Hosed in Canada; Housing Crash is a Given
by ilene - May 31st, 2010 12:26 am
Hosed in Canada; Housing Crash is a Given
Courtesy of Mish
Inquiring mind may be interested in an email from Robert Clegg at the University of Calgary regarding housing prices in Canada vs. disposable income.
Robert writes …
Mish, I love your blog and read it daily. I came across this article with respect to Canada’s housing bubble. The articles states, " Canadians are spending more and more of their disposable income on housing. In Toronto, 44% of disposable income goes to housing and in Vancouver the figure is a whopping 68%. The trend is likely not sustainable."
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
Is Canada’s housing bubble about to burst?
Here is the article to which Robert Clegg referred: Is Canada’s housing bubble about to burst?
Canadians are spending more and more of their disposable income on housing. In Toronto, 44% of disposable income goes to housing and in Vancouver the figure is a whopping 68%. The trend is likely not sustainable.
The federal government imposed tighter mortgage
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DiggIsrael Deploys Three Nuclear Cruise Missile-Armed Subs Along Iranian Coastline
by Zero Hedge - May 31st, 2010 12:05 am
Courtesy of Tyler Durden
Even as futures are feeling buoyant as a result of the JPY drop following the collapse of the Japanese ruling coalition (which in itself will likely spell serious JGB troubles in the days ahead), Middle-east geopolitical issues have once resurfaced… or technically submerged as the case may be. The Sunday Times reports that “three German-built Israeli submarines equipped with nuclear cruise missiles are to be deployed in the Gulf near the Iranian coastline.” Presumably, this a defensive move: “The first has been sent in response to Israeli fears that ballistic missiles developed by Iran, Syria and Hezbollah, a political and military organisation in Lebanon, could hit sites in Israel, including air bases and missile launchers. The submarines of Flotilla 7 — Dolphin, Tekuma and Leviathan — have visited the Gulf before. But the decision has now been taken to ensure a permanent presence of at least one of the vessels.” We are not sure Iran will take the news with the required dose of stoic acceptance. But at least we now have confirmation that Israeli subs are not being used by the Obama administration as a means of delivering nuclear armaments to the continental shelf (unless this too, is another Criss Angelesque Emmanuel Rahm masterpiece).
More from the Times:
The flotilla’s commander, identified only as “Colonel O”, told an Israeli newspaper: “We are an underwater assault force. We’re operating deep and far, very far, from our borders.”
Each of the submarines has a crew of 35 to 50, commanded by a colonel capable of launching a nuclear cruise missile.
The vessels can remain at sea for about 50 days and stay submerged up to 1,150ft below the surface for at least a week. Some of the cruise missiles are equipped with the most advanced nuclear warheads in the Israeli arsenal.
The deployment is designed to act as a deterrent, gather intelligence and potentially to land Mossad agents. “We’re a solid base for collecting sensitive information, as we can stay for a long time in one place,” said a flotilla officer.
The submarines could be used if Iran continues its programme to produce a nuclear bomb. “The 1,500km range of the submarines’ cruise missiles can reach any target in Iran,” said a navy officer.
It now seems that the Middle East is dead set…
Erik Nielsen On Europe Past And (Immediate And Rosy) Future
by Zero Hedge - May 30th, 2010 10:29 pm
Courtesy of Tyler Durden
Goldman’s Erik Nielsen has yet to disclose if he is joining his Euro-pal Jim O’Neill in declaring all out war on the bears (for those unsure about the reference see here, and FYI Jim, the grizzlies send their love… and in keeping with the animal references, they don’t really give a rats ass about the occasional dead cat bounce). What he has no problem disclosing, however, is his latest round of rose-colored ebullience, even as other, “slightly” more objective europundits see the end of the Eurozone as ever more imminent. It is stunning how cognitive dissonance can lead two people to the following diametrically opposite conclusions: Erik Nielsen: “The European recovery continues to look pretty good and solid to me” and Ambrose Evans-Pritchard: “[the Pan-European austerity package] can end only in two ways. Either Germany tolerates massive monetary reflation by the ECB or Spain will be forced out of EMU, setting off a catastrophic chain-reaction through north Europe’s banking system.” Of course, when one is in the business of perpetuating ponzies, while another has a page view quota, the truth likely is somewhere inbetween. Then again, “inbetween” two polar opposites is a wide range. Anyway, since we will likely see a lot more pain “on the plain” shortly, here are some soothing words for all those who are still long and strong and need goal-seeked analyses.
Happy Friday night,
Gosh, I can’t believe I just wrote that, but here I am collecting my thoughts on Europe while others are out having fun. But I’ll be off to my local coast in Denmark tomorrow morning for a long weekend – and writing this now seems a better idea than spoiling the (almost) midsummer nights up on my childhood beach. Here goes:
- The past week delivered another stream of good, to very good, real economy data out of Europe while markets started to calm down the last couple of days.
