CA Economic Fundamentals 2008 (07,08)

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Financial illiteracy a big part of current crisis

A few years back, the person winning the dream home raffle at Edmonton`s summer fair now known as Capital Ex was shocked to find out how much she would have to pay for things like property taxes and utilities.

Similarly, one reason for the housing crisis in the United States is that many first-time homebuyers didn`t understand that mortgage interest rates kept unusually low in the wake of the 2001 terrorist attacks would soon rise and in many cases become unmanageable.

"That whole sequence of events initiated the subprime issue, and I don`t know that the consumer understands this causal web," said Dave Salloum, portfolio manager with RBC Dominion Securities.

http://www.canada.com/edmontonjournal/news...d9-f9ca4e929198

 

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Gas prices putting brakes on consumers: economist

Volatile gas prices are causing more Canadian consumers to park their cars this summer, but there is some light at the end of the road.

Pump prices have fluctuated over the past few months from the $1.20 range to nearly $1.50 a litre, driving down consumption.

BMO Capital Markets economist Douglas Porter said that while gasoline prices rose 8.8 per cent in Canada during May, service station sales were up just 2.4 per cent, "suggesting that drivers really did park it in the face of soaring prices."

http://www.canada.com/ottawacitizen/news/b...f8-3347974cbd6d

 

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Dollar boosts Canadian cities` cost of living: survey

The strong dollar has made Canadian cities relatively more expensive places for foreign firms to relocate their employees, an annual survey of the living costs in major cities around the world has found.

The added cost isn`t necessarily enough to deter them, but it is enough to make them give careful consideration to such relocations, said Danielle Bushen, a principal with international consulting firm Mercer, which conducted the survey released today.

Toronto is the most expensive Canadian city, and 54th most expensive in the world, jumping 28 spots up the ladder from 82nd place a year ago, this year`s survey found. However, all other Canadian cities surveyed climbed in the ranks as well, with Vancouver moving to 64th from 89th, Calgary to 66th from 92nd, Montreal to 72nd from 98th, and Ottawa to 85th from 109th.

http://www.canada.com/edmontonjournal/news...ce-f10386f54e73

 

[joeiannuzzi]

Holding companies can give rise to double tax problem

Okay, so it`s not the nicest table in the world. The fact is, it`s been down in a corner of our basement for 10 years. In her haste to purge our home of unwanted things, my wife, Carolyn, donated that table, a perfectly good set of encyclopedias, a mood ring and two nice rug hangings to a charity down the road that was having a garage sale to raise money. Now, I can part with the mood ring, but that table was something I made in high school with my own two hands. I still recall paying $23 for the wood to make it. And now, so many years later, I find myself buying my own table back for $25.

There is something very wrong about a man having to pay for his own stuff twice. It`s equally painful to pay tax on the same amount twice. Let me explain.

http://www.theglobeandmail.com/servlet/sto...ory/TPBusiness/

 

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RRSPs now safe if you go bankrupt

Here`s good news that will give investors some peace of mind:

If you find yourself in financial trouble and have to declare bankruptcy, your registered retirement savings are now safe from your creditors.

Recent amendments to Canada`s Bankruptcy and Insolvency Act now rule that for bankruptcies occurring after July 7, 2008 creditors can no longer go after your Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) or Deferred Profit Sharing Plans (DPSPs) to pay off owing debts. In the past, only some investments such as certain segregated funds and pension funds were protected from creditors. Now, you don`t have to worry that all your retirement savings will be forfeited if you go bankrupt. However, to prevent intentional protection of funds, any money put into registered plans in the 12 months before a bankruptcy (or longer) may not be subject to this new rule.

http://www.torontosun.com/Money/2008/07/25/6259581-sun.html

 

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Oil prices , Canadian dollar poised for fall, agency says

Oil prices will sink well below $100 U.S. and the Canadian dollar will retreat to the mid-90 cents U.S. level, the federal export promotion agency said in its latest forecast yesterday.

Exports will rise by 4.2 per cent this year, Export Development Canada predicted, but added that all of the increase will come from higher energy prices as the volume of trade is projected to fall by four per cent.

