Crack Shacks, Mansions, and Household Wealth

Dave Gonigam – July 23, 2012

  • Are Canadians richer than Americans. Well, yes… but for how long?
  • Professor Niall Ferguson pinpoints “the biggest trend in economics, and perhaps geopolitics, in our lifetime”
  • Byron King on the “white sands” that will speed up a critical step in the mining of metals by 99%
  • A Chinese gold scam that could drive investors toward physical metal… an honest, if bizarre, silver offering from a scammy U.S. company… the most vitriolic letter ever addressed to The 5… and more!

   Here’s a Monday milestone: Your typical Canadian is now richer than your average American. On paper, at least.

“Over the past five years,” reports the Toronto Globe and Mail, “net worth per Canadian household has exceeded net worth per American household (total combined value of liquid and real estate assets minus debt) for the first time.”

The paper cites figures from Environics Analytics that say the average household net worth in Canada was $363,202 in 2011. That compares with a U.S. figure of $319,970. The greenback and the loonie are more or less at parity these days, so the numbers aren’t skewed by currency fluctuations.

But wait, you ask… Isn’t Canada in the midst of a housing bubble? Wouldn’t that skew the numbers?

   If you plug the word “Canada” and then “housing” into Google, the first auto-fill suggestion that comes up is “bubble.” Before “market.” Before “price.”

The question is of more than passing interest to this editor, en route to Vancouver for this week’s Agora Financial Investment Symposium.

Vancouver is truly a lovely place. It is also one of the world’s most-expensive housing markets. This year, it supplanted Sydney as No. 2 on a list assembled by an outfit called Demographia; Hong Kong is still tops.

Indeed, Vancouver is the inspiration for a website called “Crack Shack or Mansion?” — in which you look at pictures of various homes and guess whether they’re crack shacks or a $1 million-plus properties.

This one’s a mansion, listed for $1,180,000

   “Canadians hold more than twice as much real estate as Americans and, once mortgages are factored in, have almost four times as much remaining equity in their real estate,” the Globe and Mail story goes on.

The part about their equity is good… as long as prices hold up. Right?

To be sure, Vancouver is an outlier when it comes to Canadian real estate. Still, the average home price in Canada last month was C$369,339, according to the Canadian Real Estate Association.

In examining whether such a figure is sustainable, it’s worth asking how it compares with median household income — which in 2010 was C$69,860.

Ouch… The average house price is 5.2 times median household income — rather more than the 2 or 3 times the personal finance experts would tell you is prudent.

At the peak of the U.S. housing bubble in 2006, the average home price was $246,500. Meanwhile, median household income was $48,201. That works out to a multiple of… whaddya know, 5.1 times.


   “Not much in history is inevitable,” says the historian Niall Ferguson, “but the shift from the West to the East looks like a pretty profound trend that it’s hard to imagine suddenly stopping.”

Professor Ferguson spoke to CNN this weekend on his way to Vancouver for the opening address of our Symposium. “The IMF,” he says, “has China’s GDP exceeding that of the United States within four years… This is the biggest trend in economics, and perhaps geopolitics, in our lifetime.

“I don’t think it’s going to stop for at least another 10 or 20 years, at which point demographics and other forces will start to slow the Chinese economy down. But this isn’t something that is just about to collapse, and those that think there’s a China implosion just around the corner are engaging in wishful nonthinking.”

We’re not sure what Ferguson is going to say in Vancouver, except it will be something he wouldn’t share with Fareed Zakaria and an audience of millions worldwide. His talk is called The West and the Rest: Our Slight Depression in Historical Perspective.

Ferguson leads an all-star lineup of speakers this year, including Gloom Boom & Doom Report editor Marc Faber, Fusion IQ chief and blogging sensation Barry Ritholtz, the inimitable Doug Casey, a full stable of Agora Financial editors and Agora Inc. founder Bill Bonner.

