An update on a property in Richmond: House that sold for 33% below assessed value in 2012 now in foreclosure.

Faithful reader will recall 6691 Gibbons Drive in Richmond.

Back in Oct/Nov 2012 we made a couple of posts about this property. The hook?  The property was listed - and sold - for 33% less than it's assessed value. Assessed at $1,258,600, it went for $845,000.

Pretty good deal, eh? Well… apparently it wasn't for that particular buyer.

Word comes from Richmond realtor Arnold Shuchat that the property is now a foreclosure sale.  From Shuchat's blog:

Another Court ordered sale (foreclosure sale) hit the market today at 6691 Gibbons-see MLS# V1054760. This property was listed back in March 2012 for $1,258,000 and eventually sold for under $850k in November of 2012. It is just listed for sale at $1,049,000 and is assessed for property tax purposes at $1,112,000.

Foreclosures usually mean that mortgage commitments are not being honoured. Often the owner stands to lose some equity in this process as well as costs for legal fees. Many times the lender will also lose depending upon the loan to value of the property

The listing says: "Excellent building lot or investment property in a prime location surrounded by new Million Dollar homes. Wide 84' frontage with a total of 7834 sq ft allows you to build a 3600 sq ft home plus a 3 car garage. Solid 2 level 2550 sq ft 4 bedroom + den home. Excellent location within walking distance to Thompson Elementary, Burnett Secondary & Terra Nova Shopping Mall"

Ya gotta love how it's being listed at the current assessed value and not for what it sold for.  It will be interesting to see what it sells for this time.

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More Concerns Out Of China?

The bad news continues to flow out of China. The Telegraph reports that: Tumbling Chinese yuan sets off 'carry trade' rout, triggers derivatives contract

China’s yuan has suffered its biggest one-week fall in 20 years, nearing key trigger levels that threaten a wave of forced selling and mounting stress for those with dollar debts.

The jitters come amid reports of fire-sales of Hong Kong property by Chinese investors desperate to raise cash, some slashing their prices by 20pc for a quick sale. A liquidity squeeze in mainland China has already led to the collapse of Zhejiang Xingrun real estate this week with $570m of debts, the biggest property failure so far.

Meanwhile Hong Kong's The Standard, in an article titled Bankruptcy Looms, reports that in addition to the solar, coal and real-estate developer companies that are on everyone's radar as potential future bankruptcy candidates, one can also add steel makers to the list, with its report that Highsee Group, the largest private steel makers in Shanxi province has defaulted on CNY3 billion of debt, unable to repay its bonds on time.

Finally, a South China Futures Brokerage shuts down on "significant business risks"

Will the ripples be felt here?

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Wed Post #2: Is China's 'Minsky Moment' at hand?

Numerous articles have been written about the tremendous debt that is being created world wide, and in China specifically.

Many are wondering if the 'Minsky Moment' is at hand for China.

The Minsky Moment refers to the moment at which a credit boom driven by speculative and Ponzi borrowers begins to unwind. It is the point at which Ponzi and speculative borrowers are no longer able to roll over their debts or borrow additional capital to make interest payments. Minsky states this usually occurs when monetary authorities, in order to control inflationary impulses in the economy, begin to tighten monetary policy. The PBOC’s latest Q4 Monetary Policy Report indicates it intends to continue to tighten liquidity in order to control the excessively fast growth of shadow banking credit.

Of the $1.8 trillion in Trust Loans provided by the shadow banking sector, nearly $600bn, or RMB 3.6 trillion will come due in 2014.

Defaults or near-defaults have begun to occur with regularity over the past three months and are likely to pick up in quantity significantly over the next year. As it is becoming more clear that investors may not get all of their money back, interest rates on trust products, wealth management products (WMPs), corporate bonds, and bank loans have risen by roughly 200 basis points in the last year.

Earlier this month China experienced it's first ever corporate bond default.

And the fallout has begun. WKZO notes: As credit tightens at home, Chinese sell Hong Kong luxury real estate.

HONG KONG (Reuters) - Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43 percent of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell coincides with a forecast 10 percent drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan ($565.25 million) heightened concerns that financial risk was spreading.

"Some of the mainland sellers have liquidity issues - say, their companies in China have some difficulties - so they sold the houses to get cash," said Norton Ng, account manager at a Centaline Property real estate office close to the China border, where luxury houses costing up to HK$30 million ($3.9 million) have been popular with mainland buyers.

Property agents said mainland Chinese own close to a third of the existing homes that are now for sale in Hong Kong - up 20 percent from a year ago. Many are offering discounts of 5-10 percent below the market average - and in some cases as much as 20 percent - to make a quick sale, property agents and analysts said.

Is it a precursor to what we are about to see in Vancouver? If so ponder this chilling quote:

"Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago," said Joseph Tsang, managing director at Jones Lang LaSalle. "But now they want to cash in as liquidity is quite tight in the mainland."

Panicked Mainland Chinese appear desperate for cash:

In a nearby development called The Green - developed by China Overseas Land and Investment - about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainland Chinese in 2012.

