Dead cat bounce

As you may have noted, the US seems willling to gamble $500 billion (yeah, new billions) on a rescue of the American financial sector. That suddenly made the recent selloff in the stock market, in the way of the demise of Bears, Lehman and Merrill, look totally overdone. So, Friday was a buyfest with markets surging, as fear switched to greed faster than a Wall Street trader can change his shorts.

Alas, it was but a dead cat bounce, since the fundamentals of a debt tidal wave in North American canot be fixed overnight. Nonetheless, this could cause a reciprocal uptick – at least for a few days, or weeks – in the real estate market, humans being what they are. Should be interesting, since the long-term arrows are still pointing down.

The article below is from today’s Globe, and will hopefully serve as a reminder that the Canadian housing market is only starting to undergo a correction. The cats here are totally ripe. — Garth

Let the seller beware

(Globe and Mail, September 19, 3008)

When Heidi Samuda listed her three-bedroom townhouse in Vancouver for sale last month at $829,000, she thought it might take a couple of weeks to sell.

But the property still hasn’t sold and Ms. Samuda has dropped the price to $799,000.

“When I listed I think things had just sort of started to shift,” Ms. Samuda said Thursday.

She’s confident she’ll get her price, but she’s also trying to remain calm in the midst of a slumping real estate market that’s now being sideswiped by turmoil in the financial sector. “I think it’s just a matter of not freaking out,” she said.

The property market has been slowing for months across much of Canada and the recent turmoil in the financial sector could slow things even more. Banks are toughening lending practices, fewer discounts are being offered on posted mortgage rates and several players have pulled out altogether.

Back in January, real estate sales were still so hot that one big lender sent more than 100 mortgage brokers to Paradise Island in the Bahamas for a three-day trip at the island’s exclusive Atlantis resort. All bets are off for a similar trip next year.

Already the number of companies jostling for customers is shrinking.

In July, General Electric Co. became the latest in a series of niche lenders to announce it would stop taking residential mortgage applications in Canada, joining PMI Group Inc.

For many borrowers, the days of getting quick approval are over.

“If you have bad credit, no down payment and a good job, you can’t get a mortgage in Canada any more,” said Alex Haditaghi, chief executive officer of mortgagebrokers.com., a Toronto-area mortgage broker. “Two years ago you could say ‘Let me work on it,’ and one of the alternative lenders would have done it for you.”

Such is the new landscape of the housing market as listings surge, sales plunge, prices cool – and the final sparks fizzle out on one of the country’s strongest-ever residential real estate booms.

Vancouver is the latest housing market to show dramatic signs of weakening. The number of listings in that city has doubled from a year ago while sales have been cut in half. It’s also taking up to three times as long to sell. “Deals that were going through last year aren’t going through this year,” said Ian Martin who runs Erealty.ca, an online Vancouver realtor.

Added Lorne Goldman, a broker of residential and commercial real estate in the city: “As one [commercial property] lender said to me, ‘If a deal has hair on it, we don’t look at it.’”

The Calgary market has given ample warning of the slowdown that was to come.

During the peak of its housing boom early last year, most homes were subject to bidding wars and selling at well above the asking price in less than two weeks, said Jim Sparrow, real estate agent at Calgary-based Keller Williams Realty.

Now prices have drifted 10 per cent lower, the average time on the market is 52 days, and sellers are being told to price their properties competitively or face the prospect of not finding anyone who even wants to peek inside the door.

“I’m being brutally honest with my clients. The reality is there are fewer buyers out there, and the only way to attract an offer is to have a property that is competitively priced,” Mr. Sparrow said.

In the past 14 days, 1,903 new listings have hit the Calgary market and during that time there have been 1,637 price reductions, according to information on Mr. Sparrow’s website. There were 802 sales.

Despite much lower interest rates than two decades ago, Canadian home prices still look to be at their most overvalued since 1991, according to a report by David Wolf, a Toronto-based economist at Merrill Lynch & Co.

Since his report came out last month Canadian housing market fundamentals such as permits, sales and building starts have deteriorated more rapidly than he had anticipated, he said in an interview. Add in the crisis in the U.S. financial markets and things could get even shakier, he said.

While it’s tough to see the market slow, most Canadians are still well ahead in terms of their home values, said Gary Siegle, regional manager for Alberta and south Saskatchewan at mortgage broker Invis.

It’s people who bought in cities like Calgary at the peak last year, either for capital gains or with a “now or never” attitude, that may now be struggling, he added.

69 comments ↓

#1 Roger on 09.19.08 at 1:49 pm

Victoria is also having a real estate downturn and prices for single family homes have dropped every month since April. Click on my name to see graphs and charts that show market conditions. You can also see a slideshow that shows that our price rise is very similar to the US and the correction is just starting here.

The local newspaper has starting talking about the falling prices, rising inventory and the drop in sales over the last month. Even the Victoria Real Estate Board is finally admitting the boom is over.

