As Group of 20 leaders left London last night pledging to do "whatever is necessary" to get the world economy growing again, there is an emerging belief that a global recovery is already underway -- and that the upswing may be as robust as the fall was dramatic. Article below
TSX tops 9,000 point benchmark!
• TSX+131.32 to 9,073.14. shot to its highest close in nearly 3 months on hopes that actions agreed to at the G20 summit in London, which included a trillion-dollar deal to help combat the global financial crisis, would help restore global growth.
• DOW +216.48
• Dollar +1.29c to 80.59USD
• Oil +$1.27 to $48.39US per barrel.
• Gold -$18.70 to $907.40USD per ounce
• Canadian 5 yr bond yields +.09bps to 1.82 four weeks ago it was 1.81
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
World leaders pledge US$1-trillon in aid
World markets applaud
Simon Kennedy and Kitty Donaldson in London, Bloomberg
World leaders agreed on a regulatory blueprint for reining in the excesses that fed the worst financial crisis in six decades and pledged more than US$1-trillion in emergency aid to cushion the economic fallout.
The Group of 20 policymakers, meeting in London, called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks. They tripled the firepower of the International Monetary Fund (IMF) and offered cash to revive trade to help governments weather the turmoil resulting from the surge in unemployment. They avoided the divisive question of whether to deliver more fiscal stimulus to their own economies.
The statement amounts to an effort to rewrite the rules of capitalism to address an integrated world economy that has outgrown the ability of nations to keep it in check. The assembly echoed -- on an international stage -- the introduction in the U.S. of securities regulation after the 1929 crash.
"By any measure the London summit was historic," President Barack Obama said after the talks. U.K. Prime Minister Gordon Brown said, "we have reached a new consensus that we take global actions together to deal with the problems we face."
The measures to fight the recession and reform finance helped push U.S. stocks up, extending a global advance, and Treasuries down. The Dow Jones Industrial Average exceeded 8,000 for the first time since Feb. 10, before settling up 216.48 points, or 2.79%, at 7,978.08, while the S&P 500 rose 23.30 points, or 2.87%, to 834.38. In Toronto, the S&P/TSX composite index rose 131.32 points, or 1.47%, to close at 9,073.14, marking its highest closing level since Jan. 9.
Even as the G-20 leaders said they will maintain power over their own markets and companies rather than cede it to a cross-border regulator, they closed ranks behind "greater consistency and systematic co-operation" to flesh out a new regulatory order first outlined at a November meeting in Washington.
The crackdown is "a major step forward," Nobel laureate Joseph Stiglitz, a professor at Columbia University, said in an interview. "It's a historic moment when the world came together and said we were wrong to push deregulation."
Blaming "major failures" in regulation as "fundamental causes" of the credit crunch, the G-20 said national regulators will be revamped to better monitor threats to the international system.
A new Financial Stability Board will be established to unite regulators and join the IMF in providing early warnings of potential threats. Once recovery is underway, work will begin on new rules aimed at avoiding excessive leverage and forcing banks to put more money aside during good times.
Hedge funds that are "systemically important" will be subjected to greater oversight, as will all key financial instruments, markets and instruments, the G20 said. That signals a setback for German Chancellor Angela Merkel and French President Nicolas Sarkozy, who wanted all of the investment funds brought under the spotlight.
That didn't stop the funds' lobby from complaining the US$1.4-trillion industry had been made a "scapegoat" for the market meltdown. "Although we agree that any entity that provides banking services should be regulated as a bank, the vast majority of hedge funds do not fall into this category," Andrew Baker, chief executive of the London-based Alternative Investment Management Association, said in an interview.
Principles will also be introduced on pay and bonuses to create "sustainable compensation schemes" after concern that executive remuneration rewarded short-term risk-taking over the long-run interests of companies. Accounting-standard setters were urged to improve valuation methods and credit-rating companies will be forced to meet a code of good practice.
Having proved a sticking point at the talks, the G20 said it will impose sanctions on tax havens that do not provide enough information. Officials split over the Organization for Economic Co-operation and Development publishing a list of such nations, agreeing in the end not to block it after Mr. Obama and Mr. Sarkozy hashed out a deal with Chinese President Hu Jintao.
After bilateral meetings around London on Wednesday, Thursday's summit was held at East London's barn-like Excel Center, within sight of the Canary Wharf, which houses Citigroup Inc.'s Citibank, Barclays PLC, HSBC Holdings Plc and Bank of America Corp. After a one and a half hour breakfast meeting, the group spent most of its time in a circular room, taking breaks for one-on-one chats in a separate lounge, a U.K. official said.
