By Duncan Hood - Friday, September 4, 2009 - 2 Comments
A weekly scorecard on the state of the economy in North America and beyond
I’ve always believed that Canada is a nation of optimists. Now I know it for sure. For all the talk of the dangers of an “adverse feedback loop,” where consumers collectively get depressed about the wilting economy and make things worse by spending less, the numbers show that Canadians may already be spending our way out of this mess.
Earlier this week, Statistics Canada released a report showing that Canada’s real GDP increased by 0.1 per cent in June, the first monthly increase since July of last year. It was tentative cause for celebration, and it was interesting to see what was fuelling that uptick. It wasn’t manufacturing, construction, mining or anything so fundamental. Apart from the rising price of oil, Canada’s baby steps toward a recovery seem largely due to—surprise!—a bit of a consumer spending spree. Continue…
By Duncan Hood - Friday, August 28, 2009 at 8:30 AM - 5 Comments
A weekly scorecard on the state of the economy in North America and beyond
So how about that recovery? You missed it? Too bad, because the last few months might be as good as it gets for a while.
According to our Graph of the Week (see right), compared to other nasty recessions of the past, the S&P 500 has already enjoyed one of the best rebounds ever. The bad news is, that may be all the rebounding you’re going to see for some time. Because if this recession is anything like the previous ones, we’re either just on the cusp of a plunge into the next Great Depression, or (more likely) we’re in for a few years of going sideways, as we did after the oil crisis of 1973 and the tech crunch of 2001-02.
It’s certainly possible that we could embark on a new bull market and pick up where we left off in 2007, but the smart money seems to be on a recovery of the excruciatingly slow variety. Why? As Warren Buffett wrote in the New York Times last week, mainly because “enormous dosages of monetary medicine continue to be administered” by the government, and “before long, we will need to deal with their side effects.” In short, the U.S. has taken on its largest non-wartime deficit since 1920 to get us this far, and it’s still racking up debt at a frightening rate. Eventually that money will need to be paid back, and even the U.S. will be strained by the effort. Continue…
By Duncan Hood - Tuesday, May 5, 2009 at 12:20 PM - 11 Comments
How CEOs became obscenely overpaid, and what can be done about it
It was a bitterly cold February morning in Toronto just over a year ago when Gary Hawton witnessed a miracle. As CEO of Meritas Mutual Funds, a socially responsible investing company in Kitchener, Ont., he had been watching executive pay levels surge from generous to ridiculous over the last 15 years, and he’d had enough. As of 2007, the collective compensation of Canada’s 100 best-paid CEOs had crashed through the billion-dollar mark, and average individual pay packages were topping $10 million apiece. As a professional investor, Hawton knew that most CEOs were simply not worth that kind of money.
He sent letters to all the big Canadian banks asking them to allow shareholders to vote on CEO pay packages. He spoke out at shareholder meetings and talked up the issue to the press. At first, he was completely ignored. But Hawton, a former investment banker raised with strong Christian values, is a bit of a crusader. So last year, he decided to try a different strategy. He would introduce a shareholder’s motion that, if passed, would pave the way for a vote on executive pay whether the banks liked it or not. He knew it was a long shot. He knew it would take at least two years, quite a lot of money and infinite reserves of patience. He also knew that his mission would quite likely make him the financial world’s Don Quixote.
By Duncan Hood - Thursday, March 26, 2009 at 4:15 PM - 2 Comments
A weekly scorecard on the state of the economy in North America and beyond
Did Suncor and Petro-Canada just make a huge mistake? After all, when they announced their all-stock $19-billion deal to merge earlier this week, it looked like they were just taking one struggling oil company and hitching it to another one. It’s hard not to conclude the end result will simply be a really big struggling oil company.
The problem is, the planned merger doesn’t fix the underlying problems at both companies: oil is still trading at less than half of last year’s $147 high. Separating oil from mucky grit is still so expensive that many oil sands operations are becoming unfeasible. Worse, TD Economics has just issued a report saying we likely won’t see a sustained rally in oil for a couple of years yet. So you can’t blame some observers for calling this merger misguided.
