“How much have homes appreciated in value where you live?” I asked.

“Well, I sold a home in early 2000 for about $180k” he started. “Now that same home, with maybe $300k worth of upgrades would go for $700k-$800k”

Uh oh, I thought strike one

I proceeded to tell him about Bend and how at our height, the median was around $400k.

“What is it now?” he asked.

“Well, I think last month the median was around $180k”

The businessman sat there, mouth agape, stunned.

“Glad that isn’t happening up north, I’d be in trouble.  I think homes in Canada are going to just level off in large YoY appreciataion because they were so cheap before”

strike two I thought.

“Well why couldn’t it happen with Canada also?” I asked directly.

He looked at me, and with conviction, said “Well, Canada is different…” and proceeded to tell me how.

Strike three I thought this thing is toast

And then today I read this article from mish

…

Imagine, 68% of your disposable income being spent on housing costs with the remaining disposable income likely being spent on their favorite Top Ramen and KD dinners. This is insane as well as unsustainable. It’s funny that many Canadians seems to think that the 49th parallel has magically created immunity from a housing bust that in their minds is exclusive to the United States. I can’t tell you how many times friends and acquaintances say that Canada’s banks are sound and there was no sub-prime lending and it just can’t happen here. I’m quick to remind them that the loss of one income from a two income family will in essence convert a low credit risk to a poor credit risk akin to that of a sub-prime borrower real fast. Now, multiply this my hundreds of thousands if not millions of borrows and we too have a major problem in Canada no different from that of the US. Wishful thinking really. The proof’s in the pudding and this puddings going to bring a dose of reality to those that are living in fantasy land, way beyond their means and who apparently have missed the global financial crisis that’s been gaining traction and intensity since August 2007.

We’re not only “Hosers” in Canada but we’re royally Hosed as well!!

Robert Clegg, JD, LL.M
Ombudsman, University of Calgary
Calgary, Alberta

Now if only I could figure out how to short the housing mess that we all know is coming to Canada, I’d be insanely rich.

-peace

Here is the truth of the matter.

“The hopes were that this IMF/German bailout would be the rescue for Greece and the euro currency. But if you look at credit spreads, that’s clearly not the case,” said Michael Pento, senior market strategist at Delta Global Advisors. “I think this reminds me too much of the summer of 2007 when we first saw the Bear Stearns hedge funds collapse. I think this is the first salvo of a metastasizing sovereign debt crisis that will spread,” also saying the contagion could go beyond Europe and into Asia and the U.S.

“It’s a very real crisis,” he said. “I’m afraid over the next few years here it’s going to come to America. And I guarantee you this — there is no IMF bailout coming to the U.S.”

Overseas, Hong Kong’s Hang Seng lost 1% while Japan’s Nikkei shed 3.3%. The FTSE in London fell 1.5% and the DAX in Frankfurt was lost 0.8%.

LINK

DOW FALLS ALMOST 1,000, THEN REBOUNDS

LINK

So as the world starts its rapid plunge into the reality that does exist, all I can say is “Good luck!”

Right now, there is a lot of talk concerning our landlord neighbor to the east. And it is hard to decypher what is the truth. How can we answer questions like;

• Is the rapid expansion of lending in 2009 leading to a catastrophic bubble in China?
• Are the growth numbers that came out for Q4 acurate or are they simply puff?
• How committed to understanding China should I be?

The only one of these that I can out right answer is the last one. Yes. You should be very committed to learning all you can about our owners friends. Which brings me to Michael Pettis. He is an author and professor at the Peking University Business School and with this position, he has the unique advantage of working/learning/living in the country of interest.

Blog
Bio
Books (Sorry Dunc)

The depth of his knowledge is vast. And when I first started my self motivated education five years ago, on real estate and world markets, Michael’s blog would have been a challenge to read. But I encourage everyone, to read his stuff. It is just that good.

Take his post on currencies.

Already some of my students whose parents own their own businesses have been telling me that Chinese speculative money held abroad is flowing back into the country.  One of my students from rich coastal city Wenzhou, the most free-wheeling and business-savvy city in China, and perhaps the world, just rolled his eyes when I asked him if his family and friends were tying to bring money into the country.  “Of course,” he said.  I didn’t get the impression that he thought mine was an especially astute question.

That is the type of “on the ground” perspective that Michael can offer. Which helps me out a lot. For a while I watched the dollar as it tanked into the 70′s. Wondering if we were going to break lower. Michael’s post on the dire straights of other world economies and their fiat currencies was enlightening. It made me realize that holding US dollars (right now) is not that absolute worst position in the world (though not the best). Maybe I should own more RMB.

Also, I personally would love to go to a school like this.

a) Economics and fianance are a real passion/hobby of mine

b) The Chinese market will be an area of continued growth

Learning from a school in China would be extremely insightful into how the Chinese people think. Also, learning the language would be a great tool towards anyone’s career.

And now I will bring up someone who is a buddy of mine. The dude is totally brilliant. His name is Tony Bivens and he is currently completing a degree in linguistics from a University in Thailand (Tony, I know you read this, so post in the comments about the University if you get time).

I think his degree will be highly effective in his future career. As the world drifts from the US being the sole super power, we will have a great need for accurate communication with many emerging countries. So I am envious of Tony a wee bit. I see him as having a ton of opportunity. I only wish he blogged a tad more so I could read up on his thoughts. Though I really enjoy our skype conversations.

Jared.Out()