It’s my understanding that in 1929 companies listed on the exchanges routinely sold shares at 30-40 times earnings. Today, you can find a multitude of shares trading between 5 and 10 times earnings. It’s hard to find any that trade above 20 times earnings. Why do you think that our markets are going to drop by another 50%?

XIU.TO down from the first purchase $20.58 31.54% Aug 29 the safety of indexes =o)

BQI bought again at 1.64 luckily when the exchange rate was much more favourable.

Now you guys can watch me burn or turn =op

Sorry I missed you there. I don’t see any Milroy sales recorded on the MLS but it’s possible that they are not reporting. Some builders and developers actually remove listings from the system when they sell.

We had quite a discussion about that report in a previous post.

http://tinyurl.com/5raz4d

“Investment banker Merrill Lynch Canada

singles out Saskatoon and Regina as the most overpriced housing market in the country, estimating prices are overvalued by 50 per cent” ??

http://www.westerninvestor.co/Last%20months%20issues%20pdfs/wi-C.pdf.

http://market-ticker.denninger.net/

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=cd79bccc-3fd5-4939-8846-d9b87675cdb2

” oil prices are reaching the point where they could threaten new oilsands projects in northeastern Alberta, experts said.

Justin Bouchard, an oilsands analyst with Raymond James in Calgary, said new projects such as Petro-Canada’s $21-billion Fort Hills mine could be threatened by a combination of skyrocketing costs and lower oil prices. “You’d never go ahead with it at $80,” Bouchard said. “It would be very difficult to imagine sanctioning it today.”

Bob Dunbar, an oilsands expert with Strategy West consultants in Calgary, agreed prices have taken a back seat to costs for the past few years as developers have struggled with rising prices for labour and materials like steel.

He reckoned that Fort Hills would need a sustained price of about $90 to be considered economic.

Older projects like Suncor’s Millennium expansion still continue to generate healthy returns at $80 and even newer projects such as Canadian Natural Resources’ Horizon mine and the OPTI/Nexen Long Lake thermal operation are probably resilient to the latest price crunch.

But companies that rely on significant outside funding sources without internally generated revenue are in trouble. ”

They throw in a bull at the end…

” “it’s not the prevailing price today that matters, but where oil prices will be in 2012 and beyond.

“Unlike conventional oil and gas, oilsands is really about your long-term view. And we’re still really bullish on crude over the long term.” “

“Prices are going to come down and I think pretty hard. For first time buyers this is great. On an average house you saving at least 5,000 every month you wait.”

I sure hope you are right. As a renter in my early 30s, I’m really sick of the “I’m sorry you have cancer” look I get from people when I tell them that I am renting. I’ve come to realize that owning your own home is a social status and for some reason people think my husband and I have “failed” or have been poor managers of money because we are renting.

Without going into a lot of detail, there are so many reasons why we are still renting. But I think we are actually ahead of many people because we have learned the discipline of saving and paying cash for everything (even a car) and haven’t had consumer debt for about six years.

My heart also goes out to those who are relying on the markets for their retirement, but I hold onto the hope that somehow first time buyers will benefit for waiting to purchase a house.

2006 is ancient history…

I was in Calgary over Thanks Giving. The Calgary Herald ran an interesting piece on oilsands development. Basically it said projects that are up and running are relatively safe. But new ones in the works are being hurt badly by the perfect storm of lower oil prices (this was when it dipped just below $80), skyrocketing construction materials and labour costs. Construction and labour costs have went *way* up since 2006.

How the hedge fund squeeze will push stocks even lower

http://www.moneyweek.com/investments/stock-markets/how-the-hedge-fund-squeeze-will-push-stocks-even-lower-13913.aspx

Well, because of the hedgie effect, share prices could easily fall some way further than anyone expects. “The market’s going to overshoot on the downside”, says Peter Boockvar at Miller Tabak, who sees the Dow tumbling to 5,000 next year, more than 40% below today. “When that occurs, I’ll be a raging bull”.

The credit crunch claims its biggest victim – Argentina

http://www.moneyweek.com/news-and-charts/economics/the-credit-crunch-claims-its-biggest-victim-argentina-13892.aspx

Which country will go bust next?

http://www.moneyweek.com/news-and-charts/economics/which-country-will-go-bust-next-13906.aspx

Chris,

Good question, I’ve been wondering that myself. It’s downtown so I’m thinking sales have fared better compared to other areas. (but hope I’m wrong)

It’s true, pension plans are taking a hit from the market turmoil. People do not have to be directly investing money in stocks to be losing money right now. Plans will differ in their investment startegies-you’d have to check your particular fund.

