Tag: finance

Over the past several weeks, courtesy of the jump in oil prices from 13 years lows, the narrowly reopened window granting some companies the chance to sell equity and in some cases debt (and promptly use the proceeds to repay their secured lenders), and the various last-ditch extensions afforded to near-default oil and gas companies, the dire reality of the default wave about to be unleashed in the shale patch has been swept under the rug, if only briefly.

That is about to change.

In a recent interview with Bloomberg, Fitch’s Eric Rosenthal paints a very disturbing picture: the rating agency senior director predicts that about $40 billion worth of energy debt will likely default in 2016.

Here are some of the highlights behind his forecast of a 6% default rate, the highest non-recessionary rate since 2000.

The increase in the overall default rate to 6 percent from 4.5 percent relates purely to the challenges of low commodity prices in the energy and metals/mining sectors. A false dawn in prices last spring allowed many energy companies to access the capital markets. As a result, the sector accounts for more outstanding debt in the high yield bond universe than any other — 19 percent. When combined with metals/mining, the two most distressed sectors account for 25 percent of the high-yield bond universe. Energy, rightfully, received much attention last year. With $13 billion of defaults already tallied this year, compared to $17.5 billion for all of 2015, it shows no signs of slowing down. E&P and coal companies are the most prone to default this year, with expected default rates of 30 percent to 35 percent and 60 percent, respectively. As these companies work through their last lifelines, like distressed debt exchanges, there is an expectation that we will see more filings.

On the ongoing liquidity concerns resulting from what remains mostly a shut high yield issuance window:

Currently, $63 billion of energy and metals/mining bond issues are bid below 40 cents. While there is definitely noise around names that are bid in the 60-to-80-cents region, the majority of issues trading at deep discounts are near-term default candidates. The high-yield market has bounced back nicely over the past few weeks, highlighted by a record $5 billion in mutual fund inflows, but the energy troubles aren’t getting resolved with crude oil prices still under $40. Liquidity is definitely a concern.

Is the recent bounce in oil prices enough to delay the day of reckoning?

While crude oil prices have gained more than $11 from a Feb. 11 low, the levels are still well below what is required to break even. Most energy companies need the WTI to be north of $50 and quickly. If this happens, the capital markets could thaw a bit and asset sales might get done, enabling these companies to keep going. However, several of these companies are already in a precarious position and will be tested further by semiannual interest payments due next month. Many have already used lifelines like distressed debt exchanges and hired restructuring advisers, so absent that fast rise in WTI, some defaults will be inevitable. We estimate about $40 billion of additional outstanding energy bond debt will likely default this year.

Finally, on a topic very dear to us, recovery rates and what to expect if there is a 20% cumulative default rate in the energy sector.

The 30-day post-default energy price over the past 12 months is 23 percent and that figure is unlikely to rise considering current secondary levels. It doesn’t bode well for recoveries. In the worst cases, investors could be looking at cents on the dollar.

In short, it looks like we may be in the eye of the hurricane, and it is only a matter of time before the pent up avalanche of energy defaults is unleashed.

But how long; what are the specifics? For those who enjoy combing through forward calendars, we have conducted a quick search of all U.S. 144A oil and gas bonds trading at 30 cents on the dollar or less, and which have an interest payment over the next six month, starting in April through September. As can be seen from the 141 individual bonds that satisfy these criteria, the eye of the hurricane is set to leave and unleash some very strong wind.

via Zero Hedge http://ift.tt/1PaWkRU Tyler Durden

For the past four years, bond traders have quickly turned their focus after Federal Reserve meetings to something called the dot plot (seen as a key insight into their collective thinking on rates). The problem is, as Bloomberg exposes, the forecasts weren't very good… and fund managers are increasingly ignoring the dot plot for investment decisions, as one strategist exclaimed "we don’t put a lot of credibility in the dots, [officials] have usually been cheerleaders for the economy, and they get turning points in the economy wrong."

