Uncharted Waters

Alot has happened in the world since I last blogged. Concerning the financial sector, we're witnessing a historic market meltdown on Wall Street. Many of the prominent investment banks are falling one after the other. Over the weekend, Henry Paulson (US Treasury Secretary) and Ben Bernanke (Chairman of the Board of Governors of the Federal Reserve) are putting the final touches on a $700,000,000,000+ (yes, that's what billions looks like) bailout plan to rescue Wall Street. The problem with this bailout is systemic on many levels. The bottom line is that the already cash strapped US taxpayer will be on the hook for this bailout. Where is everyone going to get the money? It will be like pouring gasoline on a huge burning fire. We are also witnessing the nationalization of the banking system and disintegration of the free market. A postponement of the inevitable which is now amplified exponentially. Keep in mind the Federal Reserve is composed of a group of private bankers! To pump money back into the system, money printing machines will run 24/7. This will only lead to one thing: hyperinflation. This will translate to a future of higher interest rates which will wipe everyone out. I just hope that the shields on the USS Alberta are at maximum capacity and will hold.

Back on the home front, Stephen Harper has called a federal election approximately one year earlier than expected. Remember that Harper is the same person who introduced Bill C-16 back in 2006. This bill was aimed to structure a 4 year time period between federal elections. Now, there is only one perception of this bold move. It is the only way he will win a majority government. But why call an election so early? Timing is crucial. Amidst a straight face, Harper knows the truth of Canada's impending economic condition. In 2009, the economic landscape of Canada will further deteriorate as we follow in the wake of the US. Despite all the current hot air pumping that Canada's fundamentals are strong, we just cannot ignore what is happening to our neighbours down south. There is no doubt we will be affected to some degree.

In Calgary, we are seeing a loosening of the social fabric. Murders, shootings and crime dominate headlines each day. Road rage is the worst I have seen in my lifetime here. Many attribute these factors to a growing city but I believe that you have recognise the increased levels of stress by living in the most expensive inflationary province in the country. The city just feels different now. Calgary continues to lead the nation in real estate price declines amidst having the oil sands in our backyard. Office vacancies in the city are also set to rise. Another condominium project has stopped construction bringing the total now to three (Gateway Midtown, Manchester Station, and Skytower). The diplomatic answer to the construction stoppage is high construction costs. But in reality, you'll find many of the buyers have walked away from their deposits not willing to gamble anymore in a dwindling housing market. There are more tough times ahead for the real estate industry. Surely, all these elements portray the sound "economic fundamentals" that have been eternally preached. I think not.

For those of the bulls remaining who believe that house prices will just plateau and not decrease sharply, don't be foolish or overly confident. Looking at past historical trends with a statistical fine tooth comb will not prepare you for what will happen in the next couple of years as the world enters into a position of financial chaos and eroding economies.

In times like these, the most favourable position is to be debt free.