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broken_legs
03-18-2011, 10:18 AM
Lengthy article discussing strengths, weaknesses, and historical performance of Canada vs others. Good read.

http://www.zerohedge.com/article/canada-bubble



the two particular engines that have driven our success—resources and real estate. Both are cyclical. Prices rise and fall as supply and demand shift. Only that’s no longer seen to be the case in Canada. Never mind that some experts now say the surge in commodities exceeds anything we’ve seen in two centuries, or that by many measures the housing market sits at multi-decade highs. Those who see good times ahead are convinced the phenomenal gains reflect a fundamental shift in the global economy. In short, it requires one to ascribe to the four most dangerous words in the world of investing: this time it’s different.

Cos
03-18-2011, 11:01 AM
Hate to be a synic but I stopped reading here:


Of course I never bought into the real estate hype and totally missed the boat on the spectacular run-up in housing prices. My friends were all laughing at me because I preferred renting and waiting for a major correction in housing, which has yet to materialize. But it will and when housing corrects, the Canadian economic miracle will be exposed for what it truly is, lots of hot air driven mostly by speculative flows, not by solid fundamentals.



I find that a lot of people who COULD have bought a house for $89,000 are first in line to admit we are going to see a huge housing correction.

broken_legs
03-18-2011, 11:06 AM
Originally posted by Cos
Hate to be a synic but I stopped reading here:



I find that a lot of people who COULD have bought a house for $89,000 are first in line to admit we are going to see a huge housing correction.

Yea, why read any of the analysis because there's an opinion that you don't agree with.

Home owners are totally unbiased.

Cos
03-18-2011, 11:15 AM
Originally posted by broken_legs


Yea, why read any of the analysis because there's an opinion that you don't agree with.

Home owners are totally unbiased.

WTF is your problem. I read 3/4 of the entire article. One guy said that due to financial stability Canada will be okay, the other guy said because of cyclical trends within housing and resources Canada is in for a world of hurt.

As soon as the decent article stopped and he started going all dooms day he ignored the positives in the economy.

The McLeans article is good. The blogger is biased as hell.

BigMass
03-18-2011, 11:27 AM
Canada lagged behind the US after the 2008 crash. The US stimulated and added massive support under their markets, Canada followed. This helped us avoid a crash similar to that of the US. So while the US bubble popped and is now on life support at the expense of creating a bond bubble, Canada never experienced the original downturn like the US. That’s why Calgary still has outrageous house prices that are confusing so many people. Our economy and inflated asset prices are hinging on a US recovery. Problem is the market supports like low interest rates, tax breaks, incentives and quantitative easing have to come to an end (or do they?). At that point SHTF because nothing has been fixed yet. There are still trillions of dollars of derivative losses off the books along with underwater mortgages, foreclosures and a huge US debt problem. So we either get a double dip worse than the first or massive inflation due to continued money printing to keep the supports under the entire house of cards. Canada is too far linked to the US economy to avoid being hit in one way or another. If the US crashes, we crash. If the US inflates, we inflate. Either way there is no avoiding some sort of shtf scenario in the future. I find it rather cute when people talk about Canada being some sort of bright shining beacon that will remain unscathed, not realizing how much everything behind the scenes is intertwined globally. We are all part of the same failed system that has already crashed but we’re too blinded to realize it.

broken_legs
03-18-2011, 11:29 AM
Originally posted by Cos


WTF is your problem. I read 3/4 of the entire article. One guy said that due to financial stability Canada will be okay, the other guy said because of cyclical trends within housing and resources Canada is in for a world of hurt.

As soon as the decent article stopped and he started going all dooms day he ignored the positives in the economy.

The McLeans article is good. The blogger is biased as hell.

First you said you read about 1/3 and made up your mind. Now you are saying you read an entire 3/4.

"It's Different This Time"

sputnik
03-18-2011, 11:32 AM
Wasn't the Canada housing bubble supposed to burst in 2008? 2009? 2010?

I guess is HAS to be 2011.

Right?

It's different this year.

sputnik
03-18-2011, 11:35 AM
2010 broken_legs thread.

http://forums.beyond.ca/st/301666/remax-were-still-in-a-giant-re-bubble/

Don't worry guys. This time he is right.

