· TSX +219.38pts (Reuters) powered to its second triple-digit gain in a row as major banks climbed after releasing results that were not as bad as some analysts feared.
· Dow +212.67pts also showed very strong gains due to the unexpectedly robust economic data and decline in oil prices
· Dollar -.46c to $95.07US due to a drop in oil prices after the International Energy Agency pledged to dip into emergency stockpiles if Tropical Storm Gustav disrupted U.S. oil production. The Loonie has been linked increasingly to oil prices as Canada's importance as an energy producer has grown. Another factor was growing expectations that the Bank of Canada would have to cut its key lending rate to shore up softening economic growth
· Oil -$2.56 to $115.59US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +3.20 to $837.20US per ounce
Harper doesn't rule out recession
Globe and Mail Report on Business
INUVIK — Prime Minister Stephen Harper, who is expected to call an election as early as next week, did not rule out the possibility the Canadian economy may have slipped into recession but said Thursday that if so it would only be in a technical sense.
Mr. Harper was speaking on the eve of the release of second quarter GDP data, which will show whether Canada has had negative growth for two successive quarters – the most popular technical definition of a recession.
Most analysts expect slightly positive second-quarter growth after the first quarter's annualized reading of -0.3 per cent, but many say there is a risk it could be negative.
“People talk about a technical recession. Even if that's true, I don't think it's a real recession,” Mr. Harper told a news conference in the Arctic town of Inuvik, without confirming whether growth did in fact come in negative for two quarters.
“Somebody said a recession is when people start losing their jobs, and when your neighbour loses his job. There are job losses, but overall employment is pretty stable,” Mr. Harper said.
The economy remains strong and while employment numbers have softened they remained very high, he said.
Sensitive to the political ramifications if there is a recession, Mr. Harper said: “Look, I'm not trying to sugarcoat this. I said a year ago, and I said as we moved into the new year, that 2008 would be a year of significantly slower economic growth, because of the circumstances we have in the global economy and in the American economy.”
But he added: “At the same time I believe the fundamentals of Canada are strong, will get us through this [slow] growth, and if we make the right policy choices we will actually emerge from it with a very strong economy.”
He said it was not a time to go back to policies in the style of former Liberal Prime Minister Pierre Trudeau and impose taxes.
This was a reference to the Liberal Party's current proposal to introduce a carbon tax to fight climate change and offset it with income tax cuts and help for the poor.
Conservative sources have said that Harper would like to trigger an election next week, before Parliament returns from its summer recess on Sept. 15.
Statistics Canada will release the gross domestic product data on Friday at 8:30 a.m. EDT
Friday, August 29, 2008
Thursday, August 28, 2008
Financial Update
· TSX +231.58pts (Reuters) as the key resource and financial sectors were lifted by commodity prices and a rally by Canadian banks. All the major banks rose as the heavy hitters release their quarterly results this week, culminating in reports from 3 institutions, including Royal Bank of Canada , which rose 2.7%
· Dow +89.64pts
· Dollar +.15c to $95.53US
· Oil +$1.88to $118.15US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +5.90to $834.00US per ounce
Often a mortgage originator with integrity and honesty, will question the need to verify documents that seem legitimate. Please see article below from the National Post which emphasizes the severity of fraud in our industry and the amount of damage just two people can cause.
Two charged in $30-million real estate fraud
VANCOUVER -- A marathon investigation into one of the biggest financial frauds in B.C. history has led to multiple criminal charges being filed against former Vancouver lawyer Martin Wirick and Vancouver real-estate developer Tarsem Singh Gill.
Both men were arrested Tuesday after a six-year investigation.
Messrs. Wirick and Gill are charged with two counts of fraud and theft against 77 different homeowners, and two counts of fraud and theft against lenders in 30 different loan transactions. Mr. Wirick is also charged with two counts of uttering false documents and Mr. Gill with one count of possession of stolen property.
The total amount of money alleged to have been unlawfully taken from homeowners and lenders exceeds $30-million.
Three Fannie Mae execs out
NEW YORK (Reuters) - Fannie Mae the biggest U.S. mortgage finance company, on Wednesday announced a shake-up of top executives, including the exit of its chief financial officer, in an effort to better implement a plan to preserve capital and cut losses.
Fannie Mae announced management changes amid a storm of controversy over its ability to survive a wave of mortgage defaults that have caused four straight quarters of losses and recent speculation a government bail-out was near. But the board is "firmly committed" to Chief Executive Officer Daniel Mudd, Chairman Stephen Ashley said in a statement .
Stephen Swad, who was CFO since early 2007 and helped Fannie return to timely filing of financial statements following a major accounting scandal, was replaced by Fannie Mae Controller David Hisey, the company said. Peter Niculescu, head of capital markets, will replace Robert Levin as chief business officer. Fannie Mae's chief risk officer, Enrico Dallavecchia, will also leave.
The changes "signal they are trying to correct some problems," said David Dreman, chairman of Jersey City, New Jersey-based Dreman Value Management, LLC, a Fannie Mae and Freddie Mac shareholder. "When you change risk management people, it has to be viewed as recognizing problems, so it is mildly positive."
· Dow +89.64pts
· Dollar +.15c to $95.53US
· Oil +$1.88to $118.15US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +5.90to $834.00US per ounce
Often a mortgage originator with integrity and honesty, will question the need to verify documents that seem legitimate. Please see article below from the National Post which emphasizes the severity of fraud in our industry and the amount of damage just two people can cause.
Two charged in $30-million real estate fraud
VANCOUVER -- A marathon investigation into one of the biggest financial frauds in B.C. history has led to multiple criminal charges being filed against former Vancouver lawyer Martin Wirick and Vancouver real-estate developer Tarsem Singh Gill.
Both men were arrested Tuesday after a six-year investigation.
Messrs. Wirick and Gill are charged with two counts of fraud and theft against 77 different homeowners, and two counts of fraud and theft against lenders in 30 different loan transactions. Mr. Wirick is also charged with two counts of uttering false documents and Mr. Gill with one count of possession of stolen property.
The total amount of money alleged to have been unlawfully taken from homeowners and lenders exceeds $30-million.
Three Fannie Mae execs out
NEW YORK (Reuters) - Fannie Mae the biggest U.S. mortgage finance company, on Wednesday announced a shake-up of top executives, including the exit of its chief financial officer, in an effort to better implement a plan to preserve capital and cut losses.
Fannie Mae announced management changes amid a storm of controversy over its ability to survive a wave of mortgage defaults that have caused four straight quarters of losses and recent speculation a government bail-out was near. But the board is "firmly committed" to Chief Executive Officer Daniel Mudd, Chairman Stephen Ashley said in a statement .
Stephen Swad, who was CFO since early 2007 and helped Fannie return to timely filing of financial statements following a major accounting scandal, was replaced by Fannie Mae Controller David Hisey, the company said. Peter Niculescu, head of capital markets, will replace Robert Levin as chief business officer. Fannie Mae's chief risk officer, Enrico Dallavecchia, will also leave.
The changes "signal they are trying to correct some problems," said David Dreman, chairman of Jersey City, New Jersey-based Dreman Value Management, LLC, a Fannie Mae and Freddie Mac shareholder. "When you change risk management people, it has to be viewed as recognizing problems, so it is mildly positive."
