The landing

Update time:

First, Sears surrenders. As prefaced here yesterday, the company which was once our largest retailer is going down for the count. Sears Canada is bankrupt, announcing on Thursday the first 55 locations that will be shuttered, erasing the jobs of about three thousand people (without severance pay).

Sears has been a disaster for shareholders, with the stock collapsing in value over the course of a year and, it seems, about to go to zero. Retailing’s in the same soup as print and electronic media – where the industry is now begging Ottawa to pony up money to pay 35% of reporters’ salaries, so they can rewrite press releases from the local real estate board.

But newspapers are as terminal as regional shopping malls, travel agents, cashiers and (yes) realtors.

Second, the Buffett factor. Shares of Home Capital, Genworth and almost all other outfits involved in mortgages shot higher Thursday after legendary rich guy Warren Buffet became the largest shareholder in troubled Home Capital. Soon he will own almost 40% and has provided a backstopping LOC – effectively taking Home Cap off the critical list.

Does this mean everything is suddenly okay with the real estate market?

Nope. No change there. It’s negative sentiment  – not struggling subprime lenders or retreating Chinese dudes – that’s responsible for a 50% sales drop and a 12% price plop in the Big Smoke. What Buffett did (again) is recognize an opportunity to mine profits out of a distressed company. He’s already made $260 million in a capital gain, and he’s actually not loaning Home Cap anything – just providing an emergency pot of money which is already invested and on which the company must pay standby interest.

Third, up she goes. Expectations of a Bank of Canada rate hike are undiminished by oil’s recent slide or the growing anxiety of GTA homeowners. An increase next month is 50-50, but one by the end of the year is now 80-20.

Benefiting from that already are rate-reset preferred shares, which this pathetic blog has consistently recommended you own. Not only do prefs churn out a nice steady dividend, currently in the 4%-4.5% range, but they do it in a tax-efficient way, since you get to claim the dividend tax credit on cash that flows in every 90 days. Better yet, they go up in price along with rates – which helps explain the 25% hike in the capital value of preferreds since early 2016, and the 8% total return investors have enjoyed so far this year. When the BoC pulls the trigger, there’ll be more.

Prefs should make up about 20% of your overall portfolio, and half of the fixed-income allocation – along with corporate, provincial and high yield bonds, and a smidgeon of government debt. Remember – this part of your accounts is there to reduce volatility, provide consistent income and be a counterweight when you do something stupid, like short Home Capital (or anything else).

Lastly, Joe has a question.

Love your blogs! In Sept 2015 I decided to go with a 5 year variable for my mortgage, currently at 1.90%. Should I try to switch to a fixed with a possible anticipation of rates going up soon or hold on with the variable until renewal?

That’s easy. Hang on. Your mortgage rate is so obscenely, ridiculously, freakishly low it will take several rounds of tightening by the central bank to make it worth your while locking in. If feeling frisky, Poloz may up the cost of money four times between now and the beginning of 2019, which would add a full point to your home loan. But it’ll still be a lowly 2.9% at that point, barely more than the cost of a fixed-fiver if you locked in now.

So relax. Divert your extra cash into an ETF-based investment portfolio for the next three years. Then dump the growth against the mortgage principal upon renewal. That should help take some sting out of what comes next.

 

217 comments ↓

#1 Leo Trollstoy on 06.22.17 at 6:17 pm

Fredricton, NB

I’m here for the sea food

#2 Terry Chang-Kee on 06.22.17 at 6:20 pm

The First shall be last and the last shall be first.

#3 BMan on 06.22.17 at 6:28 pm

“Prefs should make up about 20% of your overall portfolio, and half of the fixed-income allocation…”
I know this is a great option for non registered accounts, buy what if you are not maxing out rrsp/tfsa yet (portfolio is all registered accounts)? No dividend tax credit matters there. Still worthwhile to hold these in an rrsp and/or tfsa?

#4 RentYVR on 06.22.17 at 6:32 pm

The next BoC move is a cut. You heard it here first.

Stay long (in duration) my friends.

#5 I'M NOT POLOZ on 06.22.17 at 6:33 pm

Poloz will not let the Loonie go above 80 cents, and Morneau wants to know where you live (Morneau confronted by Dan Dicks at Bilderberg meeting in USA):
https://www.youtube.com/watch?v=PgmeR6tBjMI

Morneau wants to know where you live so that he will sign you up to work for free at a Canadian Gulag under a 10-cent loonie….What is a Bilderberg? It sounds like ice cream or a Top 5 company.

#6 Mindwerk on 06.22.17 at 6:35 pm

As once Buffett said “when theres blood on the streets, is time to buy”… good timing.

#7 Leo Kokivakis on 06.22.17 at 6:36 pm

First, Canadian pensions to the rescue:

http://pensionpulse.blogspot.ca/2017/05/canadas-pensions-to-rescue.html?m=1

Now the Oracle of Omaha!

Don’t kick yourself if you didn’t buy shares st the bottom, only Warren Buffett has pockets deep enough to take that kind of risk.

Will be interesting to see how long the Buffett effect lasts….

#8 Bubba on 06.22.17 at 6:36 pm

You can get a Fixed Fiver for far less than 2.9%.
HSBC has them advertised at 2.39%. Anyone with a decent credit score will have the bank drop it an extra 25 basis points, without evening having to ask. That leaves 2.14% for a fixed five.

#9 Ace Goodheart on 06.22.17 at 6:43 pm

Saw a creature that scared me today. Looking at this thing was like looking in a microscope at your toothbrush.

You wonder what crazy creepy things are crawling around with you every day? I just saw them.

This was a mortgage. It looked simple enough. It was high risk, relatively high interest and it was a one year deal.

Here is how it worked: The buyer had slightly poor credit. Wanted to purchase a house way out of his price range, with almost no down payment. Banks wouldn’t touch him. Private lenders also avoided him. Looking at his monthly expenses and income, there was no way he could carry any additional debt. He was in the negatives already, borrowing to stay afloat, in arrears on everything.

Enter the “private trust”. This thing is made up of people’s private investments, put together into a mortgage trust type thing, run by a corporation, offering loans to those who can never repay them (or even keep up with the interest). The names of the individual investors are listed. There were ten of them.

So, how does this thing work? Interest was 12% per annum. It was designed as a line of credit, requiring interest only payments. In addition to the 12%, there were three other payments, all taken out of the principal at closing. They were referred to as “fees”.

The total amount of these “fees” ended up being 28% of the loaned total, meaning that the guy was immediately returning 28% of the borrowed money, to the lenders, and adding the 28% to his borrowed amount registered against his house.

Total interest for one year of borrowing money like this? A sweet 40%.

This is like a payday loan. Hide interest in fees and insurance charges. People are putting these things on their houses. The result is, after paying $2800.00 per month in interest for a year, the guy is 28% more in debt than he was before he bought the house, and he has to remortgage, for additional fees.

This stuff is debt spiral financing. A lot of people are using these things now as they have this sort of maniacal desire to purchase houses they can’t pay for or afford.

Behind it all, are people’s private retirement investments, being loaned out for ridiculous fees and interest to people who cannot afford to borrow.

Stay tuned……

#10 Game On Victoria on 06.22.17 at 6:43 pm

Contrary to VREU and collapsing sales in Victoria, the South Island communities are having bidding wars – bidding wars in semi-rural areas! Prices up 25-30% over the last year. Rents up 20% (for those new homes being rented out and those with fixed terms leases ‘renewing’)

A parallel to what happened with the Metro communities like Surrey and Langley last year and this year, and with the Fraser Valley – with Vancouver prices pushing afar those that have cashed out and those with families that cannot afford houses. And of course, the resulting spike in prices and rents..

Ouch! The crisis spreads. Soon all of BC will be written off as this pattern spreads – those cashing out and ‘refugees’ from high priced cities spread to surrounding communities bidding up prices; those that cannot afford and those cashing out to the urban dwellers then spread farther out, increasing prices in their surrounding communities, and so on and so forth.

#11 Pete on 06.22.17 at 6:44 pm

Simplyput7 on 06.22.17 at 2:06 pm
#251 InvestorsFriend on 06.22.17 at 12:50 pm

People will now take mortgages here again as well. I am just about 100% sure that Home Capital is now out of the woods.
————————————————————
Not all money is good money. I don’t ever want to owe a cent to Warren Buffett.

And I don’t think the initial mortgage rates people received at Home Capital, will be the renewal rate Buffet will allow Home Capital to issue again. These people will foreclose and he will sell their houses to get his money back. Then issue new mortgages at a higher rate to people who have no choice but to go to Home Capital as they have been turned away from every other private lender.

Also, if Home Capital plans to be a smaller company in the future, so that they don’t need line of credits at 9% or more from loan sharks, then they will have to start turning away people who cannot pay the new higher rate for these scarce mortgages. This will slow the demand for housing as lower qualified people will not be able to get enough money to buy homes.

This is not a win for the Canadian housing market, just more proof to the world that our housing market is nothing more than smoke and mirrors, that can only continue to exist when loan sharks rescue highly indebted homeowners.
____________________________

Exactly and its funny to see useless realtors and mortgage brokers cheering the hope that fraudulent mortgages will continue. It’s not going to continue and price will continue to crash. Yes 12% drop in 8 weeks is a crash and a bad one. As happy crash guy would say Happy Housing crash

#12 El Jako on 06.22.17 at 6:45 pm

Sears has *significant* problems beyond “millennials like shopping online. Their CEO is an idiot, the stores look like old K-Mart stores that were left abandoned for 5 years before someone decided to put a few zombies in and turn the lights on, and even preceding the current CEO, Sears spent three decades ruining its name by replacing quality Sears brands with Chinesium. As anyone who’s an owner of an old-school Craftsman tool, and made the mistake of buying a newer one, can attest.

#13 Freedumb on 06.22.17 at 6:46 pm

Warren Buffer and me are practically the same when it comes to investing.

#14 broader mind on 06.22.17 at 6:49 pm

Great, the OSC must be so proud. Rob from the poor and give to the rich. Canadian stock holders to Buffet. Massive news of demise then barely a whisper when HCG is saved.Something smells really bad.

#15 HoweStreet.com on 06.22.17 at 6:50 pm

Ross Kay on HoweStreet.com Radio:
“Seasonally” Adjusted Numbers, and Avoiding Mortgage Penalties.
White Rock “Brown Water” – a home sale killer.

http://www.howestreet.com/2017/06/19/seasonally-adjusted-numbers-mortgage-penalties/

#16 Marcus on 06.22.17 at 6:52 pm

Russia just shot down an American Global Hawk drone over the Med off the shore of Syria. This drone is one of 3 of this make and function in the American Air Force. It coordinates communications across the battlefield in Syria. This drone was shot down in retaliation for the American downing of the Syrian Air force fighter bomber that was bombing an ISIS convoy two days ago. The Global Hawk costs 240 Million dollars and the Syrian plane is worth about 5 million. I think Russia just made these types of actions very costly. Invest accordingly.

#17 Keith on 06.22.17 at 6:53 pm

So, bricks and mortar retail, and print journalism are on the way of the dinosaur. Retail sales clerk is probably the single biggest occupational category in Canada. Lose most of those jobs and you wipe out most of the entry level and student jobs that are going.

So, we won’t need truck drivers or cabbies. Scratch most of the people operating machinery, driving trains, piloting planes. Ditch most of the servers in the food and beverage industry, and most of the remaining clerks.

Does the government have a good track record of educating and preparing people for the real world, for the work force? How about mid life career changers. The degree holders serving coffee might have some questions Well, there are some excellent apprenticeships and co op programs out there, but we have a long way to go to match the system in Switzerland where almost every job is an apprenticeship with post secondary but going to university is less than 25% of the population.

How about the private sector. Do they invest in training? Well back in the day of staying with the same company for decades, company training programs were good. These days, too much corporate training is underfunded and of poor quality.

Looks like the working and white collar middle class was just a brief hiccup in human history, as it continues to disappear, at first at a snail’s pace decades ago and slowly but surely faster and faster. The trend is clearly in place. Very bumpy road ahead.

#18 Screwed Canadian Millennial on 06.22.17 at 6:56 pm

How do the rich get richer? Get sweetheart deals to buy a stock at a 50% discount.

What a racket.

Warren Buffett’s Berkshire Makes Home Capital Group An Offer They Can’t Refuse
https://betterdwelling.com/warren-buffetts-berkshire-makes-home-capital-group-an-offer-they-cant-refuse/

#19 Millennial905er on 06.22.17 at 6:57 pm

Back for another round- your moronic real estate themed link of the day:

https://www.reddit.com/r/PersonalFinanceCanada/comments/6iwblq/is_real_estate_a_bad_idea/

“I’m a 17 year old from Ontario who is almost done high school and really want to get into real estate and have for as long as i can remember.”

Garth, take a breather with the millennials; you can officially start mocking Gen Z.

#20 AK on 06.22.17 at 6:57 pm

“Prefs should make up about 20% of your overall portfolio”
——————————————————————–
I have a long way to go on that one. (1.84%). But I am working on increasing it.

#21 Ray on 06.22.17 at 7:00 pm

I though you said lock in the other week Garth?
—–
Sears is for fogeys.

#22 TrumpForTheAges on 06.22.17 at 7:03 pm

The Fed has risen rates twice yet bond yields have decreased so may not really matter what Poloz does.

#23 Timmy on 06.22.17 at 7:07 pm

You’ve ignored the fact that oil is now in a bear market, and at $43 a barrel, if this continues it will impact the Canadian economy significantly, and this is another case for not raising rates.

#24 calgarytran on 06.22.17 at 7:08 pm

Cryptocurrencey trading – the next big thing?

Paper currencies, central banks……will disappear.

#25 Bart on 06.22.17 at 7:09 pm

Poloz won’t raise anything unless forced to Americas actions. He will hold out, he has to, millions of Canadian homeowners depend on low rates.

#26 Bart on 06.22.17 at 7:11 pm

Target will hire those employees laid off by Sears. Oh wait…

#27 Bart on 06.22.17 at 7:13 pm

Trudohh is desperate for a pipeline yet oil prices are dropping…quick! Time for some selfies

#28 Gonna Wait on 06.22.17 at 7:14 pm

With 50% less sales happening last month in The GTA, no wonder bankers are getting paid off.

Less sales = less employees needed.

#29 Leo Trollstoy on 06.22.17 at 7:17 pm

Yes! Fredericton #1!

Literally

#30 oncebittwiceshy on 06.22.17 at 7:18 pm

240 M-F from yesterdays post: “Stop thinking that the government and banks won’t act to stabilize a bad crash. They might stop raising rates, or lower rates again, or relax rules for existing homeowners.”

The people that are thinking that the government and banks won’t help out are probably the boomers that lived through the 80’s crash.

Ask someone, maybe your daddy, what the government did to help all those poor homeowners that lost their homes when interest rates went up over 20%. Yes, it would have been really easy to drop the rates back to maybe 19% … lol.

The banks? It’s funny how kids today think that the actual owners of the house are going to help out the “borrowers” of the house because they thought they had”bought”it.

There is not going to be a save of this devastating crash and believe me I wish that there could be because the fallout from this one will be long remembered.

It’s so much easier to learn from other people’s mistakes but as a country we were completely blinded by our “escape” from the Global Financial Crisis.

Good luck to all over the next couple of years. Very few people will be fortunate enough not to feel the pain. It will be very tough to watch family and friends suffer even if you managed to play it smart.

