Save mom

growth-modified

Peter wrote me earlier this week. Nice kid. With a confused mom. “I discovered your blog about a year ago and have become a saver and investor since,” he says, in the mandatory suck-up portion of this letter.

“My mother is currently living in the house we grew up in, however we’ve moved out and she’s by herself now in 4 bedroom plus den house. She’s 53 years old and there’s only about 200k on the mortgage of this detached 905 home. I’m urging her to sell, invest and enjoy her life debt free and liquid. However she wants to buy a million dollar property close to the city. It’s hard to argue since buying a house has worked out well for people in recent years. I wanted get your advice on what her best course of action would be at her age and financial situation. Thank you for all your work, and for being the voice of reason in these weird times.”

I replied: What is your mother’s income? What is her employment? What are her assets? Is she on her own? Does she have a pension coming?

Says Peter: “Her income is around 50k. She does interior design, custom drapery and alterations around, but income varies year to year. She also gets about 1k a month from my grandmother’s retirement pension (they live together). And also another $800 a month from renting out the basement.

“Besides the house, worth maybe $900,000, she has $50k savings. No pension.”

Shudder. Is this the face of Canada? I fear so. Pete’s mom has net worth of $750,000, with 93% of it concentrated in one asset. If she buys the fat house, she’ll have 100% in one asset, at one address, in one suburban hood – plus her debt will increase from by 50%. At 53 years old, in a menial job, she’ll have no liquid assets, no pension income (beyond CPP and granny’s grand a month) and be forced to rent out a portion of the residence. Her mortgage will certainly renew higher every five years, and she’ll probably never pay it off.

Financially unstable, vulnerable, at risk – and living in million dollar digs. If a housing correction ensues, or mom loses her job making curtains, or the economy reverses, or interest rates inflate, there’ll be a crisis. Without liquid assets to tide her over, she’d have to sell – likely happening when buyers are scarce, prices falling and houses turning cold and illiquid.

Peter’s mom (with $700,000 in equity walking into a $1 million deal) does not require mortgage insurance. She will qualify for bank financing at barely over 2%. She won’t have to go through the mortgage stress test. There’ll be nothing standing between her and own suicide-by-horniness except her brave blog-addled son. And meanwhile (surely) her friends will tell her how astute she is to be ‘investing’ in a better house and what a success she’s become.

But what if she took his advice and bailed? Well, that $700,000 put into a non-registered investment account averaging 6-7% would double before she reached the age of 65 – even faster if she stuffed TFSAs for herself and gran. From the $1.4 million she could draw a retirement income of about $84,000 (at 6%). If it was set up as a return-of-capital distribution, then it would be non-reportable income, meaning she could keep and spend it all, plus collect her $18,000-per-year in CPP and OAS without much, if any, clawback. So instead of owning a house on which she could barely afford to pay the mortgage, property tax, insurance and maintenance, she’d have an income twice that of when she was working.

Of course, mom & granny would have to rent. But the cost of doing so is equivalent to carrying an existing $200,000 mortgage, plus property taxes and related occupancy costs, less the rental income. In short, by cashing out at the market peak (or close to it) with rates at the bottom (or near) she’d capitalize on windfall gains, eliminate real estate risk, create her own pension and cement lifetime financial security. Or, she can fall for suburban house porn, roll the dice and face an absolutely unknown future.

Housing analyst Ross Kay predicts Canadian real estate will plop in value by 17% after Monday’s mortgage rule change. Royal LePage’s Phil Soper says this is housing’s “last hurrah.” CMHC is raising its risk assessment of the overall Canadian residential real estate market from ‘moderate’ (orange) to ‘strong’ (code red). Moody’s Analytics says Canadian interest rates will move higher over the next two years. Dominion Bond Rating Service says it now takes 82% of income in Vancouver and 50% in Toronto to afford the average house – all but assuring prices will fall.

Does she know any of this?

Finally, as this pathetic blog has said for some time, things will get a lot worse in the burbs than they become in the city. Leafy urban enclaves or detached houses a short haul from downtown are not going to lose 40% of their value. But you can’t say the same for McMansions in the hinterland. Worst. Choice. Possible.

So, Petey, this is on you. Save mom.

148 comments ↓

#1 BigW on 10.18.16 at 6:03 pm

First.

Another quality blog post by GT

#2 Love My Kia on 10.18.16 at 6:05 pm

Who won the pot last night?

#3 Brock on 10.18.16 at 6:06 pm

First time first.

PS a lot of you commenters are total weirdos

#4 Jungle on 10.18.16 at 6:06 pm

Tell your mom she should take the money and run. At her age no point in keeping a million dollar house with no savings.

Plus renting = less responsibility/work and more time for yourself. Good for that age.

#5 wanabe-first on 10.18.16 at 6:14 pm

show us 6-7% portfolio please

#6 Rick Fast on 10.18.16 at 6:18 pm

Garth, you had mentioned a small drop in GTA of 10-15%, did you mean this would be the short term correction? Do you see it falling ~10% each year for a number of years as you had previously mentioned?

#7 Victor V on 10.18.16 at 6:20 pm

http://www.bnn.ca/housing-pundits-wrong-canada-won-t-have-major-major-collapse-former-rbc-ceo-1.587490

“I appreciate why policymakers have been moving in the direction they have been moving but we have yet to have — and I don’t believe we are going to have – a major, major collapse in housing.”

– Former RBC CEO, Gord Nixon

#8 Renter in Surrey on 10.18.16 at 6:24 pm

Just a note to say thanks, Garth.

My Mother passed away in the summer, and my Dad move to a Retirement Home, leaving the house in Guelph empty. My sister wanted to wait to sell, but after three months, and after seeing what is happening in Vancouver, I hurried back to clean up the house, and list it before the insanity stops in Ontario.

The house sold in 18 hours – three offers, and we got 46K over asking. Now my sister thinks I am a hero, but really, it’s you.

Take care,

#9 Almontage on 10.18.16 at 6:25 pm

Disclaimer: Garth client here.
I do listen to his advice, but even without it I’d never put 100% of my assets into a house and enjoy Purrfect Bistro for din-din.
I’m not in the GTA so it’s a bit easier to stay close to the rule of 90. And we do like buying the odd action figure for the grandkids.

#10 Larry B on 10.18.16 at 6:29 pm

Garth is right, please save Mom!!!

#11 Brian Ripley on 10.18.16 at 6:31 pm

“So instead of owning a house on which she could barely afford to pay the mortgage, property tax, insurance and maintenance, she’d have an income twice that of when she was working.” Garth

I agree, it’s all about income, and the competition for income is going to increase.

As my chart of annual earnings in Canada by province shows, household incomes are either going sideways or down with few exceptions: http://www.chpc.biz/earnings-employment.html

As consumers take on the discipline of debt reduction after a lengthy housing splurge that has debt to income at historic levels, spending will slow and spending is someone else’s income.

The aging population is also a spending drag. $8/month for Netflix (3.2 million new subscribers last quarter) is a lot cheaper and easier than sitting through the latest bombast at the movie complex.

#12 JSS on 10.18.16 at 6:33 pm

Ok, so we get it that house prices in the suburbs will fall.

But when will it be time to buy that 3,000 sf walkout?

#13 Joe2.0 on 10.18.16 at 6:36 pm

I was on the Sunshine Coast on the weekend sitting in a pub next to a local RE agent and a bunch of Chinese buyers to be.
Apparently the new tax doesn’t apply to the Coast?
Or that’s what I overheard him say?

#14 MSM-Free Zone on 10.18.16 at 6:37 pm

“…..Royal LePage’s Phil Soper says this is housing’s “last hurrah…..”
__________________________

No, Phil, this is really just a realtor’s last hurrah. The gravy train is over. Nothing to see here folks, keep moving.

Though, for a limited time, with the new mortgage rules in place, I hear you can still trade in a used Audi these days and almost receive a brand-new Kia.

The rest of Canadians will be soon be celebrating a return to home affordability and a shrinking gap between the have’s and will-never-have’s.

#15 MSM-Free Zone on 10.18.16 at 6:45 pm

#7 Victor V on 10.18.16 at 6:20 pm
_________________________

Just curious, what would a former $12.7 million per year CEO of Temporary Foreign Workers know about the day to day realities of the average working Canadian?

#16 TurnerNation on 10.18.16 at 6:46 pm

Is that bigarider writing in?

-This Leslieville semi does appear slanted:

https://www.homechannel.ca/listing-view/111-Alton-Ave-Toronto-Ontario-E3628578/111-Alton-Ave-Toronto-Ontario.cfm

#17 Mark on 10.18.16 at 6:47 pm

To top it all off, the $900k “estimate” is likely a dramatic misestimate. Toronto/Vancouver housing has been relatively flat for over 3 years now, and too many armchair real estate experts have been extrapolating the price increases they’ve seen in the newspaper ‘headlines’ to their own situations. Not being sophisticated enough to understand that the headline numbers have been heavily influenced by the changing sales mix.

So far more likely is that the house in question is only $650k-$700k or so (ie: no fake increases over the past 3 years), and a $200k mortgage off of that, after Realtor fees, is $400k or so.

