Courage

HIPSTERS modified

The banks pay you one half of one percent to keep money there. What if they paid you nothing? What if you had to pay the bank to keep savings for you? Would you do it?

Over 75% of depositors, in a global survey done by ING, said no way, dude. They’d pull the cash. But put it where?

In Japan twenty years ago people used to save 23% of their incomes. About a year and a half ago, savings turned negative. Incredible. And why? Japan has a rapidly-aging population, in part because it eschews immigration. The country’s greying at an alarming rate, and old people spend their savings, instead of saving their income. But mostly, why put money in the bank when you get 0.002% on deposits? That’s two bucks a year on $100,000. (The only consolation might be this: the inflation rate in Japan is negative .5%.)

This is probably why sales of home safes in Japan have ballooned lately.

As mentioned here, half the bond debt in the world now pays 1% or less. A quarter of the global population lives in countries with negative interest rates. It’s an indication growth is slow, with a huge oversupply of commodities, labour and industrial capacity. One direct consequence is a big squeeze on the middle class. So we get Brexit, Trump and social unrest as a result. In nation after nation, the divide between the rich and the rest is growing. And no amount of rioting in the streets, punitive taxation, shot cops or political change will alter that.

Sucks. But it should also encourage you to try and be on the winning side of that equation. That’s what this blog’s all about. It won’t do much for global GDP, but it might help save your tosh. Advice follows, below. Here are five things.

Don’t even bother saving your money. Invest it instead.

There’s a depressingly significant chance the Bank of Canada will again nip rates, even as the US Fed raises them there in 2016. This country is now on the wrong side of the curve, which means savers will be doomed to collecting less in interest than they are robbed by inflation and tax. Nobody will be able to retire adequately on savings accounts, GICs or a bond-heavy portfolio (plus the piteous Canadian pension pogey). Investing in growth assets may be more volatile, and it may be scary. But running out of money’s the far greater risk.

Avoid tax. Disappoint politicians.

The more the rabble feels disenfranchised, the more tax will be piled on. Look at the laughable move in Vancouver to punish people for not living in their properties full-time. Or the new T2 tax creating a bracket taking more than half the income of most doctors. Or the 50% slash in the most democratic and effective tax-saving vehicle in the nation. These are not rational moves. They’re political.

So the first action for everyone should be to fully fund the TFSA, then invest in broadly-diversified growth assets, not savings accounts. After that, stuff your RRSP, not necessarily for retirement but immediate tax relief and to shift income from high years to low ones. For your kids, open RESPs, where money can grow tax-free for a couple of decades, and the government will hand over grants. It’s the easiest 20% you’ll ever make. And avoid interest, 100% of which is taxed. You’re better off to collect income in the form of dividends and capital gains, where taxes are reduced by up to half.

Invest in growth, not debt.

As interest rates sink, the return on fixed-income dwindles while central bankers flood the world in liquidity. So a river of money flows into equities. It’s happening now. Brexit may have hurt the voters who made it reality, but the event has helped stock markets climb to historic highs. Bonds paying nothing make dividend-yielding assets look a lot more attractive. Ditto for REITs with great distributions and preferreds’ 5%+ yield. The days when retirees could sit back and clip coupons are gone, gone, gone.

Shun the doomsters, the scared and the skittish.

I once knew a money manager who for two solid years said markets were overpriced and would correct. They actually did, about four times – normal dips – yet he invested nothing, fearing more declines. His clients ended those years with single-digit gains while the TSX and the S&P shot ahead more than 12%. Such lack of experience and judgment is common. It takes courage and confidence to invest when others are timorous and tepid. There are always reasons to be afraid, and in a world of over-information, paralysis by analysis is commonplace. Just look at this blog’s comments section full of losers and nihilists.

Stay liquid, diversified and balanced – and that includes real estate.

Having said to invest, not recoil, do so intelligently. Don’t lock your capital into long-term assets, like five-year GICs for example. Ensure you have a broad diversification among various asset classes and also geographically. No individual stocks. No mutual funds. Not too much maple. No deferred-sale-charge products. No leverage, unless you really understand the risks. And always maintain balance. Safe things in your portfolio as well as growth assets. Yep, some bonds included because they help reduce overall volatility. As for your house, balance matters there, too. Remember the Rule of 90.

Finally, the Royal Bank just called the Vancouver market a ‘bubble’. You know what that means, right?

RBC CHART

170 comments ↓

#1 Randy on 07.17.16 at 1:40 pm

‘Special’….like the Special Olympics.

#2 Jimmy on 07.17.16 at 1:46 pm

First !!

#3 Dennis Fulton on 07.17.16 at 1:57 pm

First!

#4 TurnerNation on 07.17.16 at 1:59 pm

Well Dawgs, the next time the newz asks for your mind…if I die tomorrow maybe…if I’m lucky, a dozen people would weep.
A few hundred more would miss me

The rest of the 7 billion people here? Not a peep

We are born as something, die as nothing then join Everything.

#5 ExpatCanuck on 07.17.16 at 2:02 pm

Good article Garth.

#6 Robbie Maslow on 07.17.16 at 2:04 pm

Garth, question on RESP, do the investment gains and grants keep up with the inflation in the cost of getting an education? And what if your kid doesn’t go to school and there is no RRSP room left? Hard to invest in an RESP for the baby when who knows what universities will become in 2032.

#7 Moron Face on 07.17.16 at 2:14 pm

Some excellent advice here…

#8 Dean on 07.17.16 at 2:27 pm

As always, a voice of reason in a tsunami of misinformation.
Thanks for this blog Garth.

#9 NotAGreaterFool on 07.17.16 at 2:28 pm

Leak reveals secret tax crackdown on foreign-money real estate deals in Vancouver

https://www.scmp.com/sites/default/files/uploads/2016/07/14/cra_webinar_june_2_16.pdf

#10 jb on 07.17.16 at 2:31 pm

First!!…..gold ‘nutter’ who wonders why Garth despises the epitome of wealth accumulation and protection throughout time?
Gold!
What does Garth know that refutes humanities recognition of the preciousness of this metal?
Portable, liquid and easily converted into cash at an open and readily available ‘world price’.
Isn’t this exactly the mantra Garth preaches here with great repetition?
LIQUIDITY!!!???
Nothing is more liquid than GOLD!
Gold stands alone against the profligacy of the FED, world banks, and the fallacy of ‘to big to fail’.
Pure, mined in Canada and available to all who seek protection from the vagaries of life.
Unique its ability to be a store of value, art and creation.
In its physical form, it alone holds no counterparty risk.
So what about it Garth, why do you hate gold?
Details please, I would love to hear your full thoughts on the matter.
Please help us see the light!

#11 Harbour on 07.17.16 at 2:39 pm

“Over 75% of depositors, in a global survey done by ING, said no way, dude. They’d pull the cash. But put it where?”
…………………………………………………………………….

Canadians stopped the peso accounts years ago, they went for that big fat juicy margin with no interest and bought real estate instead.

Remember real estate never goes down, at least not in any Gen X or Millennials lifetime. lol

#12 David on 07.17.16 at 2:41 pm

Why no individual stocks? Companies like MIC, SJR.B, NA, BCE, CM, LB, T, BNS, TRP, EMA, RY, BMO, ENB, TD, FTS, GWO, and CU all pay generous, secure dividends and usually produce rich capital gains over time. No fees to pay other than the $10 to buy and lucrative tax savings at the end of the line. Low risk, high returns. What could be simpler?

#13 Ole Doberman on 07.17.16 at 2:45 pm

DELETED

Post one more anti-Chinese comment and you’re gone. — Garth

#14 Mad Max on 07.17.16 at 2:47 pm

Pay for deposits? Soon they will tax deposits and assets, like in Switzerland, they tax net worth. When we go cashless, savings will be illegal. Credits, debits, the credits will have an expiry date.

#15 BOOM! on 07.17.16 at 2:48 pm

Thought I read something in one of your books similar to this post. I did.

Yup. Been doing this for a while. This year the returns thus far, have been Spectacular!!! ..and It’s only half done!

#16 Brazil ex-pat on 07.17.16 at 2:51 pm

The more the rabble feels disenfranchised, the more tax will be piled on. Look at the laughable move in Vancouver to punish people for not living in their properties full-time. Or the new T2 tax creating a bracket taking more than half the income of most doctors. Or the 50% slash in the most democratic and effective tax-saving vehicle in the nation. These are not rational moves. They’re political.

+++++++++++++++++++++++++++++++++++

This is a ridiculous statement. The tax will be on foreigners parking cash. The Govt is not going to be so stupid as to tax “Canadians” going on a walk about in Australia or to golf in Arizona for 6 months.

#17 Damifino on 07.17.16 at 3:20 pm

#10 jb

Garth does not hate gold.

Garth does not hate houses.

They are simply two asset classes among very many. Gold should have some portion of a diversified portfolio. These days, though, that should be a very small portion, possibly even zero.

Houses (more specifically, residential real estate) are insanely overvalued in Vancouver and Toronto and thus should be avoided or liquidated in those cities to realize equity gains which should then be properly invested.

In other cities, owning property might make some sense depending upon an individual’s situation. In any case, if you are adhering to the rule of 90, you should relax.

#18 Shalia on 07.17.16 at 3:34 pm

#19 Smoking Man on 07.14.16 at 7:27 pm

Nice ain’t so nice. See how retarded the English language is.

70 dead. Let me guess, It was a Buddhist.
——————

Nice, France is French.
Idiot.

#19 Nelley on 07.17.16 at 3:41 pm

3 more cops killed in Baton Rouge (7 shot)-if this keeps up Trump will win a landslide.

#20 Love My Kia on 07.17.16 at 3:52 pm

In nation after nation, the divide between the rich and the rest is growing. And no amount of rioting in the streets, punitive taxation, shot cops or political change will alter that.
==========================

Wrong Garth.

War does. Revolution changes everything.

Don’t dismiss that it can’t happen here. All through history war has existed and will continue until we extinguish ourselves from terminal stupidity.

#21 Nattie on 07.17.16 at 4:02 pm

The boyfriend mistakenly got the child lock on his new phone, which blocked a myriad of the typical adult sites…and Zillow.
There’s a “house horny” joke in there somewhere.

#22 Geotrouble on 07.17.16 at 4:10 pm

Garth, if BOC reduces rate wouldn’t Preferrreds be negatively effected?

Not the yield, which is why you buy them. — Garth

#23 Westbank on 07.17.16 at 4:20 pm

Finally, the Royal Bank just called the Vancouver market a ‘bubble’. You know what that means, right?

Link?

