Sunday Funnies - December 13th, 2009

(click image to enlarge)

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Poppycock

You may recall back in October we talked about Bank of Canada Governor Mark Carney going up to Parliament Hill and using a portion of his presentation to tell our elected officials what bloggers have been saying all year - that Canadians may be getting in over their heads in the purchase of homes.

The BOC, said Carney, would be conducting an 'analysis' just to be sure.

Well... the 'analysis' is out and Carney tells us that he has concluded that household debt is now biggest risk to financial system.

Quelle Surprise!

Especially given the Sprott Asset Management Report we profiled that shows how little asset prices would have to decline in order to wipe out the tangible common equity of our vaunted Canadian Banks.

Carney, recognising the looming potential disaster, once again laid the groundwork for his mea non- culpa by urging prudence among Canadians who are borrowing at super-cheap rates today but may not be able to afford higher payments tomorrow.

The BOC used a 'stress test' to show that rising interest rates between mid-2010 and mid-2012 would saddle a growing number of Canadians with unmanageable debt loads.

"Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the bank said.

[... meaning what? Dump that house/mortgage now to some other schmuck who might also ignore my warnings before it's too late?]

To banks, Carney had this to say. “Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations."

Translation: a collapse is going to hurt us all.

That said, Carney took care not to create too much concern. He was quick to stress that Canadian banks currently have more than enough capital on hand to absorb potential losses, suggesting that even the worst-case scenario in the stress test would fall short of risking a collapse of the financial system.

Uh-huh.

Interestingly the world is starting to take notice that everything may not be peaches and cream in the Land of the Maple Leaf's banking system.

The respected financial website SeekingAlpha ran a story today saying, "Who Says There Were No Canadian Bank Bailouts?"

"[Canada] essentially put $15 billion of capital into the Canadian banks that participated in [a unique] $75 billion CMHC program. How is [this funding] any different than the pref share offerings via the American TARP program, other than the fact that Canadian taxpayers didn’t receive any purchase warrants on Canadian bank shares as compensation? Let’s not forget, the TARP was originally designed to take assets off U.S. bank balance sheets so as to free up capital.

There is only a subtle distinction between injecting capital into a bank and relieving it of assets so that it can avoid a capital injection. Kind of like your Dad temporarily buying your bike from you when you ran out on money in University, and then selling it back to you six months later when you were flush from a summer job.

The notion that Canada’s 'free market' took care of itself over the past 15 months is poppycock."

So is the idea that our nation, particularly the City of Vancouver, isn't sitting on a massive housing bubble.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Time to deck the halls

Today's a day for decking the halls, so a short post of various thoughts for you.

Ludwig von Mises was a German economist who predicted the 1930s Depression. During the 1920s he was snubbed by economists world-wide as he warned of a looming credit crisis. It's interesting to read his thoughts today.

Mises's ideas on business cycles were spelled out in his 1912 tome "Theorie des Geldes und der Umlaufsmittel" ("The Theory of Money and Credit"). Not surprisingly few people noticed, as it was published only in German and didn't exactly rate as a beach read in the Fatherland.

Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention.

Left alone, interest rates would adjust so that only the amount of credit that is voluntarily supplied and demanded, would be used.

When credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.

Mises noted that government-imposed expansion of bank credit distorts our desire for saving versus consumption. Government-imposed interest rates (set artificially below rates demanded by savers) leads to increased borrowing and capital investment beyond what savers will provide.

Under ordinary circumstances any random spikes in credit would be quickly absorbed by the system; the pricing errors corrected and the half-baked investments liquidated, much like a supple tree yielding to the wind and then returning.

But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash.

Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.

This is the critique many are leveling at Alan Greenspan and Ben Bernanke for the chain of events that has transpired since the dot com crash of the late 1990s. A severe recession was put in abeyance as the Fed interfered with the economic cycle leading to today's conditions.

Perhaps his most poignant observation Mises makes is that, "there is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a voluntary result of the abandonment of further credit expansion, or later as a final and total catastrophe of the currency system."

We keep hearing from Carney, Bernanke, et al that they cannot withdraw the stimulus because the 'recovery' is too fragile right now. And consensus is that any withdrawal will trigger a deflationary spiral.