- We also saw a number of important policy measures in Spain and Italy.
- Fitch downgraded Spain today, but I really can’t get excited. AA+ is fine, but the timing… Some thoughts on why I differ from a lot of people on the prospects for the Euro-zone.
- Former PM and finance minister, and present head of the IMF’s European department, Marek Belka is about to be
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Free Advice to the Stars Re: Ponzi Schemes
by ilene - May 30th, 2010 9:16 pm
Free Advice to the Stars Re: Ponzi Schemes
Courtesy of Joshua M Brown, The Reformed Broker
Apparently, something happens when you get famous…the things that tether you down to earth, such as rational thought and common sense, evaporate into the aether.
Yesterday, Kenneth Starr, money manager for Sly Stallone, Annie Leibovitz, Jacob the Jeweler, Uma Thurman, Martin Scorsese and Wesley Snipes, was arrested for a ponzi scheme. In light of this news and in remembrance of similar scams gone by (Dana Giachetto, Bernie Madoff, etc), I thought I’d offer the following free advice to the Hollywood set when working with an advisor…
1. Anyone who refers to himself as a "Financier" is full of sh*t.
2. Your financial advisor is not supposed to play polo or wear designer sunglasses, nor should he ever have a popped up collar under any circumstances. He must never wear shoes without socks or wear a watch with a diamond bezel.
3. In truth, if an advisor or money manager’s opening shpiel is about all of the other famous people he works with, this should not make you feel comfortable. Its actually a giant red flag indicating that you are dealing with a starf*&%er and a social climber who is more concerned with himself than you.
4. Even your brother-in-law will rob you if you give up power of attorney. Go ask Billy Joel. Uma Thurman signed over Power of Attorney so that Ken Starr would do her taxes. That’s funny, my CPA never seemed to need signatory authority over my bank account to prepare my tax forms…hmmm.
5. Custody of assets is all you need to know. If your money guy needs to set up extraneous accounts in both your name and his, its a scam. If he asks you to transfer money into a financial institution that you haven’t seen advertise during The Masters, its a scam. If he tells you not to worry about receiving statements because he’s "taking care of everything", its a scam. You get the idea.
6. Most important: Your financial guy is NOT supposed to party with you. He shouldn’t be at the same nightclub as you buying bottles, nor should he have a copy of Variety in his waiting area. The financial advisor is the guy you apologize to when you sleep through an appointment with him, hung over from an all-night rager. He’s not supposed to be there with you at the club, holding your hair while…
Michael Lewis Summarizes Financial Reform Infiltration
by Zero Hedge - May 30th, 2010 8:48 pm
Courtesy of Tyler Durden
To: Wall Street chief executives
From: Your man in Washington
Re: Embracing the status quo
Our earnings are robust, our compensation has returned to its naturally high levels and, as a result, we have very nearly regained our grip on the imaginations of the most ambitious students at the finest universities — and from that single fact many desirable outcomes follow.
Thus, we have almost fully recovered from what we have agreed to call The Great Misfortune. In the next few weeks, however, ill-informed senators will meet with ill-paid representatives to reconcile their ill-conceived financial reform bills. This process cannot and should not be stopped. The American people require at least the illusion of change. But it can be rendered harmless to our interests.
To this point, we have succeeded in keeping the public focused on the single issue that will have very little effect on how we do business: the quest to prevent taxpayer money from ever again being used to (as they put it) “bail out Wall Street.”
As we know, we never needed their money in the first place, and by the time we need it again, we’ll be long gone. If we can keep the public, and its putative representatives, fixated on the question of whether their bill does, or does not, ensure there will be no more bailouts, we may entirely avoid a discussion of our relationship to the broader society.
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In the short term, we must do whatever we can to dissuade Representative Barney Frank from allowing any part of these discussions between senators and representatives to be televised. In the longer term we must return to the shadows. Do your work in private; allow your money to speak for you; and remember, the only way we’ll get the financial reform we need is if we pay for it. No one else can afford it.
Guest Post: Goodbye Keynes – Hello Ricardo!
by Zero Hedge - May 30th, 2010 8:20 pm
Courtesy of Tyler Durden
Submitted by Frode Haukenes of Econotwist
Goodbye Keynes – Hello Ricardo!
The world has been fighting the financial crisis by using every possible trick according to John Maynard Keynes‘ playbook. But, as The Great Depression taught us, extreme government spending tends to cause about as much problems as it solves. Perhaps it’s time to put Keynes back on the bookshelf, and pull out the 200 year old theories of David Ricardo.
“While budget stimulus measures are intended to boost demand from financially constrained consumers, it may for others – the majority – result in the emergence of Ricardian behavior.”
