What Does the Price of Oil have to do with Globalization?

If you don’t know who Jeff Rubin is, he was formerly the chief economist for the CIBC and he always had some interesting views on the the Canadian economy and the world economy. He was recently on the Hour with George Stromboulopoulos (OK I am a couple weeks behind, it was in in May!) and had some very interesting viewpoints on where the world is heading and what will happen with oil prices.

The link to the video is here, Jeff Rubin on The Hour

Some of the key observations I took from this was the shrinking of our world if (or more accurately when) oil prices get back to triple digits and how it will effect globalization. I would love to hear some of your thoughts as well.

I especially liked how he talked about cheap oil disappearing, which has been something we have talked about for ages. I can personally guarantee we will never run out of oil, it’s just not how the economy works. Once the price reaches a certain point it just becomes unfeasible to produce it and we move to the next most cost effective method. At that point the $200 or $300 or possibly $500 a barrel oil sits in the ground, never to be used.

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Has the Real Estate Market Rebounded?

The latest statistics for May are out for Calgary and area and there is some very optimistic news to be found in them, depending on how you interpret the numbers that is. Compared to May of 2008, the total amount of sales of all properties for May 2009 has increased over 10%.

The good part of the numbers is that sales of single family homes in Calgary increased by 15.79%, while condominium sales increased 13.17%. The bad part is sales for towns outside Calgary decreased by 6.97%. This currently isn’t quite as good for the surrounding bedroom communities (like Chestermere, Langdon, etc.), but is still a positive sign that the market is adjusting as it is better than it was.

The most promising part of theses recent statistics is a significant drop in the number of properties going up for sale this year versus last year. Combining this with increased sales is helping the market to achieve the coveted “balanced market” status. A balanced market is defined as only having between two and a half months to four months of inventory for sale.

During the winter months, we hit a peak of slightly over 11 months of inventory which turns the market into a complete buyers market. When those listings versus sales numbers become this unbalanced buyers become in complete control which leads to longer days on the market as buyers have more properties to choose from, lower prices due to increased competition to sell, more conditions set by the buyers and lower actual sales prices versus the list price.

The alternative to this was when we had less than a month’s inventory of properties for sale during spring of 2006 and 2007. During the craziest times of 2006, we had less than a couple weeks worth of inventory; this turned into the ultimate sellers market. As many of you remember, this resulted in bidding wars, huge price jumps, minimal if any conditions set by buyers and often conditions set by sellers and general pandemonium in the market.

Now as we are starting to dip into the equilibrium of a balanced market we will start to see a steadier, healthier market place. At least for now that is. Although I am quite optimistic about the market in general, I’m not sure we are entirely through the rough times yet.

As a trend spring is a much busier time of the year for Real Estate sales and that is one of the factors currently affecting the market. Yes, we also have incredibly low interest rates helping to make properties affordable, so we have a second positive factor kicking in as well. It’s whether we can maintain this momentum through the slower summer and fall months that will really tell us we are in a recovery or not.

If we stay balanced or close to balanced through the remainder of the year we should see a nice healthy 2010 with values once again starting to move upward. Although unlike earlier this decade, it will be a much more manageable single digit annual growth in values rather than the single digit monthly growth that occurred previously. So while the housing market is rebounding, we haven’t completed the rebounding, quite yet.

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Did You Miss It?

OK, so I made it through May, now if I can only get through June. It seems to be one thing after another. Catching up on postponed maintenance issues, couple of vacancies popping up, some troubles with shared accommodation tenants, my weekly newspaper articles, the revolving door lately with weekly tenants and my monthly newsletters. Ooops, hold on, there wasn’t a monthly newsletter in May!!

 

It’s true, but I don’t think anyone noticed, did you? I was in my fifth year of sending a newsletter out each and every month. I hadn’t missed one month, sure I cut it very close to the end of the month many a time, but I had never missed a month before. It was a grand total of 52 total issues straight, but I don’t think I have it in me for another 52.

 

That’s part of the problem, the newsletter takes a big portion of my time each month to prepare. Sure I can borrow from my weekly articles, but perhaps I need to revisit why I am doing this.

 

Part of the reason has been to share knowledge, hopefully many of you have learned and been educated by my various topics. Part of the reason is to provide guidance and mentorship to people about motivation, setting goals and even a little bit about your own self improvement. It’s also been a vehicle to attract potential investors who may wish to take advantage of our experience and knowledge to provide themselves with some pretty darn good returns.

