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September 18th, 2007 at 7:58 pm
… in fact, one could argue you’re simply the flip side of the same coin of which the die-hard guns-and-PMs-under-the-floorboards gold-bugs are made.
So how about some fair consideration for the asset?
Is it perhaps telling us something?
Guilty as charged. I am totally closed minded about this, and I can’t help it. It is not the gold itself. I am not particularly keen on it, but there’s not much more to say about aspect. What goads me to no end is the messenger, the archetypical gold bug. There are probably gold investors who don’t fall into this category (such as yourself). But then there are the ones who argue like as if they spend their childhood at the Federal Reserve, using all the jargon. If they are not to subtle they link to outlandish conspiracist websites. But they always always without fail bring up the “why did the Fed stop tracking M3″. To me it is cultish.
If inflation is so understated, why is long term debt so cheap. Heck, goldbugs, screw gold and short bonds with maximium leverage. But for the love of god, stop trying to recruit into your flock. Gold bugs proliferate and join internet forums of all kinds, and before you know it all conversations turn to gold, gold gold. And that is all I have to say about that.
September 18th, 2007 at 7:52 pm
Optimus_subprime said:
Freako,
“Not sure I follow. You argued that a rate cut has already happened in everything but name because of the fed funds rate. I pointed out that more recently it has traded well ABOVE the target rate. I don’t quite get your response where you call the article flawed and point to MSM spin. Do you doubt that the fed funds rate has been trading above rather than below target recently?
I said:
Optimus, maybe you are in need of a firmware upgrade?
The target rate for federal funds, the rate which banks lend money to each other overnight is just that, a target rate. It is the rate, when breached, and it had been twice in June up to 7% and again on Aug 3 at 6.5% by the actual free market FedFunds rate, at which time the FED “WILL” intervene and buy a financial asset with “NEWLY CREATED MONEY”, thereby lowering the FedFunds rate. This intervention reassures bankers that the FED will honor its target rate. In effect, Mr. Freako is absolutely correct. The Fed Funds rate had already been lowered since June! The target rate, however, has just recently been lowered.
Optimus_Prime said:
“Hello? Reported inflation, or more precisely CPI, is just a statistic based on a market basket. Now just how does the methodology used to calculate a statistic affect actual wages and prices?
That’s like saying changing the statistical definition of obesity would affect people’s weights.”
I said:
Except with people’s weight, there is a standard based on BMI (Body Mass Index). It’s not statistical, rather it’s scientific..
CPI is a very elusive number and you are right, it tries to measure a basket of markets. Usually, it’s something that we couldn’t live without. Which means, transportation because our essential needs to life depends on it. Why? Because, if transportation ceases to function, who will supply our food, medicine and essential services since most of them are foreign provided. Oil prices has risen and so does wheat!
That’s general CPI.
But we also have our own CPI as well. Food, clean water and medicine are 3 essentials that we can’t live without. No food, you die. No water, you die and no new life saving modern medicine, you suffer or die. If these items go up in price, you will be forced to pay up and the increase in prices reflect inflation. We all know this to be true.
However, not all items go up. We know that today’s computers are cheaper. Mac Lisa in the 1980 retailed for about $10,000. Now, you can get an Intel Core Duo iMac for $1299 which has a lot more power than the Lisa!
Cost of a new car with Bluetooth/MP3 and the works are ever more affordable?!? These features were only available on high end vehicles of the past.
I can go on and on, but some items do go down due to cost productivity and product technology used to derive lower costs.
Besides, we adults make certain choices, mostly for status.
Iphone is not a life and death choice. It’s expensive, but give you that “status” edge. And so does an iPod Touch.
A BMW or a Lexus is not a life and death choice either. They’re expensive, but give you that “status” edge as well.
A $500,000 or up 550 sqft Vancouver Condo in Yaletown or a 1 million dollar East Van home is not a life and death situation either. There are places in Kits that rent for $910 to $1200. Certainly beats $1800 a month on a 550 sqft box! And yet, people make this choice even when an alternative choice can be made. Yes, you don’t get the “status” of living in Yaletown, the bling bling.
So should CPI reflect that? People who own expensive homes bought with questionable loans, have non-callable line of credit (yes, there’s A LOT of them) used to finance fancy cars and supplement their over-extended mortgage and an iPod Touch?!? with ordinary jobs?
And then have the balls to ask for outrages increases, because Vancouver is an expensive place to live in? Vancouver maybe an expensive place to live in, but ordinary jobs have to have wage parity with jobs available in other towns or cities when normal CPI is factored in. The current civil strike in Vancouver are definitely asking a bit “MORE” than normal.
What if the economy suddenly turns?
It certainly happened in 1982.
In China, almost 83% of homes are bought with cash, albeit at insanely inflated prices. But in Canada, most homes are bought with borrowed money, albeit at insanely inflated prices. Who do you think will be a faster price depreciation??
If you borrow money, eventually you will need to return it back.
If you use cash, it’s yours. That’s the difference.
The CPI in China reflects for the most part, the inflation index caused by the return of cash, whereas the CPI in Canada reflects for the most part, the inflation index caused by the return of fiat money.
September 18th, 2007 at 7:18 pm
freako said: But I am sorry, I have had enough jousting in the past with myopic gold bugs that I know it is as senseless as debating intelligent design. Gold bugs come armed and endless supply of facts that suggest that they know the inner workings of the Fed and you don’t. When cornered logically, one of these jargon ladened arguments always come to the rescue. As you can tell, I am definitely not debating in good faith, because that faith was used up a long time ago. Might as well agree to disagree right now.
freako, you know we respect your normally well considered arguments, but I would humbly submit that you have a ‘lacune’ where gold is involved… in fact, one could argue you’re simply the flip side of the same coin of which the die-hard guns-and-PMs-under-the-floorboards gold-bugs are made.
