TSX has its worst one-day percentage loss since 1987
Markets post big losses as U.S. recession now official
· TSX -864.41pts (Reuters) after gaining over 1,100 points last week, the TSX plunged 9.3% led by the energy and financial sectors. The prospect that the Conservative minority government could be ousted also had some impact on the sell-off. In Ottawa, opposition parties have reached a tentative deal to bring down the Tory government and form a coalition government that would pump billions of dollars into the economy
· DOW -679.95pts as the National Bureau of Economic Research said the United States is in recession and has been for a year.
· Dollar -.53c to $80.31US. "If anything will suffer from political uncertainty, it's the Canadian dollar, and I think we saw that notably on Friday, when the dollar failed to rally despite the strength in the stock market,'' said Norman Raschkowan, chief investment officer at Mackenzie Financial Corp.
· Oil -$5.15 to $49.28US per barrel.
· Gold-42.20 to $776.80US per ounce
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Manulife Financial is moving to shore up its capital base after falling into a loss for the first time in its history as a public company. Canada's largest insurer will issue $2.125-billion in common equity at a discount after seeing its capital base eroded amid extreme volatility in financial markets.
A recession by another definition
RICHARD BLACKWELL TAKES QUESTIONS ON THE FINANCIAL CRISIS
RICHARD BLACKWELL December 2, 2008
How did the National Bureau of Economic Research (NBER) figure out that the United States has officially been in a recession for a year?
The NBER doesn't use the usual definition of a recession - two consecutive quarters of decline in gross domestic product (GDP). It instead looks for the peak of economic activity by considering GDP and several other factors, such as production, employment, consumption and real income.
When the peak is reached and the economy begins to decline significantly, that's when the recession has started, according to the NBER.
This often means that an official recession is not declared by the NBER until it is well under way, or is even over. And it means that there can sometimes be an official recession under way when there aren't two consecutive quarters of GDP decline. So far, that's the case this time. (U.S. GDP fell in the third quarter, but was up in the second.)
The recession will not be considered finished until the economy reaches its trough. But that, too, won't be determined until much later.
What is the NBER anyway?
The NBER was founded in 1920 by a group of economists who wanted to understand business cycles. It is a non-profit research organization with more than 1,000 university professors and researchers functioning as "associates" who study how the U.S. economy works. Since the 1960s, it has been considered the official arbiter of when the United States is in recession.
An NBER subgroup, the business-cycle-dating committee, actually makes the decision to declare a recession. That key committee is currently composed of economists from Harvard, Stanford, the Massachusetts Institute of Technology, Northwestern University, the University of California at Berkeley, and the U.S. Conference Board.
Has the NBER said when the recession will end?
The NBER refuses to make any forecasts, so they've given no public opinion on when the recession will end. They'll only tell us after the fact.
What's the point of declaring a recession a year after it has begun?
Economists, historians and bureaucrats study the NBER's analysis to help them figure out how recessions work, and what patterns are repeated. But to make short-term decisions, politicians usually use more immediate data such as the GDP figures or employment data.
When oil was about $50 (U.S.) a barrel a few years ago, what did a litre of gas cost? My recollection was that it was lower than it is now.
In fact, the last couple of times oil was at about current levels, the price of gas at the pump was pretty close to where it is now. Last week, with oil at just over $50 a barrel, the average price at the pump across Canada was about 83 cents (Canadian) a litre, according to figures compiled by Calgary company M.J. Ervin & Associates. The last time oil was about the $50 mark was in mid-January, 2007, and at that time the average price of gas was roughly 87 cents a litre.There's been talk about some companies' stock values going down to zero. What happens when a company gets to that point?
The Toronto Stock Exchange says a stock can never fall to zero, because for a trade to take place, there has to be a price set. Anybody bidding zero cents for a stock would have that bid rejected as invalid. But a stock can trade for as low as half a cent.
Tuesday, December 2, 2008
Monday, December 1, 2008
Financial Update
TSX posts sixth day of gains
“The bank shares have all been whacked” said Andrew Pyle, Wealth adviser at ScotiaMcLeod. “We’ve had the pre-result warnings out and the markets digested it and I think financials should be OK barring another shock wave that comes out of the US.”
