• 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.
---------
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
Wednesday, June 23, 2010
Tuesday, June 22, 2010
Financial Update For June 22, 2010
• TSX +8.49 beat a profit taking retreat due to China’s signal that it will let its yuan currency appreciate is a boost to airlines, insurers and consumer firms operating in China
• DOW -8.23
• Dollar -.30c to 97.62cUS
• Oil -$.64 to $77.82US per barrel.
Gold -$.17.50 to $1,239.70 USD per eased from record highs as safe-haven demand eased.
Garry Marr, Financial Post • Friday, May 7, 2010
Here’s one way to tackle the red-hot Canadian housing market: Get someone to buy you a home.
That someone would be your parents. According to a new survey from TD Canada Trust, 10% of Canadians are considering buying a condominium for their adult children. A year ago, only 5% of parents thought about buying the kids a condo.
“It could be something that the parents are looking at as a long-term source of income, letting their children live it in for now,” says Chris Wisniewski, associate vice-president of real estate and secured lending with TD.
It could also be that parents know condominium prices, like detached homes, have climbed to unprecedented levels, making it difficult for adult children to come up with a minimum 5% down payment, let alone the 20% needed to avoid costly mortgage default insurance.
Toronto condo research firm Urbanation Inc. says the average existing condominium in the city sold for $331,000 in the first quarter of 2010. Based on an average $369-per-square-foot price, that’s a 900-square-foot unit.
For a new one, prices averaged $443 per square foot in the first quarter, so about $400,000 for that same-sized condo.
Ms. Wisniewski says low interest rates are convincing parents to step up and buy their children homes. The condominium represents an attractive alternative to those parents because the costs are stable.
“They know what the maintenance costs will be,” she says. “[Parents] are thinking, ‘I’m not worried my children are too young to accept the responsibilities of home ownership if I set them up in an apartment. They don’t have to recognize the responsibilities of maintenance in an apartment.’ ”
Parents might also see a condominium as a way to get their kids to start a family. The survey found 36% of Canadians are willing to raise families in a condo.
“One of the reasons for that is affordability,” says Ms. Wisniewski. “Where are the new condominiums being built? They are being integrated in really nice existing neighbourhoods with all the infrastructure and all the schools and amenities.”
Brian Johnston, president of developer Monarch Corp.’s Canadian division, says he doubts families will ever be integrated into the condominium stock, but does agrees with the premise that parents are helping to buy housing for their children. He says parents often want to keep children close to them so they’ll chip in for a condominium in a nearby neighbourhood.
“How do we know they’re helping out? They tell us when they are writing the cheques for the deposit,” Mr. Johnston says.
Mr. Johnston said when it comes to recent immigrants to Canada, there is “lots of help” from family members to get that first home. “Condominiums are not inexpensive and they’re going to need that help, particularly if the younger ones have not had time to build up their finances.”
The builder has his own children and, based on today’s prices, he figures he’s going to have to lend a helping hand. “I don’t expect them to be able to buy a condo … before they are 30. That is just part of the deal [for parents],” says Mr. Johnston.
It’s not like Baby Boomers don’t have the cash. There have been endless studies that suggest the Boomers are set to inherit billions of dollars in the coming years from their parents.
Craig Alexander, deputy chief economist with TD Bank Financial Group, says there is no hard data to suggest how much parents are helping children, but they certainly have the financial capacity to lend a hand.
Canadians have $1.5-trillion invested in stocks and mutual funds with $500-billion of that figure in capital gains.
“The generation before the Baby Boomers were big savers and, as a consequence, there is a very large income transfer going to take place over time,” says Mr. Alexander, adding it makes sense that some of that money is going to end up in housing and real estate.
For first-time buyers facing rising rates and increasing prices, the helping hand couldn’t come at a better time — just ahead of tighter mortgage financing rules. Most of them probably hope their folks go from “considering” buying a condo to actually doing it.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Invest+real+estate+your+kids/2999480/story.html#ixzz0rJ4pBdc4
Eric Lam, Financial Post • Monday, Jun. 21, 2010
What the @#$!?
In this occasional feature, the Post tells you everything you need to know about a complex issue. Today, Eric Lam explains what a yuan is, and why the Chinese government has decided to let it appreciate.
So what’s a yuan anyway? Is it the same as a renminbi?
The renminbi, aptly translated as “the people’s currency,” is the official name of the currency of the People’s Republic of China except for Hong Kong and Macau. Meanwhile, the yuan is the primary unit of said currency, along with corresponding terms for 10 cents and a cent. However, in common usage renminbi and yuan are basically interchangeable, kind of like how we also call the Canadian dollar the loonie. At the moment, a loonie gets you a little less than 7 yuan.
What exactly did the Chinese government announce over the weekend?
On Saturday night the People’s Bank of China said it had decided to “proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” It’s pretty vague, as grand pronouncements from central banks go, but the gist of the message is the PBoC has decided to let the renminbi’s value fluctuate compared with the U.S. dollar.
Which means?
Essentially, the renminbi has been pegged to the greenback at a fixed rate since September 2008, a move to protect China’s economy from the financial crisis. However, economists estimate this peg has undervalued the currency as much as 40% as China’s economy roared out of the gates following the crisis. While the renminbi’s value could go either way, it is likely to move in a positive direction in the near-term considering the strength of China’s economy and the relative weakness everywhere else.
Why should anyone care what China’s doing with its money?
A lot of stuff these days is made in China. The Chinese have been accused of manipulating their currency to artificially drum up business for Chinese corporations, and cut other countries out of the global export market. The United States was worried enough about this that it almost ignited a trade war with China earlier this year, after President Barack Obama threatened to impose punishing tariffs on Chinese exports.
Does this mean China caved, then?
Neither side is going to give an inch when the stakes are so high. Most economists do not believe China is simply caving in to the demands of the IMF and the United States. Rather, the move was made to slow runaway growth of China’s economy by making its exports more expensive. At the same time it is expected to boost the development of the consumer side of the economy as imports become cheaper. Also, the timing is likely not a coincidence, with the intense scrutiny and criticism China has faced regarding its currency expected to rise to a fever pitch at the G20 meetings in Toronto this weekend.
Read more: http://www.financialpost.com/news/What+yuan/3182698/story.html#ixzz0ra3prxkU
• DOW -8.23
• Dollar -.30c to 97.62cUS
• Oil -$.64 to $77.82US per barrel.
Gold -$.17.50 to $1,239.70 USD per eased from record highs as safe-haven demand eased.
Garry Marr, Financial Post • Friday, May 7, 2010
Here’s one way to tackle the red-hot Canadian housing market: Get someone to buy you a home.
That someone would be your parents. According to a new survey from TD Canada Trust, 10% of Canadians are considering buying a condominium for their adult children. A year ago, only 5% of parents thought about buying the kids a condo.
“It could be something that the parents are looking at as a long-term source of income, letting their children live it in for now,” says Chris Wisniewski, associate vice-president of real estate and secured lending with TD.
It could also be that parents know condominium prices, like detached homes, have climbed to unprecedented levels, making it difficult for adult children to come up with a minimum 5% down payment, let alone the 20% needed to avoid costly mortgage default insurance.
Toronto condo research firm Urbanation Inc. says the average existing condominium in the city sold for $331,000 in the first quarter of 2010. Based on an average $369-per-square-foot price, that’s a 900-square-foot unit.
For a new one, prices averaged $443 per square foot in the first quarter, so about $400,000 for that same-sized condo.
Ms. Wisniewski says low interest rates are convincing parents to step up and buy their children homes. The condominium represents an attractive alternative to those parents because the costs are stable.
“They know what the maintenance costs will be,” she says. “[Parents] are thinking, ‘I’m not worried my children are too young to accept the responsibilities of home ownership if I set them up in an apartment. They don’t have to recognize the responsibilities of maintenance in an apartment.’ ”
Parents might also see a condominium as a way to get their kids to start a family. The survey found 36% of Canadians are willing to raise families in a condo.
“One of the reasons for that is affordability,” says Ms. Wisniewski. “Where are the new condominiums being built? They are being integrated in really nice existing neighbourhoods with all the infrastructure and all the schools and amenities.”
Brian Johnston, president of developer Monarch Corp.’s Canadian division, says he doubts families will ever be integrated into the condominium stock, but does agrees with the premise that parents are helping to buy housing for their children. He says parents often want to keep children close to them so they’ll chip in for a condominium in a nearby neighbourhood.
“How do we know they’re helping out? They tell us when they are writing the cheques for the deposit,” Mr. Johnston says.
Mr. Johnston said when it comes to recent immigrants to Canada, there is “lots of help” from family members to get that first home. “Condominiums are not inexpensive and they’re going to need that help, particularly if the younger ones have not had time to build up their finances.”
The builder has his own children and, based on today’s prices, he figures he’s going to have to lend a helping hand. “I don’t expect them to be able to buy a condo … before they are 30. That is just part of the deal [for parents],” says Mr. Johnston.
It’s not like Baby Boomers don’t have the cash. There have been endless studies that suggest the Boomers are set to inherit billions of dollars in the coming years from their parents.
Craig Alexander, deputy chief economist with TD Bank Financial Group, says there is no hard data to suggest how much parents are helping children, but they certainly have the financial capacity to lend a hand.
Canadians have $1.5-trillion invested in stocks and mutual funds with $500-billion of that figure in capital gains.
“The generation before the Baby Boomers were big savers and, as a consequence, there is a very large income transfer going to take place over time,” says Mr. Alexander, adding it makes sense that some of that money is going to end up in housing and real estate.
For first-time buyers facing rising rates and increasing prices, the helping hand couldn’t come at a better time — just ahead of tighter mortgage financing rules. Most of them probably hope their folks go from “considering” buying a condo to actually doing it.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Invest+real+estate+your+kids/2999480/story.html#ixzz0rJ4pBdc4
Eric Lam, Financial Post • Monday, Jun. 21, 2010
What the @#$!?
In this occasional feature, the Post tells you everything you need to know about a complex issue. Today, Eric Lam explains what a yuan is, and why the Chinese government has decided to let it appreciate.
So what’s a yuan anyway? Is it the same as a renminbi?
The renminbi, aptly translated as “the people’s currency,” is the official name of the currency of the People’s Republic of China except for Hong Kong and Macau. Meanwhile, the yuan is the primary unit of said currency, along with corresponding terms for 10 cents and a cent. However, in common usage renminbi and yuan are basically interchangeable, kind of like how we also call the Canadian dollar the loonie. At the moment, a loonie gets you a little less than 7 yuan.
What exactly did the Chinese government announce over the weekend?
On Saturday night the People’s Bank of China said it had decided to “proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” It’s pretty vague, as grand pronouncements from central banks go, but the gist of the message is the PBoC has decided to let the renminbi’s value fluctuate compared with the U.S. dollar.
Which means?
Essentially, the renminbi has been pegged to the greenback at a fixed rate since September 2008, a move to protect China’s economy from the financial crisis. However, economists estimate this peg has undervalued the currency as much as 40% as China’s economy roared out of the gates following the crisis. While the renminbi’s value could go either way, it is likely to move in a positive direction in the near-term considering the strength of China’s economy and the relative weakness everywhere else.
Why should anyone care what China’s doing with its money?
A lot of stuff these days is made in China. The Chinese have been accused of manipulating their currency to artificially drum up business for Chinese corporations, and cut other countries out of the global export market. The United States was worried enough about this that it almost ignited a trade war with China earlier this year, after President Barack Obama threatened to impose punishing tariffs on Chinese exports.
Does this mean China caved, then?
Neither side is going to give an inch when the stakes are so high. Most economists do not believe China is simply caving in to the demands of the IMF and the United States. Rather, the move was made to slow runaway growth of China’s economy by making its exports more expensive. At the same time it is expected to boost the development of the consumer side of the economy as imports become cheaper. Also, the timing is likely not a coincidence, with the intense scrutiny and criticism China has faced regarding its currency expected to rise to a fever pitch at the G20 meetings in Toronto this weekend.
Read more: http://www.financialpost.com/news/What+yuan/3182698/story.html#ixzz0ra3prxkU
Monday, June 21, 2010
Financial Update For June 21, 2010
• TSX -18.38 record bullion prices kept a lid on otherwise broad-based losses across nearly all sectors.
• DOW +16.47
• Dollar +.55c to 97.92cUS
• Oil +$.39 to $76.79US per barrel.
Gold +$9.70 to $1,257.40 USD per ounce a new record high close for gold as investors bought the metal to protect wealth from Europe’s financial turbulence and on concern that the economic recovery isn’t as strong as expected. Gold, up 15% this year, is heading for its 8th straight weekly gain and its 10th consecutive annual gain, the longest winning streak since at least 1920
Seeing through home sellers' camouflage
by Stephanie Farrington, Bankrate.com
Mortgage rates have started to climb again. While that's probably a good sign for the economy, it may also be a wake-up call for people who have been hitting the snooze button on the time in which they hoped to buy a house.
If you're one of the many Canadians just entering the buyer's market, it's easy to get caught up in the critical aspects of home buying and forget some of the details. The clock is ticking, rates are rising and what matters in a house is location, location, location, right?
Yes and no. Location matters, but if you're not careful and observant when making your choice, you could get a great location and still end up with a money pit.
In some cases, people anxious to sell their home have been known to make a few cosmetic adjustments to hide the areas where their house might need a little extra care or even some serious repairs. Here's what to watch out for.
A fresh coat of paint in the basement
Dean Langner, a Canadian Residential Appraiser, or CRA, with Kors & Associates, in Victoria, has worked for 15 years as an appraiser and home inspector. During that time, he's seen a lot.
"One thing I find suspicious is a recently painted concrete floor and two or three feet of foundation in an unfinished basement," he says. "A lot of times, basements will leak, and they'll get that mineral stain around the concrete. Before they sell, some owners will cover it up with a coat of paint."
Langner says if you suspect a problem, go back for a second visit. "The only way to tell is to wait for a good heavy rain and visit again to check for moisture. If you're still uncertain, you can hire a plumber with a camera, and they can look down the pipes."
Checking pipes like this is not done in the course of a usual inspection, but Langner says it's worth making it a condition of the sale if you're really worried, because drainage problems can be very difficult to fix.
New sewage or drainage pipes
Around the foundation of every house is a permanent, porous piping system, called weeping tile, that acts as a drain and keeps water from entering your basement. "Over time, this pipe can fail. It can fill with debris and mud and stuff, and it is not easily fixed," says Langner.
In older houses, weeping tile isn't even made of pipes -- it's a series of half-round, clay tiles placed next to each other. So, if the house or the land shifts, you could be in for trouble.
The money you spend to have a plumber look at your drains could end up saving you thousands of dollars, to say nothing of the time and inconvenience of digging a trench around the perimeter of your house to replace the draining system.
A recently pumped septic tank
Jeffrey D. Leiser, author of "The Home Buying Inspection Guide" and "You Can Sell Your House: For Sale By Owner," has his own cautionary tales about plumbing. "The worst is when a home owner is hiding problems with a septic or sewer system. Having the septic tank pumped out prior to an inspection can give the appearance of a well working system," he says. "A failed septic system can cost well over $20,000 in replacement costs."
He says sewer systems can also be bladed -- which involves using a long tube with a rotating blade at one end to clean pipes and cut out blockages -- so that they appear to be working without backups. But, again, this is a short-term solution to an expensive, long-term problem.
Unusual smells
Your senses are your first and one of your best methods of avoiding deception. Mould smells like mould. It's easy to hide the visual signs of mould with paint, but it's a hard smell to mask. Don't be afraid to sniff around any area that makes you feel uneasy.
Suspicious piles and large plants
If something looks out of place, ask about it. A pile of bricks stacked against the side of the house could just be a pile of bricks, but it could also be a way of hiding a cracked foundation.
That newly planted yet mature tree in the back yard, the one in front of the retaining wall? Look behind it. Just as people will paint over stains, they sometimes landscape over cracked retaining walls or other problem areas.
Protect yourself
Follow your gut. If you think someone is lying to you, ask more questions and use your written offer as a means to get the truth. Contracts are there to protect you, and conditions of sale are a good way to ensure you're covered. If you're unsure about how to do this, ask your real estate agent or your lawyer, but do not go in unprotected. It's usually easier to avoid buying a problem than it is to fix it.
If, in the end, you find yourself left holding the bag despite your best efforts, where can you turn?
Danny Berehula, director of the Saskatchewan branch of the Better Business Bureau, or BBB, says the BBB will try to help, but the help they can offer is limited because the transaction does not typically take place between a business and an individual but rather between two individuals.
"We're another resource for them, but most people, when this happens, would probably want to call their lawyer," he says. "There are laws in place, and if it's a serious matter, then it will become a legal matter. They can use us as a mediation service, but once it becomes a legal issue, we stand out of it."
So, take your time and think through your purchase carefully. All of the experts agree on one point -- sometimes you have to accept a few problems to get your dream house, but it's best to understand how much the trouble your home might cost you before you sign on the bottom line. http://ca.finance.yahoo.com/personal-finance/article/bankratecanada/1597/seeing-through-home-sellers-camouflage
RBC to fund programs helping Canadians avoid credit problems
Garry Marr, National Post • Sunday, Jun. 20, 2010
You find yourself deep in debt and you can’t get out. Who is responsible? Is it the financial institution who handed you the rope you used to hang yourself? Or should you be looking in the mirror?
This past week, Credit Counselling Canada awarded Royal Bank of Canada with its creditor of the year award. “They won it for thinking outside the box,” says Patricia White, executive director of the Toronto-based group.
For years, not-for-profit credit counselling groups have received donations from banks to assist their debt management services. Credit counselling agencies help people organize their finances to avoid bankruptcy. But RBC is also giving money to financial education aimed at helping Canadians — especially younger ones — avoid debt problems.
Until they come up with a vaccine for taking on debt you can’t afford, a little preventative education is probably the next best thing.
“Hopefully, it will stop people from getting into trouble in the first place,” said Ms. White, noting other banks have also been supportive of counselling and education. “But RBC has stood up and said they will support this with some funding. We already go into high schools, but this will help us do more.”
With Father’s Day tomorrow, I can’t help think there is an important role for parents to play in terms of helping children avoid serious credit problems.
Ms. White agrees. “As a parent, I started educating my kids early. I said here’s 5¢ and tried to get them to understand the value of money.”
