Tuesday, June 9, 2009

Financial literacy

Content by Reid:

I would define a person as truly financially literate when they can apply a holistic approach to making a key financial decision. By that I mean they can factor in the implications of a financial decision on other aspects of their financial life both short and long term. In order to be financially literate someone has to have a good handle on the following knowledge or skills:
  • Budgeting and cash flow management and then apply these principles to their daily lives
  • Retirement planning and sheltered retirement investment tools
  • Understanding of assets allocation and basic investment approaches
  • Understand the time value of money
  • Understanding of economics and how changes impact their life
  • Decent understanding of personal taxation
  • Ability to look out and plan for the long term (as financial success only really comes over the long term)
  • Can assess potential risks/opportunities and factor these into possible scenarios and outcomes
The problem is that to learn and apply all of what I describe above will take most people a long time to master. Given that we teach basically none of these skills to our youth in school or at home or even in our universities, it is no surprise that few people in our society are truly financial literate. Even if someone knows all of this, it does not mean they will apply it to their own lives. My father worked in the financial industry, made a great living and had all of this knowledge, but he had no discipline and died bankrupt.

Although most of us are not financially literate, we can do extremely well financially if we only understand and can apply the first point above. Do you know how to budget and does one understand that getting ahead financially requires you to spend less than you earn? If one understands this simple rule and you live to it, then you have a real opportunity to live a financially rewarding life.

The people I refer to as financially illiterate are those do not apply that first rule above and live beyond their means. In terms of buying a house, these people will assume that if the bank is going to lend them 5 times their income, then they obviously can afford a house and will typically buy to the maximum of their debt capacity. There will be no longer term consideration as to whether higher interest rates will impact them or if they can properly save for retirement. These people often look to their realtor and mortgage broker for advice on the home they should buy and mortgage they should take on, but do they understand the problem with their biased advice?

Looking backwards the financially illiterate in Canada were generally spared from despair in retirement because most Canadians retired with a defined benefit pension plan which gave them a secure post employment income. Looking ahead twenty years, few outside of the public sector will retire with these types of pensions and therefore it is far more important today to understand financial concepts and apply them.


StargazerXL said...

Reid, this indeed was an excellent post.

My immediate reaction is, what can be done now? My second reaction is, what can I do to make myself more financially literate?

It is true that financial literacy is not taught in schools. Perhaps the best place to learn in college, assuming you aren't a finance major, is an "investment club." For those of us who are well past college, however, what can we do now?

Can you recommend any particular books or websites where such knowledge can be learned?

jesse said...

Beyond basic savings, it surprises me how clueless many people are about how to determine an asset's value and the time cost of money. While most may not grasp some of the complex mathematics behind finance, having an intuitive sense of what "value" really means would do wonders.

Good post.

Reid said...

StargazerXL, after my dad almost lost everything in the early 1980’s I made a point that I would never repeat his mistakes. Over the next ten years I read almost every book (pre internet days) on financial planning, investment management and tax planing I could get my hands on and applied it to my life. I found these books very useful and started to learn more each time I read a new book. So you may need to read multiple books before you start to feel comfortable. My suggestion would be to start reading a book focused on all financial matters (not just investing) that it is written to a Canadian audience. The reason is that one should start to understand the Canadian tax system and all of our tax sheltered options. There are many you can buy at Chapters as there are internet sites, but I would start with a book as it will allow you to address each area. In my opinion it is better to have a basic understanding of each area than being really good at only a few areas.

As I mentioned in the post the most important thing is to get a handle on living below your means and putting money aside each month. This requires a family to prioritize and is not easy, but you need willingness and discipline and not high levels of education to be successful at this most critical skill.

One thing that I have learnt over the years is that proper financial planning is very unique to the person or couple. Everyone has different circumstances, objectives and dreams and therefore there is no one solution for everyone. This is why many “free” financial planers fail as they are often compensated to sell you mutual funds or insurance and therefore the ultimate advice you get from them is always the same.

Roger said...

What caused this spring rally? Low interest rates. What could possibly stall the rally and turn it into a dead cat bounce? Higher interest rates. So....

TD announces another jump in rates..

