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If the real estate market’s going to break, it’s going to break soon

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

The Toronto Real Estate Board has released statistics showing a 33-per-cent year-over-year jump in the city's housing prices and it has become commonplace for U.S. and global portfolio managers to solicit and debate shorting opportunities for the country's property markets on social media.

The pressure is intense enough, from all sides, that I expect that whichever direction prices are going to break, they are going to break soon. Bank of Montreal economist Doug Porter compared Toronto housing to the tulip bubble in the 17th century, CIBC has been defiantly warning about rent control and Scotia's head of Canadian banking is asking regulators to stickhandle a soft landing for prices.

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"@rcarrick Smart take on Toronto housing from Doug Porter at BMO Economics" – (research excerpt) Twitter
"Toronto-area home prices hit record as market remains 'drum tight'" – Report on Business
"Toronto housing market requires further government intervention: Scotia' – BNN

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Bloomberg lists the world's most crowded trades, the ones investors should avoid. The trades include bets on higher interest rates in Eurodollar markets, short positions on the CBOE Volatility (VIX) Index, and technology ETFs.

"These Winning Positions Could Turn Into Market Migraines" – Kawa, Bloomberg

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Maclean's magazine reports that even auto companies are concerned about how quickly Canadian consumers are adding debt to buy new vehicles,

"In the U.S. the average new car loan was 5.5 years, compared with six years in Canada. And automakers—not just Ford—are concerned, says George Iny, car analyst and director of the Automobile Protection Association. 'They've told regulators two or three times now that they are concerned that car buyers are overburdened and carrying a lot of debt forward from a previous financed vehicle when they go into a dealership to finance a new one.'"

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Could it be that the average Canadian is carrying so much debt that another $30,000 to $50,000 seems like a rounding error?

"Even Ford Motor Co. is concerned about Canadians' car loan debt" – Maclean's

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There's been a lot of ink spilled over online shopping destroying bricks and mortar retail operations, but one expert thinks the fears are overdone,

"Deloitte Consulting Chief Retail Innovation Officer Kasey M. Lobaugh, speaking at the ShopTalk conference in Las Vegas last month, said that conventional wisdom is wrong. ... It's a phenomenon Lobaugh called 'death by a thousand paper cuts,' in both his email and his presentation. Consumers, he wrote, have shifted their shopping habits, and online is growing, but brick-and-mortar is not shrinking, although many retailers are.

"While some may position the issue in retail as one of online vs. brick-and-mortar, our data shows that the issue is a more complicated blend of volatility and fragmentation of market share from a market where the barriers to entry have dropped and new competitors have flooded the market and stolen share," he wrote."

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"Everything You Know About the Internet Killing Retail May Be Wrong" – Motley Fool

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Tweet of the Day: "@jsblokland This is one very scary chart! via @HumbleStudent " – Twitter

Diversion: "Why So Many Americans Are Saying Goodbye to Cities" – Derek Thompson, The Atlantic

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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