The waning influence of the Fed’s projections is showing up in derivatives markets. After the December revision to the projected path of interest rates, traders responded much less than they did earlier in the year in the market for derivatives known as overnight-indexed swaps.

 

As Bloomberg reports, market reaction to changes in the dot plot, once pronounced, has become more muted in recent months and investors at firms including Pacific Investment Management Co., BlackRock Inc. and Aberdeen Asset Management say they won’t take the Fed’s projections at face value when they’re updated Wednesday at the end of a two-day policy meeting.

If the Fed is aiming to prepare the market for three or four rate increases this year, after officials in December projected four, traders aren’t buying it.

 

“We always thought four hikes was an aspiration, not a forecast” for this year, said Richard Clarida, New York-based global strategic adviser with Pimco. “If you ask me, ‘Rich, would you like to play third base for the Yankees,’ I say yes. If you ask ‘Rich, will you play third base for the Yankees,’ I say no.”

 

Aberdeen’s Maldari said he started questioning the economic projections in Fed statements in July, when the central bank inadvertently released confidential staff economic projections that implied rates should rise to 0.35 percent by the end of 2015, rather than the 0.625 percent implied in the most recent dot plot at that time.

 

“That tells me they are thinking one thing and saying something else,” he said.

Either way, as investors prepare for the Fed’s March 15-16 meeting, they think the policy statement and Fed Chair Janet Yellen’s press conference will attract most of the market’s attention. Clarida, of Pimco, expects the median Fed official’s projection will be for three interest-rate increases this year.

“Almost certainly, the 2016 dots will shift down,” Clarida said.

 

But “if they mark down 2016 to one hike, that would be a surprise. It would also be negative for stocks and credit spreads,” since investors would take that as a sign the economy is weaker than expected.

Good luck tomorrow Janet.

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By Chris at http://ift.tt/12YmHT5

I recently recorded a conversation with one of the most genuine, successful and intelligent human beings I have the pleasure of knowing.

Grant Williams is a seasoned investment veteran having spent over 30 years in the markets – from New York to Tokyo and many places in between.

Together with Raoul Pal, Grant founded Real Vision TV, a refreshing and desperately needed antidote to Bloomberg, CNBC and the likes. Real Vision TV is a place where the world’s best investors share their ideas and lessons via in-depth and fluff-free interviews.

(If you’re not yet familiar with Real Vision TV you can and in fact should try it out for a month completely free by getting your access here. It’s hands down one of the best investing resources out there, and I don’t say this lightly.)

Grant also blends history and humour with keen financial insight in his investment newsletter “Things That Make You Go Hmm…” which has quickly become one of the most popular and widely-read financial publications in the world.

We discussed the global economy and what we believe is the most important element at the forefront of the minds of the world’s most successful money managers and traders.

Grant will also be joining us to share his ideas and insights at our upcoming Seraph Global Summit in June, along with a host of other smart investors and all-around interesting people. If you think you fit that description you can find out how to attend the Summit here.

Now, enjoy the conversation and let me know what you think about it by commenting here. Some things we discussed might be a bit controversial to some so I’m curious to hear your thoughts.

– Chris

“You can go through turbulent times and still have victory in your life.” – Natalie Cole

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Submitted by Eric Matias Tavares of Sinclair & Co.,

via Zero Hedge http://ift.tt/1PaQYWR Tyler Durden

Submitted by Michael Snyder via The Economic Collapse blog,

If Americans are so happy, then why do we consume 80 percent of the entire global supply of prescription painkillers?  Less than 5 percent of the world’s population lives in this country, and yet we buy four-fifths of these highly addictive drugs.  In the United States today, approximately 4.7 million Americans are addicted to prescription pain relievers, and that represents about a 300 percent increase since 1999.  If you personally know someone that is suffering from this addiction, then you probably already know how immensely destructive these drugs can be.  Someone that was formally living a very healthy and normal life can be reduced to a total basket case within a matter of weeks.

