Friday Free-for-all!
What’s that up ahead? Could it be.. Yes, I think it is.. The weekend! Let’s do our regular end of the week news round-up and open topic economic discussion. Here are a few stories I’ve noticed lately:
-Dubai debt trouble hits Canadian markets
-BC Home affordability takes a hit as prices rise
-Will Vancouver experience the post-game blahs?
-Housing Bubble: Is the market overpriced?
-Border braced for thousands on Black Friday
-Call for sponsors to save conservatory & farmyard
-GM Canada dealers sue to stay open
-Hope is not a debt reduction plan
So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
“I can’t wait for the day when these guys get exactly what they deserve” « Vancouver Real Estate Anecdote Archive Says:
December 1st, 2009 at 12:33 am
[...] Yalie at vancouvercondo.info 29 Nov 2009 3:59 pm & 4:13 pm responds to the statements made by wannabe flippers at the recent release of presales for ‘The Mark’ condo complex – [...]
November 30th, 2009 at 12:44 pm
@patriotz:
There is a fundamental difference between bubbles and what is going on today. If people want to overprice an asset and pay for it with real money that is fine, let them go crazy because they are limited by their wealth anyway. The folks buying condos today are not paying with real money- they are paying with artificially unlimited future money lent to them at artificially low interest and with artificial risk assessment. This is not a natural bubble, this is artificially created madness.
November 30th, 2009 at 12:13 pm
@realpaul: @realpaul: just came back from shopping in a supermarket that was offering a head of lettuce for 8.75 Euro or about $14. Can you imagine?
Yes SIR, I CAN!
How do you like that part of the globe? I remember being pissed out completely in Brussels, when I purchased hamburger (approx double the price here) and was asked to pay 1 euro for ketchup bag.
And its even getting better with the prices there…
November 30th, 2009 at 8:43 am
Keynsian theory was the holy grail for governments as it proposed an expanding revenue base ad perpetuum through guaranteed incremental tax increases on rising values. It looks like the opposition was right and Keynsian economics is nothing but a pyramid scheme that fell flat when it reached the inflection point.
As we see all things consumable have reached untenable values so that affordability has been reduced to a payment as opposed to a purchase.
The Keynsians will have us believe that houses, automobiles and washing machines can continue to appreciate ad nauseum as long as you are drawing a wage. But its the old story "when the last person to have a penny left after taxes please turn out the lights.
Sadly the last people to get this are the governments who have forecast thier wage agreement budgets on the ever expanding tax base of higher costs.
Not only is this stupidity stealing from future revenues but it is unsustainable without a build up of massive national debt which will begin to compete with the consumer markets for net cash.
Now lets see….at last report the CDN consumer was 154% indebted to cash flow. Hmmmmmmmmmmmm. It don't look good to me.
November 30th, 2009 at 5:30 am
@Anon:
Do note that bubbles have been around a lot longer than fiat money, from the tulip mania to the US stock market bubble of the 1920's (when the US was still on the full gold standard). In RE, you can look at the massive Florida bubble in the 1920's and right here in Vancouver in the early 1900's, among others.
These were regional bubbles though, I don't think a global RE bubble would have been possible without fiat money.
November 30th, 2009 at 5:23 am
@domus:
Well yes. the BoC is a Crown Corporation, i.e. it's part of the government, although it's supposed to be independent of cabinet control in its operations. But the BoC has an explicit mandate to preserve the integrity of the banking system, which means supporting Crown guarantees on debt, which means increasing the money supply if need be. It's not some conspiracy, it's supposed to work that way. The real issue is the the government's fiscal irresponsibility.
November 30th, 2009 at 3:54 am
Maxed out Canadians forced to choose between having a life and paying nothing but mortgages and condo fees for the rest of thier lives. Even at that there is zero left for savings in reitrement. So the choice is now 'to condo at the risk of all else?" Nice.
http://www.theglobeandmail.com/globe-investor/per…
This can't be a good scenario for any other retail sector, even the credit card companies can't be happy about watching the sky high real estate prices sucking every penny out of the economy.