In a week where Allan Edwards forecasts the bear market to finally bite back, when Richard Russell speculates that the next downturn will be 'vicious', and Meredith Whitney believes the US government is "out of bullets" (see yesterday's post)... well Mises makes for some interesting reading.

Better make sure that eggnog has some rum in it.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Delusional

Last Autumn, when the markets were melting down, I made an observation that I still hold to today.

What occurred in 2008 was a significant financial earthquake and we still do not completely appreciate the full repercussions of what occurred.

I believe that statement holds true today.

It's one of the primary reasons I am still extremely bearish on the outlook for real estate in the world's most bubbly city: Vancouver.

On Tuesday we saw financial markets tumble as credit-rating agencies slashed Greece and Dubai government related debt.

Looming on the horizon will be downgrades to similar debt issued by the United Kingdom and the United States.

It has too.

The fiscal imbalances and accumulated debt that has built up from trying to rescue our economy from the financial crisis is piling onto an already massive amount of government debt.

As David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto, said yesterday, "Anybody who thinks we are through this credit collapse is delusional. It is ongoing."

That message was echoed by this week on CNBC by Meredith Whitney, a former analyst at the investment bank Oppenheimer & Co. Inc.

Whitney, who has her own firm now, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.

And what she forecasts for 2010 is anything but positive.

Whitney said that she believes government is running out of ways to help the economy as the US faces major issues regarding credit and employment.

"I think they're out of bullets," she said.

Whitney keyed in on the main reason that all the improvement we are seeing is, in fact, a false recovery. Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace.

Consumer lending dropped 1.7% on an annualized basis in October, the ninth straight monthly decline. Whitney noted that consumers are "getting kicked out of the financial system" as the stimulus money is cycled to the banks bottom line and feeds a speculative frenzy in the stock market.

"What's so frustrating is you have an administration that is arguing such a populist (ideology) and not appreciating all the unintended consequences that the consumer and small businesses have far less credit," Whitney said.

With consumer spending making up about 70% of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow will put a severe headlock on future growth.

And that means there will be no economic recovery - at least not on a scale both the United States and Canada need to see.

"I have 100% conviction that the consumer is not getting any better and there's not more liquidity," Whitney said.

"I don't think you can cut taxes enough to stimulate demand," Whitney said. "For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it's a real issue. You can't get around it. This has never happened before in this country."

When you combine a failed 'immaculate economic recovery' with a need to service massive amounts of government debt, you soon realize that we are in the midst of a huge paradigm shift in North America.

The average Joe simply does not appreciate what our economic future holds for us.

As Rosenberg said, "Anybody who thinks we are through this... is delusional.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Get a grip

"The folks who are worrying about an early rise in interest rates should get a grip. Please."

That's the way a scolding story in the Financial Post started off (Let's relax on interest rates - December 8th)

The Financial Post wants you to know that, despite fears in the US that the job market might be strengthening, there is every indication that the Federal Reserve will keep interest rates low for at least the next six months, if not for a couple of years.

The real question, says the FP, "is whether or not the Fed's policy of low, low interest rates will encourage matching rates in Canada and promote a housing bubble in this country."

Promote a housing bubble? Sigh.

At least the article contains a nugget or two of accurate assesment. Noting the "dire condition of the U.S. economy", the Post says "our [Canadian] economy has not been hit as hard as that of the U.S. The single most notable difference is that Canadian home prices have remained stable and, in some cities, have even gone up."

Exactly. The only reason Canada is different right now is because of the irrational housing bubble. There are no strong fundamentals, there is no emerging manufacturing base building a foundation for down the road. All we have are stable home prices that have not collapsed... yet.

But with the brewing storm in Europe over Dubai, Greece and UK debt combined with an American economy that is in 'dire' straights, the requiste immaculate recovery is still a long ways off.

We've managed to juggle this charade and keep all the balls in the air awaiting a strong recovery to fill the void.

How much longer can we continue to do that?

=================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

The 'B' Word

Today's post is brought to you by the letter 'B'.

It could be 'B' as in Bubble, as more and more people are starting to acknowledge here in Canada.

As faithful readers know, Bank of Canada Governor Mark Carney’s pledge to freeze record-low borrowing costs through June 2010 is single-handedly responsible for the stunning recovery in home prices.

