@hugo_the_newfie, Australia
Well, this is no surprise. If you have a secured line of credit arranged at the bank – whether it’s drawn or not – the feds just put you in the crosshairs. We hinted days ago it was coming. Now it’s here. The consequences could be far-reaching at a time when real estate’s wobbly from both the stress test and (especially) swelling interest rates.
The move comes on the heels of the bank cop (OSFI) requiring everyone (including those renewing a mortgage and switching lenders) to qualify for a loan at an elevated rate. The stress test dictates it must be the bank offer + 2%, or the benchmark of 5.3% – whichever’s higher. Before long that will be over 6%.
Now the feds have raised the alarm about HELOCs. No wonder. These borrowings, secured by real estate equity, have turned houses into ATMs. People have swarmed the banks to get them, and currently we owe $235 billion, up 35% in the last eight years. Home equity LOCs are sweet because they come at a low rate (usually prime plus a half), are immensely flexible since you can borrow or pay off as much or as little as you want, when you want, and they’re cheap to carry. About a third of borrowers, for example, never pay them back – they just keep making interest payments on the outstanding amount.
Canadians use HELOCs for three main reasons: (a) to renovate real estate, (b) buy more real estate, like a cottage or a rental unit, and (c) hand their spawn money for real estate. Given the fact we’re in a property price bubble with household debt at historic levels and interest rates steadily inflating, lending people funds to buy more real estate based on the inflated, imperiled real estate they already own is a seriously bad idea. Ottawa just got it.
But, like I said, too late. Those hundreds of billions have been loaned. The cost of money will rise another four or five times (says the central bank). So if borrowers can’t pay down the principal now, what’ll they do in a year? How much risk have the banks walked into? Isn’t this exactly what the American lenders did – pretend real estate values would forever rise, and keep lending against them?
Okay, so here’s a change. This may sound modest at first blush. It’s not.
Effective immediately bankers will assume you have borrowed all of your LOC, even if you’ve borrowed nothing. The monthly payment required to service that full amount will be used to determine your debt-ratio limit and, in a majority of cases, push it beyond the red line. That would prevent borrowing more money on the line or expanding/refinancing or possibly renewing an existing mortgage. You could not switch lenders to get a lower rate without facing the stress test – which you’d fail.
This will cause a lot of folks to slash their HELOC limits, eliminating a financial safety net for the prudent. It will make people think twice about using those lines to buy secondary properties or hand over borrowed down payments to their kids. It could make investors wary about dipping into their equity to diversify into financial portfolios.
This also showcases how the feds are freaking over our steaming mountain of family debt and the impact rising rates will have. Three million households have HELOCs. It’s been the fastest-growing form of borrowing. Most of the cash is being plowed right back into the same asset class – residential real estate. It’s as if we learned absolutely nothing from the American housing collapse which created a global financial crisis.
Like the stress test, this move’s designed to tap the brakes, forcing banks to be way more badass than in the past. HELOC growth could shudder to a halt. The biggest impact might well be on the Bank of Mom, funded by home equity. And do not underestimate the effect those coming rate increases will have. Within four years all existing mortgages will have renewed at higher rates, while HELOC costs balloon immediately with every Bank of Canada adventure.
And, yes, there’s more to come.
132 comments ↓
First!(?)
US Home-Buying Sentiment Craters to Second-Lowest Level Ever Recorded
http://www.investmentwatchblog.com/us-home-buying-sentiment-craters-to-second-lowest-level-ever-recorded/
Pink Pumpkins being carved in Vancouver.
These guys have decided to take their speculation attempt for another spin.
Purchased for 1.32 in July 2017 it has been an ongoing saga with no end in sight.
The ask this time is 1.39 and so once again how up-to-date is the information these guys are being fed as they are still expecting the new buyers to foot the bill.
Just to put in context what the are asking a house nearby at 1978 e 64th avenue,that I could have ran as a Less than assessed post sold in late May for 1.22 and was assessed at 1.71 and was 20 years younger.
Close to 30% less than assessed.
Did I mention this house is on a busy street?
The assessment of this one only comes in at 1.49.
If anyone is crazy enough to pay what these guys paid, they should take it in a heartbeat and tow the expenses along behind them for a while.
Forget Mr Market, this current market has claws that she will drag down your back and leave scars for life.
Sticky prices?
She got a Fast Car…
M44BC
https://m.youtube.com/watch?v=AIOAlaACuv4
2052 e 49th ave,Vancouver paid 1.32 July 2017
Now asking 1.39
https://www.zolo.ca/vancouver-real-estate/2052-east-49th-avenue
$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Feel free to make a donation.
Flop For Fox Fund…
http://www.terryfox.org/get-involved/ways-to-give/
Another day, more melting of oil and the TSX. A few weeks ago, and pretty much over the past few years I’ve been saying that the real problem Poloz will face going forward is deflation, not inflation, and raising interest rates is a mistake. And here we are. TSX YTD is negative. Oil is falling. Inflation is dead and Poloz has basically neglected his inflation mandate of 2% — inflation running a mere 1.5% annualized over the past decade. If ever there was a case for removing a central banker for cause, Poloz would be the poster child, with an enormous amount of economic output sacrificed due to the incompetent leadership of the Bank of Canada in running overly tight monetary policy.
With so much short-term consumer credit in the Canadian system, repricing takes effect very rapidly. Your average Canadian, without much of a pay raise over the past number of years, has literally hundreds of additional dollars coming out of their pockets straight into the hands of the lenders. And even the lenders themselves aren’t doing so well as there is little to no confidence that the BoC won’t damage their business prospects further by raising rates when clearly such is not justified.
Nobody has a plan to move beyond hyper-consumerism, and RE investment for the future of the Canadian economy. Entire industries which previously behaved counter-cyclically, such as technology, have largely been excised from the Canadian economy due to government policy and lack of investor confidence. Sure, if the price of gold skyrockets as is widely believed to be a likely outcome in a significant deflationary period, a few more mines will get built in Northern Ontario and Northern BC. But the benefits will be extremely concentrated amongst a relative few. Little to nothing works as well systemically as a RE bubble for distributing wealth amongst an entire population as 70%+ of Canadians own homes, but I reckon only a fraction of a percent have any statistically relevant non-pension exposure to the precious metals mining sector as either investors or employees.
Unless the numbers turn around rapidly, the BoC is done with its rate hiking. Put a fork in it, they’re done. CPI is likely to shrink again this month, with gas prices now falling nicely. Layoffs at Bombardier and in the construction sector are putting tens of thousands into the streets with very few jobs actually being created to replace all that is being lost.
scary stuff!
Wow this would happen as soon as I buy a place after giving up that they were ever gonna go hard on borrowers
Already been doing this for quite some time. The qualifying payment used on a HELOC is the full limit at 60/300 @ the BOC 5 year benchmark rate. Maybe it wasn’t mandated before but it has been done for at least 2 years.
Love reading your blog – excellent stuff.
As I’ve said before, I know some families that will be absolutely devastated by this.
These are not families that spend exorbitantly. Very modest cars, very modest lifestyles, but they’ve bought over-priced properties in the last few years to house their growing families, and over-borrowed to help contribute to maternity leaves or cover for illnesses that kept them from working.
Then they were hit with special assessments on the properties they’d bought, and used their HELOCs to pay for those.
Suddenly, they’re in danger of maxing out, and are looking at paying premium interest rates on their debt for the next 10 or 20 years, because they’ll never get ahead.
Yesterday’s blog post about taxes was titled ‘the trap’. If you ask me, this will be the trap really bites.
boring blog. i just show up for the excuses
Nawww Garth, the HELOC people just took your advice, borrowed at low rates and plowed it into equity markets. All good here… nothing to see.
