Preparing To Blame The Inevitable Canadian RE Crash On The Bears! – “I wish the perma-bears would just go back to their lairs for a really long nap.”

“For years we’ve listened to housing perma-bears Garth Turner and Ben Rabidoux warn of a collapse in housing prices. But those stubborn price indexes just aren’t co-operating. When is Armageddon ever going to descend?
Actually, I do have a fear of Armageddon. Namely based on the risk that the thicket of gloomy blog posts/tweets eventually whip up homeowner anxieties enough to precipitate waves of selling in a self-fulfilling prophecy. Moreover, the risk of such an outcome could be climbing with the mainstream media picking up on the theme (in a rather uncritical way considering the subtleties of economic cycles and statistics missed by the perma-bears).
As a homeowner, I admit not only to a vested interest, but also to wishing the perma-bears would just go back, frankly, to their lairs for a really long nap. Their proclamations substantially risk devaluating a major asset of mine. Furthermore, if Canadian housing were to crash similar to what occurred in the U.S., there will be a rather traumatic impact on the Canadian economy and all our living standards.”

– image and text from ‘When will housing Armageddon arrive?’, Larry MacDonald, Canadian Business, 30 May 2012

Once a speculative mania gets underway, the fact that it will crash is as inevitable as gravity and sunrise.
The villains of a mania, if there are any, are the many parties that contributed to its expansion, not those who point out the nature of that which has developed.
After years of denial, after ignoring mountains of evidence & years of measured arguments from bears, RE bulls are now suggesting that we all follow the path of even more denial. This is a psychologically primitive response and one that should invoke both laughter and sadness in those who hear it.
The woeful thing is that, despite the fact that this is so obviously a ridiculous argument, some will actually end up believing it, and will blame the coming crash on ‘naysayers’. As though if we all simply linked hands and pretended all was good, it would be so.
This is a truly remarkable, preposterous (and, given it’s publication by ‘Canadian Business’, arguably landmark) article. Mr MacDonald appears to be a homeowner who is likely over invested in his home, and whose future financial well-being is consequently under threat, and who is now allowing wishful thinking to blur his ability to weigh the evidence.
The bubble will implode because it’s a bubble, not because people point to it and say “Look, a bubble!”
– vreaa

41 responses to “Preparing To Blame The Inevitable Canadian RE Crash On The Bears! – “I wish the perma-bears would just go back to their lairs for a really long nap.”

  1. Sorry Larry, all bubble’s have to pop eventually,especially in light of a world in total turmoil. Talk about a head up his arse, these journalists need some retraining that markets go up AND down, or it wouldn’t be a market.

    • People who seem to study finance always seem to forget the economics behind the markets. Maybe he skipped that class when(if?) he was getting his finance degree ?

    • He is just speaking from fear. What he is really saying is he does not know the answers for why the market is beginning to fail. The guy was invested on faith alone.

  2. The article also has all sorts of additional minor points of interest.
    For instance, use of the term ‘permabears’ as a way of dismissing an individual’s opinion outright. We all know that sensible bears can turn bullish when market conditions dictate. Yeah, we’ve been Vancouver RE bearish for years, but only because the market has been extremely overextended for years.

    • NoteToEd: Thematically related abstract from a piece by DJ MartyStrong entitled, “The Persian Rugs Going Out of Business Sale!” – as recently featured on YVR’s least subtle ‘partisan’ political weblog…

      “That unfortunately is a scenario we humans are not all that good at seeing. If it is indeed a bubble, it will remain invisible to all those but a chosen few. Those few will be madly blogging about it and preaching their gospel of “sell now” at cocktail parties, desperate to be proven right. And even if history does prove their predictions about a real estate crash to be correct, we’ll still find them annoying and usually find a way to avoid them at the party.”

