Friday, October 30, 2009
What will the October numbers reveal...?
Wednesday, October 28, 2009
Commercial Real Estate
Hot cities like New York and Hong Kong and London have teeny weeny cap rates and now Vancouver.
The reason is clear, we have a lot of money chasing very little product.
As we all know a lot of people come to Vancouver with money, they retire from out East, they come from overseas and a lot of people here are making big chunks of money. After a few years of almost no interest in the bank, many finally make the leap into commercial real estate to try and juice their returns. They like to keep it local, so they can keep an eye on it.
Some of our retail rentals (like Robson Street) are amongst the highest per sq foot in North America.
The logic is that while it may just be 5-6% return now, the market is tight and so rents will go up and in a few years you may have CAP rates of 8% or more.
Downtown rental buildings have had particularly low CAPs. Some selling with minuscule 4-5% rates.
The problem with such low rates for commercial rates...be it office, retail or residential.. is how easily the CAP rate can disappear altogether.
A renovation or an elevator which needs replacing OR A tenant who leaves or goes bankrupt (and the tenant-inducement needed to bring another one in) and your total returns for the year are gone.
Also any on-going weakness and the rents will NOT be going up, and in fact may go down to keep struggling tenants.
Looks like the total sales of commercial property have fallen dramatically all across Canada. Though Vancouver was saved somewhat by the big ticket purchase of Bentall V by a German Pension agency. This seems like an expensive buy to me, especially in this environment. They must have a lot of faith in Vancouver:
http://tinyurl.com/yz2fzzs
Monday, October 26, 2009
MYR 300 FREE money for self employed
Although $60 a year is a small money but are you sure you want to pass on any FREE money ?
Assuming EPF declare a dividend of 4%, you will get more than MYR 10,670 5 years down the road out of the MYR 6,000 you have been saving. MYR 100 x 12 months x 5 years.
If you save the same MYR 100 monthly else where, it will need 22.01% interest rate to obtain the same return 5 years down the road.
22% passive return is not something available readily anywhere in the market. The only con side of this offer is its limit of MYR 300 contribution from the govertment in the next 5 years. Which is pathetically little. Then again, it also means it doesn't hurt at all to save the extra MYR 100.
Comes to think of it, is Someone intentionally trying NOT to pay out this FREE money by NOT promoting it as it deserves ? So they may declare a good policy change but keep things quiet and then at the end they can say, "it's you who didn't take our offer!"
Proceed with care and patient, EPF department does NOT know how to handle this yet ... their typical responses are, "Come back next year ..."
Zero Sum = Nothing ?
Sunday, October 25, 2009
MYR 50 credit card fee - Solve debt with more debt !?
Saturday, October 24, 2009
This is absolute Lunacy...
I really cannot get over the fact that Harper's Government is almost doubling the CHMC's ability to lend in just over a year.
What are thinking? What happened to the fiscal Conservatism?
Think about it..if you are a bank lending officer and sitting across from you is someone who has, with great difficulty, saved 15-20% down-payment but is subject to the vagaries of the job market or someone who can only scrape together 5-10% but has a government-issued CHMC guarantee behind them...which would you lend the most money to?
I know the concept of the CHMC is laudable. Help low earners get on the property ladder. It was the same rationale used by Fannie Mae and Freddie Mac and the HUD in the US.
In fact what happened was a catastrophe. A lot of these folks were too extended to get into their purchases, had very little 'skin' in the game and with the smallest drop they lost their equity and stopped payments.
Lower income earners are also, unfortunately, the most likely to get hurt first in a recession.
'The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.
For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.' Globe and Mail October 21st.
What does this all mean? It means when, and if the second round of the recession comes in 2010, there will be nothing left to fight it with. The Provincial and Federal Governments are already tapped out and the Federals will be dealing with CHMC losses and Baby-boomer costs. There will nothing left to stimulate with.
We will be forced to live within our means.
The governments here have made many decisions, some good and some bad, but this is one of the worst.
To 'Help' people to get into housing when the economy is so uncertain, when the prices are near or at their peaks, when interest rates at so low and could conceivably double in the next few years, is....IMVHO ECONOMIC LUNACY and purely political!!
