Skip to main content


Showing posts from April, 2011

February Canadian GDP negative

After the blistering pace of GDP growth on Q4/2010 (4.5%), the sudden drop in activity is somewhat worrying (-0.2%).  Then again, Canada, an export nation is dependent on its southern neighbors for nearly 70% of its exports, and as yesterday’s U.S. figures show that the economy is slowing south of the border.
(Source: StatsCan)
Moreover, the strength of the Canadian dollar is almost certain to have impacted the terms of trade and new order flows.  Interestingly the Canadian real estate sector continues to grow, and expectations of this trend to continue for some time (maybe until he end of Q2/2011).  
(Source: StatsCan)
The net contributors to GDP for February were retail, services and construction whereas manufacturing was a real drag on GDP for February (-1.6%), it had been positive to the tune of 2.5% in January.  The biggest drag in the manufacturing -7.5% was vehicles and spare parts… once again the North American picture is painted south of the border.

Canada votes on Monday

The democratic process is an amazing thing.  How the mood of a nation can be expressed and make radical changes to the direction of a country, and to the life of its politicians.  A month ago when the Liberal/NPD and Block Quebecois “forced” a no-confidence vote against the Conservative government of Steven Harper, the intent was as follow:
Steven Harper was hoping that his conciliatory budget would provide sufficient ammunition to demonstrate to the population that (a) he didn’t want elections, (b) he had the best and most experienced team to lead the country.  Michael “Iggy” Ignatief was not really a player here, he was not courted by Harper in the budget negotiations – he was bidding his time till the next election.  Jack Layton, the forever leader of the NPD thought he held the most compelling cards; setting himself apart from the other two parties as the one offering a third way.  The Block was for “Quebec” whatever that means.  They have been adrift for years and survive because …


Yeah most people have only barely heard of this place.  Basically the Canadian Northern Territories eastern part that was split out 12 years ago.  A tiny (29,000) population an incredibly harsh climate and really far from the beaten track.  From Montreal it’s a 5 hour flight with a connection. The last road north ends at James Bay project, nearly 500 km from the southern border.  There are no roads between the communities (distance and cost).  Nunavut is Land area 1.6x the size of India.  
The Globe and Mail has a fascinating series on the territory – discovered while reading the Economist… Saddening is the level of despair, extreme binge drinking, low education standards (or even completion rate) and massive unemployment.  Although I didn’t live in Canada when the region was formed, it remains that a territory constituted I remember wondering what was the benefits of creating this new territory. 
Turns out that those who runt he place agree, that Nunavut has been a disaster, the idea …

Canadian house prices: Up again

Not terribly exiting, but it turns out that Canadian house prices are up again to the tune of 0.1%. The Canadian market had seen a brief correction, in the closing months of 2010, but this “correction” (about 0.3%) has now been fully reversed. Everything is well again in the land of Canadian housing, Vancouver’s recent insanity (25 bidders on one house with a $600k bump over the asking price) is not a sign of anything nefarious, it’s all good.
Canadian premier house price index is the Teranet National Bank of Canada House Price index

Taking democracy for granted

Having lunch with a friend today we realized that we were both voting Liberal for the same reason:The Conservatives’ assault on our democratic system. In politics it is often the small things that need to be watched. Unfortunately, few are watching the small but important things.
First assault was the Prorogation a very Canadian move by the governor general that allows for the suspension of parliament. It was used by the conservative government as a way to stop the three opposition parties from forming a government. Never mind that this all started because Canada’s minister of defense refused to answer some embarrassing questions on the action of Canada’s troops in Afghanistan.
The second assault occurred just a few weeks before the recent budget failed and the minority conservative government lost a vote of no-confidence (leading to the election of May 2nd). This was the Minister of International Cooperation Bev Oda who LIED to parliament.
In a federal parliamentary democracy such as wh…

Surprise Canadian farmers plan to increase planting acreage!

