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Friday Free-for-all!

Hello! It’s the end o’ the week and winter games wrap-up. Let’s do our regular news round up and economic news discussion post, here are a few stories to kick off the chat:

–NYT: a $1 billion olympic hangover?
–ReMAX: few listings mean tight spring market
-Google search for ‘housing bubble’ in Canada and US
–a cooler take on a hot housing market
–Canadian inflation rates 1915 – 2010
–Automatic tipping makes some visitors complain
–Reports show US recovery losing momentum

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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Porky Pig

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Real estate agency Re/Max said the prospect of higher interest rates, the arrival of the Harmonized Sales Tax in Ontario and B.C. in July, and recent changes to modestly tighten mortgage financing rules have prompted an "unprecedented number of purchasers" to enter the market

Why do people rush in to buy, when they know that the fundamentals will get much worse soon and will likely result in lower prices? Makes no sense…

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patriotz

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@Porky Pig:

Why do people rush in to buy, when they know that the fundamentals will get much worse soon and will likely result in lower prices?

Well because they can't figure it out, of course. People are stupid.

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Porky Pig

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Automatic tipping is outrageous. I am a good tipper, but a tip is always tied to performance. If the service isn't good enough, then the server or cook deserve no tip. With automatic tipping, the restaurants untied tipping from quality of service and changed it into an entitlement or an outright theft.

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patriotz

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@Porky Pig:

It's just concealing the true purchase price of the meal. No gas station or store would be able to get away with tacking on 10% to the marked price at the cash register – they would be prosecuted. Why should restaurants be any different.

If the owners of restaurants are so concerned about the economic well-being of their staff they should give them a raise. And increase the price on the menu to make up for it.

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domus

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Great link on inflation. Notice that, unlike US and UK, this is happening in a period of extremely stron loonie and favorable exchange rate. The phenomenon is common to all the great money printers (UK,US,Canada). In the Anglosaxon world only Australia has taken serious step to avoid a burst of price increases, and only because their economy was in the middle of commodity/RE frenzy. In summary, inflation is possibly the most understated phenomenon at the moment. With such rates of money printing and velocity of money due to pick up over the next year or so, expect those numbers to pick up considerably. Governments see it as a benign phenomenon, because it would decrease debt liabilities. Of course, they would not want people to realize how bad it can be for their purchasing power. Commentators like Krugman are to blame… Read more »

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vreaa

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The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 5: Raise or Raze http://wp.me/pcq1o-xO I walk around our neighbourhood taking inventory: renovation, renovation, that house raised and a new foundation poured, that one with a second storey added, and there, a house demolished — razed with a “z” — and a new house built in its place. In the six and a half years that my wife and I have lived in the Grandview area of Vancouver, there have been a startling number of major renovations, and demolitions followed by new construction. – Froogle Scott In his fifth episode, Froogle Scott shares with us his careful observations of the effects of the boom on the houses in his neighbourhood of Vancouver, and describes the process whereby “increasingly massive war chests of home equity” are used to renovate and… Read more »

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patriotz

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@domus:

Governments see it (inflation) as a benign phenomenon, because it would decrease debt liabilities.

No they don't, because inflation inevitably results in higher interest rates. The bond markets are not going to be cheated out of their real returns.

The primary reason why the Federal government was able to balance the budget in the 90's was the big decline in interest rates, and that happened because the bond markets were no longer afraid of substantial inflation going forward.

Bring back that fear and you bring back high interest rates. Guaranteed. Particularly when your currency is not "too big to fail". That would be a catastrophe with today's level of consumer indebtedness and lack of bargaining power of labour.

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Peter

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I wonder if the auto gratuit levied by the cactus club of 18%, 20% at Library Square for the Olympics will come back to haunt them. This was for ordering drinks at the bar with no waiter and 20% seems like a generous tip. Things will slow down after the Olympics as people economize after $10 beers so everything will balance out.

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domus

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@patriotz:

I disagree, but we won't know until things fold out. I see your view as the 'optimistic' take on governments. In your view governments genuinely worry about repaying real debt and for the long term well being of the economy.

What i see is a bunch of governments in 'emergency mode'. They are all overloaded with debt. Private households' liabilities are even higher. These are powerful incentives to run some inflation.

I know, I know: interest rates will pick up. But 3 years of 5% inflation will do wonders to reduce debt loads. This is Krugman's argument.

The problem of course is that letting the inflation genie out of the bottle opens a new can of worms: it is hard to get back to low inflation.

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patriotz

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@domus:

In your view governments genuinely worry about repaying real debt and for the long term well being of the economy

Not really, our current "Conservative" government is clearly not concerned about either one.

But they, and those that support them, are very much concerned about corporate profits and stock prices, and inflation is bad for them. Google "death of equities" to see what I mean.

Inflation and the resulting higher interest rates would also result in an even bigger RE bust than we would see otherwise, and any government is going to be concerned about the fallout from that. They may not care about the financial position of the ordinary person but they do need the votes.

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pricedoutfornow

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$1 billion hangover is right. I went to an Olympic event yesterday (lucky for me, I didn't pay a cent) and happened to hear some people behind me talking. They were from Nova Scotia, the person said "We're never going to do this again, so we're spending like there's no tomorrow, really racking up the credit card! But it's a once in a lifetime opportunity, so why not?"

Party on dudes! Enjoy it while you don't have to think about the bills to come!