Wednesday, August 27, 2008
Financial Update
· TSX +10.11pts (Reuters)
· Dow +26.62pts
· Dollar +.22c to $95.38US
· Oil +$1.16to $116.17US per barrel
· Gold +2.40to $828.10US per ounce
Articles on the front page of the Globe and Mail -Report on Business August 27, 2008 confirm financial market worries over anticipated poor quarterly results.
CIBC takes $885-million hit
Canadian Imperial Bank of Commerce, the third big bank to report its third-quarter earnings, said Wednesday that it earned $71-million, down from $835-million a year ago, as it took a hit of more than $880-million relating to risky securities. CIBC is the Canadian bank that's been hardest hit by the U.S. subprime mortgage crisis, because of its large exposure to securities tied to subprime housing. The exposure caused it to take a $2.48-billion writedown in the previous quarter
BMO burned by subprime mortgage exposure Bank of Montreal has been dragged further into the subprime mortgage crisis, putting aside hundreds of millions of dollars for troubled loans tied to the U.S. real estate sector.
At the same time, BMO continues to be tripped up by a variety of complicated investment products, demonstrating that financial markets continue to sour.
Chief executive officer Bill Downe – who was cautiously optimistic earlier this year that things might get better – said Tuesday that the challenging times aren't going to let up soon. With the U.S. economy continuing to slow, “falling house prices, rising unemployment, tightening credit standards and high gasoline and grocery bills are all expected to depress consumer spending,” he said. “In particular, house prices will continue to decrease until the large inventory of unsold houses is absorbed.” BMO’s profit fell by 21%.
· Dow +26.62pts
· Dollar +.22c to $95.38US
· Oil +$1.16to $116.17US per barrel
· Gold +2.40to $828.10US per ounce
Articles on the front page of the Globe and Mail -Report on Business August 27, 2008 confirm financial market worries over anticipated poor quarterly results.
CIBC takes $885-million hit
Canadian Imperial Bank of Commerce, the third big bank to report its third-quarter earnings, said Wednesday that it earned $71-million, down from $835-million a year ago, as it took a hit of more than $880-million relating to risky securities. CIBC is the Canadian bank that's been hardest hit by the U.S. subprime mortgage crisis, because of its large exposure to securities tied to subprime housing. The exposure caused it to take a $2.48-billion writedown in the previous quarter
BMO burned by subprime mortgage exposure Bank of Montreal has been dragged further into the subprime mortgage crisis, putting aside hundreds of millions of dollars for troubled loans tied to the U.S. real estate sector.
At the same time, BMO continues to be tripped up by a variety of complicated investment products, demonstrating that financial markets continue to sour.
Chief executive officer Bill Downe – who was cautiously optimistic earlier this year that things might get better – said Tuesday that the challenging times aren't going to let up soon. With the U.S. economy continuing to slow, “falling house prices, rising unemployment, tightening credit standards and high gasoline and grocery bills are all expected to depress consumer spending,” he said. “In particular, house prices will continue to decrease until the large inventory of unsold houses is absorbed.” BMO’s profit fell by 21%.
Tuesday, August 26, 2008
Financial Update
Financial worries knock Toronto stocks lower
· TSX -158.33pts (Reuters)prompted by weak financials, as worries over growing fallout from the credit crisis rattled investor confidence. Home-grown anxiety also weighed on the large financial sector as the major Canadian banks are set to report quarterly results this week.
· Dow -241.81pts In New York, stocks fell sharply on credit concerns, while global growth worries stung big technology and industrial companies.
· Dollar -.21c to $95.16US A negative tone in North American equity markets hurt the Canadian dollar, as financials sold off on both sides of the border on credit market fears, and the heavyweight energy sector of the Toronto Stock Exchange fell as oil prices fluctuated
· Oil +$.52to $115.11US per barrel
· Gold -$7.80 to $819.90US per ounce
Data on gross domestic product for the second quarter will be released on Friday. That will also be the last major piece of data before the Bank of Canada makes its Sept. 3 rate announcement.
Existing U.S. home sales up in July
MARY ANN CHASTAIN, THE ASSOCIATED PRESS
The Associated Press
The listing agent has boldly stated a change in the sales price to attract buyers to this home in a neighborhood in Columbia, S.C. Monday Aug. 25, 2008. Sales of existing homes rose 3.1 percent in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust. (AP Photo/Mary Ann Chastain)
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Deeply-discounted properties being snapped up in parts of the country hit hardest by the housing bust
August 26, 2008 Alan Zibel The Associated PressSales of existing homes in the United States rose 3.1 per cent in July, easily beating Wall Street's expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust.
However, the number of unsold properties hit an all-time high, the latest indication that the worst housing market slump in decades is far from over.
The National Association of Realtors reported yesterday that sales rose to a seasonally adjusted annual rate of five million units. Sales had been expected to rise by only 1.6 per cent, according to economists surveyed by Thomson/IFR.
Home sales were 13.2 per cent lower than a year ago and prices were down dramatically. The median price for a home sold in July dropped to $212,000 US, down by 7.1 per cent a year ago.
Despite the third monthly sales jump this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data.
That represented a 11.2 month supply at the July sales pace, matching the all-time high set in April.
Sales were up in all regions of the country except the South, which posted a 0.5 per cent decline. Sales rose by 5.9 per cent in the Northeast, 0.9 per cent in the Midwest and 9.7 per cent in the West.
Analysts say that until the inventory level is reduced to more normal levels, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures.
Despite the rise in sales, Lawrence Yun, the Realtors' chief economist, was reluctant to conclude that the U.S. housing market has hit bottom.
While buyers are pouncing on lower prices -- especially in places like California, Florida and Nevada -- sales are sluggish in formerly stable states like Texas.
"People are responding to lower prices,'' Yun said, but there is "too much uncertainty'' about the housing market's future to mark a definite bottom.
One key unknown is the ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have cut back the availability of mortgages significantly as they cope with mounting losses from foreclosures and officials ponder whether to shore up the two struggling companies.
· TSX -158.33pts (Reuters)prompted by weak financials, as worries over growing fallout from the credit crisis rattled investor confidence. Home-grown anxiety also weighed on the large financial sector as the major Canadian banks are set to report quarterly results this week.
· Dow -241.81pts In New York, stocks fell sharply on credit concerns, while global growth worries stung big technology and industrial companies.
· Dollar -.21c to $95.16US A negative tone in North American equity markets hurt the Canadian dollar, as financials sold off on both sides of the border on credit market fears, and the heavyweight energy sector of the Toronto Stock Exchange fell as oil prices fluctuated
· Oil +$.52to $115.11US per barrel
· Gold -$7.80 to $819.90US per ounce
Data on gross domestic product for the second quarter will be released on Friday. That will also be the last major piece of data before the Bank of Canada makes its Sept. 3 rate announcement.
Existing U.S. home sales up in July
MARY ANN CHASTAIN, THE ASSOCIATED PRESS
The Associated Press
The listing agent has boldly stated a change in the sales price to attract buyers to this home in a neighborhood in Columbia, S.C. Monday Aug. 25, 2008. Sales of existing homes rose 3.1 percent in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust. (AP Photo/Mary Ann Chastain)
Email the author
Deeply-discounted properties being snapped up in parts of the country hit hardest by the housing bust
August 26, 2008 Alan Zibel The Associated PressSales of existing homes in the United States rose 3.1 per cent in July, easily beating Wall Street's expectations, as buyers snapped up deeply discounted properties in parts of the country hit hardest by the housing bust.