TD was the first of the Big 5 today to announce a rate increase. Canada’s second largest bank is hiking rates as follows:

* 5-year posted fixed rate: 5.85%, up 0.40%
* 4-year posted fixed rate: 5.14%, up 0.30%
* 3-year posted fixed rate: 4.65%, up 0.50%

That 5-year move is the biggest increase in almost a year.

If history is a guide, the other large banks will likely announce their own increases in the next 24 hours.

Assuming the banks all move their 5-year posted rates to 5.85%, that will amount to a 0.60% increase in the last nine days.

Roger said...

Follow up to my last post....

The rally won't stall overnight. The FTBs with pre-approval letters will still be keen to buy before time runs out. And their will be a last minute mad rush by some to get a pre-approval application backdated before the end of the week.

However, around September things will really start to fade. The buyer pool will be drying up and this is also the start of the slow season which runs through to December.

One realtor on Twitter already remarked that there will be a switch to variable. I don't buy it. Two different mortgage brokers have told me that their variables are running under 25% of clients now. And with the higher fixed rates now these closed variable and switch mortgages are even more risky and less attractive.

I hope the realtors and sellers cash in while they can. Sales and prices will start sliding again in the fall.

StargazerXL said...

Reid, thanks. My father lost it all in the late 70's, so I can sympathize. I think family is probably the main source of education about finances, and so financial illiteracy perpetuates.

In my situation, I've had no one experienced around me in my family to point the way. I had a wealthy aunt who I once approached but she turtled up after I broached the subject (perhaps she thought I was after her nest egg..? Go figure.)

For my own situation, I have been able to get household spending in under control. Now I am at the stage where I think I can realistically begin to grow something. This is why I am interested in this topic.

I guess I am looking for a specific recommendation. My fear is that financial advice books are as plentiful (and wacky) as health/diet advice books, and it can be hard for someone relatively inexperienced like me to separate the quality books from the "get rich quick" schemes.

There are lots of books on the shelf about how to make money. (I wonder how many of them advise you to write books about how to make money? :-) Suggestions from anyone would be much appreciated.

corporatebully said...
This comment has been removed by a blog administrator.
HouseHuntVictoria said...


these are 3 good starting points:




I suggest you ignore all of the "buy a house today" messages, however, these are balanced and will give you a pretty good starting point. I burned through all of these on a weekend or less of concentrated reading.

Roger said...

Stargazer XL,

Gordon Pape wrote a book a few years ago called "Get Control". It covers the whole gamut including budgeting, mortgages, retiring, saving etc.

The Greater Victoria Public library has copies so it won't cost you a dime!

Gordon pape - Get Control..

Dumb Canuck said...

Roger - we're back to the risk balance discussion on higher interest rates.

Mortgage rates go up - check
Unemployment rate goes up - check

What will FTB confidence do?

This will determine prices.

Metaldwarf said...

A different way of looking at the Subprime Crisis

An Easily Understandable Explanation of Derivative Markets:

Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later "marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't
really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.

Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who
immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers.

Now, do you understand?

Metaldwarf said...

I had lunch with a Realtor and mortgage broker today. The mortgage broker told me about the rate increase, and the Realtor told me that she expects 120 days of brisk business then the market will be dead.

omc said...

All this interest rate rising stuff gets my scotsman senses tingling. We will have to wait and see when the time is right in the future though. Things are going to get reall ugly with all the FTBs running around trying to give thier money away on an ever decreasing inentory. A real feeding frenzy. I wonder how PB is doing?

Dumb Canuck said...

Metaldwarf - I disagree about the 120 days of high activity. We're heading into summer, so activity normally drops. In addition, the pool of buyers with pre-approved mortgages at the lowes rates will be constantly decreasing. I give 3-4 months above what would be expected otherwise.

PainInThe said...

I think the "rally", such as it is, will be stalling a lot sooner than anyone thinks. Like flicking a switch.

It sure did in the US, and more than once.

Reid said...

I agree with Roger, things will be busy until September and then they will die just as seasonal sales drop. Combine this with with Gordo's September 1st budget which has to include job losses (the question is how many) and the end of whatever tourist season we will see.

Look like the tide is turning around; all things will start to point towards higher unemployment, fewer buyers and lower prices. It will be a very interesting fall and winter.

