20 comments on The Round-Up: July 6th 2007
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20 comments on The Round-Up: July 6th 2007
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Stoneleigh,
Thanks for all you're hard work researching the financial meltdown in progress in the US and Canada. I've contended since the S&L crisis in the early 80's that anyone with an MBA and a computer needs to be shot.
The derivatives market reminds me of Enron. Jeff Skillings had a Harvard MBA, while Kenny-boy had a Doctorate in Economics from the University of Houston. The only problem is most of us have houses, while few people had Enron stock.
The subprime reset chart you linked to is very discouraging-it looks as though house prices will be in the toilet for at least 5 years. Here in Galveston there are a very large number of houses for sale, and the owners have just now begun to really drop prices. However, the median price per square foot is only about $75, so I doubt it will fall more than 1/3rd. Galveston is a poor town though, so we have plenty of sub-prime mortgages.
Bob Ebersole
Great post...Thanks!!
here's a sobering article on the coming economic collapse:
http://globalresearch.ca/index.php?context=va&aid=6209
Hi Bob,
It really isn't happening in Canada yet, but we'd be kidding ourselves to think that it won't. Canada never had anything like the subprime loan situation in the US fortunately, but people here are just as hooked on easy credit and easy credit is on its way out. Canadians are more indebted than ever, but they feel richer because they have more.
The parallel between Enron and the derivatives market is very apt. At Enron too the inevitable rating downgrade came very late in the game, meaning that most investors were left holding an empty bag.
My guess is that real estate prices have a very long way to fall indeed. I expect them to undershoot in value before any kind of recovery could be expected because the sheer momentum of the decline is likely to be so large once it really picks up steam. Unfortunately real estate can become illiquid very quickly, and a price collapse becomes a vicious circle of defaults, reposessions, oversupply, further price falls etc. Many people who are now quite secure will end up finding themselves at risk, especially as there will be collateral damage to employment, investments of all kinds, pensions, savings etc. IMO we are heading into a second Great Depression.
Hard to say IMO.
Places like Toronto for instance, will likely face the same crush of chaos externalities (energy/climate change) as say NY thus, RE value will adjust accordingly.
RE value in Vancouver on the other hand, should continue to rise as said chaos externalities will most assuredly not affect the westcoast as they will the east. (NOTE: this is why NORTHCOM splits the continent east/west).
Moreover, I assert that Vancouver is likely to become the last surviving city -as we conceptually define the term- in Canada, if not the North American continent as a whole for the list of advantages of this locale are staggering.
I'd recommend moving to BC now if at all possible Stoney.
Thanks for the invitation :) I've never been to BC and I hear it's very beautiful, but I couldn't possibly afford to live there. I'm afraid that Vancouver has one of the biggest property bubbles in North America right now, and I expect the readjustment to be vicious even without a subprime element.
Vancouver, viable? I don't know.
You have several million people crowded into a small valley surrounded by mountainous terrain. A very limited patch of rich farmland is rapidly being covered with suburban roads and housing. As long as the groceries are trucked in from California this is not a problem.
The Vancouver real estate boom is fed by Asian money, to no small extent. It also derives from the fact that Vancouver's climate is mild and its setting is very pleasing, esthetically. But that won't mean much in the face of any real economic hardship.
Right on JFP, we're a world class city since Expo 86 which only translates into one more place that can't feed itself.
Soon all the old homeless streetpeople will be getting ready to greet all the new homeless streetpeople who get chucked out of their fleabag hotels when Vancouver hosts the winter Olympics in 2010. They are painting a big sign that reads. WELCOME TO ALL YOU SILLY BUGGER TOURISTS COMING HERE JUST IN TIME FOR THE END OF THE WORLD.
Spirit of the West (a Vancouver band) wrote a powerful song on that topic in the 1980s - the last time Vancouver hosted something similar and exactly the same thing happened. I think it was called 'I'm Alright Jack'.