However, the number of unsold properties hit an all-time high, the latest indication that the worst housing market slump in decades is far from over.
The National Association of Realtors reported yesterday that sales rose to a seasonally adjusted annual rate of five million units. Sales had been expected to rise by only 1.6 per cent, according to economists surveyed by Thomson/IFR.
Home sales were 13.2 per cent lower than a year ago and prices were down dramatically. The median price for a home sold in July dropped to $212,000 US, down by 7.1 per cent a year ago.
Despite the third monthly sales jump this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data.
That represented a 11.2 month supply at the July sales pace, matching the all-time high set in April.
Sales were up in all regions of the country except the South, which posted a 0.5 per cent decline. Sales rose by 5.9 per cent in the Northeast, 0.9 per cent in the Midwest and 9.7 per cent in the West.
Analysts say that until the inventory level is reduced to more normal levels, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures.
Despite the rise in sales, Lawrence Yun, the Realtors' chief economist, was reluctant to conclude that the U.S. housing market has hit bottom.
While buyers are pouncing on lower prices -- especially in places like California, Florida and Nevada -- sales are sluggish in formerly stable states like Texas.
"People are responding to lower prices,'' Yun said, but there is "too much uncertainty'' about the housing market's future to mark a definite bottom.
One key unknown is the ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have cut back the availability of mortgages significantly as they cope with mounting losses from foreclosures and officials ponder whether to shore up the two struggling companies.
Thursday, August 21, 2008
Financial Update
TSX get big lift from resource shares
· TSX +286.29pts its highest advance in 3 weeks, as investors snapped up energy stocks after U.S. inventory data showed a bigger than expected drawdown of gasoline stocks last week.(Reuters)
· Dow +68.88pts as the financial sector improved despite mounting worry and a growing conviction that the U.S. government will have to bail out government sponsored mortgage enterprises Freddie Mac and Fannie Mae.
· Dollar .02c to $94.23US
· Oil $.45to $114.98US per barrel as traders shrugged off a massive increase in U.S. crude inventories and a stronger U.S. dollar and focused on possible supply threats.
· Gold -$.80 to $810.30US per ounce
Weakness in Canadian economy helping homebuyers
Financial Post Garry Marr, Canwest News Service There is some good news in the falling housing market, affordability is improving.
Desjardins Economic Studies says that after eight years of rising prices, housing costs are going down. "For the second quarter in a row we have had an increase in affordability," said Hélène Bégin, senior economist with Desjardins.
However, she warned consumers should not get too excited about the market conditions because affordability is still very close to the all-time low reached in 1990.
The Desjardins Affordability Index is calculated by determining the ratio between average household disposable income and the income needed to obtain a mortgage on an average-priced home, known as the qualifying income.
The report from Desjardins said its affordability index climbed to 110.7 last quarter after dropping close to 100 at the end of 2007. In the early 1990s, the affordability index was as low as 93.6.
Desjardins says that affordability has increased by about 10% in the past two quarters because of falling home prices and lower mortgage rates.
The Canadian Real Estate Association said last week that the average price of a home sold in the country's major markets was $327,020, a 3.6% increase from a year ago. It was the second consecutive month prices had dropped on a year-over year basis.
Statistics Canada also said last month new homes prices grew only by 3.5% in June from a year earlier. It was the slowest rate of growth since March, 2002.
Desjardins noted that in the first half of the year, existing home prices rose by 4.4% compared to 10% a year earlier. The posted rate on a one-year mortgage also fell from 7.25% in March to 6.3% by the end of June. The posted rate on a five-year mortgage fell from 7.15% to 7.1% during the same period.
"House prices are just not going up as strongly as before and in some places in Western Canada, like Calgary, we have had some price drops. With the kind of return we have in Calgary, it has a big impact on affordability," said Ms. Bégin.
Prices in Calgary fell 7.8% in July from a year earlier, according to CREA.
They were off 5.8% in Edmonton during the same period. Desjardins says affordability in Calgary improved by 7.5% over the last three months.
Even with the improved conditions, affordability is still off almost 30% from the peak reached in late in 2001. Long-term Desjardins thinks affordability will continue to improve. "Prices are going to go up slowly,"
said Ms. Bégin. "Out west we've seen a turning point where prices are going down."
The drop in prices is good news for home builders, according to the chief operating officer of the Canadian Home Builders' Association.
"If you were sitting in my chair what you would be experiencing is one very busy housing industry from coast to coast," said John Kenward. "There has been a slowing down in certain markets and builders in those market say it's a return to a more normal market place."
· TSX +286.29pts its highest advance in 3 weeks, as investors snapped up energy stocks after U.S. inventory data showed a bigger than expected drawdown of gasoline stocks last week.(Reuters)
· Dow +68.88pts as the financial sector improved despite mounting worry and a growing conviction that the U.S. government will have to bail out government sponsored mortgage enterprises Freddie Mac and Fannie Mae.
· Dollar .02c to $94.23US
· Oil $.45to $114.98US per barrel as traders shrugged off a massive increase in U.S. crude inventories and a stronger U.S. dollar and focused on possible supply threats.
· Gold -$.80 to $810.30US per ounce
Weakness in Canadian economy helping homebuyers
Financial Post Garry Marr, Canwest News Service There is some good news in the falling housing market, affordability is improving.
Desjardins Economic Studies says that after eight years of rising prices, housing costs are going down. "For the second quarter in a row we have had an increase in affordability," said Hélène Bégin, senior economist with Desjardins.
However, she warned consumers should not get too excited about the market conditions because affordability is still very close to the all-time low reached in 1990.
The Desjardins Affordability Index is calculated by determining the ratio between average household disposable income and the income needed to obtain a mortgage on an average-priced home, known as the qualifying income.
The report from Desjardins said its affordability index climbed to 110.7 last quarter after dropping close to 100 at the end of 2007. In the early 1990s, the affordability index was as low as 93.6.
Desjardins says that affordability has increased by about 10% in the past two quarters because of falling home prices and lower mortgage rates.
The Canadian Real Estate Association said last week that the average price of a home sold in the country's major markets was $327,020, a 3.6% increase from a year ago. It was the second consecutive month prices had dropped on a year-over year basis.
Statistics Canada also said last month new homes prices grew only by 3.5% in June from a year earlier. It was the slowest rate of growth since March, 2002.
Desjardins noted that in the first half of the year, existing home prices rose by 4.4% compared to 10% a year earlier. The posted rate on a one-year mortgage also fell from 7.25% in March to 6.3% by the end of June. The posted rate on a five-year mortgage fell from 7.15% to 7.1% during the same period.
"House prices are just not going up as strongly as before and in some places in Western Canada, like Calgary, we have had some price drops. With the kind of return we have in Calgary, it has a big impact on affordability," said Ms. Bégin.
Prices in Calgary fell 7.8% in July from a year earlier, according to CREA.
They were off 5.8% in Edmonton during the same period. Desjardins says affordability in Calgary improved by 7.5% over the last three months.
Even with the improved conditions, affordability is still off almost 30% from the peak reached in late in 2001. Long-term Desjardins thinks affordability will continue to improve. "Prices are going to go up slowly,"
said Ms. Bégin. "Out west we've seen a turning point where prices are going down."