Considering the direction of grain prices (actually all commodities) Canadian farmers are unsurprisingly looking to max out their planting acreage.  No so much an interesting statistics, but in fact if you double the price of wheat farmers will increase their wheat production.
Obviously farmers have done their math, and the dramatic increase in fuel prices (and pesticide and fertilizer) still make the farming business attractive.  Anyway, there you go, if you raise prices farmers like the rest of us will respond to price incentive.

Canadian House Price – Bubble yet

A few weeks ago, I blasted a Canadian newsmagazine over its coverage of the Canadian house price rise over the past few years, and how there was not really a bubble (then maybe there was) without giving any facts.
In Canada, looking at the principal cities house price to median income we have:
Montreal:4.2x Toronto:5.6x Vancouver 7.0x Victoria9.0x Halifax:3.5x
BTW these are those I remember of the top of my head, although Calgary house price are high, income (all that oil business) have been rising even faster, so that although Calgary is expensive in absolute term, its not in terms of income.Finally anything seriously over 4x is considered overvalued territory.
Below is a diagram of the U.S. (countrywide average) median income to house price.

(Source: The  Big Picture Blog)
As can be observed U.S. house price are still not “affordable” by any sensible metrics (despite what the medias are saying) that have stood the test of time. Last week, an amazing incidence, a house that was listed in a ni…

Oil at $200

The story right now is that the “war” premium – caused by Middle Eastern instability is around $30; oil should be priced around $80 -- $90/bbl, instead of the $125/$110 we are seeing in the Brent and WTI markets. One of my favorite bloggist is EarlyWarning which discuses a range of issues but seems to have built a very interesting side business in looking at the Middle Eastern oil production market.
Readers will remember my commentary a few days ago that the Saudi oil minister had indicated that because of glut the Kingdom was reducing production from 9 million to 8.5 million bbl/day.
(Source:  Early Warning)
Early Warning looking at some third party data noted a number of interesting facts:Rig count which had been declining for years has been rising in the past quarter.Halliburton, one of the companies involved in drilling in the Kingdom indicated that most of the rigs were being deployed on older fields (that’s how you increase production), but also that long dormant projects were bei…

O-Oh! Inflation in Canada

Expectations was for March 2011 inflation to be 0.6% and 0.2% (CPI & Core CPI), but the numbers were a lot higher:  1.1% and 0.7%.  More to the point, over the past 12 months consumer prices rose 3.3%, very close to the Bank of Canada’s target CPI upper edge (The February number was 2.2% -- so this is a very bad figure).

Digging in the data some of the biggest culprits were clothing/shoes (100% imported) and food (part of the food component is included in core inflation calculation).  Of course last week I commented on the difference in prices in Canada Vs. the U.S. and one of the sectors where Canada did worse was clothing and shoes… I guess Canadians are used to getting ripped off.  The implication here is that the BoC will have to look very closely at its interest rate policy; the second impact is that the apparels segment will probably face some margin compression going forward.

What is even more worrying is the seasonally adjusted inflation number (Pure number no Core …

Euope and Da Banks

Reality of the European crisis are finally hitting market prices.  Also this weekend the Saudi oil minister said that SA was reducing production, because there’s just not enough demand to justify the current production level, which would seem to indicate that a good chunk of the current market pricing is driven by financial market hysteria – wow something new.
Back to Europe, over the weekend two developments:  the Finns elected parties that are against further PIIGS bail outs.  The second event was that the British government has indicated that they will no support any further financial aid beyond the help they have given so far under current European agreements.  Then this morning a spokesperson for the German ministry of finance indicated that Greece debt will be restructured before the summer.  
Once it is generally accepted that restructuring is required, the issue then becomes how much of a hair cut will be required.  The generally agreed (and to a certain extent priced) cuts for …

NDP or Conservative -- a perspective

“I asked my friend's little girl what she wanted to be when she grows up. She said she wanted to be Prime Minister of Canada some day. Both of her parents, NDP supporters, were standing there, so I asked her, "If you were Prime Minister what would be the first thing you would do?" She replied, "I'd give food and houses to all the homeless people." Her parents beamed, and said, "Welcome to the NDP Party!" "Wow...what a worthy goal!" I told her. I continued, "But you don't have to wait until you're Prime Minister to do that. You can come over to my house, mow the lawn, pull weeds, and sweep my yard, and I'll pay you $50. Then I'll take you over to the grocery store where the homeless guy hangs out. You can give him the $50 to use toward food and a new house." She thought that over for a few seconds, then she looked me straight in the eye and asked, "Why doesn't the homeless guy come over and do the work, …

Canadians are getting rip-off!

