· TSX -143.47 profit taking after 4 days of gains lowered the tsx amid further signs of a worsening global economy
· DOW -226.40 fresh wave of dismal U.S. data, including labor market and housing figures, added to the economic gloom and rattled investor confidence, sending N.American equity markets lower
· Dollar -.54c to 81.75USD Canada's dollar weakened against the greenback as the price of oil dropped and a batch of bleak U.S. economic data kept investors away from riskier assets.
· Oil -$.72 to $41.44USper barrel.
· Gold +16.90 to905.10 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Retailers are becoming creative to try and help stimulate the US economy.
Lose your job, Hyundai will take your car back Nicolas Van Praet, Financial Post
Buy or lease a new car and if you lose your job over the next 12 months, we'll take it back.
The offer is from Hyundai Motor Co. to Americans. The program's name: "Hyundai Assurance," whose TV ads state, perhaps in a cheeky stab at Detroit's big three automakers asking for billions in taxpayer-funded emergency aid: "An automaker that's got your back. Isn't that a nice change?"
It is a sign of the times, an automaker tapping into the national gloom with an offer of solace. It's also a reworking of the relationship between a car company and its customers, shifting responsibility for unpredictable events over to the seller from the buyer. And it just happens to be the brainchild of a Canadian entrepreneur named Vince Beretta.
Mr. Beretta is the founder and chief executive of Walkaway Canada Inc., a Toronto-based developer of credit products for the auto and recreational vehicle market. For the past eight years, he has been chipping away making small gains selling his protection plan, underwritten by ING Novex Insurance, to individual retailers. Just over 208 dealers now offer it to their clients wanting a bit more piece of mind.
In October of last year, Mr. Beretta hit real paydirt.
As he tells it, Hyundai Motor America executives were talking in a meeting late last year about the lack of consumer confidence, lamenting how vehicle incentives just weren't driving consumers to dealership doors any more. They were trying to figure out if there was some way to give Americans the reassurance to buy their cars. Someone in the room mentioned Walkaway and suggested Hyundai look at it.
A deal was quickly struck that saw Hyundai offer Walkaway's product, under the "Assurance" banner, across its entire U.S. lineup of vehicles starting Jan.2. Walkaway Canada will earn royalties, Mr. Beretta says, allowing it to double its current $14-million annual revenue.
Hyundai believes the program is striking such a chord that the automaker is replacing one of its two Superbowl ads featuring its Genesis car with a commercial centered on Assurance.
"This product helps sells cars. We've known that for years," Mr. Beretta says. "Why hasn't it landed with an [auto manufacturer before this]? Quite frankly because they haven't needed it. They've been selling record amounts of vehicles."
Until last year that is. U.S. auto sales were sliding for 11 straight months through September. But in October, they collapsed.
As the financial crisis ripped through stock markets, U.S consumers completely lost their appetite for buying big-ticket items, pinning most automakers to the ropes in what General Motors Corp. called the worst sales month since the end of the Second World War. Hyundai's U.S. sales fell 31% that month, mirroring double-digit increases at other companies.
People hesitate to buy a new car for one of three reasons, Mr. Beretta says: The unwillingness to take on more debt, job security, and health. "We answer all three of those," he says. "We're selling security in an insecure time."
In all, Walkaway has allowed Canadians to break more than $32-million in total vehicle loan and lease obligations since 2000. That may be nothing compared to the value of credit Americans may abandon with the Assurance program.
The ranks of America's jobless is growing as major employers announce layoffs to cut costs. The U.S. Labor Department reported Thursday that the number of U.S. workers drawing on unemployment benefits was 4.78 million in the week ended Jan.17, the highest since record-keeping started in 1967.
"It doesn't matter whether you can get a $199 a month lease or a $239 a month finance payment," says Richard Cooper, vice-president in Canada for market research firm J.D. Power & Associates. "That's not going to matter if what you're concerned about is whether you're going to have a job in three or four months."
Through Assurance, Hyundai pledges to offset up to $7,500 of negative equity in the vehicle returned, meaning it will pay up to that amount to make up the difference between what you still own on your vehicle loan and what the now-used vehicle is worth. Responsibility for the returned vehicle falls to the dealer. Buyers can return their vehicle if they lose their job, become disabled, or go bankrupt, among other conditions.
Hyundai has no plans at the moment to offer the Assurance program in Canada, saying newly-introduced pricing offers and low financing are resonating well with buyers here.
Friday, January 30, 2009
Thursday, January 29, 2009
Financial Update for Jan. 29, 2009
· TSX +146.60-up for a 4th straight session, led by the heavily weighted financial sector, on hopes that the multibillion-dollar stimulus package unveiled in Tuesday's Canadian budget and further U.S. government action will promote economic stability.
· DOW +200.72
· Dollar +.74c to 82.90 USD
· Oil +$.58to $42.16 per barrel.
· Gold -$11.30 to888.200 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
· DOW +200.72
· Dollar +.74c to 82.90 USD
· Oil +$.58to $42.16 per barrel.
· Gold -$11.30 to888.200 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Wednesday, January 28, 2009
Financial Update for Jan. 28, 2009
Budget fights economic crisis with cash
I have simplified and highlighted the key points for the 2009 budget below
· TSX +103.12 to 8759.63
· DOW +58.70 to 8174.73
· Dollar 0.8190 USD
· Oil -5.36 to $41.54 per barrel.
· Gold -11.90 to887.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Highlights from the 2009 federal budget:
- $40 billion in stimulus spending to kickstart the economy
- $8.4 billion for skills and retraining
- The Home Renovation Tax Credit (HRTC) is designed to get Canadians spending now to help create jobs in industries typically hurt by an economic downturn.
- Homeowners can claim 15% of costs on projects worth $1,000 to $10,000 The maximum tax credit (on $9,000 in renovations) is worth $1,350.
- RRSP Home Buyers Withdrawal raised to $25,000
- provide up to $750 in tax relief to help a First Time Home Buyer with their purchases.
- increase the basic personal amount all Canadians can earn without paying federal income tax - The basic amount would go from $9,600 to $10,320, retroactive to Jan. 1.
- a single parent earning $40K will save about $150
- a two-income couple with two kids earning $70K will save about $200
-a two-income couple with two children earning $100K will save about $280
-increases the amount low and middle-income families can earn before child benefits are phased out
- gives seniors tax savings of up to $150 a year by increasing the age credit amount by $1,000
- $500 million to Canada Health Infoway for electronic health records
- $150 million for visitor improvements and upgrades to Parks Canada
- $323 million over two years to restore federal buildings
- $296 million to enhance air passenger security
- $1 billion for clean energy research, development and demonstration projects
- $81 million over two years to speed up the cleanup of contaminated federal sites
- $10 million to improve government environmental reporting
Homeowners in line for 15% rebate on renos
Janice Tibbetts, Canwest News Service/National Post Published: Tuesday, January 27, 2009
OTTAWA -- Canadians who want to sod their lawns or renovate their bathrooms will get a tax break worth up to $1,350 as a key plank of the government's effort to inspire spending.
For a certain sector of consumers, 2009 could become the year of the reno, following the announcement Tuesday of a Home Renovation Tax Credit Tax Credit that lets taxpayers claim 15% of their fixups until Feb. 1, 2010.
"The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects," the budget documents said, "thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada's housing stock."
The government said the incentive is expected to provide about $3-billion in tax relief to some 4.6 million families.
The credit, which is available for homes and cottages effective immediately, is designed to boost construction, forestry and other industries.
Taxpayers can claim renovations on their 2009 tax returns on costs over $1,000, but not exceeding $10,000.
The home renovation program would appear to involve considerably less red tape than some existing initiatives that encourage investment in the home. Programs that involve rebates for investment in the energy efficiency of a house, for example, require a government auditor to approve the changes made to a home to ensure energy efficiencies have been realized.
The HRTC, however, simply requires homeowners to apply for the tax credit, directly on their income-tax returns. The only demand is that the taxpayer save the appropriate receipts in case of a future audit by Revenue Canada.
It also, though, means contractors will have to produce invoices for jobs such as backyard landscaping or basement refinishing -- work that Finance officials yesterday noted is often conducted on a cash basis, with no paperwork produced.
The list of eligible expenses includes renovating kitchens, bathrooms or basements; new carpeting or flooring; building additions, decks, or retaining walls; installing furnaces or water heaters; interior and exterior painting; or driveway resurfacing.
Routine maintenance does not qualify. Such things as new furniture, appliances, tools, carpet cleaning and snow removal are excluded.
Also on the home front, the government will put an extra $300-million over two years into energy retrofits, raise to $25,000 the amount first-time homebuyers can borrow from RRSPs, and provide up to $750 in tax relief to help with their purchases.
I have simplified and highlighted the key points for the 2009 budget below
· TSX +103.12 to 8759.63
· DOW +58.70 to 8174.73
· Dollar 0.8190 USD
· Oil -5.36 to $41.54 per barrel.
· Gold -11.90 to887.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Highlights from the 2009 federal budget:
- $40 billion in stimulus spending to kickstart the economy
- $8.4 billion for skills and retraining
- The Home Renovation Tax Credit (HRTC) is designed to get Canadians spending now to help create jobs in industries typically hurt by an economic downturn.
- Homeowners can claim 15% of costs on projects worth $1,000 to $10,000 The maximum tax credit (on $9,000 in renovations) is worth $1,350.
- RRSP Home Buyers Withdrawal raised to $25,000
- provide up to $750 in tax relief to help a First Time Home Buyer with their purchases.
- increase the basic personal amount all Canadians can earn without paying federal income tax - The basic amount would go from $9,600 to $10,320, retroactive to Jan. 1.
- a single parent earning $40K will save about $150
- a two-income couple with two kids earning $70K will save about $200
-a two-income couple with two children earning $100K will save about $280
-increases the amount low and middle-income families can earn before child benefits are phased out
- gives seniors tax savings of up to $150 a year by increasing the age credit amount by $1,000
- $500 million to Canada Health Infoway for electronic health records
- $150 million for visitor improvements and upgrades to Parks Canada
- $323 million over two years to restore federal buildings
- $296 million to enhance air passenger security
- $1 billion for clean energy research, development and demonstration projects
- $81 million over two years to speed up the cleanup of contaminated federal sites
- $10 million to improve government environmental reporting
Homeowners in line for 15% rebate on renos
Janice Tibbetts, Canwest News Service/National Post Published: Tuesday, January 27, 2009
OTTAWA -- Canadians who want to sod their lawns or renovate their bathrooms will get a tax break worth up to $1,350 as a key plank of the government's effort to inspire spending.
For a certain sector of consumers, 2009 could become the year of the reno, following the announcement Tuesday of a Home Renovation Tax Credit Tax Credit that lets taxpayers claim 15% of their fixups until Feb. 1, 2010.
"The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects," the budget documents said, "thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada's housing stock."
The government said the incentive is expected to provide about $3-billion in tax relief to some 4.6 million families.
The credit, which is available for homes and cottages effective immediately, is designed to boost construction, forestry and other industries.
Taxpayers can claim renovations on their 2009 tax returns on costs over $1,000, but not exceeding $10,000.
The home renovation program would appear to involve considerably less red tape than some existing initiatives that encourage investment in the home. Programs that involve rebates for investment in the energy efficiency of a house, for example, require a government auditor to approve the changes made to a home to ensure energy efficiencies have been realized.
The HRTC, however, simply requires homeowners to apply for the tax credit, directly on their income-tax returns. The only demand is that the taxpayer save the appropriate receipts in case of a future audit by Revenue Canada.
It also, though, means contractors will have to produce invoices for jobs such as backyard landscaping or basement refinishing -- work that Finance officials yesterday noted is often conducted on a cash basis, with no paperwork produced.
The list of eligible expenses includes renovating kitchens, bathrooms or basements; new carpeting or flooring; building additions, decks, or retaining walls; installing furnaces or water heaters; interior and exterior painting; or driveway resurfacing.
Routine maintenance does not qualify. Such things as new furniture, appliances, tools, carpet cleaning and snow removal are excluded.
Also on the home front, the government will put an extra $300-million over two years into energy retrofits, raise to $25,000 the amount first-time homebuyers can borrow from RRSPs, and provide up to $750 in tax relief to help with their purchases.
Tuesday, January 27, 2009
Financial Update for Jan. 27,2009
On the day where Canada is will be opening up the spending taps in a huge way, massive layoffs took place south of the border. Will the governments budget get people back to work, or stem the potential layoffs above the 49th parallel? Will the Liberals throw their support or join forces with the NDP. For those of you that like politics, this should be a couple of interesting days ahead. Enjoy……
· TSX +28.54 to 8656.51
· DOW +38.47 to 8116.03
· Dollar 0.8186 USD
· Oil +.27 to $46.00 per barrel.
· Gold -4.20 904.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Budget's impact to be instrumental in nature of Canada's economic recovery
Mon Jan 26, 5:46 PMJulian Beltrame, The Canadian Press
By Julian Beltrame, The Canadian Press
OTTAWA - How quickly and strongly Canada's economy rebounds from the worst slump in almost two decades could come down to a few lines in Tuesday's federal budget and their execution, economists say.
Last week, Bank of Canada governor Mark Carney presented a rosy picture of the recovery with Canada bouncing back strongly next year.
But Carney had a significant caveat. He was assuming massive and effective stimulus in the United Sates and in Canada to make his sunny prediction work.
All indicators, particularly the Canadian government's own projection of $64 billion in deficits over the next two fiscal years, point to massive stimulus, likely split between spending and tax cuts.
"No single move is perfect, no single move does everything economists want it to do, so maybe the best plan is to sprinkle it among a couple of different areas and that's what it looks like they will do between infrastructure, worker retraining and some kind of tax relief," said Douglas Porter, deputy chief economist with BMO Capital Markets.
Based on the surprising flood of spending announcements that have been released before the budget - the latest being Monday's $7 billion for infrastructure - economist Dale Orr believes stimulus spending of $19 billion in 2009-10 fiscal year and $15 next fiscal year.
The deficits will be even larger due to a sharp drop in revenue flowing into the government's coffers because of the downturn.
Most economists view spending on job-intensive infrastructure projects as among the most effective ways to stimulate the economy short term, and praised Monday's announcement.
In a paper released separately, Benjamin Tal of CIBC World Markets estimated that $10 billion in infrastructure spending is ready to go this year and could potentially create 110,000 jobs, while boosting the country's gross domestic product by 1.5 per cent.
Along with the $6 billion of unspent infrastructure projects Ottawa already has in the pipeline from previous years - the added commitment, along with provincial and municipal participation - would put that figure well beyond $10 billion.
"Given the fact we are running a huge infrastructure deficit, I think it's a huge win-win situation," said Tal. "We have to face it, what we are doing now is buying jobs and infrastructure has a much higher multiplier in terms of creating jobs."
But the spending commitments announced still leave Ottawa with about $10 billion to play with in the budget, some or most in the form of tax cuts.
In a brief scrum, Finance Minister Jim Flaherty said the budget will aim "to stimulate the economy, (encourage people to) buy Canadian, and take some steps to protect Canadians tomorrow."
Earlier Monday, the Canadian Manufacturers and Exporters association called for the budget to address the issues of business credit and liquidity and to make adjustments to the tax system.
A monthly survey of manufacturers conducted for the CME indicated that there has been a deterioration in the number of new orders they're getting in the early days of 2009.
The survey found 21 per cent of the respondents said the value of their orders in early Janaury fell by more than 30 per cent compared with October - putting one-fifth of the 379 respondents in the weakest category.
-
Some key spending measures the Harper government has signalled for Tuesday's budget:
-$4 billion over two years for ready-to-go provincial and municipal infrastructure projects, including roads, bridges and sewers.
-$2 billion for repairs, maintenance and construction at colleges and universities.
-$1 billion for "green" infrastructure.
-$2 billion for housing.
-$1.5 billion to retrain workers.
-$1 billion to help single-industry towns.
-$500 million for agriculture.
-$150 million for forestry.
-Billions of dollars in loan guarantees for the auto industry.
More than 75,000 jobs lost in corporate carnage
Blue chips in U.S., Europe rein in costs
Janet Whitman, Financial Post Published: Monday, January 26, 2009
NEW YORK – Marking one of the most brutal days in corporate history, big American and European companies Monday slashed more than 75,000 jobs.
The massive layoffs come as companies across practically every industry – from banking to cellphones, retail, cars and heavy equipment – struggle to rein in costs and stay afloat as the worldwide recession deepens.
Economists said they don't see any end to the bloodletting until well into 2010.
"Unfortunately with the outlook still so grim for the economy, they are going after the biggest expense on their books, which is labour," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "It's not a good omen for the economy. It means more people will be out of work and there will be less income available to spend by consumers."
The headline-grabbing pink slips by several blue-chip names started in Europe, with electronics maker Philips laying off 6,000 jobs as it sank into the red for the first time since 2003, while banking giant ING plans to trim its workforce by 7,000.
In the United States, Monday's cuts were no less harsh, with 7,000 planned at D.I.Y. chain Home Depot; 8,000 at No. 3 cellphone provider Sprint Nextel Corp.; 2000 at automaker General Motors; 3,400 at semiconductor company Texas Instruments; and as many as 19,000 by Pfizer Inc. as part of the pharmaceutical behemoth's US$68-billion takeover of rival Wyeth.
The largest layoffs came from Caterpillar Inc., which plans to reduce its workforce by 20,000 as global demand for construction and mining equipment sinks.
Referring to the wave of layoffs Monday in Washington, D.C., U.S. President Barack Obama urged swift passage of an US$825-billion package of spending and tax cuts that's aimed at helping bring the sputtering U.S. economy out of its recession.
"These are not just numbers on a page," Mr. Obama said. "As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold."
Caterpillar's job cuts sent a particularly grim signal about the global economic outlook given that Peoria, Ill., company is poised to get a big boost from the U.S. stimulous package, which is heavy on infrastructure spending.
