Lessons

A year ago a single share in Home Capital traded on Bay Street at $39. Today it was $8 – and this was actually a good day for the failing subprime lender. There are several lessons in this story which this week gripped the mortgage industry, the financial sector, regulators and depositors.

First, if you need another good reason not to buy individual stocks, here she be. Retail investors never actually know what’s going on inside the boardroom, despite all the regulatory requirements about disclosure. Home Capital was an investment-grade entity a few months ago, and this week had to take a $2-billion loan at outrageous interest just to keep the doors open. The stock collapsed almost 80% in a year, and 64% in a single day.

So while this is a loser company with a failed management team that has been shorted to death by people betting against our housing bubble, it still has hundreds of thousands of investors with shares in their RRSPs and TFSAs – where losses cannot even be written off. Lesson: diversify. Own the whole market through an index-based ETF and never think you are smart enough to pick winners. You’re not.

Second, Home Capital runs Home Trust and Home Bank, and has billions of savers’ money in its vaults. Well, actually, it doesn’t have any (or much), since it was all given out in the form of mortgages to people too financially dodgy to qualify for loans at the banks. Most of the $13 billion in GICs is locked in, so depositors cannot get at their money to move it. But the funds in high-interest accounts continue to bleed away – another $300 million yesterday.

Home responded by upping its rate on deposits by a half a percentage point which these days is big money. This move promises to makes its balance sheet a little stinkier than it already is, but the outfit has little choice. All that money being removed needs to be covered. Why did so many people entrust billions and billions to a company now held together with bungee cords? Because it was paying a little more interest than the Big Five on deposits.

Lesson: Know where you’re putting your cash and never be seduced into handing over money because of a pathetic premium on the deposit rate. The more you receive in interest, the more risk you embrace (that’s why they pay more). Yes, we have deposit insurance in this country, but the limits are constrained and the process lengthy. Nobody needs that stress – especially risk-averse, wussy investors who would opt for brain-dead, illiquid GICs in the first place.

Third, the collapse of Home Capital (the carcass is now for sale) and the spray it got all over other subprimers like Equitable Trust (owner of EQ Bank) won’t immediately result in the GTA or YVR housing bubbles being shot from the sky. But it hurts.

This is one more nail in a coffin of inevitability. Ontario’s 16-point plan last week to piddle on the housing fires was one. BC’s election, resulting (possibly) in an NDP government, will be another (God help us). Rising interest rates, falling taxes and protectionism in Trumpland will be another. Nosebleed prices, a 33% one-year appreciation and buyer shock in Toronto yet another. A surge in listings as more people understand the party is ending, a big one. And the implosion of the country’s largest Alt lender the latest nail.

Lesson: This is a dangerous time to buy and a fading chance to sell. In fact, you may already be too late. Bidding wars are winding down, realtor auctions resulting in no bids, asking prices being moderated, buyers backing out and the media turning critical. Of course, most people have yet to clue into the change, and we’ll continue to see lineups for new developments or pre-sale condos plus competition for scarce homes in demand areas. But if you don’t need to purchase, wait. If you really need to sell, pounce. In both cases, be aggressive.

We may forget about Home Cap in a year or two. But we will not avoid the consequences. Might as well learn something.

137 comments ↓

#1 AK on 04.28.17 at 5:52 pm

“Despite all the regulatory requirements about disclosure”
——————————————————————-
I wonder If the regulators don’t want to rock the boat, since the Real Estate sector is the only one performing well over the past 5 years.

Mortgage fraud is probably worse in this country than It was in the U.S. during the GFC.

#2 The Arctic Gringo: Qalunaaq on 04.28.17 at 5:58 pm

Every year I build my own igloo – no contractors, no mortgage, and my 4G never fails.

#3 AK on 04.28.17 at 6:03 pm

“A year ago a single share in Home Capital traded on Bay Street at $39”
——————————————————————
I sold my shares on April 29, 2016 for $37.50, when I saw Marc Cohodes on BNN. My average price was just over $30.00, so I was very lucky, thanks to Marc.

#4 Pillboy on 04.28.17 at 6:07 pm

I found out long ago that my tax slip for interest from the pittance of interest in my savings account was issued by TD Mortgage Corporation. My true liquidity is kept in my brokerage account because it cannot be used to to fund others’ speculative mortgages, and is better insured. Those tax slips are issued by TD Waterhouse.

#5 wonderwoman on 04.28.17 at 6:11 pm

First!!!

#6 Mark on 04.28.17 at 6:11 pm

If GTA RE really appreciated 33% last year, why are we even having this discussion? HCG should be able to sell every last one of those mortgages, pay everyone off, and still have a few billion in equity to distribute amongst their shareholders.

But what if GTA RE didn’t really appreciate 33%. What if it didn’t appreciate at all, and we’ve all (well most of us) been taken for fools. For reading newspapers that basically copy Realtor press releases verbatim without the sort of critical analysis and discussion that formerly came from our news media.

Those pre-sale condo line-ups, didn’t we find out that those were concocted and fabricated in Vancouver? By developers who were offering locals a little bit of money to stand in line? Or staged balloon rides with “Chinese” that were actually Canadians hired to play the part? A most disgusting marketing tactic indeed, to play upon the racial insecurities that are harboured by some Canadians.

The sector is just one heaping steamy mess. And usually cockroaches don’t just occur one or two at a time.

#7 Party on Garth on 04.28.17 at 6:13 pm

Household credit for Canada to the end of March, 2017 from the Bank of Canada:

http://credit.bankofcanada.ca/householdcredit

Business credit for Canada to the end of March, 2017 from the Bank of Canada:

http://credit.bankofcanada.ca/businesscredit

#8 Debtslavecreator on 04.28.17 at 6:22 pm

Lights out Canadian economy
The illusion of wealth and “growth” is going to quickly turn into a dramatic economic crisis that will leave millions of Canadians with nothing to show for decades of work. I have recommend to countless fellow Canadians that record low rates are not to be used to max out leverage against an illiquid asset trading at all time inflation adjusted highs
Use record low rates to help your mortgage balance come down faster
Many Canadians have been using their imaginary equity to create real contractual obligations that need to be paid from future unearned income with interest – in s record junk debt bubble incomes temporarily rise far in excess of the underlying economic capacity and incomes inevitably stall and drop once the junk debt bubble comes to an end
Hence all record debt bubbles are always followed by devastating economic problems
I expect a very difficult 5-10 year stagflationary depression as the system naturally tends to eliminate the excess debt through deflation but then massive monetary and fiscal interference by the authorities help to debase our currency and the cost of living especially taxes continues to escalate wildly
This is the tip of the iceberg in what ought to be a debacle of an economic crisis putting to rest illusions of Canadian superiority

#9 Livin Large on 04.28.17 at 6:25 pm

The next 5 years aren’t going to be pretty. Time for me to look across rhe big pond for some seaside bargains to wait it out.

#10 Ummmm on 04.28.17 at 6:33 pm

What Garth ain’t telling you is that Home Capital is leveraged 10 to 1. That means like all banks they are collecting interest at 10 times of what they are giving out and collecting interest on morgages on money they lent out that actually doesn’t exist. On 90% of all mortgages they created the money out of thin air!!

If that isn’t fraudulent than what is! Government should have 100% control of Money supply!!!!!

#11 I'm Not Poloz on 04.28.17 at 6:36 pm

Poloz told me that when he cuts interest rates to 0.25% on May 24, 2017, his advice is to sell your real estate from Toronto and invest it in the Big 5 Banks in their High Interest E-savings account which yield at maximum 0.55%.

Poloz said that we should be thankful that we’re earning 0.55% interest, minus bank fees, while the Loonie is losing value to the USD, Pound and Euro.

Poloz said that he will cut interest rates to 0.00% to lower the Loonie from the present 73c, down to 50c in order to operate Canada “at full capacity”.

We have a depreciating Loonie, and a real estate bubble, but Poloz advises us to work for free to earn a measly 0.55% interest on savings, under a projected 50c-70c loonie.

Poloz claims that there is no inflation in Canada, but real estate in Toronto is rising at 30% per year, rents are up, a tin of seafood which cost $0.99 in 2014 is now $1.88 on Sale at No Frills in Ontario.

#12 common sense on 04.28.17 at 6:37 pm

Nice 0.7% GDP # today out of the USA, likely lower when revised.

Go to cash anyone?

#13 JSS on 04.28.17 at 6:37 pm

So what happens to HCG’s dividends? is it still paying out, or have they eliminated it yet?

