Hudson’s Bay Co. looking to raise $365 million in initial public offering

By The Canadian Press - Tuesday, November 20, 2012 at 7:56 PM - 0 Comments

TORONTO – Canada’s oldest company, Hudson’s Bay Co., returned to the public stock market Tuesday with muted reaction as shares in the company closed slightly lower than the initial asking price of $17.

HBC (TSX:HBC) plans to sell a total 21 million shares — about one-fifth of the company’s stock — raising about $365 million through an initial public offering. The $17 asking price values the company at about $2 billion.

Shares in the company closed 25 cents lower than its initial bid price at $16.75 after some 4.3 million changed hands Tuesday on the Toronto Stock Exchange in early trading before the sale of its shares closes next week.

True share trading under the symbol “HBC” is expected to begin on the closing of the offering, expected Nov. 26.

The owner of the Bay, Home Outfitters and U.S. retailer Lord and Taylor says the IPO will primarily consist of a treasury offering of 14.7 million common shares, grossing about $250 million before expenses.

Proceeds from that portion of the IPO will go to HBC, which will use the funds to reduce its debt.

There will also be a secondary offering by Hudson’s Bay Company (Luxembourg) of 6.7 million common shares, for gross proceeds of $115 million for the selling shareholder.

The private Luxembourg holding company will continue to have about 98 million common shares of the Toronto-based public company, or about 82 per cent of the Hudson’s Bay Co.’s outstanding stock.

The company says the IPO price values the department store company at about $2.04 billion.

The offering is being made through a syndicate of underwriters led by RBC Capital Markets, BMO Capital Markets, CIBC and BofA Merrill Lynch.

Hudson’s Bay says the Toronto Stock Exchange has conditionally approved the listing of the company’s common shares subject to fulfilling the customary TSX requirements.

HBC last traded on the Toronto Stock Exchange in 2006 before it was taken private by U.S. businessman Jerry Zucker, who later died unexpectedly. New York-based NRDC Equity Partners acquired the company in 2008 for $1.1 billion from Zucker’s widow.

Since then, the company has been working to transform its stores and revamp its image into a more upscale retailer.

Hudson’s Bay Co. said in a revised prospectus its preliminary results suggest its third quarter revenues were up 3.8 per cent from the same time last year but its margins were squeezed by shortages and seasonal clearance markdowns.

Preliminary results showed total revenue rose to $930.4 million for the third quarter ended Oct. 27.

That’s up $33.7 million from $896.7 million in the comparable quarter last year.

The company, which plans to use the proceeds of the offering to repay debt, said it has improved sales productivity and earnings growth, partially through a capital investment of more than $420 million since 2009, but added it has more work to do.

HBC said it plans to pay a quarterly dividend with a target payout ratio of 20 to 25 per cent of expected net earnings.

Petronas and everything after

By Aaron Wherry - Monday, October 22, 2012 at 8:00 AM - 0 Comments

The Globe explains what precipitated Christian Paradis’ 11:57pm announcement on Friday night.

After a long stretch when the deal seemed to be on track, the transaction “came unglued” quite suddenly Friday after the federal government unexpectedly sought to extend talks, said one of the people. Behind the scenes, Petronas had made offers of concessions but was getting little feedback on what it would take to get the deal done, the person said, and was out of patience.

The government had already used up its chance to unilaterally extend talks, and by law could only continue the negotiations with Petronas beyond the deadline with the agreement of the Malaysian company. Petronas did not want to continue talking “indefinitely,” so it took the risk of demanding the federal government make a call, said a second person with knowledge of the situation.

The New Democrats are unimpressed.

“The lack of transparency is starting to reach new heights. Who releases such an important decision at midnight on a Friday? Someone who has something to hide and no way to explain,” Mulcair said.

All eyes now turn to the stock market.

