We’re doomed

ADVICE modified

Whether it’s the bedroom eyes, chiseled jaw or the rippling pecs will never be known. Maybe even the advice. Dunno. It just happens. Complete strangers want to share their intimacies with me. And here we go again.

Routinely I’m accused of fabricating these letters. I wish. But these people actually exist. What’s more alarming, they dwell among us, reading this very blog. So keep your elbows in.

Dear Garth, I have been reading your blog for 4 years and most of the time I do agree with your views to be conservative with $$$ and to invest, and not get over your head with debt. However, living in westside Vancouver it is difficult to be risk-averse. Anyways, my wife and I are both academics who have had to scratch and claw for everything that we have (no trust funds here). I am 55 and my wife is 52 and we have an 11 year old. We are both profs bringing in a total of $360K per year, and we are both workaholics.

We have a paid for (smallish) but stylish duplex that we could sell for in this market for 1.7M. We have about 1.2M in our pension plan at the university, and 220K in savings, with 45K in an RRESP and about 45K in an extra locked RRSP. We have always lived below our means, but this seems to not have served us well as our 1400 square foot place will be rather small when the 11 year old takes up an electric guitar and blasts us out of the house.

We are on the fence with trying to purchase a spectacular completely renovated 2100 square foot duplex in Kitsilano that we think we can get with 2.6 Million. With 1.7M + 0.2M extra, this would leave us with a 700K mortgage to finance over 15 years. We clear about 18K per month, and in the first 5 years it would cost around 5.5K per month (including property taxes), which we can easily do.

In Vancouver it is very difficult for people, there are very few rentals on the west side and the idea of turning Vancouver into a “world class city” has been so detrimental to so many people. I am a Bernie Sanders supporter and do wish that we had a more egalitarian society for us all. All the best, Max.

Like, where do we start? With the fact you and your smart wife make $360,000 a year, clear $18,000 a month and have saved only three hundred thousand after decades? Or that you’re ‘risk-averse’ and are considering blowing your savings and taking on a $700,000 mortgage in your mid-fifties? Or that you’re actually thinking about paying $2,600,000 for half a house? Or you have utter confidence your pension will be there thirty years hence?

You may have PhDs, but this is nothing but a case of truck-stop, dumb-ass, HGTV house horniness which you’re blaming on an 11-year-old. Shame. No sane person spends that kind of money on a duplex unit, Max, and in so doing deliberately hollows their savings, chokes down a load of debt and then looks to a pathetic blog for justification. Stay where you are. Send the rest of Bernie.

Now, on to Jason, who appears to the penultimate Helicopter Kid – with Mom and Dad seriously in control. There is a price to be paid when you take free money. This is an extreme case.

Found your blog and like it. My parents recently gave me $600,000 which they specified should be spent on real estate for myself. I can access another $200,000 from mom & dad interest-free, amortized over 30 yrs or so. I’m currently single, early 30s, earn a modest income as an economist, plan to live in Toronto, maybe find a partner in next 5 yrs but no kids for sure. My question is: what would you do? Is it better to invest in a house or a loft/condo? Should I buy for my current lifestyle (not much need for space eg 1 bedroom units) or would I be crazy to overlook places that aren’t exactly attuned to my current lifestyle but will likely have more sustained demand/appreciate faster (eg 2 bedrooms, a home)? Should I take the fantastic parental loan to buy a nicer spot, or is it better to stay debt free and improve my current cash flow to invest in higher-yielding investments (e.g. stock market)? You’re probably super busy and don’t have time for this, but thought I’d write just in case!

How could I not reply, Jason? Not every day do we hear from a manipulated 30-something who happens to walk into six hundred grand from the Bank of Mom. But the question is, why would they make such a dumb stipulation, and why would you agree to it? You’re young, unattached and obviously don’t need real estate. Besides, dude, you’re an economist – trained to recognize asset bubbles, risk and aberrant human behaviour (even in mothers).

The simple answer to your question is, don’t bury $600,000 in a condo which is highly unlikely to grow in value, has insane ownership fees and was probably constructed out of glue, staples and gravel. A SFD is obviously better, but that means more Momsie. The better solution is to just take the cash and invest it in a balanced, diversified portfolio (with a fully-funded TFSA) which could end up being worth $5 million when you’re fifty. They’ll get over it.

And speaking of screwed-up parents, here’s the situation Thomson is facing:

Hi Garth, long time blog reader, first time writer. My parents have saved nothing for retirement. My mother is 63 and no longer working due to health issues, and my Dad is 55 and still toiling away. The reason I’m writing is that my mother has the option to either take a $1600/mo pension from her employer, or a $226,000 lump sum. Based on what I’ve read on your blog, I think the lump sum is the right way to go.

They also have a mortgage of $110,000. [email protected] said that, rather than sell the house and pocket $100,000 or so, they could get a shiny new 25-year mortgage. Her rationale is that it would be cheaper than renting. Needless to say, this sounds crazy and I think they should sell the house and put that money into their tiny nest egg and rent.

My questions:

Where is the safest place for them to park this money while losing as little as possible to inflation? and; this 25 year mortgage idea is crazy, right?

It’s depressing how many times I hear this. Not about the sleazy, self-serving [email protected], but rather people in their sixties who have managed to save nothing and have 100% of their net worth in a single asset. The public pension was never designed to paper over people’s life mistakes. Living for six decades and ending up with zero net worth is a fail. So, what should they do about it?

Simple, and Tom’s already got it figured out. Commute the pension and sell the house. By commuting you take over possession of the money which then becomes the property of the family, not the pension plan. You can lessen tax exposure by managing your own portfolio (or having it done inexpensively) since every pension payment is fully taxed by investment returns are not. You are protected against future woes a plan may face (it happens). And the rate of return can be equal or greater than that which most plans earn. Plus, given the low interest rates today the commuted value has been pushed higher.

If these guys take the lump sum, dump the property and add in the equity, this $336,000 egg can throw off about $1,700 in monthly income (some taxable, some not), and still largely preserve the capital for later life. Their debt would be reduced to zero. Plus no property tax. No maintenance. Add in CPP and OAS as they become available, plus some employment income, and this is the best outcome, even paying rent.

Lessons: You can be young and poor and happy. Never old. The greatest risk is running out of money, not losing it. Don’t seek advice at the bank. In the end we all need income, not a house. And if you’re going to mess up your financial life, at least have one good son.

181 comments ↓

#1 TRUMP on 07.04.16 at 6:36 pm

As soon as that bubble bursts….I am going all in.

That’s how I get rich….

The sheeple pile in and got no where to run

#2 Harbour on 07.04.16 at 6:49 pm

Does anybody write you that makes 60K a year?

#3 JSS on 07.04.16 at 6:50 pm

Amazing how high income people can end up with nothing, and yet some $65K/yr peasant can end up somewhat wealthy.

#4 Jimmy on 07.04.16 at 6:51 pm

#2 Trump

#5 crowdedelevatorfartz on 07.04.16 at 6:53 pm

The first couple with their combined earnings over 360k per annum, pension of 1.2 mil, 260k socked away and a condo thats “worth 1.7 mil……. remind me of the poor poor people that write into the Globe and Mail on saturdays for investment advice….
” I’m worth 4 million, have a 2 year old Jag and summer in Stadd…..should I winter in Cancun?”

Give me a break.

#6 WallOfWorry on 07.04.16 at 6:55 pm

Interesting anecdotes as usual Garth.

Did you see the article in the Wall Street Journal pointing out the divergence in the bond and stock markets? What do you make of the bond market screaming risk off yet the stock market plods higher? Additionally, the appreciation in the stock market is not the retail herd piling in? Do we have Central Banks trying to maintain stability in the stock market after Brexit by stepping in and buying? If the economy is slowing, and predictably will continue due to Brexit, and with 8 quarters of declining EPS would you not agree that this can’t end well for the stock market?

http://www.wsj.com/articles/stock-market-to-bond-market-la-la-la-i-cant-hear-you-1467662232?mod=e2tw

#7 Braj on 07.04.16 at 7:00 pm

@ #2

Likely, but the interesting ones are the cases such as the couple making $360k, with little liquid assets (compared to salary) and yet still house horny. Really bangs home the point.

#8 Randy Randerson on 07.04.16 at 7:03 pm

If Max is a Bernie Sander’s fan, why the hell isn’t he giving up his lofty salary to make the society more “egalitarian”?

Face it, Max, the reason you’re making banks is because capitalism works. If you want communism, look at China 50 years ago. There’s a reason my dad escaped that shit hole of a country.

#9 yeah right on 07.04.16 at 7:05 pm

To the PHD couple: you lost at life anyway since you made your first and only child so late, but priorities i guess…
To the 600k freefall dude who doesn;t see kids in his future: you are an idiot too, and stop blaming foreigners trying to repopulate Canada
To the old couple: oh well, you have to live somewhere, may be you are able to pay 100k in the next 10 years… To the rest of canadians: you are 99% financial stupid and we will pay for it.
Who made coin during the gold rush? The hummer/shovel vendors?
Who makes coin during housing bubbles? Construction industry. Follow the money donors in BC and ONT politics and you’ll understand why nobody will prick this bubble. Or maybe not, the JT guy is from Quebec and doesn’t really care or has a little envy still in him and will level the field.

#10 CJBob on 07.04.16 at 7:08 pm

Garth:…make $360,000 a year, clear $18,000 a month and have saved only three hundred thousand after decades?
_________________________________________
They have a house worth 1.7 million so let’s assume prices crash and it’s only worth 1 million. Pensions aren’t guaranteed so let’s cut the 1.2 million in half to 600K. So they are worth 1 + 600 + 300 = 1.9 million in the case of major crashes and have jobs that are guaranteed as anything possible and you see a problem? Wow. All I can say is wow.

#11 come on on 07.04.16 at 7:10 pm

Tell us how 336k can create 1700/month mostly tax free while preserving most of the capital. Share this portfolio with us. What stocks would this investment hold today?

#12 F.dover on 07.04.16 at 7:22 pm

2/3 of the world lives on $3.00/day, like my CPP benefit, and the most stoopid person ever, along with his wife gross $18,000/month….teaching? I forgot to mention on 6/29#53, that my wife had worked at a little country school 3km away and ride shared. What the hell kind of hell does this prof live in to think the way that he does?

Amazing sunsets this time of year, if you can see them un-obstructed across this bay from your window….

I get zero interest from the savings I expected interest income to humbly sustain on, so that the prof can borrow a million for another 700 square feet?

Yes, I AM F.dover

#13 Trump 2016 on 07.04.16 at 7:23 pm

You are right Trump. Let’s make America great again!

Canadian’s obsession with debt makes Americans seem conservative financially….

;)

#14 Grey Dog on 07.04.16 at 7:23 pm

PhDs who live below their means and basically have NO SAVINGS!!! Book smart but absolutely NO financial literacy. You need to start reading some constructive realistic street smart financial literacy books. You are doomed, if you do NOT TURN YOUR SHIP AROUND NOW. You are not workaholics you are spendaholics. You are at the age when you show up to work some day, and the Institution of Higher Learning tells you both that you have hit your Best Before Date! Happens all the time. Accounting Dept will realize they can cancel the two of you out replace you with 4 part timers, no need to pay health benefits that today they have committed to you. Besides, it looks good if they hire recent graduates.

Ever heard of garage band? Jeez, your your son may just be going thru a guitar phase, it may be over in a year!

Start reading, sign up for some school sponsored retirement courses.

YOU ARE DEFINITELY NOT RICHER THAN YOU THINK!!! (Unless you start saving and investing today!)

#15 not 1st on 07.04.16 at 7:25 pm

Garth, you had your fun. Surely these are joke letters. They cannot for the life of me be real people. Maybe they are trolling you?

On another note, notice how all those 28 year old engineers making $400k per yr in the patch stopped writing in?

#16 Willdaman on 07.04.16 at 7:25 pm

Every time you write about “$x amount can return $y per month” it makes we worry about those that don’t think beyond the word you print. You’re obviously using long term averages to determine what a monthly return could look like, but given that they are averages you can’t rely on these numbers as a consistent return (much less any sort of consistent monthly payout)…some months/years can be more some can be less.
In the case of the third letter, you’ve told these people to sell their house and perhaps they can get $1700 monthly out of their portfolio. If they’re going to sell their house per your advice then they’ll be renting. In “below average” market return years how do you expect them to pay rent without seriously eroding investment principal? The right move for these guys is probably hanging onto their house (the extra $100k in the portfolio from a house sale would only translate into $6k/year, assuming the fiction of 6% average return…if the equity was more like $500k them the answer would be more obvious) while commuting the pension.
Assuming interest rates remain flat or slowly climb (and not fall!) I’d throw all my eggs into the ZPR basket for ease and inflation protection, balanced portfolio be damned!

#17 ROCK BEATS PAPER on 07.04.16 at 7:34 pm

People believing an asset to be “safe” is part of the reason why bubbles get fostered.

Are bonds “safe” when the yields are at multi-century lows and prices at highs? Are stocks “safe” while the US market is at the single most extreme point of valuation in history for the median stock?

#18 BOOM! on 07.04.16 at 7:38 pm

HA!

