Financial Update For Oct. 30, 2009

• TSX +269.89 to 11,075(Reuters) snapped a four-session-long losing streak, as the U.S. Commerce Department reported that U.S. gross domestic product rose at a 3.5 per cent annualized pace, slightly better than the 3.3 per cent growth that economists had expected. It was the first time the U.S. economy has grown since early 2008.

• DOW +199.89 to 9,962

• Dollar +1.00c to 93.72

• Oil +$2.41 to $79.87US per barrel. Commodity prices turned higher in the wake of the GDP announcement, which raised hopes that an expanding U.S. economy will translate into increased demand.

• Gold +$16.50 to $1,046.40USD per ounce


Recession takes a mental toll, expert says

By Rose Simone, Record staff

WATERLOO – As the recession takes its toll on jobs, it will also take a toll on the mental health and productivity of the nation, says the head of federal non-profit corporation that is trying to put mental health issues on the business agenda of workplaces.

“The advent of depression is in part a function of the uncertainty and job insecurity in our lives,” Bill Wilkerson, co-founder and chief executive of the Global Business and Economic Roundtable on Addiction and Mental Health, said in an interview after speaking at a forum on work-related stress in Waterloo on Thursday.

“The absence of work, loss of work, and uncertainty about work is a major factor in the mental health status of the whole population,” he said.

Wilkerson was speaking at the forum organized by the Waterloo Region Suicide Prevention Council.

He said he was disconcerted by the trend of “emptying the workplace,” even before the recession hit, and added that “it is tragic and harmful to the country’s economic growth.”

Wilkerson said the lost work time productivity because of depression and substance abuse in Canada is now estimated at $51 billion a year. Stress also increases the risks and costs associated with heart disease, diabetes and high blood pressure, he added.

He said companies also have immediate commercial reasons to care about mental health because everything from sales to customer service and customer loyalty are affected by the employer’s relationship with the workers.

Wilkerson added that although some people mistake depression as a sign of weakness, it is actually a “disease of the brave and the hard-working.” Soldiers suffer post-traumatic stress after witnessing horrific scenes precisely because they care about the victims, and likewise, people suffer from depression because they care about what they do, he said.

He said the politics and culture of a workplace typically play a bigger role in stress than the work itself, because people become anxious and depressed if they feel they are not treated fairly or are prevented from contributing their skills.

Wilkerson, who was sworn in as a member of the Royal Canadian Mounted Police because he was helping that organization develop strategies for dealing with workplace stress, added that even in a high-stress job like policing, “the policing itself is not the major source of stress . . . the source of stress is usually what is going on in the office.”

He also said companies need to promote work-life balance and discourage taking work home. He added that since Waterloo Region is the home of the BlackBerry, a symbol of the “hurried world we live in,” it also should take a leadership role in researching ways to help people achieve a work-life balance and promote better mental health.

Wilkerson said insurance companies that provide disability benefits also have a responsibility. “You could never get insurance to operate in a building that did not have a fire protection system. So what if insurance companies were to say to a company, ‘because of your disability rates and work-time losses, there is something amiss in the kind of management you have?’”

Wilkerson added that reducing the toll of depression “requires social innovation, not just medical science.”

Financial Update For Oct. 29, 2009

US Housing Prices May Fall Further article from US Mortgage Brokers Association newsletter below
• TSX -248.21 to 10,805(Reuters) every stock market in the world was down yesterday on doubts about the strength of the US economic recovery. TSX closed to its lowest level in 2 months dipping below the 11,000 pt mark
• DOW -119.48 to 9,762 dipped below 10,000 pts as sales of new US homes fell 3.6% last mth against an expected 2.6% rise
• Dollar -1.08c to 92.72 fell to its lowest level in 3 weeks influenced by a dip in oil prices
• Oil -$2.09 to $77.46US per barrel.
• Gold -$4.80 to $1,034.70USD per ounce

Housing Prices May Fall Further

Forbes Magazine from MBA Newslink

A number of factors suggest housing prices could drop another 10%.
Over the past few months, there have been suggestions that the U.S. housing market might finally be bottoming out. Since July, the decline in sales of both new and existing homes has moderated. Moreover, over the past three months, there has been a very modest increase in home prices at the national level as measured by the 20-city S&P/Case-Shiller home price index. However, the high inventory of unsold homes, continuing foreclosures, and double-digit unemployment could mean that housing prices have further to fall.

Reasons for cheer. A number of "green shoots" suggest cause for some optimism:
--Inventory reduction. Whereas housing starts are presently estimated to be running at a 600,000 annual rate, underlying U.S. household formation is presently running at an annual rate of approximately 1.5 million units. Lower residential construction relative to household formation is allowing excessive home inventories to be gradually worked off.

--Cheap mortgages. As a result of the Federal Reserve's highly accommodative monetary policy, and the activity of the government-sponsored home lending enterprises, mortgage rates have declined to more affordable levels. For example, 30-year fixed-rate mortgages have fallen below 5% for the first time in many years.

--Increased affordability. The slide in home values has brought prices more into line with their long-run fundamentals. Since September 2006, U.S. home prices have fallen 27%, bringing prices back to the level prevailing in mid-2003. As a result, the ratios of home prices to rents and of home prices to incomes are now much more in line with historic levels. The index of housing affordability now stands at its most favorable level in the past 20 years.

Reasons for doubt. Despite these "green shoots," there remain a number of factors that suggest that U.S. home prices have not quite hit bottom:
--Inventories historically high. Despite small declines in recent months, the inventory of unsold homes at the national level remains at close to its historic high. A key indication of the degree of excess home inventory is that the number of vacant homes, in which neither an owner nor a renter presently dwells, exceeds its normal level by nearly 1 million units.

--Foreclosure crisis. The United States is presently suffering from a foreclosure crisis that is further adding more homes to a market already characterized by excess inventories. Forward-looking indicators, such as the number of mortgages that are more than 90 days delinquent (i.e., behind payment) suggest that the pace of foreclosures could increase in the months ahead.

--High unemployment. A very weak labor market situation inhibits households from making the long-term financial commitments, such as buying a home. The Labor Department estimates that approximately 16.5% of the labor force is either unemployed or in involuntary part-time employment. At the same time, the huge slack presently affecting the labor market is exerting downward pressure on wage income growth. Most economists--including White House Council of Economic Advisers Chair Christina Romer--do not foresee much improvement in the labor market in 2010.

--Mortgage resets. Next year, approximately $200 billion in "Option ARM" mortgages (adjustable rate mortgages) are due to reset to higher rates. This is likely to add to the foreclosure problem, since these resets will produce a sharp jump in debt service payments.

--Default incentive. Finally, another factor adding to the foreclosure problem is that a growing number of U.S. households now have "negative equity" in their homes (i.e., their mortgage debt exceeds the value of their homes). Since mortgages in most U.S. states are "non-recourse loans" (the lender cannot pursue the borrowers' other assets, beyond the home), negative equity gives homeowners a strong incentive to default on their mortgage loans.

Outlook. The present high level of unsold housing inventories, the poor state of the labor market and the current wave of foreclosures suggest that home prices may have a further 10% to fall (in real terms). This will add to the financial distress facing the banking sector, inhibiting a return to above trend GDP growth in 2010.

Financial Update For Oct. 28, 2009

“a recession is when your neighbour loses his job. Depression is when you lose yours” Ronald Regan

The US recession may be officially over, but…

High dollar `hollowing out' manufacturing economy

Articles below

• TSX -181.34 (Reuters) now that investors have received some reassurance about the 3rd-quarter earnings season, it’s getting harder to maintain the powerful rally that’s been running along since March.“It looks like the bar is pretty high,” said John Johnston, chief strategist, the Harbour Group at RBC Dominion Securities

• DOW +14.21

• Dollar +.08c to 93.80

• Oil +$.87 to $79.55US per barrel.

• Gold -$7.40 to $1,034.70USD per ounce

• • http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us


The recession may be officially over, but recovery is fragile and job losses still mounting

Tom Raum, THE ASSOCIATED PRESS
The Canadian Press, 2009

WASHINGTON - It is about to become official: The U.S. recession is over - but not the pain.

The government will release figures this week expected to show that the economy has awakened from its deepest slump since the 1930s and is in the early stages of a recovery. But the following week, the government will issue another set of figures expected to show unemployment continuing to rise toward and possibly above a clearly recessionary 10 per cent.

How can both be possible?

The government releases third-quarter Gross Domestic Product figures on Thursday. Many forecasters say they will show GDP growing at an annual rate of about 3 per cent, validating a widely held belief among economists that the recession ended in June or July.

But try telling that to the more than 15 million still unemployed, the small businesses and individuals who can't get loans and the people whose homes are worth less than their mortgages.

Assertions by government and private economists that the recession is over - issued amid graphic examples of continuing wide distress - are raising fresh questions about economic scorekeeping.

The national recession may be technically over, but the state of the economy remains in the eyes of the beholder.