Economists said the latest round layoffs add to a picture that was already gloomy.
"These are high-profile big names with big round numbers so they grab headlines," said Joshua Shapiro, chief U.S. economist with MFR Inc. in New York. "What's more important is that over the past several months, small and medium size companies have been slashing right and left.
That's where the growth has been. Large companies haven't really been in adding much in years."
Although the United States is expected to start pulling out of its recession in mid-2009, workforce reductions are likely to persist into 2010, economists said.
"The problem is that employers are not aware when an economy turns around," said Mr. Baumohl of the Global Economic Outlook Group. "They don't know whether it's a slight improvement or a temporary improvement so they will likely hold off on any hiring until well into 2010 and 2011 when they're convinced the recovery is the real thing."
Economists aren't predicting that U.S. unemployment, which now stands at a little more than 7%, will get anywhere near the 25% rate during the Dirty Thirties.
But they do expect it to keep climbing, with some seeing it peaking above 10% in 2010. That would mark America's first double-digit unemployment rate since the double-dip recession in the early 1980s.
In a sign of the pain ahead, a survey released Monday showed that nearly half of U.S. employers have been avoiding layoffs in favour of other cost-cutting measures, such as freezing salaries and implementing forced vacations.
According to the survey, released by global headhunting firm Challenger, Gray & Christmas, Inc., 92% of companies have initiated some sort of cost-curbing measures.
The most frequently employed cost-control initiative was reducing travel expenses, which was cited by 67% of those surveyed. Hiring freezes followed at 58%, while only 56% said they were resorting to permanent workforce reductions.
Pfizer's acquisition of Wyeth highlights the tremendous pressure on corporate chieftains to rein in costs and could be a sign of many more layoffs to come as industries consolidate to fight against the economic downturn.
"With excess capacity out there just about everywhere and stock prices depressed, we're going to see more opportunistic mergers where, clearly, the goal is to try to reduce costs," said Mr. Shapiro of MFR. "Most of that cost is labour."
· TSX +28.54 to 8656.51
· DOW +38.47 to 8116.03
· Dollar 0.8186 USD
· Oil +.27 to $46.00 per barrel.
· Gold -4.20 904.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Budget's impact to be instrumental in nature of Canada's economic recovery
Mon Jan 26, 5:46 PMJulian Beltrame, The Canadian Press
By Julian Beltrame, The Canadian Press
OTTAWA - How quickly and strongly Canada's economy rebounds from the worst slump in almost two decades could come down to a few lines in Tuesday's federal budget and their execution, economists say.
Last week, Bank of Canada governor Mark Carney presented a rosy picture of the recovery with Canada bouncing back strongly next year.
But Carney had a significant caveat. He was assuming massive and effective stimulus in the United Sates and in Canada to make his sunny prediction work.
All indicators, particularly the Canadian government's own projection of $64 billion in deficits over the next two fiscal years, point to massive stimulus, likely split between spending and tax cuts.
"No single move is perfect, no single move does everything economists want it to do, so maybe the best plan is to sprinkle it among a couple of different areas and that's what it looks like they will do between infrastructure, worker retraining and some kind of tax relief," said Douglas Porter, deputy chief economist with BMO Capital Markets.
Based on the surprising flood of spending announcements that have been released before the budget - the latest being Monday's $7 billion for infrastructure - economist Dale Orr believes stimulus spending of $19 billion in 2009-10 fiscal year and $15 next fiscal year.
The deficits will be even larger due to a sharp drop in revenue flowing into the government's coffers because of the downturn.
Most economists view spending on job-intensive infrastructure projects as among the most effective ways to stimulate the economy short term, and praised Monday's announcement.
In a paper released separately, Benjamin Tal of CIBC World Markets estimated that $10 billion in infrastructure spending is ready to go this year and could potentially create 110,000 jobs, while boosting the country's gross domestic product by 1.5 per cent.
Along with the $6 billion of unspent infrastructure projects Ottawa already has in the pipeline from previous years - the added commitment, along with provincial and municipal participation - would put that figure well beyond $10 billion.
"Given the fact we are running a huge infrastructure deficit, I think it's a huge win-win situation," said Tal. "We have to face it, what we are doing now is buying jobs and infrastructure has a much higher multiplier in terms of creating jobs."
But the spending commitments announced still leave Ottawa with about $10 billion to play with in the budget, some or most in the form of tax cuts.
In a brief scrum, Finance Minister Jim Flaherty said the budget will aim "to stimulate the economy, (encourage people to) buy Canadian, and take some steps to protect Canadians tomorrow."
Earlier Monday, the Canadian Manufacturers and Exporters association called for the budget to address the issues of business credit and liquidity and to make adjustments to the tax system.
A monthly survey of manufacturers conducted for the CME indicated that there has been a deterioration in the number of new orders they're getting in the early days of 2009.
The survey found 21 per cent of the respondents said the value of their orders in early Janaury fell by more than 30 per cent compared with October - putting one-fifth of the 379 respondents in the weakest category.
-
Some key spending measures the Harper government has signalled for Tuesday's budget:
-$4 billion over two years for ready-to-go provincial and municipal infrastructure projects, including roads, bridges and sewers.
-$2 billion for repairs, maintenance and construction at colleges and universities.
-$1 billion for "green" infrastructure.
-$2 billion for housing.
-$1.5 billion to retrain workers.
-$1 billion to help single-industry towns.
-$500 million for agriculture.
-$150 million for forestry.
-Billions of dollars in loan guarantees for the auto industry.
More than 75,000 jobs lost in corporate carnage
Blue chips in U.S., Europe rein in costs
Janet Whitman, Financial Post Published: Monday, January 26, 2009
NEW YORK – Marking one of the most brutal days in corporate history, big American and European companies Monday slashed more than 75,000 jobs.
The massive layoffs come as companies across practically every industry – from banking to cellphones, retail, cars and heavy equipment – struggle to rein in costs and stay afloat as the worldwide recession deepens.
Economists said they don't see any end to the bloodletting until well into 2010.
"Unfortunately with the outlook still so grim for the economy, they are going after the biggest expense on their books, which is labour," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "It's not a good omen for the economy. It means more people will be out of work and there will be less income available to spend by consumers."
The headline-grabbing pink slips by several blue-chip names started in Europe, with electronics maker Philips laying off 6,000 jobs as it sank into the red for the first time since 2003, while banking giant ING plans to trim its workforce by 7,000.
In the United States, Monday's cuts were no less harsh, with 7,000 planned at D.I.Y. chain Home Depot; 8,000 at No. 3 cellphone provider Sprint Nextel Corp.; 2000 at automaker General Motors; 3,400 at semiconductor company Texas Instruments; and as many as 19,000 by Pfizer Inc. as part of the pharmaceutical behemoth's US$68-billion takeover of rival Wyeth.
The largest layoffs came from Caterpillar Inc., which plans to reduce its workforce by 20,000 as global demand for construction and mining equipment sinks.
Referring to the wave of layoffs Monday in Washington, D.C., U.S. President Barack Obama urged swift passage of an US$825-billion package of spending and tax cuts that's aimed at helping bring the sputtering U.S. economy out of its recession.
"These are not just numbers on a page," Mr. Obama said. "As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold."
Caterpillar's job cuts sent a particularly grim signal about the global economic outlook given that Peoria, Ill., company is poised to get a big boost from the U.S. stimulous package, which is heavy on infrastructure spending.
Economists said the latest round layoffs add to a picture that was already gloomy.
"These are high-profile big names with big round numbers so they grab headlines," said Joshua Shapiro, chief U.S. economist with MFR Inc. in New York. "What's more important is that over the past several months, small and medium size companies have been slashing right and left.
That's where the growth has been. Large companies haven't really been in adding much in years."
Although the United States is expected to start pulling out of its recession in mid-2009, workforce reductions are likely to persist into 2010, economists said.
"The problem is that employers are not aware when an economy turns around," said Mr. Baumohl of the Global Economic Outlook Group. "They don't know whether it's a slight improvement or a temporary improvement so they will likely hold off on any hiring until well into 2010 and 2011 when they're convinced the recovery is the real thing."
Economists aren't predicting that U.S. unemployment, which now stands at a little more than 7%, will get anywhere near the 25% rate during the Dirty Thirties.
But they do expect it to keep climbing, with some seeing it peaking above 10% in 2010. That would mark America's first double-digit unemployment rate since the double-dip recession in the early 1980s.
In a sign of the pain ahead, a survey released Monday showed that nearly half of U.S. employers have been avoiding layoffs in favour of other cost-cutting measures, such as freezing salaries and implementing forced vacations.
According to the survey, released by global headhunting firm Challenger, Gray & Christmas, Inc., 92% of companies have initiated some sort of cost-curbing measures.
The most frequently employed cost-control initiative was reducing travel expenses, which was cited by 67% of those surveyed. Hiring freezes followed at 58%, while only 56% said they were resorting to permanent workforce reductions.
Pfizer's acquisition of Wyeth highlights the tremendous pressure on corporate chieftains to rein in costs and could be a sign of many more layoffs to come as industries consolidate to fight against the economic downturn.
"With excess capacity out there just about everywhere and stock prices depressed, we're going to see more opportunistic mergers where, clearly, the goal is to try to reduce costs," said Mr. Shapiro of MFR. "Most of that cost is labour."
Monday, January 26, 2009
Financial Update for Jan. 26,2009
· TSX +123.04 to 8627.97
· DOW +128.47 to 8077.56
· Dollar 0.8191 USD
· Oil +.12 to $46.35 per barrel.
· Gold 908.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Bankers fight to keep card rates up
Issuers battle behind the scenes to influence buget
Eoin Callan, Financial Post Published: Monday, January 26, 2009
Bank lobbyists are fighting a rear-guard action to dissuade the government from taking aim at high credit card interest rates and fees in tomorrow's federal budget.
Bankers were cautioned about a week ago the Conservatives were considering tackling concerns raised by consumer and small businesses groups about price gouging.
The warning reflects political sensitivity to criticism of the banking sector that has surfaced during public consultations and constituency-level soundings after state intervention to support the financial system.
As Ottawa prepares fresh measures to bolster credit markets, stimulate investor demand, and bail out industry, it is mindful of the growing potential for a backlash as Canadians wrestle with their own personal debt loads.
But industry lobbyists are aggressively opposing any meddling in the complex mechanisms they use to set rates and transaction fees for credit cards, a profitable business line that the government currently has no authority to scrutinize or regulate.
"When you have a banking system that has performed so well in the midst of a global crisis, perhaps better than any in the world, why would you burden it with a new extra layer of regulation?" asked one person in the industry.
The banking lobby has successfully faced down past efforts to regulate credit card rates or to force disclosure of how fees and prices are set.
But the issue has gained fresh momentum since retailers reacted angrily to a sudden increase in the fees collected from merchants by banks each time they process a Visa or Mastercard payment, which the Retail Council says cost Canadians a total of $4.5-billion in "hidden fees" last year.
Jack Layton, leader of the New Democratic Party, said the credit squeeze had put many retailers and small businesses in a position where excessive rates and fees could have a material adverse impact on the future of their enterprise.
"We favour stronger regulations to prevent banks from charging unfair credit card interest rates and transaction fees," Mr. Layton said.
In the Senate, influential Liberals on the banking committee are also rattling their sabres, though it would likely take the weight of House of Commons to overcome entrenched industry opposition to the status quo.
The simplest first step for Jim Flaherty, the Finance Minister, to take if he chose to tackle concerns over credit cards would be to mandate the finance committee to hold hearings.
The initial goal would likely be to conduct an audit and compel the banks to disclose their costs, revenues and profit margins on credit card services, information they have long refused to share.
But bankers and lobbyists have been arguing any foray into an area of their business currently beyond the reach of the federal government presages an attempt to increase the burden of regulation.
Yet reflexive arguments against new regulation are losing some of their political force as the global financial crisis prompts deeper examination of the different functions banks fulfil in the economy.
Credit cards are an example of a commercial enterprise that also doubles as basic service, according to Duff Conacher, chairman of the Canadian Community Reinvestment Coalition.
"There are a lot of things you cannot do without a credit card any more. You can't really travel -- book a flight, rent a car, or stay in a hotel -- without one," he says.
That, he argues, makes the profit margins on the services a matter of public interest.
Mr. Conacher says one example of an industry practice that is unlikely to stand up under scrutiny is banks charging interest on 100% of a monthly credit card balance after most of the loan has been paid off.
"Let's say you go into a branch thinking you owe about $1,020, and make a payment of $1,022, but actually you owe $1,023. Then because you still owe $1, they will keep charging you interest on the original principal -- $1023 -- even though you've paid off more than 99.9% and only owe $1.
It doesn't work that way with most loans, so why credit cards?" he asks.
· DOW +128.47 to 8077.56
· Dollar 0.8191 USD
· Oil +.12 to $46.35 per barrel.
· Gold 908.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Bankers fight to keep card rates up
Issuers battle behind the scenes to influence buget
Eoin Callan, Financial Post Published: Monday, January 26, 2009
Bank lobbyists are fighting a rear-guard action to dissuade the government from taking aim at high credit card interest rates and fees in tomorrow's federal budget.
Bankers were cautioned about a week ago the Conservatives were considering tackling concerns raised by consumer and small businesses groups about price gouging.
The warning reflects political sensitivity to criticism of the banking sector that has surfaced during public consultations and constituency-level soundings after state intervention to support the financial system.
As Ottawa prepares fresh measures to bolster credit markets, stimulate investor demand, and bail out industry, it is mindful of the growing potential for a backlash as Canadians wrestle with their own personal debt loads.
But industry lobbyists are aggressively opposing any meddling in the complex mechanisms they use to set rates and transaction fees for credit cards, a profitable business line that the government currently has no authority to scrutinize or regulate.
"When you have a banking system that has performed so well in the midst of a global crisis, perhaps better than any in the world, why would you burden it with a new extra layer of regulation?" asked one person in the industry.
The banking lobby has successfully faced down past efforts to regulate credit card rates or to force disclosure of how fees and prices are set.
But the issue has gained fresh momentum since retailers reacted angrily to a sudden increase in the fees collected from merchants by banks each time they process a Visa or Mastercard payment, which the Retail Council says cost Canadians a total of $4.5-billion in "hidden fees" last year.
Jack Layton, leader of the New Democratic Party, said the credit squeeze had put many retailers and small businesses in a position where excessive rates and fees could have a material adverse impact on the future of their enterprise.
"We favour stronger regulations to prevent banks from charging unfair credit card interest rates and transaction fees," Mr. Layton said.
In the Senate, influential Liberals on the banking committee are also rattling their sabres, though it would likely take the weight of House of Commons to overcome entrenched industry opposition to the status quo.
The simplest first step for Jim Flaherty, the Finance Minister, to take if he chose to tackle concerns over credit cards would be to mandate the finance committee to hold hearings.
The initial goal would likely be to conduct an audit and compel the banks to disclose their costs, revenues and profit margins on credit card services, information they have long refused to share.
But bankers and lobbyists have been arguing any foray into an area of their business currently beyond the reach of the federal government presages an attempt to increase the burden of regulation.
Yet reflexive arguments against new regulation are losing some of their political force as the global financial crisis prompts deeper examination of the different functions banks fulfil in the economy.
Credit cards are an example of a commercial enterprise that also doubles as basic service, according to Duff Conacher, chairman of the Canadian Community Reinvestment Coalition.
"There are a lot of things you cannot do without a credit card any more. You can't really travel -- book a flight, rent a car, or stay in a hotel -- without one," he says.
That, he argues, makes the profit margins on the services a matter of public interest.
Mr. Conacher says one example of an industry practice that is unlikely to stand up under scrutiny is banks charging interest on 100% of a monthly credit card balance after most of the loan has been paid off.
"Let's say you go into a branch thinking you owe about $1,020, and make a payment of $1,022, but actually you owe $1,023. Then because you still owe $1, they will keep charging you interest on the original principal -- $1023 -- even though you've paid off more than 99.9% and only owe $1.
It doesn't work that way with most loans, so why credit cards?" he asks.
Thursday, January 22, 2009
Financial Update for Jan. 22,2009
Stock markets surge on late day recovery in financials, energy
TORONTO - The Toronto stock market ended a volatile session sharply higher thanks to late day bounces in financial and energy stocks, which helped to claw back a good-sized chunk of the previous day's losses.Rising financials also helped New York markets surge, as did a well-received earnings report from IBM Corp. (Canadian press)
· TSX +252.96 to 8757.89
· DOW +279.01 to 8228.10
· Dollar 0.7928 USD
· Oil +.15 to $43.70 per barrel.
· Gold +2.20 to $852.30 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Decade of debt reduction in peril
STEVEN CHASE
From Thursday's Globe and Mail
January 21, 2009 at 9:07 PM EST
OTTAWA — A five-year string of huge deficits projected for Ottawa will unwind a decade of debt reduction and leave the country more than $100-billion further in the hole, new forecasts say.
Canada's parliamentary budget watchdog and a senior private-sector economist separately released similar projections for Ottawa's financial health Wednesday, less than one week before the Harper government is set to tip Canada deep into deficit through a massive stimulus budget aimed at countering a deepening recession.
Both projections blame the deteriorating economy and an expected slow recovery.
Dale Orr of IHS Global Insight Canada forecasts Ottawa will rack up cumulative deficits of $115-billion over the next five years – an amount that would more than reverse its efforts at paying down the national debt since 1997-1998.
Ottawa has paid down $105.2-billion of federal debt in the past 11 years, starting from when former Prime Minister Jean Chrétien's Liberal administration slashed the deficit and began running surpluses.
Although more debt is not ideal, the federal government is more equipped to handle it than it was in the mid-1990s, when the national mortgage hit $562-billion. That's because the Canadian economy has grown significantly since then.
Still, Ottawa will now miss its goal of reducing the debt-to-gross domestic product ratio – a measure of an economy's ability to afford government debt – to 25 per cent by 2012.
