Expectations for Oil in the next 6 months. -
http://finance.yahoo.com/tech-ticker/article/30380/Oil-Bubble-Set-to-Pop-Crude-to-Fall-25-Percent-in-6-Months-Says-Invesco's-Garnick?tickers=OIL,USO,DUG,GLD,XLE
Housing : Active listings going through the roof. Buyers market ? or is it?
Patient buyers will be rewarded as the markets decline over the next 6 - 7 years.
http://realtylink.org/statistics/buyers_market_listed_main.cfm
Bonaventure
Thursday, June 26, 2008
Sunday, May 25, 2008
Commodities - What's really driving prices up?
New Investment vehicles, ETFs, Hedge Funds etc are driving prices beyond normal supply demand economics. The money being diverted in to commodities have increased more in aggregrate over the last five years than at any other time in U.S. History.
Some ETFs use Futures contracts others will take physical posession, both drive prices higher.
Manufactors have to compete with ETFs that are taking millions of tons of valuable metals and minerals off the world markets.
India's demand for fertilizer has grown by 10% a year, but prices have risen 150 to 300% in the last year alone.
"Chinese demand for Oil has increased by 920 Million barrels over the last 5 years, demand from Speculators has risen by 848 Million barrels over the same period. " according to Mr Michael Masters portfolio manager for Masters Capital Management LLC.
"Institutional investors have moved into commodities as a way to protect themselves against volatility in interest rates and the stock market."
Royal Dutch Shell, OPEC and others have been telling us that there is no shortage and don't intend to increase production.
Use of Futures contracts are driving Oil higher and higher, up 19% this month alone.
Happened to the Tech bubble. Tech Managers were being hailed as Investment Gurus.
By mid 2000 Nortel was in almost every Mutual Fund ( even Dividend Funds) chasing higher returns.
Nortel topped out at $ 120 and by August 2000 Fund Managers were taking profits, that left the small retail investor jumping in to buy Nortel at "bargin prices" of $ 90 to $ 100.
As we now know Nortel has lost 99% of its value over the last 8 Years.
This high stakes poker game being playing on the World Stage with billions and billions of $$$ has to be a concern. All we can do is watch from the side lines ( hurts our wallets in the mean time) and wait for the final chips to fall. Are we there yet? When Dividend Funds are adding Resource Stocks to their portfolios I know we are getting close.
Some ETFs use Futures contracts others will take physical posession, both drive prices higher.
Manufactors have to compete with ETFs that are taking millions of tons of valuable metals and minerals off the world markets.
India's demand for fertilizer has grown by 10% a year, but prices have risen 150 to 300% in the last year alone.
"Chinese demand for Oil has increased by 920 Million barrels over the last 5 years, demand from Speculators has risen by 848 Million barrels over the same period. " according to Mr Michael Masters portfolio manager for Masters Capital Management LLC.
"Institutional investors have moved into commodities as a way to protect themselves against volatility in interest rates and the stock market."
Royal Dutch Shell, OPEC and others have been telling us that there is no shortage and don't intend to increase production.
Use of Futures contracts are driving Oil higher and higher, up 19% this month alone.
Happened to the Tech bubble. Tech Managers were being hailed as Investment Gurus.
By mid 2000 Nortel was in almost every Mutual Fund ( even Dividend Funds) chasing higher returns.
Nortel topped out at $ 120 and by August 2000 Fund Managers were taking profits, that left the small retail investor jumping in to buy Nortel at "bargin prices" of $ 90 to $ 100.
As we now know Nortel has lost 99% of its value over the last 8 Years.
This high stakes poker game being playing on the World Stage with billions and billions of $$$ has to be a concern. All we can do is watch from the side lines ( hurts our wallets in the mean time) and wait for the final chips to fall. Are we there yet? When Dividend Funds are adding Resource Stocks to their portfolios I know we are getting close.
Tuesday, April 22, 2008
Interest Rates and Housing always head in the same direction
April 22, 2008
Another rate cut and deeper in red. Boom and here comes the bust.
Is the history of boom bust cycles going to repeat itself?
We are seeing this play out in the US, just a matter of time before it moves North.
The Bank of Canada warned of a deepening economic slowdown as it cut its key interest rate by 50 bps.
Since December 4, 2007 the Bank of Canada has been aggressive in cutting rates by 150bps.
Canada's slowing economy is driving interest rates and housing lower.
US, Ontario/Quebec then out west to BC/Alberta. That's the cycle.
Housing, usually a 25 - 30% drop, but after the party in Alberta their drop maybe as bad as it gets in the states.
