Juggling Dynamite

Electric autonomous vehicles are a technology that’s time has come for many reasons.  Avoiding unnecessary carnage, cost and loss from intoxicated and inattentive drivers is a huge one.

In the meantime, as with drinking and driving, zero social and legal tolerance are necessary to effect behavioral changes.  (Send this documentary link to anyone you know who is still fiddling with their phones while driving).

After falling for 35 years, road fatalities have been increasing again for the past two years with the proliferation of ‘smart’ phone use.  But for the evolution of safety features like seat belts and airbags, you have to believe that the number of road fatalities today would be higher still.  Bikers and pedestrians are not so lucky.  And of course, it’s not just fatalities.  For injured survivors, their families and taxpayers, there are lifelong costs and suffering.

Publishing accurate facts on the cost and carnage is also critical. Right now, that is not happening. See: Smartphones are killing Americans, but no one is counting.

The Canadian Office of the Superintendent of Financial Institutions this morning announced stress testing rules will be expanded to include both uninsured and insured mortgages in Canada.

Starting January 1, 2018, Guideline B-20 requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.

In addition, federally regulated financial institutions are prohibited from doing additional credit arrangements in any form that circumvents the institution’s maximum loan to value ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.  See today’s OSFI Bulletin release here.

These changes are long overdue and just a few more steps in restoring some prudent lending rules in what has been a decade of wild west credit abuse in Canada.  In the longer run these moves are important in shoring up more stable financial foundations for households and the economy.   In the near term though, it is another move likely to help mean revert Canadian real estate sales and prices.  And the process will not be pain free.

Canada’s housing market is “ripe for a pretty severe correction” with Canadian Imperial Bank of Commerce the most vulnerable, according to Steve Eisman, a fund manager at Neuberger Berman Group LLC. Here is a direct video link.

“In Canada, there’s some pretty good evidence that the housing market is finally starting to turn over,” Eisman said in a Bloomberg TV interview on Monday. “Canada is not going to crash, but it hasn’t had a credit cycle in 25 years. I think they’re about to have one.”