Tuesday, December 15, 2009

End of Year post

Well 2009 didn't quite pan out as we had expected. It started OK for those of us hoping for reasonable house prices in our city and Province. By the end of 2008, demand had completely collapsed with the MOI near 20. Compare that with 4 +/- now.

However the central banks and governments made a herculean effort to turn things around. Having ignored all these bubbles on the way up, and in fact helped inflate them, they threw caution to the wind.

Buying bad loans from banks, cutting interest rates to zero and in Canada doubling the CHMC's capacity to insure loans. How smart is that??? Encourage people with limited resources to access funds, when prices are high, when unemployment is starting to rise and when interest rates are at historic lows! Exactly what happened in the US. Maybe, just maybe too many policy makers are from Goldman Sachs...like Mark Carney, and Hank Paulson and Robert Rubin and dozens of other decision makers.

As I mentioned in a post early in 2009, the combination of lower mortgage rates and the 15% or so price drops meant that the actual carrying cost of an Average Vancouver property was 30-40% lower.

That was enough to bring people flooding back and we have had another boom in house prices.

Almost every bank economist and even Mark Carney at the Bank of Canada have warned on bubbling home prices. Duh..what do you expect? It would be like inviting your buddies to an all-you-can-eat ribs buffet and then reminding them of their bulging midriffs. They aren't going to hear you.

Rosenberg, the permabear, says the risk for mortgages has been shifted from the banks themselves who are happily gorging on the steepest yield curve for twenty years - ie they pay almost nothing to borrowers but lend long at much higher rates- while the CHMC will pick up the lion's portion of the losses, when and if they occur.

Here are some of my thoughts:

1) House prices have increased at a rate twice as fast as family incomes since 2002.

2) House prices in Canada are up 80% since 2002

3) In the US and Europe, consumer debt to income levels are dropping, as debts get paid by a chastened consumer. In Canada it is still rising.

4) In Vancouver we have been in a pressure cooker for prices for several years. Olympic build out and hype, low interest rates, relative lack of land, population growth and speculation have all fed the frenzy.

However ironically we have not been able to surpass our previous highs (yet) while many other cities in Canada who have not faced these events ..have and are.. hitting all time highs. Even in Ontario which has seen it's manufacturing base badly damaged.

This suggest that interest rates are the most important factor.

It certainly walks and talks like a bubble and does not seem sustainable to me. Unfortunately as a species we are not too concerned with sustainability. The wise thing to have done would have been to use tax and fiscal policy to try and slow down the rise in house prices. Instead they have done the opposite and are now faced with a monster which if disturbed will cause major collateral damage to everyone, even the prudent.

So it would seem that interest rates are the main driving factor.

Well short rates cannot go any lower, so they are 'as good as it gets'. Long rates have been drifting up in the US and I suspect will start drifting up here too. Who wants to be paid 3.5% for a ten year bond. Not me.

I have no forecast for interest rates, but will watching them closely. Generally speaking, short rates are set by the Central banks and the bond markets decide long rates. However there is so much manipulation in the market, with Central banks buying bonds long bonds to keep long interest rates down, and keeping short rates too low (some say 4% too low) for too long, inflation be damned, that they don't make sense.

Remember Greenspan - the previous Fed Chairman, he told folks to go short and variable in their mortgages, and then proceeded to raise rates 16X!! Basically pushing everyone who listened to him into foreclosure. It was as if he was a Manchurian candidate planted by another country to destroy the US.

Well it seems to me like a lot of folks are doing a Greenspan here. They look at their 2.5% short term rate and can afford the payments, but if rates were to suddenly move up by 2-3% they would be calling the CHMC to pick up the keys and then we would all pick up the cost.

They say predictions are only made by fools, so here is mine:

All assets are linked now. Gold and stocks and commodities. Until they keep rising , our RE will also have a strong bid. Some of this is fear unwinding, some is our old friend speculation coming back. A lot is based on the US dollar carry trade...borrow US dollars for next to nothing and buy something, anything.

When and if this all unwinds, then fear will return and folks will see their homes once more as a burden to carry and not path to life-long financial freedom.

When will that happen? Will it even happen? We shall see

Happy holidays to you all. May you have a prosperous and healthy New Year.

Wednesday, December 2, 2009

Help for broadcasters- off topic.

Regular readers know that my pet peeve is the broadcasters, like Canwest Global, who got themselves into a mess by buying assets at the top and then when they cannot service the loans, asking for Federal help (aka bail-outs) or money from the cable companies (which will probably come out of our hides in the form of higher cable fees).

The irony of a right-wing organization like Canwest, which through the National Post used every opportunity to slam unions and bail-outs, and promoted the free-market devoid of government intervention, asking for this is beyond bizarre.

If your business fails- you close down and someone else buys your assets and gives it a shot. You don't ask for government help or demand contracts be renegotiated with other succesful businiesses.

In any case the CRTC is asking for feed-back here:


This is what I submitted. It took me a few minutes to do so.

Please CRTC DO NOT give in to the pressure from the TV Monopolies. I am a small businessman and if I mess up, over-extend myself and get into financial trouble, I have to deal with the consequences, which include possible bankruptcy.

No one will come to my aid.

However, the TV companies over-paid for assets, over-paid their executives and now are complaining that if we dont face an extra tax to support them they will shut down local programming.

What a farce! Maybe I would be more receptive if they gave an undertakeing to cut their mutimillion dollar purchases of US programming and promised to cap executive pay in the future.

Our media ownership is far too concentrated. Let them break up and others will take over. If necessary the small independants can be funded,but please dont send our money into a big black corporate hole.

Stand up for the Canadian programming and for diversity of ownserhip and views.


BTW - do we need more competition in the cable space too, you betcha. They are already scooping up a bigger share of the internet and cell phone markets too.

Ok you squeeze another post out of me...

Anon said:

"In Nov 2008, we almost had a great depression. That is what it took to bring the prices down.

Now we are much higher. Anyone guess what it's going to take for an encore? Probably nothing, hence if prices do drop it will be 5-10% at MOST."

He/she has a point. The rebound has happened at lightening speed. Look at Japan for example. When their RE bubble started to burst in 1992, interest rates were cut aggressively, and stayed low. In fact the cutting started just before the bust got going.

However once it started there was nothing that could prevent the drop. However here and in the US, our governments have also cut interest rates to the same absurdly low levels and while it hasn't done much for US housing, our prices have reignited again.

The two charts above show the price of Japanese RE and interest rates:

Saturday, November 28, 2009

Sorry there is nothing to write guys...