Bonaventure D'sa
http://beallthatyoucanbebd.blogspot.com/ The Amazing Secrets to achieving your Goals !
http://seniorshelpguide.blogspot.com/
November 29, 2007
Quick question!
When Interest Rates are rising, are House prices rising or falling? Interest Rates UP, House Prices? --- Up or Down?
If you said, when Interest Rates are rising, House Prices are/will Fall, then think again….
In reality, When Interest Rates are rising - House Prices are climbing, and when Interest Rates are falling - House Prices are dropping.
Has more to do with the health of the economy than the mortgage rate.
When the economy is healthy, things are good, people are working,inflation is rising,House Prices are rising, Interest rates will rise to slow down the economy.
When the economy is loosing steam, jobs are lost, House Prices are falling, Interest Rates will decline.
I won't get into the full discussion of the why, only the facts.
For the last few years the US housing market was on a tear, yet they experienced 17 rate hikes up to June 29, 2006.
Since then the bubble has bust and guess what, we are seeing Interest Rate cuts, and no one is expecting House Prices in the US to run up anytime soon.
In Canada, we have seen 9 rate hikes in a row, rates rose from a low of 3.75%, January 15, 2002 to the current rate of 6.25% July 10, 2007, the Housing market has experienced a similar move.
Interest rates in Canada have risen 66% over the last 5 years and Real Estate has doubled.
The last Real Estate bust saw Interest rates drop from 13.50% in 1989 to 7.25% in 2000.
Real Estate bottomed in 1999 out East and 2000 in BC.
Going further back, to the Real Estate bubble of the late 70s early 80s.
Interest rates rose from a "lowly" 9.25% in 1978 to a high of 18.25% in 1982.
Rates doubled and so did the Housing Market. Subsequently the housing bubble bust and so did Interest Rates.
History is a great educator, and every time we say its different this time, History repeats itself.
Next stop, almost everyone agrees are more rate cuts.
If we get a rate cut on December 4th - this will send a strong signal as to the direction of the Canadian Housing market.
The housing market going up or down starts in the US, next is Ontario/Quebec, then West to BC/Alberta. Happens everytime, and this time is no different.
Have a great day.
Another rate cut and deeper in red. Boom and here comes the bust.
Is the history of boom bust cycles going to repeat itself?
We are seeing this play out in the US, just a matter of time before it moves North.
The Bank of Canada warned of a deepening economic slowdown as it cut its key interest rate by 50 bps.
Since December 4, 2007 the Bank of Canada has been aggressive in cutting rates by 150bps.
Canada's slowing economy is driving interest rates and housing lower.
US, Ontario/Quebec then out west to BC/Alberta. That's the cycle.
Housing, usually a 25 - 30% drop, but after the party in Alberta their drop maybe as bad as it gets in the states.
Bonaventure D'sa
http://beallthatyoucanbebd.blogspot.com/ The Amazing Secrets to achieving your Goals !
http://seniorshelpguide.blogspot.com/
November 29, 2007
Quick question!
When Interest Rates are rising, are House prices rising or falling? Interest Rates UP, House Prices? --- Up or Down?
If you said, when Interest Rates are rising, House Prices are/will Fall, then think again….
In reality, When Interest Rates are rising - House Prices are climbing, and when Interest Rates are falling - House Prices are dropping.
Has more to do with the health of the economy than the mortgage rate.
When the economy is healthy, things are good, people are working,inflation is rising,House Prices are rising, Interest rates will rise to slow down the economy.
When the economy is loosing steam, jobs are lost, House Prices are falling, Interest Rates will decline.
I won't get into the full discussion of the why, only the facts.
For the last few years the US housing market was on a tear, yet they experienced 17 rate hikes up to June 29, 2006.
Since then the bubble has bust and guess what, we are seeing Interest Rate cuts, and no one is expecting House Prices in the US to run up anytime soon.
In Canada, we have seen 9 rate hikes in a row, rates rose from a low of 3.75%, January 15, 2002 to the current rate of 6.25% July 10, 2007, the Housing market has experienced a similar move.
Interest rates in Canada have risen 66% over the last 5 years and Real Estate has doubled.
The last Real Estate bust saw Interest rates drop from 13.50% in 1989 to 7.25% in 2000.
Real Estate bottomed in 1999 out East and 2000 in BC.
Going further back, to the Real Estate bubble of the late 70s early 80s.
Interest rates rose from a "lowly" 9.25% in 1978 to a high of 18.25% in 1982.
Rates doubled and so did the Housing Market. Subsequently the housing bubble bust and so did Interest Rates.
History is a great educator, and every time we say its different this time, History repeats itself.
Next stop, almost everyone agrees are more rate cuts.