We see by this article that even singles and dinks have nothing left but debt at the end of every month. When the debt gets maxed out it doesn't leave anything for lifestyle.
Canada is becoming a slave country where people will travel less, have fewer children and be forced to feed, cloth and recreate those children less ably than any other previous generation.
As such, this subject will be forced to sell in her old age because she has no pension or retirement savings leaving her to live on super inflated costs and a dollar which is increasingly worthless on the world market, meaning the cost of all imports ( pretty much 99% of all CDN consumables)are going to cost dramtically higher in the future as our currency dies along with the USD.
Watch out, Wallmart is going to be too expensive for the average CDN to shop in because of the Chinese currency rapidly appreciating against the Loon.
Look forward to a Canada where you have a nation of million dollar condos inhabited by a people who are eating rats and spiders.
BTW I'm in Finland right now and I just came back from shopping in a supermarket that was offering a head of lettuce for 8.75 Euro or about $14. Can you imagine?
November 30th, 2009 at 2:11 am
Yalie, you are right, too much speculation, not enough focus on creating value. But don't blame the morons- they are innocent in their desire to live better and have more stuff. The real issue is our government. If they did not manipulate our money we would not have these problems. Of course our government is not special in this, they are racing with the rest of the world. but still it is them who are directly responsible for the mess, not the speculators who are simply weak, confused and opportunistic.
November 30th, 2009 at 1:43 am
game_over its pretty scary. I think this climate scam if it goes through will make the housing bubble look like nothing. The only inconvenient truth about al gores inconvenient truth movie was that it was completely ficticuous.
November 30th, 2009 at 12:44 am
@patriotz: the government guarantee has the complicity of the Central Bank. If the government had no leverage on them, and could not print money indirectly thorugh them, they would be much more careful with the fiscal stance. It's a game of 'roles'. Right now BoC and government are exactly on the same page, hard to draw a line.
You have been informed, now it is uo to you what you do with that info.
November 30th, 2009 at 12:40 am
@ReadyToPop: ditto! Politicians should not decide house prices. This is a joke, and it is going to end badly. People will lose their shirts, both buyers and taxpayers. Most will be worse off. And all because some smart guys in suits have to get re-election. Be vocal! Tell other people! And write to your MPs! And to the BoC! Dropping an email to them is your right and costs nothing to you!
November 30th, 2009 at 12:20 am
"nieites"
128 – wtf?
November 29th, 2009 at 11:46 pm
I was informed this week that the feds will be cutting off all infrastructure stimulus funding in March 2011, and those provinces and local governments that have not used it by then will be caught holding the bag for uncompleted projects. There will be no extensions in funding!
This announcement means that there is effectively only one building season left for most of the Province, so all projects will be pushed through because no one wants to be left holding the bag. If you couple this drying up of stimulus funding, with the completion of all Olympic venues, the BC construction boom is all but done. All the emergency bullets to keep the construction boom going have now been used up….
Federal austerity measures are just around the corner….1990s, here we come
November 29th, 2009 at 11:26 pm
@patriotz
I stand corrected…they aren't printing money…*yet*. They say they will if they have to. They are almost giving it away though and that is still distorting the market. Not the place to be if you're a value investor.
November 29th, 2009 at 11:14 pm
In case anyone out there is still in the dark I will dispell ALL nieites with one major statement.
The man made climate change sewindle had been exposed.
google CLIMATEGATE.
You HAVE been DUPED.
IT IS NOT YOUR FAULT.
Send you representitive info detailing the fat that you do not want him/her to vote for this GLOBAL TREATY.
This is my last email at the 11TH HOUR to you. Time is of the essence and I must move on to get more RELEVANT people involved.
Do not laugh at me until ou have reviewed the evidence….
which will no matter after 7 days from now…or review it and anaylize it and take action.
