Not there yet

Friday update. Buckle up.

The cost of money.
Mortgage brokers say the banks are swinging the hammer. Five-year rates will increase to between 2.2% and 2.44%. No big surprise, given the spike in bond yields lately (we showed you the chart two days ago). So, VRMs remain the best deal – at least for a year or so.

But here’s the worry: mortgage volumes exploded by more than 40% year/year in the first half of 2021. Even scarier, the biggest debt swallowers are those with the least financial history – kiddos. The GenZ gang. Mortgage applications from them have doubled. Clearly the newbie buyers are banking on the big price gins of the past five years continuing, to paper over their borrowing binge.

Maybe it’ll happen. Um, maybe not. But the reality is all these folks will have to renew their loans at some point within the next 60 months Rest assured it will not be at 2%. As yammered about here yesterday, inflation is igniting. Wow, look at oil today. Five bucks more than 24 hours ago. Gold is tanking. BTC gamblers are going nuts. Puppies are on sale. What a messed-up world.

High inflation will bring higher rates. As the labour market tightens, wage demands will ensure it. Average families cannot afford average houses, while food and basic essentials are spiraling. Workers at John Deere in the US just figured out that a busted supply chain is their best friend. They’re on strike for a sizeable wage gain, which is likely to be offered. It’s turning into a bad time to be a boss. Employees are so irritating.

So the bond market says six or seven Bank of Canada increases are coming within the next 36 months, adding about 1.5% to existing rates. The prime and HELOCs will be circa 4%, VRMs will clock in at 3.5% and fixed fivers north of that. That will sure makes a difference if you just borrowed $1.4 million to buy a so-so house in the GTA for $2.2 million, after putting almost a million down.

Gulp.

The markets.
Mr. Market went on a tear this week after a few losing sessions. Gone are worries about the supply chain, China, inflation, corporate revenues, Biden’s big-tax agenda, Covid or the S&P at 36 times earnings. It’s the reopening trade, baby. Only 30% of the world has been vaxed, and investors figure the post-pandemic recovery will keep giving for years more.

It’s Q3 earnings season now and Goldman’s profits were squid-sized ginormous. The betting is that oversized demand for goods – houses, appliances, EVs, lumber, electronics – that the virus brought to North America will be replaced with an even bigger appetite for services as Delta retreats. As mentioned here yesterday, the service sector accounted for 70% of the US economy and 60% of Canada’s GDP pre-Covid. Then it collapsed. Now it’s coming back. The sight of 18,000 screaming hockey fans in Toronto the other night is visual proof.

The pandemic is over in Mr. Market’s mind. If you think the Dow at 35,000 is a nosebleed, break out the oxygen. Call the Sherpas! We’re going up.

T2 & the Freelanders
Ten more sleeps until Mr. Socks unveils his new federal cabinet. We know Chrystia will be our non-financial finance minister. We know ministers will be picked carefully by gender, geography and diversity. And we know there will be roughly $80 billion in additional federal spending in the next fiscal year.

Parliament will be recalled in the third week of November. Then a Throne Speech. Then a holiday break. Then the budget. And more taxes.

Blog dog Jesse has a question:

If there is indeed an increase to the cap gains inclusion rate announced early next year, how soon would that go into effect? And thus when would be the optimal time to try and realize any cap gains?

An increase in the capital gains inclusion rate is widely expected by the Street and accountants everywhere. It’s something the NDP has been pushing, and the Libs are philosophically aligned with. Currently half of a gain is tax-free and the rest is added to taxable income. That’s meant the highest rate (for people making $250,000 or more in a single year) has been 26%. So earning in the form of capital gains has been an investment pillar.

What’s likely? Maybe 60%. Or 75% as the new inclusion rate. The actual amount of additional revenue raised by the feds would be modest, since the top 10% of tax filers (by income) account for 70% of the tax raised this way – and because investors can just decide not to crystallize gains.

But it’s the kind of eat-the-rich symbolism that politicians love.

The answer, Jesse: the change would be effective on the day of the budget. Now, never make an investment decision based solely on the potential of a tax change. Instead, act in the pursuit of your goals. But if you plan on cashing in some chips anyway, the next 70 days might be a wise choice.

About the picture: “Please find attached a picture of our fur children,” writes Tim, from Hamilton. “On the left is Henry, a 2 year old Lab / Border Collie mix (so we were told).  On the right is Sophie, an 8 year old St. Bernard / Beagle mix (again so we were told). Thanks again for all of your help over the years.”

113 comments ↓

#1 SunShowers on 10.15.21 at 2:50 pm

Solidarity with striking John Deere and Kellogg’s workers!

#2 Paddy on 10.15.21 at 2:51 pm

Those are some happy pupsters right there!!!

Is it bad that I want the interest rates to rise so the highly indebted will drown???….The idiots who bought at peak level with their smug smiles will quickly turn to frowns, then the crying will ensue….I’m a sick puppy, I know

#3 Diharv on 10.15.21 at 2:51 pm

Trudeau will introduce a CEMBOB (Canada Emergency Bailout Benefit) for those that find themselves underwater or in over their heads because defaults would be bad for his one trick gasbag economy.

#4 TurnerNation on 10.15.21 at 2:53 pm

Keep an eye on the food supply. Some predict that, soon a USA rail line will be staging a walkout due to mandates. Life in a Former First World Country. That ‘stupid leaked email’ did say 2021 Q3 Supply Chain breakdown?

.Italy: Port workers in Trieste and Genoa plan to stage indefinite blocking protests at both ports from Oct. 15. The purpose of the action is to pressure the Italian government to abandon plans to make Green Passes mandatory for all workers in Italy from Oct 15 (garda.com)


— Control over Travel/Movements. Notice only two unions are fighting this – Toronto Police and Toronto Transit.
Why? Oh I don’t know…any kind of job action by these would have city-wide CHAOS no?

.On a new front in the TTC vaccine battle, union calls transit agency’s mandate ‘illegal’ (thestar.com)


— Almost back to normal! In Northwest Territories & BC. Permanent rolling Economic and Social lockdowns.
2022-23 (likely 2025). Papers please Citizen. Normalcy.

.Restrictions extended as NWT introduces vaccine proof at businesses (cabinradio.ca)

.B.C. health officials impose additional COVID-19 restrictions on northern B.C. to curb transmission (cbc.ca)

.Ontario not on ‘safe ground’ yet to lift more COVID-19 restrictions: science table director (cp24.com)
.Ontario’s top health official wants to wait to see impact of Thanksgiving before lifting capacity limits in some settings (cp24.com)

..
— Yes this WW3 is for our Minds. WrongThink will not be tolerated Comrades. Be mindful of your Social Credit Score at all times. Ahh the New System. The Charter was Barter, FYI.

“A Calgary-based street pastor, his brother and an anti-mask cafe owner have been fined, put on probation and ordered by a judge that they must also preach science if they continue to rail against COVID-19 public health rules”
https://www.cbc.ca/news/canada/calgary/pawlowski-brother-street-church-christopher-scott-contempt-1.6209420

#5 None on 10.15.21 at 3:00 pm

Is it true that for every 1% increase in mortgage rates that you would expect roughly 10% decline in housing prices just to keep the mortgage payments the same on the same amortization schedule? ( I could do the math but…).

So over the next 3 months, on fundaments we would expect a 15% decline in housing prices with the FOMO noise and variability around it.

Any bets on what the inverse acronym will be for FOMO?

FOGB? Fear of going broke?

#6 alexinvestor on 10.15.21 at 3:11 pm

That the market is ignoring high oil prices and China scares me. Probably all Chinese banks are insolvent, and they are going to print yuan like crazy to make the system solvent. That’s what a real real estate bubble looks like when it bursts.

#7 Dolce Vita on 10.15.21 at 3:11 pm

“the big price gins of the past five years continuing”

https://www.statista.com/statistics/487406/gin-and-geneva-value-weight-in-the-united-kingdom-uk/

España not happy.

https://www.statista.com/chart/12724/who-drinks-the-most-gin/

— Sorry Garth, I could not resist

[a.k.a. on occasion: Overlord “Employees are so irritating.”]

——————-

Sure hope you are correct about Mr. Market Garth.

I thought another year maybe a year & a half years worth of growth but YEARS?

Time for my threadbare portfolio to grow into quasi-threadbare. That would be nice.

#8 Diamond Dog on 10.15.21 at 3:12 pm

#136 AM in MN on 10.15.21 at 10:03 am

I hear the same enthusiasm from gold bugs investors, believing gold or Bitcoin is the next currency because the dollar will fail. Sorry, but enthusiasm doesn’t move the needle.