 

As I reflect on these various reasons it becomes apparent that I can still continue to fulfill these reasons, but without having to do a monthly newsletter, I can just continue blogging away, but I need to have a more consistent effort with my postings.  Perhaps it involves making sure I post something every week, some insights as to what is happening in the market, a great book I believe everyone should read, or even the weekly rantings of a busy landlord, but something.

 

So for at least the summer, the newsletters are done, perhaps once fall comes around I may have a change of heart, but I may instead relish all the free time I have created and I can fill it with handyman work!

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Anyone Working Downtown?

If you are you are just in time for my shameless plug for my wife’s art work. Her group, the Riverview Artist’s Group is having an art sale and display on the plus 15 level of the TransCanada Pipeline Building this week and she will be sitting there this afternoon (Monday June 1st, Tuesday morning and Thursday afternoon eagerly looking for people to visit with her and potentially buy some great collectible art pieces.

 

If you work downtown, it would be great if you could stop by and say hi to her and possibly introduce yourselves to her, oh and maybe purchase a nice piece of art at the same time wouldn’t hurt!

 

Karen Biko Art work

 

Here is a sample, for more check out her site at http://www.karenbiko.com.

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Quick Reminder – Rod Burylo – Smart Money in a Crazy World Investing Close to Home

This event is coming up next Tuesday and I picked a horrible time to send the info out last weekend as many of you seemed to be away for the long weekend and came back to mounds of email I am sure. I can still get some tickets for this event for anyone interested in their investments.

 

Rod will be talking about the stock markets and Real Estate, if you are currently investing in either, or considering investing in either, you may want to be there. Wouldn’t you rather be well informed about the options out there than just move randomly along like many others? The event is in Airdrie and starts at 6:30 Tuesday May 26th, so if you would like to attend there is still time, please email me back ASAP and I will get you on the list.

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Smart Money in a Crazy World, Part 2

Up to 1,100 GM dealers closing in the US, 789 Chrysler franchises are also getting shuttered. Rumor has it GM is going to even get taken off of the Dow Jones Industrial Average. Sure North American car manufacturers have been missing the big picture that Honda, Toyota, Hyundai and now even Kia are seeing, but who could have forecast this?

 

Strange that large gas guzzling SUV’s that were the bulk of the profits for domestic car manufacturers have become less popular. Could it be that there are other events going on right now that the average investor is also missing out on? If large corporations like GM and Chrysler are missing the boat, what chance does an average investor have in this market?

 

As I mentioned in the previous post, how can people invest in a market or environment this crazy? Wouldn’t you like to hear where some of the smart money is going? You can sit back and wait for everything to works it’s way through the system, but how far back will you be compared to individuals who looked for new opportunities right now?

 

On May 26th Rod Burylo will be speaking in Airdrie about what is happening with the smart money in a crazy world right now and will be focusing on investment opportunities during a recession. There will be a heavy emphasis on Real Estate (in case you don’t know, I love Real Estate!) and Western Canada (which happens to be a great place as well).

 

The tickets for this event are valued at $35 a piece and there is only around 400 spots available. That is the bad part, the good part is my readers will have access to some of the tickets at no cost if they can get back to me before the event fills up. This is information you would probably like to have, so if you would like tickets (for Free!) email me back as soon as possible (bill@housez.ca) and let me know. The event starts at 6:30 with registration and the presentation begins at 7 and runs until approximately 8:30.

 

If you cannot attend, but know others who would be interested please forward this post on, have them register on the blog and email me about attending. I’m not sure about the current head count, but it’s best to do this sooner than later.

 

 

 

 

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Smart Money in a Crazy World

The stock market is making huge gains todayMonday

The market has lost all the gains from the previous dayTuesday

The stock market has had its biggest single gain today this year!The Following Week

The market has lost all of its growth it has made so far this monthThe Following Day

So do these headlines look familiar? I may not have them exact, but for anyone following the stock market during the last few months haven’t we seen all these headlines, and more than once? How are people investing in this type of crazy market getting any sleep?

 

Do you think the smart money is following this crazy world, or is there perhaps better, safer, more advantageous places to keep your investment money? Are you willing to trade market timing for consistent returns alongside the other “smart” investors? If you are tired of watching your retirement money dwindling away perhaps you would be interested in an upcoming seminar later this month being presented by Global Real estate Investments?

 

If hearing the views of an International Speaker on the changing world of the stock market and Real Estate Investing interests you watch for the next couple of blog posts. It might involve investing a couple hours of your life and your return could involve making your retirement a bit more comfortable. Not a bad trade off when you consider it!

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Oil Breaks $58 a Barrel, But Does it Help?