· TSX +516.85pts (Reuters). TSX soars led by a big jump in bank stocks as investors also piled back into beaten-down commodity stocks, in part because the Chinese government announced a stimulus package and a cut in interest rates, raising hopes that the moves will stabilize metal prices and increase demand
· DOW +102.43pts up for a 5th session
· Dollar -.39c to $80.84US.
· Oil -$.01 to $54.44US per barrel. markets closed
· Gold+$7.70 to $816.20US per ounce markets closed
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
attached is an excerpt from Financial Post personal Finance columnist Jonathon Chevreau’s new book Findependence Day. It’s written in a factual/fiction format similar to the Wealthy Barber. In this excerpt, The Mortgage Mantra, the main characters discover the power of paying down a mortgage. This is an excellent reference piece to keep for sharing with your clients.
The Toronto Star article below is an excellent illustration of why Banks are reluctant to accept Powers of Attorney. As markets and lender guidelines tighten, expect to see more evidence of attempts at fraud and remember the Know Your Client rule.
Fraudster's house 'sale' ends up costing bank
Bob Aaron
The fallout from mortgage fraud cases in recent years continues to occupy the attention of lawyers, judges and the innocent parties involved.
Back in 2006, Paul Reviczky rented out a house he owned on Sheppard Ave. W. to a person who turned out to be a fraudster. Using a forged power of attorney in favour of Reviczky's non-existent grandson, the bogus tenant listed the property for sale on the Multiple Listing Service.
The house was eventually sold to Pegman Meleknia without the knowledge of the true owner, and the "tenant" disappeared with the sale proceeds.
Real estate lawyer Satwant Singh Khosla had acted for Meleknia, the innocent purchaser. HSBC Bank Canada financed the transaction by giving Meleknia a first mortgage that was title-insured by Stewart Title Guaranty Company.
On closing, HSBC advanced the mortgage money to Khosla, who deposited it into his trust account at the Royal Bank of Canada. Khosla then drew a certified cheque in favour of Paul Reviczky for $429,861.06, representing the balance of the purchase price.
The cheque was certified by RBC and handed over to the fraudster on closing. He forged the signature of Paul Reviczky on the back of the cheque, and deposited it into an account at the Korea Exchange Bank of Canada (KEBOC) in the name of Aaron Paul Reviczky, the fictitious grandson. He then disappeared with the money.
It took two separate court hearings last year for Reviczky to get clear title restored to his own name. Last December, a court ruled that the HSBC mortgage, which financed Meleknia's purchase, was invalid because the bank failed to scrutinize the bogus power of attorney.
Following that ruling, Stewart Title paid off and discharged the HSBC loan. At the same time, it also reimbursed Meleknia for his losses in purchasing a house that the seller didn't own.
To my surprise, the story did not end with that ruling. Another court case was waiting in the wings.
At the conclusion of last year's litigation, Stewart Title was out-of-pocket all of the money it had paid to HSBC and Meleknia.
Khosla, representing Stewart Title's interest in recovering the money, sued the Korean bank to recover its losses. In the lawsuit, Khosla alleged that by clearing the cheque on the basis of a forged and unauthorized endorsement, KEBOC was liable for damages of $429,481.26 for conversion – in other words, wrongfully taking the money.
KEBOC denied that improper conversion of the funds had taken place. Instead, it pointed the finger at Khosla, the lawyer who wrote the cheque in the first place.
Last May, Khosla applied to the Superior Court for what is known as a summary judgment on its claim against the bank, without having to go to trial.
Khosla argued that the act of conversion is one of "strict liability," which means that the bank would be responsible for cashing the cheque with the forged endorsement, no matter what actions it took or how careful it was.
Earlier this month in Toronto, Justice Frances Kiteley released her decision and agreed with Khosla. KEBOC was held responsible for conversion and was ordered to pay Khosla $429,481.26 plus interest since May, 2006, and costs of $6,000.