Or, as Ronald Reagan liked to say, a recession is when your neighbour loses his or her job. Depression is when you lose yours.

A survey of economic forecasters prepared by Blue Chip Economic Indicators, a research organization, predicted GDP growth to remain positive in each quarter through the end of 2010. In a survey by the National Association of Business Economics, 34 of 43 economists polled said the recession is over.

"From a technical perspective, the recession is very likely over," said Federal Reserve Chairman Ben Bernanke.

"A recession that showed no signs of ending last January appears to be firmly entering the recovery phase," said Christina Romer, the chair of the White House Council of Economic Advisers.

But nobody is sugar coating the statistics, especially in the administration, which agrees with private surveys suggesting that unemployment will hover near 10 per cent through most of next year.

"Even when you've turned the corner, you have so much work to do," Romer told Congress' Joint Economics Committee.

And while she credited much of the turnabout to government stimulus measures and moves by the Fed, she said "by mid-2010, fiscal stimulus will be contributing little to further growth."

Even ahead of the report expected to show an increase in economic growth, The Conference Board, a private Chicago-based research group, reported Tuesday that consumers' confidence about the U.S. economy fell unexpectedly in October as job prospects remained bleak.

That fueled speculation that an already gloomy holiday shopping forecast could worsen. Consumer spending accounts for more than two-thirds of the entire economy.

The economy has lost 7.2 million jobs since the recession began in December 2007, 3.4 million of them since President Barack Obama took office in January.

James K. Galbraith, an economist at the University of Texas at Austin, suggests too much attention is given to when recessions technically begin and not enough to other measures of the economy.

"It's just a word. A recession technically lasts during negative quarters. But that doesn't mean you're back to prosperity once you have positive growth. You're back to prosperity when the unemployment rate is back around 4 per cent," Galbraith said. And that, he said, could take years.

A recession is popularly defined as two or more consecutive quarters of negative economic growth, or declining output.

But a more refined determination is made by the National Bureau of Economic Research, a private group of leading economists charged with dating the start and end of economic downturns. It not only looks at GDP but at employment levels, real personal income, industrial production and wholesale and retail sales.

It put the start date at December 2007 and has not yet called an end.

There have been 11 recessions since World War II. In the two most recent ones, job growth lagged long after the recessions were deemed over. In the most recent two - July 1990-March 1991 and March-November 2001 - the unemployment rate did not fall to prerecession levels for several years.

After the eight-month 2001 recession, the unemployment rate went from a prerecession 4 per cent in 2000 to 4.8 per cent in 2001. Then it kept climbing even higher - to 5.8 per cent in 2002 to 6 per cent in 2003. It didn't return to under 5 per cent until 2006, when it fell to 4.6 per cent.

While there are clear signs of recovery, it is uneven.

Stocks have surged about 50 per cent since their March lows. And a year after Washington rescued the financial industry, some large banks and Wall Street firms have roared back to profitability.

But smaller banks and other businesses are struggling, and many have failed or are failing.

That disconnect sparked anger among the public and led to sweeping government action last week to limit executive compensation at financial firms that accepted federal bailout money.

"While credit may be more available for large businesses, too many small business owners are still struggling to get the credit they need," Obama said in his weekly radio and Internet address. "These are the very taxpayers who stood by America's banks in a crisis - and now it's time for our banks to stand by creditworthy small businesses, and make the loans they need to open their doors, grow their operations and create new jobs."

There have been modest improvements in manufacturing and other parts of the nonfinancial business sector, yet lingering signs of weakness in commercial real estate and retail spending.

Economists suggest some of the expected increase in economic growth is a bounce off the bottom. They attribute it to government stimulus spending, including the now-expired Cash for Clunkers program; accommodative Fed monetary policies and widespread cost-cutting by companies.

Many companies let inventories run down so much that when they ran out, orders picked up. Home resales ticked up as buyers scrambled to complete their purchases before a tax credit for first-time owners expires. And U.S. exporters have benefited from a relentless decline of the dollar that has made U.S. goods cheaper and more competitive overseas.

But none of this adds up to a sustainable upswing.

"Absent robust job growth, it is not a true economic recovery," said White House economic adviser Jared Bernstein.

High dollar `hollowing out' manufacturing economy

Iain Marlow- Toronto StarSpecial Features

Foreign exchange rates are "hollowing out" Canada's already-battered industrial economy and require intervention by the Bank of Canada, CIBC said on Tuesday.

Avery Shenfield, CIBC World Markets' chief economist, argued the soaring loonie could force Canada's bruised manufacturers and exporters to leave the country.

The comments, the latest salvo from intervention advocates, came hours before Bank of Canada Governor Mark Carney appeared in front of the House of Commons committee on finance.

In the short term, Shenfield said, the Bank of Canada is keeping interest rates low to maintain activity in sensitive areas of the economy, such as housing construction. However, in the long term, the strategy will result in permanent damage, he said.

"If businesses are making decisions today about where to locate, which plants to leave open, which to close, and they look at Canada as an expensive place to export from – because our workers are expensive in U.S. dollar terms – then we might lose facilities during this period of Canadian dollar overvaluation," Shenfield told the Star.

Carney has recently talked down the dollar in public statements that seem to be working, since the loonie dropped from 97 cents against the U.S. dollar last week to 93.80 cents on Tuesday.

But he told the committee that although currency was important, it was not a necessary component in keeping inflation rates down.

That makes sense to Eric Lascelles, chief economics and rates strategist at TD Securities, who said it is impossible to fight the recession war with a double front against both the currency and inflation.

"It's quite clear that the Canadian dollar's strength is damaging some sectors of the economy, I don't think that's particularly up for debate," he said.

"Where the issue stands, is whether it's practical to think that one can successfully intervene in the currency."

To alter the currency, the Bank of Canada can buy and sell on foreign exchange markets.

The last time it did so was in 1998, an intervention that Lascelles said was "ultimately unsuccessful."

He added that the bank cannot possibly try to control the currency and the rate of inflation at the same time.

"You're always back to square one, which is not trying to proactively influence the currency, but rather trying to respond to it simply by indicating the consequences when the currency does move," he said.

Carney, according to United Steelworkers economist Erin Weir, is interpreting the bank's role in an overly conservative fashion. Pointing to the Bank of Canada Act's preamble, Weir said Carney and his team have a responsibility not only to regulate macroeconomic policy, but to protect employment.

"Mark Carney has raised the prospect of intervening in currency markets, but seems reluctant to actually do so."

Financial Update For Oct. 27, 2009

• TSX -147.25(Reuters) after an early morning surge as investors, who have been dithering over further gains for days, took confusion over the U.S. homebuyer tax credit as excuse to sell and lock in profits
• DOW -104.22
• Dollar -1.35c to 93.72 to the lowest level in almost three weeks as the head of the nation's central bank reiterated concern the currency has grown too strong and crude oil and stocks tumbled.
• Oil -$1.82 to $78.68US per barrel. on concerns that a sluggish economic recovery will keep fuel demand low.
Gold -$13.50 to $1,042.10USD per ounce

Financial Update For Oct. 26, 2009

• TSX -151.24 to 11.382(Reuters) in a broad-based decline involving all sectors and led by falling tech and energy shares.

• DOW -109.13 bringing the DOW back under 10,000 pts to 9,972 There was no particular reason for the negative investor sentiment

• Dollar -.37c to 95.07 sank further against the greenback as warnings from the BoC that the currency's strength was a risk to economic growth weighed on investor sentiment.

• Oil -$.69 to $89.59US per barrel.

• Gold -$2.20 to $1,055.600USD per ounce

Study says variable-rate mortgages better deal for borrowers most times

The Canadian Press

TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX:BMO) says the more volatile variable rate mortgages will save you money in the long run.

The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.

That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.

A fixed rate locks the borrower into a set interest rate for a certain period of time.

That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

Variable rates change along with interest-rate moves.

U.K. economy shrinks unexpectedly

The latest GDP report out of Britain says the economy there shrank in the third quarter, surprising many economists. European correspondent Stephen Beard talks with Steve Chiotakis, co-host of the Marketplace Morning Report, a British national business program, about what's behind the numbers.

Steve Chiotakis: In Great Britain today, there's a lot of head scratching over the latest Gross Domestic Product report. The economy there shrank in the third quarter of the year. Many economists had thought the GDP would rise, officially putting an end to the recession. Marketplace London correspondent Stephen Beard is with us live to talk about the reaction to the number. Good morning, Stephen.

Stephen Beard: Good morning, Steve.

Chiotakis: Stephen, how bad are these numbers and what's behind them?

Beard: Britain's GDP fell by four-tenths of 1 percent in the third quarter.And this is an historically bad figure. It's the first time in more than half a century that the U.K. economy has contracted for six quarters in a row. What's behind it? A sharp decline in the services sector -- catering, hotels, distribution all performed badly. And more generally, consumer spending has softened. There was no growth at all in retail sales in November.