Just a few quick comments on oil prices which have been starting to move upwards over the last little while. Initially this appears to be a great thing, but there are a couple hiccups. We trade barrels of oil in US dollars, so while it is good that oil has gone up in price, much of the goodness is taken away by our dollar increasing in value against the US dollar by a nickel during the same time period.

 

The repercussions of the US printing money to push into the economy is that over time they devalue their currency against the other foreign currencies out there. We are starting to see some of this effect currently and we have to look at big picture economics when we see our dollar rising. If we compare it only to the US it initially appears good, although it does affect manufacturing and exports as their costs rise. It’s when we see that the US dollar is actually decreasing in value when compared to the majority of other currencies that it becomes more of an issue.

 

So in the big picture, a higher Canadian dollar is great for importing items in and our purchasing power when traveling to the US or buying their goods.  At the same time it eats away profits from oil exports, other products we export and the over all cost of manufacturing. Since the majority of our Eastern provinces are heavy manufacturing areas you can see this being a negative influence.

 

So does $58 oil help, yes it does, but only if the Canadian dollar doesn’t increase to much in value at the same time.

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Cosmic Karma, or What’s Wrong With People?

What a day, but to start this off I have to backtrack to a conversation I had with my book keeper last week about what goes around comes around. Pattie pointed out that both Karen and I are “good people”. I’m not sure if everyone would agree with that, but I’m sure 99.9% of people would agree we are good people not out to hurt, cheat or rip people off.

Her point at the time was that all the good things we have done for people since she has known us will eventually come back to us in good ways and in multiples. Now Karen has gone out of her way to help people on a pretty consistent basis and if there is an injured animal, well lookout. We have made many decisions over the years that may not have been the best decisions for us, but they were the right decisions. I’ve received my snow angel pin in the past and continue to help shovel not only in the neighbourhood I live in, but in neighbourhoods I own property in as well. People like and trust us for the things we do and we are proud of that. So hopefully some of this Cosmic Karma starts coming around soon, especially after today!

So on to today now. I have a tenant who has fallen behind, it seems to becoming more common every month now around Calgary as people are getting laid off and there is no more low hanging fruit everywhere. You have to decipher that metaphor on your own! This tenant has been with me for almost three years and they have had a few hiccups in the past, but always caught up.

This time just felt different. Things came up and he couldn’t meet with me to pay me as scheduled, then there were family illnesses, then vehicle problems, then new phone calls and days to meet rescheduled and missed phone calls. Anyway, I reached a point where the last day we were guaranteed to get together, which was Sunday, no call, no reply to my phone call, or my email, nothing.

I had reached the end of my rope, I needed to start the eviction process. I called and left them a message explaining my next steps Sunday night, by this time very frustrated. I like to give people the benefit of the doubt, and I understand times are tough, but I still have to make my payments.

Monday was a write off as it was article writing day and the kids were home as part of Easter break so we took them to a movie in the afternoon. So Tuesday I started compiling all the information I needed to gather so I could go file for an eviction at the Residential Tenancy Dispute Resolution Services board downtown.

So after about two hours plus I had my approximately 50 pages of lease documents, emails, statements of evidence etc all compiled. This morning (Wednesday), I made my four copies and put them all together and headed down to file.  So after about 40 minutes, I had my hearing date set and now I just had to meet the tenants and serve them the papers.

I wasn’t even out of downtown and my phone rang, it was the tenant and he had been away for the Easter weekend and was on his way back to Calgary, but wouldn’t be home until the evening, best of all he had a portion of my rent for me. I didn’t cancel the hearing yet, I have until Monday to do that, and I won’t do that until I have cash in hand. I will update you!

So here I was feeling horrible I was having to evict what are normally a nice couple who are having a tough go right now. Hopefully they come through.  So what were they thinking? Any time any tenants have problems I tell them they have to communicate with me. If I know what is going on, I can work with them. If I get shut out, I get that uneasy feeling.

Unfortunately, my story doesn’t end there today. I have another tenant in one of my shared accommodation properties that has also seen some hard times. Another hard luck story, moved out here a few months ago, had a girlfriend who he had been living with and broke up with, had a great job that suddenly disappeared and he had nowhere to turn.  Here’s the background.

He had been with us for several weeks by then and had been great, nice younger guy trying to make it in the tough world. So I helped him out, pointed him to some of the groups that could help and away he went. I even told him I would carry him a bit if he worked extra hard to keep the sidewalks cleared of snow and the house clean. Now I know he was a worker as he was going to Diversified Staffing every single day to get work and the other tenants were vouching he went out every day and came back late every day. Plus he had all the time sheets from the jobs to show me, but he was only making $10 or $11 an hour and after taxes just kind of scraping by.

