August 2009

[Ally]

Loonie Drubbed on rising Greenback

The Canadian dollar tumbled more than US1¢ yesterday, its biggest loss against the greenback in seven weeks and its fourth straight loss since Jim Flaherty, the Minister of Finance, said steps could be taken to dampen the currency`s rapid rise.

But while the market has turned cautious on the Canadian dollar following the comments, the decline is largely a result of lower oil prices, combined with a rise in demand for U. S. dollars because of more bullish sentiment about recovery prospects.

Marc Chandler, a senior currency strategist at Brown Brothers Harriman, said the top three performing currencies in July -- the Canadian dollar, Swedish krona and Norwegian krona -- were now the worst performers in August as traders readjusted their positions.

"We recommended long Canadian dollar positions in July, but turned cautious early last week just before Finance Minister Flaherty repeated concern about the loonie`s strength," he said.

The Canadian dollar fell US1.06¢ to US90.79¢ yesterday. It has lost 3% against the U. S. dollar since hitting a high of US93.82¢ at the start of the month and has depreciated for the past four sessions.

Read the full article here.

 

[Ally]

Apartment Sector sinks Starts

Housing starts in Canada declined unexpectedly in July, falling to an annualized rate of 132,100 in July from 137,800 in June, Canada Mortgage and Housing Corp said yesterday.

Economists had been calling for a seasonally adjusted rate of 145,000 new home starts.

The housing agency blamed the volatile multiple starts segment for the decline.

"This was a fairly disappointing report, and it suggests that the buoyancy that has been seen in the past two months in this segment of the housing market hasn`t gained much traction, clouding an otherwise positive tone in Canadian housing market activity," said Millan Mulraine, TD Securities economic strategist.

"Even so, our bias remains for increased housing market activity in the near terms as the combination of low mortgage rates, relatively attractive home prices and the various tax incentives continue to spur Canadian housing market activity."

Read the full article here.

 

[Ally]

Canadian Exports on the rise

OTTAWA–Statistics Canada says the country`s international trade deficit narrowed to $55 million in June from $1.1 billion in May as exports rose and imports fell.

The agency says exports rose 2.3 per cent to just under $29.3 billion after three consecutive monthly declines, while imports fell 1.3 per cent to just over $29.3 billion.

The export increase was due to a substantial rise in shipments of energy products.

June marked the fourth consecutive decline in imports.

Read the full article here.

 

[Ally]

Canda Scores B+ on Economic Report Card

OTTAWA — Canada has been doing its homework but is still just shy of honour-student status, according to an economic report card released Thursday, which shows the country moving from a low "B" grade in 2008 to a high "B" in 2010.

The ratings forecast from the Conference Board of Canada has Canada`s economy in fifth place out of 17 comparable Western countries next year, up from 11th place in 2008.

According to the report card, Norway will be top of the class in 2010, as it was in 2008. Other "A" grades went to Australia, the United States and Belgium.

"The differences (in rankings between 2008 and 2010) largely reflect the policy stimuli adopted by each country and how much repair is needed to each country`s financial sector and fiscal balance sheets," the board says.

Canada is moving up because it is better placed to weather the recession than most countries.

Read the full article here.

 

[Ally]

Canada`s Trade Deficit Narrows to $55M in June

Canada`s trade deficit with the rest of the world narrowed to $55 million in June from $1.1 billion the previous month, Statistics Canada reported Wednesday.

Merchandise exports increased 2.3 per cent to just under $29.3 billion following three monthly declines, while imports fell 1.3 per cent to just over 29.3 billion.

The increase was due to exports of energy products, which rose 14 per cent to $6.4 billion. Exports of crude oil rose 22.3 per cent, reflecting increased demand from the United States.

If energy products were excluded, total exports would have declined 0.5 per cent, Statistics Canada said.

Exports to the U.S. climbed 5.1 per cent, widening Canada`s surplus with its largest trading partner to $3.1 billion from $1.7 billion in May.

Higher exports of gold were behind the growth in the industrial goods and materials sector, which increased by 6.1 per cent to $6.3 billion.

Read the full article here.

