Tuesday Numbers/CKNW

There were 234 new listings today and 109 sales, for a sell/list of 49.68%.  Inventory reached 8,790, with over 90s at 2,524, or 28.71%.

 Some of you probably heard Bob Rennie, Helmut Pastrick, Michael Campbell and Michael Levy this morning on Bill Good’s show. It was a very interesting show.  If you missed it just go to CKNW, sign up for their club and go to the audio vault and start listening around 9:10. 

My favourite take away?   Mr. Rennie mentioned passive investors with 25%-40% down collecting rent downtown.  To be fair, he may have been talking about past sales, but if not, I’d sure like to see those units!  He also mentioned that we won’t have over-supply downtown because the buildings under construction are all 80% to 100% sold.  That strikes me as a convenient measure of supply.  I’ve argued before that ownership (and the price of it) isn’t the key; housing demand  (whether satisfied by owning or renting) is the key.  It will be interesting to see if we continue to absorb the supply that’s being built now.

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112 Comments

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112 responses to “Tuesday Numbers/CKNW

  1. WoW

    Rob, now you get it, you see how the ‘spin’ is applied – now watch as fundamentals trump spin. Don’t blink.

  2. Domus

    It seems that I owe LongTimeReader a thank you: there were 7 responses to his version of the questionnaire.

    Shall we check together the ‘wisdom of the masses’? Here are the average for each category (obtained giving to everyone a weight of one. Remember that all points must sum up to 100):

    1) crash (down >30%) : 26.42

    2) correct (down 10-30%) : 50.7

    3) remain approximately unchanged (between -10% and +10%) : 14.57

    4) appreciate modestly (up 10-30%) : 7.42

    5) make laughable the disparity between rich and poor (up >30%) : 0.85

    In this (very small, but I suppose informed) sample we have that people give a 77% probability to a correction larger than 10%.

    Around 15% probability of no change. Meager 8% probability of an increase.

    Newcomer is the most bearish, followed by Whybuywhenucanrent, Johnnyrent, Dude, alex, Mightymouse, and (the bull of the group) LongTimeReader.

    Even if we halve the results associated to (1) and (2), to discount bearishness of respondents, we have a nearly 40% chance of a large downward adjustment.

    Maybe the bulls thought it was not worth participating?

  3. Domus

    Some news (thanks to Calculated Risk, as usual, although I doubt he reads this blog….):

    Merrill Lynch: House Prices May Fall 30%

    From MarketWatch: Merrill Lynch says U.S. nationwide home prices may fall 30%

    Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years …

    And Bloomberg quotes Rosenberg: U.S. 2008 Growth Forecast Cut in Half by Merrill

    “Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades likely will result in the worst consumer recession since 1980,”

  4. chip

    Economists are a dime a dozen, and their predictions are worth about as much.

    Here’s Rosenberg, for example, in 2005:

    “We could be in store for 1%-ish growth next year,” says David Rosenberg, North American economist at Merrill Lynch. He’s taken his estimate for S&P 500 profit growth down to 2% next year.”

    What really happened to the S&P500 in 2006?

    Rose 16%.

    Maybe he’s right this time, maybe he’s wrong. But either way, there’s no point putting too much stock in it (pardon the pun).

  5. Domus

    ….it might be his time to be spot on……anyway, aren’t we back to late 2006 in the S&P500…..give it few more months and maybe he might turn out to be right with that 1%…..

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  7. alex

    TSX opened down 300. We are in interesting times. Anyone overleveraged is in trouble, same for business. Leverage is great on the way up, but can mean disaster heading down. Bear markets are short but savage, this will be a doozy. I don’t think this is a minor correction. But what do I know? My money is where my mouth is, I believe me. Check with me in 6 months.

  8. AmPa

    Rob,

    So Mr. Rennie maybe correct that 80 – 100 % of the constructions in downtown are already sold.

    But what if 50% of those were bought by flippers? Is there not a difference between housing demand for speculation versus housing demand for occupation?

  9. Mr. Maxwell

    This is an interesting story on the US situation. While we are to some extent different, I think you will find there are many similarities in our markets.

    http://www.nytimes.com/2008/01/23/business/23leonhardt.html?hp

    Supply and demand are key in most market matters. Not a revelation. Rennie is a smart guy and knows that but he is a realtor promoting for his developer clients. There is no upside talking about presale speculation and other such issues when you are making piles of money promoting condos? Given the nature of this blog I suppose these are trite statements.

  10. Domus

    If you go to a cheese-burger joint and ask them whether they sandwiches are good, what are they going to say? No?

    That’s Rennie: he is a marketer. He sells condos for a living. Is he going to say that buying them right now is dangerous?

  11. househunter

    What BS. I am into SFH’s and don’t know much about condos. But all you have to do is talk to a notary who does completions. In this abnormally hot market, the notaries are booked 2-3 months in advance. A notary located on the east side complained that they have NO completions for the month of Februrary. They have not seen that in years. Also, take a look at how many new houses are for sale on the west side. In our hot market, we would be lucky to have 20 new houses on the market that are 0-2 years old. This week we have > 53 west side houses that are 0-2 years old. This is not something we have seen for a long time. I am not a bear, I am definitely a bull but I am not building anything until the new home inventory on the West side starts to move. This is not a positive sign so far.

  12. blueskies

    But what if 50% of those were bought by flippers? Is there not a difference between housing demand for speculation versus housing demand for occupation?

    Ampa i am totally appalled this is my exact question…. is speculative demand “real”?

  13. Domus

    The way I see it, speculative demand thrives on non-speculative demand.

    1)Speculators are middle-men who profit from holding RE units for the purpose of resale.

    2)If the resale value evaporates, speculative demand disappears.

    3)In the process, the investors holding units when the music stops are burnt.

    Has the music stopped yet, or the concert will last a few more months. To me, this is inconsequential. I know it will stop.

  14. robchipman

    alex:

    You should check out Terrence Corcoran in the NP yesterday morning. He called yesterday’s rally and also called for more sell-offs today. He’s got an interesting perspective (plus, he’s a grouchy old guy, which is often humourous in and of itself).

