Time to lock in that mortgage rate?
• TSX +255.47 to 11,947 in a broad-based rally as investors were emboldened by a $1 trillion emergency rescue package out of Europe aimed at containing Greece's debt crisis
• DOW +404.71 to 10,785
• Dollar +1.83c to 97.63cUS
• Oil +1.69 to $76.80US per barrel. Energy producers were among the top gainers as the price of U.S. crude oil rallied more than 2 percent on the back of the aid plan.
• Gold -$9.60 to $1,200.40 USD per ounce as the better prospects for the European economy undercut safe haven buying of gold
Time to lock in that mortgage rate?
Andrew Allentuck, Financial Post Published: Thursday, May 06, 2010
Taking on a mortgage is a big commitment. Every buyer who uses a mortgage has the choice of floating or going with a fixed rate that often costs a couple of percentage points higher per year. Today, for example, one can get variable rates at an average rate of 2.34% while five year closed rates average 5.27%, according to Fiscal Agents Financial Services Group in Oakville, Ontario. Negotiated rates can be lower.
If rates never changed very much, there would be no contest – the floating rate deal would win. But rates do rise and fall and therein lies the borrower's dilemma.
Borrowers with kids and an aging car fear that their ability to pay interest rates twice or thrice the current floating rates are limited. "The test is liquidity and risk tolerance," says Derek Moran, a registered financial planner who heads Smarter Financial Planning Ltd. in Kelowna, B.C. "People with ample liquidity can afford to take a chance on rising mortgage rates. It follows that those who lack liquidity feel some pressure to avoid drastic interest rate increases."
The point is not merely academic, for Canada, in spite of recent mortgage rate increases, is still at a relatively low point of rates over the last four decades. "There is more room for rates to go up than down," Moran points out.
The cost of making a decision to float or go fixed varies with the rate differences.
In 2008, Moshe Milevsky, Associate Professor of Finance at the Schulich School of Business at York University, and Brandon Walker, a research associate at the Individual Finance and Insurance Decisions Centre in Toronto, published a study that measured the direct and opportunity costs of going with either choice. "Over the long run, homeowners really do pay extra for fixed rate mortgages," they concluded.
The reason is intuitive. Lenders do not want to take the chance that when they have to refinance a loan that they will be stuck paying more than they are getting.
Mismatching what they lend with the cost of what they borrow can cut their profits and even lead to insolvency. So lenders attach what amounts to an interest rate insurance fee and bundle that into the price of money they lend on fixed terms.
Milevsky and Walker confirmed this explanation. "The study showed that a positive Maturity Value of Savings [the value of investing the difference between floating and fixed mortgages in 91-day T-bills] was positive the majority of the time, so the homeowner saved by using a variable-rate mortgage."
The amount of money that the homeowner can save by taking a chance on floating rates varied in the Milevsky and Walker study, depending on the time periods in question. But the average amount was impressive: $20,630 as of 2008. Put another way, floating allowed borrowers to cut the time it would take to pay off the mortgages by a year or more, in some cases as much as five years on 15-year amortizations.
Rational calculation and personal feeling are, of course, different things. A person with a fixed income and a great deal of debt may be reluctant to put a rate casino between himself and the lender and will therefore go with certainty, even at a high price.
It is also a matter of experience. "First time buyers tend to pay close attention to the cost of the mortgage," says Laura Parsons, Areas Manager of Specialized Sales – which includes mortgages, for the BMO Financial Group in Calgary. For them, the appeal of locking in is relatively high. Their mortgages are new, the amounts they owe are higher than they would be 10 or 15 years in future when the mortgage is substantially reduced, and their incomes, often early in their adult lives, are lower than they will be in future.
"First time home buyers are net debtors and they don't want to endanger their finances," suggests Adrian Mastracci, a portfolio manager and financial planner who heads KCM Wealth Management Inc. in Vancouver.
There are other strategies that the buyer can use to provide some rate insurance without taking on what Milevsky and Walker have demonstrated as the high cost of peace of mind.
"The buyer can take a variable rate mortgage but set payments higher than the minimum required" says Parsons. "That could be at the 5 year closed rate, which would mean a faster paydown and growing asset security while still keeping the low cost of the variable rate mortgage. Faster paydown is itself cost insurance if interest rates do rise."
Banks are nothing if not inventive in helping clients cope with the fixed versus floating dilemma. For example, TD Bank offers to give 5% of the amount borrowed on a five or six year fixed rate residential mortgage to the borrower. The program, aptly dubbed the "5% CashBack Mortgage," implicitly acknowledges that fixed rate loans can be more costly than variable rate ones.
