Farmer Diaries

So over the past few weeks, petrol has gone from $99/bbl to about $91/bbl.  During that time the CAD has gone from parity to the USD to 0.97 to the greenback.  Now my Western Canadian friends can say what they want but it remains that the correlation between the CAD/USD trade and the price of crude is well correlated (factor of 82% -- which is high). Anyway, where oil price are going from here I have no idea. On a related note several Shale Gas Cos are facing dramatic financial pressures.  Looking at the numbers it would seem that break even is around $8/MMBTU whereas price are around $2.6/MMBTU.  Turns out that the wells depletion rate is the issue -- Shale Gas Cos have been hiding the dramatic drop in production via faster and faster new drillings; a shell game that eventually blows up! Turns out not only is Shale Gas exploration dangerous; its also a money losing proposition, who knew!

If it were not so sad it would be funny; after the mortgage backed securitization fiasco in which GS played a leading role in mis-stating the facts for their clients -- like they had no role whichsoever on selecting the mortgage pool. GS's muppets have been playing the games for years, they suspected that the bank was screwing them; now they know.  I had friends who work at GS (note the tense) I always though they have a certain moral fiber (and I don't mean it as a compliment), an ability to see the real world in a way that fits their own reality (thruthiness if you will). The lastest, thanks to their (soon to be ex) grossly incompetent lawyer (and apparently not much of a human being) was to provide the world with the proof they they treat clients as muppets, unless of course they are favoured clients (read hedge funds).  Turns out that not only did GS actively promote naked shorting (which is in the same ballpark as insurance a house you don't own an...

Some very strange things are happening in China, but the overall theme is:  Capital outflow.  The discussion is remarkably technical, but in a nutshell investors because of global uncertainty and apparent economic growth deceleration in China are looking to hold US dollars. First, it would seem that the opening gambit is the deceleration in China's export machine -- America is limping along and Europe is at the edge of the abyss.. so the Chinese government's "usual" source of dollars is drying up (e.g. exporters).  More to the point those exporters now appear to be short US dollars.  While foreigners are finding fewer investment opportunities in China. Now, China has an easy out, it could sell US treasuries and replace these IOU with American dollars (the same thing really), but China is reluctant to admit to this problem, because it could create a vicious cycle outcome with more people believing that there is an excess of Yuan.   BTW the impact of...

OK, Over the past few weeks there's been a debat in Canada as to whether the Canadian economy was facing the "dutch disease", which for those who don't know -- the Dutch economy was decimated when the country discovered oil, that drove up its currency and killed its manufacturing sector (we're talking the late 50's and early 60s). First and foremost the whole "dutch disease" has always been a side bet, even in the Netherlands -- other factors played an equally important role in the destruction of the manufacturing sector; bad management, bad labor practices and bad government policies -- added to a strong currency caused by the the oil & gas sector. For some reason Westerners  (Canadian -- not global)  have taken the view that the strong commodity sector -- and oil in particular have nothing to do with the strength of the CAD, of course this is complete bullshit, but where they are right, its not the only reason.  Several studies have showe...

I participated in my first ever Kickstarter project.  By coincidence it is, by now, the single most successful Kickstarter project.  The idea behind Kickstart is driven by cloud sourcing; where ideas go to the "cloud" to fund their ideas. This one is for a watch that talks to your iPhone.  See here

Up here in the Great White North (Canada) spring is a May affaire (usually), there are even sayings that outline that until may you should stay bundled up.  I have seen major snow storms in mid April, so a month ago we got 26c and yesterday too.  Even mor unusual is the Laurentians when I have a cottage, and were last weekend the lake was completely free of ice... Usually we have to wait until mid May for the ice to go away. Spring was at least 3 weeks early

I've posted before about the fact that for more than a year now I have been living without a car, and loving it!  This morning I was reading an article in The Atlantic Cities citing JD Powers (the car evaluation company) about how young people were no buying the "American Dream"of buying a house in the "burb" with two cars and 2.5 kids.  Rather they were looking at living in areas were walking (or cycling) was a transit option. On a personal note the first generation of my friends' children are now of driving age (scary) but a surprisingly large number seem uninterested (many failing to even obtain driving licenses).  The JD Powers' analysis seem to show that young adults see cars as a tool rather than a status symbole. One article (especially in a specialized publication that seem to favor mixed development housing etc) does not a trend make, although JD Powers does add weight to the argument.  As a 50 year old who lived for many years...

