TSX higher for third straight day on oils, banks
· TSX +254.52 to 8186.82(Reuters) in a rally sparked by better than expected bank earnings and stronger oil prices
· DOW-88.81
· Dollar +.09c to 79.80USD
· Oil +$2.72 to $45.22US per barrel.
· Gold -$23.90 to $941.80 USD per ounce
· Canadian 5 yr bond yields +.08bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Canadian Banks still profitable despite global crisis
The Canadian PressCanada's banks are reporting weaker profits than a year ago, but even the feeblest of the Big Five is still raking in a net profit of $1.6 million a day while many major banks in the United States and elsewhere are effectively insolvent.
Bank executives are congratulating themselves that, as CIBC's Gerry McCaughey put it, "Canada finds itself better positioned than other economies both to weather this downturn and benefit from a subsequent recovery.''
But the bankers also acknowledge that 2009 will be tough, and even maintaining flat earnings for the year will be hard as the shrivelling economy erodes their volume of business and cranks up the number of bad loans.
The Royal Bank, Canada's largest, said yesterday it earned $1.05 billion, almost $12 million every day, during the first quarter of the banking year. This was down 15 per cent from a year earlier, but better than Bay Street was expecting.
Also above analyst expectations was CIBC, which earned $147 million in the November-January period. That was better than its year-ago loss of $1.46 billion but still was corroded by hundreds of millions of dollars because of ongoing exposure to toxic debt instruments in the United States.
The Royal and CIBC reported a day after TD Bank started the quarterly series with a profit of $712 million, down from $970 million a year earlier but with all its businesses solidly profitable -- even U.S. banking.
The National Bank of Canada, the country's sixth-largest, had first-quarter earnings of $69 million, down from $255 million a year earlier.
Still to report are Bank of Nova Scotia and Bank of Montreal, both next Tuesday. Analysts expect them, like the others, to be profitable but less profitable than in recent years.
Friday, February 27, 2009
Thursday, February 26, 2009
Financial Update for Feb. 26, 2009
· TSX +72.97(Reuters) as energy issues gained on stronger oil prices and financials got a boost from smaller-than-expected drop in quarterly profit at Toronto-Dominion Bank .
· DOW-80.05
· Dollar -.72c to 79.71USD
· Oil +$2.54 to $42.50US per barrel.
· Gold -$3.40 to $965.70 USD per ounce
· Canadian 5 yr bond yields +.08bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Associated Press DETROIT - General Motors Corp. says it lost US$9.6 billion in the fourth quarter and burned through $6.2 billion in cash as it sought government help to avoid running out of cash.
America's biggest domestic automaker lost $30.9 billion for all of 2008 as it struggled against a U.S. sales slump and a global recession.
GM has received $13.4 billion in federal loans and its executives are in Washington, D.C., Thursday to talk to the Obama administration about the company's request for up to $30 billion.
First-time homebuyers could lead real estate rebound
Kristine Owram The Canadian Press
Lower home prices and shifting demographics mean first-time buyers could lead a rebound in Canada's real estate market, experts said yesterday at a real estate conference in Toronto.
Phil Soper, president and chief executive of Brookfield Real Estate Services, said rookies are the largest category of buyers in the real estate market, accounting for close to 70 per cent of all transactions at the height of the housing boom.
However, they've been scared away in droves by the economic downturn, which was led in part by record foreclosure rates in the United States as homeowners defaulted on their mortgage debt.
Such a lack of first-time buyers can grind the real estate market to a halt, Soper told Scotiabank's annual real estate outlook conference.
"When new buyers stop entering the market, it's like sand in the gears,'' he said.
Although Canada has managed to duck the severity of the housing crisis in the U.S., the 10-year boom that saw housing prices soar, particularly in the western provinces, ended abruptly last year.
Canadian housing starts -- the number of new residential construction projects -- were down to 211,056 in 2008, about eight per cent lower than an average of almost 230,000 in the period from 2004 to 2007. Resale activity fell by 17 per cent in 2008 while home prices dipped by one per cent, according to Scotiabank.
Things seem to have worsened dramatically in January, with housing starts falling to an eight-year low of 153,500 annualized units and home prices down 11 per cent year-over-year.
And the bank predicted the decline will continue through 2009, with housing starts forecast to fall to around 155,000 units, another 15 to 20 per cent decline in the number of resales and a 10 per cent drop in prices.
But Adrienne Warren, a senior economist and real estate specialist at Scotiabank, said this points to a buyers' market.
"Certainly the softening we've seen in prices, the increase in listings, is giving first-time buyers more choice,'' Warren said.
· DOW-80.05
· Dollar -.72c to 79.71USD
· Oil +$2.54 to $42.50US per barrel.
· Gold -$3.40 to $965.70 USD per ounce
· Canadian 5 yr bond yields +.08bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Associated Press DETROIT - General Motors Corp. says it lost US$9.6 billion in the fourth quarter and burned through $6.2 billion in cash as it sought government help to avoid running out of cash.
America's biggest domestic automaker lost $30.9 billion for all of 2008 as it struggled against a U.S. sales slump and a global recession.
GM has received $13.4 billion in federal loans and its executives are in Washington, D.C., Thursday to talk to the Obama administration about the company's request for up to $30 billion.
First-time homebuyers could lead real estate rebound
Kristine Owram The Canadian Press
Lower home prices and shifting demographics mean first-time buyers could lead a rebound in Canada's real estate market, experts said yesterday at a real estate conference in Toronto.
Phil Soper, president and chief executive of Brookfield Real Estate Services, said rookies are the largest category of buyers in the real estate market, accounting for close to 70 per cent of all transactions at the height of the housing boom.
However, they've been scared away in droves by the economic downturn, which was led in part by record foreclosure rates in the United States as homeowners defaulted on their mortgage debt.
Such a lack of first-time buyers can grind the real estate market to a halt, Soper told Scotiabank's annual real estate outlook conference.
"When new buyers stop entering the market, it's like sand in the gears,'' he said.
Although Canada has managed to duck the severity of the housing crisis in the U.S., the 10-year boom that saw housing prices soar, particularly in the western provinces, ended abruptly last year.
Canadian housing starts -- the number of new residential construction projects -- were down to 211,056 in 2008, about eight per cent lower than an average of almost 230,000 in the period from 2004 to 2007. Resale activity fell by 17 per cent in 2008 while home prices dipped by one per cent, according to Scotiabank.
Things seem to have worsened dramatically in January, with housing starts falling to an eight-year low of 153,500 annualized units and home prices down 11 per cent year-over-year.
And the bank predicted the decline will continue through 2009, with housing starts forecast to fall to around 155,000 units, another 15 to 20 per cent decline in the number of resales and a 10 per cent drop in prices.
But Adrienne Warren, a senior economist and real estate specialist at Scotiabank, said this points to a buyers' market.
"Certainly the softening we've seen in prices, the increase in listings, is giving first-time buyers more choice,'' Warren said.
Wednesday, February 25, 2009
Financial Update for Feb. 25, 2009
Markets recover from multi-year lows to close sharply higher
· TSX +211.66(Reuters) Buyers were encouraged by an assessment from U.S. Federal Reserve chair Ben Bernanke that "there is a reasonable prospect'' the recession will end this year and that big US banks won’t be nationalized
· DOW +236.16
· Dollar +.51c to 80.43USD helped by a rebound in North American equity markets and higher prices for oil, a key Canadian export.
· Oil +$1.52 to $39.96US per barrel.
· Gold -$25.50 to $969.10 USD per ounce
· Canadian 5 yr bond yields +.03bps to 2.03
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Economy shrinking but end to recession in sight, Fed chair says
Jeannine Aversa The Associated Press
WASHINGTON The U.S. economy is suffering a "severe contraction,'' Federal Reserve Chair Ben Bernanke told Congress yesterday. But he planted a glimmer of hope that the recession might end this year if the government managed to prop up the shaky banking system, and Wall Street rallied.
Bernanke said the economy is likely to keep shrinking in the first six months of this year after posting its worst slide in a quarter-century at the end of 2008.
Bernanke said he hoped the recession will end this year, but that there were significant risks to that forecast.
Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.
"Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,'' Bernanke told the U.S. Senate Banking Committee.
Among the risks to any recovery are if economic and financial troubles in other countries turn out to be worse than anticipated, which would hurt U.S. exports and further aggravate already fragile financial conditions in the United States.
Another concern is that the Fed and other Washington policy-makers won't be able to break a vicious cycle where disappearing jobs, tanking home values and shrinking nest eggs are forcing consumers to cut back sharply, worsening the economy's tailspin. In turn, battered companies lay off more people and cut back in other ways.
"To break that adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets,'' Bernanke said.
In an effort to revive the economy, the Fed has slashed a key interest rate to an all-time low and Obama recently signed a $787-billion stimulus package of increased government spending and tax cuts.
In addition, Treasury Secretary Timothy Geithner has revamped a controversial $700 billion bank bailout program to include steps to partner with the private sector to buy rotten assets held by banks as well as expand government ownership stakes in them -- all with the hopes of freeing up lending. The Obama administration also will spend $75 billion to stem home foreclosures.
Those and other bold steps -- including a soon-to-be-operational program to boost the availability of consumer loans -- for autos, education, credit cards and other things -- should over time provide relief and promote an economic recovery, Bernanke said. That program is "about to open,'' he told lawmakers, without providing an exact date.
Sen. Christopher Dodd, D-Conn., chair of the panel, and other senators suggested expanding that program overseen by the Fed and Treasury, to help squeezed local governments.
Radical actions by the government since last fall when the financial crisis intensified have relieved some credit and financial strains, Bernanke said.
"Nevertheless, despite these favourable developments, significant stresses persist in many markets,'' he said.
Although Bernanke didn't mention any financial institutions by name, Citigroup Inc. -- the industry's troubled titan -- apparently is in line for additional government help.
Critics worry the Fed's actions have the potential to put ever-more taxpayers' dollars at risk and encourage "moral hazard,'' where companies feel more comfortable making high-stakes gambles because the government will rescue them.
Stress tests on the nation's biggest banks, which regulators will start conducting today, are designed to give regulators a better idea of how much additional capital and the type needed for banks to lend if the crisis were to grow worse than anticipated, Bernanke said. Regulators will assess banks' capital needs over a two-year horizon.
The nation's unemployment rate is now at 7.6 per cent, the highest in more than 16 years, and it will climb higher -- even in the best-case scenario that an economic recovery happens next year.
The Fed expects the jobless rate to rise to close to nine per cent this year, and probably remain above normal levels of around five per cent into 2011. The recession, which started in December 2007, already has killed a net total of 3.6 million jobs.
Fed policy-makers think that a "full recovery'' of the economy is likely to take more than two or three years, Bernanke said.
To brace the economy, many analysts predict the Fed will leave its key rate at record lows through the rest of this year.
· TSX +211.66(Reuters) Buyers were encouraged by an assessment from U.S. Federal Reserve chair Ben Bernanke that "there is a reasonable prospect'' the recession will end this year and that big US banks won’t be nationalized
· DOW +236.16
· Dollar +.51c to 80.43USD helped by a rebound in North American equity markets and higher prices for oil, a key Canadian export.
· Oil +$1.52 to $39.96US per barrel.
· Gold -$25.50 to $969.10 USD per ounce
· Canadian 5 yr bond yields +.03bps to 2.03
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Economy shrinking but end to recession in sight, Fed chair says
Jeannine Aversa The Associated Press
WASHINGTON The U.S. economy is suffering a "severe contraction,'' Federal Reserve Chair Ben Bernanke told Congress yesterday. But he planted a glimmer of hope that the recession might end this year if the government managed to prop up the shaky banking system, and Wall Street rallied.
Bernanke said the economy is likely to keep shrinking in the first six months of this year after posting its worst slide in a quarter-century at the end of 2008.
Bernanke said he hoped the recession will end this year, but that there were significant risks to that forecast.
Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.
"Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,'' Bernanke told the U.S. Senate Banking Committee.
Among the risks to any recovery are if economic and financial troubles in other countries turn out to be worse than anticipated, which would hurt U.S. exports and further aggravate already fragile financial conditions in the United States.
Another concern is that the Fed and other Washington policy-makers won't be able to break a vicious cycle where disappearing jobs, tanking home values and shrinking nest eggs are forcing consumers to cut back sharply, worsening the economy's tailspin. In turn, battered companies lay off more people and cut back in other ways.
"To break that adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets,'' Bernanke said.
In an effort to revive the economy, the Fed has slashed a key interest rate to an all-time low and Obama recently signed a $787-billion stimulus package of increased government spending and tax cuts.
In addition, Treasury Secretary Timothy Geithner has revamped a controversial $700 billion bank bailout program to include steps to partner with the private sector to buy rotten assets held by banks as well as expand government ownership stakes in them -- all with the hopes of freeing up lending. The Obama administration also will spend $75 billion to stem home foreclosures.
Those and other bold steps -- including a soon-to-be-operational program to boost the availability of consumer loans -- for autos, education, credit cards and other things -- should over time provide relief and promote an economic recovery, Bernanke said. That program is "about to open,'' he told lawmakers, without providing an exact date.
Sen. Christopher Dodd, D-Conn., chair of the panel, and other senators suggested expanding that program overseen by the Fed and Treasury, to help squeezed local governments.
Radical actions by the government since last fall when the financial crisis intensified have relieved some credit and financial strains, Bernanke said.
"Nevertheless, despite these favourable developments, significant stresses persist in many markets,'' he said.
Although Bernanke didn't mention any financial institutions by name, Citigroup Inc. -- the industry's troubled titan -- apparently is in line for additional government help.
Critics worry the Fed's actions have the potential to put ever-more taxpayers' dollars at risk and encourage "moral hazard,'' where companies feel more comfortable making high-stakes gambles because the government will rescue them.
Stress tests on the nation's biggest banks, which regulators will start conducting today, are designed to give regulators a better idea of how much additional capital and the type needed for banks to lend if the crisis were to grow worse than anticipated, Bernanke said. Regulators will assess banks' capital needs over a two-year horizon.
The nation's unemployment rate is now at 7.6 per cent, the highest in more than 16 years, and it will climb higher -- even in the best-case scenario that an economic recovery happens next year.
The Fed expects the jobless rate to rise to close to nine per cent this year, and probably remain above normal levels of around five per cent into 2011. The recession, which started in December 2007, already has killed a net total of 3.6 million jobs.
Fed policy-makers think that a "full recovery'' of the economy is likely to take more than two or three years, Bernanke said.
To brace the economy, many analysts predict the Fed will leave its key rate at record lows through the rest of this year.
Tuesday, February 24, 2009
Financial Update for Feb. 24, 2009
TSX hits lowest point in 5 years
· TSX-302.32 to 7,647.67 (Reuters) to its lowest closing level in more than 5 years, hit by lower commodity prices, weak economic data and nagging concerns about U.S. banks.
· DOW -250.89 to 7,111.78 Lingering uncertainty about the U.S. government actions to shore up beleaguered banks rattled equities in the US causing the DOW to trade at its lowest level in 10 years
· Dollar -.12c to 79.92USD
· Oil -$1.69 to $38.44US per barrel.
· Gold -$7.20 to $994.60 USD per ounce The slide in oil prices followed weak Canadian retail sales data for December
· Canadian 5 yr bond yields -.05bps to 2.00
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Made-in-Canada recession: retail sales plunge shows problems not all from afar
By Julian Beltrame, The Canadian Press
OTTAWA - The Canadian economy took a beating in December, with retail sales plunging a Scrooge-like 5.4 per cent, the largest such fall in 15 years, as consumers stayed away from stores and auto dealerships during the traditional high-spending month.
Retail figures released Monday by Statistics Canada suggest that weak consumer spending and a sagging housing market are adding to an already battered export sector to drag the economy more deeply into recession.
'We can't just point our finger at the U.S. and the rest of the world and say, 'There's our problem,"' noted economist Douglas Porter of BMO Capital Markets.
'We've also seen a deep drop in domestic indicators as well, like housing and now consumer spending."
The latest retail number may also go a long way toward dispelling the notion that Canada's economy is far healthier than that of the U.S., the so-called epicentre of the global crisis.
Economists are now unanimous in predicting Canada's gross domestic product will come in weaker than America's for all of 2008 when the fourth-quarter gross domestic product figures are released next Monday.
They predict fourth-quarter GDP in Canada shrank between three and four per cent, about the same as the 3.8 per cent contraction south of the border and far worse than the Bank of Canada's recent prediction of negative 2.3 per cent growth.
The two economies don't appear to be far apart for 2009, either.
A new survey of U.S. economists forecasts the U.S. economy will shrink a further 1.9 per cent this year, within the range of the more pessimistic projections for the Canadian economy.
'In terms of GDP growth, Canada did worse (last year), but in terms of employment growth we surpassed the U.S.," said Paul Ferley, assistant chief economist with the Royal Bank. He noted, however, that the loss of 129,000 jobs in January points to a worsening jobs picture in Canada as well.
Ferley and many other economists still see Canada doing slightly better this year, largely because of stronger financial markets and expectations that commodity prices, particularly that of oil, will recover somewhat.
But Merrill Lynch Canada chief economist David Wolf says those advantages may be overestimated, noting that although the crisis began in the U.S., countries such as Japan are already far deeper in the hole. The United States, he says, is further ahead of Canada in making adjustments to the recession and has taken more aggressive stimulus measures.
'Canada's financial markets are clearly in better shape but it's not going to matter much if no one wants to borrow or lend," Wolf said.
In a speech in Toronto, Bank of Canada senior deputy governor Paul Jenkins said getting credit markets working is the key to returning economies back to growth.
'Stabilization of the global financial system is a precondition for economic recovery globally and in Canada," he said in notes of his speech released by the central bank.
Later in the day, the central bank took the extraordinary step of agreeing to accept riskier securities like corporate bonds as collateral in an effort to make it easier for cash-strapped businesses to obtain loans.
The next move by the bank to spur lending will likely come on March 3, when many economists predict governor Mark Carney will slash short-term interest rates another half-point, bringing the bank's overnight rate to an historic 0.5 per cent.