"It's different this time"

max_boost
03-18-2011, 11:35 AM
Originally posted by sputnik
Wasn't the Canada housing bubble supposed to burst in 2008? 2009? 2010?

I guess is HAS to be 2011.

Right?

It's different this year.

2012!!!

broken_legs
03-18-2011, 11:48 AM
Originally posted by sputnik
2010 broken_legs thread.

http://forums.beyond.ca/st/301666/remax-were-still-in-a-giant-re-bubble/

Don't worry guys. This time he is right.

"It's different this time"

broken_legs 2008 memory lane:

http://forums.beyond.ca/showthread.php?s=&threadid=230501&perpage=20&highlight=&pagenumber=2

You made an appearance there too. With the exact same comments too actually lol.

I'll fight you to the death, sputnik. :rofl: Never giving up. Unless new information becomes available that is (I reserve the right to change my opinion based on new information)

Seems like we had a 15% drop in home prices since then. "But thats a ""correction"". Because house prices didn't drop to ZERO, I am wrong.

Note that back then I was saying I don't see anything that would support the housing market.

Since then we've MASSIVE government intervention and support in the lending and housing markets both directly through CMHC and indirectly by bailing out the banks.

Who knows when it will "crash" or "correct" - but based on the information I can see, it will.

I can't predict what the government will do next to artificially support housing prices, but I can look at charts, and incomes and historical relationships to determine that home prices in Canada are overvalued.

What can research can you show us that proves house prices are valued in a sustainable manner?

Also love how you make this about ME being right. Don't argue with me - Thats pointless (as proved so many times online here lol) Argue against the research, argue against the facts.

Cos
03-18-2011, 11:50 AM
Originally posted by broken_legs


First you said you read about 1/3 and made up your mind. Now you are saying you read an entire 3/4.

"It's Different This Time"

Where did I say I read a third? I said I read the McLeans article and up to the point where the guy said all his friends laugh at him because he is still renting.

Say hello to my ignore list.

broken_legs
03-18-2011, 11:51 AM
Originally posted by Cos


Where did I say I read a third? I said I read the article and up to the point where the guy said all his friends laugh at him because he is still renting.

Say hello to my ignore list.

Hello.

sputnik
03-18-2011, 12:30 PM
Originally posted by broken_legs
Seems like we had a 15% drop in home prices since then. "But thats a ""correction"". Because house prices didn't drop to ZERO, I am wrong.

Note that back then I was saying I don't see anything that would support the housing market.

I am the first person to say that housing prices aren't guaranteed and these days are more likely to go down than go up. Just follow some of the threads that 89coupe has been a real estate evangelist in.

What you fail to recognize is that the moment you use the word "bubble" you inherently imply "imminent crash" whether you intend to or not.

If you claim that there is a bubble, then said bubble shouldn't be able to last years without popping. Are you willing to say that you were previously wrong or that your information was inaccurate. Or are you saying the bubbles can last years and decades?

Jlude
03-18-2011, 12:41 PM
Originally posted by Cos


Where did I say I read a third? I said I read the McLeans article and up to the point where the guy said all his friends laugh at him because he is still renting.

Say hello to my ignore list.


You didn't say you read a 1/3 directly, but you did say you stopped reading at this "quote" point and that point happened to be 1/3 of the article.

broken_legs
03-18-2011, 03:15 PM
Originally posted by sputnik


I am the first person to say that housing prices aren't guaranteed and these days are more likely to go down than go up. Just follow some of the threads that 89coupe has been a real estate evangelist in.

What you fail to recognize is that the moment you use the word "bubble" you inherently imply "imminent crash" whether you intend to or not.

If you claim that there is a bubble, then said bubble shouldn't be able to last years without popping. Are you willing to say that you were previously wrong or that your information was inaccurate. Or are you saying the bubbles can last years and decades?


I'm not failing to recognize anything man. You are ignoring what I my position is, and putting words on the page for me.

Again, you never come back with any kind of factual evidence to support that house prices are not in a bubble.

