· TSX +115.61pts as a bargain-hunting rally took hold in hard-hit resource shares.
· Dow +164.79pts
· Dollar -.59c to $92.89US.
· Oil -$1.71 to $100.87US per barrel
· Gold -$16.60to $741.30US per ounce marking its longest streak of losing sessions in eight years.
New home prices rise — but not by much
Jamie Sturgeon, Financial Post
Price increases on new homes eased for the sixth month in a row in July, increasing by a meagre 0.1% as the national market continues to soften, Statistics Canada reported on Thursday.
Contractors' selling prices were up 2.7% from July of last year but below the year-over-year rise of 3.5% seen between 2007 and 2006. The tapering off in the growth of home prices continues a two-year trend dating to September 2006, the federal agency said.
Slowing demand in Western Canada is leading the country-wide slowdown StatsCan said. The latest evidence came from Edmonton, where prices dipped by 5.3% on an annual basis in July - the sharpest drop in 23 years. In Calgary, prices declined 0.3% annualized - a 12-year low.
"Markets in these cities continue to adjust after experiencing record price increases in the last two and a half years," Statscan said.
Yet further east in booming Saskatchewan, prices grew by a sizable 29.6% in Regina, while Saskatoon saw an annual increase of 13.1%, as a result of higher material and labour costs.
In contrast, Vancouver saw prices tick up a modest 1.6% in July. Canada's largest city, Toronto, saw an increase of 3.7% while Montreal recorded a rise of 5.7%, StatsCan said.
"This is yet further evidence that the housing market in Canada continues to cool," said Charmaine Buskas, economic strategist with TD Securities in a research note
Friday, September 12, 2008
Thursday, September 11, 2008
Financial Update
TSX breaks losing streak
the Bank of Canada has an unofficial rule of thumb that says for every $10 decrease in the price of oil, the inflation rate drops 0.2 percentage points. With oil down more than $40 from its peak in July, the implication is for inflation falling roughly 0.8 percentage points. HEATHER SCOFFIELD , Globe and Mail
· TSX +350.39pts as investors shopped for bargains after days of losses on the TSX amid a sharp move away from commodities.
· Dow +38.19pts after U.S. investment bank Lehman Brothers said it will sell a majority stake in its investment management unit after losing $3.9 billion US in the third quarter
· Dollar +.07c to $93.48US.
· Oil -$.68 to $102.58US per barrel The price of oil, one of the most influential determinants on the TSX, closed slightly lower in jittery trading, as the strengthening U.S. dollar and signs of a slowing U.S. economy outweighed inventory drops and word that OPEC would cut production.
· Gold -$29.20 to $757.90US per ounce
Productivity down for third consecutive quarter The Canadian Press OTTAWA The labour productivity of Canadian businesses fell for a 3rd straight quarter, highlighting a marked deterioration in the country's competitiveness and a signal that growth is slowing and inflation becoming more of a risk, economists say. Statistics Canada reported yesterday that the 0.2% drop in the second quarter of the year came primarily from the mining and oil and gas extraction industries, as well as construction. It followed a drop-off of 0.6% in each of the previous 2 quarters, the most consecutive quarterly declines since 1990.
Another “BANK” to compete against you! Not mentioned in the article, and contributing to profit, is the Canadian Tire Mortgage that Manulife finances. Although the article says they “don’t want the challenges of bricks and mortar” they no longer do business in the mortgage broker channel… And below….. House prices overvalued in Canada
Banking revenues beef up Manulife financial picture
Michael Hammond RECORD STAFF WATERLOO
Don't expect Manulife Financial to open a bank branch anytime soon, but the insurance company's banking division has become a major source of revenue growth, Manulife Canada's chief executive said yesterday.
Paul Rooney said Manulife Bank of Canada loaned out $1 billion in the company's second quarter ended June 30, and that volume is growing by $1 billion a quarter.
Despite the surging fortunes of the banking unit, Rooney said he doesn't see it moving more toward a traditional banking model.
