Wednesday, September 30, 2009

Good for Canada?

China is boosting spending on all kinds of natural resources - oil and mining acquisitions by at least half this year to take advantage of lower valuations after prices slumped. The nation’s sovereign wealth fund this week spent $2.75 billion on commodities companies and approximately $60 billion in the past year.

“China sees it as ‘We’re going to use the resources for several decades, so therefore our pricing expectations are different,’” Goodyear said. There “will be resource needs ahead, and they will want access to these resources in the years ahead.”

Chinese companies will step up the pace of overseas mergers and acquisitions in a “new wave” of deals.

This bodes very well for Canadian natural resource companies, and, in turn, for Canada as a whole. It goes along with my much repeated theme that "Canada has the goods that the rest of the growing world needs". Canada should be able to ride this secular wave that should last for at least another decade.

Another point of interest here is the simple little fact that one by one, Canada's mining companies are disappearing - either by way of merger with another or by take-over. With fewer companies to choose from, prices should...

Copper prices have doubled and oil has jumped 54 percent this year as China boosted imports to fuel its stimulus spending needs.

http://www.bloomberg.com/apps/news?pid=20602013&sid=ayAyMtVos3tQ



Saverio Manzo

Thursday, September 24, 2009

Smaller, Regional Banks tell tale

Ninety-four banks have failed so far this year. 94 now gone and the pace of bankruptcies have not yet slowed. This, in my mind, gives us a good indication of the true current health of the US economy.

FDIC weighs extraordinary steps, including loans from banks, to shore up insurance fund

WASHINGTON (AP) -- The Federal Deposit Insurance Corp. is weighing several costly -- and never-before-used -- options as it struggles to shore up the dwindling fund that insures bank deposits.

Ninety-four banks have failed so far this year. Hundreds more are expected to fall in coming years largely because of souring loans for commercial real estate.

Bank failures since the financial crisis struck have drained the fund to its lowest level since 1992, at the peak of the savings-and-loan crisis. The fund insures deposit bank accounts of up to $250,000.

"Lots of banks are going to require more capital, and (Bair is) trying to rob from the rich and give to the poor,"

The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry.

Each option carries risk: Drawing money from healthy banks would take dollars out of the private sector, making that money unavailable for investment in the weak economy. But charging the whole industry a fee to replenish the fund could push weaker banks toward failure.

http://finance.yahoo.com/news/FDIC-weighs-extraordinary-apf-3266069115.html?x=0



Saverio Manzo

Monday, September 21, 2009

If we had only listened to Shania

She got it right.
Back in 2002 Shania came out with a song (lyrics below) about the excesses of spending, making money and greed that creating the financial collapse we are all a part of. Its like she had a crystal ball, one that many did not heed to. Mortgages, credit card excesses – she sang about it all!

Check out the song at:

www.youtube.com/watch?v=0SAdIveCzXc

Artist: Twain Shania
Song: Ka-Ching

We live in a greedy little world
That teaches every little boy and girl
To earn as much as they can possibly
Then turn around and
Spend it foolishly
We've created us a credit card mess
We spend the money we don't possess
Our religion is to go and blow it all
So it's shoppin' every Sunday at the mall

All we ever want is more
A lot more than we had before
So take me to the nearest store

Can you hear it ring
It makes you wanna sing
It's such a beautiful thing--Ka-ching!
Lots of diamond rings
The happiness it brings
You'll live like a king
With lots of money and things

When you're broke go and get a loan
Take out another mortgage on your home
Consolidate so you can afford
To go and spend some more when you get bored

All we ever want is more
A lot more than we had before
So take me to the nearest store

Can you hear it ring
It makes you wanna sing
It's such a beautiful thing--Ka-ching!
Lots of diamond rings
The happiness it brings
You'll live like a king
With lots of money and things

Let's swing
Dig deeper in your pocket
Oh, yeah, ha
Come on I know you've got it
Dig deeper in your wallet
Oh

All we ever want is more
A lot more than we had before
So take me to the nearest store

Can you hear it ring
It makes you wanna sing
It's such a beautiful thing--Ka-ching!
Lots of diamond rings
The happiness it brings
You'll live like a king
With lots of money and things

Can you hear it ring
It makes you wanna sing
You'll live like a king
With lots of money and things
Ka-ching!



