New listing activity in the Saskatoon real estate market picked up considerably this week as 161 new listings were placed on the agent MLS including 105 single-family homes and 46 condominiums. Additionally, 47 of 84 cancelled listings found their way back to the MLS as new listings. I suspect that some of the homes that moved out of the system as “expired listings” at the end of September made a comeback as new listings this week. Still, the total inventory of active listings saw fairly modest growth of 8 units over the previous week, to finish at 1,688 including 1,049 single-family homes and 534 condos.
In addition to the 47 re-lists, most of which returned sporting a new price, 156 Saskatoon home sellers approved a change to their pricing strategy in hopes of luring a willing buyer. The average asking price of all active listings is still a whopping $329,769, some 10-15% higher than average selling prices over the past few months.
A total of 53 residential properties were reported as firm sales, including 49 in the single-family homes and condo category. 45 of 49 sold for less than the asking price while four sellers managed to attract offers at, or above their list price. The average of three overbid sales came in high at $20,533 with the largest of the three boasting a sale price that was $55,000 over asking. This is a new townhouse property so I suspect that the buyer likely negotiated some additional improvements that led to the higher selling price. Those buyers, who managed to negotiate a discount, purchased their new home at an average of $12,376 below the asking price.
Average list and sale prices of the properties that did sell declined again for the third week in a row in spite of yet another residential sale that topped the one million dollar mark. The entire history of the Saskatoon MLS shows 6 sales within city limits that managed a selling price above one million dollars. Five of those occurred this year; three of them were reported after September 15.
The “Saskatoon real estate: week in review” is intended to provide a brief overview of the most recent market activity. Due to the small samples, average prices can vary significantly from one week to the next. For more reliable price trend information, see our most recent “Closer Look at the Saskatoon Real Estate Statistics” published on October 10.
See a Google map displaying the boundaries of Saskatoon real estate “areas” here
Data collection and calculation for our statistical reports
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
Follow our daily updates on Twitter @SaskatoonHomes.
Norm Fisher
Royal LePage Saskatoon Real Estate
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{ 79 comments… read them below or add one }
Norm,
I feel if I would have put $600 a month for the last 4 years towards lottery tickets and the casino, I would have a better chance of being wealthier now
On one hand, I see a recession for the global economy, but we will pull through and I will recoup my losses.
On the other hand, I see a severe global recession with a mixture of the 30’s, the 70’s and as well as the asset property bubble of Japan of the late 80’s. Stagflation and a downturn like Japan that will last years.
It ain’t fun having bi-polar
Crikey, good points.
The USA borrows 2 billion dollars a day just to keep the lights on. Over 10 Trillion in debt. Eventually there becomes a point of no return in paying that back. And then all hell breaks loose. Maybe that time is now, maybe not.
Norm said:
“The average asking price of all active listings is still a whopping $329,769, some 10-15% higher than average selling prices over the past few months.”
This is an interesting stat. It means that the sellers still don’t get it. There will be more price reductions and re-listing activity in the coming weeks. Sellers will chase the market down as discussed in the previous thread.
Inventory is not dropping but sales at this time of the year will start to decline as we approach winter. Sales will also be impacted due to concerns about the economy and new CMHC mortgage rules.
Norm – What feed back are you getting from your agents in the last two weeks? Are the calls from buyers tapering off with all this economic uncertainty? In your post you said that firm sales were holding up but those offers might have been made a few weeks ago before the market meltdown. Any conditional sales numbers from last week?
Hey Roger,
Inventory is down about 70 units since the end of last month. I expect that we’ll continue to see it moderate some over the next few months.
I’m finding that the phone is ringing less and email inquiries are also down. This is not unusual at election time and there is no doubt that “uncertainty” will be a factor in the weeks ahead. I agree also that most of this week’s sold activity dates back to the previous week. Conditional sale numbers don’t offer much. Agents have almost stopped reporting them. They don’t want people to know that a house is off the market until they’re sure it’s sold.
Credit is also a factor here. I spoke with a mortgage guy on Friday who said minimum beacon score requirements have been raised and that they are fighting to keep some sales together that would have been a slam dunk three months ago. At my office, our sales board (actually a pdf file) is showing five collapsed sales for October. I suspect that most of those are finance rejections or cold feet.
Norm said:
“The average asking price of all active listings is still a whopping $329,769, some 10-15% higher than average selling prices over the past few months.”
Ugh. The housing market is still outrageously overpriced (and doesn’t reflect how much houses are truly worth in such a small city with a less than stellar infrastructure), AND my market funds are tanking.
Good grief, Charlie Brown. Is Saskatoon going to remain in Bizzarro World forever? What’s the deal?
Norm,
Yes, credit is a factor. An example is this little gem from an add on the saskhouses website:
**BACK ON MARKET DUE TO FINANCING** PLEASE BE PREAPROVED BEFORE YOU MAKE OFFER**
I reiterate a comment made months ago, housing may be local, but the money that provides the financing with which to purchase it is global. I believe one commenters response was something very articulate like “the sky is falling!!!”
It is very often the case that when someone encounters an argument pointing out a problem that they do not understand they resort to something like the chicken little argument. It is obvious that the sky was not falling, but it was beginning to snow. It snowed all summer long, getting colder and colder until finally one could go skating on the international credit market. In fact the ice became so thick one could quite safely take a humvee on the ice and use it as a fishing shack.
People need to understand that the amount of money in credit markets dwarfs the much sexier cash in equities. What has been happening recently in the stock markets is merely the visible component to a much bigger problem in credit markets. And exactly analogous to an iceberg, that which is seen is a very small part of the real problem. Since the beginning of the year, we have witnessed about 26 trillion dollars of stock market value around the globe go to money heaven. No one knows the precise amount in the credit markets. The intense fear that this shock has engendered among lenders has been augmented by the suspension of mark to market accounting rules. A measure that was originally supposed to chip away at the frozen expanse resulted in possibly doubling the thickness of the problem. We went from a pretty mild Decembers ice, to February’s thickness after a bitterly cold january. It must also be pointed out that any effects of leverage in credit markets on the way up will also be felt, negatively, on the way down.
As a response the central bankers of the world have undertaken a series of measures that have been almost as breathtaking in their scope as is the complete disinterest of the general populous. In the latest move, the US Fed, the ECB, the BoE and BoJ have all decided to provide unlimited US dollar funds, to central bank borrowers against appropriate capital. This statement is meaningless unless you cave been following recent events closely enough to know that the definition of central bank borrowers has been widened, (although, it does not include you, yet) and that of appropriate capital has been expanded to include what until very recently was considered by the international credit community as containing the same value as used toilet paper amidst a dysentery outbreak. This is of course, the big gun. The equivalent of trying to use a megaton bomb to melt the ice.
