Crawl Across the Ocean

Tuesday, January 22, 2008

Because it's different here / this time / etc.

Via the comments at Vancouver Condo Info, here's a funny article from the CBC on how B.C. is protected from any fallout from the economic problems, with the biggest concern being that people might lose a little confidence because they see all the negative headlines.

"On Tuesday morning the main Canadian index, the S&P/TSX composite, was up 337 points to 12,467 by 11 a.m. ET after it had tumbled 605 points on Monday, while the U.S. market opened with a nosedive after being closed on Monday for a holiday.

Mutual funds and other investments are taking a hit, but B.C.'s economy is relatively protected, say economists.

"We have this commodity and construction boom of epic proportions which is keeping the western provinces essentially at full employment," Aron Gampel, the deputy chief economist of Scotiabank told CBC on Monday."

So the U.S. is going into (is already in) a recession, but it won't affect B.C. because of the commodity boom (and these commodities are being sold to who, exactly?).

Meanwhile, how long will 'a construction boom of epic proportions' last when house prices drop in B.C. like they did in the U.S.?

Consider this chart of U.S. housing starts.


"SFU business professor Lindsay Meredith sees no black clouds on B.C.'s economic horizon. And he predicts consumers — especially cross-border shoppers — might actually benefit if retailers in the U.S. begin slashing prices."

So, if people cross the border to do their shopping somewhere else, that will be *good* for the B.C. economy? OK then.

I've heard of 'every cloud has a silver lining', but sometimes it seems like the media in B.C. thinks that clouds are actually made of pure silver. The fact is, sooner or later we'll see the impacts of a U.S./global slowdown here in B.C.

For example: Canfor closing two mills in Fort Nelson, B.C. ... "The PolarBoard oriented strand board mill and the Tackama plywood mill are closing indefinitely, with the firm blaming poor wood product markets"

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  • Silver cloud? More like platinum!

    In all seriousness, rural BC is a much better short-term barometer as they're much more resource-based... things won't hit the fan for the urban crowd until companies realize they have to slash jobs.

    Real estate will also get hit if foreign capital is trying to get out of the local marketplace. Given the liquidity of our real estate market, it may result in a price compression if the supply hits too quickly and starts to lower asking prices in a cascading fashion.

    I wouldn't want to own a concrete box in the sky right now, and I could imagine the people rationalizing the 2010 olympics as a reason to "hold on for dear life", but that event should theoretically be priced in the marketplace already.

    By Blogger Sacha, at 12:21 PM  

  • I remember fondly being told, in all seriousness, that I just didn't get the new internet economy where companies didn't need to actually earn money.

    It's been so long since we've had a broad based and sustained downturn that some people have never seen one and others have begun to believe they won't happen any more.

    That's not a prediction, just a concurrence with your observation.

    By Blogger KevinG, at 4:57 PM  

  • Is there some reason why anyone listens to the predictions of economists (much less business profs!) anymore? Granted, they've predicted ten of the last four recessions, but I think this reflects their expertise best.

    By Blogger Josh Gould, at 7:08 PM  

  • Sacha, you reminded me of an old Bruce Cockburn lyric which is somewhat appropriate for the current situation:

    "In the bar, in the senate, in the alley, in the study
    Pimping dreams of riches for everybody
    Something for nothing, new lamps for old
    And the streets will be platinum, never mind gold
    Well, hey, pass it on
    Misplaced your faith and the candy man's gone
    I hate to tell you but the candy man's gone"

    Kevin - I remember watching CNN back in the tech bubble, the condescending tone that the anchors took with Warren Buffett, telling him how things had changed, he was behind the times and he just didn't get it...

    Josh - I'm not sure anyone listens to the predictions of economists, it's just that the media has to fill the space/time somehow and they're not very imaginative.

    Love that clip, I left a link to it myself, in the comments over at Darren Barefoot's place a couple of days back.

    By Blogger Declan, at 9:49 PM  

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