#whatcouldgowrong
Housing price collapse circa 2022?
Me thinks.. yesssir!
Yawn…..yesterday was far superior:)
You’re wrong Garth. Canada DOES have a valuable lesson. Banks will just not foreclose in the first place. The US stopped foreclosing after they realized what it was doing to house prices. The irresponsible will live for free until inflation catches up. Condos are F’d but SFR should be ok in terms of price. Although good luck trying to sell…
I hope some readers didn’t take your advice too literally and have some liquidity instead of solely relying on LOC which can go away during the down credit cycle.
So who faces this new Debt Service Ratio Test?
That would be only people being reviewed for new borrowing?
Will that even apply to most mortgage renewals at the same bank where you just sign the renewal offer and continue?
Presumably if you have a paid off house and an existing HELOC, and don’t apply for new credit but just use the existing HELOC, no one is reviewing your debt service ratio and there is no impact?
Are there only 3 million households with HELOCs? How many LOCs on top of that?
Does the new rule apply to LOCs (non-home equity)?
Do these rules or have they always applied to credit limits on credit cards which can also be very high.
I don’t know Garth, all this stuff makes perfect sense and should lead to prices decline
yet this RE thing just doesn’t die, no matter what
Good evening Garth and team,
Last 9 out of 10 postings are about real estate.
Is it possible to have one about finance soon?
Thank you.
Such an unexpected surprise! the Canadian Govt and the Banks had no idea this would happen! LOL! Sheep get sheared …. pigs get slaughtered.
My Canadian yield curve chart has the 10yr less 2yr plot just 16 beeps away from inversion:
http://www.chpc.biz/yield-curve.html
In May, June and July of 2007 the 10-2yr spread was negative 10 beeps and the TSX Real Estate Index tipped over into plunge-ville.
During the ’07-’08 plunge, average Toronto SF Detached prices lost $63,867, or 13% in 13 months; now (Oct 31 data) Toronto SFDs are down 16% or $195,006 in 19 months.
Toronto SFD prices are up 132% over last 10 years and have been trending sideways for the last year.
Meanwhile, on the mean streets of the GTA, everyone still wants a detached, the real estate economy is LITERALLY booming, everyone wants property, there is no good property to be had be it industrial, employment, retail, residential, office, mixed use. Perceived values may be high, but are they? Good parcels have all been snatched up. Policies encourage vertical development and intensification while environmental policies squeeze developable land. Values may fall in the outer burbs, less desirable areas, but who cares. Four or 5 more rate increases aren’t going to stop this train. Oh no, 1%, we’ll all sink, no, maybe 1% of people will. The problem in the GTA is everyone is worried about calamity. When will it end, when will we all be doomed. I lived the mentality of this blog, no more. Instead, embrace the growth, embrace the country, let’s progress and make our Region the best it can be. There is no reason to be such pessimists and fuss over quarter point rate increases every 3-4 months. Garth, get a grip. You’ll be wearing a tin foil cap soon. Best to see your prophecy through, or, let it go.
You forgot one other major use for HELOCS. Borrowing against your inflated asset so that you can lend to someone the banks won’t touch so that they can buy an inflated asset too. This is Canada’s subprime and its a lot more common than most think
Where’s Happy Housing Crash when you need him…..?
My Canada Bonds are losing value, and where was the dog eating?
It’s a good thing rates are coming down then. Oil to $40 and $CAD into the 60s. TSX back into the 14Ks.
Many banks have been doing this for a couple years…..
Actually not, according to the brokerage industry. – Garth
Unless the numbers turn around rapidly, the BoC is done with its rate hiking. Put a fork in it, they’re done.
++++++++++++++++++++++++++++++++++++
Not so fast. As James Carvil once said “When I die I want to come back as the bond market. It scares the hell out of everybody.”
Interest rates will continue normalizing as demand for real money (not fake borrowed money) escalates. Those who borrowed fake money will learn that they need to pay it back with real $$, and as we all know any asset that is in shortage experiences a price rise which means that interest rates will continue going up.
The U.S. will keep raising rates and until they stop Canada’s along for the ride.
In the lighter side of the news I heard today that T2 has decided that an un-buildable pipeline isn’t enough for his taxpayer funded buying spree; he just bought the rights to produce Season Two of Roseanne for $500 million. What a guy!
In the mean time Canada loses $120 million a day in oil revenue. Sweet!
Garth Really – this is fake news I have had LOC for 15 years and used it to build up a real-estate rental portfolio. The green bank would never give me more that 65% for secured loc, so whats the risk. They need to let the market fix itself and stay out of it. LOC,s are great for investing. I built up enough cashflow over the past 15 years to retire and this could not have happened without easy money. I don’t think what I did coukld be done if starting now with all these rules.
#22 Darts – Tell us who would borrow against an inflated home asset, to lend it out to anyone the banks won’t touch, to buy a home in a downward market? I really want you to win the cigar from my box!
@THE REAL MARK
What makes you think that Poloz actually cares about the CPI? Look at his last statement. “The global economic outlook remains solid”. The bank believes the consumer is being supported by “solid employment income growth.”
His reasons are absurd.
Poloz has already decided to raise rates to keep up with the Fed. Then he fabricates justifications that give the illusion that he’s in control of the process. Deviation from the Fed usually means destabilizing imbalances in our economy.
The BOC will never admit that they don’t have control over their own interest rate policy.
>Here’s something interesting. Now who didn’t want to build a pipeline? Beggar thy neighbour back at ya? Karma?
https://www.cbc.ca/news/canada/british-columbia/natural-gas-supply-bc-fortis-turns-to-open-market-1.4896976
Pipeline blast forces FortisBC to open market to boost natural gas supply
Company preparing for a potential acute shortage, spokesperson says
The Canadian Press · Posted: Nov 08, 2018 7:40 AM PT
FortisBC is looking at several options to boost its stock of natural gas in an effort to get its customers through the winter after a pipeline blast squeezed off supply.
Sean Beardow, manager of corporate communications with Fortis, says the flow through the Enbridge pipeline that exploded near Prince George, B.C., last month has reached about 55 per cent, far below what will be needed this winter.
He says the company is getting more fuel from an Alberta pipeline and has received permission from the B.C. Utilities Commission to purchase natural gas on the open market.
Enbridge has said it wants to get its pipeline capacity up to 80 per cent after the explosion — the cause of which has yet to be determined — but Beardow says even that won’t be enough for the winter, especially if it’s cold….
—
Looking around the comments section for last little while:
“Silence is the best reply to a fool.” Ali ibn Abi Talib
(Hint, Garth.)
Must be a really rich dog.
“Like the stress test, this move’s designed to tap the brakes, forcing banks to be way more badass than in the past. ”
‘There you go again..’ (as Reagan used to say),referring to the Banks as badass). Poor things are only trying to scratch out a living in a world gone mad.
There is some sense in this new initiative of including a payment based on limit versus balance. Example: Peeps that currently apply for mortgages who insist they will use their investment resources for down payments (all the while fully intending to draw down on that big line of credit) which results in a false calculation of the total debt service ratio (affordability ratio).
Given the variable interest rates applied to these HELOC mortgages some might find the original amortization they chose has grown legs. Worse yet, they might decide to ditch the old HELOC and refinance all their debt into the good old fashioned conventional type mortgage only to find the value of their home has dropped so significantly it is not possible. They are ‘underwater’. Oh oh….. Too bad they listened to the real estate cartel and trusted their property assessments hoping both would steer them in the direction of financially sound moves. Imagine those who loaded up on rental properties and what the multiple effect of that scenario might be, and how long it will be before the finger pointing begins…
Oh me. How to put the Genie back in the bottle.