So how about some fair consideration for the asset?
Is it perhaps telling us something?
Any chance of revising your relationship with gold?
—-
Disclosure: I don’t think that optimus is that out of line suggesting pog $1500 at some point. I’ve traded pm stocks since pog was $250, so another 100% doesn’t seem that insane. Especially since we haven’t had broad public participation in this gold bull yet.
I suppose that puts me in the crazy gold bug camp, too, but you have to call it as you see it.
September 18th, 2007 at 6:59 pm
…why do you think the U.S Fed stopped reporting M3 money supply last year?
Because there is no accurate way to measure M3. “Everyone” already bitches about CPI inaccuracies – estimating repos and eurodollars is at least an order of magnitude more difficult.
September 18th, 2007 at 5:28 pm
BC leads the country with nearly 1 in 55 jobs being generated through the real estate industry…
I think that our provincial unemployment rate will soon be going up by 1.5% or so…
September 18th, 2007 at 4:16 pm
drachan,
yeah if you know yoy,mom per-cent accordingly by location, then you can learn more lesson.
September 18th, 2007 at 4:08 pm
ytboomer,
That’s hilarious. If you just change the title to “why you should NOT be buying now”, the rest of it would pretty much make sense.
September 18th, 2007 at 3:32 pm
Been a while since I posted, last time was when I had just sold my place in Yaletown almost a year ago. Anyway, still renting and happy other than the August stock market hickup that took off some of my paper gains… alas, I’m still ahead in my model even with the price increases since then!
Anyway, what spurs my post is a mailing I got from a friend of a friend that decided to become a real estate agent just over one year ago. When this individual decided to leave their well paying job and become an agent, I knew the market was done…
Here is what it says in the “why you should be buying now” mailer they sent me (verbatum):
“Many articles on the BC housing boom cite the strength of our economy as one of the main reasons the market remains so strong, and what a boom it has been! Total residential sales reached 3,873 units in July 2007, a thermometer-breaking 41.8 percent increase when compared to 2,732 sales in July 2006 and an increase of 5.0 percent when compared to 3,687 sales in July 2005
Part of that economic strength comes from the jobs created from and the spending associated with homepurchases such as: moving costs, new appliances, furniture, renovations by buyers, professional services and taxes.
BC leads the country with nearly 1 in 55 jobs being generated through the real estate industry; the national average being 1 in 100. For each MSL sale, $40,450 in consumer spending is injected into our economy. According to a recent report for the Canadian Real Estate Association, the resale housing industry in Canada generated more than 158,000 jobs and an average of $15.3 billion from 2004-2006″
Whoa, the agent prints this kinda thing and doesn’t worry about a fragile propped up market? The RE market is booming because of the booming economy which is booming because of the RE jobs due to the booming RE market….I hear the porthole glass cracking on their submarine.
Sorry for the long post.
September 18th, 2007 at 2:06 pm
Most union jobs have contracts that stipulate wage increases are based on CPI
Pensions yes, but union contracts, no. Clearly CPI is a factor, but, contracts are negotiated with fixed increases going forward. For example 3,4,4 etc. Bringing us back to the issue of implicitly calling people dumb, are you now doing this for employers and employees? If CPI is hogwash, such a fact will be taken into account during labour negotiations.
Look deeper into the methodology into the definition of the CPI and you’ll see that it is an arbitrary measure, yet it is used greatly as a measure of inflation.
Agreed. Arbitrary is a strong word, but there is definitely subjectivity involved.
As I have stated before a better metric for measuring inflation is the rate of money supply growth
And as I already mentioned, I disagree. Money supply can grow at a decent clip without causing any inflation. Whether inflation would result would depend on the growth of the economy and the demand for money (velocity etc).
… why do you think the U.S Fed stopped reporting M3 money supply last year?
You are to entering fringe conspiracist gold bug territory here.
Interest rates would be much higher if a more realistic approach of measuring inflation is used reflecting the true rate of inflation.?
The Fed does not control long term rates. Are you suggesting that long term debt holders are unable to see through official CPI figures?
You’re right professional bond traders don’t give a rats ass about hidden inflation.
Nope I meant the other way around. Professional bond traders would be hip to hidden inflation. Unless you think they are stupid. Why is long term debt at historically low rates if inflation is as high as you suggest?
So long as the joe average believes the govn’t rhetoric then there is no problem – they’re along for the ride (expectations on inflation).
What ride? The ride of giving money away?
I’d like to say that by 2010 olympics, gold will be at $1,500/oz heading towards its real all time high…
Yup, you’re a certified gold bug. Why don’t you just accept that fact that you were wrong in 1980 (now I am being cheeky).
You do seem well educated on the issues and you argue your case well, and I presume that you debate in good faith. But I am sorry, I have had enough jousting in the past with myopic gold bugs that I know it is as senseless as debating intelligent design. Gold bugs come armed and endless supply of facts that suggest that they know the inner workings of the Fed and you don’t. When cornered logically, one of these jargon ladened arguments always come to the rescue. As you can tell, I am definitely not debating in good faith, because that faith was used up a long time ago. Might as well agree to disagree right now.
