Debt fears worry investors
No, not the little half-million dollar mortgage debt you may be carrying, I’m talking about the big debt. Government debt. Everybody’s doing it, but there isn’t a lot of comfort in the numbers right now. Investors around the globe are showing more and more fear of big unmanageable debt loads and defaults.
A recent report out of BMO Capitol Markets goes so far as to recommend moving into ‘cash or cashlike instruments‘.
So lets presume you’ve got money rather than debt. What are you doing to protect it and make it grow? Are you moving into or out of equities or are you burying it in a jar in the backyard?
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June 10th, 2010 at 12:14 pm
@Anoymous:
No there aren’t. When the tide goes out it’s going to look a lot like Wreck Beach. And a lot of grannies are going to see their “loans” to the grand-kids disappear into the aether.
June 10th, 2010 at 7:07 am
@No More Gordocracies: exhibit A on why goldbugs are irritating. BTW, I wouldn’t take my investment advice from some guy named Jim at Sears.
June 10th, 2010 at 2:40 am
@No More Gordocracies:
You said it. Were you even around in the 1980’s?
The general level of consumer prices (including rents) has a little more than doubled since 1982. Thus the CAD has lost about 60% of its value since then.
Could you explain to use how a currency, or anything else, can lose over 100% of its value?
June 10th, 2010 at 1:46 am
@McLovin:
“Actually in inflation adjusted terms Gold has lost 50% of its value since it peaked in 1982.”
Actually compared to the value of the Canadian Dollar which has lost about 700% since 1982 gold is doing just fine. Just because you don’t own any and have no idea what you are talking about is no reason to call people who own gold crazy. Those who recommended your post deserve everything they are getting by not owning gold.
It’s amazing the stupidity of some of the kids on this forum. But that’s not my problem. There is not one analyst that has ever proved that gold has been a bad investment in the last 10 or 15 years. before that everything was stagnant, gold, home prices, food prices etc. Things only started getting *really* inflationary in the mid ’90s.
The FACT remains that putting money in the bank is by far the dumbest thing one can do. Had one invested in real estate 10 years ago OR gold, they would be miles ahead of the losers who put their money in the bank and never made a penny, in fact they paid the bank to keep their money. Figure it out.
Those hesitating to hedge their futures with gold better realize one thing, they aren’t making any more gold so buy now before you are priced out forever. Houses aren’t going to go up in price much longer but gold will never go down significantly from here ever again in my opinion and those who have watched the discussion on gold by different people here over the years know that this is right and those who knock gold are not only wrong but have been harming others with their ignorant advice.
June 9th, 2010 at 11:35 pm
@patriotz: Sorry but none of your reasons actually refute the argument that the tax is not good for consumers.
As for the other reasons you stated about the need for HST, well they are valid, and yes I believe the average person are extremely shortsighted and can’t connect the dots between low taxes + high social spending = big debts, there are just better way to go about it. I don’t believe HST is the best way to resolve the currently issue. Rather I think HST will only mask the true underlying problems for a longer period and make things even worse. You can’t solve a gov’t spending issue with taxes, it just shifts money from consumer to gov’t at best and lowering or even reduce economic growth at worst.
As for the argument about HST making us more competitive, please, give me a break! HST will at best save 3% or 4% off a sales price because most of the costs are things like labour which business doesn’t pay HST on. I don’t think the real/biggest cause of our shrinking export sector is due to these 3% or 4% PST tax.
June 9th, 2010 at 11:17 pm
@arit: I know in advance how much I am going to pay
Excellent point, arit. The nickels and dimes of home ownership start adding up quickly and can come in leaps and bounds. I doubt very much most home owners fully account for their time and capital spent on maintaining a property. One, it takes a lot of time to do properly and two, it requires meticulous record keeping.
If you want to get a better idea of the baseline costs of home ownership, look at a landlord’s income statements for the past 10 years. They generally have an incentive to keep good records.
June 9th, 2010 at 11:05 pm
Yet another fun price to rent comparison:
#401 – 1168 Richards asking $2995 to rent.
http://tinyurl.com/3aysafy
#402 – 1168 Richards asking $1.325 Million to buy!
http://tinyurl.com/327puv2
Price / Monthly Rent = 442!