This is the ENDGAME.
I said my piece.
what did you do?
November 29th, 2009 at 9:42 pm
Further to the Province article regarding lineups at The Mark, check out the contrasting piece written by the same journalist released on the same day…
http://www.theprovince.com/business/When+paychequ…
What a town!
November 29th, 2009 at 9:37 pm
I'm number 126!!!!
November 29th, 2009 at 9:18 pm
@flip_this:
No it's not. CMHC is not a central bank. The money that CMHC uses to buy mortgages is borrowed on the bond market.
November 29th, 2009 at 8:39 pm
Hey SupraLadyBoy:
Yeah those "investors" have the balls to load up all right. If you are still living with Mummy and Daddy, doesn't that mean you have no balls at all? I guess it must be convenient, far less "tucking" needed to get you into those teeny tiny little skirts. Are you lubing your thighs up with coconut oil to help you slither into them?
You're funny, dude who looks like a lady. You live at home, you have no skin at all in the game and yet you post lie you're Donald Trump. It's even funnier because I have to point out, the faster prices rise, the faster you yourself are priced out of the market.
I'm already priced out of the market, in that I flat out refuse to borrow half a million bucks for a shitty, leaky condo. I hope prices rise another 20% too, because then you'll be locked in Mummy and Daddy's basement eating rat poo dim sum and waiting for your parents to kick off.
Won't that be fun! At least it'll keep you in Richmond and out of downtown Vancouver.
Unlike you, I've ben east of the Rockies and know what life in other parts of Canada is ike. I can't say I'd enjoy an Alberta winter, and Toronto isn't my kind of town but like in Montreal can be fun. I'll bet now that they finally paid off their Olympic debt they'll have some money for infrastructure projects, too.
One way or the other though I don't buy into the "Best place in Canada" hype, much less the "best place on earth" bullcrap.
By the way dude, if you drive a Ferrari, why is your nickname on here "supraboy"? I'm sure we'd all love to know.
On an unrelated note, I did my first decent grocery shop here in Nova Scotia. I was surprised how prominently produce that had been locally grown was market. My dad was telling me farmer's markets are extremely popular here too. People like to buy locally made good as much as possible, which I thought was very cool. I thought it was cool because it's surprisingly hard to find BC produce grown in Vancouver. In most stores it's not clearly marked.
That's just an annecdote, not a hard data point.
I was impressed with the local liquor stores too. They all have my favorite beer, an English import. It's 50 cents cheaper too which is nice. I cold only ever find it in one location in BC.
I'm not looking for much in life really, a decent roof over my head, good food on the table, family and friends nearby. It seems more likely I'll find that here.
November 29th, 2009 at 8:35 pm
@patriotz: "The real cause is government guarantees on mortgage lending".
I think that besides guaranteeing mortgages, CMHC is also buying large quantities of mortgage backed securities from the banks. So technically this is creation of money/credit, channeled through the housing market.
November 29th, 2009 at 7:50 pm
http://www.guardian.co.uk/commentisfree/2009/nov/…
ditto…
November 29th, 2009 at 7:20 pm
@ReadyToPop:
No they're not. Yields on common and preferred shares, and corporate debt are still quite high. If yields on RE were being depressed (i.e. prices inflated) just by an increase in the money supply the yield on all assets would be affected.
The real cause is government guarantees on mortgage lending. If these did not exist lenders would be demanding much higher down payments and interest rates, regardless of the very low rates on deposits and government bonds.
November 29th, 2009 at 6:56 pm
@Yalie
Actually, I take it back. I DO want these guys to get what they deserve. They represent everything that’s wrong with our society lately – basically people trying to generate cash without generating anything of value.
Yalie…you're really up against the BoC. They're the ones generating more cash without generating anything of value. That's what's causing these market distortions. If responsible savers were earning what they deserve, this wouldn't be happening. Write your MP.
