The emanator

SCALE modified modified

Two years ago mortgage lenders mocked this pathetic blog. It wasn’t hard. After all, houses were inflating monthly, and here I was cautioning the citizens of Canuckistan not to pickle themselves in debt, but to keep real estate exposure in balance with other assets.

Pshaw. Nobody cared. Least among them the people whose livelihood depends on handing out epic mortgages to the masses. “Predictions of a Canadian housing crash have been unsubstantiated and have emanated largely from one man: Garth Turner,” said industry publication Canadian Mortgage Trends back when brokers were gods. How embarrassing.

Of course, things have changed. “Financial advisor warns against pinning one’s hopes on housing,” Mortgage Broker News headlined a few days ago.

The continuous price increases in the high-demand housing markets of Vancouver and Toronto might be attractive to those who are looking to sell at a profit later down the line, but a prominent financial advisor cautioned against putting all of one’s eggs on the real estate basket.

Finance blogger and author Garth Turner described the dire situation faced by many young adults who are considering investing in Vancouver and Toronto homes.

“The liquid assets among 35-year-olds who have been working for seven or eight years is breathtaking. There aren’t any. Instead, all the cash has gone into lifestyle, a soul-sucking condo or repaying student debt,” Turner wrote.

Hmm. Change in tone. No wonder. I’m not alone any more.

On Friday the Royal Bank raised a serious alarm. Here’s what George Davis, chief technical analyst at RBC Dominion Securities, had to say about our hormone-drenched housing fetish:

“The housing market serves as the most prominent risk to financial market stability in Canada. We have been receiving an increased number of questions from investors about the underlying dynamics of the housing boom, along with key concerns and their potential implications for markets.”

No guff. Real estate and related activity now make up about a fifth of the total Canadian economy, and are even more consequential in delusional BC, where the local government has just enacted a tax basically promising a housing event. But RBC agrees with me, it’s not foreigners buying (before) or selling (now) that’s behind real estate excess. It’s us, and our inability to resist ‘affordable’ debt.

“The availability of cheap credit has stoked concerns that the economy may now be susceptible to a housing market shock as consumer leverage reaches a historical high… While foreign buyers may be small in terms of absolute numbers, they are often buyers of the high-end, luxury segment that defines the highest property price points.”

Exactly. Every time some greater fool Chinese dude buys a $40 million house, people in the market for a $1 million Van crack shack develop a serious case of FOMO, and, as Davis writes, “anticipate that recent price appreciation will continue into the future and rush in to purchase real estate in the fear of being priced out of the market or missing out on anticipated future gains.”

This is how the Canadian real estate market – at least in Vancouver, Toronto and (now) Victoria, Hamilton and other spillover areas – became completely detached from the national economy, where jobs and trade are in decline and growth has slowed to a crawl.

The bank (and me) is not alone. The chorus of warnings is cacophonous. Every major debt rating agency, the IMF, Capital Economics, CMHC, the World Bank, the federal bank regulator and bank CEOs have joined it. And yet in the past year total household indebtedness – already at a record – went up another 6%. House prices snaked higher to what appears to be a peak. It’s just so obvious that your friends, colleagues at work and idiot relatives cannot help themselves. Our one-asset national financial strategy carries on towards an uncertain conclusion.

Think 8 on the Richter.

In other words, of course there will be economic disruption if the housing market plops widely. Bank share values may be impacted, but don’t expect anything more consequential (they’ve spent years preparing for this). Jobs, however, will be affected, along with overall consumer spending, retail sales and industrial output – plus Bay Street will likely come off its current equity romp (the TSX has added 12.9% so far this year). For investors, that means keeping the balance suggested here in the growth part of your portfolio – about 18% in maple and the other 42% in US and international assets.

Meanwhile, if you’re anywhere near retirement and have hoarded the bulk of your net worth in bricks, well, you know what to do.

164 comments ↓

#1 TurnerNation on 08.21.16 at 5:19 pm

Its true here in Kommunist Kanada that our ruling corporate elites pretend to pay us and we pretend to work. Notice any taxi driver, security guard on their cell phones all the time. Why not.

When, 15 year in a trade to earn $15/hr?

And we pay $30 for burger + beer + tax + tip at any chain restaurants?

http://torontolife.com/food/cooks-leaving-toronto-kitchens-corey-mintz/

““A chef is a Red Seal trade. Yet every other trade makes around $30-$40 an hour. Where a cook makes $15-$20. I’ve been in the industry for 15 years. I quit 2 months ago. Best decision ever. New job pays me better than the kitchen with no prior job experience. My 15 years still gets me $15 an hour offers. It’s a joke.””

#2 TurnerNation on 08.21.16 at 5:21 pm

Men vs. Women.
Tag this #FreedomFirst, SmokingMan

Was supping sitting at bar and a bride-to-be cames up, bachelorette party on the other side included her younger sister, and back and forth ensued and I side stepped a “What do you do for a living question”. (Seriously it’s a perfect night on a rooftop patio – no one cool talks about work unless…).
Then, she asked it again, What do you do for a living.
I told it and she invited me over to see her crew. I demurred.

Still got it (my money I mean. What I do for a living.)

M40ON

#3 For those about to flop... on 08.21.16 at 5:23 pm

VREU and The American had a spirited debate about where and why people live in certain areas of the U.S

Most of you will know the basic numbers but this map that I found does it slightly differently.

For what its worth if I was allowed to live in the U.S year round I doubt it would be in Florida or Arizona…

M42BC

http://imgur.com/8OcucU7

#4 Revol on 08.21.16 at 5:24 pm

You called it, Garth.

Ironic that the 15% Foreign Tax is what will nail the Real-Estate market.

#5 pathcontrolmonk on 08.21.16 at 5:26 pm

With Canada set to accept 400,000 Chinese “students” per year at the request of our overlords in the People’s Republic, I have lost hope that things will normalize anytime soon.

http://www.nationalpost.com/m/wp/full-comment/blog.html?b=news.nationalpost.com/full-comment/terry-glavin-canadas-servile-relationship-with-china

There will not be 400,000 more Chinese people coming to Canada annually. Any more fabricated comments like this and you will be benched. — Garth

#6 Russ on 08.21.16 at 5:29 pm

Where’s Jimmy?

#7 majik on 08.21.16 at 5:30 pm

“The liquid assets among 35-year-olds who have been working for seven or eight years is breathtaking”

There’s your problem there. Mid-thirties with not even a decade of work behind you, pissing away your money on baubles with built-in obsolescence. I’m 37 with 16 years of work behind me and all the experiences and life lessons that go with. So many folks dawdling in college these days, just get one damn degree and get out. If you’re not working or productively contributing to society by at least 24 or 25 then to be honest…. words can’t describe.

#8 BOOM! on 08.21.16 at 5:32 pm

You mean -finally- Canada might have reached “Peak House”?? Would be very unsettling to a good many who thought, ‘no way, that is ever going to happen.’

Well, whether, real estate, or stocks, commodities, bonds, or Beanie Baby like fads, they reach a peak, then fall back, sometimes temporarily -which can be years- at other times sometimes forever -which is a lot longer.

I always enjoy a good market cleansing, whether it was Japan romp in real estate, or us the guys down south, and maybe now, Canada.

You will get through it just fine. Only thing to worry about is how much your meddling government ,might try to ‘help out’ the homeowners. That will undoubtedly screw you over. Just look at what saving the Big Banks has done for us? They haven’t learned a lot in my opinion.

M64WI

#9 Mark on 08.21.16 at 5:37 pm

Jobs, however, will be affected, along with overall consumer spending, retail sales and industrial output – plus Bay Street will likely come off its current equity romp (the TSX has added 12.9% so far this year).

Romp? The TSX is still down from its levels of 8 years ago. Its dirt cheap on a P/B and even a P/E basis, and its dividend yield referenced against 10-year or 30-year GoC paper has never been so high relatively speaking. If anything, as the housing market continues to decline, the TSX should be a significant beneficiary of both Millennials and the near retirees starting to get serious about acquiring assets that can provide legitimate amounts of growth.

As “Shawn” suggested yesterday, the whole thing smells like a sort of 1990s setup, in which, as money cycles away from speculating in houses, and moves towards stocks, that stocks could see vigorous gains. I’d suggest, especially in Canada where there was no meaningful and full recovery from the 2008 declines — one of the few “developed” country stock markets not to set meaningful new highs in its equity valuations post 2008/2009 debacle.

For investors, that means keeping the balance suggested here in the growth part of your portfolio – about 18% in maple and the other 42% in US and international assets.

Unfortunately for Canadian equity investors, who are notoriously overweight Canadian equities (and have suffered accordingly), rebalancing to such ratios would be a ‘sell low, buy high’ sort of scenario. If the TSX (current P/E = 15) were to reprice itself to be similar to that of the S&P500 (current P/E = 27), that’s roughly a 27,000 TSX. That’s a heck of a lot of growth to leave on the table at this point. I know, rebalancing and all of that is algorithmic, but there can be a lot of danger in switching asset allocations mid-stream, especially with so many great assets in Canada trading in distress, and with so many visible bubbles in the United States.

#10 Utopia on 08.21.16 at 5:38 pm

First!

#11 Scumop on 08.21.16 at 5:39 pm

Guessing “bankruptcy counsellor” should be the career move for a fair percentage of people in re and banking.

#12 MSM-Free Zone on 08.21.16 at 5:47 pm

Crocodile tears from a bunch of unethical, financial hypocrites who have themselves stoked the fires and profited handsomely over the last decade.

We’ve seen this movie before.

#13 Wog on 08.21.16 at 5:47 pm

The Federal Reserve has set up a cute little Facebook page. The comments section will not disappoint :)

https://www.facebook.com/federalreserve/?fref=ts&rf=106262046076826

Did you know that the Federal Reserve is essentially a private entity? Interesting documentary below…

https://www.youtube.com/watch?v=5IJeemTQ7Vk

#14 rknusa on 08.21.16 at 5:49 pm

still do not see any evidence of a real change in the market

daily GTA sold listings show almost all properties selling in less than a week and often 20% over asking

where is the beef?

#15 This Week in Money on 08.21.16 at 6:00 pm

Ross Kay on This Week in Money
Bear market in real estate, bull market in litigation ?

http://howestreet.com/2016/08/21/this-week-in-money-61/

#16 JaneDoe on 08.21.16 at 6:04 pm

Based on Garth’s suggested weightings I would like to put a Vanguard portfolio together but have a couple of questions if anyone can help me out. I’m still not totally clear which should be held in an RRSP vs TFSA. I have about $50K to invest right now and will continue adding $1K/month going forward. Am I on the right track with these funds I’ve researched below? Any suggestions appreciated. I like trying to figure this stuff out, but, egads, the more I read the more confused I get.

8% – Gov’t bond fund – (RRSP – VSB)
10% – Higher yielding prov or corp fund (RRSP? Suggestions? XBB?)
20% – Preferred (RRSP or TFSA? Suggestions? XPF / XEI?)
8% – REIT (RRSP – VRE)
17% – Cdn (TFSA – VCN)
20% – US (RRSP – VUN)
17% – Int’l (RRSP – VIU?)

#17 Perspective on 08.21.16 at 6:14 pm

We definitely have a housing bubble, but we have a bubble in assets generally.

I think you called this 10 years ago.

#18 Andrew Woburn on 08.21.16 at 6:14 pm

I think it was only last June that I drew attention to a new US start-up called Otto that was developing self driving highway trucks. Now it has been bought out by Uber for $680 million. One of Uber’s objectives was to acquire an industry leading team whose chief came from the Google self driving group.