China Overseas Land was not immediately available to comment.

"Some banks were chasing them (Chinese landlords) for money, so they need to move some cash back to the mainland," said Ricky Poon, executive director of residential sales at Colliers International. "They're under greater pressure from banks, so they're cutting prices."

In West Kowloon district, an area where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some Chinese landlords are offering discounts on the higher-end, three- to four-bedroom apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 square foot (121 square meter) apartment at the Imperial Cullinan - a high-end estate developed by Sun Hung Kai in 2012 - for HK$19.3 million, 17 percent less than the original price. The landlord told agents to sell the flat "as soon as possible," said Richard Chan, branch manager at Centaline Property in West Kowloon.

"The most important thing for them is to sell as soon as possible," Centaline's Chan said. "In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market, that's for sure."

It will be interesting to see if this selling frenzy occurs on our shores as well.

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Wed Post #1: Ron Paul On The "Illusion" Economy: "We are bankrupt and have been encouraged to take on more debt"

"So sometimes you have housing bubbles and sometimes you have housing busts, then you have housing bubbles and bond bubbles that's all [the] result of the manipulation of interest rates, which is my real objection to it." 

"So one half of our economy is socialized, because it's the control of the money supply, the control of the interest rates," "We don't believe they're capable of doing it and I think history shows that the record is pretty bad." 

"The economy on the surface looks good, but if you look at hardcore unemployment and standard of living of the middle class, there's still a lot of problems out there... So if we look only at the stock market, then we're in denial."

(Hat tip: Zero Hedge)

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Dark clouds over Hong Kong's property market as 'perfect storm' looms

Interesting article in the South China Morning Post titled, "Dark clouds over Hong Kong's property market as 'perfect storm' looms."

It seems real estate prices and sales have fallen significantly since the Chinese government instituted measures last year to cool the real estate sector. So much so that analysts are expecting more gloom in the months ahead.

Overall property sales plunged to a 23-year low last year, a development that has fuelled fears Hong Kong will repeat the major downward trends the colony has experienced in the past.

What's evolving is seen as the perfect storm: government curbs that crimp demand at a time of increasing supply combined with an imminent interest rate rise that threatens to set off a severe price correction.

A collapse in demand that saw overall property sales plunge to a 23-year low of 70,501 deals last year has fuelled fears of a repetition of major downward trends of the past.

Amid the continuing slide, which began when the government imposed a hefty increase in stamp duty in February last year, gloom-and-doom forecasts of prices plunging as much as 35 per cent in two years have emerged.

"There are strong similarities with the 1997 bubble, but the exceptionally low level of interest rates has encouraged homebuyers to borrow more in this cycle than in 1997. So the market is far more dependent on inter-generational transfer of equity, low supply and low interest rates," said Andrew Lawrence, the managing director of real estate equities research at Malaysian investment bank CIMB Securities.

Before 2009, about 75 per cent of property transactions required a mortgage, Lawrence said, but following a drop in mortgage rates, now at a historical low of about 2.2 per cent, nearly every property transaction had been mortgage-funded.

One of the most bearish property analysts in the city, Lawrence said home values could fall more than 50 per cent in a worst-case scenario if the government did not relax the higher stamp duties. 

The real estate collapse in 1997 had no floor because it was driven by economic contraction, which created a downward spiral.

A repeat of that today would have stunning repercussions.

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Now it's the Chinese Millionaires in Richmond banding together and threatening to sue.

In our last post (Chinese Millionaires In Beijing Upset Canada Terminating Investor Program, Threaten to Sue) we told you about how the Federal Government of Canada, in last month's Federal budget, had cancelled the International Investor Program (IIP).

Under the scheme, would-be migrants worth a minimum of $1.6 million loaned the government $800,000 interest-free for a period of five years. The simplicity and low relative cost of the risk-free scheme made it the world's most popular wealth immigration programme.

In response 10 investor applicants  in Beijing held a news conference to plead to the Government of Canada not to dismiss the pending 45,500 applications that had been frozen in the system.

Their desire? Process those applications before terminating the program. Those investor applicants (some of whom had applied five years ago) also stated that they were discussing their options with lawyers in Canada and whether to sue for compensation for the years they had been waiting.

Well now it appears it's not just applicants in Beijing who keen to litigate.

40 Chinese community groups in the Vancouver suburb of Richmond gathered this week to also protest the cancelation of Program - and to discuss their own plans to sue the Federal Government.

According the the Richmond News:

Chinese community groups gathered in Richmond to protest the cancelation of the Investor Class Program in last month’s federal budget, and to consolidate their efforts to fight, and potentially sue, the government.

Banners with messages such as, “We love Canada. We are willing to contribute” and “Say no to the latest changes of immigration policy” provided the backdrop Wednesday for the six-person panel, which addressed the crowd about the economic implications of cancelling a program which expedites immigration for the wealthy.

Chris Ho, an immigration lawyer, who was the only speaker to address the crowd in English, pointed out the mixed messages being sent by the government in regards to investment and immigration.