As usual, we’re offering audio recordings if you’re unable to join us. And this year, we’re adding high-definition video to the mix as well. All the slides, graphs and ticker symbols will be in plain view. And if you sign up before the conference opens tomorrow afternoon, you lock in the lowest possible price.

   Looks as if the “risk-off” trade is in play as a new week begins. Asian stock markets closed down. European stock markets opened down. S&P futures are down 1%. According to the major financial media, Spain is still a mess. Imagine that…

In overnight trading, the yield on a 10-year Treasury sank to a record low, beneath 1.44%.

   Precious metals aren’t exempt. Spot gold is down in early-morning trading to $1,572. Silver’s back below $27.

   From China comes word of a huge gold futures trading scam. According to China Daily, more than 5,000 investors were ripped off to the tune of $59.6 billion since 2008.

“That is obviously a very significant amount, this is an enormous scam,” comments Vancouver veteran Adrian Day, president of Adrian Day Asset Management, in a post at

The Chinese newspaper was thin on details of the scheme, but the implications are clear enough: “It might make Chinese investors turn toward the physical, rather than esoteric contracts,” says Mr. Day. “I don’t think it will make Chinese people not buy gold. It will just make them want to buy physical gold and keep it.”

[Ed. note: We’ve searched long and hard for a bullion dealer we can recommend with no reservations. This year, that search finally bore fruit… and last week, we took the wraps off the Hard Assets Alliance — hands down, the simplest way to buy, store, sell or take delivery of precious metals.

For a limited time, setting up an account is absolutely free… so you can see for yourself how simple the website interface is, at no risk to you. Here’s where to get started. Full disclosure: We may be compensated once you fund your account; but we wouldn’t recommend this service if we didn’t believe it offered you an outstanding value.]

   “This white sand stuff may be the cusp of a revolution in mining technology,” writes Byron King from the road.

He too is on his way to Vancouver, by way of the Rocky Mountain West. “I won’t name the state, let alone the city or the company. I agreed to confidentiality in order to pay a visit and peek behind the curtain.”

Byron witnessed two experiments: In the first, a scientist poured a concentrate of copper into a beaker filled with resin. It then took 24 hours for the resin to separate the copper from the solution. It’s 1960s mining technology.

“Then,” says Byron, “the scientist poured the same pale blue concentrate of copper into another beaker. This second beaker had a different substance inside — let’s call it ‘white sand.’ This second, white sand substance is specifically designed to speed up reactions.”

“Basically, white sand shaves over 99% of the time from chemical extraction of metals — many different kinds of metals — from solutions. White sand also removes metals more efficiently and thoroughly from solution. And white sand is much less expensive than the other traditional item — the resin in the first beaker.”

“My conclusion? This company and its partners are going to change the world. Soon. And it’s all made in the USA, by the way.”

For the moment, Byron won’t reveal the name of this company even to his paid readers. He has more research to do. Stay tuned…

   Chalk up another casualty of the meltdown at commodities brokerage PFGBest: All of a sudden, silver SpongeBob SquarePants coins are a collector’s item.

After the arrest of CEO Russell Wasendorf Sr. and the firm’s bankruptcy filing this month, FBI agents swooped in on company headquarters in Cedar Falls, Iowa. Among the assets seized from the vaults: a cache of 1-ounce silver tokens depicting SpongeBob and his cartoon friends, sold by subsidiary PFB Precious Metals…

Real silver… and really hokey

As late as last Friday, the domain — registered to Russell Wasendorf — was still up and running and hawking a set of four 1-ounce tokens (plus “an individually numbered Certificate of Authenticity issued by the New Zealand Mint”) for $259 each. Alas, as of yesterday, visitors got a “403 — Forbidden: Access is denied” message.

We now see a set available on eBay for $450.

Thus, it takes an FBI seizure to make these Franklin Mint-style trinkets worth more than the metal they’re stamped on.

   “Unless you speak English as a third or fourth language or was born yesterday,” a reader writes, “I can possibly understand your outright misrepresentation of the president’s speech.”

