Financial Update for Feb. 17, 2009

Markets were closed on Monday as most Canadian provinces celebrated Family Day and Presidents Day in the US

· TSX -100.68 (Reuters)
· DOW -82.35
· Dollar +.70c to 81.03USD
· Oil +$3.53 to $37.51US per barrel.
· Gold -$7.00 to $941.50 USD per ounce
· Canadian 5 yr bond yields +.03bps to 2.11
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html

Obama poised to sign stimulus into law BEN FELLER The Associated Press

WASHINGTON — President Barack Obama is ready to sign into law the most sweeping economic package in decades, a rescue plan meant to reinvigorate job creation, consumer spending and public optimism. Add the bill to an ever-growing deficit.

Capping the biggest victory of his month-old administration, Mr. Obama will sign the economic legislation Tuesday in Denver

Clement urges India to invest in Canada

Meagan Fitzpatrick, Canwest News Service

OTTAWA - Canada is wide open for business and is still a wise place to invest despite its weakened economy, federal Industry Minister Tony Clement is telling government officials and business leaders in India this week.

Mr. Clement arrived in India on Saturday for a six-day visit to New Delhi and Mumbai, and during a teleconference with reporters Monday he said his two primary objectives there are to encourage more foreign direct investment by Indian businesses in Canada, and to tap into the growing tourist market in India and convince vacationers to pick Canada as a destination.

During the last two days he met with ministers from the Indian government, held a round table with tour company operators to get feedback on how to market Canada, and met with a group of young professionals and entrepreneurs.

"The message was the same: that Canada is open for business, that we have withstood the economic turmoil relatively well, as compared to other G7 and OECD countries, our bank system is one of the few bank systems that hasn't needed a bailout, for instance, and that we are positioned to get out of the contraction as quickly as possible and then start to grow again," said Mr. Clement.

The industry minister said he told those he met with that Canada's corporate tax structure and changes being made to the Investment Canada Act, the legislation that regulates investments made by non-Canadians in businesses in Canada, should make Canada an attractive location for Indian companies to grow.

Mr. Clement said Canada is signalling "our steps away from the protectionist ill-winds that are blowing." He and his counterparts did discuss efforts by the United States Congress to include protectionist-type measures in that country's economic stimulus package, Mr. Clement said, and they "came to the conclusion that Canada and India are on the same side" and that "protectionism had to be resisted."

The industry minister said they agreed that it would be better for the global economy and the American economy if it resisted protectionist pressures and that he thought India wanted some assurance that Canada would not pursue a protectionist agenda.

Canada and India conduct about $4-billion worth of trade every year and Mr. Clement said there is no reason that figure should not increase, especially given there are one million Canadians of Indian origin and that the two countries have positive relations.

Household debt loads in 'danger zone'

Carla Wilson, Canwest News Service

VICTORIA - Many Canadian households carry debt loads in the "danger zone," says the executive director of the Ottawa-based Vanier Institute of the Family.

Average household debt rose to more than $90,000 in 2008, Clarence Lochhead told a recent meeting of Victoria's Association of Family Serving Agencies. The Vanier Institute is a non-profit agency promoting the well-being of Canadian families.

The total debt-to-disposable income ratio rose to 140% last year, Mr. Lochhead said, referring to the Institute's report, The Current State of Canadian Family Finances.

Last year, the average household income was $65,200, up by 11.6% from 1990. In that same period, spending jumped by 24.4%, total debt went up more than six times faster than incomes, and annual savings shrank, he said.

The median (mid-point) real earnings of Canadians, when adjusted for inflation, show little increases between 1980 and 2005, he said. Meanwhile, many citizens are overloaded at work.
The reward: "We got credit. We got a lot of credit," he said in reference to interest rates dropping in the past several years.

"But there was a whole, I think, really big cultural shift too in the way we think about spending, the way we feel about money, the way we feel about availability of credit - the push to spend when you don't have money," he said.

When spending outpaces income, families end up close to the edge of their monthly budget. Mr. Lochhead said it can be financially painful if they hit a bump in the road, whether it is due to the fallout from today's recession or a personal reason.

It is not irrational behaviour to pull back on spending, Mr. Lochhead added. He said that not all debt is bad, but rising consumer debt as a percentage of annual income is "problematic."

Looking at the examples from past recessions, Mr. Lochhead said it could take a long time to recover from this recession.

He also had advice for governments that plan stimulus spending, "At the provincial level, why don't we do something about social assistance rates?" That money goes immediately back into the local economy, he said.

"Any analysis of spending at the lower income end will show you that every marginal dollar received will be spent and there is a very high probability that it will be spent locally."

When we are talking about infrastructure, Mr. Lochhead urged looking at more than roads and bridges. "Let's talk about providing supports that are going to help families."