Look at the chart. See the word “bubble”? It means “bubble.” Go figure. — Garth

#24 NEVER GIVE UP on 07.17.16 at 4:20 pm

I spoke at length with a long time customer of mine with a Main St. Vancouver Store.

She’s Asian but not Chinese and she’s angry.

She says customer count is way down YoY. Her June is Down $21,000. Her July is down $11,000 so far.

So I ask her why. She says families are moving out of the neighborhood in droves. I asked her then why should there not be replacement people moving into the homes that are vacated. She said The homes are being left empty or are staffed with a senior person to keep the home from being ransacked while it appreciates in value. She said these people who move into the homes don’t buy things. They aren’t attached to the community and are moving on in a few years.

She says business taxes are killer and the government has no incentive to do anything because they are big beneficiaries of high housing prices.

Home taxes have more than doubled in 5 years in her area.

This person is articulate and well educated and is telling it like it is.

Just walk along coal harbor after sundown and you can see why business are starving. 80 to 90% of the windows are dark.

I asked her if a tax on empty housing will help and she said that the speculators are too smart for that and that they resemble mice. She said that “whenever you close a mouse hole they will scurry to the next hole instead”.

She started to ramble on about all the empty stores that are not making it in the neighborhood and then she started on Robson Street. Robson is really dying right now.

I told her that BC scored biggest in Canada for jobs and she just couldn’t believe it because she is having such a hard time.

She said houses in the Main Street area have flipped continuously for the last 3 years starting in the 7 to 900K level and now are around 1.5m to 2.1m level today. She said many houses have flipped 3 to 5 times. I wonder if our banks are involved?

I felt really sad for her. She is under great pressure right now.

#25 Fustercluck on 07.17.16 at 4:45 pm

The year is 2040 and Vancouver’s houses are worth $80-million.

http://www.theglobeandmail.com/news/british-columbia/the-year-is-2040-and-vancouvers-houses-are-worth-80-million/article30944616/?reqid=70feca23-69da-4c4b-81e1-0c35db332e13

#26 JO on 07.17.16 at 4:47 pm

Agree with you Garth but if most of your money is in TFSA RESP and RRSP, then you are completely exposed to politicians as governments have a solid history of confiscating retirement savings. Interest will consume more than 50% of tax revenues within 10 years so when the sovereign debt crisis begins with 3-5 years and rates on govt bonds spike, you do not want most of your money trapped inside of RRSP and TFSA
Now before coming after individual registered savings they are likely to force public sector pensions to “invest” in govt bonds and infrastructure “investments”. Also the capital gains tax is likely to soar up to 90 % so non registered accounts will be no good too. And housing will be rough as property taxes will explode in most areas

Beware the Canadstan government
JO

No Canadian government, ever, will confiscate personal retirement savings. — Garth

#27 MF on 07.17.16 at 5:00 pm

16 at 4:10 pm
Garth, if BOC reduces rate wouldn’t Preferrreds be negatively effected?

Not the yield, which is why you buy them. — Garth

-Aren’t most pref shares rate reset? Won’t they reset at a lower level yield? Since i’ve held cpd i’ve noticed the yield going down ever so slightly.

On the topic of the BOC, can someone tell me how reducing rates thus far has helped us in any way? Why is this the only policy there is?

#23 NEVER GIVE UP on 07.17.16 at 4:20 pm

Your post sums it up nicely. All this money flowing into real estate is strangling the real economy. Again, how does reducing the key interest rate help this situation? Who is flying the plane here? Does anyone have a plan? Anyone?

MF

#28 NEVER GIVE UP on 07.17.16 at 5:01 pm

I really believe we need a foreign ownership law similar to Thailand and the Philippines.

I can see that foreigners have to jump through awfull hoops to control property in Thailand but it discourages rampant speculation.

Thailand restricts foreign ownership of land because they care about their people and rightly so.

The argument about Canada having lots of land. Well The Lower Mainland doesn’t and that is where everyone is buying.

I would not care if foreigners wanted to buy some tundra but we are in a worse position here with geo and political borders leaving a small sliver of useable land.

Foreigners will only go for the very best of what we have leaving our best properties in our most beautiful cities unattainable for the people who built them.

Why does our government not care about it’s citizens?

#29 Rooskie on 07.17.16 at 5:11 pm

So I don’t yet have 20% of my otherwise balanced portfolio in USD as you’ve previously recommended. I’ve been patiently waiting for a more favorable exchange rate. Is now the time to act?

#30 F.dover on 07.17.16 at 5:23 pm

The only asset class with a higher over rated price than Van Real Estate right now would be all of the Stock Markets. P/E ratios are at an insane all time high. Many company’s are borrowing money at ZIRP to pay dividends on non profits.

I want return of my investment, not so much return on the investment in this climate.

I have said there is no money in making money, and it is becoming obviously true. Caterpillar knows all about that by now.

No way anybody can convince me that stocks are worth more in truth than they were at Christmas in 08, because the current dynamics are so far worse than at that time.

Mega downward adjustment guaranteed to take place before a much of a sizeable increase does.

We shall see it soon, apparently.

Garth stocks have obviously been wonderful for you, and I am glad you are so happy about your successes.

This time it is so different in every way, I can’t jump in with you with confidence.

Sorry for the negativity, but it is how I interpolate the numbers now.

The S&P ratio in 2009 was 71. Today it is 25. And you’re giving advice? — Garth

#31 common sense on 07.17.16 at 5:28 pm

#4 Turner Nation.

Perfect. Great Post.

#32 tccontrarian on 07.17.16 at 5:53 pm

17 Damifino on 07.17.16 at 3:20 pm

#10 jb

Garth does not hate gold.

Garth does not hate houses.

They are simply two asset classes among very many. Gold should have some portion of a diversified portfolio. These days, though, that should be a very small portion, possibly even zero.
**********************************************

Although I agree that yes, they are two asset classes among many others, gold now should be a larger than usual allocation in a diversified portfolio, not less!
The currency wars going on globally now, all but guarantee that ‘real’ money (gold/silver), are going to be beneficiaries by default.

I’m presently well over 25% in precious metals/commodities, another 25%-30% energy, and building an increasingly larger short position on select high-dividend US ETFs.

But, I am contrarian in my investment style, which is not suitable for everyone. Doesn’t pay off every single year, but on the good years (like this one so far), the out-sized gains more than make up for previous returns.

Even former Fed Chair, Alan Greenspan, thinks gold is worthwhile holding. See for your self. An interview below with several good points on the yellow metal:
https://youtu.be/uExEdyQWftw

#33 common sense on 07.17.16 at 5:54 pm

#26 NEVER GIVE UP

Why? (They need the money).

Isn’t that’s what its about most of the time?

#34 Ed on 07.17.16 at 5:55 pm

Thanks for the sane advice, and for keeping the not so sane in the comments section in check.

#35 WhenTheLeveeBreaks on 07.17.16 at 6:07 pm

Garth, What’s the corollary in the US for a TFSA? The Roth 401K?

The TFSA is a great savings concept…

Yup, the Roth IRA. — Garth

#36 WhenTheLeveeBreaks on 07.17.16 at 6:15 pm

@JB…gold is a poor investment. Doesn’t even protect against inflation. Look at a chart, adjusted for inflation, gold is still below 1980’s highs – 45 years later.

#37 Trump Will Make America Great Again! on 07.17.16 at 6:22 pm

DELETED

#38 Fed-up on 07.17.16 at 6:27 pm

#22 Geotrouble on 07.17.16 at 4:10 pm
Garth, if BOC reduces rate wouldn’t Preferrreds be negatively effected?

Not the yield, which is why you buy them. — Garth
———————————————————————–

So if I bought a house that yielded 5% return on my rent after all expenses but lost 25-30% of its purchase value in less than a year, would that make it a good investment? I guess the price of the home may or may not come back one day too wouldn’t it?

What matters is where the capital value of any asset stands when you want or need to sell it, and preferreds will move higher eventually with rates. If you buy a vehicle for yield, then enjoy the yield. People here seem to have a tough time understanding that. — Garth

#39 orange guy shorts on 07.17.16 at 6:29 pm

Tangerine has a special promo for select clients — 3.25% for the next 3 months. I guess I was a targeted client cuz I pulled all my money out for awhile now. However, 3.25% is very appealing in this summer/fall of uncertainty.

Would you do it Garth? Sit on the sidelines on a relatively juicy return, or just stay invested?

You think 3% for 90 days is juicy? Do you have $10 million to give the fruit people? — Garth

#40 Tom Fawcett on 07.17.16 at 6:44 pm

So I saw a map recently the gave the areas of the GVRD where there was a disconnect between what folks were declaring for income and what the cost of living there should be. Many of us have neighbors who are leaving their families in BC and working overseas. One does not have to be Perry Mason to think there may be some tax evasion going on. I had seen any evidence that the Canadian government had been proactive dealing with this issue. Until now. The 50 auditors are likely the thin edge of the wedge. It usually takes government a long time to act and I expect this process will take some time. If as many of us suspect there is under reporting going on and after an audit a few folks get caught and hit with some really big tax bills; many others will decide there are better places to live. We all have to pay our share.

Why are people (who are non-residents) making income in other jurisdictions evading taxes? — Garth

#41 D.D. Corkum on 07.17.16 at 6:46 pm

#12 David on 07.17.16 at 2:41 pm

“Why no individual stocks? […]”

I concur that Garth is a bit sour in dissing individual stocks, but he makes a very strong case for ETFs as a source of diversity.

Personally I do a hybrid: individual stocks for a basket of companies, supported by ETFs for broad exposure that couldn’t be done by individual stocks alone.

#42 Linda on 07.17.16 at 6:50 pm

So if there is a huge oversupply of commodities, labour & manufacturing, why is it that Japan hasn’t improved by now? Is their entire senior population still working? Should not a decline in available labour due to retirees improve the picture? Of course, Japan also was an early leader in automation, robotics & manufacturing efficiencies so perhaps that more than offset any reduction in the human pool of workers…..

#43 BS on 07.17.16 at 7:04 pm

Why are people making income in other jurisdictions evading taxes? You pay Canadian income tax only on income earned and received in Canada. — Garth

All residents of Canada or even those with ties to Canada have to pay taxes on all income earned regardless of where it is earned.

