Author Topic: Any Canadian Mustachians starting to get nervous about the Loonie?  (Read 21452 times)

BigBangWeary

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Obviously the oil downturn is hitting Canada hard, but the BOC's talk of negative interest rates and its apparent strategy of doing everything it can to keep housing prices high is starting to really hurt. With the US normalizing, and Poloz hoping to restart a decimated manufacturing sector with a low-Loonie strategy (probably too late), I am starting to think we are looking at a 60 cent dollar again.

Other than oil, the problem seems to be structural and long-ish lasting. Canadians are seriously indebted on a personal level, which makes the BOC very hesitant to raise rates. What are Canadian Mustachians thinking here?

We import a lot more in Canada than we used to, so it is much harder to do the 'buy local' strategy. Most of the world is priced in US dollars and inflation is very likely to take off if Poloz continues to run counter to the US on interest rates.

Do you have a strategy going forward, or is it pretty much too late? Do you believe the dollar will rise again in the next 10 years? Personally, I think it will be low for long.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #1 on: December 19, 2015, 11:32:16 PM »
Well, the overall problem is that our economy is in the toilet.  The crappy loonie is just a reflection of that.

With the sliding exchange rate I am spending more thoughtfully.  I think it's showing up most in the produce aisle, though a book I'm buying as a gift is 25% more expensive than I expected, so the price creep isn't just at the supermarket.  Vacations based on USD expenses will be reduced or postponed if too pricey.

Currency gains on my U.S. and EAFE ETFs have (mostly) counterbalanced an awful year for Canadian assets (S&P TSX index, preferreds, REITs all way down.) Going to stay internationally diversified.  (I can only imagine the tears shed and Rolaids consumed for people holding nothing but Canadian assets.  Ouch.)

As for the crap economy, we can move for work if needed.  Not tied to local RE and going to keep it that way for a while.  Not going to take on any debt (and wouldn't even consider it unless tied to profitable income generation of some kind.)

Bad economic times aren't actually that bad for people who have steady jobs and/or money.  There may be deals on goods and services that are normally too expensive to be good value.  I invest continuously as cash flows in and I fully expect that some investments made during a slow economy (and pessimistic general sentiment) will end up appreciating handsomely in the future.  (Maybe I'll ask DH if we can celebrate upcoming birthdays, anniversaries, Christmases by buying more ETFs...  Hmm...)

I think it'll take another oil boom to raise the loonie up significantly, and that seems a ways off (though you never know...) I'm not doing anything too fancy in reaction or anticipation of the poor exchange rate, but I think they're prudent moves that will help us survive (and possibly better.)

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #2 on: December 19, 2015, 11:38:09 PM »
Not worried. No debts or mortgage anymore. Not big consumers. DW works for a huge U.S. based company which is reaping record profits, so no worries about job loss there. The Canadian dollar only serves to ensure her job security. We don't holiday in the U.S, but rather Mexico, whose dollar is equally as beat up as ours, so no real impact for us there.

The commodity boom-bust cycle is predictable. Canada WILL rise again. But yeah, a lot of Canadians are ill prepared for what is to come. I'd really hate to have a big mortgage right now. I think a housing correction is finally looking imminent.
« Last Edit: December 19, 2015, 11:40:49 PM by Jon_Snow »

alsoknownasDean

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #3 on: December 20, 2015, 12:29:49 AM »
Exchange rates are a double edged sword. There's industries that will benefit from a weaker currency and others that will struggle.

Here in Australia over the last couple of years our dollar has dropped from around parity with the $USD to around $USD0.70. Some local businesses were really struggling to be competitive with the high dollar, so the exchange rate drop has benefited them.

I am kicking myself for not loading up on US market ETFs back then though :)

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #4 on: December 20, 2015, 11:36:54 AM »
It's a bit of an unsettling time, isn't it?  I'm a bit of a doomer around climate change/peak oil, etc, anyway, so my long term view is that things aren't really going to improve, although there may still be some short boom-y cycles.

