By Chris Sorensen - Friday, May 17, 2013 - 0 Comments
Celebrated partnerships like the Boreal Forest Agreement are crumbling. Can corporations and NGOs really work together to save the environment?
Rachel Plotkin is well-acquainted with the Valhalla Inn in Thunder Bay, Ont. A science-project manager for the David Suzuki Foundation, Plotkin has spent more days than she cares to count holed up in one of the hotel’s meeting rooms with representatives from local logging companies and fellow environmental groups. They are trying to hammer out a conservation plan for a four-million-hectare section of boreal forest in northwestern Ontario, and the thousands of woodland caribou that call it home.
Their work represents a sliver of the sweeping Canadian Boreal Forest Agreement signed in 2010 by 21 forestry companies and nine non-governmental organizations, or NGOs. In a bid to put decades of pitched battles behind them, the two sides pledged to jointly develop conservation and sustainable land-use plans for 76 million hectares of mostly untouched forest that stretches from Quebec to British Columbia. But progress has been painfully slow. With the agreement’s three-year anniversary barely a week away on May 18, the two sides have yet to offer much in the way of concrete results.
Angry with the glacial pace, two of the original signatories, Greenpeace Canada and Canopy, have dropped out of the pact, blaming the forestry companies for dragging their feet. The industry, on the other hand, accuses Greenpeace and others for being impatient and unrealistic with their demands. “We understand that this is very complex,” says Plotkin, who remains hopeful a breakthrough will be reached. “But our patience is wearing thin.”
By Chris Sorensen - Friday, May 10, 2013 at 5:40 PM - 0 Comments
Outgoing Bank of Canada governor Mark Carney’s stick-handling of the 2008 financial crisis was widely viewed as a central-banking success story; it helped him snare his new gig as governor of the Bank of England, starting on July 1. But in many ways, Carney’s replacement, Stephen Poloz, the head of Export Development Canada, has an even more vexing task in front of him. Whereas Carney moved swiftly but predictably to drop benchmark interest rates when faced with the global financial crisis (and, somewhat less predic ably, announced he intended to keep them there for an extended period), Poloz faces several smaller, but no less troublesome threats: an overheated housing market, soaring personal debt, stubborn unemployment and anemic GDP growth. And they come at a time when conventional monetary policy has far less influence, given that money has been so cheap, for so long.
By Chris Sorensen - Tuesday, May 7, 2013 at 8:07 PM - 0 Comments
With monikers like HD 178911 Bb, the names handed out for the more than…
With monikers like HD 178911 Bb, the names handed out for the more than 800 “exoplanets” that have been discovered by astronomers beyond our solar system don’t exactly conjure up images of exotic alien worlds. And the International Astronomical Union seems intent on keeping it that way. The IAU, which represents more than 10,000 professional astronomers in 90 countries, raised eyebrows recently when it lashed out at groups offering the public the chance to help rename an exoplanet or two, saying in a terse statement that “such schemes have no bearing on the official naming process.”
The verbal beat down appeared directed at crowd-sourcing company Uwingu, founded by American planetary scientist Alan Stern. Uwingu was advertising the chance to rename the recently discovered Alpha Centauri Bb, which orbits one of the two stars in the nearby Alpha Centauri system. It charged $4.99 to nominate a new name and $0.99 to vote on a winner (the leading contenders so far are Rakhat and Caleo).
Uwingu, for its part, argued that people can call exoplanets whatever they want—like they do with Polaris (Alpha Ursae Minoris), also commonly known as the North Star or Pole Star. A further twist: there is no official list of exoplanet names, or even stars. Rather, according to Popular Science, there are several celestial catalogs, each with their own naming practices recognized by the IAU. The bottom line? Earthlings seem destined for unnecessary confusion in the event of an alien invasion.
By Chris Sorensen - Friday, May 3, 2013 at 8:24 AM - 0 Comments
Stock advice? Just Google it.
Buy low, sell high, the old adage goes. The problem, of course, is that it’s impossible to know which way the market is about to move. Or is it?
In a bid to climb inside the heads of millions of investors, British researchers compared 98 search terms typed into Google between 2004 and 2011—examples include “inflation,” “portfolio” and even “cancer”— to the performance of the Dow Jones Industrial Average. The researchers used a simulation tool to buy short positions in a portfolio that tracked the index (a bet the market would decline) when the frequency of the search terms being tracked spiked, hypothesizing investor nervousness would first manifest itself as a flurry of Google searches. By contrast, when the frequency of the queries fell, the study’s authors bought the index.
It turned out that trading on mentions of “debt” was extremely good at predicting market declines, allowing the simulator to earn a 326 per cent return over the study period, compared to 16 per cent for a more conventional buy-and-hold strategy. There were, however, several less obvious predictors of an impending sell-off, including the word “restaurant.” Perhaps investors planned to treat themselves to a nice meal after recording a sizable capital gain?
By Chris Sorensen - Tuesday, April 30, 2013 at 11:00 AM - 0 Comments
Resource prices have driven the Canadian economy for over a decade. Are the good times coming to an end?