Residents of Canada have to pay tax on their worldwide income to Canada no matter where they earn it,” says Georgina Tollstam, an accountant and Partner with KPMG…

The Canada Revenue Agency defines someone as a “factual resident” if they maintain “significant residential ties” to Canada.

http://www.cbc.ca/news/business/taxes/6-must-know-tax-facts-for-canadians-earning-abroad-1.1167892

The reference, I believe, was to people who are not resident taxpayers. — Garth

#44 crowdedelevatorfartz on 07.17.16 at 7:10 pm

@#16 Brazil ExPat
“The tax will be on foreigners parking cash. The Govt is not going to be so stupid as to tax “Canadians”….”
********************************************

Interesting dilema.
What I want to see is the first elderly Vancouverite thats completely out of it, locked up in an old folks home drooling porridge and filling thirsty underwear for several years while their home sits empty…..”TAX THEM!” sez Mr Politician, ” Cause they’re rich……”
Nothing will happen til they die and the estate lawyers deal with the fall out.
This vacancy tax is;
a) optics for gullible voters and
b) a cash grab.
Nothing more.

#45 salonist on 07.17.16 at 7:12 pm

No Canadian government, ever, will confiscate personal retirement savings. — Garth

Can Canada Revenue Agency Garnish CPP and OAS

Yes, Canada Revenue Agency can garnish CPP and OAS as well as all types of pensions. You may hear that creditors may not do this or may only be able to take a percentage. However, Canada Revenue is not a typical creditor. It is important to stress that CRA has more power than a credit card company or other creditor.

#46 crowdedelevatorfartz on 07.17.16 at 7:17 pm

@#23 Westbank

Let me guess. Devils Advocate is your realtor.

#47 Mocha on 07.17.16 at 7:25 pm

Japanese, after witnessing the effects of excessive, poorly thought-out modern immigration policies in western nations, are choosing future economic uncertainty over “no-go zones”, increased crime, cultural disintegration, suicide murders, racial unrest, and eventually becoming minorities in their own country. It’s a trade off. History shall judge which ideology was the better of the two.

#48 ww1 on 07.17.16 at 7:28 pm

#35 WhenTheLeveeBreaks on 07.17.16 at 6:07 pm
Garth, What’s the corollary in the US for a TFSA? The Roth 401K? The TFSA is a great savings concept…

Yup, the Roth IRA. — Garth

Except that the US Roth IRA is limited to those with income below a certain threshold (currently $117,000 for a single person, $184,00 for married filing jointly).

#49 young & foolish on 07.17.16 at 7:39 pm

I may be wrong, but I think most people who saved any sort of money, were “savers” (as in the bank account, bond, or GIC kind). Most people never have and still don’t invest in equities, REITs, or preferreds.

This blog is not for most people. — Garth

#50 young & foolish on 07.17.16 at 7:45 pm

“So if I bought a house that yielded 5% return on my rent after all expenses but lost 25-30% of its purchase value in less than a year, would that make it a good investment? I guess the price of the home may or may not come back one day too wouldn’t it?”

This is a good point. Houses (rental properties) have done great in capital appreciation as well as yield over the last 20 years, especially in demand cities (like GTA). Buying now though is not likely to net you 5%.

#51 X on 07.17.16 at 8:09 pm

If rates are heading down, would that mean that Bill Morneau may enact stricter mortgage/lending/RE changes? (in September I think he is supposed to publicly respond) I am doubtful that he will do anything that really has an impact, as that would be bad politics but….

Wouldn’t it be an easy sell to cancel the RRSP homebuyers withdrawal thingy…I mean if we are upping the CPP, b/c people aren’t saving enough on their own, why let them withdraw what little they have saved.

I don’t know about changing the down payments further, but limiting amortization periods at 25 sounds reasonable, larger mortgages have to be qualified under this period anyways.

I don’t know enough about the actual lending responsibilities/rules and regulations, but some further onus should be put on the banks, and a little less on CMHC (which is the taxable pocket of the average joe)

Would also love to see standards for the RE industry in general, such as with the financial industry, as most Canadians have most of their wealth there, it really should be regulated stricter.

#52 nonplused on 07.17.16 at 8:23 pm

I still don’t get one thing about the rule of 90. Is it equity or appraised value? How does the mortgage figure in?

To my way of thinking a person who owns a $500,000 house but also has a $400,000 mortgage only has $100,000 invested in his house, the rest is debt, the bank owns it. So for most people the difference between $100,000 and $500,000 when calculating the rule of 90 is substantial.

Also, if we are going by equity, the rule of 90 seems to mean that as a person approaches retirement, even if their house was previously paid off, they should start borrowing against it to invest in the “balanced portfolio”, and at some point sell the house and rent.

Somehow I still think traditional cash flow analysis might be more accurate here. Yes, Garth has discussed all these factors ad-nauseum, but I think the way to calculate whether you should own rather than rent comes down to what the full in cost of ownership is over the time you expect to live there versus renting. So include taxes, mortgage interest, closing costs, maintenance, hot tub chemicals, the arborist, all of it and then compare to renting and of course there will be a squiggle factor based on lifestyle experience.

Some people say the reason to own is because “you can do what you want to the property”. This is not true of course because if you do something weird to the property you will have to undo it at your own expense before you can sell for top dollar. This is why letting your children pick their own color of paint for their rooms is not a good idea unless you are factoring in painting it again before you sell.

#53 KAC on 07.17.16 at 8:23 pm

The concern about tax dodgers generally revolves around members of wealthy families whose “breadwinner” earns his money overseas but who retains “strong connections to Canada”, such as a house (or 2 or 3), a wife and children.

Here’s what the CRA says:

“The Canada Revenue Agency defines someone as a “factual resident” if they maintain “significant residential ties” to Canada. This means you may be temporarily working outside of Canada, vacationing but still have a home in Canada, have a family living in Canada and have a Canadian drivers licence.

To cease residency in Canada, and cease paying taxes to Canada, you have to go about the process of severing residential ties. This means you must no longer have a place to live in Canada, that you have set up a place to live somewhere else, set up financial accounts in a new place, and, if married, have taken your family with you.

Tollstam said that the CRA used to use a 24-month time period to determine non residency, but that has since been eliminated from its guide. She said that basically a minimum of 18 to 24 months away from Canada is now required to be a non-resident.”

Based on the above, it appears likely that a substantial amount of tax evasion is taking place in areas of Vancouver where “low income” families live in mansions.

Strikes me if the people obsessed about how other people are doing worried more about how they themselves are doing, they’d obsess a lot less. — Garth

#54 MinInMission on 07.17.16 at 8:35 pm

Damn, I can read this stuff, but, I don’t understand it, or, know how to do any of it.

#55 For those about to flop... on 07.17.16 at 8:42 pm

Check out how the big boys get their hands in your pockets…

M42BC

https://imgur.com/cHSglHA

#56 Freedom First on 07.17.16 at 8:45 pm

Yes. Personally, I think aiming for enough passive income to live off of while still investing is a worthy financial goal. And the sooner the better. For me, to invest my money in anything, I want to be paid. I will accept yield and capital gains. RRSP’s & TFSA’s have been excellent vehicles for me. So has RE, and other things.

Of course, having an enjoyable lifestyle throughout one’s lifestyle is also wise, or what is the point? Also, for myself, nothing in life is worth borrowing for. No exception. Debt, or Divorce, are by the far the 2 major causes of Financial ruin. I think divorce is probably #1. The majority of all people’s world wide are, and have always been, financial lunatics, ruled by their greed, fear, and unethical selfishness.

The “Real” Freedom First.

ps thank you to my Fan Club for posting most of the comments using my name. I can feel the love.

#57 devore on 07.17.16 at 8:45 pm

#38 Fed-up

So if I bought a house that yielded 5% return on my rent after all expenses but lost 25-30% of its purchase value in less than a year, would that make it a good investment? I guess the price of the home may or may not come back one day too wouldn’t it?

You found residential real estate that yields 5%?

#58 The Wet Coast on 07.17.16 at 8:49 pm

Why are people (who are non-residents) making income in other jurisdictions evading taxes? — Garth

I am going to be charitable about this, as at may be ignorance of the rules. Its called residential ties to Canada. There are 2 basic rules. If you live in Canada for more than 182 days you are a Canadian person for tax purposes. But here is the sneaky rule, even if you live in Canada less than 182 days but have residential ties you are subject to Canadian taxes. Residential ties include but are not limited to owning real estate, credit cards, having a spouse or children living in Canada. I had some very good lawyers advise me on this when I moved to the US for 9 years. Here is how it works. Lets use the US as an example. Lets say someone is working in the US but has a home, car and kids in Canada. Pretty strong case for residential ties. Once residential ties are established the person working in the US would pay the tax they owed in the US first, then say Canadian tax rates are higher. The person would then owe the difference between the US rate and the Canadian rate in Canada. In the case of Canada and the US this differential isn’t huge. However, the are a number of places where this differential is huge. If this plays out the way I think it will some folks are going to find the government of Canada demanding $$$$. It will take time to fully play out. But essentially folks are going to find that if you move your family to Canada to enjoy everything this country offers you will pay the same total tax as everyone else. Its right and fair.

#59 james on 07.17.16 at 8:49 pm

” Japan has a rapidly-aging population, in part because it eschews immigration”

Nonsense. Plenty of countries have no immigration and positive population growth.

And good for the Japanese. Their culture will still exist 200 years from now.

The problem in Japan is that young people don’t want to have children. The same problem plaguing indigenous people in Europe and other regions.

Governments could easily solve this through incentives. Iran managed to tame its population growth problem through incentives and education.

Great idea. More children. Just what a 7.4-billion-person world needs. — Garth

#60 Andrew Woburn on 07.17.16 at 8:54 pm

#180 The American on 07.16.16 at 9:36 pm
At #142: Andrew Woburn, so if it is four times the amount t if everyone consumed like an American, imagine what it would be if everyone consumed like a Canadian! After all, you all consume 20% more energy per capita than Americans. Another poor, misinformed, and delusional Canadian.
========================

I know punctuation can be tricky so I will carefully explain that those two squiggly things that often begin and end a section of text are called “quotation marks”. They are used to indicate that the words that fall between them come from and are being properly attributed to a third party.

Once you understand this, you will be able to grasp that this “poor, misinformed, and delusional Canadian” (see how it works?) was actually directly quoting the New Yorker magazine. This is a prestigious American publication with which you might be familiar although, as it is quite full of big words, perhaps not. Another common use of quotation marks is to indicate irony as, for example, the “superiority” of American education.

#61 Mark on 07.17.16 at 9:03 pm

3.25 for 90 days. How can you say that’s not juicy Garth. That’s a 12%annualized yield. Plus it gives the individual 90 days of liquidity to wait for the stock market crash. Brexit effects have not come into play yet. Just wait until the new liquidity crisis. Only things safe will be gold and marijuana stocks!!!