And of course many don’t make it back at all.  According to the CDC, more than 28,000 Americans died from opioid overdoses in 2014.  Incredibly, those deaths represented 60 percent of all drug overdose deaths in the United States for that year…

A report released by the US Centers for Disesase Control and Prevention (CDC) in January revealed that drug-overdose deaths reached a new high in 2014, totaling 47,055 people. Opioids, a type of powerful painkiller that requires a prescription, were involved in 60% of those deaths.

Many Americans that start out on legal opioids quickly find themselves moving over to heroin because it is often cheaper and easier to obtain, and the U.S. is now facing a tremendous epidemic of heroin abuse as well.  In fact, the number of Americans that die of a heroin overdose nearly quadrupled between 2000 to 2013.

Finally, the federal government has started to take notice of this crisis.  A bill was recently passed to spend more than a billion dollars over the next two year fighting this problem.

But as long as doctors are writing thousands upon thousands of new prescriptions for these painkillers each year, this crisis is not going to go away any time soon.

In the Appalachians, these prescription painkillers are commonly known as “hillbilly heroin“, and all of the attention that the New Hampshire primaries received focused a lot of attention on how this crisis is destroying countless numbers of lives up in the Northeast.  But one survey found that the states with the biggest problems with painkiller addiction are actually in the West…

The National Survey on Drug Use and Health, a survey of approximately 67,500 people across the United States, found that the states with the highest rates of narcotic painkiller abuse were in the West – Arizona, Colorado, Idaho, Nevada, New Mexico, Oregon and Washington.

Unless you are about to die, I would very strongly recommend that you resist any attempt by your doctor to put you on these “medications”.  Just consider what happened to one stay-at-home mother named Norah Mangan…

I am an educated, suburban wife and stay-at-home mother of four. Life had been good to me until a fateful visit with an orthopedic physician, my chief complaint being mild arthritic pain in my toes. My physician handed me the first of many monthly prescriptions for Oxycodone and what followed that appointment was a rapid descent into hell. Within six months, I had become a raving drug addict.

Before too long, Norah had to turn to means that were less than legal in order to keep fueling her addiction.  Her life was turned into a complete and utter disaster by drugs that were legally prescribed to her…

It wasn’t long before my legal monthly prescription fell woefully short in terms of keeping my life altering pain at bay. In the interest of not incriminating myself, I’ll simply share that when procured through other means, Oxycodone generally sells for one dollar per milligram. I was draining our savings and was out of my mind. I was so tortured that I didn’t care about the deterioration of my moral values, in fact, I didn’t even notice. It’s hard to imagine that in such a short period of time I had morphed from a Mrs. Cleaver, baking hot cinnamon buns in anticipation of my children’s arrival home from school, to Scarface crushing pills on the glass top of the executive desk in our home office while thinking to myself as I heard them arrive from school…why oh why are they home already?

You can read the rest of her amazing story right here…

The truth is that we are the most drugged people on the face of the planet.  It has been estimated that 52 million Americans over the age of 12 have used prescription drugs in non-medical ways, and this problem gets worse with each passing year.

According to research that was published in the Journal of the American Medical Association, 59 percent of all U.S. adults are currently on at least one prescription drug, and 15 percent of all U.S. adults are on at least five prescription drugs.  And the numbers are far worse for older Americans.  The following statistics come from one of my previous articles…

–According to the CDC, approximately 9 out of every 10 Americans that are at least 60 years old say that they have taken at least one prescription drug within the last month.

 

–There is an unintentional drug overdose death in the United States every 19 minutes.

 

–In the United States today, prescription painkillers kill more Americans than heroin and cocaine combined.

 

–According to the CDC, approximately three quarters of a million people a year are rushed to emergency rooms in the United States because of adverse reactions to pharmaceutical drugs.

 

–The percentage of women taking antidepressants in America is higher than in any other country in the world.

 

–Children in the United States are three times more likely to be prescribed antidepressants as children in Europe are.

 

–A shocking Government Accountability Office report discovered that approximately one-third of all foster children in the United States are on at least one psychiatric drug.

 

–A survey conducted for the National Institute on Drug Abuse found that more than 15 percent of all U.S. high school seniors abuse prescription drugs.

