Juggling Dynamite

We humans are like crows–easily distracted by shiny stuff. As always, the factor that most determines whether an asset ends up being accretive or not is the price we pay to acquire it. Lax lending and low rates make present prices possible, but often not investment worthy. See: Reno shows having profound impact on buyers.

Dubbed the HGTV Effect by some agents after the television channel that focuses on home improvement shows, a growing number of buyers are splurging on homes simply because they’re decked out with granite countertops, stainless steel appliances and a fresh coat of a trendy paint colour.

“The influence of all of these television shows has really hit the mainstream buyer,” says Desmond Brown, another Toronto agent. “They want what they see on television.”

Brown says spending as little as $20,000 to $30,000 to renovate a kitchen or finish a basement, and hiring a stager to remove clutter, replace light fixtures and lighten up the walls, can boost a home’s sale price by as much as $150,000 in Toronto’s real estate market…

“Right now prices are so high in Toronto that buyers can’t afford any renovations. But what they can afford is a bigger mortgage. So if they see something that’s completely finished and ready to go and it looks fantastic and it sparkles, they’ll pay all kinds of money for it.”

Back to the central theme of the past few years, low borrowing costs have allowed many assets and services to become outrageously expensive. The prices being paid are likely to haunt current buyers for years to come.

Warning some profanity in this clip…listen at your own discretion. Excellent connection of some dots here.

Trendy clothes are cheaper than ever. That sounds great for the people who buy them, but it’s horrible for the people who make them. Here is a direct video link.

This week’s “spoofing” arrest of a home-based trader in England accused of causing the May 2010 flash crash, insults the intelligence of anyone who pays even a passing attention to the rampant deceit and rigging so dominate in our much abused capital markets today. Michael Lewis offers his own incredulity here, see: Crash Boys:

“Traders who seek to manipulate the U.S. stock market are meant to encounter resistance from the market itself. During the flash crash, Navinder Sarao apparently used Jon Corzine’s now defunct MF Global to place orders and clear trades. Why didn’t MF Global see what he was up to, or at least call him to ask him about it? There’s now a big business on Wall Street of firms renting out their HFT infrastructure to prop shops. Does that business depend on the brokers paying no attention to what their customers are doing? Do the big Wall Street firms that rent out their technology bear any responsibility for what their customers do with the weapons they’ve been given? For that matter, why don’t U.S. securities exchanges assume any responsibility for what happens on them?

Sarao’s manipulative orders were placed on the Chicago Mercantile Exchange. Why didn’t the CME notice what was going on? Or did they notice, and simply not care, as the behavior was standard practice for their high-frequency trading clients?

Then there is the biggest question of all: How can a guy working from his parents’ house in suburban England whose only actionable orders were to BUY stock market futures cause such a sensational collapse in U.S. stocks? On the day of the flash crash, Sarao never actually sold stocks. He was trying to trick the market into falling so that he could buy in more cheaply. But whom did he fool with his trick?”

Jon Corzine’s MF Global was aiding and abetting improper trading activities before the firm collapsed in 2011? Shocking! Of course none of that has hurt Mr. Corzine. Off scot-free from his last endeavor, Corzine is reportedly looking to launch his next hedge fund. It’s very profitable to be above the law…