Maybe you noticed that markets just hit new highs? Post-Brexit. — Garth

#62 Say What? on 07.17.16 at 9:09 pm

No Canadian government, ever, will confiscate personal retirement savings. — Garth

——————————————————–

Garth, you also said we wouldn’t EVER have negative rates. We’re almost there.

Garth, how come you won’t print my posts?

We are not almost at negative rates, Ottawa will never confiscate retirement savings, and you just answered your question. — Garth

#63 Mark on 07.17.16 at 9:15 pm

As I said brexit effects have not come into play yet. Come back to this post in 90 days and you will see how the lack of financial liquidity starting in Europe will play on the markets. 2008 problems were never solved and it will be magnified

#64 Pete on 07.17.16 at 9:15 pm

No Canadian government, ever, will confiscate personal retirement savings. — Garth

They’ll just tell you where you must invest it
OR they’ll invest it for you
OR it will be inflated away into worthlessness
OR they’ll ban cash (precious metals and barter items too, owning 2 bottles of tide=illicit trading activity) and maybe even put an expiration date on funds in the bank (hey, we didn’t confiscate it, you neglected to spend it on time). Some Zimbabwe money had an expiry date on the bank notes themselves.
OR etc etc etc.
They’ll never say “we’re confiscating it”.
Seriously, look at Argentina. To say it can’t happen here is the same as saying that “we’re different”/”it’s different this time”. I thought that those sentiments were a no-no on this site.

This is hopeless. — Garth

#65 Nobody on 07.17.16 at 9:17 pm

#47 yes they chose; decline, deflation, ageing and eventual extinction.

http://www.japantimes.co.jp/news/2015/05/16/national/social-issues/japan-becoming-extinct/#.V4wt6usrLC1

#66 Smoking Man on 07.17.16 at 9:21 pm

Why are so many Chinese loaded.

Gambling is part of the cultural. And if you never take risks and bet the farm once in a while.

You die poor.

Well there is always a one in twenty nine million shot at hitting the lotto.

It’s a pitty teachers train you to be frightend of Risk.

#67 PawPatrol on 07.17.16 at 9:27 pm

Young 30’s and renting a nice house with 2 young kids in the lower mainland. Husband is starting to become discouraged that he didn’t buy a house a couple years ago as now his income is going up nicely. Obviously prices are unsustainable but it would be nice to know if we have to wait 2 years or 10 for a proper correction. We’re focusing on diversified investments but to be honest now we just want a home to call our own. Just frustrated and obviously losing a lot of confidence in our government, who must think we’re all cute for swimming in major debt.

#68 Apocalypse2016 on 07.17.16 at 9:34 pm

Baton Rouge today.
Cleveland this week.

Mayhem will be peaking not long after.
Markets won’t know what to do.

The Summer of Hell is upon us.

#69 conan on 07.17.16 at 9:36 pm

Nato countries being a little bit too quiet about what just happened in Turkey. Also, same thing with the Turkish secularists.

The silence is a little too unnerving. So, next couple of weeks will be telling.

Erdogan firing all the judges is crazy. That’s Hitler moves.

This could make markets very jittery.

#70 Cory on 07.17.16 at 9:36 pm

This had been a great year for my portfolio compared to last. Started buying again mid/late January. It was the opportunity I was waiting for for a long time, all yield driven but not chased. I’d say how much I’m up in percentage but I’d probably not be believed anyway but the yield alone will pay all bills and some rent for the year as was desired and intended. Survive first, save/profit second.

I don’t know why people panic in those times. That money has to go somewhere eventually so it’ll most likely be equities in today’s world as indicated by the markets since 2009.

#71 Nelley on 07.17.16 at 9:39 pm

#65Nobody-the promoters of Ponzi economics always point to population growth as a magic cure-all and population decline as “decay”. The area with the largest population growth (by far) is AFRICA-if that is your idea of economic paradise you can have it-the Japanese don’t want it.

#72 Nelley on 07.17.16 at 9:43 pm

#69Conan-Merkel’s obsession with bringing a third world Islamic dictatorship into the EU is beyond reckless-the UK won’t be the last to leave if she succeeds.

#73 TRUMP on 07.17.16 at 9:54 pm

Nice Sunday read. One of the best yet. Your wasting your time trying to convince others there in a bubble.

Advising us where to put our money is time well spent.

#74 Catalyst on 07.17.16 at 9:55 pm

looking at the chart in 2011 would have told you the same thing and it continues to go up. Strange new world we live in, but I’m harder to convince these days we will ever be going back to ‘normal’

#75 Aardvark on 07.17.16 at 9:56 pm

@David. Kodak

#76 ovidet on 07.17.16 at 10:11 pm

Or the new T2 tax creating a bracket taking more than half the income of most doctors.
Inaccurate and vague statement. No individual in Canada pays half of their income to the tax collector.

Marginal tax rates now exceed 50%. — Garth

#77 Maldroit Ape on 07.17.16 at 10:13 pm

> This is hopeless. — Garth

Likely, fortunately most of us come here for a witty financial blog and not to have our paranoid schizophrenia treated.

Relevant link for today’s post: http://www.marketwatch.com/story/why-youll-need-dow-150000-to-retire-comfortably-2016-07-16

And another for a blog theme:

http://www.nytimes.com/2016/07/17/upshot/why-land-may-not-be-the-smartest-place-to-put-your-nest-egg.html?_r=0

#78 WalMark of Sadkatoon on 07.17.16 at 10:15 pm

Nothing can stop the US economy baby! BOOM!

http://www.marketwatch.com/story/hiring-slowdown-brexit-scare-us-economy-ploughs-ahead-2016-07-17

#79 Alex G. on 07.17.16 at 10:19 pm

#61 Mark on 07.17.16 at 9:03 pm

Mark, the Tangerine offer is valid for 90 days (technically less so now since it expires at the end of September) and it’s 3.25% annualized on new deposits only.

12% would have been sweet, alas, it is not so.

#80 Mark M. on 07.17.16 at 10:20 pm

“…even as the US Fed raises them there in 2016.“ – Garth

No. Not even a remote possibility this year or next. It will in fact be “one and done.” Just like many here in the steerage section have been saying for more than a year.

Not four hikes this year like we were told by the “experts” late last year. None.

It is glaringly obvious to evey fair minded reader of this blog that the great US “recovery” was built on cheap money that can never be taken away. What’s worse is that the wheels are falling off with interest rates effectively negative when inflation is taken into account.

The Fed’s next move is to cut rates, when it happens Garth, please remember all of us you keep deleting who have thus far been better at predictions than you.

#81 Orange Special on 07.17.16 at 10:27 pm

Re #61
That’s 3.25% (annual yield) from July 5- Sept. 30,2016 on a Tangerine savings account with a max of 500k only for those who have been offered the deal.Your money is liquid and you can remove it any time. Still ,almost 6 times better than .55% offered by my big 5 bank .

#82 Andrew Woburn on 07.17.16 at 10:29 pm

#68 Apocalypse2016 on 07.17.16 at 9:34 pm
Baton Rouge today.
Cleveland this week.

The Summer of Hell is upon us.
===================

We’ve had worse. We survived.

Google “Riots”, Detroit 1967, Watts, 1965.

#83 BOOM! on 07.17.16 at 10:37 pm

#48 WW 1

You are correct the American TFSA (Roth) is limited by an earnings limit.

HOWEVER… that high-earner can still salt away pre-tax money using either a 401-K, 457 (if available), and when they are over 59.5 years re-charcterize the money into a ROTH (paying the income taxes). This is called a “backdoor ROTH” used by the more wealthy to circumvent the earnings limit.

I never earned enough to have used this strategy.

Where there is a will… there is usually a dead body, hungry lawyers, and greedy relatives.

M64 WI

#84 Metaxa on 07.17.16 at 10:40 pm

@ #54 MinInMission:
Damn, I can read this stuff, but, I don’t understand it, or, know how to do any of it.

A lot of us, Min, a lot of us.

I enjoyed a fairly lucrative 30+ year career in one of the toughest sectors around..independent, owner operated hospitality…plus my brother and I partnered on a small string of rentals in Calgary for +/- 20 years.

Comes time to really plan for retirement and I realized I know a bit about running small business and can help you write a serious business plan but I do not want to learn an entire new alphabet.

I hired chefs and cooks…didn’t do it myself. Same with barkeeps, host/hostesses (mmmm) and that worked well for me.

So I hired a lady to do this stuff for me. She works at one of the old time wealth places that have been bought up by chartered banks but it was more important to me that she was connected to my community, was staying for the duration, not fleeing for the perhaps bigger money in the big city, etc.

Started out small, around a quarter mil but due to unfortunate stuff I ended up with all the rentals, sold those at damn near retail and now she looks after a sizable chunk…as soon as CRA issues letters of clearance on both an estate and the winding up of a family trust.

I’m not going to be hunting lions in Africa but I’m also not going to be picking my meat out of the 30% off bin at Superstore either.

Turns out she has a little Garth in her…balanced and diversified, minimum MER (fees) and maximum tax planning. I don’t mind what she takes because she leaves me so much more and I can spend my time ogling the new neighbour next door. Yummy mommy, not a mommy with a tummy, if you know what I mean.

Never be afraid to hire a pro at what they do…all these guys loudly proclaiming that you have to do it yourself just might be broke, you never know.

#85 Cloudy on 07.17.16 at 10:43 pm

It seems to me back when Flaherty and Carney were warning everyone not to gorge on debt because rates would one day rise, the only people that listened were businesses, which are the main targets of of the policy. If I am to believe the news I read, business investment has gone down instead of growing and the only thing keeping our economy plugging along is real estate and consumer spending on low quality consumer goods.

#86 BOOM! on 07.17.16 at 10:45 pm

#70 Cory

Yes, this year has been VERY good to ‘investors.’ My portfolio growth is just below 10% and the year is barely half over.

What’s not to like in that?

#87 Sheane Wallace on 07.17.16 at 10:49 pm

Let’s be clear here.

The slow growth does not justify lower interest rates.
Growth has no relationship to rates whatsoever. Return is a function of the risk and available savings. There are no savings available to subsidise further debt. accumulation. Period.

If not for the credit funny money created at will rates would be north of 5-6 % with all the consequences.

There will be lower and lower rates, even negative, for sure in Canada, maybe in US and then the currencies will die.

Hold whatever you can in real assets- paid real estate, major defensive stocks, including consumer staples.

Liquidate ALL cash holding in 2-5 years,

Inflation is not negative, inflation is rampant, manifesting itself in higher housing, rent and food prices.

#88 Sheane Wallace on 07.17.16 at 10:53 pm

BTW bonds will provide ‘real’ return in the next 2-3 years as interest rates go negative and then, OH BOY! inflation will show up big time and YOUR savings will be destroyed.

