September 2007 Market Research

[BMironov]

QUOTE (Don @ Sep 16 2007, 01:34 PM) 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

It is [longer amortization] such a big factor now that last "Housing Affordability" report is the first one to introduce it and says:

QUOTE Longer amortization mortgage products are a large and growing share of monthly mortgage originations, particularly in the high ratio mortgage segment. This development has unfolded within the past year and a half as the market has gone from standard 25-year options towards 30-, 35- and 40-year mortgages.

Because our affordability calculations assume a standard 25-year conventional mortgage in order to allow for a common benchmark over time and across markets, the result is that the share of household income going towards home ownership costs is likely overestimated for some entrants in today`s market.

Report is available at:
http://www.rbc.com/economics/market/pdf/house.pdf

Best regards,
Boris

 

[BMironov]

Would you like to see the forecast for condo market in 2011?

CanWest reported on Friday:
Steady demand will keep condo prices steady: report (Sep 14, 2007)
http://www.canada.com/topics/news/national...2db&k=84573

QUOTE Baby boomers leaving their "empty nests" for more convenient, smaller homes near shops and restaurants will keep the price of condos in major Canadian cities buoyant over the next several years.
...
Demand from boomers over age 55, as well as first-time buyers looking for affordable housing alternatives, will keep price growth steady, the report said.
...
Census figures released in July by Statistics Canada show the number of people aged 55 to 64, many of whom are approaching retirement, is at a record high of 3.7 million.

Genworth Financials "Summer 2007 Metropolitan Condominium Outlook" report is available at:
http://www.genworth.ca/mi/eng/downloads/Me...o_Summer_07.pdf

P.S. Genworth has an interesting facts page about their typical customer:
http://www.genworth.ca/mi/eng/downloads/Ho...s_June_2006.pdf


For those who invest into condo market big boom is coming. Report provides forecast of condo market up to year 2011.

 

[BMironov]

Globe and Mail reported:What`s not to love about the loonnie? (Sep 17, 2007)
http://www.reportonbusiness.com/servlet/st...ry/robNews/home

QUOTE International investors are piling into a currency that`s fuelled by high commodity prices and a buoyant economy, while scrambling out of the U.S. dollar, which has plunged to record lows against other currencies including the euro.
...
“What we`re seeing is a clear decoupling between the strength in Canada, boosted by the huge demand for commodities from emerging countries like China and India, and the much more lacklustre economic situation in the U.S.,” Mr. Schlossberg said.

There is also big transition happening in Canadian industry. Continue reading following post.

 

[BMironov]

Globe and Mail:Use soaring loonie to go high tech, Flaherty says (Sep 17, 2007)
http://www.theglobeandmail.com/servlet/sto...NStory/Business

QUOTE Some economists are predicting the dollar`s rise will dampen Canada`s hot economy, as Canadian products become more expensive in the United States, which is in the grips of a slowdown.

If the manufacturing industry is to succeed, it must become more productive and more technologically sophisticated, Mr. Flaherty said.

The higher dollar means that technology imports that might enhance productivity are now much cheaper for Canadian manufacturers, he said.

In addition to that advantage, the Finance Minister hinted the government is considering extending a two-year tax break for manufacturers who buy new machinery.

He calls the move, which currently expires at the end of 2008, a shot of adrenaline for the sector. Sunday, he cited it as the most important thing the government has done to help the industry cope with the soaring loonie.
...
But he stressed that the economy is stronger than been in a generation. Inflation has remained under control, governments are in surplus, the unemployment rate is at a 33-year low, and Canada is one of the few countries in the world with sound public pension plans, he said.

This sheds some light on how Canadian exporters get through tough time of soaring Canadian dollar. All these steps make a lot of sense in the face of aging population.