#14 When Will They Raise Rates? on 04.28.17 at 6:39 pm

#6 Mark on 04.28.17 at 6:11 pm

But what if GTA RE didn’t really appreciate 33%. What if it didn’t appreciate at all, and we’ve all (well most of us) been taken for fools

——————————

This site has all of the selling prices in the GTA going back 365 days:

http://watch.ohmyhome.ca/#/HouseSold

^ Compare a year ago to today for comparables on the same street, come back here and report your findings.

#15 Pete from St. Cesaire on 04.28.17 at 6:40 pm

‘Why did so many people entrust billions and billions to a company now held together with bungee cords?’
———————————————————-
Everything now is held together with bungee cords, but there is no percentage is admitting such and there is no parallel system (yet).

‘Lesson: diversify.’
————————————-
You’re not listening. Refer to statement above; note the word “everything”.

#16 Frank Simpson on 04.28.17 at 6:42 pm

I would be more worried about another stock market crash.

The great depression brought out deposit insurance in the U.S. and banks, financial institutions abuse the system.

The real fact is they don’t want to compensate anyone for a reasonable 2%+inflation which is minimum 3.5% to 4.0% these days for bank deposits, GIC’s.

Also, deposit insurance CDIC back in 1967 was $20,000 and adjusted for inflation should be minimum $145,955.

This is based on Bank of Canada’s inflation calculator.

#17 crowdedelevatorfartz on 04.28.17 at 6:46 pm

“BC’s election, resulting (possibly) in an NDP government, will be another (God help us)…..”
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

I’m sorry Garth but a lot of normally sane people cant stand the thought of 4 more years of smirking, vapid one liners from Christy Clark.
She natters on about “a balanced budget” while the “off the books” future financial commitments (BC Hydro, BC Ferries, Site C Dam, LNG, and on and on and on) balloons to a 130 billion debt… All while taking $50,000.00 per year in cash “top ups” from her Party.
No
The stench is overwhelming….and for me to say that you know its bad…..
If it takes 4 years of NDP politically correct social dithering to force the reset of the Liberal Party to something approaching fiscal normality….thats the price we’ll have to pay.
NDP….one term and then banished for another 15 + years

#18 Long-Time Lurker on 04.28.17 at 6:50 pm

It’s amazing. Canada had it’s own subprime mortgage crisis and (2) billion dollar bailout and nary a whimper from the media or the experts.

“We almost went into meltdown.”

“Eh? Is that that cheese they put on poutine?”

#19 Joe on 04.28.17 at 6:50 pm

Is Tangerine (backed by Scotia) safe, they offer 3.21% over a 3 month term for new deposits. I rotate my funds between my wife and my account to take advantage of these offers every 3 months.

#20 fancy_pants on 04.28.17 at 6:53 pm

Ya should have bought a home instead of home capital. I have particularly sharp hindsight vision.

#21 Mike on 04.28.17 at 6:53 pm

….This blog, and most readers including me have been saying housing crash for last 4 years – All wrong.

Housing prices in Canada go UP all the time on average…

#22 AB Boxster on 04.28.17 at 6:54 pm

‘especially risk-averse, wussy investors who would opt for brain-dead, illiquid GICs in the first place.’

—————————————-
You continue to out-prose yourself on a daily basis Garth.
Makes one chuckle, despite the depressing topic of debt and upcoming housing implosion.

#23 Vundo on 04.28.17 at 6:55 pm

http://www.vox.com/2017/4/28/15435048/fyre-fest-explained-ja-rule-social-media-disaster
Today’s lesson is not to trust models luring you to an island with songs.

#24 D C on 04.28.17 at 6:56 pm

Ok, but I’m one of those people with a Home* GIC in my kid’s RESP (hence my question about fixed income options a few weeks ago when you wrote about this issue). Should I be concerned…?

#25 old gringo on 04.28.17 at 7:08 pm

My banker sent me this notice today!

Hola mi amigo
Buenas tardes,
You have a maturing CD Monday, the rates to renewal are:

6.16 % 70 days
6.44 % 120 days
6.58 % 210 days
6.87 % 360 days

#26 I'm stupid on 04.28.17 at 7:09 pm

At what point is Ontario in trouble? $312 billion is a big number.

#27 Nonplused on 04.28.17 at 7:17 pm

Isn’t this sort of how the US real estate “collapse” started? Trouble in the subprime market that was “contained”?

This time next year the politicians are probably going to be trying to find ways to prop up the real estate market. They always do just the wrong thing at just the wrong time.

#28 Smoking Man on 04.28.17 at 7:33 pm

This is my take on the market

Bidding wars fizzle. A week a go Wynee said she will be bringing in measures that will put an end to the practice. So all the buyers took a q from that and are sitting.

The sellers wanting to take advantage of the practice are listing in groves. No bids.

Looking at comparables I figure this shit bungee would be a good deal at 1.1 million. However you got to be realistic at the shift in the marked. No point keeping it at 900k hoping for a war.

I re priced it at a Million and some smart bugger will realize they are getting a deal.

All those people pricing there homes 500k below market trying to get a bidding war going, it ain’t going to work. The budders if any will low ball.

My advice if you got to sell be honest, price 100k below current market and stay firm. Buyers aren’t stupid.

GTA has a housing shortage with more and more people coming here for good paying jobs. Posative population growth. In 2008 usa the cities that took the biggest hits where in negative population growth.

This is a pause for a few months I’m still calling 2018 peak.

Most cant see it. Nor could they see Trump in the white house.

Dr Smoking Man
PhD Herdonomics

#29 crdt on 04.28.17 at 7:38 pm

Just a flesh wound, nothing to see here. It seems they suddenly can’t sell the bullsh*t loans they made to people who should have never been approved. No matter, everyone involved already got paid, millions were made, luxury car leases signed, toys bought. Oops, I suppose these, dare I say, sub-prime borrowers who officially did not exist up until two days ago will have to try their luck at the old unfriendly banks to see if they can stay in their ill gotten house financed with their powerful bullsh*t. A friend was so impressed a few years ago when the traditional banks wanted him to come to the branch to apply, whereas, the sub-prime guys rolled up to the house and made it so much more pleasant. Wonder if the fabulous Canadian banks with their ultra prudence can stay honest and not lie to the peeps to keep the party going long enough for most of them to exit filthy and rich…

#30 Smoking Man on 04.28.17 at 7:45 pm

There will be no crash. We are going to go back to a normal market where you list it a bit over what it’s worth and fight it out.

#31 Dan.t on 04.28.17 at 7:46 pm

#11 I’m Not Poloz
haha, I know you are being over dramatic but you are not far off. Funny thing is, tell normal average Canadians the same thing and they will look at you like you have 4 eyes!

What? Interest rates?, What? Dollar depreciating? What, housing can go down? What? But the bank said I’m richer than I think?

I guess now in hindsight, the bank and the powers that be, had to do what they did. Governments fear deflation more than anything so they decided to make selling houses to each other the number 1 business in Canada. Kick the can down the road…I guess they didn’t think Canadians would take the ball and run right outta the stadium and then some. Crap now what?

2 trillion in debt, unaffordable housing, massive debt, rampant speculation with free (and often fraudulent loans), speculators who can’t do math, but who cares when you expect double digit returns year after year after year…cap rate, cash flow positive/negative, What? f**k who cares!.

What will they think of next?

It’s gonna be a bail out of mass proportions- I just know it. Those who were prudent and didn’t drink the cool aid will be get screwed and those reckless and greedy will cry foul and get bailed out. Just like home Capital…no other choice. Otherwise the lie gets exposed and it’s lights out.

That is the world we live in now. Sad but it won’t surprise me.

USA Great Financial crisis, like 2 people went to jail. The rest a slap on the wrist. Home Capital, nothing will happen. Fraudulent real estate brokers, dealer ect… no biggie.

As long as prices are still going up, all good, But when crap hits the fan, those heavily in debt will cry foul, look for gov bail out and boo hoo all over the place.

It’s always someone else’s fault. Just like that stupid article about the buyer who (boo friggen hoo) had to buy his 700k+ townhouse without any conditions, no inspection, all while bending over and holding his ankles because, boo, hoo, the market is so hot, I had no choice.

Apparently, that is news in Canada. Page 2, right after near nuclear war with the nut bar that drinks too much soju in Asia. And follow up on housing market on page 3.

#32 TurnerNation on 04.28.17 at 7:51 pm

Is the after party on May 13th at Southside Johnny’s?
(I like only two big name domestic brews: Labatt 50 and Molson Export. Am I an old man?)

