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January 11, 2019 | What Went Up The Most is Coming Down the Most–Bank on it

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

As I have explained frequently, asset prices that went up on the same low rates, lax lending, speculation and foreign capital flows the past decade are now coming down together all around the world.  In the process, the assets, markets, cities and holders that rose the most, now have the most to lose–it’s pretty straight forward.

What makes this cycle likely to be more damaging than average, is the historically rare combination of real estate, corporate securities and many collectibles moving through synchronous decline all at once.

In addition, the world has never been more indebted and levered on falling asset prices.

The bonus will be clearance sales across the board for those with cash waiting to buy; the shock will be the loss of net worth by present holders.  Recall that Toronto and Vancouver areas came into this downturn as two of the top four most overvalued realty markets in the world.  That said, It’s not just Toronto and Vancouver:  a synchronized global slowdown is here:

What’s interesting is that the slowdown seems primarily to be affecting “world class” cities — those that attract large numbers of people and money from abroad, especially the wealthy…

In a report last year, the IMF noted that house price trends from Toronto to Sydney to London are becoming increasingly synchronized. The “global factor” now accounts for a third of the house-price change in a city like Vancouver, it estimated.

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January 11th, 2019

Posted In: Juggling Dynamite

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