Buyer beware: the Facebook debacle

By Chris Sorensen - Wednesday, June 6, 2012 at 11:48 AM - 0 Comments

Richard Drew/AP

A beaming Mark Zuckerberg stood before a wobbly makeshift podium on Friday, May 18, and “rang” the electronic NASDAQ Stock Market’s opening bell. He was flanked by key executives and surrounded by giddy employees who had gathered for the made-for-TV event, held outdoors at the social networking giant’s campus in Menlo Park, Calif. The crowd erupted in cheers, as well they should have. Many were about to realize huge fortunes as Facebook, the hottest property in Silicon Valley, was finally about to list its shares on a public stock exchange through one of the most-hyped initial public offerings (IPO) of the last decade. But while insiders had much to celebrate—Zuckerberg, 28, pocketed US$1.15 billion and still holds a nearly $20-billion stake in the company he co-founded in 2004—just about everyone else got taken for a ride.

The trouble began almost immediately. The shares, priced at $38 apiece, were supposed to begin changing hands at 11 a.m., but massive demand—some of it by high frequency traders using sophisticated computer systems—overwhelmed the NASDAQ’s automated trading system, causing a half-hour delay. It would prove to be an ominous sign. Once things were back up and running, the stock shot up but almost immediately began to falter. Panicked investors tried to sell only to learn the technical glitches meant their brokers had no way of knowing if orders had been processed (many weren’t).

By the time the dust settled at the closing bell, Facebook’s stock sat at $38.23—a false floor maintained by lead underwriter Morgan Stanley’s frantic efforts behind the scenes to buy up shares at the offer price. The respite proved short-lived. As soon as the markets opened the following Monday, Facebook’s stock fell another 11 per cent. Two weeks later, it is trading 20 per cent below the offer price, with some speculating more losses are inevitable.

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Is this market boom for real?

By Chris Sorensen - Monday, March 26, 2012 at 10:28 AM - 0 Comments

Richard Drew/AP

The Nasdaq composite index crossed the 3,000-point mark last week, prompting a flurry of recollections about the last time the lofty milestone was reached. It was almost 13 years ago, Nov. 2, 1999, just as online grocery business Webvan was putting the finishing touches on its initial public offering—one of dozens of Silicon Valley companies going public with a half-baked idea and plenty of investor enthusiasm. Webvan’s stock soared in its first few days of trading. But a year and a half later the company filed for bankruptcy, joining the ranks of Pets.com (online pet supplies), Boo.com (fashion apparel) and Flooz.com (an online currency) as one of the tech bubble’s biggest flame-outs.

This time, though, things look different. The roaring stock market is being led not only by flash-in-the-pan start-ups, but immensely profitable companies like Apple Inc., now the most valuable corporation on the planet. Nor is it just a tech story. The S&P 500 Index has rallied 25 per cent over the past five months, as has the Dow Jones Industrial Average. In fact, taken all together, U.S. stocks have clawed their way back to pre-2008 levels, according to the broad-based Wilshire 5000 Total Market Index (Canada’s S&P/TSX composite index, by contrast, is up 65 per cent since the crash, though it’s down slightly over the past year).

So much for gloomy predictions about a decades-long recovery—at least as far as the markets are concerned. It barely took three years. Of course, the eternal question is whether the good times will continue. Many believe they will, arguing that U.S. corporations, having cut costs to the bone during the recession, are therefore poised to continue reaping the rewards as the U.S. economy gains traction. Just imagine, say the bulls, what will happen once the U.S. economic engine is once again firing on all cylinders, and the U.S. housing market turns around. “There’s a lot of runway,” Jim Cramer, the excitable host of CNBC’s Mad Money, recently told viewers.

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Two stocks and $20

By Richard Warnica - Tuesday, November 15, 2011 at 11:10 AM - 0 Comments

Imagine you have $20 to invest and one of two stocks to spend it on. On the one hand, you have Company A, an established player with a significant, if shrinking, share of the lucrative smartphone market. On the other, you have Company B, an Internet darling with huge revenues but no profits.

