Thursday, January 15, 2015

Oil. Real Estate. Jobs. Are you panicking?

Let's get the easy stuff out of the way first.

Swam Monday. 1K 18:30, moderate, followed by some drill.

Swam Wednesday, 2 K, 38 minutes exactly, nice and easy. Followed by some hot tub.

All along with some stretching and a painful yoga class where I bailed on all the moves, and did my own. Very cranky hip and low back.

There used to be a bumper sticker; do you remember this one? "Please God, let there be another oil boom, I promise not to piss it away this time." Yup, pissed away again, officially, by the incompetent government in Edmonton. They've done this several times at least, depending on exactly how you do the calculations.

You'd think we'd learn and vote out these idiots. But no, in the by elections where we could safely vote our unhappiness without really changing anything, we voted them in again. Sigh. No wonder they think they can spend like drunken sailors on, golden parachutes for buddies, airplane flights, and penthouse apartments, and committee pay for doing nothing, and a very very long list of other abuses.

I work for an oil and gas company. At least I do this week. Next week might be different, in that I could join my boss's boss, who got fired today. It's hardly an exclusive club. And the stock is still languishing, now under $2 a share. Sooner or later, one of 3 things will happen. They will file for bankruptcy protection to restructure or just go under. Someone will swoop in and buy up the whole thing. Oil prices will recover in time for the plan to work and rescue the stock price from the doldrums. My job is not certain in any of those scenarios.

Maybe I should make book on the outcome. At one company I was very well plugged in, and was running the informal pool on who the next person to leave would be, until I was the one leaving. I don't think I'll tempt fate. I will say that I will be surprised if I get to Christmas this year without them telling me to go away. Right now they are happy with me and my work, but sometimes that doesn't matter anymore.

There are many people in the same boat. Target and Sony announced they were pulling out of Canada, at the cost of nearly 20,000 jobs, and with an undisclosed ripple effect through the economy.  Suncor, one of the biggest players in my business, just shed 1000 jobs. Stay tuned.

There was a recent survey that said almost half of Canadians are living paycheque to paycheque. Some of those people in the previous paragraph are going to be in trouble, and that could well include some of the Suncor ex-employees. Some of them probably made a very good salary, but are likely to have correspondingly higher expenses.

House prices in Calgary are crazy stupid right now. They will correct soon. If you are thinking about buying a house here, or really anywhere in Canada, don't. Rent. They will be getting cheaper soon. Now is not the time for a sale just because you're tired of living in this one. If you're selling your house now, you'd better NEED to be selling it. Good luck with that, I'm sorry to have to say.

When we built our house in 1984 there were a ton of foreclosures on the market. Why? The NEP was one factor, and the price of oil dropped. Many people who were mortgaged to the hilt lost everything when one of the people involved lost their job. EI doesn't cut the mustard with a big mortgage, and the banks owned a lot of homes for a while because they weren't willing to restructure.

So far we don't hear about foreclosures, but it's early days yet. The price is stagnating, and will soon be dropping as people are forced to put their homes on the market. There is an unknown, but large number of people only a little older than me with retirement plans that relied on selling the big old family home for big dollars, then retiring somewhere cheaper. Well, there's going to be lots of cheaper places, but I think the rest of the plan is in serious danger of coming unglued.

On this topic, one of the things that pisses me off is the idea that if housing prices drop to the point your house is worth less than what you owe, your financial world is over. Nonsense! Nothing could be further from the truth. As long as you can make the mortgage and utility payments, and don't have to sell, you are fine. Hang tough. Cut discretionary spending, and kill the debt as fast as possible, and you'll likely be ok.

It might take a long time for house prices to recover, but that's ok. A house isn't an investment like stocks or bonds. You bought the house because you needed a place to live, right? Um, guys, right?

One of my life theories revolves around what needs to happen. Let's take a trip across town, for example, to meet up with someone very compulsive about being on time. A potential employer, maybe, or that super hot date that is giving you this one last chance. Being late is catastrophic. So what do you do?

You allow lots of time, maybe twice as much time as you think it will take, planning for everything to go wrong. In this scenario, you'll get all the green lights. You won't run into traffic problems. You will be in the right place at the right time for super-star parking. The elevator will be right there for you. You are left with the chance to do a last minute review or polish your pitch.

