Archive for October 2nd, 2009
Canada’s IMF Upgrade an Important Sign Post
Friday, October 2nd, 2009
Canada’s GDP growth outlook got an upgrade from the IMF this week thanks in part to the outlook for commodities prices, as well as global demand coming from the developing world, in particular, China and India. Yesterday, we discussed the outlook for China and India in Mobius, Rogers, and IMF Love China.
Bloomberg reports: Canada’s economy will grow more in 2010 than previously forecast and shrink more in 2009, helped by commodity prices that have rebounded ahead of a global recovery, the International Monetary Fund said in its World Economic Outlook report.
The U.S.’s biggest trading partner will contract 2.5 percent in 2009 and grow 2.1 percent in 2010, the IMF said today. The IMF had predicted in July the Canadian economy would shrink 2.3 percent this year before rebounding to 1.6 percent in 2010.
“The recent rebound in commodity prices and reduced reliance on manufactured products have helped exports,” the report said. Canada exports oil, natural gas, metals and other commodities.
The IMF upgrade is an important signpost, and on its own, its great news, but it is actually far more important than it appears at first. As local investors, we tend to focus more on how we feel locally. You have to also pay close attention to Canada’s attractiveness to foreign investors.
Last week, we discussed the idea that China and BRIC peers may not be interested yet in investing in Canada Bonds, even though they are an ultra-safe alternative to US Treasuries, because the by-product would be a higher Canadian dollar, which means they would pay higher prices for our commodities exports.
Its true, for those reasons, they may not be interested in our paper, but on the other hand, large global investors are.
Our yields are not only higher (for now), our bonds are also perceived to be inherently safer than those of the US and UK, thanks to Canada’s sound fiscal position, stable credit market, and strong, and well capitalized banking system.
Andrew Willis reports that Ontario floated $2-billion of 10-year bonds, with a 4% coupon in the US, following an offering of Canada bonds made by the Federal Government.
Ontario tapped American credit markets on Tuesday with a $2-billion (U.S.) 10-year bond offering, a financing that follows of a federal government issue in the global market.
As part of a busy week, Ontario sold debt with a 4 per cent interest rate, offering investors a 73 basis points premium over the benchmark U.S. government bond. Bank of America/Merrill Lynch, BNP Paribas, Deutsche Bank and TD Securities were the lead underwriters.
These developments continue to provide evidence that Canada is in the uniquely advantageous position in the developed world to become a powerful, and key, world financial market, as a result of its once-in-several-decades position.
The benefits are two-fold.
- Canada’s capital market as a magnet for foreign capital, attracting large investments from global investors looking for a safe haven in both the fixed income and equity markets. Canada’s risk/reward is favourably tilted for reward given its position in the global commodity complex and economic stability.
- Canadian companies will be among the world’s biggest producers and vendors of commodities to the emerging markets, which all face long term shortages of oil, food, water, and metals.
Its high time for Canadians to recognize that Canada is poised for superior growth during the next decade.
The perfect-storm-like convergence of the credit crisis, which has investors looking for the safest places in the world to invest, and the dramatic redistribution of wealth and economic transformation that is driving the growth of the developing world, and the resultant demand for commodities has Canada is in the cross-hairs of both.
Bottom Line: Canadian investors should view any weakness in markets as a graduated opportunity to accumulate positions in Canadian banks and key, preferably under-levered, commodities producers.
Tags: 10 Year Bonds, Andrew Willis, BRIC, Canada, Canada Bonds, Canada Exports, Canadian Economy, China, Commodities, Commodities Prices, Commodity Prices, Credit Markets, Emerging Markets, Fiscal Position, Foreign Investors, GDP Growth, Global Demand, Global Investors, Global Recovery, Growth Outlook, India, International Monetary Fund, Investing In Canada, Ntario, oil, Outlook Report, Post Canada, Signpost, Uk Thanks, World Economic Outlook
Posted in Emerging Markets, India, Markets | No Comments »
Greenspan vs. Strauss-Kahn
Friday, October 2nd, 2009
This post features a discussion at the Yalta Annual Meeting/Yalta European Strategy between Alan Greenspan, former chairman of the US Federal Reserve, and Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF). The moderator of the three-part discussion is Chrystia Freeland, US managing editor of the Financial Times.