November 29th, 2009 at 6:44 pm
http://www.theglobeandmail.com/news/world/dubais-…
November 29th, 2009 at 4:59 pm
Just got back from looking at rentals downtown.
438 Seymour, 2 bedroom and 2 bathroom $1500.
Sub penthouse unit in 30 year old concrete hi rises,2 bed, 2 bath, 980 sq ft $1400.
Palisades X3 asking $1900 for 900 sq ft, all would negotiate lower for a lease today.
With the Olympics coming you’d think rent would remain flat or even increase and yet rent has dropped as much as 40% since last summer……
Maybe the morons that lined up last night to buy at Mark will rent me a unit for $1100 in 2013.
They can pay the additional $2,000+ to subsidize me while they live with Mommy and I'll go eat dim sum.
November 29th, 2009 at 4:47 pm
Worst case scenario they are forced to sell their stake.
Not a big deal really.
November 29th, 2009 at 4:17 pm
So, I'm thinking about this Dubai thing on a rainy Sunday. Isn't the port (of Vancouver) half-owned by DP World, which Google tells me is an affiliate of Dubai World? Maybe that silly little debt-restructuring thing is being blown out of proportion, but if not does anyone know what problems at DP World would mean for our port?
November 29th, 2009 at 4:13 pm
Actually, I take it back. I DO want these guys to get what they deserve. They represent everything that's wrong with our society lately – basically people trying to generate cash without generating anything of value.
As an entrepreneur, I have been busting my butt the last three years building a real business, with a real product, that people can actually use. It would be bad enough if these flippers were merely throwing themselves off the financial cliff, but what really gets me is that through the associated misapplication of capital and the inevitable economic fallout they're creating, they're also going to take out hard-working, honest people who do real work.
November 29th, 2009 at 3:59 pm
"I'm here because they are selling Yaletown at today's prices, but the speculation is [that] prices will go up after the Olympics," Arora said.
…
"The prices went up $50,000 last night," Dhana said. He hoped to buy a unit in the $500,000 price-range, and also expected prices to surge in February 2010.
…
I'm not a vindictive person, but with such breathtaking displayes of ignorance as these, it's hard not to think "I can't wait for the day when these guys get exactly what they deserve"
November 29th, 2009 at 3:38 pm
@Mold city:
How do you know I'm living at home? And how do you know whether I have properties or not out there? If I can rent out properties while I live for free, why not? Get the suckers to subsidize my spending on fine dining and dim sum is the way to go.
Hey Scumboy: .
Meanwhile greedy “I buy two my huzzba buy two” types commit to a foolish purchase that by now should be obviously risky.
You have to face the facts, those people have balls to load up while you sat on your thumbs sucking lollipops. Ain't our fault you missed the boat. I hope Vancouver property prices rise another 20%, price your sorry ass out of this market forever. If you want to come back to Vancouver, you better have a couple million cash to start. I hope we'll never see you again in our neck of the woods.
November 29th, 2009 at 3:26 pm
No comment required:
http://www.theprovince.com/business/Condo+lineups…
November 29th, 2009 at 3:12 pm
Just got back from looking at rentals downtown.
438 Seymour, 2 bedroom and 2 bathroom $1500.
Sub penthouse unit in 30 year old concrete hi rises,2 bed, 2 bath, 980 sq ft $1400.
Palisades X3 asking $1900 for 900 sq ft, all would negotiate lower for a lease today.
With the Olympics coming you'd think rent would remain flat or even increase and yet rent has dropped as much as 40% since last summer……
November 29th, 2009 at 12:33 pm
A friend of mine sent me this. Very scary stuff. His comments are in quotes.
—
"This is from the CMHC 2008 Financials – $183 billion of Interest rate swaps with an average of 4 year term up 36% from 2007. If interest rates go up before 2012 will there be a giant default or does the Montreal Accord prevent Canada's banks from demanding payment?