It is also where the beautiful frozen lake analogy breaks down completely. There are currently many credit vessels completely encased in ice, and oddly enough they have a much better chance of sinking through the ice than in open water. One hopes that this desperate and disparate measure by the central banks works to thaw the waters and slow the sinking. But yes, there will certainly be more sinking.
In light of all the international pyrotechnics the actions happening in Canada are very interesting. Recently it was announced that mortgages that were until now held on Canadian banks’ books will be allowed to move off the balance sheet, to free up capital. Why? Ignoring the few stragglers coming to the party far later than fashionable, there is already less demand for new housing, auto and consumer credit. Why on earth do Canadian banks need more access to capital? One possibility is that the banks will not be mortally wounded if Canadians begin to default on mortgage debt. This is probably accurate. Although the theory that this would ensure continuous access to credit to Canadian consumers is quite silly; banks don’t tend to increase lending to people who are defaulting on loan payments, particularly when their international colleagues are bathing in bad loans. A more plausible explanation could be found in the news item that outlined unprecedented actions by the American Fed. It appears that Bernanke is so desperate for capital that he has opened lines of communication with the big Canadian banks. If the international credit markets do indeed thaw momentarily, due to recent central bank actions, it would still behoove the big Canadian banks to consider that while the waters may now be warm enough for sailing, they are shark infested. And some of those sharks are much much larger than the TD’s wooden tub.
The effect of all this on local house prices is probably going to be negative, and relatively fast. Whereas it took years for housing finance to fall apart in the US, it was much faster in Britain. Part of this is because the bubble was bigger in the UK, but some of it certainly was because the credit crunch was much further along. Some argue that the international credit crisis may be over before it meaningfully affects Canadian house prices. This is possible, but in my view, unlikely. I think we are already beginning to see its effects. But what the hell do I know? I’m often wrong. I certainly hope I am this time. What I expect is a great deal of pain and suffering. Who in their right mind would not wish to be wrong about that?
Hi Norm,
Would it be possible for you to display the median sales prices for each of the 4 areas in Saskatoon in your weekly posts?
Thanks Norm.
Glen
@Armoth,
“Short commute, decent wages, and a small town feel.”
yeah, gotta love that ’small town feel’….
http://www.cbc.ca/canada/saskatchewan/story/2008/03/13/miffed-mcleans.html
S,
Fear is what makes me and others who can look at the market objectively at an advantage. Look at the sheer number last week of volume on very popular stocks trading at 3 times sometimes more volume pummeling the stock to utter oblivion. Take for instance my lovely BQI
I bought a small amount of shares for 3.71 and watched it drop like a rock in a unfavored sector. Looking at similiar companies everyone related to oil or commodities got destroyed. You know what I did? I bought several thousand shares at a premium price because of fear. Now once again I have made several thousand dollars from the fricken stock i love!!!!!!!!! Now you ask what does this have to do with Saskatoon Real Estate.
What is Saskatoon real estate stock worth and what are the benefits? Short commute, decent wages, and a small town feel. You could try to guess where the bottom is or you can just buy a house and live in it. You cant really know where the bottom is in anything stock market or real estate there are signs yes but only signs its not a sure thing. If what you want in a house available to you and in ur price range go buy it dont try to wait because of fear. For all we know a huge rock can hit us from space and destroy us all so why sweat about it. Well there is my rant Hope you enjoyed it only me and callum left as bulls yay……
guy_in_regina,
I have some bad news! Major crimes in city dropping.
http://tinyurl.com/4g44ds
How long do we have to hear about this MacLean’s article that’s based on 2006 crime stats?
Robin,
The average list price is high but selling prices are down a good ten points from the high. Thinks are looking up, or down depending on how you want to view it.
S,
Some real words of wisdom. I have to ask, is that you Sam Johnson?
Sigh. Well, I’m glad to see your enthusiasm continues unabated, Armoth.
There was a huge rally today, I’m really glad that you were able to recover some of your losses. But when you take a step back and look at the bigger picture and the causes for this latest rally, what do you really see?
Europe put $2.3 trillion on the line today to protect the continent’s banks, a figure that dwarfs the Bush administration’s $700 billion rescue program. The U.S. government is now set to buy perpetual preferred equity stakes in nine top financial institutions as part of its new plan.
To stimulate lending, these bailout plans are attempting “to recapitalize banks. The method of recapitalization is best described as robbing Taxpayer Pete to pay Banker Paul. In essence, money is taken from the taxpayer (via taxes, printing, and weakening of the dollar) and given to the wealthy so the wealthy supposedly will have enough money to lend back (at interest) to those who have just been robbed.” (Mish).
Governments are doing this because their ability to lend without this level of intervention is essentially zero. I hope they will be successful, but right now the TED spread is still unbelievably high by historical standards, and other indicators of perceived credit risk in the general economy are still high. This level of intervention is unprecedented, but some level of damage to the global economy has happened, and will take some time to show up in the numbers. In the short term, though (say in the next six months to a year), do you really see a catalyst for sustained economic growth? Job growth? Do you see the value of any asset class climbing? How? I just have to think that the economic data might continue to be negative for some time. I certainly don’t think the damage that’s happened in the system is suddenly going to turn around on a dime.
In any case, I do continue to wish you the best of luck in your endeavors. I also hope that you’re able to hold those stocks long enough to see some good gains.
In a previous post I mentioned how homeowners lock-in the profit on their house when a neighbour sells. Here is a related article that some might find interesting. http://tinyurl.com/lostcash
All that money lost in stock market, housing never really existed: economist
Robert Shiller, an economist at Yale, puts it bluntly: The notion that you lose a pile of money whenever the stock market tanks is a “fallacy.”
He says the price of a stock has never been the same thing as money – it’s simply the “best guess” of what the stock is worth. Shiller uses the example of an appraiser who values a house at $350,000, a week after saying it was worth $400,000. “In a sense, $50,000 just disappeared when he said that,” he said. “But it’s all in the mind.”
Norm,
No, I am not Sam Johnson
Thanks for joining the conversation s.
I would love to see the stats on the new lower crime stat numbers for Saskatoon so I could again compare them with Detroit, to see if we’re still higher.
Nice to see the TSX has bounced back a bit today. It does give people some confidence, like me
Days of up 8% or down 8% will not be uncommon for the next while. I hope that intervention by the governments does steer the world away from a depression or severe recession. I think and hope it can happen, but there will be casualties along the way.