For investors and producers alike, gold’s recent rout was as devastating as it was unexpected. The price plummeted by $200 an ounce over a two-day period last week, suffering its biggest single-day drop in 30 years. Though it eventually stabilized at around $1,400 an ounce, stocks of gold mines—many of them Canadian—continued to be hammered by investors for days afterward, with some reports suggesting that as many as 15 per cent of the world’s gold mining companies are now wallowing in red ink.
There are many theories as to what caused gold to fall so far, so fast. They range from rumours that Cyprus planned to sell off some of its reserves to pay for its bailout, to the easing of fears that central bankers are destroying currencies with their unprecedented stimulus measures. “People thought loose monetary policies lead to rampant inflation,” says Keith Head, a professor at the University of British Columbia’s Sauder School of Business. “But gold prices stayed high, even when the underlying theory was repudiated by actual evidence, and that’s a vulnerable situation to be in.”
The big question now is whether other commodity prices will follow suit. Though gold, which traded as high as $1,888 an ounce in 2011, is unique in many respects—it is valued mostly as a way to store wealth, as opposed to as an industrial input—prices of everything from aluminum to zinc have slumped over the past several years after hitting historic highs, creating fears of a broader crash. Edward Morse, the head of commodities research at Citigroup, recently wrote that “the questions over gold and some overly securitized commodities like copper relate to whether their recent robustness is bubble-like and about to burst.” He claims that 2013 could be the year the decade-long boom in raw-material prices driven by China’s rapid growth finally hears its “death bells ring.”
How it all plays out will be crucial in determining Canada’s future prosperity. Nearly one-fifth of the country’s GDP can be attributed to resource industries and their spin-offs, not to mention half of all exports. “It’s been well-recognized, including by Mark Carney [the governor of the Bank of Canada], that commodities pretty much saved our bacon over the past few years,” says Pierre Gratton, the president of the Mining Association of Canada. But now global forces appear to be working against us, with resource prices falling, just as a once-hot housing market falters and consumers are awash in debt. “Higher prices bring on more supply, which brings down prices,” Gratton says. “That’s the cycle and we’re in a bit of that now.”
The latest shoe to drop came earlier this month when China revealed its growth was slowing more than expected. It said GDP came in at 7.7 per cent in the first quarter, down from 7.9 per cent in the fourth quarter of 2012. That threatens to translate into less demand for everything from lumber needed to frame buildings to the nickel used to make stainless steel.
The news helped suck the air out of Canada’s already lagging stock markets, home to roughly 60 per cent of the world’s mining firms. The S&P/TSX Composite Index has fallen 10 per cent since early 2011 and was one of the world’s worst-performing major indexes in 2012, while the S&P/TSX Venture Composite Index, which tracks mostly junior mining companies, is down by nearly 60 per cent as investors shelve their appetite for risky, early-stage projects. Meanwhile, the Dow Jones Industrial Average, which tracks some of America’s best-known companies, is up 25 per cent over the same period.
It’s a much different environment than just a few years ago, when theories of “peak oil” and even “peak copper” were prevalent. The prices of energy and minerals, when adjusted for inflation, more than doubled between 2003 to 2008, while the price of food increased 75 per cent, according to a 2012 report by the UN department of economic and social affairs. The report called the run-up in prices “unprecedented in its magnitude and duration” and suggested the world is witnessing the early phases of a decades-long “super-cycle expansion” in commodities driven by “the rapid pace of industrial development and urbanization in China, India and other emerging economies.” It seemed like a historic shift in the world’s economic balance of power (previous super-cycles resulted from the industrialization of the United States in the late-19th and early-20th centuries, and the rebuilding of Europe and Japan in the postwar years). Some estimates suggested that the world’s developing economies will represent nearly 80 per cent of global GDP by 2050, compared to about 50 per cent today.
Demand is only part of the equation, though, as every economist knows. Rising prices cause producers to boost production and seek out new reserves of key resources. That, in turn, boosts supply and eventually causes prices to drop—which is why commodity markets have historically been prone to major swings. Copper, for example, hit a high of $4.66 a pound in 2011 amid talk of a looming global shortage. (Copper is used in a variety of industrial applications, including wiring and plumbing.) There were reports of thieves trying to steal church roofs in Britain, and even power lines, with some electrocuting themselves in the process. Just two years later, the price has fallen back to about $3.20 a pound as new mines begin to come online.
With similar price declines under way for other key materials, producers are suddenly being forced to rethink multi-billion-dollar projects. Australia’s BHP Billiton said last year it was postponing several projects worth an estimated $50 billion. Brazilian miner Vale SA has suspended a potash project in Argentina, while Rio Tinto Group, the world’s second-biggest miner of iron ore, is in the midst of a major cost-cutting effort.
How bad this will be for Canada depends on whether this is a mere blip, or the beginning of the end of the Chinese-powered commodities super-cycle. The federal government estimates that the energy, mining and forestry industries contribute more than $30 billion annually to public coffers and employ up to 1.6 million people when related industries are taken into account. Ottawa is counting on revenue from the country’s natural-resource industries to help it meet its goal of balancing the budget by 2015, noting in its “action plan” that there are “more than 600 major resource projects, worth over $650 billion” planned over the next decade.
