Leverage

“I need smarter friends,” Chris says. Could be. After all, one of his friends (seriously) sent him the real estate flyer boldly reproduced below.

“Check this out,” he says. “Apparently many are gullible!!! It’s head shaking and that’s why Trump is leader of free world and socks doesn’t know what to do at G20 cause he was too busy at raptors rally and the recent parade.”

Well, that may be stretching things, Chris. But there’s point to be made here about the Common Man (sorry, Person). People are financially illiterate, naïve, susceptible. No wonder they get into trouble with money. The real estate profession ain’t helping, either. By setting up a competition between a hunk of real estate and liquid assets it’s the enemy of balance. This makes people think all they need is to own is a single thing – a house – as both shelter and financial strategy. One more reason never to fully trust anyone making their living on commission.

Let’s hope the dinglenuts who designed this is merely ignorant. And not evil. But I wonder.

If the Sandy-Randy challenge has arrived in your mailbox, or that of  a loved one, here are some things to remember.

First, be realistic. Real estate in Canada’s best market (the GTA) has increased in value about 2% this year. A balanced and diversified portfolio is up about 10%. Inflations is 2.5%. The long-term appreciation of real estate is about 4%. The long-term growth in financial assets is about 7%. Houses are not retirement plans. They’re houses. You live there.

Second, real estate investors face massive expense to both buy and sell. For example, the average detached house in 416 comes with a $60,000 bill for double land transfer tax to be paid in full on the day of closing. The average commission payable upon selling is about $65,000. Plus HST. So before any real estate investor can ‘earn’ a cent in profit in that market, they must have a $125,000 jump in value – more than 8%.

In contrast the cost to build a balanced portfolio with about a dozen positions in it is maybe ten bucks a trade. Same to sell. That’s $240, compared wth $125,000. (And I didn’t even mention the burden of lawyers, appraisers and home inspectors.)

Of course the whole Sandy-Randy realtor charade is premised on leverage. The stock investor is portrayed as having used $30,000 cash to secure a $30,000 investment while the housing dude used 10x leverage to buy a $300,000 house. There’s nothing preventing Sandy from using a loan (or margin) to secure the liquid assets, of course (creating tax-deductible interest), but let’s examine what leverage means.

If financials swoon and Sandy’s portfolio loses 10% of its value in a correction, she has 10% less money, retains 90% of her wealth and has no debt. If the real estate market corrects by 10%, Randy loses 100% of his equity, has zero wealth, and is left with $270,000 in debt. Why do the Re/Max guys never mention this?

Of course, carrying costs are a factor. There are none with a financial portfolio, unless you hire some smart guy to manage it for 1% a year – a fee you may be able to write off your taxes. With a piece of highly-leveraged real estate, there are mortgage payments, property tax, insurance, condo or strata fees and maintenance. Yes, you get to live in a house, but renting one is cheaper. Besides, financial portfolios can pay you a positive monthly cash flow.  Houses cost money to keep.

Taxes on profits? Yes, they’re tax-free with real estate. Ditto for a portfolio held inside a TFSA, RRSP or both.

Finally, risk. Not only does leverage wildly exaggerate risk in any falling market, but the danger of putting all your net worth in one bucket these days is extreme. Real estate’s a sitting duck for more government taxation as it becomes a symbol of wealth (look at BC). Housing also turns illiquid when the market sours. Financial assets, in contrast, can be sold in seconds. The last thing you want going into retirement is a paid-off home that can’t be turned into cash flow to live on. So a one-asset plan’s a total crap shoot on what conditions may be when that holding must be punted.

Life is about balance. If you need to buy a house and can afford it without gutting your net worth or leveraging your family up the wazoo, go for it. Prices are lower in many places and mortgages are cheap. But this is not a contest. Failing to stuff a TFSA for several decades, neglecting a retirement plan or lacking wealth for when troubles come – that’s gambling.

Sandy wins. She’s a little hot, too. Maybe she needs a friend, Chris?

77 comments ↓

#1 islander on 07.02.19 at 2:35 pm

Oh great one – speak to us of ‘iBuying!

https://finance.yahoo.com/news/next-housing-bubble-could-come-120033418.html
“So-called iBuying (for instant buying) involves firms using algorithms to provide sellers with fixed-price offers on their homes.”

#2 NotLegalAdvice on 07.02.19 at 2:57 pm

“In contrast the cost to build a balanced portfolio with about a dozen positions in it is maybe ten bucks a trade.” – G.T.

For fun today, let’s all get together and create a balanced and diversified portfolio together with 12 positions.

1) BMO; 2) VGRO; 3) VBAL; 4) SP500; 5) FTSE 100 Index; 6)

Please help me finish this. Thanks!

Meaningless without correct weightings, nor knowledge of the investor. – Garth

#3 Dan Atkins on 07.02.19 at 3:15 pm

Largarde is going to succeed, replace Draghi as ECB boss. ood luck Europe your really going down now.

#4 Rick on 07.02.19 at 3:19 pm

It looks like Sandy has a NASA logo on her shirt. I’m sure this was not an accident and they are trying to project something to the viewer.

Thanks for being awesome Garth!

Rick

#5 Bobby on 07.02.19 at 3:39 pm

I recall a somewhat humorous encounter with a new realtor a number of years ago. He told me I was foolish to put monies into a pension fund, real estate was where it was at. I chuckled.
I ran into him a few months ago. I’m thinking of retiring in a few months, he said he took a second job awhile ago. Go figure.

#6 I dunno ... on 07.02.19 at 3:39 pm

Your math seems awfully complicated to most I think. The ‘Battle of the investors’ math seems a lot easier to understand for the common sheeple. No one has time for math anymore …

#7 Not So New guy on 07.02.19 at 3:41 pm

I think the 2020 election will be a referendum. Not on Trump. On the American voter. Depending on what they choose will determine if the American voter has finally lost its collective mind

#8 NotLegalAdvice on 07.02.19 at 3:49 pm

For fun today, let’s all get together and create a balanced and diversified portfolio together with 12 positions.

1) BMO; 2) VGRO; 3) VBAL; 4) SP500; 5) FTSE 100 Index; 6)

Please help me finish this. Thanks!

