FFFA! CMHC! RETIREMENT! LOTTO! RULES!

It’s that time of the week again!

Let’s do our regular end of the week news round up and open topic discussion thread.

Here are a few recent links to kick off the chat:

CMHC outlived its mandate
House retirement plan for boomers
Lottery retirement plan
Full mortgage rule effect to come
Start CMHC privatization now?
Condo market driven by bad math
Toronto condo halts on plunge
ICBC sheds staff

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

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More Data Please
Guest
More Data Please
Vote up or down on whether or not Flaherty should freeze the CHMC consumer insurance obligation ceiling now and start auctioning the insurance obligations to private firms. Flaherty did it before when income trusts were a material and ongoing drain on tax revenue. Income trusts amounted to an accounting trick. They transferred the bonafide CRA tax obligations from companies(partnership type) to individual investors with smaller tax obligations for the benefit of those individuals and to the detriment of other tax payers. Income trust listings on the TSX surged and festered with all manner of ponzi operators joining the fray. In 2006 he killed income trusts dead, and many complained. Retired people in particular were using the monthly distributions of these risky trust unit stocks to live bigger than they otherwise would on the more prudent fixed income investments like long… Read more »
jesse
Member
patriotz
Member

“One need only look to our neighbours to the south to see the disastrous effect government meddling in the mortgage market can have.”

How about looking right here in Canada? Were you complaining back in 2006 when the Cons brought in the 0/40? Didn’t notice house prices taking off?

“By privatizing the CMHC, the government could reduce the amount of exposure taxpayers have to the mortgage market and prevent any future distortions of the marketplace.”

The Crown cannot assign its obligations. Privatise profits, socialise losses.

“There are also questions about how attractive the CMHC would be to private investors, especially if the government lifts its guarantees.”

Ya think?

The NP is following the same line as its counterparts south of the border – saying nothing while the biggest housing bubble in history unfolded, and then suddenly discovering a problem when an oncoming bust becomes obvious.

patriotz
Member

@More Data Please:
“Vote up or down on whether or not Flaherty should freeze the CHMC consumer insurance obligation ceiling now and start auctioning the insurance obligations to private firms.”

The Crown CANNOT assign its obligations.

More Data Please
Guest
More Data Please

@patriotz: Crown Obligations

Laws can change. Beneficial flow through taxation of income trust partnerships were the law until 2006, when Flaherty announced changes.

Insurance obligations could be sold off with NHA backing that is more adverse than 90%. 80% 70% etc. The contracts are presently making money and they could be sold after 100% backing is withdrawn.

Patriotz, you’ve made this objection before. If it’s more than a theoretical point, please make it clear why you are right. Here’s the legislation:

http://laws.justice.gc.ca/eng/acts/N-11/page-1.html

BTW, in case you want to try that old CSB saw, these aren’t Canada Savings Bonds. These securities are issued by the CMHC, not The Bank of Canada.

patriotz
Member

@More Data Please:
You cannot “sell” an obligation. An obligation is something you owe somebody else. You cannot make a deal with a 3rd party to escape your obligation.

“these aren’t Canada Savings Bonds. These securities are issued by the CMHC, not The Bank of Canada”

All CMHC obligations are expressly guaranteed by the Crown. Also CSB’s are obligations of the GoC directly, not the Bank of Canada. The obligations of the BoC, like any central bank, are bank notes and deposits it holds, i.e. the monetary base.

http://www.bankofcanada.ca/wp-content/uploads/2012/09/statement_financial_position_310812.pdf

Anonymous
Guest
Anonymous

I caught the tail end of a CBC Vancouver news story last night that made it sound like the Vancouver real estate market is on an upswing. They were saying sales were up in October. They were at some townhouse project and boasted how there were 500 pre-sale buyers registered to buy as soon as the units come available. Real estate agents were talking about how sales were great. It was quite a bullish news piece. At one point they had to soften the bull message with the line, “But it is still a buyers’ market.”

More Data Please
Guest
More Data Please

@patriotz: Hoping for more.

I concede that it would be difficult to change the rules on the existing CMHC insurance contracts. Going forward however, similar to the phased income trust tax changes, 100% backing could be reduced on new contracts.

Admittedly I was hoping to see how much fear I could create with my initial post. At least two people voted it down before you threw a wet blanket on the CMHC armageddon scenario I was testing.

Nevertheless, phased changes to CMHC backing would still have punishing effects on irresponsible borrowers which, if resulted in counterparty defaults, the effected existing 100% contracts would default to 90% backing as well.

Anonymous
Guest
Anonymous

This is the bullish CBC news piece. You guys HAVE to watch this. It starts off with “Perhaps the real estate slump in Metro Van is turning around. Sales were up in October. But is it really a reversal in fortune?”

http://www.cbc.ca/player/News/Canada/BC/ID/2299315929/

Rusty's Ghost
Guest
Rusty's Ghost

@patriotz:

i was under the impression the ‘crown’ can do whatever the hell it wants these days

prorogue, anyone?