Those funds will be paid over to Stewart Title, which had reimbursed HSBC for its losses due to the fraudulent sale of the property and the invalid mortgage from the innocent buyer.
This means that the big loser in the case is not Reviczky, Meleknia, Khosla, HSBC or Stewart Title, but instead the bank which cashed the lawyer's trust cheque on the basis of a forged endorsement.
Since the fraudulent sale of the Reviczky property, the Ontario government has made it much more difficult to use a power of attorney in real estate transactions. Hopefully, in future, the occurrence of this type of fraud will be greatly reduced.
Bob Aaron is a Toronto real estate lawyer whose column appears Saturdays. He can be reached at bob@aaron.ca. Visit his website at aaron.ca.
“The bank shares have all been whacked” said Andrew Pyle, Wealth adviser at ScotiaMcLeod. “We’ve had the pre-result warnings out and the markets digested it and I think financials should be OK barring another shock wave that comes out of the US.”
· TSX +516.85pts (Reuters). TSX soars led by a big jump in bank stocks as investors also piled back into beaten-down commodity stocks, in part because the Chinese government announced a stimulus package and a cut in interest rates, raising hopes that the moves will stabilize metal prices and increase demand
· DOW +102.43pts up for a 5th session
· Dollar -.39c to $80.84US.
· Oil -$.01 to $54.44US per barrel. markets closed
· Gold+$7.70 to $816.20US per ounce markets closed
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
attached is an excerpt from Financial Post personal Finance columnist Jonathon Chevreau’s new book Findependence Day. It’s written in a factual/fiction format similar to the Wealthy Barber. In this excerpt, The Mortgage Mantra, the main characters discover the power of paying down a mortgage. This is an excellent reference piece to keep for sharing with your clients.
The Toronto Star article below is an excellent illustration of why Banks are reluctant to accept Powers of Attorney. As markets and lender guidelines tighten, expect to see more evidence of attempts at fraud and remember the Know Your Client rule.
Fraudster's house 'sale' ends up costing bank
Bob Aaron
The fallout from mortgage fraud cases in recent years continues to occupy the attention of lawyers, judges and the innocent parties involved.
Back in 2006, Paul Reviczky rented out a house he owned on Sheppard Ave. W. to a person who turned out to be a fraudster. Using a forged power of attorney in favour of Reviczky's non-existent grandson, the bogus tenant listed the property for sale on the Multiple Listing Service.
The house was eventually sold to Pegman Meleknia without the knowledge of the true owner, and the "tenant" disappeared with the sale proceeds.
Real estate lawyer Satwant Singh Khosla had acted for Meleknia, the innocent purchaser. HSBC Bank Canada financed the transaction by giving Meleknia a first mortgage that was title-insured by Stewart Title Guaranty Company.
On closing, HSBC advanced the mortgage money to Khosla, who deposited it into his trust account at the Royal Bank of Canada. Khosla then drew a certified cheque in favour of Paul Reviczky for $429,861.06, representing the balance of the purchase price.
The cheque was certified by RBC and handed over to the fraudster on closing. He forged the signature of Paul Reviczky on the back of the cheque, and deposited it into an account at the Korea Exchange Bank of Canada (KEBOC) in the name of Aaron Paul Reviczky, the fictitious grandson. He then disappeared with the money.
It took two separate court hearings last year for Reviczky to get clear title restored to his own name. Last December, a court ruled that the HSBC mortgage, which financed Meleknia's purchase, was invalid because the bank failed to scrutinize the bogus power of attorney.
Following that ruling, Stewart Title paid off and discharged the HSBC loan. At the same time, it also reimbursed Meleknia for his losses in purchasing a house that the seller didn't own.
To my surprise, the story did not end with that ruling. Another court case was waiting in the wings.
At the conclusion of last year's litigation, Stewart Title was out-of-pocket all of the money it had paid to HSBC and Meleknia.
Khosla, representing Stewart Title's interest in recovering the money, sued the Korean bank to recover its losses. In the lawsuit, Khosla alleged that by clearing the cheque on the basis of a forged and unauthorized endorsement, KEBOC was liable for damages of $429,481.26 for conversion – in other words, wrongfully taking the money.
