Earlier this month, single day house records fell nation-wide, as rates started to move up. Fence-sitters were sent into buyer mode and prices on homes started to look pretty solid. How long will it last and can it be sustained are great questions? If I knew the future, I would be retired by now.
There was one guy that I was sure knew the future, because he had an uncanny knack for being right. I learned a valuable lesson from my old boss Ray Murray, during my years at Beneficial Finance and that was..."There is no such thing as a guarantee in economic cycles".
It was about 18 years ago, during a period where Edmonton's economy was stagnant and everywhere else in the province was increasing in value. I was presenting him with a potential mortgage deal and was trying to convince him that the economy in Edmonton would suddenly catch up with the rest of Alberta, within a year. There was very little equity in the deal I was supporting, but if the economy did what I thought it would do, the deal would be just fine. Mr. Murray then put the challenge to me; He told me that if I would personally guarantee that the economy would increase by the following year, then I could do the deal. He wanted the guarantee in writing. I knew that I was in no position to start guarantee that, because I did not have deep pockets like Beneficial. Then he asked me why I would ask to risk the investment money of others on something that I could not be 100% sure of myself. I stewed about it for weeks and then forgot about it until one year later, when I was looking at the Edmonton housing prices. They were actually down by 10% from the time I had the conversation with Mr. Murray. I called him up and asked him if he was a soothsayer. He says he honestly did not know what was going to happen, but after his 30 years in the business he was smart enough to know that there are no guarantees in economic cycles.
"If I wouldn't invest my own money into it, why should I ask others to risk theirs". That suddenly became my cornerstone philosophy. My lending decisions became a bit more conservative, but I never knowingly made a deal that would loose the investor any money.
Ray Murray is retired now, but his down to earth business savy was not lost on me. He always saw me as an optimistic person and there is nothing wrong with that if you look at the deal from every possible angle. Ray was also a stickler for sharp pressed creases in your suits and shined shoes. I still prefer casual Fridays, but will always appreciate the valuable lessons from my own Yoda, Mr Murray.