The market is slow but not weak yet. There are still folks running to buy.

Larry Yatter has shown that some market have started dropping.

However nothing much will happen until all assets start to drop..Gold, Stocks and RE. What will be the catalyst? Higher interest rates or a Dubai-like black swan event.

I am heading into hibernation and probably wont put up a post until something changes, which may not be until the New Year.

Wednesday, November 18, 2009

New record? Not quite- but close

Rob Chipman has pointed out on his blog how close we are to the record (average) prices of 2008.

Here is his chart:


Hard to believe that we would see record prices at a time when the US, our major trading partner, was in such difficulty- when our main exports- natural gas and lumbar are down significantly from a year ago, when major employers are cutting back or closing and even the City and Province are pulling in their horns.

I guess it is the very low rates, the pre-Olympic hype and building boom and.....a sense amongst buyers that they may have already missed the boat and have to dive in regardless of the price.

In any case the market is strong and if it goes much higher then we have to re-evaluate the 'bubble bursting graph' which we have been following so far.

It wold be unusual, compared with other bubbles, if the price bounces straight back higher. As I have said several times, if the prices exceed their previous highs then we have a different ball game.


However, I must admit the market 'feels' different from the record prices in late 2007 - early 2008. At that time houses were often selling over list, as buyers panicked to buy. There were less than 20 SFH under $1 Million in West Van, now there is 40.

Sellers are dropping their prices (albeit from high levels and by small increments) quickly. It is as if they think that this could be the sweet spot for sellers and may not last.

The Fraser Valley was nearly as hot as down-town, but after the crash of a year ago, the recovery has been much more muted outside of Vancouver.

Lets wait and see. I posted almost 8 months ago, that the huge drop in interest rates, coupled with the 15-20% drop in prices, had reduced the effective cost of ownership by 35% or more from the peak. Well we have given back most of the price drop.

If and when it does drop again, and the banks and CHMC struggle, unemployment rises...I doubt we will have much money left in the kitty to bail us out:


Saturday, November 14, 2009

Get ready

I hope those who are feverishly buying right now are:

1) secure in their jobs

2) have taken into account possible increases in taxes.

Vancouver City council is looking at job cuts and increased taxes to try and deal with huge budget short-falls. These job cuts will be in full time City Hall positions and even police and fire-fighter positions. Not good.



What happens after the Big corporate party/ Nationalistic medal struggle AKA the Olympics? What sort of shape will the Provincial and City budgets be in then??

Don't expect to find out until well after the Olympics. You will remember how we had a projected balanced and then a small deficit from the Provincial Government until AFTER the election, when the truth about the deficit emerged.


BTW if the answer to 1) and 2) above is no...or not sure, then at least make sure you have a CHMC insured mortgage so we can all be on the hook when you walk...

Monday, November 9, 2009

Nothing to see here...move along

We have Electronic Arts cutting 1500 jobs including a bunch here. We have Morgan Chase closing their Surrey call centre with the loss of 700 jobs, which followed close on the Ebay call centre closing last May which also saw 700 job losses... and here's what Kodak is doing http://tinyurl.com/yajcdhc
and yet RE is still strong!

That 1.5% Variable rate sure covers up a lot of outrageous pricing.

Who would have thought a couple of years ago, when we had our peak prices, that the US would be facing 10.2% unemployment and a real estate collapse, that BC's biggest resource..natural gas would be at multi-year lows, that BC and the Federal Government would be facing huge budget deficits and YET that our RE would be within spitting distance of those highs and in some other Canadian cities they would be at new highs??

Therein lies the power of devaluing money. Print it, pay nothing on it, lend it, spend it when you don't have it...ANYTHING to keep the worldwide bubble alive and well.

Maybe we are getting some $$ from HK. I just saw a BNN program on the price of RE in HK. If you think we are pricey here, you ain't seen nothing.

Meanwhile those pricey Olympic rentals aren't being absorbed. From the CBC:

Olympic rental market swamped with homes

Thousands of homeowners vying for Games tourists

Last Updated: Tuesday, November 3, 2009 3:49 PM PT Comments88Recommend33CBC News
Tanya Peters and Tyler Jones . (CBC)

The Olympic dream for many in B.C.'s Lower Mainland has little to do with sporting events or who makes it to the podium. They're hoping to rake in the gold by renting out their homes to tourists coming to the 2010 Games.

But it's not working out that way for everyone trying to take advantage of the opportunity. It appears the Olympic rental market has slowed to a crawl.

"There was that big buzz about people renting out their homes and making a killing on it," said Vancouver resident Tanya Peters.

Peters and Tyler Jones planned to get married in Costa Rica during the Games. Their vision was to rent out their house to Olympic visitors to help pay for the wedding. But so far, they have no takers, and now regret not hopping on the gravy train earlier.

"I know several people who rented out and did make a lot of money but they rented out a year ago," Peters said.

Corporations, teams and media outlets that needed to book homes in advance for big prices appear to have already made their bookings.

Jones and Peters have had their home listed on various websites since July. They have dropped their price to $3,000 for two weeks from $5,000.

A Vancouver couple hope to rent out this house during the Olympics, but find themselves in a market swamped with rentals. (CBC)
The explanation might be in the simple economics of the situation: There are more people who want to make big money than there are who want to spend it.

Thousands of homes for rent
"When the supply is larger than the demand, it's hard to maintain those price levels," said Bruce Fougner, president of Lloyds Travel Group in Vancouver.

Fougner estimated there were at least 6,000 homeowners in and around Metro Vancouver looking for Olympic renters right now. The majority of new rental listings were people wanting to get away, he said.

Jones and Peters say they are not giving up on their Olympic dream. And they plan to be on the beach in Costa Rica in February, no matter what.

But if they have to lower their price much further, it wouldn't cover the costs of additional insurance, fitting their home with extra beds and putting their valuables in storage, they said.

"We're not banking on it happening. But if it happens, that would be great," Peters said.

Wednesday, November 4, 2009

....getting us pumped up for the Olympics

It seems like we are not getting sufficiently excited about having an extremely expensive sports event and hundreds of thousands of people descend on our densely populated over-crowded strip of SE BC.

So we now have media ads featuring our Canadian athletes extolling us to support them, we have a news radio channel (official radio station of the Olympics) telling us how many great jobs are opening up in serving and bar tending. We also have the workers at Whistler being taught by some person from Disney University (yes it exists) and how to be a gracious host. Even Gregor Robertson was all excited about the Olympic Village today and one athlete was telling the media how great it was to be able to stay in luxury accommodation. Bob Rennie was reassuring them that the city wont be on the hook for the 1100 units. lets hope he is right.