Keep in mind if discounted five year mortgage rates rise to 4.5%, it will reduce the borrowing capacity of a typical buyer by almost 11% and if rates rise to 5.0%, then borrowing capacity will be down over 16%. So not only will we see a lot less buyers, but those still around will have a lot lower buying capacity.

Roger said...


The February budget stated that there would be considerable cuts in discretionary spending. Do you think the Liberals will start leaking some of the departmental expenditure cuts in advance of the September budget?

Once the cabinet ministers are sworn in they have to say something over the next few months.

Vic said...

We know the health care budget is going to be shot all to pieces. I can only imagine what Gordo has in mind to save money in that sector. Talk of some nasty cuts to some essential services.

Reid said...

Roger, what I have heard is that the Ministries have been drafting their budgets over the past weeks, but Campbell is not happy with what he is seeing. It appears lots of directors and up want to maintain their budgets. I hear lots of people sitting around with little to do as program have been cut back, but few people have been let go.

Everyone has been told that cuts will be limited to 5%, but Campbell changes his position on things like the wind. If he is pressured to cut, I would guess he could take out 20% from the staff and still operate OK.

Cuts to contractors have not happened to extent proposed in Feb budget, but so I assume more to come here as well.

Nick said...

Gordon Pape is a good one, but I quite enjoyed starting with the Canadian editions of Finances for Dummies and Investing for Dummies. They were a good starting point to get acquainted with all of the jargon in an approachable way. After that, I felt confident enough to read "real" books about stocks, bonds, mutual funds, etc, without having to google every other word.

StargazerXL said...

Thanks to all for your suggestions. I appreciate it very much. I will be off to the library soon.

I have to admit some hesitancy about Gordon Pape though. My first experience with him was when he was shilling for those reverse mortgages on TV a few years ago, and he really came across like a ghoul. Perhaps it is to his credit that he stopped being associated with them...

Roger said...


I have a copy of Pape's book. I think you will be pleasantly surprised. Solid advice and not pushing any products.

Metaldwarf said...

I have the same distrustful feeling about Pape, I have read some of his newspaper columns over the years, and constantly find myself second guessing everything he writes.

Those reverse mortgage ads really made him out to be a swindler and a used car salesman. The way they would start in mid sentence and were designed to look like a talk show or newscast. I always imagined some poor senior waking up with the TV on, with those adds running, being tricked into thinking it was the tail end of an information piece rather than an advertisement.

First impressions of distrust are hard to break. I am sure he is knowledgeable and educational but I just don't trust him.

Reverse mortgages have their place, but they tend to really really suck. There was an interesting graph in one of Garth Turners books where he shows a timeline of home equity. Equity peaked at retirement, but cash is needed in retirement so the home is reverse mortgaged for income, and equity falls to zero over time.

Interest being paid all the way up and down.

Metaldwarf said...

Western Canada leads nation's new home price decline

By Mario Toneguzzi, Calgary HeraldJune 10, 2009Comments (9)

CALGARY - New housing prices across the country fell by three per cent in April compared with a year ago, primarily because of continuing declines in western Canadian centres.

In Calgary, Statistics Canada said new houses prices fell by 8.8 per cent from April 2008 to April 2009. Edmonton saw a year-over-year drop of 12.5 per cent while Saskatoon had an 11.9 per cent decline. In Vancouver, the drop was nine per cent.

The federal agency's New Housing Price Index, released today, also showed that contractors' selling prices decreased nationally by 0.6 per cent in April from March.

Between March and April, prices declined the most in Vancouver (1.2 per cent) followed by Edmonton (0.9 per cent) and Calgary (0.8 per cent).

"In Alberta, although some builders reported increased material costs as a result of new fire code regulations, these increases were negated by builders lowering prices or offering free upgrades in an increasingly competitive market," said Statistics Canada.

Among surveyed cities, the largest increase between April 2008 and April 2009 was registered in St. John's (17.0 per cent).

© Copyright (c) The Calgary Herald

Travel Girl said...

I recommend the book "The Total Money Makeover" by Dave Ramsey. Unfortunately it's not geared toward Canadians but it is full of common sense advice (which barely anyone does these days).

It covers budgeting, saving, investing, etc... And it walks you through "baby steps" to help you get control of your finances and get rid of debt and become wealthy in the long run. I swear by Dave Ramsey's advice.

HouseHuntVictoria said...