The “perfesserrs” on the wet coast are major losers! $360 a year in income and not even 1 million in RRSP or TFSA? Gee, what the hell did that education buy you turkeys? Sure, buy the semi, why not add ‘REAL loser’ to a near perfect record!

For case no#2 these people I have a bit more sympathy.
Parents can be VERY controlling. The $600 was forced on him probably, invest it wisely, tell mom ‘this is not the time to buy RE’ repeat yearly for 20 years…

Case #3. There is always an excuse for not saving for retirement. HUGE ASS FAIL! Assuming you earned even minimum wage, the old man works, no excuse! Sell the house, commute the pension, start stuffing a TFSA.
If you live long enough you will run out of money -almost guarantee that! Don’t sell the house, I will guarantee that one! Hope you chose wisely, or learn to love dumpster diving!

Bou I have no sympathy anymore for stupid! Garth, I am amazed at the extent of DUMB in the world.

M64WI

#19 alex stezenko on 07.04.16 at 7:45 pm

Hey Harbour, lol. I feel the same way. I make 36000 grand a year, and I feel ok. Maybe I’m just a simpleton. That kind of money blows me away.

#20 Doug t on 07.04.16 at 7:47 pm

Volatility !!! The world is so volatile that people do not see “investing” in markets as viable or safe. So you have to live somewhere – buy a house and hope for the best seems the new mantra – funny because I’ve been telling friends for a few years that real estate is in a bubble and it will pop – now it seems low rates and easy money will continue – lol it IS different this time I guess

#21 Frank Stigleze on 07.04.16 at 7:48 pm

Well now with Canada Day and Independence Day almost gone the ugly U.S. Jobs report for June-2016 is coming Friday-July-8.

It will be weak for sure 85,000 to 110,000 at best. This will put more fuel on the fire of falling interest rates, bond yields specifically and low wages and low wage annual increases of 1.6% to 1.80% at best and up and down stock markets.

The Fed raising interest rates to 2% to 3% over the next couple of years. What a mirage.

#22 A Yank in BC on 07.04.16 at 7:50 pm

And I thought the old saying was that teaching doesn’t pay.

#23 acdel on 07.04.16 at 7:50 pm

Great Blog as usual but your title says it all “we’re doomed”, with well educated (book smart but not so smart) people such as your first example can even contemplate what is asked by them to you; as well as all the special interests groups getting their ways throughout this country.

For those 15 to 25 yrs to retirement save up and move to a different country upon retirement.

I use to hold high hopes for this beautiful country but now not so much. C’est la vie!

#24 NoName on 07.04.16 at 7:57 pm

#207 };-) aka Devil’s Advocate on 07.04.16 at 5:19 pm

Go and re read my post, and you just might notice that i never dissed an education. i just pointed out what i did, INTEGRITY, let me put that in a BOLD for you.

You can quote whoever you want, and spin it any way you want, you and me know what is all about.

NoName

#25 Andrew Woburn on 07.04.16 at 8:00 pm

#148 BillyBob on 07.04.16 at 4:08 am
So yes, it is incorrect to say that European members of Parliament are unelected. But it is disingenuous to not continue on to mention that they can be – and are – overridden by the unelected Commission.
========================

Calling the EU “undemocratic” is about as accurate as saying Brexiteers are all “xenophobic”. There is an element of truth to both statements but reality is far more complex than a bumper sticker label.

The Canadian civil service is undemocratic and produces more than a few policy initiatives that upset a lot of voters. We rely on our elected reps to keep their “elitist” tendencies in check. In the EU, the force countervailing the Commission comes not from the Parliament but from the Council, the elected heads of the now 27 EU member nations. For example, the elected Council has clearly stated that it is taking charge of the Brexit negotiations, not the appointed Commission.

The Council may have undermined the democratic effectiveness of the Parliament as much as the Commission. If you were the British PM, would you really want a bunch of British EU politicians running around proposing policies that might conflict with yours? Wouldn’t you love it if some other “foreign” organization was there to take the political heat for policies you and your Council buddies actually supported?

The idea that British politicians had little effect on EU governance is deeply suspect. The Brussels apparatchiks have been publicly drooling with joy at the thought they no longer have to be constrained by the Brits’ point of view.

#26 Nelley on 07.04.16 at 8:04 pm

What is seldom discussed is the other side of the financial coin-not just how much money you can accumulate, but how much money you need. If your need for money is insatiable (very common with the MSM influence) your chances of ever accumulating enough are very slim.

#27 Damifino on 07.04.16 at 8:05 pm

More people who apparently don’t read Garth Turner’s blog or know anything about him yet seek his blessing.

Je ne comprends pas.

#28 John on 07.04.16 at 8:05 pm

Why people still ask stuch questions? Don’t they already know the answers? If they love the blog and still ask such questions, yes, we are doomed. And yes, people are lazy to learn, don’t know anything about investment like you do Mr. Turner, and they still think that losing the money in a volatile market is more likely than from buying a house.. that’s why they want to hear from you “yes, buy that house, everything is gonna be great”.

#29 acdel on 07.04.16 at 8:08 pm

Garth or whomever wishes to comment; what is your take on Silver. It is a heavily used mineral in many industrial applications and it has been on a real tear lately?? I am asking long range not short. Thanks.

#30 Shawn on 07.04.16 at 8:18 pm

Safe?

#17 ROCK BEATS PAPER on 07.04.16 at 7:34 pm said:

People believing an asset to be “safe” is part of the reason why bubbles get fostered.

Are bonds “safe” when the yields are at multi-century lows and prices at highs?

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

Response: No, not safe, especially long-term bonds.

Are stocks “safe” while the US market is at the single most extreme point of valuation in history for the median stock?

*********************
They would not be safe at that extreme point of valuation . But your claim here is not even close to correct. Stocks (S&P 500) have a trailing P/E that at around 23 is lower than extremes.

Furthermore, the reasonableness of the P/E depends on interest rates and inflation as well as growth. Extremely low interest rates and low inflation justify higher P/Es than the historic average.

The S&P 500 may be somewhat over-valued but it is certainly not at an extreme point of valuation.

Stocks are priced to give a higher return than bonds over the long term. The dividends alone beat bonds.

But… again… people believe just exactly what they want to believe don’t they? And they can certainly find ample support on the internet for anything they wish to believe. And they can find a rabid group to support their views as well.

#31 Blacksheep on 07.04.16 at 8:24 pm

Shawn Allen # 199 on 07.04.16 at 3:33 pm

“Some resort to calling those with a different understanding liars.”

“Blacksheep’s name calling reflects badly on him.”
———————————-
Once the technical aspects of the defence have failed, we find ourselves the last stop in the internet debating process…

The ’emotional appeal” or “shamming” phase.

“Blacksheep’s not playing nice” he “called us a name”

Sorry dude, that only works if I care what you or any one else thinks.

If it walks like a duck and quacks like a duck, the odds are high, it’s a friggen duck.

#32 A Yank in BC on 07.04.16 at 8:24 pm

I certainly hope that dear ol’ Max isn’t an English Professor. He made a whole series of grammatical and punctuation errors in just three paragraphs. I mean.. c’mon.

#33 Grey Dog on 07.04.16 at 8:27 pm

Ever watch a Holmes on Homes? He’s so rich cause he’s correcting the problems the other renovators messed up in a big way! I’m always very suspicious of a freshly renovated homes. Actually, that’s why I prefer to do our own renos. Not for show, but for living in.

#34 bigtowne on 07.04.16 at 8:33 pm

Buffalo gas price coming in around $2,30ish per gallon.

Gas at the pump prices are soft and it only will diminish as summer unfolds..Supply is overwhelming demand so no suprise is sneezing a tad on the outlook. Up ahead dear oh well the dollar has found its footing for the foreseeable now.

The war against the Savers has ended with the Savers under the foot of their Central Bankers crying in utter defeat. The other war must remain anonymous due to the PC cover it has garnered over several decades is a parallel to the Savers conflict where the winner has no idea what he is winning.

#35 Brexit opportunity for RE on 07.04.16 at 8:34 pm

Foreigners, please come to Vancouver and avoid the Brexit mess!

http://www.bloomberg.com/news/articles/2016-07-04/realtors-pitch-vancouver-to-soak-up-capital-flight-from-brexit

#36 Ret on 07.04.16 at 8:34 pm

Universities and colleges are businesses masquerading as public institutions. They are at the government trough continually while at the same time they, and their public sector union employees, are extorting as many dollars as possible from each student and their family.

University and college tuition fees and added additional fees guarantee that graduates will spend a decade as debt slaves paying off student loans before they can think of moving on with their lives.

No doubt Max Jr. will be getting subsidized tuition from the university that his parents work at.

At McMaster U in Hamilton, tuition available for a dependent,

http://www.workingatmcmaster.ca/benefits/tuition-assistance/maximums/

The McMaster additional fees for everything from the solar car, marching band, refugee assistance, etc. Add these up and it comes to hundreds of dollars each year.

https://www.mcmaster.ca/bms/student/pdf/fees_included.pdf

Consumer Reports this month is a must read for students and parents who are considering jumping down the university/ college debt hole. The Canadian situation is similar in many respects.

#37 leavingsoon on 07.04.16 at 8:34 pm

@ #9 yeah right on 07.04.16 at 7:05 pm

“To the PHD couple: you lost at life anyway since you made your first and only child so late, but priorities i guess…”

Why did they lose at life? Can you explain your reasoning?

#38 Metaxa on 07.04.16 at 8:44 pm

Every time it is one of these letters to the Boss posts my wife says I can drink whenever the commentary advice includes the admonishment to get a divorce.

Its still early out here so please go easy on me…hold off on the always appropriate and practical divorce suggestion for a bit, OK?

#39 tkid on 07.04.16 at 8:50 pm

I hope the Phd’s wind up homeless and living under a bridge in a 20 year old van. Really, I do. How does one earn a $360,000 annual salary and yet have frak all in savings?

DON’T COUNT THE *&^*ING PENSIONS! MOST TEACHER PENSIONS ARE BADLY UNDERFUNDED AND IF YOU GET BACK YOUR CONTRIBUTIONS, YOU’LL BE DOING WELL!

And yet, what are the two Masters of Moronity doing? “Like, we’d like to get further in debt, in a badly over-valued real estate market, at a point in our lives where we can’t afford to make any more financial mistakes, Dude! Peace out, man!”

How does one complete frak things up as totally as they have?

#40 Bottoms_Up on 07.04.16 at 8:51 pm

#12 F.dover on 07.04.16 at 7:22 pm
—————————
Profs making that kind of dough are typically very good researchers that bring in millions of dollars in grant money to the university, plus may have business interests. They did mention they are workaholics, but given their choice of profession and to maintain that salary grade, they likely have no choice.

#41 joblo on 07.04.16 at 8:55 pm

“but this is nothing but a case of truck-stop, dumb-ass,”

Hey easy on us truck stop dumb-asses :)

#42 Balmuto on 07.04.16 at 8:56 pm

#203 Shawn Allen on 07.04.16 at 4:14 pm
Fractional Reserve Banking

#191 Balmuto on 07.04.16 at 2:15 pm …

Good example. I agree with it but not your end conclusion. Your example is what I call step one and it shows how the bank is funding Bob’s loan with Bob’s own deposit. All is in balance as you say.

Can you continue to show how the example works when Bob spends the $900 in the chequing and account assume whoever he spends it with deposits it in a different bank?

What will assets and balance sheet look like then?

Will the bank need to attract another $900 deposit from say Sue to replace the $900 Bob had on deposit as it has flowed away to a different bank?

What is then funding the $900 loan to Bob? Is it not the new deposit from Sue? (or whomever they attract the deposits from)
——————————————————————–
Thanks Shawn. To your first question, I would say that when Bob spends the $900 and it ends up as a deposit in another bank then Bob’s bank is still balanced but its balance sheet has been reduced in size. The bank has lost a $900 liability (Bob’s deposit) but has also lost a $900 asset (the cash reserves to fund the wire transaction to an external bank).

To your second question, the $900 loan to Bob is an asset that remains on the books while the corresponding liability of his $900 deposit was removed. Which would appear to create an imbalance. But then another asset was removed (the $900 in cash reserves) so in aggregate, both assets and liabilities were reduced by $900 and that should be all that matters.

Finally, to prevent the size of the balance sheet from permanently being reduced by $900, Bob’s bank will indeed need to attract new deposits. But in your example, “Sue” could simply the mirror image of Bob at another bank. There is no need for Sue to be a “saver” squirreling her money into GICs. She could have also borrowed $900 from her own bank and used the proceeds to buy goods from a retailer that used Bob’s bank, and vice-versa for Bob. The impact to both banks would therefore net out and there would be no impact to either bank’s financials.

Hope that helps.

#43 };-) aka Devil's Advocate on 07.04.16 at 8:57 pm

Crowdedelevatorfartz on 07.04.16 at 5:56 pm
Yo Devil’s Advocate

Just read an article in last weeks Economist.

Probability of Jobs replaced by software
(where 1 = certain)

Dentists o.oo4
Clergy o.oo8
Firefighters o.17
Actors o.37
Pilots o.55
Typists o.81
Real Estate Sales o.86
Accountants and auditors o.94
Telemarketers o.99

Apparently there is a God and its Microsoft.