The drop in prices is good news for home builders, according to the chief operating officer of the Canadian Home Builders' Association.
"If you were sitting in my chair what you would be experiencing is one very busy housing industry from coast to coast," said John Kenward. "There has been a slowing down in certain markets and builders in those market say it's a return to a more normal market place."
Wednesday, August 20, 2008
Financial Update
· TSX -55.52pts A sharp selloff in bank stocks sent the Toronto stock market lower , but TSX losses were limited by solid gains in energy and mining stocks.
· Dow -130.84pts after former International Monetary Fund chief economist Kenneth Rogoff said that "the financial crisis is at the halfway point, perhaps." He added that he expects "one of the big investment banks or big banks" to go under.
· Dollar .29c to $94.25US
· Oil $1.66to $114.53US per barrel after the U.S. dollar weakened against the euro and a rally in heating oil pulled new buyers into energy markets.
· Gold +11.40 to $811.10US per ounce
Wholesale sales register fifth hike in six months
Eric Shackleton The Canadian Press
The Canadian economy appears to be growing, but at a weak pace, after grinding to a halt earlier this year, with recent economic numbers suggesting things might not be as bleak as first thought. Statistics Canada reported yesterday wholesale sales were up 2% to $45.2 billion in June, the fifth increase in 6 months. They were up 1.5 per cent in May and 1.6 per cent in April.
Craig Alexander, deputy chief economist at TD Bank Financial Group, called the increase "significant,'' noting they were still up a "solid'' 1% even after stripping out price effects
Globe and Mail-Report on Business NEW YORK — Applications for U.S. home mortgages last week fell to their slowest pace since December 2000. Applications for mortgages mirror the slump in U.S. housing that is now in its third year, according to the drop in home prices as measured by the Standard & Poor's/Case Shiller indexes. In addition to rising rates, lenders have sharply tightened requirements for obtaining a loan, squeezing out borrowers without strong credit ratings
· Dow -130.84pts after former International Monetary Fund chief economist Kenneth Rogoff said that "the financial crisis is at the halfway point, perhaps." He added that he expects "one of the big investment banks or big banks" to go under.
· Dollar .29c to $94.25US
· Oil $1.66to $114.53US per barrel after the U.S. dollar weakened against the euro and a rally in heating oil pulled new buyers into energy markets.
· Gold +11.40 to $811.10US per ounce
Wholesale sales register fifth hike in six months
Eric Shackleton The Canadian Press
The Canadian economy appears to be growing, but at a weak pace, after grinding to a halt earlier this year, with recent economic numbers suggesting things might not be as bleak as first thought. Statistics Canada reported yesterday wholesale sales were up 2% to $45.2 billion in June, the fifth increase in 6 months. They were up 1.5 per cent in May and 1.6 per cent in April.
Craig Alexander, deputy chief economist at TD Bank Financial Group, called the increase "significant,'' noting they were still up a "solid'' 1% even after stripping out price effects
Globe and Mail-Report on Business NEW YORK — Applications for U.S. home mortgages last week fell to their slowest pace since December 2000. Applications for mortgages mirror the slump in U.S. housing that is now in its third year, according to the drop in home prices as measured by the Standard & Poor's/Case Shiller indexes. In addition to rising rates, lenders have sharply tightened requirements for obtaining a loan, squeezing out borrowers without strong credit ratings
Tuesday, August 19, 2008
Financial Update
· TSX +22.67pts eking out a slight gain thanks to support from consumer and gold stocks.
· Dow -180.51pts down sharply following more reports that the sector remains under stress.
· Dollar +.38c to $94.43US
· Oil -$.87 to $112.87US per barrel settling below US$113 a barrel for the first time in over 3 months as tropical storm Fay steered clear of oil-producing infrastructure in the Gulf of Mexico. A slightly weaker U.S. dollar compared to the euro kept oil prices from slipping further. A falling dollar typically pushes oil prices higher as investors buy crude and other commodities as hedges against inflation.
· Gold +13.60 to $805.70US per ounce
Ruling on ABCP restructuring plan likely won't mark and end to courtroom battles
By David Friend, The Canadian Press
TORONTO - The Ontario Court of Appeal says the restructuring plan intended in part to unfreeze $32 billion of asset-backed commercial paper investments should proceed as planned - marking a major victory for individual investors.
In the decision released late Monday, the judges found that a decision made by an Ontario Superior Court judge two months ago should be upheld.
That earlier decision by the Superior Court had prevented ordinary corporate and individual investors from suing brokerages, financial services companies, the banks and bond rating agencies for millions of dollars in losses they suffered from the collapse of the asset backed short term investments last year.
The restriction on lawsuits was one of the main reasons the various players in the financial community, particularly the banks, and many investors, were able to agree on a broad restructuring plan to reimburse investors who lost money on the so-called ABCP investments.
"We ought not to interfere with his decision that the plan is fair and reasonable in all the circumstances," the appeal judges wrote.
"Implementation of the plan, in his view, would work to the overall greater benefit of noteholders as a whole. I can find no error in principle... It was his call to make."
The appeals court decision marks a significant step for small investors who have been trying to get their money back from the failed investments since the market froze last year.
If the court had decided against the restructuring plan it would have wiped out months of preparations intended to move past the process.
Canadian ABCP was a victim of last summer's crisis in U.S. subprime mortgages, amid worries that some of the paper was tied to dodgy U.S. home loans, in addition to bundles of higher-quality mortgages, car loans, credit card receivables and other assets.
Many corporate investors relied on bond rating agencies, who rated the debt as an acceptable risk, and poured milliions of dollars into the short-term investments, hoping to get their money back quickly when they needed it.
However, the investments were frozen last summer because the financial community could not value the ABCP investments.
A rescue plan was hatched by the Pan-Canadian investors committee - representing very large investment groups, including pension plans - late last summer to clean up the problems, and was headed by Bay Street lawyer Purdy Crawford.
Individual investors who had chunks of their life savings in ABCP have seen that investment teeter on the brink of either being tied up for several years or wiped out if the rescue plan failed and the notes were dumped at a discount by the major players.
Some mid-sized investors, a number of corporations and large individual investors with ABCP holdings of more than $1 million but less than hundreds of millions, launched the appeal. Many regard themselves as disadvantaged by the plan.
"Each of the appellants has large sums invested in ABCP - in some cases, hundreds of millions of dollars. Nonetheless, the collective holdings of the appellants - slightly over $1 billion - represent only a small fraction" of the ABCP, the judges wrote.
· Dow -180.51pts down sharply following more reports that the sector remains under stress.
· Dollar +.38c to $94.43US
· Oil -$.87 to $112.87US per barrel settling below US$113 a barrel for the first time in over 3 months as tropical storm Fay steered clear of oil-producing infrastructure in the Gulf of Mexico. A slightly weaker U.S. dollar compared to the euro kept oil prices from slipping further. A falling dollar typically pushes oil prices higher as investors buy crude and other commodities as hedges against inflation.
· Gold +13.60 to $805.70US per ounce
Ruling on ABCP restructuring plan likely won't mark and end to courtroom battles
By David Friend, The Canadian Press
TORONTO - The Ontario Court of Appeal says the restructuring plan intended in part to unfreeze $32 billion of asset-backed commercial paper investments should proceed as planned - marking a major victory for individual investors.
In the decision released late Monday, the judges found that a decision made by an Ontario Superior Court judge two months ago should be upheld.
