#117

Thank Ronaldo for your feedback in your post, I will check your reference.

About your question, are you for real?

I was asked several times the same question, in some of cases I got a bitter taste with my answers.

1-a mechanic “friend” asked me if I was ready to repair the engine of my car, ending up putting in wrong order the pressure and oil rings around the pistons, result, complete engine damage, I had to dump my car and got another, I also dumped that friend.

2-Rich dad school came to town to teach how a 5 grade kid can successfully invest in real estate with no risk, besides of a few hours of entertaining show it did not have further consequences, a bunch of crooked people behind a name, they also ask you if you are real serious about your future, etc.

3-Another RE motivator with more sense in his words made me invest in US Real Estate, I currently in the selloff process, I’m lucky to be able to recover the cost after everything, most investors did not, another one who required from you to be real in your wishes. My advice for people is to think twice before jumping on these ideas, a group of investor got screwed with a multi million dollar project in North Dakota losing their money, I was simply lucky I did have the funds at that time because I was sold about the idea, just pure luck.

That’s why this question brings me some feeling in my skin, it’s not your fault, it’s my past.

I promised myself to be able to WALK in relation to investments, no more runs, no more kamikaze feelings of being able to jump from cliffs in order to achieve financial security. If I screw up while doing my own investments I won’t complain or blame anybody, it will be my own fault.
I have a unique goal, being able to cover with passive income my monthly expenses + 2% to cover the inflation. But the Open office spread sheet shows me that is very difficult if not impossible for most people.
I mean OpenOffice because you do not need Microsoft word to analyze your numbers, making your life cheaper.

#129 fancy_pants on 10.08.15 at 9:50 am

#110 Chaddywack on 10.08.15 at 12:37 am

I love renting. When I have jerk neighbours I just move and give notice with really no extra cost.

on the flip side, what are the odds the probability of having jerk neighbours increases in ‘rental’ areas? speculation of course but ownership and pride (aka. property care) tend to marry together more often than rentalship and pride

Ah yes, the owners-are-superior-to-renters argument. Right up there with ageism and gender discrimination. — Garth

#130 Broke Dick on 10.08.15 at 9:58 am

Over that half-decade, by the way, a balanced (60/40), globally-diversified portfolio grew by just over 8% a year. In comparison, the price of real estate in the GTA increased by an average of 6% (from an average of $465,369 in the autumn of 20111 to $627,395 today). Hmm. Tell mom that.
====================================
I told Mom that and she wisely added that it also has provided us a place to live rent free!

Property tax, insurance, strata fees, maintenance and financing charges are not “free.” Use your noggin. — Garth

#131 Daisy Mae on 10.08.15 at 10:14 am

#86: “Once in office, after “examining the books” almost anything can be justified.”

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

Ain’t THAT the truth? LOL

#132 45north on 10.08.15 at 10:23 am

Bombardier trouble:

http://aviationweek.com/commercial-aviation/bombardier-c-series-concerns-grow-talks-airbus-collapse

Bombardier is a very important Canadian company. Irreplaceable.

#133 Broke Dick on 10.08.15 at 10:37 am

Over that half-decade, by the way, a balanced (60/40), globally-diversified portfolio grew by just over 8% a year. In comparison, the price of real estate in the GTA increased by an average of 6% (from an average of $465,369 in the autumn of 20111 to $627,395 today). Hmm. Tell mom that.
====================================
I told Mom that and she wisely added that it also has provided us a place to live rent free!
Property tax, insurance, strata fees, maintenance and financing charges are not “free.” Use your noggin. — Garth
– ============================
House is paid for so no mortgage, and other fees you have listed are much less than rent. Much less!

Then you ignore the lost opportunity cost of the entire real estate equity. Use your noggin. It’s not “free.” — Garth

#134 Nora Lenderby on 10.08.15 at 10:41 am

#126 CHERRYBLOSSOM on 10.08.15 at 9:43 am
…people who do not share Canadian philosophy, religions, manners or culture. They do not integrate. This is not racist just facts.

It’s not the Canadians I mind, it’s just the d*mned white immigrants.

#135 Nora Lenderby on 10.08.15 at 10:50 am

#122 Ralph Cramdown on 10.08.15 at 8:51 am
…The land appreciates, the structure depreciates.

Yes, and no. Land can also depreciate. It can erode (waterfront properties are notorious for needing regular maintenance in the form of concrete and fill to stabilize) and locations can become blighted by planning decisions (roads, change of use nearby), by ecological change, by demographics, political change or just by fashion.

In this depressed area there are families holding onto large amounts of property, houses and industrial land, with the idea that the economy will turn around and come back someday. It’s a multi-generational delusion, imo.

And then there are the interesting family squabbles – some big houses in the “best” area of town have been uninhabited for decades or are lived in by the 85-year old matriarch, last of her generation, who thinks that heating is a luxury.

People do not always think rationally about anything, economics being the least of it.

#136 Lea on 10.08.15 at 11:21 am

#126 CHERRYBLOSSOM

You can add Americans to your list. It is very hard to integrate. Here in North Vancouver the locals are very, very exclusive.

Integration is a two way street. When you have the teachers at school taking pains to explain that they are born and raised locally, what hope is there for new comers integrating?

What is the “Canadian philosophy”? Not to mention religions, manners or culture? We moved from California, have the same Pacific drawl and look of the locals, slightly different manners, no particular religion, and our cultures are first cousins. With all the similarities, we are still struggling to “integrate” because the locals are not interested. If we looked and sounded different the barrier to acceptance would be even higher.

