September 2007 Market Research

[BMironov]

Hello,
Let`s start assembling sources of information that will help us through conversations with potential and actual Joint Venture partners.

Based on my experience with news services, I would read newspaper article and double check source of information for the article. For example, many of us heard about Hebron project re-announced on August 22, 2007. CBC News reported on that day:

"N.L. announces $16B Hebron oilfield deal

Newfoundland and Labrador and a consortium led by Chevron have made a multibillion-dollar deal on the Hebron offshore oilfield project, Premier Danny Williams said Wednesday. The deal is expected to generate revenues of $16 billion for the province over the 25-year life of the project, Williams said at a press conference in St. John`s. The federal government will receive $7 billion, he said."

It was a great surprise to me that Chevron Canada`s web site does not have anything about this $16 billion project. Surprise-surprise!

On one of the next days Globe and Mail carried article with one key word. It is "agreement in principal". Another surprise is that in very short time election is coming to Newfoundland. Hmmm.

As Don Campbell use to say: "Always look behind the curtain".
Boris

 

[Anonymous]

As a Sr. REIN Member tip.

We print many of these articles out and have them in a binder for presentation. In a recent meeting with a "Large" investor, he stated to our team that"

"We do more research to purchase $100,000 property than most people do, including myself, to purchase a business, stocks, or any other investment."

 

[DonCampbell]

Job Market still Hot. Here is the latest (September 7th, 2007) release showing the Canadian job market still incredibly strong. Interesting to see that manufacuting and goods-producing are leading the growth once again (as predicted at REIN)
RBC States:

Canada’s jobs market still hot

The gain in employment was led by a rebound in part-time jobs, which increased by 16,800 after falling in the three previous months. Full-time employment edged higher, increasing by 6,500 following the 19,700 increase in July. Year-to-date, full-time employment is up 194,000 with part-time employment up by a more modest 38,000.

The goods-producing sector was the leader in jobs growth for the second month running. Construction employment rose 15,500 and manufacturing shed just 3,200 jobs, maintaining most of July’s unexpectedly large 19,600 gain. Service-producing jobs increased by a marginal 2,900 after falling by 13,100 in July. A 31,000 drop in transportation and warehousing jobs plus declines in professional services (down 14,400) and information, culture and technology (down 10,600) were offset by a rebound in educational services jobs (up 32,800) and solid gains in health care and business/building services.

The unemployment rate held at the lowest level since 1974 and wage growth continued to be firm. The average hourly wage rate for permanent workers rose 0.9% and was 3.8% higher than in August 2006, the fifth month of solid monthly gains in the wage rate and the fastest pace of increase since August 2006.

The consistent gains in employment, historically low unemployment rate and the acceleration in wage gains highlights that Canada’s economy is operating beyond its capacity limits. While the Bank of Canada would normally be raising interest rates against this economic backdrop, especially given that inflation is running faster than the 2% target, volatility in financial markets and increased downside risks to the U.S. economic outlook will keep the Bank on the sidelines for now. We expect that by early next year an easing in the credit crunch will see the Bank refocus on the upside risks to inflation, with rate hikes expected in the first quarter of 2008.

 

[BMironov]

Hello,

Just checked report of Statistics Canada (Daily, September 6, 2007)
http://www.statcan.ca/Daily/English/070906/d070906a.htm

Interesting to see some facts versus text interpretation

QUOTE Construction intentions cooled down in July as the value of building permits declined, halting two months of record-setting performances. Municipalities issued building permits worth $6.2 billion, down 11.3% from $6.9 billion in June.

Just a grim picture that "market is over".

Right after this paragraph is graph presenting trend. ... Something is not what just was said.

Looking at the table by the end of report (% change from year 2006 to 2007 - right column):
Ottawa +15.7% ($182.6M)
Toronto +21.3% ($1231.5M)
Hamilton +41.9% ($71.4M)
Calgary +38.6% ($694.4M)
Edmonton +27.5% ($401.5M)
Vancouver +27.9% ($790.3M)
Victoria +37.8% ($101.9M)
... just to name few and it is $3.5B which is more than a half of $6.2B taken.