So who do you buy? If you’re like most of the market last week, the answer is B, the online coupon giant Groupon. Last week, it raised US$700 million in an initial public offering—the biggest for a tech stock since Google’s in 2004. The offering was set at US$20 on Thursday; by Friday, its shares were trading above US$28, giving the company a US$13-billion valuation. Not bad for a firm facing questions over its accounting and skepticism about its potential for profitability. It’s the opposite story for Company A, Canada’s Research In Motion. As Groupon shares soared, those of the still-profitable BlackBerry manufacturer continued to slide. At some points recently, RIM stock was trading for less than the company’s book value of US$18.92 per share.

With service outages and the PlayBook struggling, it’s been a tough year for RIM. With a growing revolt from local business partners, Groupon, too, remains an iffy bet. Perhaps the smart move might be to put that $20 in the bank.

This may get ugly

By Jason Kirby and Chris Sorensen - Monday, August 15, 2011 at 10:00 AM - 16 Comments

North American markets rebound after Monday plunge

By macleans.ca - Tuesday, August 9, 2011 at 12:14 PM - 0 Comments

North American markets edged up in early trading Tuesday after record sell-offs a day earlier saw trillions of dollars in value wiped out from global stocks. The Dow Jones Industrial Average, the NASDAQ, the S&P 500 and the TSX Composite were all up between 1 and 3 per cent by 11 a.m. (ET). But overseas markets continued to slide. Stock markets in Japan, Australian, Hong Kong and South Korea all dropped between 4.5 and 8.5 per cent Tuesday. Some of those losses were clawed back in later trading. The drops come amid twin financial crises in the United States and Europe as well as news out of China on Monday that inflation climbed in July to a three-month high.

Globe and Mail

Google graph too small to show S&P/TSX tumble this morning

By Erica Alini - Monday, August 8, 2011 at 12:09 PM - 33 Comments

The Canadian stock market took such a dive this morning it went–literally–through the bottom of a Google Graph of the S&P/TSX Composite, the Canuck benchmark index (see this screenshot we took at 10.14 AM). The drop was largely attributed to Standard and Poor’s downgrading of the US’s long-term creditworthiness from AAA to AA plus on Friday.  The S&P/TSX Composite tumbled over 3 per cent in early morning trading before rebounding slightly.

Are you worried by the downturn in global financial markets?

By macleans.ca - Wednesday, August 3, 2011 at 12:51 AM - 39 Comments

When presidents and PMs give investment advice: The ultimate insider information

By Jason Kirby - Thursday, May 12, 2011 at 6:43 PM - 3 Comments

(AP Photo/The Daily Texan, Tamir Kalifa)

In his daily briefing email this morning, New York investment strategist Edward Yardeni pointed out President Barack Obama not only called the bottom of the stock market in 2009, he forecast the recent collapse in commodity prices, too:

I guess we should pay closer attention to President Barack Obama’s investment advice. On April 19 he called the top in commodity prices, in general, and oil prices, in particular, when he said, “It is true that a lot of what’s driving oil prices up right now is not the lack of supply. There’s enough supply. There’s enough oil out there for world demand,” Obama said. “The problem is…speculators and people make various bets, and they say, you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going to go up real high. And that spikes up prices significantly.” Remember that on March 3, 2009, our nation’s Chief Strategist told us to buy stocks: “On the other hand, what you’re now seeing is–is profit and earning ratios are–are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.” He is on a roll.

As you’ll no doubt recall, Obama wasn’t the only world leader to slap a “buy” recommendation on markets in those dark days. Prime Minister Stephen Harper took a lot of knocks in October 2008 when he went on CBC and told Canadians the upheaval in the stock market was a time to get in.

Harper: “The stock market will sort itself out. I suspect some good buying opportunities are opening up with some of the panic we’ve seen in the stock market in the last few days.”

Peter Mansbridge: “Do you really want to be heard saying that? Are you suggesting people should be buying?”

Harper: “I think there are some great buying opportunities out there.”

As it turned out, he was right, if a bit early. Markets continued to fall until the following March, but if you took the PM’s advise and bought, say, the S&P/TSX Composite Index, you’d be up roughly 25 per cent today. (I looked, but couldn’t find any recent comments from Harper that related to the current bubble in commodity prices.)

