If you’ve followed Garth Turner even obliquely as I have over the years, you know that the financial advice that Mr. Turner dispenses in his columns, TV shows and his blog can often be, shall we say, a bit questionable. After all, this is the same guy who recommended buying Nortel at $40 as it was falling off a cliff. But, hey, everyone thought Nortel was going to rule to the world, so it may be a bit unfair to single out Mr. Turner for recommending it to readers.

Fast forward to 2011 and Mr. Turner has made a recent career out of forecasting an impending implosion in the Canadian housing market. He’s been at it for the past three years and for a short while in late 2008, it did seem that his prediction was coming true. Except that after a brief downturn, the housing market recovered all its losses and marched even higher. The markets can be merciless on prognosticators.

The housing market could still crash and Mr. Turner could very well turn out to be right. But I’m pretty sure that some of the financial advice that Mr. Turner dispenses on his wildly successful blog to take advantage of a real estate crash is extremely suspect. Take this recent post as an example. In it, Mr. Turner recommends that Al, a 45-year old Oakville resident with a wife and two kids living in a $425,000 paid-off home, should take out a $200,000 loan secured by the property and invest it in a balanced portfolio (40% fixed income, 60% stocks). Mr. Turner estimates that Al will be borrowing at 3% and “making 8% or so”, which implies spending $300 per month on interest on the loan and earning $1,000 in the form of “capital gains and dividends”. Mr. Turner says:

This is called diversification. It mitigates against having the bulk of your net worth in one asset alone. It lets the government pay for a big chunk of your borrowing. It takes non-performing real estate equity and turns it into income-producing capital. It takes advantage of generationally-low interest rates to create your own carry trade. It builds up the critically-important non-registered side of your investment portfolio, since RRSPs are destined to become tax bombs.

This advice is so bad that I don’t even know where to begin. First, an 8% expected return from a balanced portfolio is not very likely at a time bonds are yielding 3%. Second, it doesn’t make much sense for anyone to borrow short at 3% and lend long at 3%. Third, holding bonds in taxable accounts is terrible when Al also has $200,000 is his RRSP account. Fourth, home equity is not “non-performing” when the owner is living in it (and not paying for the privilege). Fifth, borrowing against a free-and-clear property is not “diversification”; it is leverage.

Last but not least, Al will be in big trouble should housing markets crash, a drum that Mr. Turner is fond of beating relentlessly. His home value will drop, his leveraged portfolio will likely take a large hit and with a shaky economy, he may also be facing a bleak job situation. Meanwhile, he is still servicing the loan and income from the portfolio may not cover his interest expenses entirely. As if Al isn’t in enough trouble already, if we are facing the financial Armageddon that Mr. Turner has been predicting, Al’s bank may be in trouble and may want that loan back. Al’s situation could turn out to be similar to that of an investor with a large position in Nortel who borrowed against his holdings and invested the proceeds in US stocks back in the early 2000s. Today, the Nortel holdings are worth zero, the US stock holdings have lost money and the investor would have been paying interest on his loan for 10 years with only losses to show for it.

Updates: Garth Turner responds by saying that “8% return is no stretch” when his portfolio made 15% last year. It’s hard to argue with such sound logic.

Nick Rowe of the Worthwhile Canadian Initiative blog explains why Garth’s suggestion is not diversification. Check out this comment in the post for the heavy duty math on why leveraging doesn’t reduce risk (as measured by variance).

This article has 67 comments

  1. As much as I like reading Garth’s blog (he’s a great writer) – I have to agree that his advice is really just speculation and shouldn’t be followed.

    In Al’s case – what difference does it make if his house goes down in value? Why does he need to diversify?

  2. Sounds awfully similar to some of the bad advice given out at the banks advising boomer’s to open up LOC’s on their paid off houses to invest or just blow on renovations and travel.

    Or the Smith Manoeuvre fad of a few years ago before the market crashed.

    Great idea, let’s leverage one over-valued asset and “invest” it into more over-valued assets.

  3. You’re right that Garth is a bit of a nut and frequently gives inconsistent, irrational, or contradictory advice, but not all of his advice is dodgy. He’s the lone voice with a reasonable audience advising young couples to stay out of the Vancouver housing market right now, which is almost certainly good advice. He’s also one of the only voices calling for sane lending policy at the CMHC and reform of its board (it boggles my mind that there’s no one with a background in finance in charge of the CMHC–it’s all former real estate people).

  4. What should Al do instead?

  5. The thing that scares me is that people read the blog w/o thinking for themselves. I once heard of a lemming that jumped over the edge a cliff …. good job calling him out on this one. I can’t read the blog. @Mike he may be a great writer but good writing, for myself, can not prevail over cynicism, mass error in judgment/prediction and fear mongering.