Given that work is likely to be minimal in the interior decorating field going forward, probably the most prudent advice to give to this family would be to take their $400k in equity and move somewhere they could be completely paid off. Lenders, if they’ll even give mortgages to self-employed, highly correlated to the housing market types, aren’t likely to give them on very good terms. A $300k house in a mid-market city, maxxed out TFSA’s for both her and mom, and none of this renting out nonsense seems most prudent.

#18 For those about to flop... on 10.18.16 at 6:51 pm

These towns might be a good place to look for affordable housing in the States…

M42BC

http://imgur.com/XWhYKza

#19 powder_hound86 on 10.18.16 at 6:52 pm

All gravy, but I’ll be shocked if diversified index portfolios are doubling in the next 10 years given current valuations.

I hope that is what happens, but I’m not as optimistic as you are for future returns.

#20 Smoking Man's Old Man on 10.18.16 at 6:53 pm

One thing you mention frequently is that our time here on earth is limited and it’s the one thing we can’t get anymore of and I couldn’t agree more.

Why people invest so much time into attaining things they ultimately have to leave behind is beyond me.

My Mother passed away last week, I spent the last days of her life by her side in palliative care. As difficult as it was to watch her die, it certainly causes one to reflect on how we treat others, spend our limited time, and ultimately what really matters…

#21 crowdedelevatorfartz on 10.18.16 at 7:10 pm

Yo Pete!
Tell her to sell the house, invest the money and move into a 2 bedroom apartment for a few years…..Houses are tanking.
She may actually like the idea of someone else shoveling the walkway and the convenience of the elevators……wait……did I say elevators?

#22 Braj on 10.18.16 at 7:19 pm

Good luck Pete..hope you can do it and report back!

#23 Mark on 10.18.16 at 7:20 pm

“All gravy, but I’ll be shocked if diversified index portfolios are doubling in the next 10 years given current valuations. “

Current valuations are beneath historic averages, at least on indexes outside of the United States. The TSX index in Canada trades beneath its long-run average P/E in the 17-20 range, at a mere 15-16X earnings. The emerging markets, historically, are outright cheap after little growth in the past 8 years.

So why wouldn’t an index portfolio at least return similar to what it did in the past? If anything, returns could be quite outsized in some of the out of favour asset classes, particularly emerging markets and Canadian equities, as some of the overvalued stuff, particularly US tech, and the bond market revert to valuations more in line with historic averages.

If you bought XIU 9 years ago, basically all you’ve done is collected dividends, and not made anything. This is quite historically unusual, and the TSX index is quite cheap at this point.

#24 For those about to flop... on 10.18.16 at 7:22 pm

#17 Mark on 10.18.16 at 6:47 pm
To top it all off, the $900k “estimate” is likely a dramatic misestimate. Toronto/Vancouver housing has been relatively flat for over 3 years now, and too many armchair real estate experts have been extrapolating the price increases they’ve seen in the newspaper ‘headlines’ to their own situations. Not being sophisticated enough to understand that the headline numbers have been heavily influenced by the changing sales mix.

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

When your makers were putting you together at the robot factory , I think one of them spilt coffee on part of your systems.

Either that or they forgot to tighten a screw ,a bolt ,a wire or are you just a nut…

M42BC

#25 Shawn on 10.18.16 at 7:23 pm

Can you elaborate on return-of-capital distributions in an upcoming post? How are these set up? What are the necessary criteria? Thanks! (I’m 39 but I like to plan ahead).

#26 Freedom First on 10.18.16 at 7:33 pm

Yes. Any one asset strategy is high risk. That being said, mom and granny are still way better off than the majority of Canadians. Of course mom should sell, invest, and rent. However, the main risk for mom right now, being only 53, is that some astute male parasite may wiggle his way into her life. Men and women both, are vulnerable to deceit. Happens all the time.

I abhor users and abusers, as I am a man of integrity who lives with a clear conscience. Fact.

007
Freedom First
PHD/Freedomonics

#27 Hairhead on 10.18.16 at 7:38 pm

Numbers . . . duh . . . . . how does they wurk?

Seriously, 80% of any major life decision comes down to easily-calculated numbers. I think that all high schoolers should have real-life number training. My son just learned today in Grade 11 “Apprenticeship Math” that a payday loan from one of those ripoff-sharks actually carried an interest rate of 470% annually!

(As for the other 20% in your life decisions? That’s the personal-philosophy and individual-circumstance stuff that, as an adult, you should be aware of.)

Garth, keep showing people how 2+2=4. No matter how many times you do it, there are people who will gain from the lesson!

#28 crowdedelevatorfartz on 10.18.16 at 7:42 pm

Well.
Its official.
Death by Meteor wins on Nov.7th

http://www.reuters.com/article/us-usa-election-meteor-idUSKCN12I20S

#29 Come to Windsor on 10.18.16 at 7:42 pm

350km from To there you can buy a low end house for $110,000 : 3 bedroom, 1bath, backyard, $1200/yr tax.
John Bogle says the market is efficient? When somebody is dumm, somebody else is smart. Mom can sell the 900k “house” , buy a better house for $200,000 in Windsor, follow the investment path, enjoy longer summers and earlier springs, shop in a big city 15min drive away- Detroit suburbs. And visit her son or go to To to plays whenever she wants, a 3.5hr drive away.

#30 The Great Gazoo on 10.18.16 at 7:44 pm

Thanks to blog dog Darrell and Garth, my Mother’s cousin will be getting $950 from the B of C – after I did some family name searches.

#31 Paul on 10.18.16 at 7:47 pm

#16 TurnerNation on 10.18.16 at 6:46 pm

Is that bigarider writing in?

-This Leslieville semi does appear slanted:

https://www.homechannel.ca/listing-view/111-Alton-Ave-Toronto-Ontario-E3628578/111-Alton-Ave-Toronto-Ontario.cfm
———————————————————-

Leslieville ???? Lol

#32 ww1 on 10.18.16 at 7:53 pm

#1 BigW on 10.18.16 at 6:03 pm
First.

Another quality blog post by GT

#3 Brock on 10.18.16 at 6:06 pm
First time first.

PS a lot of you commenters are total weirdos

So what happened to DELETED : 8. Firster – yes, Jimmy, you. ??

It was so nice while it lasted.

#33 conan on 10.18.16 at 7:55 pm

Agree on the McMansions in the hinterland equaling crapola.

We are at the beginning of an economic revolution between National governments that must have population growth and an economic diaspora that needs far less people.

We may see the following over the next couple of decades:

Population centers less then 5 thousand get abandoned.
The suburbs become the dumping ground for the unemployed and poor.
Inner city poverty zones get bulldozed and turned into expensive homes.
Complete reorganization of the debt economy

#34 HD on 10.18.16 at 7:55 pm

Question for Garth or blog dawgs and gals.

Friend of mine is moving her mom from her principal residence to an apartment. She is not planning on selling the house right away. She would like to rent it out and eventually sell when it makes sense to her.

Is there a grace period for her to benefit from the capital gain exemption after she moved out of the house while collecting rental income from said asset?

Thank you.

Best,

HD

#35 Daelin Didderty on 10.18.16 at 7:56 pm

Garth, Mark or Smoking Man,
What would a Trump Presidency do for the GTA Real Estate Market vs a Hillary Presidency?
I am thinking Trump would be better for real estate because he works in the business but I’d love your opinions.

Seriously? — Garth

#36 bigtowne on 10.18.16 at 8:19 pm

My visit to the local bank branch today was not the usual feast of complimentary cookies; squares; coffee and cream and local papers. The pastries were missing as was the cream and the papers. Only the coffee was in evidence.

The bankers are slimming down on the amenities which over the past five years I always anticipated. Getting crumbs on the actual accounts I tended to fill up my pockets with as many goodies without emptying all the plates.

Cost cutting at the bank..my word.

#37 Smoking Man on 10.18.16 at 8:22 pm

#20 Smoking Man’s Old Man on 10.18.16 at 6:53 pm
One thing you mention frequently is that our time here on earth is limited and it’s the one thing we can’t get anymore of and I couldn’t agree more.

Why people invest so much time into attaining things they ultimately have to leave behind is beyond me.

My Mother passed away last week, I spent the last days of her life by her side in palliative care. As difficult as it was to watch her die, it certainly causes one to reflect on how we treat others, spend our limited time, and ultimately what really matters…
…….

Wise post… My condolences.
Totaly aggree.

3 funerals in two years. For me.
It was two years today we lost a Nephew in the prime of his life at 28.

That one crushed everyone .. His folks will never recover. Shiniest star in our family, boom gone.

Makes you re evaluate shit. Can’t take it with you.

#38 Linda on 10.18.16 at 8:31 pm

Question – how does Mom get the full value of selling the house? The story above cites she’d have $700,000 (plus her $50,000) if she sold. What about realtor fees? Land taxes? Legal fees? Would the bank soak her for paying off her mortgage ‘early’?

Of course, IF her house sold quickly with a bidding war she might clear $700,000 even with those potential reductions listed above.

