China’s Wealthy as Canadian Real Estate Forcing Function

From the WSJ tonight, an article that (drive-by) makes the case for why wealthy Chinese immigration represents such an important forcing function in Canadian real estate. As the following figure shows, Canada is right behind the U.S. as the most desired location for exiting Chinese with more than $1,6m in assets.

Now, here is the important thing: Canada is only one-tenth the U.S.’s size, so the effect on Canadian real estate is immense, especially when the inbound wealth is funneled largely into two population centers, Vancouver and Toronto. And, within those two cities, most of the Chinese immigrants settle in Vancouver West and Markham/Thornhill, respectively. Incredible point mass of capital.

China emigration

“Price-Quakes” in Stock Exchanges

New PLoS paper echoing some of Didier Sornette’s work on tectoni models of stress relief in financial markets:

Price-quakes in World’s Stock Exchanges

Background

Systemic risk has received much more awareness after the excessive risk taking by major financial instituations pushed the worlds financial system into what many considered a state of near systemic failure in 2008. The IMF for example in its yearly 2009 Global Financial Stability Report acknowledged the lack of proper tools and research on the topic. Understanding how disruptions can propagate across financial markets is therefore of utmost importance.

Methodology/Principal Findings

Here, we use empirical data to show that the worlds markets have a non-linear threshold response to events, consistent with the hypothesis that traders exhibit change blindness. Change blindness is the tendency of humans to ignore small changes and to react disproportionately to large events. As we show, this may be responsible for generating cascading events—pricequakes—in the worlds markets. We propose a network model of the worlds stock exchanges that predicts how an individual stock exchange should be priced in terms of the performance of the global market of exchanges, but with change blindness included in the pricing. The model has a direct correspondence to models of earth tectonic plate movements developed in physics to describe the slip-stick movement of blocks linked via spring forces.

Conclusions/Significance

We have shown how the price dynamics of the worlds stock exchanges follows a dynamics of build-up and release of stress, similar to earthquakes. The nonlinear response allows us to classify price movements of a given stock index as either being generated internally, due to specific economic news for the country in question, or externally, by the ensemble of the worlds stock exchanges reacting together like a complex system. The model may provide new insight into the origins and thereby also prevent systemic risks in the global financial network.

via PLoS ONE: “Price-Quakes” Shaking the Worlds Stock Exchanges.

Twitter Digest: 2011-11-02

  • Explosive Volatility: A Model of Financial Contagion http://t.co/fECVKSDU #
  • What are the current odds we have military government in Greece by end of year? 20% 60%? Higher? #
  • Narrative fallacies, convenience sampling, etc. played role in Dutch soc psych fraud, approp enough – http://t.co/57ET3XGv #
  • Huge solar power plants are blooming in California's southern deserts – http://t.co/Knw3nldp #
  • Greece PM George Papandreu increasingly reminds me of former Newfoundland premier Clyde Wells in the Meech era, but that's just me. #
  • What news Americans follow, 1996-2008 http://t.co/naNnNWAA #
  • On my Greece military rule question, answers were trimodal: 2% / 50%/ never. Some point out military now less capable of rule than Papandreu #
  • RT @seb_shepard: @pkedrosky neatly broken into: gloomy Europeans / cynical N. Americans / Greeks #
  • Eurozone crisis: live blog http://t.co/9g0oRRMF #
  • Note to self: Don't leave possessions on other continents. Huge pain getting them back. #
  • Cognitive dissonance: Fuel economy now in top 10 factors for U.S. sports car buying for 1st time ever – http://t.co/jsM39Lde /via @drgrist #
  • The (r)evolution of the marathon: An unprecedented era http://t.co/ZJFgWf61 #
  • Good analysis: Greek referendum is coin-flip on euro exit http://t.co/MvnSHrWn #
  • Despondent Greeks call referendum plan blackmail – http://t.co/Uhikd7YR #
  • Those fall/winter/spring/summer colds are the worst. #
  • Recently finished Ian Kershaw's "The End", on the final days of Hitler's Germany. Smart & unrelenting. http://t.co/VWF28LaW #
  • Scholarships for snowboarders looking to attend mountain schools? I want to be 18 again. http://t.co/fzIdbe3W #
  • Got to respond to a Groupon hypothetical yesterday on @BloombergTV with "If my aunt had wheels she'd be a bicycle". My work here is done. #
  • I also argued yesterday on @BloombergTV that we should worry about Groupon "pundit fatigue". What will all these people do post-IPO? #
  • Lest anyone be in doubt that Greece's infection has moved well beyond that host, I give you Italy – http://t.co/ocfiyC0S #
  • Bethany McLean: Did accounting help sink Corzine’s MF Global? http://t.co/jvZSeHQG /via @john_hempton #
  • Martin Wolf: Creditors can huff but they need debtors http://t.co/XzZ01GBc #
  • Love the Freudian autocorrect of European "momentary union" for "monetary union". http://t.co/9ygBDvQp #
  • Lake Mead's glass is no longer half empty, but 52% full – http://t.co/JYjjvaV0 #
  • Twenty of the world's top athletes and explorers share their dream trips – http://t.co/2ZhF5OOi #
  • Flipped to new Gmail UI and am very unhappy. How do I go back? #
  • Whew, back in old Gmail. I missed my Minimalist Gmail extension. #
  • Spider porn and moments of transcendence – http://t.co/rJn8Nn8a #
  • The never-ending Fed obsession with mortgage refinancing in U.S. is a remarkable indictment of monetary policy. #
  • So, we're three weeks from the US supercommitee deadline, and also 17 days from a possible govt shutdown. I see no troubles there. #
  • You'll either really dig this, or go WTF? A self-referential aptitude test – http://t.co/Ul3BOxaH #
  • Pesek: Mona Lisa Will Look Great on China’s Wall – http://t.co/fB13lElT #
  • Lowenstein: The widespread belief that liquidity offers safety is an illusion, & a terribly dangerous one at that. http://t.co/3xHY9WW3 #
  • Bogleheads: How do you deal with all the economic doom & gloom? – http://t.co/ZnNNbfFP #
  • "I was on safari in the suburbs". — Louis Theroux, "America's Most Dangerous Pets" #
  • If any of you fine people get a chance to watch this new Louis Theroux BBC special on wild pets, watch it. He's like no-one else. #
  • Thoughtful energy outlook with data for both peak-ers and non-peak-ers – http://t.co/YWjUkVAy #
  • Good perspective: Tax impasse threatens US deficit progress: http://t.co/yXUDCZt0 #FT #

