Baloney Budgets – “I understand you’re trying to make Vancouver look like a place people would want to live. Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate.”

“Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate. I understand you’re trying to make Vancouver look like a place people would want to live (and therefore make money off assisting them with their relocation), but please exercise some ethical restraint. 1) There is nowhere in Kits Allison can buy a month’s worth of groceries for $170, unless she’s living off of plain oatmeal and carrots. Shopping at IGA, Safeway or Choices could easily run a person $100 per week, not including much protein, and she can forget the occasional bottle of wine. 2) Gerald is spending almost 50% too much on his apartment. Back before people thought of housing as a place to sleep instead of one more status symbol, the lender rule was no more than 28% of your gross salary should go towards housing. His $36k/year is $3000/month; 28% of that is $840, so his $1225 rent is $385 too high. An actual financial planner would tell you the same thing. But since he can’t rent a studio in Coal Harbour (or maybe anywhere in Vancouver) for $840, he’d be stuck in a basement suite in Dunbar or Kits. Do any of your prospective clients know how much of the city lives in someone else’s basement? Also, what about paying off his student loans, or did he luck into rich parents? 3) You have not factored in the impact of interest rates returning to their long-term norm of about 7% (never mind the rate reset they’ll face in a few years, courtesy of the bank). What does that do to Mara and Jeff’s mortgage amount? Also, where are these people eating out so cheaply? A nice dinner plus wine four times per month at the listed total means their final bill with tip is $60 every week. Please show me a restaurant where a couple can get a “nice dinner” including a bottle of good wine for $52 including tax; I’d like to go there. Do they have any existing debt to service? 4) Same interest rate problem as Mara and Jeff. Misleading people as to the actual costs of living in this city helps no one but yourselves.”
– Dan, commenting below an article at 2vancouver.com titled ‘Vancouver Money and Budgets: A few case studies’ [23 Nov 2012], that sketches out proposed budgets for people in Vancouver in 4 different situations. As Dan points out, the budgets have elements of fantasy about them. [hat-tip to VCI; posted here for the record.]

It’s expensive to live in this city, largely because of costs associated with accommodation. This is very, very bad for Vancouver: It forces young people away, and diverts resources from other areas of the economy. We’d bet that relocation companies like ‘2vancouver.com’ have some relevant stories they could tell. – vreaa

105 responses to “Baloney Budgets – “I understand you’re trying to make Vancouver look like a place people would want to live. Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate.”

  1. …and predictably, that comment has been removed.

  2. Anonymous Guy (currently) working for the machine that keeps this insanity moving

    Wow,, what a crap article.

    As usual trying to mask the ridiculous urban poverty even “professionals” in Vancouver are forced to endure.
    Razor thin margins from being a saver to a debtor even when everything goes to according to plan.
    Highlights…
    – 2 Kids and $130 per month daycare? what the hell was that about? Do they have a slave labourer living in their flex space who they only have to feed?
    – Couples saving less than 6 Grand a Year? so how much do you think will go to retirement or instead on vacations, emergencies and future special assessments on their property?
    – Two kids and no defined contribution RESPs? very responsible, just throw them the leftover scraps at the end of the month (I guess these flakes have their priorities straight (lunchtime tai chi and fencing classes))
    – So no one carries debt that needs to be paid our or at least serviced?

    At least it is quite honest in the mediocre salaries Vancouverites earn. Just make sure the readers know that those aren’t just starter salaried fast tracked to six figures executive positions, but rather where your employer will leave you to rot, unless you make moves to another employer who will hopefully hire you for slightly more, then leave you there to rot again.
    Diagonal career advancement is the Vancouver Way, show loyalty and get moved from labour to equipment in the bosses balance sheet.

  3. There’s nothing compelling in Vancouver to make us want to stay after having lived no where else but here for almost 60 years. Vancouver has more problems than just RE prices. We anticipate our immigration application to be approved by early 2013. We’ve sold or given away half our stuff and will be leaving Vancouver (and Canada) in early 2013 (and not immigrating to the US).

  4. You can easily get a studio in Vancouver for $840/mo. Almost anywhere.

    • You can also have a nice dinner for two with wine (it doesn’t have to be a whole bottle) for $60. Especially on Tuesdays, like mentioned in the article.

      If you are deconstructing someone’s argument, at least use valid counterarguments…

      • Agree on both counts, $60 for dinner is totally reasonable and as long as you aren’t in downtown a studio for $840 shouldn’t be that hard to find. I bet you could even find an older studio in downtown for that much (say, gastown).

      • $60 barely gets you burgers and a couple of beers for two at Whitespot…

      • Two $15 plates of food, two $7 glasses of wine, 12% tax, 20% tip (even on top of the tax, quite generous) and ta-da, $60.

        Guess it all depends on your definition of a ‘nice’ meal.

      • Hmmm, me and my other half eat at restaurants regularly and we like the occasional glass of wine and we rarely spend over $60 includings tips of around 15%.

        Also, the article mentioned “a nice dinner every Tuesday night” when many restaurants have deals (or at least used to have, not sure if that changed)

      • Strictly speaking, my old CoalHarbour digs were pretty sauve – albeit compact/by choice…

        That said, I routinely spent 1.5X more than the monthly rent on restaurants… Easily.

        NextUp… What do you mean, “Half a bottle”, Bubbly… !!!! In his salad days, as HomeLessInDunbar could well attest, Larry Hagman would routinely polish off four Veuves… Gerard D. manages about 5 vintage labels per diem. You Philistine, you! [Just kidding. But 1/2 a bottle!!!!! Sacrilege.]