#31 SimplyPut7 on 06.22.17 at 7:28 pm

At 8:45 min ‘It had a fuse on it’

* Warren Buffet tells you to take it or leave it
* Shareholders don’t have a say
* No plans to let depositors easily take their money out if things go south, by continuing to offer high interest saving accounts (HISAs). Hope to have mostly term deposits in the future.

Yup, looks like Home Capital shareholders and depositors are in control of their finances again.

http://www.bnn.ca/berkshire-offer-had-a-fuse-on-it-the-making-of-home-capital-s-deal-with-warren-buffett-1.786228

#32 dakkie on 06.22.17 at 7:34 pm

Canadian Bubbles – Home Capital Group Is On The Verge Of Collapse, Will Receive A Large Bail Out From The Canadian Taxpayers Very Soon.
http://investmentwatchblog.com/canadian-bubbles-home-capital-group-is-on-the-verge-of-collapse-will-receive-a-large-bail-out-from-the-canadian-taxpayers-very-soon/

#33 conan on 06.22.17 at 7:36 pm

I called a Home Capital Group a buy, when it was a little over 5 bucks. The proof is in the pudding, free sprinkles for everyone!

https://www.youtube.com/watch?v=549B76uehxo

#34 Nonplused on 06.22.17 at 7:39 pm

The last time I was in Sears was a couple of years ago. All I bought was a lifetime supply of bags for an old Kenmore vacuum cleaner I have that is well built and looks to continue ticking along for years, but I can’t find bags for it anywhere else. I expected Sears to go away already back then.

Now that I think about it I should have also got a spare belt for the power head. Those break too from time to time.

Sears has marketed some great products over the years, everything from washing machines to riding mowers, and their service used to be exceptional. But something went wrong over the years. My wife bought a seriously fancy fridge from them some years back and not a month after the warranty expired the “control board” went, rendering the fridge useless. It didn’t even run anymore. Now, I can understand having a control board for such a fancy fridge but no mechanical backup to even keep the compressor running when it fails? Luckily we had an old mechanical fridge a friend gave me in the basement suite, which was unoccupied at the time.

But the story gets worse! My wife called Sears to get a service call out and they said “two weeks”! No fridge for 2 weeks even if we are paying for the repairs?? So my wife found one of these guys who does service work out of a van and he came the next day. But he had to Fed-Ex the part from Mexico for $350. Even at that he got the thing working again well before Sears could show up.

So the decline of Sears has been a long time coming. They used to be known for top shelf products and service, but eventually they became little more than a Walmart with no groceries and higher prices. At least the Bay figured out to keep their clothing, jewelry and luggage departments top notch but Sears didn’t even do that. I have a hard foot to fit shoes to (wide) and Sears has nothing that will fit. The Bay doesn’t have much either, but they at least have a few.

This house we are in now was built in 1996 and I think that is about when the Sub-Zero fridge that is in here went in. Oh and also some smaller fridge in the basement bar/kitchenette. Both are still working, 21 years on. We had to replace a heating wire in the Sub-Zero to do with the ice maker. Total cost $350 total time 2 days. Also the ice maker in the downstairs fridge works but it doesn’t shut off (it just keeps making ice and fills up the whole freezer) so we don’t use it. But the fridge itself still works. Key to both? No control boards. In essence what happens when they put in a control board is you get the same sort of reliability and longevity you can expect from a laptop.

I would never buy a Sub-Zero, I don’t have that kind of money to throw around, but I have to say I am pretty impressed with the one I have and the service you get as compared to Kenmore at this point. Sure, it doesn’t dispense water, which is weird because it has an ice maker, but it dawned on me at one point that typical Sub-Zero buyers don’t drink tap water.

#35 JSS on 06.22.17 at 7:42 pm

Why no severance packages for Sears employees?

#36 Blacksheep on 06.22.17 at 7:43 pm

Who is the most successful investor in the US and the whole godamn planet?

http://www.therichest.com/business/economy/10-of-the-most-successful-investors-in-the-world/

That’s right, Warren Buffet.

The impact of Mr. Buffets investment in Home Capital (Can RE) can not be overstated, as much as it’s being downplayed here.

How much $’s he makes or loses on his investment is completely irrelevant (+260 mill so far) it was his vote of confidence, in Canadian RE that matters. How many big players do you think will attempt to take to opposite side of this trade and short our RE market now?

That’s right, no one with half a brain. You can guarantee anyone short is scrambling to cover as I type.

This of course changes nothing in the Supply VS Demand equation, but it sure as hell gives a psychological boost of confidence to those on the fence about Canadian RE investment.

I can hear it now:

Good enough for Warren, good enough for me.

#37 Happy Housing Crash Everyone! on 06.22.17 at 7:44 pm

Interest rates are going higher people. Sorry realtors and mortgage broker shysters. We all know you guys are screaming in horrible financial pain. Times will only get harder in this housing crash . Happy Housing Crash Everyone! :-)

#38 TCContrarian on 06.22.17 at 7:46 pm

Like the master said: “history doesn’t necessarily repeat, but it rhymes” M. Twain
*********************************************

“During the first quarter of 2007, the signs of a problem in the housing market started to reveal themselves. Housing prices started to decline, mortgage delinquencies accelerated, and the secondary market for anything but the highest-quality mortgages began to show signs of fatigue.

The first line of institutions to feel the effects were mortgage originators like New Century Financial and Countrywide Financial, which Bank of America (NYSE: BAC) regrettably acquired in 2008. On March 2, New Century announced that, “as a result of the Company’s current constrained funding capacity, the Company has elected to cease accepting loan applications from prospective borrowers effective immediately while the Company seeks to obtain additional funding capacity.”

These tremors subsequently triggered a series of events that culminated, for the time being, at least, in the bankruptcy of two Bear-managed hedge funds that specialized in mortgage-backed securities. And this was the “watershed” moment that Cayne related to Merrill Lynch’s then-CEO Stanley O’Neal during a chance encounter at restaurant in late-July 2007.”

https://www.fool.com/investing/general/2013/03/15/a-timeline-of-bear-stearns-downfall.aspx

TCC

#39 TWO FINGERS WATSON on 06.22.17 at 7:48 pm

Garth I bet u a bag of mice no interest rate increase in 2017 and none again in 2018. A reduction maybe, but no increase.

#40 Kool Aid on 06.22.17 at 7:50 pm

Get ready, the great rate up cycle is nearing.

Steady interest rate hikes will supplant any hope of new normal lower we will go interest rates magic.

An interest rate ran up will see rate normilation globally over the next 48 months.

The US Fed continues to hike, other economies will be obliged to follow or risk serious erosion of asset ownership along with major capital outflows.

I know, hard to image interest rates of 3-5%, well, the same should be said regarding the lower for longer and negative interest rates envoirment, seriously… debt, get out from under it.

#41 Nonplused on 06.22.17 at 7:51 pm

Oh one more comment on the control boards. How much more efficient do they really make our appliances given how frequently they fail? The basic business of cooling the fridge is where most of the energy goes and that can be done with a mechanical switch.

One more comment on stupid electronics we don’t need. So I bought a hyped energy saver thermostat for my house, complete with touch screen, green labels all over the box. Problem was it would use up a set of batteries in less than a month and then not heat the house. So I put the old thermostat, the mechanical “mercury” one, back on in tandem only set to a lower temperature so at least the pipes wouldn’t freeze. But the fancy one kept going through batteries so finally I brought it back and got a much simpler one. I did not remove the mechanical thermostat though, “just in case”.

#42 Blacksheep on 06.22.17 at 7:51 pm

Can. rates are going nowhere….

Dollar is holding at 75 cents with oil tanking. Raise rates and Poloz can kiss export increases goodbye. Not going to happen till domestic wage pressure starts occurring, on mass.

#43 Howard on 06.22.17 at 7:53 pm

“Retailing’s in the same soup as print and electronic media – where the industry is now begging Ottawa to pony up money to pay 35% of reporters’ salaries, so they can rewrite press releases from the local real estate board.”

LOL! Nice one.

#44 Bobby13 on 06.22.17 at 7:53 pm

Explain how fluffet gets to buy the shares at an average 10$/share and it rockets up instead of going to 10 where he scooped them whose pushing the price up so recklessly.

#45 IHCTD9 on 06.22.17 at 7:56 pm

#11 El Jako on 06.22.17 at 6:45 pm

…As anyone who’s an owner of an old-school Craftsman tool, and made the mistake of buying a newer one, can attest.

——

My trusty old 11amp Craftsman circular saw just smoked itself into oblivion last week. I blame me, as I was ripping 2×4’s down to make railings, and I was just pushing it too hard. I think I may have started to think it was bullet-proof. Had that saw for 16 years. I have a mid 80’s Craftsman 1/2″ electric impact that still works great!

Bought a 15 amp DeWalt this time around, and I’m not convinced it will do any better than the old Craftsman, it’s a lot smaller and lighter.

#46 Eating quinoa in Vancouver on 06.22.17 at 7:59 pm

#5 – it does sound like ice cream. New flavours for Garth’s store. I’ll have one scoop of Bilderburg and one of Covfefe.

#47 A Reply to #6 Mindwerk on 06.22.17 at 8:05 pm

“As once Buffett said ‘when theres blood on the streets, is time to buy’… good timing.”

It wasn’t Buffett who said it; it was Rothschild.

#48 Hans on 06.22.17 at 8:07 pm

Will Berkshire save the housing markets? Not likely. But I think you haven’t accounted for them re-entering the market as an originator of new mortgages. This is why the whole “crisis” started…..deposits pulled and renewals were being turned elsewhere. Now, or should I say shortly because I think the run up on shares is only getting started, they will come back with a vengeance and offer terms that any contractor or immigrant looking for a refinance will jump at. Add in the short squeeze that’s only started, I hope Cohodes gets destroyed on this play. Not because HCG doesn’t deserve the scrutiny, but because I hate short players who seem to be able to tank companies with innuendo and assertions, but little in the way of facts.

The last time I checked, HCG was one of the most shorted stocks on the TSX. Now you have very deep pockets backing it…..good luck shorts. How many million shares will need to be covered. The company will have the capacity to issue more shares to shore up their balance sheet and tada! They are a bonifide competitor, dropping rates in the name of regaining business, forcing other lenders to do the same to try to keep market share.

#49 Nonplused on 06.22.17 at 8:08 pm

#15 Marcus

Have you got a source for that? If it is true it is a frightening development. Sure, shooting a drone down does not imperil a human life as the downing of the SU bomber did (it was not a fighter), but the Americans will not back down. They only know how to escalate. Drone or not, if the Russians or the Syrians shot something American down, it’s time to stock up the bunker. In the same way that they shot 59 cruise missiles at an air base for a chemical attack on somebody else that didn’t probably happen, it is quite likely they will now try and take out all radar and air defenses in Syria and while they can probably do it, there will be dead American pilots and huge outrage. This could lead to the first time in history that the US and Russia have actually been shooting at each other. I don’t predict good results. Russia is weaker, but they are also closer to home and not trying to police the rest of the planet at the same time.

#50 Cheese on 06.22.17 at 8:12 pm

Some days, one just feels like giving up to go live as a hermit in the deeper parts of the Shield

#51 Deplorable Dude on 06.22.17 at 8:18 pm

Love my Preffereds……even inside an RRSP they still churn out juicy 5% ish dividends.

Ohhh and the Trumpinator admitting he has no tapes tapes….Genius….called Comey’s bluff….making sure he didn’t lie in testomony..i.e. Collaborating Trumps story that he confirmed 3 times Trump wasn’t under investigation.

#52 Darren Rayburn on 06.22.17 at 8:19 pm

Interest rates! What interest rates going up! The 30 year Canada bond yield is 1.99%.

This is right below 2%. Just like back in 2016 BREXIT when the 30 year Canada went down to the 1.56% mark.

I love these lower interest rates. My 30 year 6% to 6.5% government strip bonds bought back in 1998, 1999, 2000, 2001, 2002 have accrued 200% compound interest in 17+ years.

This is around 11% to 12% per annum. This is not even including the capital gain on these ones.

My other 4.5% to 5.5% government strip bonds I bought of the several years not maturing until 2037 to 2041 have accrued 7% to 9% per annum and capital gains not included either.

Interest rates are staying lower for longer and the Bank of Canada, U.S. Federal Reserve and other central banks will have a short term impact on any rate increases because of stubborn slower economic growth, recessions, stock market, equity market downturns of 15% to 30% coming soon, higher unemployment both structurely and demographics will keep this going for at least 10 more years.

Small blips up in bond yields like in November-2016 TRUMP impact gone now in the bond market are short term in nature.

Flat low rates short to long term at best for any rate changes in bonds.

#53 crowdedelevatorfartz on 06.22.17 at 8:24 pm

@#34 JSS
“Why no severance packages for Sears employees?”
******

they filed for bankruptcy.

Severance “Packages” arent a garantee……….
On a more important note….

I think most of the Sears Pensioners are crapping their pants right about now

#54 Andrew Woburn on 06.22.17 at 8:25 pm

#17 Screwed Canadian Millennial on 06.22.17 at 6:56 pm
How do the rich get richer? Get sweetheart deals to buy a stock at a 50% discount.

What a racket.
======================

This might be true if there were a line-up of worthy Canadian investors itching to do the deal at a “fair” price, but I didn’t see any.

#55 Freedumb on 06.22.17 at 8:26 pm

#36 Happy Housing Crash Everyone! on 06.22.17 at 7:44 pm

Interest rates are going higher people. Sorry realtors and mortgage broker shysters. We all know you guys are screaming in horrible financial pain. Times will only get harder in this housing crash . Happy Housing Crash Everyone! :-)

————————–
—————–

I find your posts so refreshing and original. You don’t just keep posting the same thing over and over like some people do. You’ve always got something new to say, something fresh. :)

#56 Soaps on 06.22.17 at 8:29 pm

Garth, any update on the guy who sold his place for like 2.2 million, only to have the buyer back out?

Your last update left it at him relisting his home and his lawyer firing a shot across the delinquent buyer’s bow.

Please update! I love soap operas

Lawyers wrestling. Updates as merited. — Garth

#57 The Totally Unbiased, Highly Intelligent, Rational Observer on 06.22.17 at 8:32 pm

The Mainstream Media is still trying unsuccessfully to find any legitimate critics of President Donald J. Trump and his common sense policies for American greatness. So, once again, the Mainstream Mess has reported on some scary-sounding character spouting off against the president for the free publicity. Some guy by the name of Stephen King decided to take some cheap shots at President Trump while he was busy working hard to make America great again. Where does the media find these nobodies that almost nobody has ever heard of? A careful search to try to find out who this shadowy character is, and to uncover his dark motives, has finally revealed that he is obviously just another failed “writer” (and I use that term in its loosest possible sense) who is envious of best-selling author Donald J. Trump’s superior book content.

As every educated person knows, Donald J. Trump wrote such famous classics as The Art of the Deal, The Art of the Comeback, and Think Like a Billionaire, plus more. This is all really serious literature at its very best, coming from a great American president, businessman, and author who is both constructive and thought provoking, practical and intellectual, sexy and rich, and so on and so on, on and on. You get the idea. If you don’t, then you are just not with it. If you don’t know him, you don’t belong.

