November 2009

[Ally]

How to stay Richer

I`ll let you in on a little secret: Wealthy investors do not have any more insight into where the market is going than the typical Main Street investor.

Consider last year`s calamitous market plunge -- very few wealthy investors saw it coming. To the contrary, according to a survey of millionaires by Northern Trust in the fall of 2007, the overwhelming majority expected positive returns from stocks in 2008, while 13% were outright bulls, anticipating returns of greater than 10%. Further, the richer the investor, the more optimistic they were. The U.S. market`s 38% drop must have been a shocker.

So it isn`t prognostication skills that make the wealthy savvy with their money. Instead, in my experience, it is their tendency to focus on three critical aspects of successful investing.

First, they diversify across a wider range of asset classes and investment strategies. According to the Capgemini Merrill Lynch 2008 World Wealth Report, millionaires globally invested in a varied mix that not only included the traditional asset classes of cash, fixed income and equities, but also allocations to real estate and alternative investments.

Robust asset class diversification can improve a portfolio`s returns without a corresponding increase in risk. Or, as the saying goes, "diversification is the only free lunch available in investing." As a case in point, certain alternative investments such as gold, managed futures and low directional equity long/short hedge funds were superb buffers in the stormy markets of 2008. Wise investors avidly pursue the free lunch of optimal diversification at the asset class level.

Read the full article here.

 

[Ally]

Canadian Economy disappoints in Q3, risks setbacks

NEW YORK - Canada`s economy performed worse than expected in the third quarter and while now recovering, it risks further setbacks due to the sharp rise of the Canadian dollar, Bank of Canada Governor Mark Carney said on Thursday.

Carney said the bank`s projection last month of 2 per cent annualized growth in the third quarter did not likely materialize but the overall outlook, including the strongest domestic spending profile in the G7 next year, remained the same.

"Recent indicators suggest somewhat softer growth relative to that 2 per cent projection but the expectation is that the overall profile of the growth in that projection -- so accelerating growth in the fourth quarter and into 2010 for Canada -- remains valid," he said in a press conference following a speech in New York.

Finance Minister Jim Flaherty earlier on Thursday suggested he thought the economy could have stood still in the third quarter, saying he agreed with the Organisation for Economic Co-operation and Development`s forecast that the growth profile for that quarter was "flattish."

Quarterly growth figures will be released on November 30 and analysts are mixed on whether the economy stopped shrinking.

Read the full article here.

 

[Ally]

Fiorito: Bedbugs can be beaten

The bedbug report has finally been tabled, along with its frank and graphic information guide, and the city`s board of health met the other day and has made recommendations, and ... hang on a minute.

I was talking to a woman a while ago. She lives in a seniors` apartment building on Yonge St., just south of College. She showed me how the bedbugs had bitten her arms and legs. I was grateful that we were talking outside and not in her apartment.

She said she couldn`t sleep, and she was anxious all the time and, as we talked, we were joined by a couple of her friends who said they had all been bitten.

The women told me there had been an anti-bedbug program in their building, run by one of the tenants, and funded by the Toronto Community Housing Corporation. They said the program – a methodical campaign of steaming, sealing of cracks, washing of clothes, vacuuming of rugs, decluttering and so on – had worked remarkably well.

But then the money – a piddling ten grand – ran out after roughly a third of the building had been done, and the bedbugs did what bedbugs do when you stop fighting them. They came back hungry, and in force.

Read the full article here.

 

[Ally]

Do`s and Don`ts of Real Estate Photography

The home wasn`t one Carla Johnson could visualize herself living in – at least not at first.

The initial images snapped of the property didn`t grab her, and it didn`t help that the photos focused on the dining room set and bedroom furniture that weren`t exactly her taste.

The home was eventually purchased by a relocation service and snapshots of the empty space were taken.

Johnson checked out the new photos – and was hooked.