During the plenary sessions, the leaders wore microphones and got simultaneous translations for any of the 13 languages spoken. When one wanted to speak, he or she pressed a button, set off a light and waited for his or her turn.
After a lunch of filet of beef and talks that went 30 minutes beyond schedule, the room erupted in applause when the final text was agreed upon.
The G20's pact to impose tougher regulation marks a narrowing of differences after Ms. Merkel and Mr. Sarkozy entered the summit demanding Mr. Brown and Mr. Obama endorse a more detailed response to the crisis than that initially planned.
"We never thought we would find an agreement this large," Mr. Sarkozy said. Ms. Merkel called it a "victory for common sense."
Having committed US$2-trillion in fiscal packages to save their economies, the leaders said Thursday they would "deliver the scale of sustained fiscal effort necessary to restore growth," while ensuring sustainable budgets and price stability in the long term. With banks still bogged down by toxic assets, the G20 promised "to take all necessary actions" to restore the availability of credit and protect major institutions.
Mr. Obama and Mr. Brown have pushed for more spending, only to run into resistance from Ms. Merkel and Mr. Sarkozy, who argue they've done enough, have bigger social-safety nets and don't want to bust budgets. The IMF will gauge the policies taken, which should accelerate the recovery of the global economy to its long-term trend, the G20 said.
Inundated with record requests for loans from troubled economies, including Pakistan and Hungary, the IMF was told its war chest will be boosted by US$500-billion and it will receive another US$250-billion in special drawing rights, the agency's synthetic currency. Multilateral development banks, including the World Bank, will be enabled to lend at least US$100-billion more.
"It's historic, there's no question about it," said Colin Bradford, an economist at the Brookings Institution in Washington.In return for their contributions, emerging markets such as China and Brazil will receive more of a say in the fund, the G20 said. The IMF will also use revenue from sales of its gold reserves to aid the world's poorest countries, and its next leader will no longer automatically be a European.
The G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United States, the U.K. and the European Union. Officials from Spain and the Netherlands were also present. The leaders will meet again in New York in September, Mr. Sarkozy said.
Friday, April 3, 2009
Thursday, April 2, 2009
Financial Update for April 2, 2009
Markets Rally again! This rebound suggests that yesterday's rally may have been more than just end-of-quarter window dressing and that underlying support may be increasing," said Colin Cieszynski, market analyst at CMC Markets Canada. "Overall, recent trading suggests that bullish and bearish sentiment appears to be in balance and that equities may continue to trade back and forth."
• TSX+221.43. as investors refocused their attention on promising housing and manufacturing data.
• DOW +152.68
• Dollar +.02c to 79.30USD finishing at a level that belied its volatile range as risk appetite and technicals pulled the currency off a two-week low.
• Oil +$1.27 to $48.39US per barrel.
• Gold +$3.50 to $926.10USD per ounce
• Canadian 5 yr bond yields -.01bps to 1.73 four weeks ago it was 1.86
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Low rates not the only factor
Financial Planning
Helen Morris, Financial Post As mortgage rates remain low, homeowners looking to renew their mortgages can get some great deals. However, those people who are hoping to secure a good rate are also likely to be assessing their own wider financial well-being, what with increasing job losses, stock-market routs and the recession.
"If you [are] in a market sector that may be subject to layoffs or you believe that your employer may have issues and may not be there for you tomorrow," says Peter Veselinovich, vice-president, banking and mortgage operations at Investors Group, "you may want to adjust the amount of your payments to reflect what a reduced cash flow or revenue flow into your home might look like."
This could mean looking at a longer amortization period.
Mr. Veselinovich says it is crucial not to look at your mortgage in isolation but as part of your overall financial plan. Mortgage professionals suggest shopping for rates well before your renewal date.
"I would consult with a mortgage broker 120 days prior to your renewal date because we can hold a rate for you," says Heather Paterson, mortgage specialist with Invis in Toronto, an independent mortgage brokerage. "If rates go down, we can get you a lower rate; if rates go up, then we've got you protected at today's rate."
The sub-prime fiasco aside, there are many products and lenders operating in what's known as the conventional mortgage market in Canada. These are the lenders who provide mortgages for individuals with regular jobs and decent credit ratings.