By Duncan Hood - Monday, February 23, 2009 at 6:50 PM - 1,392 Comments
New evidence shows that Canadian prices could go down, and stay down, for a decade
There are still people out there who don’t believe Canada is about to be hit by a devastating housing crisis, but Riaz Kassam isn’t one of them. For him, the crisis has already arrived.
Last July, he made an $80,000 pre-sale payment on a $1.5-million penthouse condominium in Vancouver’s tony H&H Yaletown building, just a few blocks away from where he lives. Kassam, a 42-year-old computer analyst, who’s married with no kids, expected to move in by the end of 2008. But when he put his current apartment on the market, he didn’t get a single offer. He thought maybe he had priced it a little high, so he knocked a bit off. Still, no offers. He lowered it again, and again, until eventually he was offering his apartment for a full $120,000 less than his initial asking price. That’s when he realized he was in trouble. “We reached the point where we couldn’t drop the price any more,” he says, “or we wouldn’t have enough for the down payment on the new property.”
By Duncan Hood - Thursday, February 5, 2009 at 11:29 AM - 9 Comments
If so, we want to hear how you’re making the most of these tough times
It’s hard to see a silver lining in all this economic doom and gloom, but some Canadians are taking advantage of this period of upheaval to make changes in their own lives—for the better. Are you one of them? Have you gone back to school to get ahead? Have you left a job you hated for a volunteering position you love? Are you finding that scaling back to a simpler life has made you happier? Tell us your story (in the comments below).
By Duncan Hood - Tuesday, January 27, 2009 at 8:06 PM - 3 Comments
So the budget is out and it looks like the Tories are going to…
So the budget is out and it looks like the Tories are going to take us time travelling. Poof! It’s the 1970s again, and there’s no problem the government can’t spend its way out of. Never mind that it didn’t work then, and it left us with a government debt that crippled a generation and was only recently paid down to a reasonable level.
The truth is that we’ve been living beyond our means for a while now, and the only solution is to get used to living within our means. There is no black magic that can make that ugly truth go away. Running consecutive deficits is simply a way of borrowing more money in a desperate attempt to keep the party going. But it won’t stop the pain, it will just delay it. It’s like dealing with a hangover by going on another drinking binge. Excessive government debt will have to be paid back down again in the future, so we are simply punishing “future” Canadians for our mistakes. By running up a deficit we may make life better now, but we’re making our future less bright.
I saw Warren Buffett give a talk in Toronto about a year ago, and he observed that there has never been a case where a government had run up a large debt where it didn’t subsequently crank up the money presses and allow the value of its currency to fall, thus reducing the amount it owes to its creditors. Problem is, that usually leads to inflation. No one can predict the future, but with governments running up big debts all over the world, it doesn’t seem impossible that global inflation could be a huge problem five years from now. If it is, it will only make things worse.
Anyone would be in favour of stimulating the economy if they knew it would make things better, but I’m not 100 per cent sure that it will. Not the way this budget does it, anyway. Even the Tories seem to have misgivings about what they’re doing, hinting that they’re being pushed into something that they’re not entirely comfortable with. I can understand spending government money on bridges, roads and other infrastructure projects, because that stuff needs to be done anyway. But I’m not sure I like the idea of bankrolling my neighbour’s kitchen renovation, which is exactly what this budget forces me to do. It will no doubt help my neighbour, but I don’t think it will help the country—and it certainly won’t help me.
By Duncan Hood - Monday, January 26, 2009 at 10:39 PM - 1 Comment
The Swiss use a backup currency for more stability
Many solutions have been proposed for the global credit crunch, but the most novel one yet is circulating in an unassuming academic paper that’s been stirring up a lot of buzz. The idea? That businesses create their own backup currency and leave the banks out of it entirely.