Uber is introducing a small number of self driving cabs in Pittsburgh next month although they must carry drivers ready to take over. In both the cab and truck initiatives, Uber will be working with Volvo which, although still based in Sweden, is now owned by Geely Motors of China. They expect to introduce fully self driving cabs by 2021. Ford has also the same target date for its own automated cabs.

Those who are skeptical of the apparent speed with which self driving technology is being developed should note the Geely connection. Although we are used to American regulators ruling the roost on such tech development, there is no longer any real reason that the field testing could not be carried out in perhaps more permissive jurisdictions like China.

http://business.financialpost.com/news/transportation/uber-buys-self-driving-truck-startup-otto-forms-us300-million-alliance-with-volvo

#19 45north on 08.21.16 at 6:37 pm

utopia: ( five years ago )

On August 24th of this year, Agriculture and Agri-Food Canada announced a commitment of 370,000 dollars to support research into the causes of the bee die-off in Saskatchewan and other provinces.

http://www.greaterfool.ca/2011/08/26/in-the-real-world/#comment-120706

sounds like a tough fight: ( one year ago )

Last September, the law firm Siskinds LLP filed a class action suit on behalf of several Ontario beekeepers for $450 million against Syngenta and Bayer, two makers of the neonicotinoid insecticide that is used on 99 per cent of the corn and 66 per cent of the soybeans grown in Ontario.

http://www.cbc.ca/news/technology/bee-crisis-are-mites-or-neonics-the-real-culprit-1.3116368

#20 Sci-Fi from YVR RE? on 08.21.16 at 6:44 pm

#14 rknusa

Too much 420 dude or dudette.

Go to this YVR Realtor web site and peruse daily data from REBGV Avg. List Price vs. Avg. Sell Price:

http://www.robchipman.net/

Can you find one day in August where YVR Sell > List? You won’t, because there are none.

And take a look at the average selling price…not one over $1 MM. Guess Zolo.ca not far off the mark is it? Go back to their early July data and you will find Avg. Sell Price > $1 MM.

So if anything, Zolo.ca optimistic on avg. selling price at $1.1 MM when this Realtor site shows avg. sell price well below $1.1 MM at $853 K.

Their Late July data shows Sell Price > List. So guess what? Prices are dropping fast and daily REBGV average data even lower than Zolo’s.

As Garth said, time to get out before the rest catch on.

YVR RE Sci-Fi denial at its best.

#21 Frank on 08.21.16 at 6:49 pm

Wait you and the bank agree that there will be more price appreciation to come due to fomo? I thought Zillow said peak house was 5 months ago? How many peak house calls have their been?

I get tired of waiting. I have a nice balanced portfolio but the same net worth on paper as my condo buying friends and they don’t have to wait 2 months for a landlord to fix a broken dryer.

#22 Bottoms_Up on 08.21.16 at 7:10 pm

Shame Garth, not even an obscure reference in today’s blog post to The Hip? Canadian icon, T2 was at the event, the story even made 2nd most read on the BBC news website yadda yadda yadda

#23 Freedom First on 08.21.16 at 7:11 pm

Great to be debt free.

Freedom First Club Member # F54376

#24 PDX Canuck on 08.21.16 at 7:12 pm

Garth, Why the 18% allocation towards CDN equities? Why not just US (largest economy in the works) and international?

Reason: Canadians are already invested in maple, via their job/business and any real estate holdings. Other than patriotic reasons, is there any need for further exposure?

Canada’s GDP is less than 2% of world GDP. An 18% exposure (plus job/business and house) seems like excessive concentration.

https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

#25 jess on 08.21.16 at 7:16 pm

just wondering but how many ontarians defaulted in the 20 year periold from 1996-2016? Is this > than 800 000?

do they then come permanent renters? only to become squeezed by high rents for the REIT generators?

From the Guardian :
Private landlords get £9.3bn in housing benefit from taxpayer, says report

Amount is nearly double what was paid 10 years ago according to National Housing Federation study
The NHF calculated that if all those housed in the private rented sector lived in affordable housing, taxpayers would save £1.5bn a year. David Orr, the federation’s chief executive, said: “It is madness to spend £9bn of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes.”
https://www.theguardian.com/society/2016/aug/20/private-landlords-9bn-housing-benefit-taxpayers-national-housing-federation-report
=========
and i hear ontario liberals want to copy what the brits did see Friday 12 June 2015 10.30 BST
…was the idea that a benefit payment should be paid to tenants instead of straight to their landlords

https://www.theguardian.com/housing-network/2015/jun/12/universal-credit-u-turn

#26 45north on 08.21.16 at 7:17 pm

This week in money:

Ross Kay talks tough: the single largest collapse in real estate in North America! This is going to swamp BC. I mean Fort St. John is not going to pick up the slack. He said last week that unlike Toronto in the 1990’s, the decline in prices cannot be made up by people paying down their mortgages for 10 years.

Okay so the Canadian Parliament opens September 19. It should disallow the BC legislation! That’s how big this is.

#27 WUL on 08.21.16 at 7:27 pm

Garth says:

“Meanwhile, if you’re anywhere near retirement and have hoarded the bulk of your net worth in bricks, well, you know what to do.”
*******************
I appreciate and value your advice and time will tell. I am in this group you describe. With respect, I am not going to take this advice. I am going to take a different strategy. I cannot spell it out here. It is too long and is worth moolah.

I am going to start a blog and newsletter ($19/month subscription fee – $26/month premium subscription) called “The Hardscrabble Retiree”. Watch for it.

#28 Aggregator on 08.21.16 at 7:29 pm

Canada fin min: Open to easing foreign investment restrictions on China

See what happens when a province goes against the demands of the Governor General commander-in-chief. One million annual immigrants are coming to Canada by 2020. Be ready.

#29 Colostomybag on 08.21.16 at 7:29 pm

Re: to
#14 rknusa on 08.21.16 at 5:49 pm
still do not see any evidence of a real change in the market daily GTA sold listings show almost all properties selling in less than a week and often 20% over asking
where is the beef?

Me neither. Haven’t seen any slowdown here.

#30 Shawn on 08.21.16 at 7:31 pm

Mark #9

Some interesting points. I think we may have a 1990s set up in the US (or perhaps an early 1940s set up) – regardless as far as Canada is concerned there are some stark differences this time around. In particular the extreme nature of the real estate bubble.

The early 90s were characterized by a 35% decline in GTA real estate and modest subsequent TSX appreciation. The 2014-15 bear market was less severe than the 1990-91 bear market. Real estate valuations in the GTA are far more extreme this time around while Canada’s broad economy is more narrow. Real estate and banking accounts for some 60%+ of TSX market cap (banks are 39% alone). This is dangerous and quite different from emerging markets where technology represents ~18% market cap.

I’m currently zero Canada will remain that way. The way I look at it, why take the chance. “Tell me where I’m going to die so I never go there.” – WB

#31 JOE on 08.21.16 at 7:39 pm

#14 rknusa
i noticed the same in just sold GTA listing show almost all houses going above 20% asking and selling within a week. shit krazay

#32 Smoking Man on 08.21.16 at 7:39 pm

George Davis is the only fx economist I pay attention too.

He’s in a league of his own. I think he won best economist in world award in London earlier in the year….

Long Branch Apprentice… A great resource pay attention to him…

#33 Mark on 08.21.16 at 7:40 pm

We definitely have a housing bubble, but we have a bubble in assets generally.

How so? I can buy many assets, on the public stock markets, particularly in Canada, at well beneath replacement cost. Think railways, telecoms, pipelines, mines, and other long-term infrastructure. At beneath replacement cost. Many sectors in Canada’s economy, such as its tech sector, have been in a state of outright depression for quite a few years (unfortunately many of the best players aren’t even public companies, so they’re not investible by the general public).

So I’d personally make your comments more specific. We have a bubble in interest-rate correlated assets because interest rates are at extreme lows and bond prices are probably in a bubble. But to generalize that to ‘assets’ is highly problematic.

Guessing “bankruptcy counsellor” should be the career move for a fair percentage of people in re and banking.

There will certainly be a good chunk of people in the banking sector who will need to move from roles facing customers trying to sell the indebted lifestyle, more towards customer facing roles trying to sell the debt repayment lifestyle.

It’ll be an interesting shift, that’s for sure. Especially since bank borrowers have been so thoroughly conditioned, over the past decade or so, to think of the bank as being their ‘friend’, not their mortal enemy. “You’re richer than you think” will give way to “pay us our money back as you agreed or else”.

#34 Michael King on 08.21.16 at 7:44 pm

#15, thank you! Just listened to the Ross Kay interview. Highly recommend to other readers.

#35 Paul on 08.21.16 at 7:52 pm

#21 Frank

Waiting two mounths to fIx a dryer. Good thing it wasn’t the toilet.
Get off your ass! Lol

#36 Aggregator on 08.21.16 at 7:52 pm

#20 Sci-Fi from YVR RE?

The SP/LP ratio or spread only indicates so much because that data is from the last list price, not the orginal list price which could be lower then the last price. During the US housing crisis, the SP/LP fell below 100 and took over one year before average selling prices were affected. Chart

Any indicator you're looking at in RE has to sustain for months to be a trend change, otherwise it's just a blip.

#37 Jimmy on 08.21.16 at 7:53 pm

#6 Russ

Thanks for thinking of me. Getting very wet at the closing ceremonies.

#38 salonist on 08.21.16 at 8:08 pm

Detached home sales in Richmond plummet

http://www.cknw.com/2016/08/19/detached-home-sales-in-richmond-plummet/

#39 Bram on 08.21.16 at 8:14 pm

#26 45north on 08.21.16 at 7:17 pm
Okay so the Canadian Parliament opens September 19. It should disallow the BC legislation! That’s how big this is.

Even if it’s that bad, the worst thing to do now is to avoid the burst, and prop it up.

The longer the bubble grows, the louder the bang.
So better now, than in 6 yrs time.

If we are to have a crash, we should have it now: painful but quick.

#40 pathcontrolmonk on 08.21.16 at 8:18 pm

There will not be 400,000 more Chinese people coming to Canada annually. Any more fabricated comments like this and you will be benched. — Garth

Apologies, I must have read that number in a blog referencing the recent move to double visa centers in the PRC. 400,000 is the number of long stay 10 year visas granted to citizens from the PRC in 2015, that is in addition to 600,000 permanent residency applications from the same country. So, I was partially wrong, but the real numbers are even more unsustainable.

http://www.scmp.com/news/world/united-states-canada/article/1995284/ten-year-canadian-visas-chinese-nationals-hit-almost

#41 TurnerNation on 08.21.16 at 8:21 pm

Re. Macallan – last couple of years I caught their tasting events in Toronto.
Ruby, Sienna, Amber and Gold.
Sienna is my fav.
But I don’t drink at home, and while going out any rotgut will suffice it. Not going to spend $200-400 on abottle.

#42 JSS on 08.21.16 at 8:21 pm

I would keep an eye on the impact the housing bubble will have in common share dividends of Canadian banks. Dividend freeze is one thing, but a dividend cut would be devastating to many including individual share owners, pension funds, etfs, mutual fund owners, etc.

I recall reading that National Bank cut their common share dividend in the early 90s, coinciding with the last major housing bust.

#43 TurnerNation on 08.21.16 at 8:27 pm

Hey Context about St. Clair E. you mentioned last blog. Saw this recently a fund buys it all up:

https://www.bisnow.com/toronto/news/office/behind-the-deal-slate-takes-full-control-of-yonge-and-st-clair-55812

#44 PDX Canuck on 08.21.16 at 8:29 pm

Interesting, my previous post was deleted…

Garth,
Curious about the 18% allocation towards Maple. How about just a US and an International allocation?

Why? Canada is less than 2% of the world GDP. Further, Canadians are already exposed to the CDN economy via jobs/business and….their expensive houses.