 

[Anonymous]

This is a great idea! If this thread gets a lot of interest, I may sticky it (put it to the top of the forum) for everyone to post recent news stories and sources.

 

[BMironov]

News Topics
Hello,

Interesting article was published today by Globe and Mail "For oil companies, the good old (bad old) days are over" (Sep 07, 2007)

http://www.reportonbusiness.com/servlet/st...lumnsBlogs/home

(Sorry, in couple of weeks this article will be removed and put to archive with pay access)

QUOTE Now look at what`s happening. Economic nationalism is on the rise. Poor countries that once begged foreign oil companies to develop resources buried in deserts and jungles are now kicking these same companies out. Development, revenue and tax laws are being furiously rewritten to favour domestic interests.
...
With energy prices strong, and governments in Africa and Asia enjoying their oil and gas spoils, there is no reason to believe the nationalization trend will end any time soon. At the same time, shareholders of Western oil and gas companies will put pressure on management to avoid plunking fortunes into countries like Algeria because of the new risks. They will suggest that exploration and development money be spent elsewhere.

But where? The biggest potential oil and gas projects reside, inconveniently, in countries where you wouldn`t want to spend your vacations.



...Now, please spend 10 minutes and watch the following video:
http://youtube.com/watch?v=UQyRx8M9BZo (Oil sands)
http://youtube.com/watch?v=Y_jOBURovPM (Alberta 2020)
And one more extra video:
http://www.cbsnews.com/stories/2006/01/20/...in1225184.shtml (60 Minutes: The oil sands of Alberta, June 25, 2006)

I guess, the answer is obvious.

-----


Canada avoids U.S. economic woes ... for now
National Post (Sep 08, 2007)
http://www.canada.com/nationalpost/financi...723&k=14836

QUOTE North America is becoming a tale of two economies - sinking housing and shrinking job markets south of the border but boom times for both here.
...
Canada`s job market, like its housing market, has so far been unaffected by the financial market turmoil that spilled across the U.S. border. Canada pumped out 23,000 jobs last month and kept the unemployment rate at a modern-day low of six per cent.And not only were there more jobs here, they were also paying more, four per cent more on average than a year earlier, and well above the 2.2-per-cent increase in the cost of living over that period. In contrast, the U.S. lost jobs last month, while the employment gains of the previous two months were also revised downward, as that country`s housing market recession and subprime-mortgage market meltdown spread to the so-called real economy."Though the Canadian economy remains very well supported, the main question mark going forward is the outlook for the U.S. economy," cautioned National Bank of Canada economist Eric Dube.

...

Statistics Canada noted that the increase in employment boosted job growth for the year so far to 232,000 or 1.4 per cent, up slightly from the 1.2 per cent over the same period a year earlier.

-----


Hello,

A bit more of great news from Western Canada reported by

Edmonton Journal (Sep 11, 2007):
Job market stuck in overdrive
http://www.canada.com/edmontonjournal/news...41-e18996c3cde1

QUOTE Edmonton employment opportunities will continue to grow in the fourth quarter of 2007, according to Manpower Inc. employment agency.
...
Looking beyond next quarter, Luft said shortages in workers and supplies have caused some energy-related activity to be postponed, but not cancelled -- ensuring Alberta employment will remain strong for the foreseeable future.
...
[about percentage of major employers who planning to hire]
The net outlook for the fourth quarter is 48 per cent in Calgary, 46 per cent in Regina, 39 per cent in Vancouver, and 31 per cent for all of western Canada.
The western Canadian outlook is strongest in construction, wholesale and retail trade, and mining -- including natural-gas drilling, which Luft anticipates will be especially active into 2008.

Nationally, the Canadian outlook of 16 per cent .

