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WHAT DOES A BLADE OF GRASS HAVE TO DO WITH ELEPHANT TESTICLES?

September 5, 2017

If you have watched the movie “JFK” you might recall Kevin Costner explaining the “magic bullet theory”.  This was the official notion that one bullet was able to completely switch direction several times.  Anyway part of his explanation about statistics went something like this:

Using the right statistics, you can make an elephant dangle over a cliff saved from falling only by hanging onto a single blade of grass by its testicles

O.K. now you know what this blog is all about, statistics!

According to the Canadian Bankers Association (“CBA”) Canadians own on average 66% of the value of their homes. However that statistic is an average that includes the homes belonging to the top 1-2% of Canadians who own multi-million dollar homes without a mortgage.

Statistics Canada reports a very different statistic – still to be taken with a grain of salt since they too may not have explored and considered all factors.  For example Stats Canada may have relied on the, evidently unreliable, information emitting from the CBA which has apparently only factored bank mortgages into its calculations.  Actual mortgage statistics may be vastly different again – there is an increasing number of (completely uncounted) private mortgages in the marketplace.

In any event according to Statistics Canada 69% of Canadian households (13.3 million) own their own homes (remember that “owning a home” refers only to who’s name is on title it has nothing to do with whether or not there are mortgages registered against the property).  Of those home owners 58.6% of them had mortgages that represented more than 83% of the value of their properties.

According to Stats Can., people who own their own homes pay about $600 a month more than (statistically) they can afford for their homes while renters only exceed the threshold by around $400.  The issue of affordability was raised in an earlier blog that spoke about TDS and GDS ratios as indices of affordability.

Businesses will frequently report favourable statistics, and the CBA is no different, it is after all an Association that represents the interests of Canadian Banks.  So to see them manipulate data in some manner to serve their own interests is not remarkable by any means.  However, to understand what statistics really mean we must ask more questions about the data sourced and how it was presented and the type of statistical methodology used.