"The overall mortgage rate environment in Canada is exceedingly good. You can get a five-year fixed mortgage for less than 5% ... there have been increases in the variable rate product -- it used to be there was a discount up to 1%," says Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals (CAAMP). "Today the best you can do is probably prime plus 0.6%."
This means that as the prime rate has fallen, variable customers could be looking at a rate as low as 3.6%.
"The difference in those rates is really the insurance premium for peace of mind you're going to get by locking in your rate," Mr. Veselinovich says. "I like to call it the insomnia factor ... if you're going to be concerned that ... any material movement in interest rates could reflect a payment that you could no longer afford ... then you should be looking at a fixed-rate mortgage."
Many economists expect rates to continue to decline.
"Going into the second half of this year, we will start to see a lower mortgage rate," says James Marple, economist in economic forecasting at TD Economics. "Going into 2010, we're starting to see signs of an economic recovery ... We start to see inflation picking up and we will see short-term interest rates rise."
Mr. Murphy says it is crucial to ask lots of questions and not only about the rate.
If you are thinking of moving house in the near future, check whether your mortgage is portable without penalty if, for example, you move to another province. Most national lenders will be happy to do this but some smaller regional institutions may not be able to. Each mortgage deal has many varied aspects, so analyzing it in detail is crucial. For example, many have penalties associated with early repayment or early exit from the deal.
"If you're not satisfied with the answers you're getting, go to somebody else," Mr. Murphy says. "The rate environment itself is low and going lower. I think the lenders are trying to provide the best products they can in uncertain times."
• TSX+221.43. as investors refocused their attention on promising housing and manufacturing data.
• DOW +152.68
• Dollar +.02c to 79.30USD finishing at a level that belied its volatile range as risk appetite and technicals pulled the currency off a two-week low.
• Oil +$1.27 to $48.39US per barrel.
• Gold +$3.50 to $926.10USD per ounce
• Canadian 5 yr bond yields -.01bps to 1.73 four weeks ago it was 1.86
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Low rates not the only factor
Financial Planning
Helen Morris, Financial Post As mortgage rates remain low, homeowners looking to renew their mortgages can get some great deals. However, those people who are hoping to secure a good rate are also likely to be assessing their own wider financial well-being, what with increasing job losses, stock-market routs and the recession.
"If you [are] in a market sector that may be subject to layoffs or you believe that your employer may have issues and may not be there for you tomorrow," says Peter Veselinovich, vice-president, banking and mortgage operations at Investors Group, "you may want to adjust the amount of your payments to reflect what a reduced cash flow or revenue flow into your home might look like."
This could mean looking at a longer amortization period.
Mr. Veselinovich says it is crucial not to look at your mortgage in isolation but as part of your overall financial plan. Mortgage professionals suggest shopping for rates well before your renewal date.
"I would consult with a mortgage broker 120 days prior to your renewal date because we can hold a rate for you," says Heather Paterson, mortgage specialist with Invis in Toronto, an independent mortgage brokerage. "If rates go down, we can get you a lower rate; if rates go up, then we've got you protected at today's rate."
The sub-prime fiasco aside, there are many products and lenders operating in what's known as the conventional mortgage market in Canada. These are the lenders who provide mortgages for individuals with regular jobs and decent credit ratings.
"The overall mortgage rate environment in Canada is exceedingly good. You can get a five-year fixed mortgage for less than 5% ... there have been increases in the variable rate product -- it used to be there was a discount up to 1%," says Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals (CAAMP). "Today the best you can do is probably prime plus 0.6%."
This means that as the prime rate has fallen, variable customers could be looking at a rate as low as 3.6%.
"The difference in those rates is really the insurance premium for peace of mind you're going to get by locking in your rate," Mr. Veselinovich says. "I like to call it the insomnia factor ... if you're going to be concerned that ... any material movement in interest rates could reflect a payment that you could no longer afford ... then you should be looking at a fixed-rate mortgage."
Many economists expect rates to continue to decline.
"Going into the second half of this year, we will start to see a lower mortgage rate," says James Marple, economist in economic forecasting at TD Economics. "Going into 2010, we're starting to see signs of an economic recovery ... We start to see inflation picking up and we will see short-term interest rates rise."
Mr. Murphy says it is crucial to ask lots of questions and not only about the rate.