Problem is moving fast enough to take advantage – inertia drag hardly to be overstated & if she lived in this house for decades – & since her son states he & his siblings grew up living in the house decades it likely is – plus how long has granny lived there? – the emotional attachment may well outweigh any pragmatic economic choices.

Tough. She has to move at some point since she has no money and no pension. — Garth

#39 McFly604 on 10.18.16 at 8:37 pm

“custom drapery and alterations”. Petey, your mom is a decorator not a designer. Difference being a degree and four years in university.

#40 Jenny on 10.18.16 at 8:38 pm

I’m a financial advisor, and even I can’t wrap my head around how many people are pouring their net-worth into only real estate. A good portion of the country has almost 90% of their net-worth into a single asset, the rest are split between retirement and living paycheck to paycheck.

It makes even less sense that only half of people in Canada apparently work according to this article. https://betterdwelling.com/only-50-of-canadians-have-jobs-the-unemployment-pandemic/

#41 Corban on 10.18.16 at 8:40 pm

Hahaha, my mom is practically in the same situation. I can’t even get her to read the blog :(

#42 will on 10.18.16 at 8:42 pm

“If it was set up as a return-of-capital distribution, then it would be non-reportable income…”

How is that done Garth? Some of the distributions I get are ROC but I think you are talking about something else. Please explain.

#43 BS on 10.18.16 at 8:54 pm

#7 Victor V on 10.18.16 at 6:20 pm
http://www.bnn.ca/housing-pundits-wrong-canada-won-t-have-major-major-collapse-former-rbc-ceo-1.587490

“I appreciate why policymakers have been moving in the direction they have been moving but we have yet to have — and I don’t believe we are going to have – a major, major collapse in housing.”

– Former RBC CEO, Gord Nixon

So I guess a “major collapse in housing” cannot be ruled out?

#44 boonerator on 10.18.16 at 8:55 pm

A lot of the problem with renting is pure status competition, bragging to ones peers.
To convince your mom, tell her if she sells, she will have the money to rent a fabulous apartment with lots of bling to impress her friends. The fab apartment would cost more than an efficient one but the social benefit of living large might allay your mom’s fears of being a “renter”.

Or she can get better friends. — Garth

#45 Metaxa on 10.18.16 at 8:55 pm

Bears repeating…
…My Mother passed away last week, I spent the last days of her life by her side in palliative care. As difficult as it was to watch her die, it certainly causes one to reflect on how we treat others, spend our limited time, and ultimately what really matters…

Can’t agree more with the above sentiment.
I’ve buried far too many and all too recently at this later point in life.

My wife of 42 years and I are comfortable, my adult children are all comfortable.

I still dabble in the odd business deal but now its not to benefit me, I do it to help out the other guy a bit. Still ends up of benefit to me…go figure!

Life is good, enjoy it while you can. Soon someone else will be picking out the colour of your morning porridge and all the stainless and granite in the world won’t overcome the fact that you need help taking a dump.

#46 paulo on 10.18.16 at 8:58 pm

peter: no brainier- grab the loot and run before its to late!

#47 Wrk.dover on 10.18.16 at 9:00 pm

So price of housing drops 17%. Next step will be the house horny emulating the central bank actions with the stock markets…buying the dip!
Only the central banks can print money, but Peters mother can borrow it.

#48 Koshy Alex on 10.18.16 at 9:00 pm

The remarks, Ms. Grunwald said, “make it sound like HRC DOESN’T think the game is rigged — only that she recognizes that the public thinks so.” Ms. Grunwald added: “They are angry. She isn’t.”

http://www.nytimes.com/2016/10/16/us/politics/wikileaks-hack-hillary-clinton-emails.html?action=click&contentCollection=Europe&module=RelatedCoverage&region=EndOfArticle&pgtype=article

#49 WaitingForWorldToChange on 10.18.16 at 9:04 pm

Interesting article on the impacts of global debt, the increase in debt coupled with low growth creating systemic deflationary pressures. In that environment hard to raise rates, yet Fed acknowledging that low rate environment not healthy.

http://conversableeconomist.blogspot.ca/2016/10/global-debt-hits-all-time-high.html

#50 Greaterfool D. on 10.18.16 at 9:18 pm

The problem with political jokes is they often get elected :)

#51 45north on 10.18.16 at 9:28 pm

Peter save Mom!

Finally, as this pathetic blog has said for some time, things will get a lot worse in the burbs than they become in the city. Leafy urban enclaves or detached houses a short haul from downtown are not going to lose 40% of their value. But you can’t say the same for McMansions in the hinterland. Worst. Choice. Possible.

here’s why I think 50% loss is a better figure – three reasons:

The level of household indebtedness in Canada is now at a historic high of 168 per cent of disposable income. higher than the US figure when its housing market dropped

the Bank of Canada cannot meaningfully lower interest rates – by contrast the US Fed lowered rates from 5% to 0% as the US housing market dropped

most Americans with mortgages had 30 year fixed term mortgages in contrast to Canadians who have only 5 year mortgages.

as for things being worse in the burbs, yes they will. Some posters here hypothesized that Brampton would retain its value ahead of City of Toronto. ha! or Scugog. double ha!

https://en.wikipedia.org/wiki/File:Greater_toronto_area_map.svg

#52 Smoking Man on 10.18.16 at 9:31 pm

I remember during the Brexit race, MSM was reporting the stay side at 90% and the exit side at 10% the day before the vote. My Herdometor had it at exit 55% stay 45%

I spend a lot of time in the USA. Spent Friday night to Monday night at the Casinos in NY.

So I start talking about it in the chairmen lounge. (ak losers lounge.) Whenever I polled anyone, it’s like they both suck, but as soon as I made it apparent that I’m liking Trump, they open up huge. They hate Hillary and have no choice to support Trump. Even when I talked to some millennials. That surprised me.

Openly supporting Trump seems to be a big taboo, a cultural sin until a wink and a nudge open them up.

I can not see how Trump will not take it in a landslide.

Even Facebook is exploding with Trump Support with real names attached to support.

Bet accordingly

#53 Joe Schmoe on 10.18.16 at 9:32 pm

#5

I have some moola with Garth and his comments about 6-7% are anecdotally correct. I just looked at my yields since 2012.

The number rings true from 2012 to date inclusive of that stinker of a year in 2015.

He’s laid out all the pieces, tough to post a catch all portfolio not knowing a person’s situation.

Pay the 1% for Garth or someone else and learn the easy way.

I too was cynical awhile back, but have no regrets now. I can afford to grow at 5-6% because I was lucky enough to start young.

I used a few other companies in the past, but landed on the fee for service model for most of our investments.

And no he is not paying me, or offering a fee reduction.

However there could now be some free sprinkles in your future. — Garth

#54 Tony on 10.18.16 at 9:35 pm

Re: #5 wanabe-first on 10.18.16 at 6:14 pm

http://www.wisemoneyisrael.com/2012/02/24/earn-8-percent-with-israeli-bonds/

#55 South Etobicoke Trump Campaign Central on 10.18.16 at 9:45 pm

Are the Turner Investment portfolios really returning 6-7%? Over what time scale?

What are the returns of the Turner balanced portfolio since 2013?

A balanced, globally-diversified 60/40 portfolio has delivered an average of about 6.5% over the past six years, two of which (2011 and 2015) were losers for equity markets in New York or Toronto. Returns should improve going forward. — Garth

#56 The Spectre on 10.18.16 at 9:49 pm

Code red for Alberta too. It’s time to get rid of Rachel and all the socialists.

We deal with Jr next.

#57 Tony on 10.18.16 at 9:53 pm

Re: #35 Daelin Didderty on 10.18.16 at 7:56 pm

A Trump victory would cause a major stock market crash and if the rig artists don’t try to rig the indexes upwards again it could be a 10 to 25 year bear market. Trump would be bad for real estate.

Wrong. Trump won’t win. If he did, the market would do a Brexit, and recover. The only long depression is between your ears. — Garth

#58 WalMark of Sadkatoon on 10.18.16 at 9:54 pm

“Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.”

#59 Smoking Man on 10.18.16 at 9:56 pm

Peter

Talk to your mom and go see Garth, I met him, he’s not that scary in real life.

The burbs will get crushed in a real estate meltdown. Look at Niagara Falls, no jobs no economy yet wild speculation is sending prices through the roof. Windsor, Hamilton, Brampton with highest car insurance in the civilized world, with Wynne deliberate gridlock on the two highways going north and south

People move their cause they can’t afford Toronto and are the most financially stressed.

Toronto will eventually get hit no matter that the Messiah of the millennials T2 says he’s going to do. He has opened the floodgates to Tempory Foreign Workers. Good by good IT jobs in Toronto.

What the loony left don’t get yet is the psychological and economic destruction of culture and the economy is the only way to get a one world government stamp of approval from a vanished middle class.
Tactics:
Gender wars
Race Wars
Climate Change
All tools in the tyrant’s divide and concur playbook.

I cover it briefly in my book, remember Nictonite is ruled by a one world government. and it sucks. That’s why I live on earth now.