For its part, RBC has a RateCapper Mortgage that builds on the initial low cost of a variable rate mortgage but limits the cost if rates shoot up. On a five year mortgage, the borrower will never pay more than the capped rate and if the variable rate, based on the prime rate, drops below the RateCapper mortgage maximum, the interest rate charged to the borrower also drops. The plan is a compromise and spreads interest rate risk. Many other lenders allow borrowers to mix fixed and variable rates, thus accomplishing a similar goal.
Plan selection, it turns out, is gender-related. According to a BMO survey, men, 44% of the time, are more likely than women to choose a fixed rate mortgage than women, who make that choice only 28% of the time. Women, it turns out, tend to make the better choice, for as BMO's analysis shows, "fixed rates were advantageous during only two periods – through the late 1970s and in the late 1980s, in both cases ahead of a period rising interest rates, as is the case now."
So where are interest rates headed? The yield curve, a line that links interest rates for periods of time from 1 day to 30 years, implies that rates will rise, but not very much.
There is no sense that we are returning to a period of double digit rates. Moreover, there are deflationary forces at work, notes Patricia Croft, chief economist of RBC Global Asset Management in Toronto. "The present crisis in European finance and the potential fizzling out of the present recovery in North American capital markets could presage falling inflation and even disinflation – the subsidence of rising prices and interest rates," she explains..
BMO forecasts that the rising Canadian dollar will put downward pressure on consumer prices, reflecting the fact that much of what Canadians eat and use is imported. Inflation could flare up, BMO's economists say, but there is a balanced risk of declining prices. For now, the Bank of Canada is being very cautious in its interest rate management commitments. For those who are strapped for cash, personal circumstance may dictate the choice of a fixed rate. But for everyone else, the folly of trying to make interest rate predictions over a business cycle and to predict both the short term rates and the long term rates along the yield curve should be apparent. No promises, of course, but the odds of saving money are with borrowers who choose variable rate plans or those that emulate them.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/story.html?id=2994048#ixzz0nWSeUpXO
Tuesday, May 11, 2010
Monday, May 10, 2010
Financial Update For May 10, 2010
Trading on emotion "The market realizes there is actually a country risk, Since Lehman's collapse the banks were in focus, now it is the credibility of countries.”
Housing starts expected to build on recovery data Today, Canada Mortgage and Housing Corp. reports its April housing-start figures
• TSX -150.00 to 11,692 Markets continued to sell off Friday as fears of a widening government debt crisis in Europe overshadowed strong job numbers. However markets surged around the world this morning after the European Union launched a loan plan at 3am in Brussels worth almost $1-trillion (U.S.) to reverse the losing war against the sovereign bonds of debt-choked countries that had threatened to sink the euro zone.
• DOW -139.80 to 10,380
• Dollar +.77c to 95.80cUS
• Oil -$2.00 to $75.11US per barrel."If the world is a risky place and growth is in question, that hits commodities and that hits Canada hard," said Patricia Croft, chief economist, RBC Global Management.
• Gold +$13.10 to $1,210.00 USD per ounce
•
Trading on emotion
Janet Whitman, Financial Post, with files from Bloomberg Published: Saturday, May 08, 2010
Gobsmacked traders and investors stared at their computer screens in disbelief on Thursday as stocks nosedived, wiping out a trillion dollars in market value in 10 stomach-churning minutes.
As panic spread that stocks were veering off a cliff, the market snapped back just as quickly, recouping most of its losses. Jittery investors haven't been so quick to recover.
On Friday -- a day after what is believed to be a technical glitch helped take the Dow Jones Industrial Average down a record 998.50 points -- stocks zigzagged in volatile trading as market participants tried to make sense of the turmoil.
The panicky reaction could be a sign of the summer to come as stressed investors trade on gut reactions instead of using their heads.
"We are chained to this problem of going up with greed and down with fear and the market either thrills or haunts us," said Somnath Basu, professor of finance at California Lutheran University in Thousand Oaks.
"None of it's driven by reasonable thinking. People forget and go chase returns and then when the markets start crashing they get scared and start getting out. They're not thinking that stocks should be held for 20 or 30 years."
Prof. Basu, an expert in "behavioural economics," said he anticipates a series of mini stock-market bubbles and crashes leading to bigger bubbles and crashes as people let their emotions rule their investment decisions.
Before their tumble this week, stocks were up around 70% from the lows they reached at the height of the financial crisis in 2008.
"Is that driven by fundamentals or irrational exuberance?" asked Prof. Basu. "Many economic indicators are not showing the same thing. We don't know what's going to happen when the US$2-trillion in stimulus and bailout money stops working. Maybe the stock-market gain was premature, because people were tired of being in the dumps."
At this stage, it's still unclear how a technical glitch might have sparked a sell-off that led to one of the craziest 10 minutes in stock-trading history.
Barack Obama, the U.S. president, said U.S. regulatory authorities are probing the wild swing in stocks that appears to have been exacerbated as investors shrugged off surprisingly strong gains in employment in Canada. The TSX index dropped 4.24% for the week, its worst performance since July last year.