You are right, “not racist, just a fact.” I admire that Garth does not allow Chinese bashing because people like you would jump from HAM to “Hot American Money” in a heartbeat.

#137 Cra on 10.08.15 at 11:23 am

I respect you Garth but CRA should change rules and investigate how houses are bought in cash, foreign investors, pot growers, lottery winners etc. What incentive do i have to pay taxes when i can clearly see At my kids daycare that people with luxury cars are applying for subsidy?

#138 Mark on 10.08.15 at 11:26 am

“Johnny buys a $500k house 5 years ago in Vancouver with 5% down ($25k). He sells it today for 30% more and walks away with over 100k after fees, etc. So a 400% return in 5 years”

How about this updated example:

“Johnny buys a $500k house 2 years ago in GTA/GVR with 5% down. He sells it today at a 10% loss (including fees) and walks away owing $25k which his bank reluctantly offers to finance at 10%/annum as unsecured debt.”

Far, far more realistic as the game of leveraging to gains stopped being viable years ago with the onslaught of new housing in the marketplace.

If “Johnny” waits a few more years, that mere 10% loss (including closing costs) is likely to be considerably greater. Meanwhile, years of mortgage payments will have been made, at amounts usually equal to greater than or equal to rent, that will simply disappear to the banks. So much for that old RE cliché, “renting is like throwing money away”.

#139 James on 10.08.15 at 11:29 am

Garth,

I don’t think you need to be a racist or a bigot to believe the Chinese (or any foreign) accumulation of Canadian real-estate is an issue that we need to deal with. The bottom line is that it all comes down to population. There are 1.4 billion Chinese citizens and 35 million Canadians. As their economic wealth and power continues to increase in the coming decades, they will have more millionaires than Canada has citizens in total. They will also have turned their country into one of the most polluted, overpopulated cesspools to live in, under an oppressive communist regime. It’s logical to believe that they will continue to purchase Canadian real estate and relegate the majority of the Canadian population to second class citizens. All the people posting on this blog want to know, is why that is a good thing? This is not even an issue that affects me personally. I’m in my early 30s, already a multi-millionaire and own my house in a prime neighborhood paid for in cash. I’m not here to moan and complain that I’m priced out of the market. I simply believe that the greater good of Canadians will not be served by allowing foreign investors of any nationality to buy up all the prime Canadian real-estate. At a minimum, massive taxes should be levied on these types of purchases in order to benefit Canadian citizens.

My second issue is your and many others unshakable belief that rates need to rise. For the foreseeable future, this is simply not the case. In economics, it’s almost never ‘different this time’ and it’s typically a bad bet to believe that history will not repeat itself and mean-revert. Therefore, I fully understand why you and many other believe that rates will mean revert to historical norms. What’s different this time than any other point in history is technology. It is reshaping every aspect of our society and eliminating the need for labour in almost every industry. I’ve previously discussed robotics in manufacturing, self driving cars/trucks in shipping. I came across an interesting story involving farming yesterday. Have a read:

http://www.businessinsider.com/spread-the-first-robotic-farm-2015-10

For those doomers who believe that we will never feed our population, they have not considered that we can use vertical space and robotics to farm more efficiently than can be done outdoors. We will have no problem feeding 10 or even 20 billion humans in the future at food costs even lower than we pay now.

Therein lies my entire argument. The future does not hold higher prices for anything. As labor is eliminated from the supply chain, prices will continue to be driven lower. There will be NO inflation for several decades for all of humanity, so why would rates need to rise?

For those of you reading this and thinking about their currently rising grocery (and other) bills – please don’t confuse currency devaluation driven inflation for true cost inflation.

I know Garth and many of you can look at the big picture globally and see that in the future, energy costs, food costs, transportation costs, etc. will all be LOWER than they are now. The only cost which can rise is labor, and we can and will eliminate labor from the supply chain to mitigate these increases. For these reasons, I don’t believe rates need to rise and this time may truly be different.

If you think foreign buyers (a relative handful) will relegate the rest of us to ‘second-class citizen’ status you’re not as bright as the rest of your note purports. Try to separate fear from logic. — Garth

#140 Doug T. on 10.08.15 at 11:39 am

my mortgage will be paid off in 6 months – looking back I would never have bought in the first place – combining all the costs of home ownership and getting a little tipsy and thinking we actually needed a full kitchen reno – NOT – I tell my son unless the market totally crashes do not buy – rent and invest. Do as I say not as I do :)

#141 Grantmi on 10.08.15 at 11:41 am

Here we go all over again!!!!!

Analyst Mark Hanson Sees Housing Bubble ‘Larger Than 2006’

As the late Yogi Berra might have said, it’s deja-vu all over again for the beleaguered housing market.

While home prices nationally haven’t returned to their peak of the last housing boom, CNBC warns that some experts claim the housing market is in a bubble far worse than the devastating 2006 collapse.

Read Latest Breaking News from Newsmax.com

http://nws.mx/1Oo2zFE

#142 VoteABC on 10.08.15 at 11:49 am

In terms of the market bouncing back…

I find using a Trailing 12 Month return the best way to look at the bumps in the market. It covers all seasons, and helps me not focus on the blips.

July 31st, I had a Trailing 12 month return of 13.6%

Lost 3.6% and lost 3.9% in August and September respectively. Adjusted nothing in my holdings.