I love how the Realtor(r)s page offers up that the mortgage cost is $5,506 per month with a mere 20% down. I’m pretty sure that doesn’t include the $4400 / year property taxes.
June 9th, 2010 at 10:27 pm
Went to see another rental tonight. Yet again scenario was: girl bought condo few years ago on her own, met a guy, now they’re engaged/living together/newly married. And he has his own place already. So instead of selling, she wants to rent it out, often for emotional reasons “I just LOVE my condo, I’ll NEVER sell.” I can’t tell you how many times we’ve run into this while looking for a new place to live. I fear that this is because they read the same article I did a few years ago, in a women’s magazine (just to clarify, yes I am female) The article basically said “girls, you don’t need a MAN to buy a place, go out and show your independence and buy your OWN place!” Piece of fluff, essentially. So I can foresee a situation in a few years where these girls realize this financial independence comes at a price. Negative equity, anybody? It may come as a shock for us in our thirties who never knew there could be such a thing as the condo being worth less than the balance of the mortgage (of course that flaky magazine article never mentioned the risks of owning now did it?) Or what to do when the guy eventually comes along and you have to sell because you want a house or need the space for the baby?
I guess I haven’t been a very good girl for not listening to garbage like that from the MSM over the past few years and instead socked my cash in the bank. Damn.
June 9th, 2010 at 9:58 pm
#60 @superduperbulltime: “Bear if zombie scenario happen and you need shave off gold to buy bread safety deposit box not likely to exist.”
Bring it on! I am well prepared for “zombie scenario”. I rehearse many times by playing video games! But whose side I be on?!?!?! It not matter as long as I’m armed!
June 9th, 2010 at 9:49 pm
Actually in inflation adjusted terms Gold has lost 50% of its value since it peaked in 1982. (Even with the multiyear run up)
McLovin
PS – Goldbugs and crazies please please don’t turn this real estate blog into a forum to discuss gold. There are many other places to do that.
June 9th, 2010 at 9:36 pm
Buying land in Europe… The Euro is not that low, it is back to its entry level. It is considered on the low side below 1.10 (1.19 now). Besides, taxes in Europe can be expansive, and capital gain for non resident can be nasty. The short term future of Europe is far from rosy.
What about buying land in Canada for long term investment?
I know that Chinese investors are buying agricultural land in Quebec.
June 9th, 2010 at 9:33 pm
@No More Gordocracies: Nice chart, but why not link to the one that goes back further than 10 years?
http://goldprice.org/charts/hi....._o_usd.png
Check out what gold prices did in the early eighties when our last big housing bubble popped.
If gold ‘keeps up’ with housing prices and housing prices are overpriced, what does that mean for the future of the yellow metal?
June 9th, 2010 at 9:27 pm
Bob Rennie new marketing campaign
http://www.youtube.com/watch?v=ONEYGU_7EqU
June 9th, 2010 at 9:17 pm
Great documentary on CNBC on now about the US housing bubble, and how it spurned the credit crisis…
Its great…
There is discussion about how incomes fail to rise as fast as prices, the irrational exuberance and “giddiness” from instant equity, the government’s role in consciously creating the bubble to prevent an economic crisis after 9/11….
It has plenty of interviews with “homeowners” that lost their American dream, that lost their instant fortunes, the realized wealth is not created from RE ownership…
It really is bear porn…
June 9th, 2010 at 9:15 pm
@elvince:
@arit: Wheter you pay for those repairs straight from your pockets or through your monthly payment to your landlord is kinda irrelevant.
+++++++++++++++
Really? I’ve never heard of a renter getting hit with a $50K special assessment to fix a leaky condo, have you?
June 9th, 2010 at 9:10 pm
@Best place on meth:
“Failed Flippers” is a new show coming to HGTV this fall
++++++++++++++++++
Sounds like some sort of exotic Asian soup.
June 9th, 2010 at 8:52 pm
elvince Says:
@arit: Wheter you pay for those repairs straight from your pockets or through your monthly payment to your landlord is kinda irrelevant.