KEBOC denied that improper conversion of the funds had taken place. Instead, it pointed the finger at Khosla, the lawyer who wrote the cheque in the first place.
Last May, Khosla applied to the Superior Court for what is known as a summary judgment on its claim against the bank, without having to go to trial.
Khosla argued that the act of conversion is one of "strict liability," which means that the bank would be responsible for cashing the cheque with the forged endorsement, no matter what actions it took or how careful it was.
Earlier this month in Toronto, Justice Frances Kiteley released her decision and agreed with Khosla. KEBOC was held responsible for conversion and was ordered to pay Khosla $429,481.26 plus interest since May, 2006, and costs of $6,000.
Those funds will be paid over to Stewart Title, which had reimbursed HSBC for its losses due to the fraudulent sale of the property and the invalid mortgage from the innocent buyer.
This means that the big loser in the case is not Reviczky, Meleknia, Khosla, HSBC or Stewart Title, but instead the bank which cashed the lawyer's trust cheque on the basis of a forged endorsement.
Since the fraudulent sale of the Reviczky property, the Ontario government has made it much more difficult to use a power of attorney in real estate transactions. Hopefully, in future, the occurrence of this type of fraud will be greatly reduced.
Bob Aaron is a Toronto real estate lawyer whose column appears Saturdays. He can be reached at bob@aaron.ca. Visit his website at aaron.ca.
Friday, November 28, 2008
Financial Update
TSX continues its climb
· TSX +110.25pts (Reuters).TSX’s main index rose for the 5th straight session thanks to strength in energy and materials issues, raising hopes that the market is close to finding a bottom.
· DOW +pts closed for American Thanksgiving
· Dollar -.06c to $81.23US.
· Oil +$ to $54.44US per barrel. markets closed
· Gold to $808.50US per ounce markets closed
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Ottawa seeks more influence over banks
Eoin Callan, Financial Post
The Conservative government Friday sought the power to take stakes in the country's banks and to seize control of troubled financial institutions, in the most radical and far-reaching response yet to the crisis in the global financial system.
The new authority would allow the government to inject capital into private institutions or to take over a failing lender and split it into a "good bank" and "bad bank."
The radical measures would empower Ottawa to follow the example of Washington and London and other western capitals that have bought shares in banks and gained influence over their affairs.
The steps are "in keeping with the action plans we agreed to with our international counterparts at the G7 and G20 meetings," Jim Flaherty, the Minister of Finance, said Friday in his autumn economic statement.
The minister said he was seeking: "The legal ability to inject capital into a federally regulated financial institution to support financial stability, on terms that would protect taxpayers."
The measures mean the Conservatives are setting aside free-market ideological principles and internal party resistance, taking what they view as a pragmatic approach that borrows from the experience of other countries in battling the credit crisis.
While government officials do not anticipate using the new powers, they feared being caught with their hands tied if the credit crisis continued to drain capital from the country's banking system and intervention was required to save a bank or insurer.
Bay Street was cautiously welcoming of the moves, though executives and senior government officials had previously argued these new powers were not required.
"It is probably a prudent thing to do," said one person in the industry.
A senior industry figure said the government was "updating its toolkit to give it similar authorities to what is available to other governments around the world."
A bank official stressed that "these are tools that we hope they never have to use."
Mr. Flaherty warned that the country was "far from finished confronting unheard-of global economic and financial threats."
"Canada has not faced such severe economic tests in a generation," he added.
The legislation gives Mr. Flaherty similar powers to those used by Hank Paulson, United States' Treasury Secretary, to top inject capital into Wall Street institutions and bail out banks.
There were signs that the Conservatives were preparing to fight a pitched battle over a range of economic and emergency measures to depict opposition parties as threatening market stability if they voted against the government, with comparisons being made with the initial rejection of the $700-billion Washington bail out by Congress.
The legislation will also give new powers to the Canada Deposit Insurance Corporation to follow the example of its U.S. counterpart and seize and operate distressed lenders.