That is because, like you, the author of Thee Economist article doesn’t actually know what a good realtor does. If it was as easy as posting information on the Internet I would agree. But that is the last thing that gets a home sold.

I am not the least bit concerned a that the real estate services profession will meet its demise anytime soon. The internet only enhances what we do and how we do it. It is not, can not and will not be a substitute. But to understand that you would have to know what it is we actually do.

#44 tkid on 07.04.16 at 9:06 pm

Why did they lose at life? Can you explain your reasoning?

They have a child. Their priority is the well-being of the child. And yet, they want to expose their child to financial hardships and money worries? Children are not oblivious to how secure their parents are financially.

When things go badly financially for these two, they will find they have NO emergency savings, nothing in their kitty for retirement, and a ton of debt that will cost them their brand new house. In this situation, the child will suffer.

What should they do? Bin the need for the new house, and unless they have immediate plans to sell the current house, quit adding the value of the current house into their fiscal mathematics.

They also need to quit adding the value of their pensions into their fiscal mathematics. Why? Because the first pillar of financial security is can you stand alone if pensions, cpp, and oas suddenly disappear? These two can’t.

So they need to fix this. They are spending way too much money right now (leaving beneath their means, oh God my ribs hurt from laughing too much). They need a pro to go over their spending (think Gail Vaz-Oxlade) and determine what can be cut. They have 10 years before they hit the big 65. If they can come up with $200,000 a year and toss that into savings, they’ll have over two million for retirement.

If they go to Garth, and get him to be their financial planner, they will be the first set of The Fiscally Challenged that Garth has semi-profiled who then went on to correct their mistakes. And everyone here will be impressed with them.

#45 Paul on 07.04.16 at 9:16 pm

Hey Garth
Buckle up!!!!

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

#46 WallOfWorry on 07.04.16 at 9:20 pm

#29…..”Garth or whomever wishes to comment; what is your take on Silver. It is a heavily used mineral in many industrial applications and it has been on a real tear lately?? I am asking long range not short. Thanks.”

Silver follows and amplifies the move in gold. Many, like Garth will scoff at holding precious metals. However, some will argue that we are in the midst of a currency war, so as nations pump liquidity into the market trying to fuel growth (along with low interest rates) you should see the precious metals appreciate. This is a very volatile market. I am a firm believer that everyone should hold at least 5% in precious metals…and due to the macro-economic circumstances we find ourself in…I would argue with a 10% core holding. Finally, you could diversify that holding between the precious metal itself as well as the miners. I am a proponent of holding the miners as that is where the leverage is…and therefore reduce the overall percentage. ie) hold 5% in miners and ignore the volatility. We have entered a new bull market so buy and hold for the next few years as the currency issues work themselves out.

#47 acdel on 07.04.16 at 9:25 pm

#38 Bottoms_Up

If that is the case as you stipulated, then there services would be welcomed in any Canadian affordable city; there is always a choice..

#48 young & foolish on 07.04.16 at 9:29 pm

“How does one earn a $360,000 annual salary and yet have frak all in savings?”

Stop bashing folks like these, they may be big spenders and thus good customers for your business!

#49 WallOfWorry on 07.04.16 at 9:32 pm

I know that Garth will dismiss as “doomsday” posturing…but for those that are interested in the risk associated with high government debt and low growth levels from a respected author:

https://ellenbrown.com/2016/07/01/brexit-and-the-derivatives-time-bomb/

A “respected writer” who calls the American central bank a “private cartel.” Shows where you are coming from. Another bullion-licker. — Garth

#50 Vanreal on 07.04.16 at 9:34 pm

Ok. You may not have made up the letters but someone sure did. I think your chain is being yanked big time.

You should read my mail, 99% of which is never posted. — Garth

#51 Julie K. on 07.04.16 at 9:36 pm

Would appreciate clarification on statement “largely preserve the capital”. What % preservation = “largely” using a million as lump sum invested over 30 years? 90%? 75%?

#capitalpreservation

#52 Willdaman on 07.04.16 at 9:42 pm

To those piling on the professors…you guys need to stop and think for a moment about the path that got them to where they are.

So you really think they started working at 23 as profs making $360k combined and worked for 30 years at that salary with no debt?

Minimum they each would have had 4yr under grad, plus 2-4 years for their PhD’s (pretty much a standard prerequisite to be a prof). Add potentially a couple of years post doc research. Add tuition for undergrad and grad school. Durong PhD you get a pittance stipend to live off, which doesn’t put a dent into your debt. Start as a non tenured prof making peanuts. I knew a guy in 2000, early-mid thirties, who was an assistant prof in health sciences, started at $50k/year. Salaries slowly creep up from there, and security from getting tenure is a bonus.

So once you start making better money and pay off your education debt, buy a house, have a kid and pay for those expenses, I can easily see how these two profs are in the position that they’re in.

#53 Freedom First on 07.04.16 at 9:44 pm

I always find all of the write-ins to Garth very interesting. Reminds me that most people are going to do what they are going to do, regardless of what wise advice they are offered. I see it all the time. And I am perfectly ok with that.

For myself, the 1 trait I have that I think has been the most liberating for me, though there is several, is that I put 0 thought into trying to impress anyone with what I own, or don’t own, or how I live my life. Throughout my life, many men have told me they admire how I live my life. But very few women. Not at all surprising to me.

As always, my Freedom First.

#54 crowdedelevatorfartz on 07.04.16 at 9:50 pm

@#25 Andrew
“Calling the EU “undemocratic” is about as accurate as saying Brexiteers are all “xenophobic”……
*******************************************

Watch out! Billy Bob thinks ‘xenophobic” is for simplistic dolts….he prefers “Bigoted buffoons”… far more cerebral.

@# 35 Devils Advocate
“But to understand that you would have to know what it is we actually do…..”
*******************************************

Ummmmm, Let me take a stab at it oh wise and merciful Glorified Used Car Huckster……..

Sales?

#55 A. Paul Gill on 07.04.16 at 9:52 pm

Garth,

Thanks for sharing these stories. I don’t know the real estate market that well, but I do understand supply and demand.

Apparently, there is a thing called “Vancouver logic”. It’s sort of logic, but like a Twilight Zone kind of logic. I hope the best for all these people and hope they understand that the contrarian view is only unpopular until it become the rule. In that light, one comment is important to mention.

Comment #29 is exciting and refreshing in that regard ecause it takes the contrarian view. Silver will go up. It should be trading at 10% the price of gold which should be $ 130 USD but it’s trading at $ 19. It’s a 10 bagger waiting to happen. Companies like Great Panther Silver have doubled and will so again. Other commodities like lithium, gold, graphite and oil also look positive. You home is an asset where you are able to create liquidity from right now. It will not always be the case. Liquidity is not the norm for markets. A balance of buyers and sellers is the norm. Good luck to all.

Silver is likely the worst investment anyone could make outside of silver mining stocks. It’s lost 60% of its value in five years. More to come. — Garth

#56 WalMark of Sadkatoon on 07.04.16 at 9:56 pm

poor souls

all 3 are slaves of different stripes

but still slaves

clear as day

it’s too bad

#57 Shawn on 07.04.16 at 9:57 pm

Balmuto on Banking

The bank has lost a $900 liability (Bob’s deposit) but has also lost a $900 asset (the cash reserves to fund the wire transaction to an external bank).

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

Thank you, your explanation is good. They did not have said cash reserve in your example but okay they can borrow that from the central bank and then attract the new deposit as you say.

Not sure Sue is going to borrow money from one bank to place in another. Maybe Sue’s deposit came from selling Bob or someone else a paid-for car. Pure savings as far as Sue in concerned.

In your example your bank needed to attract a deposit to fund Bob’s loan. That is the point. At that point they in effect borrowed Sue’s deposit to fund Bob’s loan.

Bob’s loan was initially funded by the deposit the bank created for him. But as soon as he spends that the bank needs to have borrowed a deposit from Sue or some else in order to keep funding that loan.

The thing is any bank balance sheet will show that the loans are offset mostly by deposits.

Some people read the Bank of England paper and read about fractional reserve banking and came to the conclusion, for example, that the statement

“One man’s debt is another man’s savings” is false. Well, the bank balance sheet says it is true.

I mean, do some people think that no one has any savings at all in the bank because the banks created the deposits in the first place?

Even at the initial getgo, one could say that the bank borrowed $900 from Bob in order to give Bob the $900 loan. After all the deposit they created in the checking accounts is a debt the bank now owes to Bob. Bob just asked for his loan to the bank (the deposit) to be paid back right away as he spends it.

Whatever, I have said for years and years that on this blog, extremely few minds are ever changed.

People think what they want to think. A few people even get very angry and resort to name calling if others don’t agree with them.

Whatever, I devote a fair amount of time trying educate people. I have the credentials to support that. And I occasionally post a link to my web site and so readers here know exactly who I am and what my credentials are. (But Garth does not like me to use his site to attract traffic to my site, that’s fair and I respect that)

Some people may appreciate my efforts, others not so much.

I am thinking of imposing another several months ban on myself in posting here as it is indeed a waste of time. Some will be glad to hear that.

Thanks again for your respectful contribution.

Meanwhile perhaps we should all just buy some bank shares. I have 36% of my portfolio in financials, almost all of that in bank stocks (some preferred). That seems like enough.

#58 ww1 on 07.04.16 at 10:01 pm

“$1600/mo pension from her employer, or a $226,000 lump sum.”

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

The decision to commute can be bit complicated. Her pension payout amounts to an 8.5% return on the amount available by commuting. So, given an expectation of a balanced portfolio paying out 6% (not guaranteed by an means in the next 5 to 10 years) or staying in the pension and making 8.5%, not commuting seems like a better financial decision

This assumes :

1) You trust the company (or government institution) to continue to pay that pension amount for the rest of your life. Or expect it to offer an equivalent commuted value later if they choose to fold up the pension plan.

2) Your pension has survivor benefits so that your spouse continues to draw all (or even a reduced amount).

Risks vs rewards? The best decision is not clear to me.

#59 Shawn on 07.04.16 at 10:04 pm

Sorry, one more…
Balmuto said:

There is no need for Sue to be a “saver” squirreling her money into GICs. She could have also borrowed $900 from her own bank and used the proceeds to buy goods from a retailer that used Bob’s bank, and vice-versa for Bob.

*****************************************
But that GIC thing is a possibility isn’t it? And does not the retailer consider his deposit to add to his savings? It was an addition to the retailers cash in the bank.

Damn what a waste of time this has been…

#60 WallOfWorry on 07.04.16 at 10:09 pm

Silver is likely the worst investment anyone could make outside of silver mining stocks. It’s lost 60% of its value in five years. More to come. — Garth

You are funny! You pick the absolute high and use that as the comparable. Why don’t you go back 10 years? However, mark this page as this will be just another one to add to your lengthy list of being continually wrong in predicting financial markets. When are interest rates going up Garth? Oh right…Brexit means they can’t but even you point out that Brexit is quickly forgotten. Comical.

My apology. Since 1980 silver has lost 81% of its value. — Garth

#61 Cristian on 07.04.16 at 10:12 pm

“I am a Bernie Sanders supporter and do wish that we had a more egalitarian society for us all. ”

Ha, ha, ha, you idiot, in the egalitarian society you crave you’d make $30,000/year like everybody else around you. And that’s only for a number of years, until everybody understands there’s no point in trying to work harder and try to improve your life because it’s simply impossible, you won’t be allowed to. I grew up like that. Go live in North Korea for a while if that’s what you miss.

#62 Bottoms_Up on 07.04.16 at 10:24 pm

#22 A Yank in BC on 07.04.16 at 7:50 pm
————————————-
A strict teaching professor may earn a starting salary of $55-65,000/yr, and average age is mid- to late 30’s. You need to bring in big grant money to earn anything decent, which means massive competition writing grants, and employing an array of lab rats/researchers.

#63 JM on 07.04.16 at 10:27 pm

Commuted value on pension seems a little low in this case, but still a good option to have control in the long run, lots of pensions that seem secure have run into trouble.

#64 Biggest Guelph Fan on 07.04.16 at 10:34 pm

I bought a 10 oz bar of silver in the late 70’s as a teenager at about $40/oz. it was during the time the Hunt brothers were trying to corner the market. I think my Dad let me do it to learn a lesson. I never sold that bar, it sits on my desk at my home office and reminds me everyday about mania in the markets. I’ll never get back that money but I learned a valuable lesson. It’s never “different this time”

#65 Soviet Capitalist on 07.04.16 at 10:34 pm

Having grew up in Soviet Union, it drives me nuts to see people from a prosperous society still praising communism.
Have they been living under a rock?!
They appear totally detached from reality.
Instead of ruining the American continent with this sort of ideas, why they don’t just move to a communist country to ‘enjoy’ the egalitarianism?!