September 18th, 2007 at 1:50 pm
satv
“drachan,
that house you talking about is touchin 2 million mark,so your friend will never ever able to buy that again,and for next vocation they have to borrow loan.”
What have you been smoking? It sold for 1.2 in late spring, YOY is around what 5-7% this year? How on earth does that equal 2 million? Even if you multiply the price gains by a factor of ten you’re still way off. This kind of statement just goes to show how you have no clue whatsoever when it comes to mathematics or putting a logical argument together.
I generally try to avoid talking to you and Chief precisely because of your fanatical faith in the RE market. It’s like a religion for you and you will continue to believe beyond any reason until it slaps you in the face (perhaps even then).
September 18th, 2007 at 12:57 pm
Freako,
“Not sure I follow. You argued that a rate cut has already happened in everything but name because of the fed funds rate. I pointed out that more recently it has traded well ABOVE the target rate. I don’t quite get your response where you call the article flawed and point to MSM spin. Do you doubt that the fed funds rate has been trading above rather than below target recently?”
Sorry I’m not sure how to post url’s for websites like I did on the previous post.
If you go to http://www.ny.frb.org/markets
and find Federal Funds Data with its daily closing price you’ll see that the Fed Funds have been trading well below its target rate for over a month! You go back further in the daily close rates and you’ll see that Fed Funds daily close doesn’t deviate more then 5-10 basis points away from its target. Sure it can trade at 6… but it can also trade at 0.01 as well on the low end… the daily rate is the better indicator. What happened today with the rate cut was not that big of a surprise. They’re language on the otherhand indicates that further rate cuts would be needed, thus equities/bonds/currency/gold has adjusted accordingly in anticipation.
“A second ago you said that people buy real estate to hedge hidden inflation, but now you say that home prices would be lower if CPI clued into this? Can’t say I follow.”
Interest rates would be much higher if a more realistic approach of measuring inflation is used reflecting the true rate of inflation. It has been kept artifically low. You’re right professional bond traders don’t give a rats ass about hidden inflation. So long as the joe average believes the govn’t rhetoric then there is no problem – they’re along for the ride (expectations on inflation). If real interest rates decline, bonds do exceptionally well. Keep inflation down, and keep gold down and the game can continue.
I’d like to say that by 2010 olympics, gold will be at $1,500/oz heading towards its real all time high…
“Not trying be cheeky or give deliberately give you a hard time, but I just can’t reconcile your views with reality. IMHO of course.”
I appreciate your views and others, it keeps me questioning my views and conclusions. However, my reality is, I’ve parlayed my housing gains into gold. I may not be 100% correct in my views, but thus far my portfolio agrees with my views (i’m not the only commodity/gold bull around).
Housing will decline both nominally and in real values. However, more attention should be payed at the real value.
September 18th, 2007 at 12:26 pm
drachan,
that house you talking about is touchin 2 million mark,so your friend will never ever able to buy that again,and for next vocation they have to borrow loan.
September 18th, 2007 at 12:23 pm
drachan,
june 23,2007-kfinancial,
My dream is far from over. I’ve got my reward already buddy. You wanna pay so much for real estate, take it. I sold my place for a pretty good gain. Thanks to people like you SATV. Guess what, my parents are selling their place too. You wanna buy it? It’s just simply economics. And do you know how the homeless issue is going to drive the market? DOWN!!!!! Why? Because the government is going to buy and build more homes for them. That takes away the stress on the demand curve, hello!!!!!! This will also lower the demand on the rent. Thus producing more negative cashflow for those real estate investors. You like it or not. The market is going to crash!!!
Originally, I had a mortgage on my place. But when the market crash, I’m gonna have a paid off place, sweet!!!!
Some the people that bought high is gonna have a huge mortgage with negative equity. That must be fun!!!!
And SATV, going up, Whatever!!! Even if it does, like I said, by how much? Borrow at 7% to gain 5% does not make sense. Nice and simple. Even if the market is going to gain 8% year over year, you not gaining anything. The Agent is going to eat away any gain made.
I totally agree with Wg2c. I don’t beleive 50% is excessive at all. Just simply do a cashflow analysis. 50% drop is not even the break even point yet. The bubble is form by speculation. Once speculation is gone, it’s back to basics. In fact, it will shoot downwards past equilbrium point. Markets tend to overshoot, both upward and downward.
In addition, developers have built way too many homes. BC’s net migration is not very high. It barely covers our natural shift in demographics.
6/23/07 3:57 PM
September 18th, 2007 at 12:16 pm
“Hello? Reported inflation, or more precisely CPI, is just a statistic based on a market basket. Now just how does the methodology used to calculate a statistic affect actual wages and prices?
That’s like saying changing the statistical definition of obesity would affect people’s weights.”
Now with most jobs, wages increase yearly based on the reported inflation rate or CPI. Most union jobs have contracts that stipulate wage increases are based on CPI. If you have followed the definition of the CPI, it has indeed changed periodically. Reasoning behind doing so is of course new goods would need to added to the basket and old goods that no one purchases anymore would eventually fall out of the basket. Look deeper into the methodology into the definition of the CPI and you’ll see that it is an arbitrary measure, yet it is used greatly as a measure of inflation. As I have stated before a better metric for measuring inflation is the rate of money supply growth, or as I would like to measure is how much a good would cost per oz. of gold.
CPI does not measure the true rate of inflation and thus any conclusions based upon its methodology is flawed. The Bank of Canada basis its monetary policy on arbitrarily made numbers such as CPI, PPI, core inflation etcetc… why do you think the U.S Fed stopped reporting M3 money supply last year?
