Investing in the stock market - Discussion

[Sp3nny]

9 hours ago, Elias Pettersson said:

19% interest where your mortgage was $60,000 on an $80,000 property is ALOT different that 3.5% on the same property where your mortgage is $1.5 million and the value of the same property is over $2 million.

 

We don't need to get to 19% interest rates to have a full blown real estate market crash.  6-7% will probably do the trick.  We are looking at the potential of 5 year fixed rates hitting close to 6% by end of year.  So we are not as far off as you think.  A 6% fixed mortgage rate on a $1 million mortgage is around a $6000 per month mortgage payment.  Add in the property taxes and the buyers other debts and your yearly income for qualification of that $1 million comes out to over $220,000.  At 7%, the yearly income that is needed is over $240,000.

 

The average price of a home today is close to $1.3 million.  With a 20% downpayment you are looking at a $1 million mortgage.  Most couples are not making anywhere near $220,000 combined income.  The math does not support these current real estate prices based on these higher interest rates.  Also, most buyers today are local, they are not foreign buyers, so the foreigners are not coming to save the real estate market.  It's gonna get ugly...

While I mostly agree, I think that most buyers today are already part of the market as sellers, or those who have the means to pick up an investment property with the former cheap rates, rather than first time buyers. Perhaps I'm wrong on that, I have no evidence to back up my theory, but as you said, most people's income makes first time buying near impossible right now, especially with the new stress testing requirements, so thats what makes sense to me. Does that change the fact that interest rates could wreak havoc on the market, no. But, the impact would be less in that case, as a good portion of the mortgages would be less leveraged.

 

Real estate is definitely in a precarious situation overall.

[Boudrias]

8 minutes ago, Sp3nny said:

While I mostly agree, I think that most buyers today are already part of the market as sellers, or those who have the means to pick up an investment property with the former cheap rates, rather than first time buyers. Perhaps I'm wrong on that, I have no evidence to back up my theory, but as you said, most people's income makes first time buying near impossible right now, especially with the new stress testing requirements, so thats what makes sense to me. Does that change the fact that interest rates could wreak havoc on the market, no. But, the impact would be less in that case, as a good portion of the mortgages would be less leveraged.

 

Real estate is definitely in a precarious situation overall.

Agreed. Increased rates threaten existing mortgage holders if they have not fixed their rate. Another aspect is the question of how many parents have helped their kids into mortgages? Thought they were helping and now their kids are in trouble and even their own retirements might be threatened. 

[nuckin_futz]

4 minutes ago, Elias Pettersson said:

When I say 6-7% I am talking about the actual borrowing rate for consumers, not the Bank of Canada rate.  Right now a 5 year fixed rate is at around 4.79%.  That will increase to around 5.50% once the new rate hikes kick in in July.  Then you are looking at probably at least one more rate hike before the end of the year, so realistically you can expect the borrowing rate for a consumer to hit 6% by December.  That will basically stop the real estate train in its track.  And then we go into 2023 and you will see an abundance of new supply hitting the market as people realize they can't afford their home any longer.  Buyers will stop buying unless it's absolutely necessary, so you will see inventory levels accelerate quickly.  

 

As for the government changing its rules, that is never going to happen.  Eliminating the foreign buyers tax would be political suicide for the government.  And even if they do revise it somehow, I don't think that will have much of an impact to be honest.  Most buyers are local now, that has been the case for several years now and the governments have closed most of the loopholes for foreigners to purchase.  They can't just reverse course now in order to save the market.

Maybe then it will be enough to actually meet the demand. The demand is the key factor. In the last 13 years there has been trillions made in global equity and real estate markets. That money is sitting there waiting for a place to park itself. IMO it's more than enough to sop up any temporary excess supply.