    AmPa:

    That was my point. I’ve mentioned it before. The value of RE depends more on housing demand than on buying demand. (At the same time, whether the’s a shill or not, Bob Rennie is no dummy. Its worth paying attention to, and analyzing, what he says). If I can rent it the only question that remains is whether someone wants to buy the unit so that it can be rented. Rennie also pointed out that we aren’t building any rental stock on a large scale…unless you include individually owned condos (and not just downtown – let’s face it, they’re being built everywhere). I think Rennie’s argument in this case holds water – provided the metrics work and provided there is sufficient housing (read “rental”) demand. Clearly I don’t think we meet the metrics test. We’re going to figure out if we meet the rental demand test.

    Househunter:

    What I find most challenging is that this market seems to stall and then jump with pretty pronounced movements. It seems like a real case of fits and starts, with the bias being upward. We keep looking for the downward signal (as we have for a few years now), but just when you think that things have changed (based on anecdotal evidence like what you see), you come into the office and get a surprise that confounds you. I can say this: its tougher for our sellers to write their own tickets nowadays (compared to 2005, for example). But, its till very tough for buyers.

    Blueskies:

    Speculative demand is always real. After all, they put their money on the table and make the deal, right? I think the real question is: is it enduring? Again, if its backed up by housing demand, its enduring. If its not, well, speculators better have deep pockets. Personally, I don’t like risk as much as I like returns, and I think you can get satisfactory returns while reducing risk. Therefore, I don’t like speculation, at least if its the prime goal. On the other hand, if you buy with 24%-40% down, have it cash flow, have good tenants, have quality property, and then see it double… 🙂

  15. vomitingdog

    I went to the Millenium Water sales centre yesterday and met a guy there that had bought 4 properties. He and 3 of his buddies did the same… that’s 4 each. He’s now waiting for phase 2 when he and his buddies will pick up 4 MORE EACH. He plans to flip all 8 and then land himself as good a suite as possible in the waterfront units.

    He can’t possibly be the only one doing this. The agent there told me a lot of S. Koreans come in and buy more than one. I know that a nothing 2-bed condo in Seoul goes for about 2 million, so even Millenium Water must look like a bargain. I guess Bob believes his own sales stats, what can I say except if it’s a house of cards, we’re all going to get hurt badly.

  16. vomitingdog

    Oh and also, the flipper was told by Rennie’s agent that he could expect rents of between $3,000 and $4,000 for his 2-bed units. How could any agent say that? (It’s a rhetorical question, don’t answer it, I know how they can say it.) They should be liable for what they promise.

  17. Noname

    Vomitingdog,

    He must have meant during ‘those’ 2 weeks…

    Noname

  18. robchipman

    VD:

    Agency is a misunderstood concept, and I think your post helps point that out. Rennie Marketing’s “agent” is more likely an employee, and not really an agent of anyone, least of all the buyer. The implication should be obvious.

    Nice 2 bed dwntwn? I’d say low $2000s. $4,000? Better be pretty nice.

  19. Mr. Maxwell

    This is from the NY Times article that I link to above. It applies here in Vancouver. Speculation in this market depends on price appreciation not rising rents.

    “The situation with house prices looks worse. Until 2000, the relationship between house prices and rents remained fairly steady. The same could be said about house prices relative to household incomes and mortgage rates. But the boom of the last decade changed this entirely.”

    In the context of presales, the market can turn downward months/years before the buyer has to close and pay for the unit. While there may be legal consequence, speculators will walk from their deposits. This is especially true of non-resident speculators.

  20. jesse

    ” The value of RE depends more on housing demand than on buying demand”

    Hey Rob, can you clarify? For example if I sell property and I receive four offers, two from buy-to-let investors, two from flippers who plan to sell in six months, the price I receive is not based solely on demand for dwellings but on competition between buyers regardless of how they plan to use the property in the short term. In the long term I agree dwellings are occupied but this does not preclude spurts of tulip-mania.

    As a bit of a sidebar, southeast England is a good example of what happens when supply does not keep up with demand. It’s not like people are living on the streets; instead they compromise and start sharing accommodations. The same happens in Vancouver too. People will sublet, live with parents, share a double bed, etc.

    It’s fine to say that 90% of under-construction units are sold but the rents charged need to be affordable to someone or rents must fall. In addition, if enough buy-to-let supply comes online, rents would also fall until all units are filled. (The issue for many landlords, as you mention, is that there is a floor on the rents they can charge before they go negative CF.) The point is that supply is always meeting demand as long as there is “pent-up demand”. (Except in extreme cases, like Phoenix or Sacramento, where there is no pent-up demand; there is no demand at all!)

  21. Ymir

    I guess the question that begs to be asked is: why on earth would you want to live in Vancouver if the only way you can afford it is by sharing a double bed with a stranger?…
    Are people going insane here or is it me?

  22. foo

    Rob,

    I agree most people looking for the downward signal have been confounded for the last 2-3 years. But the last two weeks things DID change. Stock market sentiment has gone from complacent to concerned to panic. The previous occasions that the Central banks jumped in with rate cuts, the market soared right afterwards and the talking heads said all is well. This time the sentiment is that the party is over. Take a look at what happened to Apple and Google, never mind the financial sector where the real pain is.

    When people see their RRSPs in freefall, their friends start getting laid off, they stop thinking they’ll upgrade, or buy a nice second home, or a condo downtown for the kids. And with >1000 units getting completed this year, there’s going to be a lot of flippers looking to get out. Panic sets in much quicker than you think.

  23. foo

    One other thing,

    I agree Bob R is a smart cookie. That’s all the more reason not to take notice of anything he says in public. The real insights come from what he says to his business associates in private. The stuff he says in public is designed to further the goals he discussed in said private conversations.

  24. Priced Out

    “When people see their RRSPs in freefall”

    Yes, its RRSP season. People know what’s going on, especially middle class to wealthy people. I think this is it for the Vancouver real estate boom. DONE!!!

  25. jesse

    “The point is that supply is always meeting demand as long as there is ‘pent-up demand’. ”

    I should clarify: supply meets demand but sellers and buyers may disagree on price, leading to higher inventories. Eventually someone loses the game of chicken but it can take years.

  26. s.p.

    as an aside…
    as you drive around vancouver in the evenings – look up at the pretty condos…
    something i noticed is that there are a lot of units with no lights on which leads me to suspect the following:
    1. home owners are in over their heads so they are living with the lights off to conserve money
    2. home owners cant afford light bulbs
    3. units are empty – because they are waiting to be sold
    4. units are empty – because they are waiting to be rented
    5. owners have multiple condos and they only spend a couple nights a week in each condo – so its sitting empty for that night

    next time your driving around, look up…what do you see?

    spark

  27. Priced Out

    “Eventually someone loses the game of chicken but it can take years.”

