Skip to main content

Whoa Nelly!

Man this market is insane.  Up here in Canada we are watching as spectators, unclear of what our role is in this financial ballet taking place in Europe and in the U.S.  The Canadian stock market is off by nearly 2%, the Canadian dollar dropped 3¢ today – which is a lot.  

On a global basis what we do know:  Energy, metals and other raw materials prices are dropping fast.  WTI crude that was flirting with $85/89 bbl in April is now trading just north of $65/68 per bbl (-24%).  




What we don’t know:  rumors of a German bank in trouble are all over the “blogosphere” after the government there prohibited the shorting of bank stocks, this morning the German Minister of finance indicated that the EU needs to have a mechanism in place if country needs to restructure their debt burden (Greece is not a solution going forward)… what do they know that the market doesn’t?  

Economic indicators (south of the border as usual) are downright horrible, deflation seems to be the problem now, unemployment is up, and housing demand is falling.  Apparently, 10% of all mortgages are behind in their payments.  It turns out that when the money supply drops (as does credit) there are real consequences to the economy.

Anecdotal evidence in Canada is that the real estate market is cooling down; several reports are emerging of a dearth of buyers for condos in Toronto… There is no doubt that the new permits are drying, but then last months number were so large, it is easy to conclude more out of the data the exists.

One thing for sure is that prices are dropping for natural resources, on the other hand manufacturers in Canada just got a massive break, the Canadian dollar has droped nearly 6% on the past two weeks, and energy costs are down 25% in Canadian dollar terms  

Most Canadian economist are taking the view that inflation will breach the BoC’s comfort zone of 1.00% to 3.00% range, others look at the trend line and come to a different conclusion.  That inflation is under control, and if raw material prices are dropping in price then inflation should be tame in Canada – reducing the pressure on the BoC to raise interest rates


My GDP growth estimate remains unchanged at 3.2% for 2010.  Q1 was very strong (first report) but at the very least a slowing in global economic activity and the fall raw material is bound to affect Canadian GDP growth.  Moreover, a slowing housing market will impact GDP growth.  Q3/Q4 will be much slower but still growing.  Giving Canada a positive overall growth rate of slightly more than 3% is still on the cards. 2011 is another story…

Comments

Post a Comment

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b)...
Post a Comment
Read more

Spray painting Taylor Swift G650 aircraft (updated)

 First, a bit of paint will not harm anyone.  These climate activities are going to learn two things in the next few days:  (1) Trespassing at an airport is a felony almost anywhere in the world.  That means criminal prosecution.   (2) removing paint from an aircraft is expensive.   So these climate activists are about to find out the reach of the British criminal system and it will not be pleasant, the UK has very strict laws about that, I would be surprised if cleaning the aircraft of all the paint will cost less than $100,000.     I am sure that when they planned (premeditation) this little show they had a very valid logic to doing this.  Tonight, they are probably realizing the depth of their troubles.   I understand that in the UK it's a minimum one-year jail sentence.    Also, good luck travelling with a criminal trespass charge against you.  I am relatively certain that the airline industry will ...
Post a Comment
Read more

Janet Yellen from China supporter to Hawk...

There is rarely serious news in the world these days, it seems that most newspapers are filled with headlines and little else, and then Ms Yellen went to China.  Secretary Yellen has long been known in the Biden administration as the voice of moderation when dealing with China, yet as her trip which concluded yesterday a hawk was born:  She warned the Chinese against dumping goods in the United States.    fighting words! The American administration is very concerned about the lack of Chinese domestic consumption.   Even before the COVID-19 epidemic, there were already the beginning signs of a slowdown, automobile sales were off.   China is facing domestic deflation (a clear sign of collapsing demand) China imports few consumer goods, they import raw materials and intermediary goods.   It seems that the American administration is concerned that the Chinese administration will dump consumer goods abroad to keep its manufacturing machinery ...
Post a Comment
Read more