The outlook for exports next year is no brighter despite the more competitive currency as the retreat in prices for oil and other commodities pulls exports earnings down by one per cent, it said.

http://www.canada.com/ottawacitizen/news/b...9f-52cfa4d3e1bd

 

[joeiannuzzi]

Dip in oil price is only temporary

Along-awaited correction in oil prices is upon us. Demand destruction from high oil prices and weak economic growth, combined with rising supplies over the next year, create an opportunity for oil prices to fall further. But it probably won`t last long.

Market demand for energy, not speculation by traders, is the main reason for higher oil prices over the past year. Therefore, oil prices are unlikely to keep falling for long unless emerging market demand falters.

http://www.nationalpost.com/todays_paper/s....html?id=681302

 

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Progress is bittersweet in Gold Rush country

WHITEHORSE -- Rob Jack points to the grey-panelled home a few doors down from his own and smiles. "Just went for half a million," he says, while taking a break from working on the 30-foot Winnebago parked in his driveway. "Mine is close to $400,000 now. But these are nothing. Go down the street and around the corner. Those places are going for upward of $800,000.

"It`s crazy. Who would have guessed?"

Yes, who would have guessed. It won`t be long, realtors here say, before Rob Jack`s tony Whitehorse subdivision of Copper Ridge routinely sees homes going for a million dollars or more. Many of the ch`teau-style estates wouldn`t be out of place in the upscale suburbs of Vancouver or Toronto. Or Whistler, for that matter.

http://www.theglobeandmail.com/servlet/sto...Story/TPComment

 

[joeiannuzzi]

Canada proves `tax-friendly`

OTTAWA -- Canada and its major cities are relatively tax-friendly places for business, more so than the U.S. and its major cities, according to the findings of a global survey by an international accounting firm.

"Canada has the third-lowest tax cost for businesses among 10 countries studied," KPMG said in the firm`s latest guide to international business costs -- Competitive Alternatives 2008 -- released Monday.

The findings fly in the face of common complaints by business that Canada has an uncompetitive tax system.

http://www.canada.com/edmontonjournal/news...c4-e1f7bf790435

 

[joeiannuzzi]

High food prices are here to stay

TORONTO -- Rising grain and dairy prices are taking a growing slice out of household incomes as food giants such as Kraft Foods Inc. hike their prices to cover higher input costs. That slice is expected to continue to grow, according to Donald Coxe, global portfolio strategist at BMO Capital Markets.

"I just don`t believe that we`re going to, three years from now, have the share of people`s spending budgets on foods consumed at home anywhere near as low as it is now," said Coxe. "There is nowhere to go but up for food prices. Any pullbacks are buying opportunities."

http://www.canada.com/theprovince/news/mon...e7-48be36721a22

 

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Commodities boom has room to grow: analyst

Scotiabank`s commodity price index sprinted to a new record high for the sixth consecutive month in June, and despite recent declines it is far too early to call an end to the cycle, says analyst Patricia Mohr.

"People have been calling an end to the commodities boom for the past three years," said Ms. Mohr, commodity market specialist at Scotiabank. "I`m not in that camp."

Oil prices have led July`s commodity decline, falling sharply in recent weeks from its July 3 high of $147.86 U.S. to $121.65 in midday trade Tuesday.

http://www.canada.com/ottawacitizen/news/b...eb-0a97800f975d

 

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Corn-based ethanol: The negatives outweigh the positives

Canada`s governments have done something really stupid in subsidizing corn-based ethanol, and requiring its increased use, but apparently cannot correct their mistake.

As a policy to reduce greenhouse gas emissions, corn-based ethanol is a poor option; as a farm subsidy program, it`s also a poor bet. Making matters worse, corn-based ethanol takes corn-for-food out of production, and moves land from other kinds of production into corn, thereby adding to what are already rising food prices.

http://www.theglobeandmail.com/servlet/sto...PComment/?query=

 

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Provinces knocked for corporate tax policies

OTTAWA - Provincial governments are "whittling away" the gains to be had from recently reduced corporate taxes by micromanaging their economies, and shifting an unreasonable amount of the business tax burden onto fast-growing, leading-edge sectors, says a latest analysis of the country`s tax policies.