    Buyers never have to buy, but sometimes sellers have to sell.

  28. WoW

    Lights out – yes, I noted that, and I find it odd odd odd….mabye the owners bought night-vision glasses will all of their RE gains? Could this be the answer? Or maybe they are so excited about all the mulla they are making, the are engaged in activities that are better done with the lights dimmed way down? In any event, I find it odd.

  29. YLTWNboomerang

    s.p.

    “there are a lot of units with no lights on…”

    I made this observation last year and also noticed: Have a look around dinner time, same thing, no lights particularly in the Yaletown / ConcordP area. Next, at the same time, check out all the Yaletown restaurants at the same time during mid week evening eating time and guess what, not many diners (except right now as dine-out vancouver upsets the balance and brings the weeked suburbanites diners out midweek). Where are all these people eating? Either they can’t afford to eat or pay for electricity, or there is nobody living in these units!

    Hmmm, nobody living in the units? Can’t be true, so take a walk down your new tower’s parking lot right down to the basement and suprise… no cars! I sold my waterfront townhouse last year in a 3 year old Concord building and even at that point the parkade was only at about 60% capacity. A friend of mine and his wife in the building lived in a one bedroom den but had no problem parking their two cars and work truck (3 vehicle total) in the underground parking as they just decided to use two of the eternally vacant spots rent free; four years in, they have shifted spots twice but still park 3 vehicles underground with only one official spot.

    So, maybe people who live downtown don’t need cars as they can walk to their job… wait a second, how many downtown jobs are there? How come there is so much traffic coming downtown from the suburbs each day? All these empty parking spaces can’t mean empty units can they???

  30. BOBBYBEAR

    1 day reversal on the Dow. Fed will cut again next week. WOW.

  31. Mr. Maxwell

    Rob – “Agency is a misunderstood concept, and I think your post helps point that out. Rennie Marketing’s “agent” is more likely an employee, and not really an agent of anyone, least of all the buyer. The implication should be obvious.”

    Not the agent of anyone? By virtue of Rennie’s company being retained by the developer to market and sell units Rennie’s employee signing up buyers obviously has obligations to the developer. The primary obligation being to sell units. They are an agent of the developer.

  32. robchipman

    Jesse:

    Here’s what I mean. Flippers may think that the property may double in six months. The long term investors may not care too much about that, buying simply because it makes sense with an assumption of say, 5% nominal annual growth, long term. On purchase negotiation day the flippers drive the price up until they reach a point where the long termers conclude its not worth buying. After that the flippers have only owner occupiers to compete with. They can still bid the prices higher (and we’ve seen that happen).

    Now, let’s assume that the properties get sold, and are on the market. The long term investors get the rent they needed. As prices rise rents feel pressure, but they’re bought in, and can survive on under market rents quite nicely. We’ve seen it, and its one of the reasons why rents don’t climb as quickly as sales prices.

    But, let’s assume supply wasn’t sufficient for flippers buying demand. They keep demanding, developers keep building and selling, and prices keep rising. Then, as the cranse are dismantled and the keys are handed over we find that housing demand isn’t as strong. Somebody is getting vacancies. (And we may see that in the coming months/years – after all, there’s a lot of building going on).

    The owner occupiers don’t care, as long as they can pay the mortgage. The long term investors don’t care, on the same basis. They can rent, even at lower rates, because they bought wisely (if they hadn’t, they’d have been unknowing speculators). But, again, someone is going to have vacancies. If housing demand is less than buying demand, that is the only conclusion.

    Rents may drop, but people don’t move at the drop of a hat to save a bit of money. Kids are in school, lifestyles are in place, and moving is a hassle. Also, many tenants have rents locked into 3.8% increase rates, and so are arguably under market already.

    What did we see? Buying demand drove prices up, but housing demand didn’t support them (unless the guys with vacancies have very deep pockets).

    Now I’m not saying housing demand isn’t strong, or isn’t here. I’m just saying its more important, long term, for price support than buying demand. We’ll see which way that frog is going to jump before too long. I’m not guessing at this point, except to say that there is a lot of building. Vancouver zoning requires commercial at the bottom of a lot of multi-family residential. A lot of the residential gets sold and occupied, but a lot of the commercial stays vacant for years. What’s the problem? No demand. Drive down the street and you can see the evidence.

    Your southeast England sidebar is well taken: another way of looking at it became apparent when watching the movie “Notes on a Scandal”; one of the characters lives in a London…basement suite. Very nice place,etc, but a basement suite, all the same. In Vancouver we’ve traditionally thought of basement suites as places for students or lower income people. That’s changed, and we’ll see more changes like you mention. Affordability will force it. You can rent my super nice downtown luxury pad for a price that pays my bills but that bankrupts you, or you can settle for less. What do we think will happen when people can’t pay the rent? I now have one property that I rent that is a single room and bathroom -kitchen, bedroom, everything all in one. It stays full at under $600. I have another – nice clean, pretty new – 1 bedroom, a bathroom and a kitchen. Who needs a living room, right? And with eco-density we’ll see people living in garages before long. Anyway, it boils down to the same thing – housing demand is the master that must be served in the long term.

    Ymir:

    You know the story about the frogs in the pot of cold water on the stove? Make the change gradual enough and people accept just about anything.

    Foo:

    I’m not saying this will happen, but we have sseen it in the past. When the stock market scares people, they move to real estate. I’m pretty sure that Michael Levy (never a RE bull in my memory) pointed that out on CKNW yesterday. In other words, I don;t think the stock markets are sending a clear enough signal yet, and I note that many are looking at it as a chance to buy.

    But, if flippers do need to get out, there may be chances to buy. Here’s a parallel: right now some stock bargain hunters don’t want to buy yet, while others are jumping on what they see as value. Flippers face a challenge. To get out of mortgage obligations they either need to sell for more than the mortgage (we’ve discussed whether a 30% haircut would make stuff attractive to investors, and we’ve talked about high ratio speculators – do the math) or they need to pony up the shortfall, or they need to be foreclosed on. In short, if we see a correction, it won’t be overnight. It will take time. Patience will be rewarded on the buy side (jmho).

    s.p:

    When you were out driving around, did you leave your lights on at home? And the guy beside you in the big SUV? Where does he live?