    To blindly follow someone who has been wrong for years on end is folly.

  6. Cue the blog dogs as they say (when they’re not saying ‘first!’ but are the 9th post) complaining how this is all profit magazine’s evil attempts at sullying their prophet.

  7. Well said. I’m tired of hearing recommendations to leverage a house for “diversification”. After borrowing against a home to invest in other assets, the home represents exactly the same percentage of net worth that it represented before borrowing. Changes in the home’s value affect net worth in exactly the same proportions whether you have a mortgage or not. The only difference from a risk point of view is the added risk from the new assets. This may or may not be a good strategy, but it is not diversification in the sense of reducing risk.

    If an investor is serious about diversification, he should either save new money to invest in other assets or consider moving to a less expensive home and investing the difference in new assets.

  8. To be fair to Turner, you’re cherry-picking only part of that linked article to make a point.

    In the scenario Turner presents (and who knows if they’re true stories or simply fictitious to make an illustration), the homeowner in question is already seeking to leverage some of the equity in his home as he waits to “move up” sometime in the future. However the homeowner is seeking to leverage in such a backwards and nonproductive way that he’s doomed to failure from the get go.

    As I read it, Turner is simply recommending a saner way of going about leveraging about half the present value of his home, which that advice certainly is compared to the homeowner’s plan. Turner’s is a plan that carries some risk, but if the homeowner was going to do it anyway then he may as well do it correctly.

    Paging through some of the other articles, Turner’s not calling for a housing Armageddon (at least at this point, dunno if he was at some point in the past), he’s calling for a correction in the most overpriced cities (Vancouver primarily) and a multi-year erosion as prices revert to the mean.

    If that were the case (and it appears just as likely as any other scenario, more likely than some) then it’s unlikely the homeowner’s equity would drop to the point where the bank calls the loan. In fact, from what I’ve read, it’s pretty unlikely that a bank calls a HELOC at any point as it’s an income-generating asset that can be sold off to another institution if needed. (and if banks start calling HELOCs, one that has been used to invest is in better shape than the majority that are used to consolidate debt or buy toys no?)

    It’s not advice suited for just anyone, but it’s certainly far from the worst advice that could be offered to someone in that situation.

    Oh – and it would seem that Turner classifies preferred shares as fixed income, so he’s looking at more like 5% for the fixed side vice where bonds are currently.

  9. @ Michael

    I’m not sure I understand your point.

    If we take the scenario presented at it’s simplest, the homeowner is 200K invested in various equities (for sake of argument) and 400K invested in residential real estate (his home) for a 33% / 66% split in a total of 600K assets.

    If he then took 200K of the house equity, invested it in a basket of various productive equities and fixed income as Turner recommends, then pays off the loan using the interest and the tax rebates, should he not end up with 400K in equities and other products and 400K in his house for a 50:50 split?

    If one accepts that residential real estate is an asset class that can mean-revert just like any other (and is usually extremely illiquid when it does) then isn’t that diversifying some of the real estate risk into other instruments that may or may not follow the same pattern of crash and recovery as the local real estate market does?

    I suppose it would be possible for the homeowner to simply save and invest that extra 200K to accomplish the same thing, but the scenario as presented doesn’t impact the family’s cash flow to the same extent that saving 200K would (as they’re presumably paying the interest charges with the income from the financial products).

  10. @ Jak – Turner has modified his initial position from 2008 in recent posts. This is closer to his original beliefs:


    Although I have to admit he did guess the price of gas about right. But 2003 prices have no come around again (which is way more than a multi-year erosian).

  11. @ Geoff

    Thanks. I wasn’t going to pick through years of back posts. 🙂

    Looks like the 2003 bit was in reference to the US (which is still going down today as far as I know – they may very well have given up gains back to 2000 by now). Gas was right, Chrysler was wrong – but then again, mortgage rates aren’t as high as he predicted either.

    Money is still pretty cheap, I wonder what will happen when rates do rise (as they inevitably must from this point). It does seem that certain areas are highly vulnerable to correction, and that country-wide there may very well be a knock-on effect that sees some kind of mild correction for all. 15% as Turner calls for – perhaps, but I know from my own personal contacts that even a 10% correction would be enough to erase all the equity they’ve got (40y amm bought with 0 down a few years back now).

  12. @Jak: After the loan is paid off, he will indeed be 50/50 split between his home and other investments. However, just after taking out the loan, 67% of his net worth will be in his home and 67% of his net worth will be in the other investments. The excess over 100% is the loan. As I said before, I’m not arguing that this is a bad idea. I’m just saying that his home is 67% of his net worth both before and after taking out the loan. By taking out this loan he is increasing his investment risk even though it feels like he is reducing it through diversification.