The C.D. Howe Institute`s latest report on Canadian tax policies, released Wednesday, issued a stark warning to governments that pursue tax initiatives aimed at boosting the fortunes of "structurally declining industries," such as manufacturing and forestry.

http://www.canada.com/edmontonjournal/news...c1-7f40b6ac5016

 

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GE exits Canadian mortgage business

TORONTO --A finance subsidiary of General Electric Co. plans to wind up its Canadian alternative mortgage business this week as part of a wider corporate shift away from consumer finance, according to a note sent to brokers. GE Money said as of the close of business today, it will no longer accept new Canadian mortgage applications but will fund existing commitments. The value of GE Money`s Canadian mortgage business was less than $1-billion, and it entered the market in 2005.

http://www.canada.com/victoriatimescolonis...30-c74fc3827859

 

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Ottawa`s power shift earns mixed response

TORONTO, CALGARY, OTTAWA -- Premiers and provincial ministers contemplated their own new international deals yesterday and praised the federal government`s stated willingness to give them more independence on the world economic stage. "This is, without a doubt, the most significant policy change in the federal government in at least 25 years," said Conservative Premier Ed Stelmach of Alberta.

"We`ve always advocated, as the province of Alberta, to be involved in those negotiations that have an impact on our province, and the Prime Minister has heard us very clearly and reflected that position in this latest policy change."

Transport Minister Lawrence Cannon suggested this week that Ottawa is prepared to shift some traditionally federal economic powers to its provincial counterparts, including allowing Quebec to have a labour-mobility agreement with France.

http://www.theglobeandmail.com/servlet/sto...ional/Politics/

 

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A zero-down mortgage by another name?

As the financial industry sits down with Ottawa this week to assess tighter mortgage rules, another lending product could find its way into the spotlight - cash-back mortgages.

Keen to avoid a U.S.-style housing bubble, the federal government recently cracked down on lenders and insurers through a series of reforms. Major changes already announced include a planned withdrawal of government guarantees for mortgage loans where the down payment is less than 5 per cent of the home`s value, and for those with amortizations of more than 35 years.

http://www.theglobeandmail.com/servlet/sto...PStory/Business

 

[joeiannuzzi]

Canadian economy tumbles

OTTAWA - Canada`s economy took an unexpected tumble in May, as weakness in the energy sector and other major industries highlighted a "see-saw pattern" that has confounded many economists and kept the country`s central bank on the sidelines for months.

Gross domestic product edged down 0.1 per cent during the month -- the fourth decline in six months -- after a meagre rise of 0.4 per cent in April, according to a Statistics Canada report Thursday, providing new signs that the economy may be tipping toward recession.

http://www.canada.com/windsorstar/news/bus...b1-25dbf25e76ad

 

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Canadian auto sales defy gravity

WINDSOR -- Canadian auto sales rose five per cent in July, defying economic conditions that led to the worst U.S. sales month in 15 years.

Canadian sales leader General Motors reported an increase of 5.2 per cent and No. 2 automaker Ford saw sales drop by 13.8 per cent, while third-place Chrysler Canada snapped a 23-month winning streak of consecutive sales increases in Canada to finally slip by 7.6 per cent.

Both Toyota and Honda, the fourth and fifth-place automakers in Canada as measured by sales, made strong gains in both sales and market share, posting vehicle sales increases of 17.8 per cent and 18.9 per cent, respectively.

http://www.canada.com/victoriatimescolonis...09-bf696276ef3f

 

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Online contracts can test consumer savvy

Sami Chaudhry is a diligent and technologically savvy customer, but even he doesn`t bother to read contracts when they pop up on Web sites before purchasing software or signing on to online banking.

"I give it maybe a 30-second scan. I started reading some of them, but they`re written so long and written so small, I have no idea what they`re saying. It`s extremely complicated and it`s not clear to me at all," says the Montreal project analyst, 31.

Online shopping and e-commerce are pitched as a fast and convenient way to do business. And Canadians are biting, with sales nearing $8 billion annually, according to Statistics Canada.

http://www.canada.com/reginaleaderpost/new...fa-b3d3a9c66773

 

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Is now the time to buy?

Just four years ago, with the loonie at a lowly 85 cents against the American dollar, Canadians winced at even shopping across the border.

But with our currency riding high, we`re no longer feeling like the poor cousins. Now, even buying a vacation home or investment property in the U.S. seems within reach.

And the stars are lining up for Canadian buyers in other ways: the collapse of the U.S. housing market has led to steep drops in home prices in prime locations like Florida.

http://www.canada.com/reginaleaderpost/new...25-58d4a98f9fc7