· TSX +210.22pts broke out of a 4session slump as the heavyweight resource sectors benefited from strong commodity prices and outweighed the sagging financial sector
· Dow -109.51pts amid continuing credit crunch worries and a report from the U.S. Commerce Department stating that retail sales dipped 0.1 % last month, the first decline since February and a worse showing than the flat reading economists had been expecting
· Dollar +.03c to $94.12US
· Oil +2.99to $116.00US per barrel. after a bigger-than-expected decline in gasoline supplies in the U.S
· Gold +16.80 to $825.00US per ounce –
Investors still jittery one year after ABCP collapse
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David Friend The Canadian Press TORONTO
A year has passed since the collapse of Canada's $33-billion asset-backed commercial paper market and small investors are still waiting for the Ontario Court of Appeal to decide what happens to a restructuring plan that has served as the only hope of investors recovering some of their money.
It wasn't supposed to happen like this, with hundreds of Canadians anxiously hoping their retirement savings wouldn't be whittled down to a mere fraction of their worth -- then again, the market wasn't supposed to crumble last summer either.
Signs of the ABCP troubles began on Aug. 14, 2007, when Coventree Inc. (TSX: COF), the largest nonbank arranger of ABCP in Canada, announced that a "market disruption'' tied to the default of U.S. mortgages resulted in the firm being unable to find investors interested in rolling over the investments as they matured.
The trading of Canadian commercial paper was quickly frozen, and over time the ABCP deterioration spread to world markets.
In Canada, a committee was formed to clean up the problems, headed by Bay Street lawyer Purdy Crawford.
All of the unpredictability has left some Canadians that invested in ABCP, many of them retired, reconsidering their savings, their futures and even looking at selling their homes to gain some financial certainty.
But some say that they've chipped away at their short-term savings over the past year and are nearing dire straits.
"I think we all knew the restructuring plan was going to take a lot of time to put together,'' said Daryl Ching, an independent consultant who spent months working alongside corporations holding ABCP, and last summer dealing with securities at Coventree.
"What's shocking to me is how long the court of appeals is taking.''
Two-and-a-half months ago the restructuring plan seemed to be close to a finale.
An Ontario Superior Court judge had accepted an amendment to the plan that would allow certain noteholders to pursue claims of fraud against brokerages and dealers that sold them ABCP, while protecting banks and rating agencies from litigation.
But the decision also left open a 21-day window for individual and corporate investors to file appeals on the case, and the three judges assigned to the process have been working on a decision since late June.
The date for a final decision is anybody's guess because of scheduling and summer holidays.
"I thought there was a sense of urgency,'' Ching said.
"I've heard people give me stories like, 'The court should not be rushed into making decisions like this.' But we do have 2,000 retail investors who have their life savings in limbo.''
"I think this is a unique enough situation that the decision should be expedited.''
For investors like Yulan Wong, who lives in Vancouver, a resolution can't come soon enough.
The 60-year-old retired real estate agent says she was forced to return to work this summer after realizing she might not have enough money to pay for her bills and the university education of her niece, who is under her care.
"I'm hoping and I'm hoping, and getting really scared they might not pay back the money,'' she said.
"I was looking after money for my niece, because she lost both parents, and I'm feeling very guilty.''
All together Wong estimates that she has $300,000 frozen in the ABCP debacle, and she said that if the assets remain frozen past the current Aug. 31 deadline she might have to consider other major changes to her life.
"I really don't know what I'll do . . . Going back to real estate is difficult at this stage because of the (housing) market, and I've given up all my leads thinking I was going to retire this year,'' she said.
"I could sell my house but I still have two kids who are living here.''
Stories like Wong's dilemma have sprouted up across the country but were virtually unknown when the troubles first emerged.
Ching remembers the uncertainty that surrounded his final weeks at Coventree, before he became an independent consultant.
"I didn't even know there was a single retail investor at Coventree,'' he said, recalling the order of events late last summer.
"For me, it was when a retail investor went on my ABCP blog and made a comment saying 'I'm a Canaccord client and I've got ABCP.' And that was probably (months later) in December.''
"I'm sure there's some that knew about it. Certainly we didn't,'' he added.
A list of ABCP holders has never been officially compiled because of confidentiality laws, but it quickly became apparent that the known investors were just the tip of the iceberg when a Vancouver businessperson launched a suit against Canaccord for selling him the assets, and more lawsuits followed.
Crawford said it wasn't until the ABCP restructuring committee embarked on a three-day whirlwind tour to talk to retail investors in March that he understood just how many average Canadians were affected by the frozen assets.
"We started in Toronto, and it wasn't so obvious there,'' he remembers, saying that the numbers grew when they moved on to Montreal and Edmonton. In Vancouver, "the place was packed. It was good for those investors to have a face to talk to. I saw the anger.''
