Last night I was surfing through Twitter and one tweet caught my eye. Mostly it was because it was in ALL CAPS which annoys me to no end, but the word ‘canada’ made me mildly curious.

The title of the article is “Canada’s dirty subprime secret” and while I was considering a subscription before, this is making me rethink my decision. If I had one, I’d be contemplating canceling my subscription, because they’re writing stories to drum up subscriptions and traffic to their site, and not reporting the news.

The biggest reason they’re jumping at shadows (and by doing so, are having a bigger impact on the economy than the issue they’re pretending to be investigating) is the numbers alone have no meaning. It’s only in the context of the North American and Global market that we can see what impact might be expected.

They do make an effort to cite Benjamin Tal, whose name has made an appearance here before. I’m not surprised that he declined to be interviewed for this article though.

In 2006, Mr. Tal estimated more than 85,000 Canadian homeowners had subprime loans.

When you put that in to perspective, there were  1.8 million homes in 2006. That’s 4.7% of loans…compared to 61% in the US. I don’t care how you try to cook those numbers, they’re not even in the same ballpark.

The Globe and Mail appear to be pretty good at finding individuals with sad stories, or isolated cases of sub-par lending practices, but a handful of people does not make for a crisis. Shame on you Geg and Jackie. You’re inciting panic when there’s nothing to panic about.

I think that Stephen Gordon is probably right….

I can’t understand how this non-story became the main item of a Saturday edition of Canada’s Newspaper of Record. Now that I’ve wasted a perfectly good Saturday morning, I’m in a sufficiently snarky mood to suggest that the Globe has succumbed to a nasty case of Headline Envy. “Look at all these eye-catching stories coming out of the US! We wants them, we wants them, we must have them!”

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Our friend Benjamin Tal was quoted in an article I ran across this week in the Globe and Mail. There were some interesting quotes in the article called The days of wine and roses and showpiece kitchens are well and truly over, for now. (Ed Note: Is it just me, or should the title of an article reflect the actual content of the article?)

Wealth effects of real estate plainly ramp up to their long-run effects much faster than the wealth effects resulting from gains in corporate equities.

and

Households feel more confident of gains in housing wealth and thus spend more readily and quickly when they occur.

Both of those come from a paper that Erik Belsky et al at Harvard’s Joint Center for Housing Studies. I agree with this, but I think that Benjamin Tal had a much earthier way of phrasing it.

You basically feel richer, and you go and spend and have a nice dinner on the house. That’s the way I see it.

The current economy has caused all sorts of wierd consumer behaviours, and a big part of that reason is the mainstream media putting an extreme headline on everything (except for title of this article).The important part of this has been Ben’s estimate that $50 billion has gone into cash and simple savings over the last year. This is simple cash in savings accounts and such. People are saving in more conservative ways, and that’s cash the banks are going to have to start lending out if they want to keep making money. REIN members like me are good investments and we’re going to be in the right place to get some great deals on borrowing money. How? Really good Real Estate education.

When you’re investing for the long term, a year or two in “negative equity” dosen’t concern you.

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The real driver (such as it is) of the current American and global recession is the lack of available credit. It was Benjamin Tal from CIBC who pointed out that Ben Bernanke, the chariman  of the US Federal Reserve is a student of the Great Depression. His diagnosis, (via Ben Tal, which I agree with), is that the fundamental issue, and the one thing that would have lessened the severity of the depression is the constriction of credit. (If you can’t sleep tonight, try Berdanke’s 150-page PhD thesis. You’ll be asleep in no time.)

There are lots of bubble bloggers and pundits out there who rant and rave about how easy or exotic credit is what caused the US recession. Really, it was caused by a number of things. However, the one thing that will make the difference between a 1-2 year recession and a 3-5 year severe recession will be how the credit markets shape up over the next few months.

Credit is essential to business. Yes, the US went too far, with mortgages, ABCP and similar issues. However, without credit, products don’t get shipped, things don’t get built, and people don’t get paid. Credit is the vascular system in which the life-blood of the economy gets pumped. Let’s not fuck it up.

And that’s my rant for today.

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Benjamin Tal, who I’ve discussed before after his July 2008 presentation on the state of the Canadian and US economies to the Real Estate Investment Network, was finally quoted in some good context in a CBC article. (Hat tip to Gary McGowan and Don Campbell on myREINspace) It’s nice when the mainstream media publishes something that’s real, even if it doesn’t drive a lot of traffic or sell a lot of advertising.

The core take away:

“To be sure, house prices in Canada will continue to ease in the coming months, but the triggers that led to a free fall in Canadian real estate markets in the early 1990s and today in U.S. markets are nowhere to be found.” – Benjamin Tal

In a nutshell, the major cause of the US bubble and resultant meltdown was the subprime borrowing that fueled house prices. However, the gains we’ve seen in Canada have not been caused by the same availability of credit, but rather by economic fundamentals in most regions.

At the peak of the cycle, subprime and Alt-A mortgages accounted for no less than 33 per cent of originations in the U.S. market. In Canada we estimate that at the peak, non-conforming mortgages reached 5.4 per cent of originations.

Things are going to keep easing or being essentially flat with respect to inflation, but only for another 6-18 months. Then it’ll be back to steady growth, as one would expect from a fundamentally strong market which experiences the same cyclical growth we see in all systems.

It’s still a buyers market in Alberta, and I’m doing what I can to buy more real estate, one cash-flowing property at a time.

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Benjamin Tal is a Senior Economist with CIBC World Markets. He gave a great talk on the North American Economy at the June 2008 REIN meeting which I blogged about this week.

While I was poking around for more information the next day I noticed that he very seldom shows up in search results.

In Canada if you search for Benjamin Tal, you get a post from Canadian Mortgage Trends, the two from CIBC World Markets, and then me in position #4.

If you search in the US (in this case from New York) I’m still in the top 30!

(Actually, that screen shot was from yesterday (Sept 3/08) and as of today (Sept 4/08) I’ve moved up to #10 and 11)

And finally, if you think that Ben’s wrong, or even just a little off in his economic predictions and search for ‘Benjamin Tal is wrong’ the first thing you see is what looks like an article saying the Consumer Watch Canada is a little concerned. It’s actually a CIBC newsletter.

So what should you do? Own your real estate on the search engine results pages. When someone searches for your name, you’d better be their first stop and own that conversation!

• Buy your own domain name. That’s why I bought chrisdavies.ca. The.com version was already taken by a guy who just pointed it to his LinkedIn profile.
• Get onto LinkedIn and pick a vanity URL for your profile. Mine is W. Chris Davies. Do similar things on other social sites like facebook.
• Use other websites with your real name. My Slideshare name is ChrisD. My profile and my presentations show up for queries where my blog never will.
• Pay attention to what’s going on online. Set up a Google Alert for your name and your website. If you’ve got a company name, do that one too.

A company like CIBC should really look at some SEO and reputation management for senior employees.

The key to success for most of us is just a little bit of marketing. The internet is just one part, but it’s an essential one.

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