Saturday, October 16, 2010


Was going to put up a tax post- but gotta answer Chad's points-Chad's comments and mine below in green. I will put up the tax post in the next few days.

ChadMPNP said...

The last post is full of a ton of incorrect hyperbole's.

We are at 10% unemployment in the US. That isn't hyperbole it is real especially in a country with limited social safety nets and the number one cause of bankruptcy is medical bills. Losing your job (and hence your medical coverage) is a disaster.

I can list many individuals and firms that predicted and profited from the US crash.

Please list them. Not hedge funds please. We know some of those scum-bags made money, most of it by forcing the tax-payer to pay AIG's bad debts.

I know many people that bought into the correction of 2008 in Vancouver and have sold for a handsome profit during the snapback to new highs in 2010.

They did in indeed. No argument there.

I have an issue with Canadian bears always saying the Govt and BoC came in and artificially pumped up the markets to new highs.

Some simple internet searching would have made you think twice about that statement. The CMHC borrowing ability was tripled between 2007 and the end of 2009. Some of that may come to bite us in the future. In total the CMHC has over $500 Billion in liabilities. The CHMC has insured 90% of all insured (and therefore high risk) mortgages. So the tax-payer is holding the crappiest paper of all, and lost of it.

Then the Bank of Canada cuts rates so that mortgage payments drop by 25% or more.

You dont think these actions saved the market from a well-deserved correction??

The market goes where it's going to go, stimulus is very short term in nature, you can't whine about a market that has gone up for 2 years and blame the govt because even more stimulus was given in the US and their markets are still making new lows. Why when they've done pretty much everything Canada has done and then some in the US is their housing market still at lows?

The reason for this is obvious. The US RE industry is BK. We were just over-priced. The US hits the fan and our dumb politicians - who, BTW hated the Socialist CMHC and Wheat Board and EDC and WEDC when they were in opposition- do the simplest most brain-dead thing they can to stimulate the economy. They lower rates and let people who-really-cannot-afford-to-buy into the market, insured by you and I.

Result: we go where the US WAS before their debacle.

They should have sat back and thought about the right move, but instead like deer in head-lights they jumped on trusty old RE to pull them out of the hole. Yup it did that all right. Instead Canadians put themselves into the hole with debt, but the pols could say they staved off a recession and BTW they get to boast that our banks are so solid..


The banks are lending it out at 4% and paying savers ZERO. That's a good scam. Meanwhile the riskiest stuff is being insured by they just get to clip coupons. Take away the risk. Have a steady Eddy 4% spread - which is historically very high- NICE!

But even they are getting worried about this madness and every week another bank is coming out with reports warning that RE is grossly over-priced especially in this fine town.


  1. Oh lord where do I start with those that made money on the collapse in the US. I would list ALL of them but I simply don't have to time, however the most notable would be Kyle Bass, Doug Kass, Jim Paulson, all of which were either short equity or other vehicles to profit from the collapse, NONE of which got any government support or any intervention whatsoever. You should really look at the incredibly support US housing is given. Just imagine if there was a home buyers tax credit here in Canada, you bears already look foolish with markets again hitting all time highs, imagine how parabolic it would get if there were a tax credit for buyers. They're at a point in the US where there might be PRINCINPLE REDUCTION, if that's not intervention to the greatest possible extent I don't know what is. Not only is there a ton of stimulus in the US RE market now, but valuations are back at 2003 levels, that 1,2 punch has lead to no bounce in the markets, while Van RE is at or very close to all time highs. You mentioned roughly a year ago that you would admit you were wrong if your ridiculous "double-top" techinical formation didn't hold and we ripped to new highs. Well, Fish, it hit a new all time high after you made your proclamation, and in the most recent month, after a shallow pullback, it ripped to new all time highs. You remind me of traders I see on the desk that refuse to admit they are wrong and dig themselves deeper holes and like I've said for a while now, just be thankful that there's no easy way to short Van RE because you bears would have been CRUSHED many times over.

  2. 'Kyle Bass, Doug Kass, Jim Paulson' I did say EXCLUDING hedge fund managers, but some how that is all you have listed.

    As to shorting- no one would short a market that the governments do everything in their power to keep propped up.

    If the dumbass Greenspan hadn't tried to prop up Wall Street and RE for twenty years we would not have the crisis we have now.

    The cure for a glutton is not to give them more food.

    Flaherty and Harper and Co - complained loudly about the CMHC and all the quasi- Crown organisations until they came to power and then they lost their nerve and allowed the CMHC to pile up a ruimous amount of debt.