A survey out of the United States this week by the National Foundation for Credit Counseling found 41% of Americans say they learned their personal finance skills from their parents. Is there any reason to believe Canadian children are any different?
The funny part is, the same U.S. survey asked parents to rate their own financial literacy and 34% gave themselves a grade of C, D or an F. At least they are being honest.
The U.S. group points out that children learn by watching. If they see you saving, they’ll save. If they see you unorganized with your expenses, guess what? The group also suggests involving your children in family financial decisions.
Jeff Bennett, managing director of RBC Collections, says educating consumers earlier in their lives is something the bank is interested in promoting. “We are trying to separate the two important components the not-for-profit credit counselling firms are doing — the educational and financial literacy component from the debt management and budgeting component,” he says.
“We’d like to move things further up in the life cycle to keep people out of trouble, rather than helping them once they are in trouble.”
While some people blame the high interest rates the banks charge on things like credit cards for getting them into trouble, Mr. Bennett says financial institutions have no interest in seeing customers wrestle with debt problems.
“The best thing we can have is a customer who understands the financial requirements of his life and makes plans for the future. Someone who doesn’t have problems is a happy client and a client who will refer people to us,” he says.
Everybody has a role in financial education and Mr. Bennett says it’s never too early to begin teaching about money.
Read more: http://www.financialpost.com/news/fund+programs+helping+Canadians+avoid+credit+problems/3166884/story.html#ixzz0rU9rbZkJ
• DOW +16.47
• Dollar +.55c to 97.92cUS
• Oil +$.39 to $76.79US per barrel.
Gold +$9.70 to $1,257.40 USD per ounce a new record high close for gold as investors bought the metal to protect wealth from Europe’s financial turbulence and on concern that the economic recovery isn’t as strong as expected. Gold, up 15% this year, is heading for its 8th straight weekly gain and its 10th consecutive annual gain, the longest winning streak since at least 1920
Seeing through home sellers' camouflage
by Stephanie Farrington, Bankrate.com
Mortgage rates have started to climb again. While that's probably a good sign for the economy, it may also be a wake-up call for people who have been hitting the snooze button on the time in which they hoped to buy a house.
If you're one of the many Canadians just entering the buyer's market, it's easy to get caught up in the critical aspects of home buying and forget some of the details. The clock is ticking, rates are rising and what matters in a house is location, location, location, right?
Yes and no. Location matters, but if you're not careful and observant when making your choice, you could get a great location and still end up with a money pit.
In some cases, people anxious to sell their home have been known to make a few cosmetic adjustments to hide the areas where their house might need a little extra care or even some serious repairs. Here's what to watch out for.
A fresh coat of paint in the basement
Dean Langner, a Canadian Residential Appraiser, or CRA, with Kors & Associates, in Victoria, has worked for 15 years as an appraiser and home inspector. During that time, he's seen a lot.
"One thing I find suspicious is a recently painted concrete floor and two or three feet of foundation in an unfinished basement," he says. "A lot of times, basements will leak, and they'll get that mineral stain around the concrete. Before they sell, some owners will cover it up with a coat of paint."
Langner says if you suspect a problem, go back for a second visit. "The only way to tell is to wait for a good heavy rain and visit again to check for moisture. If you're still uncertain, you can hire a plumber with a camera, and they can look down the pipes."
Checking pipes like this is not done in the course of a usual inspection, but Langner says it's worth making it a condition of the sale if you're really worried, because drainage problems can be very difficult to fix.
New sewage or drainage pipes
Around the foundation of every house is a permanent, porous piping system, called weeping tile, that acts as a drain and keeps water from entering your basement. "Over time, this pipe can fail. It can fill with debris and mud and stuff, and it is not easily fixed," says Langner.
In older houses, weeping tile isn't even made of pipes -- it's a series of half-round, clay tiles placed next to each other. So, if the house or the land shifts, you could be in for trouble.
The money you spend to have a plumber look at your drains could end up saving you thousands of dollars, to say nothing of the time and inconvenience of digging a trench around the perimeter of your house to replace the draining system.
A recently pumped septic tank
Jeffrey D. Leiser, author of "The Home Buying Inspection Guide" and "You Can Sell Your House: For Sale By Owner," has his own cautionary tales about plumbing. "The worst is when a home owner is hiding problems with a septic or sewer system. Having the septic tank pumped out prior to an inspection can give the appearance of a well working system," he says. "A failed septic system can cost well over $20,000 in replacement costs."
He says sewer systems can also be bladed -- which involves using a long tube with a rotating blade at one end to clean pipes and cut out blockages -- so that they appear to be working without backups. But, again, this is a short-term solution to an expensive, long-term problem.
Unusual smells
Your senses are your first and one of your best methods of avoiding deception. Mould smells like mould. It's easy to hide the visual signs of mould with paint, but it's a hard smell to mask. Don't be afraid to sniff around any area that makes you feel uneasy.
Suspicious piles and large plants
If something looks out of place, ask about it. A pile of bricks stacked against the side of the house could just be a pile of bricks, but it could also be a way of hiding a cracked foundation.
That newly planted yet mature tree in the back yard, the one in front of the retaining wall? Look behind it. Just as people will paint over stains, they sometimes landscape over cracked retaining walls or other problem areas.
Protect yourself
Follow your gut. If you think someone is lying to you, ask more questions and use your written offer as a means to get the truth. Contracts are there to protect you, and conditions of sale are a good way to ensure you're covered. If you're unsure about how to do this, ask your real estate agent or your lawyer, but do not go in unprotected. It's usually easier to avoid buying a problem than it is to fix it.
If, in the end, you find yourself left holding the bag despite your best efforts, where can you turn?
Danny Berehula, director of the Saskatchewan branch of the Better Business Bureau, or BBB, says the BBB will try to help, but the help they can offer is limited because the transaction does not typically take place between a business and an individual but rather between two individuals.
"We're another resource for them, but most people, when this happens, would probably want to call their lawyer," he says. "There are laws in place, and if it's a serious matter, then it will become a legal matter. They can use us as a mediation service, but once it becomes a legal issue, we stand out of it."
So, take your time and think through your purchase carefully. All of the experts agree on one point -- sometimes you have to accept a few problems to get your dream house, but it's best to understand how much the trouble your home might cost you before you sign on the bottom line. http://ca.finance.yahoo.com/personal-finance/article/bankratecanada/1597/seeing-through-home-sellers-camouflage
RBC to fund programs helping Canadians avoid credit problems
Garry Marr, National Post • Sunday, Jun. 20, 2010
You find yourself deep in debt and you can’t get out. Who is responsible? Is it the financial institution who handed you the rope you used to hang yourself? Or should you be looking in the mirror?
This past week, Credit Counselling Canada awarded Royal Bank of Canada with its creditor of the year award. “They won it for thinking outside the box,” says Patricia White, executive director of the Toronto-based group.
For years, not-for-profit credit counselling groups have received donations from banks to assist their debt management services. Credit counselling agencies help people organize their finances to avoid bankruptcy. But RBC is also giving money to financial education aimed at helping Canadians — especially younger ones — avoid debt problems.
Until they come up with a vaccine for taking on debt you can’t afford, a little preventative education is probably the next best thing.
“Hopefully, it will stop people from getting into trouble in the first place,” said Ms. White, noting other banks have also been supportive of counselling and education. “But RBC has stood up and said they will support this with some funding. We already go into high schools, but this will help us do more.”
With Father’s Day tomorrow, I can’t help think there is an important role for parents to play in terms of helping children avoid serious credit problems.
Ms. White agrees. “As a parent, I started educating my kids early. I said here’s 5¢ and tried to get them to understand the value of money.”
A survey out of the United States this week by the National Foundation for Credit Counseling found 41% of Americans say they learned their personal finance skills from their parents. Is there any reason to believe Canadian children are any different?
The funny part is, the same U.S. survey asked parents to rate their own financial literacy and 34% gave themselves a grade of C, D or an F. At least they are being honest.
The U.S. group points out that children learn by watching. If they see you saving, they’ll save. If they see you unorganized with your expenses, guess what? The group also suggests involving your children in family financial decisions.
Jeff Bennett, managing director of RBC Collections, says educating consumers earlier in their lives is something the bank is interested in promoting. “We are trying to separate the two important components the not-for-profit credit counselling firms are doing — the educational and financial literacy component from the debt management and budgeting component,” he says.
“We’d like to move things further up in the life cycle to keep people out of trouble, rather than helping them once they are in trouble.”
While some people blame the high interest rates the banks charge on things like credit cards for getting them into trouble, Mr. Bennett says financial institutions have no interest in seeing customers wrestle with debt problems.
“The best thing we can have is a customer who understands the financial requirements of his life and makes plans for the future. Someone who doesn’t have problems is a happy client and a client who will refer people to us,” he says.
Everybody has a role in financial education and Mr. Bennett says it’s never too early to begin teaching about money.
Read more: http://www.financialpost.com/news/fund+programs+helping+Canadians+avoid+credit+problems/3166884/story.html#ixzz0rU9rbZkJ
Friday, June 18, 2010
Financial Update For June 18, 2010
• TSX +24.92 to11,946 rose for a sixth-straight day, as strong gold shares offset weaker financial issues, which were pressured by soft U.S. economic data. Factory data in the U.S. Mid-Atlantic region was weaker than expected and U.S. jobless claims rose. "The broader concern is the U.S. employment market is not bouncing back," said Francis Campeau, a broker at MF Global Canada
• DOW +24.71
• Dollar -.15c to 97.37cUS .
• Oil -$.88 to $76.79US per barrel.
Gold +$18.20 to $1,248.70 USD per ounce Concern over the U.S. figures lit a flight-to-safety fire under gold futures, which rose to a new record high close
Canada’s financial hub is preparing for G20 lockdown
Jameson Berkow, Financial Post •
All five major banks will be reducing hours or shutting a total of 51 branches that are inside or close to the summit meeting in downtown Toronto. Plans are also underway to reduce staff on trading floors and corporate offices and move some operations to remote locations or allow employees to work from home.
Most banks will be implementing so-called “business continuity plans” — previously put to the test during the SARS outbreak and the Ontario power blackout in 2003 — and now being put through their paces once again. Although the summit takes place on the June 26-27 weekend, many banks will be limiting operations in the days leading up to it.
Banks are keeping details of their plans largely under wraps. Many bank employees who generally work downtown still don’t know if they are going to be coming into work or if they will be at a remote site setup. Much will depend on the intensity of the protests and the level of street disruptions.
The Bank of Montreal, in addition to closing nine downtown locations, intends to shift part of its trading operations to an alternate location outside of the secure zone, which encloses most of the financial district.
“Trading will probably split operations, moving half of its staff to an alternate location to reduce demand on the main trading floor,” Ralph Marranca, a spokesman for BMO said. At the peak of the summit disruption, BMO could have as many as 40% of its downtown staff working from home, he added, though plans are still in flux.
Toronto-Dominion Bank will modify hours at 22 branches, for five business days leading up to the summit.
“Like many companies expecting to be impacted by the summit, we have pretty robust plans in place,” said Wojtek Dabrowski, a spokesman for TD. “In order to make sure everything runs safely and smoothly we’re closing eight branches in the downtown core.”
Decisions about further closures or reductions in hours, including trading and other operations will be made on an ongoing basis, Mr. Dabrowski said.
For Royal Bank of Canada, the summit will be a real-life test of its continuity strategy.
“This is an actual event taking place in Toronto so we are putting our customized business continuity plans in place,” Don Blair, a RBC spokesman said.
RBC’s strategy, which also involves closing eight of its downtown branches from June 24 until June 27, will have as many employees as possible who work downtown either work from home or from alternative RBC locations in the Greater Toronto Area. According to Mr. Blair, RBC is planning to maintain normal trading operations for its investment services, Mr. Blair said.
An RBC branch in Ottawa was firebombed last month. The group that claimed responsibility for the attack, FFFC-Ottawa, has said it planned to protest at the Toronto event as well.
The Canadian Imperial Bank of Commerce will be closing six downtown locations, including its flagship Commerce Court branch, for all or part of the summit duration.
Aside from closing six downtown locations, Bank of Nova Scotia is not planning any specific mitigation strategy to deal with the G20 disruption. Though the bank will be “implementing business continuity plans as required,” said, Joe Konecny a bank spokesman.
The Toronto Stock Exchange (TSX), which maintains a corporate headquarters one block from the secure zone, is expecting approximately 75% of its staff to work from home. Though it does not anticipate any impact on its trading operations which occur off-site, according to TSX spokeswoman Carolyn Quick
Read more: http://www.financialpost.com/news/g20/Canada+financial+preparing+lockdown/3157538/story.html#ixzz0rAW64xT8
• DOW +24.71
• Dollar -.15c to 97.37cUS .
• Oil -$.88 to $76.79US per barrel.
Gold +$18.20 to $1,248.70 USD per ounce Concern over the U.S. figures lit a flight-to-safety fire under gold futures, which rose to a new record high close
Canada’s financial hub is preparing for G20 lockdown
Jameson Berkow, Financial Post •
All five major banks will be reducing hours or shutting a total of 51 branches that are inside or close to the summit meeting in downtown Toronto. Plans are also underway to reduce staff on trading floors and corporate offices and move some operations to remote locations or allow employees to work from home.
Most banks will be implementing so-called “business continuity plans” — previously put to the test during the SARS outbreak and the Ontario power blackout in 2003 — and now being put through their paces once again. Although the summit takes place on the June 26-27 weekend, many banks will be limiting operations in the days leading up to it.
Banks are keeping details of their plans largely under wraps. Many bank employees who generally work downtown still don’t know if they are going to be coming into work or if they will be at a remote site setup. Much will depend on the intensity of the protests and the level of street disruptions.
The Bank of Montreal, in addition to closing nine downtown locations, intends to shift part of its trading operations to an alternate location outside of the secure zone, which encloses most of the financial district.
“Trading will probably split operations, moving half of its staff to an alternate location to reduce demand on the main trading floor,” Ralph Marranca, a spokesman for BMO said. At the peak of the summit disruption, BMO could have as many as 40% of its downtown staff working from home, he added, though plans are still in flux.
Toronto-Dominion Bank will modify hours at 22 branches, for five business days leading up to the summit.
“Like many companies expecting to be impacted by the summit, we have pretty robust plans in place,” said Wojtek Dabrowski, a spokesman for TD. “In order to make sure everything runs safely and smoothly we’re closing eight branches in the downtown core.”
Decisions about further closures or reductions in hours, including trading and other operations will be made on an ongoing basis, Mr. Dabrowski said.
For Royal Bank of Canada, the summit will be a real-life test of its continuity strategy.
“This is an actual event taking place in Toronto so we are putting our customized business continuity plans in place,” Don Blair, a RBC spokesman said.
RBC’s strategy, which also involves closing eight of its downtown branches from June 24 until June 27, will have as many employees as possible who work downtown either work from home or from alternative RBC locations in the Greater Toronto Area. According to Mr. Blair, RBC is planning to maintain normal trading operations for its investment services, Mr. Blair said.
An RBC branch in Ottawa was firebombed last month. The group that claimed responsibility for the attack, FFFC-Ottawa, has said it planned to protest at the Toronto event as well.
The Canadian Imperial Bank of Commerce will be closing six downtown locations, including its flagship Commerce Court branch, for all or part of the summit duration.
Aside from closing six downtown locations, Bank of Nova Scotia is not planning any specific mitigation strategy to deal with the G20 disruption. Though the bank will be “implementing business continuity plans as required,” said, Joe Konecny a bank spokesman.
The Toronto Stock Exchange (TSX), which maintains a corporate headquarters one block from the secure zone, is expecting approximately 75% of its staff to work from home. Though it does not anticipate any impact on its trading operations which occur off-site, according to TSX spokeswoman Carolyn Quick
Read more: http://www.financialpost.com/news/g20/Canada+financial+preparing+lockdown/3157538/story.html#ixzz0rAW64xT8
Thursday, June 17, 2010
Financial Update For June 17, 2010
Home sales sputter in May
• TSX +13.51 as investors looked for direction and markets digested solid gains from the previous session.
• DOW +4.69
• Dollar -.03c to 97.52cUS.
• Oil +$.73 to $77.67US per barrel.
Gold -$3.90 to $1,229.50 USD per ounce
Home sales sputter in May
Steve Ladurantaye Real Estate Reporter Globe and Mail
Buyers backed away from Canada’s housing market in May, driving sales lower in what is traditionally the busiest month of the year for the country’s real estate agents.
The housing market has been key to Canada’s economic recovery, as low interest rates and pent-up demand drove buyers into the market after months of stagnation in 2008. But with interest rates likely heading higher in the second half of the year, many buyers who would have preferred to buy in the fall or early winter chose to buy sooner.
Tougher mortgage rules imposed by the federal government in mid-April also prompted buyers to act sooner, the Canadian Real Estate Association said. Meanwhile, tens of thousands of homeowners have seen the rampant demand and listed their houses for sale to take advantage of high prices.
Sales fell to 8.5 per cent to 40,393 units in May compared with April. Sales remain elevated by historical markers, but are 15 per lower than last fall’s peak.
Prices were essentially flat in May, gaining 0.5 per cent to an average national resale price of $346,881 – the highest on record.
• TSX +13.51 as investors looked for direction and markets digested solid gains from the previous session.
• DOW +4.69
• Dollar -.03c to 97.52cUS.
• Oil +$.73 to $77.67US per barrel.
Gold -$3.90 to $1,229.50 USD per ounce
Home sales sputter in May
Steve Ladurantaye Real Estate Reporter Globe and Mail
Buyers backed away from Canada’s housing market in May, driving sales lower in what is traditionally the busiest month of the year for the country’s real estate agents.
The housing market has been key to Canada’s economic recovery, as low interest rates and pent-up demand drove buyers into the market after months of stagnation in 2008. But with interest rates likely heading higher in the second half of the year, many buyers who would have preferred to buy in the fall or early winter chose to buy sooner.
Tougher mortgage rules imposed by the federal government in mid-April also prompted buyers to act sooner, the Canadian Real Estate Association said. Meanwhile, tens of thousands of homeowners have seen the rampant demand and listed their houses for sale to take advantage of high prices.
Sales fell to 8.5 per cent to 40,393 units in May compared with April. Sales remain elevated by historical markers, but are 15 per lower than last fall’s peak.
Prices were essentially flat in May, gaining 0.5 per cent to an average national resale price of $346,881 – the highest on record.