Central banks have been printing money like crazy and flooding the markets including the Bank of Canada (20 billion in the last month not including the 25 billion mortgage bailout or the 30 billion swap with the US federal reserve) This is setting us up with higher inflation and with little or no economic growth we could be headed for 70’s style stagflation. This is not good but better than the alternative. Higher interest rates are a possiblity in the future.
As for Canadian banks, they are said to be healthy and the government will not let them fail.
http://www.financialpost.com/story.html?id=877949
“Average list and sale prices of the properties that did sell declined again for the third week in a row in spite of yet another residential sale that topped the one million dollar mark.”
So, knocking $1m off the aggregate value for the week and subtracting one sale leaves us $277,506 each for the other 48 sales.
That’s back to August territory.
“As for Canadian banks, they are said to be healthy and the government will not let them fail.”
The last part of your statement is clearly true, it seems. This is announcement is from the BOC today:
As Part of the G7 Action Plan, Bank of Canada Introduces New Measures to Provide Liquidity to the Canadian Financial System
http://tinyurl.com/4zk6ot
Bookrat,
I’m not sure that would be a fair way to crunch the numbers. These weekly numbers often swing 20-30K from one week to the next. Even if it was $277K it wouldn’t be fair to say “prices are back to ____ level” based on the numbers from one week.
Bookrat,
High and low end sales can easily skew the numbers when there are only a few sales to average. Pruning the data is generally not good for statistical analysis. That is why it is better to look at the median sale price if you want to see how the market is trending. The 3 month average that Norm is now showing on his graphs is also a useful trend indicator.
Norm – any chance of including 3 month median average on the graph? Dashed lines for rolling would result in less “clutter”.
@Roger: I would like to use the median, but I go with what Norm gives me.
I agree with the 3-month trendline, and that’s what I use in my personal stats. I do happen to think that pruning the outliers gives a clearer picture, though; if I knew what the lowest sale was last week, I’d have knocked that off too, but I don’t so I make do with what information I have to come up with the most reasonable picture.
As norm wrote recently, there have been five $1m+ sales since Sep 15. I would be very curious to know the average prices in Saskatoon with all sales, and without both the top 5 and bottom 5 outliers. Which do you think would give a more accurate reflection of what people might actually pay on the open market right now?
@Norm: Sorry, wasn’t implying that prices *overall* were at August numbers, just that the weekly price was the lowest seen since August 11-15 (~$270k), Aug 22-25 (~$271k) or Aug 18-22 ($276k)… which in turn were the lowest numbers seen since March.
Thanks for the data and your blog to bring so many valuable discussion, Norm.
For represent the statistics of sale history, i suggest to use box plot.
“In descriptive statistics, a boxplot (also known as a box-and-whisker diagram or plot) is a convenient way of graphically depicting groups of numerical data through their five-number summaries (the smallest observation, lower quartile (Q1), median (Q2), upper quartile (Q3), and largest observation).”
http://en.wikipedia.org/wiki/Box_plot
I guess you are using excel to generate the plot. See these for reference how to do it in excel.
http://peltiertech.com/Excel/Charts/BoxWhisker.html
or this if you know more about excel
http://blog.immeria.net/2007/01/box-plot-and-whisker-plots-in-excel.html
Bookrat,
No sweat.
I think I said “5 sales above a million (within the city) in the entire MLS history, three since Sept. 15.
231 condos and SF homes sold since 9/15. Take out the top five, and the bottom five and the average comes to 288,866. The median for that same period is $269,900.
Recent medians (SF and condos, areas 1-5).
June: $299,900
July: $284,500
August: $276,900
September: $271,000
Roger,
I may just do that. Thanks again.
Don,
Thanks for the suggestion. I’ll have a look at this. I am using Excel, but it’s the Mac version which I find quite different from the Windows version.
Norm we all know Saskatoon and Regina will still have the two highest rates of major crimes, they always do and they were so far ahead of the rest of the country last year that it wasn’t even funny!
On the plus side, the Conservatives seem to think that Alberta’s crimes are all by immigrants, so with their stronger mandate they can further crack down on the high rate of immigrant crime on the prairies.
http://canadianpress.google.com/article/ALeqM5iEJmOnTzg2RkGafFZs_tUTVyJZhw
Norm interesting downward trend in median house prices in Saskatoon
June: $299,900
July: $284,500
August: $276,900
September: $271,000
Off over 10% from June …
All the fancy stats suggestions aside, a weekly median, or running graph of same, would be nice
Nick,
“Norm we all know Saskatoon and Regina will still have the two highest rates of major crimes.”
Well, that may be and I know how much some of us hate to celebrate the improvements. I apologize for challenging the 2006 data.
“the Conservatives seem to think that Alberta’s crimes are all by immigrants”
I have no idea who is responsible for crime in Alberta but this strikes me as a funny story. In Saskatchewan, we always seem to point to the “aboriginals” (see the MacLean’s story) and nobody gets asked to resign over that.
“a weekly median, or running graph of same, would be nice”
Have you been here? http://tinyurl.com/3o4lt4
I plan to keep these updated on a monthly basis. I am struggling a bit with the weekly numbers as there is often some misinterpretation happening. I may just graph the weeks out over a long period and see what it looks like. Appreciate the suggestions.
Canadian home prices continue to fall
http://www.financialpost.com/news/story.html?id=882383
“Canadian homebuyers should not expect to see the kind of price correction that’s underway in the U.S. where overly indebted homeowners are selling into a housing market where foreclosures and the number of newly constructed unoccupied homes are increasing,” said Mr. Klump.
Canadian Real Estate Price Charts
http://www.canadian-housing-price-charts.235.ca/
“Now that Vancouver has put 5 consecutive months of falling prices on the board we can see that individual Canadian markets are not that different from each other when it comes to responding to a global credit contraction and commodity sell off. A global credit contraction affects everyone everywhere. It is a myth that Canada and its population centers are immune to what is going on globally. Canadian administrators like to pitch that idea and all sorts of other nonsense so that you dear tax paying voter will not think for yourself. The bubble has burst”
Norm,
“Major crimes in city dropping.”
Those are really encouraging, and welcome, numbers! I hadn’t seen that story.
Anybody who lives in S’toon, Regina, or PA ought to know that crime, particularily violent crime, is a serious issue in these centres. I wasn’t ragging on our cities, I was just pointing out that we have some pretty serious problems, which are in direct contradiction to Armoth’s “small town feel” declaration – IMO anyway.
I think a big reason why the crime rate is perceived to be going down in Saskatoon is because people no longer bother to report to the police when they have had their persons or properties victimized. They know the police will not do anything, and thye know if by some freak of luck that the persons are caught by police, that they will get a slap on the wrist and be right back on the street again the next day.
