Farmer Diaries

This report is both worse and better than anticipated.  The reality of Canada's unemployment rate drop is entirely driven by a fall in the participation rate, as few new jobs were created in July, but potential workers got discouraged. (Source: StatsCan) Addendum:  I must add that total job created in the month was 7.1k (expectation of 15k, and 28k in June).  In terms of private sector creation it was +28k full time jobs and -18.4k part time jobs -- full time jobs are always better than part time jobs. On a year-on-year basis the picture is "positive" insofar as 252,000 jobs were created in the private sector, while 72,000 jobs were lost in the public sector. We anticipate that this trend will continue, as the Federal government is looking to cut its budget by nearly $4 billion for the 2014/15 budget term, so that the budget deficit of 2010/11 is reverse to a surplus. While Canada's Q2/11 GDP growth appears to be flat, the Bank of Canada is still...

Sunday morning heading back home from an overlong bike ride – 68km, I noticed that a nearby overpass was blocked by the police.   Since I was not planning to go near there, what kind of cretin goes to a police blockade I always wonder?   I went home had a shower and moved-on with my daily activities.   Much later I found out that once again Montreal ’s crumbling infrastructure led to a near disaster.   This time there were no injuries but it was a close thing, workers where around and apparently two cars had just passed under the overpass when something like a 100 tons of concrete decided that Newton was right! This time Montrealers were lucky, but it has not always been the case.   Part of the problem is that for politicians what’s fun is building new things, but repairing them is always such a boor, plus you don’t get your picture in the paper for repairing infrastructure.   Again, Canada’s press is full of miss-information (they’re very good at that...

The biggest “item”, and I wish I could give it less importance is the forward curve on Canadian interest rates, which at +0.21 over the next 12 months tells you that the “market’s” interpretation of the current global economic situation is for interest rates in Canada to remain at their current – and very accommodative – 1% level for the foreseeable future! Overnight, the Swiss National Bank ( Switzerland ’s central bank) gave up the ghost and reduced its benchmark overnight rate to 0.25%, the ECB cannot be far behind, for while inflation is still a problem in Europe , far more critical is the financial instability – The Italian president will be making a speech as soon as the European markets close.   Everyone is suddenly realizing that the contagion risk is a real and present danger, mainly because Europe ’s “leaders” have successfully implemented policies “too little and too late” to calm the markets.   Europe is now facing a $2 trillion problem ( Italy ’s economy is aroun...

Celebrating the agreement to increase the debt ceiling is a little like someone suffering from cancer, whose house is on fire, while there's a shoot-out between gangsters and the cops outside, finding an empty wallet... [ From Foreign Policy Magazine ] Lets no forget that the agreement does nothing for the economy, since for the past two weeks the U.S. government (White House & Congress) has been negotiating an agreement on America continuing to pay the interest on its debt. Now that's what I call a breakdown of government. BTW, Congress spent two whole days debating the "Return of the incandescent light bulb" something Congress has unanimously agreed to in 2005 (Yes of course this was during a Republican administration...).  Moreover, Congress has basically shut down the FAA. Canada was on holiday yesterday, so no news (especially since its the August doldrums up here)

It seems that Canada's economy didn't generate much growth in May -- it actually contracted by 0.3%!  Primary cause was the energy sector, a  combination of summer shutdown and very adverse weather (such as huge forest fires) cause the sector to go negative to the tune of 5.2%.  For those who don't remember April GDP growth was a big fat zero! Now that's not to say that the rest of Canada's economy shines a beacon of growth.  In fact, the rest of the economy was either flat or exhibited small drop, primary downer number was manufacturing which was down 0.4% for the month. Obviously the numbers announced by the Americans this morning (Q1/11 GDP number was revised down from 1.9% to 0.4%, and Q2/11 was revised from 1.7% to 1.3%), hardly helped.  Canadian interest rate futures are down to 37 bps, which tells you that Canadian interest rates are going nowhere fast, the probability of an increase in Canadian benchmark rates is zero for 2011, and very small for Q1/12...

