Worsts

When the official numbers emerge in a week or so, the extent of social engineering will become obvious. Vancouver is pooched. Socialism doesn’t work. You cannot make things cheaper by taxing them more. Every politician in Canada should be watching, taking notes, and never forgetting. One of our great cities is in trouble, largely of its own making.

March was a mess. April will probably be worse. A silent spring on the left coast.

Consider the recent stats coming out of one of the most expensive and petulant housing markets in North America:

  • Detached house sales in the city are sitting at a 27-year low. Fewer than 140 homes changed hands last month, toppling 44% from a year ago.
  • As sales plunge, listings decline. Sellers are “confused”, the real estate board boss says. “They’re just holding on, taking a wait-and-see approach.”
  • Sales for the entire urban region are scarcely better, falling 37% from last year.
  • There haven’t been this few properties for sale since the end of the credit crisis. That has helped keep prices from collapsing along with sales. But this will change when owners understand the market’s about to get a lot worse.
  • Condo prices have shot high with the sales ratio sitting far about that of detached houses, thanks new mortgage rules. What was affordable no longer is. Meanwhile investment dollars have been driven away by the empty houses tax, the luxury property tax, the anti-Alberta speculation tax and the 20% anti-foreigner tax.
  • In the first 90 days of this year, a mere 350 houses sold in YVR, the lowest ever. Worse that during the darkest days of the financial crisis.

“It’s going to be a very dry year,” realtor Allan Angell told his clients the other day. “Our government continues to steal the equity from our houses.”

Angell has been compiling stats for more than 30 years, back to the mid-Eighties. What he’s just published is at shocking odds with the subdued story being told by the Great Vancouver Real Estate Board. “We saw less demand from buyers and fewer homes listed for sale in our region in the first quarter of the year,” the board admits. “High prices, new tax announcements, rising interest rates, and stricter mortgage requirements are among the factors affecting home buyer and seller activity today.”

But only by putting this in historic context can you see the damage now being wrought by the perfect storm of monetary policy, regulatory overkill and elected morons.

  • West Vancouver. Average sales for a March over 34 years have been 77. The worst-ever March saw 40 sales – until now. Last month just 26 occurred.
  • North Vancouver. Average sales over the last three decades for a March have been 141. The worst March on record had 79 deals. Last month there were only 70.
  • On the Westside the three-decade March average for sales is 182. The worst month ever had 94. This March the number was 58.
  • Greater Vancouver. The March average for the whole region is 1,415, with the worst recorded total being 1,036. But last month just 757 sold – a precipitous drop of 46.5%.
  • Finally, unsold inventory of detached luxury houses is mounting fast. For example, only 3% of the 117 properties worth more than $6 million have sold this year. So, 97% linger.

This is the start, not the end. The impact of Comrade Premier Horgan’s market-killing plan has been largely psychological so far, as the spec tax is just being legislated. Sentiment has turned negative against BC almost everywhere outside the province, since the notion of seriously taxing long-time property owners just because they have Alberta or Ontario license plates is anti-Canadian. Ripping off buyers coming in from other countries with a massive 20% surcharge looks xenophobic and tribal. It makes BC seem like a backwater economy. The river of money that jurisdictions like Florida and California welcome to help pay for local services, is slowing to a dry trickle in the Lower Mainland and on the Island. Meanwhile mortgage regs are pushing demand into condos, escalating the debt of newbie buyers.

Sales go first, prices later. The only brake on valuations now is the paucity of listings. When it becomes clear there are several years of NDP incompetence, rigid ideology and trial-and-error legislation ahead, sellers will be scrambling to get out. Mr. Angell will have many more ‘worsts’ to record.

Mint

DOUG By Guest Blogger Doug Rowat

For sports-collectible enthusiasts like me this is a big week.

While there are many iconic sports cards, the two most important are the 1909 T206 Honus Wagner and the 1952 Topps Mickey Mantle. Both transcend the sport of baseball and have achieved an elevated status in the sports-collectibles market not unlike that of Leonardo da Vinci’s Mona Lisa in the art world.

The Honus Wagner card is incredibly rare and virtually never comes up for sale (this card became even more famous after Wayne Gretzky owned one for a time back in the 1990s along with now disgraced former LA Kings owner Bruce McNall). The Topps Mantle card does come up for auction occasionally, but very, very rarely in mint condition. This week, though, one did. It is one of only six in the world in such immaculate shape. You can learn more about the card here.

At the time of this writing, it wasn’t known what the card actually sold for, but pre-auction estimates had it valued at US$3.5 million. Sports cards are an undeniably real, and often lucrative, alternative investment. Ken Kendrick, managing general partner of the Arizona Diamondbacks, has one of the most famous card collections in the world. He owns Gretzky’s former Honus Wagner card and also one of the finest examples of the Topps Mantle card. These two cards combined are estimated to be worth more than US$20 million. Based on relative size and weight, they may actually be the most valuable investments in the world. What would compare? Gold? Nope. Diamonds? Probably not. In fact, on a per-gram basis, it might take the actual Mona Lisa to rival the value of these two tiny pieces of cardboard (if you’ve ever seen the Mona Lisa at the Louvre, it’s actually quite small).

The Holy Grails

  

Source: Wikipedia, Heritage Auctions

In fact, sports cards have become so investible that earlier this year the first trading card index was constructed by PWCC, the biggest seller of investment grade trading cards. The PWCC Top 100 Card Index tracks the 100 most valuable and liquid trading cards on the market. The Index includes cards of baseball players such as Babe Ruth, Hank Aaron and Mickey Mantle as well as cards of legendary players from other sports including Magic Johnson and Wayne Gretzky. PWCC makes every effort to make their data transparent, but even a casual check of recent auction results indicates that the below performance rings true.

PWCC Top 100 Card Index vs S&P 500 (% change)

Source: PWCC

Now, I don’t present all of this information to plug my favourite hobby, but rather to highlight the value of alternative investments. As I’ve written before on this blog, traditional portfolio managers are often dismissive of investors who pursue such interests. Not so with me. There’s nothing wrong with having a small allocation (perhaps 2–3%) of your overall portfolio held in something non-traditional.

Perhaps you collect wine, scotch, antiques, vintage cars or motorcycles, artwork, coins or stamps, vinyl records, classic movie posters, sports memorabilia or Star Wars collectibles (check out the Netflix show The Toys that Made Us—a rare Boba Fett action figure can put your kids through university). What’s important is 1) it’s enjoyable and remains so, and 2) you constantly educate yourself and purchase carefully, thus increasing the odds that your collection actually appreciates.

You also need to be fully aware of the risks of your investment. For instance, I know that sports card companies can easily disrupt the market by producing too much product. This is what happened in the mid-1990s when the sports card market was on life support due to oversupply. I’m also fully aware that fraud and counterfeiting are ongoing problems. But this is true of most other investments as well, including art and wine. Witness the collapse of the legendary New York art gallery Knoedler in 2011 or the uncovering of prolific wine fraudster Rudy Kurniawan in 2012.

The Next One?

Source: eBay

So, what do I personally collect? Connor McDavid rookie cards similar to the one above. He’s clearly lived up to the hype. We’ll see if my investment appreciates in 10 years, but it’ll be a lot more fun than investing in, say, a bond ETF. Don’t misinterpret: bond ETFs are crucial long-term investments, but they certainly don’t get the pulse racing.

Collecting hockey cards connects me to a sport that I love and no bond in the world is going to able to compete with this:

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.