M41ON

#33 Dan.t on 04.28.17 at 7:51 pm

Forgot to add

“It’s always someone else’s fault. Just like that stupid article about the buyer who (boo friggen hoo) had to buy his 700k+ townhouse without any conditions, no inspection, all while bending over and holding his ankles because, boo, hoo, the market is so hot, I had no choice.”

Only to find out his foundation was cracked and about 20 other things in the build were flawed and overall the construction job sucked. Now he deserves his money back because he was forced to over bid and couldn’t do his own due diligence.

It is a great world when you can screw up, blame others and get bailed out.

#34 BC_Doc on 04.28.17 at 7:56 pm

#25 D C on 04.28.17 at 6:56 pm
Ok, but I’m one of those people with a Home* GIC in my kid’s RESP (hence my question about fixed income options a few weeks ago when you wrote about this issue). Should I be concerned…?
——————————————————————–

Half a life-time ago, I spent a year working for the FDIC across the border in the United States. When I worked there, we were the folks who examined banks and either closed or merged them with other banks if they became insolvent. If you were a depositor, as long as you were under the $100k limit (now $250k limit in the US), the pay-out process was quick and painless. Garth states that the process for paying out deposits and interest from a failed bank here in Canada is “lengthy” which I find surprising as one of the roles of the CDIC is to encourage depositor confidence and prevent nasty runs on distressed banks like one used to see a century ago.

@D C– your child’s deposit is back-stopped by the CDIC and the Canadian government. Even if Home Capital is shuttered by the bank regulators, your child’s deposit will be fine. I wouldn’t lose a minute of sleep over it.

#35 Tulips on 04.28.17 at 7:58 pm

#22 Mike on 04.28.17 at 6:53 pm
….This blog, and most readers including me have been saying housing crash for last 4 years – All wrong.

Housing prices in Canada go UP all the time on average…
—————————————-

You are wrong – they definitely do not go up all the time. Looking back it’s not hard to find multi-year periods over which housing went down by double-digit percentages in major locations in Canada. It can and it does happen whenever the price of any asset including housing goes far above utility value.

Ask anyone who owned a house nearly anywhere in the USA during it’s last crash. The masses thought there was no direction other than up for houses there too. Personal finances were decimated by the crash, and the pain doesn’t just go away when the price drops end. Just ask the guy who’s still forking over huge payments because he paid 800K for a place in 2006 with a neighbor who paid 400K in 2009 for the similar place.

You should talk to more Americans about the reality of housing bubbles and you may change your tune. Nobody knows exactly when, but we’ve set the stage for a major crash of our own by letting it get this far beyond rational. The less affordable all these unspecial houses become, the more likely the crash is near.

#36 CDIC check on 04.28.17 at 8:01 pm

I called the CDIC office in Toronto and the rep said investors would be covered within days of HomeCap insolvency. Call was made when the news broke. Insured on account / name/ registered basis on amounts 100k or less.

#37 Mark on 04.28.17 at 8:02 pm

What Garth ain’t telling you is that Home Capital is leveraged 10 to 1. That means like all banks they are collecting interest at 10 times of what they are giving out and collecting interest on morgages on money they lent out that actually doesn’t exist. On 90% of all mortgages they created the money out of thin air!!

*sigh*, that’s not true at all. Home (as well as every other bank) has to borrow, from shareholders, depositors, the bond market, the commercial paper market, etc., every dime they in turn lend out. They do not conjure money out of thin air. This bank run they are experiencing is proof of that — proof that they actually need to be funded, in order to turn around and make mortgages and meet whatever other obligations they have to their suppliers.

Now someone will probably reply to my post right now, citing some Bank of England paper that states that banks conjure money out of thin air. The problem with that ‘paper’ is that they’re discussing the systemic effects of a leveraged banking system, not individual participants, such as your local bank. Its a highly academic paper intended for academics, and the context has no applicability to the situation that is facing that of HCG, or even individual banks that we interact with.

#38 BC_Doc on 04.28.17 at 8:06 pm

@DC:

From the CDIC website. Payout looks pretty painless.

http://www.cdic.ca/en/financial-community/Pages/protecting-your-deposits.aspx

Interestingly, RBC-DI is still flogging Home Capital’s GICs which as of yesterday were paying out 25bps above the next crappy non-bank bank. So much for moral hazard on RBC’s part– the banks always win and the taxpayer is always on the hook for the failure.

#39 Mark on 04.28.17 at 8:06 pm

“My banker sent me this notice today!
Hola mi amigo
Buenas tardes,
You have a maturing CD Monday, the rates to renewal are:”

Yeah probably in a currency which is expected to lose a few percent in value over the next few years. As is typical of most higher-rate currencies (the higher rate is compensation for depreciation!).

Housing prices in Canada go UP all the time on average…

1990-1995 disagrees with you in the GTA. The early 1980s disagrees with you in Calgary. Etc.

The real fact is they don’t want to compensate anyone for a reasonable 2%+inflation which is minimum 3.5% to 4.0% these days for bank deposits, GIC’s.

2%+ inflation? Where? Canadian inflation isn’t even 2%, and is trending lower.

Also, deposit insurance CDIC back in 1967 was $20,000 and adjusted for inflation should be minimum $145,955.

Or eliminated altogether, so people don’t pile into banks that pay higher rates of interest without considering the risk involved. And embrace things like diversification.

#40 steerage steward on 04.28.17 at 8:07 pm

Case study on high risk high return. Risk is not apertaied until it is too late

#41 Scully on 04.28.17 at 8:07 pm

#17 -crowded farts- I’m with you (well not in an elevator) – it’s time for Christy to go. I might regret that but I can’t take her autocratic, myopic agenda anymore. I wish a goat was running so I could vote for it instead of our current choices. I need a drink.

#42 Ace Goodheart on 04.28.17 at 8:17 pm

“First, if you need another good reason not to buy individual stocks, here she be. Retail investors never actually know what’s going on inside the boardroom”

This is just not true. I posted on here months before that stock tanked that it was going to take a fall. HCG’s share price collapse was predictable for months before it happened. You can look up my old post to confirm it.

This is not an example of why you shouldn’t hold individual stocks.

A damaged company has a predictable stock price collapse, with the collapse occurring months after warning signs began appearing. This is normal. Companies always do this. First warning signs, then a few months’ later, things fall apart.

#43 TrumpForTheAges on 04.28.17 at 8:22 pm

What does the abysmal US GDP number do to future rate inincreases? Looks like another year of 2% or less growth?

#44 jay on 04.28.17 at 8:23 pm

#27 Billions, trillions, its just more ions.

#45 Dr. Talc on 04.28.17 at 8:28 pm

Industry driven Scam alert:
The price of new electrical panels just doubled. Following the NEC in the US, the Canadian electrical code has just been ‘updated’ to put virtually everything in your house on arc fault breakers.( they cost 10 times as much, and trip 100 times as much) If you buy new, or upgrade your service you will pay more and make more trips to your panel to reset nuisance trips.
When corporations like Eaton, Schneider, GE, Siemens, Federal Pioneer etc. start bragging about how many lives they will be saving….watch your wallet.
there is more,,, strobe lights on your smoke co2 detectors, hope you’re not epileptic

#46 mitzerboy aka queencitykidd on 04.28.17 at 8:30 pm

https://youtu.be/tPmbRSier_o

no problem

#47 Doghouse Dweller on 04.28.17 at 8:37 pm

If a 1 year GIC @ 1.28 % is a brain dead wuss deposit .Then what would you call the Polozo GoC 1year bond @ .5 % ?

They’re both non-investments. But one is liquid. — Garth

#48 Smoking Man on 04.28.17 at 8:49 pm

#33 TurnerNation on 04.28.17 at 7:51 pm
Is the after party on May 13th at Southside Johnny’s?
(I like only two big name domestic brews: Labatt 50 and Molson Export. Am I an old man?)
….

Works for me. My preference is Brador does that age me. Back in the day. Tee top off the trans am. One hand on the wheel the other with an ice cold Brador with Super Tramp Cranked.

#49 Jason Sensation on 04.28.17 at 8:55 pm

#4 Pillboy on 04.28.17 at 6:07 pm
I found out long ago that my tax slip for interest from the pittance of interest in my savings account was issued by TD Mortgage Corporation. My true liquidity is kept in my brokerage account because it cannot be used to to fund others’ speculative mortgages, and is better insured. Those tax slips are issued by TD Waterhouse.

………..
Wrong brokerages loan out their free cash to fund other loan operations. Net interest income is a big portion of brokerage profit, more so than trading commissions for discount brokers.