“Gold is a hedge against inflation”, we’ve heard over and over precisely because its a commodity that has value that marches to the beat of it’s own drum and that drum is supply/demand like anything else.

Most of the gold that has been mined in the world is still out there on display, not having gone anywhere. What gives gold it’s value is demand from more and more people walking on this planet. For as long as global populations continue to increase, gold will offset new supply and keep its value. It’s a hedge against a particular kind of inflation driven by currency disruption (and affordability explaining why it dips during crashes) and we will see this with the dollar I believe sometime in 2024 on but not today or tomorrow and so, gold remains flat relative to apple and orange comparisons.

Reminds me of a Buffet saying. “What you buy is price. What you sell is value.” I prefer real estate over gold as an inflation hedge or land of any kind but entry level counts huge. It really depends on the market with real estate.

Crypto bugs have the same fake belief as gold bugs, “we are the next currency”.

https://coinmarketcap.com/

Note the market caps of all crypto not ascending or even trading until 2016 or later with Bitcoin leading the pack. Note too, that most of this cryto isn’t circulating from the actual buy and sale of goods, but from investors buying the currency believing values will go higher.

2016 was marked by? Trump governance and Trump appointments in the Fed. Crypto was given a green light even though it had major red flags on how it conducted business and it has, right up to the present in my mind, been poorly regulated.

Note, Yellen is looking for the taxation on the gains within Crypto itself to justify it’s existence. With near 2.5 trillion in cap, understandable pressure from the industry itself is there to pressure her to not shut crypto down, so she’s looking for a way to save it:

https://www.dailymail.co.uk/news/article-10061109/Yellen-BACKS-IRS-reporting-600-transactions-tax-7T-gap.html

When you think of it, it’s the only way government can justify it’s existence! And founders of Cryptocurrencies have said as much, that the government is willing to look the other way with Ponzi’s for a mere 15% taxable gain for years now (and Biden is bumping it up). Dogecoin was a start up named as a running joke attributed to this fact. SHIBA INU was started up as a joke of a joke.

Are you with me so far, ya feel me? It’s all good when there are gains that can be taxed but what happens if/when there is another market crash? Not a flash in the pan crash like the commodity crash of 2016 or the pandemic crash of 2020, but an ugly, long, drawn out crash typified by one or more bubbles bursting at once (like housing, the stock market, bonds, commodities and yup, Crypto).

What will that do to Crypto, a currency that isn’t really being used much to buy and sell anything other than the black market and shady despots, it’s value supported mostly by investors hoping it keeps climbing to the moon as more invest in the Ponzi, filled with moonbeam dreams that the dollar will fail and Crypto will rise from the ashes?

The quick answer is that if crypto sells off hard which is predictable in a multi bubble collapse, the currency could be used to write off capital losses as well as gains. Suddenly, Crypto is out of favor by government because of tax leakage and it’s existence can no longer be justified. (you read that right)

Crypto is suddenly recognized for what its always been, a Ponzi scheme that should have never been allowed to see the light of day from regulators and after investors take a tremendous beating with little to no support to jusify it’s existence, it’s shut down for what it is.

A pipe dream gone bad. An exploitation of poor and corrupt regulation. A Ponzi that blows up in everyone’s faces. Politicized (like it already was/is), another odious shard from the Trump era. A predictable failure. An icon of investment failure as popular as Evergrande bonds. A flounder. A flop. A loser that epitomizes market inefficiency and excess.

#9 Flop… on 10.15.21 at 3:14 pm

Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9

I haven’t seen someone called Daniel pass the puck to another guy so much since Daniel and Henrik Sedin when they used to play for the Canucks.

Maybe Daniel retired so he would have more time to troll Trackie…

M47BC

#10 Doug in London on 10.15.21 at 3:15 pm

Look on the bright side. If and when interest rates go up, bond prices will drop and it will be a good time to get more exposure to bond funds. You could buy them with profits made from selling some rate reset preferred share ETFs. Between now and then, it’s a good time to take some profits on oil stocks and ETFs. You know, the ones that were dirt cheap 19 months ago.

#11 Penny Henny on 10.15.21 at 3:22 pm

I agree with Dr V and Daniel.
Although I believe Daniel explained it best.

#12 Dolce Vita on 10.15.21 at 3:23 pm

#4 TurnerNation

.Italy: Port workers in Trieste and Genoa

More bark than bite TN. They protested which is healthy in a democracy but no port or supply chain blockages:

https://www.rainews.it/dl/rainews/articoli/green-pass-protesta-blocca-italia-disagi-allerta-autotrasporto-ad9cdeab-673b-4f78-8ef1-be664c2d0085.html

https://www.adnkronos.com/green-pass-obbligatorio-lavoro-proteste-in-tutta-italia_17nqjLYTKktLtIRaXgIqTz

My guess is they all remember 2020 and the Unions were on board with the Green Pass all along with Business before it came out.

Green Pass obligatory at work ended up with this outcome in Italia in the past month, Sep 13 to Oct 13:

With the obligation of the Green pass, the first doses of vaccine increased by 46%
https://www.msn.com/it-it/notizie/italia/con-l-obbligo-del-green-pass-le-prime-dosi-di-vaccino-cresciute-del-46/ar-AAPwsaL?ocid=winp1taskbar

563,186 Green Passes were issued in one day.

— FWIW and see if it holds true.

#13 None on 10.15.21 at 3:23 pm

Edit my post:

I mean a 1.5% increase over the next 3 YEARS.

#14 Quintilian on 10.15.21 at 3:28 pm

“Is it bad that I want the interest rates to rise so the highly indebted will drown???….”

No Paddy you are not sick.

But you might be somewhat misinformed.
The likelihood of rising interest rates is very low.
That doesn’t mean there won’t be a crash.

Extending low rates will insure price escalation until the blow up.

#15 Brett in Calgary on 10.15.21 at 3:30 pm

Exactly.
—————
#10 Doug in London on 10.15.21 at 3:15 pm
Look on the bright side. If and when interest rates go up, bond prices will drop and it will be a good time to get more exposure to bond funds. You could buy them with profits made from selling some rate reset preferred share ETFs. Between now and then, it’s a good time to take some profits on oil stocks and ETFs. You know, the ones that were dirt cheap 19 months ago.

#16 IHCTD9 on 10.15.21 at 3:33 pm

#178 Dr V on 10.15.21 at 2:40 pm
IHCTD9 – I do not agree with the $728k.

You are still missing the concept.

A very simple question.

If you lend me $264k, and I give it back to you. Am I out $264k?
——

Lent via a mortgage?

#17 Dolce Vita on 10.15.21 at 3:42 pm

“investors can just decide not to crystallize gains.”

— Garth

Thought about moving Cash account investments to EU, find a bank in a low Cap Gain country, etc., etc. Figured it all out on how to do it:

https://taxfoundation.org/capital-gains-tax-rates-in-europe-2021/

So that option exists but a pain in the derrière to put into action.

For now, will not cash in a Cap Gain. Strategy has been switching over to ETFs that have high dividend yields of at least 10%. (incl. play money in high risk ETNs of +20% dividend yield).

Wait and see.

Act only when necessary, if at all.

#18 willworkforpickles on 10.15.21 at 3:53 pm

“But if you plan on cashing in some chips anyway, the next 70 days might be a wise choice.”

Those will come to pass as wise words.
But for those buying RE in those days as with any time through 2021… within 3 or 4…maybe in 5 years time, they will come to realize they made the worst investment decision of their lives.
None will set their feet on solid earth long enough to research why at this point in time.

#19 Andrewski on 10.15.21 at 3:58 pm

Great post Garth, however there’s a percentage of people that are so ingrained with their biases that they can’t see the truth that’s staring them in the face.

#20 DonM on 10.15.21 at 4:02 pm

An increase in the Capital Gains will be temporary. It will be cut back once a new government gets in. What should one do? Buy dividend paying shares or ETF’s that have a history of increasing the dividend. Increasing dividends push up the price floor of the security. Hold forever or at least well into the next government. It will take a few years before the next PM can unwind the destruction to our economy that Justin is responsible for.

#21 Ponzius Pilatus on 10.15.21 at 4:05 pm

A comment on the “cripple”. If I may.
Rick Hanson is not a cripple, nor is former Van Mayor Sam Sullivan, or the late Stephen Hawkin.
And the list is long.

