recession
- Thread starter maximus
- Start date
Some of this is border-line hystera
Interesting thread, kind of. I enjoy the topic but can't read a whole thread on the subject.
Just was reading the latest data on S&P/Case-Shiller Home Price Indices from Jan 2000 - Nov 2008. Interesting enough over this 8 year time period only one city actually declined over this period. Many such as Miami, LA, and New York, are giving up some of the absolutely massive increases that have occurred over this period. Miami for example started at a based of a 100, as they all did, and was as high as 275 in 2006-2007, and have now dropped to about 175. So whether or not one lost money, depended on when you got into the market. Much the same applies here.
Anyway, the problem with predictions either positively or negatively is too much weight is focused on current conditions. When times are good people think they're going to remain good and focus their predictions accordingly.
True story: About 3-4 years ago I went into a bank to buy a mutual fund for my wife. The lady knowing that I'm in the same profession asked me what I use to forecast the gain in international equities. I said 6-7%
She says 6-7%???, we use 15% cause look what happened last year and the year before. I replied I couldn't care less what happened in those previous years a 15% annual return going forward was completely irresponsible to project over a 25-30 year time span.
Point is, much the same is happening here. Mass fear..creates extreme predictions. Case in point this peak oil arguement. For one, we don't know if we passed peak oil or not, point two we're in a recession and presumably we're going to use less, point three, alternative energy is being seriously looked at, so we don't know where oil prices are going.
Inflation. We're currently far more worried about deflation than we are inflation. House prices going down is DEFLATIONARY, not inflationary. Deflation causes far more fear to government officals than inflation. Deflation essentially stops purchases dead in their tracks cause they think what they buy today is going to be cheaper next week, so they wait, and guess what, they're right.
Why?
Because it becomes a self forefilling prophecy.
We have very little to worry about in terms of inflation, unless the world as a whole stops lending money to the US government, and there's little sign that that's about to happen. If it did, the US would either increase interest rates, print money, or let the $$ fall. Problem is it's in no one's best interest, including China's who lending most of this money, to purposely shrink their biggest market. In fact I'd go so far as to say the governments would likely welcome some signs of inflation right about now.
Credit. Credit is going to be used with much more caution going forward, that's a given. But in Canada we have a pretty sound basis for lending so things will likely rebound here in the next 18 months or so.
Stock Market. The market is unlikely to ever recover to where it was for a number of reasons. The main reason is the baby boomers are aging and this was their retirement savings. And while many thought they had a high tolerance for risk, nobody anticipated this type of correction. Going forward they're going to be a more cautious lot and they're going to also start drawing down their RRSP's/RRIF's in mass starting in about 10 years. Put eventually similar to a cap rate in housing, P/E multiples or dividend yields will became attractive enough to attract the smart money and the less smart money will do what it always does, follow along.
House prices. House prices for the most part are regional issues. For example much of Vancouver's house prices are related to the scarity of land, we have water to the west, mountains to the north and the border to the south. That leaves a very finite amount of land, and make no mistake, it was land prices that were shooting up far more than actual house prices. A correction, sure we're going to get one, we've had about a 15% correction to date probably about another 10% or so.
Who's affected, that's the bigger question. We if you're past 40 and bought property in your late 20's or early 30's your'e probably fine. Your prices have essentially doubled and you're likely giving up some of the gains you made on paper.
If you're in your 20's or renting and hoping to get in the market, this is a dream come true. You've probably spend years wondering whether or not you were going to get into the market and now you see your chance.
If you bought over the last 2-3 years, well unfortunately your the group who has to ride out the storm.
Going forward, I think after house prices correct they're going to remain flat for several years.
Interesting thread, kind of. I enjoy the topic but can't read a whole thread on the subject.
Just was reading the latest data on S&P/Case-Shiller Home Price Indices from Jan 2000 - Nov 2008. Interesting enough over this 8 year time period only one city actually declined over this period. Many such as Miami, LA, and New York, are giving up some of the absolutely massive increases that have occurred over this period. Miami for example started at a based of a 100, as they all did, and was as high as 275 in 2006-2007, and have now dropped to about 175. So whether or not one lost money, depended on when you got into the market. Much the same applies here.
Anyway, the problem with predictions either positively or negatively is too much weight is focused on current conditions. When times are good people think they're going to remain good and focus their predictions accordingly.
True story: About 3-4 years ago I went into a bank to buy a mutual fund for my wife. The lady knowing that I'm in the same profession asked me what I use to forecast the gain in international equities. I said 6-7%
She says 6-7%???, we use 15% cause look what happened last year and the year before. I replied I couldn't care less what happened in those previous years a 15% annual return going forward was completely irresponsible to project over a 25-30 year time span.
Point is, much the same is happening here. Mass fear..creates extreme predictions. Case in point this peak oil arguement. For one, we don't know if we passed peak oil or not, point two we're in a recession and presumably we're going to use less, point three, alternative energy is being seriously looked at, so we don't know where oil prices are going.
Inflation. We're currently far more worried about deflation than we are inflation. House prices going down is DEFLATIONARY, not inflationary. Deflation causes far more fear to government officals than inflation. Deflation essentially stops purchases dead in their tracks cause they think what they buy today is going to be cheaper next week, so they wait, and guess what, they're right.
Why?
Because it becomes a self forefilling prophecy.
We have very little to worry about in terms of inflation, unless the world as a whole stops lending money to the US government, and there's little sign that that's about to happen. If it did, the US would either increase interest rates, print money, or let the $$ fall. Problem is it's in no one's best interest, including China's who lending most of this money, to purposely shrink their biggest market. In fact I'd go so far as to say the governments would likely welcome some signs of inflation right about now.
Credit. Credit is going to be used with much more caution going forward, that's a given. But in Canada we have a pretty sound basis for lending so things will likely rebound here in the next 18 months or so.
Stock Market. The market is unlikely to ever recover to where it was for a number of reasons. The main reason is the baby boomers are aging and this was their retirement savings. And while many thought they had a high tolerance for risk, nobody anticipated this type of correction. Going forward they're going to be a more cautious lot and they're going to also start drawing down their RRSP's/RRIF's in mass starting in about 10 years. Put eventually similar to a cap rate in housing, P/E multiples or dividend yields will became attractive enough to attract the smart money and the less smart money will do what it always does, follow along.
House prices. House prices for the most part are regional issues. For example much of Vancouver's house prices are related to the scarity of land, we have water to the west, mountains to the north and the border to the south. That leaves a very finite amount of land, and make no mistake, it was land prices that were shooting up far more than actual house prices. A correction, sure we're going to get one, we've had about a 15% correction to date probably about another 10% or so.
Who's affected, that's the bigger question. We if you're past 40 and bought property in your late 20's or early 30's your'e probably fine. Your prices have essentially doubled and you're likely giving up some of the gains you made on paper.
If you're in your 20's or renting and hoping to get in the market, this is a dream come true. You've probably spend years wondering whether or not you were going to get into the market and now you see your chance.
If you bought over the last 2-3 years, well unfortunately your the group who has to ride out the storm.
Going forward, I think after house prices correct they're going to remain flat for several years.
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It seems like it has not bottomed out yet; people are still being layed-off.
With Vancouver 2010 Winter Olympics; we're getting into a $4 billion big hole of debt.
We're DOOOOMed
With Vancouver 2010 Winter Olympics; we're getting into a $4 billion big hole of debt.
We're DOOOOMed
