March 09, 2009

New Internet Venture - Make Extra Money

A month or so ago, I offered an opportunity to become involved in a new internet venture; I look foward to working with the group of people who have joined me on this wonderful ride.   This new spin on an old idea will be LIVE by the summer.   Although there is no longer an opportunity to become involved with the venture, you can still register now to receive our Free Gift when we go Live on the Net!
It's free to register, you'll receive a free gift in the early summer, and you'll learn how to barter goods and services to reduce your cash outflow and get stuff you want or need.  If I haven't convinced you to register at, you might do so after seeing what I've received with no cash outlay over the last few weeks only!
  • a couch reupholstered
  • fitness classes for my students
  • large dents on my car repaired
  • driveway resurfacing
  • carpet replacement at my cottage
  • plumbing repairs
Regsiter with today and save thousands tomorrow with this innovative approach to a time-tested concept.  

Should We Take Responsibility

I often wonder whether the excesses of our lifestyles (as opposed to the lifestyles of our parents and grandparents) are at least partially responsible for this mess we're in now.   For many decades, we have lived in what I call the "I deserve" decade.   During this time, we have not worked for the money first, then purchased later.   Instead, we have bought first (because we deserve) then figured out how to pay for it later.   In simple terms, this is easy to understand:  the over mortgaging of a house, the easy credit society of North America, the resistance to working for a living, or the grandiose excesses of our lives.  
What if we were to apply this concept to a much larger scenario?   Take for example, the workers in the automobile industry.   Can we consider that the union strength and worker demands might have had at least something to do with the fact that there is almost no positive, healthy auto industry left?  What about Nortel?  This corporation (who's stock are now valued at 10 cents, and has written off 3 billion dollars over the last 4 months and fired over 70,000 employees) has just somehow voted on 45 million dollars worth of bonuses for senior level management!   I mean, imagine the entitlement umbrella under which these guys are taking cover!  And this is just after posting a 15% drop in revenue!
If we think about, we have all been responsible for getting to where we have landed.  Our destination was almost certified from the day we boarded the train.   If we are to climb our way out of this, I believe we will need to take some responsibility for changing the way we operate, both personally, and corporately. 

This Recession Will Deepen

CMHC has forecasted that our economy is to rebound by 2010 and the Bank of Canada chief has also been quoted as expecting a rebound in early 2010; these forecasts have also been received with widespread ridicule.   I wouldn't necessarily ridiculue anyone for their forecasts, but I would consider looking at the current facts and trends.   All of the forecasts that have been proclaimed, over time, have been revised downwards as these last few months have passed.  For example, an original housing starts fourth quarter outlook from last year was predicated at 200k, but reduced to 177k, then reduced even further.  The fact is that housing starts are now lower than they have been in seven years!  I believe that housing starts, which have been steadily declining since last October, and are primarily fueled by the global financial crisis will result in further decline of home sales, leading to a further softening of the economic climate.    But Duggan, the CMHC chief has proclaimed the following:
"Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals."
Further reports from CMHC show drastic declines in housing starts, especially in the West (most likely because it was booming the most), where upwards of 30% drops are expected by the year's end!   Can you imagine if your home value dropped by 30% in one year?   But most reports and many forecasters are suggesting that perhaps with the exception of BC and Quebec, most provinces should see some relief in 2010.   I guess we'll just have to wait and see.
Home sales in Canada have also been steadily declining (housing starts and home sales are interconnected); current forecasts for average decline rates are in the 15% range for the next year!   Average home prices are expected to decline by a little over 5 %!   Current data shows that Canadian home sales have plunged dramatically by 41% and prices dropped by 11%!  This signifies a huge and abrupt stalling (but a year is still less abrupt than a day, or a few minutes, like in the stock market - and we did have notice) of the market.
Set off by AIG (the world's largest insurance company) which recently received a bailout of over 180 billion dollars!!!!, markets were in a spin this past week.   Last Monday, AIG wrote off over 62 billion dollars and coupled with a sinking US economy and a drop in Gross Domestic Product (Canada's drop was over 3% last quarter)  markets reacted aggressively.   Our stock exchange dropped over 435 points in just one day - the lowest close in OVER a decade!
Since Labour Day, the stock market average has been going south consistently.  Markets ranged in the 14000 point scale and now our just over 7000 - a 50% drop since September/08 and we are only in March/09.  Although things aren't as bad for us in this area as it is in the US (where markets closed last week at their lowest ever in more than a decade!), things are still concerning.   And with the GDP continuing to decline, this is my summation:  this recession will continue to deepen. 