I said before and I'll say it again, Canadian housing is in a bubble by every single measure (Price, Affordability, Capita Per Household, Income per Household, Prices/GDP, HIstory, etc..)

Either 2 things have to happen:
1.) Canadians miraculously reduce their debt levels and get giant raises of 50 % or more.
2.) Housing prices come down.

How do I know the government wont step in again and extend this a little longer? I have no idea. I just know what the evidence shows, and that is that we are in a bubble.

max_boost
03-18-2011, 03:30 PM
Vancouver's real estate is crazy. First it was the HK'ers and now apparently all the rich mainlander's love the 604 as well lol Given how heavily populated HK/China is, that's why Vancouver is so appealing? Ocean, mountains? U C a Lot of Asians lol

Are property prices overvalued? What will trigger a huge correction? I thought the government already taken steps with more stringent mortgage requirements. Other than another global recession and collapse of commodity prices? What gives? :dunno:

Cos
03-18-2011, 03:36 PM
Originally posted by Jlude



You didn't say you read a 1/3 directly, but you did say you stopped reading at this "quote" point and that point happened to be 1/3 of the article.

Ah but I opened the MacLeans article as well. Lol

broken_legs
03-18-2011, 03:41 PM
Originally posted by Cos


Ah but I opened the MacLeans article as well. Lol


Too bad Cos never read the entire Mcleans article, it says all the same stuff as the blog, just doesn't draw any conclusions and leaves it to the reader.

89coupe
03-18-2011, 03:45 PM
Originally posted by max_boost
Vancouver's real estate is crazy. First it was the HK'ers and now apparently all the rich mainlander's love the 604 as well lol Given how heavily populated HK/China is, that's why Vancouver is so appealing? Ocean, mountains? U C a Lot of Asians lol

Are property prices overvalued? What will trigger a huge correction? I thought the government already taken steps with more stringent mortgage requirements. Other than another global recession and collapse of commodity prices? What gives? :dunno:

Just focus on Calgary and the 10% increase for new homes this year ;)

kenny
03-18-2011, 03:58 PM
Argue long enough and eventually everyone is correct (or wrong). :rofl:

bitteeinbit
03-18-2011, 04:49 PM
Originally posted by broken_legs



Either 2 things have to happen:
1.) Canadians miraculously reduce their debt levels and get giant raises of 50 % or more.
2.) Housing prices come down.

How do I know the government wont step in again and extend this a little longer? I have no idea. I just know what the evidence shows, and that is that we are in a bubble.
To be fair it's quite possible that prices simply stagnate for a while. The biggest increases in my region were between 2001-2008. they are still going up but not nearly as quickly as before. Still, house prices are out of whack but what "used to be normal" might never be "normal' again. This is perhaps the new norm.

Cos
03-18-2011, 05:34 PM
Originally posted by bitteeinbit

To be fair it's quite possible that prices simply stagnate for a while. The biggest increases in my region were between 2001-2008. they are still going up but not nearly as quickly as before. Still, house prices are out of whack but what "used to be normal" might never be "normal' again. This is perhaps the new norm.

Well for the last year (since I bought my place) prices have been stagnant or dropped about 3.5%. I wouldnt doubt you are right. Prices, if they dropped, could destroy parts of the economy. If they rose it would be a bubble that is unsustainable. I know for me I will not be selling our place quite as quick as I planned. That being said I dont think my place is going to lose another 50k. Therefore I think the stagnant price idea is probably plausible.

Hakkola
03-18-2011, 06:25 PM
http://www.albertacanada.com/documents/SP-EH_AlbertaEconomicQuickFacts.pdf

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


I think even if there's a Canadian housing bubble it doesn't mean there is one in Calgary, or Alberta for that matter. Unless the price of oil goes down I don't think Calgarians need to fear a crash. If you look at how we make our money there isn't a whole lot to worry about.

The second link isn't entirely pertinent but I think it's interesting to look at.

Xtrema
03-18-2011, 06:52 PM
Originally posted by kenny
Argue long enough and eventually everyone is correct (or wrong). :rofl:

Only truth in this thread.

People looks for bubble or the boom will find neither for the next few years.

