Thursday, July 1, 2010

CNBC housing groupies

Wow.  Apparently the US housing market has gotten so terrible at providing "feel good" stories to the market pumpers at CNBC, they had to whore themselves out to the lowly Canadian realtors/banksters.  For an absolutely hilarious, yet completely innacurate read, check out "Why the Canadian Housing Market Didn't Crash"

A more apt title might have been "Why the Canadian Housing Market Hasn't Crashed YET", or "How the hell are Canadian homebuyers THAT stupid?", or "How the Canadian taxpayers are funding subprime mortgages so that the big 6 can reap monstrous profits".  I could go on all day...but back to the article:
They saw a housing boom, they saw a recession, and yet the Canadian housing market is still cooking with gas.
Fundamental differences in Canadian banking, borrowing and home buying.  Going back to your opening line, we watched you dump gasoline on your housing market and then light yourselves on fire.  So while watching you do this, and wondering, "What the fuck were they thinking?", we have been slowly marinating gasoline pool of debt in large part due to CMHC and are just trying to find someone with a match to get this party started.  In short: the correct answer appears to be: "We're to stupid (or arrogant) to think the same thing can't happen here."
Lloyd Atkinson is an economist and also an empty nester, who just sold his large family home in Toronto and downsized to a condo overlooking the city. He sold his home in one day.

"In the U.S., the whole idea of owning a home, there is almost a national obsession," Atkinson says. He knows because he's an American citizen as well. But he also knows that the banking system in Canada does not allow for the type of irresponsible buying and borrowing that we saw in the U.S. at the height of the recent housing boom (2004-2006).
Really?  Your representation of "normal" is interviewing a BANK ECONOMIST who sold his home in the housing boomville of Toronto (second only to the idiocy of the Vancouver housing market).  Fair and balanced right?

I love how Lloyd is an "expert" on the US housing market as well because he's an American citizen...reminds me of how Sarah Palin is an "expert" in foreign relations because she's aware Alaska is near Russia (don't ask her to find either on a map though).
Finally, the biggest difference is that if a Canadian borrower goes into foreclosure, the bank can and will come after that borrower's assets until the balance is repaid.
There is no easy way to walk away.
These are full recourse loans.
OOOOOHHHHH... The "recourse" argument.  Damn, you guys did your homework...or did you?  How many US states had recourse loans as well?  How did that work out?  And how exactly does a recourse loan help the lender if the owner HAS NO OTHER ASSETS besides their grossly overvalued home?
"There is an element of conservatism that runs right through the Canadian housing industry, from the banking, financing element, to the homebuilders and even in the resale of homes," says Phil Soper, CEO of Brookfield Real Estate Services - Royal LePage. "The innovation has safety valves."
Way to interview a realtor to balance the views of the bank economist.  I wasn't aware 5% down (which you can borrow to boot) and 35 year amortizations was the definition of "conservative".
Bubble it may be, and the air is coming out a bit now, but every one of the realtors, economists, and homeowners I interviewed said no way, no way would the Canadian housing market crash as the U.S. market did. Benjamin Tal put it best: "This was not a made in Canada, this was a made in the U.S. recession, and in many ways Canada was a second hand smoker here."
Wait, what?  NOW YOU ADMIT IT'S A BUBBLE?!?  Don't you guys understand that you can't say "that word"?  And thanks for summarizing that this entire shitpile of "reporting" was based upon the thoughts of a bank economist, a CEO of a real estate company, and a homeowner (oh wait, the homeowner was the bank economist).  Shit.  (I love the double "no way" for emphasis by the way...brilliant)

As for the smoking analogy...we may have used to be a second hand smoker.  But it looked so cool watching you smoke, we had to give it a try.  And we'll be damned if we're now going to give up our 3+ pack a day habit, because we're fucking RESPONSIBLE, and there's no way that we're going to get lung cancer, despite what the massive government adds say on the packs.

Why? Because, "It's different here."

Krugman - STFU

Separated at birth?  Frankly I'd rather hear Clooney's take on the global economy than the shit spouted by his Keynesian fanboy doppelganger.  Krugman has never met a problem that couldn't be solved by throwing piles of government debt at.   Lately he's been yapping about the failure of the G20 to agree to engage in more ridiculous "stimulus" resulting in the onset of the next Depression (somewhere he missed the memo that we can't actually prevent the recession and should have embraced it rather than trying to delay the inevitable and wasting trillions in doing so).
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
Seriously, Krugman needs to shut his frickin piehole, because the more he yaps, the more the people at Nobel should seriously consider yanking the joke of an award the Nobel prize in economics has become.  The only thing Krugman is "correct" about is that this shitstorm has been brought on by a failure of policy.  But he completely misses the mark on what that policy should look like.  Mish has far more on Krugman's ineptitude at in How Policy Errors Cause Depressions (and how "in isolation" some things Krugman says make sense)

The problem of the G20 is that some countries (the EU) are beginning to "get it"; where "it" is that you can't endlessly borrow money to prop up a bunch of zombie banks that lent money to anyone with a pulse because eventually the funding from the bond market dries up when they start demanding yields approximating the likelihood of the weaker players actually being able to make good on their debt (Greece, Spain, and the rest of Club Med).   The bigger idiots (US and Japan) still haven't figured out that the same principle applies to them, (eventually). 

Clearly the solution to the problem of too much debt is even more of it.  If I can't maintain my personal spending level, it makes perfect sense that I should borrow more than I make to come up with the difference.  Even if I'm spending 10-20% more each year annualized while my income is growing at a paltry level of 1-2% which isn't sufficient to maintain my standard of living.  Obviously, tt is the banks responsibility to give me the money I need (want) to spend...and I promise to pay it back the future, assuming I get a big raise...if I feel like paying it back...and if not, well I'll just borrow more and add it to the IOU, right?  Clearly the banks don't really care if I pay back the principle. 

A child could understand the simplistic notion that piling on ever more debt is not sustainable.  Unfortunately for us, many economists and most politicians today do not.