Housing Bubble Update: Is it progressing?

Last Summer we wrote a post pondering if the housing bubble was finally beginning to unwind and indicators were pointing towards it, but we had this to say:  no one knows for sure.  Anyone who claims to know is probably either a fool or trying to sell you something (a guy named Garth, perhaps?).  This post is a follow up update to that original post.

The basic takeaway: we still don’t know.  Prices have been adjusting downwards in multiple markets, but things are still very overpriced.  So our advice is to be very very cautious.

As a recent post over at Better Dwelling has noted: Canadian prices are down significantly in Toronto since April 2017 (and Canada-wide since Toronto is such a large economic force), but up in some much smaller markets.  The number of sales are also down significantly.  These are market conditions that COULD be pointing to the end, but a reversal is, as always, still quite possible.

If you’re a buyer looking to buy the dip, we would strongly caution against it as it’s a situation where you are trying to “catch a falling knife”.  Our recommendation would be to buy a house (when you need one) once the market has deeply corrected and once exuberance has been firmly replaced by fear.

StorageVault Canada Inc: An interesting way to play the Coming Housing Downturn

StorageVault Canada Inc  is the only publicly traded company in Canada that manages public self storage facilities.  They have been aggressively expanding in a growing market and we believe they are positioned uniquely to take advantage of the coming Canadian housing market crash.

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The Hillarious Bias of Real Estate Brokers and Agents

Real Estate Agents and Brokers generally like to portray themselves as experts who are “on your side”.  While you might find the occasional agent who is working in your best interests, we believe that most agents are in it to make money and little else.  And as you will see, there is incredible bias in this department

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The Housing Bubble is NOT only in Toronto and Vancouver

Many who believe that massive housing bubble exists, believe it only exists in Toronto and Vancouver.  This is false and also an irrelevant argument, for even if it were true, the run up in these two cities would be enough to cause massive damage to the Canadian economy.  We believe that the price run-up has also occurred in most major Canadian cities (though often not to the same extent) and in many small towns.

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The Canadian Dollar is Heading Lower

It may not happen in the near term, although recent declines suggest otherwise, but for a number of reasons, the Canadian dollar might well be in trouble.  Much like our previous article about the difficult position the Canadian central bank faces, the CAD faces some seriously negative macroeconomic forces.

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The Bank of Canada and the Housing Market: an Unenviable Position

The Bank of Canada is in a very difficult position because of House Prices for a number of reasons.  It is our current thesis that they are stuck between a rock and a hard place.  The rock being the need to raise interest rates to combat inflation and a sinking Canadian dollar and the hard place being the massive housing bubble and huge levels of consumer debt in Canada. Some of these difficulties are also faced by central banks around the world and some are uniquely Canadian.

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Preferred Shares and their Pitfalls : Chasing Yield

In this yield chasing environment for income investors, it’s harder and harder to find decent yield in the low-interest rate, high P/E stock market environment.  One option is to purchase Preferred Shares on the stock market for their high yield.  But this option can potentially be dangerous as we will explain.

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ETF Bond Investing and Avoiding Rate Risk: Target Maturity Bond ETFs

So here’s your predicament: you think the markets are overvalued and you still want yield, but yields are still at near all-time lows and long term bonds suffer from extreme rate risk (where rising yields will eat away at bond prices).   And you can’t invest in Canadian Real Estate because it is in one of the largest bubbles in history.  And, finally, you do not want to pick and choose bonds yourself i.e. you want a bond fund.

If you just invest in a short-term, medium-term, or long-term bond ETF, (for example:  BMO Short Bond ETF Ticker: ZCS) you are still exposed to uncertainty regarding rate risk.  The problem is that these funds are perpetually recycling your capital into new short term bonds.  Unlike purchasing a bond directly, they do not have a specific maturity.  So, how do you invest in bonds within an ETF that DO have a specific maturity.

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Things that Hold Their Value over Time aka Inflation Proof Assets

If you’re like me (and let’s face it, you are not), then you’re constantly looking for new and creative ways to diversify your fantastic wealth. Especially in this environment of low yield, high priced bonds, globally over valued real estate and sky high stock valuations, what is a conservative to do to preserve wealth?

This article is about things/physical assets that hold their value over time (or at least they have somewhat historically). This is by no means fool proof and certainly not a comprehensive list, but we will try to go over a few of our favorites.  We will also go over a few others that we would not advise you invest in. Continue reading “Things that Hold Their Value over Time aka Inflation Proof Assets”