Archive for January, 2012

31
Jan
12

Is Democracy Dead in America?

After listening to President Barack Obama’s state of the union address (aka thrown speech), you start to wonder, what happened to Democracy? From saying that we must give all Americans a fair and equal chance to suceed, that the gap between the rich and poor must be addressed, taxes raised on the rich as well as restore the American dream of every American owning their own home, it makes you scratch your head. Wait a minute, isn’t this the same multi-millionaire President that extended George Bush’s tax breaks for the rich, has cause more people in American history during his term in office to rely on food stamps (1 in 7) as well as become poor (150 million) as well as bailed out the Big Banks rather than the general population. Why is he waiting until election time to make such promises than trying to prevent such problems from occuring during his Presidency?

On the flip side two other multi-millionaires from the other party seem to believe they could do a better job than their predecessor (George W. Bush) and this current president? With only two parties (very much like former Communist Russia), what choice do you have? Is there any difference between the two political parties in the US? With so many politicans in Congress and Senate who are wealthy, how can they relate to the common folk? With large corporations making record amounts of political contributions to put their guys in office, how can the common population be represented in the decision making process? With two decades now passed since a former Governor from Arkansas who rose from poverty to become the President of the United States (Bill Clinton) when the American Dream once existed, is democracy in America now dead?

24
Jan
12

Toronto’s Commercial Property Bubble

With 137 new real estate construction projects slated for Toronto, amidst the already abundance of supply, there seems to be a new property bubble brewing, even more imminent than the residential one and that is the commercial property bubble. With the number of new office towers in the city, demand for leasing space is disturbingly slowing with some of the older office buildings, such as First Canadian Place and TD Center (to name a few), where the vacancy rate has climbed to over 20%. There has never been such high vacancy rates in downtown Toronto for such buildings yet on the flip side the number of projects that have come up in this latest commercial real estate construction boom has outsripped the previous one in the late 80’s as well as late 70’s combined. Remember what happened afterwards?

With Scotiabank rumoured to list their flagship Plaza for a hefty price tag of $1 billion to raise capital, is this a sign of trouble ahead? Tenants are moving into the newer buildings thus leaving their old office spaces at record a pace. With alot of debt on the balance sheets of the companies holding these expensive real estate properties, they are desperately spending alot of money renovating and upgrading the old buildings to attract more customers. With increases in layoffs in Canada of late, how can they attract more customers? Although it has been some years in the US since their residential real estate has collapsed, Canada’s previous patterns of real estate cycles tend to be reverse from the US. In the past few recessions, the Commerical Property Market collapses first before the residential (remember the famed SkyDome and Olympia and York bankruptcies of the early 90’s?).

With recent numbers for the Toronto Real Estate Board on the commercial property sales, the numbers look very negative. Is history repeating itself? Are real estate developers ignoring the supply numbers and is it time demand falls off the cliff to counterbalance?

06
Jan
12

Toronto Real Estate Collapsing

Although it has not been receving much media attention of late (and that is why this website exists), the Toronto Real Estate Market really got hit hard in the latest period of December 2011. Traditionally December is a slower month than November in terms of real estate in general, but not this bad. According to the Toronto Real Estate Board’s figures, sales of 416 area code properties dropped from 3,027 to 1,948 from November to December which represents a whopping 36% drop. Sales of 905 area code properties dropped from 4,065 to 2,770 representing a decline of 32% month over month as well.

The average sales price of a property in the 416 area code fell from $524,805 in November to $474,270 in December. That is a drop of over $50,000. When combining both area codes (otherwise known as the GTA) from November to December, sales of detached homes dropped dropped 35%, condos dropped 31%, semi-detached dropped 37% and townhouses dropped 33%.  The biggest losers definitely in Toronto 416 where average prices for detached homes dropped $74,171, semi-detached homes dropped $44,912, townhouses dropped $45,886 and condo’s dropped $14,027.

With Canadians maxed out to their limits in terms of borrowing money (via debts) how will this progress towards the spring during a time when many people list their houses for sale? What happens when the very high demographic of baby boomers set to retire look to sell their homes to downsize or move to retirement communities? What if the unemployment situation in Canada worsens with the Global debt situation reaching records levels? What if interest rates rise due to market conditions? People who remember the early 80’s and early 90’s realize that Toronto’s real estate is in the midst of yet again a cyclical collapse.

03
Jan
12

Is the US Government Manipulating Statistics?

With the releasing of Economic Indicators by the US Government, there seems to be many revisions that make the current number look alot better than it actually is. Let’s take the following examples made over the past couple of months to see the impact:

The numbers for Construction Spending released on January 3, 2012 for the previous period was revised from +0.8% to -0.2% showing the latest at +1.2%. The number would have been -0.9% for the latest period had it not been for the revision.

The numbers for Existing home sales released on December 21, 2011 for the previous period was revised from 4.97M to 4.25M.

The numbers for Factory Orders released on December 5, 2011 for the previous period was revised from +0.3% to -0.1% showing the latest at -0.4%. The number would have been -0.8% for the latest period had it not been for the revision.

The numbers for New home sales released on November 28, 2011 for the previous period was revised from 313K to 303K.

The numbers for Durable Orders released on November 23, 2011 for the previous period was revised from -0.6% to -1.5% showing the latest at -0.7%. The number would have been -1.6% for the latest period had it not been for the revision.

The numbers for Wholesale Inventories released on November 9, 2011 for the previous period was revised from +0.4% to +0.1% showing the latest at -0.1%. The number would have been -0.4% for the latest period had it not been for the revision.

The numbers for FHFA Housing Price Index released on October 25, 2011 for the previous period was revised from +0.8% to +0.0% showing the latest at -0.1%. The number would have been -0.9% for the latest period had it not been for the revision.

The numbers for Industrial Production released on October 17, 2011 for the previous period was revised from +0.2% to +0.0% showing the latest at +0.2%. The number would have been 0% for the latest period had it not been for the revision.

With the actual results (excluding the previous revisions) well below analyst estimates for the latest periods, what better way to make the economy look better than it is actually doing by beating analysts estimates each time? And what better way to do so via the US Government lying and manipulating the statistics each time? When mathematics are a weakness of the many out there, how would they know?