Seems like over exposure. I get patriotism, but that shouldn’t be a part of one’s investment criteria.
Garth, Why the 18% allocation towards CDN equities? Why not just US (largest economy in the works) and international?

Reason: Canadians are already invested in maple, via their job/business and any real estate holdings. Other than patriotic reasons, is there any need for further exposure?

Canada’s GDP is less than 2% of world GDP. An 18% exposure (plus job/business and house) seems like excessive concentration.

https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

Your previous comment was published 1 hour and 12 minutes before you submitted it again. Anyone following your advice would have missed a 12% gain in the TSX over the past eight months. Never exit an asset class. — Garth

#45 Hip on 08.21.16 at 8:35 pm

Even Gord Downie from the Hip sold his Toronto house late last year. The smart $ is gone like the wind before you know it.

#46 Mark on 08.21.16 at 8:40 pm

Shawn,

I think you’re completely off on your claim that housing/finance makes up 60% of the TSX’s market capitalization. Its closer to 35% if you take the overall capitalization of the ‘financial sector’ in the index including the insurance companies. Additionally, as I’ve explained previously, the banks effectively have a ‘short’ position in Canadian housing by virtue of having huge allocations to CMHC insured mortgages redeemable at 100 cents on the dollar.

Not sure where the other 25% of the allocation you claim comes from? Are you including Canadian Tire and Loblaws (George Weston, etc.)? The rest of the TSX index appears to be heavily in oil and gas firms, miners, pipelines, utilities and telecoms, with minor exposure to a few other sectors — hardly companies with any meaningful exposure to the housing sector.

The early 90s were characterized by a 35% decline in GTA real estate and modest subsequent TSX appreciation.

The TSX tripled 1990-2000, with the banks and the tech sector leading the way (most banks quadrupled in 1990-1998, only stopped in their tracks when then Finance Minister Paul Martin kiboshed bank merger plans!). The O&G and mining sectors were in the midst of a depression with the only short-term vibrance seen in the golds with the Bre-X excitement which eventually gave way to a resumption in that sector’s depression.

I’m currently zero Canada will remain that way. The way I look at it, why take the chance.

Good luck with that. I’m heavily overweight Canada because buying at historically depressed ratios of book value, and extreme dividend yields tends to yield superior long-term results. With the banks positioned against the housing market, and the historical inverse correlation to the housing market, the TSX should have a good ride upwards for years to come. And even if not, it still pays a dividend yield closing in on twice that of the S&P500. Tax-preferred for Canadian investors no less.

#47 Mark on 08.21.16 at 8:46 pm

“I would keep an eye on the impact the housing bubble will have in common share dividends of Canadian banks.”

A housing bubble bust should be extremely beneficial for dividends from the Canadian big-5 banks as the banks will no longer need to retain earnings to expand their balance sheets. So not only will they migrate to much greater payout ratios, but as balance sheets shrink and the need for capital is lessened, they should be in the position to pay out retained earnings of the past.

For the past two decades, banks have been retaining approximately 60% of their earnings, and paying out the other 40% to shareholders. Using the retained earnings as their equity backstop for loan growth. No loan growth, no need for earnings retention.

#48 X on 08.21.16 at 8:47 pm

“The bank (and me) is not alone. The chorus of warnings is cacophonous. Every major debt rating agency, the IMF, Capital Economics, CMHC, the World Bank, the federal bank regulator and bank CEOs have joined it. And yet in the past year total household indebtedness – already at a record – went up another 6%. House prices snaked higher to what appears to be a peak. It’s just so obvious that your friends, colleagues at work and idiot relatives cannot help themselves. Our one-asset national financial strategy carries on towards an uncertain conclusion.” Garth

First of all, RE for most isn’t a financial strategy, more like blind financial confidence.

Second, does anyone really expect anything in regards to rule changes on lending, mortgages, etc from Mr Morneau?

Maybe rule/regulations changes comes after the meltdown, and there is someone to point the finger at. Otherwise it would make for a poor political move.

#49 RayofLight on 08.21.16 at 8:49 pm

The trend in manufacturing is robotics. Workers even in China, perhaps India are not immune. There is a tsunami of change coming to “work” as we know it. There will / could be a convergence of technologies arriving soon that could /will combine nanotechnology, miniature powerful computers, artificial intelligence, G5 connectivity in a manner we still may not be able to appreciate. For example, auto manufactures now as we know them (GM, Ford, etc.), could be blindsided by a reduced demand for autos due car share programs or to personal drones controlled over the internet and it’s cameras feeding into a Virtual Reality headset. (Why drive somewhere when you can see it in 3D through a headset instantly?) My point? Now more than ever a person has to be financially liquid. People cannot be certain the job they have now won’t disappear or change beyond their capabilities in 5 years.

https://ca.finance.yahoo.com/blogs/insight/the-robots-are-coming–and-they-could-take-millions-of-jobs-from-asian-workers-184518120.html?vp=1

#50 Joseph R. on 08.21.16 at 8:50 pm

#13 Wog on 08.21.16 at 5:47 pm
The Federal Reserve has set up a cute little Facebook page. The comments section will not disappoint :)

https://www.facebook.com/federalreserve/?fref=ts&rf=106262046076826

———————————————

Ben Bernanke has his own blog, with a comment section:

https://www.brookings.edu/blog/ben-bernanke/2016/08/08/the-feds-shifting-perspective-on-the-economy-and-its-implications-for-monetary-policy/

Is the world big enough for 2 Bearded Wonders with a blog?

#51 pathcontrolmonk on 08.21.16 at 8:54 pm

As it turns out, my number of 400,000 wasnt so far off if you extrapolate the planned doubling and eventual tripling of visa cent in the PRC. Student visas issued in 2015 to PRC nationals was 120,000, so 360,000 is pretty close.

Visas cover a wide range of activities, most of which involve tourism. Stop beating the yellow peril drum. It’s ugly. — Garth

#52 Harbour on 08.21.16 at 9:02 pm

Notice how all the chiefs of banks, government, real estate suddenly jump on the unsustainable wagon… lol

#53 pathcontrolmonk on 08.21.16 at 9:07 pm

Nothing “yellow peril” about it Garth, some of my best friends are yellow, even my Korean/Japanese wife. I am just trying to contribute to the conversation on Canada RE. Google alternative immigration strategies to Canada, and other than marrying an unwitting Newfie, student visas top the list. With that number of “students” coming to Canada from the PRC to stay, sadly I expect YVR’s RE bubble will be sustainable indefinitely, although I expect a correction in the price of Durian.

Enough. — Garth

#54 Vancouver meltdown on 08.21.16 at 9:12 pm

As Bloomberg reports, the Ontario Teachers’ Pension Plan is quietly seeking buyers for a minority stake in its C$4 billion real-estate portfolio in Vancouver, including office towers and shopping malls.

http://www.bloomberg.com/news/articles/2016-08-19/ontario-teachers-said-to-sell-stakes-in-vancouver-buildings

What’s interesting about this news is RE bubble is not just stupid “regular people”, Bank of Mom, FOMO, condos, SFHs, as Garth suggests, but also institutional investors, commercial developments.

#55 Barb on 08.21.16 at 9:21 pm

If banks have “spent years preparing for this”, why have Canadian banks gone the same stoooopid route as American banks back in 2006-2008, giving mortgages to people who haven’t got a hell of a chance of buying groceries so they can eat each month?

Had always heard Canadian banks were more circumspect.

#56 Smoking Man on 08.21.16 at 9:36 pm

Why does Kevin Donovan still have a job at the Star?

https://youtu.be/uJIMhNq042Q

True journalisum is dead..they let these lefty mush for brains say what ever they want.. Bold faced lies.

Years ago a bright kid by the name of Steven Glass published some stories that he made up in his head. Like attending a hackers conference. He was crucified, back then when MSM had a glimmer of credibility left. His stories extremely funny and entertaining. Look at the shit Donovan gets away with.

Why do people need to visit this pathetic blog and click alt+F then SMO to find the truth about shit.

Inspite of the fact that I’m a confesed serial lier…

Garth I’ve done about every other job known to Man and rose to the top every time.

I want to be a journalist now… Set it up. You have connections…. I don’t need a salary….

Someone needs to keep these lefty liers in check. No ones doing anything about.

#57 Happening now on 08.21.16 at 9:44 pm

http://imgur.com/8OcucU7

#4 Revol on 08.21.16 at 5:24 pm
You called it, Garth.

Ironic that the 15% Foreign Tax is what will nail the Real-Estate market.

Really ……like 6 yrs worth of predictions. ……, lets wait and see first ehh !

#58 Canadian banks on 08.21.16 at 9:47 pm

55 Barb

If banks have “spent years preparing for this”, why have Canadian banks gone the same stoooopid route as American banks back in 2006-2008, giving mortgages to people who haven’t got a hell of a chance of buying groceries so they can eat each month?

Had always heard Canadian banks were more circumspect.

—-

Good point.

Garth, how exactly banks “spent years preparing for this”?

What do you know about it as a fact, not as rhetoric?

#59 Frank on 08.21.16 at 9:49 pm

Waiting two mounths to fIx a dryer. Good thing it wasn’t the toilet.
Get off your ass! Lol

Even if I did know dryer repair I’m not allowed to for warranty purposes.

#60 Tc on 08.21.16 at 9:52 pm

Hey Garth and readers,

#61 Context on 08.21.16 at 9:54 pm

#43 TurnerNation: Not far enough to the east and a company I never heard of before have their own portfolio of holdings holding for the long run.

#62 For those about to flop... on 08.21.16 at 10:06 pm

#55 Barb on 08.21.16 at 9:21 pm
If banks have “spent years preparing for this”, why have Canadian banks gone the same stoooopid route as American banks back in 2006-2008, giving mortgages to people who haven’t got a hell of a chance of buying groceries so they can eat each month?

Had always heard Canadian banks were more circumspect.

///////////////////////////

They have better been or they are about to be circumcised…

M42BC

#63 Mark on 08.21.16 at 10:07 pm

“Garth, how exactly banks “spent years preparing for this”?”

Let’s see. The big-5 have insured basically every loan that is meaningfully at risk in a housing crash with the CMHC. By either requiring it at the time of the housing purchase, or by purchasing CMHC insurance “after the fact” on the bank’s own account.

For example, some loans that were as high as 50% LTV in Calgary had CMHC insurance bought against them. Why? Because the bank honestly believes that the market, at least in Calgary, could crash by 50%. When you consider that ~$900B of a ~$1.4T mortgage market in Canada is under some form of CMHC insurance, that means that the banks are highly protected.

The banks have also been slowly ratcheting up their spreads against their costs of funding over the past few years. “Prime”, for example, used to be a mere 125bp over the BoC policy target rate. Today, “Prime” is now set, at all of the Canadian banks (at their discretion) at 220bp above the BoC policy target.

The banks have engaged in subtle changes to their offered loan agreements to clarify and re-inforce that mortgage indebtness not only forms a charge against property, but also against the person’s assets. Set off provisions have been enhanced. Mortgage offerings from many of the banks even include clauses allowing the lender, in its sole discretion, to determine that collateral is insufficient. Basically a call provision the bank can invoke, without recourse, if it is to the bank’s economic advantage to force early repayment or foreclosure on a loan.

What else have they done? The banks now have mortgages on people’s credit records. So there’s enhanced surveillance of a borrower’s financial affairs available pretty much in real time.

Also, quite different from the situation in the 1990s, is that the Canadian banks now have 40% of their loan book in adjustable rate loans. So basically if any liquidity crisis arises at a big-5 bank, they can reach out to their debtors, rather than the markets, for short-term cash to defeat it (with the BoC obliged to act if such morphs into a systemic crisis in the usual way). Adjustable rate lending just wasn’t that popular in the 80s and 90s, but has been a major breakthrough in terms of risk management at the Canadian big-5 institutions.