  13. @Jak: I’m not sure that Garth’s suggestion is all that much better than Al’s own prescription, which involves taking out a mortgage on the home funded by the RRSP at 7% to invest in a “low-risk diversified” portfolio. He is doing this while waiting for a correction in the housing market to trade up to a bigger home. Garth instead says Al’s better off simply borrowing against the home to invest. In my opinion, there isn’t much difference between Garth’s strategy and Al’s own (though if Al planned on investing the proceeds within his RRSP, Garth is correct that he won’t be able to claim carrying charges on his investment. It’s not clear to me if Al said he is planning to invest the portfolio within a RRSP or Garth is assuming he did).

    Turner has written quite a few books painting a doomsday scenario:

    I’m sure there are blog posts around reflecting the world view in his books. I’ll try and dig them up.

    @Michael: I agree. What bothers me about these suggestions is that Al is already saying he is not a very good investor. “I had a lost decade”… How is he suddenly going to invest even more money (which is also borrowed) wisely? Shouldn’t Al focus on how to invest the money he already has wisely before borrowing to invest?

    @Sustainable PF: In a moment of madness, I bought “The Greater Fool” when it came out. I can’t get past the first 50 pages. One of these days, I should read it again if only to remind myself of the follies of timing the markets, whether it is housing or stocks.

    @Chris L: If I were Al, I would buy that bigger house provided I can easily handle the mortgage payments and really need it right now. That’s because Al is already exposed to the housing market and to some extent changes in price have a neutral effect on him. Or if I felt very strongly that prices are going to fall, I’ll simply start saving money for trading up over the short-term. Meanwhile, I’ll look into investing that $200K in the RRSP more wisely.

    @Viscount: I do agree that housing is likely overpriced today. After all, we’ve had rising prices for close to a decade now. And yes, I agree that Garth’s advice on that score is a very good one.

    @Echo: Of course, banks would love turning a situation where they make no profits (owner simply owns a home) into one where they can earn a profit on the loan and on the investment portfolio.

    @Mike: Exactly. Al owns his home free and clear. He is only 45 and he also has another 200K in his RRSP. Looks like he is a good saver. All he needs to do is learn to invest better or find someone who can do it for him. Why complicate matters? Shouldn’t the first rule of financial advice be “do no harm”.

  14. @Geoff: Thanks for that blast from the past. Gas is at $1.31, so Garth may have nailed that one. Watch out Jeff Rubin. You’ve got competition now. Here are a few more:



  15. I don’t read Garth’s blog and am not really qualified to comment on his latest suggestion to the Oakville resident. However, one item that did get my attention in your rebuttal is “holding bonds in a taxable account is terrible”? Well, I thought that being diversified was a good portfolio strategy, and if you are my age [78] and don’t have the luxury of contributing to an RRSP, and you have filled your TFSA with bonds, what other “safe” -[meaning Capital preservation] alternative is there in a taxable margin a/c?

  16. Interestingly, I have followed Garth Turner off and on for a few years. I find he’s like most advice and info that comes from the media and bloggers (no offense to those on MoneySense) that you have to take in with a grain of salt and larger dose of commonsense. Do what works and feels right to you.

    Side note, he also advised people years ago that letting lumps of cash for emergency funds etc. sit in low paying liquid savings accounts (or similar) was a waste of potential investment income. He went on to suggest that lines of credit be used for this purpose and to take the lumps of cash and invest them. Maybe for some this makes sense if you have a very secure job with paid benefits, disability insurance etc. but not for others.

    Article is a good reminder.

  17. I wonder why the bank doesn’t want to earn 8% instead of 3% from their money. There must be some really stupid people working at these banks.

  18. @CC: “In my opinion, there isn’t much difference between Garth’s strategy and Al’s own”

    Someone posted on CMF about the same scheme Al was proposing. I pointed out that loaning the money to yourself is not the same as leverage (the debate is now on as to whether there’s any benefit to the scheme vs. just investing in the RRSP, but it’s certainly not leveraging to invest).

    “If I were Al, I would buy that bigger house provided I can easily handle the mortgage payments and really need it right now. That’s because Al is already exposed to the housing market and to some extent changes in price have a neutral effect on him.”

    That depends on, if you believe there is a correction coming, how you think it will play out. If the percentage change is the same for the cheap house and the big house, there’s a benefit to waiting once those percentages become real numbers (e.g.: $400k house to $800k house requires coming up with a new $400k, but $300k house to $600k house only requires finding $300k — saving $100k for waiting). Of course, if I was Al, and was pessimistic on RE and wanting to move up, I’d find a bigger house to rent and sell the townhouse now. But I’m crazy like that.

