Alberta Bubble Blog - Latest Comments in Bad Karma- Consequences catch up with you, eventually

Re: Bad Karma- Consequences catch up with you, eventually

carennedy — Thu, 05 Nov 2009 12:54:46 -0000

Love this take on health and economy.....

Re: Bad Karma- Consequences catch up with you, eventually

Totalmotorcycle — Mon, 28 Sep 2009 05:34:38 -0000

I agree with everything you said except I'm heavily on the deflation side of the coin. Raising unemployment, pay cuts, decreases in spending (non-gov), falling home and car prices (large purchases), stock market fall all show me deflationary pressures.

Official StatsCan canadian data shows we are currently in a deflationary zone of -0.8% YoY.

Re: Bad Karma- Consequences catch up with you, eventually

Totalmotorcycle — Mon, 28 Sep 2009 05:29:36 -0000

A lot of people that can afford to buy decide to rent. Just like people who can afford to buy an SUV decide to buy a car instead.

Holding a mortgage is renting money from a bank. And if you disagree with that, then you would agree then the interest you pay on the borrowed money is thrown away just like rent.

Re: Bad Karma- Consequences catch up with you, eventually

Totalmotorcycle — Mon, 28 Sep 2009 05:25:16 -0000

"With the pain that some baby boomers felt to their nest eggs I suspect that some will cash in from the recent stock market recovery and head for the hills and for a life of frugality as jsan aptly indicated. "

I agree as well. October will be a very interesting month in the stock market I hear.

If I was a baby-boomer and I didn't cash out already in Stocks, I would be doing so now and living a life without stock market worry.

Re: Bad Karma- Consequences catch up with you, eventually

Totalmotorcycle — Mon, 28 Sep 2009 05:23:02 -0000

"low" meaning less than 8% historical average for prime or "low" meaning vs the 22% we saw in the last bust?

Re: Bad Karma- Consequences catch up with you, eventually

Carioca Canuck — Mon, 28 Sep 2009 00:05:48 -0000

If you had been around here long enough you could have previosuly read that I posted the wife and I were pre-approved for a mortgage of $175K back in 2004, but we decided not to buy because thing were getting crazy and the math didn't make sense. My prior BK status in 1998 was irrelevant to my getting credit.

Re: Bad Karma- Consequences catch up with you, eventually

goldenpipewrench — Sun, 27 Sep 2009 23:35:51 -0000

condos in new york that are empty.....

http://nymag.com/realestate...

credit in 2010 is going to get ugly...

http://www.telegraph.co.uk/...

keep moving the deck chairs people .no matter what she is going down.........

Re: Bad Karma- Consequences catch up with you, eventually

Name — Sun, 27 Sep 2009 20:56:12 -0000

A couple of posts from Marketdepth right up your alley Gloria:

On the magnitude of the CMHC's impact in the housing market

http://marketdepth.typepad....

and how to hedge home equity in Canada

http://marketdepth.typepad....

Re: Bad Karma- Consequences catch up with you, eventually

das auto — Sun, 27 Sep 2009 20:43:46 -0000

The only thing you "forgot" to mention, is that renting and staying in cash wasn't really your decision but the only option for you due to your bankruptcy status.

Re: Bad Karma- Consequences catch up with you, eventually

Peter — Sun, 27 Sep 2009 19:08:52 -0000

Mark Carney on TV show “Mansbridge one on one” says:
Interest rates will be low for a long time untill 2014>>>

Re: Bad Karma- Consequences catch up with you, eventually

Mike — Sun, 27 Sep 2009 18:27:13 -0000

Jsan raised an important point on the baby boomers and what role they will play in the next decade. I read an article that a large percentage of US baby boomers who were at retirement age but working went on social security when they lost their jobs and could not find jobs. This phenomenon is likely to continue as the unemployment picture remains grim into 2011 by most estimates. Also, this factor has impacted unemployment rates somewhat since those individuals moved from the unemployment column to the retired column helping the unemployment picture.

With the pain that some baby boomers felt to their nest eggs I suspect that some will cash in from the recent stock market recovery and head for the hills and for a life of frugality as jsan aptly indicated. In any event, the next 5 yrs will be an interesting period as inflation, debt and baby boomers collide for a toxic mess.