"The agent did it right, they did full-room shots," she recalled in a recent interview at a downtown coffee shop. "The kitchen and the dinette and the family room were all one big space in the back, so they took shots of this side of the space and of the far side... so you knew the whole layout and the flow."

"I knew looking at the photos online – my husband did, too – and went, `That`s the kind of place we`re looking for."`

Read the full article here.

 

[Ally]

Retail Sales rise more than expected in September

OTTAWA — Canadian retail sales surpassed expectations in September, pointing to a domestically driven economic recovery even as exports continue to lag.

Sales rose one per cent during the month to $34.9 billion, the seventh increase in nine months, Statistics Canada said Monday. Increases were recorded in six of eight major sectors, led by gains in the automotive sector. That followed a revised one per cent increase overall in August.

"The promise of an economic revival in the third quarter was delivered upon — not by factories but by consumers," said Krishen Rangasamy, an economist at CIBC World Markets.

"Higher consumer confidence fuelled by low interest rates, rising home prices and job creation helped to lift retail sales," Rangasamy said. "Still, that might not be enough to prevent Canadian GDP for the third quarter from ending up close to flat."

Most economists had expected retail sales to rise by 0.6 per cent in September.

Read the full article here.

 

[Ally]

The Nisga`a Nation shows the way

A quiet revolution of sorts is taking place in British Columbia: A self-governing First Nation has made history by allowing its members to enter the modern economy.

The Nisga`a government has approved a law to allow individual Nisga`a residents to own land in fee simple. That means the property is owned completely by the individual and can be transferred or sold to whomever that individual chooses. Land title will then be registered and protected in a Nisga`a land registry. With time, many hope the land can then be registered in the B.C. land registry office, which would give it more security.

This is revolutionary for a First Nations reserve, though not for the rest of us, as "fee simple" is exactly how almost every Canadian has bought and sold property for generations. It is important because such property ownership is foundational for wealth creation. For example, most small businesses nowadays are financed through loans obtained by placing an entrepreneur`s home up as security. The Nisga`a can now start up and expand their own businesses in the same way.

For most First Nations under the Indian Act, title to reserve land is held by the Crown and is controlled by band councils. Not so for the Nisga`a. As a signatory to a modern treaty (British Columbia did not enter into historic treaties of the sort entered into by other parts of Canada), Nisga`a lands were transferred to the Nisga`a government, which could transfer it to individuals.

For bands governed by the Indian Act, it is admittedly possible to possess individual allotments of land through measures such as customary rights and band-issued certificates of possession. But these are much weaker than fee-simple ownership, as often they cannot stand up in courts or they can be taken away by band leadership. These tools are not capable of bringing First Nations into the economy.

Read the full article here.

 

[Ally]

Much ado about Canada`s Housing `Crisis`

The first rule of social policy advocacy is to get yourself a really Big Number. The bigger and bad-der your problem appears, the better. Whether it makes any sense is beside the point.

This explains why some poverty groups still cling to the deliberate deception of before-tax poverty rates. Any poverty rate that ignores the role of taxes and transfers in redistributing income, as before-tax calculations do, only tells half the story. But advocates use it rather than the after-tax figure because it makes poverty look bigger.

The same statistical obfuscation appears to be going on in housing policy.

The Co-operative Housing Federation of Canada released a report this month on the "staggering" housing crisis in Canada. Its conclusion that four million people, or nearly 13% of all households, were in "core housing need" received dutiful mention in the National Post. As did the demand that it`ll take $4.66-billion to fix the problem.

But what exactly is core housing need? As with most statistical legerdemain, it takes a bit of digging to figure out.

Read the full article here.

 

[Ally]

Tax Credit spurs U.S. Home Sales

WASHINGTON -- Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years as buyers rushed to take advantage of a popular tax credit, a survey showed Monday.

The National Association of Realtors said sales surged a record 10.1% to an annual rate of 6.10 million units, the highest since February 2007, from a downwardly revised 5.54-million-unit pace in September.