        [NoteToEd: on returning, circa 2005, it struck me as pleasurably odd that I could ‘abode’ myself across from JimmyP’s yacht for less than a typical monthly parking spot in TheCity. I made the most of it until, once again, duty called.]

      • The Poster Formerly Known As Anonymous

        He was on the HMS Nem, berthed near Jimmy Pattison’s yacht.

      • Egads, Poster Formerly Known as Anonymous! Who tipped you off!???

        Needless to say, as GhostShips go, Nemesis’ arrival in the harbour was particularly disconcerting to agents of the MiddleKingdom unaccustomed to bibulous BBQs… local pirates were none too happy, either…

        http://en.wikipedia.org/wiki/Nemesis_(1839)

        [NoteToEd/SS100X: It’s old school, but when you navigate by the stars and your steel hulled vessel is restricted to a magnetic compass… Your binnacle had better come equipped with the Mighty’Balls’ O’Nelson: http://tinyurl.com/cc8e5nj ]

    • I rent my basement suite to students in the Oakridge area for 850 right now. It’s only about 400 sq feet but it’s sufficient. Not big enough for a couple though.

      • Real Estate Tsunami

        German Landlords?

      • Medical degree? Check. Millionaire by 30? Check. Students living in the basement? Check. Is this what it means to be rich and successful in Vancouver?

        Brian, I hope you are not offended, but never ceases to amaze me what people do to live in this city. In almost anywhere else in North America, you could have lost the troglodytes years ago.

      • I know plenty of millionaires and multi-millionaires who rent part of their houses out. It’s whatever makes you happy. For some people, being frugal and saving the most amount every month makes them happy. We’re lucky, my family annual income is around $350K only from bachelor education. While we don’t spend excessively, we like to enjoy our life because you never know what’s going to happen tomorrow. We probably don’t save as much as Brian, but we like to enjoy our life while we can before kids.

  5. But a small objection here….100 dollars a week for food from IGA? What the hell do you people eat that costs 5200 dollars a year? Steak and Lobster and smoked Salmon every night maybe?

    Get a grip people. Anybody who spends more than a hundred a month TOPS is eating all the wrong things. I mean that in all sincerity. More veggies will do you good. You have seriously got to cut back on the cheese and Sodas and fats and meats and processed food or you will all end up ugly, fat, diabetic or in a coronary ward of Vancouver General Hospital.

    Sheesh! What sick idiot spends more than 100 dollars each month per person on food????

    • Farmer, your sarcasm isn’t coming through.

      • Naked Official Overdrive

        How about mine, loyal cadre?

      • Real Estate Tsunami

        Costco has a hot dog for 1.50, includes a fountain drink.
        Or you can just walk around and the tasting stands.
        Cadres (sorry Naked) use your imagination!
        Canada is the land of the plenty, you just have to go and get it.

      • Real Estate Tsunami

        And then there’s always the food bank, this glorious legacy of EXPO 86.
        There were no food banks in the Lower Mainland before 1986.

      • I was having a moment. I feel better now after ventilating a little.

    • If you are being sarcastic, then yeah, it isn’t showing.

      I’d love to know how you could get by on $100 a month (~$3.33 a day) for groceries. KD and hotdogs for dinner every day?

      • UBCghettodweller

        Less than $100/week is totally doable. Bloody hell, I eat whatever I want including the “expensive bread” and decent cheese and still spend well less than $100 on both groceries including booze (as a grad student, if you aren’t a borderline alcoholic, you aren’t doing your PhD right.)

      • $100 a week, sure, easy as hell, Farmer said $100 a month.

      • When I was going to grad school, back in the stone ages 12 years ago, a budget of $200 a month was do-able. Now-a-days: I don’t think so…

      • UBCghettodweller

        LJ, yeah, $200/month is difficult if not close to impossible in Vancouver itself. Elsewhere in the country, maybe. $300/month is closer to something that is still possible.

        I have more budgeted to food than many because I’ve learned that you need, food, exercise and sleep to not totally burn out. You can skimp on one of those and still get away with it. Since my NSERC stipend isn’t too bad, I choose skimping on sleep and putting more hours in to the lab. Publish or Perish.

      • You can go to the foodbank.
        Otherwise 3.33 a day for groceries per person is next to impossible. I’m pretty cheap (see my blog)… let’s see for breakfast, cereal and milk would run me about 50 cents. Lunch: sandwich with meat, veggies and milk will set me back about 1.50. (Good) instant noodles for dinner: 1.20, so you could do it. I can’t imagine doing that every day though.

      • Brian: I think that someone subsisting on that diet would be suffering from scurvy within a couple of months. Saw it happen to a student during my undergrad: took a bet to live on KD for an entire school year (c. 8 months) and came down with scurvy in the 5th. Tragic, but that seems to be what is in store for over-leveraged condo owners….

      • I apologize and hereby withdraw my obnoxious statement. Sorry if any feelings were hurt. Whats that they say about drinking and thinking? I don’t incidentally spend more than a 100 a month on food. Never have. But then I grow my own food, can and dry and pickle the products, make my own cheese and keep a beehive. I realize not everyone can do that so my remark was really out of line. Try to forgive me if you can.

  6. Gerald’s budget is pretty funny. No car, no bus pass, $59 in monthly savings. Hopefully his computer or TV never break as he will never be able to replace them. If his rent increases his savings will fall to about $25/month.

