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January 6, 2016 | One of those days

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


Some days it’s hard to know where this blog should begin. There’s just so much pathetic news to wade through! So, snap on those sexy hip waders, and follow me. Breathe only when necessary.

Down she goes:
The dollar, oil, Alberta, the markets, federal finances – take your pick. It’s almost a perfect storm for T2 and the gender-perfect mob around him. Oil lost almost five-and-a-half per cent of its value on Wednesday, taking crude to the $34 mark. The dollar is now in the 70-cent range. Bay Street shed more skin as a result. And when the IMF lowered its forecast for global growth, it pretty much sealed the fate of the Alberta NDP, along with every other government that thinks it can spend or tax its way to prosperity.

It’s the crapstorm this prescient, oft-maligned yet always tasty blog has been warning you about for months. In a country full of house-horny, snorfling debt addicts clearly living beyond their means the whole notion of a government-engineered ‘soft landing’ is as silly as thinking you can eat the rich to feed the middle class. Alas, every generation has to learn. Now it’s your turn!

Up she goes:
On Friday the Royal Bank kicks off the latest round of mortgage increases. Yes, so much for all the macroeconomists who visit the comments section to patiently explain why rates can never swell. This is happening not only because December 16th changed everything, but also due to new mortgage market rules quietly introduced by federal regulators last year. That includes higher costs for lenders who securitize and sell their CMHC-insured mortgages plus a push by the bank cop (OSFI) to force banks to shoulder more risk by holding increased capital against mortgages.

What it means: even though the Bank of Canada is doing nothing, and may actually cut rates temporarily later in the year, mortgages are going vertical. The days of the sub-3% fiver are over. Even variables are jumping (by .15%). By the way, this rate hike does not come in isolation. RBC last raised rates (quietly) eight weeks ago, and Scotia popped a few of theirs a month back. More to come.

Down they go:
If you don’t think deflation in Western Canada matters, you’re a fool. Like bad country music and truck nuts, it’s impossible to keep this from spilling over the border. So all of the above – oil, failed politics, rate creep and economic chill – is decimating the higher end of the Calgary real estate market. Interesting, since a year or two ago this was the fastest-growing in Canada.

CALGARY Sales of million-plus properties in Cowtown last year collapsed 39.6%. Ouch. Even the real estate board is throwing in the towel. “It’s not a surprise given if you look at what happened in employment overall year-over-year,” says CREB’s in-house economist. “There was some job gains in Calgary but the losses were all in like business services and construction which tend to be more of the higher paid sectors. So not a real surprise that it starts to impact the higher end of the market and less sales activity, especially when you have uncertainty about what’s going to happen.”

Meanwhile up the road in Edmonton, an identical story is starting to unfold. last year sales fell 9% while the number of houses hitting the market exploded 66%. Condo deals tanked by 13%. Practicing for his new gig as a Comedy Central host, after handing in the keys to his leased R7, head realtor Geneva (Giggles) Tetrault said, “2015 was a steady year for real estate in Edmonton.”

Up she goes:
Or did she? Toronto realtors certainly scored the headlines they craved Wednesday morning with the latest boffo market numbers – 9% more sales in 2015 than the year before and a big 9.8% jump in average prices – but there’s more than meets the eye here. While the industry is claiming a record year in 2015, others say phooey. The numbers smell.

For example, ex-realtor and housing analyst Ross Kay correctly points out there are 21% more houses in the Big Smoke now than in 2007, when one out of every 14 houses changed hands in an active market. Last year only one of every 18 sold – so how is this a new record when activity decreased?

Silly Ross. He’s already forgotten his Realtor Math.

Meanwhile, here’s a question: A year ago the average GTA property cost $566,726 and to buy it required $17,000 in closing costs, for a total of $583,715. Today the average price is $622,217, but if you sold there would be a 5% commission, leaving you $591,106. So, in real life, the gain is $7,381, or 1.2% – and you can do better than that at the credit union, can’t you?

Down he goes:
Poor Bill. Used to make a million a year as a BSD on Bay Street. Now he’s reduced to asking the plebes what they think he should be doing to save the country from its own hormones. So yesterday the federal finance minister, Bill Morneau, launched pre-budget consultations – a tad late in the game after the Libs already jacked taxes on the successful, eviscerated the annual TFSA contribution limit and gave away billions to fight climate change in countries which never heard of us.

Anyway, do you have a message for the guy? Good. Here’s your chance. You could win a selfie!

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January 6th, 2016

Posted In: The Greater Fool

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