Economy imploding

[$alvador]

^ that sounds cool, did they have any issues with zoning regulations? if you're really out in the middle of nowhere then comfy off-grid living can be pretty easy, just need to throw up a cabin and outhouse, wire them shits up to a few hundred watts of PV feeding a battery so you get a few hours of LED bulb lighting nightly, heating can be taken care of with a wood-burning stove and the fridge and cooking can be run off gas.

 

[$alvador]

http://www.bloomberg.com/news/artic...-close-stores-cut-1-500-jobs-in-restructuring

Just the latest casualty in this meltdown

 

[$alvador]

Did you guys see RBC advertising "employee pricing mortgages"? I guess a lot of Canadians will spend the rest of their natural lives paying interest charges

 

[OG buckshot jr]

That's nothing new, though. We are brainwashed into owning homes because it's the only real value we accrue before retiring and selling off. Problem is, you never really own, it takes too long and is to expensive. And now a days, good luck saving the 20% down or even affording the monthly payments. I'm lucky I have a great career, but not all do.. this place is super unaffordable..

 

[Remy]

http://www.bloomberg.com/news/artic...-close-stores-cut-1-500-jobs-in-restructuring

Just the latest casualty in this meltdown

This is a no brainer for the company though, the number of Futureshops and Best Buys side by side is stupid. You cant maintain that business model without long term impact.

 

[OG buckshot jr]

Agreed. The only reason it failed is because people caught on that the two were one company.. that and they carried the same (literally), overpriced consumer-grade shit. You can't charge $1000 for consumer-grade speakers and expect to survive...

 

[Hinouchi]

$100 for a 1M HDMI monster cable anyone?

 

[Steve]

There is not a single decent deal to be found at any US-BestBuy. I can only imagine how fucking terrible Canadian best buy is/was

 

[Steve]

Agreed. The only reason it failed is because people caught on that the two were one company.. that and they carried the same (literally), overpriced consumer-grade shit. You can't charge $1000 for consumer-grade speakers and expect to survive...

it doesnt help them that the same consumer grade crap is available online for 15-30% cheaper

 

[OG buckshot jr]

it doesnt help them that the same consumer grade crap is available online for 15-30% cheaper

Excellent point - IF you're an American. That's why I left that point out. For us Canadians, we have to order from a majority of American manufacturers and get screwed by higher price, shit exchange rate, high taxes and duties and shipping. By that time, it's actually more expensive for us. I personally think that's why American retailers keep trying to open brick and mortar stores here while keeping goods priced higher - à la target. Bad example because target had too much competition here, but you get the point.

 

[$alvador]

Shuttering FutureShop seems like a no-brainer in the grand scheme of things but it's symptomatic of retail's changing relationship with the market. The middle-class, who have been the major buyers of the sort of goods sold at FutureShop (and RadioShack, Target, etc) are being squeezed harder under the weight of growing household debt and getting smarter about how they spend their money. We bought the concept of "recession" in 2008 but it's getting clearer that we're either on the edge of or already falling into a full-on depression and the consumer market is the first expendable to be scuttled during the freak-out.

The housing market is finally starting to really take a beating as well and expect the condo market to nosedive on this little bit of news. Maybe employee pricing on mortgages is business as usual, but right now it just looks like a powerplay to secure the bank's profit before the housing market falls off the cliff in a massive "adjustment". The bank's selling economic slavery and people are lining up around the block to put money down on the chains.

 

[OG buckshot jr]

I Don't think I agree with your hyperbole at all. The GTA won't be affected at all seeing as how every home - be it a shitty little condo or detached house - has bidders lined up. This is truly why prices have gone up and is a more realistic representation of true price (supply vs demand), and it's only getting worse as the GTA gets more and more densely populated.

As for retail, I think Steve and I laid out the reasons why brick and mortar is being phased out for some businesses - and that's to keep the cost of goods down and competitive with the ever growing number of savvy, price-conscious online shoppers. It's a natural progression, in my opinion. You don't see Home Depot and Rona's closing, nor do you see super markets closing. It's all relative and dependant on what the product is and electronics seems to be the only market changing. I think people forget that the electronic market is 90% luxury anyway, so if anything this will drive cost down and/or make people spend more effectively and stop buying iPhones and tv's every year. In my opinion, this is a good thing for Canadian household debt. We won't crash simply because of the amazing amount of tax we pay.