If we get a rate cut on December 4th - this will send a strong signal as to the direction of the Canadian Housing market.
The housing market going up or down starts in the US, next is Ontario/Quebec, then West to BC/Alberta. Happens everytime, and this time is no different.
Have a great day.
Sunday, April 20, 2008
Can/will Canada avoid the Boom Bust cycles of Past?
Is Canada heading for a similar fate as the US?
Baby Boomers have turned Canada in to a nation of spenders.
Its amazing how much of this latest boom has been fuelled by debt? Similar to the US.
As always there is good debt ( mortgage) and undesirable debt ( credit card debt from over spending).
An increasing number of Canadians are in negative monthly cash flow, too much Spending not enough Income? Their increase in spending has out paced their increase in disposal incomes.
How are Canadians paying for this lifestyle?
Debt, Credit Cards, Lines of Credit, Home owners lines of Credit has become the norm.
Borrowing more, paying interest only on loans, minimum payments on Credit Cards has pushed Canadian debt levels to an all time high, and yet no one seems to be raising the Red flags.
We are led to believe the frenzy ( no longer a boom) in commodities will be enough to prevent Canada from a similar fate as the US.
The party is almost over. Its been a nice 7 year run.
Canada will be heading for the same fate as the US once the housing boom turns to bust.
US, Ontario/Quebec then BC/Alberta, that's the housing story.
Manufacturing then the resource sector, that's the employment (unemployment) story, going up or down.
History repeating itself. Shades of the early 80's and 90's.
http://seniorshelpguide.blogspot.com/
Baby Boomers have turned Canada in to a nation of spenders.
Its amazing how much of this latest boom has been fuelled by debt? Similar to the US.
As always there is good debt ( mortgage) and undesirable debt ( credit card debt from over spending).
An increasing number of Canadians are in negative monthly cash flow, too much Spending not enough Income? Their increase in spending has out paced their increase in disposal incomes.
How are Canadians paying for this lifestyle?
Debt, Credit Cards, Lines of Credit, Home owners lines of Credit has become the norm.
Borrowing more, paying interest only on loans, minimum payments on Credit Cards has pushed Canadian debt levels to an all time high, and yet no one seems to be raising the Red flags.
We are led to believe the frenzy ( no longer a boom) in commodities will be enough to prevent Canada from a similar fate as the US.
The party is almost over. Its been a nice 7 year run.
Canada will be heading for the same fate as the US once the housing boom turns to bust.
US, Ontario/Quebec then BC/Alberta, that's the housing story.
Manufacturing then the resource sector, that's the employment (unemployment) story, going up or down.
History repeating itself. Shades of the early 80's and 90's.
http://seniorshelpguide.blogspot.com/
Thursday, April 17, 2008
US housing woes spread around the Globe
April 14, 2008
UNITED STATES – Sal Guatieri
Other news… "Housing Woes in U.S. Spread Around Globe: The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India. This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well. In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one, will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse." New York Times, page A1
Another Housing Meltdown Looming?
http://nbnet/economics/amcharts/apr1608.pdf
Canadian Housing Market—No Longer Immune?
http://nbnet/economics/amcharts/apr1808.pdf
We are expecting another rate cut on Tuesday April 22, could be as much as .50%
Interest Rates and Housing have always headed in the same direction.
What does this mean?
The economy is slowing down, job losses, interest rates are heading lower.
Falling homes sales - Calgary down almost 40%, decline in construction of new homes, layoffs in the construction industry, migration of these workers to Ontario, but most to sunny warm BC.
Result is lower labour costs.
Can't find anyone to do that house renovation? Watch what happens in 6 - 12 months.
Happens every time. This time is no different. History repeating itself.
Are we there yet? Some are finally becoming believers.
Next Are we there yet - the commodities story. Is it a real shortage or a created shortage?
UNITED STATES – Sal Guatieri
Other news… "Housing Woes in U.S. Spread Around Globe: The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India. This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well. In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one, will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse." New York Times, page A1
Another Housing Meltdown Looming?
http://nbnet/economics/amcharts/apr1608.pdf
Canadian Housing Market—No Longer Immune?
http://nbnet/economics/amcharts/apr1808.pdf
We are expecting another rate cut on Tuesday April 22, could be as much as .50%
Interest Rates and Housing have always headed in the same direction.
What does this mean?
The economy is slowing down, job losses, interest rates are heading lower.
Falling homes sales - Calgary down almost 40%, decline in construction of new homes, layoffs in the construction industry, migration of these workers to Ontario, but most to sunny warm BC.
Result is lower labour costs.
Can't find anyone to do that house renovation? Watch what happens in 6 - 12 months.