Philippe d’Arvisenet
For those not too familiar with economic theories; Ricardian behavior is basically increased consumer spending due to expectations of higher taxes in the future. This effect has been shown to emerge more widespread in countries with large governmental debt, and lead to significant difference in the recovery process among nations.
The increase in public debt registered over the last few years is without precedent.
In each of the main OECD countries, public debt is not on a sustainable path, BNP Paribas chief economist, Philippe d’Arvisenet writes in a research paper.
This contrasts with past periods, during which emerging markets have appeared more at risk from this perspective.
The majority of developed countries will have a public debt ratio in excess of 90% in the middle of the decade, BNP Paribas estimates.
However, according to the IMF, from 2007 to 2014, the debt ratio in these countries is expected to rise by an average of more than 30 points of GDP, reaching an average of 110% of GDP.
Philippe d’Arvisenet points out that of this increase, 3 points will be related to supporting the financial system.
- 4 points to the increased cost of debt.
- 10 points to automatic stabilizers.
- 3.5 points to budget stimulus measures.
- 9 points to losses of tax revenues relating to the decline in asset prices.
“The widening of deficits is largely structural in nature. The deficit ratio adjusted for cyclical variations is 4.4% in the euro zone out of a total deficit of 6.7…
Curbing Drug Company Abuses: Are Fines Enough?
by ilene - May 30th, 2010 6:57 pm
Curbing Drug Company Abuses: Are Fines Enough?
By Ken Stier, courtesy of TIME
In late April, when the Justice Department announced its deal with AstraZeneca for the pharmaceutical company to pay a $520 million fine, as a result of the off-label marketing of its blockbuster anti-psychotic drug Seroquel, Justice officials called it a "historic settlement." Attorney General Eric Holder, Health and Human Services Secretary, Katherine Sebelius, and the head of the Food and Drug Administration held a press conference, trumpeting it as part of the administration’s "top priority" fight against health care fraud. It was the largest ever civil-only fine imposed by the U.S. Government for an off-label marketing offense — promoting the drug for uses not approved because it has not been shown safe, necessary and effective.
Seroquel had FDA approval for use in short-term treatment of schizophrenia and acute bipolar 1, but according to Justice’s complaint the company aggressively marketed the drug "as a long-term cure-all for a broad spectrum of psychiatric maladies, including…aggression and agitation in children" even though clinical studies have sometimes shown "serious and debilitating side effects," particularly among the elderly and children. Seroquel is typically prescribed by psychiatrists, but was being marketed to general medical practitioners, including staff at nursing homes, veterans hospitals and prisons, and to neighborhood pediatricians, making patients "guinea pigs in an unsupervised drug test," according to a prosecutor.
The company denied the allegations but agreed to settle to "avoid the delay, uncertainty, inconvenience, and expense of protracted litigation." That kind of outcome is not uncommon. A conviction in court can be crippling to companies. The government too has an interest in avoiding expensive court fights, particularly if it feels it can gain future compliance through fines and corporate integrity agreements [CIAs] that allow it to guide and monitor companies’ compliance efforts.
But critics are starting to question these settlements, pointing out that even such large fines have yet to make a serious dent in recurring marketing abuses. AstraZeneca’s fine represented just 16.5% of revenue earned from Seroquel during the years its off-label marketing was ongoing — $8.6 billion in the U.S. between 2001 and 2006. Just how much of this was due to improper marketing is unclear, but considering the limited primary market and the widespread use of the drug, it was bound to have been significant.
Since companies can roll the costs of such fines into…
DJIA Sell Signal
by Chart School - May 30th, 2010 6:24 pm
DJIA Sell Signal
Courtesy of Allan
Below is a monthly chart of the DJIA with both a long term Trend Model (low volatility version) and a long term Elliott Wave count. In addition, I’ve added the elements of an Advanced GET Mechanical Sell Signal which as of the end of May has generated a fresh SELL on this monthly chart. [Click on charts to enlarge]
(1) Trend Model: The Monthly Trend Model has been on a SELL since June, 2008 @ 11,350. The rally that began in early 2009 was insufficient to flip this model from its entrenched SELL MODE and now it appears that prices are once again in sync with the dominant trend, DOWN.
(2) Elliott Wave Count: In terms of Elliott Wave counts, this one shows a completed multi-decade five waves up, terminating in October, 2007. I would expect at a minimum, a decade of lower prices. Whether current prices are in an ABC, or have traced out Waves 1 and 2 and are now in Wave 3 DOWN, is academic. Whether a Wave 3 or Wave C, both are third waves, so the expectation is hard down under either interpretation.