  19. @Maurice: Your comment goes to show how personal finance is specific to each individual. In the context of this post, Al who is 45 and has $200K balance in his RRSP should likely not hold bonds in his taxable account. A retiree who has no more tax-deferred room and is living off his portfolio will be fully justified in holding bonds in taxable accounts.

    @marie: I’ll be the first to admit that everyone should think for themselves before making a decision. Anything you read in the media, including on this blog, even if they have the right intentions, may not always be appropriate for everyone.

    @Sean: I agree with your point. Leveraging to invest isn’t as simple as it is often made out to be.

    @Potato: In this example, since Al took out a RRSP mortgage, he is not simply shifting money around. He is leveraging. He is bound by the terms of his mortgage to pay regular interest and the principal back. He can’t simply forgive the RRSP loan anymore than a bank would be willing to forgive his LOC loan.

    I don’t disagree that Al could save a bundle by waiting and real estate crashes sometime in the future. And yes, if he really believes RE is about to crash selling and renting will save an even bigger bundle. But I bet you that most people are not willing to do it. The mere thought of moving makes me shudder, which I think is how most people feel.

  20. Many thanks, I feel much better now!

  21. @Michael James: I came here to say what you said. Thanks for saving me the trouble!

  22. @CC: The forgiveness (or lack thereof) is not what makes it leverage. If he has $200k in his RRSP, and uses it to loan himself money to invest, he can still only invest $200k in equities/whatever. He can’t increase his exposure to equities this way. Indeed, the point of an RRSP mortgage is usually to reduce leverage.

    • @Potato: I agree that by lending to himself, Al cannot increase his exposure to equities. But his RRSP is not empty. It basically holds a $200K bond, secured by Al’s home and a string of coupons that Al is obliged to pay. I do think I’m quibbling over what exactly “leverage” means and I’ll agree that from the POV of how much can be invested in some asset, Al’s plan is very different from Garth’s.

      @Pat: I find it quite ironic that a guy who tries to portray himself as a martyr for free speech (he says he was kicked out of the Conservative Party because Harper hated his guts for speaking his mind on his blog) censors reader comments. I do think Garth is likely right about housing prices. It does seem bubblish in many places.

  23. I have been following Garth’s blog for a while now, mostly because I find his writing style and some of the blog comments entertaining. Also, he is one of the few people pointing to the fact that RE prices in Canada are in bubble territory.

    However, I agree that his financial advice is at times contradictory, incorrect and even dangerous. Therefore, I am glad to see this post by CC, especially since Garth seems to enjoy the blind trust of some of his followers. He is also quite manipulative in what comments he allows to appear on his blog and what he censures. From what I have experienced, well-argued criticism is not welcome (wackos are fine though). There was even a case once when I pointed a mistake in his math – nothing special; any normal person would have just said “thanks, I’ll correct it”. However, the infallible Garth quietly corrected the mistake but still censured my comment. Try posting a note on his blog about CC’s criticism; I tried twice without success 🙂

  24. Pingback: Scary — Greater Fool – The Troubled Future of Real Estate

  25. @ Viscount
    “He’s the lone voice with a reasonable audience advising young couples to stay out of the Vancouver housing market right now, which is almost certainly good advice. He’s also one of the only voices calling for sane lending policy at the CMHC and reform of its board (it boggles my mind that there’s no one with a background in finance in charge of the CMHC–it’s all former real estate people).”

    Not true at all. There are several good web sites out there advocating the same message, though without the frequent personal attacks and rampant censoring of dissident voices…




  26. Garth is the Fool

    A previous book written by Garth Turner “The Strategy” would have put you in the poor house if you follwed his advice. Turner is often factually challenged, and promotes a “strategy” which is high risk and is reminiscent of a snake oil salesman.

    Read the entire customer review…


  27. Turner has a really bad track record. I remember an article 12 years ago or so were he was recommending mortgaging your home equity and using the loan proceeds to buy technology stocks. Sadly many people approaching retirement bought tech mutual funds on this advice. They did poorly but Turner and the sponsoring fund salesman did much better. When I hear his name I think of a carnival barker.

  28. Pingback: Scary | HoweStreet.com

  29. I love how Garth repeatedly keeps talking about his portfolio making 15% last year, 8% this year but won’t divulge any specific details about it. Some investment advisor.

    Considering how he constantly twists and distorts figures and percentages in his blog postings, it makes it his claims even less believable.