Another great blog with realistic insights.
This just came out in the online version of The Globe and Mail .
New HELOC rules and mortgages .
https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-a-quiet-rule-change-will-make-it-tougher-for-canadians-with-a-heloc-to/?utm_source=facebook.com&utm_medium=Referrer%3A+Social+Network+%2F+Media&utm_campaign=Shared+Web+Article+Links
Calgary = Pummeled Into Submission.
I can’t wait for next Tuesday’s plebiscite on the 2026 Winter Olympics bid. Every smart city in the world has declined to bid.
Will my ballot be spoiled if I write on it “What part of NO do you not get?”
As I am not a hotelier, construction company owner, Chamber of Commerce lackey or gadfly, etc. there is only one answer. I predict a resounding no vote. Hold them in Castlegar, BC.
The IOC is quite a meritocracy. Hence the son of Antonio Samaranch is now a VP of the IOC.
DELETED
Here is an interesting chart.
https://data.oecd.org/hha/household-debt.htm
Denmark is really pickled and Hugarians must be really happy.
So are you talking secured or unsecured LOC’s not linked to any chattel?
HELOCs are secured. – Garth
First of all, great job on the blog and thank you for your consistency.
Next, this has only been implemented by TD Bank thus far, officially. That does not necessarily mean that others will follow suit as we’ve seen when TD Bank increased their prime rate a while back. Supposedly RBC has a similar policy since 2013, but I have not seen them resort to it – up until now that is. Manulife is another one with similar underwriting guidelines. This is not a saving grace by any means, as access to funds is becoming limited and rates are on the rise.
My only question is, what is their motive? Why did they lend so freely and cheaply for the past decade only to turn off the tap so abruptly?
TD is the fourth bank to do so. – Garth
@#39 Thanksgiving Turkin
“Why did they lend so freely and cheaply for the past decade only to turn off the tap so abruptly?”
++++
The real estate golden goose is over cooked?
Happy HAPPY Housing Crash Everyone! The housing bubble is finiahed. You will start to see more house fires and foreclosures. Many people use their HELOC to pay their mortgage and expenses. Yes sounds crazy but every SHYSTER(mortgage broker) khere knows the scary truth. Many will now go bankrupt. Its game over for SHYSTERS and the housing bubble. The housing market just went from bad to [email protected]$king terrible.
Look out below.
Happy Housing Crash Everyone! :-)
“F”, the elfin deity, would be rolling over in his grave if he saw all of his efforts foiled by those pesky libs. Poor Jim. He started it with a bang, now it will end with a whimper.
#24 Quagmire from Family Guy on 11.09.18 at 5:53 pm
My Canada Bonds are losing value, and where was the dog eating?
—————————————————————
Newfoundlands – drooling is kinda a thing for them…
#28 bobo on 11.09.18 at 6:32 pm
Garth Really – this is fake news I have had LOC for 15 years and used it to build up a real-estate rental portfolio. The green bank would never give me more that 65% for secured loc, so whats the risk. They need to let the market fix itself and stay out of it. LOC,s are great for investing. I built up enough cashflow over the past 15 years to retire and this could not have happened without easy money. I don’t think what I did coukld be done if starting now with all these rules.
_ _ _
Epic facepalm.
Some wait for RE crash to buy in, some wait with HELOC for stock market crash to buy in.
If not real estate, then what kind of asset classes are good candidate to invest the available cheap HELOC money?
A global cheaplabor ETF would be a good candidate, not much price inflation danger there now and any time soon.
As a couple of others have pointed out, it’s true, banks have been doing this for quite some time. I know, I’ve lived it for a long time. They actually even include credit cards. Say you have a $3000 limit on your Visa. Well, banks consider that fully borrowed and at Visa’s posted rate (19%?). Doesn’t matter if you pay off your balance every month.
Also, you bought a new home right? Now you need furniture so you go and buy it before you move in and you take the deal the Brick is offering – do not pay for one year. The banks will do a credit check right before they pay out for the mortgage. They’ll see that and if it brings your ratio above the right amount – too bad, so sad, but no mortgage. Also seen that happen.
This is a change. Included in debt ratio is not what you borrowed but what you might borrow if the line were fully extended. – Garth
There is no substitute for Cash
If HELOC limits can be slashed or the HELOC taken away, that is more proof that only cash is cash.
Cash is the one and only investment that is guaranteed to be stable in terms of its nominal dollar value a month from now. The same cannot be said for the other asset classes.
Credit is a great substitute for many purposes – unless it might be taken away.
Only cash is cash. Keeping some modest allocation to cash can be a good idea. And, in the case of job loss who would want the stress of using a LOC anyhow?
Also, are people really sure that using a LOC or HELOC after you lose your job is within the terms and conditions? Are we not obligated to tell the bank if we use a LOC or HELOC after losing our job?
Race to 900k.
Featured these guys a couple of times and their wait to exit the market continues.
What they did is, buy a property and then demolished it and build a couple of detached structures otherwise known as an Infill.
They just took a token 10k off to show that they are negotiable on price,I remember when it was asking well over a million and not that many detached properties had gone for lower.
Things have changed and the bottom rung has moved down 200k in the last 6 months.
These guys probably had the right idea to make a decent profit before late 2016,but they haven’t sold the other structure either and now are all tied up waiting for someone to give them their pass.
This is pretty much brand new,except from the cobwebs of the protracted sales process but people just aren’t seeing any value.
Older, uglier detached’s are going instead and the Milly’s want the view as well as the glass and granite and so this one is not suited for current market demand.
People are acting like Vancouver is about to go duplex mad, but if detached properties continue to fall then I don’t think the excitement goes far beyond the development crowd and The Sell Squad that needs a new racehorse to back…
M44BC
4650 Baldwin St,Vancouver.
Brand new infill house.
Asking 959k
https://www.zolo.ca/vancouver-real-estate/4650-baldwin-street
Better to live within ones means?
This will fall on deaf ears.
#4 The Real Mark on 11.09.18 at 4:57 pm
Wow is that really the real you? If so keep it up. It wasn’t techno-jargon-babble intended to confuse, but actually articulate and sound. Often i wonder if you’re highly intelligent, but a terrible writer, or woefully ignorant but a talented writer. Keep doing what you did here tonight…
However the other Real Mark is awfully funny, and you earned him!
Garth, long has your sensible advice been get a personal unsecured LOC from the bank for rainy days so one can put their money to work. As someone that is looking to vultch a good SFD deal potentially as soon as next year, does this mean i’m better off closing said unused, unsecured LOC before qualifying for a mortgage?
Its obvious TPTB are crashing the housing bubble back to the mean average. A housing bubble is a negative for the real economy. You all know this is 100% true and happening right now. :-)
Can someone please start telling the children not to spend money they don’t have. Thank you.
‘effective immediately bankers will assume you have borrowed all of your LOC, even if you have borrowed nothing’. Maybe I have missed something here, but this is not a new thing, as least not so far as the bank we have our HELOC with is concerned. We had requested an increase in our HELOC limit back in 2012 & the bank loan officer explained that they would have to assess our credit worthiness for the increase by calculating our debt ratio including the full amount of the HELOC, even though at that time we had no outstanding balance on it. When we queried whether this was normal practice we were assured it was, because the bank had to take into account the fact that we could borrow the full amount of the HELOC at any time.