    P.O.:

    Correct you are! The big question is: how many have to sell, because selling under those conditions is painful. The worse the selling conditions the more “have to sells” decide they really don;t have to sell, hence price stickiness on the way down.

  33. s.p.

    leaving lights on:
    actually yes – i do leave 1 cfl bulb on.

    there is something psychologically comforting about coming home and having a light on waiting for me…i hate this quote but i will use it: its like having a ‘candle in the wind’ waiting for me.

    (makes me feel warm inside – also the cat is scared of the dark).

    not sure about the guy in the SUV next to me – i suppose he’s driving home? or to his second job?

    my comments were anecdotal and by no means scientific.

    cheers,

    spark

  34. robchipman

    s.p.:

    Its an old observation, though. “lights are out, not only is nobody home, nobody lives there, they’re owned by specu-vestors, the sky is falling, etc”

    It might be right. It might be wrong. But it is old and has various alternate explanations.

  35. WoW

    Rob – do you think Allan Angell has it right, or do you think we have a big uptick this spring? Or a bigger downtick than may currently be bandied about?
    thx

  36. Domus

    “I have another – nice clean, pretty new – 1 bedroom, a bathroom and a kitchen. Who needs a living room, right? ”

    Rob, I think you have a good point there. One thing that I often mention to people is the way condos’ blocks are built.
    I still have to see a three bedroom condo with living room and den which is not a penthouse.
    In Europe they are pretty normal: you have a vast choice of middle-range (not penthouse) condos with more than 2 bedrooms. They often have large balconies and open spaces (terraces). They are very nice to live in.
    It seems to me they just don’t build them here: all I see is layers of very boxy condos.

    Now think of the following: there are a lot of costs in owning and operating a SFH. Lots of headaches. I might prefer to spend good money on a large condo, but not necessarily a penthouse. Where do I go?
    If a median income family outgrows their small apartments, they have only the choice to buying a SFH (or attached), often moving to the suburbs. Why?

    Does anybody know of condos/apartment blocks with large units (3 bed + living room + den) ? Do they exist in Vancouver?

  37. beans

    domus there are some in Burnaby I know of, 3 bedroom, 2+ washrooms, living room. $540-600K

  38. Johnnyrent

    A very comprehensive new post from Mohican, required reading for bull and bear alike:

    http://langley-financial-planning.blogspot.com/

    I think a debate on the information contained in the above link would be interesting.

  39. Domus

    Thanks beans. How about Vancouver proper? Do you know any, or all condos are small boxes for chicken?

  40. -A-

    “Some of you probably heard Bob Rennie, Helmut Pastrick, Michael Campbell and Michael Levy this morning on Bill Good’s show. It was a very interesting show.”

    I have to admit I did not hear the show, but I would imagine it was probably a typical repeat, of a few realtors stacking up the phone lines, and show screener/producer letting a couple of enthuse Kool-Aid drinker through, and asking whether it was a good idea to pay the mortgage first or top up the old RRSP.

    The average IQ of the Bill Good Show listener is probably below that the average 15yr old from Point Grey.

    For the show to have any credence whatsoever they would have to disclose the guests RE holding.
    Any guesses who has the biggest RE holdings?
    Bob Rennie, Helmut Pastrick, Michael Campbell and Michael Levy ,
    or Bill Good?

  41. vomitingdog

    Actually the flipper I met went into this project with one of Rennie’s agents–like he or she has bought 4 units too and plans on buying 4 more. So presumably the advice of $3-4K to rent a 2-bed came right from the horse’s mouth. The flipper did say when I asked him if he was afraid of the RE market that he was “terrified”. But he’s a gambler and I’m not. And he may be living in a penthouse by 2011 and I may not… or it could be the other way around!

    This dog just loves sniffing around. I went for a walk around False Creek after than and noticed lots of empty units. A lot of them in clumps, like 8 stories of empty units no lights on at 5:30 to 7:30 pm and no I don’t mean in the newest builds either… ones that are at least 2 years old. Also I can’t help noticing some of the ones that look just like the ones I see on craigslist for $2600/month, month after month. And when I phone some of these rentals up they’re “it’s $2,400 a month but we could make a deal.” I’m getting a whiff of something fishy!

    v-dog

    P.S: All the Millenium Water Rennie Marketing people I spoke to are certifiied real estate agents.

  42. Domus

    Yes, great data-filled post at Mohican’s!
    Well done, excellent analysis, most corners covered!

  43. robchipman

    WoW:

    I already went on record with a prediction of single digit appreciation this year (no basis for the guess – it was simply that – a guess). So no, I don’t see a big uptick.

    Domus:

    Big condos for the masses haven’t hit the mainstream in Vancouver yet in any kind of big way. However, families do get raised in the small Yaletown condos now. I think we’ll see the innovation, but you’ll either see higher dollar paid for it or lower prices all around.

    -A-:

    Can I summarize your last post as “I didn’t actually see the evidence, but I’ll describe it to you anyway and then pass solemn judgement on it”? 🙂

    V-Dog:

    The ” agent” in all liklihood wasn’t really an agent. That’s my point. Agency confers responsibilities that don’t jibe with your story.

    I bet the guy is scared. We have a client who bought and sold many pre-sales in the past. He looked cool and flashy, but at days end he had a stack of documentation on each of his flips and he watched them like a hawk. He’s out of that business now and very well off, but it was nerve-wracking for him while he did it.

  44. robchipman

    I do like that post at Mohican’s. I also like the “Donate” button!

  45. Annon

    It’s too early to be cheering. I mean look at the headline talking about a recovery in stock market simply because the fed, congress, and some banks want to put together a rescue plan. When none of them have money, where is that money coming from? Who really are affected by stocks? Even if such rescue plan can help companies from going down, who benefits from it? Certainly not the general public because after all the number of people that are involved in the stock market is way smaller than those that aren’t. And where do fed get money they don’t have? Print money or raise tax?

  46. -A-

    Rob, any guesses who has a sizeable RE holding?
    The host or the guests? And has flipped quite a few properties over the last few years?

    Or let see if you can answer honestly for a change:

    Do you know who among the mentioned is a flipper?

    No long convoluted BS answers please.

  47. -A-

    -A-:

    Can I summarize your last post as “I didn’t actually see the evidence, but I’ll describe it to you anyway and then pass solemn judgement on it”?