Happens every time. This time is no different. History repeating itself.
Are we there yet? Some are finally becoming believers.
Next Are we there yet - the commodities story. Is it a real shortage or a created shortage?
Tuesday, April 8, 2008
Housing Affordability - January 26, 2008
All the Stars are lining up
1978 - affordability 37% - house value $ 50,000
1982 - house value $ 120,000 ( top of cycle)
1985 - house value $ 90,000 (bottom of cycle)
1994 - affordability over 60% - house value $ 320,000 ( top of cycle )
2000 - house value $ 250,000 ( bottom of cycle)
2004 - affordability 30 % - house value $ 300,000
2007 - affordability 70% - house value $ 550,000
See notes written in 2004 on :
2) Interest Rate Cycle. - Rates are heading lower.
3) Real Estate Cycle. -its been a nice 7 year run. Prices have doubled.
The next move is usually a 25 - 30 % decline - over the next 6 - 7 years.
Are we there yet??? Yes we are.
---------------------------
Posted February 4, 2004,
The rough guide I use is double the price. If a house was $ 250,000 in 2001 then it would be at least $500,000 at the top.
Sounds crazy but it happened in every Real Estate boom.
I base my forecast on 3 things, which are intertwined.
1) Real Estate Cycle
2) % of Income required to carry a Mortgage
3) Interest rate Cycle
1) Real Estate Cycle
BC is usually around 1 - 2 years behind Toronto in the Real Estate market.
In Toronto the Real Estate cycle started in late 1999, we bottomed out in 2001.
The same would hold for the top of the cycle. Watch Toronto's Real Estate to find out when we may be at the top.
Our current cycle has nothing to do with the 2010 Winter Games. Our cycle started before we got the games.
2) Cost of carrying a Mortgage.
House prices may be higher but at these low interest rates it is cheaper to own a $300,000 house today than a $50,000 house in 1978.
The % of income needed to support the mortgage payments is lower today around 30% compared to 37% in 1978.
At the top of the last boom in 1994 it was almost 60%.
So we have a long way to go.
3) Interest Rate Cycle.
BC again is behind Ontario in terms of a business cycle. The economy in Ontario will be 1 - 2 Years ahead of BC. Going up or coming down.
As the Canadian economy picks up ( meaning Ontario ) and inflation becomes a problem The Bank of Canada will start to raise interest rates.
Increasing interest rates means jobs are easier to come by, people are getting raises, more disposal income and people are spending more.
Initially higher rates will not hurt the housing market since people have better jobs, better job security etc.and are willing to pay a higher rate to get into their own house.
As inflation and the economy heat up The Bank of Canada will keep on raising rates.
There will come a time that those rates hikes start to slow down the economy ( Ontario).
When the % of ones income required to carry a mortgage hurts,and the difference between the mortgage payments and the cost of renting are too wide, is when we will be at the top.
I just had a customer who bought last week and his mortgage payments and condo fees are lower than his rent.
We have yet to see those interest rate hikes. In fact we should see at least another rate cut over the next 2 months.
When interest rates are at the top, that is when BCs Real Estate market seems to be at the top. Happened the last 2 booms 1982 and 1994.
1978 - affordability 37% - house value $ 50,000
1982 - house value $ 120,000 ( top of cycle)
1985 - house value $ 90,000 (bottom of cycle)
1994 - affordability over 60% - house value $ 320,000 ( top of cycle )
2000 - house value $ 250,000 ( bottom of cycle)
2004 - affordability 30 % - house value $ 300,000
2007 - affordability 70% - house value $ 550,000
See notes written in 2004 on :
2) Interest Rate Cycle. - Rates are heading lower.
3) Real Estate Cycle. -its been a nice 7 year run. Prices have doubled.
The next move is usually a 25 - 30 % decline - over the next 6 - 7 years.
Are we there yet??? Yes we are.
---------------------------
Posted February 4, 2004,
The rough guide I use is double the price. If a house was $ 250,000 in 2001 then it would be at least $500,000 at the top.
Sounds crazy but it happened in every Real Estate boom.
I base my forecast on 3 things, which are intertwined.
1) Real Estate Cycle
2) % of Income required to carry a Mortgage
3) Interest rate Cycle
1) Real Estate Cycle
BC is usually around 1 - 2 years behind Toronto in the Real Estate market.
In Toronto the Real Estate cycle started in late 1999, we bottomed out in 2001.
The same would hold for the top of the cycle. Watch Toronto's Real Estate to find out when we may be at the top.
Our current cycle has nothing to do with the 2010 Winter Games. Our cycle started before we got the games.
2) Cost of carrying a Mortgage.