It will be interesting to see if this turns into a liquidity crisis for non bank brokers

#50 traderJim on 04.28.17 at 9:02 pm

Anyone who is breathing who has a deposit or GIC with HCG will be scrambling to get that money out.

The ones who are locked into GICs will hold their breath until their GIC matures and they can grab their cash and run.

No way I can see that they can survive.

#51 meslippery on 04.28.17 at 9:05 pm

it still has hundreds of thousands of investors with shares in their RRSPs and TFSAs – where losses cannot even be written off.
——————————-
But profits can be taxed Humm. rigged?

#52 Doug t on 04.28.17 at 9:05 pm

Just like an iceberg- there’s more to worry about than is visible to the naked eye.

RATM

#53 Toronto Stinks on 04.28.17 at 9:05 pm

90% of Home Capital ‘s mortgages have been created by simply punching a number into a computer and creating money out of thin air. This is called leveraging in economics. With the $2 Billion they just recieved the can legally lend out $20 billion in new home loans since leveraging is set at 10 to 1.

That means they are collecting 29% INTEREST ON $2 billion!! So they are still making money (7%) after the 22% interest they are paying the pension fund.

Home Capital will be just fine!!!

Making interest on money Home Capital

#54 Smoking Man on 04.28.17 at 9:27 pm

Mind made up now.

Voting for Mad Max Bernier.
Soon to be a Drama teachers worst nightmare.

#55 yorkville renter on 04.28.17 at 9:28 pm

#34 – is that for real??? pathetic.

#56 Watch this! on 04.28.17 at 9:29 pm

Watch this interview. You will LOL so hard. I was in tears
http://www.bnn.ca/video/home-capital-not-a-risky-investment-for-us-hoopp-ceo~1111585

#57 Watch this! on 04.28.17 at 9:30 pm

Plus you will want to pull your money out or sell ASAP!

#58 toronto1 on 04.28.17 at 9:45 pm

#31 Smokie, your wrong dude, the fact your place is for sale is clouding your judgement

The herd’s mentality has shifted- its all downhill from here

Here are 3 anecdotal stories from my personal circle of friends. All occurred in the last few weeks

#1- An old friend of mine who lives in KW was one of the biggest RE perma bulls i have ever known, he owns 2 spec homes besides his primary residence and is partners in at least one other property i know of (he wanted me to go partners with him but i declined) anyway guy was telling me that KW SFH are going to 850 and then 1 million by next year – tru believer too. used to get monthly emails and txts about how i should buy, pictures of listings, how much he made last month etc..
he phoned me last week about a completely different matter, talk shifted to RE and he told me that the consensus between his family, other investors is that its over and going to get ugly- big crash in a year etc… (guy went form perma RE bull to perma bear in a months time) is listing his properties and hopes to make a modest profit.

#2. Was out two weeks ago for a buddies Bday- within that extended group there is guy, new to Canada, maybe 5 or 6 years, anyway another RE perma bull, last time i saw him was either end of Feb or beginning of March- was frustrated, got outbid on 2 different condos- was preaching buy now or never etc.. I ask him if he ended up buying one yet- guys starts rhyming off 1989 stats, says that this is the end, he is not buying for a while, this wont end well etc.

#3. At Easter this year, massive party as this year it was both Catholic and Orthodox Easter on the same day so i had the pleasure off running into the wifes extended family that we usually only see at weddings , mostly old school Italians with some Greeks, to my surprise the little old Italian ladies were all saying dont buy RE now, its at the top- prices have no where to go but down.

The herd is changing- expect more listings with the new rent rules announced this week by Wynne , expect more speculators that purchased in the last 3 years to sell as soon as they can, expect credit availability to dry up soon for all but the best credit score clients.

#59 NoHopeTown on 04.28.17 at 9:52 pm

Please tell me where bidding wars have dried up and deals are falling through, I’d like to know so I can go buy a house there. Anywhere within 2 hours east of Toronto it’s still madness. Recently a house that was listed for $825k sold for $810k. The deal fell through for whatever reason and they relisted for $849k, held off offers again and it just sold again for $890k. Things are still completely ridiculous and getting worse IMO.

#60 dakkie on 04.28.17 at 9:57 pm

CANADIAN HOUSING BUBBLE STARTING TO BURST! – Canada’s “New Century” Moment

http://investmentwatchblog.com/canadian-housing-bubble-starting-to-burst-canadas-new-century-moment/

#61 Smoking Man on 04.28.17 at 9:58 pm

#51 traderJim on 04.28.17 at 9:02 pm
Anyone who is breathing who has a deposit or GIC with HCG will be scrambling to get that money out.

The ones who are locked into GICs will hold their breath until their GIC matures and they can grab their cash and run.

No way I can see that they can survive.
….

Jimbo. I sniff a bail out. Librals are in power. They throw other people’s money at anything.

#62 Doghouse Dweller on 04.28.17 at 10:09 pm

They’re both non-investments. But one is liquid. — Garth
—————————————-

Liquid at a loss ,104.25 to buy and 103.53 to sell. Anyhow you have to keep your cash somewhere. Owning deadbeat government bonds with rates at 5000 year lows, not so savory.

That’s why anything that walks like a safe asset or quacks like a safe asset is going through the roof. But the lame ducks like Poloz and company can`t seem to grasp the concept..
Hell , even the guy who bought Smokie’s boat has figured it out !

#63 waiting on the westcoast on 04.28.17 at 10:10 pm

Mark… *Sigh*

Read and learn….

https://en.m.wikipedia.org/wiki/Capital_adequacy_ratio

#64 Mark Jagg on 04.28.17 at 10:16 pm

Great write up GarthTurner, all the signs of financial down fall have been apparent for the past 3yrs. Especially when it came to Over bidding, Government did nothing with the consumer protection act. The municipal Governments joined in on the cash grab opportunity themselves with reckless Mafia style increases in permits rates and others applications forms and implementing new property taxes structures…profit, profit, profit for the Government. Now, their pockets are full and decide to bring Crown Corparations & the economy down…Let’s think twice before we Re-Elect the same people again. I ran for Mpp and understand how the political system works. Mark Jagg

#65 OttawaMike on 04.28.17 at 10:19 pm

ETF’s are great for the bull market but what happens when stocks go sideways or flat for an extended period?
Then stock pickers end up ahead if they buy well.

Myth. The majority of stock investors crash & burn. — Garth

#66 jas on 04.28.17 at 10:29 pm

It is election time in BC. (I live here) but here is a thought folks for all:

1. I think, the law ought to be changed so that like the US president, no MP and no MLA can run more than two terms. Period. (these two winning terms may be consecutive or otherwise). With this idea, we can have new and fresh candidates and with them, fresh ideas will come. But will any party who forms govt. at federal or provincial level do it? Of course not!! And that is where we, the voters come in. Give it a thought folks.

2. How much is the maximum CPP one can get after working for 40 years in Canada? I guess it is around $1200/month. This is the Max and after 40 years of work.
Now look at MPs and MLAs, just by being an MP or MLA for two terms (and these may not even be full terms if election is called earlier by the ruling party to take advantage of the favourable political climate) they are entitled to some sizeable (I guess) pension !! Where is the fairness in the system? Will they reform it? Not at all. Again, we the voters must hold their feet to fire, Folks wake up!!

#67 Smoking Man on 04.28.17 at 10:29 pm

Turner Nation my response to you took me back.

Super Tramp… I’ve never been a Rudy on a train to no where half way down the line.

I’m Rudy now. I’ve convinced myself I’m a gonzo writer even though I’m not even close.

The brain if used the wrong way. Gets us in trouble.

That’s why nothing else matters.

Enjoy and crank it.

https://youtu.be/JSlXH7MLhd8

#68 Smoking Man on 04.28.17 at 10:46 pm

SJW this song may save your future.

It worked for me. Come punch me in the head, I won’t hit back inspite of that mirror in the room last night that thought it was better than me. @SMOKINGMAN THE PIC

On may 13th try and get a real education. You only get an hour with me, then the meter is on. Got no job.

https://youtu.be/n3Rzug1OWPU

#69 Smoking Man on 04.28.17 at 11:10 pm

When the machine farts you out its ass and spits on you for good luck. I knew that lose tooth, and the two grey hairs that I forgot to save off where going to be a problem. I saw it long ago via real music.

https://youtu.be/YLP0y-X4uYs

#70 HellYeah on 04.28.17 at 11:11 pm

@33 – (I like only two big name domestic brews: Labatt 50 and Molson Export. Am I an old man?)