How is that ‘juicy’ 0.5 % GIC return?
Negative interest rates on 10 yrs government bonds? Hello?

What are you guys drinking/smoking? Pass it around.
I am doing scotch – Johnnie today and things look different here.

#89 Poloz on 07.17.16 at 10:56 pm

Why are people (who are non-residents) making income in other jurisdictions evading taxes? — Garth

Because, according to our law, having bank accounts, family living here etc ( all kinds of criteria) it makes them a resident of Canada and therefore taxable on world income. You shoud know that.

People are taxed where they earn income. The same income is not taxed again in Canada, where they may or may not have ties. That’s what tax treaties are for. You should know that. — Garth

#90 Toronto Dweller on 07.17.16 at 11:03 pm

Love checkin’ in here on Sunday. Good and sound advice offered with no emotional outbursts and guilty trips.

#91 Poloz on 07.17.16 at 11:07 pm

Strikes me if the people obsessed about how other people are doing worried more about how they themselves are doing, they’d obsess a lot less. — Garth

We’re talking about the law – not how other people live!

Oh. Then let’s discuss declaring rental suite income. — Garth

#92 Old School on 07.17.16 at 11:07 pm

#12…Why no individual stocks? Companies like MIC, SJR.B, NA, BCE, CM, LB, T, BNS, TRP, EMA, RY, BMO, ENB, TD, FTS, GWO, and CU all pay generous, secure dividends and usually produce rich capital gains over time. No fees to pay other than the $10 to buy and lucrative tax savings at the end of the line. Low risk, high returns. What could be simpler?

——

This is the way to superior risk adjusted returns – dividend growers all of them – proceed…

#93 MF on 07.17.16 at 11:10 pm

#70 Cory on 07.17.16 at 9:36 pm

In 2008/9 we spent trillions trying to “save” the economic system. They succeeded only at kicking the can down the road. The next 2008/9 which is on the way because all things/markets are cyclical, we do not have trillions to spend and equities will not rebound so quick.

That’s why they are trying everything to keep the market liquid long enough in hopes that growth somehow starts again. They are failing though, since with all that stimulus (trillions) we have anemic growth and negative rates.

MF

#94 Sheane Wallace on 07.17.16 at 11:10 pm

People are taxed where they earn income. The same income is not taxed again in Canada, where they may or may not have ties. That’s what tax treaties are for. You should know that. — Garth
——————
exactly. And I am showing them the finger in exactly 1 month.

Tax my middle finger.

#95 MF on 07.17.16 at 11:16 pm

#88 Sheane Wallace on 07.17.16 at 10:53 pm

Lol exactly. A negative bond. What a joke. Complete failure by our “experts”.

Everything I have read says that money flows from bonds to stocks and vice versa. How, then…are we at negative yields due to some “demand” for safety, and stock indexes at all time highs? Where is all the money coming from? Who is risk on and risk off at the same time? How can money be in both places.

It all looks so manipulated it’s comical.

The brain dead patient requires more “stimulus” please. Draghi?

MF

#96 Sheane Wallace on 07.17.16 at 11:19 pm

#92 Old School \

It would be smart to stay away from Ca stocks for a while
Ca is 2 % of the world economy with the biggest credit/housing bubble in the world history.

Implosion in real value is imminent and certain, few stocks like Pizza Pizza will thrive, people have to eat.

But for the rest? JUST STAY AWAY from them, I can’t unfortunately capitalise stronger my statement.

#97 MF on 07.17.16 at 11:25 pm

#67 PawPatrol on 07.17.16 at 9:27 pm

Don’t worry you are not the only one. Ask anyone who has bought a house and “made a lot of money” in the last six years where they would move to if they sold today.

They will all say the same area they are living in now with the same debt loads. They will just go more in debt for a bigger house. They fail to see the bigger house has also increased in value the last six years and that they are no better off then they were before. Very few in our population understand this and so, when the massive collapse happens, they will all get creamed since debt was never paid off.

MF

#98 Sheane Wallace on 07.17.16 at 11:30 pm

A friend of mine bought semidetached in very crappy in my mind area on Britannia Rd in Brampton for over 650 k. On 60 k income. With 3 kids.

That’s right folks.

Insured by your government.

#99 Smoking Man on 07.17.16 at 11:39 pm

DELETED

#100 Fed-up on 07.17.16 at 11:58 pm

#57 devore on 07.17.16 at 8:45 pm

#38 Fed-up

So if I bought a house that yielded 5% return on my rent after all expenses but lost 25-30% of its purchase value in less than a year, would that make it a good investment? I guess the price of the home may or may not come back one day too wouldn’t it?

You found residential real estate that yields 5%?
——————————————————————————

Actually no….8% and have gone up nearly 15% in value in the past 12 months.

Not even a real estate fan.

#101 Sheane Wallace on 07.18.16 at 12:02 am

The fact that people will withdraw their savings if negative rates are introduced is significant,.

The question is (and I urge the idiots in power to consider it seriously) if when they could stop paying taxes because they can;t handle that burden and survive.

So what will the idiots do? Go after the doctors?

#102 Old School on 07.18.16 at 12:06 am

I may be wrong, but I think most people who saved any sort of money, were “savers” (as in the bank account, bond, or GIC kind). Most people never have and still don’t invest in equities, REITs, or preferreds.

This blog is not for most people. — Garth

—-

soooo….cute…awww

#103 ww1 on 07.18.16 at 12:31 am

##83 BOOM! on 07.17.16 at 10:37 pm
This is called a “backdoor ROTH” used by the more wealthy to circumvent the earnings limit.

Boom .. knew about that when i posted .. just trying to keep things simple .. isn’t the US tax code wonderful?

#104 carboy on 07.18.16 at 12:36 am

well all capital gains I made in the USA still required me to pay CDN taxes after the US took there share first ..Same income taxed in both countries maybe my specialized US/ CAD accountant does not know what he is doing?

#105 fishman on 07.18.16 at 1:30 am

“Lets discuss declaring rental suite income, Garth” Thats a no brainer. Declare it. All tenants hate their landlords. CRA does mass audits on a individual sector,like (builders, fishermen, waiters, landlords). They’ll go through & look for red flags, but mostly its anonymous tips. The number one source by far are spurned women. Way way back are screwed over partners, tenants out for revenge, jealous husbands, in laws, ” Of course if your tenants are doing something that is illegal then you have the Mexican Standoff. You get the rent in cash & Mom”s the word.

One of the better examples in Vancouver was when the East Indian truck drivers were hauling lumber across the line & getting chits for GST rebates. Except they hadn’t paid the GST in the first place. All the GST rebate checks were cashed at the Punjabi Credit Union up on Fraser St. The Feds finally clued in (officially they said they lost between 60 to 100 million) and asked the tellers working there why they hadn’t noticed all these truck drivers cashing these 20. 30 & 40 thousand dollar government checks. Ya & the girls are going to phone in & say that their boss, the founder & current President of their Credit Union> Mr. Malik <who was residing downtown in Remand going through a trial for sending 300 mostly Indians into a 20,000 ft. dive into the Irish sea, might be involved in something nefarious. Mr. Malik wasn't found guilty of anything by the way. I never heard of Revenue Canada getting any money back either. Maybe they figured out which Mr. Singh was what & how much, but it was money for nothing for awhile.

#106 Joe2.0 on 07.18.16 at 2:08 am

66 Smoking man
“Why are so many Chinese Loaded”
It’s a numbers game, there are a lot of Chinese.

#107 Roland on 07.18.16 at 3:03 am

Higher immigration rates don’t solve any country’s aging demographics. All higher immigration does is postpone the “peak grey,” but at cost of making the eventual problem even worse.

Why? Simple.

The reason developed countries have a grey problem is that their fertility rates are sub-replacement.

It has been found throughout the developed world that migrants assimilate to the host country’s fertiliy rate within one generation. i.e. no matter where the migrants come from, their fertility rate goes sub-replacement too, soon after they arrive.

Not hard to understand how this happens. The developed world is an expensive place to try to raise children. Just as it costs too much to make cutlery or TV sets in the developed countries, it costs too much to make many babies here. So we import people from places where they’re cheaper to make.

They’re born and raised elsewhere. But then they grow old and get sick and die here. So importing babies, in the end, never solves the Grey Problem.

But it’s easy to figure out why politicians in the developed world want to do whatever they can to postpone the reckoning. High immigration rates is the demographic version of “extend and pretend.”

On the whole, it would be better for us to just bite the bullet for 20-30 years, let the big cohorts age their way up and onward. Then we would eventually have a more column-shaped, rather than mushroom-shaped, population pyramid.

Finally, bear in mind that fertility rates are plummeting all over the world. Even countries like Mexico and Iran are now sub-replacement. China’s sub-replacement. If trends continue, the whole planet is going grey within 50 years.

#108 Shane on 07.18.16 at 3:31 am

“There’s a depressingly significant chance the Bank of Canada will again nip rates, even as the US Fed raises them there in 2016.”

So now we are not going to follow the USA like 96% of the time? Why were we ridiculing those people who said Canada will do opposite the USA. Guess we were wrong again. sigh…

#109 Shane on 07.18.16 at 3:36 am

“Oh. Then let’s discuss declaring rental suite income. — Garth”

My landlord drives/owns a cab and makes mostly cash money. Has 2 suites in home gets $1800/month. Together like $80,000 undeclared income. Because of low income, his 3 kids get $1599/month tax free in benefits.

Guess we were wrong again. Evading taxes is a win since government does not care. sigh…

#110 Koshy Alex on 07.18.16 at 5:30 am

Maybe you noticed that markets just hit new highs? Post-Brexit. — Garth

Yes Sir we did………………………..

The money revolution being perpetrated by the world’s central bankers: Don Pittis

Soaring real estate prices and rising stocks disguise a transformation in the traditional rules of economics

http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801

#111 #9 NotAGreaterFool...unsure on 07.18.16 at 6:13 am

Read “CRA slide presentation” from link you provide and I find that $1.3 million extra tax dollars were garnered from 339 files (p. 29) which to me, hardly seems to be the CRA “crackdown” that you allude to.

Rather, it shows that the CRA does not have the manpower (or the will) to find offenders, whether local or offshore, OR that flipping, tax dodging etc. are not as bad as everyone thinks these wrongdoings are in YVR RE.

Still a good read about the YVR RE and the tax dodging shenanigans that go in a bubble market.