The three months leading up to the end of September was the largest quarterly decline in a decade for Canadian pensions. Funds have likely fallen a lot further since then. In fact, since Oct. 1, the TSE S&P/TSX composite has fallen from 11,285 to 9,294 (at the close of trading today). I was able to cash out a pension fund in the spring that originated with an employer in another province. I have not cashed out my pension with my current employer, and I’m not sure I will. I haven’t worked here too long. It’s quite a lengthy process, and you take quite a hit unless you cash out into an RRSP (which I did). Most of that money is now in short-term cash equivalents.

George,

I’m not sure everyone would agree with you that I’ve been smart, but thanks. I guess we’ll see how it all shakes out.

I doubt if you were close to retirement that you would agree your statement.

pension funds have lost money

the housing atm is losing money

Expect retail sales continueing to drop not due to people saving, but less people feeling wealthy and tapping into their home equity.

There are only 2 low risk investments right now.

Going into cash and paying off debt. Everything else is a fool’s game.

Confidence. Confidence in the market was slowly eroding with price drops and slowing sales just before the summer. Add a possible severe world wide recession to that and not people are confident in sinking 450k into a house that will probably continue depreciating in value for x amount of years.

Credit. Now this is the biggest factor for this market, IMHO, even bigger than the speculators trying to cash out now. Even though variable rates are low, with more rate cuts to follow, credit is not as easy to get as it used to be. And the amount given out is less everyday. I would not rule 25% down over 25 years becoming the min in a few years.

Fear. 2007 was the year that people had the “fear of being priced out”. 2009 will be the year of ” fear of being priced in”. Meaning many sellers NEED to sell and will slash their price just to get rid of the house.

I said before this economic turmoil that the average house should be around 200k. Now, I think that might be a bit high.

Prices are going to come down and I think pretty hard. For first time buyers this is great. On an average house you saving at least 5,000 every month you wait. For upgraders, I would recommend selling your house first, then start looking because there is so much inventory to choose from. Offering 20% less than asking?

I think real estate will become a boxing day sale but with only a handful of people in the store. Crikey, you will be one of few smart ones:)

Hey Norm – have you heard how condo sales at The Milroy are going?

it is a risk, no doubt, but like I have mentioned, wife and I have company pension plans so if I am wrong about the markets collapsing we have those to fall back on. We are young, we will possibly enter back into the market after a few years. Like I have mentioned before, if one has food, water, shelter and freedom, everything else is gravy. Billions in the world do not have this.

But I feel sorry for many people who are close to retirement. Some will have to work a few more years and others you have lost all, will work until the die. In a short time horizon, shorting would be an option for some people, otherwise people should be prepared for more losses. The driver of the North American economy is the consumer. And the consumer is tapped out without the ability to get more credit to grow the economy. People have talked about peak oil, I disagree, we have reached peak credit and now the downturn is gonna hurt, even on the island of Saskatchewan.

About the chart. Yikes 67% loss for the Nasdaq!

http://en.wikipedia.org/wiki/Athabasca_Oil_Sands

“In mid-2006, the National Energy Board of Canada estimated the operating cost of a new mining operation in the Athabasca oil sands to be C$9 to C$12 per barrel, while the cost of an in-situ SAGD operation (using dual horizontal wells) would be C$10 to C$14 per barrel.[10] This compares to operating costs for conventional oil wells which can range from less than one dollar per barrel in Iraq and Saudi Arabia to over six in the United States and Canada’s conventional oil reserves.

The capital cost of the equipment required to mine the sands and haul it to processing is a major consideration in starting production. The NEB estimates that capital costs raise the total cost of production to C$18 to C$20 per barrel for a new mining operation and C$18 to C$22 per barrel for a SAGD operation. This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs C$36 to C$40 per barrel for a new mining operation.

Therefore, although high crude prices make the cost of production very attractive, sudden drops in price leaves producers unable to recover their capital costs—although the companies are well financed and can tolerate long periods of low prices since the capital has already been spent and they can typically cover incremental operating costs.”