I wouldn’t believe for one minute that crime is getting any better in this town. Rather, I would guess the perceived drop is just the city and police fudging the numbers to make the situation seem better than it is.
I know that crime is down in our neighbourhood. The community association sends out the list of reported crimes, even the loud parties and bike thefts are included. There is no hesitation to report here. There is a big push to report everything, as a community, so that people know they wont get away with it. I would love to compare the crime stats between Meadowgreen and Sutherland sometime. I bet it would be an eye opener.
As for some of the more well off centers… I wonder if idle money is the devils capital. Anyone who’s lived in Lloyd knows that there is a seedier side to oil and construction booms. Its starting to spread all over now. I went home to my small eastern Sask town for Thanksgiving and found that its suffering the drug and crime problems normally associated with much bigger towns. Yah sure, there used to be drug and booze issues, but never to this extent, its endemic now and there is hardly a family not affected in some way. There are some big problems brewing in small town Saskatchewan. If its bad in the small towns, how can the city not be more affected? This can’t be good for the future of the province.
I wish I knew what the heck can be done about it. How do you tell entire populations to ‘Smarten up!’?
Norm the reason the immigrant comment was funny is that it is completely inaccurate. The Conservative candidate has no idea who actually causes crime in Alberta. Immigrants are actually more likely to have their children graduate from university and contribute more to the economy than those born here. As well as committing less crime than other demographics.
Pretty tough to combat crime when they’re targetting the group least likely to commit crimes already.
Jason, your argument seems very familiar, if reversed. I have heard quite a number of people say that the only reason Saskatoon’s crime numbers are so high is because people are NOT afraid to report to police – that because we do have this small-town mentality we are more willing to bring the police in on matters that would get ignored or go unreported in larger centers. As such (goes the argument) it is not that we actually *have* any more crime in Saskatoon than elsewhere, only that it is reported more frequently than elsewhere which skews the statistics.
Now here comes your argument saying that we DO have more crime than elsewhere, but that people are reporting it less, which skews the stats. So if everyone is out there skewing the stats, and people are going to pull them this way and that, then what’s the point of having them in the first place?
Puts me in mind of some of my favourite quotes on the subject of statistical interpretation:
Andrew Lang: “He uses statistics as a drunken man uses lampposts – for support rather than illumination.”
Mark Twain: “Get your facts first, and then you can distort them as much as you please.”
—
Captcha comments: Chautauquanscall?? What sort of a sadist put that in a captcha?
A couple of interesting news items today:
Banks pushing homeowners to lock in mortgage rates:
http://tinyurl.com/3rr4tr
“Canadian banks are trying to convince consumers to lock in their mortgage rates because more than 20% of the home loans they have negotiated have become unprofitable, according to industry sources.
The push has come after the banks cut the discount they offered to consumers with variable-rate products tied to the prime lending rate. Two weeks ago a consumer could get a variable rate product at 0.60 percentage points below prime; today it is one percentage point above prime.
“Banks are scaring people and those people are calling us asking whether they should lock in,” said Vince Gaetano, a vice-president with Monster Mortgage, a mortgage brokerage firm.
His advice is pretty emphatic. Anybody with a mortgage negotiated in the past two years would be out of their mind to lock in to, say, a five-year term, he said. They would be going from a rate as low as 3.35% to 5.79%. Lines of credit previously negotiated at a rate below prime are also still valid.
“If you’ve got a mortgage rate negotiated below prime, you have a dinosaur. It doesn’t exist anywhere. You should hold onto until the end of the term,” said Mr. Gaetano. “The banks propped up all their rates 160 basis points because they knew the Bank of Canada would be lowering rates.”
In other news:
According to the Canadian Real Estate Association, the average resale house price in 25 major markets fell 6.2 per cent in September, year over year.
http://tinyurl.com/4jstra
Sorry in advance; this post is not about real estate.
@Laura,
“Anyone who’s lived in Lloyd knows that there is a seedier side to oil and construction booms.”
I believe Lloyd has the ‘youngest’ population of any SK city. As a group, young people commit more crimes than older people. I also believe you’re right about money; some research indicates that if a community has social problems (i.e. drugs, alcohol, gambling, violence), an influx of economic activity (i.e. people and money) tends to excaserbate those problems, in addition to whatever other effects are experienced (many of them positive).
@Jason,
You may be right. I can’t find the info, but I seem to remember reading that the large SK urban centres have relatively low rates of crime reporting. That being said, there’s some pretty innovative crime reduction strategies going on in S’toon right now, and I think it’s highly likely that they’re having an impact. In any given society, it’s a fairly small percentage of the population responsible for the majority of crimes – so called ‘chronic offenders.’ If you successfully target them, you have a very good chance of making a real dent in crime.
We’ve got a lot of work to do though; Saskatchewan’s crime rates have been the highest in the country for 10 years.
Recent medians (SF and condos, areas 1-5).
June: $299,900
July: $284,500
August: $276,900
September: $271,000
—————————–
Thank you Norm. Those were the numbers that I was hoping to see.
The median sales price is more meaningful than the average sales price.
guy_in_regina wrote: “I believe Lloyd has the ‘youngest’ population of any SK city. As a group, young people commit more crimes than older people. I also believe you’re right about money; some research indicates that if a community has social problems (i.e. drugs, alcohol, gambling, violence), an influx of economic activity (i.e. people and money) tends to excaserbate those problems, in addition to whatever other effects are experienced (many of them positive).”
I lived in Lloyd for 13 months (06-07). Although neither I nor my property were the victims of any crime, there was quite a lot of it there. From what I gathered, there was a lot of spill-over from Edmonton. There were a couple shootings when I was there – both perpetrated against the same guy on two separate occasions. One in the Wal-Mart parking lot at 3:00 in the afternoon.
Young, largely uneducated, people (18-25) earning 100K plus a year can make for an “interesting” place to live.
I also remember Lloyd’s housing prices – very similar to what we have here now. In 2006 I was astonished that you could get more for your money in S’toon than Lloyd. I hear they have settled a bit there though.
I’m not sure this is the appropriate forum for this question, but what is going on with the $CAD? It’s dropped $.30 in less than a year. Canada’s domestic and international account balances are orders of magnitude better than the US’s. The Petro-Dollar myth that Hedge Funds bought into is being unwound? Oversold? Both? Is it just the USD that is completely out of whack?
And oil down 50% in three months? That’s just nuts.
Crikey,
My understanding is the dollar has followed our commodity based exports including oil. Since we have just had the commodity bubble pop, our dollar has lost its value with the decline in commodities. Oil has dropped about half;so much for peak oil! I also believe the US dollar is being pushed higher with more demand. Even with all the turmoil in the States, many investors feel safer with the US dollar than other currencies.
