TSX UP! Dow UP! Dollar UP! Oil UP! Gold UP!
· TSX continued skyward +201pts Thurs and another 156pts Friday to reach a new high
of 14,984.
· Dow also up both days +94. + 41.36
· Dollar +.43c to $ $1.00
· Oil +$.76 to $127.82US per barrel is worrying not just for consumers, but also for major oil
firms and producer countries fearful of demand destruction and a potential price collapse.
“The price is scary,” a Sr oil executive said. “The market may be poised for a big drop,
especially if the speculators exit in a hurry.” So far, the highest profile predictions have
been for further price rises
· Gold +13.60+US to $917US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
Tip:
Dow Jones Industrial Average (DJIA)
There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities however the DJIA is one of the best known and most widely quoted stock market averages in the media. It contains an average made up of 30 actively traded blue chip stocks spanning many different industries that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The average is quoted in points rather than dollars. It is price weighted, meaning that a $2 change in a $100 per share stock will have a greater affect than a $2 change in a $20 per share stock
TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index
Please find attached an interesting mortgage article from The Financial Post on the different exotic mortgages and how both US and Canada were affected by their utilization of them.
HOW WOULD YOU LIKE YOUR MORTGAGE?
Sarah Dougherty Canwest News Service Published: Saturday, May 17, 2008
It's difficult to imagine what lenders and brokers were thinking when they dreamed up the shaky mortgage products that set off the U. S. housing meltdown.
Take the "Ninja" mortgage, for example. That's the catchy phrase one lender used for the "no income, no job, no assets" home loan for which just about anyone could qualify. Other lenders offered "liar loans" that let borrowers merely state their incomes without producing backup documentation.
In Canada, lending standards never deteriorated to the same extent, thanks to a less-fragmented and more-conservative banking sector and different regulatory environment.
But regulators have recently cut lenders in Canada some slack. Combine those changes with the entrance of new players on the mortgage scene and you have more choices for Canadian consumers, but perhaps some hidden risks for the housing market.
"Canada was kind of an anomaly compared to international mortgage markets," says Derek Holt, vice-president of Scotia Capital Economics, part of Scotiabank. "We didn't have as much mortgage product innovation. "
That changed in 2006 when the federal government liberalized the mortgage insurance market in Canada, Mr. Holt says. Until then, only Canada Mortgage and Housing Corp. (CMHC), the government-owned housing agency and one other company offered the mortgage insurance required when homebuyers put down less than 20% of the purchase price.
The changes allowed more foreign mortgage insurers to come to Canada and stimulated competition. New products emerged, including 40-year amortizations, 100% and interest-only mortgages. But the proliferation of options has some homebuyers confused. "There are so many variables in the mortgage market that you really need a road map," says Jim Rawson, a regional manager in Toronto with Invis, an independent mortgage brokerage.
So, how do some of the new products work and how risky are they for borrowers and the housing market?
With interest rates dropping, consumers might consider a front-loaded variable-rate mortgage. This option gives you a larger-than-normal discount from the prime interest rate for an initial period, say six months, before you have to decide whether to lock into a fixed rate. "This can be a terrific product for people considering playing the [interest] rate game ... if you think rates will come down again," Mr. Rawson says.
The only trick is to make sure you are, indeed, allowed to convert to a fixed rate and that when you do, you'll get the best discounted rate available, Mr. Rawson says.
Longer amortization periods, now up to 40 years, also are new. This option can suit young borrowers with high income-earning potential, people with other major short-term expenses, buyers in higher-priced urban markets and income property investors.
Mr. Holt estimates longer-term mortgages now account for three-quarters of monthly insured purchase applications in Canada, with 40-year products accounting for half of that.
The upside of this change, Mr. Holt says, is it will bring more buyers into the market. A longer period to repay also means less risk to credit markets in the short term because it eases cash flow difficulties for borrowers, he says.
But over the long haul, 40-year mortgages raise a new set of risks for housing and credit markets. "The shock risks from interest rate changes and changes in employment become accentuated if you are using higher-leveraged products," Mr. Holt says. And, of course, there is no free lunch: 40-year terms come with tougher qualifying criteria, higher interest rates and higher mortgage insurance premiums.
Then there are interest-only mortgages. These loans let borrowers pay only interest and no principal for the first five or 10 years. This option can be attractive for young buyers with high income-earning potential or borrowers expecting a large inflow of money from an inheritance, for example.
Given all these innovations, this is "no longer your grandfather's mortgage market," Mr. Holt says. But that doesn't mean Canada is headed down the same treacherous path as the U.S. market
The Canadian market is more resilient, Mr. Holt says. Subprime or low-quality mortgages make up only a small portion of Canadian mortgages, unlike the U. S. peak in 2006 of one in four.