    Rob, my solemn judgement is that the evidence is tainted, so I am throwing out the case.

    What you say? Do you know which one is a big time flipper?

  48. vomitingdog

    It was an agent!!!! A qualified agent. An agent going into a deal with 4 buddies. The agent, who works for Rennie, believes that these new SE False Creek units will fetch between $3-4K a month by 2010 when they will be built…. and he has put his money where his mouth is by buying 4 units.

    This out of the mouth of the flipper who is in it with his buddies, one of which is the Rennie agent!

    This was the “there’s a limited downside to this deal” angle that they all reassured themselves with. The fact that the agent who works for Rennie is confident that that’s what these apartments will fetch! There’s no problem digesting the concept of agency and these guys know what they’re getting themselves into but feel better knowing that their buddy, one of Rennie’s AGENTS says their asses are mostly covered. Yeesh!

  49. -A-

    Rob, have you ever sold or know anyone who has sold to the flipper?

  50. -A-

    Well Rob, Which one from the CKNW show flips?

  51. robchipman

    -A-

    Question 1 – answer: No, and who cares who has a sizeable real estate holding and who has flipped what anyway? None of them are market makers. If you want to make a conspiracy argument fly at ‘er. The point is that you don’t know what was said, and haven’t made the effort to listen. Yet you’re passing judgement. Par for your course. BTW, they were discussing much more than local real estate.

    As for your second question, who exactly is “the flipper”? Do you mean a specific person (the target of your current conspiracy) or do you mean any flipper?

    V-Dog:

    I think I was misreading you. By agent I mean someone representing a principal’s position (in this case, representing the buyers). I don’t think you’re describing anyone in that role.

    Rennie’s agent (if he is acting as such) is acting for the seller. If he’s acting for himself let’s face it: Realtors both make and lose money on the market. Just because he’s buying doesn’t mean things will turn out rosy.

    Anyway, buyers should have representation from an agent. There is a degree of protection conferred. The guys may feel they have their butts covered simply by hanging around an agent, but if your story is accurate they obviously do not. They’re just rolling dice; if they’re rolling it based on foolish representations made by the “agent” then either the agent is in doo doo or else they don’t have an agent. (Without details you can’t really say for sure, right?)

  52. tqn

    “The average IQ of the Bill Good Show listener is probably below that the average 15yr old from Point Grey.”

    this kind of statement just showed how mature you are and how high the IQ you scored!

  53. vomitingdog

    Exactly. And my point about Bob Rennie is that he has created an atmosphere where he and all his copywriters, layout artists, designers and agents believe what he says. I think he even believes what he says. Most egomaniacs do.

    “Mr. Rennie mentioned passive investors with 25%-40% down collecting rent downtown. To be fair, he may have been talking about past sales, but if not, I’d sure like to see those units! He also mentioned that we won’t have over-supply downtown because the buildings under construction are all 80% to 100% sold.”

    Well, Rob you can see those units anytime you like. All you have to do is go down to the Millenium Line. And in his ego-driven mind and on his balance sheets, buildings under construction ARE 80-100% sold.

    If you like, I can go back to Millenium and ask them what kind of rents I could look forward to if I chose to buy as an investment and see if any of the agents bite?

  54. vomitingdog

    Water. Millenium Water, I meant.

  55. robchipman

    If the rents are like you say, they probably do cash flow just fine! 🙂 Unfortunately, like I say, for most nice 2 beds downtown I only get in the low $2,000s.

  56. -A-

    “The average IQ of the Bill Good Show listener is probably below that the average 15yr old from Point Grey.”

    Sorry I meant 5 yr old.

  57. Mr. Maxwell

    Rob – “Anyway, buyers should have representation from an agent. There is a degree of protection conferred.”

    Okay, you have acknowledged the agent in the sales centre is an agent for the developer selling Millenium Water. I’d like to know the degree of protection afforded by having a buyer’s realtor. In particular, what would you advise the buyers as their agent in the example set out by VD? What degree of protection would you provide?

  58. BBY

    “Rennie’s agent (if he is acting as such) is acting for the seller. If he’s acting for himself let’s face it: Realtors both make and lose money on the market. Just because he’s buying doesn’t mean things will turn out rosy.”

    Realtors are like stock brokers who will promote stocks. Lost a few $$$ learning not to trust stock brokers. Sadly, the first realtor (a “top producer”) so put me off RE, that I never got in to the place that I wanted, as the creepster talked me out of it, for places that he wanted to sell me. Anyhow I digress…
    Just as the aforementioned broker ended up in deep crap for the deals he claimed to believe in, so realtors can get burned by having more than enough confidence to buy RE.

    I believe there’s an old adage that the easiest sucker to sell a used car to, is another used car salesman.

  59. vomitingdog

    If I win the lottery, I’m going to buy the upper floor of the Arthur Erickson building and 3 or 4 designer stainless steel buckets to catch the leaking water. Nothing’s more soothing than surround-sound.

  60. Peter

    How many % sold is always a fictitious number. The builder/developer can reserved a large number of units and calculate the % sold based on partial inventory.
    100% sold doesn’t necessary mean 100% of all condos built are sold. It just mean 100% of the condos that are up for sales are sold.

    In otherwords, they can put up a sign saying that 80% sold and have 50% of totaly actualy inventory left.

    It’s just a propaganda technique.

    http://library.thinkquest.org/C0111500/proptech.htm

    There is no regulation on those %. This is one of the most widely used tricks by the developer/builder WORLDWIDE!!!

  61. -A-

    “There is no regulation on those %. This is one of the most widely used tricks by the developer/builder WORLDWIDE!!!”

    I wonder if they use other tricks such as going on the airwaves on a show where some of the participants are simply shills, and the “impartial host” who is in on it, throws some soft pitches to the perpetrators of the scam.

  62. Mr. Maxwell

    Peter, it is done here but I’m not sure how widespread it is. I know of one project the developer made claims about sales in “phases” when the project wasn’t phased! It didn’t sell well at the opening and they arbitrarily determined they would call a certain number of units phase 1 even though entire building was for sale at the opening. It is a Rennie marketed project downtown.

    There is no express BC real estate legislation prohibiting such practices but one could bring a claim under competition legislation for deceptive practices. A private citizen wouldn’t fund such a legal claim unless they suffered damages. If you don’t have damages you don’t have a claim worth bringing. In practical terms it would have to be brought by the competition authorities.