We are a deeply unhappy nation that has been trained to turn to pills as a “quick fix” for our hurt and our pain.

Yes, there are medical situations that call for prescription pain relievers.  But what we are seeing in America today goes far, far beyond that.  We are a nation of addicts that is always in search of a way to fill the gaping holes that we feel deep in our hearts.  This prescription pain killer crisis is just another symptom of a much deeper problem.

via Zero Hedge http://ift.tt/1YXJcqI Tyler Durden

While not nearly as exciting as JPM cornering and manipulating the gold or silver markets, over the past few years Jamie Dimon’s bank appears to have cornered a very prominent commodity traded on the London Metals Exchange, aluminum, resulting in price “anomalies” which as Reuters politely puts it “mean prices do not always reflect fundamentals” and which as we put it, reflect outright manipulation, however because regulators are captured have so far completely slipped through the cracks.

According to Reuters, large amounts of aluminum traded on the London Metal Exchange over the past couple of years “have at times been in the hands of a dominant position holder.” Citing sources at commodity trading houses, warehouses, producers, brokers and banks “one such position holder is U.S. bank JPMorgan.”

Reuters adds that “other companies have done so in past” which perhaps is meant to mitigate JPM’s culpability, but merely confirms that if it isn’t one bank manipulating commodity markets, it’s another – the famous example of Sumitomo’s Yasuo “Mr. Copper” Hamanaka comes to mind.

As Reuters points out, “while no rules have been broken, holding a large, sometimes dominant position can to an extent have an influence on prices in the short term for contracts that will soon reach maturity.” For its part, the LME said it “would seek additional information from market participants regarding activity that raises concern.”

“If a breach of the LME’s rules is deemed to have occurred, we would take appropriate action.”

We won’t hold our breath.

The details of JPM’s quasi-cornering of aluminum are as follows: the positions have typically meant a backwardation or premium for the nearby contract, suggesting tight supplies. But aluminum is oversupplied and inventories are massive, which mean the natural state of the market should be contango or discount.

It also means holders of short positions, which could be bets on lower prices or hedges for physical holdings, have had to pay more to roll over their positions.

“JPMorgan have been doing this on-and-off for a long time. The
backwardation (or premium) doesn’t accurately reflect oversupply,” a
Reuters source at a commodity trading firm said.

“The positions are large, not many people can do these amounts. It’s worthwhile for JP because they can borrow very cheaply, they have the credit rating,” an aluminum trader at a commodities broker said.

For some months now there have been large holdings of aluminum warrants, which are a claim to metal stored in warehouses approved by the LME. Currently there is a dominant position holding 50-79% of warrants. 

One consequence of this is the premium for the cash contract over the benchmark three-month future. It rose to around $23 a tonne in December, the highest since late 2014.

Reuters reveals the following details of large open interest holdings since April 2014 gathered from industry sources.

• FEBRUARY 2016 CONTRACT

One company held 20-29 percent of open interest on February 10, between 403,000 and 584,000 tonnes. Prices on that day value the holding at $596-$864 million. A $5 contango for the February vs March contract became a backwardation of $8 on Feb. 15, 2 days before expiry.

• JANUARY 2016 CONTRACT

One company held 20-29 percent of open interest on Jan. 18, between 238,000 and 346,000 tonnes or $350-$508 million. A $5 contango for the January versus February contract turned into a $8 backwardation on Jan. 19, one day before expiry.

• DECEMBER 2015 CONTRACT

One company held 20-29 percent of open interest on December 14, between 230,000 and 333,000 tonnes or $352-$493 million. A $7 discount for the December versus the January contract became a $31 a tonne premium on Dec. 15, one day before expiry.

• APRIL 2015 CONTRACT

One company held 30-39 percent of open interest on April 8, between 748,000 and 972,000 tonnes or $1.3-$1.7 billion. A $5 discount for the April versus the May contract turned into a $22 backwardation on April 13, two days before expiry

• NOVEMBER 2014 CONTRACT

One company held more than 40 percent of open interest on Nov. 11, more than 1.223 million tonnes or a minimum of $2.5 billion. A $10 contango for the November versus the December contract became a $21 premium on Nov. 18, one day before expiry.

