Vancouver Secrets

Recession Tips

Or, How Are You Planning On Surviving This Recession.

photo credit: megananne

With a recession all but certain, you have two choices:

1) Hunker down, cut back and ride it out…

2) Ignore it and continue down a blissful path of running up your credit.

#2 sounds a lot more fun, less work, and if you’re listening to the Canadian media, all will be hunky-dory.

The reality is that with the market poised to go well below 10,000, the Canadian dollar is retreating, our commodities are falling fast, the price of oil is headed towards $50… it’s starting to sound like an exact repeat of the 80’s.

High interest rates are certain to be here next year, the price of a home will be significantly less than it is today, and stocks will be a bargain. Hell, if you want to get into business you’ll be sure to find a company you can buy for a song.

Cash is now king.

Those with cash can play along with Warren Buffett and buy up assets at incredibly low prices. Those that do will be incredible rewarded and - in good ‘ol Canadian fashion - be vilified (or at least frowned upon).

Canadian’s don’t like those that get rich by being smart. Just look at the what’s being blamed for the current mess. Wall Street, greed, sub-prime mortgage brokers…

The reality is that a socialist policy of making it the right of every American - whether they could afford it or not - to have a home lead to this collapse.

The market and the financial industry just did what was expected - they made money off of a “system” the Democrats handed them.

When house prices stoppped rising at a rate of 10%+ per year, the system failed.

This is because people who never had the income to pay for the home that was given to them through the Equal Housing Opportunity laws suddenly couldn’t get a home equity line of credit to cover the spread.

Then it became the game of musical chairs. Pass the mortgage around and the last one left holding the bag wins.

Unfortunately, the Canadian financial system played in this game too. We’re only starting to hear the news - wait till after the election for the rest of the story.

So, it’s official - we’ve maxed out our credit… now our bills are due.

If you want to get through the next few years without serious pain, now’s the time to:

1) Put away your credit cards.

2) Avoid loans or relying on your home equity.

3) Save.

The bright side of the above is that you will lessen your carbon footprint - and get those pesky environmentalists off your back - and you’ll seep better at night.

How are you planning on surviving the recession?

Barney Frank Gets His _ _ _ Handed To Him

Finally, someone accurately accuses and challenges a member of Congress over his involvement in this current financial crisis.

Barney Frank, the failed Chairman of the House Services Committee for his role in the Fannie Mae-Freddie Mac, gets taken to task, finally.

One other point that isn’t made very often:

When the Democrats took over the House of Representatives and the Senate in January of 2007, the Dow Jones was at an all-time high of 12,400 and gas prices around $2.15 per gallon. The Republican-led Congress of the previous 4-years had left a strong-economy in the hands of Democrats.
In two years two years, under Democrat-controlled Congress the Dow Jones hit a 5-year low of 10,485 and gas prices loomed near $4 dollars a gallon.

This Congress is the worst in history and not enough attention has been paid to this fact.

Love him or hate him, O’Reilly serves a purpose.

We Just Got A Little Poorer Today

photo credit: Nick McCarthy

In case you’ve been under a rock today - U.S. stocks suffered their worst day in seven years as the Dow lost more than 500 points, the steepest point drop since the day the stock market reopened after the Sept. 11 terror attacks.

The Toronto stock market also lost more than 515 points today. It now has lost 18.7% from its most recent high June 18. The selloff since June has wiped more than $350 billion of market value from the stocks listed on the TSX, affecting your pension plans, RRSPs, mutual funds and other equities investments.

Oil prices also lost more than $5 a barrel to $95.71 extending a two-month slide from the record $147 a barrel.

The upheaval in the financial sector could trigger another round of commodities liquidation. Investors may unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.

As much as some will try to pin this on current governments, this mess isn’t caused by a political party. It’s caused by house prices falling in the US.

Simple as that.

Once house prices started to fall, investors walked out on real estate. Prices fell further.

Consumers tightened their wallets, credit tightened and home equity loans evaporated. This is the root cause of the US mortgage mess - sub-prime mortgages being the first to crash.

The symptons are starting to show here… Canada’s hot housing markets cooled as home sales fell 3.4% in August, bringing the year’s retreat to 19.3%, the worst since 1998. National house prices are down 5.1 per cent for the year, according to the Canadian Real Estate Association.

Hang on for a bit of a ride over the next few months. The market is adjusting and there will be more casualties. And we’ll feel each one in Canada. Cash is now king.

My big worry is derivatives. An “impossible to explain” investment tool that I’m sure is about to cause a lot of pain. They keep being mentioned each time a financial institution fails - and the liability of these investments is in the trillions.

This could be ultimately where we get hit the hardest.

–