Wednesday, June 16, 2010
Financial Update For June 16, 2010
• TSX +240.20 its 4th straight day of gains and the largest rise since May 10, after healthy demand at several euro zone debt auctions in Spain, Ireland and Belgium, and a subsequent rally in commodity markets whetted investor appetite for riskier assets. Key prices of oil, gold and copper all gained, supporting the index's heavily weighted energy and materials sectors
• DOW +213.88 up after the Federal Reserve Bank of New York economic index showed expansion of manufacturing in and around New York state in June for the 11th straight month
• Dollar +.70c to 97.55cUS shrugging off mediocre North American data and tracking global stocks, commodities and other riskier currencies higher after successful European debt auctions raised confidence in the global economic recovery.
• Oil +$1.82 to $76.94US per barrel. as economists anticipated confirmation on Wednesday that U.S. stockpiles of oil declined for a third straight week.
Gold +$9.90 to $1,234.40 USD per ounce
Wal-Mart Canada issues rewards-based MasterCard
First of several financial services products Barbara Shecter, Financial Post • Tuesday, Jun. 15, 2010
Freshly-minted Walmart Canada Bank kicked off its foray into financial services with a rewards MasterCard credit card on Tuesday, but the low-price retailing giant is not ruling out bringing serious competition to the country’s handful of big banks through products and services such as loans and mortgages.
“Walmart will always look to save customers more so they can live better. That’s our mission,” said Trudy Fahie, chief executive of Walmart Bank Canada. “The bank offering will be no different than our retail offering.”
This month, Walmart won final approval from Canada’s banking regulator to open a full financial services business in Canada, something the successful retailer failed to accomplish in the United States amid fierce industry backlash.
In Canada, consumer groups have pushed for more competition in the banking sector, arguing that services charges and other costs are higher because the landscape is dominated by the country’s six big banks.
Read more: http://www.financialpost.com/news/Walmart+begins+Canadian+banking+push/3156480/story.html#ixzz0r13I2hFo
• DOW +213.88 up after the Federal Reserve Bank of New York economic index showed expansion of manufacturing in and around New York state in June for the 11th straight month
• Dollar +.70c to 97.55cUS shrugging off mediocre North American data and tracking global stocks, commodities and other riskier currencies higher after successful European debt auctions raised confidence in the global economic recovery.
• Oil +$1.82 to $76.94US per barrel. as economists anticipated confirmation on Wednesday that U.S. stockpiles of oil declined for a third straight week.
Gold +$9.90 to $1,234.40 USD per ounce
Wal-Mart Canada issues rewards-based MasterCard
First of several financial services products Barbara Shecter, Financial Post • Tuesday, Jun. 15, 2010
Freshly-minted Walmart Canada Bank kicked off its foray into financial services with a rewards MasterCard credit card on Tuesday, but the low-price retailing giant is not ruling out bringing serious competition to the country’s handful of big banks through products and services such as loans and mortgages.
“Walmart will always look to save customers more so they can live better. That’s our mission,” said Trudy Fahie, chief executive of Walmart Bank Canada. “The bank offering will be no different than our retail offering.”
This month, Walmart won final approval from Canada’s banking regulator to open a full financial services business in Canada, something the successful retailer failed to accomplish in the United States amid fierce industry backlash.
In Canada, consumer groups have pushed for more competition in the banking sector, arguing that services charges and other costs are higher because the landscape is dominated by the country’s six big banks.
Read more: http://www.financialpost.com/news/Walmart+begins+Canadian+banking+push/3156480/story.html#ixzz0r13I2hFo
Monday, June 14, 2010
Financial Update For June 14, 2010
• TSX +31.07
• DOW +38.54
• Dollar -.24c to 96.73cUS
• Oil -$1.70 to $73.78US per barrel.
• Gold +$8.10 to $1,228.90 USD per ounce enjoys a third straight weekly gain
The new face of debt
Andrew Allentuck, Financial Post • Friday, Jun. 11, 2010
For James Kennedy, a federal civil servant before he retired, and his wife, Jane, who retired from the Calgary civil service, the golden years have become a series of tough compromises. Both 59, they live in Qualicum Beach, B.C., a five-minute walk from the Strait of Georgia on Vancouver Island. They enjoy the mild weather, long walks on the beach and their beautiful home.
Trouble is, a lack of employment income combined with debt stalk the good times they thought they would have after they left their careers.
Their jobs paid them a total of about $100,000 per year. Today, as a result of too much house and the repairs it entails — repainting, new floors, new electrical circuits, new kitchen counters, custom French doors and other elegances — they carry a debt of almost $70,000, nearly twice their retirement income of $37,000 a year.
If they pay off the debt, James and Jane would face a cash shortage. They could do it, but it would wipe out all of their RRSPs and other retirement assets built up over their working lives. A tough choice.
“We used to think that our house would go up enough in price to cover our debts,” Mr. Kennedy explains. “But I don’t think you can rely on that.”
Their situation could be resolved by selling the house, yet they fear that having paid too much in renovations, even downsizing might leave them house broke — with a nice abode and nothing else.
“As I approach the age of 60, I don’t want to carry so much debt. There has to be an end to the debt. I want my mind to be clear that when we get our Canada Pension Plan and Old Age Security, we will be able to keep those benefits. We don’t want to go into our sunset years paying off our debts.”
See The Kennedys are not alone. A flurry of recent studies show a significant increase of retirees in debt. First was Investors Group, which said 62% plan to carry debt such as a mortgage into their golden years. Then Royal Bank of Canada came out with its Ipsos Reid poll, which found four in 10 Canadians retired with some form of debt, and one in four began retirement with a mortgage on their primary residence.
“More and more, Canadians are carrying debt into retirement,” said Lee Anne Davies, head of retirement strategies at RBC.
Just this week, BMO Financial Group noted less than half of Canadians 55 and over have a post-retirement income strategy in place and only a third have considered that they might outlive their savings.
It’s a new and dangerous trend.
Unlike their parents and grandparents, who remembered the Great Depression and regarded debt as a first step toward ruin, today’s retirees, especially Baby Boomers born between 1947 and 1966, grew up comfortable with owing others. Indeed, for many who grew up in the expansionary years of the 1960s, it was a normal and expected to have a credit card, fund a university education with loans, graduate to readily available mortgages and then to handy lines of credit from accommodative banks.
“Retirees, especially Boomers, are less averse to debt than their parents were,” says Peter Drake, vice president for retirement and economic research with Fidelity in Toronto. The contrast with earlier generations is stark, Mr. Drake adds. “They lived through a sustained period of strong economic growth and have adopted the idea that they will be well-off.”
Boomers have always had a major influence on consumer trends, and now they are changing the face of retirement as well.
“Boomers don’t have the same sense of saving for bad days that their parents had,” explains Charles Mossman, a finance professor at the Asper School of Business at the University of Manitoba. “When they retire, former workers, especially those who don’t have defined-benefit pensions that provide a guaranteed and sometimes even an indexed cash flow, wind up with more debt service charges than they can afford.”
According to a special report by The Office of the Superintendent of Bankruptcy that was released in 2008, 15.3% of all individual bankruptcies in Canada in 2003 were of individuals 55 and over, up from 6.9% in 1993. “Those over 65 are less likely to be able to recover economically and socially from the bankruptcy,” noted the OSB.
The risk of senior bankruptcy grows with age. A study for the Canadian Institute of Actuaries released June 2007, shows that longevity risk — the chance of living to a very ripe old age — poses the problem of running out of personal savings.
Given Canadians’ extending life expectancy — currently 78 for males, 83 for females — a person retiring at age 55 has a 40% chance of running out of personal savings by age 85 and a 90% chance of being flat broke by age 95. It should be noted the data shows that women, who outlive men on average and tend to have lower lifetime incomes, have even greater reason to fear poverty caused by longevity.
Compounding the longevity problem is the trend, promoted by some financial services companies, to early retirement. Remember Freedom 55? But retiring at that age means giving up what may be one’s most financially productive years. Indeed, if the average retiree has paid down most of his or her debts, and delays retirement to age 62, he or she can live in reasonable financial security, says demographer David Foot, an economist on the faculty of the University of Toronto and author of the 1996 bestseller Boom, Bust & Echo.
It would be wrong to label all debt foolish and all debtors in peril of financial catastrophe, argues Tina DiVito, head of retirement solutions at BMO Financial Group. “There is bad debt and good debt. Bad debt may be what one borrowed for a transitory pleasure, such as a vacation, after which the borrower has to pay high interest rates and gets no tax breaks.
“Good debt bears moderate rates of interest and is payable in a reasonable time period, perhaps as a part of an investment that makes interest tax-deductible,” Ms. DiVito says.
For good debt, consider the case of 61-year-old Montreal retiree Ioanna Jakus, who has maintained a mid-six figure investment portfolio while living on an after-tax income of less than $2,000 per month.
A former bank employee, she has a $10,000 line of credit with her stock broker. “I use the line to buy stocks and bonds,” she says. “I can deduct the interest I pay from my taxable income. My investments have been successful and have more than paid the cost of credit. What’s more, rates of interest are so low that borrowing to invest just makes sense for me.”
Not only has Ms. Jakus made intelligent use of credit, she has done so expertly, selecting low-risk GICs, bonds and blue-chip stocks with strong dividends. “I have always been motivated by the knowledge that only I can control my destiny,” she explains. “My husband and I paid off the mortgage — that was when interest rates were near 20% — and we never borrowed again for spending.
“Of course, I can clear my investment debt in a moment by using cash in one of my accounts. My philosophy has always been not to take risks that I cannot afford, especially when it comes to borrowing money.
“Nobody can look after me as well as I can,” she adds.
That’s a lesson a lot of retirees have yet to learn.
Read more: http://www.financialpost.com/news/face+debt/3143925/story.html#ixzz0qpSbthjV
• DOW +38.54
• Dollar -.24c to 96.73cUS
• Oil -$1.70 to $73.78US per barrel.
• Gold +$8.10 to $1,228.90 USD per ounce enjoys a third straight weekly gain
The new face of debt
Andrew Allentuck, Financial Post • Friday, Jun. 11, 2010
For James Kennedy, a federal civil servant before he retired, and his wife, Jane, who retired from the Calgary civil service, the golden years have become a series of tough compromises. Both 59, they live in Qualicum Beach, B.C., a five-minute walk from the Strait of Georgia on Vancouver Island. They enjoy the mild weather, long walks on the beach and their beautiful home.
Trouble is, a lack of employment income combined with debt stalk the good times they thought they would have after they left their careers.
Their jobs paid them a total of about $100,000 per year. Today, as a result of too much house and the repairs it entails — repainting, new floors, new electrical circuits, new kitchen counters, custom French doors and other elegances — they carry a debt of almost $70,000, nearly twice their retirement income of $37,000 a year.
If they pay off the debt, James and Jane would face a cash shortage. They could do it, but it would wipe out all of their RRSPs and other retirement assets built up over their working lives. A tough choice.
“We used to think that our house would go up enough in price to cover our debts,” Mr. Kennedy explains. “But I don’t think you can rely on that.”
Their situation could be resolved by selling the house, yet they fear that having paid too much in renovations, even downsizing might leave them house broke — with a nice abode and nothing else.
“As I approach the age of 60, I don’t want to carry so much debt. There has to be an end to the debt. I want my mind to be clear that when we get our Canada Pension Plan and Old Age Security, we will be able to keep those benefits. We don’t want to go into our sunset years paying off our debts.”
See The Kennedys are not alone. A flurry of recent studies show a significant increase of retirees in debt. First was Investors Group, which said 62% plan to carry debt such as a mortgage into their golden years. Then Royal Bank of Canada came out with its Ipsos Reid poll, which found four in 10 Canadians retired with some form of debt, and one in four began retirement with a mortgage on their primary residence.
“More and more, Canadians are carrying debt into retirement,” said Lee Anne Davies, head of retirement strategies at RBC.
Just this week, BMO Financial Group noted less than half of Canadians 55 and over have a post-retirement income strategy in place and only a third have considered that they might outlive their savings.
It’s a new and dangerous trend.
Unlike their parents and grandparents, who remembered the Great Depression and regarded debt as a first step toward ruin, today’s retirees, especially Baby Boomers born between 1947 and 1966, grew up comfortable with owing others. Indeed, for many who grew up in the expansionary years of the 1960s, it was a normal and expected to have a credit card, fund a university education with loans, graduate to readily available mortgages and then to handy lines of credit from accommodative banks.
“Retirees, especially Boomers, are less averse to debt than their parents were,” says Peter Drake, vice president for retirement and economic research with Fidelity in Toronto. The contrast with earlier generations is stark, Mr. Drake adds. “They lived through a sustained period of strong economic growth and have adopted the idea that they will be well-off.”
Boomers have always had a major influence on consumer trends, and now they are changing the face of retirement as well.
“Boomers don’t have the same sense of saving for bad days that their parents had,” explains Charles Mossman, a finance professor at the Asper School of Business at the University of Manitoba. “When they retire, former workers, especially those who don’t have defined-benefit pensions that provide a guaranteed and sometimes even an indexed cash flow, wind up with more debt service charges than they can afford.”
According to a special report by The Office of the Superintendent of Bankruptcy that was released in 2008, 15.3% of all individual bankruptcies in Canada in 2003 were of individuals 55 and over, up from 6.9% in 1993. “Those over 65 are less likely to be able to recover economically and socially from the bankruptcy,” noted the OSB.
The risk of senior bankruptcy grows with age. A study for the Canadian Institute of Actuaries released June 2007, shows that longevity risk — the chance of living to a very ripe old age — poses the problem of running out of personal savings.
Given Canadians’ extending life expectancy — currently 78 for males, 83 for females — a person retiring at age 55 has a 40% chance of running out of personal savings by age 85 and a 90% chance of being flat broke by age 95. It should be noted the data shows that women, who outlive men on average and tend to have lower lifetime incomes, have even greater reason to fear poverty caused by longevity.
Compounding the longevity problem is the trend, promoted by some financial services companies, to early retirement. Remember Freedom 55? But retiring at that age means giving up what may be one’s most financially productive years. Indeed, if the average retiree has paid down most of his or her debts, and delays retirement to age 62, he or she can live in reasonable financial security, says demographer David Foot, an economist on the faculty of the University of Toronto and author of the 1996 bestseller Boom, Bust & Echo.
It would be wrong to label all debt foolish and all debtors in peril of financial catastrophe, argues Tina DiVito, head of retirement solutions at BMO Financial Group. “There is bad debt and good debt. Bad debt may be what one borrowed for a transitory pleasure, such as a vacation, after which the borrower has to pay high interest rates and gets no tax breaks.
“Good debt bears moderate rates of interest and is payable in a reasonable time period, perhaps as a part of an investment that makes interest tax-deductible,” Ms. DiVito says.
For good debt, consider the case of 61-year-old Montreal retiree Ioanna Jakus, who has maintained a mid-six figure investment portfolio while living on an after-tax income of less than $2,000 per month.
A former bank employee, she has a $10,000 line of credit with her stock broker. “I use the line to buy stocks and bonds,” she says. “I can deduct the interest I pay from my taxable income. My investments have been successful and have more than paid the cost of credit. What’s more, rates of interest are so low that borrowing to invest just makes sense for me.”
Not only has Ms. Jakus made intelligent use of credit, she has done so expertly, selecting low-risk GICs, bonds and blue-chip stocks with strong dividends. “I have always been motivated by the knowledge that only I can control my destiny,” she explains. “My husband and I paid off the mortgage — that was when interest rates were near 20% — and we never borrowed again for spending.
“Of course, I can clear my investment debt in a moment by using cash in one of my accounts. My philosophy has always been not to take risks that I cannot afford, especially when it comes to borrowing money.
“Nobody can look after me as well as I can,” she adds.
That’s a lesson a lot of retirees have yet to learn.
Read more: http://www.financialpost.com/news/face+debt/3143925/story.html#ixzz0qpSbthjV
Friday, June 11, 2010
Financial Update For June 11, 2010
• TSX +185.21 sharply higher as good economic news from China sent commodity stocks higher on the resource-heavy TSX and helped curb worry that Europe's debt crisis will seriously hamper the global recovery.
• DOW +273.28 to 10,172
• Dollar +1.21c to 96.97cUS
• Oil +$1.10 to $75.48US per barrel.
• Gold -$7.70 to $1,221.10 USD per ounce as a rise in stocks and the euro reflected sharper appetite for nominally higher-risk assets
Canada modestly impacted by European debt crisis so far, Bank of Canada says
BY LUANN LASALLE
MONTREAL — While the European debt crisis has only had a “modest” impact on Canada, the crisis isn’t over and all governments need to be on healthy fiscal paths, Bank of Canada governor Mark Carney said Thursday.
“So there’s been a modest impact on financial conditions — a slight tightening of financial conditions in Canada — and a modest impact on commodity prices,” Carney said at a news conference.
“But it’s not over. You know, this is serious stuff,” he said, adding that it is “incredibly important” to execute the right policies to deal with the situation.
The head of Canada’s largely independent central bank has been providing similar advice to policymakers for months. His latest speech comes as Canada prepares to play host to G20 and G8 meetings from June 25 to 27, when the state of the world’s financial system will be among the main topics.
Canada won widespread accolades during the 2008-09 credit crisis and recession, for a regulatory regime credited with avoiding problems that forced the United States and other governments to bail out major banks and insurance companies.
Carney said he’s encouraged with the measures that European policymakers have taken so far, “but I don’t think anybody is of the view that more will not be required.”
“What we are seeing at present is a stronger demand from the market for more credible plans, more rapid plans, more rapid movements to fiscal sustainability at any level of government.”
BMO Capital Markets senior economist Michael Gregory said Carney’s remarks suggest the Bank of Canada has room to raise its key rates in July — following a quarter-point hike this month.
The central bank’s policy rate had been set at an all-time low of 0.25 per cent last year as a means to ease the cost of borrowing in order to stimulate the economy out of the deepest recession in decades.
“Bottom line: It sounds like the urgency of the risks posed by the European situation has eased somewhat in the Bank of Canada’s mind,” Gregory wrote in a note.
“Other things equal, this modestly raises the odds of a followup rate hike on July 20.”
Carney wouldn’t say if another hike in the central bank’s policy rate is expected this summer. On June 1, the Bank of Canada raised its key rate a quarter point to 0.5 per cent, the first time in almost three years.
