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Baby, we got a bubble!?
- Thread starter simuls
- Start date
daveto
Active Member
CG, from what I've read I think you are a marketer/salesman who says what will best move product, rather than truly believing what you say. But if I take this last post at face value, allow me to point out errors and contradictions therein.
1. You are charting the RE profits from trough to peak. This produces a highly misleading ROI for any asset class or investment.
2. You refer to the profit of RE for the last 10 years as a lost opportunity for anyone who didn't leverage into that asset class. However, gold has increased in price 6 times over that period, more than double real estate. So may we presume that you would agree that anyone who invested in RE was foolish for not instead buying gold? May we similarly presume that you are know selling your RE so that you can buy gold?
3. Ulimately, your comment about RE having increased over since 2000 and also since 2008 is similar to the gambler who presumes that because a roulette wheel has come up red 10 consecutive times, he was a fool for not betting a large portion of his net worth on red for those 10 spins.
4 Finally, 10 years ago many experts forecast that tech stocks were overvalued based upon earnings. But the uneducated masses were riding the euphoria of the speculative profits (unsupported by earnings), subsequently lost most of their paper profits. Those of us who argue that Canadian RE is overvalued, base those arguments on metrics such as the cap rate (the net rental income compared to the current market purchase price). In other words, we say that Canadian RE is overvalued based upon earnings, same as the tech bubble in 2000. There is nothing wrong with riding a speculative bubble to windfall profits, just so long as the savvy investor knows when to exit.
It seems to me that those who argue in support of Canadian (or Toronto) RE price sustainability, base their arguments upon retroactive results and factually unsupported theories (asian investors, new immigrants). I haven't read anything logically coherent to explain why our RE prices are sustainable long term at these levels.
I applaud anyone's good fortune. And if someone made a fortune from pets.com or Las Vegas real estate or whatever and then sold at the right time, more power to them. But for every person who cashed in their speculative profits, there are several others who lost it all (and more).
In conclusion, risk/return move in lockstep together and there is no path to easy wealth. I encourage any investor to consider their diversification and their ability to withstand a 25% drop in any of their held asset classes. If any reader of my post thinks a 25% drop in RE is not possible and therefore merits no consideration, then I would encourage you to do further research. Or you can keep your eyes focused happily on the rear view mirror, cackle happily as you ignore the "construction ahead - slow down" signs from guys like me, and hit the accelerator. Good luck either way.
Last edited:
Condo George
Active Member
Dave, its 12 hrs ahead here in Singapore, I am tired..... I apprecaite your post. Some here keep on thinking about me as a sales guy but not many of you pick up on the fact that I am an investor and consider myself a wealth builder for my clients, I don't sell any site and any door that is for sale. I buy what I do promote and sell.
I hope we all do well in whatever we invest in, all long as we are trying I guess, good luck
I hope we all do well in whatever we invest in, all long as we are trying I guess, good luck
Ric
Active Member
Well said.
interested
Senior Member
This is a commentary from the Globe and Mail in response to the article that the "Crisis Weary Rich held their nerve".
I am not commenting about the article which may/may not be true as it refers to anecdotal views of various private wealth managers and in fact I believe it is probably more true than not at least for the time being.
There is the 1 comment which I found interesting:It refers to an article that one would say is written by a bear but I believe it truly summarizes the state of affairs in the US and if extrapolated; has to have an impact on Canada and also ultimately on Canada's real estate.
http://www.comstockfunds.com/(X(1)S...&menugroup=Home&AspxAutoDetectCookieSupport=1
Posted on: Thursday, August 11, 2011
Printer Friendly Format Printer Friendly Format Send to a Friend Send to a Friend RSS Feed RSS Feed
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Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys
Recent Market Commentary:
8/18/11 Bear Market Far From Over
8/11/11 Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys
8/4/11 Suddenly It All Matters
7/28/11 No Good Outcome From The Debt Ceiling Crisis
7/21/11 Deficit Deal Could Derail Growth
7/14/11 Why The Economy Feels So Bad
7/7/11 Nothing Matters Until It Does
6/30/11 Europe's Southern Tier Still A Festering Problem
6/23/11 Why Fed Policy Is Paralyzed
6/15/11 Please click on the latest "Special Report' on Left Side of Home Page
6/9/11 Economic Policy Out Of Ammunition As Consumers Retrench
6/2/11 It's The Recovery That's Temporary----The Pause Is Real
5/26/11 More Confirmation Of The Economic Slowdown
5/19/11 Economic Slowdown Is Already Here
5/12/11 An Ominous-Looking Market Top
5/5/11 The Tipping Point Has Arrived
4/28/11 Bernanke's Unconvincing Press Conference
4/21/11 The Negative Consequences Of Ending QE2
4/14/11 Market Outlook Negative Both Technically And Fundamentally
4/7/11 Why 2011 Is Like 2000 and 2007
Next >>
Search Archives:
1. Eleven years ago we experienced the strongest secular bull market in U.S. history covering the period from 1982 to 2000 (interrupted only by the 1987 crash). This secular bull market ended with the most outrageous valuations in history. In fact, the P/E and px to cash flow and every other metric you wish to use were more than double the prior peaks over the past 100 years. The NASDAQ valuations metrics were off the charts and NASDAQ hasn't come close to this high since. All this was accompanied by extreme debt increases over the prior 20 years. This was clearly (in our humble opinion) the start of the present secular bear market which should surpass the secular bear from 1966 to 1982 by a large margin. And in fact, the market did decline sharply for the next 3 years. However, the politicians and the Fed could not handle the pain that it would take to wipe out the overvaluations and excess debt that took place during the bull market. Instead, the Fed lowered the Fed Funds rate from 6.25% to 1% and kept it there for and extended period causing a second bout of "irrational exuberance" revolving around a housing bubble and a secondary stock market bubble from 2003 to 2007.