In frightening contrast, it appears that Stephen King never could think of anything worthwhile to write about. Tragically, his “writer’s block” did not stop the blockhead from scribbling away, frantically seeking fame and fortune to the point of insanity, all the while suffering from a severe case of “diarrhea of the pen.” Stephen King lacked meaning and purpose in life, and wallowed in the morbid muck, and the stuff he produced shows it. Many of his “writings” could honestly be described as “a horror.” Even he himself would have to agree. He just wanted to get some attention by scaring people. It was so much easier than trying to do anything useful with his life. This is so sad. Who did he think would ever read any of that stuff anyway?

Sometimes a self-proclaimed “writer” will just spill some ink and waste some paper and pretend that there is some profound meaning to it. This is the same thing as a self-proclaimed “artist” pooping on the canvass and pretending that there is some profound meaning to it. Of course, other people are expected to look like crazy to try to see the supposedly profound meaning. Both the “writer” and the “artist” try to keep a straight face and not laugh too openly about this old joke that they play on the vain fools who fall for such tricks, and who read their “writings” and view their “art.” The Donald is such a gifted writer that he produced many positive, uplifting, and enlightening masterpieces that will be treasured by astute collectors for years to come. Stephen King produced lower class stuff of a more temporary nature that could be used for kindling in the wood stove.

There have always been people writing fiction, who still wanted to be “writers” even though they did not have anything good to say. For example, hundreds of years ago, some character called William Shakespeare wrote some questionable plays. Though he and his publicists have been trying hard ever since to peddle them as something worth reading or watching, it is now clear that the Puritans were absolutely right to be suspicious of the theatre.

Long after the world has totally forgotten about the gratuitously violent plays written by Bill Shakespeare (such as Julias Caesar), and the boo-BOO “writings” of Stephen Fink (none come to mind), the truly amazing insights of best-selling author extraordinaire Donald J. Trump will live on to inspire, motivate, edify, and dazzle future generations of those who love to dwell on the good things in life.

#58 Adrian on 06.22.17 at 8:35 pm

Yesterday, you showed a graph of Canada’s real estate prices growing since 2008, compared to the USA, where prices fell and then slowly recovered. The following article by Professor Steve Keen explains how real estate prices depend on the acceleration of mortgage debt. When new debt as a percentage of GDP falls and turns negative, unemployment rises and sparks a deflationary recession. (Canada is shown about half-way down the article.)

https://www.macrobusiness.com.au/2017/06/steve-keen-on-the-secret-source-of-eternal-australian-growth/

#59 Noodles on 06.22.17 at 8:39 pm

3% mortgage rates won’t do squat. We need at least 5 percent. Maybe in 20 years time?

#60 John Martin on 06.22.17 at 8:41 pm

Fond memories of Craftsman Tools. In 1960 I bought a box of Craftsman Tools including wrenches, 1/4″, 3/8 & 1/2 ” sockets, , ratchets, screwdrivers,etc. for $49.95. I`ve abused them royally, but never broke one and I still have about 75% of them. Come to think of it I didn`t pay tax on them either !! :)

M80Mb

#61 Millennial falcon on 06.22.17 at 8:43 pm

I’m screaming in horrible financial pain! Oh the agony! LMAO

#62 Private debt becomes public debt. White collar crimes pays on 06.22.17 at 8:46 pm

The banks know they will get bailed out. Just look at previous examples like ireland and spain. fast track 22mins onwards

http://www.aljazeera.com/programmes/specialseries/2017/05/debt-machine-170515074319495.html

#63 Tony on 06.22.17 at 8:47 pm

Re: #38 TWO FINGERS WATSON on 06.22.17 at 7:48 pm

Remember America can fake all their GDP and employment numbers in the future even as their economy continues to go completely down the drain. You have to consider this when making a bet.

#64 Tony on 06.22.17 at 8:51 pm

Re: #47 Hans on 06.22.17 at 8:07 pm

Unless the terms of the deal change the share price should trend at exactly $10.50 Canadian a share because of share price dilution. The share price jumped on expectation of a deal closing this June 29th but the share price should quickly reverse sharply to the downside as no other suitors will surface.

#65 Pete from St. Cesaire on 06.22.17 at 8:58 pm

How do the rich get richer? Get sweetheart deals to buy a stock at a 50% discount. What a racket. Warren Buffett’s Berkshire Makes Home Capital Group An Offer They Can’t Refuse
——————————————–
You can be sure there is a deal to get the Fed Gov to bail-out Home Capitol. That’s where Buffets profits are to be made. Certainly not with the compamy or the market itself.

#66 Dan.t on 06.22.17 at 8:59 pm

Whatever. Nothing will change. Ever year for 15 years prices hit new highs in BC. Obviously it is not an issue and obviously enough people can afford them at these prices so. Nothing will change.

#67 Pete from St. Cesaire on 06.22.17 at 9:08 pm

How much $’s he makes or loses on his investment is completely irrelevant (+260 mill so far) it was his vote of confidence, in Canadian RE that matters.
——————————————————–
That’s right. He was enticed into investing with the promise of a fed gov bail-out of HC; the Buffet name was needed to trick people into having confidence in the market and the already doomed company. He’s not foolish enough to believe that there is any true recovery possible for HC.

#68 The classic on 06.22.17 at 9:13 pm

Now is the time to buy your gold and silver , the canadian government is running a social agenda to strenghten resolve instead of creating an econmic platform, Intrest rates will inevatably rise and it will turn this economy , time to invest in hard assets to protect your families future

As rates rise, so do currency values, dropping commodity prices lower amid weaker demand. Great strategy, if your family can eat rocks. — Garth

#69 april on 06.22.17 at 9:33 pm

Michael Campbell, Money Talks – June 17/17 “Pop goes Canada’s Housing” “The Key is China”.

I just clicked Submit and I got “your posting too quickly, show down. I hadn’t posted anything yet?

#70 Smoking Man on 06.22.17 at 9:33 pm

#125 The BioTech Guy on 06.21.17 at 10:38 pm
#113 Smoking Man

You are way off on CS grads in Toronto, my friend. This is CS mecca in the world now. Mainly AI and Machine Learning but also cloud computing and many others.

I can’t find the right people for my team of forty and need to resort to newcomers from Nepal and of all places! This is for pure software development where we need most thinking. Maybe IT is a bit different.

Of course not all schools and all degrees are created equal but for real work you can’t find decent grad in this city below 6 digit income.

We do agile not because they can’t think through the problem but because requirements and the world is changing way too fast for a traditional waterfall.
…………………

I would have responded sooner but I got my hands full with free bestinvoice.biz I’ve stopped my Google AdWords till I catch up. I just wanted some cash flow to for gambling and alcohol abuse. Did not mean it to turn into a job.

I’m calling BS on why you do Agile, it’s the whole what if my developer gets hit by a bus theory. When you break it up, it’s a lot less risk, you can pay less but get way more bugs and shit results.

And what if the guy scooping the project is just an idiot who has memorized the acronym dictionary, you know he’s an idiot but has perfect teeth so you let it slide.

I surf the waterfall with one foot on a short board, the other foot waving to the crowd. I’m the best. I refuse to whore myself for the ridiculous rates resulting from the flood of TFW.

#71 Vit on 06.22.17 at 9:36 pm

DELETED

#72 MR. MR. on 06.22.17 at 9:44 pm

#47 Hans

You are delusional if you think buffet will allow home capital to continue with fraudulent mortgages. Buffet wins in a housing crash. The biggest losers are SH. Lots of stock dilution and interest rate that are at 9%. Buffet or no buffet it was a terrible deal. No one wanted to invest in home capital unless they were getting very favorable terms that border stupid to except. The SP should of went down. With luck the SP will go higher and you can short it at earnings.

#73 WUL on 06.22.17 at 9:44 pm

This old timer liked Sears in the old days. Somehow I broke a Craftsman wrench many years ago. I took it to Sears and staff walked over to the rack, grabbed a replacement, gave it to me and asked not a single question. Less than 45 seconds.

#74 Smoking Man on 06.22.17 at 9:45 pm

USDCAD range bound, at the lower limit right now, you know what to do.

#75 Damifino on 06.22.17 at 9:49 pm

#58 John Martin

In 2010 I sold a Craftsman radial arm saw that I bought in 1984. The guy who took it said it was only because it was made in America, before most of the ‘overseas junk’ flooded in.

#76 Binder Dundat on 06.22.17 at 9:52 pm

@ #52 crowdedelevatorfartz

“I think most of the Sears Pensioners are crapping their pants right about now”

You betcha:

http://ca.reuters.com/article/businessNews/idCAKBN19D2FW-OCABS

“Sears Canada to end pension payments-court filing

NEW YORK (Reuters) – Sears Canada Inc (SCC.TO: Quote) plans to file a motion with a Canadian court to request permission to suspend certain monthly payments to its pension plan because it is running low on cash, according to a court filing.”

The retailer, which filed for bankruptcy Thursday, also intends to stop payments to a post-retirement benefit plan providing retirees with life insurance and medical and dental benefits, according to the filing. Sears Canada is current on the payments for the pension and post-retirement benefit plan now.

#77 genbizx on 06.22.17 at 9:55 pm

#48 nonplused
oh here we go again…a tiny, city-sized country with another citizen who’s got it all figured out..the big bad u.s. again. the guy who sits on his couch talking about how so and so just missed a breakaway in the game last night and quotes stats out his ying yang…that guy doesn’t know poo and a country whose well being rises and falls on everything the us does should know it’s role and shut it’s mouth

#78 Asterix1 on 06.22.17 at 9:56 pm

Too many posts cheering for one side without any relevant arguments. “GO LEAFS GO”, “GO HABS GO”. Same chant, different context.

An unbiased analysis of Toronto RE market will quickly point to the fact that is a massive bubble, one that is deflating.

Regarding a rate increase in Canada, I hope they start raising it for the good of the country. Will it happen in July?

GO LEAFS GO.

#79 GFD on 06.22.17 at 10:03 pm

12% crash in 8 weeks is theoretically 78% annually…….sounds fundamentally right

#80 choptstix on 06.22.17 at 10:07 pm

http://www.straight.com/news/927761/city-vancouver-report-reveals-25495-homes-either-empty-or-used-temporary-and-foreign
”City of Vancouver report reveals 25,495 homes either empty or used by temporary and foreign residents”

#81 Smoking Man on 06.22.17 at 10:07 pm

I feel for my former clients on the trading floor, their heads must be spinning just about now.

They must be thinking where can we learn about acceptable pronouns? What does cultural appropriation mean?

Smiling and clapping while the boss looks over their shoulder as they watch Justin Trudeau hug a unicorn clip on youtube while thinking WTF, don’t laugh it might cost me my job.
https://www.youtube.com/watch?v=Xp7OAjiaJXI

Searching online for the best diversity and inclusion course, realizing identity politics is becoming more important than making loot for the firm and ourselves.

Going to a speech therapist to try and get that manly voice up a few octaves, aiming for that elusive trans sound.

Everyone gets a trophy now except for Smoking Man.

Sorry, I don’t wear pink or pinko shirts, not in my DNA.

#82 april on 06.22.17 at 10:16 pm

#68 – O, my mistake. It went so fast I didn’t see it happen.

#83 n1tro on 06.22.17 at 10:25 pm

#72 Smoking Man

“USDCAD range bound, at the lower limit right now, you know what to do.”

My crystal ball is telling me the USD will turn around the 26th next week. May go down to 1.3166 but huge upside after that. Can any other forex traders confirm?

#84 X on 06.22.17 at 10:25 pm

IF the BoC were to raise rates in July…just for arguments sake…yes it would immediately affect some interest rates, and some professions….but its general effect on the economy is felt about 6 months later…is that about right?

#85 dr. talc on 06.22.17 at 10:26 pm

print and electronic media – where the industry is now begging Ottawa to pony up money to pay 35% of reporters’ salaries

—-

traditional print and electronic media have a lot in common with politicians: they all bear false witness.
The general public is finally waking up.

#86 WUL on 06.22.17 at 10:27 pm

The Craftsman wrench I broke was a bigger open end / box end. Maybe 1 and 1/4 inch. I was probably sniping it with a three foot pipe or pounding it with a big hammer.

Sears likely suspected that but did not care.

“Nostalgia Tool Time” tonight on GF. Beats the IT job market and textile factories like Berkshire Hathaway. Yes, WB’s first purchase was a textile plant with that name.

#87 crowdedelevatorfartz on 06.22.17 at 10:27 pm

@#56 The totally unbiased Trump lickspittle….blah, blah, blah.

Apparently Trump’s meandering babblespeak has rubbed off…….

#88 Hans on 06.22.17 at 10:29 pm

@#70 Mr.Mr.

I am delusional I guess. The price is at $19 though and I dont think Im dreaming. Berkshire is likely the best case outcome for a crisis in confidence….and where does the fraudulent issue come from. Speak to a mortgage broker about how banks come to them looking for a bump in originations. Rules are relaxed. Conditions waived. All until the bank has hit their target mortgage value. Im not talking hcg either. Liar loans….yes theyre an issue and i highly doubt hibbard would let it continue. If u listen to his interview today…..they are going to continue in the mortgage origination business and continue to look to securitize them for a profit (i.e. not keep them on the books and pass of the risks of default). Maybe Im not so delusional. The 9% loan? Its a moot point now. There isnt going to be the need shortly. This new board has done a masterful job of steering the titanic out of iceberg alley.

#89 Quebec is Great on 06.22.17 at 10:37 pm

To anyone interested in defending this glorious blog, head over to reddit here:
https://www.reddit.com/r/canada/comments/6ioo11/realtors_internal_numbers_show_toronto_home/
and drop some sanity on the misguided.

#90 Mark on 06.22.17 at 10:38 pm

Personally I don’t think Warren Buffet really appreciates what he’s walked into here. By making this investment, he’s drank the Canadian RE sell side “Kool Aid”, the of rising prices when we’re really much closer to 2013 prices, the 2013 CMHC-change-induced plateau, with LTVs at a lender like HCG are much closer to 100% than the mere 67% claimed. You’d think that Buffet would have been educated as to the nature of the shifting sales mix in RE, and its profound impact on Canadian prices in the post-2013 period, but this investment, and the severe exaggeration of the value of HCG really calls that into question.

Yeah I know, Investorsfriend will probably respond and remind me that Buffet has at least 1000X more wealth than do I, how dare I criticize. But there are plenty of examples, historically, of “the smartest people in the room” being wrong, extremely wrong at the tail end of long-term economic cycles. Committing large amounts of capital well past a sector’s “best before date”. This may very well be one of those cases.

#91 conan on 06.22.17 at 10:42 pm

Sears had everything, and more really, to be the first Amazon dot com. How their board of directors missed this, is beyond mysterious.

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

#92 Mark on 06.22.17 at 10:45 pm

“As rates rise, so do currency values, dropping commodity prices lower amid weaker demand. Great strategy, if your family can eat rocks. — Garth”

The 1970s disagree with you Garth on the correlation between interest rates and commodity prices. Commodities of all kinds did extremely well despite rising rates. But the contemporary situation appears to be much closer to the 1930s, that of significant and widespread deflation, especially with the triple bubbles (housing/RE, debt, and equities) present in the US economy in the late 1920s that are set to unwind.

The reason? As deflation destroys value of assets and pricing in the economy, gold becomes a safe haven, an asset that can’t default. With gold being at such a low concentration of portfolio assets, historically, its a pretty slam dunk contrarian proposition to have at least a modest portfolio exposure. Even if its just by way of owning a Canadian equity index fund exposed to the miners.

