SharperDingaan

Keep in mind ... Minimum DP's have been increased, & maximum LTV's increased via legislation. With all borrowers now either meeting these thresholds, or having their bank repossess & force a sale - weaker hands have been forced out & bigger cushions against loss put in place; for everybody. Sure, if you're the one repossessed you aren't happy - too bad. If you don't have the DP or income required, you cant afford it - get over it. Find a cheaper house, earn more income, or get someone else to front more DP for you - you are not entitled. Unlike the US, you are also being deliberately shut out, for the protection of everybody. Lot less risk .... SD

Most argue that RE bubbles are actually a plus. New houses get built, old areas get repurposed, infrastructure gets upgraded (water, sewage, transit, etc.), higher paying jobs from related construction, additional RE commissions, etc. But like anything, abuse it - & you will get burnt. Canada has long had HELOCs & some of the US instruments. Unlike the US, the market levers are much more tightly controlled - & OSFI/BOC/CMHC routinely tighten to cool down markets. Folks will be angry no matter what; whether a bubble was allowed - or they were prevented from borrowing under tighter rules. House ownership is not an entitlement, & neither is a short commute to work. CMHC outlived its main purpose of enabling returning servicemen (WWII) to buy a house (stability) & start families, many years ago. SD

For the most part you either have this (dull Type B's), or you don't (impatient Type A's). It can't really be learnt either, as learning typically evaporates under pressure ... so know yourself, & play only to your strengths. The good news is that the Type B's usually win over the long haul, simply because the Type A's will make errors. SD

Get yourself a trade to do in your spare time, & hire yourself out under your own shingle, or to someone else, on a casual basis. Work an average 15 hours/month on weekends as a baker, plumber, auto mechanic, etc. - & you will do quite well. Depending on skill set, look at start-ups & contribute 'guidance' for equity. You only need to find the next Apple, once. SD

Re Abu Dhabi/Dubai. Much of the building was built on money laundered funds. $ in to create a bank -> new build real estate financed by that new bank -> new real estate built at higher prices to bubble it -> loan against the appreciation to repatriate the $ in. Bank is collapsed (crises), the kingdom takes over the shiny new buildings, & offers cheap rent in Grade A buildings to anyone who would like to start-up/open a business catering to the ME. Very smart. The same process built Vegas, & Havana; just different players. The Paris of the ME was already taken (Beirut), so we got Disney Land instead - just keep in mind that Beirut, Abu Dhabi, & Dubai were all long established trading ports before the West found them; & hot money has been around for a very long time. On any given day the status of Hong Kong could be revoked, making it just like the rest of China - & it would wipe out the wealth of anyone in Hong Kong that is not in gold. So to insure survival ... periodically sell down/borrow against HK assets, invest the cash in Vancouver RE .. & you will never be poor. Vancouver RE gets a steady ongoing inflow of new cash - but the value of the condo to a HK buyer is primarily safety, not shelter. If it goes down 35% next week, it is largely irrelevant. It could never happen here is fallacy - ask anyone from Beirut. SD

There is always a bad guy; in London it was the Arabs following the oil boom, then it was the Russians, now it is the Chinese. The reality is that many of these properties are actually rented out (to friends) at below market rates - & it is often flight money, bribe money, or money laundered funds making the purchase. Players change, but the asset itself stays; realty fees & higher property taxes are just the cost of doing business. Locals bitch because they couldn't match the bid, are not the friends getting below market rates, & cant make their case for deferred taxes because of difficulty paying bills (as those rich guys ARE paying, & ON TIME). The fact that locals benefit from the modernized services financed by those property taxes, & higher borrow capacity resulting from rising property values - is conveniently ignored. You don't need people actually using the place - as Abu Dhabi, & much of Dubai proves. But you have the place, & debt free, because it is an emergency asset that you can use - should you have to flee home with nothing but the shirt on your back. Exiles are routinely created every day. Taxing is also not the answer (UK). You simply flip the place into a locals name, retain a call option at the purchase price, & agree the annual fee on the option for the next 99 years. SD