"I think the opportunity for us is to be the adviser's bank," he said at a financial services conference in Toronto yesterday. "I don't want the challenges of the bricks and mortar."
Manulife Bank, established in 1993, is geared toward the insurance company's clients who want to simplify their investments into a single account. Rooney, who works out of Manulife Canada's head office in Waterloo, said the concept has caught on in Australia, but is still in its infancy in Canada. The banking division's growth has been driven by the Manulife One product, which is billed as a flexible mortgage account. The product also serves as an everyday banking account. Whenever income is added into the account, the interest helps pay down a client's mortgage.
Rooney and Sun Life Financial Canada president Dean Connor spoke of another emerging growth opportunity at the conference -- serving the needs of the growing pool of baby boomers. Connor said his Waterloo-based company has developed an "aggressive" growth plan that is focused on the needs of aging boomers, especially their health-care requirements. He pointed out that this will be a key area of focus for insurers given that governments in developed countries have been shifting the cost of health care to individuals.
Rooney said a number of these boomers own their own small businesses, which will help create another big opportunity in the coming years. There are 2.4 million small businesses registered in Canada, he said, many of which are owned by people nearing retirement age. This means there are about $1.2 trillion in business assets that are set to change hands by 2010, he added.
"It's another area where we're going to be focusing," he said.
House prices overvalued in Canada
Eric Beauchesne, Canwest News Service
OTTAWA -- Canadian homeowners should be prepared for a fall in housing prices, warns a study that estimates homes in most cities are overvalued, and by as much as 25%.
With the exception of Toronto and Edmonton, houses in Canada's major cities are overvalued by anywhere from $32,000 to $87,000, says the study of prices in nine cities by researchers at the Sauder School of Business at the University of British Columbia.
The study, released Monday, looked at prices for single-family homes in the second quarter of this year in nine major Canadian cities, and compared prices in those cities with what they would be in a balanced market based on the relationship between house prices and rents.
Only in Toronto are prices in balance with rents, the study concluded. In Halifax, Montreal, Ottawa, Regina and Winnipeg prices would need to drop by at least 20% to be in balance and in Calgary by 7% and in Vancouver by 11%.
In contrast, Edmonton prices are actually below equilibrium, and would have to rise by 8% to be in balance, it said.
"The decade long boom in Canadian markets is over," Tsur Somerville, the study's lead author.
Housing affordability is a severe problem in some Canadian cities, limiting the ability of markets to continue to rise, says the report titled "Are Canadian Housing Markets Overpriced?"
The rapid price increases in many Canadian cities since 2001 along with the downturn in the U.S. housing market has raised concerns about the future of housing markets here, it noted.
"There are parallels between the path of house prices in Canadian and U.S. markets," it said.
During the U.S. housing boom, which ran from 1997 to 2006, prices rose 132%, while in Canada over the 2001-08 boom prices in the nine cities rose by an average of 87%.
While Canada's more conservative lending practices have prevented the speculative excess and severe downturn experienced in U.S. markets, they haven't prevented homes from becoming overpriced, it said.
The assessment of whether a housing market is in balance or equilibrium takes into account the ratio of rent to prices, mortgage rates and the cost of owning a house, and the expected long-term price appreciation.
In dollar terms, the amount by which house prices would have to fall to bring them back into balance in each of the overpriced cities was: Calgary $32,000, Halifax $58,000, Montreal $68,000, Ottawa $81,000, Regina $87,000, Vancouver $85,000 and Winnipeg $74,000.
That houses are overpriced doesn't, however, guarantee that they will fall, it said.
"Instead the market could return to equilibrium through an extended period of housing price appreciation that is above zero, but below the long run rate," it said.
The potential for price declines is greatest in cities that have a large supply of unsold inventory or a mismatch between the number of units and the number of households ready to occupy them, it says, adding that by that criteria Vancouver is the most at risk of a housing price correction, though compared with most of the other cities the decline would be relatively moderate.
While the study looked at prices for single-family homes, it noted that a concern in some housing markets is that the buyers of units are not living in them, it added.