Keep in mind Dubai can't blend and pretend $80 billion of debt."
Third-Party Asset-Backed Commercial Paper (ABCP)
At 31 December 2008, CMHC held Canadian Third-Party Sponsored ABCP issued by a number of trusts (conduits) with an original cost of $239 million, of which, $60 million was classified as Available for Sale, $102 million as Designated at Fair Value and $77 million as Held to Maturity. At year end 2007, the Corporation held $249 million however, during 2008; two trusts paid their debt in full resulting in the Corporation receiving $10 million. At the dates CMHC acquired these Third-Party Sponsored ABCP, they were rated R-1 (High) by Dominion Bond Rating Service (DBRS), the highest credit rating issued for commercial paper.
In August 2007, the Canadian market for Third-Party Sponsored ABCP became illiquid resulting in these investments not paying on maturity. An agreement, The Montreal Accord (the “Accord”), was reached in August 2007 whereby investors agreed to a standstill, that committed investors not to take any action which would result in an event of default.
On 23 December 2007, the Pan-Canadian Investors Committee (the Committee) reached an agreement in principal on the restructuring of the ABCP. On 17 March 2008, the restructuring plan was fi led in the Ontario Superior Court requesting the Court to call a meeting of the Accord ABCP holders to vote on the restructuring proposal. On 25 April 2008, the Accord ABCP holders voted in favour of the restructuring proposal and on 5 June 2008, the Court sanctioned (the Sanction Order) the proposal. On 25 and 26 June 2008, the Ontario Court of Appeal heard motions from Accord ABCP holders seeking leave to appeal and an appeal of the Sanction Order. On 18 August 2008, the Ontario Court of Appeal upheld the Sanction Order and on 19 September 2008, the Supreme Court of Canada upheld the Ontario Court of Appeal Decision. On 19 December 2008, a new agreement to swap the illiquid commercial paper for new longer-term debt replaced the March 2008 restructuring plan. The governments of Canada, Ontario, Quebec and Alberta also agreed to provide $3.5 billion in financial backing to support the new restructuring agreement. In addition, an Ontario Court extended bankruptcy protection for the ABCP to 16 January 2009; the foreign banks were not covered by the court order. The restructuring took place on 21 January 2009 (see Note 22).
In the absence of an active market for Third-Party Sponsored ABCP at 31 December 2008, the fair value of the instruments below were estimated using valuation techniques that included a 100% probability of successful restructuring and weighted discounted future cash flows techniques (taking into account the lack of liquidity).
5. DERIVATIVES
Derivatives are financial contracts whose value is derived from price movements in one or more underlying securities, indices or other instruments or derivatives. The Corporation uses derivatives (interest rate swaps, foreign currency swaps, interest rate futures and equity index futures) in connection with its risk management activities.
Interest rate swaps are transactions in which two parties exchange interest cash fl ows on a specified notional amount for a predetermined period based on agreed-upon fixed and floating rates. Notional amounts are not exchanged. The value of these swaps is derived from movements in interest rates. They are used to manage reinvestment risk, refinancing risk, or mismatches in the timing of receipts from assets versus payments of liabilities.
Foreign currency swaps are transactions in which two parties exchange currencies and interest cash flows on a specified notional amount for a predetermined period. The notional amount is exchanged at inception and at maturity. The value of these swaps is derived from movements in foreign exchange and interest rates. They are used to manage foreign exchange risk arising from foreign denominated debt.
Interest rate and equity index futures are contractual obligations to buy or sell a financial instrument on a future date at a specified price established by an organized financial market. The credit risk is reduced as changes in the futures’ contract value are settled daily. Futures are used to manage asset allocation in the Insurance and Securitization Activities.
The table below provides the notional amounts of the Corporation’s derivative transactions. Notional amounts, which are off-balance sheet, serve as a point of reference for calculating payments and do not represent the fair value, or the potential gain or loss associated with the credit or market risk of such instruments. The Corporation does not have derivatives embedded in other financial instruments (host contracts) which require separation.