  7. If people migrate to Vancouver with an expectation of being a yuppie on a low salary there’s nothing anyone can really do for them. With the exception of the family with kids, it seems “living close to the action” is implied. Hmmm…

  8. Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government.

    Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin.
    http://www.forbes.com/sites/baldwin/2012/11/25/do-you-live-in-a-death-spiral-state/

  9. Given many of the comments above, it seems the writers of the original article could perhaps have emphasized that it helps to have extreme budgeting skills in Vancouver … budgeting as an adventure sport, perhaps… where only the agile and frugal survive.
    BC – Bring Creativebudgetingskills

    • Or just don’t buy. Vancouver is pretty reasonable to live in as long as you don’t have the urge to own a box in the sky at double the cost of renting it.

      • No problem, Vreaa. I am trying to make up for my obnoxious comment of yesterday. I have not seen Granthams article by the way. Will look into it. We do have a serious food problem on the horizon though. I have been monitoring it since late summer.This one is off the radar altogether. The media has not picked up on the clues but we are headed for a class one global food disaster and the pinch will be in developing nations dependant on imports. That spells discord and political upheaval. There is nothing quite like a problem with food costs that can be the lever to pressurize even the most stable of governments. I worry about it because we do not need more instability in the world right now. I forsee serious inflation developing here on these shores too if Corn fails again. That commodity is just too critical to all aspects of our food chain. It is the equivalent of oil in that regard.

    • Maybe that is part of what got under my skin. Few make any sacrifices. They just pony up with the cash and then complain afterwards about the cost of living. It takes effort to save and exercise some frugality each day but you need to do it if you want to fatten your accounts.

      Let the processed foods go and stick with the fresh veggies, dairy and good bread. I make bread for the hell of it and damn if it isn’t the best bread around. And there must be worse ways to spend your free time than learning the amazing arts of food preservation.

      The basics are really simple. Sugar, salt, vinegar, smoke, a dryer and spices .It is only time that seems to be the missing ingredient for most people. I just made a can of 36 dried eggs for the hell of it. They say they keep for years but this is my first go round .Anyway, I whipped some up in an omellette and they actually look pretty good. Taste about normal too.

      I realize I am getting off track but one of the things I worry about is coming food inflation. I also believe we are headed for another food shock in the Third World.

      My concerns revolve around the fact that global grain supplies are at such a low level combined with the drought in the US which is probably just the beginning of a secular dry period that is a follow up to what we saw in the Dirty Thirties. Dry trends are a worry and they don’t usually come as a single year event. What we are seeing is that much of the US corn crop withered due to lack of rain this year and the expectation is it could be repeated again this summer.

      Anyone else notice the prices for wheat and corn lately? They shot up in the fall and did not come back down. This is unusual and implies higher prices are here to stay for awhile. It will get much worse too if crops do not come in strong next year.

      But what do you think will happen if there is simultaneously a poor yeild in Australia, Brazil, Russia or Canada? The exporting countries are heavily relied upon by much of the world for basic supplies of rice, corn, wheat and soy. Yet here we are at 40 year lows for what is in the bins.

      A crisis is coming I assure you and it will be the source of some serious future inflation.

      • Farmer -> Thanks for the comment.

        Have you read Jeremy Grantham’s letter in this regard? Grantham is one of the wisest investors around. I particularly like the interviews where he refers to how he is assisting his sister with her money. Interviews with him on youtube are always worth the watch.. a very considered way of approaching the markets.

        In July 2012 he put out a quarterly letter to clients called ‘Welcome to Dystopia! Entering a long-term and politically dangerous food crisis’.
        It is certainly worth the read (google it yourself and pick your source.. it’s no longer up at Grantham’s own site).

      • The Poster Formerly Known As Anonymous

        Throw in the fact that we peaked in production of easily recoverable oil in 2005, and you can deduce there is a terminal food crisis coming of epic proportions, in our lifetimes. Pretty soon (20 years), most to all of our disposable income will be shoveled into the bare essentials of life, and obtaining food will become the #1 household priority. We will be glad of the weeks when we get enough protein. Warm clothing will be a luxury item we mend for a decade instead of discarding when a zipper breaks.

        We take all too many things for granted in this historical window of unprecedented energy wealth. Look for things to change perceptibly in the next ten years.

        (As an aside, that is why I worry a great deal about the oil-and-water dynamic of having essentially two – three culturally and linguistically distinct large populations living in the lower mainland. The rapid pace of immigration without integration has created two or more visually and aurally identifiable groups, with not enough agricultural land to grow enough food locally to sustain the numbers. If the trend continues, look for regional war in the next 25 years as oil products for transportation and production of food become prohibitively expensive – i.e. unobtainable in the quantities required due to net energy recovered on energy invested to extract. Worst case, total ethnic polarization is seen, and the large groups of CBCs and CBIs and and CBXs are forced to choose sides, or are fucked.)

        Wish it weren’t so; we need politicians with science and engineering backgrounds capable of understanding the maths on food production who have the stones to limit expansion of the regional population to its true carrying capacity in absence of oil subsidies to food production.

        There is a considerable wealth of evidence to suggest what I say about oil and food production coming true, and game theory demonstrates taking action now would be the optimal strategy whether or not it occurs as predicted.