There is no deflation, nor will there be. — Garth

#93 will on 06.22.17 at 10:47 pm

Sounds like you are ok with a small percentage in high yield bonds Garth. My problem is my high yield bond fund is terminating next month as per plan. It has been a good fund with reliable payout. Any suggestions for a replacement fund?

#94 Smoking Man on 06.22.17 at 10:47 pm

Crossed the Rubicon on LinkedIn tonight. I was gentle.

You know it’s going to get worse the more loot free bestinvoice.biz gets.

No way I’m going back to my former life. I just shot it in the head.

#95 Mark on 06.22.17 at 10:54 pm

“erasing the jobs of about three thousand people (without severance pay).”

You sure about the ‘without severance pay’? I know wages, for work actually rendered, have priority over unsecured creditors in the hierarchy of claims in a bankruptcy. But presumably the severed employees would achieve at least some recovery as unsecured creditors for their severance claims.

In the case of the 2003 CCAA restructuring of Air Canada, the recovery to unsecured claims was 20 cents on the dollar. Any Sears Canada bonds trading out there (I don’t have a Bloomberg terminal!)? If anyone knows, how many cents on the dollar are they trading at?

#96 Timberr on 06.22.17 at 10:55 pm

Even the rich know it’s time to cash out….

“Billionaire Joe Segal’s $63M Vancouver mansion up for sale”

“The residence was recently assessed by the province at $40 million, making it one of the province’s most valuable properties.”

“The nearly 22,000 square foot home sits on an extremely private, gently sloping 1.28 acre property, overlooking English Bay and the North Shore mountains.”

http://www.cbc.ca/news/canada/british-columbia/billionaire-joe-segal-s-63m-vancouver-mansion-up-for-sale-1.4173229

#97 Ponzius Pilatus on 06.22.17 at 11:01 pm

Try to figure the difference between idiots who are hoarding Capital shares because the Sage invested in the company, or the idiots who are hoarding Vancouver RE.
No difference, stupid gullible sheeple both of them.

#98 Mark on 06.22.17 at 11:05 pm

“How do the rich get richer? Get sweetheart deals to buy a stock at a 50% discount. “

The rich can also get a lot poorer that way, especially if they think they’re getting a 50% discount on a stock that may very well be completely worthless.

Those who are worried about wealth inequality should actually be quite glad that the ‘rich’ are willing to double down on investing in a sector and an asset class that is well past its peak. Leaving opportunities available for mere mortals to invest in sectors that offer the proposition of much greater value and returns.

It may take quite a few generations for Warren Buffet’s offspring to become poor, but most rich people these days accumulated their wealth relatively recently (usually through concentrated sector bets). Family wealth lasting more than a century is actually quite rare in the modern/contemporary economy precisely because the kids don’t diversify out of the successful concentrated sector bets made by their parents.

#99 Lahdeedah on 06.22.17 at 11:08 pm

Hey, blog dogs, why no mention of Sears’ cousin, HBC aka Hudson Bay Company, hmm? Why just 2 weeks ago, they were in the news for laying off 2000 employees and restructuring (that’s a lot more than RBC’s layoffs) http://business.financialpost.com/news/retail-marketing/hudsons-bay-co-to-cut-2000-jobs-throughout-north-america-by-end-of-2018/wcm/be868143-e68a-4410-a4a7-27b672d9eb41

And just this past week, a US investor in HBC pleaded for them to consider repurposing their stores and selling off their ‘crown jewel’ locations for the sake of real estate gains.

Today’s indebted consumer, who still wants to have their cake and eat it too, and then take a photo of it with their $800 smartphone and post it on instagram #nomnom (that’s millennial speak for you old fogeys out there, lol – whoops, there I go again), this consumer wants to shop either at Costco, Walmart or Amazon for low prices and convenience and to save a buck…so that they can spend the rest of their bucks (on credit, of course, we don’t carry cash anymore) on high-end luxury goods in the US’s gift to retail, Nordstroms and Saks. That’s very telling of the economy and the consumer’s strategy to spend their (the bank’s) money. And a sure sign that whatever is troubling HBC is bigger than the brand, its a symptom of the times, and the same problem that has run Sears into the ground. Nobody wants to waste time in a huge department store that has $30 towels when they can get the same brands for half the price at Winners or Marshalls or heck, go to Walmart or Costco for even less. Or, if they really don’t feel like trodding through the crowds, just go on Amazon and get that puppy drop-shipped with the click of a mouse and a reassuring customer review and star-rating.

And then go to Nordtroms and buy a $900 pair of Manolos. And take a pic, and post it on instagram, cause you’re #onfleek girl!

#100 Evan on 06.22.17 at 11:22 pm

It’s not surprising to see Buffett buy some deep value firms. He made his highest returns off of “cigar butt” companies, troubled firms, before being forced to switch into large growth companies due to the size of his portfolio.

http://www.netnethunter.com/have-you-been-sucked-into-the-warren-buffett-trap/

The perf’s Garth talks about seem like a good hedge against rates, but it really pays to get a good understanding of deep value since the returns are so good.

https://www.brokenleginvesting.com/what-is-deep-value-investing/

Not recommended for people who have no desire to learn about investing or have weak stomaches though.

#101 InvestorsFriend on 06.22.17 at 11:23 pm

YES!, you may hold Prefs in RRSP and TFSA

#3 BMan on 06.22.17 at 6:28 pm asked:

“Prefs should make up about 20% of your overall portfolio, and half of the fixed-income allocation…”
I know this is a great option for non registered accounts, buy what if you are not maxing out rrsp/tfsa yet (portfolio is all registered accounts)? No dividend tax credit matters there. Still worthwhile to hold these in an rrsp and/or tfsa?

************************************
You are correct that if you have both registered and non-registered accounts then try to put the tax advantaged stuff (prefs and capital gains) in the non registered.

BUT many people have ONLY registered accounts.

Instead of thinking hey I don’t get the dividend tax credit, focus on the fact that you don’t pay any tax! So a pref in a TFSA is always a better return than a pref in a taxable account. But again if you have fixed income favor the registered for that and the TFSA for the pref.

In a TFSA it is obvious that you pay no tax and so certainly have not “lost” the dividend tax credit. AND mathematically it can be shown that an RRSP gives identical return to TFSA if the tax rate at withdrawal is the same as it was at contribution. So again you LOST nothing in terms of no dividend tax credit. You gained due to no tax in RRSP.

Anyhow my simple theory for my RRSP is invest for the highest return I can get at an acceptable risk level. Works for me.

But remember when you put 10k in an RRSp and get back 4k refund it means your share of the RRSP is 60% (that was what you paid). The government will tax back about 40% on withdrawal. Your 60% will grow completely tax free. That’s the math.

RRSP investors are poorer than they think as they forget that the taxman always owns about 40% of “their” RRSP. Fair since the taxman contributed about 40% through the refund. And more than fair since your 60% share will grow tax free. The math does not lie.

The RRSP refund is not a gift. Rather it is, mathematically speaking, the taxman becoming a partner in your RRSP. He’s about a 40% partner. In return he lets your 60% grow tax free forever. Learn to love him for that.

#102 Stock Picker on 06.22.17 at 11:29 pm

Bufettt paid $10 a share for home Capital, leaving current shareholders dangling. The Tsx is now one third valued in marijuana stocks, buy the index etf only if yer stoned. Anyone else reminded of Bre X and Nortel days. Poloz once again does the Trudeau twirl away from rates rising. He said yesterday that oil is the new concern du jour. unless your not already punch drink from Poloz rope a dope bs…stay on point…..no rate increase while Trudeau tries to get reelected. Meanwhile F is on a tear, stock picking still rules.

#103 InvestorsFriend on 06.22.17 at 11:33 pm

Blacksheep is Correct

#35 Blacksheep on 06.22.17 at 7:43 pm said:

The impact of Mr. Buffets investment in Home Capital (Can RE) can not be overstated, as much as it’s being downplayed here.

*******************************************
Absolutely correct.

P.S. Don’t you know I am the former Shawn (not the current one)?

And yes loans create deposits aka money. And yes there is NOTHING nefarious about that. In fact it is wonderful. And yes every dollar of debt so created is offset by a dollar of deposits owned by someone. And yes one man’s debt is another man’s savings. Whee we are awash in savings as houses are bid up in price and turned into one man’s mega debt and another man’s mega savings. That could end badly as too much has been borrowed by many people. But any suggestion that the banks are not an essential part of our prosperity is dead wrong.

#104 White Crock BC on 06.22.17 at 11:34 pm

RE: Hans on 06.22.17 at 8:07 pm

Cohodes lost some serious cash today.

Pretty sure he can absorb those losses though by

selling eggs and what not.

#105 In the news today on 06.22.17 at 11:35 pm

http://www.ctvnews.ca/business/foreign-home-buyers-surge-37-per-cent-in-montreal-on-growth-in-chinese-purchases-1.3471550# :

“Foreign home buyers surge 37 per cent in Montreal on growth in Chinese purchases”

Foreign buyers in Montreal = 1.8%. Why does this even merit a news story? Or posting here? — Garth

#106 InvestorsFriend on 06.22.17 at 11:40 pm

Taxman as partner in RRSP

If you bought a rental house and then your brother bought 40% of it from you, you would not take his cash and go to Mexico on vacation and then whine when he wanted his 40% of the proceeds on sale of the house later. But that is exactly what many RRSP investors do since they don’t realise the refund was the taxman buying in for about 40% of “their” RRSP. And the 40% on withdrawal is of course not certain, could be higher, could be lower. But the point stands. That RRSP refund is no gift. It does not increase your net worth by a dime.

#107 Jerry on 06.22.17 at 11:43 pm

Preferred shares:

Most people have their holdings divided between fixed income and equity in order to stabilize their portfolios by exploiting inverse correlation of the two classes. Counting preferreds as fixed income is a poor tactic as they do not correlate well with any class and their correlation with bonds is the lowest of all.

They are only truly beneficial if held in non-registered accounts. The tax advantage is gained there but lost in registered accounts, which wipes out any benefit you would have gained by taking on the risk of holding them.

Rubbish. — Garth

#108 InvestorsFriend on 06.22.17 at 11:44 pm

Blacksheep

Sorry, I meant the Buffett impact on Home Capital itself can not be over-stated. As far as the impact on Canadian home prices, I see very little impact other than it does keep Home in the mortgage lending game. But there were other lenders stepping in anyhow. I guess it might lower mortgage rates for non-prime borrowers a bit. But that is minimal impact I think.

#109 Smoking Man on 06.22.17 at 11:46 pm

When god is afraid of you.

https://youtu.be/2X_2IdybTV0

#110 Mark on 06.23.17 at 12:04 am

“. The Tsx is now one third valued in marijuana stocks, buy the index etf only if yer stoned.”

You sure you’re not the one who’s stoned? The S&P/TSX Composite Index is currently:

36% Financial Services
16% Energy
12% Basic Materials
9% Industrial Services
8% Technology
7% Utilities
7% Consumer Goods
1% Industrial Goods

(source: TD Canadian Index e-Series fund website).

IF the BoC were to raise rates in July…just for arguments sake…yes it would immediately affect some interest rates, and some professions….but its general effect on the economy is felt about 6 months later…is that about right?

There definitely is lag, but the BoC does not operate in isolation from the rest of the economy. If rates need to rise, the bond market, in the weeks and months prior to a BoC policy rate change, usually indicates such in its implied expectations of BoC policy. The BoC essentially verifying the outcome, not actually setting policy. If the BoC attempts to steer policy in such a way that is completely contrary to the markets or to reality, speculators can and do react fairly quickly in response.

For example, if the BoC raised rates in July, where the data more strongly indicates the need for rate cuts to head off accelerating Canadian deflation, the Canadian dollar could react quite violently to the upside and the deceleration in new orders in the export sector could be quite rapid.

#111 Crypto millionnaire on 06.23.17 at 12:17 am

A follow up to my post of two days ago.

Thanks to everybody who provided advice.
I have not decided what to do yet.

Interestingly enough, the price of Ethereum went down 10-15% since then, and there was a flash crash on one of the exchanges (GDAX).

Some fat fingered bozo sold millions worth of Ethereum with a market order, which crashed the price from $320 to $260 within seconds.
Then a cascading effect of market stop loss orders being triggered and margin long positions being liquidated had ALL buy orders in the book filled, bringing the price to a few cents temporarily.

However, you have to remember that many exchanges offer crypto trading, and while the price was brought so low on ONE exchange, all the rest remained around $300.

So basically some people got wiped out, while other saw their buy orders executed at at few cents, and became instantly millionaires.

This is how messed up AND exciting crypto trading can be.

So when I see people here asking whether they should buy Ethereum and Bitcoin, my advice would be to:

1) Only invest an amount you could afford to lose overnight. It really happens over there, and you don’t get it back.
2) Never ever use margin if you trade
3) Avoid trading altogether, just do your research and pick a crypto with the most upside potential in terms of utility and adoption. Then hold for months or years.
4) Don’t leave your coins in an exchange. Use an offline wallet.
Exchanges in the crypto world are quite immature, as displayed by this flash crash.
They are also very tempting targets for hackers.

Good luck

#112 Doug t on 06.23.17 at 12:26 am

What are you expecting in the next 5 years? 10 years? 20 years? Try to envision what is coming down the pipe – oil less important, retail bricks and mortar dying, robotics leading the way, wages stagnant, social anxiety growing, social unrest due to wealth separation – celebrate Canada’s 150 bday cause this country will never be the country we grew up in –

RATM

#113 Dee on 06.23.17 at 12:37 am

Sorry Garth but I think you might be wrong with this one. Sales have taken a beating but a big part is people cannot get financing. Ive heard this from several people. People I know of in the mortgage business were trying everything to get private money to fund mortgages because there were problems with the alt lenders. And the alt lenders were doing a lot of, umm, special deals (what I heard through the grape vine).

Now I dont know if the osc or whichever regulating body will keep a close eye on the alt lenders but I hope to God they do. If not, it is still party on. This is sad.

#114 Ronaldo on 06.23.17 at 12:42 am

#7 Leo Kokivakis on 06.22.17 at 6:36 pm

Will be interesting to see how long the Buffett effect lasts….
——————————————————————
Only in it for a quick buck. Won’t be around for long and then watch the stock drop once again. Seen this movie before.

#115 Ronaldo on 06.23.17 at 12:49 am

#104 InvestorsFriend

That RRSP refund is no gift. It does not increase your net worth by a dime.
——————————————————————
Depends on what the tax rate on withdrawal will be. Could be only 20% or lower in which case you end up the winner. Not many will melt down their RSP’s and end will up paying more tax in the form of clawbacks to other means tested benefits or even the OAS. RSP’s are not for everyone. In fact, not for most people..

#116 steerage steward on 06.23.17 at 1:08 am

Toronto condo market looking up

https://m.youtube.com/watch?v=E1d5VvCa8Fo

#117 steerage steward on 06.23.17 at 1:18 am

Interested how Garth feels about Buffet investing in this? Payed a few million in fines last week, get a few billion this week from a very smart invester

#118 paulo on 06.23.17 at 1:20 am

the engineered dead cats bounce : featuring HGC and
Warren Buffet. so whom is up for some good old fashion
Texas hold em? lets see 27% in the pot already check or raise umm this will be interesting,the onlookers are already surrounding the table.