March 07, 2009

Market Update & Personal Finance Suggestions


For many months, there have been warnings of a market meltdown, or an impending crisis.   Unless you live in a cave, you know by now that there are problems both in the US and globally.   Financial markets like the TSX went down over 800 points this week, house prices all over Canada are falling, the US situation is a disaster, with people loosing their homes left, right and centre, and debt load consumers are bracing for job losses in all major Canadian industries.   And although, we're not facing the same horrific situation here in Canada, we are definitely feeling the pinch on the credit lending side.   There will be less lending, more prudent decision making, and tighter controls.   As of October 15th, Canadian lending institutions will administer the change in law on lending practises, to buffer the Canadian economy and avoid the credit crisis facing the Americans.   (In parts of Southern California, for example, half of all house sales are reposessions!   HALF of all house sales!   And listen to this:  a majority of all houses are full of stuff the owners leave behind, including TVs, flat screen TVs, and other high-ticket items.   What's the reason?   They can't afford movers, so they just pack their car with whatever fits and leave the rest behind.)  Surely these are all signs of omminous times. 
What does that mean for us?    Well, I think it means time to plan ahead.   We're likely a few months behind whatever economic horror is occuring across America.   According to Warren Buffett, the "Americans are heading for an economic Pearl Harbour."  If Pearl Harbour or something like it is in the near future, then we should clean house to make sure we are padding ourselves with cloaks of safety.  
Here are some personal financial suggestions:
  1. Clean house:  review all of your monthly expenses and reduce them in any way you can.
  2. Get rid of excess stuff you don't need by selling on e-Bay.   You'll generate income AND clean house.
  3. Start an internet business and spend a few hours per week working on it... it may provide you with a few extra thousand in a year or two.
  4. Do not pay off all your bills with any windfalls:  buy some property instead. 
  5. If you have any savings accounts, switch them to banks paying high interest on savings accounts (without the bother and chains of locking in).   This means you leave TD or BMO and head over to, or   All of these banks offer regular savings accounts that pay out 3% interest.   It's better than nothing and it's NOT locked in.
  6. Review all your credit outstanding and make a plan to get rid of them.
  7. Consider buying stocks now or in the next while... as things are sliding.    When stocks go down, we forget that it's actually the best time to buy!

Here are some real estate suggestions:

  1. Refinance today!    Get a credit line quickly.   If your house goes down in price and you lose your job, at least you'd be able to use the credit (from today's value of your home) to purchase something which will generate income. 
  2. Buy cash flow property now!   
  3. Sell off large scale equity property that have no possibility of becoming cash flow property.  

Take heart, things will get better.   In the meantime, make sure you clean house and review your holdings.  Slight adjustments now will guarantee your financial future will be that much brighter!

Barter - The Recessionary Economy


Has anyone heard about barter exchanges?   I've been using BNL (Barter Network Ltd.) and Itex Canada for sales and purchases for several years, and it's worked really well.   What is a barter exchange?   The simple version of a barter exchange is that it works on the old fashioned idea of trading services or goods.    It's a great system if you're short of cash, or want to produce extra disposable income with little effort to a dedicated market.   The barter exchanges I have used are "Barter Network Limited" and Itex Canada, ( as well as Trade Business Exchange:   There's also some internet websites and  
In effect, you barter (trade) your services or goods in exchange for a credit, which then you can spend with any of the other people in the barter exchange system.   The bonus to this system is that it is cashless (you don't need money), and it is a dedicated market:  people will look to you because you are a barter exchange member.   It's a great idea!  (P.S.   The exchanges charge a small fee to join, then a percentage of sales, but it's worth it.)    Tell them I referred you - you never know I might get a kickback or referral fee, and instead of donuts and juice at the next meeting, we might just have champagne and caviar!  LOL....

The R-Word: Recession!

Recession Definition
None of us has been living in a cave for the past few months, so we all know that the economic crisis in the US is in full swing.   Most of us also know, believe, respect the opinion of economists, or at minimum, recognize that history repeats with respect to most things; the translation advises us that we are about to be affected by the economic crisis faced by the US and a recession is either already occuring or imminent.
What exactly is a recession?   According to economic definitions, a recession is a downturn in the business cycle that occurs when the real gross national product (GNP)—the total output of goods and services produced population declines for two consecutive quarters, (1/4 year = 3 months, so 2 consecutive quarters is six months). Recessions are usually characterized by a general decrease in output, income, employment, and trade lasting from six months to a year. A more severe and long-lasting economic crisis is known as a depression.   Mostly because we are living in North America, our government somewhat protects us from dropping into an economic depression, which hasn't happened for decades - mostly due to government interventions and strategies. 
Recession History
A quick review of the history of the recession indicators from the turn of century start with a 1907 drop in the Dow Jones Industrial Average to the tune of 35% over a period of nine months!   If we remember anything from high school history, we know about the Stock Market Crash of 1929, when stock markets dipped 85% over three years, but made a dramatic drop over a few short months and for the first time affected global markets.   Then there was the 10 month recession in 1960-61.  Then the Iranian Revolution and the associated oil crisis and energy crisis of 1969-1970.   Some of us might remember the oil stock crash of 1973, when the evening news showed us line ups for gasoline in the US, oil prices quadrupling (due to OPEC changes) and heavy financial losses from Vietnam, with economists and financial analysts described the 40% drop in the two year period post 1973.   In the early 1980s, there was the recession of 1982 and 1983, caused by tight monetary policy in the US to control inflation and sharp correction to overproduction of the previous decade, which effectively was masked by inflation.  The national exuberance of the 80s (real estate in Canada as well as the S & L (Savings & Loan) exuberance) period probably led to the recession of the late 1980s.    Most of us can't help but forget the 'Black Monday' of  October 8th 1987, when stocks abruptly fell in one morning, but continued to fall over three weeks to an almost 82 points.   Then, spurred on by the tech stocks, the collapse of junnk bonds and a credit crunch, as well as the internet revolution, there was the serious 1990 recession that lasted from July 1990 through to March of 1991, but had after effects for some time after that; fortunately, government spending and other initiatives helped to stall the advent of an actual depression, although interest rates for residential mortgages climbed dramatically during this period.   The next recession began in March of 2001 and ended in November, with after effects until 2003 with the collapse of the Dot com Bubble.    Of course, we all remember the minor correction/contraction caused by the September 11th attacks and the accounting scandals.  However, since about 2002-2003, there has been no recession, with the economy in an upward swing that seemed everlasting - until now.
Update - July 2008