        Now that that’s said, since I know around 95% of people reading this will dismiss it as the ravings of a nut job, and no action will be taken until it’s too late, it’s time to put my head back in the sand where it feels happiest. Carry on people, nothing to see here, just crazy paranoid doomer talk.

      • Nothing too crazy about your hypothesis regarding oil. Actually I have been giving it quite a bit of thought lately too. With the advent of global grain shortages combined with the potential for war and the related hikes in energy prices where these are concerned I can foresee a very serious inflationary event on the horizon.

        I appreciate that many good analysts are leaning towards a deflationary future as deleveraging continues but these other conditions warrant monitoring. The future is not written and the Gold bugs may yet turn out to be the absolute winners as an ugly period of simultaneous price hikes in food and energy conspire to tax incomes across the globe. I have more thoughts on the topic than there is time to relate but I will stop there today.

      • The Poster Formerly Known As Anonymous

        And Farmer, you are very fortunate to have the opportunity to produce so much of your own food. Inertia keeps me from imposing the changes in lifestyle required of our family to achieve the same – its just too inconvenient to move to land in the valley when the problem hasn’t yet materialized. I know I will regret this some day, but aside from baking our own bread, growing herbs and tomatoes and even potatoes on the balcony, we are entirely store-dependent for food inputs. (And I am dragging my heels on the gun license application to begin acquiring some hunting skills… )

      • Darn! Moderated again. And just when I was getting warmed up…..

        No matter. I will add some commentary as this is a subject of serious interest for all of us and it is one that is not being given the attention it duly needs.

        As many of you are already aware there has been substantial social upheaval in Egypt and elsewhere in North Africa on the tail of steep commodity price increases since the global financial crisis.

        I think there is little doubt that much of the turmoil was driven by rising food costs in otherwise stable nations where a majority of the income of the average person is already consumed by food.

        Sharp price hikes for bread, grains, meat and other staples have hurt the poor who were in many cases already struggling to make ends meet. The backlash in Yemen, Egypt, Libya, Syria and elsewhere has been self evident and as an outcome some governments were overturned while others continue in a state of ongoing criisis.

        While some of the difficulties have abated during the past year we are again seeing soft commodity prices on the rise. Soft commodities (for those who are unfamiliar with the topic) refer to those products like Rice, Oats, Soybean, Sugar, Wheat and Corn that are traded on the large public international exchanges. The prices for these products and others are set and reset continually and are currently being bid up steeply on the basis of poor agricultural data from the United States.

        In addition, in the past months we have seen announcements of Quantitative Easing or other Central Bank and Government stimulus coming from all parts of the world including the European Union, the US, Japan and China.

        These are significant and broad based and give us an early warning indicator into further rounds of food price hikes across the globe as excess capital finds its way into the speculative grain markets.

        A quick look at the price charts for Wheat or Corn tell us unequivocally that the Third World and developing nations are about to face another round of “food shocks”.

        How do I know that?….Futures markets of course. There is absolutely no doubt whatsoever that inflationary pressures are on the rise for the most essential of our daily needs. In Africa it is a daily reality already although little press exists on that subject.

        Food prices are again marching higher.

        Why I am concerned is that the “Easing” we are seeing now is coming on the heels of a devastating drought in the US that saw much of the Corn crop fail. The US is currently the worlds largest exporter of corn and a lack therein means that prices for alternative grains will spike in concert with the rising costs of corn as supply diminishes or local demand further reduces stocks.

        Some of you may already appreciate that commodity prices are set globally and thus what happens in the US with a Corn failure immediately leaks through to the developing world. Those countries like Egypt who depend upon imported grains to feed their people will feel these changes most accutely.

        A shortage of Corn thus immediately translates into price increases for Rice, Wheat and cooking oil. Some time later we also see a proportional uptick in the cost of beef, pork and chicken. Indeed, most of the worlds commercial meat stock is also grain fed and so as input costs rise the end product (meat) comes at a steeper price.

        It is bad enough that some people will have difficulty buying basic grains in the coming months. Even worse when they can no longer afford even one chicken. A lot of people are going to be very, very angry as this reality sets in.

        No country meanwhile has any immunity to the sharp price changes we have recently seen on the various commodity exchanges. Corn and Wheat have both spiked significantly within the past months. Between mid June and mid July both of these essential crops shot up by over 50%.

        Those hikes have not yet been felt in the supermarket though due to the nature of the commodity buying and selling and the time lag between commodity contract purchases, expiration and the flow through to the retail level.

        But it is coming and it is coming very, very soon.

        So with these two ideas in mind (the US corn crop failure and current Easing policies) designed to reflate the global economy, we are now seeing significant headwinds develop where food is concerned that will negatively impact poorer countries.

        We should therefore be prepared for disruptions, protests and political instability in poorer countries as the reality of these changes flow through to all levels of the supply chain and eventually hit the retail level.

        Indeed, we will soon see serious price hikes in meat and cooking oil as a direct outcome of the Corn disaster and so this is one other event that should be on your radar.

        Furthermore, this is just the first year of a poor crop cycle in the US and it is not inconceivable that the coming season will be equally dismal thus putting significant upward pressures on global grain stocks which are already far too low.

        I believe these events have the potential to induce considerable inflationary pressures both in North America and abroad at all levels of the marketplace.

        Apologies for being off the real estate subject but this is just too important a topic and I think it needs commenting on. I will again add that the impending risk of war in the Mid East with its potential to disrupt energy flows is a compounding factor that in concert with “Easing” and a growing food shortage problem could have significant inflationary impacts on the whole globe in the near future.