“The immigration minister had announced ... that a new investor program would be coming. That was in January of 2014. In February, we have the minister of finance announce that the program is being cancelled.”

In justifying the cancellation, Minister of Immigration Chris Alexander is reported as saying, “there is also little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country.

“Overall, immigrant investors report employment and investment income below Canadian averages and pay significantly lower taxes over a lifetime than other categories of economic immigrants.”

Ho argues that the minister has no evidence. “Do we have a very conclusive study or information that can point us to that? I don’t think so,” he said.

But the paying of tax isn't the only angle the group is pursuing. There is, in their words, "the issue of expectations":

“There is a doctrine called legitimate expectation. This is not new. For someone who has already filed an application, they would expect someone to deal with the application. You can’t just cancel the application without doing anything.”

The groups also speculated on the economic impact of the cancellations:

Steve Kou, a representative from the business community, gave his speech in Chinese, but later answered questions in English about the economic impact of the lost of the investor program.

“If the cancellation happens, there are no new direct investors in Canada or B.C. So if there is no more money coming to Canada, the growth rate will slow further,” said Kou.

Kou stated that the cancellation would have a huge impact on the B.C. economy, in almost all areas, starting with real estate.

“The first area would be real estate. If you cannot immigrate to Canada, why buy the properties here?”

And in an attempt to leave no racist card unplayed, the groups also threw out this beauty:

Sophia Huang, another lawyer on the panel, challenged the government’s attitude, stating that Chinese immigrants came to Canada 125 years ago as railroad builders, and paid a head-tax, which was recently apologized for, but now they are saying “please don’t come.”

“We are saying, ‘Listen, you need to communicate with us better. We would like to come here, this is our country, not only your country, it’s ours. Our Chinese ancestors built this.’”

The coalition, supported by more than 40 community organizations, is calling for supporters to vote for people who will speak for the Chinese voice. It is also threatening a possible class action lawsuit for those affected by the immigration changes.

Oh my.

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Tues Post #2: Chinese Millionaires In Beijing Upset Canada Terminating Investor Program, Threaten to Sue

Last month, while we were enjoying a bit of a break, one of the bigger news stories was the fact that Canada axed the Immigrant Investor Program (IIP).

The announcement, delivered by Finance Minister Jim Flaherty as part of the government's new budget, meant that an estimated 45,500 mainland Chinese in the queue for visas in Hong Kong would have their applications "eliminated" and their fees returned.

The program had been in a state of limbo since 2012, when applications to the scheme were frozen.

Under the scheme, would-be migrants worth a minimum of $1.6 million loaned the government $800,000 interest-free for a period of five years. The simplicity and low relative cost of the risk-free scheme made it the world's most popular wealth migration programme.

But as Flaherty noted in his budget speech which axed the program:

"For decades, [the investor scheme] has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require."

The Immigrant Investor Programme, which has brought about 185,000 migrants to Canada, was instrumental in facilitating an exodus of rich Hongkongers in the wake of the 1989 Tiananmen crackdown and in the run-up to the handover. More than 30,000 Hongkongers immigrated using the scheme. About 67,000 mainlanders have migrated to Canada under the IIP.

Many believe that influx flowed largely to Vancouver and was instrumental in rapidly inflating our current housing bubble.

Ian Young, who writes for the South China Morning Post, attempted to quantify what the elimination of the program might mean for Vancouver real estate:

High property prices are the defining factor of life in this city. Yet despite a wealth of punditry, few have tried to actually calculate the potential impact of the demise of the millionaire migration scheme, which has brought tens of thousands of rich Chinese and others to Vancouver. 

So here goes.

From 2005 to 2012, the federal IIP brought 36,951 rich people to British Columbia. That’s an average of 4,619 per year, representing 1,340 households at current averages under the scheme. A 2011 study showed 90.4 per cent buy homes, suggesting 1,211 actual purchasing households per year have been removed from the Vancouver market by last week’s decision (since almost the totality of BC investor migrants live in its largest city). This is equivalent to only 4.25 per cent of the 28,524 residential sales in greater Vancouver last year.

At this stage it’s crucial to note that reducing the sheer number of sales doesn’t necessarily move a market down (the worst week of the 2008 stock market crash saw record trading volume in New York). But extracting buyers who pay above prevailing prices certainly does.

And I can think of six “known unknowns”, five of which will undoubtedly increase the impact of those 1,211 lost households.

First the relatively good news - for owners, anyway. We don’t know how many would-be IIP arrivals will find some other way of getting to Vancouver. Some will. Most probably won’t, because if options other than a years-long queue for the costly IIP existed, they would have taken them.

And now for the five scary bits, that will assuredly magnify the impact of those lost purchasing households.

• 1. Investor migrants are rich, so they buy more costly properties, and it’s the price of expensive detached homes that fuel Vancouver’s market. Condo and townhouse prices rose by a third from 2005 to 2012, but detached prices doubled. Under the most recent IIP benchmarks, principal applicants must have been worth a minimum of C$1.6 million. Compare that to the Vancouver average household worth of C$662,600 (Environics Analytics).  

• 2. Some IIP households buy more than one property in Vancouver. 