 

[Ally]

Canada Posts Record July for Real Estate Sales

VANCOUVER — Record July sales in Metro Vancouver and Victoria helped lift British Columbia`s real estate market into balanced conditions between buyers and sellers across the province, the B.C. Real Estate Association reported Friday, compared with last summer`s slide into buyer`s territory.

Across the country, meanwhile, markets experienced record sales in July posting their biggest year-over-year increase in two years.

With lower prices and near record-low mortgage rates, buyers across the province rushed to buy up 10,051 homes through the Multiple Listing Service in July, the association said, lifting the month`s results 53 per cent over the same month a year ago.

"Record home sales in Metro Vancouver and Victoria propelled the province into balanced conditions last month," association chief economist Cameron Muir said in a news release.

Conditions are not equal everywhere, Muir cautioned. He said interior markets have been hampered by their reliance on struggling resource industries, and interior markets have been interrupted by forest fires.

Read the full article here.

 

[Ally]

Freedom Investment Club Provides no joy for its Shareholders

More bad news for Vancouver-based Freedom Investment Club.

The club has been wildly popular. To date, more than 5,500 people have invested $110 million in the club`s various funds, making it North America`s largest investment club.

But under founder, chairman and CEO Michael Lathigee, the club has pursued a risky investment strategy that is coming back to haunt investors.

The club`s flagship fund, FIC Canada, started selling shares for $1 each in 2002. By early 2008, the net asset value had risen to $2.70 per share.

The share price has since plunged to 22 cents, due mainly to the sagging value of its Alberta real estate holdings, where 80 per cent of the club`s money is invested.

Read the full article here.

 

[Ally]

Foreigners buy more Canadian Securities in June

OTTAWA — Canadian stocks and federal bonds continued to look attractive to foreign investors in June, Statistics Canada reported Tuesday.

Non-resident investors snapped up $10.5-billion of Canadian securities — including $5.5-billion in Canadian bonds, "ending the second quarter of 2009 with an all-time high foreign investment," the federal agency reported.

They also sold off $2.4-billion worth of provincial government bonds but spent $2.7-billion on Canadian money market instruments.

Foreign investors also bought $2.3-billion worth of equities, Statistics Canada said, spreading the wealth across most sectors, with the exception of information technology.

Read the full article here.

 

[Ally]

Canadian Stimulus Money will Kick-Start Construction: Flaherty

OTTAWA — Back from his nearly weeklong trip in China, Finance Minister Jim Flaherty said he was astounded by the number of tower cranes in Beijing and Shanghai, signs of China`s $586-billion U.S. stimulus package at work.

While not on the same scale, Flaherty said Monday that Canadians should expect to see more backhoes, trucks and hard hats in their travels as funds from Ottawa`s $46.6-billion Cdn stimulus program finally begin to manifest in the cross-country economy.

"It takes time to get money out the door and working. But there is going to be more and more visibility of construction projects across Canada as we repair bridges, roads, universities, schools and so on," Flaherty said in a broadcast interview.

He added the stimulus scheme, passed in the last budget and amended slightly in June, remains "the right plan" and his government, which returns to the House of Commons next month, intends to implement it.

Read the full article here.

 

[Ally]

Is it better to Rent than Own?

Denis Hancock`s family is your typical Canadian clan. The program manager and his wife Sophie live in a spacious three-bedroom house in Toronto`s trendy High Park neighbourhood with their 15-month-old daughter. He works, she stays at home, preferring afternoons playing with her child in their backyard than slaving away at an office. There`s only one difference between Hancock`s brood and his neighbours: they rent their 1600 sq/ft house.

Hancock`s decision to rent, rather than own, their house wasn`t taken lightly. He and his wife talked about buying, but with Toronto`s high home prices — the average price tag is $322,059 for a standard house — and a desire to live in the city rather than the suburbs, they turned to renting.

"Renting is great, especially the flexibility," says the 32-year-old Hancock. "Like a lot of relatively young people, we haven`t fully made all the decisions of exactly where we want to live, so until you really hammer out decisions, this option works."

The debate over renting versus owning has been raging for decades, with home ownership mostly winning out. But as the economy suffers, and with residential home sales largely declining since Q1 2008 (sales did reach pre-recession levels in May, according to the Canadian Real Estate Association [CREA]), renting is still a viable alternative to the expensive housing market.