2. Wall Street and Washington wanted to push everyone possible into a home even if they were not close to being able to afford one. Washington worked with banking institutions to get them in homes they couldn't afford and then Wall Street packaged these loans, got AAA ratings and sold them to their clients. We discussed the insanity of these processes for the entire period and felt confident that when this bubble finally burst it would be extremely painful.
3. Although many on Wall Street believe the market is currently undervalued we disagree. The market expected the S&P 500 to earn $108 in early May of 2008 but due to the bursting of the bubble the earnings came in at $50 for operating earnings (excludes write-offs) and $15 for reported earnings (GAAP). The analysts that are using $100 this year and more next year for the S&P 500 and a P/E of 15 to magically come up with 1500 on the index are guilty of faulty reasoning. We believe we will trade at below 10 times depressed earnings which should take us down to the lows of 2009 or below. It is clear to us that there will have to be a global slowdown in the second half of this year and next. The reasoning for the slowdown is again the debt, but not just the sovereign debt, the private debt is even worse than the public debt. The total debt in this country is over $52 trillion and the public debt is around $9 trillion ($14.5 trillion if you count the debt used in funds that were raided by the government like Social Security).
4. The Household Debt (H/H) is by far the most extreme and will be the debt that will be the cause of the "double dip" in our opinion. The H/H debt was almost always about 50% of GDP and 65% of Personal Disposable Income (PDI) but started rising during the past 20 years as the consumers went on a spending binge where they bought everything they could on credit (especially homes) and even used their homes as an ATM machine. This took the debt from about $5-$6 trillion to $14.5 trillion at the peak in 2008. They are now cutting back and saving more and the debt has shrunk to about $13.5 trillion. We expect this debt to decline below $10 trillion (possibly $8 trillion) and will drive the U.S. into a "double dip" and affect the global economy as well, since the U.S. is three times the size of every other country-- and consumption is 70% of our economy. The latest revisions downward in the GDP for the first half of 2011 confirm our long held belief in the "double dip."
5. The "Tea Party" could have been good for the country, if they were elected before the consumption binge and outrageous spending by the government took place. However, now we are prisoners to all the debt accumulated during the past 20 years (especially the last 10 years) as we entered two wars without paying for them and promised the elderly much more than we could deliver. Cutting spending now that we are being strangled to death by the debt is a formula for disaster-since, if we don't generate growth now the deficits will explode.
6. Believe it or not, Europe is in worse shape economically than the U.S., and since we sell close to one quarter or our exports to Europe, the contagion over there only makes the U.S. debt situation worse. And with Japan's demographics, which are much worse than the U.S. ( a much more aging population), they are not any better. China will also have a very difficult time engineering a soft landing after an incredible planned economic expansion based almost completely on construction of homes and office buildings.
Shares of the Comstock Capital Value Fund are only offered for sale in the United States. The materials in this website are not an offer to sell or solicitation of an offer to buy any security , nor shall any such security be offered or sold to any person, in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Investors should consider the investment objectives, risks, sales charges and expense of the fund carefully before investing. The prospectus contains more complete information about this and other matters. The prospectus should be read carefully before investing.This Fund utilizes short selling and derivatives. Short selling of securities and use of derivatives pose special risks and may not be suitable for certain investors. Short selling is the sale of a borrowed security and losses are realized if a price of a security increases between the date the security is sold and the date the Fund replaces it. Derivatives may be riskier than other types of investments because they may respond more to changes in economic conditions than other investments.