That earlier decision by the Superior Court had prevented ordinary corporate and individual investors from suing brokerages, financial services companies, the banks and bond rating agencies for millions of dollars in losses they suffered from the collapse of the asset backed short term investments last year.
The restriction on lawsuits was one of the main reasons the various players in the financial community, particularly the banks, and many investors, were able to agree on a broad restructuring plan to reimburse investors who lost money on the so-called ABCP investments.
"We ought not to interfere with his decision that the plan is fair and reasonable in all the circumstances," the appeal judges wrote.
"Implementation of the plan, in his view, would work to the overall greater benefit of noteholders as a whole. I can find no error in principle... It was his call to make."
The appeals court decision marks a significant step for small investors who have been trying to get their money back from the failed investments since the market froze last year.
If the court had decided against the restructuring plan it would have wiped out months of preparations intended to move past the process.
Canadian ABCP was a victim of last summer's crisis in U.S. subprime mortgages, amid worries that some of the paper was tied to dodgy U.S. home loans, in addition to bundles of higher-quality mortgages, car loans, credit card receivables and other assets.
Many corporate investors relied on bond rating agencies, who rated the debt as an acceptable risk, and poured milliions of dollars into the short-term investments, hoping to get their money back quickly when they needed it.
However, the investments were frozen last summer because the financial community could not value the ABCP investments.
A rescue plan was hatched by the Pan-Canadian investors committee - representing very large investment groups, including pension plans - late last summer to clean up the problems, and was headed by Bay Street lawyer Purdy Crawford.
Individual investors who had chunks of their life savings in ABCP have seen that investment teeter on the brink of either being tied up for several years or wiped out if the rescue plan failed and the notes were dumped at a discount by the major players.
Some mid-sized investors, a number of corporations and large individual investors with ABCP holdings of more than $1 million but less than hundreds of millions, launched the appeal. Many regard themselves as disadvantaged by the plan.
"Each of the appellants has large sums invested in ABCP - in some cases, hundreds of millions of dollars. Nonetheless, the collective holdings of the appellants - slightly over $1 billion - represent only a small fraction" of the ABCP, the judges wrote.
Monday, August 18, 2008
Financial Update
· TSX -262.21pts a selloff in gold and oil pushes TSX as concern over global recession fuels fear that commodity prices have hit their peak
· Dow +43.97pts
· Dollar +.38c to $94.43US
· Oil -$1.24 to $113.77US per barrel.
· Gold -22.40 to $792.10US per ounce suffering its largest weekly decline after just 5 months ago breaking through $1000 US per ounce
Almost a year to the day the ABCP market ground to a halt, investors find out Monday whether a plan to restructure the $32b asset-backed commercial paper market can proceed from the Ontario Court of Appeals
· Dow +43.97pts
· Dollar +.38c to $94.43US
· Oil -$1.24 to $113.77US per barrel.
· Gold -22.40 to $792.10US per ounce suffering its largest weekly decline after just 5 months ago breaking through $1000 US per ounce
Almost a year to the day the ABCP market ground to a halt, investors find out Monday whether a plan to restructure the $32b asset-backed commercial paper market can proceed from the Ontario Court of Appeals
Friday, August 15, 2008
Financial Update
· TSX -18.31pts
· Dow +82.97pts
· Dollar -.07c to $94.05US
· Oil -$.99 to $115.01US per barrel.
· Gold -16.80 to $808.20US per ounce –
A recent report showed US foreclosures were up 8% in July compared to June and up 55% compared to July 07
National Post online article below says 17% of people surveyed do not understand the recent gov’t changes, including 25% of non-homeowners.
A great opportunity to contact your customers or to post information to your website to explain the changes.
Attached is the informative article that Merix provided at the end of July explaining the changes as well
--------------------------------------------------------------------
Many Canadians oppose tougher mortgage rules
But then again, many don't understand them, says survey
Eric Beauchesne, Canwest News Service
Published: Wednesday, August 13, 2008
OTTAWA -- Nearly one-quarter of Canadians do not agree with the federal government's mortgage lending crackdown, a proportion that rises to nearly a third among non-homeowners, survey results done for a mortgage lending firm suggest.
And only 45% agree with the tighter mortgage lending rules and that the federal government needs to protect Canadian homeowners, a level of support for the changes that falls even further to just one-quarter among non-homeowners, according to the online survey conducted by pollster Angus Reid for ResMor Trust Co.
In an effort to avoid a U.S.-style housing market meltdown, Finance Minister Jim Flaherty last month tightened up the rules governing mortgage lending practices in Canada, including limiting the amortization period for government insured mortgages to 35 years from 40 years, requiring a minimum down payment of 5% for such mortgages, virtually eliminating zero-down mortgages, and requiring that anybody with an insured mortgage have a minimum credit score.
Those who disagree with the measures said they reduce options for people wanting to buy a home.
However, the results also indicate that 17% do not understand the changes, including 25% of non-homeowners.
Further, the findings suggest that the higher the level of understanding, the lower the level of opposition to the new rules.
"I was surprised that 23% do not agree with the measures," Darren Thompson, vice-president of lending for ResMor Trust, said in an interview.
"This survey clearly demonstrates a need for industry professionals to educate Canadians about the new measures, specifically those entering the market for the first time," he said, adding that's something that the federally licensed trust company is doing.
"The measures are not seriously impacting the ability of consumers to get a mortgage," he said, citing as an example an industry finding that more than half of those who took out 40-year mortgages would have qualified for a 25-year mortgage. "It was just enabling them to get a lower monthly payment but at a much greater interest cost."
Mr. Thompson also disagreed with critics of the measures who have warned that the tighter rules will put an added chill on an already cooling housing market.
"There's still lots of financing out there," he said, adding that the measures protect the Canadian taxpayer from having to foot a large bailout if the market goes south as it has in the U.S.
The survey, meanwhile, also revealed a regional divide in the level of support for the tighter rules and the level of understanding of the rules.
Agreement with the new rules in the heated housing markets of the Western provinces and in Ontario is significantly higher than in the Eastern provinces and Quebec, the report said, noting support for the crackdown was 64% in British Columbia, 56% in Alberta, 47% in Saskatchewan and Manitoba, 46% in Ontario, but only 35% in the Atlantic provinces and 34% in Quebec.
The proportion indicating a lack of understanding of the new rules was highest in Quebec and Atlantic Canada, at 23% in both markets, and lowest in British Columbia at only 7%, followed by 13% in Manitoba and Saskatchewan, 18% in Alberta, and 16% in Ontario.
The online survey of at least 1,000 adults conducted last month following the release of the new rules is considered accurate within 3.1 percentage points 19 times out 20
· Dow +82.97pts
· Dollar -.07c to $94.05US
· Oil -$.99 to $115.01US per barrel.
· Gold -16.80 to $808.20US per ounce –
A recent report showed US foreclosures were up 8% in July compared to June and up 55% compared to July 07
National Post online article below says 17% of people surveyed do not understand the recent gov’t changes, including 25% of non-homeowners.
A great opportunity to contact your customers or to post information to your website to explain the changes.