#112 Zen Headspace on 07.18.16 at 7:05 am

#67 Paw Patrol
“Young 30’s and renting a nice house with 2 young kids in the lower mainland. Husband is starting to become discouraged that he didn’t buy a house a couple years ago as now his income is going up nicely. Obviously prices are unsustainable….”
——————————————————————–
Leave the Lower Mainland. Leave Vancouver. Leave BC. Go back for a visit once in a while to have a look at the mountains. Bring a camera.
BC is not the only place where they have homes for sale.
Move to where you can afford a home.
Be Mobile. Be Liquid. Be Diversified. Be Water.

#113 Scott on 07.18.16 at 7:44 am

Latest directive from the fuher bunker: no individual stocks. Can’t have the minions thinking to much. Besides how am I going to make any money
churning your account?

With a large (seven-figure) portfolio is is impossible to achieve the kind of diversification most people need in order to reduce volatility, sleep at night and grow their funds, by buying individual stocks. As for ‘churning’ (making excessive trades to drive up transaction fees), fee-based advisors do not charge for trades nor derive any revenue from them. If I had a buck for every numbnuts who came to this blog, though… — Garth

#114 crowdedelevatorfartz on 07.18.16 at 8:08 am

@#99 Smoking Man

Hitting the bottle a little early today are we Smokey?
How does THAT get past the ‘censor”?

#115 cropgrower on 07.18.16 at 8:21 am

yikes…..I think you missed that #99 comment Garth……

Yes, I did miss that. I sincerely apologize to anyone who read that garbage. — Garth

#116 ww1 on 07.18.16 at 8:24 am

#104 carboy on 07.18.16 at 12:36 am
well all capital gains I made in the USA still required me to pay CDN taxes after the US took there share first ..Same income taxed in both countries maybe my specialized US/ CAD accountant does not know what he is doing?

If your accountant is doing his job, you get a credit for the US tax you pay that offsets the Canadian tax. It’s not perfect and there are a few tricks but as a result you are essentially not taxed twice on the same income

#117 busman7 on 07.18.16 at 8:35 am

@#114 I am wondering the same thing? Usually just skip over his natterings but that one caught my eye.

#118 Nelley on 07.18.16 at 8:46 am

#93MF-“We” didn’t spend trillions to “save” the economic system-we transferred trillions (basically in future liabilities) to one group of people from a larger group of clueless sheep-basically picking someones pocket and then getting thanks for it.

#119 Ace Goodheart on 07.18.16 at 8:54 am

RE: “There’s a depressingly significant chance the Bank of Canada will again nip rates, even as the US Fed raises them there in 2016. This country is now on the wrong side of the curve, which means savers will be doomed to collecting less in interest than they are robbed by inflation and tax.”

As I was saying, currency devaluation. Inflation will outpace interest on savings. When that happens, guess what, your money is worth less than it used to be.

This stuff is all delayed currency devaluation. Governments and banks have become very good at holding the value of money at a level that its intrinsic worth does not support. Look up “syndication” in terms of borrowing and lending. These people are printing money and lending it to themselves.

Don’t let them fool you into thinking that the money they are lending you, and the money that our governments are borrowing, is other people’s savings. It is not. Most of it is “syndicated”, lump sum stuff that banks are creating and loaning to themselves.

The older people get, the less what they do makes sense and the more it is just habit and resistance to change. Remember this when you try to figure out why a bunch of banks and governments would “create” money out of nothing, and loan it to themselves at interest rates that are a fraction of a percentage point. This is what they are used to doing. If it no longer makes sense, that doesn’t matter to anyone other than a hot headed 20 year old who has decided that the system is nuts and isn’t shy about saying something.

This is what is “goosing” house prices. Worthless money, basically being given away.

#120 Adam Jenkins on 07.18.16 at 8:57 am

#61 Mark

3.25 for 90 days. How can you say that’s not juicy Garth. That’s a 12%annualized yield.

————-

Hahahaha. You think a bank is actually going to offer 12% annualized on a deposit, even if it’s just for 90 days? 3.25% is an annualized rate, dude. The simple fact that you thought they would give you a 12% annualized rate shows how clueless you are.

#121 Mr. Frugal on 07.18.16 at 9:12 am

Time to get on the Trump Train. It’s so exciting to see democracy and patriotism in action. Screw the globalists.

╔════╗──────────────╔═══╗╔═══╗╔╗╔═══╗─╔╗╔╗╔╗
╚═╗╔═╝──────────────╚══╗║║╔═╗║║║║╔══╝─║║║║║║
──║║╔══╦╗╔╦════╦══╗─╔══╝║║║─║║║║║╚══╗─║║║║║║
──║║║╔═╣║║║╔╗╔╗║╔╗║─║╔══╝║║─║║║║║╔═╗║─╚╝╚╝╚╝
──║║║║─║╚╝║║║║║║╚╝║─║╚══╗║╚═╝║║║║╚═╝║─╔╗╔╗╔╗
──╚╝╚╝─╚══╩╝╚╝╚╣╔═╝─╚═══╝╚═══╝╚╝╚═══╝─╚╝╚╝╚╝
───────────────║║
───────────────╚╝

Instructive to see how Trump supporters spend their time. — Garth

#122 Gonkman on 07.18.16 at 9:32 am

#45 salonist on 07.17.16 at 7:12 pm
No Canadian government, ever, will confiscate personal retirement savings. — Garth

Can Canada Revenue Agency Garnish CPP and OAS

Yes, Canada Revenue Agency can garnish CPP and OAS as well as all types of pensions. You may hear that creditors may not do this or may only be able to take a percentage. However, Canada Revenue is not a typical creditor. It is important to stress that CRA has more power than a credit card company or other creditor.

————————————————————-

OAS is NOT Retirement Savings. Its Free taxable money from the Government.

CPP is “Retirement” savings I guess but it is sucky.

Anyone who counts on OAS/CPP as their only source of retirement savings = FAIL. Unless you like Cat food.

Well you can always eat the Drywall in your 2.5Million dollar VAN House. But I think a 1×1 section of Drywall would be the same price as a 24Oz Filet Mignon.

Would you really want to eat your “Valuable” house.

#123 BOOM! on 07.18.16 at 10:05 am

#103 WW1

Thanks for clarifying that. It is a small minority of couple who have net taxable income over $185K in the US.

Trust me, those that do have better ways to invest their money, and keep the deductions alive.

Yes, our tax code is almost as goofy as Canada’s.

Cheers!

#124 fancy_pants on 07.18.16 at 10:08 am

All good advice Garth. Since savers have been punished the last decade, money is simply finding better returns, namely stock markets and RE.

But negative rates don’t just indicate growth is slow, it indicates the entire political and economic system is broken. The cycle of promises/lies/spend/tax that we call democracy has led us down a deep debt filled hole – one that is becoming more and more difficult to service. Only more public debt (QE) can service the current public debt. Economies are not growing but debts are. Model breaks under such conditions. Stagflation is on it’s way.

http://www.reuters.com/article/eurozone-bonds-idUSL8N19Z1QW

#125 BOOM! on 07.18.16 at 10:16 am

#93 -95 -97 MF

I see a lot of ‘bitchin’ in these, but no solutions.

WHAT would you suggest for growing your long term house, or retirement money?

You know where my thought lie, and what has been working for ‘me’ while the whole world we can’t save, what are you doing to protect yourself in a world of crazy?

#126 cramar on 07.18.16 at 10:19 am

Talking to a RE broker friend on the weekend. He told me about a conversation with a person who runs a home inspection organization in the GTA. Person said business is down 40% this year, because people are not getting inspections. They are putting in offers without conditions to win the bid!

So it seems the greater fool will not just be the last buyer when the bubble bursts, but the last buyer who finds out there are also $100k repair issues.

#127 Smoking Man on 07.18.16 at 10:22 am

Wow, I let the bottle get the better of me last night.

I sincerely apologize to everyone,with regards to that vulgar comment. especially Garth.

Seeing that I have absolutely no memory of typing it.
I am imposing a time out for myself, and will seek treatment.

Cheers

#128 Guy Fawkes on 07.18.16 at 10:40 am

I feel so good today I just have to let everyone know. Finally convinced wife to sell our house in Niagara. Listed on Monday, took offers on Friday. House sold for almost 20% over asking. My debts will be paid and I found a house in same neighborhood for pe ratio of 19. I can’t believe the crazies have spread this far from 416. #SummerToSell Life is great! Thank you Garth and all blog dogs for sharing your knowledge. Another family back on track.

#129 not 1st on 07.18.16 at 10:42 am

Garth’s last few posts show he is really starting to get it – well most of it anyway.

Maybe read on a bit more;

http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801

#130 Neil Armstrong on 07.18.16 at 10:50 am

RBC calls Vancouver housing a bubble here:

http://media.rbcgam.com/pdf/economic-compass/rbc-gam-economic-compass-cdn-housing-201411.pdf

#131 Neil Armstrong on 07.18.16 at 10:52 am

Shoot, wrong link, please retract.

#132 Ponzius Pilatus on 07.18.16 at 11:13 am

#82 Andrew Woburn on 07.17.16 at 10:29 pm
#68 Apocalypse2016 on 07.17.16 at 9:34 pm
Baton Rouge today.
Cleveland this week.

The Summer of Hell is upon us.
===================

We’ve had worse. We survived.

Google “Riots”, Detroit 1967, Watts, 1965.
——————
Sure. But the states are sooo much more civilized these days.
And they even have a black President now.

#133 Doug T. on 07.18.16 at 11:18 am

this is where we are heading – get ready

http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801

#134 Steve on 07.18.16 at 11:25 am

Hi Garth. I’m trying to figure out the best way to save under a specific circumstance. Wife and I have a little one under 6 so we get the child benefit, which is based on income. Is it better to save in an RRSP as opposed to a TFSA in order to lower income so we can get more from the CCB?

The RRSP will not lower your taxable income. Use an RESP. — Garth

#135 CJBob on 07.18.16 at 11:39 am

#122 Gonkman on 07.18.16 at 9:32 am
CPP is “Retirement” savings I guess but it is sucky.
__________________
By sucky I assume you mean extremely well diversified with a very low operating cost and a track record of good performance since that’s what the statistics show. Even the Financial Post couldn’t find anything bad to say about them:
http://business.financialpost.com/news/fp-street/cpp-fund-generates-highest-one-year-return-of-18-3-per-cent

Thanks for adding your insight though, very valuable.

#136 Bytor the Snow Dog on 07.18.16 at 11:59 am

Recent posts by Garth seem to suggest that he understands the plight of many however his “if you can’t beat ’em join ’em” strategy ignores the fact that, for the reasons he indicated, most persons don’t have the means to do so.

