Tuesday, July 22, 2008

our kittinger moment

On 16 August 1960, Joe Kittinger jumped from a balloon into the stratosphere (102,800 ft.) to make the longest skydive from the highest altitude in history. He reached a peak velocity of 614 mph (988 km/h), a mark that still stands as the fastest speed ever reached by a human without a vehicle. Though Kittinger fell short of supersonic speeds, he did get pretty close.

Automatic camera recording Kittinger as he leapt from the Excelsior balloon

I see this as analogous to the RE market that we have. It is stratospheric, and record-breaking. It is very cold and lonely up here, and there is only one way down - free-fall, and hope that the parachute works.

Despite the planning of NASA, USAF, etc., no one knew just how it would go. Kittenger's pressure suit sprang a leak, and he suffered intense pain in his hand. Between 90,000 feet and 70,000 feet, Kittenger had great difficulty in breathing. Jayzus, 614 MPH straight down.

Here is the formula that describes his acceleration:


where

v = terminal velocity
v/0 = initial velocity, which is zero in this case
a = acceleration, due to gravity in this case
Deltax = change in distance, 12,800 ft (3,900 m) in this case

I wanted to write a formula that would describe the potential of acceleration once this market starts its free-fall, but my calculus sucks. It will be horrific though, and will likely reach a velocity heretofore unheard of.

Canadians owe $100 Billion in unsecured credit card debt, and who knows how many billions in mortgage debt. Our manufacturing sector has imploded, and continues to burn. Job growth in recent years is mostly in the government, and of course, part-time and service industry jobs. Our federal government has no cookies in the cupboard for when things start to get tough in the next year or so. The US (our biggest market) is already in free-fall, with $1 Trillion in unsecured credit card debt, and of course, a 15% decline in property values (nationally - with some markets down ~40%). That $1 Trillion is not so scary - it is 10x what Canadians owe, but they have 10x our population. Per capita, we are in the same boat.

It is a long, long way down from here, and I think that the fall is going to be very swift.

No parachute either.

9 comments:

Anonymous said...

Fantastic analogy. Only one difference. The hand will only be hurting for a very short while.

The parachute ain't opening, period.

~SPLAT~

shikko said...

solipsist;

This is tangentially on topic, buy you can check out actual footage of this jump in the video for the song "Dayvan Cowboy" from the confusingly-named Scottish band Boards of Canada:

http://youtube.com/watch?v=_lEsLcGB7Vo

One bit of trivia: the music lasts for 4m 31s, which was how long Kittinger was in freefall.

As for real estate, I agree with anon@5:26. The coming collapse is going to hurt a lot more than Vancouver's hand.

Anonymous said...

Wow, fantastic little history lesson there. That was fascinating. 600 m/ph Crazy! I agree with you on all points. The beauty of the internet is you can read "average Joe economists" take on what all the numbers mean and you get the real goods. As we know, high profile media type economists never tell it like it really is. Doomsday numbers, "Recession" and comparisons to other terrible times in history incite fear and only perpetuate the pull back.

pbell

Anonymous said...

never mind doing the math....
i have one word to describe this:

aaaaaaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaaaaaa
aaaaaaaaaaaaaa
aaaaaaaaaaa
aaaaaaaaa
aaaaaaa
aaaaa
aaagh!!

blueskies

patriotz said...

Here's a prediction for you - Vancouver will fall farther in its first year of decline than any US city, with the possible exception of Miami. At least 15%.

When the Olympics arrive in February 2010 this city - and most of the province for that matter - will be in the midst of a financial and psychological meltdown.

Anonymous said...

You forgot the contribution of drag to the equation. As your velocity increases, so too does the force of drag created by wind resistance. Not much of a factor in the stratosphere, but definitely important at lower altitudes. When the force of wind drag = the force of gravity, acceleration stops and the falling body has reached 'terminal velocity'.

The only reason I mention this is that the whole stickiness of prices seems to be the 'drag' in the Vancouver housing market free fall. Sellers stubbornly holding out and thinking that this softening is just a blip before things pick up steam again.

I'd like to counter that. I'm an engineer (in case you hadn't guessed by the nerdy first paragraph) who moved out here a little over three years ago - and already have seen at least 3 separate married couples (friends) pack up and head back east as soon as they had their first babies. Reason cited: 'Vancouver is just not a good city to raise kids in. Who wants to raise a family in a 500sqft box on the 22nd floor?'. I think the appeal of Vancouver is getting lost on families, and this place is soon going to polarized into two groups. Retiring wealthy boomers, and young 20 somethings who don't mind living 5 or 10 to a small Yaletown condo.

Just my $0.02.

VancouverGuy said...

It's not tough to live only one to a small Yaletown condo if you rent actually...

solipsist said...

~SPLAT~

Indeed

This is tangentially on topic

thanks for the link. That is a cool video.

...high profile media type economists never tell it like it really is...

And that is why we don't bother with them much.

Jeff Rubini seems half right half of the time. But why is CIBC eating so much?

never mind doing the math....

Thanks for the Coles Notes blueskies.

patriotz - that sounds reasonable to me. Are you my alter ego?

You forgot the contribution of drag to the equation.

But I haven't! I have factored that in. The drag co-efficient is i/f + a/fi x de/div/fc x 3.14 - ua

where

i=I am
f=farked

a=amount
fi=financed

de=death
div=divorce
fc=foreclosure

3.14 is the value ascribed to job transfers/loss of employment/disillusion with Vancouver

ua=unknown anomalies

It's not tough to live only one to a small Yaletown condo if you rent actually...

But what if you need to grow some food?

realist said...

Solipsist:

A witty analogy, for which I thank you. I entirely agree with you and Patriotz, as usual. It will be the 21st century's reprise of the 1930's, and not much more fun - materially far better, but psychologically 'the big bust'. Real estate will be loathed by many of its mortgagors, who will come, very sadly, to understand the 'mort' part of 'mortgage'. A great pity, and it could have been avoided.