Here's my back of the napkin yield calculator for CAD$12.
It pays for hosting and domain blog costs; thanks.
...more than half of fund managers have never experienced a prolonged bear market... @Hipster_Trader
Millennials who did not 'catch' FOMO might be very relieved at this point in the business cycle.
Canada Has a Broken Housing System and It Has Fucked Over Millennials - Vice, Oct 2018
The above sounds like it, but no,
that's not a quote about Canada;
but these are:
Canadian real estate sales are feeling the pinch of higher interest rates, and consumer credit isn’t far behind. Bank of Canada (BoC) numbers show household debt printed a new record high. Despite the record high, the rate of growth continues to slow for consumer debt levels. The decelerating growth is yet another indicator that the credit cycle has peaked. Better Dwelling, July 2018
Market Rate Outlook: One more hike this year plus two more hikes next year. The market is not fully pricing in the next BoC rate increase until December... Canadians are now more sensitive to higher rates than ever before. That means consumption is slowing faster with every 1/4% BoC rate increase. RateSpy.com Sept 2018
Canada's economy is set to slow down even with a NAFTA deal, economists say:
And as my long term chart study of Canadian Debt, GDP, Foreign Direct Investment and Balance of Trade shows, since the credit crash of 2009, Canadian's awesome consumption via debt has not led to higher wage employment production in Canada but to lower wage warehousing and transportation of goods and services that we import to maintain our lifestyles.
"The one-million square foot Toronto centre will be Amazon’s sixth facility in Ontario and ninth in Canada." Financial Post, July 2018
"Stabilization should not be interpreted as the start of another strong rally," they warned (TD Bank economists Derek Burleton and Rishi Sondhi). That's because mortgage rates are on the rise, and home affordability levels have reached their worst levels in a quarter century... in fact historical data shows that over the past half century, inflation-adjusted house prices in Toronto fell for about a third of the time. huffingtonpost.ca, Sept 2018
I have added in comparison on the chart, the rise in single family detached housing prices for Vancouver and Toronto as well as the increase in annual employment earnings all since 1999, the eve of the dot com tech crash.
The result is a six and a half fold increase in housing cost relative to employment earnings.
Some rental housing cost relief will occur with increases in minimum wages, but minimum wagers are not a source of buyers for detached houses in Canada's crazy towns.
If the real estate bulls are correct in their projection that house prices are not going to drop in any meaningful way because of dearth of land, string pulling by government or money laundering then society is going to have to deal with the prospect of guaranteed incomes to offset housing unaffordability and we will have to provide better access to services and housing closer to employment.
The CMHC survey report confirms, Montreal buyers had less need to spend beyond their budget than the Vancouver and Toronto cohort.
CMHC acknowledges via a closing reference to Robert Shiller's observation that "narrative economics"...
...sound prescient to describe what could be some influence happening in the local imaginary of homebuyers. The human brain has a natural draw toward stories whether they are factual or not... stories are powerful instruments to share information and reproduce narratives with economic impact.
The echo chamber stories we bolster our decisions with are well known, oft repeated and have created FOMO (fear of missing out) via the memes of "foreign buyer competition, money laundering, growing immigration, dearth of available land, prices always rise, prices won't drop much now, let renters pay the mortgage, rents are rising, housing is always in demand, government needs low interest rates, government provides financing subsidies, government will protect the construction employment boom" etal.
Executive Summary from CMHC June 2018
Chart Below CMHC 3Q 2018: Housing Market Assessment
Anil, a retired UBS rates options trader, quotes investment strategist Jeremy Grantham:
Bubbles have a blowoff phase lasting 21 months. Using a 5% threshold, the run from Feb 16 to Dec 17 was 22 months.
Hence the question "Have we seen the melt-up?" It certainly appears that way for Toronto Real Estate (as of February 2018 data) and the March data may add even more weight to the thesis.
Weak hands will offer up their assets first and in Canada we have a lot of household debt that eventually will face term renewals and the official stress test which is the greater of either the Bank of Canada’s five-year benchmark rate, now 5.14%, or the rate offered by a lender plus another 2%.
If you are thinking of 'buying the dip' make sure your income is amortized over the length of your mortgage. In a melt down, the erosion of net worth will shift a lender's risk management exercise to more closely examine the strength and security of your net income.
As we know employment income growth is facing profound challenges.
Global Risks 2018
"Canada's big housing markets in 'Goldilocks moment." CBC News, October 12, 2017
Mr Soper, president and CEO of Royal LePage also declared that Canadian housing is 'just right' if we are to use his metaphor:
Canadian housing is enjoying a Goldilocks moment — not too hot, and not too cold.