Travel west from Toronto to Mississauga; & the cost of a very similar house, drops by roughly 70K - just because it is no longer Metro TO. One GoTrain stop, maybe 5 minutes of additional commute, train goes every 30 minutes until 1AM in the morning. Keep going west from Mississauga, & the same thing happens again as you pass through Oakville & Burlington. A similar thing happens if you go north or east of Metro Toronto. Go really west to Hamilton; same GoTrain line (no drive, no parking), but maybe a 90 minute commute to bank land. A many roomed century, & very modernized, mansion may set you back 650-750K; the similar mansion in a Toronto Parkdale (cruddy area) would cost you 1-1.25M, & a 30-40 minute subway commute to bank land. Buy that mansion in Rosedale (Toronto tony area), with maybe 5 minutes less commute, & its 1.75-2.25M. As property tax in Hamilton is less than 35% of what it would be in Toronto (lower value + lower mill rate), the cost of a monthly GoTrain pass is essentially free. Choice of lifestyle cost. Toronto is no different to New York, London, Paris, SFO, etc. Vancouver is just joining the club. SD

Those 800K-1.5M condos are debt free & often bought by active & retired boomers. Lux, new, one-floor, & in the centre of the action; no different to someone buying a 1/4 floor in New York - just cheaper. They will live there a good 10yrs+, & eventually use a reverse mortgage against the place to finance their dotage. Long-term money. Nobody forced that medium income to buy a house at 10x income. Thousands of people move further out of the city & commute; 60-90 minutes each way is pretty normal for a London, New York, Toronto, etc. If you don't want to commute, you made a lifestyle choice - so pay the freight & stop whining. Nothing says you have to buy in Vancouver either, you could have rented. If you sold your West Van house nothing prevents you from buying lux condos in other cities, renting them out, & using some of that CF to pay your rent in Vancouver. Again, if you want to live in Vancouver you have made a lifestyle choice - so pay the freight. Nothing prevents anyone from either downsizing to a smaller place, or teaming up with other generations to jointly buy & live in a larger place that has been re-modelled. Common practice in both Indian & Arabic communities, & it often comes with built-in baby sitting. If you are that concerned about cost - either change your lifestyle, or pay the freight your choice generates. Life is full of hard choices. SD

A large part of Vancouver RE is Asian owned investment property, & is mortgage free; get over it. If condo prices fell in any major way, those investors would simply club with their friends & buy the 2nd condo cheap - in anticipation of a later sale 1-3 yrs later. If they needed cash in the interim, they would simply mortgage the condo, & rent it out cheap to pay the P&I. If the Vancouver condo market were a slum, we would call this process gentrification, & have no trouble pushing out the poor living there - making them homeless. If you want to live in a nice place, either outbid everyone else in the world who would like to live there, or accept the fact that you cannot afford to live there anymore. You would not listen to that poor persons angst, so why would you expect anyone to listen to yours. No different to parts of London, Paris, Geneva, Toronto, etc. SD

Re Value. Every reader of XYZ financial statements will have a different opinion as to what the RE or PPE of XYZ is worth. But most don't realize that XYZ has the assets because to XYZ they are worth than MV; if XYZ thought otherwise they would sell the asset & lease/rent the space back. RE is usually also linked to war-chests; the sale & leaseback is not executed until you need the money, & the lease is back end loaded to minimize early rents & boost the P&L as much as possible. SD

Deprecation results because the asset has a finite life; typically 40 years for IFRS purposes. Evidence that the estimated life of the asset is infinite, & depreciation falls to zero - the common practice for hydro dams. Maintenance costs are expensed as the admin cost of setting up & maintaining amortization schedules, exceeds the benefit. A REIT might consider capitalizing if their costs are significant, but its rare. If you did capitalize, & maintenance cost exceeded depreciation, historical cost would rise very slowly over time. In most cases, changing highest & best use of the land will render the building obsolete before it physically breaks down. The perfectly good silo on a farmers land, now surrounded by a town, is actually worth nothing - as economics dictate that the land be sold & houses erected instead. Put a mall up in a new development, & 40yrs later you should be knocking it down & re-using the space for offices or houses; therefore economics dictate use of poor quality materials during construction, & not maintaining the mall - to strengthen your case for re-zoning 40yrs out. SD

You might want to remind yourself that a public coy does not have to sell equity to raise capital- it can also swap debt for equity. Buying OTM calls & distressed debt at cents, tripping a covenant, & forcing extreme dilution through a debt/equity swap; is a time-honored technique, & almost always immediately followed by a privatization (hedged via the OTM calls). A real underlying business, suddenly relieved of the bulk of an excessive interest burden, is a very valuable thing - & most are not about to share, or report to the world about it. The additional advantage is ability to preplan tax ahead of an IPO exit strategy, & increase your final payout into the 7-8 zero range within 5-10 yrs of initiation. Always get paid, & paid well; for whatever you do. SD