        We will know where we stand by mid summer if US crops are stable.

        Farmer

      • The Poster Formerly Known As Anonymous

        Thanks for sharing your research, Farmer! You are right; developing countries will be hit first and worst, but we will not be untouched.

      • The Poster Formerly Known As Anonymous

        “I appreciate that many good analysts are leaning towards a deflationary future as deleveraging continues but these other conditions warrant monitoring. The future is not written and the Gold bugs may yet turn out to be the absolute winners as an ugly period of simultaneous price hikes in food and energy conspire to tax incomes across the globe. ”

        Deflation in unproductive assets, and deleveraging, yes. Rise in prices of food and energy, also yes. Result will be more money sent to basics and less to industrial production, leading to less industrial production and less jobs, income… Could be ugly stagflation, in which case either they print, or we all get used to less of everything. A whole lot less… and that assumes system remains stable. As you point out, if food inflation triggered Middle East unrest causes oil choke (e.g. Hormuz), all hell breaks loose. Good times!!!!!

        Please pass the sand bucket.
        (Joking aside, in all earnesty, it’s something almost not worth thinking about, since its so beyond our control, like a megatsunami. Better just to get on with life! Now back to work i go.)

      • The Poster Formerly Known As Anonymous

        Wow, exciting! First time ever in moderation… quoting Farmer did it.

      • Ralph Cramdown

        Thanks so much for so much food for thought, Farmer. I’ll be the first to admit that I don’t follow commodities as closely as I should.

        That said, I’m more optimistic than you are. The very long term trend in soft commodity prices is down, down, down, in yields/acre is up, up, up. If you look at the long charts, real pork and corn prices do occasionally double. Is it possible we’ve been living in an era of unsustainably low protein prices? Maybe, but I guess that could be solved by a 100 million who’ve recently gotten used to beef going back to pork, 500 million recent porkers going back to chicken and a billion recent KFC converts going back to beans. I may sound trite, though I’m not trying to be. Fish farming offers a lot of potential and, as they say, the cure for high commodity prices is high commodity prices. Some of the places which have experienced food unrest recently (e.g. Egypt) were subsidizing staples all along, so it isn’t so much that a sustainable system became unsustainable, but that a price spike finally broke a likely unsustainable system.

        Food prices could certainly consume more of the budget than they do now, but not hugely more. I find that the spread between beef and hamburger is still at recession levels (i.e. people are so stretched that they’re driving up the price of ground beef and driving down the price of steak, even though for only a few dollars more a pound…) There’s still an awful lot of slack in North American prices, I’d say, based on the difference between what I pay for protein (I shop the flyers and know how to use a freezer) and what many others seem to be paying.

        I hope you’re wrong, but even if you’re right, western guns would likely prevail.

      • The Poster Formerly Known As Anonymous

        @Ralph

        “Western guns would likely prevail”

        At what cost to society?

      • Ralph Cramdown

        Hey, I didn’t claim it would be pretty.

      • Well thanks all. I might just be catching up since I have not posted here in such a long time. I don’t incidentally see a great discord coming for any of the big food exporters like Canada, the US or Australia. Our surpluses are more than adequate to meet demands at home so nobody really needs to go out and plant a garden other than to enjoy the outdoors and commune with nature.

        Actually most gardeners will tell you the cost of growing your own does not really pay off as store bought food is still too cheap too justify all the effort and costs.

        I do believe though that another global food shock could be very disruptive on the macro political side and the risks rise if you have a neighbor who is having trouble meeting demands people can afford.

        There is enough food to go around at this time but inefficiencies in transportation, storage and distribution combined with income inequalities, subsidy distortions and trade barriers make for a bad brew. Throw in a drought in one or two of the major exporters and the brew is lethal.

        When I consider the amount of liquidity in the system (all systems including our own here at home) and look out to the future it is not hard to conceive of how a combination of rising energy costs and export shortages of key inputs for both animal feed and staple grains consumption might result in serious price hikes in most aspects of our lives.

        Corn is an Achillies heel. It is in absolutely everything from packaging to pharmaceuticals to food grade oil, plastics, abrasives, paper and beauty products. It is the number one input for livestock feed. Oh yeah, and we eat mountains of it where it is found in virtually every processed food you can imagine. This is why the failure of corn crops is so inflationary and it is why I call corn the oil of the food world.

        If we are in a secular drought cycle then expect prices for everything to rise as all grains are hiked in tandem with corn. Wheat paralells corn tick for tick on the exchanges at times like this incidentally and shortages of one type of crop push up the prices of related products.

        Now combine that with the potential for oil to again ramp higher if anyone starts tangling in the Mid East and we the makings of a price shock as all that liquidity suddenly starts finding its way back into the market.

        Overseas that could mean war or revolution and Africa is always one of the most vulnerable. Here at home we will just feel miserable as prices start ramping up in the absence of wage hikes. That is usually a gut check for retailers and the consumer economy and initially it will shave a little growth.

        On a brighter note though there are substantial moves underway to expand agriculture across the dark continent. Millions of hectares have been sold or leased to the big producers in the past few years and supply is quickly ramping up. There is a veritable land rush here that is almost unknown in the West.

        One of these days I will tell you more about it……see that’s how I managed to get back to the topic of real estate and not get in hot water with the host who is trying to keep this a real estate blog!

