Friday, January 7, 2011

Today's letter is M: As in Media and Manipulation

Garth Turner covered this yesterday and I wanted to take the time to point it out to my colleagues who read this blog.

The battle over mortgage terms is starting to heat up. As many of you know Mark Carney, Governor of the Bank of Canada came out in December with another salvo of debt warnings. This was followed up by a couple of Banks (TD, BMO) calling on the government to take the initiative because they could not be expected to curb debt lending for competition reasons.

The concern? The vast majority of new home loans are being written are 5/35ers and the debt loads are becoming alarming amongst Canadians.

Carney has been urging Ottawa to do something about it as well and Finance Minister Jim Flaherty has hinted changes might be coming.

Enter the Canadian Real Estate Association (which represents Realtors).

Real estate agents and brokers are being urged to write their MPs immediately to counteract this move. They argue that mortgage debt isn't the same as other consumer debt. It's “the foundation of household equity and a gateway to financial security.”

More importantly, it's the foundation and gateway to Realtor financial security (aka paycheques).

  • “Additional changes to mortgage financing rules would raise the barrier to home ownership excessively and destabilize housing markets and the economy. In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity. They allow existing home owners to change properties or rent.

    “Creating burdensome barriers for first time buyers will seriously impact the rest of the market, including retirees looking to downsize. Further tightening of mortgage rules would have other far reaching consequences for the economy. It risks causing a home price correction, a drop in the net worth of Canadian households, lowered economic growth and reduced tax revenues. Consumer confidence would be damaged, labour mobility would be impeded, and unemployment would stay elevated.”

In a desperate attempt to save paycheques, this urgent communication has been sent out to all member Realtors (click on image to enlarge):

Meanwhile, despite concerns that these moves could kill the real estate market, the full court press is being applied to get the general public to BUY, BUY, BUY before they are priced out forever.

Royal LePage has come out with a report predicting real estate prices increasing in Canada in 2011 far more than expected. The report is titled, "Strengthening Economic Recovery and Low Interest Rates Point to a Stronger Than Anticipated 2011 for Housing Market".

This is in conjunction with the R/E industry's own version of the Art of Media Manipulation. Newspaper articles touting the R/E line magically appear at the same time.

The Globe and Mail tells us "House prices to see steady climb", the Toronto Star tells us "Canadian housing prices set to rise in 2011" and the Toronto Star warns that a looming "Buying frenzy to push up house prices".

Seems to me if the government simply tightens regulations, prices will fall and then people can buy houses at affordable prices, a move which will make Carney happy and keep Realtors employed as more houses trade hands.

But I guess if you eliminate the huge commission from the sale of multi-million dollar homes, Realtors will have to work harder.

Silly me.

Over in the Silver Corner

Two interesting items for you from yesterday in Silver.

First from Zero Hedgee comes this announcement that the CFTC will be voting on 10% position limits next week in an attempt to control the rampant manipulation going on in precious metals.

Second is this thread on a Yahoo messageboard. This could be interesting just for the speculative value if this goes viral on the internet:

  • New Year Strategy from Blythe's Former Traders 5-Jan-11 02:04 pm


    This is what I am hearing from your former traders (who made "very interesting career decisions"). Well it seem that they are on to a new scheme to corner the Comex and drive the price of silver up $10 to $15 dollars in a matter of weeks.

    The strategy is as follows. We know that Comex only has 105 million ounces of silver of which only 50 million ounces are available for delivery. (I personally don't believe the Comex numbers are anywhere near that high, but that is neither here nor there for now.) Well, all it would take is 10,000 contracts on the Comex to buy up all the "available silver" at the Comex and 20,000 contracts to deplete it completely. The current front month March OI is north of 78,000.

    Watch the OI closely. Blythe's former traders are advising major hedgefunds and billionaire investors to buy up as many contracts as possible as March 1 approaches and deposit the cash needed to stand for delivery for the month of March. The purpose is not necessarily to bust the Comex but to force the Comex to pay a premium (some as much as 30 percent) for cash settlement. Think about it. If a group of hedgefund gets together and bankroll $1 billion, they can buy more than 30 million ounces of silver. Of course, the contract sellers like The Morgue cant deliver the silver so a cash settlement is the only recourse. So what's wrong with $200 million in profit on a $1 billion investment that takes less than 4 weeks total?

    Guess what Blythe? Your former traders are advising everyone they know to put on this trade come the first week of February. Is this what happened in the December contracts? Is this why silver went from $22 on September 30 to $29 by December 1? How much do you think silver will spike in February as we approach March 1? The traders think silver will be north of $45. Heck it went over $9 as we approached December and everyone who got a pay off in terms of a premium cash settlement will be back for more. And they are all gonna be bringing friends to partake in the bounty.

    Your former traders are telling everyone who would listen that all they need to do is purchase a huge amount of March contracts near the end of February and stand for delivery and they will all make 20 percent in a matter of days. Is this what you are hearing Blythe? If so, shouldn't you let the price of silver move up so that you can get some physical to deliver before March 1?

    Either way

    You're going home in a body bag, do-da, do-da...

Ahh fun times everywhere, eh?



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1 comment:

  1. Why is it that this silver story is so captivating? So tired tonight... Its hard trying to understand how all the pieces and players fit together. Position limits to be enforced? Really?? Probably not. ...V