If you are thinking of moving house in the near future, check whether your mortgage is portable without penalty if, for example, you move to another province. Most national lenders will be happy to do this but some smaller regional institutions may not be able to. Each mortgage deal has many varied aspects, so analyzing it in detail is crucial. For example, many have penalties associated with early repayment or early exit from the deal.
"If you're not satisfied with the answers you're getting, go to somebody else," Mr. Murphy says. "The rate environment itself is low and going lower. I think the lenders are trying to provide the best products they can in uncertain times."
Wednesday, April 1, 2009
Financial Update for April 1, 2009
Stocks surge on last day of quarter despite economic woes
• TSX+124.17 as traders continued to buy into a 3-week-old rally despite news of another month of economic contraction in Canada and a disappointing reading on American consumer confidence.
• DOW +86.90
• Dollar +.03c to 79.28USD
• Oil +$1.25 to $49.66US per barrel.
• Gold +$7.30 to $925USD per ounce
• Canadian 5 yr bond yields -.05bps to 1.74 four weeks ago it was 1.91
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Big summit, small hopes; leaders meet on economy
By Tom Raum, The Associated Press LONDON - Desperate but divided on ways to lift their countries from economic misery, world leaders converged for an emergency summit Tuesday holding scant hopes of finding a magic-bullet solution for the crisis that brought them hurrying to London. Prime Minister Stephen Harper arrived Tuesday evening, as did U.S. President Barack Obama and others.
Even as the leaders were arriving, the United States acknowledged its allies would not go along with a massive burst of stimulus spending, while Europe was forced to backpedal from hopes for tighter financial regulation. Instead, leaders are trumpeting the limited common ground they could reach, including more money for the International Monetary Fund and closer scrutiny of hedge funds and tax havens. As for the broader issues, they're hoping for the best, or at least that they will do no harm.
Choosing the right mortgage
New tack stresses sense, not cents
Ray Turchansky, Canwest News Service Published: Monday, March 30, 2009 FP Mortgages-Special Report
Traditionally, the most important consideration in choosing a fixed or variable mortgage has been which strategy would save the most money.
But that might no longer be the case: Choosing a type of mortgage and term today may come down to what makes sense for the individual homeowner rather than what saves cents.
"If you were buying a house 10 years ago, fixed versus variable was the biggest decision you made," says Moshe Milevsky, finance professor at Toronto's York University and executive director of the Individual Finance and Insurance Decisions Centre. "But now there are more important things in place. Equity prices are falling, housing prices are falling. I think there are three or four things more important than fixed versus variable now."
Mr. Milevsky's 2001 study of five-year rolling interest rates from 1950 to 1999 showed that 88.6% of the time, homeowners would have been better off with floating or short-term mortgages rather than five-year, fixed-rate mortgages, saving an average of $22,000 on a $100,000 mortgage amortized over 15 years.
"The last time I looked at it, a year ago, the same strategy was holding up. Roughly ... 85% of the time, you were better off going with variable rates, rather than fixed rates."
Another, lesser consideration was peace of mind: New homebuyers might sleep better when essentially paying an insurance premium as part of locking-in payments for five years.
But saving a few dollars should no longer be the determining factor in the fixed-variable dilemma.
"Too much emphasis has been based on this study," Mr. Milevsky says. "It's the most-downloaded item on our Web site. But if you look at interest rates right now, you're debating over a per cent. When fixed rates were 9% and variable rates were 5%, that's a big difference. That's another issue."
The flattening of the bond yield curve in recent years meant you might pay only 1% or 1.5% more to lock in a long-term rate, and that made the stability of fixed rates much more attractive than it was five years earlier.
Many homeowners with variable rates below prime are now offered renewal rates above prime. Discounts can sometimes be negotiated on longer terms, and other times on variable rates.
"Renewing is not just a day at the bank, it's a major event in the life of your house," says Mr. Milevsky, adding that low rates make other considerations more important in the fixed-variable debate. "If you're going to renew in a year or two, what if your housing price is lower than the value of the loan, and the banks won't give you that again? What about locking in as long as possible? If I get the five-year rate, they're not going to bother me.
"No. 2 is how much money is put down. If you put down only 5%, how much of an effect will that have on your credit rating? Banks are more cautious. Getting a deal might depend on whether you go fixed or variable.
"[Then] there's the question of employment. If you do not have a mortgage with flexibility, what if you can't make a payment for months?"
One compromise may be a combination mortgage that is part-fixed and part-variable.