As I stated, if anyone is buying now for the sake of low interest rates then that person better be prepared to pay down on their mortgage as an insane rate to benefit. Paying down extra per mth on your mortgage will go directly to your principal. Unless you possess the capacity to attack and reduce your principal aggressively over the next 5 yrs then your inability to pay anything substantially above your monthly pymt will see a dramatic increase in your interest rate in 5 yrs time, which means interest will account for a bigger portion of your mthly mortgage pymt when you renew in 5 yrs and it will eat away a bigger portion of your mortgage by the time you renew in 5 yrs thereby offsetting any gains you have made in reducing your principal for the first 5 yrs. I suspect that most who bought to take advantage of the record low mortgage interest rates will struggle to make their basic monthly mortgage pymt. They are unlikely to benefit in any significant way from their decision.

Re: Bad Karma- Consequences catch up with you, eventually

Plast — Sun, 27 Sep 2009 14:43:09 -0000

This summer Imperial's Kearl Lake bitumen mine was given the go-ahead, and expansions at Suncor, Shell and CNRL that have been shelved could quickly resume. There is also a growing number of oilsands projects in the region.

Joke !!! I am working on Suncor. Before 2013-14 no any activity.

Re: Bad Karma- Consequences catch up with you, eventually

jsan33 — Sun, 27 Sep 2009 14:16:25 -0000

Again, this is the reality. The economy has shown signs of recovery based only on MASSIVE stimulus and debt spending. That is NOT a true healthy recovery. This is purely a "let's borrow ourselves into recovery" recovery. This type of recovery is NEVER sustainable. It works while the stimulus sugar hit is working it's way through the system but than falls flat on it's face when the stimulus runs out.

The unemployment rate shows the real picture. What surprises me is you would think that there would be a larger job recovery as stimulus puts people to work? Why wouldn't we? You pay one fellow to dig a hole and another to fill it in. My point has always been what comes after, when there is nothing left to drive the jobs. No "Cash for Clunkers" to keep dealers employed and auto plants humming along, no home renovation rebates which keep trades people busy and reno stores and suppliers jumping, no infrastructure money which keeps many thousands employed in the construction field busy. What stimulates job growth after this? Especially when your economy is over 70% consumer spending driven and that consumer is in debt to historical levels with zero or very little savings?

The sort of economic growth that we witnessed over the last decade or two had to come to a crashing halt eventually, it was primary driven by consumers taking on more and more debt. There had to get to be a point where the consumer could borrow no more. They borrowed without any thought of the future, they did not care how much debt they had, only that they could get what they wanted and GET IT NOW! Housing being a very good example.

.
U.S. Job Seekers Exceed Openings by Record Ratio

Re: Bad Karma- Consequences catch up with you, eventually

Mr Happy — Sun, 27 Sep 2009 14:05:59 -0000

For starters, the money will be used to service lots (44,000 possible), not building any houses.

I'm just trying to point out that the government is giving money to service lots at a time when there is 718 properties for sale in Fort Mac. Do you think the Government may have some inside information on the future development of the Oil Sands??? Probable not. LOL

Re: Bad Karma- Consequences catch up with you, eventually

jsan33 — Sun, 27 Sep 2009 13:58:15 -0000

It seems like spending even Trillions of Borrowed dollars can't dig the US out of it's mounting debt. Green Shoots everywhere. Allot of people also are not taking into account that not only is the unemployment rate going higher meaning less Tax revenue for State, Federal and city expenses but more is going out in the form of welfare, unemployment, etc. Add to this the first of a HUGE wave of Baby Boomers who are hitting retirement who will no longer be paying taxes but will start living very frugally and will also start collecting Socail Security and Medicare.

The US will NEVER dig out of their mess and Canada will be dragged under with them. This is what happens when you have 2 decades ( the last being the worst) of unbridled, debt driven consumption. The party is over and soon everyone will realize it as the economies languish. Here in Canada, it will soon begin to hit allot of people just how grossly overpriced Real Estate really is as the masses begin to realize that the good times are not coming back anytime soon.

Young, unemployed and facing tough future

Re: Bad Karma- Consequences catch up with you, eventually

jsan33 — Sun, 27 Sep 2009 13:49:19 -0000

50 Million a year to develop affordable housing in Fort McMurray. What's that 100 houses minus the cost of building the infrastructure so are we talking about 75 houses?

Wow, it's a regular Boom. It seems like the Alberta government is trying to appear that it is taking care of it's people, or at least it's oil people. While at the same time they are laying off droves in the health care industry and proposing to close thousands of long tern care beds.

Re: Bad Karma- Consequences catch up with you, eventually

Mr Happy — Sun, 27 Sep 2009 13:18:32 -0000

I thought the end was nigh.