If there was any good news on the horizon, it came from a Harris-Decima poll which showed consumer confidence in Canada reviving slightly.
The January poll showed 27 per cent of respondents expecting they'll be better off a year from now, an increase from the 20 per cent who were optimistic in December.
But if there is growing consumer confidence, it hasn't translated into behaviour yet and for good reasons, said Porter.
'There's no question the actual job losses we've seen and the actual wealth hit we've seen from the decline in equity markets is playing a role," he said. "It's more than just a confidence matter."
The retail sales decline in December was widespread, although the automotive sector suffered the most with sales crashing 12.7 per cent. Statistics Canada says three-quarters of the December retail decline was rooted in automotive, without which retail sales fell 1.8 per cent.
In non-automotive retailing, the largest decline in December was in building and outdoor home supplies, where retail sales fell 5.6 per cent.
Meanwhile, sales at gasoline stations fell 11.7 per cent in December, and have dropped 28.8 per cent since last September. That reflects a sharp decline in prices at the pump since last summer, but also the impact of a struggling economy on consumer driving habits as well as reduced business demand for gasoline for the industrial and trucking sectors.
Significant monthly decreases were also registered in sectors traditionally associated with holiday shopping. Sales in the clothing and accessories stores fell 3.7 per cent, furniture, home furnishings and electronics stores and miscellaneous retailers dropped two per cent, general merchandise stores fell 0.4 per cent.
· TSX-302.32 to 7,647.67 (Reuters) to its lowest closing level in more than 5 years, hit by lower commodity prices, weak economic data and nagging concerns about U.S. banks.
· DOW -250.89 to 7,111.78 Lingering uncertainty about the U.S. government actions to shore up beleaguered banks rattled equities in the US causing the DOW to trade at its lowest level in 10 years
· Dollar -.12c to 79.92USD
· Oil -$1.69 to $38.44US per barrel.
· Gold -$7.20 to $994.60 USD per ounce The slide in oil prices followed weak Canadian retail sales data for December
· Canadian 5 yr bond yields -.05bps to 2.00
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Made-in-Canada recession: retail sales plunge shows problems not all from afar
By Julian Beltrame, The Canadian Press
OTTAWA - The Canadian economy took a beating in December, with retail sales plunging a Scrooge-like 5.4 per cent, the largest such fall in 15 years, as consumers stayed away from stores and auto dealerships during the traditional high-spending month.
Retail figures released Monday by Statistics Canada suggest that weak consumer spending and a sagging housing market are adding to an already battered export sector to drag the economy more deeply into recession.
'We can't just point our finger at the U.S. and the rest of the world and say, 'There's our problem,"' noted economist Douglas Porter of BMO Capital Markets.
'We've also seen a deep drop in domestic indicators as well, like housing and now consumer spending."
The latest retail number may also go a long way toward dispelling the notion that Canada's economy is far healthier than that of the U.S., the so-called epicentre of the global crisis.
Economists are now unanimous in predicting Canada's gross domestic product will come in weaker than America's for all of 2008 when the fourth-quarter gross domestic product figures are released next Monday.
They predict fourth-quarter GDP in Canada shrank between three and four per cent, about the same as the 3.8 per cent contraction south of the border and far worse than the Bank of Canada's recent prediction of negative 2.3 per cent growth.
The two economies don't appear to be far apart for 2009, either.
A new survey of U.S. economists forecasts the U.S. economy will shrink a further 1.9 per cent this year, within the range of the more pessimistic projections for the Canadian economy.
'In terms of GDP growth, Canada did worse (last year), but in terms of employment growth we surpassed the U.S.," said Paul Ferley, assistant chief economist with the Royal Bank. He noted, however, that the loss of 129,000 jobs in January points to a worsening jobs picture in Canada as well.
Ferley and many other economists still see Canada doing slightly better this year, largely because of stronger financial markets and expectations that commodity prices, particularly that of oil, will recover somewhat.
But Merrill Lynch Canada chief economist David Wolf says those advantages may be overestimated, noting that although the crisis began in the U.S., countries such as Japan are already far deeper in the hole. The United States, he says, is further ahead of Canada in making adjustments to the recession and has taken more aggressive stimulus measures.
'Canada's financial markets are clearly in better shape but it's not going to matter much if no one wants to borrow or lend," Wolf said.
In a speech in Toronto, Bank of Canada senior deputy governor Paul Jenkins said getting credit markets working is the key to returning economies back to growth.
'Stabilization of the global financial system is a precondition for economic recovery globally and in Canada," he said in notes of his speech released by the central bank.
Later in the day, the central bank took the extraordinary step of agreeing to accept riskier securities like corporate bonds as collateral in an effort to make it easier for cash-strapped businesses to obtain loans.
The next move by the bank to spur lending will likely come on March 3, when many economists predict governor Mark Carney will slash short-term interest rates another half-point, bringing the bank's overnight rate to an historic 0.5 per cent.
If there was any good news on the horizon, it came from a Harris-Decima poll which showed consumer confidence in Canada reviving slightly.
The January poll showed 27 per cent of respondents expecting they'll be better off a year from now, an increase from the 20 per cent who were optimistic in December.
But if there is growing consumer confidence, it hasn't translated into behaviour yet and for good reasons, said Porter.
'There's no question the actual job losses we've seen and the actual wealth hit we've seen from the decline in equity markets is playing a role," he said. "It's more than just a confidence matter."
The retail sales decline in December was widespread, although the automotive sector suffered the most with sales crashing 12.7 per cent. Statistics Canada says three-quarters of the December retail decline was rooted in automotive, without which retail sales fell 1.8 per cent.
In non-automotive retailing, the largest decline in December was in building and outdoor home supplies, where retail sales fell 5.6 per cent.
Meanwhile, sales at gasoline stations fell 11.7 per cent in December, and have dropped 28.8 per cent since last September. That reflects a sharp decline in prices at the pump since last summer, but also the impact of a struggling economy on consumer driving habits as well as reduced business demand for gasoline for the industrial and trucking sectors.
Significant monthly decreases were also registered in sectors traditionally associated with holiday shopping. Sales in the clothing and accessories stores fell 3.7 per cent, furniture, home furnishings and electronics stores and miscellaneous retailers dropped two per cent, general merchandise stores fell 0.4 per cent.
Monday, February 23, 2009
Financial Update for Feb. 23, 2009
GOLD TOPS $1000 per ounce
· TSX-235.36(Reuters)
· DOW -100.28
· Dollar +.63c to 80.04USD
· Oil -$.54 to $38.94US per barrel.
· Gold +$25.70 to $1,001.80 USD per ounce
· Canadian 5 yr bond yields -.04bps to 2.05
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Canadian bank profits down but not out, for now (Reuters) - It's a problem most of the world's bankers would love to have in 2009.
Canadian banks are expected to post weaker quarterly results when they kick off their reporting season on February 25. Yet unlike many U.S. and European lenders -- ravaged by the global financial crisis, forced to beg for government aid and dogged by rumors of nationalization -- Canada's banks are actually expected to turn a profit.
The country's banking system was ranked last year as the world's soundest by the World Economic Forum. Analysts said the Canadian industry's conservative lending practices, which helped it avoid the writedowns and losses seen at firms like Bank of America Corp and UBS AG , should ensure a profitable first quarter.
Some predicting a brighter economy
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Despite the glut of bad news, some experts are seeing early positive signs
Julian Beltrame The Canadian Press
The economic picture across Canada keeps darkening, but at least some economists see a faint ray of light on the horizon.
Conference Board chief economist Glen Hodgson has joined an exclusive club of forecasters who see the Canadian and the U.S. economies approaching a recovery.
"To be sure, these are still early days in the search for recovery -- the bottom has not been reached,'' he cautions in an article. "(But) if you look hard enough, there are some early positive signs that the recession is approaching bottom.''
Hodgson believes the bears are missing the sunshine peeking through the black clouds, particularly in America, where President Barack Obama is moving aggressively to hike government spending, rescue cash-strapped homeowners and shore up the banking sector.
Even before the "exceptional'' government measures have had time to take effect, he said encouraging signs were starting to appear.
U.S. housing sales and prices rose six per cent in December after falling off a cliff for most of 2008, mortgage rates have fallen one percentage point, and the risk factors of financial markets and spreads are down from October.
This analysis is certainly one favoured by only a minority, although it largely tracks that of the Bank of Canada and University of Toronto economists.
These three groups see the economy hitting bottom during the first half of 2009 and starting a slow recovery in the latter half before picking up steam to a near four-per-cent advance in 2010.
Last month, Bank of Canada governor Mark Carney defended his rosy outlook by pointing out that past recoveries from deep recessions in the early 1980s and 1990s have been quicker than he was predicting.
"When recoveries come, they come sharply,'' Carney said at the time, while admitting that economic forecasting is as much art as science.
Hodgson agreed -- he breaks with most economists in seeing the current crisis as not that unusual.
"The trigger for the recession was exceptional, being credit markets, but if you compare the cycle in terms of quarterly impact to the last (few) recessions, it's not that different,'' he explained.
"I'm not an optimist, I'm simply looking for a real-world balance. At some point we are going to hit bottom and have a recovery."
Despite that, some of the news keeps getting worse.
Yesterday, Statistics Canada reported the annual inflation rate edged one-tenth of a point lower to 1.1 per cent in January bringing the rate to the lowest in two years. But measured on a month-to-month basis, prices actually fell 0.3 per cent from December, the fourth straight month in which prices have dropped.
Bank of Montreal economists also see conditions worsening and this week cut their forecast for the Canadian economy in 2009 by half a point to negative two per cent.
Analysis: Can bankers meet the financing needs of corporate Canada?
Eoin Callan, Financial Post
The country's top bankers are deeply sceptical about the ability of markets to meet the financing needs of corporate Canada as economic headwinds push companies' backs against the wall.
Executives warn that pressures will continue to build in the financial system and that banks will increasingly struggle to fill funding gaps left by the retreat of more fickle investors from capital markets.
Solving this impasse will require further action by Ottawa to restore confidence in credit markets and stem the flow of bankruptcies and job losses, according to bankers.
"The number one recommendation I would give to our government, and to others, is we have to get the capital markets growing," said Rick Waugh, chief executive of Bank of Nova Scotia.
"The problem now is the bond market and equity market are largely closed, and of course that puts on pressure [that] comes back to banking system," he said.
Addressing this will require new extraordinary short term interventions to restore confidence as well as structural reforms to make it easier for companies to raise money through credit markets, bankers say.
Yet executives are anxious not to strike an alarmist tone or be seen to criticise Ottawa, lest they provoke a political confrontation or rattle investor confidence.
Bill Downe, chief executive of BMO, acknowledged that in order to bring about a fresh round of action to stimulate markets and the economy, "the government of Canada will need to be pressured to do it".
But he said there was a risk a process like this would conjure up the kind of apocalyptic imagery that was invoked in the United States to get a $800-billion fiscal stimulus and $700-billion bank bail out package passed by Capitol Hill.
"In order to get the political will to get the economic stimulus package in place it was necessary to create a very high level of anxiety about what happens if [it is not passed]" said the executive.
"The impact of the rhetoric that was necessary has probably come back into our own mind set," said Mr. Downe, adding existing measures should be given time to take effect.
Instead of clamouring for immediate action, bankers are taking a long view and using private discussions with Ottawa to advocate more radical state intervention, while lobbyists work behind the scenes.
"I understand that there is a good amount of co-operation and discussion both between our institutions and government, but also internationally," said Nancy Hughes-Anthony, head of the Canadian Bankers' Association.
Bank lobbyists also see an opening to advance their agenda when the Conservative government is forced to report on implementing the recent budget as a condition of the ongoing support of Michael Igantieff, the Liberal leader.
The first of three "accountability" reports is due on March 26, and is adding urgency to bureaucrats' efforts to implement the full $200-billion of "extraordinary" support pledged to the financial sector.
"All of a sudden the blood pressure has gone up," said one bank lobbyist.
The willingness of bank lobbyists to use Mr. Ignatieff's ability to bring down the government as leverage represents a significant change of tack now that the opposition has abandoned plans for a coalition government.
The bank lobby had previously rallied around the Conservatives and recoiled at the unpredictable prospect of a coalition supported by the Bloc Quebecois and New Democratic Party.
But while the political wheels grind in Ottawa, companies across the country are likely to bump up against ceilings on the amount banks will lend and face prohibitive costs to tap public markets.
Standard& Poors identified over-exposure to struggling companies as one of the main risks facing the country's banks, in a recent report.
"The Canadian economy we believe has significant concentration issues because many industries are dominated by a few very large players, a situation that makes it difficult for Canadian banks to avoid excessive loan concentrations," said the otherwise-glowing assessment by the ratings agency.
The head of Scotia said this creates a Catch 22 for banks that want to remain "disciplined" about limiting risk "yet still feel obligated in meeting the needs of our customers."
"There is a dilemma there," he said.
Mr. Waugh said this "has been somewhat addressed in the budget, but is an issue going forward".
He said "the policies and incentives that the government can provide would be very important" in getting "capital markets functioning again".
Not all market participants and observers are as pessimistic about the state of the country's capital markets.
People in the industry who track sales of corporate bonds – and who didn't have a lot to do in the fall of 2008 – tend to get pretty excited about the handful of companies have been able to raise money in debt markets.
Altaf Nanji, a credit analyst at RBC Capital Markets, said the Canadian corporate bond market is "not vibrant, but there are signs of life."
But bankers' concern also relates to the hidden market for corporate credit, the shadow capital market where banks bundle loans to companies too small to go directly to markets, and pass them on to investors in a process called securitisation.
This market has been moribund since credit markets seized in August 2007, leaving banks with tens of billions of outstanding securitised credit to carry and limited ability to sell on new loans.
Research by Michael Gregory, an economist at BMO, suggests this has led to a significant shift from investor-backed financing for companies to direct bank lending through so-called Bankers' Acceptances.
"Will securitisation come back as a vehicle for people to access finance? Yeah, I think it will eventually come back. In what form it will come back is still to be determined," said Lindsay Gordon, chief executive at HSBC, the foreign bank with the biggest footprint in Canada.
It is unclear how much concern this substitution of bank lending for market financing is causing at the Bank of Canada at this juncture.
But warnings from bankers that it will become increasingly unsustainable amid a prolonged recession have been heard in government.
The recent budget included $12-billion for the government to buy securitised credit off banks, but only if backed by auto loans and equipment leases, in a bid to get credit flowing to car buyers.
One of the things bankers are looking for is essentially a much larger and far-reaching version of this program that would use public funds to create more demand for repackaged debt and bonds, essentially making taxpayers a lender of last resort to corporate Canada dur
· TSX-235.36(Reuters)
· DOW -100.28
· Dollar +.63c to 80.04USD
· Oil -$.54 to $38.94US per barrel.
· Gold +$25.70 to $1,001.80 USD per ounce
· Canadian 5 yr bond yields -.04bps to 2.05
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Canadian bank profits down but not out, for now (Reuters) - It's a problem most of the world's bankers would love to have in 2009.
Canadian banks are expected to post weaker quarterly results when they kick off their reporting season on February 25. Yet unlike many U.S. and European lenders -- ravaged by the global financial crisis, forced to beg for government aid and dogged by rumors of nationalization -- Canada's banks are actually expected to turn a profit.
The country's banking system was ranked last year as the world's soundest by the World Economic Forum. Analysts said the Canadian industry's conservative lending practices, which helped it avoid the writedowns and losses seen at firms like Bank of America Corp and UBS AG , should ensure a profitable first quarter.
Some predicting a brighter economy
Email the author
Despite the glut of bad news, some experts are seeing early positive signs
Julian Beltrame The Canadian Press
The economic picture across Canada keeps darkening, but at least some economists see a faint ray of light on the horizon.
Conference Board chief economist Glen Hodgson has joined an exclusive club of forecasters who see the Canadian and the U.S. economies approaching a recovery.
"To be sure, these are still early days in the search for recovery -- the bottom has not been reached,'' he cautions in an article. "(But) if you look hard enough, there are some early positive signs that the recession is approaching bottom.''
Hodgson believes the bears are missing the sunshine peeking through the black clouds, particularly in America, where President Barack Obama is moving aggressively to hike government spending, rescue cash-strapped homeowners and shore up the banking sector.
Even before the "exceptional'' government measures have had time to take effect, he said encouraging signs were starting to appear.
U.S. housing sales and prices rose six per cent in December after falling off a cliff for most of 2008, mortgage rates have fallen one percentage point, and the risk factors of financial markets and spreads are down from October.
This analysis is certainly one favoured by only a minority, although it largely tracks that of the Bank of Canada and University of Toronto economists.
These three groups see the economy hitting bottom during the first half of 2009 and starting a slow recovery in the latter half before picking up steam to a near four-per-cent advance in 2010.
Last month, Bank of Canada governor Mark Carney defended his rosy outlook by pointing out that past recoveries from deep recessions in the early 1980s and 1990s have been quicker than he was predicting.
"When recoveries come, they come sharply,'' Carney said at the time, while admitting that economic forecasting is as much art as science.
Hodgson agreed -- he breaks with most economists in seeing the current crisis as not that unusual.
"The trigger for the recession was exceptional, being credit markets, but if you compare the cycle in terms of quarterly impact to the last (few) recessions, it's not that different,'' he explained.
"I'm not an optimist, I'm simply looking for a real-world balance. At some point we are going to hit bottom and have a recovery."
Despite that, some of the news keeps getting worse.
Yesterday, Statistics Canada reported the annual inflation rate edged one-tenth of a point lower to 1.1 per cent in January bringing the rate to the lowest in two years. But measured on a month-to-month basis, prices actually fell 0.3 per cent from December, the fourth straight month in which prices have dropped.
Bank of Montreal economists also see conditions worsening and this week cut their forecast for the Canadian economy in 2009 by half a point to negative two per cent.
Analysis: Can bankers meet the financing needs of corporate Canada?
Eoin Callan, Financial Post
The country's top bankers are deeply sceptical about the ability of markets to meet the financing needs of corporate Canada as economic headwinds push companies' backs against the wall.