• AUGUST 2014 CONTRACT

One company held 20-29 percent of open interest from Aug. 18, between 224,000-325,000 tonnes or $450-$650 million. A $10 discount for the August vs the September contract became a $16 premium on Aug. 18, two days before expiry.

• APRIL 2014 CONTRACT

One company held more than 40 percent of the open interest on April 9, more than 920,000 tonnes of metal or $1.7 billion. A $15 discount for the April versus the May contract became a premium of $14 a tonne on April 15, the day before expiry.

As a result, we now know that JPM has not only cornered the aluminum market as of this moment – something that very likely will go on indefinitely – but said cornering had lead to the abovementioned “price anomalies.” What is surprising is that according to the CFTC, the LME and various regional regulators  this is perfectly normal behacior, and likely happens every day as big banks are given a green light to do whatever they want with any one product.

We wonder if whether having had the above information at hand, U.S. District Judge Katherine B. Forrest would have dismissed the LME, JPMorgan, Goldman Sachs, Glencore and others from recent multidistrict litigation accusing them of manipulating aluminum prices.

If nothing else, at least today’s disclosure of aluminum manipulation answers the implicit question in our post from two months ago, in which we reported that “Someone Is Trying To Corner The Copper Market” on the LME, where the described pricing “anomaly” was virtually a carbon copy of what is taking place with aluminum on the LME.

We now have a pretty good idea of the “who”, and we wonder if that same “who” has also managed to corner by comparable means or otherwise, any other commodity markets, including certain precious metals.

via Zero Hedge http://ift.tt/1psAxk5 Tyler Durden

Following MoveOn.org's "success" last Friday, George Soros is back on the lips of an increasing number of Americans as Bloomberg reports, the liberal billionaire, whose effort to unseat President George W. Bush in 2004 shattered political spending records, is returning to big-ticket activism after an 11-year hiatus. Soros has spent or committed more than $13 million to support Hillary Clinton and other Democrats this election cycle and has warned Donald Trump (and Ted Cruz) of "consequences" for their words and actions. Welcome to the Oligarchy.

Having already already donated  more than his total disclosed spending in the last two presidential elections combined, Bloomberg reports,

Soros has expressed alarm over the past few months at the candidacies of Republicans Donald Trump and Ted Cruz. In a statement last week about a new group he's funding to increase voting by Latinos and immigrants in the election, he again mentioned the two candidates by name.

 

"The intense anti-immigrant and anti-Muslim rhetoric that has been fueled by the Republican primary is deeply offensive," Soros said in the statement. "There should be consequences for the outrageous statements and proposals that we've regularly heard from candidates Trump and Cruz."

 

Michael Vachon, a spokesman and political adviser to Soros, said there was no single cause for the increase in spending. "His support of Clinton is one reason. The tone of the other candidates is the other," Vachon said. The Clinton, Cruz and Trump campaigns, which face crucial primary contests in Ohio and Florida today, didn't respond to requests for comment.

Soros's importance to Clinton goes beyond the checks he writes, since other major Democratic donors sometimes follow his lead.

At the same time, it's likely that in a general election, Trump would pillory Clinton for her reliance on Soros and other wealthy hedge-fund managers. The billionaire real-estate developer has spent months portraying his Republican rivals as the tools of their donors.

Soros's personal fortune stands at about $24 billion, according to the Bloomberg Billionaires Index.

Soros spent an unprecedented $27 million trying to defeat Bush's re-election in 2004, much of it through independent groups known as 527s that could accept donations of unlimited size. While the groups Soros funded knocked on doors and tried to boost voter turnout, a conservative 527 group aired a powerful series of ads questioning Democrat John Kerry's war record, helping Bush win a second term. "They were in-your-face distortions of the truth," a frustrated Soros told the New York Times Magazine in 2006. "People don't care about the truth."