Sadly, neither Labatt nor Molson are domestic anymore. Labatt is owned by Anhauser Busch (Belgian) and Molson is owned by Coors and incorporated in the US. Want a domestic brew? Go local, go micro.

#71 D C on 04.28.17 at 11:15 pm

Thanks @BC_Doc. Yes, I realize my GICs are covered through CDIC. I was more interested to hear your experiences and opinions re: timing. Garth’s comments about potential painful, protracted insurance claims were a bit worrisome. $5000 here or there isn’t going to limit my kid’s education, but it would be nice to know I’ll have opportunity to get it back in case things go sour.

@traderJim “locked into GICs will hold their breath until their GIC matures and they can grab their cash and run”… yes, you bet!

@Mark re: comments about penalizing GIC holders: GICs can be a part of a fully invested balanced portfolio. Why would you penalize my 30% fixed income in my investments, or my 70-80% in my kid’s RESP (for initial use within next 2 years)?

#72 JAN on 04.28.17 at 11:25 pm

We may forget about Home Cap in a year or two. But we will not avoid the consequences.

Who is we, homeowners or renters???

#73 BC_Doc on 04.28.17 at 11:51 pm

@D C– You’re welcome. If you have the time and are inclined, send a short e-mail to the CDIC (e-mail address was at the bottom of the link I attached earlier) with your questions about the process and timeline involved when it comes to paying out small depositors (<$100k aggregate) in the event of bank insolvency. I suspect their response will reassure you and (if you care to post it here) other folks who follow Garth's blog that are concerned about their deposits.

#74 WUL on 04.29.17 at 12:01 am

I just noted on @stats_canada that 65% of Dragons’ Den pitches are longer than Kevin O’Leary’s political career.

#75 Long-Time Lurker on 04.29.17 at 12:06 am

#38 Mark.

Mark’s never heard of fractional reserve banking. Look it up, Mark. I’d ignore your posts but some naive person might fall for your blather.

From my perspective, it looks like Canada is going to follow the U.S. and have a housing market crash that will be similar to how theirs was.

Here are some old clips from the news show 60 Minutes on the U.S. housing crash of 2008.

Limited Sage, you can have a look into the probable future if you watch these.

60 Minutes

House of Cards – Subprime mortgages, mortgage backed securities, foreclosures.

part 1, 7min 11sec
https://www.youtube.com/watch?v=rLvn_4-f9h8

part 2, 7min 11 sec
https://www.youtube.com/watch?v=EwGxEjnmh80

The Mortgage Meltdown – Alt A Loans

12min, 30sec
https://www.youtube.com/watch?v=iUuROWEMjm0

#76 N on 04.29.17 at 12:16 am

Analyzing data from the Real Estate Board of Greater Vancouver and the Canada Revenue Agency, he found an odd inverse relationship between incomes and housing; the higher the house price, the lower the declared income; the lower the house price, the higher the income.
http://www.theglobeandmail.com/real-estate/vancouver/housing-talk-gets-louder-and-angrier-in-vancouver/article34850038/?reqid=da27f6f0-fc07-4a4f-9426-55e409f17476

#77 Original dave on 04.29.17 at 12:58 am

Worry will really set in once (and if) equitable group or one of the companies show real weakness and make front page. The public might assume bad management by home cap but if another company shows theres problems, people will link the problems directly to the sub prime market. That’s when panic will likely set in. I think we are close

#78 For a friend on 04.29.17 at 1:47 am

Question for Garth or anyone here with a dystopian mind on investments:
I have a certain amount saved up in CAD. I’m dollar cost averaging into mutual funds and ETFs I’m reasonably confident in. Assuming the CAD drops over the next five years, will Canadian mutual funds/ETFs that hold US and international funds go higher because what they hold is outside of Canada? Or will their value also depreciate because they’re being held in CAD?

#79 TurnerNation on 04.29.17 at 2:16 am

#49 Smoking…
Well as this is a Boomer nostalgia blog…speaking of Trans Am I did once see this: a rare one. Massive laggy turbo. And waiting for the carburetor high speed jet to kick in? Forever.
https://en.wikipedia.org/wiki/Pontiac_301_Turbo

I still know how to time an engine, and adjust drum brakes. OBD I & II. Bay St job now…eat your heart out.

I’m M41ON

#80 acdel on 04.29.17 at 2:17 am

#6 Mark

I hear you and understand your points.

But!! All it takes due to human greed; whether it is a local or a foreigner to offer an overpriced bid on one property to get the ball rolling.

Sure those (many) scumbags realtors and mortgage brokers take complete advantage of human emotions, but who is really to blame?? Those who get suckered into it or those who just won the lottery???

To blame foreigners ( I was one at one time) is just plain foolish, it is always up to the seller!!

Not saying you did, but just a overview of what so many have mentioned in the past posts; as mentioned before; scumbag realtors, brokers, and opportunist sellers are the real issue’s or are they; it’s capitalism..

#81 Jane24 on 04.29.17 at 2:29 am

What worries me is that although all my Canadian family and friends have scored big on TO RE over the last decade they all have LOCs which they have used like ATMs to cover both living costs and toys and trips.

They all say I am a millionaire because of my house paper value and get excited but don’t deduct the outstanding mortgage and their debts in their head from the paper sum. It is some kind of group mind blindness that I truly don’t understand.

#82 29% interest unlikely on 04.29.17 at 3:23 am

Actually, the interest rate is higher:

$20 Billion x 4.64% 5 yr Fixed = $928 million/year
On $2 Billion that = 46.4%.
Net, cost of borrowing at 22.5% = 23.9% (assumes they have no other costs other than borrowing, unlikely)

Tidy sum if it were not that all of their assets, mostly mortgages, is as of 2016 = $20.5 Billion.

Their Revenue in 2016 = $240 million.

Which means, they would have to DOUBLE their entire market share, as a minimum, to achieve the above numbers. On the Revenue side, $928 million is almost 4X what they currently sell.

Unlikely.

#83 Annek on 04.29.17 at 3:24 am

Reading todays issue and comments is depressing as it is evident we are falling into an abyss, mainly of our own making , in terms of such a false hype about housing going up and never coming down and our governments mismanagement in contolling this escalation
I am also worried about the corruption of the CEO of HOOPP pension plan, if which I belong, lending out 2 billion to save a doomed company of Home Capital.

When this bubble bursts, not only the fools who bought at peak going to suffer, but us taxpayers who are backing CMHC and now pension plans where the management are making poor decisions.

#84 Tony on 04.29.17 at 3:35 am

Re: #6 Mark on 04.28.17 at 6:11 pm

You see the worst case scenario with the share price because they get paid last. The depositors get paid first the bond holders second and the share holders last. Presently there is more than enough to pay the depositors but if the housing market crashes in price no one gets paid from Home Capital.

#85 Tony on 04.29.17 at 3:48 am

Re: #59 toronto1 on 04.28.17 at 9:45 pm

The entire Canadian housing market will collapse when Trump slaps tariffs on China. That will be the day the last dollar (yuan) flows out of China.

#86 Tony on 04.29.17 at 4:00 am

Re: #39 BC_Doc on 04.28.17 at 8:06 pm

It isn’t painless, you get no interest paid to you while things are held up in limbo for somewhere around two years or less.

#87 Steve on 04.29.17 at 7:05 am

I have many Home Trust clients / and lots far from financial dodgy / that’s very harsh Garth / people in life run into trouble due to job loss / illness / divorce
Home Trust rates are great for people trying to have a house again ( 4-6% ) private lenders are seeking 10-15% with 3% fee’s / thus making it hard for the mortgage broker to charge on top ….
i think the banks are far more dodgy / they offer credit to anyone with a good credit score / and a stable job / they offer so much credit and people are on the forever payment plan that eats 70-110% of their income
Anybody can have a change of life events that puts them in a bad spot

#88 Trumpocalypse2017 on 04.29.17 at 7:22 am

MAJOR. MAJOR CONFLICT COMING!!

http://www.npr.org/sections/thetwo-way/2017/04/28/526014978/trump-warns-of-potential-major-major-conflict-with-north-korea

KOREA TESTS MISSILE AGAIN!!

http://www.bbc.com/news/world-asia-39750240

This was a “failed” missile test. Deliberate deception on the part of NK. They are ready and the dictator has nothing to lose by now dragging in the world because he knows he will otherwise be toast.

Costco is already open – get supplies NOW.