Executives warn that pressures will continue to build in the financial system and that banks will increasingly struggle to fill funding gaps left by the retreat of more fickle investors from capital markets.
Solving this impasse will require further action by Ottawa to restore confidence in credit markets and stem the flow of bankruptcies and job losses, according to bankers.
"The number one recommendation I would give to our government, and to others, is we have to get the capital markets growing," said Rick Waugh, chief executive of Bank of Nova Scotia.
"The problem now is the bond market and equity market are largely closed, and of course that puts on pressure [that] comes back to banking system," he said.
Addressing this will require new extraordinary short term interventions to restore confidence as well as structural reforms to make it easier for companies to raise money through credit markets, bankers say.
Yet executives are anxious not to strike an alarmist tone or be seen to criticise Ottawa, lest they provoke a political confrontation or rattle investor confidence.
Bill Downe, chief executive of BMO, acknowledged that in order to bring about a fresh round of action to stimulate markets and the economy, "the government of Canada will need to be pressured to do it".
But he said there was a risk a process like this would conjure up the kind of apocalyptic imagery that was invoked in the United States to get a $800-billion fiscal stimulus and $700-billion bank bail out package passed by Capitol Hill.
"In order to get the political will to get the economic stimulus package in place it was necessary to create a very high level of anxiety about what happens if [it is not passed]" said the executive.
"The impact of the rhetoric that was necessary has probably come back into our own mind set," said Mr. Downe, adding existing measures should be given time to take effect.
Instead of clamouring for immediate action, bankers are taking a long view and using private discussions with Ottawa to advocate more radical state intervention, while lobbyists work behind the scenes.
"I understand that there is a good amount of co-operation and discussion both between our institutions and government, but also internationally," said Nancy Hughes-Anthony, head of the Canadian Bankers' Association.
Bank lobbyists also see an opening to advance their agenda when the Conservative government is forced to report on implementing the recent budget as a condition of the ongoing support of Michael Igantieff, the Liberal leader.
The first of three "accountability" reports is due on March 26, and is adding urgency to bureaucrats' efforts to implement the full $200-billion of "extraordinary" support pledged to the financial sector.
"All of a sudden the blood pressure has gone up," said one bank lobbyist.
The willingness of bank lobbyists to use Mr. Ignatieff's ability to bring down the government as leverage represents a significant change of tack now that the opposition has abandoned plans for a coalition government.
The bank lobby had previously rallied around the Conservatives and recoiled at the unpredictable prospect of a coalition supported by the Bloc Quebecois and New Democratic Party.
But while the political wheels grind in Ottawa, companies across the country are likely to bump up against ceilings on the amount banks will lend and face prohibitive costs to tap public markets.
Standard& Poors identified over-exposure to struggling companies as one of the main risks facing the country's banks, in a recent report.
"The Canadian economy we believe has significant concentration issues because many industries are dominated by a few very large players, a situation that makes it difficult for Canadian banks to avoid excessive loan concentrations," said the otherwise-glowing assessment by the ratings agency.
The head of Scotia said this creates a Catch 22 for banks that want to remain "disciplined" about limiting risk "yet still feel obligated in meeting the needs of our customers."
"There is a dilemma there," he said.
Mr. Waugh said this "has been somewhat addressed in the budget, but is an issue going forward".
He said "the policies and incentives that the government can provide would be very important" in getting "capital markets functioning again".
Not all market participants and observers are as pessimistic about the state of the country's capital markets.
People in the industry who track sales of corporate bonds – and who didn't have a lot to do in the fall of 2008 – tend to get pretty excited about the handful of companies have been able to raise money in debt markets.
Altaf Nanji, a credit analyst at RBC Capital Markets, said the Canadian corporate bond market is "not vibrant, but there are signs of life."
But bankers' concern also relates to the hidden market for corporate credit, the shadow capital market where banks bundle loans to companies too small to go directly to markets, and pass them on to investors in a process called securitisation.
This market has been moribund since credit markets seized in August 2007, leaving banks with tens of billions of outstanding securitised credit to carry and limited ability to sell on new loans.
Research by Michael Gregory, an economist at BMO, suggests this has led to a significant shift from investor-backed financing for companies to direct bank lending through so-called Bankers' Acceptances.
"Will securitisation come back as a vehicle for people to access finance? Yeah, I think it will eventually come back. In what form it will come back is still to be determined," said Lindsay Gordon, chief executive at HSBC, the foreign bank with the biggest footprint in Canada.
It is unclear how much concern this substitution of bank lending for market financing is causing at the Bank of Canada at this juncture.
But warnings from bankers that it will become increasingly unsustainable amid a prolonged recession have been heard in government.
The recent budget included $12-billion for the government to buy securitised credit off banks, but only if backed by auto loans and equipment leases, in a bid to get credit flowing to car buyers.
One of the things bankers are looking for is essentially a much larger and far-reaching version of this program that would use public funds to create more demand for repackaged debt and bonds, essentially making taxpayers a lender of last resort to corporate Canada dur
Friday, February 20, 2009
Financial Update for Feb. 20, 2009
· TSX+9.40 (Reuters) as energy issues strengthened on higher oil prices, managing to offset weaker gold miners, which retreated along with the price of gold.
· DOW -89.68 little response to Tuesday's passing of the U.S. government's massive $787-billion stimulus bill and Wednesday's announcement by president Barack Obama of a US$75-billion program aimed at throwing a lifeline to millions of Americans on the brink of foreclosure.
· Dollar -.07c to 79.41USD
· Oil +$4.86to $39.48US per barrel.
· Gold -$1.70 to $976.50 USD per ounce
· Canadian 5 yr bond yields +.02bps to 2.09
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
In economic news, Canada Mortgage and Housing Corp. reported housing starts fell 7.5 per cent to about 211,056 units in 2008 from 2007. But the agency forecast sharply lower levels of starts for the next two years and sliding home sales as the recession further discourages consumer confidence, with starts expected to be about 160,250 for 2009 and about 163,350 for 2010 followed by some improvement.
CMHC also said that existing home sales, as measured by the Multiple Listing Service, are expected to decline 14.6 per cent during 2009 while the average price will slide 5.2 per cent.
. Obama commits to growing trade between Canada and the United StatesJulian Beltrame, The Canadian Press
OTTAWA - U.S. President Barack Obama strongly pledged sweeping co-operation on a wide range of economic issues Thursday in what appeared to be a designed effort to reassure Canadian insecurities about growing protectionism in his country.
The first visit from the new president appeared to be an unqualified success for Prime Minister Stephen Harper as Obama not only checked off each of his stated concerns - from the border, to autos, to free trade - but offered a rosy view of future relations.
"I expect four years from now the U.S.-Canada relationship will be even stronger than it is today," he said after the leaders' meeting in the prime minister's office. "I expect increased trade, I think we'll see increased integration of efforts on energy and various industry, and I think that's to be welcomed."
Specifically, Obama said he does not believe the controversial "buy America" clause in his stimulus package will significantly discriminate against Canada. Rather, he said he and Harper discussed using some of the spending earmarked by both countries for infrastructure projects to improve traffic flow at clogged border crossings.
And, he said it would be possible to include labour and environmental side agreements into the North American free trade deal without disrupting the agreement, a major concern with both Canada and Mexico.
Obama said he had no interest in doing something that would shrink trade.
On autos, Obama made clear he considered the battered industry one that is shared between Canada and the U.S. and said there would be co-operation in government rescue efforts.
The soothing words from the smooth-talking president was welcomed by Canada's business community, which had been awaiting any signal from Obama on where the relationship was headed.
"In my view the meeting was as good as it could get," said Thomas d'Aquino of the Canadian Council of Chief Executives. But d'Aquino and others cautioned that "the devil is in the details" and that in the U.S. system, the president shares power with Congress on most economic matters.
Jayson Myers of the Canadian Manufacturers and Exporters called it a "a good basis for moving forward" but added that "we've seen good starts before."
"We'll see as time goes on how buy America provisions are interpreted, we'll see how the administration balances border security with efficiency, and we'll certainly see (the impact) of this plethora of regulations coming out of the departments of the U.S. governments," he said.
Business leaders believe the stickiness at the border is probably the most serious and most difficult challenge facing Canada because the Americans see it primarily as a security issue, while Canada sees it as an impediment to trade.
Chamber of Commerce president Perrin Beatty points out that on average a North American automobile involves six or seven crossings of parts and supplies, estimating new regulations have added several hundreds of dollars to the cost.
Harper confronted the issue at his joint news conference with Obama, trying to make the case that Canada is equally concerned with security.
"The view of this government is unequivocal," he said. "Threats to the U.S. are threats to Canada. There is no such thing as a threat to the national security of the United States that does not represent a direct threat to this country."
D'Aquino said he was encouraged that Obama's response was to talk about common security concerns.
"If he had said, 'We are deeply concerned about security in Canada, I would have been worried,' " he said, although he cautioned much work remains to be done before the border problem is resolved.
The same could be said about how the Barack administration will implement the buy America clause in the new stimulus package, said Brenda Swick, a trade lawyer with McCarthy Tetrault.
Although Obama said the U.S. will abide by its trade obligations, those obligations do not extend to states and local governments. Still, she said Obama could wave the protectionist provisions for U.S. trading partners, particularly Canada, Mexico and Europe, by declaring it in the "public interest."
"So if there's a will, there's a way," she said. "I got it more from Harper that there was a will, (but) Obama wasn't as clear."
· DOW -89.68 little response to Tuesday's passing of the U.S. government's massive $787-billion stimulus bill and Wednesday's announcement by president Barack Obama of a US$75-billion program aimed at throwing a lifeline to millions of Americans on the brink of foreclosure.
· Dollar -.07c to 79.41USD
· Oil +$4.86to $39.48US per barrel.
· Gold -$1.70 to $976.50 USD per ounce
· Canadian 5 yr bond yields +.02bps to 2.09
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
In economic news, Canada Mortgage and Housing Corp. reported housing starts fell 7.5 per cent to about 211,056 units in 2008 from 2007. But the agency forecast sharply lower levels of starts for the next two years and sliding home sales as the recession further discourages consumer confidence, with starts expected to be about 160,250 for 2009 and about 163,350 for 2010 followed by some improvement.
CMHC also said that existing home sales, as measured by the Multiple Listing Service, are expected to decline 14.6 per cent during 2009 while the average price will slide 5.2 per cent.
. Obama commits to growing trade between Canada and the United StatesJulian Beltrame, The Canadian Press
OTTAWA - U.S. President Barack Obama strongly pledged sweeping co-operation on a wide range of economic issues Thursday in what appeared to be a designed effort to reassure Canadian insecurities about growing protectionism in his country.
The first visit from the new president appeared to be an unqualified success for Prime Minister Stephen Harper as Obama not only checked off each of his stated concerns - from the border, to autos, to free trade - but offered a rosy view of future relations.
"I expect four years from now the U.S.-Canada relationship will be even stronger than it is today," he said after the leaders' meeting in the prime minister's office. "I expect increased trade, I think we'll see increased integration of efforts on energy and various industry, and I think that's to be welcomed."
Specifically, Obama said he does not believe the controversial "buy America" clause in his stimulus package will significantly discriminate against Canada. Rather, he said he and Harper discussed using some of the spending earmarked by both countries for infrastructure projects to improve traffic flow at clogged border crossings.
And, he said it would be possible to include labour and environmental side agreements into the North American free trade deal without disrupting the agreement, a major concern with both Canada and Mexico.
Obama said he had no interest in doing something that would shrink trade.
On autos, Obama made clear he considered the battered industry one that is shared between Canada and the U.S. and said there would be co-operation in government rescue efforts.
The soothing words from the smooth-talking president was welcomed by Canada's business community, which had been awaiting any signal from Obama on where the relationship was headed.
"In my view the meeting was as good as it could get," said Thomas d'Aquino of the Canadian Council of Chief Executives. But d'Aquino and others cautioned that "the devil is in the details" and that in the U.S. system, the president shares power with Congress on most economic matters.
Jayson Myers of the Canadian Manufacturers and Exporters called it a "a good basis for moving forward" but added that "we've seen good starts before."
"We'll see as time goes on how buy America provisions are interpreted, we'll see how the administration balances border security with efficiency, and we'll certainly see (the impact) of this plethora of regulations coming out of the departments of the U.S. governments," he said.
Business leaders believe the stickiness at the border is probably the most serious and most difficult challenge facing Canada because the Americans see it primarily as a security issue, while Canada sees it as an impediment to trade.
Chamber of Commerce president Perrin Beatty points out that on average a North American automobile involves six or seven crossings of parts and supplies, estimating new regulations have added several hundreds of dollars to the cost.
Harper confronted the issue at his joint news conference with Obama, trying to make the case that Canada is equally concerned with security.
"The view of this government is unequivocal," he said. "Threats to the U.S. are threats to Canada. There is no such thing as a threat to the national security of the United States that does not represent a direct threat to this country."
D'Aquino said he was encouraged that Obama's response was to talk about common security concerns.
"If he had said, 'We are deeply concerned about security in Canada, I would have been worried,' " he said, although he cautioned much work remains to be done before the border problem is resolved.
The same could be said about how the Barack administration will implement the buy America clause in the new stimulus package, said Brenda Swick, a trade lawyer with McCarthy Tetrault.
Although Obama said the U.S. will abide by its trade obligations, those obligations do not extend to states and local governments. Still, she said Obama could wave the protectionist provisions for U.S. trading partners, particularly Canada, Mexico and Europe, by declaring it in the "public interest."
"So if there's a will, there's a way," she said. "I got it more from Harper that there was a will, (but) Obama wasn't as clear."
Thursday, February 19, 2009
Financial Update for Feb. 19, 2009
· TSX-202.75(Reuters) for a third straight session, touching a 2009 low, pressured by weak energy and financial issues and a slide by Rogers Communications Inc.
· DOW +3.03 New York markets were little changed despite the announcement of a plan from U.S. President Barack Obama to deal with the home foreclosure crisis
· Dollar +.35c to 79.48USD
· Oil -$.31to $34.62US per barrel. as another dose of bad economic news only raised concerns about the global downturn's impact on energy demand.
· Gold +$10.70 to $977.70 USD per ounce The lone sector in positive territory was the resource-laden materials group, as gold prices got a boost as investors sought refuge from economic gloom.
· Canadian 5 yr bond yields +.07bps to 2.07
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Five issues Harper, Obama are likely to tackle
Craig Offman, National Post
As excitement builds for Barack Obama's first state visit to Canada on Thursday, so does the pressure on its frantic schedule.
At home, Mr. Obama is being pushed to address the environmental fallout from Alberta's oil sands or the injustices of our softwood lumber exports. Stephen Harper, on the other hand, faces calls to bring up the status of 22-year-old accused terrorist Omar Khadr or U.S. designs on oil deposits in the Arctic.
But a clenched-fist approach will not benefit Canada, diplomats say, especially when a profound economic crisis trumps all other issues.
"The stakes are too big to worry about the price of eggs in Quebec," said James Blanchard. A former U.S. ambassador to Canada during the Clinton administration, Mr. Blanchard predicts this will be a broad, big-picture, meeting in which new objectives supersede old resentments.
"I think that previous meetings have often been unsuccessful because Canada focused on the trees and the weeds, rather than the forest," he added.
"Over the years, our State Department has been quite amused that Canada avoids the big issues and focuses on the small ones.
"We'll typically leave those details and issues to the Cabinet, or frankly, the sub-Cabinet," Mr. Blanchard said.
Echoing other former ambassadors from both countries - including Canada's Allan Gotlieb and Paul Cellucci of the United States - Mr. Blanchard, foresees five concerns: protectionism, the effects of the bailout, the environment and energy and Afghanistan.
Given that the two sides have an hour on average to cover each topic during this speed-bonding session, lower-level diplomats will likely be left to sweat over the smaller stuff. "It needs to be big picture, and Stephen Harper knows that," Mr. Blanchard said. "It's not going to be nitpicking over wheat and lumber."
The Rise of Protectionism
"I'd expect the Prime Minister to point out the damage from protectionist activity," said Mr. Gotlieb, Canada's former ambassador to the United States during the Mulroney years. Reacting to an alarming rise in "Buy American" rhetoric, Mr. Harper will likely echo a message his ambassador, Michael Wilson, sent to the U.S. Senate recently: Canada is your largest-single customer, and if either of us throws up walls, it will hurt us both. The costs of doing business will actually increase. Delay and disruptions would ensue at our borders. Competitiveness would suffer, and in the end, both nations risk losing jobs, not creating them. Mr. Obama, who has spent a lot of political capital arguing the same point, would likely agree. "I'd also expect Mr. Obama to say that it's up to the United States to honour its international obligations," Mr. Gotlieb said.
Thickening of Borders
In an effort to protect the homeland from potential acts of terror, the United States has tightened security along the 49th parallel. But these chokepoints are literally costing both countries money: The thickening of the borders is damaging our respective economies.
In the past two decades, we have become joint producers on everything from films to auto parts - and the more goods, services and labour are held up at checkpoints, the less productive we become.
"We have to make sure the border is secure and facilitating," said Mr. Cellucci, who was U.S. ambassador to Canada during the first Bush administration.
Mr. Cellucci argued that the "smart border" program - which calls for "facilitating the free flow of people and commerce" - is working; other diplomats would say that Canada's greatest advantage, proximity, has turned against us in the post 9/11 era.
"The thickening of our border has become our comparative disadvantage," said Mr. Gotlieb, reversing the gains made by the free-trade agreement signed by his former boss and Ronald Reagan in 1988. This is a major weakness at a time when we compete with one-stop exporters such as the European Union and China. Look for the two leaders to announce efforts to initiate research into a smarter border program.
Marrying the Environment with the Economy
In a telling encounter with reporters last week, Canada's Environment Minister, Jim Prentice, described his new responsibility as balancing energy security, the economy and environment.
This widened purview perhaps reflects Mr. Harper's own micro green shift as he tries to engage the new President.