Chiotakis: And why, Stephen, did this report come as such a surprise?

Beard: Well because there have been some tentative signs of recovery over the third quarter. And more positive signs for the global economy. Also, the British government and the Bank of England have thrown so much at this economy, people were really expecting more signs of life. I mean, we've had a one-trillion pound bailout of the banks, a cut in sales tax, a big and quite successful car-scrappage scheme, and short-term interest rates of half a percent. So people thought, really, the economy had to have at least crawled back into positive territory after all that. The currency markets reacted quite badly to this, Steve. The pound fell a cent against a weak dollar on the news. Currency traders seem generally concerned that the U.K. may turn out to be the only major economy still in recession.

Chiotakis: Yeah, we're going to see about that when we get the first look at U.S. third-quarter GDP next Thursday

Bernanke prods Congress for financial overhaul to prevent future crises

By Jeannine Aversa Associated Press

WASHINGTON — Federal Reserve Chair Ben Bernanke prodded Congress Friday to enact legislation overhauling the U.S. financial regulatory system to prevent a repeat of the banking and credit debacles that thrust the country into crisis.

“With the financial turmoil abating, now is the time for policy-makers to take action to reduce the probability and severity of any future crises,” Bernanke said in remarks to a Fed conference in Chatham, Mass.

For its part, the Fed has been taking steps to strengthen oversight of banks, sharpen consumer protections and on Thursday unveiled a sweeping proposal to police banks’ pay policies to make sure they don’t encourage top executives and other employees to take reckless gambles.

But Congress needs to step in and close regulatory gaps and make other changes that only lawmakers have the power to do, Bernanke said.

At the top of his list: Congress must set up a mechanism — along the lines of what the Federal Deposit Insurance Corp. does with troubled banks — to safely wind down big financial firms whose failure could endanger the entire system.

And the costs for such a mechanism should be paid through an assessment on the financial industry, not by taxpayers, Bernanke said.

Moreover, Congress needs to set up better systems for regulators to monitor risks lurking in the financial system, he said.

The Obama administration has proposed such action as part of its overhaul of financial rules. Its plan would expand the Fed’s powers over big financial institutions but reduce it over consumers. Congress, however, is leery of expanding the Fed’s reach because it and other regulators failed to crack down on problems that led to the crisis.

The House is expected to pass legislation by the end of the year, but the Senate is unlikely to consider the bill until early next year.

A House panel on Thursday approved a piece of the plan, creating a federal agency devoted to protecting consumers from predatory lending, abusive overdraft fees and unfair rate hikes. Doing so, however, strips some powers from the Fed.

Bernanke, in his remarks Friday, talked about the central bank’s efforts to bolster consumers protections.

He also said the Fed is working on rules to better safeguard consumers from abuses when it comes to overdraft protection, reverse mortgages and gift cards.

But he didn’t get into a public debate over whether the Fed — or a new consumer agency — is best equipped to do the job.

To beef up banking supervision, Bernanke again said regulators are considering assessing a capital surcharge on big financial companies or requiring that a greater share of their capital be common equity. The Fed also supports efforts for banks to build larger capital buffers in good times and allow them to be drawn down in bad times.

Forceful actions taken by the Fed and the government helped avert a global financial crisis last fall and since then financial conditions have “improved considerably,” he said.

But the fallout from the crisis has been severe, reflected in deep drops in economic activity and heavy job losses both in the U.S. and overseas, he said.

The Fed chief didn’t talk about the future course of interest rates in his speech or in a brief question-and-answer session afterward.

To nurture the budding recovery, the Fed is expected to keep a key bank lending rate near zero when it meets in early November. Analysts predict rates will stay at record-low levels into part of next year.

Finanical Update For Oct. 21, 2009

TSX -.27(Reuters)

• DOW -50.71

• Dollar -1.98c to 95.17 as the central bank announced it was leaving interest rates at 0.25 per cent - and will likely keep them that low until the middle of next year as it had earlier indicated.

• Oil -$.52 to $79.09US per barrel.

• Gold +$.50 to $1,057.80USD per ounce
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Carney wins round one with loonie, taking currency down two cents with one blow

By Julian Beltrame, The Canadian Press

OTTAWA - The Bank of Canada took the wind out of the loonie's sails Tuesday, driving down the currency nearly two cents against the U.S. dollar with a warning that it was prepared to stick to low interest rates for some time.

And although the central bank's words have had short-term impacts on the currency before, this time the effect may last longer, economists said.

In one of the gloomier reports in months, the central bank's governing council declared that a strong loonie threatens Canada's economic recovery, saying its recent rise more than offset all the encouraging indicators seen over the summer.

"(The) heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures," the bank said. "The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July."

As expected, the central bank kept its policy interest rate moored at the historic low of 0.25 per cent, the level it's been at since the spring.

The affect of the bank's statement could be seen immediately. The currency fell a penny against the U.S. dollar within minutes of the announcement and kept going, at one time trading down 2.17 cents U.S.

It closed on slightly better footing, though still down 1.98 cents at 95.17 cents U.S.

Economists said the reason for the big drop was not so much what the bank said about the dollar - it had made similar warnings for months - but more because markets had expected it would soon follow the lead of Australia, which has begun to raise interest rates.

Canada's central bank put a stop to that speculation Tuesday when it downgraded economic growth prospects for this year and 2011.

The bank now estimates the Canadian economy will shrink by 2.4 per cent in 2009, not 2.3 per cent as it predicted last month. Next year's forecast was unchanged at three per cent growth, but the bank downgraded its forecast for 2011 growth by two-tenths of a point to 3.3 per cent.

As significantly, it set back a full quarter its expectation for when economic output and inflation can be expected to return to where it wants them, to the fall of 2011.

"This is a somewhat more modest recovery in Canada than the average of previous economic cycles," the bank said.

With inflation nowhere in the horizon, there appears little urgency for governor Mark Carney to back off his conditional commitment to keep the central bank's policy rate at the lower bound of 0.25 per cent until next July. The thinking may be that short-term interest rates will stay at the historic floor even longer, perhaps until the end of next year.

"The delay in returning back to its target rate on inflation would allow a longer period of keeping rates on hold," said CIBC chief economist Avery Shenfeld.

"Financial markets tend to get edgy sitting still, but Carney is a man in no hurry to act."

Royal Bank currency strategist Matthew Strauss said Carney's gambit will have long-lasting impacts on the dollar.

That doesn't mean the dollar won't rise again, since the main driver will be oil prices and other external forces. But, he said, the bank governor has taken some of the speculation out of the calculation and going forward expects the loonie will underperform compared with other commodity-weighted currencies, such as the Australian dollar.

"It will definitely have an effect," he said. "Now the market knows exactly where the Bank of Canada and the Government of Canada stands."

Scotiabank economists Derek Holt and Karen Cordes said the markets should have seen it coming.

They wrote in a note to clients that it's ill-advised to lump Canada in with Australia, saying there are "night-and-day differences in the Canadian economy's export exposures and currency sensitivities."

Canada fell into a recession similar to one it experienced in the early 1990s, with its recovery prospects closely tied to the weak U.S. economy. Australia, which is benefiting from returning strong growth in China, never fell into even a technical recession.

Carney believes the Canadian dollar will keep future growth even more sluggish than it thought a few months ago.

Two indicators from Statistics Canada on Tuesday filled in the picture of an economy that is recovery, but not robustly.

The leading index of economic indicators rose 1.1 per cent in September, slightly less than the revised 1.2 per cent gain registered in August. And Canadian wholesalers took a hit in August as sales dropped 1.4 per cent.

The TD Bank said it now believes the Canadian economy likely contracted 0.2 per cent in August after a flat reading in July.

In September, the last time the bank pronounced on interest rates, Carney and the governing council had enthused that the recovery was going so well it was expecting to revise its July growth forecast that predicted 1.3 per-cent growth in the gross domestic product in the third quarter and three per cent in the fourth.

But that was when the bank expected the loonie to average 87 cents US through 2010.

Financial Update For Oct. 20, 2009

Why Canada's housing sector didn't collapse ….for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.

• TSX +33.63(Reuters) as further weakness in the U.S. dollar boosted commodity prices.

• DOW +96.28

• Dollar +.83c to 97.15 rising on firm commodity prices and ahead of the Bank of Canada's interest rate announcement on Tuesday

• Oil +$1.08 to $79.61US per barrel.

• Gold +$6.60 to $1,057.30USD per ounce

•

Why Canada's housing sector didn't collapse

Globe and Mail Update Published on Monday, Oct. 19, 2009

While it's tempting to think of a “housing correction” as a continent-wide phenomenon, National Bank Financial says the Canadian and U.S. markets couldn't be more different.

“The two have absolutely nothing in common,” senior economist Marc Pinsonneault wrote in an economic update Monday. “In Canada, the correction got under way much later and lasted nowhere as long.”