Dr. Smoking Man
Ph.D. Herdonomics.

#60 NoName on 10.18.16 at 10:02 pm

lately i heard few very funny jokes, but sadly i cant remember any of them, dont know why i know thousands of jokes when you need then nothing comes out.
i’ve been thinking abut those belgions and them in some vilage protesting canada/eu free trade, ill scale down on a belgium beer and chocolates, that will teach them a lesson, when their gdp start trending down. hoo in a right mind pays 4.50 for bottle.. but that is topic for anoter day…
i was thinking abut mid apr rockabilly bob weekend in LV, earlier but i think that i have to aks wife first if will let me go. i dont mid her tagging along but that means kids are going and one of two wants to meet chumlee, but i dont want to be cab driver on weekend to, mon to fri is enough me thinks, they disagri…
i talke fo few friends of mine in us that i tought that they are far lest as you can get and to my suprise all (3) are talking trupm. think that last debate and hilaris war mongering double speaking done ’em in.
just guessing…
back to fun stuff rockabilly bob
https://youtu.be/wqi3CSGJnds?t=20s

(7,513)

#61 WalMark of Sadkatoon on 10.18.16 at 10:03 pm

“Dominion Bond Rating Service says it now takes 82% of income in Vancouver and 50% in Toronto to afford the average house – all but assuring prices will fall.” – Garth

“Toronto/Vancouver housing has been relatively flat for over 3 years now” – WalMark

I’m going to agree with Garth on this one. Toronto and Vancouver house prices will fall.

#62 Greaterfool D. on 10.18.16 at 10:07 pm

Man sacrifices his health to make money. Then he sacrifices money to recuperate his health. And than he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future. He lives as if he is never going to die, and than dies having never really lived.
Dalai Lama

#63 AR on 10.18.16 at 10:08 pm

Ryan and Doug are optimistic tonight. At the current 2-3% annual return – rule of 72 says the portfolio will double in 24-36 years. Bring on the 6-7%. :) Shows that investing requires tremendous patience …10 years?

#64 Shane on 10.18.16 at 10:08 pm

“Leafy urban enclaves or detached houses a short haul from downtown are not going to lose 40% of their value.”

Why not? Whats different from before if it isn’t a)foreign money, b) stable immigration, or c)low interest rates (they’ve gone up to 4.64%).

Do you see the factors above changing to prevent a 40% crash? Like a) foreign money starting to come, b) increase in immigration, and c) low rates for along time.

It just doesn’t make sense.

#65 Mark on 10.18.16 at 10:09 pm

“Next step will be the house horny emulating the central bank actions with the stock markets…buying the dip!”

There are exceedingly few ‘house hornies’ left that actually qualify for financing in any significant numbers. Home ownership rates are at record highs. That’s why the market will take an extended period, 10-20 years, to fully recover back to even nominal prices. A real recovery may never occur barring a massive increase in birth rates.

What would a Trump Presidency do for the GTA Real Estate Market vs a Hillary Presidency?
I am thinking Trump would be better for real estate because he works in the business but I’d love your opinions.

If you’re a long-term owner of real estate, basically the best thing that can happen for you is a decline in RE prices. Such that, little new supply comes to market, and rents can at least keep up with inflation and not be damaged by an influx of new supply. Re-investment opportunities with lower real estate prices are also better with low RE prices.

So I’d expect that Trump would take a hatchet to the GSE’s such as Fannie Mae/Freddie Mac. I would expect that Trump would try and crack down on the banks, forcing them to tighten lending standards and drive down prices.

Trump has made many comments to the effect that he is not very leveraged. He allegedly only has $600M of debt, mostly mortgages, against a portfolio in the several billion dollars. With such relative low levels of leverage, it would be to an investor like Trump’s best interests to drive RE prices down through policy actions.

OTOH, the policy of Bill Clinton, continued under George W Bush, was to loosen credit for RE through many explicit and implicit policy actions. I would have to presume that Hillary would attempt to perpetuate this policy. The big problem with pumping a specific asset class like RE so hard and for so long is that overcapacity becomes so much of a problem that prices start falling naturally due to that overcapacity, rather than rise as low rates or the availability of credit would imply.

In a nutshell, Trump = tight money policy. Hillary = loose money policy. I think a Trump presidency would be better for investors personally, even if Trump doesn’t take a hatchet to the cost of government as he has claimed he would. Of course, the big wildcard with either candidate is just how much congressional support either of them receive. If Trump (or Hillary) win by a landslide, then I think Congress will have little choice but to fall in line, but if the vote is split 50/50, the next 4 years are likely to be complete and utter gridlock.

#66 Shane on 10.18.16 at 10:11 pm

Trump may win because many people openly say they are voting Clinton but deep down inside they will vote Trump. I can see a swing of about 5-10% for that.

Wait and see.

And why are people attacking people here? “Wrong. Trump won’t win. If he did, the market would do a Brexit, and recover. The only long depression is between your ears. — Garth”

#67 Mark on 10.18.16 at 10:28 pm

“Can you elaborate on return-of-capital distributions in an upcoming post? How are these set up? What are the necessary criteria? Thanks! (I’m 39 but I like to plan ahead).”

Return of capital, in a trust (ie: a mutual fund trust) generally arise from either cashflows that are the result of depreciation. Or the refunding of paid-in capital.

In a nutshell, when you receive a return of capital distribution from a mutual fund trust, you reduce the cost base of your investment accordingly. If the adjusted cost base of your investment is less than zero, then return of capital is, in essence, a capital gain, and becomes taxable as a capital gain.

As a portfolio strategy, ‘return of capital’ can be implemented by preferentially selling, in the phase of your life where you need income, investments which have not appreciated much. In preference to heavily appreciated investments.

For example, I’m pretty young. I have a large holding of XIU for the Canadian portion of my portfolio. When I am closer to retirement, I should stop buying XIU, and start buying an XIU analogue, such as XIC, EWC, VXC, etc. In retirement, when I need to sell units, I would thus sell the analogue in preference to selling XIU (which, by then, will have heavily appreciated and may very well have a cost base of 10-20 cents on the dollar, attracting a large tax liability!). Thus much of my income, at least in early retirement, would be ‘return of capital’, and would not be taxable. Especially useful in early retirement where people tend to have larger expenses due to travel interests, acquisition of capital goods such as a new car/house, etc.

Is there anything more you’re looking for specifically? Occasionally, certain corporations will apply for, and gain approval from the CRA, under a very limited set of specific circumstances to make a distribution of paid-in capital as a dividend, which is a return of capital. Generally this sort of situation arises when a corporation is being wound down or is in the phases of being wound down. Rarely do successful active businesses make return of capital distributions, although they certainly do pay dividends to their owners.

Nope. Totally irrelevant to what I suggested. Stop pretending you are an advisor. — Garth

#68 Smoking Man on 10.18.16 at 10:40 pm

#66 Shane on 10.18.16 at 10:11 pm
Trump may win because many people openly say they are voting Clinton but deep down inside they will vote Trump. I can see a swing of about 5-10% for that.

Wait and see.

And why are people attacking people here? “Wrong. Trump won’t win. If he did, the market would do a Brexit, and recover. The only long depression is between your ears. — Garth”
……

Trump will win, there will be a slight dip in equities, then a surge, Corp taxes down to 15% Jobs Jobs Jobs Risk on……

Goodbye, Communist Canada.

Mental case Government. T2 will be so into despair , he will chuck Butts and Suzuki under the bus and build the pipelines.

Just to keep people lining up for selfies. He’s addicted to that, I’m and expert on addictions.

Make sure you got more Oil futures than bonds in that Structured Note.

Offshoring one’s wealth when Aliens whisper the future in your ear is so underrated.

Bastards told me in may of 2010 hovering over Long branch. Write the book.

Why they picked an illiterate dyslexic is beyond me. Guess the pricks have a weird sense of humor. Thousands of years trapped on a planet with a one world government.

#69 Smoking Man on 10.18.16 at 10:45 pm

Nope. Totally irrelevant to what I suggested. Stop pretending you are an advisor. — Garth

If he ever gets a fan base that gets crushed. It’s your fault, your obsession with free speech. That’s why I wear flip flops vs cowboy boots. Toes are the antenna to the UCC. It’s in the manual.

#70 Doug in London on 10.18.16 at 10:53 pm

@For those about to flop, post #18:
Wow, and I thought Ragged Ass Road in Yellowknife was an unusual place name.

@Come to Windsor, post #29:
I couldn’t agree more. If I were in her shoes I would sell the place (in other words cash in my winning lottery ticket) and move to a much cheaper place like Windsor or Sarnia tomorrow.

#71 bdwy sktrn on 10.18.16 at 10:54 pm

Either that or they forgot to tighten a screw ,a bolt ,a wire or are you just a nut…

M42BC
————————–
some of the gems he leaves behind can only make one think of crowded’s deposits.

#72 Smoking Man on 10.18.16 at 11:08 pm

Lisa Laflam CTV. such an embarrassment to intellect.

#73 Bytor the Snow Dog on 10.18.16 at 11:11 pm

@26 Freedom First sez:

“However, the main risk for mom right now, being only 53, is that some astute male parasite may wiggle his way into her life.”