"I'm getting to be a bigger fan than I used to be," Mr. Milevsky says. "I used to say 'diversify your assets, not your liabilities,' but if you can make the deal to lock in some of your mortgage, that might be a good thing. But that's two mortgages, with two sets of prices, and if it's an extra $200 that's one thing, but an extra $1,000 is another."
• TSX+124.17 as traders continued to buy into a 3-week-old rally despite news of another month of economic contraction in Canada and a disappointing reading on American consumer confidence.
• DOW +86.90
• Dollar +.03c to 79.28USD
• Oil +$1.25 to $49.66US per barrel.
• Gold +$7.30 to $925USD per ounce
• Canadian 5 yr bond yields -.05bps to 1.74 four weeks ago it was 1.91
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Big summit, small hopes; leaders meet on economy
By Tom Raum, The Associated Press LONDON - Desperate but divided on ways to lift their countries from economic misery, world leaders converged for an emergency summit Tuesday holding scant hopes of finding a magic-bullet solution for the crisis that brought them hurrying to London. Prime Minister Stephen Harper arrived Tuesday evening, as did U.S. President Barack Obama and others.
Even as the leaders were arriving, the United States acknowledged its allies would not go along with a massive burst of stimulus spending, while Europe was forced to backpedal from hopes for tighter financial regulation. Instead, leaders are trumpeting the limited common ground they could reach, including more money for the International Monetary Fund and closer scrutiny of hedge funds and tax havens. As for the broader issues, they're hoping for the best, or at least that they will do no harm.
Choosing the right mortgage
New tack stresses sense, not cents
Ray Turchansky, Canwest News Service Published: Monday, March 30, 2009 FP Mortgages-Special Report
Traditionally, the most important consideration in choosing a fixed or variable mortgage has been which strategy would save the most money.
But that might no longer be the case: Choosing a type of mortgage and term today may come down to what makes sense for the individual homeowner rather than what saves cents.
"If you were buying a house 10 years ago, fixed versus variable was the biggest decision you made," says Moshe Milevsky, finance professor at Toronto's York University and executive director of the Individual Finance and Insurance Decisions Centre. "But now there are more important things in place. Equity prices are falling, housing prices are falling. I think there are three or four things more important than fixed versus variable now."
Mr. Milevsky's 2001 study of five-year rolling interest rates from 1950 to 1999 showed that 88.6% of the time, homeowners would have been better off with floating or short-term mortgages rather than five-year, fixed-rate mortgages, saving an average of $22,000 on a $100,000 mortgage amortized over 15 years.
"The last time I looked at it, a year ago, the same strategy was holding up. Roughly ... 85% of the time, you were better off going with variable rates, rather than fixed rates."
Another, lesser consideration was peace of mind: New homebuyers might sleep better when essentially paying an insurance premium as part of locking-in payments for five years.
But saving a few dollars should no longer be the determining factor in the fixed-variable dilemma.
"Too much emphasis has been based on this study," Mr. Milevsky says. "It's the most-downloaded item on our Web site. But if you look at interest rates right now, you're debating over a per cent. When fixed rates were 9% and variable rates were 5%, that's a big difference. That's another issue."
The flattening of the bond yield curve in recent years meant you might pay only 1% or 1.5% more to lock in a long-term rate, and that made the stability of fixed rates much more attractive than it was five years earlier.
Many homeowners with variable rates below prime are now offered renewal rates above prime. Discounts can sometimes be negotiated on longer terms, and other times on variable rates.
"Renewing is not just a day at the bank, it's a major event in the life of your house," says Mr. Milevsky, adding that low rates make other considerations more important in the fixed-variable debate. "If you're going to renew in a year or two, what if your housing price is lower than the value of the loan, and the banks won't give you that again? What about locking in as long as possible? If I get the five-year rate, they're not going to bother me.
"No. 2 is how much money is put down. If you put down only 5%, how much of an effect will that have on your credit rating? Banks are more cautious. Getting a deal might depend on whether you go fixed or variable.
"[Then] there's the question of employment. If you do not have a mortgage with flexibility, what if you can't make a payment for months?"
One compromise may be a combination mortgage that is part-fixed and part-variable.
"I'm getting to be a bigger fan than I used to be," Mr. Milevsky says. "I used to say 'diversify your assets, not your liabilities,' but if you can make the deal to lock in some of your mortgage, that might be a good thing. But that's two mortgages, with two sets of prices, and if it's an extra $200 that's one thing, but an extra $1,000 is another."
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