Enough already!

There are some of us curmudgeons who really didn't want these games. We cant get around the city as it is. We think affordable housing is a better use of money than big ice rinks and Multimillion dollar ski runs. We don't want Hundreds of Millions spent on security. As for the athletes, we wish them well, very well, but the cost of hosting it here could have been better spent on them..help them train, buy them equipment AND have the whole event somewhere else.

Anyway we are stuck with it and all the inconveniences and it will bring. But please VANOC and major sponsors, spare us the..'we-are-doing-it-for-athlete's' BS. The developers and speculators have done VERY well out of this event. The politicians will feel important for a couple of weeks, and the Olympics have just become a contest of tallying who has the most medals which seems to me to defeat the purpose which is...what is it again

Sunday, November 1, 2009

October Numbers

As usual Larry Yatter is the first one out with the numbers for average prices:


They show that detached are within a hair of the highs and apartments and attached look to have surpassed their previous highs.

Well what can we say about the graph...as I said every 'bubble bursting graph' will look different. I gave some examples in this post:


It may be that we are following the more complex top set by places like Southern California :


However I have to say, if we continue with these strong gains, then we may have to admit that a new up-trend has started...difficult though that is to believe...from these lofty levels, driven by all-time low interest rates.

I expect all Canadian cities to show gains.

Here is how it happened:

We are in the same position as places like Norway and Singapore. Norway is resource-rich, and Singapore is fiscally sound. We are probably both. When the crisis happened, interest rates world-wide crashed and many areas outside of the US and UK where banks had been completely irresponsible did not need this extra stimulus. The result was a new property boom.

The rates dropped to save banks and to help manufacturing, but what they did was reignite assets. Look at gold well over $1000 and property prices in many parts of the world started to take flight.

Some of these areas were Norway, Hong Kong, Singapore and South Korea and of course Canada.

Of course in the other jurisdictions they are doing something about it. In Norway they are raising interest rates specifically to cool RE. Regulators in South Korea, Hong Kong and Singapore told banks they needed to tighten lending, to nip the RE bubble in the bud.

Meanwhile what are we doing? We have a few words of caution from Mark Carney but no increase in interest rates, and the Government with one eye on the next election, is INCREASING the ability of the CHMC to lend at these over-priced levels.

We are truly setting ourselves up for a crisis. Both by feeding the fire of price speculation, and encouraging folks to get into the market with very little skin in the game AND at the lowest rates in history.

We should be doing the opposite. Waiting until rates are high and likely to go down, wait until prices have fallen and then help people buy..they would be getting in at the bottom of the prices an the top for rates not vice verse.

We are just setting these folks up for failure at the slightest rise in rates, drop in value or increase in job losses.

Enough said. Lets see what November brings. The October numbers were not heartening for those waiting for more reasonable prices

Friday, October 30, 2009

What will the October numbers reveal...?

Will they be scary for the bears??
We really cannot go up much higher in price without jeopardizing the 'bubble bursting graph'.
Real estate has definitely cooled from the heat of summer, but is still being bid, supported mainly by incredibly low rates.
Five year variable rates are as low as 2.25% at ING!
No wonder some folks are saying..price be damned...the carrying costs are low....so I am buying!
As long as rates stay low, they are fine. Once rates rise they will be skewered and we will all be picking up the tab, either through CHMC bail-outs or our savings will be inflated away or home owners in trouble will get tax relief or other help.
Once again this potential crisis-in-the-making could be stopped right NOW. Raise the minimum deposits and severely restrict the CHMC are two first steps.
Heck put a Federal RE sales tax in place taking 1% from buyers and 2% from sellers, so when the banks start crying about foreclosures or the CHMC needs a capital infusion, the government has a 'sinking fund' to pay out of, not just throw the bill at everyone else. That extra 3% will help cool the market, then when RE strats to fall down, take it off.
Owning a home is not a decision to take lightly. A deposit must be saved, a potential rise in interest rates must be budgeted for, repairs and assessments (eg a special post Olympic assessment??) must be expected.
It is too easy to make an offer and sign on the dotted line and then wail when it doesn't work out.
If you have any doubts about that..take a look at the US. Despite the soaring stock-market, in the third quarter (which just ended) there were over 900,000 foreclosures in the US, the highest number on record...ever.
Who is the gate-keeper? The Commission-based Realtors and mortgage brokers who could be telling the buyers what they can afford and should not over-extend themselves? I am sure some are and some aren't.
Bank of Canada Governor Mark Carney made some weak noises about the housing market being frothy and people taking on too much debt at these low rates.
If he believes that he should walk across Ottawa to Stephen Harper's office and tell him we have the potential for another bubble, which will be supported, eventually, by the money of the prudent.
Happy Halloween!

Wednesday, October 28, 2009

Commercial Real Estate

Vancouver has some of the lowest CAP rates (% returns) on commercial real estate in North America.

Hot cities like New York and Hong Kong and London have teeny weeny cap rates and now Vancouver.

The reason is clear, we have a lot of money chasing very little product.

As we all know a lot of people come to Vancouver with money, they retire from out East, they come from overseas and a lot of people here are making big chunks of money. After a few years of almost no interest in the bank, many finally make the leap into commercial real estate to try and juice their returns. They like to keep it local, so they can keep an eye on it.

Some of our retail rentals (like Robson Street) are amongst the highest per sq foot in North America.

The logic is that while it may just be 5-6% return now, the market is tight and so rents will go up and in a few years you may have CAP rates of 8% or more.

Downtown rental buildings have had particularly low CAPs. Some selling with minuscule 4-5% rates.

The problem with such low rates for commercial rates...be it office, retail or residential.. is how easily the CAP rate can disappear altogether.

A renovation or an elevator which needs replacing OR A tenant who leaves or goes bankrupt (and the tenant-inducement needed to bring another one in) and your total returns for the year are gone.

Also any on-going weakness and the rents will NOT be going up, and in fact may go down to keep struggling tenants.

Looks like the total sales of commercial property have fallen dramatically all across Canada. Though Vancouver was saved somewhat by the big ticket purchase of Bentall V by a German Pension agency. This seems like an expensive buy to me, especially in this environment. They must have a lot of faith in Vancouver:


Saturday, October 24, 2009

This is absolute Lunacy...

I really cannot get over the fact that Harper's Government is almost doubling the CHMC's ability to lend in just over a year.