Everyone is now focusing on Spain and/or Portugal now as the "next domino" to fall, but in fact the "solved problem" that is Greece keeps on rearing its ugly little head. Last week the European commission published a 195 page paper detailing most of these facts ( the second economic adjustment programme for Greece , march 2012).  Pay special attention to page 55 (where most of the juice lay). In mid March the Greek government was so broke that it raided the bank account of the 6 largest Greek University, a public utility and other government controlled entities; the result now the six universities have to close because they cheques (like salaries) have begun to bounce -- the accounts were emptied to the tune of Euro 1.7 billion, so that the Greek government could make whole a sovereign owned bond payment.    The reason is that although Greece was scheduled to receive Euro 74 billion on March 20th it only got Euro 7.5 billion.  N...

Go figure!  How can the same movie be rated G in Canada and rated R in the US.  Clearly something is wrong.  First off, the movie is a "pull no punch documentary about bullying"  the language is "frank" and the imagery is difficult.  The thematic is particularly troubling since it deals with something we have all at the very least all seen (or worse suffered). For some reason a frank analysis of a huge problem for children in North America -- maybe cathartic to children suffering from bullying and may even make those who "tax" think hard about their action is seen as something unacceptable for American children to see. Sad and amazing

I return to Montreal in the early 1990's from living more than a decade in London.  I worked for a few years here at what is now a major aircraft manufacturer.  One of the first thing I was asked is whether I played ice hockey -- I answered no (I really don't), but out of curiosity I asked if there was a team -- even then this was a big company, imagine my surprised when I was told there was not only a team, there were leagues (plural intended!)  In fact each "plant" had something like 30 or so teams -- some were nearly NHL caliber in the playing ability. Every night when there is a hockey game in Montreal (at the Bell Centre) its a full house.  Every single ticket has been sold, and that's despite the team playing rather badly over the past few years (decade).  In fact, the Montreal Canadian are the NHL's most profitable team in terms of revenues (and by a long shot) with Boston and NY Rangers r. So yesterday was budget day in ...

The continuing (although the end is in sight) saga that is the Republican primaries has proved to be a fascinating process and a recent article in the NYT has put even more colour to the race to the White House.  South Carolina has been the bellwether for presidential politics for more than 20 years, and yet in the recent GOP contest some of the data is hard to believe and represents a disaster for the GOP. A few days ago I mentioned that the Hawaii GOP primaries participants totalled slightly less than 10,000 voters -- in a population basis of 1.7 million (trust me that's not a lot).  But the results from exit polls for the South Carolina primaries are even scarier (for the GOP).  First the shift in the type of voters; whereas four years ago something like half the primary voters (we are talking GOP here) were fundamentalist christians, now it's 64%.  Whereas 95% of voters in 2007 were white now its 98% (scarcely believable that So...

As a finance guy there are a few things you have to read almost on a daily basis; the Wall Street Journal, The Economist, The Financial Times are the three core "journals of record" of the financial world.  Over the past 5 years my reading habits have been changing.  First to go was the WSJ, frankly now that the rest of the journal (the Editorials and opinions always were) has been taking over by the loony right and now colours everything they write (I blame Newscos to some extent... but the seeds have long been there).  The FT for some reason (maybe because the problems in Europe are so severe) has become such a Eurocentric publication to become almost irrelevant to my needs. I had a short divorce from the Economist (2002/06) but I'm now back in the fold.  The one surprise has been the NY Times that has proven to be a very good replacement for the WSJ (Ok the opinion pages has the same problem, except from the other side of the isle),  ...