Citigroup, however, argues that the next 10 years will be defined mainly by a series of commodity-speciﬁc booms and busts, as opposed to broadly based increases. “The first quarter provided a clear precursor of what’s to come—the majority of commodities saw prices fall across the board, and those that rose did so for commodity-specific reasons,” Morse’s team wrote. Examples of the latter included natural gas prices that rose because of a temporary stall in production, and cotton prices that spiked because of uncertainty about Chinese buying following reduced plantings.
Others maintain that global raw-material prices will be only temporarily moderated as producers catch up with demand. “I don’t think it’s the end of the bull run in commodities, but I think we will go through a number of years of industrial metal prices being somewhat lower than they have been,” says Patricia Mohr, the vice-president of economics and head of commodities-market research at the Bank of Nova Scotia. “China’s demand will continue to grow, although at a slower pace. But the level of demand is already huge.”
British investment guru Jeremy Grantham is particularly bullish. He argued in a recent U.S. television interview that the combination of China’s rapidly urbanizing population combined with dwindling amounts of cheap, easy-to-access resources points to a future where prices of key commodities continue to soar. He says a sustained rise in the price of oil is helping to further magnify those increases, since it makes extracting and transporting other resources more expensive. Calum Turvey, a professor at Cornell University who is a past editor of the Canadian Journal of Agricultural Economics, says oil’s impact on the price of food is even more direct. “As oil prices rise, ethanol becomes more profitable, which increases the price of corn,” he says. That, in turn, causes farmers to plant more corn, decreasing the supply of other grains and oilseeds and driving up their prices.
In a sector where constructing a new mine can take up to 20 years, the industry is necessarily taking a long-term view. “You’ve also got India and a bunch of smaller economies in Africa that are growing at a very fast rate,” says Gratton. “So even as China’s growth abates, you’ve got other industrializing countries coming behind it that, we believe, will keep demand for materials robust.” He says the current slump is even being welcomed in some parts of Canada, where the recent boom was accompanied by skyrocketing equipment costs and a persistent shortage of labour. “I was in Saskatchewan recently, and they’ve got a lot of investments in uranium and potash and other things,” Gratton says. “You almost get this sense of relief that things have calmed down a little.” Investors, on the other hand, are almost certainly feeling their heart rates rise.
By Chris Sorensen - Thursday, April 25, 2013 at 11:00 AM - 0 Comments
How car companies and QR codes are reaching out to the public
For years, automakers and rental-car companies enjoyed a mutually beneficial, if somewhat uninspired, relationship. Car companies needed a place to dump slow-selling models (hence the armada of PT Cruisers), while rental firms sought big discounts on thousands of vehicles.
Now, thanks to the ubiquity of smartphones, both sides have also spotted an opportunity to make lucrative connections with the driving public. General Motors, Mazda and others are increasingly equipping rental cars with scannable “QR” codes that not only point customers to websites offering handy location-based services such as Yelp and GasBuddy, but also information about the make and model of car they’re driving—effectively treating rental cars as a virtual showroom.
Enterprise Holdings, which operates Alamo Rent A Car, Enterprise Rent-A-Car and National Car Rental, already has the codes in more than one million vehicles. The best part? An incentive to stock rental fleets with cars people actually want to drive.
By Chris Sorensen - Tuesday, April 23, 2013 at 8:00 AM - 0 Comments
Chris Sorensen on Royal Dutch Shell and the hunt for black gold in the Arctic
Royal Dutch Shell’s efforts to drill for offshore oil in the Arctic, one of the harshest environments on Earth, have so far been a lesson in humility. Last season’s drilling program was marred by numerous delays, equipment failures and a towing mishap that left the company’s $290-million Kulluk drill rig grounded off the coast of Alaska during a fierce storm.
The oil giant’s $5-billion Arctic program was unceremoniously suspended in February before a single offshore well was completed (Shell had planned to drill as many as 10 wells in the Chukchi and Beaufort seas over the next few years, but was only able to start two). Adding insult to injury, Shell was publicly criticized by the U.S. Department of the Interior, which demanded a detailed plan to address issues ranging from logistics to oversight of contractors before any further drilling would be allowed to go ahead. “Shell screwed up in 2012,” Ken Salazar, the recently resigned Secretary of the Interior, was quoted as saying. Undeterred, Shell recently signed a memorandum with Russia’s Gazprom that includes offshore exploration in Russia’s Arctic shelf.
With an estimated 30 per cent of the world’s undiscovered natural gas and 13 per cent of its undiscovered oil, the Arctic, and Shell’s struggles there, highlight both the risks and rewards oil companies face in a world where most easy-to-access hydrocarbons have already been tapped. But some of the dangers could soon be ameliorated as the industry races to minimize the use of vulnerable floating platforms, and focuses instead on equipment that can be bolted directly to the sea floor, where it’s relatively protected from ice and violent weather. “Our vision of the future is that a lot of things you now see on platforms and oil rigs can be moved to the sea floor—the processing, separation and boosting,” says Patrick Kimball, a spokesperson for Houston-based FMC Technologies, one of several oil-services companies leading the charge into the deep. “When there’s ice covering the surface six months of the year, this approach offers advantages because everything’s on the sea floor and monitored with remotely operated vehicles,” Kimball says.