While it is possible that other banks were not following this practice, I think it highly unlikely. The only difference I can see between our experience & ‘the new rules’ is that the banks could choose not to include a HELOC in any creditworthiness check & now, apparently, they have to include it. So possibly some people who were slipping by in the past will now be stopped from borrowing any more, or even borrowing at all. It will be interesting to see what ‘more to come’ will entail.
The 2024 Federal election will be won by the party promoting policy and regulations to reinflate the gas bag.
Boss, you were once in the tellie industry.
Wanna be business partners where we create a television network and all we show is real estate carnage to counter the HGTV crowd?
I’ve already got a name for the network picked out.
Debtflix…
M44BC
#118 viorelli on 11.08.18 at 11:41 pm
Unfortunately, Vancouver’s escalating real estate prices (distant past) can be attributed to numerous natural and unnatural factors:
6. Close flights to Hawaii, Las Vegas, AZ, and Cal )
10. numerous new immigrants from China, Russia, Brazil who own mansions and drive very expensive cars, kids are in hockey too)”
Always love when people mention a place is great because it is easy to escape somewhere else….counterintuitive much?
Also the Brazilians taking over hockey was humourous to say the least.
On the next list add,
11. Rain and Clouds for 300 days per year!
Lovely. Less credit availability means lower prices for all.
Because credit availability sets prices.
Soon you will have to pledge less of your lifetime surplus value to a banker who has the right to create bank credit, which is fungible with sovereign money.
seriously ?
The ‘world’s first’ A.I. news anchor has gone live in China
https://www.cnbc.com/2018/11/09/the-worlds-first-ai-news-anchor-has-gone-live-in-china.html
This is a change. Included in debt ratio is not what you borrowed but what you might borrow if the line were fully extended. – Garth
Yes, we’re on the same page. That’s exactly what I’m saying. Even applies to credit cards.
Nah, don’t think so. No bank adds an unused cc limit into the TDS ratio. – Garth
> Unless the numbers turn around rapidly, the BoC is done with its rate hiking. Put a fork in it, they’re done.
BoC follow the FED. It’s like you are flying a plane but checking the height by looking at the amount of power left on your phone.
https://www.ratespy.com/wp-content/uploads/2018/07/Fed-versus-Bank-of-Canada-Rate-700×466.jpg
In the 1980s, my parents used to dress up to go to the bank, much like others at the time.
Will that day ever come back?
Garth,
easy to fix excessive real estate prices in Canada. Convert all provincial/national parks into freehold real estate. Offer incentives to IT companies to relocate to pristine areas.
example, Banff…develop the hell out of it, and then turn it into a silicon valley north with tax incentives……next!
Cash in fact has no storage of value. It devaluates.
Owning shares in corporations that feed civilization provides equity.
Funny how that works. Borrow more at your own risk.
the past week i spent in the heartland of the indian community for the diwali celebrations.
what i have learned and knew for many years, that they will rent out their basements, take a second job, bring their parents from the punjab etc to keep their house of cards going.
the scottish math that these bankers use, yes all bank presidents are scottish in canada, like you will ever see a chinese canadian as the president of the RBC.
anyway, my comment is about cultural differences in risk assessment, calculations, stress and struggle.
the traditional living arrangements that the old stock canadians have been accustomed to are hard wired into the stress test, debt service ratio etc.
newcommers are able to absorb more stress, live with higher ratios etc, not because their special its because
their way of living and costs are substantially lower.
it still doesnt change the fact that you should all go the usa where you can write off mortgage interest on your home, yes subject to the 750K new mortgage limit, you can have more than one property etc.
with lower rates and better writeoffs the usa always makes better living. but thats a side note.
the canadian bankers are way to conservative, thats why they are protected, if they had real competition they will have shrunk 50% by now,
Canada is great country, wait in line health care, get your generic drugs, kids go to school for free, university highly subsidized etc. realtively safe etc.
but the flipside is you will be relatively poor all your life regardless of your actions, its the system, its been long set up by the 100 families, the government and the banks and insurance companies. thats it.
go riders go.
HONG KONG (BLOOMBERG) – A Chinese ham producer has come up with an innovative way to pay its creditors. Some holders of its debt will now receive its pork products instead of interest payment.
Zhengzhou-based pork producer Chuying Agro-Pastoral Group Co said it has reached an initial agreement with creditors holding 271 million yuan (S$53.7 million) of its debt over such a plan, according to a filing on the Shenzhen Stock Exchange on Thursday (Nov 8). Only the interest portion will be repaid with ham or pork gift packages, it said.
The announcement came after the company failed to repay 500 million yuan local bonds due Nov 5. amid a cash crunch resulting from a drop in demand for pork products thanks to the spread of African swine fever. As of Sept 30, the company had 1.3 billion yuan cash, compared with short-term debt of 8.4 billion yuan, according to Bloomberg-compiled data.
https://www.straitstimes.com/business/companies-markets/china-company-pays-its-bondholders-in-ham-instead-of-cash
Very sobering post Mr. Turner. This high debt, mortgage and car loan over extendedness is going to be very painful for many even if it only goes 1.25% higher in 2019. Due to geopolitics I believe you could add easily add another 2% to the interest increases by Q3 2019.
#62
Yes when the Banks have credibility again. The Bank is not your friend.
Can you give some insight on whole life and universal life insurance?
I hear people are often purchasing this product. Can you offer the pros and cons.
Chinese President Xi Jinping’s mantra that homes should be for living in is falling on deaf ears, with tens of millions of apartments and houses standing empty across the country.
Soon-to-be-published research will show roughly 22 percent of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That adds up to more than 50 million empty homes, he said.
The nightmare scenario for policy makers is that owners of unoccupied dwellings rush to sell if cracks start appearing in the property market, causing prices to spiral. The latest data, from a survey in 2017, also suggests Beijing’s efforts to curb property speculation — considered by leaders a key threat to financial and social stability — are coming up short.
“There’s no other single country with such a high vacancy rate,” said Gan, of Chengdu’s Southwestern University of Finance and Economics. “Should any crack emerge in the property market, the homes to be offloaded will hit China like a flood.”
https://www.bloomberg.com/news/articles/2018-11-08/a-fifth-of-china-s-homes-are-empty-that-s-50-million-apartments
Apparently the debate will never be resolved:
https://www.straight.com/news/1162801/josh-gordon-vancouverites-dont-need-re-education-about-foreign-ownership-and-housing?fbclid=IwAR0Z7hAizHsHNt0YbNGLchKDZpydosjmZCp9GkbK8JkrB0fcORd8dh222gA
To all the people from Ontario,Alberta etc…on the blog,I’m really sorry for burning your eyeballs with my posts the last couple of years.
This is how sad it is out West.
A person on a forum today when they were trying to show someone evidence of price drops listed two options for the person to check out.
Option 1) Teranet,fair enough some people find fault with it, but whatever.
Option 2) Some dickhead from The Tasmanian Institute of Transparency.
That’s all they could come up with as it’s pretty much all one way traffic.
Pray for Vancouver.
Mercy…
M44BC
“The Teranet House Price Index does that. They show Vancouver (Metro) having a drop of 0.4% in a month – and the first drop they record. In other words, prices that they monitor had shown increases until July 2018 – and now a drop. (Toronto saw a 3.3% drop in a month, and the peak in that market was a year earlier).
The Pink Snow Blog looks at individual examples of houses and condos across the lower mainland where achieved prices are way below asking, and in many cases now, below the price paid by the seller. Although the plural of anecdote isn’t data, there are plenty of anecdotal records there to suggest a trend. For example, an apartment in Yaletown was bought last year for $1.38m. Initially it was being offered as a flip at $1.45m. Now, after three price reductions it’s down to $1,318,800, with a $60,000 reduction in the price they were trying to get only two weeks earlier. It still hasn’t sold yet.”
