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Friday Free-for-all!

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188 Comments

It’s that time of the week again, let’s do our regular weekend news round up and open topic discussion thread! Here are a few links to kick off the chat:

–REBGV October Stat PDF
–Carney not complacent on debt and housing
–Here’s what half a mil will get you
–City urges speculators to cool it on Cambie
–Runawayscreaming on leaving the province
–Sellers file complaint on effective home inspector
–HK home sales fall over 50% in October
–N.B. stops accepting immigrants from China
–Harper predicts ‘cooler heads’ will prevail in Greece

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

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Anonymous

@chip:…. One small case in point of the West’s deliberate decline is this Keystone pipeline. The US has delayed it yet again, till next year, yet this is an instant generator of 20,000 jobs, sources energy from a friendly and stable neighbour and isn’t even a new development considering another pipeline already exists today….

All nationalism issues aside, can someone explain to me why Canadians want to build a pipeline to send crude to Texas when a refinery could be build in Canada and gasoline sold to the US at significantly higher prices, creating a lot more jobs and and without a pipeline and all the associated costs. I don't get it.

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Anonymus

: "If it has, it will take generations for it to play out."

Yeah right, there are not enough resources on this planet for 7 billion people to take generations to play it out. it will rather be quick and steep decline for the nation that consumes 25% of oil production.

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jesse

@chip: "delay, delay. Decline, decline" Agree with 1, disagree with 2. They will delay a recovery with these types of delays but the country's failure to act is not a sign of impending depression, it's a sign of slow growth. The stats to watch in the US IMO are housing-related ones. Once inventory overhang is cleared employment will start gaining steam much more quickly. Much of the employment malaise right now is construction-related. The return of this employment will happen relatively quickly, given experiences of previous severe recessions. My best bet now is 2015. That's another ~4 years of headwinds. Oh and the bond market… they will see it coming. Another thing on China, people may see the US as bloated, expensive, with a large swath of its populace uneducated, but on the other side it provides stable rule of… Read more »

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jesse

@chip: "I’m not sure China will have such stiff competition in the future at the rate things are going."

Your argument that China is bigger is a major reason why I think its growth will be much slower in the future: it needs to start supplying itself goods and paying for them. Headwinds get stronger the closer they get to the front of the pack.

For games programmers/gamers out there, China is being bolstered by "catch-up logic" that will start to wane as they "catch up".

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patriotz

@WFT?:

"Wait Until globalization creates wage parity across the world "

The EU is far more integrated economically than the world will ever be and they are a long way from wage parity. The US is still pretty far from it for that matter.

There are valid reasons why one country should have higher wages than another even given open trade.

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WFT?

@chip:

Wait Until globalization creates wage parity across the world (a process that is well under way and a reason why resale BC wages have declIned over the last 30 years). With wage parity China is toast.

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chip

One small case in point of the West's deliberate decline is this Keystone pipeline. The US has delayed it yet again, till next year, yet this is an instant generator of 20,000 jobs, sources energy from a friendly and stable neighbour and isn't even a new development considering another pipeline already exists today.

But delay, delay. Decline, decline.

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chip

@jesse:

"Japan is an economic powerhouse but by no means is it the threat it was deemed 20 years ago to overtake the world."

China has 8 times the population of Japan and they're just getting started. And the fear of Japan occurred in the 80s, when the US and Europe were still looking rather robust. I'm not sure China will have such stiff competition in the future at the rate things are going.

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Crash

"Burquitlam condo project"

rumour has it through friends I know in the area that the developers paid on average $1.1 million for the houses along that stretch. Most of the houses were tear-downs.

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DonLogan

@jesse:

Interesting comparison of Japan in the eighties at the height of its real estate bubble with the madness in China today.

http://www.businessinsider.com/dj-vu-all-over-aga…

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patriotz

@Patiently Waiting:

Note that the great RE bust of the early 80's took place entirely during the construction of the first Skytrain line, and when it started running at the beginning of 1986 RE prices were barely above the real bottom. The Skytrain had been announced in November 1980 just months before the price peak.

Did properties along the line show any different price behaviour from anywhere else? Nope.

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patriotz

@ADRA:

"The important thing to note in their definition is the “not been given thorough analysis” part"

By this definition most people who buy GIC's are speculators since they don't give it "thorough analysis".

I'll stick to Ben Graham's definition.

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Patiently Waiting

Realtors speculate heavily on Burquitlam condo project by buying-out the first building in under an hour.

http://www.bivinteractive.com/index.php?option=co…

“Realtors know that, with the Evergreen Line, the prices are going to appreciate fast and property values will go up before the building is even completed.” Scam Good

He better hope so because, if they don't, he might want to high-tail it back to Kelowna.