You can obtain a free prospectus by calling G. Distributors, LLC., Inc. at 1-800-GABELLI (1-800-422-3554), or contacting your financial representative or by visiting http://www.gabelli.com. The Comstock Capital Value Fund is distributed by G. Distributors, LLC. One Corporate Center, Rye, NY 10580
© 2011 Comstock Partners, Inc.. All rights reserved.
netsential
website developers
Note: I have also included their last bit of advertisement not for its solicitation but rather it sounds that they may invest as short sellers and hedgers and this may distort their views; i.e., they seek market pullbacks and bet against the market.
None the less; the bullet points are interesting.
I wonder if others on the forum accept the bullets and believe if this plays out that Canadian real estate will be affected.
I am not commenting about the article which may/may not be true as it refers to anecdotal views of various private wealth managers and in fact I believe it is probably more true than not at least for the time being.
There is the 1 comment which I found interesting:It refers to an article that one would say is written by a bear but I believe it truly summarizes the state of affairs in the US and if extrapolated; has to have an impact on Canada and also ultimately on Canada's real estate.
http://www.comstockfunds.com/(X(1)S...&menugroup=Home&AspxAutoDetectCookieSupport=1
Posted on: Thursday, August 11, 2011
Printer Friendly Format Printer Friendly Format Send to a Friend Send to a Friend RSS Feed RSS Feed
Share Share link on Twitter Tweet Shared 13 times
Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys
Recent Market Commentary:
8/18/11 Bear Market Far From Over
8/11/11 Lengthy Bullet Points on our Bear Case Regardless of Interim Rallys
8/4/11 Suddenly It All Matters
7/28/11 No Good Outcome From The Debt Ceiling Crisis
7/21/11 Deficit Deal Could Derail Growth
7/14/11 Why The Economy Feels So Bad
7/7/11 Nothing Matters Until It Does
6/30/11 Europe's Southern Tier Still A Festering Problem
6/23/11 Why Fed Policy Is Paralyzed
6/15/11 Please click on the latest "Special Report' on Left Side of Home Page
6/9/11 Economic Policy Out Of Ammunition As Consumers Retrench
6/2/11 It's The Recovery That's Temporary----The Pause Is Real
5/26/11 More Confirmation Of The Economic Slowdown
5/19/11 Economic Slowdown Is Already Here
5/12/11 An Ominous-Looking Market Top
5/5/11 The Tipping Point Has Arrived
4/28/11 Bernanke's Unconvincing Press Conference
4/21/11 The Negative Consequences Of Ending QE2
4/14/11 Market Outlook Negative Both Technically And Fundamentally
4/7/11 Why 2011 Is Like 2000 and 2007
Next >>
Search Archives:
1. Eleven years ago we experienced the strongest secular bull market in U.S. history covering the period from 1982 to 2000 (interrupted only by the 1987 crash). This secular bull market ended with the most outrageous valuations in history. In fact, the P/E and px to cash flow and every other metric you wish to use were more than double the prior peaks over the past 100 years. The NASDAQ valuations metrics were off the charts and NASDAQ hasn't come close to this high since. All this was accompanied by extreme debt increases over the prior 20 years. This was clearly (in our humble opinion) the start of the present secular bear market which should surpass the secular bear from 1966 to 1982 by a large margin. And in fact, the market did decline sharply for the next 3 years. However, the politicians and the Fed could not handle the pain that it would take to wipe out the overvaluations and excess debt that took place during the bull market. Instead, the Fed lowered the Fed Funds rate from 6.25% to 1% and kept it there for and extended period causing a second bout of "irrational exuberance" revolving around a housing bubble and a secondary stock market bubble from 2003 to 2007.
2. Wall Street and Washington wanted to push everyone possible into a home even if they were not close to being able to afford one. Washington worked with banking institutions to get them in homes they couldn't afford and then Wall Street packaged these loans, got AAA ratings and sold them to their clients. We discussed the insanity of these processes for the entire period and felt confident that when this bubble finally burst it would be extremely painful.
3. Although many on Wall Street believe the market is currently undervalued we disagree. The market expected the S&P 500 to earn $108 in early May of 2008 but due to the bursting of the bubble the earnings came in at $50 for operating earnings (excludes write-offs) and $15 for reported earnings (GAAP). The analysts that are using $100 this year and more next year for the S&P 500 and a P/E of 15 to magically come up with 1500 on the index are guilty of faulty reasoning. We believe we will trade at below 10 times depressed earnings which should take us down to the lows of 2009 or below. It is clear to us that there will have to be a global slowdown in the second half of this year and next. The reasoning for the slowdown is again the debt, but not just the sovereign debt, the private debt is even worse than the public debt. The total debt in this country is over $52 trillion and the public debt is around $9 trillion ($14.5 trillion if you count the debt used in funds that were raided by the government like Social Security).