The actual report is available at:
http://www.manpower.com/press/meos.cfm
and as PDF:
http://files.shareholder.com/downloads/MAN...N_MEOS_Q407.pdf

Outside of article in Edmonton Journal here are more numbers for rest of Canada:
Outlook is based on survey of 1700 Canadian employers.
Atlantic Canada: +28% (want to hire) -8% (want to shrink work force) = +20% (net)
Ontario: +22% -9% = +13%
Quebec: +15% -12% = +3%
Western Canada: +39% -8% = +31%

From report:
QUOTE Western Canada employers in the Construction sector expect the most dynamic hiring climate with a Net Employment Outlook of +50%. Western Canada employers in the Construction sector expect the most dynamic hiring climate with a Net Employment Outlook of +50%. Employers in the Wholesale & Retail Trade sector also anticipate a bullish quarter with a Net Employment Outlook of +49%, while employers in the Mining sector forecast a vigorous hiring climate with a Net Employment Outlook of +46%. Employers in the Finance, Insurance & Real Estate sector expect a booming three months with a forecasted Net Employment Outlook of +40%.

-----


Hello,

Statistics Canada released today report
http://www.statcan.ca/Daily/English/070911/d070911.pdf

Canadian international merchandise trade (Sep 11, 2007)
QUOTE Imports continued to gain ground, jumping 3.5% to $35.7 billion, from a revised $34.5 billion in June. This second consecutive monthly rise was led by an advance in imports of automotive products.
Canadian companies exported $39.3 billion in July, a 1.4% increase from the revised $38.8 billion in June. Industrial goods and materials as well as automotive products were the driving forces behind this increase.

Very interesting story is revealed in numbers of table "Merchandise trade"
Just in one year Canada`s trade with US contracted almost 4%. At the same time Trade with the rest of the world expanded by $14B which is about 27% growth. Overall exports grew by 5% and imports by 4.6%!

It all means that our trade relies less and less on US market.

This growth in exports come from many industries (not just oil from oil sands):
Agricultural: +13.7%
Industrial goods: +20.6%
Machinery: +4.1%
Consumer goods: +12.9%


Another part of Daily is
New Housing Price Index (July 2007)
New houses are getting more expensive in all CMAs except Windsor. Some data about change from July 2006 to July 2007:
QUOTE Ottawa +1.4%
Toronto and Oshawa + 2.4%
Hamilton +4.3%
Kitchener +1.6%
Calgary +9.8%
Edmonton +38.4%
Vancouver +9.2%

Needless to say that this trend will be repeated by prices of resale houses in few months.

Happy investing!


-----


Hello,

Today Toronto Star reported:
Wage hikes at highest level since May 2001 (Sep 12, 2007)
http://www.thestar.com/Business/article/255562

QUOTE Buoyed by the bargaining power that comes with the lowest unemployment rate in three decades, Canadians are enjoying their heftiest pay increases in years, a trend that is expected to continue.
...
Average hourly wages in Canada rose 4 per cent in August from a year earlier, according to Statistics Canada, marking the second-highest year-over-year wage growth in a decade, eclipsed only by the gain of 4.1 per cent in May 2001.
...
The driving force is a tight labour market. Canada`s unemployment rate was at a 33-year low of 6 per cent in August.

If your tenants get this income hike it will be easier to talk about rent increase.

 

[DonCampbell]

Sub prime Mortgage Issue:

Here is a direct link to my article in the National Post on September 8, 2008. It sheds some light on the `sub-prime` issue currently making headlines.

http://www.canada.com/nationalpost/financi...fd-d41f8d1c48ed

 

[David90]

Here is a great news article on the oilsands economic impact for the rest of canada and our long-term outlook. Just click on the link below:
Canadian oilsands to become important global oil source: CIBC"

http://www.canada.com/topics/finance/story...9b0&k=87922

 

[DonCampbell]

The article below that was just posted, is one of the most imporant releases of the year for sophisticated investors. Print it out, save it send it to joint venture partners.
You will quickly see what cutting through the hype and fear is all about

QUOTE (birkholz @ Sep 12 2007, 08:38 AM) Here is a great news article on the oilsands economic impact for the rest of canada and our long-term outlook. Just click on the link below:

Canadian oilsands to become important global oil source: CIBC"

http://www.canada.com/topics/finance/story...9b0&k=87922

 

[BMironov]

Thank you birkholz,

Here is the working link:
http://www.canada.com/topics/finance/story...9b0&k=87922

And here is the link to the full CIBC World Markets report that the story discusses:
http://research.cibcwm.com/economic_public...d/occrept62.pdf

 

[BMironov]

Hello,RBC released "Housing Affordability" (Sept 2007) report today.
It is available at:

http://www.rbc.com/economics/market/pdf/house.pdf

QUOTE Increases in house prices, mortgage rates, utilities and property taxes all combined in the second quarter to deliver a severe hit to housing affordability.