#66 Brydle604 on 07.04.16 at 10:35 pm

Ontario tried a speculation tax on property, and the market ‘collapsed overnight’

This could change the market in Vancouver in a hurry if the Politicians had the balls to enact it.

http://business.financialpost.com/personal-finance/mortgages-real-estate/ontario-tried-a-speculation-tax-on-property-and-the-market-collapsed-overnight

#67 bill on 07.04.16 at 10:36 pm

#9 yeah right on 07.04.16 at 7:05 pm
Who made coin during the gold rush?
hmmm…the guys selling eggs didnt do to bad either…
http://www.smithsonianmag.com/history/gold-rush-california-was-much-more-expensive-todays-dot-com-boom-california-180956788/?no-ist

#68 Don't commute the pension just yet on 07.04.16 at 10:44 pm

How can u advise them to commute the pension plan when it’s spitting out 8.5%? (1600*12)/226,000.

I think it’s relevant to know what company the pension is with. If it’s govt. you’d be crazy to commute it knowing how hard it is to earn 8.5% these days. Take into account how hard it is for avg folks to be disciplined to remain invested in these volatile markets.

Just being realistic.

Not government, which creates sizeable risk. — Garth

#69 Sydneysider on 07.04.16 at 10:46 pm

What kind of academic writes “anyways”?

#70 John in Mtl on 07.04.16 at 10:47 pm

#44 tkid on 07.04.16 at 9:06 pm

“…They also need to quit adding the value of their pensions into their fiscal mathematics. Why? Because the first pillar of financial security is can you stand alone if pensions, cpp, and oas suddenly disappear? These two can’t”.

I bet 90% or more, Canadians are in this boat – if public pensions and any private pension dissapears, they are toast. Wanna bet there’ll be a revolution; politicians, CEO’s and banksters will be hanging from lamp posts in all cities if it ever comes to this?

#71 Balmuto on 07.04.16 at 10:56 pm

#209 Mark on 07.04.16 at 5:41 pm
“A bank starts the day with a perfectly matched balance sheet (Assets = Liabilities) and then receives two customers: Sally the saver and Bob the borrower. Sally makes a cash deposit of $100 into her savings account. Bob wants to borrow $900. The bank lends Bob $900, in the form of credit to his chequing account. Let’s look at the net impact on the balance sheet:

Assets = $100 cash reserves + $900 loan to Bob = $1,000

Liabilities = $100 credit to Sally savings account + $900 credit to Bob chequing account = $1,000

Assets ($1,000) therefore equal liabilities ($1,000) and cash reserves of $100 represent 10% of liabilities.

Doesn’t quite work that way. This is how it works. A saver decides to start a bank. They contribute $100 which is known as equity. This equity becomes a liability of the bank as it has been borrowed from the saver.

The bank uses this $100 in equity to ‘backstop’ borrowing an additional $900 from other savers. The bank uses the $1000 thus on the balance sheet to make a loan to a borrower.
——————————————————————–
Are you suggesting the bank needs to borrow the $900 from external sources before being able to lend out the $1,000? If that is the case, then how do you suppose the bank will receive the proceeds of such borrowings? I can think of only two ways: the bank will receive a physical cash payment, or the bank will receive a wire payment from another financial institution, and ultimately this will end up as a credit in its Bank of Canada settlement account, which counts as a cash reserve. As a result, the bank will now have an additional $900 in cash reserves, for a total of $1,000 ($100 coming from the cash deposit of the initial saver). There are now $1,000 in reserves backing $1,000 in deposits (assuming the loan was deposited back into the same bank). I fail to see how that results in a “fractional” reserve banking. Unless you assumed that the original $900 borrowed by the bank was in the form of demand deposits and not term loans. In which case you would now have $1,000 of cash reserves backing $1,900 of deposits – a 53% reserve ratio, not the 10% ratio you seem to be implying.

That doesn’t sound like the banking system we have.

Now if the bank instead lends out $1,000 by simultaneously creating a $1,000 deposit, no such addition to cash reserves takes place. Not $1 has been added to the bank’s vault, nor $1 to its settlement account at the Bank of Canada. The bank still only has its initial $100 in cash deposited by the initial saver in its reserves to back the $1,000 – which gives you the typical 10% reserve ratio.

I can’t see how the banking system in aggregate would get to this kind of ratio if the process was only as you described.

#72 Basil Fawlty on 07.04.16 at 10:56 pm

Garth you are a cherry picker. A commenter asks you to look back 10 yrs on silver, so you go back 36yrs. Amazing, precious metals and their shares are on a tear and you still are in denial.

Volatile, capricious, unstable asset wholly unsuited for ownership by any prudent investor. — Garth

#73 Silver Surfer on 07.04.16 at 10:56 pm

The time to buy silver was at the start of the year. For those wanting to get in now the SHIP HAS LEFT THE PORT. Getting in now is buying really high so don’t do it!!

#74 Mark on 07.04.16 at 11:05 pm

“Damn what a waste of time this has been…”

Don’t beat yourself up over it. We’ve both given extremely clear and concise examples. Sometimes people don’t know what they don’t know, and that’s what makes them rather undebateable.

#75 TurnerNation on 07.04.16 at 11:08 pm

Acquaintances house in Vaughan sold. Unsure of price though it listed at 1mill. (My head lists reading that price.)
Bought 10 years prior for 425k. Over six figures in renos were poured in.
Not too far from Dork University.

Anyway I shorted the close on Fri. Give us a few days and we’ll take off the weight.

#76 45north on 07.04.16 at 11:11 pm

I am a Bernie Sanders supporter and do wish that we had a more egalitarian society for us all. All the best, Max.

Let’s restate your problem. You are two professional people whose careers are very important to them. Very important. Sell your house and rent. $1.7 million at 7% should give you $119,000 a year with which to rent. You would be in a good position to follow your careers wherever they take you.

Let’s put it another way. If you go ahead with this crazy ass scheme you could wind up with a $700,000 debt, own a house whose value is declining and not be able to follow your careers because you are stuck in the house.

Over the picnic table I heard Vancouver real estate has gone parabolic. I believe it’s going to crash.

#77 TurnerNation on 07.04.16 at 11:12 pm

US markets that is. TSX was up on resources.

#78 Metaxa on 07.04.16 at 11:15 pm

# 52 Willdaman

…So once you start making better money and pay off your education debt, buy a house, have a kid and pay for those expenses, I can easily see how these two profs are in the position that they’re in.

assume goodwill, make logical assumptions, offer an alternate view without insult or false bravado…Who are you?
Where did you come from?

(lol)
((as the kids would say))
(((three?)))

#79 Doug in London on 07.04.16 at 11:18 pm

As you are no doubt aware today, July 4, is American Independence Day. It’s a holiday and date of great significance in the history of the United States. Only 3 days ago it was Canada Day, also a date of great significance in Canada’s history. On that date in 1867 the first 4 provinces (Ontario, Quebec, New Brunswick, and Nova Scotia) united to form Canada, seemingly against all odds as not everyone saw the merit in such a union. Only farsighted people like Sir John A Macdonald himself had the foresight and vision to see such merits.

Most likely the first order of business for the next few days after Confederation on July 1 was the signing of various documents pertaining to terms and conditions of this new union. From what I’ve read above, as well as in other posts here by Garth, the second order of business right after Confederation should have been to get good financial education going RIGHT AWAY in the schools of this new nation. It’s LONG OVERDUE.

#80 NoName on 07.04.16 at 11:29 pm

find a triangle and press play!

http://www.wsj.com/articles/SB10001424127887324659404578503373420392566

#81 leavingsoon on 07.04.16 at 11:32 pm

@ Willdaman

2-4 years for a PhD?!?! I wish. Maybe for some fields. Or if you do it in Britain. The 5 year PhD was pretty standard in STEM fields back when the 50 year old PhDs did their graduate degrees already. These days its often 5.5-7 for the wetlab sciences.

#82 Carlyle on 07.04.16 at 11:50 pm

#23. Acdel – For those 15 to 25 yrs to retirement save up and move to a different country upon retirement

That’s my plan. At 39 starting a new job I got into the defined benefit pension game late, but I think that it’s not too late. The hard choice will be choosing to quit at 55 so I can commute into a LIRA, or continue to work until I hit 85 factor at 62. With my work pension the choice to commute disappears once you hit 55.

#83 SWL1976 on 07.04.16 at 11:52 pm

Ebbs and flows, learn to ride the wave.

Garth, I have to agree with WallOfWorry. The US Federal Reserve is a private shady banking cartel and your love and faith in them will only lead to heart break. Your missed calls on interest rates amongst other things are really starting to show. As far as silver goes, I have doubled my money in a short time and have no plan on getting off this wave any time soon. Surf’s up.

Love your blog, but perhaps you should value the information more here in the steerage section. If memory serves me, we do have a better track record on many calls than you, our gracious host.

Tinfoil theories are becoming much more sane in this mixed up world

Bullion licker or fake paper worshiper???

Pick your poison. It’s all about balance

#84 };-) aka Devil's Advocate on 07.04.16 at 11:55 pm

#24 NoName on 07.04.16 at 7:57 pm
#207 };-) aka Devil’s Advocate on 07.04.16 at 5:19 pm

Go and re read my post, and you just might notice that i never dissed an education. i just pointed out what i did, INTEGRITY, let me put that in a BOLD for you.

You can quote whoever you want, and spin it any way you want, you and me know what is all about.

NoName

Hate to be a grammar cop and gawd knows my english is far from impeccable but seeing as you are on a related topic; it’s “you and I” NOT “you and me”. TIP: as were you speaking of yourself “… I know what it’s all about”. NOT “me knows what it’s all about”.

Don’t, DON’T, belittle education. it makes you look, and apparently sound, like a complete imbecile and a target to rightfully be called out on such an ignorance.

#85 };-) aka Devil's Advocate on 07.05.16 at 12:03 am

#54 crowdedelevatorfartz on 07.04.16 at 9:50 pm

@# 35 Devils Advocate
“But to understand that you would have to know what it is we actually do…..”
*******************************************

Ummmmm, Let me take a stab at it oh wise and merciful Glorified Used Car Huckster……..

Sales?

Actually no… education. A REALTOR®, a good REALTOR®, helps their principal make well informed decisions. There is no “selling” we help our principals make informed decisions by educating them on the facts and their options… all their options along with the perils and gains of each. We don’t fortune tell we deal with the real of history and here and now.

If you are being “SOLD” then you need to look for another agent.

#86 bill on 07.05.16 at 12:09 am

#73 Silver Surfer on 07.04.16 at 10:56 pm
yeah .. a bit late now -you sold ? I did last week.

#87 Mark on 07.05.16 at 12:10 am

“Are you suggesting the bank needs to borrow the $900 from external sources before being able to lend out the $1,000? “

Yes. That’s how it works. The bank needs to attract $900 worth of deposits, or otherwise borrow the $900 from other banks, from the money markets, etc., in order to fund the investment into a $1000 loan. It could even raise money through equity issuance to cover the balance, although usually the ‘cost’ of equity (ie: expected return) is significantly higher than other sources of funding.

It is equity (ie: assets in excess of liabilities) that gives the bank the credibility to go out and borrow. Whether from the public (as depositors), or from the money/bond markets. Keeping a good credit rating is hence a “life or death” situation for a bank, and banks will do anything, even lie, about their financial health, to maintain public confidence in their credit-worthiness.

” If that is the case, then how do you suppose the bank will receive the proceeds of such borrowings? “

Depositors bring cash, or they bring the electronic equivalent through a payments network, ie: Fedwire, etc.

As a result, the bank will now have an additional $900 in cash reserves, for a total of $1,000 ($100 coming from the cash deposit of the initial saver

There is no need for a bank to hold reserves, and they generally don’t. As Shawn pointed out in his post, all a (Canadian) bank needs to do is maintain risk-weighted assets that are approximately 110% of risk-weighted liabilities. Banks maintain day-to-day short-term liquidity sufficient for small transactions, but they are forced to go into the interbank financing market if there is a significant cash shortage which cannot be rectified on a same-day or overnight basis. In extreme cases, that of a significant imbalance in current assets and liabilities, banks can take certain assets to the Bank of Canada’s “discount window” for short-term cash resources. Significant use of the ‘discount window’ is usually seen as a loss of confidence in the institution, which, left unarrested, tends to result in a bank run.

“Not $1 has been added to the bank’s vault, nor $1 to its settlement account at the Bank of Canada”

I think you don’t really understand the role of the Bank of Canada in the contemporary Canadian banking system. The banks do not keep funds or reserves “on deposit” with the BoC. The BoC’s role is primarily to implement monetary policy, and to provide a discounting/liquidity mechanism in support of monetary policy.

#88 Vic Beaumont on 07.05.16 at 12:11 am

Man you are funny! You are right, how could you NOT comment! Keep it up my friend as you make me laugh every weekday! Where do you get those awesome pics??? Do you subscribe to a dog blog of some sort?

In real estate you are 100% correct. In your comments about central bankers being right, Believing the American stats on employment and ISM…not so much. That s OK though, you blog brightens my day! Dont ever quit!

#89 not 1st on 07.05.16 at 12:41 am

Garth, you are wrong. Silver is not the worst investment – govt treasuries are. Anybody that owns these is a fool to the extreme. 12 trillion in negative yield and you support govt follies by giving them your money to play with.

