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Showing posts from April, 2010

I was Pepper Sprayed Yesterday!

OK, yesterday instead of going to the gym (I’m good at finding excuses) a buddy and I went to lunch at Ruben’s a “fake” deli in Montreal’s downtown. So, we sit down to eat, and I my nose is itching, and throat is raw, I start sneezing, and keep on sneezing throughout the meal. My buddy notices that many people in the restaurant (including staff) are also sneezing. After leaving, I was walking along the street and suddenly felt an intense pain in my right eye! I though maybe I should go and see my doctor, it was remarkably uncomfortable.
This morning I discover this, building was evacuated, 30 people found ill!It seems that on Wednesday night Montrealers got a little exited when their hockey team (Montreal Canadian) won their series again Washington.The cops used pepper spray to calm things down (why anyone would think that pepper spray would calm things down is beyond me…). Some how the pepper spray lingered until Thursday… strange but true.

Are you kidding me!

Yesterday was supposed to be flurries in the morning and rain in the afternoon.  We got heavy snow all day...this picture was taken by Ms. FitN at 9 pm, the snow as still being driven hard, total accumulation was about 10cm .. 4 inches.

Of course that was at home, down town (on google map, 1.3km walk) there was only a sprinkling.

PIIGS’ Impact on Canada

This blog is unashamedly Canadian in content; if it doesn’t relate to Canada I’m not interested, there are so many blogs that have a U.S. or European slant this one is about Canada.  First and foremost, very little of Canada’s trade takes place with Europe, China and the U.K. are more important partners (I know UK is part of Europe…).  What would be the impact of a EMU failure on Canada?
Some of my colleagues tell me I’m a pessimist; I think I’m a realist.  What are the odds that Greece (the "G" in the PIIGS) will be able to reduce government spending in a meaningful way without creating a domestic depression and a change in government?  History shows that when outside forces coerce a government to reduce expenditure -- think of Germany in the 1920 bad things can happen.  According to some analyst it would take 30 years of austerity to reduce government debt to 60% of GDP. 
Two possible outcomes: 
(1) Germany relents and the EU agrees to provide Greece with Euro 45 billion (wi…

Foreigners continue to buy Canada

According to StatsCan, foreign investors continue to buy Canadian securities. Non-residents added another $6.7-billion ($7.8 billion in bonds, -$1.1 billion in equities & others) to their holdings of Canadian securities in the month, all of which were bonds as they sold stocks and money-market paper. Foreign investors have added Canadian bonds to their portfolios for 14 straight months, with acquisitions totaling $100.7-billion since January 2009.
Why are foreigners suddenly so enamored with Canada? Several reason stick out, first the Canadian dollar is increasingly behaving like a petro-currency (see Mike Moffatt’s analysis), which shows the CAD’s correlation with the WTI (Oil) near 90%, what other “acceptable” currency has this kind of profile (ok the Ausi and Kiwi dollars)?Secondly, (and I wont post it here again) Canada has a very enviable sovereign debt profile with all (Federal and provincial) governments looking to control deficits.Finally, Canada’s central bank can worry ab…

Wall Mart as an inflation indicator

Last week Wall Mart announced that they were cutting price on 10,000 items!To give you a sense of what this means, the CPI is calculated on less then 6,000 items!Also last week the FOMC released its March 16, 2010 minutes.Not much has changed from the previous meeting, but one thing has, inflation expectations were revised downward.Those who have been looking for inflation were disappointed AGAIN!
But then on the face of a contraction of the M2 by $11.7 billion and the MZM by $5.2 billion the M2 is contracting at a rate of 2% per annum, while the MXM is contacting by 7.2%.The Feds have allowed the monetary base to shrink (a first), so while rates are low, the abundance of money supply is beginning to recede.Finally bank credit continues to shrink by $13.2 billion, or 8% per annum – another record, banks instead are playing the yield curve, borrowing short term money from the government and lending it back at a much more attractive rate.
          Teranet - National Bank of Canada        …

The Canadian dollar’s fair value

Aside from Greece, the Canadian financial press is all about the strength of the Canadian dollar, which hovers around parity with the American greenback.  One of the most interesting aspects has been the increase in the estimates of fair value for the Canadian dollar, from around .87¢ in 2006 to the U.S. dollar to near .93¢ today.   CAD Vs. USD 2002-2010
It has been nearly 25 years since I really though about economic theory, and currency was discussed in one class only – Money and Banking taught by Bill Watson (at McGill U.) so I had to hit the books again to look beyond the Big Mac Index (made famous by the Economist) and look at the BoC and FEER models [FEER dates back to 1994 – Williamson et all].  The question with the CAD dollar approaching parity with the US dollar what’s the fair market value for the CAD?
Toronto Dominion Bank published a report: Has the Canadian Dollar gone too far too fast? [2008/Q1] Which makes a valiant attempt at generating a reasonable answer.  Between June…

Its hard to be a bear!

And getting harder everyday especially a Canadian bear, because the hard data just doesn’t support my position.Certain days it gets very depressing, like many investors I missed the stock market rally of 2009, could have caught it on the way up, but I never believed in it!I was always waiting for the other shoe do drop, so far I’m still waiting.
Up here (in Canada) the economy is humming, there is no doubt about it, growth appears solid, and although the Federal and Provincial governments “open the spigot” they’ve now firmly closed them.The Liberal administration which runs the Quebec government was courageous in the face of impossible circumstances; namely that health care costs are out of control, and now absorb 40% of government spending (Vs. 31% in 1980), furthermore the trend is worrying, health care costs are growing by 5.8% per annum vs. 2.8% for the rest of government expenses.It doesn’t take a PhD in mathematics to figure out that is an unsustainable trend line.
So up here in C…