Exactly 12 months ago today I moved out of my now sold "big house" in Westmount to my loft in Old Montreal.  It was also the day that I gave up my car -- actually my third ever car... For a Canadian born in the 1960s I have an unusual relationship with cars; first as a teenager I lived downtown where owning a car was not only useless but was far too expensive, although I had great summer jobs (working in hospitals) the idea of paying a $100 dollars a month for parking was a non-starter.  As I grew older (and went to university -- less then 3 blocks for my parents's apartment), the idea of moving out was less than appealing .  So after three years of university I moved to London (England) where owning a car made absolutely no sense whatsoever (so by the time I came back to Montreal in 1994 -- I was 33 by then) I had never owned a car!   In fact, the first car I ever owned was a 1994 Saturn -- all of three years before moving to S...

Ok so watching the Republican slug fest last night, it was amazing how well Santorum did, considering that all the polls had him trailing Gingrich and Romney, turns out that he won, and Romney came in third (although it must be said it was a very close contest with each of the three picking 1/3 of the vote).  It is also telling that despite Romney superior cash position (Romney outspends two or three times over the combination of Gingrich and Santorum), that he does so poorly.  Romney will almost certainly win this contest (although people said the same thing about Clinton in 2008) but the cost may be substantial.  In this era of "video playback" it will be hard for him to walk back his comments.  He will also be unable to go after Obama's health care program (since it was largely modeled on Romney's own Massachusetts' plan).  I think it was the NYT that outlined that this primary was the cheapest in over a decade. Most amazi...

First, I've got to be more precise, I love his honesty about his mid 17th century opinions, and be upright about his insane views.  This guy who clearly didn't understand Kennedy's speech about the separation of church and state -- that by the way allowed Santorum, a catholic, to run for president.  He doesn't understand why the founding fathers wanted separation (so that the European state conflicts would not appear in America). This is a man who is against contraception (probably also against vasectomies?), against abortion at any cost, against women at work, and now against education for Americans (a guy who has BA, MBA, JD...).  Get this, America's right is eating it up, they love this stuff. I love Santorum for his honesty, unlike his friends (those who are running, and those who are not) that speak in code, the kind of code that gave us "separate but equal" and "intelligent design".  No Santorum would gladly bring 'merica ...

My favorit line yesterday from Commerzbank's announcing 4th quarter profits up from Euro 257MM to Euro 316 MM, including in this marvellous performance was a profit from buying back its own bonds in the secondary market of Euro 735MM; so more than 100% of Commerzbank's fourth quarter performance was driven by the ECB's largesses -- in the form of LTRO borrowings; think about it the reason that the bank's debt was prices so low was because the probability of repayment was low, now with the help of the ECB's money, Commerzbank was able to retire that debt at a substantial discount. At the same time Commerzbank will boost capital by Euro 1 billion, and the bank will improve performance by reducing risky assets (i.e. read here fewer loans).  You can bet serious money that what Commerzbank is doing is also being done by DB, SocGen, BNP.  So companies looking to borrow will find it increasingly difficult, if you cannot borrow you cannot invest -- especially ...

its not a lack of material, but a lack of time.  I am now the General Partner in a new hedge fund... its a lot of work... On that, my partner and I decided that will not accept any US money in our fund, we are much too concerned with the new Dodd Frank rules.  A hedge fund manager recounted to me that they've just received a 300 page questionnaire to fill out.  300 pages (that's phone book thick).  I though he was exaggerating -- until I read The Economist that mentioned that same document (apparently my friend was exaggerating its only 298 pages long...). In Canada, hedge funds have a closer but more discrete supervision.  Fewer rules but tighter regulations.  It seems that America is doing its best to kill capitalism... Anyway, now you know!

As a Canadian living in Canada, where the Bank of Canada continues to warn of extremely dangerous financial times ahead, I watch in amazement the action of American and European banks -- maybe they know something we don't in Canada, but it remains that these institutions are trading as if Basel III was not going to happen -- ever.  Entering into trades that will soon be prohibitively expensive (because of capital requirements). This was gleaned not through some great market insight on my part, rather a discussion today with some three "old bankers" who've worked the entire planet -- as bankers (you know, a few years in NY, Tokyo, London and maybe even some stranger outpost such as Shanghai...).  Bottom line these guys were telling me at lunch today (they now all work for Canadian banks) that they are observing what's going on in the market and are surprised!  First off, because all of Canada's banks effectively o...

