Potato

Two recent blog posts on Dundee from others: https://divestor.com/?p=8229 http://prefblog.com/?p=37057 I have B & D prefs, and tend to oscillate between excitement at how cheap they are (and look how much there is on the balance sheet behind them!) and a deep fear that the bums will get so enthralled at watching their dumpster fire that it ends in tears for all.

Not sure how relevant it is to a HQ (vs an R&D branch), but Toronto's got the Vector Institute that may help act as a draw.

Lots of cool things happening in this space, esp. with connected devices to help manage chronic conditions. This is I think the only such service for acute cases that I've heard of that ties into the provincial health reimbursements -- I can't even imagine how you guys managed to make that work. Starting to make me nervous on my NWH.UN holdings if fewer cases will need in-person treatment... For access to medical records, there's also MedChart, MyChart, and MyUHN, and I think a few other hospitals have their own patient portals in the works. From what I can see on the outside, OCHIS seems to be pushing to make these types of things easier for companies (and hospitals) to accomplish, and I imagine there are similar initiatives out west.

Which claims would you like to confirm? That people will go to great lengths and be in poor overall financial shape but still make the mortgage payment? Perhaps the CMHC report he references at the beginning is a good place to start: "The average credit scores of mortgage holders improved in the fourth quarter, in addition to a decrease in their likelihood of bankruptcy. In contrast, consumers without a mortgage continued to follow a declining trend in their average credit scores beginning in 2015, as well as an increasing likelihood of bankruptcy." https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=201&itm=1&lang=en&sid=TZDSf8odDoxFnGkBUWuOyQz0BLwXU49KK6oCznBMdTzWm9rMKxL3KTQ70mJNBqRW&fr=1500398459821 This could be because homeowners with a mortgage became better credit risks, or because the hot markets gave more people with houses the option to sell the house and avoid bankruptcy (or to go refinance or get a 2nd mortgage, etc.). The delinquency rate was 0.3%, or 20,058 mortgages in '16Q4 of 5.85M mortgages. There were 31,067 bankruptcies and insolvencies that quarter, so lots of people who went bankrupt without even becoming delinquent on their mortgage, though that doesn't directly back up what he's saying as we're missing how many of those bankruptcies were by people without a mortgage, and how many delinquencies were "cured" before sliding to a bankruptcy or proposal, and how many people had to seek the help of a credit specialist (or family member or in some other way came close to the edge) but ended up being able to pull out of their credit spiral without a bankruptcy or proposal. I'm out of hard proof, but if I squint and take a guess at the numbers, I think it holds up that there are a fair number of people who hit the wall before falling very far behind on their mortgage, and that there are more Canadian consumers in trouble (or one relatively minor surprise expense away from trouble) than the very low number of mortgage delinquencies implies. Not sure if my opinion and interpolations are helpful for you, though.

Do you mind digging up the link? Apparently I suck at Googling because I'm not seeing it. Thanks! Here you go! http://thechiltonmethod.com/

I self-published my book. I wrote about the whole experience on my blog (though I'm Canadian so the process might be a bit different if you're in the US): http://www.holypotato.net/?p=1304 A few years on and the book has been modestly successful (almost 2500 sold). It's certainly not quit-my-day-job income. I still haven't even made minimum wage for all the time put in to make it happen (but I spent way more time on it trying to make it good than was needed to just push an early draft out the door, and it's not like I would have used that time much more productively anyway). But enough for pizza a few times a month, or to cover the hard costs of another project. My cost estimates would be in the same ballpark as DW's. Dave Chilton (author of the Wealthy Barber) just put together a video course on self-publishing and it looks really good (can dig up the link if you can't find it through google).

I've heard this idea several times but it's not really true. When a stock goes up, generally market-cap-weighted indexes don't have to buy any more -- the value of the shares they already hold goes up too to maintain the greater weight in the index. Equal-weight indexes will actually create selling pressure as a stock goes up.

Thanks doughishere, some of this is crazy. I mean, if it got sent before it had to have been created before, but I guess lawyers and judges have to allow for time machines, or that documents can be sent that have not yet been created? It's hard to believe legalese is really like this sometimes.

I also hate the new system, and sent them feedback to that effect. My biggest gripe is with quotes: I used to be able to enter 10 tickers and very quickly pull up real-time quotes, now it's one at a time and much slower for that. The whole site seems very slow to respond, which is especially aggravating because of the extra clicks to get anywhere. One thing I do like is the "top movers" and index changes on the landing page.