“I would say it’s too early to make a judgment, nor is it necessary for us to make a judgment today.”
This week, the World Bank raised the possibility of a second recession affecting most of the industrialized world if governments don’t deal successfully with the unfolding European debt crisis affecting such countries as Greece and Spain.
The risk is serious enough that it will likely be the key topic of discussion for leaders meeting in Toronto later this month at a G20 summit.
During his speech to a Montreal economic conference, Carney said that banks should prepare for radical reforms to the world’s financial system that will make it look a lot more like what’s already in Canada.
The Canadian banking sector has been held as an example for the international community because its conservative investment practices helped it endure the credit crisis in 2008.
“The rigour of Canadian capital regulation was an important — although far from exclusive — reason why the Canadian system fared so well during the crisis,” Carney told the International Organization of Securities Commissions.
And he stressed that reforms pose no threat to the global recovery, saying the opposite is true — they will help economic growth.
Once implemented, global financial institutions will be required to retain more and better capital, improve liquidity and reduce risk, and introduce a capital buffer that is sufficiently large to absorb losses encountered in the 2008 crisis that led to a global recession, Carney said.
Although the coming changes will be significant, Carney dismissed critics who believe the requirement for more capital reserves will limit banks’ ability to lend and slow down economic activity.
In fact, the opposite will happen, he said.
The reforms will cause banks to shift focus away from trading risky financial instruments and more to conventional lending to businesses and individuals that spur growth, he argued.
And he noted that banks will be given plenty of lead time to meet new standards since the implementation date of key reforms won’t be until the end of 2012.
http://news.therecord.com/Business/article/726447
The bad news - bad news on U.S. jobs
by Brett Arends, WSJ.com and MarketWatch
Commentary: Five reasons the employment numbers are worse than they seem
BOSTON -- The news on jobs isn't as bad as it seemed last Friday.
It's worse.
President Obama and Treasury Secretary Geithner were trying to putting on a happy face, but the markets weren't buying. They have tumbled worldwide since the latest payroll data.
But instead of overreacting, the markets may only just be waking up to the real bad news.
1. Look out ahead.
We already know that when you strip out the short-term Census jobs, May's jobs growth was a pitiful 41,000. But what people haven't realized is that the leading indicators for June are even worse. TrimTabs Investment Research Inc. tracks the real-time jobs picture by monitoring income tax deposits at the Treasury. And these have suddenly started falling. Based on the latest data, the firm predicts the economy will actually lose up to 200,000 jobs, net, in June. "The big news is that we have a job loss of about 200,000 coming in June," says Trim Tabs' Madeline Schnapp, "and the market isn't ready for it."
It's not just the stock market. You can bet that the administration -- and the country -- isn't ready either. Remember, we need to create about 100,000 just to keep up with population growth.
2. One and a half million people have 'disappeared'?
The government says the unemployment rate "edged down" to 9.7% -- keeping it below the politically sensitive 10% level.
But that's only because about one and a half million people have just, miraculously "disappeared" from the official labor force.
A million and a half people disappearing? It sounds like a crazy conspiracy theory. But there it is, buried in the fine print of the government's own data.
From May 2009 to May 2010, the U.S. "civilian non-institutional population" of prime working age -- 20 to 64 -- expanded by one and a half million, 180.5 million to 182 million.
Yet over the same period the official tally of the labor force over age 20 held steady at just 148 million.
What happened to those extra people?
The Bureau of Labor Statistics doesn't have a full explanation. "We don't have direct questions (in the survey) addressing that fact," said a spokeswoman. But many of the disappeared are "unemployed who have decided not to look for work any more," or who haven't looked for work recently. Anyone who hasn't actively sought a job in the last four weeks vanishes from the rolls.
People dropping out completely are not a bullish sign -- unless, perhaps, one is measuring the unemployment figures for the government.
3. Some of the new "jobs" may not even exist
That's because they're being counted by the Federal Department of Guesswork. Ever since 1994, say economists, Uncle Sam has been using some statistical, er, "adjustments" to the core jobs data to come up with the, er, "true" picture. It will surprise no one that these "adjustments" make the data look better, rather than worse. The government makes estimates about new companies being started up as well as jobs being lost.
Those adjustments may be adding as many as half a million extra "jobs" to the core figure, says independent economist John Williams at Shadow Government Statistics.
In previous recessions, these adjustments may have had some justifications, because new companies formed very quickly in the recovery. But this recession has been unlike any other in our lifetimes, because it was caused by too much debt rather than economic overheating. So the recovery has been different as well. The slump in bank lending and the money supply in the past year suggest new companies are probably being formed far more slowly than in past recoveries, if at all. Bottom line: many of those jobs may not exist.
4. The private sector picture may still be in recession
Some recovery: The number employed in the private sector is still about 900,000 below where it was even a year ago, and about 8 million below where it was in 2007. And remember, it has to keep growing just to stand still, because the population is growing.
"There's practically no growth in private sector employment," says Gluskin Sheff strategist David Rosenberg. Jobs growth was anemic even in the parts of the economy allegedly leading the recovery, such as manufacturing. And now, he says, many leading economic indicators have started to turn down again.
The jobs growth is so slow, Rosenberg says, that by his calculations "it is going to take years, probably five to seven years, before we recoup the employment (lost) from the Great Recession," he says. Five to seven years? "There's a significant chance," he adds, "that for the first time ever we will go into the next recession without having seen a new peak in employment."
5. And as for earnings...
In the quest for some more cheerful news, the government said for those who do have jobs, average hourly earnings were up 1.9% from a year ago.
Good, yes?
Er, not really.
The government also reported that those workers produced 2.8% more goods and services per hour. So they actually got paid about 1% less for each widget they made, TV they sold, or meal they served. Oh, and over the same period consumer prices rose 2.2%. So even those lucky enough to be working have gone backwards -- before taxes.
http://ca.finance.yahoo.com/personal-finance/article/yfinance/1646/the-bad-news---bad-news-on-jobs
Managing debt while rates grow
Terry McBride , For Canwest News Service SASKATOON -- Canadians have taken advantage of extremely low interest rates to overextend themselves. The Bank of Canada wants to try to prevent inflation by raising interest rates to slow the economy down. How will debtors manage?
Inflation vs. deflation
Actually, debtors generally prefer inflation (when prices go up) because that can make it easier to repay a debt, which is a fixed dollar amount owing. Loan payments become more affordable when wages keep up with inflation.
Debtors usually fear deflation (when prices go down) because it becomes more difficult to repay an obligation when the fixed number of dollars can buy more. Deflation is already a major concern these days in Europe where some governments are raising taxes and cutting back on spending to tackle mushrooming public debts. Businesses there may be forced to cut prices and workers’ wages to cope with the economic slowdown.
Debtors fear deflation. How can they handle debt payments after their wages are cut or they lose their jobs? Serious household debt management issues arise.
Mortgage term
If your mortgage is coming up for renewal, how do you choose the best mortgage term? If you have had a variable or floating rate of interest tied to the prime rate, should you take the safe route and lock in a fixed, usually considerably higher, interest rate for five years?
If your mortgage payments rise, then you will have to look at various ways to manage other debts.
Consolidate
One popular debt management strategy is to combine various loans into your mortgage or a line of credit. Consolidation can eliminate high-interest credit card debt. Free up some cash flow by reducing your interest costs.
Talk to a professional debt counsellor. Can you have a single monthly payment? You could continue to make the same level of payments on your consolidated loan as you did before consolidation. Aim to reduce your principal owing and cut interest costs.
Amortization
Knowing how amortization works will help you to understand how to properly manage your debts. Amortization is how long you are scheduled to repay an instalment loan.
If interest rates rise, consider stretching the repayment period on an instalment loan to reduce the size of your monthly payments. Making your payments smaller seems very attractive at first. However, by making payments over a longer time period you will eventually pay much more interest in the long run.
Debt snowball
Here is a strategy for cutting down your overall debt level:
Make a list of your debts. Add up how much you pay on each loan.
Pick the smallest debt to tackle first. Pay the minimum on all debts except for your target debt. Pay whatever is left on your target debt until it is paid off. Then, continue with the debt snowball strategy by choosing the next debt on the list as your target debt. Pay it off.
Borrow wisely
The next time you have to borrow, avoid buying something that drops in value. The only time you should buy something using debt is if it is something that will appreciate in value or generate additional cash flow for you.
As a general rule, if you are buying something with borrowed money, make sure that what you buy lasts longer than the debt. Don’t add to your debt burden by going on a vacation financed by credit cards.
Emergency fund
Do you have to borrow when you have an emergency? Instead you should build an emergency fund with cash held in reserve. You could use a Tax-Free Savings Account, the cash surrender value of a whole life policy or a Canada Savings Bond payroll savings plan, for example. Having cash available to pay for an emergency will give you greater financial security than an untapped line of credit.
Terry McBride is a member of Advocis (The Financial Advisors Association of Canada)
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Managing+debt+while+rates+grow/3136091/story.html#ixzz0qXodyQrw
• DOW +273.28 to 10,172
• Dollar +1.21c to 96.97cUS
• Oil +$1.10 to $75.48US per barrel.
• Gold -$7.70 to $1,221.10 USD per ounce as a rise in stocks and the euro reflected sharper appetite for nominally higher-risk assets
Canada modestly impacted by European debt crisis so far, Bank of Canada says
BY LUANN LASALLE
MONTREAL — While the European debt crisis has only had a “modest” impact on Canada, the crisis isn’t over and all governments need to be on healthy fiscal paths, Bank of Canada governor Mark Carney said Thursday.
“So there’s been a modest impact on financial conditions — a slight tightening of financial conditions in Canada — and a modest impact on commodity prices,” Carney said at a news conference.
“But it’s not over. You know, this is serious stuff,” he said, adding that it is “incredibly important” to execute the right policies to deal with the situation.
The head of Canada’s largely independent central bank has been providing similar advice to policymakers for months. His latest speech comes as Canada prepares to play host to G20 and G8 meetings from June 25 to 27, when the state of the world’s financial system will be among the main topics.
Canada won widespread accolades during the 2008-09 credit crisis and recession, for a regulatory regime credited with avoiding problems that forced the United States and other governments to bail out major banks and insurance companies.
Carney said he’s encouraged with the measures that European policymakers have taken so far, “but I don’t think anybody is of the view that more will not be required.”
“What we are seeing at present is a stronger demand from the market for more credible plans, more rapid plans, more rapid movements to fiscal sustainability at any level of government.”
BMO Capital Markets senior economist Michael Gregory said Carney’s remarks suggest the Bank of Canada has room to raise its key rates in July — following a quarter-point hike this month.
The central bank’s policy rate had been set at an all-time low of 0.25 per cent last year as a means to ease the cost of borrowing in order to stimulate the economy out of the deepest recession in decades.
“Bottom line: It sounds like the urgency of the risks posed by the European situation has eased somewhat in the Bank of Canada’s mind,” Gregory wrote in a note.
“Other things equal, this modestly raises the odds of a followup rate hike on July 20.”
Carney wouldn’t say if another hike in the central bank’s policy rate is expected this summer. On June 1, the Bank of Canada raised its key rate a quarter point to 0.5 per cent, the first time in almost three years.
“I would say it’s too early to make a judgment, nor is it necessary for us to make a judgment today.”
This week, the World Bank raised the possibility of a second recession affecting most of the industrialized world if governments don’t deal successfully with the unfolding European debt crisis affecting such countries as Greece and Spain.
The risk is serious enough that it will likely be the key topic of discussion for leaders meeting in Toronto later this month at a G20 summit.
During his speech to a Montreal economic conference, Carney said that banks should prepare for radical reforms to the world’s financial system that will make it look a lot more like what’s already in Canada.
The Canadian banking sector has been held as an example for the international community because its conservative investment practices helped it endure the credit crisis in 2008.
“The rigour of Canadian capital regulation was an important — although far from exclusive — reason why the Canadian system fared so well during the crisis,” Carney told the International Organization of Securities Commissions.
And he stressed that reforms pose no threat to the global recovery, saying the opposite is true — they will help economic growth.
Once implemented, global financial institutions will be required to retain more and better capital, improve liquidity and reduce risk, and introduce a capital buffer that is sufficiently large to absorb losses encountered in the 2008 crisis that led to a global recession, Carney said.
Although the coming changes will be significant, Carney dismissed critics who believe the requirement for more capital reserves will limit banks’ ability to lend and slow down economic activity.
In fact, the opposite will happen, he said.
The reforms will cause banks to shift focus away from trading risky financial instruments and more to conventional lending to businesses and individuals that spur growth, he argued.
And he noted that banks will be given plenty of lead time to meet new standards since the implementation date of key reforms won’t be until the end of 2012.
http://news.therecord.com/Business/article/726447
The bad news - bad news on U.S. jobs
by Brett Arends, WSJ.com and MarketWatch
Commentary: Five reasons the employment numbers are worse than they seem
BOSTON -- The news on jobs isn't as bad as it seemed last Friday.
It's worse.
President Obama and Treasury Secretary Geithner were trying to putting on a happy face, but the markets weren't buying. They have tumbled worldwide since the latest payroll data.
But instead of overreacting, the markets may only just be waking up to the real bad news.
1. Look out ahead.
We already know that when you strip out the short-term Census jobs, May's jobs growth was a pitiful 41,000. But what people haven't realized is that the leading indicators for June are even worse. TrimTabs Investment Research Inc. tracks the real-time jobs picture by monitoring income tax deposits at the Treasury. And these have suddenly started falling. Based on the latest data, the firm predicts the economy will actually lose up to 200,000 jobs, net, in June. "The big news is that we have a job loss of about 200,000 coming in June," says Trim Tabs' Madeline Schnapp, "and the market isn't ready for it."
It's not just the stock market. You can bet that the administration -- and the country -- isn't ready either. Remember, we need to create about 100,000 just to keep up with population growth.
2. One and a half million people have 'disappeared'?
The government says the unemployment rate "edged down" to 9.7% -- keeping it below the politically sensitive 10% level.
But that's only because about one and a half million people have just, miraculously "disappeared" from the official labor force.
A million and a half people disappearing? It sounds like a crazy conspiracy theory. But there it is, buried in the fine print of the government's own data.
From May 2009 to May 2010, the U.S. "civilian non-institutional population" of prime working age -- 20 to 64 -- expanded by one and a half million, 180.5 million to 182 million.
Yet over the same period the official tally of the labor force over age 20 held steady at just 148 million.
What happened to those extra people?
The Bureau of Labor Statistics doesn't have a full explanation. "We don't have direct questions (in the survey) addressing that fact," said a spokeswoman. But many of the disappeared are "unemployed who have decided not to look for work any more," or who haven't looked for work recently. Anyone who hasn't actively sought a job in the last four weeks vanishes from the rolls.
People dropping out completely are not a bullish sign -- unless, perhaps, one is measuring the unemployment figures for the government.
3. Some of the new "jobs" may not even exist
That's because they're being counted by the Federal Department of Guesswork. Ever since 1994, say economists, Uncle Sam has been using some statistical, er, "adjustments" to the core jobs data to come up with the, er, "true" picture. It will surprise no one that these "adjustments" make the data look better, rather than worse. The government makes estimates about new companies being started up as well as jobs being lost.
Those adjustments may be adding as many as half a million extra "jobs" to the core figure, says independent economist John Williams at Shadow Government Statistics.
In previous recessions, these adjustments may have had some justifications, because new companies formed very quickly in the recovery. But this recession has been unlike any other in our lifetimes, because it was caused by too much debt rather than economic overheating. So the recovery has been different as well. The slump in bank lending and the money supply in the past year suggest new companies are probably being formed far more slowly than in past recoveries, if at all. Bottom line: many of those jobs may not exist.
4. The private sector picture may still be in recession
Some recovery: The number employed in the private sector is still about 900,000 below where it was even a year ago, and about 8 million below where it was in 2007. And remember, it has to keep growing just to stand still, because the population is growing.
"There's practically no growth in private sector employment," says Gluskin Sheff strategist David Rosenberg. Jobs growth was anemic even in the parts of the economy allegedly leading the recovery, such as manufacturing. And now, he says, many leading economic indicators have started to turn down again.
The jobs growth is so slow, Rosenberg says, that by his calculations "it is going to take years, probably five to seven years, before we recoup the employment (lost) from the Great Recession," he says. Five to seven years? "There's a significant chance," he adds, "that for the first time ever we will go into the next recession without having seen a new peak in employment."
5. And as for earnings...
In the quest for some more cheerful news, the government said for those who do have jobs, average hourly earnings were up 1.9% from a year ago.
Good, yes?
Er, not really.
The government also reported that those workers produced 2.8% more goods and services per hour. So they actually got paid about 1% less for each widget they made, TV they sold, or meal they served. Oh, and over the same period consumer prices rose 2.2%. So even those lucky enough to be working have gone backwards -- before taxes.
http://ca.finance.yahoo.com/personal-finance/article/yfinance/1646/the-bad-news---bad-news-on-jobs
Managing debt while rates grow
Terry McBride , For Canwest News Service SASKATOON -- Canadians have taken advantage of extremely low interest rates to overextend themselves. The Bank of Canada wants to try to prevent inflation by raising interest rates to slow the economy down. How will debtors manage?
Inflation vs. deflation
Actually, debtors generally prefer inflation (when prices go up) because that can make it easier to repay a debt, which is a fixed dollar amount owing. Loan payments become more affordable when wages keep up with inflation.
Debtors usually fear deflation (when prices go down) because it becomes more difficult to repay an obligation when the fixed number of dollars can buy more. Deflation is already a major concern these days in Europe where some governments are raising taxes and cutting back on spending to tackle mushrooming public debts. Businesses there may be forced to cut prices and workers’ wages to cope with the economic slowdown.
Debtors fear deflation. How can they handle debt payments after their wages are cut or they lose their jobs? Serious household debt management issues arise.
Mortgage term
If your mortgage is coming up for renewal, how do you choose the best mortgage term? If you have had a variable or floating rate of interest tied to the prime rate, should you take the safe route and lock in a fixed, usually considerably higher, interest rate for five years?
If your mortgage payments rise, then you will have to look at various ways to manage other debts.
Consolidate
One popular debt management strategy is to combine various loans into your mortgage or a line of credit. Consolidation can eliminate high-interest credit card debt. Free up some cash flow by reducing your interest costs.
