John Templeton died this week, he will be sorely missed. Wise heads are becoming less and less in this market. He sold his firm to Franklin in 1992 for $440 Million.
SEC in the US found serious short comings in the practises of Moodys and other rating agencies. (which was a mjor reason for all the sub-prime problems). They put the potential for profit above the quality of their work. No kidding!
GM is now trading at the lowest level in 50 years. The Hummer brand is up for sale, and the shareholders wil meet in August to review the plans.
The TSX composite index has given back nearly all the gains it made earlier this year.
The sub-indexes have tracked the big economic trends. Financial service companies have been big losers, as some banks have been caught in the credit crisis.
Genuity Capital Markets reported on Thursday the country’s biggest bank RBC, “could” face another writedown of $900 million to $1.5 billion in the third quarter on widening credit spreads and deteriorating subprime investments. Royal Bank has already booked about $1.64-billion in pretax writedowns since the fourth quarter of last year. The bank’s stock fell for a third day in a row on high volume shares. The operative word here was “could”, I’m betting that Genuity is behind the shorting of RBC stock, and thereby putting this “could” into the markets.
In reality, write-offs are not direct impacts to real numbers. They are just “notional: amounts to say that we don’t think we’re going to get this money, so we will write off the debt on our books. Meanwhile back at the ranch, they’ll go full blast and collect the debt. Yep, they don’t tell the lenders not to pay them. So, next time around, all this newly collected debt is now magically turned into profits!
Energy companies are up, reflecting higher oil prices.
Crude oil prices hit a new record Friday, surging over $147 US a barrel, boosted by “threats” of missiles from Iran, and a “possible” disruption to tight global supplies.
Did you see the display of rocketry in Iran the other day - another reason to wonder what the heck is going on here. They could not get them all started - had to retouch the pictures to actually look like a threat!
What a hoot!
There are no supply/demand/upside/downside/fears/ worries or other nonsense. The speculators are running the commodities market.
Most drivers have modified their driving behaviour, even if only slightly, and have cut back on their consumption of gasoline. It is hard to believe that demand in N. America is still exceeding supply. And about China and India, most of them still drive scooters, and the increase in Oil prices after reduction in subsidies has made those drivers reconsider their car-lust.
I looked at my Google home page today - 10 plug-in electric cars being brought to market that would never have been considered but for $150.00 crude oil.
Canadians are getting stronger. Twenty years ago it took two people to carry ten dollars’ worth of groceries. Today, a five- year-old can do it!
Apparently TV viewing is up according to Nielsen. I’m not surprised with the price of OIl , less people are going on holiday or out to the movies, food places etc.
UNEMPLOYMENT IN CANADA
Unemployment rate creeps up to 6.2% in Canada
Canada’s unemployment rate crept up 0.1 percentage points in June to 6.2 per cent as the economy lost about 5,000 jobs.
Tens of thousands of Canadians, most of them in Ontario, lost their full-time jobs or were forced into part-time work last month. Four provinces added some full-time jobs but the other six had losses, including 45,500 that disappeared in Ontario.
Statistics Canada said the only industry with a notable increase in employment last month was professional, scientific and technical services, with monthly gains totaling 37,000 jobs.
“Reality may finally be catching up with the Canadian job market,” said Douglas Porter, deputy chief economist with BMO Capital Markets.
“Overall, June’s employment report shows a labour market that is moving closer in line with the slowing economic growth picture,” said TD Bank economist James Marple. “Job growth is a lagging indicator and the contraction experienced in the first quarter of this year is now showing up in the job numbers.”
Dawn Desjardins, assistant chief economist at RBC economics research, said Canada’s economy is set to continue to grow at a sub-potential pace.
“Today’s weaker-than-expected jobs report and the trade balance numbers set the stage for the Bank of Canada to hold the policy rate steady at next week’s rate-setting meeting despite policymakers’ growing concerns about the near-term inflation outlook,” Desjardins said.
And CIBC economist Krishen Rangasamy said Canadians should expect more monthly declines, or very modest gains, for the rest of the year as Canada’s export economy continues to struggle from reduced demand in the U.S.
But economists stressed that given the downward trajectory of job creation recently, the days of 30,000-a-month employment gains are past for at least the rest the year.
After starting 2008 on a tear by pumping out 46,000 new jobs, employment growth has almost uniformly slipped each month, leading to June’s outright losses. Meanwhile, full-time employment has fallen in three of the last four months for a total of 70,000.
Most economists said the central bank is unlikely to cut rates at its policy meeting next week, although they also said Governor Mark Carney is unlikely to follow the advice of the C. D. Howe Institute panel of economists that rates should be raised.