"It's important for the Prime Minister to talk about how we can work together to combat climate change while continuing to make sure that oil flows from the sands," said Mr. Cellucci, alluding to U.S. reliance on Canadian oil, which can run as high as 2.5 million barrels a day, making us its largest supplier.
As much as conservationists on both sides of the border criticize the oil sands, Mr. Harper will likely advance the argument that so-called "Dirty Oil" is no dirtier than coal or nuclear power.
Charles Doran, director of the Center of Canadian Studies at the Paul H. Nitze School of Advanced International Studies, said the two leaders would be shrewd to announce some kind of joint research and development project that would look for cleaner ways to extract oil from Northern Alberta. "That's something looks good, that is good, that is new – and that they could do together."
Bailouts
Even if Canada is emerging from this economic storm in better shape than the United States, a frenetic flow of goods and people inextricably links the two countries. In the course of one day alone, the equivalent of $1.5-billion in commerce and 300,000 people cross their common borders, an interdependence that also binds their financial health.
"These are not the conditions they wanted for the first meetings, but the reality is that everything will be focused on the bailouts," Mr. Doran said.
"They'll be discussing the efforts to recover from this recession or depression and the impact the policies will have on each other's countries." Mr. Doran points out, for example, that the trillion-dollar bailout in the United States might trigger massive inflation on both sides of the border.
Mr. Gotlieb, who was in Washington, D.C. during the Mulroney and Reagan years, suggested Mr. Harper could bolster the economic relationship by suggesting that the two meet each year around the same day to review policies, a top-down way of bonding and breaking down barriers.
"How else do you translate the recognition that we're most important trading partners and neighbours?" he asked. "By improving the relationship."
Canada's new role in Afghanistan
As recent as Tuesday, Mr. Obama did not overtly suggest that troops Canadian troops should stay beyond its 2011 deadline for withdrawal, but the omission might have been strategic: He still might want our soldiers to remain in a non-combative capacity.
Once in Ottawa, a very sensitive Mr. Obama will likely reiterate his gratitude to Canada for its sacrifice but will also reinforce his predicament: He has identified the region as the principal front in the war on terror, and the United States requires greater manpower there. So where does that leave Canada? While both leaders would probably agree that the re-emergence of the Taliban is an international concern, and that NATO should make a greater commitment to the imploding region, Mr. Obama might gently suggest Mr. Harper prolong Canada's mission beyond its 2011 deadline for withdrawal, offering its talents in a different capacity.
"I think there will be a discussion about what other things Canada can do to help," said Paul Cellucci. "Whether it be rebuilding the infrastructural needs, civil needs, the things Canadians are quite good at."
· DOW +3.03 New York markets were little changed despite the announcement of a plan from U.S. President Barack Obama to deal with the home foreclosure crisis
· Dollar +.35c to 79.48USD
· Oil -$.31to $34.62US per barrel. as another dose of bad economic news only raised concerns about the global downturn's impact on energy demand.
· Gold +$10.70 to $977.70 USD per ounce The lone sector in positive territory was the resource-laden materials group, as gold prices got a boost as investors sought refuge from economic gloom.
· Canadian 5 yr bond yields +.07bps to 2.07
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Five issues Harper, Obama are likely to tackle
Craig Offman, National Post
As excitement builds for Barack Obama's first state visit to Canada on Thursday, so does the pressure on its frantic schedule.
At home, Mr. Obama is being pushed to address the environmental fallout from Alberta's oil sands or the injustices of our softwood lumber exports. Stephen Harper, on the other hand, faces calls to bring up the status of 22-year-old accused terrorist Omar Khadr or U.S. designs on oil deposits in the Arctic.
But a clenched-fist approach will not benefit Canada, diplomats say, especially when a profound economic crisis trumps all other issues.
"The stakes are too big to worry about the price of eggs in Quebec," said James Blanchard. A former U.S. ambassador to Canada during the Clinton administration, Mr. Blanchard predicts this will be a broad, big-picture, meeting in which new objectives supersede old resentments.
"I think that previous meetings have often been unsuccessful because Canada focused on the trees and the weeds, rather than the forest," he added.
"Over the years, our State Department has been quite amused that Canada avoids the big issues and focuses on the small ones.
"We'll typically leave those details and issues to the Cabinet, or frankly, the sub-Cabinet," Mr. Blanchard said.
Echoing other former ambassadors from both countries - including Canada's Allan Gotlieb and Paul Cellucci of the United States - Mr. Blanchard, foresees five concerns: protectionism, the effects of the bailout, the environment and energy and Afghanistan.
Given that the two sides have an hour on average to cover each topic during this speed-bonding session, lower-level diplomats will likely be left to sweat over the smaller stuff. "It needs to be big picture, and Stephen Harper knows that," Mr. Blanchard said. "It's not going to be nitpicking over wheat and lumber."
The Rise of Protectionism
"I'd expect the Prime Minister to point out the damage from protectionist activity," said Mr. Gotlieb, Canada's former ambassador to the United States during the Mulroney years. Reacting to an alarming rise in "Buy American" rhetoric, Mr. Harper will likely echo a message his ambassador, Michael Wilson, sent to the U.S. Senate recently: Canada is your largest-single customer, and if either of us throws up walls, it will hurt us both. The costs of doing business will actually increase. Delay and disruptions would ensue at our borders. Competitiveness would suffer, and in the end, both nations risk losing jobs, not creating them. Mr. Obama, who has spent a lot of political capital arguing the same point, would likely agree. "I'd also expect Mr. Obama to say that it's up to the United States to honour its international obligations," Mr. Gotlieb said.
Thickening of Borders
In an effort to protect the homeland from potential acts of terror, the United States has tightened security along the 49th parallel. But these chokepoints are literally costing both countries money: The thickening of the borders is damaging our respective economies.
In the past two decades, we have become joint producers on everything from films to auto parts - and the more goods, services and labour are held up at checkpoints, the less productive we become.
"We have to make sure the border is secure and facilitating," said Mr. Cellucci, who was U.S. ambassador to Canada during the first Bush administration.
Mr. Cellucci argued that the "smart border" program - which calls for "facilitating the free flow of people and commerce" - is working; other diplomats would say that Canada's greatest advantage, proximity, has turned against us in the post 9/11 era.
"The thickening of our border has become our comparative disadvantage," said Mr. Gotlieb, reversing the gains made by the free-trade agreement signed by his former boss and Ronald Reagan in 1988. This is a major weakness at a time when we compete with one-stop exporters such as the European Union and China. Look for the two leaders to announce efforts to initiate research into a smarter border program.
Marrying the Environment with the Economy
In a telling encounter with reporters last week, Canada's Environment Minister, Jim Prentice, described his new responsibility as balancing energy security, the economy and environment.
This widened purview perhaps reflects Mr. Harper's own micro green shift as he tries to engage the new President.
"It's important for the Prime Minister to talk about how we can work together to combat climate change while continuing to make sure that oil flows from the sands," said Mr. Cellucci, alluding to U.S. reliance on Canadian oil, which can run as high as 2.5 million barrels a day, making us its largest supplier.
As much as conservationists on both sides of the border criticize the oil sands, Mr. Harper will likely advance the argument that so-called "Dirty Oil" is no dirtier than coal or nuclear power.
Charles Doran, director of the Center of Canadian Studies at the Paul H. Nitze School of Advanced International Studies, said the two leaders would be shrewd to announce some kind of joint research and development project that would look for cleaner ways to extract oil from Northern Alberta. "That's something looks good, that is good, that is new – and that they could do together."
Bailouts
Even if Canada is emerging from this economic storm in better shape than the United States, a frenetic flow of goods and people inextricably links the two countries. In the course of one day alone, the equivalent of $1.5-billion in commerce and 300,000 people cross their common borders, an interdependence that also binds their financial health.
"These are not the conditions they wanted for the first meetings, but the reality is that everything will be focused on the bailouts," Mr. Doran said.
"They'll be discussing the efforts to recover from this recession or depression and the impact the policies will have on each other's countries." Mr. Doran points out, for example, that the trillion-dollar bailout in the United States might trigger massive inflation on both sides of the border.
Mr. Gotlieb, who was in Washington, D.C. during the Mulroney and Reagan years, suggested Mr. Harper could bolster the economic relationship by suggesting that the two meet each year around the same day to review policies, a top-down way of bonding and breaking down barriers.
"How else do you translate the recognition that we're most important trading partners and neighbours?" he asked. "By improving the relationship."
Canada's new role in Afghanistan
As recent as Tuesday, Mr. Obama did not overtly suggest that troops Canadian troops should stay beyond its 2011 deadline for withdrawal, but the omission might have been strategic: He still might want our soldiers to remain in a non-combative capacity.
Once in Ottawa, a very sensitive Mr. Obama will likely reiterate his gratitude to Canada for its sacrifice but will also reinforce his predicament: He has identified the region as the principal front in the war on terror, and the United States requires greater manpower there. So where does that leave Canada? While both leaders would probably agree that the re-emergence of the Taliban is an international concern, and that NATO should make a greater commitment to the imploding region, Mr. Obama might gently suggest Mr. Harper prolong Canada's mission beyond its 2011 deadline for withdrawal, offering its talents in a different capacity.
"I think there will be a discussion about what other things Canada can do to help," said Paul Cellucci. "Whether it be rebuilding the infrastructural needs, civil needs, the things Canadians are quite good at."
Wednesday, February 18, 2009
Financial Update for Feb. 18, 2009
Markets skid lower from widespread pessimism
The latest turbulence to hit markets comes after a weekend meeting of G7 finance ministers and central bankers failed to reassure investors. Gavin Graham, director of investments at BMO Asset Management, said the markets are reacting to the sudden fall of economies around the world. Further concerns about the financial sector were sparked after two leading agencies, including a report from Moody's Investors Service, warned about growing risks to European banks as the recession deepens.
· TSX -299.40 (Reuters) to its lowest level in 7 weeks as pessimism about the global economy took a big bite out of bank stocks and investors worried about the survival of General Motors Corporation as it sets out to cut 47,000 jobs globally
· DOW -297.81 to 7,552.6, a fraction of a point away from its low reached in November.
· Dollar -1.27c to 79.13USD
· Oil -$2.58 to $34.93US per barrel.
· Gold +$25.50 to $967.00 USD per ounce The lone sector in positive territory was the resource-laden materials group, up 0.5%, as gold prices got a boost as investors sought refuge from economic gloom.
· Canadian 5 yr bond yields -.11bps to 2.00
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Obama launches stimulus package
Email the author
U.S. president says it may mark 'the beginning of the end' of the country's economic woes
February 18, 2009
Liz SidotiThe Associated Press
DENVER
President Barack Obama signed a massive $787 billion package to revive the economy yesterday, saying the measure represented the "essential work of keeping the American dream alive in our time.''
The stimulus plan of spending programs and tax cuts is at the heart of Obama's effort to turn the economy back into a job-creating machine. It comes with a huge price tag for taxpayers and lingering doubts about whether the plan's results will match all the lofty promises that its supporters have made.
Obama signed the bill in Denver, the city where he accepted his party's presidential nomination last summer and a leader in the so-called "green'' clean energy jobs that the legislation supports.
The president now turns his attention to a plan to help struggling homeowners who are trying to fend off foreclosure.
"I don't want to pretend that today marks the end of our economic troubles,'' Obama said before signing the legislation.
"Nor does it constitute all of what we are going to have to do to turn our economy around. But today does mark the beginning of the end.''
Meanwhile, the White House isn't ruling out a second economic plan, although none is in the works right now, spokesperson Robert Gibbs said yesterday.
The legislation is the most sweeping economic overhaul plan put forth in decades.
It pumps money into infrastructure projects, health care, renewable energy development and conservation, with twin goals of short-term job production and longer-term economic viability.
There's a $400 tax break for most individual workers and $800 for couples, including those who do not earn enough to pay income taxes.
It dishes out tens of billions of dollars to states so they can head off deep cuts and layoffs.
It provides financial incentives for people to start buying again, from first homes to new cars.
And it provides help to poor people and laid-off workers, with increased unemployment benefits and food stamps, and subsides for health insurance.
Ahead of Obama's arrival in Colorado, the White House went live with a website, www.recovery.gov, that will allow people to track where the money is being spent.
The White House press office also promoted the projected job growth for each state and congressional district.
The failing economy continues to dominate Obama's time.
Today in Arizona, Obama will unveil his plan to halt home foreclosures.
The unemployment rate is now at 7.6 per cent, the highest in more than 16 years.
Analysts warn the economy will remain feeble through 2009.
Republican legislators, meanwhile, largely balked at the economic package.
It drew no Republican votes in the House and only three in the Senate, albeit vital ones.
Many Republicans said it was short on cutting taxes and the spending measures didn't target the vast sums of money well enough toward short-term job creation, which was the major goal of the bill.
Republican National Committee chair Michael Steele derided the plan, saying in a statement that "the Democrat plan focuses on putting Americans on the public dole, while the Republican plan focuses on putting America back to work.''
But with the economy shedding jobs, there was widespread consensus in Washington for some sort of stimulus, and fast.
Yet the government's action comes at a cost down the line.
Many private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion, including the stimulus spending.
That's about three times last year's shortfall, and such year-to-year deficits contribute toward a mounting national debt.
The latest turbulence to hit markets comes after a weekend meeting of G7 finance ministers and central bankers failed to reassure investors. Gavin Graham, director of investments at BMO Asset Management, said the markets are reacting to the sudden fall of economies around the world. Further concerns about the financial sector were sparked after two leading agencies, including a report from Moody's Investors Service, warned about growing risks to European banks as the recession deepens.
· TSX -299.40 (Reuters) to its lowest level in 7 weeks as pessimism about the global economy took a big bite out of bank stocks and investors worried about the survival of General Motors Corporation as it sets out to cut 47,000 jobs globally
· DOW -297.81 to 7,552.6, a fraction of a point away from its low reached in November.
· Dollar -1.27c to 79.13USD
· Oil -$2.58 to $34.93US per barrel.
· Gold +$25.50 to $967.00 USD per ounce The lone sector in positive territory was the resource-laden materials group, up 0.5%, as gold prices got a boost as investors sought refuge from economic gloom.
· Canadian 5 yr bond yields -.11bps to 2.00
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Obama launches stimulus package
Email the author
U.S. president says it may mark 'the beginning of the end' of the country's economic woes
February 18, 2009
Liz SidotiThe Associated Press
DENVER
President Barack Obama signed a massive $787 billion package to revive the economy yesterday, saying the measure represented the "essential work of keeping the American dream alive in our time.''
The stimulus plan of spending programs and tax cuts is at the heart of Obama's effort to turn the economy back into a job-creating machine. It comes with a huge price tag for taxpayers and lingering doubts about whether the plan's results will match all the lofty promises that its supporters have made.
Obama signed the bill in Denver, the city where he accepted his party's presidential nomination last summer and a leader in the so-called "green'' clean energy jobs that the legislation supports.
The president now turns his attention to a plan to help struggling homeowners who are trying to fend off foreclosure.
"I don't want to pretend that today marks the end of our economic troubles,'' Obama said before signing the legislation.
"Nor does it constitute all of what we are going to have to do to turn our economy around. But today does mark the beginning of the end.''
Meanwhile, the White House isn't ruling out a second economic plan, although none is in the works right now, spokesperson Robert Gibbs said yesterday.
The legislation is the most sweeping economic overhaul plan put forth in decades.
It pumps money into infrastructure projects, health care, renewable energy development and conservation, with twin goals of short-term job production and longer-term economic viability.
There's a $400 tax break for most individual workers and $800 for couples, including those who do not earn enough to pay income taxes.
It dishes out tens of billions of dollars to states so they can head off deep cuts and layoffs.
It provides financial incentives for people to start buying again, from first homes to new cars.
And it provides help to poor people and laid-off workers, with increased unemployment benefits and food stamps, and subsides for health insurance.
Ahead of Obama's arrival in Colorado, the White House went live with a website, www.recovery.gov, that will allow people to track where the money is being spent.
The White House press office also promoted the projected job growth for each state and congressional district.
The failing economy continues to dominate Obama's time.
Today in Arizona, Obama will unveil his plan to halt home foreclosures.
The unemployment rate is now at 7.6 per cent, the highest in more than 16 years.
Analysts warn the economy will remain feeble through 2009.
Republican legislators, meanwhile, largely balked at the economic package.
It drew no Republican votes in the House and only three in the Senate, albeit vital ones.
Many Republicans said it was short on cutting taxes and the spending measures didn't target the vast sums of money well enough toward short-term job creation, which was the major goal of the bill.
Republican National Committee chair Michael Steele derided the plan, saying in a statement that "the Democrat plan focuses on putting Americans on the public dole, while the Republican plan focuses on putting America back to work.''
But with the economy shedding jobs, there was widespread consensus in Washington for some sort of stimulus, and fast.
Yet the government's action comes at a cost down the line.
Many private economists are forecasting that the budget deficit for the current year will hit $1.6 trillion, including the stimulus spending.
That's about three times last year's shortfall, and such year-to-year deficits contribute toward a mounting national debt.
Tuesday, February 17, 2009
Financial Update for Feb. 17, 2009
Markets were closed on Monday as most Canadian provinces celebrated Family Day and Presidents Day in the US
· TSX -100.68 (Reuters)
· DOW -82.35
· Dollar +.70c to 81.03USD
· Oil +$3.53 to $37.51US per barrel.
· Gold -$7.00 to $941.50 USD per ounce
· Canadian 5 yr bond yields +.03bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Obama poised to sign stimulus into law BEN FELLER The Associated Press
WASHINGTON — President Barack Obama is ready to sign into law the most sweeping economic package in decades, a rescue plan meant to reinvigorate job creation, consumer spending and public optimism. Add the bill to an ever-growing deficit.
Capping the biggest victory of his month-old administration, Mr. Obama will sign the economic legislation Tuesday in Denver
Clement urges India to invest in Canada
Meagan Fitzpatrick, Canwest News Service
OTTAWA - Canada is wide open for business and is still a wise place to invest despite its weakened economy, federal Industry Minister Tony Clement is telling government officials and business leaders in India this week.
