January 2010

[Ally]

Bank of Canada leaves key interest rate unchanged, no hurry to raise rates

OTTAWA -- Even though global growth is "somewhat" exceeding expectations, the Bank of Canada indicated Tuesday it is in no hurry to begin raising its benchmark rate as the recovery continues to depend on "exceptional" fiscal and monetary stimulus.

As widely anticipated, the central bank left its benchmark rate unchanged at 0.25%, and reiterated its conditional pledge to keep it at that historically low level until the end of the second quarter in an effort to reach its 2% inflation target.

Most bank watchers were looking to this statement for any changes to the central bank`s forecast and hints it might begin backing away from its conditional rate pledge. Overall, analysts say the statement tried to reinforce caution about the recovery unfolding.

"The renewed and determined commitment to keep rates steady until mid-year can be seen as slightly dovish," said Douglas Porter, deputy chief economist at BMO Capital Markets.

The main stock index in Toronto was down slightly on the central bank statement, while the Canadian dollar had slipped roughly 40 basis points, to just above US97¢, after hitting a three-month high.

Read the full article here.

 

[Ally]

Key index posts largest gain in 27 years

OTTAWA - A key measure of Canada`s economic performance posted its biggest monthly gain in 27 years in December, driven by strong household spending and rising stocks, Statistics Canada said yesterday.

For the seventh-straight month the federal agency`s composite leading index rose, growing by 1.5% during December "and matching February 1983 for the largest monthly advance since September 1958," the federal agency said. The index was up 1.3% in November.

"For a second-straight month, growth was widespread as none of the 10 components fell," the agency said. "The largest gains continued to originate in household spending and the stock market."

Many economists had expected a 1% gain in the index during December.

"This was an undoubtedly strong report, and it suggests that the Canadian economic recovery picked up considerable speed in the last quarter of the year following the modest pace of GDP growth in Q3," said Millan Mulraine, economics strategist at TD Securities.

Statistics Canada said its housing sub-index rose 3% in December -- the eighth-straight monthly increase.

Read the full article here.

 

[Ally]

Nine ways to avoid being Madoffed

Run down a conventional checklist of things to do when picking a financial advisor: Find someone who listens, who has a plaque on the wall attesting to having passed various tests and satisfied regulatory standards, who is recommended by colleagues and who seems fluent in his trade.

Then think about Bernard Madoff, Earl Jones and Norbourg Group -- to name a few of the more recent financial scandals that have rocked Bay and Wall streets. Each of the above probably would have satisfied that checklist.

The crooks are a minority of the people who provide financial services, but they are also examples of high-profile financial advisors and market makers who used their credibility and, in case of Madoff, his eminence as former head of the Nasdaq exchange and operator of a glamourous hedge fund, to wring money out of trusting clients.

The scandals were unearthed when many people called up to ask for their money to be cashed in. That`s the mark of a Ponzi scheme, in which new investors` funds are used to pay older investors` returns.

So, what can one do to avoid being damaged, even ruined, by a dishonest financial advisor? It all begins with filtering out those who don`t measure up to the most basic standards of honesty.

Read the full article here.

 

[Ally]

Mortgage shopppers opt for caution

The housing industry fired back yesterday at comments from Ottawa that the sector might be overheated with a new report that shows Canadians have become conservative in their mortgage choices, leaving little chance for delinquencies.

The Canadian Association of Accredited Mortgage Professionals surveyed its members, who issued more than 40,000 mortgages totalling $10-billion during 2009, and found 86% of loans went into fixed-rate mortgages. Of those, more than 70% had fixed rates for longer than five years.

Jim Murphy, chief executive of the Toronto-based group, said the report`s results show the risk in the marketplace "is clearly manageable." He left little doubt about one of the reasons his group compiled the research.

"It was done in response to some of the musings at yearend by first the Finance Minister and then governor of the Bank of Canada," Mr. Murphy said.

Mark Carney, the Bank of Canada governor, has warned about rising levels of household debt, which is reaching record levels. He has said consumers may be failing to account for higher interest rates in the foreseeable future, leaving households "increasingly vulnerable" to any economic shocks.

Read the full article here.