We're far from FI, so it's kind of a weird time to navigate.  We are granola-hippie-buy-local types, so we are seeing some of the benefits of that lifestyle lately.  We produce a ton of our own food, barter for others, buy in bulk (year or two supply at a time) at wholesale prices for some staples, are open to hunting/crabbing, etc.  We do still buy some food, and have definitely seen the sharp rice in prices. But we are grateful to feel very buffered from those increases thanks to our substantial pantry stores, and worry about others who are not so fortunate.  Other goods we try to buy Canada-made anyway, which are less effected by currency swings, and also try to reduce our need for manufactured stuff generally.  Of course, you're right, there's no way to do this completely, but doing so means that those few things that we need periodically (car parts come to mind!) that have dramatically risen in cost are still affordable within our budget.  This is also when buying used is a winning strategy!

We're hoping our goal of selling our home in the spring and merging households with my mom will be exactly well-timed before any real-estate bubble-risk pops.  If things work out, the plan will cut my commute and eliminate our mortgage, allowing DH to do more flexible work and decrease hours significantly.

We really haven't pursued FI in the usual stash-building way that most on here are, but have been focused on building resilience.  The plan is to enjoy a simple life, have me work at my enjoyable, flexible job for many years to come, reaping a secure pension (fingers crossed), and saving as we can, while building a significant community network of mutual interdependence and support.  We hope this will allow us to thrive no matter what is going on in the wider economy.  At the moment, we're seeing that strategy really pay off.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #5 on: December 20, 2015, 11:57:21 AM »
Focused on building resilience.  The plan is to enjoy a simple life, have me work at my enjoyable, flexible job for many years to come, reaping a secure pension (fingers crossed), and saving as we can, while building a significant community network of mutual interdependence and support.  We hope this will allow us to thrive no matter what is going on in the wider economy.  At the moment, we're seeing that strategy really pay off.

This right here should be just a way of life, if more people were sensible, positive and mindful oh how grand society would be.
Such wise words !

The Canadian economy is so complex to me right now as I have the benefit of seeing three distinct markets (although an eastern Canada perspective would help in there) I live on VanIsle, work sales out of Calgary and have businesses/work in SE Saskatchewan.

I see the island right now as optimistic and doing very well (we even opened a store here). More businesses keep opening and friends that own businesses have said summer of 2015 was some of the busiest they have seen. The island is also a tourist destination and I think summer of 2016 will see world traveler flocking here, so we will see another crazy summer. (often the locals go into hiding lol) I also think we are extremely fortunate on the island with all the farmers markets that provide us amazing food that is somewhat sheltered from larger influences. Also to the topic of food, we really need to start eating seasonal foods.
Calgary has enough long term capital projects to hopefully see it through another year or two keeping a few big construction firms rolling and work that way. Oil corporate offices are hurting and layoffs are monthly but maybe that frees up talented individuals for other industries. Also once a city gets to the size of Calgary doesn't it in a way create a bit of it's own economy just supporting itself.
SE Saskatchewan , primarily where we moved from is a ghost town of sorts with the drop in oil. Very quiet and very scary, we have a retail business there and sales are down about 40%. The only ones who did really good this last 6 months were the farmers apparently.

The biggest thing I look at with Canada, the only thing that ties us together is our dollar. Our country is so large and distances between micro economies so great that they seem to act independently of each other. I don't feel we are in a housing bubble, just regional corrections based on supply and demand.

Big cars Big houses is a societal thing and those same people will get themselves in trouble anywhere in the world..of course rising interest rates on mortgages will kick many people's ass.

The low dollar does help stop the bleeding on low oil at least a little for the producers being that they sell oil based on US WTI.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #6 on: December 20, 2015, 12:04:27 PM »
I'm not Canadian, but I plan to travel to Canada on vacations more often to take advantage of the low loonie.

Hopefully there are more US-based people like me that will travel to Canada and help your economy out.

I also plan to buy some salmon while there to bring with me back home. Any good suggestions for buying frozen local salmon that I can take on the plane with me back home? I love pacific salmon and plan to load up on my trip. I am also going to gift salmon for Christmas to my family. Well, they will get a promise for salmon to be given to them a month later. ;-)

I do have a lot of international investments that have been hammered due to the strong US dollar vs. every-other-country, so I am also suffering a bit from it. I'm making it up by travelling cheaper instead.

Jon_Snow

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #7 on: December 20, 2015, 12:38:13 PM »
Uh, if you ever happen to come out this way in the Summer...we could go out and catch our own.

Much cheaper. :)

I think what would prove to be a huge psychological blow to the country would be if, like the U.S., a significant segment of the population became underwater on their mortgages.
« Last Edit: December 20, 2015, 01:14:39 PM by Jon_Snow »

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #8 on: December 20, 2015, 01:22:13 PM »
We're avoiding going to the US and instead staying in Canada for any vacations.  And buying lots of cnd index funds (to my targeted allocations, of course!).