#22 Roe Jogan on 10.15.21 at 4:12 pm

DELETED (Anti-vax)

#23 IHCTD9 on 10.15.21 at 4:16 pm

#9 Flop… on 10.15.21 at 3:14 pm

time to troll Trackie…

——

Hey, an alliteration!

#24 Adam on 10.15.21 at 4:17 pm

@ #5 None on 10.15.21 at 3:00 pm

***

Here’s a table I did to show the potential effect rising interest rates will have on home prices. This assumes that the market price is based on what monthly payment people can afford. This assumes a monthly payment of $4,486 and how values would change based on different interest rates.
(I’m glad I’m a renter and not levered up 25 times with rates increasing)

2.50% 1,000,000
3.00% 946,027
3.50% 896,116
4.00% 849,916
4.50% 807,108
5.00% 767,404
5.50% 730,542
6.00% 696,284

#25 Sheesh on 10.15.21 at 4:19 pm

178 Dr V on 10.15.21 at 2:40 pm
IHCTD9 – I do not agree with the $728k.

You are still missing the concept.

A very simple question.

If you lend me $264k, and I give it back to you. Am I out $264k?

…..

You bought something with that $264k, so you no longer had the $$. If you sold that item you bought for less than you purchased it for, and I wanted my $264k back, then you’d be out some money, wouldn’t you?

#26 GrumpyPanda on 10.15.21 at 4:23 pm

OK. Enough is enough. Bring back Garth’s flag. Or what’s left of it. And Don Cherry. Or what’s left of him.

#27 cramar on 10.15.21 at 4:25 pm

Can’t help but wonder…will investors in Dec. decide to tap into cap. gains while they can? Will there be a large end-of-year taking of profits? That might just snowball and tank the markets!

Hummm!

#28 Faron on 10.15.21 at 4:44 pm

#21 Ponzius Pilatus on 10.15.21 at 4:05 pm

A comment on the “cripple”. If I may.
Rick Hanson is not a cripple, nor is former Van Mayor Sam Sullivan, or the late Stephen Hawkin.
And the list is long.

You may, and I agree — pretty gross. No surprise from our pal Sail Away of course. My running hypothesis is that he replied a bit too fast to have been able out-think his default bias and put his quasi human face on it. I made a similar mistake a bit ago and had the balls to apologize for it. Unfortunately, owning up to mistakes is “weak” according to this crowd. Reason #8973 I have zero interest in ever meeting up with many of these dudes.

Also interesting given the number of disabled war vets out there who would qualify as one of Sail Away’s “cripples” despite having been fellow warriors at some point.

Prepare to receive another plume of CO…

#29 Franco on 10.15.21 at 4:51 pm

All that nonsense talk that the inflation we are experiencing will be short lived, but then no one saw the supply chain issue and shortage of workers coming when the temporary inflation theory was made by the Feds.

#30 Barry on 10.15.21 at 4:54 pm

“Now, never make an investment decision based solely on the potential of a tax change.”

Really?

I’ve held a Perpetual Preferred from BAM since 2009 when the market really tanked. Since then I’ve made almost every invested penny back in dividends since I purchased it at $16. When it hit $25.55 in late September, and knowing it could be called in June, 2022 @ $25 I decided to pull the plug with a $36,000 profit. So yeah – I do pay attention to taxes. 50% is better than 75% which is the probable rate in 2022. It’s going to happen folks. I ain’t going to be caught with my pants down

#31 cramar on 10.15.21 at 4:55 pm

Just heard that Elon Musk again is the richest man on the planet. Worth $230 billion, more than Gates and Buffett combined! Go Tesla!

#32 Dr V on 10.15.21 at 5:07 pm

25 Sheesh

“You bought something with that $264k, so you no longer had the $$. If you sold that item you bought for less than you purchased it for, and I wanted my $264k back, then you’d be out some money, wouldn’t you?”

Yes, of course. Now if the renter had invested that money, he no longer has it either, and may also have to
sell at a loss. But the renter could not leverage to get the money.

But that was not the premise of Daniel’s original post.
It showed how the leverage worked on an appreciating asset.

Now the $264k does come into the equation when you determine the cash at the completion of the sale. You cannot double count it on the expense side. And in his last example, IHCTD9 double counted the realtor.

Please refer to my post at 158 for the simplest example I could come up with to show the power of leverage.

11 Penny – yes Daniel explained things very well.

#33 Jack Blazer on 10.15.21 at 5:14 pm

Tiff is clearly working the Trudeau Borrows More for Longer Policy. His problem with transparency is that no believes his rationale and near everyone questions his motivation. Trudeau has stated he’s got a whole lot of borrowing to do, and only Tiff can make his dreams come true. Tiff Trudeau risk Canada’s future generations financial health. “Boffo” job numbers nobody believes. Direct foreign investment still hemorrhaging. It’s real estate bubbles or nothing for Trudeau Tiff.

https://financialpost.com/fp-finance/banking/if-rbc-ceo-is-right-about-impending-spending-spree-interest-rates-will-rise-sooner-than-expected

#34 Richard L on 10.15.21 at 5:16 pm

Did you ever get you flag back Garth?

#35 Faron on 10.15.21 at 5:18 pm

#67 Wrk.dover on 10.11.21 at 6:17 pm

Faron; a favor please.

How does the 2010-2020 climate of Digby NS compare with that of the Garden City, St Catherines Ont back in 1960-1970? Which was the one better for truck farming?

Hey Wrk.dover, looking at Niagara in Ontario as a stand in for St. Catherines, but am having trouble finding a good site for Digby. There is currently no Environment and Climate Change Canada station there. Nearest station is way out on Brier Island, so probably not at all reflective of local farming conditions… I don’t have national data at my fingertips like I do BC’s, but looking.

Plan here is to look at growing degree days ~May through Sept. Or just mean temperatures. I am assuming the area isn’t precipitation limited on average. Correct me if wrong.

#36 An Older Blog Watcher on 10.15.21 at 5:19 pm

That will sure makes a difference if you just borrowed $1.4 million to buy a so-so house in the GTA for $2.2 million, after putting almost a million down. – Garth,
……………………………………………………………………………..
I’m having difficulty understanding how average couples can afford prices as mentioned above. Who can put a million down just as if you do it everyday?

People who just sold and have ambitions. – Garth

#37 Love_The_Cottage on 10.15.21 at 5:36 pm

So the bond market says six or seven Bank of Canada increases are coming within the next 36 months, adding about 1.5% to existing rates.
__________
If anyone wants to wager I’ll take the under. Have been hearing warnings of rate increases for 10 years now. For the record I have no debt so I’d like to see rates go up.

#38 Reality Check on 10.15.21 at 5:38 pm

24 Adam
Here’s a table I did to show the potential effect rising interest rates will have on home prices.
——————————
Yes, except house prices are extremely sticky to the upside – people would rather sell grandpa’s war medals than sell their house for less than what they thought it was worth 2 years ago. Plus there is lots of spending fat to be trimmed to help meet higher payments – two leased late model cars, $120/month cell phone plans, ordering out twice a week, $2500 goalie camps for junior.
Prices will come down if interest rates increase significantly but it will be a long slow grind.

#39 Left GTA on 10.15.21 at 5:44 pm

So if I hold Preferred shares ETF in my non reg account I should sell them before year end to claim capital gains for 2021. When can I repurchase them again in my non reg account if I want to hold them for dividends? Because TFSAs almost full and no room in rrsps. I also commuted my pension this year so my taxable income is high. Would it make more sense to hold onto the preferred share in the non reg acct and just continue to collect dividends? Or I could sell them in 2022 and claim capital gains when my income is low.

#40 HonestEnD on 10.15.21 at 5:45 pm

Forget about bloated real estate costs for a moment…check this out. Yup…unregulated realtors…adding a few of their own points to those year/year gains.

https://www.cbc.ca/news/canada/marketplace-real-estate-agents-1.6209706

#41 Barb on 10.15.21 at 5:58 pm

Henry and Sophie look ready for you to throw that stick! So alert.

#42 Ok, Doomer on 10.15.21 at 6:03 pm

“We know ministers will be picked carefully by gender, geography and diversity.”

+++++++++++++++++++++++++++++++++++

Hmmmm…… I remember a time that if you hired people based on sex and race, you were sexist and racist.

But apparently if you have great socks and a smokin’hot haircut that doesn’t apply anymore.