'The Cabel' disputes this assertion, insisting that the state of the housing market is simply reflecting what Carney has called “an element of pent-up demand” (Carney speech to reporters Nov. 19).

“Rates are exceptionally low, affordability has improved in part because of the low level of interest rates and part because of some former price adjustments, and we are seeing a housing-price response,” said the Governor.

Pundits insist that they don’t believe that there’s a bubble, that most of the market action is from typical Canadians trying to buy their first home or move up. Rising prices? That's just an unintended consequence of the current low, low rates.

But when Canadians are waiving conditions and paying 10% (or more) than a home's asking price you know it's not a regular market - particularly when we sit in one of the worst economic times since the Great Depression of the 1930s.

The most notable thing here is that Carney insists that what's happening in the housing sector is simply an unintended by-product of his attempt to help the economy recover from its first recession in 17 years. Carney says he has given 'clear guidance’ on why he has taken the actions with interest rates he has.

“Rates are exceptionally low, they are exceptionally low for a purpose and we have given pretty clear guidance on how long we expect they will have to remain at these levels in order to achieve the inflation target,” Carney told reporters Oct. 22.

But Eric Lascelles, chief economist and rates strategist with TD Securities Inc., raises a point that more and more people finally raising. In Toronto Lascelles noted that the central bank hasn’t talked much about house prices, “to the bafflement of international investors.”

“It makes perfect sense that there is a good appetite for the housing market,” Lascelles said. What no one seems to want to address is “whether this is a bubble in the making or simply a recovery from earlier softness.”

David Laidler, a former visiting economist and special adviser at the Bank of Canada and now a fellow at the C.D. Howe Institute, a Toronto research group notes that “the worry has got to be that you might be getting a housing bubble out of this.” Laidler is a member of the institutes's Monetary Policy Council, which studies central-bank decisions and said in a Dec. 3 statement that a “possible unintended effect” of Carney’s commitment is “the buoyancy of mortgage lending, particularly variable-rate mortgages, and the housing market."

Unintended... there's that word again.

And it's that word that rankles the most.

Do people truly believe that the astonishing rebound in housing prices - with no intervention from the Bank of Canada - is simply an 'unintended' by-product of Carney's actions to recover from recession?

Maybe today's 'B' word actually stands for 'B' as in Banks.

In a fascinating report from Sprott Asset Management, the average leverage ratio of the Canadian banking system is analysed and compared.

Sprott notes that the average leverage ratio of the Canadian banking system is higher than that of the largest US banks in all periods reviewed.

Now each of the top ten US banks received common equity injections by both shareholders and the US government, thereby improving their respective leverage ratios during this economic crisis.

And the Canadian Banks?

• "Looking at the Canadian system more closely, all five Canadian banks are levered at an average of 31:1, which is actually the lowest leverage ratio during the three years that we reviewed. This implies that if the Canadian banks’ tangible assets were to drop by 3%, their tangible common equity would effectively be wiped out.
  
  Now, that doesn’t mean they would go bankrupt per se, but it does give us an indication of how little asset prices would have to decline in order to wipe out their tangible common equity. These leverage ratios worry us because they leave such a razor thin margin for error on the ‘tangible asset’ side of the leverage equation. We are always cautious about investing in companies that have zero or negative common equity - we’ve seen what happens to public companies that trade at those levels, General Motors being a good example.
  
  Acknowledging the leverage levels above, you may wonder how the Canadian banks escaped the 2008 meltdown unscathed. The answer is that they received significant assistance from the Canadian government. First, they received $65 billion in liquidity injections from the Insured Mortgage Purchase Program (IMPP), whereby Canada Mortgage and Housing (CMHC) purchased insured mortgages from Canadian banks to provide additional liquidity on the asset side of their balance sheets.
  
  Next, the Bank of Canada provided them with an additional $45 billion in temporary liquidity facilities. Finally, a Canadian Bank also received assistance from the Canada Pension Plan (CPP) through the purchase of $4 billion in mortgages prior to the IMPP program, for a total government expenditure of $114 billion."

When the Bank of Canada slashed interest rate to dirt they helped to artificially preserve real estate asset prices by creating another irrational housing euphoria in the country.

Unintended... Or a deliberate calculation to preserve the "razor thin margin on the tangible asset side" of the Canadian Banks leverage equation... a group the Canadian Government had just moved heaven and earth to protect?