QUOTE "Our economic fundamentals are as solid as the Canadian Shield," he said [Finance Minister Mr. Flaherty]

 

[BMironov]

Another fundamental shift is happening for US dollar:
Toronto Star:
Euro new currency of choice, says Greenspan (Sep 17, 2007)
http://www.thestar.com/Business/article/257401

QUOTE Former U.S. Federal Reserve chairman Alan Greenspan said it is possible the euro could replace the U.S. dollar as the reserve currency of choice.
...
According to an advance copy of an interview to be published in Thursday`s edition of the German magazine Stern, Greenspan said the dollar is still slightly ahead in its use as a reserve currency, but added that "it doesn`t have all that much of an advantage" anymore.

 

[BMironov]

Statistics Canada released:New motor vehicle sales (Sep 18, 2007)
http://www.statcan.ca/Daily/English/070918/d070918.pdf

Report says about 2.7% decline in sales of new vehicles in Canada. Through report they compare June 2007 to July 2007.
But look at the graph! Trend shows almost 6% increase in July 2007 over July 2006. Compare the numbers and they reveal interesting story about wealth built in oil sands and distributed over the country:

______July 2006___July 2007____Change
NL___1926________2429_______(+26.1%)
PEI____415________414________(-0.25%)
NS____3716_______4120_______(+10.8%)
NB____2944_______3109_______(+5.6%)
SK____3392_______3852_______(+13.6%)
AB____21281______22278______(+4.7%)
BC____15967______16774______(+5.1%)

You see what 1 car means in economy of PEI!

In case of BC it is not just oil sands that make the difference. It is Olypics development as well.

 

[BMironov]

National post:Lumber companies urged to axe production (Sep 18, 2007)
http://www.canada.com/nationalpost/financi...a4-32867532461b


QUOTE As the high-flying loonie cuts ever more deeply into the bottom line of money-bleeding Canadian lumber exporters, industry observers remain mystified at how many 2x4s this country is still producing, and are calling for radical measures to boost prices that have fallen to 15-year lows.

Seventy per cent of the country`s lumber production should close its doors for at least a month over the Christmas break, said Dundee Securities analyst Richard Kelertas, while admitting that is unlikely to happen.
...
Industry earnings have fallen from a slim second-quarter 2006 profit of $61-million to a $347-million loss in the same quarter this year. Still, Canadian lumber production -- especially in British Columbia, where nearly half of the country`s softwood is harvested -- has not kept pace with the staggering drop in U.S. demand, which consumes about 50% of Canadian lumber.

 

[BMironov]

National Post:Bold move especially good for Canada (sep 19, 2007)
http://www.canada.com/nationalpost/financi...62-391bd0226210

QUOTE The Fed`s 50-basis-point cut, which took its key benchmark rate down to 4.75%, is a bold attempt to cut the worsening U.S. housing recession off at the knees and prevent it from dragging down the rest of the economy, including the all-important consumer.

Anything that keeps the world`s biggest economy on the path toward growth is good news for oil prices, which blasted above US$82 a barrel; copper. which gained 2%; and nickel, which soared 3.5%, all of which are especially good for Canada and the loonie.
...
It will take months to see how far the U.S. economy had sunk before the cut, and probably a few more to see if the cut was effective, though yesterday`s move had one immediate and very important impact: boosting investor and consumer confidence.

Amid the uncertainty, the Canadian dollar, backed by surging commodity prices, a current account surplus and government finances firmly in the black, is going to continue to look attractive to foreign investors.