September 18th, 2007 at 11:26 am
Canadian dollar at 98.746 cents right this moment…
Gold is climbing…
Markets are up…
And here’s an interesting one: the Japanese Yen is UP against the US dollar. The Euro’s way up against the JPY. I wonder what caused the JPY to weaken all of a sudden?
September 18th, 2007 at 11:19 am
Many other options at their disposal…
At their disposal to achieve what?
that article is flawed in so many ways.
Not sure I follow. You argued that a rate cut has already happened in everything but name because of the fed funds rate. I pointed out that more recently it has traded well ABOVE the target rate. I don’t quite get your response where you call the article flawed and point to MSM spin. Do you doubt that the fed funds rate has been trading above rather than below target recently?
My guess is inflation reported at 2.4%ish is completely false.
Why then are long term rates historically low? Is the bond market also stupid?
There is a huge disconnect between CPI and money supply growth.
Yes, and the difference can be attributed to growth of the economy rather than hidden inflation.
If inflation is reported using a different method other then CPI our interest rates would be much higher, possibly 8-9%.
Long term debtholders don’t give a rat’s ass about official inflation. They can see right through that. Unless you are going on record as stating that they are really dumb and you are really smart. In that case, I do hope you are loaded to the gills with derivatives. I do think long term rates seem artificially low, and lack liquidity/risk premia, but nothing along the lines of what you suggest.
thus people choose to purchase homes subconsciously as a way to battle inflation.
Let me get this straight. Professional bond traders are oblivious to hidden inflation, but Joe Average learned about it in a dream?
If inflation is reported as it should be, rents would be higher and wages would be higher, but home prices would be lower. That is my take….
A second ago you said that people buy real estate to hedge hidden inflation, but now you say that home prices would be lower if CPI clued into this? Can’t say I follow.
Second, what does CPI have to do with rents being higher? Aren’t rents determined by supply and demand rather than government statisticians? Or did you mean only mean rents in the context that it is tracked by CPI? When I said that rents are lagging, I am talking about market rents.
Not trying be cheeky or give deliberately give you a hard time, but I just can’t reconcile your views with reality. IMHO of course.
September 18th, 2007 at 11:01 am
If inflation is reported as it should be, rents would be higher and wages would be higher, but home prices would be lower.
Hello? Reported inflation, or more precisely CPI, is just a statistic based on a market basket. Now just how does the methodology used to calculate a statistic affect actual wages and prices?
That’s like saying changing the statistical definition of obesity would affect people’s weights.
And the reason rents aren’t higher isn’t mysterious at all. Provided supply keeps up with the number of households, rents will track household incomes. And supply is actually outpacing the number of households.
September 18th, 2007 at 10:58 am
Now watch the Canadian dollar go over par with the U.S. before October!
September 18th, 2007 at 10:46 am
Jeez. Fed cut by 0.5. Punch bowl refilled!
September 18th, 2007 at 9:46 am
Is that true Satv? If so, good job Kfinancial, you got out right near the peak. I have a friend who sold her house in the spring for 1.2 mil after buying at 650k about eight years ago. They’re currently on an around the world trip and home schooling their kids on the profits they made and will be back in a year or two to buy another house or perhaps rent for another year or two if the market isn’t completely settled yet.
I find it kind of amusing that you are holding on to your properties satv, I wish you no ill but I am kind of looking forward to you losing a bundle just so you’ll shut the hell up.
September 18th, 2007 at 8:38 am
K-FINANCIAL,”desperate buyer”.A Model for this room,buy low sell high theme.kfinancial good to see you back after three months,here is little back up on this former “bull”.
kfinancial sold his condo last year in fear of “crash”.then he start predicting crash in hope to early the crash will come, he can buy low again then he will predict up trend,but his own sold unit has gone up from 50k-100k.
now he has become desperate and beggging for crash.hey k financial, I hope you did not assist your parents to sell their unit,or you did?
September 18th, 2007 at 7:59 am
http://tinyurl.com/2lznak
“So far this week, fed funds, the main U.S. short-term overnight lending market among banks, have traded at their session highs above 6 percent, or a full 75 basis points above the 5.25 percent target rate the Federal Reserve sets.”
Sorry don’t have a whole lotta time today to give a reply since i’m so busy at work but that article is flawed in so many ways. What I said earlier is that the fed funds rate has averaged between 30 and 70 basis points lower then the target. Now if you want to talk about highs or lows within a trading day well on August 14, the low was 0.50%
http://www.ny.frb.org/markets/.....dsdata.cfm
See the fed funds rate can spike up or fall down lower then the target rate on any given day but it’s the Feds job to have the daily close around the target rate + or – 5-10 basis points at most. MSM spin as usual, and just because it’s on reuters doesn’t mean that it is true…
Now as for fed tools, as you may have already heard they’ve tried other things besides cutting the posted fed funds target rate. They’ve changed the definition of what is collateral in repo agreements, injected liquidity, lowered the lending rate and if that doesn’t work perhaps they can change the reserve requirements or raise the federal deposit insurance amounts. Many other options at their disposal…
“Now, why are rents lagging badly?”
I’ve thought about this for a while and can’t come to a conclusion.
