Turmoil is the new normal

Wow. What a weekend in the financial markets!  Lehman Brothers has filed for chapter 11 bankruptcy, an emergency trading session was opened on Sunday, Bank of America is said to have struck a deal to buy Merrill Lynch, and AIG is looking at ‘options’ for business capital.

Phew.  That all came out of left field eh? I mean no one could have predicted that excesses in credit markets would lead to problems like this right?  That would be a feat worthy of a soothsayer, like predicting that overvalued housing markets would fall.

Fortunately for us local experts like Helmut Pastrick of the CUCBC predict that our housing market will be going up by 10 percent.. er, no.. sorry thats changed to dropping by 10%, maybe more.

Anybody have some Gravol?

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oziijjiizo
oziijjiizo
12 years ago

Real Estate meets Hurricane Ike

http://tinyurl.com/cltcx

…and the winner is !

freako
freako
12 years ago

In order to get another laugh at Pastrick's expense, I clicked on the link to the CBC article talking about his 10% 2008 prediction. In the comments section, a total knob who goes by the handle exsentrik wrote the following. Don't know what is funnier, the "Shiller who?" part or the last sentence. Richard B123 I would like to rebut some of your pionts 1) Posters keep refering to the "burst" in 1980's. That sistuation was to do with high intrest rates. You might not be old enough to remember but the intrest rates in that era were 17 to 21 %. It’s a credit meltdown similar to whats happening in the US now. As far is Robert Shiller, Head of Economics at Yale university has do go, I have no idea if this person really exists and what sort… Read more »

bankrat
bankrat
12 years ago

Lets start a pool: First Canadian bank to fail or need bail out? I say CIBC. 😀

dear john
dear john
12 years ago

A lot of well paid people in New York are out of work now:
http://www.msnbc.msn.com/id/26727482/

..So who's buying the financials right now? WaMu anyone?

let's compare w
12 years ago

Calgary $390,091, -8

Edmonton $329,207, -4.8

Montreal $261,604, +6.2

Ottawa $282,792, +5.6

Regina $237,814, +36.1

Saskatoon $279,366, +10.3

Toronto $364,880, +0.8

Vancouver $557,114, -5.2

Victoria $452,205, -1.2

Windsor, Ont., $164,503, -5

Winnipeg $190,979, +12.6

National average $316,052, -5.1

http://www.canada.com/victoriatimescolonist/news/

Looks like Regina, Winnipeg,Possibly because they are running out of land, and all the rich Asians have finally discovered it and will move there after Vancouver's Olympics.

Van-zee
Van-zee
12 years ago

Fractional reserve lending lets commercial banks invent money through lending it out and then they charge interest on the money they just invented. Whats really cool about it is they use deposits that are liabilities and pretend they are reserves. Of course when you get to invent money through lending you're going to want to make as many loans as possible for as much as you can.

" Greed I'd like to introduce you to fear, I think the two of you will get along famously"

ted
ted
12 years ago

Part of the problem was a system that gave incentives to give out loans but removed the personal responsibility from those giving them out. I've got to wonder how solid some of the loans in BC have been during the past boom years – are we in for a local version of 'subprime' when people discover the past appreciation isn't normal and the correction grinds on? We're only a few months in, Vancouver is down 4 or 5 percent, and already people are forecasting the bottom?

ted
ted
12 years ago

The globe has a collection of quotes from people about this market turmoil:

"in 1932 these big banks didn't go bankrupt"
http://www.reportonbusiness.com/servlet/story/RTG

betamax
betamax
12 years ago

Don’t expect too much from mainstream reporters.

They can either write up what someone tells them, or do laborious research themselves. Both pay the same.

Drachen
Drachen
12 years ago

JB

"the CEOs of these investment banks."

Those CEOs are earning hundreds of millions of dollars in incentives because of how the accounting system was engineered (by them). They earned bonuses based on the future theoretical return from the loans they made not on actual returns, more loans good or bad = bigger bonuses. They will all retire filthy rich.

As Adam Savage likes to say, "Well there's your problem!"