 

[BMironov]

TD commentaryCore inflation slows but remains above target(Sep 19, 2007)
http://www.td.com/economics/comment/rs091907.pdf


QUOTE CPI slows to 1.7%, core index eases to 2.2%
...
While some might interpret today’s report as an indication that inflation is coming back down to the BoC’s 2% target on its own, we caution against such a reading of the data , The drop in auto prices and energy price relief in August will likely be short lived, as special auto pricing offered in the month comes to an end and record-high oil prices push energy costs higher. In addition, real GDP growth was 3.4% annualized in Q2, the second consecutive period of above-potential growth with accelerating domestic demand to boot. Meanwhile, a historically lean 6.0% unemployment rate and a notable acceleration in wage growth underscores the persistent tightness in Canada’s labour market. This, alongside a lackluster productivity record, suggests that the Canadian economy is increasingly operating in a state of excess demand. Moreover, while global financial markets have been roiled by the trauma in U.S. housing, the Canadian housing market remains hot, with most homeowners likely to enjoy further appreciation in values this year and next. The housing boom is, thus, expected to rumble on longer. Needless to say, then, the outlook for inflation remains an overarching concern. Normally, the Bank of Canada would be raising interest rates against this economic backdrop, especially given that core inflation has been stubbornly above the Bank’s 2% target for a year now. However, ongoing concerns over the credit market and increased downside risks to the U.S. economic outlook will keep the Bank on the sidelines for now. We expect that should credit conditions ease by year-end, the Bank will refocus on the upside risks to inflation. As yet we cannot rule out the possibility of a 25bps rate hike in December and January.

 

[BMironov]

CIBC World Market:Reversal of Fortune (Sep 20, 2007)
http://research.cibcwm.com/economic_public...load/ssep07.pdf

QUOTE What a difference a decade can make. Turn the clock back a few years and most Canadians were looking wistfully across the border at the prosperity of their American neighbors. Seldom had America looked stronger and seldom had Canada been more in its shadow. The American economy, the cradle of the IT revolution, was nothing less than a technological dynamo that was single handedly driving nearly 30% of global GDP growth. Compared to American technology assets in Silicon Valley, Canada’s resource based economy had that rust belt look of a place whose time had long past.
...
Whether it’s the exchange rate, the stock market, or housing prices, asset markets are all painting the same picture. Canada is getting richer relative to the US. Ultimately that’s about the economy. With the developing world, not the US, driving global resource demand, the umbilical cord that has always connected the Canadian economy to the much larger American market is about to be severed.

In this issue you will find:
1) "US Subprime—Has the Correction Gone Too Far?" by Benjamin Tal
2) "Canadian Banks: Short Term Pain, Long Term Gain" by Avery Shenfeld
3) "Canada: Living With a US Slowdown, Stronger C$" by Warren Lovely

 

[BMironov]

Globe and Mail posted interview with CIBC World Market Senior Economist Avery Shenfeld about parity between C$ and US$Avery Shenfeld on parity (Sep 20, 2007)
http://www.theglobeandmail.com/servlet/sto...0/BNStory/Front

QUOTE What are the two most important reasons it has done so?
In part, it`s a case of a rising tide lifting all boats, as disfavour with the U.S. dollar, tied to America`s trade deficit, pushed up the currencies of its trading partners. But Canada`s ability to stay with the pack owes largely to a huge move in commodity prices in the past few years, which not only increased foreign demand for our currency, but also created the income and employment growth needed to offset the hit to non-resource exporters.

 

[BMironov]

Globe and Mail:Alternative mortgage market expected to double (Sep 20, 2007)
http://www.reportonbusiness.com/servlet/st...ry/robNews/home

QUOTE Despite the subprime mess in the United States, Canada`s alternative mortgage market is expected to more than double in the next five years, according to industry representatives.The value of the country`s entire mortgage market will be about $800-billion in 2007, according to data presented at a conference Thursday in Woodbridge, Ont., hosted by the Canadian Association of Accredited Mortgage Professionals (CAAMP).

About $24-billion, or 3 per cent, of that amount will be comprised of subprime mortgages, or loans to home buyers that don`t qualify for traditional bank mortgages. That`s expected to rise to $70-billion, or almost 9 per cent of the total, in the next five years.