What are thinking? What happened to the fiscal Conservatism?

Think about it..if you are a bank lending officer and sitting across from you is someone who has, with great difficulty, saved 15-20% down-payment but is subject to the vagaries of the job market or someone who can only scrape together 5-10% but has a government-issued CHMC guarantee behind them...which would you lend the most money to?

I know the concept of the CHMC is laudable. Help low earners get on the property ladder. It was the same rationale used by Fannie Mae and Freddie Mac and the HUD in the US.

In fact what happened was a catastrophe. A lot of these folks were too extended to get into their purchases, had very little 'skin' in the game and with the smallest drop they lost their equity and stopped payments.

Lower income earners are also, unfortunately, the most likely to get hurt first in a recession.

'The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.

For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.' Globe and Mail October 21st.

What does this all mean? It means when, and if the second round of the recession comes in 2010, there will be nothing left to fight it with. The Provincial and Federal Governments are already tapped out and the Federals will be dealing with CHMC losses and Baby-boomer costs. There will nothing left to stimulate with.

We will be forced to live within our means.

The governments here have made many decisions, some good and some bad, but this is one of the worst.

To 'Help' people to get into housing when the economy is so uncertain, when the prices are near or at their peaks, when interest rates at so low and could conceivably double in the next few years, is....IMVHO ECONOMIC LUNACY and purely political!!

Thursday, October 22, 2009

The Perfect Storm

They are showing the Perfect Storm on TV.

Are we setting up for the Perfect Storm in Canada?


Exhibit one...exploding deficits like this one:


Exhibit two...completely oblivious to the foolish errors that took place south of the border, we are marching to exactly the same drum:

'The federal government has quietly given Canada Mortgage and Housing Corp. more financial muscle, raising concerns the multibillion-dollar agency is expanding at an unprecedented pace with little oversight.

For the second time since the beginning of 2008, Ottawa has raised the amount of mortgage insurance CMHC can have outstanding. The increase moves the cap to $600-billion, up from $450-billion and nearly double the $350-billion limit in place at the end of 2007.
' Globe and Mail October 21st.

Insanity: doing the same thing over and over again and expecting different results. Albert Einstein

Wave one. The crisis hits. Governments and policy makers did nothing to prevent the onset, but now throw everything at it, everything they have.

We go deep into deficit.

The crisis is averted, for now.

Asset bubbles reignite..RE here, Gold and Oil worldwide.

Wave two hits. They have nothing to fight the fire with. How can a Provincial Government which has a $25 Billion deficit pay for it's regular programs, never mind expand??

We hit the Perfect Storm.

Is this scenario likely? Maybe. Not many economists are even mentioning it as a possibility. Yet it is very possible. All governments are facing increasing expenditure and declining revenue...and add to that the baby-boomer entitlement programs and it is hard for me to see how this can end well.

Sunday, October 18, 2009

Nuttin' much to say

We are seeing some normal fall cooling in the temperature and the housing market. The numbers are still pretty strong, and far from a buyer's market, though if you check craigslist, you will see some 'deals' being offered.

I think Klepto has been too busy to parse the numbers and I haven't got much to say. Lets see what October brings.

If the commodity market continues strong and assets like the stock-market and $CAD stay strong and interest rates remain low-the market will continue buoyant and the bubble bursting graph I posted below will fail.

However if any of these change directions then we will see renewed weakening.

Nothing more to say. Lets wait and see what the end-of-October numbers have in store for us.

Sunday, October 11, 2009

Have a Great Thanksgiving

Not much to say. Still bullish, but slightly less frenetic action in the market. We will have to wait for all assets to correct to see significant softening, since they all seem connected at present..gold, $CAD, stocks, RE, oil and commodities.

BTW here is the bubble graph I have posted before and Larry Yatter's graph of Vancouver average prices. As you can see it looks like make or break time!

Tuesday, October 6, 2009

Late Breaking News on the Athlete's Village

Pulled off CTV news.

Final cost to tax-payers depends on how strong the property market is. Best case from Robertson = break even.

Worst case $1 billion in the hole.

As they said on CTV, politicians should not dabble in business.

More importantly who advised the previous council (only Susanne Anton is left in the boat from that administration) ? Which law firm, which accountants and financial advisers??

Should they not be held liable?

Does anyone have the time to ferret through City info and find out who these advisers were?

Meanwhile the RCMP have been questioning the friends of Olympics opponents. Be careful who you share that extra-hot skimmed late with :


And yes anon (from the last comments) I did see what happened to Canwest. The ire of the public prevented at least one tax-payer bail-out, though I do feel sorry for the employees

CanWest union decries bankruptcy protection

2009-10-06 16:01 ET - News Release

Mr. Peter Murdoch reports


After CanWest Global Communications Corp. filed for Companies' Creditors Arrangement Act (CCAA) protection for some of its operations, Peter Murdoch, vice-president of media for the Communications, Energy and Paperworkers Union of Canada (CEP), said in reaction, "Media workers at Canwest stations should not be forced to pay the price with their pension and severance payments for financial problems that are of the company's own making."

"Employees have done everything they can to sustain this company," says Mr. Murdoch. "Thousands have already lost their jobs and there has been no wage increase for years.

Though management salaries have been excessive -- $49-million to eight people from 2001 to 2008, while during that same period over 1,000 Canwest employees lost their jobs.

Those who are left are on pins and needles, including pensioners." Mr. Murdoch adds that governments, banks and media conglomerates have all ignored the warnings about the dangers of massive media convergence and unsustainable debt. "CEP will be front and centre to ensure that employees are first in line for company obligations," says Mr. Murdoch.

Mr. Murdoch also says the federal government should step up to the plate. "The federal government has been irresponsible in monitoring and policing pension plans, and where is it now to backstop this?"

"Yet another major company has filed for bankruptcy protection under Prime Minister Stephen Harper's watch," says CEP president Dave Coles. "It's time for this government to stop congratulating itself and to take action to prevent more working people from falling victim to this recession."

CEP represents more than 25,000 newspaper and broadcast employees across Canada, including workers at the National Post and Global TV who are affected by the filing announcement.

Sunday, October 4, 2009

When Prudence Doesn't Pay

Who are bears? Permanent pessimists and negative souls ,who secretly pray for the collapse of civilization. Not most of the ones that I know.

In fact most are fiscally careful people...they save money, buy things on sale and won't over-pay for something because they 'just have to have it right now'.

