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Showing posts from March, 2013

What does Canadian manufacturing say?

Canadian manufacturing has been in a funk for the past 4 months (well at least till January 2013).  The numbers are just not that great.

Sales are off both in 2002 dollars and actual dollars


Canadian manufacturing has been depressed; and its across the board although transport equipment sales were off their game (we are talking aerospace here -- Bombardier).  Canada is a small economy and aircraft sales are lumpy, sale in the aerospace sector were off 20% between December and January -- normal variation, still overall sales are way off.
Inventories are rising too
On a geographical basis Ontario and Quebec were the worse hit; Quebec obviously is the Aerospace sector (although they have an important presence in Ontario) but the Ontario has seen steep decline in vehicle sales.  Rumors of "channel stuffing" abound in the car sector (see here).  From vast Audi depot  to the same story for American made vehicle; then again, wages are stagnant in the US, and Median wages are fallin…

Random thoughts on Cyprus and Quebec

So a deal was done on Cyprus; depositors with less than Euro 100,000 will see no drop in the value of their deposits; those with deposits in excess of Euro 100,000 watch out!  Strict capital control will be impose (by Cyprus) that will mean that despite keeping the Euro, Cyprus is now isolated from the rest of the Union.  Capital control essentially means the end of the Euro experiment in Cyprus, don't know how the rest of the game will work, but certainly no one will participate in Cypriot bond issues -- especially if the money is frozen in the country.

What happens next, what about Spain, Greece? I just don't know, maybe Cyprus was a special case --turns out that according to the Dutch minister of finance, bank bailout is over in Europe! but it all depends on the next few months, if Cyprus will ends up in a depression then they will not be the it will nevertheless be the blueprint for southern Europe, if they recover quickly I just don't know.  One thing for sure, the E…

Cyprus -- Black Swan event?

Was Cyprus the black swan event that everyone was waiting for late in 2012?  I don't know, but it has all the hallmark of a geopolitical disaster.  First, it puts in play the whole idea that deposits for less than $100k are guaranteed.  Even if this agreement between Cyprus' new government and the IMF/EU fails, the gate has been opened to employ this solution elsewhere.   Europe's technocrats have decided that your money is really theirs to play with, and dispose as they see fit. Watch out Greece -- your government will not play ball, we will get our cash out of your savings accounts...
"the Russians are coming!  the Russians are coming!" would be the best statement I could make on the events of the past 72 hours.  It is more than likely that Europe has just sold Cyprus to the Russians (giving them the ability to build a massive base on the island) next door to the middle east for $20 billion.  Not only is Europe now sucking on the teat of Russian Gas to an unpr…

China -- the export machine continues

From the Telegraph yesterday morning:
China's trade figures released this morning are shocking. They tell us that China is still flooding the world with excess goods, and is once again a net drain on global demand. As you may have seen, Chinese exports surged 22pc in February. Imports fell 15pc. This is exactly what pessimists feared. For all the talk of a great shift by China away from export-led growth to internal demand, the reality is that the Politburo is still propping up the same old system, still shovelling subsidies to loss-making firms and state behemoths to keeps factories open. Investment is still 49pc of GDP. Consumption is still 36pc. China is still a massively deformed economy, and the global effects of its imbalances are getting bigger every year as the economy grows at far higher rates than the West. For all those who insist that China is now moving towards a consumption society I say BullShit!  The immediate reality of China's government is that they don't wa…

Employment in Canada

Well both the US and Canada published their new job numbers for January, while the number in the US at 236k was respectable Canada's number at 51k was a blow out.  Amazingly, this is as if the US had created 500k jobs in January -- so it gives a sense of proportion.

Canadian unemployment trend



The big winners were Ontario +30k and British Columbia +20k.  The big looser was my province, Quebec, that saw virtually no growth.  No point in "pointing fingers" the current government's policies (especially on language) is doing a great job at pissing off people that would/could create jobs here.  Its not that they are "socialists" is that they come across has having only electoral priorities.  It may not work out for them.

However, for Canada overall the news is excellent   One of my new favorite blogs Sober Look has an excellent piece about Canada -- interesting though process, some of the analysis is incorrect, but still generally valide.   His overall point is …

60 minutes, China's Property Bubble & Reality

Although I didn't record it, last Sunday night 60 minutes had a bit on the Chinese property bubble that makes your head spin.  I first became aware of the "real estate bubble" in China 5 years ago, but again market phenomena can outlast almost any prediction.  A convergence of events make this bubble a necessity and a tragedy.
A necessity because although the median Chinese is poor, there is a growing middle class, and in a country of 1.2 billion the law of large numbers applies.  First, most of the properties have been bought.  Developer need the capital from investors to ensure that they can afford to build their projects (a fundamental aspect of the Chinese financial system).  These apartments are kept empty, because in China a "used" apartment is not worth as much as a new apartment.  
Second, Chinese investors have limited scope for deploying capital (as was explained in the report) no foreign investments allowed, limited or no return on bank investments,…

Dinner conversation and Ignorance

Last night when to a birthday party, sitting across the table from me was this youngish Chinese women.  Smart and well spoken, she speaks English, French, Mandarin and Cantonese!  slightly better than most Quebecers!

Anyway, this women was making the point, loudly in fact, that China's policy was the right one, to promote exports and restrict imports, the only problem in here mind was that China was accumulating too many dollars.

As an economist, and a dinner guest, how to do you reply to this idiotic statement.  Well, turns out it rather easy (hint:  after our conversation she gave e dirty looks and stopped talking to me -- which was actually a blessing).  Anyway, I told here that the accumulation of dollars (or US government debt -- the same thing) was a direct consequence of this policy of supporting exports surplus -- that by definition if your exports are greater than your imports you will accumulate dollars (that's what probably pissed here off the most).  She had not m…