The ratio is currently 30 per cent, and because of the faltering economy, it would only have dropped to 27 per cent by 2013-14, according to Mr. Orr. He says the effect of the stimulus package will push it to 29 per cent instead.
Kevin Page, Canada's parliamentary budget officer, said his calculations show Ottawa could run deficits over the next half decade that total between $46-billion and $105-billion. And this forecast doesn't include the tens of billions of dollars in additional spending in next week's budget.
“It's symptomatic of an economy that's going to be operating for a number of years well below its potential,” Mr. Page said.
“I think we kind of fell asleep at the switch, almost assuming we'd never get one of these downturns [again],” he said. “When you get these cyclical downturns, you're going to get revenues falling dramatically.”
Finance Minister Jim Flaherty didn't quarrel with Mr. Page's projections of up to $105-billion in deficits over the next five years.
“What we're going to do is what we've been asked to do by Canadians from coast to coast: We are going to address Canada's needs in a time of global recession,” he said.
“Canada needs some spending on the stimulus side. We will do that and that will result … in a substantial deficit.”
He said the Harper government will lay out a plan for emerging from deficits “as Canada exits from recession” in next week's budget. “We will not create a permanent, long-term deficit for Canada and I will set out how we will ensure that on Tuesday.”
Mr. Orr predicts Ottawa will end up spending $50-billion over several years in stimulus to help revive the economy and won't run balanced budgets again before 2014-2015.
Still, he noted, the additional debt will mean more money goes toward paying interest to lenders. “[It] will slightly restrict the fiscal options for future generations, and perhaps more important, threaten the hard won fiscal discipline of the past decade,” Mr. Orr said.
Both Mr. Orr and Mr. Page say Ottawa would have to cut spending or raise taxes in order to return the federal government books to a balanced position within five years.
“It's a psychological turning point for Canadians to come off 11 years of balanced budgets and surpluses,” Mr. Page said.
Mr. Flaherty said Wednesday Ottawa will offer tax breaks or incentives in the budget to revive the economy – measures sources expect will target both businesses and consumers.
TORONTO - The Toronto stock market ended a volatile session sharply higher thanks to late day bounces in financial and energy stocks, which helped to claw back a good-sized chunk of the previous day's losses.Rising financials also helped New York markets surge, as did a well-received earnings report from IBM Corp. (Canadian press)
· TSX +252.96 to 8757.89
· DOW +279.01 to 8228.10
· Dollar 0.7928 USD
· Oil +.15 to $43.70 per barrel.
· Gold +2.20 to $852.30 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Decade of debt reduction in peril
STEVEN CHASE
From Thursday's Globe and Mail
January 21, 2009 at 9:07 PM EST
OTTAWA — A five-year string of huge deficits projected for Ottawa will unwind a decade of debt reduction and leave the country more than $100-billion further in the hole, new forecasts say.
Canada's parliamentary budget watchdog and a senior private-sector economist separately released similar projections for Ottawa's financial health Wednesday, less than one week before the Harper government is set to tip Canada deep into deficit through a massive stimulus budget aimed at countering a deepening recession.
Both projections blame the deteriorating economy and an expected slow recovery.
Dale Orr of IHS Global Insight Canada forecasts Ottawa will rack up cumulative deficits of $115-billion over the next five years – an amount that would more than reverse its efforts at paying down the national debt since 1997-1998.
Ottawa has paid down $105.2-billion of federal debt in the past 11 years, starting from when former Prime Minister Jean Chrétien's Liberal administration slashed the deficit and began running surpluses.
Although more debt is not ideal, the federal government is more equipped to handle it than it was in the mid-1990s, when the national mortgage hit $562-billion. That's because the Canadian economy has grown significantly since then.
Still, Ottawa will now miss its goal of reducing the debt-to-gross domestic product ratio – a measure of an economy's ability to afford government debt – to 25 per cent by 2012.
The ratio is currently 30 per cent, and because of the faltering economy, it would only have dropped to 27 per cent by 2013-14, according to Mr. Orr. He says the effect of the stimulus package will push it to 29 per cent instead.
Kevin Page, Canada's parliamentary budget officer, said his calculations show Ottawa could run deficits over the next half decade that total between $46-billion and $105-billion. And this forecast doesn't include the tens of billions of dollars in additional spending in next week's budget.
“It's symptomatic of an economy that's going to be operating for a number of years well below its potential,” Mr. Page said.
“I think we kind of fell asleep at the switch, almost assuming we'd never get one of these downturns [again],” he said. “When you get these cyclical downturns, you're going to get revenues falling dramatically.”
Finance Minister Jim Flaherty didn't quarrel with Mr. Page's projections of up to $105-billion in deficits over the next five years.
“What we're going to do is what we've been asked to do by Canadians from coast to coast: We are going to address Canada's needs in a time of global recession,” he said.
“Canada needs some spending on the stimulus side. We will do that and that will result … in a substantial deficit.”
He said the Harper government will lay out a plan for emerging from deficits “as Canada exits from recession” in next week's budget. “We will not create a permanent, long-term deficit for Canada and I will set out how we will ensure that on Tuesday.”
Mr. Orr predicts Ottawa will end up spending $50-billion over several years in stimulus to help revive the economy and won't run balanced budgets again before 2014-2015.
Still, he noted, the additional debt will mean more money goes toward paying interest to lenders. “[It] will slightly restrict the fiscal options for future generations, and perhaps more important, threaten the hard won fiscal discipline of the past decade,” Mr. Orr said.
Both Mr. Orr and Mr. Page say Ottawa would have to cut spending or raise taxes in order to return the federal government books to a balanced position within five years.
“It's a psychological turning point for Canadians to come off 11 years of balanced budgets and surpluses,” Mr. Page said.
Mr. Flaherty said Wednesday Ottawa will offer tax breaks or incentives in the budget to revive the economy – measures sources expect will target both businesses and consumers.
Wednesday, January 21, 2009
Financial Update for Jan. 21,2009
· TSX -336.55 to 8504.93
· DOW -332.00 to 7949.09
· Dollar 0.7923 USD
· Oil +.34 to $41.15 per barrel.
· Gold +3.60 to $859.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Canada finds itself in a 'credit deadlock'
Jacqueline Thorpe, Financial Post Published: Tuesday, January 20, 2009
What if the Bank of Canada cut interest rates and nobody borrowed? As the Bank of Canada joins other central banks around the world in slashing interest rates to historic lows, this is the essential conundrum they face.
They may have brought some semblance of normality to credit markets, and harangued banks back into lending, but now borrowers are on strike.
Call it a "credit deadlock," as David Laidler, fellow-in-residence at the C.D. Howe Institute, does, or a shift from "aspirational to desperational" spending, as Goldman Sachs quipped Tuesday, but the fact is people are becoming less willing to borrow and spend, even if the Bank of Canada's benchmark interest rate is now a tantalizing 1%, the lowest policy rate since the Bank of Canada was founded in 1934.
If consumers were getting antsy about spending as house prices and stock prices tanked, they are hardly going to start borrowing and spending if they are now also losing their jobs.
The United States is now well into this consumer deleveraging process as the unemployment rate has risen from a trough of 4.4% to 7.2% in the space of little over a year.
In Canada, the process has only just begun. For a while, it looked like we might be able to skate through the slowdown with just a flesh wound or two but the complete and total collapse in commodity prices has put paid to that notion, as news Tuesday showed.
Manufacturing shipments for November fell 6.4% to $48.4-billion in November as commodity prices plunged. Strip out the price declines and volumes were still down 3% and new orders plummeted 12.9% as U.S. demand froze.
Meanwhile, Suncor Energy Inc. reported its first quarterly loss in 15 years, chopped spending plans for the second time in less than three months, and indefinitely postponed its oil sands expansion plans as oil has cratered to US$39 per barrel from its peak of US$147 in the summer.
We may have a healthier financial system than our G7 colleagues but our G7 colleagues haven't seen their golden goose vaporized in the space of six months.
That goose -- all natural resources combined -- accounted for all the growth in Canada's export earnings from 2004 to 2008 (non-resource exports slumped 17% on the back of a strong dollar and a drop in auto sales) half the value of the S&P/TSX until the third quarter of 2008 (up from 20% in 2003); and half the growth in business investment from 2003 to 2006.
The goose has not been a big jobs or GDP generator on its own since it is so capital intensive, but the boost to national income from the longest and steepest commodity boom in the post-war period has been phenomenal, stoking profits and the Canadian dollar which have been recycled back to consumers in the form of tax cuts, lower import prices and higher disposal income. That in turn has boosted jobs and income growth all down the pipeline.
Canadians were not afraid to take on ever-increasing debt under this rosy scenario.
But it has all vanished now. A report from BMO Capital markets Tuesday said many commodities such as copper and zinc are now trading below their average operating costs, let alone their all-in costs.
As we wait for other sectors to pick up the slack, the job losses will mount and the opposite, negative dynamic will take hold.
That is not to say the rate cuts will have no impact at all. They will help the banks, which dutifully passed on the cuts through a drop in prime lending rates to 3% from 3.5%. Those with variable rate mortgages and lines of credit will benefit.
An FP colleague who renegotiated her mortgage in September says her mortgage rate -- prime, minus 75 basis points -- will fall to an astonishingly low 2.25%. But she is not about to go out and run up her line of credit. People in general will try to cut back their debt and shy from fresh borrowing.
And while the Bank of Canada forecasts growth will rebound to 3.8% in 2010 from a contraction of 1.2% this year, debt workouts are usually long and painful as anyone who has watched them in the corporate sector knows.
· DOW -332.00 to 7949.09
· Dollar 0.7923 USD
· Oil +.34 to $41.15 per barrel.
· Gold +3.60 to $859.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Canada finds itself in a 'credit deadlock'
Jacqueline Thorpe, Financial Post Published: Tuesday, January 20, 2009
What if the Bank of Canada cut interest rates and nobody borrowed? As the Bank of Canada joins other central banks around the world in slashing interest rates to historic lows, this is the essential conundrum they face.
They may have brought some semblance of normality to credit markets, and harangued banks back into lending, but now borrowers are on strike.
Call it a "credit deadlock," as David Laidler, fellow-in-residence at the C.D. Howe Institute, does, or a shift from "aspirational to desperational" spending, as Goldman Sachs quipped Tuesday, but the fact is people are becoming less willing to borrow and spend, even if the Bank of Canada's benchmark interest rate is now a tantalizing 1%, the lowest policy rate since the Bank of Canada was founded in 1934.
If consumers were getting antsy about spending as house prices and stock prices tanked, they are hardly going to start borrowing and spending if they are now also losing their jobs.
The United States is now well into this consumer deleveraging process as the unemployment rate has risen from a trough of 4.4% to 7.2% in the space of little over a year.
In Canada, the process has only just begun. For a while, it looked like we might be able to skate through the slowdown with just a flesh wound or two but the complete and total collapse in commodity prices has put paid to that notion, as news Tuesday showed.
Manufacturing shipments for November fell 6.4% to $48.4-billion in November as commodity prices plunged. Strip out the price declines and volumes were still down 3% and new orders plummeted 12.9% as U.S. demand froze.
Meanwhile, Suncor Energy Inc. reported its first quarterly loss in 15 years, chopped spending plans for the second time in less than three months, and indefinitely postponed its oil sands expansion plans as oil has cratered to US$39 per barrel from its peak of US$147 in the summer.
We may have a healthier financial system than our G7 colleagues but our G7 colleagues haven't seen their golden goose vaporized in the space of six months.
That goose -- all natural resources combined -- accounted for all the growth in Canada's export earnings from 2004 to 2008 (non-resource exports slumped 17% on the back of a strong dollar and a drop in auto sales) half the value of the S&P/TSX until the third quarter of 2008 (up from 20% in 2003); and half the growth in business investment from 2003 to 2006.
The goose has not been a big jobs or GDP generator on its own since it is so capital intensive, but the boost to national income from the longest and steepest commodity boom in the post-war period has been phenomenal, stoking profits and the Canadian dollar which have been recycled back to consumers in the form of tax cuts, lower import prices and higher disposal income. That in turn has boosted jobs and income growth all down the pipeline.
Canadians were not afraid to take on ever-increasing debt under this rosy scenario.
But it has all vanished now. A report from BMO Capital markets Tuesday said many commodities such as copper and zinc are now trading below their average operating costs, let alone their all-in costs.
As we wait for other sectors to pick up the slack, the job losses will mount and the opposite, negative dynamic will take hold.
That is not to say the rate cuts will have no impact at all. They will help the banks, which dutifully passed on the cuts through a drop in prime lending rates to 3% from 3.5%. Those with variable rate mortgages and lines of credit will benefit.
An FP colleague who renegotiated her mortgage in September says her mortgage rate -- prime, minus 75 basis points -- will fall to an astonishingly low 2.25%. But she is not about to go out and run up her line of credit. People in general will try to cut back their debt and shy from fresh borrowing.
And while the Bank of Canada forecasts growth will rebound to 3.8% in 2010 from a contraction of 1.2% this year, debt workouts are usually long and painful as anyone who has watched them in the corporate sector knows.
Tuesday, January 20, 2009
Financial Update for Jan. 20,2009
Bank of Canada lowers overnight rate target by 1/2 percentage point to 1 per cent
· TSX -78.92 to 8841.48
· DOW 8282.22 markets were closed yesterday.
· Dollar 0.7957 USD
· Oil -1.43to $40.87 per barrel.
· Gold -2.80 to $832.20 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 1 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 1 1/4 per cent.
The outlook for the global economy has deteriorated since the Bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity.
Heightened uncertainty is undermining business and household confidence worldwide and further eroding domestic demand. Major advanced economies, including Canada's, are now in recession and emerging-market economies are increasingly affected. Energy prices have fallen as a result of substantially weaker global demand.
Stabilization of the global financial system is a precondition for economic recovery. To that end, governments and central banks are taking bold and concerted policy actions. There are signs that these extraordinary measures are starting to gain traction, although it will take some time for financial conditions to normalize. In addition, considerable monetary and fiscal policy stimulus is being provided worldwide.
Canadian exports are down sharply, and domestic demand is shrinking as a result of declines in real income, household wealth, and consumer and business confidence. Canada's economy is projected to contract through mid-2009, with real GDP dropping by 1.2 per cent this year on an annual average basis. As policy actions begin to take hold in Canada and globally, and with support from the past depreciation of the Canadian dollar, real GDP is expected to rebound, growing by 3.8 per cent in 2010.
A wider output gap through 2009 and modest decreases in housing prices should cause core CPI inflation to ease, bottoming at 1.1 per cent in the fourth quarter. Total CPI inflation is expected to dip below zero for two quarters in 2009, reflecting year-on-year drops in energy prices. With inflation expectations well-anchored, total and core inflation should return to the 2 per cent target in the first half of 2011 as the economy returns to potential.
Against this background, the Bank today lowered its policy rate by 50 basis points, bringing the cumulative monetary policy easing to 350 basis points since December 2007. Guided by Canada's inflation-targeting framework, the Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent target over the medium term. Low, stable, and predictable inflation is the best contribution monetary policy can make to long-term economic growth and financial stability.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the Monetary Policy Report Update on 22 January 2009. The next scheduled date for announcing the overnight rate target is 3 March 2009.
· TSX -78.92 to 8841.48
· DOW 8282.22 markets were closed yesterday.
· Dollar 0.7957 USD
· Oil -1.43to $40.87 per barrel.
· Gold -2.80 to $832.20 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 1 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 1 1/4 per cent.
The outlook for the global economy has deteriorated since the Bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity.
Heightened uncertainty is undermining business and household confidence worldwide and further eroding domestic demand. Major advanced economies, including Canada's, are now in recession and emerging-market economies are increasingly affected. Energy prices have fallen as a result of substantially weaker global demand.
Stabilization of the global financial system is a precondition for economic recovery. To that end, governments and central banks are taking bold and concerted policy actions. There are signs that these extraordinary measures are starting to gain traction, although it will take some time for financial conditions to normalize. In addition, considerable monetary and fiscal policy stimulus is being provided worldwide.
Canadian exports are down sharply, and domestic demand is shrinking as a result of declines in real income, household wealth, and consumer and business confidence. Canada's economy is projected to contract through mid-2009, with real GDP dropping by 1.2 per cent this year on an annual average basis. As policy actions begin to take hold in Canada and globally, and with support from the past depreciation of the Canadian dollar, real GDP is expected to rebound, growing by 3.8 per cent in 2010.
A wider output gap through 2009 and modest decreases in housing prices should cause core CPI inflation to ease, bottoming at 1.1 per cent in the fourth quarter. Total CPI inflation is expected to dip below zero for two quarters in 2009, reflecting year-on-year drops in energy prices. With inflation expectations well-anchored, total and core inflation should return to the 2 per cent target in the first half of 2011 as the economy returns to potential.
Against this background, the Bank today lowered its policy rate by 50 basis points, bringing the cumulative monetary policy easing to 350 basis points since December 2007. Guided by Canada's inflation-targeting framework, the Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent target over the medium term. Low, stable, and predictable inflation is the best contribution monetary policy can make to long-term economic growth and financial stability.
Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the Monetary Policy Report Update on 22 January 2009. The next scheduled date for announcing the overnight rate target is 3 March 2009.
Monday, January 19, 2009
Financial Update for Jan. 19,2009
Interesting article below about banks increasing rates on consumer loans/lines of credit amidst increase pressure from the government to lend more. How will the banks deal with a potential rate cut from the Bank of Canada when they meet shortly…
· TSX +40.79 to 8920.40
· DOW +68.73 pts to 8282.22
· Dollar 0.8069 USD
· Oil +$5.79to $42.30 per barrel.
· Gold -2.60 to $837.20 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Tight credit starts to bite consumers
TARA PERKINS AND LORI MCLEOD
From Saturday's Globe and Mail
January 16, 2009 at 9:10 PM EST
The credit crunch, which has already squeezed corporate borrowers, is now trickling through to consumers, with higher interest rates and tighter lending terms.
