Liberty

Good piece, thanks for posting.

WOW!!! It looks like millennials have completely missed the point that cash as a store of value. As long as the cashflow covers the expenses, all is good. There are going to be a lot of people living in their parent's basements for a long time. It's human nature. I don't think people have ever liked this whole concept of "you can only buy what you can afford with the money that you have saved" concept. If credit had been as available as it is now in the 60s or whatever, the boomers would've gorged on it to buy muscle cars with no seatbelts, turntables, and bell bottom pants or whatever. Most people have no idea how to manage money and don't think very far ahead, which is sad.

Unless I'm misreading that, it sounds like people are paying 2.75% extra for the privilege of paying with their credit cards: Crazy. Guessing people desperate or illiterate enough to do that are probably not always paying it every month...

Make sure to also teach saving and spending. Most people don't just fail at investing, they also don't have much to invest in the first place and spend it all on crap that doesn't really make their lives better.

That's awesome. I never could get into exercising much because I tend to find it boring, and I also don't like team sports or activities that need me to leave the house (I know, that rules out a lot of things). I tend to end up doing mostly bodyweight stuff (push ups, pull ups) and I work at a standing desk, so at least I'm up and walking around all day, and I do try to take walks outside when it's not too cold. But I wish I had the kind of habit that you have, as I know it would be great for me. All this introduction to ask: Do you just naturally like exercising, or have you found tricks to make it more fun? I suppose I could try to do it while listening to podcasts or audiobooks or something like that...

One thing that I've found helps sleep quality is a white noise machine. I know some people hate any noise, but we love it. This is the model that we have: http://www.amazon.com/Marpac-DOHM-DS-Natural-actual-Machine/dp/B000KUHFGM

I try to get 8-9, sometimes am fine with 7.

A little about tech for a change: http://stratechery.com/2015/1999/

The greater fool theory. That's basically all bubbles. http://en.wikipedia.org/wiki/Greater_fool_theory

What do you mean? You don't think that at a certain point incomes simply can't keep up, and interest rates will go up in the US, forcing the bank of Canada's hand (if they don't want the CAD to be even weaker -- Canada is still a net importer)? Or that some random shock to the economy (we already have mining in the dumps, and now oil) will be enough? Caring only about short-term monthly payments rather than the actual entire price of something is not sustainable. The government is far from being the only entity that can do something. When they ease like they did recently, they are just kicking the can down the road and making it worse when we get there.

http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/vancouver-real-estate-prices-continue-climb-projected-to-skyrocket/article23799929/

Looking for more Nate? http://www.oddballstocks.com/2015/03/latest-interview-on-benzinga-premarket.html

Glad you guys & gals liked it.

I'm going to step aside from this conversation. I will suggest that: - the starting point of that graph was probably deliberate and things might look different if you looked at a longer time period Found these which goes back to 1980: http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/home-buying/article11502773.ece/BINARY/w620/Real+house+prices%3A+Canada+vs.+the+U.S. http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/home-buying/article11502650.ece/BINARY/w620/Ben+Chart+1

Best of luck with that.

Um. No. Cities don't grow overnight. The historical average of house prices in Canada and the US can be compared over time. Why did they diverge recently but not before? Why was 2006 considered to be an overpriced market in the US but not in Canada? Nobody said that prices were the same everywhere, but this phenomenon is a country-wide thing, just like it was in the US in 2006. Some places are worse than others, but most of the factors that have caused this (federal housing policies, interest rates, media psychology, busts in other asset classes driving people away, etc) were country-wide factors. This isn't like the Toronto bubble in the late 80s. You can look at price trends in almost any city in the country and see it happening, not just in Vancouver and Toronto -- prices might not be as high, but in a small city where houses used to cost 175k, the fact that they now cost 300k barely a decade later is still telling. In any case, this comparison between two very close and similar countries is just one of many factors. Even if that didn't exist, there would still be price ratios to incomes, price ratios to rents, price ratios to replacement costs, growth in prices vs inflation, growth in prices vs historical, debt levels vs historical, buying psychology, lack of good data about the market (the US is way ahead of us there), etc.

That's a good point. Obvious, you don't buy the average price in the country. If I lived somewhere where houses were selling for a reasonable price (some little town in New Scotia or something), I'd buy. But where I am, I don't think they are, and I look at the behavior of everyone around me, how they think about RE, not giving any thought to risk, expecting things to keep going exactly as they have for the past 10-15 years, and how they are buying based on what they can afford to pay per month (without much margin of safety, at these super low rates), and I know that this is not a sustainable thing. And where I live is a lot less expensive than the big cities. Still, too expensive is too expensive; a Toyota Corolla might be a good deal at $20k, but it's overpriced at $40k regardless of the arguments the salesperson has. The argument that you live in your house, so it doesn't matter if you overpay might be convincing if buying a house was the only option apart from a cardboard box, but I can rent and get a nice subsidy from my landlord (ie. to live in equivalent comfort, while putting aside as much as I'm putting aside now (in house equity vs savings/investing), would cost me significantly more).

Do you really think you could sell a house in Toronto and buy something similar in NYC for half the price? No, but that's not what I said either.