    Where will this end? We will see, but the US experience is not good - nor is the Spanish, UK, Irish or Icelandic for that matter.

    How can a rational market exist when government panics and pumps it up at the slightest sign of weakness.

    You keep mentioning the US market - well then do you think the Canadian market will follow the same path. Our price/rent, over-all debt levels, owner equity levels etc are all near what they were in the US before the crash...

  3. Chad uses the word parabolic! And he seems to think that is a good thing, and can be sustained. LOL

  4. Alex, when you own property, parabolic is just fine, so long as you sell into that spike. Fish, why would I exclude hedge fund managers? Scared the list will be too long? My argument was contra to yours saying that NO ONE could have predicted this and that and I am pointing out those that did predict and and profited off it, with ZERO "AIG style bailouts". Weren't you supposed to shut down the blog if we hit new average highs in Van RE? That happened quite some time ago and just hit more new all time highs. Unfortunate.

  5. Society lost but hedge fund managers gained - that seems like a good deal to me.

    BTW- i also forecast it. I used to comment on VHB's blog years ago and stated clearly that the US RE market was crazy (as I visit frequently) and when it burst, things would be very bad.

    As to the AIG comment - unfortunately this shows your fundamental lack of knowledge of what happened.

    These hedge fund guys bet against housing by shorting the sub-prime indexes. In many cases the other side of the bet was AIG. If not directly, then by Investment banks like Goldman laying off risk with AIG.

    So if the government had not paid off AIG's huge losses, Goldman and co would have lost billions and the hedge funds would have made zilch. It helps to have friends in high places.

    I said in August if sales drop and MOI goes up again and HPI (not average which is flawed) goes up I would be out because you cannot comment on an irrational market.

    That did not happen in September, so I still blog. Maybe your wish will come true in October.

    BTW- since you are such an expert on the US situation- why don't you think it could happen here?

  6. Hey Fish do you think the bears under-estimated the effect of the huge buying from China/ Korea/Taiwan and that is why the correction has been so muted.

  7. Frank- I have no doubt that this is an important factor in more expensive areas, and Richmond. However it probably has very effect on Victoria and the Fraser Valley as we can see from the numbers.

    The Canadian government has very little restriction on buying and owning RE and so for some people we have become a RE savings bank - but like I said most of the effect is in certain areas, and perhaps some knock on effect from that.

    As to the bears, everyone makes decisions based on what they see, and I doubt most people thought in late 2008 when banks were going bank-rupt across the world that governments would sooo quickly take on all the liabilities on the tax-payers' shoulders to save the big money and keep the system ticking for a short while longer.

    They pre-sold the future for an immediate (and very violent) rebound

    If anyone saw that coming, they sure didn't make any enlightening posts or comments that I read!

  8. Chad comments are on the spot, like it or not, and he has been right. Right now the market is very tight and there is not much supply on the market. As soon as smth good comes on the market, it is gone. This is still a hot market. Yes, prices are insane, but when credit is cheap, money does not look necessarliy for value, so this market has still some legs. Bears have been calling for a crash since 2002. eight years is a long time to be wrong. ental market for familys of 4 and more is extreamly tight. Try to find a 3 bedroom place, decent for a family. It is not easy. Will the market crash? I think no, stable to stagnation seems to be the future till all the money printing by central bankers reaches the working guy, which may be a long time. I have long had this suspicion that RE is acting like gold, hedge agianst the money printing which does not seem stupid after all.

  9. Fish, have some accountability for once. Your post several months ago, before we made new highs post the 2008 correction said you would admit YOU WERE WRONG if the market made new highs, it not only made new highs but it CONTINUES to make new highs. Also, enough with the AIG crutch to your flawed argument. The bottom line is you said no one could have predicted the decline, I pointed out those that predicted and profited from the decline, regardless of counter party risks etc, they predicted and positioned themselves for the declines, contra to your previous posts. There are interesting stats and actual numbers posted on this blog from time to time, but when your opinion clouds the facts it diminishes its value.

  10. Where did i say no-one could have predicted the US decline bozo? I predicted the decline!

    I was short the US home builders in 2006 and 2007. Lost initially and then made coin.

    I also predicted the decline of the Canadian market. I was very wrong until late 2008, when i was right in a big way. 20% in a few months right. Then early in 2009, I said the price drops and the mortgage drops added up to a 30+% decline in the carrying costs and this could be a buying opp. It was.

    Did I buy? No!

