Entries from August 2009 ↓

Kind of a rep


The new face of Canadian debt millionaires.

The loudest noise in my local HD on Saturday came from the birds singing in the rafters. Knots of staff in orange aprons covered with bling and tape measures hung around roofing materials, cellulose blinds and the unloved end-of-season BBQs. I was there for the bunker, of course. This was the weekend to install the backup emergency power supply to the standard standalone power supply for the standby generator. Tempus fugit, if you get my drift.

A friend to the south called to say she’d just driven down millionaire’s row in East Oakville. ‘A forest of signs,’ she said. ‘Never seen that in my life.’

Indeed, some lakefront estates in that area trade hands once every few decades. Some, never. And certainly not like today – with fat price reductions slipping through to local brokers weekly. Hell, you can even rent a $4 million place that used to belong to the president of Ford for eleven grand a month. That’s 3%.

In the resort town of Wasaga Beach, a local developer desperate to sell languishing new homes sent out an email blast trumpeting CREA’s latest release – “TORONTO (Reuters) – Canadian resale home prices are likely to rise, not fall, and sales will match or exceed those of last year, the Canadian Real Estate Association said in a revised forecast on Thursday, August 27.  A much stronger showing in the second quarter, and a solid start to the third quarter, prompted CREA to predict a dramatic rise in home sales for 2009, and for prices to edge up…”

Hey, kids. Everybody’s doing it! Jump in!

This weekend’s Globe ROB carried the usual coy photo of a couple willing to spill their financial guts all over a broadsheet page, but eschewing a full-frontal headshot (above). The thirtysomething BCers own $1.43 million in real estate, with $1.14 in financing. That’s 8.3 times income (and she’s on mat leave), with debt payments taking 77% of net income.

Said the financial advisor in a blaze of insight, “they should consider downsizing.”

Canada, it turns out, is getting kind of a rep these days. Family debt-to-income ratios are now among the highest in the developed world. Our housing market is one of the most expensive on the planet relative to national income. A survey of the least affordable places to live had four BC cities in its top list. No other country has gone from a record government surplus to a record deficit as fast as Canada. And our trade deficit has just reappeared for the first time in 30 years – not the kinda news you want to hear when you’ve hitched your wagon to free trade.

As mentioned here a few million times (I’m tedious), what our indebted fellow countrymen and women can look forward to are higher taxes, stiffer mortgage rates and a constipated economy. There is absolutely no validity to PMSH’s comments that we will be out of this historic deficit pit without public pain. That’s not a political statement. Mere fact. The next ten years will be defined by what has happened since October.

And as I mentioned two days ago, our major economic provinces – BC, Alberta and Ontario – are equally in the soup. Surpluses have turned into deficits, with tax increases, spending cuts or both a certainty.

So, let me summarize: Families more indebted than ever. Economy still sucks. Trade crumbles. Pols choke. Did I miss anything?

Oh yeah, record real estate sales.

Gotta run. Time for a genset check.

History repeats?

history repeats

To enlarge, right-click and select 'View image'

Reader Lorne Beagle sends this along to ruin the weekend for most equity investors. “I overlayed these charts today.” he says. “I just thought you might appreciate the similarities (… guess we’ll see if it keeps etching out a similar path??)”

We sure will. Now, let’s hear it for Fibonacci.