#119 I thinks I know something on 06.23.17 at 1:50 am

I just don’t see how anyone can be so delusional as to think interest rates are going up in the near future. The recent rates hikes in the US were just a blip. They will most likely be going down again soon. And Canada will probably turn to negative rates in the coming years. Rate increase? What nonsense! This ponzi scheme has a long way to go before it collapses.

#120 Nonplused on 06.23.17 at 2:09 am

#75 genbizx

????

#121 Where's The Money Guido? on 06.23.17 at 2:27 am

The Federal Liberals supposedly gave the province of BC $10 million to help with the fentanyl crisis in Vancouver and BC and no one has seen any money.
So who has it, the feds or BC gov’t. Probably in BC’s general revenues, that’s where Crusty’s getting the money for all those promises in the throne speech after she “heard the public”…, this time. lol

#122 DON on 06.23.17 at 2:38 am

#9 Game On Victoria on 06.22.17 at 6:43 pm

Contrary to VREU and collapsing sales in Victoria, the South Island communities are having bidding wars – bidding wars in semi-rural areas! Prices up 25-30% over the last year. Rents up 20% (for those new homes being rented out and those with fixed terms leases ‘renewing’)

A parallel to what happened with the Metro communities like Surrey and Langley last year and this year, and with the Fraser Valley – with Vancouver prices pushing afar those that have cashed out and those with families that cannot afford houses. And of course, the resulting spike in prices and rents..

Ouch! The crisis spreads. Soon all of BC will be written off as this pattern spreads – those cashing out and ‘refugees’ from high priced cities spread to surrounding communities bidding up prices; those that cannot afford and those cashing out to the urban dwellers then spread farther out, increasing prices in their surrounding communities, and so on and so forth.

*********************
Where in Victoria or other places on the island? Houses in my neighborhood are sitting for longer and longer as we tick into the summer.

#123 Karma on 06.23.17 at 3:25 am

#38 TWO FINGERS WATSON on 06.22.17 at 7:48 pm
“Garth I bet u a bag of mice no interest rate increase in 2017 and none again in 2018. A reduction maybe, but no increase.”

The market disagrees with you. Click “5H” or “1W” on the chart.

https://ca.investing.com/rates-bonds/canada-1-year-bond-yield

#124 Wrk.dover on 06.23.17 at 6:03 am

Is Mark Poloz?

#125 A Reply to #88 Mark on 06.23.17 at 6:13 am

Hasn’t Buffett already doubled his money?

#126 A Reply to #99 InvestorsFriend on 06.23.17 at 6:27 am

In all your calculations (re RRSPs) you ignore the time value of money and discounted cash flow. The taxes refunded and reinvested at the front end (age 20+) are worth much more than the taxes paid at the back end (age 71+), regardless of tax rates.

#127 Dharma Bum on 06.23.17 at 6:55 am

Smoking Man must have finally been usurped by the alien.
The imposter alien now posting as Smoking Man thinks he is fooling us. Ha ha. We’re onto you, sneaky alien being.
Obviously you are not the real Smoking Man.
You can spell and be articulate. Hmmmmmmmmm……..

#128 maxx on 06.23.17 at 7:17 am

#8 Ace Goodheart on 06.22.17 at 6:43 pm

Oh yes, the power of dumb.

Only in Canaduh would you find borrowers this stupid.

No mystery whatsoever as to why rates are near zero and housing costs in the frozen north so insane.

Never underestimate the profit to be milked from house horny, googly-eyed morons.

This is precisely the fiscal plaque Canaduh needs to remove from the economy.

Starting 10 years ago.

#129 Lahdeedah on 06.23.17 at 7:27 am

#101 InvestorsFriend on 06.22.17 at 11:33 pm

True dat. Buffet bought his first company in just this fashion, bought majority share in something that was on the rocks. He must be having fond memories. Probably the most rational, unfazed investor out there. He’s always looking for deep value and fire sales. That’s his schtick. Cool hand Luke. And yeah, all those mortgages are backed by houses, and if not Home Capital, then some bank would repossess them at some point, so why not him?

#130 Renter's Revenge! on 06.23.17 at 7:30 am

Retail is dead! Long live retail!

#131 keep dreaming on 06.23.17 at 7:56 am

12% crash in 8 weeks is theoretically 78% annually…….sounds fundamentally right

………

:)

#132 Julia on 06.23.17 at 7:58 am

#52 crowdedelevatorfartz

Technically they filed CCAA, which allows for restructuring under the Bankruptcy and Insolvency act. They are not bankrupt at this time and if they can successfully restructure they will not be. Now whether they can restructure is another story.

I see no reason why terminated employees will not get statutory termination payments.

#133 Julia on 06.23.17 at 8:00 am

#52 crowdedelevatorfartz

Just to add: Pension is a separate entity. It is underfunded and pensioners will certainly be compromised if they Company cannot fund the shortfall or continue to contribute going forward. They will retain what they contributed at a minimum.

#134 Julia on 06.23.17 at 8:11 am

#93 Mark
You sure about the ‘without severance pay’? I know wages, for work actually rendered, have priority over unsecured creditors in the hierarchy of claims in a bankruptcy.

WEPPA allows for a superpriority in a Receivership or Bankruptcy, up to $3,800 per employees including severance via Service Canada (who then has a claim maximum $2,000 per employee over the estate but excluding severance).
This is a CCAA so this superpriority doesn’t apply so wages and severance can be paid by the Company but are unsecured claims if they are not paid.

#135 Julia on 06.23.17 at 8:16 am

Adding: Wages and severance are unsecured *until* a bankruptcy, then employees can claim via Service Canada who will have a super priority.

Note: I should really get my coffee before responding with incomplete comments.

#136 TurnerNation on 06.23.17 at 8:35 am

A buddy tried selling his “investment condo” in Toronto. Deal fell through on financing.
Buyers walked. Cannot find another one.
He’s getting a lawyer.

It’s over. Kaput

#137 Livin Large on 06.23.17 at 8:37 am

Ronaldo, that “when your tax rate is lower” concept is what the banks and mutual fund pushers use as their mythical sales pitch…it make common sense. However, “common sense” is almost always commonly wrong.

The cost of living has and always will increase and compound over time and the longer the time, the greater the compounding.

My first job out of university in 1979 paid me $1,500 gross per month and I lived quite comfortably on it. Today? Not a chance in hell of maintaining even that lifestyle on twice that.

The Feds created the RRSP instrument knowing full well it was in their best interest to collect their due on the back end when cashflow demand was much higher and therefor. The RRSP concept only “works” if inflation is neglible and if that’s the case then returns are equally neglible.

Now, if RRSP withdrawl tax rates were variable based on the age at withdrawl then I’d be all in.

The government is never your friend when it comes to money.

#138 fancy_pants on 06.23.17 at 8:38 am

Imminent rate hike warnings is decade old lip service that has outdone Peter crying wolf many times over. The puppets at the levers have their hands tied.

Our debt-based monetary system cannot handle ‘normal’ rates anymore. How many times can the same $ be lent over and over? We continue to test those limits. QE lets off steam but that simply perpetuates the problem. Financial crisis 2.0 and/or inflation is far more imminent than any significant rate increases.

This can’t end well. Don’t hold too tightly to your hard earned cash. Enjoy it along the way. Don’t assume the value of your savings for tomorrow is promised.

#139 crowdedelevatorfartz on 06.23.17 at 8:55 am

@#124 A Reply to Investors Fiend
“In all your calculations (re RRSPs) you ignore the time value of money and discounted cash flow. The taxes refunded and reinvested at the front end…”
*******
Yep.
No to mention if that RRSP tax refund is dumped into a TFSA……….

#140 Oakville Stinks on 06.23.17 at 9:01 am

I just reviewed homes for sale in Oakville.

Neighbour dropped price by $200,000 in the last month.

Asking $1.15 Million (1 month ago)
Asking $0.960 Million (Today)

Similar Houses in the area have also dropped in price to that same level and sellers are now competing for buyers!!!!!

#141 Realtorist on 06.23.17 at 9:11 am

The investment shows Buffett’s LACK of confidence in the Canadian R/E Market…He is lending $2 billion but wants $4 billion of mortgages as collateral. The $4 billion have an LTV of roughly 75% which means the $2 billion is secured against about $5.3 billion of real estate. $2b/$5.3b = 37%. There you go folks, THE GREATEST INVESTOR IN THE WORLD IS LENDING AT 37 CENTS ON THE DOLLAR FOR CANADIAN REAL ESTATE. BUCKLE UP BECAUSE THE CRASH JUST STARTED!!!

#142 The Technical Analyst, CSTA, CPD on 06.23.17 at 9:16 am

“Prefs should make up about 20% of your overall portfolio, and half of the fixed-income allocation”

Garth, I know where you are coming from. But I respectfully disagree and it’s not the advice “I” would give to my clients nor when I mentor Financial Literacy in regards to a Balanced portfolio.

You say “It’s not about Capital appreciation but income”. And I agree with that but it is misleading as most investors can’t take a 10-50% loss and not sell. Prefs are stock, not bonds and have no place in a BALANCED (60/40) 40% of FI. in a aggressive growth portfolio (80/20), yes.

Then we have this today:

Fitch Ratings‏ @FitchRatings · 22h hours ago

“Canadian Banks: Housing prices & Household Debt Remain Twin Concerns.”

AND

Ryan should have noted this:

ETF (XLF) outflows for Financials -$191,799,630. That’s just yesterday.

Food for thought.

Preferreds are more stable than common stock and absolutely should be on the fixed-income side of a balanced portfolio, although they have characteristics of both bonds and equities. Investors need to be educated that preferreds are held for tax-efficient, predictable and superior income, paid quarterly. The coming capital gains appreciation as rates rise from historic lows is but a bonus. And you teach financial literacy? Pity. — Garth

#143 westcdn on 06.23.17 at 9:21 am

I was about 4 and I found a perch on a hill behind my house. I had my jack knife and my Dalmatian dog with me. I liked to take in the scenery. I see a commotion beneath me. I wasn’t hiding and I was plainly visible. I did not comprehend what was going on. Then I see my mother come on to the back lawn, fall to her knees and start crying. I run down to her and ask what is wrong. She nearly broke a rib.

When I turned 5, my mother thought I should have a bike – school was coming. My father said no way unless I could ride. She borrowed a bike from neighbours. She pushed me down the hill – it wasn’t steep. She probably ran beside me but I was focussed at what was coming. She would kiss my boo-boos, give me a hug and then push me down the hill again. By the end of the day, I could ride that bike like a champion. I got a bike on the next barge shipment.

I happened to watch an episode of Marilyn where she sent a guy to a restaurant to learn to learn to cook. He is asked to do a flambé. His response – I love you mom.

A worthy post. — Garth

#144 A Reply to #56 The Observer on 06.23.17 at 9:31 am

Horror master Stephen King, with more than 50 titles, has sold an estimated 350 million books.

Tony Schwartz, ghostwriter of the The Art of the Deal, in a New Yorker article in July, revealed he felt “a deep sense of remorse” about his contribution to making Trump popular.

“I put lipstick on a pig,” he said. “I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.”

Here is a running list of good books whose sales have spiked because of Trump: Margaret Atwood’s The Handmaid’s Tale, Hannah Arendt’s The Origins of Totalitarianism, Eric Arthur Blair’s 1984, John Lewis’s March, Sinclair Lewis’s It Can’t Happen Here, and the Constitution of the United States.

#145 Ole Doberman on 06.23.17 at 9:32 am

#35 Blacksheep on 06.22.17 at 7:43 pm

Who is the most successful investor in the US and the whole godamn planet?

http://www.therichest.com/business/economy/10-of-the-most-successful-investors-in-the-world/

That’s right, Warren Buffet.

The impact of Mr. Buffets investment in Home Capital (Can RE) can not be overstated, as much as it’s being downplayed here.

How much $’s he makes or loses on his investment is completely irrelevant (+260 mill so far) it was his vote of confidence, in Canadian RE that matters. How many big players do you think will attempt to take to opposite side of this trade and short our RE market now?

That’s right, no one with half a brain. You can guarantee anyone short is scrambling to cover as I type.

This of course changes nothing in the Supply VS Demand equation, but it sure as hell gives a psychological boost of confidence to those on the fence about Canadian RE investment.

I can hear it now:

Good enough for Warren, good enough for me.
———————————————————
It’s ok Garth I got this one…

Distressed play like I said, Buffet will be collecting millions of distressed mortgages after the crash. Grab a brain or go back to your pasture – Doberman

#146 crowdedelevatorfartz on 06.23.17 at 9:47 am

@#130 Julia
“I see no reason why terminated employees will not get statutory termination payments…..”
*****

In a perfect world yes but we ARE talking bankruptvy.

The taxman is first in line.
The Banksters Loans second.
Suppliers owed money third.
Contractors, Truckers, etc etc etc……Fourth
Severance packages for a company that is going banklrupt are way way way down the list of

The company has already filed to reduce retirement benefits for employees and cease contributing to their benefits program. There is always a powerful argument for commuting a pension, when you are able. — Garth

#147 Julia on 06.23.17 at 10:03 am

#144 crowdedelevatorfartz

They are not yet bankrupt. Severances packages and wages are currently at the back of the bus. Company can opt to pay them or not – that will be part of their restructuring plan and (as Garth points out) they are requesting an end to pension and benefit payments to retirees. That plan is subject to court approval.

If (when) they do file for bankruptcy with a plan not approved by the court of a failure to meet the approved plan, employees become 1st in line under WEPPA including severance albeit capped amount.

#148 Stock Picker on 06.23.17 at 10:14 am

Mark…..108….what you smoking? The first thing pot does is destroy comprehension. I said……The total value of pot stocks makes up for 1\3 THE VALUE of the TSX …. not 33% of the index……hence the reference to Nortel and Bre X which at their heights accounted for more than half the entire dollar value of the index……not like the other stocks went away Mark.

Poloz decides no rate cut…..he’s sent up bizarre messages in puffs of smoke……two in the past two days……yesterday it was oil…today its Canada’s low inflation…..as obvious as it is that the BOC is FOS on the inflation file….Poloz is desperate to backtrack on any idea rates will rise. He thinks suasion is a tool he can bandy around on a daily basis to keep investors short selling the dollar…..he will not raise rates while Trudeau numbers are collapsing…..period.

#149 Julia on 06.23.17 at 10:14 am

Let me correct my previous statement. I don’t think the company can *opt* to pay wages and severance or not. I believe have a statutory obligation to do so – however, if they can’t pay them the employees are unsecured creditors unless a bankruptcy happens.

The company is asking the court for cessation of their funding obligations into the pension and benefits for retirees but I don’t think they can get away from statutory payments (wages and severance) – maybe a bankruptcy expert can chime in.

#150 Eks dee Sipal on 06.23.17 at 10:23 am

#77 GFD on 06.22.17 at 10:03 pm
12% crash in 8 weeks is theoretically 78% annually…….sounds fundamentally right

Big double yup. I told you so. Was I speaking Spanish?
The Oracle getting involved in CAN RE means that you can stick a fork in it. I know his real identity and I profit from this knowledge, while all of you think I’m crazy. Oh well.

#151 Livin Large on 06.23.17 at 10:28 am

It surprises me when talk of the efficacy of RRSP is discussed, how rarely anyone mentions the huge income allocation shift that RRSP create.

They shift what would have otherwise have been tax advantaged capital gains and dividends into the highest taxed form of income there is…earned income.