This would allow the federal agency to split up an institution into a "good bank" and "bad bank", hiving off crippling debts and continuing to make loans and operate the company until it can be wound down or sold.
The Conservatives are also seeking "the power to direct CDIC" to carry out emergency rescues and shotgun weddings like those carried out over in intense weekend negotiating sessions by U.S. authorities to avert failure by Citigroup, Washington Mutual, and Wachovia.
The CDIC is also being given a new borrowing limit of $15-billion to help fund these tasks.
The steps were agreed to following consultations between the Department of Finance, Bank of Canada and the Office of Superintendent of Financial Institutions.
The overall package reflects private advice given by central bankers and regulators who pressed the Conservatives to bring Canada into line with other leading industrialized nations.
· TSX +110.25pts (Reuters).TSX’s main index rose for the 5th straight session thanks to strength in energy and materials issues, raising hopes that the market is close to finding a bottom.
· DOW +pts closed for American Thanksgiving
· Dollar -.06c to $81.23US.
· Oil +$ to $54.44US per barrel. markets closed
· Gold to $808.50US per ounce markets closed
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
Ottawa seeks more influence over banks
Eoin Callan, Financial Post
The Conservative government Friday sought the power to take stakes in the country's banks and to seize control of troubled financial institutions, in the most radical and far-reaching response yet to the crisis in the global financial system.
The new authority would allow the government to inject capital into private institutions or to take over a failing lender and split it into a "good bank" and "bad bank."
The radical measures would empower Ottawa to follow the example of Washington and London and other western capitals that have bought shares in banks and gained influence over their affairs.
The steps are "in keeping with the action plans we agreed to with our international counterparts at the G7 and G20 meetings," Jim Flaherty, the Minister of Finance, said Friday in his autumn economic statement.
The minister said he was seeking: "The legal ability to inject capital into a federally regulated financial institution to support financial stability, on terms that would protect taxpayers."
The measures mean the Conservatives are setting aside free-market ideological principles and internal party resistance, taking what they view as a pragmatic approach that borrows from the experience of other countries in battling the credit crisis.
While government officials do not anticipate using the new powers, they feared being caught with their hands tied if the credit crisis continued to drain capital from the country's banking system and intervention was required to save a bank or insurer.
Bay Street was cautiously welcoming of the moves, though executives and senior government officials had previously argued these new powers were not required.
"It is probably a prudent thing to do," said one person in the industry.
A senior industry figure said the government was "updating its toolkit to give it similar authorities to what is available to other governments around the world."
A bank official stressed that "these are tools that we hope they never have to use."
Mr. Flaherty warned that the country was "far from finished confronting unheard-of global economic and financial threats."
"Canada has not faced such severe economic tests in a generation," he added.
The legislation gives Mr. Flaherty similar powers to those used by Hank Paulson, United States' Treasury Secretary, to top inject capital into Wall Street institutions and bail out banks.
There were signs that the Conservatives were preparing to fight a pitched battle over a range of economic and emergency measures to depict opposition parties as threatening market stability if they voted against the government, with comparisons being made with the initial rejection of the $700-billion Washington bail out by Congress.
The legislation will also give new powers to the Canada Deposit Insurance Corporation to follow the example of its U.S. counterpart and seize and operate distressed lenders.
This would allow the federal agency to split up an institution into a "good bank" and "bad bank", hiving off crippling debts and continuing to make loans and operate the company until it can be wound down or sold.
The Conservatives are also seeking "the power to direct CDIC" to carry out emergency rescues and shotgun weddings like those carried out over in intense weekend negotiating sessions by U.S. authorities to avert failure by Citigroup, Washington Mutual, and Wachovia.
The CDIC is also being given a new borrowing limit of $15-billion to help fund these tasks.
The steps were agreed to following consultations between the Department of Finance, Bank of Canada and the Office of Superintendent of Financial Institutions.
The overall package reflects private advice given by central bankers and regulators who pressed the Conservatives to bring Canada into line with other leading industrialized nations.
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