Gambling with contingency funds
No-lympics pointed out this article in todays Province. Apparently two BC condo strata councils have lost substantial amounts from their reserve funds by putting that money in higher risk /higher return investments than the legally allowed bonds, GICs or bank accounts.
“It’s been going on for years,” says Gioventu. “The first time I had to deal with it was nine years ago. People get greedy and look for shady deals. But nine years [ago], we had a pretty big drop in mutual funds and we had stratas investing in mutual funds. That was probably the first time it popped up on the radar screen.”
Legislation limits the type of investments in which condo reserve funds can invest.
The Strata Property Act Regulations, Section 6.11, says permissible investments include government bonds, GICs or simply holding the money in a bank account.
In most cases, investing in equities is not permitted.
The strata council in the Okanagan, however, alleges it was misled by an investment adviser.
“Our strata council has done something rather stupid,” wrote one strata member to Gioventu’s Condo Smarts column, published every Sunday in The Province.
“In 2005, our treasurer invited a broker from an investment firm to talk to our council about managing reserve funds. We took advantage of the advice and decided to place our contingency funds with the investment broker to gain the highest yield possible. Unbeknown to us, the funds were extremely risky.”
While the strata earned more than 10 per cent in 2006, the portfolio is now worth half its value, said the strata member.
(No Ratings Yet)
Loading ...
November 17th, 2008 at 12:38 pm
November 17th, 2008 at 12:46 pm
November 17th, 2008 at 1:11 pm
“For just $94,000 you can own 50% of this $400,000 luxury condo!
The reason is simple. We will lose our deposit of $56,000 if we cannot come up with the total balance by closing date. Problem is we are approved for only $250,000 mortgage and cannot come up with the rest.
We will accept any offer that could save even half of our deposit.
So if you have cash or good credit, this is a great opportunity to own a property with at 50% of its selling price.
If interested, please contact us ASAP for more details.”
http://vancouver.en.craigslist.....02951.html
November 17th, 2008 at 1:16 pm
http://vancouver.en.craigslist.....34367.html
November 17th, 2008 at 1:20 pm
and in brazil, a trader shot himself. times are getting tragic.
November 17th, 2008 at 1:44 pm
Too bad I can only vent about this on a blog because I don’t want to alienate my friends and coworkers, the same people who rolled their eyes and shook their heads at me as recently as May.
November 17th, 2008 at 1:58 pm
Why is it people like politicians, corporate executives, bankers, and social engineers (from now on referred to as PCBS, pronounced as PCBs) who use other people’s money have lax laws regulating them and the use of money that does not belong to them, when we the people have to live up to more stringent requirements to use our own money? I refer specifically to the Strata Property Act Regulations, RRSP and RIFF restrictions, and the multitude of tax regulations.
It seems like to me, that all levels of governments of Canada have a lot to answer for. It seems like to me, the system is set up for the individual to be controlled and be limited to accessing their hard earned money, and to help the PCBS then take from the proletariat with impunity.
The underlining problem here is that the PCBS of the world have no respect for money that is not theirs. It is a very sorry world we live in, when your tax dollars are missed spent, your investments are missed spent, your savings are under threat, and others think they know better than you as to how you should spend your money. You can’t give money to the government, you can’t put your money into investments, you can’t safeguard your wealth in banks, and you don’t have a right to spend money the way you want, without it being under great risk of being misappropriated.
What has this world come to? A bigger question yet, why do people put up with this garbage? There was a time when people would march in the streets, when they would protest, even violently, my gosh…there was time when people would revolt! Have we really all become so bloody pathetic? Have we really all become just mindless automatons? What the hell is wrong with society today? Do we really all have to wait for some sort of monstrous depression before people then get off their fat lazy behinds and then worry about their days food requirements, little the next 50 years of food supplies?