Potato Hat
Potato Hat
12 years ago

Don't expect too much from mainstream reporters. All but a few of them will follow the same template for writing an article: 1) Find a story. 2) Write about it 3) Gather some background information on the story and append it in inverted pyramid format 4) Add 1-2 quotes from experts 5) Spellcheck Reporters will usually make sure their experts are "legitimate," in that they have some sort of background that makes them an expert in whatever area is being reported on (Pastrick certainly qualifies in this regard.) But they almost never vet the expert, consider their past statements, or weigh what agenda the expert might have. It's just too much work for too little reward. It's lazy reporting, but honestly, who among us can't say we've slacked through a day, week or year at work before? And given that… Read more »

JB
JB
12 years ago

What is the most outrageous is the people at the top of this pyramid scheme claiming ignorance about what was happening on their watch. Alan Greenspan and the CEOs of these investment banks. C'mon, give me a break! Anyone with half a brain knows that when you instill a psychology of (don't bother saving, just borrow and spend) ) cheap money for far too long, people buy out of fear of rising prices and that causes more irresponsible behavior. The BOC isn't off the hook here either. Whatever happened to "economics 101"? Now a lot of people (voters) have been left out of this game, not because they are low income or unintelligent, but because their timing wasn't right. That's right folks, step right up and vote for a system that no longer rewards saving and personal responsibility.

Anonymous
Anonymous
12 years ago

Unrelated:

Which are your favourite investment blogs?

(not touching housing for a few years)

BBY
BBY
12 years ago

In a sign the market is stabilizing, however, the level of new listings cooled from the record levels hit in the four previous months.

In August there were 44,377 new listings in the country's major markets, compared with 50,341 in July.

Odd, how the author doesn't attribute the lower listings for August to seasonality… Although I'm sure RE pimps will trot out seasonality as the reason for lower sales in August…

I wonder what the author will make of September's listing #s as the trend from the first half of the month continues?

jesse
jesse
12 years ago

"Why does the press continue to go back to 'experts' like Helmut Pastrick for their opinion after they are proven wrong?"

Because nobody else is willing to send in a fall guy to go on record saying anything to the contrary. An up-and-coming financial analyst could make a name for him/herself by quoting a 40% drop, if permission could be obtained from brass to say such things.

richard
richard
12 years ago
Drachen
Drachen
12 years ago

Anyone want to place bets on when we'll pass record inventory levels (by Paul's numbers) in Vancouver?

We were at 20,098 on Friday and the previous record peak was 20,280 at the end of July.

I'm calling Wednesday.

Phil
Phil
12 years ago

Why does the press continue to go back to "experts" like Helmut Pastrick for their opinion after they are proven wrong? I guesss I already know the answer to that!

Stocks not down too much this AM despite the financial turmoil underway. Plunge Protection no doubt.

alexcanuck
alexcanuck
12 years ago

A commenter on (I think) the big picture suggested BofA is desperately trying to attain "too big to fail" status.

Makes as much sense as the thinking that created this mess.

Garth
Garth
12 years ago

RJB, that's a great video. I haven't seen that guy before but he sure seems to know what he's talking about.

You know, I remember the morning of September 11 when I heard about it on the way to work. My first thought was: "everything is going to change now."It did, of course, but I wonder if the changes coming about now may be of much greater (or at least broader) significance. If the banking system goes down, our entire way of life goes down with it. Note I am not predicting anything. I am just worrying about a worst-case situation which unfortunately seems to be a possibility.

Gadwin
Gadwin
12 years ago

Everybody is rushing for the exits now in Vancouver, but the exit is getting narrower and narrower. The panic is starting and people are getting trampled in the process.

RJB
RJB
12 years ago

Here's a video about Lehman's lending quidelines (FICO scores, debt to income, documentation, etc.). These are the types of loans on their books.
http://www.youtube.com/watch?v=6-qThuhHXrs

Anonymous
Anonymous
12 years ago

Great coverage on "Calculated Risk".

This gem from the comments…

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&amp