Read the full article here.

 

[Ally]

Mortgage debt soars in Canada

Despite warnings from some bankers that consumers should be prudent when taking on household debt, Canadians are gaining a healthier appetite for risk and taking on longer-term mortgages.

A survey released Monday by the Canadian Association of Accredited Mortgage Professionals shows 18 per cent of mortgages are long-term, compared with 16 per cent a year earlier and 9 per cent in 2007.

"If consumers stretch themselves too far this could be a problem later on," housing economist Will Dunning, the author of the report, said.

Some in the industry have expressed concern that consumers are buying more expensive properties than they would normally and loading up on debt because of the artificially low interest rates.

"What happens to the people who can barely afford mortgages at 4 per cent when they renew at 6, 7 or even 8 per cent? Or what happens in 35 years when some Canadians are 65 years old and just finishing their mortgage?" says William Stynes, a manager with Bytheowner.com.

The average mortgage interest rate reported by respondents was 4.55 per cent, down from 5.41 per cent last year. However, analysts say rates have nowhere to go but up.

Read the full article here.

 

[Ally]

Numbers on EI swell

The number of Canadians receiving jobless benefits jumped 7.1 per cent in September, reversing two months of declines, led by increases in Ontario, Alberta and British Columbia.

About 818,000 people got employment insurance in the month, marking a 63.5-per-cent increase since October of last year when the labour market peaked, Statistics Canada said Tuesday.

The report comes as Canada`s unemployment rate has risen to a near 11-year high of 8.6 per cent. The bulk of the job losses, though, occurred in the first five months of the recession.

To see Statscan map on unemployment click here

The number of people on EI has risen in all cities across Canada on a year-over-year basis. It has doubled in several cities, with the fastest increases in Calgary and Edmonton. It also more than doubled in Greater Sudbury, Vancouver, Victoria, Saskatoon, Hamilton and Kitchener.

New claims fell, offering some indication of stabilization in the labour market. Initial and renewal claims received in September fell 5 per cent and have been declining since May.

Read the full article here.

 

[Ally]

A few Questions to put your Energy Literacy to the testAccess to affordable energy is essential to our way of life, making the upcoming gathering of world leaders in Copenhagen profoundly important. Yet few Canadians possess the level of "energy literacy" needed to understand what`s at stake. Here are a few questions that will help test your own energy literacy.

What is the fastest-growing form of global energy use?

If you said electricity, you`re right. And because coal is the major fuel for electricity, power generation contributes about 21 per cent of global greenhouse gas (GHG) emissions, compared with land, sea and air transportation at 11 per cent, according to International Energy Agency data.

What is the case in Canada?

Electricity generation produces 17 per cent of Canadian GHG emissions. Transportation produces 25 per cent, much higher than the global average and reflecting the size of our country.

Which fuels generate Canada`s power?

Nationally, hydro contributes about 61 per cent, coal 20 per cent, nuclear energy 15 per cent, natural gas and oil 4 per cent. Wind contributes less than one-half of 1 per cent, according to Canadian Electricity Association data.

Read the full article here.

 

[Ally]

Stable Apartments lure Investors

Ugo Bizzarri`s Timbercreek Asset Management Inc. already owns 9,000 apartment units, mostly in southern Ontario, but also in Ottawa, Halifax and Montreal. The firm is in expansion mode, but the last place you`ll see it raising money is in the public markets.

"Apartments are very predictable and very stable," says Mr. Bizzarri, who has been investing in the apartment sector for about 10 years on behalf of institutional investors.

While stock markets have been anything but stable, apartment buildings generally held their value through the recession because of steady financing, low vacancy rates and a supply-constrained environment created by government regulations.

All the water-cooler talk may be about the red-hot housing market, but as apartment owners are quick to point out, about one-third of Canadians still don`t own.