Talk to a professional debt counsellor. Can you have a single monthly payment? You could continue to make the same level of payments on your consolidated loan as you did before consolidation. Aim to reduce your principal owing and cut interest costs.
Amortization
Knowing how amortization works will help you to understand how to properly manage your debts. Amortization is how long you are scheduled to repay an instalment loan.
If interest rates rise, consider stretching the repayment period on an instalment loan to reduce the size of your monthly payments. Making your payments smaller seems very attractive at first. However, by making payments over a longer time period you will eventually pay much more interest in the long run.
Debt snowball
Here is a strategy for cutting down your overall debt level:
Make a list of your debts. Add up how much you pay on each loan.
Pick the smallest debt to tackle first. Pay the minimum on all debts except for your target debt. Pay whatever is left on your target debt until it is paid off. Then, continue with the debt snowball strategy by choosing the next debt on the list as your target debt. Pay it off.
Borrow wisely
The next time you have to borrow, avoid buying something that drops in value. The only time you should buy something using debt is if it is something that will appreciate in value or generate additional cash flow for you.
As a general rule, if you are buying something with borrowed money, make sure that what you buy lasts longer than the debt. Don’t add to your debt burden by going on a vacation financed by credit cards.
Emergency fund
Do you have to borrow when you have an emergency? Instead you should build an emergency fund with cash held in reserve. You could use a Tax-Free Savings Account, the cash surrender value of a whole life policy or a Canada Savings Bond payroll savings plan, for example. Having cash available to pay for an emergency will give you greater financial security than an untapped line of credit.
Terry McBride is a member of Advocis (The Financial Advisors Association of Canada)
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Managing+debt+while+rates+grow/3136091/story.html#ixzz0qXodyQrw
Thursday, June 10, 2010
Financial Update For June 10, 2010
• TSX -66.54 another rocky finish as investor sentiment soured after the Federal Reserve's Beige Book said economic growth was subdued in many regions of the United States.
• DOW -40.73
• Dollar +.39c to 95.76cUS
• Oil +$2.39 to $74.38US per barrel.
• Gold -$15.60 to $1,228.80 USD per ounce “With confidence in paper currency systems badly shaken in the financial crisis, gold, it seems, is reasserting its old role as the ultimate debt-free money,” according to a new report from UBS Wealth Management as the yellow metal ran to yet another record high above $1,250 per ounce earlier this week . “We think that the price of gold has yet further to rise.” In its note to clients, the UBS analysts said gold has re-established its role as “safe haven” and should hit US$1,500 an ounce in 12 months’ time
Wells Fargo closes outlets in Canada
Barbara Shecter, Financial Post • Wednesday, Jun. 9, 2010
Wells Fargo Financial Corp. Canada is closing its outlets across the country and will no longer make customer loans, but will maintain existing real estate, auto and consumer loan accounts.
“In response to recent analysis of our operations, we have made the decision to stop originating consumer loan products in Canada,” the company said in a statement to customers on its website, which states that Wells Fargo has 130 stores across Canada.
The company is also suspending originations in its private-label credit card business.
Wells Fargo & Co., one of the largest banks in the United States, began to withdraw consumer lending from Canada in 2008 at the height of the financial and economic crisis. In November 2008, it decided to exit the indirect auto-lending business. Then, last July, Wells Fargo stopped offering residential mortgages and home-equity loans in Canada.
Wells Fargo Financial was the largest of the company’s five business lines in Canada, with total consumer receivables of $1.9-billion at the end of April.
Wells Fargo and other U.S. lenders such as General Electric Co. thrived in Canada before the financial crisis. The companies loaned money to consumers and home buyers, including those who may not have qualified for loans from Canadian banks.
Canada’s financial services sector is dominated by the domestic chartered banks and while foreign players have managed to get a toehold in the country, history has been marked by dramatic entrances followed by often quiet retreats.
According to the Wells Fargo website, the company has been providing financial products and services to Canadians for more than 60 years.
Some operations will remain in Canada, including a building in suburban Toronto to administer existing loans and mortgages.
“There will be no change to our customers’ existing account terms and conditions,” said Rick Valade, president of Well Fargo Financial Corp. Canada. “We still have more than 450 team members based in Canada available to support and service existing customers.”
Business loan operations will continue through division under the umbrella of parent company Wells Fargo & Co., such as Wells Fargo Equipment Finance Inc., and Wells Fargo Global Broker Network, an insurance brokering and risk management services company.
In April, Wells Fargo & Co., which has combined assets of US$57-billion, merged its asset lending businesses in Canada with similar operations acquired through its purchase of Wachovia Crop. in 2008. The combined operations operate under the name Wells Fargo Capital Finance.
Read more: http://www.financialpost.com/news/Wells+Fargo+closes+outlets+Canada/3133005/story.html#ixzz0qRuvrRe7
Bank and investment dealer complaints hit record high BY DAVID FRIEND
TORONTO — More complaints were filed by consumers against Canada’s financial industry last year than ever recorded before, as tumbling stock markets left some customers caught in disputes with their financial advisers.
The Ombudsman for Banking Services and Investments reported Wednesday that it opened 990 cases in 2009, a 48 per cent increase over the previous year.
The national organization also processed more than 12,400 individual inquiries from consumers and small businesses in 2009.
Ombudsman Douglas Melville said a growing number of filings have been made against the investment industry in recent years, and that 2009 was no exception.
“The global economic crisis, coupled with sharp declines in financial markets, gave rise to much of the increase in complaints we saw,” Melville said.
“However, despite the improvement in the markets over the last year, complaint volumes remain high. We expect this to continue.”
Last year, 599 of the cases were related to the investment industry, an increase of 71 per cent, while 391 were banking cases, an increase of 21 per cent.
Melville said that banking complaints often involved mortgage prepayment penalties, lines of credit and fraud.
“On the investment side, the vast majority of cases were related to the suitability of investment advice,” Melville said.
“Investment advisers need to fulfil their ‘know your client’ obligations as well as explain the risks and characteristics of the products they are recommending.”
The ombud said that 28 per cent of cases reviewed last year received compensation, with 20 per cent of banking complaints compensated and 35 per cent of investment complaints.
In response to the findings, the Canadian Bankers Association said that the 391 banking cases examined by the ombud represent about one in every one-hundred thousand transactions that are made at Canadian banks each year.
“With such a huge volume of transactions, mistakes can sometimes happen and we want to make things right,” said CBA spokesperson Maura Drew-Lytle in an email.
“But there are also many cases where a customer is unhappy with a situation and escalates their complaint when the bank was within its rights.”
Drew-Lytle said banking customers can also use a free complaint-handling system designed to resolve consumer complaints, before filing a complaint outside the banking industry.
The ombudsman’s office can investigate complaints from clients of financial institutions, including banks, investment dealers, trust companies, mutual fund dealers, credit unions and scholarship trust plans. Its services are free to consumers, and it can recommend compensation of up to $350,000 http://news.therecord.com/Business/article/725762
Europe’s debt crisis could undermine economic recovery, says World Bank THE CANADIAN PRESS OTTAWA — The World Bank is warning that the European debt crisis could derail the global economic recovery.
In its latest global economic prospects report, released Wednesday, the bank says Europe’s debt problems have created new hurdles on the road to sustainable medium-term growth.
Greece, Spain, Britain and other European countries face huge government debts and are moving to cut spending in a bid to balance their books and get their costs under control.
Many fear the cuts will slow growth in Europe and undermine the fragile recovery from recession now going on in many countries.
The World Bank predicts the global economy will grow between 2.9 and 3.3 per cent this year and next, and between 3.2 and 3.5 per cent in 2012. That would reverse a 2.1 per cent decline in 2009.
The bank says developing economies are expected to grow between 5.7 and 6.2 per cent each year from 2010-2012.
Meanwhile, high-income countries are projected to grow by between 2.1 and 2.3 per cent in 2010 — not enough to undo the 3.3 per cent contraction in 2009. In 2010, those countries could grow by between 1.9 per cent and 2.4 per cent.
“The better performance of developing countries in today’s world of multi-polar growth is reassuring,” Justin Yifu Lin, the World Bank’s chief economist, said in the report.
“But, for the rebound to endure, high-income countries need to seize opportunities offered by stronger growth in developing countries.”
The World Bank says the global recovery faces several important headwinds over the medium term, including reduced international capital flows, high unemployment, and spare economic capacity exceeding 10 per cent in many countries.
While the impact of the European debt crisis has so far been contained, prolonged rising government debt could make credit more expensive and curtail investment and growth in developing countries, the financial agency warns.
On the upside, world merchandise trade has rebounded sharply and is expected to increase by about 21 per cent this year, before growth rates taper down to around eight per cent in 2011-2012.
The World Bank’s projections assume that efforts by the IMF and European institutions will stave off a default or major European government debt restructuring.
But even so, developing countries and regions with close trade and financial connections to highly indebted countries may feel serious ripple effects.
“Demand stimulus in high-income countries is increasingly part of the problem instead of the solution,” said Hans Timmer, director of the Prospects Group at the World Bank.
“A more rapid reining in of spending could reduce borrowing costs and boost growth in both high-income and developing countries in the longer run.”
Regardless of how the debt situation in high-income Europe evolves, a second round financial crisis cannot be ruled out in certain countries of developing Europe and Central Asia, where high debts and slow recovery could threaten the banking sector.
“Developing countries are not immune to the effects of a high-income sovereign debt crisis,” said Andrew Burns, manager of global macro-economics at the World Bank.
“But we expect many economies to continue to do well if they focus on growth strategies, make it easier to do business, or make spending more efficient.” http://news.therecord.com/Business/article/725712
Have a great day!
• DOW -40.73
• Dollar +.39c to 95.76cUS
• Oil +$2.39 to $74.38US per barrel.
• Gold -$15.60 to $1,228.80 USD per ounce “With confidence in paper currency systems badly shaken in the financial crisis, gold, it seems, is reasserting its old role as the ultimate debt-free money,” according to a new report from UBS Wealth Management as the yellow metal ran to yet another record high above $1,250 per ounce earlier this week . “We think that the price of gold has yet further to rise.” In its note to clients, the UBS analysts said gold has re-established its role as “safe haven” and should hit US$1,500 an ounce in 12 months’ time
Wells Fargo closes outlets in Canada
Barbara Shecter, Financial Post • Wednesday, Jun. 9, 2010
Wells Fargo Financial Corp. Canada is closing its outlets across the country and will no longer make customer loans, but will maintain existing real estate, auto and consumer loan accounts.
“In response to recent analysis of our operations, we have made the decision to stop originating consumer loan products in Canada,” the company said in a statement to customers on its website, which states that Wells Fargo has 130 stores across Canada.
The company is also suspending originations in its private-label credit card business.
Wells Fargo & Co., one of the largest banks in the United States, began to withdraw consumer lending from Canada in 2008 at the height of the financial and economic crisis. In November 2008, it decided to exit the indirect auto-lending business. Then, last July, Wells Fargo stopped offering residential mortgages and home-equity loans in Canada.
Wells Fargo Financial was the largest of the company’s five business lines in Canada, with total consumer receivables of $1.9-billion at the end of April.
Wells Fargo and other U.S. lenders such as General Electric Co. thrived in Canada before the financial crisis. The companies loaned money to consumers and home buyers, including those who may not have qualified for loans from Canadian banks.
Canada’s financial services sector is dominated by the domestic chartered banks and while foreign players have managed to get a toehold in the country, history has been marked by dramatic entrances followed by often quiet retreats.
According to the Wells Fargo website, the company has been providing financial products and services to Canadians for more than 60 years.
Some operations will remain in Canada, including a building in suburban Toronto to administer existing loans and mortgages.
“There will be no change to our customers’ existing account terms and conditions,” said Rick Valade, president of Well Fargo Financial Corp. Canada. “We still have more than 450 team members based in Canada available to support and service existing customers.”
Business loan operations will continue through division under the umbrella of parent company Wells Fargo & Co., such as Wells Fargo Equipment Finance Inc., and Wells Fargo Global Broker Network, an insurance brokering and risk management services company.
In April, Wells Fargo & Co., which has combined assets of US$57-billion, merged its asset lending businesses in Canada with similar operations acquired through its purchase of Wachovia Crop. in 2008. The combined operations operate under the name Wells Fargo Capital Finance.
Read more: http://www.financialpost.com/news/Wells+Fargo+closes+outlets+Canada/3133005/story.html#ixzz0qRuvrRe7
Bank and investment dealer complaints hit record high BY DAVID FRIEND
TORONTO — More complaints were filed by consumers against Canada’s financial industry last year than ever recorded before, as tumbling stock markets left some customers caught in disputes with their financial advisers.
The Ombudsman for Banking Services and Investments reported Wednesday that it opened 990 cases in 2009, a 48 per cent increase over the previous year.
The national organization also processed more than 12,400 individual inquiries from consumers and small businesses in 2009.
Ombudsman Douglas Melville said a growing number of filings have been made against the investment industry in recent years, and that 2009 was no exception.
“The global economic crisis, coupled with sharp declines in financial markets, gave rise to much of the increase in complaints we saw,” Melville said.
“However, despite the improvement in the markets over the last year, complaint volumes remain high. We expect this to continue.”
Last year, 599 of the cases were related to the investment industry, an increase of 71 per cent, while 391 were banking cases, an increase of 21 per cent.
Melville said that banking complaints often involved mortgage prepayment penalties, lines of credit and fraud.
“On the investment side, the vast majority of cases were related to the suitability of investment advice,” Melville said.
“Investment advisers need to fulfil their ‘know your client’ obligations as well as explain the risks and characteristics of the products they are recommending.”
The ombud said that 28 per cent of cases reviewed last year received compensation, with 20 per cent of banking complaints compensated and 35 per cent of investment complaints.
In response to the findings, the Canadian Bankers Association said that the 391 banking cases examined by the ombud represent about one in every one-hundred thousand transactions that are made at Canadian banks each year.
“With such a huge volume of transactions, mistakes can sometimes happen and we want to make things right,” said CBA spokesperson Maura Drew-Lytle in an email.
“But there are also many cases where a customer is unhappy with a situation and escalates their complaint when the bank was within its rights.”
Drew-Lytle said banking customers can also use a free complaint-handling system designed to resolve consumer complaints, before filing a complaint outside the banking industry.
The ombudsman’s office can investigate complaints from clients of financial institutions, including banks, investment dealers, trust companies, mutual fund dealers, credit unions and scholarship trust plans. Its services are free to consumers, and it can recommend compensation of up to $350,000 http://news.therecord.com/Business/article/725762
Europe’s debt crisis could undermine economic recovery, says World Bank THE CANADIAN PRESS OTTAWA — The World Bank is warning that the European debt crisis could derail the global economic recovery.
In its latest global economic prospects report, released Wednesday, the bank says Europe’s debt problems have created new hurdles on the road to sustainable medium-term growth.
Greece, Spain, Britain and other European countries face huge government debts and are moving to cut spending in a bid to balance their books and get their costs under control.
Many fear the cuts will slow growth in Europe and undermine the fragile recovery from recession now going on in many countries.
The World Bank predicts the global economy will grow between 2.9 and 3.3 per cent this year and next, and between 3.2 and 3.5 per cent in 2012. That would reverse a 2.1 per cent decline in 2009.
The bank says developing economies are expected to grow between 5.7 and 6.2 per cent each year from 2010-2012.
Meanwhile, high-income countries are projected to grow by between 2.1 and 2.3 per cent in 2010 — not enough to undo the 3.3 per cent contraction in 2009. In 2010, those countries could grow by between 1.9 per cent and 2.4 per cent.
“The better performance of developing countries in today’s world of multi-polar growth is reassuring,” Justin Yifu Lin, the World Bank’s chief economist, said in the report.
“But, for the rebound to endure, high-income countries need to seize opportunities offered by stronger growth in developing countries.”
The World Bank says the global recovery faces several important headwinds over the medium term, including reduced international capital flows, high unemployment, and spare economic capacity exceeding 10 per cent in many countries.
While the impact of the European debt crisis has so far been contained, prolonged rising government debt could make credit more expensive and curtail investment and growth in developing countries, the financial agency warns.
On the upside, world merchandise trade has rebounded sharply and is expected to increase by about 21 per cent this year, before growth rates taper down to around eight per cent in 2011-2012.
The World Bank’s projections assume that efforts by the IMF and European institutions will stave off a default or major European government debt restructuring.
But even so, developing countries and regions with close trade and financial connections to highly indebted countries may feel serious ripple effects.
“Demand stimulus in high-income countries is increasingly part of the problem instead of the solution,” said Hans Timmer, director of the Prospects Group at the World Bank.
“A more rapid reining in of spending could reduce borrowing costs and boost growth in both high-income and developing countries in the longer run.”
Regardless of how the debt situation in high-income Europe evolves, a second round financial crisis cannot be ruled out in certain countries of developing Europe and Central Asia, where high debts and slow recovery could threaten the banking sector.
“Developing countries are not immune to the effects of a high-income sovereign debt crisis,” said Andrew Burns, manager of global macro-economics at the World Bank.
“But we expect many economies to continue to do well if they focus on growth strategies, make it easier to do business, or make spending more efficient.” http://news.therecord.com/Business/article/725712
Have a great day!
Wednesday, June 9, 2010
Financial Update For June 9, 2010
Housing starts drop in May, in latest sign Canada's housing market is cooling
• TSX +12.44
• DOW +123.49
• Dollar +1.05c to 95.37cUS
• Oil +$.55 to $71.99US per barrel.
• Gold +$4.60 to $1,244.40 USD per ounce
Mortgage brokers not yet fully protecting data
THE CANADIAN PRESS
OTTAWA — Mortgage brokers still have a way to go in protecting the personal information of their customers, the privacy commissioner said Tuesday.
Jennifer Stoddart said an investigation by her office into the loss of hundreds of credit reports in Ontario two years ago found brokers have tightened their security.
But she says the controls should be tougher, especially since brokers play a major role in home-buying. Brokers handle a quarter of all mortgages and almost half of all first-time mortgages.
The audit was started after the brokerages reported 14 data breaches in the space of a few months in mid-2008. Someone impersonating an experienced agent downloaded credit reports for people who hadn’t even applied for a mortgage and compromised the personal information of thousands of people.
The mortgage companies themselves went to the commissioner when they discovered the leaks.
