Fraser Institute Reports That “Canadian Governments DEBT Will Hit $1.3 Trillion This Year”

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To me, this is absolutely unbelievable!

The collective debt of our Provincial and Federal Governments is going to top $1.3 Trillion Dollars in 2016 and shockingly few people seem to be concerned about it!

It is absolutely staggering to me how all the highly educated and heavily credentialed (and highly paid) “experts” employed by we consumers, to serve as our governments can perform so poorly!

Has anyone ever done any type of analysis on the “value return” on consumers tax money invested in our governments?

All Canadians are required to pay taxes, irrespective of what is going on in their life, yet our governments, both Federal and Provincial apparently feel that they don’t have to abide by those same “commandments“!

I’ve never been one to complain about paying taxes as this country has been very good to me in a business sense (at least since I got my personal stuff together) and I see taxes as simply the way things have got to be.

I see how screwed up America is over some fixation over “not paying taxes“, which seems like one of the fundamental agendas of the Republican Party for as long as I’ve followed that game.

Oh, I understand that the “educated elite” argues that “some national and subnational debt is needed” but just as I’m opposed to “over-leaverage” in Condo Land (many speculators buying to flip and cannot “close” if they have to), I don’t see “debt” as even an answer, let alone being falsely proposed as “the” answer.

I have published here for a long time now, that “debt is a silent killer“.

I’ve been challenged by some highly educated M.B.A. guys who insist that “through leverage one succeeds in real estate investing“.

The have a sound-sounding argument but I see this approach much like a mouse on a treadmill.

I see that many people make their money through leveraging everything they touch.

To me, factoring in the potential downside risk seems to be a calculation that few people seem to care about.

I do nothing without first assessing any/all “downside risk“.

High leverage means being tied to the treadmill.  You’ve “got to keep up with the machine or the machine drags you down“.

I saw Condo Land‘s entire real estate market completely collapse in 1989.

Mortgage interest rates spiked by double digits in weeks!

The bottom of the market in Condo Land literally fell out.

I see many, many of the exact same signs today in Condo Land, from developers offering incentives to buyers like, minimal down payments, upgrades, parking spaces or lockers.

We just saw the government introduce new legislation to require 10% instead of just 5% down, which I am sure will carry minimal impact on those speculators that have been driving the market in Condo Land for decades.

However you read it, consumers are funding a very high risk game here.

They are buying high price (over-priced in my professional opinion) product (condo units) mostly on leverage, in an already “over-saturated” market, that is being artificially propped up by artificially low (propped up) interest rates.

These speculators are in the most cases buying on “credit” (that’s what ‘leverage’ is) so now we go right through our society with everyone being leveraged to the max, our Federal Government, our Provincial Governments, our Municipal Government, right down to our average consumer!

Speculators have been misled by ‘hysteria sales events‘ and other manipulation sales tactics to think that this game is just going to go on forever.

Condo Land is not a “housing play” as much as it has been a “commodity play“.

Developers offered speculators alleged “early access to buy suites at discounted prices“, a shell game that I’ve repeatedly disclosed here on my blogs.

They pay Realtors upwards of 6% – 8% in many instances to deliver up family, friends and acquaintances to attend these events, giving Realtors instant “credibility” to consumers, even if they’ve just gotten their real estate license and know nothing about Condo Land.

The Province of Ontario is about to hit $300 BILLION DOLLARS in debt this year, while the Federal Government tacks on and additional Billions more in infrastructure projects (we certainly need infrastructure building but does it have to be on credit?)!

The arguments that I’m reading from economists rely totally on the old argument about “money being so inexpensive that its the best time to invest“!

To me, this is simply “flawed logic“!

Our governments, in my humble opinion, are and should be the role models for consumers in the area of finances and they are setting a very poor example.

Interest rates are being artificially held down and I find it objectionable that this fact is ignored by the people that we (vote in and) “pay to manage our affairs“.

The federal government expects to spend $25.9 billion this fiscal year to service its debt this year and they are talking about “making only  interest payments“.

That’s spent money folks!  The debt stays the same going forward and those billions are simply left on the table.

How can we equate “progress” then?

And what about that  “$23.9 billion we spent last year on national defence” with this year’s budget being “just under $19 Billion“?

We are talking “Billions” here people!

Ontario spends about $11.3 billion a year to service its debt!

Can someone please tell me how we progress out of this mess!?!

I’m a simple guy!

I couldn’t run my business like this.

I have built a profession on advising real estate investors on how to invest and I have never promoted the concept of leverage because I’ve seen the industry turned upside down in a matter of days once and I have no doubt that this can occur again.

The big question is “when“.

I have not invested in or recommended investing in Condo Land for the past couple of years now.

As an investor myself, I have built a solid investment strategy that carries the least “risk”, which is to invest primarily in your personal residence.

Investment number one is your home.

Investment number two is your mortgage.

Investment number three is your investment income property and investment number four is the mortgage on the investment property.

If you are blessed with more abundance then all the speculative investments in the world are available to you.

I’ve narrowed my portfolio to two million and a half plus residences, one I live in and the other I rent out.

Both are paid for, are in excellent physical condition is excellent locations and both with solid upside equity growth potential as a result.

The hidden killer that most speculators don’t analyze is “interest” as it eats up the profit.

Most condos today in Condo Land do not carry themselves as stand alone investments, meaning that the landlord, after paying common element fees, property taxes, mortgage payments, must pay additionally out of his/her pocket every month the simply service the debt.

This made some sense when condo were priced in the $325 per square foot range but with today’s $800 per square foot, landlords are subsidizing their investment every month.

I call that losing money!

You then must factor in what you expect to sell it for when profit taking time comes.

You are betting that condos will just continue to go up in price for ever!

They were at $400 per square foot in 1989 when the market crashed and it took until 2009 when 18 Yorkville was introduced to return to $400 per square foot.

So, assuming that you can sell it at $900 per square foot down the road and then factor in your carrying costs to date, 5% to your Realtor, Capital Gains Tax (50% tax free 50% “income” providing you’ve kept the unit long enough to satisfy CRA that it qualifies as a Capital Gain and not Business Income), and you may find that you have accepted a very “high risk” investment strategy.

And to do it all on “credit” is what really shocks me.

I’ve managed to run my business with “balanced books” and I don’t feel that it is asking too much for our government to do the same thing.

We are a resources rich country and I’m confident that a very good argument could be put forward that we should have no difficulty balancing our books if we approached it properly.

I just feel that our perspective need tweaking!

I’m Charles

 

 

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