Financial Update For June 23, 2010

• TSX -138.14 amid fluctuating commodity prices, as traders eyed the U.S. Federal Reserve's two-day meeting in which the Fed is widely expected to leave interest rates unchanged at record lows near zero
• DOW -148.89
• Dollar -.45c to 97.17cUS
• Oil -$.61 to $77.21US per barrel.
Gold +$..20 to $1,239.90 USD per

In economic news, Statistics Canada said the consumer prices index (CPI) rose 1.4% year-over-year in May following a 1.8% increase in April. Economists were expecting CPI to rise to 1.3% year-over-year in May
U.K. Unveils Canada-style Austerity Budget -Paul Vieira, Financial Post •
Britain, Germany and France stood united yesterday in announcing plans to impose a bank tax -- yet another sign of a growing rift among Group of 20 countries ahead of the leaders' summit in Toronto on how to restructure the global economy after they had banded together to pull it out of the abyss.
The disagreements, ranging from banking reform to whether additional stimulus or deeper budget cuts are now required, throw a major wrench into Canada's call for "solidarity" among G20 members to nurture the global recovery while at the same time putting in place the pieces to assure strong but sustainable growth. These divisions are likely to be reflected in the final communique from the Toronto meeting, which may indicate countries are on their own in terms of implementing measures best suited for their economies.
"There's now major differences amongst the players," said Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, adding this is a reflection of the uneven recovery underway in the global economy. "The G20 is searching for common interests, and a year on from the peak of the crisis, it doesn't look like it is there."
The debate over the global bank tax was one of those hot-button G20 issues that pitted the big European economies against Canada and other countries that did not bail out their financial institutions. While there is no consensus in the G20 to proceed, that didn't stop Britain, Germany and France from saying banks in their countries would be taxed.
Britain was first off the block, as that country's Conservative-led coalition government unveiled a £2-billion annual levy on banks as part of its budget. At the same time, French President Nicolas Sarkozy and German Chancellor Angela Merkel released a joint letter they sent to Prime Minister Stephen Harper--who is hosting the leaders this weekend -- demanding the G20 agree on a transaction tax. That is highly unlikely, given Canada's stern opposition. Instead, the G20 communique may suggest it will be up to individual countries to determine what measures are required to ensure taxpayers aren't stuck with footing the bank bailout bill.
Canada had proposed an alternative, called embedded capital, which would see lenders insure themselves through the issue of debt securities that could be converted into shares in a crisis. But a spokesman for Finance Minister Jim Flaherty said the Canadian alternative has, so far, won over few converts as "concerns" have been raised.
"I think embedded capital is dead," said Paul Masson, a professor at Rotman School of Management and former senior Canadian official at the International Monetary Fund. "The uncertainty about how the conversion into equity would be triggered makes it a fifth wheel."
With no agreement on a tax or embedded capital, this means more focus will be on changes to banking regulatory standards--governing capital levels and leverage limits -- to curb the type of excessive risk-taking that sparked the crisis. Canada is keen to get further agreement at this G20 summit to ensure a deal is ready later this year. But Mr. Masson said the timetable is too optimistic as the issues are too complicated. And, he said, unanimity is not assured, nor is implementation, as some countries might balk given their weak economies.
The Bank of Canada warned as much this week in its semiannual financial system review, when it said there's a risk the required changes to banking rules could be "diluted."
As if this weren't contentious enough, there's a division emerging on what the global economy requires now. Canada and others want G20 members to outline credible, yet aggressive, plans to reduce debt-to-GDP levels as part of the effort to unwind global imbalances. However, the Obama administration in Washington -- one of the biggest debtor nations -- is now talking about the need to press on with additional stimulus in an effort to avoid a potential double-dip recession.
Canada will seek an agreement among G20 members in Toronto to halve their deficits by 2013, and get debt-to-GDP ratios on a more sustainable level by 2016.
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FINANCE MINISTER VOWS TO SLASH DEFICIT BY £135B. HERE'S HOW HE MEANS TO DO IT:
SPENDING
- Three-quarters of reduction to come from spending cuts.
- Cuts of 25% to all departments outside health, foreign aid.
- Two-year public-sector wage freeze.
- Queen
Elizabeth's public allowance frozen at £7.9-million.
- £11-billion cut from welfare bill. Single mothers enticed to return to work when children reach school age.
TAXES
- Banks to face annual extra levy of £2-billion.
- VAT (like GST) will jump to 20% in January from 17.5%
- Capital gains on sale of assets rises to 28% from 18%.
- Payroll tax to rise one percentage point.
- Threshold at which people
begin paying taxes raised £1,000 to £7,475, exempting 880,000.
- Corporate tax rate falls to 24% by 2014 from 28%.