“The breaches prompted the brokerages to take some positive steps to better protect personal information,” Stoddart said in her report. “However, our audit found that those changes did not go far enough.”
The report said brokers now are more careful in allowing access to personal data, but don’t always have the alarm systems, secure walls and other physical safeguards to protect the files.
They also don’t have computer systems to restrict access to credit reports and aren’t always careful in disposing of their files.
She says mortgage brokers audited by her office have accepted her recommendations to improve security.
The association representing mortgage professionals acknowledged Stoddart’s findings and promised full support.
The Canadian Association of Accredited Mortgage Professionals said it has “an ongoing commitment to improving the information-handling procedures of mortgage brokers and their agents to ensure client protection.”
Stoddart said some firms simply didn’t understand the privacy risks and their responsibilities in protecting privacy.
Of the five brokerages audited, four agreed to all of Stoddart’s recommendations for tighter controls. One is out of business.
The brokers’ case was part of Stoddart’s 2009 annual report, tabled Tuesday in Parliament.
The report said the protection of privacy is increasingly moving into the virtual world and requires a global approach.
“In our interconnected world, we need to take a co-operative approach to protecting personal information,” she said.
She pointed to her office’s much-publicized fight with Facebook over privacy issues as an example of the difficulties in the online, borderless world.
“It was wide-ranging and the issues were incredibly complex and, in some aspects, highly technical.”
Stoddart prodded the social network into tightening privacy provisions and says she’ll be watching to make sure these changes are effective.
She has also opened an investigation into Google over accusations that it captured data from private wireless networks while assembling its street views.
The privacy commissioner is an officer of Parliament charged with overseeing the Personal Information Protection and Electronic Documents Act.
http://news.therecord.com/Business/article/724969
Housing starts drop in May, in latest sign Canada's housing market is cooling
By Sunny Freeman, The Canadian Press
TORONTO - New home construction slowed in May as the number of startups last month fell below economists' expectations — the latest indicator that Canada's once white-hot housing market is cooling off.
Canada Mortgage and Housing Corp reported Tuesday that the annual rate of housing starts dropped last month, pegging the rate at 189,100 units in May, down from a revised 201,800 in April.
Douglas Porter, deputy chief economist at the Bank of Montreal, said May's figures were below expectations but "hardly a shock."
"The surprise so far in 2010 had been how quickly starts had ramped up from their depressed levels a year ago," Porter wrote in a note Tuesday. "While the May level of starts is the lowest so far this year, it’s still above where we see activity for all of 2010."
Economists have widely predicted a slowdown in the housing market in the second half of 2010.
Consumers pushed many sales forward into the latter half of 2009 and the early part of 2010 in order to get into the market in advance of tougher new mortgage rules in April, the widely expected interest rate increase that was announced by the Bank of Canada in June and the implementation of the harmonized sales tax in Ontario and B.C. coming July 1.
CMHC said the decrease in May is consistent with its forecast of 182,000 housing starts for all of 2010.
Urban starts fell 9.5 per cent to 165,200 units in May, while rural starts were estimated at an annual rate of 23,900 units. Urban multiple starts, which include condos and townhouses, decreased 5.6 per cent to 92,800 units, while single urban starts dropped 14.1, to 72,400 units.
While spring and summer are generally the busiest building seasons of the year, construction is expected to slow markedly as a result of cooling demand in Canada's housing market, Porter said, adding it looks as though Canadian residential construction activity has peaked for the time being and will recede in the months ahead.
Most economists now predict that home prices will either remain flat or fall in the rest of the year and into 2011.
Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group, said starts dropped in May despite unseasonably warm, construction-friendly weather in Central and Eastern Canada and were the first major setback for home building in several months.
"Today's data suggest that the rebound in home-building activity from last year's recession is quickly running out of steam," he wrote in a note Tuesday.
"Prior to May, starts had rallied strongly from a recession low of 112,000 units in April of last year. In the first four months of the year, starts had plateaued at the 200,000 level."
He added that TD Economics anticipates average resale home prices to decline by six to seven per cent over the next four or five quarters.
"A bigger culprit (than the HST) however, is easing price conditions in the broader housing market, as sales continue to come off the boil and more listings make their way onto the market," Burleton said.
But, thanks in part to a strong showing in April, housing starts in the second quarter are still likely to be solid—around 190,000 to 195,000 on an annualized basis —down slightly from about 200,000 units in the first quarter, Burleton predicted.
Meanwhile, he said in the second half of the year, housing starts will moderate to the 160,000 to 170,000 unit range.
The Canadian Real Estate Association last week lowered its 2010 national forecast for resale transactions following a weaker than anticipated start to the year in some provinces, mainly British Columbia, Ontario and Alberta.
CREA also revised its projected housing price increases for this year, saying it still expects a record to be set this year but that the increase now is expected to be just 1.6 per cent over 2009.
The previous forecast had called for prices to rise 5.4 per cent over last year's record-setting peak.
The association predicted that by 2011, the national average housing price is expected to decline by 1.5 per cent, driven down by an easing of the growth in sales in B.C. and Ontario.
http://ca.news.finance.yahoo.com/s/08062010/2/biz-finance-housing-starts-drop-latest-sign-canada-s-housing.html
• TSX +12.44
• DOW +123.49
• Dollar +1.05c to 95.37cUS
• Oil +$.55 to $71.99US per barrel.
• Gold +$4.60 to $1,244.40 USD per ounce
Mortgage brokers not yet fully protecting data
THE CANADIAN PRESS
OTTAWA — Mortgage brokers still have a way to go in protecting the personal information of their customers, the privacy commissioner said Tuesday.
Jennifer Stoddart said an investigation by her office into the loss of hundreds of credit reports in Ontario two years ago found brokers have tightened their security.
But she says the controls should be tougher, especially since brokers play a major role in home-buying. Brokers handle a quarter of all mortgages and almost half of all first-time mortgages.
The audit was started after the brokerages reported 14 data breaches in the space of a few months in mid-2008. Someone impersonating an experienced agent downloaded credit reports for people who hadn’t even applied for a mortgage and compromised the personal information of thousands of people.
The mortgage companies themselves went to the commissioner when they discovered the leaks.
“The breaches prompted the brokerages to take some positive steps to better protect personal information,” Stoddart said in her report. “However, our audit found that those changes did not go far enough.”
The report said brokers now are more careful in allowing access to personal data, but don’t always have the alarm systems, secure walls and other physical safeguards to protect the files.
They also don’t have computer systems to restrict access to credit reports and aren’t always careful in disposing of their files.
She says mortgage brokers audited by her office have accepted her recommendations to improve security.
The association representing mortgage professionals acknowledged Stoddart’s findings and promised full support.
The Canadian Association of Accredited Mortgage Professionals said it has “an ongoing commitment to improving the information-handling procedures of mortgage brokers and their agents to ensure client protection.”
Stoddart said some firms simply didn’t understand the privacy risks and their responsibilities in protecting privacy.
Of the five brokerages audited, four agreed to all of Stoddart’s recommendations for tighter controls. One is out of business.
The brokers’ case was part of Stoddart’s 2009 annual report, tabled Tuesday in Parliament.
The report said the protection of privacy is increasingly moving into the virtual world and requires a global approach.
“In our interconnected world, we need to take a co-operative approach to protecting personal information,” she said.
She pointed to her office’s much-publicized fight with Facebook over privacy issues as an example of the difficulties in the online, borderless world.
“It was wide-ranging and the issues were incredibly complex and, in some aspects, highly technical.”
Stoddart prodded the social network into tightening privacy provisions and says she’ll be watching to make sure these changes are effective.
She has also opened an investigation into Google over accusations that it captured data from private wireless networks while assembling its street views.
The privacy commissioner is an officer of Parliament charged with overseeing the Personal Information Protection and Electronic Documents Act.
http://news.therecord.com/Business/article/724969
Housing starts drop in May, in latest sign Canada's housing market is cooling
By Sunny Freeman, The Canadian Press
TORONTO - New home construction slowed in May as the number of startups last month fell below economists' expectations — the latest indicator that Canada's once white-hot housing market is cooling off.
Canada Mortgage and Housing Corp reported Tuesday that the annual rate of housing starts dropped last month, pegging the rate at 189,100 units in May, down from a revised 201,800 in April.
Douglas Porter, deputy chief economist at the Bank of Montreal, said May's figures were below expectations but "hardly a shock."
"The surprise so far in 2010 had been how quickly starts had ramped up from their depressed levels a year ago," Porter wrote in a note Tuesday. "While the May level of starts is the lowest so far this year, it’s still above where we see activity for all of 2010."
Economists have widely predicted a slowdown in the housing market in the second half of 2010.
Consumers pushed many sales forward into the latter half of 2009 and the early part of 2010 in order to get into the market in advance of tougher new mortgage rules in April, the widely expected interest rate increase that was announced by the Bank of Canada in June and the implementation of the harmonized sales tax in Ontario and B.C. coming July 1.
CMHC said the decrease in May is consistent with its forecast of 182,000 housing starts for all of 2010.
Urban starts fell 9.5 per cent to 165,200 units in May, while rural starts were estimated at an annual rate of 23,900 units. Urban multiple starts, which include condos and townhouses, decreased 5.6 per cent to 92,800 units, while single urban starts dropped 14.1, to 72,400 units.
While spring and summer are generally the busiest building seasons of the year, construction is expected to slow markedly as a result of cooling demand in Canada's housing market, Porter said, adding it looks as though Canadian residential construction activity has peaked for the time being and will recede in the months ahead.
Most economists now predict that home prices will either remain flat or fall in the rest of the year and into 2011.
Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group, said starts dropped in May despite unseasonably warm, construction-friendly weather in Central and Eastern Canada and were the first major setback for home building in several months.
"Today's data suggest that the rebound in home-building activity from last year's recession is quickly running out of steam," he wrote in a note Tuesday.
"Prior to May, starts had rallied strongly from a recession low of 112,000 units in April of last year. In the first four months of the year, starts had plateaued at the 200,000 level."
He added that TD Economics anticipates average resale home prices to decline by six to seven per cent over the next four or five quarters.
"A bigger culprit (than the HST) however, is easing price conditions in the broader housing market, as sales continue to come off the boil and more listings make their way onto the market," Burleton said.
But, thanks in part to a strong showing in April, housing starts in the second quarter are still likely to be solid—around 190,000 to 195,000 on an annualized basis —down slightly from about 200,000 units in the first quarter, Burleton predicted.
Meanwhile, he said in the second half of the year, housing starts will moderate to the 160,000 to 170,000 unit range.
The Canadian Real Estate Association last week lowered its 2010 national forecast for resale transactions following a weaker than anticipated start to the year in some provinces, mainly British Columbia, Ontario and Alberta.
CREA also revised its projected housing price increases for this year, saying it still expects a record to be set this year but that the increase now is expected to be just 1.6 per cent over 2009.
The previous forecast had called for prices to rise 5.4 per cent over last year's record-setting peak.
The association predicted that by 2011, the national average housing price is expected to decline by 1.5 per cent, driven down by an easing of the growth in sales in B.C. and Ontario.
http://ca.news.finance.yahoo.com/s/08062010/2/biz-finance-housing-starts-drop-latest-sign-canada-s-housing.html
Tuesday, June 8, 2010
Financial Update For June 8, 2010
Is it too early to be moving away from stimulus to fiscal restraint?
• TSX -64.87 to 11,504. ended lower again in volatile trading as energy and financial shares tumbled on economic uncertainty
• DOW -115.48 to 9,816 taking Dow industrials below last month's flash crash lows and the S&P 500 to its lowest close in seven months.
Dollar +.04c to 94.32cUS
• Oil -$.07 to $71.44US per barrel.
• Gold +$23.10 to $1,239.80 USD per ounce ongoing fears about euro zone debt contagion causing investors to flee to safe-haven assets, gold rallied to less than $10 below its all-time high
Ford Credit Canada applies for bank status
BY KRISTINE OWRAM
TORONTO — Ford’s Canadian lending arm is applying to become a bank so it can access a new source of funding.
Ford Credit Canada, a subsidiary of Ford Motor Co., would be able to accept consumer deposits that would be guaranteed by the Canada Deposit Insurance Corp. if the company is granted bank status, said Ford Credit spokesperson Margaret Mellott.
“It’s really very simple: our goal is to support Ford dealers and customers, and part of the way we do that is through a wide variety of funding channels and sources and this is a strategy to diversify our funding,” she said.
As a bank, Ford Credit Canada would offer guaranteed investment certificates, or GICs, as well as a “very, very limited online-only savings operation,” Mellott said.
But the company wouldn’t alter its core service, which is to provide financing for Ford dealers and customers.
If the application by Ford Credit Canada is approved, the Oakville-headquartered company will change its name to Ford Credit Bank.
The approval process is expected to be a lengthy one.
“There’s no timetable, but there’s a lot of due diligence. There’s a lot of study involved because, of course, the government will make a very measured decision,” Mellott said.
The major automakers’ finance arms suffered during the 2008-09 financial crisis as credit tightened, making it difficult or nearly impossible to raise money to fund their lending activities.
Frozen credit markets were a major factor in slumping vehicle sales in both Canada and the U.S., which served to exacerbate the recession and forced major automakers Chrysler and General Motors into bankruptcy protection.
Most automakers’ financing arms were forced to increase the credit score necessary to get a lease or loan to protect themselves from defaults after the financial meltdown. That created a vicious cycle, making it harder for consumers to lease or buy new vehicles, while it simultaneously became more difficult for dealers to get the financing necessary to keep their showrooms stocked.
Chrysler Financial was forced to wind down due to a lack of capital after Chrysler filed for bankruptcy protection in the United States in April. General Motors’ credit company, GMAC Financial Services, took over its business.
During the recession, GMAC applied for and received bank holding status in the United States, a category that made it eligible for government support, including guarantees of its debt and access to emergency loans. GMAC’s banking arm has since been rebranded as Ally and offers GICs and savings accounts in Canada.
Ford was the only one of the Detroit Three automakers that wasn’t forced to restructure under U.S. bankruptcy protection during the economic crisis. Ford Credit hasn’t applied for bank status in the United States.
The Canadian Press
Is it too early to be moving away from stimulus to fiscal restraint?
Email the author
THE CANADIAN PRESS
OTTAWA — Governments warned a day would come when they would need to tackle the most tricky and risky period of their economic recovery project. Now it’s here.
With the global economy barely emerging from what was called the worst recession in six decades, governments across Europe are already putting into practice spending restraints that go well beyond withdrawing stimulus.
Other countries, including Canada, have announced plans to follow suit next year.
The drive to consolidation — the new buzzword for austerity measures being demanded of deeply-indebted countries in Europe — is emerging as the key topic of discussion and disagreement at the upcoming G20 leaders meeting in Toronto.
Even Germany, with arguably the healthiest economy in Europe, got into the act Monday by announcing plans to cut welfare benefits, introduce new taxes and shed government jobs to save about $100 billion over the next three or four years.
But while everyone agrees governments must come to terms with ballooning deficits at some point, many analysts are questioning whether they are jumping the gun.
And getting the timing and size of consolidation wrong could be devastating, they say.
Influential economist Paul Krugman, a recent Nobel prize winner, last week referred to talk of consolidation so early in the recovery cycle, particularly with European woes mounting, as “crazy.”
“What I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery... is the time for policy-makers to stop helping the jobless and start inflicting pain.”
Perhaps not surprisingly, only the United States is resisting the siren call of consolidation and in fact appears headed toward more stimulus, although Krugman says the drive to restraint is starting to impact some stimulus measures.
The danger is that removing stimulus and cutting spending too soon can pull the rug out from under the main driver of the economic recovery so far, and that’s the public sector.
But many are already taking the leap. Some, like Greece, because markets won’t lend them money unless they do. Others, like Canada’s admittedly mild measure last week to raise interest rates one-quarter point, because they fear the creation of inflation and asset bubbles if they keep cheap money policies in place too long.
The International Monetary Fund, which supported the weekend communique of G20 finance ministers that asked countries with challenges to accelerate the pace of consolidation, estimated 30 million jobs could be created if governments worked together on the right policies, or 30 million lost if they don’t.
“What’s at stake then in Toronto — the difference between good and bad policy — is 60 million jobs,” said the fund’s managing director Dominique Strauss-Kahn said.
But many economists are questioning whether the global economy is as strong as the pro-consolidation advocates believe, particularly with Europe likely to be mired in zero or even negative growth for years to come.
U.S.-based chief economist Nariman Behravesh of IHS Global Insight says it is far too early to be cutting public spending, adding that even Greece should be allowed some time before starting to consolidate.
“The last thing some of these economies need is fiscal consolidation,” he said.
“You get into this downward spiral in which fiscal contraction makes the recession worse, which makes the deficit worse and you get into this very bad situation that is counterproductive.”
The a real-world example of the consequences of getting it wrong is Japan in 1997, when it erroneously thought the economy was on the mend and raised taxes to repair its fiscal balance sheet.
Instead, the Japanese malaise intensified and wound up causing even bigger deficits.
Canada is regarded as being in a relatively cushy place with debt to gross domestic product ratios half to one-quarter the size of some of its G7 members, but its economy too could take a hit from a slowdown in global growth caused by poor policy decisions.
Scotiabank economist Derek Holt said governments are “between a rock and a hard place” when it comes to making the jarring move from stimulus to restraint.
The transition can be painful, as Canada found out in the mid-1990s when then finance minister Paul Martin pushed through a draconian program of higher taxes, government downsizing and funding cuts that went to social programs like health care. And Canada’s debt problems at the time were mild compared to what much of Europe, Japan and the U.S. face today.
But Canada also caught a break in beginning consolidation as the world entered one of the greatest economic expansion periods in several generations, helping Ottawa grow out of deficit. If emerging markets are strong enough to propel global growth, Europe might also prosper through restraint, said Holt.
“My gut view is that two years from now we’ll be able to say that Europe has gone through a terrible period of virtually non-existent growth, but has repaired much of the damage to their fiscal position and are better prepared for longer-run growth,” he said.
“Whereas the U.S. will be exposed as having been the sleeping giant that waited too long.”
But it could also go the other way. Behravesh said a more sensible path for the G20 to follow is to draft plans for austerity, but wait until 2012 before starting to implement them. http://news.therecord.com/Business/article/724303
• TSX -64.87 to 11,504. ended lower again in volatile trading as energy and financial shares tumbled on economic uncertainty
• DOW -115.48 to 9,816 taking Dow industrials below last month's flash crash lows and the S&P 500 to its lowest close in seven months.