Meaningless without correct weightings, nor knowledge of the investor. – Garth

__________________________________________

I want to invest the $60k that I have in my TFSA for a long term investment. I will keep contributing my max-room each year. I will stick to your 60/40 split of equities and fixed income. I’ll keep my 60 percent evenly distributed between Canadian, US and Emerging Markets.

Out of the 40 percent (fixed income), I want 10% to be government bonds and the other 30 percent I have no idea where to invest.

I just can’t figure out which ETFs to pick up to stay balanced and diversified.

#9 Brian Ripley on 07.02.19 at 3:52 pm

In other earnings news, ie: from one’s labour… 3 of my earnings charts have been updated now with latest data:
http://www.chpc.biz/earnings-employment.html

Inflation watchers… NEW EMPLOYMENT EARNINGS HIGH in 7/10 provinces but Alberta not included

APR 2019 Provincial Earnings
​Average employment earnings in Alberta are 2% below their October 2014 $60,961 peak and are:
10% above Ontario
12% above the national Canadian average
16% above BC and
19% above Quebec (no typo)

​​Since the Pit of Gloom in March 2009, average earnings are:
​Up 30% or 3.0% per year in Quebec
Up 28% or 2.8% per year Nationally
Up 26% or 2.6% per year in Alberta
​Up 27% or 2.6% per year in Ontario
Up 25% or 2.5% per year in BC

#10 Old Dog New Tricks on 07.02.19 at 4:03 pm

4 Rick on 07.02.19 at 3:19 pm
It looks like Sandy has a NASA logo on her shirt. I’m sure this was not an accident and they are trying to project something to the viewer.

Thanks for being awesome Garth!

Rick

________________

I noticed that too. Looks like the designer was trying to send a message. Balanced and diversified.

#11 LP on 07.02.19 at 4:07 pm

This post, and some of the comments in response, have made me realize the truth in a cartoon I received today in an E-mail.

“I’m so thankful that my teacher taught me about parallelograms and not about income tax. Especially during parallelogram season!”

#12 Dogman01 on 07.02.19 at 4:15 pm

#8 NotLegalAdvice on 07.02.19 at 3:49 pm

“I just can’t figure out which ETFs to pick up to stay balanced and diversified.”

Look at XBAL or VBAL

and done.

#13 slam on 07.02.19 at 4:48 pm

The Sandy vs Randy isn’t a fair comparison.

If Randy uses 30k and leverages to buy 300k property, the fair comparison would be to use 30k and leverage to buy 300k worth of stocks.

Then if both go up 10%, the earnings are the same.

Same if both go down 10%, you now owe more than you own.

Obviously it was not intended to be fair. – Garth

#14 Dolce Vita on 07.02.19 at 4:59 pm

#3 Dan Atkins

You might be right.

Still, anyone better than Juncker, even Ms. Von Der Leyen (she wants an EU army…Germans).

Belgium’s Michel heads the Council (anti-Brexit, anti-renegotiation = unhappy English).

All brought to you by the Merkel, Macron dung show.

To be honest, as long as the EU keeps letting Jeff Bezos’ Amazon.it deliver booze from all over the EU (and beyond) at cut rate prices and free of shipping right to my door, I’m all in on the appointed EU apparatchiks.

Yes, I am.

#15 Barb on 07.02.19 at 5:01 pm

CBC Kelowna radio this morning made mention of a German “piggy bank day”, where children are encouraged to deposit their savings annually.

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

Apparently, Germany’s population saves approximately 10% of earnings a year, versus 5% for North Americans.

I think it’s a great program to get kids used to putting money away.

#16 Shawn Allen on 07.02.19 at 5:07 pm

Fair Interest Rate Comparison

Apparently the interest rate at 5% down with CMHC insurance is cheaper than the rate with 20% down and no CMHC. Bizarre!

But is is possible (why is it not required?) to show how much the CMHC fee effectively adds to your interest rate assuming a 25 year amortization and perhaps assuming you accelerate and pay off in 15 years?

Burying the CMHC fee into the mortgage makes it a rather hidden fee. Why is that allowed in such a heavily regulated activity?

#17 JM on 07.02.19 at 5:22 pm

Great article but I certainly take exception to “One more reason never to fully trust anyone making their living on commission.”

I make my living on commission but would never undermine the importance of integrity. Retention rate is one of the fundamental metrics of a good sales person.

True. A thoughtless generalization. – Garth

#18 Dolce Vita on 07.02.19 at 5:25 pm

PS to my #14 post (Amazon.it prices, delivered to my door, free shipping with Prime):

750 ml Cointreau €13.99
750 ml Jose Cuervo Especial Silver €13.00
750 ml Pampero Rum Blanco €8.08 (better than Bacardi)

or €35.07 (€1 discount for buying all 3 at once).

CDN $51.87.

At BC prices, basically the Rum was free. And yes, the above a Margarita mix with a rum chaser (to beat the heat).

Italia. WHAT a country!

—————————————-

Good article Garth. Basic financial math all Canadians should be aware of, but alas.

Still, never give up spreading financial orthodoxy. As for me, back to my Margarita.

Ciao e buonanotte d’Italia.

#19 Cottingham a bargain on 07.02.19 at 5:32 pm

The pictures depiction of the two investors is decidedly stupid and one sided . Sadly a lot of real estate investors do think this way when comparing financial assets and RE.

However Garth , you are disingenuous too in the paragraph that starts with “ when financials swoon.. “

You depict Sandy as retaining 90% of her wealth yet she is down the same 30k , her initial stake as is Randy . All additional costs of RE acquisition acknowledged .

The balance sheet impairment for both is identical .

A 10% loss on a $30,000 portfolio is a 10% loss. A 10% decline in the value of a 10x leveraged $300,000 property is a 100% loss of the invested cash. – Garth

#20 TheDood on 07.02.19 at 5:42 pm

#7 Not So New guy on 07.02.19 at 3:41 pm
I think the 2020 election will be a referendum. Not on Trump. On the American voter. Depending on what they choose will determine if the American voter has finally lost its collective mind
____________________________________________

Let’s trade Trudeau for Trump, and we’ll throw in cash and draft picks!