 

Governments change the rules all the time. That's the function of government. Temporarily eliminating the tax would not be political suicide if it averts a housing crisis. Government is run by scoundrels. Scoundrels will do whatever they have to in order to save their own skin. Perfect example of that is 2009. Governments (central banks) decided they were going to engineer a recovery and they did, but not without massive intervention. Government has no qualms about intervening. So can they reverse course to save the market? Their recent history says that's exactly what they will do.

 

In 24 years of being in markets the one thing I have learned more than anything is do not have a rigid opinion. The vast majority of the time I developed a rigid opinion I wound up getting my ass kicked. Your opinion seems pretty rigid. I think Bruce Lee summed it up best when he said "Empty your mind. Be formless, shapeless — like water. You put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle. You put it in a teapot, it becomes the teapot. Now water can flow or it can crash. Be water, my friend."

[The Arrogant Worms]

Read this from a mortgage broker on Red Flag Deals yesterday....

 

Yes, bond yields are up sharply again today which puts more upward pressure on fixed rates. Fixed rates currently range from 4.19% to 4.94% depending on your situation. If you want to know where rates are at the end of this week or next week then I would recommend posting then. To get a quote tailored to your situation, you will need to post the answers to the questions on page one of this board. We can then let you know the lowest rates that you will be eligible for.

 

 

Read this from another mortgage broker today.........

 

If your current amortization is a 25 years, most likely the maximum amortization period the lender will allow you to extend back is 25 years unless your original amortization was 30 years to begin with. If not, it may trigger a refinance in order to go back to 30 years.

This means, you may need to re qualify as a new mortgage. It would be best to contact your mortgage provider's mortgage servicing department and ask what is the maximum amortization period you can extend your mortgage back too.

Also, 30 year amortization mortgages usually have a slightly higher rate about 0.10-0.15% difference between the 25 year vs. the 30 year amortization.

If you are looking to do a straight renewal with another lender, I have the following rates:

5 year variable 2.45% (prime - 1.25%) prime currently is 3.7%
5 year fixed 4.24%

You can extend back up to 25 years with this monoline lender.

Hope this helps.

[WeneedLumme]

3 hours ago, nuckin_futz said:

Maybe then it will be enough to actually meet the demand. The demand is the key factor. In the last 13 years there has been trillions made in global equity and real estate markets. That money is sitting there waiting for a place to park itself. IMO it's more than enough to sop up any temporary excess supply.

 

Governments change the rules all the time. That's the function of government. Temporarily eliminating the tax would not be political suicide if it averts a housing crisis. Government is run by scoundrels. Scoundrels will do whatever they have to in order to save their own skin. Perfect example of that is 2009. Governments (central banks) decided they were going to engineer a recovery and they did, but not without massive intervention. Government has no qualms about intervening. So can they reverse course to save the market? Their recent history says that's exactly what they will do.

 

In 24 years of being in markets the one thing I have learned more than anything is do not have a rigid opinion. The vast majority of the time I developed a rigid opinion I wound up getting my ass kicked. Your opinion seems pretty rigid. I think Bruce Lee summed it up best when he said "Empty your mind. Be formless, shapeless — like water. You put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle. You put it in a teapot, it becomes the teapot. Now water can flow or it can crash. Be water, my friend."

Trillions have been wiped out of existence by the drops in the equity and crypto markets recently. And the trillions in equity in the China real estate market are evaporating even as we speak, much of it tied up in apartments that nobody wants to live in or buy, as the values continue to drop.

 

And even if they could be sold, the China government is making it harder and harder to get money out of China. I believe that you are mistaken about trillions of dollars sitting around waiting to be invested in our real estate market, which is nowhere near as foreign-buyer-friendly as it was a decade ago.

 

Demand for real estate (or almost anything else) is very much affected by price, which for real estate includes the price of money. Last year it was possible to get a 5-year fixed-term mortgage for as low as 1.8%. Now you are looking at well over 4%. Consequently the demand for real estate has dropped sharply and is almost certain to continue to drop as rates keep rising.