#43 Ponzius Pilatus on 10.15.21 at 6:04 pm

#177 Travelbug on 10.15.21 at 2:38 pm
#28 Dolce Vita – you finally gave away where you live!
I looked it up, in the beautiful Friuli region. Will be in Venice next spring, might come and visit you…love Italian culture and especially food and wine!
—————
Good luck with that one.
I think Billy Boy tried visiting him once, and Dolce’s moma kicked him out.
She said: no visitarios in basemento.
She speaks funny Italian.
Maybe Dolce can translate.

#44 IHCTD9 on 10.15.21 at 6:06 pm

#32 Dr V on 10.15.21 at 5:07 pm

…And in his last example, IHCTD9 double counted the realtor
———

Nope. First time the realtor cost was counted towards the input total. The second time the realtor was deducted from the full unadulterated sale price of the property to arrive at the walk away cash number.

Two totally different unrelated calculations. One to find the total the homeowner slogged into round tripping the property. The other to determine how much cash the homeowner walked away with.

The former was not utilized to determine the latter, thus not double counted.

#45 Barb on 10.15.21 at 6:06 pm

“Parliament will be recalled in the third week of November. Then a Throne Speech. Then a holiday break. Then the budget. And more taxes.”

—————————————–
And T2 coming here Monday for a visit. Ugh!
But the good news is that the land border opens Nov. 8 and I’m going to get in my 4×4 and go…and probably spend 3 days looking for a “molecular test lab” so I can be “COVID-negative” to come back home…eventually.
Something to look forward to, finally!

Hubs staying home and grumbling about how much money he’s losing with every penny gain in the Cdn dollar.

#46 Nonplused on 10.15.21 at 6:08 pm

I wouldn’t think of Crack Newz as a reliable source but this does seem like something that could happen in California:

https://www.cracknewz.com/2021/10/the-california-version-of-green-new.html

Anyone who has been following the contortions that motorcycle and auto manufacturers have had to go through over the years to be able to sell in California would see this article as plausible. Or the new law banning commercial yard maintenance equipment.

If it is true, it is just more proof that the energy and supply chain problems were not caused by covid. They were caused by regulation. They would have happened without covid anyway. And when covid goes away, the other problems won’t.

#47 IHCTD9 on 10.15.21 at 6:13 pm

#25 Sheesh on 10.15.21 at 4:19 pm
178 Dr V on 10.15.21 at 2:40 pm
IHCTD9 – I do not agree with the $728k.

You are still missing the concept.

A very simple question.

If you lend me $264k, and I give it back to you. Am I out $264k?

…..

You bought something with that $264k, so you no longer had the $$. If you sold that item you bought for less than you purchased it for, and I wanted my $264k back, then you’d be out some money, wouldn’t you?

—— — –

Yep. Unless you got the loan to uh, put in the bank. Then you could give it back later plus 5% or so financing. That way you’d almost not be out any money.

#48 Habitt on 10.15.21 at 6:26 pm

Nothing wrong with people with ambitions eh. Let em go I say. They’ll likely pay more than their fair share of taxes. Just leave enough for the lower cake eating crowd to live. Simple eh

#49 Dboy on 10.15.21 at 6:26 pm

My friend bought a home, west of kitchener Ontario. 750K! In his early 30s. Works 3 days a week, in the trades, no apprenticeship or license. Wife is on disability, brings her to therapy twice a week. 100km each way to work. This wont end well!

#50 Penny Henny on 10.15.21 at 6:26 pm

#32 Dr V on 10.15.21 at 5:07 pm
Now the $264k does come into the equation when you determine the cash at the completion of the sale. You cannot double count it on the expense side. And in his last example, IHCTD9 double counted the realtor.
////////////

Yes he double counted the $264k mortgage payout and the $65k closing fees. You are correct.
And he failed to realize that the buyer has a place to live in while the investor still has to rent a comparable place at market prices.
The comment that both owner and investor had ‘about’ the same results is just plain wrong.
No insult intended.
I am not a wordsmith (not like Ponzie) but once again Daniel said it best. I don’t blame him for not replying, you can’t make someone see what they don’t want to see.

#51 cuke and tomato picker on 10.15.21 at 6:28 pm

GRAB YOUR PROFITS NOW SELL, SELL AND SELL.

#52 Sunny Daze on 10.15.21 at 6:47 pm

DELETED

#53 Dr V on 10.15.21 at 6:52 pm

44 IHCTD9

“The former was not utilized to determine the latter, thus not double counted.”

Our owner has not put out the $65k or the $264k until the time the trust account is credited with money from the purchaser.

So he receives that 1.1M – 264 – 65 = $771k. We are good there, right? Those costs are expensed out at that time.

But you have already counted them as an expense along with the $115k and the $284k totalling $728k.

Please just think on that for a bit.

#54 Wrk.dover on 10.15.21 at 6:58 pm

Faron; Niagara on the Lake is too hard to beat that is the orchard/vineyard, but if your site is on the Escarpment, that will work.

Brier Island is the Digby reference site, but at the end of 60 mile long Digby neck, between St Marys Bay and the Bay of Fundy is moderated coolish in the summer. Greenwood is a hell hole heat trap in the summer, so run with Yarmouth for your data.

In the summer of 1982 or 3, Yarmouth had 60+ consecutive days of fog. This year, they had 88 days over 20 with the 30 year average being 57 days.

Yarmouth should really show some impressive results for the then vs now comparison against Niagara Falls or Beamsville or some such place on the QEW toward Hamilton.

#55 Faron on 10.15.21 at 7:02 pm

#46 Nonplused on 10.15.21 at 6:08 pm

I wouldn’t think of Crack Newz as a reliable source but this does seem like something that could happen in California.

About sums up our media landscape, don’t it? Find a viewpoint that agrees with your own, even if it’s utter crap, and latch onto it like a pitbull. Keeps junk sites like zerohedge, Breitbart, some of huffpost and MSNBC, and now Cracknews (like, WTF) alive and thriving NTM Joe Rogan and Alex Jones and Rush Limbaugh (RIH). Do better Nonplused. Your judgement is crap IMO.

#56 crowdedelevatorfartz on 10.15.21 at 7:05 pm

@#42 Ok Doomer
“Hmmmm…… I remember a time that if you hired people based on sex and race, you were sexist and racist.”

+++

Especially if they are unqualified political hacks.

A certain non finance “Finance” Minister comes to mind.

Oh well.
Deeper into the Debt trough Canada goes and hopefully our non charismatic “finance” minister will be anointed to lead the Liberals in the next election in 18 months or less.

#57 Wrk.dover on 10.15.21 at 7:06 pm

Arguments can’t win on fact against a guy named after a bulldozer.

Stunting raises insurance on all of your cars, not just the sleeper. Why we sold my wife’s hotrod and the 350/350 from it in 2010. Greta was pretty young back then.

Garth is pretty happy tonight, therefore me too!

#58 KLNR on 10.15.21 at 7:14 pm

@#9 Flop… on 10.15.21 at 3:14 pm
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9

I haven’t seen someone called Daniel pass the puck to another guy so much since Daniel and Henrik Sedin when they used to play for the Canucks.

Maybe Daniel retired so he would have more time to troll Trackie…

M47BC

is it still considered trolling when the guy is right?

#59 Ponzius Pilatus on 10.15.21 at 7:24 pm

IH, DR.V et al.
You looking for the solution in the wrong place.
It’s not a math problem.
It’s all about emotions, conformation bias and egos.
No right or wrong answer.
Having said that, opportunity cost of the downpayment must always be part of the equation.
And this almost always tilts it in favor of renting.

#60 Slava on 10.15.21 at 7:25 pm

Garth: So the bond market says six or seven Bank of Canada increases are coming within the next 36 months, adding about 1.5% to existing rates.

Is that supposed to be sounding scary? 1.5% over 3 years on top of ridiculously low interest. Oh well, so it will be just simply low instead of ridiculously low.

#61 NDP LIBERALS WATCH OUT on 10.15.21 at 7:27 pm

What if the NDP is thinking and knows about Canadian investors not selling or crystalizing their capital gains and decides it wants capital gains taxed like all other investment income, interest, dividends, foreign income, dividends, interest etc. by annual inclusion in your annual tax return.

You have some stocks, ETF’s, REIT’s, bonds, real estate that is worth $40,000 more by December-31-2021, then you have to include it as income and pay the tax rates in this case, new capital gains rates when that happens. I would not put it pass them NDP and Liberals going with it in the upcoming federal budget.

#62 Slava on 10.15.21 at 7:28 pm

#20 DonM on 10.15.21 at 4:02 pm

An increase in the Capital Gains will be temporary. It will be cut back once a new government gets in. What should one do? Buy dividend paying shares or ETF’s that have a history of increasing the dividend.