Some borrowers are being notified that rates on their credit lines and cards are going up, and others are having borrowing limits scaled back.
Home buyers taking out a variable-rate mortgage, meanwhile, will find a premium over the prime rate of 70 to 80 basis points, rather than the discount they might have found just six months ago. (A basis point is 1/100 of a per cent.)
While financial institutions in the United States took similar measures last year and banks in Canada have been charging their corporate customers more, the competitive consumer-banking environment in Canada has made it more difficult for Canadian lenders to pass their higher costs along to individual borrowers.
But signs are mounting that financial institutions are going to raise prices on consumer loans, even as the federal government attempts to tackle the thorny issue of credit in its Jan. 27 budget.
Ottawa wants to grease access to credit at reasonable prices to keep the economy churning through the downturn.
The price of bank loans is also likely to hit the spotlight Tuesday, when the Bank of Canada is expected to cut interest rates again.
Banks are under pressure to reduce rates and lend more at a time when they are worried that more borrowers will struggle with their debts, a concern reflected in their increased provisions for troubled loans.
Bank of Montreal is sending letters to customers notifying them of a 1 percentage point increase in interest on lines of credit. The prime rate has been declining in recent months while the cost of borrowing has risen dramatically for all banks, the letters say.
BMO's increase, which affects customers who obtained credit lines before Oct. 15, does not make its products the most expensive in the industry. “From our survey of the market which was confirmed as recently as today, our personal line of credit offering is competitive and in fact favourable compared to some of our major competitors,” a spokesman for the bank said earlier this week. But the move signifies a new willingness among banks to raise rates.
“I think we'll see the rest of the competitors follow suit in some fashion,” said Edward Jones analyst Craig Fehr. “I think this is going to be the first of many product lines that will get repriced.”
The banks, which fund more than half of their loans through deposits, are seeking to loosen the vise grip that lower interest rates have placed on their profits.
“Since the banks depend on deposits for much of their funding, if you reduce prime without being able to reduce deposit rates by the same amount, the margin gets squeezed,” said National Bank analyst Robert Sedran. “Increasing the borrower's spread to prime restores some of that lost profitability. You could see more of that behaviour if interest rates continue to fall.”
Canadian Tire is raising the rate on its Options MasterCard credit cards by 2 percentage points, effective in March. A number of competitors have already raised rates, said spokeswoman Lisa Gibson.
“In this case, just given the economy and so on, we made the decision to raise it,” she said.
Canadian Tire has also reduced the spending limits on accounts that were inactive in order to reduce risk in the company's portfolio, she added. “We also stopped credit limit increases for riskier customers.”
American Express sent letters to a number of Canadians last month informing them the limit on their card had been cut. The company recently tightened some of its criteria, and has increased scrutiny of customer limits in light of the economic environment, said spokeswoman Lauren Dineen-Duarte.
One cardholder, who says she has never missed a payment and has a good job and credit rating, was surprised to receive a form letter from Amex Dec. 24 scaling back her credit limit by more than $16,000.
“These regular reviews are undertaken to protect card members' interests by helping them avoid taking on additional debt that they may not be able to support,” said the letter, which informed the cardholder her limit had been reduced to $1,000.
Ms. Dineen-Duarte said that although “this is an area that is being given increased scrutiny at this time, we have currently only had to take action like reducing credit limits for less than half-a-per-cent of our total card member base.”
She added that Amex carries out its assessments based on the financial information it has on record, including the card holder's spending and payment patterns, and external information it obtains from credit reference agencies.
As Toronto-Dominion Bank chief executive officer Ed Clark pointed out at an industry conference recently, there is new evidence that more Canadian consumers will have trouble repaying their loans. Personal bankruptcies and unemployment are on the rise, and soured loans are expected to follow.
As a result, financial institutions are stepping up efforts to reduce risk in their lending portfolios, and protect profits.
“Will we be able to start to recover, in the lending markets, our cost of lending?” Mr. Clark mused. “I think every bank is trying to do that, but this is a highly competitive market.”
He later added, “We're going through every line of business and saying, ‘Okay, would you make this loan if you assume we're going to have 8 per cent or 9 per cent unemployment?'”
Discounts on variable-rate mortgages, which had become standard during the housing boom but evaporated late last year, are showing no signs of a revival. Lenders are charging about a percentage point above prime on open, variable-rate mortgages with a five-year term. The best current deal is 60 basis points over prime, according to a mortgage broker.
In October, banks and other lenders stopped offering discounts off the prime rate on variable mortgages, and shortly thereafter began charging their mortgage customers a premium over prime.
While rates are historically low, the difference between receiving a discount and paying a premium above prime can translate into a 20-per-cent difference in the biweekly payment amount on a $300,000 variable-rate mortgage.
· TSX +40.79 to 8920.40
· DOW +68.73 pts to 8282.22
· Dollar 0.8069 USD
· Oil +$5.79to $42.30 per barrel.
· Gold -2.60 to $837.20 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Tight credit starts to bite consumers
TARA PERKINS AND LORI MCLEOD
From Saturday's Globe and Mail
January 16, 2009 at 9:10 PM EST
The credit crunch, which has already squeezed corporate borrowers, is now trickling through to consumers, with higher interest rates and tighter lending terms.
Some borrowers are being notified that rates on their credit lines and cards are going up, and others are having borrowing limits scaled back.
Home buyers taking out a variable-rate mortgage, meanwhile, will find a premium over the prime rate of 70 to 80 basis points, rather than the discount they might have found just six months ago. (A basis point is 1/100 of a per cent.)
While financial institutions in the United States took similar measures last year and banks in Canada have been charging their corporate customers more, the competitive consumer-banking environment in Canada has made it more difficult for Canadian lenders to pass their higher costs along to individual borrowers.
But signs are mounting that financial institutions are going to raise prices on consumer loans, even as the federal government attempts to tackle the thorny issue of credit in its Jan. 27 budget.
Ottawa wants to grease access to credit at reasonable prices to keep the economy churning through the downturn.
The price of bank loans is also likely to hit the spotlight Tuesday, when the Bank of Canada is expected to cut interest rates again.
Banks are under pressure to reduce rates and lend more at a time when they are worried that more borrowers will struggle with their debts, a concern reflected in their increased provisions for troubled loans.
Bank of Montreal is sending letters to customers notifying them of a 1 percentage point increase in interest on lines of credit. The prime rate has been declining in recent months while the cost of borrowing has risen dramatically for all banks, the letters say.
BMO's increase, which affects customers who obtained credit lines before Oct. 15, does not make its products the most expensive in the industry. “From our survey of the market which was confirmed as recently as today, our personal line of credit offering is competitive and in fact favourable compared to some of our major competitors,” a spokesman for the bank said earlier this week. But the move signifies a new willingness among banks to raise rates.
“I think we'll see the rest of the competitors follow suit in some fashion,” said Edward Jones analyst Craig Fehr. “I think this is going to be the first of many product lines that will get repriced.”
The banks, which fund more than half of their loans through deposits, are seeking to loosen the vise grip that lower interest rates have placed on their profits.
“Since the banks depend on deposits for much of their funding, if you reduce prime without being able to reduce deposit rates by the same amount, the margin gets squeezed,” said National Bank analyst Robert Sedran. “Increasing the borrower's spread to prime restores some of that lost profitability. You could see more of that behaviour if interest rates continue to fall.”
Canadian Tire is raising the rate on its Options MasterCard credit cards by 2 percentage points, effective in March. A number of competitors have already raised rates, said spokeswoman Lisa Gibson.
“In this case, just given the economy and so on, we made the decision to raise it,” she said.
Canadian Tire has also reduced the spending limits on accounts that were inactive in order to reduce risk in the company's portfolio, she added. “We also stopped credit limit increases for riskier customers.”
American Express sent letters to a number of Canadians last month informing them the limit on their card had been cut. The company recently tightened some of its criteria, and has increased scrutiny of customer limits in light of the economic environment, said spokeswoman Lauren Dineen-Duarte.
One cardholder, who says she has never missed a payment and has a good job and credit rating, was surprised to receive a form letter from Amex Dec. 24 scaling back her credit limit by more than $16,000.
“These regular reviews are undertaken to protect card members' interests by helping them avoid taking on additional debt that they may not be able to support,” said the letter, which informed the cardholder her limit had been reduced to $1,000.
Ms. Dineen-Duarte said that although “this is an area that is being given increased scrutiny at this time, we have currently only had to take action like reducing credit limits for less than half-a-per-cent of our total card member base.”
She added that Amex carries out its assessments based on the financial information it has on record, including the card holder's spending and payment patterns, and external information it obtains from credit reference agencies.
As Toronto-Dominion Bank chief executive officer Ed Clark pointed out at an industry conference recently, there is new evidence that more Canadian consumers will have trouble repaying their loans. Personal bankruptcies and unemployment are on the rise, and soured loans are expected to follow.
As a result, financial institutions are stepping up efforts to reduce risk in their lending portfolios, and protect profits.
“Will we be able to start to recover, in the lending markets, our cost of lending?” Mr. Clark mused. “I think every bank is trying to do that, but this is a highly competitive market.”
He later added, “We're going through every line of business and saying, ‘Okay, would you make this loan if you assume we're going to have 8 per cent or 9 per cent unemployment?'”
Discounts on variable-rate mortgages, which had become standard during the housing boom but evaporated late last year, are showing no signs of a revival. Lenders are charging about a percentage point above prime on open, variable-rate mortgages with a five-year term. The best current deal is 60 basis points over prime, according to a mortgage broker.
In October, banks and other lenders stopped offering discounts off the prime rate on variable mortgages, and shortly thereafter began charging their mortgage customers a premium over prime.
While rates are historically low, the difference between receiving a discount and paying a premium above prime can translate into a 20-per-cent difference in the biweekly payment amount on a $300,000 variable-rate mortgage.
Friday, January 16, 2009
Financial Update for Jan. 16,2009
Plan offers tax credit for home renovations
The Harper government has been floating the idea of a tax credit for home renovations - an idea that could deliver significant stimulus for Canada's residential construction industry in the Jan. 27 budget.
- TSX +191.25 to 8879.61
- DOW +12.35 to 8212.49
- Dollar 0.7988 USD
- Oil -1.42 to $35.40 per barrel.
- Gold -1.50 to $806.70 USD per ounce
- www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Next week’s outlook: The Bank of Canada meets on Tuesday January 20th and 3 key questions will be answered:
1. By how much will the BOC reduce their overnight target rate?
2. Will the Big Banks follow?
3. If so, by how much?
Plan offers tax credit for home renovations
Flaherty floats idea before meeting with premiers today
STEVEN CHASE AND BRIAN LAGHI
From Thursday's Globe and Mail
January 15, 2009 at 4:00 AM EST
OTTAWA — The Harper government has been floating the idea of a tax credit for home renovations - an idea that could deliver significant stimulus for Canada's residential construction industry in the Jan. 27 budget.
Deliberations continue as Canada's premiers meet today in Ottawa to put the final touches on a budget request for Prime Minister Stephen Harper - one that sources say will include more cash for employment training, more benefits for the jobless and extra funding for infrastructure.
Finance Minister Jim Flaherty, meanwhile, has been conducting his own consultation on the looming budget, expected to deliver up to $30-billion in stimulus to soften an economic downturn.
During a closed-door session in Montreal last week, Mr. Flaherty asked participants' opinion on a partly refundable tax credit for renovations. Some economists among the more than 20 attendees criticized the proposal while representatives of the building-trades sector lauded it.
Tax credits can be used to reduce the amount of taxes a person owes to the government, but refundable tax credits can benefit filers even if they have no taxes to be paid; in that case, they could get a refund based on the credit.
The federal Finance Department looks favourably on stimulus spending that helps builders, in part because so many of their materials are made in Canada. This ensures more benefits of stimulus spending remain in this country than if the money goes to taxpayers in the form of rebates to spur consumption. There's a good chance that consumer spending would leak the benefits of stimulus to foreigners: 50 per cent of durable goods bought in Canada are imported.
"[By] contrast, only 20 per cent of investment in residential and non-residential buildings is imported through such inputs as building materials," the Finance Department said in its recent paper on stimulus.
One important decision Mr. Flaherty will have to make should the Tories proceed with this idea is whether to offer a tax credit for home renovation in general, or merely for retrofits and upgrades that increase energy efficiency.
Toronto Dominion Bank chief economist Don Drummond said stimulus for home renovations would be helpful because there's a limit to how many public works projects Ottawa can kick start soon.
"There's only so much of the big infrastructure stuff you can get going in 2009 and 2010," Mr. Drummond said.
"We are past the peak of employment in the construction industry, and those people are going to be getting laid off."
One drawback of programs such as subsidies for retrofitting and house refurbishment is that they are typically difficult to administer, hard to monitor and susceptible to fraud.
In Ottawa, the premiers plan to ask Mr. Harper when they meet with him tonight and tomorrow for more infrastructure money and increased flexibility in spending it.
The Harper government has committed itself to $33-billion over seven years, and is pledging to accelerate that spending. But premiers want the government to add to the overall global total.
Governments also appear close to an agreement to streamline environmental requirements for infrastructure projects. Ontario is particularly concerned for Ottawa to find a way to increase benefits for the unemployed and not just money for worker training. Toronto wants more workers to be able to access benefits.
Premiers will not put a price tag on their requests. "Most premiers are not looking to jam up the feds and put an astronomical number they can't meet," the source said.
Canada's municipal governments yesterday released a list of more than 1,000 infrastructure projects that they say could start this spring if federal funds become available.
Combined, the projects would create more than 150,000 jobs, the Federation of Canadian Municipalities said in a release.
The Harper government has been floating the idea of a tax credit for home renovations - an idea that could deliver significant stimulus for Canada's residential construction industry in the Jan. 27 budget.
- TSX +191.25 to 8879.61
- DOW +12.35 to 8212.49
- Dollar 0.7988 USD
- Oil -1.42 to $35.40 per barrel.
- Gold -1.50 to $806.70 USD per ounce
- www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Next week’s outlook: The Bank of Canada meets on Tuesday January 20th and 3 key questions will be answered:
1. By how much will the BOC reduce their overnight target rate?
2. Will the Big Banks follow?
3. If so, by how much?
Plan offers tax credit for home renovations
Flaherty floats idea before meeting with premiers today
STEVEN CHASE AND BRIAN LAGHI
From Thursday's Globe and Mail
January 15, 2009 at 4:00 AM EST
OTTAWA — The Harper government has been floating the idea of a tax credit for home renovations - an idea that could deliver significant stimulus for Canada's residential construction industry in the Jan. 27 budget.
Deliberations continue as Canada's premiers meet today in Ottawa to put the final touches on a budget request for Prime Minister Stephen Harper - one that sources say will include more cash for employment training, more benefits for the jobless and extra funding for infrastructure.
Finance Minister Jim Flaherty, meanwhile, has been conducting his own consultation on the looming budget, expected to deliver up to $30-billion in stimulus to soften an economic downturn.
During a closed-door session in Montreal last week, Mr. Flaherty asked participants' opinion on a partly refundable tax credit for renovations. Some economists among the more than 20 attendees criticized the proposal while representatives of the building-trades sector lauded it.
Tax credits can be used to reduce the amount of taxes a person owes to the government, but refundable tax credits can benefit filers even if they have no taxes to be paid; in that case, they could get a refund based on the credit.
The federal Finance Department looks favourably on stimulus spending that helps builders, in part because so many of their materials are made in Canada. This ensures more benefits of stimulus spending remain in this country than if the money goes to taxpayers in the form of rebates to spur consumption. There's a good chance that consumer spending would leak the benefits of stimulus to foreigners: 50 per cent of durable goods bought in Canada are imported.
"[By] contrast, only 20 per cent of investment in residential and non-residential buildings is imported through such inputs as building materials," the Finance Department said in its recent paper on stimulus.
One important decision Mr. Flaherty will have to make should the Tories proceed with this idea is whether to offer a tax credit for home renovation in general, or merely for retrofits and upgrades that increase energy efficiency.
Toronto Dominion Bank chief economist Don Drummond said stimulus for home renovations would be helpful because there's a limit to how many public works projects Ottawa can kick start soon.
"There's only so much of the big infrastructure stuff you can get going in 2009 and 2010," Mr. Drummond said.
"We are past the peak of employment in the construction industry, and those people are going to be getting laid off."
One drawback of programs such as subsidies for retrofitting and house refurbishment is that they are typically difficult to administer, hard to monitor and susceptible to fraud.
In Ottawa, the premiers plan to ask Mr. Harper when they meet with him tonight and tomorrow for more infrastructure money and increased flexibility in spending it.
The Harper government has committed itself to $33-billion over seven years, and is pledging to accelerate that spending. But premiers want the government to add to the overall global total.
Governments also appear close to an agreement to streamline environmental requirements for infrastructure projects. Ontario is particularly concerned for Ottawa to find a way to increase benefits for the unemployed and not just money for worker training. Toronto wants more workers to be able to access benefits.
Premiers will not put a price tag on their requests. "Most premiers are not looking to jam up the feds and put an astronomical number they can't meet," the source said.
Canada's municipal governments yesterday released a list of more than 1,000 infrastructure projects that they say could start this spring if federal funds become available.
Combined, the projects would create more than 150,000 jobs, the Federation of Canadian Municipalities said in a release.
Thursday, January 15, 2009
Financial Update for Jan. 15,2009
Holiday sales: Much worse than feared
Retail group says combined November-December sales fell 2.8%, after expecting a modest gain.
· TSX -273.19 to 8688.36
· DOW -248.42 pts to 8200.14
· Dollar 0.8017 USD
· Oil -.46to $36.82 per barrel.