 

Soros signed on as an early backer of Obama during the 2008 campaign, but spent only about $5 million on political causes that cycle, according to a tally by Bloomberg that doesn't include undisclosed donations to political nonprofits. He spent even less in 2012, even though the Supreme Court's Citizens United ruling prompted a flood of new seven-figure contributions that year.

A few months later, Soros told a Clinton confidant that he wished he hadn't backed Obama in the primary four years earlier.

"He said he's been impressed that he can always call/meet with you on an issue of policy and he hasn't met with the president ever," Neera Tanden said in a 2012 e-mail to Clinton, who was then serving as Obama's Secretary of State. "He regretted his decision in the primary — he likes to admit mistakes when he makes them and that was one of them."

The e-mail was one of thousands of Clinton's messages that the State Department later made public, several of which show what a warm reception Soros got from her office.

At Davos in January, Soros remarked that Trump and Cruz are engaging in "fear mongering." But he predicted that neither of them would prevail in the November election. "Here I have to confess to a little bit of bias, so take that into account," he told Bloomberg Television. "I think it's going to lead to a landslide for Hillary Clinton."

Can The GOP stop Soros? "Trump and Cruz doing the work of ISIS"

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Submitted by B.F.Marcus via Foundation for Economic Education,

 

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Way back in June of last year, we showed you 13 cities where millennials have no hope of affording a home. They included Seattle, Boston, New York, Washington DC, San Jose, San Diego, San Francisco, and Los Angeles.

“The bad news is that the areas that often most appeal to young adults are also the ones where homeownership is the most out of reach,” Bloomberg remarked at the time before quoting one 28-year-old with a graduate degree as saying the following: “I’m making a good salary and I’m doing all these things that I’m supposed to be doing. But you’re just not able to save enough to get to that number. Housing is so inflated.”

Yes, “housing is so inflated” in certain areas not the least of which is Vancouver where prices have gone full-retard. As we wrote early last month, “residential property sales in Greater Vancouver rose 31.7% in January, 46% above the 10-year sales average for the first month of the year and the second highest January ever according to the Greater Vancouver Real Estate Board.”

The benchmark price for a detached home in Vancouver: $1,293,700. The benchmark price for an apartment: $456,600.

That’s led to all sorts of ridiculous aberrations including the now famous shack-like “fixer upper” that sold for $2,500,000 in Point Grey. “Hot doesn’t quite describe Vancouver’s three-alarm fire of a housing market,” Bank of Montreal chief economist Doug Porter remarked, underscoring the madness. 

New data out today from the Canadian Real Estate Association shows the average price of a home in Canada rose an astonishing 16% Y/Y to more than $500,000. Underscoring the extent to which British Columbia and Ontario are driving the market, stripping out those two provinces pulls the national average down to under $300,000. Here’s a look at the province-by-province breakdown:

And here’s city-by-city:

“The number of single family home sales above one million dollars is rising in Greater Vancouver and the GTA,” Gregory Klump CREA’s chief economist said. “If recent trends continue, home sales above $1 million will account for a greater share of activity and will further fuel year-over-year average price increases in these markets.”

We also remarked last month on Canada’s growing tech industry and how it’s affected property prices in Waterloo, Ontario known as “Canada’s Silicon Valley.” The population in Waterloo is only 140,000, but the city has two universities and a Google office. As for the real estate market, it’s “lightning in a bottle” to quote Google’s country manager for Canada. “The buzz has created a ‘land grab’ and now, condos are renting for nearly C$2,000 per month while one-bedroom units are selling for more than a quarter of a million dollars,” we said.

Well now, in a story that combines all three themes mentioned above (millennials, Vancouver housing, and Canada’s tech economy), we learn that housing as become so expensive in Vancouver that millennials are simply moving away, threatening the city’s burgeoning tech culture. 

Meet Kevin Oke, co-founder of LlamaZoo Interactive and former Vancouver resident.

