Personal Finance

How long is the current interest rate sustainable?

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  • Oct 3rd, 2014 10:59 am
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Deal Addict
Jan 7, 2014
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Anikiri wrote:
Sep 16th, 2014 8:05 am
Really? We are using that Garth Turner blog now was a source? You're one of those people, huh?

I don't disagree with your first statement, but the moment you used that as a source all your credibility went down the barrel. Are we to simply omit the fact that Garth Turner has been wrong for a good half decade?
That was not my statement but a direct copy paste from the blog that is why I gave the source. I tend to learn from everyone. Even a broken Clock shows correct time twice a day. Garth may have been wrong several times but he does make some valid points. "A highly debt ridden society that for growth relies on selling houses to each other rather than boosting manufacturing and other sectors , is not a good sign of healthy economy. From where will the first time home buyers come?" is a valid point to note from his blog for example
Sr. Member
Feb 11, 2010
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Anikiri wrote:
Sep 16th, 2014 8:05 am
I don't disagree with your first statement, but the moment you used that as a source all your credibility went down the barrel.
Asker123 wrote:
Sep 16th, 2014 10:37 am
That was not my statement but a direct copy paste from the blog that is why I gave the source.
:lol:
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Jan 15, 2009
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Just north.
gilboman wrote:
Sep 15th, 2014 11:41 pm
greaterfool isn't a real source...except source for being wrong for a almost a decade straight now.

our bond yields (esp mortgage banks sell) do not track the US
http://www.investing.com/rates-bonds/ca ... bond-yield

http://www.investing.com/rates-bonds/u. ... bond-yield

If you look at both graphs, they pretty much track each other over the last 10 years. Stop spouting baseless BS when you don't understand how interconnected our economy to the US is.
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Poutinesauce wrote:
Sep 16th, 2014 2:31 am
This. This is the reality no one wants to face. This is the new normal. If interest rates are raised, countless will become bankrupt and the economy will all fall apart. All the western world is stuck in the same state Japan went through earlier.

It is the direct end of the modern current consumerist western lifestyle, free trade, and the implosion of the nuclear family which have people take on countless debt but removes good and stable jobs from them.
You do realized that the USD is strengthening, whether you like it or now, because their economy is picking up steam. When USD strengthens, CDN will weaken. Guess what currency are commodities most commonly quoted it? USD. So inflation because of currency fluctuation will wipe out the poors, everything will be expensive.

Now imagine if you run Canada, would you want to protect the RE market, or the financially strapped populace? Guess which group has more voting power?
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May 1, 2012
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Asker123 wrote:
Sep 16th, 2014 10:37 am
That was not my statement but a direct copy paste from the blog that is why I gave the source. I tend to learn from everyone. Even a broken Clock shows correct time twice a day. Garth may have been wrong several times but he does make some valid points. "A highly debt ridden society that for growth relies on selling houses to each other rather than boosting manufacturing and other sectors , is not a good sign of healthy economy. From where will the first time home buyers come?" is a valid point to note from his blog for example
Just in case you and your kin do not realize this, but Garth Turner panders to a specific subset of society. More succinctly, he panders his schtick to those who are mostly priced out, jaded, and forever renters. Reading Garth Turner makes this crowd feel better about their sutation in the hopes that any-day-now this RE bubble will pop and prices depreciate 70-90%. Where they are now in the affordability column and able to scoop up their dream homes.


Having said that, I do think in this instance he isn't wrong. I hardly think anyone is going to say that statement is wrong. But that does not mean what Garth pander is right. In light of the fact that this guy is short of forever-wrong, there is really nothing he says that can rectify his previous ills.

The one question we should be asking is, who is the right person to judge whether Garth's prophetics are correct? Is that you? If it isn't then why are you sourcing his blog and proclaiming that Garth is right this time? He might be right, but most likely he is wrong. Remember, no one can predict anything, and all Garth does is predict.
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I don't know why the group-hate for Garth Turner is so strong on RFD. The man might be wrong about housing, but at least he's not a shill trying to sell you anything, unlike RE agents. Granted, he is a financial adviser, but nowhere in his daily blog did he try to sell his service to anyone. His email address is plainly in sight, and you're more than welcome to contact him to seek his service.

His main point isn't that RE is bad, it's that a lot of Canadians are so fixated in RE that it jeopardized their financial future. It's never a good idea to concentrate in one single sector/stock/house as a nest egg, you need diversification to help smooth out the rough rides in life. He even said he likes RE, and that they deserve a spot in anyone's portfolio, provided that the price matches the value. Garth has suggested that it's not a bad idea to buy RE for their monthly rental income, and as a guideline, the price:annual rent ratio should be 10 or less to make it a good investment. But if you buy a place that's cash flow negative, and hoping to sell the place for a gain at a unspecific point down the road, than it's speculation.