    Did you? Yes. Bully for you.

    In August I said lower sales and higher MOI should not bring a higher HPI.

    If these THREE happen I will quit blogging. They didn't happen! Sorry to disappoint you.

  11. I think you must have entered an alternative reality Chad. if you look at all the bear blogs going back 5 or more years they have been predicting both the drop in the US and Canada.

    Lots of links to the US housing bubble blogs, and to Mish and to all those who said US was due for a big fall.

    Most of us were out of the stock-market for that very reason or were short US RE stocks (there is no equivilent to the US home-builders on the Canadian exchanges)

    This may well be the final hurrah for Canadian housing before we too have our long delayed, government deferred, correction, or maybe the Chinese investors buy every inch of land and every house standing.

    We will see.

    You are obviously happy with your purchase and it seems you timed it well. I wish you well with it, but no reason to try and attack those that hold a different view-point. They may be right! and believe me humble pie does not taste good. I know, I have had to eat it more than once.

  12. .. and I quote

    Fish10 said...

    "Who would have thought the US would crash so long and so deep, bringing banks down leading to a near depression."

    End of argument. You are wrong, once again, maybe it's getting habitual?

  13. It is a rhetorical question..Chad really! I obviously must make my blog simpler to read.

    As in- 'who in the mainstream thought that the RE crash would have such a profound effect.'

    We did. We have posting and commenting about it for years.

    I was posting with freako and VHB about the US five years ago.

    This is meant to indicate the complacency that pervaded the US then and does so now in Canada.

    You are right - I was wrong. I must be 100% literal from now on, so that concrete thinkers don't acnt twist my words.

  14. "when you own property, parabolic is just fine, so long as you sell into that spike."
    Okay, gotcha. So this IS a big bubble, and you are playing it as a speculative venture, and you are clever and nimble enough to exit at the right time?
    Good for you! Best of luck with that one.
    Just drop all the talk about how it is NOT a bubble and naive youngsters should buy in for the long term at 5%/35 years, m'kay?

  15. US housing markets, for the most part, still have a ways to go down. The financial crisis was merely the convenient vehicle that brought them back down to earth. If there was no "financial crisis" it would have been something else.

    Vancouver will undoubtedly have some other "crisis" to blame for its falling prices.

    As for Chad being "right" well as of 7:37am today he's right. And he will be for 7:38am as well. And every time he writes on this blog for the next year he will be. But he has to be right for every second for the next 30 years. Bears only need be right once.

  16. Alex, how about you actually read what I have said in the past? I believe we are in for correction, a fairly steep one, but like I've said for a FULL YEAR now, it's not time for the decline yet.

    Jesse, that's an idiotic statement at the end. If the market is overvalued and corrects 10%, bears will be right, eh? Even though you guys have been wrong for 50-100% of increases.

  17. Enough of this right and wrong crap. There is no perfect time for everyone to buy.

    First of all, a good time for someone to buy is when they can buy a place that they like for a price, so they can afford it even if rates go up signifigantly. It also helps if their payments are less than rent on a similar place.

    I'm sick of hearing bears have been wrong for 8 years. The only way someone could be wrong for 8 years is if they had the option to buy a place they liked without putting themselves into financial danger should the price fall or rates go up.

    While it may seem like someone who bought in 2003 with 5% down and a 35 year mortgage bearly making payments was smart, I would disagree. Sure, it worked out for them, but I would say the risk they put themselves in wasnt worth it.

    Also, on a personal note, I have only had the option to buy for about 2 years. Even then, I couldnt have purchased the place I rent now. I could now because I have saved up a bigger downpayment.

    So, my condition to buy is that I like the place, and could purchase it for about the same as equivilant rent. If that doesnt happen for 15 years and prices tripple, I was wrong. But if I am ever able to buy for less than the dip in 2008 then I was right.

    So tell me chad, are you saying I should buy now as prices will never fall below the lows of the previous year or should I wait as you do see a signifigant correction coming?

  18. That's your choice, Davers, I don't care what you do. How can you say the only way someone is wrong is if they had an option to buy and didn't? The bottom line is there has been a debate for over 10 years about the direction of Van RE and bears have been DEAD WRONG, simple as that.

  19. Haha ChadMPNP is angry...again. He is an overstuffed idiot. Good night.

  20. "If the market is overvalued and corrects 10%, bears will be right, eh?"

    I didn't state that. I stated that bears can wait for, say, 10 years and if real prices drop 40% they make out like bandits. Nobody here cares what happens to you.