#21 Dolce Vita on 07.02.19 at 5:47 pm

#19 Cottingham a bargain

Oh Garth, you and your voodoo math.

;-)

#22 paulo on 07.02.19 at 5:49 pm

Well i will bite:

Sandy is wearing a NASA shirt, you know the people whom are the best at figuring S**T out

Randy looks like your typical sheep about to go to slaughter in the real estate ponzi game in Canada

im going to guess that sandy wins in the end!

#23 Tales from the Crypt on 07.02.19 at 6:16 pm

This reminds me of when a certain real estate figure (cough cough Bob) likened millionaire migration to welcoming refugees from Uganda and a certain UDI boss (cough cough Anne) likened millionaire migrants to “savvy farmers” settling the West.

#24 paracho on 07.02.19 at 6:21 pm

The above poster is highly deceptive . It borders on false advertising . They are working on the financially illiterate and naïveté .
1. The above does not mention the interest on the $270,000 alluded to mortgage. Given amortization the cost of mortgage interest , which is not tax deductible in a principle residence . Can greatly increase the cost of owning such an asset . The potential appreciation of said House should be greater than this cost combined with other costs such as property taxes , maintenance and others mentioned .
2. There is a lot more work in owning a property than tracking a portfolio .
3. One asset is a poor diversification strategy and greatly increases volatility .
4. There is uncertainty with real estate and this article clearly ignores this fact . This $300,000 property could theoretically have a market value of $250,000 in say 5 years. Then the owner if need be would have to sell at market value. Accumulating a loss on value plus the cost of mortgage interest plus all other costs . Quite a deep hole .

#25 Lowered Expectations on 07.02.19 at 6:26 pm

What is the holdup?

This double accounting system is double handling. We are trying wrastle with these crappy June numbers and obviously fix them.

So, what are we going to tell the public?

I need a few more days to twist some numbers.

Then what?

The data is still going to look bad in the Okanagan, just not as bad. The retail and tourism workers don’t seem to be picking up the slack left by the numbered corporations tied to the Cayman Islands who have retreated.

Okay.

#26 Cottingham a bargain on 07.02.19 at 6:34 pm

#-19-Cottingham a bargain on 07.02.19 at 5:32 pm
The pictures depiction of the two investors is decidedly stupid and one sided . Sadly a lot of real estate investors do think this way when comparing financial assets and RE.

However Garth , you are disingenuous too in the paragraph that starts with “ when financials swoon.. “

You depict Sandy as retaining 90% of her wealth yet she is down the same 30k , her initial stake as is Randy . All additional costs of RE acquisition acknowledged .

The balance sheet impairment for both is identical .

A 10% loss on a $30,000 portfolio is a 10% loss. A 10% decline in the value of a 10x leveraged $300,000 property is a 100% loss of the invested cash. – Garth
——————-

Hi Garth , please re read my original post . I was specifically referring to the example you give of a financial asset investor borrowing 300 thousand as you reference in your paragraph cited .

I am specific when I say a leveraged financial asset investor at 300k experiencing a 10% loss is identically balance sheet impaired as the RE investor in picture , all other costs granted of RE acquisition accepted.

But she did not leverage. Only crazy RE speckers do that. – Garth

#27 Rich Boomer Here on 07.02.19 at 6:44 pm

First off, life is good.

I only had to make one decision my entire life. That was to buy a house. I am a financial genius.

I pretended to worked 41 years in a government job. I came for the job and stayed for the pension. No such thing as performance reviews in the good ol’ days.

My days are pretty good. Fire up the BM X3 and hit up De Dutch for breaky. I don’t like how long it takes to serve me, but I like waffles. Then head over to Urban Fare for lunch. I cut anyone off in the parking lot, especially those young entitled drivers. I earn my respect.

Back to my paid off, 5-bedroom home, where 4 bedrooms have been vacant for 21 years. The grass needs some roundup. WD40 is a good alternative to getting those weeds. I will not settle for anything less than golf course standard grass. I think this cured the bug issue too. Haven’t seen insects for years around my place. I also take a quick look around to see if anyone is breaking bylaws. I take pride in enforcing neighborhood block watch. Good neighbors are law abiding. Don’t park on my curb.

Well, it is getting late, so I am going to order some food over the phone for delivery and get some much needed rest in my king size bed as tomorrow is another repeat. This pension money is the gift that keeps on giving. Life is good in Canada.

#28 Leo Trollstoy on 07.02.19 at 6:54 pm

Great pic today of branch manager and assistant branch manager

#29 Sued Canadian Millenial on 07.02.19 at 6:56 pm

Betterdwelling is flooded with realtors who insist that Toronto is the place to be, more vibrant and richer than NYC.

I don’t know who is stupid to pay thousands of dollars a month to rent a cockroach and mold infested room inside a basement apartment, but there are Greater Fools (TM) brb gonna get sued by Garth Turner for trademark infringement.

#30 Greater Vancouver New Home Sales Drop Nearly 90% on 07.02.19 at 6:57 pm

BD facts yesterday:

Greater Vancouver Pre-Sale Listings Decline Over 65%

Greater Vancouver Sales of New Construction Drops Nearly 90%

Greater Vancouver New Home Pre-Sale Absorption gettin’ lowwwwww.

Greater Toronto New Home Sales Increase 94% To Highest Level In Over 16 Years.

Who saw this coming? I did, a warned everyone here where the money was running. Wake-up Eastern Canada.

#31 Scott Bryer on 07.02.19 at 7:43 pm

Lagarde was the French Finance Minister for many years. what a disaster that country has become. She is also brought up on certain alleged charges before the courts. I am hearing Trump is eyeing EU trade tariffs coming soon. They need a shakeup.

#32 Ken M. on 07.02.19 at 7:45 pm

#27 Rich Boomer Here on 07.02.19 at 6:44 pm
First off, life is good.

I pretended to worked 41 years in a government job. I came for the job and stayed for the pension.
———–
Finally the truth. You get full indexing on the pension?