By Chris Sorensen - Monday, April 15, 2013 at 8:00 AM - 0 Comments
Adidas and Under Armour make strides against footwear giant
It sounds like another marketing gimmick, but Adidas promises its new Energy Boost running shoes will actually make runners lighter on their feet. The German footwear giant says a new, springier sole material, which looks vaguely like Styrofoam, returns energy better than traditional compounds and could help it close the gap with Nike, the industry leader.
It’s merely the latest salvo in an increasingly competitive industry, which generated $14 billion in the U.S. last year. “The sneaker business has hit another level,” says Matt Powell, an analyst at SportsOneSource in Maine. “Technology and colour are driving the market right now.”
Nike has embraced technology in a big way. Last year, it unveiled a wristband that measures how far the wearer walks, how many calories they burn, and syncs all the data with a smartphone. It also introduced a $250 pair of basketball sneakers equipped with sensors that can tell players how high they jump. And it’s constantly releasing new colour combinations to keep consumers buying. That includes Day-Glo Christmas editions of its Lebron X and Kobe 8 basketball shoes that went on sale last year.
By Chris Sorensen - Wednesday, April 10, 2013 at 2:17 PM - 0 Comments
When the news first broke that Porter Airlines was about to announce a conditional purchase of 30 of Bombardier’s new C-Series jets, which could be used to service destinations across North America and effectively make Porter Canada’s third national airline, many assumed CEO Robert Deluce intended to fly them out of airports in Montreal or Ottawa—or possibly Toronto’s Pearson. That’s because Porter’s main hub at Toronto’s island airport currently prohibits commercial jet aircraft under a decades-old agreement signed by the City of Toronto, Ottawa and the Toronto Port Authority, which oversees the airport. Plus, the runways at the island are currently too short to comfortably handle the C-Series, designed to compete with the smallest jets made by Boeing and Airbus.
But that’s not the way Deluce does business. He’ s an extremely cagey operator—not unlike the airline’s raccoon mascot—and he knows that going up against Air Canada and WestJet on an equal footing is a recipe for bankruptcy. On the other hand, flying longer-haul routes out of Billy Bishop Toronto City Airport—to Vancouver, Calgary and Los Angeles, among other places—gives Porter a huge competitive advantage since the island is within spitting distance of Toronto’s downtown (whereas Pearson is about 40 minutes away in Mississauga) and Air Canada’s presence there is strictly limited (Porter controls most of the take-off and landing slots thanks to a sweetheart deal with the port authority), while WestJet doesn’t operate there at all. And, right on cue, Deluce today revealed that he will indeed attempt to have the ban on jets on the island repealed and the runways lengthened.
Opening up the tripartite agreement to accommodate Porter’s expansion promises to spark a vicious political battle. Toronto’s former Mayor David Miller successfully ran for office in 2003 on a campaign that opposed the further development of the airport, arguing that it would negatively impact efforts to redevelop Toronto’s then largely industrial waterfront. Other opponents argued that Deluce wouldn’t be satisfied with a small, regionally-focused operation at the island, and would eventually push for a bigger, more disruptive operation—a fear that turned out to be spot-on. Not surprisingly, then, several city councillors have already spoken out against Deluce’s latest plans.
But here, too, Deluce is making an astute calculation. Unlike Miller, Toronto Mayor Rob Ford has made it clear he’s a Porter fan, as have the federal Conservatives. And the port authority has been on Porter’s side since Day 1. Nor does it hurt that Porter is buying from Bombardier, a Canadian company that’s received its fair share of government support in the past. Most importantly, there’s little evidence to suggest Porter’s presence at the island since 2006 has made Toronto’s waterfront a less desirable place. It certainly hasn’t stopped thousands of people from snapping up pricey units in the huge condo towers that have been built within earshot of the airport’s runways. And if those people aren’t worried about planes zipping by their floor-to-ceiling windows, Deluce no doubt reasons, why should anyone else be?
Though speculation about Porter’s future has swirled ever since it shelved its IPO plans in 2011, Deluce’s latest gambit suggests he has a few tricks up his sleeve yet.
By Chris Sorensen - Tuesday, April 2, 2013 at 10:50 AM - 0 Comments
Stalled growth, rising debt — Canada’s stuck
Our latest cover story is actually two stories, comparing the state of the Canadian and American economies. View the companion piece to this story, here.
To outsiders looking in, Canada must seem like a potent place. In the midst of a global recession, our banks were profitable, home prices soared and lost jobs were quickly replaced—all feats Ottawa was fond of boasting about. “We have the soundest financial system in the world and that’s a strong point that we can share with others,” Finance Minister Jim Flaherty told reporters in 2008. A few years later, at the World Economic Forum in Davos, Prime Minister Stephen Harper promised to set the stage for a generation of economic growth with changes to immigration and a focus on selling oil and gas to Asia—part of a grand vision to make Canada an “emerging energy superpower.” The country’s new-found reputation for punching above its weight may have also played a role in the U.K.’s decision to hire Bank of Canada governor Mark Carney to run the Bank of England, the first time a foreigner has been sought for the job.