Mr. Clement arrived in India on Saturday for a six-day visit to New Delhi and Mumbai, and during a teleconference with reporters Monday he said his two primary objectives there are to encourage more foreign direct investment by Indian businesses in Canada, and to tap into the growing tourist market in India and convince vacationers to pick Canada as a destination.
During the last two days he met with ministers from the Indian government, held a round table with tour company operators to get feedback on how to market Canada, and met with a group of young professionals and entrepreneurs.
"The message was the same: that Canada is open for business, that we have withstood the economic turmoil relatively well, as compared to other G7 and OECD countries, our bank system is one of the few bank systems that hasn't needed a bailout, for instance, and that we are positioned to get out of the contraction as quickly as possible and then start to grow again," said Mr. Clement.
The industry minister said he told those he met with that Canada's corporate tax structure and changes being made to the Investment Canada Act, the legislation that regulates investments made by non-Canadians in businesses in Canada, should make Canada an attractive location for Indian companies to grow.
Mr. Clement said Canada is signalling "our steps away from the protectionist ill-winds that are blowing." He and his counterparts did discuss efforts by the United States Congress to include protectionist-type measures in that country's economic stimulus package, Mr. Clement said, and they "came to the conclusion that Canada and India are on the same side" and that "protectionism had to be resisted."
The industry minister said they agreed that it would be better for the global economy and the American economy if it resisted protectionist pressures and that he thought India wanted some assurance that Canada would not pursue a protectionist agenda.
Canada and India conduct about $4-billion worth of trade every year and Mr. Clement said there is no reason that figure should not increase, especially given there are one million Canadians of Indian origin and that the two countries have positive relations.
Household debt loads in 'danger zone'
Carla Wilson, Canwest News Service
VICTORIA - Many Canadian households carry debt loads in the "danger zone," says the executive director of the Ottawa-based Vanier Institute of the Family.
Average household debt rose to more than $90,000 in 2008, Clarence Lochhead told a recent meeting of Victoria's Association of Family Serving Agencies. The Vanier Institute is a non-profit agency promoting the well-being of Canadian families.
The total debt-to-disposable income ratio rose to 140% last year, Mr. Lochhead said, referring to the Institute's report, The Current State of Canadian Family Finances.
Last year, the average household income was $65,200, up by 11.6% from 1990. In that same period, spending jumped by 24.4%, total debt went up more than six times faster than incomes, and annual savings shrank, he said.
The median (mid-point) real earnings of Canadians, when adjusted for inflation, show little increases between 1980 and 2005, he said. Meanwhile, many citizens are overloaded at work.
The reward: "We got credit. We got a lot of credit," he said in reference to interest rates dropping in the past several years.
"But there was a whole, I think, really big cultural shift too in the way we think about spending, the way we feel about money, the way we feel about availability of credit - the push to spend when you don't have money," he said.
When spending outpaces income, families end up close to the edge of their monthly budget. Mr. Lochhead said it can be financially painful if they hit a bump in the road, whether it is due to the fallout from today's recession or a personal reason.
It is not irrational behaviour to pull back on spending, Mr. Lochhead added. He said that not all debt is bad, but rising consumer debt as a percentage of annual income is "problematic."
Looking at the examples from past recessions, Mr. Lochhead said it could take a long time to recover from this recession.
He also had advice for governments that plan stimulus spending, "At the provincial level, why don't we do something about social assistance rates?" That money goes immediately back into the local economy, he said.
"Any analysis of spending at the lower income end will show you that every marginal dollar received will be spent and there is a very high probability that it will be spent locally."
When we are talking about infrastructure, Mr. Lochhead urged looking at more than roads and bridges. "Let's talk about providing supports that are going to help families."
· TSX -100.68 (Reuters)
· DOW -82.35
· Dollar +.70c to 81.03USD
· Oil +$3.53 to $37.51US per barrel.
· Gold -$7.00 to $941.50 USD per ounce
· Canadian 5 yr bond yields +.03bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Obama poised to sign stimulus into law BEN FELLER The Associated Press
WASHINGTON — President Barack Obama is ready to sign into law the most sweeping economic package in decades, a rescue plan meant to reinvigorate job creation, consumer spending and public optimism. Add the bill to an ever-growing deficit.
Capping the biggest victory of his month-old administration, Mr. Obama will sign the economic legislation Tuesday in Denver
Clement urges India to invest in Canada
Meagan Fitzpatrick, Canwest News Service
OTTAWA - Canada is wide open for business and is still a wise place to invest despite its weakened economy, federal Industry Minister Tony Clement is telling government officials and business leaders in India this week.
Mr. Clement arrived in India on Saturday for a six-day visit to New Delhi and Mumbai, and during a teleconference with reporters Monday he said his two primary objectives there are to encourage more foreign direct investment by Indian businesses in Canada, and to tap into the growing tourist market in India and convince vacationers to pick Canada as a destination.
During the last two days he met with ministers from the Indian government, held a round table with tour company operators to get feedback on how to market Canada, and met with a group of young professionals and entrepreneurs.
"The message was the same: that Canada is open for business, that we have withstood the economic turmoil relatively well, as compared to other G7 and OECD countries, our bank system is one of the few bank systems that hasn't needed a bailout, for instance, and that we are positioned to get out of the contraction as quickly as possible and then start to grow again," said Mr. Clement.
The industry minister said he told those he met with that Canada's corporate tax structure and changes being made to the Investment Canada Act, the legislation that regulates investments made by non-Canadians in businesses in Canada, should make Canada an attractive location for Indian companies to grow.
Mr. Clement said Canada is signalling "our steps away from the protectionist ill-winds that are blowing." He and his counterparts did discuss efforts by the United States Congress to include protectionist-type measures in that country's economic stimulus package, Mr. Clement said, and they "came to the conclusion that Canada and India are on the same side" and that "protectionism had to be resisted."
The industry minister said they agreed that it would be better for the global economy and the American economy if it resisted protectionist pressures and that he thought India wanted some assurance that Canada would not pursue a protectionist agenda.
Canada and India conduct about $4-billion worth of trade every year and Mr. Clement said there is no reason that figure should not increase, especially given there are one million Canadians of Indian origin and that the two countries have positive relations.
Household debt loads in 'danger zone'
Carla Wilson, Canwest News Service
VICTORIA - Many Canadian households carry debt loads in the "danger zone," says the executive director of the Ottawa-based Vanier Institute of the Family.
Average household debt rose to more than $90,000 in 2008, Clarence Lochhead told a recent meeting of Victoria's Association of Family Serving Agencies. The Vanier Institute is a non-profit agency promoting the well-being of Canadian families.
The total debt-to-disposable income ratio rose to 140% last year, Mr. Lochhead said, referring to the Institute's report, The Current State of Canadian Family Finances.
Last year, the average household income was $65,200, up by 11.6% from 1990. In that same period, spending jumped by 24.4%, total debt went up more than six times faster than incomes, and annual savings shrank, he said.
The median (mid-point) real earnings of Canadians, when adjusted for inflation, show little increases between 1980 and 2005, he said. Meanwhile, many citizens are overloaded at work.
The reward: "We got credit. We got a lot of credit," he said in reference to interest rates dropping in the past several years.
"But there was a whole, I think, really big cultural shift too in the way we think about spending, the way we feel about money, the way we feel about availability of credit - the push to spend when you don't have money," he said.
When spending outpaces income, families end up close to the edge of their monthly budget. Mr. Lochhead said it can be financially painful if they hit a bump in the road, whether it is due to the fallout from today's recession or a personal reason.
It is not irrational behaviour to pull back on spending, Mr. Lochhead added. He said that not all debt is bad, but rising consumer debt as a percentage of annual income is "problematic."
Looking at the examples from past recessions, Mr. Lochhead said it could take a long time to recover from this recession.
He also had advice for governments that plan stimulus spending, "At the provincial level, why don't we do something about social assistance rates?" That money goes immediately back into the local economy, he said.
"Any analysis of spending at the lower income end will show you that every marginal dollar received will be spent and there is a very high probability that it will be spent locally."
When we are talking about infrastructure, Mr. Lochhead urged looking at more than roads and bridges. "Let's talk about providing supports that are going to help families."
Friday, February 13, 2009
Financial Update for Feb. 13, 2009
· TSX +40.89(Reuters)
· DOW -6.77
· Dollar -.13c to 80.33USD
· Oil -$1.96 to $33.96US per barrel.
· Gold +$4.70 to $948.50 USD per ounce
· Canadian 5 yr bond yields -.04bps to 2.08
http://www.financialpost.com/markets/market_data/money-yields-can_us.html
FP WASHINGTON -- Democratic leaders in the U.S. Senate and House on Thursday wrapped up a last minute tax cut and spending details in the US$789-billion economic stimulus bill, setting votes for Friday by both chambers.
The House is scheduled to vote Friday morning and the Senate plans to follow in the evening.
Both chambers are expected to approve it which would meet a deadline set by President Barack Obama to approve the emergency spending and tax cut package before the end of the upcoming holiday weekend.
· DOW -6.77
· Dollar -.13c to 80.33USD
· Oil -$1.96 to $33.96US per barrel.
· Gold +$4.70 to $948.50 USD per ounce
· Canadian 5 yr bond yields -.04bps to 2.08
http://www.financialpost.com/markets/market_data/money-yields-can_us.html
FP WASHINGTON -- Democratic leaders in the U.S. Senate and House on Thursday wrapped up a last minute tax cut and spending details in the US$789-billion economic stimulus bill, setting votes for Friday by both chambers.
The House is scheduled to vote Friday morning and the Senate plans to follow in the evening.
Both chambers are expected to approve it which would meet a deadline set by President Barack Obama to approve the emergency spending and tax cut package before the end of the upcoming holiday weekend.
Thursday, February 12, 2009
Financial Update for Feb. 12, 2009
· TSX -80.00(Reuters) dragged lower by the information technology sector as shares of Research In Motion dropped 15.4% on a profit warning
· DOW +50.65
· Dollar +.22c to 80.46USD
· Oil -$1.61 to $35.94US per barrel. on persistent concerns that the recession will further erode demand and leave too much supply in the market
· Gold +30.10 to $943.80 USD per ounce Gold stocks were the bright light during Wednesday's session
· Canadian 5 yr bond yields .0bps to 2.12
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Reuters WASHINGTON -- U.S. congressional negotiators Wednesday reached a deal on US$789-billion in emergency spending and tax cuts, handing a big victory to President Barack Obama in his effort to pull the economy out of a steep tailspin.
Negotiators in the House and Senate overcame an apparent last-minute snag on funding to help states plug growing budget deficits and money to renovate schools that Mr. Obama had sought.
The huge package is aimed at reversing a deep recession and news of the compromise sent U.S. stock markets higher
First trade deficit in a generation Gary Norris The Canadian Press In a watershed economic event, Canada has tallied its first monthly trade deficit since 1976 -- a year of demoralizing stagflation when over a million workers took to the streets in a day of protest against the Trudeau government's economic policies.
Statistics Canada reported yesterday that merchandise imports exceeded exports by $458 million in December.
It was a sharp reversal from a surplus of $1.2 billion in November, and economists -- who generally had expected a surplus of about $500 million -- said the trade picture could remain bleak indefinitely.
The art of mortgage renegotiation
ROB CARRICK Globe and Mail Report on Business
Falling mortgage rates have revealed yet another way the banks are charging their clients more in these financially stressful times.
Rates on mortgages have fallen a lot in the past several months, prompting many people to ask about renegotiating in order to cut costs. “The bulk of my business today is people breaking their mortgages,” said Jim Tourloukis, a mortgage broker with Advent Mortgage Services in Markham, Ont.
The problem in breaking a mortgage is the penalty that lenders charge. Banks typically have two ways to calculate the penalty and recently they've switched to the more expensive one.
A little context may help you gauge how annoyed you should be about this. With a recession and global financial crisis hurting their revenues, the banks have been pushing up interest rates on lines of credit, charging more in service fees and adjusting credit card rules to extract more money from clients. Mortgage penalties are somewhat different in that they're mainly influenced by what's happening with interest rates.
It's boilerplate in mortgage contracts for penalties associated with breaking a loan to be set at the greater of three months' interest or the difference between the interest the bank could make on your mortgage as originally arranged versus lending money out at current rates.
Mr. Tourloukis explained that three months' interest was the typical penalty until rates began to fall hard in the past couple of months. Now, the so-called interest rate differential, or IRD, is the larger penalty.
“The spread between the client's rate and what banks can lend money for now has grown dramatically,” he said.
If you have any thoughts of breaking your mortgage, get on it today. If mortgage rates fall further, and they could ease a little bit more, then interest rate differentials will grow in size and cost you more.
Mortgage brokers say breaking your mortgage is worth some thought if your current rate is in the low 5-per-cent range or more. Mr. Tourloukis said he's been renegotiating five-year, fixed-rate mortgages at 3.99 per cent for clients who several months ago signed up for similar loans at 5.79 per cent. Other mortgage brokers are showing five-year rates in the low 4-per-cent range.
The first step in breaking a mortgage: Ask your lender what your penalty would be. There's no standardized calculation of penalties, so your number will depend on your lender's own policies and personal circumstances like the amount you've borrowed and the number of years left on your mortgage.
In some cases, breaking your mortgage just won't make sense because of the steep IRD amount.
“If you have a lot of time left on your term, it could be deadly,” said Vince Gaetano, vice-president at Monster Mortgage in Toronto.
Practices vary widely among banks, but one method for calculating the IRD is to compare a client's original rate against the posted rate for the term that corresponds with the remaining time left on the mortgage. Example: You're two years into a five-year mortgage, so your IRD would be calculated using the current posted three-year rate.
Once you know your penalty, ask your lender to show you how much interest you'd save by renegotiating with the best possible current rate. If the penalty overwhelms the potential savings, then you have a couple of options beyond giving up.
One is to try and negotiate the penalty lower, or have it eliminated altogether. Mr. Tourloukis said lenders have the discretion to help clients out this way.
Another is to chop the amount of money you owe on your mortgage, thereby reducing the penalty for breaking the loan. The way to do this is to take advantage of the prepayment privileges built into most mortgages.
For example, you might be allowed to prepay as much as 20 per cent of your outstanding balance in a year without incurring any charges. Make this lump-sum payment and then get a quote on the penalty to break your newly shrunken mortgage.
There are a couple of strategies to look at if you'd benefit from breaking your mortgage but can't afford the penalty charge.
One is to take the cost and add it to your mortgage balance. In some cases you'll still end up paying less interest than if you stayed with your current mortgage.
Another possibility is a blend and extend, where you jump into a new mortgage that blends your existing rate with the lower current rate and extends your term by a few years. There's no penalty charged in a blend and extend, but you won't save as much as you would if you paid the penalty and got the best possible current interest rate.
“If you want the better rate, you have to come up with the cash,” Mr. Gaetano said.
· DOW +50.65
· Dollar +.22c to 80.46USD
· Oil -$1.61 to $35.94US per barrel. on persistent concerns that the recession will further erode demand and leave too much supply in the market
· Gold +30.10 to $943.80 USD per ounce Gold stocks were the bright light during Wednesday's session
· Canadian 5 yr bond yields .0bps to 2.12
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Reuters WASHINGTON -- U.S. congressional negotiators Wednesday reached a deal on US$789-billion in emergency spending and tax cuts, handing a big victory to President Barack Obama in his effort to pull the economy out of a steep tailspin.
Negotiators in the House and Senate overcame an apparent last-minute snag on funding to help states plug growing budget deficits and money to renovate schools that Mr. Obama had sought.
The huge package is aimed at reversing a deep recession and news of the compromise sent U.S. stock markets higher
First trade deficit in a generation Gary Norris The Canadian Press In a watershed economic event, Canada has tallied its first monthly trade deficit since 1976 -- a year of demoralizing stagflation when over a million workers took to the streets in a day of protest against the Trudeau government's economic policies.
Statistics Canada reported yesterday that merchandise imports exceeded exports by $458 million in December.
It was a sharp reversal from a surplus of $1.2 billion in November, and economists -- who generally had expected a surplus of about $500 million -- said the trade picture could remain bleak indefinitely.
The art of mortgage renegotiation
ROB CARRICK Globe and Mail Report on Business
Falling mortgage rates have revealed yet another way the banks are charging their clients more in these financially stressful times.
Rates on mortgages have fallen a lot in the past several months, prompting many people to ask about renegotiating in order to cut costs. “The bulk of my business today is people breaking their mortgages,” said Jim Tourloukis, a mortgage broker with Advent Mortgage Services in Markham, Ont.
The problem in breaking a mortgage is the penalty that lenders charge. Banks typically have two ways to calculate the penalty and recently they've switched to the more expensive one.
A little context may help you gauge how annoyed you should be about this. With a recession and global financial crisis hurting their revenues, the banks have been pushing up interest rates on lines of credit, charging more in service fees and adjusting credit card rules to extract more money from clients. Mortgage penalties are somewhat different in that they're mainly influenced by what's happening with interest rates.
It's boilerplate in mortgage contracts for penalties associated with breaking a loan to be set at the greater of three months' interest or the difference between the interest the bank could make on your mortgage as originally arranged versus lending money out at current rates.
Mr. Tourloukis explained that three months' interest was the typical penalty until rates began to fall hard in the past couple of months. Now, the so-called interest rate differential, or IRD, is the larger penalty.
“The spread between the client's rate and what banks can lend money for now has grown dramatically,” he said.
If you have any thoughts of breaking your mortgage, get on it today. If mortgage rates fall further, and they could ease a little bit more, then interest rate differentials will grow in size and cost you more.
Mortgage brokers say breaking your mortgage is worth some thought if your current rate is in the low 5-per-cent range or more. Mr. Tourloukis said he's been renegotiating five-year, fixed-rate mortgages at 3.99 per cent for clients who several months ago signed up for similar loans at 5.79 per cent. Other mortgage brokers are showing five-year rates in the low 4-per-cent range.
The first step in breaking a mortgage: Ask your lender what your penalty would be. There's no standardized calculation of penalties, so your number will depend on your lender's own policies and personal circumstances like the amount you've borrowed and the number of years left on your mortgage.