Now is good to buy homes to live in. But sucks as investment. You have to wait too long to get $ back.

yellowsnow
03-19-2011, 12:39 AM
Let's face it, the Alberta economy is directly affected by oil and gas. we are a boom and bust economy.

With oil prices rising, and oil sands production increasing, it means more jobs (higher GDP in Alberta), more jobs means more people moving to Alberta, more people = higher demand for housing.

if anything, i see house prices increasing in the next few years. the media is just overreacting on the whole 35-30 yr amortization thing. A lot of people bought their first homes in the last couple months because of this. People are dumb, they believe everything the media tells them.

I predict house prices increasing substantially in the next little while. I'm going to be buying some good cash flowing properties, cuz I believe jobs are coming to Calgary, and more people will be moving here.

The truth is, in Calgary, housing isn't that unaffordable compared to the rest of the major cities in Canada. If house prices went back down to 2004 levels, I'd be laughing and buy a shit load of properties... as would many other people in Calgary. People's wages aren't going down, there are more jobs available now, and with oil being so unstable in the middle east, canada is looking very attractive to a lot of countries looking for a stable supply of oil and gas.

thoughts?

broken_legs
03-19-2011, 01:22 AM
Originally posted by yellowsnow


thoughts?

Some points you may want to consider:

- By Far most of Alberta GDP comes from conventional drilling for GAS. Gas is in the crapper and has been for the last 2 years.

- The CAD is appreciating like a mother against the USD. Bad news for oil sands

- If oil prices stay high, the other 80% of the population in calgary that doesn't work in oil and gas is going to start losing by paying more for fuel, heating, groceries etc. Not to mention the effects on the rest of Canada - Want to get an idea what happens when oil keeps rising? Look at 2008 for an example.

- Calgary has the best average income to home price ratio for all the major cities. But it's still historically out of whack in terms of affordability. See Nenshi affordable housing projects etc... Not everyone is a beyond millionaire.

- Albertans have the highest debt ratios in Canada (kind of negates the high salary effect especially if interest rates move)

Just some more data to plug into your equation...



PS - What kind of down payment are you making to get a property to cash flow in Calgary right now? whats your expected caprate?

bigbadboss101
03-19-2011, 07:37 AM
Originally posted by max_boost
Vancouver's real estate is crazy. First it was the HK'ers and now apparently all the rich mainlander's love the 604 as well lol Given how heavily populated HK/China is, that's why Vancouver is so appealing? Ocean, mountains? U C a Lot of Asians lol

Are property prices overvalued? What will trigger a huge correction? I thought the government already taken steps with more stringent mortgage requirements. Other than another global recession and collapse of commodity prices? What gives? :dunno:

My mom did mentioned that prices in Van is crazy. I would move to Vancouver if a) there were more jobs in my field and b) it's not so populated. Seems like a lot of people are rich and don't need to work and don't need to learn English. Cost of living (housing, taxes) is high.

yourmom
03-19-2011, 09:53 AM
Originally posted by 89coupe


Just focus on Calgary and the 10% increase for new homes this year ;)

But don't forget the YoY loss of 2.68% on SFH.

bitteeinbit
03-19-2011, 10:36 AM
Originally posted by yellowsnow thoughts?

1-What if you buy a whole bunch of houses for cashflow and then prices go back down to 2004 levels? Will you be laughing then?

2-I'm no real estate expert but I personally don't think Canada is headed for a housing crisis like in the US. If there is a correction it would be a minor one, I think price growth will simply be slower than it has this past decade. If you can pick up a few properties without having to take huge mortgages (meaning, pay them cash or put a very substantial cash down on them) then I think it's one of the wisest investments there is. Simple fact is that in the long-term, property and land only rise in value. If you can get cashflow from them (rent) you're laughing.

Keep in mind maintenance costs and the fact that being a landlord is not always easy. Also: 2012 is fast approaching so maybe there's no point in spending your money on houses just yet :D

broken_legs
03-19-2011, 12:32 PM
Originally posted by bitteeinbit



2-I'm no real estate expert...

...Simple fact is that in the long-term, property and land only rise in value.