Most people don’t try. You do not need to be rich to be successful. — Garth

#137 Darryl on 07.18.16 at 12:05 pm

No Canadian government, ever, will confiscate personal retirement savings. — Garth

Maybe not ‘Garth. But they are being confiscated by high inflation of essentials like food and low returns on investments . Along with low wage growth and higher taxes.
Not looking good here .
I may just move into the Doomer camp. Or out of Canada.

#138 Brazil ex-pat on 07.18.16 at 12:26 pm

#133 Doug T. on 07.18.16 at 11:18 am
this is where we are heading – get ready

http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801

++++++++++++++++++++++++++++++++++++

Agreed….the phony growth put out by Govt and Banks will continue….until it doesn’t.

#139 dsw on 07.18.16 at 12:33 pm

“No leverage” – unless you understand the risks

my spouse gets a steeply discounted LOC rate as she is a credit union employee.

i just opened an unregistered account, and am planning to buy chunks of preferred shares, up to about 50K.

The difference between the yield and the interest is about 3%.

I convinced her I know what I’m doing. Can anyone confirm?!

Thanks!!!

#140 Ogopogo on 07.18.16 at 12:38 pm

One blog post containing the secret to financial success and a lifetime of freedom and peace of mind.

Wow, simply wow.

This is a gift to Canadians (and beyond) that’s only fully appreciated by those reaping its benefits. I count myself among those blessed few.

The enslaved and the ignorant will foam at the mouth at Garth, trapped in their own bubble of self-loathing and blaming everyone but themselves for their mistakes.

The wise listen, and give thanks, even if they don’t agree with our host on everything.

And on that note, thanks Garth.

You still can’t borrow the bike. — Garth

#141 Brett in Calgary on 07.18.16 at 12:44 pm

Great post Garth. Too bad there are so many mouth breathers on here.

#142 Sheane Wallace on 07.18.16 at 12:47 pm

# 119 Ace Goodheart,

Exactly,
Lending money that does not exist/were not saved/do not represent passed labour causes:
1. Lower rates for the money saved, so lower return to savers
2. Higher inflation as there is more ‘money’ circulating that do not represent passed labour

So the part of money that represents passed labour is diluted, it is in essence form of theft. Savers get less money that are worth less.
Central banking was never intended to work this way, specially in combination with fractional reserve banking system.
Is it essence a monetary coup that overrides the default contract that creates the fabric of the society, country and government.
It is also a form of slavery and forced labour, by stealing your savings which is also a violation of property rights.

By accepting monetary policies and currency (forced by governments) one becomes not part of the whole/the government but owned by the government which was never the intend of the societal contract that lead to the formation of modern countries.

governments have no place in the markets.

#143 Roial1 on 07.18.16 at 12:55 pm

#28 NEVER GIVE UP on 07.17.16 at 5:01 pm

Thailand restricts foreign ownership of land because they care about their people and rightly so.
————————————————————
The above is NOT a true statement.

The reason for the “foreign ownership” law is to give the local authorities a way to extract GRAFT period.

A friend of mine “owns” a resort apartment building in a mid sized city over there. The level of local graft is astounding and goes on at every level.

example: You need water? you buy a license. BUT, to get one with enough supply for your business you MUST cross the palm of a bureaucrat. Then pay the much smaller cost of the license. No “baksheesh” no license.
Oh, you may get a license for 1/4 of what you need but not enough for the business. And the bureaucrat will be backed up by his boss because he gets a piece of the action.
And because of the land ownership law you have NO comeback as the property can be ordered into the ownership of the Thai who’s name is on the title with yours and you can be sent packing. NO recourse, no compensation.
Check it out.
I know about this as my friend has been trying to sell and can’t because his Thai “partner” will not let him.
That’s how it works in Thailand.

#144 jess on 07.18.16 at 12:55 pm

Bank of England governor Mark Carney decided not to cut rates last Thursday, but a day later his chief economist Andrew Haldane called for a “package of mutually complementary monetary policy easing measures” to fight off the damaging financial effects of Brexit.

Soaring real estate prices and rising stocks disguise a transformation in the traditional rules of economics

By Don Pittis, CBC News Posted: Jul 18, 2016 5:00 AM ET Last Updated: Jul 18, 2016 5:00 AM ET \\=
http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801
================================

Central Bank Lending
A channel system is one where a central bank is willing to supply (lend) an arbitrary
amount of balances to banks at a fixed interest rate and to absorb (borrow) an arbitrary
amount of deposits at a fi xed interest rate. In “Optimal Monetary Policy in a Channel System” Aleksander Berentsen and Cyril Monnet find that it is always optimal for the central bank to set its lending and borrowing rates equal to one other. The optimal monetary sets the central bank’s nominal interest rate equal to zero, i.e., the Friedman rule, when there is no possibility of default. However, if there is a possibility of agents defaulting on their loans to the central bank, then the central bank will set a strictly positive interest rate and, thus, the Friedman rule is no longer optimal

Use in economic theory
https://en.wikipedia.org/wiki/Friedman_rule

#145 Dogman01 on 07.18.16 at 1:01 pm

An article correlated with the phenomenia of “free money” and how disturbing it is.

http://www.cbc.ca/news/business/central-bankers-policy-rules-economics-1.3680801

We live in “interesting times”. Will there eventually be inflation at the consumer level, there is in housing, seems to be in my utility bill.

#146 Sheane Wallace on 07.18.16 at 1:02 pm

past labour, damn that spell checker

#147 Self Directed on 07.18.16 at 1:08 pm

#127 Smoking Man on 07.18.16 at 10:22 am

Wow, I let the bottle get the better of me last night.

I sincerely apologize to everyone,with regards to that vulgar comment. especially Garth.

Seeing that I have absolutely no memory of typing it.
I am imposing a time out for myself, and will seek treatment.

Cheers
——————————
You’re hilarious. And much more insightful sober. I recommend giving me your booze money for my TFSA Account. Or start a booze fund “ticker” at the bottom of your posts, so we can all track your performance. Seriously, wish you the best.

#148 bdwy sktrn on 07.18.16 at 1:21 pm

#121 Mr. Frugal on 07.18.16 at 9:12 am

╔════╗──────────────╔═══╗╔═══╗╔╗╔═══╗─╔╗╔╗╔╗
╚═╗╔═╝──────────────╚══╗║║╔═╗║║║║╔══╝─║║║║║║
──║║╔══╦╗╔╦════╦══╗─╔══╝║║║─║║║║║╚══╗─║║║║║║
──║║║╔═╣║║║╔╗╔╗║╔╗║─║╔══╝║║─║║║║║╔═╗║─╚╝╚╝╚╝
──║║║║─║╚╝║║║║║║╚╝║─║╚══╗║╚═╝║║║║╚═╝║─╔╗╔╗╔╗
──╚╝╚╝─╚══╩╝╚╝╚╣╔═╝─╚═══╝╚═══╝╚╝╚═══╝─╚╝╚╝╚╝
───────────────║║
───────────────╚╝

————————————-
VREU’s head just exploded.

RIP, we’ll miss ya!

#149 Franco on 07.18.16 at 1:42 pm

I am pretty sure that there is something in the bible that says people in the last days will throw out their gold, silver and cash as they would be worthless. not to far off the mark, lets hope not. We are in a re-adjusting period and it will last for about 40 years until the baby boomers die off.

#150 AB Boxster on 07.18.16 at 1:44 pm

While I don’t disagree with anything Garth recommends, one wonders how long this strategy will provide success.

Central bankers continue to push more money into the system, buying up bonds and keeping rates artificially low. Savers get nothing. Smart investors are rewarded.
Whether its through overpriced real estate or intelligent investing strategies.

For now.

And as the pretend growth continues, stimulated by fiscal and monetary policy, one wonders how long it can continue.

All of the old economic rules and theories seem to have been thrown out the window…

Negative bond yields.
Artificially controlled interest rates.
Massive individual and national debt.
Anemic growth.
Huge levels of unemployment and underemployment.
Disruptive technologies on the horizon.
Disruptive policies (globalism) failing.

So yes, Garth is correct. His strategy and advice is the only way to make return in today’s bizarre world of new economics.

However, to have any level of confidence, that the governments and central bankers of the world really have a clue as to the outcome of this great economic experiment, is not an exercise in portfolio balance or risk management.

Rather, it is more an expression of blind faith in policies that have no basis of historical precedent and little evidence of logical planning.

Economic policy based upon hope and prayer.
What could go wrong?

#151 S.Bby on 07.18.16 at 1:47 pm

Bank profits get hammered by low interest rates:

http://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=f16400&mobile=false

NEW YORK, N.Y. – Bank of America’s earnings fell 20 per cent in the second quarter, the bank said Monday, as historically low interest rates dented the bank’s profitability, just like it had done for its major competitors.

#152 shawn on 07.18.16 at 1:49 pm

Debt and money, misunderstood

#142 Sheane Wallace on 07.18.16 at 12:47 pm
# 119 Ace Goodheart,

Exactly,
Lending money that does not exist/were not saved/do not represent passed labour causes:

*************************************
Money represents a claim on goods and services and it can be redeemed for same anytime.

Money borrowed means it has to be repaid by producing some valuable goods and service later such as by working (labour) or providing goods or services created from capital such as income from rent or from the output of some machine or software system or output from a farm. Labor need not be involved but can be.

Every good or service bought with borrowed money was PRODUCED before it was bought. It’s not in any way fake. Someone on the is earth essentially has paid for EVERYTHING by the time it was consumed. The person consuming it may be in debt. But someone has paid for it entirely up front.

Really.

You are sadly misguided to think otherwise.

#153 shawn on 07.18.16 at 1:52 pm

Ludites Live

It is indeed incredible that anyone who knows the benefits of mechanisation these past 200 years (or these past 1000 for that matter) could possibly think that robots and automation are a threat to average living standards.

Truly, the internet has allowed the incredibly stupid among us to have a voice and an audience as never before. Who resembles this comment?

#154 shawn on 07.18.16 at 2:05 pm

Banking, misunderstood

Fundamentally, to borrow and spend has always meant to consume or buy today what another has already produced or owned and to pay it back later.

Bleats about electronic money created from thin air do not change this. ALL that is consumed on earth has actually been PRODUCED on earth. There is no debt to the Martians.

In any case, the goal is to build up your stock of money and wealth and wealth producing ability rather that to worry about the nature of money and debt.

#155 gonkman on 07.18.16 at 2:06 pm

#122 Gonkman on 07.18.16 at 9:32 am
CPP is “Retirement” savings I guess but it is sucky.
__________________
By sucky I assume you mean extremely well diversified with a very low operating cost and a track record of good performance since that’s what the statistics show. Even the Financial Post couldn’t find anything bad to say about them:
http://business.financialpost.com/news/fp-street/cpp-fund-generates-highest-one-year-return-of-18-3-per-cent

Thanks for adding your insight though, very valuable.