Province unveils Fort Mac expansion
Alta. to spend $241 million over five years to develop neighbourhoods for 44,000.

Fort McMurray housing is among the most expensive in Canada, with average home prices around $630,000.

www.globaltvedmonton.com/mo...

Re: Bad Karma- Consequences catch up with you, eventually

BearClaw — Sun, 27 Sep 2009 12:59:39 -0000

"Cash for clunkers was a failure. Sept auto sales are anticipated to be "much worse" than expected."

GM and Chrysler are still intact and new auto inventories at 24-year lows. I understand the concept of borrowing from future demand so sales could very well decline again. But after the crash auto sales were well below sustainable levels so this decline may be temporary.

http://www.bloomberg.com/ap...

"TALF was a failure. The fed simply spoon fed large banks hoping they would lend, but they didn't. All the big banks did was speculate on the stock market via their prop desks. Now we have a stock market bubble waiting to burst.
- PPIP has no takers. Version 3 is set to be released in an attempt to see what coercion can be done to save credit defaults. "

The government was trying new programs on a weekly basis so pointing out a couple that were not utilized is hardly representative. I don't know what the libor rate is now, but I think its reasonable to say that government intervention "fixed" the liquidity crises.

http://www.calculatedriskbl...

"Foreclosures continue to rise. Shadow inventory in the US is sitting at about 3 years absorption of current sales rates. In Canada we have "shadow developments", which no one wants to acknowledge or accurately account for."

What shadow inventory? There are one-third the number of single family houses under construction in Calgary than there were during the peak (from 6000+ to 2000). Multi-family under construction has decreased substantially as well.

http://www.cmhc-schl.gc.ca/...

"- CC delinquencies are at 35 year highs.
- Unemployment at 25 year highs."

Is this Canadian or American and do you have a source? Alberta unemployment is currently about as bad as it was in the mid-90s. (I recognize that as of recently it is still deteriorating).

..There are many negative signs in the economy and government intervention is not necessarily good long-term. My opinion on the housing market is that gains made in 2009 will start to reverse and overall the market will be weaker in 2010. However I do not anticipate a precipitous price crash in 2010 due to continued low interest rates, government intervention, low resale and new construction inventories.

Re: Bad Karma- Consequences catch up with you, eventually

Carioca Canuck — Sun, 27 Sep 2009 12:28:20 -0000

Worldclass....

I forgot to add that in order for inflation to occur, banks have to lend and consumers have to spend. Neither is happening despite government's best efforts........banks need the printed money to cover the loan losses they are hiding, and the consumers are saving for the rainy days that are ahead.

Reading today that the unemployment rate for 20 somethings is 52% in the US........not hard to believe. Tomorrow's homewoners no longer exist.

Re: Bad Karma- Consequences catch up with you, eventually

Carioca Canuck — Sun, 27 Sep 2009 12:25:36 -0000

Well then they just shouldn't buy, as doing so in a bubble is financially imprudent.

The Calgary Herald has an article about house prices going up 300% since 1980........I posted there in the comments section about 4-5 times as "Wealthy Renter".......since Mario Toneguzzi does not let "Carioca Canuck" post comments on his articles. Imagine that eh ?

The fact that I had the unmitigated gall to point out that the wife and I had saved the cash equivalent to a homeowner's equity in 1/3 the amount of time while still paying a high value of rent, or that the actual out of pocket cost of buying 30 years go only netted my parents a $40K paper gain after all the bills were added up, has the "brainwashed" recent Calgary homeowners in a tizzy, as it was akin to stating that God was a black Protestant female during the time of the Spanish Inquisition.

Studying the psychology of RE is most fascinating.........people throw logic, facts and reason out the window in pursuit of granite. All they have to do is stop buying.......it's a really simple response to a growing problem.

Re: Bad Karma- Consequences catch up with you, eventually

worldclass — Sun, 27 Sep 2009 10:57:52 -0000

Well, to add some balance to the commentary here I think I should add in some 2 cents of opinion. By the way, where is the extreme Squidly lately? Hope he's OK.

I guess my posts are getting largely ignored in the replies here as they've either become more of the "same ol' thing that worldclass posts" or it is finally accepted that the world governments are insane and pursuing the debasement of money.