#33 IHCTD9 on 07.02.19 at 8:02 pm

That flyer is for those who WANT to believe the message.

Just a little positive reinforcement for the moist masses who would lust after home ownership anyway.

Red meat that they can show their S/O in hopes of swaying them.

Ammunition aimed at those who were primed, but may be having second thoughts.

#34 Victotialiver on 07.02.19 at 8:10 pm

I’m quite intrigued with the NASA symbol on her shirt ..as if they are trying to imply that even though she is so smart … she can’t even figure out how to invest properly. And the “ regular guy” is smarter … wow.. crazy ..

#35 MaryEn on 07.02.19 at 8:21 pm

#8 Think about prefferds. They are still bargain with great yield.

#36 Ronaldo on 07.02.19 at 8:35 pm

#27 Rich Boomer Here on 07.02.19 at 6:44 pm

I pretended to worked 41 years in a government job. I came for the job and stayed for the pension. No such thing as performance reviews in the good ol’ days.
——————————————————————
I worked in government so I know what you are saying. I sat next to a guy that would come to work every morning usually with hangover. First thing he did was take out a bunch of papers and files from his desk drawer and spread them all over his desk. He would walk around with a piece of paper in his hand making like he was doing something. At the end of the day he would put all the papers and files back in the drawers. The Peter Principle at its best. He had reached his level of incompetence.

Same routine day after day. He eventually got a promotion and I was next in line for the job so I ended up getting his job. After a couple weeks I finally had to let management know that the job was redundant.

You wouldn’t happen to be this guy would you?

#37 Bradley Lambley on 07.02.19 at 8:40 pm

Obviously, a student of mine. I have been using this technique like forever to make myself and my students rich.

#38 Sandy on 07.02.19 at 8:48 pm

Has no place to live. So she pays $1850 a month for rent. Chris uses this for the mortgage and has monies left over

Decisions , we all have em

Those that bought real estate a decade ago ? Well kudos to them. Paying a lot more now , some areas ship has sailed ; a pipe dream . Remember the pundits that called for a real estate correction in 2010? Yikes

#39 Ronaldo on 07.02.19 at 9:00 pm

#38 Sandy on 07.02.19 at 8:48 pm
Has no place to live. So she pays $1850 a month for rent. Chris uses this for the mortgage and has monies left over

Decisions , we all have em

Those that bought real estate a decade ago ? Well kudos to them. Paying a lot more now , some areas ship has sailed ; a pipe dream . Remember the pundits that called for a real estate correction in 2010? Yikes
—————————————————————-
You obviously don’t live in Alberta.

#40 ImGonnaBeSick on 07.02.19 at 9:06 pm

#27 Rich Boomer Here on 07.02.19 at 6:44 pm

Some tear water tea tonight?

#41 the Jaguar on 07.02.19 at 9:07 pm

A sad observation in markets like the lower mainland where property speculation and ‘FOMO’ caused market values to soar. ( not so much these days).
People who bought 20 or 30 years ago and drank the kool-aid, but did nothing to curb reckless spending(their rationale that they had equity fallback in their home and real estate only went ‘up’). It did for a while. But reckless spending, like ‘reckless behaviour’ elsewhere in life eventually catches up with people. Always. Thinking they can wander into their local lender of choice and refinance all the credit card/line of credit debt kind of backfires when their incomes did not keep up with the price appreciation level and payments are now not affordable – no matter how much the house is worth. Especially if one or both retired or lost their job. Smart people would look around the landscape, size up their options, and maybe say “Hey Martha…let’s cash out of this bloated real estate asset while there is still time, pay off all the debt, and maybe downsize to something affordable or move to a smaller community where housing isn’t super sized. We will even be able to invest some of the remaining equity” and live comfortably with no worry hanging over us. Seems simple, doesn’t it? But they don’t do it. Fear of what people would think about downsizing or (OMG) “renting”. Keeping up appearances to friends, family, co-workers. Get smart, people. When the whip comes down everyone is a player in a game called ‘survival’.
Freedom, health, choices, time with those we love.. those are the real assets. Don’t ‘miss out’ on those.

#42 Chaddywack on 07.02.19 at 10:02 pm

“Sandy wins. She’s a little hot, too. Maybe she needs a friend, Chris?”

She’s a cartoon!

#43 VicPaul on 07.02.19 at 10:11 pm

#34 Victotialiver on 07.02.19 at 8:10 pm

I’m quite intrigued with the NASA symbol on her shirt ..as if they are trying to imply that even though she is so smart … she can’t even figure out how to invest properly. And the “ regular guy” is smarter … wow.. crazy ..

**********

Sadly, I think it’s far more insidious and wilfully sexist than you think. The cartoon shows a female with the symbol – she’s the rocket scientist and can understand how to navigate the stock market / the village idiot, (ALWAYS portrayed as a white man -anything else would be racist and hurtful, don’t cha know) can level the investing “playing field” by buying RE – lame David /Goliath allusion.
If you’ve been paying even casual attention to commercials over the last fifteen years, you’ve noticed distinct and, in some cases overt (a woman slapping a man’s hand away from the console of her new car) demonstrations of misandry. Given the tenure of our society today, I’m surprised so few recognize it.
In the media today, DJ Trump accuser flaunting a new book – her message/rhetorical question? Do we need men? really…

#44 akashic record on 07.02.19 at 10:24 pm

I like SRandy.

#45 PBrasseur on 07.02.19 at 10:26 pm

Yes leverage works both ways, that pretty much sums up this country’s economic future…

#46 Lizard Man on 07.02.19 at 10:37 pm

#8 Not Legal. Such thinking about insulating yourself entirely from risk is how really bad things happen to your investments over the long term . Only by assuming risk will you ever make money. I invest for profit, not to get a prostate massage from a smooth talking 1%er a couple of times a year. Do your homework, stop being so braindead lazy.