“Because you don’t or wasn’t, there is absolutely no excuse for this outright lying.”

[As a courtesy to you, dear reader, we have edited this individual’s letter to spare you his predilection for ALL CAPS.]

“I don’t know you other than your articles. Even though you won’t share this with your readers, because evil prevails when good men do nothing, I cannot allow this lie to go unchallenged.”

[Heh, a variation on the old “I dare you to print this” trick. Still works, too…]

“As any reasonable American would tell you after reading the president’s words in context (excluding Glenn Beck, Rush, Bachmann and the like), ‘you didn’t build that,’ refers to our national infrastructure and public servants that all taxpayers supply to the economy to make our nation the strongest and most-productive nation on Earth. To interpret any other way is a blatant lie, unless you do not understand basic English. ‘No man is an island,’ in case you haven’t herd [sic] is his theme.”

“Nowhere does he suggest that government is the ‘source of prosperity’ or should get all the credit for personal success.”

“In my opinion, what you are attempting to do is disgraceful, deceitful, racist and un-American.”

The 5: Um, wow.

It would appear the state of political discourse is rapidly degenerating to a state where it was, oh, 10 years ago. That predates The 5’s existence, but Addison was holding forth with Bill Bonner at The Daily Reckoning. There they’d get smeared with the “un-American” tag for deigning to point out that a “preventive” war in historic Mesopotamia might not be the “cakewalk” neoconservatives promised. (The fact Addison and Bill were writing from Paris at the time only egged on the critics…)

For the sake of newcomers: We have no interest in red team versus blue team politics around these parts. This editor cares little whether the TSA officer he encounters at the airport today is a union member (as Democrats would like) or an employee of a private contractor (as Republicans would like). The whole thing’s a scam, “security theater” and an affront to The Idea of America.

   “The reader who accused you of ‘running with the prevaricators’ may have formulated in argument, but it is a totally wrong argument.”

[Uh-oh… Back to the red herring of whether the “that” in “you didn’t build that” referred to “your business” or “roads and bridges.” But bear with…]

“As a former university English instructor in the ’80’s and someone with an M.A. in English, where I specialized in grammar, this person’s argument is wrong. His/her further using of his/her analysis to prove you run with prevaricators is not only ludicrous, but shows his/her own bias.”

“With so many noun clusters in the passage that close together, it is a grammar error that should be marked in any college rhetoric class paper. ‘That,’ more than likely, refers to ALL of the noun phrases in the passage as a list OR it refers solely to ‘business.’ I’m willing to accept either as possible until further clarification comes.”

“Only an explanation from the speaker can clarify what was really meant. Barring such an explanation, people must make an analysis of the meaning from what they know of the beliefs and character of the person speaking.”

The 5 was right on in its analysis. The grammar error is minor. The real issue, from a discourse analysis/logical fallacy level, is that President Obama is offering a logical fallacy known as a ‘false dilemma’ or ‘either-or fallacy.’ Since much of political diatribe today makes extensive use of this fallacy, The 5 should spend more time dealing with logical fallacies in arguments.”

“Unfortunately, as you have found from responses like the above person, understanding and dealing with false dilemma fallacies will tend to be beyond many people’s pay grade. If the analysis deals with ‘their’ candidate, people tend to read it as a personal and dishonest attack on said candidate while the real argument goes completely over their head.”

“Keep up the good work.”

The 5: We’ll soldier on…


Dave Gonigam
The 5 Min. Forecast

P.S. We’re now airborne, on our way to the “Land of the Misty Giants” — as the Canadian jazz great Oscar Peterson called his native land’s westernmost province.

This might be our final opportunity to remind you that recordings of this year’s Agora Financial Investment Symposium are still available at the lowest possible price. Audio, high-def video… it’s your choice. But as soon as the conference opens tomorrow at 1:00 p.m. local time in Vancouver — that’s 4:00 back on the East Coast — the price goes up. Here’s your chance to beat the clock.


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