As I pulled off my cowboy books and prepared to be sautéed in that human microwave now installed at the airport security circus, Mr. Glum Guard looked up and said, “So, should I invest in oil or gold?”
That was an easy answer. The world needs oil, I said. It does not need gold. Meanwhile my privates tingled a little as I looked at the full body scanner, manned by another giant uniformed dude decked out in blue latex gloves and a headset. It was pure intimidation. The least I could do as I stood on the yellow spots and raised my arms was give the machine two hand gestures that I’m sure by now are in my CSIS file. If this blog abruptly ends, you’ll know why.
The good news is my travels are ending. Almost. A little jaunt to the prairies in a couple of weeks. A talk in Toronto on November 9th. Then I am able to find more time to devote to other business interests, and my next book – which dives more into the reasons why people do what they do with their money, and how to profit from knowing that.
Interestingly, I was asked twice last night in Calgary – at two separate events – if the housing market was different there (and immune from nasty trends) in light of my call for $100-plus oil. Of course, it isn’t. With 90% of the population of Alberta not involved in the resource sector, there’s no reason to think oil inflation will end up increasing the salaries and wages of nurses, teachers, car dealers or the guys who work in Best Buy.
Meanwhile, whatever oil does, there’s no escaping the ravaging effects of record household debt, the last wheezing, sad years of the Boomers, a steady diet of higher taxes, tepid economy growth or creeping rates. A real estate salvation in Alberta (outside of Fort Mac) because of crude is akin to the rescue of Vancouver by those wealthy Asians or the stabilizing influence of the federal government in Ottawa – nothing by a blast of upskirt sunshine by the house pimps.
In fact, events of the last few days have me feeling more jaded than usual. Riots in France as the government tries to raise the retirement age from 60 to 62. Despair in Britain as the coalition leaders there slash half a million civil servant jobs, gut the navy and also bomb retirement benefits. Worry in the US as the foreclosure mess threatens banks and comes as mid-term elections are set to destabilize Washington. And reports like this from blog dogs around the planet:
“Garth: We live in Squamish and sold our house a year ago for $620K. I track the prices of houses faithfully now. A house that’s been on the market around the same time as ours (a year now), started at 649k, has dropped two times in listing price and is now sitting at 559k. Two well established town home developments I’ve been tracking since last year – the one development: peak prices were 425K, I just saw one listed for 337K and the other development mid to high 300’s now sitting at 289k. Doing the math, it appears to be a drop of between 13-17% just in the past year. Yes, there are starting to be fewer listings – but that’s because people are pulling their homes off the market after no action.”
All of this – spending cuts, austerity measures, social unrest, indebted citizens, bank woes, political morass – is pulling us in the same direction, towards a deflationary swamp. It’s consistent with what central banker Mark Carney was warning about earlier this week – crappy growth for the next two years – and with the warning from TD economists that too many Canadians are one financial shock away from being seriously screwed. Families have precious little in the way of savings or reserves, 70% of us have no pensions and we just finished borrowing obscene amounts to buy houses which are declining in value.
How does this possibly end well?
So my advice remains: (1) Shift wealth from real estate to financial assets. Now. (2) Invest in things that pay you to own them (like bond interest, preferred dividends, REIT income and sector ETF capital gains). (3) Avoid taxes – legally. (4) Be balanced and diversified with a proper asset allocation. (5) Love liquidity.
Deflation will eventually lead to inflation. But real estate’s done for a generation. Everybody’s standard of living is at risk. Nine in ten people have absolutely no idea those pictures of turmoil in Europe or anguish in America give glimpses of our own potential future. The best path ahead is the one few will take.
BTW, if ever in Calgary, come and see me in detention.