#2 mattbg on 09.19.08 at 2:10 pm

Very strange signals… if the market response is taken as a vote, doesn’t this mean that the market does not believe in a free market?

#3 canuck99 on 09.19.08 at 2:55 pm

The question I have is isn’t all this printing of new money, over and over, each bailout tripping over itself to outspend previous wall street hemorages to a total tune in the trillions.

Isn’t this all inflationary if not hyper-inflationary?

If not then when and how will this turn into deflation or a depression?

#4 pbrasseur on 09.19.08 at 2:57 pm

This is insane!!!

This crisis was created in good part by the state willingness to promote RE by pushing low interest rates and by assuming part of the credit risk (through Freddy, Fannie and the like).

Guess what they are doing it fix it. They will assume even more of the risk!!!!!!

#5 Mike B formerly just Mike on 09.19.08 at 3:34 pm

Canadian Stock people are truly the most retarded people on the planet. Major heavily leveraged banks that have been around for 160 years go under … AIG faulters and Merril has troubles and stock people run to the hills. The US pulls a fast one on the world and basically changes the rules of the game to end up winning the game by pouring money they don’t have into the financial system essentially bailing out the guys who bankrupted thousands of people and other companies throughout the world and then the Canadian stock guys jump in , days later, and say everything is ok now. Are these people for real. 500 Billion will just be printed essentially and the world will go on its merry way. Truly retarded ….700 points up… give me a break

#6 My_View on 09.19.08 at 4:35 pm

How the hell is the TSX over 800 today? The free market, what a joke.

#7 Truth or Talk on 09.19.08 at 4:39 pm

The story about Hedi Samuda reminded me of something my very wise first boss said to me many years ago:

_____________________

Wise boss: When the market is collapsing, and you feel that urge to panic, do you know what you must do?

Young Me: Yes, master. I must not panic.

Wise boss: No, stupid boy. You need to panic. It is much better to panic at the top than at the bottom.

#8 Noz on 09.19.08 at 5:00 pm

The rise in stock prices is due to people short selling.

This is going to be nothing but a bandaid…I don’t see how the housing market can bounce back when A) people don’t have money B) banks are not going to loan out money, C) people are losing their jobs left and right.

There are shills out there that think things are going to turn around. They are smoking crack.

What are they expecting to happen? Banks go back to the way they were and start loaning money again easily? Are they crazy? If that does happen, then it clearly indicates that all bets are off as far as regulation, common sense, and whatever else is concerned.

Perhaps they are intentionally changing the rules right under our nose…and we think it’s simply business as usual.

#9 POL-CAN on 09.19.08 at 5:35 pm

Garth…. A dead cat bounce is all it is…. It will get much worse in the weeks to come….

Took two days to recover what was lost in the first three days of the week. And how many billions did this little recovery cost? I heard yesterday $ 900 billion USD just in the recent bailouts and that does not include all of the write downs to date nor does it include the future losses and it does not include last nights revelations….

I remember when Roubini predicted 1.5 to 2 trillion earlier in the year…. It will be much worse then that….

Here is an interesting read entitled Global Financial Meltdown:

http://www.globalresearch.ca/index.php?context=va&aid=10268

Total crash in October?

#10 POL-CAN on 09.19.08 at 5:38 pm

Yet another article that should scare the crap out of everyone….

It’s the Derivatives, Stupid! Why Fannie, Freddie, AIG had to be Bailed Out

http://www.globalresearch.ca/index.php?context=va&aid=10265

#11 George Popovic on 09.19.08 at 5:40 pm

The fundamental question is….Is it possible for the US government to manipulate the market indefinitely? Sometimes it may seem so but eventually the balance will be restored. This market wants to crash and it will regardless of the level of manipulation including the one annouced today.
It is just a matter of time and each attempt to prevent the inevitable makes the final fall that much more dramatic.
Smart money sold into this rally.

#12 Bobby in Victoria on 09.19.08 at 6:11 pm

It is a good time to get out of the market when most Canadians are buying. Most seem to buy at the top!!

#13 Rob on 09.19.08 at 6:18 pm

Since no one will be able to short, anyone want to start a morbid little pool regarding when the next Dow and TSX nosedives happen, together or on their own…say the next 500+ pt drop in any given day?

I’m going to assume WaMu is toast by next Thurs, so I’ll pick Thurs.

#14 John on 09.19.08 at 6:34 pm

Stocks soar on relief over plans to restore calm to financial system!

U.S. Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke put together a massive rescue plan to buy up dodgy mortgage assets held by troubled financial institutions.
“We’re talking hundreds of billions (of dollars)”, Paulson said at a morning briefing.
It’s so eazy,when just you printed hundreds of billions $ US,and you safe the Market.
The problem is fixed .Period.
I really can’t understend economic fundametals about
currency relation CAD-USD.
This week we saw that oil price had jumped 14%, gold and silver about 15%, in US they still have bad news about unemployement and housing depression, and finaly FED will printed hundreds of billions.
All thouse facts are ten times worst than situaton from Nov/07/2007 when $ US The dollar had fallen over 17%. Today $ US is 16% up from Nov/07/07?