A study conducted by the Bank of Montreal showed that prices in the U.S. are between 15% and 30% lower than in Canada!  This is no big surprise, with the internet I can buy books at Amazon (for my Ipad) that are at least 20% cheaper than if I bought them from the Canadian equivalent.
But the best one yet relates to Quebec’s based SAQ (Quebec’s liquor store monopoly).  A few months ago they purchased a high end U.S. distributor, and the same bottle of wine in the U.S. sells for 28% less than in Quebec.  When confronted with this fact, the PR person (soon to be unemployed if there is any justice) argued that the SAQ has a wider mission, to generate additional revenues for the Government -- really this person said that to a journalist from the Montreal based French newspaper “La Presse”.  Truth of the matter, the SAQ is now stating that as a monopoly it has an OBLIGATION to rip-off its customers.
There used to be a thriving business in Canada of buying cars in the U.S., especially luxury m…

Odds and ends in Canadian economic statistics

We’re in the quiet zone, some data is coming out but no real identifiable trend is emerging.
Interest Rates remain unchanged
The Bank of Canada once again decided to remain on the sidelines.  The BoC said:  Although recent economic activity in Canada has been stronger than the Bank had anticipated, the profile is largely consistent with the underlying dynamics outlined in the January MPR.  Aggregate demand is rebalancing toward business investment and net exports, and away from government and household expenditures.
In other words the BoC is happy that industry is spending and that consumers are “holding back” a little. There is still tremendous concern about the level of Canadians 'indebtedness.
Inflation Expectations are rising
Input costs have been rising for more than a year. Most Canadian companies are seeing their margins being squeezed and are looking at price increases – that would result in higher inflation in Canada (still below the BoC’s upper target range of 4% -- still). A…

Strange day

This morning I woke up to the radio going-on about how oil prices had dropped, getting to my Bloomberg terminal at 7 this AM, I looked at oil prices and saw, WTI at $110/bbl – not far from Friday’s close, so a big WTF moment, then I realized that overnight WTI crude had gone up as high as $112/bbl. Hence the radio freekout.
This morning, TSX opened down 45 pts, and is now near -85 pts, the news is that commodity prices are off. So I checked “King” copper, and he’s up.Mr. Aluminum (he’s up too, so are steel prices). Oh and VIX index is down at 18, like everything is fine, 18! So I just don’t know what’s going on here.Actually, European and Asian markets were all off in Monday’s trading – that makes more sense than commodities reflex, and the reality of the U.S. market is driven by POMO activity (Feds’ money injection machine). My guess is that around 3 this afternoon the U.S. market will roll over.
Kaddafi (or Gadafy depending on your preferred spelling) is looking at a serious problem w…

Canadian Employment: Bad or Good news?

This morning the numbers for job creation were reported with a small drop for the month of March 2011, 1,000 jobs were lost instead of 28,000 created – as per the market’s expectations. Now that’s bad news on the surface.Dig a little (and since its on line 4 of the StatsCan report you don’t have to dig very deep, the underlying is that 91,000 full time jobs were created and 92,000 part time jobs were eliminated.
That’s good, because few people work part time out of choice. Hence the U6 unemployment in the U.S. is around 15% (while unemployment is around 9%), because some people have part time jobs when the want full time work. So this is good-“ish” news for Canada.
Yesterday’s building permit for February came out at +9% which somewhat erases the precipitous fall in new permits for January. Most of the gain was in the non-residential sector (not entirely surprising as if you are going to buy machine tools and equipment you will require space in which to install them.
These factors says n…