My guess is inflation reported at 2.4%ish is completely false. Now since rents are calculated within the CPI, it would show very little movement. Inflation on the other hand should not be measured by CPI. Inflation is typically a monetary issue, and the world’s money supply has gone amuck. There is a huge disconnect between CPI and money supply growth. If inflation is reported using a different method other then CPI our interest rates would be much higher, possibly 8-9%. However, since most govn’ts use some form of fudged numbers, interest rates are kept lower then they should be, thus people choose to purchase homes subconsciously as a way to battle inflation. (Buy now or forever be priced out type argument). If inflation is reported as it should be, rents would be higher and wages would be higher, but home prices would be lower. That is my take….
September 18th, 2007 at 3:12 am
A house on east hastings going for 1 million is certainly not out of the question provided that I see a grande coffee at starbucks going for $10 and gasoline prices going for $2.50 a litre…
I presume that your point is that value is in the eye of the beholder. However, RE spending is a little less discretionary, and does require the cooperation of lenders, who may not agree with your perception of value. Now, why are rents lagging badly?
As I am writing this WTI spot oil has made another all time nominal high yet just barely a blip on the MSM.
Dunno, maybe the MSM realized that in nominal terms, oil prices will CONTINOUSLY break records, and got tired of the story. If I recall correctly, real prices have been higher.
No they’re not the same.
For all practical purposes, how is it different?
Earlier you said: “Basically, the Fed was not taking part in open market operations to bring the Fed funds rate back to the target. The rate has already been cut, they just never announced it…”
Have you checked the news lately? What happened to rates already being cut?
http://tinyurl.com/2lznak
“So far this week, fed funds, the main U.S. short-term overnight lending market among banks, have traded at their session highs above 6 percent, or a full 75 basis points above the 5.25 percent target rate the Federal Reserve sets.”
Now given that our currency tracks oil as you pointed out, the path of least resistance and probability of moving is up for oil.
If it was that simple, why is the oil futures market so dumb?
U.S productivity gains are meager when compared to the double digit days of the late 90′s or even post 9/11 recovery.
Are you shooting from the hip on these? Productivity is strong from a historical perspective.
http://tinyurl.com/2zvwsf
I am not saying that I disagree with you on all counts, but you have some fairly strong opinions about how things will go down, and when I poke around, there are quite a few holes in your case.
September 18th, 2007 at 2:55 am
I do agree that (US) housing will fall, albeit in real terms, and yes nationally
Get out of that cave Rip Van Winkle. Housing in the US is already down in nominal terms almost everywhere, including upscale NYC suburbs.
The biggest bubble areas, such as Florida and California Central Valley, are already down over 20% nominal and will see 50% nominal IMHO.
US as a whole will probably see about 20% nominal, but that’s hiding a lot of carnage in those places and elsewhere.
September 18th, 2007 at 12:07 am
“The question is whether all the economic “spinoff” which is supposed to pay for all the capital investment is going to happen. The way things are looking, that’s looking less likely by the day.”
As I have likely mentioned before, the arguments for this were based upon notions like increases in tourism over a twenty year period after the games, due to Olympic exposure. I doubt most proponents of the games even believe this, but many of these had pretty strong financial incentives to trumpet it.
September 17th, 2007 at 11:03 pm
“I say you are wrong, but you need to be more specific. I presume that you meant national numbers. Housing has lots to fall, and nationally 10% is a lot. California will see 25-30% nominal IMHO.”
I do agree that housing will fall, albeit in real terms, and yes nationally. It seems this board is divided between bulls and bears (more bears) each giving their own arguments. I will 100% agree with all the bears’ arguments but I am not discounting what the real estate bulls have to say. Both you guys are right and wrong. However, I find that the bulls have been right for the wrong reasons. A house on east hastings going for 1 million is certainly not out of the question provided that I see a grande coffee at starbucks going for $10 and gasoline prices going for $2.50 a litre…
As I am writing this WTI spot oil has made another all time nominal high yet just barely a blip on the MSM. Last year it was a huge story.
“Same sh*t different pile.”
No they’re not the same.
“All currencies are fiat, though I imagine that some are more fiat than others. In the case of U.S., it is backed by the U.S. economy, which is racking up productivity gains. I agree that all is not well down south, however.”
Yes fiat currencies are ugly, some more so then others. But the most meaningfully ugly fiat currency is the U.S. Now given that our currency tracks oil as you pointed out, the path of least resistance and probability of moving is up for oil. In addition, since the loonie as a fiat currency is less ugly then the U.S dollar, it is not hard to figure out which way the loonie will go by this time next year…
U.S productivity gains are meager when compared to the double digit days of the late 90′s or even post 9/11 recovery. Until there is some sort of technological breakthrough, productivity gains are most likely from the further utilization of idled equipment/resources or a reduction of excess unproductive labour in the manufacturing sector. (we all know someone who’s left their job and become a realtor, mortgage broker… had to take a shot at them)
As for the China & India story, it is indeed an incredible story of 2 Billion ppl entering the world economy. However, them entering the world economy does not equal housing prices continue to appreciate… I’m saying once they’ve acheived the ability to grow internally, our commodity driven economy shall shake loose our strong bond with the U.S…
September 17th, 2007 at 10:05 pm
Is SATV on drugs? Like hell the market will keep going up. Try listing your property with a RE agent and they will tell you it’s going down as we speak. Don’t believe me. Just call one up and list your property and tag on 5% more than the recent sale price and see if they will help you market it.
September 17th, 2007 at 8:55 pm
BILLIONS WITHDRAWN MONDAY
September 17th, 2007 at 8:25 pm
I actually think that U.S housing may not fall much further. Perhaps another 10%??
I say you are wrong, but you need to be more specific. I presume that you meant national numbers. Housing has lots to fall, and nationally 10% is a lot. California will see 25-30% nominal IMHO.