CMHC rental vacancy rates went from 0.3% in April 2008 to 1.2% in April 2009, or in other words, a jump of almost 400%!

Roger said...

Follow up to yesterdays post on mortgage rate increases...

Today BMO, CIBC, RBC, Scotiabank, National & Laurentian all followed TD and raised their mortgage rates.

5 Yr. posted rate is now 5.85%. The Canadian mortgage rate increases now total .6% in less than 10 days.

Lets take a look at TD's "special rate" for a five year fixed mortgage. It is now 4.55% vs. 3.89% two weeks ago. Here is what that means to a buyer that has a $1737 for a monthly payment and takes a 35 yr. amortization.

- 3.89% max. mortgage of 400K
- 4.55% max. mortgage of 367K

So what will a first time buyer do? Maybe go 4 year fixed at 4.09% or variable at 2.85%

- 4.09% max. mortgage of 389K

- 2.85% max. mortgage of 462K

Things will get interesting real soon. Will the current variable holders get nervous and switch? Will their be a big push by the RE industry to get them to go variable? Get ready for spinorama.

omc said...

Looks like some FTBs are getting schooled in economics now.

Reid said...

Roger, I look forward to the next nine months as it will be very interesting times. How will the RE and mortgage industry play the naive FTB's and will this be in their best interest. How many FTB's will be stupid enough to fall for whatever is pitched.

Vic said...

Another deceiving MSM/TC pumper article by Carla. It starts out talking dismal numbers and ends with rich Albertans buying Fairfield homes for $1.15 million.

New home prices fall in Western Canada, including Victoria

New home prices fell more than expected in April, led by declines in major centres in Western Canada including Greater Victoria.

The capital region saw its housing price index decrease by 0.6 per cent in April, slightly higher than March, when it dropped by 0.5 per cent, Statistics Canada said today.

Victoria’s month-over-month drop matched the Canadian average. However, the price index declined in Greater Victoria by seven per cent between April 2008 and April 2009 - higher than the national average slide of three per cent.


Dumb Canuck said...

HHV - interesting link - vacancy rate up to 1.2% from 0.3%, but rents up 5% for 1BR to 15% for 2BR in Victoria.

Roger - keep those stats coming!

On the unemployment front, found out today that around 60 contract IT staff in one department are out of luck as their contract ends this month. Only around 20 people will be with the new contractor, starting in September (lower work load). Doesn't spell good for office space needed either.

HouseHuntVictoria said...

interesting that the messaging is shifting to pick on the gotta-have-it-nows

Olives said...

re Rental Vacancy - there was a lady on the CBC radio this morning( I think from a rental agency - Newport?) Anyways, she stressed the low vacancy was for purpose-built rental buildings only and did not include basement suites, condos, etc. In fact, she stated the vacancy rate for rental condos was more like 10 percent

Olives said...

Good article HHV - interesting that the author stated a mortgage should be no longer than 25 years and your housing costs (including taxes, insurance, etc.) only 25 percent of income - otherwise it is considered unaffordable.

But of course.

Reid said...

My sense is that vacancy rates could rise significantly over the coming months for the following reasons:
• There is a large pool of rental accommodations in Victoria
• In recent years there has been a large number of people moving to Victoria for new jobs (construction, government, etc) and most start out renting
• Many university students stay in Victoria after graduating as they have been able to find a job and most rent
• After a few years, many of these renters get adjusted to the real estate prices and buy, but historically there has been a stream of new renters behind them to take over their rentals
• Today there are few new jobs available in Victoria which reduces the number of people moving to Victoria and the number of students that will stay in town
• Many of those renters that came to Victoria over the past few years are the FTB’s buying in this cheap debt driven rally and will be vacating their rental properties over the coming months.
• The rising unemployment rate will force many other renters to downsize, share places, move home, etc.

The reason that vacancy rates could shoot upwards is that although this real estate buying spree started in March most new buyers did not start taking possession until May and the large movement of people out of their rentals and into their new purchases will take place between now and September. Consequently those newly released April vacancy stats do not reflect much if any of this recent dead cat bounce. Since there will far fewer new renters to back fill the surge of rentals being vacated over the coming months, it could get very tough for landlords by mid summer.

Roger said...

BCREA has released their May stats report (pdf) CLICK HERE..