So, should you listen when pols say buy? Obviously politicians will say anything if they think it will make voters happy, and like perma-bulls, they’ll never, ever issue a sell call, no matter what.

Still, there’s value in at least considering their words when it comes to the broad sweeps of the economy. After all, they do have  their hands on the levers of government spending, which they both used to deploy billions of dollars for infrastructure projects, tax cuts and bailouts. Both were no doubt aware of efforts by their respective central bankers to employ considerable monetary stimulus to reboot the economy. In the case of Obama’s sell recommendation for commodities, it came just weeks before the Chicago Mercantile Exchange hiked margin requirements for energy futures traders, a move that regulators and politicians had been pushing for, and which accelerated the commodity sell off.

Whatever your views on government stimulus and intervention in the economy, there’s no denying each leader has the power to influence consumer and investor sentiment with their policies. In other words, Harper and Obama can be seen as the ultimate insiders.

So, Mr. Prime Minister and Mr. President, got any stock tips?

Twittering traders

By Erica Alini - Tuesday, April 19, 2011 at 9:00 AM - 0 Comments

CP/AP Photo/Alastair Grant

Even experienced traders talk about the difficulty of predicting the stock market. But new research suggests there’s a useful device out there to guess the market’s mood: Twitter. With thousands of investors exchanging tweets every day, the micro-blogging site is like an earphone plugged into the very conversations and rumours that move the markets. For investors who tune in, the rewards are substantial, according to Timm Sprenger, a doctoral student at the Technical University of Munich.

After tracking 250,000 tweets a day for six months, he showed that buying and selling shares based on following market-related tweets can reap an average rate of return of 15 per cent. Sprenger, who offers his services on TweetTrader.net, used tweets to extract sentiment rankings that he says predicted movements on Standard & Poor’s 500-stock index a day ahead of time. But some warn that Twitter can be manipulated to promote or discredit stocks. Eavesdroppers beware.

'It is a mythical tree spirit, the true, fragile nature of which only Stephen Harper understands'

By Aaron Wherry - Monday, March 21, 2011 at 11:45 AM - 64 Comments

Tabatha Southey listens to the Prime Minister, imagines a world in which democracy is an actual threat to the welfare of the nation.

During Canadian federal elections, neighbourhoods are canvassed by hoards of zombies. These zombies do not just put fliers through your mail slot – they zombie-knock at your door while you’re trying to make dinner. They often ask you if you have any issues that are of particular concern to you. And after inquiring about whether you’re properly registered to vote, they ask you if you need a ride to the polling station, and then they eat your brains. It’s intrusive.

Meanwhile, investors are surprisingly unpanicky about the possibility of an election.

TMX-LSE: merger impossible?

By Jason Kirby - Monday, February 21, 2011 at 6:30 AM - 2 Comments

Photograph by Andrew Tolson

The “history-making” stock exchange nuptials now under way have revealed once and for all how globalized capital markets have become. Just consider the United Nations of characters who masterminded the deals. Canada’s TMX Group, which is run by an American, announced plans last week to merge with the London Stock Exchange, of which a Frenchman is CEO. Shortly after that, the German Deutsche Börse AG, led by a Swiss executive, said it was in talks to buy New York’s NYSE Euronext, whose chairman hails from Holland. But all that intermingling in the boardrooms did little to prepare people for the idea that the Toronto Stock Exchange is about to become a whole lot less Canadian.

Since the deals became public, critics have worried about what they entail. A columnist in Montreal’s La Presse said the transaction with London marks “the beginning of the end for ultimate Canadian control” of the stock market. For some in the U.S., the overture from Germany for what the Wall Street Journal called the “citadel of American capitalism” stung particularly hard. Officially, the arrangement is a merger, but most see it as a takeover, and John Whitehead, a former co-chairman of Goldman Sachs Group, said the sale of the New York Stock Exchange is “an insult to all America,” while Jim Cramer, the host of Mad Money on CNBC, bemoaned, “Everything is for sale in this country.”