At least you got 1/2 of that statement right. ;)

http://www.mybudget360.com/wp-content/uploads/2009/05/asset-price-deflation.png

bitteeinbit
03-20-2011, 10:15 AM
What's that graph take into calculation? The 80ies did see a burst, but even if you take inflation into account, I've never heard of properties loosing value where I'm from. Short-term: sure. If you bought right before a housing bubble you'd be kicking yourself. But wait 10 years and you should be ok. Even then, had you bought a house in the 80ies you'd be happy as it would have gained a whole lot of value anyways, especially if you take % of annual salary into account.

Xtrema
03-20-2011, 11:18 AM
Broken Legs, history doesn't forecast the future.

As someone who crashed and burned during the 91 down turn, while I do see a bit of history repeating, the world is a lot different place and economies are a lot more connected since 91.

But history do tell me that investment property is not going to be very profitable in the short term. Old houses won't worth as much, new houses will take 5% drop in value as soon as you move in.

It's sign of a balanced market.

As I have always said, if you need it and can afford it, not a bad time to be a first time owner. If you wish for the bottom, you just missed it by about 18 months.

yellowsnow
03-28-2011, 02:33 PM
Originally posted by broken_legs


At least you got 1/2 of that statement right. ;)

http://www.mybudget360.com/wp-content/uploads/2009/05/asset-price-deflation.png

since when is land a depreciating asset? where did that chart come from even?

broken_legs
03-28-2011, 03:32 PM
Originally posted by yellowsnow


since when is land a depreciating asset? where did that chart come from even?

Think about other economies that experienced huge credit induced real estate bubbles.

The chart in question is from the 3rd largest economy in the world, Population of 126 million, very similar demographics pyramid issues to Canada and the US, the central bank of this country followed the exact same path that both the US and Canadian banks are following now (low interest rates, buying toxic crap from banks).

Is real estate in North America is somehow different than real estate elsewhere?

Have there been other multi-decade periods of real estate deflation in Canada or elsewhere?

Tik-Tok
03-28-2011, 05:00 PM
Originally posted by yellowsnow


since when is land a depreciating asset? where did that chart come from even?

Japan.

JDMsomething
03-28-2011, 09:52 PM
We are in an inflationary global market, perhaps it might even get "hyper inflationary" with all the stuff happening in the U.S.

Sadly our fate is ties to their dollar.

I think that housing prices will stay pretty stagnant however the purchasing power of our dollar in canada will go down, thus making assets harder to attain.

liquid1010
03-29-2011, 07:20 PM
Originally posted by broken_legs


Think about other economies that experienced huge credit induced real estate bubbles.

The chart in question is from the 3rd largest economy in the world, Population of 126 million, very similar demographics pyramid issues to Canada and the US, the central bank of this country followed the exact same path that both the US and Canadian banks are following now (low interest rates, buying toxic crap from banks).

Is real estate in North America is somehow different than real estate elsewhere?

Have there been other multi-decade periods of real estate deflation in Canada or elsewhere?

I haven't commented in this topic until now - considering I'm actually somewhat undecided on the issue. Now is obviously not a good time to use real-estate for cashflow, but as a longterm equity investment I still like it.

The comment above however, comparing Japan to Canada is a little overreaching. Other than the comments mentioned - we are different in many other ways. For one, Canada is significantly driven by immigration with a rapidly growing population. Japan on the other hand was already flattening out in the 80's. Secondly, our demographic pyramid is nowhere near as severe as Japan. Thirdly, as per Japanese culture, the savings rate was high and most people invested heavily in gov't bonds - allowing them to easily continue an ever larger slide into deficit. Canada's deficit may be large, but barring another coalition minority government.... we should start to see that turn around.

Another point - if Real-Estate is in a bubble as you would suggest, what are better investment alternatives in your opinion? I want to hear this.......

Sugarphreak
03-29-2011, 07:55 PM
...

broken_legs
03-30-2011, 12:56 PM
Originally posted by liquid1010

I haven't commented in this topic until now - considering I'm actually somewhat undecided on the issue. Now is obviously not a good time to use real-estate for cashflow, but as a longterm equity investment I still like it.