[nuckin_futz]

3 minutes ago, WeneedLumme said:

Trillions have been wiped out of existence by the drops in the equity and crypto markets recently. And the trillions in equity in the China real estate market are evaporating even as we speak, much of it tied up in apartments that nobody wants to live in or buy, as the values continue to drop.

 

And even if they could be sold, the China government is making it harder and harder to get money out of China. I believe that you are mistaken about trillions of dollars sitting around waiting to be invested in our real estate market, which is nowhere near as foreign-buyer-friendly as it was a decade ago.

 

Demand for real estate (or almost anything else) is very much affected by price, which for real estate includes the price of money. Last year it was possible to get a 5-year fixed-term mortgage for as low as 1.8%. Now you are looking at well over 4%. Consequently the demand for real estate has dropped sharply and is almost certain to continue to drop as rates keep rising.

In 2009 the S&P bottomed at 666 today it closed at 3730. That's a 5.6 fold increase even after the recent losses. Whatever has been wiped out of equity this year pales in comparison to the gains that were made. That money is looking for a home.

 

My point is if need be our RE markets would be made to be more foreign owner friendly in a heartbeat if it meant averting a disaster.

[flanny]

On 6/13/2022 at 12:01 PM, Warhippy said:

I've been banging the "The End is Near" drum for a few years now; even prior to covid.  Just about every possible risk factor has been noted and come to fruition.  The craziest thing is how little of this is genuinely going to be the actual fault of the government vs how much of this is actually at the feet of corporations and people who were unable or unwilling to live within their means.

 

Fuel prices nearly doubling in 120 days

Rent/Housing almost tripling in a decade

Food costs and transportation costs jumping by 44% in 3 years

 

This is insanity and it only has/had one logical outcome.  The fed and BoC are up against a wall and they are out of options outside of large rate increases.  If our government is smart, they'll enact laws to curtail corporate purchases of homes and farmland as well as essential corporations and industry.  The run on will be swift and vicious because there's a lot of $$ out there still and it's owned by people who already have enough sway and hold over governments due to their extreme wealth without buying up everything essential.

 I disagree with this. Our current inflation and conflict situation is totally at the feet of government policy, mostly green new deal politics, secondarily printing money to keep people at home during Covid.

 

Western government pipeline cancellations, carbon taxes, lease busting, high royaltys, and threats to make oil obsolete mean companies can't waste money expanding production as they normally would, so it's been up to Putin to fill the supply role in the interim, and he knew it. We'd have sub $65 oil and low inflation in a free market. Energy costs trump all.

[Warhippy]

17 minutes ago, flanny said:

 I disagree with this. Our current inflation and conflict situation is totally at the feet of government policy, mostly green new deal politics, secondarily printing money to keep people at home during Covid.

 

Western government pipeline cancellations, carbon taxes, lease busting, high royaltys, and threats to make oil obsolete mean companies can't waste money expanding production as they normally would, so it's been up to Putin to fill the supply role in the interim, and he knew it. We'd have sub $65 oil and low inflation in a free market. Energy costs trump all.

Ugghhh again?

 

Which one are you?

 

No.  Government is not to blame for everything.  No carbon taxes are not to blame for the price at the pump doubling in 125 days.  No cancelling pipelines is not the cause of canada's oil issues, that was set back in 1984.    Canada only gets 8% of all it's oil/etroleum from russia.  Green energy investment is actually creating jobs faster than oil and paying almost as well.  New industry will always do that.

 

While fiscal policy since 2009 has in fact been a huge driver of what is happening, especially being injected with steroids over the past 24 months.  it is far from "the reason" for it.  Much of this is and always will be laid at the feet of corporations (like the big 5 oil producers) and people living on artificially low interest rates for over a decade.

[Warhippy]

3 hours ago, nuckin_futz said:

My point is if need be our RE markets would be made to be more foreign owner friendly in a heartbeat if it meant averting a disaster.