The banks may be tightening up Locs but the credit card companies are still increasing my credit limit. got a letter in the mail. you deserve more fun today. we’ll increase your limit. just say yeah I want to borrow more. nope. i always pay off my credit card automatically every month. it is just for convenience and record keeping. mamma done tole my, when I was in knee pants, banks are a two face, they’ll get you singing the blues
#4 The Real Mark… Some people thought the same thing about rates on the way down ‘there’s no way they’ll lower it again’…. The bank dudes will always surprise you…
You know what really sucks as a renter?
When your landlord comes to you and says hey sorry I have to sell the place, however you can stay if you agree to pay $400/m more which is still slightly below market rent.
Twenty five years ago my first job was in a bank. When I worked for them they calculated tdsr as though all revolving accounts were maxed out. To make sure staff wouldn’t over extend themselves.
After I left the bank suddenly tdsr was only based on actual debt plus $75 a month for heat.
It really did used to depend on how much they wanted your business. And staff were not wanted.
#62 JSS on 11.09.18 at 8:04 pm
In the 1980s, my parents used to dress up to go to the bank, much like others at the time.
Will that day ever come back?
same..same…same
Periodically I thrown on a suit and tie for the day at the office. People think its a job interview. If they ask about the temporary abandonment of denim, I reply, “I have a meeting with my banker.”
As a member of the middle class, I am just one of many millions of people pretending I’m rich.
“It’s as if we learned absolutely nothing from the American housing collapse which created a global financial crisis.”
—-
I wonder whether it’s going to be Iambic Pentameter or Haiku. Perhaps a Canadian Hai-kut (hair-cut) LOL
(“The future doesn’t necessarily repeat, but it rhymes.”) M.T.
pic
Ezackly,
Like the stress test, this move’s designed to tap the brakes,… – Garth
I think we are beyond tap… getting close to locked up and in the beginning of a skid…
Enjoy the ride!
“More to come”. I suspect that will be the real killer. Just wondering if interest payments will become mandatory, or any of the principal on the HELOCs.
Initially this latest move stops the growth, but I think I’m more curious about the lowering of that debt to a soft landing for the Canadian consumer and more importantly the lenders.
I wrote a while back that I thought this HELOC issue was the real threat to our way of life as it created the subprime conditions through the three scenarios listed in this article. It was the perfect loophole to borrow more than what would be approved normally by any lender especially on a single asset.
If the OSFI mandates mandatory interest payments, or perhaps a portion of the principal it will be an immediate forced sale for those who can’t pay it.
That could start a full blown credit freeze, a collapse in value of just guessing several hundred billion dollars of housing assets triggering margin calls (HELOC loans) on even healthy borrowers to restore banking capital to OSFI regulated values.
I know that’s a mouthful, but I’m seriously concerned about this. We could very well end up like the Americans did in their housing crisis with no chance of lowering rates to save the day, unless you like paying 10 bucks for two imported tomatoes.
#59 jess on 11.09.18 at 7:57 pm
seriously ?
The ‘world’s first’ A.I. news anchor has gone live in China
—————————-
Named Mark? Reboot/error 404
Latest Reports
http://www.rbc.com/economics/latest-reports/index.html
#69 jorden on 11.09.18 at 8:43 pm
Can you give some insight on whole life and universal life insurance?
I hear people are often purchasing this product. Can you offer the pros and cons.
————————————————————–
Jorden, a finances-related question, good show!
The first thing you want to ask is why do you need a life insurance policy, for how much and will that situation change over time? If so, maybe you don’t want to make a long (for life) term commitment…
Canadians can be notorious for being over-insured from a pay now or pay later perspective…
I know post media aka Vancouver Sun/Province need the ad revenue and just post whatever the real estate association throws at them. But this is getting ridiculous…MSM is dying a slow death.
Real estate forecast anticipates 2019 sales to edge up after 2018’s fall
Tighter mortgage rules and higher interest rates have dented buying power, but health of the economy backs higher demand.
https://vancouversun.com/category/business/real-estate
https://vancouversun.com/news/local-news/free-mortgage-deal-attracts-buyers-to-langley-development-despite-condo-glut
Everyone and anyone would rather live in Phoenix than where you live
You live in a crap hole
Let’s keep it real
Lol
Berlin real estate prices becoming too high (unaffordable to most). Mayor is suggesting a ban on foreign buyers much like NZ.
No link…google it.
I’m always wrong on BoC moves
It’s sad
#65 crossbordershopper
You got that right.
Canadians crave newcomers, they see them as the savior of the economy, their pension. who rescues them from the scary ghost of demographic decline. They don’t even care how they look like.
In reality, what sets newcomers apart from the old stock, is that they take the risks that Canadians are taught to never take.
Most Canadians would find not only financially irresponsible, but clinically insane to show up in an unknown world, thousands miles away, with a few hundred dollars in your pocket, in the cage of your mother tongue, maybe even with a wife and kid.
Yet, here we are.
A couple of decades later, in your house, by the pool, with the German car in your garage that’s too daring to entertain, with kids graduated, and you left with your trooper, still beautiful wife and amazing plants, trees to take care of, you understand the horror that such an idea creates in the mind of a true Canadian.
With gratitude in your heart for your good fortune, you offer tobacco from your garden to the Creator, and ask for insight to hatch the next big plan, when time comes to that. You have to figure out how to teach your grand kids the spirit that most around them considers not only financially irresponsible, but clinically insane – and transform it to a successful life of the opposite. With all the luck and blessings this needs.
86 Leo Trollstoy on 11.09.18 at 10:28 pm says… “Everyone and anyone would rather live in Phoenix than where you live”
My sister lives in Phoenix ana i woulda only live there from November till May… too hot in the summer
collateral value = permitted loan exposure
surprise
it can shrink…been a while…
and now you must maintain the permitted exposure
all of a sudden….actually it had been quite some time…
you must pay more than the minimum monthly payments….to own I mean finance that really over your head assets…
real money will matter again
Interesting thing about this credit tightening cycle is it comes at the same time that corporations are posting strong growth and profit.
So what you have is a bunch of people selling their equities in a panic so they can pay down debt, which creates depressed share prices in a rising corporate profit environment.
This, in case I have not been clear above, represents an historic buying opportunity that is likely to get better as credit continues to tighten.
Now is a really good time to load up on equities.
#87 DON on 11.09.18 at 10:34 pm
Berlin real estate prices becoming too high (unaffordable to most). Mayor is suggesting a ban on foreign buyers much like NZ.
———
Been there 4years ago.
Vibrant City, Start Up Capital of the world.
Now my brother tells me the real estate craze is destroying the soul of Berlin.
So sad.
#71 Keith on 11.09.18 at 8:51 pm
Apparently the debate will never be resolved:
https://www.straight.com/news/1162801/josh-gordon-vancouverites-dont-need-re-education-about-foreign-ownership-and-housing?fbclid=IwAR0Z7hAizHsHNt0YbNGLchKDZpydosjmZCp9GkbK8JkrB0fcORd8dh222gA
***************
If you don’t like proper analysis don’t read this. You will be confronted with ‘omitted variable bias’ and realize how many debates/arguments are riddled with ‘omitted variable bias’. The holy grail of disingenuous politicians, media and vested interests.
Dolce: you may find this interesting.