 

[Ally]

Commercial Real Estate still hurting

Canada`s commercial real-estate market faces another tough year, but is at least poised for more rapid recovery than the battered U.S. market once the economic cycle begins its next upswing, says real-estate services company Avison Young. In 2009, "the dislocation in real estate lending and investing was so severe in March and April that the market appeared to be on the verge of collapse," said Mark Rose, Avison Young chief executive.

Read the full article here.

 

[Ally]

A middling recovery

Top economists from Canada`s five biggest banks came together yesterday at the Economic Club of Canada`s annual outlook breakfast, in front of a crowd of 1,200 at the Sheraton Centre in downtown Toronto. In true consensus, the group views 2010 with guarded optimism, predicting a more subdued economic climate in Canada and south of border than is normal in the wake of economic recession. With so much uncertainty on big issues such as interest rates, sovereign debt, employment and inflation clouding the picture, all five economists predict only a mild recovery in North American GDP growth over the next 12 months. But thankfully, the threat of a double-dip recovery remains unlikely. Here`s what they had to say:

SHERRY COOPER

chief economist, BMO Capital Markets

2010 GDP PREDICTIONS

2.6%

Canada

2.6%

United States

ON THE U.S. ECONOMY:

"I believe the recovery in economic activity has taken root but the recovery in the United States will be subpar and for many people it will be suspect because the unemployment levels in the U.S. remain extremely high and the average duration of unemployment remains at a record high."

Read the full article here.

 

[Ally]

Record House sales revive Bubble fears

The heated debate about whether the Canadian housing market is in the midst of a bubble is likely to continue into this year, thanks to December sales that set a new record for the month.

Existing homes recorded their best December ever as the recovery in the Canadian housing market saw sales climb 7.7% last year from 2008, according to the Ottawa-based Canadian Real Estate Association. Despite the impressive rebound, the 2009 market saw a decline of 10.7% from the record-breaking pace set in 2007.

The stakes are high as the Canadian housing industry battles the government, which has not ruled out tougher requirements for homebuyers to cool the market. Two scenarios rumoured to be under consideration include increasing the minimum downpayment to 10% from 5% and shortening the length of amortizations to 25 years from 35 years -- moves that would drive many consumers out of the market.

This past week the mortgage brokerage industry produced a report showing much of the Canadian market has opted for locking its rates into longer terms, thereby providing a shield against rising interest rates that most predict will come by the middle of this year.

"We think that dismissing housing risks is being a tad Pollyannaish, but it`s all the rage in Ottawa circles these days," said Derek Holt, an economist with the Bank of Nova Scotia. "The industry is full of talk of an unsustainable non-bubble, whatever that is, and driving a message that borrowers are all acting out of utter forward-looking brilliance.

Read the full article here.

 

[Ally]

Carney watches for signs of Ecomic healing

OTTAWA -- Bank of Canada Governor Mark Carney is entering a crucial phase for clinching the recovery.

Having helped steer Canada`s economy out of recession, Mr. Carney and policy makers across the globe are carefully watching for signs that their economies are healing and trying to determine the right moment, and the right pace, at which to start withdrawing the unprecedented stimulus that helped counter the effects of the financial crisis.

While few believe there`s much chance Mr. Carney will abandon his "conditional" commitment to keep borrowing costs at a record-low 0.25 per cent through the middle of the year or longer, every piece of economic data over the next few months will be parsed for indications of how quickly rates might rise in the second half of the year and beyond.

Timing is particularly important because no central banker wants a repeat of 1937, when the U.S. Federal Reserve tightened prematurely, snuffing out a tentative recovery and thus prolonging and worsening the Great Depression.

No economist believes the central bank chief is going to adjust borrowing costs tomorrow, and few contend he should be rushing to so much as tweak the wording of the pledge to leave rates where they are unless the inflation outlook changes.

But six months before a July decision which could mark the first rate hike since the crisis, a quarterly economic and inflation forecast this Thursday may offer clues about whether Mr. Carney thinks the recent rebound is here to stay, and how quickly the economy might return to something resembling pre-recession form.

Read the full article here.