In some cases, breaking your mortgage just won't make sense because of the steep IRD amount.
“If you have a lot of time left on your term, it could be deadly,” said Vince Gaetano, vice-president at Monster Mortgage in Toronto.
Practices vary widely among banks, but one method for calculating the IRD is to compare a client's original rate against the posted rate for the term that corresponds with the remaining time left on the mortgage. Example: You're two years into a five-year mortgage, so your IRD would be calculated using the current posted three-year rate.
Once you know your penalty, ask your lender to show you how much interest you'd save by renegotiating with the best possible current rate. If the penalty overwhelms the potential savings, then you have a couple of options beyond giving up.
One is to try and negotiate the penalty lower, or have it eliminated altogether. Mr. Tourloukis said lenders have the discretion to help clients out this way.
Another is to chop the amount of money you owe on your mortgage, thereby reducing the penalty for breaking the loan. The way to do this is to take advantage of the prepayment privileges built into most mortgages.
For example, you might be allowed to prepay as much as 20 per cent of your outstanding balance in a year without incurring any charges. Make this lump-sum payment and then get a quote on the penalty to break your newly shrunken mortgage.
There are a couple of strategies to look at if you'd benefit from breaking your mortgage but can't afford the penalty charge.
One is to take the cost and add it to your mortgage balance. In some cases you'll still end up paying less interest than if you stayed with your current mortgage.
Another possibility is a blend and extend, where you jump into a new mortgage that blends your existing rate with the lower current rate and extends your term by a few years. There's no penalty charged in a blend and extend, but you won't save as much as you would if you paid the penalty and got the best possible current interest rate.
“If you want the better rate, you have to come up with the cash,” Mr. Gaetano said.
Wednesday, February 11, 2009
Financial Update for Feb. 11, 2009
"We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada," he said.
"We don't do spin." Mark Carney
· TSX -229.39(Reuters) Snapping a 5 session winning streak, the TSX and the Canadian dollar tumbled on disappointment with U.S. Treasury Secretary Timothy Geithner's plan to help the financial sector.
· DOW -381.99 The new bank rescue plan in the US landed with a thud on Wall Street. Worried that the revamped financial bailout was far too short on details, especially on how to clean up the books of the banks, investors sent the Dow Jones industrials tumbling
· Dollar -1.97c to 80.24USD
· Oil -$2.01 to $37.55US per barrel.
· Gold +21.40 to $914.20 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Julian BeltrameThe Canadian Press OTTAWA
Canada's economy can bounce back next year, but only if the United States and other world governments take "exceptional'' measures to end the crisis in financial markets, says Bank of Canada governor Mark Carney.
The hopeful and sobering assessment comes a month after the central banker put his credibility on the line with what other economists called an overly optimistic forecast pointing to a strong rebound next year after a tough 2009.
''Decisions taken in the coming weeks in the United States and in other major economies to isolate toxic assets in order to create a core of 'good' banks will be critical,'' Carney said in his first appearance before the House of Commons finance committee since the recession hit Canada in the fall.
'If these national and multilateral measures are not timely, bold, and well-executed, Canada's economic recovery will be both attenuated and delayed.''
Shortly after Carney spoke, the U.S. Senate approved President Barack Obama's giant economic stimulus measure, part of a string of powerful government steps that could marshal close to $3 trillion US in taxpayer and private money to revive the collapsing U.S. economy.
The 61-37 vote by the Senate was a key victory for Obama but sets up tough talks with the House of Representatives, which passed a slightly different version than the $838 billion bill approved yesterday.
In another development yesterday, a senior Canadian Finance Department official called the U.S. Senate approval and the pending passage of a bailout package helpful in helping stabilize the financial system and restarting the flow of credit.
The U.S. plan will be a topic at the weekend meeting in Rome of G7 finance ministers and central bank governors where Finance Minister Jim Flaherty is expected to be the lead speaker on a discussion on financial markets.
In his Commons committee appearance, Carney pointed to the U.S. bailout bill as an example of the extraordinary policy initiatives he believes can rescue the global economy. In Canada, MPs approved in principle last week the federal government's budget containing a $40-billion stimulus -- initiatives Carney believes will fully kick in in 2010.
Under skeptical questioning from MPs, the central banker stuck to his prediction of a 3.8 per cent growth in 2010 and dismissed criticism that his forecast was overly rosy.
''We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada,'' he said.
"We don't do spin.''
Liberal finance critic John McCallum was encouraged by Carney's optimism, but said he is not convinced the Harper government is committed to rolling out the $40-billion stimulus contained in the budget as quickly and effectively as possible.
Although Canada is doing slightly better than the U.S., McCallum noted that 129,000 jobs were lost in January alone, while personal bankruptcies soared by 51 per cent nationally in December from a year ago -- indications the slump is broadening.
The TD Bank has estimated job losses could hit 325,000 by year's end, pushing the unemployment rate to 8.8 per cent.
In another sign of the bleak times, General Motors Corp. became the latest of a growing list of companies announcing massive layoffs. It said it is cutting 10,000 salaried employees worldwide, including an unspecified number in Canada, where the company has 2,000 white collar workers.
Economists expect the Canadian economy to shrink by more than one per cent this year as the troubled manufacturing sector in Ontario and Quebec continues to shed employment and resources industries in Western Canada cut jobs to cope with lower prices for oil, grain, metals and minerals.
"We don't do spin." Mark Carney
· TSX -229.39(Reuters) Snapping a 5 session winning streak, the TSX and the Canadian dollar tumbled on disappointment with U.S. Treasury Secretary Timothy Geithner's plan to help the financial sector.
· DOW -381.99 The new bank rescue plan in the US landed with a thud on Wall Street. Worried that the revamped financial bailout was far too short on details, especially on how to clean up the books of the banks, investors sent the Dow Jones industrials tumbling
· Dollar -1.97c to 80.24USD
· Oil -$2.01 to $37.55US per barrel.
· Gold +21.40 to $914.20 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Julian BeltrameThe Canadian Press OTTAWA
Canada's economy can bounce back next year, but only if the United States and other world governments take "exceptional'' measures to end the crisis in financial markets, says Bank of Canada governor Mark Carney.
The hopeful and sobering assessment comes a month after the central banker put his credibility on the line with what other economists called an overly optimistic forecast pointing to a strong rebound next year after a tough 2009.
''Decisions taken in the coming weeks in the United States and in other major economies to isolate toxic assets in order to create a core of 'good' banks will be critical,'' Carney said in his first appearance before the House of Commons finance committee since the recession hit Canada in the fall.
'If these national and multilateral measures are not timely, bold, and well-executed, Canada's economic recovery will be both attenuated and delayed.''
Shortly after Carney spoke, the U.S. Senate approved President Barack Obama's giant economic stimulus measure, part of a string of powerful government steps that could marshal close to $3 trillion US in taxpayer and private money to revive the collapsing U.S. economy.
The 61-37 vote by the Senate was a key victory for Obama but sets up tough talks with the House of Representatives, which passed a slightly different version than the $838 billion bill approved yesterday.
In another development yesterday, a senior Canadian Finance Department official called the U.S. Senate approval and the pending passage of a bailout package helpful in helping stabilize the financial system and restarting the flow of credit.
The U.S. plan will be a topic at the weekend meeting in Rome of G7 finance ministers and central bank governors where Finance Minister Jim Flaherty is expected to be the lead speaker on a discussion on financial markets.
In his Commons committee appearance, Carney pointed to the U.S. bailout bill as an example of the extraordinary policy initiatives he believes can rescue the global economy. In Canada, MPs approved in principle last week the federal government's budget containing a $40-billion stimulus -- initiatives Carney believes will fully kick in in 2010.
Under skeptical questioning from MPs, the central banker stuck to his prediction of a 3.8 per cent growth in 2010 and dismissed criticism that his forecast was overly rosy.
''We don't do optimism; we don't do pessimism; we do realism at the Bank of Canada,'' he said.
"We don't do spin.''
Liberal finance critic John McCallum was encouraged by Carney's optimism, but said he is not convinced the Harper government is committed to rolling out the $40-billion stimulus contained in the budget as quickly and effectively as possible.
Although Canada is doing slightly better than the U.S., McCallum noted that 129,000 jobs were lost in January alone, while personal bankruptcies soared by 51 per cent nationally in December from a year ago -- indications the slump is broadening.
The TD Bank has estimated job losses could hit 325,000 by year's end, pushing the unemployment rate to 8.8 per cent.
In another sign of the bleak times, General Motors Corp. became the latest of a growing list of companies announcing massive layoffs. It said it is cutting 10,000 salaried employees worldwide, including an unspecified number in Canada, where the company has 2,000 white collar workers.
Economists expect the Canadian economy to shrink by more than one per cent this year as the troubled manufacturing sector in Ontario and Quebec continues to shed employment and resources industries in Western Canada cut jobs to cope with lower prices for oil, grain, metals and minerals.
Tuesday, February 10, 2009
Financial Update for Feb. 10, 2009
· TSX +39.26 to 9,047 (Reuters)supported by financials a day before U.S. Treasury Secretary is to unveil an overhaul of the US$700-billion aid plan for the financial sector
· DOW-9.72
· Dollar +.69c to 82.21USD as hopes that U.S. bank bailout and stimulus plans will help revive the global economy lured some traders to riskier assets like the domestic currency.
· Oil -$.61 to $39.56US per barrel. Oil prices fell as another round of poor company earnings and job cuts tempered an OPEC announcement that dozens of production projects were being tabled
· Gold -21.50 to 892.80 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
By David Friend, The Canadian Press -
Canadian consumers and businesses are going bust at an alarming rate as the sputtering domestic economy continues to show signs of further trouble ahead.
Bankruptcy filings soared nearly 46.7 per cent in December, the Office of the Superintendent of Bankruptcy said Monday.
The report by the federal monitoring agency found that 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December 2007.
Home-market 'correction is in full swing': construction, sales, prices down
By Brenda Bouw, The Canadian Press
There are more signs Canada's housing market is facing a significant slowdown after a double-digit percentage drop in home construction starts last month and a forecast that sales and prices will slide this year.
As the recession digs in and the unemployment rate rises, economists say nervous consumers are standing still when it comes to buying and selling real estate.
The results are increasing numbers of dwellings on the market, dropping prices and a slowdown in construction.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic commented Monday.
Canada Mortgage and Housing Corp. reported housing starts fell to a seasonally adjusted annual rate of 153,500 units in January, down 10.9 per cent from December in the steepest monthly drop since March 1995.
It was the fifth straight decline and left home construction at its slackest pace since 2001, well below market expectations of 169,000.
Also Monday, the Canadian Real Estate Association predicted house prices nationally will fall eight per cent this year as the number of Multiple Listing Service sales tumbles 16.9 per cent to 360,900 units.
Three months ago, the association was forecasting only a 2.1 per cent price slippage for 2009 on a three per cent decline in the number of sales.
Its latest forecast would represent the smallest national MLS sales volume since 2000, following a 17.1 per cent drop in 2008.
Gregory Klump, chief economist for the association, said that although there were some incentives for home buyers in the recent federal budget, "they won't take hold until there is an improvement in buyer psychology."
The Jan. 27 budget included a plan to expand the insured mortgage purchase program by $50 billion to $125 billion, which is meant to encourage banks to increase mortgage lending.
Ottawa also increased the RRSP withdrawal limit for qualified home buyers to $25,000 from $20,000, and introduced up to $750 in tax relief for closing costs for first-time buyers.
The real estate association said sales are expected to fall in every province this year, led by declines of about 19 per cent in British Columbia, Alberta and Ontario.
B.C and Alberta, which have seen the biggest price jumps in recent years, are expected to see home prices fall the most, by 10.6 per cent and 8.9 per cent respectively.
Meantime, the average home price in Newfoundland and Labrador is forecast to rise 4.8 per cent - the only province forecast to see an increase.
CIBC economist Benjamin Tal said he is forecasting a sales drop of about 15 per cent and price decline of about 10 per cent nationwide this year.
Tal said the Canadian housing market is in a "correction, not a free fall. However, "the recovery will not be very quick."
Scotiabank economist Adrienne Warren said the home market is in "retrenchment mode."
"It's no surprise that home builders are pulling back, facing slowing demand and increasing amounts of unsold inventory," Warren said.
"What you are also seeing now is that the condo market has finally cooled off."
Still, Warren said Canada has nowhere near the housing crisis as the United States, where risky lending has made foreclosure sales common.
CMHC said in its report that overall housing starts declined across the country, with a lot of the steam coming off the hot market that had prevailed in most of Western Canada.
"Reduced sales and increased listings in the existing-home market have led to reduced spillover demand in the new-home market," stated Bob Dugan, the Crown corporation's chief economist.
On a seasonally adjusted basis, January's starts were down from December by 30.3 per cent on the Prairies, 29.1 per cent in British Columbia, 14.6 per cent in Ontario, 8.6 per cent in Atlantic Canada and 1.4 per cent in Quebec.
"Western Canada in particular continues to see activity fall off a cliff, with starts in B.C. at the lowest level since 2002, and in Alberta the weakest since 1996," BMO's Kavcic wrote in a note. "Both provinces are seeing activity at half year-ago levels."
And last month's steep national drop in single-family-unit starts "adds further downside risk to economic growth forecasts," commented TD Bank economist Pascal Gauthier.
Gauthier said single-unit construction is generally less volatile than multiple-unit starts, and the sharp downturn "bodes poorly for the private residential investment component of real GDP growth."
The TD commentary added that improved home affordability will likely support starts this year at the pre-boom level of about 150,000, but "if starts continue on this downward momentum without signs of stabilization ... even this prudent forecast could fall by the wayside
· DOW-9.72
· Dollar +.69c to 82.21USD as hopes that U.S. bank bailout and stimulus plans will help revive the global economy lured some traders to riskier assets like the domestic currency.
· Oil -$.61 to $39.56US per barrel. Oil prices fell as another round of poor company earnings and job cuts tempered an OPEC announcement that dozens of production projects were being tabled
· Gold -21.50 to 892.80 USD per ounce
· Canadian 5 yr bond yields +.4bps to 1.97
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
By David Friend, The Canadian Press -
Canadian consumers and businesses are going bust at an alarming rate as the sputtering domestic economy continues to show signs of further trouble ahead.
Bankruptcy filings soared nearly 46.7 per cent in December, the Office of the Superintendent of Bankruptcy said Monday.
The report by the federal monitoring agency found that 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December 2007.
Home-market 'correction is in full swing': construction, sales, prices down
By Brenda Bouw, The Canadian Press
There are more signs Canada's housing market is facing a significant slowdown after a double-digit percentage drop in home construction starts last month and a forecast that sales and prices will slide this year.
As the recession digs in and the unemployment rate rises, economists say nervous consumers are standing still when it comes to buying and selling real estate.
The results are increasing numbers of dwellings on the market, dropping prices and a slowdown in construction.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic commented Monday.
Canada Mortgage and Housing Corp. reported housing starts fell to a seasonally adjusted annual rate of 153,500 units in January, down 10.9 per cent from December in the steepest monthly drop since March 1995.
It was the fifth straight decline and left home construction at its slackest pace since 2001, well below market expectations of 169,000.
Also Monday, the Canadian Real Estate Association predicted house prices nationally will fall eight per cent this year as the number of Multiple Listing Service sales tumbles 16.9 per cent to 360,900 units.
Three months ago, the association was forecasting only a 2.1 per cent price slippage for 2009 on a three per cent decline in the number of sales.
Its latest forecast would represent the smallest national MLS sales volume since 2000, following a 17.1 per cent drop in 2008.
Gregory Klump, chief economist for the association, said that although there were some incentives for home buyers in the recent federal budget, "they won't take hold until there is an improvement in buyer psychology."
The Jan. 27 budget included a plan to expand the insured mortgage purchase program by $50 billion to $125 billion, which is meant to encourage banks to increase mortgage lending.
Ottawa also increased the RRSP withdrawal limit for qualified home buyers to $25,000 from $20,000, and introduced up to $750 in tax relief for closing costs for first-time buyers.
The real estate association said sales are expected to fall in every province this year, led by declines of about 19 per cent in British Columbia, Alberta and Ontario.
B.C and Alberta, which have seen the biggest price jumps in recent years, are expected to see home prices fall the most, by 10.6 per cent and 8.9 per cent respectively.
Meantime, the average home price in Newfoundland and Labrador is forecast to rise 4.8 per cent - the only province forecast to see an increase.
CIBC economist Benjamin Tal said he is forecasting a sales drop of about 15 per cent and price decline of about 10 per cent nationwide this year.
Tal said the Canadian housing market is in a "correction, not a free fall. However, "the recovery will not be very quick."
Scotiabank economist Adrienne Warren said the home market is in "retrenchment mode."
"It's no surprise that home builders are pulling back, facing slowing demand and increasing amounts of unsold inventory," Warren said.
"What you are also seeing now is that the condo market has finally cooled off."
Still, Warren said Canada has nowhere near the housing crisis as the United States, where risky lending has made foreclosure sales common.
CMHC said in its report that overall housing starts declined across the country, with a lot of the steam coming off the hot market that had prevailed in most of Western Canada.
"Reduced sales and increased listings in the existing-home market have led to reduced spillover demand in the new-home market," stated Bob Dugan, the Crown corporation's chief economist.
On a seasonally adjusted basis, January's starts were down from December by 30.3 per cent on the Prairies, 29.1 per cent in British Columbia, 14.6 per cent in Ontario, 8.6 per cent in Atlantic Canada and 1.4 per cent in Quebec.
"Western Canada in particular continues to see activity fall off a cliff, with starts in B.C. at the lowest level since 2002, and in Alberta the weakest since 1996," BMO's Kavcic wrote in a note. "Both provinces are seeing activity at half year-ago levels."
And last month's steep national drop in single-family-unit starts "adds further downside risk to economic growth forecasts," commented TD Bank economist Pascal Gauthier.
Gauthier said single-unit construction is generally less volatile than multiple-unit starts, and the sharp downturn "bodes poorly for the private residential investment component of real GDP growth."