Agreed. You cant find anything that will cash flow at a reasonable cap rate anywhere now.



The comment above however, comparing Japan to Canada is a little overreaching. Other than the comments mentioned - we are different in many other ways. For one, Canada is significantly driven by immigration with a rapidly growing population.


Absolutely 100% agree with you that Canadian economy needs immigration. If not we would have fallen short a while ago. However,



Japan on the other hand was already flattening out in the 80's. Secondly, our demographic pyramid is nowhere near as severe as Japan.


Yes they flattened right around when they started a 20 year deflation. Demographics have a massive affect on economies. There is a giant wave of baby boomers about to retire and live longer than any generation has before. Canada is about to see the same thing happen (unless it's different this time)

This:
http://www.hrsdc.gc.ca/eng/publications_resources/research/categories/labour_market_e/sp_615_10_06/images/img20.gif

And This:
Canada 2010:.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan 2007
http://www.statcan.gc.ca/pub/91-215-x/2010000/i003_en.gifhttp://www.jillstanek.com/Japan%27s%20population%20pyramid-thumb-500x346.gif

Makes me think we are exactly like Japan, perhaps even worse. OUr only hope is that people start f*cking like rabbits, or we start immigrating more 21 yr old taxi drivers with PHDs ASAP.



Thirdly, as per Japanese culture, the savings rate was high and most people invested heavily in gov't bonds - allowing them to easily continue an ever larger slide into deficit. Canada's deficit may be large, but barring another coalition minority government.... we should start to see that turn around.


If I understand correctly, you're saying that high savings & japanese bonds purchases allowed the Japanese to domestically fund their own deficit.

http://financialpostbusiness.files.wordpress.com/2010/08/version2.jpg

Canada had a savings rate of 16% and that is what has funded the consumer credit expansion for the last 30 years.

Also, the US has a low savings rate, they print money like its no ones business.

Meanwhile Japans savings rate has been halved since their slide started in the 80's.



Another point - if Real-Estate is in a bubble as you would suggest,

As I've asked for this many times here, please show me any kind of chart, statistics, facts, information, empirical analysis of anything that shows that Canadian households are appropriately priced given any historical metric.

IMO is a mountain of evidence that suggests we are in a bubble, while there are only opinions that rely on "its different this time", "real estate only goes up", arguments to support that things are fairly priced.



what are better investment alternatives in your opinion? I want to hear this.......

Good question. You and I both agree, real estate as an investment right now is a horrible use of capital.

Equities, commodities, and PMs are going straight up.

Mattloaf
03-30-2011, 07:47 PM
Originally posted by broken_legs

Good question. You and I both agree, real estate as an investment right now is a horrible use of capital.

Equities, commodities, and PMs are going straight up.

Agreed. I'm looking into holding some PMs while the sh!t hits the fan for the next little while. Does anyone have any suggestions on the best way (most cost effective way) of buying physical PM?

I'd love any advice on the subject!

liquid1010
03-30-2011, 09:07 PM
Originally posted by broken_legs

Good question. You and I both agree, real estate as an investment right now is a horrible use of capital.

Equities, commodities, and PMs are going straight up.

I actually don't agree with you - I think Real-Estate is still a good investment for long-term equity..... not cashflow.

I want to know how you see a scenario where the housing bubble bursts, but yet equities and commodities continue to climb? That's completely illogical.....

broken_legs
03-30-2011, 10:28 PM
Originally posted by liquid1010


I actually don't agree with you - I think Real-Estate is still a good investment for long-term equity..... not cashflow.



....heh?

Just help me along to understand your thinking here, cause I don't get how you make money on a property that is losing money each month.

Please explain more. Microsoft Excel has stopped me from doing lots of really stupid stuff with my money - Have you tried it?


Originally posted by liquid1010

I want to know how you see a scenario where the housing bubble bursts, but yet equities and commodities continue to climb? That's completely illogical.....


So you are forcing me into a hypothetical choice here - why?

When did I say that equities and commodities would continue to climb if the CANADIAN housing bubble burst?