Not true. The Fed has many other options open to them other then lowering and raising of TARGET rates.
Same sh*t different pile.
Despite the lifting of foreign content limits in RRSP’s beginning July 2005, and having record purchases of foreign funds since then (don’t know the exact figures but it could be around 100billion), our loonie has appreciated nearly 20% when compared to U.S dollar.
The Canadian dollar tracks oil very well. If in doubt, chart them.
The underlying fundamentals of a fiat currency backed by nothing and holds record amounts of debt
All currencies are fiat, though I imagine that some are more fiat than others. In the case of U.S., it is backed by the U.S. economy, which is racking up productivity gains. I agree that all is not well down south, however.
Now couple this with peak oil, and china and india awakening,
This is starting to sound familiar.
September 17th, 2007 at 8:11 pm
Of course, all this depend on the Olympics covering itself with ticket sales and broadcasting rights.
Covering the Olympics’ operating expenses was never in serious doubt. The Olympics are a party for the rich, and rich are with us always. And I think the TV rights have already been sold.
The question is whether all the economic “spinoff” which is supposed to pay for all the capital investment is going to happen. The way things are looking, that’s looking less likely by the day.
Therefore, if the Rich Asians(TM) doesn’t show up to buy all the condos for the Olympics, a lot of the scheduled construction will take a hit.
I do hope that was intended as sarcastic. The Winter Olympics are not very big with Asians, and at any rate, Olympic spectators, no matter how flush they are, don’t buy RE just so they can have a place to stay for 2 weeks.
September 17th, 2007 at 5:15 pm
How in the world will the provincial government’s surplus
(Which is just another name for over taxation) going to prevent a real estate crash?
SURPLUS:is a forever green song for bc government already invested in lots of projects,after 10 will be time to make profit.
going to prevent a real estate crash?
that is sickness for “poor”bears so I think government can not prevent that,for “bulls”their is no crash so government have no issue of that kind.
” Vancouver Re will always go up”
don’t you know that’s already up 125 per cent in last 5 year.and will be countinue……
here is a cut out list for condo market for METRO VANCOUVER
2007: $314,471 (+7.2%)
2008: $327,163 (+4.0%)
2009: $341,116 (+4.3%)
2010: $352,800 (+ 3.4%)
2011: $365,491 (+3.6%)
September 17th, 2007 at 5:03 pm
Putting that in perspective, Alberta has about 10% of jobs construction related (BC is 8%). All other provices are 6% or less.
September 17th, 2007 at 4:44 pm
200K jobs, or about 8% of total workforce jobs, in BC are directly related to construction.
Include property developers, Realtors, and mortage related services and you can add around 50K more.
That’s 10% of the jobs. Not 25% like in that specific part of Florida. Nevertheless, 10%, with all the other sources of jobs in BC, is pretty significant.
September 17th, 2007 at 3:41 pm
Currently there are tons of construction projects scheduled to last beyond 2010 or start after 2010, such as the Gateway project, Evergreen line, broadway rapid transit plan, and some of the condos that started late, among other stuff. Of course, all this depend on the Olympics covering itself with ticket sales and broadcasting rights. There is a contingency fund, but it’s pretty thin compared to the total scope of Olympics. Therefore, if the Rich Asians(TM) doesn’t show up to buy all the condos for the Olympics, a lot of the scheduled construction will take a hit.
In other words, the current economy of GVRD has factored in all the up side, but none of the down side. Even if the Olympics is a total financial success, the current constructions alone can crush the RE market. The probability of an Olympics covering itself is pretty slim, however. Just for reference, the 2008 Olympics will be a massive financial loss, in the order of tens of billions, as the estimated cost range from 20 to 30 billion. But the Chinese government has a trillion dollar foreign reserve ready and willing to cover it. Will the federal government bail BC out of this Olympics?
September 17th, 2007 at 2:33 pm
More evidence that i don’t understand this world. Quote from article:
“”How quickly things can change
William Coleman, 50, who was a senior superintendent at a home builder, learned how quickly things could change. He lost his job in January. Now he’s pouring concrete in a parking lot. His income dropped from $100,000 to $60,000. But Coleman says he feels lucky. His new employer had 250 workers last year. Now it has 30.
“I had to take the only job that was available,” he said. “Everybody’s looking for work.”"
The guy had to take the only job available and he STILL earns US$60k. AND, he pours concrete in a parking lot.
Is there more to “…pouring concrete in a parking lot…” than meets the eye?
It appears to me that in the US housing prices throughout this boom have remained significantly below those of Vancouver, AND the US income levels have been much higher.
They should try living in Vancouver and then they really would be singing the blues.
September 17th, 2007 at 2:26 pm
All the information you have stated regarding the US/CAN exchange is not secret information and you are one of many who feel that way, therefore it is already reflected in the current price probabilistically.
September 17th, 2007 at 2:25 pm
Greenspan: Interest rates need to go to double-digits
I guess when the time comes to renew ARM’s in Vancouver,many will just turn the keys over to the bank.
The Bank will offer to renew the mortgage with 45yr terms.
Still not a good situation to be paying for a leaky condo for 45 years.
Funny, Greenspan is surprised by the consequences of his experiment, while most of us on this board knew exactly what was coming.