 

[BMironov]

TD EconomicsREGIONAL DIVIDE NARROWS AS WESTERN MARKETS COME OFF THE BOIL (Sep 21, 2007)
http://www.td.com/economics/special/pg0907_housing.pdf

QUOTE - Erosion in affordability will bite into demand
- Balanced eastern markets to turn in healty performance
- Regional divide in housing market performance to narrow
- US-style housing correction not in the cards for Canada

Highlights of this report are available at Globe and Mail
Home sales activity `likely to cool` next year: TD (Sep 21, 2007)
http://www.reportonbusiness.com/servlet/st...ry/robNews/home

 

[BMironov]

Hello,

Just found interesting interactive link about history of Canadian / US dollar exchange rate:
http://www.theglobeandmail.com/v5/content/...res/ROB/dollar/

 

[BMironov]

TD Economics:Comparing parity 1976 - 2007 (Sep 24, 2007)
http://www.td.com/economics/special/cb0907_parity.pdf

QUOTE Highlights

• The Canadian Dollar was last at parity in 1976
• There are substantial similarities between the two eras, but also several differences
• One difference is parity was achieved from opposing trends. In 1976, the Canadian dollar was already depreciating when it touched parity and it did not stay at parity for long
• This time, parity was the culmination of a trend appreciation in the C$ Rate spreads were more favourable during the first parity occurence Both eras saw major commodity appreciation that supported the Canadian dollar Canada`s twin surpluses are a relatively recent phenomen that add strength to C$ but did not exist to the same extent in 1976 Canadian productivity levels were much more comparable to the US in 1976 and have since deteriorated - this argues against C$ strength today

 

[BMironov]

Statistics Canada

Railway carloadings (Sep 26, 2007)

http://statcan.ca/Daily/English/070926/d070926.pdf



QUOTE
On a year-over-year-basis, intermodal loadings in July climbed 5.7% from July 2006, while non-intermodal tonnage grew 3.1%. Traffic received from the United States also remained above last year's volume, rising 17.9% from July 2006.




Remember post:

http://myreinspace.com/rein_members_only/News_Archive/96-668-September_2007_Market_Research.html



QUOTE
Imports continued to gain ground, jumping 3.5%

...

Canadian companies exported $39.3 billion in July, a 1.4% increase

...

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%

 

[BMironov]

Financial Post:Ottawa posts $14.2B surplus (Sep 27, 2007)
http://www.canada.com/nationalpost/financi...fe3&k=61242

QUOTE The Conservative government said Thursday it posted a surplus of $14.2-billion for the 2006-07 fiscal year, bigger than the $9.2-billion projection.

It marks the 10th consecutive year Ottawa took in more tax revenue than it paid out.
...
The government said the surplus was the result of a strong economy. Moreover, it said it was able to spend $700-million less than forecast.

Toronto Star:
Another big surplus on the way (Sep 27, 2007)
http://www.thestar.com/News/article/261073

QUOTE Prime Minister Stephen Harper is in Toronto today to announce another huge federal government budget surplus of more than $10 billion.
...
The surplus in 2005-06 was $13.2 billion.
...
Harper is sure to point out today that the government will use the latest surplus to reduce the $467 billion national debt.

 

[BMironov]

Globe and Mail:For GM, deal is a `game changer` (Sep 27, 2007)
http://www.reportonbusiness.com/servlet/st...ry/robNews/home

Just a great article putting some light on life of General Motors and how it is going to change

QUOTE As the old joke goes, General Motors Corp. [GM-N] is a health care provider masquerading as a car maker. Not any more.
...
The deal marks a critical step in GM`s struggle to regain its competitive edge against surging Japanese rivals, Toyota Motor Corp. and Honda Motor Co.
...
"It`s pattern-setting, not just in Detroit, but across the U.S. economy," said Prof. Shaiken, a geography professor at the University of California at Berkeley.
...
Without concessions, GM risked running out of gas. The company`s retirees outnumber current workers 4 to 1. That compares with a ratio of 2 to 1 at Ford Motor Co. and 1 to 1 at Chrysler LLC.