The proposal is set out by Bernard Lietaer and his colleagues in “White Paper on the Options for Managing Systemic Bank Crises.” In it, Lietaer, who is currently a research fellow at the Center for Sustainable Resources of the University of California, suggests that if businesses can’t get the money they need from banks, maybe they should lend it to each other instead. For instance, if the banks won’t lend money to HP to buy processors from Intel, then why not create a credit system that lets Intel lend money to HP so it can buy Intel’s chips?
By Duncan Hood - Thursday, January 15, 2009 at 12:56 PM - 3 Comments
Asper says the company may be forced to breach a debt covenant
Canwest took another step closer to the brink yesterday. At the company’s annual general meeting in Toronto on Wednesday, CEO Leonard Asper announced not only weaker than expected results for the first quarter of its 2009 fiscal year, but even more worrying, that Canwest may be forced to breach a covenant on its debt.
Asper said his company had been blindsided by a sudden drop in advertising revenue resulting in a $33-million loss in the company’s first quarter, compared to a $41-million profit in the same quarter last year. “We have no certainty that we have hit bottom,” he told investors, “I don’t think anyone in this room feels comfortable saying that. It’s hard to say it’s getting worse, but it’s certainly not getting better.”
By Duncan Hood - Monday, December 22, 2008 at 9:00 AM - 1,009 Comments
The stock has fallen by more than 90 per cent and major investors are bailing out, as fear mounts over a debt crunch
Next year will mark the 10th anniversary of Leonard Asper’s ascent to the top job at Canwest Global Communications, taking over the reins from his late father Izzy. But there might not be much of a celebration. It hasn’t been an easy ride. When the youngest Asper became president and CEO in 1999, Canwest was trading at close to $20 a share. As of early this week, it was treading water around 60 cents. What was once arguably Canada’s leading media company was kicked off the country’s main market index in September, and is now a struggling penny stock.
Asper himself seems more perplexed than anyone by his company’s rapid decline. After all, as he’s fond of pointing out, Canwest is not only making money, it’s making more money every year. Revenues have increased from $2.7 billion in fiscal 2006, to $2.9 billion in 2007, to $3.1 billion in 2008. Similarly, Canwest’s EBITDA (earnings before interest, taxes, depreciation and amortization)—a popular indicator of a company’s profitability—looks healthy. As of August, the end of Canwest’s latest fiscal year, its EBITDA hit a three-year high of $578 million—$91 million higher than the year before. Canwest’s various holdings, which include Global Television, Network Ten in Australia, various websites and 10 major daily newspapers (including the National Post), are as a whole still making money. And analysts say that from a strategic standpoint, the company’s decision to acquire Alliance Atlantis and its portfolio of top specialty TV channels last year made perfect sense.
By Duncan Hood - Thursday, December 18, 2008 at 5:06 PM - 26 Comments
Duncan Hood on All Business
Back in early August, before the market collapsed and the economy tumbled after it, I wrote a piece for Maclean’s called “There will be pain” that gravely forecast that Canada was in real danger of developing an inflation problem. Boy was I wrong. Now, of course, consumers have stopped buying and everyone is worried about the exact opposite, deflation, which would see prices spiralling down and taking corporate profits with them.
That raises a serious question: Am I an idiot?
I prefer to think not. And I’ll haul out that timeless punditry excuse in my defence: My prediction wasn’t wrong, I was just off on the timing.
I still think that the U.S. and Canada will develop an inflation problem, in fact I now think it will be much worse. It’s just that it’s going to take a year or so before we get there. And on Tuesday I got some backup from some heavy-duty artillery in the financial pundit world.
Martin Wolf, associate editor and chief economics commentator at the Financial Times of London, also thinks that today’s deflation problem could quickly turn into a huge inflation problem. As he points out in his latest column (registration may be required) the two are actually pretty closely related, as both are side effects of an unstable economy. I like to think of it this way: When everything is steady, you keep standing upright, but when you’re thrown off balance, you’re as likely to fall forward as backward.