#89 They don't ring a bell at the top on 04.29.17 at 7:28 am

When they do, it’s always false alarm. I don’t know what your deal is Garth, but there’s an obvious lack of objectivity that kinda disqualifies you as an analyst, sorry. Still entertaining read at times though.

How about writing a piece on the extraordinary timing coincidence of Sousa’s market intervention and OSC’s investigation into HCG? It’s not like there’s no precedent in Canada of a financial co being brought down to the benefit of competitors. Read up on Confederation Life collapse to the benefit of our PM (at the time) relatives.

#90 maxx on 04.29.17 at 8:09 am

Realtards: Prepare to retool your so-called skills.
The fiscal landscape is changing right under your feet.
Fast.
Most Canadians will be smiling like the Cheshire cat as this re monstrosity unwinds and you all end up eating each others’ lunches.

#91 Penny Henny on 04.29.17 at 8:31 am

The Smoking Man’s Legend Tour.
Visit quaint Longbranch. Have a beer at South Side Johnnys. Play hide the JD bottle. Flick your butts over the side bushes and then pass out in the gazebo. Now only $999 with offers anytime.
https://www.realtor.ca/Residential/Single-Family/18089399/57-JAMES-Street-Toronto-Ontario-M8W1L4-Long-Branch

#92 paulo on 04.29.17 at 8:31 am

#78
sort of like cockroaches if you see a large mama the siblings are close by….

#93 Livin Large on 04.29.17 at 8:35 am

Totally agree with Tony. The time from failure to payout by CDIC has run about 18-24 mons in the past.

The process is very similar to being a secured creditor of a bankrupt company. 6 months to let the initial dust settle, 6 months plus to perfom due diligence on the claims and another 6 months plus to process payouts, all the while interest stopped accumulating a year and a half ago.

#94 maxx on 04.29.17 at 8:36 am

#18 Long-Time Lurker on 04.28.17 at 6:50 pm

“It’s amazing. Canada had it’s own subprime mortgage crisis and (2) billion dollar bailout and nary a whimper from the media or the experts.

“We almost went into meltdown.”

“Eh? Is that that cheese they put on poutine?””

More like the insufferable stench of raclette.

#95 Felix on 04.29.17 at 8:42 am

Good pic today, Garth.

Dogs do have some usefulness, I cannot deny.

Some other tasty examples:

http://davidbarrie.typepad.com/david_barrie/2008/01/whats-on-the-me.html

#96 Victor V on 04.29.17 at 8:49 am

#79 For a friend on 04.29.17 at 1:47 am

If you’re bearish on the loonie, then pick up VFV. Gives you exposure to the US market and will also do better as CAD drops.

Forget about mutual funds — fees too high.

#97 Cto on 04.29.17 at 9:03 am

I truly believe that this is a country of no consequences. People get away with anything White Collar exec’s, or just some young woman looking for a thrill and attention climbing a crane. If that young woman had a fall to her death, the construction company would have been sued for millions and millions.
In the same way, I fear that if a lot of young adults fall to their death financially they will be bailed out by our government by billions and billions. We the Pruden taxpayer with saved money will pay for the costs. It sickens me just to think about it.

#98 maxx on 04.29.17 at 9:12 am

#22 Mike on 04.28.17 at 6:53 pm

” ….This blog, and most readers including me have been saying housing crash for last 4 years – All wrong.

Housing prices in Canada go UP all the time on average…”

A few things:
You can never win against those holding all the power and use it to favour one industry or another.
RE price insanity is largely irrelevant for the masses over 50 and especially so for those over 60 who might want to live the (high) life for the rest of their days.
If you’re in your 40s, you have my deepest sympathies.
Most owners sitting on a pile of cash in brick form will miss the boat for various, really dumb reasons.

Best thing we ever did was to crystallize all re gains. We now rent and haven’t seen an increase in over 6 years.

Play your own game. Most importantly, ignore realtards, banks and msm.

#99 Penny Henny on 04.29.17 at 9:26 am

#29 Smoking Man on 04.28.17 at 7:33 pm
This is my take on the market

Bidding wars fizzle. A week a go Wynee said she will be bringing in measures that will put an end to the practice. So all the buyers took a q from that and are sitting.

The sellers wanting to take advantage of the practice are listing in groves. No bids.

Looking at comparables I figure this shit bungee would be a good deal at 1.1 million. However you got to be realistic at the shift in the marked. No point keeping it at 900k hoping for a war.

I re priced it at a Million and some smart bugger will realize they are getting a deal.

All those people pricing there homes 500k below market trying to get a bidding war going, it ain’t going to work. The budders if any will low ball.
/////////////////////////////

Smokey the buyers are slowly stepping back in. I’m in W08 (north of Longbranch for those who are not aware).
Saw a couple sold last two days that were underpriced and sold in bidding war. The prices were more reflective of January prices not the craziness we saw in Feb or March. The 1.1M you wanted for your place was a Feb price. The 1m you’ll get is January price.
I take offers on Monday. In W08 asking $899,000.
January price would have been 1.05.
Feb price would have been 1.17.

I will report back on Tuesday.

#100 Penny Henny on 04.29.17 at 9:30 am

#33 TurnerNation on 04.28.17 at 7:51 pm
Is the after party on May 13th at Southside Johnny’s?
(I like only two big name domestic brews: Labatt 50 and Molson Export. Am I an old man?)

M41ON

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

add Red Cap Ale to that list.

M52ON

#101 Pre-retiree on 04.29.17 at 9:32 am

Most seem to think HOOPP made out like bandits with a high interest loan + $2 of mortgage for every $1 loaned. CEO insists it’s above board but the appearof conflict is tricky

#102 Pre-retiree on 04.29.17 at 9:38 am

*appearance of conflict

#103 Doghouse Dweller on 04.29.17 at 9:39 am

#79 For a friend

If your US and international funds go higher, then they are worth more
when changed back into CDN dollars. Same as if you owned Euros and US dollars . Foreign companies are priced in their respective currencies. Its like getting your money out of the country and away from the incompetency in charge.
If the fund is hedged to CDN then the currency diversification is removed.
I like foreign dividends EWA, RBL, EDIV, ZEQ, ZDM, DRG.UN — etc…….

#104 Grantmi on 04.29.17 at 10:11 am

This smells a bit like a Bear Sterns 10 years go.

This weekend should be interesting.. all the damage control and the plunge team meeting to float this pig.

#105 jess on 04.29.17 at 10:14 am

Home ownership at lowest rate since 1971, 180,000 homes vacant: Ireland’s housing crisis laid bare
The CSO Housing statistics paint a bleak picture of Ireland’s housing policy

http://www.independent.ie/irish-news/home-ownership-at-lowest-rate-since-1971-180000-homes-vacant-irelands-housing-crisis-laid-bare-35639106.html

=========
what happened to professor kelly …what have we learned offical narrative is clear

https://www.youtube.com/watch?v=8LCofepdUzE

#106 Penny Henny on 04.29.17 at 10:15 am

When will they raise rates?
http://scottgrannis.blogspot.ca/

#107 crowdedelevatorfartz on 04.29.17 at 10:18 am

@#87 Trumpocalypse
“Costco is already open – get supplies NOW.”
*****

Have shares in Costco do we?

So Trumpy
If you have Beans, Bullets, Bumwad and Bullion in the bunker….
Is there any room for Cornflakes,Coffee, Cash, Canned soup and Conjugal visits????

#108 Doug in London on 04.29.17 at 10:28 am

@Frank Simpson, post #16:
I hope you’re right. It’s spring now, the time of year when a lot of people sell off stuff cheap at yard sales. I would LOVE to see a good yard sale on stocks. BRING IT ON!!!!!

#109 crowdedelevatorfartz on 04.29.17 at 10:32 am

@#82 Jane24
“It is some kind of group mind blindness that I truly don’t understand….
++++++

Herd mentality that ( right or wrong) justifies their position.
You cant change stupid and they’ll hate you for it , so dont bother.
Just be happy you haven’t drank the ( my house is an ATM) koolaid…..

#110 John on 04.29.17 at 10:41 am

Housing market has stalled in GTA. Credit is now tighter and speckers are trying to unload but there are no buyers. Inventory is building everyday . Sorry Realtors buyers are not stepping back in.

#111 Gasbag Boomer on 04.29.17 at 10:56 am

Okay Smokie, let’s see if I can follow your logic. You list at $899K and get zero interest. So, then you bump the price a week or so later by $100K.

How’s that working out for ya?