#64 Jesse W on 08.21.16 at 10:13 pm

“Based on Garth’s suggested weightings I would like to put a Vanguard portfolio together but have a couple of questions if anyone can help me out. I’m still not totally clear which should be held in an RRSP vs TFSA. I have about $50K to invest right now and will continue adding $1K/month going forward. Am I on the right track with these funds I’ve researched below? Any suggestions appreciated. I like trying to figure this stuff out, but, egads, the more I read the more confused I get.

8% – Gov’t bond fund – (RRSP – VSB)
10% – Higher yielding prov or corp fund (RRSP? Suggestions? XBB?)
20% – Preferred (RRSP or TFSA? Suggestions? XPF / XEI?)
8% – REIT (RRSP – VRE)
17% – Cdn (TFSA – VCN)
20% – US (RRSP – VUN)
17% – Int’l (RRSP – VIU?)”

JANE DOE:

Generally by Garth’s notions TFSA should be growth funds while RRSP is safe funds. I think he also prefers calling bond funds “safe stuff” for balancing out your equity funds moreso than chasing dividends. I would go lower on your Pref Shares and High yield fund prospects. Canadian Couch Potato really likes VAB and I believe Garth may as well. Food for thought. Cheers.

#65 For those about to flop... on 08.21.16 at 10:13 pm

#62 For those about to flop… on 08.21.16 at 10:06 pm
#55 Barb on 08.21.16 at 9:21 pm
If banks have “spent years preparing for this”, why have Canadian banks gone the same stoooopid route as American banks back in 2006-2008, giving mortgages to people who haven’t got a hell of a chance of buying groceries so they can eat each month?

Had always heard Canadian banks were more circumspect.

///////////////////////////

They have better been or they are about to be circumcised…

M42BC

////////////////////////////

Upon further reflection, the banks could escape by the skin of their teeth…

M42BC

#66 For those about to flop... on 08.21.16 at 10:17 pm

#63 For those about to flop… on 08.21.16 at 10:13 pm
#62 For those about to flop… on 08.21.16 at 10:06 pm
#55 Barb on 08.21.16 at 9:21 pm
If banks have “spent years preparing for this”, why have Canadian banks gone the same stoooopid route as American banks back in 2006-2008, giving mortgages to people who haven’t got a hell of a chance of buying groceries so they can eat each month?

Had always heard Canadian banks were more circumspect.

///////////////////////////

They have better been or they are about to be circumcised…

M42BC

////////////////////////////

Upon further reflection, the banks could escape by the skin of their teeth…

M42BC

////////////////////////////

Probably should have pointed out that the banks have a lot of skin in the game…

M42BC

#67 Paul on 08.21.16 at 10:21 pm

#59 Frank

Just a little dig.

#68 WallOfWorry on 08.21.16 at 10:22 pm

While we speculate about a potential real estate correction and the impact to the economy…over in Germany they contemplate something far worse:

http://www.reuters.com/article/us-germany-security-stockpiling-idUSKCN10W0MJ

#69 Mark on 08.21.16 at 10:25 pm

“Reason: Canadians are already invested in maple, via their job/business and any real estate holdings. Other than patriotic reasons, is there any need for further exposure?”

Well diversification is good and everyone should be diversified. But the argument for a Canadian overweight is that most of us will retire (voluntarily or not) in Canada, and probably remain in Canada. Needing to spend Canadian dollars. So at some level, we need to invest in assets that bear some correlation to the Canadian economy. Yes, we can be heros if we invest overseas and make big gains not available in Canada, but there is also the possibility of significant underperformance.

The other issue is that, for taxable Canadian investors, the dividend tax credit is so valuable that even if Canada is doomed to structurally lower returns (a concept that I disagree with, with Canada’s returns over the past ~30 years only lagging because of the sector mix), the dividend tax credit makes up for a lot of that.

For example, its been said that half of the returns from a long-term dividend stock portfolio are from cash dividends, and the other half is in stock appreciation. Largely approximating the 50% payout ratio seen over the long-term. The dividend tax credit provides a roughly ~28% advantage over income which does not have the dividend tax credit associated with it. So basically a Canadian investor can tolerate a 1-3% lower long-term ROI on “Canadian”-eligible investments vs. foreign investments, and still break even on an after-tax basis.

I think what Garth strenuously argues against is people taking one-asset strategies. Which is heavily seen in RE. And heavily seen in investment portfolios, even within equities which, more often than not, are overwhelmingly Canadian in the accounts of Canadian equity investors. When foreign companies go on sale, Canadians shouldn’t be afraid to scoop them up. Nor should Canadians be afraid to sell Canadian companies when they’re richly priced, to buy comparatively cheaper foreign companies or indices when the opportunity arises. A systemic rebalancing approach, as advocated by Garth et al, basically embodies this approach algorithmically and automatically.

#70 acdel on 08.21.16 at 10:27 pm

I am an idiot to many out there; I will stay overweight in Canada.
Second largest country in the world with all the resources the world needs minus the enviro hypothetical nut-heads that seem to enjoy what we have to offer without spending the ten to hundreds of thousands to become self sufficient, hypocrites!

Let’s let a country that absorbs more carbon then it contributes pay for ideas that other major contributors will only take advantage of our stupidity and our ideas. They are laughing at us, I think that our premiers are finally starting to realize this, maybe not, but the sensible people are, want to continued health care, how much more can one afford?? An extra ten cents a liter, extra on electricity, heat, insurance, food, mortgage, water, sewage, municipal taxes, provincial taxes, national taxes, education, daycare and who knows what I am missing, how much is enough? Spare me the rhetoric hypocrites…

I could give a sh*t what the boomers (grumpy old farts that think they know it all) that worked hard under ideal conditions and now preach to all of us that do not have the same ideal conditions minus interest rates. Seriously comparing conditions to today there is no comparison, I am a gen-xer that has to put up with their war time ideas, there are exceptions that get it, Garth has tried to help us but a majority think that we still owe them, sorry all, just venting, sometimes the boomers attitudes really piss me off, they seem to think that they are the only contributors to what we have in Canada today; meanwhile all generations have made a contributions and now we have a similarity to grumpy old men, it’s called enviro hypocrites that expect everything for nothing and complain about the boomers, how ironic.

Generations never change always the same crap, but now, more to the extreme. If I hear another idiot whining on how tough they have it expecting Canada to change on a dime, overnight, not realizing what it took to get here, making wages that most cannot even comprehend, enjoying our education system and yet not making a contribution to alternatives energies but bragging how they doubled there incomes in the current excellent system that all paid for through hard work, enjoy all that oil and gas has made and continues to make a major contribution to flying and etc to all the gracious third world countries with great beaches that could give a crap about the environment, just profits. We are expected to pay more under record real-estate prices, high rents, high food prices, many parents that end up at the food-bank to feed their kids etc, please tax us more, anyways, my rant, I am out of here….

#71 Smoking Man on 08.21.16 at 10:29 pm

Now let’s compare what glass did vs. Kevin Donavon.

Glass wrote fiction, made shit up, no one got hurt.

Kevin made up shit. And helped destroy Gomeshi and Rob Ford.

http://www.usatoday.com/story/news/nation/2014/01/27/stephen-glass-new-republic-fabricator-law-license-denied/4940813/

Is it me, I’m I the last one standing with brain that sees this crap, despite all my efforts to shut my brain down with oceans of wine and JD.

Something seriously wrong with this world.

#72 not 1st on 08.21.16 at 10:30 pm

Garth, what about that time you were on that radio program with Brad Lamb and Sherry Cooper.

Why not a rematch.

#73 Long Branch Apprentice on 08.21.16 at 10:46 pm

Canadians seem to have an insatiable appetite for distraction and diversion. It really is astounding.

Ben Malroney’s new morning show looks like just the sort of nonsense distraction Canadians crave and rely on.

Looks like the attention whore of a PM will be the first guest on the program, eat it up people. Act like it matters one bit.

Bread and Circuses.

#74 BS on 08.21.16 at 10:46 pm

#21 Frank on 08.21.16 at 6:49 pm
Wait you and the bank agree that there will be more price appreciation to come due to fomo? I thought Zillow said peak house was 5 months ago? How many peak house calls have their been?

I get tired of waiting. I have a nice balanced portfolio but the same net worth on paper as my condo buying friends and they don’t have to wait 2 months for a landlord to fix a broken dryer.

You don’t have to wait 2 months either. You have the option to just pay out of pocket for the repairs like your condo buying friends. If you want so desperately to own it will give you that same warm fuzzy feeling when you actually have to pay for maintenance.

Of course you can also just file a complaint with the RTO and not only get the landlord ordered to make the repair but they will order the landlord to rebate rent for failure to act in a timely manner on the repair. Something like that would be worth about $150 per month rental rebate.

#75 waiting on the westcoast on 08.21.16 at 10:52 pm

Mark’s heavy on maple and CDN equities… Time to short Canada… ;-)

Could this just be another tease… I know a lot of you think the US is struggling but it is really going quite strong on the consumer front. I will be putting our system’s numbers out tomorrow and your will see strong growth again in the US.

http://www.bloomberg.com/news/articles/2016-08-21/fischer-signals-2016-rate-hike-with-economy-nearing-fed-goals

#76 45north on 08.21.16 at 10:58 pm

Bram:

my original post: Okay so the Canadian Parliament opens September 19. It should disallow the BC legislation! That’s how big this is.

you’ve got to understand that the collapse of real estate is going to undo Christy Clark and the BC Liberals. Disallowing the BC legislation would help restore confidence in Canadian real estate but more importantly it would seize the political initiative. It would put the Liberal Party on the side of property owners who make up the bulk of the electorate.

my feeling is the collapse of BC real estate is going to spread across the country and with it spread a political revolt. Same old same old is not going to cut it.

#77 WalMark of Sadkatoon on 08.21.16 at 11:00 pm

daily GTA sold listings show almost all properties selling in less than a week and often 20% over asking

YYZ real estate prices are a rising anomaly.

#78 WalMark of Sadkatoon on 08.21.16 at 11:11 pm

I’m currently zero Canada will remain that way. The way I look at it, why take the chance.

Good call. Canada is a negative growth story with a population of indebted workers. Job losses mounting and with unending trade deficits; the complete opposite of an export country.

I called it a year ago. The libs will preside over the collapse of the Canadian economy. I was right again.

You’re welcome

#79 Hotdogs from Heaven on 08.21.16 at 11:18 pm

Just read an interesting article about the global bond bubble, what with those 13 trillion U.S. dollars worth of zero to negative interest rate bonds.

It also came with a huge warning about all those rushing into bond ETFs, especially from developing countries, in the search for yield.

All of this is a bubble that will eventually pop and when it does we’ll see yields go higher throughout the world. That will include mortgages and all of sorts of other Canadian debt.

#80 Jim on 08.21.16 at 11:18 pm

On a scale of 1 – 10 how accurate is Zolos.ca at predicting selling price?

#81 MF on 08.21.16 at 11:26 pm

#40 pathcontrolmonk on 08.21.16 at 8:18 pm

I actually welcome this initiative from the Liberal government. Chinese are hard working, friendly, and assimilate well. That is the type of immigrant we need.

#70 acdel on 08.21.16 at 10:27 pm

Yup I agree, but like you said, be careful about painting a broad brush. All millennials are not castrated liberal males or gender confused females with tattoos and pink hair. A lot of us older millennials get it in particular, and are plotting the next strategy for a conservative government (yes I know the cons are not perfect, but they are better when it comes to the economy and this climate change bs).