I've tried to tilt at that windmill a few times but there's just so much to possibly cover and you never know which piece is going to resonate with some people. Plus much of it is academic -- beyond "renting and investing the difference is really the better deal right now", there isn't much they can do. Besides, then I get into answering the next question of "what's investing?" HAM is "Hot Asian Money", one purported cause of high prices. It's a controversial one because it's pretty clear that there is some of that action happening, but it's not clear if it's enough to be material, or just enough to inspire stories that drive local speculators -- and even if it is material, what it means for the local market (are prices forever divorced from local incomes because of money flowing in from afar, or is a bubble especially precarious because that money flow could be pointed elsewhere at a whim?)

The entire thing? I mean, I suppose that depends on what you mean. Because I could summarize the short thesis in a statement: Canadian RE (esp. GTA & GVR) is over-valued and will at some point in the future correct. But to detail all the bits that go into that... can't say I've ever seen it. Some parts I've never even seen the bits discussed in the full light of day, just hinted at. We don't have good data on the scale of private lending, and how much of that may be creating feedback loops by being financed via prime HELOCs. Even after seeing Urbancorp's troubles, we have no idea what kind of shape the builders are in, just that condos keep going up. Even after HCG was forced to disclose their little problem, it's not clear how much fraud-for-shelter/speculation is happening there, let alone system-wide. For all the scare stories of HAM and money laundering and foreign buyers, it's not clear how much actual money is coming in, and how much the stories of money coming in are driving local speculation. Also very hard to find pre-internet information on the last housing bust(s), like 1989 in Toronto. In the wake of that lots of TrustCos became distressed, and the entire TrustCo model became almost invisible. I was able to dig up some annual reports from National Trust showing the collapse in the mortgage portfolio, but not the ones that collapsed first. I used to make forts out of CDIC print-outs from that era as a kid, and unfortunately that's all been shredded and disposed of now. If you dig up newspaper clippings the yellow peril angle could be word-for-word from some of today's stories, just changing mainland China to Hong Kong. Sources/writers that like to focus on the macro picture tend not to talk about anecdotes and the tails. The average household debt is skyrocketing, etc., etc., but what's scarier is that it really only takes single-digit percentages of people getting into trouble to spark a massive crash. If you were able to randomly sample the bottom 10% of owners in bubble cities and look at what they've borrowed, and what their budgets are like, and how leveraged they are to prices continuing to go up, even the bears might be scared. I've seen a few people (David Chilton in particular) suggest that approach to putting context and faces to the population-level data, but not many essays or articles that do (or when they do it tends to just be a small handful of cases instead of a few hundred, with the context of where on the bellcurve those people fall). We know affordability is "stretched" but just what kind of lengths are people actually going to to fulfill their house lust? I, too, have ready probably thousands of articles, and also have no idea on timing. I figured Calgary would continue to accelerate to the downside after the oil plunge helped turn it around last year, but it looks to be levelling off now.

The insurance is backed (90%) by the government, but not MIC itself (i.e., the gov't doesn't pay until MIC is out of capital). This has been central to my thesis as well -- to my mind, MIC shouldn't exist. There's no reason to go there unless CMHC won't insure. The buyers don't care one way or the other, and the lenders/banks prefer CMHC because it gets a lower risk weighting on their books.

Toronto is becoming a market with several answers. Condo appreciation slowed way down over the past few years, and now many condos are at ~225X price-to-rent, whereas detached houses have been bonkers for the last few years (on top of the already bubbly start), so price-to-rent in much of North York is up to ~350-400X. For example, a $1.5M house rents for about $4k/mo ($48k/yr). Property tax would be $10.5k/yr, insurance likely about $1.5k/yr, maintenance would be a bit tougher to estimate but likely at least $5k/yr, so about 2.1%, not including transaction costs. For a condo in downtown Toronto a $310k place may be $16.8k/yr to rent; prop tax of $2.1k, insurance ~$0.5k, condo fees ~$3.5k, other maint ~$1.5k, so about 3%, not including transaction costs. I called out transaction costs because even though they're one-time, they can approach 10% round-trip up here, so even with 10-20 year horizons they can be meaningful.

Thanks Nelson!

I don't understand the customer base. Who has enough equity in their house for that LTV, yet needs to pay those rates (esp. with a mortgage broker)? How do you check that there aren't other liens on the property? How does your loan generally get repaid? (specifically what I'm thinking is whether people are taking small loans from you and then paying you back out of their employment earnings, or if paying you back depends on getting a prime or alt-a loan from another lender) Do you do any affordability checks? (debt ratios, budget workups, business plans, etc.)