Mish's Global Economic Trend Analysis

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Olympic Disaster in Vancouver, Taxpayers on Hook for $1 Billion "Ghost Town" Posted: 08 Sep 2010 03:40 PM PDT It boggles the mind to think that anyone can possibly think of Olympics as doing anything more than throwing taxpayer money straight down the toilet. Of course vendors and real estate agents do not give a damn about the long-term consequences as long as a quick buck can be made. Now it's payback time as Vancouver taxpayers on hook for $1-billion as most Olympic Village units unsold Sixty-six per cent of Vancouver's pricey Olympic Village condos remain unsold — a total of 483 units at the massive False Creek development that served as athletes' housing during the two-week 2010 Games. Vancouver Mayor Gregor Robertson, whose city remains on the hook for more than $1.03 billion of the cost of the project, predicts it will take a "full two-year term" to sell the remaining units. The suites, which are priced anywhere from $400,000 to $5 million each, have been subject to the HST since July. The city's investment in the project includes a $750-million loan plus undisclosed interest payments, $120 million still owed to the city for the land and a $110-million outlay for 252 affordable housing units. Today, six months after the 2010 Olympic Games, the village resembles a ghost town. Walking down the empty streets last Saturday afternoon, it was hard to find anyone actually living in the $1.2-billion former Olympic Village. Even the security guards conceded there's not much to do at the "showcase" Millennium Water development, where only 254 condos have been sold. Fortunately Chicago dodged a bullet as it was foolishly attempting to "win" the upcoming 2016 Olympics. In this game, winning the bid is a guaranteed loss for taxpayers. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Consumers Shun Credit Cards - Credit Card Usage Drops, Debit Card Usage Rises Posted: 08 Sep 2010 11:25 AM PDT Consumers have had enough of high interest rates on credit cards but its a case of one plastic for another. Bloomberg reports Cardholders Prefer Debit as Credit-Card Use Falls Americans are shunning their credit cards and using debit to avoid incurring more debt, said Javelin Strategy & Research. Total payment volume for debit cards surpassed credit-card volume for the first time in 2009 and will continue to eclipse it in 2010, according to a report released today by the Pleasanton, California-based market-research firm that specializes in financial services. At San Francisco-based Visa Inc., the world's biggest payments network, the total payment volume for debit cards increased by 7.9 percent in 2009 to $883 billion as credit-card volume declined by 7.3 percent to $764 billion. Volume for debit cards at No. 2 MasterCard Inc. in Purchase, New York, rose by 5.8 percent and 2.8 percent at No. 4 Riverwoods, Illinois-based Discover Financial Services. Fifty-six percent of consumers said they had used a credit card in the past month compared with 87 percent who said they had in 2007, according to the study, which surveyed 3,294 people in November 2009 for that question. Other findings were based on data collected online from 5,211 respondents in March 2010 and 5,000 consumers in November 2009. If the rate of decline continues, 45 percent of consumers will reach for a credit card in 2010, the study said. Long-Term Shift Another cause for reduced credit-card use is financial reform aimed at protecting consumers, which has decreased the number of new cards given and cut available spending limits, the Javelin report said. Federal legislation that limits overdraft fees, caps on fees banks charge merchants for debit-card transactions and credit-card legislation mean banks have to recoup losses and are only giving cards to the most creditworthy borrowers, the study said. Younger people also favor debit over credit because of the immediate nature of making a payment, which means the shift to debit will be long-term, said Van Dyke. And since younger cardholders favor the convenience of debit cards, they won't turn to cash or checks, he said. Purchase transactions generated by credit and debit cards in the U.S. totaled more than 27 billion from Jan. 1 through June 30, according to the Nilson Report, an industry newsletter in Carpinteria, California. Debit-card purchases accounted for 65 percent of all sales, up from 62.3 percent, the Nilson Report said. Total Revolving Credit Revolving Credit Percent Change From Year Ago Reasons For Decline In Credit Usage Bankruptcies Other Loan Writeoffs Consumers Paying Down Debt Increasing Favoritism Towards Debit Cards Gift Cards Bank Lending Standards Increase Unprecedented Drop in Revolving Credit This is all part of an overall secular shift in consumer attitudes towards credit and debt, and bank attitudes towards lending. It's a good thing but Bernanke will not see it that way. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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