 

[$alvador]

Of course buyers are lined up, because you have employee pricing on mortgages and the CMHC is readying to jack insurance premiums on the overleveraged buyers. So, CMHC is worried, insurers are worried, we're still waiting on the federal budget, and the dollar has crashed to the low point it was at in 2008.

Oh, and subprime lending for mortages is hot now. All the factors that lead up to the U.S. housing bubble crash are now in play here in Canada. This is all fact, not hyperbole. We think we're immune because reasons, but those reasons aren't solid enough to bet the future on.

Check this out Canada household debt ratio hits new record of 163.3%:

“It’s partly fuelled by the Bank of Canada’s rate cut and party fuelled by the strength in the Toronto and Vancouver housing market,” said Mr. Porter.

So there you have it sir, your explanation for why Rona and Home Depot aren't closing. Why the fuck would home reno shops be closing when the very reason our household debt has become unmanageable is because everyone's gung-ho about buying houses? Supermarkets aren't closing because it doesn't matter how much food costs, it's not something any of us can just refuse to buy. With household debt being at 163% though, I don't think the outlook is as rosy for the rest of the food services industry.

So yeah, let's not hit the panic button, but let's also not turn a blind eye to the fact that our economy is more stressed than it was during the 2008 recession, let's also not just ignore the fact that sooner or later the BoC is going to have to jack the rate, and that taxes will have to rise to pay for the many over-budget and overdue, vital transit projects under construction in the GTA, and that the public with record household debt is going to have to somehow figure out how to absorb all these coming costs and in addition to all that, figure out how to keep RE propped up, because it's the biggest chunk of our GDP, and it's dependent entirely on the Toronto and Vancouver markets now (the rest of the country has already hit the skids).

 

[$alvador]

some good news to go with the bad: the TFSA contribution limit will likely be doubled. It hasn't been confirmed but it's almost guaranteed to happen, as a desperate measure to keep household debt from continuing to rise while the interest rates are low.

The main question I'm waiting to have answered is whether the BoC can maneuver us into the promised "soft landing" for real estate. Toronto's in a funny situation, the housing market is blatantly overheating and yet there's this seemingly endless supply of condos-nobody-wants.

 

[OG buckshot jr]

You're still missing the point about housing that I tried to make. It doesn't matter WHAT rates BoC sets, it makes absolutely NO difference in what way the CMHC chooses to scam people, there are too many people being ushered into the GTA from the usual 3rd-world shitholes. Period. You could literally start selling these people parking spaces with tents as homes - and as long as it's legal - they will buy them just to be in the GTA where they have their home country's grocer, lawyer, immigration lawyer, community center etc.

 

[TurboTaco]

Employee pricing on mtgs is the same for any cdn. Working in a bank i know we have the same best rates we offer to our best clients/potential mortgagees. Of course if an advisor can eke out a higher rate for a client who goes with whatever number we give, then so be it. Otherwise everyone asks for the lowest of the low which is what employees r offered as well....thats been status quo for decades in the bank.

The fact that BoC dropped rate by .25% with the majors banks reducing prime to 2.85 was only made because they felt it would help stimulate economy, which it definitely will. More cause of concern is what happens a year or two from now when rate is likely increased. I highly doubt prime would just jump beyond 0.50% without something awful happening globally in the markets. CMHC and Genworth already tightened their rules and incr premiums charged to help weather the storm should mass mtg defaults occur like in the US in 2008/9. They no longer cover mtgs over $1mil now which means those new immigrants and homebuyers with less than 20% down looking to buy that home/realestate in downtown toronto/yorkville/oakville etc cant unless they have the downpayment for it. That doesnt mean they necessarily can afford the mtg n pmts but in the end if they cant, they sell (for profit or loss persobally, while the bank wins from interest n penalties)

Consumer household debt is at an all time high but again its a measure that includes mortgages which i personally consider 'good debt'. I feel bad for people who bought high during the boom in provinces and cities other than GTA/vancouver but even still, suggesting rent vs own on the long term is better is very shortsighted and poor advice for most people.

I fee like you are more on the alarmist-economist bandwagon salvador. Alot of econ/finance articles mention a bunch of concerns you point out but I do believe they can be exaggerrated.