The TD commentary added that improved home affordability will likely support starts this year at the pre-boom level of about 150,000, but "if starts continue on this downward momentum without signs of stabilization ... even this prudent forecast could fall by the wayside
Monday, February 9, 2009
Financial Update for Feb. 9, 2009
Stocks perk up as investors look past dismal jobs data toward stimulus –TSXs first close above 9000 since Jan 9
· TSX +147.04Dismal employment news couldn't stop North American stock markets from registering solid gains for a 4th day as investors look ahead to the U.S. economic stimulus program and an announcement of aid for the financial sector.
· DOW +217.52 The main driver is the Obama administration fiscal stimulus package and the announcement about the financial system and positive data we're seeing from China," said Jennifer Dowty, portfolio manager at MFC Global Investment Management
· Dollar +.29c to 81.52USD
· Oil -$1.61 to $39.56US per barrel. Oil prices dropped below US$40 as the government reported U.S. employers slashed more than a half million jobs last month, the most in 35 years.
· Gold +$.30 to913.90 USD per ounce
· Canadian 5 yr bond yields - .4bps to 1.93
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Monday Chuckle:
In the US, foreclosures are high, unemployment is high, Michael Phelps is high…..
· TSX +147.04Dismal employment news couldn't stop North American stock markets from registering solid gains for a 4th day as investors look ahead to the U.S. economic stimulus program and an announcement of aid for the financial sector.
· DOW +217.52 The main driver is the Obama administration fiscal stimulus package and the announcement about the financial system and positive data we're seeing from China," said Jennifer Dowty, portfolio manager at MFC Global Investment Management
· Dollar +.29c to 81.52USD
· Oil -$1.61 to $39.56US per barrel. Oil prices dropped below US$40 as the government reported U.S. employers slashed more than a half million jobs last month, the most in 35 years.
· Gold +$.30 to913.90 USD per ounce
· Canadian 5 yr bond yields - .4bps to 1.93
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Monday Chuckle:
In the US, foreclosures are high, unemployment is high, Michael Phelps is high…..
Friday, February 6, 2009
Financial Update for Feb. 6,2009
Canada lost 129,000 jobs in January, the worst month of employment loss on record. The decline was far greater than anticipated and bumped the unemployment rate to 7.2
· TSX +167.89higher for a third straight session in a broad rally led by strength in the key energy and materials groups, which rose on higher commodity prices.
· DOW +106.41
· Dollar +.06c to 81.23USD
· Oil +$.85 to $41.17US per barrel.
· Gold +$12.00 to913.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Canada posts record monthly job lossThe Canadian economy lost a startling 129,000 jobs in January -– almost all full-time positions, Statistics Canada reported Friday, bringing the cumulative total for the last three months to 234,000 and pushing the unemployment rate to 7.2% from 6.6%.
The consensus among Bay Street economists was that roughly 40,000 jobs disappeared in the first month of 2009. The economy lost 71,000 jobs and 34,000 jobs, respectively, in November and December.
Statscan said the drop in employment was most pronounced in manufacturing, where the net loss totalled 101,000. There were declines in a number of other industries as well. The only industry with notable gains was health care and social assistance, where employment increased by 31,000.
Canada's three largest provinces accounted for the entire employment decrease in January. While just over half of employment losses were in Ontario, 71,000, there were also large declines in both British Columbia, 35,000, and Quebec, 26,000. Employment was little changed in all other provinces.
A report this week from the economics team at Toronto-Dominion Bank indicated that the country stands to lose 325,000 jobs in 2009 as major industries slash production in response to weaker demand, pushing the unemployment rate to 8.8%. Meanwhile, Bank of Nova Scotia forecasts job losses of 220,00 this year with the unemployment rate settling at 8%. The recent federal budget said the stimulus measures would create or maintain 190,000 jobs.
Info below from:
Fraud hunting gets a boost in recession
John Shmuel, Financial Post "There's a direct correlation in the downturn of the economy and the increase of fraudulent activity," he says. "There's a number of reasons for that, not the least of which are desperate times call for desperate measures."
Mike Savage, head of Ernst & Young's fraud investigation and dispute services group, says it always comes down to opportunity. "Fraud is a human behaviour. At any point in time, an individual can feel the pressure to commit fraud -- they see the opportunity, and they can somehow rationalize it in their head that it's OK."
In 2007, according to Mr. Filliter, Canadian corporations lost an estimated $30-billion to fraud. That staggering sum has most likely increased for 2008, he says, and may explode in 2009 unless corporations take steps to protect themselves.
· TSX +167.89higher for a third straight session in a broad rally led by strength in the key energy and materials groups, which rose on higher commodity prices.
· DOW +106.41
· Dollar +.06c to 81.23USD
· Oil +$.85 to $41.17US per barrel.
· Gold +$12.00 to913.60 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Canada posts record monthly job lossThe Canadian economy lost a startling 129,000 jobs in January -– almost all full-time positions, Statistics Canada reported Friday, bringing the cumulative total for the last three months to 234,000 and pushing the unemployment rate to 7.2% from 6.6%.
The consensus among Bay Street economists was that roughly 40,000 jobs disappeared in the first month of 2009. The economy lost 71,000 jobs and 34,000 jobs, respectively, in November and December.
Statscan said the drop in employment was most pronounced in manufacturing, where the net loss totalled 101,000. There were declines in a number of other industries as well. The only industry with notable gains was health care and social assistance, where employment increased by 31,000.
Canada's three largest provinces accounted for the entire employment decrease in January. While just over half of employment losses were in Ontario, 71,000, there were also large declines in both British Columbia, 35,000, and Quebec, 26,000. Employment was little changed in all other provinces.
A report this week from the economics team at Toronto-Dominion Bank indicated that the country stands to lose 325,000 jobs in 2009 as major industries slash production in response to weaker demand, pushing the unemployment rate to 8.8%. Meanwhile, Bank of Nova Scotia forecasts job losses of 220,00 this year with the unemployment rate settling at 8%. The recent federal budget said the stimulus measures would create or maintain 190,000 jobs.
Info below from:
Fraud hunting gets a boost in recession
John Shmuel, Financial Post "There's a direct correlation in the downturn of the economy and the increase of fraudulent activity," he says. "There's a number of reasons for that, not the least of which are desperate times call for desperate measures."
Mike Savage, head of Ernst & Young's fraud investigation and dispute services group, says it always comes down to opportunity. "Fraud is a human behaviour. At any point in time, an individual can feel the pressure to commit fraud -- they see the opportunity, and they can somehow rationalize it in their head that it's OK."
In 2007, according to Mr. Filliter, Canadian corporations lost an estimated $30-billion to fraud. That staggering sum has most likely increased for 2008, he says, and may explode in 2009 unless corporations take steps to protect themselves.
Thursday, February 5, 2009
Financial Update for Feb. 5,2009
· TSX +64.46Commodity stocks led the gains while falling financial stocks held things back
· DOW-121.70 U.S. trends contrasted with strong gains overseas
· Dollar -.12c to 81.17USD Concerns about the U.S. government's plan to stabilize the bank sector prompted a move back into the greenback, considered a safe-haven play, and undid the Canadian currency's early move to its highest level since Friday.
· Oil -$.46 to $40.32US per barrel.
· Gold +$9.70 to902.70 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Has Obama shut down the party on Wall Street?
Janet Whitman, Financial Post
After years of increasingly bloated pay packages, top executives could soon see their lavish lifestyles crimped as Barack Obama, the U.S. President, unveiled plans Wednesday to crack down on compensation.
Critics were quick to slam his suggestions, arguing enforced pay cuts would lead to an exodus of capable executives and make it tough for companies to recruit and retain top talent.
"No one goes into Wall Street to save the world," Meredith Whitney, a bank industry analyst for Oppenheimer & Co., told Bloomberg Television. "Compensation is the motivating factor."
Top executives at companies receiving "exceptional" bailout funds from the U.S. government will have salaries capped at US$500,000, under the new rules outlined by Mr. Obama and Timothy Geithner, the Treasury Secretary.
Companies would also face more scrutiny of travel on corporate jets, office renovations and holiday parties. Mr. Obama also said he wanted to take the "air out of golden parachutes" for departing executives.
He said the actions were necessary because of "shameful" behaviour by Wall Street executives.
"We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses."
Mr. Obama said the cap strikes the right "balance" between fair compensation and proper stewardship of taxpayer funds.
"This is America. We don't disparage wealth. We don't begrudge anybody for achieving success.
And we believe that success should be rewarded. But what gets people upset - and rightfully so - are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers.
"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it's a bad strategy - and I will not tolerate it as President."
The crackdown comes as Americans have grown increasingly irate over banks paying huge bonuses, while posting record losses and getting hundreds of billions in aid from taxpayers.
According to the New York state comptroller's office, big banks and securities firms in the Big Apple paid more than US$18-billion in bonuses last year.
At the same time, the city's six largest financial firms lost more than US$42-billion and received US$90-billion in government bailout money.
Many Wall Street analysts and industry observers do not believe a pay cap is the solution, and Wall Street could end up losing many of its best and brightest just when it needs them most.
"If President Obama succeeds in limiting CEO pay to $500,000, it will create two distinct markets for CEO talent," said Peter Cohan, an investment consultant and business professor at Babson College in Wellesley, Mass.
"One relatively small one which, for reasons of altruism, is willing to take a pay cut to run a government-owned entity. And the second, much larger one, which continues to rake in millions without suffering from all the public opprobrium that has befallen various banks and insurance executives over the last few months."
For now, the US$500,000 cap will not be as far-reaching as some corporate chieftains might have feared.
Only companies that have received "exceptional assistance" are subject to the rule, which includes the provision any additional compensation be in restricted stock that will not vest until taxpayers have been repaid.
So far, that restriction would seem only to apply to companies in particularly bad shape, such as insurer American International Group, financial services giants Bank of America and Citigroup, and automakers General Motors and Chrysler, which each have received tens of billions in bailout money.
Companies that already have received taxpayer aid will only have to abide by the new pay restriction if they return for more funds.
But CEOs at other companies are bound to feel the pinch in other ways as the Obama administration's increased scrutiny leads to a reduction in perks, such as trips on the company jet to lavish vacations at luxury resorts.
Goldman Sachs, considered among the healthiest banks on Wall Street, already is looking at how to avoid such restrictions.
The Wall Street bank is eager to repay the US$10-billion in bailout it received in October so it does not have to follow limits it agreed to when it accepted the funds.
"There are pretty minor, at this point, executive compensation restrictions and we'd like to get out from under those," David Viniar, Goldman's chief financial officer, said at a financial services conference in Florida.
One Wall Street analyst accused Mr. Obama of playing to the crowd.
"This is pure political grandstanding. If the limit has bite, it will be counterproductive and the unintended consequences will hurt the U.S. as skilled and bright senior managers make choices," said David Kotok, chief investment officer at Cumberland. "If the limits have loopholes, they are a sham. Industrial policies fail. So will this one."
· DOW-121.70 U.S. trends contrasted with strong gains overseas
· Dollar -.12c to 81.17USD Concerns about the U.S. government's plan to stabilize the bank sector prompted a move back into the greenback, considered a safe-haven play, and undid the Canadian currency's early move to its highest level since Friday.
· Oil -$.46 to $40.32US per barrel.
· Gold +$9.70 to902.70 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Has Obama shut down the party on Wall Street?
Janet Whitman, Financial Post
After years of increasingly bloated pay packages, top executives could soon see their lavish lifestyles crimped as Barack Obama, the U.S. President, unveiled plans Wednesday to crack down on compensation.
Critics were quick to slam his suggestions, arguing enforced pay cuts would lead to an exodus of capable executives and make it tough for companies to recruit and retain top talent.
"No one goes into Wall Street to save the world," Meredith Whitney, a bank industry analyst for Oppenheimer & Co., told Bloomberg Television. "Compensation is the motivating factor."
Top executives at companies receiving "exceptional" bailout funds from the U.S. government will have salaries capped at US$500,000, under the new rules outlined by Mr. Obama and Timothy Geithner, the Treasury Secretary.
Companies would also face more scrutiny of travel on corporate jets, office renovations and holiday parties. Mr. Obama also said he wanted to take the "air out of golden parachutes" for departing executives.
He said the actions were necessary because of "shameful" behaviour by Wall Street executives.
"We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses."
Mr. Obama said the cap strikes the right "balance" between fair compensation and proper stewardship of taxpayer funds.
"This is America. We don't disparage wealth. We don't begrudge anybody for achieving success.
And we believe that success should be rewarded. But what gets people upset - and rightfully so - are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers.
"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it's a bad strategy - and I will not tolerate it as President."
The crackdown comes as Americans have grown increasingly irate over banks paying huge bonuses, while posting record losses and getting hundreds of billions in aid from taxpayers.
According to the New York state comptroller's office, big banks and securities firms in the Big Apple paid more than US$18-billion in bonuses last year.
At the same time, the city's six largest financial firms lost more than US$42-billion and received US$90-billion in government bailout money.
Many Wall Street analysts and industry observers do not believe a pay cap is the solution, and Wall Street could end up losing many of its best and brightest just when it needs them most.
"If President Obama succeeds in limiting CEO pay to $500,000, it will create two distinct markets for CEO talent," said Peter Cohan, an investment consultant and business professor at Babson College in Wellesley, Mass.
"One relatively small one which, for reasons of altruism, is willing to take a pay cut to run a government-owned entity. And the second, much larger one, which continues to rake in millions without suffering from all the public opprobrium that has befallen various banks and insurance executives over the last few months."
For now, the US$500,000 cap will not be as far-reaching as some corporate chieftains might have feared.
Only companies that have received "exceptional assistance" are subject to the rule, which includes the provision any additional compensation be in restricted stock that will not vest until taxpayers have been repaid.
So far, that restriction would seem only to apply to companies in particularly bad shape, such as insurer American International Group, financial services giants Bank of America and Citigroup, and automakers General Motors and Chrysler, which each have received tens of billions in bailout money.
Companies that already have received taxpayer aid will only have to abide by the new pay restriction if they return for more funds.
But CEOs at other companies are bound to feel the pinch in other ways as the Obama administration's increased scrutiny leads to a reduction in perks, such as trips on the company jet to lavish vacations at luxury resorts.
Goldman Sachs, considered among the healthiest banks on Wall Street, already is looking at how to avoid such restrictions.
The Wall Street bank is eager to repay the US$10-billion in bailout it received in October so it does not have to follow limits it agreed to when it accepted the funds.
"There are pretty minor, at this point, executive compensation restrictions and we'd like to get out from under those," David Viniar, Goldman's chief financial officer, said at a financial services conference in Florida.
One Wall Street analyst accused Mr. Obama of playing to the crowd.
"This is pure political grandstanding. If the limit has bite, it will be counterproductive and the unintended consequences will hurt the U.S. as skilled and bright senior managers make choices," said David Kotok, chief investment officer at Cumberland. "If the limits have loopholes, they are a sham. Industrial policies fail. So will this one."
Wednesday, February 4, 2009
Financial Update for Feb. 4, 2009
Harper government survives budget vote
By Joan Bryden, The Canadian Press OTTAWA –
Stephen Harper's minority government has extended its lease on life, winning approval in principle Tuesday for a federal budget that will plunge the country into deep deficit. The big-spending budget aimed at stimulating the flagging economy passed easily by a vote of 211-91.
The budget includes plans to spend $40 billion over two years on measures to kickstart the economy, including infrastructure, social housing, home retrofits, parks, tourism, railways and Arctic research. It also includes $2 billion in income tax cuts.
In the process, the budget projects the government will rack up towering deficits of $86 billion over five years - the first time in 13 years that Canada has plunged into red ink
· TSX +3.80 as a rise in financials on hopes generated by surprise jump in U.S. home sales data offset commodity stock weakness.
· DOW +141.53 as some better than expected housing data helped take investors' minds off mixed earnings news and dismal auto sales figures.
· Dollar +.88c to 81.29USD
· Oil +$.40 to $40.78US per barrel.
· Gold -14.70 to 892.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
National Post WASHINGTON -- U.S. President Barack Obama said Tuesday he wants Congress to make changes to the controversial "Buy American" provision in its nearly $900-billion economic stimulus legislation, warning it would be a "mistake" for the United States to put up new barriers when global trade is already suffering.
"I agree that we can't send a protectionist message," Mr. Obama said in a televised interview with Fox News. "I want to see what kind of language we can ... work on this issue," he added. "I think it would be a mistake, though, at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade."
Credit delinquencies rising, Deloitte warns
Jamie Sturgeon, Financial Post
Canadian credit-card users could face a wave of credit checks, limit reductions and even account closures as issuers fight against a rise of between 5% and 10% in the delinquency rate.
Consumer debt on credit-cards issued by Canadian banks has soared nearly 40% since 2004 on the back of loosened standards, according to accounting giant and advisory firm Deloitte. Now, it's delinquencies that are rising. The average loss rate of between 3% and 4% has risen by between 50 and 100 basis points, according to the firm's new report, Uncharted Waters for Credit Issuers, released Tuesday.
Deloitte puts the total value of outstanding consumer debt on credit cards at $80-billion, putting as much as $800-million at risk of write-offs in the next year if issuers "fail to take action immediately."
Some institutions have already moved to tighten standards, implement credit limit decreases on some accounts and have halted advertising of low-rate balance transfers.
However, "overall balances for most issuers are staying level or increasing," the report said. As a result, it suggests banks, credit unions and other financial institutions offering credit cards should increase credit checks on customers.
The report also calls for a "watch list" for accounts with unusually high cash-advance activities, as they "may indicate that cardholder is in financial difficulty."
"There is a high correlation between the percentage of the credit line being used and the likelihood of default."
Other measures include stopping automatic credit limit increases as well as speeding up the process of contacting customers who've failed to make a payment.
By Joan Bryden, The Canadian Press OTTAWA –
Stephen Harper's minority government has extended its lease on life, winning approval in principle Tuesday for a federal budget that will plunge the country into deep deficit. The big-spending budget aimed at stimulating the flagging economy passed easily by a vote of 211-91.