Do you mean that only CANADIAN equities and CANADIAN commodities will rise/fall? :rolleyes:

Secondly, the housing bubble in the USA, UK, SPAIN, Portugal, France, Greece, Japan, Germany etc. has already busted and is currently double dipping yet commodities are still going up.

According to you:

Originally posted by liquid1010
That's completely illogical.....



What exactly do you want me to say here man? I don't know what to do with this hot potato you just dropped in my lap.

Thx
b

UndrgroundRider
03-31-2011, 03:43 AM
lol. I love how broken_legs acts like an expert on everything. Always just one google search away from his next PhD... :facepalm:



Originally posted by broken_legs
- By Far most of Alberta GDP comes from conventional drilling for GAS. Gas is in the crapper and has been for the last 2 years.

O&G only account for 25-30% of the real alberta GDP. "Most" implies > 50%.


Originally posted by broken_legs
The CAD is appreciating like a mother against the USD. Bad news for oil sands

Yes, this is true. But the USD is depreciating against a lot of currencies. They don't have the domestic production to fulfill the demand. And, in addition to that, the O&G market has adapted well to rates like this in the past. Another 10% and we have a real problem, but any less than that and everything will be fine.


Originally posted by broken_legs
- If oil prices stay high, the other 80% of the population in calgary that doesn't work in oil and gas is going to start losing by paying more for fuel, heating, groceries etc. Not to mention the effects on the rest of Canada - Want to get an idea what happens when oil keeps rising? Look at 2008 for an example.

Haha. Previously you argued that O&G will be doing poorly (due to the CAD appreciating against the USD) and that this is bad for everyone, now you argue that if O&G does well it is also bad for everyone. You can't seem to make up your mind.

Of course you're totally wrong on this point though. O&G drives the Alberta economy. If the cost of living increases as a direct result of O&G price increases, then so will wages, and so will immigration, and housing, and so on and so forth. No need to thank me for the econ 101 lesson, send cheques by mail.



Originally posted by broken_legs
- Calgary has the best average income to home price ratio for all the major cities. But it's still historically out of whack in terms of affordability. See Nenshi affordable housing projects etc... Not everyone is a beyond millionaire.

There's your problem. You're looking at one variable to predict the outcome of a function that has tens of thousands of variables. Historical analysis of a market is fundamentally flawed for this reason. While it can provide insight into certain specific situations, using it as a general rule is entirely misguided.


Originally posted by broken_legs
- Albertans have the highest debt ratios in Canada (kind of negates the high salary effect especially if interest rates move)

I could see it, but I'd like to see the data on this one. You have a bad habit of reading 3 words in a 15+ word sentence and drawing your own totally different conclusions. With that in mind, because Alberta is so O&G dependent, it's in its nature to be very boom & bust. This can lead to out of whack debt ratios, and historically speaking, debt ratios have always lagged behind changes in the GDP.

sputnik
03-31-2011, 06:54 AM
Originally posted by UndrgroundRider
O&G only account for 25-30% of the real alberta GDP. "Most" implies > 50%.

That figure fails to recognize the business that is not directly in the O&G sector, but benefits from the O&G business in Alberta.

Take away O&G from Alberta and you will quickly see a TON of other businesses fail.

liquid1010
03-31-2011, 02:27 PM
Originally posted by broken_legs
[B]
....heh?

Just help me along to understand your thinking here, cause I don't get how you make money on a property that is losing money each month.

Please explain more. Microsoft Excel has stopped me from doing lots of really stupid stuff with my money - Have you tried it?

After deleting my sarcastic response - I'll attempt to explain this in a mature way. By saying that RE isn't a cashflow investment, I'm saying that you should not expect it to generate significant immediate dividends for you - as given current prices and rental rates it simply won't do that. What I am saying is that RE is still a good equity investment in that it is (A) a better store of value, and (B) will show long-term capital appreciation. Make sense? Key word here is long-term..... and by that I mean 5+ years at least.

I'll respond to the rest later....

broken_legs
03-31-2011, 10:40 PM
Originally posted by UndrgroundRider
lol. I love how broken_legs acts like an expert on everything. Always just one google search away from his next PhD... :facepalm:


I just google search my own posts now ;)




O&G only account for 25-30% of the real alberta GDP. "Most" implies > 50%.


