2013-05-19T01:22:05-04:00 Daniel Tencer http://www.huffingtonpost.ca/author/index.php?author=daniel-tencer Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Daniel Tencer Good old fashioned elbow grease. tag:www.huffingtonpost.com,2012:/theblog// 2013-05-17T10:01:17-04:00 2013-05-17T10:01:21-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
“Senator Duffy does not, nor has he ever, been employed as a lobbyist for Sun News/Sun Media. Nor have we asked Senator Duffy act as an agent on our behalf,” network vice-president Kory Teneycke said in a statement published by Sun Media national bureau chief David Akin.

CTV’s Robert Fife cited an anonymous source Thursday to allege Duffy -- who resigned from the Conservative caucus on Thursday over a growing expenses scandal -- “approached a Conservative insider with connections to the CRTC three weeks ago to discuss Sun Media.”

“You know people at the CRTC,” the source quoted Duffy as saying. “This is an important decision on Sun Media. They have to play with the team and support Sun Media’s request.”

Duffy is well connected in Canadian media. He worked at CBC’s Parliament Hill bureau for more than a decade before becoming host of CTV/Baton Broadcasting’s Sunday Edition, which ran from 1988 to 1999.

He has been accused of political partisanship before. In 2008, the Canadian Broadcast Standards Council ruled Duffy had violated broadcasting ethics during the election by airing a series of “false starts” to an interview with then-Liberal Leader Stephane Dion. The Conservatives went on to trounce Dion’s Liberals in that election.

Duffy’s ties to the Prime Minister’s Office appear to be closer than many observers had believed. The revelation this week that Prime Minister Stephen Harper’s chief of staff, Nigel Wright, cut Duffy a $90,000 cheque to cover expenses the senator had been ordered to repay is raising questions about the PMO’s involvement in the controversy.

It may also raise questions about the prime minister’s role in the alleged effort to pressure the CRTC into approving Sun News’ “mandatory carriage” licence.

Sun News’ Teneycke told the broadcast regulator last month rejecting the application would amount to a “death sentence” for the controversial, right-leaning current affairs channel, which has been struggling with low ratings and reluctance from cable companies to carry its signal since its launch in 2011.

The company recorded a loss of $18.5 million for the year ending in August, 2012, and predicts a loss of $19.5 million for 2013.

Sun News is asking for 18 cents per TV subscriber per month, which is estimated to bring in about $18 million in annual revenue.
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Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
In an oil market outlook released Tuesday, the agency also said Canada’s oil sands will contribute to a North American “oil supply shock” that could fundamentally alter the state of the global energy market.

“Increasing volumes of crude oil transported by rail raise questions of safety,” the IEA said, as quoted at Bloomberg. “Our analysis reveals that compared to pipelines, rail incident rates are higher while the opposite holds for spill rates.”

The IEA found the risk of a rail spill is six times as high as the risk of a pipeline spill, but pipelines simply spill more when they rupture.

The agency looked at eight years of data from the U.S. Department of Transportation, from 2004 to 2012, but noted it did not include a 2013 rail oil spill in Minnesota that leaked more than double what had been spilled in the four years before.

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The study backs up research from the American Association of Railroads, released last month, which found that rail transport spills 0.38 gallons of oil per million barrels moved, compared to 0.88 gallons for pipelines.

The IEA’s outlook predicted the rise of shale oil production in the U.S. and growing production in the oil sands will send “shockwaves” through the global energy market.

Oil from the traditional OPEC nations will decline to just 30 per cent of world supply by 2018, while North American production will account for 40 per cent of new supply coming on to the market, the IEA said.

The agency predicted total oil imports to North America would plummet from 5.6 million barrels per day in 2012 to 3.4 million barrels per day in 2018, as the continent shifts to greater use of U.S. and Canadian oil.

“The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15,” the IEA said.

The IEA’s assessment of pipeline safety will likely be good news to the ears of the railroad industry, which has played itself up as an alternative to the development of oil pipelines.

Faced with delays and controversies surrounding the Keystone XL and other pipelines, the energy industry is turning to railroads to fill the gap.

CP Rail, which recently reported its best quarterly earnings on record, says it expects to double oil shipments by the end of 2015.