- Vancouver’s ‘renovictions’ driven in large part by vacate clause - via Business Vancouver August 2018
- New Westminster renovictions leave low-income renters feeling desperate - via CBC News June 2017
- Cook Street Victoria apartment tenants face ‘renovictions’ - via Times Colonist March 2017
- Tenants facing 'renoviction' went up against a powerful Vancouver developer and lost - via Metro September 2016
- Rent law changes coming, but not for ‘renovictions:’ Coleman - via Metro September 2016
- Renters of Vancouver: “It’s a new kind of renoviction” via Straight September 2016
Look for headlines soon to come out of Toronto documenting their experience of renovictions. Everyone has to pay more for housing now because of 9 years of ZIRP & NIRP
FROM Alberto Gallo, Bloomberg, August 2017
Economists are split on why inflation has lagged gains on growth and unemployment. The Fed has reassured low inflation is temporary, but many believe structural factors will keep inflation lower for longer than traditional models suggest. We are in that camp.
The scars left on the economy by the prolonged recession -- such as workers permanently dropping out of the workforce, new technologies that maximize sharing of existing resources, falling demographics, and a general weakening of labor bargaining -- are all responsible for keeping inflation subdued.
If inflation is likely to remain low due to structural factors, then QE may be less useful than previously thought. In fact, continuing QE can expose markets and the economy to two risks.
The first is that over time, persistent low interest rates may become self-defeating. Absent a fiscal policy stimulus, low interest rates may lose their impact or even become deflationary: aging populations save more to make up for lower returns, firms invest in new technologies employing fewer workers, and workers who were trained in sectors that were booming during the crisis remain permanently out of the workforce.
The second risk is that QE will generate dangerous side effects, including asset bubbles, rising wealth inequality, and a misallocation of resources in the economy. Negative or zero rate polices have pushed investors into search-for-yield strategies, distorting the risk premium in credit and volatility. QE has favored the haves over the have-nots, contributing to wealth inequality and to an asset-rich, wage-poor recovery.
Finally, NIRP/ZIRP can encourage resource misallocation by keeping alive zombie companies.
Capitalism Doesn't Work at 0%
"It would pay to travel to Mars because the returns here on Earth are very very low."
Bill Gross, June 2016
More than 70% of non-cash, first-time home buyers — and 54% of all buyers — made down payments of less than 20% over at least the past five years, according to the National Association of Realtors.
According to Better Dwelling, February 2017, "1 In 5 Canadian Homeowners Commits Mortgage Fraud, Says Top Broker" and the three most frequent frauds are falsifying owner occupancy, hiring a shady mortgage broker to forge documents, and personal financial engineering (eg: hiding debt).
So 20% of Canadian mortgage applicants are willing to overstate their equity and or cash flow positions on a bet that a market that has been a fabulous thrill since the crash of 2008-09 will continue unimpeded.
Risk managers and margin clerks are no longer buying the story. When market prices drop, everyone's attention shifts to shrinking equity and rising loan to value levels.
The Toronto Housing market has already telegraphed the end of the 10 year trend of single family detached prices gaining 20% per year. Prices are now down over 17% in the last four months from the March 2017 peak. The 2007-08 correction was only a 13% drop in 13 months (Plunge-O-Meter).
And Vancouver buyers are still in lala land.
Hilliard Macbeth digs into the Toronto numbers beginning at 8.05 minutes below:
50 Shades of Real Estate
Facing staggering debt loads, hundreds of Alberta post-secondary students are logging on to seekingarrangement.com connecting them to "sugar daddies" who can provide them a monthly allowance and gifts in exchange for negotiated relationships. Calgary Sun January 14, 2017
The red notations show the latest Demographia unaffordability rank of each University location. It's not surprising to see Toronto, the biggest metro in Canada as a destination for pussy grabbers. If we had the data, I would imagine Vancouver, the most unaffordable city in Canada and the 3rd most unaffordable out of 404 global cities, would also incent young men and women into prostitution. In 2011, the Vancouver city council estimated there were +/- 10,000 sex workers in the city. (Vancouver Sun, Sept 30, 2016). Note that Victoria BC is listed on the chart above; you know, that nice little tourist town and retirement village that promotes itself as "a little bit of Britain". The study chart claims 361 Victorians use SeekingArrangement.com which amounts to 0.5% of Victoria's 2006 census. Tea, crumpet, hair pie anyone?
"Students from 20 British universities are joining dating Web sites matching young women with older men, in an attempt to raise money to pay off student loans and other debts." IBTimes.co.uk 2012.
Meanwhile new generations of young inheritors of our social contract enter the culture as a rank commodity to be exploited by daddy.
Canada could use an overhaul of its collective aspirations.
Vancouver Named Sugar Daddy Capital of Canada 2013
Here’s a look at the top 10 Sugar Daddy destinations:
- Paris, France
- Puerto Vallarta, Mexico
- Palm Springs, California
- San Juan, Puerto Rico
- Chicago, Illinois
- Seattle, Washington
- Punta Cana, Dominican Republic
- *Vancouver, Canada
- Las Vegas, Nevada
- Barcelona, Spain
*Vancouver Sugar Daddies spent $4,307 monthly on their younger counterparts on average, more than anywhere else in the country.
Vancouver Sugar Daddies are 40 years old and make $292,506 annually, on average. CTV NEWS 2014
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
Balance Of Trade
Rent Or Buy