Which is why i suggested if provincial and federal governments in Canada were smart, they'd enact legislation to ensure corporate and foreign runs on farmland, property and crown corps or essential assets are 100% off limits.

[Elias Pettersson]

7 hours ago, Sp3nny said:

While I mostly agree, I think that most buyers today are already part of the market as sellers, or those who have the means to pick up an investment property with the former cheap rates, rather than first time buyers. Perhaps I'm wrong on that, I have no evidence to back up my theory, but as you said, most people's income makes first time buying near impossible right now, especially with the new stress testing requirements, so thats what makes sense to me. Does that change the fact that interest rates could wreak havoc on the market, no. But, the impact would be less in that case, as a good portion of the mortgages would be less leveraged.

 

Real estate is definitely in a precarious situation overall.

The scariest part for me is that we are about to exceed the stress test rates that were set to make sure buyers didn’t over extend themselves on their mortgage. 
 

The stress test rate used to be 4.79% and is now 5.25%. The 5 year fixed rate will soon surpass that number once the 75 basis point rate hike takes effect. 

[Elias Pettersson]

7 hours ago, Boudrias said:

Agreed. Increased rates threaten existing mortgage holders if they have not fixed their rate. Another aspect is the question of how many parents have helped their kids into mortgages? Thought they were helping and now their kids are in trouble and even their own retirements might be threatened. 

That’s a good point. Around 80% of buyers choose to take a variable rate mortgage. They are told that rates will eventually stabilize and so they never need to actually lock in. Those buyers will be hit with devastating rate increases. If the Bank of Canada increases their rate by 75bps then these buyers are looking at a $600-700 per month increase on the interest portion of their mortgage payment on a $1 million mortgage. 

[WeneedLumme]

2 minutes ago, Elias Pettersson said:

The scariest part for me is that we are about to exceed the stress test rates that were set to make sure buyers didn’t over extend themselves on their mortgage. 
 

The stress test rate used to be 4.79% and is now 5.25%. The 5 year fixed rate will soon surpass that number once the 75 basis point rate hike takes effect. 

I would assume that most of the expected 75 basis point increase has already been priced in to the 5 year fixed rate. They're not like variable rate mortgages where the rate will jump on the date the BoC makes the announcement.

 

But yes, mortgage rates are expected to soon be above the stress test rates that many buyers qualified at, which creates a rather worrisome scenario.

[Elias Pettersson]

7 hours ago, nuckin_futz said:

Maybe then it will be enough to actually meet the demand. The demand is the key factor. In the last 13 years there has been trillions made in global equity and real estate markets. That money is sitting there waiting for a place to park itself. IMO it's more than enough to sop up any temporary excess supply.

 

Governments change the rules all the time. That's the function of government. Temporarily eliminating the tax would not be political suicide if it averts a housing crisis. Government is run by scoundrels. Scoundrels will do whatever they have to in order to save their own skin. Perfect example of that is 2009. Governments (central banks) decided they were going to engineer a recovery and they did, but not without massive intervention. Government has no qualms about intervening. So can they reverse course to save the market? Their recent history says that's exactly what they will do.

 

In 24 years of being in markets the one thing I have learned more than anything is do not have a rigid opinion. The vast majority of the time I developed a rigid opinion I wound up getting my ass kicked. Your opinion seems pretty rigid. I think Bruce Lee summed it up best when he said "Empty your mind. Be formless, shapeless — like water. You put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle. You put it in a teapot, it becomes the teapot. Now water can flow or it can crash. Be water, my friend."

The big money investors aren’t in the residential real estate game any longer. They have moved towards the multi family investments (apartment buildings) and commercial side of the equation.  You don’t see investors buying entire floors of condo buildings any longer. The residential market is primarily driven by local first time home buyers, people downsizing and upgrading to bigger homes. 
 