      • Just a hunch… but I suspect you’ll enjoy this, Farmer…

        [MotherJones] – DOJ Mysteriously Quits Monsanto Antitrust Investigation

        …”There’s an age-old tradition in Washington of making unpopular announcements when no one’s listening—like, you know, the days leading up to Thanksgiving. That’s when the Obama administration sneaked a tasty dish to the genetically modified seed/pesticide industry.

        This treat involves the unceremonious end of the Department of Justice’s antitrust investigation into possible anticompetitive practices in the US seed market, which it had begun in January 2010. It’s not hard to see why DOJ would take a look. For the the crops that cover the bulk of US farmland like corn, soy, and cotton, the seed trade is essentially dominated by five companies: Monsanto, DuPont, Syngenta, Bayer, and Dow. And a single company, Monsanto, supplies nearly all genetically modified traits now so commonly used in those crops, which it licenses to its rivals for sale in their own seeds.

        What’s harder to figure out is why the DOJ ended the investigation without taking any action—and did so with a near-complete lack of public information. The DOJ didn’t even see fit to mark the investigation’s end with a press release.”…

        http://tinyurl.com/d6akk4k

        [NoteToEd: All markets are political in their origins/construction/’supervision’-or lack thereof]…

      • EinsatzgruppenVancouver

        “Maybe that is part of what got under my skin. Few make any sacrifices.”

        This is completely true, however, I’m not sure it’s fair for us to get our nose out of joint about it. Since at least WW2, “society” has been training people to be consumers, not producers. Well, here they are. So now we have in the USA, hipsters shopping at whole foods with food stamps. Or, better said, by poor ol’ Kurt Cobain, back in 1990 or so, “Here we are now, entertain us.”

        What did we expect would happen? That today’s coddled generation Xers and Yers would live through 18 years of helicopter parenting and then go join the marines?

        Also, @farmer, your discussion of the ease of preservation suggests to me that you’re a fellow “survivalist/prepper”. You got 3 months worth of food for when the Cascadia fault wrecks everything from Eureka CA to vancouver with a megathrust quake? All that food from California and mexico that comes up I-5 by truck isn’t gonna make it once cascadia goes.

      • Three months supply?…not even close. Family tradition. There is always a years worth of canning and preserves on hand. Its only the fresh stuff and root veggies you need to pamper if you want to get them through the winter. Got to have some for planting again too, right? But nobody ever called us preppers or survivalists. Its just old fashioned common sense to keep a seasonal supply through the winter. You have got to bear in mind that refrigeration is still a pretty recent phenomenon. They still had ice boxes when I was a kid although only the richer neighbors afforded the deliveries. Probably half my friends still keep to the old ways although it is in decline and not about survival anymore….more about the pure enjoyment of making your own food and knowing what went into it. And really, once you get the hang of it your own stuff is always the best

  10. I track my finances very closely and my wife and I spent 1000.00 a month on food. About 450 in restaurants and 550 on groceries.

    We eat well, but we do shop at Superstore and Save-On (our one big shop a month on 15% off day).

    • My food budget, which I track every month since 2005, is very much like yours, around $1000 a month. My wife and I have been trying to lower it to $600 a month for the longest time, but we only manage to achieve that maybe twice a year, otherwise, like you, its 50/50 on superstore and restaurants. One thing we do is to not buy drinks at restaurants, and try to limit our dine out cost to below $30 total each meal.

    • I’m on a crazy tight budget. Two people on one unreliable pay cheque. I can get by on 25-50 bucks a week for two people pretty easily.
      We are mostly vegetarian, eat a lot of beans/pasta/rice, make everything from scratch (store bought bread is gross…) and only shop at the farmers’ markets. We love food and eat well. We also live in the suburbs, however, so veggies are half the price.
      My Vancouver friends spend very little on food as well, because they are mostly vegans and they bus out to the little markets for food, not the IGA. But these people are barely making ends meet, just the same. It isn’t a glamorous lifestyle.

    • Can you unlock my posts please Vreaa. I am in the Mod queu again.

    • Well, good to know my $820 a month, inclusive of formula, two kids in diapers, razor blades and eating out or homemade steak in lieu of, isn’t completely outside the range. I think a lot of people are cross-border shopping for milk and meat, eggs. $2.50 for a big jug of milk and $5.50 for chicken thighs, half the price of here. Veggies and fruit are insanely expensive no matter where you go.

      Noticed no one is setting aside money for haircuts or charity. Nice hair is not cheap, even if you box colour a good haircut for a woman is no less than $50 and more like $80 if you’re downtown.

      • The Poster Formerly Known As Anonymous

        how do you home-make steak? i am fascinated to learn!

        you could cut your own hair… and gillette mach 3s will run to six months of daily shaves if you just wet the stubble for 5 mins before trying to shave with them. Ask me how i know.

  11. By the way if anyone wants a great budget tool, try mint.com. It’s fantastic and free.

    You will likely be surprised about how much you spend on things.

  12. I rent with two little kids and two professional salaries. I find it expensive for the following reason: I feel compelled to save $4,000/month because even at that rate it will take me ten years to save up the *excess* cost of a suburban house. With say $500,000 down we’ll be left with a mortgage that fits our incomes (say a $300,000 mortgage). Naturally, the hope is that the market and I can meet in the middle.

    If the *excess* price of houses drops I might start saving less per month (sticking to the same ten-year deficit elimination scheme), hence the “affordability” of Vancouver will improve for me as a renter.

    If you are into this sort of thing, try mint.ca.