The S&P/TSX composite index charged ahead 848.42 points or seven per cent to 12,912.99, the largest one-day percentage gain since Oct. 21, 1987.
The TSX also benefited from advancing oil prices, which sent energy shares higher.

#15 Gerdie on 09.19.08 at 6:37 pm

It looks like there was a run on the Fed in the last couple of days. I think Hyperinflation will drain people’s disposable income on life sustaining essentials. This one’s a much more brilliant invisible looting scheme than Weimar since it is much more difficult to obtain debt shredding bank credit. Home prices could go into very rapid unwind to handle $10 loaves of bread.

#16 anonymous on 09.19.08 at 7:18 pm

Well, I made a small fortune in the markets today. I made a big bet, in US financials, on Wednesday and added to it on Thursday. And I booked most of the gains today.

The Canadian stock markets and real estate are still screwed.

The US economy is still slowing. The US stock market isn’t going to crash and they avoided run on the banks.

So where are we? Start taking some gains Monday and Tuesday. We are going to see some hedge funds having to liquidate later on in the week.

That is your chance to buy. Just remember to sell financials before Oct. 2, when the SEC will get rid of the shortseller ban.

You know, I almost puked my brains out Thursday afternoon after the market started to slide. My heart couldn’t take the fear and pain, but I listened to my head and bought. That’s what it takes to buy at the bottom.

Remember that feeling when the real estate market bottoms and everyone is telling you how smart you are for not buying.

#17 smwhite on 09.19.08 at 7:26 pm

So the market gets a push with more cash from Ben Bernake’s magical money tree…

Let’s give him a round of applause for the upcoming rise in commodity prices. So how do you all feel about the free world’s central banks experimenting with super low interest rates?

Saw an interesting tid-bit on BNN last night where a rep from a junior exploration company basically said that because of the credit “crunch”, getting capital for projects was going to be tough, to say the least. He also stated that you pretty much need two years operating cash in the bank to get through “this”…

This is going to be the case for construction, oil and gas, mining, etc.

Give it a couple days, this reaction to the market wasn’t good news today, despite what some people might think. Even Nortel is making the news again!

#18 anonymous on 09.19.08 at 7:27 pm

Rob,

I’d guess that WaMu is going to be bought by Citigroup for a 30% premium. That’s my prediction.

The US stock market makes a hell of a lot more sense to me than buying the stupid overpriced TSX.

#19 smwhite on 09.19.08 at 7:31 pm

http://en.wikipedia.org/wiki/Image:Inflation-1923.jpg

Notice the woman using “MBS” for firewood… :)

http://en.wikipedia.org/wiki/Hyperinflation

#20 POL-CAN on 09.19.08 at 10:10 pm

Garth….

Starting to see some real anger out there

http://www.youtube.com/watch?v=Jen6d8zlVI8

#21 dd on 09.19.08 at 10:36 pm

18 anonymous,

Great … I will short the US stock market in the next little while. It doesn’t look good down south.

At least Canada has oil and gold. It will go higher if oil and gold goes higher. So is oil and gold overpriced then?

#22 dd on 09.19.08 at 10:39 pm

13 Rob,

Shorting mid caps on all US markets over the next year.
Less earnings and some will not be able to get credit.

#23 3rdman on 09.19.08 at 11:16 pm

I’d like to step back a mo and look at the wider picture..

American households need to get their debt paid down and start building savings – no mean feat.

The (new) U.S. government needs to get a lid on it’s increasing debt-load by raising taxes on consumers who have no more money to consume with.

How much blood can you squeeze out of a stone?

And now being a little reflective:

http://news.aol.ca/article/how-did-lone-home-survive-ike/347664/

#24 confused and a little crazed on 09.19.08 at 11:52 pm

I think this market is a fake out . It will go up and down repeatdely for the month of sept ending in up about 30 %…some more, some less Then Oct runs around companies provide their 3rd quarter fiscal reports. They will find sales are ddown, revenue down ..couple of lawsuits…accusations of fraud…you know the usual. the market starts down again. Then you have the elections . Once the new Prez and his posse take over , they will find even more interesting accounting practices..maybe forced to increase interest rates further excarberating the meltown.

Something llike that. You must have noticed the US Govt will try everying to prop up the market thereby dragging this correction to it longest duration of time possible. just my prediction…But it does seem posssible, no?

#25 WetCoaster on 09.20.08 at 1:20 am

This melt down has nothing to do with real estate.
This melt down has nothing to do with commodities.
This melt down has nothing to do with any equities.

It’s more of a gathering of all people, and everything they can pay in taxes…forever. And the next generation will pay for the pirates of ‘free market’ corporatism.

Tax serfs…forever.

#26 wealthy renter on 09.20.08 at 9:15 am

This is a general and perhaps naive question, but I am probably not the only person wondering the same thing.

If bad mortages are removed from the balance sheets of banks, will the housing bubble in the US inflate again?