Apartment vacancy rates across Canada remain relatively low -- 2.7% in April 2009, according to Canada Mortgage and Housing Corp. That was slightly up from the 2.6% of apartments vacant a year earlier.

Read the full article here.

 

[Ally]

Danger of Canadian Housing Bubble

Click here to watch.

 

[Ally]

Canada expected to emerge from negative-inflation Phase

OTTAWA - The holiday from inflation might be over.

The past year`s economic environment has been tough. But one positive thing to come out of it is that we`ve been paying less, overall, for the things we buy.

However, if economists are right, all that came to an end last month.

Statistics Canada is scheduled to release its consumer price index for October on Wednesday. After four straight months of year-on-year price declines - unheard for almost 15 years until last June - the average estimate of the experts is that prices were up 0.3 per cent last month.

Much of it comes down to petroleum-related prices. Oil and gasoline prices were sky-high in the summer of 2008 and fell off a cliff when the market crisis exploded that fall. Gasoline in Canada went from averaging $1.279 a litre in September of that year to 87.6 cents just two months later, according to energy consultancy MJ Ervin & Associates.

Read the full article here.

 

[Ally]

Home Ownership costs on the rise

OTTAWA — Owning a home in Canada is starting to get more expensive as mortgage rates edge higher and house prices rebound, according to a report by RBC Economics Research.

The proportion of pre-tax household income needed to maintain a home rose in the third quarter of this year for the first time since the spring of 2008, and across all housing types, RBC said Wednesday.

The cost of owning a typical detached bungalow increased one per cent to 40.2 per cent from the previous quarter, the report said. A standard townhouse rose 0.7 per cent to 32.3 per cent, while a regular condo edged up 0.5 per cent to 27.6 per cent and a standard two-storey home increased 1.2 per cent to 45.8 per cent.

"Home affordability deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values," said Robert Hogue, RBC`s senior economist. "Despite this increase in home ownership costs, affordability measures have still shown improvement from a year ago."

RBC said an average detached bungalow — the index benchmark — works out to 66.8 per cent of pre-tax household income in Vancouver, 48.6 per cent in Toronto, 39.2 per cent in Ottawa, 37.5 per cent in Montreal and 36.7 per cent in Calgary.

Read the full article here.

 

[Ally]

Russia sparks Canadian Dollar rally

The Canadian dollar rose more than half a cent Wednesday after the Russian central bank signalled it plans to diversify some of its reserves into the currency.

The statement triggered wide-spread gains in the loonie. The currency rose to a one-week high of 95.13 cents (U.S.) from yesterday`s close of 94.52 cents and advanced against the euro and Mexican peso.

"The Canadian dollar has strengthened across the board on that news story," said Ian Stannard, senior currency strategist at BNP Paribas SA in London. "The diversification theme is one that`s going to remain in place for some time."

Read the full article here.

 

[Ally]

Underwater Mortgages dog U.S. Housing

Don`t try to tell Mandy Peacock that the housing market in the United States is showing any signs of life.

"I don`t think we`ve hit anywhere near the bottom," said Ms. Peacock, managing partner at AAA Home Rescuers in Las Vegas, which helps people modify mortgages.

Ms. Peacock typifies the problem facing millions of American homeowners.

She bought a condominium in Las Vegas in 2006 for $250,000 (U.S.), borrowing the full amount at an interest rate of around 12 per cent. When the recession hit a year later, house prices in the city plummeted and it wasn`t long before Ms. Peacock`s mortgage was far higher than the value of the condo. She finally gave up and is now selling the property for $49,000.

"I`m definitely an optimistic, positive person," she said. "However, for my industry I have to be realistic too."

Read the full article here.

 

[Ally]

Looking at Property? Be careful what you step in

Frothy real estate markets attract more than young families looking for new places to live - they inevitably draw out investors looking to make an epic return on rapidly rising prices.