• 3. Some high-value purchases have a cascade effect through the market. For example, when a Chinese investor immigrant pays C$3 million for an elderly widow’s rancher on Cambie Street, that sale triggers the purchase of a three-bedroom townhouse in Kitsilano and down payments on condos for her two adult children. Such things happen - not always, but sometimes.  

• 4. Now for one of the two biggest concerns. Our calculations so far only cover actual arriving immigrants. But how many of the 65,000 would-be immigrants who were dumped from the IIP queue last week had already bought in Vancouver? Of the applicants from 2009-2011 who made up the bulk of the backlog, 62.8 per cent were bound for BC. That’s an estimated 11,866 households. Not only have these households been removed from the pool of future purchasers, it’s reasonable to assume that some will soon be liquidating existing Vancouver holdings.  

• 5. The final unknowable is human nature. Already talk of an impending disaster in the market is a feature of Chinese-language forums. How many non-IIP owners will head for the exits too, and how fast will they do so? 

To be sure, there is no way of telling how much these five factors will come into play. But let’s make some conservative assumptions regarding the first three. Imagine that homes bought by IIP households cost twice as much as the average residential sale; considering that the rich Chinese who make up 81 per cent of Vancouver’s investor migrants are concentrated in expensive neighbourhoods of Richmond and the Westside, that’s not a stretch. Now imagine that each home-purchasing IIP household buys not one, but two properties (over how many years? Irrelevant, since the effect will be annualised over time). And let’s say that an IIP purchase triggers another purchase that would not otherwise have occurred in 25 per cent of cases.

The annual effect of the extraction of those 4.25 per cent of sales doesn’t look so insignificant anymore. On a dollar basis, our scenario balloons the figure to 21.25 per cent in lost sales per year. This estimate applies across the entire market; the effect will be magnified in the Westside and Richmond.

The actual impact remains to be seen and it's a story local real estate watchers are following very closely.

Which brings us to todays developments (and you gotta love this).

At a news conference in Beijing yesterday, 10 IIP investor applicants pleaded to the Government of Canada not to dismiss the 45,500 applications that had been frozen in the system.  Their desire?  Process those applications before terminating the program.

It seems while waiting for their approval, many of those 45,500 applicants had already come to Vancouver, bought homes and had enrolled their children in schools here.

Father-of-two Yu Qingxin, who manages commercial buildings, schools and hospitals in China, said he had already bought a house in west Vancouver for nearly $2 million Canadian dollars ($1.8 million) in preparation to emigrate… 

Another applicant, Du Jun, said he had moved his child out of the Chinese school system to a Canadian school near Beijing. Now, after two years studying at this school, it is almost impossible for his child to return to the Chinese education system, he said.

But now, with the termination of the IIP and the pending applications terminated, investor applicants (some of whom had applied five years ago) are discussing their options with lawyers in Canada and whether to claim compensation for the years they had been waiting.

Immigration consultant Larry Wang said that Canadian government's policy was "unjustified" and the investor applicants want Canada to "correct its mistake."

"They are not refugees. They can have a very good life in China. They just want to have a better life in Canada," said Wang, a Beijing-born Canadian.

Wang said it was Canada's right to stop its investor program, but it should not disqualify candidates who had already applied.

Umm… perhaps the issue here is that those applicants shouldn't have considered their application a fait accompli?

If you moved to Canada before being approved and then you application was, in effect denied, is Canada really to blame for your gamble?

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Tues Post #1: Is studying Gen Y providing a wake up call for Boomers in Real Estate?

“Boomers, wake up to this. A recent survey by Sun Life Financial suggests almost one in four Canadians see their house as their main source of income in retirement. Newsflash: Gen Y may not be able to pay the price you’re expecting to get for your home when you sell in the years to come.”

This gem of a quote comes from the Globe and Mail's Ron Carrick's latest column titled "Think Gen Y will prop up Canada's housing market? Think again."

Carrick closes with:

"If it’s not Gen Y’s economic struggles that cool the market, it will be the total disconnect between rises in house prices and income “

Amen.

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World's Biggest Bond Fund Cutting Canadian Holdings Due To Anticipated Real Estate Downturn Of Up To 30%

Pimco, the world’s biggest bond fund,is slashing its holdings in Canada due to an anticipated decline of 10% to 30%.

Some excerpts from the Globe and Mail article.

Pimco’s primary Total Return Fund, with assets of almost $250-billion (U.S.), cut its holdings of Canadian debt to 2% in the third quarter of last year, compared to 4% 12 months earlier.

About a month ago, on Pimco’s website, Mr. Devlin wrote that there is little chance of an all-out meltdown in Canadian real estate and that he expects a more orderly cooling.

A full crash, he wrote, would only be sparked by developments he doesn’t see in the cards, such a sharp hike in interest rates, a sharp rise in unemployment or a disruption to mortgage credit.

But you have to wonder… what other dominos would fall if real estate declined 20%? 

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Sat Post #2: Vancouver's Average Detached Home Price sets another record high

Once again we thank realtor Larry Yatkowsky who promptly provides monthly statistics for the interested to peruse.

