Financial

Freedom from greed

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It’s hard to believe in our system some days. Capitalism’s supposed to epitomize the free market being free, self-correcting when necessary. Yet too many people are losing their jobs and their faith because of greed and self-interest.

2008 was a disaster. 2009 will probably be worse.

Last year the stock market lost half its value, the car companies went on their knees, real estate became a wealth sinkhole and it seemed  money was safe nowhere. This year little will improve, and a lot will get worse. Most of us will know somebody who loses work. All of us will likely shed money – in falling investments, the value of the house or business decline and failure.

Governments fear recession will beget deflation which morphs into depression and could erupt into anarchy. Meanwhile most people have been lulled into a dependency which is simply unsustainable. Will they turn hostile, or even violent, when credit cards are voided, grocery stores open sporadically or power outages mean no gas or ATMs? North Americans, most of them, cannot last a week without the infrastructure of modern life. And it’s the collapse of the financial system – banks, stock markets, loans and mortgages – which is at the heart of the larger crumble.

Resale home prices, Canada ( ) & US ( )

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Take real estate. House values in the US have been falling for three years and have yet to hit bottom. Prices in Canada just began falling a few months ago, and may continue to do so for a very long time. Recent buyers, especially those who got in with zero down and fat mortgages, could soon owe more than they own. How will they react? Will they soldier on paying extreme levels of debt? Or walk? And what will be the effect of that on everyone else?

Greed, unbridled and unvarnished, played a large role in getting us here. Greedy traders and bankers and hedge fund investors. Greedy house sellers. Greedy buyers. Greedy realtors, mortgage brokers and marketers. Combined with inattentive politicians and ineffective regulators, it’s dealt a serious blow to this capitalism whose embrace we’re hooked on.

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Xurbia is a but a small corner in a scurry of mayhem. It’s about regaining control in uncertain times. You might not be able to fix Wall Street, but at least you can generate your own power, produce your own food, take care of your family and make it through a storm.

You can also take concrete steps to get your own financial life in order, recognizing, for example, that in deflationary times there is no greater monster than borrowed money. Just as you can light up the dark, so can you lighten debt.

This section of Xurbia will offer some tools in this regard. We’ll start with what I can vouch for. – Garth

atc-cover After the Crash: How to Guard your money in these Turbulent times

(Key Porter Books, Toronto), by Garth Turner

How we got into this mess…and how to get out—from one of Canada’s most trusted financial experts

The news has been a disaster: stock markets have tanked; pensions attacked RRSPs and savings erased. Choked-up credit markets have made bank loans and mortgages more expensive, and millions of people are losing their jobs A recession of generational proportions is sideswiping family finances. House values are plunging across Canada.

How did we get into this mess? What does the future look like? What can I do to protect myself? To protect my investments and my family? Will this turn into a new Depression?

Financial expert Garth Turner answers each and every question in this up-to-the-minute guide to everything you will need to know to deal with the fallout. This isn’t crystal ball incantation or eye-glazing academic mumbo jumbo. It’s straight talk from an expert on what you can do to safeguard your investments…and your future.

Turner’s prophetic voice has been heard by millions of people throughout a career that has spanned a string of best-selling books, sold-out lectures and the Parliament of Canada. After the Crash is essential reading for everyone looking for a guide through our troubled times.
> How to prepare for a possible depression
> How to survive a depression if one occurs
> How to reduce your debt, immediately
> How to bail out of real estate with n future. How to be a vulture in getting real estate you want.
> A strategy for acquiring and owning gold.
> Why you need cash and where to put it.
> How, exactly, a deflationary spiral could start, and how to deal with it
> How to see, and exploit, the opportunities financila crisis has brought
> Where money is safe.