The BofC is also pumping the system with billions of dollar, lowering the value of the our currency and setting the stage for higher inflation down the road. They say that banks are fundamental sound and well capitalized. But the BofC is quietly injecting 4 Billion here, 6 Billion there, buying 25 billion worth of mortgages with the possiblity of up to 225 BILLION if we have a severe slowdown!!! , swapping 30 Billion with the federal reserve in the last month. Banks are saying they are not making money on variable rate mortgages and the playing field is not the same as other countries national banks. But nothing to see here, moving along, moving along:)
They are in more trouble than they are letting on.
http://bankimplode.com/
Oil plunges under $70 a barrel
http://www.theglobeandmail.com/servlet/story/RTGAM.20081016.woilprices1016/BNStory/energy/home
“Crude has now dropped 53 per cent since surging to a record $147.27 on July 11″
Oil speculators are running for cover and this is before US economy gets worse before it gets better ( if that ever happens).
The lower oil goes, so does our dollar.
How low can oil go? I don’t think $35 a barrel is out of the question for 09, but then again add an invasion of Iran and we could see new highs. Regardless, we will just get screwed at the pumps.
Fall in house prices broadens, deepens
http://www.thestar.com/Business/article/518213
“Canadian homebuyers should not expect to see the kind of price correction that’s underway in the U.S., where overly indebted homeowners are selling into a housing market where foreclosures and the number of newly constructed unoccupied homes are increasing,” CREA chief economist Gregory Klump said.
However, despite the drop in the overnight rate, tight credit markets mean banks are pricing variable-rate mortgages at a premium because of the uncertainty, said John Cocomile of GreedyMortgage.com.
“There is so much mayhem in the markets the lenders are really scared about short-term loans so they are dissuading people from taking them,” Cocomile said. Variable mortgages were typically going for the prime rate (offered to banks’ best customers) plus 1 per cent, or about 5.25 per cent, yesterday.”
It seems like the drop in house prices has been offset by higher mortgage rates thus making affordability the same as when prices were at the peak.
Hey George,
I also think there is a huge amount of deleveraging happening with hedge funds right now, which is probably contibuting to the decline in oil prices. Hanky-Panky Paulson hs indicated that hedge funds will not be covered by any government intervention, but then again, he also said:
“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention.” [18] Spring, 2007
“U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades” August, 2007
On July 20, 2008, after the failure of Indymac Bank, Paulson reassured the public by saying, “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”
On August 10, 2008, Secretary Paulson told NBC’s Meet the Press that he had no plans to inject any capital into Fannie Mae or Freddie Mac. On September 7, 2008, both Fannie Mae and Freddie Mac went into conservatorship.
He used to anger me, but now I’m feeling a bit sorry for the guy.
I’m not sure that $35 oil is in the cards. I hear that OPEC has bumped up their meeting to discuss the possibility of cutting production.
$35 oil, why not?
http://inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart.htm
Oil was under $40 in 2004. It traded under $20 in 2001. And in 1998 it even went under $10 briefly.
Traders are dumping oil on the speculation that worldwide demand will weaken even though OPEC is talking about closing the oil tap a bit. This is before the world enters a recession, when oil will drop even further.
Peak oil, China and India demand, Nigerians fighting is all crap to justify the price when it really has to do with speculation and price manipulation.
Secretary Puppet, I mean Paulson. I feel sorry for him to, only worth hundreds of millions.
He was head of GS until 06. So, 1, he saw this mess coming and did not care or was not allowed to do anything about it. 2, he and the rest of the Wall Street and government are stupid.
He and the rest of the fat cats are going to fix this?
Either way, it does not look promising for the Middle Class for the United Socialist States of America.
(disclaimer: don’t mind me, I am just going crazy over the losses in my stocks. I have been told Canada will weather this just fine. Funny, I’m Canadian and I have lost about 40k in assets from stocks and calculations of RE loss of my own home since spring, but my debt is about the same.)
George,
“don’t mind me, I am just going crazy over the losses in my stocks.”
You may want to consider buying. It took some of the edge off of my craziness.
It’s starting to look like we may be at, or close to the bottom.
OMG, I may have to stop blogging here.
It’s getting too painful to watch.
Does this equation make sense to you?
The most likely result of:
A global depreciation in real estate
+ a global credit seizure
+ massive global injection of taxpayer liquidity into financial institutions
+ extensive loan delinquencies
+ a reduction in available credit and LOC’s to the consumer
+ collapsing forestry, manufacturing, commodities and shipping sectors
+ soon to be higher unemployment due to layoffs in forestry, manufacturing, commodities and shipping sectors
+ increase in cost of services
+ negative savings
_________________________________________
is going to equal a stock market revolution of some sort in the foreseeable future?
Because it sure doesn’t make sense to me.
Long time lurker here….
Norm, we are nowhere near the bottom. Where did you get this notion from? If you want to give money away why not donate it to a charity? This makes much more sense than pissing it away on the stock market. And you will probably feel better about yourself to boot. At the very least please do not encourage others to follow your lead.
Now back to lurking….
Crikey,
I’m not suggesting that some kind of rally is imminent, only that there may actually be some good buys out there today. As I said before, I’m happy to take a 5% dividend on a high quality blue chip company. The stock market will go through many more booms and busts before I’m ready to spend this money.
John,
“If you want to give money away why not donate it to a charity?”
I promise this won’t affect my charity budget. The money comes from my RSP budget which I will continue to invest in RSP’s until I retire.
“Norm, we are nowhere near the bottom. Where did you get this notion from?”
The TSX has gone from 15,000 to 9,000. That may not be the bottom but it’s close enough in that direction for me, given my long term perspective. As far as I’m concerned, it wouldn’t hurt my feelings if it dropped to 7,500 in time for next year’s contribution.
“At the very least please do not encourage others to follow your lead.”
George is not a moron. He is not likely swayed solely by my encouragement, or yours.
George,
My apologies if my comment crossed some line I’m unaware of. It was intended more to as a consolation to you than anything. Clearly you are still holding what you purchased at a much higher price so I assumed you see some value in holding those investments.
When it comes to solid stocks, I’d say buy, then buy more. A complete world wide economic collapse aside(a media fetish as much as the hype on the way up), you’ll double your money on many stocks in a year or two. Triple them on some.
George:
Thanks for the link to inflationdata.com . Its great! I’ve always wanted to compare what things used to cost to what they cost now, without inflation marring the picture.
No wonder my late oil crisis model car (1984 Caravelle) is so good on gas compared to far newer ones. Its got no guts at all, but it gets 27 mpg on the highway. My old ‘94 Mazda never would have gotten that.