“Housing in Vancouver is insane — it was insane when I left and it’s more insane now,” Oke told Bloomberg. “If you’re trying to do the startup thing full-time, it would have been really difficult with all the expenses.”

Indeed, Kevin.

“Oke, now 33, is part of the millennial retreat from a city where housing prices have skyrocketed at a faster pace than even in San Francisco, another North American technology locus,” Bloomberg writes. “Rising costs are putting Vancouver’s vaunted growth engine at risk as the city hemorrhages people employed in tech and new media for more affordable locales, including Victoria and Kelowna. The flight of millennials from Vancouver is similar to trends found in other cities with soaring home prices.”

According to Statistics Canada, Vancouver added only 884 net new people age 18-24 last year. That’s the lowest level on record. The net number of those age 25-44 fell 1,300, the most since 2007 which, you might recall, is the year the country experienced a commercial paper crisis that in many was a canary in the coal mine ahead of the the US housing meltdown.

“We’re banging our heads on the wall,” Christine Duhaime, founder and executive director of the Digital Finance Institute says. “Why aren’t they staying?”

“Because it’s too expensive,” she says, answering her own question. “Vancouver is going to lose its tech edge.” Here’s the insanity graphed:

And while the millennials fleeing rising home prices in Vancouver are flocking to the likes of Victoria and Kelowna, we’ve got a better idea for those who are feeling priced out of the market: Calgary, where the death of Canada’s oil patch has literally driven prices into the ground:

Of course you’ll have to deal with rising property crime, higher suicide rates, and soaring foodbank usage, but hey, you can’t have it all. 

Normally, these things have a way of sorting themselves out. People get fed up, they leave, demand falls, supply rises, and prices adjust. Only there’s an x-factor here: China. Where thanks to expectations of a much deeper yuan devaluation, investors are moving their money out of the country to “safer” havens – like Canadian real estate. 

So get ready Kevin, because as long as the PBoC can’t figure out how to manage a controlled devaluation, the bubble you’re seeing in Vancouver and Toronto will spread and when it does, you better hope you bought instead of rented.

*  *  *

Bonus: Here are some excerpts from “Without Affordable Housing, Vancouver Risks Becoming An Economic Ghost Town,” by Ryan Holmes, CEO of HootSuite, is an angel investor and advisor, and mentors startups and entrepreneurs as originally published in The Financial Post:

The tech economy in Vancouver and across Canada has never looked brighter. 

But there’s one enormous cloud looming on the horizon — housing affordability. It’s no secret that Vancouver housing is increasingly unaffordable. (The same goes for Toronto, to a slightly lesser extent.)

An influx of global capital has affected the local real real estate market, though that’s far from the sole cause. The population of Metro Vancouver is growing at a clip of roughly 30,000 residents each year, fueled primarily by immigration from abroad. Low-cost borrowing and fast-rising home values have driven purchases for investments, rather than as a place to live. And Vancouver’s geography — hemmed in by mountains and ocean, with limited space for development — is only compounding the issue.

The consequence of this is impossible to overlook. Unaffordability is emptying Vancouver of one of its most valuable assets — young people who grew up in the city and who are invested in it. As well, qualified newcomers who could bring talent, drive and vision to Vancouver are looking elsewhere. The projected closure of more than a dozen Vancouver public schools hints at the scale of the problem: Families can no longer afford to live here.

This is worrying for several reasons, chief among them that it makes it exceptionally hard to grow a business in Vancouver. I’ve experienced this firsthand at my company, but it’s hardly unique to the technology sector.

This lack of affordable housing has reached a crisis point. Vancouver risks becoming an economic ghost town: a city with no viable economy, other than a service industry catering to wealthy residents and tourists.

Today, the city consists of a few square kilometres of high-rises in a tiny downtown core, hemmed in by a sea of single-family homes. This approach to urban development no longer makes sense.

Yet, conversations at the highest levels have been noticeably lacking. Vancouver desperately needs all government stakeholders — local, provincial and federal — to come to the table and begin the search for solutions in earnest.

via Zero Hedge http://ift.tt/1Ml9ETM Tyler Durden