We also have stronger underwriting standards than the U. S. market, Mr. Holt says.
But Canadians are paying a price indirectly. Some mortgage rates are higher than they should be because Canadian banks are taking writedowns related to U. S. mortgage-based securities.
Tuesday, May 20, 2008
Thursday, May 15, 2008
Financial Update
Economy showing signs that worst is already past: economists
· TSX +9.61.
· Dow +66.20
· Dollar -.15c to $ $99.57
· Oil -$1.58 to $124.22US per barrel
· Gold -$3.10US to $865.40US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
By Julian Beltrame, The Canadian Press
OTTAWA - The loonie once again worth about the same as the U.S. greenback, employment, exports and consumer spending continuing strong - what is happening to Canada's year of economic discontent?
Just as the Canadian and U.S. economies were expected to be at their gloomiest - falling into negative numbers or close to it in the second quarter - some economists are entertaining the notion that the worst may already be in the past.
"What's with the doom and gloom in Canada lately?" asked BMO deputy chief economist Doug Porter this week in a list of 10 reasons to feel good about the economy.
Among the categories - strong income growth and employment, no real credit crunch, rising equity prices, a surprising trade surplus and a healthy housing market.
"We know that bad news sells, but this is ridiculous," Porter said of the hand-wringing in face of the positives.
Even in the U.S. - which is the real threat to the Canadian economy in terms of falling exports - the news has not been as uniformly bad as most economists had been forecasting for months, and the talk that the U.S. had already dipped into recession has not been supported by the numbers.
Growth in the U.S. has been tepid at best at 0.6 per cent the past two quarters, but it has remained above the line. And while many had pointed to the second quarter as the time the American economy would cross the line, the early numbers are at best mixed.
This week saw another "surprise" when the U.S. Commerce Department reported retail sales had actually risen 0.2 per cent in April, or 0.5 per cent if auto sales are excluded.
Meanwhile financial markets, a key factor behind of the U.S. slump, are showing signs of normalizing, according to Federal Reserve chairman Ben Bernanke, although he stressed they are far from back to normal.
And the U.S. dollar continues to firm against most currencies except Canada, where the loonie is bucking the trend and slowly gaining on the greenback.
The Canadian and American dollars have been flirting with parity. On Wednesday, the loonie peaked above US$1 before falling to close at 99.57 cents U.S. on Wednesday, well up from the recent low of 97.61 cents on May 2.
That's not the best news for manufacturers, who prefer a weak dollar to make their exports cheaper in the U.S., but it will be welcome by Canadians who plan to cross the border for a summer vacation this year.
"The Canadian dollar will probably be stronger this summer than I thought it would be," said RBC currency strategist David Watt. "I think it will likely trade at around parity or just above over the next few months."
The big reason is oil trading at record highs near US$125 a barrel, but another is natural gas - which represents a bigger net Canadian export commodity than crude, and which has seen prices firm to above $10 per 1,000 cubic feet from about $7 at the end of 2007.
Global Insight economist Dale Orr cautions that while some signs have been encouraging, it is too early to break open the champagne.
It is now likely that the U.S. will avoid a classic recession defined as two quarters of contraction, although growth this quarter may dip into the negative side. But nobody should confuse that with a healthy economy, he added.
"Sure the U.S. economy is going to be picking up sharply from here to the end of the year, but that's probably going to be overwhelmingly because of the U.S. government fiscal rebates (about $600 per individual) that's worth about one per cent of gross domestic product," he explained.
"Now the real issue is, when we get to the first quarter of next year, are we going to be faced with weak fundamentals that take us back to almost zero growth or will all the monetary easing kick in to keep them afloat."
Another indicator of how the economies in Canada and the U.S. are faring comes Thursday when both countries report on the latest manufacturing activity, which is expected to show some growth in Canada.
A quicker than expected turnaround in U.S. growth and consumer spending would help Canadian exports to the country - the only real weakness in the Canadian economy, said Bank of Montreal economist Michael Gregory.
Yet he is not convinced the relatively good news means the U.S. or Canada are out of the woods.
"I don't know many people that can tell the difference between minus 0.5 per cent and plus 0.5 per cent growth, either way it feels bad," he pointed out.
But his colleague, Douglas Porter, would rather look at the glass as half full. He points out that economists have been too quick to accentuate the negative and even interpret good news - like last week's $5.5 billion trade surplus, the largest since last May - into bad by emphasizing that volumes of exports declined. "The glass is more than half-full in Canada and the global economy is in a lull in the middle of one of the greatest booms on record," he noted. So Canadians should stop "obsessing" about what he called a "temporary bout of cyclical weakness."