#86. We love our autumns, winters , lakes, trees and mountains. Keep your head in your sand.
soo…
if it takes 1 acre to feed one person(a veggy only diet)
and Greater Vancouver has a population of some 2,430,000 people.
and an area of 2,700 square miles(including the mountain watersheds)wiki source
Vancouver needs
3796 square miles of farmland to feed itself.
if you add animal protein to the diet
you need 2 – 3 acres of farmland to feed a person
(this is based on a neutral input farming and rough numbers)
Greater Vancouver could try to achieve green environmental status by…
its claimed goal
bulldozing every building…
and Greening the environment
replacing it all with green farmland, and still be food deficient by at a least some 1000+ square miles green miles assuming nothing but protein deficient soy heads living there..
have fun…
Silver
Silver
A NOTHING burger.
Now, if OSFI told the banks that existing/future HELOC owners MUST PAY BACK the money like a mortgage, with monthly P+I payments commencing on such and such date, now THAT will have an effect on this type of debt risk to the banks (i.e., extinguish the risk in a “reasonable” amount of time). But not before.
All the new rules do is establish an overall credit limit for connected HELOC RE asset(s). Not exactly ground shaking. Existing HELOCs are water under the bridge.
Like Poloz, OSFI should have acted sooner to curb the huge debt load Cdn’s have taken on. Too late.
Lent money WITHOUT a repayment schedule NEVER comes to a good end.
We all need only look at our own life experiences when we “lent” money to a financially reckless, free spending and irresponsible friend – if that ended well?
Say GOODBYE to that money. It will NEVER be repaid.
The above is what the BoC and OSFI let happen so that Canada would dig its way out of the 2007 recession.
Recent regulations are “window dressing”, “save face” from reckless OSFI that stood by as FREE MONEY was created for Cdn’s to go on an irresponsible debt fueled spending spree (some of that debt createf more debt when “investment RE” was purchased with the money – how irresponsible is that, gambling a BETTER choice).
History will say this was the DUMBEST thing Gov Regulators could have let happen and acting only when it was too late.
Shit load of marines here in funner California. Going to put a leash on my wife at the pool tomorrow. They are here for you know war guys celebration.
She has a thing for real men. Hates T2.
Not sure where I fit in. I love those guys too.
Re: #4 The Real Mark on 11.09.18 at 4:57 pm
Interest rates in Canada were always higher than American interest rates until Poloz took the helm. Unpresidented damage was caused to the Canadian economy by those two needless interest rate cuts in 2015. The legacy of those two cuts lives on as more and more Canadians were duped into borrowing well beyond their limits. Interest rates in Canada should be raised well above American rates as zombie corporations need to declare bankruptcy once and for all. A system reset needs to take place.
Glad I have not got involved in the Canadian “home owners” market
https://www.youtube.com/watch?v=8V4Yzif8jQY&t=59s
funny how the liberal party would like you (and is advising you) to be conservative with your hard earned money whereas the so called conservative party (a la harper) wanted you to be nothing but liberal with your hard earned money. it seems the liberal party is the party that is in fact truly conservative. ok let’s hear the bashing now.
Re: #88 The Real Mark on 11.09.18 at 10:36 pm
Poloz doesn’t want to lose his job knowing full well Canadian interest rates are supposed to be higher than interest rates in America to support the Loonie.
So to summarize:
We basically allowed extreme over-leverage in housing by allowing purchases with very low down-payment (1), reduced the rates in addition for much longer than needed and using that to further leverage, not deleverage during low rates period (2), removed the risk from the banks putting it on taxpayer’s shoulders through CHMC (3) and in addition allowed squared ultra-extreme over-leverage through HELOC approaching 300 billions based on pretty much non existing equity in housing, based on debt (4).
In addition we incentivized the banks to lend by creating competitive environment (5) and run the biggest ever brainwashing (based on non-existing rich foreigners myths) media campaign to convince the sheeple to buy into housing (6).
We are talking here about the most extreme credit bubble that ever existed in housing in history, that completely distorted investments, the economy, has everlasting damage to the psychology of the people and will literally destroy life of generations of young people to an unimaginable degree basically rendering the big Canadian cities as impossible to live in for them.
To arrive at the point when a condo in GTA costs 12 annual net incomes for an average household, 20 if you add the interest and then 1.5 k monthly in maintenance and taxes on top of it.
The numbers for SDH is probably 20 and 30 yearly net incomes, yes that is net average household incomes respectively without and with interest calculated in it.
They call it ‘affordable’ housing.
But to afford it you have to commit you life to work /if lucky to have one, live for the mortgage, not having kids (as you can’t afford it, remember your goal in life is to live for the mortgage payments), never to save anything or retire.
Live to work for the mortgage, bank profits and parasitic real estate and media cartels in short.
I am not sure if this is a calculated slaughter of the shepple stock by the owners of this place or just plain stupidity but at this point it really does not matter.
Now they want their money back (BoC does not work for you borrowers, no matter what you think) and we are at the doorsteps of the biggest economic tsunami that is about to hit us ever.
Combine that with the incompetence of the liberal government and their strange ideological agenda and you get the perfect storm about to hit us.
Prepare accordingly but it is going to be bad and smelly and the pan will last really long, when the thingy hits the fan.
For me, I have my popcorn ready.
Cheers.
@#4
WRONG. WRONG. WRONG.
Drowning economies in excess money creates poverty, in many cases irreversible, by polarizing wealth in far too few hands.
Higher rates is precisely what ALL morbidly debt-obese economies need. Steven Poloz is undeniably on the right track as is the OSFI. Bravo and about time.
The value of money needs restoration and right quick. Those who find themselves in debt can simply suck it up.
People need to reassess needs vs. wants, put the brakes on spending and PAY OFF DEBT.
Your post, IMHO, is pure, unadulterated hogwash.
Higher rates won’t threaten nor hurt the economy – au contraire, the current state of affairs is rather the result of $hitty money supply decisions over the past 18+ years and not in any way related to higher rates.
Time to pay the piper.
#103
OK Stan, but what’s the upside?
#65 crossbordershopper on 11.09.18 at 8:21 pm
“the scottish math that these bankers use, yes all bank presidents are scottish in canada, like you will ever see a chinese canadian as the president of the RBC.”
So, you’re saying Bahrat Masrani is Scottish? lol
https://en.wikipedia.org/wiki/Bharat_Masrani
“#102 Tony on 11.10.18 at 2:39 am
Re: #88 The Real Mark on 11.09.18 at 10:36 pm
Poloz doesn’t want to lose his job knowing full well Canadian interest rates are supposed to be higher than interest rates in America to support the Loonie.”
The loonie will (and arguably does) perform poorly if too much economic output is sacrificed due to overly tight policy. And given the crisis of underemployment in Canada, its apparently obvious why the loonie isn’t viewed too favourably. People and talent are wasting away, when, with proper monetary policy, we definitely could have seen much more investment instead of the current freak show of the wrinklies hoarding excess portfolio allocations in cash savings accounts and GICs as Garth tells us about frequently.
IMHO, its a mistake to think that the CAD$/USD$ pair, or really, any currency pair for that matter, trades on interest rate differences alone. Yes, I know, there are simpletons who think that the central banks can manipulate exchange rates by manipulating interest rates. In the short term, perhaps a few traders have actually made a buck trading in such a way, but its actually a far more complex problem of macroeconomics and systemic economic policy over the longer term. And the high rate environment run by Poloz et al has proven to be a complete failure.
#99 Tony on 11.10.18 at 2:16 am
Re: #4 The Real Mark on 11.09.18 at 4:57 pm
Interest rates in Canada were always higher than American interest rates until Poloz took the helm.
