Tuesday, August 14, 2007

the grab bag # 8


It's better to be a dog in a peaceful time than be a man in a chaotic period.

These are interesting times to be sure. Everyone breathe. I feel that morbid fascination that one feels as they pass a funeral procession, or approach a train wreck. You know something is up when you see flashing lights ahead. The lights have been flashing for quite a while now, and the visceral thrill of regarding the carnage is building.

The markets are still crashing - despite the massive cash infusions of the central banks. Markets post big losses as credit concerns persist.

Bad paper is knee deep, and investors are sitting things out (aside from cashing out).
Shares of Toronto-based finance company Coventree Inc. plunged 72 per cent Tuesday as it warned it may face lawsuits — one day after the Canadian financial company said it couldn't find buyers for $250 million of its asset-backed commercial paper.
That's asset backed paper, and nobody is biting.

Financial market turmoil could lead to lower interest rates, economists say.

I think this mess is going to be with us for a while, and I think that RE prices will become less dependent on interest rates, but will subside due to fatigue and uncertainty. Unemployment is low in the west (Alberta 3.3%, BC 4.1%) and gets higher as you head east. Ontario is at 6.5%, and by the time you hit NFLD, it's 13.6%. The east could use lower rates. We don't want them here. And, someday they will return to historic norms (7-8%). Maybe they haven't sucked everyone in yet.

Chaotic times indeed.

The lights are still flashing.

Update - Thursday, August 16

TSX wipes out 2007 gains

Globe and Mail Update

August 16, 2007 at 1:25 PM EDT

Canada's benchmark stock market
plunged more than 575 points Thursday, as the mounting uncertainty in credit
markets knocked it further into official correction territory.

The fat lady has not begun singing yet...

9 comments:

solipsist said...

A quote from this article on the "credit crunch" from the Giddy and Malfeasant.

"We're not at the canned-goods-and-bottled-water-in-the-basement-with-a-gun scenario yet," Mr. Johnston said of the liquidity crisis.

It's interesting to read such apocalyptic language in that venerable (if venous) publication. Remember that it is for public consumption. Surely it is more dire than reported.

TSX officialy in "correction" mode, money tightening up, consumer confidence down in the US, etc. Is it just me? or is this starting to look wild?

I just laugh at the cruel irony of waiting for reason, and possibly being denied a mortgage when things do shake out. Self-employed mortgages were a welcome development. I wonder if they will be harder, or impossible to get.

patriotz said...

Where were you in '82?

Well I wasn't holed up in the basement, but things were pretty ugly.

HADENOUGH said...

Hi! I am on a holiday in the Okanagan and was talking to the neighbour in the condo next to ours.

He said that Vancouver was under valued and property should be more for a 1st class city like Vancouver. My husband who has worked in Manhattan, London and we lived in Paris for 15 years just stood there with his mouth hanging open. We lived in Toronto for 5 years, nice city but certainly not "world class". I can't believe people really think the city is undervalued as far a real estate. I imagine many people do.

WoodenHorse said...

Once you show up in the Onion, you know you are toast.

http://tinyurl.com/2fhvba

shikko said...

hadenough said:
He said that Vancouver was under valued and property should be more for a 1st class city like Vancouver. My husband who has worked in Manhattan, London and we lived in Paris for 15 years just stood there with his mouth hanging open. We lived in Toronto for 5 years, nice city but certainly not "world class".

I am starting to form the opinion that anyone who thinks Vancouver is a world-class city has never lived outside the region as an adult. Yes, this may be a nicer place to live than where you grew up, but nicer does not equal world-class.

Can anyone comment on this? Any contradicting anecdotes from people not obviously vested in the hype?

William's Real Estate Blog said...

So where do people invest their money now? The volatile stock market? The 4% GIC? or The over value Real Estate stock market?

patriotz said...

First of all, I don't care a flying f*ck whether anyone thinks Vancouver is a "world-class city". It's just another empty aphorism.

However one thing you can be objective about is rents, which are the market's valuation of having a place to live. So how do rents in Vancouver compare with Tokyo, London, New York, etc?

It's the fundamentals, stupid. Only yield can support prices in the long run.

bakakuse said...

I don't think I would be throwing money into the stock market yet, and cash is certainly no longer trash even in Canada now.

HSBC will give you 5% until October in a savings account. 5%!! They're only doing it to get your business after but then dump them in October and go to ICICI and get 4.5%. Those are pretty nice yields to be getting risk free, higher than any we've seen around here for a while.

Does anyone think Dodge and the spineless BOC will hike rates next meeting?

solipsist said...

Well I wasn't holed up in the basement, but things were pretty ugly.

Yes, things were very ugly at that time. I was early into my working life, and it sucked. Hard to find a job, and hard to keep a job. But, the music was great, 1984 was still two years away, and I was having all the fun that a young buck could hope for.

We lived in Toronto for 5 years, nice city but certainly not "world class". I can't believe people really think the city is undervalued as far a real estate. I imagine many people do.

No it's not, but it is more "world class" than Van.

Once you show up in the Onion, you know you are toast.

You scared me wooden! I thought I was toast!

I am starting to form the opinion that anyone who thinks Vancouver is a world-class city has never lived outside the region as an adult. Yes, this may be a nicer place to live than where you grew up, but nicer does not equal world-class.

Temperate climate does not equal "world class" IMHO. Neither do the Olympics, the sea, or the mountains. Calgary had the Olympics (and sort of has mountains), I would not call it "world class". Nagano (Olympics and mountains) isn't either (though I had some good times there). Sarajevo? I'll pass (Olympics and mountains). Anse aux Meadows has the sea too - "world class"?

Just keep saying it, and eventually, it might be so. Phenomenon? or noumenon?

Those are pretty nice yields to be getting risk free, higher than any we've seen around here for a while.

Does anyone think Dodge and the spineless BOC will hike rates next meeting?


The days of easy money are done for a while. I thinks it's time for more pedestrian yields. The GIC rates from 92-96 or so were 9%. That's nothing to sneeze at.

As far as BoC raising rates in Sept., I am going to go out on a limb and say that I think they will. I hope they do. If they don't, I think that things are going to get very weird.