· TSX +9.61.
· Dow +66.20
· Dollar -.15c to $ $99.57
· Oil -$1.58 to $124.22US per barrel
· Gold -$3.10US to $865.40US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
By Julian Beltrame, The Canadian Press
OTTAWA - The loonie once again worth about the same as the U.S. greenback, employment, exports and consumer spending continuing strong - what is happening to Canada's year of economic discontent?
Just as the Canadian and U.S. economies were expected to be at their gloomiest - falling into negative numbers or close to it in the second quarter - some economists are entertaining the notion that the worst may already be in the past.
"What's with the doom and gloom in Canada lately?" asked BMO deputy chief economist Doug Porter this week in a list of 10 reasons to feel good about the economy.
Among the categories - strong income growth and employment, no real credit crunch, rising equity prices, a surprising trade surplus and a healthy housing market.
"We know that bad news sells, but this is ridiculous," Porter said of the hand-wringing in face of the positives.
Even in the U.S. - which is the real threat to the Canadian economy in terms of falling exports - the news has not been as uniformly bad as most economists had been forecasting for months, and the talk that the U.S. had already dipped into recession has not been supported by the numbers.
Growth in the U.S. has been tepid at best at 0.6 per cent the past two quarters, but it has remained above the line. And while many had pointed to the second quarter as the time the American economy would cross the line, the early numbers are at best mixed.
This week saw another "surprise" when the U.S. Commerce Department reported retail sales had actually risen 0.2 per cent in April, or 0.5 per cent if auto sales are excluded.
Meanwhile financial markets, a key factor behind of the U.S. slump, are showing signs of normalizing, according to Federal Reserve chairman Ben Bernanke, although he stressed they are far from back to normal.
And the U.S. dollar continues to firm against most currencies except Canada, where the loonie is bucking the trend and slowly gaining on the greenback.
The Canadian and American dollars have been flirting with parity. On Wednesday, the loonie peaked above US$1 before falling to close at 99.57 cents U.S. on Wednesday, well up from the recent low of 97.61 cents on May 2.
That's not the best news for manufacturers, who prefer a weak dollar to make their exports cheaper in the U.S., but it will be welcome by Canadians who plan to cross the border for a summer vacation this year.
"The Canadian dollar will probably be stronger this summer than I thought it would be," said RBC currency strategist David Watt. "I think it will likely trade at around parity or just above over the next few months."
The big reason is oil trading at record highs near US$125 a barrel, but another is natural gas - which represents a bigger net Canadian export commodity than crude, and which has seen prices firm to above $10 per 1,000 cubic feet from about $7 at the end of 2007.
Global Insight economist Dale Orr cautions that while some signs have been encouraging, it is too early to break open the champagne.
It is now likely that the U.S. will avoid a classic recession defined as two quarters of contraction, although growth this quarter may dip into the negative side. But nobody should confuse that with a healthy economy, he added.
"Sure the U.S. economy is going to be picking up sharply from here to the end of the year, but that's probably going to be overwhelmingly because of the U.S. government fiscal rebates (about $600 per individual) that's worth about one per cent of gross domestic product," he explained.
"Now the real issue is, when we get to the first quarter of next year, are we going to be faced with weak fundamentals that take us back to almost zero growth or will all the monetary easing kick in to keep them afloat."
Another indicator of how the economies in Canada and the U.S. are faring comes Thursday when both countries report on the latest manufacturing activity, which is expected to show some growth in Canada.
A quicker than expected turnaround in U.S. growth and consumer spending would help Canadian exports to the country - the only real weakness in the Canadian economy, said Bank of Montreal economist Michael Gregory.
Yet he is not convinced the relatively good news means the U.S. or Canada are out of the woods.
"I don't know many people that can tell the difference between minus 0.5 per cent and plus 0.5 per cent growth, either way it feels bad," he pointed out.
But his colleague, Douglas Porter, would rather look at the glass as half full. He points out that economists have been too quick to accentuate the negative and even interpret good news - like last week's $5.5 billion trade surplus, the largest since last May - into bad by emphasizing that volumes of exports declined. "The glass is more than half-full in Canada and the global economy is in a lull in the middle of one of the greatest booms on record," he noted. So Canadians should stop "obsessing" about what he called a "temporary bout of cyclical weakness."