#152 Eks dee Sipal on 06.23.17 at 10:28 am

#84 WUL… I’d like to know what hammer you were using that would break an original Craftsman 1.25 wrench. I still use an old sledgehammer that is older than I am, nothing works better. Indeed all the new stuff is total crap. The Feds charge me Duties when I import stuff that cannot even be found in Canada, what a racket.

#153 InvestorsFriend on 06.23.17 at 10:33 am

In Response to two replies on RRSPs

#113 Ronaldo on 06.23.17 at 12:49 am said:
#104 InvestorsFriend

That RRSP refund is no gift. It does not increase your net worth by a dime.
——————————————————————
Depends on what the tax rate on withdrawal will be. Could be only 20% or lower in which case you end up the winner. Not many will melt down their RSP’s and end will up paying more tax in the form of clawbacks to other means tested benefits or even the OAS. RSP’s are not for everyone. In fact, not for most people..

*************************************
Agreed the tax on withdrawal could be higher, could be lower. But as that is usually far in the future, best to just assume a similar tax rate. The point here is to educate people that the tax refund is no gift. If it is a 40% refund, best to assume the taxman owns 40% of your RRSP. You’re poorer than you thought. RRSPs are good for most middle class and richer people. But agreed, not for everyone.

#124 A Reply to #99 InvestorsFriend on 06.23.17 at 6:27 am said:

In all your calculations (re RRSPs) you ignore the time value of money and discounted cash flow. The taxes refunded and reinvested at the front end (age 20+) are worth much more than the taxes paid at the back end (age 71+), regardless of tax rates.

****************************************
Agreed, that for example you put in 10k and get 40% 4k refund. It grows in decades to $100k and say you pay 40% tax $40k. Sounds bad $4k refund led to $40k tax. Actually it is wonderful, Your net cost was only $6k after refund and that grew to $60k tax free, Think of the $40k as the government simply taking back its 40% share of “your” RRSP. $6k in TFSA would also grow to $60k at the same return. If the RRSP result is same as TFSA when tax rate unchanged at both ends then RRSP must also be tax free. Simple logic. Do you now agree?

I did not in any way ignore time value of money.

If the tax rate on RRSP withdrawal is less than at contribution your net RRSP contribution actually has negative tax. Strange but true. The math does not lie and neither do I.

Don’t spend the refund in Mexico or you are effectively spending the taxman’s share of your RRSP!

#154 Eks dee Sipal on 06.23.17 at 10:41 am

It appears to me that older folks on this blog don’t understand what Amazon is. It’s not a retail store online. It’s a distribution infrastructure using technology that makes all other forms of product distribution look like dinosaurs (BTW, dinosaurs are a fraud that never existed, but I digress).

E-commerce is just one of the many technological breakthroughs that Amazon employs. Those of you comparing the cost of specific items online versus at your local store are missing that most items offline are sold at a tremendous loss that the brick and mortar hopes to recover in volume. That plan is now failing miserably for many retailers, as you can see from the Retail Apocalypse unfolding before your very eyes. Amazon captures 50% of all business online in the US. Still at only about 20% (as I type this) of total sales in all of retail, but even if you are blind, you could see what is coming.

#155 crowdedelevatorfartz on 06.23.17 at 10:45 am

@#147 Julia
“but I don’t think they can get away from statutory payments (wages and severance) – maybe a bankruptcy expert can chime in…..”
*****

Expert or not.
The Sears “employees” are walking a financial tightrope blindfolded and with their hands tied behind their back and no Bank on this planet would touch them with a Mortgage bargepole.
All the Laws on the planet cant produce money that isn’t there.
Pensions reduced to pennies on the dollar?
Financial uncertainty is the only certainty in this situation.

Hopefully they will be ok but my gut feeling and past experience hearing pensioners of Bankrupt “legacy” industries wailing that “the pension money is gone! I’m broke”

Doesn’t give me a warm fuzzy feeling.

Stay tuned.

#156 TurnerNation on 06.23.17 at 10:49 am

Is this a fridge repair blog?

Interesting news from one of the Dream Reits today.

‘Strange brew it’ll kill what’s inside of you’

#157 Smoking Man on 06.23.17 at 10:58 am

Who wants to bet the Wynee rolls back her 16 step program.

“It’s a bit cooler,” Ms. Wynne said in a recent interview. “But I think the jury is out yet. I don’t think we know at this point exactly what the forces are. We’re monitoring it with the experts and the associations to see what is happening. It’s entirely possible that there is some cooling effect because of the announcements that we made and people know now what’s coming, but it could be other forces. It’s just too soon to say.”

#158 Penny Henny on 06.23.17 at 11:01 am

#88 Mark on 06.22.17 at 10:38 pm
. But there are plenty of examples, historically, of “the smartest people in the room” being wrong, extremely wrong at the tail end of long-term economic cycles

//////////

Mark is RIGHT. He thinks he is the smartest person in the room and he is constantly wrong. So this makes him Right.

#159 Russ on 06.23.17 at 11:07 am

Livin Large, et al

You cannot simplify everyone’s RRSP situation into a blog comment.

Being a single income family for over 3 decades it is the only practical way to bring some tax fairness to me via income splitting. And throw in early retirement for the full benefit.
Yahoo. Take that T2

Albeit, we had to live on less each year so I could put aside 20% most years. At 60, the portfolio of finannies look good, half in RRSP and a bunch in TFSAs from the refunds (as suggested by others)

#160 Victor V on 06.23.17 at 11:08 am

30% of Toronto households plan to list homes amid government intervention: Survey

http://www.bnn.ca/30-of-toronto-households-plan-to-list-homes-amid-government-intervention-survey-1.787064

#161 Damifino on 06.23.17 at 11:41 am

#150 Eks dee Sipal

The Feds charge me Duties when I import stuff that cannot even be found in Canada, what a racket.
—————————————-

Those duties are there to protect industries that will be started by entrepreneurs borrowing cheap money to start manufacturing businesses rather than simply speculate on overpriced real estate.

Once again, the government has your back.

#162 IHCTD9 on 06.23.17 at 11:44 am

#135 Livin Large on 06.23.17 at 8:37 am Ronaldo, that “when your tax rate is lower” concept is what the banks and mutual fund pushers use as their mythical sales pitch…it make common sense. However, “common sense” is almost always commonly wrong. The cost of living has and always will increase and compound over time and the longer the time, the greater the compounding. My first job out of university in 1979 paid me $1,500 gross per month and I lived quite comfortably on it. Today? Not a chance in hell of maintaining even that lifestyle on twice that. The Feds created the RRSP instrument knowing full well it was in their best interest to collect their due on the back end when cashflow demand was much higher and therefor. The RRSP concept only “works” if inflation is neglible and if that’s the case then returns are equally neglible. Now, if RRSP withdrawl tax rates were variable based on the age at withdrawl then I’d be all in. The government is never your friend when it comes to money.
____________________

All true of course, but with a little examination there is more to it. Everything does not go up in cost with time, many things actually go down relative to incomes.

Any electronic item you can name is dirt cheap compared to 20 years ago.

Gasoline is dirt cheap compared to 10 years ago.

Oil – cheap!

Clothes – cheaper than they’ve ever been.

Tools, so cheap it’s ridiculous.

Food is cheap compared to 50 years ago and the variety available is 10X larger now.

Commodities like Nickel, copper, Moly, Chromium – all super mega cheap in 2017 compared to 2006.

Base materials markets go up and down affecting the costs of just about everything made downstream. Globalization, technology, and automation are driving costs down huge, and will do so even more when robots do most of the manual work in the near future. Online shopping is chopping prices down as well. Wait until the packages are delivered by autonomous vehicles of some kind (trucks, cars, drones etc…)

In 1981, the biggest baddest Craftsman lawn tractor you could buy was $4500.00 $USD.

What does the biggest baddest Craftsman mower cost 36 years later in 2017? About $4500.00 $CAD.

#163 Smoking Man on 06.23.17 at 11:50 am

Party On

http://business.financialpost.com/news/economy/inflation-data-out-today-confirms-bank-of-canada-can-take-its-sweet-time-raising-rates/wcm/3406731e-c5af-4aa3-b6c6-478c823f7de5

#164 IHCTD9 on 06.23.17 at 11:51 am

There is always a powerful argument for commuting a pension, when you are able. — Garth
___

This should be a no brainer if you work in the private sector. I think Stelco/US Steel retirees are learning this lesson right now. Essar/Algoma may be next up.

I have passed this info stated here previously to my bud who works for a Honda assy plant. Last time I talked to him he said he is waiting for the next buyout 5+ years down the road to bail out with a big cheque, and he will indeed be commuting his pension if he is able.

#165 Victor V on 06.23.17 at 11:54 am

Loonie weakens as subdued inflation reduces rate hike chances

http://www.bnn.ca/loonie-weakens-as-subdued-inflation-reduces-rate-hike-chances-1.787192

TORONTO – The Canadian dollar fell on Friday against its U.S. counterpart after weaker-than-expected domestic inflation data reduced the chances of an interest rate hike next month from the Bank of Canada.

The annual inflation rate cooled to 1.3 per cent in May, below forecasts for 1.5 per cent, pushing it further away from the Bank of Canada’s 2 per cent target as the cost of food fell and gasoline prices moderated, data from Statistics Canada showed.

The central bank’s three measures of core inflation remained subdued.

“It is going to be very difficult for the Bank (of Canada) to hike as soon as next month when you still haven’t carved out a bottom on inflation,” said Derek Holt, head of capital markets economics at Scotiabank.

Chances of a hike in July fell to just 20 per cent from one-in-three before the inflation report, data from the overnight index swaps market showed.

#166 Mark on 06.23.17 at 11:57 am

“The total value of pot stocks makes up for 1\3 THE VALUE of the TSX “

I’d be astonished if that were actually true. But since you are making such a bold claim, do you have a few tickers and their market capitalizations that you’d like to share? The total market capitalization of Canadian listed firms is in excess of $1T, and I’m not personally aware of any combination of marihuana stocks that would come anywhere even close to even a 10th of that, let alone 1/3rd. But I am sometimes wrong, some say I’m often wrong, so by all means, show us the way!

#167 TWO FINGERS WATSON on 06.23.17 at 11:59 am

Okanagan home sales spike in May! 31% surge in Sales over last month (617 units vs. 807 units), yet 72 units off May 2016’s record breaking month.

There are 376 fewer places on the market than last year representing a –13.17% drop. Last year there were: residential – 859 units, condo – 399 units, townhouse – 246 units compared to 2017; residential – 788 units, condo – 353 units, townhouses – 237 units.

The average home price shot up to $703,809 in May 2017. 17% increase year over year. That equates to the average home buyer paying $102,581 dollars more for the same home.

Consumers will likely find rising prices, short turn-arounds between when a property is listed and when it is sold and multiple offer situations – all of which make for conditions that are challenging to navigate.

#168 IHCTD9 on 06.23.17 at 12:00 pm

#150 Eks dee Sipal on 06.23.17 at 10:28 am #84 WUL… I’d like to know what hammer you were using that would break an original Craftsman 1.25 wrench. I still use an old sledgehammer that is older than I am, nothing works better. Indeed all the new stuff is total crap. The Feds charge me Duties when I import stuff that cannot even be found in Canada, what a racket.
____

I think WUL mentioned a 3 foot length of pipe was used to “amplify” the application of torque.

I did the same to the handle of a 35lb Chinese vise working on some dozer part. Snapped the entire vise in half. Turned out it was sand cast grey Iron – not worth fixing.

The next year I found an Antique RECORD Nodular Iron Vice at a yard sale. Made in England. If you smack this thing with a 3 lb mallet, it will ring like a bell. I have tested it thoroughly over the last 5 years – it will last me the rest of my life guaranteed.

#169 Mark on 06.23.17 at 12:13 pm

“They shift what would have otherwise have been tax advantaged capital gains and dividends into the highest taxed form of income there is…earned income.”

Not if you make some reasonable attempts at tax optimization of your portfolio, ie: put your fixed income into the tax deferred accounts, and keep your Canadian eligible-dividend generating stuff, as well as stocks that are likely to generate mostly long-term capital gains in taxable accounts.

Financial crisis 2.0 and/or inflation is far more imminent than any significant rate increases.

I’m not sure how Canada or even the USA would get significant inflation when the consumer population is extremely heavily indebted. All that “the market” needs to do to quell any inflation is simply to increase the cost of that debt, and wham, consumer purchasing power disappears. A deflationary crisis seems far more likely, at least while there’s so much debt out there.

#170 Nuke on 06.23.17 at 12:23 pm

heard they rounded all the Sears employees into either the Metro Center or a nearby hotel. the Metro Center were mass-fired, the others have to do clean up.

On the other hand the Ontario Liberals have negotiated with the civil servants before their contracts come up next year (election year) giving them 7.5% till 2022. Or 1.5% in October and 1% every six months from 2019 through march 2022.

#171 Mark on 06.23.17 at 12:25 pm

“E-commerce is just one of the many technological breakthroughs that Amazon employs.”

All that technology, but does Amazon make money? No, aside from AWS, which is essentially a fancy form of off-balance-sheet financing for tech startups (basically they lease computer capacity), Amazon does not make money.

What good is all that technology if they can’t use it to make money? That aside, I’d have to seriously question if Amazon has any sort of enduring technological advantage or ‘moat’ in their business that does not already exist elsewhere.

The annual inflation rate cooled to 1.3 per cent in May

Remember, that’s an annualized number, and dropped quite significantly. Which means that month over month, seasonally adjusted, CPI is likely deflating. Canadians have increasingly little purchasing power as the cost of credit is rising.

Mark is RIGHT. He thinks he is the smartest person in the room and he is constantly wrong. So this makes him Right.

I’ve never claimed to be. And just how have I been ‘constantly wrong’? My latest ‘score’ has been correctly predicting that this rate hike nonsense would be quelled by comatose CPI numbers. Month over month CPI is actually deflating. If the deflationary trend keeps up, which is most likely will with the falling RE market, the BoC will be, sooner or later, back for more rate cuts.

#172 POLOZ IS WRONG on 06.23.17 at 12:28 pm

no rate hike in July

https://www.bloomberg.com/news/articles/2017-06-23/canada-core-inflation-slows-to-lowest-since-1999-key-takeaways

#173 IHCTD9 on 06.23.17 at 12:32 pm

#158 Damifino on 06.23.17 at 11:41 am #150 Eks dee Sipal The Feds charge me Duties when I import stuff that cannot even be found in Canada, what a racket. —————————————-

Those duties are there to protect industries that will be started by entrepreneurs borrowing cheap money to start manufacturing businesses rather than simply speculate on overpriced real estate. Once again, the government has your back.
_________________________

Right, those entrepreneurs are racing to high tax, high regulation, high wage, high energy cost, union loving countries like Canada to start their businesses.

In case you’ve missed it -manufacturing investment is exiting Canada. Actual manufacturing businesses are leaving. Manufacturing infrastructure is being left to rot, or is being torn down (like at GM Oshawa).

The only thing Government is doing to our back is sticking a knife in it.

#174 n1tro on 06.23.17 at 12:39 pm

#152 Eks dee Sipal

Agreed 100%. What is coming is more closing of brick and mortar stores. I wouldn’t be surprised if Best Buy goes away soon. They are staying afloat from all the floor space revenue that they charge manufacturers.

eg. Samsung wants to sell their latest phone at Best Buy. Best Buy turns around and takes fees for floor space and signage and then when a phone is sold, takes a % based on volume.