It was the busiest October on record for realtors as the rebound in housing continued to gain momentum. Sales have been so strong that the Canadian Real Estate Association boosted its sales forecast for the year by 6.6 per cent to 460,200 units. Buyer enthusiasm has also led to record-high prices - the average is forecast to hit $317,900 by the end of the year.

The gains have been fuelled by record low mortgage rates - which means more of what is being paid on a mortgage is going toward paying the loan, rather than the interest.

One thing is clear - not everyone buying right now is looking for a place to live. Here`s what you need to know before using real estate as an investment.

The upside

With prices set to gain 6.6 per cent in what was supposed to be one of the worst in Canadian real estate history, there is clearly some money to be made.

Read the full article here.

 

[Ally]

Dollar rises on news Russia`s Central Bank to invest Foreign reserves in loonie

TORONTO - The Canadian dollar shot closer to parity with the U.S. dollar on Wednesday after the Russian central bank said it is preparing to invest in the loonie and diversify away from the American greenback.

The Russian central said it plans to invest some of its foreign exchange reserves in Canada`s currency to diversify its portfolio and reduce dependence on the U.S. dollar.

The Canadian dollar rose to its highest level in a week, reaching an intraday high around noon at $95.69.

Meanwhile, the U.S. dollar slid to a 15-month low against the euro and to its weakest level against the yen since January.

Coinciding with the American dollar`s weakness, the gold sector headed higher into record territory, up $12.60 to US$1,178.40 an ounce.

A Canadian market that has fared better than many during the recession, and a sluggish U.S. economy, make Canada an ideal investment for banks looking to diversify their investments away from U.S. dollar reserves, the staple reserve currency in most countries, said Steven Butler, director of foreign exchange at Scotia Capital.

Read the full article here.

 

[Ally]

William Watson: How to deal with Bubbles

You may have heard something about a big debate going on these days: Lean or clean? No, it`s not about people`s tastes in body types. It`s about how central banks should approach bubbles. Should they "lean against the wind" and try to prevent bubbles from growing in the first place? Or should they simply "clean up" afterwards, since figuring out what`s a bubble and what`s a justifiable increase in an asset`s price is a lot easier after the price has broken.

The debate has been cast in lean/clean terms by William R. White, formerly Deputy Governor of the Bank of Canada, now at the OECD. He`s a leaner, leaning hard toward leaning rather than cleaning.

At first blush many economists will conclude, as former Fed Chairman Alan Greenspan always has, that leaning is just nuts. Asset prices go up. Asset prices go down. How in the world do you know when a rising asset price is going to experience "mean reversion," that is, come back down to its trend value, and when it`s going to continue rising as a result of some fundamental change in underlying conditions in demand or supply? (If you do know, you can make tons of money.) "This time is different" are famous last words in many financial episodes, and the title of quite a good book about financial manias over the last 800 years, but in fact sometimes things really are different and prices make a permanent move. You would have lost disastrously over the last three decades betting the price of computing power would have experienced "mean reversion."

So it`s quite an achievement for White even to put together a respectable case that central banks really should think much more about leaning against the wind. The argument he provides is explicitly Austrian, which will commend it to many readers of this page. He quotes Hayek in two places and relies heavily on the fundamental proposition of Austrian economics that: "It is not self evident that policies are desirable when they are effective only at the expense of creating even bigger problems in the future."

That`s a jab at Greenspanian monetary policy, which White sees as having imparted an inflationary bias to U.S. monetary policy and sown the seeds of future disaster even as it fought against recessionary tendencies in 1987, 1998 and 2001. If the Fed rushes in with buckets of liquidity every time a financial market experiences stress, the market learns that stress is not such a fearful thing. As a result, monetary policy becomes less effective. As White writes: "The degree of monetary easing required to kick start the United States economy seems to have been rising through successive downturns as the `headwinds` of debt have become stronger." Much of the debt in question was spawned by monetary policy itself: Credit begets collateral, which begets further credit, an evolution the Fed has fostered over the last 25 years.


Read the full article here.