Canada: the Internet’s bumpkin

By Peter Nowak - Wednesday, March 21, 2012 at 3:08 PM - 0 Comments

"We're on YouTube, eh?" (CP Images)

Yeah, baby! Canadians are the most awesome YouTube watchers and Facebook photo uploaders in the world, woohoo!

But deriving actual value from the Internet, as in jobs and money savings–you know, the kind of usage that actually matters–well, not so much.

That’s the conclusion reached by a new report released on Monday by the Boston Consulting Group, which looked at the economic impact the Internet has had on G20 countries. It turns out in Canada it accounted for about $49 billion or three per cent of GDP in 2010. That ranks ninth in the G20 and below the group’s average of 4.1 per cent.

The Internet’s contribution to Canada’s GDP is expected to grow to 3.6 per cent by 2016, which will place Canada even further behind the expected average of 5.3 per cent. By then we’ll be twelfth.

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Return to Hooverville

By Aaron Wherry - Tuesday, September 27, 2011 at 9:45 AM - 15 Comments

Like her colleague Douglas Porter, Sherry Cooper expresses her concern about the Prime Minister’s call for austerity.

“The misplaced belief that the road to economic prosperity is paved by near-term fiscal tightening, as espoused by our own Prime Minister Stephen Harper and British Prime Minister David Cameron last week, shows we have learned nothing from Herbert Hoover’s response to the Great Depression,” Ms. Cooper said.

The wrong medicine

By Aaron Wherry - Monday, September 26, 2011 at 9:46 AM - 4 Comments

Douglas Porter quibbles with the Prime Minister’s prescription for economic woe.

“We could be making some of the same mistakes. Certainly, there are echoes of 1937,” agreed Douglas Porter, deputy chief economist at the Bank of Montreal. Last week, Prime Minister Stephen Harper and British Prime Minister formed an unusual alliance of debt hawks, coming down firmly on the side of stricter austerity as the way out of the crisis – at least in Europe … 

Mr. Porter said Mr. Harper’s call for global austerity is “precisely the wrong medicine at this time.” Government bond yields in Canada, and in most other countries, have sunk to multi-year lows in recent days. That’s a sign that financial markets are stressed about economic growth prospects, not government deficits or inflation, according to Mr. Porter. “Governments shouldn’t be aggressively cutting spending when the economy is gasping for air,” he said. “That’s certainly the wrong prescription.”

Don't bank on it

By Chris Sorensen - Tuesday, April 5, 2011 at 11:13 AM - 1 Comment

Photograph by Jessica Darmanin

Tourists ambling through Toronto’s financial district often stop to snap a photo of the historic Toronto Stock Exchange building on Bay Street. Though dwarfed by the bank towers that now surround it (the art deco facade is actually inset in one of the TD Centre’s sleek, black towers), the building’s imposing stone walls, tall, narrow windows and the detailed frieze that runs above the entrance nevertheless evoke a sense of solemnity and gravitas—the idea that Canada’s capital markets are serious business. The reality of a modern stock market, though no less important, is somewhat less exciting to behold. In the case of the TSX, now part of the TMX Group, most of the action takes place in a humming data centre in suburban Toronto, after the trading floor was officially closed in 1997 (although TMX’s headquarters and a media centre remain in a nondescript office tower downtown).

Now those clusters of computer servers are suddenly the subject of national hand-wringing, after TMX said last month that it plans to merge with the London Stock Exchange in a bid to create a transatlantic player. And among the most vocal opponents have been several of Canada’s big banks. They are calling on Ottawa, which will review the deal, to block the $7-billion transaction, to ostensibly prevent the loss of a strategic national asset. Their powerful voices, as dominant players in Canada’s capital markets, could turn out to be a deciding factor in whether the deal is permitted to go ahead.

Critics say the banks’ protestations are nakedly self-interested. For one thing, the country’s big banks are all stakeholders in a rival trading platform that has helped kneecap TMX’s business in recent years—not exactly the sort of behaviour one would expect from a group concerned about safeguarding a key national institution. At the same time, observers note that in the event of a TMX-LSE merger, the banks are facing the prospect of competing on a more global scale when it comes to offering lucrative brokerage and dealer services. “Now they will be competing not just with Canadian banks and other entities, but with European banks—particularly through London,” says Maurice Levi, a finance professor at the University of British Columbia’s Sauder School of Business.

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Ideas you can take from the bank

By Paul Wells - Monday, November 29, 2010 at 9:00 AM - 14 Comments

“One rarely has to wait long at Perimeter before somebody comes along with a gift of money,” I wrote in September in my account of a month at Perimeter Institute for Theoretical Physics in Waterloo.  Today will be another such day. But not nearly routine, even by the standards of such days.

This afternoon the usual suspect when it comes to funding for Perimeter, its founder and chairman Mike Lazaridis, will be joined at the big black building in Waterloo by a newcomer: Bill Downe, the CEO of BMO Financial Group. Downe’s bringing the cheque: $4 million to establish — deep breath — the “BMO Financial Group Isaac Newton Chair in Theoretical Physics at Perimeter Institute.”

The Institute’s endowment fund, kept full by Lazaridis, will match the bank’s donation to make $8 million. BMO’s $4 million is the largest single donation it has ever made to a science project. It is the largest corporate gift Perimeter has received in its decade of existence. And it marks a new moment for the science park, because it marks the first time it attracts serious private money from a source that didn’t get rich selling BlackBerrys. As we’ll see this is only the beginning of that trend. But it’s what Perimeter will do with the money that’s really intriguing.