For these folks Vancouver RE hasn't made sense for several years now. The widely accepted, often quoted ratios are...keep your mortgage to 3.5 X your total income and keep your house expenses to 40% of net income. Vancouver has been well over these numbers for a long time.

So they have patiently waited, like the counterparts in the US.

The US bears have been richly rewarded for their patience, as the housing crisis struck and foreclosures mounted. They now have their pick of properties and a low mortgage rate (assuming they still have a job!)

Here in Vancouver (in fact in all Canada) it looked like the bears were about to get their moment in the sun as well. As you can see from the graph below, sales completely collapsed last year.

The rate of collapse was unprecedented. The bounce up was also unprecedented, even faster than the preceding bubble. Enough to make a bear's head spin
. No wonder the bears are downcast.

Who would have forecast an instant rebound back up to pre-crisis sales levels. It was like Vancouver hit a trampoline.

So why were so many caught off guard by this rebound. Here are some reasons:

1) Firstly there was the interest rates. The BOC dropped the rates to 0.25%. Never before had they been so low. As I posted at the time the drop in mortgage rates was like a 30% drop in prices.

2) The drop in interest rates not only made mortgages cheaper, but rates on deposits dropped encouraging those with a large down-payment to put it in property. Both 1 and 2 helped move the equation in the direction of buying versus renting.

3) Those of us who have a lived here a long time time failed to understand the allure of our city. This is particularly true for retirees, who come here with funds. The last that apartment sold in my building was to a retired dentist from out east. He also bought another apartment and a commercial property for investment. He admits the cap (returns) rates on both are minuscule compared with what he could get out east..'but I can keep an eye on them here'.

4) The drop in interest rates and Federal and Provincial crisis spending came at a time when we already had a boom from construction, both Olympic related and residential, commodities were still pretty solid eg gold and oil, and so we just bubbled some more.

Ok so that is what happened -what now?

I will give that my best shot in the next post.

Thursday, October 1, 2009

Final projection for September

Projection from 30-Sept-2009 : 19 of 21 days Complete *
Listings: 5553 (-10% yoy) (+22% mom)
Sales: 3459 (+118% yoy) (+1% mom)
Sell/List: 62% (+36 pp yoy) (-13 pp mom)
MOI: 3.9 (-70% yoy) (+4% mom)
Actives: 13,572 (-35% yoy) (+4% mom)
* Rate of Increase: 44 per day

Avg Price SFH: $863,265 (+9.3% yoy) (-3.0% mom) (-6.2% from peak)
Avg Price Condo: $435,134 (+7.4% yoy) (+3.1% mom) (-3.3% from peak)
5-day Average SFH: $931,340 (+7.9% from current month)
5-day Average Condo: $430,755 (-1.0% from current month)

Median Price SFH: $704,211 (+1.2% mom)
Median price Condo: $378,029 (+1.1% mom)

* Missing data from Sept 21 and threw out erroneous data from Sept 30.

The REGBV will release the actual tally within a few days.

Monday, September 28, 2009

Bears feeling cheated??

Understandably the bears are growling.
They were on the cusp of a major drop in house prices, a veritable waterfall in the numbers and then <<<<<<< happened.

Rates were cut and banks were bailed out world-wide, including in Canada.
Forcing consumption, penalizing savers became the 'play book' that governments followed. Never mind that the poor earth is groaning under our current orgy of consumption. We have built such a worldwide ponzi scheme that any let up will cause the over-leveraged house of cards to collapse.
Welcome to Capitalism in the 21st Century.
So 'cash-for-clunkers', zero interest rates on deposits, 'home improvement' tax-credits and other imaginative schemes were implemented. There aren't many more bunnies to be pulled out of the hat though.
So if/when RE resumes it's drop (unless we are in an inflationary spiral), there wont be much else that can be done. I doubt we will have tax-deductible mortgages in Canada, as they do in the US, the costs of this would be fiscally prohibitive.
Meanwhile Vancouver's housing bounced on a trampoline.
A quick drop, blink and you missed it, and up we went again.
Here is the graph again in case we forget how far we went up and then down:

Based on Kelpto's numbers below, September should be pretty flat. Now we will have to wait and see what October's has in store for us.

Saturday, September 26, 2009

September 2009 Projections

The Fish has invited me to post GVREB MLS monthly projections on his blog. I'll try to post weekly updates on Friday/Saturday plus an end-of-month final summary. It may take a couple tries to tune my format to suit the blog and it's audience. Feedback is welcome.

These projections are based on a linear model driven by the daily stats published by Gavin Hughes (
http://www.nvcondos.ca/). I also need to credit Canadian from RE talks for initiating these projections and Jesse for helping to fill in missing historic data.

The intent of these posts is to get an early or predictive feel for how the month's numbers may end up, and discuss the impact and ramifications to our local real estate market. Please remember, that all models are wrong, but some models can be useful.

Projection from25-Sep-2009: 17 of 21 days

Listings:5614(-9% yoy)(+24% mom)
Sales:3547(+124% yoy)(+3% mom)
Sell/List:63%(+37 pp yoy)(-13 pp mom)
MOI:3.8(-71% yoy)(+2% mom)
Actives:13,643(-35% yoy)(+5% mom)
Rate of Increase:
46 per day

Avg Price SFH:$857,048 (+8.5% yoy)(-3.7% mom)(-6.9% from peak)
Avg Price Condo:$434,517 (+7.3% yoy)(+3.0% mom)(-3.5% from peak)
5-day Average SFH:$911,863 (+6.4% from current month)
5-day Average Condo:$423,588 (-2.5% from current month)

Median Price SFH:$701,271
(+0.8% mom)
Median price Condo:$375,051
(+0.4% mom)

Month to date:

Total Listings:4545(Avg 267 per day)
Total Sales:2871(Avg 169 per day)

We're still seeing very strong sales for this time of year, but new listings are on the rise. September will have the highest monthly total of new listings this year.

It looks like we have more sellers trying to take advantage of the recent price increases and sales activity. If sales hold up this fall, we may be able to reach an awkward balance. If sales decline and listings remain high, prices may begin to recede. This fall will be a good test of the strength of the market.

Note: Missing data for September 21. (Not published by Gavin). Baseline numbers will be posted in the comments.

* Disclaimer: These projections are not produced or endorsed by the REBGV.

Wednesday, September 23, 2009

Fall is darker and more gloomy

The optimism of summer has passed, reality is sinking in. An Angus Reid poll showed Canadians more concerned about their finances and work situation than July, even though the stock market and commodities and RE have been strong in the last two months.