Though I don't bat for the other team like Radley or Bearclaw, I would like to note that they may be right. Look at it this way:

1. Governments of the world debasing value of paper money
2. All the debt owed becomes easier to pay off as soon as this current deflation ends....which it will... there are signs of it everywhere.
3. True inflation is here... defined as an increase in the supply of money.
4. Calgary has this new Plan It idea that probably will get passed. It limits the number of detached SFH and favours multi-family developments that are attached. http://tinyurl.com/yelcenb

Pretty much everything that Squidly, CC, Garth Turner, and myself (during 2007 and 2008) SHOULD have happened. In fact, things would be better quicker if we were to have a true recession and home prices were to fall. Short term pain, but long-term gain. HOWEVER, because of the government programs we are in a whole different world now. I think those telling people to "hang on" are still probably right in the long long term...but it is irresponsible to ignore that time=money, and that many small families have held-off buying homes too long and missed this recent window. Will they eventually get to buy lower? Maybe in a few years... but even that is an uncertainty.

Re: Bad Karma- Consequences catch up with you, eventually

Carioca Canuck — Sat, 26 Sep 2009 20:16:58 -0000

realstinkyagent.....

"I'm sick and tire of the the spin from these people, it's time people start ignoring them and start using their own brains, but that's hard to do for a lot of people"

You are not alone in these sentiments. Seems that the REIC directly and indirectly employs some 27% of the Canadian population........so government will allow the media to allow the REIC to lie, to keep the government in power and the people feeling smug, when really, they are stupid.

Buying RE is totally emotional, however, using logic in our bubble makes purchasing RE a non-issue for people capable of clear and rational analysis.

Re: Bad Karma- Consequences catch up with you, eventually

realstinkyagent — Sat, 26 Sep 2009 19:34:17 -0000

here's a perspective of the job situation in canada.
http://www.globeinvestor.co...

Re: Bad Karma- Consequences catch up with you, eventually

Mike — Sat, 26 Sep 2009 19:32:18 -0000

In order for busts to happen, enough people have to buy into these selling schemes. When enough fools take the plunge, it creates the right scenario for the unfolding later. The buyers who took the plunge in the recent spring/summer 2009 RE rally are helping to create those conditions. Right now, EI is keeping many people alive. When EI runs out in the winter for a large number of recipients it could get ugly.

In any event, the govt's handling of this recession has effectively delayed the onslaught and pushed it into the future. Consumers have borne the brunt of it as credit card delinquencies, soaring debt loads, wage deflation, personal bankruptcy levels, etc have shown.

Finally, those who bought in the belief that they will benefit from record low interest rates on their 25 year mortgages must pay down their mortgages faster during these 5 yrs to benefit and to offset the higher rates coming down the road. If you are simply struggling to make your basic mortgage payment you cannot benefit from low interest rates. Those who will benefit are the people who can somehow afford to pay their mortgage down faster in the next 5 yrs.

However, the truth is that most of these individuals will struggle to pay their mortgages because of basic affordability issues smack in the middle of a recession notable for rising unemployment, high debt and wage deflation, which will last for yrs. For a healthy percentage of those who bought in 2008 and 2009 they will not benefit from these record low mortgage rates, which was exactly the reason the RE industry told them was a great idea for buying.

Re: Bad Karma- Consequences catch up with you, eventually

realstinkyagent — Sat, 26 Sep 2009 18:39:41 -0000

I personally know of people who bought at the top of the market in mid 2007 for $350k-480k on a single income of $35-45k, now that is about 10x+ before tax income, at any time before 2006 in alberta if any did this their family members and good friends would rush them to the mental hospital ASAP, but now it's the other way around if any one talk about buying at the normal average of 2x income ratio (we bought at less than 2x income in 2000 and our house was just above the average price ) people would think you are a nut. would anybody be buy a car a for $40k when you can buy the exact same car last year for only $20k even if the monthly is lower or the same base on low interest rate? No off course not but people seem to buy into the spin from the real estate industry that it's ok to buy a house for $400k when it was only $180k just a few couple of years ago oh but interest rate is low,

It;s funny how the real estate industry some how find any positive spin on EVERYTHING, like "buy now because price is lower than last year" or " buy now because price has gone up from last year" or the most common one now is " now buy because monthly payment to lower than previous year (who cares if it's 2-3x more than the historical normal price compare to income)",
how ever I'm sure if selling price was lower but monthly payment was high the spin would be "buy now because price is cheap, (who cares if the monthly payment is high)"
I'm sick and tire of the the spin from these people, it's time people start ignoring them and start using their own brains, but that's hard to do for a lot of people.