I really dont believe our economy is headed for a slide, let alone another recession similar to 2008 for the time being. Fact of the matter is economies are all cyclical. Nothing and no govt/mkt can ever maintain growth and returns YOY forever. Global economies mean there are always winners when someone loses and losers for someone winning. if it isnt a housing/mtg debt issue that causes our financial system to buckle, it will be another reason. Even if our govt fiscal policy came up with the best and most well-rounded proposals n solutions, it could all still go to shit because our economy relies on other countries and govts who dont have to have the same goals n ideals for their nation like we do. It is inevitble that canada, the world, based off our existing economic and financual system, will experience another recession/depression or hard times. I just think its gonna be more than 5 yrs from this point

 

[$alvador]

I agree and that's exactly why my outlook is grim. The fact that central banks all over the world are trying to manipulate the economy to maintain the status quo is why the economy will continue to stagnate. We're all so indebted that nobody wants to rock the boat so instead we're all just passing the buck. No great collapse, no great growth either.

 

[TurboTaco]

This is true, but the discussion is turning from economics to ideologies. In the end, the world has been using a form of trickle-down economics for well over a century.

First worlds, developed nations, big wigs with money invest globally to third world nations with the benevolent promise of opportunities, jobs, growth, etc. we know from history, experience and reality that this system works, but terribly. The costs in terms of human labour, ethics, global pollution and environment, etc. are partly a result of this rigid framework that was created for a world that was much different in the 1900s vs where we stand today.

A lot of policies are constantly based on outdated models or methods which are not designed to take considerations of anything new or different. When something important and big enough does come along, it takes years or decades with the cooperation of multi nations to get a ball rolling. For example digital currency.

The problem is that the majority of the world says they want change but said minority are content being armchair critics and still living the status quo. The players (nations govts tyrannts billionaire philanthropists) that can change things wont because for one, it probably costs too much or requires far too much coordination, logistics and agreement for any one person/party to take charge, and 2) because people/parties are human and humans care about themselves before others (for the majority again).

To change the world in terms of global economics and to change the system, i mean a real overhaul, would be near impossible at this stage in our world. No fucks are given...by the ones who should give a fuck.

The best we can do is build upon our own skillsets n abilities to play the game of life we are raised to play. In the end though, through perspective, you won the lottery, that is being born in a place like canada or america. At least we have the luxury of complaining about having a mortgage or debt because it usually means u can afford to have a home or visa to buy more shit u dont need.

 

[Glocky]

That's nothing new, though. We are brainwashed into owning homes because it's the only real value we accrue before retiring and selling off. Problem is, you never really own, it takes too long and is to expensive. And now a days, good luck saving the 20% down or even affording the monthly payments. I'm lucky I have a great career, but not all do.. this place is super unaffordable..

But but... I've only had this place 11 years and will be done paying in about 7... turned a 25 year mortgage into 18 years. In that 11 years, I paid about $25k to do a garage (excavation/foundation paid, the rest supplies) that added $50k in immediate equity. All in all, I have about $97K left on my mortgage but my place is now worth $325k+ (one of the few houses on the street with a garage, real estate agents drop off their cards with notes that say "I could sell your house in 48 hours for $300k!" - no doubt, because it's under-priced by 10%). Not bad considering I paid $166k + $25k = $191k, except I didn't pay the $25k (early inheritance from my father in law). So... doubled in 11 years, paid in 18 years, just in time for first kid to go to post-secondary.... sigh.

 

[OG buckshot jr]

But but... I've only had this place 11 years and will be done paying in about 7... turned a 25 year mortgage into 18 years. In that 11 years, I paid about $25k to do a garage (excavation/foundation paid, the rest supplies) that added $50k in immediate equity. All in all, I have about $97K left on my mortgage but my place is now worth $325k+ (one of the few houses on the street with a garage, real estate agents drop off their cards with notes that say "I could sell your house in 48 hours for $300k!" - no doubt, because it's under-priced by 10%). Not bad considering I paid $166k + $25k = $191k, except I didn't pay the $25k (early inheritance from my father in law). So... doubled in 11 years, paid in 18 years, just in time for first kid to go to post-secondary.... sigh.

I agree, there are situations where it's better, but not for all, especially for newer generations that are useless (not educated) that have shits jobs while cost of living goes up. I own (pay mortgage) too, and will own because I can. But it's not for all..