mcliu

What if mortgage rates ever turn negative and you're paid to borrow? How will home prices (or asset prices in general) behave then?

Gio, how much of a premium to NAV would you pay for this? ???

Sorry to interrupt the conversation, but what's real inflation and nominal inflation? :o

Totally missed whatever happened here. ???

yadayada has a good point. There's significant productivity growth available for China's economy on a per capita basis. The current output per person is significantly lower than most developed countries. Meanwhile, Japan's productivity has largely caught up to Western standards by the late 80s. I mean GDP per capita is China is still 1/5 of Taiwan..

This is called a bull market ;D +1 ;D

All the banks have summer programs. Most do campus recruiting as well. That's a good place to start.

LOL "we're not bear stearns" Can't believe shares IPOed at only 17 just 3 years ago. In hindsight, that's quite a bargain.

Don't want to hijack this thread, but the median household income for NYC is ~$55K.. No one seems to address the fact that the numbers show that the cost to service debt has gotten significantly cheaper today in Canada than it was 10 years ago. And it's continuing to get cheaper to service debt. I think most media outlets quote that debt-to-income has gone up significantly over the past decade, but they fail to mention that the cost of that debt is actually lower today.. I mean a high debt-to-income ratio really becomes a problem if 1) cost of debt goes up 2) income goes down.

Manhattan's median annual household income is $67K. Toronto is around $72K.

That's the whole point though. Even though debt-to-income has risen by 70%. The cost of carrying that debt has dropped by more than 50%. So on a net basis, the carrying cost of your debt may have actually declined over the past 2 decades. From an affordability perspective, it's actually cheaper to buy a $600K today than to buy a $350K house in 2005, even though the price has nearly doubled. So you end up with a mortgage twice as big, but the cost of that servicing that mortgage is actually lower.. Obviously, if you believe that rates will go back to the levels in the early 80s, then the debt service is unlikely to be sustainable. However, you can't rule out the possibility that rates will continue to go lower.. I mean it's been going lower for the past 4 decades.. P.S. I actually think housing prices are ridiculous in the GTA area, but I just wanted to make sure we're covering all the possibilities.

Isn't the bigger issue: “It's not what you don't know that kills you, it's what you know for sure that ain't true.” ;D

Would it be possible that people can just afford to pay more for a house? This is just a back-of-the-envelope calculation: Toronto Median Detached Home in 2005 was ~$350K. Avg. Mortgage Rate: 6%. Median Household Income ~$65K Toronto Median Detached Home in 2014 was ~$600K. Avg. Mortgage Rate: 3%. Median Household Income ~$72K If you assume a 70% LTV at those rates, interest expense in 2005 would be $15K and in 2014 would be $13K. Given that household income has risen while interest expense has declined.. http://creastats.crea.ca/treb/mls/mls05_median.htm http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm

You should be able to find the proxies on SEDAR.

Just playing the devil's advocate here, even though P/Rent or P/Income ratios are higher than historical averages, mortgage rates and bond yields are also lower than historical averages. Adjusting for that, maybe housing prices aren't as overvalued as it seems? That obviously changes if mortgage/interest rates go back to or above historical averages. However, what about the off chance that we have another decade or two of low/declining/negative interest rates? ::)

Isn't the issue here stock buybacks vs. capital expenditures/r&d and not stock buybacks vs. dividends?

Most companies and managers being bad is a general problem, it doesn't have anything to do with buybacks specifically. Whatever system you put them in, most people will make mistakes, follow the herd, put their interests above the shareholders', grow for growth's sake, waste money, focus on the wrong things, follow fads, etc. Investors get more of a choice with buybacks than with dividends, actually. With dividends you don't have a choice but to get it and pay taxes. With buybacks, you can decide to sell shares in pro-rata to the buyback or not (and then be taxed less). Certainly, if buybacks are done properly, they are somewhat more tax-efficient by allowing you defer taxes. However, the key is if they are done properly. If you believe that on average share buybacks are value-destructive (or even non-value-enhancing), and that shareholders are better capital allocators, than perhaps dividends offer a better route for investors despite the lack of tax deferral. I'm not suggesting that the mechanism itself is flawed, merely the incentives that allow most companies to exploit this mechanism. I mean if we assume a world where buybacks aren't allowed. Then you have less situations where companies would repurchase stock at 100x P/E to push up stock prices vs. investing in R&D/factories that can generate large returns 20 years down the road or paying a dividend to shareholders who can reallocate the dividends. Obviously, you can argue that the company may just use the excess cash to purchase a couple of corporate jets. However, from an optics perspective, shareholders would easily dismiss that as excessive and wasteful. On the other hand, things like poorly timed share buybacks continue under the veil of shareholder-friendly governance.

The article does raise some issues: First, companies are exactly great at capital allocation. With dividends at least investors get to make the choice.. Second, short-term incentives may push companies toward buybacks that lift the stock price above option strikes rather than pursue value-enhancing investments that payoff over the long-term. From the CEO and board's perspective, they don't really know how long they'll be at the company for, and their stock options have finite lives. So, why pursue something that will pay off decades years down the road when they can buy stock, get a huge bonus and quit/retire/get fired?

Or it may be worse of active value investors, since all the non-value investors and dumb money are investing in ETFs, the only remaining investors that compete with each other are smart active value investors? :o

http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/calgary-housing-market-hits-seven-year-low/article22749863/?cmpid=rss1

Why can't Saudi Arabia just produce more at lower prices in order to support their budget?

Full transcript Very interesting. Thanks! The net effect may not be as positive as it seems since only a quarter of the savings is actually being spent. That spending is also offset by cuts in capex and spending in O&G..

How do you determine whether the money saved from lower fuel prices will be spent vs. used to pay off debt or saved?

Just theoretically speaking, what would you do assuming most markets do reach 2007 levels? Would you hold cash or some sort of alternative currency or just buy the cheapest stocks in an expensive market?

Your avatar?