—————————————————————-

I didn’t say it wasn’t managed well. 18.3% Return… for which you get your annual payout increased by Inflation (CPI). So it made 18.3% last year and you get an 1.8% CPI increase in your payout (if you are collecting). Yeah!! Awesome performance but you don’t get that! CPP is only increased by CPI (Inflation %) every year.

So the CPP Fund is making 4%-20% a year investing and paying out between 1%-3% in actual increased payouts to you. Nothing like a 3%-17% Hidden MER in the CPP Fund.

And don’t forget when you croak your estate gets $0 except spouse at 60%ish I believe?

Don’t drink the KOOL-AID. Do the MATH. But then again MATH is HARD.

Take 30 Years of Max CPP Contributions plus the employer contributions and invest it in Low Cost ETF’s for 30 Years. You would have a pile of cash to live on which is also 100% transferable to your estate.

I am not against CPP as we would have to many greater fools in thirsty underwear eating even more Catfood if it didn’t exist because people don’t save.

But don’t get hung up on performance.. as the Payout increases aren’t based on that. They are based on CPI.

#156 gonkman on 07.18.16 at 2:07 pm

No Canadian government, ever, will confiscate personal retirement savings. — Garth

Maybe not ‘Garth. But they are being confiscated by high inflation of essentials like food and low returns on investments . Along with low wage growth and higher taxes.

——————————————————————–

My returns are doing fine… your need to “Risk” your money more and invest as Garth suggests. Savings accounts and GIC’s aren’t going to cut it. The 80’s and 90’s are long gone.

Personal Income Taxes just got lowered by Captain Selfie..

And essentials like food haven’t moved gone that far out of whack. You just need to shop around and pickup sales instead of just throwing whatever you want in your shopping basket. If it’s priced insanely… let it rot on the shelf.

#157 shawn on 07.18.16 at 2:26 pm

Seriously?

The aptly named gonkman just above said:

So the CPP Fund is making 4%-20% a year investing and paying out between 1%-3% in actual increased payouts to you. Nothing like a 3%-17% Hidden MER in the CPP Fund.

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

The returns are what allow the ultimate CPP payments to average FAR higher than contributions. The ceasing of CPP upon death also contributes to same.

To suggest that inflation increases in CPP should EQUAL the return is misguided. But it might be a good idea to make increased or decreases tied to return. as it is retirees (CPP collectors) face no risk so why should they benefit from high returns.

#158 Doghouse Dweller on 07.18.16 at 2:34 pm

“The world’s central bankers may have started a revolution more radical than anything ever dreamed of by Karl Marx” -CBC

“On March 11, 1935, the Bank of Canada began operations
The Minister of Finance can issue written instructions for the bank to change its policies. This has never actually happened in the history of the bank to date.” -Wiki

How can this be ? The representative of the people has never instructed the Bankers on policy.

And we wonder why we no longer earn anything on our savings and pay outrageous interest on loans !

Anyone ?

#159 jas on 07.18.16 at 2:38 pm

Garth: you mentioned in response to a comment about decline in CPD price that if one is seeking yield then price decline doesn’t matter. I guess the same argument would then apply in one buys rental RE in Calgary. Would it not? Considering the price to rent ratio gives a very good yield.

Show me a rental house in Calgary giving a 5% yield with a tax credit on the income, full liquidity with no purchase or exit costs and I will agree. — Garth

#160 Grey Dog on 07.18.16 at 3:12 pm

Bytor the snow Dog: most people don’t have the means…
You talk yourself into believing you “don’t have the means” believe me if you consistently have a portion of income put away each pay cheque, time plus compounding will bring you to a number at retirement that will surprise you today! Save then INVEST today for the retirement YOU want in the future.
We saved for many years but didn’t INVEST til 09…what a difference an investment financial advisor can make! Certainly wish we had INVESTED years ago…could have been fully retired by now. Actually tried many years ago, didn’t have enough saved and advisor we sought at that time treated us like we were toxic… It is a shame too many advisors won’t touch a lower number. Look what Garth did for those youngun’s a few weeks ago, hit their number and now enjoying life on their terms.

#161 jess on 07.18.16 at 3:40 pm

welcome to “freedom plaza”
..”2010, the United States Supreme Court overturned the handgun law, and last year a federal judge ruled that prohibiting the sale of firearms was unconstitutional.”
================
gun deaths
Source: Data compiled by the Chicago Tribune Breaking News Center.
http://apps.chicagotribune.com/news/local/young_victims/

dead kids is not evidence?

…”Chang found that the city’s “blanket ban” on sales and transfers of firearms violated the constitutional right to keep and bear arms….He acknowledged that Chicago has a serious problem with gun violence but said the city had not demonstrated how allowing the sale of firearms would pose a “genuine and serious risk” to public safety.

#162 Dan on 07.18.16 at 4:05 pm

Is it me or is the RBC housing report extremely bias towards pumping real estate?http://media.rbcgam.com/pdf/economic-compass/rbc-gam-economic-compass-cdn-housing-201411.pdf

Basically, ja housing is crazy expensive, but no worries because A-B and C are good.

Or sure Canadians have taken on a ton of debt to buy houses but it’s all good because it’s worse else where in the world and “Fortunately, Canadians have been
doing the more prudent of the two – buying homes that at least increase the asset side of the balance sheet….Moreover, everyone has to live somewhere. A mortgage payment and the debt associated with it helpfully eliminates the cost of paying rent.”

Or maybe it’s true if you eliminate Vancouver (+lower mainland) and Toronto area. I guess 700K for a townhouse an hour drive from Vancouver is a bargain and still quite affordable (based on incomes and debt levels). Insane!

Finally, good to see incomes are sky rocking in Canada ” This measure notes that home prices have outpaced inflation by a whopping 130% since 1980.
In practice, however, real home prices are a poor measure of affordability. A key reason is that household incomes rise over time. Buyers can afford to pay more whether or not a house actually costs more to build.”

How much have wages gone up since 1980? How much have houses gone up?

After reading the whole report that I m baffled and a bit confused- guess its all good. Keep buying at any price but hurry!

#163 Memes on 07.18.16 at 4:19 pm

So the Vancouver and Lower Mainland real estate bears have had an every changing narrative since the great financial crisis of 2008.

First, it was according to fundamental economic analysis, everything was over-priced. Price to rent and price to income ratios were out of whack. How could the average family making 70k afford that million dollar house? The market will surely correct with those debt levels.

Then no correction.

Second, it was interest rates will double in a few short years and the corresponding massive rise in mortgage payments will crush the virginal buyers and correct the market. After a measly .25% increase in 2015, the much anticipated 4 interest rate hikes in 2016 are now off the table. Rate increases for 2017 are looking like a fantasy. And now in the it ‘cannot possibly happen’ world, the BOC looks like it will actually cut rates. No following the US rate cycle as it has done 93% of the time.

Now no correction.

Now, because rates are not going up, it is a debt wall that will prompt a market correction. Every year the ratio of debt to disposable income gets brought out – 140% of income, then 145%, 150%, 155%, 160%, an onwards. But our debt levels have far exceeded the US at its housing peak and there is no hint of any correction.

Sorry millennials, the realtors are right when they say no correction coming. The bearish camp changes the main catalyst for a market correction every couple of years once the market shows no sign of correction.

And for those of us that have been around bearish blogs since 2006, we have cited peak housing since 2012 whenever somebody looks at the ‘slow down’ in June sales.

This year’s slow down is no different then any other – there is simply no inventory out there. What exists is completely overpriced, crap, and insulting to even the most desperate buyers. Anything that is priced right sells out in bidding wars,and asking if not higher prices. Sales always slow down in June but come the fall and especially next Spring they will be right up there again.

The bearish call is enticing for those that are risk aversive and do not have the financial means to compete in these markets.

#164 calgaryPhantom on 07.18.16 at 4:34 pm

Garth: you mentioned in response to a comment about decline in CPD price that if one is seeking yield then price decline doesn’t matter. I guess the same argument would then apply in one buys rental RE in Calgary. Would it not? Considering the price to rent ratio gives a very good yield.

Show me a rental house in Calgary giving a 5% yield with a tax credit on the income, full liquidity with no purchase or exit costs and I will agree. — Garth

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No way. Almost every “landlord” i know is either making a 0% or a negative yield on house rentals these days.

#165 Sheane Wallace on 07.18.16 at 4:48 pm

#154 shawn

Which part of: ‘somebody else is consuming the fruits of your labour’ did you nod understand?

Of course there are more claims on wealth due to banking model and monetary policies, which diminishes your claim, the one of the producer, at the expense of somebody else who does nothing productive.

#166 Sheane Wallace on 07.18.16 at 4:49 pm

at the benefit of somebody else who does nothing productive.

#167 Sheane Wallace on 07.18.16 at 5:03 pm

RBC is correct, no housing bubble here so let’s cancel CMHC insurance and let the lenders enjoy the fruits of their prudent lending.

It is easy to be arrogant when backed by the public courtesy of the idiots at BOC and governments.

Highly educated workers more likely to have low-paying jobs: study

https://ca.finance.yahoo.com/blogs/insight/highly-educated-workers-more-likely-to-have-low-paying-jobs-than-in-the-past–study-154409248.html

minimum wage (sales clerks) workers with MBAs. The new reality.

direct result of fundamentally wrong policies that will impact your kids.

#168 jess on 07.18.16 at 5:18 pm

‘The Art of the Deal.’ written by Tony Schwartz the ghostwriter (myth maker) of Trump’s 1987 breakthrough memoir

http://www.newyorker.com/magazine/2016/07/25/donald-trumps-ghostwriter-tells-all

#169 Westbank on 07.18.16 at 6:00 pm

#130 Neil Armstrong on 07.18.16 at 10:50 am
RBC calls Vancouver housing a bubble here:

http://media.rbcgam.com/pdf/economic-compass/rbc-gam-economic-compass-cdn-housing-201411.pdf
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Thanks this is what I was looking for !

#170 orange guy shorts on 07.18.16 at 6:17 pm

regarding the 3.25% at Tangerine
let’s just do some very quick math
let’s say you have $50,000
3.25% * 2.5months/12months = $335 in interest of which probably half goes to the government.

Not very juicy.

But still, as Garth likes to point out – this is all very liquid. A few clicks of the mouse, and I can get back into the market.

As Garth pointed out, markets just hit new highs post-Brexit… so I’m gambling, not investing, by trying to time the markets.