MF

#82 MF on 08.21.16 at 11:28 pm

#65 For those about to flop… on 08.21.16 at 10:13 pm

Welcome back Flop,

By the way, my TFSA is still slightly positive :)

MF

#83 Mark on 08.21.16 at 11:36 pm

“Good call. Canada is a negative growth story with a population of indebted workers.”

The problem with that theory is that the TSX historically bears little correlation to the Canadian economy. Its perfectly possible to be a bear on the Canadian economy, but a bull on the TSX. The 1990s proved this quite well out in theory, with the Canadian economy suffering simultaneous depressions in both government as well as resource employment, yet the stock market tripled led by the banks and the tech sector.

Most Canadian retailers, restauranteurs, housing construction firms, developers, etc., are privately held or foreign held. Walk into a shopping mall and you’ll mostly see multinationals or foreign-owned firms mostly selling imported goods. So while it will be painful for individual Canadians when many of these companies go “tits up”, its hardly something that would reflect back on the Canadian stock market.

Also, indebted workers are workers for which risk premia can rise against at the lenders. An indebted population implies significant bank profits, especially as those banks systemically constrain credit, a prelude to falling debt. An indebted population means a population that is highly incented to get up and work each day, as opposed to a population that isn’t indebted and will only seek out leisure. As house prices continue to fall nationwide, demand truncation in many discretionary sectors should create falling prices and a rising Canadian dollar. Repayment of debt is also highly supportive of the value of the Canadian currency and will keep risk-free bond yields very low for a significant period to come (even as spreads expand on riskier credit).

So basically it all adds up to a very bullish setup for the TSX, as was experienced in the 1990s. And ‘collapse’ of the Canadian economy is highly exaggerated, although for certain individuals, especially those over-exposed to the housing sector, the pain could be severe. As it was when Canada’s tech sector collapsed in the early 2000s, affecting a relatively narrow segment of over-exposed individuals rather than the whole economy.

#84 Smoking Man on 08.21.16 at 11:38 pm

CTV introducing a new show. More man hating, what else is new. A morning show, Benedict Martin Paul “Ben” Mulroney the host.

Brian you really fkd up in the father role is what I’m thinking.

How did your kid get so messed up. At leased you did something right with Mark.

Who am I talk.

Paranting isen’t easy. I got dud too..

#85 Ace Goodheart on 08.21.16 at 11:43 pm

Re: “Bank share values may be impacted, but don’t expect anything more consequential (they’ve spent years preparing for this) –

The preparation that the company has made for the event, is not what erases the share value.

You will find that the value of a share has little, if anything, to do with the underlying fundamentals of the company.

This ridiculous and yet very accurate fact comes from something that I like to call “goodwill” towards the share. I don’t know what it’s actually called. I took that name from the balance sheet item “goodwill” that you find when you examine the financials of most companies.

This means that you have companies, who produce nothing, have no income, have never sold anything at all, being valued very highly, because people think that they are going to make a lot of money (think dot.com bubble).

You have other companies, who produce a reliable income stream, have actual assets that could be sold, and yet trade below both their book value and their earnings (have a look at Canadian REITS).

You have Canadian Chartered banks, who, despite having little, if anything to do with the 2008 financial meltdown, lost 50% of their share value during and following the event.

That’s all “goodwill”. It does not relate at all, one bit, to the actual value of a company.

It has a devastating effect on the share value.

Look for “goodwill” towards Canadian Chartered Banks to evaporate should there be a real estate “bust”. That is when a contrarian investor starts digging. Figure out how badly exposed the bank actually is, what their balance sheet looks like, then purchase their at a major discount.

Usually I find that the contrarian investor then has to wait out a couple of earnings reports, where the beaten down stock tops ridiculously low earnings expectations, before reaping the rewards of ignoring the paranoid, uninformed, driven by fear masses, and actually researching a stock purchase.

Oh, another interesting thing for those of you who read this far. Have a look at your mortgage disclosure statements if you have a variable rate. You will find an interesting clause which tells you at which interest rate point your monthly payments will no longer cover your interest. Most mortgages now, this amount is under 5%.

That means yes, the payments being made by most folks who took out a mortgage in the last five years, would not cover even the interest on the mortgage, if interest rates were to go up to slightly below 5%.

If you have a fixed rate mortgage, this effects you also as when you have to renew in 5 years (or 5 years from whenever you signed) you also wouldn’t be able to even pay the interest on your current monthly payment

#86 NEVER GIVE UP on 08.21.16 at 11:51 pm

Last week returned from another business trip to China. The 53rd in 14 years. Like pathcontrolmonks article says they are getting more and more oppressive.

I love the people who work for me and with me in China. At street level it appears to be a land of freedom of commerce. But behind the scenes it is a nightmare of corruption and oppression.

Do not dare speak about the government. My associates say.
I am getting sick of travel there. They have finally found out a way to kill the VPN services so you have to go through the Great firewall of China for everything. It takes 2 minutes to open the green bank and look at your balances! Foreigners there are second class in this regard.

Now with the G20 you have to go through airport style security to get on a bus or train within a hundred miles of Hangzhou.

I can totally understand why everyone wants to leave there. I just dont want all of them to ruin the affordability of one city in Canada.

If we are going to take a lot more immigrants from anywhere why cant we put in a 5 year minimum in a certain city or province? Why is it not spread out for all immigrants on a lottery system that allocates immigrants to areas based on population?

Why cant we have graduated citizenship? It is just simple thinking out fo the box! We have graduated drivers licences in BC. The first year you can only drive a family member with you. Then later comes more responsibility.

I will maintain that Canadian citizenship is worth a million bucks and many in the world would happily pay that for a passport from here. Why is it so hard to ask for a few restrictions on where people settle so the impact is not so hard on one city?

#87 carbon on 08.21.16 at 11:53 pm

Let’s let a country that absorbs more carbon then it contributes pay for ideas that other major contributors will only take advantage of our stupidity and our ideas.

The country may absorb more carbon than it contributes – but not by design, care or innovation…

There is a big gamble here: you may stick to the lucky resources the country has at the expense of ignoring emerging technologies that can drive economic growth and wealth of the future.

#88 Spectacle on 08.22.16 at 12:04 am

Great comments in reply to Mr . Turners excellent blog tonight!

Question for all my Dogs::
I’ve got a 1 year old Baby Boy I’d like to set up financially. With this inevitable real estate slow melt on its path, and this financial uncertainty, there must be some rare insights regarding this rare ( once in a lifetime??) opportunity to put such a plan together for him?

Look forward to any input in the morning. Had some whole life advice last year when he was born!

Regards

#89 Metaxa on 08.22.16 at 12:08 am

Sunday story time…

Listening to the CBC’s commercial free broadcast of the Hip’s hometown concert last night and reminiscing about it now, to night…here is a story about another iconic Canadian band.

In the mid 60’s the McNeil Clinic in Saskatoon had a contract with the CIA. I know this because I was a sentient human then and my mother was a partner in the clinic (and a clinical psychologist) ((Although the contract wasn’t hers, she worked with children)).

The study, paid for by the US taxpayer, was to find out the efficacy of talk therapy combined with LSD therapy on alcoholism in US big wigs, generals, Fortune 500 CEO’s, etc.

Very promising and substantial results too until Nixon and Haldeman made up their list of Schedule A drugs, included LSD, and stopped all kinds of things in their tracks.

So the courier who ferried the jars (yes jars) of liquid LSD from the labs at the University of Calgary to the clinic suddenly was out of legit work. He also was a drummer in a local band. This was the precursor to the Summer of Love but all the bands and musicians in Canada were moving west across Canada and then down to LA.

I was running a coffee house/drop in center for the AYM (Anglican Youth Movement..I hadn’t totally given up on them yet) called the Hung Rat and many of these musicians would drop in and play a gig or two before moving on.

So my buddy, the retired LSD courier and drummer, hung around a lot wanting to grab a fantasy and end up rich in LA. (spoiler…he did)

zizzzzzz (that is fast forwarding) He ends up the drummer for Johnny Cash’s touring band…but he never forgot the lure of a jar of liquid LSD either.

Remember paper road maps?
All of a sudden police were looking for sheets of blotter paper with discoloured spots on them and throwing you in jail for such things.
So turns out Texaco road maps were printed on a pretty close to the real thing blotter paper, no coating.

Put a drop onto each city, town let it dry and fold the map back up and ta da! Every car including hippie vans had mutiple road maps back in the day…

Think about that next time you listen to the Guess Who’s Running Back to Saskatoon…Moose Jaw, Broadview, Moosomin too / Runnin’ back to Saskatoon / Red Deer, Terrace, Hanna, Medicine Hat / Sing another prairie tune

To get back on topic, the Guess Who invested many millions of their earnings into prairie real estate, malls, apartments, etc.

#90 NEVER GIVE UP on 08.22.16 at 12:15 am

#76 45north on 08.21.16 at 10:58 pm
—————————————————-
A recent poll by the province newspaper of 9000 plus people found out that the vast majority , over 70% want a revenge crash of over 50% in real estate.

So Christy is just being astute in catering to the electorate.

Even the home owners hate the bubble because they cannot buy when they sell so everyone is a prisoner in their own home!

#91 Spectacle on 08.22.16 at 12:18 am

#86 NEVER GIVE UP on 08.21.16 at 11:51 pm
“Last week returned from another business trip to China. The 53rd in 14 years…..”

“I love the people who work for me and with me in China. ………..I am getting sick of travel there.

Why is it so hard to ask for a few restrictions on where people settle so the impact is not so hard on one city?”
*****************my reply ************

Hi, your clearly a mature and worldly businessman/traveller #86 Never Give Up. It’s the Agenda 21 , making its way to Canadian ( world wide) shores. Do some of your own research into Agenda-21 , pretty destructive stuff . But your own handle says it best, Never Give Up. I’d appreciate your ongoing insights into finances and the effect world affairs has on our work-life-balance . Any Dogs got an informative link for Never Give Up?

Regards,

#92 WalMart of Sadkatoon on 08.22.16 at 12:39 am

For what its worth if I was allowed to live in the U.S year round I doubt it would be in Florida or Arizona…

Forget living there. Just buy the US property and rent it out. As a Canadian with USD in hand, everything is dirt cheap up here.

#93 WalMart of Sadkatoon on 08.22.16 at 12:40 am

#83 Mark on 08.21.16 at 11:36 pm

Can’t use a rear view mirror to predict the future.

Sorry.

The Canadian economy is impotent. The US economy rocks!

#94 PDX Canuck on 08.22.16 at 12:58 am

#69, Mark

Thx for the detailed response, re: why invest in Maple. I didn’t think about the dividend tax credit. Makes sense.

I guess I would still want to think hard before holding 18% of my portfolio in Canada. As Garth points out, the TSX has had a great run this year (vs the S&P)…but what about the last 2 years? The last 5? Not so good.

Anyways, good discussion…

PS. Apologies to all (esp Garth) for the multiple posts and cut and paste errors. The perils of posting from a smart phone, on the road, with poor connectivity. That said, I needed my greaterfool.ca blog fix, no matter what it took…

#95 #36 Aggregator Cornell Data? on 08.22.16 at 1:28 am

The point of the YVR Realtor website is simple, he is using current, near real time (every day), REBGV data and coming up with lower average sales prices than even Zolo.ca is showing at present and he posts data back to July of this year (basically, average sell price oscillating between $850 to 900 K vs. early July of about $1MM; May average was $1.4 MM).

Also, list prices are always more than sell prices. Just because Realtors say they are all selling SFHs at 30% over, does not make it true. The actual data speaks for itself.

The above indicates a cooling market showing prices dropping and not appreciating, exactly what his sales to list ratio calculations should reflect (a ratio < 100%) and they do.

In conclusion, I am happy for Cornell and their data but it would be more useful if they came to YVR and created a chart for its market instead since the chart does not state what country or region it is for, let alone, for Repeat Sales-to-List, whatever that is.

