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Flipping Assets is Not Working for Labour
The series of charts gathered by Lance Roberts in his July 26, 2013 post "Housing" - Is It Really Recovering? demonstrate that in the U.S. the so called Housing Recovery is mislabeled and perhaps is more an example of Capital leverage over Labour.
I took at look at some Canadian charts (left) and see that in Canada a similar condition is occurring with the Balance of Trade being stuck in a negative channel for the last 5 years (in the U.S. it's been negative since 1980's). Canadians are regularly consuming more than they produce and in the last year and half, Labour costs for Capital have plunged back to 2005-2006 levels.
Can Canadian Labour learn how to leverage Capital to create long term value in the social contract?
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REO to OREO to IPO
The Maps show houses for rent in the Phoenix AZ area owned by Silver Bay Realty Trust Corp. which issued its Initial Public Offering (IPO) December 2012 at $18.50/share.
The top map shows their listing stock for rent in March 2013; the bottom map is 4 months later (July 23, 2013) showing their huge listing pile for rent.
It reminds me of Monopoly half way through the game when one or two players have their properties fully developed and are waiting for the remaining players to capitulate before the battle to the finish takes place.
The lower chart shows the percentage price change of Silver Bay (SBY down 14%), the iShares Dow Jones U.S. Real Estate Index ETF (IYR up 13%) and the yield on the U.S. 10 Year Treasury ($TNX up 51%) over the last 8 months. Notice that the Silver Bay stock price did not get a lift with the 10yr Treasury yield's most recent correction. Cash buyers preferred the broader ETF IYR.
There are going to be winners and losers in the corporate rent and flip game and like Monopoly the really big money will probably end up with all the houses.
The housing recovery is for a few shareholders based on the belief of future capital gains. For the rest of society, it's just a different landlord.
My thanks to Barry Ritholtz's So You Want To Be A Landlord? for his observation July 23rd, 2013 of the massive inventory Silver Bay is promoting on their website.
REO = Real Estate Owned (usually by a lender after foreclosure)
OREO = Other Real Estate Owned (financial statement notation)
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In Detroit fundamentals were replaced "by Belief".
Fundamental Real Estate Appraisal is done by Comparison, by Replacement and by Income. If you do the analysis you can form a snapshot opinion on market value. If you rely on belief, then good luck to you.
"As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009." It was the fourth-largest bankruptcy filing in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc. (Wikipedia). Chrysler had filed for Chapter 11 bankruptcy protection a month before on April 30, 2009.
Do you remember that in 2009, the internet was full of photos of rows upon rows of unsold Hummers? Crude Oil had peaked in July 2008 at $147 a barrel. Apparently GM management believed in super sizing cars.
Now Detroit is filing bankruptcy and it is by far the largest of its kind in U.S. history with respect to a city population of about 700,000 and the amount of its debts and liabilities, could be as high as $20 billion according to Emergency Manager Kevyn Orr on July 18th, 2013 (USA Today).
Detroit is going to transform debt into equity. There are 2 ways. Pay it all back to the lenders, bond holders and claimants over time or do what Iceland did in 2008 and default. Since 1980, Argentina has defaulted three times on its domestic debt (Mises.org).
Myth "An unproved or false collective belief that is used to justify a social institution."
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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.
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HSBC group chief economist Stephen King points to the stock market’s multi-year advance and the under performance of the (U.S.) economy as a growing gap between hope and economic reality by BOTH policymakers and households in his new book When the Money Runs Out: The End of Western Affluence.
King says "We’ve been wrongly budgeting for a return to 3.5% per year average real growth."
Ok lets look at some 50 year charts all with a start date of 1962 to see what the trend is. Down.
The shaded areas on the chart all touch Zero to 5% per year GDP growth at March 31/13 on the right hand % Y axis. All 4 developed economies have the same degree of slope down on lower highs and lower lows.
Australia gets the closest to policy desires but has dropped to 2.5%. Both the United States and Canada are under 2% and Great Britain is under 1%, way under.
If the housing inflationists want to keep chasing real estate prices higher, I suggest they start buying a lot of goods and services otherwise the GDP charts are going to continue eating away at employment, wages and income distribution.
Read the whole July 8/13 interview of Stephen King, by Michael J. Casey, The Wall Street Journal.
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 SpaceRip
ADDENDUM July 15, 2013
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
The Perfect Tide: Sea Level
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
"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'