In one weekend, I can’t see congress coming up with a plan that reforms (for lack a of a better term) mortgage lending in the United States.

If the banks are set to square and employees in the industry, right down to the broker make gobs of money from pumping mortgages, with the Fed as a backstop, what will stop housing from hitting the stratosphere again?

I guess the devil will be in the details.

#27 wealthy renter on 09.20.08 at 9:34 am

http://www.usnews.com/blogs/the-home-front/2008/09/19/ron-paul-this-bailout-wont-be-the-last.html

I am answering my own question, but Ron Paul argues they are trying to keep housing prices artificially high instead letting them fall to prices where poor people can afford them. The is a caustic rebuke of the bailout.

I don’t agree with most his politics, but of all the presidential candidates, he has the best grasp of economics.

#28 POL-CAN on 09.20.08 at 10:32 am

# 27 wealthy renter

Please go to and read The Automatic Earth blog…
Garth was kind enough to link to it from this site…..

http://theautomaticearth.blogspot.com/

All your questions and more will be answered :)

#29 Dave on 09.20.08 at 11:00 am

Blaming short selling on the financial mess is stupid and I can’t believe people are buying into the BS.

The short sellers didn’t create the loans to people who were unable to pay them, the short sellers didn’t drop interest rates to record lows and cause “bubbles”.

Blaming short sellers is like charging a bystander with arson because he reported a fire. Everyone has known for over a year that the financial market was a mess but were afraid to do anything.

This huge bailout will only increase the debt of national treasuries and we will enter into stagflation at best or even total economic collapse.

The people in the SEC are to blame for their deliberate lack of oversight.

#30 anonymous on 09.20.08 at 12:09 pm

wealthy renter,

Nope. We will not have another housing bubble in the states for at least 20 years. It’s just going to be too painful.

When Calgary crashed in the early 80’s… were coffee shops buzzing about how much money everybody was going to make eventually because of the cheap prices of housing or oilfield equipment? No.

Everyday americans will not be able to take the pain. And the stories about people getting wiped out will be passed down to the younger people growing up.

Think about it like that.

However, we will see bubbles elsewhere… but it won’t be in dot-coms, housing, crude oil, agriculture.

Maybe pharma? Or even staple stocks (PG, JNJ, PEP, MO, etc.)? Or video game companies, even?

Bubbles are a common occurance these days, but they are always in different sectors for different reasons. They need to “sound” fundamental in order to be bought by the stupid public.

When I see one starting to form, I’m all over it… until regular spacebrain people start talking about how much money they made. That’s when I get out.

#31 My_view on 09.20.08 at 12:57 pm

How are the U.S.A going to avoid a worthless dollar & crazy inflation/taxes? Ive always heard, sooner or later a generation of Americans will have to pay. Yeah right, its the U.S of F*******. A. Same bullshit different smell……

#32 smwhite on 09.20.08 at 1:15 pm

Look, its “confidence” raising the price of commodities, not the extra few billions in cash thrown into the system.

“CHICAGO (Reuters) – Commodities from oil to copper to grains rose Friday in a vote of confidence for a U.S. government plan to buy up toxic mortgage debt at the core of the financial meltdown that sent shock waves across the globe.”

#33 Keith in Calgary on 09.20.08 at 2:30 pm

What you saw yesterday was “the mother of all short coverings”. Traders had to by financial stocks to cover their enormous short positions as short selling was stopped. And the rest of the lemmings went from there…….

Nothing more, nothing less. Come next week it’s going back down again…….

Bernanke is printing money as fast as he can now……..a trillion here, a trillion there…..the US is toast and we are not far behind.

Watch for their AAA credit rating to be dropped next. You don’t increase you national debt from 9.7 trillion to 10.7 trillion and have your credit score go up.

#34 Calgary Rocks on 09.20.08 at 3:40 pm

Blaming short sellers is like charging a bystander with arson because he reported a fire. Everyone has known for over a year that the financial market was a mess but were afraid to do anything.
===============================

I used to trade prop in a previous life. Anywhere between 100K/1M shares/day.

When the SEC got rid of the up tick rule it became a lot easier to join the market on the short side, thus encouraging even more selling. There are other issues that I saw, like allowing the specialist to trade with the order flow rather than against it. All in all, these new rules did nothing to stabilize the market and everything to increase traders’ profits.

Our shop’s volume was peanuts compared to today’s hedge funds.

#35 bill on 09.20.08 at 4:13 pm

I’ve been buying up shares of Barrick in the past few weeks…a premiere gold company like this will thrive in the short and long term given the continued chaos in the capital markets:

http://news.goldseek.com/KennethGerbino/1222023600.php

This is not the time to play with junior mining penny stocks and gamble…Barrick is the #1 gold company in the world for a reason.

Only place I feel safe parking cash for now.