If things do turn into positive yield someday, they are going to pay you out with your own hard earned and taxed money. People are DAF if they own these things. Silver and gold make way more sense.

#90 Donny Brown on 07.05.16 at 12:57 am

The really really stupid part of this ‘professors’ comment is that he thinks American politics has anything to do with Canada.

“You may have PhDs, but this is nothing but a case of truck-stop, dumb-ass, HGTV house horniness which you’re blaming on an 11-year-old. Shame. No sane person spends that kind of money on a duplex unit”

This moron probably voted for the Canadian version of a destructive naive politician in Trudy McFarty Pants…but can’t figure out why his life is swirling down the toilet….

This turd is a big part of the problem of how we end up with a clueless moron like Lisping Turd as PM

#91 Frank on 07.05.16 at 1:24 am

The number of people in here that think professors primary role is to teach is shocking. Have you ever been to a university campus? They’re not teachers, they’re now akin to researchers. Grad students do the teaching. Professors are usually top 3% in their field, pushing the boundaries of whatever field of study it is. Whether or not you think it’s valuable, no one cares, you’re probably not in the top 60% of what you do. Of course they make decent money.

Why don’t they have a ton saved up? Because they haven’t been making that forever. They probably made $40k a year until they were 38 years old.

Academics can annoy me to but lets not talk filth about them. Universities have been a massive force of enlightenment in western society since the middle ages. Many of the key innovations of society both technical and cultural of the last 400 years have come from halls of learning.

But yeah, they shouldn’t but the place.

#92 Professor Salary...Smoke & Mirrors? on 07.05.16 at 1:47 am

SFU highest Professor Salary = $129,000/yr ($102K/yr short in total of what they claim)

SFU highest Professor Salary Merit = $144,600/yr ($70K/yr short in total of what they claim)

Even if they write books (no longer lucrative unless you self publish), they still come up short of $360K/yr. Also, at their age it is unlikely they are at the peak of the above salary amounts unless they began teaching at 24 and had a salary scale increment every year of their lives (again, unlikely).

Doubtful they make the difference up teaching into part time studies at night as there are maximum hours/week collective agreement rules and that is usually done by cheap/grunt sessional instructors which are way down the pay scale.

Only higher possible salaries if they are in the Administration, which is unlikely from the tone of the letter.

Garth, are you sure about their salary? I think they are blowing smoke up one of your private parts.

#93 Bobby on 07.05.16 at 2:28 am

For #43 Devils Advocate,

Yes, I’ve bought and sold many houses and many times I’m left scratching my head as to what the realtor actually did for their commission.

#94 BillyBob on 07.05.16 at 3:24 am

Yes.

This really is the leader of a G7 nation. Really waving a rainbow Canada flag like a drunk college student.

Canada is becoming the laughingstock of the world. Just try to picture Obama jumping around at a Pride parade with a rainbow-altered Stars and Stripes and you realize how absurd JT looks.

Celebrate whatever you want, but don’t disrespect the nation’s flag. Especially if you happen to be, oh, the Prime Minister. He looks like an absolute clown.

The reasons to be proud to be Canadian slip away daily…it isn’t a country, just a collection of special interest groups.

Say, is he wearing his pink anti-bullying shirt that Smoking Man loves so much?

http://www.theglobeandmail.com/news/toronto/a-positive-solidarity-highlights-toronto-pride-parade/article30734527/

#95 Canis on 07.05.16 at 3:57 am

I’m pretty sure the professors’ 1.2 million in the university’s pension plan is in two registered, defined-contribution accounts that aren’t going to disappear (as defined-benefit plans can). Their contributions to these consume almost all their registered-plan “room”; thus their otherwise surprisingly small savings in an RRSP outside the pension plan.
Given their earnings, they are working in “applied” fields that attract research grants and contracts, and/or they are doing significant amounts of administrative work.
If they’ve been earning six figures plus for a while — and their ages would suggest they have — they should have more in their pension accounts; my guess is they have invested their contributions (and the university’s) too conservatively.
Their story suggests the danger posed by Vancouver’s current real estate mania to the city’s social fabric and institutions. No family with their income — however high it seems to most — should consider spending more than $2 million for half a house. But lots of locals like them think like they do these days.

#96 Shilly Shally on 07.05.16 at 4:36 am

“Assuming interest rates remain flat or slowly climb (and not fall!) I’d throw all my eggs into the ZPR basket for ease and inflation protection, balanced portfolio be damned!”

1) I would say that the CPD is the better bet….great potential upside IF rates ever get a whiff of incremental adjustment. Meanwhile it’s a good little payer to add to an equity heavy portfolio at this stage where it seems that both ZPR and CPD have hit bottom and are consolidating nicely.

2) The Pimco managed PGI.UN is yielding 8.34% avoids the pitfalls of a dead money bond ‘balanced portfolio’. It is structured around ‘loans’ rater than debt….hence the attractive non correlated to equity or bond performance.

#97 Dave in Kincardine on 07.05.16 at 6:23 am

Comment on #6, “Bonds rally, yields fall at the same time the stock market rallies. Is the government stepping up to buy and push the stock market higher to boost confidence?”

I think it is unlikely. If you look the rally is around Utilities and Consumer Staples – both defensive plays that pay. People ran for the safe stuff.

#98 Ace Goodheart on 07.05.16 at 6:58 am

Is anyone watching this?:

https://www.thestar.com/business/2016/07/04/british-mutual-fund-halts-withdrawals-as-investors-panic-over-brexit-vote.html

Currency controls. In the (soon to be former) UK. Unbelievable. This is how it starts. Get ready London, you are about to be Balkanized.

The Scottish vote is coming up, they will leave (they are already in talks with the EU to obtain membership for themselves as a separate country).

And we have Trump in the USA, poised to win against a candidate with so many holes in her she looks like swiss cheese. Canada is looking better and better, as a location for displaced Americans and Londoners to escape to.

#99 BillB on 07.05.16 at 7:01 am

Garth, why did you switch to speaking in indented italics, with the quotes as non-indented plain text? Seems the opposite to the way it should be.

Regardless, the free advice is greatly appreciated as always!

#100 Zen Headspace on 07.05.16 at 7:09 am

No wonder most of the moisters coming out of university today are dumber than when they went in. Besides partaking in alcohol, weed, coke, meth, ecstasy, protests, gender neutrality, and dorm room shenanigans, they are being educated by people who are stupid. “A fool and his money are soon parted”. The professors are essentially fools. Academia is an incubator for spawning dumbasses. These folks are insulated from reality. Their behaviour is an insult to hard working people everywhere. They need to get their heads out of their butts and books, and do some real learning. Start with heeding the wisdom of Garth. Practical Reality 101.
Stop being extreme. Follow the Middle Way. As professors, you must have heard about Icarus. Stop your outrageous and dangerous desires in their tracks. Stop spending. Start saving. Enjoy the life you have without increasing your debt, your spending, or your material possessions. Be free.To follow the profitable path, look to the master, follow the master, walk with the master, see through the master, become the master. Garth is the master.

#101 OttawaGuyRenting on 07.05.16 at 7:09 am

SM Herdenomics will be a course one day.
The middle class will look back on this time in history in about 15 years. Gloom.
Tired old and beat down inside a one asset strategy. They did it to themselves – like a drug habit but one your parents approve of.

Buy a house! Buy two like my friend and rent one out and now live in the second because you can’t flip it here in Ottawa.

Scale the walls of debt like a slave griping to the reality you are JUST like everyone else. When you don’t own you are looked down upon like a peasant.

I look around at friends in their 40s-50s paying for mom and dads grocery bill. Buying THEM cars.

Funny how it goes both ways.

#102 CJBob on 07.05.16 at 7:52 am

#18 BOOM! on 07.04.16 at 7:38 pm The “perfesserrs” on the wet coast are major losers! $360 a year in income and not even 1 million in RRSP or TFSA?
________________________
Do readers here not realize that a pension is like an RRSP, and with a very generous pension you actually would have no RRSP contribution room come tax time?

These guys have done nothing wrong and if they’ve enjoyed the rest of the money they spent on trips they are doing fantastic.

#103 doom on 07.05.16 at 8:17 am

#94 BillyBob on 07.05.16 at 3:24 am
+1

and yes, we are doomed
http://peakoil.com/consumption/why-the-collapse-of-the-u-s-economic-financial-system-has-accelerated

#104 JZ on 07.05.16 at 8:23 am

I have to disagree with commuting the pension for the second guy. $1600/month or $226k? That’s $19,200/year, or 8.5% annual yield on the commuted amount. I don’t know what employer his mom works for, but unless it’s an oil and gas exploration, coal mining, or dry bulk shipping company, I doubt their unsecured debt is trading at 8.5% yield.

I would advise the guy to look up if the employer of the mom has outstanding traded debt securities and see what they are trading at before making a decision on the pension. It would be dumb to sell your pension for less than what the market is pricing unsecured debt at. In a bankruptcy, pensions have at least as much seniority as unsecured debt, and sometimes higher seniority due to political intervention.

#105 acdel on 07.05.16 at 8:24 am

Thanks for the feedback on Silver. I should have clarified that I was referring to Silver stocks as opposed to a physical bar of silver.

Most new gadgets that we purchase and will continue to purchase have rare precious metals within them to operate. Since we are moving towards such a future, new technologies, robots, etc, how much of a demand does one foresee (long term) for precious metals?

Not sure if this is true or not but I read once that all the physical gold that countries hold; if combined into one large pile would only fill up two and a half Olympic swimming pools.

#106 crowdedelevatorfartz on 07.05.16 at 8:36 am

@#85 Devils Advocate

“….helps their principal make well informed decisions. There is no “selling” we help our principals make informed decisions by educating them on the facts and their options… all their options along with the perils and gains of each. We don’t fortune tell we deal with the real of history and here and now…..”
********************************************

INFORMED decisions?
You’re either delusional OR you’ve been drinking CREA’s Purple KoolAid far far too long..

You belong one of the most information controlling cartel’s in Canada.
CREA fights every attempt to shine a light on its practices with endless Court filings.
Zillow comes to mind.
God forbid Canadians have the same access to housing info that US purchasers have with the click of a mouse. It might affect a buyers INFORMED decision AND your fat , juicy commish…….
Sales history, past prices, accurate count of days listed on the market, etc.etc.etc.
Then we have : representing both buyer and seller (soon to be illegal but today…what conflict? Nah…sign here), bid pedaling, refusing to present low bids, creating buyer or seller panic with sales tactics, omitting information unless asked, and never forget
that big…..fat…..juicy…….commission.

The last thing most real estate sales people these days want ………… is an informed client.

Because if they were “informed” they wouldnt be buying right now.

Not to worry. Its all coming to an end. Time for you to retire.
The “easy peasy” days of getting a sucker to agree to you “representing” them ( when its really the house that sells its self). Snapping a few digital photos to post on the MLS ( no 4saleby Owner Here)website. Then the exhausting demands of hammering a “For Sale” sign( careful not to get any dirt under those perfectly manicured nails) with balloons tied to it at street corners and spending a few hours each Sat and Sun “earning” a $50k commission are soon coming to an end.

No no “Informed buyers” are what is going to bite your “profession” in the nads in the very not too distant future…….if a computor software program doesnt replace you first.

#107 crowdedelevatorfartz on 07.05.16 at 8:43 am

@#94 Billy Bob

The only thing worse than Trudeau and his equally annoying “take a photo of me too” wife is THIS…..

http://www.google.ca/url?url=http://www.ucobserver.org/faith/2015/03/harper/&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwj3lf7FrNzNAhUO5mMKHbCuDPgQFghEMAw&usg=AFQjCNGMrUcMbeXS0GhflfHvYFykHfTiag

#108 };-) aka Devil's Advocate on 07.05.16 at 8:49 am

#93 Bobby on 07.05.16 at 2:28 am
For #43 Devils Advocate,

Yes, I’ve bought and sold many houses and many times I’m left scratching my head as to what the realtor actually did for their commission.

You paid the commission you must have agreed to when you listed the property for sale with that agent so;

Like the mechanic who fixes your car – what do you care what they did to fix it so long as your car is running for a price you agreed to pay.

Like the dentist who cures your toothache – what do you care how they cured it so long as they did for the price you expected.

Like the barber/hair stylist who cuts your hair – what do you car so long as you are satisfied with the cut and the price you agreed to pay.

Like the carpenter who fixes your broken door – what do you care what he did to fix it so long as it now works for the price you agreed to pay.

etc.
etc.
etc.

So too is it with real estate.

It baffles me why some homeowners would interview an agent and ask “What is your marketing plan?”. That is none of their business. What is their business is that they are confident the agent will get the job done for an agreed to price. You know that agreed price going in because you sign a contract. If the agent doesn’t get the job done to your satisfaction there is no sale and you don’t pay that agent.

And that is where real estate is different than most services – you don’t pay if you are not 100% satisfied because if you aren’t 100% satisfied you don’t accept the offer in the first place.

Real simple. You hire someone to do the job you can not do because you don’t have the skill or do not have the time to do. If you think you have the skill and the time by all means… DO IT YOURSELF.