So I did give him an eviction notice in February, just to protect myself and to make sure he knew I was serious. So eventually, he started to get me some of the rent he owed me and I knew he was still barely surviving, so I grabbed some food off my own kitchen shelves and dropped it off to him. It wasn’t a lot, some KD and some Ichiban noodles, but enough to make sure he was getting something to eat. It was the right thing to do.

He started to be pretty consistent at paying every week, but I could never catch him at the house, he would just leave his rent in his room for Saturday collection. Sadly, he also started to leave his bedroom sliding window wide open as well and since he had taken to sleeping at his ex girlfriends on the weekends, he left it like this during a weekend snow storm and a rainstorm, which irritated me a tad.

Finally about two weeks ago, I showed up at the property and surprised him. At that point, he confessed that he was avoiding me because he wasn’t able to catch up. Being the good person I unfortunately (?) am, I told him as long as he keeps up the weekly rent, not to worry, things would turn for him. If however he couldn’t pay he had to go, I couldn’t afford to let him get any further in the hole.

Well Saturday roles around and surprise surprise, no rent money in the room. He did text message me though telling me he got back to the office to late Friday to get paid and I would have my money Monday. Monday roles around and I try to track him down, no sign of him, I stop by multiple times over the next several days, leave another note, nothing. Saturday comes by again, and there is a new note telling me he won’t get paid until Monday due to the long weekend.

So Monday, I show up at the house again, prepared to be disappointed, but ever hopeful! Alas though, more disappointment, no rent, no tenant and another wide open window which I shut. I left him a new note, written with a bit of frustration suggesting to him that if I didn’t have the money here Wednesday, he needed to pack up and disappear.

Now we are back to present time, so after my courthouse visit and my call from my tenant who may (or may not) have money for me Thursday I zipped over to this other property to check on my other buddy. Since it was late morning the house was empty, everyone had gone off to work, so I let myself into buddy’s room to see if he left me money and back to surprises, he had no money there, but he did have a note. This is where my head started to spin.

So just to recap, I helped this guy out, I pointed him to eviction services which he never followed up on, I gave him the eviction, but didn’t enforce it as I didn’t want to kick him out on the street, I gave the guy food out of my own home, I went above and beyond to help him out and his note read as follows.

I called landlord and tenant advisory board they said you have to give me another eviction notice because I have receipts for rent paid after the first eviction notice meaning you overlooked it and let me stay. As you can see I plan to leave by the weekend. Second thing is you can not walk in whenever you want you have to give 24 hours notice before entering and you can be charged. It is the law.

Wow, I went out of my way and now he was using Landlord and Tenant against me and threatening to charge me. I was disappointed, I was disillusioned with people and I was pissed off I had let this guy stay in my property. All I did was help him out along with numerous other people recently, so where is the Cosmic Karma that is supposed to be coming back to me?

It’s put a damper on my whole day, it’s affecting how I want to deal with people and it may cause me to be less of a helpful person to others. I’m still trying to wrap my head around it and wondering how much of a bite this will take out of my positive energy.

It all comes back to, what’s wrong with people? Don’t they understand the actions they take have repercussions on others? Why do people feel they deserve a free ride? What makes them deserve anything more than you do or I do. If you are reading this, you already understand it’s not a free ride out there; you get what you work for. If you are willing to put in the time and effort and you have done your homework to ensure you are heading down the right path, eventually you will see rewards.

The Real Estate business sucks right now if you take a short term look at it, today really sucks when it knocks me down a peg or two. Karen and I are in it for the long haul though and it has brought us rewards we would never have seen if we stayed in our 7:15 to 5:30 jobs. We will continue to work our goals and at this point I will continue to try and right my upset Karma and move forward.

My message today is you can only help people so much, they really have to want help to move to the next level. You can only do so much before you have to give up and move on. Don’t take this post as a negative message, or a warning to never help people out, just be cautious. As for me, I probably will still help people, although with more caveats along the line and less rope given out, at least for now.

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New Alberta Unemployment Stats Out

Alberta’s new employment stats came out and it shows Alberta has hit an unemployment rate of 5.8%, our highest level since 1997 when it hit 5.9%. This number is probably low due to the number of contractors and self employed people who fit between the cracks of the unemployment numbers, but we are still in a far better situation than most other areas of the country.