#36 BILL on 09.20.08 at 7:52 pm

I looked at some prime mortgage numbers
I figure there are 9 billion dollars worth
of prime paper out there . I hope my numbers
are wrong . People are heading for the life boats.
interest free loans to these home rime owners may
work in saving the market ,giving the money to
MR Bonus ceo will only help the porcch
car dealers.

#37 dd on 09.21.08 at 12:34 am

One expensive clean-up bill:

1) Estimated total US banking bail-out: 2 Trillion
Estimated total US tax payers 300M x .75 x. 90 = 200M
(total pop = 300m, .75 is population > 18, .90 total population paying tax

Therefore $2,000,000,000,000 / 200,000,000 US tax payers

Estimated tax bill for each US taxpayer = $10,000

2) Estimated total US liabilities …. say $45 Trillion. This is current debt of 9Trillion, plus all pension, health, and other benefits not on the books. There are lots of numbers out there but this is the one that I have heard lately

Divide by total US tax payers in 1)
$45,000,000,000,000 / 200,000,000

$45 Trillion/200 Million US tax payers = $225,000

OK … check my math, population, and tax payer estimates.

Open for discussion

#38 dd on 09.21.08 at 12:44 am

24 confused and a little crazed ,

Ya … we are not out of the woods yet. There is still a lot of personal debt out there. This downturn is going to be painful.

Long bear market is here.

#39 Dawn in Calgary on 09.21.08 at 12:49 am

US urging other nations to rescue own financial firms: report

WASHINGTON (Reuters) – Senior Bush administration officials have pressed their counterparts in Japan, Germany, Britain and other nations to establish rescue plans for their own troubled financial firms, The Washington Post reported on Saturday.

http://www.canada.com/calgaryherald/news/story.html?id=8382faf3-805a-49e7-bcad-5fd6b807f12b

Well, of COURSE they are — who wants to be the one holding the bag? The country who prides itself on democracy, who trumpets the free market economy — doesn’t want to be the only one paying the bill.

I say let the chips fall where they may. I am overcome with anger over how easy the bailout was to obtain. Even at this level, there is no accountability. The taxpayers get shafted again, having to pay for the greed and malfeasance of Wall Street.

I realize this off topic, but I’m really pissed off – and it’s not even my country!

#40 Schmoey on 09.21.08 at 3:02 am

This is an e-mail sent to me by Providence Sales:

“”Providence at Kensington is so perfectly located that everything you desire is within walking distance so you can leaving your car behind.

Fence Sitting
For the first half of 2008 buyers who were looking to purchase a new home had wisely and decidedly chosen to take a wait and see approach when considering whether to buy or wait. Some of the factors which influenced this approach include:The meltdown of the U.S. sub prime mortgage sector.
The increased cost of living as a result of the rapid increase of the price of oil.
The Canadian dollar rose in value much too quickly for our export market to respond to.The hope that mortgage rates would drop (source: Calgary Herald September 11, 2008).

So where are we now? Today the consensus amongst the majority of analysts is that residential values in the U.S. are at near to bottoming out or have bottomed out.

Calgary prices have similarly bottomed out. Prices are projected to increase moderately in the near term
Mortgage rates for a 3 year term, available to Kensington purchasers at 5.35.
The Canadian economy is forecasted to escape a recession and Alberta more so.
City of Calgary council has approved a tax that, if adopted, will add $5,000 to the cost of buying a home.
Isn’t it your time? Kensington prices were recently reduced on the remaining few units which are finished with hardwood, stainless appliance, granite, window coverings, air conditioning and so much more! Providence still has a great variety of homes available in spite of 4 being sold in August. Your only opportunity to live in the heart of Kensington will soon be over!

With over 800 people currently on our database, it might very well be the right time for you to reconnect with Providence at Kensington.

In light of this current trend in the market, isn’t it wiser to to be a day early rather than a day late?

We would be pleased to set up a private appointment at your convenience. This is the right time!””

Nice try, boys. But my advice to you is: watch the sunday paper for coupons for those extra-large packs of Depend Diapers!

#41 David on 09.21.08 at 3:09 am

It is unfortunate that taxpayers and people with pension funds will wind up experiencing the socialisation of real losses. The kleptocrats who engineered this financial crisis have undergone a St Paul style conversion. There is a bull market right now for government intervention and bailout funding, otherwise asset values are de-leveraging at a torrential pace.
Nortel used to make up about 20% of the TSE market cap at its height. Right now the market cap for Nortel is $1.4 billion and shares are trading in VSE penny stock ranges like $2.75.
Manulife, the steward of widows and orphans funds in Canada had its share prices decline about 6% last week. It turns out, Manulife has about $800 million in outstanding exposure to those venerable and august financial houses known as Lehman, AIG and Washington Mutual. Talk about top of the classroom brilliance!!
All this financial crisis due to overpriced homes with zero equity. There are not too many easily gulled mullett potential homeowners out there any more. The market needs to find its bottom, prices need to fall and interest rates need to rise. All those liquidity injections do not solve the insolvency issues and any benefits are offset by a decline in the purchasing power of a buck.

