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50/10 10/50 "We're in California, isn't there a better way of doing that?" Elon Musk
The bottom 50% of most national populations is participating in less than 10% of its wealth, and the top 10% of populations is wheeling and dealing with over 50% of its national wealth. If you are in the bottom 50%, you are working at the wrong trade if your desire is to enjoy just some of the benefits of those above you; for instance more free time.
It's doubtful that in this period of history there is any point in waiting or voting for your governors to move you up the ladder because the 10% make up the rules of the game. The only remedy I can see is to retrain so that you have a skill that the top 10% needs and that the bottom 50% doesn't have.
Here are some high quality and free educational providers, Khan Academy and EdX to get you started and an interview with Elon Musk "A lot of education is vaudevillian" from April 17, 2013 at the Khan Academy office in Mountain View (48min).
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The Rich Get Richer
When it comes to flipping houses in the U.S. it is the very wealthy who excel at the gross margin.
Total flipping activity (bought and sold in 6 months) is down by about 13% Y/Y but in the 2 to 5 million dollar price range, the flip count is up 350% Y/Y.The mid and low end price flippers are being forced into holding, folding or chasing prices down the slope.
What's that old saying... "The rich get richer and the poor get children"? Well fortunately the poor are getting smarter and the birth rate is falling due to "demographic transition
" according to Warren Sanderson, a professor of economics at Stony Brook University."Don't talk so much, old sport... Play!"
The Great Gatsby F. Scott Fitzgerald
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Asset Bubbles Correct
We have lot's of "Eiffel Tower" price patterns to refer to that have a fully formed right side to the tower; Japan is a classic with a multiple decade reversion.
I have lined up the peaks of the Japanese, U.S. and Canadian stock markets with housing index overlays.
The Canadian pair looks to be at a crossroad and according to a Statistics Canada medium growth projection, net immigration along with net birth-death may also have a right side reversion.
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Part Time-Full Time, Male and Female Employment in Canada
STATS CAN Employment Data
: In Canada, more women than men work at part time jobs (+/- twice as many) and both older men and women (45 years and older) are more employed part time than younger men and women (age 25-44).
In the category of full time employment, there appears to be a declining number of younger men (since about 1990) employed relative to full time older men who appear to have made and kept the biggest percentage gains in job acquisition.
With full time employed women the story is similar except that BOTH younger and older women have made large percentage gains in getting employment and for 20 years during the period between 1983-2003, younger women were getting more jobs than older men.
If the trend continues of greater productivity through technological advance and the wage disparity between men and women is not erased, we could see more full time jobs auctioned off to women who live longer than men
The chart above (updated annually) is also located on the Earnings Page
Sell Your Florida Real Estate BEFORE 100,002,013 AD
You are in a flood plane. Toronto, Detroit and Chicago, you should think about buying property further west and Vancouverites you might want to buy a few more boats. Note to people of Manhattan, the global financial centers are going to move from their present locations. Timing is everything.
"Earth 100 Million Years From Now" Youtube by SpaceRipImage Credit MorgueFile.com
Earth's landmasses were not always what they are today. Continents formed as Earth's crustal plates shifted and collided over long periods of time. This video shows how today's continents are thought to have evolved over the last 600 million years, and where they'll end up in the next 100 million years. Paleogeographic Views of Earth's History provided by Ron Blakey, Professor of Geology, Northern Arizona University.
ADDENDUM July 15/13 Miami is on its way to becoming an American Atlantis.
The following snippets are taken from the July 4th, 2013 issue of Rolling Stone article by Jeff Goodell
Miami is on its way to becoming an American Atlantis. It may be another century before the city is completely underwater (though some more-pessimistic scientists predict it could be much sooner), but life in the vibrant metropolis of 5.5 million people will begin to dissolve much quicker, most likely within a few decades.
"Miami, as we know it today, is doomed," says Harold Wanless, the chairman of the department of geological sciences at the University of Miami. "It's not a question of if. It's a question of when."
The Organization for Economic Co-operation and Development lists Miami as the number-one most vulnerable city worldwide in terms of property damage, with more than $416 billion in assets at risk to storm-related flooding and sea-level rise.
South Florida sits above a vast and porous limestone plateau. "Imagine Swiss cheese, and you'll have a pretty good idea what the rock under southern Florida looks like," says Glenn Landers, a senior engineer at the U.S. Army Corps of Engineers.