Attached is the informative article that Merix provided at the end of July explaining the changes as well
--------------------------------------------------------------------
Many Canadians oppose tougher mortgage rules
But then again, many don't understand them, says survey
Eric Beauchesne, Canwest News Service
Published: Wednesday, August 13, 2008
OTTAWA -- Nearly one-quarter of Canadians do not agree with the federal government's mortgage lending crackdown, a proportion that rises to nearly a third among non-homeowners, survey results done for a mortgage lending firm suggest.
And only 45% agree with the tighter mortgage lending rules and that the federal government needs to protect Canadian homeowners, a level of support for the changes that falls even further to just one-quarter among non-homeowners, according to the online survey conducted by pollster Angus Reid for ResMor Trust Co.
In an effort to avoid a U.S.-style housing market meltdown, Finance Minister Jim Flaherty last month tightened up the rules governing mortgage lending practices in Canada, including limiting the amortization period for government insured mortgages to 35 years from 40 years, requiring a minimum down payment of 5% for such mortgages, virtually eliminating zero-down mortgages, and requiring that anybody with an insured mortgage have a minimum credit score.
Those who disagree with the measures said they reduce options for people wanting to buy a home.
However, the results also indicate that 17% do not understand the changes, including 25% of non-homeowners.
Further, the findings suggest that the higher the level of understanding, the lower the level of opposition to the new rules.
"I was surprised that 23% do not agree with the measures," Darren Thompson, vice-president of lending for ResMor Trust, said in an interview.
"This survey clearly demonstrates a need for industry professionals to educate Canadians about the new measures, specifically those entering the market for the first time," he said, adding that's something that the federally licensed trust company is doing.
"The measures are not seriously impacting the ability of consumers to get a mortgage," he said, citing as an example an industry finding that more than half of those who took out 40-year mortgages would have qualified for a 25-year mortgage. "It was just enabling them to get a lower monthly payment but at a much greater interest cost."
Mr. Thompson also disagreed with critics of the measures who have warned that the tighter rules will put an added chill on an already cooling housing market.
"There's still lots of financing out there," he said, adding that the measures protect the Canadian taxpayer from having to foot a large bailout if the market goes south as it has in the U.S.
The survey, meanwhile, also revealed a regional divide in the level of support for the tighter rules and the level of understanding of the rules.
Agreement with the new rules in the heated housing markets of the Western provinces and in Ontario is significantly higher than in the Eastern provinces and Quebec, the report said, noting support for the crackdown was 64% in British Columbia, 56% in Alberta, 47% in Saskatchewan and Manitoba, 46% in Ontario, but only 35% in the Atlantic provinces and 34% in Quebec.
The proportion indicating a lack of understanding of the new rules was highest in Quebec and Atlantic Canada, at 23% in both markets, and lowest in British Columbia at only 7%, followed by 13% in Manitoba and Saskatchewan, 18% in Alberta, and 16% in Ontario.
The online survey of at least 1,000 adults conducted last month following the release of the new rules is considered accurate within 3.1 percentage points 19 times out 20
Thursday, August 14, 2008
Financial Update
· TSX +210.22pts broke out of a 4session slump as the heavyweight resource sectors benefited from strong commodity prices and outweighed the sagging financial sector
· Dow -109.51pts amid continuing credit crunch worries and a report from the U.S. Commerce Department stating that retail sales dipped 0.1 % last month, the first decline since February and a worse showing than the flat reading economists had been expecting
· Dollar +.03c to $94.12US
· Oil +2.99to $116.00US per barrel. after a bigger-than-expected decline in gasoline supplies in the U.S
· Gold +16.80 to $825.00US per ounce –
Investors still jittery one year after ABCP collapse
Email the author
David Friend The Canadian Press TORONTO
A year has passed since the collapse of Canada's $33-billion asset-backed commercial paper market and small investors are still waiting for the Ontario Court of Appeal to decide what happens to a restructuring plan that has served as the only hope of investors recovering some of their money.
It wasn't supposed to happen like this, with hundreds of Canadians anxiously hoping their retirement savings wouldn't be whittled down to a mere fraction of their worth -- then again, the market wasn't supposed to crumble last summer either.
Signs of the ABCP troubles began on Aug. 14, 2007, when Coventree Inc. (TSX: COF), the largest nonbank arranger of ABCP in Canada, announced that a "market disruption'' tied to the default of U.S. mortgages resulted in the firm being unable to find investors interested in rolling over the investments as they matured.
The trading of Canadian commercial paper was quickly frozen, and over time the ABCP deterioration spread to world markets.
In Canada, a committee was formed to clean up the problems, headed by Bay Street lawyer Purdy Crawford.
All of the unpredictability has left some Canadians that invested in ABCP, many of them retired, reconsidering their savings, their futures and even looking at selling their homes to gain some financial certainty.
But some say that they've chipped away at their short-term savings over the past year and are nearing dire straits.
"I think we all knew the restructuring plan was going to take a lot of time to put together,'' said Daryl Ching, an independent consultant who spent months working alongside corporations holding ABCP, and last summer dealing with securities at Coventree.
"What's shocking to me is how long the court of appeals is taking.''
Two-and-a-half months ago the restructuring plan seemed to be close to a finale.
An Ontario Superior Court judge had accepted an amendment to the plan that would allow certain noteholders to pursue claims of fraud against brokerages and dealers that sold them ABCP, while protecting banks and rating agencies from litigation.
But the decision also left open a 21-day window for individual and corporate investors to file appeals on the case, and the three judges assigned to the process have been working on a decision since late June.
The date for a final decision is anybody's guess because of scheduling and summer holidays.
"I thought there was a sense of urgency,'' Ching said.
"I've heard people give me stories like, 'The court should not be rushed into making decisions like this.' But we do have 2,000 retail investors who have their life savings in limbo.''
"I think this is a unique enough situation that the decision should be expedited.''
For investors like Yulan Wong, who lives in Vancouver, a resolution can't come soon enough.
The 60-year-old retired real estate agent says she was forced to return to work this summer after realizing she might not have enough money to pay for her bills and the university education of her niece, who is under her care.
"I'm hoping and I'm hoping, and getting really scared they might not pay back the money,'' she said.
"I was looking after money for my niece, because she lost both parents, and I'm feeling very guilty.''
All together Wong estimates that she has $300,000 frozen in the ABCP debacle, and she said that if the assets remain frozen past the current Aug. 31 deadline she might have to consider other major changes to her life.
"I really don't know what I'll do . . . Going back to real estate is difficult at this stage because of the (housing) market, and I've given up all my leads thinking I was going to retire this year,'' she said.
"I could sell my house but I still have two kids who are living here.''
Stories like Wong's dilemma have sprouted up across the country but were virtually unknown when the troubles first emerged.
Ching remembers the uncertainty that surrounded his final weeks at Coventree, before he became an independent consultant.
"I didn't even know there was a single retail investor at Coventree,'' he said, recalling the order of events late last summer.
"For me, it was when a retail investor went on my ABCP blog and made a comment saying 'I'm a Canaccord client and I've got ABCP.' And that was probably (months later) in December.''
"I'm sure there's some that knew about it. Certainly we didn't,'' he added.
A list of ABCP holders has never been officially compiled because of confidentiality laws, but it quickly became apparent that the known investors were just the tip of the iceberg when a Vancouver businessperson launched a suit against Canaccord for selling him the assets, and more lawsuits followed.
Crawford said it wasn't until the ABCP restructuring committee embarked on a three-day whirlwind tour to talk to retail investors in March that he understood just how many average Canadians were affected by the frozen assets.