Affordability deteriorated in every housing class we track, in every province and in every major city.
...
Ontario — Sharp erosion, but tame relative to the west
The province underwent a sharp deterioration in affordability in the second quarter due to higher prices, mortgage rates and utility bills. But, a look at historical affordability numbers in Ontario should help calm nerves that the province may be at risk of a significant correction. Unlike many of the western provinces, affordability — measured as the share of income required to service basic homeownership costs — remains comfortably below levels reached in the late 1980s just before the major housing market crash. What further complicates this stage of the housing cycle is the impact of extended amortization products in extending affordability.
...
Alberta — Now less affordable than Ontario
The province suffered a deep erosion in affordability conditions this quarter as markets took multiple hits from rising mortgage rates, hefty house price gains, higher utility costs and a modest up-tick in property taxes. All combined, these factors led to an across-the-board double-digit deterioration that make Alberta`s two-storey and detached homes less affordable than their Ontario and Quebec counterparts. While affordability levels still remain comfortably better than conditions in British Columbia, the continuing slide is flashing warning signs. House prices have been growing at a pace well above incomes and, within a fairly brief period, this has created stressed affordability conditions. The fundamentals driving housing markets across Alberta are still supportive of healthy housing markets going forward, but we expect the market to continue to pull off from its current pace of resale activity, price gains and new home construction.

...Lower affordability translates to lower vacancy rates.

 

[BMironov]

Hello,
Following last REIN workshop "Mortgage Broker vs. Banker" there is an article in Financial Post:
How to find a lender that fits your terms (Sept 08, 2007)
http://www.canada.com/nationalpost/financi...1f-83aaa7f68c6f

QUOTE ...About a third of all mortgage holders consulted a broker when they took out their current mortgage, according to a CAAMP study.

As a rule of thumb, the process is simpler when you use a broker, notes Jeff Morris, a mortgage consultant from Lower Sackville, N.S. You fill out the forms once and the broker does most of the legwork. And because mortgage brokers deal with smaller banks and trust companies, as well as lenders that only work with brokers, they may well be able to give you the product you need at a lower price. Finally, providing you don`t have a dodgy credit history, it`s not likely to cost you anything. But don`t assume -- ask whether there is a fee for the service.

Whether you use a broker or not, you should still compare rates at insurance companies, virtual and bricks-and-mortar banks, trust companies, caisses populaires, credit unions, finance companies and pension funds. Web sites like canadamortgage.com and themortageguide. ca cut down on work by allowing you to compare rates and apply online.

 

[BMironov]

Financial Post:CN executive sees plenty of potential for growth (Sep 12, 2007)http://www.canada.com/nationalpost/financi...7e0&k=99548

QUOTE The new container terminal at the port in Prince Rupert, B.C., which has its official opening today, is expected to bring an additional $300-million in revenue to Canadian National Railway Co., which has exclusive rail access to the site.

Q How do you expect the new terminal to help grow your business?
A It clearly positions our international, intermodal business to have significant growth over the next few years as the terminal opens up and ramps up to full capacity, which we have said is 500,000 [twenty-foot equivalent units] by the end of the year. That`s quite a big ramp-up for us. In addition to that, it also creates a lot of opportunity for us to develop new lines of business to take advantage of the empty capacity that will be going back towards Asia.

Q How have the shippers responded to the new facility?
A Very favourably. Not only is this an opportunity for us to move product, but more importantly, it`s an opportunity for North American exporters to look to Asia for new markets.

 

[BMironov]

National Post:Natural gas giants keep tight gripon purse strings (Sep 12, 2007)

http://www.canada.com/nationalpost/financi...b0e&k=33095

There is forecast for natural gas prices for year to come based on investments by big players.