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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #9 on: December 20, 2015, 01:24:23 PM »

I think what would prove to be a huge psychological blow to the country would be if, like the U.S., a significant segment of the population became underwater on their mortgages.

I was thinking this exact thought as I drove through a new Winnipeg suburb yesterday…hundreds and hundreds of houses built in the last couple years, nothing under 500k (most significantly higher).  Seriously doubt people actually make enough money to afford them.  Maybe put 5% down…one small correction, and they're significantly underwater. 

Daisy

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #10 on: December 20, 2015, 02:10:50 PM »
Uh, if you ever happen to come out this way in the Summer...we could go out and catch our own.

Much cheaper. :)

I think what would prove to be a huge psychological blow to the country would be if, like the U.S., a significant segment of the population became underwater on their mortgages.

That might be an option. Thanks for the offer.

But I need me some salmon when I go in the winter. I'll  eat it all before summer comes around.

BDWW

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #11 on: December 20, 2015, 02:41:34 PM »
We (and other people around here) used to go shopping in Calgary when I was younger. My parents even took us to do our school shopping there once.

Not sure how much that helps, but I can see it happening again if the loonie stays weak. It used to be kind of a given that you get more for your (american) dollars in Canada.

Reynolds531

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #12 on: December 20, 2015, 08:35:14 PM »
Just a few additional things I've noted here in Ontario. Gas prices are stubbornly high. We did drop to about 86 cents a litre when the local Costco opened a gas station. Other communities are still higher.

Local car dealers are literally running radio ads offering top dollar for trades to send to the US. I know a few people in the industry, and a lot of money is being made sending SUVs and pickups across the border.

I think manufacturing may actually be picking up. Maybe..

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #13 on: December 20, 2015, 09:35:12 PM »
We're avoiding going to the US and instead staying in Canada for any vacations.  And buying lots of cnd index funds (to my targeted allocations, of course!).
Sure its expensive if you act like a normal person but we are smarter than that, we follow MMM :) I just did 16 days on the road in the US for under $600 and that included ferry tickets off Vancouver Island , US National Park pass and fuel to go 6700km. Dirtbaggin' is cheap and easy way to see 9 NP and 8 States :) The ridiculously cheap fuel with our crap dollar puts us basically at par so no different than a CND road trip.
« Last Edit: December 20, 2015, 09:37:40 PM by Stasher »

Stasher

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #14 on: December 20, 2015, 09:36:39 PM »
We (and other people around here) used to go shopping in Calgary when I was younger. My parents even took us to do our school shopping there once.

Not sure how much that helps, but I can see it happening again if the loonie stays weak. It used to be kind of a given that you get more for your (american) dollars in Canada.

And at the same time I remember everyone that would go on shopping trips to Great Falls

Zikoris

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #15 on: December 20, 2015, 11:37:53 PM »
Not me, it doesn't seem to affect me. The only thing we've done differently was choose a Canadian rather than American city for our last mini-vacation, but it was a place we've wanted to go for a long time anyway (Montreal). We honestly buy so little consumer goods that small price changes don't really affect us. Lately it does seem like there's more local/Canadian produce at my usual grocery store, but it could be my imagination.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #16 on: December 21, 2015, 05:13:44 AM »
I agree with the poster who suggested diversifying now, before the loonie drops further. In our case, as expats earning local currency, the exchange rate works in our favour. It means that we can buy more Canadian dollars with our salary. So now is a great time to invest in Canada. To me, it's like the Canadian dollar is on sale! Gotta stock up!

Another Reader

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #17 on: December 21, 2015, 05:23:32 AM »
Canadians bought a lot of foreclosures in Phoenix in 2009-2012.  Between appreciation and the exchange rate, a lot of those properties are now being sold for some very nice profits.

snacky

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #18 on: December 21, 2015, 08:15:09 AM »
the outlook for Canada in general for the next while is pretty terrible, I think. we can't be both a country that largely exports its commodities for processing in other countries and a first world country, as a permanent thing. sooner or later that arrangement had to fail. If we invested major dollars in refineries, mills, etc. so we could export value-added products that would be huge, but I don't see it happening.
Obviously our economy is more complicated than that, but the lot of it is less than it could/ should be, because of shortsighted planning.