In presenting the offer from London, TMX Group CEO Thomas Kloet and LSE chief executive Xavier Rolet went to great lengths to present it as a “merger of equals.” But looking at the terms of the $3.2-billion all-share agreement, which would give the U.K. company control of 55 per cent of the combined business, Ontario Finance Minister Dwight Duncan said it doesn’t appear all that equal to him. Nor is he keen on the idea that Dubai, which currently owns nearly 21 per cent of the LSE, will have a major seat at the table. “I’m not sure I want them owning our stock exchange,” he told one newspaper. Duncan has the power to veto the deal, as does Quebec, since the TMX Group was formed after the 2008 merger of the TSX Group and the Montreal Exchange.

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TMX and LSE join forces

By macleans.ca - Wednesday, February 9, 2011 at 1:05 PM - 1 Comment

Toronto’s TMX Group and the London Stock exchange announced on Wednesday they will be merging. Xavier Rolet, currently the LSE’s CEO, will become the chief executive of the merged group. The combined fiscal clout of the new group is substantial – both groups have 6,700 listings combined, meaning a collective market value of $5.8-trillion. But the merger only puts the LSE-TMX group seventh on the global trading stage, beneath the Honk Kong Exchanges, Exchanges & Clearing Group and Deutsche Borse. While critics call the merger a “defensive” action to cut costs that diverts management’s attention from developing growth strategies, executives involved say it is seizing a growth opportunity that will create a global leader in resource and energy stocks. The deal will require the approval of government departments in Canada and the U.K., including Investment Canada, the Ontario and Quebec securities commission and the Financial Services Authority. If approved, the TMX-LSE group will become the trading leader in the European Union.

The Globe and Mail

Selling stocks on Twitter

By Julia Belluz - Tuesday, January 25, 2011 at 10:20 AM - 8 Comments

It had almost all the markings of a pump and dump scheme: rapper 50 Cent encouraged his 3.8 million Twitter followers to invest in a penny stock, causing H&H Imports to jump by 290 per cent over two days, and resulting in a paper profit for the music star of some US$8.7 million. “You can double your money right now,” he wrote. “Just get what you can afford.” With 50’s blessing, shares in the Florida-based company soared to 39 cents each from 10 cents. He later deleted the tweets about the stock, which trades as HNHI, and replaced them with more moderate words: “I own HNHI stock. Thoughts on it are my opinion. Talk to financial adviser about it.”

Shortly after those final words, the H&H share price dropped to 25 cents, leaving critics to wonder whether 50 used his Twitter influence to artificially increase the value of a stock for its shareholders’ benefit. So far, it appears the 35-year-old rapper (whose real name is Curtis Jackson) has avoided violating securities laws because he has not sold any of his H&H stock. The U.S. Securities and Exchange Commission declined to comment about whether they’d investigate. Still, questions remain about what constitutes a 140-character pump and dump.

'The stock market is for suckers'

By Jason Kirby - Monday, January 24, 2011 at 9:00 AM - 52 Comments

Justin Sullivan/GETTY IMAGES

Were it not for the source and recipients of the email—From: Goldman Sachs, To: Our most outrageously rich clients—it would have read like one of those Nigerian investment scams that slip through spam filters now and then. “When you have a chance I wanted to find a time to discuss a highly confidential and time-sensitive investment opportunity,” the secretive missive began. But this was clearly no shady dispatch from Lagos. What investment bank Goldman Sachs offered by way of the emails, sent out to thousands of its most valuable high-net-worth clients in early January, was the chance for them to buy a piece of the hottest company in America: Facebook.

Since the social networking site infused itself into every facet of our lives, investors have anticipated the day when the company would take its place in capitalist folklore beside Microsoft, Netscape, Apple and Google. Everything seemed to be in place—the phenomenal growth, chief geek Mark Zuckerberg’s rapid ascent to Bill Gates-ian prominence, The Movie!! It all suggested we were about to witness one of those rare moments when the spark of innovation meets the greatest wealth-creation machine the world has ever known: the American stock market.

