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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September 16th, 2008 at 7:42 am
Real Estate meets Hurricane Ike
http://tinyurl.com/cltcx
…and the winner is !
September 15th, 2008 at 10:06 pm
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 of information he has to make a statement like that.
2) People keep assumeing that some one whose buying a bugnlow style home in vancouver for 700k is a first time home buyer. That simply is not the case. First time home buyers are buying condos and apartments. People that are selling there homes and downsizing or onto there 2 or 3 rd home are buying these prices homes. They already have equity built up so really they are only taking on a small mortgage which there income can support. No first time home buyer will buy a house for 700k.
3) I don’t know were your getting your pop growth figures from, but I have lived in vancouver my whole life and I have see the population grow dramaticly. Just try taking any or the freeways during rush hour and compare the travel time now to just 6 years ago. Ie I used to travel from surrey to West 4th in vancouver in 1997 it took me about 45 minutes. The same comute takes me now over 1 hr and 15 minutes. The route hasn’t changed. The population has increase
4)No comment don’t know anything about victoria
5)Don’t know much about condos or apartment market at the present time. But the 74% figure that your refering to high I agree. But if you read the artile closly they were talking about the whole price of the property, Not counting your downpayment or your equity you have in the house. Read number 2 again.
I don’t want to upset people the facts are staring you in the face. Get on while you can still buy something or wait and be priced out forever
September 15th, 2008 at 9:57 pm
Lets start a pool: First Canadian bank to fail or need bail out? I say CIBC.
September 15th, 2008 at 9:55 pm
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?
September 15th, 2008 at 5:15 pm
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/victoria.....4eb1873c36
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.
September 15th, 2008 at 4:10 pm
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”
September 15th, 2008 at 3:33 pm
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?
September 15th, 2008 at 3:29 pm
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.co.....quotes0915
September 15th, 2008 at 3:14 pm
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.
September 15th, 2008 at 2:31 pm
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!”
September 15th, 2008 at 2:10 pm
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 there’s basically no repercussions for using bad or compromised sources, it’s not surprising that so many mainstream reporters fall into this trap.
September 15th, 2008 at 1:44 pm
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.
September 15th, 2008 at 1:18 pm
Unrelated:
Which are your favourite investment blogs?
(not touching housing for a few years)
September 15th, 2008 at 12:04 pm
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?
September 15th, 2008 at 11:18 am
“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.
September 15th, 2008 at 10:24 am
average home prices drop 5%
September 15th, 2008 at 10:19 am
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.
September 15th, 2008 at 8:49 am
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.
September 15th, 2008 at 7:19 am
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.
September 15th, 2008 at 7:08 am
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.
September 15th, 2008 at 1:04 am
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.
September 14th, 2008 at 11:25 pm
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
September 14th, 2008 at 11:17 pm
Great coverage on “Calculated Risk”.
This gem from the comments…
http://cgi.ebay.com/ws/eBayISA.....escription