    PS. Daycare is at least $1800 for two little kids. Mine is fairly cheap. Yet more than rent, go figure.

  13. I would love to know where the family is getting after school care for $130/month. Then there is feeding 4 people for $850 a month, no RESPs, no RRSPs, and $400 savings a month? How are they going to have the $28000 in the bank they need to make sure they are covered for 4 months? Vacations? Expenses for summer care? This person should be embarrassed to offer this as a budget.

  14. I bet many people, especially in Vancouver spend $100 a month just at Starbucks or at coffee shops!

    • I do. Easily,

    • UBCghettodweller

      I get bitching and complaining from fellow grad students about this all the time. Yet they’ll easily drop $30 just going to the pub on a Friday. Do you know how much reasonably priced beer $30 buys even at our communisitic liquor stores here? That’s good drinking for three or four people (or about two grad students) with beer that’s much better than what’s on tap at most bars!

      The cost of eating and drinking out has lead me to become a much better cook and take up the art of home brewing which involves a whole lot of microbiology/chemistry geekery that I enjoy.

    • Hit the nail on the head, Calguy. That is where consumption meets reality and people waste their potential retirement savings on those “for the moment’ luxuries. Thing is nobody considers a coffee in an overlit, pastel colored cafe a luxury anymore. It is just a way to kill time.

      Seriously….they should go home and make bread.

    • little remembered – roasting was diy before popularization of supermarket brands mid-century … surprisingly easy for you to depose starbux et al, wrt cup quality, armed with popcorn popper or hot air gun … let there be smoke and supplemental fire hazard … http://tinyurl.com/o3vc5t … ps. nem, kindly relay reliable coords of receptive hsf sasquatch w/ nice hair

  15. baloney haha I see what you did there

  16. [Off topic] Is this what active listings will look like this spring? Chart A little good ol’ off-the-chart TA suggests it may be.

    • I had those thoughts, too, on seeing the chart at YM.
      To be fair, we’d have to take it back a few years, in which case it could look more like a range… but your conclusions could still be valid (a breakout is coming?).
      In support of this I did comment on apparent inventory ‘basing’ with this chart here, way back in a 2010 TA post:
      “Lastly, another bit of TA: The Vancouver MOI chart is mapping out a bottoming pattern. The 2008-2009 spike is likely heralding a much bigger upcoming spike:
      CHART

      • Those are interesting charts. Only I’m not sure how support levels may apply for housing. I don’t have long-term listing data but if I did I would measure it in standard deviation terms.

        For example on the chart you posted showing average price with A,B,C and D support levels – I’d would measure the bull run from 2000 on, since the last two decades are most comparable with each other.

        Chart 1 Chart 2

        The above charts show M/M and Y/Y growth in standard deviation terms. In laymen’s terms, think of 0 as the median m/m or y/y percentage growth from 2003 to present. This shows cyclical cycles of what is over and under normal. As can be seen in chart 2, a wave is trending down below norm. How long and how deep can’t really be predicted because it’s related to behavior on price changes, dollar volume, sales and whatever the government may throw at it if needed.

        Going into the next few quarters the biggest risk is still the fiscal cliff that holds a lot of uncertainty for investors. Hopefully it will get resolved, however, government induced situations can turn very bad if markets decide to hold a gun to Washington’s head to resolve the issue. If that’s the case then we could see a very bad situation for Canadian housing and the economy this spring.

        Side note: Winter time is peak season for foreclosures and delinquency payments, so there may be an mini breakout in MOI in the coming quarters.

    • You guys and your TA… It’s Friday!… T&A would be a better OffTopic. SpoilSports.

  17. Terminalcitygirl

    $7k per month for a house with “swinning poor” but no furniture.

    http://vancouver.en.craigslist.ca/van/apa/3447138338.html

    This ad screams desperate amateur landlord. When trying to rent out a house “worth” $7k per month, wouldn’t a property manager be a no-brainier?

  18. Interesting that they’d bother to remove the original comment, given that the “Director and Co-Founder” of that site acknowledged it on VCI (http://vancouvercondo.info/2012/11/magical-thinking-with-budgets.html/all, comment #28).

    I wonder if they’ve heard of the Streisand Effect.

  19. EinsatzgruppenVancouver

    @Farmer – you think gold bugs might be the winners, eh?

    Uh, isn’t the classic reason to buy gold is a hedge against inflation, right? Uh, so, if it’s a good idea to buy gold when inflation is coming, well, then, um, if deflation is coming, then buying gold is the opposite of a good idea, is it not?

    Look, we all read this site and can cite the real estate bear arguments chapter and verse: interest rates, changes in downpayment and other mortgage qualification rules, that real estate in vancouver has tripled in 12 years, it’s 2 or 3 standard deviations above historical norms (more like 5 if you’re west of cambie and north of 33rd), therefore almost certainly a bubble, right? C’mon, we’re all garth turner fans, this is frigging gospel.

    Gold in 1999 was under $300/oz. So another way of looking at it is if real estate had done what gold has done in the last 12 years, a 2000 sq ft house west of cambie and north of 25th ave would be going for six or seven million, not 2.

