Thursday, June 30, 2011

Sombre Happy Canada Day...

Not just because we have had such terrible weather so far this year, but because being responsible and keeping your sanity in the midst of a rip-roaring bubble (of any kind) is danged difficult.

Especially when you know the carnage that will fall upon our friends and our country, if and when the bubble bursts. In fact even those who have sat it out will be forced to share the pain.

It's like going with a bunch of friends to the bar and trying to get them to moderate their imbibing while they are guzzling down the booze. You are staying sober, and end up having to take them to the hospital and paying the bra tab and the medical bills.

It's already happening with 1% rates for savers and 3.7% inflation. The speculators are eating out money and all the idiot at the Bank of Canada can do is wring his hands and keep saying 'please stop borrowing so much'. He needs a good kick in the wallet and then someone should pull him by the ear and show him the excellent charts on Ben's site- duh! You did it! You and Flaherty and Harper.

Have a good one folks. We are lucky to live here, renter or owner. It is a great country. So by the way are the US and Spain and they are both reeling from stupid mistakes by their policy makers that led to a housing bubble that burst and caused carnage. How far away can we be?

Saturday, June 18, 2011


Ok folks - Keynes bashing has become a popular sport amongst commentators and the bloggers who have no clue what they are talking about.

They hear others say that the Fed and the Western economies are practicing Keynesian economics by dropping rates and incurring large government deficits and just parrot it.

Here is a mini-Keynes primer:

Keynes was in favour of active involvement by the government in the economy. He did not believe in an economy left to the vagaries of chance, speculators and big money.

He wanted Governments to actively intervene to BURST bubbles.

He believed that Government spending should go DOWN when things were good and then RISE when things were weak to smooth out the hills and valleys.

Government policy should be directed at high employment levels where ever possible.

OK lets see what happened:

1) We had total failures Bernanke and Greenspan and successive US Treasury Secretaries like Robert Rubin, Lawrence Summers and Henry Paulson who believed in the free market. They removed regulations (anti-Keynsian) and denied bubbles in the stock market and RE (both of which burst with catastrophic effects).

The laissez-faire market-knows-best philosophy is based on the theories of Milton_Friedman- the anti-Keynes. He did not believe in regulating or Government intervention at all.

He also espoused small Government, less spending and lower taxes. Margaret Thatcher, the PM of UK, was a strong believer in his theories. Well taxes were cut but spending was not.

2) When it hit the RE bubble in the US exploded and it hit the fan then everyone suddenly turned from free marketers to Keynesian interventionists!!

The Friedman philosophy would have you leave the speculators to go down and let the market fall. But this could not happen- why??

Because most of the assets that were collapsing -stocks and bonds as well as the big deposits in banks, the bank bonds, the banks stocks and the senior executives of the banks - were the very rich and well connected. And they brought out their big guns and convinced everyone to move all the banks liabilities to the tax-payers for the sake of economy!

This is NOT Keynesian.

The first thing that happens in many countries is the big bank deposits are guaranteed by government (not Keynesian) then Interest rates fall everywhere (Keynesian) .

Now if they were playing by the Keynes play-book they would incur deficits to spend out of the recession. Yup they did that in spades, except they hadn't dropped spending in the good times, so started off from a deficit position.

Now here is a major difference... Keynes said the Government should NOT support assets but spend on infrastructure instead, which will help productivity in the future and has a direct impact in the economy and employment.

The Governments did not do that.

The US bought non-performing paper from banks and hedge funds, then bought it's own debt - all in an attempt to bolster assets. It worked - the stock market doubled, commodities soared and Wall Street insiders made their biggest bonuses ever. The UK did the same as did most European countries.

However unemployment has remained high and housing is moribund, since it is still deflating from the bubble the idiot twins said didn't exist and it is linked to the US consumer which has not benefitted from this experiment of Bernanke's.

Canada did put some money into rather quickly thrown-together and often ill-thought out infrastructure projects -like earthquake-proofing a tiny foot- bridge over the Capliano river that no-one uses and which took months and many $$$$. China embarked on a major infrastructure program and fared the best.

However the Tories could not resist buying loans from banks and doubling the CMHC-monster.

All this would have Keynes rolling in his grave. Almost none of is Keynesian.

So now when someone starts to say that Keynesian economics have failed, you can slap them hard and direct them to the facts.

Not much to say...waiting mode

Vancouver is still selling and other parts are not.