BCE
New chief executive George Cope, BCE’s main unit, Bell Canada, is hoping to cast a different public image, with a a “100-day plan”. This means firing 2,000 of its 15,000 managers in 100 days
BCE intends to overcome its biggest weakness — underperformance in the growing wireless-phone sector by its Bell Mobility business –by improving customer service and product offerings and investing heavily in its network and technology. LOL ?
They are still keeping the same old Chief Financial officer and all the other guys that got BCE into the mess it was in! So, I don’t think it’s that great a plan.
So, I guess Teachers Pension Plan is going to have to add even more money to make BCE work out. Fortunately, I don’t deal with them anymore I’ve already made the shift.
Mr. Cope noted in an interview that while the team is smaller, one extra executive is dedicated to customer service – Whopee, did they say ONE extra. “It’s an important message to all of our team members,” he said. “The customer level is where we have to win this game.”. Don’t say it – show it!
BCE is set to take on $32-billion in new debt in a buyout from Teachers set to close on Dec. 11. So, It’ll be tough get the cash ready. So more layoffs to come.
But Mr. Cope declined to offer specifics about layoffs. But there will be plenty of movement, even among the roughly 50,000 employees remaining within the BCE fold.
MORTGAGES
Bank of Montreal changes mortgage offerings after Ottawa changes rules. Should avoid a US style collapse.
Bank of Montreal said that it will immediately change its mortgage offerings ahead of regulatory changes set to take affect in October.
The bank said it will immediately set the maximum amortization period for mortgages at 35 years and require a minimum down payment of five per cent.
Ottawa moved to tighten the rules for government-guaranteed mortgages this week trying to prevent a US style meltdown.
Starting Oct. 15, the Finance Department said it will no longer guarantee 40-year mortgages and will require a minimum down payment of five per cent of the value of a home.
Government-backed insurance is currently available on mortgages where the loan-to-value ratio is up to 100 per cent - in other words the buyer has borrowed all the money to buy a home and then gets insurance coverage on the whole amount.
What will this mean, it should further reduce demand and eventually prices in Canadian real estate. Yep, real estate can come down. Who would have thought of it, just a year ago!
Real estate is not only sinking in the USA but it is also happening in UK, Ireland, Germany, China, even Japan. This is the fallout of global central bankers gone wild with their printing presses. Canada is at the edge of the pond and a large boulder was thrown into the middle 2 years ago. Just wait, the fun is just getting started.
The question now isn’t whether or not the value of houses in Canada will continue to drop, but rather a question of how severe this drop will be and for how long. Seeing as the U.S. housing sector is currently in the process of being flushed down the toilet, I’m guessing it’ll be years/decades before we see another increase in our home values.
You know what they say, what goes up, comes down, it had to because the rubber band could only stretch so far, before it snaps back, with so many people losing there jobs, & all the good paying ones in the auto sector going to other countries, it was inevitable.
FREDDIE
Mortgage stocks cut losses in frantic NYSE trading
The losses in shares of two huge U.S. mortgage companies and guarantors, Fannie Mae and Freddie Mac, hurt US investments and key U.S. politician had to step in and calm financial nerves by saying the companies were sound.
On Friday speculation fueled by the New York Times led to further drops as they reported that the U.S. government might have to take over one or both of them. The paper cited unnamed sources. Personally I think it was The tooth Fairy and the Easter Bunny.
Together, these two entities back or hold nearly half of the total $12 trillion US in mortgages. Most of it really good mortgages and not the sub-prime crap. Later on the Times said no government action is imminent.
The US Senate banking committee chairman Christopher Dodd said the companies have access to the capital they need. He said he talked with Federal Reserve chairman Benji Bernanke and U.S. Treasury Secretary Henry Paulson, and that the two are “looking at various options” for supporting the companies if they need it.
Moreover, some analysts said there was no fundamental reason for the price drops.
The volume was huge, with a combined total of 800 million shares changing hands. The two together usually trade about 40 million shares a day. The 800 million is equal to half the total volume of all stocks traded in New York on a typical day. Wow!
The two companies buy mortgages and repackage them as investments, a key role in the financial underpinnings of U.S. home ownership.
Without them, the US economy would collapse. So, the government will come to the rescue, and not allow them to go bankrupt.
Fannie Mae exists to ensure mortgage lenders have enough funds to lend to homebuyers at low rates.
Freddie Mac finances housing for low- and moderate-income families by ensuring there’s a stable supply of money for lenders to make the loans new homebuyers need.