 

[Ally]

Rate speculation eases

OTTAWA - Retailers chopped prices for clothing, furniture and appliances at a record pace in December in a battle to lure cautious consumers in the key Christmas period, data showed yesterday -- reinforcing the view that inflation poses no threat and the Bank of Canada could hold off longer than expected on rate hikes.

That helped send the Canadian dollar into a tailspin, as it posted its sharpest decline in three months. Also weighing down on the currency was news that Chinese authorities had instructed certain of its banks to curb lending because they failed to meet capital requirements. Traders sold the loonie on worries that the red-hot Chinese economy could slow, and hence dampen expansion in commodity-rich Canada.

But the shocker for markets was Canadian consumer price data for December, which showed inflation was much softer than analysts` expected. The Bank of Canada sets its key policy rate to achieve inflation of 2%.

Headline inflation dropped 0.3% month over month, while the year-over-year rate stands at 1.3% -- a big swing from negative readings in September but below the expected 1.6% rate. Meanwhile, core inflation, which removes volatile-priced items such as energy, also fell 0.3% in the month, leaving the year-over-year rate unchanged from November at 1.5%.

Read the full article here.

 

[Ally]

Russia`s Central bank starts buying Loonie, stocks

Russia`s central bank has started buying Canadian dollars and securities, First Deputy Chairman Alexei Ulyukayev said.

"The Canadian financial market isn`t very big," Mr. Ulyukayev told reporters in the central Russian city of Tula Wednesday. The bank can invest a "significant amount" in the Canadian currency, "but the securities market is limited." He didn`t specify how much the bank had invested.

Russia aims to diversify its reserves, the world`s third-largest stockpile, and promote regional currencies in trade and finance to reduce risks posed by the dominance of the U.S. dollar. The central bank said in November that it planned to add Canada`s dollar to its reserves and might consider including other currencies later.

Bank Rossii is "discussing" the possibility of buying Australian dollars, chairman Sergei Ignatiev said last month.

Read the full article here.

 

[Ally]

High Dollar to slow recovery, Central Bank says

OTTAWA—The higher-valued Canadian dollar and the possibility the global recession will linger longer than expected are raising questions about the strength of Canada`s recovery, the Bank of Canada said today.

In its quarterly economic outlook, the central bank said the global economic recovery has begun and Canada is no longer technically in a recession, which is defined as six months of consecutive negative economic output.

But Bank governor Mark Carney is cautious about the strength of the economic rebound in this country.

"There is a risk that persistent strength of the Canadian dollar could act as a significant further drag on growth," the Bank said in its quarterly Monetary Policy Report, released this morning.

"Another important downside risk is that the global recovery could be even more protracted than projected," the Bank adds.

The Canadian dollar, which has been trading in the 95-cent (U.S.) range on exchange markets, has climbed steadily over the past two years. A higher dollar makes Canadian exports to the U.S. market less competitive and slows economic growth, particularly in the country`s manufacturing heartland of Ontario.

Read the full article here.

 

[Ally]

Carney warns on growth

OTTAWA -- Mark Carney, the governor of the Bank of Canada, warned yesterday the country has to boost its troubling productivity record or face years of sputtering economic growth that would be hard-pressed to surpass the 2% mark.

For now, the central bank reiterated an economic recovery is under way, boosted by improved global prospects and government stimulus, with growth to peak in the second quarter of this year, at a 4.3% annualized pace, according to its latest forecast introduced yesterday. Business investment and the pace of export growth are set to ramp up through 2010, while the red-hot activity in Canadian real estate will peter out once pent-up demand subsides and affordability declines, it indicated.

But growth slowly and surely tapers off each and every quarter, hitting 2.2% expansion in the final three months of 2011, when the economy is scheduled to have reached potential.

After that, however, output is to remain limited unless productivity improves, Mr. Carney suggested.

"We have a productivity performance that has been relatively disappointing in recent years, and until we see an uptick in productivity, at least at this stage, looking for real growth much north of 2% is not yet a realistic prospect," the governor said.

Read the full article here.

 

[Ally]

BoC says Canada to gain from U.S. growth spurt

OTTAWA -- The Bank of Canada has significantly upgraded its growth forecast for the United States in its latest economic forecast released Thursday, arguing the U.S. export sector is set to "grow substantially" as it capitalizes on a weaker dollar, and a productive and price-competitive labour force.