  30. We know mortgage rates will be rising, since they can’t fall any further, removing 1st time homebuyers, thus crushing the real estate market. We know that already 70% of Canadians own real estate, so there is no big pent-up demand. We know taxes will only increase in a country with an historic deficit and an exploding debt. We know idiot 0/40 then 5/35 down- payment/ amortization rules have allowed armies of people without money to buy houses. We know household and mortgage debt is extreme. We know the cost of living is rising and salaries aren’t. We know no data exists to support the argument of rich Asian immigration saving the housing industry, otherwise CREA would definitely publish it, and therefore it’s a myth. We know according to the IMF Canada has the highest housing prices in the world! We know the Boomers are house-rich, in need of retirement cash, and will soon dump.

    And now we know more about Canadian lending standards from Business News Network (BNN) speaking with Neil Mohindra, Director, Centre for Financial Policy Studies, Fraser Institute concerning the CMHC Moral Hazard.


    This is what really matters. The Bank of Canada and our Finance Minister has been telling the Canadian public that the housing party is over. The CMHC has almost a half trillion of debt on its books; CMHC is leveraged 10 to 1; that scares the living hell out of the Finance Minister and the BoC. You can’t fight the BoC!

    Finally in Kelowna right now, they are giving, to people who can’t afford a down payment, grants of $45,000 to buy houses. Now Canadian taxpayers are on the hook for these mortgages as well. This is INSANE!


    All this points to a declining housing market.

    Buy low, sell high….now is the time to sell.

  31. Looking to buy a house in Florida, then you’ll need someone who knows the area, you need boots on the ground; otherwise you may make a poor investment. Information is power!

    The rich are not buying in Canada; they’re buying in the US right now, because they know value. Look at this recent report put out by Citibank concerning where the wealthy are buying real estate in the world … it’s the US!


    Here’s another recent article from the Globe and Mail with the financially astute and prestigious Vancouver Belzberg family investing in US real estate:


    And on April 26th, 2011, John Lichtenwald, owner of Metro Vancouver Properties — a collection of seven Re/Max offices in the Vancouver region mentioned that he’s bought US real estate and wrote on a discussion board of the Globe and Mail concerning Florida “If you are an investor … in the US there are some good opportunities [for real estate] right now!”

    I just spent 6 weeks in Florida researching and purchasing a house. I bought a 3 bedroom, 2 bathroom house with a double car garage on .25 of an acre with 80 ft of seawall and direct sail boat access to the Gulf of Mexico for $179,900, which was appraised in 2006 for close to $600,000. Location, location, location!

    The area I bought in is the “Point Grey / Rosedale” of Florida; these are distressed properties that are priced well below assessed value. If you’re contemplating buying in Florida, which will return you many dollars more than purchasing in Canada (currently there is no value in Canadian real estate; it’s among the highest priced in the world and it’s on the verge of a severe correction) now is the time to join me as a partner to buy up distressed properties on premium locations in Florida.

    Avoid the coming real estate correction in Canada and diversify your real estate portfolio before it’s too late. These are the lowest prices for real estate in the US in 40 years! Buy value now in the US, like the rich are doing!

    We’re seeking 50 cash investors with a minimum of $100,000 and up to invest in this value oriented investment.

    If you’re interested send a note to the email address below with your name and phone number; we will contact you.


  32. People want to get blood from a stone. The $200,000 in Al’s rrsp should not be sitting there doing nothing. A portfolio of provincial strip bonds with 12-15 year maturities are yielding about 4.40% – 4.50% today. The $200,000 rrsp in 20 years would be worth about $475,000. Also, a $5,000 tfsa yearly investment for 20 years for Al and his wife with the same provincial strip bonds 4.40% – 4.50% would be worth about $155,000 each for a total of $310,000 for both Al and his wife.Also, Non-registered investments in an emergency fund of at least 1 year of expenses in liquid short-term high yield savings account or cashable gic is a good idea. This could be $20,000-$30,000 if Al and his wife could save this if not $15,000 could be more realistic. Also, short-term gic’s from 1-5 years for other non-registered investments if Al and his wife have still left over cash. Some banks allow small amounts as little as $500 for minimum investments in gic’s. I think this is a low risk, safe way to build future investments as long as investments are held to maturity, The $425,000 townhouse in Oakville is a principal residence and is not an investment like bonds,gics, stocks, etf’s etc. It is a place to live and should not be used as a piggy bank. If future real estate prices rise with past inflation in 20 years the $425,000 Oakville townhouse could be worth $775,000 but regardless borrowing from your house is not worth the long-term risk. Finally, resp’s are also a good idea for Al and his wife’s kids. When Al is retired at 65 he and his wife could convert matured investments to long-term provincial bonds which depending on future interest rates could be 4.50% as today’s low interest rates or 6.50% just as they were 11 years ago in the year 2000. If you don’t save and have a plan you can’t have a solid future investment portfolio. People don’t plan to fail but fail to plan and speculation, day trading ,borrowing and having most of one’s investments in the stock market, real estate, mutual funds etc. which does not give a secure cashflow and could drop 20%+ and has high annual management expenses and fees could put the plan in backwards. One last thing, if rising inflation is concerning anyone I have been buying 1 ounce Canadian silver maple leaf coins since 2002 with my first purchase at $6.00 an ounce and now they cost $51.00 an ounce. A small percentage of 5%-10% of a portfolio is the maximum I used.