An article in today's FT drew my attention, how clients are asking their investment banks to create investment products that will protect them when/if Greece falls out of the Euro or the Euro ceases to exist (two option, one outcome).  Asking investment banks for this kind of advice smacks of stupidity.  First, because in the past, protection products have been better at generating fees for the arranger than at protecting the investors; think of portfolio protection in the early 90s.  Secondly, and more importantly, the issue with the failure of Lehman was not the direct consequences but the indirect ones!  It is the "Unknown, unknowns" that kill you, and that cannot be protected against. A simple example, many companies would be looking at protecting core assets and revenue streams, but what if your bank goes belly up, not because it did anything really stupid, but because it had exposure to other banks that had stupid exposure -- the loops are endless. ...

Ok, so most of North America is shut down today, family day in Ontario, and I'm not too sure what's the holiday in the U.S. But, what is interesting is the direction of oil prices -- not too sure what is driving them today, it is hard to believe that with Europe's economy is taters, China lowering interest rates (by 50 bps) because of the weakening housing market (although inflation is still sky high there), that the driver for higher oli price is a seemingly recovering U.S. economy... no, I suspect it is the neo-con (and evangelicals) trying real hard to start another war -- this one with Iran. The most amazing commentary this weekend was that from a close confident of GW Bush (the young one) whose decision to invade Iraq was partly driven by a desire to see the apocalypse that woud eventually lead to the rapture (I wish I was joking), that and the ideal of finishing "dad's war" were the prime drivers -- despite what everyone say's in the GOP today t...

Not a huge surprise (a little surprise), still CPI for January 2012 is going up again, although a small increase (from 2.3% to 2.5%), underlying this inflation is higher food prices +4.2% and higher gasoline prices +6.5%, and February is looking dodgy on the fuel side, as oil prices (Brent crude hit the $120/bbl yesterday).   So StatsCan shows that inflation that had shown a positive trend for the past few months, is now on a reverse course.  Canada's reality is that the economy did relatively well in 2011 with GDP growth of 2.1% (very very early estimates of Q4/11 are for GDP growth of 1.3% annualized).  The rest of world had a bad time in 2011 -- Europe seems to be  in a slow down mode -- Greece GDP shrank by 7% in Q4/11 -- not annualized data, real absolute shrinkage.  However, since so little of Canada's export are destine for Europe... The first "reality" is that January 2011 saw gasoline prices at a 40 month high (yep we go to go "pr...

At the time the media claimed that such an exit would cause terrible dislocation: Massive GDP contraction Massive layoffs Social unrest. How exactly is the situation now any better for the Greeks, Check GDP contraction, Check massive layoffs and social unrest.  In fact, and BNP's quarterly results are the proof (if any was needed), the game of shell being played in Greece was to give European banks the time to write off, or selloff their risky assets. BNP first wrote off 20% of its exposure to Greece, then to 50% and now 70% write down.  They have also reduce USD denominated assets by 30%. BNP is certainly not the only bank that has done this, several have also taken the hard decisions... but Greece is still failing; Over the past three years GDP is down 16% and unemployment has risen from 7% to 20%.  The latest demands -- 30% reduction in minimum wages and further cuts in government programs are certain to make things worse; and there ...

I suspect that what Bill Gates and window were trying to do, Apple has in large accomplished. I own: (1) MacMini (2) Macbook Air (3) Iphone (4) Apple TV (5) Apple Router So first off I listen to all my music on my stereo via Apple TV, I use my MacMini DVD driver to load software onto my MacBook Air and finally, I now print on my old Canon printer with no wires attached to my MacBook Air. Of course I can access all my files that are on my MacMini hard drive -- useful because it is backed up by timemachine that backs all my files every night... I have no idea if I had a different wifi router all this would work?  I will try to print this weekend at the cottage -- maybe it will work, there too Are you kidding me. The only shortfall is the synchronizing of calendar and address book.  That is really is not working very well yet., although I seem to have found a solution with Fantastical...