#96 Mark M. on 08.22.16 at 1:33 am

#75 – Waiting – http://www.bloomberg.com/news/articles/2016-08-21/fischer-signals-2016-rate-hike-with-economy-nearing-fed-goals

So Fischer signals 2016 rate hike? How many did he signal 7 months ago?

The US “recovery” is over. An economy growing at 1% after 8 years of emergency interest rates and trillions in QE is a disaster.

There are no rate hikes coming, this year or next. The Fed’s next move is a cut. After that QE4, because the first three rounds were so effective.

When it happens, please return and tell us why. I can’t wait to hear the excuses from the “US is BOOOOMING” crowd.

#97 Harley on 08.22.16 at 1:41 am

International business news channels and journals have been all over the Boomer Transition out of bonds and balanced into equity. TSX is up 13 ytd but our ‘dividend aristocrats are up much more (RY) at 80 for ex.
Up from the 50’s.
The equity market is set to melt up, the ignition is barely started, this is the last chance boomers can make money in their generation. Get with it.

#98 how the banks prepared for this? on 08.22.16 at 1:48 am

Well, it is not the big 5 that pumped at the margin but the credit unions and mom&pop mortgage underwriters…
Well banks don’t like competition so more rules are going to change soon, like a cmhc deductible. Guess who can afford that and who cannot comply…
CUs are screwed, but the market share will be 100% for bmo, td, CIBC, nb, ry
Wait, wait, wait… this is the second punch for RE at least in BC
Top of the market gutted, now bottom too, people in the middle are so screwed

#99 Steve French on 08.22.16 at 2:19 am

So after a year long self imposed exile from the GF (after Sir Garth told me to get lost for talking about inequality)…. I just dropped in to see what condition the GF’s condition is in.

And sure enough, I see Monsieur Le Smoking Man is still at it.

For goodness sakes Smokey…. “what in God’s Holy Name are you blathering about?”

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

#100 Perspective on 08.22.16 at 5:32 am

My post seemed to get lost somewhere

http://thecontactnewspaper.cfbtrenton.com/archives/2006/10_March_2006/mar_24_2006/thecontact_mar_24_2006.pdf

So, who is better off in the period hence, the renter who invested or the homeowner? Interesting math.

#101 Perspective on 08.22.16 at 6:08 am

MARK

So I’d personally make your comments more specific. We have a bubble in interest-rate correlated assets because interest rates are at extreme lows and bond prices are probably in a bubble. But to generalize that to ‘assets’ is highly problematic.

All assets are interest rate correlated.

#102 CJBob on 08.22.16 at 7:51 am

#31 JOE on 08.21.16 at 7:39 pm
i noticed the same in just sold GTA listing show almost all houses going above 20% asking and selling within a week. shit krazay
__________________
Comparing to the asking price isn’t the best analysis since listings are commonly lower than the expected selling prices these days. Comparison to previous year seems more valuable to me.

I do agree that there is no slowdown that I can see on single family homes in the GTA. My wife works in a public school and there is pent up demand from people in condos/apartments looking for houses. If prices were to drop even a bit the void would be filled quickly by those who have been looking, in some cases for years.

#103 Smoking Man on 08.22.16 at 8:03 am

Seems like I’m not the only one that sees, modern day journalism in deep decline.

How can you trust MSM on anything, Real estate, Finance, Politics?

Long live the Blogs.

http://nypost.com/2016/08/21/american-journalism-is-collapsing-before-our-eyes/

PS.
Frenchy good to see you back.

#104 Shawn on 08.22.16 at 8:15 am

Mark,

Pull up a long term chart of the TSX. It’s a very volatile index due to its lack of diversification. The TSX stood at 4000 pts in 1990. By 2003 it stood at 6000. Compare that to the S&P 500 over the same period. In fact I would rather own the emerging market index than the TSX – far more diversified and less financial exposure.

I agree that the extra 1% yield on the TSX over the S&P500 is nice in addition to the dividend tax credit, but in terms of capital appreciation it doesn’t compare (and most certainly won’t compare in the future).

The dividend tax credit reinforces home bias in Canada – the vast majority of Canadian investors own the banks. They’re extremely over owned. Regardless of what the economic and earnings impact of a sizeable real estate correction has on the banks long term, it the short term investors will be sellers and their shares will decline. The early 90s was a rough period for the TSX. I think this time around things will be worse.

#105 Shawn on 08.22.16 at 8:23 am

Mark,

In fact the TSX only began to really move in 1993 when the tech boom was beginning to be embraced by the retail investor & the S&P500 & Nasdaq were already on a tear.

Moral of the story: just buy the S&P 500 (VFV, VUN) and let it go. It might be a good idea to get some small & mid cap exposure also in addition to emerging market exposure.

The TSX has almost no innovative sector exposure (3% tech). This is the lowest on record for the index. Brutal.

#106 Jimbo on 08.22.16 at 8:37 am

Finally the zero guy has some worthy content. OTPP is not happy but I’m sure smoking man is. OTPP dropped the ball. They should have read this blog.

http://www.zerohedge.com/news/2016-08-21/vancouver-housing-market-implodes-smart-money-scrambles-get-out-now

#107 crowdedelevatorfartz on 08.22.16 at 8:40 am

@#70 acdel
“the boomers (grumpy old farts that think they know it all…..)”
********************************************
Well I am old and I do fart.

As for the “…..preach to all of us that do not have the same ideal conditions minus interest rates. Seriously comparing conditions to today there is no comparison….”
*******************************************

Well, if you’re going to cherry pick stats so will I.
I was born at the end of the “boom”. Started my work life in the early 70’s.
High inflation, high unemployment, all the full time “careers” were already snapped up by older boomers, credit was impossible to get ( only BANKS loaned you money for cars at 10% or higher…. not dealerships desperate to loan you at 0% to “make the sale).
Housing? Please. Most of my friends bought crappy land outside of the city and eventually built or their “rich” parents loaned/gave them their “grubstake” as a wedding gift (sound familiar?).

Save the whine(or as millenials call it “rant”).

We Boomers have heard it all before and it doesnt impress.
Time to crawl out of the sandbox, put on your big boy pants and learn to walk…….by yourself…..without boomer mommy and daddy telling you “good job!” everytime you crap your diapers and huck up some spittle on your clean shirt…….no…… one….. cares.

Get over it.

#108 CJBob on 08.22.16 at 8:41 am

#104 Shawn on 08.22.16 at 8:23 am

Moral of the story: just buy the S&P 500 (VFV, VUN) and let it go….

The TSX has almost no innovative sector exposure (3% tech). This is the lowest on record for the index. Brutal
__________________
Shawn, you’ve made several good points, but I notice you haven’t commented on f/x risk. If you’re going to go 0% maple I’d suggest a portion should be in VUS which is Canadian $ hedged if, like me, most of your future expenses are in CAD.

#109 Mark on 08.22.16 at 8:49 am

“In fact the TSX only began to really move in 1993 when the tech boom was beginning to be embraced by the retail investor & the S&P500 & Nasdaq were already on a tear.”

About 3 years past the peak of the RE market at the time (ie: 1990). Sounds familiar? As we’re roughly 3 years past peak in the Canadian RE market (peak = 2013).

The TSX has almost no innovative sector exposure (3% tech). This is the lowest on record for the index. Brutal.

Given US tech’s totally absurd and completely disconnected from reality valuations, I’d consider that to be a feature.

The TSX stood at 4000 pts in 1990. By 2003 it stood at 6000.

You’re leaving out that it was 11,000 in 2000 (and in 1990, levels in the 3000s were more typical!). In hindsight, a perfect time to sell and buy that Toronto house from which so much interest was removed from that asset class.

All of this was with the two major sectors of the TSX basically decapitated. Oil and gas, as well as mining. Basically only tech and banking led the way. Quite impressive though, and a lot of the leadership in banking had to do with the bank’s effective countercyclical positioning by virtue of the banks taking an effective short position in the housing market.

#110 Mark on 08.22.16 at 8:55 am

” All assets are interest rate correlated.”

Completely disagree here. Many assets are negatively correlated to interest rates. For example, firms that finance long-term infrastructure with long-term debt tend to be inversely correlated to interest rates as low rates imply low inflation, and debt of the past at high rates must continue to be paid at high rates. Hence, firms in this category such as railways, telecoms, pipelines, oil and gas firms with capital intensive long-reserve life production, and other infrastructure-heavy companies with long-term debt tend to benefit from higher long-term interest rates which allow for price increases and constrained new investment in competitive plant. While obviously RE, and firms primarily financed with short-term debt with short-term assets tend to be highly positively correlated to low interest rates.

So there definitely are ways to position oneself in assets to benefit from rising long-term interest rates. Many assets have been suppressed significantly in value due to the low rates.

#111 NoName on 08.22.16 at 9:15 am

#82 MF on 08.21.16 at 11:28 pm

so i have to ask this MF, now that tfsa is in black and your mood is lot better, i have to ask you, did you go all in, on you tfsa, or did “spread” out purchases over some period of time. what is a play there dividends/income, growth or something else.
if you dont wont to share that, and you tell me ef of that fine too.

#112 The American on 08.22.16 at 9:19 am

At #96: Mark M., a Fed rate hike is indeed coming third quarter. Use all the rhetoric you’d like, but it will not change the fact it is almost upon us. Enjoy!

#113 NoName on 08.22.16 at 9:38 am

#103 Smoking Man on 08.22.16 at 8:03 am

mother jones version of what is wrong with journalism now days.


“Conservatively, our prison story cost roughly $350,000. The banner ads that appeared in it brought in $5,000, give or take.”

http://www.motherjones.com/media/2016/08/whats-missing-from-journalism

#114 Smoking Man on 08.22.16 at 10:48 am

#112 The American on 08.22.16 at 9:19 am
At #96: Mark M., a Fed rate hike is indeed coming third quarter. Use all the rhetoric you’d like, but it will not change the fact it is almost upon us. Enjoy!
………………..

Did you make a bet on it,? Long USD. It’s irrelevant to what BOC will do.

In Canada Record household debt, no wage growth, no pipelines, Low rates, even a rate cut, for 3 or 4 more years in Canada. 416 Real Estate nowhere near the top yet. MSM full of do-do.

#115 Shawn on 08.22.16 at 10:59 am

Mark,

I don’t disagree with your bearish view on real estate. I think the TSX will rise – but only as the S&P500 pulls it higher like it has done in the past. We will probably whitness the emergence of another tech company like Nortel that will dominate the TSX at some point in the future.

I generally think the S&P500 is a far better investment. You can’t compare the 2.

#116 Shawn on 08.22.16 at 11:05 am

In addition, US tech is not overvalued. US tech companies have cash hordes like no other time in history. Look at the Nasdaq performance since 2009 – very similar to its outperformance off of the 1974 bottom. We’re in the very early stages of a secular bull market in US tech (& global tech for that matter). Canada is a low tech economy – it will lag as a result.

#117 Perspective on 08.22.16 at 11:10 am

# 110, Mark;

Completely disagree here. Many assets are negatively correlated to interest rates.

———————————————

That’s how it works; rates suppression equals asset appreciation (negative correlation). The only asset class to benefit from increasing rates would be financials like insurers. I hope you have someone else doing your investing.

#118 WallOfWorry on 08.22.16 at 11:16 am

Garth…any comments on the issue of negative yields and as a consequence the unnatural forces it places on the global markets? When you factor in the demographic shifts in developed nations, there is a large segment of the population (both in retail and institutions) who need to generate a guaranteed return for pensions etc…what do they do? Currently over 1/3 of sovereign debt is negative…and there is lots of discussion about helicopter money? Is that the next step? The point being that we have unnatural interventions in the markets which could lead one to question your hypothesis that the standard balanced portfolio as you have outlined is the most prudent approach?

