Financial Update

(Reuters) - The TSE's main index ended slightly lower, plagued by uncertainty over the U.S. bailout plan. If this thing came out and was passed today, I think the market would take off," said Rick Hutcheon, president and COO at RKH Investments, of the U.S. bailout. "But the market is getting worried that something is going to happen to derail this thing, or that it's going to take so long that it's going to be ineffective by the time it actually gets (passed),"

· TSX -19.27pts Warren Buffett's $5 billion investment in Goldman Sachs is something the markets would love to react to but can't because they're fixated on these other issues
· Dow -29.00pts
· Dollar -.04c to $96.46US.
· Oil -$.88 to $105.73US per barrel.
· Gold +3.50 to $889.00US per ounce

George Bush painted a frightening picture for Americans last night on prime time television. He positioned supporting his proposal to Americans as protecting their own retirement fund instead of bailing out Wall Street.

Below is an article on the Merrill Lynch report which challenges every other economist’s prevailing view of a positive Canadian economy, saying Canadians are more overextended than Americans or Britains, and its only a matter of time before our housing and credit markets crack.

Bush issues dire economic warning WASHINGTON, (AFP) - Warning "our entire economy is in danger," US President George W. Bush called unprecedented crisis talks for Thursday with White House rivals John McCain and Barack Obama and congressional leaders.

Bush announced the summit in a prime-time televised speech Wednesday seeking public support for his 700-billion-dollar Wall Street rescue plan and to pile pressure on angry lawmakers who declared the shock proposal dead on arrival.

"We're in the midst of a serious financial crisis," Bush said in his 13-minute speech from the White House.

"Without immediate action by Congress , America could slip into a financial panic," the vastly unpopular president said. "Ultimately, our country could experience a long and painful recession."

Six weeks before US elections and four months before he hands the battered US economy to a new steward, Bush said inaction could wipe out banks, threaten retirement nest eggs, send home values into freefall, foreclosures skyrocketing and create millions of new jobless.

"We must not let this happen," urged the president, who said a rare "spirit of cooperation" in Washington in the face of the crisis had led him to invite McCain, Obama, and top House and Senate leaders of both parties to the White House.

Bush had invited Obama in a personal telephone call 90 minutes before his speech, the White House said. The Democrat's chief spokesman, Bill Burton, confirmed in a statement that the Illinois senator would attend.

Obama has worked all week with top lawmakers, Treasury Secretary Henry Paulson, and Federal Reserve chairman Ben Bernanke and "will continue to work in a bipartisan spirit and do whatever is necessary to come up with a final solution," said Burton.

"We will discuss the progress we have made to improve the administration's deeply flawed plan to address this unprecedented crisis," Democratic Senate Majority Leader Harry Reid said in a statement.

"As I have said throughout, tomorrow's meeting and future deliberations must be focused on solutions, not photo ops," Reid said, after other Democrats mocked McCain's decision to suspend his campaign over the crisis as a gimmick.

Opinion polls show the US public is angry at Wall Street but deeply divided about a remedy, with many ready to blame Bush and his Republican party -- which itself has fissured over the plan amid fierce objections from conservatives.

They have expressed dismay over the massive government involvement in the economy, while Bush's Democratic foes have pushed for more government oversight and stronger consumer protections, and both sides have balked at the price tag.

Speaking to his angry allies, Bush explained: "I faced a choice, to step in with dramatic government action or to stand back and allow the irresponsible actions of some to undermine the financial security of all."

Addressing suspicious Democrats, he promised that the plan must ensure that reckless executives do not reap a "windfall" from taxpayer funds.

He also said he recognized the package would "present a tough vote for many members of Congress," acknowledging "it is difficult to pass a bill that commits so much of the taxpayers' hard-earned money."

But lawmakers "must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow," he warned.

It was not clear how much impact what is arguably the president's most potent political weapons -- the ability to command national attention -- would have with just four months left in his term.

"At this point, there are real doubts about the president's ability to be seen as a trusted and credible source on the economy by the American public," a conservative Republican congressional aide told AFP on condition of anonymity.

But public remarks from all sides suggested that Bush could count on a consensus that inaction could trigger a global financial meltdown.

"Now is a time to come together -- Democrats and Republicans -- in a spirit of cooperation for the sake of the American people," McCain and Obama said in an unusual joint statement.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail," they said.

Merrill Lynch bearish on housing

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September 25, 2008 Eric Shackleton The Canadian Press
Merrill Lynch is challenging the prevailing view that Canada's housing and mortgage markets are more stable than their U.S. counterparts, warning that households in this country are so indebted that it's only a matter of time before we see a major downturn here as well.
In a report issued yesterday, Merrill Lynch Canada economists said many Canadian households are more financially overextended than their counterparts in the United States or Britain.
They said it's only a matter of time before the "tipping point'' is reached and the housing and credit markets crack in Canada.

The Merrill Lynch Canada report by economists David Wolf and Carolyn Kwan acknowledges that the analysis is more pessimistic than the prevailing view.

Prime Minister Stephen Harper, in British Columbia for the federal election, responded to the investment firm's warnings by repeating his assurances that Canada's economy is in good shape.
"I think our housing market is in a strong position (and) consumer markets, as well, are stronger in Canada than the U.S. and the position taken by our financial institutions.''

"Of course, we have seen that this market has somewhat weakened in the last 12 months but we will not see such a situation here as in the U.S.''

The National Association of Realtors reported yesterday that the U.S. median sales price in August fell 9.5 per cent to $203,100 US, the largest decline on records dating to 1999.

Many economists have said repeatedly that Canada's housing and banking sector is much more stable than its American counterparts and unlikely to crash -- since it didn't spike in recent years because of many differences between the two countries.

Benjamin Tal, an economist with CIBC who has been closely following the ups and downs of the housing industry, said yesterday he sees no "trigger'' threatening Canada's housing and mortgage market.

"To see a crash in the housing market you need a trigger.

"The trigger in 1989-1990 was extremely high interest rates.

"The trigger in the U.S. was subprime mortgages. We're still missing the trigger for Canada,'' Tal said.

However, Merrill Lynch -- whose U.S. parent is one of the biggest victims of a crisis in financial markets that is rooted in the American housing and mortgage meltdown -- said Canadians should be wary.

Household net borrowing in Canada amounted to 6.3 per cent of disposable income in 2007 -- meaning they're carrying more debt than households in the United Kingdom and not far off the peak U.S. shortfall in 2005 -- just before the subprime mortgage crisis erupted.

Gregory Klump, chief economist with the Canada Mortgage and Housing Corp., said there would need to be a spike in interest rates or massive layoffs before the housing market would take a tumble.

Right now, Klump said, "we have a stable labour market'' and interest rates are low.
"There's no distress sales in Canada, not like in the States.''

The Merrill report says housing prices are now falling and inventories of unsold homes are rising sharply.