    Yet people think gold is a good buy, but real estate is in a bubble. Picture dr evil saying riiiiiight…

    • not an argument for/against gold … you fundamentally misunderstand or misrepresent what is a bubble … price action is only one determinant … equally important is relative over/under-ownership and popularity … most people own little if any gold and the financial msm hates it … can’t say that about RE

  20. Gold is a highly liquid and easily traded commodity that substitutes as cash. Houses are not although they may act a store of value. As currency though housing does not meet the tests. There is a good case for much higher Gold prices in the future meanwhile although I would agree it has seen at least one parabolic move. Some people felt that spelled the end of its price rise yet it has stubbornly refused to make any significant retracement. That suggests a floor supporting further upward momentum. On the issue of deflation we are certainly not yet facing that in Canada. We have growth and prices are still inching up. The only truly deflationary force in this country that is about to rear its head in the future is in the area of real estate as prices correct back to historical norms. So that is an isolated asset risk and one that is actually easy to avoid if you cash out and skip the period of falling prices. Inflation is present in many other areas though. Even goods we purchase out of Asia are coming with higher sticker prices as rising wages, rents and a housing bubble there translate into more costly goods for us. None of these were addressed by most post though. I specifically referred to the inflationary risks posed by faltering corn crops combined with risks or war and how it may impact oil and other energy. I am referring to a very real scenario but one that is still strictly hypothetical. It has not happened.

    I merely warn that it will.

    • EinsatzgruppenVancouver

      “yet it has stubbornly refused to make any significant retracement. That suggests a floor supporting further upward momentum.”

      Really, you think so? It doesn’t suggest any such thing to me. Warren Buffet said something about how the demand for gold is caused by the demand for gold. There’s also Saint Jeremy (Saunt? Any Stephenson fans out there?) Grantham:
      https://en.wikipedia.org/wiki/Jeremy_Grantham

      ” You can perhaps only have that degree of confidence if you have been to the history books as much as we have and looked at every bubble and every bust. We have found that there are no exceptions. We are up to 34 completed bubbles. Every single one of them has broken all the way back to the trend that existed prior to the bubble forming.”

      But somehow gold is different, is that your position? In 12 years it’s sextupled in price (is that the right word for 6x increase?) but somehow isn’t a bubble? This is “the new normal”? “This time, it’s different”? The arguments for gold sound a lot like the arguments made by real estate bulls and thoroughly deconstructed/ridiculed by (saunt?) Garth Turner.

      Here’s where I think you went wrong:
      “The only truly deflationary force in this country that is about to rear its head in the future is in the area of real estate”

      That’d be nice, if it were true, but it isn’t.

      http://www.theeconomicanalyst.com/content/revisiting-demographics-another-reason-why-next-decade-will-be-nothing-last

      Take a look at the “population pyramid” graph about 3/4 of the way down. To sum up the problem, the year the whole subset of the population “younger than the baby boomers” begins to outnumber the baby boomers is projected to be 2016 (also the year Harper promised income splitting for families last election…. I’m sure it’s a coincidence…). Think about that. There are so many bloody boomers that it’s taken 5 decades to produce as many canadians. That fact, and the fact that everyone born after about 1964 has basically seen zero wage gains in their adult working lifetime, that’s where your deflationary pressure comes from.

      You know in inflation adjusted-dollars, gold was higher when it last peaked in the 80s, right? It peaked at something like $2300/oz in “2008 dollars”. By the late 90s, it was down to under $300/oz (non-inflation adjusted). So if you’d bought gold at north of $700/oz in the 80s, you’re just barely breaking even about now.

      Go back and read Grantham’s full article about bubbles. There are no exceptions. Every single time something significantly deviated up from it’s historical norms, it crashed. He’s up to 34 bubbles and counting.

      Why are so many people eager to believe that real estate is in a bubble, but somehow “it’s different” when it comes to gold?

      • Ralph Cramdown

        You’re doing it wrong. Goldbugs don’t measure gold prices in dollars (or anything else), they measure everything else in terms of how much gold it takes to buy it. Thus there’s no point talking to them about a ‘bubble’ in gold, it’s merely reflective of everything else getting more expensive in nominal dollars, yet cheaper in gold, because of all that pesky inflation that the bond market has spectacularly failed to discount.

      • EinsatzgruppenVancouver

        “You’re doing it wrong. Goldbugs don’t measure gold prices in dollars (or anything else), they measure everything else in terms of how much gold it takes to buy it. “

        Yeah, uh, you got me there. Sometimes it’s like debating with austrian school economists. It’s taking circular logic to a high art form…

      • rc, the bond market doesn’t discount much of anything because bernanke has decided this is now the role of the fed … we’ll see how long his price fix holds … the world is out of cheap asian labor to co-opt (i.e. asian wage inflation is here now and the walmart imports have begun to cost more not less) … printing and large deficits in principle should drive the usual consequences … if correct, when the adjustment happens, it will be a big one

      • Actually, yes. I do think there is a floor under Gold right now. That does not make me a fan of the metal though…..just an observer. If you had read some of my posts from the past you would note that I have expressed considerable scepticism about the continued bouyancy of Gold. I am ambivalent for a wide variety of reasons that I won’t go into tonight. Needless to say I seriously doubt Gold will exceed 2500 dollars in the end. It is simply preposterous that it will see more than 10,000 an ounce as some predict as that would essentially mean the US dollar has collapsed. I do not see the dollar collapsing. On the contrary it has shown considerable strength relative to other currencies. I assure you I am no Gold bug. You are preaching to the choir here.

      • Seeking knowledge...about Van RE, that is

        I hope this blog doesn’t end up discussing the financial markets or worse yet, another one of those ‘mad money’, ‘rich dad’ type forums.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s