"If markets turn, these investor-buyers might behave in a manner akin to other asset markets, dumping their units to avoid future greater perceived price declines," it said. "In contrast, owner occupiers, unless forced to sell, can remain in their units and wait out a weak market."
In contrast, prices in Edmonton would have to rise by $32,000 to bring them back into balance, and that's despite what has been an annual increase in prices of 13.4% during the 2001-08 housing boom.
Annual price increases during the 2001-08 housing boom for the other cities studied were 14.5% in Regina, 12.4% in Calgary, 10.6% in Vancouver, 10.2% in Winnipeg, 8.1% in Montreal, 5.7% in Halifax, 5.7% in Ottawa, and 7.2% in Toronto
the Bank of Canada has an unofficial rule of thumb that says for every $10 decrease in the price of oil, the inflation rate drops 0.2 percentage points. With oil down more than $40 from its peak in July, the implication is for inflation falling roughly 0.8 percentage points. HEATHER SCOFFIELD , Globe and Mail
· TSX +350.39pts as investors shopped for bargains after days of losses on the TSX amid a sharp move away from commodities.
· Dow +38.19pts after U.S. investment bank Lehman Brothers said it will sell a majority stake in its investment management unit after losing $3.9 billion US in the third quarter
· Dollar +.07c to $93.48US.
· Oil -$.68 to $102.58US per barrel The price of oil, one of the most influential determinants on the TSX, closed slightly lower in jittery trading, as the strengthening U.S. dollar and signs of a slowing U.S. economy outweighed inventory drops and word that OPEC would cut production.
· Gold -$29.20 to $757.90US per ounce
Productivity down for third consecutive quarter The Canadian Press OTTAWA The labour productivity of Canadian businesses fell for a 3rd straight quarter, highlighting a marked deterioration in the country's competitiveness and a signal that growth is slowing and inflation becoming more of a risk, economists say. Statistics Canada reported yesterday that the 0.2% drop in the second quarter of the year came primarily from the mining and oil and gas extraction industries, as well as construction. It followed a drop-off of 0.6% in each of the previous 2 quarters, the most consecutive quarterly declines since 1990.
Another “BANK” to compete against you! Not mentioned in the article, and contributing to profit, is the Canadian Tire Mortgage that Manulife finances. Although the article says they “don’t want the challenges of bricks and mortar” they no longer do business in the mortgage broker channel… And below….. House prices overvalued in Canada
Banking revenues beef up Manulife financial picture
Michael Hammond RECORD STAFF WATERLOO
Don't expect Manulife Financial to open a bank branch anytime soon, but the insurance company's banking division has become a major source of revenue growth, Manulife Canada's chief executive said yesterday.
Paul Rooney said Manulife Bank of Canada loaned out $1 billion in the company's second quarter ended June 30, and that volume is growing by $1 billion a quarter.
Despite the surging fortunes of the banking unit, Rooney said he doesn't see it moving more toward a traditional banking model.
"I think the opportunity for us is to be the adviser's bank," he said at a financial services conference in Toronto yesterday. "I don't want the challenges of the bricks and mortar."
Manulife Bank, established in 1993, is geared toward the insurance company's clients who want to simplify their investments into a single account. Rooney, who works out of Manulife Canada's head office in Waterloo, said the concept has caught on in Australia, but is still in its infancy in Canada. The banking division's growth has been driven by the Manulife One product, which is billed as a flexible mortgage account. The product also serves as an everyday banking account. Whenever income is added into the account, the interest helps pay down a client's mortgage.
Rooney and Sun Life Financial Canada president Dean Connor spoke of another emerging growth opportunity at the conference -- serving the needs of the growing pool of baby boomers. Connor said his Waterloo-based company has developed an "aggressive" growth plan that is focused on the needs of aging boomers, especially their health-care requirements. He pointed out that this will be a key area of focus for insurers given that governments in developed countries have been shifting the cost of health care to individuals.
Rooney said a number of these boomers own their own small businesses, which will help create another big opportunity in the coming years. There are 2.4 million small businesses registered in Canada, he said, many of which are owned by people nearing retirement age. This means there are about $1.2 trillion in business assets that are set to change hands by 2010, he added.