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WSJ Gets Away from Whole Distracting “News” Thing

This browser screenshot show how WSJ is getting away from the whole “News” thing.

Wsj

We Have Convictions

Ironic magazine ad from newly bust MF Global

Mfglobal\

via WSJ

Corzine and the Liquidity Trap

Smart Roger Lowenstein take on liquidity’s submerged risks:

Time and again, otherwise canny investors fall for the salve that in a liquid market, they can always get out, therefore what’s the problem? At Lehman, in the mid 2000s, executives took comfort in the notion that that the bank was in the “moving business” not the “storage business.” Then, the mortgage market froze, and everyone was in the storage business.

Liquidity is a backward-looking yardstick. If anything, it’s an indicator of potential risk, because in “liquid” markets traders forego trying to determine an asset’s underlying worth – - they trust, instead, on their supposed ability to exit. Investors now in low-yielding U.S. Treasury bonds may, one day, discover this lesson for themselves.

It’s hard to overestimate the extent to which the siren of liquidity has seduced even ordinary Americans. During the housing bubble, anyone who took out a mortgage they couldn’t afford, upon advice they could always refinance, was tacitly assuming they could trade their old loan for a new one. They were counting on continued liquidity in the mortgage market–and so were the banks that lent them the money.

via Corzine Forgot Lessons of Long-Term Capital: Roger Lowenstein – Bloomberg.

Fun with Pete Townshend

Pete Townshend riffs, verbally

Let me introduce you briefly to my inner artist, then I will put him back in his box.

 

I dont give a shit about making money. I think rock music is junk. I am a genius. The Who were OK but without me they would have all ended up working in the flower market, or worse – in Led Zeppelin. John Peel played some records that were so bad that I thought he was taking the piss sometimes. The BBC only gave us Pop Radio 1 in the 60s five years after the pirates had proved there was an audience for it. Sadly, unlike the pirates, they didnt accept payola.

I really should put this inner artist guy back in his box yes? Have we got our newspaper headlines yet?

via Pete Townshend Accuses iTunes of Not Doing Enough For Musicians, Says Illegal Downloaders Might As Well Steal His Sons Bike While Theyre At It | The Measure.

 

Europe’s “Momentary Union”

Momentary

The Creditor/Debtor Game

Good piece tonight by Martin Wolf in the FT:

The country with the credit sets the rules. Debtors have to beg, particularly in a fixed currency arrangement, whenever finance is needed to cushion an adjustment imposed via deflation. Creditors can also insist on their interpretation of the causes of a crisis. Germany states that it is all the fault of bad fiscal policies: correct those and bind fiscal policy for all time; the virtuous will then inherit the earth.

This view of the world suffers from three drawbacks: it is wrong; it is self-defeating; and it is destabilising. It is wrong because far from all crisis-hit countries suffered from irresponsible fiscal policies. In important cases, they suffered far more from irresponsible private lending and borrowing. It is self-defeating, because attempts by every member country to tighten fiscal policy at once will impoverish all, including creditors. The view is also destabilising, because the way out of this trap would be via a shift of the eurozone into external surplus. Resolving the internal imbalances by worsening global ones is a bad idea.

via InfoViewer: Creditors can huff but they need debtors.

Another Day, Another 100-Year Event

Check the bund move in lthe ast twenty-four hours. Another day, another 100-year event.

Bund