An article in the Globe and Mail this morning discuss how four of Canada's largest banks used the market turmoil to raise cheap cash.  In fact, the cost of debt for Canadian banks over the past few months (5 year paper) has dropped.  Canadian banks' funding base for 5 year debt is based off the Bank of Canada's 5 year treasury rate (the Canadian benchmark) which has declined from 2.9% to 2.15% today.     All the money being invested in Canada is having a dramatic impact on Canadian sovereign and corporate yields.  For Canadian banks, worried about the risk of contagion -- their biggest fears are, as Rumsfeld famously described "Unknown unknowns", raising cash makes perfect sense, especially since there is strong demand for Canadian banks paper.   Problems in the financial system can arise from unexpected directions that will surprise bankers' liquidity.  So far the markets are calm, Futures are down.  There's a bit of Fed POMO activity this mor...

If any proof was required, today from StatsCan From April to May, average weekly earnings of non-farm payroll employees increased 0.5% to $875.64. On a year-over-year basis, average weekly earnings were 3.3% higher compared with May 2010.  Whereas American income is static, in Canada income continues to rise.  However, inflation up here is a bigger problem than south of the border.  In fact, two of the principal daily expense of Canadians are food and fuel and both are up substantially more (4.8% and 9% respectively) than income. Still, they don't represent 100% of Canadians' monthly expenditure. Canada is looking at growth of income and that's what's important.  My guess is that the strength of the CAD will mute inflation pressures, although one of the most important source of inflation in Canada are services....In terms of "where the earnings are being generated"  Warehousing services and manufacturing are the le...

Sorry for the infrequent posts, its just that there's not much to talk about up here in the great white north! Anyway, Canada's "Case Shiller Index" the Teranet - National Bank House Price Index came out today, guess what, house prices are up again (+1.3%) for May 2011 (for a total of Y0Y _4.4% increase in prices) -- shock and surprise, below is a reproduction of the 6 city national index So that's about it, Canadian prices continue to rise.  Oil is at $99/bbl and despite the strength of oil prices the only city that is lagging in price rise in Calgary -- Canada's "oil town".  Vancouver which is already one of the world's most expensive real estate is the big winner with a 6.6% increase in price, followed by Montreal at 6.3%. Another argument for Mark Carney, the Governor of the Bank of Canada.  Although events south of the border would seem to preclude any increase in Canadian interest rates.

Back in the saddle after two weeks of R&R it is strange to see the world’s problem to be the same they were a fortnight ago.   The British characterization of the GOP as a “Bunch of Nutters” was a good expression of the world’s view of America , and to a certain extent the exasperation of seeing an artificial crisis.   Despite what the GOP is saying that we got to put the credit card away, the debt ceiling crisis is about having spent the money and not wanting to pay the bill.   So far the markets are calm, down a bit, but nothing to set your hair in fire. Up here in the Frozen North, statistics do not wait for those on holidays!   Consumer price index for June was released in Friday, while not as bad as May’s number of 3.7%, 3.1% is hardly a source of happiness, especially when you consider that the two outstanding items were food (4.8%) and energy (15%) – with Gasoline up 28%... Nevertheless, prices on a seasonally adjusted basis were down 0.4%, so there is...

Many years ago, landing for the first time in Tokyo, i finally understood the Gozzila movies. As a child of the sixties, ultra-man was part of my daily TV intake, granted you could see the zippers of the monster's costumes, but it was the city that always turned me off, it just didn't look real, until I landed in Tokyo. Tokyo looked like a city in the Gozzila flicks. The same goes for French movies, they have a certain look that is all theirs, one reason is French cars; Renault, Citroen, and Pegeot. After about a week in the French outback i realised why French movie have that particular look, virtually all cars here are built by French companies, a few German cars, but virtually no Japanes cars! I don't know why, there is no doubt that the French are chovinistic, still. Another thing that suprised me is the number of "France blanche" signposts (white france), I'm in an extremely rural part of France, the population here is 99% white, still, they resent ...

Don't know how reliable internet will be "en vacances", so see you all in 2 weeks, more or less!

In May 2011 Canada created 22,000 jobs, America created 25,000 In June 2011 Canada created 28,000 jobs, America created 18,000 In June 2011 the birth/death model added 131,000 jobs to the American  numbers (There is no birth/death model in Canada nor does Canada retro-actively adjust its job creation numbers -- No, I don't know why!). Just saying,