Kinda like this guy?

http://www.cbc.ca/news/canada/toronto/james-regan-tenant-eviction-1.3808079

#74 Bytor the Snow Dog on 10.18.16 at 11:13 pm

@#29 Come to Windsor-

Shhhh, don’t tell them. I

#75 Darryl on 10.18.16 at 11:20 pm

#29 Come to Windsor on 10.18.16 at 7:42 pm
350km from To there you can buy a low end house for $110,000 : 3 bedroom, 1bath, backyard, $1200/yr tax.
John Bogle says the market is efficient? When somebody is dumm, somebody else is smart. Mom can sell the 900k “house” , buy a better house for $200,000 in Windsor, follow the investment path, enjoy longer summers and earlier springs, shop in a big city 15min drive away- Detroit suburbs. And visit her son or go to To to plays whenever she wants, a 3.5hr drive away.—–
————————————————————–

Been searching there for weeks and 200 k seems light .
Need at least 350 to 550 for somethin decent . Still less than 1/2 the price though.
Whats with the 1400 dollar yearly water bills . I have paid less that 400 for years.

#76 ww1 on 10.18.16 at 11:35 pm

#34 HD on 10.18.16 at 7:55 pm
Is there a grace period for her to benefit from the capital gain exemption after she moved out of the house while collecting rental income from said asset?

Once again, I’ll point out that this is a good chance for me to suggest that she pay for professional advice for something that could cost her tens of thousands of dollars in taxes.

But if you want free advice, I’ll assure you that the CRA has no concept of a “grace period”. And that she does not need one.

I think you are confused about what all this means. She does not have to actually declare anything to get a “capital gains exemption” – it just applies to her house from the time she purchased to when it was sold (or rented out). Ther are no tax forms or other paperwork and nothing to declare on a tax return. An exemption means she does not have to declare any gain while it was her principal residence.

But this changes when she starts to rent the house. Any appreciation in value after that becomes a capital gain – and that’s something that has to be declared on a tax return when the property is sold (or she moves back in).

And of course any rental income, minus associated expenses, become normal income for her and is taxed that way.

Free advice from a wanna-be blogdog – worth exactly what you paid for it.

tl;dr : No captial gains tax owed on the value of the house today. Capital gains tax only due on appreciation after she starts to rent.

#77 WUL on 10.18.16 at 11:45 pm

It is beneficial to have Garth in Alberta (albeit under sad circumstances – Jim Prentice M.P., P.C., Q.C., Rock Solid Guy).

We get comments here after 11:00 Eastern Time for a change.

#78 Fed-up on 10.19.16 at 12:12 am

#55 South Etobicoke Trump Campaign Central on 10.18.16 at 9:45 pm

What are the returns of the Turner balanced portfolio since 2013?

——————————————————————————–

Hey how about them Blue Jays?

;)

#79 Ronaldo on 10.19.16 at 12:14 am

#34 HD on 10.18.16 at 7:55 pm

HD, I had a situation similar to what you mention several years ago whereby I moved from one city to another to take a job. I purchased a home in my new location and rented out my previous principal residence. Unless the rules have changed since then, the home once rented would be deemed to have been sold at whatever the market value would have been at that time. I had an appraiser appraise the home at the time that I rented it. Home was rented for 7 years and then sold. Unfortunately this was the period between 1984 and 1990 when the markets were not very healthy and so the house sold at a loss. I was able to write off a capital loss on the lot portion and a terminal loss on the home itself against my income so that helped to regain some of the losses. She should talk to an accountant in this regard to confirm whether those rules still apply. It is important to get a value determined at the time of renting for income tax purposes. Hope this is of help.

#80 3s on 10.19.16 at 12:28 am

How ironic! Take this to its extreme. I have moved back to a third world city ironically for its unbeatable lifestyle – its rated in the top 5. I park the car a block from work in the CBD in an area that is of historical importance. The now $ multiple mil properties were passed down through the generations and is owned by still jobless or very low income peeps, prone to substance abuse…instead of selling up, investing and living like kings forever and more, they sit on the pavement in front of their kingdoms and beg for bread….

#81 FritoPaw on 10.19.16 at 12:39 am

Reasonable advice, but were the disparaging remarks about Mom’s career choice totally necessary? Maybe she works hard and chose that line of work because she likes it, is good at it and doesn’t view it as just a “menial job” “making curtains”

#82 HD on 10.19.16 at 12:58 am

@ #76 ww1 on 10.18.16 at 11:35 pm

Thanks. The info is much appreciated.

Best,

HD

#83 WalMark of Sadkatoon on 10.19.16 at 1:51 am

Bookies paying $1m to people betting on Clinton

http://www.cbc.ca/amp/1.3810006

Looks like a sure thing.

Trump toast or I eat my underwear

#84 Squish on 10.19.16 at 2:11 am

#76 ww1 on 10.18.16 at 11:35 pm

“I think you are confused about what all this means. She does not have to actually declare anything to get a “capital gains exemption” – it just applies to her house from the time she purchased to when it was sold (or rented out). Ther are no tax forms or other paperwork and nothing to declare on a tax return. An exemption means she does not have to declare any gain while it was her principal residence.”

Side note, but if I’m not mistaken, one of the recent changes to mortgage rules – starting with the 2016 tax year – is that you do indeed now have to make such declarations, fill out tax forms, etc. in order to claim the capital gains tax exemption on the sale of your principal residence. Garth wrote about this, earlier in October.

#85 jane24 on 10.19.16 at 2:38 am

Another factor that will slow RE is that sales have been taken from the future. People who would have naturally purchased in 2017 and 2018 have already brought through FOMO. I really don’t think that there are that many short-term purchasers out there now. This would have resulted in a natural purchase wave slowing of the market without the recent govt changes.

With the finance changes also in the mix, plus Christmas and a harsh winter forecasted, this market will go down quickly and deeply.

#86 #37 Smoking Man...So true & Bad Mood Today Everyone? on 10.19.16 at 2:40 am

So true about losing family and re-evaluating life.

Why I just picked up and moved to “Il Bel Paese” and for a song, can jet around the EU and environs, meet new people and have a lot of fun.
__________________________________________

Garth, your rebuttals today are hilarious…still killing myself laughing (e.g., her brave blog-addled son, the only long depression is between your ears…still laughing at both).

I mean, who still uses the words “addled” and “gossamer”?

Garth, I think you are a closet 18th Century Romanticist.

Take a break from work and go to Portovenere, IT and see where a soul mate [Byron] would begin his swim to Lerici across the Bay of Poets.

Some of the regular Blog Dogs are just as sharp today (e.g., When your makers were putting you together at the robot factory…).

Like, did everyone get up on the wrong side of the bed today?

Not complaining, bring it on Garth and acolytes…too much fun and poignancy today, the latter courtesy of Smoking Man…who knew?

bsant

#87 Travelbug on 10.19.16 at 3:08 am

Hi Garth,
I have been an avid reader of your blog for the last few years and my husband and I have followed your advice regarding a balanced portfolio. We have been mainly focusing on growth, investing in equities, REIT’s, ETF’s, debentures etc. and it all has worked out very well. Nearing retirement now, we will have to re-think our strategy and change our portfolio into a more income generating one. In this respect, your today’s mention of non-taxable “return of capital distributions” has tweaked my interest. Could you please explain in more detail what that means? Thank you very much in advance.

#88 Not only Lisa Laflam... on 10.19.16 at 3:13 am

Smoking Man, for entertainment plus, tune in to CBC The National and their revolving door of hosts now that Mansbridge is going to retire.

CBC is now the self-appointed counterbalance to Fox News regarding Trump…they are worse than NBC (it’s not even our election).

Watch CBS on any night that CBC bashes Trump and you conclude that CBC is living in some Lefty Bubble that masquerades as investigative reporting.

They will report for 10 seconds on a Clinton, yet again, lie or faux pas courtesy of Wiki Leaks and then go on to rebut that with 2 minutes of what amounts to utter bull manure, an insult to any thinking person but which provides Left revelry.

Even Lefty comedian Bill Maher can take some pointers from CBC.

Adding insult to accident, they put together a panel of Lefty biased nobody’s to comment for another half hour about, in essence, Trump Bad, St. Clinton Good.

T2 should never have increased their budget.

bsant

#89 Gullible Canada on 10.19.16 at 5:40 am

China has continued to drop the axe on real real estate speculation and yet our sissy prissy pollyannas here drip through their patented diapers to call a my action to slow speculation here as racist. Canada foams at the mouth when it comes to foreigners interfering with our national economic good, and that goes for our energy industry. Just this morning another article of unemployment hardship in a national paper showed how American anti canada lobbies against energy jobs, backed by Camaddas famous greens has resulted in increases I’m poverty and prostitution . Do lib yards like baby face Trudeau realize that foreign interests are sometimes toxic to Canadian citizens?

#90 Grantmi on 10.19.16 at 7:26 am

#7 Victor V on 10.18.16 at 6:20 pm

“I appreciate why policymakers have been moving in the direction they have been moving but we have yet to have — and I don’t believe we are going to have – a major, major collapse in housing.”