Long ago we reminded our nephews of the negative effect when a well above average, very successful man moves into a richer neighbourhood (Taleb). As the poor guy - you (or your spouse) is made to feel a failure, & you will become one ... if you play the game set up for you. But change the game, & Lenny - you are the fox in the hen house! After that, there were never any further issues. SD

Some things to be mindful of: You are applying a technique that takes you from poor (youth) to wealthy (grandpa) over a lifetime. Keys to the entire thing; are (1) ability to recognize your place in the time/process - as it is occurring, & (2) recognition that wealth is multi-dimensional - not just the size of your portfolio. Its not hard to recognize those who are good at it. The advantage of youth is nothing to lose, & everything to gain (same as when you started investing). They need to be aggressive, in your face, thrown into the world without safety nets, roughed up, & allowed to fail. Most are going to get beat-up at first, find equilibrium, & then come back attacking. Your job is to let it happen, then quietly direct. The very good will attract followers (natural leaders), be very aggressive, & almost certainly business orientated - your job is to show it is far more profitable to be on the right side of the law. Success, or failure, your investment is probably going to go far - & along the way there will be lessons from both. Any team with the next Bill Gates as its CEO, an Al Capone as CFO, & Machiavelli as consigliere is bound to do well. Periodically remind yourself as to what wealth actually is - by giving a randomly chosen homeless person 1-2K in cash, & quietly watching what they do with it. You would be surprised at how many either give the cash away to others as food, drink, etc. - or simply burn it. SD

HW is going to have to wear this for a very long time, & it ranks right up there with what SAC almost pulled off on FFH. We can debate similarities, but that is the perception - & years later it hasn't dulled any. Ultimately it is going to come down to what they have to do to shake the monkey off their back, & the AMF imposing it. We would be one of the compensated, but we would prefer a history making & precedent setting fine; massive enough to choke, but not kill. A headline 1B of funds to the endowment of a couple of Graham style investment chairs in Canada, payable over 2-3 holding periods of 3-5yrs each. If HW compounds at 15%/yr, the day 1 capital injection will double in 5 yrs & quintuple in 10. Upfront cost of 250M, the master demonstrates his craft over a decade to the recipients, & those recipients get a guaranteed minimum payout irrespective of investment performance. Straight forward modified DB pension plan. Sh1te happens, but it shouldn't kill you; & two wrongs don't make a right. SD

There is a wide range of condo size & location within each city. The term 'average' is pretty meaningless here. Most shoebox investment condo's are bought because PIT & condo fees after tax - are significantly less than renting; & little suzy does not have to fight others to get the place. Mom/pop invest by putting up the DP - & suzy rents the condo from them while going to school. Suzy's rent = mom/pops net monthly after-tax cost. Mom/pop will often also be the agent buying/selling the place, & selling directly to other families with sons/daughters in similar positions. Minimal MLS involvement, & a good chunk of the commission $ stays within the family. Raise rates 500bp & the value of all real estate declines, not just condos. SD

Originally patented in 1972, but brought to fame by Dutch school kids making it as a science project, & more recently by Lipsmark briefly getting it into the US earlier this year. Can be made in your kitchen. Obviously great for concerts & deserts - but the real value would in cleaning up oil slicks. http://www.palcohol.com/f.a.q..html http://animalnewyork.com/2014/powdered-alcohol-better-drinking-chemistry/ http://www.reuters.com/article/2007/06/06/us-dutch-drink-odd-idUSPAR64994620070606 SD

Is there a similar setup on the male side ... the Sicilian relatives ;) SD

Just to broaden the discussion a bit .... It is fairly common for the women of wealthy European families to set up corporate trusts where a godmother seeds, a parental age advisor trains the family girls - & works for equity in the trust, and the advisors daughter(s) manage the day-to-day affairs of the trust. Participants may borrow against the trust assets (buy a hotel, estate, house, business, school, etc.) but withdrawals are extremely restricted (re-seeding, death, near death, etc.) Training focuses on the various life-stage financial risks relative to women, is culturally specific, & is very open minded. Arrangements often go back many generations, & former madams/trophy wives in the chain are nothing unusual. These are the female consigliere, very little phases them, & they find you - you don't find them. SD