Anyway, as he writes, deflation is easy to cure. You just keep the money presses rolling — which is exactly what the U.S. is doing now. The more there is of something, the less it’s worth, and that applies to the almighty American greenback too. The problem is, once you’re cured the deflation problem, “the central bank will need to sell assets into the market, to mop up the excess money it has created in fighting deflation…. Otherwise, deflationary expectations may swiftly turn into expectations of above-target inflation.”
That’s why I’m dead set against all of the huge bailouts we’re seeing. They’re just prompting us to print more and more money, and we will pay the price for that, eventually. We’re not curing the problem, we’re just replacing one crisis with another. As Wolf writes, “the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence.”
What do you think?
By Duncan Hood - Thursday, December 4, 2008 at 11:48 AM - 1 Comment
George Weston Ltd. has just announced that its subsidiary Dunedin Holdings is in discussions…
George Weston Ltd. has just announced that its subsidiary Dunedin Holdings is in discussions with Mexico’s Grupo Bimbo (okay, settle down, it’s not that funny) to sell off its bread and baked goods business. This follows hot on the heels of the sale of Weston’s Neilson Dairy division to Saputo Inc.
Exciting stuff, but the buzz we’re hearing from sources on Bay St. is even more exciting: Some are speculating that Weston is raising cash so that it can buy up the outstanding shares of Loblaw Companies Ltd. and take it private.
Wouldn’t that be a smart idea? After all, Loblaw is pretty cheap right now.
We have no confirmation yet that this is indeed what’s happening, but something is up: Shares of Loblaw have surged up by almost 10 per cent in the last hour and a half. Stay tuned…
By Duncan Hood - Wednesday, December 3, 2008 at 3:51 PM - 9 Comments
As this surprising graphic shows, the amount of money pledged to bail out the…
As this surprising graphic shows, the amount of money pledged to bail out the U.S. economy amounts to more than: the amount spent on getting a man on the moon, the Vietnam War, the Korean War, the Iraq War, NASA’s all-time budget and The New Deal, combined. (And yes, the numbers are inflation-adjusted.) Imagine what the U.S. could have done with that money if it didn’t have to bail out all those banks…
By Duncan Hood - Tuesday, November 11, 2008 at 5:41 PM - 6 Comments
The U.S. economy is still by far the world’s biggest, and as a borrower,…
The U.S. economy is still by far the world’s biggest, and as a borrower, the U.S. government is still rated as one of the world’s safest. But something weird is happening in the U.S. government bond market, and Randall Forsyth at Barron’s, for one, is concerned.
I was taught that you should worry when what’s called the ‘yield curve’ on the bond market inverts, or goes negative. That means the yields on longer term bonds are lower than the yields on short term bonds, which means that people expect yields to fall. But that’s not happening — in fact the yield curve has almost never been steeper.
Some economists say that means a recovery is coming, but Forsyth isn’t so sure. He’s concerned because as the news gets worse and worse, the curve is getting steeper and steeper.
At the same time, the cost of insurance against the possibility that the U.S. Treasury could default is getting more and more expensive. That seems to indicate that the market believes that the Treasury could indeed fail to meet its debt obligations.
So could the U.S. actually go bankrupt? You never know. As Forsyth notes, you start borrowing a trillion here, and a trillion there, and pretty soon you’re talking about real money.
By Duncan Hood - Thursday, November 6, 2008 at 12:00 AM - 1 Comment
Now regular investors can lose it all just like the pros
The fallout from the financial meltdown is getting stranger and stranger. Almost everyone with an RRSP has already been scorched by falling stocks, but it turns out that thousands of Canadians have, in some cases inadvertently, put their savings directly into complex financial instruments called credit default swaps. Now they could lose every penny.
Jim Cougle, a 59-year-old field manager in Fredericton, N.B., was one such investor. He says his broker approached him with what looked like a conservative investment a few years ago to supplement his retirement income. He thought he was investing directly in a basket of top-rated corporate bonds, and as he says, “what could be safer than that?”