Problem is that consumers are starting to be smarter and go into a place like Best Buy and play with products but then go online to order it from Amazon for less because they deal with the manufacturer direct and cut out the middleman and their fees. Just a matter of time until all manufacturers wake up and either establish their own B2C or just deal with Amazon via B2B.

Real life example. Was looking for a triband router. Staples, Bestbuy, and even Walmart had it around $250 (give or take a $1). Checked out the reviews online.
Went onto Amazon and ordered it for $218 with free shipping.

#175 calgarytran on 06.23.17 at 1:00 pm

crypto millionaire,

Good advice for newbies. Cryptocurrencies will be the next big thing after internet.

#176 45north on 06.23.17 at 1:05 pm

Realtorist: talking about Warren Buffet: He is lending $2 billion but wants $4 billion of mortgages as collateral. The $4 billion have an LTV of roughly 75% which means the $2 billion is secured against $5.3 billion of real estate. $2b/$5.3b = 37%. He is lending at 37¢ on the dollar!

He is lending on better terms than that. He is lending on the middle class and on the reliability of Canadian case law which Canadian banks have worked to establish.

carpetbagger

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

A Reply: Tony Schwartz, ghostwriter of the The Art of the Deal, in a New Yorker article in July, revealed he felt “a deep sense of remorse” about his contribution to making Trump popular.

Tony Schwartz talking about Donald Trump: If he had to be briefed on a crisis in the Situation Room, it’s impossible to imagine him paying attention over a long period of time

http://www.greaterfool.ca/2016/07/22/careful-what-you-wish-for-7/#comment-461518

God bless America

#177 A Reply to #149 Livin Large on 06.23.17 at 1:23 pm

“It surprises me when talk of the efficacy of RRSP is discussed, how rarely anyone mentions the huge income allocation shift that RRSP create. They shift what would have otherwise have been tax advantaged capital gains and dividends into the highest taxed form of income there is…earned income.”

First, RRSP withdrawals are taxable income, but not earned income.

http://www.cra-arc.gc.ca/E/pub/tg/t4040/t4040-e.html#stp_2chrt_3

Second, RRSPs make sense as a tax shelter (even for tax-advantaged income and high subsequent tax rates) when you take into account the time value of money, discounted cash flow, and tax-free compounding over several decades.

#178 Contrarian Coyote on 06.23.17 at 1:36 pm

#138 Oakville Stinks on 06.23.17 at 9:01 am
I just reviewed homes for sale in Oakville.

Neighbour dropped price by $200,000 in the last month.

Asking $1.15 Million (1 month ago)
Asking $0.960 Million (Today)

Similar Houses in the area have also dropped in price to that same level and sellers are now competing for buyers!!!!!

===

Damn. Let the discounting begin! I’ve been tracking a few up here in the Kawarthas in Lakefield (Just north of Peterborough.) These two have disappeared, re-listed at new prices.

2159 MARSHALL LANE, SELWYN, Ontario K0L2H0
$1,275,000 (March)
$1,195,000 (June)

(http://www.realtor.ca/Residential/Single-Family/18329395/2159-MARSHALL-LANE-SELWYN-Ontario-K0L2H0)

105 CLEMENTI Street , LAKEFIELD, Ontario K0L2H0
$499,999 (February)
$450,000 (April)
$399,999 (June)

http://www.realtor.ca/Residential/Single-Family/18222533/105-CLEMENTI-Street-LAKEFIELD-Ontario-K0L2H0

The one on 105 Clementi is a weird one that has had rooms & renos added to it over the years. They shot themselves in the foot with that February price – WAY too high for that house. You can get a decent brick house with acreage for that in the area.

#179 Stan Broock on 06.23.17 at 2:06 pm

#167 Mark on 06.23.17 at 12:13 pm

I’m not sure how Canada or even the USA would get significant inflation when the consumer population is extremely heavily indebted. All that “the market” needs to do to quell any inflation is simply to increase the cost of that debt, and wham, consumer purchasing power disappears. A deflationary crisis seems far more likely, at least while there’s so much debt out there.

———————————-

Wrong.

Just look at food prices in Canada. Twice the prices in Europe.

The markets are global, not local and whatever we import goes up in price due to the falling CAD.

When I look back at prices in US and Canada in the last 10 years I see inflation, not deflation.

Deflation is pretty much a killer for the current debt based monetary system so it will not be allowed (Ben Bernanke).

#180 Stan Broock on 06.23.17 at 2:13 pm

#163 Victor V on 06.23.17 at 11:54 am

Inflation weakens?
No way, just statistical mumbo jumbo, simply an excuse to not raise the rates.

#181 Stan Broock on 06.23.17 at 2:18 pm

#160 IHCTD9 on 06.23.17 at 11:44 am

You are arbitrarily selecting time periods to compare to support your view.

wrong on food, we are eating GM crap vs. real food 30 years ago, despite significant food inflation.

important stuff – education, housing, health costs much more today than 20-30 years ago.

#182 Livin Large on 06.23.17 at 2:21 pm

In case it wasn’t abundantly clear that I was speaking specifically about RRSPs and not about non registered accounts…I was.

There are clearly strategies to avoid the great income source allocation problem with RRSPs but I was speaking specifically about the myths involved with RRSPs and the forced shifting of income source when pulling money out.

#183 Van Isle Booming on 06.23.17 at 2:36 pm

#120 – Don
#9 Game On Victoria on 06.22.17 at 6:43 pm
Contrary to VREU and collapsing sales in Victoria, the South Island communities are having bidding wars – bidding wars in semi-rural areas! Prices up 25-30% over the last year. Rents up 20% (for those new homes being rented out and those with fixed terms leases ‘renewing’)
A parallel to what happened with the Metro communities like Surrey and Langley last year and this year, and with the Fraser Valley – with Vancouver prices pushing afar those that have cashed out and those with families that cannot afford houses. And of course, the resulting spike in prices and rents..
Ouch! The crisis spreads. Soon all of BC will be written off as this pattern spreads – those cashing out and ‘refugees’ from high priced cities spread to surrounding communities bidding up prices; those that cannot afford and those cashing out to the urban dwellers then spread farther out, increasing prices in their surrounding communities, and so on and so forth.
*********************
Where in Victoria or other places on the island? Houses in my neighborhood are sitting for longer and longer as we tick into the summer.

————-

North of Victoria in Cobble Hill, Mill Bay, Shawnigan Lake, Duncan…all up over 20%. I have access to the listings services with sale dates and prices.

Houses are being listed 25% over 2016 list prices, which were already based on inflated assessments. Average homes are selling for list price and anything decent there are actually bidding wars, with homes selling 10% over list price – absolutely stupid, especially since these areas got crushed in the 2007-2008 pullback.

#184 neo on 06.23.17 at 2:38 pm

#155 Smoking Man on 06.23.17 at 10:58 am

Who wants to bet the Wynee rolls back her 16 step program.

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

Rolls it back when and at what point there Smoking Man?

If she does it after prices fall another 10-15% it’s already game over. You know how long government takes to take a look…and then a second look…and then a study..and then a committee to look at the study before they do anything.

#185 InvestorsFriend on 06.23.17 at 2:42 pm

Couple More Responses to my attempt to educate about RRSP refunds and tax:

#149 Livin Large on 06.23.17 at 10:28 am said:

It surprises me when talk of the efficacy of RRSP is discussed, how rarely anyone mentions the huge income allocation shift that RRSP create.

They shift what would have otherwise have been tax advantaged capital gains and dividends into the highest taxed form of income there is…earned income.

*****************************************
That is a common misconception and totally wrong.

Obviously TFSA is tax free. It can be shown mathematically that $10k in an RRSP with 40% $4 k back in refund (so your net cost is $6k) grows to the exact same amount as $6000 in a TFSA as long as the tax on withdrawal stays the same at 40%. Logically then the tax on your decades of growth on your cost the $6k is zero same as TFSA. You don’t lose any tax benefit. Instead your tax is ZERO i the example. In reality tax rate on withdrawal could be higher than 40% in which case you pay some tax or it could be lower so you get negative tax. And still people whine that they misses a dividend tax credit! False.

#137 crowdedelevatorfartz on 06.23.17 at 8:55 am posted
@#124 A Reply to Investors Fiend
“In all your calculations (re RRSPs) you ignore the time value of money and discounted cash flow. The taxes refunded and reinvested at the front end…”
*******
Yep.
No to mention if that RRSP tax refund is dumped into a TFSA……….

*********************
My explanation shows there is no tax on your share of the RRSP if you consider that the refund funds 40% of your RRSP and grows to cover the tax. I can only give this mathematical truth so many times. Some will learn. Others never.

You are quite correct that another way to do it is put the tax refund into TFSA. That can grow to exactly pay all the tax on the RRSP withdrawal assuming same returns and unchanged tax rate.

Bottom line RRSPs equal TFSA under these assumptions and are therefore a gift to investors.

Don’t spend that refund!

Actually I think 124 was agreeing that RRSP is a great way to invest. Whiners who think they are missing dividend tax credit and capital gains lower tax rate are simply wrong.

#186 Nemesis on 06.23.17 at 2:44 pm

#IfYouCan’tBeat’Em… #BuyEm…

[Reuters] – Harley-Davidson enters race to buy Italian rival Ducati: sources

…”U.S. motorcycle maker Harley-Davidson (HOG.N) is lining up a takeover bid for Italian rival Ducati, potentially bringing together two of the most famous names in motorcycling in a deal that could be worth up to 1.5 billion euros ($1.67 billion), sources told Reuters…

…Milwaukee-based Harley-Davidson has hired Goldman Sachs to work on the deal, one source familiar with the matter said, adding tentative bids were expected in July.
Volkswagen, whose Audi division controls Ducati – maker of the iconic Monster motorbike – is working with investment boutique Evercore on the sale which will help it fund a strategic overhaul following its emissions scandal.”…

https://www.reuters.com/article/us-volkswagen-ducati-m-a-idUSKBN19C1XX

#187 Blacksheep on 06.23.17 at 3:04 pm

To those critical of my comment on Buffet, I think your missing the point. Let me try again.

PERCEPTION = EMOTION

If you ‘feel’ you’ve been slighted by someone, your likely to be ‘angry’.

I don’t know or care whether Buffet gains or loses on his investment in HC, but there is one thing I am 100% confident of. In general, the masses don’t read the dirty details as some have laid out here, they just scan the headlines and that’s what sticks in their minds.

They are not, wanna be economist blog dogs cause they’re busy with kids, work and life’s other distractions.

RE market valuations are largely based on emotion, (FOMO?) not rational thinking, just look to Van/TO prices for confirmation.

Warren Buffet’s investment is a not going to turn a market, if the masses have already concluded it is a bad time to buy RE.

All it does is provide some positive messaging to said masses, that W. B. is putting his $’s into the Can RE industry, maybe he knows / sees something we don’t due to the fact, he is likely as connected as one can get.

And maybe those that have been calling for a significant correction for multi years (used to be me) are simply incorrect because they’re conclusions are based on what’s taken place in the past and are unable to envision what’s really happening?

Our world is awash with rapid change. For some reason we can ‘see’ and accept this occurring in almost every other aspect of our lives, but believe our standard of living should be constant and hold the expectation that one should be able to own RE in their chosen local, to be on par with that of our parents?

The human condition is never ‘different this time’, but just maybe the circumstances that affect global RE investment / values are.

#188 Pepito on 06.23.17 at 3:12 pm

#177 Stan Broock on 06.23.17 at 2:06 pm

“Just look at food prices in Canada. Twice the prices in Europe.”
__________________________

And the produce is delicious, not the tasteless cardboard you get in Safeway. That’s the real difference.

#189 MF on 06.23.17 at 3:12 pm

Stan Brock,

No one outside of maybe four people in all of Canada believed there actually would be a rate increase by the bank of Canada.

The same institution routinely mentions household debt levels and runaway house prices has the balls to tell us that inflation is the lowest since 1999. Lol just a pathetic institution, and whose statements mean nothing.

MF

#190 A Reply to #151 InvestorsFriend on 06.23.17 at 3:43 pm

#3 BMan on 06.22.17 at 6:28 pm
#99 InvestorsFriend on 06.22.17 at 11:23 pm

The discussion was whether it made sense to put tax-advantaged investments into registered (rather than non-registered) accounts.

You made the following point: “That RRSP refund is no gift. It does not increase your net worth by a dime.”

I took umbrage with your assertion. The tax refund is a gift. An investment (whether tax-advantaged or not) in an RRSP will have a higher valuation after several decades than one made in a non-registered account, regardless of tax rates. And the explanation is the power of tax-free compounding.

#191 YVR on 06.23.17 at 3:48 pm

“An increase next month is 50-50, but one by the end of the year is now 80-20.” – Garth

Super low (cooked?) inflation numbers. Odds next month are 10-90 and 50-50 by year end now.

All jaw boning. Housing and immigration too big to fail now.

#192 A Reply to #180 Livin Large on 06.23.17 at 4:21 pm

“There are clearly strategies to avoid the great income source allocation problem with RRSPs….”

What does the above even mean? What are the strategies?

“… but I was speaking specifically about the myths involved with RRSPs and the forced shifting of income source when pulling money out.”

What are the myths of which you speak?

RRSPs should still be maxed out, regardless of the type of investment vehicle or the taxation of RRSP income or withdrawals.

#193 Mark on 06.23.17 at 4:23 pm

“Just look at food prices in Canada. Twice the prices in Europe.”

Usually when we talk of ‘inflation’, as in consumer price ‘inflation’ we are referring to change in prices, not absolute price levels. Canada is, globally, a very expensive place to live, but our per capita income is also amongst the highest in the world. Canadians spend very little of their personal income, relatively speaking, on food compared to those in most other countries.

Deflation is pretty much a killer for the current debt based monetary system so it will not be allowed (Ben Bernanke).

That’s the theory, but deflation, like inflation, tends to be self-reinforcing and very hard to defeat. In the 1930s, they basically threw everything but the kitchen sink at the problem of deflation, yet only WW2 really ‘rescued’ the world from it. At a terrible price.

#194 AGuyInVancouver on 06.23.17 at 4:24 pm

#178 Stan Broock on 06.23.17 at 2:13 pm
#163 Victor V on 06.23.17 at 11:54 am

Inflation weakens?
No way, just statistical mumbo jumbo, simply an excuse to not raise the rates.
_______________________
I’m beginning to wonder if there is something of a sinister hand at work myself. First the article about grocery stores raising prices on anything that is not in the core index, to avoid consumer wrath. And how can our dollar have depreciated so much, without it showing up in inflation numbers? Ask any business owner how much components priced in USD have increased over the last three years!

It looks to me like we fell into the Japan trap mentioned at the onset of the 2008 recession.

#195 45north on 06.23.17 at 4:25 pm

Coyote: north of Lakefield

2159 MARSHALL LANE, SELWYN, Ontario K0L2H0
$1,275,000 (March)
$1,195,000 (June)

$1.2 million! outside of commuting distance to Toronto – 2 hours 15 minutes to 215 Huron Street where I used to work. If you take the 407 which is a toll road.

I doubt the Royal Bank is going to give you more than $0.6 million on a mortgage. I really doubt it.

#196 EU Prices are Local on 06.23.17 at 4:47 pm

In NE Italy, where I live, prices generally cheaper vs. Canada but not half.