I think people are realising that, while we will not have an-end-of-the-world-as-we-know-it scenario, things are NOT back to normal. The economies of the world have only been prevented from falling off the cliff by the tax-payers assuming a large portion of the private sector's debt obligations.

If people are more concerned about their finances they will reign in spending and we will have another round of pressure on assets world-wide.
I don't think we have had enough of a purge to make up for the years of excess.

BTW here is Mish's thoughts on Canada's/Vancouver's RE:

He is saying the same things us bears have been saying for some time.
Inventory does seem to be moving up as the list/sell number drops.

Tuesday, September 22, 2009

Demographics and all that

There is a discussion on the Real Estate Forum about whether BC should continue to attract young people. Migrants from other Provinces or immigrants to keep the tax base high.

There are lots of opinions but no data.

Well here is one piece of data- median age:


As you can see we are sitting at a pretty high median age in most parts of the Province. Some parts like South Okanagan are over 50. That means half the population is over 50 years of age!

Lots of areas are over 40, and the curves are pointing upwards. BC's over-all median is 40 and is likely to keep moving up. Even if we had a baby boom now, and the median age came crashing down, those bouncing babes wont be paying tax for two another two decades.

Take out the children and students and retired folks and that doesn't leave a lot of people left to carry the increasingly heavy tax burden. WE NEED YOUNG PEOPLE NOW.

By contrast China's Median age is 33. In India it is 25. Canada is 39. Ontario is 37.

The fight in the near future will be to how attract young people. Countries which have low birth rates and low immigration, and an elderly population who expect good benefits are near implosion.

eg Japan which has been a two decade long deflation partly due to demographics.. has a debt to GDP of...wait for it...of 197%!!

How are young Japanese going to pay this huge debt, when there are less of them and lots of older folks who will need care and support? It defies belief.

This graph demonstrates the shift that is going on quite dramatically:


Friday, September 18, 2009

Money makes the world go around...

A good comment from Markoz..

MarKoz here: I had really thought that the stagnation in sales and surge in listings last year was the beginning of the end. I was wrong. I had always considered government intervention in the RE market to be somewhat random, and that ultimately market forces would bring prices down. I now believe that no provincial or federal government will let prices down as long as their members have a pulse ...... I know that nearly 70% of Canadians are homeowners. Virtually all politicians are certain to be homeowners....

He is absolutely right. The politicians will do everything they possibly can to prop up real estate. It is the big kahuna. The result of it's collapse can be seen in the US. Wide spread bankruptcies, unemployment and bank bail-outs.

It's too bad they weren't a bit more concerned on the way up, allowing banks, speculators and regulators to behave completely irresponsibly. If you allow a huge unstable tower to be built in front of your eyes, don't you think it could come crashing down one day??

What more can they do in Canada if/when the down-trend resumes?

Not a lot.

Interest rates are already rock bottom and tax-relief on mortgages or other mechanisms to support prices will just exacerbate the huge deficit. (BTW the UK just posted it's largest ever deficit). So their options are becoming very limited.

Firstly we have to get one thing straight- who are these much maligned politicians? Are they aliens bread in captivity sent to rule and ultimately destroy our planet. No. On the whole they are just like us. Apart from the odd Billionaire like Paul Martin the rest of our pols are fairly regular Joes..who like to feel important (and popular). Some have a vision, others are guided by polls.

They will tell us what we want to hear, not what we (deep down) know has to happen. This is the same the world over. The response to the financial crisis, which by the way was completely avoidable, was to loosen money even more...punish savers yet again...and reward irresponsible activities, especially by highly paid bankers.

Was there an alternative. You bet, but I am not sure anyone would like it very much. Let real estate drop.
1) Let all assets drop and find their natural support.
2) Let the big banks fail if need be.
3) Pay up on insured accounts.
4) Seize the bonuses of the bankers responsible and let the chips fall where they may

The result would have been a catharsis of default and even possibly a rapid depression. Awful, yes. But the excesses of the last twenty years of bubbling assets, deregulation, greed and materialistic orgy would have been dealt with in one fell swoop.

Governments would be there to pick up the pieces afterwards and stop people from starving -at a much lower cost. Then we would have had to rebuild a system that was not based on fractional lending or which did not allow the privatization of profits and the socialization of losses.

Were we ready for this around the world?

Not at all.

So our politicians did their damnedest to plug the hole, for now. As one economist said..."they just kicked the can down the road". The degree of debt that they are accumulating will require a huge expansion in the economy to service, if that doesn't happen there will be a de facto default which is monetization (you print the money to pay your debts).

Future generations won't be burdened by it, because it will probably come to a head in the next few years and will have to be dealt with: by slashing and cutting, or defaulting and printing money.

Sunday, September 13, 2009

Where are all these bears coming from?

As a reader once stated, Fish..'you write an obscure blog that no-body reads'. He/She was right.

It was therapy for me, a way of thinking aloud.

In any case I would have about 130 readers on a busy day and 100 on a quiet one. The same folks.

The numbers have recently been moving up. Last Friday they reached

Who are these new readers? They could only be coming from 4 groups:

1) Those that own but don't want to sell
2) Those that own but want to sell
3) Those that don't own but want to buy
4) Those that don't own and don't want to buy

Groups 1 and 4 aren't going to waste their time reading a RE blog, so it is the potential buyers and sellers who have flocked here.

I wonder which group is more? I could run a poll if I thought it would be truthfully answered.

Ok whither the market.

That was a VERY strong bounce from March. It caught a lot of us by surprise. It mirrored the US and Canadian stock-markets. As soon as it was apparent that the world (actually the banks of the world) would not be coming to an end, the buyers rushed out to buy, benefiting from lower mortgage rates and lower prices. For a short time the rent/buy comparison got pretty close.

The mortgage rates have inched up a tiny bit recently, the prices have firmed and so the 'great deals' are not so great. Once again the numbers support renting rather than owning.

Now we are starting to see some early signs of weakness. Two things to remember if we have moved into a bear market:

1) The bubble graph suggests that we should start seeing the drop starting soon or all bets are off.
2) The initial drop is precipitous, the subsequent one long and drawn out.

That would support what a RE-savvy friend said last night at dinner. Now retired, I asked him what to do. You missed the big drop last year when the blood was running in the streets, now you have to wait for the slow drop.

Wednesday, September 9, 2009

Buyers Gone Wild

As I said in my last comment in the previous post, folks can get too excited when they are in 'buying mode' and throw caution to the wind.