Sprott goes on to note that,

• "for reference, the entire tangible common equity of the Canadian Banks in 2008 was $68 billion. Can you put two and two together?"
  
  "The Canadian government injected a sum through mortgage purchases worth more than the entire tangible common equity of the Canadian banking system! On top of that, the Bank of Canada provided more than 50% of the tangible common equity of the system in emergency liquidity facilities."

The Canadian housing market continues to baffle observers in the United States and around the world. We are daily fed propaganda that tells us that the dramatic performance of our nation's real estate during this worldwide economic crisis is all a result of the solid foundation of our nation's banks and the virtuous conservatism of the Canadian financial system.

Uh-huh.

The Sprott report is simply the latest that sumarizes the many concerns critics have had about what's happening with Canadian Real Estate, CMHC and the banking system.

Increasingly it seems we are only a couple moves away from the symbiotic relationship that exists between those two other well known 'B' words: Boom and Bust.

The 'Boom' is currently happening and observers are raising alarm bells.

Be wary. The next time you hear "give me a 'B'...", you might just see the market kick back the word investors dread the most... bust! A development which would lead to today's true 'B' word; a word that summarizes our thoughts on all this malarky about 'unintended' consequences .

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sunday Funnies - December 6th, 2009

(Click on image to enlarge)

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Outside... looking in.

Came across a comment posted over at the blog Vancouver Condo Info that is worth reading.

It was posted by 'San Franciscan in Vancouver' and gives you an idea of just how crazy things look from the point of view of an outsider.

• I can’t help but just laugh my guts out about what is happening in this town (Vancouver), province (British Columbia) and country (Canada).
  
  To me, this pipedream looks very much like the 2002-2005 hay days of the California housing boom. I have personally experienced this and can probably write a book about it. I think the title of it would be called “Collusion”. It is merely how all bubbles are created. Collusion, on the part of the government by a way of low interest rates, a drive to increase homeownership at all costs in order to extract political dividends including becoming a subprime lender of last resort (e.g. CMHC in Canada’s case), mortgage and real estate broker and borrower fraud, unwarranted government subsidies to certain segments of the economy, i.e. the construction, real estate and financial intermediation sectors , to name a few.
  
  Location exclusivity being touted as miraculous reason for why prices are not where they should really be. Complete detachment from reality when it comes to economic and financial fundaments (e.g. price / rent ratios, price to earnings, population income potential, economic diversification etc). To add fuel to the fire which is destined to inevitably engulf all colluded parties involved, purported “chronic housing shortages”,” multi-decade demand outstripping supply” continuously trumpeted analyses and trends, “land-use restrictions” or “ lack of buildable land” justifications for why housing prices are so high, “net growth in foreign and inter-state (province) migration”, “the presence of a diversified economy “, and so the list went on, were all symptoms of the bubble mania which took hold in California in the early part of the decade.
  
  This was all good until there were no more greater fools left to bid up the inflated housing prices, and so the party abruptly stopped. People realized that they were not buying homes. In fact, they were renting them for the price of the mortgage.
  
  Those aforementioned fallacies, and many more others, are some of the principal reasons why the bubble burst in the States and why it will follow suit in Canada. British Columbia is no California, heck, Canada’s GDP is less than that of post-bubble California, with the country’s economy NOT as well diversified as one would expect, BUT heavily dependent on a few industries (e.g. oil and gas, energy, forestry and other derivative commodity industries, heavy machinery, construction etc.).
  
  Noteworthy is that Vancouver MSA’s per capita income is half of what per capita incomes are in the San Francisco Bay Area, certain portions of Los Angeles and San Diego areas, where prices have plummeted more than 50% from their peak.
  It’s only a matter of time until the bubble bursts.
  
  The deflation in the U.S. started when the Federal Reserve began increasing interest rates. This could, however, start sooner than that. One should pay a close attention on consumer psychology when it relates to perceived expectations in the future. Often, this is how contagions, financial panics, great depressions are started. The longer the imbalances persist in the greater economy when it comes to housing, the more painful and protracted the adjustment is going to be when it comes.
  