Read more: http://www.financialpost.com/RIFT+WIDENS/3188568/story.html#ixzz0rg1AoHW4
Forget market timing, it's all about life timing
Garry Marr, Financial Post •
'You know, you're making the biggest mistake of your life. The housing market is going to fall."
I got this great piece of advice from another journalist at the Financial Post, who has since left the newspaper, after buying my first home. Not exactly the type of thing you want to hear after taking on huge debt and making the biggest financial decision of your life.
Lucky for me, I didn't heed that advice about Toronto's red-hot real estate market -- in 1998. I'm not going to say I made a shrewd business decision 12 years ago, or even six years later when I bought a larger house.
For me, it wasn't a case of not following what turned out to be bad advice from a fellow business journalist. Nor was it about trying to time the market.
I was simply following the same pattern as most Canadians: I got married and decided to stop renting and buy something. Later came the need for a bigger home when the second kid was on the way.
Which brings us to today. The supply of housing is rising fast as people try to list their homes for sale before the market "crashes." This is happening at the same time that demand is starting to wane. Economists and even the real estate industry are all predicting a correction, the only argument being how severe it will be.
So, the question for anyone buying is, should you wait?
Don Lawby, chief executive of Century 21 Canada, thinks the strategy of waiting for a crash is not going to work during this economic cycle. "For a market to crash, you have to have people who are desperate to sell," says Mr. Lawby. "People will [only sell] if they can't afford their mortgage or they don't have a job."
He doesn't see a decline in prices, "unless you are predicting that mortgages will renew at a hefty premium, which is not the case, or a whole bunch of people are going to lose their jobs."
Mr. Lawby believes neither will happen.
And, he adds, you are really into a risky game if you are timing the market. "A house is a home. If all you are doing is looking at it as an investment --that's what happened the last 15 years--it's not just that. It's a place to live and a place to raise a family," says Mr. Lawby.
Even Benjamin Tal, a senior economist with CIBC World Markets, who last month said in a report that Canadian housing is 14% overvalued, has doubts about playing the market. But he suspects that's exactly what some Canadians will do.
"Is there a sense that prices will go down and people will wait? I think it might be an issue," says Mr. Tal. "It won't be the main reason [people don't buy], but it will happen at the margins. The fact that people sell at the peak and wait to buy is a normally functioning market."
But even if you do make the right call on housing prices, it could end up backfiring on you in other ways. For example, if interest rates rise fast enough, any gains you make on price could be erased by interest charges, says Mr. Tal.
Edmonton certified financial planner Al Nagy says you need to think of your house the way you think about any long-term investment. "Whether it's an investment for use in your retirement or a house to live in, it's a long-term thing. The timing becomes less critical than it would be if it is a speculative [investment]."
And he says making a call on the housing market is as tricky as any other investment call. "It's very rare you catch the bottom. You can't let the market dictate when it's time to buy. The time to buy is when you can afford it," says Mr. Nagy.
I'm not sure that philosophy would fly with my former colleague, but the problem with timing the market is, what if your timing is off?
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Forget+market+timing+about+life+timing/3129672/story.html#ixzz0rJ3cAHut