Personally, I think we have bigger problems than just the present financial mess, and a housing bubble imploding. There is something wrong with society, a systematic sickness permeating throughout all levels of society where everyone has just become detached to their own responsibilities. Specifically, we have the PCBS telling the rest of society how to live, while at the same time, most of the rest of society follows like sheep. And remember sheep eventually end up in the slaughterhouse. That leaves the rest, quietly living, watching, and avoiding trouble, like many of you who frequent to this blog
Here’s some advice; don’t be a sheep!
+D
November 17th, 2008 at 2:00 pm
Thanks for the tip !…VANCOUVER REAL ESTATE NEVER GOES DOWN… that’s what my waiter/broker Robert Rennie says (PS anyone heard of him ? …I hear he used to sell real estate.)
November 17th, 2008 at 2:48 pm
Good points…but maybe you have answered your own question.
aka people ARE sheep.
The majority of people are either confused or too trusting. Knowledge is power … and if people were truly informed or kept informed there would be either (i) revolts in the streets or (ii) actually responsible and accountable Gov’t by now.
Gov’ts have effectively been co-opted to serve a minority . They are made up of Machiavellian bureaucrats and often naive malleable one- or- two -trick pony/agenda politicians.
Actually trying to create a fair and level playing field for the majority would be too much work in their minds , detract from pet projects, and hold them accountable.
The current governance structure for all levels of Gov’t basically lets those in charge get away with murder, there is little if any formal bodies to police it(ie what gov’t do) , and IMHO, it is getting worse.
Unless you have the resources to fight any issue “X” in court, consider it a lost cause even if you are 100% in the right and they are 100% in the wrong.
Until things change, it may simply be “every person for themselves ” , keep away from the given kool - aid, and avoid stratas ( a whole other level of quasi-gov’t) at all cost if you can.
November 17th, 2008 at 2:55 pm
Your savings for retirement have more flexibility in their allowed investment vehicles to accommodate the needs of savers of many different age groups. If you’re 20 to 40 years old you can afford to have more of your retirement savings in riskier and hence potentially more profitable investments. If you’re 50+ and you have the bulk of your savings in risky investments then you’re ignorant and deserve any losses you suffer, you’ll have to survive off CPP and OAP, tough luck.
There’s so much literature, educational seminars, common sense etc that warn against risky retirement portfolio allocations that I feel about as sorry for a near retiree losing their life savings in the stock market as I do for SATV losing his life savings in a condo flipping investment.
It’ll soon be time for folks to accept responsibility for their own financial well being and stop depending on the Government to protect you.
November 17th, 2008 at 3:13 pm
http://www.bnn.ca/news/4894.html
“SEC charges Mark Cuban with insider trading”
If you know who he is, you’re likely laughing at this too. Here’s an excerpt:
“Cuban, one of the five finalists to buy the Chicago Cubs pro baseball team, faces civil charges by acting on nonpublic information and selling his entire stake in Mamma.com to avoid more than $750,000 US in losses, the SEC alleged.
Cuban, listed by Forbes magazine as one of the 400 richest Americans with an estimated net worth of $2.6 billion, said he intends to contest the allegations.”
This guy is one of the richest people in the world. He’s about to lose a whopping 0.03% of his total net worth on this investment. He uses insider info to plan his trade and gets busted. I can’t emphasize this enough: a rich guy willing to do whatever it took not to lose 0.03% of his total net worth.
Now please, someone, explain to me why so many rich foreigners will be flocking to Vancouver to buy overvalued real estate. I don’t know how the richest 1% accumlated their wealth, but I assume it wasn’t from buying overvalued assets. This little story is a reminder of how much rich people love losing money. Remember Martha? Tsk tsk Mark.
November 17th, 2008 at 3:20 pm
November 17th, 2008 at 3:38 pm
Isn’t the usual out to cut a deal ….pay a fine…. but with no admission of guilt ?
Ther ya go Mark Cuban…now you don’t have to hire any of OJ’s dream team of lawyers.