I suspect that you will dismiss this legitimate question as the only bubble you seem to believe in is the Canadian real estate market.

#119 416/905 PRICES DOWN MID MONTH on 08.22.16 at 11:32 am

TREB Mid month stats are out and not good! Prices DOWN Y/O/Y AND M/O/M….

DOWN ABOUT 5% SINCE LAST MONTH ! Lets see how TREB and MSM try to spin this one into the positive LOL

#120 WallOfWorry on 08.22.16 at 11:34 am

#112…The American: “At #96: Mark M., a Fed rate hike is indeed coming third quarter. Use all the rhetoric you’d like, but it will not change the fact it is almost upon us. Enjoy!”

The bond market is clearly suggesting that there is no rate hike in Q3?

#121 BOOM! on 08.22.16 at 11:38 am

#82 MF
Glad to hear the TFSA is rebounding. (they always do ya know)…

#70 Acdel

Don’t know what to say here. The world has changed -again. From high interest rates, and few jobs (worth a shit) 70’s- to no interest rates, and dam few jobs worth a shit. The technology front offers a great deal worldwide, don’t know about your hood. The rest, eh, not so much.

I DO know it is NOT the Boomers’ ‘fault’ that the world you find today is not as ‘good’ as you dream it was when they were your age. You weren’t there there!

Yes, I see young people in their 20’s struggle as we did at that age. I also see it is not ‘impossible’ now, as it was not ‘impossible’ then. Impediments abound, as they always have, and will.
(get used to that idea, bullshit never changes).

My life this week:

Just after getting a new 3 tooth partial to replace a 3 tooth bridge where the root of an anchor tooth broke, last night while munching on a corn on the cob, bam! the other 3 tooth bridge breaks! So… another round of BS at my dentist! (Yes, the wallet can get lighter without ever trying!)….sigh!

M64WI

#122 NoName on 08.22.16 at 11:47 am

this is really interesting

http://digg.com/2016/every-ship-in-the-world

Note to tree huggers pay attention when “dude” says that “…world wide shipping produce more co2 than UK or Canada…” inst that interesting.

#123 Context on 08.22.16 at 12:20 pm

TurnerNation :- Are you the one looking for a restaurant, patio, live music operation?

#124 Mark M. on 08.22.16 at 12:27 pm

At #112 The American

4 rate hikes this year, right? When they don’t materialize make sure to cite China, Brexit, the weather, anything but reality.

Seriously, you praise an economy growing at 1% after trillions in stimulus and emergency low interest rates for 8 years.

There is no rate hike coming, how many times does the Fed have to fool you before you figure them out? Their next move is a cut, then a return to QE. Prepare your explanation, perhaps you can collaborate with JP and WalMark on it.

#125 TRT on 08.22.16 at 12:28 pm

Hot air and fear mongering by these institutions. Been happening for a decade now.

With immigration rates set to soar, YVR real estate may go up another 100% from here.

#126 Context on 08.22.16 at 1:01 pm

#106 Jimbo:- I saw that article on Vancouver last night and what do the figures tell you in relation to Toronto? It reflects history as the condo junk will be the first to go and the traditional housing remains steady with a small downward percentage.

#127 pBrasseur on 08.22.16 at 1:11 pm

#124 Mark M.

Seriously, you praise an economy growing at 1% after trillions in stimulus

If QE money had been stimulating the economy we would be drawning in inflation. As a matter of fact QE money served to statisfy the huge demand for cash reserves.

read and learn:

http://scottgrannis.blogspot.ca/2016/08/qe-and-amazing-demand-for-money.html

#128 Ace Goodheart on 08.22.16 at 1:20 pm

Not sure if I agree that there will be any sort of large “dip” in the prices of detached houses in Vancouver. The prices can’t go any higher, because no one can afford them anymore. But if they come down a little, then once again, we have a large group of people who can afford a house.

If prices go back down to the “sweet spot” where the middle class can afford them, and no one is buying, then we have evidence of a speculative housing bubble. I’m just not entirely sure that is going to happen.

The thing about Canada is it’s tiny. It’s this very small little country, contained in this massive, mostly deserted and unlivable land area. So there are not a lot of choices as to where to live and work. If a person doesn’t need to work, then yeah, it’s a clean slate. As long as you can set yourself up with a means of generating electricity and you can somehow get propane in, you can live pretty much anywhere in Canada. Most of us have to work, though, and that limits where we can live.

With the US housing crisis, the difference was people were paying insane prices, for houses in locations that could be easily replicated. The States is huge. There are many, many places to work. It is mostly populated. It is criss crossed with highways and railways.

In Canada we have one highway that connects all the Provinces (though not the Territories). This past winter, it suffered a broken expansion joint on a recently installed suspension bridge. At that point, the Western half of Canada was cut off from the Eastern half, for all those traveling by road.

If it was easy for everyone in Vancouver to go and work in the States, half the population would have already left. The weather on the West Coast gets better as you head south, and so do the jobs and the house prices.

There are all sorts of different factors which are causing high house prices in Toronto and Vancouver. Right now, houses in Vancouver aren’t selling, and I believe the reason is that no one can afford them. Toronto houses continue to sell quicker than they can be listed (and often before they are listed, or on the same day). Toronto’s middle class “out of reach price point” will likely be a little higher than Vancouver’s, however we may not get there because there are a lot more houses (Toronto is huge, Vancouver is not). So the only thing that might “kick it” to the Toronto market would be an interest rate hike (and that ain’t happening, as if it did, the Ontario Government would effectively be bankrupt).

We’ll see anyway what happens. Likely there will be a small dip in the Vancouver prices, but I wouldn’t look for anything major. There are just too many people there looking for houses. As soon as prices start to come down a little, they will all start buying again.

#129 Too lazy to gold dig on 08.22.16 at 1:45 pm

#2 TurnerNation on 08.21.16 at 5:21 pm
Men vs. Women.
Tag this #FreedomFirst, SmokingMan

Was supping sitting at bar and a bride-to-be cames up, bachelorette party on the other side included her younger sister, and back and forth ensued and I side stepped a “What do you do for a living question”.
………
Still got it (my money I mean. What I do for a living.)
M40ON

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Really TurnerNation? Are you aware some/many guys do the same thing? I can’t tell you how many times I’ve been asked ‘so what does your daddy do’. Pathetic. Gold digging losers couldn’t even dig up enough Stanford Binet points to think to suss out MY income…..

#lazyatworklazyinthesack

#130 jess on 08.22.16 at 1:47 pm

auditor fines troubling flaws in the gang database

from the electronic frontier
…”Aaron Harvey, a 26-year-old club promoter in Las Vegas at the time, was arrested and taken back to his native city of San Diego. He was charged with nine counts of gang conspiracy to commit a felony due to the fact that a couple of his Facebook friends from the Lincoln Park neighborhood where he grew up were believed to be in a street gang. Police further suspected that those friends took part in nine shootings, all of which occurred after Harvey had moved to Nevada. Even though no suspects were ever charged in connection to the actual shootings, Harvey still spent eight months in jail before a judge dismissed the gang conspiracy charges against him as baseless. As a direct result of his unjust incarceration, he lost his job and his apartment in Las Vegas and had to move in with family in San Diego.”
https://www.eff.org/deeplinks/2016/08/demand-california-fix-calgang-its-deeply-flawed-gang-database

Prosecutors drop robbery case to preserve stingray secrecy in St. Louis
A pistol-whipped victim, who required 18 stitches, is “shocked” at the outcome.

Cyrus Farivar – 4/20/2015, 8:00 AM
http://arstechnica.com/tech-policy/2015/04/prosecutors-drop-robbery-case-to-preserve-stingray-secrecy-in-st-louis/

..”Citing the constraint of a corporate non-disclosure agreement, a police officer in Baltimore even risked contempt charges by refusing to answer judicial inquiries about how police used the devices. Baltimore public defender Deborah Levi explains, “They engage in a third-party contract to violate people’s constitutional rights.”

#131 Context on 08.22.16 at 1:54 pm

#119 416/905 :- This fits with the latest trends of builders furnishing inventory units to be rented out and anyone can now buy a condo with no down payment. Furthermore contract assignments abound to be sold before closing and the pre-sale prices are becoming very secretive, as well as, prices for units that are near completion.

#132 Frank on 08.22.16 at 1:56 pm

#74

It’s warrantied so I don’t have to pay out of pocket. I just need the building guy to show up.

Yeah, I could go the RTB route but it’s a $100 filing fee and then i have to win. In my case the dryer isn’t completely broken, the heating element is just faulty and emits less heat (problem with this model apparently) so it just takes 90mins to dry a simple load. So there’s a risk I lose the case and money and earn the ire of my landlord.

My overall point is that owning something comes with responsibility (right now I wouldn’t want to be responsible for a mortgage on a place in Vancouver given the risk) but it comes with convenience too. There’s a reason I own a car and don’t rent that often. Or power tools, I could rent from the home depot for less given how often I use them but it’s sometimes not to have to answer to someone. Property rights are a foundation of Western society and that ownership of anything is nice. That said I’ve spent the last 8 years watching my house buying friends grow rich while taking the risk of a one asset strategy. It’s looking lile my risk mitigation investment hasn’t been of value so I’d like to see some validation for it. In the meantime I’ve lived in 3 different places because the previous 2 owners decided to sell what was legally theirs.

#133 TurnerNation on 08.22.16 at 1:57 pm

Context no not me. I know only trading/markets.

#134 The Wet Coast on 08.22.16 at 2:00 pm

Talked with a respected Coquitlam realtor on the weekend. He said its slow even the crickets are sleeping.

#135 Brazil ex-pat on 08.22.16 at 2:14 pm

#116 Shawn on 08.22.16 at 11:05 am
In addition, US tech is not overvalued. US tech companies have cash hordes like no other time in history. Look at the Nasdaq performance since 2009 – very similar to its outperformance off of the 1974 bottom. We’re in the very early stages of a secular bull market in US tech (& global tech for that matter). Canada is a low tech economy – it will lag as a result.
+++++++++++++++++++++++++++++++++++

The fact that shit tech companies whose crap needs to be rebooted everyday and requires a Phd to figure out is WHY these $20 made in China for a $1000 Iphone tech companies – are overvalued.

Get it?

#136 salonist on 08.22.16 at 2:19 pm

referencing sunday
trying to fathom todays telegraph article

Germans told to ‘stockpile food and water’ in civil defence plan

http://www.telegraph.co.uk/news/2016/08/22/german-defence-plan-tells-citizens-to-hoard-food-and-water/

#137 AK on 08.22.16 at 2:20 pm

#124 Mark M. on 08.22.16 at 12:27 pm

“Their next move is a cut, then a return to QE. Prepare your explanation, perhaps you can collaborate with JP and WalMark on it.”
———————————————————-
There will not be a rate cut and no additional QE.

The market is forward looking and you should follow the market. Not the ones who claim Gold will hit $5,000.00, and you know who I am talking about.

#138 Ronaldo on 08.22.16 at 2:20 pm

#107 crowdedelevatorfartz on 08.22.16 at 8:40 am

”We Boomers have heard it all before and it doesnt impress.
Time to crawl out of the sandbox, put on your big boy pants and learn to walk…….by yourself…..without boomer mommy and daddy telling you “good job!” everytime you crap your diapers and huck up some spittle on your clean shirt…….no…… one….. cares.

Get over it.”
———————————————————-

EXACTLY, could not have said it better.

#139 Shawn on 08.22.16 at 2:31 pm

Mark,

I strongly disagree with your view of the US economy. Inflation will be the surprise. We’re in a generational trough for interest rates. The Fed might wait until after the election, however. This is it.