I respectfully disagree, elvince. It’s very relevant.
I can plan my budget, knowing in advance that my expenses for housing are X dollars per month (plus whatever it goes up every year, which is very little in my case). I never have unexpected expenses.
As a homeowner it’s not the case. Most my coworkers are home owners, and it’s almost daily stories: roof needs to be replaced, 10,000CAD. toilet exploded, 2,000CAD, etc. The common theme: Unexpected expenses popping out of “nowhere” requiring you to pay.
I realize that I also pay for this through rent, but I know in advance how much I am going to pay…
Think about our dearest friend Froogle Scott…
Regards
arit
June 9th, 2010 at 8:52 pm
@Teddybear:
“We thought about buying gold coins, however, after you pay tax, and commission, and godknowswhat, it is not worth the hassle, ”
WRONG! There is ZERO tax on .999 bullion (gold and silver bars or coins) such as Maple Leafs and the commission is a paltry 20.00 +/- for a 1 ounce coin worth 1300.00 CAD
Try Jim at Western Coin and Stamp in Richmond or the coin shop IN Sears Metrotown.
June 9th, 2010 at 8:40 pm
@Big Crash:
don’t mind patriotz, although he’s one of the more knowledgeable posters here, he has been misleading people on the subject of gold for years now it seems. He obviously knows absolutely nothing about keeping up with inflated home prices by owning gold. Gold has SAFELY way outperformed house prices across Canada. Anyone can pull up a 10 year chart on gold and ask themselves why patriotz hates gold like what’s the motive?
For those who can read a chart, this is a thing of beauty
http://goldprice.org/charts/hi....._o_cad.png
and one should not pay any attention to fluctuations of 10-20% along the path upwards. Gold could actually trade down to 800.00 USD and still be in a bull market. Gold will keep rising against all currencies because paper money is crap as anyone who has seen home prices double in 10 years knows all too well. Those who owned gold back in 2000 have kept up with the housing prices and more. Those who followed patriotz’s advice have lost out in a major way.
June 9th, 2010 at 8:38 pm
@Big Crash:
don’t mind patriotz, although he’s one of the more knowledgeable posters here, he has been misleading people on the subject of gold for years now it seems. He obviously knows absolutely nothing about keeping up with inflated home prices by owning gold. Gold has SAFELY way outperformed house prices across Canada. Anyone can pull up a 10 year chart on gold and ask themselves why patriotz hates gold like what’s the motive?
For those who can read a chart, this is a thing of beauty
http://goldprice.org/charts/hi....._o_cad.png
and one should not pay any attention to fluctuations of 10-20% along the path upwards. Gold could actually trade down to 800.00 USD and still be in a bull market. Gold will keep rising against all currencies because paper money is crap as anyone who has seen home prices double in 10 years. Those who owned gold back in 2000 have kept up with the housing prices and more. Those who followed patriotz’s advice have lost out in a major way.
June 9th, 2010 at 8:33 pm
@SamanthaD: Hi Samantha! Welcome from Ontario! I’m also an Ontario to Vancouver transplant, and know several others. There sure are a lot of us.
I too love this area. It’s a mecca for extremely interesting people.
Let me tell you about two of them. They were young, maybe 22. I think one worked as a barista, the other did sales at a Levi’s store. They also liked having lives – what point would it be to live in Vancouver if you just hang out in your appartment each night? That left enough rent money for a sliver of accomodation. I think there were 9 of them to a small house in East Van. I don’t have the exact story but one of their friends went crazy so they couldn’t live there anymore, and moved back to Ontario.
That was because of the inflated rental market, let alone the house buyer’s market, which is much harder to get into. With my professional job I don’t have any trouble renting, but I couldn’t buy anything I would want to live in.
Maybe financial hubs like New York can have a thriving culture where the non-well-endowed simply can’t afford to live there, but Vancouver can’t. The overinflated RE market is killing this city. I don’t want Vancouver to fail, I want the RE bubble to fail.
June 9th, 2010 at 8:28 pm
“If you ever leave the Matrix, come back to the blog we will explain the difference between wealth and debt.”