House prices may be higher but at these low interest rates it is cheaper to own a $300,000 house today than a $50,000 house in 1978.
The % of income needed to support the mortgage payments is lower today around 30% compared to 37% in 1978.
At the top of the last boom in 1994 it was almost 60%.
So we have a long way to go.
3) Interest Rate Cycle.
BC again is behind Ontario in terms of a business cycle. The economy in Ontario will be 1 - 2 Years ahead of BC. Going up or coming down.
As the Canadian economy picks up ( meaning Ontario ) and inflation becomes a problem The Bank of Canada will start to raise interest rates.
Increasing interest rates means jobs are easier to come by, people are getting raises, more disposal income and people are spending more.
Initially higher rates will not hurt the housing market since people have better jobs, better job security etc.and are willing to pay a higher rate to get into their own house.
As inflation and the economy heat up The Bank of Canada will keep on raising rates.
There will come a time that those rates hikes start to slow down the economy ( Ontario).
When the % of ones income required to carry a mortgage hurts,and the difference between the mortgage payments and the cost of renting are too wide, is when we will be at the top.
I just had a customer who bought last week and his mortgage payments and condo fees are lower than his rent.
We have yet to see those interest rate hikes. In fact we should see at least another rate cut over the next 2 months.
When interest rates are at the top, that is when BCs Real Estate market seems to be at the top. Happened the last 2 booms 1982 and 1994.
Canada Prime Rate changes - Since Jan 15, 2002
By Bonaventure D'sa
Current Prime Rate 4.75 %
January 15, 2002 to Present
Date Rate % Change Action
April 22, 2008 4.75 0.50 Cut
March 4, 2008 5.25 0.50 Cut
January 22, 2008 5.75 0.25 Cut
December 4, 2007 6.00 0.25 Cut
September 5, 2007 6.25 No Change
July 10, 2007 6.25 No Change
December 5, 2006 6.25 No Change
October 18, 2006 6.25 No Change
September 6, 2007 6.25 No Change
July 10, 2007 6.25 0.25 Hike
March 24, 2005 6.00 0.25 Hike
April 25, 2005 5.75 0.25 Hike
March 7, 2005 5.50 0.25 Hike
January 24, 2005 5.25 0.25 Hike
December 6, 2004 5.00 0.25 Hike
October 18, 2005 4.75 0.25 Hike
Sept 7, 2005 4.50 0.25 Hike
October 8, 2004 4.25 0.25 Hike
Sept 8, 2004 4.00 0.25 Hike
April 13, 2004 3.75 0.25 Cut
March 2, 2004 4.00 0.25 Cut
January 20, 2004 4.25 0.25 Cut
Sept 3, 2003 4.50 0.25 Cut
August 12, 2003 4.75 0.25 Cut
April 15, 2003 5.00 0.25 Hike
March 4, 2003 4.75 0.25 Hike
July 16, 2002 4.50 0.25 Hike
June 4, 2002 4.25 0.25 Hike
April 16, 2002 4.00 0.25 Hike
January 15, 2002 3.75 0.25 Hike
Current Prime Rate 4.75 %
January 15, 2002 to Present
Date Rate % Change Action
April 22, 2008 4.75 0.50 Cut
March 4, 2008 5.25 0.50 Cut
January 22, 2008 5.75 0.25 Cut
December 4, 2007 6.00 0.25 Cut
September 5, 2007 6.25 No Change
July 10, 2007 6.25 No Change
December 5, 2006 6.25 No Change
October 18, 2006 6.25 No Change
September 6, 2007 6.25 No Change
July 10, 2007 6.25 0.25 Hike
March 24, 2005 6.00 0.25 Hike
April 25, 2005 5.75 0.25 Hike
March 7, 2005 5.50 0.25 Hike
January 24, 2005 5.25 0.25 Hike
December 6, 2004 5.00 0.25 Hike
October 18, 2005 4.75 0.25 Hike
Sept 7, 2005 4.50 0.25 Hike
October 8, 2004 4.25 0.25 Hike
Sept 8, 2004 4.00 0.25 Hike
April 13, 2004 3.75 0.25 Cut
March 2, 2004 4.00 0.25 Cut
January 20, 2004 4.25 0.25 Cut
Sept 3, 2003 4.50 0.25 Cut
August 12, 2003 4.75 0.25 Cut
April 15, 2003 5.00 0.25 Hike
March 4, 2003 4.75 0.25 Hike
July 16, 2002 4.50 0.25 Hike
June 4, 2002 4.25 0.25 Hike
April 16, 2002 4.00 0.25 Hike
January 15, 2002 3.75 0.25 Hike
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