The big news for this month? Vancouver's detached home price hits another record high at $1, 361,023.

VMD over on Vancouver Condo Info provides an interesting comment on February's real estate sales.

Vancouver February 2014 estimated sales will come in at approximately 2,500.  That's an impressive 39% increase over February 2013.  Presumably the R/E media will highlight this fact as evidence the real estate market is surging back.

On the flip side, the February 2014 sales are -4% when compared to the 10 year average.  January 2014 sales, when compared to the 10 year average, had surged 6%.  So February 2014's totals failed to maintain that sales surge.

As VMD says, wonder which number the papers will use as headline?

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Sat Post #1: PBS examines the mysterious epidemic devastating the west coast starfish population

PBS out of Seattle is examining the mysterious epidemic devastating the local starfish population.

Starfish, also known as sea stars, are wasting away by the tens of thousands, not just in Puget Sound, but up and down North America’s Pacific Coast. And nobody knows why. It seems the Sea stars are experiencing a mass die off all the way from Southern California to Alaska, with mortality rates up of 97% according to biologists. The die off has spread in a matter of 2 months, from just a few areas, to the whole Pacific ocean coast.

Shortly after the Washington State observations, a mass die-off of both Sunflower stars (Pycnopodia helianthoides) and sun stars (Solaster dawsoni) was observed in the waters around Vancouver, BC at the end of August and the beginning of September, 2013.

At first, only a certain species known as the sunflower star seemed to be affected. Then it hit another species, then another. In all, about a dozen species of sea stars are dying along the West Coast. It’s been coined sea star wasting syndrome.

But researchers say it’s too early to connect these outbreaks.

In addition we note that back in August, Washington's blog posted an article asking: Is Fukushima Radiation Contaminating Tuna, Salmon and Herring On the West Coast of North America?, an article in which Washington draws attention to various other developments in the waters off our coast.

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Fri Post #3:Bloomberg reports the obvious. Says Gold Price "Manipulated For A Decade", repeatedly slammed lower.

Bloomberg is out with a story headlined "Gold Fix Study Shows Signs of Decade of Bank Manipulation" and confirms what many have long suspected about Gold and Silver manipulation in the market.

The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say…

“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”

The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.

The report identified patterns that are suspicious in the extreme. And with the revelations about fixing in other markets, such as Libor, have all but confirmed that the market is being blatantly manipulated in the minds of many investors

Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behavior. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. The moves weren’t replicated during the morning call and hadn’t happened before 2004, they found.

Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.

There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards, Abrantes-Metz said in a telephone interview this week.

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Fri Post #2: CMHC Announcement - Much Ado About Very Little?

So the big CMHC announcement, which had the real estate industry all a tither, was made this morning and the result was a bit of a yawner.

As we speculated yesterday, it was all about CMHC premiums.

Starting in May Canada's national housing agency has increased the amount of money that homeowners with less than 20% down payments must pay to insure their mortgages.

On 95% Loan to Value mortgages the standard premium rises from 2.75% to 3.15%. Under the old system, that borrower would pay an insurance premium of $6,875 for a $250,000 mortgage. Under the new system, their premium would jump by $1,000 to 7,875. On a typical 25-year mortgage at 3.49 per cent, that person would be paying $4.98 more on their mortgage payment, every month, to pay down the fee.

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Fri Post #1: More West Coast Fukushima radiation stories in the news

More on the Fukushima radiation story hitting Vancouver and the North American west coast as the topic hits mainstream media.

You will recall we posted two days ago about the approaching plume of radiation in the ocean from the disaster at the Fukushima Nuclear Plant.

We also referenced an NBC story about how something is killing all the starfish all up and down the west coast of North America.

In another disturbing development is this news story telling us something is also killing off all the oysters and scallops off the BC coast: Mystery surrounds massive die-off of oysters and scallops off B.C. coast:

Something is killing oysters and scallops in dramatic numbers, causing suppliers to warn of shortages and producers to worry about the future of their businesses. The cause is unknown, but ocean acidification is the main suspect.

"The water is clean… we haven’t had any environmental concerns, so I’m not sure what’s going on,” said Mr. Perrault, who owns Little Wing Oysters and is president of the BC Shellfish Grower’s Association.

Yesterday we told you about the respected Scientific American Magazine  which had just published an article titled "Radioactive Isotopes from Fukushima Meltdown Detected near Vancouver"

On another front, News1130 ran a story asking: How much radiation testing is being done in BC? - Doctors maintain there is no threat to British Columbians:

VANCOUVER (NEWS1130) – Experts continue to insist we’re under no threat, despite low-level radiation from Japan being found off the BC Coast in recent months.

Radiation from Japan’s Fukushima plant meltdown three years ago has reached our offshore waters, according to the Bedford Institute of Oceanography in Nova Scotia.

Provincial Health officer Dr. Perry Kendall is among those saying it’s nothing to worry about. “All of the experts that I’ve consulted with both in Canada and in the US say there is no concern.