 

We lose perspective when we compare our current numbers with anything in the recent past due to the overwhelming growth we have seen in the last several years. To help with our perspective we need to remember our current rate of unemployment is the same as the lowest unemployment number Ontario has seen in the last 20 years, and they were only below 6% once in that time frame. Maybe 5.8 isn’t quite as bad as it looks?

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Liked this quote a lot!

“Real Estate cannot be lost or stolen, nor can it be taken away.  Purchased with common sense, paid for in full, and managed with reasonable care, it’s the safest investment in the world.”

Franklin D. Roosevelt

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Alberta Sees Spike in Mortgage Arrears – Should We Turn Out the Lights?

Once again, it looks like it’s all over, Alberta blew another boom. With news like this is there any hope for the millions of people who call Alberta home?  Before we all get too carried away (and especially if you don’t know I am a sarcastic individual at the best of times), maybe we need to look a bit closer at this spike.

 

Statistically the spike was indeed huge, mortgages in arrears have increased, in fact they have more than doubled which is not good. They have increased from 0.20% all the way to 0.45% of the total number of mortgages out there. In case you missed it, there was a decimal point before the numbers. We have gone from one fifth of a percent of all mortgages being in arrears to just under one half of a percent.

 

So using a different way to explain this what it means is we have gone from one person out of every 500 with mortgages falling behind to a situation where just less than two people with mortgages out of 200 is falling behind. Let me try spinning it this way, we have gone from a point in May of 2007 where 99.86% of people were current with their mortgage to a point now where only 99.55% are able to.

 

On the serious side, it is incredibly unfortunate when anyone loses their home and in the past we have helped people to avoid foreclosure. The majority of those properties we dealt with had little to do with unemployment and loss of equity in properties which are creating a whole new set of families falling behind. It is not a good position to be in and the numbers will probably continue to increase over the next year. We just have to put it into perspective that it is not even remotely similar here to many areas in the US and we still have more upside in the near future than most other provinces.

 

When you do read some of these doom and gloom headlines don’t get dragged into the gloom, instead look into the numbers and see if it really is that bad.

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What Does One Trillion Dollars Look Like?

A friend just sent this link to me that provides a visual representation of what a trillion dollars look like. After you walk through the web page the final graphic represents the amount of money that just the US is infusing into the economy to stimulate growth.

What Does One Trillion Dollars Look Like?

 

If you start adding up all the money other countries are also infusing into the world wide economy it can be rather eye opening. If you were wondering how long the economic crisis is going to last, understanding how much money is being pushed in to bolster the economy is a good place to start. Once this money starts pushing through the economy it will only be a matter of time before it starts affecting everything.

 

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Are you Thinking of Locking Your Variable Rate Mortgage In?

Wow, the Bank of Canada has gone and dropped the prime lending rates to banks by another 50 basis points earlier this week and the major banks jumped right in after them and most have announced their prime rate is now down to 2.5% If you went with a variable rate mortgage a year ago or earlier, as I advised people too, you are now probably paying less than 2% interest on your mortgage payments. How does that feel?

To put it in perspective if you had locked in at 5.5% a year ago, and your mortgage was only $250,000, you would be paying almost $500 more a month than if you had a variable rate at prime -.5. For a rental property in a market with more vacancies appearing this is huge. That allows you a $500 window of price reductions for rent if you need it, or a one month subsidy to attract renters. If the mortgage was on your primary residence you have managed to reduce expenses without cutting back! So it is also a winner.

So a few new questions that popped up now. First, with the prime rate so low, should you lock your variable rate mortgage in before it goes up? Second, are variable rate mortgages still the best way to go if I need a new mortgage?

 

With all the dismal results pouring in the Finance Minister is now stating that this recession could drag on for quite a while. Translation is that the government cannot afford to raise interest rates until they see a definite turnaround in the economy. This should keep rates low for possibly the entire year and would indicate to leave your variable rate mortgage where it is.

At this point banks are no longer offering prime minus anything on their mortgages or credit lines. Everything has switched over to prime plus a percentage. Rumor from the mortgage people and banking industry is that this will change near the end of the year and we may see prime minus a half percent again in 2010. At this point there are some very attractive one year rates out there that may be a better option. Then next year you can convert them to variable, depending on where the rates are trending and the overall economic situation.

If you have any questions or comments, I would love to hear them.

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A Simple Explanation of the Credit Crisis

We keep hearing about the financial crisis and people are constantly wondering how long the economic crisis will last, but rarely do you find a good explanation of how this all started.

 

Thanks to Desmond for sending me this great video which provides a simple explanation of how and why it occurred.

 

Here you go, The Short and Simple Story of the Credit Crisis.

 

 

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