Another war and another credit crunch brings us to 2008.   Here we are, with a brooding economy south of the border (should we have known when our dollar crept up for the first time in three decades?).   As the real estate bubble continued to gain momentum, and more and more people were encouraged by the social morals of this day and age (purchase on credit and worry later - laden with debt) affected the judgement of the mortgage industry, and we continued to buy, buy, buy, and spend, spend, spend, we should have known it would end.   And now, it has.  

What are we to do?   That's the million dollar question.  If you're in real estate, you might now be reducing your risk and playing the RichDad "Where can I really find hard core cash flow properties?" routine....whatever your choice, you've surely reviewed your goals and modified your real estate decisions over the last six months, to accommodate for the changing financial arenas.
Update - March 2009
Well, here we are:  in a full out recession, which people are likening to the Great Depression of the Dirty Thirties!   With AIG needing a further bailout, with auto companies failing, and European banks at the brink of disaster, what are we to do?     I continue to say that this is likely one of the best times to buy we've seen in the last couple decades.  You could argue that we should wait a few more months to a year to make sure that we've hit the low, but regardless, moving forward, we should look at the situation as a situation of hope!   Why?   Because this is the type of situation they are talking about when they say "Buy Low, Sell High."   Don't run for cover or let the media and the economic uncertainty rule your decision making.   Break free!  

A Warning With A Lot of Notice


In one of my newsletters of the past, I included the following sentence: " Since everyone is saying that real estate is about to take a major plunge downwards..."  then I went on to warn people (like I'm warning myself) to maybe consider hiding in cashflow properties, and less in equity purchases.  Quickly thereafter, I received a chastizing email saying that my comments were terribly irresponsible; there was also a link to a CMHC article about the sellers' markets returning to a balanced state!   (In retrospect, what were they thinking to write an article like that when clearly the writing was on the wall?)   The email went on to say that my comments could become a self-fulfilling prophecy.   And, I do believe in those types of things as well.  I know, like the movie "The Secret" ( - if you haven't watched it, you've missed a great message) that our beliefs, ideas, and values become our reality because they drive our daily decisions.  
The only problem is that I don't believe I was prophesizing.   I think I was reflecting on the market changes in the US, which have historically been followed by market changes right here in Canada because of our major trade connection and inter-dependence.   Remember Pierre Elliot Trudeau's famous comment about the mouse and the elephant?   Who has greater power?   I  think it stands to reason that we are about to be impacted by the growing and impending recession in the US.   This is not a prophecy:  Michigan is in a disastrous condition and Florida is becoming known as the "Foreclosure State".  Several other states have seen huge decreases of real estate equity. 
At the same time, I believe that we will not drop dramatically and have as many problems as the US is having and is about to have, because we haven't been as aggressive as the US in the sub-prime mortgage market.  As Canadians, our ideas, beliefs, and values are somewhat less aggressive, and from a business perspective, when times are good, this may not been viewed as avant-guarde, (or old fashioned, as even the new 40 year amortization raises eyebrows here) but during times of recession, the offsetting value is that we will be somewhat insulated from the degree of negative drop. 
Although I'm no economics major, and certainly don't profess to be anybody important in this great debate, I have to wonder why the Bank Of Canada is even considering dropping the rates.   After all, I know a few basic things:  
  1. There is a huge sub-prime mortgage crisis occurring in the US; 
  2. The US will suffer from the 3 trillion + spent on the war effort for decades;
  3. We are succumbing more and more to the manufacturing prowess of the emerging markets;
  4. The trade interdependency between the US and Canada will affect us more than it will them, and lastly;
  5. The downturn in the economy already happening will negatively affect the Canadian economy because of its interdependency.   
So, I guess I agree that while some ideas can become self-fulfilling prophecies, other thoughts and ideas can be reflective of changing trends in the markets, and should be serving as warnings to us all.   Current investors need to be aware, in my opinion, more than ever before, that this is a time for cash flow purchases - not risky equity deals.  If the market continues to drop, your cash flow properties will protect you and provide more or less the same income, regardless of whether the value of the property goes higher or lower. 
This did prove to be a correct summation of the recessionary tendency of the time.  Now, there isn't anyone who wouldn't agree that 'hindsight is 20/20', but it wasn't too hard to see this one coming!