#47 JT on 07.02.19 at 10:50 pm

@ I dunno …
Your math seems awfully complicated to most I think. The ‘Battle of the investors’ math seems a lot easier to understand for the common sheeple. No one has time for math anymore …
——————————————————————–
OMG. Garth used nice round numbers, what’s so complicated? That no one has time for math these days is why so many are drowing in debt. Your comment, however brief, is the most ignorant statement I have heard in recent memory regarding basic financial literacy …

#48 Doug t on 07.02.19 at 10:57 pm

#27

love it – my brother in law did same and last year took a “job” with the World Bank in Washington for 4 years to “rinse and repeat” but now in U.S. $$

#49 Sam on 07.02.19 at 11:38 pm

Real estate in the GTA ? If you didn’t buy a decade ago ya blew it . Rent rent rent

Sorry

#50 Trudeau smarter than German engineers...not on 07.03.19 at 12:06 am

Only a failed drama teacher would think that he knows better than 10,000 German engineers. Germany’s experiment with renewables was an unmitigated failure, but Trudeau is determined to run Canada into the blades of that collapsing windmill:

https://twitter.com/ShellenbergerMD/status/1146045263238369284
“Germany’s renewables experiment is over. By 2025 it will have spent $580B to make electricity nearly 2x more expensive & 10x more carbon-intensive than France’s.

The reason renewables can’t power modern civilization is because they were never meant to.”

The sickest part of the German experiment is that they will be now forced to choose between being dependent on Russia for natural gas or destroyiong an ancient forest to strip mine filthy brown coal. Scroll down a bit on the above twitter link and see the story about the fate of the Rambach forest. Imagine if we were forced to strip mine under Cathedral Grove on the Island.

But somehow, magically, Trudeau understands all of this energy stuff better than anyone, ever, and can show the Germans how it’s done as he says “Hey, Gunther… hold my Tim’s and watch this….”

Idiots standing on the shoulders of idiots. Idiots all the way down.

#51 Oh Canada, I weep. on 07.03.19 at 5:08 am

Poloz is screwed. Or he will screw Canada, my bets on the latter.

https://www.washingtonpost.com/business/2019/07/02/trump-says-he-will-nominate-christopher-waller-judy-shelton-reshape-federal-reserve-board/

Rates are headed south, no doubt.

#52 Hamsterwheelie on 07.03.19 at 6:34 am

#41 – I think you’re describing my dad there. We’ve encouraged him to sell and live off the earnings but he thinks rent is ‘throwing money away’. He’s also listening to his real estate agent who says things like ‘your house is earning you $70,000 a year’ – he uses the line of credit since the only income he has is about $10,000 a year from renting out a summer cottage (also where he lives)

The poster math worked for us though – leverage and a doubling in value or more, of every house we bought – now down to 2 houses from 4 & upwards to 6 units in 2 houses with the money returned via leverage.
This city may have been the only one in the golden horseshoe so vastly undervalued (in comparison to others nearby) for huge Victorian houses. The exodus of Toronto folks to Hamilton continues ….vastly different prices than 2011 (all houses were under $200,000 that we purchased) & as long as they don’t have to commute – happy people.
As Garth says all real estate is local – we saw the doughnut that was this city and now that hole is filling in nicely with developments, improvements, amenities (great parks, shops, galleries, restaurants) it ain’t perfect but it worked for us happy hamsters.

#53 dharma bum on 07.03.19 at 7:39 am

#6 I dunno

Your math seems awfully complicated to most I think.
——————————————————————–

Oh…math, shmath.

Let’s just have FUN!

Go Raptors! Oh…wait.

Raptors are over. Leafs suck. Blue Jays blow. Argos? Ha!

What bandwagon is left for Toronto hipsters, wannabes, millennials, sheep, zombies, and other vacuous souls to hop onto?

I guess it’s back to talking real estate at crappy parties.

#54 maxx on 07.03.19 at 7:52 am

@ #4

“….they are trying to project something to the viewer. ”

Yeah, like realtards are smarter than most. They have a patent on “knowing”.
I took the re course (for fun and insight) and half of them coudn’t manage simple math – plus, their writing skills sucked. Big time.
Serendipity is all it is. The happenstance of low rates. Realtard aggregate IQ does not outstrip that of space people.

I know. I worked with them.

#55 crowdedelevatorfartz on 07.03.19 at 8:22 am

Realtors in BC about to start living on Mac and Cheese?

https://www.citynews1130.com/2019/07/02/housing-realtor-vancouver/

Lets see how many large condo tower builds get cancelled before the end of 2019…….

#56 Renter's Revenge! on 07.03.19 at 8:33 am

Good. The more people think that real estate is a good investment, the better. It keeps other types of investments fairly valued. We don’t want a repeat of the 90’s where people give up on real estate and create a massive bubble in the stock market. Then what would I do? Buy a house? Oh, the horror!

#57 crowdedelevatorfartz on 07.03.19 at 8:36 am

@#43 VicPaul
“If you’ve been paying even casual attention to commercials over the last fifteen years, you’ve noticed distinct and, in some cases overt ….. demonstrations of misandry….”
+++++

Yup.
Noticed it over the past 15 years or so.
Doesnt matter if its TV, radio, whatever.
Same message repeated endlessly.

All males are portrayed as idiots requiring “rescue” from their own stupid decisions.
Watch or listen to five minutes of any commercials and be amazed.
All men stupid, all women smart.
One wonders if the “role playing” situations were reversed …… how long it would take before the protest groups would be clamouring for their “rights” to be defended…..

Netflix or other commercial free options are a nice break from the relentless ” gender signalling”…
Cable tv deserves its demise……
:)

#58 Kick out the jams on 07.03.19 at 9:03 am

Can someone breakdown the basic math behind the commission, taxes, etc… on buying a house? The other half is getting mad house horny and I need some cold hard numbers to fend her off!! Of course, she has a friend whose downtown Toronto condo “went up like $200k in 2 years”…

#59 IHCTD9 on 07.03.19 at 9:26 am

#50 Trudeau smarter than German engineers…not on 07.03.19 at 12:06 am
Only a failed drama teacher would think that he knows better than 10,000 German engineers. Germany’s experiment with renewables was an unmitigated failure, but Trudeau is determined to run Canada into the blades of that collapsing windmill.
___

Renewables could do the job just fine – but it will take a few sacrifices from the peoplekind.