"We started in Toronto, and it wasn't so obvious there,'' he remembers, saying that the numbers grew when they moved on to Montreal and Edmonton. In Vancouver, "the place was packed. It was good for those investors to have a face to talk to. I saw the anger.''
· Dow -109.51pts amid continuing credit crunch worries and a report from the U.S. Commerce Department stating that retail sales dipped 0.1 % last month, the first decline since February and a worse showing than the flat reading economists had been expecting
· Dollar +.03c to $94.12US
· Oil +2.99to $116.00US per barrel. after a bigger-than-expected decline in gasoline supplies in the U.S
· Gold +16.80 to $825.00US per ounce –
Investors still jittery one year after ABCP collapse
Email the author
David Friend The Canadian Press TORONTO
A year has passed since the collapse of Canada's $33-billion asset-backed commercial paper market and small investors are still waiting for the Ontario Court of Appeal to decide what happens to a restructuring plan that has served as the only hope of investors recovering some of their money.
It wasn't supposed to happen like this, with hundreds of Canadians anxiously hoping their retirement savings wouldn't be whittled down to a mere fraction of their worth -- then again, the market wasn't supposed to crumble last summer either.
Signs of the ABCP troubles began on Aug. 14, 2007, when Coventree Inc. (TSX: COF), the largest nonbank arranger of ABCP in Canada, announced that a "market disruption'' tied to the default of U.S. mortgages resulted in the firm being unable to find investors interested in rolling over the investments as they matured.
The trading of Canadian commercial paper was quickly frozen, and over time the ABCP deterioration spread to world markets.
In Canada, a committee was formed to clean up the problems, headed by Bay Street lawyer Purdy Crawford.
All of the unpredictability has left some Canadians that invested in ABCP, many of them retired, reconsidering their savings, their futures and even looking at selling their homes to gain some financial certainty.
But some say that they've chipped away at their short-term savings over the past year and are nearing dire straits.
"I think we all knew the restructuring plan was going to take a lot of time to put together,'' said Daryl Ching, an independent consultant who spent months working alongside corporations holding ABCP, and last summer dealing with securities at Coventree.
"What's shocking to me is how long the court of appeals is taking.''
Two-and-a-half months ago the restructuring plan seemed to be close to a finale.
An Ontario Superior Court judge had accepted an amendment to the plan that would allow certain noteholders to pursue claims of fraud against brokerages and dealers that sold them ABCP, while protecting banks and rating agencies from litigation.
But the decision also left open a 21-day window for individual and corporate investors to file appeals on the case, and the three judges assigned to the process have been working on a decision since late June.
The date for a final decision is anybody's guess because of scheduling and summer holidays.
"I thought there was a sense of urgency,'' Ching said.
"I've heard people give me stories like, 'The court should not be rushed into making decisions like this.' But we do have 2,000 retail investors who have their life savings in limbo.''
"I think this is a unique enough situation that the decision should be expedited.''
For investors like Yulan Wong, who lives in Vancouver, a resolution can't come soon enough.
The 60-year-old retired real estate agent says she was forced to return to work this summer after realizing she might not have enough money to pay for her bills and the university education of her niece, who is under her care.
"I'm hoping and I'm hoping, and getting really scared they might not pay back the money,'' she said.
"I was looking after money for my niece, because she lost both parents, and I'm feeling very guilty.''
All together Wong estimates that she has $300,000 frozen in the ABCP debacle, and she said that if the assets remain frozen past the current Aug. 31 deadline she might have to consider other major changes to her life.
"I really don't know what I'll do . . . Going back to real estate is difficult at this stage because of the (housing) market, and I've given up all my leads thinking I was going to retire this year,'' she said.
"I could sell my house but I still have two kids who are living here.''
Stories like Wong's dilemma have sprouted up across the country but were virtually unknown when the troubles first emerged.
Ching remembers the uncertainty that surrounded his final weeks at Coventree, before he became an independent consultant.
"I didn't even know there was a single retail investor at Coventree,'' he said, recalling the order of events late last summer.
"For me, it was when a retail investor went on my ABCP blog and made a comment saying 'I'm a Canaccord client and I've got ABCP.' And that was probably (months later) in December.''
"I'm sure there's some that knew about it. Certainly we didn't,'' he added.
A list of ABCP holders has never been officially compiled because of confidentiality laws, but it quickly became apparent that the known investors were just the tip of the iceberg when a Vancouver businessperson launched a suit against Canaccord for selling him the assets, and more lawsuits followed.
Crawford said it wasn't until the ABCP restructuring committee embarked on a three-day whirlwind tour to talk to retail investors in March that he understood just how many average Canadians were affected by the frozen assets.
"We started in Toronto, and it wasn't so obvious there,'' he remembers, saying that the numbers grew when they moved on to Montreal and Edmonton. In Vancouver, "the place was packed. It was good for those investors to have a face to talk to. I saw the anger.''
Wednesday, August 13, 2008
Financial Update
Stocks falter as credit woes weigh
· TSX -36.19pts continues its downwards spiral, closing 8 of the 9 last weeks lower than it opened them, mostly because of tumbling oil prices as well as weakness in gold and materials.
· Dow -139.88pts JPMorgan Chase said it has accumulated $1.5 billion of losses so far this quarter on mortgage-related assets. The news stoked concerns of more pain yet to come.
· Dollar +.57c to $94.09US
· Oil -1.44 to $113.01US per barrel. To a new 3 month low on more evidence that developed countries such as the United States are cutting back on their energy use· Gold plummets -$5.35 to $815.50US per ounce – to an 8 month low as a strong US dollar triggered a massive sell off
U.S. banks tighten credit
Email the author
August 12, 2008 The Associated Press WASHINGTON
More U.S. banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the American economy.
The U.S. Federal Reserve said yesterday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.
The new survey, conducted in early July, found that about 75 per cent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 per cent of banks who said they were tightening lending standards for prime mortgages in the previous survey.
The Fed's July survey covered 50 banks which hold about 80 per cent of the residential mortgages on the books of all commercial banks.
Out of this group of 50 banks, 32 said they were still originating so-called non-traditional home mortgages. Among these 32 banks, about 85 per cent said they had tightened their lending standards, up from 75 per cent who said they were tightening lending standards for non-traditional mortgages in April.
The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories.
· TSX -36.19pts continues its downwards spiral, closing 8 of the 9 last weeks lower than it opened them, mostly because of tumbling oil prices as well as weakness in gold and materials.
· Dow -139.88pts JPMorgan Chase said it has accumulated $1.5 billion of losses so far this quarter on mortgage-related assets. The news stoked concerns of more pain yet to come.
· Dollar +.57c to $94.09US
· Oil -1.44 to $113.01US per barrel. To a new 3 month low on more evidence that developed countries such as the United States are cutting back on their energy use· Gold plummets -$5.35 to $815.50US per ounce – to an 8 month low as a strong US dollar triggered a massive sell off
U.S. banks tighten credit
Email the author
August 12, 2008 The Associated Press WASHINGTON
More U.S. banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the American economy.
The U.S. Federal Reserve said yesterday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.
The new survey, conducted in early July, found that about 75 per cent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 per cent of banks who said they were tightening lending standards for prime mortgages in the previous survey.
The Fed's July survey covered 50 banks which hold about 80 per cent of the residential mortgages on the books of all commercial banks.