In millions – 2008 2007
Interest Rate Swaps 4 years
181,523 4,621 157 132,700 645 205
Foreign Currency Swaps 2 years
2,344 129 7 3,737 – 698
Interest Rate Futures
(149) – - (58) – -
Total
183,718 4,750 164 136,379 645 903
and
The carrying amount at 31 December 2008 of Capital Market Borrowings is $438 million higher than the contractual amount due at maturity. CMHC’s liabilities are backed by the full faith and credit of the Government of Canada and there is no significant change in value that can be attributed to changes in credit risk.
"Note this is just the $ value of real fiat $ the Canadian taxpayer is on the hook for. This does not include any paper contracts or derivatives that are subject to counter party issues like the $1.8 billion in interest rate swaps previously sent. This will end badly."
November 29th, 2009 at 12:30 pm
other ted'
I suppose Dubai COULD use that indoor snow/ski facility, couldn't they?
November 29th, 2009 at 11:39 am
I can't believe Dubai's real estate bubble could possibly affect world markets. If only they did something to sustain their bubble like get the olympics. I hope someone in the olympic committee realizes this and gives them the winter games which will save the world. Good thing our government is much smarter and got the games now this madness can go on forever.
November 29th, 2009 at 11:32 am
scullboy,
7 years? I wish! We landed here in 2003, but were in a position to buy only in 2006. That's when we started looking for houses, and realized what's going on. Then we made the "arit 10 year plan". It's been four years into the plan now, and we have saved religiously the difference between our rent and the mortgage, roughly 1000 a month.
We put all that money into one stock that is in the medical high tech industry. All the eggs in one basket.
And don't bother saying I am insane for doing that. I already know it.
Best regards
arit
November 29th, 2009 at 10:10 am
@gork:
Another interesting view on Dubai, and what it really means to world capital markets:
http://www.frontlinethoughts.com/pdf/mwo112809.pd…
November 29th, 2009 at 6:44 am
Hey Arit,
You know what I find sad? You gave to wait almost 7 years before making what should be a reasonably priced purchase. That's 7 years of "temporary" living before you reach your goals.
Meanwhile greedy "I buy two my huzzba buy two" types commit to a foolish purchase that by now should be obviously risky.
And all the while the zombies chant "best place in the world, best place in the world, everyone wants to live here!"
I went out to my family's conpany's Christmas party last night. The food was good, if a bit simple (I could have done a way better job
, a couple of the employees busted out a harmonica and some guitars, drinks were had and the whole thing was generally awesome.
One guy who works for the family firm used to go to school with me. One of his brothers went out to Alberta, paid too much for a house and is now a reluctant landlord.
Meanwhile my frient stayed, got married, bought a modest home and can afford a decent truck and small boat.
Just pointing out that a modest lifestyle can be a very fulfilling one. Food for thought.
November 29th, 2009 at 5:12 am
Arit, both are what they are. But if non flippers weren't active in the market and taking on debts that are unsustainable the flippers would be dead. The irresponsible FTB IMO is far worse a problem because he's naive and more difficult politically to manage the fallout. If only flippers were dying a horrible death the government could easily tell them to go to hell. Throw in a few naive owner occupiers otoh and everyone gets bailed out.
November 29th, 2009 at 3:43 am
@rp:
Right on. And remember, the taxpayer is not holding the bag on pre-sale defaults. The developer takes the pre-sale buyer to the cleaners. One dog eating another. True justice.
Keep that supply flowing, idiots
November 29th, 2009 at 12:47 am
interesting views on dubai crisis, dollar, ….
http://www.youtube.com/watch?v=cSWSwhn-AWc&NR…
cheers
November 29th, 2009 at 12:32 am
Suckers are falling over themselves to buy into a condo pre-sale at the peak of a massive bubble, and it's called The Mark?
Now that's what I call irony!