While Jay Ritchilin of the David Suzuki Foundation agrees there is no immediate concern, he says government monitoring remains minimal.

“A proactive government response with active monitoring, regular communication, some education about what various levels of radiation do and don’t mean, just seems to me to be something you would expect a government to do,” he tells us.

Ritchilin adds most of the research comes from independent groups.

CBC picked up on the radiation testing theme and published this piece: Fukushima radiation on B.C. coast measured by crowdsourcing - Scientists from Woods Hole Oceanographic Institution recruite 'citizen scientists' to collect data. The most stunning part is that an American Oceanographic Institute is calling on civilians to do water testing because government isn't:

People along the British Columbia coast are being asked to step in where governments in Canada and the U.S. have not — to measure radiation from Japan's crippled Fukushima Daiichi nuclear plant in B.C.'s ocean waters.

Scientists from the Woods Hole Oceanographic Institution in Woods Hole, Mass., are calling on the public to collect data from B.C.'s oceans for a crowd-funded research project.

The website ourradioactiveocean.org is recruiting "citizen scientists," ordinary people who can raise $600 for a home testing kit and then take water samples to return to Woods Hole for analysis.

"I think it's important to get measurements, and since the governments aren't doing it, we thought the public has a large concern we'd ask them help collect and fund the sampling," said Woods Hole Oceanographic Institute researcher Ken Buesseler.

Although it has been urged, Buesseler says there is incomplete monitoring, and little data, for radiation in Pacific coastal waters from either Canadian or American authorities.

Fisheries and Oceans Canada have taken measurements along the coast up to 1500 km west of Vancouver for cesium 134.

Isotopes from the meltdown three years ago were predicted by some to reach North America this year.

"There's a great alarm, when you don't know. People can speculate all kinds of things," said Buesseler.

Early results appear to be good news.

Eight samples are already in, exclusively showing isotopes from natural sources, or nuclear weapons testing from decades ago.

"But we think it's important to monitor that so people have some confidence that the waters are safe," Buesseler said.

He said from the available models and data, levels of Cesium-134 are well below levels considered safe to drink. Scientists do not believe radiation from Fukushima will cross the ocean in anything more than trace amounts.

He said the institute decided to fill the gap in information because dire warnings online of the potential impact of radiation from Fukushima was generating too much public fear, without any data to base it on.

As always, we'll keep an eye out for more news on this issue.

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Thurs Post #2: So what's the speculation on CMHC's announcement tomorrow?

Scanning the web, the blogosphere is all a twitter about the CMHC news conference tomorrow but there seems to be very little concrete info about what's coming.

Even Garth Turner, who normally seems to have connections with upcoming announcements, is reduced to mere speculation.

So what will Evan Siddall, CMHC's new CEO, have in store for Canadians tomorrow?

The Globe and Mail reported in December that there has been pressure on CMHC to raise its premiums and many believe this is what the big presser is about. CMHC has not raised its premiums since the late 1990s, and actually lowered them between 2003 and 2005.

While premiums are technically paid by the lenders, the cost is passed along to borrowers, so any increase will be felt by borrowers. 

Premiums vary depending on the size of the down payment and are calculated as a percentage of the mortgage. The smaller the down payment, the higher the premium. For example, the standard premium is 1% for a mortgage with a loan-to-value ratio of 80%, and 2.75 percent for a mortgage with a loan-to-value ratio of 95%.

CMHC has two private-sector rivals: Genworth MI Canada Inc., and Canada Guaranty Mortgage Insurance Co. Industry sources say the private-sector players have been reluctant to raise prices on their own, for fear of losing business, but they have told the federal government that they would like to see CMHC raise its premiums.

The private-sector players argue that higher premiums are overdue because mortgage insurers have been required to bolster the amount of capital that they set aside in recent years, and flat prices coupled with higher capital requirements have put pressure on profit growth.

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Thursday Post #1: Scientific American Magazine - "Radioactive Isotopes from Fukushima Meltdown Detected near Vancouver"

Following up on yesterday's post, we note that Scientific American Magazine published an article on Feb. 25th, 2014 titled  "Radioactive Isotopes from Fukushima Meltdown Detected near Vancouver"

The subheading stresses that "the levels of radiation detected are well below the safety limit for drinking water". 

Radiation from Japan's leaking Fukushima nuclear power plant has reached waters offshore Canada, researchers said today at the annual American Geophysical Union's Ocean Sciences Meeting in Honolulu.

Two radioactive cesium isotopes, cesium-134 and cesium-137, have been detected offshore of Vancouver, British Columbia, researchers said at a news conference. The detected concentrations are much lower than the Canadian safety limit for cesium levels in drinking water, said John Smith, a research scientist at Canada's Bedford Institute of Oceanography in Dartmouth, Nova Scotia.

Tests conducted at U.S. beaches indicate that Fukushima radioactivity has not yet reached Washington, California or Hawaii, said Ken Buesseler, a senior scientist at the Woods Hole Oceanographic Institute in Woods Hole, Mass.