– Former RBC CEO, Gord Nixon

“The steady improvement in [home] sales will support price appreciation…[despite] all the wild projections by academics, Wall Street analysts, and others in the media.” – David Lereah was Chief Economist at the National Association of Realtors when he said this. The day was Jan 10, 2007, just as US housing prices steadily worsened falling even farther than many skeptics had predicted.

#91 jaybee on 10.19.16 at 7:41 am

If there ever a time and place and situation to sell, this is it. Wow, just wow.

#92 Mishuko on 10.19.16 at 7:44 am

As Garth always preaches… it’s about balance. Instead of being suckered into a mortgage and bragging about home ownership I rather brag that I can spend a few weeks away travelling in my car on road trips. Meeting some of the nicest people in the world and eating some of the greatest meals to honor my taste buds.

Problem right now is like SM has said earlier this year. The left label. Point fingers. Blame social constructs. No one wants to publicly acknowledge they are hedonistic or eccentric. For me it’s all about happiness. If owning gargantuan mortgages gets you off… k enjoy!

#93 crowdedelevatorfartz on 10.19.16 at 8:19 am

@#56 The Spectre
“Code red for Alberta too. It’s time to get rid of Rachel and all the socialists.”
********************************************

Riiiight.
Your memory seems to be a tad vague.

It was the NDP that crashed the world price of oil?
The NDP ran years of budget deficits until the Heritage Fund ran dry?
Socialist Norway started a similar fund at the same time and its now worth $900 Billion.
The NDP ran years of budget deficits until a Provincial sales tax became a possibility?
The NDP did nothing about the housing boom until it popped along with all those oil patch jobs when the world price of oil tanked?

Yeah. Its all the NDP’s fault.
No. They just inherited the Conservative shitpile

Who elected them?
A majority of voters?
Look in the mirror when you’re fling-ing the manure.
They were voted in to get incompetant, financial pigs o….u…t from the trough.

#94 cherry blossom on 10.19.16 at 8:42 am

Garth you might eat to research the the “K” Wave. A tsunami of stock market depreciation. Not just a silly Elliot Wave. It could wipe everyone out. Worth a peak into.

#95 TurnerNation on 10.19.16 at 8:45 am

Of course not. “– Former RBC CEO, Gord Nixon” and his family must have tens of millions purchased in tony areas. Rec properties too. Biased.

I’d believe more if he said his RBC stock holding never will crash.

#96 Andrew t on 10.19.16 at 8:49 am

#52 Smoking Man on 10.18.16 at 9:31 pm
I remember during the Brexit race, MSM was reporting the stay side at 90% and the exit side at 10% the day before the vote. My Herdometor had it at exit 55% stay 45%

I spend a lot of time in the USA. Spent Friday night to Monday night at the Casinos in NY.

So I start talking about it in the chairmen lounge. (ak losers lounge.) Whenever I polled anyone, it’s like they both suck, but as soon as I made it apparent that I’m liking Trump, they open up huge. They hate Hillary and have no choice to support Trump. Even when I talked to some millennials. That surprised me.

Openly supporting Trump seems to be a big taboo, a cultural sin until a wink and a nudge open them up.

I can not see how Trump will not take it in a landslide.

Even Facebook is exploding with Trump Support with real names attached to support.

Bet accordingly

Yeah I know that patch of upstate NY, it’s akin to the Rust Belt and I can see it being heavily Trump. Thing is, the big cities skew the other way, and of course there are way more votes in the cities, which is why the boondocks can vote Trump all they want and it won’t matter.

#97 Ray Skunk on 10.19.16 at 8:50 am

#93

Another one with the Norwegian Sovereign Fund.

When Norway has to send equalization payments to the rest of Scandinavia, then you can perhaps compare.
How many hundreds of billions have QC and the east coast sucked out of AB over the past few decades?

I say this as no big fan of Alberta, I’ve never even been there.

#98 Ole Doberman on 10.19.16 at 9:31 am

http://www.bnn.ca/housing-pundits-wrong-canada-won-t-have-major-major-collapse-former-rbc-ceo-1.587490

Lol Gord Nixon played a big part in blowing up the gas bag as CEO of RBC that’s why they have his retired butt on BNN like a Catholic stepping into the confessional!

Ok Gord no “major, major crash” – just maybe a crash.

Back to retirement with you Gord – Gartho Turner is your high priest now, and he does not absolve you from your sin!

Amen brother

#99 isuckless on 10.19.16 at 9:36 am

Hey how about them Blue Jays?
———-
Coming from another continent (and slightly different culture) I never understood the fascination with the traveling circuses of NFL, MLB, NHL.
How anyone can think about this differently than WWE (world “wrestling” entertainment!) and not question results, was always beyond my understanding.

#100 TurnerNation on 10.19.16 at 9:45 am

Oh how our elite rulers and Sunshine listers must be roaring with laughter. They took 90% of our money. A unique system of Kanadian Kommunism.

Bet that plum ad contract went to a favored firm.

http://www.cbc.ca/beta/news/canada/toronto/ontario-electricity-support-1.3809961

“Ontario’s energy minister admits the bulk of nearly $12 million spent on the government’s plan to offer financial help to low-income electricity customers went to consultants and advertising.”

#101 HD on 10.19.16 at 9:45 am

@ #79 Ronaldo on 10.19.16 at 12:14 am

Thanks Ronaldo!

Best,

HD

#102 Wise Advice on 10.19.16 at 10:19 am

Great column and some surprisingly sage reflection from some of the blog dogs (SM and his Old Man). I’ve watched several family members die in palliative care and you really can’t take it with you…especially a mortgaged $1M home in the GTA.

Save Mom…for gawd’s sake, save her before she commits a monstrous mistake.

#103 Johnny Boy on 10.19.16 at 10:23 am

#69 Smoking Man on 10.18.16 at 10:45 pm

Nope. Totally irrelevant to what I suggested. Stop pretending you are an advisor. — Garth

If he ever gets a fan base that gets crushed. It’s your fault, your obsession with free speech. That’s why I wear flip flops vs cowboy boots. Toes are the antenna to the UCC. It’s in the manual.
…………………………………………………………………
You sure the antenna is in your toes and not stuffed up your derriere?
BTW Wearing flip flops could indicate that perhaps your a parrot-head? Just sayin………

#104 Renter's Revenge! on 10.19.16 at 10:27 am

#93 crowdedelevatorfartz on 10.19.16 at 8:19 am

The NDP ran years of budget deficits until the Heritage Fund ran dry?
Socialist Norway started a similar fund at the same time and its now worth $900 Billion.
The NDP ran years of budget deficits until a Provincial sales tax became a possibility?

————————-

Interesting, because Norway has a 25% sales tax, while Alberta has no sales tax.

How enthusiastic are Albertans about paying a 25% sales tax so that their NDP government can build the Heritage Fund back up?

Maybe we can do a blog dog poll on this :)

#105 Vern in Cowtown on 10.19.16 at 10:43 am

“So, Petey, this is on you. Save mom.”

Uh, but no pressure there, Pete! Hhahaha.

Garth, as you listed Pete’s mom’s position and prior to your assessment, I thought, “MAN, SOMEBODY JUST PITCHED GARTH A BEACHBALL OVER THE PLATE. He gone!”

#106 Cory on 10.19.16 at 10:44 am

#42 will on 10.18.16 at 8:42 pm
“If it was set up as a return-of-capital distribution, then it would be non-reportable income…”

How is that done Garth? Some of the distributions I get are ROC but I think you are talking about something else. Please explain.
———————————————————–

ROC is simply getting your own money back thus reducing your cost base.

Nope. Return of capital distributions from your own portfolio do not reduce any asset’s ACB. It’s simply what it suggests – a dipping into the principal to pay yourself monthly. That is non-reportable income, and your tax profile is determined solely by realized capital gains, dividend or interest income – most of which is taxed less when overall income is low. Principal distributions are replaced by investment income. — Garth

#107 jess on 10.19.16 at 10:47 am

The “appearance” of foreign

Big fines for banks not effective, says FINMA head (17 Oct 2016)
Banking watchdog: About 15 Swiss banks in money laundering ‘red zone’ (17 Oct 2016)

http://www.swissinfo.ch/eng/money-laundering_big-fines-for-banks-not-effective–says-finma-head/42520476
=======
How “Lucifer’s Banker” Brought Down The Swiss Bankers.. (w/Guest: Brad Birkenfeld) names 19,000 accounts

The rule change 2001 relates to a QI agreement that allowed UBS to open accounts for US clients with foreign stocks and bonds without having to report them to the IRS In what is known as a qualified intermediary agreement, UBS agreed to tell the IRS about income and identifying information for American clients with U.S. stocks and bonds, if those clients gave permission.
Birkenfeld explained how UBS sent a letter to its US clients who elected not to provide Form W-9, used to identify a taxpayer when payments are made to them, using the bank’s status as Qualified Intermediary (QI) to protect the client’s real identity. UBS also suggested ways around the regulation, such as excluding US securities from portfolios and for the beneficiary to hold them directly, or for a structure to be put in place between the foundation/trust and the bank which serves as an independent non-transparent owner, and submit documents to the QI to this effect.Without such consent, clients were supposed to sell their U.S. stocks and bonds. If they didn’t consent and didn’t sell their stocks and bonds, UBS was supposed to withhold about 30 percent of any sale proceeds or income on the account. The bank was supposed to anonymously pay withheld amounts to the IRS.