Xurbia price (author inscription included): $20 Cdn

book-cover Greater Fool: The Troubled Future of Real Estate

(Key Porter Books, Toronto) By Garth Turner

When Canadian real estate prices were hitting some of their highest levels in early 2008, Garth Turner cut through the hype, hyperbole and greed, to deliver a message which turned out to be prophetic:

Imagine listing your home for sale, but there are no buyers. You drop the price. Again. And again. The house across the street’s now for sale. And the one two doors down, plus a dozen others in a two-block radius. Nothing’s selling, and every time one home is reduced, all are affected. This property used to represent wealth. Now it’s a wealth trap. Most of what you have is here, and with each day passed, it diminishes.

Imagine your first home - a dream in granite and stainless. You bought it from the region’s largest builder, for 1.5 per cent down - enough to cover closing costs - and mortgaged the rest. Months later, the economy turns abruptly. Your spouse loses his job and the monthly payments - mortgage, taxes, utilities - are crushing. You decide to sell, but the realtor tells you the market’s also turned. Your mortgage is now greater than the value of the home. After paying commission, you’ll have no house, no equity, and still owe the bank more than $20,000. Oh my God, how could this have happened?

“Greater Fool” was a wake-up call for scores of homeowners, sellers and buyers who heeded Turner’s warning and were saved from making the mistakes which now have caused so much misery for others. The book is also a guide to avoiding the traps which residential real estate still holds for millions of people.

> What will happen next to the housing market
> Why Canadian real estate is on a parallel path to the one which brought down America
> How to get sell real estate successfully in a falling market
> What kinds of residential real estate will have a future
> The greatest threat Baby Boomers face – house-rich, and cash-poor
> What kind of mortgage to get, and how to get out of it fast

Xurbia price (author inscription included): $20 Cdn

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B o o k    R e v i e w s

‘The world according to Garth: Hard times have just begun, look out below.’

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By Julian Beltrame, Canadian Press

OTTAWA — Garth Turner is finding that the scarier things get, the more people pay attention to his doomsday alerts. One reason is that he’s out of politics, he says, so his economic forecasts are no longer seen as possibly tainted by partisanship.

But more important may be that the former MP’s alarmist book about collapsing housing prices in Canada - “Greater Fool,” which he began writing last December when the sky seemed to be the limit - has turned out scarily bang-on. If he turns out to be as prescient with his soon to be released new book - After the Crash - Canadians would be well advised to heed his warning and on how to survive the economic collapse.

Turner, who has worn a number of hats in his career including entrepreneur, journalist, broadcaster, author and combative politician, is predicting hard times for Canada over the next two years and he hasn’t ruled out a good old fashioned depression.

‘His alarmist book about collapsing house prices in Canada has turned out to be scarily bang-on’

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“We’ve had a crash. America has crashed, stock markets crashed, Wall Street crash, real estate crashed and the global economy crashed,” he says of the events of the fall. “The world as we’ve known it is gone. You are not going to get credit cards in the mail, you are not going to get lines of credit easily. Those days are gone. The question now is are we going into a bad recession, are we going into a depression?”

Turner believes Canada’s gross domestic product will plunge five to eight per cent from the beginning of the recession, which he believes began after Labour Day, to the end, which he says won’t come until the spring of 2010.

As well, he expects housing prices will plunge another 30 per cent next year - on top of the 11 per cent drop so far this year. For the first time since the Dirty Thirties, Turner expects many Canadians will wind up owing more on their homes than what their home is worth, particularly those who purchased in the last two years with little down payment.

That’s not a depression, as he sees it, but pretty darn close.

Most economists - but not all - would scoff at such doom and gloom, to which Turner replies: That’s what they said when he predicted Canada’s housing market was on the same disastrous path as America’s.
“It’s a relatively straight forward to weave some pretty ugly scenarios,” says Douglas Porter. “He’s probably not too far out of line to say things could be very ugly if policy makers make missteps or don’t step in to support the economy.” Porter places greater faith in the massive economic stimulus packages being proposed around the world, and in Canada. Prime Minister Stephen Harper is pegging the deficit next year at up to $30 billion, mostly as a result of increased spending to help the economy.

The Bank of Canada and Ottawa have also injected over $110 billion in liquidity - cash -to grease the money markets, and interests rates have been chopped.

Turner agrees those bold actions could stave off the worse, but they also may not, he adds.