That’s not particularly true. Throughout much of the 2000s, CAD$ rates were consistently lower than USD$ rates. The Canadian economy solidly outperformed.
Unpresidented (sic) damage was caused to the Canadian economy by those two needless interest rate cuts in 2015.
Needless?? Inflation has run 1.5%/annum for the past decade. The target, the agreement between the GoC and the BoC is for 2%. Not only were those rate cuts needed, a huge mistake was made in not cutting further, and raising the rates when there was no longer-term return to the 2% target rate for inflation. Now CPI is in deflation, and by most indications, the deflation is set to continue in the coming months. Cash savers have been unjustly enriched by the interest rate hikes, while borrowers, and businesses, who borrowed and/or invested on the assumption that the BoC would stick to its 2% inflation mandate have been significantly shortchanged. The TSX has gone a decade with no index return aside from dividends.
Maybe Poloz will get it right in the coming months and realize the deflationary abyss into which the Canadian economy is plunging…
#153 Donna Quintapine on 11.09.18 at 11:18 am
“Once again democrats twist the facts, see how they really work, http://www.fee.org, click on articles and find article, The Myth of Scandinavian Socialism of Google that. Many of these governments say they are not a socialist governments.
I would not dismiss Garth either. Many younger people today do not have real life experience and believe everything they have read or heard without researching it or experiencing it.”
“The whole idea of having very low interest rates and lax lending criteria are a move toward more socialistic policies and most are naive or don’t understand this simplistic economic outcome. Get informed, in the U.S., the getting rid of much stricter lending criteria under Bill Clinton in 1990’s to make housing credit available to many that would never qualify for decades were given false borrowing power due to this.”
-Donna, you’re getting fiscal policy mixed up with monetary policy. Fiscal policy is the policy whereby Governments adjust their….ah who cares.
This post is such a joke.
“Younger” people looked on in horror as zero interest rates caused asset bubbles all around, and allowed current asset holders (older generations) benefit.
You, and people like you, have it reversed.
And btw, the welfare state has its origins in the immediate aftermath of ww2. Long before any young person was born.
MF
#89 akashic record on 11.09.18 at 10:42 pm
“In reality, what sets newcomers apart from the old stock, is that they take the risks that Canadians are taught to never take.
Most Canadians would find not only financially irresponsible, but clinically insane to show up in an unknown world, thousands miles away, with a few hundred dollars in your pocket, in the cage of your mother tongue, maybe even with a wife and kid.”
-Umm, most people who come to Canada come for a better life. They want to leave poverty, war, tribalism, and corruption.
No one finds them insane for doing that? And the economics of it all are usually a secondary thought.
Do you know any immigrants?
MF
“Drowning economies in excess money creates poverty, in many cases irreversible, by polarizing wealth in far too few hands. “
That’s definitely not happened in Canada (yet). The housing bubble has been extremely egalitarian, since 70%+ of Canadians own their own homes, and have participated in the gains associated with rising housing prices. The remaining non-participants (usually called ‘renters’) have benefited greatly from a vast expansion in the rental stock.
Its the inevitable deflation of such which promises to concentrate the wealth, as only a relative few own inversely correlated assets that can withstand and prosper in the deflationary crash that is associated with the contraction of credit, and the policy that inevitably will be required to combat such.
This is why rates should have been kept low, while the GoC/CMHC/OSFI work, from a policy point of view, to deflate the housing bubble and get some other sector established in the economy. Despite what some people here think, BoC monetary policy is a rather blunt instrument. It cannot be used to target certain sectors of the economy, like housing. There are plenty of other sectors of the Canadian economy that are in serious need of investment/modernization, and it is policy tweaks made by other economic and monetary policy actors that highly influential in tuning exactly where credit flows. Using a systemic tool to target a sector-specific bubble (housing) is highly inappropriate and exposes the Canadian economy to the very serious risk of long-term operation far beneath potential. Robbing Canadians of enormous amounts of potential wealth and wellbeing.
@#69 re: “Can you give some insight on whole life and universal life insurance?
I hear people are often purchasing this product. Can you offer the pros and co ”
Don’t waste your time on either. Both are a combination of life insurance and investment product. If you need life insurance, buy term life insurance which is pure insurance. If you want to invest, see Garth.
@#56 Flop
“Debtflix…”
++++
Good one.
*********************************
@#93 Ponzie
“Now my brother tells me the real estate craze is destroying the soul of Berlin….”
+++++
Those damn local Vancouverites just dont know when to stop buying property…..
Surely you’ve been keeping an eye on oil prices, which have been tanking in the last short while, and are eliciting dramatic doom imagery on marketwatch – https://www.marketwatch.com/story/stock-market-investors-wrestle-with-a-glut-of-bearish-signs-as-oil-prices-plunge-2018-11-10
I do remember the oil slump in 2015, cause it pulled everything else down with it – is this the same thing? What is going on with oil, and will this carry over into the rest of the stock market?
#109 MF on 11.10.18 at 9:07 am
#89 akashic record on 11.09.18 at 10:42 pm
“In reality, what sets newcomers apart from the old stock, is that they take the risks that Canadians are taught to never take.
Most Canadians would find not only financially irresponsible, but clinically insane to show up in an unknown world, thousands miles away, with a few hundred dollars in your pocket, in the cage of your mother tongue, maybe even with a wife and kid.”
-Umm, most people who come to Canada come for a better life. They want to leave poverty, war, tribalism, and corruption.
No one finds them insane for doing that? And the economics of it all are usually a secondary thought.
Do you know any immigrants?
MF
—
I think that you two are confusing immigrants and refugees. Out of my 20 yrs in canada i didn’t hear single complaint about immigrants and refugees. Ok few time i was refed/descrobed as fresh of the boat but more as a joke than as derogatory thing.
Now i am wondering what happened in last few yrs, we went from acceptance and inclusion to right out heytriot light toward people that speak and write with an accent.
Here is an interesting read about what i just described tables are very interesting, especially 2nd one.
https://www.migrationpolicy.org/article/building-mosaic-evolution-canadas-approach-immigrant-integration
The gubberment allowed 40 year mortgages. Next to nothing down. What do you expext?????
It was a wrong move, which I opposed. But it was also brief. Don’t overstate the impact. – Garth
Short and interesting video on Henry George.
100k attended his funeral, and his 1879 book (Progress and Poverty) outsold every other book in the 1880s and 1890s, bar one: The Bible.
https://youtu.be/xUXyfVDyXlQ
Nearly made mayor of New York, also.
Will 100k be at Krugman’s funeral? I think not.
interesting read
https://www.bloomberg.com/opinion/articles/2018-11-06/trump-says-you-should-feel-richer-do-you
so this coming thursday is ontario budget day. The rumours I’ve heard are that a lot of low hanging fruit that can be cut will be cut. We’ll see what happens… maybe a huge round of layoffs by christmas? I don’t know
#37 baloney Sandwitch on 11.09.18 at 6:51 pm
=========
More likely the reverse way around. The Danes are probably rich and the Hungarians close to being broke.
These charts are useless because they are only focussing on debt, not net worth. The average Dane probably has a lot of assets that far exceed his / her debt, the average Hungarian probably doesn’t own much.
According to those charts the Swiss would be pooched also. Does anyone seriously believe that lol.
Average humans, for the most part, are pretty stupid.
Debt snorfling, consumption addicted, FOMO addled, house horny morons. They never learn.
That’s why history is destined to constantly repeat itself.
These things that Garth writes about are so obvious, yet so many argue and refute the wisdom of its simplicity.
All it takes to understand the perils of what happens when you over borrow indiscriminately is basic common sense.