· Gold -16.30 to $808.20 USD per ounce ·
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
By Parija B. Kavilanz, CNNMoney.com senior writer
Last Updated: January 14, 2009: 2:10 PM ET
NEW YORK (CNNMoney.com) -- The retail industry's leading trade group blamed a "deep recession, severe winter weather and five fewer shopping days" for a 2.8% drop in 2008 holiday sales - a far worse outcome than the industry expected.
The National Retail Federation had originally forecast holiday sales for the combined November-December shopping months to grow 2.2%, which would still have been the weakest pace of gain in at least six years.
As it was, it turned out to be the first-ever decline in the measure since the group initiated it in 1995.
The two-month holiday period can account for as much as 50% of retailers' annual profits and sales.
"The current economic crisis proved to be more challenging than any had anticipated," NRF Chief Economist Rosalind Wells said in a report. "Consumers showed they were more than willing to wait out retailers this year causing increased pressure on prices."
Also, the group said a shift in the calendar which resulted in five fewer shopping days between Thanksgiving and Christmas in 2008 versus the previous year meant consumers had fewer days to do their gift shopping and merchants had fewer days to log additional sales.
The latest government report on December retail sales, also released on Wednesday, supported Wells' point.
The Commerce Department report showed overall retail sales fell 2.8% last month and declined 3.1% excluding auto purchases, despite a last minute surge in holiday-related purchases in the week before Christmas.
December's sales drop marked the sixth straight monthly sales decline in 2008 and the longest consecutive stretch of monthly declines in the measure in at least four decades.
What's more, last year's ugly holiday sales could force an unraveling of the retailing industry, forcing several chains to go out of business in 2009.
Many retailers, including Circuit City, Linens 'n Things and Whitehall Jewelers already either filed for bankruptcy or liquidated last year. That trend is expected to rapidly pick up pace in the weeks and months ahead.
The latest casualty - regional department store chain Gottchalks, which operates 58 stores in six Western states - filed for bankruptcy Wednesday. But analysts warn that given the credit market freeze, it's highly unlikely that any merchant who files for bankruptcy in this environment will come out alive
Retail group says combined November-December sales fell 2.8%, after expecting a modest gain.
· TSX -273.19 to 8688.36
· DOW -248.42 pts to 8200.14
· Dollar 0.8017 USD
· Oil -.46to $36.82 per barrel.
· Gold -16.30 to $808.20 USD per ounce ·
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
By Parija B. Kavilanz, CNNMoney.com senior writer
Last Updated: January 14, 2009: 2:10 PM ET
NEW YORK (CNNMoney.com) -- The retail industry's leading trade group blamed a "deep recession, severe winter weather and five fewer shopping days" for a 2.8% drop in 2008 holiday sales - a far worse outcome than the industry expected.
The National Retail Federation had originally forecast holiday sales for the combined November-December shopping months to grow 2.2%, which would still have been the weakest pace of gain in at least six years.
As it was, it turned out to be the first-ever decline in the measure since the group initiated it in 1995.
The two-month holiday period can account for as much as 50% of retailers' annual profits and sales.
"The current economic crisis proved to be more challenging than any had anticipated," NRF Chief Economist Rosalind Wells said in a report. "Consumers showed they were more than willing to wait out retailers this year causing increased pressure on prices."
Also, the group said a shift in the calendar which resulted in five fewer shopping days between Thanksgiving and Christmas in 2008 versus the previous year meant consumers had fewer days to do their gift shopping and merchants had fewer days to log additional sales.
The latest government report on December retail sales, also released on Wednesday, supported Wells' point.
The Commerce Department report showed overall retail sales fell 2.8% last month and declined 3.1% excluding auto purchases, despite a last minute surge in holiday-related purchases in the week before Christmas.
December's sales drop marked the sixth straight monthly sales decline in 2008 and the longest consecutive stretch of monthly declines in the measure in at least four decades.
What's more, last year's ugly holiday sales could force an unraveling of the retailing industry, forcing several chains to go out of business in 2009.
Many retailers, including Circuit City, Linens 'n Things and Whitehall Jewelers already either filed for bankruptcy or liquidated last year. That trend is expected to rapidly pick up pace in the weeks and months ahead.
The latest casualty - regional department store chain Gottchalks, which operates 58 stores in six Western states - filed for bankruptcy Wednesday. But analysts warn that given the credit market freeze, it's highly unlikely that any merchant who files for bankruptcy in this environment will come out alive
Wednesday, January 14, 2009
Financial Update
Energy stocks help TSX claw back losses; N.Y. weak on Alcoa earnings- The Canadian Press
TORONTO - The Toronto stock market closed sharply higher Tuesday following a steep loss as energy stocks revived and financials advanced after Bank of Montreal (TSX:BMO) bought a piece of troubled U.S. insurer American International Group.
· TSX +168.22 to 8961.55
· DOW -25.41 pts to 8448.56
· Dollar 0.8224 USD
· Oil +$1.09to $38.87 per barrel.
· Gold +$4.30 to $825.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Oilsands on agenda for Obama visit: Harper
Renata D'Aliesio and Jason Fekete, Calgary Herald Published: Tuesday, January 13, 2009
The oilsands will be on the agenda when Prime Minister Stephen Harper meets with Barack Obama on his first foreign trip as president of the United States.
Harper told a local morning radio show today that his Conservative government wants to work together with its southern neighbour on energy and environmental issues, and he'll stress this point when Obama travels to Canada soon after his Jan. 20 inauguration as America's 44th president.
The prime minister acknowledged there are concerns about the environmental footprint of the oilsands -- the largest industrial development in Canada.
"To be frank on the oilsands, we've got to do a better job environmentally. We hear a lot of pressure on that," Harper said.
"At the same time, the development of these things is pretty important, in our judgment, to North American energy security. So I think there's balance to be seen there."
Harper, who said he's "delighted" Obama has chosen Canada as his first foreign visit, pointed out the United States has its own environmental challenges related to energy production.
"The United States is a big country for coal-powered electrical generation. That's pretty dirty, too," the prime minister said.
Harper is in Calgary today meeting with a dozen heavy hitters from the business community. He held a 60- to 90-minute meeting at the Harry Hays building downtown to get their input on what sort of economic stimulus should be in the Jan. 27 federal budget.
Those included in the business round table are oilpatch giants Randy Eresman from EnCana, Murray Edwards of Canadian Natural Resources, Hal Kvisle from TransCanada, Rick George from Suncor and Ron Brenneman from Petro-Canada. Also taking part in the meeting are senior executives from other sectors, including Sean Durfy from WestJet, Steve Snyder of TransAlta, Nancy Southern from ATCO, Ron Mannix of Coril Holdings, Fred Green from Canadian Pacific Railway and George Gosbee of Tristone Capital.
It's the latest round of pre-budget consultations Ottawa is conducting with business leaders, labour groups and ordinary Canadians in advance of its fiscal blueprint. Harper has said the budget will be the biggest in a long time, while Finance Minister Jim Flaherty has promised extraordinary measures.
The prime minster told the Calgary radio station that his government is considering tax cuts for Canada's middle class and enhancements to the Employment Insurance program.
"It's a little difficult to do a temporary tax cut. How do you do a temporary tax cut? You don't want to be in a position of raising rates back up again," Harper said.
"But I do think we have to do something to make sure that the middle class is part of the budgetary package that we'll be bringing down, and that they're part of the recovery plan."
Harper reiterated plans to significantly boost infrastructure spending nationwide, but said he doesn't want to see long-run structural deficits.
"It is a time for the government to go in, borrow that money, put it to use, make sure the economic activity and confidence is sustained through what we think will be a difficult year or two," he said.
"The vast majority of spending that we will do, we will make sure is short term," he added. "We'll try and make sure there's not a big tail and we're not having deficits once the economy recovers. "
TORONTO - The Toronto stock market closed sharply higher Tuesday following a steep loss as energy stocks revived and financials advanced after Bank of Montreal (TSX:BMO) bought a piece of troubled U.S. insurer American International Group.
· TSX +168.22 to 8961.55
· DOW -25.41 pts to 8448.56
· Dollar 0.8224 USD
· Oil +$1.09to $38.87 per barrel.
· Gold +$4.30 to $825.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Oilsands on agenda for Obama visit: Harper
Renata D'Aliesio and Jason Fekete, Calgary Herald Published: Tuesday, January 13, 2009
The oilsands will be on the agenda when Prime Minister Stephen Harper meets with Barack Obama on his first foreign trip as president of the United States.
Harper told a local morning radio show today that his Conservative government wants to work together with its southern neighbour on energy and environmental issues, and he'll stress this point when Obama travels to Canada soon after his Jan. 20 inauguration as America's 44th president.
The prime minister acknowledged there are concerns about the environmental footprint of the oilsands -- the largest industrial development in Canada.
"To be frank on the oilsands, we've got to do a better job environmentally. We hear a lot of pressure on that," Harper said.
"At the same time, the development of these things is pretty important, in our judgment, to North American energy security. So I think there's balance to be seen there."
Harper, who said he's "delighted" Obama has chosen Canada as his first foreign visit, pointed out the United States has its own environmental challenges related to energy production.
"The United States is a big country for coal-powered electrical generation. That's pretty dirty, too," the prime minister said.
Harper is in Calgary today meeting with a dozen heavy hitters from the business community. He held a 60- to 90-minute meeting at the Harry Hays building downtown to get their input on what sort of economic stimulus should be in the Jan. 27 federal budget.
Those included in the business round table are oilpatch giants Randy Eresman from EnCana, Murray Edwards of Canadian Natural Resources, Hal Kvisle from TransCanada, Rick George from Suncor and Ron Brenneman from Petro-Canada. Also taking part in the meeting are senior executives from other sectors, including Sean Durfy from WestJet, Steve Snyder of TransAlta, Nancy Southern from ATCO, Ron Mannix of Coril Holdings, Fred Green from Canadian Pacific Railway and George Gosbee of Tristone Capital.
It's the latest round of pre-budget consultations Ottawa is conducting with business leaders, labour groups and ordinary Canadians in advance of its fiscal blueprint. Harper has said the budget will be the biggest in a long time, while Finance Minister Jim Flaherty has promised extraordinary measures.
The prime minster told the Calgary radio station that his government is considering tax cuts for Canada's middle class and enhancements to the Employment Insurance program.
"It's a little difficult to do a temporary tax cut. How do you do a temporary tax cut? You don't want to be in a position of raising rates back up again," Harper said.
"But I do think we have to do something to make sure that the middle class is part of the budgetary package that we'll be bringing down, and that they're part of the recovery plan."
Harper reiterated plans to significantly boost infrastructure spending nationwide, but said he doesn't want to see long-run structural deficits.
"It is a time for the government to go in, borrow that money, put it to use, make sure the economic activity and confidence is sustained through what we think will be a difficult year or two," he said.
"The vast majority of spending that we will do, we will make sure is short term," he added. "We'll try and make sure there's not a big tail and we're not having deficits once the economy recovers. "
Tuesday, January 13, 2009
Financial Update January 13th,2009
Stocks tumble as oil falls on economic worries- AP So much for the Santa Claus rally. A run-up at the end of the 2008 that had some investors hoping the worst was over is crumbling on fear that corporate profit reports arriving this week will signal a recovery in the economy is further off than Wall Street had hoped.
· TSX -291.85 to 8793.27
· DOW -125.21 pts to 8473.97
· Dollar 0.8228 USD
· Oil -$3.29to $37.59US per barrel.
· Gold -$34.00 to $821.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
New home prices continue drop
Jamie Sturgeon, Financial Post Published: Monday, January 12, 2009
New home prices fell in November for the second consecutive month-to-month decrease, Statistics Canada said Monday. The average price on a new house declined 0.3%, the federal agency said, as demand continued to cool across the national real estate market in the fall. The dip continues the first reverse in home prices in more than a decade, following the 0.4% decline experienced in October. Yet the results varied from region to region, with some markets still witnessing considerable price increases.
St. John's recorded the largest annualized gain, with the value of a new home up more than 25% from 2007, a clip that narrowly outpaced Regina.The monthly increase in St. John's was 3.4%.
In a sign that Saskatchewan is beginning to feel the bite of a recession it has largely avoided so far, home prices were flat in Regina in November while in Saskatoon prices continued to come down. New home prices were down 0.5% in Saskatoon "confirming a trend of deceleration in this city," Statscan said. "Builders continued to report difficult market conditions."
The drops continued further west.
New home prices in Edmonton recorded a 12-month plunge of 7.9% - largest monthly decline since May 1985. Prices dipped 2.5% in Calgary. On a monthly basis, prices fell 0.3% in Edmonton and 1.1% in Calgary between October and November.On the West Coast, builders cut new home prices in Vancouver by 1.7% in November, a trend continued in Victoria, Statscan said.
Markets in Eastern Canada, which have shown more stable supply-demand conditions, continued to rise, Statscan said. Compared with November 2007, contractors' selling prices were 4.3% higher in Ottawa and 2.0% higher in Toronto.In Québec, the 12-month growth rate was 5.4%, while in Montréal, prices increased 4.6%, the agency said. No market east of Saskatchewan experienced a month-to-month decline in new home prices.
· TSX -291.85 to 8793.27
· DOW -125.21 pts to 8473.97
· Dollar 0.8228 USD
· Oil -$3.29to $37.59US per barrel.
· Gold -$34.00 to $821.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
New home prices continue drop
Jamie Sturgeon, Financial Post Published: Monday, January 12, 2009
New home prices fell in November for the second consecutive month-to-month decrease, Statistics Canada said Monday. The average price on a new house declined 0.3%, the federal agency said, as demand continued to cool across the national real estate market in the fall. The dip continues the first reverse in home prices in more than a decade, following the 0.4% decline experienced in October. Yet the results varied from region to region, with some markets still witnessing considerable price increases.
St. John's recorded the largest annualized gain, with the value of a new home up more than 25% from 2007, a clip that narrowly outpaced Regina.The monthly increase in St. John's was 3.4%.
In a sign that Saskatchewan is beginning to feel the bite of a recession it has largely avoided so far, home prices were flat in Regina in November while in Saskatoon prices continued to come down. New home prices were down 0.5% in Saskatoon "confirming a trend of deceleration in this city," Statscan said. "Builders continued to report difficult market conditions."
The drops continued further west.
New home prices in Edmonton recorded a 12-month plunge of 7.9% - largest monthly decline since May 1985. Prices dipped 2.5% in Calgary. On a monthly basis, prices fell 0.3% in Edmonton and 1.1% in Calgary between October and November.On the West Coast, builders cut new home prices in Vancouver by 1.7% in November, a trend continued in Victoria, Statscan said.
Markets in Eastern Canada, which have shown more stable supply-demand conditions, continued to rise, Statscan said. Compared with November 2007, contractors' selling prices were 4.3% higher in Ottawa and 2.0% higher in Toronto.In Québec, the 12-month growth rate was 5.4%, while in Montréal, prices increased 4.6%, the agency said. No market east of Saskatchewan experienced a month-to-month decline in new home prices.
Friday, January 9, 2009
Financial Update January 9th,2009
Financials, energy boost TSX
· TSX +100.26pts (Reuters) aftera late-session burst with the materials group boosted by strength in gold-mining issues as bullion prices rose. Financials and energy were also higher
· DOW -27.24pts
· Dollar +1.31c to $.84.85US.
· Oil -$.93to $41.70US per barrel.
· Gold +$12.80 to $854.50US per ounce a rally sparked by a weaker greenback as the U.S. deficit is expected to balloon on proposed economic stimulus packages aimed at lifting the economy from recession. "Gold is a very good refuge and safe haven," said John Ing, president of Maison Placements Canada.
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
v Banking regulator won't boost capital targets Doug Alexander, Bloomberg Canada's top banking regulator has no plans to raise the required levels of capital needed to be retained by the country's lenders, Superintendent Julie Dickson said.
"The Canadian banking system remains very well capitalized," Ms. Dickson, who heads the Office of the Superintendent of Financial Institutions, said during the conference hosted by RBC Capital Markets in Toronto. The regulator has no plans to raise its current targets, and "doing so now would also amplify the economic downturn," she said.
Canadian banks have raised about $6.7-billion (US$5.6-billion) in share sales in the past two months to bolster their balance sheets amid a global recession. Canadian lenders reported regulatory capital of 8.9% to 10.5% of assets at the end of October, above OSFI's 7% target. The so-called Tier 1 capital ratio is a measure of a bank's financial strength based on its equity as a percentage of risk-weighted assets. OSFI has a target for total capital ratio, which is 10%.
v TORONTO (Reuters) - The Bank of Canada hinted on Thursday that it would continue to lower interest rates this year but gave no indication of how deep the cuts would be as the global recession hits the Canadian economy. Deputy Governor Pierre Duguay said the bank continued to monitor developments in world markets to decide its next moves, amid market expectations of a rate cut on January 20.
v .Obama says drastic action needed to save U.S. economy Sheldon Alberts, Canwest News Washington Correspondent
WASHINGTON -- Appealing to an American public confronted daily with worsening economic news, U.S. president-elect Barack Obama warned Thursday the nation is headed for years of severe recession unless he wins approval for an unprecedented government stimulus package in the first weeks of his presidency.
Intensifying his campaign to build support for the economic rescue package, Mr. Obama said the U.S. government may soon be unable to prevent a long-lasting crisis without a huge injection of new spending and tax cuts to jolt the economy back to life.
"I don't believe it's too late to change course, but it will be, if we don't take dramatic action as soon as possible," Mr. Obama said at George Mason University in Fairfax, Va.
"If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity. . . . In short, a bad situation could become dramatically worse."
It was the starkest language Obama has used to describe the deepening crisis, and was aimed at persuading Americans no entity other than the federal government is capable of restoring the country's economic health.
He was also hoping the dire message would increase pressure on Congress -- particularly Republicans and conservative Democrats - not to throw up roadblocks to block the passage of stimulus legislation by early February.
"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said. "And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."
