Friday, November 28, 2008

The Sky is Falling... or not...

Are you suffocating yet under the sky that has crashed upon you? Are you hanging off the edge? You know, because the bottom is falling out. If you’ve been paying attention to the current take on the Canadian economic crisis you should be panicking by now. Y’know, because the ship is going down RIGHT NOW.


Except it isn’t really. Yes things have shifted and yes prices are falling – gas and house prices, for instance – and it isn’t that the economists have been quoted out of context, it’s just that the context that has been spun.


Considering the recent event that passed for a Canadian election and as the national conscience has been pulled southward by that other election, this so-called “economic crash” has provided a most excellent weapon, in the form of mud dredged from the so-called crisis, for the warring political parties to chuck at each other. There’s nothing like getting you to believe you will never retire and that your house is only worth 2$ but that the bank is on the way to take it - and your kids - to get your focus back home and make you vote. The Global Economic CRISIS a great story but so was the one about weapons of mass destruction - or global warming... and where is Al Gore these days anyway?


I’ve worked for some years on the housing side of the financial industry. Working in our field can give a person motion sickness like living on a buoy in the Bay of Fundy in winter. However, the view is pretty clear unless certain interested parties fog it all up.


Recently, I spoke to a couple friends who have senior positions in the oil patch. They pointed out that oil companies build their budgets on the per-barrel break even point, which is currently around the $40 mark. At today’s $55, there is still profit happening and there's not a lot of reason to panic, unless you’re someone who will see their annual $5million bonus shrink to $3 million - or if you're one of those Wall Street fat cats who Obama is suggesting should try on some ethics for a change.Our Canadian oil and gas markets are immensely stable thanks in large part our hungry neighbour to the south, which takes fully a third of our produced oil.


As for the real estate market, yes prices have dropped but that isn’t the whole story. Prices in most Canadian locations have fallen to pretty much where they would have been had that crazy, unsustainable bubble not happened in late 2006 and early 2007. Our local real estate board’s statistics show that the real estate market is very stable and actually in better shape than it was at this time last year. Fewer available listings and more single family homes being sold mean a better balanced marketplace and will help clear out the glut of built but not sold condominiums in this city.


The part of the story you're not hearing, because it doesn't fit (as in "Don't confuse them with facts") is that in various parts of this country, values are very stable and in some places they are rising. Betcha didn't see that stat in the news lately.


The Canadian banking systems is properly regulated, so there’s no possibility of our banks failing. The international organisation that rates banking stability places Canadian banks at 6.7 out of 7 possible points. So... if your bank is colluding in this "we have to tighten our credit and lending" schtick, they've jumped on a profitable bandwagon. They're not drowning. They're making money, rest assured.


Our local employment markets are strong; our oil and gas industry is in full production. So things slow down for a few months. This isn’t the catastrophe that some might want it to be.


As I wrote about 2 years ago - and as MacLean's magazine has finally picked up on - this 'crisis' might get Joe Public to get his head around the difference between I want it (a ridiculous looking, wasteful, poorly designed penis enlargement tool called a HumVee or a vagina enhancing enormous house that looks gorgeous but is all balsa wood, hollow-core doors and glue) and I need it (a decent, probably-used car that is small, reliable and cheap on petrol and a home. The kind people like to come to because it's comfortable and smells like cookies).


Those of you who had to have the big-assed house and the stupid looking, mostly always empty, enormous vehicle and 5 credit cards with huge limits which you've maxed out - I have zero sympathy for you. Serves you right. Grow up. Learn the difference between need and want. If you can't figure it out, go spend a couple months in a third world country where it is a luxury for people to eat once a day and where a good day means the snipers stayed home.


And yes, I'll gloat. I live in a 55 year old house. Paid for in full. I drive a 12 year old car that was used when I got it. Paid in full. I have under $5000 in personal debt, all at 4%. I have no credit card debt. I travel twice a year. We stay with friends and family and we offer them the same benefit in exchange. I wear my clothes for years; I shop at discount fashion shops but I spend less than $50 a month on clothing. I have a very, very inexpensive gym membership and I otherwise do free activities like skating outside or running. My kids never got allowances and once they were 15 they all got jobs because I wasn't going to pay for their frivolities - and they didn't have those for long... when you make your own money, you figure out pretty quick what's worth spending it on.


Am I missing out? Yeah. On a ton of stress. No thanks.


We did this recession thing in the 80s and the 90s and we'll do it again. There's much more to life than stuff. Much. In reality, this crisis will be no rougher than 160 grit sandpaper and will do about the same job of knocking off the imperfections and shining the whole thing up.


What you learn from it? Well, that will depend on how much reality you're willing to handle.

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