It makes perfect sense, Robert Shiller has famously studied that over the last 100 years in the US, price of RE barely keeps up with inflation. You can choose to ignore Shiller and call him an elitist and disregard his idea, or that US data don't apply to Canada. But you're also being close-minded about the idea that RE might not be the best and only investment you need in life, sticking your head in the sand to ignore opposing views that uncomfortably confront your world view.
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May 1, 2012
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guyver0 wrote:
Sep 16th, 2014 11:35 am
I don't know why the group-hate for Garth Turner is so strong on RFD. The man might be wrong about housing, but at least he's not a shill trying to sell you anything, unlike RE agents. Granted, he is a financial adviser, but nowhere in his daily blog did he try to sell his service to anyone. His email address is plainly in sight, and you're more than welcome to contact him to seek his service.

His main point isn't that RE is bad, it's that a lot of Canadians are so fixated in RE that it jeopardized their financial future. It's never a good idea to concentrate in one single sector/stock/house as a nest egg, you need diversification to help smooth out the rough rides in life. He even said he likes RE, and that they deserve a spot in anyone's portfolio, provided that the price matches the value. Garth has suggested that it's not a bad idea to buy RE for their monthly rental income, and as a guideline, the price:annual rent ratio should be 10 or less to make it a good investment. But if you buy a place that's cash flow negative, and hoping to sell the place for a gain at a unspecific point down the road, than it's speculation.

It makes perfect sense, Robert Shiller has famously studied that over the last 100 years in the US, price of RE barely keeps up with inflation. You can choose to ignore Shiller and call him an elitist and disregard his idea, or that US data don't apply to Canada. But you're also being close-minded about the idea that RE might not be the best and only investment you need in life, sticking your head in the sand to ignore opposing views that uncomfortably confront your world view.
Can you give us Garth Turner's credentials as a financial adviser? People who studied this subject all their lives aren't able to accurately predict anything yet Garth is a preeminent expert in all-fields-finance?

Also, you don't think his notoriety garners him enough attention to make a shiny penny? You think him being called onto panels, speaking in lectures, speaking in conferences, etc.. are all free? He is most certainly making a couple dollars on his pandering.
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Jan 15, 2009
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Just north.
Anikiri wrote:
Sep 16th, 2014 11:49 am
Can you give us Garth Turner's credentials as a financial adviser? People who studied this subject all their lives aren't able to accurately predict anything yet Garth is a preeminent expert in all-fields-finance?

Also, you don't think his notoriety garners him enough attention to make a shiny penny? You think him being called onto panels, speaking in lectures, speaking in conferences, etc.. are all free? He is most certainly making a couple dollars on his pandering.
So his message and idea are wrong then?

Attack the idea, not the person.
Deal Addict
Jan 7, 2014
2369 posts
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Winnipeg
Anikiri wrote:
Sep 16th, 2014 11:24 am
Just in case you and your kin do not realize this, but Garth Turner panders to a specific subset of society. More succinctly, he panders his schtick to those who are mostly priced out, jaded, and forever renters. Reading Garth Turner makes this crowd feel better about their sutation in the hopes that any-day-now this RE bubble will pop and prices depreciate 70-90%. Where they are now in the affordability column and able to scoop up their dream homes.


Having said that, I do think in this instance he isn't wrong. I hardly think anyone is going to say that statement is wrong. But that does not mean what Garth pander is right. In light of the fact that this guy is short of forever-wrong, there is really nothing he says that can rectify his previous ills.

The one question we should be asking is, who is the right person to judge whether Garth's prophetics are correct? Is that you? If it isn't then why are you sourcing his blog and proclaiming that Garth is right this time? He might be right, but most likely he is wrong. Remember, no one can predict anything, and all Garth does is predict.
Dude .. chill.... I am not judging or anything.... I just found a bang on reply to the Gentleman who was saying as to why Canadians won't raise interest even if Fed raise its rate and this reply was on Garth's blog so I just posted the info here. As I said, we as an intellectuals have an ability to filter out information. I don't believe that all Garth does is predict, again , its my personal opinion and you have the right to disagree but his blog has lots of information one can learn from. I filter a lots of parts but a few things are good to know.
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May 1, 2012
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Markham
guyver0 wrote:
Sep 16th, 2014 11:53 am
So his message and idea are wrong then?

Attack the idea, not the person.
Attack the snake oil but not the person who sells it?
Deal Addict
Jan 15, 2009
1030 posts
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Just north.
Anikiri wrote:
Sep 16th, 2014 11:56 am
Attack the snake oil but not the person who sells it?
So what is he trying to sell you? His fee-based financial advise?

Nowhere on his blog is he promoting his service, he does not go about claiming that people should use his service, and he does not have any advertisement about his affiliation with Raymond James. A simple cursory search on Google will tell you where he works and how to get in touch with his company. Again, his email is there, it's for you to seek him out.

