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8.23.06

File this under ‘Sucks To Be You’.

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Last week, a man in Montreal woke up to find that he and his wife had the winning numbers to the 42 million dollar Lotto 6-49 jackpot…or so the Montreal Gazette said.

Turns out they misprinted the numbers and the man had actually won nada. He is now suing for damages from those few hours he spent as a jubilant, but albeit mistaken, winner.

There’s a lesson to be learned here. If you think you may have just won 42 million dollars, get a second opinion. I think I’d rather not ever win than think I have only to find out, after all the money’s been spent in my head, that I was wrong.

Ouch.

Filed in: Weird Stuff
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8.22.06

Pop goes your house.

I We have no money to invest right now, with a new house and baby on the way. But I’m still following a few select companies, watching for good value in the market, and following financial market news.

Barron’s on the weekend had an article titled “The No-Money-Down Disaster” about the housing bubble in the USA. Inventories of unsold houses are rising, new home starts are falling, personal debt levels are skyrocketing, and mortgage defaults are increasing. Those are all big, scary things.

However, the following stats sort of blew my mind:

  • 32.6% of new US mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000.
  • 43% of first-time home buyers in 2005 put no money down.
  • 15.2% of 2005 buyers owe at least 10% more than their home is worth.
  • 10% of all home owners with mortgages have no equity in their homes
  • $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007

You owe more than your home is worth if your home goes down in value from your purchase price. It happened here in Canada in the 80’s when interest rates were in double digits, as housing prices went down because mortgage payments became too expensive as mortgages were renewed at the much higher interest rates. But prices are going down for a different reason in the US. These interest-only mortgage products have made it too easy for people to buy homes.

We have been luckier in Canada, as our banks haven’t been as “creative” with mortgage products, and there hasn’t been the same property frenzy as there has been in the USA over the past 5 years. But look at Calgary today and tell me a correction isn’t somewhere in their future?

I could rant for days about this, but everyone’s eyes are probably glossing over already. Suffice to say that I’m watching for opportunities to personally profit should the housing bubble burst …

Filed in: Money | Rants
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August 22, 2006 - 1:53 pm

Kris - I am also watching and actually taking a financial planning course to back me up.

Victoria’s housing prices rose 26% between the end of 2004 and the end of 2005. What a gongshow it is out there…your money doesn’t buy much, but the inventory has started to rise and, if it actually is a “bubble”…I’m fairly certain it’s about to burst.

BC is awesome. It’s not half-a-million-for-a-condo awesome.

August 22, 2006 - 2:01 pm

Gary - I enjoyed your financial dribble Dan. Keep the good stuff coming. Here’s an anecdote on the housing bust. An accountant in Detroit bought a house a couple of years ago paying interest only for a couple of years. Right about now, it resets to paying off principal and so her payments rise about 60% or so ( i can’t remember the exact number). If she tried to reset the mortgage she would have to pay exhorborant fees. So she can’t afford to pay that (she claims that the details of the mortgage weren’t clear) and now wants to sell the place. However, no one bit on her original asking price of $470,000 and now she’s reduced it to $270,000 and still no buyers! The US is in for a hurtin’, my friends. But please tell me how you would plan to profit from the impending US housing bust? I’m not quite sure I have a strategy for that other than buying a house in the US.

I was just in Calgary. My brother was telling me about the craziness there. They bought a house just over a year ago and the value has gone up 60% since they bought. The bad part is they do not have grass yet. Contractors are a little busy at the moment.

August 22, 2006 - 3:33 pm

mark - those stats are hilarious in a “terribly alarming and sad” sort-of-way. It’s amazing that so many people could be so… irresponsible.

I too am interested in hearing how Dan plans on profiting from these (un)fortunate circumstances.

August 22, 2006 - 4:01 pm

Jen - Coming from a home owner in Calgary that could go on an 8 hour rant about the ridiculous-ness of this city and its inflated prices – I will spare you but if any of you have inside information or a slight indication on the bursting of the C-Bubble, please let a girl know. My greatest fear of ’06 is to be grouped into the above mentioned statistics (the Canadian version of course).

The funny part of this is that the only way you can make any money off your real-estate “investment” is to sell while the prices are hot and get the heck out of this town. Everything else is increasing at the same rate and therefore completely unaffordable. Unless I plan on living in my 800 sq. ft. of space until I’m 85, then as a single (unmarried) person I have no hope in hell in ever affording anything remotely close to a single family home in this town. Or anything larger than a shoe-box for that matter.

Now if only salaries could increase at the same rate as housing prices then we wouldn’t necessarily have a problem.

August 23, 2006 - 2:35 pm

dan - I think it’s funny that the google ads for this entry are refinance offers – perpetuating the problem 🙂

August 24, 2006 - 10:41 am

dan - How to profit? Let’s think … ideas in bold.

– People will be losing their homes because they can’t afford payments on a mortgage renewed at higher interest rates.
– Some of these people will find smaller, cheaper homes to buy. Some will be forced back into the rental market.
– Rental vacancy rates should fall, so residential property management companies should be more profitable, as their overhead is absorbed by more tenants.  These are often structured as income trusts, so pay out that excess profit in monthly dividends.  Saweet.
– Losing their house has scared these people into spending less $. Discount retailers should see further sales growth.
– Losing their house has made people realize they’re living on the edge. Companies that help you out of bankruptcy or restructure your finances should do well. In fact, maybe we should start one?!?