#42 dd on 09.21.08 at 11:26 am

Nouriel Roubini … watch the two clips …

http://online.barrons.com/article/SB121763156934206007.html?mod=9_0035_b_fundsqa_main_collection&page=sp

#43 Mountain Girl on 09.21.08 at 11:31 am

dd #37-
Am I reading that correctly?
The total debt, including the new bail-out, works out to $225k per taxpayer?!!
And that’s on top of the record household debt of the average American?
Where and how are they going to come up with that money?
It was explained that the market rally over the bail-out was largely due to short-sellers covering their bases, but still – what are people celebrating with the buying frenzy?
As far as I can tell, the bail-out is a really flimsy band-aid. A flimsy band-aid over a severed limb!!
Just like all the other screwy debt-products that have permeated the market, there doesn’t seem to be anything substantial behind it.
Americans don’t have $225k apiece to rescue their economy!
I remain very leery of the whole mess. Am I missing something important? Is the massive sum going to be raised through higher taxes or more complicated financing schemes?
I should probably head over to Automatic Earth and see if they can set me straight, but regardless! I still wouldn’t buy a house right now. It’s still a crazy idea with the market in the shape it’s in.
I am baffled by the sighs of relief and cock-eyed optimism. This may be better than complete market meltdown, but not by much. And for how long?

#44 george on 09.21.08 at 11:39 am

Good read I found on investment site.

Warning: Nasty Surprises Coming Next Week
by Martin D. Weiss, Ph.D. 09-21-08

America’s $47-trillion bubble of debt has burst.

America’s $180-trillion balloon of derivatives has popped.

And all the president’s men cannot put them back together again.

Last year, they tried three different mortgage work-out plans. This year, they tried a massive economic stimulus package. They resorted to a myriad of unprecedented lending facilities. They even bailed out Bear Stearns, Fannie Mae, Freddie Mac and AIG. Each attempt was more radical than the previous. And each attempt failed miserably.

Now, appearing before the American people at the White House Rose Garden, they’ve declared that they’re going to try again, this time with an even bigger, more ambitious plan: A structure to buy up the bad debts of sinking banks … a guarantee for money market funds … a prohibition on certain short selling activities.

And with all this, they say, they’re finally going to “restore confidence” and “end the debt crisis.”

But there are a few, not-so-small dangers they’re not talking about plus a few nasty surprises, shocks and wake-up calls coming as early as next week:

The fear factor: Their actions are so much more extreme than anyone expected … they’re inadvertently sending the message to smart investors and speculators around the world that the crisis must also be far more extreme than anyone expected. Rather than reducing uncertainty, the president’s men are creating more fear.

The selling stampede: These investors are more anxious than ever to sell and get the heck away from risk. They’re waiting for the knee-jerk market rally to end. And they’re getting ready to sell with both hands.

Leading lenders to water: Millions of Americans continue to default on their mortgages. Hundreds of millions of homes continue to fall in value. So the risk of lending today to consumers is astronomical.

With this backdrop, Mr. Bernanke and Mr. Paulson can pump all the money they want into sick and dying lending institutions, but there’s nothing they can do to get the lenders to drink — to lend that money to high-risk borrowers.

No free lunch: Where do the Treasury, the Fed and Congress get the money? Contrary to popular myth, they cannot just “print” it out of thin air. They have to either borrow the funds from investors or raise it from taxpayers.

$1-trillion tab: Just for the rescues and bailouts announced to date, the most conservative estimate of the bill is $1 trillion. The federal budget deficit is already projected to be well over $400 billion. These new measures could easily double and triple that deficit.

http://www.moneyandmarkets.com/Issues.aspx?Warning-Nasty-Surprises-Coming-Next-Week-2294

#45 JOHM on 09.21.08 at 12:18 pm

My sub prime numbers 7 trillion of prime paper
out there . I also hope i am wrong .
Why people are giving the bank the keys .
1.Low wage jobs if you have one in a dieing job market.
2.Rents may be less than a mortgage payment
3. You payed example $300000 now worth $240000
4. your debt = $60000 PLUS $150000 interest a year.
5. after 10 years you payed $ 270000 in interest insurance , taxes ,maintenance ,
only to find out that you have no equity in your home
after 10 years .
6. 270000 prime home owner expenses 10 years
-20000 rent expenses 10 years
+ 70000 savings if you rent
7. These prime mortgage holders will re

#46 Calgary rip off on 09.21.08 at 1:09 pm

Schmoey:

“Calgary prices have similarly bottomed out”. Are you referring to Calgary house prices?

Houses are still double priced what they are worth. The costs are nowhere close to pre-boom prices.

What costs are you thinking of?