  33. CC: Yep. I had a go at the exact same topic (with help from my commenters) here: http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/04/garth-turner-bleg.html

    Some of Garth Turner’s advice is good. House prices may well fall. But this particular bit of advice is not good. I wish he would change it.

  34. @Nick: Thanks for the link to your post. If I were Al, I’d learn to invest that $200K portfolio in the RRSP wisely first. It doesn’t make much sense to ask an admittedly average investor to take out more money to invest. At least, in my opinion.

    @Mike: I’m surprised Garth even wrote a rebuttal. I’ve updated the a link to his post.

  35. I have been following Garth Turner’s blog for over a year. I take what I need from it but am far too conservative for investing like he would like us all to. My wife and I are debt adverse. We did sell our house several months ago in the Okanagan Valley and are sitting on $500k with which we are going to buy another house on Vancouver Island, but not until 2012. This advice from Garth turned out to be dead on as the house prices where we are interested have been falling and hardly any sales last fall…..All the same listings back from $20K to $75K less than last year,with few sales in this very desirable seaside community

  36. @ CC: However I’m not surprised by the kind or rebuttal he wrote. Your site is discounted as “the wimpy MoneySense site,” you as “a young father of three brave enough to be anonymous,” and your criticism as “invective.” Apart from this and some handwavy arguments, nothing specific of substance in the rebuttal.

  37. I think this is the first time I’ve ever heard the term “wimpy” used to describe a website.

  38. I follow his blog to get a feel on housing, which I do believe will drop. I did point out to him how it is nothing special making 8 and 15% when the market has risen 50%+ in that timeframe – comment was censored. I’ve made 60% since October and near 100% on silver bullion – that doesn’t disillusion me into thinking these returns are even remotely sustainable.

    If a conservative 8% was as easy and assured as he says, everyone would be doing it

  39. I’ve learned far more from reading Garth’s blog over the last two years than I have from my MoneySense subscription. Speaking of my subscription, after reading this article I think I just figured out another way to trim my expenses…

  40. Yeah, I agree with Bruce. A 15% return last year is not unreasonable. The TSE went from about 11800 last March to roughly 13900 this March. Although not to be expected every year either. An 8% target is fair yoy.

    Not sure I agree with using leverage to invest for someone with basically no investing knowledge. Personally I wouldn’t leverage more than 50% on a residence. But that is just what I am comfortable with.

    I do agree that it is a shame, that so many people do have alot of equity in their homes basically doing nothing.

  41. Garth Turner is my financial adviser and if he says he’s earned 8%+ in his portfolio, he ain’t kidding. We’ve been up 12% since we moved last October to now. I think he was bang-on with Al’s advice. If Al doesn’t have anywhere else to put his money, taking it out of the home to INVEST, is not as “suspect” as people taking it out to put it into a new kitchen, car or vacation that doesn’t return any money. If the market looks like it’s tanking, it’s liquid investment so the money can be pulled and put right back into the loan repayment. As for him not sharing how he got his investments performing as high as it does – read his books and blogs and he gives everyone the tools to do the same thing. What he has in his portfolio shouldn’t have to be fully disclosed but he comes much closer than anyone else out there.

  42. @Edward: I admit Garth is likely right that we will see a correction in home prices. It’s hard to get the timing right with these things but with housing posting strong gains for more than a decade now, a cooling is more likely than not.

    @Pat: Garth also says “DIY investing’s usually fatal”. That 8% sounds even more of a stretch to me now. Garth does clarify only 10% of “fixed income” is in “low-yield bonds”. Still, it is hard to make 8% when you are paying 2% to your helper even if you had just 10% in bonds.

    @Mike: Yeah, I had a chuckle over being called a “wimpy website”.

    @Bruce: Exactly. Markets move up and down and portfolios do the same. Some years are positive; others are negative. I made 10% last year and 17% the previous year but also lost 20% in 2008.

    @Cal: I don’t doubt that Garth earned 15% last year. What I’m questioning is, on average, expecting Al to earn 8% on his leveraged investment in the future. Especially when he has 40% in “fixed income”. Lets say Al will earn 5% on his preferred shares. That means his equity portion has to return 10%. Add in 2% to pay advisors and you are looking at 12% from the stock portion. I think that’s quite a stretch.

