President Trump: The NEW one and only politics thread

Iron_chet · Jul 12, 2018

typefitter said: ↑

Thanks for the non-dickhead answer (@doctorquant, et al). Just coming at it from a different perspective. I've always assumed a seven-figure house had 20 percent put down. (And my five-year fixed mortgage back then was nowhere near that interest rate. I'm just signing a new mortgage at 2.6 percent.)
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Where are you getting 2.6%? I am renewing right now and can only get Scotiabank down to 2.9?

playthrough · Jul 12, 2018

The Big Ragu said: ↑

I realize it is a time investment, and thinking about this stuff isn't everyone's cup of tea. But if you are really want a handle on the Canadian housing market, I heard a very good podcast a few weeks ago. These two Canadians who wereon top of it and gave a thorough analysis of things. The Canadian housing market is a ticking time bomb.

Among other things they touch on and explain: 1) Credit expansion in Canada has gone on unchecked over many years now, savings are way down, and among other things (and it is just one unintended consequence) a big housing bubble that formed. They have numbers right now that are worse in many ways than they were in the U.S. during our housing mania. And lending practices have become lax there. 2) There is a very seedy underbelly to what has happened there, and it relates to the government-mandated mortgage-insurance you mentioned in your earlier post. It has created very perverse incentives for lenders, in that those sizeable mortgage insurance provisions are backstopped by the government. That de-risks the lending from the institutions. On top of it there is a patchwork mortgage regulation structure that really doesn't have anyone on top of policing mortgage originations. . . . and the short of it is that one of the guys was explaining that fraud, falsifying loan documents, etc. is prevalent. It's a mirror of one of the things that created the housing mess here. The risk doesn't sit with the lenders originating the loans (here it was Fannie, Freddie and a shadow lending market, for which a similar one has developed in Canada), so they have no incentive to give a shit. At least the banks don't. They are just going to do whatever they have to do to originate more and more loans. And the assumption is that if there is a default, well, the government is backstopping it, so we're not on the hook. Which is what creates risky behavior. That feeds the bubble, obviously, because it creates way more demand than there should be in a balanced market, which drives up the prices.

This wasn't a part of this podcast, but typing what I just did, I was thinking about something I saw Jim Chanos say at a conference recently about fraud. The fraud cycle follows the financial cycle. For the last 8 or 9 years, central banks, have all worked hard to create a fairy tale, in which they have enabled more and more credit and the risk that ha come with it, by manipulating interest rates. The Bank of Canada is a small player compared to the Fed, the ECB and BOJ, but it has certainly done its part. Cheap money has created an epic bull market here, spurred by a lot of things, but to a great degree, corporations loading up their balance sheets with debt and using the money to buy back their own stock. That drives up the stock price, which is fine by the management who puts in those stock buybacks, because they have largely been selling into it, reaping the windfall. In Canada, it created a housing mania, as consumers have leveraged themselves up and bid up prices. The reason they can do it is that during a mania, people get sucked in, and they never see the rotting pieces underneath what is happening while all of the artificiality is pumping up prices. That only start to appear at the end. And when it ends, there is a huge consequence. Don't assume that Canada's housing market has it figured out. And if you do listen to the podcast, when a serious deleveraging happens, and it is inevitable, remember that it didn't come as a surprise to EVERYONE. There were people speaking reasonably, but they get drowned out. Just as, in 2002, 2003, 2004, 2005, 2006, etc. there were people here getting drowned out. If others had listened, particularly the central banks that create these credit and fraud cycles, a lot of financial pain could have been avoided (you lose the phony sugar highs, too).

One other thing. I am not an expert on Canadian housing, although it is such an obvious mania situation that it has been on my radar for at least the lsat couple of years. You said that mortgages are hard to get because it is so tightly regulated and there are like 5 banks. But that isn't the reality. As it has gotten harder to get a bank mortgage, an unregulated shadow lending market has picked up the slack. The Bank of Canada itself has been tracking it, and reporting about it, and the short version is that loans in the uninsured space from those lenders are increasingly going to highly indebted households and for amortizations longer than 25 years. And these are lenders whose activities fall out of the federal regulatory scope. There are a lot of originations coming from credit unions, mortgage-investment corporations that are speculating and money pooled by individual speculators. Honestly, it reeks of what subprime became here.
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What's this you say about lax Canadian lending practices?

The Big Ragu · Jul 12, 2018

That's a really good pull.

Donny in his element · Jul 12, 2018

Home sick. C-Span3 coverage of the Strzok witch hunt (did do that right?) is engrossing. I need to watch more live government.

Della9250 · Jul 12, 2018

"Because Alabama has always been at the forefront of support of Israel"

Chef2 · Jul 12, 2018

I miss the hammer.

HanSenSE · Jul 12, 2018

Donny in his element · Jul 12, 2018

Do you think Roy Moore knows that SBC is Jewish, speaks Hebrew, and is descended from Holocaust survivors?

HanSenSE · Jul 12, 2018

Della9250 said: ↑

"Because Alabama has always been at the forefront of support of Israel"

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So if you're scoring at home, it's Sacha Baron Cohen 2, Republicans who've made recent news 0. Amirite?

Inky_Wretch · Jul 12, 2018

So much winning!

Donny in his element · Jul 12, 2018

Inky_Wretch said: ↑

So much winning!

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He also said -- twice -- Ireland is part of the UK.

terrier · Jul 12, 2018

HanSenSE said: ↑

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Proud of my congressman for calling bullshit on him on the floor.

Given that my congressman is both gay and Jewish, you can guess where this is headed...

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President Trump: The NEW one and only politics thread

Iron_chet Well-Known Member

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