Carney doesn’t start his new gig until July 1. But already the holes in Canada’s narrative of economic exceptionalism are big enough to drive an oil sands dump truck through. Our banks, though still sound, have been downgraded by rating agencies because of their exposure to a potential Canadian housing bubble and high levels of consumer debt. Economists are worried that a pullback in government spending won’t be offset quickly enough by a ramp up in exports. And Alberta’s vaunted oil and gas sector is suddenly in trouble as a glut of new U.S. crude threatens prices and future investment. The stiff headwinds are reflected in GDP forecasts now expected to come in well under the previously anticipated (and already dismal) two per cent growth for 2013.
Canadians previously took pride in the fact that our small, resource-based economy was doing far better than that of our bigger neighbours to the south—Harper reminded CNBC viewers as recently as 2011 that Canada was still “outperforming the average, or the pack, in the industrial world”—but in the space of just few months the tables have seemingly turned. What happened?
By Chris Sorensen - Saturday, March 30, 2013 at 8:00 PM - 0 Comments
Canadians look south at home loan heaven
Finance Minister Jim Flaherty has been scolding mortgage lenders who offer their customers five-year fixed rates below three per cent, lest they spark a flurry of home buying and further inflate Canada’s housing bubble. Meanwhile, south of the border, where the housing market is just beginning to claw its way back from its 2007 implosion, banks are wooing nervous consumers with rates that are just a touch higher—at 3.63 per cent—but can be locked in for 30 years. Not only is that a far better deal than Canada’s current 10-year fixed rates of 3.69 per cent, the maximum term most lenders will offer, but it’s a great way to guard against an inevitable rise in interest rates down the road.
On the surface, it seems like another case of Canadians getting a worse deal than their American counterparts—not unlike when they buy a hardcover book or a new car. Across the board, mortgages are now cheaper in the U.S., where interest rates are currently lower and competition much greater in general. The 30-year mortgages are also not, technically, fixed-rate, because they can easily be refinanced by borrowers who want to take advantage of lower rates. “The person borrowing can get out at any time by switching to another lender, or just by paying it off,” says Nicholas Rowe, an associate professor of economics at Ottawa’s Carleton University. “The rates can’t go up, but they might go down if you find a better deal.”
While a great deal for borrowers, Rowe cautions the U.S.-style 30-year mortgage still comes at a price. Since lenders face an increased risk if rates fall, they need to compensate by charging slightly higher interest rates. (In contrast, the most popular Canadian mortgages are “closed,” meaning they can’t be refinanced or paid off early without incurring a penalty, and are for significantly shorter terms—usually five years.) Patrick Lawler, the chief economist of the U.S. Federal Housing Finance Agency, said in a panel discussion two years ago that U.S. borrowers pay at least an extra 0.25 to 0.5 percentage point in rates in exchange for the option to prepay without penalty and sometimes “another percentage point or two” to have a long-term fixed rate, according to a report in the Wall Street Journal. Nevertheless, as many as 80 per cent of borrowers in America opt for 30-year mortgages, which are backed by housing finance giants Fannie Mae and Freddie Mac (another reason why U.S. rates are cheaper despite heightened risk).
By Chris Sorensen - Thursday, March 28, 2013 at 1:37 PM - 0 Comments
BlackBerry (formerly Research In Motion Ltd.) continues to prove its harshest critics wrong. The company today posted a return to profitability in the fourth quarter, announced the retirement of co-founder and board vice chair Mike Lazaridis and revealed that the company sold about a million devices running its new BB10 platform during the three-month period. The device sales were in-line with Wall Street’s expectations and were considerably more than the 300,000 or so predicted by some of the more bearish analysts following the stock.
It’s the first piece of solid data about the company’s efforts to make the transition from its legacy OS to a new platform. Though still too early to call BB10 a success, CEO Thorsten Heins said during a conference call that more than 50 per cent of people who have bought a BlackBerry Z10 touchscreen were non-BlackBerry customers, which bodes well for the company’s early efforts to win back market share from industry leaders Apple and Google. A version of the device featuring a physical keyboard is expected to launch soon.
Key to BlackBerry’s comeback will be making an impact in the huge U.S. market. While some analysts have expressed concerns about the Z10′s mid-March U.S. launch, Heins suggested it was far too early to pass judgment (the figures reported today only include sales up until March 2). He also cautioned against making assumptions about Z10 sales based on spot checks with retailers. “Guessing the store line-ups has become a bit of a spectator sport in our industry,” Heins said. “I would like to emphasize that BlackBerry 10 has a phased roll out.” In other words, investors will have to wait another three months for more answers.
By Chris Sorensen - Sunday, March 24, 2013 at 8:00 PM - 0 Comments
China’s ‘ghost cities’ are raising fears of an epic crash with global consequences
In Ordos, a city of 1.5 million in Inner Mongolia, there sits a mostly vacant district that was built to house and service another one million people, complete with huge public squares and museums. In Dongguan, more than 2,500 km to the south, the sprawling New South China Mall opened in 2005 to host an expected 70,000 shoppers each day, but remains mostly empty. Other so-called “ghost cities” are strewn across China.