Go live in Zurich and be shocked. So not global.

Even within Italy, prices cheaper in S. Italy due to much higher unemployment and poverty rates vs. NE Italy.

To compare a wide of range of prices in EU cities vs. Canadian cities, go to Numbeo:

https://www.numbeo.com/cost-of-living/comparison.jsp

#197 choptstix on 06.23.17 at 4:59 pm

http://www.metronews.ca/news/vancouver/2017/06/22/725000-for-one-bedroom-condo-at-humble-joyce-station.html?platform=hootsuite
”News / Vancouver
$725,000 for one-bedroom condo at Joyce Station raises red flags”

#198 I Just Don't Get our Debt Levels on 06.23.17 at 5:06 pm

Equifax says today that Canadians owe $1.73 trillion end of 1st Qtr 2017, up 6.9% in a year.

Excluding mortgage debt, the average Canadian owes $22,125 at the end of March 2017.

Still making payments, low delinquency rates.

I just don’t get it. How is this possible?

Are people living beyond their means and the banks letting them get away with it unchecked?

Or a Canadians more wealthy than all these studies that say we are scant basis points or percents away from credit oblivion in cost increases?

#199 Karma on 06.23.17 at 5:06 pm

Garth, is there are political reason why CPI doesn’t have much sensitivity to housing price changes?

https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary_362_0.pdf

#200 Simplyput7 on 06.23.17 at 5:09 pm

#10 Pete on 06.22.17 at 6:44 pm

I have been more hopeful about the real estate industry in the last few weeks as more honest realtors and consultants speak out about our housing addiction:

* Ross Kay – gives weekly updates on the housing market in Canada http://www.howestreet.com/tag/ross-kay/
* Sold.Watch – sold reports for registered users (thank you for fighting TREB)
* Zoocasa – shows how many days a listing has been active and the taxes for the property
* Zolo – neighbourhood market stats, shows if the price has been reduced (as long as it’s the same active listing)
* Realosophy’s John Pasalis on BNN – to hear a realtor say he’s not telling his buyers to jump in the housing market, and that Richmond Hill home price increases were largely due to speculators, was refreshing.

The mortgage broker industry still needs work though. There are too many people taking out mortgages and home line of credits without the basic understanding of how each product works, and the risks involved with borrowing from either of them. But I guess Canada needs to take baby steps to see progress.

#201 Karma on 06.23.17 at 5:11 pm

It really makes people doubt the competency of Stats Can and the Bank of Canada if they deliberately understate housing inflation in their CPI measure.

https://nbf.bluematrix.com/sellside/EmailDocViewer?encrypt=81ca5182-3b97-4e79-a96a-38faa8ec7a58&mime=pdf&co=nbf&[email protected]&source=mail

#202 The Technical Analyst, CSTA, CPD on 06.23.17 at 5:14 pm

And you teach financial literacy? Pity. — Garth

Yes I do teach financial literacy and am very proud of that fact. Although I do not think you have ever attended one of my lessons so I don’t think you in a position to judge me.

Risks of Preferreds:

1. Not all dividends are taxed at the lower rate.
2. A key risk of preferred stocks is that they are sensitive to interest rates, as is the case with bonds. Because preferred stocks usually pay dividends at a fixed rate in the 6% range, *** the share price falls as prevailing interest rates increase.***
3. As Treasury bond yields approach a preferred stock’s dividend rate, demand for the stock declines, sending its price lower.
4. Preferred stocks also present credit risks and industry sector risks. (Industry sectors have their own particular risks, ie, Energy/Oil)
5. Another risk shared by most preferred stocks and bonds is call risk, since most preferred shares allow the issuing company to redeem the shares on demand, before the actual redemption date for the shares.
6. While preferred stocks can earn a rating of investment grade, many have ratings below BBB and are considered speculative or junk.

Class dismissed. Feel free to read more at: http://www.investopedia.com on your own time.

Rate reset preferreds (which dominate the Canadian market now) gain in capital value as rates rise. You are seriously incorrect. Please stop teaching anyone anything. — Garth

#203 Livin Large on 06.23.17 at 5:16 pm

Thanks Stan Broock. I was about to make the same points but I would have used fat more words.

And then there’s clothing. A pair of standard Levis or Lee jeans in 1979 was $29 with no HST and a low PST they lasted 5-6 years. Today you’d be paying over $100 + HST and still getting a much poorer weight of denim lasting maybe 3 years. And shirts…I buy mine mail order from the US since mid ’80s so it’s hard to compare but back then they were $17 US without sales tax but $10US per order for shipping. Today, about $60 US, HST is now charged and shipping is only about $20US. So, even shirts have more than quadrupled.

Bottom line? In 40 years the basic cost of living has about quadrupled so, I need about $60K-65K pretax income or it’s net equivalent in tax advantaged income like cap gains and divs to just maintain my 1979 standard of living and frankly I want at least a little better than that.

Relying on RRSP income that’s taxed at the highest rate coming out means that I have to have a hell of a lot more of it than I do capgains and divs.

Self directed investing may not be for everyone but the reality is that far too many people take the advice of the [email protected] or some mutual fund pusher and buy the hype that their income coming out of an RRSP in 30 or 40 years only needs to maybe double to ensure a satisfying standard of living.

Personally, I want to pay the minimum of taxes (all of them) that I am legally required to pay and RRSP withdrawals are the exact antithesis of that mindset.

#204 espressobob on 06.23.17 at 5:19 pm

It doesn’t seem that long ago many swore in the comment section, they would never touch pref ETFs ever again after dumping their positions and maxing losses.

It’s ok, I was one of the buyers. Thanks!

#205 Simplyput7 Don't Forget "My Realty Check" on 06.23.17 at 5:21 pm

Probably the best of the lot:

http://www.myrealtycheck.ca/

They show you the pricing shenanigans that go on for a property (e.g., in YVR). The price change mpa/charts are nice and so are the price increases vs. decreases.

My favorite is the “Multiple Change Properties” list which shows the messed up pricing strategies that Realtors use over time on a property.

For BC, after selecting a property in the “Multiple Change Properties” list, you can then go to e-valueBC and get its assessed value and in most cases the purchase price within the past 3 years…revealing to say the least.

#206 Munich vs. Vancouver on 06.23.17 at 5:22 pm

re #191 .. comps

https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=Germany&country2=Canada&city1=Munich&city2=Vancouver

Munich has BMW, Siemens, Allianz, Bavarian State.gov and many many many great businesses, employers and OPPORTUNITIES. A plethora of parks and sport venues, great climate and access to wide open country in the Alps and beyond.

What exactly does Vancouver have to offer?

Vancouver would probably be attractive for qualified professionals if the cost of living including rents, home ownership etc would be half of what Munich is charging.

As it stands, Vancouver is more expensive than Munich. Offers NO opportunities to young professionals, NO chance of building wealth and NO real prospect for a better future.

They’ve over done it here and people are leaving. Munich just being one example of a better place to live, work and raise a family.

As much as globalization has washed billions of Dollars into the Vancouver RE economy, that same globalization is allowing Vancouverites to look at options around the world. Language skills are not even required in many trades.

#207 jess on 06.23.17 at 5:27 pm

digital money (transaction laundering) …
Cyber Risk | Thu Jun 22, 2017 | 4:35pm EDT
Exclusive: Fake online stores reveal gamblers’ shadow banking system

http://www.reuters.com/article/us-gambling-usa-dummies-exclusive-idUSKBN19D137

#208 Smoking Man on 06.23.17 at 5:31 pm

#182 neo on 06.23.17 at 2:38 pm
#155 Smoking Man on 06.23.17 at 10:58 am

Who wants to bet the Wynee rolls back her 16 step program.

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

Rolls it back when and at what point there Smoking Man?

If she does it after prices fall another 10-15% it’s already game over. You know how long government takes to take a look…and then a second look…and then a study..and then a committee to look at the study before they do anything.
……
We all know Jun is in the shitter.

I say either July, Aug or Sept

Leaning toward Aug 10th if listings continue to surge.

#209 maxx on 06.23.17 at 5:31 pm

#40 Nonplused on 06.22.17 at 7:51 pm

“Oh one more comment on the control boards. How much more efficient do they really make our appliances given how frequently they fail? The basic business of cooling the fridge is where most of the energy goes and that can be done with a mechanical switch.

One more comment on stupid electronics we don’t need. So I bought a hyped energy saver thermostat for my house, complete with touch screen, green labels all over the box. Problem was it would use up a set of batteries in less than a month and then not heat the house. So I put the old thermostat, the mechanical “mercury” one, back on in tandem only set to a lower temperature so at least the pipes wouldn’t freeze. But the fancy one kept going through batteries so finally I brought it back and got a much simpler one. I did not remove the mechanical thermostat though, “just in case”.”

What excellent commentary. I am so in the same camp. We don’t “greenify” a damned thing, per gadgetry. Buy second-hand for most of the stuff we use, buy a fuel-efficient car and run the thing into the ground, vegetarian…..that’s green enough. The additional measures, such as your example and others such as those idiotic mercury-laden, “long lasting”, soft-serve light bulbs are shite and a half. I’ve stockpiled enough conventional incandescent bulbs for 3 lifetimes. I won’t have any of those other abominations in my living space.
Drive-clean on, drive-clean off, drive clean on……….people are better off ignoring most newfangled, middleman shilled crap.

#210 Livin Large on 06.23.17 at 5:37 pm

Geeze Louise I didn’t think the blogs could miss the clear as day point I was making.

I wasn’t even remotely talking about which asset class to put into registered accounts. My point was: regardless of which class you put them in within a registered account, the income and capital comes out as “earned income”.

““There are clearly strategies to avoid the great income source allocation problem with RRSPs….”

What does the above even mean? What are the strategies?

“… but I was speaking specifically about the myths involved with RRSPs and the forced shifting of income source when pulling money out.”

What are the myths of which you speak?

“RRSPs should still be maxed out, regardless of the type of investment vehicle or the taxation of RRSP income or withdrawal” Holy crap Noooooooo, well not if you’re aim is to maximize your after tax income when you withdraw because the same dollar of income is taxed far lower if it came from non registered capital gains and a little worse if “eligible dividends” while every penny the average Joe pulls out of an RRSP is taxed at it’s maximum rate and the RRSP has to be drawn down by a non optional point in time whereas the capgains and divs have no such requirement except deemed dispersal at death.

IMO the only time a RRSP ” contribution should” be
maxed out is when you have no where else to put it or in the case of a large tax free windfall like an insurance payout or inheritance when you still have contribution headroom.

The last place for income producing investments (again my own personal bias) is in any instrument that taxes
them at the highest marginal rate possible.

I would far prefer to earn $40K in dividends in my situation than I would want to earn $65K in earned income from a RRIF or annuity or God forbid, a GIC.

#211 Buffet factor on 06.23.17 at 5:45 pm

Every analyst in the room knows that Canada’s RE is overvalued and due for correction. Buffet just got his bets in early on a booming debt restructuring session.

Why would this successful investor buy at the top? He burnt the shorts and made money. Now he just waits for the next shoe to drop and as someone else suggested, go after distressed sales and foreclosures where properties will change hands at 50 cents on the Dollar.

When the cycle restarts, he will sell into strength.

The crash can commence full on.

#212 Munich vs. Vancouver...good one on 06.23.17 at 5:53 pm

I moved to Pordenone, Italy (city of 50,000 dating back to the 10th century) from Vancouver. 10 km from the Alps, 60 km from groomed beaches stretching from Lignano to Venice (about 50 km worth) and in the middle of Prosecco and Tiramisu country (we also gave you polenta, radicchio and arugula). 1 of the top 10 most livable cities in Italy incl. ecology.

We use no GMO, growth hormone or steroids in our food.

Meal prices inaccurate for Pordenone, they are lower. I can get a 12 inch pizza delivered to my house for under €8 vs. the abominations Canadians are forced to eat called “pizza”.

Rents are 2X to 3X more in Vancouver as is property. I have a 6th floor penthouse suite, 75 sq. m., marble, granite & hardwood everywhere that I bought for €100,000. My yearly taxes are €90.

Venice is 85 km away. Milan 3.5 hrs by train. Rome about 5 hrs by train. Naples 1 hr flying time (see Naples, then die). Most major EU cities within 2 hrs flying time.

I agree #206, more opportunity in Munich and I live like a king where I am on a nice pension + that of Gov Canada…never touch my savings.

Tomorrow off to Firenze for “Calcio Storico Fiorentino”.

Ciao d’Italia.

#213 Mark on 06.23.17 at 5:55 pm

“And how can our dollar have depreciated so much, without it showing up in inflation numbers?”

Well with Canadian RE peaking in 2013, there simply hasn’t been a lot of demand to actually cause inflation. The economy has been pretty comatose in the post-peak era, keeping demand restrained. Inflation has not only been kept under control, but recently we’re actually seeing month over month explicit CPI deflation.

If RE hadn’t peaked and plateaued in 2013, then we would have seen all sorts of inflation since. But household balance sheets are in terrible shape, and thus, the deflationary impact of this has more than offset what ordinarily would be the expected outcome of a falling Canadian dollar.

If the CAD$ keeps rising, and house prices start falling significantly from their 2013 plateau, the Bank of Canada probably will have to implement ZIRP in fairly short order.

Rate reset preferreds (which dominate the Canadian market now) gain in capital value as rates rise.

Well a lot of caution is warranted there, especially since the call provisions on a many such issues are very generous in favour of the issuer. Because they sit between debt and equity on the hierarchy of claims, one needs to do a thorough interest rate sensitivity analysis of the equity. In the case of many preferred issuers, such as insurers and banks, this isn’t as easy as it might look as it requires a lot of assumptions as to the state of the macro environment if rates were to rise. For the FIRE sector, rising long-term rates can be profoundly quite negative.

#214 Annimal on 06.23.17 at 6:05 pm

@ #211 Buffet factor on 06.23.17 at 5:45 pm

He actually makes more money if they fail. Look up the structure of the deal. No risk to him whatsoever.

HCG liquidity is back down to before the announcement today. That was short lived.

#215 crdt on 06.23.17 at 6:07 pm

Uncle Warren just pulled up to the Buffet?

#216 espressobob on 06.23.17 at 6:18 pm

A solid portfolio is comprised of several asset classes. Some outperform, others not so. If you buy quality, there should be no issue loading up on underperformers.

Fear can be the best friend any investor could ever know.

#217 Fish on 06.23.17 at 6:45 pm

#186 Nemesis on 06.23.17 at 2:44 pm
#IfYouCan’tBeat’Em… #BuyEm…

[Reuters] – Harley-Davidson enters race to buy Italian rival Ducati: sources

…”U.S. motorcycle maker Harley-Davidson (HOG.N) is lining up a takeover bid for Italian rival Ducati, potentially bringing together two of the most famous names in motorcycling in a deal that could be worth up to 1.5 billion euros ($1.67 billion), sources told Reuters…

…Milwaukee-based Harley-Davidson has hired Goldman Sachs to work on the deal, one source familiar with the matter said, adding tentative bids were expected in July.
Volkswagen, whose Audi division controls Ducati – maker of the iconic Monster motorbike – is working with investment boutique Evercore on the sale which will help it fund a strategic overhaul following its emissions scandal.”…

https://www.reuters.com/article/us-volkswagen-ducati-m-a-idUSKBN19C1XX

Thankyou