Read the full article here.

 

[Ally]

Canada`s Inflation rate drops to 56-Year-Low

OTTAWA -- Canada`s overall inflation rate fell by 0.9% in July, according to Statistics Canada data released Wednesday.

The decrease in the consumer price index, which the agency attributed to a 23.4% decline in energy prices during the last year, follows a 0.3% contraction in June.

However, when traditionally volatile sectors such as fuel prices are discounted, inflation rose 1.8% during the month.

The core inflation rate is now at 1.8%, well below the Bank of Canada`s target of 2%, and down from the 1.9% rate posted in June.

"This is the lowest inflation rate since 1953," writes Sal Guatieri, senior economist with BMO Capital Markets, in a note. "However, the year-ago comparisons will become tougher going forward (recall $1.35/litre gasoline last summer), so July could well mark the nadir in this cycle, and inflation should turn positive later this year."

Read the full article here.

 

[Ally]

Canada`s Leading Indicators rise for the first time since Crisis

OTTAWA - Canada`s composite leading index advanced last month, the first increase since global markets started to crash in August 2008, Statistics Canada reported Wednesday.

The July increase of 0.4% follows declines of 0.1% in May and June that were later revised to indicate no change.

Six of the 10 components thought to lead general economic trends advanced in July, the federal agency said, the best showing since May 2008.

The stock market posted the biggest gain, at 5.7%, with housing in second place at 4.5%. Durable goods sales rose 2.1%, though furniture and appliance sales were down by 0.4%.

Two of the three manufacturing measures were down, with new orders for durable goods showing the largest drop for the month, at 5.9%. Shipments of products were also down, affected by declining forestry and auto exports, but hours worked by employees posted a positive number, up 0.3% from June.

Read the full article here.

 

[Ally]

Buffett says U.S. Federal Debt poses fresh threat to Economy

The U.S. must address the massive amounts of "monetary medicine" that have been pumped into the financial system and now pose threats to the world`s largest economy and its currency, billionaire Warren Buffett said.

The "gusher of federal money" has rescued the financial system and the U.S. economy is now on a slow path to recovery, Mr. Buffett wrote in a New York Times commentary Tuesday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Mr. Buffett says the U.S. is fiscally in "uncharted territory."

The government is trying to spark business and consumer spending through a US$787-billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record US$1.841-trillion in the year that ends Sept. 30.

"Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects," Mr. Buffett, 78, said. "For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."

Read the full article here.

 

[Ally]

U.S. Plan Boosts Canada

The U. S. government`s cash-for-clunkers scheme was devised in part to buck up the top lines of Detroit`s fragile automakers and fuel the U. S. manufacturing sector.

But it`s turning into an equally big windfall for their Japanese-based competitors -- and boosting orders at auto factories outside the United States. Canada is feeling the positive effects, even if it has only a modest scrappage program of its own.

Toyota Motor Corp.` s Corolla compact, made at its assembly factory in Cambridge, Ont., and Honda Motor Co.` s Civic, built in Alliston, just north of Toronto, are the two most popular cars under the U. S. Car Allowance Rebate System. Overall, only about half of the new vehicles purchased under the program were manufactured in the United States, according to the latest data from the U. S. Highway Traffic Safety Administration.

Read the full article here.

 

[Ally]

Recovery to be long, difficult, IMF says

There is, indeed, a recovery underway, but it will be long and difficult, and require a massive rebalancing in the global economic landscape -- otherwise, growth is likely be "anemic" for years to come, warns the chief economist for the International Monetary Fund.

"The world is not in a run-of-the-mill recession," said Olivier Blanchard in an article to be published today. "The turnaround will not be simple. The crisis has left deep scars which will affect both supply and demand for many years to come."

Whether intentional or not, Mr. Blanchard`s analysis throws cold water on those who say the economy is about to rebound quickly from one of the deepest recessions since the Second World War. Investors have banked on a solid recovery as North American markets have gained as much as 50% from lows set last March.

While the Bank of Canada said last month it believes economic growth is set to return in the current quarter, both Stephen Harper, the Prime Minister, and Jim Flaherty, the Finance Minister, have been wary of declaring the recession over, warning any recovery is "fragile."