When China’s economy was flying, such spending was little more than a curiosity, an inevitable by-product of a rapidly urbanizing country of 1.3 billion where construction investment accounts for nearly half of GDP. But these days, economic growth is slowing—the government is targeting 7.5 per cent this year, compared to more than nine per cent a few years ago—and all those empty apartments are beginning to look more sinister. Are they evidence of an epic real estate bubble waiting to burst, with global consequences, or just another relatively harmless sideshow of China’s centrally managed economy?
There’s little doubt that Beijing’s policy-makers are wrestling with an overheated property market. In a bid to clamp down on speculators who are driving up prices on units they don’t plan to live in, the government recently unveiled plans to introduce a new 20 per cent tax on profits from home sales, while raising down-payment requirements in certain cities. That, in turn, sparked a buying frenzy ahead of the new rules. In Beijing, home sales spiked 280 per cent during the first week of March, compared to the same period a year earlier. Adding fuel to the fire was a recent 60 Minutes report in which a reporter toured vacant development projects and interviewed Wang Shi, the chairman of Vanke, one of China’s biggest real estate developers. Wang said he believes China is currently in the grips of a real estate bubble and its burst would trigger an Arab Spring-like uprising. The stocks of several Chinese developers plummeted soon after the program aired.
By Chris Sorensen - Thursday, March 21, 2013 at 1:00 PM - 0 Comments
How does this ‘almost theatrically overblown phone’ deliver on user experience?
With its five-inch screen, 13-megapixel camera and software that senses whether you’re looking at it, Samsung’s new Galaxy S4 is “an almost theatrically overblown phone, stuffed to the plastic casing with hardware and features,” according to PC Magazine.
It was not quite the revolutionary device many had hoped for, but it’s still making über-minimalist Apple Inc. uncharacteristically uncomfortable. In a Wall Street Journal interview, marketing chief Phil Schiller dismissed the S4 and other phones that run Google’s Android software as unworthy iPhone competitors, citing a subpar user experience.
He may well be right, but the comments came off looking petty and defensive, given that Apple’s stock has dropped by 35 per cent over the past six months, while Samsung’s has soared 11 per cent. Besides, it’s unlikely consumers will punish Samsung for offering them more for their money.
By Chris Sorensen - Friday, March 15, 2013 at 8:00 PM - 0 Comments
The Jobs Report: The biggest threat facing the economy is a massive shortage of qualified workers
On a recent February evening, Karl Eve received an emergency call from a restaurant owner in Canmore, Alta. The busy eatery had suddenly found itself with no hot water, even though the basement hot water tanks appeared to be working fine. A plumber with 10 years’ experience, Eve eventually traced the problem to a malfunctioning dishwasher and got the hot water flowing again—much to the owner’s relief.
It’s the sort of detective work Eve says he loves about his job. He also likes that his plumbing business, which he runs with his wife in nearby Exshaw, provides his family with a comfortable middle-class lifestyle. But it was a career he very nearly missed. Never a fan of textbooks, Eve ended up toiling in a southern Ontario gypsum mine after high school. It was only after moving to Alberta years later that he considered a career in the trades. A chance meeting at a church potluck led to a ride-along with a local plumber and, ultimately, an apprenticeship. “I discovered there was a lot to learn, especially when it came to math,” Eve says of his four years of training, which included eight weeks a year in a classroom. “The amount of education was very surprising to me, but in a positive way. I grasped it with both hands, so to speak.”
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Eve’s story is more rare than it should be in Canada. Many consider the trades to be low-paying, go-nowhere jobs, if they consider them at all. But it’s a perception not grounded in reality, as Eve’s healthy hourly rate of $90 to $135 suggests. Nor is it one Canada can afford to maintain. Numerous studies warn Canada is facing a massive shortage of skilled workers over the next few decades as millions of baby boomers hit retirement age and exit the workforce.
By Chris Sorensen - Tuesday, March 12, 2013 at 7:00 PM - 0 Comments
Manitoba credit unions are beating out Bay Street banks as the best places to park cash
It may seem like a contradiction, but these days, a high-interest savings account at one of Canada’s big five banks, where base rates are just over one per cent, often doesn’t even keep pace with inflation. And as the industry continues to consolidate—with the Royal Bank of Canada’s recent $1.4-billion purchase of Ally Financial (and the subsequent winding down of Ally’s 1.8 per cent high-interest savings accounts) being the latest example—the alternatives for savers are rapidly becoming fewer and further between.
Unless, that is, you’ve been stuffing your money into Manitoba. Several of the province’s credit unions boast online divisions that still offer attractive two per cent interest rates on their high-interest and tax-free savings accounts. They also sport catchy names like AcceleRate (Winnipeg’s Crosstown Civic Credit Union), Achieva (Winnipeg’s Cambrian Credit Union) and MAXA (Brandon’s Westoba Credit Union). Another, called Hubert, was launched two years ago by Sunova Credit Union of Selkirk. It features a smiley-face logo and promises “happy savings.”
John Hamilton, a spokesman for Credit Union Central of Manitoba, the provincial industry’s trade association, says the RBC purchase of Ally is already being felt by members—many of which take deposits from non-Manitoba residents. “The virtual credit unions have said they’re getting more calls and emails from out of province,” he says.