Not just foreclosures which SHOULD be bought at good discounts to asking, but often ARE NOT...but even regular purchases.

They have probably looked around a lot and finally found something that both partners (and their parents) agree is suitable, they have the pre-approved mortgage in their back pocket which will soon expire, the poor realtor has taken them to dozens of showings, friends are asking.."haven't you found anything you liked yet?", implying they are being difficult and picky.

In short, there is a lot of emotional baggage tied up in the property, and it is hard to walk away if the sellers refuse to budge on price.

That's why it is critical to decide exactly how much house you can afford and stick to it. Remember to draw up a spread-sheet and plug all possible expenses in like repairs and special assessments and higher mortgage rates in a few years.

And look around. There is no need to be panicked into buying. Remember no one HAS to buy, but many people HAVE to sell.

Yaletown and Downtown

Looks to me like the going rate is now $500 +/- /foot. Anyone paying more should have a good reason to do so. Anyone paying a lot less, is probably doing well in this market.





coal harbour:


Here's your choice:

A one bedroom in the Fraser Valley or a 4 bed on an acre in Hawaii:


Sunday, September 6, 2009

Time to clear something up...

I read on many bear blogs that rich outside investors from China, Hong Kong, the US, Alberta, The Middle East, South Africa, Israel etc are helping drive up real estate. (These are just some of the absentee owners in my building)

I think it is true, they are a factor. Especially in the high-end and down-town market.

However before we get too self-righteous about it, we have to remember that one of the reasons we get to live such a high standard of living is due to the constant infusion of outside money.

What do we produce in this Province that has monetary value:

Some of our fruit and vegetables and meat.
Natural gas and hydro power
Natural resources- coal, metals, wood, some oil
Gaming Software
Gold and silver

The price of many of the above have plummeted in value.

Meanwhile we have a lot of things to pay for...cars, trips to Mexico, TV's, fridges, medicines, huge medical costs for the greying population, doctors fees, huge costs for the permanently-on-welfare and drug-damaged populations. We also have to pay for a Province the size of a huge European country, where everyone expects clean water, electricity, a school nearby and to be flown down for free, for emergency treatment, by helicopter even if they live in the farthest flung corner or an inaccessible Island.

Then there is the Olympics...

How can we possibly afford all this?

We can't.

We have been kept solvent due to the constant influx of outside money. From tourists, unfortunately from drugs (with all the mayhem that brings) and outside investors. They maybe Taiwanese 'helicopter' families living on the Westside sending kids to Private Schools, they maybe Korean or Middle Eastern investors on the North Shore, Germans buying ranches in the interior or South Americans parking money in our banks.

What they all have in common is the dollars they bring with them. Millions of them to buy their properties, pay for the up-keep and enjoy our Province. Their money moves around, gets taxed, gets deposited in our banks, gets lent out, gets spent again and makes jobs etc etc.

So while us bears may complain about these folks competing with locals for properties, the truth is, without the constant infusion of outside money we could not sustain our life-style. A lot of us bears would probably lose our jobs and the medical and social system would not be sustainable.

Even now our Province is in a serious financial mess. Somehow the Liberals believed that despite the financial catastrophe down south and in Europe we would only have modest deficits, or that is what they told us before they were re-elected. Well that myth has been blown out of the water. Major cuts are coming.

If the money stops flowing from outside, you can expect those cuts to be a LOT deeper.


Thursday, September 3, 2009

The BUBBLE Graph and Economic Psychology

Jason asked about the bubble graph:

That bubble life cycle graph.....I very much want to believe in it. Does anyone know how the dude who came up with it came up with it? Is there any scientific explanation of why a bubble would behave that way? It seems to make sense, but so far I've held off my wife from wanting to buy in this bubble using numbers, data, and facts. It's getting tougher the longer this drags on, and I'd love to show her that bubble lifecycle chart and say "Look! We're right at the precipice! Don't give up now, Dr. So-and-so proved that humans are sheeple and act in this way because of X Y and Z!"

The graph is well-known to demonstrate bubble psychology. The version I use (http://tinyurl.com/ntvgvj) which is widely duplicated on the net, was drawn up by the Professor of Economics and Geography at Hofstra University, Jean-Paul Rodriguez. I cant find his original article on the net anymore, but it was dated 2006.

The reason it works so well, is that there are so many who didn't get in on the bubble run-up and jump in when the price first breaks. They are the last buyers and the next drop has no more buyers to prop it up and we drop longer and deeper. The steepness of the drop can be sudden or slow and steady.

It seems to describe psychological behaviour of bubbles very well.

It has played out almost perfectly in the US. I have included a chart and some links to go over:

Source: Seattlebubble.com

The notches at the top can be slightly different in different bubbles. Here is the chart for California:


But when it finally drops- it drops:


It is not just RE - all bubble assets TEND to follow the graph. look at gold in the late 1970's. It peaked, dipped ran right back up and then crashed good and hard.


A quick look at the NASDAQ chart from 1997-2002 will show a similar pattern.

The shape of the graph gets skewed by desperate efforts of governments to keep the asset at bubble levels, and stop it falling. They do this even at the expense of future generations of savers and tax-payers, and just exacerbate the situation.

It would be better to allow a collapse and then pick up the pieces, rather than the slow bleed that eventually ends at the same place. The Trillions that the US has spent on trying to prop up housing has just slowed the process but the end-point is the same. Income and housing have to come back into balance.

Will we follow the graph?? Who knows, just because the US did doesn't mean we will too. Maybe we are not in a bubble!

Maybe the resilience of our prices is an indication that we were very undervalued in the past (which as I stated before we probably were) and are now reaching fair market value on a global/resource availability scale. Heck, maybe we are the new Monaco of the North?

I personally think that we have over-shot to way over-valued, but that it is just my opinion, which was vindicated for 6 months late last year and early 2009 but which reversed after that. I am waiting to see where we go from here.

Tuesday, September 1, 2009

As Summer fades the time has come to re-evaluate the bear case

The last twelve months have been very interesting. This time last year the financial crisis was galloping along and taking with it the highly speculative Vancouver Housing market.

We hit a no bid situation as everyone hoarded money, wondering which banks and even countries (eg Iceland) would be closing down. MOI hit twenty months, the stock markets lost 50% in half a year and it looked as if the bears' most dire predictions were coming true and we would all be carried off the cliff.

However the central banks and governments of the world, having done NOTHING to stop the speculative bubble, acted en masse using Trillions of our money, and promising obligations to future generations not yet born, to stem the bleeding.