Dollar +.04c to 94.32cUS
• Oil -$.07 to $71.44US per barrel.
• Gold +$23.10 to $1,239.80 USD per ounce ongoing fears about euro zone debt contagion causing investors to flee to safe-haven assets, gold rallied to less than $10 below its all-time high
Ford Credit Canada applies for bank status
BY KRISTINE OWRAM
TORONTO — Ford’s Canadian lending arm is applying to become a bank so it can access a new source of funding.
Ford Credit Canada, a subsidiary of Ford Motor Co., would be able to accept consumer deposits that would be guaranteed by the Canada Deposit Insurance Corp. if the company is granted bank status, said Ford Credit spokesperson Margaret Mellott.
“It’s really very simple: our goal is to support Ford dealers and customers, and part of the way we do that is through a wide variety of funding channels and sources and this is a strategy to diversify our funding,” she said.
As a bank, Ford Credit Canada would offer guaranteed investment certificates, or GICs, as well as a “very, very limited online-only savings operation,” Mellott said.
But the company wouldn’t alter its core service, which is to provide financing for Ford dealers and customers.
If the application by Ford Credit Canada is approved, the Oakville-headquartered company will change its name to Ford Credit Bank.
The approval process is expected to be a lengthy one.
“There’s no timetable, but there’s a lot of due diligence. There’s a lot of study involved because, of course, the government will make a very measured decision,” Mellott said.
The major automakers’ finance arms suffered during the 2008-09 financial crisis as credit tightened, making it difficult or nearly impossible to raise money to fund their lending activities.
Frozen credit markets were a major factor in slumping vehicle sales in both Canada and the U.S., which served to exacerbate the recession and forced major automakers Chrysler and General Motors into bankruptcy protection.
Most automakers’ financing arms were forced to increase the credit score necessary to get a lease or loan to protect themselves from defaults after the financial meltdown. That created a vicious cycle, making it harder for consumers to lease or buy new vehicles, while it simultaneously became more difficult for dealers to get the financing necessary to keep their showrooms stocked.
Chrysler Financial was forced to wind down due to a lack of capital after Chrysler filed for bankruptcy protection in the United States in April. General Motors’ credit company, GMAC Financial Services, took over its business.
During the recession, GMAC applied for and received bank holding status in the United States, a category that made it eligible for government support, including guarantees of its debt and access to emergency loans. GMAC’s banking arm has since been rebranded as Ally and offers GICs and savings accounts in Canada.
Ford was the only one of the Detroit Three automakers that wasn’t forced to restructure under U.S. bankruptcy protection during the economic crisis. Ford Credit hasn’t applied for bank status in the United States.
The Canadian Press
Is it too early to be moving away from stimulus to fiscal restraint?
Email the author
THE CANADIAN PRESS
OTTAWA — Governments warned a day would come when they would need to tackle the most tricky and risky period of their economic recovery project. Now it’s here.
With the global economy barely emerging from what was called the worst recession in six decades, governments across Europe are already putting into practice spending restraints that go well beyond withdrawing stimulus.
Other countries, including Canada, have announced plans to follow suit next year.
The drive to consolidation — the new buzzword for austerity measures being demanded of deeply-indebted countries in Europe — is emerging as the key topic of discussion and disagreement at the upcoming G20 leaders meeting in Toronto.
Even Germany, with arguably the healthiest economy in Europe, got into the act Monday by announcing plans to cut welfare benefits, introduce new taxes and shed government jobs to save about $100 billion over the next three or four years.
But while everyone agrees governments must come to terms with ballooning deficits at some point, many analysts are questioning whether they are jumping the gun.
And getting the timing and size of consolidation wrong could be devastating, they say.
Influential economist Paul Krugman, a recent Nobel prize winner, last week referred to talk of consolidation so early in the recovery cycle, particularly with European woes mounting, as “crazy.”
“What I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery... is the time for policy-makers to stop helping the jobless and start inflicting pain.”
Perhaps not surprisingly, only the United States is resisting the siren call of consolidation and in fact appears headed toward more stimulus, although Krugman says the drive to restraint is starting to impact some stimulus measures.
The danger is that removing stimulus and cutting spending too soon can pull the rug out from under the main driver of the economic recovery so far, and that’s the public sector.
But many are already taking the leap. Some, like Greece, because markets won’t lend them money unless they do. Others, like Canada’s admittedly mild measure last week to raise interest rates one-quarter point, because they fear the creation of inflation and asset bubbles if they keep cheap money policies in place too long.
The International Monetary Fund, which supported the weekend communique of G20 finance ministers that asked countries with challenges to accelerate the pace of consolidation, estimated 30 million jobs could be created if governments worked together on the right policies, or 30 million lost if they don’t.
“What’s at stake then in Toronto — the difference between good and bad policy — is 60 million jobs,” said the fund’s managing director Dominique Strauss-Kahn said.
But many economists are questioning whether the global economy is as strong as the pro-consolidation advocates believe, particularly with Europe likely to be mired in zero or even negative growth for years to come.
U.S.-based chief economist Nariman Behravesh of IHS Global Insight says it is far too early to be cutting public spending, adding that even Greece should be allowed some time before starting to consolidate.
“The last thing some of these economies need is fiscal consolidation,” he said.
“You get into this downward spiral in which fiscal contraction makes the recession worse, which makes the deficit worse and you get into this very bad situation that is counterproductive.”
The a real-world example of the consequences of getting it wrong is Japan in 1997, when it erroneously thought the economy was on the mend and raised taxes to repair its fiscal balance sheet.
Instead, the Japanese malaise intensified and wound up causing even bigger deficits.
Canada is regarded as being in a relatively cushy place with debt to gross domestic product ratios half to one-quarter the size of some of its G7 members, but its economy too could take a hit from a slowdown in global growth caused by poor policy decisions.
Scotiabank economist Derek Holt said governments are “between a rock and a hard place” when it comes to making the jarring move from stimulus to restraint.
The transition can be painful, as Canada found out in the mid-1990s when then finance minister Paul Martin pushed through a draconian program of higher taxes, government downsizing and funding cuts that went to social programs like health care. And Canada’s debt problems at the time were mild compared to what much of Europe, Japan and the U.S. face today.
But Canada also caught a break in beginning consolidation as the world entered one of the greatest economic expansion periods in several generations, helping Ottawa grow out of deficit. If emerging markets are strong enough to propel global growth, Europe might also prosper through restraint, said Holt.
“My gut view is that two years from now we’ll be able to say that Europe has gone through a terrible period of virtually non-existent growth, but has repaired much of the damage to their fiscal position and are better prepared for longer-run growth,” he said.
“Whereas the U.S. will be exposed as having been the sleeping giant that waited too long.”
But it could also go the other way. Behravesh said a more sensible path for the G20 to follow is to draft plans for austerity, but wait until 2012 before starting to implement them. http://news.therecord.com/Business/article/724303
Monday, June 7, 2010
Financial Update For June 7, 2010
• TSX -242.26. After tip-toeing carefully higher for a week, markets lurched violently lower under the weight of disappointing U.S. jobs figures and new worries about European government finances, where accusations that Hungary may have fudged some of its economic statistics -- as had been alleged previously about Greece -- raised new fears about the health of the European economy as its fiscal and sovereign debt crisis drags on. Data showing Canada continues to create solid jobs growth was brusquely dismissed by markets now grudgingly staring at a slower global recovery.
• DOW -323.31 to 9,931slid through psychological support at 10,000. The second and more crippling blow to the markets came with the release of the U.S. employment report. The eagerly anticipated report, released by the U.S. Labour Department, showed that U.S. companies added far fewer than anticipated jobs in May, putting a spotlight on the fragility of the country's economic recovery. While the United States created 431,000 jobs last month, the vast majority of those positions were temporary Census hires by the U.S. government, with only 41,000 jobs added in the private sector. Some economists had been predicting a private-sector increase of as many as 200,000 jobs.
• Dollar -.76c to 94.28cUS
• Oil -$3.10 to $71.51US per barrel.
• Gold +$7.90 to $1,216.20 USD per ounce
Janet Whitman, Financial Post Canada, which remains on much sounder economic footing than the United States, had a better-than-expected increase of 24,700 workers added to payrolls in May, with most of the gain in full-time and private-sector positions, Statistics Canada reported. Bay Street had been forecasting a 15,000 gain.
The U.S. rate isn't likely to head much lower this year or next because the expected U.S. economic growth of around 3% or 4% won't be enough to create sufficient jobs for the roughly 15 million Americans out of work and new entrants in the labour market.
Canada's strong jobs report, meanwhile, shows the Bank of Canada was on the right track by raising interest rates earlier this week despite the financial turmoil in Europe, said Benjamin Reitzes, an economist with BMO Capital Markets. "Canadian employment is now only 108,000 from the peak hit in October 2008, and is up 1.7% from a year ago, much better than the still-negative yearly change in the U.S.," he said.
The strong report indicates more interest-rate increases are coming, perhaps as soon as July, some analysts said. http://www.financialpost.com/Jobs+stall/3115343/story.html
Wal-Mart new kid on bank block John Greenwood, Financial Post •
Wal-Mart Stores Inc. changed the face of retail in North America by making life easier for the little guy through its simple formula of cutting prices and cranking up volumes.
Is banking next?
This week the retailing giant won final approval to open a bank in Canada, providing entry to an industry that has been much criticized for perceived high prices and lack of competition.
Andrew Pelletier, a spokesman for Wal-Mart Canada, said the company plans to provide "convenient and value-focused financial products and services" for its customers.
He declined to discuss details of the company's plans in advance of the official lunch of the new bank, set for June 15.
While the rise of Wal-Mart has been a boon for consumers, it has been devastating for competitors, many of whom ended up being bought out or going out of business.
In the United States, fierce resistance from the banking industry forced the retailer to abandon a bid to buy a bank early in the decade, though it continues to offer services such as cheque cashing and money transfer.
Wal-Mart applied for the licence to the Office of the Superintendent of Financial Institutions, the Canadian banking regulator, nearly two years ago. Mr. Pelletier declined to discuss why the process has taken so long.
If Wal-Mart saw opportunities south of the border where there are more than 1,000 banks fighting it out for customer deposits, there would likely be an even bigger prize waiting in this country, where the industry is dominated by a oligopoly of just six major players.
Consumer groups regularly complain about credit card fees and low interest rates on savings accounts available to bank customers in Canada. Management fees on Canadian mutual funds, most of which are controlled by the big banks, are similarly out of whack compared with the United States and other developed countries.
In the United States, Wal-Mart is a significant player in the money-transfer business, partly because many of its customers are recent immigrants still with family in other parts of the world. Additional services, such as the ability to offer deposits and make loans, would provide further opportunity to the company at a time when profits from its bread-and-butter retail business have come under pressure from the recession.
Wal-Mart would not be the first non-bank to try to break into financial services in Canada. Other retailers such as Canadian Tire Corp. and Loblaw Cos. are also working to establish themselves.
One of Wal-Mart's main advantages may be its reputation for low prices, which may help it get the word out to potential customers that it can offer a better deal than the competition at a time when Canadian consumers are scrambling for all the savings they can get.
The federal government has recently taken steps to shake up the banking sector, including the decision to make it easier for credit unions to expand across the country and the move to prohibit banks from using their websites to sell insurance.
Opening a bank is a costly undertaking for Wal-Mart and the company will likely move carefully as it plots its moves over the next few years, but it clearly believes the investment will pay off. http://www.financialpost.com/news/financials/Mart+bank+block/3115350/story.html
• DOW -323.31 to 9,931slid through psychological support at 10,000. The second and more crippling blow to the markets came with the release of the U.S. employment report. The eagerly anticipated report, released by the U.S. Labour Department, showed that U.S. companies added far fewer than anticipated jobs in May, putting a spotlight on the fragility of the country's economic recovery. While the United States created 431,000 jobs last month, the vast majority of those positions were temporary Census hires by the U.S. government, with only 41,000 jobs added in the private sector. Some economists had been predicting a private-sector increase of as many as 200,000 jobs.
• Dollar -.76c to 94.28cUS
• Oil -$3.10 to $71.51US per barrel.
• Gold +$7.90 to $1,216.20 USD per ounce
Janet Whitman, Financial Post Canada, which remains on much sounder economic footing than the United States, had a better-than-expected increase of 24,700 workers added to payrolls in May, with most of the gain in full-time and private-sector positions, Statistics Canada reported. Bay Street had been forecasting a 15,000 gain.
The U.S. rate isn't likely to head much lower this year or next because the expected U.S. economic growth of around 3% or 4% won't be enough to create sufficient jobs for the roughly 15 million Americans out of work and new entrants in the labour market.
Canada's strong jobs report, meanwhile, shows the Bank of Canada was on the right track by raising interest rates earlier this week despite the financial turmoil in Europe, said Benjamin Reitzes, an economist with BMO Capital Markets. "Canadian employment is now only 108,000 from the peak hit in October 2008, and is up 1.7% from a year ago, much better than the still-negative yearly change in the U.S.," he said.
The strong report indicates more interest-rate increases are coming, perhaps as soon as July, some analysts said. http://www.financialpost.com/Jobs+stall/3115343/story.html
Wal-Mart new kid on bank block John Greenwood, Financial Post •
Wal-Mart Stores Inc. changed the face of retail in North America by making life easier for the little guy through its simple formula of cutting prices and cranking up volumes.
Is banking next?
This week the retailing giant won final approval to open a bank in Canada, providing entry to an industry that has been much criticized for perceived high prices and lack of competition.
Andrew Pelletier, a spokesman for Wal-Mart Canada, said the company plans to provide "convenient and value-focused financial products and services" for its customers.
He declined to discuss details of the company's plans in advance of the official lunch of the new bank, set for June 15.
While the rise of Wal-Mart has been a boon for consumers, it has been devastating for competitors, many of whom ended up being bought out or going out of business.
In the United States, fierce resistance from the banking industry forced the retailer to abandon a bid to buy a bank early in the decade, though it continues to offer services such as cheque cashing and money transfer.
Wal-Mart applied for the licence to the Office of the Superintendent of Financial Institutions, the Canadian banking regulator, nearly two years ago. Mr. Pelletier declined to discuss why the process has taken so long.
If Wal-Mart saw opportunities south of the border where there are more than 1,000 banks fighting it out for customer deposits, there would likely be an even bigger prize waiting in this country, where the industry is dominated by a oligopoly of just six major players.
Consumer groups regularly complain about credit card fees and low interest rates on savings accounts available to bank customers in Canada. Management fees on Canadian mutual funds, most of which are controlled by the big banks, are similarly out of whack compared with the United States and other developed countries.
In the United States, Wal-Mart is a significant player in the money-transfer business, partly because many of its customers are recent immigrants still with family in other parts of the world. Additional services, such as the ability to offer deposits and make loans, would provide further opportunity to the company at a time when profits from its bread-and-butter retail business have come under pressure from the recession.
Wal-Mart would not be the first non-bank to try to break into financial services in Canada. Other retailers such as Canadian Tire Corp. and Loblaw Cos. are also working to establish themselves.
One of Wal-Mart's main advantages may be its reputation for low prices, which may help it get the word out to potential customers that it can offer a better deal than the competition at a time when Canadian consumers are scrambling for all the savings they can get.
The federal government has recently taken steps to shake up the banking sector, including the decision to make it easier for credit unions to expand across the country and the move to prohibit banks from using their websites to sell insurance.
Opening a bank is a costly undertaking for Wal-Mart and the company will likely move carefully as it plots its moves over the next few years, but it clearly believes the investment will pay off. http://www.financialpost.com/news/financials/Mart+bank+block/3115350/story.html
Friday, June 4, 2010
Financial Update For June 4, 2010
• TSX +31.21. as energy shares rallied on a rise in oil prices
• DOW +5.74 U.S. private sector employers added jobs in May and the services sector increased payrolls for the first time in more than 2 years, building evidence that the U.S. labor market is picking up steam
• Dollar -.26c to 96.04cUS
• Oil +$1.75 to $74.61US per barrel. after a report showed U.S. fuel consumption at its highest level in more than a year, and there was an unexpected decline in oil inventories last week.
• Gold -$12.50 to $1,209 USD per ounce there's some profit-taking in the gold sector on the back of the decline in gold
Pension shortfall hits middle class
About 20 to 25 per cent of Canadians are not saving enough to provide an adequate retirement income, says the chief economist of TD Bank Financial Group.
One of the ironies of that statistic is that these pension laggards fall into the middle class group of those who earn $30,000 to $80,000 a year, Craig Alexander said Thursday in Kitchener.
Every Canadian should have a pension that replaces 60 to 70 per cent of their employment income, Alexander said in an interview. Canadians earning more than $80,000 can generally take care of themselves, while those earning below $30,000 can replace much of that with a variety of government pension supplements, he said.
It’s that middle group that poses one of the biggest challenges, he noted.
Alexander was in Kitchener to attend a roundtable discussion chaired by Ontario Finance Minister Dwight Duncan on ways to improve Canada’s retirement income system. About 30 business, labour and pension experts met with Duncan behind closed doors.
It’s the last of a handful of meetings Duncan is holding across the province in preparation for a meeting of finance ministers in Prince Edward Island on the weekend of June 12-13 to look at Canada’s retirement income system.
While Canada’s pension system is not in crisis at the moment, issues such as pension solvency, volatile financial markets, inadequate savings by some individuals and a decrease in the number of workers with defined benefit plans that provide a fixed source of income all mean we can’t afford to be complacent, Alexander said.
A variety of options have been trotted out, such as raising Canada Pension Plan contributions, supplementing CPP benefits, raising the age at which retirement savings plans can be cashed in, offering better protection for defined benefit plans or more incentives to set up defined contribution plans, he noted.
“I don’t think there is a black and white answer to this one,” he said of the retirement income dilemma.
In any case, politicians need more data, and people need more access and knowledge about how to improve their pension coverage, Alexander said. Solutions could come from either the public or private sectors, he added, noting “I am an agnostic on that issue.”
He would like to see financial literacy courses on such issues as savings, debt, mortgages and pensions taught in school as early as Grade 8.
In an interview prior to the roundtable meeting, Duncan said that with only about 30 per cent of Canadians covered by private pension plans and more baby boomers heading into retirement, governments need to act so that pension obligations don’t cut into health-care spending and other public-sector needs.