For the nation and the people in it, an extended period of terrible economic times is terrible, obviously.

For me personally, it's making a summer trip to NYC look like a bad idea, and it's influencing me to move my investment to non-Canadian vehicles. Garth Turner says light on maple.
On the bright side, I have a secure job, and if there's a sudden drop in real estate prices I intend to take advantage of that.

Cathy

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #19 on: December 21, 2015, 09:14:01 AM »
... The crappy loonie is just a reflection of that. ...
... our crap dollar ...
... To me, it's like the Canadian dollar is on sale! Gotta stock up!
As a new investor, hope this question doesn't come off naive: since the CAD dollar is so cheap, and as someone mentioned that "it's like the Canadian dollar is on sale!", does it make sense to change our target allocation (say from 25% CAD to 50%) so to accumulate more CAD stocks / ETFs / funds? Any insight would be appreciated!

This is the same error that another forum member recently made in the context of purchasing silver. The fact that CAD/USD is currently lower than it was in the recent past does not mean that the current price is "crap"; it does not mean that CAD/USD is "on sale"; and it does not mean that now is a good time to bet on CAD/USD increasing. Those decisions have to be based on the fundamentals of the proposed investment, not on whether it is currently priced lower than it was in the recent past.

Note: I express no view on the fundamentals of CAD/USD or any other currency pair.
« Last Edit: December 21, 2015, 09:17:02 AM by Cathy »

debbie does duncan

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #20 on: December 21, 2015, 10:33:13 AM »
Quote
.
Sure its expensive if you act like a normal person but we are smarter than that, we follow MMM :) I just did 16 days on the road in the US for under $600 and that included ferry tickets off Vancouver Island , US National Park pass and fuel to go 6700km. Dirtbaggin' is cheap and easy way to see 9 NP and 8 States :) The ridiculously cheap fuel with our crap dollar puts us basically at par so no different than a CND road trip.

[/quote]

What is dirtbagging????? Extreme camping?

TrMama

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #21 on: December 21, 2015, 12:49:10 PM »
Our strategy is pretty much the same as it's always been. Spend less than we make, invest and keep paying off the house. Since our mortgage rate is fixed and it's due to be paid of before the current term expires, we're not in any danger of losing the house. DH works for the feds, and since I work for a US owned firm who sells it's product mainly in US dollars, my salary just got cheaper for them to pay.

We also co-own a piece of property in Vancouver. We hope to sell it later this year and I'm sure the low Canadian dollar won't hurt Chinese demand for property there. Frankly, the low dollar only makes me less nervous about a RE decline in the city.

We won't be doing any US travel or shopping for quite a while.

Stasher

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #22 on: December 21, 2015, 07:41:26 PM »


What is dirtbagging????? Extreme camping?

I guess to the regular crowds it would be more of the "VanLife" or car dwellers.

Its more of a term that is used by the hiking and climbing community, you could say the same for surfers or skiers/snowboarders. Went to that epic location with only their clothes on their back and their vehicle with no real money just so they could climb, surf or ski to feed their passion.

This is Alex Honnold, the greatest free climber currently on earth....his van is pretty pimp though.
https://youtu.be/CArfaGmYuGM
Maybe a better example more extreme example
https://youtu.be/cseSMl1f770
What is a Dirtbag
https://youtu.be/ESuMIYyC19I


Regardless for my trip as example I took all my climbing and backpacking gear and tossed it in the car and hit the road. I slept in my vehicle, cleaned up at rest stops and bought my food at grocery stores. I cooked on my little camping stove, had good meals and warm coffee in the morning to kick of amazing days out hiking. I loved every second of it. My biggest luxury was the money spent on a single coffee at Starbucks every day or so that was along the route so I could sit for an hour or so and enjoy the free (and extremely fast) wifi. <<the coffee is better at the Duncan Garage ;) >>



Anyhow only time will tell what the economy will do, all we can control is how we live in the present. Make wise choices and tomorrow is out of our control so don't stress about it.
« Last Edit: December 21, 2015, 07:57:58 PM by Stasher »

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #23 on: December 22, 2015, 10:28:34 AM »
I'm not really concerned about the dollar.  I've lived through a number of economic cycles now and that is what they are - cycles. 

If you don't have to sell a house you hold through down times.  Historically downturns have always been time limited and prices have risen again to an average of 4% a year. 