"It's another area where we're going to be focusing," he said.
House prices overvalued in Canada
Eric Beauchesne, Canwest News Service
OTTAWA -- Canadian homeowners should be prepared for a fall in housing prices, warns a study that estimates homes in most cities are overvalued, and by as much as 25%.
With the exception of Toronto and Edmonton, houses in Canada's major cities are overvalued by anywhere from $32,000 to $87,000, says the study of prices in nine cities by researchers at the Sauder School of Business at the University of British Columbia.
The study, released Monday, looked at prices for single-family homes in the second quarter of this year in nine major Canadian cities, and compared prices in those cities with what they would be in a balanced market based on the relationship between house prices and rents.
Only in Toronto are prices in balance with rents, the study concluded. In Halifax, Montreal, Ottawa, Regina and Winnipeg prices would need to drop by at least 20% to be in balance and in Calgary by 7% and in Vancouver by 11%.
In contrast, Edmonton prices are actually below equilibrium, and would have to rise by 8% to be in balance, it said.
"The decade long boom in Canadian markets is over," Tsur Somerville, the study's lead author.
Housing affordability is a severe problem in some Canadian cities, limiting the ability of markets to continue to rise, says the report titled "Are Canadian Housing Markets Overpriced?"
The rapid price increases in many Canadian cities since 2001 along with the downturn in the U.S. housing market has raised concerns about the future of housing markets here, it noted.
"There are parallels between the path of house prices in Canadian and U.S. markets," it said.
During the U.S. housing boom, which ran from 1997 to 2006, prices rose 132%, while in Canada over the 2001-08 boom prices in the nine cities rose by an average of 87%.
While Canada's more conservative lending practices have prevented the speculative excess and severe downturn experienced in U.S. markets, they haven't prevented homes from becoming overpriced, it said.
The assessment of whether a housing market is in balance or equilibrium takes into account the ratio of rent to prices, mortgage rates and the cost of owning a house, and the expected long-term price appreciation.
In dollar terms, the amount by which house prices would have to fall to bring them back into balance in each of the overpriced cities was: Calgary $32,000, Halifax $58,000, Montreal $68,000, Ottawa $81,000, Regina $87,000, Vancouver $85,000 and Winnipeg $74,000.
That houses are overpriced doesn't, however, guarantee that they will fall, it said.
"Instead the market could return to equilibrium through an extended period of housing price appreciation that is above zero, but below the long run rate," it said.
The potential for price declines is greatest in cities that have a large supply of unsold inventory or a mismatch between the number of units and the number of households ready to occupy them, it says, adding that by that criteria Vancouver is the most at risk of a housing price correction, though compared with most of the other cities the decline would be relatively moderate.
While the study looked at prices for single-family homes, it noted that a concern in some housing markets is that the buyers of units are not living in them, it added.
"If markets turn, these investor-buyers might behave in a manner akin to other asset markets, dumping their units to avoid future greater perceived price declines," it said. "In contrast, owner occupiers, unless forced to sell, can remain in their units and wait out a weak market."
In contrast, prices in Edmonton would have to rise by $32,000 to bring them back into balance, and that's despite what has been an annual increase in prices of 13.4% during the 2001-08 housing boom.
Annual price increases during the 2001-08 housing boom for the other cities studied were 14.5% in Regina, 12.4% in Calgary, 10.6% in Vancouver, 10.2% in Winnipeg, 8.1% in Montreal, 5.7% in Halifax, 5.7% in Ottawa, and 7.2% in Toronto
Wednesday, September 10, 2008
Financial Update
· TSX -487.88pts plunging more than 3%, weighed down by falling commodity prices and closing in on January's 2008 low. Since last Tuesday, the index has fallen more than 11 %.
· Dow -280.01pts In New York, stocks slumped also as worries about the ability of U.S. investment bank Lehman Brothers to raise capital, fueled concern about the broader banking sector, sending the Dow Jones industrial average down 2.42%
· Dollar -.51c to $93.92US.
