Bank CEO/s – “There is a bubble. What we see now is probably, at worst, a soft landing.”

Speaking in Toronto, Bank of Nova Scotia chief executive officer Rick Waugh said even though there is a housing bubble in Canada, he doesn’t expect the residential real estate market to crash.
“What we see now is probably, at worst, a soft landing,” Mr. Waugh told reporters after a speech to the Toronto financial community.
“The economy is strong enough and diversified enough that the impact will be handled accordingly without the risks of a bubble – of an extreme bubble. There is a bubble.” …
“The numbers we are seeing now are really not a huge surprise,” Mr. Waugh said. “They are well within our expectations, let’s say 10 per cent in sales volume, and 10 per cent in prices.”
Of the slowdown in the market, he added: “This is happening. It is happening.”

– from ‘At worst, housing market headed for soft landing: Scotiabank CEO’, G&M, 18 Sep 2012

We haven’t been headlining each and every banker’s comment on the RE markets, but this one will suffice as fairly representative of what’s being said currently.
Thoughts:
1. Note the pattern; played out in all RE collapses around the world. First, “There is no bubble”. Then “Sure, there’s a bubble, but the ‘landing’ will be soft”. (Later: “We warned this was a bubble and that price drops were likely.”)
2. One has to wonder whether these guys actually understand what a bubble is. If you admit one is present, the coming collapse is a given.
3. “Probably, at worst, a soft landing.” Really? Does he really believe those are the odds?
– vreaa

26 responses to “Bank CEO/s – “There is a bubble. What we see now is probably, at worst, a soft landing.”

  1. I think you’d have to agree that a bank CEO saying that real estate prices in an area where he lends are going to crash is akin to shouting “Fire!” in a crowded theatre. Irresponsible at best, a breach of his duty to his shareholders at worst.

    One can certainly argue that talking up the market is unethical (“lying”) if he doesn’t believe it, so maybe they should just jeep their mouths shut?

  2. Esmerelda Fitzmonster

    Soft Landing
    A Little Pregnant
    Harmless Crime
    Controlled Enthusiasm
    Completely Destroyed
    Honest Politician
    Kosher Ham
    Quick Fix
    All Natural Artificial Flavour

    and on it goes…..

    More on Global at 6

    • Very funny 🙂
      +1

    • EsmereldaFitzmonster, you Darling, you!

      You forgot….

      “Mission Accomplished!”

      Let me guess… It’s going to be a “SoftLanding”… in a ‘SoftPatch’… [The IrishBingo CowDung kind?]

      [NoteToEd: METAR across entire PNW so “Bello Imponante!” I’ve been preoccupied breaking in new Michelins, CheatingDeath and FloutingTheLaw. TwoRedCoats were so ‘Shock&Awed’ earlier today by the ExhaustNote and LeanAngle they just waved and threw their CitationPads out the CrownVictoria’s window. ThankGoodness for RadarAbsorbing paint.]

  3. Averaged numbers across the country will probably show that the market isn’t actually a total smoking greasy fireball on the tarmac. However, data collected specifically from places like Vancouver, Toronto and Calgary might tell a totally different story.

  4. Everyone talks about the talking head’s duty to shareholders. The Borg serves the machine… What about the duty to himself as a human being who actually knows that bubbles do not land softly or deflate gently. The willingness to lie, tow the line leads to a shitty life. He can have it…

  5. “For built into this situation is the eventual and inevitable fall. Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape. Something, it matters little what – although it will always be much debated – triggers the ultimate reversal. Those who had been riding the upward wave decide now is the time to get out. Those who thought the increase would be forever find their illusion destroyed abruptly, and they, also, respond to the newly revealed reality by selling or trying to sell. Thus the collapse. And thus the rule, supported by the experience of centuries: the speculative episode always ends not with a whimper but with a bang. There will be occasion to see the operation of this rule frequently repeated.”

    – A Short History of Financial Euphoria, John Kenneth Galbraith

  6. Sounds very familiar to Ben Bernanke when describing the US housing market. Here are some of his great predictions.

    (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

    (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

    (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

    (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

    (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

    (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

    Yep, no one panic, we will be fine, its different here.

  7. “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained…”

    I remember Jon Stewart’s response: yes they are contained – on planet Earth!

  8. Does anyone else miss the bulls? I know they could be annoying with all that “ain’t gonna happen here; I’ve made bajillions on my RE investments while you’re a lonely, poor renter” nonsense but a part of me wishes they’d come back. It would be nice to hear that ‘SFH will never decline more than 15%’ or that ‘land is the ultimate investment – stay away from condos – buy land’…not accurate, but nice.

    Also, more importantly I’d like to gloat a bit.

  9. Don’t make me dust of the infamous Angelo Mozilo soft landing quote!!!
    Disingenuous banker is disingenuous, or at least I had thought so until last summer. Ask me again about this in a couple of years.

    • Orange Mozilo is one of the big winners of the US housing bubble. He tunelled out Countrywide by using shareholder’s money to extract over half-a-billion dollars for himself when it was clear (to bears and smarter analysts at least) that the company cannot possibly survive. He only paid $67 million in fines.

  10. If “soft landing” is the worst-case scenario, what is the best case scenario? Perpetuating the bubble?

    Seems to me like…

    Diagnosis: You have cancer.
    Worst-case scenario: We eradicate the cancer by surgery and chemotherapy.
    Best-case scenario: The cancer just sits there growing in your body.

  11. Soft landing? What an idiot! It’s never happened in history and yet this guy trots it out as a possibility. Ya right. Go ask the Americans about this “soft landing” theory. They’re laughing their heads off at us!

  12. Achtung, HerrIllustrious…. your pet RoboRedaktor is chewing on one…. Danke Schoen!

  13. Bank CEO’s calling for the 10% decline know that 10% decline has already happened and that it will take 12 months to show up in the y-o-y numbers.

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