A number of oilsands companies, such as Cenovus, are mulling using rail as a permanent alternative to pipelines.

Last fall, a B.C.-based company floated the idea of replacing the controversial, proposed Northern Gateway pipeline to Canada’s West Coast with a railway. The idea got some tentative support from aboriginal communities.

A recent U.S. State Department report argued building the Keystone XL pipeline would have little impact on the environment, because it assumed railroads would fill the gap.

But cost could prove to be an obstacle. The cost of moving a barrel of oilsands bitumen by pipeline is estimated at around $10, compared to around $15 to $18 for rail, with some estimates as high as $30 a barrel to ship oil by rail.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-13T13:59:15-04:00 2013-05-13T14:01:24-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
The move — if it happens — is meant to prevent a housing market collapse in the face of record-high prices, record-low interest rates and the appearance of potentially irresponsible lending practices.

But it will likely raise the alarm in the home lending industry, which has already been complaining about Finance Minister Jim Flaherty’s move last year to tighten mortgage rules.

Flaherty last year reduced the maximum length of a mortgage covered by Canada’s government mortgage insurer, CMHC, to 25 years from 30, and reduced the amount you can borrow against the value of your home.

But the Office of the Superintendent of Financial Institutions (OSFI), which regulates Canada’s banking sector, is apparently growing worried about uninsured mortgages — those not covered by CMHC.

OSFI is contemplating limiting the maximum length for any mortgage to 25 years, from the current 35, according to Canadian Mortgage Trends.

If that were to happen, lenders would no longer be able to reduce monthly payments by stretching out a mortgage’s amortization over 35 years, and monthly payments for many prospective borrowers would have to be higher. That, in turn, would price some people out of the market.

The Globe and Mail cites a banker's estimate that about 40 per cent of uninsured mortgages have amortization periods greater than 25 years.

The volume of home sales in Canada was 25 per cent lower in April of this year than it was during the same period last year, although prices have held up and are still about 62 per cent higher, on average, than in the U.S.

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Some economists expect prices to start following the downward trend in sales at some point this year. Will Dunning, an economist with the Canadian Association of Accredited Mortgage Professionals, predicts house prices will start falling this year and has estimated that Flaherty’s rule changes will kill 190,000 jobs related to construction and real estate. Further tightening of the rules would likely further dampen housing activity.

(Not everyone agrees that Flaherty’s rules began the housing market’s slide, as evidence exists some weaker elements of the housing market were already in decline when the rules were put in place.)

In an email to the Globe and Mail, OSFI stressed no decisions have been made.

“We are working to determine the desirability of some changes given current conditions in housing markets and recent trends in household indebtedness,” OSFI spokesman Brock Kruger told the Globe.

Flaherty, Bank of Canada Governor Mark Carney and OSFI have all expressed concerns that Canada’s housing market has become overheated, with prices rising too high and borrowers taking on too much debt.

But the industry has been busily working against Flaherty’s attempts to cool the market, offering rock-bottom interest rates and various forms of discounts and rebates.

Canadian lenders have to get CMHC insurance for any mortgage on which the buyer puts less than 20 per cent down. But in the wake of the tougher CMHC rules, lenders have been increasingly turning to uninsured mortgages with longer amortization periods to get people to buy homes.

Even before the new rules came in, OSFI appeared concerned that segments of Canada’s housing market are beginning to resemble the subprime lending mess in the U.S. in recent years.

Home Capital, a lender that focuses on customers who have been rejected for mortgages by the big banks by offering uninsured loans, was recently singled out by a renowned hedge fund manager as a company that could be in big trouble if house prices decline. (Home Capital claims that everything is fine with its business model.)

Other market observers and investors have even suggested Canada’s banks could face financial difficulties due to their exposure to Canada’s housing market.

“Our review reveals that the average loan/value ratios of U.S. banks just before the housing collapse are similar to those we currently see on residential loans in Canada,” investment research firm Morningstar recently said in a report.

“More important, their distribution is eerily similar. … [I]t appears that the CMHC and the banks have significant risk of losses or impairment to capital levels.”