Tick Tock, Tick Tock
September 17th, 2007 at 2:18 pm
comparing the current situation to Japan would not be the best analogy. Japan’s problem was that they refused to realize the losses on their books
I have read the same and wasn’t suggesting a specific correlation re. Japan; merely making the point that falling rates may prolong the downfall but won’t reignite the fervor nor save the profligate.
drop of 10% in imported goods would lessen the impact for a home owner (although ppl seem to pay more attention to home prices)
As you suggest, nickle-and-dime price drops on daily goods are a poor sop for tens of thousands of dollars in lost equity.
I’m referring to the Keynesian school of thought which puts a clear distinction between consumer goods and producer goods.
Understood, thx for clarifying.
September 17th, 2007 at 2:09 pm
“yes, when you say 1.2 for US/CAD conversion rate, does it means 1.2US = 1CAD? If yes, can you please provide some data (or insight) why would it happens?
Personally I believe that we would see parity (sometime new year) and the trend would reverse..”
This is more of insight. Despite the lifting of foreign content limits in RRSP’s beginning July 2005, and having record purchases of foreign funds since then (don’t know the exact figures but it could be around 100billion), our loonie has appreciated nearly 20% when compared to U.S dollar. Naturally, people have become accustomed to having a weaker loonie when compared to the U.S dollar so they would think that this must end soon and decide to purchase foreign denominated equities/assets.
The number one performing asset class in the last 6 years post 9/11 has not been housing. The best performing asset class is commodities. Canada is an exporting nation. Under previous conditions, commodities were primarily cyclical and rose and fell with the economy. This time it is different (different from the 80′s to present, but similar to the 70′s). The difference this time is the U.S dollar. The underlying fundamentals of a fiat currency backed by nothing and holds record amounts of debt (trade deficit, social security, medicare) by all accounts would lead to a drastic revaluation at some point. This revaluation all depends on when the foreigners decide to monetize their debt (ie: dump bonds).
Now couple this with peak oil, and china and india awakening, (which at some point have internal driven growth) all bodes well for the canadian currency for the next little while.
I don’t think that the U.S dollar will fall off a cliff like the 97 currency crisis in East Asia, but more like roll down a hill gradually. The Canadian dollar will do well versus the U.S dollar but the best performing currencies are those that have the least to do with the U.S ie: New Zealand, Australia
Just wait till people start talking bout gold and silver and other commodities related stocks at cocktail parties = )
September 17th, 2007 at 1:37 pm
“The only thing the Fed can do is lower rates, and doing so also lowers the dollar and increases inflation, which carry their own set of problems.”
Not true. The Fed has many other options open to them other then lowering and raising of TARGET rates. I have already said that the Fed lowered rates beginning last month…its just that the general public didn’t get the memo… For instance the Fed can influence money supply via sale and repurchase agreement or reverse repo’s and like we have seen in the past few months, the infusion of liquidity, change of reserve requirements and even the classification of what is “collateral” when using repo’s… For the general public there is a fixation on the Fed Funds rate which is a guideline!
“Also, lowering rates won’t stop a housing crash — only drag it out like Japan. Once you remove the speculative motive, the housing Ponzi scheme collapses.”
I don’t doubt that housing prices will see a substantial haircut in REAL terms, but comparing the current situation to Japan would not be the best analogy. Japan’s problem was that they refused to realize the losses on their books and it was more of a localized problem being only in Japan. The current situation would better be compared to the IMF crisis of 1997 (East Asian Currency Crisis)…if you would like me to explain why, I shall do so at a later time. For the countries that got hit the hardest during that time, their nominal price in real estate acutally went up (Thailand, Malaysia, Indonesia, Phillippines, Singapore) but they experienced a significant (some places got nailed by 50%) drop in currency values that made their nominal gains meaningless. There was enourmous consumer price inflation at the same time due to higher import prices.
“”real” dollars are current (or indexed) Canadian dollars, not Can dollars compared to US dollars. A 20% drop in Can prices is still a 20% drop, even if it costs us less to buy gas and trinkets in Bellingham.”
Import prices will go down. The problem is this will not happen till there is a bigger move downward in the U.S dollar index (Since all commodities are priced in U.S dollar terms prices within the consumer price index are likely to experience a disinflation) Likewise, retailers are unable to adjust their prices constantly to match the respective exchange rates. A drop of 20% in cdn real estate would sound bad, but coupled with a corresponding drop of 10% in imported goods would lessen the impact for a home owner (although ppl seem to pay more attention to home prices). However, if you have more then 1 home, being your own residence then good luck to ya!
“Those terms refer to changes in general price levels and money supply, not price changes in specific asset classes.”
That depends on what theory of economics you use. Classical economists would refer to inflation and deflation as changes in the general price level whereas Austrian School of economics believe inflation and deflation as a relation to the money supply. I’m referring to the Keynesian school of thought which puts a clear distinction between consumer goods and producer goods. It is all quite possible to have inflation in consumer goods and deflation in producing goods at the same time.
September 17th, 2007 at 12:06 pm
I actually think that U.S housing may not fall much further. Perhaps another 10%?? I’m saying this because the Fed and the U.S Govn’t are going to open up the taps and let the money flow.
The only thing the Fed can do is lower rates, and doing so also lowers the dollar and increases inflation, which carry their own set of problems. You predict that the US dollar will ‘fall off a cliff’, but you don’t follow through with the ramifications thereof.
Also, lowering rates won’t stop a housing crash — only drag it out like Japan. Once you remove the speculative motive, the housing Ponzi scheme collapses.
However, in real terms, this correction should not be to harsh because by this time next year our loonie vs the dollar should be 1.20+ U.S/Cdn
“real” dollars are current (or indexed) Canadian dollars, not Can dollars compared to US dollars. A 20% drop in Can prices is still a 20% drop, even if it costs us less to buy gas and trinkets in Bellingham.