Thursday, August 14, 2008
Wednesday, August 13, 2008
Financial Update
Stocks falter as credit woes weigh
· TSX -36.19pts continues its downwards spiral, closing 8 of the 9 last weeks lower than it opened them, mostly because of tumbling oil prices as well as weakness in gold and materials.
· Dow -139.88pts JPMorgan Chase said it has accumulated $1.5 billion of losses so far this quarter on mortgage-related assets. The news stoked concerns of more pain yet to come.
· Dollar +.57c to $94.09US
· Oil -1.44 to $113.01US per barrel. To a new 3 month low on more evidence that developed countries such as the United States are cutting back on their energy use· Gold plummets -$5.35 to $815.50US per ounce – to an 8 month low as a strong US dollar triggered a massive sell off
U.S. banks tighten credit
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August 12, 2008 The Associated Press WASHINGTON
More U.S. banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the American economy.
The U.S. Federal Reserve said yesterday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.
The new survey, conducted in early July, found that about 75 per cent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 per cent of banks who said they were tightening lending standards for prime mortgages in the previous survey.
The Fed's July survey covered 50 banks which hold about 80 per cent of the residential mortgages on the books of all commercial banks.
Out of this group of 50 banks, 32 said they were still originating so-called non-traditional home mortgages. Among these 32 banks, about 85 per cent said they had tightened their lending standards, up from 75 per cent who said they were tightening lending standards for non-traditional mortgages in April.
The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories.
· TSX -36.19pts continues its downwards spiral, closing 8 of the 9 last weeks lower than it opened them, mostly because of tumbling oil prices as well as weakness in gold and materials.
· Dow -139.88pts JPMorgan Chase said it has accumulated $1.5 billion of losses so far this quarter on mortgage-related assets. The news stoked concerns of more pain yet to come.
· Dollar +.57c to $94.09US
· Oil -1.44 to $113.01US per barrel. To a new 3 month low on more evidence that developed countries such as the United States are cutting back on their energy use· Gold plummets -$5.35 to $815.50US per ounce – to an 8 month low as a strong US dollar triggered a massive sell off
U.S. banks tighten credit
Email the author
August 12, 2008 The Associated Press WASHINGTON
More U.S. banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the American economy.
The U.S. Federal Reserve said yesterday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.
The new survey, conducted in early July, found that about 75 per cent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 per cent of banks who said they were tightening lending standards for prime mortgages in the previous survey.
The Fed's July survey covered 50 banks which hold about 80 per cent of the residential mortgages on the books of all commercial banks.
Out of this group of 50 banks, 32 said they were still originating so-called non-traditional home mortgages. Among these 32 banks, about 85 per cent said they had tightened their lending standards, up from 75 per cent who said they were tightening lending standards for non-traditional mortgages in April.
The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories.
Tuesday, August 12, 2008
Financial Update
· TSX -138.55pts to 13,203, pulled down lower again by resource shares, which fell with commodity prices
· Dow +48.03pts to 11,782
· Dollar -.17cto $93.52US Sharply lower oil prices and a broader correction among other major currencies against the greenback has helped push the Canadian dollar down almost 7% since last hitting par with its U.S. counterpart just three weeks ago. And if economic forecasts are correct, the loonie will decline further, boosting the prospects for industries like manufacturing, forest products, information technology and health care.
· Oil after falling $10 last week -$.75 to $114.45US per barrel falling to a new 3 month low as the U.S. dollar extended its rebound and more signs emerged that China's energy demand could be leveling off and traders monitored the conflict between Russia and Georgia that some believe could disrupt supplies
· Gold tanked 4% -36.50 to$820.85US per ounce to its lowest level in a year
· A strong US dollar also caused copper to hit a 6 month low
New home prices soften, construction plummets Gary Marr, Financial Post
New home construction, fuelled by a major drop in Ontario, continued to decline last month confounding economists who now say the housing market is falling faster than expected.
Canada Mortgage and Housing Corp. said they were 186,500 new homes constructed last month on a seasonally adjusted annualized basis, a 13.6% drop from a month earlier. The pain was felt hardest in Ontario's condominium market where the construction of multiple apartment units was down 57.9% in July from a month earlier.
Paul Ferley, assistant chief economist with RBC Economics, noted the slide in housing starts was worse than many economists had estimated. The consensus was for 210,000 starts in July which would have been only a 3.6% decline from June.
"The weakness is occurring much sooner than we expected," said Mr. Ferley, adding no one is expecting the Canadian housing market to get as ugly as its United States counterpart.
"The drop in starts in July was likely slightly overstated with the weakness largely concentrated in Ontario. However, housing activity is definitely on a downward trend consistent with indications of deteriorating affordability through last year," said the economist.
Most of the country was hit by the sudden dip with Alberta and British Columbia the only exceptions. Starts rose 23% in Alberta from a month earlier and 5% in B.C. from June to July.
While much is being made of the fact that the condominium sector skewed the July numbers, construction of single family homes is also waning. CMHC said urban single starts dropped 6.6% in July from a month earlier.