Despite the negative sentiment recently, Canada’s banks continue to ride high in the rankings of the world’s safest, and economists from Canada’s big banks pretty much unanimously agree the housing market is in for a soft landing, and not a U.S.-style collapse.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-10T12:47:42-04:00 2013-05-10T12:47:57-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
According to documents from the Canada Revenue Agency (CRA), tabled in parliament Thursday, 44 taxpayers were convicted of crimes related to offshore accounts between April 1, 2006, and March 31, 2012.

“This involved $7.7 million in federal tax evaded and the court sentences totaled $6.8 million in fines and 337 months in jail,” stated the CRA document, which was posted to the web by CBC’s Kady O’Malley. The agency had put together the report at the request of opposition members of Parliament.

In 37 of the 44 cases, the convictions were secured through guilty pleas. Seven cases went to trial, the CRA said. Fines ranged from $12,000 to $1.1 million, and jail sentences ranged from zero to 48 months.

The agency would not release the names of the convicted persons, due to privacy regulations.

The CRA report comes as Canadians for Tax Fairness (CTF) released a new report estimating that the amount of money held by Canadians in the world’s 12 largest tax havens has reached $170 billion.

Extrapolating from StatsCan data, the CTF, which “promotes a progressive tax system,” said the amount of money held in the top three tax havens — Barbados, the Cayman Islands and Luxembourg, has doubled since 2005, to $109 billion.

“That is $109 billion hidden away, untaxed, while the rest of us pay our share on every cent we earn,” CTF executive director Dennis Howlett said in a statement.

Tax evasion jumped into the spotlight as an issue last month when an international consortium of journalists released leaked data on tens of thousands of offshore accounts, including, reportedly, those of 450 Canadians.

The government found itself in a tug-of-war with the CBC and the journalists’ consortium over access to the data.

But the U.S. announced Thursday it is teaming up with the U.K. and Australia to expose the tax cheats listed in the data leak. While a report at the CBC questioned why Canada wasn’t part of the team, the Canadian Press reported that Revenue Minister Gail Shea expects the U.K. will share the data with Canada.

The U.S. Internal Revenue Service said it had acquired substantial data about assets hidden in Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands.

On Wednesday, the Canadian government announced it was creating a team of six to 10 bureaucrats that would be devoted to pinpointing tax evaders.

Liberal Senator Percy Downe has been pushing the CRA to begin estimating Canada's "tax gap" — the amount of money government would be collecting in revenue if offshore havens didn't exist. Though many countries estimate this number, the CRA has so far refused to do so.

“Revenue Minister Gail Shea has said that she is ‘considering the ... request, and will respond in due course’. Not good enough. Canadians deserve the facts, and only once we have them can we truly understand the extent of the problem of overseas tax evasion and just how much our country may be losing out on programs and benefits that could be funded by this lost money,” Downe said in a statement earlier this week.

— With files from The Canadian Press]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-09T15:06:58-04:00 2013-05-09T15:11:41-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
Steven Eisman, who was featured prominently in The Big Short, a book about investors who made money off the recent economic crisis, told a conference in New York City Canada’s lenders are vulnerable to a slowdown in the housing market.

Eisman blamed “misaligned” government policies for creating a potential bubble in Canada’s housing market, the Wall Street Journal reported.

He said Canada’s government-backed mortgage insurer, Canada Mortgage and Housing Corp. (CMHC), has insured too many mortgages and is now coming close to a $600-billion cap on the value of mortgages it can back.

“When something gets that big, even governments get nervous,” he said, as quoted at the New York Times.

He echoed a point made by some other critics in recent years that the CMHC has become too loose in handing out mortgage insurance, and has helped create a housing bubble by making it relatively risk-free for banks to hand out mortgages to consumers. (The CMHC — and, by extension, taxpayers — are on the hook if an insured mortgage goes bad).

Eisman singled out Home Capital, a Canadian mortgage lender that loans money to people rejected by banks (what in the U.S. would qualify as a “subprime” loan), as a company that could be in deep trouble amid a housing downturn.

“If housing rolls over, this company is going to have problems,” he said.

(Home Capital’s problems haven’t yet appeared, though: The company this week reported a 13.7-per-cent increase in earnings and said it’s confident in Canada’s housing market.)

