Swan and Bear

12/31/2014

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Canadian Real Estate, the Black Swan and the Russian Bear

While we wait for the December 2014 Canadian real estate data from the various boards, here are some year end quotes that underscore just a few of the large scale inputs that can overwhelm the so called immunity that Canadian real estate prices are said to have against any deep price correction as has happened to other over leveraged housing and other commodity and financial derivative markets since the .com blowout of March 2000.

In case you have forgotten the depth and velocity of the previous market reversal when average Canadian single family detached housing prices plunged in 2007-2008 (chart); householder equity vanished as follows:

Vancouver prices lost $122,900 (15.9% in 8 months)
Calgary prices lost $92,499 (18.3% in 18 months)
Edmonton prices lost $78,719 (18.5% in 21 months)
Toronto prices lost $63,867 (13% in 13 months)

The chronologically ordered links below go to the full articles.

TRADE WARS & SANCTIONS
Joseph A. Fry notes in Dixie Looks Abroad: The South and U.S. Foreign Relations, 1789-1973 that the US annexed Texas from Mexico to make it a slave state and put a stop to “British abolitionist designs” (56). However, the ultimate reason for annexing Texas was to “obtain domination of the world’s production of raw cotton.” (56)

“The monopoly of the cotton plant was the great and important concern. That monopoly, now secured, places all other nations at our feet.” US president Tyler: (Sikes and Keener, The Growth of the Nation, p. 239). President Tyler continued: “An embargo [on cotton] of a single year would produce in Europe a greater amount of suffering than a fifty years’ war.” (Fry, 56) Why America Annexed Texas and Loves Saudi Dictators by Robert Barsocchini WashingtonBlog December 30, 2014

ENERGY INVENTORIES SWELL
While the U.S. rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show. U.S. producers battling OPEC for market share may increase output further from the highest rate in more than three decades as costs decline almost as fast as oil prices, Goldman Sachs Group Inc. said in a Dec. 15 e-mailed report. The oil price slump is driving producers to move drill rigs to lower-cost fields, according to the report. By John Jansen (Bloomberg) via Across the Curve, December 30, 2014

SENTIMENT SHIFT
The percentage of respondents who think the economy will strengthen over the next six months fell to 15.2 per cent, the lowest since 2008, in the week ended Dec. 26. The share of Canadians predicting a worsening economy surged to a 2014-high of 33.3 per cent, more than double the readings in the summer. There’s also evidence the global plunge in crude oil prices is beginning to have an impact on the housing market at a time when Canadian households are sitting on record debt levels and with overvalued real estate. By Theophilos Argitis, Bloomberg News December 29, 2014.

BEAR TRAINING
This week the ideological ante was upped by the Kremlin with the comments of Fr. Vsevolod Chaplin (a media gadfly cleric and official spokesman of the Moscow Patriarchate), who gave a very long newspaper interview in which he castigated, among other things, radical Islam, usury, and the West generally, but it was his comments on the current conflict with America that got all the attention. Chaplin minced no words, proclaiming that Russia’s God-given goal today is halting the global “American project.” As he explained: It is no coincidence that we have often, at the price of our own lives … stopped all global projects that disagreed with our conscience, with our vision of history and, I would say, with God’s own truth. Such was Napoleon’s project, such was Hitler’s project. We will stop the American project too.” By John R. Schindler The XX Committee December 27, 2014

MEH
An experienced observer, Patrick Armstrong, former political counsellor at the Canadian Embassy in Moscow, has serious concerns with NATO policy, but foreign policy distinctions do not trouble (Canadian) Foreign Minister Baird or the Prime Minister. The oafs are in charge in Ottawa. By Duncan Cameron, Global Research, December 27, 2014 Rabble.ca December 23, 2014

BIG PHARMA
Across Helmand province in April 2014, hundreds of thousands of people were taking part in the largest opium harvest in Afghanistan's history. With a record 224,000 hectares under cultivation this year, the country produced an estimated 6,400 tons of opium, or around 90 percent of the world's supply. The drug is entwined with the highest levels of the Afghan government and the economy in a way that makes the cocaine business in Escobar-era Colombia look like a sideshow. If you understand the Afghan government as a narco state, then the fact that opium production has actually increased – while the U.S. (and Canadians) spent billions on counternarcotics efforts and troop numbers surged – starts to make sense. By Matthieu Aikins, Rolling Stone December 4, 2014

1984
Pepe Escobar sums up what is driving current global geopolitics and war: "What you’re really talking about is what’s happening on the immense energy battlefield that extends from Iran to the Pacific Ocean. It’s there that the liquid war for the control of Eurasia takes place." A Primer On the REAL Global Geopolitical Battle by WashingtonsBlog October 8, 2012