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ADRA

@PennyStock: If we're going by the Wikipedia definition of Speculation: "Speculation typically involves the lending of money for the purchase of assets, equity or debt but in a manner that has not been given thorough analysis or is deemed to have low margin of safety" The important thing to note in their definition is the "not been given thorough analysis" part in which I have typically exclude people from the title. If in fact the ignorant (of finances and of the RE sector's fundamentals) then you can and should call every buyer in the Vancouver area a speculator, because I'll be damned if there's anything in this market that's anywhere close to fundamentals in the market. Furthermore, "Speculation can also cause prices to deviate from their intrinsic value if speculators trade on misinformation, or if they are just plain wrong."… Read more »

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ADRA

@jesse: There are sure things that will eventually keep China from growing into an industrialized powerhouse, and mostly its that they'll have outlasted consumer demand for their production. Sad, really because it means we're all heading for a glacial growth rate if not now but maybe as long as 50 years. Hell by then, we may all be talking reduction and returning to some form of equilibrium with nature (Not that I'm a Hippy ideologically, but I doubt anyone can seriously expect the human race to grow indefinitely without severe ecological degradation). PS: Regarding China/Japan, they're #2/3 in the GDP count http://www.nationmaster.com/graph/eco_gdp-economy… As you can see, they're already providing a large percentage of the worlds production. Add to that http://www.nationmaster.com/graph/eco_exp-economy… and China and Japan have relatively healthy amounts of exports as well. USA: 8.6% exports / GDP China: 15% exports… Read more »

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PennyStock

@Best place on meth: "But she didn't so what is your point?"

You're right, she did not buy a house here, as far as I know. Nor did Mark Zuckerberg, despite the Vancouver Sun's giddy commentary.

My point is that there probably exist people in Vancouver (the ultra-rich) whose attitude to buying houses is simply consumption, not speculation. They would view the cost of the house as a negligible sunk cost.

Anyways, this point is probably not worth discussing further. These hypothetical ultra-rich are certainly much less than 1% of the population.

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jesse

@ReadyToPop: While the Canadian banking system may be sound — liabilities are adequately hedged by government guarantees or high equity positions of borrowers — the whole system including government, banks, corporations, and households should be looked at. On that front it looks like households and governments are taking on a significant amount of future unbooked liabilities. Making sure banks are sound ignores the real problem of assets that poorly yield.

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ReadyToPop

In absolute terms — actual liquid capital — Canadians banks are less capitalized than many of their European and American counterparts. In fact, all big five Canadian banks, using the American and European method of capital ratio measurement, rank in the bottom ten of the biggest 50 banks in the world. Even the embattled French bank, Société Général, has a better absolute capital ratio than BMO, TD, CIBC, RBC and Scotiabank. Are Canadian banks sounder? It depends. If you assume that Canadian mortgage default rates will never reach levels seen in the U.S., then I guess they’re potentially okay. But if we were to replicate the scale of the American downturn, our banks would be lesser equipped to deal with the losses than even Citibank was. So the “soundness” of Canadian banks cannot merely be measured as a function of… Read more »

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Anonymous

I held off from buying for the last 5 years because I speculated prices would come down.

If you really take the logic through, everyone who can afford to buy is speculating, whether they buy, or don't buy. You put your money on red or black and the wheel turns. So everyone is a speculator.

Can we move on now?

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Anonymous

@McLovin: http://www.computersmiths.com/chineseinvention/

1368-1644

Ming Dynasty

Mongols are defeated. Strong Emperors bring about a prosperous era. Building of the Forbidden City and Imperial Tombs. Arrival of Jesuits. Changan city changes its name to Xian.

Medicine and Health

Bristle toothbrush 1498- almost 300 years later in the West

Google is not that hard to use man. Better search in Chinese on Baidu if you actually cared about it.

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Anonymous

@PennyStock: 🙂 Excellent argument, well presented!

I really didn't like picking on VREAA either as I do love his/her blog. However when we are talking about the every current Vancouver buyer is a speculator argument, VREAA is the first to pop into my head as well, that is the position stated on his/her blog very often.

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Anonymous

@DEFAULT NAME: Dude, you were backing argument that every Vancouver buyer is a speculator because at the very minimal, if they thought prices would drop like US, they wouldn't buy.

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Anonymous

@patriotz: So if buying a house is cheaper than renting by 3% but house prices is falling at 4% per year then that's not speculation because buying is cheaper than renting? Sorry but you are simply twisting the definition of speculator to suit how you want it to mean.

It would be far better and more credible if you people simply just used the common accepted definition of speculation (eg. say Oxford English dictionary) and just call majority of Vancouver buyers stupid and/or greed. When you have to "twist" or give your own definition of a word to make your point then you aren't making the point and you lose credibility.

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jesse

@Chip: The biggest problem China has to deal with is its consistency in applying the rule of law. Part of the reason people are leaving is because the business climate is very difficult to navigate and uncertain. The country may catch up with Western Europe, Japan, and North America, I think it will be longer than most think.

Smells a lot like Japan in the '80s. Japan is an economic powerhouse but by no means is it the threat it was deemed 20 years ago to overtake the world.

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Chip

@McLovin:

The New York Times says China will overtake the US in the number of patent filings this year. China has it's issues but the world is changing quickly, and it probably doesn't bode well for the West.

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