Aug 31 – trailing 12 months return: 8.1%
Sept 31 – trailing 12 month return: 4.6%

Today, Oct 10 – trailing 12 month return back up to 8.2%

No panic, no fear! Just stay the course and keep plunking money into the pot every paycheck.

#143 HP Sauce on 10.08.15 at 11:56 am

Our house since ’09 in Toronto has appreciated 8.3 % per year since …. it’s doubled in price. It’s not bad. At least we have that going for us.

Unless you realize the gains (and deduct closing costs and commission), it is illusory. — Garth

#144 HP Sauce on 10.08.15 at 12:09 pm

and yes that does include property tax, maintenance, interest rate etc. etc.

#145 TurnerNation on 10.08.15 at 12:10 pm

Yellow pages laying off 300. Bnn.ca

Oil going to $55 soon. Me.

#146 SWL1976 on 10.08.15 at 12:12 pm

#64 Ralph Cramdown

Never before have so many crackpots had easy access to video, audio, graphics and text production, with a virtually free worldwide distribution network.

So true. Yet never before have we had such mass numbers of well educated, ‘informed’ citizens plead ignorance when they are presented with facts and simple laws of physics.

Fear sells.

Yes it does. Yet many ‘crackpots’ you speak of sell nothing, and are simply offering their opinion of their observations of the world around them. Many are presented with facts people refuse to believe.

Unlike the corporatocracy we live in, who is in the business of selling lies.

Most people seem to prefer being lied to by people wearing expensive suits I guess.

So every morning, thousands of these crackpots get out of bed and produce another compelling story about how it’s all coming apart, undermined by vast conspiracies with limitless resources.

It is all coming apart. If you can’t see it you are simply not looking. The market falters on threat of a rate hike, yet when the ‘data’ doesn’t support a rate hike the market rallies.

Is this the new normal?

Millions of their followers duly add comments in a self-reinforcing echo chamber of congratulatory insiderness.

Kind of like here

Never before have so many outsiders been convinced to their very cores that they knew more than the world’s top economic minds and policymakers, but also more than the everymen that surround them in real life.

The policy makers are the real crooks.

Many people today are so rooted in their beliefs that they absolutely refuse to acknowledge the reality of the situation.

This all at the expense of current and future generations.

I may never figure out how recency bias can apply to interest rates, and housing, yet seem to elude this recent bull market and this debt based economy.

Truly, a mass delusion and paranoia the likes of which has rarely been seen.

It truly is a mass delusion out there.

Too bad more people are not encouraged to, or take the time to comprehend the reality of the situation.

#147 TurnerNation on 10.08.15 at 12:28 pm

126 cherry bloatsam.

Nonsense. I work with a dozen 25-35 yrs olds from all over the world. Some born here others not.
They grew up Canadian like me. No difference.
The kids are alright.

#148 TurnerNation on 10.08.15 at 12:31 pm

#128 the oil control ring is always at the bottom. You could take block to machine shop and get it bored oversized. Add new larger pistons.
Fits with mantra: there’s no replacement for displacement!

#149 IKnow on 10.08.15 at 12:36 pm

#38 IKnow on 10.07.15 at 7:43 pm
House buyers are happy to see 6% annual gain for a 75% leveraged asset.
Plus that unmeasurable pride of being a land baron.

In a condo? Lord of the balcony and the storage locker. — Garth

————————————————-

I said “House buyers” Garth.
Land is the only appreciable asset.
Unless the condo building was designed by Mike Angelo.

#150 kommykim on 10.08.15 at 12:46 pm

RE:#128 learningfromyou on 10.08.15 at 9:48 am
I have a unique goal, being able to cover with passive income my monthly expenses + 2% to cover the inflation.

Have you read Mr Money Mustache?
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

It’s a bit simplistic, but will give you the general idea.

#151 Broke Dick on 10.08.15 at 12:48 pm

Over that half-decade, by the way, a balanced (60/40), globally-diversified portfolio grew by just over 8% a year. In comparison, the price of real estate in the GTA increased by an average of 6% (from an average of $465,369 in the autumn of 20111 to $627,395 today). Hmm. Tell mom that.
====================================
I told Mom that and she wisely added that it also has provided us a place to live rent free!
Property tax, insurance, strata fees, maintenance and financing charges are not “free.” Use your noggin. — Garth
– ============================
House is paid for so no mortgage, and other fees you have listed are much less than rent. Much less!
Then you ignore the lost opportunity cost of the entire real estate equity. Use your noggin. It’s not “free.” — Garth
===================================
No, not free. But as you had already mentioned, balanced portfolio up 8% per yer, housing went up 6% per year. Also to note that the gains in the home price are 100% tax free, and within this time frame the cost of “having a place to live” was less.
You could counter that if we go back and select a longer time frame your numbers would look better. And I wouldn’t disagree.
But the example you use over the last 5 years with Toronto prices factored in clearly shows housing was the winner. Hindsight= 20/20

Your conclusion is false. But it’s not a contest. The goal is a balanced life. — Garth

#152 Ronaldo on 10.08.15 at 12:49 pm

#128 learningfromyou –

Thanks for your honest reply. i sincerely hope that the information I suggested provides you with the help you are seeking. I have met personally with Garth, not the Garth on this blog, but the man who started this company and he is a very caring honest individual whose goal is to help people like yourself with investing. I know all to well of the things that you speak about and I can tell you that in my many years in the investing world i have run into many shysters myself and I have a saying that goes like this. “Screw me once, shame on you. Screw me twice, shame on me” Good luck and I would be interested in your feedback going forward. Have a good day.