If your beef is with financial advisers, than it's just not Garth that you're against, but the entire industry. You're confusing the two.
Deal Fanatic
Mar 24, 2008
5615 posts
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Toronto
guyver0 wrote:
Sep 16th, 2014 11:35 am
...
His main point isn't that RE is bad, it's that a lot of Canadians are so fixated in RE that it jeopardized their financial future. It's never a good idea to concentrate in one single sector/stock/house as a nest egg, you need diversification to help smooth out the rough rides in life. He even said he likes RE, and that they deserve a spot in anyone's portfolio, provided that the price matches the value. Garth has suggested that it's not a bad idea to buy RE for their monthly rental income, and as a guideline, the price:annual rent ratio should be 10 or less to make it a good investment. But if you buy a place that's cash flow negative, and hoping to sell the place for a gain at a unspecific point down the road, than it's speculation.

It makes perfect sense, Robert Shiller has famously studied that over the last 100 years in the US, price of RE barely keeps up with inflation. You can choose to ignore Shiller and call him an elitist and disregard his idea, or that US data don't apply to Canada. But you're also being close-minded about the idea that RE might not be the best and only investment you need in life, sticking your head in the sand to ignore opposing views that uncomfortably confront your world view.
How can RE be part of your portfolio if you don't buy it because it's overvalued? Being diversified would mean some RE exposure, would it not?

In terms of ideal Price/Annual rent ratio of 10, a $200,000 property should generate $20,000/year (or $1667/month) in rent. Is that reasonable? I remember that this ratio used to be 15 at one point... not sure who changed it.

You are absolutely correct that according to studies (Shiller et al.), historically RE has only tracked inflation (~3%/year) while stock market has returned around 10%. Does this mean that this will be true going into the future? Garth Turner is implying just that.
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ksgill wrote:
Sep 16th, 2014 12:30 pm
How can RE be part of your portfolio if you don't buy it because it's overvalued? Being diversified would mean some RE exposure, would it not?

In terms of ideal Price/Annual rent ratio of 10, a $200,000 property should generate $20,000/year (or $16,667/month) in rent. Is that reasonable? I remember that this ratio used to be 15 at one point... not sure who changed it.

You are absolutely correct that according to studies (Shiller et al.), RE historically has only tracked inflation (~3%/year) while stock market has returned around 10%. Does this mean that this will be true going into the future? Garth Turner is implying just that.
You're correct, some exposure to RE would be ideal, but the keyword is "some". If you have all your money tied up, then it's no longer "some" but "all". You can get exposure to RE via REIT, or if your portfolio is in the 7 figures, than possibly a few rental units.

The ratio of 15 is a guideline for affordability between buying/renting a house. A 10 is for investment purposes, you'd want to recoup your investment sooner rather than later, and by using a lower ratio, it makes it less likely that your "decent" investment will turn into a "poor" investment, should you find yourself with a high turnover of tenants, or go with a long stretch of no tenants.

No one has the power of foresight, but it would be reckless to completely disregard Shiller's study, and say that it doesn't apply going forward. You can choose to ignore history at your own peril, and I can choose to follow history at my own peril, but like Mark Twain said, "History doesn't repeat itself, but it does rhyme." I have faith, albeit blind, that RE will still be barely treading above inflation in my lifetime. Back in the 1978/79, people think it was the death of equities, and that there is no point in owning stocks. S&P 500 was below 100, guess where it is now today?
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Mar 24, 2008
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Toronto
guyver0 wrote:
Sep 16th, 2014 12:45 pm
...
The ratio of 15 is a guideline for affordability between buying/renting a house. A 10 is for investment purposes, you'd want to recoup your investment sooner rather than later, and by using a lower ratio, it makes it less likely that your "decent" investment will turn into a "poor" investment, should you find yourself with a high turnover of tenants, or go with a long stretch of no tenants.

No one has the power of foresight, but it would be reckless to completely disregard Shiller's study, and say that it doesn't apply going forward. You can choose to ignore history at your own peril, and I can choose to follow history at my own peril, but like Mark Twain said, "History doesn't repeat itself, but it does rhyme." I have faith, albeit blind, that RE will still be barely treading above inflation in my lifetime. Back in the 1978/79, people think it was the death of equities, and that there is no point in owning stocks. S&P 500 was below 100, guess where it is now today?
Where do you see me forecasting anything? I am just pointing out that the complete basis of this, "RE will only track inflation" theory is past performance. I am not arrogant enough to even try to forecast the performance of equities or RE and that's why I know my asset allocation will roughly be 50/50 where the first 50% is allocated to RE (including my primary residence) + Fixed Income assets and the other half will be invested in globally diversified equity portfolio.
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Jan 15, 2009
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Just north.
My bad if I misinterpret your words. My stand is still that RE price will follow inflation, nothing more, over my lifetime. FYI I'm 100% in globally diversified equities, to put money where my mouth is.

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