Mr. Pinsonneault said “prudent lending practices” in Canada prevented the housing market from falling as hard as its American counterpart, and pointed out that Canada's crisis was a side-effect of its recession rather than its cause.

Here are four ways the markets have differed:

Duration of slowdown

The Canadian market began to slide in October, 2008, while the American slump has lasted 2 1/2 years.

“People wishing to sell their homes either cut their asking price or quite simply took their property off the market,” he said of the Canadian market. “Lower interest rates, lower home prices and renewed consumer confidence led to a quick recovery in sales, so much so that as early as last May, these had surpassed pre-recession levels.

Price declines

According to Teranet, Canadian home prices fell 8.9 per cent from their August, 2008, highs to their recessionary lows eight months later. In the U.S., the S&P/Case Shiller index shows prices slid 33 per cent in 33 months.

Delinquency rates

Canadian banks have seen delinquency rates climb to 0.4 per cent, compared to the 0.65 per cent high reached in 1992. The number is far greater in the U.S., at 3.67 per cent.

Consumer spending

When home prices are under pressure, consumers tend to reel in the spending.

“According to Statistics Canada, from the end of Q3 2008 to mid-2009, the value of household real estate wealth sagged only 1.1 per cent,” he said. “The impact of this impoverishment on consumer spending has been negligible.”

In the U.S., the value of household real estate wealth dropped 18.2 per cent. The Federal Reserve estimates that for each dollar lost in housing wealth, consumer spending pulls back up to 15 cents.

Steve Ladurantaye

Financial Update For Oct. 19, 2009

TSX +.25(Reuters)

• DOW +67.03

• Dollar -.35c to 96.32

• Oil +$.95 to $78.53US per barrel.

• Gold +$.90 to $1,050.70USD per ounce

http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Give yourself some credit

Don't expect rubber-stamped mortgage approvals anymore

Helen Morris, National Post

Whether you are planning to move from an existing home or are stepping into the property market for the first time, and unless you have a substantial supply of cash, you will likely require a mortgage.

Interest rates may be at historic lows but with uncertain and changing market conditions, lenders want to be doubly sure that borrowers can repay a mortgage. This has led to lenders placing more stringent conditions upon borrowers and demanding more detailed and verifiable proof of income and ability to pay.

A borrower's income, expenses, credit history and down payment are all considered when assessing whether they qualify for a mortgage.

"Prior to eight months ago, for a standard salary individual, I could do the mortgage on a job letter," says Jeff Mayer, a mortgage agent with the Mayer Group, part of the mortgage brokerage firm Mortgage Intelligence. "Now you need a job letter ... then they want a pay stub...and a lot of times they'll ask for two paystubs, then they're going to want either a T-4 or a notice of assessment. The bank wants to make sure that you can afford the mortgage. It's tough love; they want to make sure that you're going to stay in your house."

If you work overtime it is essential to check with the lender if this income can be counted towards your mortgage qualification.

"In a lot of situations, with unemployment rising, there is not as much overtime," says Gary Siegle, a regional manager with the Invis mortgage brokerage firm. "Lenders are looking at that a little bit more carefully."

Because of increased default rates in some communities, some lenders will now only consider a base salary when evaluating a mortgage application.

If you have a stable job, a decent-sized deposit and a good credit score, putting in the hard work at the application stage can secure you a good deal.

"With prices having softened due to the recession, housing has never been more affordable," Mr. Siegle says. "It is a little more difficult to qualify when it comes to showing your income and proving different parts of [it], but it's also much easier to qualify on the numbers because house prices are down and mortgage rates are on sale, really."

However, mortgage qualification has become rather more testing for those with lower credit scores, smaller deposits or irregular income.

"Lower credit scores have become more difficult to get traditional financing for. You can still quite often get a mortgage but it's just going to cost more," Mr. Siegle says. "Those with very poor credit probably have much more difficulty today. If you've got bad credit and haven't been proven to be able to manage it, maybe you need to get things fixed up before you get a mortgage."

It has also become a lot tougher for self-employed individuals to get mortgage financing, Mr. Mayer says. Lenders are still allowing self-employed applicants to state their own income levels but the income stated must be deemed reasonable based on the size and type of business.

Many lenders, Mr. Siegle says, are demanding extensive documentary evidence from self-employed applicants and even then, lenders can refuse to provide a mortgage if they believe that disparities between taxable and real income are not reasonable.

It is not just borrowers buying their own homes who are facing tougher lending criteria.

For buyers of rental properties, Mr. Siegle says, lenders have become less generous when calculating how much rental income can be used to qualify a mortgage. Conventional lenders used to include up to 80% of the rental income when calculating how much homebuyers could borrow. However, due to a higher risk of default, now he says some lenders are including only 50% to 70% of the rental income.

Close

Financial Update For Oct. 16, 2009

A hot real estate market getting hotter

average sale price of a house in Canada increased 13.6% from a year ago.

• TSX -28.27 to 11,504(Reuters) on lower gold prices and disappointing U.S. earnings news

• DOW +144.80 to 10,062

• Dollar -.81c to 96.67

• Oil +$2.40 to $77.58US per barrel. Hits another 2009 high

• Gold -$14.100 to $1,049.80USD per ounce

• Canadian 5 yr bond yields +.03bps to • http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Canada's annual inflation rate edged down one-tenth of a point in September, staying well below zero at minus-0.9 per cent

Canada a tale of two economies: as export sector staggers, domestic activity booms

By Julian Beltrame OTTAWA — Two reports Thursday reinforced recent trends that show a strong domestic Canadian economy propped up by floor-low interest rates and a recovering housing market, and a weak manufacturing sector hammered by the sky-high dollar and a squeeze on exports.

“What it’s telling us is that low interest rates are working in Canada,” said CIBC chief economist Avery Shenfeld. “We’ve had a number of disappointments on the export front. Where Canada is showing vigour, it’s on the domestic front in response to low interest rates.”

The most recent evidence is the outsized growth in house sales during the third quarter — given the still-weak overall economy.

The Canadian Real Estate Association reported that in real terms, sales of existing homes in the country have never been stronger than in the just-completed third quarter. The association said more than 135,000 units were sold in the July-to-September period — 18 per cent higher than the corresponding period last year before the recession hit.

Meanwhile, Statistics Canada figures released early Thursday showed factory shipments fell 2.1 per cent in August as the activity from the U.S. cash-for-clunkers program, which had artificially spurred auto sales in the United States, subsided.

As well, there are few signs of recovery ahead for the battered manufacturing sector as new orders have practically stagnated and unfilled orders fell 4.2 per cent.

“The fact remains that Canada’s manufacturing sector remains under duress,” said TD Bank economist Grant Bishop, noting the new challenge of a dollar that many expect to regain parity with the U.S. greenback by year’s end.

A perhaps even bigger barrier to a recovery in Canada’s export sector, which accounts for about one-third of the economy, is that consumer demand in the U.S. for what Canada has to sell — cars, parts, lumber and consumer items — isn’t about to pick up any time soon.

A new Conference Board of Canada forecast of the U.S. economy estimated that consumer spending will remain in the dumps throughout 2010, rising only about one per cent from already abysmal levels.

The problem faced by the Bank of Canada is that hinting it may raise rates sooner than next summer, when its conditional pledge to keep the policy rate at 0.25 per cent runs out, will only add fuel to the loonie’s flight and further harm exports and manufacturers. Suggesting that rates will remain as low as they are for a long time feeds into a housing asset bubble and risks inflation.

“The decisive rebound (in home sales) puts the Bank of Canada in a quandary — while the hot housing market cries out for rate hikes, the runaway loonie screams ‘No!’ ” is the way Doug Porter, deputy chief economist with BMO Capital Markets, puts it.

The big banks recently raised mortgage rates by up to a third of a point on many loans, a move that could slow down demand in some markets. However, mortgage rates are still extremely low by historic standards. The Canadian Press

A hot real estate market getting hotter

Garry Marr, Financial Post The statistics may not say it yet but Toronto real estate sales representative Kate Watson can already feel the ground shifting.

A new set of data from the Ottawa-based Canadian Real Estate Association (CREA) shows the market tighter than ever with the lack of supply in new listings conspiring to make a hot market even hotter.

CREA said Thursday the average sale price of a house in Canada reached $331,602 last month, a 13.6% increase from a year ago. There just isn't enough new product coming to market to meet demand. Last month, there was 80,816 new listings across the country, compared to 97,657 a year ago.

The supply problem is happening in almost every major Canadian city. Toronto new listings were down 25.3% last month from a year ago. Calgary was off 26.1%.

The number of months of inventory in the market -- which is based on the number of months it would take to sell current inventories based on current sales activity -- was 4.9 months in September. That figure was down slightly from August and way off the peak of 12.8 months reached in January.

CREA expects the situation to ease in the coming months as sellers realize the type of prices they can get if they list. Ms. Watson, who works for Wright Real Estate Brokers Ltd., says the situation is already resolving itself.