A drastic reduction/total cessation of use for the following items would be 100% required;

1. Washing Machines
2. Dryers
3. Dishwashers
4. Air Conditioners
5. Electric resistance or Ground source heating
6. Electric Cars
7. Water Heaters
8. Freezers

If anyone wants to find out just how much power and storage you’d need to cover 800-900 KW/hr’s per month, and a peak load of maybe 10-15 KW/hr, break out your wallet and try it with windmills and solar.

Good luck.

#60 Chopping Broccoli on 07.03.19 at 9:53 am

#20 TheDood on 07.02.19 at 5:42 pm
#7 Not So New guy on 07.02.19 at 3:41 pm
I think the 2020 election will be a referendum. Not on Trump. On the American voter. Depending on what they choose will determine if the American voter has finally lost its collective mind
____________________________________________
Let’s trade Trudeau for Trump, and we’ll throw in cash and draft picks!
____________________________________________
I agree with the Trudeau for Trump trade !
However, our cash is basically worthless, and we need to think about rebuilding in the future, so we shouldn’t give up draft picks IMO. My thoughts would be throw in Climate Barbie and the bag of used pucks she was hit with.

#61 IHCTD9 on 07.03.19 at 10:14 am

#57 crowdedelevatorfartz on 07.03.19 at 8:36 am
@#43 VicPaul
“If you’ve been paying even casual attention to commercials over the last fifteen years, you’ve noticed distinct and, in some cases overt ….. demonstrations of misandry….”
+++++

Yup.
Noticed it over the past 15 years or so.
Doesnt matter if its TV, radio, whatever.
Same message repeated endlessly.

All males are portrayed as idiots requiring “rescue” from their own stupid decisions.
Watch or listen to five minutes of any commercials and be amazed.
All men stupid, all women smart.
One wonders if the “role playing” situations were reversed …… how long it would take before the protest groups would be clamouring for their “rights” to be defended…..

Netflix or other commercial free options are a nice break from the relentless ” gender signalling”…
Cable tv deserves its demise……
:)
_________

This stuff carries on mainly because most Men don’t really give a rip about it – especially White Men (the biggest “idiot” of all). These commercials are trying to get the female dollars, and if portraying Men as fools separates these Women from their hard earned dollars – then we will keep seeing it.

Bottom line is most Men won’t be protesting as they don’t exactly care. Real life is still pretty damn good – and everyone can plainly see this. Trying to make Men look like a troop of monkeys is like trying to racially insult a white dude – it just doesn’t really work.

Granted – there definitely are groups of Women out there that just freaking hate Men. I consider it a compliment, and empowering. They’re basically shouting at me that I’m the best because I am Male. When I look around me, I have to agree that these 3rd wavers are right – things ARE going great – and being a real Man had a TON to do with it.

There are MILLIONS of Men out there who have their sh!t together, and are reaping the rewards of hard work, and good decision making, so we’ll never hear the end of the wailing and gnashing of teeth from the feminazis (at least, I hope they never run out of reasons to scream).

The feminists will always have reasons to blow up when they read the statistics, but hey – the Women who married us are loving every minute of it. :)

#62 Shawn Allen on 07.03.19 at 10:41 am

Speaking of Leverage and Bank Borrowing

Since this is the topic I will repeat (with a few minor edits) what I posted as requested by Stan last week about how bank lending works.

Here is how Banking works to create deposits and loans.

Frank has a paid for house worth $1 million and decides to sell and to rent (so far Garth is nodding) and (to Garth’s dismay) live off of the GIC income produced from that and from the rest of his large investment portfolio.

Joe goes to a bank and gets a mortgage for $950k with $50k down which is in his chequing account.

Step 1: The bank does an electronic entry showing an added $950k in Joe’s chequing account and a loan owing from Joe of $950k.

At this stage the bank needed no cash reserve to do this. Its balance sheet has gone up by $950 in assets (loan due from Joe) and up by $950 in deposit owed to Joe. The bank’s equity or wealth is unchanged. Joe’s purchasing power is up by $950k. The bank has created $950k in money since bank deposits are money. The bank is subject to a minimum equity capital ratio (not to be confused with cash reserve) and can only do the above if it had some excess owner’s capital over and above the regulatory minimum, which it typically would have. At this stage Joe’s newly created deposit is self funding his own new loan for the bank. Therefore the bank needed no cash reserve to do this (yet).

Step 2: Joe writes a cheque for $950k and he now owns the house. Frank deposits the cheque in some different bank. Now Joe’s bank needs to have some cash reserve to honor that cheque. In order to avoid depleting its cash reserves (perhaps at the clearing bank), the lending bank will compete to attract a deposit to replace Joe’s deposit that just left. That’s why banks pay interest on deposits despite the way they are created.

If Frank keeps the $950 in GICs (which are bank deposits) you can see how that can be used to fund loans by his bank. Actually, no matter what Frank does with his $950k it will tend to stay as a deposit in some bank or other where it can be used to fund loans. Only if it is sent out of the country or taken out as cash and remains out as cash will it not remain as a deposit in some bank or other.

The owner of that deposit as it changes hands will certainly think of that money as his or her savings.

Deposits, despite the way they are created, are owned by depositors (not banks) and are considered by those owners to be their savings and deposits fund loans.

Stan, is this a bit more clear now? If not, you may need to take or re-take a basic accounting course and take a look at some bank balance sheets. Smaller banks and credit unions are good balance sheets to look at since they avoid the complicated businesses that the bigger banks are into.

You are correct that the banking system as a whole creates money and that this contributes to inflation. That’s a system that has worked well for most of us but you are entitled to your opinion that it is harmful.

P.S.

P.S. to Stan

You can see that Joe’s loan becomes Frank’s deposit.

As always, one man’s debt is another man’s savings.

You would agree that the proceeds of the house sale become Frank’s “savings” even if he did not pile that up a dollar at a time and even though it was created via Joe’s loan (which is not Frank’s concern)?