#153 HP Sauce on 10.08.15 at 12:51 pm

Unless you realize the gains (and deduct closing costs and commission), it is illusory. — Garth

so what say you? would this be the time to sell and get the gains I can out of it?

A bird in the hand… — Garth

#154 Renter's Revenge! on 10.08.15 at 12:55 pm

#109 KT on 10.08.15 at 12:23 am
Real estate is a tangible asset, stocks and bonds are magic numbers in the matrix ..

How do ya like dem apples?

http://www.transcanada.com/asset-map.html

#155 IHCTD9 on 10.08.15 at 1:00 pm

#122 Ralph Cramdown on 10.08.15 at 8:51 am
#97 My Life is a Pile of Shit — “The “essence of real estate” is not the dirt, it’s the location and the interior, and one gets both with apartments. What “essence of real estate” comes with a detached house if it looks like a crack shack?”

The land appreciates, the structure depreciates. Over the decades, you keep maintaining and renovating the structure until, one day, it is worth more dead than alive. Then you either keep living in it yourself as gentrification or densification pass you by, redevelop it, or sell it to someone for land value so they can.

This is also true in a high rise condo, except that it is a complex, multimillion dollar structure whose maintenance is controlled by amateurs, some of whom think their divine purpose in life is to keep the condo fees as low as possible. End-of-life in these buildings will be like beetles fighting in a jar.
___________________________________________

If you think through the life of a high rise condo to it’s logical conclusion, somewhere before they knock the building down it would become cost prohibitive to maintain one compared to the fees the building could ever collect from it’s collective owners at the time.

As the building becomes older, resale values of the units would suffer a beating at the hands of time and newer buildings. As this happens, those who can afford to move onwards and upwards move out, while those who can’t stay.

As the building ages the maintenance costs steadily increase, at the same time, the building can only attract less and less wealthy buyers, at lower unit prices.

At some point the combination of financially disadvantaged owners, along with sky high maintenance results in no more maintenance being done.

At this point the building is on the fast track to becoming a vertical owner occupied slum, with no chance of reversing its fate.

It is eventually condemned, imploded, and the cycle starts over again.

#156 saskatoon on 10.08.15 at 1:01 pm

#134 Nora Lenderby

garth, why do you publish some racist comments, but delete others?

if this post said (even in jest):

“It’s not the Canadians I mind, it’s just the d*mned black immigrants.”

you would not allow it.

logical consistency is the cornerstone of rationality.

#157 bill on 10.08.15 at 1:04 pm

#64 Ralph Cramdown on 10.07.15 at 8:55 pm
very eloquent Ralph.
worthy of passing along I reckon. with your permission…

#158 Lea on 10.08.15 at 1:04 pm

#141 Grantmi

An argument for raising interest rates, or maybe shutting down HGTV would work.

#159 waiting on the westcoast on 10.08.15 at 1:06 pm

#126 CHERRYBLOSSOM on 10.08.15 at 9:43 am
“It is not just Chinese, it is rich Koreans and Pakistani. It is people who are not brick layers and people who do not share Canadian philosophy, religions, manners or culture. They do not integrate. This is not racist just facts”

My family are immigrants from Italy. My father has many friends from that time that rarely left ‘little Italy’ sections of town and spoke little English. Their children though are fully integrated and ‘corrupted’ by the laziness that comes from living in such a great, wealthy, entitled country (as am I relative to my parents’ work ethic)… ;-)

Seriously – integration always takes a generation. And frankly, it is the diversity and fusion of our cultures that will give us a leg up as we become a more globalized. And it makes for great food, new arts, and broadens our horizons/modes of thinking.

Just curious- have you spent much time adapting to the aboriginal community???

#160 kommykim on 10.08.15 at 1:15 pm

RE: #109 KT on 10.08.15 at 12:23 am
Real estate is a tangible asset, stocks and bonds are magic numbers in the matrix ..

You don’t own real estate. You have a document that says that you can occupy it and sell it. The value of the document is contingent upon the government honouring your rights to said property. It’s all magic.

#161 TCContrarian on 10.08.15 at 1:17 pm

Well, earlier I posted this and got no reply (#63). People who support the thesis that ‘this bull has room to run’ are committing the usual error of extending the most recent trend (ie. recency bias) – just like the house-horny folks.
The way I see it, there is little upside left while there’s much downside in the US markets (S&P500 etc). Ditto for Canadian RE.
Disclosure: I’m short US, long Energy, short CDN RE (ie. I’m renting).

**********************************************
Garth, you say:
…”Of course there will be more down sessions, but it’s hard to make the case that we’re not still in the midst of a bull market that has miles to go….”

Although anything is possible I guess, I’d say that statistically speaking (from historical record), very very unlikely.
From 2009 to 2015 ie. ~6+ years, this has been one of the longest bull markets on record. So, please G.T., would you please qualify your statement (make your case) that it has “miles to go”.

Based on what? Perhaps QE4,5,…? Surely you’ve heard of a ‘dead-cat bounce’ as it relates to market action.