Make sure you don't have to sell by buying what you can afford and having rental income ie. a suite if need be.  The "underwater mortgage" wiping out equity in Canada can occur for recent purchasers who only put the 5% down, but that is a minority of purchasers who use (or qualify for) the 5% down and have bought recently.  The median net worth of Canadian families is over $250,000 and a lot of it is home equity which is a fairly big buffer against a downturn. 

As far as the dollar goes, we won't be going to the states much until our dollar improves.  It will.  Just might take some time.  I'm okay with that.

Investing, I'll stick to Canadian Couch Potato and ride out ups and downs until I need the money in ten years or so.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #24 on: December 22, 2015, 10:35:22 AM »
A low Canadian dollar means my job is more secure, because we're more competitive for our engineering services.  When the dollar rises, it means that it's cheaper to buy stuff.  So, kinda a net neutral in my book.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #25 on: December 22, 2015, 10:46:17 AM »
It's a little annoying because I'm getting ready to FIRE in the next couple of years.  I work for a foreign company that's doing well, so my job security is good.  However it's worrying that 1.  manufacturing is in the decline in Canada, 2.  high tech is in the decline in Canada and 3.  so many people seem to have huge huge mortgages.   So our economy is mostly consumer based plus resources.  Yurk.  I am letting my asset allocation shift to reduce Canadian holdings a bit more. 

On the bright side, I hope to be able to get a good price on a retirement home!

elaine amj

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #26 on: December 22, 2015, 11:23:32 AM »
DH JUST moved back to working in Canada last year after spending the last 20 years working in the US. We are really trying not to think about this :( He got a nice 30% pay increase to come back to Canada - with a ton more stress and hours. Now the loonie has dropped by almost 40%. So hard to think he could have gotten the same pay increase in his old cushy, laid back job with zero stress.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #27 on: December 22, 2015, 05:32:48 PM »
DH JUST moved back to working in Canada last year after spending the last 20 years working in the US. We are really trying not to think about this :( He got a nice 30% pay increase to come back to Canada - with a ton more stress and hours. Now the loonie has dropped by almost 40%. So hard to think he could have gotten the same pay increase in his old cushy, laid back job with zero stress.
But hopefully you moved back to Canada while still holding US savings funds, so in a way they are worth 40% more to you if you were to cash that in and buy Canadian investments. Then hopefully in a few years we see a dollar back up in the 90cent range and you could be looking at a 20% return on investment just by hedging against the dollar.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #28 on: December 22, 2015, 06:02:36 PM »
I'm not too worried. I have seen some positive signs with manufacturing picking up. It's a good time to invest with many stocks undervalued.

elaine amj

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #29 on: December 22, 2015, 09:10:05 PM »
DH JUST moved back to working in Canada last year after spending the last 20 years working in the US. We are really trying not to think about this :( He got a nice 30% pay increase to come back to Canada - with a ton more stress and hours. Now the loonie has dropped by almost 40%. So hard to think he could have gotten the same pay increase in his old cushy, laid back job with zero stress.
But hopefully you moved back to Canada while still holding US savings funds, so in a way they are worth 40% more to you if you were to cash that in and buy Canadian investments. Then hopefully in a few years we see a dollar back up in the 90cent range and you could be looking at a 20% return on investment just by hedging against the dollar.

We still do a lot of our spending in the US though (shopping, travel, etc) so it doesn't seem like a good idea to move what money we have (about 2-3 years US spending in cash) back over here only to have to trade it back for US dollars in a year. We do also have a fair bit of US investments (401k l, pensions, etc) that we were planning to leave in the US as we expect to continue spending a significant chunk of our expenses in US dollars.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #30 on: December 22, 2015, 11:12:57 PM »
Unfortunately we have been saving in Canadian because we always thought we would come home. Now we don't know. Only 20% in USD. We've just been watching our net worth plummet on an international level the last few years. Oh well. Earning in USD so that helps.

Now the question is what to save in going forward with uncertainty as to where we will end up. We want to make a move somewhere more permanently in the next few years. Unfortunately I see a 60 cent Loonie and bad Canadian fundamentals for at least the next 5-10 years.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #31 on: December 23, 2015, 01:07:37 PM »
With personal debt levels at 164%, the ongoing housing bubble in Toronto, our national debt, and our new government's commitment to spend even more in an attempt to get riches, I am absolutely terrified.   It won't take much longer for those falling dominoes from low oil to finally get from Calgary to everywhere else.  The last PM put all his eggs in two baskets--housing and oil.  I'm really glad 40% of my portfolio is in US/International indices.