Hm… interesting, you might be onto something. All of my CDN dividend paying stocks gained 2% in the last week.

#63 Steve French on 10.15.21 at 7:29 pm

So the investigation report is that the railway line was not the source of the Lytton BC fire.

Attention would presumably therefore turn to other possible sources for the fire that burned down a town and killed 2 citizens….

…other possible sources such as a woke church burning.

#64 Joe on 10.15.21 at 7:42 pm

So my brother-in-law that keeps making fun of me because I have a bunch of 2.92% to 3.45% 5 year GIC’s in my RRSP’s, TFSA’s maturing in 2024 and bought a house with my sister now saddled with a $900,000 mortgage is going to be facing a 3.5% to 4% mortgage rate.

They got a 3 year , fixed rate mortgage, 1.75% last year which will have to be renewed in January, 2023. If they have to pay 1.5% to 1.75% more for their $900,000 mortgage and face $15,750 more just in annual interest, yikes, this is serious crap. In just over 2 years from now, on top of this much higher gas, heating, food, insurance, property taxes, general cost of living.

#65 Faron on 10.15.21 at 7:47 pm

#51 cuke and tomato picker on 10.15.21 at 6:28 pm

GRAB YOUR PROFITS NOW SELL, SELL AND SELL.

¿Por qué?

#66 IHCTD9 on 10.15.21 at 7:54 pm

#53 Dr V on 10.15.21 at 6:52 pm
44 IHCTD9

“The former was not utilized to determine the latter, thus not double counted.”

Our owner has not put out the $65k or the $264k until the time the trust account is credited with money from the purchaser.

So he receives that 1.1M – 264 – 65 = $771k. We are good there, right? Those costs are expensed out at that time.

But you have already counted them as an expense along with the $115k and the $284k totalling $728k.

Please just think on that for a bit.
———-

I think I see what’s going on here…

The list of inputs (728k) was a stand alone total for determining a number for which the rent/invest dude would be allowed to invest. The original scenario was a step closer to real world than Garth’s having the homebuyer pay a mortgage, and the investor deposit incrementally.

The number was 500k, but obviously buying a 500k house will require a lot more $ than that. So I made that “input” list to arrive at a fair apples to apples number for the investor to pump. IMHO, letting the homebuyer pump 728 while limiting the investor to the home purchase price of 500k just ain’t fair. That’s all that list was for. It was never part of ROI calculations.

You seem to be looking at it from an accounting perspective and pointing out I got the same number in the same column twice. The 728 does not belong in either column – it’s just keeping things fair for rent/invest dude.

Right from the beginning, the input total, and the 771k total were two totally separate unrelated numbers – for two totally different jobs. One to establish the limits for the investor, the other to determine the cash-out for the home owner. From there it would only be a hop, skip, and jump to see who the winner is :). Go back to #44 and read it again now that you’ve read this post – it’ll probably make more sense.

Follow?

#67 IHCTD9 on 10.15.21 at 7:58 pm

#50 Penny Henny on 10.15.21 at 6:26 pm

“Yes he double counted the $264k mortgage payout and the $65k closing fees. “

Nope

“And he failed to realize that the buyer has a place to live in while the investor still has to rent a comparable place at market prices.”

Nope

“The comment that both owner and investor had ‘about’ the same results is just plain wrong”

Nope

Hat-trick!

#68 Gary on 10.15.21 at 7:58 pm

Dboy, my friend is just the opposite. He is scare alot when he saw his parents lose their home when his dad died when he was only 12. He is working 55 to 60 hour weeks for 30 years plus in precast, has a wife 2 kids since the early mid 80’s and now is 58.

His wife took care of the kids, all grown up now pretty successful but my friend and his wife are very conservative. They have no debts for decades now and have nothing but provincial bonds and GICs in their $475,000 spousal RRSP, 512,000 his RRSP, $169,000 TFSA, a GTA home worth $875,000 and a Ontario Savings Bond actual paper certificate of $300,000.

#69 Sunny Daze on 10.15.21 at 8:06 pm

Wall Street is never Main Street.

Stay balanced.

Stay safe.

#70 Adam on 10.15.21 at 8:16 pm

#38 Reality Check on 10.15.21 at 5:38 pm

***

True but a lot of people are stretching their budgets to get leverage up to this level. They might have some fat to trim in their budgets but lenders underwriting standards will act as a limit on what people can pay. It’s easy to sacrifice to make your mortgage when you’re sitting on a pile of equity. It’s a lot harder with no or negative equity.

#71 Flop... on 10.15.21 at 8:36 pm

#58 KLNR on 10.15.21 at 7:14 pm
@#9 Flop… on 10.15.21 at 3:14 pm
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9

I haven’t seen someone called Daniel pass the puck to another guy so much since Daniel and Henrik Sedin when they used to play for the Canucks.

Maybe Daniel retired so he would have more time to troll Trackie…

M47BC

is it still considered trolling when the guy is right?

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

Hey Kingston Boy, that was called a joke.

Do you remember them?

We had them back in the 80’s…

M47BC

#72 Dogman01 on 10.15.21 at 8:47 pm

#6 alexinvestor on 10.15.21 at 3:11 pm

That the market is ignoring high oil prices and China scares me. Probably all Chinese banks are insolvent, and they are going to print yuan like crazy to make the system solvent. That’s what a real real estate bubble looks like when it bursts.

—————————-

Canada has an Evergrande economy

https://nationalpost.com/opinion/kelly-mcparland-canada-has-an-evergrande-economy

#73 Ponzius Pilatus on 10.15.21 at 8:49 pm

#57 Wrk.dover on 10.15.21 at 7:06 pm
Arguments can’t win on fact against a guy named after a bulldozer.
—————–
Haha.
Did not know IHTCD9 is named after a bulldozer.
Explains a lot, though.
Bulldozes right thru, like the guy who went on a rampage in a small town in Colorado.

#74 NOSTRADAMUS on 10.15.21 at 8:50 pm

CALL THE SHERPAS, WE’RE GOING UP.
Garth, when mountain climbing, the higher you go up, the greater the possibility of cerebral edema ( swelling of the brain) which causes irrational behavior. A little known fact, more people die coming down the mountain than going up. Before long, a great number of the overindebted mountain climbers will perish, they will never, ever, see base camp again. One more time,” Beware the Ides Of November, at your peril” Amen Brother.

#75 crowdedelevatorfartz on 10.15.21 at 8:52 pm

One wonders when the Prime Minister will grovel enough to get the First Nations to allow Canada to raise the flag to full mast again since he’s let them decide when and IF Canada can raise the flag.

https://www.citynews1130.com/2021/10/15/justin-trudeau-visit-tkemlups-te-secwepemc-kamloops/

Seems he was practicing his groveling this past week in Kamloops.

#76 Wallflower on 10.15.21 at 9:10 pm

having trouble envisioning the bernard/beagle event

#77 Faron on 10.15.21 at 9:11 pm

#75 crowdedelevatorfartz on 10.15.21 at 8:52 pm

General reading of the rules is that flags remain at half mast until sundown on day of funeral. Many of these kids were probably buried with little to negative fanfare (negative meaning under secrecy according to testimony in the T + RC). Personally, the national holiday seems to have been a prime choice for recognition of the deaths and return of the flag to full hoist. Perhaps waiting for the final reports from the first nations in question? Perhaps a full year? Being reminded of the non to minimally documented burials by a lowered flag doesn’t bother me one bit, however. Each day of the flag being kept low is a day further distinguishing Canada from many ongoing human rights atrocities.

#78 IHCTD9 on 10.15.21 at 9:21 pm

#59 Ponzius Pilatus on 10.15.21 at 7:24 pm
IH, DR.V et al.
You looking for the solution in the wrong place.
It’s not a math problem.
It’s all about emotions, conformation bias and egos.
No right or wrong answer.
Having said that, opportunity cost of the downpayment must always be part of the equation.
And this almost always tilts it in favor of renting.
———

I’m open to being wrong, but it looks like two different maths were being done here. Your accounting brain probably saw it happening, but I did not until Dr. V’s last post.

I’m thinking this one’s going down as impasse due to communication breakdown.

And yes, I am a bulldozer: International Harvester Corporation TD-9 (IHCTD9) The guy from Colorado was “Killdozer”. IHCTD9

#79 David on 10.15.21 at 9:25 pm

Can they do that, NDP Liberals watch out, that you have to pay taxes on unrealized capital gains each year? This means what ever your investments, property gained a certain value $20,000 for example and you have to pay capital gains taxes even though you have no real money in your account as cash to pay the income taxes.