Vancouver, BC – June 11, 2009. The British Columbia Real Estate Association (BCREA) reported that Multiple Listing Service (MLS®) residential sales in the province rose 3 per cent to 8,270 units in May 2009 compared to the same month last year. It was the first year-over-year increase since December 2007.
Year-to-date, MLS® residential sales dollar volume was down 31 per cent to $11.7 billion over the same period last year. A total of 26,359 units were sold in the first five months of 2009, down 26 per cent from 2008, while the average MLS® price declined 7 per cent to $443,252.

Roger said...

The MSM is already "suggesting" ways to handle the rising mortgage rates..

Is it too late to refinance your mortgage?..

The days of ridiculously cheap mortgage rates appear to be over. Now they're just cheap.

Mr. Iankelevic says some of the best deals out there are the variable-rate mortgages. Given that the Bank of Canada has said interest rates are likely to remain unchanged until the second quarter of 2010, a variable rate can provide huge savings for home owners who can stomach a little risk.

Will the FTB's buy into the variable rates are "fixed" until next July story? When they switch to fixed they could get really burned.

Pressure is on the BOC and FED to start raising rates by year end. The G8 finance ministers are meeting Friday and Saturday and plan to release details of how they will not let stimulus spending get out of hand. The Bond markets are eagerly waiting for the news.

Roger said...

Who are these FTBs? This story is an actual example..

Taking the plunge and buying your first home..

I think the first 3 words are very appropriate!

Lets see. New job, no assets, student loans, at the max for TDS and GDS and 10% down from RRSP. What could possibly go wrong?

Reid said...

Roger, guess what happens to the 40% TDS ratio when her mortgage resets at 5% ,6% or even 7% in five years time.

Mortgage rates up again in US. As long as equity markets continue to march ahead, bond yields are likely to keep climbing.

A problem I see with mortgage rates over the coming months will be that the three and four year rates are still really low and most FTB's could care less if their reset happens a year early.

Secondly FTB's will be told that variable mortgages can save then a lot of money. Any advisor who recommends to a 5/35'r to go into a variable rate mortgage should be jailed in my opinion.

Metaldwarf said...

While the post itself is just more of the same, the last sentence from a post over at greaterfool.ca, Garth Turner's blog, got me thinking.

"Rates, oil and loonies will all be rising. If you can’t figure out how to turn that into money you don’t deserve much."

Disclosure: Only a fool would listen to free advice posted anonymously on the internet. This is for discussion only, I am not recommending any of the following.

Rates: as rates go up prices of goods/assets, should fall as affordability falls. This should also be bullish for GIC type investments as they will start to provide a better yeild.

Oil: Oil producing companies and related industry should all see higher profits and higher stock prices as oil increases in price. Buy oil stocks.

Loonies: The dollar has been up and down, mostly tied to the movement in oil. I think the Loonie is probably realistically valued in the 70-80 cent USD range. We are currently up at 90+ cents. with a high loonies you can buy more US stocks and investments with the same number of loonies now, and when the loonie falls back to 70-80 cents USD, sell the US investments for more Loonies.

Compound the ideas, buy American oil company stock to take advantage of the high loonie, and oil profits.

Please critique my ideas, Mr. 4am and VG/Vic I am sure you have your own thoughs.

Metaldwarf said...

Roger, I can see your point on the 5/35 variable rate mortgage, however, If I were to buy today I would personally go variable.

The difference with my strategy compared to what I assume is the norm, is that I wouldn't max myself out using the variable rate.

I am assuming that if someone is going 5/35 they are intentionally stretching themselves to the max to get a bigger home they really can't afford.

Assuming a budget of $2000/month 35 year amortization buys:

Variable @ 2.85% = 531,000
5 year fixed @ 5.85% = 357,000

That 3% spread is a huge amount of buying power. A lot of people will load up on the debt and take the $531,000, when rates go up or they refinance they are screwed.

Personally, I plan on taking advantage of the banks generosity, keep my 3% spread and plow it into my principle. If I go variable, with a mortgage of $357,000 the monthly payment is $1344/month. I am disciplined enough to over fund the mortgage using the same $2000, which banks me an extra $656 per month. That is my money not the banks. At that rate the principle is paid off in 19.4 years instead of 35. I build equity faster, giving me more options if/when I do need to refinance.

