Friday, January 23, 2009

Hurry, Hurry, Hurry! Step Right Up!

As we saw in the last post, Warren Buffet - the Oracle of Wall Street - believes there are tough times ahead for the economy. He cautions against thinking things will turn around in the next six months and that there is not going to be some magical transformation to change the economy. As for all the money government is pumping into the economy, well... that isn’t necessarily going to produce anything dramatic in the short term at all.

Now enter the Real Estate Pollyanna's.

Today we bring you Royal LePage and their forecast for 2009. What is their take on the economic firestorm currently engulfing the world?

Why... all this negativity is just an 'emotional reaction' on the part of consumers.

From their report:

Emotional reaction to recent economic and political instability did much to dampen consumer confidence during the latter part of 2008, causing a marked slowdown in house sales activity. However, as a more rational understanding of the issues gains ground, together with a wide range of announced corrective measures, consumer confidence is anticipated to recover, prompting real estate activity to pick up once again in the latter half of 2009. Further, Canada in 2009 enjoys a stronger economic foundation than most countries and that should temper the housing market correction. The combination of low inflation, reasonable employment levels and improving housing affordability, driven in part by low mortgage rates, are anticipated to stimulate demand in the coming months.

Canadians have been confused and justifiably skeptical of the efforts of the worlds' central banks and governments to combat the global economic crisis. There is broad belief, however, that Canada's financial house is in better shape than many peer countries, particularly the U.S. While the federal and most provincial governments have been slow to implement economic stimulus packages, they enjoy broad public support in principle. Together with the actions taken by the Bank of Canada, the positive impact on consumer confidence stemming from infrastructure spending announcements and other stimulus programs is expected to be significant.

We believe that the Canadian economy will struggle early in 2009, but that conditions will progress continually throughout the year. Improving credit markets, the stimulative impact from a weaker Canadian dollar, together with the implementation of large fiscal stimulus initiatives, set the stage for a return to growth in the second half of 2009.

So there you have it. Warren Buffet insists the money government is pumping into the ecnonomy is not going to produce anything dramatic in the next six months. Meanwhile Royal Lepage insists that the positive impact from all this government stimulus will be significant once consumers develop a 'rational understanding' of the situation.

In the early 1900s, snake-oil salesmen became infamous as husters always trying to sell you something of no value by preying on the simple minded and the easily manipulated.

The dichotomy between Warren Buffet and Royal Lepage is laid bare.

Which side do you think has your best interests at heart, and which side do you think is trying to manipulate your outlook?


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