You really came all the way out here just to argue semantics?



Yes, this is true. But the USD is depreciating against a lot of currencies.

Our biggest trading partner is the USA. Whats your point?


They don't have the domestic production to fulfill the demand.

Canada replaced Mexico and Saudi Arabia as the biggest importer to the US a while back. WHats your point?




And, in addition to that, the O&G market has adapted well to rates like this in the past. Another 10% and we have a real problem, but any less than that and everything will be fine.


Rates? you mean the price of oil? You're saying that the Oil & Gas industry has adapted to "rates like this". Of course they have! They make more money at "rates like this". Further more, why would the "Another 10%" be a "real problem" for the oil and gas industry? Wouldn't they be making more money if prices went up???

Seriously for the third time, what is your point??? Youre not making any sense.



Haha. Previously you argued that O&G will be doing poorly (due to the CAD appreciating against the USD) and that this is bad for everyone, now you argue that if O&G does well it is also bad for everyone. You can't seem to make up your mind.

Of course you're totally wrong on this point though. O&G drives the Alberta economy. If the cost of living increases as a direct result of O&G price increases, then so will wages, and so will immigration, and housing, and so on and so forth. No need to thank me for the econ 101 lesson, send cheques by mail.


Wrong? No i'm not. I think you need to re-read your econ 101 book.

CAD strength is bad for exports. We are an export based economy. The only thing that has negating this is the coinciding rise in commodity prices.

None of those things you mentioned are as elastic as the commodity prices that drive this economy, that you've already admitted is a 'Boom and Bust'.

I bet you a tank of gas that oil can hit 150$/BBL and the economy will crash before Wages, immigration, housing "so on and so forth" increase to match. You can keep your rubber cheque.

I already cited 2008 as a perfect example of what happens when oil prices are too high, but you seemed to ignore that, so here is the 70s for you:

In Canada the industrial east suffered many of the same problems of the United States. Overall the oil embargo had a sharply negative effect on the Canadian economy. The economic malaise in the United States easily crossed the border and increases in unemployment, and stagflation hit Canada as hard as the United States despite Canadian fuel reserves.




There's your problem. You're looking at one variable to predict the outcome of a function that has tens of thousands of variables. Historical analysis of a market is fundamentally flawed for this reason. While it can provide insight into certain specific situations, using it as a general rule is entirely misguided.


So in your professional opinion "It's different this time".

.... Ok then Thanks for bringing all your facts and analysis.



I could see it, but I'd like to see the data on this one. You have a bad habit of reading 3 words in a 15+ word sentence and drawing your own totally different conclusions. With that in mind, because Alberta is so O&G dependent, it's in its nature to be very boom & bust. This can lead to out of whack debt ratios, and historically speaking, debt ratios have always lagged behind changes in the GDP.

So you know Albertans have the highest per capita debt burden in Canada. They also have the lowest debt/asset ratio (thats a good thing ;) ). The bad thing about that though, is the biggest asset Albertans have is real estate.

This thread really isn't about Alberta its called "is Canada in a bubble", but heres some more for ya:



CREA historical data shows a decline from 1980 through to 1985 of approximately 20% for Vancouver, Saskatoon and Winnipeg while the drop approached 40% in the oil dominated economies of Edmonton and Calgary, yet through those years oil prices were still historically high

JDMsomething
04-03-2011, 11:10 AM
Originally posted by liquid1010


After deleting my sarcastic response - I'll attempt to explain this in a mature way. By saying that RE isn't a cashflow investment, I'm saying that you should not expect it to generate significant immediate dividends for you - as given current prices and rental rates it simply won't do that. What I am saying is that RE is still a good equity investment in that it is (A) a better store of value, and (B) will show long-term capital appreciation. Make sense? Key word here is long-term..... and by that I mean 5+ years at least.

I'll respond to the rest later....

You should only be buying secondary real estate FOR cashflow, with potential equity appreciation.


It is not an investment if you are losing money every moneth and "hoping" it goes up in value....that is called gambling.