According to some of the explanations on that site though, isn’t the B of C just replacing the money that went ‘poof!’ when the TSX tanked? It should only cause inflation if they pump out more money than everybody lost, or am I totally out to lunch?
Using the bubble analogy, let me see if I understand what the worlds governments are trying to do…
So they patched the ‘burst bubble’ with extra money they conjured into existence, so now they can slowly ‘deflate’ the bubble by removing money from the system. (I’m assuming by taxes or interest rates since that’s the usual government way of making money disappear) That way the correction happens more slowly and people don’t panic… only people are still panicking because they don’t trust any government a lick and they know that the government hasn’t any wiggle room since the economy is tanking. It’s pretty hard to tax the unemployed.
Is this the trouble in a nutshell? I know its likely way more complicated than that, but I just want to understand in general terms… like Joe the plumber… only not an idiot.
Norm,
no apologies needed. Most of my losses are of perceived value. My initial investment is in solid companies with god income statements( unless there is funny business) that unless there is a complete meltdown they will ride out the storm.
Norm and Mark,
There may indeed be some “good buys” out there, but they will be far better buys in 6-18 months without buying the dips all the way down, IMHO. There will be a time to convert to hard assets, but that time is not even close to being now as far as I can see it.
But what do I know, anyway? There is no mare reason to listen to me than anyone else.
Laura,
Different world governments appear to be going about this different ways, but the pressure is on for them to start operating together, which could have unforseen consequences. For example, Ireland was the first in Europe to guarantee deposits, and as investors fled banks in their home countries to the perceived safety of Irish banks, the rest of the EU quickly followed, even though they were derided at first. There’s talk of Canada headed this way as well, for the same reasons.
What happens when a country floods its own monetary system with currency or makes money far too cheap through low interest rates? At first rampant inflation in things like stocks or house prices, as demand for goods is driven up. Anyone can buy anything with his or her own credit leverage and a lack of fear of consequences. Then devaluation and deflation emerge as fundamentals catch up, followed by a liquidity crisis due to exposed (fraudulent) leverages— leverages which have an essentially infinite multiplication of pseudo value in exotic financial vehicles. What happens when you flood the global market with toxic debt that far exceeds the ability of any country, and even consortiums of companies or countries to address the issue?
You have a global meltdown, or you try to stave off the inevitable reckoning with 700 billion dollar band-aids that have within their conduct of use no provisions for transparency, because that transparency would expose the far deeper and more widespread fraud under the symptoms. (This is all, of course, to help with an orderly “unwinding” of fraudulent assets.) In the end what you will see, no matter the route, is worthless garbage.
I’m not even convinced that governments have thought about “reinflating” the bubble at this point, and I’m not even sure it’s possible, at least to the levels we once had.
George,
If there is a “complete meltdown” there will be little benefit to cash anyway.
As I have just been reminded of the foolishness of being optimistic, please note that the following comment is not intended to encourage anyone to “buy.” It’s simply put forward as a little evidence that I’m not the only one who thinks it may make sense. Just remember, I said it first.
“So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful…
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.”
Warren Buffet – October 17, 2008 – New York Times
http://tinyurl.com/56bkbx
Housing sector shaking out from financial crisis
http://www.businessedge.ca/article.cfm/newsID/18803.cfm
“For the first time in more than a decade, realtor Graham Reid is telling his clients the house they are about to put on the market may not sell.He said dropping prices doesn’t help because many buyers are waiting to see how low the market might go.
TD Bank economist Pascal Gauthier predicts housing starts, another indicator of real estate activity in Canada, will drop by about 15 per cent across the country by the end of the year.
“No province is likely to escape this unwinding in residential activity in the coming quarters,” Gauthier said.
Oh, how silly of me. How can anyone be worried about the economy when the “Oracle” is underwater!! Buy GE, GS and CEG now!! Buffet needs a bailout!!
Norm,
I agree that cash is a terrible long term asset. But it does have its moments of glory and right now is one of them. Timing is important
Let’s take 500,000 and use cash, Saskatoon real estate and TSX (stock) and bought in the spring when everything was going great guns for Saskatchewan’s economy.
Cash- if put into a GIC would have netted you just under inflation 3%. Very liquid and easy to move.
Real Estate – A loss of about 10%. $50,000. With more losses coming. Very, very illiquid.
TSX- A loss of 30- 40%. $150,000 – $200,000. More losses could come or a person could break even in a few years. liquid.
Real estate is the worst investment right now as we are still quite far from the bottom. TSX may or may not be. And cash is like the turtle in the race. Slow and steady is not bad over the next year.
Crikey,
It seems to me that it was you who implied that my position is “silly.” I said no such thing about yours.
Perhaps I’m reading too much into this:
“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
I’m about 20-40%+ ahead of most people I know right now. I’m not worried my position is “silly”.
I have no idea what you’re invested in or how long you are, so I have no idea whether or not your postion is silly either. My only issue was the yesterday’s tacit ecouragement for others to buy in this environment. I may have read too much into this too (it’s very likely, actually). I fully realize you’re not responsible for anyone’s behavior. I also fully realize that George is a bright guy and not easily influenced. You might have a far wider influence over others’ behaviour than you think you do, however.
Norm,
Glad you are buying stocks it is an opportunity that only comes once in a lifetime to those that see it. I am working 7 days a week now putting all of it into the stock market namely XRE.TO a reit index etf. They pay a decent dividend while u wait and are immune from the income trust tax coming 2011.
Crikey,
The ironic thing is you say for others to wait for real estate to bottom out and crash yet when the stock market loses 40% you say not to buy. You can see where I am coming from =o)
George,
OPEC will never let oil get that low if you could see the signs now is the perfect time to buy in an unfavoured sector either way if oil goes down you win at the pump and if it goes up you win with stock appreciation.
“The ironic thing is you say for others to wait for real estate to bottom out and crash yet when the stock market loses 40% you say not to buy. You can see where I am coming from =o)”
No, I can’t. First off, I’m not telling anyone not to buy. There will be a time for me to buy hard assets- it’s just not now.
Buffet, on the other hand, is telling people to buy. What he really is saying: “I need to publicly announce my buying spree to make sure you people follow in my wake to prop up me up.” He says he’s buying to get you buying. Once you start buying, he’ll be selling. Sure some stock looks “cheap” at this range, if you know they can hold revenue and profits. A small problem with being at the start of a gloal recession, however, is that we don’t know how far earnings will fall. Not having a crystal ball, who on Earth knows what will happen long term.
That’s all I’m saying.