Friday, October 23, 2009
Case Study : How to use Money ?
Thursday, October 22, 2009
The Perfect Storm
Are we setting up for the Perfect Storm in Canada?
Maybe.
Exhibit one...exploding deficits like this one:
http://ca.news.yahoo.com/s/capress/091022/national/ont_economy
Exhibit two...completely oblivious to the foolish errors that took place south of the border, we are marching to exactly the same drum:
'The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.
For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.' Globe and Mail October 21st.
Insanity: doing the same thing over and over again and expecting different results. Albert Einstein
Wave one. The crisis hits. Governments and policy makers did nothing to prevent the onset, but now throw everything at it, everything they have.
We go deep into deficit.
The crisis is averted, for now.
Asset bubbles reignite..RE here, Gold and Oil worldwide.
Wave two hits. They have nothing to fight the fire with. How can a Provincial Government which has a $25 Billion deficit pay for it's regular programs, never mind expand??
We hit the Perfect Storm.
Is this scenario likely? Maybe. Not many economists are even mentioning it as a possibility. Yet it is very possible. All governments are facing increasing expenditure and declining revenue...and add to that the baby-boomer entitlement programs and it is hard for me to see how this can end well.
Tuesday, October 20, 2009
I have earned 67% in a day !! can it be TRUE ?
- One day earning doesn't really mean much. As shown in this article, another day of 67% lost would not only not break even but actually making you some loses. The average return for the whole year is more important so that it is comparable with other rates like BLR and fix deposit interest rate etc. Persistency over the years would also become more important as time goes. Be reminded that Warren Buffet average annual return is 15.6% ( details in Greatest Investors of all time ).
- It is also not too hard to catch the 2nd pitfall. Actual amount matters. Earning 67% from $1,000 is very different than earning 67% from an investment of $100,000. I can easily turn $1 to $2 earning 100% return but I would be happy if I can get 10% return from my $1 million investment. This is the part that says size does matter and a big percentage number is only exciting when it works together with another big number.
- Another pitfall is one that some may overlook. Investment return should be calculated based on total capital, not the transaction amount itself. For example, I have allocated $1 million for a particular investment. In one particular transaction, I invested $100,000 and earned 67% return while the rest of the $900,000 sits somewhere doing nothing. My overall return is actually 6.7% only. Meaning I have earned $67,000 with $1 million. This is particularly important when judging fund managers performance.
Sunday, October 18, 2009
Case Study : Property Investment Opportunities are Rare ?
Purchase Price : $4 millionsBank Loan : 100%Loan Rate : 6%Monthly Rental : $30,000
- Many people want to buy it but not all of them have 4 millions
- Many people do not qualify for a 4 millions loan
- Some people CAN buy this but this may NOT be their only choice
- Some people WANT to take this kind of opportunity but NEVER found this particular one!
- Both seller and buyer may have personal preferences ... etc.
Nuttin' much to say
I think Klepto has been too busy to parse the numbers and I haven't got much to say. Lets see what October brings.
If the commodity market continues strong and assets like the stock-market and $CAD stay strong and interest rates remain low-the market will continue buoyant and the bubble bursting graph I posted below will fail.
However if any of these change directions then we will see renewed weakening.
Nothing more to say. Lets wait and see what the end-of-October numbers have in store for us.
Sunday, October 11, 2009
Have a Great Thanksgiving
BTW here is the bubble graph I have posted before and Larry Yatter's graph of Vancouver average prices. As you can see it looks like make or break time!
The Biggest Chunk of Insurance Cost
10 years old policy has an effective commission cost of 20% = 2 / 1020 years : 10% = 2/2040 years : 5%
What happen after Automatic Saving ?
- Choose an account that gives highest interest you can find for your ASS account
- Decide how much emergency fund you need in your ASS ( usually in number of months or years of your monthly expenses )
- Once achieve the emergency fund amount, the overflow should goes into investment
- Your investment potential return should be significantly higher than your ASS return
- move the emergency fund to FD, Bond Fund or Money Market Fund if interest is higher than your ASS account.
- Continue looking, learning, categorizing and revising until your investment return is Passive and higher than your active income.
30% LOST is MORE than 30% profit ?