Saverio Manzo

Friday, September 18, 2009

Prince Harry's inheritance

Princess "D" legacy lives on…

England’s Prince Harry turned 25 this week when he’ll be entitled to the part of the inheritance left to him by his mother Princess Diana of Wales, writes Laura Elston in the Independent.

Princess Diana had an estate of £21 million ($35 million CAD$), but more than £8 million was paid in inheritance tax, leaving almost £13 million ($20 million CAD$) split between Harry and his brother, Prince William.



Saverio Manzo

Thursday, September 17, 2009

Jobs and the economic impact


One of the more unusual aspects of the current economic downturn is the steady erosion in jobs. While employment always lags the economy and markets in times of rebound, the erosion of jobs in this cycle is like nothing seen in the post-war period. Until jobs show recovery, a major housing recovery will not occur, and deficits will rise.

Of significant concern is that fact that past recessions saw employment recovery in a rebounding manufacturing sector. Those jobs are gone, and aren't coming back.

Keep in mind these observations concern the US and not necessarily Canada. However, an anemic US consumer will have an impact on the goods and services Canada sells to our neighbor.

The most important take-away from this observation is the simple little fact that the US consumer accounts for some 80% of the country's economy. So with a high unemployment rate and no wage increase - the writing is on the wall for the foreseeable future.





Saverio Manzo

Monday, September 14, 2009

To save or to spend: simply a matter of sentiment?

In Canada the “savings” trend for the average person has been on a decline for decades. There was a time when the previous generation, and the ones before that – would save some 5 to 10% of their family’s net income. Great for thinking ahead – planning for retirement or just saving for a rainy day. But this prudent habit nearly all but ended in recent years until the financial meltdown and great recession of 2008-09.

Now the fear is that savings rates will escalate at a rapid pace – swinging the pendulum too far to the other side – and this excessive savings means that there will be less spending. Less consumer spending, of course, has a substantial negative impact of the economy. Therein lies the conundrum.

Consumer confusion: Save more, or spend more to help Canada's economy
By Brenda Bouw, The Canadian Press

The recession is confusing a lot of consumers who on the one hand are told to save money for a rainy day but on the other are encouraged to spend to help boost the economy.

It's a conundrum economists call "the paradox of thrift," which means that too much savings can lead to an overall drop in consumption and threaten a nation's economic growth.

"Saving is good, but at the same time ... consumption is good," said CIBC World Markets economist Krishen Rangasamy.

Rangasamy said savings rates typically fall when the economy is strong and rise when it's weak. Consumption rates run in the opposite directions.

When times are good, Rangasamy said people feel comfortable with the rising price of their homes and stock portfolios and spend more.

"They think 'Why do I need to save when I am getting richer?"' he said.

On the flip side, when a recession hits, there's a change in mindset.

"That encourages people to save for the future," he said, which in turn weighs on consumption, which in turn contributes to a weaker economy and higher job losses.

Rangasamy said the key to a solid economy is a balance of both saving and spending.
"Zero per cent savings is not good and neither is 40 per cent," he said
Canadians' savings rate was 4.5 per cent in the April-June quarter, according to Statistics Canada. That is up from 3.4 per cent for same time last year and well above the 1.9 per cent savings rate in the second quarter of 2007.

The savings rate was 6.1 per cent in 2001, when the last economic downturn hit. That's the highest it has been since 1996.




Saverio Manzo

Friday, September 11, 2009

Should over-weight people pay higher taxes?

If we were more physically fit would we be less of a burden on the heath care system? This, in turn, would slow down the rate of increase in health care costs. Should those who choose to eat sugar-laden food, leading to one being over-weight, pay higher taxes?

In late July, Men's Health Editor Peter Moore met with President Obama in the Oval Office to talk health care reform. The most controversial part of the interview was on the subject of sin taxes—that is, taxing soda and other sugar-laden products, as well as activities that sabotage the health of the masses.

Here's what the President told us: "I actually think it's an idea that we should be exploring. There's no doubt that our kids drink way too much soda. And every study that's been done about obesity shows that there is as high a correlation between increased soda consumption and obesity as just about anything else. Obviously it's not the only factor, but it is a major factor.

http://www.menshealth.com/cda/article.do?site=MensHealth&conitem=cf2237c26ab93210VgnVCM10000030281eac____&cm_mmc=DailyDoseNL-_-2009_10_09-_-MainBlk-_-body1




Saverio Manzo