November 17th, 2008 at 3:52 pm
http://vancouver.en.craigslist…..34367.html
That’s hilarious. Why didn’t they just throw in a picture of Pacific Rim Park and some surfers, instead? Reedickulous.
November 17th, 2008 at 4:20 pm
Between contract signing and closing, these people managed to save a whopping $0 more. If they are that stretched now, how likely are they to be able to keep up with their share of the mortgage? Tenancy in common would remove some of the risk, but why would the original purchaser’s lender advance $250k for their half-share, now worth < $200k?
November 17th, 2008 at 4:24 pm
I think we can attribute a lot of the consumer behaviour as well as investing behaviour over the past decade to a desire for instant gratification.
People want that quick fix, whether it’s buying the latest bling item or speculating on the next bubble.
Nobody wants to save up for a new car. They buy it now on credit.
No specuvestor wants to look at fundamentals and earnings reports. They want an over-leveraged mortgage-backed asset that they can flip to the next fool for 20% more next year.
There’s 3 different kind of buyers. Primary users, investors, and speculators.
Take a farm tractor for example.
1. Primary user - A farmer buys a tractor to work his farm.
2. Investory - An investor buys a tractor and leases it out to a farmer.
3. Speculator - A speculator buys borrows money to buy a tractor in the hopes of selling it to another speculator next year.
I think we know within which category the majority of buyers in the past 2 years fall.
November 17th, 2008 at 5:14 pm
What about money market funds? Are those allowed for stratas? Those aren’t “supposed” to lose any money, right, right, right?
November 17th, 2008 at 5:26 pm
November 17th, 2008 at 5:45 pm
***************
I’m sorry, but “highest yield possible” was not equated with higher risk? These retards deserve to be sued by the other strata members.
I’m sorry, but
November 17th, 2008 at 5:57 pm
Not to mention that they managed to contravene the relevant statute pertaining to the allowable classes of investments. Either they were completely incompetent, negligent, or greedy. I smell a tort action being cooked up, although that may be relegated to the status of a moral victory, given that the council may not have much in the way of assets.
November 17th, 2008 at 6:01 pm
This real estate and equity implosion is will remind people what risk is, again, and its relationship to reward.
November 17th, 2008 at 6:32 pm
Job losses causing people to double up. Check.
Oversupply with amateur landlords. Check.
Price bubble fueled with debt. Check.
November 17th, 2008 at 6:40 pm
Ken Clarke warns Britain is on the brink of ‘meltdown’
November 17th, 2008 at 6:40 pm
November 17th, 2008 at 6:57 pm
November 17th, 2008 at 7:34 pm
In addition to your excellent point about metrotown check out Shangri La for an indicator of where rental prices are going! $1700 and dropping (I’m looking to move there but they might come down even more).
Who’s going to pay $1750 for a unit at the ritz/sapphire or melville when you can be in a 5 star hotel and landmark?
Meanwhile $500 million dollars worth of construction jobs and materials are biting the dust weekly and leaving a lot of previously high paid construction people unable to pay the inflated rents and/or mortgage payments…
November 17th, 2008 at 7:55 pm
bdk - Where did you get $500M weekly? I’d like to see the data. I know we’re losing jobs in construction, it makes sense, but that number sounds huge, was it arbitrary?
November 17th, 2008 at 7:57 pm
I heard on the radio they are expecting UNemployment levels of 9 %
That’s probably a conservative estimate.
Good news on the global scene is at a premium eh.(ie is it an endangered species ?)
November 17th, 2008 at 8:03 pm
November 17th, 2008 at 8:11 pm
I basically pulled that number out of my ass but it sounded good didn’t it?
November 17th, 2008 at 8:25 pm
November 17th, 2008 at 9:05 pm
FYI - The Ritz is rolling along again. I feel all the blasts from my office, several times a day I might add. They have a pretty deep hole there right now. I think there is another three months of blasting/excavating scheduled. No signs up still, but construction continues. The project was halted for about 4 days, only.