But when the financial crisis hit, he started getting letters warning he could lose all his money. Eventually, he was “flabbergasted” to learn that his investment, called ROC Pref III Corp., essentially consisted of about 125 credit default swaps on corporate bonds. The problem is, some of those bonds were issued by firms such as Lehman Brothers, Fannie Mae and Freddie Mac—which had either gone bankrupt, or were close to it. Continue…
By Duncan Hood and Jason Kirby - Thursday, October 9, 2008 at 12:00 AM - 0 Comments
The stock market is in free fall, and the economy is just beginning to suffer. Will you ever be able to retire? Well, that depends . . .
For more than a decade, Trish McAuliffe and her husband, Jim, have lived with a financial sword hanging over their heads.
Trish and Jim went to work for General Motors in Windsor, Ont., right around the same time in the early 1980s. It was 1996 when they got their first termination letters—notices that they would be put on “indefinite layoff” within a few months. They had a toddler and a baby at home, and had just bought a house. Jim, who was 31 at the time, came down with shingles, which his doctor attributed to extreme stress.
Their jobs were saved when thousands of older workers accepted voluntary buyouts, cutting down the number of layoffs. But soon, another termination notice arrived, then another, and another. Finally, in 2004, after years of flirting with financial ruin, the McAuliffes decided to move to Oshawa, Ont. GM was cutting back operations in southwestern Ontario, but had just invested $2.2 billion in its Oshawa facilities. They pulled up stakes, said goodbye to family and friends and moved four hours east in search of stability. They were in their new home for a year before the axe fell again, then again and again—three termination notices in about 36 months. Each time they received what amounts to a stay of execution. “We’ve had these death notices over us for three years now,” she says. “We’re terminally ill, but we haven’t died yet.”
But with the global economy now slinking inexorably toward recession and worldwide financial markets lapsing in and out of panic, Trish, now 47, admits she’s wondering if and when that next letter might arrive, and what it will mean when it does. She alternates between worry and resignation. Her kids are 13 and 14, and will be off to university soon. She knows that they’ll have to rack up significant debt to get a degree. She knows that if she and Jim lose their jobs, “the house will be the first thing to go . . . we’ll have to downsize.”
“It’s like a feeling of gut rot that sits in your stomach,” she says. “When you get the letter, it feels like people are pitying you. I hate that feeling. My kids hate it.”
It’s little comfort to know that in the past month, millions of Canadians have come to share her sense of dread. Canada’s stock market has plunged and all the latest economic numbers point to recession. This week economists confirmed that they expect Canada’s GDP to contract through the remainder of 2008 and the first few months of 2009. That certainly means more job cuts, less consumer spending and no end of anxiety.
What started as a brush fire among heavily indebted U.S. homeowners who bought wildly overpriced homes they couldn’t afford has grown and spread into an international conflagration that threatens the stability of the world’s biggest lending institutions, and every company that relies on credit to fund its operations. That, combined with the stunning market declines of the past two months, raises frightening scenarios for the millions of Canadians who, over the past 20 years, bought hundreds of billions of dollars in mutual funds, pouring their retirement savings into the stock market in the hope and belief that a generation of steady economic growth would translate into a retirement of beach vacations, summers at the cottage, and a hefty legacy left for the kids. Instead, millions find themselves with decimated retirement funds, declining real estate values and uncertain job prospects—all of it hitting at the very moment that they expected to be cruising toward an easier pace of life.
It used to be that McAuliffe, a third-generation auto worker, worried mainly about the next year’s mortgage payments, and whether she could afford to give her kids all the things they wanted. Now her fears are bigger, and more far-reaching. She worries for her job. “You know, I used to say I wouldn’t even get out of bed for $10 or $12 an hour. I really used to wonder how people survived on that kind of money,” she says. “Now sometimes I think I might just have to.” She’s desperately hoping she can hang on at GM until her pension kicks in five years from now. Even then, she wonders if GM can weather this storm to pay her retirement benefits.