· Oil -$3.08 to $103.26US per barrel Oil prices tumbled on expectations OPEC would leave output targets unchanged and as the hurricane threat to U.S oil operations in the Gulf of Mexico eased.
· Gold -$10.40 to $787.10US per ounce
Many people have “conspiracy theories” regarding the government and the economy. Below is an editorial with an interesting perspective on the recent market fluctuations.
The real reason commodities are tumbling
JOHN HEINZL Globe and Mail
To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.
Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.
“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.
“My attitude is, goddamn it, they're good … it was brilliant.”
To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.
The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.
According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets.
Because many hedge funds were using massive leverage to short financials and go long on commodities, when North American markets opened and banks initially rallied, the funds were forced to cover their short positions.
At the same time, the U.S. dollar was rallying because the risk of holding Fannie and Freddie paper had diminished. The rising dollar, in turn, made commodities less attractive, giving funds that were already scrambling to cover their financial shorts another reason to dump oil, grains and other commodities.
The losses were swift and dramatic. On the Friday before the July 11 announcement, crude oil closed at $145.18 a barrel. Over the following five days, it plunged 11 per cent. “Leverage was being unwound dramatically,” Mr. Coxe said on a conference call last week. “We had a true panic.”
As oil and other commodities were tumbling, fears about the slowing global economy were mounting, giving resources another push downhill. This was also in keeping with the Fed's wishes, because lower commodity prices would help quell fears about inflation.
Mr. Coxe has no proof that the Fed and Treasury acted in concert to boost financials and sink commodities. He is basing his assertions on conversations with hedge fund managers and on years of watching financial markets. “There's no doubt whatever in my mind” about what happened, he says.
The future is less certain, however. Now that Freddie and Fannie have been nationalized, the credit crisis is still very much alive and financial stocks are looking as shaky as ever. As for commodities, once the current storm passes, Mr. Coxe is confident they will recover.
· Dow -280.01pts In New York, stocks slumped also as worries about the ability of U.S. investment bank Lehman Brothers to raise capital, fueled concern about the broader banking sector, sending the Dow Jones industrial average down 2.42%
· Dollar -.51c to $93.92US.
· Oil -$3.08 to $103.26US per barrel Oil prices tumbled on expectations OPEC would leave output targets unchanged and as the hurricane threat to U.S oil operations in the Gulf of Mexico eased.
· Gold -$10.40 to $787.10US per ounce
Many people have “conspiracy theories” regarding the government and the economy. Below is an editorial with an interesting perspective on the recent market fluctuations.
The real reason commodities are tumbling
JOHN HEINZL Globe and Mail
To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.
Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.
“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.
“My attitude is, goddamn it, they're good … it was brilliant.”
To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.
The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.
According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets.
Because many hedge funds were using massive leverage to short financials and go long on commodities, when North American markets opened and banks initially rallied, the funds were forced to cover their short positions.
At the same time, the U.S. dollar was rallying because the risk of holding Fannie and Freddie paper had diminished. The rising dollar, in turn, made commodities less attractive, giving funds that were already scrambling to cover their financial shorts another reason to dump oil, grains and other commodities.
The losses were swift and dramatic. On the Friday before the July 11 announcement, crude oil closed at $145.18 a barrel. Over the following five days, it plunged 11 per cent. “Leverage was being unwound dramatically,” Mr. Coxe said on a conference call last week. “We had a true panic.”
As oil and other commodities were tumbling, fears about the slowing global economy were mounting, giving resources another push downhill. This was also in keeping with the Fed's wishes, because lower commodity prices would help quell fears about inflation.
Mr. Coxe has no proof that the Fed and Treasury acted in concert to boost financials and sink commodities. He is basing his assertions on conversations with hedge fund managers and on years of watching financial markets. “There's no doubt whatever in my mind” about what happened, he says.
The future is less certain, however. Now that Freddie and Fannie have been nationalized, the credit crisis is still very much alive and financial stocks are looking as shaky as ever. As for commodities, once the current storm passes, Mr. Coxe is confident they will recover.
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