Read the full article here.

 

[Ally]

We`re Unlikely to Repeat 1991`s `Jobless Recovery`

Canada`s unemployed are finding work at almost the same pace they did before the recession began, suggesting that when the economy turns around, it won`t bring with it a 1991-style "jobless recovery," says a report released yesterday by CIBC World Markets.

While the number of unemployed Canadians has soared to 1,583,000 and the unemployment rate to 8.6%, people are finding new jobs within an average of 15 weeks, only one week longer than it took before the economic slide began, said senior economist Benjamin Tal.

"Rising unemployment in a context of a relatively short duration of unemployment is a reflection of a dynamic labour market where becoming unemployed does not mean remaining unemployed," Mr. Tal said.

Furthermore, he said, the data suggest that the current wave of personal bankruptcies, which climbed more than 54% to almost 11,000 claims in the month of June, will be relatively short-lived.

The report explains that while the bottom line is the unemployment rate, the bigger implications for the economy lie in how much time people spend out of work. The longer people remain unemployed, and the larger the number of people doing so, the worse the impact on the economy at large, as consumer confidence falls and underlying fundamentals wilt.

Read the full article here.

 

[Ally]

Inflation at 56-Year Low, but No One Noticed

Canada`s inflation rate hit a 56-year low yesterday and will likely slip further in the coming months as the index continues to react to last year`s record surge in oil prices. But while overall prices appeared somewhat deflationary in July, consumers would be forgiven for not noticing because core inflation, which excludes energy, remains higher than a year ago.

"Many Canadians are unlikely to feel their cost of living declined," said Sebastien Lavoie, an economist at Laurentian Bank Securities.

Mr. Lavoie said prices of frequently purchased goods, such as food and parking, remained higher, while those of big-ticket durable goods, including cars and furniture, had fallen.

"The problem is that unless you buy these durable goods -- less likely amid the labour-market woes and increasing financial tensions -- you don`t benefit from these lower prices," he said.

Read the full article here.

 

[Ally]

Canada Wholesale Trades Value beats Forecast

OTTAWA -- Canada`s wholesale trade values rose in June for the first time in nine months, Statistics Canada said Thursday.

Sales values roles 0.6% to $40.4-billion, beating expectations of a 0.2% month-over-month increase.

Trade volumes rose for the third consecutive month, rising by 1% in June.

Automotive sales were the biggest contributor to June`s increase in trade with a 3.3% month-over-month increase to $5.8-billion, though those numbers remained 24.6% off the year-ago figures.

Ontario reaped the greatest benefit from the revived automotive sector with its sales rising 1.7% to $19.9-billion, the fourth monthly increase for the province.

Read the full article here.

 

[Ally]

Wholesale Sales rise in June

OTTAWA – Wholesale sales rose for the first time in nine months in June, mainly due to increases in the automotive products and food, beverages and tobacco products sectors.

Statistics Canada reports sales in current dollars rose 0.6 per cent to $40.4 billion.

In volume terms, the agency says wholesale sales increased one per cent in June; their third consecutive monthly increase.

In current dollars, three of the seven sectors, accounting for just over half of total wholesale sales, advanced.

While remaining well below their peak in July 2008, automotive products sales rose 3.3 per cent to $5.8 billion in June, their fifth straight increase since a sharp drop in January.

Read the full article here.

 

[Ally]

Flipping Properties can be Taxing

You won a bidding war for a home last night and paid $400,000. You receive a call the next morning from one of the losing bidders, stating that they will pay you $425,000 for the same property. Your deal is not supposed to close for two months. Can the first buyer do this and make $25,000?

This introduces the difficult subject of flipping properties, or completing an assignment of the agreement of purchase and sale. There are many questions to consider in the above example.

Can the first buyer sell their interest in the property before they actually own it?

Does the buyer need the permission of the seller?

Does land transfer tax have to be paid twice?

What happens if the second buyer does not close the deal?

If this is a house or condominium resale agreement, then the first buyer has the absolute right to sell their agreement before they take title to the property. The reason is that the standard Ontario Agreement of Purchase and Sale form does not prevent the buyer from doing this.

Read the full article here.