Thanks in advance!
tcc

#162 IHCTD9 on 10.08.15 at 1:27 pm

#114 Great Canadian Bubble Co. on 10.08.15 at 1:54 am
Sometimes I really wish the Vancouver money-parking situation was being taken advantage of by a variety of nationalities from a variety of countries. Then we could have an honest discussion about it without people accusing others of being against a certain ethnicity.
____________________________________________

If the CRA gets the facts on the matter, and they happen to be what is popularly understood, then you need not worry where they are from.

The CRA will be onto this like a dog in heat if the proceeds are as significant as they appear to be. Just a matter of time, no honest discussions required.

#163 Ralph Cramdown on 10.08.15 at 1:47 pm

#142 SWL1976 — “It is all coming apart. If you can’t see it you are simply not looking. The market falters on threat of a rate hike, yet when the ‘data’ doesn’t support a rate hike the market rallies. Is this the new normal?”

No, it’s the OLD NORMAL.

The modern crackpot theory of markets is that, back in the old days, they reacted to news exactly how the naif everyman would expect, but now, because of the Fed’s thumb on the scales etcetera, they react irrationally.

But if you read market history, you’d know that this is bunk. Here’s a #timestamp from 1936:
https://en.wikipedia.org/wiki/Keynesian_beauty_contest

Stocks, bonds, currencies — none of them act naive-rational. Sometimes, we understand why (some of us, anyway):
https://en.wikipedia.org/wiki/Overshooting_model

If you want naive-rational markets, I’d suggest orange juice futures. When sudden unexpected news of a frost in Florida breaks, the market reacts exactly as you’d expect. For the rest, good luck. In the long run, markets are rational. In the short run, they’re a clown circus.

#164 IHCTD9 on 10.08.15 at 1:53 pm

While considering my investment options, I always keep coming back to the same thing:

Can I build a firewood processor that is better and cheaper than any other one out there?

I keep coming up with the same answer – Yes… :)

#165 AZ_xdisciple on 10.08.15 at 2:04 pm

That didn’t take long. Saudi king hospitalized for dementia. What say you, Ralph Cramdown? Just a coincidence, right? (I revealed here a few days ago that he is the actor known as James Lipton).

#166 James on 10.08.15 at 2:09 pm

Garth,

I appreciate that you took the time to read my comment. You have a pretty dedicated following, and a small box on which to stand and hopefully make a difference. I’m just trying to lend a different perspective which ultimately might help effect some change. In regard to your comment:

“If you think foreign buyers (a relative handful) will relegate the rest of us to ‘second-class citizen’ status you’re not as bright as the rest of your note purports. Try to separate fear from logic. — Garth”

I would remind you of my logic, which was that in a decade or two from now, millionaires in China will likely outnumber the entire population of Canada due to the fact that their “1%” is such a huge number of people. 1% of 1.4 billion is 14 million… If even 5% decided to purchase Canadian real-estate, they would own most of the Coastal and prime urban property. I would also direct you to look at what happened in our Eastern provinces (Nova Scotia, PEI, etc.) when it became popular for wealthy Canadians from other provinces and Americans to purchase oceanfront property there. The local residents were effectively priced out of oceanfront property ownership. They became, as per my earlier statements, second class citizens. By passing laws requiring owners to actually reside in the province, they managed to drive the prices back down and keep prime property affordable for residents. My argument is more of an ideological one rather than an economic or capitalist one. However, I firmly believe that the majority of Canadians would agree with me. Why don’t you put up a poll on that question?

#167 Steve on 10.08.15 at 2:25 pm

I haven’t commented in a long time. I’m sold my house almost two years ago and have rented all that time. We still have no debt. Our credit card goes up and down, but never more than 600$. Then we pay it down and wait for the next set of tires or car problem etc. We save money too and invest some as well. Real estate caused my debt problems. Now I know for sure. Owning a house seduced us into debt beyond our wildest nightmares. It’s weird how that happens

#168 Reasonfirst on 10.08.15 at 2:35 pm

“Stephen Harper in a cute niqab”

You know the the irony of this is that you would still recognize him with those cold eyes.

#169 Holy Crap Wheres The Tylenol on 10.08.15 at 2:43 pm

#126 CHERRYBLOSSOM on 10.08.15 at 9:43 am

So most countries have now imported THE HOLY WAR, centuries old. But now because if immigration and migration most countries have it. I wish politicians of the World would have had the far sight to put an end to Asad and Isis instead of spreading the pain.

And by the way Garth, foreigners started coming in droves to Vancouver just after EXPO 1967. I was there and still am and have watched the influx. It is not just Chinese, it is rich Koreans and Pakistani. It is people who are not brick layers and people who do not share Canadian philosophy, religions, manners or culture. They do not integrate. This is not racist just facts.
___________________________________________
A lot of people will argue otherwise and call you racist but it is true. A lot of areas in the GTA are ghettoized enclaves where immigrants cohesively bond like mercury in a glass flask. Cohesion is the property of like molecules (of the same substance) to stick to each other due to mutual attraction. Same goes for people unfortunately its natural and we can somewhat blame the government for its failed multicultural policies. When I lived in America as a Canadian born student the school system told us we are Americans first and foremost no-matter where we came from. Many of my friends who I grew up with were from other countries but we were all Americans first. What is an American?
American dream coined 1931 by James Truslow Adams (1878-1949), U.S. writer and popular historian in “Epic of America.”
[The American Dream is] that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position. The dream is to start new, start over and create your new life moving forward. I always my relatives left the old country with its problems and left the baggage behind to start anew.
A lot of newcomers bring the baggage from the old country with them. Unfortunately in Canada being Canadian is taking a back seat to say for argument sake being a immigrant from Sri Lanka. Here your a Sri Lankan who just happens to live in Canada, doesn’t integrate with mainstream society and will attempt to do everything possible to resist integration into mainstream. (No offense to anyone from Sri Lanka, I;m just using your country as an example). Our government encourages newcomers to do this with multiculturalism. Canada first should be taught here! We are all immigrants to this land in some way no matter how long you’ve been here.