#109 Ace Goodheart on 07.05.16 at 8:54 am

RE: #108 };-) aka Devil’s Advocate:

“It baffles me why some homeowners would interview an agent and ask “What is your marketing plan?”. That is none of their business. What is their business is that they are confident the agent will get the job done for an agreed to price. You know that agreed price going in because you sign a contract. If the agent doesn’t get the job done to your satisfaction there is no sale and you don’t pay that agent. ”

If this baffles you, you must never have sold a house.

The trick with agents is once you have them, you cannot easily get rid of them. They are not like lawyers, where you can hire and fire them at will. If you hire an agent to sell a house, you are stuck with this person. If you decide you don’t like their marketing style or their sales tactics, and you fire them and hire another one, they can actually sue you for the full commission they would have earned had they sold your house for whatever price the new agent gets. Agents routinely do this (have a look at the civil court docket in Toronto and you will see on any given day any number of people being sued by their real estate agents).

So you do have to ask a lot of questions and be very well informed. You are signing a contract with this person and it is very hard to get out of.

#110 Yuus bin Haad on 07.05.16 at 9:04 am

Anyone need to be reminded why this blog is dubbed “The Greater Fool”?

#111 Ace Goodheart on 07.05.16 at 9:05 am

RE: #100 Zen Headspace

“A fool and his money are soon parted”. The professors are essentially fools.

Not really. Profs have become talented business people, running universities as their own private cash machines.

Being a prof at a university used to be something a person did for love of the job, with the expectation that they would not do as well, financially, as their peers. Academic life was a ticket to life long poverty, in pursuit of one’s dreams.

That has all changed. Go to a Uni and have a look at how it is being run. They publish new text books every semester. All they do is change the page numbers. The profs won’t give out the page references to the old books (that are being sold on the black market) even though they wrote them.

We have talk about certain degrees being sold for certain prices, (this is already being done) as students can readily use these degrees to get jobs (look at law, medicine, nursing, accounting). Again, the University is being run as a business, selling “work tickets” to whomever can afford them.

Being a university prof has become an incredibly profitable activity, which is being undertaken by skilled business people who are watching their bottom lines and running Universities like retail stores.

Fools and their money are soon parted. However, the fools in this case, are not the professors.

#112 Hank Posilijka on 07.05.16 at 9:43 am

Fixed rate mortgage rates will soon drop as the 5, 10 and 30 year Canada bond yields fall sharply again, 0.55%, 1.0%, 1.62% with the 30 year Canada bond yield being an all time low.

#113 NoName on 07.05.16 at 9:45 am

84 };-) aka Devil’s Advocate on 07.04.16 at 11:55 pm

Don’t, DON’T, belittle education. it makes you look, and apparently sound, like a complete imbecile and a target to rightfully be called out on such an ignorance

——-

You know that you are losing an argument when you resort to “noname” caling.

funy that you over looked fact you represent other side of an argument and first thing after you quoted me all thos educated people you went and pointed finger at the banks to deflect.

Deflection, tipical response of someone who knows truth but don’t wants to admit it.

http://www.abuseandrelationships.org/Content/Behaviors/other_focus.html

integrity
inˈteɡrədē/
noun

the quality of being honest and having strong moral principles; moral uprightness.

You keep putting all those Ⓡ’s in other comments, make s me wonder maybe you are closet pirate…

NoName
NoPHD

#114 Dan Duran on 07.05.16 at 9:47 am

Don’t be too hard on the couple making 360k a year yet having only 220k in savings. “Living below their means” too. It doesn’t add up…except in one case, which seems likely to me, being they are looking for advice.. perhaps they took advice years ago and had half a million or even 1 million in some emerging markets fund, or perhaps in energy stocks or whatever the fad was 5-10 years ago. Also took advice to wait for the housing market to crash before they move up from their modest semi. Hard to believe they’d wait 11 years to realize 1400 sqft will be a bit tight at some point.

#115 CJBob on 07.05.16 at 9:51 am

For those who didn’t like T2 before the election I understand you still don’t like him and probably never will.

For many of us who did vote for him we prefer the tone of inclusion, rather than the tone of anger and fear that Harper was using. Even the Conservatives have publicly stated that their tone needed/needs to change.

It’s worth noting that all Conservative leadership candidates were also in the pride parade. If you’re against this you are on the wrong side of history.

When’s the next straight parade? — Garth

#116 $600k from Parents??? on 07.05.16 at 9:54 am

Are you kidding me ?? WTF is wrong with these parents .

Who gives their kid 600 Fu#$ing thousand!!

Ive heard of $10k to $50k but this kid is spoiled to the hilt…..and probably has zero clue how lucky he is !!

God help us ….

#117 };-) aka Devil's Advocate on 07.05.16 at 10:03 am

#109 Ace Goodheart on 07.05.16 at 8:54 am

… So you do have to ask a lot of questions and be very well informed. You are signing a contract with this person and it is very hard to get out of. …

THAT goes both ways.

Sometimes you just have to walk away. Unfortunately too often agents are so anxious to get the listing they make promises they can’t deliver on.

I’d rather turn you down than let you down.

#118 Basil Fawlty on 07.05.16 at 10:07 am

I like silver and sure it is volitile, but it is a metal with many practical uses. Germanies largest bank has admitted price rigging in silver and current prices are mainly set in the futures market.
Given negative interest rates, and bubbles in many markets, a small allocation to silver is a prudent addition to one’s portfolio. The upside potential is huge, as central bank currency debasement goes full retard.

It’s the opposite of debasement. The ECB is fighting the winds of deflation, which make currency more valuable. All PMs are doomed investment assets. — Garth

#119 Burton on 07.05.16 at 10:14 am

What do you expect from academics. Probably have PHD’s in gender studies and ethnic relations. That would explain a lot.

#120 Shilly Shally on 07.05.16 at 10:19 am

Speculation tax history.

“http://business.financialpost.com/personal-finance/mortgages-real-estate/ontario-tried-a-speculation-tax-on-property-and-the-market-collapsed-overnight”

I think the market is too big to fail this time around and the government can’t afford to let the last pillar of the economy standing to fall.

Low rates have caused a new monster to lift it’s sleeping head….fiscal stimulus….governments spending massively for the foreseeable future. Look for egregious increase in income tax in the future…start looking at shelters now.

Either way this is great for the equity market. Panic in the real estate market will drive the sidelined dough into stocks…..and stupid government spending will do the same.

#121 };-) aka Devil's Advocate on 07.05.16 at 10:21 am

#113 NoName on 07.05.16 at 9:45 am

You dissed education by implicitly putting yourself, with no education, above those with and thereby demonstrated the typical ignorance that accompanies a lack of education.

#122 Gonkman on 07.05.16 at 10:26 am

When’s the next straight parade? — Garth
—————————————————

Garth,

You should know better. We can’t have that.

A Straight Pride Parade = Homophobic Parade

You cannot be proud to be a straight human anymore (Well at least voice that opinion).

That equals being a Racist and/or Homophobic and/or Misoginist and/or +/- whatever PC Terms the MSM would like to add.

Even though you are not.

#123 Basil Fawlty on 07.05.16 at 10:36 am

Yes, they are fighting deflation through a massive money creation binge that has created unprecedented misallocations of capital. It is costing more and more for the essentials needed to stay alive. This means our money is worth less. Average people are not getting pay raises that cover the increasing costs. The value of currency is going down, in a time deflation, as the central banks know nothing but money creation through debt.

#124 Balmuto on 07.05.16 at 10:41 am

“#112 Hank Posilijka on 07.05.16 at 9:43 am
Fixed rate mortgage rates will soon drop as the 5, 10 and 30 year Canada bond yields fall sharply again, 0.55%, 1.0%, 1.62% with the 30 year Canada bond yield being an all time low.”

It’s already started. I checked ratespy for the best 5yr fixed rate about a week ago – it was 2.15% a week ago, now it’s down to 2.08%. Same provider. We’re going to hit 2.00%, easy.

#125 Zen Headspace on 07.05.16 at 10:52 am

Re: #111 Ace Goodheart

“Not really. Profs have become talented business people, running universities as their own private cash machines.”
——————————————————————–
They are fools because the money that they so cleverly accumulated by way of their academic endeavours will soon be parted from them through their financial illiteracy, ignorance, house horniness, greed, material desire, craving, and grasping. It’s one thing to know how to generate cash. It’s an entirely different thing to know how to keep it and grow it. Taking on a mortgage for bloated residential real estate in your mid-50’s is not an indicative trait of “talented business people”.
As Garth noted, they are victims of HGTV porn, on their way to house addiction and bankruptcy in their looming old age.
When you focus your attention on desire -which translates to materialism/greed, in most cases, you lose you focus on the present moment. You live in your own delusion when you desire that which you don’t already have. You notice what you don’t have, and place importance on it. You will do things that you wouldn’t ordinarily do for something that you desire. Desire isn’t need. When you’re in the Zen Headspace, you know that desire is fleeting and can’t be satisfied. It creates unreal expectations and pulls you away from reality. Reality is the only place you can really be sure of yourself.
If you already own an overvalued property in Wetcouver, cash in, move away, and enjoy the new found freedom that your once-in-a-lifetime windfall.
Or, be a greater fool, up the ante, let it ride, and forever encumber yourself into debt slavery to a ticking time bomb that will take you down sooner or later.
When a man is stimulated by his own thoughts, full of desire and dwelling on what is seemingly more attractive, his craving increases even more. He is making the fetter even stronger. But he who takes pleasure in stilling his thoughts, practicing the contemplation of what is unnecessary, and remaining recollected, now he will make an end of craving, he will snap the bonds of desire. His aim is accomplished, he is without fear, rid of craving and without the accompanying burden.

#126 young & foolish on 07.05.16 at 11:01 am

Precious Metals … pay nothing, and you can only hope somebody pays you more when you are ready to sell.

#127 Centre Wing on 07.05.16 at 11:08 am

http://www.cbc.ca/news/business/house-prices-brexit-negative-interest-1.3659726

Houses are a smart investment! CBC says so!

No, their perennial house-humping columnist says so. — Garth

#128 Damifino on 07.05.16 at 11:12 am

Who gives their kid 600 Fu#$ing thousand!!
———————————-

It’s OK as long as they don’t spend it all on one place.

#129 Shawn on 07.05.16 at 11:17 am

Banking…

For the record, while I appreciate Mark’s support I don’t agree with all that he says about banking. Sorry Mark.

Mark seems to be too focused on the other side of the chicken and egg debate saying deposits always come before loans.

As I acknowledged and the Bank of England stated. At the initial step a deposit and loan are created simultaneously. Bob’s loan is his OWN savings deposit at that moment. The bank is funding the loan to Bob with Bob’s own deposit.

Next step the deposit is transferred to a different bank and our bank must attract a deposit to continue to fund the loan (else its cash reserves fall).

After the deposit is initially created from thin air simultaneous with the loan (and there are LIMITS on this including the bank having 10% owners equity) the deposit then moves off and and moves around many times and each bank needs to continually attract deposits to offset loans.

One man’s loan is always offset by a deposit (or a bit of bank owners equity capital) owned by someone.

In banking, savings are about equal to loans. Check any bank balance sheet.

I think I presented a balanced view showing money creation by the banks AND the fact that banks need to attract deposits AND the fact that once deposits are created they belong to some customer or other and deposits are someone’s savings after they are created.

Mark may be right that banks don’t have reserves at the central bank. They CAN go there in emergencies. Technically the reserves may be at some clearing bank but that is an important detail. They DO have reserves someplace. It’s called cash on their balance sheets.

#130 Grey Dog on 07.05.16 at 11:20 am

Mark your calendars: next Straight parade is the Santa Claus parade, Toronto, second last Sunday in November, rebroadcast after the Macy’s American Thanksgiving parade. Also note March 17, St Patrick’s Day parade, mind you, one and all are invited.

#131 Mary Thompson on 07.05.16 at 11:30 am

To Hank about mortgage rates and interest rates:

Actually I just looked and they are even lower than you posted.

Canadian bonds 2, 5, 10 and 30 years are 0.48%, 0.53%, 0.98%, 1.60%.

Who knows how low they will go today.

#132 Cone of Silence on 07.05.16 at 11:33 am

Billion Dollar Fund Manager Comes Out of Retirement To Bet Against Canadian Real Estate

https://betterdwelling.com/city/toronto/marc-cohodes-short-canadian-real-estate/

#133 Julie K. on 07.05.16 at 11:38 am

Marc Cohodes (on Twitter @AlderLaneeggs) take on Van RE is intriguing.

Just watched him on GlobalBC TV. He is “expecting” a 50-80% correction to Vancouver RE in the near future.

He passionately believes hot BC housing market is directly linked to ongoing corruption within BC Liberal government allowing money laundering ex China.

Keep in mind he is shorting HCG (TSX).

Wonder if this is the same Marc I see posting here?

#134 Ace Goodheart on 07.05.16 at 11:39 am

RE: #125 Zen Headspace

“If you already own an overvalued property in Wetcouver, cash in, move away, and enjoy the new found freedom that your once-in-a-lifetime windfall.”