"It might be an opportunity to look at some companies that got knocked lower, but people are more afraid to invest when they see this kind of thing going on," said Peter Cohan, an economic analyst and professor of management at Babson College in Wellesley, Mass.
"The smart thing to do is buy here by a torrent of computerized selling in a market that was already on edge over concerns that Greece's debt woes could drag down the rest of Europe and slow global economic growth.
"In my view, there was no emotion in it at all," said Mr. Cohan of Babson. "High-frequency trading and flash trading accounted for 60% of the volume. We don't know yet what triggered all of that buying and selling. The majority of the volatility had nothing to do with human emotion at all. It had to do with what was programmed in the computers."
Regardless of the cause, investors do seem to be gripped once again by fear and emotion at a level not seen since the height of the financial crisis.
The dramatic sell-off sent the market's so-called fear gauge -- formerly known as the Chicago Board Options Exchange volatility index, or VIX -- to its biggest surge in three years.
The index surged again yesterday, reaching a high for the year and a record 86% increase for the week amid concerns European leaders won't be able to control Greece's debt crisis.
"The market realizes there is actually a country risk," said Achim Matzke, head of global index and technical research at Commerzbank AG in Frankfurt. "Since Lehman's collapse the banks were in focus, now it is the credibility of countries." Read more: http://www.nationalpost.com/story.html?id=3003011#ixzz0nWWeHztC
Housing starts expected to build on recovery data
; 'Housing starts have risen 80% from their cyclical lows'
Derek Abma, Financial Post
If record job gains from April weren't enough to convince you the Canadian economy is on solid ground, a few more measures are coming down the pipe over the next week that could support the case.
"In Canada, we're in the home stretch of reports on what was evidently a very strong first quarter, and the early news on Q2," CIBC World Markets chief economist Avery Shenfeld said in a research note on Friday, which followed Statistics Canada's report that 108,700 additional people found work last month-- about four times what was expected.
Today, Canada Mortgage and Housing Corp. reports its April housing-start figures. Economists anticipate an annualized rate of 205,000, up from a revised figure of 200,900 in March. The last figure marked a small decline from the previous month, on a seasonally adjusted basis, but things have come a long way since the market bottomed out at 112,000 in April 2009.
"To date, housing starts have risen a massive 80% from their cyclical lows, retracing over half of the peak-to-trough drop," Millan Mulraine, senior strategist with TD Securities, said in a report released on Friday.
Mr. Mulraine, who's forecasting a start level of 210,000 for April, attributes some of the current strength to homebuyers looking to avoid the new harmonized sales taxes taking effect in Ontario and British Columbia in July. He also noted that April was warmer than usual, helping along construction efforts.
Another big report comes Wednesday in the form of merchandise trade data for March. Economists anticipate a Canadian surplus -- the amount exported minus what's imported -- of $1.6-billion, up from $1.4-billion in February. If right, it would mark the fourth straight surplus.
CIBC World Markets economist Krishen Rangasamy credited improved economic conditions globally as probably helping Canada maintain it trading-surplus streak in March, including greater demand for vehicles in the United States.
"The merchandise trade report for March will likely add to earlier data that presages (Canadian economic) growth of around 5.7% (annualized) for the first quarter," Mr. Rangasamy said. "But the party won't last forever for exporters, given the lagged effects of a strong Canadian dollar and the expected slowdown in the U.S. economy later in the year."
Speaking of the auto industry, Statistics Canada on Friday will release data on domestic new-vehicle sales for March. A 4% monthly decline is expected following an 8.1% jump in February.
The federal agency will also release March figures for manufacturing sales that day. A one% rise in the value of factory transactions is expected by economists after the slim 0.1% gain in February.
"Canadian manufacturing-sector activity has been on a breathtaking run lately, with sales rising for six consecutive months on the back of strong domestic and foreign demand," Mr. Mulraine said.
Mr. Mulraine is in line the consensus of economists in his March manufacturing forecast, citing transportation equipment as well as products made of petroleum and coal as helping to fuel the gains.
Besides these reports, a number of Canadian companies, such as George Weston and Jazz Air, will release quarterly earnings. As well, the United States will see data on March wholesale trade toomorrow, its own March trade data on Wednesday and April retail sales on Friday.
Read more: http://www.financialpost.com/story.html?id=3007517#ixzz0nWZkq2Sr
Housing starts expected to build on recovery data Today, Canada Mortgage and Housing Corp. reports its April housing-start figures
• TSX -150.00 to 11,692 Markets continued to sell off Friday as fears of a widening government debt crisis in Europe overshadowed strong job numbers. However markets surged around the world this morning after the European Union launched a loan plan at 3am in Brussels worth almost $1-trillion (U.S.) to reverse the losing war against the sovereign bonds of debt-choked countries that had threatened to sink the euro zone.