I’m with Tony Danza on the topic of construction. Build baby, build! I want them to create the mother of all glut. Let the MOI keep climbing. Let the speculators keep buying. And then let them all rush to the exits together at once.
November 17th, 2008 at 9:07 pm
November 17th, 2008 at 9:16 pm
Remember a canceled project also means layoffs or laid off workers being hired to accelerate other developments coming online. Either way — less employment or more supply — it has basically the same effect. Hard to know which one will cause prices to undershoot more at this point but I’ll throw it out there that unemployment is deadly for prices because it takes away demand and adds supply at the same time.
November 17th, 2008 at 9:52 pm
November 17th, 2008 at 10:12 pm
There are good ones in the lot, and they’re the ones likely
to be retained on the projects that are left.
A few weeks ago I overheard a conversation on skytrain with some Olympic Village workers who were cluing into the fact that there was nothing lined up for them after that project was over. They talked about a coworker who started saving a few months ago. That’s not going to be a lot of savings.
So once the construction jobs disappear these guys will quickly boil off their savings and be hooped. Many with addictions acquired during the good times. They will land hard. Hopefully for us they will leave the city looking for work in Alberta. The desperate ones that stay could likely add to the criminal population with muggings and B&Es.
November 17th, 2008 at 10:13 pm
Jesse, I just love the psychological trauma cancelled projects inflict on the pre construction buyers.
At first they are giddy, as they believe what the professional pumper’s carefully media delivered message which says “project is cancelled because costs have risen, and therefore any new construction coming onto the market will be selling for more”
Eventually reality sets in, and the preconstruction, and recent buyers begin to see the pattern firmly entrenched in other bubble markets, and they finally begin to see it’s just like the last crash we had in Vancouver.
Then they read the local paper and even their hero Pastrick calls for a 30% price drop.
Next comes the realization if Pastrick calls for a 30% and we calibrate the crash meter properly it will likely be a 50% drop and possibly much more.
Oh Maggie we need you mow more than ever.
November 17th, 2008 at 10:20 pm
The doer gets rich by being in the market. The loser gets poor by sitting at the computer dreaming of the property market. Which one are you?
Get out there!
November 18th, 2008 at 12:39 am
Yes, government monetary policy in the US and Ottawa is behind all of this. But there has been so much criminality, corruption, gross negligent incompetence, and so much over all dishonesty, cover up and deceit that I want to see some pols and real estate con men and women doing Perp Walks.
I have had it.
November 18th, 2008 at 12:56 am
“$354000 SUPER DESPERATE SELLER - Cant make payments. Burnaby Townhome (Highgate - Stride Area)
Owner needs this sold asap.
Maplewood Terrace.
Comparables have sold for up to $380000. This unit has all of the upgrades. 2 level, 2 bedroom, 1 year old beauty. 915 sf. Stainless steel package, laminate floors. Better than new. No GST. Make an offer. Any offer. Seriously. All offers will be considered.”
http://vancouver.en.craigslist.....83292.html
November 18th, 2008 at 1:36 am
November 18th, 2008 at 1:49 am
You win the award for the stupidest person on this blog. You read a story in the fishwrap and from that you’re able to generalize about tradesmen? Wait, I hear church bells ringing? Are they calling you to the sermon or is that the ringing in your head?
November 18th, 2008 at 2:41 am
I know plenty of tradesmen, some smarter than others. But where I agree with BBY is that the ones I know have not planned for the rainy day. They spend as much as they make. The minority are savers. I suppose it’s a microcosm of society in general and not just trades that do it. We’re a society of borrow to have nows. The majority of people are more concerned with “can I afford the minimum monthly payment?” rather than “can I afford it?”
November 18th, 2008 at 4:34 am
P.S. Does anybody know where I can score some jib?
November 18th, 2008 at 8:33 am
Found on Calculated Risk.
November 18th, 2008 at 9:20 am
The number of Canadians who now expect housing prices to fall has more than doubled since last spring, a survey by a mortgage brokers group has found.