Totally agree with this second comment. Especially if you’re mortgage free. Doesn’t matter how nice the mountains are or how much you like rain and 10 degree weather in January in Canada, 1.7 million for a 1400 square foot 1/2 of a house is too much money. Sell and invest.

Anyone sitting on one of these 4.5 million dollar detached houses in Vancouver, who owns their house and is not selling, really needs to think about this a little more.

Too bad they weren’t in Toronto. They could purchase this for their 1.7 million:

https://www.realtor.ca/Residential/Single-Family/17037626/49-HALFORD-AVE-Toronto-Ontario-M6S4G1-Lambton-Baby-Point

Or perhaps this might be something they’d like:

https://www.realtor.ca/Residential/Single-Family/17126120/21-NORSEMAN-ST-Toronto-Ontario-M8Z2N9-Stonegate-Queensway

Yeah, I know, they’re a little more than the desired 2200 square feet. But hey, if you’ve got a little extra square footage to throw around, maybe that 11 year old will be getting a little brother or sister?

#135 rainclouds on 07.05.16 at 11:39 am

#108 Deluded Devil “And that is where real estate is different than most services – you don’t pay if you are not 100% satisfied because if you aren’t 100% satisfied you don’t accept the offer in the first place.

Name me one other service where you are absolutely sure you will be “100% satisfied” BEFORE the service is rendered. Typical arrogance from a cloistered industry.

Welcome to the new reality. MLS cracked wide open with far more data and your industry with independent oversight. Given your comments, seems overdue.

I will agree with you on this, good realtors are still required and Zillow/Oversight will not have any impact on them. Now about those ridiculous commissions…..

#136 Grey Dog on 07.05.16 at 11:42 am

Tom, DO NOT LEND YOUR PARENTS A CENT. Unless, you are fabulously well off! They will interfere with YOUR life plans and retirement. They really need to get a library card and read every single one of the jar lady’s books. Gail Vas Oxlade. Your doomed if they don’t.

Not that my Grandmother kept jars, but she was one of those frugal ladies, a case of not wanting to give up her home, at Royal York and Bloor, lived to 92 on ~$13,000./yr. she continued to do lots of activities, keeping her young and healthy right up to her final 3 months. That was just 15 years ago.

So Tom, it can be done, they need to know exactly where every dollar is spent, to have any peace in their lives going forward.

#137 cramar on 07.05.16 at 11:44 am

The two profs say they have a $360k income, live frugally, yet have only $220k in savings. Too bad 20 years ago ago they didn’t read The Millionaire Next Door by Thomas J. Stanley. He gave the equation for financial success. They know only two thirds:

High Income + Fugally + ??? = Financial Success

Paraphrasing Stanley, “Earn much. Spend Little. Invest the difference.”

I love educating University professors.

#138 Mary Thompson on 07.05.16 at 11:51 am

Standard Life’s $3 Billion property commercial fund halted, stopped, closed its mutual from redemptions.

Try to use that excuse why you can’t pay all your bills and taxes.

This will happen more as BREXIT works its way through.

#139 LP on 07.05.16 at 12:18 pm

#137 cramar on 07.05.16 at 11:44 am

Paraphrasing Stanley, “Earn much. Spend Little. Invest the difference.”
***********************

We learned, years ago, to “Give 10%, save 10%, and spend the rest in joy and thanksgiving.” It usually worked for us.

The only thing I would have changed, given perfect hindsight, is to invest that 10% rather than save it.

F69ON

#140 NoName on 07.05.16 at 12:30 pm

#121 };-) aka Devil’s Advocate on 07.05.16 at 10:21 am

You dissed education by implicitly putting yourself, with no education, above those with and thereby demonstrated the typical ignorance that accompanies a lack of education.

———————-

No its not me it was actualy you.With enough education, experience and a clean record; grandfathering would make sense. The real estate industry’s natural attrition rate at less than five years is huge.

BTW it would probably surprise you, as it did me, just how many REALTORS® have an undergraduate degree or higher.!

What i pointed out is that people gravitate where the money is, not dot i am above them. i will give you a benefit of doubt that you miss red what i wrote…

Interesting that you pointed out that there is many house salesmans with undergraduate degree or higher. I can tell you that i know/work lots of Engineering graduates or P.Eng. -s that do same job as a do.
People gravitate where a money is. But to assume that integrity kicks in with degree is funny. Thank yo for laugh.

i understand your anger, its hard to be an honest man in a crooked world…

NoName over and out, this conversation is DONE! Iam taking young lad out for an ice cream.

#141 };-) aka Devil's Advocate on 07.05.16 at 12:42 pm

#106 crowdedelevatorfartz on 07.05.16 at 8:36 am

Like I keep saying; I am not at all concerned that the real estate services profession will meet its end any time soon. NOT AT ALL.

Seriously, do you really think someone would be willing to pay $34,000 (at 7 & 3) for someone to look after securing a firm and binding deal on their house if there weren’t some value there? People aren’t that stupid. Yet 95% of homeowners, when it comes time to sell, choose the services of a professional REALTOR®.

You are a part of the 5%. I get and applaud that. The fact is, although I’m sure you don’t know it, the better REALTORS® choose their clients more than the clients choose them. You my friend are not our audience.

As in all things it is not the seller that sets the price. It is the market which sets the price of all things. Simple supply and demand. Apparently Mr. Fart there is a demand for our services which I have heard is ending for all my over two decades in the business yet, now more than ever it seems, the demand is strong.

#142 SFU or UBC on 07.05.16 at 12:45 pm

@#92 Professor Salary…Smoke & Mirrors?

Who says they’re at SFU? The list of UBC salaries offers up quite a few options in that range for even just a single earner.

http://ubyssey.ca/salaries/search/?&pg=1

(That said, I doubt it’s any of those high earning tenured professors in the school of business, with the lack of financial sense they’re showing.)

#143 CJBob on 07.05.16 at 12:52 pm

#137 cramar on 07.05.16 at 11:44 am
…I love educating University professors….
______________________________
I’m sure that with over 3 million dollars of net worth they appreciate the help.

Has anyone every seen a net worth calculation where home value (perhaps discounted) and pensions aren’t included? Garth gets you guys wound up and you fall for his math every time. Amazing. He’s sitting back laughing.

For many the hate could be jealousy because they poor profs have a higher net worth than most can ever dream of even if/when house prices do come down.

#144 Brazil ex-pat on 07.05.16 at 1:14 pm

Billiary gets off scot free from FBI investigation. The bankers and politicians never go to jail.

TRUMP 2016

#145 WalMark of Sadkatoon on 07.05.16 at 1:22 pm

My apology. Since 1980 silver has lost 81% of its value. — Garth

ouch no wonder metal lickers are poor

better them than i

#146 Ryan on 07.05.16 at 1:22 pm

Hey Garth, I know this website is a big proponent of renting vs buying in the GTA and GVA, but we’re finding that renting is not all that it’s cracked up to be either. Landlord just sold our place after a year living here (Vancouver) and is cashing out. Rents are going up too. We’re a family of 3 and rent is $2000/month. I can buy a similar place, albeit out in the burbs, with total housing costs of $2500/month with the security of knowing we can stay in one place. While I don’t feel great about getting into the housing market right now, I also don’t feel great about the alternative. Plus we’d be buying a townhome, which don’t seem to have appreciated as wildly as the detached market, so I’m hoping slightly less risk. Thoughts?

Show us the numbers. And what assets do you own? — Garth

#147 CJBob on 07.05.16 at 1:34 pm

BTW 1.2 million in the pension indicates that it is likely defined contribution, not defined benefit (can’t tell for sure but based on the wording). So for those who don’t get this, just substitute RRSP for pension.

If that’s the case do you still think they haven’t saved anything?

It’s DB, divided between them, non-commutable. — Garth

#148 Ryan on 07.05.16 at 1:45 pm

Few assets to speak of; finished studies just a few years ago. Own a car. No debt. Income of about $125,000. About $75K cobbled together for a down payment. That’s been sitting in a TFSA, which isn’t returning much these days. Looking at places in the $400-450K range. We want to live here long term.

#149 Balmuto on 07.05.16 at 2:16 pm

#87 Mark

“I think you don’t really understand the role of the Bank of Canada in the contemporary Canadian banking system. The banks do not keep funds or reserves “on deposit” with the BoC. The BoC’s role is primarily to implement monetary policy, and to provide a discounting/liquidity mechanism in support of monetary policy.”

The Canadian banks all have settlement accounts at the Bank of Canada. That is how wire payments from one bank to another are settled. The Bank of Canada will determine the net amounts owed to each participating institution and will debit/credit the balances accordingly. See the link for details. Here is the most relevant section:

“Beyond its oversight responsibilities under the Payment Clearing and Settlement Act, the Bank of Canada has two other roles in Canada’s payments systems:
•The first is settling the positions among the participants in the LVTS and the ACSS. There are about a dozen financial institutions in these systems that have “settlement accounts” with the Bank. At the daily settlement times, the systems calculate the net amounts owing among the institutions, and those amounts are settled via entries to the institutions’ accounts at the Bank”

http://www.bankofcanada.ca/core-functions/financial-system/canadas-major-payments-systems/

Now in your example where a start-up bank needs to borrow $900 to lend $1,000 and that payment was made entirely by wire, the bank would have a balance of $900 sitting in its settlement account at the Bank of Canada. Just as if the payment was made entirely by cash, the bank would have $900 in cash sitting in its vault. An unnecessary reserve to back a $1,000 loan and subsequent deposit.

Of course the bank can get reduce these excess reserves but the point is it never needed them in the first place. There is absolutely nothing stopping the bank from raising the money from the loan “internally” by simply simultaneously creating a $1,000 loan and subsequent $1,000 deposit without the external funding preamble that you described. Show me where our banking legislation prevents this from happening.

#150 YVR reverting on 07.05.16 at 2:49 pm

“Since March, we’ve seen more homes listed for sale in our market than in any other four-month period this decade”
m/m sales drops in YVR, check REGBV report …

#151 rainclouds on 07.05.16 at 2:52 pm

#132 cone of silence, Thanks!

Watched the Cohodes interview on BCTV. He pounded the Provincial politicians. Basically called them inept and liars (which they are)

Am thinking Premier Cleavage and the rest of the Sleazebags Libs are passing around a Costco sized bottle of Advil wondering what is coming tomorrow as their daily turd. The spin has machine stopped working.

As Professor Schiller said about RE bubbles ” watch the media, when the stories go negative….”

Every. Day. now.

#152 bill on 07.05.16 at 2:55 pm

#105 acdel on 07.05.16 at 8:24 am
I am pretty sure Silver Surfer was talking about all aspects of the silver market.
some of the ‘by products’ of a coppermine are precious metals . increased copper demand doesnt help silver much eh?. those appliances of which you write use a lot more copper than pm

#153 10 yr bond cracks a buck! on 07.05.16 at 3:01 pm

wow…..99 cents for canada 10 year !

Mortgage money for everyone! LOL

#154 jess on 07.05.16 at 3:17 pm

mr. carney must be worried….insurance funds/negative equity domino?

http://www.taxresearch.org.uk/Blog/2016/07/05/pray-to-anyone-you-believe-in-that-we-dont-have-a-property-crash/

=================
Property funds halt trading as Brexit fallout deepens

Surge in requests to redeem investments prompts freeze on funds as sterling tumbles to 31-year low and Bank of England says risks have crystallised

https://www.theguardian.com/business/2016/jul/05/aviva-halts-trading-in-its-property-fund-brexit-standard-life

#155 The problem with MSM on 07.05.16 at 3:18 pm

“a 0.6% per cent increase from a year ago but a 7.7% drop from a month ago”

so conveniently they fail to mention in the headline that sales are down over 7% from May ? 7% in one month!

So typical…

http://business.financialpost.com/personal-finance/mortgages-real-estate/vancouver-home-prices-head-even-higher-in-june-amid-record-sales

#156 SWL1976 on 07.05.16 at 3:18 pm

#126 young & foolish

Precious Metals … pay nothing, and you can only hope somebody pays you more when you are ready to sell.

—————–

Duuuuuuuuhhhh

Buy low sell high

For every transaction their are both winners and losers

I don’t understand the hate on for pm’s on this blog

There’s a time and place for every investment class and the truly wise should well know and understand this

#157 };-) aka Devil's Advocate on 07.05.16 at 3:23 pm

#135 rainclouds on 07.05.16 at 11:39 am
“Welcome to the new reality. MLS cracked wide open with far more data and your industry with independent oversight. Given your comments, seems overdue.”

Well now the it will be impossible for the MLS to be cracked wide open. IMPOSSIBLE.

The MLS is not what you think. The MLS is merely a conduit that facilitates collaboration between REALTORS. Each Board has it’s own system (Kinnexus, Matrix etc. ) and while the communicate with one another they aren’t the real “system”. Collaborating REALTORS are the SYSTEM.

Now tell me how are you going to harness and break that puppy wide open! Just Ain’t gonna happen. Nothing, absolutely NOTHING can control that collaboration. The harder you try the further you would be from doing so. It’d be like herding cats.