• DOW -139.80 to 10,380
• Dollar +.77c to 95.80cUS
• Oil -$2.00 to $75.11US per barrel."If the world is a risky place and growth is in question, that hits commodities and that hits Canada hard," said Patricia Croft, chief economist, RBC Global Management.
• Gold +$13.10 to $1,210.00 USD per ounce
•
Trading on emotion
Janet Whitman, Financial Post, with files from Bloomberg Published: Saturday, May 08, 2010
Gobsmacked traders and investors stared at their computer screens in disbelief on Thursday as stocks nosedived, wiping out a trillion dollars in market value in 10 stomach-churning minutes.
As panic spread that stocks were veering off a cliff, the market snapped back just as quickly, recouping most of its losses. Jittery investors haven't been so quick to recover.
On Friday -- a day after what is believed to be a technical glitch helped take the Dow Jones Industrial Average down a record 998.50 points -- stocks zigzagged in volatile trading as market participants tried to make sense of the turmoil.
The panicky reaction could be a sign of the summer to come as stressed investors trade on gut reactions instead of using their heads.
"We are chained to this problem of going up with greed and down with fear and the market either thrills or haunts us," said Somnath Basu, professor of finance at California Lutheran University in Thousand Oaks.
"None of it's driven by reasonable thinking. People forget and go chase returns and then when the markets start crashing they get scared and start getting out. They're not thinking that stocks should be held for 20 or 30 years."
Prof. Basu, an expert in "behavioural economics," said he anticipates a series of mini stock-market bubbles and crashes leading to bigger bubbles and crashes as people let their emotions rule their investment decisions.
Before their tumble this week, stocks were up around 70% from the lows they reached at the height of the financial crisis in 2008.
"Is that driven by fundamentals or irrational exuberance?" asked Prof. Basu. "Many economic indicators are not showing the same thing. We don't know what's going to happen when the US$2-trillion in stimulus and bailout money stops working. Maybe the stock-market gain was premature, because people were tired of being in the dumps."
At this stage, it's still unclear how a technical glitch might have sparked a sell-off that led to one of the craziest 10 minutes in stock-trading history.
Barack Obama, the U.S. president, said U.S. regulatory authorities are probing the wild swing in stocks that appears to have been exacerbated as investors shrugged off surprisingly strong gains in employment in Canada. The TSX index dropped 4.24% for the week, its worst performance since July last year.
"It might be an opportunity to look at some companies that got knocked lower, but people are more afraid to invest when they see this kind of thing going on," said Peter Cohan, an economic analyst and professor of management at Babson College in Wellesley, Mass.
"The smart thing to do is buy here by a torrent of computerized selling in a market that was already on edge over concerns that Greece's debt woes could drag down the rest of Europe and slow global economic growth.
"In my view, there was no emotion in it at all," said Mr. Cohan of Babson. "High-frequency trading and flash trading accounted for 60% of the volume. We don't know yet what triggered all of that buying and selling. The majority of the volatility had nothing to do with human emotion at all. It had to do with what was programmed in the computers."
Regardless of the cause, investors do seem to be gripped once again by fear and emotion at a level not seen since the height of the financial crisis.
The dramatic sell-off sent the market's so-called fear gauge -- formerly known as the Chicago Board Options Exchange volatility index, or VIX -- to its biggest surge in three years.
The index surged again yesterday, reaching a high for the year and a record 86% increase for the week amid concerns European leaders won't be able to control Greece's debt crisis.
"The market realizes there is actually a country risk," said Achim Matzke, head of global index and technical research at Commerzbank AG in Frankfurt. "Since Lehman's collapse the banks were in focus, now it is the credibility of countries." Read more: http://www.nationalpost.com/story.html?id=3003011#ixzz0nWWeHztC
Housing starts expected to build on recovery data
; 'Housing starts have risen 80% from their cyclical lows'
Derek Abma, Financial Post
If record job gains from April weren't enough to convince you the Canadian economy is on solid ground, a few more measures are coming down the pipe over the next week that could support the case.
"In Canada, we're in the home stretch of reports on what was evidently a very strong first quarter, and the early news on Q2," CIBC World Markets chief economist Avery Shenfeld said in a research note on Friday, which followed Statistics Canada's report that 108,700 additional people found work last month-- about four times what was expected.
Today, Canada Mortgage and Housing Corp. reports its April housing-start figures. Economists anticipate an annualized rate of 205,000, up from a revised figure of 200,900 in March. The last figure marked a small decline from the previous month, on a seasonally adjusted basis, but things have come a long way since the market bottomed out at 112,000 in April 2009.
"To date, housing starts have risen a massive 80% from their cyclical lows, retracing over half of the peak-to-trough drop," Millan Mulraine, senior strategist with TD Securities, said in a report released on Friday.