The province has already passed one bill on pension reform that addresses some of the less contentious issues, but Duncan said he is planning more legislation in the fall to address more serious issues such as the regulation of defined benefit plans. http://news.therecord.com/Business/article/722251
• DOW +5.74 U.S. private sector employers added jobs in May and the services sector increased payrolls for the first time in more than 2 years, building evidence that the U.S. labor market is picking up steam
• Dollar -.26c to 96.04cUS
• Oil +$1.75 to $74.61US per barrel. after a report showed U.S. fuel consumption at its highest level in more than a year, and there was an unexpected decline in oil inventories last week.
• Gold -$12.50 to $1,209 USD per ounce there's some profit-taking in the gold sector on the back of the decline in gold
Pension shortfall hits middle class
About 20 to 25 per cent of Canadians are not saving enough to provide an adequate retirement income, says the chief economist of TD Bank Financial Group.
One of the ironies of that statistic is that these pension laggards fall into the middle class group of those who earn $30,000 to $80,000 a year, Craig Alexander said Thursday in Kitchener.
Every Canadian should have a pension that replaces 60 to 70 per cent of their employment income, Alexander said in an interview. Canadians earning more than $80,000 can generally take care of themselves, while those earning below $30,000 can replace much of that with a variety of government pension supplements, he said.
It’s that middle group that poses one of the biggest challenges, he noted.
Alexander was in Kitchener to attend a roundtable discussion chaired by Ontario Finance Minister Dwight Duncan on ways to improve Canada’s retirement income system. About 30 business, labour and pension experts met with Duncan behind closed doors.
It’s the last of a handful of meetings Duncan is holding across the province in preparation for a meeting of finance ministers in Prince Edward Island on the weekend of June 12-13 to look at Canada’s retirement income system.
While Canada’s pension system is not in crisis at the moment, issues such as pension solvency, volatile financial markets, inadequate savings by some individuals and a decrease in the number of workers with defined benefit plans that provide a fixed source of income all mean we can’t afford to be complacent, Alexander said.
A variety of options have been trotted out, such as raising Canada Pension Plan contributions, supplementing CPP benefits, raising the age at which retirement savings plans can be cashed in, offering better protection for defined benefit plans or more incentives to set up defined contribution plans, he noted.
“I don’t think there is a black and white answer to this one,” he said of the retirement income dilemma.
In any case, politicians need more data, and people need more access and knowledge about how to improve their pension coverage, Alexander said. Solutions could come from either the public or private sectors, he added, noting “I am an agnostic on that issue.”
He would like to see financial literacy courses on such issues as savings, debt, mortgages and pensions taught in school as early as Grade 8.
In an interview prior to the roundtable meeting, Duncan said that with only about 30 per cent of Canadians covered by private pension plans and more baby boomers heading into retirement, governments need to act so that pension obligations don’t cut into health-care spending and other public-sector needs.
The province has already passed one bill on pension reform that addresses some of the less contentious issues, but Duncan said he is planning more legislation in the fall to address more serious issues such as the regulation of defined benefit plans. http://news.therecord.com/Business/article/722251
Thursday, June 3, 2010
Financial Update For June 3, 2010
House prices have peaked for the year
• TSX +208.70. surged after a steep selloff the day before, as upbeat investors scooped up beaten-down shares including heavyweight energy and banking issues. Canada's oil production might be perceived as a bit safer than U.S. Gulf-based production.
• DOW +225.52 where investors were encouraged by U.S. data showing pending sales of previously owned homes increased to a six-month high in April.
• Dollar +1.42c to 96.30cUS
• Oil +$.28 to $72.86US per barrel.
• Gold -$4.20 to $1,221.50 USD per ounce
Outrunning the bear market
by By Alexandra Twin, senior writer
Wednesday, June 2, 2010provided by
After the Dow's worst May in 70 years, the threat of the stock correction becoming a full-blown bear market has intensified.
But this isn't new territory for long-term investors. They've faced this precipice 29 times since World War II, according to Standard & Poor's chief investment strategist Sam Stovall.
In 17 cases, they've avoided seeing a correction (a decline of at least 10% off the highs) turn into a bear market (a decline of at least 20% off the highs).
In 12 cases, they weren't so lucky. And in three of those 12 cases it became what Stovall calls a "mega meltdown," or a decline of 40% or more. In fact, the 2008-2009 stock market bloodletting sent the S&P 500 crashing 57% from an all-time high to a 12-year low.
But as the correction vs. bear market debate continues, what seems to be critical, at least on the technical side, is that the selling not surpass 15%. Historically, if that happens, the correction will become a bear market.
So far this current correction has avoided that 15%. At its worst, the S&P 500 was down 12.3% off the highs. As of Tuesday's close, the S&P 500 was down 12% from the highs.
But hovering below the 15% mark doesn't mean the selling is over by any means.
"We don't know if the market direction is going to be up or down, but we do know it's going to be up and down day to day," said Randy Frederick, director of trading and derivatives at Charles Schwab.
The increased volatility increases the likelihood of more selling, particularly with the market in a mode where it retreats on both big news and a lack of news.
The threat of the European debt crisis, the weaker euro, the BP oil spill, increased tensions between North and South Korea and signs that China's booming economy is slowing all dragged on stocks in May. But there have been numerous days in which there was little relevant news, either on the positive or negative side, and stocks sold anyway. Tuesday's market, for example.
So correction or bear? Here's what to consider:
Correction: If the market is in correction mode, it will probably chop around for a few months, then move higher, according to Stovall.
Of the 17 times that the correction didn't become a bear market, stocks lost an average of 14% over a four-month period. Typically it took stocks another four months to get back to breakeven, and another four months of gains before another correction or pullback kicked in.
A pullback is considered a decline of 5% to 9.99%. They happen frequently and like corrections, are part of normal market functioning. Stovall estimates there have been more than 50 since World War II.
There were only two times (1955 and 1997) that the market "corrected," recovered and then turned lower right away. More often, the market gets back to breakeven and then gains an average of 10%.
Bear market: S&P research shows that when a correction becomes a bear market, it tends to stretch on for 14 months and yield a decline of 33%, on average. The recovery back to zero tends to take nearly two years.
Stocks currently appear to be in a "garden variety bear market," pushing toward a decline of 20% to 30% as the mountain of problems becomes too much for investors, according to the editors of the Stock Trader's Almanac.
Heightened investor worry: In what could be either a bad or good sign, depending on whether you're a contrarian, investor sentiment took a turn for the worse last week, according to the latest survey from the American Association of Individual Investors (AAII).
Bearish sentiment, or the expectation that stocks will fall over the next six months, jumped 17.2% to 50.9%, marking the highest level of pessimism in the survey since November 2009.
Also, AAII's monthly survey showed investors pulled money out of stocks last month and reallocated it to bonds, cash or cash equivalents, reflecting global jitters and the fear of further stock erosion.
Investors held just 50.9% of their portfolios in stocks and stock funds in May, down 9.5% from April. That's the smallest percentage in stocks since May 2009, shortly after the market bottomed. It's also below the historical average of 60% http://ca.finance.yahoo.com/personal-finance/article/cnnmoney/outrunning-bear-market-20100602
House prices have peaked for the year
By Sunny Freeman
TORONTO — Skyrocketing home prices appear to have reached their height and are expected to stabilize for the rest of the year and into 2011 as the real estate market cools significantly, economists say.
Gregory Klump, chief economist at the Canadian Real Estate Association, foresees a slight decline in year-over-year prices in the latter half of 2010 before they flatten in 2011. This will happen as new listings come onto the market faster than anticipated and balance out the dynamics between buyers and sellers.
On Wednesday, the real estate association revised its projected housing price increase for this year down from 5.4 per cent to just 1.6 per cent over 2009.
The association predicted that the national average housing price will decline by 1.5 per cent by 2011, driven down by lower prices in the strong markets of B.C. and Ontario, while prices in the rest of the country will remain stable.
Will Dunning, chief economist at the Canadian Association of Accredited Mortgage Professionals, said this year’s prices have likely peaked, and should remain flat for the rest of the year before falling in 2011.
“Last year there was a pattern during the year — slow at the start, strong at the finish, and it’s going to be the opposite this year, almost a mirror image,” he said.
“Somebody who’s in a position to buy can take the time to make sure they get the property they want at a price they’re comfortable with,” he added.
The real estate association also lowered its 2010 national forecast for resale transactions by nearly 40,000 from its previous forecast of 527,300 due to a weaker-than-expected start to the year in British Columbia, Ontario and Alberta.
“The biggest contributor to the downward revision in annual sales activity would be British Columbia, where affordability has begun to bite into sales activity. Their first quarter came in weaker than expected and that’s expected to carry throughout the year,” Klump said.
The association now expects 490,600 units will be resold nationally this year through the Multiple Listing Service. This is still up 5.5 per cent from 2009.
A number of temporary factors pulled sales forward to the latter part of 2009 and the first part of this year, including anticipation of higher mortgage rates, tougher mortgage lending regulations and new taxes in Ontario and B.C. that will add thousands of dollars to the final price tag of many houses starting July 1.
The association’s revision came a day after the Bank of Canada announced it was hiking its key lending rate from an emergency low of 0.25 per cent to 0.5 per cent. Many economists predict that the era of historically low interest rates has come to an end and that rates are now on an upward trend.
Although mortgage rates have gone up and are expected to rise further, the association says the higher cost of borrowing will have a minimal impact on the market this year. Instead, sharp price increases earlier in the year appear to have been the main factor for the expected decrease in demand in British Columbia and Ontario.
Dunning said while some buyers “could drive themselves crazy” trying to calculate whether it’s better to get into the market now while mortgage rates are low but prices are high, or to wait until the opposite is true, it’s so difficult to get it right that homebuyers should just buy when the time is right for them.
Rob Hafer, regional manager at Invis mortgage brokerage, agreed that market timing is tough, and generally not worth the headache since a house is such a long-term investment.
“If you’re going to buy real estate, it’s a long-term investment, so if you can afford the home now … no matter when you bought within a couple years you’re probably ahead of the game anyway,” he said.
“If you can get in now and you can hold it long term, it’s always a good time to buy,” he added.
Klump said the market adjustment will stop short of venturing into a buyers’ market as “a more challenging pricing environment” will deter some potential sellers and limit the supply of available homes.
“A lot of people who were thinking they were going to clean up on their asking price are going to be faced with a lot of competition from other sellers out there, and ultimately will take their house off the market and try again when the pricing environment becomes more to their liking,” he said
But Dunning said balanced markets don’t last very long and said he believes market conditions will soon favour buyers.
“It’s usually always one way or the other, and we’ve had this immensely powerful sellers’ market and …there could be a very rapid transition so that it now becomes a buyers’ market.”
The Canadian Press http://news.therecord.com/Business/article/721499
• TSX +208.70. surged after a steep selloff the day before, as upbeat investors scooped up beaten-down shares including heavyweight energy and banking issues. Canada's oil production might be perceived as a bit safer than U.S. Gulf-based production.
• DOW +225.52 where investors were encouraged by U.S. data showing pending sales of previously owned homes increased to a six-month high in April.
• Dollar +1.42c to 96.30cUS
• Oil +$.28 to $72.86US per barrel.
• Gold -$4.20 to $1,221.50 USD per ounce
Outrunning the bear market
by By Alexandra Twin, senior writer
Wednesday, June 2, 2010provided by
After the Dow's worst May in 70 years, the threat of the stock correction becoming a full-blown bear market has intensified.
But this isn't new territory for long-term investors. They've faced this precipice 29 times since World War II, according to Standard & Poor's chief investment strategist Sam Stovall.
In 17 cases, they've avoided seeing a correction (a decline of at least 10% off the highs) turn into a bear market (a decline of at least 20% off the highs).
In 12 cases, they weren't so lucky. And in three of those 12 cases it became what Stovall calls a "mega meltdown," or a decline of 40% or more. In fact, the 2008-2009 stock market bloodletting sent the S&P 500 crashing 57% from an all-time high to a 12-year low.
But as the correction vs. bear market debate continues, what seems to be critical, at least on the technical side, is that the selling not surpass 15%. Historically, if that happens, the correction will become a bear market.
So far this current correction has avoided that 15%. At its worst, the S&P 500 was down 12.3% off the highs. As of Tuesday's close, the S&P 500 was down 12% from the highs.
But hovering below the 15% mark doesn't mean the selling is over by any means.
"We don't know if the market direction is going to be up or down, but we do know it's going to be up and down day to day," said Randy Frederick, director of trading and derivatives at Charles Schwab.
The increased volatility increases the likelihood of more selling, particularly with the market in a mode where it retreats on both big news and a lack of news.
The threat of the European debt crisis, the weaker euro, the BP oil spill, increased tensions between North and South Korea and signs that China's booming economy is slowing all dragged on stocks in May. But there have been numerous days in which there was little relevant news, either on the positive or negative side, and stocks sold anyway. Tuesday's market, for example.
So correction or bear? Here's what to consider:
Correction: If the market is in correction mode, it will probably chop around for a few months, then move higher, according to Stovall.
Of the 17 times that the correction didn't become a bear market, stocks lost an average of 14% over a four-month period. Typically it took stocks another four months to get back to breakeven, and another four months of gains before another correction or pullback kicked in.
A pullback is considered a decline of 5% to 9.99%. They happen frequently and like corrections, are part of normal market functioning. Stovall estimates there have been more than 50 since World War II.
There were only two times (1955 and 1997) that the market "corrected," recovered and then turned lower right away. More often, the market gets back to breakeven and then gains an average of 10%.
Bear market: S&P research shows that when a correction becomes a bear market, it tends to stretch on for 14 months and yield a decline of 33%, on average. The recovery back to zero tends to take nearly two years.
Stocks currently appear to be in a "garden variety bear market," pushing toward a decline of 20% to 30% as the mountain of problems becomes too much for investors, according to the editors of the Stock Trader's Almanac.
Heightened investor worry: In what could be either a bad or good sign, depending on whether you're a contrarian, investor sentiment took a turn for the worse last week, according to the latest survey from the American Association of Individual Investors (AAII).
Bearish sentiment, or the expectation that stocks will fall over the next six months, jumped 17.2% to 50.9%, marking the highest level of pessimism in the survey since November 2009.
Also, AAII's monthly survey showed investors pulled money out of stocks last month and reallocated it to bonds, cash or cash equivalents, reflecting global jitters and the fear of further stock erosion.
Investors held just 50.9% of their portfolios in stocks and stock funds in May, down 9.5% from April. That's the smallest percentage in stocks since May 2009, shortly after the market bottomed. It's also below the historical average of 60% http://ca.finance.yahoo.com/personal-finance/article/cnnmoney/outrunning-bear-market-20100602
House prices have peaked for the year
By Sunny Freeman
TORONTO — Skyrocketing home prices appear to have reached their height and are expected to stabilize for the rest of the year and into 2011 as the real estate market cools significantly, economists say.
Gregory Klump, chief economist at the Canadian Real Estate Association, foresees a slight decline in year-over-year prices in the latter half of 2010 before they flatten in 2011. This will happen as new listings come onto the market faster than anticipated and balance out the dynamics between buyers and sellers.
On Wednesday, the real estate association revised its projected housing price increase for this year down from 5.4 per cent to just 1.6 per cent over 2009.
The association predicted that the national average housing price will decline by 1.5 per cent by 2011, driven down by lower prices in the strong markets of B.C. and Ontario, while prices in the rest of the country will remain stable.
Will Dunning, chief economist at the Canadian Association of Accredited Mortgage Professionals, said this year’s prices have likely peaked, and should remain flat for the rest of the year before falling in 2011.
“Last year there was a pattern during the year — slow at the start, strong at the finish, and it’s going to be the opposite this year, almost a mirror image,” he said.
“Somebody who’s in a position to buy can take the time to make sure they get the property they want at a price they’re comfortable with,” he added.
The real estate association also lowered its 2010 national forecast for resale transactions by nearly 40,000 from its previous forecast of 527,300 due to a weaker-than-expected start to the year in British Columbia, Ontario and Alberta.
“The biggest contributor to the downward revision in annual sales activity would be British Columbia, where affordability has begun to bite into sales activity. Their first quarter came in weaker than expected and that’s expected to carry throughout the year,” Klump said.
The association now expects 490,600 units will be resold nationally this year through the Multiple Listing Service. This is still up 5.5 per cent from 2009.
A number of temporary factors pulled sales forward to the latter part of 2009 and the first part of this year, including anticipation of higher mortgage rates, tougher mortgage lending regulations and new taxes in Ontario and B.C. that will add thousands of dollars to the final price tag of many houses starting July 1.
The association’s revision came a day after the Bank of Canada announced it was hiking its key lending rate from an emergency low of 0.25 per cent to 0.5 per cent. Many economists predict that the era of historically low interest rates has come to an end and that rates are now on an upward trend.
Although mortgage rates have gone up and are expected to rise further, the association says the higher cost of borrowing will have a minimal impact on the market this year. Instead, sharp price increases earlier in the year appear to have been the main factor for the expected decrease in demand in British Columbia and Ontario.
Dunning said while some buyers “could drive themselves crazy” trying to calculate whether it’s better to get into the market now while mortgage rates are low but prices are high, or to wait until the opposite is true, it’s so difficult to get it right that homebuyers should just buy when the time is right for them.
Rob Hafer, regional manager at Invis mortgage brokerage, agreed that market timing is tough, and generally not worth the headache since a house is such a long-term investment.
“If you’re going to buy real estate, it’s a long-term investment, so if you can afford the home now … no matter when you bought within a couple years you’re probably ahead of the game anyway,” he said.
“If you can get in now and you can hold it long term, it’s always a good time to buy,” he added.
Klump said the market adjustment will stop short of venturing into a buyers’ market as “a more challenging pricing environment” will deter some potential sellers and limit the supply of available homes.
“A lot of people who were thinking they were going to clean up on their asking price are going to be faced with a lot of competition from other sellers out there, and ultimately will take their house off the market and try again when the pricing environment becomes more to their liking,” he said
But Dunning said balanced markets don’t last very long and said he believes market conditions will soon favour buyers.
“It’s usually always one way or the other, and we’ve had this immensely powerful sellers’ market and …there could be a very rapid transition so that it now becomes a buyers’ market.”
The Canadian Press http://news.therecord.com/Business/article/721499
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