Crikey,
Im sorry you are mistaken about Buffet. For one is it public information what he buys and trust me he has millions of groupies that yell it from the mountain tops long before he says anything. 2. He is a buy and hold investor or else why would he do the goldman sachs deal with 10% dividend. 3 If you want to accuse somebody of being a pumper and dumper at least choose som1 believable like Jim Cramer since he is a trader and would profit from practices like that. 4. Did you enjoy thanksgiving =o) I know i did now im sick of turkey(vile bird)
I had a fantastic Thanksgiving. I started cooking at 10am and had the last dishes put away at nearly 8pm, but it was great, if I do say so myself.
Thanks.
Crikey,
Perhaps I’m reading too much into this:
“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
Oh, I see where you’re coming from.
My posting of the Warren Buffet quote was primarily defensive. You implied that my decision to buy was nonsensical. John followed up by suggesting that I am foolishly pissing money away.
I’m not a big time investor and I am not sure about whether or not I could have done better by waiting. I am feeling confident that these buys will serve me well over the long term. As my objectives are long term, it would suit me fine if the market continued to decline for several years before it recovers. I will enjoy the opportunity to buy low as long as it lasts.
I admire you for the foresight that you had to get out when you did and I’m not questioning the decision that you’ve made to stay out at this time. That said, there is nothing nonsensical or foolish about my decision to buy some investments at a much lower price than I’ve paid for them in the past.
In the Crash of 29, many famous investors told the public it was a good time to buy, is that the same as Buffet trying to show confidence in the market now?
Maybe not a depression, but the world is at least headed for a severe slowdown for next few years. Credit will be harder to get. And it is here in Saskatchewan already. In todays Star Phoenix, major developments such as River Landing have to come up with more capital before they are given the credit they need to start.
1927-1933 Chart of Pompous Prognosticators
http://www.gold-eagle.com/editorials_01/seymour062001.html
http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
Armoth,
I don’t believe for one bit that OPEC contols the oil. The same people in the world who control the credit, control the oil as well. What happens with oil is guess. If price was factored just with supply and demand, not with speculation and price manipulation, the price would be a lot lower. But, then again, what do I know?
I never meant to imply that you or your investment strategies were nonsensical or foolish. Clearly my “instinct to protect” got the better of me here- we’re all adults, can make our own financial decisions and live with the consequences. You are an obviously bright man who is often surprisingly honest, realistic and upfront. It’s very apparent that many other people think so too, and that’s why we keep coming back here.
All I was really trying to say (jabs about Buffett needing a bailout aside), was that paying less than you have in the past for an asset should not be the only issue to consider. I think I have less to lose by buying in slightly late than buying too early. If you sold late (or not at all), of course you would feel differently. Your ideas about when to call bottom are just as legitimate as mine- impossible for anyone to time exactly.
At least on my end, consider the issue “dropped”.
An interesting quote from Peter Schiff’s latest book entitled “The Little Book of Bull Moves in Bear Markets”: (page 64)
“One thing that strikes me as particularly comical is the way media constantly asks the experts (typically realtors) if the time is right for buyers to step into the market and scoop up the supposed bargains. In the first, has anyone ever met a realtor who told them now is not the time to buy? In the second place, the question misses the point that practically all potential buyers have already bought. There are not too many of us who waited out the bubble, and those of us who did will certainly not be foolish enough to overpay now”.
I think that sums up my won situation, and probably many on this blog. I, and many of you, won’t be fooled into buying real estate at a slight reduction from peak as we have now.
My Dear Norm,
I must concur with the “a fool and his money are soon parted” lobby. There is nothing wise about purchasing an item that cost $1 today, and will be worth 50 cents tomorrow, even if it was priced at $2 yesterday.
You want to be be watching the stock market death spiral from a safe distance.
Cramer: Buffett Buying, but Should You?
http://www.thestreet.com/video/10443034/cramer-buffett-buying-but-should-you.html?puc=_htmlatb&s=1
“In the first, has anyone ever met a realtor who told them now is not the time to buy?”
Yeah, this is his blog
Crikey and Norm,
You guys are a case study of civilized disagreement – John Gormley would be disgusted… Zing!
One one hand, the markets have shed quite a bit of flab in a short period (I think they were quite overvalued to begin with, mind you). So, now might be a good time to buy.
On the other hand, seems like this slowdown/recession is just getting started. So, now might not be a good time to buy.
It’s a tough call; but I’m taking the latter position.
As an aside, today I went for lunch with a guy who thought it was a good time to buy a little stock last week – he said he’s down $5,000 on it. Now, it has only been a week or so. But still… he wasn’t too happy about it.
Armoth,
I figured if anyone knew the answer you would. Do you know where I can find a list of ETFs that I can buy using CAD? I am interested in stuff like Japan, Asian, Brazil, Korea, Germany, France, etc. However I can only find the USD ones. Your help would be appreciated. Thanks
My good chap Sam Johnson,
On your advice I shall redeem these worthless certificates forthwith and count my 5.1% early return, minus brokerage fees, a gift from my gracious creator. Kindly grant this poor fool the benefits of your wise counsel by sending word, without delay, when the bottom is upon us. Else I fear that a miserable life awaits me.
Let’s give this a break folks. As I said before, I’m talking about my annual RSP contribution here. Should the markets lose all of their value I can probably recover from my foolishness. Sure glad I didn’t mention what I bought.
Crikey,
Cheers!
“Not at all,” unfortunately. I requested a conversion to cash on, or about August 1. I allowed myself to be talked out of it. Now, that was foolish.
I did not choose to buy because I felt we had hit the bottom. I bought because I believed there are decent opportunities for fairly decent returns even in the absence of growth in stock prices.
Guy_in_regina,
A friend of mine once said, “When you ask most agents if it’s a good time to buy, or a good time to sell, they’ll ask you what you’re considering doing before they answer the question.”
George,
The bottom was particularly long in coming in the great depression crash but the value of the Dow did triple between 1932 (bottom) and 1936. These things are pretty much always followed by a bull run and it can happen in the midst of very difficult times. I wish each one the best in identifying that proper time to jump in.
For those thinking the stock markets are going to keep tanking, keep in mind that much of them have already priced in a credit freeze and a recession. Many have pulled out fearing outright depression. Well, the credit squeeze seems to be fading day by day now, as lending rates between banks have been falling daily all week. Markets are quite forward looking and often start rising rapidly before the economy is growing again. The tsx could regain 20 percent quite quickly, who knows when, next month? next spring? and sitting in cash, you’ll miss it. I think there is far more upside potential in the next year than downside risk. And Norm, you are right, you should buy now, and then buy again if it’s 10 percent lower next fall. You’ll be well vindicated three or four years from now when the stockmarket is 40 percent higher than it is now.