Mr. Mulraine, who's forecasting a start level of 210,000 for April, attributes some of the current strength to homebuyers looking to avoid the new harmonized sales taxes taking effect in Ontario and British Columbia in July. He also noted that April was warmer than usual, helping along construction efforts.
Another big report comes Wednesday in the form of merchandise trade data for March. Economists anticipate a Canadian surplus -- the amount exported minus what's imported -- of $1.6-billion, up from $1.4-billion in February. If right, it would mark the fourth straight surplus.
CIBC World Markets economist Krishen Rangasamy credited improved economic conditions globally as probably helping Canada maintain it trading-surplus streak in March, including greater demand for vehicles in the United States.
"The merchandise trade report for March will likely add to earlier data that presages (Canadian economic) growth of around 5.7% (annualized) for the first quarter," Mr. Rangasamy said. "But the party won't last forever for exporters, given the lagged effects of a strong Canadian dollar and the expected slowdown in the U.S. economy later in the year."
Speaking of the auto industry, Statistics Canada on Friday will release data on domestic new-vehicle sales for March. A 4% monthly decline is expected following an 8.1% jump in February.
The federal agency will also release March figures for manufacturing sales that day. A one% rise in the value of factory transactions is expected by economists after the slim 0.1% gain in February.
"Canadian manufacturing-sector activity has been on a breathtaking run lately, with sales rising for six consecutive months on the back of strong domestic and foreign demand," Mr. Mulraine said.
Mr. Mulraine is in line the consensus of economists in his March manufacturing forecast, citing transportation equipment as well as products made of petroleum and coal as helping to fuel the gains.
Besides these reports, a number of Canadian companies, such as George Weston and Jazz Air, will release quarterly earnings. As well, the United States will see data on March wholesale trade toomorrow, its own March trade data on Wednesday and April retail sales on Friday.
Read more: http://www.financialpost.com/story.html?id=3007517#ixzz0nWZkq2Sr
Friday, May 7, 2010
Financial Update For May 7, 2010
Was typo behind Wall Street plunge? For a brief, heart-stopping period, stock markets plunged, currencies went crazy, bonds ran wild and investors ran for cover
Greek legislators pass crucial austerity bill despite protests “Either we vote and implement the deal, or we condemn Greece to bankruptcy”
Islamic mortgages now in Canada
• TSX -32.73 to 11,842 closed lower for a fourth straight session. Amid the selloff, the TSX fell 452 points, or 3.8 percent, to 11,422,73, its lowest level since February 25. It was the steepest one-day percentage fall since June 2009. Article below…
• DOW -347.80 to 10,520
• Dollar -2.09c to 95.03cUS hitting a near 3 mth low. What we’re seeing is a very strong, strong U.S. dollar, because very quickly people are closing out foreign positions and moving into the deepest capital markets in the world: The U.S. and the U.S. treasury market.”
• Oil -$2.86 to $77.11US per barrel. on fears the debt crisis could threaten economic recovery and undercut demand for oil.
• Gold +$22.30 to $1,196.90 USD per ounce . jumped 3 percent to a near record on a broad flight to safety.
•
The Canadian Press OTTAWA - Canada added 108,700 jobs in April, far more than economists had expected.
As a result of the huge number of jobs added last month, Canada's unemployment rate slipped to 8.1 per cent — down from 8.2 per cent in March.
Was typo behind Wall Street plunge?
The Canadian Press, Reuters and thestar.com
What was that? For a brief, heart-stopping period, stock markets plunged, currencies went crazy, bonds ran wild and investors ran for cover.
But by the end of the day U.S. stocks had recovered much of their losses, the Toronto Stock Exchange was basically flat losing 32.7 points to close at 11,842.43, and the Canadian dollar, though pummeled, was still intact.
Experts were flustered, but puzzled by the wild action, though they generally pointed to the ongoing Greek debt crisis.
Rumors also circulated that the panicky sell-off had been triggered by a U.S. stock trader mistakenly put in a sell order for 15 billion shares of Procter & Gamble on the New York Stock Exchange, instead of 15 million.
Whether that’s true or not, the stock dived to $40 from $60 within moments just before 2.30 p.m..
The Dow Jones Industrial Index also began a free-fall of about 1,000 points, or 10 per cent, in less than half an hour.
It didn’t stop with stock markets. The U.S. dollar soared, which meant the Euro plunged along with the Canadian dollar.After rising as high as 97 cents U.S, at one point the Canadian dollar was down almost 4 cents. It finished the day at 95.03 cents U.S.
Pascal Gauthier of TD Economics pointed to the Greek debt crisis as a possible trigger for the turmoil.
Jean-Paul Trichet, who heads the European Central bank, said in Lisbon Thursday that the bank’s governing council had not discussed the possibility of buying government bonds. Many analysts have speculated it might do so, as a means of providing debt-crushed governments with financial support.