If, for every dollar a Canadian earns, they owe $1.64 (and rising), how does that Ponzi scheme finally end?
« Last Edit: December 23, 2015, 01:11:46 PM by Kaspian »

GuitarStv

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #32 on: December 23, 2015, 01:30:44 PM »
Toronto isn't in a housing bubble.

Mmm_Donuts

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #33 on: December 23, 2015, 01:45:51 PM »
Toronto isn't in a housing bubble.

Really? What'll happen to Toronto housing when interest rates rise?

Here's a chart comparing house prices to income in Toronto:


Kaspian

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #34 on: December 23, 2015, 01:49:17 PM »
Toronto isn't in a housing bubble.

Umm...  Was that sarcasm?  :/ 

With the average sale price of a detached house in Toronto at $1.017 million and the average wage at around $87,000, you bet your butt it's a bubble.

Le Barbu

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #35 on: December 23, 2015, 02:03:10 PM »
Is it to late? No, it's never to late to draw a good plan and move on.

For many years now, 70%* of our investments are outside Canada (45%US and 25% International) and our portfolio real return is 7.4% YTD, not that bad for a bearish market !

Now, about the 164% debt/income, it's fearful stats but pointless if the big picture is not taken into account. As an example, if your ONLY debt is a 90k$ mortgage @ 2.05% on a house with a 250k$ market value, your income is 55k$ and RRSP, TFSA and other investments worth 250k$, you have a 164% debt/income level but does it mean you are in a bad/scarry situation?

The bad result of the low oil price is many people keep driving around for no reason in their F-150 (or F-250?) burning the mondial oil reserve.

*60% of our net worth

Kaspian

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #36 on: December 23, 2015, 02:25:56 PM »
your income is 55k$ and RRSP, TFSA and other investments worth 250k$

Which would be fine, but most Canadians don't have that ^^.  Not the ones I've met anyway.  Liquid assets?  Pshaw.  Paycheque to paycheque, baby!   House?  Oh hell yeah, it's worth $450K.  Me:  "Umm... Didn't you take out a second mortgage as well as a home equity line of credit ?"  :(

Le Barbu

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #37 on: December 23, 2015, 02:47:36 PM »
your income is 55k$ and RRSP, TFSA and other investments worth 250k$

Which would be fine, but most Canadians don't have that ^^. Not the ones I've met anyway.  Liquid assets?  Pshaw.  Paycheque to paycheque, baby!   House?  Oh hell yeah, it's worth $450K.  Me:  "Umm... Didn't you take out a second mortgage as well as a home equity line of credit ?"  :(

Not the ones I've met neither, so this mean: 1-We haven't met each other yet, 2-The people we met are probably the same, 3-There is not many mustachians around here

I learned not to say things like "-your mortgage should be alomost repaid since you bought this house back to 1998!" because it makes me sad to ear this "-hell no! we changed the windows, remodeled the kitchen, went to Hawaï, changed our car (twice) and sent the kids to university so, we still owe the same because we maxed out the HELOC. Anyway, we are going to work until 85, at least!"

Most people I know with a sizeable NW have: 1-All of their NW locked into housing, 2-All of their investments in Canada, 3-All of their investment into high MER mutual funds

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #38 on: December 23, 2015, 03:07:05 PM »
Toronto isn't in a housing bubble.

Really? What'll happen to Toronto housing when interest rates rise?

Here's a chart comparing house prices to income in Toronto:



Doesn't that graph just demonstrate that Toronto is getting denser? I'm more familiar with Vancouver and I'm sure it's graph looks similar. The reason has a lot do do with the fact that SFH are being torn down and replaced with condo towers and townhouse complexes. So yes, the cost of land is increasing, but the density is also increasing. It doesn't seem logical to exclude multi-family units from a graph like that, you need to include them to get a true picture of the cost of housing.