  63. BBY

    How many % sold is always a fictitious number. The builder/developer …
    http://library.thinkquest.org/C0111500/proptech.htm

    There is no regulation on those %. This is one of the most widely used tricks by the developer/builder WORLDWIDE!!!”

    Not that I disagree with the sentiment, but isn’t your post using some of the same propaganda techniques described in the link? Can you substantiate the claim that the SOLD % numbers that developers advertise are not regulated. I’d like to believe you, but want to stick by the ethics that the developers are accused of violating.

  64. Strataman

    Rob; “Its an old observation, though. “lights are out, not only is nobody home, nobody lives there, they’re owned by specu-vestors, the sky is falling, etc” Its a building by building thing Rob, update on Spectrum Towers 1 and 2 are 85% rented and occupied, Towers 3 and 4 are 75% vacant and un occupied. Todays info lots of realitors in there trying to sell, known reduction 0f $85,000 today. Okay its a one off and probably listed too high, but why in four towers in the same complex are things so differant? Rob what do you know about the pre sale differances between #1 and #2 versus #3 and #4? I’m asking from the point of view that you may be able to access info I can’t I know your not involved directly in those buildings. If you were why the huge differance? Put your Sherlock Hat on! 🙂

  65. Dmello

    “There is no regulation on those %. This is one of the most widely used tricks by the developer/builder WORLDWIDE!!!”

    This tactic is widely used in Vancouver, just take a walk down Georgia street. The Georgia development signs have big “Over 80% sold” stickers on them even though they have only released 1/3 of the units. Same goes for The Ritz… News covered the story that over 50% of the units sold the first couple weeks, but of course thats only 1/2 of the total units to be released.

  66. -A-

    Rob, as an insider, I am sure you must hear about all kinds of “trick and traps” won’t you share?

  67. robchipman

    Mr. Maxwell:

    I’m not sure I am acknowledging that the person we’re talking about is an agent for Rennie/the developer. He may well be a licensed agent working for Rennie Marketing, owing clear agency duties to the developer. Or not. He may just be an unlicensed employee, in which case his agency duties are diminished. He may also be someone who works for Rennie on another project, while crowing about his plans to purchase at another one. I’m not clear which he is. But I am clear that he isn’t the buyer’s agent, and I don’t think the buyer should depend on any representations he makes.

    Your question is still good though. I’d tell them, to begin with, that the rent projections are excessively rosy. I’d explain the contract clearly and objectively, with their interests in mind. I’d explain, and make sure they had a good understainding, of what flipping entails, including the downsides. Let’s face it: if you’re just going to speculate on rising prices, why not buy something already standing and at least collect some rent while you’re waiting?

  68. blueskies

    the “there’s a limited downside to this deal” angle that they all reassured themselves with. The fact that the agent who works for Rennie is confident that that’s what these apartments will fetch!

    vd:

    well put! REIC types tend to drink their own KoolAid and will buy into a bad deal at great risk to themselves…..

    like I say, for most nice 2 beds downtown I only get in the low $2,000s

    rob could you describe a typical unit?
    we are currently renting a 2bd/2ba DT for $16oo pet friendly with no outdoor space.

    thnx

    re: the Spectrum…. first impression was a purely speculative play nothing to with housing at all but then i’m a cynical old coot.

  69. Mr. Maxwell

    Rob – “I’d tell them, to begin with, that the rent projections are excessively rosy. I’d explain the contract clearly and objectively, with their interests in mind. I’d explain, and make sure they had a good understainding, of what flipping entails, including the downsides. Let’s face it: if you’re just going to speculate on rising prices, why not buy something already standing and at least collect some rent while you’re waiting?”

    Fair enough. With respect, aside from the contract explanation you are largely expressing opinion. It may be an educated opinion based on experience or numbers but no one can predict the future. Another realtor may express the opinion that it is very possible such units in the Water will command $4,000 per month and leave it at that. They may even be right. Given commission is only payable if a transaction completes, I suspect that later opinion is more likely. There is no recourse to a realtor for such puffery. We all gotta eat. Why kill a deal moving forward with statements you’re not obligated to make. There isn’t much ultruism in the RE business.

  70. Johnnyrent

    I’m surprised this particular installment of the blog hasn’t focused more on Rob’s comments, specifically:

    “He (Rennie) also mentioned that we won’t have over-supply downtown because the buildings under construction are all 80% to 100% sold. That strikes me as a convenient measure of supply.”

    If any of you have followed some of the other regional blogs, you will know that Vancouver’s CMA population has grown (and continues to grow) at a rate less than 30,000 persons per annum and yet, never mind units on the market already, there are something like 25,000 worth of 12 months completions for the Vancouver CMA in 2008. Do the math.

    Speculation in a market where rents are no where near those required to cover carrying costs, by any measure, is fueled by one thing; price appreciation.

    Never mind price corrections. I suspect that should there be even a significant reduction of the rate of appreciation, many speculators that have no emotional attachment to their homes, will bail. Therein lies the second canary in the coal mine, the first being prices deteriorating in the burbs.

  71. Anonymous

    “B ill Good prefers a young audience.”

    Does he have a choice?

    Beat hangin out at school grounds.

  72. Mr. Maxwell

    Rob – “Let’s face it: if you’re just going to speculate on rising prices, why not buy something already standing and at least collect some rent while you’re waiting?”

    Because you’re a clever speculator who knows renting doesn’t make sense with high ratio financing. You are putting down a small deposit on a presale with no obligation to close for many months during which time you will make tens of thousands of dollar of appreciation doing nothing. It has been working so far…..

  73. View

    Domus

    Bosa City Gate above Main and Terminal has larger house size rooms, if you don’t mind the location.

  74. Whybuywhenucanrent

    Anyone know why the banks are tanking in aftermarket trading?

    On the NYSE,
    HSBC, up $3.51 during day, down 3.97 aftermarket
    TD, up $3.50 during the day, down 4.65 aftermarket
    CIBC, up $4.47 during day, down $2.95 aftermarket

    As per midnight pacific time at quote.yahoo.com

  75. blueskies

    Anyone know why the banks are tanking in aftermarket trading?

    still waters run deep…..

    after closer inspection the remedies were found to be wanting.

    tomorrows’ markets will be down… again

  76. coco

    Catching up on some of the threads. Interesting comments that people would buy real estate if the stock market is jittery.