When something becomes more overvalued, the magnitude of the price drop that would result from a bubble bursting becomes bigger too. In places like Vancouver and Toronto, it could be quite big, just like in some parts of the US the 2009 house bust was a lot more severe than in other places. Averages don't tell the whole story (cue story of the man drowning in the river 4-feet deep on average). ie. If the tech bubble had burst in 1997 rather than 2000, the drop would have been lower. If the US housing bubble had burst in 2005 rather than... This situation in Canada lasting longer isn't a good thing. It's not like there's a 25% drop written in stone from whatever level. Also, real estate is a very psychological asset that people buy for emotional reasons, and when psychology turns, it can happen very quickly, and a drop doesn't have to stop at fair value. It can go through the floor quite a bit. Downsides of that are that houses aren't very liquid, especially not if the market becomes troubled (which is when you might need money most - ie. Calgary these days), if you want to own a house, whatever appreciation you get would just go to pay for the appreciation in whatever place you're moving to. You could try to jump out of the market at the top and rent for a while, but trying to time these things is always very hard. Seems less risky to me to try to jump in from outside when you see prices being low than try to jump out from inside when prices are high -- and I don't see being out as a missed opportunity since we rent quite a nice place, so not a sacrifice, and my capital is compounding in the market faster anyway, and I feel it's less risky to own a dozen high quality businesses than 1 asset in 1 city on 1 street. To me the same questions always remain: Why are houses almost twice as expensive in Canada as in the US? People keep adding debt to buy things that don't generate cashflows. What happens if capital appreciation stops or reverses? What happens when interest rates start rising in the US? Why is Canada one of the most expensive places to buy a house in the world when looked at ratios to rents and incomes, as well as historically for same country? How fast have incomes gone up in Canada in the past 10-15 compared to house prices? How long can that delta keep widening? Etc.

How is it opposite?

Either that, or people pretend that A and B are the same thing when they aren't, or that what Buffett and Munger said were blanket statements without any possible exceptions. ie. It's perfectly fine to say that most derivatives are dangerous because people don't know what they're doing, don't know what their real exposure is, etc.. And then have Buffett use derivatives that he understands, where he knows what his exposure and risk is, etc. It's not contradictory. It's people who only remember the soundbites ("derivatives are weapons of mass destruction") rather than the actual more subtle arguments that were made in a certain context, at a certain time, or in answer to a specific question. Same with Buffett and Munger saying bad things about the PE industry, because yes, in general is has a set of incentives that make it pretty bad for long-term value creation and risk control. But that doesn't mean that there can't be exceptions. Do you think Munger and Buffett would say that their statements were about every single PE firm in existence? 3G is PE, but they seem to be pretty long-term oriented and to think like owners. How are the businesses they've owned for a long time doing (and what does that tell you about how they are investing and cutting? Is it possible that they are really good at finding actual waste to cut - and that they pick businesses that they know have ton of it to cut - and still invest in the core business?)? How often do they flip things compared to most PE? How do they protect their downside? Buffett's a pretty smart guy. If you asked him about his comments on PE and 3G, I doubt he'd say "oh, you caught me". He might say that his problem is with a lot of PE practices, and that 3G doesn't have those. And it's not because he doesn't have the stomach to do big restructuring himself that it's something that should never be done and that you can't strengthen a business that has grown soft and fat over time. People assume that because Buffett doesn't like to do certain things, that he would be against them in all situations in the abstract...

Timing is hard, for sure, but value remains value. I'm sure people thought tech stocks were overvalued in 1997... Didn't make them fairly valued in 1999 because there hadn't been a crash yet. The problem is I think for the foreigners, houses are cheap here. A million for them is cheap to have an address in Canada. Places like Scarborough, a smallish house asks for 500k can be sold for 700k. And the same house maybe worth mid 40 couple years ago. Not sustainable if all buyers are local and need employment income to sustain mortgage. But we are talking about ppl who does not mortgage Where is "here"? Just Vancouver or all of Canada? If houses are cheap here, just imagine how much cheaper they are in the US (about half price) and in other places around the world (Europe) that haven't had this massive, way above inflation, decade long run of debt binging. A few years ago the government allowed 40-year amortizations and 0 percent down, do you think that has had an impact on psychology and that maybe there's a lot of inertia there? Once things go up fast enough for long enough, people become convinced that it'll always be that way (especially if other asset classes get killed in the meantime and people lose confidence in them). I think we're still moving from past decisions, but now with mining in the hole, oil crashed, the canadian dollar clobbered, the US getting better, debt piling up and incomes getting farther and farther away from home prices, something has got to give. Otherwise what, households making 60k will be buying 2 million dollar bungalows in a few years? Look at any world comparison, and we're one of the most expensive places in the world compared to rents or incomes or replacement costs (behind Hong Kong..) yet Canada's weather sucks and our economy is not doing well... Vancouver and Toronto aren't Paris or New York, that's for damn sure. Also, blaming it all on foreigners will be shown to be a mistake in due time, I think. Most of what I see is that they are only a small part of the market. There was a survey in victoria where it was less than 1% of the market. But of course, realtors love to keep the illusion going (buy now or never! these rich foreigners will outbid you if you don't give your maximum!), so data is hard to come by for most places. In fact, even numbers on housing coming from realtors are really suspect and the media basically reprints their press releases; there's a total lack of transparency in our market.

Timing is hard, for sure, but value remains value. I'm sure people thought tech stocks were overvalued in 1997... Didn't make them fairly valued in 1999 because there hadn't been a crash yet.