#112 Doug in London on 04.29.17 at 11:13 am

@jess, post #106:
If there are so many vacant homes in Ireland, why aren’t all those rich people from China buying them all up with their hot Asian money? There are so many to choose from, which should depress prices, no bidding wars, and you can take your time hiring a building inspector before buying without worrying about someone else scooping it up. An even better question, why aren’t Irish people frantically scooping them up?

#113 Dan from Richmond Hill on 04.29.17 at 11:28 am

For Mark and his sales mix theory:

This townhouse was about $300.000 10 years ago, $600.000 3 years ago and now $988.000.

https://www.realtor.ca/Residential/Single-Family/18089409/19-KING-WILLIAM-Crescent-Richmond-Hill-Ontario-L4B4S7-Langstaff

Who has so much money?
What type of income one must have to afford it?

#114 Jack Smith on 04.29.17 at 11:31 am

To Mark

If you want to eliminate CDIC insurance and other government backed guarantees than eliminate everything else that governments does to make us poorer.

No income taxes, no H.S.T., no health taxes, no property taxes, gasoline taxes, excise taxes, cap and trade, carbon taxes coming, payroll taxes job killing taxes, all other types of taxes, user fess etc., no red tape and government tied up regulation, no business taxes, no rigging of interest rates Bank of Canada, no legal limit on interest rates charing 60% maximum, etc. etc.

I can go on and on. If you can’t have some minimum certainty of depositing money in a financial institution then maybe we should get rid of banks, stock markets and everything financial.

The guy who deposits money in an account with a Canadian financial institution is not a mortgage company or bank examiner, analyst.

He or she just needs a place to put their money somewhere so when he needs it, it is there.

#115 Smoking Man on 04.29.17 at 11:34 am

#100 Penny Henny on 04.29.17 at 9:26 am
#29 Smoking Man on 04.28.17 at 7:33 pm
This is my take on the market

Bidding wars fizzle. A week a go Wynee said she will be bringing in measures that will put an end to the practice. So all the buyers took a q from that and are sitting.

The sellers wanting to take advantage of the practice are listing in groves. No bids.

Looking at comparables I figure this shit bungee would be a good deal at 1.1 million. However you got to be realistic at the shift in the marked. No point keeping it at 900k hoping for a war.

I re priced it at a Million and some smart bugger will realize they are getting a deal.

All those people pricing there homes 500k below market trying to get a bidding war going, it ain’t going to work. The budders if any will low ball.
/////////////////////////////

Smokey the buyers are slowly stepping back in. I’m in W08 (north of Longbranch for those who are not aware).
Saw a couple sold last two days that were underpriced and sold in bidding war. The prices were more reflective of January prices not the craziness we saw in Feb or March. The 1.1M you wanted for your place was a Feb price. The 1m you’ll get is January price.
I take offers on Monday. In W08 asking $899,000.
January price would have been 1.05.
Feb price would have been 1.17.

I will report back on Tuesday.
…..

Agreed only two ways to do it now. Extremely low price, bidding war. Or as I’m seeing a trend devolop price it at Jan pricing and wait for the tired buyers who are tired of playing games in bidding wars. I’m still getting lots of showings at million so it’s just a matter of time.

Sellers won’t give away properties the buyers realizing that soon.

Good luck on your place.

#116 LL on 04.29.17 at 12:33 pm

# 39 – …”the banks always win and the taxpayer is always on the hook for the failure”….

When banks are making profit, profit are privatized.
When banks are having financial problem/debts, the bill is paid by the taxpayer!

How can they loose?!!

#117 dosouth on 04.29.17 at 12:43 pm

RRSP’s and TFSA’s….somebody’s gonna get a hurt real bad. Of course this will be the fault of the Boomer’s and the poor Millennial’s will be back at the trough of mom and dad.

#118 Deplorable communications on 04.29.17 at 12:47 pm

#92 Penny Henny on 04.29.17 at 8:31 am

The Smoking Man’s Legend Tour.
Visit quaint Longbranch. Have a beer at South Side Johnnys. Play hide the JD bottle. Flick your butts over the side bushes and then pass out in the gazebo. Now only $999 with offers anytime.
https://www.realtor.ca/Residential/Single-Family/18089399/57-JAMES-Street-Toronto-Ontario-M8W1L4-Long-Branch
..
That is one gussied up pig!

#119 Piet on 04.29.17 at 12:52 pm

@#67 jas
“Now look at MPs and MLAs, just by being an MP or MLA for two terms (and these may not even be full terms if election is called earlier by the ruling party to take advantage of the favourable political climate) they are entitled to some sizeable (I guess) pension !!”

The solution is never to vote for an incumbent. If no MP or MLA ever gets a second term, none of them will be eligible for the obscene pension.

Seriously? Perpetually inexperienced leaders. Your brain needs vacuuming. — Garth

#120 Mark on 04.29.17 at 12:54 pm

“Mark’s never heard of fractional reserve banking. Look it up, Mark. I’d ignore your posts but some naive person might fall for your blather.”

Of course I’ve heard of fractional reserve banking. The ‘reserves’ are the equity that the bank has. “fractional reserve” merely allows a bank to borrow more funds than it has in capital, in order to make loans that are a multiple of its equity capital. As long as those loans perform at an interest rate at least equal to that of the cost of funding, equity should be preserved and should grow.

However, if the return on investment < cost of capital, then equity is destroyed. Which is exactly what appears to be happening to HCG which is now paying double-digit rates of interest on a mortgage book that returns, what, 4-6% at best net of admin expenses? The market perception of the value of HCG's equity has been reduced accordingly.

For Mark and his sales mix theory:

Sure, some properties within the mix have appreciated. Some have depreciated. Anyone can cherry pick a handful of examples, one way or the other. Conceptually the sales mix refers to a large number of properties, ie: the entire transactional volume, which is viewed relative to the overall property base.

Who has so much money?

Canadian speculators. Or the high-end enclaves of the GTA, the people who have been getting rich on the excesses in RE. Banker/lawyer/RE investor types.

#121 Tony on 04.29.17 at 12:56 pm

Re: #107 Penny Henny on 04.29.17 at 10:15 am

Every year is a mirror image or carbon copy of the last year… EVERY YEAR!! Is there anything coming out of America that is even close to being the truth anymore?? We’ve heard all the stories the weather and everything else. Of course nothing like this has ever happened going back to the days of Christopher Columbus. Of course growth can only get stronger in the second and third quarter because every year they tell you the same thing will zero facts to back up anything.

#122 NEVER GIVE UP on 04.29.17 at 1:16 pm

“BC’s election, resulting (possibly) in an NDP government, will be another (God help us).”
==================================
Garth, If you are a homeowner in BC who is cashing in you can say the above. But what about the masses and the children of said homeowners who cannot get in the market.

No one has mismanaged the economy more than the Liberals from an egalitarian point of view. But from the one percenters point of view they have done well.

I have 7 children and even though one of them can possibly buy now as he has a high income and he is a chartered accountant. He ran the numbers and prefers to rent.

I will be voting NDP for the first time in my life. It will be an “F-U” vote. There are a lot of hostile people here.

I know the crony capitalists will leave for Alberta and California in protest and build high rises there but so be it. We need to re-assess what damage has been done to the economy here.

When property values get too high small business leaves town. There are no more gas stations in Down town Vancouver. The last one was just sold for $70 million and will close down as soon as they get a permit to build a high rise.

With the ghost houses in Coal harbor there are few viable businesses in operation in the neighborhood.

They pay full taxes for fewer customers as no one lives there.

#123 Paul on 04.29.17 at 1:43 pm

Smoking may want to cash his ticket??

Sld 57 James St $227,500 11/14/2001
Sld 57 James St $307,000 9/21/2004
Sld 57 James St $409,000 11/05/2007
Sld 57 James St $492,000 11/17/2010
Ter 57 James St 4/20/2017
New 57 James St 4/27/2017

#124 For those about to flop... on 04.29.17 at 1:50 pm

The boss of this blog once encouraged me to find a reason to vote for a certain party during an election.

Going down to vote today with the whole family, I suspect we are going to all vote for the same party,but I won’t be trying to persuade anyone anyway.