Eisman’s comments come as new data paints a conflicting picture of Canada’s housing market, but clearly shows that a bursting housing bubble hasn’t materialized, at least for now.

While data from CMHC shows housing starts fell a whopping 25.4 per cent in the year to April, 2013, StatsCan’s new house price index, released Thursday, shows house prices remain stable, rising 0.1 per cent to April from the month before, a slightly slower pace of growth than seen in earlier months.

That has led some observers to conclude Canada’s housing market is experiencing a “soft landing,” not a U.S.-style crash.

The nature of the slowdown “suggests we are not crashing, people are not panicking, especially condo builders," CIBC World Markets chief economist Benjamin Tal said recently.

So Who’s Right?

A clear divide in opinion is growing between Canada’s institutions and international investors on the state of the country's housing market.

While the “soft landing” theory is generally espoused by Canada’s banks, real estate groups and mortgage brokers, many investors — particularly hedge funds — are betting heavily against Canada's economy, and predicting that Canadian banks and the loonie will suffer from a slowing housing market.

A California-based hedge fund recently went “all-in” against Canada’s economy, placing 95 per cent of its clients’ assets into bets bank stocks and the loonie will slide amid a housing slowdown.

Marc Faber, publisher of the notoriously pessimistic Gloom, Doom and Boom Report, told a discussion panel at the Globe and Mail Wednesday he believes Canadian housing may have entered a bubble, and not just the famously expensive Toronto and Vancouver markets, but Calgary and other major cities as well.

Yet here at home, investors are much more positive.

Peter Munk, the founder of Toronto-based Barrick Gold, the world’s largest gold producer, recently decided to put his money into financing Toronto condo projects.

The Globe described it as a “contrarian” move, considering condo sales in Toronto fell 55 per cent in the first quarter of this year, compared to the same period in 2012.

“That’s the wonderful thing about the markets; if all of us had the same view, we couldn’t afford to buy anything,” Munk said. “It’s wonderful to have opposing views.”]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-07T13:42:11-04:00 2013-05-07T15:07:41-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
It’s a stark reminder of the large regional disparities that separate Canada’s regions, and an indicator that this problem has only been made worse by the recent economic turmoil.

According to a report from the Conference Board of Canada, 21 of Canada’s 46 mid-sized cities still have fewer total jobs than they did in 2008, when the world, including Canada, was plunged into the worst economic slowdown since the Great Depression.

The Conservatives touted the news in early 2011 that Canada had recovered all the jobs lost during the sharp, nasty recession that technically ended in 2009.

But the Conference Board report would suggest that while some parts of Canada have soared economically in recent years, many parts of the country are effectively still stuck in a recession.

The situation in Ontario appears particularly bad, with all of the province’s mid-sized cities still struggling with employment rates below that seen before the recession, the Conference Board reports.

But Ontario isn't the only one. Western Canada is also dotted with cities that have fewer jobs than before the recession, including, perhaps surprisingly, several Alberta cities -- Lethbridge, Medicine Hat and Red Deer. So while the oil sands may be benefiting big cities like Calgary and Edmonton, as well as Fort McMurray, the centre of the oil patch, it has had little positive effect for other cities in the province.

That Ontario’s mid-sized cities have been particularly hit hard would suggest the decline of Canada’s manufacturing base has played a role in this phenomenon.

Check out the Canadian mid-sized cities whose economies still haven't recovered the job losses of the last recession.

]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-05T13:20:47-04:00 2013-05-05T13:27:12-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/ boring during his press conference with Finance Minister Jim Flaherty earlier this week.

But boring may be exactly what you want from a central banker, and in any case Poloz' record as an economist holds some surprisingly colourful anecdotes.

For one thing, Poloz, who most recently was the head of Export Development Canada, has in the past argued that Canada is suffering from Dutch Disease -- the whittling away of a country's manufacturing base due to an overly strong currency caused by oil exports.

"The bottom line? Symptoms of Dutch Disease are beginning to appear, with profit margins expanding in the energy sector and contracting in a number of manufacturing sub-sectors," he wrote in 2005.