"We have results from eight locations, and they all have cesium-137, but no cesium-134 yet," Buesseler said. (Isotopes are atoms of the same element that have different numbers of neutrons in their nuclei. In this case, cesium-137 has more neutrons than cesium-134.)

The scientists are tracking a radioactive plume from Japan's Fukushima Daiichi nuclear power plant. Three nuclear reactors at the power plant melted down after the March 11, 2011, Tohoku earthquake. The meltdown was triggered by the massive tsunami that followed the quake.

The initial nuclear accident from the Fukushima reactors released several radioactive isotopes, such as iodine-131, cesium-134 and cesium-137. Cesium-137 has a half-life of 30 years and remains in the environment for decades. Cesium-134, with a half-life of only two years, is an unequivocal marker of Fukushima ocean contamination, Smith said.

"The only cesium-134 in the North Pacific is there from Fukushima," he said. Cesium-137, on the other hand, is also present from nuclear weapons tests and discharge from nuclear power plants.

Smith and his colleagues tracked rising levels of cesium-134 at several ocean monitoring stations west of Vancouver in the North Pacific beginning in 2011. By June 2013, the concentration reached 0.9 Becquerels per cubic meter, Smith said. All of the cesium-134 was concentrated in the upper 325 feet (100 m) of the ocean, he said. They are awaiting results from a February 2014 sampling trip.

The U.S. safety limit for cesium levels in drinking water is about 28 Becquerels, the number of radioactive decay events per second, per gallon (or 7,400 Becquerels per cubic meter). For comparison, uncontaminated seawater contains only a few Becquerels per cubic meter of cesium.

Cesium-137 levels at U.S. beaches were 1.3 to 1.7 Becquerels per cubic meter, Buesseler said. That's similar to background levels in the ocean from nuclear weapons testing, suggesting the Fukushima plume has not reached the U.S. coastline yet, he said.

The new monitoring data does not show which of two competing models best predicts the future concentration of Fukushima radiation along the U.S. West Coast, Smith said. These models suggest that radionuclides from Fukushima will begin to arrive on the West Coast in early 2014 and peak in 2016. However, the models differ in their predictions of the peak concentration of cesium — from a low of 2 to a maximum of 27 Becquerels per cubic meter. Both peaks are well below the highest level recorded in the Baltic Sea after Chernobyl, which was 1,000 Becquerels per cubic meter.

"It's still a little too early to know which one is correct," Smith said.

Fukushima’s radiation reached coastal Canada first because of the powerful Kuroshio Current, which flows from Japan across the Pacific. The plume will then flow down the coast of North America and circle back toward Hawaii, models predict.

The impending arrival of radioactive contaminants from Fukushima has raised concerns among coastal residents in the United States and Canada. But oceanographers and radiation experts say the radiation levels will be too low to threaten human health.

"These levels are clearly not a human or biological threat in Canada," Smith said.

But Buesseler thinks even low levels of contamination merit monitoring, both for human health information and for the wealth of data about Pacific Ocean currents such monitoring could provide. On Jan. 14, he launched a website called "How Radioactive is Our Ocean?", where the public can make tax-deductible donations to support the analysis of existing water samples, or propose and fund new sampling locations along the West Coast.

And at Fukushima, radioactive water continues to escape from the damaged power plant into the ocean. A new leak was reported last week, although that one did not empty into the ocean.

As mentioned yesterday, we will continue to follow this story and update with items of interest.

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Wed Post #2: More Mortgage Changes from CMHC on Friday? - Updated

Are there more, significant changes coming our way from CMHC this friday?

The website Mortgage Trends posted today that CMHC has advised reporters that will be making an announcement Friday at 11:00 A.M. EST.

What's interesting is that they’ve notified reporters well in advance, which apparently is somewhat unusual. So unusual, in fact, that it has many speculating that it will be a major announcement. Some suggest CMHC will be increasing the down payment required for CMHC for insured mortgages from the current 5% to back to 10%.

Reuters, however, ran a story on Feb 24th, 2014 which noted Federal Finance Minister Jim Flaherty said there were no imminent plans to intervene in the mortgage market:

In the interview, Flaherty indicated he is not overly concerned about the state of the housing market and said, as expected, there are no imminent plans to intervene in the mortgage market to curb lending after having done so four times already since 2008. But he said it would be "unwise" to rule it out as a tool in the future… For now, the minister is focused on increasing scrutiny of the mortgage insurance business of the federal housing agency, the Canada Mortgage and Housing Corporation (CMHC), and encouraging the growth of private mortgage insurers.

This real estate blog offers their opinion on what the changes might entail:

Option 1 – Some Form of Privatization? This would be big news and create great political fodder, if this was part of the announcement would likely be under taken by a partial break up of sectors with some remaining core functions of the crown corporation. Australia took a similar approach with success.

The recent budget included the statement “The Government continues to adjust the housing finance framework to restrain the growth of taxpayer-backed mortgage insurance and securitization,” which have also been a running theme to statements made by the Finance Minister. Reducing future taxpayer burden is clearly part of the agenda,.So the question that begs here, is what step could they take to reduce taxpayer risk, which leads to our Speculation Options 2 and 3:

Speculation Option 2 – A change to the down-payment requirements: A return to 10% down-payment structure, eliminating the 5% down option.