F35 to buy or not to buy

Canada is in the process of replacing its aging CF18 (already 30 years old) fighter aircraft. Canada is a both a small and a large country, its geography is large, but its 36 million population is small. The decision to replace the aging CF18 has been long and arduous, and the Department of Defense has finally settled on the F35 strike aircraft, currently being tested and readied for deployment (2016) in the US Air Force.
So far the DoD has indicated that the aircraft should cost about $75 million a piece and we are looking to buy 65 – for a total of nearly $5 billion. On top of that the DoD has budgeted for the aircraft consumable and training facilities – basically another $4 billion. For a grand total of $9 billion.
Those who want to buy the aircraft maintain that it was specifically created as a replacement for the F18 aircraft (the American version of the CF18), and therefore an excellent and affordable aircraft for the Canadian armed forces. It also a dual mission aircraft, it is …

Canadian House Prices -- The Puff piece edition

One of Canada’s premier magazine:  Macleans (nice folks that talk about nice things – think of it as the Canadian version of Time Magazine), wrote an exposé on the Canadian housing sector.  Actually, a non-exposé, since the one hard fact disclosed in the article is that Canadians have too much debt.  [Note I don't link the article  -- its too embarrassing, use Google its called the "Canada Bubble", march ]
Although there is some discussion about how the Canadian boom in natural resources is driving demand for housing (and foreign investors are poring money into Canada), at no time does this article talk hard facts.  It’s a bit like watching U.S. TV news: “After the break, how your cat is killing you!”.  The truth of the matter is that Canada’s housing is doing very very well indeed!  In some places (Vancouver and Victoria) house price (as a percentage of median income) are in nose bleed territory (900% and 700 respectively).  In fact, there is a simple rule of thumb, if h…

Bank of Canada Quarterly Survey

As the title implies every quarter the BoC does a business survey, which ask four basic questions, (1) Are sales prospects growing, (2) Will you hire more people, (3) are you capacity constrained and (4) What is your inflation perception.
As a whole the answers were unsurprising; on the growth front, outlooks are tempering – but are now near the historical (last decade) average. The same goes for employment growth and capacity utilization.However, it must be noted that capital expenditure on plant and equipment is still above the trend line (but also returning to the historical trend line).

The BoC is well aware that there is a substantial level of commodity inflation baked in the cake for the summer.Producer price have been nearly double the level of CPI (Core or otherwise) for nearly a year now. Canada’s strong economy gives manufacturers some pricing power (inflation in the service sectors has been stronger for months now). Overall, this report is indicative that the 0.5% growth in J…

Screening for Prostate Cancer is apparently a waste of time

I wrote about something similar a few years ago, specifically as it relates to the use of two stents during an angioplasty procedures instead of one. Now the British medical Journal says that the incidence of cancer among those who are tested for prostate cancer and those who are not (rectal exam and PSA) showed no statistical difference.
In other words, testing for prostate cancer doesn’t improve survivability! Rather a shocker as a guy who gets an annual physical, but not entirely surprising. The same type of study was done for Breast cancer and it was showed that survivability didn’t improve for women below the age of 50 (in other words an expensive, intrusive test didn’t help).
I wonder if there will be the same type of outcry there was for the breast cancer testing for women below the age of 50?My guess is that exams (not fun, but part of the annual check up will continue), and that inertia will keep PSA tests on the list of blood test that are done every year by my doctor.
It rema…

Socialized Canadian Medicine

Americans often (some Canadians too by the way) complain about Canada’s “socialized” medical system – in fact in Quebec it is one of the most restrictive systems in the world. The bitching is that you may have to wait for essential car, whereas in the U.S., you pay your money and you get your service.
Of course never mentioned in these comments are what if you don’t have the money, or more to the point you don’t have enough. How about if the choice is about feeding your family or getting cancer screening/treatment? What do you do?Well it appears that the answer is you feed your family.
In "More Adults Foregoing Medical Care, Health Insurance Due to Cost," Becker's Hospital Review highlights one of the tough choices the "recovery" is forcing many Americans to make. More adults are foregoing medical care or health insurance because they can't afford it, according to studies by the New York-based Commonwealth Fund and D.C.-based Families USA. The studies, reported…