Update:

Consumers nervous about buying condos

BMO puts mortgages on sale – 2% off

Home resales take biggest tumble since 1994

US retail sales collapse as holiday shopping approaches

Sun Micro to cut 6,000 jobs

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From Montreal, Tammy sends me this email:

“I am a 40-year-old woman with a young toddler and I just read your blog dated November 9th, and I was wondering, do I have to sell my property and move to the country? Particularly, since I listened to your past advice and we recently purchased a modest slick urban Montreal condo a stone’s throw from 2 Metro stations and close to all services, for $199,000. I put 25% down and have $139,000 left to pay (our only debt). I’m a good saver, and it’s all going into cash. We don’t own a car and know we are better off than most, with a combined income of $125,000. I was hoping to leverage my condo to buy an investment property to diversify our investments, but now am wondering if I should pay off the condo ASAP and find a small farm instead that I can get to by commuter train. I’m worried about the future for my son and greatly appreciate your straight talk.”

Yikes. More evidence I should never write things that may be, instead of things that are.

In fact, this squirrel talk reaction has been extremely interesting. Over the last two days a few hundred people have left comments here, some questioning my sanity (entirely reasonable), some saying they totally understand the scenario I described, and the majority recoiling in piqued denial. Strikes me that anyone under the age of 40 or so has one hell of a tough time imagining a week, let alone a month or a year, with social breakdown or economic collapse. And yet we live in a world in which we went from being okay four months ago to one in which banks failed, Wall Street icons toppled, stock markets capitulated, governments committed trillions to bailouts, the auto industry crashed, retail sales evaporated, hundreds of thousands of people lost their jobs and economists are talking about China bringing on global deflation.

So, face it. The trip from here to some form of depression (when economic activity falls by 10%) ain’t that far. And if history is any guide, we know a depression brings one sure thing: falling asset values, falling incomes and yet debt levels which do not fall. That’s why depressions suck, for the indebted and the unprepared.

In my post of a few days ago I did not predict this deflation-tinged recession will evolve into a depression, Great or otherwise. I merely suggested how you might need to respond if you found yourself in one. Made sense to me. After all, most people in our society (and on this blog, apparently) are in some form of denial, not to mention devoid of the self-reliance that helped get the last generation through the 1930s. In those times nobody had credit card debt. Mortgages were fairly rare and reasonably small. There were no derivatives, CDOs, mortgage-backed securities, credit default swaps or Porsches. The government was not writhing in debt. There were no godless blogs like this one to scare the crap out of mothers in Montreal.

Which brings us back to Tammy. You’re okay. Chill. Don’t borrow against the condo to buy rental real estate because that’s a trap, not a diversification. Pay your mortgage off, but keep a cash reserve. Keep reading. Stay aware. Don’t run away to the country.

But, hey, do you get many squirrels on that balcony?