Norm,
May I add this to your list of fine qualities- you’re also pretty damned funny.
I did take a small loss- about 7%- by cashing out when I did. In retrospect I do feel like I waited too long, but I didn’t listen to my “gut” right away for fear I was catastrophizing. I tend to do that on occasion.
Regarding the market, my intention is not buy back the same number of units at a discount in the future, but to be able to buy substantially more units at some later date for roughly the same amount of cash. Right now the market is so volatile who knows what I will eventually end up doing. I completely agree that the market may pick up well before the economy does. I was thinking about this disagreement earlier this evening and though that in reality, buying more units along the ride down may not be that different in the eventual outcome. The only difference is that I have not lost on the way down, whereas I very well may lose some on the way up. We would both like to be sitting in a good position for the upswing. We may get there by different routes, but the outcomes may possibly not that different. Yikes, I think I’ve been “De-Beared” Just a little.
Well, enough of that. Thank you again for putting up with the likes of us.
Good night!
Vinny,
If you go to Ishares.ca there is a fund which is rrsp legible but it is entirely sp500 its in the international tab. For the other countries the only ones I found are all in USD but an easy way to look them up is go onto http://www.fool.com and use their search typing in ishares and it will pull up a ton of ishares emerging market etfs.
This is in regards to buffet’s New York Times piece. Don’t believe buffet! It seems strange that buffet would come out now and say it is a good time to but when in an interview just 3 weeks ago he was saying this was the worst financial crisis he has seen in his lifetime. He actually used the reference of the american economy to a great athlete and said ‘the athlete is on it’s back’ and went on to say that the government needed to revive the athlete.
In the interview he then goes on to talk about the leveraged situation everyone is in. Banks, consumers, governments, and many businesses are all leveraged up and now everyone except government is scared to death of that debt. This fact is nothing new to anyone on this blog. He states quite clearly that as people start to deleverage there is going to be massive side effects to the global economy. In his opinion, the only solution is for the US government to step in and start buying up debt to stop the deflationary spiral. Otherwise, buffet says we are looking at years of deflation. Keep in mind that the man is extremely conservative with his statements. If he says years, I read decades.
He went from that to a buy recommendation so quickly, it really makes me wonder his game. Given his doom and gloom prediction a couple weeks ago I really see his latest NYT post as an attempt to bump up the stock market and with it the economy and the credit markets. He has all his money, his legacy, essentially everything in the stock market, of course he doesn’t want to see a collapse. Do not trust Buffet.
Crikey,
In theory, your plan definitely produces the better result in terms of “more” if one can time the market correctly. At 45 years of age, more would be nice but my primary objective is “enough.”
Something,
Wouldn’t you agree that the landscape has changed significantly in the past three weeks? Prices are down considerably. Hasn’t the government taken pretty bold steps in buying up debt?
If you read that piece, Buffet actually claims that none of his personal portfolio was invested in equities three weeks ago. Everything was in government bonds and he says he is now in the process of turning to equities.
To the best of my knowledge the guy has publicly and accurately predicted turns towards both bull and bear markets. In 1974, he said, “Now is the time to invest in stocks and get rich.” In 1999, he said, “Investors these days are expecting far too much from the stock market.” I am not aware of any reputation attached to Buffet which suggests he publicly spins for profit.
Perhaps I’m missing something here, but Buffet strikes me as a good man (committed about 90% of his wealth to charity) and a sharp investor.
Norm,
I really didn’t mean that as an attack on Buffet’s character, I’m sure in his mind he means well. However I think his allegiance is to the US whose future is directly tied to the economy. Maybe he doesn’t want to see a crash, both for his own sake and for his country’s. Who know his true motivation. However the nature of the credit problems are such that they can temporarily be solved by people’s perception and moods. e.g. if you are a business owner and you are convinced there will be a recession, rather than wait for it to happen the logical decision may be to start cutting costs, reduce inventory and conserve cash in preparation. If you do that your suppliers and your employees are forced to cut back, etc… It’s a downward cycle. So maybe Buffet, in his infinite wisdom, thinks that is a bad idea, maybe he feels obligated to try to stop the process. This is pretty much what he said on his charlie rose interview except he was urging the government to solve the issue.
As far as his predictive abilities on the economy I would say they are nothing special. You are right that he made a wicked call in ‘74 but otherwise he has stayed fairly non-committal. Yes, he said things were over-heated in 99 but he made similar comments several years earlier as well. He completely missed the 2002 bottom and even said in his annual report that while stocks were cheap he had seen them much cheaper. As this credit crisis built-up, while many others were pointing out the problems in the subprime market and credit markets in general he again deferred an opinion. He has even now said that he thought the crisis was over after the Bear Stearns bail-out.
What Buffet IS good at, is identifying and investing at favorable prices in superior businesses. So you probably will do okay if you invest strictly in the stocks that he buys. The problem is, the deals he has been getting lately with goldman and GE are simply not available to anybody else. The stocks he buys for his personal portfolio are not published so that won’t do you any good either. If you don’t invest in his picks well there is no guarantee that you are going to get very good results.
Beyond Buffet, the problems in the general economy are far from solved. All that has happened is the western governments have shifted the financial responsibilities onto their shoulders. This is at best a temporary solution as it doesn’t solve the problem of too much debt. The US debt for example is 300% of their GDP if you include consumer, business, municipal, state and federal debt. This is simply unprecedented. Ultimately there are going to be severe consequences and sacrifices will need to be made. This would have terrible reprecussions for the US economy and ultimately the global economy as well.
It wouldn’t surprise me if the government intervention calmed the credit markets down and we saw a bounce but the fundamental issues remain. If you are a long-term investor I don’t think this is a buy yet.
An article from the Calgary Herald to share:
Kelowna condo project hit by financing crisis
Calgary companies stop building after losing bank funds
http://tinyurl.com/6dv84n
“Two Calgary real estate firms are at the centre of a half-completed $30-million Kelowna condo project that became a victim of the spreading credit crunch, after construction activity was halted Wednesday when bank financing dried up.”
I don’t know anything about these Calgary RE firms or how financing is usually arranged in these circumstances. Is it typically run on a fairly tight margin?
I understand deposit holders will get refunded, but a bit disturbing, nonetheless. Getting new financing for this developer may not be easy.
Crikey,
I understand that there were a few condo projects in Vancouver that went into receivership early this year.
http://www.yattermatters.com/real-estate/pre-sales-and-receivership-in-vancouver/
Someone was telling me a similar story about something in Calgary but I’m not sure if that’s accurate.
Received this by email recently. Will be interesting to see if this one goes ahead. Sure hope so.
http://www.normfisher.ca/images/teamblog/riverlanding.jpg