Mr. Obama's speech comes a day after the Congressional Budget Office announced the 2009 U.S. budget deficit will soar to a record $1.2 trillion in 2009. And that's before the passage of the stimulus package, which is expected to cost close to $800 billion.
New U.S. unemployment statistics are due Friday, with predictions that another half million jobs were lost in December.
"There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy," Mr. Obama said.
"Only government can break the vicious cycles that are crippling our economy -- where a lack of spending leads to lost jobs, which leads to even less spending, where an inability to lend and borrow stops growth and leads to even less credit."
Several polls have shown Americans, while deeply concerned about job safety and fearful of a potential depression, are also increasingly wary about the effectiveness of large-scale government stimulus plans.
There has been a widespread public perception that the $700-billion bailout of Wall Street last fall was unsuccessful, insofar as the nation's credit markets have remained exceedingly tight, and consumer loans remain difficult to obtain.
Mr. Obama pledged a "sweeping effort" to halt the nation's foreclosure crisis, and said he would use a "full arsenal of tools to get credit flowing again."
Mr. Obama offered no details about the precise cost of the stimulus package, though it's expected to include $300 billion in tax cuts. An initial proposal could be presented to Congress by week's end.
The initial reaction to Obama's plea from Republicans on Capitol Hill was mostly positive, although the co-operative tone was laced with expressions of caution about the size of the stimulus.
Senator Mitch McConnell, the Senate minority leader, said Obama must remain mindful of the "eye-popping" federal deficit.
"Given the deficit numbers, it really ought not to be a trillion-dollar spending bill. I think we can start by saying that," said Mr. McConnell.
Representative John Boehner, the GOP leader in the House of Representatives, said he was looking for Mr. Obama to find "the right balance" between jump-starting the economy and risking unending deficits.
"Yes, our economy needs help. But at the end of the day, how -- how much debt are we going to pile on future generations?" Boehner said.
Still, Mr. McConnell said he was encouraged with Obama's efforts to reach out to Republicans.
"It's clear to me from listening to the president, the new president, that he wants to include Republican ideas," he said.
Mr. Obama sought to allay fears his promised stimulus package will be hijacked by lawmakers eager to load up legislation with pork-barrel projects or wasteful spending.
"It is not just another public-works program," Mr. Obama said.
While some of the stimulus will be aimed at rebuilding crumbling transportation infrastructure, it will place heavy focus on modernizing the nation's health-care system and creating tens of thousands of "green jobs," he said.
The plan will include a goal to double the national output of alternative energy in three years, computerize medical records, and retrofit federal government buildings.
Most of the three million jobs the plan is designed to create will be in the private sector, Mr. Obama said.
"I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy," he said. "We'll invest in what works."
· TSX +100.26pts (Reuters) aftera late-session burst with the materials group boosted by strength in gold-mining issues as bullion prices rose. Financials and energy were also higher
· DOW -27.24pts
· Dollar +1.31c to $.84.85US.
· Oil -$.93to $41.70US per barrel.
· Gold +$12.80 to $854.50US per ounce a rally sparked by a weaker greenback as the U.S. deficit is expected to balloon on proposed economic stimulus packages aimed at lifting the economy from recession. "Gold is a very good refuge and safe haven," said John Ing, president of Maison Placements Canada.
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
v Banking regulator won't boost capital targets Doug Alexander, Bloomberg Canada's top banking regulator has no plans to raise the required levels of capital needed to be retained by the country's lenders, Superintendent Julie Dickson said.
"The Canadian banking system remains very well capitalized," Ms. Dickson, who heads the Office of the Superintendent of Financial Institutions, said during the conference hosted by RBC Capital Markets in Toronto. The regulator has no plans to raise its current targets, and "doing so now would also amplify the economic downturn," she said.
Canadian banks have raised about $6.7-billion (US$5.6-billion) in share sales in the past two months to bolster their balance sheets amid a global recession. Canadian lenders reported regulatory capital of 8.9% to 10.5% of assets at the end of October, above OSFI's 7% target. The so-called Tier 1 capital ratio is a measure of a bank's financial strength based on its equity as a percentage of risk-weighted assets. OSFI has a target for total capital ratio, which is 10%.
v TORONTO (Reuters) - The Bank of Canada hinted on Thursday that it would continue to lower interest rates this year but gave no indication of how deep the cuts would be as the global recession hits the Canadian economy. Deputy Governor Pierre Duguay said the bank continued to monitor developments in world markets to decide its next moves, amid market expectations of a rate cut on January 20.
v .Obama says drastic action needed to save U.S. economy Sheldon Alberts, Canwest News Washington Correspondent
WASHINGTON -- Appealing to an American public confronted daily with worsening economic news, U.S. president-elect Barack Obama warned Thursday the nation is headed for years of severe recession unless he wins approval for an unprecedented government stimulus package in the first weeks of his presidency.
Intensifying his campaign to build support for the economic rescue package, Mr. Obama said the U.S. government may soon be unable to prevent a long-lasting crisis without a huge injection of new spending and tax cuts to jolt the economy back to life.
"I don't believe it's too late to change course, but it will be, if we don't take dramatic action as soon as possible," Mr. Obama said at George Mason University in Fairfax, Va.
"If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity. . . . In short, a bad situation could become dramatically worse."
It was the starkest language Obama has used to describe the deepening crisis, and was aimed at persuading Americans no entity other than the federal government is capable of restoring the country's economic health.
He was also hoping the dire message would increase pressure on Congress -- particularly Republicans and conservative Democrats - not to throw up roadblocks to block the passage of stimulus legislation by early February.
"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said. "And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."
Mr. Obama's speech comes a day after the Congressional Budget Office announced the 2009 U.S. budget deficit will soar to a record $1.2 trillion in 2009. And that's before the passage of the stimulus package, which is expected to cost close to $800 billion.
New U.S. unemployment statistics are due Friday, with predictions that another half million jobs were lost in December.
"There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy," Mr. Obama said.
"Only government can break the vicious cycles that are crippling our economy -- where a lack of spending leads to lost jobs, which leads to even less spending, where an inability to lend and borrow stops growth and leads to even less credit."
Several polls have shown Americans, while deeply concerned about job safety and fearful of a potential depression, are also increasingly wary about the effectiveness of large-scale government stimulus plans.
There has been a widespread public perception that the $700-billion bailout of Wall Street last fall was unsuccessful, insofar as the nation's credit markets have remained exceedingly tight, and consumer loans remain difficult to obtain.
Mr. Obama pledged a "sweeping effort" to halt the nation's foreclosure crisis, and said he would use a "full arsenal of tools to get credit flowing again."
Mr. Obama offered no details about the precise cost of the stimulus package, though it's expected to include $300 billion in tax cuts. An initial proposal could be presented to Congress by week's end.
The initial reaction to Obama's plea from Republicans on Capitol Hill was mostly positive, although the co-operative tone was laced with expressions of caution about the size of the stimulus.
Senator Mitch McConnell, the Senate minority leader, said Obama must remain mindful of the "eye-popping" federal deficit.
"Given the deficit numbers, it really ought not to be a trillion-dollar spending bill. I think we can start by saying that," said Mr. McConnell.
Representative John Boehner, the GOP leader in the House of Representatives, said he was looking for Mr. Obama to find "the right balance" between jump-starting the economy and risking unending deficits.
"Yes, our economy needs help. But at the end of the day, how -- how much debt are we going to pile on future generations?" Boehner said.
Still, Mr. McConnell said he was encouraged with Obama's efforts to reach out to Republicans.
"It's clear to me from listening to the president, the new president, that he wants to include Republican ideas," he said.
Mr. Obama sought to allay fears his promised stimulus package will be hijacked by lawmakers eager to load up legislation with pork-barrel projects or wasteful spending.
"It is not just another public-works program," Mr. Obama said.
While some of the stimulus will be aimed at rebuilding crumbling transportation infrastructure, it will place heavy focus on modernizing the nation's health-care system and creating tens of thousands of "green jobs," he said.
The plan will include a goal to double the national output of alternative energy in three years, computerize medical records, and retrofit federal government buildings.
Most of the three million jobs the plan is designed to create will be in the private sector, Mr. Obama said.
"I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy," he said. "We'll invest in what works."
Thursday, January 8, 2009
Financial Update January 8th,2009
TSX falls hard
· TSX -350.77pts (Reuters) as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.
· DOW -245.40pts Startling job losses in the US and a warning from tech bellwether Intel Corp added to the gloomy investor sentiment and heightened fears of an extended recession.
· Dollar -1.01c to $.83.54US.
· Oil -$5.95to $42.63US per barrel. "Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that's why the price of oil has come down," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier
· Gold -$24.30 to $841.10US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
U.S. private-sector employers shed 693,000 jobs in December, a report by ADP Employer Services showed, suggesting more dire news to come in U.S. government jobs data due on Friday.
Canadian employment figures for December are also due on Friday and are to show the economy shed some 22,000 jobs. It will also likely underscore economists' forecasts that the economy is in for a rough ride through the first half of the year and will see little or no growth in 2009 as the recession takes hold.
David Friend The Canadian Press
Canadians should brace themselves for another year of economic woe that could top the misery that unfolded in the latter half of 2008, according to some of the country's leading bank economistsThe flood of dire financial challenges facing the United States is still working its way steadily across the border into Canada, TD Bank chief economist Don Drummond told a gathering at the Economic Club of Toronto yesterday.
"We shouldn't really be thankful for the end of 2008 because I think (it) will have proven to be a better year than 2009,'' he said.
"We'll have a rough fourth quarter, but it'll really hit in Canada in the first quarter, and we'll start to see a lot more variables that look somewhat like the United States.''
The dramatic economic decline will likely push Bank of Canada governor Mark Carney to further slash interest rates, to as low as 0.5 per cent, in an effort to fend off deepening economic problems, suggested Avery Shenfeld of CIBC.
"The Bank of Canada has been aggressively cutting interest rates and has more to do,'' he said at a news conference after the meeting.
However, he added that "going all the way to a zero interest rate might not be necessary, given that we're going to get the stimulus from both the U.S. actions and fiscal policy, and we also have a cheaper dollar.''
Last month, Canada's central bank slashed a key interest rate to 1.5 per cent, its lowest level in half a century.
The bank economists focused especially on the world economy, and how what started as a U.S. economic slowdown began to relentlessly expand in recent quarters.
"There is no question that the current situation is without precedent,'' said Bank of Montreal's Sherry Cooper.
"It is global, it is affecting sectors around the world and there is no place to hide.''
In Canada, the global economic meltdown will continue to affect the country for at least the first half of the year before it returns to moderate growth, the economists agreed.
A report from BMO Capital Markets suggested real GDP will contract just over two per cent, while unemployment will rise to eight per cent by the end of the year.
Home prices are also expected to erode further while consumer spending tightens, especially in auto sales, the BMO report said.
Cooper said she believes government policies and monetary stimulus will bring the country out of a recession, and that a recovery will start in the third quarter.
"At the end of the day we will have outperformed much of the rest of the world, certainly the rest of the G7,'' she said.
Canadians not deflated
Jacqueline Thorpe, Financial Post
Deflation may be public enemy number one among central bankers, monetary policy wonks and bond market aficionados, but a survey shows it has not even a blip on the average Canadian's radar screen.
The poll released Wednesday shows 50% of Canadians expect inflation to increase over the next year, versus 21% who expect the current recession to be deflationary.
The finding, contained in Pollara Inc.'s annual financial outlook survey, underscores the grip inflation continues to hold on the Canadian psyche. It could ultimately be a good thing, providing a bulwark against deflation -- a downward spiral in prices caused by consumers delaying purchases in anticipation of cheaper goods in the future. Deflation can become debilitating if it causes companies to cut production and employment, leading to ever-weaker output.
That inflation, rather than deflation, is still the main concern for Canadians could be understandable if the survey were conducted last summer when commodity prices were soaring and gasoline roared across $1 a litre, but the poll of 2,670 people was conducted between Dec. 11 and 15, 2008. That was after gas prices had tumbled, sale signs filled shopping malls, stock markets had tanked, house prices were beginning to fall and constant talk of depression and deflation filled the airwaves.
After decades of worrying about inflation, it could be that Canadians have not yet wrapped their heads around the idea that prices can also materially drop.
It could also be that with the domestic economy in relatively better shape than in the United States, Canadians simply do not see deflation posing as much of a threat as south of the border. There, the U.S. Federal Reserve has pulled out all the stops to try to prevent deflation, including cutting interest rates to nearly zero.
Meanwhile, it is hard for any average consumer to see lower prices as a threat.
"Nobody understands deflation can be bad for them because they don't recognize it could also involve their pay cheque," said Avery Shenfeld, senior economist at CIBC World Markets.
Mr. Shenfeld was among a panel economists who attended the release of the survey at an Economic Club of Toronto outlook on Wednesday.
"The reason prices are falling is usually that the economy is in a mess."
The Bank of Canada could take some heart in the perception that deflation is not considered as big a threat as policymakers or the media do. For deflation to become dangerous it has to seep into the consciousness, causing consumers to curtail purchases.
"Inflation expectations tend to be pretty sticky in both directions which is actually good thing for public policy," Mr. Shenfeld said.
While deflation is no big threat, the survey, with a margin of error of plus or minus two percentage points 19 times out of 20, shows Canadians see many economic demons over the next year: A record high 91% believe the economy is in recession; almost a third believe the recession will last 13 to 18 months; 68% believe employment will worsen while 31% believe either it somewhat likely or very likely someone in their household may lose a job.
Oddly, many Canadians still expect their personal financial situation to be maintained or even improved in 2009, said Michael Marzolini, chairman of Pollara. This could be because the Canadian unemployment rate has not dramatically soared yet.
Canadians are all government interventionists now, survey data show.
"The villains are on Wall Street or in Washington," Mr. Marzolini said of the average perception. "The current solution is direct government intervention, spending on infrastructure job retraining, tax cuts and even bailouts and protectionism. The private sector has become part of the problem. It has been seen to fail
· TSX -350.77pts (Reuters) as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.
· DOW -245.40pts Startling job losses in the US and a warning from tech bellwether Intel Corp added to the gloomy investor sentiment and heightened fears of an extended recession.
· Dollar -1.01c to $.83.54US.
· Oil -$5.95to $42.63US per barrel. "Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that's why the price of oil has come down," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier
· Gold -$24.30 to $841.10US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
U.S. private-sector employers shed 693,000 jobs in December, a report by ADP Employer Services showed, suggesting more dire news to come in U.S. government jobs data due on Friday.
Canadian employment figures for December are also due on Friday and are to show the economy shed some 22,000 jobs. It will also likely underscore economists' forecasts that the economy is in for a rough ride through the first half of the year and will see little or no growth in 2009 as the recession takes hold.
David Friend The Canadian Press
Canadians should brace themselves for another year of economic woe that could top the misery that unfolded in the latter half of 2008, according to some of the country's leading bank economistsThe flood of dire financial challenges facing the United States is still working its way steadily across the border into Canada, TD Bank chief economist Don Drummond told a gathering at the Economic Club of Toronto yesterday.
"We shouldn't really be thankful for the end of 2008 because I think (it) will have proven to be a better year than 2009,'' he said.
"We'll have a rough fourth quarter, but it'll really hit in Canada in the first quarter, and we'll start to see a lot more variables that look somewhat like the United States.''
The dramatic economic decline will likely push Bank of Canada governor Mark Carney to further slash interest rates, to as low as 0.5 per cent, in an effort to fend off deepening economic problems, suggested Avery Shenfeld of CIBC.
"The Bank of Canada has been aggressively cutting interest rates and has more to do,'' he said at a news conference after the meeting.
However, he added that "going all the way to a zero interest rate might not be necessary, given that we're going to get the stimulus from both the U.S. actions and fiscal policy, and we also have a cheaper dollar.''
Last month, Canada's central bank slashed a key interest rate to 1.5 per cent, its lowest level in half a century.
The bank economists focused especially on the world economy, and how what started as a U.S. economic slowdown began to relentlessly expand in recent quarters.
"There is no question that the current situation is without precedent,'' said Bank of Montreal's Sherry Cooper.
"It is global, it is affecting sectors around the world and there is no place to hide.''
In Canada, the global economic meltdown will continue to affect the country for at least the first half of the year before it returns to moderate growth, the economists agreed.
A report from BMO Capital Markets suggested real GDP will contract just over two per cent, while unemployment will rise to eight per cent by the end of the year.
Home prices are also expected to erode further while consumer spending tightens, especially in auto sales, the BMO report said.
Cooper said she believes government policies and monetary stimulus will bring the country out of a recession, and that a recovery will start in the third quarter.
"At the end of the day we will have outperformed much of the rest of the world, certainly the rest of the G7,'' she said.
Canadians not deflated
Jacqueline Thorpe, Financial Post
Deflation may be public enemy number one among central bankers, monetary policy wonks and bond market aficionados, but a survey shows it has not even a blip on the average Canadian's radar screen.
The poll released Wednesday shows 50% of Canadians expect inflation to increase over the next year, versus 21% who expect the current recession to be deflationary.
The finding, contained in Pollara Inc.'s annual financial outlook survey, underscores the grip inflation continues to hold on the Canadian psyche. It could ultimately be a good thing, providing a bulwark against deflation -- a downward spiral in prices caused by consumers delaying purchases in anticipation of cheaper goods in the future. Deflation can become debilitating if it causes companies to cut production and employment, leading to ever-weaker output.
That inflation, rather than deflation, is still the main concern for Canadians could be understandable if the survey were conducted last summer when commodity prices were soaring and gasoline roared across $1 a litre, but the poll of 2,670 people was conducted between Dec. 11 and 15, 2008. That was after gas prices had tumbled, sale signs filled shopping malls, stock markets had tanked, house prices were beginning to fall and constant talk of depression and deflation filled the airwaves.
After decades of worrying about inflation, it could be that Canadians have not yet wrapped their heads around the idea that prices can also materially drop.