“There might have been expectations that the bank might take some measures, though we were of the view that they would not,” Gauthier speculated.
He warned that other days like this could loom ahead.
“On the fiscal side, those economies that were fragile to begin with before the recession like Greece, Italy, Spain are going to be vulnerable, and markets are going to be nervous,” he said.
“This is going to stay with us. This isn’t just a one-day thing.
Camilla Sutton, currency strategist at Scotiabank, said no one was attacking the Canadian dollar. Instead, investors ran for the safety of U.S. investments.
“This story is about the U.S. dollar,” she said. “What we’re seeing is a very strong, strong U.S. dollar, because very quickly people are closing out foreign positions and moving into the deepest capital markets in the world: The U.S. and the U.S. treasury market.”
The Canadian dollar was simply trampled by the rush into the U.S., she said.
* NEW YORK—The biggest intraday point drop ever in the Dow Jones Industrial Average may have been caused by an erroneous trade entered by a person at a big Wall Street bank, multiple market sources said Thursday.
The so-called "fat finger" trade apparently involved an exchange-traded fund that holds shares of some of the biggest and most widely traded stocks, sources said. The trade apparently was put in on the Nasdaq Stock Market, sources said.
Several sources said the speculation is that the trade was entered by someone at Citigroup. A Citigroup spokesman said it was investigating the rumor but that the bank currently had no evidence that an erroneous trade had been made.
CNBC reported this afternoon that a trader entered a "b" for billion instead of an "m" for million in a trading order, setting off a series of events that led to the Dow’s biggest one-day drop since 1987.
Greek legislators pass crucial austerity bill despite protests
BY ELENA BECATOROS
ATHENS — Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth $147 billion Cdn.
The rescue loans are aimed at containing the debt crisis and keeping Greece’s troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.
Clashes in Athens broke out at the end of the main protest that drew tens of thousands of people as police pushed back a few thousand demonstrators outside parliament.
The violence was quickly contained with riot police firing tear gas at the protesters, who had earlier pelted them with oranges and bottles. Several small fires burned in surrounding streets. No injuries or arrests were reported.
The clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed.
Demonstrators banging drums and shouting anti-government slogans through bullhorns, unfurled a giant black banner outside parliament earlier Thursday. More than 30,000 demonstrators filled downtown streets, chanting “They declared war. Now fight back.”
In parliament, lawmakers voted 172-121 to approve the cuts — worth some $40 billion Cdn. through 2012 — that will slash pensions and civil servants’ pay and further hike consumer taxes.
Prime Minister George Papandreou expelled three Socialist deputies who dissented in the vote, reducing the party’s number of seats to 157 in the 300-member parliament.
“We have done what was necessary, not what was easy,” Finance Minister George Papaconstantinou said after the vote. “Without these measures, we’d be thrown into the deepest recession this country has ever known.”
The bulk of Thursday’s protest — organized by the Greek Communist Party — quickly dispersed, leaving about 5,000 demonstrators outside parliament before police dispersed them.
Protester Thodoris Mougiakos said he was angry the IMF would control Greek finances.
“It’s blackmail,” the 32-year-old engineer said. “There is money, but they spend it on things like armaments and businesses. The church has money, too. If we had been drawing money from all these sources, we wouldn’t be in this situation now,”
But the protest remained peaceful, in contrast with Wednesday’s rioting that left three people dead, 59 injured and 25 people arrested. Police said 50 stores, banks and offices were damaged and seven vehicles damaged or burned.
Papaconstantinou said Greece would default on debt payments this month unless it received the bailout loans from the International Monetary Fund and 15 euro-zone countries that had remained divided for months on how to aid Athens.
“Today things are simple. Either we vote and implement the deal, or we condemn Greece to bankruptcy,” Papandreou told parliament before the vote.
“Some people want that, and are speculating (on it), and hope that it will happen,” he said, referring to speculative attacks that have been blamed for raising Greece’s borrowing costs to unsustainable levels. “We, I, will not allow that. We will not allow speculation against our country, and bankruptcy to happen.”
European governments are now scrambling to get parliamentary approval for the Greek loans. European leaders will meet on the issue in Brussels today.
Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy, its long-term prospects are unclear. The country’s growth prospects are weak, and the population’s willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.
Opposition parties lambasted the government for imposing measures that are too harsh for the population to bear.
“The dose of the medicine you are administering is in danger of killing the patient,” conservative opposition leader Antonis Samaras said.
“You know that these measures have sparked a social explosion ... The citizens of this country have to believe there is a way out. Because whoever cuts pensions of €700 cannot convince anyone.”
Samaras also expelled a dissenting lawmaker, former Foreign Minister Dora Bakoyannis, reducing his share of parliamentary seats to 90.