Just remind yourself that there is a hierarchy to these things, & you gain by moving against the flow ... Technical analysis is frequently a substitute to doing 'real analysis'; usually because the investor wants the glamour, but doesn't have the patience, or horse power of a formal investment training. Money is made by selling punters on the pseudo-science; & as with all mania - the more you can convince, the better it seems to work. ..... but punters have to not realize that they are trading against the algorhythm's programed in house computers. Fundamental analysis is primarily 'marketing analysis'; to drive activity in XYZ. Buy and hold until the next great idea next quarter - or earlier, if trading revenue is sagging. Money is made by selling funds that they have to act on your report, or miss out on the rise & lose future business to competitors. And the bigger your production house - the more effective the 'persuasion' ..... but funds have to not realize that they are trading against the derivative off-sets lurking in the production house dark-pools. Such finely oiled machines are not very robust .. so every now & then - throw some pebbles in. And keep the gains when the machines burp. SD

We use it for hedging purposes. Mostly trends, 50 day EMA & RSI. We also find that when markets close in on cross-over points, the probability of a cross-over tends to rise. That extra 5-10% for noise is essentially the same as a dividend. SD

Sloth just sucks. Get involved in a production start-up - & it'll quickly take care of the problem ;) SD

+1 SD

We got into distressed investment because investments failed, & we hadn't the brains yet to sell early or recover our cash before entering the swamp; we also blew up a few times before we learnt. We hold a CFA designation, were trained in credit by the US Fed, & have spent some time as a corporate treasurer; assume that you are playing against a GS in this space. If you don't intimately know IPS risk limits, the exit procedures, duration, convexity, etc. - you're the one wearing milk-bone undies in the pack of wolves. Long time ago Canada hit the debt wall, & medium term coupon rates were routinely 14%+. Canada's were routinely stripped into IO & PO tranches in the secondary market, & longer dated zero-coupon PO's routinely sold at compound yields of 25-30%. We loaded up & simply let everything mature. We had realized that while sovereigns cannot go bankrupt (they just print more money), it is not a problem if you live in the sovereign - & are not buying anything from abroad (FX devaluation). We also hold a degree in Economics, amongst others. Paul Martin & Jean Cretien arrived, the economy was grown, budget deficits turned into surpluses, & surpluses were used to pay down debt. Debt was refinanced at lower coupons, & debt paid down extremely rapidly. Mid-term yields fell dramatically & all our Canada's went to massive premiums. Because we had the sense to ride the yield curve & go with long dated zeros on very high coupon bonds, these were the first bonds repurchased - & our 20-25yr terms shrank to 5 years or less. Punch card stuff. At the time the $C was ridiculed as the Canadian Peso, & frankly was worth about as much. There was no cash in the economy, mortgages routinely were at 17-20% - if you could get one, & anyone doing this strategy was considered 90% in a mental institution. Very similar to many parts of Europe, in the last 5 years or so. Not all distressed bonds are the same. SD

Where to begin .... ! A priori. No idea what our, or others, results will be 1 yr out. Yesterdays great result also doesn't mean that todays result will be great (I could just have been lucky). But I can say that the successful guy with 40 yrs+ of results (40 yr compound return > market rate) very likely knows his business very well. All athletes believe they are better than every other athlete at the start of the race, but every race has only one winner (assume no draws). Which race. Every sprinter is faster than a marathoner over a short distance, but most can't run even a quarter marathon before collapsing exhausted. Yes, I may know this market very well & have been through a few cycles - but the marathoner has been through many more, dealt with repeated secular change, & come out successfully. Either there were billions of monkeys clattering on typewriters when this marathoner started (Taleb), or this marathoner is a pretty special monkey! Baggage. Small & private doesn't have the burden of fiduciary restriction (investment policy), size, marketing, & regulatory burden; its easy to get in/out, no explaining yourself to shareholders, & no need for a 2.5B+ profit, per quarter, to demonstrate to the world that you still have it. Many folks on this board routinely outperform WEB (.. ericopoly!), but were we WEB's size ? - probably not. Compare sprinters to sprinters, not marathoners. Rubber measurement. Take 50% of your capital off the table today, & double your remaining investment in 1 year; your opportunity cost is 50%. Do it again the following year, & the opportunity cost is now 75% - you're a terrible investor! Apparently, consecutive returns of 100%/yr is terrible performance? SD