Some great posts on the other RE bear blogs discussing Mark Carney's recent pronouncements on RE. He seems to be getting into panic mode about the state of our indebtedness, and belatedly, has realised that he is about to become our version of Bernanke...leading the folks into a chasm of debt and bankruptcy.

Once again his words are pointless. No-one listened the last time and no-one will listen this time, even when he uses words like 'housing is taking on the characteristics of a financial asset rather than being driven by fundamentals' . No kidding!

Why doesn't he go to China and look at all the houses bought to store value and left empty because no one trusts the value of their money, the government and carrying rates are still too low.

Well we have all those three except the last one is even lower- why shouldn't housing become a financial asset when you are trashing money so much. and why not just come out and say 'housing is in a bubble'! Why use this hard-to-understand BS that Greenspan used.

BTW- words without actions are pointless.

On the Chinese angle, I am hearing ego-driven bidding wars from mainland Chinese for properties in West Vancouver and the Westside. Literally hundreds of thousands being bid over asking so as not to 'lose face'. Why would they do that? How easily can you make money to pay tax on it, and then throw it away like confetti.

Maybe it is this type of money

If Carney has any balls , one of his actions would be to look more closely to make sure we are not the recipients of 'hot' laundered money.

Then tell Flaherty to kill the CMHC- bloated self-serving creature that it is, and finally move rates up to match inflation.

That would much more than hours of useless chatter which no one listens to. His speech didn't
even make it to the front page of our local papers with all the hockey stuff.

Tuesday, June 14, 2011

One of these reports don't add up

First the Vancouver Sun touting a boost in Whistler sales 'this Spring'

So the article came out today....and..

We are 8 days away from the END of Spring!

Where is this big buying frenzy??

Here is a local realtors site, which I highly recommend BTW for Whislter RE info, and the picture seems to be very different!

In fact sales seem to be all but disappearing, and are running out of steam not gaining steam.

The sales rate has a MOI of 24 months and more at this rate.

So what do we make of this all, is it a typo? Did they mean NEXT Spring? Is it shoddy journalism - are they just reporting industry opinion without any fact checking?

Friday, June 3, 2011

Central Okanagan RE board report

Here are the first few paragraphs - my comments in italics

Kelowna, BC – The Central Zone of the Okanagan Mainline Real Estate Board (OMREB) reported May 2011 sales activity of all MLS® property types were down compared to sales reported at this time last year but were up from April as serious sellers begin to compete for home buyers moving into Spring.

sellers COMPETING for buyers who would have thunk it! In fact the title of all three reports is 'Serious Sellers Compete for Spring Home Buyers'

Overall unit sales during May dipped 17.6% compared to 2010 (to 337 from 409) but rose 13.87% over the previous month (297 in April 2011). Sales volumes totaled $133.4 million compared to $168.1 million in May 2010. Total residential units sold last month were down 16.93% compared to 2010 (to 314 from 378) but rose 5.72% from April (272). Inventory continues to decline over last year at this time – down by 5.92% to 5,217 units compared to 5,545 in May 2010 with new listings falling by 7.97% over last year (to 1,212 from 1,317), and down 8.1% from last month (1,031 in April).

5217/337 = 15.4 MOI

“Hopefully, the gradual improvement in sales will continue as we move into the summer months and more out of town buyers visit our area. It is too early to see any consistent trends in the Spring market as many factors have affected consumer confidence and created buyer hesitation to date – from the tightening of mortgage qualifying rules, to HST concerns and referendum uncertainty. As well, distressed prices in the States have added competition for potential recreation, investment and retirement property buyers,” says Kent Jorgenson, OMREB Director and REALTOR® in the Central Zone.

More out of town buyers..sounds like they are almost begging for HAM!

North Okanagan Report

2627/123 = 21.3 MOI


“Buyers still enjoy an excellent selection in the North Okanagan. We are noticing that houses coming onto the market that are priced to reflect today’s values are selling relatively quickly.

Shuswap/Revelstoke Report

1689/68 = 24.83 MOI quote:

“The gradual improvement in sales activity is expected to continue and will pick up further as the weather continues to warm up, bringing more buyers out looking at houses. It is too early to see any consistent trends in the Spring market as many factors have affected consumer confidence and created buyer hesitation to date – from the tightening of mortgage qualifying rules, to HST concerns and referendum uncertainty. As well, distressed prices in the States have added competition for potential recreation, investment and retirement property buyers,” says Karen Singbeil, OMREB Director and REALTOR® in the Shuswap Zone.