  43. Kudos to you for posting this, CC. Garth and his cadre of True Believers can be a bit obnoxious when he’s challenged – witness what happened when Canadian Mortgage Trends wrote a critical article a few months back.

    It’s becoming very clear why he was booted from caucus.

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  45. BadMother, I don’t think people are questioning Garth’s return of 15% last year or asking him to disclose his portfolio positions. On the contrary, as several people have already mentioned, 15% in a year when the market has performed so well is nothing special. The point is that past performance over a single year(!) cannot be used as a basis for future expectations. It is completely meaningless and Garth knows this very well. So why does he keep using it as an argument?

    I asked him some time ago to tell us the average return over the last 10 years of, say, 10 randomly selected portfolios of his clients. He refused. Why? If his stated purpose is to help people and he believes that a professional adviser can produce superior returns, why wouldn’t he provide this information that could persuade people to seek professional help?

    As for his books, I have read only the Money Road and was thoroughly disappointed. It is nothing more than a lexicon of financial therms. He has tried to touch on all possible subjects – technical analysis, bonds, derivatives seg funds, etc. It’s so superficial that it’s useless. One can get more in-depth information from wikipedia.

    If you read carefully his blog posts, you’d notice that they are abundant with hand-wavy arguments. As a physics professor I can tell you that hand-wavy arguments can sometimes be useful in explaining complex concepts. But at the same time, when not accompanied by more rigorous analysis, they can give the listeners the wrong impression that they understand the subject… or that the speaker understands it.

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  49. Tony from Calgary

    Garth’s advice is great, in so much that it woke me up to some of the unsustainable things that are going on in Canadian real estate market. However, being that I’m a sponge for anything “conspiracy’esq” my reading expanded to other more “extremist” sites like Automatic Earth and Zero Hedge.

    Looking back at Garth now, I’m thankful he got me thinking, but I don’t visit his site nearly as much. He rips into the housing market without abandon (as he probably should), but then quickly advises people give him their money to invest in the stock market… a stock market that is so totally overvalued and is only being propped up by manipulation (i.e. QEasing).

    His love of his 15% portfolio is just as suspect as that of a real estate agent’s passion for semi-detached homes with stainless & granite counter tops.

  50. @BadMother: I’m curious. What do you mean by “Garth Turner is my financial adviser”? Is he managing your money? Is he providing specific financial advice tailored to your situation? Or are you merely picking up financial tips from his blog?

  51. This is what she means…


    Garth’s got an agenda. That’s why he always advises people to email him to get the name of a ‘good financial advisor’. It turns out to be him. Go figure…

  52. CC – Garth is a fee based financial advisor, he uses his blog as a marketing tool to pick up new clients.

  53. Nice article and great comments. I too read the Greaterfool site, I do enjoy the writing, more for the humour than its accuracy.
    As much as I agree with a lot of the comments here that GT is seriously in love with his own voice (blog). His real estate views are valid but his other macro economic views are so full of Sh*t that you can scarcely believe that he believes his own writings.

    The most telling evidence usually comes in the sarcastic comments he makes to people.

    A week or so ago, he replied that he (GT) was up 5% a year for the past 3 years. Now to me, it he is a professional advisor and he can only manage 5% a year then that is a dismal performance. After he takes his % fee you might aswell just leave the cash in a bank (!)
    He constantly goes on about Bonds, comments like “we made out like bandits” on the bond performance, then last week he publishes a graph showing the bonds were at best up 6% in the past 6 months, and that these had “offset any losses”. Hence he most likely broke even!

    His biggest beef is the Gold & Silver Bugs. His greatest venom is directed towards the goldbugs pointing out that compared to gold and silver his own performance is not that great.

    I suppose once a politician, always a politician, his faith in the “system” is complete. I guess the next year or so will prove him vindicated in his real estate predictions but he will be proved utterly wrong on just about everything else.

  54. Garth Turner is right regarding Real Estate. Everything else, may work for some

  55. I would like to thank this editor for pointing out the flaw in leveraging against a paid off home! It is scary when we live in a world where so many well respected “economists” recommend “non-ecomomists or (non-experts)” to put their home, where they live to offer it to a bank, who doesn’t care about human needs, just to try and make a few extra percent in higher risk investments, only to be knocked over by taxes, inflation, and un-predictable world events. I don’t know anyone personally that built wealth without real estate, so why give it away for risky business dealings or risky advice.