4. The Household Debt (H/H) is by far the most extreme and will be the debt that will be the cause of the "double dip" in our opinion. The H/H debt was almost always about 50% of GDP and 65% of Personal Disposable Income (PDI) but started rising during the past 20 years as the consumers went on a spending binge where they bought everything they could on credit (especially homes) and even used their homes as an ATM machine. This took the debt from about $5-$6 trillion to $14.5 trillion at the peak in 2008. They are now cutting back and saving more and the debt has shrunk to about $13.5 trillion. We expect this debt to decline below $10 trillion (possibly $8 trillion) and will drive the U.S. into a "double dip" and affect the global economy as well, since the U.S. is three times the size of every other country-- and consumption is 70% of our economy. The latest revisions downward in the GDP for the first half of 2011 confirm our long held belief in the "double dip."
5. The "Tea Party" could have been good for the country, if they were elected before the consumption binge and outrageous spending by the government took place. However, now we are prisoners to all the debt accumulated during the past 20 years (especially the last 10 years) as we entered two wars without paying for them and promised the elderly much more than we could deliver. Cutting spending now that we are being strangled to death by the debt is a formula for disaster-since, if we don't generate growth now the deficits will explode.
6. Believe it or not, Europe is in worse shape economically than the U.S., and since we sell close to one quarter or our exports to Europe, the contagion over there only makes the U.S. debt situation worse. And with Japan's demographics, which are much worse than the U.S. ( a much more aging population), they are not any better. China will also have a very difficult time engineering a soft landing after an incredible planned economic expansion based almost completely on construction of homes and office buildings.
Shares of the Comstock Capital Value Fund are only offered for sale in the United States. The materials in this website are not an offer to sell or solicitation of an offer to buy any security , nor shall any such security be offered or sold to any person, in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Investors should consider the investment objectives, risks, sales charges and expense of the fund carefully before investing. The prospectus contains more complete information about this and other matters. The prospectus should be read carefully before investing.This Fund utilizes short selling and derivatives. Short selling of securities and use of derivatives pose special risks and may not be suitable for certain investors. Short selling is the sale of a borrowed security and losses are realized if a price of a security increases between the date the security is sold and the date the Fund replaces it. Derivatives may be riskier than other types of investments because they may respond more to changes in economic conditions than other investments.
You can obtain a free prospectus by calling G. Distributors, LLC., Inc. at 1-800-GABELLI (1-800-422-3554), or contacting your financial representative or by visiting http://www.gabelli.com. The Comstock Capital Value Fund is distributed by G. Distributors, LLC. One Corporate Center, Rye, NY 10580
© 2011 Comstock Partners, Inc.. All rights reserved.
netsential
website developers
Note: I have also included their last bit of advertisement not for its solicitation but rather it sounds that they may invest as short sellers and hedgers and this may distort their views; i.e., they seek market pullbacks and bet against the market.
None the less; the bullet points are interesting.
I wonder if others on the forum accept the bullets and believe if this plays out that Canadian real estate will be affected.
daveto
Active Member
Interested, yes I agree with those bullets. I think that much of the western world has been increasingly borrowing from future consumption, and that we were protected from the consequences of that in 2009 by unprecedented fiscal and monetary policy. But more borrowing does not cure the consequence of too much borrowing. I think all of this will effect jobs/incomes/consumption in many countries for the next decade or so, and I can't see any reason why our real estate wouldn't be affected.
dlam
Active Member
A good example is Scotiabank plastering huge signs on their store fronts "Borrow to get ahead". In some ways it makes sense, like the old adage, use others' money to make you money. But that shouldn't apply to anyone, there are risks and it requires knowledge.
mettle
Active Member
hmmm... we're in the wsj today...
http://online.wsj.com/article/SB10001424053111904279004576524893838118716.html
http://online.wsj.com/article/SB10001424053111904279004576524893838118716.html
cityplaceguy
Active Member
With interest rates staying low this is the best time to buy, it really is common sense!! Buy in at low and pay as much as you can to take advantage, it look like a good few years IMO. All I can say is buy buy buy!!!
Forget the rest come get the best!
Forget the rest come get the best!
ducati0000
Active Member
http://ca.finance.yahoo.com/news/Ho...5ZmlUb3BTdG9yaWVzBHNsawNob3VzaW5nc3RhcnQ-?x=0
more reason for no bust.
more reason for no bust.
Kenny
Active Member
I'm gonna assume you're being sarcastic.
Dilla
Senior Member
I'm pretty sure he's a real estate agent, so...no, he's not.
He's not just any agent. Search his other posts. He's special.
detroitbootybass
Active Member
Ha ha ha!