#63 torontorocks on 07.03.19 at 11:19 am

Anyone who did not manage their money smartly during the last 10 year run will be hurting – fortunately I stayed invested and that helps me somewhat in exploring a home in the GTA. And an observation (and thanks to websites like HouseSigma that post full disclosures on price) – you can see the shenanigans people undertake on their listings and some of the listings are outright offensive – $400,000 price increase in one year “just because”. but while certain pockets are trading ‘over asking’ (and I put it in quotes because maybe they really traded for a more reasonable price), I don’t find them trading at lofty multiples like last year. and then some don’t trade at all. so the seller, thinking its a forever rising market, doesn’t sell. now you have the standoff. wait a year, lease the place out, and maybe prices come back, or maybe they flatline and decline a bit and people suddenly wake up that its not a forever 10%+ p.a increase. it is a bizarre market now – and if they pull back on these maneuvers to normalize it, they will have failed. they need to reign in air bnb (normalize rents), they need to let credit risk be stratified across incomes (which they kind of do with the 20% down >$1MM) and you’ll see some normalization in the markets.

#64 Gravy Train on 07.03.19 at 11:46 am

#59 IHCTD9 on 07.03.19 at 9:26 am
“[…] If anyone wants to find out just how much power and storage you’d need to cover 800-900 [kWh] per month, and a peak load of maybe 10-15 [kWh], break out your wallet and try it with windmills and solar. Good luck.” Just got my power bill yesterday. For the two months ended June 20, I only had to pay for one third of the power used (12.9 kWh/day); the rest was produced by our solar panels (last year we used 38.5 kWh/day). The power company provided us with a bidirectional meter, so there’s no need for storage; we can sell our excess power back to the power company at the same price we bought it.

My annual after-tax rate of return on the purchase of the solar panels for the next 25 years is estimated to be 12.81%. That’s a good investment, isn’t it? Can you make that rate of return consistently in the stock market? Good luck! :P

#65 TheDood on 07.03.19 at 11:47 am

#60 Chopping Broccoli on 07.03.19 at 9:53 am
#20 TheDood on 07.02.19 at 5:42 pm
#7 Not So New guy on 07.02.19 at 3:41 pm
I think the 2020 election will be a referendum. Not on Trump. On the American voter. Depending on what they choose will determine if the American voter has finally lost its collective mind
____________________________________________
Let’s trade Trudeau for Trump, and we’ll throw in cash and draft picks!
____________________________________________
I agree with the Trudeau for Trump trade !
However, our cash is basically worthless, and we need to think about rebuilding in the future, so we shouldn’t give up draft picks IMO. My thoughts would be throw in Climate Barbie and the bag of used pucks she was hit with.

________________________________________

LOL! Done!

Trudeau, Climate Barbie, a bag of pucks, and a box of tape for Trump! Let’s float the deal and see what America says.

#66 IHCTD9 on 07.03.19 at 12:53 pm

#64 Gravy Train on 07.03.19 at 11:46 am
#59 IHCTD9 on 07.03.19 at 9:26 am
“[…] If anyone wants to find out just how much power and storage you’d need to cover 800-900 [kWh] per month, and a peak load of maybe 10-15 [kWh], break out your wallet and try it with windmills and solar. Good luck.”

Just got my power bill yesterday. For the two months ended June 20, I only had to pay for one third of the power used (12.9 kWh/day); the rest was produced by our solar panels (last year we used 38.5 kWh/day). The power company provided us with a bidirectional meter, so there’s no need for storage; we can sell our excess power back to the power company at the same price we bought it.

My annual after-tax rate of return on the purchase of the solar panels for the next 25 years is estimated to be 12.81%. That’s a good investment, isn’t it? Can you make that rate of return consistently in the stock market? Good luck! :P
___

We are talking about the grid itself running on windmills and solar. Obviously the main grid will not have another grid to tie into to cover shortfalls and peak loading.

Even our existing grid in Ontario that uses all kinds of clean and dirty power production STILL has gas turbine generators to cover peak loading requirements (I’ll bet there are several of them running right now as we type to power all the air conditioners!).

You are using over 1100 KW/hr per month. Would you like to try to set up a battery bank and inverters that could cover you for 38,500 watts total usage per day while simultaneously covering a peak loading of at least 10,000 watts? Hope you’re rich! It would be way less expensive just buying it off the pole – especially after Wynnes’ “make the children pay” fair hydro plan.

A Grid tie net metering arrangement changes everything because all the problems of running truly off grid are solved – by staying on the grid. The whole purpose of grid tie is to get folks going on solar because without it, no one would suffer the lifestyle loss, or the insane cost of setting up off grid for the same power supply as they got previously off the pole.

Once you’ve done the math, you’ll see that trying to run the main grid off of windmills and solar (in Canada) is essentially impossible. Not without massive concessions in power consumption. New technology absolutely required.

#67 IHCTD9 on 07.03.19 at 1:16 pm

#64 Gravy Train on 07.03.19 at 11:46 am

My annual after-tax rate of return on the purchase of the solar panels for the next 25 years is estimated to be 12.81%. That’s a good investment, isn’t it? Can you make that rate of return consistently in the stock market? Good luck! :P
___

Hmm. I’d like to test this assertion if you don’t mind.

After tax you say? So, are you in on the Micro-FIT deal? If yes, you can ignore the rest of the questions.

How many watts are you running?
Are you using Sun Trackers?
What is your annual grid tie insurance cost?
What are your annual maintenance costs?
What is the increase in home insurance to cover the array?

I’d guess a turn key 6KW system is $20K. If you are averaging 25,600 watts produced per day (every day) then your system must be massive. Like 60-70 thousand watts – or more. Unless your array is located in Saudi Arabia. If it is this massive, then the cost was huge too.

Something smells a little fishy…

#68 oh bouy on 07.03.19 at 1:28 pm

@#57 crowdedelevatorfartz on 07.03.19 at 8:36 am
@#43 VicPaul
“If you’ve been paying even casual attention to commercials over the last fifteen years, you’ve noticed distinct and, in some cases overt ….. demonstrations of misandry….”
+++++

Yup.
Noticed it over the past 15 years or so.
Doesnt matter if its TV, radio, whatever.
Same message repeated endlessly.

