HISTORY & READINGS at Brian Ripley's Canadian Housing Price Charts & Plunge-O-Meter

Leverage

4/21/2017

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The worsening of (housing) affordability in Q4 (2016) was the sixth quarterly deterioration in a row, the longest run in almost 20 years. National Bank of Canada FEB 8, 2017 Report

My long term chart study of housing starts vs population growth currently projects a 7% Y/Y decrease for full year 2017.

This suggests that indeed more starts could be consumed especially in this low interest rate environment.

Unfortunately the market place is skewed not to what is needed, eg: affordable family units close to appropriate services, but to what attracts non resident owners, flippers and FOMO driven investors who keep throwing greater amounts of leveraged capital at negative yielding and depreciating piles of steel, concrete and wood while governments at every level stand by in fear that they might lose this historic bonanza of property tax and transfer revenue.

My too-far-left radical idea of ending private fee simple land ownership is never going to happen in my lifetime as written. It is my expression of the frustration one feels at the polarity of choice:

Most people are at best only aware of two choices, two patterns, for land ownership – private ownership (which we associate with the industrial West) and state ownership (as in the Communist East).
The Idea of Owning Land by Robert Gilman 1984

But as Gilman points out in his piece, there are other examples of strategies between the two poles, ie: Landtrusts not only for conservation but for community purposes as well. Unfortunately:

"We don't have a national housing policy in this country and we should," "We're probably one of the few OECD [Organization for Economic Co-operation and Development] countries that don't have one."
TheTyee.ca June 2013

But now we have some Federal money being directed at that lack of policy:

Budget 2017 includes new national housing strategy. Canadian Finance Minister Bill Morneau handed down a budget Wednesday, March 22 that includes a new $11.2 billion national housing strategy
Business Vancouver March 22, 2017

Meanwhile the market grinds on. I suggest that individuals should consider investment in themselves rather than negative yielding real estate because there is no guarantee that the debt positions currently being created will be transformed into equity. What is more enduring is the ability to leverage one's skill set into cash flow as the OECD studies show:

The evidence on how well countries are prepared for the digital economy is rather disturbing. The OECD’s Survey of Adult Skills (PIAAC) suggests that more than 50% of the adult population on average in 28 OECD countries can only carry out the simplest set of computer tasks, such as writing an email and browsing the web, or have no ICT (Information and communication technologies) skills at all. Only around a third of workers have more advanced cognitive skills that enable them to evaluate problems and find solutions (OECD, 2013). As a result, many workers use ICTs regularly without adequate ICT skills: on average, over 40% of those using software at work every day do not have the skills required to use digital technologies effectively (OECD, 2016a). Skills for a Digital World OECD December 2016

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50 Shades

1/27/2017

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50 Shades of Real Estate
Canada Edition

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 chart above shows the number of students pimping themselves out to pay for education, room and board in some selected Universities.

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.

Housing unaffordability and income disparity is a result of a patchwork policy by government that has failed to get capital investment into productive employment. Instead we have metro land valuations promoted as if in a casino in a country that has an excess of land and resources. We encourage our citizens to flip real estate to satisfy state revenue needs with the collection of gross consumption taxes on every trade.

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.

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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

In or Out

1/13/2015

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PRICED OUT OR PRICED IN?

Are you worried about being PRICED OUT of real estate because interest rates are going to zoom?

Or are you anxious about being PRICED IN because the commodity bust is widening?

A solution to these stressful thoughts is to move more to cash.

If rates do zoom you will be able to move cash into higher rates of return or if the asset value bust continues, you will be able to buy more value.

The charts above show the ongoing DEFLATION in consumption prices and wage earnings. The top panel is the MIT Billion Prices Project which tracks online in real time the high-frequency price data, as well as the US inflation index (CPI). The lower panel is the U.S. FRED chart of Y/Y total private average hourly earnings of all employees with the data plotted year over year to gauge the momentum. Both series are clearly down since the 2009 Pit of Gloom.

Without wage inflation, price inflation evaporates with every actor's change in sentiment from bull to bear.

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Gallup Poll January 12, 2015
45% (U.S.) say it's a good time to find a quality job (the highest since 2007 prior to the bust and the Pit of Gloom)

The Low point on this measure was 8% in 2009 (after the pit of Gloom) and in 2011 (after the top in Commodities)

Ukulele Orchestra - Should I Stay Or Should I Go

Ides of March

3/16/2014

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What are you doing?