Seriously

#158 acdel on 07.05.16 at 3:32 pm

#152 bill

I agree Bill that now is not the time and thanks Silver Surfer.
The times are changing albeit slowly towards this so called “green energy”, new techno’s, batteries, etc. I am by no means an expert in this field, but I am interested in what people think where it will lead to 15 to 25 yrs in the future.

I understand no one has a crystal ball but there are many smart people out there that can predict better then most, thanks.

#159 rainclouds on 07.05.16 at 3:44 pm

#157 devil “Nothing, absolutely NOTHING can control that collaboration.”

Really? Looks like it already happened……

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03944.html

#160 Shawn on 07.05.16 at 3:47 pm

Banking… Again…

Balmuto just above said:

There is absolutely nothing stopping the bank from raising the money from the loan “internally” by simply simultaneously creating a $1,000 loan and subsequent $1,000 deposit without the external funding preamble that you described.

****************************************
Quite so. But whoever took out the loan will soon spend it, meaning the deposit created internally flows away to another bank. Then the bank needs to attract back a deposit to fund the loan else its currency reserve will drop.

Banks together with their customers create deposits. But the deposits are owned by customers who often refer to them as “savings”.

Every dollar loaned out is offset by either a deposit or saving of someone else or by a bank equity or bank bond owned by someone else and also often referred to as that someone’s savings.

Any notion that loans materially exceed deposits is false. Check any bank balance sheet. Loans are funded largely, often near 100%, by deposits.

Initially a bank can create a loan and fund it by creating a deposit because nothing has flowed at that moment in time. The bank has loaned the customer money and the customer has simultaneously loaned it back to the bank. Yes, the bank (together with the customer created money, and that’s a good thing).But the deposit will soon flow away.

If I own a house clear of debt and you buy it with a loan and I put the proceeds in your bank, I have effectively funded your loan. Formerly I had wealth in the house. Now I have wealth in the form of a savings account.

It’s all VERY good.

Like anything debt can be abused. But most money is created by bank loans. What fool would argue for a world without such money. In that world I would have to let you pay my house off to me over 25 years or whatever. I prefer the bank in the middle.

Meanwhile, I have a plane to catch… Amsterdam awaits.

#161 Mark on 07.05.16 at 3:52 pm

“There is absolutely nothing stopping the bank from raising the money from the loan “internally” by simply simultaneously creating a $1,000 loan and subsequent $1,000 deposit without the external funding preamble that you described.”

There is plenty to stop the bank from doing that. They require a counterparty for both the lending transaction (obviously), and a borrowing transaction. They cannot conjure a counterparty out of thin air. Hence, the external funding preamble is thus required, and the bank must compete with other potential debtors for those funds. They do this by offering a certain rate of interest and by using their record of credibility in repayment.

As for the Canadian banks’ participation in the BoC payments network, that’s not a matter of regulatory required reserves. That’s simply a matter of banks participating in the network and placing sufficient liquid collateral to support the flow of payments within that system to support their business. In the strictest sense, nothing obliges a contemporary bank to participate in such networks. Indeed, there are still plenty of small-town credit unions who literally borrow from their customers with savings, and lend those savings out to borrowers who need credit. The role of bank regulators in such case is to ensure that risk-weighted assets are comfortably in excess of liabilities.

#162 MF on 07.05.16 at 3:58 pm

#154 jess on 07.05.16 at 3:17 pm

But wait isnt a falling currency good for exports????

Why would Carney be worried? All that he and the rest of them do is cut rates so the currency is “competitive”.

What a joke.

MF

#163 James on 07.05.16 at 4:15 pm

94 BillyBob on 07.05.16 at 3:24 am

Yes.

This really is the leader of a G7 nation. Really waving a rainbow Canada flag like a drunk college student.

Canada is becoming the laughingstock of the world. Just try to picture Obama jumping around at a Pride parade with a rainbow-altered Stars and Stripes and you realize how absurd JT looks.

Celebrate whatever you want, but don’t disrespect the nation’s flag. Especially if you happen to be, oh, the Prime Minister. He looks like an absolute clown.

The reasons to be proud to be Canadian slip away daily…it isn’t a country, just a collection of special interest groups.

Say, is he wearing his pink anti-bullying shirt that Smoking Man loves so much?

http://www.theglobeandmail.com/news/toronto/a-positive-solidarity-highlights-toronto-pride-parade/article30734527/
……………………………………………………………………

I don’t care much one way or the other about gay pride parade or the whole thing. We have a family member that is actively involved in the gay community so its not a big deal. Sort of Mehh to us. We do have to agree that our current Prime Minister is a joke. He is an absolute bonafide opportunist who will do anything to get a photo opp. Jumping around and dancing is not going to help our broken economy. What a jerk, embarrassing as hell to other world leaders. Come on Justin do something great for this country and stop being such a sleazy opportunist.

#164 young & foolish on 07.05.16 at 4:19 pm

“Duuuuuuuuhhhh
Buy low sell high
I don’t understand the hate on for pm’s on this blog”

Pure speculation, not investment. Lot’s of people buy PM because they don’t trust “paper money” only to sell them back for …. um … paper money.

#165 young & foolish on 07.05.16 at 4:24 pm

Negative rates (not here yet, but getting closer) will break pension funds … and gut what’s left of the middle class.

Savers, you got routed.

#166 young & foolish on 07.05.16 at 4:26 pm

“The professors are essentially fools. Academia is an incubator for spawning dumbasses.”

You’ve got to love such commentary. Way to go Homer!

#167 Where's The Money Guido? on 07.05.16 at 4:33 pm

Re: #98 Ace Goodheart on 07.05.16 at 6:58 am
https://www.thestar.com/business/2016/07/04/british-mutual-fund-halts-withdrawals-as-investors-panic-over-brexit-vote.html

Same thing happened in 2008 in BC as I couldn’t cash out of my Vancity “Ethical” Mutual Fund for 5-6 months and lost 25% of my investment when they sold the fund out under me at the lowest point after ignoring my stop sale in the 4th month.
They’re all crooks when it comes to TSHTF, it won’t be their money they’re losing, mark my words there are no ethics involved.

#168 @148 Ryan on 07.05.16 at 4:34 pm

Ryan on 07.05.16 at 1:45 pm
Few assets to speak of; finished studies just a few years ago. Own a car. No debt. Income of about $125,000. About $75K cobbled together for a down payment. That’s been sitting in a TFSA, which isn’t returning much these days. Looking at places in the $400-450K range. We want to live here long term.
———————————–

My nephew got his schooling paid for by parents. Also dad had foresight to see housing bubble so bought each of his kids a house 15 years ago and rented them out.

Kids done school. Starting average jobs. No debt and paid off house. Property tax and bills paid by mortgage helper suite.

Now try to catch up to that. Lol

#169 @Brazil ex-pat on 07.05.16 at 4:38 pm

#144 Brazil ex-pat on 07.05.16 at 1:14 pm
Billiary gets off scot free from FBI investigation. The bankers and politicians never go to jail.

TRUMP 2016

——-

Why do you think here in Richmond BC they want to kick out the RCMP and start their own municipal police force.

Corruption is starting to rival 3rd world countries.

#170 Shawn on 07.05.16 at 5:11 pm

Bank deposits

Imagine bob gets loan and bank creates loan and deposit from thin air like we all agree (except mark)

So deposit from thin air yup. Bank can do until loans hit about 10 times equity by regulations.

Now bob buys my house which I own debt free

Banks need me to deposit bobs cheque back in bank to fund loan

If I and every house seller take cheque out in cash then banks can’t fund the loans.

So you see our savings DO fund the loans.

Capiche at last anyone?

#171 Dan Duran on 07.05.16 at 5:15 pm

#132 More lies and propaganda.. usual stuff ..money laundering bla bla bla…incomes up 1% in 30 years (???), “fraud” at a small private lender (no matter there was no fraud, just some irregularities that were a small part of the portfolio).. But I’ll give it to these Americans, they are persistent, they’ve been shorting Canadian banks for years now (in case you don’t know there’s no direct way to bet against RE) and made some on the exchange rate, payed it back (and more) in dividends.. You know the typical simple minded, oops, dividends, didn’t know we have to pay THAT… how did Green Day put it, you know, right?

#172 jess on 07.05.16 at 5:19 pm

MF
forecast before the vote
http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2016-issue-1/united-kingdom_eco_outlook-v2016-1-47-en#page2

or summary
http://www.oecd.org/economy/united-kingdom-economic-forecast-summary.htm

#173 Shawn on 07.05.16 at 5:22 pm

Idiot bond buyers

Who are the idiots buying 10 year government. Bonds at 1 percent?

Well banks are encouraged to do so since they are allowed huge huge leverage of equity on those under flawed risk weighted assets rules

Most pension funds buy out of habit and lemming behavior

Bond fund buy because bond fund buyers measure. Returns when rates. Fall and think it can continue

Betting on interest rate rise has been logical these past eight years and dead wrong oops the fools that borrowed to the hilt have won so far but stay tuned

#174 };-) aka Devil's Advocate on 07.05.16 at 5:26 pm

#159 rainclouds on 07.05.16 at 3:44 pm
#157 devil “Nothing, absolutely NOTHING can control that collaboration.”
Really? Looks like it already happened……
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03944.html

You don’t get it. Collaboration is quite a different thing than collusion.

There is no MLS®. It is nothing more than a bunch of REALTORS® collaborating with one another sharing their listings in a collaborative effort to bring buyers and sellers together. How would you propose you force such a collaborative group to do it your way. They won’t. They just won’t. They will do it their way. It is their way. They won’t listen to you. They’ll tell you to get lost. They won’t collaborate with you because you are not someone they care to collaborate with because you just don’t get it. You might force your way “in” somehow but when you do you will be ignored like a fat girl at a party where all the others are 10s.

Sorry but you want to get our attention you need to have something to offer that incents us. Do you best to tell us fat girls are people too… er well ya they are but we like 10s not fat ugly girls. You just don’t do it for us. So go hang out with your fat girl friends we got 10s to attend to.

Does that help you understand?

#175 ROCK BEATS PAPER on 07.05.16 at 5:37 pm

Shows where you are coming from. Another bullion-licker. — Garth

Not sure if that is derogatory. Definitely do not want to be licking paper money.

“It’s the opposite of debasement. The ECB is fighting the winds of deflation, which make currency more valuable. All PMs are doomed investment assets. — Garth”

Deflation makes currency valuable. Central bank is fighting that = trying to make currency less valuable. Each investment class has its time.

Of all the investments which are doomed, it would seem to me that $12 trillion negative yielding “safe” government bonds are doomed.

Gold has been around longer than all the others, millennia. Anyway, its not an investment, rather it is insurance.

#176 conan on 07.05.16 at 5:44 pm

RE: #173 Shawn on 07.05.16 at 5:22 pm

People are buying bonds because they think that it is the best place to be.

Most of these people are waiting for a sizable correction in the markets. They also make money whenever interest rates drop.

They might know more then you think they do.

#177 Smoking Man on 07.05.16 at 5:46 pm

It’s been a year since I’ve taken the Lakeshore go train at rush our

Packed is an understatement. Now that we are heading toward negative rates.. 2 million dollar bugees by the lake

#178 SWL1976 on 07.05.16 at 6:06 pm

#164 young & foolish

“Duuuuuuuuhhhh
Buy low sell high
I don’t understand the hate on for pm’s on this blog”

Pure speculation, not investment. Lot’s of people buy PM because they don’t trust “paper money” only to sell them back for …. um … paper money.

————–

Or perhaps ….. Um ….. Some just know when to strike when the iron is hot and use a cycle and out of control central banking lunatics to double their paper stash

How you play the game is how the game plays you

#179 };-) aka Devil's Advocate on 07.05.16 at 6:33 pm

#159 rainclouds on 07.05.16 at 3:44 pm
#157 devil “Nothing, absolutely NOTHING can control that collaboration.”

Really? Looks like it already happened……

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03944.html

Don’t you get it? You can crash the party but you can’t force anyone to dance with you.

A mere posting is like a fat girl at a party of 10s. You will be ignored. You may have forced us to let you in somehow but once you are there you will be ignored even the more as will whoever let you in in the first place. And no one can do anything about that because we have freedom of choice and if I don’t want to dance with you there isn’t a damn thing you can do about it. You might even be half attractive but we know deep inside you are a pshyco bitch. You have to be invited by a reputable member of our club. That’s the way it is and that’s the way it will always be. Anyone can be invited you just have to have something to offer that incents us. The more you have to offer the more motivated we are to please.

And isn’t that just about the way all life works anyway?

Do you want enthusiasm or forced compliance?

#180 crowdedelevatorfartz on 07.05.16 at 7:12 pm

@#169 Brazil ExPat
“Why do you think here in Richmond BC they want to kick out the RCMP and start their own municipal police force. …”
*******************************************
Nothing to do with corruption and everything to do with cost and competance.
The RCMP are far more expensive than a local police force and the City of Richmond doesnt really need more Bilingual (french/ english) officers that dont know their way around the city.

#181 Ronaldo on 07.05.16 at 9:33 pm

#178 SWL176

”Or perhaps ….. Um ….. Some just know when to strike when the iron is hot and use a cycle and out of control central banking lunatics to double their paper stash

How you play the game is how the game plays you”
———————————————
Exactly