Most people lack it. The consequences will play out soon.
“If you do not change direction, you may end up where you are heading.” ~ Lao Tzu
Would the last rhino and tiger in the wild please stand up?
https://www.theguardian.com/environment/2018/nov/03/experts-fear-impact-of-china-lifting-trade-ban-on-tiger-and-rhino-parts
#65 crossbordershopper
“…but the flipside is you will be relatively poor all your life regardless of your actions, its the system, its been long set up by the 100 families, the government and the banks and insurance companies. thats it.”
——————————————————————-
Observing the way of life down here in the U.S., I agree with Crossbordershopper for the most part.
I was making the same comments to my wife the other day.
Assuming that you have a half decent job, and can settle down in one of the hundreds of thriving communities available to reside in for U.S. citizens or resident aliens, you would be way ahead financially after all is said and done.
The fact that you can find great housing in many many towns and cities (and I’m not talking about crappy areas in the slums, or high crime places, or other run down areas that are so often stereotypically depicted as U.S. neighbourhoods) that have access to an abundance of services, amenities, culture, entertainment, health providers, employment, recreation, shopping choices, restaurants, good weather, cheap liquor, etc., leaves the average middle class family with a ton more disposable income than what the same family living in Toronto or Vancouver would have.
Canadians are so brain washed into thinking that they live in a safe haven, and have it “so good”, protected by the social safety net and free healthcare.
What one would save by spending a fraction of what they spend in Toronto for housing by living in a great U.S. town or city, can easily cover the cost of health insurance (assuming their employer isn’t already covering it) and other extraneous expenses that the Canadian socialist system covers.
I said it before, and I’ll say it again, the government has their hands so deeply into Canadians’ pockets, and we are so hopelessly ripped off in Canada that it’s a real shame.
Our government does its part to keep Canadians poor.
We finish the job on our own.
#110 The Real Mark on 11.10.18 at 9:15 am
1. The parties that ‘benefited’ from the housing super bubble are:
banks
real estate cartels
municipalities/higher taxes
whoever sold at the peak
big losers: savers and renters, all the consumers.
2. There is no wealth created in this credit bubble, just fake valuations, there will be lots of fake value lost as it inevitably deflates.
Only an idiot will believe these 1.5 % annual inflation numbers. You are clearly one of those.
3. Rents are rising everywhere , at least 30-40 % in the last 2 years alone, not sure where you see that deflation except in your dreams.
Cash savers have been unjustly enriched by the interest rate hikes, while borrowers, and businesses, who borrowed and/or invested on the assumption that the BoC would stick to its 2% inflation mandate have been significantly shortchanged
You mean $ 100 is too low of a price for a decorative brick in a crack shack in GTA?
You must be wild bill or the putz himself, truly delusional. And I thought there where MJ shortages.
==========================
#105 Damifino on 11.10.18 at 8:32 am
#103
OK Stan, but what’s the upside?
I thought the upside is that we are close to the bottom of the credit super hole/pit, but I could be wrong.
Let’s not forget: that was the funny part, spending on credit. Now comes the hangover/detox part.
It is clear that our consumption based economy is done, over, finito, kaput, Sore de kimatta, exactam eam.
You can’t build a skyscraper on a sandy foundation.
#113 Lahdeedah on 11.10.18 at 10:19 am
Surely you’ve been keeping an eye on oil prices, which have been tanking in the last short while, and are eliciting dramatic doom imagery on marketwatch – https://www.marketwatch.com/story/stock-market-investors-wrestle-with-a-glut-of-bearish-signs-as-oil-prices-plunge-2018-11-10
I do remember the oil slump in 2015, cause it pulled everything else down with it – is this the same thing? What is going on with oil, and will this carry over into the rest of the stock market
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I would think that this would be a good thing for a lot of companies such as the CNR who in 2017 consumed 441 million gallons of diesel fuel which is a big part of their total operational costs.
#113
The oil biz is all about supply and demand. currently the world is awash in oil
the market has realized this,the recent run up in the market is correcting to reality and that is likely 50 to 55$/bbl
for the near term- 12 month’s out.
as for negative effects on the general market, not likely
lower cost oil is good for profits and stocks in particular
so dont worry be happy!
#110 The Real Mark says… “That’s definitely not happened in Canada (yet). The housing bubble has been extremely egalitarian, since 70%+ of Canadians own their own homes, and have participated in the gains associated with rising housing prices.”
Do you ever think about the next step? The polarization in the US was caused by the rapid burst of the real estate bubble. The high home ownership and inflated asset values (wealth effect) is a transitory effect manufactured by loose monetary policy.
Or as Yogi berra once said; “if you don’t know where you’re going, you’re liable to end up someplace else”
#119 Hawk on 11.10.18 at 10:50 am
You have to look at the whole picture.
https://data.oecd.org/hha/household-disposable-income.htm#indicator-chart
Have you ever been to Budapest or Prague?
In my estimates eastern Europe’s overall standard/cost of living when accounting for real income is already surpassing many of the so called ‘developed’ countries.
Things are affordable, people have no debt or desire to get into debt as banks are kept in check and people can actually retire. A lot of cheap places to visit, great value for the money, great food.
I think even Romania is on par if not surpassing us in terms of quality of life. Tons of high tech jobs, an IT engineer has 3 times the standard of living than one in GTA. Booming agriculture, great highways, people with money in their pockets and no debt travelling Europe and the world.
Go around an see how many Romanian immigrants are there that came to Canada in the last 10 years. zero. zlich, nada.
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The gubberment allowed 40 year mortgages. Next to nothing down. What do you expext?????
It was a wrong move, which I opposed. But it was also brief. Don’t overstate the impact. – Garth
The impact was absolutely game, direction changing.
It will go into the history books as one of the most infamous and stupid decisions ever.
House prices in Canada declined by 15 % in 2 months, nobody was buying, we were on track to follow US in their develeraging which would have been painful in short term but great in long term.
Prices would have corrected to 2002-2003 levels and kept steady.
Instead we choose to keep the debt orgy going and the 40 years 0 down INSURED mortgages were a major factor/milestone in managing market psychology.
Even David Rosenberg said it openly: This whole debt crisis is Ottawa’s fault, failure of authority, regulations, greedy politicians and bankers, lobbyists.
The worst part is we kept bragging about sound financial system, banks and other nonsense and BS, even the little elfin deity was trying to give Europe, an economy that is 15 times ours advises.
@#120 dharma bum on 11.10.18 at 10:58 am
you the same db that posts on mmm?
#109 MF on 11.10.18 at 9:07 am
Do you know any immigrants?
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As much as one can know himself.
Can you comment in a further blog on advice about home lines of credit. If people have an unused line of credit on their house-should they cancel it before their mortgage renews? Will banks allow a line of credit that is not used to be cancelled (is it some how legally tied to the mortgage contract)? Thankyou
Hello,
My answer to you is focus carefully on what Canada provides to the rest of the world. Our #3 is commodities #2 British Legal Tradition #1 Cool international destination to live
We buy products from the rest of the world – and we provide in exchange a series of extremely cool modern and extremely safe cities – certainty of law. Those who are made wealth from their product sales to us want to live here.
I lived in NYC for 16 years. Toronto never registered on anybody’s scale there at least as a city to want to go to. Now that I am back I am saying “dam”!
If we focus on our urban infrastructure – build another 5 or 6 high end Yorkdale Malls – through an indoor snow complex in one or the other – put some consulate offices (rent free) in one or more.
Dam will the money flow into Canada.
Lets stop thinking about trying to “build out” businesses in industries that we have no hope in hell in competing in.
Peter