"It was bit of as logjam but it is already starting to clear," she says. "You had a lot people waiting to list until after Thanksgiving because nobody wants to put their property for sale before a holiday."

The Canadian market has had a remarkable turnaround from a winter that was the worst Ms. Watson can remember in her six years on the job which have mostly witnessed a rising market. September sales across the country were up 1.5% from August. The latest bump in sales puts the market 63% above January low.

The same things continue to drive the housing market. "Low interest rates, rebounding consumer confidence and improving overall sense of economic security continue to draw homebuyers," said Dale Ripplinger, president of CREA.

CREA's chief economist Gregory Klump said the 1.5% increase in sales while impressive shows the market is beginning to cool to some degree. "Monthly sales activity remained on a strong upward trajectory throughout the third quarter in British Columbia while showing signs it may be topping out in other provinces. On balance, this suggest the sales activity may be starting to plateau after having climbed rapidly earlier this year," he said.

The total dollar figure for all sales in the third quarter reached $41-billion, the highest level on record for the period. British Columbia and Ontario reached new highs for dollar volume. Canada's largest cities are driving the housing market. Vancouver sales in the third quarter were up 34% from second. Toronto sales rose 11% during same period while Calgary climbed 19%.

Nationally, average national sales price in the third quarter was $327,736, an 11% increase from a year ago. Sellers sitting on the sidelines are expected to move in the coming months.

"Headline average price increases over the rest of the year are expected to prompt sellers to return to the market," said Mr. Klump. "An increase in new listings will help keep a lid on price increases."

Scotiabank economist Adrienne Warren says she's not too concerned about any sort of bubble building in the housing market. "I don't think so. This is just the strength of demand and a lack of listings," she said. "As the economy stabilizes, people will feel more confident to list their homes."

Financial Update For Oct. 15, 2009

Dow passes 10,000 for 1st time in a year

The Canadian dollar zooms to its highest level in over 14 months

Oil hits 2009 high

• TSX +119.24 to 11,532(Reuters) TSX found strong support from the energy sector as the bullish reports from the U.S. raised hopes for higher crude demand.

• DOW +144.80 to 10,015.86 broke through the psychologically important 10,000 mark amid key earnings reports and a better than expected reading on retail sales in the United States.

• Dollar +1.00c to 97.48.

• Oil +$1.03 to $75.18US per barrel. Hits new 2009 high on economic optimism

• Gold -$.30 to $1,063.90USD per ounce Support was provided by the weak dollar which slipped to its lowest in more than a year, making dollar-denominated commodities like oil and gold more affordable for holders of other currencies

• Canadian 5 yr bond yields +.01bps to 2.85. The spread, based on the new MERIX 5 yr rate published of 4.34% is 1.49 so we are back in the centre of the comfort zone

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.

Canadian Tire retires from the mortgage business

John Greenwood, Financial Post

Just two years after getting into the mortgage business, Canadian Tire is calling it quits.

The big-box retailer Wednesday said it has agreed to sell its relatively measly $167-million portfolio of home loans to National Bank of Canada for book value.

Canadian Tire Corp. launched its banking operation in 2006 just as the credit bubble was building, offering savings accounts, GICs as well as mortgages. At the end of the second quarter the banking business had $2.1-billion in deposits.

"We had been in pilot [stage] for a period of time with our mortgage business and we looked at the business and the market conditions and decided longer term that the best opportunities resided in our core business and retail banking," said Huw Thomas, the chief financial officer.

The company made only about a thousand home loans over the life of the program because it was operating only in a handful of markets and was focusing only on clients with top credit ratings, Mr. Thomas said.

Following the credit crunch and the seizing up of the securitization market, many non-bank lenders have been hit by soaring funding costs and declining profits. Industry insiders said several companies that are dependent on the securitization market have recently been forced to sell off small parts of their operation and there is speculation that larger deals could follow.

Canadian Tire is a major player in the credit card business, one of Canada's largest MasterCard issuers. Before the financial crisis the business was funded largely through securitization -- packaging the loans and selling them off -- and while the disruption in that market has affected profit margins, the effect has been minimal since the company has been able to turn to its banking business for funding.

"We have no liquidity concerns about our credit card business," Mr. Thomas said, adding that the move away from securitization "has actually been reasonably cost effective."

In a statement, Canadian Tire said its "core credit card business has performed well in a difficult economic climate and the company is confident about its prospects for new growth as the economy returns to health."

The credit card portfolio has about $4-billion of loans which are still partly funded by securitization.

Mr. Thomas said Canadian Tire has no concerns about funding its credit card business "even if securitization doesn't come back."

Financial Update For Oct. 14, 2009

Eyes turn to Bank of Canada as dollar continues to soar toward parity
Gold hits another all time high

• TSX -23.38 to 11,413(Reuters) as strength in commodity prices was not enough to offset a drop in banking shares
• DOW -14.74 Concern about a heavy slate of upcoming U.S. earnings reports also persuaded some investors to pocket profits.
• Dollar +.73c to 96.48.
• Oil +.88 to $74.15US per barrel. Hits another 2009 high
• Gold +$7.50 to $1,064.20USD per ounce hitting another all time high

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.

Eyes turn to Bank of Canada as dollar continues to soar toward parity
Canadian Press OTTAWA - The recent surge in the loonie could damage the pace of Canada's recovery, Prime Minister Stephen Harper warned Tuesday as pressure built on the Bank of Canada to intervene.
The Canadian dollar has risen more than five cents in the past two weeks, much of it in the last few days of trading.
It closed up 0.73 cents at 96.48 cents U.S. Tuesday from the central bank's posted rate Friday, although it had been above 97 cents for much of the day and was higher in overseas markets Monday when Canadian markets were closed for Thanksgiving.
Speaking in Vancouver, Harper said he was concerned, especially with the quick pace of the appreciation.
"As we said before, we're not out of the woods. There are many risks ... and obviously the value of the Canadian dollar is a risk to recovery," he said.
"I don't think it's a risk to choking off the recovery but if it goes up too rapidly it does have difficult effects on our economy."
The prime minister went on to say the currency is the responsibility of the Bank of Canada, but did not say what he believes governor Mark Carney should do, if anything.
Carney has taken to trying to jawbone the dollar down since it began its steady ascent from 76.53 cents on March 9 with little to show for it.
Avrim Lazar of the Forest Products Association of Canada said the time has come for Carney to match his words with action.
"This is not a penny mining stock we're talking about. It's our currency, the foundation of our economic growth," he said.
"I'm not going to tell Mark Carney how to do his business, but we're saying if you want to keep jobs in this country and you want to avoid destroying the recovery, he has to use the tools at his disposal."
The simplest way for the bank to intervene is to print Canadian dollars and use them to purchase the U.S. currency - in essence devaluing the loonie while increasing demand for the greenback.
Many economists have been forecasting the loonie would hit parity with the U.S. greenback in the middle of next year.
"It could happen middle of next week," said Derek Holt, vice-president of economics with Scotia Capital.
That is good news for consumers in Canada, who may see the prices of imported goods fall in what economists call a "back-door pay hike," and for vacationers or retirees who spend their winter months in the warm states.
However, a strong loonie is regarded as a net negative for the economy with about 35 per cent of the country's gross domestic product is tied of exports and three-quarters of those are destined for the U.S.
The Canadian Manufacturers and Exporters estimates a one per cent appreciation in the value of the loonie - roughly equivalent to one cent at current levels - reduces sales by about $2 billion, equating to about 25,000 jobs.
The bank's next opportunity to chime in on the dollar comes next week at its pre-scheduled policy rate announcement. Few Carney will intervene.
The problem is that Canada's currency is not the only one on the move. Since March 9, other so-called commodity plays have performed just as well, or as in the case of Australia, far better. The Aussie buck has risen about 43 per cent against the U.S. currency, to Canada's 26-per-cent appreciation.
"This is a freight train. There's only so much the Bank of Canada can do," said Douglas Porter, deputy chief economist with BMO Capital Markets.
Analysts say a number of factors are at play, including the fact that money seeking a safe haven in the world's most liquid currency during the crisis this past winter is moving elsewhere now that global growth appears to be resuming.
And the fundamentals favour Canada. Growth in China and other Asian countries is again leading to an increase in demand for commodities that Canada exports. As well, Canada is not as saddled with debt as the United States.
"Sentiment has turned very quickly, very negatively against the U.S. dollar. The market is very focused on the U.S. deficit and the plans for funding it... and the market is concerned about the general outlook for the U.S.," said Camilla Sutton, a currency analyst for Scotiabank.
In the past week, the loonie got additional turbo boosts from the surprisingly strong jobs gain reported on Friday - a net gain of 31,000 jobs - and the Australian central bank's decision to raise rates, leading to speculation the Bank of Canada would be among the next to move.
The loonie's strength, however, makes that even more improbable, noted Porter, since raising rates before the U.S. Federal Reserve does will only add more fuel to the loonie's boosters.