Sunday morning, reading some tech writer on new and interesting things, I fell across an new GPS traffic app (been around for a while but I'm an old foggy!).  The app is called WAZE and it simply amazing, driving down to Montreal from the cottage it alerted me twice about minor accidents (that was slowing the traffic), and of congestion on two alterative routes to my place. Think about this, this was freeware -- and about 20x more useful that the Garmin (also installed -- and not working well at all -- it refuses my address in Montreal).  First, Waze worked from the very first, finding my location in a few seconds (mix of GPS/GSM antena) then it gave me useful information, in understandable english. For those who like to have accidents, you can also easily add hidden camera warnings (it is a Traffic social media), cop cars that are checking traffic.  The best bit, it figures out congestion just by watching other users that may be circulating ...

Reading last night that the Greek parliament had voted to support the Troika's demand for renewed and deeper austerity measures, with 20% unemployment and nearly half of those between the age of 16 and 25 unemployed you know this is going to end well! (sarcasm).  This morning, the leader of the New-Democracy Party (the likely winner of the April elections), said that he wanted to renegotiate the deal with Europe... less then 24 hours after the deal was inked. Reminds me of an old story; a friend started his working life at ACDI (Canadian developmental agency -- working mostly in Africa), he was dealing with a rather unsavoury type (President for life kind of guy) and as soon as they had signed a loan agreement; this President asked:  "Is it too early to start renegotiating the repayment schedule?" To his credit my friend soon left government employ -- since he had reported his conversation, and his boss had told him to "leave it alone". B...

On Friday, StatsCan published the merchandise trade numbers for December 2011 -- and despite a strong dollar, Canadian exports did very well indeed!  Canada generated a $2.7 billion trade surplus for the month, imports rose, but exports "exploded upward", in numbers imports rose 0.8% but export rose 4.9%. The big winner was equipment and machinery and the auto sector.  Will this continue?  Hard to say, because the US economy, which is Canada's export market prime driver seems to be in recovery mode.  On bit of statistics that worries this writer is U.S. gasoline consumption ; which is now lower than in 1980 -- 32 years ago.  BTW this not driven by a reduction in inventory, gasoline is a just in time business, no one keeps stocks, because it doesn't keep. The problem is that historically, gasoline sales have been highly correlated with economic growth (or the lack thereof), and so this could be a important marker.  For Canad...

Well the outside auditors published their final report February 1st on the on goings at Sino-Forst and the result are:  They found nothing, clearly the short sellers were wrong... one little problem; the outside auditors had very poor access to data in China.  It seems that the stone walling worked just fine.  I guess its in the hands of the RCMP now. RCMP: Sir, we are investigating the Sino-Forest problems Chinese officials:    你为什么 不 戴你的 滑稽 装备 (1) RCMP: Sir, we are trying to find if Canadian investors were defrauded Chinese official:  我不在乎  - 但 你能 唱 这首歌 “我 是一个 伐木工人 ...... ” (2) (1) why are you not wearing your funny outfit? (2) I don't care -- but can you sing that song "I'm a lumberjack..." And for those who don't know Monthy Python here it is

Apparently the Russian authorities are still prosecuting Sergei Magnitsky -- you know the lawyer who died in police custody (after torture).  I wish the FT's account was fictional (it is a little) but it turns out its true.  Earlier this week a tribunal sat (and cited Magnitsky for contempt, because he didn't show up at the trial -- apparently dying in police custody is not good enough) Read it here

Rio Tinto announced its results for the year, the numbers were good, except for one tiny little problem.  They also took a write down on Alcan.  Rio bought Alcan at insane valuation in 2007 (just before the crisis), the figure if memory serves was $100 per share.  No other buyer could come up with a figure near that (rumours are that Alcoa was near $85).  So the company that Rio bought for $44 billion in 2007 is now worth slightly more than $36 billion.  BTW its not like Rio has been standing on its hands in terms of investments into Alcan. On the bright side the CEO has agreed not take a bonus this year...  Looking at the stock (up nearly 25% since mid December), shareholders seem largely unconcerned.  Granted that in the greater scheme of things $9 billion is peanuts, still its nice to see reality come knocking.  This was a bad deal, it is hard to say what will be the long term impact to Alcan going forward (in terms of capita...