QUOTE Industry stalwarts Canadian Natural Resources Ltd., Talisman Energy Inc., Devon Energy Corp., Apache Corp., and Husky Energy Inc., which are now in the process of preparing budgets for 2008, said that they will likely match this year`s conservative spending levels, or tighten the purse strings even more.
...
In 2008, "if anything, [spending] will likely edge down as we move it to other parts of the portfolio where we think we can get a bigger bang for our buck."
...
He said the price of gas needs to be between US$8 and US$9 in New York per thousand cubic feet to generate an aftertax rate of return in Western Canada. Instead, the price of gas is running at about US$5.50.
...
"Next year, we would say that gas prices are going to stay in this $5 range, and so you will probably see a similar number of wells," said John Crum, president of the Houston-based company`s Canadian subsidiary.

 

[BMironov]

Following the news about the new container terminal in Prince Rupert, BC.CBC news (Sep 12, 2007)
New container terminal means jobs for Prince Rupert: B.C. premier
http://www.cbc.ca/canada/british-columbia/.../bc-rupert.html

QUOTE "It`ll generate hundreds of jobs here in Prince Rupert," he said, with at least 2,000 direct and indirect jobs expected in the community by 2011.

Promoters of the project said its favourable position on B.C.`s northwest coast has the potential to make it an important gateway for Pacific trade, reducing shipping times between Asia and Chicago by as much as two days.

------------------------------------------------------
Edmonton Journal reported:
Prince Rupert reflects power of partnerships (Sep 13, 2007)
http://www.canada.com/edmontonjournal/news...b5-167b4906e874

QUOTE Campbell [BC premier] said, adding, "we are going to create magic for the whole country."
...
Edmonton Economic Development Corp. vice-president Myron Borys said Edmonton is the first major stop en route to anywhere in North America.
...
Chamber of Commerce chairman Greg Christensen said the port is a key in the organization`s goal to make Edmonton a major transportation hub.
...
The port is a key link in the development of a transportation corridor through Edmonton to the prime U.S. distribution centres of Chicago and Memphis via CN`s network. Prince Rupert is 30 hours closer to Asia than all the other North American West coast ports, which are often gridlocked by the increasing volume of container traffic.

 

[BMironov]

Toronto StarHigh dollar hits Toronto (Sep 13, 2007)
http://www.thestar.com/Business/article/256219

QUOTE Whacked by the high dollar, Toronto`s economy is lagging those of western Canadian cities, although is expected to rebound next year if the manufacturing sector improves, the Conference Board of Canada said today.
...
Next year, manufacturing is expected to get a boost when Honda opens a new engine plant in Allliston and Ford begins production of a new crossover utility vehicle at its Oakville plant.
...
Overall, the Conference Board said, Ontario`s economy will again underperform the Canadian average this year, although it "now appears to be on the road to recovery."

Actual document is available at:
http://sso.conferenceboard.ca/e-Library/La...ct.asp?DID=2105
for $2400

QUOTE This publication focuses on the metropolitan economies of Halifax, Quebec City, Montreal, Ottawa-Gatineau, Toronto, Hamilton, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, Vancouver, and Victoria.

Document Highlights:

• Read GDP growth in Halifax will accelerate to 2.5 per cent in 2007, led by continued services sector strength.
• Québec City`s economy is set to grow by 2.6 per cent this year, in part thanks to strength in manufacturing.
• Ongoing manufacturing weakness will limit Montréal`s real GDP growth to 2.1 per cent in 2007.
• Ottawa–Gatineau`s economy will slow to 2.3 per cent this year, held back by sluggish growth in public administration.
• Toronto`s real GDP is forecast to expand by 2.7 per cent in 2007—still short of its economic potential.
• Once again, Hamilton`s manufacturing sector will drag down overall economic growth, to 1.3 per cent in 2007.
• Strength in construction and manufacturing will push Winnipeg`s economic growth to 3.7 per cent this year. Regina`s 3.5 per cent overall economic expansion this year will be the fastest in a decade. This year`s real GDP growth of 4.7 per cent in Saskatoon will prompt employment to advance by 4.8 per cent. Calgary`s economic growth is set to moderate to a still remarkable 4.4 per cent in 2007. Slower growth in the goods sector will temper Edmonton`s real GDP growth to a still solid 3.6 per cent this year. Vancouver`s real GDP will slip to 2.9 per cent in 2007, given slower growth in manufacturing and construction. Although economic growth will ease to 2.8 per cent in Victoria this year, employment will rise by 2.5 per cent.

