Hear Garth in Victoria
November 19. For a seat call (250) 475-3698

There was a murder the other day in a part of Toronto realtors say is hot. Houses which used to sell for two hundred in a good market now fetch eight. Families move there because it’s considered safe. I mean, it has to be, with $800,000 houses, right?

Anyway, a kid got gunned down. The neighbours apparently take comfort in the fact it looked like a surgical hit. Maybe a pro job. That’s good. Means it wasn’t just a random act of violence which might then impact property values. A poignant story about it was published here.

I mention this as another small example of the mania of our times. People on Gough Avenue probably rationalize the taking of a human life on their street because it doesn’t fit. They look around and see gentrification and wealth. Others can drive through and not really notice how this is so different from the next neighbourhood where too many people are destitute. It’s the thing about real estate, once you buy in. Very blinding.

As we all know, the best current example is Vancouver. I listened to a fellow podcaster over at HoweStreet.com hours ago. Michael Levy, who is also a gold company principal and BC business TV and radio broadcaster (cheaper than hiring a journalist), was asked about a market in which the average SFH costs over $730,000, and sales have increased 100%.

“This is not a bubble here,” he said defiantly. “It’s a healthy market.” When asked what money advice he would give new university grads, he was unequivocal. “Pool your resources and go out and buy real estate. You gotta bite the bullet…”

Human nature being what it is, the more people have gambled and risked and gone deep, the more they’ll defend the intrinsic value of their actions. The more they’ll encourage others to mimic their decision. It’s as if when everyone’s put a dwarf on their lawn, removed their clothes, or bought a goat, that it’s normal and desirable.

Bidding wars for houses in Vancouver at their peak price is akin to folks lining up on Yonge Street to buy gold when it last soared (then crashed and burned for 20 years) or soccer moms stuffing their RRSPs with Nortel at $130 a pop (it was bankrupt nine years hence) or a Dutch skilled labourer spending 2,400 florins – equivalent to 16 years wages – on a tulip bulb in 1635 (the market collapsed two years later).

This is Nasdaq all over again. In the Spring of 2000, that tech-heavy index was at 4,572. Within twenty months, it had lost 74% of its value. Down with it went an army of know-it-all day traders and millions of shocked investors, supported by a sycophantic media and self-dealing ‘experts.’

This is why I am a contrarian. The herd is seldom right. I’ve seen this too many times.

Say, can I interest you in a bulb?