#170 Holy Crap Wheres The Tylenol on 10.08.15 at 2:50 pm

So why do 85% of Millennials think real estate is a great idea and will embrace it regardless of what some grumpy, pathetic, curmudgeonly irrelevant blogging guy says?

There are six reasons. None of them pretty. Tomorrow. Bring your folks.
___________________________________________
The Bank of Mom opens at 8:00am except on Saturdays when she has to cook the children’s breakfast!

#171 Ralph Cramdown on 10.08.15 at 2:58 pm

#157 bill — “worthy of passing along I reckon. with your permission…”

Certainly, and thanks, all, for the compliments.

#172 Nagraj on 10.08.15 at 3:12 pm

In other news:

– about 30 to 40 of “God’s Elect” (the House Freedom Caucus doesn’t publicize its membership data) have succeeded in killing Boehner AND NOW Kevin McCarthy too. Oh my goodness.
I wonder if raising the debt ceiling (Dec 11th being the drop dead date) is more so at the top of their agenda than Planned Parenthood. Fun ‘n’ games or what.
Go Tea Party!

– Gross is suing Pimco for hundreds of millions. What a hoot! This is fun because he really don’t need the money. Go Bill go!

– I read where Deutsche Bank’s derivative exposure is sumpin like German GDP multiplied by 40 fer cryin out loud. (Shades of Lehman … ) RISK ON!

– and Jeremy Corbyn has yet again “snubbed the Queen” by deciding to skip the Privy Council induction ceremony. Go Jeremy go!

[Canadian MSM, it seems, has yet to discover that Britain’s Labour leader is capitalism’s Antichrist appearing on earth in the form of, heaven forfend, an Englishman.

Yes, it IS possible to become leader of her majesty’s loyal opposition as an anti-monarchist, atheist, peacenik, and to advocate a maximum wage and the nationalization of the banks.
(I guess the ed board of the G&M for example can’t quite comprehend this.) (And some of yas EVER SO STUPIDLY think Mulcair is a socialist. Ha ha ha!)]

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

Speaking of royalty – did ya get a load of where Colonial Boy sat during the Speech from the Throne? The PM is supposed to stand, along with the Commoners, ROPED OFF AT THE BACK OF THE ROOM. But not Herr Fuehrer Harpo, not Him, He manspreads Hisself in a chair, lollygags practically WITHIN REACH of her majesty’s personal Canadian representative (whose name I do not know) (and don’ bother tellin’ me). [Oh, and Quebec’s former lootenant governor, a sweet old lady, just got sent to the hoosegow. (She needed the money.)]

Yer all in trouble in more ways than one, eh?

Hey Gartho! How you feel about fox hunting?

#173 Sideshow Rob on 10.08.15 at 3:22 pm

Rate hike? Surely you jest!
Minneapolis Fed chief Narayana Kocherlakota is now dropping trial balloons that the Fed is considering negative interest rates. Japan here we come. Score yet another one for the steerage economists. Another pounding defeat for the mainstream professionals. When will they ever learn? Seriously those bay street guys in the nice suits have such a futile record that they make the Toronto maple laughs look good.

#174 Ralph Cramdown on 10.08.15 at 3:24 pm

#161 TCContrarian — “Although anything is possible I guess, I’d say that statistically speaking (from historical record), very very unlikely. From 2009 to 2015 ie. ~6+ years, this has been one of the longest bull markets on record.”

It sure has. Here’s my thoughts.

I’m enamoured of Richard Koo’s concept of balance sheet recessions versus income statement (garden variety) recessons:
https://en.wikipedia.org/wiki/Balance_sheet_recession
In the former, it takes people (corporations too!) a long time to dig themselves out. Result is a slow, grinding recovery, which is exactly what we’ve had.

What causes recessions?
– There’s corporate overexuberance, when they make too much stuff, inventory builds, and they have to stop making stuff for a while until it all sells, meanwhile layoffs, less household income etcetera.
or
– Inflation starts accelerating, the Fed takes away the punchbowl with higher interest rates, and the party’s over
or
– an external shock, like say higher oil prices, which reduces consumer spending on ‘our’ (US) stuff because we need to spend more on ‘their’ (foreign) stuff.
or
– crazy bubble pricing, runs out of buyers, bubble pops

Bull markets don’t die of old age. I don’t think any of the above are the case right now. In fact, I think American consumers have gotten a positive shock recently, with lower oil and commodity prices and a high dollar making stuff cheaper. Export is a comparatively small percentage of the US economy. US multinationals profits are suffering due to exchange rates, but that’s priced in. US based global miners/drillers are suffering due to low commodity prices, but that’s priced in.

Aside from old age, what do YOU think is going to kill this bull?

#175 Maggie the Tech Writer on 10.08.15 at 3:24 pm

#64 I think I love you, Ralph.