#140 Bram on 08.22.16 at 2:34 pm

#126
It reflects history as the condo junk will be the first to go and the traditional housing remains steady with a small downward percentage.

Yes, sfh is getting scarce compared to condo.
OTOH, sfh gets hurt far more by Chinese millionaires leaving yvr to its own devices.

Condo is what locals can afford. Maybe townhome, but not sfh.

#141 Victor V on 08.22.16 at 2:41 pm

Ottawa housing intervention could jeopardize crucial ‘cash cow,’ National Bank warns

http://www.bnn.ca/ottawa-housing-intervention-could-jeopardize-crucial-cash-cow-national-bank-warns-1.552803

A new report from National Bank Financial is cautioning policymakers that crimping demand for housing could hit federal and provincial coffers.

In the report, economists Warren Lovely and Marc Pinsonneault warned governments and regulators shouldn’t take hasty action when it comes to changes to the industry responsible for $120 billion, or 17 per cent, of government revenues in this country.

“From a fiscal perspective, housing is something of a cash cow for Canadian governments,” they wrote. “With so much at stake—economically and fiscally—policy makers would be wise to tread very careful. This is one cash cow you don’t want to tip over.”

Lovely and Pinsonneault noted the impact of a weaker housing market would be felt not just in property tax revenues, but in the aftershocks emanating from other aspects of the economy.

#142 Victor V on 08.22.16 at 2:42 pm

Home construction plummets to recession-era low in Alberta

http://www.bnn.ca/home-construction-plummets-to-recession-era-low-in-alberta-1.552717

#143 jess on 08.22.16 at 2:45 pm

Securitizing rental cash / Deutsche Bank.

blackstone :“Renters could stay renters longer than in prior economic recoveries,”
Blackstone, line of credit $3.6 billion credit line arranged by Deutsche Bank.

notice the up tick Home prices were rising. October 2012 as the homeownership rate was dropping,

https://fred.stlouisfed.org/series/USSTHPI
The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.

2013 Five Ten Capital LLC, which got a $100 million credit facility from Deutsche Bank in April to buy homes.
Feb 26, 2015 Cerberus acquiring Five Ten Capital,

=
FINRA and the SEC regularly request certain trade data, also known as “blue sheets,” to assist in the investigation of market manipulation and insider trading…

FINRA found that from at least 2008 through at least 2015, Deutsche Bank experienced significant failures with its blue sheet systems used to compile and produce blue sheet data, including programming errors in system logic and the firm’s failure to implement enhancements to meet regulatory reporting requirements. These failures caused the firm to submit thousands of blue sheets to regulators that misreported or omitted critical information on over 1 million trades.

Additionally, FINRA found a significant number of Deutsche Bank’s blue sheet submissions did not meet regulatory deadlines. Firms typically have 10 business days to respond to a blue sheet request. Between January 2014 and August 2015, approximately 40 percent of Deutsche Bank’s blue sheets were filed past the regulatory deadline; and likewise, from July to August 2015, more than 90 percent of Deutsche Bank’s blue sheets were not submitted to FINRA on a timely basis.
FINRA found that from at least 2008 through at least 2015, Deutsche Bank experienced significant failures with its blue sheet systems used to compile and produce blue sheet data, including programming errors in system logic and the firm’s failure to implement enhancements to meet regulatory reporting requirements. These failures caused the firm to submit thousands of blue sheets to regulators that misreported or omitted critical information on over 1 million trades.

#144 dimlertyz on 08.22.16 at 3:09 pm

Garth,

With the new 15% foreigners real estate tax and an oversupply of middle aged, divorced and emasculated Canadian males, will it be too long before we see a growth industry in Canadian “mail order” grooms…..to help lovely foreign brides “skirt” system…..

#145 CO2 on 08.22.16 at 3:18 pm

Note to tree huggers pay attention when “dude” says that “…world wide shipping produce more co2 than UK or Canada…” inst that interesting.

It confirms the “tree huggers” view of the importance of local vs global.

The real price of “cheap” goods, as worshiped by the pushers of globalism.

#146 Context on 08.22.16 at 3:23 pm

For those of you selling your junk condos or are thinking about it have another adventure for you to look at this weekend. How about a village atmosphere to look for future rentals with everything that you could ever want supported by the #33 bus to take you north or south to a subway. Your point of destination will be the corner of Spadina Rd. and Lonsdale Rd. to explore the ambience of a lifestyle where the #33 bus is located. Take a stroll down Lonsdale and look at the beautiful heritage apartment buildings for rent with courtyards and some with parking in the back. They should be renovated with apartments that will amaze you compared with today. The village has all the goods and services at hand without the feeling of being in a city atmosphere and this change is positive.

#147 jess on 08.22.16 at 3:33 pm

Raymond James Pays $5.95 Million For Part In Alleged Ski Resort Fraud
Vermont Department of Financial Regulation- the massive fraud scheme involving the Jay Peak ski resort
http://www.fa-mag.com/news/raymond-james-pay–5-95-million-for-its-part-in-jay-peak-disastor-27804.html
http://www.investmentnews.com/article/20160527/FREE/160529934/raymond-james-involved-in-350-million-development-fraud-sec
April
http://www.cbc.ca/news/canada/montreal/jay-peak-owners-charged-with-fraud-1.3537184

#148 Blackswan: Clintons on 08.22.16 at 3:34 pm

How will the US economy handle the collapse of the Clinton campaign, due to the latest and never ending revelations of the Clinton Foundation and the new batch of emails?

#149 crowdedelevatorfartz on 08.22.16 at 4:01 pm

@#134 The Wet Coats
“a respected Coquitlam realtor …..”
******************************************

Impossible .

There is no such animal on the planet.

Unless , of course, its the type of animal that’s been recaptured from its attempted escape from the Organ Grinders clutches and then locked in a cage with me and its only self defense is to hurriedly scarf vast bunches of overripe bananas, let nature take its course, and start flinging away in my general direction………

Over to you Devils Advocate……….

#150 Aggregator on 08.22.16 at 4:01 pm

#36 The point of the YVR Realtor website is simple, he is using current, near real time (every day).

Posting real time daily data doesn't tell you much about the overall trend. It's like looking at HFT stock trading in nanoseconds and trying to determine is there's a fundamental change. The real estate cycle is much longer then other assets, so you need months or quarters of confirmation before confirming a trend.

Most realtors are always looking at the sold price compared to the last list price. The example I posted the other day explains why comparing to the last price doesn't indicate falling prices.

Date    Price

05/21/16    $1,399,000
05/23/16    $2,399,000 +$1,000,000
05/26/16    $1,985,000 -$414,000

If that property is sold at $1,985,000, the seller is up 42% from the original asking price ($1,399,000). If the property sells at $1,985,000 compared to the last price ($2,399,000), the seller appears to be down 17.2%, when that's not the case.

Another thing is July and August are historically low season months for RE. Lots of people go on vacation. My view is that the numbers are down because buyers have to reassess their positions or scramble to come up with the tax money. But with ultra low rates and lenders willing to lend, they can always borrow money to pay the tax.

It's all about expectations on higher prices. When the government says they're going to triple some immigration programs, or build new transportation lines, that's a signal to speculators to go all in. Have Vancouver homeowners lost confidence? I don't think so.

#151 Paul on 08.22.16 at 4:20 pm

Look out below

https://www.youtube.com/watch?v=7B6i218dhhs

#152 Mark M. on 08.22.16 at 4:25 pm

#137 AK – “The market is forward looking and you should follow the market.”

Which market? The bond market says no rate hike. The stock market? Was it forward looking in October 2007?

#139 Shawn – “The Fed might wait until after the election, however. This is it.”

So this election year started with the resolve to hike four times, and you now think we’ll get one. Why? Inflation? They don’t care about it. They’re already talking about the need for higher inflation, as if any inflation is good.

How many times will you be fooled? Seriously. 1% GDP growth, the Fed and central banks the world over are failures. There is no growth, they stimulated their economies to death, and they’ll do it as long as the bond market allows it.

Once again, no rate hikes this year or next. Rate cut on the way. QE4 on the way. Prepare your explanations, they’ll be epic!

#153 For those about to flop... on 08.22.16 at 4:45 pm

Boom,I hope you get your teeth fixed.

I trust you weren’t a late entry in the drill/ corn Bob challenge.

I swear I swallowed part of one of my fillings the other day with my raisin bran

They told my fibre was my friend…

M42BC

https://m.youtube.com/watch?v=H8HKcEJNT8o

#154 Context on 08.22.16 at 4:56 pm

#141 Victor V:- Great article as am guessing these two clowns are saying that the National Bank is in big trouble and we should all close our accounts. What these mental midgets who call themselves economists fail to realize as it was the Harper Government who caused this mess by screwing around with the mortgage rules. This was and is not the fault of our present government, so who are they telling them what to do. I am frightened by their statements and am pulling all my funds out of the National Bank as they are hiding something.

#155 NoName on 08.22.16 at 4:56 pm

hey brazil dude, you where right its not zika that is a problem in brazil, its syphilis, crazy, crazy…

http://qz.com/763105/brazil-zika-syphilis-infant-mortality/

#156 NoName on 08.22.16 at 5:01 pm

#145 CO2 on 08.22.16 at 3:18 pm

co2 is not a problem, but metan is, all those cows…

#157 NoName on 08.22.16 at 5:02 pm

http://www.bbc.com/news/world-europe-25922514

#158 AK on 08.22.16 at 5:10 pm

#152 Mark M. on 08.22.16 at 4:25 pm

“Which market? The bond market says no rate hike.”
—————————————————————
The Bond market is confused due to the crap with the NIRP.

The Fed will start with the rate hikes once the election is out of the way.

#159 The American on 08.22.16 at 5:21 pm

At #124: Mark M, like I said, wait and you’ll see. Yes, I certainly praise an economy like the U.S. vs that of the ratty-ass Canadian economy. Hell, at least we saw the error of our ways with shitty lending standards and did something about it. Canadians? Balls to the wall and cook it till its completely fried. Truly, the prime example of arrogance, ultimately demonstrating utter stupidity.

#160 Context on 08.22.16 at 5:23 pm

Now when I see condos can be bought with no down payment its telling me the developers are in trouble and here is how it works. The small print stated that the buyers had to have a good credit rating and the means to qualify for a mortgage. The developers have real estate agents in the game and an offer is made subject to financing. This is handed to a mortgage broker who gets the approval who confirms the down payment is in his Trust Account ready for approval. Its now a firm deal for closing. Where did the green come from to close the deal? It came from the builder getting rid of inventory he can’t sell and obviously it was a high ratio insured mortgage.

#161 Mark M. on 08.22.16 at 5:38 pm

AK and The American,

Prepare your explanations boys, you’ll need one in a few weeks. No rate hike.

#162 Context on 08.22.16 at 6:20 pm

#159 The American: – Come to Southside Johnny’s some Saturday night trashing our country and see what happens. Mess with a beautiful gal talking badly about Canada and she will take you down in a NY minute faster than a cobra. Mess with the men there and its curtains for you, so when in Canada show some respect as a visitor.

#163 Tony on 08.22.16 at 11:07 pm

Canadian housing must rank as one of the worst possible quote investments. I look at the positives and negatives and can only see one positive that being present-day low interest rates. Everything else is a negative and going forward in time everything gets even worst for Canadian housing. The morons buying these homes, townhouses and apartments need to take business courses in how to invest.

#164 Planning for my departure | 33 and Free on 08.23.16 at 8:32 am

[…] job at 24, and not 32 and I’ve never had to dance burlesque to make ends meet. Even Garth Turner spoke succinctly of the lack of savings among many in my demographic: “The liquid assets among […]