Year of retrenchment... Excellent opportunity to invest!

 

[BMironov]

Scotiabank released report:Real Estate Trends (Sep 13, 2007)
http://www.scotiacapital.com/English/bns_econ/retrends.pdf

QUOTE Canada`s housing market shows few cracks, at least leading up to the recent turmoil in global credit markets. The continuing strength in sales, construction and price appreciation is impressive, particularly in light of the sharp correction underway south of the border for well over a year.
...
The fundamentals underpinning Canada`s housing market are still quite good. Unemployment is low, immigration is high and apartment vacancy rates are tight. There is little evidence of overbuilding or speculative buying. The industry has relatively little direct exposure to subprime lending, with these loans accounting for only about 5% of domestic mortgages in recent years compared with about 20% in the United States.
...
Canada ranks relatively low in the degree of house price overvaluation relative to other major developed nations which have also experienced a housing boom during the past decade. Using the same methodology, we estimate that average real home prices in the United States carried a near-record 14% premium in 2005. U.S. average valuations have since slipped below trend amid a large and growing supply overhang and weakening demand.

Again and again Canadian economists say that real estate market here is just softening thanks to strong fundamentals.

 

[BMironov]

Following to Statistics Canada report "Canadian international merchandise trade" (Sep 111, 2007)
Globe and Mail reported
China outsells Canada in U.S. (Sep 13, 2007)
http://www.reportonbusiness.com/servlet/st...ry/robNews/home

QUOTE China sold $312.2-billion (U.S.) worth of merchandise to the United States between Aug. 1, 2006, and July 31, 2007, while Canada shipped $305.6-billion, trade statistics show.
...
Canada and the United States are still each other`s biggest trading partner – and are expected to remain so for many years – because this country imports about four times as much in goods from the U.S. as China does. The U.S. shipped $237.5-billion to Canada over the same 12-month period from August, 2006, to July, 2007, while it only sold $59.7-billion to China.
...
There`s a silver lining to this trade shift: Canada has become less dependant on the U.S. market, with sales to the United States dropping over the past seven years.

As a share of Canadian exports, sales to the U.S. have declined to 75 per cent from an all-time high of around 85 per cent back in 2000.

"That`s actually helped Canada`s economy stay on the rails … in the last year even as the U.S. economy has slowed markedly," Mr. Porter said.

It is great article that adds some more numbers to the story of Canadian international trade. Plus, it adds to the story how Canada is getting less dependant on events on US market.

 

[BMironov]

Just went across an article in Globe and MailA retirement bar to be raised in the financial industry (Sep 10, 2007)
http://www.reportonbusiness.com/servlet/st.../robAtWork/home#

Some numbers about people who are close to retirement and what financial industry offers.
I belive, that we have much better vehicle for them to satisfy their needs during golden age.
I`m talking about JV partnership backed by knowledge of ACRE system. Win-win situation.

QUOTE First, consumers have expectations about funding retirement that are out of sync with their retirement realities. For instance, 40 per cent of pre-retirees plan to fund their retirement by working longer, yet two out of five people (regardless of wealth level) are "forced" into retirement for health or unemployment reasons before they planned. This brings the average retirement age to a surprisingly low 57. One-third of pre-retirees think they will reduce their spending - but more than 40 per cent of retirees actually spend the same or more. The plan for 30 per cent of pre-retirees is to downsize their home, a step only 5 per cent of retirees take.

Second, even when pre-retirees recognize they need help, most financial institutions fail to meet their needs. More than 1 in 4 affluent pre-retirees seek advice on how to ensure guaranteed retirement income, but only 7 per cent of that already-small segment have received any counsel from their financial advisers.

 

[DonCampbell]

Here is another good story looking at the importance of the 35 - 40 year amortization programs offered by the Canadian Banks. It was in the National Post on Saturday September 15th and it looks at how these programs are affecting the real estate markets across the country.

http://www.canada.com/nationalpost/financi...ee-4d981da6dbcd