#176 Ralph Cramdown on 10.08.15 at 3:29 pm

You have to love someone who can use ‘forfend’ and ‘hoosegow’ in the same post. It does make up for the atrocious spelling in some of the other posts. Huzzah!

#177 bdy sktn on 10.08.15 at 3:31 pm

Can I build a firewood processor
………….
I use an axe/maul.

What does yours look like?

….

Cpd plumbing new depths, ugh.

Vancouver land base shrinking daily.
Global demand for lotus land higher than ever

#178 TnT on 10.08.15 at 3:39 pm

#169 Holy Crap Wheres The Tylenol

Here your a Sri Lankan who just happens to live in Canada, doesn’t integrate with mainstream society and will attempt to do everything possible to resist integration into mainstream. (No offense to anyone from Sri Lanka, I;m just using your country as an example). Our government encourages newcomers to do this with multiculturalism. Canada first should be taught here! We are all immigrants to this land in some way no matter how long you’ve been here.

You are wrong. You are describing the fresh new comers and not long term or first generation Canadians.

I grew up in Toronto’s little Portugal neighborhood. All the parents were Portuguese Canadians but all the kids born here were Canadian Portuguese. We all played hockey and basketball, watched the same movies etc.

Now let’s take your Sri Lankan example. If they were born in Sri Lanka and now living in Canada, sure maybe you won’t see them at a hockey game or McDonalds but you sure see their kids playing hockey & basketball in the school yard and lined up at McDonalds in their fancy Honda’s.

I know my wife’s Macedonian Grandparents and Parents (born in Greece) think of themselves as Macedonian Canadians first but not any of the grand kids. None of them are fluent in their mother’s tongue.

Look at the Chinese new comers. They all play golf, own McDonalds and part take in the Canadian dream.

Check out the Sikhs, they join the RCMP, Police Force and play hockey with their traditional head wear, totally Canadian to me.

I also went to school in USA and agree. Every morning there’s a standing process facing the American Flag doing the Pledge of Allegiance + national anthem that on surface works but it is not needed here in Canada and it’s only a myth that these new comers are Canadian second.

#179 bill on 10.08.15 at 3:41 pm

thanks!

#180 Steerage Bilge on 10.08.15 at 3:41 pm

Yeah baby- what is that, $20 billion cdn pesos?

http://www.theguardian.com/business/2015/oct/08/deutsche-bank-shocks-with-warning-of-6bn-euro-losses

#181 Godth on 10.08.15 at 3:47 pm

#176 Ralph Cramdown on 10.08.15 at 3:29 pm

I can spell duplicitous. In the circle enough for you?
https://www.corbettreport.com/interview-1096-jonathan-latham-on-gmo-concerns/

You are full of $hit.
http://www.counterpunch.org/2015/10/05/gmo-propaganda-and-the-sociology-of-science/

#winningatallcosts
http://www.theecologist.org/News/news_analysis/2526593/ukraine_opens_up_for_monsanto_land_grabs_and_gmos.html

Corplantationopoly
https://www.youtube.com/watch?v=PZE9jtWcT38

#182 Holy Crap Wheres The Tylenol on 10.08.15 at 4:05 pm

#178 TnT on 10.08.15 at 3:39 pm

#169 Holy Crap Wheres The Tylenol

Here your a Sri Lankan who just happens to live in Canada, doesn’t integrate with mainstream society and will attempt to do everything possible to resist integration into mainstream. (No offense to anyone from Sri Lanka, I;m just using your country as an example). Our government encourages newcomers to do this with multiculturalism. Canada first should be taught here! We are all immigrants to this land in some way no matter how long you’ve been here.

You are wrong. You are describing the fresh new comers and not long term or first generation Canadians.
____________________________________________
I did not say second or third gen Canadians from immigrants do not integrate but their parents resist.
No I am not wrong but simply stating a fact. Drive to Brampton, Mississauga or Markham to see it. Since you were also born in Canada you are a second generation Canadian just like me. Bravo for you though, you stated you were “Canadian Portuguese” it seldom used in that fashion.
I rest my case on the words from a recent immigrant!
http://www.thestar.com/news/gta/2013/05/09/visible_minorities_on_the_map_in_brampton.html

What words would those be? That he can get by without speaking English? — Garth

#183 Spaccone on 10.08.15 at 4:16 pm

Cpd plumbing new depths, ugh.

Vancouver land base shrinking daily.
Global demand for lotus land higher than ever
———————————————-

Buckle up and mentally prepare for another 10% lower from here…I would be a buyer at ~$11. Wagering that that or $10.50 will be the capitulation level after which a slow, cautious bottom will form…but who knows.

#184 Steerage Bilge on 10.08.15 at 4:30 pm

#183 Spaccone on 10.08.15 at 4:16 pm

Cpd plumbing new depths, ugh.

Vancouver land base shrinking daily.
Global demand for lotus land higher than ever
———————————————-

Buckle up and mentally prepare for another 10% lower from here…I would be a buyer at ~$11. Wagering that that or $10.50 will be the capitulation level after which a slow, cautious bottom will form…but who knows.
————-

Tank those preferreds.. ridem down down down.

Rates going nowhere significant.

But they spit out solid cash flow.. even if your capital is now not so liquid..

Of course a preferred ETF such as CPD is liquid. It pays 5.45% with a dividend tax credit. With a yield like that you can afford to wait for valuations to improve, with a smile on your face.– Garth

#185 TCContrarian on 10.08.15 at 4:31 pm

#174 Ralph Cramdown on 10.08.15 at 3:24 pm

“Aside from old age, what do YOU think is going to kill this bull?”