      [NoteToEd: Few are the GoodDeeds which go unpunished – accordingly, as the prevailing regional MetaNarrative of ‘HousePriceOnlyGoUP!’ self-destructs… Those on the losing side of the trade will be looking for FolkDevils to castigate…]

  3. Royce McCutcheon

    Wait – bearish folks have the ability to shape markets with their minds? Dang! If that’s the case, can I ask a small favor of the “perma-bears” who inhabit this space? Instead of focusing your powerful magic on crashing the market, can you instead divert your powers to a bit of hair restoration for myself? It wouldn’t take much to get me back to where I was in my early 20s – just a little thinning to undo – so I’m really just looking for about 10 minutes from each of you. Can’t wait to look in a mirror later today!

  4. Ralph Cramdown

    Cassandra never gets any respect.

    They say the same thing about stock market short sellers. Their fears are ungrounded, their research is wrong, they’re unfairly maligning our company and depressing the stock price. Then the bottom falls out and reveals the truth, Sino Forest being the most recent example.

    It takes courage to publicly state that the emperor has no clothes, especially if you’re a professional prognosticator. I picture a guy at a roulette wheel. He keeps putting it all on red, winning, and letting it ride. Every time he does, some yob in the crowd mumbles “that ain’t gonna last” but the crowd keeps shushing him. Except, of course, that roulette wheels aren’t serially correlated and are fundamentally random, unlike housing markets.

  5. “Namely based on the risk that the thicket of gloomy blog posts/tweets eventually whip up homeowner anxieties enough to precipitate waves of selling in a self-fulfilling prophecy”

    Because the proles are too sack-of-sacks stupid to think for themselves and will believe any sort of BS story thrown their way. Oh wait.

    Notice the twitter reference. I’ve been getting some flack on “da stream” too, people can’t figure out why I “hate” so much. One wondered if I owned property and said if I believed my own arguments I should sell. So there. FTR I’m not selling, but please don’t ask more, it’s not what you think.

  6. pffft! …. Nortel Networks: How Innovation and Vision Created a Network Giant … circa 2000! … 35 used copies from $0.01 … look_inside and peek at back cover! pfffft!!!

  7. The Poster Formerly Known As Anonymous

    “the risk of such an outcome could be climbing with the mainstream media picking up on the theme (in a rather uncritical way considering the subtleties of economic cycles and statistics missed by the perma-bears)”

    So NOW the media has suddenly turned uncritical and is reporting the perma-bears’ incomplete and flawed analysis without due journalistic diligence?

    So… all those clamorous reports in the MSM about a “hot real estate market,” “buy now or be priced out forever,” “a great time to buy,” any story featuring commentary from Bob Rennie, Cam Good, Tsur Somerville, Ozzie Jurock et al, etc etc were all critically investigated before going to print?

    What happened? how did the media become so uncritical of “perma-bears” all of a sudden?

    And would Larry be so kind as to fill us in on the fine detail of these subtleties of economic cycles and statistics that these blinkered perma-bears miss? Did I miss all the considered economic analysis that Rennie and Good used to show why prices should not be allowed to decline?

    Editor is right. This is a sad article. Poor man.

    • Larry kind of reminds me of a tourist on Safari who just encountered a dangerous animal resting close by. Shhhhh! Shhhhhhh!!!! Don’t look, don’t look. If everyone would PLEEEEASE just shut up we won’t get mauled. Don’t disturb it. They can attack unexpectedly and they are ferocious when aroused from a slumber. Everything will be OK if we just tiptoe past and stay reeeeeeeeeal quiet.

  8. VREAA, I hope you will forward your comments on to Canadian Business, who knows, maybe you will end up on the editorial page?

  9. Oh yeah, lather rinse repeat. Same as the U.S. crash.

    After it is down 25% they will shut up about it.

    • 4SlicesofCheese

      Actually I find a lot of American commentators, who were wrong on the subject, still talk about it post-crash.

      Everyone loves to points the finger at everyone else.

  10. “Namely based on the risk that the thicket of gloomy blog posts/tweets eventually whip up homeowner anxieties enough to precipitate waves of selling in a self-fulfilling prophecy.”

    Yo, keep the animal spirits optimistic.

  11. Minority opinion crashes market. News at 11.

  12. If your sitting on the beach on a hot summers day, and you turn around and see a massive storm building and moving your way.