Those are just a few of the paths … any others?

August 25, 2006 - 11:50 am

dan - August market commentary from Eric Sprott of http://www.sprott.com, who manages some of our better performing mutual funds:

requiem for a housing bubble

August 26, 2006 - 8:40 am

Gary - Sprott is certainly more bearish than most, but his track record is really good. I wish he had some recommendations on investments during the crash. He’s obviously bearish on US stocks.

Of your ideas Dan, I like the residential REIT’s best. Rents will go up and vacancy rates will go down. I don’t like discount retailers because their margins are so low and I think even their revenue will suffer. As far as financial restructuring companies, I just can’t invest in a market that I dispise. These are the same companies that get people in this trouble in the first place.

8.22.06

The countdown.

Having children is a major step, and one you may never be really ready for. But some people are more prepared than others. We personally are quite a bit closer to the “prepared” end of the scale than the “can’t sustain life” end, having proven our ability to keep not one, not two but *three* pets alive simulataneously. So can we handle the addition of a new Fullerton? I think so.

I’m excited to meet him or her. Brown hair? Blonde? Blue eyes? Green? Will they enjoy wearing the ridiculous hats I’ll make them wear? Posing for photo after photo after photo for their mom?

The countdown is on.

Filed in: Life | Peanut
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August 22, 2006 - 1:47 pm

Shannen - I’m surprised you admitted that the bébé could be a boy. Impressive. I guess you are beginning to see the light.

You always knew I was right. 😉

August 22, 2006 - 1:50 pm

Kris - It’s totally a girl. Come on now.

August 22, 2006 - 2:01 pm

dan - I was raised in Trudeaupia – I use gender neutral language whenever possible to avoid offending the tender sensibilities of our dear readers.

However, I *would* be puzzled if our baby was anything other than white/pink in color. I would throw political correctness to the wind if I had to forecast a skin color …

8.22.06

It’s official.

I’m pregnant.

To clarify, its been official to Dan and I for quite some time, and to family and friends for months but apparently, it’s now official to strangers.

I was offered a seat on the bus the other day for the first time.  I was embarrassed at first…but not for long.  If this little belly can score me a seat on the sometimes crowded bus in the morning (or afternoon, for that matter), I’m in. 

Thanks, Baby Fullerton.

Filed in: Peanut
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August 22, 2006 - 11:41 am

Jen - So is there a noticeable difference in Baby Fullerton Belly (BFB) since our visit chez Wiseton, SK a few weeks ago?? Send pictures!

August 22, 2006 - 11:42 am

dan - Now’s as good a time as any to start the bidding for naming rights for this child. The only rules are that it must be able to be spelled in the roman alphabet (no bushman clicking or japanese characters, please), and it can’t end in .com. Or .tv. Or any other internet domains.

And no, no corporate logo tattoos. But thanks for asking.

8.21.06

Weekend goodness.

We arrived home from work on Thursday to the best surprise ever. GRASS!

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Sure, it seems small, but living here for the past 8 weeks has made us long for the day when we might be able to walk across our property sans dragging mud and dirt into the house and into the cars.

And don’t even get me started on Humphrey. Dog ownership has just improved seven-fold because though Dan and I knew to avoid the muck on our way to and from the house – Humphrey did not. If there was a puddle, he would find it. And it would make him happy. Us, much less so.So. We are pleased that the days of dirt are over. Bring on the back yard BBQs…for a few more weeks anyway.

This weekend also brought about some work finishing up the house. Our mission was the last of the window coverings. Most rooms had been taken care of, but somehow our master bedroom missed out on all the love and attention.

Due to the non-standard size of the window, we were either going to have to special order something in or buy curtains. And during a weekend trip to Ikea, we found the solution. Lovely, dark chocolate drapes would not only fit into the colour scheme of our room, but they promised to keep the morning light out – something we had yet to experience in this house.

But here’s the kicker. Ikea curtains are freakin’ long. I’m not sure if the windows are that much bigger in Sweden, but seriously, how many homes actually need 24 feet long curtains for full coverage? Ok, I’m exaggerating, but just barely. Thankfully they come with this iron-on hemmer stuff, so after a couple of hours of measuring, pulling taut, folding, pinning, measuring again, cutting, and ironing, our new drapes were up and looking beautiful. Too bad we didn’t think to do it a day earlier so we could have all enjoyed the sleep in rather than be forced up before it’s light outside anyway…

Now onto our next project…the fence!

Filed in: Life | Photos | Rants
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August 22, 2006 - 9:56 am

Kris - Home ownership definitely comes with never-ending projects. Our current project? New roof. Ugh. Unfortunately, it’s trumping all the fun, negotiable projects we had planned for fall. Boooooo.

August 22, 2006 - 11:36 am

Jen - I am also not a fan of the Ikea 40 ft long curtains. I got some last weekend for the little office room, but my solution was to just bunch up the extra behind whatever piece of furniture I could. So it doesn’t necessarily look bad until you see over the side of the couch. Or the computer tower & cords, which could just possibly be a fire hazard.

As for the iron-on hemmer stuff – I threw it out cause I thought you needed a sewing machine for that! Oops.

August 24, 2006 - 6:11 pm

mark - grass? so no more garage parties?

booooo!