This morning the stock price for Societe General is around Euro24.00 up 40% from its January 15 low of Euro 17. UniCredit saw its stock price double to Euro 4 from a low of Euro 2, granted the whole mess around its rights' issue clouds the picture a little bit but... This morning looking at the VIX (Volatility of the S&P 500 -- or the fear index) is at a post crisis low (low 20s), yet none of the news is particularly good, the only explanation is that the ECB's LTRO program is working as planned -- boosting stock prices despite rising real uncertainty.  The reality of Greece is hard to escape -- Greece's tax revenus are collapsing, the Greeks are reluctant to push reform any further (there is no doubt that Greece is very unproductive, it has been for years).  Bottom line, we are looking at a very messy exit by Greece of the Euro -- if there is no new cash coming (budget deficit of 9.5% mainly because revenues have collapsed) then default will occur. I don't...

Ok, so yesterday I spoke of The Economist article about how expensive Canadian homes had become, after a 13 year housing boom that reality was about to catch up with the theory:  All performances (eventually) revert to the mean. So imagine my surprise when this morning StatsCan published the new building permit for December 2011 that showed an 11% rise in permit requests... ( Source: StatsCan ) Now what's interesting here is not the trend but the level!  Frankly in building permits the trend is far from clear, but the level is important here, it is the first time that the number exceeds the June 2007 peak (not shown here -- take my word for it).  That means that despite all the statistical analysis, the view that Canadian are overly indebted (they are) construction is booming in Canada.  The increase was from "multi-family" units in Ontario and Alberta -- in fact that Ontario data is minde boggling, it represents a 28.9% increase to $1.9 billion. ...

Forwarded by a friend this morning: Now, that's simply careless and frankly insulting, that someone in Ontario would translate text from English to French, and clearly have no idea what he/she are writing.  For those who don't understand French; a loose translation would be a colloquial expression for  male self pleasuring...  You got to give it to the people of Windmill Sausage Co., Ltd.   These people must be glad they don't have a web site! Frankly, this next one is just funny: Now, in both cases neither the label manufacturer, the client or for that matter the store notice that this wording was rather incorrect -- BTW the second one is the wrong translation they used "nuts" as in "nuts and bolts" Vs nuts to eat (which would be "noix"). I know that people in Ontario generally dislike French Canadians (especially if they are from Quebec), bust still both of these errors are rather glaring, even for some one who's on...

If you are male between 15 and 24 and live in Montreal you are screwed!  Unemployment in the gender/population  segment is the worse in Canada -- on the other hand if you are a female, unemployment is not a problem!  In fact, in the 24/65 age bracket women in Canada are near full employment -- they are mostly service industry jobs, so probably not the best paying position, but at least women are working near or at full employment level. The second trend is that a huge line divides between Ontario and Manitoba between job growth and job losses -- Ontario and Quebec, Canada's central manufacturing hub are suffering whereas Canada's resources based economy (yes oil and Gas but also mining) are doing great, and there is a deeper change too,, in that Western Canada's labor force is younger -- as Canadians are attracted to the job market there, so not only are there fewer jobs in Eastern Canada the demographic implications are severe. Canada:  Employment Level ...

One of my favorit Australian blogs is Steve Keen's Debtwatch .  This is a sceptic, but in the right way.  His view on Australian housing is systematic and his 2011 call what right on the money -- Australian house price have begun falling (Australia has a lot of inflation compared to US and Canada), so for 2011 house prices fell (in nominal terms by 4.8%), but adding inflation and the figure becomes 10% -- I was not kidding! His view for 2012, more of the same, another 10% drop.  Canada and Australia were the last two OECD countries that had not seen a real correction in house price, in both regions house prices have been growing faster than national income, and so eventually, the wall had to be hit. It now leaves Canada as the only OECD country still seeing rising home prices (although the price creep has slowed apparently).  As of November 2011 house price (YoY) were 7.4% higher than in 2010 -- but for the month the prices had fallen by 0.23% for Octob...