1. He doesn’t know he’s in the Matrix.
2. If he knew, he would want to stay there anyway. It’s the only life he’s ever known.
3. Thus, there’s absolutely no hope of getting him out.
4. In the Matrix, he is a nobody, so he can’t cause us harm.
5. Thus, there’s no need to get him out, or to neutralize him.
June 9th, 2010 at 8:22 pm
@freedom, regarding “Can you afford $40 annually for safe deposit box? I have one in the main branch. Stored all my bullion coins. For larger bars I am planning a trip to Switzerland,”
Will you be posting your travel itinerary to this blog? Will you use checked baggage or carry-on? Hey, just for fun, what’s your Facebook page or other source of current photos of you?
June 9th, 2010 at 8:14 pm
@patriotz:
“AFAIC the opposition to the HST is just another expression of this province’s entitlement mentality.”
You shouldn’t generalize. I am opposed to the HST because I generally consider consumption taxes to be regressive. Despite GST rebates for lower incomes the middle class receives no relief (as usual). As for the argument that prices will lower correspondingly since businesses will have a lower cost structure, I will believe it when I see it (i.e. unlikely). At the very least the prices of labour intensive goods and services will not see much decrease at all since those costs are not subject to PST to begin with.
I won’t argue that we are over-consuming but I don’t believe for a moment that the provincial government (or any government for that matter) is trying to discourage consumption. Personal consumption is one of the key drivers of the economy so I assure you they want to keep that pump primed to shore up their stats.
We all understand that the government needs revenues but its all about the manner in which the revenues are raised. Why not utilize a progressive tax structure that taxes the wealthy, rather than institute a regressive tax that taxes the middle class? As for alternatives to increasing provincial revenues I have a pretty simple solution: increase personal income taxes on the highest brackets and even introduce additional tax brackets at higher levels. Of course we all know Campbell will never do this. We know which tax brackets he caters to and it aint us.
June 9th, 2010 at 7:58 pm
*sniff* *sob* Samantha’s right. You guys are awful, AWFUL I say! It’s enough to make me want to move to Newfoundland and become a fry cook….
June 9th, 2010 at 7:54 pm
@arit: Wheter you pay for those repairs straight from your pockets or through your monthly payment to your landlord is kinda irrelevant.
At this point the only thing I feel are relevant are the price/rent and rent/income ratios. I’m as bearish as you are, but not because of bad plumbing.
On a slightly different subject, I’ll admit the bulls might be right about one thing: some bears might be renters for life. Given this city’s completely idiotic exhuberance for real estate, it is totally possible that P/R and R/I might never make sense, so that renting will always be the best option, financially speaking. Personnaly, I wouldn’t have any problem with that (I live in a city where those ratios are WAY different from Vancouver’s), if it makes more sense to rent, just rent. If it makes more sense to buy, then buy. Right now, it definitely makes more sense to rent.
At some point, prices will come down and the ratios will make more sense, but it doesn’t mean they’ll come down enough to be worth it. Cause let’s face it, even a 20 or 30% haircut on some crackshack isn’t enough to make them investment-worthy. So Van RE might never get to a point where it’s financially worthy.
June 9th, 2010 at 7:23 pm
Insignificant Anecdote:
Monday: Plumbing under washroom sink burst, big hole.
Tuesday: Whoe plumbing under washroom sink magically replaced while I was at work.
Cost: 0$.
Worries: 0.
How much would the worry||cost be as a homeowner?
Insignificant Rebutal 1:
“I can’t wait to see you bitter people bag hold and spew the same nonsense in 2012 while the prices go up another 20% from today.”
Supraboy, you are right. Prices are going up 20%. Go buy another condo and keep us updated.
Insignificant Rebutal 2:
House Buyer:
“All Vancouver patriots ought to unite together to rebuke those lie and deformation shameless created by bears”
Oy Vey, I have a very bad feeling about you, house buyer. My sources tell me you are a “mark”, (aka Greater Fool, aka sucker, aka sheep, aka lemming, aka FTB, aka Vancouver patriot, aka cool-aid drinker, aka 600,000CAD in mortage debt).
If you ever leave the Matrix, come back to the blog we will explain the difference between wealth and debt.
Regards
arit