By Chris Sorensen - Friday, March 8, 2013 at 5:00 AM - 0 Comments
Why rock-bottom mortgage rates could spell trouble
Canadian lenders are hoping a return to rock-bottom mortgage rates will reignite a cooling housing market that threatens to take a bite out of their income.
The Bank of Montreal recently shaved its advertised five-year fixed rate to 2.99 per cent for the second time in less than a year, prompting federal Finance Minister Jim Flaherty to reiterate an earlier warning of the need to avoid “the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States.”
Analysts say the falling rates are a predictable response to Canada’s sluggish economic growth, just 0.6 per cent during the fourth quarter, as well as to expectations the Bank of Canada may not hike its trendsetting rate, stuck at one per cent, until 2014.
But the falling mortgage rates also threaten to undo Flaherty’s controversial efforts last summer to gradually let the hot air out of the housing market by tightening rules for government-backed mortgages, reducing the maximum amortization period to 25 years from 30. That, in turn, could push home prices farther into the stratosphere—at a time when debt rating agency Fitch argues they are 20 per cent overvalued—while adding more debt to Canadians’ creaking balance sheets.
A short-term boost, to be sure, but it’s the hangover we should be worried about.
By Chris Sorensen - Thursday, March 7, 2013 at 2:00 PM - 0 Comments
Game over Hollywood
From Tomb Raider to Resident Evil, video games have made their mark on Hollywood. But so far Hollywood has been unable to return the favour, despite several high-profile attempts. The latest casualty is a studio that film and TV producer Jerry Bruckheimer set up in partnership with MTV six years ago. The venture is being quietly shuttered after failing to produce a single title, according to a recent report by online news site Gamespot. Nor is Bruckheimer the only Hollywood big shot to fail to make a dent in the booming $65-billion industry. Steven Spielberg signed an deal with Electronic Arts in 2005 that yielded one non-blockbuster game—a puzzle game called Boom Blox. Director Zack Snyder signed a separate agreement with EA in 2008 to make three games—none of which have materialized, which is surprising, some say, given Snyder’s CGI-heavy action film 300, which critics often compared to a video game.
By Bookmarked and Chris Sorensen - Friday, March 1, 2013 at 9:00 AM - 0 Comments
Wheelan’s earlier book, Naked Economics: Undressing the Dismal Science, is regarded as one of the best—and most readable—introductory texts on the subject. A former U.S. correspondent for The Economist who now teaches at Dartmouth College, Wheelan skilfully cut through all the jargon and graphs to demonstrate that economics is really about people and their behaviour. Now Wheelan is attempting to demystify another important, but equally tedious-sounding field: statistics. As Wheelan points out, the inferences made from statistical data underpin much of modern life, from the movie suggestions delivered by Netflix to your chances of developing heart disease. They are also easily misunderstood, manipulated or, in rare cases, plain wrong. But how many of us know enough about stats to tell?
In a bid to explain both the power and pitfalls of statistical analyses, Wheelan draws on engaging examples that range from sports to game shows. They include: why marketers of Schlitz beer were willing to subject their brew to a blind taste test among 100 fans of a rival brand in front of a Super Bowl audience (most beers Schlitz competes with taste the same and, with a large enough sample size, roughly half of tasters were likely to pick Schlitz regardless of their stated preference); and a discussion of what’s come to be known as the Monty Hall problem: should Let’s Make a Deal contestants, faced with three doors, one of which hides a car and two that hide goats, opt to change their selection after the host reveals a goat behind one of the two doors they didn’t pick? (Yes, Wheelan argues, because the chances of winning jump from one-in-three to two-in-three.)
Still, the book feels far more dense and textbook-like than Wheelan’s previous work. It may well be that, unlike economics, which is sometimes described as a “pseudoscience,” statistics is necessarily more math-like. But given the increasing importance of stats to our everyday lives, odds are it’s worth the extra effort.
Visit the Maclean’s Bookmarked blog for news and reviews on all things literary
By Chris Sorensen - Wednesday, February 27, 2013 at 5:15 AM - 0 Comments
When it comes to electric cars, the future may be in China.
While North American consumers continue to treat electric vehicles such as the Nissan Leaf and Chevy Volt as novelties, several Chinese firms, including Dongfeng Motor and Geely Automobile, are reportedly tripping over themselves to buy troubled U.S. electric car-maker Fisker, which makes the high-end Karma and has received about $192 million in U.S. government loans.
By Chris Sorensen - Tuesday, February 26, 2013 at 5:18 AM - 0 Comments
It’s barely been a month since BlackBerry (formerly Research In Motion Ltd.) launched its long-overdue BB10 platform. But already the honeymoon appears to be over.
Despite positive reviews of its new touchscreen Z10 device, several analysts have dramatically slashed their initial sales forecasts for the current quarter. Two are forecasting sales of about 300,000, as opposed to the one million units that Wall Street had expected.