My guess is 3 months down the road we'll be wondering if it was all really worth it.

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realpaul

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A Russian newspaper describes Vanshittydiaper this way " Vancouver, he writes, “is mutton dressed as lamb. Take off the outer veneer and the stench is horrific.” I couldn't agree more. http://www.vancouversun.com/news/Vancouver+hold+O… This sorry event has been taped together with a last minute splurge of ad dollars through a tightly controlled media ( its hard to say and Vantampax in the same sentence without laughing), a policy of all night booze fueled idiocy promoted by the government by keeping the liqour stores open all night so that the drunks can fill up the camera space. I have watched with great amusement as our usually pussy policemen have been wrestling drunks to the ground 'old style' instead of tasering citizens indiscriminatley, why the change in policy girls? Underneath this shitty stinks to high heaven. Gordo looked like a deer in the headlights… Read more »

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realpaul

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should say "its hard to say MEDIA and Vantampax in the same sentence

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Best place on meth

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US recovery losing momentum?

I haven't seen any recovery at all, other than the fake one fueled by government programs using borrowed money from China.

2010/11/12 is going to be hell on America and we're too close for comfort.

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Vansanity

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@pricedoutfornow: Buddy, I know tons of people doing exactly that! They're partying hard and the common theme amongst them is that they're not going to worry about what their credit card statement looks like until its all over! It should be interesting to see the debt figures come up a few months from now. Also, I know someone who recently bought a home and is now $700k (+) in debt. His family income is somewhere around $100-125k per year. Couple kids, $3,000-$4,000 per month on house costs. Financial stress, mental stress, physical stress… sounds like a great plan. I should mention that they both came close to losing their jobs sometime ago. I'm so happy I'm not living "house poor". We're planning our vacations for the year, looking at 4-6 weeks away, Europe, Hawaii and Jamaica, few trips to Vegas… Read more »

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space889

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@vreaa: While I certainly feel the sentimental feelings the writer has for his old neighborhood and how he wish things don't change so much and in his view for the worse, I must say I don't feel quite the same way. I had recently gone back to my first home in Mount Pleasant when I came as an immigrant back in 1989 and lived there for about 10 years. There has been a lot of changes to the neighborhood and blocks where I don't recognize where I am. There have been large heritage style houses torn down and rebuild as a large townhouse complexes. However to me this is also progress. While people maybe nostalgic about those cute character houses building pre-1930, or those cute charm wartime bunglows, the question I have is do they really think it's a good… Read more »

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patriotz

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@realpaul:

A Russian newspaper describes Vanshittydiaper this way
” Vancouver, he writes, “is mutton dressed as lamb. Take off the outer veneer and the stench is horrific.”

Talk about the pot calling the kettle black. Ever been to Sochi?

You may also be cynical about the First Nations chiefs sitting with Gordo, but at least we're not killing off the local aboriginals because they want self government, like they are.

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Clarke

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"My guess is 3 months down the road we’ll be wondering if it was all really worth it."

The Olympics is a two week party that will be followed by 20 year ordeal to pay off the debt.

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MrBear

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@realpaul: Look, getting the Olympics wasn't the smartest thing Vancouver has ever done. The financial hangover will really suck, we all know that.

But while the Olympics is here I refuse to just wallow in negativity and complain about everything. You don't have to be a knee-jerk wet blanket just because you're bearish on Vancouver real estate prices. Get outside and enjoy yourself a little, you're paying for it either way.

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Supraboy

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@Porky Pig:

"Why do people rush in to buy, when they know that the fundamentals will get much worse soon and will likely result in lower prices? Makes no sense"

How do you know the fundamentals will get much worse? If you knew all this, why don't you short the markets with all your money?

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Supraboy

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@MrBear:

Today isn't the first day you're here I hope. These bears here have been bitter since the olympics were announced. They're just going to bury their heads into the ground and pretend nothing's happening outside. Don't worry about them. Those who are out and enjoying the games know how to have a good time.

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Gordon C.

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Do the establishments have a sign outside, saying that they add 18% gratuities to your bill?

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patriotz

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@Supraboy:

If you knew all this, why don’t you short the markets with all your money?

Wish I could. You cannot of course take a short position in RE itself. Also there really aren't any publicly traded companies that would take a direct hit from the RE bust. The banks have already been bailed out and I don't think there are any significant players in the RE business which are publicly traded.

Nor do I think shorting REIT's is a good strategy as they invest in multi-unit rentals and commercial properties, not individually titled properties at ridiculous prices. There's a good chance they will go down, as I think will stocks in general, but not enough of a sure thing to make a short sale.

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Drachen

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Not every bear is anti Olympics. I think it will have a net negative impact on Vancouver but that doesn't stop me from enjoying it.

I sometimes wonder if the anti-Olympics voices here are here because they're just generally 'anti'-something, now they're anti-real estate and anti-Olympics in a few years they'll find something else to complain about.

For my part I try not to be anti, I am pro-bubble thesis and pro-real estate crash to normalize prices (it has to happen eventually and the sooner it comes the less damage it will do). Those positions are just supported by sound logic, being anti-Olympics is a purely emotional stance.

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Loud Speaker

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Fan favourite Jon Montgomery tells the talk queen he's from the 'greatest place on Earth.' You Gotta Be Here.

Keep the spirit going folks- lots of medals in decades to come.

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