#47 JO on 09.21.08 at 2:12 pm

Hi all, a far more important development for our future is the current action south of the 49 to get a 700B bailout of FI s where the government plan will effectively buy garbage debt at purposely inflated prices.
Two comments today. Talk about a vision which was right on the money:
1) I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominent men.
Woodrow Wilson, after signing the Fed Reserve Act in 1913

2) If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.
Thomas Jefferson

All American taxpayers must voice their opinion to Congress and band together to stop this monumental fraud being perpetrated by these animals. The Canadian housing market will be impacted by this kind of nonsense being undertaken in the US.
JO

#48 dd on 09.21.08 at 2:32 pm

Dr Marc Faber

http://video.google.com/videoplay?docid=4388519480932709010

#49 Dawn in Calgary on 09.21.08 at 2:45 pm

Rip-off;

Schmoey was quoting from an email he received from a RE sales person.

#50 dd on 09.21.08 at 2:53 pm

#43 Mountain Girl ,

Is the debt really $225k per US tax payer? I don’t know, but it is may estimate.

But we know that the US spends more that it earns personally and by the government. Now they do have a lot of liabilities, however, what about the asset base? How about their income statement?

I would like to see what the financial statements of America Inc would look like:

Assets – minerals, forest lands, factories, Education of people, government buildings, overseas holdings.

Liabilities – current and long term debt, future value of pension and hospitial payments, cars. SUV’s and homes.

Asset produce income from the assets and,
liabilities pay for the money barrowed on the assets.

Does the US have more Assets than Liabilities? Can the US increase income to cover the current expenses and to pay off these liabilities?

Take the bail out. Do you pay for it through debt or sell an asset out right to pay for this? For example, the US could sell all government land in Hawii and Alaska to the bondholders of the debt. The bond holders, China and OPEC, have a right to those assets in case the “business goes bankrupt.”

I don’t know the answers but average US voter should ask these questions. As Canadian we should also be asking these questions to our government and ourselves.

#51 undecided on 09.21.08 at 2:55 pm

I just bougth a a SFH in T.O. and have a condo in downtown for sale. Given all opinions I have read in this blog in the last 3 – 4 weeks I might be better off holding on to the condo and renting. Anobody care to comment?

#52 anonymous on 09.21.08 at 3:50 pm

undecided,

Do you think that you are the first person to come up with the idea of renting out your place(s)?

That’s a very typical response. But this is the second step (read: 2006 in the US). People will choose to rent out their place in the hope that prices will stabilize and eventually turn around. In the end they got crushed as more and more rentals appeared on the market and prices depressed.

I would try to sell it and take anything I can get for it. But that’s just me. I’m smart when it comes to money.

Renting it out will only extend the pain. It’s a bandaid fix.

#53 deicdelyfool on 09.21.08 at 4:15 pm

Undecided,
IF you have been reading this site for 3-4 weeks then the one can only ask what your level of reading comprehension is? You wouldn’t have bought a SFH in TO. Sell the condo and get out while you can.

#54 Calgary rip off on 09.21.08 at 5:06 pm

Jo:

Consider yourself lucky to be Canadian.

Canada is much stronger than the United States because it has British influence and is in many respects Socialist.

When I swore to always be faithful to Canada as an immigrant from the United States recently this was one of the best days of my life.

I find it interesting that many co workers want to vacation in the United States. I have no desire to ever go there again.

I feel fortunate and privileged to now be a citizen of Canada, despite the housing problems in Canada.

Canadians for the most part are not as greedy as Americans. THAT is one of the reasons why Canada will not end up like the United States.

#55 Joe Taxpayer on 09.21.08 at 6:07 pm

US DEBT per Person

http://www.brillig.com/debt_clock/

#56 Joe Taxpayer on 09.21.08 at 6:11 pm

CANADA Debt per Person

15,275.34

#57 charles on 09.21.08 at 7:13 pm

I see President George Bush made a statement on t.v. yesterday where he referred to the U.S. (financial) system as a “house of cards”.

The following is the text of his comments as per Fox News.

“At first I thought we could deal with this — deal with the problem one issue at a time. We made the decision on Fannie and Freddie because there was systemic risk to our mortgage markets. And then obviously AIG came along, and Lehman came along and it was — it declared bankruptcy; then AIG came along and it — the house of cards was much bigger, beyond — started to stretch beyond just Wall Street, in the sense of the effects of failure. And so when one card started to go, we were worried about the whole deck going down, and so therefore moved, and moved hard.”

The following is the link to the article the quotes are taken from:

President George Bush’s Comments

#58 3rdman on 09.21.08 at 7:25 pm

#51 Undecided

To you and anybody else on here who may be wondering what to do with their property:

-READ GARTH’S BOOK- It’s right there for you.

Undecided: unload the condo ASAP and cut your losses and run. You don’t state but hopefully the SFH is a < 1500 sq ft in Leaside in which case you might be better situated to ride out the coming storm.

#54 quote “Canada is much stronger than the United States because it has British influence and is in many respects Socialist.”

I know you mean to be kind and respectable but the irony is today the British socialist government are the biggest and best yanky bottom lickers in the whole wide World. And are going down with them.