Speculation Option 3 – A reduction in the amount of insurance protection offered: Will it be less geared to impact the end consumers of mortgages and more to the banks in as much that the reduction will be in the security provided to the bank through CMHC reducing the risk from 100% of loan value to a similar percentage that the likes of Genworth and AIG now see at 90% of loan value. This would also even up the competitive playing field putting CMHC Insurance on par with Genworth and AIG.

My money is on Speculation Option 3 and here is why. It doesn’t impact the end consumers which would for lack of better words tick off a lot of potential home buyers (voters), have a big impact on the market (from construction to industry professionals). It would also be a step towards privatization, just like the Receiver General Fee structure implemented within the budget…is that not the trend here?

At the end of the day we only speculate and will await with anticipation what this major player in the real estate insurance market has to say this Friday!

We shall see on Friday.

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Wed Post #1: Fukushima’s radiation is approaching the West Coast

Yet another reason for offshore money not to be invested in Vancouver real estate comes with the latest scare about nuclear radiation.

In case you missed it yesterday, Bloomberg is reporting that radiation from the Tsunami damaged Fukushima nuclear power plant in Japan has been "significantly undercounted." Of particular concern for us on the Wet Coast is that the radioactive plum of water from the damaged reactor will be hitting our shores, possibly as soon as April.

How dangerous is that plume (shown above in a computer generator model)?

At the moment, no one is sure.

So far only minute traces of radiation have been recorded in British Columbia waters. This will increase as contaminants disperse eastwards on Pacific currents. But scientists are quick to stress that even the peak measurements will be well within the limits set by safety authorities.

Notwithstanding those assurances, serious concerns are being raised and alarms bells are sounding in the eco system.

Back in December 2013, NBC reported on a mass dying of starfish on the West Coast. As NBC noted, "starfish are dying in record numbers."

Visit NBCNews.com for breaking news, world news, and news about the economy

From the news clip:

Brian Williams, anchor: Environmental officials in California say there’s been another highly troubling report about what’s going on in the Pacific. Something is killing the starfish and they don’t know why. They have been dying in record numbers on the West Coast. [...] 

Pete Raimondi, marine biologist: It’s happened so rapidly that some species are just missing. [...] 

Miguel Almaguer, reporter: An epidemic affecting waters from Alaska to Southern California causing millions of starfish to fall apart and melt away. [...] Two species that used to thrive here have now vanished. [...] 

Raimondi: I’ve had probably 100 emails thus far saying, ‘Well, what about Fukushima, because of radiation?’ We haven’t ruled that out yet, but we’re clearly not ruling that in. 

Almaguer: The mysterious disease has now spread to at least 10 species of starfish and is threatening more every day.

On KRCB, Raimondi was interviewed on Nov. 21, 2013 and said:

There’s something about this outbreak that is very, very different [...] It’s always been associated with warm water in the past — an El Nino event. We’re not in an El Nino event. [...] There’s 2 things that are really bewildering. One, we aren’t in an El Nino event. The second thing is the spatial thing, from Alaska down to Orange County. It’s hard to think of a mechanism that is consistent across that whole area of geography.

Something is killing off our Starfish.  Is it the nuclear radiation from Fukushima? Or is it simply a coincidence?

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Did MacLean's admit they were wrong?

As the Sochi Olympics come to end, Vancouver finds itself bathed in snow.  Four years ago we were, like Sochi, wearing shorts and T-shirts at this time of year. Maybe we are a winter city after all?

As we turn our attention back to all matter financial and real estate, we couldn't help but notice our blog being mentioned over on Alphabet Arnie's site.

AA headlines MacLeans Admits it has been wrong?!! and he writes:

Some time ago, around early 2012 when MacLeans magazine produced an issue with a cover story featuring a skyscraper and a house on fire as if the market WAS GOING to collapse, I lambasted them in one of our local blogs, where extracts of the article were reproduced. (see Whispersfromtheedgeoftherainforest.blogspot.com). Anyways, I was trolling another local site "vancouvercondo.info when I came across this extract (in or about Jan 21, 2014), from a MacLeans reporter addressing negative market chit chat warning of a market collapse. I must say, I really relished reading this extract:

"This is a well worn theme for many Canadian reporters. Here at Maclean’s we’ve reached the same conclusion several times going back to 2008, and, admittedly, we’ve been proven fully and completely wrong."

In promoting the column on his site, AA even sent out this tweet asking others to retweet "to help inform."

Not that we wish to pour ketchup on his 'relish' or his desire to 'inform' but we think Arnie may have his timelines a little bit off.

AA believes Macleans is repudiating their 2012 cover story with that extract quote.

Umm… hate to break it to you Arnie, but the MacLean's extract is actually a quote from an article published on June 1, 2011. Far from repudiating the 2012 cover story, the extract was written almost a year before the cover story was even published (click on image to enlarge and see blue hilighted text):

Not sure they have actually admitted they were wrong about their 2012 cover story yet.

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