Why not just do a 20 year mortgage and be done with it? The same principle applies, as long as I am disciplined the spread between variable and fixed allows me to pay less interest to the bank.

I can't justify spending an extra $40,000 over 5 years, in interest to lock in. Even if rates do climb, $40,000 is a pretty good buffer of savings. Rates would have to go up A LOT before that would get eroded.

Reid said...

Metaldwarf, I think it was I who made the 3/35 variable comment. If I were to buy today, like you I would also go variable as I would put down a lot more than 5% and would pay off a big chuck each year, so my analysis would be similar to yours.

Unfortunately our approach to debt managment is not what the average 5/35'r will do.

Regardless I would not buy real estate in Canada today as it is simply far too overvalued. I would consider buying when interest rates are much higher even if that means waiting 2-5 years. Saving money is simply too hard to waste a few hundred thousand dollars on real estate.

Roger said...


If I was to buy I would also consider a 35 year variable and pour the difference from a fixed rate into the principal. But that takes discipline and most buyers will not do that. Instead they will do what my example showed and mortgage themselves to the hilt with 35 year amortization.

The variable rate, with extra paydowns, works well in typical interest rate environments. However we are far from typical conditions. Once we exit this recession the BOC rate will snap back like an elastic band and climb quickly. Fixed rates lead variables up and a switch to fixed later on could be real painful.

I have contacted three different mortgage brokers on twitter and asked them what % of clients were going variable. One independent broker said none in his office, another said 25% and a major bank affiliate said 50%. So I think the mortgage officer has considerable influence on the client, which is not a good thing.

Muriel said...

Re: the rental agency woman on the radio this morning.

She also pegged the purpose-built rental market to be only 50% of the total rental market. She seemed to be just estimating, but interesting b/c it is her industry perspective.

She also cautioned that landlords or prospective investors should not be expecting, quick, fast returns on their investments in real estate - though she did talk about returns from appreciation over time.

It was just good to hear someone acknowledge that the CMCH vacancy stats are just a part of the picture, not the whole thing.

patriotz said...

She also cautioned that landlords or prospective investors should not be expecting, quick, fast returns on their investments in real estate

Anyone buying individually titled RE today (i.e. SFH, condos) should not be expecting a positive total return, period, because they are not going to get it.

Roger said...

I dropped by Garth Turner's Greater Fool Web site this morning and fell off the chair laughing. Here's why..

Everyone wants to live here

Anonymous said...

"US cities may have to be bulldozed in order to survive"

Wait a second, I thought for sure they weren't making more land! Oh well, back to nature it is I guess.

Anonymous said...


While oil and loonies may be heading higher, compounding the idea by buying US oil companies is not correct.

This is because even if these US oil corps go up in value, that value is in part or more erased when you sell off your US equities and then have to convert them into a higher valued Canadian dollar. In other words, from a Canadian dollar perspective, your investment won't do nearly as well.

Also, I'd strongly hesitate in buying any US dollar based investments at this time, precisely because of the potential for high currency fluctuations and the strong likelihood of the US dollar going down in both the near and longer term. If the BRIC's are starting to diversify out of the US dollar as a reserve, that's good enough for me. Here's another example.


Just Janice said...

Let's see making money in an environment where US dollars are going down, and Canadian dollars are going up relative to US dollars and staying stable relative to most other countries...

Don't buy US denominated things (ie. gold, oil, US companies, USD) unless you think that the appreciation in those things is going to 'outdo' the depreciation in the dollar. What might not be bad is focussing on companies and industries that largely import from the US, and sell domestically, as their costs are going down (and as a result their profit margins are improving). A good example here might be an industry that must buy most of its equipment from the US but sells mostly to Canadians or other parts of the world (not the US). Some aspects of healthcare might fit this definition, as might some fuel cell or other ventures. Farming, agriculture, and Fishing and aquaculture might be other areas.

RE in Canada, and in Victoria more specifically would be the last place I'd sink my cash right now.

Anonymous said...

What happens when you cross a bearish economic analyst (that can read between the lines of the MSM BS) with a red neck? Pure educational entertainment.

If you thought Jim Cramer was fun to watch, wait till you see this nutjob deliver accurate market analysis.

WARNING: before you click play, be sure to cover the ears of any children nearby.


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