Mark Carney, the Bank of Canada governor, said the emergence of a U.S. exporting powerhouse likely spells tougher times ahead for Canadian producers that are already coping with a strong dollar. Among the things Canadian companies will have to do is improve productivity, which he noted has been "relatively disappointing" in recent years.

"The competitive environment for exporters has intensified without question," he told reporters at a media conference in Ottawa. "It is more competitive and it is not just U.S. competition," citing the gains made by emerging economies.

Nevertheless, the central bank has pencilled-in rising Canadian exports and business investment levels this year and next, partly on improved global prospects. Quarterly growth is set to peak in mid-2010 at 4.3%, but tail off in every quarter to the end of 2011.

Beyond that period, Mr. Carney warned it would be difficult to record growth "north of 2%" unless productivity, or output per hour work, is improved.

Read the full article here.

 

[Ally]

China: Inflation threatens impressive growth

Chinese Premier Wen Jiabao once said 2009 would be China`s toughest economic period in 50 years. He wasn`t thinking ahead. In 2010, policymakers face a seemingly impossible task -- continuing 2009`s growth of 8.7% while curbing resurgent inflation. December`s figures show the government is already behind the curve.

The annual inflation rate for consumer prices was a seemingly mild 1.9% in December. But that number understates the threat. The consumer price index (CPI) excludes the rapidly rising cost of property. And year-over-year changes miss the most recent trend. In the most recent month, prices rose 0.8% -- a nerve-wracking 10% annualized rate.

Food prices, which made up 90% of December`s annual CPI increase, are rising fastest. Bad weather doesn`t help. But easy money is what turns shortages into much higher prices. Producer prices are now rising at an annualized 11%. Those increases are being passed on to consumers -- China`s two leading alcohol brands have raised prices by around 10% and Coca-Cola is threatening to follow suit.

Non-food prices are not exempt either. Makers of cars and home appliances face rising costs and are no longer under pressure to cut inventories through cut-price sales, not after respective 58% and 25% revenue increases in December. Price rises look inevitable.

Welcome growth and excessive inflation have the same source -- a flood of bank lending. A rate hike would now be the best medicine, but it comes with uncertain and possibly hazardous side effects. Fragile parts of the economy, like private investment and services, could be hurt. Some debt-funded construction projects -- there was a mammoth ¥4-trillion ($616-billion) of infrastructure investment in 2009--could be delayed.

Read the full article here.

 

[Ally]

Economic revival sweeping Western Canada

Mere months after Alberta took the crown as Canada`s fastest-growing home to the unemployed, the province finds itself at the heart of an economic revival that is sweeping Western Canada.

Confidence has come roaring back to the resource sector that dominates the western provinces, as new hope for global economic growth fuels optimism that the see-saw of the past few years has given way to a more stable future for crude, metals and fertilizer.

All of that has translated into a sudden upshift on the levers of investment in Western Canada, as corporate leaders who have spent the past year biding their time and refining their plans now move billions of dollars to seize a moment for which they`ve been waiting. The latest came Thursday, when Canadian Natural Resources Ltd. (CNQ-T69.75-1.66-2.32%) said it is nearing a major new spending outlay in the oil sands .

"The West is on fire," said Adam Waterous, Scotia Capital`s Calgary-based head of global investment banking . "It`s fantastic news for the country. These are big, big projects that are going to get developed. And there`s no question that the West is going to lead the country out of the recession."

The change has been propelled largely by signs of an economic recovery and forecasts of accelerating growth, which all point to renewed demand for the products the West has to offer.

"The industry is starting to accept that we are through the dip," said Steve Spence, president of Osum Oil Sands Corp., which said this week that it has sought the province`s regulatory nod for a 35,000 barrel-per-day oil sands project. "Not that things have gone crazy again, but that it`s safe to start moving projects forward."

Osum`s project was just one in a string of high-profile announcements this week, which together have been industry`s way of saying "We`re back," said David McColl, research director at the Canadian Energy Research Institute.

Read the full article here.