If we had to move to Vancouver tomorrow, there's no way I'd look for a SFH in a suburb similar to the one we live in now. We'd be in a townhouse or condo. Just like if we had to move to New York City or Hong Kong or Tokyo. No one there owns SFH's, they're just not an efficient use of land in a dense city and no one there complains that they can't afford their own personal piece of land.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #39 on: December 23, 2015, 04:21:25 PM »
In a densely populated area where the number of households are increasing faster than new housing is built, the ratio of property value to median or average income is going to increase.  It's supply and demand.  As more and more high income and/or high net worth folks move in, they buy the available properties and drive up the prices.  Median or average income folks either already own or they rent.  The SF Bay Area is a classic example.  Very little new housing is being built, but people, especially high paid professionals, keep moving here.  Every housing unit in the Bay Area could probably be absorbed by the households in the upper income deciles or quartiles.  Low interest rates magnify the spread, but household income and assets are at least as responsible.  I'll bet the graph for Manhattan or San Francisco would show the same pattern.  And for a much longer time, especially in the case of Manhattan. 


Mmm_Donuts

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #40 on: December 23, 2015, 07:04:30 PM »
The reason house prices are so high compared to income in Toronto is that interest rates are at record lows. That won't last.

People in a city with a median income of $70-something thousand won't be able to afford their $500k mortgages when interest rates rise to normal levels. That's when the bubble will burst, especially if people can't count on their jobs in an unstable economy.

totoro

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #41 on: December 23, 2015, 10:39:35 PM »
your income is 55k$ and RRSP, TFSA and other investments worth 250k$

Which would be fine, but most Canadians don't have that ^^.  Not the ones I've met anyway.  Liquid assets?  Pshaw.  Paycheque to paycheque, baby!   House?  Oh hell yeah, it's worth $450K.  Me:  "Umm... Didn't you take out a second mortgage as well as a home equity line of credit ?"  :(

The median homeowner in Canada actually has a net worth at least 10X that of renters.  Home equity only accounts for 1/3 of the net worth of homeowners in Canada - private pensions are the next largest asset.  It seems like those living paycheque to paycheque are much more likely to be renters.

http://www.moneysense.ca/planning/the-all-canadian-wealth-test-2015-charts/

People who own $450,000 homes will have to have paid down $131,000 before they could access any HELOC room.  35% is a pretty big buffer for a downturn.   Refinancing depends on ability to qualify which is based on credit scores and income and you'll have to have a minimum of $90,000 paid down.  People who qualify for refinancing are generally good credit risks.  Qualifying for both refinancing and a HELOC is redundant which leads me to believe you are making up a scenario rather than being factual.

Interest rates are low but government has an interest in maintaining market stability.  Likely that they will continue to take measures to stabilize housing.  We never did have the subprime lending the US did.  That said, there can be drops in prices that are substantial in single industry towns like Fort McMurray or areas dependent on oil and gas and when combined with job loss this is a tough scenario.

I'd say that the real estate market in Canada is not standardized.  Vancouver and TO have had very significant run ups. A lot of other places have not. Best case will be a longish period of time that prices are flat in Van and TO to even out gains like we've had in Victoria.  An interest rate rise could trigger a drop.  I'd be surprised if prices fall too much in Victoria, my bet is they keep going up for a bit.

And people with a median income of $70,000 won't qualify for a mortgage of $500,000.   On $70,000 income you would need to first save up the down payment or get it from a relative and then you could qualify for a mortgage of approximately $260-320,000 assuming good credit and no other debt.

And fwiw I'd agree that densification pushes up property values and the effect is magnified as time goes on.  Look at other major cities in the US and you'll see the same pattern.   People in these cities will increasingly end up in smaller spaces, it will become more normal for families to live in condos like they do in Europe and Asia.

dess1313

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #42 on: December 24, 2015, 12:23:06 AM »
I think we canadians are in for a bit of a rough time

I have a lot of friends who are just buying houses now, getting married, etc and are facing some pretty high housing markets.  At least we're not toronto/vancouver.  that is just stupid out there.  But here in manitoba, even with our lower costs, its difficult to manage.  With average mortgage payments of 1000-1400 i'm not sure how any of this will turn out.  I was lucky and bought cheaper/earlier during the housing crash.  I still think our housing is in a bubble that's ready to burst soonish.