Financial Update For Oct. 13, 2009

TSX -47.59 Fri closed Mon(Reuters)

• DOW +78.07 +20.86

• Dollar +.71c to 95.76. on Friday-closed Mon

• Oil +.08 +$1.50 to $73.27 US per barrel.

• Gold -$7.60 +$8.200 to $1,056.70USD per ounce

• Canadian 5 yr bond yields +.17bps to 2.81. The spread, based on 5 yr rate of 4.09% is 1.18% after a huge spike in bond yields Friday, at one point being up 44 bps over 2 days, they settled up .17 bps. Four weeks ago the bond yield was 2.54%. RBC has already raised their rates by 35 BP.
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55

Most economists say recession is over and recovery is beginning

By Mae Anderson

NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.

That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.

“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.

The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.

Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.

The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.

Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.

The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.

Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.

The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.

Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.

“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.

The Associated Press

Financial Update For Oct. 8, 2009

TSX sees third day of triple-digit gains • Gold hits another all time high• Home sales have now exceeded pre-recession levels

• TSX +101.91 (Reuters) on continuing strength in metals prices and investor confidence that the economic rebound has staying power.

• DOW -5.67

• Dollar -.25c to 94.13. as weakening oil prices and a mixed showing on stock markets dragged the unit lower....

• Oil -$1.31 to $69.57US per barrel. as investors focused on U.S. government data that showed Americans still have little appetite for more petroleum

• Gold +$4.70 to $1,044.40USD per ounce continued its upward climb to close at another record high

• Canadian 5 yr bond yields -.02bps to 2.52. The spread, based on 5 yr rate of 4.09% is 1.57%

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55

Hot housing market expected to cool by November

Reuters
TORONTO -- Low financing costs and pent-up demand helped restore Canadian existing home sales to pre-recession levels, but the red-hot pace will likely peter out before the year is out, a report showed on Wednesday.

The Bank of Canada lowered rates to an all-time low with an aim to cushion the Canadian economy from external shocks. Instead, this aggressive easing has "proved to be more of a trampoline for resale housing markets," Toronto-Dominion Bank economist Pascal Gauthier said.

As of August, 50-60% of pent-up demand has been absorbed, and if the current pace persists, the demand will dry up by November, TD estimated in its Resale Housing Market Outlook. A sharp shift in consumer confidence has contributed to the rebound, combining with low and favourable interest rates that made home ownership affordable for many Canadians.

Between 45,000 and 53,000 potential sales late last year failed to materialize because consumer confidence froze up during the worst of the global financial crisis, TD estimated.

No other Canadian economic indicator in the past few months has recovered as strongly, and in fact, home sales have now exceeded pre-recession levels and matched the lofty volumes of 2007, TD said.

"After plummeting by nearly a third in the second half of last year, the seasonally-adjusted level of sales had climbed back by 61% as of August," the report said.

Overall, TD estimates national existing home sales will rise 2.4% to 445,000 units in 2009 from a year earlier, with the average price climbing 2.1% to $310,000. In 2010, sales are seen rising 2.2% to 455,000 units, while prices jump 5%. But in 2011, TD projects eroding affordability will dampen sales but the average price will still add a modest 2%.

TD also looked at nine Canadian cities and their prospects for existing home sales. All cities coast-to-coast were forecast to show gains from this year to 2010, but then retreat the following year.

On Tuesday, TD released a report that suggested the Bank of Canada could raise interest rates sooner and more aggressively than forecast if real estate strength did not cool.

Financial Update For Oct. 7, 2009

The rate hike heard round the world


Dollar hits one-year high • Gold hits record high • TSX sees triple-digit gain


• TSX +145.35 (Reuters) rose on strong commodities

• DOW +131.50

• Dollar +.93c to 94.38USD rose to its highest level in a year vs the U.S. currency on a string of factors set off by the Reserve Bank of Australia's decision to hike rates to 3.25% from 3%. The first of the Group of 20 central banks to raise interest rates as the global financial crisis eases. Financial markets took it as a signal world economies may be on the path to recovery. Scotia Capital economists said in their view the possibility of Canada following sooner than expected is "precisely nil”

• Oil +$.47 to $70.88US per barrel.

• Gold +$21.90 to $1,039.70USD per ounce The gold sector led the TSX, gaining 5.2%, topping its previous record of $1033.90 of Mar 08

• Canadian 5 yr bond yields +.06bps to 2.54. The spread, based on 5 yr rate of 4.09% is 1.54%

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55

The rate hike heard round the world

Paul Vieira, Financial Post

OTTAWA -- The Reserve Bank of Australia has become the first major central bank to raise interest rates since the financial crisis, citing rising home and stock prices along with the traditional focus on growth and inflation - factors other central bankers are expected to make more prominent as they seek to prevent a repeat of debilitating asset bubbles.

The surprise move by Australian central banker Glenn Stevens was greeted with enthusiasm by markets, as it was interpreted as a sign a global economic recovery was on track. Equities, commodity prices and the Canadian dollar surged on the move, although giving up some gains in later trading.

The Australian rate increase now puts the spotlight on other central banks, such as Canada's, which has been steadfast in setting rates to ensure a 2% inflation target. But inflation in Canada is expected to remain benign until 2011, forecasters say, due to excess manufacturing capacity in the economy and a strong Canadian dollar that will keep a lid on import prices.

The loonie reached a one-year high Tuesday of US94.82¢, before closing at US94.38¢, up 0.93¢ from Monday's close.

"Inflation is not going to be a problem. Consumer spending, and the consumer response to cheap money, however, may be a problem," said Stewart Hall, economist with HSBC Securities Canada.

The consumer response is what might push the Bank of Canada, just like its Australian counterpart. In its decision, Australia's central bank cited solid gains in housing prices and a "significant" recovery in equity markets for raising its benchmark rate 25 basis points, to 3.25%.

"I do get the sense asset prices are going to be play a greater role in the formation of monetary policy," said Michael Gregory, senior economist at BMO Capital Markets. "Because the amount of stimulus is unprecedented, and at emergency levels, removing it won't follow the same rules of thumb."

As a result, he said, central bankers might be looking at new measures to determine when to raise rates. As opposed to looking strictly at inflation and growth, Mr. Gregory said central banks might be forced to pay as much attention to asset prices and credit spreads.

In Australia, the central bank has always paid close attention to housing prices - which are a national obsession and have been on a tear over the past decade - and view them as a guage of the overall strength of the economy.

One of the main debates in the aftermath of the financial crisis is the role central banks should play in averting future meltdowns, and what powers they should be granted to execute this task. By taking on a beefed-up role as overseeing the financial system, central banks would be expected to identify asset bubbles and pop them before they burst. The collapse of the U.S. real estate market, fuelled by low lending rates that attracted less-creditworthy buyers, sparked a credit crisis and global recession.

"The general view before the calamity was that monetary policy was not an effective tool in dealing with asset bubbles," said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.

"But given how much damage was caused by the U.S. housing bubble, the view now is that cleaning up the mess afterward can be far too costly and that monetary policy may need to be responsive to asset prices."

Mr. Alexander was a co-author of a TD report released Tuesday, suggesting the Bank of Canada might be forced to raise rates before it expected should Canada's housing market continue its stellar performance.

Mr. Hall said the Bank of Canada has put itself in a "tiny bit" of a box by indicating it was prepared to keep its key interest rate at 0.25% until June 2010, on the condition that inflation would hit the 2% target in early 2011.

But Mr. Hall said the central bank "would do what it wants to do" should circumstances arise. "It won't get trapped by anything."

The Bank of Canada is set to deliver its next interest-rate on Oct. 20, followed by an updated economic outlook two days later. Analysts will be eyeing the documents closely for any change in tone regarding rates. In the meantime, the Bank of Canada's senior deputy governor, Paul Jenkins, is scheduled to speak in Vancouver Thursday regarding the future "challenges" facing central banking.

Financial Update For Oct. 6, 2009

Toronto races ahead by triple digits on further optimism over the U.S. economy


• TSX +144.29 to 11,102(Reuters) responded positively to data that showed a U.S. economic recovery may indeed be gathering speed

• DOW +112.08 The U.S. Institute for Supply Management said that its services index rose to 50.9 in September from 48.4 in August. Analysts polled by Thomson Reuters had expected a reading of 50, the dividing line between growth and contraction.

• Dollar +1.07c to 93.45USD

• Oil +$.46 to $70.41US per barrel.