Rusty's Ghost
Guest
Rusty's Ghost

@Anonymous:

dude

that little 10sq foot circle of grass that passes for a yard at :29

and of course, the RE fluffer at :34

crazy eyes!

george
Guest
george

Chastising Canadian households for their high levels of debt is a favoured past time of economists and policymakers in this country. But a new report from BMO Capital Markets argues that more of the chastising should be focused at government debt.

“In the past two years—when the hectoring of households began in earnest—public sector debt has risen much more notably than household debt,” said Douglas Porter, deputy chief economist of BMO Capital Markets.

Canadian government debt has risen much faster than household debt since 2008

http://business.financialpost.com/2012/11/01/canadian-goverment-debt-has-risen-much-faster-than-household-debt-since-2008/

Aleksey
Guest
Aleksey

@Anonymous:

Oh no, these realtors don’t look happy and confident.

Anonymous
Guest
Anonymous

@patriotz: “The Crown CANNOT assign its obligations.”

The crown can do what ever it wants through legislation.

Lotus Lander
Guest
Lotus Lander

“B.C. suffered the biggest setback in job loss, while little changed in other provinces in October, according to Statistics Canada.

The federal agency says the number of workers declined in the province by 11,000 last month. Despite the loss, the unemployment rate fell 0.3 percentage points to 6.7 per cent, the agency said, as fewer people participated in the labour force.”

http://www.vancouversun.com/business/economy/loses+jobs+Canada+unemployment+rate+remains+cent/7488623/story.html

Bo Xilai
Guest
Bo Xilai

@Lotus Lander:
“B.C. suffered the biggest setback in job loss”

I thought Cam Muir said BC was experiencing strong job gains? Didn’t he say that’s one of the reasons by BC real estate prices would go higher?

Patiently Waiting
Member
Patiently Waiting

@Rusty’s Ghost: The mortgage-helpers above the garages (Fonzie Scheme) are only 512 sqft. They are in the middle of nowhere, and it appears there is no parking for the tenant. It must be a forty minute bus ride to the mall bus loop and Westcoast Express. What are these going to rent for? Maybe $500 including internet/cable/heat and a lift to the mall every morning 😛

vanpire
Guest
vanpire

@Anonymous:
The developer has ~500 names on their mailing list, so the “report” calsl them “prospective buyers”. Hey, I’m too a prospective buyer of many things (if I win a lottery that is)

gokou3
Guest
gokou3

“The CMHC is also taking on large amounts of debt, to the point where, according to Horlacher, a “0.6% rise in the cost of servicing this debt would completely wipe out net income.”

It should be reasonable to think that any private enterprises (banks, etc) would have financing costs that are >60 bps more than that of the Canadian government (more accurately a crown corp). Thus, does it mean that CMHC is worthless to a private entity as, under a private hand at the current state, won’t be able to generate net income?

Anonymous
Guest
Anonymous

@vanpire: I’ve got a phone book therefore I have a list of thousands of prospective buyers for my snake oil!

Patiently Waiting
Member
Patiently Waiting

@vanpire: I think they are overplaying demand to their detriment. If I was in the market for these homes, I might think there is no point in looking at them as they are apparently all spoken for.

But of course, they are not. So I don’t get this marketing strategy.

VMD
Member

@Lotus Lander:
Vancouver unemployment rate continues to increase
(despite BC U/E rate dropping)
Apr 2012: 6.2% (7.3% Canada)
May 2012: 6.4% (7.3% Canada)
Jun 2012: 6.4% (7.2% Canada)
Jul 2012: 6.8% (7.3% Canada)
Aug 2012: 6.8% (7.3% Canada)
Sep 2012: 7.0% (7.4% Canada)
Oct 2012: 7.2% (7.4% Canada)

– That’s 1% increase in the last half year, while national U/E rate barely unchanged.
– But of course, U/E data is “noisy”. Will be interesting to keep watching though.

vanpire
Guest
vanpire

Re: lottery retirement plan
I think they forgot to add gambling to winning the lottery and inheritance as retirement sources.
I laugh so hard every time I hear “Play for fun, NOT TO MAKE MONEY!!!!” at the end of all those BCLC casino commercials

Rusty's Ghost
Guest
Rusty's Ghost

@Patiently Waiting:

we used to go hiking up burke mountain

i drove up their last summer, was pretty horrified – will be another PoCo ghetto

Yalie
Guest
Yalie

@VMD:

– That’s 1% increase in the last half year, while national U/E rate barely unchanged.
– But of course, U/E data is “noisy”. Will be interesting to keep watching though.

The same thing happened in California just after their bubble topped. The state led the rest of the US in unemployment increases over the next few years:

http://marketwi.se/wp-content/uploads/2010/05/image_thumb9.png

Notice how their UE rate went from 5% to 13% in 3 years. This is what happens after your economy becomes a giant real estate Ponzi scheme. Good thing it’s different here in BC.

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