Tuesday, May 13, 2008
Financial Update
Economy resilient, Flaherty declares
The Canadian Press Finance Minister Jim Flaherty says the Canadian economy is facing a variety of economic challenges, but has so far remained resilient. "Certainly there has been a psychological effect of the recession in the U.S. housing sector, but keep in mind Canadian projections are on the positive side of the ledger,'' he told the Economic Club of Toronto yesterday. Flaherty acknowledged that Canadians face rising costs, including food prices and higher airline fees tied to fuel. But, Canada hasn't seen the same type of inflationary impact that other countries have experienced
· TSX jumped +144.88 to a new record high
· Dow +130.43
· Dollar continued upwards +.12c to $ $99.56
· Oil -$1.73 to $124.23US per barrel
· Gold -$.80US to $883.70US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
TSX soars to new record thanks to RIM, EnCana
David Friend The Canadian Press
Two of Canada's most valuable companies have helped lift the Toronto stock market above its previous record high, set 10 months ago just before the credit crunch took the life out of many investments.
But some economists suggest the gains could wash away in the foreseeable future.
Both Research In Motion, the maker of the famed BlackBerry portable device, and oil and gas giant EnCana Corp. drove the market skyward yesterday. The two stocks were heavily traded, with RIM shares up eight per cent and EnCana ahead six per cent. Both stock jumps were motivated by corporate announcements, with EnCana saying it will divide itself into two companies, one focused on the oilsands and another concentrating on natural gas.
RIM investors gave its stock a boost after the company unveiled the new BlackBerry Bold smartphone, which has a wider array of functions aimed at the business market.
The two companies' combined weight pushed the TSX at the end of the day to 14,666.07, above a high of 14,625.76 set last July.
It was the third attempt the Toronto stock market has made at returning to the heights it left when the U.S. subprime mortgage mess surfaced. Last Thursday, the TSX just missed the benchmark despite a record-high closing price for crude oil.
The increase will likely evaporate somewhat if the two companies can't sustain their charge as the week progresses, said Fred Ketchen, a manager of equity trading at Scotia Capital. "We're going to give back some of these gains somewhere along the way,'' Ketchen said. "But if I keep looking out, I don't see the demand for energy backing off any time soon.''
Much of the momentum has been caused by strength in resource stocks, which represent about one-third of the market capitalization of the TSX. The energy sector has climbed 40 per cent since January while the price for crude oil rose above $125 US.
The Canadian Press Finance Minister Jim Flaherty says the Canadian economy is facing a variety of economic challenges, but has so far remained resilient. "Certainly there has been a psychological effect of the recession in the U.S. housing sector, but keep in mind Canadian projections are on the positive side of the ledger,'' he told the Economic Club of Toronto yesterday. Flaherty acknowledged that Canadians face rising costs, including food prices and higher airline fees tied to fuel. But, Canada hasn't seen the same type of inflationary impact that other countries have experienced
· TSX jumped +144.88 to a new record high
· Dow +130.43
· Dollar continued upwards +.12c to $ $99.56
· Oil -$1.73 to $124.23US per barrel
· Gold -$.80US to $883.70US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
TSX soars to new record thanks to RIM, EnCana
David Friend The Canadian Press
Two of Canada's most valuable companies have helped lift the Toronto stock market above its previous record high, set 10 months ago just before the credit crunch took the life out of many investments.
But some economists suggest the gains could wash away in the foreseeable future.
Both Research In Motion, the maker of the famed BlackBerry portable device, and oil and gas giant EnCana Corp. drove the market skyward yesterday. The two stocks were heavily traded, with RIM shares up eight per cent and EnCana ahead six per cent. Both stock jumps were motivated by corporate announcements, with EnCana saying it will divide itself into two companies, one focused on the oilsands and another concentrating on natural gas.
RIM investors gave its stock a boost after the company unveiled the new BlackBerry Bold smartphone, which has a wider array of functions aimed at the business market.
The two companies' combined weight pushed the TSX at the end of the day to 14,666.07, above a high of 14,625.76 set last July.
It was the third attempt the Toronto stock market has made at returning to the heights it left when the U.S. subprime mortgage mess surfaced. Last Thursday, the TSX just missed the benchmark despite a record-high closing price for crude oil.
The increase will likely evaporate somewhat if the two companies can't sustain their charge as the week progresses, said Fred Ketchen, a manager of equity trading at Scotia Capital. "We're going to give back some of these gains somewhere along the way,'' Ketchen said. "But if I keep looking out, I don't see the demand for energy backing off any time soon.''
Much of the momentum has been caused by strength in resource stocks, which represent about one-third of the market capitalization of the TSX. The energy sector has climbed 40 per cent since January while the price for crude oil rose above $125 US.
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