This sounds like a sneaky way of not calling it a wealth tax which it is a tax on new wealth each year.

#80 Left GTA on 10.15.21 at 9:31 pm

Dr. V & IH – Guys put it down on a spreadsheet. Google sheets you can share your results.

#81 VladTor on 10.15.21 at 9:37 pm

Garth, I 100% sure that T2 gang will increase amortization period up to 50 years.
They promised – value of houses will be increased and this is only way left to keep promises. The newbie buyers will be happy – dancing and singing “We are going play a game that’s funny – get the get the money”

Why 50? T2 – be brave! Numbers 60…70 looks more attractive!!!!

#82 IHCTD9 on 10.15.21 at 9:39 pm

#71 Flop… on 10.15.21 at 8:36 pm
#58 KLNR on 10.15.21 at 7:14 pm
@#9 Flop… on 10.15.21 at 3:14 pm
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9
Daniel
IHCTD9

I haven’t seen someone called Daniel pass the puck to another guy so much since Daniel and Henrik Sedin when they used to play for the Canucks.

Maybe Daniel retired so he would have more time to troll Trackie…

M47BC

is it still considered trolling when the guy is right?

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

Hey Kingston Boy, that was called a joke.

Do you remember them?

We had them back in the 80’s…

M47BC
—— –

Some people can’t take ‘em Flop.

#83 Ponzius Pilatus on 10.15.21 at 9:48 pm

#80 Left GTA on 10.15.21 at 9:31 pm
Dr. V & IH – Guys put it down on a spreadsheet. Google sheets you can share your results.
———————
Buying a house is mostly based on emotions, not numbers.
Same for buying an F-150
Can’t put emotions on a spreadsheet.

#84 Jackie on 10.15.21 at 10:10 pm

I think renters should get some relief and help with their rents. It is about time. I think a good idea is a tax refund for rent paid as follows, renter type #1, $2,000 tax refund for renters with annual rent below $10,000, renter type #2, $3,000 tax refund for renters between $10,000 and less than $20,000 and finally renter Type #3, $4,000 tax refund for rents above $20,000 or more.

There are a few conditions here, first it is maximum one rent tax refund per renter no matter how many properties you rent. Second, you can’t spend it, it must be placed in a RRSP or TFSA where it must be invested, saved etc. locked in until it reaches $125,000 for renters type #1, $187,000 for renters type #2, $250,000 for renters type #3.

If for whatever reason any renter type#1, #2, #3 don’t reach the required minimum value amount in their RRSP or TFSA, they can withdrawal the money at age 60 with maximum withdrawals of $10,000 per year or 25% of their rent payments at the time whichever is greater.

#85 mike from mtl on 10.15.21 at 10:22 pm

Goodness tell us something we don’t already know.

First, rates are not going up fast enough, even if and I mean if it gets to 1% and 5yr goes to 4% and says there for years on end might we start to see RE prices actually recede. Until then, party on. Folks are so bullish on RE they’d sell their mother, toys, furniture, pets, eat KD & fillings, before considering throwing in the keys.

Second ‘war on Covid’ is not done, by that I mean the G7 Governments. This situation is all too perfect: zero opposition, oversight, logic, unlimited budgets, daly FUD, propaganda galore, fuzzy goalposts. Go against the narrative and be labelled as a rightwing extremist and antivaxxer.

Yeah this is way worse situation than the GFC.

#86 Dr V on 10.15.21 at 11:07 pm

66 IHCTD9 – thank you for that well written reply, but sorry, I am not getting it, at all.

At least one of our underlying assumptions is at odds.

In your $728k of “inputs” to be “fair”, the homeowner pays back the $400k he has borrowed. Where does the renter get the 728K? Where is his rent in the calculation?

#87 Nonplused on 10.15.21 at 11:09 pm

#55 Faron on 10.15.21 at 7:02 pm
#46 Nonplused on 10.15.21 at 6:08 pm

I wouldn’t think of Crack Newz as a reliable source but this does seem like something that could happen in California.

About sums up our media landscape, don’t it? Find a viewpoint that agrees with your own, even if it’s utter crap, and latch onto it like a pitbull. Keeps junk sites like zerohedge, Breitbart, some of huffpost and MSNBC, and now Cracknews (like, WTF) alive and thriving NTM Joe Rogan and Alex Jones and Rush Limbaugh (RIH). Do better Nonplused. Your judgement is crap IMO.

————————————————-

I was working the California energy scene during the 2000 energy crisis. It was caused by poorly thought out regulation in its entirety. There was no physical cause for it. The regulators forced the utilities into a huge short position and also forced them to sell all their proprietary generation, and a few smart funds in New York et. al. like Enron and Reliant saw what they done and ran them. The citizens of California and especially anyone who held stocks or bonds in companies like PG&E lost untold billions.

Nothing natural can create a disaster to match something man made.

And I really don’t care what you think of my judgement. That was just a gratuitous insult. Stick to the article please. If you know why it was wrong point it out. All I know for sure is that everyone running a diesel has to put this DEF stuff in their truck now, and older trucks aren’t able to. If California is saying that even the big rigs need it, there will be a lot of them that are still well within their service life that wouldn’t be able to run there anymore, so the scenario is plausible. They’ve done far dumber things than that before in the golden state.

Anyway if we learned anything from agent K in “Men in Black” it’s that the real news always hits the tabloids first. That’s where you look if you want to know where Elvis is hanging out.

#88 Nonplused on 10.15.21 at 11:13 pm

#61 NDP LIBERALS WATCH OUT on 10.15.21 at 7:27 pm
What if the NDP is thinking and knows about Canadian investors not selling or crystalizing their capital gains and decides it wants capital gains taxed like all other investment income, interest, dividends, foreign income, dividends, interest etc. by annual inclusion in your annual tax return.

You have some stocks, ETF’s, REIT’s, bonds, real estate that is worth $40,000 more by December-31-2021, then you have to include it as income and pay the tax rates in this case, new capital gains rates when that happens. I would not put it pass them NDP and Liberals going with it in the upcoming federal budget.

—————————————-

Capital gains are not income until you sell. Until then they are just numbers on a spreadsheet.

#89 Don Guillermo on 10.15.21 at 11:16 pm

#75 crowdedelevatorfartz on 10.15.21 at 8:52 pm
One wonders when the Prime Minister will grovel enough to get the First Nations to allow Canada to raise the flag to full mast again since he’s let them decide when and IF Canada can raise the flag.

https://www.citynews1130.com/2021/10/15/justin-trudeau-visit-tkemlups-te-secwepemc-kamloops/

Seems he was practicing his groveling this past week in Kamloops
**************************************
We should do the Canadian thing and compromise. Cut the flag poles in half.

#90 Nonplused on 10.15.21 at 11:22 pm

#79 David on 10.15.21 at 9:25 pm
Can they do that, NDP Liberals watch out, that you have to pay taxes on unrealized capital gains each year? This means what ever your investments, property gained a certain value $20,000 for example and you have to pay capital gains taxes even though you have no real money in your account as cash to pay the income taxes.

This sounds like a sneaky way of not calling it a wealth tax which it is a tax on new wealth each year.

——————————————

All that would do is bring the tax payment forward from the year of death to the present, but since wealth is not money (and neither are capital gains), it would force a lot of early liquidations (to raise cash to pay the taxes).

Personally I would find a “wealth tax” quite demotivating, as wealth is here today and gone tomorrow. Ask anyone who had Bre-X, Nortel, RIM, Yahoo!, or Tesla. Can you imagine paying a bunch of tax based on the current value of your Tesla shares and then watching them go to zero in a few years time? Do you get your tax money back?

#91 Smartalox on 10.15.21 at 11:23 pm

The NDP – supported Liberal party are angling to push Capital gains to 60% from 50% and the official (Conservative) opposition is in the stables, fighting it out over the last tube of horse de-wormer, while in Alberta, they’re getting set to vote a couple of referenda, one about renouncing equalization payments (and one assumes, resource royalties) and the other about keeping daylight savings time all year round. So that the sun will rise at 930 in winter. Should be great for getting the kids to school on time, come Winter.

Of course, maintaining ‘standard time’ year round, (the way God and Sir Sanford Fleming intended) would be better, healthier and safer, the United Clownservative Party does not want to be seen by the electorate as the regressive conservative party.