(3) Mechanical SELL SIGNAL: Below is a close-up of the most recent five years which culminated on Friday with an Advanced GET Mechanical SELL SIGNAL. The elements of this very reliable, objective signal are Waves 1-4 shown on the chart; an Elliott Oscillator which goes from way oversold to neutral (bottom study); a False Bar Stochastic Sell Signal (top study); and a break down of the Trend Regression Channel (broken on Friday’s monthly close). The upper target for this move is shown as about 4,500 on the DJIA, the lower target (not shown), just below 1,000.
One more heads-up for the days and weeks ahead. Below is the DJIA monthly chart using my standard Trend Model settings (as opposed to the low volatility settings above). Note that the rally from 2009-2010 was enough to flip this model LONG last September. But more importantly note where the model will flip back SHORT: any monthly close below 9,601.84:
In a prior life (1977-1994) I practiced law and that experience, believe it or not, does at times help with dealing with market prediction The legal system has its own specialized sets of rules, evidence and associated standards of proof. …
Beyond Market Turbulence
by Zero Hedge - May 30th, 2010 5:19 pm
Courtesy of Leo Kolivakis
As a follow-up to my last comment, David Parkinson of the Globe & Mail reports, Despite the turbulence, strategists stay bullish:
The sight of slumping stock prices hasn’t shaken most market strategists’ confidence that the bull market#001f5e ! important; padding-bottom: 0px ! important; color: #001f5e ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;"> still has further to fly. But they warn investors to buckle up – we could be in for plenty of turbulence.
In the wake of a selloff that has knocked the U.S. benchmark S&P 500 stock index into official “correction” territory (a drop of more than 10 per cent) in the space of a month while lopping 7 per cent off Canada’s S&P/TSX composite, strategists on Wall and Bay streets are reminding clients that the size of this correction is nothing out of the ordinary in a post-recession bull market. What’s more, they insist that the selling is being driven by fear rather than fundamentals – meaning that markets with solid growth prospects are merely getting cheaper and creating buying opportunities.
“It is difficult to be very bearish of corporate assets when growth is reasonably strong, inflation is low, margins are expanding, monetary policies are easy, and valuations are undemanding,” said economist Larry Hatheway of UBS Ltd. in London.
“In the first four months of this year, investors had become increasingly complacent to risk,” he said. “This was a market vulnerable to correction – all that was missing was a catalyst.”
However, that catalyst – a major sovereign-debt scare out of Europe – has re-awakened investors’ hyper-sensitivity to risk, a lingering effect of the credit crisis of 2008-09. The depth and speed of this risk adjustment does suggest that even if stocks can track generally higher in the coming months, they may do so in a very moody, volatile way.
“People are now a lot faster on the trigger in reducing risk. This increased volatility could be a byproduct of a new way of managing portfolios,” said Stéfane Marion, chief strategist at National Bank Financial in Montreal.
“But we have to keep things in perspective. We haven’t yet seen the collateral damage [from the
…
Possible Criminal Investigation For Tylenol Maker
by ilene - May 30th, 2010 4:00 pm
Possible Criminal Investigation For Tylenol Maker
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By Alice Park, courtesy of TIME
Things just seem to be getting worse for Johnson & Johnson and one of its branches, McNeil Consumer Healthcare. After a routine inspection by the Food and Drug Administration (FDA) of a McNeil plant in Pennsylvania found serious lapses in quality control — including bacterial contamination and lack of proper evaluation of a drug’s potency — the company voluntarily recalled several over-the-counter children’s medications for colds and allergies in April.
Now, after an investigation by the FDA into McNeil’s manufacturing practices, the agency has decided to refer the case for further review to the FDA’s law enforcement arm for possible criminal action.
The House Committee on Oversight and Government Reform convened a hearing on Thursday to investigate the latest recall, since it wasn’t the first for the company this year. In January, the company recalled some of the same children’s products — children’s Motrin, children’s Tylenol and Benadryl, as well as others, including Extra Strength Tylenol for adults — because of a moldy smell coming from the medications. The odor apparently came from a chemical that coats the wooden pallets used to move and store the product packaging materials.
In testimony on Thursday, the FDA’s principal deputy commissioner Dr. Joshua Sharfstein noted that the agency may seek criminal charges for J&J for its failure to comply with safe manufacturing practices as well as its failure to act responsibly in addressing problems. As reported in the New York Times:
During a session in which some committee members questioned McNeil’s integrity, Dr. Sharfstein noted lengthy delays by the company in reporting problems to the agency. And in one case, in 2008, he said, McNeil had hired a contractor to quietly remove packages of Motrin from retailers for suspected quality problems — which he suggested was essentially an unannounced recall that was not reported to the F.D.A.
“This is something troubling to the agency,” Dr. Sharfstein said. “We think it reflected poorly on the company.”
Colleen Goggins, the worldwide chairman of J&J’s consumer group, confronted the accusations of poor quality control and admitted the lapses, as ABC News reported:
"The quality and process issues that we found at McNeil, those which led to the recall and others, are unacceptable," she said.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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