But consider what happens if you allow the normal time, or even if you're running a bit late, and you need the breaks. You'll hit every light red, the idiots will be clogging the roads in front of you, parking will be impossible, and half the elevators will be out of service that day. You will be a frothing raging maniac, and may well have lost the opportunity.

You needed everything to go right and you had no reserve. That's when things go wrong, when you need them to go right. Too many people buy houses like that, extending themselves to or beyond the limit. They hope that raise will come next year, and that interest rates won't go up, and the car will last a few more years, and nobody gets sick, and the idiots the Alberta Legislature or the Canadian Parliament don't do anything stupider than usual, and well, you get the idea.

The thing about living in Alberta is that the economic cycles are obvious. Things will come around one way or the other, up and down. It's just the news media with the price of oil doom and gloom, and the price will never go up again and we're all going to die. Bah!

I didn't work through the last one, being left standing when the music stopped. We got through it without any big changes to our lives because we had reserves. The odds are reasonable I'll work through at least part of this one. I hope.

Most people know intellectually that things will come around, and the time has come to hang tough. The problem is that most people don't know how to do that. Here's a simple plan. Stop spending money unless it's on this short list of things.

  • Shelter, meaning mortgage, rent, utilities, insurance. Do what you can to cut utility bills. Talk to your bank to restructure the mortgage before the bank comes to talk to you. Too late then.
  • Food, and I don't mean eating out. No more restaurant meals. Take leftovers for lunch. 
  • Transportation. Don't drive your car unless you have to, even though gas is cheap. See if you can sell any of your vehicles, or even all of them. An average car is 8 to 10K a year, so think about a bus pass and the occasional taxi ride. 
  • Clearing debt, especially credit card debt. 
You don't spend unless you have to. No Starbucks. No lunches out. No movies, books, or TV package. Get internet at the library. No new toys, and you sell what you have hiding in your basement that you don't use. No new electronics. No shopping to buy cheap trinkets. No retail therapy.

You hang tough until things get better. Stop worrying about what the neighbours think; they don't care about what car you drive. Really. This is about you building your reserves so that when you buy something, you don't have to worry about someone taking it away because you can't make the payments.

Alberta is in the unfortunate position of relying on selling a commodity where they do not control the price. They relied on the price staying high, and thats how we fund schools and hospitals. They even raided the Heritage Fund even though times were good. Beyond stupid. I forget the exact wording on the protest sign I saw, but something like "Cancer doesn't care about the price of oil."

Now they're reviewing all the capital projects, including the SW ring road, budgeted at $5Billion. It's only taken 60 years to get approval from the Tsuu T'ina Nation, and if we don't build it in 7 years the land reverts back to them. I doubt we will do another deal any quicker than this one.

So guys. There are provincial and federal elections coming up. Both the Alberta and Canadian governments are long in the tooth and deserve to be turfed out. The Alberta government is simply incompetent, mismanaging one of the richest flows of money in the world. And the Canadian government is being run by a guy trying to destroy Canada. Come on guys, let's get this together and figure out who else to vote for.

To save it from all being doom and gloom, here's a petty flower to make you feel better. The Amarillus in our den has decided to bloom.


  1. I couldn't agree more, Keith. Thanks for the rant. Believe it or not, it cheered me up - I guess because it's nice to know other people find the whole thing as ridiculous as I do.

    Dismayed to read your job may be in jeopardy but I'm sure you'll land on your feet whatever happens. Do keep us posted though. I have a few friends in Calgary I could introduce you to.

    Have a great weekend!

    1. In one sense, many of the jobs in Calgary's oil and gas industry are in jeopardy all the time, especially in the IT or data part of it, in the sense that projects can be cancelled, the company could be bought or sold, you could be assigned to new tasks, or in a different group. Working in this industry is not for people that need lots of stability in their working lives. In another sense, I don't think I'm in particularly more jeopardy than I was last year at this time, but you never really know for sure. That's why you need a plan B, and the savings to get through a dry spell.

  2. Good rant! It's so true and a good reminder to tighten up the purse strings. Shouldn't be too hard now that Target is leaving the country :/


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