All males are portrayed as idiots requiring “rescue” from their own stupid decisions.
Watch or listen to five minutes of any commercials and be amazed.
All men stupid, all women smart.
One wonders if the “role playing” situations were reversed …… how long it would take before the protest groups would be clamouring for their “rights” to be defended…..

Netflix or other commercial free options are a nice break from the relentless ” gender signalling”…
Cable tv deserves its demise……
:)
_____________________

lol, folks just see what they want to see.
this comments section being a prime example.
The doom is strong with you people

#69 oh bouy on 07.03.19 at 1:33 pm

@#53 dharma bum on 07.03.19 at 7:39 am
#6 I dunno

Your math seems awfully complicated to most I think.
——————————————————————–

Oh…math, shmath.

Let’s just have FUN!

Go Raptors! Oh…wait.

Raptors are over. Leafs suck. Blue Jays blow. Argos? Ha!

What bandwagon is left for Toronto hipsters, wannabes, millennials, sheep, zombies, and other vacuous souls to hop onto?

I guess it’s back to talking real estate at crappy parties.
____________________________________

lol, I bet a day doesn’t go by without you complaining about ‘other people’ or making a grand proclomation of how great you are. says more about you than them.

#70 Pfft on 07.03.19 at 1:38 pm

@#50 Trudeau smarter than German engineers…not on 07.03.19 at 12:06 am

https://twitter.com/ShellenbergerMD/status/1146045263238369284
“Germany’s renewables experiment is over. By 2025 it will have spent $580B to make electricity nearly 2x more expensive & 10x more carbon-intensive than France’s.
_________________________________

I like this one as well.

https://www.wiseinternational.org/nuclear-monitor/853/exposing-misinformation-michael-shellenberger-and-environmental-progress

#71 Jesse on 07.03.19 at 2:15 pm

Why wouldn’t you use leverage to invest in the market? If the S&P500 always goes up, why not invest only in leveraged ETF’s, like a portfolio of 60% TMF and 40% UPRO? That way you don’t need to pay a bank for the loan, and you can watch your portfolio grow faster than the market!

#72 PastThePeak on 07.03.19 at 2:45 pm

#66 IHCTD9 on 07.03.19 at 12:53 pm

Unfortunately for the tax payers of the world, the overwhelming majority of those that want to “get off fossil fuels” are absolutely clueless about what is required. A few solar panels in a field here, a windmill up on that hill – and boom – we are free from carbon with no impact on our lifestyle.

Renewables like solar and wind can play a niche role in some places, but to pursue these as the solution to the grid is just pure devastation.

Solar panels (which are made of silicon and other materials which are considered somewhat-to-very toxic) have a usable lifetime of 25 years. What happens after that? If we let governments do what they want, there would literally be thousands of square km of solar panel waste after that time period. The worst ecological waste disaster of all time.

Some evening viewing to help gain some perspective:

Corruption of the US temperature record
https://www.youtube.com/watch?v=6kUAtt2pXlc

A reality check in renewables:
David McKay
https://www.youtube.com/watch?v=E0W1ZZYIV8o

Michael Shellenberger
https://www.youtube.com/watch?v=LZXUR4z2P9w
https://www.youtube.com/watch?v=N-yALPEpV4w

#73 Citizen on 07.03.19 at 3:51 pm

I think an accurate comparison should also consider the interest payments on the mortgage.

#74 Gravy Train on 07.03.19 at 7:34 pm

#67 IHCTD9 on 07.03.19 at 1:16 pm
“Hmm. I’d like to test this assertion if you don’t mind.” Fine with me.

“After tax you say? So, are you in on the Micro-FIT deal?” No, we’re on the $1.00/watt deal.

“If yes, you can ignore the rest of the questions.” Darn.

“How many watts are you running?” 8 kW DC.

“Are you using Sun Trackers?” No.

“What is your annual grid tie insurance cost?” Zero.

“What are your annual maintenance costs?” Zero. We’ve budgeted $5,000 over 25 years for removal and reinstallation of solar panels when the roof needs repair or replacement. The solar panels are guaranteed for 25 years.

“What is the increase in home insurance to cover the array?” No increase in premium. A copy of the invoice had to be provided to the insurance company.

“I’d guess a turnkey 6KW system is $20K.” Our 20-panel, 400-watt, 8 kW DC array cost $14,925 (net of the rebate of $7,960). Our estimated first-year production is 10,478 kWh AC, and at $0.16684/kWh our annual savings are estimated to be $1,748. Thus the annual rate of return in each of the next 25 years is 10.81%.

Here’s the math:
$1,748 x (1 – (1 + 0.1081)^-25) / 0.1081 = $14,925

If annual inflation in power costs is 2%, then my annual nominal rate of return is 12.81% (10.81% + 2%).

“If you are averaging 25,600 watts produced per day (every day) then your system must be massive.” From Mar. 27 to July 2, 2019, the solar panels produced a daily average of 30.7 kWk.

“Like 60-70 thousand watts – or more.” As stated, an 8 kW DC array.

“Unless your array is located in Saudi Arabia.” I am a Canadian citizen, living in Canada.

“If it is this massive, then the cost was huge too.” As stated, I paid $14,925 for the solar panels, microinverters, monitoring system and complete installation.

“Something smells a little fishy…” Maybe take a shower! :P

#75 Cto on 07.03.19 at 8:55 pm

Dumb scared NASA engineer.
Smart slick salesman Pitbull fan…
Always is more successful than dumb engineer.
Me not spell engineering but I can flash a nice smile and lie like there’s no tomorrow!!!

#76 Randy Sandy on 07.04.19 at 6:30 am

#74 Gravy train

Did you take a loan out for the solar panels ? You generate $1700 worth a year but outlaid 14k. You haven’t broke even yet, 8+ years is needed before you are in the money?

#77 Gravy Train on 07.04.19 at 9:11 am

#76 Randy Sandy on 07.04.19 at 6:30 am
“Did you take a loan out for the solar panels?” No, I paid cash.

“You generate $1700 worth a year but outlaid 14k. You haven’t broke even yet, 8+ years is needed before you are in the money?” Yes, that is correct.