The 5.5 million or so people who now live in South Florida consume more than 3 billion gallons of water every day (including industry and agriculture). Almost all of that is pumped out of the aquifer, drawing it down and allowing more and more salt water to move in.
Since taking office in 2011, Governor Rick Scott, a Tea Party Republican has targeted environmental protections of every sort and slashed the budget of the South Florida Water Management District, the agency in charge of managing water supply in the region, as well as restoration of the Everglades.
"If you live in South Florida and you're not building a boat, you're not facing reality."
Whenever there is a full moon and a high tide, the sea water comes up on the west side of Miami Beach through the old storm drains and flows into the streets. In some places, it bubbles up between the street and the sidewalk.
"God destroyed the Earth with water the first time, and he promised he wouldn't do it again. So all of you who are pushing fears about sea-level rise, go back and read the Bible." Florida State Commissioner
Read the whole article here.
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Pride and Prejudice
Here is an excellent chart from Andrew Yan, an urban planner with Bing Thom Architects who plotted out the July 2012 Tax Assessed values of homes in Vancouver BC over and under $1 million. Vancouverites always knew that Main Street was an important demarcation between west and east as it was roughly where the line was drawn for map makers and the post office to differentiate between avenues west and east (streets run north south) and west was-is the best for an address. It is striking that this value border remains so well defined. There are pockets in the east that have created islands of million dollar plus assessments but Vancouver City planners are moving to increase densities in the east in an effort to get more "affordable" housing there and to compete with even more easterly city planners like Burnaby.
Snippet from the July 2013 Globe & Mail The $1-million white picket fence "Seeking to spur builders to pack extra density on valuable land, Vancouver city council in May approved new zoning rules for the Norquay neighbourhood on the East side."
Snippet from June 2013 The Tyee At Ground Zero for Vancouver's Towering Debate "High-rises up to 36 storeys proposed for Commercial and Broadway neighbourhood raise looming citywide question: who decides?"
Snippet from the April 2013 Burnaby NewsLeader Lougheed's turn to become high-density neighbourhood "In Burnaby, we don't just make plans, we follow them..." CLICK CHART TO ENLARGE
For Whom the Bell Tolls
Since 2009 out of the crash into the pit of gloom, I have been tracking listing prices along the west-east demarcation line with the notion that real estate prices in Vancouver will eventually deflate to long term averages. The rally out of the gloom has been so successful that listing prices remain very sticky and "low" rates hypnotize buyers into ignoring the fundamentals (negative yields
) because their faith is that inflation will raise their boat no matter how high the tide is when they launch.
I am not convinced that the Main Street fence will fall anytime soon; my apologies to Jane Austen and Ernest Hemingway.
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Canadian Billionaire Edition (2012 data)
Here is another metric for grappling with the valuation disparity between Vancouver and the GTA. (Comparison Chart
Toronto has more than twice as many billionaires as Vancouver, and more than Calgary and Vancouver combined.
Montreal has more billionaires than Vancouver and yet for the price of an average single family detached house in Vancouver you can buy 3 of them in Montreal and still have cash left over (Canada Chart
We can guess that New York and London as Financial Centers have lots of billionaires, but who knew that Moscow ranks 2nd?
According to the Knight Frank Study
, Moscow barely makes the list as a target for High Net Worth Individuals appearing only on the Political Power List at 9th place.
CLICK to ENLARGE Atlas Van Lines Migration
A Stampede for Earnings
Newfoundland and New Brunswick lead in net inbound migration while net outbound household migration is flowing out of British Columbia, Saskatchewan, Manitoba, Ontario and Nova Scotia.
Balanced net migration (50%) is happening in Alberta and Quebec; the former for employment and earnings
, the latter no doubt for culture and low cost of housing
. At the close of 2012, the biggest migration trend was into Alberta and a continuing move towards higher inbound household formation. Follow the money. This Chart is also located on the Census Page
WHAT TO DO DURING A HOUSING BUST
Japan as we know has been in a 20+ year (and still counting) housing price deflation.
As housing prices fall over long time spans, households have to make decisions about how they are going to turn the debt they acquired on the way up into equity.