The Associated Press http://news.therecord.com/Business/article/707717
Man. credit union 1st to offer Islamic mortgages
A Manitoba credit union has become the first major financial institution in Canada to offer mortgages geared towards the needs of devout Muslims.
On Wednesday, Winnipeg-based Assiniboine Credit Union (ACU) announced it was launching an Islamic Mortgage Program.
Currently, the majority of the Winnipeg's roughly 13,000 Muslims rent or don't own the homes they live in, the credit union said.
For-profit loans are problematic for people of the faith because the Qur'an forbids the payment of interest.
Under the program, the credit union and the homebuyer enter into what ACU calls a "declining partnership agreement." Both parties co-own the home and its title.
"During this time, the family has exclusive rights to live in the home and in exchange they agree to pay ACU a profit. At the end of the contract the Muslim family is the sole owner of the home," the credit union said in a press release.
The would-be homeowner must contribute a minimum of 20 per cent of the home's price at the start of the agreement, ACU said.
The plan was developed with the help of Islamic religious scholars in Canada and the U.S., the credit union added.
Greek legislators pass crucial austerity bill despite protests “Either we vote and implement the deal, or we condemn Greece to bankruptcy”
Islamic mortgages now in Canada
• TSX -32.73 to 11,842 closed lower for a fourth straight session. Amid the selloff, the TSX fell 452 points, or 3.8 percent, to 11,422,73, its lowest level since February 25. It was the steepest one-day percentage fall since June 2009. Article below…
• DOW -347.80 to 10,520
• Dollar -2.09c to 95.03cUS hitting a near 3 mth low. What we’re seeing is a very strong, strong U.S. dollar, because very quickly people are closing out foreign positions and moving into the deepest capital markets in the world: The U.S. and the U.S. treasury market.”
• Oil -$2.86 to $77.11US per barrel. on fears the debt crisis could threaten economic recovery and undercut demand for oil.
• Gold +$22.30 to $1,196.90 USD per ounce . jumped 3 percent to a near record on a broad flight to safety.
•
The Canadian Press OTTAWA - Canada added 108,700 jobs in April, far more than economists had expected.
As a result of the huge number of jobs added last month, Canada's unemployment rate slipped to 8.1 per cent — down from 8.2 per cent in March.
Was typo behind Wall Street plunge?
The Canadian Press, Reuters and thestar.com
What was that? For a brief, heart-stopping period, stock markets plunged, currencies went crazy, bonds ran wild and investors ran for cover.
But by the end of the day U.S. stocks had recovered much of their losses, the Toronto Stock Exchange was basically flat losing 32.7 points to close at 11,842.43, and the Canadian dollar, though pummeled, was still intact.
Experts were flustered, but puzzled by the wild action, though they generally pointed to the ongoing Greek debt crisis.
Rumors also circulated that the panicky sell-off had been triggered by a U.S. stock trader mistakenly put in a sell order for 15 billion shares of Procter & Gamble on the New York Stock Exchange, instead of 15 million.
Whether that’s true or not, the stock dived to $40 from $60 within moments just before 2.30 p.m..
The Dow Jones Industrial Index also began a free-fall of about 1,000 points, or 10 per cent, in less than half an hour.
It didn’t stop with stock markets. The U.S. dollar soared, which meant the Euro plunged along with the Canadian dollar.After rising as high as 97 cents U.S, at one point the Canadian dollar was down almost 4 cents. It finished the day at 95.03 cents U.S.
Pascal Gauthier of TD Economics pointed to the Greek debt crisis as a possible trigger for the turmoil.
Jean-Paul Trichet, who heads the European Central bank, said in Lisbon Thursday that the bank’s governing council had not discussed the possibility of buying government bonds. Many analysts have speculated it might do so, as a means of providing debt-crushed governments with financial support.
“There might have been expectations that the bank might take some measures, though we were of the view that they would not,” Gauthier speculated.
He warned that other days like this could loom ahead.
“On the fiscal side, those economies that were fragile to begin with before the recession like Greece, Italy, Spain are going to be vulnerable, and markets are going to be nervous,” he said.
“This is going to stay with us. This isn’t just a one-day thing.
Camilla Sutton, currency strategist at Scotiabank, said no one was attacking the Canadian dollar. Instead, investors ran for the safety of U.S. investments.
“This story is about the U.S. dollar,” she said. “What we’re seeing is a very strong, strong U.S. dollar, because very quickly people are closing out foreign positions and moving into the deepest capital markets in the world: The U.S. and the U.S. treasury market.”
The Canadian dollar was simply trampled by the rush into the U.S., she said.
* NEW YORK—The biggest intraday point drop ever in the Dow Jones Industrial Average may have been caused by an erroneous trade entered by a person at a big Wall Street bank, multiple market sources said Thursday.
