"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey' ​
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State of War

5/29/2015

 
Canada Current Account 70 year chartCLICK CHART TO ENLARGE
"A state of war only serves as an excuse for domestic tyranny."  Aleksandr Solzhenitsyn

Here we are again at month's end waiting for Canadian real estate data from May to come out.


The chart above shows Canada's current account (the sum of the net balance of trade - exports less imports - and the net income from abroad and net current transfers) from 1946 through 2015. A global commodity inflation erupted after the dot.com turn of the millennium crash which fed financial assets and real estate as well. The crash of 2008 put Canada's current account back into deep red where it still languishes unmoved by ZIRP, NIRP and Rate Normalization chatter. 

I wonder if we should invest in socially sustainable production rather than use up our credit on consumption. Just sayin'...

The stimulus for this post was the Globe & Mail May 27th online report that "Ottawa aims to keep lid on details of Saudi arms deal" 

I began to inquire into Canada's military industrial complex in 2013 to look for some correlation to the speculative craze that Canadians have relentlessly pursued in real estate. Vice also poked the arms trade story in 2014 "Canada Is Ramping Up its Arms Exporting Trade"

The only correlation I can offer is the insanity of our broken system that refuses to criticize religious beliefs held without evidence of their veracity (both theirs and ours) and the invented primacy of private property rights that allow transnational corporations the legitimacy to wage war via government proxy.

In my March 2013 "Guns or Butter" post, I included charts of then current PMI and GDP along with various quotes from newswires like the Huffington Post that underscored the obvious "...the production and trade of military goods is powerfully influenced by governments".

The point is, a modern Political class is deeply wedded to corporate mercantilism and opportunism and since no one wants the political chore of discussing the question of who benefits from murdering foreigners in their own land, the protocol from the top down, becomes silence (keep a lid on it) or worse moral confusion (it's ok to supply arms to a country that "has a persistent record of serious violation of the human rights of their citizens" even though it also violates Canada's export regulations). 

Let voters instead churn about in the blogosphere over the "foreign invasion" into Canadian real estate as diversion to the horror of war with the side benefit of maintaining the fear of the other. 

1984 - The Purpose of War


Addendum - June 2, 2015

BOOK REVIEW Kill Chain by Andrew Cockburn
Andrew Cockburn chronicles how U.S. drones complete Obama’s Kill Chain. Source: The Georgia Straight by Travis Lupick on May 27th, 2015 
The United States military’s desire to kill without putting its soldiers at risk began earlier than many realize. In Kill Chain: The Rise of the High-Tech Assassins, veteran Washington reporter Andrew Cockburn begins the story of America’s modern assassination program in the 1960s, on the Ho Chi Minh trail in North Vietnam.

Neither the technology nor public opinion was ready, he writes. “Amid the general horrors of the war, the specter of an automated battlefield, in which targets were selected and struck by remote control, touched a sensitive public nerve.”

Forty years later, in the wake of the September 2001 attack that sparked the “war on terror”, both technological capability and the American public had caught up with the military’s ambitions. Cockburn traces those parallel paths, from the jungles of Vietnam to the deserts of the first Gulf War and through the skies of Yugoslavia.

Finally came the presidency of George W. Bush and “terrorism”, a new and omnipotent enemy that required new tactics to contain. “An old idea had found its time,” Cockburn states. Soon after, the capabilities of the machines surpassed the moral attitudes of the humans who controlled them.

And so today in Afghanistan, Iraq, Pakistan, Yemen, Somalia, and Syria, U.S. Predator and Reaper drones fly overhead, often not even targeting people but instead hunting digital signatures left by their sim cards, creating an “involuntary posthumous enlistment” of every military-age male killed by an American missile.

The picture that emerges is one of a global assassination program with no civilian casualties—as far as the American public is concerned—all made possible by technical advances every bit as impressive as the feat itself.

“A single Global Hawk drone requires five times as much bandwidth as that used by the entire U.S. military during the 1991 Gulf War,” Cockburn notes.

That’s not to say humans are removed from the situation. They sit in air-conditioned bases in Florida, for example, conducting “signature strike” operations against nameless bodies that match a profile.