I think this long run of low interest has change the thought of "debt is bad" to "its only 2% that's nothing!"  Its too cheap to loan money and now we're seeing everyone with big mortgages, and car loans etc etc etc.  A whole generation has started their adult life with record low interest rates.  I also know of a lot who have run away to work in the oil patch in alberta/sask and no one thought the bottom would ever fall out of the oil industry and now it has.  All those big mortgages, car loans are now looking pretty terrible now.  Alberta is in a tailspin

I know for sure, i'm avoiding trips to the USA, and trying to not purchase US goods as much as the choice can be better.  Importing anything will hurt, vacations will be way more expensive.  Exporting from canada should be better but that's a limited market.  I'm traveling more in canada after this for sure, especially with a 70cent loonie

I'm not so worried about me, but i am worried about the people around me

elaine amj

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #43 on: December 24, 2015, 07:26:41 AM »
If nothing else, this will be good for Canada's travel industry.

I do feel that consumer goods and groceries in Canada will soon creep upwards in price. The norm has always been for the US to be a little cheaper for groceries/goods, even with a crappy exchange rate. This whole situation of cheaper groceries, etc in Canada will change soon. Still, for now, I try to compare everything based on current exchange rates and am doing a lot more shopping in Canada than is usual for me. That said, there are still many things that are cheaper to get in the US.

ShoulderThingThatGoesUp

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #44 on: December 24, 2015, 07:58:20 AM »
My employer is trying to do as much work in its Canadian offices right now as it possibly can due to the exchange rate. So that's something in your favor. The Canadian client work I have to do in late 2016, we'll barely make any money on at all. So my work will be training Canadians to do most of the billing instead of simply doing it myself.

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #45 on: December 24, 2015, 08:41:33 AM »
Is this time different than the last time? Or the time before that? Or the one before that?

Eventually these doom and gloom scenarios start sounding the same. Some people get poorer, some get richer and some never learn. Over the long term nothing has changed, the loonie has been going up and down for decades. Keep paying down the mortgage, keep investing savings and it'll work out fine,10 years from now this will all be part of the history books.

Not nervous.

scottish

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #46 on: December 26, 2015, 02:57:23 PM »
totoro, where does this data come from:
Quote
The median homeowner in Canada actually has a net worth at least 10X that of renters.
and
Quote
private pensions are the next largest asset.
I didn't see it in the MoneySense figures - which look like they are based on data from before the decrease in the price of oil.

totoro

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #47 on: December 27, 2015, 02:58:55 AM »
Renters vs. homeowners net worth:
http://economistsoutlook.blogs.realtor.org/2014/09/08/net-worth-of-homeowners-vs-renters/ (US)

Google: Changes in Household Net Worth in Canada: 1990-2009 for Canada.
"a typical homeowner was 24 times wealthier in 2005 (see Table 2). The gap between the wealth of owners and renters has been widening for at least two decades."

Very recent and detailed Canadian data here: http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/data/data_012.cfm (go to home equity and net worth)

Pensions and net worth:
Following closely behind the principal residence were private pension assets, representing 30.1% of the total value of assets held by Canadian family units in 2012.
http://www.statcan.gc.ca/daily-quotidien/140225/dq140225b-eng.htm

BigBangWeary

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #48 on: December 27, 2015, 03:42:44 AM »
While Toronto and Vancouver will always be pricier cities, I think you ignore the effects of post-2008 emergency interest rates at your own peril. Canadians have gorged on debt while savings rates have plummeted. Let's talk in a year or two once rates have normalized a bit. If families are earning good salaries in these cities, and can handle higher servicing costs, then your fellow Canadian is as prudent as you say they are ...

I am far more concerned with the 45 and under crowd in Canada who are the ones shouldering more and more of the housing debt with more precarious employment:

http://www.bloomberg.com/news/articles/2015-12-15/bank-of-canada-sees-elevated-housing-crash-risks-as-debt-climbs

And you can ask these same young Canadian families what share of the 'pension' wealth they are likely to hold going forward.

I believe Canada is a great place for the 60+ crowd. It is a very different prospect for those coming up the ranks now.
« Last Edit: December 27, 2015, 03:49:32 AM by BigBangWeary »

totoro

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Re: Any Canadian Mustachians starting to get nervous about the Loonie?
« Reply #49 on: December 27, 2015, 04:01:43 AM »
I don't believe that something that lasts a decade can accurately be characterized as an 'emergency response'.  What history does show; however, is that rates do rise and fall.  I don't expect interest rates will always be as low as they are now.

Where is your evidence of "gorging on debt" and what measure are you using to demonstrate this?  Are you talking about debts for investments or consumer debt?   Please provide criteria.