  56. I’ve been on Garths website for a few months and I read it every day. The content of his website is 99% real estate. Some of the bloggers bring up investing and Garth does vaguely comment on these post, but he does not, in any way promote or recommend his financial services on the site. In fact, he suggest that people speak to their financial advisors. Like every other profession, everybody has their own methods and optionion on how they do things and you will always have people who see things differently because it may conflict with their agenda. He does have a very sarcastic sense of humour and I think this rubs people the wrong way. His website is great, he is saying things about real estate that most of you don’t have courage to say or admit. He is not selective regarding the post that he permits on his blog. The posts that are omitted have inappropriate content which may be racist or too vulgar. A lot of people disagree with Garth and these are posted for everyone to see.

  57. The reason Garth can’t list portfolio examples over the past 10 years is due to the fact that he only recently became an advisor. He has a history of bad advice but no actual record of return. With his past (and present) record of misses I cant imagine anyone actually paying for his advice. Thank god he hasn’t been in the business longer – for the sake of the lemmings that would have surely taken a beating as a result of his failures. Do a little research, he has simply been wrong on a consistent basis for way too long. Does anyone remember his failed survivalist website, xurbia? He now flogs his books through it. He was so sure of a collapse he actually sold generators, survival kits etc. to profit from his foreseen doom. That was a few years ago.

  58. Garth is a self proclaim profit.

    I’ve read his blog for years and feel his advice is very questionable. Unlike guys like peter schiff, kyle bass who makes a prediction, stands by them and estimate a date. Garth does no such thing

    His prediction on housing several years back, is dead incorrect, but now that it looks like housing is on the verge of a bubble. He’s now claiming “I’ve told you so”,
    Originally he said 15% decline average over Canada, calling people who predicted 40% idiots. Then after several months / months of decline averaging 12% he’s now predicting a 40% decline in Re-estate prices.
    BTW he owns real estate, go figure?

    Also gold, He’s been claiming a gold Bubble too, way back when the precious metal was at 1100 all the way up til now. I know gold went to approxiately 1900 and fell back to 1500, but Garth was prediction it will fall back below 1000 and even 200. But then gold went over 1650 and is floating there present. But Garth claims he told everyone to sell at 1900. Utter BS, he’s been saying that since 1100. He talks about balance portfolio. But is so negative on gold. Especially when the US is on a verge of War with China, using Japan as its hammer.

    He’s telling everyone to stick their money into bank prefers and us treasuries. Which I find very risky, if the US falls over the fiscal cliff.

    Garth is right in his little bubble world. but I would compare him to real analyst who has a better grip of the world, economics and human psychology.

  59. I used to read his blog regularly but I got fed up with the constant thinly veiled self promotion, looks like I wasnt the only one


  60. Looks like Garth is right about one thing, this real estate market is starting to get real ugly, and despite of what the bankers tell us looks to be headed towards a crash and not soft landing this spring.

    • Alex Smart says:
      “Looks like Garth is right about one thing, this real estate market is starting to get real ugly, and despite of what the bankers tell us looks to be headed towards a crash and not soft landing this spring.”

      Is he correct? Really? Turner’s been calling for a real estate collapse or correction for so long that anything that comes out of his mouth should be declared invalid, even if he is finally right. A broken clock is correct twice a day. It’s clear from his continual ramblings that he doesn’t understand how much modern markets and economies have changed. I did have time for what he had to say some time ago but grew weary as I learned more and more about his bad advice, flip-flop political career and many of his failed ventures. I tuned out when I learned of his failed survivalist site “xurbia” which seemed to try to capitalize on the coming collapse of society (wrong again). When this guy makes solid predictions – he’s consistently wrong, so now he spouts extremely vague prognostications. The most frightening thing is, after years of bad advice he just recently went pro and became a certified financial advisor, heaven help the people who trust their nest-egg to him.

  61. Some losers took his advice in 2010 and sold in Toronto, and waited for his prophetic ‘correction’. They cant buy back in.
    Don’t take investing advice from a MSM – Government Political hack wearing an 80s trench coat and cowboy boots.
    BTW, while he told his faithful blogger moonies to sell around 2011, he bought in Toronto, didn’t write a word about it,
    sold a year later, didn’t write a word about that either. . I was surprised he listed on MLS, now everyone can analyze his ‘expert’ deal making

  62. Real Estate Agents don’t call themselves ‘advisers’ because they are, for good reason, prohibited from doing so… but Garth Turner, a retired Politician and MSM hack with a comforting degree in ‘Literature’ can reinvent himself as a ‘blogger’ and freely dispense bad ‘advice’ with impunity. In Leaside he’s known as the Imelda Marcos of cowboy boots. If ya wanna take investment advice over the internet from a guy in an 80s trench coat who says he drives a Harley go ahead.

  63. Just a friendly reminder that it’s 2015 and Garth has been wrong about housing crashing, interest rates going up, etc for 7+ years. See you in 2022 Garth!