• Gold +$13.50 to $1,016.70USD per ounce
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Financial Update For Oct. 5, 2009

Financial Post article at bottom There are a lot variables in a variable rate supports the theory that if taking a variable rate product today, perhaps the 3 year term is a better bet than the 5 yr as “consumers getting into variable rate products are facing the risk that the discounts they negotiate today will look pretty ugly in a few months” as “premiums being offered are moving up and down wildly”.
Also below:
Globe and Mail article: Big banks balk at reform plans Canadian Press article: Weak economy could be with us a while
• TSX -113.43 to 10,958(Reuters)
• DOW -21.61 to 9,487
• Dollar +.17c to 92.38USD
• Oil -$.87 to $69.95US per barrel.
• Gold +$3.70 to $1,003.20USD per ounce
• Canadian 5 yr bond yields -.02bps to 2.49. The spread, based on 5 yr rate of 4.09% is 1.60% We are in the centre of the comfort zone
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

Weak economy could be with us a while, noted economist tells Waterloo audience
BY JOHN VALORZI

WATERLOO — A weak U.S. economy could be with us ”for a very long time,” as unemployment continues to rise, consumers remain tight-fisted and business spending fails to be the demand driver needed to help boost the recovery, says Nobel-winning economist Paul Krugman.

”I’ve got a bad feeling” about where the economy is headed, Krugman said late Saturday at an international economic conference sponsored by a Canadian think tank, Centre for International Governance Innovation (CIGI) founded by Jim Balsillie, co-chief executive of BlackBerry maker Research in Motion Ltd. (TSX:RIM.)
Krugman, the keynote speaker at the conference dinner Saturday night, said Friday’s U.S. weak employment report suggests U.S. workers will continue to lose their jobs until the end of 2010 before the employment picture starts to brighten south of the border.

The U.S. unemployment rate for September jumped to 9.8 per cent and the U.S. economy shed 283,000 jobs, far more than expected and the highest in 16 years. The report suggested that shell-shocked American consumers are not spending and any confidence-building jobs recovery is still far away.

In Canada, the unemployment rate for August rose to 8.7 per cent, the highest in 10 years, with continued weakness in manufacturing. The September unemployment report will be released by Statistics Canada on Friday.

While Wall Street has rebounded and the U.S. banking sector is recovering, ordinary Americans on Main Street are still feeling the recession’s effects, Krugman said at the Centre for Governance Innovation.

”I worry that this could go on for a very long time,” the Princeton University economist said in a news conference before his dinner speech to about 200 economists, policy analysts, and government and corporate officials from around the world.

Krugman, who won the 2008 Nobel prize in economics, said that while the massive U.S. government stimulus package has helped, that can’t bring recovery on its own and more public spending may be needed. Meanwhile, weak consumer and corporate capital investment spending means further rocky times ahead.

”It’s about source of demand,” he said, alluding to the Great Depression of the 1930s, where a decade of economic weakness ended only with massive public spending during the Second World War. ”Consumers can’t do it. Export-led growth isn’t going to work because it’s a global crisis. Not only do recessions caused by financial crises tend to persist but the recovery almost invariably depends on the crisis country (the United States) moving into a large trade surplus. Since this is a global financial crisis, we have a problem.”

Krugman noted that past recessions in 1990 and 2001 saw employment recovery within 18 months, something that isn’t happening this time.
For Canada, weak U.S. growth will squeeze the automotive, forestry and parts sectors, which ship most of their output to the U.S. market. But while Canada won’t grow like before unless there’s full U.S. economic recovery, our resources-based economy will benefit from high demand for oil, minerals, grains and chemicals from China, India and other Asian economies.
Earlier Saturday, other speakers at the conference predicted that the United States will lose economic power to China over the next decade or so and the Chinese will succeed in making their currency rival the U.S. dollar as Beijing sets up regional financial ties with Japan in Asia, broadens its trade and flexes its new-found economic muscle around the world.

One expert predicted that Hong Kong could become a global financial centre as it seeks to become the pipeline for Chinese financial flows in Asia and around the world.

”Coming through this crisis, will London and New York still be as powerful,” said Gregory Chin, a York University professor and senior fellow at the Centre.
The Centre for International Governance Innovation is a non-profit, not partisan think tank based in Waterloo that conducts research, holds conferences and publishes working papers and books and makes policy recommendations on international governance issues. CIGI focuses on international relations, global economic policy and multilateral policy-making.
The think tank is based in the former Seagram Museum in Waterloo and was founded by Balsillie, who, together with Mike Lazaridis, his co-CEO at Research In Motion Ltd. (TSX:RIM) made a donation in 2002 to establish the centre.
In 2003, the federal government provided a matching grant.
The Canadian Press
Big banks balk at reform plans Kevin Carmichael and Brian Milner
Istanbul and Waterloo, Ont. — Globe and Mail Update
The world's big banks are pushing back as the move by global finance officials for more stringent regulation gathers force.
Deutsche Bank AG chief executive officer Josef Ackermann, who leads Germany's biggest lender and chairs the International Institute of Finance, suggested on the weekend that efforts by the Group of 20 nations to require financial institutions to hold more money in reserve risked choking economic growth.
“The capital issue is important, but it's not as important as liquidity and profits,” Mr. Ackerman said. Policy makers should be wary that their efforts “could go too far and jeopardize real growth in the economy,” he added at press conference in Turkey's financial capital.
Mr. Ackerman made the remarks during a conference hosted by his 375-member lobby group in the same city at the same time that economic officials from the 186 countries that belong to the International Monetary Fund and the World Bank began annual meetings of the two institutions.
The response from policy makers who have deployed hundreds of billions of dollars bailing out failed financial institutions, buying toxic securities and guaranteeing banks' asset purchases was predictably snide.
“It was only a year ago that we were on the precipice of our international banking system failing and having a massive international crisis that would have affected everyone's normal lives,” Finance Minister Jim Flaherty said in an interview.
“I have a little trouble with bankers, who were participants in that, crying wolf … They are going to have to get used to effective, stringent regulation.”
With the banks profitable again, financial markets stable and tentative signs of recovery, policy makers such as U.S. Treasury Secretary Timothy Geithner and Bank of Italy Governor Mario Draghi are racing to lock in regulatory changes before they lose the political advantage.
Walter Mattli and Ngaire Woods, two professors at Britain's Oxford University, published research earlier this year that shows that the longer politicians wait to implement reforms after a financial crisis, the greater the chance that financial industry lobbyists and other specialists take over the process and water down reforms.
Mr. Geithner dismissed Mr. Ackermann's comments as “just lobbying.”
“There is always some risk that if you do it too quickly, or you do it poorly, you'll create a bunch of unintended consequences and you will restrain innovation too much,” Mr. Geithner told reporters Sunday. “But that's not the main risk we face. The main risk we face is making sure we sustain enough political will to put in place reforms that are going to be strong enough so that we can be more confident that this will be more stable.”
Less than two weeks ago in Pittsburgh, the leaders of the Group of 20 countries endorsed a plan to force banks to hold more and higher-quality assets as capital, restrict leverage ratios and demand that compensation be tied to longer-term results, among other measures. They called on their finance ministers to define and implement specific rules over the next couple of years.
Former Canadian prime minister Paul Martin said at a conference in Waterloo, Ont., yesterday that the G20's handling of financial regulation will be one of the issues that determine the group's success as an organization for ordering the world's economy.
Mr. Martin told a conference organized by the Centre for Global Governance Innovation that the G20 should demand mandatory, not voluntary, enforcement of co-ordination by an international body. Without it, financial institutions could seek out jurisdictions with the weakest regulatory systems, he said.
“The time for the G20 to draw the line in the sand is now,” Mr. Martin said. “While the right words were said in Pittsburgh, it's far from clear that all of the G20 members are prepared to live up to their commitments.”
In Turkey, Mr. Draghi, who also heads the Financial Stability Board, a grouping of international regulators that's responsible for coming up with new regulations, said banks will have lots of time to get used to new rules.
The “new rules will be set out by year-end, will be calibrated next year” and “they will be phased in as conditions improve and recovery is assured with the aim of implementing them in the years 2011 and 2012,” Mr. Draghi told reporters, according to Bloomberg News.
There are a lot variables in a variable rate
Garry Marr, Family Man, Financial Post
He has a landmark study on mortgages, but York University professor Moshe Milevsky says he never anticipated the credit markets of the last year.
The 2001 paper examined the previous 50 years to determine whether consumers benefitted from locking into a fixed-rate mortgage or going with a variable-rate product linked to prime. Consumers did better 88% of the time by going with the variable-rate option. The study has been used by banks to lure consumers into variable rate products. Currently, about 25% of mortgage holders have gone with floating rates.
"I've written seven books and 100 research articles and that's the one I'm known for," says Mr. Milevsky, with a laugh. "I just wish some of these banks would mention the author."
He says the study results still hold true. If you factor in the past nine years, the variable rate probably does better about 96% of the time.
But that doesn't mean if you are looking for a mortgage today you should float, he says. "There is another element of risk to analyze," says Mr. Milevsky.
He's refering to the volatility in the mortgage market for variable-rate products. The variable rate is still tied to prime, but the discounts and premiums being offered are moving up and down wildly.
A year ago, consumers were being offered discounts as much as 90 basis points below prime, meaning those people who took it are now borrowing at 1.35% based on the current prime rate of 2.25%. When credit markets tanked a year ago, variable products were being sold at 100 basis points above prime.
Credit markets have calmed since. Bank of Montreal announced a week ago that its variable rate was down to 2.25%, with no discount or premium.
The Bank of Canada may have pledged to not touch the rate until next June, but consumers getting into variable rate products are facing the risk that the discounts they negotiate today will look pretty ugly in a few months.
Worse yet, the variable products being sold by the banks are generally closed mortgages, so they cannot be paid off immediately without penalty.
An open mortgage can be paid off at any time, but you pay a higher rate for the privilege. At Bank of Montreal, for instance, an open three-year mortgage costs 3.05%, so you are paying an 80-basis point premium.
"It's important to understand what kind of flexibility features you have in your mortgage," says John Turner, director of mortgages with Bank of Montreal.
With such confusion in the marketplace, these days even Prof. Milevsky is leaning somewhat in favour of the five-year closed fixed-rate mortgage. On a discounted basis, some banks are offering rates as low 3.69%.
"At some point, people have to ask themselves if they can afford the fact that eventually these things are going to go up, whether it's in one year, two years or five years," he says.
gmarr@nationalpost.com