Saturday, October 10, 2009
Married : Combine or Seperate Account ?
Your account is Yours,My account is Mine,Our account is Ours.
Friday, October 9, 2009
Web statistic - a different era for MalPF
Non Money Oriented Personal Finance Style
Gabriel is the one who is NOT that RICH but financially quite independent and freedom he has.Ahmad fights inflation by growing his own needsAh Dung is the RICH guy who didn't really get hurt by inflationMathew is the typical Average guy who is shocked by an effective inflation of 24% !!
Thursday, October 8, 2009
Bursa Malaysia teaches Don't Buy And Hold
The Malaysian stock market is one of the strongest and sometimes most dynamic markets in the world.
While the market has always recovered from falls, the same cannot be said for individual companies. Even during a booming market, some companies can suffer significant losses.
Trade only on an uptrend and sell the poor performers, this will make it impossible to experience a large loss. This is the secret to outperforming the market and achieving a consistently superior return.
Undertake some research on the Bursa Malaysia or in a local investment paper. List three shares that have showed decreased performance recently and three shares that have showed increased performance recently.
Guest Post: Student Loan As An Investment and Student Loan Debt Consolidation
A student loan is considered to be a good investment since it is taken out to establish the career of an individual that helps him earn his livelihood. However, sometimes it becomes impossible to prevent debt arising from student loans. Debt consolidation plays an important role over here. Student loan debt and mortgage loan debt are considered as “good debts” because of their positive aspects. On the other hand, credit card debt and car loans are regarded as “bad debts’” since they signify lavishness. You don’t acquire student loan debt by extravagance. These loans can be obtained more easily from federal sources than private lenders. You can get useful returns from utilizing a student loan. The more you become educated, the more is your earning capacity. However, you must not forget that you have got to pay it off.
The anxiety of paying back multiple student loans can be annoying on certain occasions. In addition to this, procrastination is a normal feature of the college life of a student. This does not spoil your results but not paying your loans when they become due for payment would certainly have a bad impact on your financial future. The most effective option for a student to drive away his financial concerns and get pleasure from his college life is a student debt consolidation loan. This type of a loan combines all your student loans into one loan that is simple to handle. You basically take out a bigger loan to manage your various smaller student loans. As a result of the affordable and competitive interest rates, you can save some money. By stretching out the repayment terms, your monthly payments are reduced considerably. You also have the opportunity of locking in an affordable rate.
At present, the last thing that you want to happen to your finances is piling up a huge amount of student loan debt. A student debt consolidation loan can be the right solution to conquer your debt problems. You have to keep in mind that private student loans cannot be consolidated with federal student loans. If you’re suffering from student loan debt, you have to consolidate your federal student loans and private student loans separately.
Tuesday, October 6, 2009
Late Breaking News on the Athlete's Village
Final cost to tax-payers depends on how strong the property market is. Best case from Robertson = break even.
Worst case $1 billion in the hole.
As they said on CTV, politicians should not dabble in business.
More importantly who advised the previous council (only Susanne Anton is left in the boat from that administration) ? Which law firm, which accountants and financial advisers??
Should they not be held liable?
Does anyone have the time to ferret through City info and find out who these advisers were?
Meanwhile the RCMP have been questioning the friends of Olympics opponents. Be careful who you share that extra-hot skimmed late with :
http://tinyurl.com/ydgsz4w
And yes anon (from the last comments) I did see what happened to Canwest. The ire of the public prevented at least one tax-payer bail-out, though I do feel sorry for the employees:
CanWest union decries bankruptcy protection
2009-10-06 16:01 ET - News Release
Mr. Peter Murdoch reports
CANWEST EMPLOYEES DESERVE BETTER
After CanWest Global Communications Corp. filed for Companies' Creditors Arrangement Act (CCAA) protection for some of its operations, Peter Murdoch, vice-president of media for the Communications, Energy and Paperworkers Union of Canada (CEP), said in reaction, "Media workers at Canwest stations should not be forced to pay the price with their pension and severance payments for financial problems that are of the company's own making."
"Employees have done everything they can to sustain this company," says Mr. Murdoch. "Thousands have already lost their jobs and there has been no wage increase for years.
