Thursday, September 16, 2010

Bubble Busting, Hyper Analyzing and Insight

First up today is more bubble denial. Today's treatsie first came to me via our friends at VREAA (although I am told it was posted earlier on the chatboard Real Estate Talks by contibutor SethM).

Back on September 7th, 2010 Pierre Marchildon, of Marchildon Property Investment Partners, posted a video commentary, The Vancouver Real Estate “Bubble”. Marchildon dismisses all this bubble talk and explains how there are merely ups and downs in the market. No crash, no collapse.

“A bubble is when there is a major dramatic drop… but you can see there is a bunch of ups and downs on their way up. Every decade, real estate doubles… that’s the point of this exercise. Don’t try to time the market.”

Translation: Buy now or be priced out forever!

Here is Marchildon's analysis (and don't tell Pierre that the entire graph he's pointing to is the first half of the bubble)...

Meanwhile Gonzalo Lira has come out with another post on Hyperinflation titled "Was Stagflation in 1979 really Hyperinflation?"

As I said two days ago, the biggest and most confounding debate that's going on right now in all of finance is determining what the final outcome of the US Federal Reserve's market manipulative actions will be.

Once again Lira has made some interesting points and, if the topic interests you, I invite you to visit his blog and read his lengthy post.

Finally some insight from an article in Macleans magazine.

In an article in the latest issue titled 'Canada should take no solace from America's woes', comes these tidbits...

  • Canadian economists Derek Holt and Gorica Djeric of Scotia Capital recently observed that most commentators are “overly sanguine with respect to the state of Canadian household finances.” Debt as a share of personal disposable income for Canadian households is at record levels, they note. While the U.S. reduces its household debt load through forced austerity measures, Canada’s number keeps getting bigger. And by some measures, the trajectory of house prices in Canada appears strikingly similar to that in the U.S. prior to the bust.

But that's okay, it's different here (TM).



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  1. When you have a graph that looks like a hockey stick, that spells "bubble" in my book.

  2. Whisper, I posted this article first on September 15th on Jurock! SethM

  3. From the outside (America) looking in, it's definitely a bubble. I flew out to Oregon to meet up with some friends from Vancouver for a weekend of catching up. Qualitatively, the real estate talk, even amongst the skeptics is much more pronounced than in the US. There's still a belief of given intrinsic value in Van that people south of the border just don't have. A lot of people here are just happy to have enough equity to refinance - even people that put down 25% have lost it and can't take advantage of lower rates.

    Separately, it occurred to me today that something I've started to see emerging in the US is lawyers trolling for customers to sue home builders for any building related issues. There are newspaper ads and regular 'community' meetings advertised by leaflet and otherwise to attend and learn how to sue your builder for a variety of suggested claims with a menu list provided just to provoke you. I'm starting to suspect this is a natural outcome of the real estate decline as home owners gasp for any extra money to right themselves, the vultures come out. I don't recall seeing this kind of thing in the heyday.

    Separately, I believe material (not hyper) inflation is coming but wouldn't guess on the exact date. The sheer amount of government debt, which I read in the WSJ last week as substantially financed short term will push it as it continues to pile up, need refinancing and the rest of the world eventually loses it's fear and looks for yield outside America at scale.

  4. Hello SethM. I must have missed that. I first noticed this on VREAA. Nothwithstanding I do appreciate your numerous worthwile contibutions on RET. I will edit the post to make a note of this.