Is it just me, but looking at Facebook's market valuation (around $75 billion) its revenues ($3 billion) you wonder what kind of growth is being factored in here. From Facebooks's S-1: We had 845 million MAUs {monthly average users} as of December 31, 2011, an increase of 39% as compared to 608 million MAUs as of December 31, 2010. We had 483 million daily active users (DAUs) on average in December 2011, an increase of 48% as compared to 327 million DAUs in December 2010. We had more than 425 million MAUs who used Facebook mobile products in December 2011 And  During the month of December 2011, we had on average 360 million users who were active with Facebook on at least six out of the last seven days, providing perspective on the number of people for whom Facebook is essentially an everyday activity Think about these numbers for a minute in terms of total world population!  Lets say there are 7 billion humans on...

For nearly 15 years I have been the proud owner of a Barbour coat, you know these coats thte Brits wear, they are green and covered in wax... Now, my coat is been "away" for some months (nearly 3 month) being repaired and re-waxed.  Well today at 12:55 the postman came and delivered the waxed and repaired coat. Finally!

The IPPI decreased in December after posting a 0.3% increase in November. It was the IPPI's largest decline since the 0.9% decrease in June 2010. The downturn in the index was largely a result of lower prices for petroleum and coal products (-3.7%) and primary metal products (-2.4%). Chemical products also contributed, though to a much lesser extent, with a 0.7% decline( StatsCan ). So the massive IPPI increase of earlier this year has tempered, on a YoY basis, IPPI is up 2.8%, not great but better than the 5.5% in May.  Again, fuel costs are at the center of the reduction, but they are joined by raw material prices (as metal prices have dropped).  Overall, its a win for Carney, that had resisted raising interest rate (because of global economic concernes) to meet inflation expectations, because he believed these pressures to be transitory.  Like the the Bank of England, the BoC was right on that call. Looking at the data in greater depth, what...

Ok, so for more than a year, the governor of the Bank of Canada, Canada's minister of finance and a number of "important folks" have been making a point in speeches that Canadians are borrowing too much and are taking on too much debt, usually to buy a condo in Toronto or Vancouver.  Well guess who's finally joined the party, but the Main Stream Media (that's what MSM means).  Anyway suddenly the papers are awash (awash I tell you) with stories about the forthcoming large scale bankruptcy of Canadian facing impossible mortgages. First off, yes Canadian have taken on too much debt, there is frothiness in the market, as is normal for any real estate market that has had a virtually uninterrupted boom for the past 13 years., but (and its an important But) comparing what's going on in Canada with the situations that has afflicted our American cousins miss the point.  First off, Canadian have seen a constant improvement in national income ...

This is almost unbelievable but it is apparently true.  The ECB (and the IMF it has to be said) have decided (BTW this is a long held position) that their exposure to Greece is worth 100 cents on the Euro!  In effect the ECB takes the view that they provided new money (not always) and that their loans to Greece cannot be redeemed for less than parity.  It gets even better, all the bonds that the ECB bought from the market should also get 100 cents on the Euro! Now the concept of Dip (Debtor in possession) financing is clear, after a bankruptcy new money gets preferential treatment in the waterfall of repayment.  Of course, the problem here is that non one in Europe wants to contemplate a Greek bankruptcy.   The "funny" bit is that now the ECB wants to make a profit on the bonds it bought in the market, because if they are redeemed at par, since the ECB bought them at a discount (yield of 7% vs coupon of 3%) they would ...

Mr. Rosenberg and I sing from the same hymn sheet.  We both take similar views (I have never met DR) that the current recovery in Canada is driven by externalities (Good for Canada), but that the economy faces some massive challenges; specifically the China ride seems to be over -- how many more cement or steel plants will the Chinese build?  For China the next shift has to be its consumption -- right now less than 35% of its GDP (compared to 69% and 55% for the U.S. and Canada respectively). DR also takes the view that more debt for over-indebted countries is not the solution.  Canada is in relatively better shape (still not good), but the U.S., the U.K and parts of Europe are in terrible shape and it will take years for this debt burden to be reduced (or forgiven).   Obviously the housing sector in America, the UK and part of Europe still have some way to go.  America will permanently reduce its single family units, so construction will be i...