It could also be that with the domestic economy in relatively better shape than in the United States, Canadians simply do not see deflation posing as much of a threat as south of the border. There, the U.S. Federal Reserve has pulled out all the stops to try to prevent deflation, including cutting interest rates to nearly zero.
Meanwhile, it is hard for any average consumer to see lower prices as a threat.
"Nobody understands deflation can be bad for them because they don't recognize it could also involve their pay cheque," said Avery Shenfeld, senior economist at CIBC World Markets.
Mr. Shenfeld was among a panel economists who attended the release of the survey at an Economic Club of Toronto outlook on Wednesday.
"The reason prices are falling is usually that the economy is in a mess."
The Bank of Canada could take some heart in the perception that deflation is not considered as big a threat as policymakers or the media do. For deflation to become dangerous it has to seep into the consciousness, causing consumers to curtail purchases.
"Inflation expectations tend to be pretty sticky in both directions which is actually good thing for public policy," Mr. Shenfeld said.
While deflation is no big threat, the survey, with a margin of error of plus or minus two percentage points 19 times out of 20, shows Canadians see many economic demons over the next year: A record high 91% believe the economy is in recession; almost a third believe the recession will last 13 to 18 months; 68% believe employment will worsen while 31% believe either it somewhat likely or very likely someone in their household may lose a job.
Oddly, many Canadians still expect their personal financial situation to be maintained or even improved in 2009, said Michael Marzolini, chairman of Pollara. This could be because the Canadian unemployment rate has not dramatically soared yet.
Canadians are all government interventionists now, survey data show.
"The villains are on Wall Street or in Washington," Mr. Marzolini said of the average perception. "The current solution is direct government intervention, spending on infrastructure job retraining, tax cuts and even bailouts and protectionism. The private sector has become part of the problem. It has been seen to fail
Wednesday, January 7, 2009
Financial Update
Flaherty says government, banks working to ensure people get loans
· TSX +186.58pts to 9,472 (Reuters) The strong start to 2009 trading continued for a 6th straight session, buoyed by strength across its three biggest sectors -- financials, energy, and materials. You're seeing confidence return back into the market. You're seeing an ability to shake off economic news that continues to be quite dismal," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver. "These gains are promising, but one still needs to be cautious."
· DOW +62.21pts on the increased likelihood of a government stimulus package
· Dollar +.52c to $.84.55US.
· Oil -$.23to $48.58US per barrel. as weak U.S. economic data triggered a bout of profit-taking.
· Gold +$8.20 to $866US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
The financial group shot up 3.6% today as Royal Bank of Canada became the third bank this week to launch a preferred share offering to bolster its capital ratios. Canada's biggest bank, announced a C$200 million preferred share offering, following offerings on Monday from Toronto-Dominion Bank and National Bank of Canada .
Budget will address credit concerns: Flaherty Paul Vieira, Eoin Callan and John Greenwood, Financial Post
The federal Finance Minister, Jim Flaherty, said Tuesday the coming Jan. 27 budget is expected to address concerns regarding access to credit, through measures analysts say could see taxpayers exposed to new market risks.
He made the acknowledgment after consultations with chief executives from Canada's big banks, indicating Ottawa has recognized lenders require additional support to make credit more freely available.
Mr. Flaherty said access to credit has emerged as the No. 1 concern after meetings with stakeholders as part of his cross-country budget consultation tour, which stopped in Montreal on Tuesday.
The measures are designed to juice a flagging economy through a combination of state loans and support for private sector lenders, and drew a grudging welcome from opposition leaders who see the budget as a make-or-break moment for the minority Conservative government.
"It was about time," said John McCallum, the Liberal party chief of economic strategy, who said government's "moves to date have been timid and cautious."
The Finance Minister said a working group of government, central bank and Bay Street representatives was being created to develop "policy options," some of which are expected to be finalized in the coming budget.
While the membership of the working group will be fluid, it will begin with a top-tier meeting in the coming weeks of bank chief executives and senior government officials accompanied by the heads of Crown corporations with the authority to make state loans.
That meeting will start a process of identifying businesses sectors where companies are being starved of loans and intervention may be required by entities like the Businesses Development Corporation, Export Development Corporation and Farm Credit Corporation.
For example, executives and officials might single out struggling companies in the forestry sector where they felt it might make sense for the state to step in and make a loan instead of a bank, people briefed on the plans said.
The work of the joint industry-government group will quickly be passed to less senior figures, and is seen as a way to overcome gaps in information and allow policymakers and the financial sector to respond quickly to pinch points across the country where lack of credit could aggravate the economic downturn.
Ottawa is also looking to intervene in the moribund market for securitized credit such as commercial paper to get funds flowing again.
"We have had discussions about ways in which we can accomplish the goal of making sure the commercial paper works and functions. Those discussions are ongoing and there are a number of policy options there," Mr. Flaherty said, adding he expected the budget to "address" these matters.
Mark Carney, Governor of the Bank of Canada, is expected to take the lead in shaping further state intervention in this sphere.
Finn Poschmann, vice-president of research at the C.D. Howe Institute, said Ottawa's options are straightforward: it could guarantee short-term commercial paper; or buy it up directly from issuers who are having trouble otherwise placing their paper.
"We have not gone down this route before," Mr. Poschmann said. "Either way, this would involve taxpayer exposure to new credit market risks."
Maintaining a functioning market where banks and companies can turn to investors to back fresh loans -- fueling credit card spending, auto financing and small businesses -- is seen as crucial to determining the severity and duration of the economic downturn underway.
Securitized debt, such as credit card loans, typically gets turned into asset-backed commercial and term paper -- a substantial market in Canada valued at over $50-billion. But since the beginning of the credit crunch, demand for these assets has plummeted, causing the market to shrink and raising the cost of financing for consumers and businesses.
Particularly squeezed are non-financial companies, most notably car leasing firms, which rely on commercial paper to fund operations.
There is also concern on Bay Street that if the market continues to erode, some banks could be forced to take the assets back onto their balance sheets, potentially requiring them to raise more capital.
CNW :Correction, not crash for Canadian real estate market in 2009; Average house prices forecast to fall 3.0 per cent
- Historically low interest rates, stable local economies and increasing affordability should support Canada's residential real estate market during transitioning period -
>> TORONTO, Jan. 6 /CNW/ - After experiencing a significant reset in 2008 -a reaction to continuous dire news surrounding the health of the globaleconomy combined with a cooling from the previous years' fervid activitylevels - Canada's resale real estate market should see only modest price andunit sales corrections take place across the country during 2009. Bothnational average house prices and the number of homes sold is expected todecline this year, according to the Royal LePage 2009 Market Survey Forecastreleased today.
Nationally, average house prices are forecast to dip by 3.0 per cent fromlast year to $295,000, while transactions are projected to fall to 416,000(-3.5 %) unit sales in 2009. In spite of this cooling trend on a nationallevel, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did muchto dampen consumer confidence during the latter part of 2008, causing a markedslowdown in house sales activity. However, as a more rational understanding ofthe issues gains ground, together with a wide range of announced correctivemeasures, consumer confidence is anticipated to recover, prompting real estateactivity to pick up once again in the latter half of 2009. Further, Canada in2009 enjoys a stronger economic foundation than most countries and that shouldtemper the housing market correction. The combination of low inflation,reasonable employment levels and improving housing affordability, driven inpart by low mortgage rates, are anticipated to stimulate demand in the comingmonths.
"While Canada's housing market is anticipated to continue to move througha period of adjustment over the next six months, we should expect modestlylower home prices, not a U.S.-style collapse, which was brought on by astructural failure of the entire American credit system," said Phil Soper,president and chief executive of Royal LePage Real Estate Services. "Mostconsumers are not aware that nationally, Canadian housing market activitypeaked in 2007 and has been adjusting lower since. We are well into thisinevitable cyclical correction."
Added Soper: "While a grey cloud hangs over some markets, the sky is notfalling. In recent years, Canada has been a difficult place to be a purchaserof real estate, particularly for first-time buyers. When real estate marketscorrect, inventory levels rise, providing buyers choices instead offrustrating bidding wars. In 2009, appropriately-priced homes will still sellfor fair value."
The housing market is expected to perform quite differently from regionto region across the country. In many mid-sized cities where home pricesremain below the national average, such as Regina and Winnipeg, prices areexpected to increase moderately through 2009, as home ownership remainsparticularly affordable. The most significant price decreases are forecast forCanada's most expensive city, Vancouver, which has experienced above averageprice increases for most of the decade. The correction is a natural cyclicalreaction to an extended period of high price appreciation. Vancouver'sfundamentals, including growing population figures and the positive economicspinoffs expected from the 2010 Olympics, remain very positive.
Observed Soper: "For several years, Vancouver experienced aggressiveprice run-ups in response to overwhelming levels of demand - conditions, whicheventually reached a tipping point. While buyers will be acquiring propertiesfor less in 2009, it is important to note that prices are coming down fromall-time record levels."
Secondary Ontario markets heavily populated by people working in themanufacturing sectors are also anticipated to experience greater than averagedeclines in house prices and activity levels in 2009. In contrast, real estatein Montreal and Ottawa is poised to remain stable, with average house pricesrelatively flat through 2009.
After moving through a period of correction that started in 2007, wellbefore other regions in the country, both Calgary and Edmonton's housingmarkets are anticipated to return to a growth state later in 2009,characterized by stable average house prices and increased unit sales. Despiteslowdowns and delay with some major energy projects, Alberta's economy remainsone of the strongest in Canada.
Looking east, Halifax's real estate market is expected to experience verymodest price appreciation through 2009. After experiencing strong priceincreases over the last year and a half, the market has hit its capacity forabsorbing rising prices and activity levels. The city's diversified array ofindustries is expected to bolster the economy and continue to create solidemployment opportunities, stabilizing home values.
Canadians have been confused and justifiably skeptical of the efforts ofthe worlds' central banks and governments to combat the global economiccrisis. There is broad belief, however, that Canada's financial house is inbetter shape than many peer countries, particularly the U.S. While the federaland most provincial governments have been slow to implement economic stimuluspackages, they enjoy broad public support in principle. Together with theactions taken by the Bank of Canada, the positive impact on consumerconfidence stemming from infrastructure spending announcements and otherstimulus programs is expected to be significant.
Concluded Soper: "We believe that the Canadian economy will struggleearly in 2009, but that conditions will progress continually throughout theyear. Improving credit markets, the stimulative impact from a weaker Canadiandollar, together with the implementation of large fiscal stimulus initiatives,set the stage for a return to growth in the second half of 2009."
<<>>
Global Economic Woes
No country is impervious to the current economic woes being felt aroundthe world. The poor performance of the equity markets and the constant streamof pessimistic economic news had a very negative impact on housing activity inCanada in 2008. Consumer confidence is expected to slowly recover during 2009as the impact of the many corrective actions introduced and announced takesroot.
Tempered, but continued growth in emerging economies, particularly China,India and Brazil, should mitigate the downside risk to Canadian commodityexporters.
Foreclosure Figures in Canada
Foreclosure rates in Canada are expected to increase, but remain verylimited, especially when compared to the U.S. experience, where a broadstructural failure of the credit system occurred. Canada's relativelyinsignificant subprime market, and in turn, the low number of Canadianscontractually committed to very risky mortgages, should result in aforeclosure rate of insufficient volume to impact house prices or transactionactivity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in2009, but remain at long-term healthy levels. Some areas in Ontario, and to alesser extent Quebec, that have high levels of manufacturing jobs, mayexperience greater than national average unemployment. Areas in Alberta tiedto the energy sector may see short-term employment declines, but theprovince's tight overall labour market is expected to mitigate the downside.
Interest Rates
The Bank of Canada's overnight target-lending rate, already at very lowlevels, is expected to be reduced again early in 2009. This should bode wellfor home buyers in 2009 as loosening credit spreads allow banks to offer moreaggressively priced mortgages.
<< 2009 Market Survey Forecast - Average House Prices
------------------------------------------------------------------------- 2009 2008 Market 09/08% Forecast Projected 2008/2007 2007 2006 -------------------------------------------------------------------------
Halifax 1.0% $234,300 $232,000 7.2% $216,339 $203,178
-------------------------------------------------------------------------
Montreal -1.0% $254,400 $257,000 4.3% $246,500 $215,659
-------------------------------------------------------------------------
Ottawa 0.0% $291,000 $291,000 6.6% $273,058 $257,481
-------------------------------------------------------------------------
Toronto -4.0% $364,800 $380,000 0.8% $377,029 $352,388
-------------------------------------------------------------------------
Winnipeg 4.0% $204,900 $197,000 20.5% $163,500 $151,983
-------------------------------------------------------------------------
Regina 6.0% $243,300 $229,500 38.6% $165,613 $131,851
-------------------------------------------------------------------------
Calgary -1.0% $402,000 $406,000 -1.9% $414,066 $346,675
-------------------------------------------------------------------------
Edmonton 0.0% $333,000 $333,000 -1.7% $338,636 $250,915
-------------------------------------------------------------------------
Vancouver -9.0% $540,100 $593,500 4.0% $570,795 $509,876
-------------------------------------------------------------------------
Canada -3.0% $295,000 $304,000 -1.1% $307,265 $276,974
------------------------------------------------------------------------- >>
· TSX +186.58pts to 9,472 (Reuters) The strong start to 2009 trading continued for a 6th straight session, buoyed by strength across its three biggest sectors -- financials, energy, and materials. You're seeing confidence return back into the market. You're seeing an ability to shake off economic news that continues to be quite dismal," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver. "These gains are promising, but one still needs to be cautious."
· DOW +62.21pts on the increased likelihood of a government stimulus package
· Dollar +.52c to $.84.55US.
· Oil -$.23to $48.58US per barrel. as weak U.S. economic data triggered a bout of profit-taking.
· Gold +$8.20 to $866US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
The financial group shot up 3.6% today as Royal Bank of Canada became the third bank this week to launch a preferred share offering to bolster its capital ratios. Canada's biggest bank, announced a C$200 million preferred share offering, following offerings on Monday from Toronto-Dominion Bank and National Bank of Canada .
Budget will address credit concerns: Flaherty Paul Vieira, Eoin Callan and John Greenwood, Financial Post
The federal Finance Minister, Jim Flaherty, said Tuesday the coming Jan. 27 budget is expected to address concerns regarding access to credit, through measures analysts say could see taxpayers exposed to new market risks.
He made the acknowledgment after consultations with chief executives from Canada's big banks, indicating Ottawa has recognized lenders require additional support to make credit more freely available.
Mr. Flaherty said access to credit has emerged as the No. 1 concern after meetings with stakeholders as part of his cross-country budget consultation tour, which stopped in Montreal on Tuesday.
The measures are designed to juice a flagging economy through a combination of state loans and support for private sector lenders, and drew a grudging welcome from opposition leaders who see the budget as a make-or-break moment for the minority Conservative government.
"It was about time," said John McCallum, the Liberal party chief of economic strategy, who said government's "moves to date have been timid and cautious."
The Finance Minister said a working group of government, central bank and Bay Street representatives was being created to develop "policy options," some of which are expected to be finalized in the coming budget.
While the membership of the working group will be fluid, it will begin with a top-tier meeting in the coming weeks of bank chief executives and senior government officials accompanied by the heads of Crown corporations with the authority to make state loans.
That meeting will start a process of identifying businesses sectors where companies are being starved of loans and intervention may be required by entities like the Businesses Development Corporation, Export Development Corporation and Farm Credit Corporation.
For example, executives and officials might single out struggling companies in the forestry sector where they felt it might make sense for the state to step in and make a loan instead of a bank, people briefed on the plans said.
The work of the joint industry-government group will quickly be passed to less senior figures, and is seen as a way to overcome gaps in information and allow policymakers and the financial sector to respond quickly to pinch points across the country where lack of credit could aggravate the economic downturn.
Ottawa is also looking to intervene in the moribund market for securitized credit such as commercial paper to get funds flowing again.
"We have had discussions about ways in which we can accomplish the goal of making sure the commercial paper works and functions. Those discussions are ongoing and there are a number of policy options there," Mr. Flaherty said, adding he expected the budget to "address" these matters.
Mark Carney, Governor of the Bank of Canada, is expected to take the lead in shaping further state intervention in this sphere.
Finn Poschmann, vice-president of research at the C.D. Howe Institute, said Ottawa's options are straightforward: it could guarantee short-term commercial paper; or buy it up directly from issuers who are having trouble otherwise placing their paper.
"We have not gone down this route before," Mr. Poschmann said. "Either way, this would involve taxpayer exposure to new credit market risks."
Maintaining a functioning market where banks and companies can turn to investors to back fresh loans -- fueling credit card spending, auto financing and small businesses -- is seen as crucial to determining the severity and duration of the economic downturn underway.
Securitized debt, such as credit card loans, typically gets turned into asset-backed commercial and term paper -- a substantial market in Canada valued at over $50-billion. But since the beginning of the credit crunch, demand for these assets has plummeted, causing the market to shrink and raising the cost of financing for consumers and businesses.
Particularly squeezed are non-financial companies, most notably car leasing firms, which rely on commercial paper to fund operations.
There is also concern on Bay Street that if the market continues to erode, some banks could be forced to take the assets back onto their balance sheets, potentially requiring them to raise more capital.
CNW :Correction, not crash for Canadian real estate market in 2009; Average house prices forecast to fall 3.0 per cent
- Historically low interest rates, stable local economies and increasing affordability should support Canada's residential real estate market during transitioning period -
>> TORONTO, Jan. 6 /CNW/ - After experiencing a significant reset in 2008 -a reaction to continuous dire news surrounding the health of the globaleconomy combined with a cooling from the previous years' fervid activitylevels - Canada's resale real estate market should see only modest price andunit sales corrections take place across the country during 2009. Bothnational average house prices and the number of homes sold is expected todecline this year, according to the Royal LePage 2009 Market Survey Forecastreleased today.
