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July 22, 2018 | Crossroads

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.

Sixty years ago my father was a high school principal. Salary, $10,000. With my mother he bought a house – two stories, four bedrooms, two baths, garage, big lot, stucco-on-brick in a small town just outside Toronto (now Mississauga). Price, $19,000.

I’ve no idea what the down payment was, but mortgages cost 8%. Within a decade they’d be almost 10%. To make ends meet, my parents took in a boarder, a nice young woman named Elizabeth. She taught me all I know about sex. (Just kidding. I was nine.)

The last time that house changed hands – renovated, but not expanded – the sale price was $1.8 million, or 100 times what my parents struggled with. The mortgage rate, however, was under 3% – less than half the historical norm. And a high school principal for the Peel District School Board (which my father eventually ran) earns $110,000.

So, salaries are ten times higher. A mortgage costs 60% less. House prices up a hundredfold.

How, then, did we lose our way over the decades? The answer is complex, including a massive increase in taxes (and the services people demand from government), a decade-long collapse in interest rates (pumping real estate) and a whole new attitude towards debt.

Today home ownership, house prices and mortgage borrowing are all at record levels. The wealth gap has widened as never before. As a direct result, politics are polarizing as people try to find solutions to an unsustainable financial situation. That’s bred a rush to protectionist populism in the States, and a drift left into a shared-economy, nanny state Canada. Neither are working. Or ever will.

More taxes just embellish government and impoverish citizens. Higher interest rates transfer further wealth from the middle to the top 1%. Trade wars whack everybody. The tribalism coming from the alt right/Trumpers is based on barriers – impossible to firewall in a Google world. The socialism of the lefties is another failed doctrine destined to kill investment, initiative and employment. Truly, we’re reached a crossroads.

Debate is useful but not a substitute for action. Moisters need to realize no government will produce houses that cost two times annual income in a major urban area. Those days died with my old man. Boomers must prepare for decades of volatility ahead, just when their working years are over and they’re most vulnerable. For those in the middle, now struggling with real estate burden, mid-career pressures, fading pensions and family costs, just getting by is no strategy.

Heed the lessons posted here. Don’t just do what everybody else does – since most of them are verifiably pooched. Stop borrowing. Seek balance. Don’t have a one-asset financial strategy. Use the generous tax shelters gifted to you. Stay single or stay married. Understand investing is not gambling. Be diversified. Don’t consume what you cannot afford. Don’t envy the wealthy, emulate them. Embrace some risk, if you want returns. Ignore FOMO. Don’t just save. Understand how you’re taxed, to avoid it. Plan. Be conservative and aggressive. Have global exposure. Find and keep one good friend. Besides the dog.

Above all, value your time. Waste none. Like $19,000 real estate, it’s not coming back. Every moment you spent wishing otherwise is a debit.

The minutes I spent writing the above words were an investment in you. Run with it.

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July 22nd, 2018

Posted In: The Greater Fool


  • Bruce Smith says:

    Meanwhile, it has always been the same, the States sneeze and Canada catches the cold.

    Here is something that I wish you would start to expound on. You don’t have to agree with me, but I know this speaks for a wide swath of the Canadians who were born here:

    Immigration into Canada…

    I don’t know one person, born in Canada, who doesn’t understand that we need immigrants to grow.

    I do know most of them resent the immigrants who won’t adapt to our society and want to take this place and change it into “their own”.

    I am now becoming a racist in my old age. Yes I admit it.

    I always was tolerant before during my 66 years on this planet as a born Canadian. It used to be, “they are new…they will learn to adapt to our ways”. Now, I am appalled at the way things have become in our country.

    I am a senior,living in Ottawa. I am being pushed and jostled on the sidewalk by immigrants who appear to be newly landed, as they walk 3 and 4 abreast and expect me to step into the gutter to let them pass

    I watch the YMCA in Ottawa with their let everyone in and let’s support them policies, treat the other residents in that facility as 2nd class citizens. “You are new here?…here…take all of this”.

    Meanwhile, native born Canadians are being treated as 2nd class citizens to our new immigrant populations.

    Enough of this bullshit!

    I am not against immigration. I am against treating our own citizens and people who were born here as if they are secondary considerations, to our new arrivals.

    We need a party like the old Reform Party to spell this out and stand up for our rights.

  • Bruce Smith says:

    In 1972 I went into the Real Estate Business at the age of 20 as a salesman. I didn’t even know what a mortgage was, nor did I understand, how they worked when I took the 3 week course to get a licence back then. I worked as a salesman, mortgage lender for a trust company, appraiser for the banks and met a lot of “monied’ people along the way.

    Fast forward to today. I am retired. I look at the house on Garden Ave. in Parkdale in Toronto that I was born in. My father paid $4,000 for it in the 40’s.
    I just looked now and it apparently has been sold over asking at $819,000…who woulda thunk?
    I am now paying $30 for a piece of steak that used to cost $5.
    A new car cost the same or more than a new house did, when I entered the real estate business back in 1972, Interest rates on mortgages at the time were 9 1/2 % on a 5 year term. I used to drive taxi at night when I first started in real estate to stay alive in between sales. I worked for Sunnyside Cab which later become folded into Arrow Cab. I worked the night shift and handled everything from soup to nuts doing this. My home base was Parkdale and High Park.
    I used to fill my gas tank up for $5.00…it was in gallons back then before Trudeau Sr. took us into our brave new world (not) that we know as Canada today.
    You want to give advice to people who are struggling to survive in all of this?
    Teach them to trade the markets…it is their only hope to stay afloat. Regular jobs and the old method of doing things just won’t cut it anymore. Just wait til A.I. and robotics take over.
    Guaranteed Annual Income, may not be a pipe dream after all….

    The times, they are a’ changin….yet again kid!



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