“As a result of the oil price increases since 2003, the economics of oil sands have improved dramatically. At a world price of US$50 per barrel, the NEB estimated an integrated mining operation would make a rate return of 16 to 23%, while a SAGD operation would return 16 to 27%. Prices since 2006 have risen, exceeding US$145 in mid 2008. As a result, capital expenditures in the oil sands announced for the period 2006 to 2015 are expected to exceed C$100 billion, which is twice the amount projected as recently as 2004. However, because of an acute labour shortage which has developed in Alberta, it is not likely that all these projects can be completed.”

So the sand oil production may stop at a price at 20 to 40.

How are you felling about the whole thing? I found it scary but a big relief at the same time. Like you’ve said, the liquidity is there, and once the bottom is in sight you can always jump back in if you choose. I maintain (and I’d think you’ll agree) that this is not a normal bear market.

Unless you have long time horizon, this is a risky market, IMHO. If you are buying today and holding for years, you’ll probably be fine. If you are down 40-50% YTD, it may take you years to recover. If you are ok with this, then fine, risk may not be that high. I am waiting for the near-term risk to dissipate before entering back into this market.

I recently saw this chart that shows the performance of one cash equivalent vs. other investments during the past (almost) eight years. BTW, the numbers for non-cash investments have worsened considerably in the last couple of weeks:

http://tinyurl.com/5bjgwq

BTW, captcha = “tempt corporate”. Do you think someone is trying to tell me something?

http://en.wikipedia.org/wiki/Tar_sands

“With 2007 crude oil prices significantly in excess of the current average cost of production of $28 per barrel of bitumen”

“With oil prices setting new highs in 2007, tax incentives were no longer necessary to encourage oil sands projects in Canada. In July Royal Dutch Shell released its 2006 annual report and announced that its Canadian oil sands unit made an after tax profit of $21.75 per barrel, nearly double its worldwide profit of $12.41 per barrel on conventional crude oil.”

The oil sand projects got hot since 2003.

http://en.wikipedia.org/wiki/Image:Oil_price_chronology-june2007.gif

So the edge price for oil sand is about 28 and below 40 investment will flee from oil sand.

I think all of these bailouts are just adding cost and prolonging the inevitable.

Who knows what will happen and where the markets will hit bottom. But according to Standard & Poor’s, there are at least 140 large US companies in danger of not being able to pay their bills in the next few months. Many are on the verge of bankruptcy. The government can not bail them all out.

http://thecomingdepression.blogspot.com/2008/10/get-ready-for-tidal-wave-of.html

Once we see some of these bankruptcies and we will, the markets will dip even further.

http://fresh.bnn.ca/reuters_story.aspx?story=2008-10-24T153441Z_01_TRE49B3Y6_RTROPTT_0_CBUSINESS-US-MARKETS-OIL.XML

“However, we believe production cuts will not rescue the oil price,” he said. “We target WTI (U.S.) crude oil prices hitting $50 a barrel next year.”

As for oil, I think we will go below 35/barrel by 2010, unless there is a war.

Once the dust settles from the market implosion, worldwide debt and cheap credit, expect major regulation changes. How does this pertain to housing? Some talk from governments is stricter lending, such as 25% down over 25 years. Where Canada goes with this, who knows, but getting rid of 40 years and 0 down is not the last step for mortgage changes in this country.

Holy crap George. That’s scary!

Have to share my captcha: “is sadness”

http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog

As I’ve said many, many times, from the point of view of Generational Dynamics, if you go back through history, there are many small or regional recessions. But since the 1600s there have been only five major international financial crises: the 1637 Tulipomania bubble, the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1789, the Panic of 1857, and the 1929 Wall Street crash.

These are called “generational crashes” because they occur every 70-80 years, just as the generation of people who lived through the last one have all disappeared, and the younger generations have resumed the same dangerous credit securitization practices that led to the previous generational crash. After each of these generational crashes, the survivors impose new rules or laws to make sure that it never happens again. As soon as those survivors are dead, the new generations ignore the rules, thinking that they’re just for “old people,” and a new generational crash occurs.

It seems whatever the governments do, they just postpone the inevitable.

Money markets start to seize up again

http://www.reportonbusiness.com/servlet/story/RTGAM.20081024.wmoneymarkets24/BNStory/Business/home

Stocks dive on fears of global recession

http://www.reportonbusiness.com/servlet/story/RTGAM.20081024.wmarketsstaff1024/BNStory/SpecialEvents2/home

When it comes to countries, I think Iceland was the canary in the coal mine.