The result was an abrupt turn around in the Vancouver market.

We really hadn't seen much of a recession in BC early in 2009. The Liberals were still talking about small and manageable deficits, there were lots of large Olympic and non-Olympic related building projects and suddenly we had the lowest mortgage rates in the last 40 years, lower gas and heating bills and Federal tax incentives.

The result was that the fire was reignited. SFH are within spitting distance of the previous highs.

Here is Larry's up-dated price chart:


Now it gets interesting. There are a few things worth noting:

1) The Provincial fiscal situation is not good. We are headed for a $2.8 Billion deficit and that assumes the worst is over, which I personally doubt. Cuts ahead, I expect the Federales who are $50 Billion in the hole to follow suit too and start cutting.

2) Unemployment will continue to rise and will do so even if we have the anemic recovery that would be my best case scenario.

3) The big projects are done...Canada Line, Golden Ears, Whistler Highway..where will these folks get hired now?


The boom that we have seen over the last 6 months or so has been pretty selective. the bubble was everywhere...Vancouver, Fraser Valley, Vancouver Island and the Okanagan and in all types of housing.

The bounce has been mostly in Vancouver and Victoria SFH. One look at Larry's chart will show that. In fact while SFH prices are up an astounding 10% YOY, condos and Town-homes are down 1% YOY.

Similarly the housing situation outside of Vancouver has been much more subdued. Many place are still falling (even beautiful cities, if they are resource based) others just stopped dropping and stabilized but are vulnerable to a dip.

The current graph of house prices is completely compatible with the bursting bubble graph :


However if prices keep going up, despite a worsening economic environment and a bubble graph which is calling for an imminent drop, then we will have to rethink the basis on which we have made our assumptions..ie we were wrong!

Saturday, August 29, 2009

Interesting Article on the Rich

Having their net worth trashed in this recession. McAfee anti-viral founder blew through $100 Million in bad RE investments. I will post a link at the bottom.

But here's what got me..he sold his waterfront stunning Hawaii estate at auction and only got $1.5 Million for it. It is stupendously beautiful. The sort of place I could happily go and live until I draw my last breath.


What would you get in Vancouver for $1.5 Million??

Anyone want to post some choice comparisons to show just HOW over-priced Vancouver is.

Here is the article:


Thursday, August 27, 2009

I'm back

A few things from my trip. There are large parts of this Province that are still in a real estate doldrums. They are areas which actually make things, or dig them out of the ground and are feeling the pinch of the economic slump. Places like Campbell River which just lost it's Mill.

Meanwhile in Victoria, everyone seems to be wondering how much further the Provincial Government will have to cut to make up for the drop off in revenue. I suspect soon the Federal Government will also start worrying about the deficit, and put on hold further plans to spend our way to prosperity.

The banks are making good profits, especially The Royal, though they have all increased their future loan loss provisions, which is prudent considering 60% more Canadians have fallen behind on their mortgages compared with a year ago.

These two facts just don't add up. Home prices are up to new highs in many parts of the country, and yet 60% more people have fallen behind on their mortgages.

That's what happens when a financial crisis hits our biggest trading partner, drags our interest rates down while we are still robust and then the crisis seeps across the border later. It means our assets get that final push of adrenaline from the low interest rates, until the reality of the economic slump brings them back down to reality.

BTW- the banks are making money from the yield curve. What could better than paying people almost nothing on their GICs or deposit accounts and lending it out at 4%-8%. Those are near the highest margins in history. I remember when banks would pay 5- 6% on deposits and lend it out to consumers at 8-10%.

They are netting 2-3% more now and can leverage that up.

BTW the TD CEO just sold $24 Million in stock options (13% of his holdings).

Thursday, August 20, 2009

Sorry folks nothing to say and I am heading off on Holiday

Enjoy the next week and lets see what late summer and fall bring for us bears. So far I feel like we have been caught in a bear trap and the jaws are getting tighter.

Do we bite the bullet cut the leg (and an arm) off and jump in or do we wait and hope sanity returns.

Friday, August 14, 2009


There is no sign of a slow-down in our housing market so far. Maybe it is the last rush to buy before school starts. However the numbers are far from bearish, with 100% sales/list or higher the last few days in many areas.

To look at Vancouver RE you would think the world was in the midst of a rip-roaring boom not a near depression.

If I had to guesstimate it, I would say prices are flat but clearly not dropping with this level of activity.

The right shoulder mentioned in the chart below may take some time to play out, but if we see prices move up higher, then the comparison with the bubble graph, or a head and shoulders top will lose validity.

Anonymous said...
What 'event' would cause the second part of that graph to play out?

It seems inconceivable that we are just on the edge of another major drop, but anything is possible

There are many things. Putting aside the black swan events which of course cannot be predicted, there are some likely suspects out there:

1) A slow down in China. We have increasing correllation with the Chinese economy (HK, China, Taiwan and you can add Korea). Not only do we have significant numbers off-shore buyers from these countries but their demand also detemines the price for many of our commodities.

China's rebound has been quick and impressive. It took a huge infusion of stimulus and orders from the government to the banks to lend or else..but it worked to stop the Free-fall and produce some domestic demand which will have to tide China over until the rest of the world recovers. However their recovery and need for commodities is still very fragile and I could see a weakening in demand later this year or early next.

China is truly an economic miracle, but the juiciest rewards may have been restricted to those with the best contacts. The fruit doesn't fall too far from the tree according to this report:


Any renewed weakness will not be well received by the rank-and-file, and could cause some social problems.

2) Interest rates. We have seen interest tick up slowly from the lows a few months ago. If we start to show some economic strength, ironically the rates will move higher and start to impede that very growth. Am I predicting that..no. It is just something to watch.

3) The Swine flu bears watching. Hopefully it will not make a big come back and restrict travel, spending etc and add to deflationary pressures.

4) A double dip recession. We are seeing some stabilisation in the US and elsewhere. However this is happening from a very low base. Unemployment sits at 9.7%, a rate that is almost unheard of in the US. If you add in the number of workers who are employed, but working on reduced hours, it would push the rate up a few more %.

Were we NOT to stabilise here, we would be looking at a full scale depression.

I think the recovery will be tepid at best and then there is a very good chance that we stagnate or start to sink again. However I do not have a good feel for the time-line, whether it would be in the next year or even longer that this happens.

I am sure you guys can think of lots more reasons too. Lets see if this pressure cooker buying keeps going or we settle to a more balanced market (and dare I say even a bear market again) once fall comes.