“We’ve never had this amount of money thrown at an economic problem, so we’re in uncharted territory,” he says. “But by the same token, they are blowing their wad all at once, so this better work because we are out of bullets.”

What if Garth Turner is right, again?

By Dan Baril (Source)

danbaril Chapter-after-chapter the crap scares out of you with near indisputable facts. Then, in the final chapter of his new book After the Crash, Garth Turner outlines three economic scenarios; Probable, Possible, and Worst Case. You’ll have to read the book yourself for the details when it’s available in mid-January, but that’s not what most caught my attention when I read my “review copy” of what will surely be another best-seller.

In that same final chapter, warding off the alarmist label some are sure to affix to his leathers, Turner rhetorically poses and answers two critical questions “…should a sensible, non-alarmist person worry about the “possible” or “worst case” scenarios above? Or is this stuff too over the top? The answer lies in the nature of risk. If the possibility of something happening is not 0%, then a prudent person usually does something to protect against it.”

The question I kept asking myself as I was reading, and since, is how much above zero percent probability are the Possible or the Worst Case scenarios, and to whom does one look for the answer?

Should Canadians look to a Prime Minister and his sidekick Minister of Finance who a few months ago told Canadians “our economic fundamentals are as solid as the Canadian Shield” or to the guy about who the Canadian Press says “…more important may be that the former MP’s alarmist book about collapsing housing prices in Canada - “Greater Fool,” which he began writing last December when the sky seemed to be the limit - has turned out scarily bang-on.”

Far from being just another “how to” book - although there is some of that too - reading between the lines of After the Crash, there is a far more fundamental message about taking back that which a few decades ago many of us unwittingly gave up. Control.

Control of what is another question, as is how much and in what denomination.
Garth makes it amply clear the decision about taking control is a very personal decision which ultimately each of us has to make on our own. The book doesn’t make the decision for you but there is certainly no shortage of facts, figures and a historical context to help the reader decide. By the end of the book it’s also clear what decisions and which path Garth has, and is, taking.

Looking back at 2008, I will be kind and generous. I won’t say politicians did what they did on purpose. Instead I will let them get away with saying they didn’t know - read as they proved their incompetence.

Truth is Misters Harper, Flaherty, Ignatieff, Layton, Duccepe, and their Provincial equivalents haven’t a clue what’s truly in store for 2009. I watched Stephen Harper’s year-end interview with the CTV duo, Robertson and Fife, and I can’t for the life of me figure out why the broadcaster needed two questioners of a man with no answers. The interview was about nothing like no show of Seinfeld ever was.

For certain and just as the real estate industry did a year ago and continues today, the government doesn’t see its role as telling the truth so much as it believes in self-servingly creating and maintaining an illusion and working to prevent widespread panic. Fair enough, there is no sense in making matters worse, but at some point - preferably sooner than later - Canadians need to draw the line on blatant deceitfulness driven by greed and power-hungry partisanship.

Politics is the blood sport it’s reputed to be. That much we know. But as of quite some time ago the end-game seems no longer about what political good is done with the winnings, rather it’s all about ensuring no end to the game of politics.
For those on the inside and those just on the outside it’s all good fun and terrific theatre. We get to play directly as strategists or indirectly as colour commentators about who’s right, who’s wrong, anticipated next moves, and an endless stream of differing analysis. But as my father used to say when we kids horsed-around too much, it’s all good fun until somebody gets hurt. And by some measure of account, it appears 2009 is going to hurt plenty.

To minimize the hurt each person has to decide for themselves how much of the Probable scenario they can weather or how much above zero percent is the probability of Garth’s predictions of the Possible Case and Worst Case scenarios. Rationalists may ask why plan for the less likely scenarios, and perhaps that’s a good question so long as you trust the person attaching percentage probabilities to each scenario.

True to form, the best line in After the Crash is a taunt at the end of chapter one; “…after you read the factors which got us here, and the trends now propelling current events, the ultimate decision is yours on how aggressively you prepare, or how much you pray you don’t have to.”

Ahem, Dear God…

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