 

[Ally]

New Report says Urban Land policies and rules making homes unaffordable

A report says urban land use policies are making homes almost unaffordable in markets around the world including Vancouver, Toronto and Montreal.

The Demographia International report looked at 272 metropolitan markets in Canada, the U.S., the U.K., Australia, New Zealand and Ireland.

The report says Vancouver is the most unaffordable market in the world when median housing sale values are compared to median household incomes.

It says Toronto is in the severely unaffordable category and Montreal is classified as being seriously unaffordable because of contraints on land use.

Read the full article here.

 

[Ally]

Federal deficit jumps to $36B

OTTAWA–Ottawa`s budgetary deficit ballooned to more than $36 billion two-thirds of the way into the fiscal year as the recession and its aftermath took a heavy toll on spending and revenue.

The federal Finance Department`s latest accounting shows the government experienced a $4.4 billion shortfall in November, bringing the deficit to $36.3 billion – a sharp contrast from where it stood last year, when it clung to a $39 million surplus.

Despite the big jump in November, the accumulated deficit put Ottawa broadly in line to meet its estimate for a record $56.2 billion shortfall by March 31, the end of the fiscal year.

The department said Friday that the deficit is almost entirely due to the impact of the recession: higher spending on things like employment insurance and the government`s stimulus program, and lower receipts from individual and corporate taxpayers.

"Revenues were down $18.3 billion, or 11.9 per cent, reflecting declines across most revenue streams," the department said.

"Program expenses were up $19.8 billion, or 15 per cent, mainly reflecting higher EI (employment insurance) benefit payments, higher transfers to other levels of government and support for the automotive industry."

Read the full article here.

 

[Ally]

Beward of promises that sound too good

List with me and I guarantee to sell your home in 60 days or I will buy it myself."

How many times have you seen advertisements like this from real estate salespeople? I have often been asked whether these guarantees are in fact legitimate. As with most advertising claims regarding guarantees, there are always terms and conditions that the guarantee is subject to, and these conditions must be immediately brought to the attention of any consumer at the time any inquiry is made about the guarantee.

In addition, the terms and conditions cannot contradict the main point in the advertising.

In a discipline case decided in March of 2008 by the Real Estate Council of Ontario, a real estate broker made a guarantee that if a buyer bought a home through the broker, then the broker would sell their home in 120 days or he would buy it himself. The buyer found a home to buy with this broker and then listed their home with the same broker. The home did not sell and then the broker refused to buy the seller`s home.

The reason given was that although the buyer did buy a home using the broker as a buyer representative, the buyer did not buy a home that was actually listed with this same broker. The broker was fined $10,000 for this misleading advertising.

Some terms and conditions may state that the salesperson will only pay 80 to 95 per cent of the appraised value. But many other points are left vague. Is the real estate commission included or excluded? When is the appraisal to take place? Who conducts the appraisal? What if the property needs repairs? Who pays for this?

Read the full article here.

 

[Ally]

Recent Property survey has its advantages

Many buyers think that if they have title insurance, they don`t need a survey when they purchase a home. In order to properly understand this issue, we first need to look at the advantages to a buyer of having an up-to-date survey when they purchase any property.

Buyers have faced all kinds of difficulties over the years when they purchased a property without a survey froma licensed surveyor. These include:

building a house on the wrong lot;

building a swimming pool on part of a neighbour`s property;

building a cottage on land owned by someone else; and

discovering major easements after closing.

It is always preferable to have a current survey before you buy a property: you`ll know about fence lines, encroachments, and easements before you complete the transaction. Encroachments include your neighbour`s garage that is partly on the land you are buying. In addition, surveyors carry their own errors and omissions insurance coverage. If they make a mistake, their insurance may provide more protection than your title insurance policy.

Read the full article here.

 

[Ally]

Habitat gets $1 Million pledge

Genworth Financial Mortgage Insurance Co. Canada (Genworth Financial Canada) and Habitat for Humanity Canada have announced a new three-year relationship, in which Genworth Financial Canada has committed $1 million to a project called The Path to Home.

The Path to Home will support home building grants, access to educational material and resources and employee volunteer commitments planned throughout each year of the project.

Read the full article here.