#59 neutral on 09.21.08 at 8:01 pm

Calgary rip off:
Even though you show all symptoms of an idiot, I would never fall down to the level of assigning you or anybody as the one (like you do towards me). When I was on low pay job, I could not afford house, but was able to buy starter condo. I was 25 too. Now my income has improved, but still well under than yours, and currently I consider switching to house with no any harm. People, who want to get a lot in one moment usually never get anything – that is problem of your case. You will be sitting on 1 million cash, but screaming to buy 80k house. After 10 years it would be late to buy anything, even you eventually will decide so. Keep dreaming!

#60 lgre on 09.21.08 at 8:31 pm

undecided I guess you decided to make a very foolish choice at this time..hope things work out.

#61 dd on 09.21.08 at 9:56 pm

Joe Taxpayer,

Thank for the info. The $9trillion is published debt and not all other debt (pension and other). Canadians own alot more that $15k if you factor in all other debt too.

#62 Marcus Aurelius on 09.22.08 at 1:17 am

COJONES AWARD GOES TO……

The Tomovici boys from Sutton Group, for their brilliant recent idea:

Take a C14 (not very high class ‘gentrifying’ area, on the wrong side of Yonge , north of Sheppard). Spend about 8 months trying to sell a new house there (with a postage-sized master bdrm) for about $1.438M, after Bosley RE couldn’t move it for $1.348M approx. Take it off list early this year, wait a few months, then re-list it at $1.688M. This is the ‘classic’ example of non-Canadian RE agent thinking. You see, these wunderkinds think that the best way to get their original (way overlisted) price, is to try to tell you that by raising an ‘ask price’ by well over $350K from the last ballpark expectation of the vendor/client in 2007 (when people were buying overlisted crap like this), you’ll love to pay them the ridiculously stupid original list price from 2007 because you got 250-350K off the List – what a bargain!.

Toronto is a minefield of bad listings like this, precisely because of totally unethical agent practices never before seen in the GTA in past ‘bubble’ markets – a particularly twist in this bubble, because we have so many rounders in the RE business from foreign shores…

#63 Calgary Rip Off on 09.22.08 at 9:42 am

Neutral:

Its seems YOU are the idiot. Good luck with that

#64 wakeup Canada on 09.22.08 at 12:42 pm

Hello all:

I’ve read many of the comments regarding this bail out, and I see many people commenting on the poor citizens south of the border…

That could be our debt as well…

SPP
NAU
etc.
And would the naysayers please do some independent research before spouting sheepish comments.

#65 Noz on 09.23.08 at 4:06 pm

Jo:

Consider yourself lucky to be Canadian.

Canada is much stronger than the United States because it has British influence and is in many respects Socialist.

When I swore to always be faithful to Canada as an immigrant from the United States recently this was one of the best days of my life.

I find it interesting that many co workers want to vacation in the United States. I have no desire to ever go there again.

I feel fortunate and privileged to now be a citizen of Canada, despite the housing problems in Canada.

Canadians for the most part are not as greedy as Americans. THAT is one of the reasons why Canada will not end up like the United States.

Evidently that is true given the housing bubble you guys are seeing in your country as well.

I like Canadians in general but you are one of those typical smug types who think you are immune to what’s going on around the globe.

Your entire economy is tied to the US…if the US farts in the wrong direction you’re screwed pal.

You claim you are tied to the British….and therefore somehow better? What a joke…you’re tied to what was a former empire that dominated the world by greed, corruption, power, and military might. So what are you so proud of? Not to mention the utter housing meltdown they are having too.

I don’t like America…I don’t like living here. I’d like to live in Canada too…but not for the same smug reasons you do.

And I’m certainly not that oblivious to think it can’t happen to me and where I am.

There are many good things about Canada…many. Probably a much better place to live overall. I’d still choose to go back to Europe for various reasons but that’s just me.

I’m sure we agree on certain things such as the housing market not having bottomed out and waiting is better now compared to what NEUTRAL proposes….

But please….don’ t be so arrogant to think you’re not going to be affected.

#66 Marco on 09.24.08 at 2:16 pm

I cannot wait a day to go back to dear old Europe.

Nothing to do with housing though.
Living standard in Canada used to compensate the bad weather, long distances and lack of culture.
Not any more. Inflation adjusted income has not gone up for probably 15 years, despite high taxes we wait months for a doctor specialist, strange “choice” of immigrants, appaling customer services, …
Some of that will wait in Europe too. At least it is compensated by more relaxed life, less time spent in the car, better weather, cafes, galleries, nice architecture, …

#67 Noz on 09.27.08 at 1:10 am

Marco…

Indeed…my heart really aches to go back to Europe….unfortunately for me, it’s an issue of immigration and language barriers.

Otherwise, I’d be there on the next airplane out tomorrow.

#68 Noz on 09.27.08 at 1:11 am

But Marco…one other thing…compared to the US, Canada IS Europe…that’s how bad it is here…lol…so you can imagine.

#69 Ted on 04.27.09 at 10:55 pm

Can someone explain to me why they would consider posting Lorne Goldman’s comments about anything other that fraud.