Nationally, average house prices are forecast to dip by 3.0 per cent fromlast year to $295,000, while transactions are projected to fall to 416,000(-3.5 %) unit sales in 2009. In spite of this cooling trend on a nationallevel, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did muchto dampen consumer confidence during the latter part of 2008, causing a markedslowdown in house sales activity. However, as a more rational understanding ofthe issues gains ground, together with a wide range of announced correctivemeasures, consumer confidence is anticipated to recover, prompting real estateactivity to pick up once again in the latter half of 2009. Further, Canada in2009 enjoys a stronger economic foundation than most countries and that shouldtemper the housing market correction. The combination of low inflation,reasonable employment levels and improving housing affordability, driven inpart by low mortgage rates, are anticipated to stimulate demand in the comingmonths.
"While Canada's housing market is anticipated to continue to move througha period of adjustment over the next six months, we should expect modestlylower home prices, not a U.S.-style collapse, which was brought on by astructural failure of the entire American credit system," said Phil Soper,president and chief executive of Royal LePage Real Estate Services. "Mostconsumers are not aware that nationally, Canadian housing market activitypeaked in 2007 and has been adjusting lower since. We are well into thisinevitable cyclical correction."
Added Soper: "While a grey cloud hangs over some markets, the sky is notfalling. In recent years, Canada has been a difficult place to be a purchaserof real estate, particularly for first-time buyers. When real estate marketscorrect, inventory levels rise, providing buyers choices instead offrustrating bidding wars. In 2009, appropriately-priced homes will still sellfor fair value."
The housing market is expected to perform quite differently from regionto region across the country. In many mid-sized cities where home pricesremain below the national average, such as Regina and Winnipeg, prices areexpected to increase moderately through 2009, as home ownership remainsparticularly affordable. The most significant price decreases are forecast forCanada's most expensive city, Vancouver, which has experienced above averageprice increases for most of the decade. The correction is a natural cyclicalreaction to an extended period of high price appreciation. Vancouver'sfundamentals, including growing population figures and the positive economicspinoffs expected from the 2010 Olympics, remain very positive.
Observed Soper: "For several years, Vancouver experienced aggressiveprice run-ups in response to overwhelming levels of demand - conditions, whicheventually reached a tipping point. While buyers will be acquiring propertiesfor less in 2009, it is important to note that prices are coming down fromall-time record levels."
Secondary Ontario markets heavily populated by people working in themanufacturing sectors are also anticipated to experience greater than averagedeclines in house prices and activity levels in 2009. In contrast, real estatein Montreal and Ottawa is poised to remain stable, with average house pricesrelatively flat through 2009.
After moving through a period of correction that started in 2007, wellbefore other regions in the country, both Calgary and Edmonton's housingmarkets are anticipated to return to a growth state later in 2009,characterized by stable average house prices and increased unit sales. Despiteslowdowns and delay with some major energy projects, Alberta's economy remainsone of the strongest in Canada.
Looking east, Halifax's real estate market is expected to experience verymodest price appreciation through 2009. After experiencing strong priceincreases over the last year and a half, the market has hit its capacity forabsorbing rising prices and activity levels. The city's diversified array ofindustries is expected to bolster the economy and continue to create solidemployment opportunities, stabilizing home values.
Canadians have been confused and justifiably skeptical of the efforts ofthe worlds' central banks and governments to combat the global economiccrisis. There is broad belief, however, that Canada's financial house is inbetter shape than many peer countries, particularly the U.S. While the federaland most provincial governments have been slow to implement economic stimuluspackages, they enjoy broad public support in principle. Together with theactions taken by the Bank of Canada, the positive impact on consumerconfidence stemming from infrastructure spending announcements and otherstimulus programs is expected to be significant.
Concluded Soper: "We believe that the Canadian economy will struggleearly in 2009, but that conditions will progress continually throughout theyear. Improving credit markets, the stimulative impact from a weaker Canadiandollar, together with the implementation of large fiscal stimulus initiatives,set the stage for a return to growth in the second half of 2009."
<<>>
Global Economic Woes
No country is impervious to the current economic woes being felt aroundthe world. The poor performance of the equity markets and the constant streamof pessimistic economic news had a very negative impact on housing activity inCanada in 2008. Consumer confidence is expected to slowly recover during 2009as the impact of the many corrective actions introduced and announced takesroot.
Tempered, but continued growth in emerging economies, particularly China,India and Brazil, should mitigate the downside risk to Canadian commodityexporters.
Foreclosure Figures in Canada
Foreclosure rates in Canada are expected to increase, but remain verylimited, especially when compared to the U.S. experience, where a broadstructural failure of the credit system occurred. Canada's relativelyinsignificant subprime market, and in turn, the low number of Canadianscontractually committed to very risky mortgages, should result in aforeclosure rate of insufficient volume to impact house prices or transactionactivity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in2009, but remain at long-term healthy levels. Some areas in Ontario, and to alesser extent Quebec, that have high levels of manufacturing jobs, mayexperience greater than national average unemployment. Areas in Alberta tiedto the energy sector may see short-term employment declines, but theprovince's tight overall labour market is expected to mitigate the downside.
Interest Rates
The Bank of Canada's overnight target-lending rate, already at very lowlevels, is expected to be reduced again early in 2009. This should bode wellfor home buyers in 2009 as loosening credit spreads allow banks to offer moreaggressively priced mortgages.
<< 2009 Market Survey Forecast - Average House Prices
------------------------------------------------------------------------- 2009 2008 Market 09/08% Forecast Projected 2008/2007 2007 2006 -------------------------------------------------------------------------
Halifax 1.0% $234,300 $232,000 7.2% $216,339 $203,178
-------------------------------------------------------------------------
Montreal -1.0% $254,400 $257,000 4.3% $246,500 $215,659
-------------------------------------------------------------------------
Ottawa 0.0% $291,000 $291,000 6.6% $273,058 $257,481
-------------------------------------------------------------------------
Toronto -4.0% $364,800 $380,000 0.8% $377,029 $352,388
-------------------------------------------------------------------------
Winnipeg 4.0% $204,900 $197,000 20.5% $163,500 $151,983
-------------------------------------------------------------------------
Regina 6.0% $243,300 $229,500 38.6% $165,613 $131,851
-------------------------------------------------------------------------
Calgary -1.0% $402,000 $406,000 -1.9% $414,066 $346,675
-------------------------------------------------------------------------
Edmonton 0.0% $333,000 $333,000 -1.7% $338,636 $250,915
-------------------------------------------------------------------------
Vancouver -9.0% $540,100 $593,500 4.0% $570,795 $509,876
-------------------------------------------------------------------------
Canada -3.0% $295,000 $304,000 -1.1% $307,265 $276,974
------------------------------------------------------------------------- >>
Monday, January 5, 2009
Financial Update
· TSX +246.41pts (Reuters)
· DOW +258.30pts investors feeling optimistic about 2009 snapped up stocks on the first trading day of the new year
· Dollar +.16c to $.82.26US. also surged despite data showing further slumps in US manufacturing sectors
· Oil +$1.74to $46.34US per barrel. Trading began the year with oil prices at half the levels of one year ago
· Gold -$4.80 to $878.80US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Below is an interesting article for your clients purchasing new homes. The assumption would be that buying new means buying perfection, however stats from this article say 88% of new homes have defects found by home inspectors.
Inspections: If these walls could talk
Jan 03, 2009 Tracy Hanes Toronto Star
After almost a year of living in their new townhouse in Uxbridge, Libby McCready and her husband figured there was little wrong with their home. But Libby's parents, who had bought several new houses over the years, urged them to take the time to fill out the Tarion new home warranty program's one-year report listing any issues.
As neither Libby nor her husband had much knowledge or experience with home building or repairs, they hired home inspector Brian Daley to have a look.
"We wanted to make sure we caught everything but we're not handy," says McCready. "Brian found a number of things we never would have noticed. The stuff he found came as a surprise."
The most significant defect Daley found was that the clothes dryer hadn't been vented properly, thus was not blowing outdoors but into insulation, which could have eventually caused a moisture and mould issue. He also noted that the plumbing to a toilet in a seldom-used second bathroom wasn't on the right angle for flushing, that a promised rough-in for an electrical fan for the fireplace was not completed and that attic insulation had been flattened in places.
Armed with Daley's report and digital photos, the McCreadys filled out the Tarion Warranty Corp. forms by the one-year deadline and as a result, those issues are covered. If they hadn't submitted the report in time, their builder would not have been obligated to repair the defects.
"Although everything turned out fine, I'd never move in to a brand-new house again without having a home inspection done right away," says McCready. "I would have rather had a comprehensive list of the problems from the start, as we'd lived here for almost a year and some of the issues could have caused problems. The inspection was totally worthwhile."
Unfortunately, most new homebuyers mistakenly "believe their new house is perfect," says Daley, when that's seldom the case. That's why Daley and Charters Kenny, both registered home inspectors (RHI), have launched New Home Inspections , a company that specializes exclusively in new home warranty inspections in the GTA and beyond.
Other home inspectors, such as Milton RHI and engineering technologist Martin Sweeney of A Home Inspection Company Inc. have also started offering warranty inspections in addition to their regular inspections of resale homes. Sweeney began doing new home inspections and preparing Tarion documents for homeowners as new development boomed in Halton Region.
New homes in Ontario are covered by the Tarion warranty for deposit insurance, protection against defects in work and materials, against unauthorized substitutions and against delayed closings and occupancies without proper notice. The most common claims relate to defects in work and materials, which require homeowners to submit a list of deficiencies at 30-day and one-year deadlines.
While builders provide a pre-delivery inspection (PDI) for buyers to note defects, Daley and Sweeney say these are more geared to cosmetic issues, such as nicks in drywall and whether the right flooring, cabinetry, etc. are provided. Those inspections usually don't include checks of the attic, of heating and cooling systems or an in-depth exploration of the house's structure and systems. And while independent third-party inspections take about three hours, PDI inspections are usually far briefer.
Daley says outside a new home, his company checks drainage and grading, looks for foundation defects, checks installation of siding and brickwork, roof installation and venting. Inside, they inspect walls, windows, floors, ceilings and doors for structural issues, check that stairs are properly supported, plumbing fixtures and fittings properly installed, that insulation in attics, basements, etc. is sufficient and will see if the heating system is distributing air properly.
"I often find insulation is insufficient or missing in attics," says Sweeney. "Sometimes, vapour barrier hasn't been installed, and on the roof I might find that nail heads haven't been caulked and sealed, which will eventually cause moisture to seep in."
He says it's difficult for the average homeowner to have knowledge of the systems and techniques used to build a house. For example, the new tankless hot water heaters and heat recovery ventilators are "really sophisticated pieces of equipment." He often finds HRV units haven't been correctly installed.
Daley says his company finds an average of 30 defect items during a warranty inspection and Sweeney says his list usually includes 20 to 30. J.D. Power and Associates' 2008 survey of GTA new home buyers found that the proportion of homes delivered "defect-free" in the GTA market was 12 per cent in 2008 (which means 88 per cent had defects). The total number of construction problems noted by buyers was down to 21 per home in 2008 from 23 per home in the previous year, according to the J.D. Power study, which includes only large volume GTA builders.
"It's not because most builders aren't doing a good job or are taking shortcuts," says Daley, but because homebuilding involves numerous complex systems.
Most large builders rely on sub-trades and as many as 30 different trades can be involved in the building of a home, says Daley – and it's unlikely all were supervised during the building process. Because they are piece workers, saving time and money is their No. 1 goal, says Daley, which may compromise quality.
Municipal building inspectors are responsible for checking every aspect of a house as it is being built, but it's virtually impossible to do this effectively in a subdivision, says Daley.
"What generally happens is they check a small percentage of homes in hopes the builders will follow their requirements for the rest of the homes."
While a builder may offer to provide one of his own reps for a warranty inspection, "it is not in the builders' interest to find fault in their own work." Daley says some builders have the best intentions, but it's more likely that their inspector will find fewer defects than a third-party professional.
Daley's company charges $375 per inspection and Sweeney charges $340 to $400, depending on the size of the house. Inspectors from both companies can help fill out Tarion warranty forms.
Anyone considering hiring a home inspector should call at least three different companies before making a decision, Daley suggests. Those with RHI designation have extensive training and are insured. A good place to start a search for a home inspector is with the Ontario Association of Home Inspectors.
· DOW +258.30pts investors feeling optimistic about 2009 snapped up stocks on the first trading day of the new year
· Dollar +.16c to $.82.26US. also surged despite data showing further slumps in US manufacturing sectors
· Oil +$1.74to $46.34US per barrel. Trading began the year with oil prices at half the levels of one year ago
· Gold -$4.80 to $878.80US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Below is an interesting article for your clients purchasing new homes. The assumption would be that buying new means buying perfection, however stats from this article say 88% of new homes have defects found by home inspectors.
Inspections: If these walls could talk
Jan 03, 2009 Tracy Hanes Toronto Star
After almost a year of living in their new townhouse in Uxbridge, Libby McCready and her husband figured there was little wrong with their home. But Libby's parents, who had bought several new houses over the years, urged them to take the time to fill out the Tarion new home warranty program's one-year report listing any issues.
As neither Libby nor her husband had much knowledge or experience with home building or repairs, they hired home inspector Brian Daley to have a look.
"We wanted to make sure we caught everything but we're not handy," says McCready. "Brian found a number of things we never would have noticed. The stuff he found came as a surprise."
The most significant defect Daley found was that the clothes dryer hadn't been vented properly, thus was not blowing outdoors but into insulation, which could have eventually caused a moisture and mould issue. He also noted that the plumbing to a toilet in a seldom-used second bathroom wasn't on the right angle for flushing, that a promised rough-in for an electrical fan for the fireplace was not completed and that attic insulation had been flattened in places.
Armed with Daley's report and digital photos, the McCreadys filled out the Tarion Warranty Corp. forms by the one-year deadline and as a result, those issues are covered. If they hadn't submitted the report in time, their builder would not have been obligated to repair the defects.
"Although everything turned out fine, I'd never move in to a brand-new house again without having a home inspection done right away," says McCready. "I would have rather had a comprehensive list of the problems from the start, as we'd lived here for almost a year and some of the issues could have caused problems. The inspection was totally worthwhile."
Unfortunately, most new homebuyers mistakenly "believe their new house is perfect," says Daley, when that's seldom the case. That's why Daley and Charters Kenny, both registered home inspectors (RHI), have launched New Home Inspections , a company that specializes exclusively in new home warranty inspections in the GTA and beyond.
Other home inspectors, such as Milton RHI and engineering technologist Martin Sweeney of A Home Inspection Company Inc. have also started offering warranty inspections in addition to their regular inspections of resale homes. Sweeney began doing new home inspections and preparing Tarion documents for homeowners as new development boomed in Halton Region.
New homes in Ontario are covered by the Tarion warranty for deposit insurance, protection against defects in work and materials, against unauthorized substitutions and against delayed closings and occupancies without proper notice. The most common claims relate to defects in work and materials, which require homeowners to submit a list of deficiencies at 30-day and one-year deadlines.
While builders provide a pre-delivery inspection (PDI) for buyers to note defects, Daley and Sweeney say these are more geared to cosmetic issues, such as nicks in drywall and whether the right flooring, cabinetry, etc. are provided. Those inspections usually don't include checks of the attic, of heating and cooling systems or an in-depth exploration of the house's structure and systems. And while independent third-party inspections take about three hours, PDI inspections are usually far briefer.
Daley says outside a new home, his company checks drainage and grading, looks for foundation defects, checks installation of siding and brickwork, roof installation and venting. Inside, they inspect walls, windows, floors, ceilings and doors for structural issues, check that stairs are properly supported, plumbing fixtures and fittings properly installed, that insulation in attics, basements, etc. is sufficient and will see if the heating system is distributing air properly.
"I often find insulation is insufficient or missing in attics," says Sweeney. "Sometimes, vapour barrier hasn't been installed, and on the roof I might find that nail heads haven't been caulked and sealed, which will eventually cause moisture to seep in."
He says it's difficult for the average homeowner to have knowledge of the systems and techniques used to build a house. For example, the new tankless hot water heaters and heat recovery ventilators are "really sophisticated pieces of equipment." He often finds HRV units haven't been correctly installed.
Daley says his company finds an average of 30 defect items during a warranty inspection and Sweeney says his list usually includes 20 to 30. J.D. Power and Associates' 2008 survey of GTA new home buyers found that the proportion of homes delivered "defect-free" in the GTA market was 12 per cent in 2008 (which means 88 per cent had defects). The total number of construction problems noted by buyers was down to 21 per home in 2008 from 23 per home in the previous year, according to the J.D. Power study, which includes only large volume GTA builders.
"It's not because most builders aren't doing a good job or are taking shortcuts," says Daley, but because homebuilding involves numerous complex systems.
Most large builders rely on sub-trades and as many as 30 different trades can be involved in the building of a home, says Daley – and it's unlikely all were supervised during the building process. Because they are piece workers, saving time and money is their No. 1 goal, says Daley, which may compromise quality.
Municipal building inspectors are responsible for checking every aspect of a house as it is being built, but it's virtually impossible to do this effectively in a subdivision, says Daley.
"What generally happens is they check a small percentage of homes in hopes the builders will follow their requirements for the rest of the homes."
While a builder may offer to provide one of his own reps for a warranty inspection, "it is not in the builders' interest to find fault in their own work." Daley says some builders have the best intentions, but it's more likely that their inspector will find fewer defects than a third-party professional.
Daley's company charges $375 per inspection and Sweeney charges $340 to $400, depending on the size of the house. Inspectors from both companies can help fill out Tarion warranty forms.
Anyone considering hiring a home inspector should call at least three different companies before making a decision, Daley suggests. Those with RHI designation have extensive training and are insured. A good place to start a search for a home inspector is with the Ontario Association of Home Inspectors.
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