"GDP growth continues to be low in the U.S. and real total household wealth has stagnated and real median household income has actually been declining." Jeff Gundlach (DoubleLine Funds).

And yet the NYSE Investor Margin Debt is at historic highs. Is this really a good time to be getting levered up? Or is it a better time to unload a burden of debt?

On his way to the Theatre of Pompey, where he would be assassinated, Caesar passed the seer and joked, "The ides of March have come," meaning to say that the prophecy had not been fulfilled, to which the seer replied "Aye, Caesar; but not gone." (Wikipedia)

Dollar War

2/25/2014

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The 2 Sided Loonie

The chart mashup shows the difference in labour unit cost between Canada and the U.S. in the top panel and the steady drop in the CAD relative to the USD since 2011 (middle panel) and the Canadian balance of trade in the bottom panel.

Only about 30% of Canada's GDP is derived from exporting and most Canadian exporters will enjoy the CAD falling against the USD because most of their export trade (75%) is to the U.S.

But the Loonie remained relatively high against the USD for 5 years (2002-05) and that led to purchasers of Canadian exports to look for alternative sources and that led to more layoffs in Canadian production plants (Bombardier cut 1700 jobs, Kellogg cut 500, Heinz cut 740, Blackberry cut 4500 - Bloomberg).

Layoffs are not easily reversed, and as the top panel of the mashup shows, the Canadian unit labour cost is 14-15% above the U.S. making it that much harder to sell into the U.S. or anywhere else (IMF via Reuters).

As a consumer society, disposable income is also shrinking in Canada as the price of everything we import goes up against the falling CAD and a falling safe haven status compounded by the end of the Canadian Immigrant Investor Program this month which only attracted 130,000 people since the 1986 inception (Globe & Mail).

The foreign investor class has good reasons to look at their Canadian asset portfolios and high on the list will be negative yielding real estate bought in the last 10 years. We could see some drama on the MAR-MOI charts this year if real estate inventory for sale surprises to the upside.

Redundancies

1/31/2014

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Divergence Update
2014 U.K. Edition
New Opportunities

Just kidding; not you dear reader unless you work in app building, robotics or machine language; or as Tom Friedman says, "as long as you are not average". Oh and he also said "Think Like an Immigrant: "We are all new immigrants to the hyper connected world, and new immigrants are paranoid optimists. I better understand what world I’m living in, what the biggest trends are and pursue them with more energy, vigor and persistence than anybody else.”

It should be obvious to everyone that the trend is a new machine software revolution that is capable of replacing not only the middle but the top as well; and Mark Carney, new immigrant that he is, knows the trend.

The Bank of England will cut up to 100 jobs following a 'Value for Money' review, as part of £18m of savings to be made by 2016. The jobs will be cut from the bank's support division, known as Central Services, and equates to roughly 10pc of the workforce in that area. In total the Bank has roughly 3,600 staff. The review, launched last autumn shortly after the arrival of Mark Carney, the Bank Governor, looked at staff deployment and spending and identified savings of £18m to be made by 2016, roughly 10pc of the spending that was under review. Central Services will now be reorganised following the review, providing "new opportunities" for some staff, while other jobs "will not be filled as staff retire or move on". "It is envisaged that there will be between 80 100 redundancies, subject to staff consultation," the Bank said. "The Bank is working closely with the Bank’s union to ensure that affected staff will receive support to find alternative employment." The Telegraph Jan 31, 2014

How long do you think the divergent spread between earnings and housing unaffordability will last?
(see Demographia update for a 3rd party view of value)

VANCOUVER & TORONTO

EARNINGS

CALGARY

The 3 charts above are EOY 2013. Current Charts are here.

Unemployment Update

1/12/2014

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Average is Officially Over

“If you cannot justify your singular ability to add value every day, you will be in trouble; that’s the big difference between us and our kids. We got to find jobs, they will have to invent them.”
Tom Friedman

"Countries that Enable will Thrive" (3.04min)

Or watch the Keynote by New York Times columnist Thomas Friedman at the 2013 Maryland Competitiveness Coalition’s Economic Summit "How the merger of globalization and the IT revolution is impacting the economy and the future of work." (47.43min) QUOTES:

