Tuesday, May 29, 2007

fly like a loon

How about that dollar? It has taken wing. It is up about a half-cent today (93.17 cents US) on hints from the BoC that it will be raising the rate to keep inflation in check. We keep hitting new 30 year highs. The last time our dollar was this high, Talking Heads had just released their first album, and Stevie Wonder was "it" (I wonder how many that are buying condo's have heard of either). We were also moving into recession.

I think that the timing is pretty safe - the economy is over-heating, house prices are, um, nuts, lumber is already in the toilet, and other economies are slowing down - which will mean less demand for commodities in general. Oil fell 2.8% today as well. It has to happen sooner or later.

The Canadian dollar is at a 15 year high against the Yen, a 6 month high against the euro and is showing strength against the most traded currencies. The big banks raised mortgage rates 0.3% today as well.

What does it mean? I think that we will see housing inventory surge, sales slow markedly, increasing unemployment, less commodity sales, less tourism, and hopefully - a return to some semblance of sanity.

This excerpt from Bloomberg

Canada's Dollar Reaches 30-Year High on Hint of Rate Increase

By Kim-Mai Cutler and Haris Anwar

May 29 (Bloomberg) -- The Canadian dollar rose to a 30-year high after the central bank said it may raise borrowing costs to restrain inflation. Short-term government bond yields surged.

The Bank of Canada suggested it may raise overnight rates in the ``near term'' to curtail inflation, though it held the benchmark lending rate at 4.25 percent for an eighth meeting. It last raised borrowing costs 0.25 percentage point in May 2006. Benchmark two-year bond yields climbed the most in almost 23 months to 4.58 percent, the highest since March 2002.

``This is more hawkish than what the market was expecting,'' said Marc Levesque, chief North American strategist at TD Securities in Toronto. ``The Bank of Canada is squarely telling the market that it's going to hike and the Canadian dollar has clearly gotten a kick off the back of that.''

The central bank, departing from earlier statements describing inflation risks as balanced, said there is an ``increased risk'' that inflation will persist above the 2 percent target. The statement added that ``some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.''

Ten of 15 economists surveyed today by Bloomberg predict the central bank will raise rates at its next meeting, July 10. Last week, two of 19 forecast such an increase. (Gee, psychology can turn pretty fast...)

Sunday, May 27, 2007

paradise to purgatory

This is a great picture lifted from somewhere. The graveyard of the city.

I've had the Joni Mitchell refrain - they paved paradise, and put up a parking lot - going through my mind a lot lately.

When I first came to Vancouver, I found it to be very pleasant. It was a small city, and I well remember being on the West side in the morning and seeing someone, and seeing that same person on the East side the same afternoon. Traffic was relatively light, and the city had a kind of sleepy feel to it.

20 years later, the traffic is choked up practically 24 hours a day, development has run rampant, they have blown up the paradise of Eagle ridge bluffs and paved it, Grouse Mountain has extended at least three-fold, Vanoc has taken over half of the dictionary, and the city that I grew to love has changed oh so much for the worse.

Whose idea and/or want was this? What kind of benefit or prestige do the Olympics, and corollary development impart on the denizens of Vancouver?

The city seems smaller than it did then, just twice as busy/packed. A lot of Vancouverites have gained massive wealth on paper, but it is next to useless unless realized.

I think the answer to the question of benefit is that "rich foreigners", greedy speculators and developers have benefited. I suppose that those that arrived from choked cities elsewhere, more recently than I, still find the city small and pleasant in contrast to whence they have come. I also realize that I am a nostalgic, and a romantic fool who dislikes change, but oh, woe. I find it a shame.

I wonder how many would have voted for the Olympics if they could have seen past the stars in their eyes?

Tuesday, May 22, 2007

curb appeal

One of the maxims/buzz phrases of RE agents is curb appeal. Everyone understands this. Plant some flowers, clean up any detritus, a few licks of paint, and you are good to go. In this beastly bull market of the last few years, you could tack on 50G's by spending 200 bucks on flowers and 500 bucks on paint.

What kind of curb appeal does the place depicted here have? They're asking 799k for it, and don't even care that the realtor's sign is obscured by garbage. Is the market so hot that you can sell a place that approaches a million dollars so lackadaisically?