Part 1: The financial crisis
Click here or on the image below to view the video.
Part 2: Global financial regulation
Click here or on the image below to view the video.
Part 3: Crisis exit strategies
Click here or on the image below to view the video.
Source: Chrystia Freeland, Financial Times (here, here and here), September 29, 2009.
Tags: Alan Greenspan, Annual Meeting, Dominique Strauss Kahn, Exit Strategies, Federal Reserve, Financial Crisis, Financial Times, Global Financial Regulation, International Monetary Fund, International Monetary Fund Imf, Managing Director, Managing Editor, September 29, Us Federal Reserve, Video Source, Yalta
Posted in Markets | No Comments »
Julian Robertson: Markets will pay the piper
Friday, October 2nd, 2009
Julian Robertson, Tiger Management founder and chairman, is always worthwhile listening to. I somehow missed his appearance on CNBC last week, but the content is still as topical as a few days ago. My apologies for the delay.
The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Robertson told CNBC.
“It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try to get out of it.
“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15-20%,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”
There are two versions of the interview - short and extended. Both are given below.
Short version (8 minutes):
Extended version (31 minutes):
Source: CNBC (here and here), September 24, 2009.
Tags: Apologies, Appearance, Armageddon, Bonds, China, Cnbc, Economic Problems, Economy, Few Days, inflation, Japan, Julian Robertson, Money, Piper, Tiger, Tiger Management, Two Versions
Posted in Markets | No Comments »
Technical Talk: Window Dressing Over
Friday, October 2nd, 2009
The comments below were provided by Kevin Lane of Fusion IQ.
Like clockwork the market was lower intraday yesterday [Wednesday] and then rallied to close well off its lows as end-of-the-quarter window-dressing assured stocks closed strong.
Today [Thursday] is the start of a new quarter and the next few days will be interesting in terms of the trading tone. We believe the predominant voices in the crowd are still from those calling for a correction and that those calling for a bullish continuation are very few and far between. With so many cautionaries we continue to believe liquidity is high.
However, we know the tape is the ultimate determinant, not opinion. That said, new highs remain fairly strong having peaked only just a few weeks back. Typically near corrective tops new highs will have peaked long before the index price peak. So far, however, the new highs have moderated but there are no glaring divergences between news highs and the underlying indices that would suggest the floor underneath the market is weakening significantly.
The S&P 500 has near-term support just below present levels near the 1,040 to 1,038 level. If that gives way the trade will turn corrective for a while.
Source: Kevin Lane, Fusion IQ, October 1, 2009.
Tags: Amp, Continuation, Crowd, Determinant, Few Days, Fusion, Index Price, Intraday, Iq, Kevin Lane, liquidity, Lows, New Highs, New Quarter, Price Peak, Quarter Window, Stocks, Tops, Voices, Window Dressing
Posted in Markets | No Comments »
Chart of the Day: Any bets on the savings rate?
Friday, October 2nd, 2009
I published a post yesterday quoting Richard Koo, chief economist of Nomura Research Institute and author of Balance Sheet Recession, as saying American consumers are suffering from a balance sheet problem and will not increase consumption until their personal finances are back in order. The chart below, courtesy of Clusterstock, leaves scant hope that individuals will stop saving and start spending again anytime soon.
“For one thing, we’re way below the personal savings rate we saw in the early 70s, let alone the savings rate in the pre-Greenspan era. With the recent wealth shock and the aging population, there are a lot of folks eager to hold on to every last dollar they’ve got,” said Clusterstock.
Source: Joe Weisenthal and Kamelia Angelova, Clusterstock - The Business Insider, September 30, 2009.
Tags: Aging Population, American Consumers, Balance Sheet, Bets, Business Insider, Chief Economist, Consumption, Era, Greenspan, Last Dollar, Leaves, Lot, Nomura Research Institute, Personal Finances, Personal Savings Rate, Recession, Richard Koo, Shock, Weisenthal
Posted in Markets | No Comments »