Think Like an Immigrant: "We are all new immigrants to the hyperconnected world, and new immigrants are paranoid optimists. I better understand what world I’m living in, what the biggest trends are and pursue them with more energy, vigor and persistence than anybody else.”
Think Like an Artisan: "Historically, artisans produced every item individually, and the best artisans provided so much value add, and took so much pride in their work, that they carved their initials into it. Do your job everyday as if at the end of the day you brought so much value add you wanted to carve your initials into it.”
Always be in Beta: "If you ever think you’re finished, you’re finished. Always see yourself as a work in progress, constantly engineering and reengineering yourself.”
PQ + CQ > IQ: "You give me a kid with a high passion quotient, a high persistence quotient and a high curiosity quotient, I’ll take them over the kid with the high intelligence quotient seven days a week.”
Think Entrepreneurially: "Regardless of your spot on the organizational chart, search for a way to provide extra – find your unique value add. “Be relentlessly entrepreneurial in whatever you do.”

2014 Resolution

12/31/2013

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IMAGINE...

...if we stopped competing with low wage producers and turned our attention to our own failing institutions and cruddy infrastructures?

Imagine if we built armies of scientists, engineers and artists and exported value instead of drudgery.

IMAGINE (John Lennon) Recorded live at Mt. Fuji Jazz Festival '91 with Blue Note on Aug. 24-25, 1991
Bass – John Patitucci
Drums – Jack DeJohnette
Piano – Gonzalo Rubalcaba

Credit Growth vs 4 Metrics

12/13/2013

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Debt Fuel Ignition Failure

This 4-chart mashup looks at Canadians (households and business) continuing to vigorously pile on debt at an even steeper angle of acquisition than before the crash into the 2009 pit of gloom.

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Canadian business has been busy reducing its labour cost but not fast or deep enough to maintain productivity or create new orders greater than before the pit.

The 5 years of Canadian negative output is a surplus boon to other countries and their productivity programs.

If we are willing to increase productivity to maintain our living standard, but reject reducing our labour cost by the expedience of withering real wages, then we have to build better machines and algorithms for production. That means changing skills from low cost physical labour to comprehensive high value intellectual labour and management combined.

If we are not willing to compete on productivity, debt will take a long time to transform into equity and will be limited in its ability to leverage.

Meanwhile Canadians blithely pile on debt. Are you over leveraged? Figure it out.

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Beveridge Curve

11/27/2013

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Are You Qualified?

Here is a continuation of the theme that North American Labour needs to retrain that I posted about last month from the point of view of who is benefiting from wealth creation.

Now, this chart mashup shows the Beveridge Curve which is the inverse relationship between the unemployment rate and the vacancy rate. It demonstrates that since the Pit of Gloom in 2009, the unemployment rate has been falling while job vacancies have been rising, BUT the counter-clockwise outward shift indicates a higher unemployment rate along the job openings curve. Employers cannot fill job vacancies either because labour is unwilling or untrained. The longer the unemployed remain so, the less likely they will fit the demands of the employer; hence the question "Are you qualified?". Can you retrain while you are idle? Can you move to where the demand for labour is?

Employers are increasingly free to locate near or attract high skill low cost labour from a giant "free trade" low barrier pool.

2011: McDonalds Hires 62,000, Turns Away Over 938,000 Global Applicants For Minimum Wage, Part-Time Jobs (16:1)
2012: Delta Air Gets 22,000 Applications for 300 Attendant Jobs (73:1)
2013: In China 1.2 Million Candidates Apply For 19,000 Government Jobs (63:1)
2013: Why did 1,701 people apply for just eight Nottingham U.K. barista jobs? (213:1)

It's another realization that the compounding effects of multilateral "trade" agreements since post WWII (GATT 1947, WTO 1995) have been changing the value of labour. Since 1994, NAFTA has been the arbiter of disputes via the dispute settlement system known as "Chapter 19" and members have agreed to ignore conventional national judicial review in favour of NAFTA's panel review. The removal of dispute resolution from judicial systems is a hallmark of Capital's ability to not just lobby government but to become government. The latest but not yet manifest "trade" agreement is TPP (Trans Pacific Partnership 2010) which aims to "liberalise the economies of the Asia-Pacific".

TPP meetings and negotiations are kept secret except for what WikiLeaks has managed to publish and ...

... anti-globalization advocates accuse the TPP of going far beyond the realm of tariff reduction and trade promotion, granting unprecedented power to corporations and infringing upon consumer, labour, and environmental interests. One widely republished article claims the TPP is "a wish list of the 1%" and that "of the 26 chapters under negotiation, only a few have to do directly with trade. The other chapters enshrine new rights and privileges for major corporations while weakening the power of nation states to oppose them." (Wikipedia)