Here is a further view. Unfortunately, I framed out the curb appeal that the portable toilet provides, and the orange safety fence - which protects the stump of a downed tree.

Of course, the house is incomplete - which leaves me wondering if it is offered for sale as is, where is, or if one has some choice in the finishes and landscaping included in the asking price. I wonder if they really want to sell it.

There are a lot of places around almost identical to this one. I see older houses bought up, torn down, and almost as soon as the new framing is done, there is a for sale sign up. I watch them complete, and sit there. Price reduced to no avail. They are most often tasteless, character-less, and adorned in hideous colours. I have seen orange ones, blood red ones, manure coloured, etc. They all share the same blue-prints, and I have seen whole streets of identical, ugly, square boxes. These are the Vancouver Specials of the 2000's.

I'm thinking of having a new series on curb appeal - as often I can get to it - over the next while. Feel free to submit candidates.

NOTE: The sign is real, just altered - for my and your amusement, and to save embarrassment to the realtor. Why should I care about the realtor? I don't really, I'm just decent.

Tuesday, May 15, 2007

what does gas have to do with it?

Yesterday I talked about the price of gas, discretionary spending, the economy, and housing prices. The Sun must be reading here because today, they have a story about the gas prices, inflation, and real estate.

Inflation is here, no matter how well hidden. Fuel prices are going to bring this all down, forget about jobs, interest rates, etc. Everything costs more when fuel costs more. Everything.

Think about those who bought in the valley after carefully budgeting, and realizing that there is now $100/month extra (or more) in commuting costs. Oops. Food is up too. So is home heat (but that won't be fully realized until next winter). What does $200/month more do to that budget? Lots of macaroni, I'd wager. Those that stretched to buy may find it impossible to keep up.

Are fuel prices perhaps going to be our "external factor" to change psychology? When inflation is finally admitted, interest rates will go up, employment will go down. The housing market will cool, and reverse.

Read the article (between the folksy lines), and make your own deduction. The summer driving season has not even arrived yet. Will gas be $1.50/L then? Sorry about yer tourism.

$5.85 an imperial gallon is a king's ransom

Pete McMartin, Vancouver Sun
Published: Tuesday, May 15, 2007

The bad news is, I am now spending $1.30 for a litre of gasoline.

The good news is, I am now spending $1.30 for a litre of gasoline.

How to square those two sentences?


I live in Delta, which, for some reason I really don't care to know, has the highest gasoline prices in the Lower Mainland, and therefore, quite possibly, in North America.

For those monarchists who still calculate the weight of their rib roasts in pounds and not kilograms, that $1.30 per litre works out to $5.85 per imperial gallon, a king's ransom. British Columbians' gouging at the pumps now rivals that of the British themselves, whose astronomical gas prices we once took a strange, self-satisfied comfort in, regaling ourselves as we did with breathless stories of the exorbitant amounts of money the Brits would pay to run their Vauxhalls. Tsk tsk, you could hear us say. Seventy-five dollars for a fill-up! How could the poor dears do it? It made us feel good about ourselves as we cruised the Safeway parking lot in our Hummers.

Those days are over, never to return again. The price might fall from today's vertiginous heights, but not so much that we will ever be able to approach a gas station again without a sense of dread.

For suburbanites such as myself, who must commute, this will mean an added economic burden.

For lower-income families, who have been forced into the suburbs by high real estate prices, it may mean the difference between owning a second car, or a home. For a hot economy like Canada's, rising gas prices could mean an inflationary spiral.

Sunday, May 13, 2007

what bubble?

A cheap post.

A cheap excuse to put up a picture of li'l solipsist.

Little gaffer has blown a bubble, and is blissfully unaware. His belly is full, he's warm, and he's dreaming. He is not thinking of tomorrow, wouldn't dream of things ever being any different. He is unable to - mostly from lack of experience.

It kinda made me think of the home-buying hordes - unaware of the bubble that is about to pop right under their noses.

OT: I saw gas at $1.30/L this weekend. That's gonna dig into those mortgage payments of those who commute to and fro' the valley. Discretionary spending is getting squeezed, and will be reflected in the economy very soon. We just don't have that kind of money.