Only that’s not how things have unfolded. In its email to clients, Goldman wasn’t talking about a public stock offering for Facebook. Instead, the bank, along with a Russian investment firm, injected US$500 million into Facebook’s coffers by way of a purely private transaction. Goldman, in turn, set up a fund through which wealthy clients could own those Facebook shares themselves, for a minimum of US$2 million. Based on that valuation, Facebook emerged a colossus worth more than US$50 billion.

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Canadian IPOs way up in 2010

By macleans.ca - Wednesday, January 5, 2011 at 12:34 PM - 0 Comments

The number of initial public offerings in Canada was way up in 2010 compared to the year before, with 25 companies listing on the S&P/TSX composite index with a combined value of $5.2 billion. In 2009, just four companies worth a total of $1.7 billion were listed. The TSX Venture, which represents smaller companies, gained 42 new entrants in 2010, compared to 20 the year before. Many of the companies that started selling on the exchanges are in resource extraction, including Athabasca Oil Sands Corp., which was the largest with a $1.3 billion offering. Neil Manji, national IPO services leader at PricewaterhouseCoopers (which released yesterday’s report), said he expects momentum to continue this year, assuming good news from the US markets.

CBC News

The Rhodes and the big ask

By Erica Alini - Tuesday, October 26, 2010 at 9:00 AM - 0 Comments

Canadians who won the Rhodes include Yves Fortier, David Naylor, and Bob Rae; Norm Betts/Bloomberg/Getty Images/ Dick Loek/Toronto Star/ Sean Kilpatrick/CP

After spending a lifetime amassing a fortune with questionable means, Cecil Rhodes, a diamond magnate in colonial Africa, left one unquestionably good thing after he died in 1902: a bequest of over £3 million, roughly equivalent to half a billion in today’s dollars, for students from abroad to study at his alma mater, Oxford University. Over 100 years and 7,000 Rhodes Scholars later, though, that money is down to about $186 million. The bequest, reads an April online note by the Rhodes Trust, which administers the scholarship, “needs to be supplemented to secure [our emphasis] and improve the Rhodes Scholarships for the future.” Gifts of the magnitude of $1 million per individual donor were “warmly encouraged.”

The turn to fundraising represents a major shift for the trust, which has traditionally relied on investment to preserve and supplement its capital. Benefactions from the illustrious community of Rhodes alumni, which includes Bill Clinton, Canada’s former governor general Roland Michener, and former PM John Turner, are not new, but shrill calls for donations came only after the trust lost nearly $70 million in the 2008-2009 financial crisis, a drop of around 27 per cent in the net value of its assets.

“We’re drawing money from the principal,” says director of advancement Krista Slade, who is helping to engineer the trust’s fundraising campaign. Though there are no plans to resize the scholarship program, she says, the trust needs to at least double the size of its endowment by the end of the decade to “be competitive.” That means raising a minimum of $160 million by 2020.

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So much for the market

By Chris Sorensen - Monday, October 18, 2010 at 9:20 AM - 0 Comments

Giovanni Rufino/CNBC/ Richard Drew/AP/ Aly Song/Reuters

With his pink shirt sleeves rolled up past his elbows, Jim Cramer, the hot-headed host of CNBC’s popular Mad Money program, hit the airways last summer just as the stock market rally began to sputter and offered viewers a tip on fixing a shredded portfolio. “Stocks as an asset class have become tarnished,” he said, referring to the gut-wrenching roller-coaster ride that average investors have endured over the past two years. “And I, as a noted stock evangelist, know that better than anyone. But, at the same time, I also know they are your best shot for making back all the money you lost.”

After plugging his book and punching up a few sound effects, the former hedge fund manager went on to suggest that investors “unlearn” the buy-and-hold philosophies made popular by billionaire investor Warren Buffett and start thinking like traders. That means buying on weakness and selling when things get too hot, taking advantage of short-term market fluctuations—just like the pros.