To fly a single Predator drone requires a support staff of 168 people, Cockburn reveals, and to keep one new Reaper drone in the air, 171.

This equipment’s reliance on so many human bodies is not a weakness but a strength that ensures its survival, Cockburn concludes. The United States’ assassination program has become an industry that employs thousands. The politicians, the civilian contractors, and the generals buying these technological marvels, they are all “inmates of the military industrial complex”.
Kill Chain & Canadian Military Spending - 2017-2027CLICK TO ENLARGE

Here is journalist Andrew Cockburn in conversation with Alyona Minkovski from HuffPost Live on April 16, 2015 discussing Andrew's new book, "Kill Chain: The Rise of the High-Tech Assassins," and the evolution of technology in warfare.

Bill Hicks - War In Iraq

"Don’t ask whether it will happen; it’s already happening. The robots are already here and they’re called corporations." Tim Berners-Lee, December 13, 2014 presentation at LeWeb; more transcript quotes via Sam Volkering's Tech Insider. 

"When the rich wage war, it's the poor who die."
Jean-Paul Sartre

The Military Industrial Complex
Eisenhower's Warning - January 17,1961

Liquidity

5/22/2015

 
10 Yr Bonds & USD May 2015CLICK CHART TO ENLARGE
"Liquidity is the most under appreciated risk factor out there. We've seen the bond market reprice to an understanding that liquidity is not as abundant as all that, and I would just worry about the liquidity risk... At some point down the road, fundamentals have to validate these high prices." said Mohamed El-Erian, Allianz Chief Economic Advisor May 18, 2015"

At 2.2 minutes in the brief interview snippet, El-Erian posits that "You can't kick the can for the whole global economy. The longer we are in this new normal of low growth and equities are propelled by new cash, the greater is the risk of financial stability down the road."

In a word; valuation.

In the chart above I have highlighted the Government 10 year yields for Canada, the U.S. and the Euro area as well as an overlay of the USD/CAD ratio. 

Rates have bottomed in North America and Europe since April 2015, and the first leg up in repricing risk has put rates up to a potential new floor as noted by the coiling action in May.

The USD/CAD ratio has turned up this past week. A strong U.S. Dollar will mute U.S. inflation since domiciled U.S. producers will have a more difficult time setting export prices, and that leads to headlines like "HP plans to eliminate 55,000 jobs by the end of 2015". 

In Canada, we can expect our main activity of consumption to be dampened by rising import prices. We may have to switch from Ikea to Craigslist to stuff our condos with.  
CPI Inflation US+Canada 2008-2015
CLICK CHART TO ENLARGE

Pitching Unicorns to Whales

5/13/2015

 
2010-2016 Average price of new Manhattan condos.
CLICK GRAPHIC TO ENLARGE
We're doing beyond well
said CEO of Vornado Realty Trust.

How to catch a whale; put a unicorn in front of them. Global money has not yet exhausted itself on trophy properties. The bets on asset price appreciation keep rolling in. Here are some snippets from the WSJ May 12, 2015
  • 220 Central Park South secured $1.1 billion in sales ... in just six weeks on the market. 
  • At One57... sales have picked up substantially ... hope to sell out the tower by the end of the year.
  • The well of buyers is deep ... at least for the best towers.
  • Investors look for higher returns than they can get from bonds.
  • Many apartments go unoccupied, used only as investments.
  • Details on buyers are scant, since wealthy purchasers typically shield their names.
  • Real-estate markets that lack transparency are prone to overbuilding. 
  • Very little information is actually getting into the market ... everyone’s just copying each other.

One57 sells for $100,000,000

and... how to adorn a Unicorn

But as the Georgia Straight pointed out on May 6, 2015 on the subject of the most expensive housing in Canada:
  • Only 16 percent of the 53,710 Vancouver homes sold in 2014 were priced over $1 million.
  • The average sale price of all residential properties in 2014 for the bottom 80 percent of the Lower Mainland Vancouver market of 42,968 units, was $462,792.
  • The average sale price of the bottom 80 percent of just the condo market was $327,486.
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  • Home
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