..” From at least 2000 to 2008, hid assets from the IRS by listing sham offshore companies as the account holders of UBS accounts, when in fact the U.S. taxpayers actually owned and controlled the accounts.
– falsified documents to disguise repatriated funds e.g. (purchase real estate)
https://www.justice.gov/opa/pr/ubs-client-pleads-guilty-filing-false-tax-return-hid-8-million-secret-swiss-bank-accounts
more examples:
https://www.justice.gov/tax/pr/seven-ubs-clients-charged-hiding-over-100-million-secret-swiss-bank-accounts-defraud-irs

#108 Canadian Moose on 10.19.16 at 10:51 am

Another great post by Garth. And hopefully Peter can persuade Mom to make the right move given her circumstances.

hin·ter·land
ˈhin(t)ərˌland/
noun
1.
the often uncharted areas beyond a coastal district or a river’s banks

I love the hinterland….my favourite place in the world, next to the Caribbean

#109 MF on 10.19.16 at 10:58 am

“Coming from another continent (and slightly different culture) I never understood the fascination with the traveling circuses of NFL, MLB, NHL.
How anyone can think about this differently than WWE (world “wrestling” entertainment!) and not question results, was always beyond my understanding.”

Enjoyment of sport and friendly competition is a universal. It’s a break from the daily routine to watch some athleticism/challenge.

Every continent has it’s favourite sport and league.

Are you in Asia? Then it’s badminton, basketball and cricket.
Soccer (not my favourite sport but still) is huge almost everywhere except N America and Asia.

Maybe soccer is fixed sometimes, but I do not believe MLB/NBA/NFL are.

MF

#110 Tudval on 10.19.16 at 11:07 am

If there’s going to be any correction in the GTA, it will be short and shallow. Rates raising in the next 2 years? Perhaps a little, but pay attention to the CB’s language. Both in the Feds, BOE you can bet BOJ, ECB and BOC will follow the trend, are basically saying they will stay behind the curve. That’s all you need to know. Borrowing all you can at 2% to invest in real assets is a no-brainer in this context and it’s the reason our gubernment is trying to put obstacles to prevent you from taking advantage. Which means, if they are successful (IF) it will be just a temporary victory – look 3-4 years down the road and everything will be peachy again. There is no reversal on pressures on RE in highly desirable locations in our lifetimes. Those who can qualify at the new arbitrary test rate set by the gubernment will be the big winners.

#111 SI2K on 10.19.16 at 11:23 am

I don’t think this will hit the GTA ‘burbs hard unless millennials happen to have an extremely low birth or elder care rate, and we know for sure they won’t have the latter. There’s all this discussion going on about families in apartments. It may work in Europe, but no one takes into consideration the concurrent factors specifically affecting Toronto: 3/4 of parents can’t find affordable child care, there’s rampant unchecked use of MJ in apartment buildings, terrible apartment stock in general, no school buses to speak of, inaccessible transit and roads, and a collapsing school district. Millennial families with elders, children, or disabilities won’t stay unless most of this is cleared up right away. This is the tide hitting Hamilton, KW/Guelph, Brantford, and Oshawa right now, and mark my words it will increase unless Gen Y is mainly infertile.

There are always these comparisons to NYC and London, which, culturally and economically, we’re not, and when the same thing is happening in both those cities anyway.

-Xer

#112 John Smith on 10.19.16 at 11:32 am

From November 30th, the stress test will apply to everyone (including those with over 20% down-payment)

http://www.lesaffaires.com/mes-finances/immobilier/ottawa-etendra-les-nouvelles-regles-hypothecaires-a-tous-les-acheteurs/590913

#113 Prairieboy43 on 10.19.16 at 11:36 am

Depleting the Norwegian wealth fund.

http://www.zerohedge.com/news/2016-08-29/norway-raiding-sovereign-wealth-fund-cover-government-expenses

////////////////////$$$$$$$$$$$///////////$$$$

Ray you should come to AB. Drive don’t fly. Visit Canada. I know it’s hard for Eastern Canadians to drive north of Toronto. However for those that due, it will be rewarding.

//////$$$$$$$//////$$$$$$///////:):):):):):):):):):)

#97 Ray Skunk on 10.19.16 at 8:50 am
#93

Another one with the Norwegian Sovereign Fund.

When Norway has to send equalization payments to the rest of Scandinavia, then you can perhaps compare.
How many hundreds of billions have QC and the east coast sucked out of AB over the past few decades?

I say this as no big fan of Alberta, I’ve never even been there.

#114 Smoking Man on 10.19.16 at 11:42 am

CNN live in Vegas talking about the sting op where it’s quite clear the DNC pays thugs to be disruptive at Trump relies.

Amazing how the panel try to down play it.

Listen to the croud after Trump’s plane lands in Vegas. Near the end of the clip.

https://youtu.be/irqLMTg-f_U

Bet Accordingly

#115 conan on 10.19.16 at 12:17 pm

Re: 25, 87
Return of principle to limit taxation on income is part of the pension legislation domain.

So in my experience, this is best achieved using those products. So , IPPs aka individual pension plans. Anything with an insurance wrap that also has the blessing of Rev Can. They police this stuff. Don’t F with them.

#116 Noel on 10.19.16 at 12:23 pm

50k a year is menial?! You’re a real man of the people there Turner.

Living in the GTA, it is well below average. — Garth

#117 pBrasseur on 10.19.16 at 12:31 pm

#104 Renter’s Revenge!

Albertans may not ave paid a sales tax, but since equalization program was put in place they have transferred what amounts to hundreds of billion to the rest of the country

#118 Steve M on 10.19.16 at 12:38 pm

“Leafy urban enclaves or detached houses a short haul from downtown are not going to lose 40% of their value.”

As I post every time this gets talked about, it certainly seems that they went up by a factor of 1/(1-0.4) since the time that people have been thinking it might be a bad idea to buy them because they’ve been going up too much.

#119 CJBob on 10.19.16 at 12:56 pm

#67 Mark on 10.18.16 at 10:28 pm
Nope. Totally irrelevant to what I suggested. Stop pretending you are an advisor. — Garth
_______________________
Actually irrelevant is pretty good for Mark. Usually what he posts is completely wrong. This is an improvement.

#120 Context on 10.19.16 at 1:12 pm

#110 Tudval:- Should I buy a home in Toronto now, and if so, which area do you recommend? Thanks so much for your informed analysis as am making notes. Now if you forgot something important will be checking back soon.

#121 cAndy LanD on 10.19.16 at 1:15 pm

reach for the stars dude. why doesn’t she put it in a non-registered investment account averaging 16-17%?

#122 jess on 10.19.16 at 1:17 pm

Breaking the Black Box
How Machines Learn to Be Racist
by Jeff Larson, Julia Angwin and Terry Parris Jr., ProPublica
October 19, 2016

This is the fourth installment in a series that aims to explain and peer inside the black-box algorithms that increasingly dominate our lives.

To illustrate how sensitive AI systems are to their information diet, we built an AI engine that deduced synonyms from news articles published by different types of news organizations. We used an algorithm created by Google called word2vec, that is one of the neural nets that Google uses in its search engine, its image recognition tool, and to generate automatic email responses.

We trained the synonym picker by having it “read” hundreds of thousands of articles from six different categories of news outlets:

Try it for yourself here.

https://www.propublica.org/article/breaking-the-black-box-how-machines-learn-to-be-racist?word=Trump

#123 Polls R Phake on 10.19.16 at 1:46 pm

#DRAINTHESWAMP

look it up

#124 T.J.BONES on 10.19.16 at 1:57 pm

DELETED

#125 Victor V on 10.19.16 at 2:02 pm

Bank of Canada warns Ottawa’s new housing rules will hit economy

http://www.bnn.ca/bank-of-canada-warns-ottawa-s-new-housing-rules-will-hit-economy-1.588058

#126 crowdedelevatorfartz on 10.19.16 at 2:10 pm

@#104 renters revenge
“How enthusiastic are Albertans about paying a 25% sales tax so that their NDP government can build the Heritage Fund back up?”
******************************************

Well. Perhaps ANY type of sales tax would be better than perhaps all that Conservative govt “hocus pocus” bragging that there was “no sales tax” when all they were doing was dipping into the now nearly defunct Heritage Fund.

They just pretended to be fiscally responsible……..and now Alberta has no money stashed away, a tanking economy and a new govt that will be forced to implement what the Cons should have years ago…..
Lets just see if the next Conservative govt repeals a provincial sales tax…..I highly doubt it.

#127 TurnerNation on 10.19.16 at 2:26 pm

NO rate hikes anytime soon. It’s a sick game like ‘duck and cover’ they are playing. This is war.