Brian Johnston, president of Monarch Corp. a major developer in the Toronto region, said the problem is the housing sector just cannot compete with its own past record. Starts hit a 19-year in 2006 and dropped only marginally last year.
"I would suggest there is a worrying trend that we are seeing such significant drop offs," said Mr. Johnston. "Starts always follow sales and I can tell you sales are definitely trending down in 2008."
Mr. Monarch said the market is cooling and builders are feeling it because they are unable to raise prices at a time when some of their costs are going up. Market conditions for existing homes are the same, with sales dropping and prices flat or falling across the country.
"It's a tougher market out there. I don't think we are in panic mode, there isn't a huge concern but we are definitely slowing down to some extent," said Mr. Johnston.
CMHC said it still expects for the seventh straight year that starts will top 200,000, the strongest housing run in Canadian history.
"It's not that bad," said Bertrand Recher, senior economist with CMHC. "What you saw was a one-month blip due to the multiple starts in Ontario and that's mainly Ontario."
In the first six months of the year, condo construction soared in Ontario and now it appears that run is over. "This is a readjusting because of those strong months," said Mr. Recher.
Pascal Gauthier, an economist with TD Bank Financial Group, echoed those comments. "There will be a natural tendency to read too much into this monthly decline," he said. "We think it's important to caution observers against such knee-jerk reaction to this month's CMHC report. Residential construction is easing and should continue to do so."
· Dow +48.03pts to 11,782
· Dollar -.17cto $93.52US Sharply lower oil prices and a broader correction among other major currencies against the greenback has helped push the Canadian dollar down almost 7% since last hitting par with its U.S. counterpart just three weeks ago. And if economic forecasts are correct, the loonie will decline further, boosting the prospects for industries like manufacturing, forest products, information technology and health care.
· Oil after falling $10 last week -$.75 to $114.45US per barrel falling to a new 3 month low as the U.S. dollar extended its rebound and more signs emerged that China's energy demand could be leveling off and traders monitored the conflict between Russia and Georgia that some believe could disrupt supplies
· Gold tanked 4% -36.50 to$820.85US per ounce to its lowest level in a year
· A strong US dollar also caused copper to hit a 6 month low
New home prices soften, construction plummets Gary Marr, Financial Post
New home construction, fuelled by a major drop in Ontario, continued to decline last month confounding economists who now say the housing market is falling faster than expected.
Canada Mortgage and Housing Corp. said they were 186,500 new homes constructed last month on a seasonally adjusted annualized basis, a 13.6% drop from a month earlier. The pain was felt hardest in Ontario's condominium market where the construction of multiple apartment units was down 57.9% in July from a month earlier.
Paul Ferley, assistant chief economist with RBC Economics, noted the slide in housing starts was worse than many economists had estimated. The consensus was for 210,000 starts in July which would have been only a 3.6% decline from June.
"The weakness is occurring much sooner than we expected," said Mr. Ferley, adding no one is expecting the Canadian housing market to get as ugly as its United States counterpart.
"The drop in starts in July was likely slightly overstated with the weakness largely concentrated in Ontario. However, housing activity is definitely on a downward trend consistent with indications of deteriorating affordability through last year," said the economist.
Most of the country was hit by the sudden dip with Alberta and British Columbia the only exceptions. Starts rose 23% in Alberta from a month earlier and 5% in B.C. from June to July.
While much is being made of the fact that the condominium sector skewed the July numbers, construction of single family homes is also waning. CMHC said urban single starts dropped 6.6% in July from a month earlier.
Brian Johnston, president of Monarch Corp. a major developer in the Toronto region, said the problem is the housing sector just cannot compete with its own past record. Starts hit a 19-year in 2006 and dropped only marginally last year.
"I would suggest there is a worrying trend that we are seeing such significant drop offs," said Mr. Johnston. "Starts always follow sales and I can tell you sales are definitely trending down in 2008."
Mr. Monarch said the market is cooling and builders are feeling it because they are unable to raise prices at a time when some of their costs are going up. Market conditions for existing homes are the same, with sales dropping and prices flat or falling across the country.
"It's a tougher market out there. I don't think we are in panic mode, there isn't a huge concern but we are definitely slowing down to some extent," said Mr. Johnston.
CMHC said it still expects for the seventh straight year that starts will top 200,000, the strongest housing run in Canadian history.
"It's not that bad," said Bertrand Recher, senior economist with CMHC. "What you saw was a one-month blip due to the multiple starts in Ontario and that's mainly Ontario."
In the first six months of the year, condo construction soared in Ontario and now it appears that run is over. "This is a readjusting because of those strong months," said Mr. Recher.
Pascal Gauthier, an economist with TD Bank Financial Group, echoed those comments. "There will be a natural tendency to read too much into this monthly decline," he said. "We think it's important to caution observers against such knee-jerk reaction to this month's CMHC report. Residential construction is easing and should continue to do so."
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