Tale of red ink

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The Article

My bubble always bursts when it comes to investments

Five years ago a quite enterprising lady urged me to go into the real estate business with her, buying houses at rock-bottom prices with the lowest downpayment, renovating them, then renting them out to pay the mortgages, and then selling them when the market rebounded.

“We’ll make millions,” the gorgeous blond with the bouncy walk, and stunningly high heel shoes declared.

Well, I tentatively got into three such projects, got the coldest feet anyone could ever get, and so persuaded her, after many sleepless nights, to buy me out.

Today, as I try to figure how to keep up with my bills, she teasingly taunts me saying: “See, you could have had $1 million in the bank—and after taxes at that.”

And the lady is absolutely right.

Currently, the bright one owns seven or eight properties and even though there’s been an average 42% hike in Calgary real estate over the past year, figures the current plateau is only temporary.

In February, I mocked the perky lady when she paid $205,000 for a 600-sq.-ft. one-bedroom condo in a building with no grounds or facilities—no swimming pool, not even the smallest gym—and told her she’d lose her shirt.

These days the same 600-sq.-ft. units in that building are going for $305,000.

A month ago, the dazzling dame who never gets daunted bought a cottage at Sylvan Lake for $200,000, is spending $50,000 on renovations, and figures by the time she decides to sell the place it will bring in $400,000 easily.

I should have married the kid.

These days she has me poring over the Financial Post, Wall Street Journal, Business Week and Forbes magazines because just about every so-called expert in the U.S. is predicting a major collapse in housing prices south of the border.

These prominent individuals give all kinds of reasons for the coming collapse, including the rapid increase in interest rates by the Federal Reserve, and that the average house in the U.S. is now on the market for five to eight months before finding a buyer.

In Calgary the time slot is about five to eight days.

Coastal properties, they insist, could well fall by 50% in price within the next few months.

As spectacular as this seems, it all sounds quite plausible when you add together all the factors.

Gee, I always wanted to live on the coast in California, just outside of my favourite city, San Diego.

Frankly, my sole assets are a $120,000 condo in Guadalajara, Mexico, and $400,000 in five-year GICs at various banks and trust, and insurance companies.

Nothing else—no other pensions—until I start picking up my CPP and OAS.

Which together will bring in about $1,200 a month.

So because I never took risks, I’m poor.

Actually, truth to tell, I did speculate now and again, the last time with utterly disastrous results.

In the stock market, I never made a cent.

Not even one with a hole in it.

Then, when I turned 50, though I still only admit to being 49, I swore I was too old to risk money at all in the stock market and would only continue to put my retirement savings in RRSPs.

Did so faithfully until the dot.com boom when a colleague mocked me for making just 5% or 6% in GICs and not 50% or 60% “in the market”.

So I broke my own promise and invested $100,000 cash in high-tech stocks—one being Calgary’s Jawz Technologies in which I bought 1,000 shares at $18 a share, only to see Jawz collapse to nothing a handful of months later—and lost the entire $100,000 when that particular bubble burst.

If I’d kept to my pledge—as I mentioned in a column a year or so ago—I’d now have $500,000 in GICs, not $400,000.

Take my advice, folks, after the age of 50, when you see a stock broker, run for the nearest life raft.

Tell you what, though, as you’re reading this, I will again be poring over the Financial Post, Wall Street Journal, Business Week and Forbes magazines, and listening to every word Ben Bernanke, head of the Federal Reserve, has to say about U.S. housing prices.

I do want to retire to a little place outside of San Diego—especially at a 50% discount.

 

Paul Jackson
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