The main reason the NDP is in power today is because the previous liberal government allowed the foreign buyers free reign on the local real estate market. The foreign buyers tax only came about because there was a massive backlash from the locals who were demanding that the liberal government do something to slow down rising prices. That finally happened in 2016, but not before we saw a doubling of real estate prices in just over 5 years. 
 

I can’t see any scenario where the NDP is going to eliminate the foreign buyers restrictions that are currently in place. That would be political suicide and I don’t think they could ever convince the locals it is for their own good to drive down prices. 
 

The government is run by scoundrels for sure. And they will do whatever it takes to save their own skin so I wouldn’t be surprised if they actually attempt to do it though. 
 

Yeah I guess you can say my opinion is pretty rigid. Maybe I am being too pessimistic. We will see. The next 6 months are gonna be a wild ride I think. Hide your wife and kids. 

[Warhippy]

Now THIS changes things.

 

Uganda reports they've found a gold deposit worth almost $12.73 trillion.  Over 32 million tonnes worth.  This has now been confirmed by numerous studies of the charted data.

 

The total global market cap for gold is $11.45 trillion.

 

This one single discovery is more than the entire global market cap.

 

What does this in fact do to the price of gold or gold as a "safe haven"?

 

Also...I heard Uganda threw a rock at like all their neighbors and America is on their way to deliver some freedom 

 

https://www.mining.com/web/uganda-says-exploration-results-show-it-has-31-million-tonnes-of-gold-ore/

[flanny]

1 hour ago, Warhippy said:

Ugghhh again?

 

Which one are you?

 

No.  Government is not to blame for everything.  No carbon taxes are not to blame for the price at the pump doubling in 125 days.  No cancelling pipelines is not the cause of canada's oil issues, that was set back in 1984.    Canada only gets 8% of all it's oil/etroleum from russia.  Green energy investment is actually creating jobs faster than oil and paying almost as well.  New industry will always do that.

 

While fiscal policy since 2009 has in fact been a huge driver of what is happening, especially being injected with steroids over the past 24 months.  it is far from "the reason" for it.  Much of this is and always will be laid at the feet of corporations (like the big 5 oil producers) and people living on artificially low interest rates for over a decade.

Governments aren't to blame for everything but they are to blame for high oil prices. Oil is cheap to produce and there is plenty of it, but governments have discouraged production so it's now expensive, along with everything else we want to buy, because energy costs permeate everything. The taxes and roadblocks were meant to make solar and wind competitive which they may now be. High oil prices are not some surprising result of these policies, they are the point of them. If less CO2 in the atmosphere is needed, this is the chosen cost.

Edited June 15, 2022 by flanny

[Elias Pettersson]

1 hour ago, Warhippy said:

Now THIS changes things.

 

Uganda reports they've found a gold deposit worth almost $12.73 trillion.  Over 32 million tonnes worth.  This has now been confirmed by numerous studies of the charted data.

 

The total global market cap for gold is $11.45 trillion.

 

This one single discovery is more than the entire global market cap.

 

What does this in fact do to the price of gold or gold as a "safe haven"?

 

Also...I heard Uganda threw a rock at like all their neighbors and America is on their way to deliver some freedom 

 

https://www.mining.com/web/uganda-says-exploration-results-show-it-has-31-million-tonnes-of-gold-ore/

I heard a rumour that Uganda has weapons of mass destruction. Not sure if it’s true or not. 

[flanny]

2 hours ago, Warhippy said:

Ugghhh again?

 

Which one are you?

 

No.  Government is not to blame for everything.  No carbon taxes are not to blame for the price at the pump doubling in 125 days.  No cancelling pipelines is not the cause of canada's oil issues, that was set back in 1984.    Canada only gets 8% of all it's oil/etroleum from russia.  Green energy investment is actually creating jobs faster than oil and paying almost as well.  New industry will always do that.