    You warn your family and friends, and anybody else who will listen. Many basking in the sun laugh at you. That storm wont hit. Itll slide along the mountain range to the south. Theyll get smashed down there, but its different here. We havent had a big storm in 20 years.

    So you pick up those closest to you, head indoors, close the windows and prepare for the srorm which is bearing down on you..

    A short time later, the storm ravages the beach with lightning thunder wind and driving rain.

    Were you responsible for the storm? No!

    There are always those who will look learn and try and understand. Others are always destined to not see the obvious.

    19,000 listings in Vancouver, markets crashed 2.5% overnight.

    Id say the wind is picking up

  13. Interesting logic. Did we Bears bring down the US/UK/Irish/Spanish/… housing markets? Well if any of you did, could you please give Vancouver a kick, patience is not my strong suit. 🙂

  14. And Larry MacDonald would scold the child for pointing out that the emperor is wearing no clothes.

  15. Irrational exuberance… from bears.

  16. I know we talk regularly here about spectacular leaps of faith and logic, but I think this has to take to cake. Where on earth were the editors?

    I saw fancy investment people put off their lunch by a red-faced, alarmed David Rosenberg in early 2008. They mostly hoped he was wrong and carried on. No one has a monopoly on being right about the future, but discounting theses because the conclusions are too uncomfortable is madness. So is expecting Ben Rabidoux to talk down a $3 trillion asset class.

  17. Too funny, ole Larry knows how to time his writings with market crashes, LOL. Maybe we’re spoiling his next book about to hit the stands “How Innovation and Vision Turned My House Into a Fricking Huge ATM”.

  18. It is exactly opposite – for the RE market, banks and costruction industry to keep going the sensible bulls should turn bearsish now. It is not the perspective buyer that is a problem now but a seller with the mind set that his RE investment is destined to grow and if it starts to decline, well – it is a temporary thing and we should weather that one etc. The bulls at the top of FIRE are about to realize that they have created a mosnter – that class of people that hoarded the houses like crazy and now is going to scream and demand that the party would go on regardless that it hurts an economy – at this price point there is not going to be any volume in sales, mortages, construction is going to come to a halt etc. The buyers at this price point are an exceedingly rare spieces that would not make any difference in the overall balance – people with the money that are not in yet and that are on the other hand are suceptible to a cool aid-brain wash – these are the mutually excluding qualities.
    I think that this is why we start to see the bearish articles in the news – the FIRE is allowing them to pop up as they need the market to go down if they hope to let some air from the baloon go before it bursted. But their previous insensible bullisch tactics gets in their own way, how ironic.

  19. This is only one of the first glimpses of this type of argument. It’s about to get real. Real as in neighbours who have been friends for years suddenly hating each other because one of them reduced the listing price on his house and “devalued every one of our properties”. That sort of sentiment is going to take hold in communities and subdivisions across the land. Imagine attending the next condo board meeting after you’ve just reduced the the listing price on your unit by $80,000 or so because you’re desperate to sell. Your fellow glass tower-dwellers will vote on a lynching.

    • It’s all the fault of bloodsucking buyers who negotiate a lower price than what it’s worth. Don’t they understand it’s in their own interest to pay a higher price to keep prices rising? Paying a lower price turns momentum around, and leads to losses for everybody.

      • That’s the spirit MM. We just need to bid up prices. It’s all about honour and it’s in the national interest. So lets not have any crying about high prices. It is our duty as good Canadians to pay larcenous asking prices with pride and carry the burden of debt with dignity. Like all good soldiers we will do it for the ones who follow. This is for the children, bless their souls.

    • So true, Cranky. Whoever flinches and drops prices first will be seen as everyone as a turncoat and outsider. That person is the weak link in the system so the fault is theirs when comparables all fall together.

  20. dont have to blame the bears; bears have been a joke for years already and will be for years to come!

  21. Fred, the joke is in your hand.

  22. Pingback: Why a Crash in Canadian Housing Prices is Certain. « alphahunt

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