Out of this group of 50 banks, 32 said they were still originating so-called non-traditional home mortgages. Among these 32 banks, about 85 per cent said they had tightened their lending standards, up from 75 per cent who said they were tightening lending standards for non-traditional mortgages in April.
The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories.
Tuesday, August 12, 2008
Financial Update
· TSX -138.55pts to 13,203, pulled down lower again by resource shares, which fell with commodity prices
· Dow +48.03pts to 11,782
· Dollar -.17cto $93.52US Sharply lower oil prices and a broader correction among other major currencies against the greenback has helped push the Canadian dollar down almost 7% since last hitting par with its U.S. counterpart just three weeks ago. And if economic forecasts are correct, the loonie will decline further, boosting the prospects for industries like manufacturing, forest products, information technology and health care.
· Oil after falling $10 last week -$.75 to $114.45US per barrel falling to a new 3 month low as the U.S. dollar extended its rebound and more signs emerged that China's energy demand could be leveling off and traders monitored the conflict between Russia and Georgia that some believe could disrupt supplies
· Gold tanked 4% -36.50 to$820.85US per ounce to its lowest level in a year
· A strong US dollar also caused copper to hit a 6 month low
New home prices soften, construction plummets Gary Marr, Financial Post
New home construction, fuelled by a major drop in Ontario, continued to decline last month confounding economists who now say the housing market is falling faster than expected.
Canada Mortgage and Housing Corp. said they were 186,500 new homes constructed last month on a seasonally adjusted annualized basis, a 13.6% drop from a month earlier. The pain was felt hardest in Ontario's condominium market where the construction of multiple apartment units was down 57.9% in July from a month earlier.
Paul Ferley, assistant chief economist with RBC Economics, noted the slide in housing starts was worse than many economists had estimated. The consensus was for 210,000 starts in July which would have been only a 3.6% decline from June.
"The weakness is occurring much sooner than we expected," said Mr. Ferley, adding no one is expecting the Canadian housing market to get as ugly as its United States counterpart.
"The drop in starts in July was likely slightly overstated with the weakness largely concentrated in Ontario. However, housing activity is definitely on a downward trend consistent with indications of deteriorating affordability through last year," said the economist.
Most of the country was hit by the sudden dip with Alberta and British Columbia the only exceptions. Starts rose 23% in Alberta from a month earlier and 5% in B.C. from June to July.
While much is being made of the fact that the condominium sector skewed the July numbers, construction of single family homes is also waning. CMHC said urban single starts dropped 6.6% in July from a month earlier.
Brian Johnston, president of Monarch Corp. a major developer in the Toronto region, said the problem is the housing sector just cannot compete with its own past record. Starts hit a 19-year in 2006 and dropped only marginally last year.
"I would suggest there is a worrying trend that we are seeing such significant drop offs," said Mr. Johnston. "Starts always follow sales and I can tell you sales are definitely trending down in 2008."
Mr. Monarch said the market is cooling and builders are feeling it because they are unable to raise prices at a time when some of their costs are going up. Market conditions for existing homes are the same, with sales dropping and prices flat or falling across the country.
"It's a tougher market out there. I don't think we are in panic mode, there isn't a huge concern but we are definitely slowing down to some extent," said Mr. Johnston.
CMHC said it still expects for the seventh straight year that starts will top 200,000, the strongest housing run in Canadian history.
"It's not that bad," said Bertrand Recher, senior economist with CMHC. "What you saw was a one-month blip due to the multiple starts in Ontario and that's mainly Ontario."
In the first six months of the year, condo construction soared in Ontario and now it appears that run is over. "This is a readjusting because of those strong months," said Mr. Recher.
Pascal Gauthier, an economist with TD Bank Financial Group, echoed those comments. "There will be a natural tendency to read too much into this monthly decline," he said. "We think it's important to caution observers against such knee-jerk reaction to this month's CMHC report. Residential construction is easing and should continue to do so."
· Dow +48.03pts to 11,782
· Dollar -.17cto $93.52US Sharply lower oil prices and a broader correction among other major currencies against the greenback has helped push the Canadian dollar down almost 7% since last hitting par with its U.S. counterpart just three weeks ago. And if economic forecasts are correct, the loonie will decline further, boosting the prospects for industries like manufacturing, forest products, information technology and health care.
· Oil after falling $10 last week -$.75 to $114.45US per barrel falling to a new 3 month low as the U.S. dollar extended its rebound and more signs emerged that China's energy demand could be leveling off and traders monitored the conflict between Russia and Georgia that some believe could disrupt supplies
· Gold tanked 4% -36.50 to$820.85US per ounce to its lowest level in a year
· A strong US dollar also caused copper to hit a 6 month low
New home prices soften, construction plummets Gary Marr, Financial Post
New home construction, fuelled by a major drop in Ontario, continued to decline last month confounding economists who now say the housing market is falling faster than expected.
Canada Mortgage and Housing Corp. said they were 186,500 new homes constructed last month on a seasonally adjusted annualized basis, a 13.6% drop from a month earlier. The pain was felt hardest in Ontario's condominium market where the construction of multiple apartment units was down 57.9% in July from a month earlier.
Paul Ferley, assistant chief economist with RBC Economics, noted the slide in housing starts was worse than many economists had estimated. The consensus was for 210,000 starts in July which would have been only a 3.6% decline from June.
"The weakness is occurring much sooner than we expected," said Mr. Ferley, adding no one is expecting the Canadian housing market to get as ugly as its United States counterpart.
"The drop in starts in July was likely slightly overstated with the weakness largely concentrated in Ontario. However, housing activity is definitely on a downward trend consistent with indications of deteriorating affordability through last year," said the economist.
Most of the country was hit by the sudden dip with Alberta and British Columbia the only exceptions. Starts rose 23% in Alberta from a month earlier and 5% in B.C. from June to July.
While much is being made of the fact that the condominium sector skewed the July numbers, construction of single family homes is also waning. CMHC said urban single starts dropped 6.6% in July from a month earlier.
Brian Johnston, president of Monarch Corp. a major developer in the Toronto region, said the problem is the housing sector just cannot compete with its own past record. Starts hit a 19-year in 2006 and dropped only marginally last year.
"I would suggest there is a worrying trend that we are seeing such significant drop offs," said Mr. Johnston. "Starts always follow sales and I can tell you sales are definitely trending down in 2008."
Mr. Monarch said the market is cooling and builders are feeling it because they are unable to raise prices at a time when some of their costs are going up. Market conditions for existing homes are the same, with sales dropping and prices flat or falling across the country.
"It's a tougher market out there. I don't think we are in panic mode, there isn't a huge concern but we are definitely slowing down to some extent," said Mr. Johnston.
CMHC said it still expects for the seventh straight year that starts will top 200,000, the strongest housing run in Canadian history.
"It's not that bad," said Bertrand Recher, senior economist with CMHC. "What you saw was a one-month blip due to the multiple starts in Ontario and that's mainly Ontario."
In the first six months of the year, condo construction soared in Ontario and now it appears that run is over. "This is a readjusting because of those strong months," said Mr. Recher.
Pascal Gauthier, an economist with TD Bank Financial Group, echoed those comments. "There will be a natural tendency to read too much into this monthly decline," he said. "We think it's important to caution observers against such knee-jerk reaction to this month's CMHC report. Residential construction is easing and should continue to do so."
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