By Chris Sorensen - Tuesday, February 19, 2013 at 7:00 PM - 0 Comments
Caught trying to mimic the latest hot product, the most powerful tech firms can’t seem to dream up anything genuinely new
It’s a sure sign a company is in desperate straits when journalists go searching for answers from a former pitchman. In a recent interview with Bloomberg, Ben Curtis, the actor who played the “Dell dude” in computer-maker Dell Inc.’s 2000-era commercials (in which he would inform strangers “Dude, you’re getting a Dell”), suggested his troubled former employer could get a sorely needed boost if his character were resurrected. “Since that campaign ended, Dell has lost their personality,” Curtis said, adding that he, too, now uses an Apple Inc.-made laptop.
Dell’s problems won’t be so easily fixed. In a bid to speed up a badly needed transition from hardware manufacturer to provider of high-margin software and services, founder and CEO Michael Dell and private equity firm Silver Lake Partners are proposing a massive $24.4-billion leveraged buyout of Round Rock, a Texas-based company that once held the title of the world’s largest maker of personal computers. It’s just another reminder of how fast the technology industry moves. One day a company is the most powerful in Silicon Valley, with a soaring stock price; the next it’s contemplating moving away from the very business that made it a household name. (In Dell’s case, its outstanding shares, once worth nearly $60, are being purchased by its founder and Silver Lake for $13.65 apiece.)
Although desktop and laptops remain ubiquitous in homes, offices and schools, sales of PCs have slumped in recent years as consumers increasingly use smartphones and tablets. Worldwide PC shipments totalled 90 million units during the last three months of 2012, according to Gartner Research, a 4.9 per cent decline from the same period a year earlier. In Canada, the fall was even steeper—down nearly 14 per cent. “We’re approaching a saturation point in the market,” says Tim Brunt, an analyst at consulting firm IDC Canada. “There are multiple PCs in every household. Everybody’s got one, so now it’s just about buying replacements.”
By Chris Sorensen - Tuesday, February 12, 2013 at 11:00 AM - 0 Comments
Why some experts believe this is the start of a once-in-a-generation boom
Ralph Acampora has nearly 50 years of experience as a stock market technician—someone who attempts to predict future stock movements by studying their historical patterns. But he says he learned one of his most important lessons not by poring over data on a powerful computer, but while eating dinner 43 years ago at Delmonico’s, a Lower Manhattan institution that traces its roots to 1827. He was seated next to a 70-year-old named Kenneth Ward, then one of the oldest market technicians on Wall Street.
Acampora, a founding member of the Market Technicians Association, asked Ward which 20th-century market had been most difficult to grasp, saying he figured it must have been the crash of 1929. But Ward replied in a gravelly voice, “Naw kid, that was a lay-up. Don’t get me wrong. We lost a lot of money, but the most difficult market I ever worked was in the 1960s.” Acampora was perplexed. Other than the “flash crash” of 1962, the Dow Jones Industrial Average—an index that tracks 30 U.S. blue chip companies—spent the rest of the decade marching to new heights. “I said, ‘But Mr. Ward, the market was going up.’ And he said, ‘It sure did, young man, but it rolled over everybody. And that’s because nobody believed it.’ ” Continue…
By Chris Sorensen - Tuesday, February 5, 2013 at 7:00 PM - 0 Comments
How the most valuable resource in our history got mired in politics, protests and logistical nightmares
Prime Minister Stephen Harper first dubbed Canada an “emerging energy superpower” back in 2006. He was talking, primarily, about Alberta’s oil sands. “We are a stable, reliable producer in a volatile, unpredictable world,” he said, sending a clear signal that Ottawa intended to realize the oil sands’ full economic potential, as well as the geopolitical clout that comes along with it.
It was music to Albertans’ ears. With the world’s third-largest proven crude oil reserves, some 175 billion barrels, behind Saudi Arabia and Venezuela, the province had long been aware it was sitting on a gold mine. All that was needed were global oil prices above US$80 a barrel (needed to offset the expense of separating gooey bitumen from the sandy soil) and the necessary political vision to make it all happen. Canada finally had both. Industry forecasts predicted that, over the next quarter-century, the oil sands would draw more than $364 billion in investment, create some 3.2 million “person-years” of employment and add $1.7 trillion to Canada’s GDP. Continue…
By Chris Sorensen - Wednesday, January 30, 2013 at 2:00 PM - 0 Comments
Two Canadian firms take the plunge into expensive ads
At a cost of $3.8 million for 30 seconds of airtime, Super Bowl ads don’t come cheap. But it can be money well spent to reach nearly 180 million TV viewers, which is why two Canadian firms are taking the plunge this year.
Montreal’s Gildan Activewear, a heavyweight in the private-label T-shirt business, wants to convince Americans that Gildan is a consumer brand just like rivals Hanes and Fruit of the Loom. Meanwhile, Research in Motion needs its first-ever Super Bowl commercial to spark interest in the launch of its new BlackBerry 10 platform.
Shelling out millions for ad spots doesn’t guarantee success. The best Super Bowl ads are memorable and capable of generating significant online buzz, which may prove challenging for Gildan and RIM—two companies not known for their marketing chops. But there’s another plus: Super Bowl advertisers tend to see a bump in their stock prices just by announcing their intentions to run a Super Bowl ad in the ﬁrst place.