#92 Nonplused on 10.15.21 at 11:27 pm

#84 Jackie on 10.15.21 at 10:10 pm
I think renters should get some relief and help with their rents. It is about time. I think a good idea is a tax refund for rent paid as follows, renter type #1, $2,000 tax refund for renters with annual rent below $10,000, renter type #2, $3,000 tax refund for renters between $10,000 and less than $20,000 and finally renter Type #3, $4,000 tax refund for rents above $20,000 or more.

There are a few conditions here, first it is maximum one rent tax refund per renter no matter how many properties you rent. Second, you can’t spend it, it must be placed in a RRSP or TFSA where it must be invested, saved etc. locked in until it reaches $125,000 for renters type #1, $187,000 for renters type #2, $250,000 for renters type #3.

If for whatever reason any renter type#1, #2, #3 don’t reach the required minimum value amount in their RRSP or TFSA, they can withdrawal the money at age 60 with maximum withdrawals of $10,000 per year or 25% of their rent payments at the time whichever is greater.

—————————————

This is why I hate brainstorming.

#93 Bark bark bark on 10.15.21 at 11:40 pm

You only pay a capital gains tax if you sell. Why would you do that voluntarily? Buy good dividend stocks and collect tax advantages income. Never sell . Selling is stupid. A smart couple can income split dividends and pay no tax. Max your kids accts…. The whole idea of being making money in Canada is to not give Trudeau a dime to spend on Oil & Gas exploration in Senegal and all the other stupid things he pees your money away on.

#94 Daniel on 10.15.21 at 11:50 pm

In case the rent to own comparison is still not understood by anyone, I’ll give a very simplified example.

Two people each have $100 to invest and live with. We will call them Person A and Person B and they’re really competitive.

Person A and B are both offered a house to buy for $50 or they can rent for $3 (payable at the start of the year for simplicity). The bank offers both of them a mortgage: on a $10 down payment there would be $1 at the start of each year in interest and the requirement to pay $2 at the start of each year towards the principal, starting the 2nd year.

Both the home and any other investments will gain 10% each year.

Person A decides to buy a home and Person B decides to rent and invest.

Person A will start with a $50 dollar house and have $89 free to invest (i.e. $100 – $10 down payment -$1 up front mortgage interest). Let’s say he invests his available $89 in baseball cards.

Person B will start with $97 in investments (i.e. $100 – $3 up front rent). He’s competitive so he decides to match Person A’s $89 investment in baseball cards and throw the remaining $8 into a diversified portfolio.

At the end of year 1 Person A has a $55 dollar house and $97.9 in baseball cards (all assets grow at 10%). Person B has $97.9 in baseball cards and $8.8 in the portfolio.

Both A and B agree to sell baseball cards to pay for their annual costs. Each have annual costs of $3 going forward, as noted above. Person A and B both start Year 2 with $94.9 in baseball cards after selling $3 to pay bills.

At the end of year 2, Person A has a $60.5 house and $104.39 in baseball cards. Person B has $104.39 in cards and $9.68 in the portfolio.

Person A and B sell another $3 of cards to pay bills and start the next year with $101.39 in cards.

At the end of year 3, Person A has a $66.55 house and $111.53 in baseball cards. Person B has $111.53 in baseball cards and $10.65 in the portfolio.

Then they decide to liquidate all assets and compare. But since they can’t stand the idea of anyone else enjoying their baseball cards, and since they’re of equal value, the two agree to burn them since they don’t affect the comparison, being totally equal from the start.

Person A sells his $66.55 house, pays off the remaining $36 he still owes to the bank for the mortgage. He is left with $30.55.

Person B is left with his portfolio of $10.65 and wonders how he got so soundly beaten.

End of example.

If one can follow that example, then one can follow the real world example of the house I provided. That’s more or less how it works, but the real world example takes into account inflation, monthly payments, real world costs etc.

#95 Nonplused on 10.16.21 at 12:48 am

Looks like the American Thinker needs to be added to Faron’s blacklist as well:

https://www.americanthinker.com/blog/2021/10/empty_christmas_stockings_dont_blame_covid_blame_california.html

#96 alexinvestor on 10.16.21 at 1:16 am

IHCTD9. The most important thing you are missing is additional interest earned on the 400k not used by the homeowner that could go into B&D … at 7% interest that’s 386K extra over 10 years. That’s why the homeowner with mortgage has beaten the renter over the past 10 years. Basically borrowing money at 2% to earn 7% on said money.

Of course, if house prices drop, the owner with mortgage will lose a lot more than the renter.

#97 Dmitry on 10.16.21 at 4:34 am

Garth, your views on vaccination campaign and its connection to “reopening” are too simplistic. Makes me wonder if you say these things repeatedly on purpose? Not sure what the purpose might be though.

Humans with antibodies for particular spike protein create selection pressure on the virus so when you get high enough percentage of people with these narrow antibodies it results in mutated viruses taking over. The antibodies no longer work to stop getting infected or transmitting infection. So your 30% figure simply means that new type of narrow antibody is required, which means the whole thing should be started over if it were to achieve some kind of causal relationship to reopening. Boosters won’t cut it because boosters are the same formulations as the original shots. If humanity keeps insisting on that path it will never “reopen”. Add to that workload on healthcare from shot side effects and diminished capacity from personnel getting fired and the rest getting burned out. Not much to be optimistic about with the current path that you are advocating so passionately.

#98 Ken from BC on 10.16.21 at 8:09 am

If the capital gains tax is applied at 75% of the gain instead of the current 50%, how hard will that hit retirees that depend on portfolio growth to provide retirement income? It seems to me that it could be an additional 12.5% in income lost to taxes. Does one have to have primarily dividend paying assets to reduce the tax burden?

#99 TalkingPie on 10.16.21 at 8:22 am

#64 Joe on 10.15.21 at 7:42 pm
So my brother-in-law that keeps making fun of me because I have a bunch of 2.92% to 3.45% 5 year GIC’s in my RRSP’s, TFSA’s maturing in 2024 and bought a house with my sister now saddled with a $900,000 mortgage is going to be facing a 3.5% to 4% mortgage rate.

They got a 3 year , fixed rate mortgage, 1.75% last year which will have to be renewed in January, 2023. If they have to pay 1.5% to 1.75% more for their $900,000 mortgage and face $15,750 more just in annual interest, yikes, this is serious crap. In just over 2 years from now, on top of this much higher gas, heating, food, insurance, property taxes, general cost of living.
********************************************

I hate to side with the real estate humpers, but I can’t blame him for laughing at you. Your RRSP investment returns are lower than inflation; ie: every year they are worth less than the year before. In the meantime your BIL’s house is surely gaining in value by 5 or even 6 figures a year. If you think that an extra $1,000-$1,500 in interest a month on a 7 figure house is going to do him in, he’s either way overleveraged or you haven’t done much math. Judging by your investment strategy (How does a TFSA mature, anyway?), I’m betting on the latter.

#100 Chalkie on 10.16.21 at 9:05 am

Once the pressure sets in on mortgage rates rising, the Real Estate prices will take a downward hit for some 10-15% for sure and perhaps even lower, it may be short lived as the world adjusts to its settling point, but its coming folks, the smart ones will start paying down their principal now, as much as you can sock it to your outstanding balance without penalties.
History has taught us, over and over, don’t be short sighted all good things eventually come to an end, this time around folks, unfortunately it will be mostly the millennials that will get hurt, as they try and raise their families, in some cases, you can even blame mommy and daddy for that, they handed over the unpayable downstroke.

#101 crowdedelevatorfartz on 10.16.21 at 9:09 am

@# 78 IHCTD9
“The guy from Colorado was “Killdozer”.”

+++

I believe the Colorado Wacko also used a modified Komatsu …. not reliable American muscle.

https://www.snopes.com/news/2017/06/09/killdozer-day-marvin-heemeyer/

The Lower Brainland is currently experiencing an “atmospheric river” of rain.

Torrential rain for hours and hours and hours….. the usual.

Ya gotta love the media.
“Heat Domes” instead of record heat.
“Atmospheric River” instead of buckets of rain.

Its the meteorologists fault.
Damn global warming has made them think they’re tv stars or something.

#102 crowdedelevatorfartz on 10.16.21 at 9:17 am

@#95 Nonplused

The US Port Authority’s just need to hire unionized, communist Chinese truckers to clear up the backlog of shipping containers…..problem solved.

#103 crowdedelevatorfartz on 10.16.21 at 9:31 am

@#77 Faron
“Each day of the flag being kept low is a day further distinguishing Canada from many ongoing human rights atrocities.”

+++
Ahh yes the appeasement policies of the Woke crowd.