I’ve decided to vote for the party that I feel is telling the least amount of porkies…

M42BC

#125 ShawnG in TO on 04.29.17 at 2:01 pm

HCG is done. Jim @ HOOPP is too smart for his own good. He said too much on BNN last night. he tried to retract his words right after he said it. too late. he just might have attracted the regulators on his tail.

link to BNN interview

http://www.bnn.ca/video/home-capital-not-a-risky-investment-for-us-hoopp-ceo~1111585

here’s an analysis of his troubles

http://brontecapital.blogspot.ca/2017/04/home-capital-group-it-is-time-for.html

summary:
– Jim called the 2 billion deal akin to a “DIP deal”. oopsie, he tried to revert that, but too late. he’s live on national tv.
– DIP = debtor in possession. he basically saying the deal is bankruptcy finance
– in exchange to 2 billion loan, hoopp is (hoping) to get 100 million fee + 10% interest on money hcg does borrow + 2.5% on money does not borrow
=> $225 to 300 million fees and interest
– the loan is secured on 4billion of hcg’s mortagages
– should hcg fail (that seems to be the plan) hoopp gets to keep the fees and interest and stand first in line for upto 4 billion of mortgages
– CDIC (insurer of GICs and savings accounts) just got bumped down by the hoopp deal
– the analyst suggeststs : fraudulent conveyance

https://en.wikipedia.org/wiki/Fraudulent_conveyance

– so the regulator is now likely to step in and void the deal

aside 1:
so now the situation is tax payers (CDIC insurance) vs tax payers (hoopp)
-> loser: tax payers, winners -> hcg and hoopp management

aside 2: i used to be saddened and annoyed by the lack of humour on the interwebs. but now i’m just used to it. i happen to have more knowledge on pensions than the avg blog dog. but apparently my jest goes over the heads of some people. let me try a new one:

in addition to doctors getting incorporated, the nurses and technicians and everyone else depend on hoopp might consider getting incorporated, since their pension may not all be there when they want it.

#126 BC_Doc on 04.29.17 at 2:17 pm

#87 Tony on 04.29.17 at 4:00 am
Re: #39 BC_Doc on 04.28.17 at 8:06 pm

It isn’t painless, you get no interest paid to you while things are held up in limbo for somewhere around two years or less.

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

Hi Tony,

I sent an e-mail to the CDIC info address. I’ll post the reply here if I get an answer. In the US, the payout was fairly rapid– holding back people’s deposits for six to 12 months after a bank failure doesn’t instill confidence in the system. It instead encourages people to make a run on the bank at the first rumour of problems– not a good way to reduce volatility in the deposit base. As I say, if I get anything back from the horses mouth, I’ll post it here.

———————————————————

Sent to the CDIC–

Good morning,

In the rare event that a CDIC member institution were to fail, could you tell me how long it would typically take for a covered depositor (i.e. insured deposit with a value below $100k) to be paid out (deposit plus accrued interest) once the institution is closed by the OSFI?

Thank you in advance for your clarification.

Sincerely,

BC_Doc

#127 conan on 04.29.17 at 2:18 pm

RE #89 Trumpocalypse2017 on 04.29.17 at 7:22 am

“This was a “failed” missile test. Deliberate deception on the part of NK.”

Not so far fetched when you consider this conflict,if it gets big, is going to change the concept of warfare, as we know it.

Sun Tzu, Art of war and the Scramjet.

China has these, so conceivable that NK might have one in development. USA, needs any excuse to get rid of their old cruise missiles, just look at Syria, to start using hyper-sonic missiles of their own.

This hyper-sonic ordinance makes capital ships and any other military target ,that is both big and expensive, vulnerable. So, a game changer.

The next military game changer is robotic mobile infantry, but for now, lets just freak out on scramjets.

https://www.youtube.com/watch?v=8F4uSl3CXVc

#128 The Wet Coast on 04.29.17 at 2:47 pm

#123 NEVER GIVE UP

I totally agree. I have 4 children and not one of them can afford to live here. Then there is health care. Don’t get sick or you’ll wind up in a hospital hallway or with 2 other sick folks in a room made for 1. Rarely do I get angry, but I am now and even though I have never voted NDP, I will this time. Every political party that loses touch needs to spend time cleaning itself. The Reform Party proved that.

How is voting NDP going to fix housing prices or health care? Or are you just voting against something? — Garth

#129 Swack on 04.29.17 at 3:03 pm

I think all politicians suck and I can’t stand any of them…
But, I’ll vote for the ones that I think will let me keep a little more of my pay check and the ones who don’t spend like drunken sailers (my apologies to any drunk sailers) So, you guess who I might vote for?
Go ahead vote your protest vote, maybe even the Greens? Christie would like that. If NDP win in BC you’ll feel good for a week or so, result will be…they will suck as well and you’ll prob have a smaller pay check then you used to.

#130 Long Time Lurker on 04.29.17 at 3:11 pm

#121 Mark on 04.29.17 at 12:54 pm
“Mark’s never heard of fractional reserve banking. Look it up, Mark. I’d ignore your posts but some naive person might fall for your blather.”

Of course I’ve heard of fractional reserve banking. The ‘reserves’ are the equity that the bank has. “fractional reserve” merely allows a bank to borrow more funds than it has in capital, in order to make loans that are a multiple of its equity capital.

“fractional reserve” merely allows a bank to borrow more funds than it has in capital, in order to make loans

Please explain what fractional reserve has to do with borrowing more funds than capital?

I recommend to everyone to ignore Mark’s advice when he gives it. I don’t know who he is but everything he writes is circumspect and makes terrible financial advice.

Mark, if you follow your own advice, I predict a lifetime of poverty for you.

#131 crowdedelevatorfartz on 04.29.17 at 3:24 pm

How is voting NDP going to fix housing prices or health care? Or are you just voting against something? — Garth
*********

Yes.
We’re voting against a Liberal Party and leadership that has no morale compass.
A Liberal party that repeatedly runs deficit budgets but says the opposite.
A liberal party that accepts cash donations for meetings with the Premier.
A liberal Party that gives the Premier $50,000.00 per year above and beyond her $200,000 a year salary.
A liberal party that has built bridges, dams, convention centers grossly over budget.
A liberal party that has spent billions on BC Hydro legacy projects( Run of River, Site C Dam) that make no economic sense and has essentially bankrupted Hydro.
A leader that has increased her media staff 4 fold to capture her every utterance …unless of course its critical.

Lost, morally corrupt, lazy, arrogant are but few of the words that come to mind when describing the BC Liberals and their current leader.

Yes, I’m voting for anyone but Christy on May 9th and judging from the street level conversations I’m hearing…..it will be a well deserved liberal debacle.

#132 Don Saunders on 04.29.17 at 3:39 pm

To Mark

2%+inflation for GIC’s and bank deposits is 3.56%. Canada’s March 2017 inflation rate is 1.56%.

Inflation is not almost non existent as you are implying.

#133 crowdedelevatorfartz on 04.29.17 at 4:47 pm

@#130 Swack
“I’ll vote for the ones that I think will let me keep a little more of my pay check and the ones who don’t spend like drunken sailers….”
******

Well, considering the NDP left a balanced budget the last time they were in power and the 16 years the Liberals have been in power they have raised, Medical Services Premiums( up 100% in 16 years), ICBC(up 92% in 16 years), Hydro( up 38% since 2013), BC Ferries( up 50% in 16 years), etc. etc.etc.
Basically higher and faster than inflation.
Not to mention introducing “user fees”, bridge tolls, sin taxes(on booze and cigarettes) while cutting money to highways , schools, and hospitals….

All that and they lied about “balanced budgets” …..

So I guess you’re voting for the NDP ?

#134 When Will They Raise Rates? on 04.29.17 at 4:53 pm

#130 Swack on 04.29.17 at 3:03 pm

I think all politicians suck and I can’t stand any of them…
————————

Eh hem. Not [i]all[/i] politicians suck…

Some of them are so good that they get kicked to to the curb by the machine and end up writing really good blogs!

But yeah, 99.9% of them do suck. :)

#135 45north on 04.29.17 at 7:10 pm

ShawnG: HCG is done. Jim Keohane is too smart for his own good.

from your link: Mr Keohane uses the phrase DIP Financing precisely and accurately and in context and then says he doesn’t know what it means.

If Home Capital cannot find a buyer then it should be liquidated. Immediately. And the transaction with HOOP should be reversed under standard bankruptcy rules for reversing fraudulent conveyance. There is no reason that taxpayers should accept subordination to a loan yielding 15-20 percent.

holy cow! so the whole deal can be reversed! On Monday morning! holy cow!

#136 slick on 04.30.17 at 6:55 am

not just Keohone

http://www.thespec.com/news-story/7268084-st-joe-s-ceo-chairs-mortgage-firm-that-got-health-pension-bailout/

#137 Andrea and Alan on 04.30.17 at 5:51 pm

So so so true. Ominous closing line foreshadowing some percipient blogs ahead…sigh. Did you know that BMO has piloted some in-school financial literacy workshops in York Region for elementary-aged students?