The much-newer Japanese transplants all have more workers than pensioners, giving them greater freedom to pay competitive wage rates and to invest.

The result is that for every Cadillac, Saturn or Silverado coming off the line, GM is saddled with $1,600 in health care costs — hundreds of dollars more than Ford or Chrysler, and $1,400 more than Toyota.
...
Eliminating the cost differential with Toyota would allow GM to pay for four new car models each year.

And so, in the wee hours of Wednesday morning, UAW president Ronald Gettelfinger and GM chief executive officer Rick Wagoner signed a deal that takes $51-billion in liabilities off the company`s balance sheet.

GM will instead put 70 per cent of that amount, or $36-billion, into a new entity, known as a Voluntary Employees` Beneficiary Association.
...
Still, analysts estimated that the health care trust will save GM roughly $3-billion a year and free up financial resources.
...
The health care trust alone could save the company $19 an hour in labour costs, or roughly $600 a vehicle, Mr. Lache said in a note to clients.

GM also won an important concession that will create a two-tier pay system. As older workers retire, the company will be able to hire new workers at much lower rates, partly dismantling a system that has been the cornerstone of union power in the auto industry. Mr. Lache estimated this alone would allow the company to trim its unionized work force to 50,000 from 73,000 today.

 

[BMironov]

Statistics Canada (Sep 27, 2007)http://www.statcan.ca/Daily/English/070927/d070927.pdf
Canada`s population estimates (Sep 27, 2007)
http://www.statcan.ca/Daily/English/070927/d070927a.htm

QUOTE Alberta has again led the provinces in population growth, according to preliminary demographic estimates for the year ending June 30, 2007. But indications are that the major component fuelling Alberta`s gains—interprovincial migration—has started to ease off.

Between July 1, 2006 and June 30, 2007, Alberta`s population increased 3.1%. This growth rate was more than three times greater than that of the country, and the strongest since 1981/1982.

Migration (Sep 27, 2007)
http://www.statcan.ca/Daily/English/070927/d070927c.htm

QUOTE Between July 1, 2005 and June 30, 2006, Alberta experienced the highest net inflow of residents, posting a migration rate of 20.3 people for every 1,000 population. British Columbia was a distant second with a net migration rate of 12.3 people, while Ontario was third at 9.6 people. This ranking was unchanged from the previous year.
...
The highest net inflow among the CMAs relative to the population size occurred in Calgary, which had a net inflow of 21.5 migrants for every 1,000 residents, followed closely by Edmonton with a net inflow of 21.0 migrants and Toronto with 17.3 migrants.

 

[BMironov]

TD Economics Special ReportThe Tiger that Roared Across Alberta (Sep 27, 2007)

Press Release:
http://www.td.com/economics/special/db0907_alta_pr.pdf

Executive Summary:
http://www.td.com/economics/special/db0907_alta_exec.pdf

Report:
http://www.td.com/economics/special/db0907_alta.pdf

QUOTE We thought we were bold when in 2003 we forecast growth in the Corridor of 4% per year over the 2002-06 period. Yet the actual figure was even more impressive, at 5% per year. Our underestimation boiled down to crude oil and, to a lesser extent, natural gas price forecasts that weren`t heroic enough, even when the surging Canadian dollar is factored in. As such, the spotlight turned up even higher on the oil sands, where the grand total of investment projects over the next 10-15 years continued to climb - from $85 bollion at the time of the 2003 report to more than $120 billion in 2007.
...
We estimate that for each $1 increase in real GDP in Alberta, $0.2 in increased GDP flow to other provinces through higher demand for goods and services.
...
We remain upbeat about the growth prospects for the Alberta economy beyond 2010. The benefits of oil sands developments will continue to migrate from the north of the province to the Corridor, with the Edmonton Area alone poised to enjoy some $50 billion in oil sands related construction projects over the next decade.

This report is more or less "Invest in Alberta 101". It is well worths reading.

Enjoy