What the U.S is experiencing right now is both inflation and deflation at the same time. Deflation in seeing house prices drop…
Those terms refer to changes in general price levels and money supply, not price changes in specific asset classes.
September 17th, 2007 at 11:43 am
optimus..
..any comments?
yes, when you say 1.2 for US/CAD conversion rate, does it means 1.2US = 1CAD? If yes, can you please provide some data (or insight) why would it happens?
Personally I believe that we would see parity (sometime new year) and the trend would reverse..
September 17th, 2007 at 11:30 am
Tax man
Vancouver dosn’t need such practice
cos as soon as a shitty smelly shack along hasting and main putting for sale,buyer will flock to the site fighting for a pc.
September 17th, 2007 at 9:27 am
Satv, Chief,Mr. Relator X
You have made a good living at fast talking and confusing the issues, but your reader’s digest version of knowledge is easily detected.
How in the world will the provincial government’s surplus
(Which is just another name for over taxation) going to prevent a real estate crash?
Stick to the basic plan, Mr. Realtor,
shift from:
” Vancouver Re will always go up”
To:
” It’s a good place for the kids” or something warm and touching.
The last slide didn’t have the grease, the internet and bloggers will provide this time,
It will get bad.
September 17th, 2007 at 8:56 am
Why is everyone so fixated on what the Fed will do trm? If the Fed doesn’t cut by 50 basis points there will be a massacre in the markets… why??? Well since Aug.8 the Fed has allowed it’s Fed funds rate to average some 30 basis points and as much as 70 basis points lower then their target rate of 5.25%
Basically, the Fed was not taking part in open market operations to bring the Fed funds rate back to the target. The rate has already been cut, they just never announced it…
I actually think that U.S housing may not fall much further. Perhaps another 10%?? I’m saying this because the Fed and the U.S Govn’t are going to open up the taps and let the money flow. I’m not saying that housing has bottomed, but that in a nominal sense U.S housing is near its bottom… What the U.S is experiencing right now is both inflation and deflation at the same time. Deflation in seeing house prices drop while inflationary at the same time as oil, wheat, soya beans, corn, copper etcetc… gets more and more pricy in U.S dollar terms. In real terms housing will do reallyreally poorly as the U.S dollar falls off a cliff and everything else gets more and more expensive. If home prices fall another 10%, no biggy, but if oil doubles, wheat quadruples, soya beans, electronics, cars all gets priced 100% more, that’s where it will hurt!
Saying things in a nominal sense really has no barring, but the MSM and small retail investors seem to give it more credit…
What about vancouver? Well in nominal terms yall SHOULD be right that we’re due for a correction, perhaps in the area of 20%? However, in real terms, this correction should not be to harsh because by this time next year our loonie vs the dollar should be 1.20+ U.S/Cdn…keep things in perspective!
Housing as an investment is finished… buy gold, buy silver, buy anything that is tangible (and no housing does not fall in that category because it is your asset but someone’s liability)
Nice board by the way, some intelligent comments, and some not so intelligent…any comments?
September 17th, 2007 at 8:31 am
The tax man is watching,
I know!.. I still owe you a tax to purchase those engineered ground wires;to eliminate the bubble!now, I have brought a back pack to pay you off;the owning amount.please count carefully;’……
British Columbia Finance Minister Carole Taylor said Friday the province’s surpluses continue to grow, and the economy remains relatively isolated”from the
economic woes of the United States”.
B.C. Finance Minister Carole Taylor delivers her first quarter financial report Friday, saying provincial surpluses continue to grow.
(B.C. Legislature Channel)
Taylor has delivered a first quarter financial report, forecasting economic growth of three per cent this year and 2.9 per cent next year.
The budget surplus for this year has jumped to $1.6 billion, up from $400 million.
for full article log on to government of bc,so tax man, I owe you nothing unless you deliver further notice.
thanks!taxman=robsnumber;’.
September 17th, 2007 at 7:09 am
Just an academic exercise, because the Vancouver Realtors, don’t do this right Satv?
September 17th, 2007 at 7:08 am
As I recall, on the old VHB there were employment stats indicating that a large amount of the job growth in BC was construction related. When construction stops, a lot of these jobs will disappear. Given the multiplier effect, there will be a lot of spillover.
In terms of replacing construction jobs with something else, if we had been building manufacturing plants rather than condos we might be in good shape. But, seeing as that was not the case, any job growth will primarily be in the service/hospitality sector.
Given current demographics, there will likely still be a fair number of openings. Unfortunately, these sorts of jobs do not pay what construction does, and tend to have less benefits too.
September 17th, 2007 at 7:04 am
The secret’s out on phantom bids:
Chief, Satv, etc read
“”Phantom bids can be used by selling agents to spark extra rounds of bidding or to spook potential buyers into rushing or raising offers. The practice is considered a breach of ethics under the Real Estate and Business Brokers’ Act of Ontario – administered by the Ontario council – and realtors who are caught can face hefty fines.”
September 17th, 2007 at 6:07 am
I think a huge portion of Vancouvers economy probably close to 40 % is based on housing/condo related construction. It is also the highest paying sector of the economy, where a construction trade will always make well in exceess of for example a Property Manager, teacher or nurse!
In that article you quoted they interviewd a real estate agent and carpenter couple who both lost their work. I can think of quite a few couples who’s entire income in Vancouver is generated by the real estate/building industry. Scary!