#128 chopstix on 10.19.16 at 2:34 pm

cutest pic…ever…kudos garth…also love the 4 kinds of labs…last pic in the 4 square was of meth lab in bc representing a zanny looking dog ‘wazzaup!!’

#129 Graeme on 10.19.16 at 2:48 pm

Hey whoa. “return-of-capital distribution” ?

What is this magical thing you speak of ??

Is it tax free?? LOL

#130 Mr. Frugal on 10.19.16 at 2:57 pm

#114 Smoking Man on 10.19.16 at 11:42 am
CNN live in Vegas talking about the sting op where it’s quite clear the DNC pays thugs to be disruptive at Trump relies.

Amazing how the panel try to down play it.

Listen to the croud after Trump’s plane lands in Vegas. Near the end of the clip.

https://youtu.be/irqLMTg-f_U

Bet Accordingly

________________________________________

Democrats are pissed that the Russians interfering with the U.S. election by leaking documents which prove that the Democrats are rigging the U.S. election. Then we get video evidence in which the Democrats openly admit that they are rigging the election and starting riots at Trump rallies.

So of course the Democrats try to discredit the undercover investigator that broke the story. My bet is on Trump. I wonder how Hillary will look in stripes. Maybe she will get a guest appearance on Orange is the New Black.

#131 chapter 9 on 10.19.16 at 3:04 pm

First off Alberta is a province and not a country. We don’t get to keep all the wealth we generate in this province. One of the biggest reasons is we are part of a federation called Canada. Most of our tax revenue goes to Ottawa and then doled out for social,health, education programs in Quebec, the Maritimes and the rest of Canada. It’s called federal equalization program which Quebec receives nearly $10 billion a year.
How much cash has flowed out of Alberta to Ottawa, between 2000-2014, on a net basis, Alberta individual and corporate taxpayers shipped an estimated $200 billion-plus to Ottawa less what the feds reinvested here.What are we seeing now from the provinces that have benefited immensely from Alberta’s oil wealth, they are opposing new oil pipelines which is jeopardizing Canada’s economic future. It is disappointing that we tolerate this crap!!

#132 EB on 10.19.16 at 3:09 pm

“Openly supporting Trump seems to be a big taboo, a cultural sin until a wink and a nudge open them up.

I can not see how Trump will not take it in a landslide.”

I’m still rating it as 80% likely for Clinton, but I feel like there’s a nontrivial chance of a Reagan surprise baffling the elites. They really have no idea how they’re presenting to the groundlings these days. The sheer arrogance and entitlement of Clinton is like fingernails on a blackboard to many.

It’s not like the grownups and the Shadow Government won’t keep President Trump in line in any case.

#133 LP on 10.19.16 at 3:20 pm

#116 Noel on 10.19.16 at 12:23 pm
50k a year is menial?! You’re a real man of the people there Turner.
**************************
Menial is usually a descriptor of the work, not of the compensation. Used that way it’s insulting in this instance. Drapers combine science, art, mathematics and manual dexterity in producing work worthy to be hung in someone’s home.

#134 Dups on 10.19.16 at 3:45 pm

Hey Garth,

When are you going to release APPs for smart devices? About: Belfountain General Store, Your Financial Website, Greaterfool etc?

It is time don’t you think?

#135 Dee on 10.19.16 at 3:49 pm

Looking forward, it seems difficult to envision long term returns of 6-7%. How are these returns estimated or come up with?

#136 isuckless on 10.19.16 at 4:00 pm

#109 MF
I agree with all your comments except the last.
Too much money is in the game and essentially nobody gets out of the circle – look at soccer leagues where two last teams get kicked out.
Why this does not happen in NA traveling entertainment circuses (corruption will became the norm -now we have only fixing)?
Games are fixed openly – just sometimes observe how teams play when they lose.

#137 james on 10.19.16 at 4:07 pm

#114 Smoking Man on 10.19.16 at 11:42 am

CNN live in Vegas talking about the sting op where it’s quite clear the DNC pays thugs to be disruptive at Trump relies.

Amazing how the panel try to down play it.

Listen to the croud after Trump’s plane lands in Vegas. Near the end of the clip.

https://youtu.be/irqLMTg-f_U

Bet Accordingly

……………………………………………………………………

Listen to the crowd my naive little man. Crowds are like sheep, they follow the leader good or bad.
Hitler’s “rise” can be considered to have ended in March 1933, after the Reichstag adopted the Enabling Act of 1933 in that month. President Paul von Hindenburg had already appointed Hitler as Chancellor on 30 January 1933 after a series of parliamentary elections and associated backroom intrigues. Looks like Trump is convincing the masses to follow him into the depths of iniquity.
https://www.youtube.com/watch?v=FGVBn_3EjmE
https://www.youtube.com/watch?v=EV9kyocogKo

#138 the other white meat (pork) on 10.19.16 at 4:14 pm

#40 Jenny

That’s not an “article”, it’s a blog post by an imbecile with a heavy bias toward the Millennial whine du jour. A numbers person, such as a financial advisor, should have sussed out the massaging of the statistics he used right away. The sad part is that he probably got a thousand Facebook “likes” from indebted basement dwellers with Communications or Women’s Studies degrees.

#139 drydock on 10.19.16 at 4:16 pm

69 Smoking Man on 10.18.16 at 10:45 pm

Nope. Totally irrelevant to what I suggested. Stop pretending you are an advisor. — Garth

If he ever gets a fan base that gets crushed. It’s your fault, your obsession with free speech. That’s why I wear flip flops vs cowboy boots. Toes are the antenna to the UCC. It’s in the manual.

………………………………………………………..
Yeah flip flops man , i don’t know.
Why not switch to sport sandals?

#140 SMOKING MAN'S WIFE's BOYFRIEND = JAKE on 10.19.16 at 4:18 pm

Hillary Clinton will be the next President – AND – for probably TWO mandates.
Voters are stupid and clueless. Therefore Hillary will win. If there were any doubts watch the debate tonight…

#141 Tudval on 10.19.16 at 4:36 pm

SI2K – “Comparisons with NY and London”? Well, we’re far from NY and London prices anyway, not even half way there, so sure, take them with a grain of salt.

pBrasseur – Do you really believe all that oil below belongs to born and raised Albertans? Is any of it under your property? And even if it was, you know you own just to about 3 ft depth, right? Most of the transfers were in the form of royalties. Transfers from income tax are only a result of structurally lower unemployment rate (think of the reasons why), you DO NOT, as an individual, pay any additional income tax for living and working in Alberta vs anywhere else.

#142 thirtysomething on 10.19.16 at 4:46 pm

I think what Garth has been preaching to us for the last few years is actually happening.

Vancouverite here and my 30 something age group has been priced out of the market for about 10 yrs now.

The few friends who do own condos recently upgraded to a townhome this past month. Put their North Van condo on the market a month ago for 625k thinking they’d have a bidding war. Crickets. Dropped it to 615, and this week 595k. 3 other units now for sale in the exact same building. Got an offer for 572k and settled for 590k.

At the same token, he spoke to his real estate agent and his townhome just dropped 40k in value in the past month since his purchase.

He’s one unhappy camper.

#143 Context on 10.19.16 at 5:05 pm

The baker in Etobicoke phoned me today about the cake preparation for the Smoking Man. I told him to make it a Cremeschnitte Cake and to have it ready for the 9th of November.

#144 Anna on 10.19.16 at 5:45 pm

These mortgage stress tests are a joke, the average Canadian buyer is not using a CHMC insured mortgage today – so it does nothing. People like this are the ones driving the whole she-bang.

#145 traderJim on 10.19.16 at 5:46 pm

I might have to change my belief that Hillary will win.

#DrainTheSwamp is just so damn good, it could win the election : )

Seriously though, WikiLeaks today ‘timestamped’ the latest poll results showing Hillary ahead by 6. Only reason they would do that is to compare it to the result once they are done exposing her.

Off to walmart for more popcorn, this is getting gooooood

#146 Penny Henny on 10.19.16 at 6:00 pm

#59 Smoking Man on 10.18.16 at 9:56 pm
Peter

Talk to your mom and go see Garth, I met him, he’s not that scary in real life.

The burbs will get crushed in a real estate meltdown. Look at Niagara Falls, no jobs no economy yet wild speculation is sending prices through the roof.
////////////////////////////////////////

FYI Smokey.
Niagara region climbing because many GTA’ers are buying houses here. Also you can buy a house for $270,000 and easily get $1400 per month rent, plus utilities.

#147 Penny Henny on 10.19.16 at 6:10 pm

No captial gains tax owed on the value of the house today. Capital gains tax only due on appreciation after she starts to rent.-Garth
/////////////////////////////

what if the house sat empty??
Sir Garth?

#148 espressobob on 10.19.16 at 6:24 pm

Still don’t understand why so many individuals have a fixation with brick and mortar? Must be a status symbol thing? The rising operating costs alone are insane.

Those that bought way back in the day could sell a tax free asset and live the life of Riley.

Cash flow and liquidity equals freedom.