    Will the consumer still have an appetite to buy Vancouver properties at these price levels when they see other countries falling house prices, the stock market declining and the word “recession” being thrown about?

    A lot of Asians are risk takers, stock market, gambling, etc. If the stock market tanks, will they hold on to their investment properties or cash in on their profits?

    I think the biggest question that no one seems to know the exact answer to is….How many speculators are out there and how many properties can flood the market at once if people get spooked or decide to cash in?

  77. coco

    RBC housing affordability forecast

    http://tinyurl.com/2oxgpg

    (they expect list/sell ratios to slow here due to a further erosion in affordability, they think we reached a stress point peak in prices late last year)

  78. coco

    Credit crunch dries up lending pool

    http://tinyurl.com/23lro6

  79. coco

    Toronto-Dominion Bank wants employees to cut back on their expenses

    http://tinyurl.com/yp3n3s

  80. coco

    Earnings growth expected to stall at Canadian banks

    http://tinyurl.com/yosy8l

  81. coco

    Above three stories on Canadian banks contradict themselves. Money available for lending, but cut back on your expenses and earnings growth expected to stall.

    How will extra money be available for loans if earnings stall and subprime writedowns continue?

    Interesting times.

  82. coco

    I just returned from Seattle. I was suppose to head to CA, but that will be later.

    My U.S. travels have been interesting and seeing the differences in the strength of the economies in New York, Seattle and Las Vegas.

    No matter what the state, you can see that U.S. consumer spending is definitely slowing, as a lot of merchandise 75% off is still sitting in the stores. In BC, 75% off would of skittered out the door in a blink of an eye.

    A lot of spring stock is already priced 50% off because the stores are running out of floor space with all the new inventory arriving.

    U.S. retail sales figures should give us an indicator which direction the economy is headed when they come out over the next few months. By what I see so far, things don’t look very good.

  83. Al

    RBC forecasts for British Columbia : “Price gains are on a moderating path, dropping
    from 18% in 2006 to 12% last year. We expect an even softer rate of 8% this year.”

    8% gain is great, especially when GIC rates are going down.
    I think, I will keep my invetment properties. No hurry to sell.

  84. Al

    And also don’t forget that with this interest rate cut, variable rate mortgages go down.
    My open variable mortgage got below 5% now.
    Not so bad at all.

  85. Domus

    Domus

    MOODY’S PLACES ITSELF ON NEGATIVE WATCH

    Washington – Moody’s the ratings agency, has placed itself on negative watch, citing it’s horrendous track record at rating just about everything except t-bills.

    “We suck. We couldn’t spot an investment-grade bond in a box of Confederacy Debentures or Continental Bank CD’s.” said one source at the agency…

    That is perhaps a not-so-obvious joke…..from The Big Picture blog.

  86. The Original Joshua

    “8% gain is great, especially when GIC rates are going down. I think, I will keep my invetment properties. No hurry to sell.”

    No hurry? 18% to 12% to 8%… notice a trend? I’d be cashing in my profits at this point… but that’s just me. 😉

  87. coco

    8% is RBC’s guess. No two economists seem to agree on anything now a days.

  88. robchipman

    Coco:

    “Will the consumer still have an appetite to buy Vancouver properties at these price levels when they see other countries falling house prices, the stock market declining and the word “recession” being thrown about? ”

    That’s the $64 question, right? The consumer clearly had enough of an appetite to make 2007 a smoking year, despite widespread reports of bad housing news from outside Canada. Declining stocks and recession are the new ingredients.

    Mr. Maxwell:

    I suspect we agree. Clever speculators can make a lot of money by cutting corners, but the exposure is greater as well. Is one way better than the other? Matter of opinion. But, lets just say that both of us went high ratio two years ago out in the suburbs. I bought an existing place, got title, got rent, and experienced neg cash flow and took the tax write off. You bought a pre-sale, put down a deposit, didn’t get rent, didn’t get title, but didn’t get neg cash flow or the tax write off.

    Two years later I’ve expereinced a big capital gain. I was highly leveraged, so my return is in the triple digits. I have had neg cash flow, but there are pros and cons to that. You? Sorry, you bought into Riverbend. Your chances of receiving title are, well, slim. Your chances of receiving a profit are, well, slim. Your chances of losing money are, well, pretty much assured.

    In other words, it can be clever to buy the pre-sale, but it can be stupid. We’ve seen the good and the bad. So far, more good, less bad. Are we confident it will continue to play out that way? Its a risk tolerance thing, I guess. I prefer more return and less risk, whenever possible.

    Regarding opinion, puffery and altruism, you might be right. 2010 is two years away. Can we argue that rents need to double to reach $4,000 for a 2 bdrm? If so, is that puffery? Maybe. Maybe not. I guess the point is that you should get an agent who will demonstrate that he eats as a result of putting your interests ahead of his own. Its a big deal. As an aside, for every consumer who has a bitch about Realtors there’s a Realtor with a bitch about consumers (buyers are liars and sellers are worse); I think that its worth recognizing that buyers and sellers are very good to Realtors. They feed and clothe them, after all. A smart Realtor recognizes that a long term relationship with repeat clients is the best recipe for success, and that’s accomplished by being a true agent. Nothing altruistic there.

    I will argue that anyone telling an investor to make an investment based on a guess at rents two years down the line is likely breaching ethical regulations, and could be subject to fines and other punishment from the Board; they’re also setting themselves up for civil action based on misrepresentation. If your answer is that the courts don’t enforce that much I’d counter by saying that’s a problem with courts, and fairly widepsread (after all, what do you get for murdering someone?)

    Johnnyrent:

    Just to be clear, when I use the word “convenient” I mean, convenient definition if you want to prove a particular point, but not necessarily a workable definition in a broader sense. In short, I’m not accepting that definition of supply level. I want to see those things not only bought, but occupied.

    Blueskies:

    2 bedroom, small glassed in office, very nice, unobstructed water view, 2 bath, small deck, excellent address, 24/7 concierge, nice facilities $2150. Several showings, several “no thanks”, then rented, so I think we pushed about as much as we could.

  89. BOBBYBEAR

    Is that a nice way of saying….”layoffs coming” ?

  90. WoW

    Rob – have prices really done much here in Vancovouver since Sept (after the 90day rush into the market)? I thought prices were almost perfectly flat since then, that’s 5 (FIVE) full months with little to no appreciation – am I wrong on this? Yes, I understand YoY comparisons, but MoM, are we not flatlining?