Wednesday, May 09, 2007

let them eat hamburger

I was mumbling about CPI, M3, inflation etc., a while back, and came across a site that discusses how CPI was rejigged. According to the author(s), it is understated by about 7%. There are all kinds of fallacious arguments about quality and safety being better, but I have never bought them.

The article is discussing the US position, but it is surely applicable to Canada.

A couple of choice quotes from the article;

Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 7% per year.
In recent decades, however, the reporting system increasingly succumbed to pressures from miscreant politicians, who were and are intent upon stealing income from social security recipients, without ever taking the issue of reduced entitlement payments before the public or Congress for approval.
The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that.

It's worth reading, and exploring the whole site.


more shadowstats

Edit: Thanks to casual observer for the link. I couldn't remember how I got there, and casual had posted the link on the previous thread to this one.

D-ohpe (baby-brain).

Thursday, May 03, 2007


I've written before about the madness of man, wondered at the disconnection from "reality", and mumbled about a depression coming. Some might say that I am bedecked in a shiny metal haberdashery, but there is a real strangeness going on.

Why did the US stop reporting M3? Why would CMHC fuel this madness by dropping to 20% the down payment required to avoid mortgage insurance? Why do "they" jig the way that inflation is reported - leaving it understated?

I was at my bank the other day and was discussing mortgage qualification with the manager. I mentioned to him that his bank had qualified me for $600k, and that I would just not be able to afford those kinds of payments. He told me that "everything changed, and disconnected from sound lending practices a couple of years ago. He agreed with me that those practices are dangerous, and plain crazy. We discussed the RE market, economy, education, etc. for a while, and he didn't know much. He almost offered me a job, saying that I should work for the bank. Me? I know things are bad now.

Where I'm going with all this is that I think we are in for some serious economic meltdowns in the very near future. I read that Cameron Muir said that things are cooling, and a more modest increase in housing prices is expected for this year, and into 2008. I believe he said 8% for this year. How could that possibly be? The Chipman Report indicates that prices are declining very marginally (1%-2%) - as I read it. I am really beyond caring anymore. It just doesn't merit reporting on.

I can't for the life of me figure why the BoC did not raise rates. The prices of energy and housing have become so daunting that something needs to give. I've always had a good feeling about David Dodge, and am wondering what comes next. Being that our dollar is closing in on the US$, it can't but indicate that the US is in very rough shape. Those who don't make the connection to our own economy are in for a rude surprise.

We are heading for a major breakdown. As freako so eloquently described it - 'humming down the Autobahn, and all the warning lights on the dash are blinking furiously, and nobody notices (or something like that). Just wait until the costs of whatever the guvmint comes up with to "battle" greenhouse gases start to crush us. There is already talk of upping the GVRD gas levy, hydro rates going up, property taxes up, food costs, pay per use this and that. Something's gonna give. There is just not that kind of money around. Not real money, anyhow.

Those who "steer" the economy (and us with it), should have put the brakes on a long time ago, but they didn't. In the US, it was purportedly to avoid recession, but the situation is so exacerbated that a recession would be the kindest of fates. The whole thing is like swerving to miss running over a chipmunk, and going head-on into an oncoming truck. It's crazy.

Below I have pasted a few quotes from an article that I read, that spurred me to drag this rant out again. I read the article as broadly contextual, and recommend the reading - with the economy, and RE (and so much more) in mind.

Conflagration coming link
System breakdowns are normal, but complete collapses can be permanent
By Michael Nenonen
By now it’s clear that our world faces a series of unprecedented ecological, economic, and geopolitical challenges. Too often, we look at these challenges in isolation from one another, perhaps because we don’t have a theoretical foundation to help us understand how they interact. Thomas Homer-Dixon’s The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization (Knopft Canada, 2006) provides just this sort of foundation. His work allows us to see past the sizzling trees to assess the direction and scale of the fire that’s consuming the forest.

It’s dangerous to prevent breakdowns. The longer we delay a breakdown, the more likely it is that it will occur at the same time as breakdowns in sub-systems and macro-systems.

Our woods will soon be ablaze. Our actions will determine which seeds, if any, will survive the fire.

What me worry? I have a tin foil hat!