  The Canadian government can keep the last fool from wanting to dump his inflated housing mortgage on the market for as long it provides backstop guarantee. However, financial markets are going to severely punish the Canadian government shortly by dumping its dollar, lowering its perceived credit worthiness (thus increasing implicitly and explicitly borrowing costs in the economy). A scenario just like this is currently unfolding in the U.S. Anyone wanna buy BC, Ontario provincial government bond at 9%? You start printing enough money until the federal currency is eventually debased and has little incremental value left.
  
  After having met recently with “respectable mortgage brokers” who have been in the business for over 25+ years, I am now firmly convinced that this market is going to have a crash landing like one never experienced before.
  
  Pre-sales “pink paper” flipping (as what was called in the U.S.) where respective condo owners would trade condos like call options by purchasing condos without any intention of taking possession of the unit(s) and thus procuring further the housing bubble, funky appraisals based on comparable sales only with little to no historical economic fundamentals in place, liar loans (i.e. stated income (NIQ loans), stated assets) etc. are all hallmarks of the impeding and most definitely inevitable collapse of housing prices in Canada.

Another outsider view comes to us with this analysis of the US vs Canadian Housing Market by the Federal Reserve Bank of Cleveland.

(hattip to the blog Housing Analysis for finding this).

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Up, Up and Away!!!!

Did you hear? Real estate is set going to launch into the stratosphere.

Tis true, the real estate industry said so.

RE/Max advises that the housing market recovery will accelerate in 2010 and that sales in Vancouver will increase by 45%!

Meanwhile Pascal Gauthier, economist at TD Economics, tells us that home prices will rise another 10% in 2010.

It's this type of news that will have the real estate cabel in overdrive in the next few months cranking out the 'buy now or be left behind forever' propaganda.

Curiously you don't seem many references to a prescient little excerpt from Mr. Gauthier's TD Report.

"Mostly what seems to be stimulating sales is the attractive financing rates and it's really helping the low to medium end," says Mr. Gauthier. "If you are entering this environment and you are already overstretched and later down the road you're facing the interest rate reset … households and lenders should both be doing very hard math here to look at how much they should be taking on."

Indeed they should. But you won't be seeing comments like that from RE/Max anytime soon.

The lesson of the US experience, where the woes associated with interest rate resets have all too clearly played out, are drowned out by the chorus of real estate glee.

The powderkeg continues to build.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Amoss admits he 'made a mistake' on Bank of Montreal

Faithful readers will remember the rumours about Bank of Montreal back in August.

Agora Financial's Dan Amoss made claims that BMO was gaming its books and had been lying about its ability to pay shareholder dividends.

As managing editor of the Strategic Short Report, a pricey Internet-based newsletter that provides 'tips' to subscribers on stocks that may be worth shorting, Amoss had issued an 'alert' about the Bank of Montreal.

Amoss implied that BMO was suffering significant losses from it's loan portfolio and wouldn't be able to maintain it's dividend payments. He predicted that a dividend cut might come as soon as that week's August earnings release, which is after the August options expiration. That cut would start a sequence of events that would drive BMO's share price down significantly.

Amoss recommended to his newsletter subscribers several market plays to take advantage of the situation, and hyped the recommendation in several internet 'teaser' ads.

The hype reached a rumour frenzy and by Sunday August 24th, the story became an honest-to-goodness Internet sensation.

In the options market on Monday the 25th, about 48,000 contracts changed hands, 34 times the usual daily volume.

The turnover included 3,405 calls and volume in the stock's puts outnumbered calls by a ratio of more than 13-to-1. The stock fell 3% during the day and the story caught the attention of the mainstream press as Bloomberg, Reuters, and several Canadian newspapers.

By opening bell on Tuesday the 26th the story washed-out as a non-event. BMO maintained it's dividend, announced it had increased profits; and news organizations found Amoss unavailable for comment.

Agora Financial issued a statement defending Amoss and said, "Of course, there's always a chance Dan’s pick is either too early or wrong. That's the nature of speculation."

Those who followed Amoss' advice were encouraged to hold their positions until December and have faith.

Well... it's now December 2nd. So what happened, you ask?

Amoss has come out and admited he made a mistake on this recommendation he advised his readers to sell their puts.

From his newsletter;

“This was the second quarter in a row that I expected conservative accounting to return to BMO, but this has not happened. It eventually will happen. Next quarter, we could see an earnings miss based upon a re-acceleration in the provision for credit losses.