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The brawl on Bay Street

By Jason Kirby - Thursday, September 16, 2010 at 11:40 AM - 0 Comments

PHOTOGRAPH BY ANDREW TOLSON

When executive egos and business interests collide in Canada, the Toronto Stock Exchange has traditionally been the battlefield on which conflicts are waged. But the latest corporate showdown on Bay Street pits the TSX itself against the most powerful financial institutions in the country.

Sometime in the next few weeks, Canadians will get their first look at what this country’s newest stock exchange could look like. That’s when Alpha Group, a company owned by the Big Six banks, Canaccord Capital, Desjardins Securities and the Canada Pension Plan Investment Board, will make public its application to become a full-fledged exchange. Jos Schmitt, CEO of Alpha, is tight-lipped about exactly how the new exchange will be structured and what services it will offer. But he’s not nearly so reticent about why he believes Canada needs another big exchange. “What we’ve had in Canada was a monopoly without any regulation of fees,” he says, referring to the TSX and its parent company, TMX Group. “We saw a lack of innovation, fees that were too high and a lack of investment. That’s why competition has kicked in.”
On buttoned-down Bay Street, those are fighting words. And competition is certain to get fierce. But this isn’t just a battle between rival exchanges for market share and fees. Some worry investors could end up getting bruised, too.

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The market has spoken

By Aaron Wherry - Monday, January 11, 2010 at 9:24 PM - 71 Comments

Catching a point our Andrew Coyne missed, Stephen Harper explains the trouble with this democracy of ours.

“The games begin when Parliament returns,” he explained. “The government can take our time now to do the important work to prepare the economic agenda ahead. That said, as soon as Parliament comes back . . . the first thing that happens is a vote of confidence and there’ll be votes of confidence and election speculation for every single week after that for the rest of the year. That’s the kind of instability markets are actually worried about.”

'You believe that?'

By Aaron Wherry - Monday, September 14, 2009 at 1:38 AM - 37 Comments

Another reality check this weekend.

Prime Minister Stephen Harper says an election would “screw up” the fragile economic recovery. But that’s not the view on Bay St. There, it elicits laughter.

“You believe that?” blurted Avery Shenfeld, senior analyst at CIBC World Markets. National political campaigns are not a cause for concern on Bay Street, he said. ”We don’t typically see a lot of financial market or business response to Canadian elections,” which, Shenfeld noted, “don’t tend to be revolutionary.”

The trouble with economists

By Aaron Wherry - Tuesday, September 8, 2009 at 2:23 AM - 16 Comments

Stephen Harper, Sept. 15, 2008. “My own belief is if we were going to have some sort of big crash or recession, we probably would have had it by now.”

Stephen Harper, Sept. 26, 2008. “The only way there is going to be a recession is if they’re elected, and that’s why they’re not going to be elected.”

Paul Krugman, Sunday. Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy… As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth …  the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

Econowatch

By Steve Maich - Thursday, June 25, 2009 at 9:00 AM - 0 Comments

On a day when the Canadian stock market plunges by more than 450 points and the Dow Jones Industrial Average tumbles by 200, it’s a tough sell to suggest that we need to start planning for the economic recovery. And yet, there was Joaquín Almunia, economic and monetary affairs commissioner for the European Union, urging all OECD countries to start preparing exit strategies for this downturn before it’s too late. “We cannot afford to get out of this recession creating big imbalances that will be the origin of the next crisis,” Almunia said.

No doubt he’s right. Over the past year, governments have pumped unprecedented mountains of stimulus into the global economy. Major banks and corporations have been bailed out, propped up and nationalized. Interest rates have been slashed to nothing. That may have averted the worst-case meltdown scenario, but it presents a lot of daunting questions as the world begins to pull out of this tailspin. Trillions of dollars in cheap money is currently sloshing through the economy. Will the system be able to soak up all that excess capital before it triggers runaway inflation? Now that governments have committed themselves to massive deficit spending over the next few years, can lawmakers find the political courage to rebalance their budgets in time to avert a massive distortion of the debt markets? Continue…