Unmarked graves constitute a never ending wailing session?
When will all the 1st “Nations” across the entire country universally agree on anything?
Especially when they can walk all over the milquetoast “leader” that is currently handing them billions in handouts.

I cant wait to see when a former head of State ( a retired PM? A Govenor General?, The Queen?) drops dead and the flags are Ordered to what….half mast? quarter mast? Full mast?

Once again our beloved, appeasing, Wokeist Whine Minister acts before he thinks…… I’m sure the election had nothing to do with it.

The sooner these clowns in Ottawa are sent packing the better.

The country can’t afford much more of their expensive, divisive, politically correct pandering.

Some people have even postulated that the Prime Minister doesn’t have the authority to “order the flag to half mast”.

http://harveyoberfeld.ca/blog/how-canadas-flag-could-impact-the-vote/

It was just another in a long line of grandstanding, posturing, infantile, displays from a Prime Minister who is clearly ….out of his depth…..unless he needs to cry on cue.

But you Wokesters buy it hook line and sinker….every time.
Imagine that.

#104 Sunny Daze on 10.16.21 at 9:37 am

In two weeks 5 year up 20 basis points. 10 year up 21 basis points. 30 year….2.04 to 2.05. The curve never lies.

We need to do better with Covid. Better masks. Safer for our kids. We have nothing without them.

Better all around mitigation. Not stagflation.

Covid is a nasty piece of work. Stay safe.

#105 G on 10.16.21 at 9:59 am

Some might find this discussion interesting.

Dr. Jordan Peterson and John Anderson exchange ideas about the freedom of conscience, policies, and mandatory vaccines. Dr. Jordan shares his experience with policies while Anderson shares tips on conducting proper debates while commenting on the governmental debates. See how Australia connects to their discussion and how social media came into play.

John Anderson spent 19 years in the Australian Parliament.

Australia: Lockdowns and Location Apps | John Anderson | The JBP Podcast – recorded Sept 9 ~1hr
https://www.youtube.com/watch?v=NoRFaiqiQGo

#106 Common Sense on 10.16.21 at 10:16 am

Daniel got it right, EXCEPT, in his most recent example with $50 houses the assumption is that home ownership costs = rental costs. That’s debatable, but changes to monthly input costs likely wouldn’t affect the outcome materially.

Houses win because of the unprecedented home price growth and low interest rates over the last 20 years. These calculations would skew towards the renter decades past.

Where IHCTD9 gets it wrong is in the calculation of input costs for the homeowner to get what’s left over after liquidation.

The homeowner has $1.1MM – $329K = $771K real dollars in the bank. However the homeowner put in $399K to get the $771K in the bank after 10 years. You can’t add the $329K at the end to input costs if you take them out of the sale proceeds. Otherwise it’s double counting. Basically we discount the value of the home by the debt and closing costs. Portfolios don’t get discounted similarly when there is no leverage.

Now the renter also put in $399K but the rules of the comparison are that the renter can only invest the original purchase inputs of $115K, plus invest monthly the difference between rent and the homeowner carrying costs. So how did rental costs compare over 10 years versus the $284K spent by the homeowner? The renter probably has a negligible amount to invest each month, maybe a few hundred.

So there is no way the renter can beat $771K with an initial investment of $115K plus maybe $4K added yearly. Homeowner wins.

We can play with some of the carrying costs, which would favour the renter although probably not materially. Factoring in taxation will favour the homeowner. We can make this ever more complex.

The inescapable truth is that risk taking, using leverage here, wins when it works out for you. It just happens that anyone with a pulse and a mortgage approval won this game over the last 20 years.

Post performance does not guarantee future returns. And I won’t claim to know which way this will all go. However I struggle to get my head around $3MM crack shacks in 10 years.

#107 Dharma Bum on 10.16.21 at 10:29 am

#74 Nostradamus

A little known fact, more people die coming down the mountain than going up. Before long, a great number of the over indebted mountain climbers will perish, they will never, ever, see base camp again.
——————————————————————————————–

There’s a great book called Into Thin Air written by John Krakauer about exactly this.

https://www.goodreads.com/book/show/1898.Into_Thin_Air

I never thought about the economics and financial analogy, though.

Interesting.

#108 This is not the 90's, 2000's on 10.16.21 at 10:32 am

TalkiePie, I don’t think you are aware of the longer term implications now of people with $900,000 mortgage balances. Incomes are not that much higher than even 20 or 25 years ago and paying down $900,000 is not the same as paying down $300,000 or $400,000.

Many real estate buyers are not too knowledgeable about finances. Let’s get real, most of them go to work and buy a house. They don’t really know much else. In 10 years, like most Canadians if most of them just keep borrowing and leveraging their future, they will be facing big property tax increases, energy costs, food costs and many cost combined with big mortgage payments, $5,000 a month plus that one bad thing happens from sickness to job losses, divorce it is a real mess after that.

#109 Andre on 10.16.21 at 11:06 am

Yes, Chalkie, we don’t want to be stuck with alot of debt even at 3.5%+ mortgage rates. We bought our house 6 years ago in the GTA for $585,000 but our mortgage beginning balance was $535,000 but we have been paying our mortgage off aggressively. I know the our mortgage rate is low, we were paying on a 5 year fixed mortgage rate of 3.76% but just renewed at 2.09% 5 year fixed. Our mortgage broker said don’t pay off our mortgage balance more than the regular mortgage payments but we want to sleep at night and we have paid off almost all our mortgage, 29% of the mortgage balance left, it is now $155,000. We will be debt free in 3 years. We have only two RRSPs with the mortgage broker with some mutual funds, $60,000 which over the last 3 years have earned total 21.2% so we just leave it there. It is 50% in fixed income, 50% in equities. Our main concern is being debt free by 36, in which we will be in 3 years.

As for Joe with his 2.92% to 3.45% GICs, yes, he is not making a high return which should be at least 6%+ these days is a high yearly return for what I am seeing. However, I don’t have all the details but my older sister is an accountant and is very conservative with her money. I noticed that alot of Canadians that have longer term GICs, usually 3 to 5 year GICs are very aggressive savers. I know my sister obviously does not like the lower interest rates being cut 40% since 2000 but she adds a lot of money to her savings by first 18% of her gross income in her RRSP, the max $11,000 a year, the $5,500 max TFSA a year and reinvests the yearly tax refunds in other GICs plus other savings yearly in more GIC’s. She is playing it both ways, she is saving paying alot of interest, $18,000 mortgage interest a year because her mortgage is not 5% to 5.5% just a decade ago when she first had it.

She is saving 50% of her gross income every year. I think the way she looks at it, if GIC rates were 5% to 6% like back in 2000 but now maximum 2.3% to 2.6%, she saves double the amount and is still reaching her financial total deposit balances this way.

#110 Faron on 10.16.21 at 11:46 am

#103 crowdedelevatorfartz on 10.16.21 at 9:31 am

Flag has already been ordered half mast several times since it was lowered indefinitely. Look it up.

You woke up on the wrong side of the atmospheric river this morning. Sheesh.

#111 Phylis on 10.16.21 at 11:48 am

#98 Ken from BC on 10.16.21 at 8:09 am
If the capital gains tax is applied at 75% of the gain instead of the current 50%, how hard will that hit retirees that depend on portfolio growth to provide retirement income? It seems to me that it could be an additional 12.5% in income lost to taxes. Does one have to have primarily dividend paying assets to reduce the tax burden?
Xxxxxx
Just to ask an additional question to embrace these potential changes, what are the impacts of increased inclusion rates on pension funds? Exempt or do funding levels drop?

#112 Dr V on 10.16.21 at 11:58 am

94 Daniel – thank you for your posts.

I reviewed your earlier exchanges with IHCTD9 and found a huge difference between you on the NW of the renter. yours was $247k or thereabouts, which I understood, but IHCTD9 had $993k. I should have immediately caught that.

In post 66, IHCTD9 lists “inputs” of $728k, all of which, he says, should be available to the renter.

But the $728k contains repayments for a mortgage, which was not available to the renter, which is a much
more accurate real-world scenario, and you clearly stated this condition for your calculation. Does not
matter whether it is “fair”.

Some other bloggers understood it perfectly. Over the last 10 years, the leveraged homeowner won out big.

And you also stated that past performance is not an indication of future returns.

Disclosure – I own a house. And a share of a rental. And I have investments. …And……a cat……

#113 zah on 10.16.21 at 1:39 pm

Watch out folks, rates will rise all of 1.5 percent over the next 18 months, wow. What to do now!

Mortgages double. Consequential for many. – Garth