********************************************
Simply put, whatever kills ALL bull markets:

1. complacency
2. valuations
3. lack of new buyers
4. all of the above

As you ought to know, the most expensive phrase in investing is, “it’s different this time”, or “it’s different here”, etc.
So, I’m betting that it’s NOT different this time – out of respect for history. No, I’m not brilliant – I just think the risk/reward is unfavourable at P/E ratios >26 (which is considered ‘bubble’ territory).

Finally, I’ve read (and totally agree with), that ‘bull-markets are breeding grounds for bear-markers, and bear-markets are breeding grounds for bull-markets’.

I was aggressively buying energy/commodity stocks recently simply because the bear was getting long (and p/e ratios low, low, low), and sentiment was extremely negative.
“buy when there’s blood in the streets”, is another one of my favourites.
Up 7% in 20 days…

Hope this ‘explains’ my approach and thoughts more clearly.

#186 Freedom First on 10.08.15 at 4:50 pm

#167 Steve

Thanks for your honesty. You are a humble man. You are going to be okay.

There is a reason that Warren Buffett said that more money has been lost on leveraged RE than on everything else….combined…..and….by a long long long ways. Debt/Leverage is consistently the most significant reason for the downfall of many millions of people world wide. Hundreds of millions recently.

#187 TCContrarian on 10.08.15 at 4:54 pm

I forgot to say…

According to certain criteria, the S&P500 bull (ie. SPY), is already over (as of March, 2015). It’s now significantly below its 200 DMA, which has turned to resistance level (from support).
If you’re waiting for the financial media to ‘inform’ you of this, good luck! They’re notorious for being ‘late’ to the party (along with 99% of their ‘guests’).

And finally, my all-time favourite quote:

“Be Right and Sit Tight”.

#188 jess on 10.08.15 at 4:59 pm

Deutsche Bank’s $7 Billion Loss
Bank of America sees U.S. banks saddled with $100 billion in exposure to troubled mining giant Glencore

#189 Freedom First on 10.08.15 at 5:01 pm

#184 Steerage bilge

Great comment Garth. Me too. Dividends rock. So does liquidity, cash, cash flow, balance, diversity, all income streams, 0 debt, a 40 year investment horizon, and no boss, wife, or dependents.

Choose wisely. You don’t have to explain anything to anybody. And don’t whine. Nobody wants to hear it.

#190 Mark on 10.08.15 at 5:01 pm

“There is a reason that Warren Buffett said that more money has been lost on leveraged RE than on everything else….combined…..and….by a long long long ways”

Of course. RE is a poor man’s “investment”, with long-term expected returns at or below the cost of credit (“leverage”). That’s why almost nobody gets rich off of it over the long term. The ranks of the world’s top billionaires are full of people with severe under-weightings to real estate.

Almost nobody goes through the principles of security analysis (as espoused by Warren Buffett, and his mentor, Graham) when it comes to purchasing residential real estate. This is why almost nobody has the wealth like Warren Buffett. Its shocking, to say the least, to see real estate trade at P/E of 35, when it basically has no real long-term growth. A disciple of Warren Buffet would be hard pressed to pay any more than 1/4 of current prices for Canadian real estate, or a P/E multiple between 8 and 10.

As you correctly point out, the market has a habit of dispatching people who own too much real estate, particularly on credit, to the poorhouse. I hope you’re listening Troll.

#191 S.Bby on 10.08.15 at 5:16 pm

#177 bdy sktn on 10.08.15 at 3:31 pm

Vancouver land base shrinking daily.
Global demand for lotus land higher than ever.
———————————————–
Yes, because the whole world wants to move to East Van.

#192 Smoking Man on 10.08.15 at 5:51 pm

#115 Steve French on 10.08.15 at 2:28 am
Yo Smokey:

This aggression will not stand dude!

Nah, not being aggressive.

Just miffed that Sir GT has been censoring me but not you!

I call for equal rights.

(I posted a link to an Australian news media story on overseas Chinese property buyers but GT thought that the very topic was racist).
…..

The bastard is funny that way.

I’ve learned.
No chirping the Chinese
Sharing conversations you have with your penis are not allowed .
Chirping Wynee, allowed.

You need to understand his phobias and work around them.

Fk no one is perfect

#193 TnT on 10.08.15 at 6:28 pm

#182 Holy Crap Wheres The Tylenol

I did not say second or third gen Canadians from immigrants do not integrate but their parents resist.

I wouldn’t call it resistance but rather it’s not required when the neighbourhood supports it. As per your posted article this softens the blow for integration. This also comes with a great variety of culinary cuisine. Toronto is top in North America for culinary varieties. If the neighbourhood did not support this then there would be faster integration but then another hamburger joints get opened.

It has always been this way in large cities regardless the decade going all the way back to the early 1900s. Look at all the history documentaries regarding the Jewish neighbourhoods in New York City, Italian and Greeks same thing.

#194 anonymous on 10.08.15 at 10:12 pm

Garth, I’ve been following your blog for a while now and have watched it grow tremendously in popularity. People I would have never imagined 5 years ago following your theories are now onboard. Maybe we are not there yet, but do you think there will come a point where there are enough visitors/followers to your advice (I. E. not buying housing) insofar that it could ‘normalize’ the housing market (soft correction)? Is that your goal with this blog?