Juggling Dynamite

Illicit inflows have helped to inflate property bubbles globally, not just in Britain.  Efforts to clamp down on it are a headwind for asset prices and the economic activity it has generated, especially in places like the U.K., Australia, Canada and beyond.

For years, Britain actively courted Russian billionaires, ignoring reports that some of their wealth was suspect. Today, there’s so much Russian cash in Britain, the capital has been nicknamed “Londongrad.”

British intelligence has warned that oligarchs’ money is propping up Putin’s regime — and helping to fund the war in Ukraine. Now, the U.K. is under pressure to show its Western allies it can stop the flood of corrupt money.

Here is a direct video link.

Danielle was a guest with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

Below is the chart showing the present 46% allocation of household net worth to equities, versus just 15% to bonds and 16% to cash. This level of risk-concentration to equities was seen at the 2000 tech bubble top and, to a lesser extent, the 2008 bubble top. However, allocations to the least risky bonds and cash are lower today than those previous risk cycle peaks. As a result, household net worth is heavily exposed to the downside of a bear market and recession. It is especially precarious because unemployment will rise as equity and housing prices fall—another train wreck in the making.

Better Dwelling co-founder and housing analyst Stephen Punwasi offers an archival antidote to the “running out of land” mania now dominating the consensus view.  Headlines from past Canadian housing bubbles since the 1930s confirm that this baseless sales pitch has resurfaced before the bust each time.  Well worth the review, see:  Canada is running out of land.  It Does that Every Few Years.  Here’s a taste:

Running out of land is as Canadian as hockey, maple syrup, or laundering money for global crime networks. In fact, Canadians love running out of land so much, they do it every few years.

Many are currently justifying high home prices by claiming a lack of land in Canada. This isn’t just something people have come to conclude themselves. It’s supported by politicians, (some) academics, and real estate developers. It doesn’t matter where either. From Vancouver to Toronto, and even into smaller cities like Halifax.

People are convinced this is the last chance to buy a house because the country is running out of land. Those who buy a condo now will live like the Barons and Baroness of the past. Forever their space in the country will be secured. Those who don’t will toile in the code mines. Hacking away at bits for Microzon, a conglomerate that owns everything. I’m pessimistic, but not even I am that pessimistic.

It turns out Canadians feel this way at the top of every real estate bubble though. Going through newspaper archives all the way back to the 1930s, we can find a whack of examples. It’s always the last year people will be able to buy. There’s no more land…