The so-called "fat finger" trade apparently involved an exchange-traded fund that holds shares of some of the biggest and most widely traded stocks, sources said. The trade apparently was put in on the Nasdaq Stock Market, sources said.
Several sources said the speculation is that the trade was entered by someone at Citigroup. A Citigroup spokesman said it was investigating the rumor but that the bank currently had no evidence that an erroneous trade had been made.
CNBC reported this afternoon that a trader entered a "b" for billion instead of an "m" for million in a trading order, setting off a series of events that led to the Dow’s biggest one-day drop since 1987.
Greek legislators pass crucial austerity bill despite protests
BY ELENA BECATOROS
ATHENS — Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth $147 billion Cdn.
The rescue loans are aimed at containing the debt crisis and keeping Greece’s troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.
Clashes in Athens broke out at the end of the main protest that drew tens of thousands of people as police pushed back a few thousand demonstrators outside parliament.
The violence was quickly contained with riot police firing tear gas at the protesters, who had earlier pelted them with oranges and bottles. Several small fires burned in surrounding streets. No injuries or arrests were reported.
The clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed.
Demonstrators banging drums and shouting anti-government slogans through bullhorns, unfurled a giant black banner outside parliament earlier Thursday. More than 30,000 demonstrators filled downtown streets, chanting “They declared war. Now fight back.”
In parliament, lawmakers voted 172-121 to approve the cuts — worth some $40 billion Cdn. through 2012 — that will slash pensions and civil servants’ pay and further hike consumer taxes.
Prime Minister George Papandreou expelled three Socialist deputies who dissented in the vote, reducing the party’s number of seats to 157 in the 300-member parliament.
“We have done what was necessary, not what was easy,” Finance Minister George Papaconstantinou said after the vote. “Without these measures, we’d be thrown into the deepest recession this country has ever known.”
The bulk of Thursday’s protest — organized by the Greek Communist Party — quickly dispersed, leaving about 5,000 demonstrators outside parliament before police dispersed them.
Protester Thodoris Mougiakos said he was angry the IMF would control Greek finances.
“It’s blackmail,” the 32-year-old engineer said. “There is money, but they spend it on things like armaments and businesses. The church has money, too. If we had been drawing money from all these sources, we wouldn’t be in this situation now,”
But the protest remained peaceful, in contrast with Wednesday’s rioting that left three people dead, 59 injured and 25 people arrested. Police said 50 stores, banks and offices were damaged and seven vehicles damaged or burned.
Papaconstantinou said Greece would default on debt payments this month unless it received the bailout loans from the International Monetary Fund and 15 euro-zone countries that had remained divided for months on how to aid Athens.
“Today things are simple. Either we vote and implement the deal, or we condemn Greece to bankruptcy,” Papandreou told parliament before the vote.
“Some people want that, and are speculating (on it), and hope that it will happen,” he said, referring to speculative attacks that have been blamed for raising Greece’s borrowing costs to unsustainable levels. “We, I, will not allow that. We will not allow speculation against our country, and bankruptcy to happen.”
European governments are now scrambling to get parliamentary approval for the Greek loans. European leaders will meet on the issue in Brussels today.
Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy, its long-term prospects are unclear. The country’s growth prospects are weak, and the population’s willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.
Opposition parties lambasted the government for imposing measures that are too harsh for the population to bear.
“The dose of the medicine you are administering is in danger of killing the patient,” conservative opposition leader Antonis Samaras said.
“You know that these measures have sparked a social explosion ... The citizens of this country have to believe there is a way out. Because whoever cuts pensions of €700 cannot convince anyone.”
Samaras also expelled a dissenting lawmaker, former Foreign Minister Dora Bakoyannis, reducing his share of parliamentary seats to 90.
The Associated Press http://news.therecord.com/Business/article/707717
Man. credit union 1st to offer Islamic mortgages
A Manitoba credit union has become the first major financial institution in Canada to offer mortgages geared towards the needs of devout Muslims.
On Wednesday, Winnipeg-based Assiniboine Credit Union (ACU) announced it was launching an Islamic Mortgage Program.
Currently, the majority of the Winnipeg's roughly 13,000 Muslims rent or don't own the homes they live in, the credit union said.
For-profit loans are problematic for people of the faith because the Qur'an forbids the payment of interest.
Under the program, the credit union and the homebuyer enter into what ACU calls a "declining partnership agreement." Both parties co-own the home and its title.
"During this time, the family has exclusive rights to live in the home and in exchange they agree to pay ACU a profit. At the end of the contract the Muslim family is the sole owner of the home," the credit union said in a press release.
The would-be homeowner must contribute a minimum of 20 per cent of the home's price at the start of the agreement, ACU said.
The plan was developed with the help of Islamic religious scholars in Canada and the U.S., the credit union added.
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