 

While fiscal policy since 2009 has in fact been a huge driver of what is happening, especially being injected with steroids over the past 24 months.  it is far from "the reason" for it.  Much of this is and always will be laid at the feet of corporations (like the big 5 oil producers) and people living on artificially low interest rates for over a decade.

Anyway, don't bother arguing with me, I just listen to this guy, who has the highest returning fund on the planet.

https://financialpost.com/commodities/energy/oil-gas/opec-exhausting-spare-capacity-confirms-oil-bull-case

[Warhippy]

57 minutes ago, flanny said:

Governments aren't to blame for everything but they are to blame for high oil prices. Oil is cheap to produce and there is plenty of it, but governments have discouraged production so it's now expensive, along with everything else we want to buy, because energy costs permeate everything. The taxes and roadblocks were meant to make solar and wind competitive which they may now be. High oil prices are not some surprising result of these policies, they are the point of them. If less CO2 in the atmosphere is needed, this is the chosen cost.

The price of fuel almost doubled in less than 120 days.  That's greed.

 

Don't blame the government.  It went from $1.16.9 to $2.24.9 in 124 days.  Taxes went up 11 cents 

[bigbadcanucks]

1 hour ago, flanny said:

Governments aren't to blame for everything but they are to blame for high oil prices. Oil is cheap to produce and there is plenty of it, but governments have discouraged production so it's now expensive, along with everything else we want to buy, because energy costs permeate everything. The taxes and roadblocks were meant to make solar and wind competitive which they may now be. High oil prices are not some surprising result of these policies, they are the point of them. If less CO2 in the atmosphere is needed, this is the chosen cost.

You're trying to sound like you know what you're talking about, but your ignorance is grossly evident.

 

The only "cheap" oil is in the middle east and Nigeria.  All other oil fields in the world either require some form of in-situ stimulation (whether its fracking, SAGD, horizontal drilling, well floods, well fires, etc.) which is costly and off shore drilling, which is even more costly.  You might want to take some time and read the financials of Canadian producers who are "mining" the giant reserves of oil trapped in sands. 

 

If you think North American governments are trying to limit oil production, you should take a trip to northern Alberta, northern Saskatchewan, Williston basin in the Dakotas and Texas.  There's no shortage of oil fields in full production.

 

"The taxes and roadblocks were meant to make solar and wind competitive which they may now be."  - you might look into what it costs to generate 1 kwh of power from solar and/or wind.  Obviously you have no clue of the economics of renewable energy generated by solar and wind farms.  The only thing making these sources viable is government subsidies, which us tax payers are paying for.

 

You might want to educate yourself before you form an opinion let alone lay it out there for the public to see.

[flanny]

2 minutes ago, bigbadcanucks said:

You're trying to sound like you know what you're talking about, but your ignorance is grossly evident.

 

The only "cheap" oil is in the middle east and Nigeria.  All other oil fields in the world either require some form of in-situ stimulation (whether its fracking, SAGD, horizontal drilling, well floods, well fires, etc.) which is costly and off shore drilling, which is even more costly.  You might want to take some time and read the financials of Canadian producers who are "mining" the giant reserves of oil trapped in sands. 

 

If you think North American governments are trying to limit oil production, you should take a trip to northern Alberta, northern Saskatchewan, Williston basin in the Dakotas and Texas.  There's no shortage of oil fields in full production.

 

"The taxes and roadblocks were meant to make solar and wind competitive which they may now be."  - you might look into what it costs to generate 1 kwh of power from solar and/or wind.  Obviously you have no clue of the economics of renewable energy generated by solar and wind farms.  The only thing making these sources viable is government subsidies, which us tax payers are paying for.

 

You might want to educate yourself before you form an opinion let alone lay it out there for the public to see.

Cenovus break even is under $40. I stated $65 oil is easily achievable in a free market. Athabasca, the least efficient oil sand producer, makes a ton of money at $65. I know this without leaving this page.

 

As for your other Solar wind complaint, you need only actually read my post. It contains the word "may".