Two percent of BMO’s entire loan portfolio is in the ‘impaired’ category. According to Blackmont Capital, this is 70% higher than BMO’s peer group of Canadian banks. Furthermore, BMO’s allowance for credit losses covers just 58% of gross impaired loans. This coverage ratio is just half of the coverage ratio of BMO’s peer group.

BMO stock trades at a very high valuation -- one that discounts a V-shaped recovery in the credit quality of its loans. I made a mistake from this recommendation, and have learned from it. The most important take-away from this experience is that banks have a lot more of control over the timing of their credit losses. Also, I’ve come to appreciate just how amazingly complacent Wall Street can be about embedded credit losses at banks.

Our trades depended on management recognizing reality. This has not happened yet. But it eventually will.

I’ll keep following BMO for a potential put option trade in the future. The next earnings report could contain the negative surprise we’ve been waiting for, but let’s wait until we get closer to that point to buy any more puts.”

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sign, sign, everywhere a sign

Slowly the wheels turn and the inevitable outcome passes another another signpost on the world stage...

This morning, for an unprecedented third straight month, Australia’s central bank raised its benchmark interest rate by a quarter percentage point to 3.75%.

On the same day, The New York Times announces that Canada is officially out of the recession.

We harken back to this speech by Bank of Canada Governor Mark Carney in which he warned Canadians that his pledge to keep the benchmark policy rate at 0.25% is “conditional” and should not be interpreted as a “guarantee.”

Carney told reporters afterward it would be unwise to assume current low rates are 'normal'. "It is an expectation, not a promise," Mr. Carney said in his remarks.

Carney told Canadians that they should "prepare for when interest rates return to normal".

Are you prepared?

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Xanadu

When all is said and done, the story of Vancouver Real Estate at the turn of the millennium is going to make for compelling reading.

Caught up in the world-wide flood of liquidity after the dot-com bust of the late 1990s, the Village on the Edge of the Rainforest saw it's real estate values skyrocket in tandem with the bubble conditions that engulfed rest of North America.

But the lessons of the bubble folly, currently being hammer home in the United States, are lost in the land of the maple leaf - and particularly on the left coast.

As Americans wallow with 25% of mortgage holders in an underwater postion, Seattle is discovering that most of the homeowners facing underwater mortgages financed their properties between 2005 and 2008 and used adjustable-rate mortgages.

Just like Canadians are doing.

The only reason our nation is not awash in a similar disaster is because our nation has effectively forstalled the real estate collapse.

The warnings and dangers of the housing meltdown are there for everyone to see. The Canadian situation is not too far removed from the fate befalling our American cousins and that realization is gaining acceptance on a daily basis in our mainstream media.

Even the Governor of the Bank of Canada now issues warnings to Canadians that they need to wake up and smell the coffee regarding the impact of looming interest rates.

But are Canadians getting the message? Are they using the opportunity to secure and save themselves from the inevitable pain that looms on the horizon?

Last week, in Toronto, we read in the national news about the return of condo lineups and buying frenzy's.

Just to demonstrate that Vancouverites can be just as brain-dead as their eastern contemporaries, the gullible have returned to their foolhardy ways and lined up for hours in a downpour on the weekend to get first dibs on pre-sale condo units being sold at "The Mark" by Onni, a new tower in Yaletown.

"We're blown away by the turnout," said an Onni rep as about 50 investors scrambled around a model of the building in the pre-sales centre.

190 units in the first 26 floors of the tower are up for grabs and will not be completed until 2013. The prices ranged from about $320,000 to more than $900,000.

All of this comes as the global debt and credit crisis continues to haunt developments in former real-estate hotspots like Dubai in the United Arab Emirates,

And in move that clearly demonstrates just how scared officials are about the fallout from stunning announcement of a de-facto default on the Dubai World development, the UAE has blocked distribution of the U.K. Sunday Times newspaper today due to its coverage of the Dubai debt crisis

Cam Good of the Onni Group said on Sunday that Vancouver is back in boom times. "The [real-estate] strength in Vancouver is unlike anything in the world," Good said.

Yeah... but that's exactly what they said about Dubai.

Daily its proven that we are living in fool's paradise.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sunday Funnies - November 29th, 2009

(click on image to enlarge)

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.