The budget includes plans to spend $40 billion over two years on measures to kickstart the economy, including infrastructure, social housing, home retrofits, parks, tourism, railways and Arctic research. It also includes $2 billion in income tax cuts.
In the process, the budget projects the government will rack up towering deficits of $86 billion over five years - the first time in 13 years that Canada has plunged into red ink
· TSX +3.80 as a rise in financials on hopes generated by surprise jump in U.S. home sales data offset commodity stock weakness.
· DOW +141.53 as some better than expected housing data helped take investors' minds off mixed earnings news and dismal auto sales figures.
· Dollar +.88c to 81.29USD
· Oil +$.40 to $40.78US per barrel.
· Gold -14.70 to 892.00 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
National Post WASHINGTON -- U.S. President Barack Obama said Tuesday he wants Congress to make changes to the controversial "Buy American" provision in its nearly $900-billion economic stimulus legislation, warning it would be a "mistake" for the United States to put up new barriers when global trade is already suffering.
"I agree that we can't send a protectionist message," Mr. Obama said in a televised interview with Fox News. "I want to see what kind of language we can ... work on this issue," he added. "I think it would be a mistake, though, at a time when worldwide trade is declining for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade."
Credit delinquencies rising, Deloitte warns
Jamie Sturgeon, Financial Post
Canadian credit-card users could face a wave of credit checks, limit reductions and even account closures as issuers fight against a rise of between 5% and 10% in the delinquency rate.
Consumer debt on credit-cards issued by Canadian banks has soared nearly 40% since 2004 on the back of loosened standards, according to accounting giant and advisory firm Deloitte. Now, it's delinquencies that are rising. The average loss rate of between 3% and 4% has risen by between 50 and 100 basis points, according to the firm's new report, Uncharted Waters for Credit Issuers, released Tuesday.
Deloitte puts the total value of outstanding consumer debt on credit cards at $80-billion, putting as much as $800-million at risk of write-offs in the next year if issuers "fail to take action immediately."
Some institutions have already moved to tighten standards, implement credit limit decreases on some accounts and have halted advertising of low-rate balance transfers.
However, "overall balances for most issuers are staying level or increasing," the report said. As a result, it suggests banks, credit unions and other financial institutions offering credit cards should increase credit checks on customers.
The report also calls for a "watch list" for accounts with unusually high cash-advance activities, as they "may indicate that cardholder is in financial difficulty."
"There is a high correlation between the percentage of the credit line being used and the likelihood of default."
Other measures include stopping automatic credit limit increases as well as speeding up the process of contacting customers who've failed to make a payment.
Tuesday, February 3, 2009
Financial Update for Feb. 3, 2009
· TSX -70.07 energy stocks fell along with oil prices and financials lost ground as investors fretted about the Obama administration's plans for a new bank to buy risky assets from other banks
· DOW-64.11markets evaporated after investors were served with more gloomy economic data
· Dollar -1.12c to 80.41USD for a third day as a decline in crude oil raised investor aversion to the currencies of countries dependent on demand for commodities for economic growth.
· Oil -$1.60 to $40.08US per barrel.
· Gold -20.60 to 906.70 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Pressure on as bank bosses give up millions
RBC’s Nixon first to cut compensation; BMO’s Downe follows suit
Eoin Callan, Financial Post
Business leaders will face a stiff challenge in restoring the credibility of the free market system in the wake of a financial and economic crisis of historic proportions, Gord Nixon said Monday as he handed back a $5-million bonus.
The chief executive of RBC said cognizance of the deteriorating economic conditions was a key factor in a "personal decision" to forgo more than half his compensation.
The move put pressure on Bay Street chieftans to follow suit and triggered a sudden reversal from Bill Downe, the head of BMO, who said Monday he was giving back a $4.1-million bonus he received last week.
The gestures follow heavy pressure on bank executives in other countries to shed luxury perks and waive bonuses, and came as U.S. President Barack Obama promised to curb the pay of Wall Street firms rescued by the government.
But Monday's twin decisions to hand back bonuses were the most high profile yet in Canada since the onset of the banking crisis and may reflect sensitivity to a public backlash brewing in this country.
Mr. Nixon said he was mindful of the fact declines in world stock markets had led to widespread "loss of wealth" and "the pressure that has put on pensioners and investors," as well as the threat of rising employment.
The head of RBC said at times like these "chief executives and leaders have to be [particularly] sensitive to issues and developments in the broader environment."
He said executives needed to be asking what they "should be doing to restore credibility and confidence in the system," alluding to co-operation between Bay Street and Ottawa to get credit flowing.
"CEO compensations at this point in the cycle should not be a big issue," he said.
It was unclear if Rick Waugh, chief executive of Bank of Nova Scotia, would retain the full $8.68-million pay package he was awarded Monday.
Mr. Waugh's compensation - excluding his pension - dropped 16% from the previous year after the bank missed three key financial targets. A spokesperson said he was out of the country and could not be reached.
CIBC said late Monday that chief executive Gerry McCaughey would receive pay with a one year delay for 2007 of $5.3-million after he waived a $1.4-million bonus, 40% less than the previous year.
Mr. Nixon's direct compensation from RBC will decline 65% from the $10.9-million he received for the previous year.
The executive also pledged to use the remaining $2.4-million he is receiving in cash incentives to buy shares in RBC, which have fallen 40% this year along with other bank shares.
Ian de Verteuil, a financial analyst at BMO, said the move would enhance the "credibility" of the bank's management.
"It is often difficult to understand the metrics that bank boards use to establish executive compensation, but it is clear in this situation that Royal's CEO intends to share in the ‘pain' experienced by the bank's stakeholders," said Mr. de Verteuil.
But Mr. Nixon stressed that his decision to waive $5-million in bonus did not mean the underlying compensation system used by RBC to reward bankers was "necessarily inappropriate or poorly structured."
Major shareholders and corporate governance advocates said Canada's banks appeared to have missed an opportunity to enact deeper reform of the way bankers are compensated.
Following reports on pay from three of the country's top five banks, Bay Street appeared to be behind the curve in holding back bonuses for bankers until the risks of trades they made were apparent, said Stephen Griggs, executive director, Canadian Coalition for Good Governance, which represents major institutional investors.
· DOW-64.11markets evaporated after investors were served with more gloomy economic data
· Dollar -1.12c to 80.41USD for a third day as a decline in crude oil raised investor aversion to the currencies of countries dependent on demand for commodities for economic growth.
· Oil -$1.60 to $40.08US per barrel.
· Gold -20.60 to 906.70 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Pressure on as bank bosses give up millions
RBC’s Nixon first to cut compensation; BMO’s Downe follows suit
Eoin Callan, Financial Post
Business leaders will face a stiff challenge in restoring the credibility of the free market system in the wake of a financial and economic crisis of historic proportions, Gord Nixon said Monday as he handed back a $5-million bonus.
The chief executive of RBC said cognizance of the deteriorating economic conditions was a key factor in a "personal decision" to forgo more than half his compensation.
The move put pressure on Bay Street chieftans to follow suit and triggered a sudden reversal from Bill Downe, the head of BMO, who said Monday he was giving back a $4.1-million bonus he received last week.
The gestures follow heavy pressure on bank executives in other countries to shed luxury perks and waive bonuses, and came as U.S. President Barack Obama promised to curb the pay of Wall Street firms rescued by the government.
But Monday's twin decisions to hand back bonuses were the most high profile yet in Canada since the onset of the banking crisis and may reflect sensitivity to a public backlash brewing in this country.
Mr. Nixon said he was mindful of the fact declines in world stock markets had led to widespread "loss of wealth" and "the pressure that has put on pensioners and investors," as well as the threat of rising employment.
The head of RBC said at times like these "chief executives and leaders have to be [particularly] sensitive to issues and developments in the broader environment."
He said executives needed to be asking what they "should be doing to restore credibility and confidence in the system," alluding to co-operation between Bay Street and Ottawa to get credit flowing.
"CEO compensations at this point in the cycle should not be a big issue," he said.
It was unclear if Rick Waugh, chief executive of Bank of Nova Scotia, would retain the full $8.68-million pay package he was awarded Monday.
Mr. Waugh's compensation - excluding his pension - dropped 16% from the previous year after the bank missed three key financial targets. A spokesperson said he was out of the country and could not be reached.
CIBC said late Monday that chief executive Gerry McCaughey would receive pay with a one year delay for 2007 of $5.3-million after he waived a $1.4-million bonus, 40% less than the previous year.
Mr. Nixon's direct compensation from RBC will decline 65% from the $10.9-million he received for the previous year.
The executive also pledged to use the remaining $2.4-million he is receiving in cash incentives to buy shares in RBC, which have fallen 40% this year along with other bank shares.
Ian de Verteuil, a financial analyst at BMO, said the move would enhance the "credibility" of the bank's management.
"It is often difficult to understand the metrics that bank boards use to establish executive compensation, but it is clear in this situation that Royal's CEO intends to share in the ‘pain' experienced by the bank's stakeholders," said Mr. de Verteuil.
But Mr. Nixon stressed that his decision to waive $5-million in bonus did not mean the underlying compensation system used by RBC to reward bankers was "necessarily inappropriate or poorly structured."
Major shareholders and corporate governance advocates said Canada's banks appeared to have missed an opportunity to enact deeper reform of the way bankers are compensated.
Following reports on pay from three of the country's top five banks, Bay Street appeared to be behind the curve in holding back bonuses for bankers until the risks of trades they made were apparent, said Stephen Griggs, executive director, Canadian Coalition for Good Governance, which represents major institutional investors.
Monday, February 2, 2009
Financial Update for Feb. 2, 2009
Corporate Canada will likely deliver a wave of dismal earnings reports in coming weeks, but market pros say that could open the door to a stock rally as investors have grown numb to bad news and are ready to pounce on any morsel of optimism. According to the Bank of Canada, the domestic economy will emerge from its recession later this year, and on a stronger footing than most other major economies.
· TSX -67.86 largely influenced by commodity prices,
· DOW-148.15
· Dollar -.22c to 81.53USD
· Oil +$.24 to $41.68USper barrel.
· Gold +22.20 to927.30 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Happy Anniversary to the Blackberry! Is it really only 10 years? Like it or not, it has changed our world.
Memories of BlackBerry still vivid 10 years later
Peter Lee, Record staff
Email the author
Software VP was shocked device named after a fruit
January 31, 2009
Matt Walcoff RECORD STAFF -KITCHENER
Ten years ago, developers at Research In Motion were working on an exciting project called PocketLink when they got the word from the marketing department that from then on, they were to refer to their creation by the name of a fruit.
"I can remember clearly at the end of '98 being shocked when they picked the name out," says Gary Mousseau, the Waterloo company's acting vice-president of software at the time.
"I was just floored. We didn't have the branding, marketing and sales experience of these guys.
We weren't appreciating their skill set."
Fortunately, the name BlackBerry stuck despite the techies' objections.
Ten years later, the Waterloo Region Record brought together some of the people involved in the creation of the BlackBerry to swap stories and talk about the genesis of the device that would change the world.
They certainly didn't feel like they were changing the world at first, says Mousseau, who was hired as RIM's 11th employee in 1991 and is now an intellectual property consultant. RIM, founded in 1984, had created an innovative device simply dubbed the 950.
It looked like a pager, but with a full keyboard, expanded monochrome screen and Intel 386 processor inside.
To the frustration of RIM's employees, the company's customers were not taking full advantage of the device's capabilities. They were using it with old servers and weak networks, mostly limiting its use to paging.
RIM was largely focused on paging in the late 90s, with email as an afterthought, says Dave Castell, who was on the marketing team for the original BlackBerry and is now retired.
"The BlackBerry project actually was more like hedging our bets or the contingency plan in case the first plan didn't work out," he said.
RIM, however, was an early adopter of email in the workplace, says Dale Brubacher-Cressman, one of RIM's first employees and program manager for handheld development in the late '90s.
So RIM had an inkling just how much of an advantage ready access to email might be.
"I think there was a realization that this could be a game-changing solution," says Brubacher-Cressman, now president of Vigor Clean Tech, an alternative-energy company in Kitchener.
"I don't think we ever imagined it would be anywhere near as popular as it became."
Mike Lazaridis, the company's founder and current co-chief executive officer, Mousseau and a few others had jury-rigged an email solution on their 950s by forwarding their work email inboxes to their mobile devices. It worked only one way; they couldn't reply to the messages.
But "it was exciting enough that one day Mike just called me into his office and said, 'Gary, we're going to solve this two-mailbox problem once and for all,' and we just started hashing it out," Mousseau says.
The two-mailbox problem meant that existing mobile devices could not work with users' work email, requiring a separate mailbox for mobile use. RIM's achievement was a solution that integrated the mobile device with the same mailbox used at the office.
RIM's employees were the test subjects for the BlackBerry email technology as the company worked on it in 1998.
They also became the first CrackBerry addicts.
"How we just did business just accelerated for me, at least in software," Mousseau says. "I got my answers so much faster; the roadblocks were just cleared quicker; I could just make decisions faster in '98."
The first devices -- machines that got BlackBerry email quickly became known as BlackBerrys -- were intended for text alone.
Conventional wisdom at RIM in the late '90s was that multi-use smartphones would never work, and the company was reluctant even to put a phone in the devices.
At the time, Jim Balsillie, RIM's other co-CEO, would compare what he called "everything devices" to the Chevrolet El Camino, the half-car, half-pickup truck that wasn't particularly good at being either, says Steve Carkner, former director of product development at the company.
Carkner now is chief executive officer of Panacis Medical in Ottawa.
Lazaridis is often called the creator of the BlackBerry. In fact, many people had a hand in the device's creation, from executives to overworked co-op students who developed software on RIM's then-modest budget.
But none of the RIM old-timers begrudged Lazaridis any of the credit.
"I'm not sure you could have replaced him with anyone else and still had BlackBerry," Brubacher-Cressman says.
"He obviously had a lot of really smart and really talented people working for him, but it was his job of pulling all that together."
mwalcoff@therecord.com
· TSX -67.86 largely influenced by commodity prices,
· DOW-148.15
· Dollar -.22c to 81.53USD
· Oil +$.24 to $41.68USper barrel.
· Gold +22.20 to927.30 USD per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Happy Anniversary to the Blackberry! Is it really only 10 years? Like it or not, it has changed our world.
Memories of BlackBerry still vivid 10 years later
Peter Lee, Record staff
Email the author
Software VP was shocked device named after a fruit
January 31, 2009
Matt Walcoff RECORD STAFF -KITCHENER
Ten years ago, developers at Research In Motion were working on an exciting project called PocketLink when they got the word from the marketing department that from then on, they were to refer to their creation by the name of a fruit.
"I can remember clearly at the end of '98 being shocked when they picked the name out," says Gary Mousseau, the Waterloo company's acting vice-president of software at the time.
"I was just floored. We didn't have the branding, marketing and sales experience of these guys.
We weren't appreciating their skill set."
Fortunately, the name BlackBerry stuck despite the techies' objections.
Ten years later, the Waterloo Region Record brought together some of the people involved in the creation of the BlackBerry to swap stories and talk about the genesis of the device that would change the world.
They certainly didn't feel like they were changing the world at first, says Mousseau, who was hired as RIM's 11th employee in 1991 and is now an intellectual property consultant. RIM, founded in 1984, had created an innovative device simply dubbed the 950.
It looked like a pager, but with a full keyboard, expanded monochrome screen and Intel 386 processor inside.
To the frustration of RIM's employees, the company's customers were not taking full advantage of the device's capabilities. They were using it with old servers and weak networks, mostly limiting its use to paging.
RIM was largely focused on paging in the late 90s, with email as an afterthought, says Dave Castell, who was on the marketing team for the original BlackBerry and is now retired.
"The BlackBerry project actually was more like hedging our bets or the contingency plan in case the first plan didn't work out," he said.
RIM, however, was an early adopter of email in the workplace, says Dale Brubacher-Cressman, one of RIM's first employees and program manager for handheld development in the late '90s.
So RIM had an inkling just how much of an advantage ready access to email might be.
"I think there was a realization that this could be a game-changing solution," says Brubacher-Cressman, now president of Vigor Clean Tech, an alternative-energy company in Kitchener.
"I don't think we ever imagined it would be anywhere near as popular as it became."
Mike Lazaridis, the company's founder and current co-chief executive officer, Mousseau and a few others had jury-rigged an email solution on their 950s by forwarding their work email inboxes to their mobile devices. It worked only one way; they couldn't reply to the messages.
But "it was exciting enough that one day Mike just called me into his office and said, 'Gary, we're going to solve this two-mailbox problem once and for all,' and we just started hashing it out," Mousseau says.
The two-mailbox problem meant that existing mobile devices could not work with users' work email, requiring a separate mailbox for mobile use. RIM's achievement was a solution that integrated the mobile device with the same mailbox used at the office.
RIM's employees were the test subjects for the BlackBerry email technology as the company worked on it in 1998.
They also became the first CrackBerry addicts.
"How we just did business just accelerated for me, at least in software," Mousseau says. "I got my answers so much faster; the roadblocks were just cleared quicker; I could just make decisions faster in '98."
The first devices -- machines that got BlackBerry email quickly became known as BlackBerrys -- were intended for text alone.
Conventional wisdom at RIM in the late '90s was that multi-use smartphones would never work, and the company was reluctant even to put a phone in the devices.
At the time, Jim Balsillie, RIM's other co-CEO, would compare what he called "everything devices" to the Chevrolet El Camino, the half-car, half-pickup truck that wasn't particularly good at being either, says Steve Carkner, former director of product development at the company.
Carkner now is chief executive officer of Panacis Medical in Ottawa.
Lazaridis is often called the creator of the BlackBerry. In fact, many people had a hand in the device's creation, from executives to overworked co-op students who developed software on RIM's then-modest budget.
But none of the RIM old-timers begrudged Lazaridis any of the credit.
"I'm not sure you could have replaced him with anyone else and still had BlackBerry," Brubacher-Cressman says.
"He obviously had a lot of really smart and really talented people working for him, but it was his job of pulling all that together."
mwalcoff@therecord.com
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