By Duncan Hood - Friday, September 12, 2008 at 5:39 PM - 15 Comments
Drivers across the country are seething mad. The price of oil has fallen from…
Drivers across the country are seething mad. The price of oil has fallen from a high of $147 a barrel in early July to just over $100, but instead of lowering the price of gas, the gas stations have just hiked it up! Many parts of Canada saw a big jump at the pumps this morning, with prices up to as high at $1.36 a litre here in Toronto.
So what’s going on? Are greedy oil companies getting out of control? Not really. The markets are operating just as they should, and supply and demand are still firmly in control. The lower price of oil reflects the long-term view that supplies will loosen relative to demand, while the hike in the price of gas reflects a possible short-term shortage of gas, as refineries in Texas are forced to shut down due to hurricane Ike.
That said, I do find that there’s some “stickiness” with price hikes, in that the price of gas goes up really fast when the price of oil does, but it follows it back down much more slowly. But hey, that’s capitalism for you. Continue…
By Duncan Hood - Monday, September 8, 2008 at 6:12 PM - 2,874 Comments
Okay, hear me out. I understand that if the U.S. government hadn’t stepped in…
Okay, hear me out. I understand that if the U.S. government hadn’t stepped in and taken over Fannie Mae and Freddie Mac (I still can’t get over those names), then the mortgage giants would have exploded. Given that they back about half of America’s $12-trillion or so in home mortgages, that would be a very bad thing. But here’s the thing: By stepping in a bailing Fannie and Freddie out, the government didn’t solve the problem, they just diluted it.
Now, instead of the misery being concentrated among those folks who knowingly placed a bet on Fannie and Freddie — such as the bondholders who lent them money — the misery will be spread out among American taxpayers from coast to coast. Is that really fair? Should regular citizens who acted prudently and tried to avoid this mess by not investing in Fannie or Freddie, not loaning them money, and not taking on ridiculous mortgages of their own, now be forced to help bail out the people who did? Because that’s what this amounts to. The money’s going to have to come from somewhere. Continue…
By Duncan Hood - Thursday, September 4, 2008 at 5:37 PM - 4 Comments
You just know that personal debt in the U.S. has got outta hand when…
You just know that personal debt in the U.S. has got outta hand when they start making movies about it. This film, I.O.U.S.A., opened a couple of weeks ago. No word on whether it will play in Canada.
Meanwhile, I just received a newsletter from fee-only financial planning firm Kerr Financial predicting a credit card crash in the U.S. that’s very much along the lines of the housing crash they’ve already had… Continue…
By Duncan Hood - Wednesday, August 27, 2008 at 3:07 PM - 0 Comments
One of the most successful strategies for investing is to buy companies when they’re…
One of the most successful strategies for investing is to buy companies when they’re trading for less than they’re really worth, and wait until the price rises to the company’s “true value” (it’s often called “value investing”). Value investors often wait until a good company gets hit by an unforeseen disaster, which temporarily decimates the share price, then they scoop up a truckload of stock and wait for the disaster to pass.
It looks very much like Maple Leaf Foods could be in just such a situation, thanks to the terrible outbreak of Listeria that’s been traced back to its processing plant in Toronto. The share price has plunged from a high of $11 to a low of $7.60 (as of this morning) in just a week and a half.
Of course this approach doesn’t always work out: Continue…
By Duncan Hood - Thursday, July 17, 2008 at 7:06 PM - 0 Comments
In the money:… NRDC Equity Partners, owner of the upscale American Lord & Taylor
In the money: NRDC Equity Partners, owner of the upscale American Lord & Taylor department store chain, finally achieved its goal of buying HBC. As a consumer I’m thrilled (in a guilty kind of way), mainly at the prospect of seeing my dowdy local Bay store get a facelift and start offering clothing brands I want to buy. I even like their pick for CEO. Today it was announced that Jeffrey Sherman, former president and COO of the Polo Retail Group, is the Bay’s new top gun. With experience overseeing the Polo stores internationally and looking after Club Monaco for a while, he might be able to inject the Bay with a little style.
