F.T.W.S.I.J.D.G.I.G.T.

(For those who say I just don’t get it…get this!)

Back in March I wrote an article titled, “They’re baaack! And why you should be worried – very worried”

In that article I made the case for why not only prudent financial awareness was paramount, but also how the manifestation of blissful ignorance, or, a belief in oversimplified business/financial advise is not the “ticket” to fulfill one’s dreams of riches, but rather, can suddenly become the “ticket” to your worst nightmare. It would seem I was more prescient about those claims than even I thought at the time.

First, this headline came across my desk about a week and a half ago via Bloomberg™. To wit:

“Cracks Appear In Toronto’s Housing Market As Capital Drops”

Today, I received a few more from a few colleagues noting the cause for concern, again, to wit:

“Contagion Fears Rise In Aftermath Of Home Capital Group Collapse”

“Why Everyone Is Talking About This Tiny Canadian Lender’s Woes”

“Home Capital’s Next Hitch Is Keeping Cash Crunch Under Control”

The above three are all within the last 24 hours of this writing. You can expect they’ll be many more. And they won’t be viewed as “All press – is good press.” You can bank on that.

For those who may not be familiar with the above struggling home loan lender, or its implications. The best description for comparison that can be given is the above lender and scenario is the mirror image of the set up that happened here in the U.S. right before the financial crisis (aka Real Estate Collapse) took hold in earnest when the lender known as New Century™ collapsed. This has all the same hallmarks.

Just to refresh a few memories it was at about this time (as in right before everything fell apart) that then Chairman Bernanke was touting the following. To wit:

Ben Bernanke July 2007:

“The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening in lending standards, and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment, as well as by mortgage rates that, despite the recent increase, remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further, as builders work down the stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth in coming quarters, although the magnitude of the drag on growth should diminish over time. The global economy continues to be strong, supported by solid economic growth abroad. U.S. exports should expand further in coming quarters. Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.”

Sound familiar?

Although this was here in the U.S., the scenario, attitudes, defending of the current meme “It’s different this time”, and more are once again on full display, and a tour de force as evidenced by its current manifestation The Real Estate Wealth Expo™.

Here’s what I stated in my original article back in March that bears repeating:

“Bubbles are easy to spot – pinpointing when they’ll pop – is quite another.

I coined that phrase a while back which is nothing more than adding my own spin combining two very old catch phrases used by seasoned traders and investors. I use the word “seasoned” for a reason. Why?

Because they’re the ones that have been around (and been burned themselves) yet lived to trade, or invest, another day. Those who remained wedded (usually the novice or one who’s never experienced true volatility) to the more prominent and specious claims of “you can’t tell when you’re in a bubble” followed with “you can always get out in time” for the most part are long gone. i.e.,The bubble popped into the ether – along with their money.

Nowhere was this phenom more apparent than the real-estate boom of the early 2000’s, which followed the prior phenom only 10 years prior (e.g., the dot-com crash) that should have seared into people’s memory for millennia just how “bubbles” take shape – and the resulting financial devastation that happens rapidly once they’ve popped.”

And then there was this…

“This is the moment in time where generic, over simplified advice, that sounds so good (and too good) shouted too an adoring crowd – should be taken as the siren, and clarion call to those who are diligent in preserving their wealth to buckle up, buckle down, and prepare in earnest. For once this show is over? “Over” is going to be something many of those attending these types of seminars are going to pray for – as in “Please make it stop!””

Whether or not Home Capital™ becomes the catalyst for contagion fears across Canada’s banking sector is irrelevant to this discussion. The real issue is that for the 10’s of thousands (remembering there were 15K attendees at the Toronto Expo alone) who blindly followed the advice their so-called “ticket to riches” portended, rather than understand the need for caution for these are the manifestations indicative of the “bubble mentality” are now suddenly realizing all that shouting of “I own you!” isn’t coming from a stage – but now might be coming from the banks, real estate tax collectors, bill collectors, and more as they seek to collect the payments that were signed for on the dotted line to riches.

But what’s worse (far worse in my opinion) The “asset” used to make all those “Crushing It!” riches are now nothing more than overpriced boat anchors with a market that has gone from “Hot!” to “Frigid.” All in the span of  less than 90 days.

“Who’da thunk it?”

© 2017 Mark St.Cyr

(Addendum: There is a companion piece to this article released later that day which can be found here.)

Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue”. Yet, over the years these insights came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue-in-cheek as to not use the old “I told you so” analogy. I’m saying this purely for the benefit of those who may be new or reading here for the first time (and there are a great many of you and thank you too all). I never wanted or want to seem like I’m doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall – good or bad – and let readers decide the credibility of either side. Occasionally however, there are, and have been times they do need to be pointed out which is why these now have taken on a life of their own. (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) And readers, colleagues, and others have requested their continuance.