There are two basic choices; get in front of the falling price curve and sell at a either a loss or gain depending on timing, or if the household has the income, pay down the debt over time as a forced savings plan. The former allows for greater savings and re-investment and the latter is a suicidal prison term chained to one price decaying asset.
In either case, households turn to saving and away from consumption.
The charts above and below are from an article by
Jack Crooks of Black Swan Trading where he argues:
1) The demand for dollar liquidity in a world where the European banking system is desperately deleveraging and many in the private world are doing the same likely means the world reserve currency remains supported, even though it is likely Ben Bernanke would like to push the buck lower.
2) The commodities super cycle is behind us. This doesn't mean all commodities go lower; agricultural commodities could spike again and are subject to lots of volatility. But even the Australian Central Bank believes there has been a peak in the mining cycle in Australia.
3) The credit crunch (2008-09) really was a sea change. Massive personal balance sheet over-leverage, coupled with the decline in the biggest personal asset, real estate, seems to have triggered a sea change in both real consumption and attitude toward future consumption. This means more savings. More savings tends to mean more money in fixed income (keeping yields low).
4) The knock-on effect of a change in reduced global consumption and increased savings is the catalyst for rebalancing the current account deficit nations with the current account surplus nations. It is especially bad news for those with export-dominated growth models who will take the brunt of the adjustment domestically; and we know who you are: China, Germany, Japan...
THE CYCLICAL NATURE OF COMMODITY PRICES ~ BOOMS & BUSTS
CLICK TO ENLARGE Canada Balance of Trade
Canada's Balance of Trade has been dropping since the Tech Bubble blew out in 2000
Over 70% of our exports are sold into the U.S. The U.S. Output has been in decline since the end of WW II. China and the Emerging Markets are growing their shares of World Output. According to the charts below the long scale cyclical shift began 60+ years ago.
Meanwhile in Canada we have been engaged in a massive 10 year debt fueled real estate bubble that is in its early phase of collapsing. The boom did create employment and consumption in the 'FIRE' economy but now real estate equity is disappearing and savings are being depleted and highly leveraged Canadians are left with the long term chore of converting their debt into new equity either by repayment or by default. Canadians are going to have to retrain themselves to compete with skilled productive foreign workers; a difficult task to accomplish under the burden of extraordinary long term private sector household debt. A national educational policy would help, but is not likely; as Ray Dalio says:
"Because these cycles evolve slowly over long time frames – over at least 100+ years – they are imperceptible to most people. They are also essentially irrelevant to rulers who typically have time horizons of a couple of years. As a result, they are not controlled, which is the main reason that they are destined to occur. If human nature was different so that debt growth doesn’t outpace income growth and income growth doesn’t outpace productivity growth, these cycles would be pretty much eliminated."
CLICK TO ENLARGE Output as % of World Output by Ray Dalio June, 2011
Shifts in Relative Wealth and Power Tend to Occur via Very Long Cycles Lasting Five Generations or More.SOURCE
: Why Countries Succeed and Fail Economically Ray Dalio June, 2011 © 2012 Bridgewater Associates, LP
These cycles have occurred through all recorded history going back to Rome and before, though they have become more sophisticated over time. While many influences contribute to these shifts in relative income and power, we believe that the two most powerful of these are 1) the psychology that drives people’s desires to work, borrow and consume and 2) war. Throughout history, these two influences have changed countries’ competitiveness and indebtedness which have caused changes in their relative wealth and power. Since different experiences lead to different psychological biases that lead to different experiences, etc., certain common cause-effect linkages drive the typical cycle. While we will describe what we believe is the typical cycle, of course no cycle is exactly typical.
Now about half of world GDP (53%) is produced in what we now call the “developed world” (US, Europe, Japan, UK, Canada and Australia) with about equal amounts being produced in the US and Europe, and about half of world GDP (47%) is produced in what we now call
“emerging countries” with a bit less than half of that being produced in China and India. Russia produces 3% of global output.
For reasons explained later, we believe that in another 15-20 years emerging countries will produce about 70% of global GDP
, China will produce about 25% and India will produce about 12% as they did in the mid-19th century. Russia will produce around 8% as it did in the
READ: The complete Ray Dalio analysis here
Definition: Purchasing Power Parity Adjusted
CLICK TO ENLARGE Share of Real World GDP by Ray Dalio June, 2011