    Your comments on this are sincerly appreciated. I’m just wondering if we are seeing a plateauing of prices (where they go from here is anyone’s guess, but I’m wondering about the data from the late fall to now?). I know spring is really when the market sets direction so I’m of course not counting higher prices ahead out.

  91. BOBBYBEAR

    Perhaps the Federal Reserve blundered when they lowered rates too low and too long during 2003, creating the credit bubble, but top executives at financial institutions made a F****** killing with stock options.
    So the point of what was bad for some was great for others may be answered more easily then one might think.
    A senior executive makes a huge salary, gets very substantial bonuses and cashes in risk free huge positions in stock options as the credit boom unfolds. Nobody complains. Not a word from anybody. Virtually nobody. Except guys like Buffet.

    Then when the good times finally ends the senior executive gets fired as his company faulters and shareholders get pounded. He has successfully qualified for a the GOLDEN handshake. Walks out the door with the biggest smile you have ever seen while his former company is left holding the bag.

    So what is the lesson? It is that the Federal Reserve will now step in and “save everybody”.

    What is a disaster for some works out very well indeed for others.

  92. An

    Wow – It was like that last year as well..

  93. BOBBYBEAR

    Next Gold?

  94. vomitingdog

    According to Jim Rogers: agriculture.

  95. WoW

    An – yes, but we had some rate rush, as late spring things were softening…then the smart buyers jumped in and bought all summer long….NOW what…they kinda stopped buying this fall, to catch their breath I guess….so far the numbers for Jan seem to indicate sellers (new listings) are wide awake, but the buyers are slower to the rush…now its early, I realize this…but interesting…dontcha think?:))

  96. Al

    For me, 5%-8% gain on my investment property is great.
    For my condo in Spectrum: today’s value is around $400K, (put down $69K).
    If, during 2008, capital gain on my $ 69K will be from $20K to $30K , it would be perfect.
    And don’t forget that capital gains are taxed very attractively.
    Yesterday, got GIC from TD Waterhouse (felt afraid to buy any stocks).
    They gave me only 3,7% on my $50K.
    Only $1,850 interest…. and taxed as income!…. Terrible investment!!!

  97. vomitingdog

    Prices will not go negative overnight. Seattle and the UK both took at least a year to get to 0% m-o-m. From what I see on my realtor’s private client link, good properties are still going, and some over asking.

  98. Al

    Strataman said, “why in four Spectrum towers in the same complex are things so differant?”
    I have few units in this development and difference between them is significant.

    One of the reasons is parking situation.
    Many Spectrum units don’t come with parking stalls.
    Without parking stall, unit would cost approximately $50K less (originally, Concord was selling parking stalls for big $).
    Today, many owners are speculating with their parkings stalls. Some owners decide to sell their parking stalls separately.
    Also, units with water view were priced much higher than units overlooking steam factory.

  99. Dmello

    Al

    At what point would you consider selling? Once it fell below 5% YOY? Or are you planning to hold for the long term?

  100. Peter

    Al,

    For your Spectrum condo, you are investing with a 80+% margin. For GIC, it is at zero margin and risk fee.

    Basically, you are comparing a risk free instrument with a low transaction cost and carrying fee to a high risk instrument with high transaction cost and carrying fee.

    You are aiming at a 5 to 10% gain. A trading account would make more sense because of the transaction and carrying cost.
    If we subtract the 3% agent fee out of the target return. You only need a 3 to 7% move in a stock to achieve your goal.

  101. Dmello

    Affordability Continues to Fall

    “Vancouver had another across-the-board deterioration last year, but the pace of deterioration slowed substantially by year end,” RBC said in its report.

    “We expect some affordability relief to materialize this year as the significant erosion [in affordability] weighs on demand.””

    http://tinyurl.com/2zueb8

  102. Al

    Dmello, yes, I would consider selling when yoy fell bellow 5%.

  103. Al

    Peter, don’t you feel stressed with huge stocks market risks?
    Things move so fast with stocks, can loose fortune in few days, sometimes in few hours.
    Last week, my husband had an idea to buy some Motorola stocks. Thanks God, he didn’t buy – yesterday, Motorola lost almost 20%.

    I feel more confident with Real Estate, it moves much slower.

    Which stocks are you buying now?

  104. coco

    Bank of Canada warns of tougher times, cuts growth forecast to 1.8 per cent for 2008

    http://tinyurl.com/3yohmg

    (this is the third time in two and half months that Canada’s growth has been revised downward)

  105. coco

    If Canada grows at 1.8% or less it will feel like a recession in comparison to the high economic growth spurt we have been in for so long.

  106. Mr. Maxwell

    Al is a good example of the type of person who will most likely sell when it appears price appreciation, in real terms, is flat. I think it’s very safe to say that prices will flatten eventually, possibly even drop.

  107. BOBBYBEAR

    Maybe we can set up a Real Estate Fund that invests strictly in parking stalls throughout the world. Rent them out. Make a few easy bucks.

  108. Unreal

    http://www.rbc.com/economics/market/pdf/house.pdf

    “Housing affordability is forecast to improve in 2008”

    Folk RBC’s forecast is out.

  109. robchipman

    The RBC report is becoming a favourite.

    -The report indicates that affordability in Calgary and Edmonton are such that the market may soon shift from a seller’s to a buyer’s market. I think that brings the strength of Vancouver’s market into focus somewhat.

    – The nation is, arguably, a tale of two markets. We need to keep that in mind when we are tempted to use national stats to butress a local argument.

    -RBC expects high single digit appreciation in BC this year. Are they nuts? (Wait, I made the same call).

    Anyway, good report. The affordability nut remains a tough one to crack, as always – after all, stuff around here has been unaffordable for years, yet it keeps selling at record levels. What kind of unaffordability is that? On the other hand, 70%+ of income to buy? Seems crazy and unsupportable(wait, we’ve been saying that for years now too). It looks like the conclusion right now is that its never one nor the other.

  110. The Original Joshua

    “RBC expects high double digit appreciation in BC this year. Are they nuts? (Wait, I made the same call).”

    err… high single digit?

  111. robchipman

    Original Joshua:

    Thanks! Fixed it!

  112. coco

    I’m sure some people will be surprised by the haircut they took on their stock market investments when they receive their Q4 statements. And…that doesn’t even include January declines yet.

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