Though management salaries have been excessive -- $49-million to eight people from 2001 to 2008, while during that same period over 1,000 Canwest employees lost their jobs.
Those who are left are on pins and needles, including pensioners." Mr. Murdoch adds that governments, banks and media conglomerates have all ignored the warnings about the dangers of massive media convergence and unsustainable debt. "CEP will be front and centre to ensure that employees are first in line for company obligations," says Mr. Murdoch.
Mr. Murdoch also says the federal government should step up to the plate. "The federal government has been irresponsible in monitoring and policing pension plans, and where is it now to backstop this?"
"Yet another major company has filed for bankruptcy protection under Prime Minister Stephen Harper's watch," says CEP president Dave Coles. "It's time for this government to stop congratulating itself and to take action to prevent more working people from falling victim to this recession."
CEP represents more than 25,000 newspaper and broadcast employees across Canada, including workers at the National Post and Global TV who are affected by the filing announcement.
Monday, October 5, 2009
BEST rates in Malaysia - update 2009 10 06
Sunday, October 4, 2009
Malaysian Personal Finance Part 1 - EPF
When Prudence Doesn't Pay
In fact most are fiscally careful people...they save money, buy things on sale and won't over-pay for something because they 'just have to have it right now'.
For these folks Vancouver RE hasn't made sense for several years now. The widely accepted, often quoted ratios are...keep your mortgage to 3.5 X your total income and keep your house expenses to 40% of net income. Vancouver has been well over these numbers for a long time.
So they have patiently waited, like the counterparts in the US.
The US bears have been richly rewarded for their patience, as the housing crisis struck and foreclosures mounted. They now have their pick of properties and a low mortgage rate (assuming they still have a job!)
Here in Vancouver (in fact in all Canada) it looked like the bears were about to get their moment in the sun as well. As you can see from the graph below, sales completely collapsed last year.
The rate of collapse was unprecedented. The bounce up was also unprecedented, even faster than the preceding bubble. Enough to make a bear's head spin. No wonder the bears are downcast.
Who would have forecast an instant rebound back up to pre-crisis sales levels. It was like Vancouver hit a trampoline.
So why were so many caught off guard by this rebound. Here are some reasons:
1) Firstly there was the interest rates. The BOC dropped the rates to 0.25%. Never before had they been so low. As I posted at the time the drop in mortgage rates was like a 30% drop in prices.
2) The drop in interest rates not only made mortgages cheaper, but rates on deposits dropped encouraging those with a large down-payment to put it in property. Both 1 and 2 helped move the equation in the direction of buying versus renting.
3) Those of us who have a lived here a long time time failed to understand the allure of our city. This is particularly true for retirees, who come here with funds. The last that apartment sold in my building was to a retired dentist from out east. He also bought another apartment and a commercial property for investment. He admits the cap (returns) rates on both are minuscule compared with what he could get out east..'but I can keep an eye on them here'.
4) The drop in interest rates and Federal and Provincial crisis spending came at a time when we already had a boom from construction, both Olympic related and residential, commodities were still pretty solid eg gold and oil, and so we just bubbled some more.
Ok so that is what happened -what now?
I will give that my best shot in the next post.
Thursday, October 1, 2009
Final projection for September
Listings: 5553 (-10% yoy) (+22% mom)
Sales: 3459 (+118% yoy) (+1% mom)
Sell/List: 62% (+36 pp yoy) (-13 pp mom)
MOI: 3.9 (-70% yoy) (+4% mom)
Actives: 13,572 (-35% yoy) (+4% mom)
* Rate of Increase: 44 per day
Avg Price SFH: $863,265 (+9.3% yoy) (-3.0% mom) (-6.2% from peak)
Avg Price Condo: $435,134 (+7.4% yoy) (+3.1% mom) (-3.3% from peak)
5-day Average SFH: $931,340 (+7.9% from current month)
5-day Average Condo: $430,755 (-1.0% from current month)
Median Price SFH: $704,211 (+1.2% mom)
Median price Condo: $378,029 (+1.1% mom)
* Missing data from Sept 21 and threw out erroneous data from Sept 30.
The REGBV will release the actual tally within a few days.