Read more: http://www.financialpost.com/news-sectors/story.html?id=2059901#ixzz0T3opKCUa

Financial Update For Oct. 2, 2009

TSX ends at 3-week low after weak U.S. data

• TSX -323.20 to 11,071(Reuters) hit by a mix of soft commodity prices and weak data from the United States that raised concerns about the strength of economic recovery. TSX remains a staggering 48% above the 5-year low it tumbled to in March

• DOW -203.00Discouraging new reports on unemployment and manufacturing reinforced worries that job losses and meagre factory output will make for a weak recovery as the nation climbs out of the worst recession in decade

• Dollar -1.19c to 93.40USD lost the full cent it gained Wed

• Oil +$.21 to $70.82US per barrel.

• Gold -$8.50 to $999.50USD per ounce

• Canadian 5 yr bond yields -.07bps to 2.51. The spread, based on 5 yr rate of 4.09% is 1.58% We are inside the comfort zone again, for the first time since Sept. 11th

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

Bulls retreat as markets brace for more gloom

Alia McMullen, Financial Post
North American stocks started the fourth quarter with a sharp drop Thursday, as disappointing U.S. manufacturing figures added to brewing anxiety about the strength of the economic recovery.

Even surprise jumps in U.S. personal spending, pending home sales and construction figures were unable to calm investors, who were determined to act cautiously ahead of Friday's non-farm payrolls figures.

"The general tone to the data is that it is at least as good as expected and in some cases much more so, but markets have priced in perfection such that only very upside surprises to indicators will matter," said Derek Holt, an economist at Scotia Capital.

"It also seems that investors may be coming around to the idea that the mixed data we keep getting suggests that the path to recovery may be a lot slower and harder than had previously been hoped," said Colin Cieszynski, a market analyst at CMC Markets Canada.

The mixed bag of data was largely positive Thursday, with personal spending in the United States up 1.3% - the fourth consecutive monthly gain and the strongest increase since late 2001. That was well above the 0.2% gain in personal income, pulling the savings rate down to 3% from 4%.

"The solid rise in consumer spending in August is heartening and is expected to be a key factor sending overall GDP back into positive growth territory in the third quarter," said Paul Ferley, assistant chief economist at RBC Capital Markets. However, he said the bulk of the jump was attributable to the federal government's "cash for clunkers" car purchasing incentive, an initiative which finished at the end of August. As a result, future spending figures may not be as strong.

Other data showed construction spending up 0.8% in August and pending home sales up 6.4%, also above expectations. However, the positive results were overshadowed by a decline in U.S. manufacturing activity.

The Institute for Supply Management's manufacturing index, which was expected to rise, slipped to 52.6 in September from 52.9 the previous month. The decline was small and the index remained above the critical 50 level that separates expansion from contraction.

However, the unexpected softness was compounded by weak manufacturing data from around the globe. The manufacturing purchasing managers index in China came in below expectations at 54.3, while the U.K. also missed the mark at 49.5.

"The pullback in momentum in the manufacturing sector simply reflects the underlying reality that when you strip away the various fiscal stimulus programs and measures, there is not much underlying strength in spending in the economy," said Brian Bethune, the chief U.S. financial economist at IHS Global Insight.

The soft factory data combined with a drop in Monster Worldwide Inc.'s measure of online job ads and a further increase in those seeking unemployment benefits suggested Friday's U.S. non-farm payrolls figures could come in worse than expected. The market had expected job losses of about 175,000 from Friday's report after 216,000 jobs were lost in August. However, Jan Hatzius, the chief U.S. economist at Goldman Sachs Group said the latest data suggested losses would be higher. He revised outlook to a decline of 250,000 jobs in September from a 200,000 drop previously.

Financial Update For Oct. 1, 2009

Canadians between the ages of 18 and 34 are more interested in saving for a house than for retirement. CP article below

• TSX -.03(Reuters) as a handful of weaker energy and technology players kept the index from adding to already hefty quarterly and monthly gains. The flat close followed data that showed Canada's economy stagnated in July, raising some doubts about whether gross domestic product would return to solid growth in the third quarter

• DOW -29.92

• Dollar +1.28c to 93.40USD

• Oil +$3.90 to $70.61US per barrel.

• Gold +$14.90 to $1008.00USD per ounce

• Canadian 5 yr bond yields -.01bps to 2.57. The spread, based on 5 yr rate of 4.09% is 1.52%

• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.55 and 1.75

Young Canadians saving less than their parents

Brenda Bouw, THE CANADIAN PRESS
The Canadian Press, 2009

Young Canadians are saving less than their parents and grandparents did at the same age, with young men being the worst at sticking to a budget, according to the results of a new survey.

The TD Canada Trust study released Wednesday suggests 80 per cent of Canadians found saving money "too hard" and that young people between the ages of 18 and 34 were more interested in saving for a house than for retirement.

Among survey responses, 19 per cent 18-to 34-year-olds said they were saving 10 to 25 per cent of their total monthly income. That compared to 29 per cent of people over age 55 who said they saved that amount when they were younger.

Young adults blamed their lack of savings on not making enough money, while people 55 and older said the cost of living prevented them from saving more when they were young.

TD's Carrie Russell said the results were disappointing and prove that saving money is not something that comes naturally to most.

"It has to be practised," said Russell, a senior vice-president at the bank. "And the earlier you start the better off you will be."

The survey found 54 per cent of 18-to 34-year-olds respondents said they have a rainy day fund, compared to 55 per cent of 35-to 54-year-olds and 63 per cent of those 55 and older.

However, 76 per cent of 18-to-34 year-olds considered themselves financially responsible, compared to 82 per cent of 35-to-54 year-olds and 86 per cent of those 55 plus.

Debt was said to be the biggest roadblock for young people trying to save more, in particular for men. Twenty-eight per cent of male respondents cited debt as the reason why they can't save more, compared to 18 per cent of women.

Women were also better at sticking to a budget, the survey indicated.

The gap was greatest in the 35-to 54-year-old range, in which 43 per cent of women said they stuck to a monthly budget, compared to 28 per cent of men.

Russell said women - often cited as being big spenders - are better at budgeting because they have practise doing it at home with family finances.

"They often deal with that tradeoff on what to spend money on, and what not. It's a daily decision," she said.

Vancouver resident Jarleen Clohan, 23, said she is good at saving money, in part because she grew up watching her parents sometimes struggle with making ends meet.

Clohan said she does shop, like most women, but that her spending is "controlled."

She saves money because she likes the "reassurance" of having a savings account.

Armin Barekat, 32, said he doesn't feel the need to save too much money.

Barekat, who lives in Vancouver, said he has a secure job and a good credit rating. He is also confident he can borrow money if needed, and pay it back.

"Saving money is good, but I don't worry about it," he said.

Barekat is saving money for a down payment on a home, but hasn't started saving yet for retirement.

"I am too young to think about that," he said.

The survey suggested 23 per cent of Canadians in Barekat's age group wanted to save for home. That figures rose to 25 per cent for those ages 35 to 54.

Looking back to their younger years, 19 per cent of people age 55 and over said they had saved for a home, while 25 per cent said they saved for retirement.

Besides providing fresh data on Canadian attitudes, such surveys are a popular promotional tool for Canadian companies, who use public opinion polls to gauge consumer thinking and to promote specific brands to ordinary Canadians.

Banks and mutual fund companies have long used such surveys to make consumers aware of financial products and services and to learn more about the public's financial management habits.

The bank released the survey to help promote its Simply Save program, which allows customers to save a preset sum every time they use their debit card.

The survey of 1,000 men and women was conducted by Angus Reid Strategies in late July. It has a margin of error of plus or minus 3.1 per cent, 19 times out of 20.