The BMO Newton chair is the first of five endowed chairs Perimeter’s director, Neil Turok, wants to establish. (The others will be named after other historic discoverers, Maxwell, Bohr, Einstein and Dirac.) The stated goal is “to attract five of the most influential theoretical physicists of our time.” Continue…

Law & Order: House of Commons

By Aaron Wherry - Friday, May 14, 2010 at 4:08 PM - 126 Comments

Liberal MP Pablo Rodriguez has been charged after something to do with a breathalyzer.

Meanwhile, the RCMP is now investigating the mortgage fraud allegations that involve, at least peripherally, Conservative MP Devinder Shory.

What if it doesn’t go as planned?

By John Geddes - Friday, March 26, 2010 at 11:55 AM - 11 Comments

Photograph by Sean Kilpatrick/ CP

Everything in Jim Flaherty’s 2010 budget hinges on his forecasts. The finance minister’s plan to shrink the deficit from a staggering $49.2 billion this year to a pesky $1.8 billion in just five years depends on steady economic growth. He’s often challenged for projecting five consecutive years of growth of around five per cent, including inflation. But Flaherty has a great comeback: he’s using the average of 15 respected private forecasts. He’s been known to rhyme off the forecasters’ names, as he began to in question period last week—“TD Bank, BMO, CIBC, RBC, Scotiabank…”—before the Speaker cut him off.

That roll call, though, may sound weightier than it really is. Of those 15 firms, Flaherty’s department told Maclean’s, six don’t attempt to project as far out as 2013-14 and 2014-15—the crucial years in his deficit-busting narrative. Of the remaining nine, some are less than ringingly confident about the numbers they offer. Take BMO Capital Markets, whose outlook is a touch more optimistic than the forecast average used in the budget. “We generally do not publish our long-range economic forecasts,” said Douglas Porter, BMO’s deputy chief economist, “and I would view these more as ‘assumptions’ than as ‘forecasts.’ ” Don Drummond, the chief economist at TD Bank Financial Group, is somewhat more pessimistic than the forecast average. Still, Drummond isn’t dismissive. “It is not as though they dreamed up a scenario biased to the optimistic,” he said. He views the budget assumptions as “credible,” although “the economy and revenues could certainly underperform.”

Yet Flaherty doesn’t build in any cushion against such potential disappointments. In his 2009 budget, he adjusted the private-sector forecast down just to be prudent—but not in 2010. Gone, too, is the old Liberal practice of setting aside contingency reserves. For Flaherty’s deficit-fighting plan to work, there can be no unpleasant surprises.

Inside the fall of a famed hedge fund

By Anne Kingston - Monday, February 8, 2010 at 12:30 PM - 6 Comments

On Aug. 3, 2009, a single-engine Cessna 206 float plane took off from Ontario’s Lake Muskoka, the epicentre of Toronto’s prestige cottage country. It rose erratically before shaving tree tops, flipping, and bursting into flames. The two passengers—pilot Jack Lawrence and his companion, Carol Richardson, were killed instantly. News of the crash reverberated through the Canadian business old guard. Lawrence, a vital 75-year-old, was one of those Runyonesque Bay Street legends, the type not seen so much since the banks began buying up brokerages. Lawrence had made his name as an aggressive bond trader, then as the architect who built tiny broker Burns & Co. into power player Burns Fry; as its chairman, he sold the firm to the Bank of Montreal in 1994 for $400 million plus. Lawrence lingered at BMO as an éminence grise for a time but his competitive, combative nature wasn’t suited to the corporate corral. In 1996, he founded Lawrence & Company Inc., an investment and venture capital firm.

As the polite tributes poured in honouring Lawrence’s legacy—as a mentor to many, as the co-founder of Toronto’s Cambridge Club and an outspoken voice on national issues—more vitriolic murmurs were being vented in the salons and squash courts frequented by Toronto society. The topic: the fallout from Lawrence’s ill-fated hedge fund, Lawrence Partners, run by Lawrence & Co. subsidiary Lawrence Asset Management, or LAM. The fund, which went public in 2005 with a $25,000 investment minimum, attracted more than 1,000 investors, among them many prominent Canadians.

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Meharchand v. Soudas

By Aaron Wherry - Friday, September 4, 2009 at 2:39 PM - 31 Comments

Another in this week’s series of Frustrated Journalists Losing Their Patience.

Today’s episode pits the CBC’s wildly frustrated Suhana Meharchand against Dimitri Soudas, who, as he says here, speaks for the Harper government, except of course when he takes a day off to speak for the Conservative party. Continue…

Don't believe the housing hype

By Colin Campbell - Friday, June 26, 2009 at 12:11 PM - 17 Comments

Judging by the latest real estate data, the Canadian housing market could scarcely be better. Average home prices are up more than 16 per cent this year, and in May they hit an all-time monthly high, according to the Canadian Real Estate Association. By those numbers, Canada didn’t just sidestep the housing market crash that continues to plague the United States, it sailed right through it virtually unscathed. And yet, there are plenty of signs that the Canadian housing market is still sitting on some very shaky ground—and even the potential that Canada’s big housing crash is yet to come.

There is one particular statistic that suggests trouble could be brewing. Unlike in the U.S., Britain and most European countries, household debt in Canada is, incredibly, still growing. That rising debt is being driven largely by record-low interest rates. Canadians have been buying homes not so much because they can afford them, but because many believe there’s never been a better time to buy, with lending rates so low. “There is no doubt that record-low mortgage rates have juiced Canada’s housing market,” wrote BMO economist Sal Guatieri, in a recent newsletter. Houses are barely more affordable now than they were during the market peak. And as people keep buying, houses may only become less and less affordable. Continue…