Trading down: Yet another automotive plant is laying off workers. This time it’s Sterling Trucks, in St. Thomas, Ont., which just axed 720 people. I have a nasty feeling we’re going to be reading news stories like that for a while…
Number cruncher: Royal LePage Real Estate Services predicts that the price of a Canadian house will “rise only modestly” this year, meaning by 3.5 per cent. Meanwhile, the Bank of Canada is predicting an inflation rate of 4 per cent by year end. That means after inflation, housing prices may actually be going down. Continue…
By Duncan Hood - Thursday, July 10, 2008 at 7:41 PM - 0 Comments
The email was sent by Bill Gates back in 2003, but it was recently…
The email was sent by Bill Gates back in 2003, but it was recently made public via the antitrust cases. In witty and painstaking prose Gates details how it took more than an hour for him to do a simple Movie Maker software download. The result? His computer ended up “an absolute mess” – and he never did get the download.
Here are some of my fave parts:
—- Original Message —-
From: Bill Gates
Sent: Wednesday, January 15, 2003 10:05 AM
To: Jim Allchin
Cc: Chris Jones (WINDOWS); Bharat Shah (NT); Joe Peterson; Will Poole; Brian Valentine; Anoop Gupta (RESEARCH)
Subject: Windows Usability Systematic degradation flame
… so I gave up and sent mail to Amir saying – where is this Moviemaker download? Does it exist?
So they told me that using the download page to download something was not something they anticipated.
They told me to go to the main page search button and type movie maker (not moviemaker!).
I tried that. The site was pathetically slow but after 6 seconds of waiting up it came.
I thought for sure now I would see a button to just go do the download.
By Duncan Hood - Thursday, July 10, 2008 at 7:18 PM - 0 Comments
In the money: …America’s investment firms, are literally and finally in the money. Last
In the money: America’s investment firms, are literally and finally in the money. Last week was the first week since the credit crunch hit the U.S. that they didn’t come running to the Fed for emergency overnight loans. Very impressive when you consider that at the credit crisis peak, they were borrowing as much as $38 billion a week. Could it mean the credit crisis is over? It’s certainly a good sign.
Trading down: Royal Bank. Oh no, I guess the credit crisis isn’t over after all. The Canadian banks still seem to have some overpriced assets that must have fallen behind the fridge or something, because it took them a while to find them. In this case it’s a predicted $1.5 billion writedown for RBC, according to a research note from Genuity Capital Markets. At one time, that would have made big headlines, now it’s like, what? Another writedown? Wake me up when they stop.
Number cruncher: Look! Continue…
By Duncan Hood - Friday, June 27, 2008 at 1:44 PM - 0 Comments
Looking for a silver lining to those scary gas prices? Here it is, courtesy…
Looking for a silver lining to those scary gas prices? Here it is, courtesy of an intriguing post on the New York Times’ Freakonomics blog. The basic argument is that rising gas prices will result in a higher cost of living, and almost always in the past, our salaries have risen when the cost of living goes up.
If that happens, and you spend as much on gas per year as the average Canadian, there’s no net gain. Your salary will go up, and so will your expenses, because of the higher price of gas. But if you don’t have a car, or you have a very efficient one, your salary will go up more than your expenses, and you’ll actually come out ahead. You’ll have more money in your pocket than you do now.
In way, it’s a bit like Dion’s complicated new carbon tax plan. If it’s implemented effectively, it will be revenue-neutral for typical carbon-based fuel users, but higher than average carbon fuel users will pay a heavy price.
But that makes me wonder whether we need Dion’s “Green Shift” plan at all. It looks very much like our open market could take care of providing the all the incentives we need to cut down on fossil fuels –- all by itself.