The figure now stands at 35 per cent, the Canadian Association of Accredited Mortgage Professionals (CAAMP) said Tuesday in releasing its annual fall survey on consumer perceptions. This is up from 15 per cent in the spring survey, the association said.
“Half of those surveyed gave a neutral answer while the number who thought prices would go up fell from 40 per cent to 20 per cent,” it said in a news release. “Westerners, who have endured particularly hot housing markets, are most negative, and in British Columbia, 48 per cent of those surveyed said they expect prices to fall, far above the national average.”
http://www.globeinvestor.com/s.....8/GIStory/
___________________________________
48% said the expected prices to fall. I’m guessing the other 52% had active listings on MLS.
November 18th, 2008 at 9:32 am
November 18th, 2008 at 9:33 am
Bob the builder,this site is for eunuch cumunity they had instaled security red beams to protect them and green beams for self fisting.
November 18th, 2008 at 9:43 am
Agreed, though it’s “woe is me”, not “whoa”.
November 18th, 2008 at 9:54 am
And you win the Miss Congeniality award. And the Lousy Reader award, as BBY talked about general workers, not “tradesmen” — not the same animal at all.
I worked in construction for years and BBY’s characterization isn’t true of everyone but definitely true of many. On average, they are a dumb bunch, increasingly so lately as anyone could get hired when things were booming.
November 18th, 2008 at 10:12 am
http://www.bloomberg.com/apps/.....refer=home
November 18th, 2008 at 10:44 am
The behaviour of care-free spending, casual drugs, drinking, etc. does not discriminate.
Anecdotally, I know lawyers, teachers, post office workers, and software developers who all engage in this kind of activity.
Last year I think I remember reading a report saying that home ownership level had hit an all time high.
Something like 60% or 70%. And I recall thinking at that time, there’s no way 60% or 70% of the adult population is responsible enough (financially) for home ownership.
More than half of the people I know spend every cent they make. In fact some spend it before they make it.
One guy was making $45K and living at home. He loves his toys. Camera equipment and video games. Rather than wait two pay cheques, he would buy a new camera lens on a credit card and make minimum payments.
Another guy was changing jobs and instead of rolling the pension contributions with his old company into an locked in RSP, he decided to cash it out, go on holidays, and buy a new car.
They seem to think they don’t need to save for retirement. Maybe everyone’s getting a $2.1M inheritance from their parents when they kick the bucket.
I know I’m not going to see a dime.
November 18th, 2008 at 11:05 am
November 18th, 2008 at 11:31 am
There were units renting at firenze last year for $1500 and $1600! Now that supply isn’t tight the first ones to drop in resale price and rental price are the trailer parks in the sky, as a snobby renter I wouldn’t pay $800 a month to live in that dump.
For an early 20’s service industry person, a dealer, a hooker it’s a fantastic location to rent because your neighbours will be younger and more forgiving but owning a unit there long term is just going to look worse and worse!
P.S. that gold purse dog lover is probably a hooker too
November 18th, 2008 at 11:48 am
November 18th, 2008 at 12:33 pm
From your resume’ on post #44
—- You either built Glen Clark’s deck…or your last name is Georgetti OR Sinclair.
BTW : want jib? …go to Pattison sign shop…ask for Glen, bring Cash or Canadian Tire money.
November 18th, 2008 at 12:34 pm
That was funny!
November 18th, 2008 at 12:50 pm
Proof positive though: We signed a lease in early Oct and we’re moving Dec 1 and we’re paying too much. The place we are moving from was on the market 6 weeks with 2 price drops, only now does it look like its going to rent. Started at $1695, went to $1650, now is $1600. We paid $1650 here for the last year. That’s a saving of $600-$1200 a year which is nothing to sneeze at!
November 18th, 2008 at 1:26 pm
Then again, it would cost you at least $600 odd bucks to move, no? So there’s no real point if you’re happy where you are.
November 18th, 2008 at 1:46 pm