That's an assertion he likely won't be making too frequently now that he's the governor of Canada's central bank. The issue of whether manufacturing is suffering due to the resource economy has become so politicized that suggesting it will quickly get you a smack-down from a Western premier.

Poloz has made other arguments that are even more likely to raise eyebrows. As the financial crisis unfolded in 2008, he wrote an article positing a very interesting theory for what caused the crash: Blame 9/11, he said.

“Arguably, the turmoil we are experiencing today is linked directly to the trauma of Sept. 11, 2001,” he wrote in a 2008 article for Business Edge. “We now know that 9/11 spawned a ‘live for the moment’ boom in U.S. consumer spending and borrowing, the likes of which have never been seen before.”

The borrowing and spending boom was indeed unprecedented, but the theory that it was spawned by 9/11 is “novel,” as the Financial Post puts it.

Many economists, looking at the bursting of the U.S. housing bubble and the subsequent financial crisis, blamed the problem on excessively low interest rates in the wake of the 2000-2001 economic slowdown, when the U.S. Federal Reserve dropped interest rates to one per cent, the lowest in half a century.

The excessively low rate encouraged irresponsible borrowing and lending, and created an asset bubble that inevitably had to burst, the line of reasoning goes.

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Poloz, too, had concerns about the U.S.’s housing market, and about the health of the U.S. financial system overall — concerns he voiced a decade before the collapse of Bear Stearns and Lehman Brothers tipped the global financial system into crisis.

As Maclean’s reports, Poloz predicted an avalanche of financial system bailouts back in 1998, after the collapse of Long-Term Capital Management. He suggested the hedge fund manager’s bankruptcy would be just the first in a long line of failures due to trading in complex derivatives.

“I think there will be lots more” fund failures, he said.

Yet at other times, Poloz appeared — in retrospect — far too optimistic about the state of the world economy, predicting in 2004 that rising interest rates would take a bite out of U.S. house prices, but “by all accounts the demand for housing has increased for fundamental, and lasting, reasons.”

Two years later, the U.S. housing market began a half-decade-long slide that would wipe one-third off the average face value of U.S. homes.

And in 2007, as the U.S. housing market was slumping and its financial institutions were headed towards catastrophe, Poloz declared, “The world truly is in better shape than in the late 1990s, and should prove resilient to financial turbulence.”

So hardly a perfect record of economic divination.

At his inaugural press conference in Ottawa this week, Poloz declared the post-crisis economic recovery “is not as robust as was anticipated,” and “we will have to stimulate the economy for a certain amount of time” — a clear sign he intends to keep Canada’s interest rate near rock bottom for some time yet.

That makes him sound a lot like the old BoC boss, Mark Carney — minus, of course, the speculation on terrorist attacks and their effect on consumer spending.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-05-01T17:15:02-04:00 2013-05-01T17:15:12-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
Following news on Tuesday that the Tories are planning to inject themselves directly into wage negotiations between the CBC and its employees, the Globe and Mail revealed Wednesday that the government has similar plans to control expenditures at all other Crown corporations, but plans to focus mostly on Canada’s national broadcaster, railway company and postal service.

While the government says the move is meant to help control costs at government-funded agencies, opponents say it has less to do with managing costs and more to do with taking direct political control of Crown corporations.

Critics say the move strongly undermines the arm’s-length relationship between the federal government and Crown corporations. In particular, some opponents of the plan raised concerns that journalistic independence in Canada could suffer if the CBC’s wage negotiations come under direct cabinet control.

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"This is an outrageous and unnecessary violation of the principle of public broadcasting,” said Carmel Smyth, national president of the Canadian Media Guild, in a statement.

“It undermines nearly 80 years of public broadcasting in Canada and around the world by meddling with the essential arms-length relationship between the CBC and the government of the day," she added.

"The change is disturbing as it has all the markings of an attempt to turn the CBC (from a public broadcaster) into a state broadcaster."

“This is maybe just a small step, but it’s moving in the direction of radio Moscow,” Friends of Canadian Broadcasting spokesperson Ian Morrison told the Hill Times.

The Tories are moving “away from the kind of independence that we need in a democratic society from the public broadcaster, especially at a time of huge concentration of ownership” in private-sector media, he said.

The Globe and Mail reported Wednesday that the Tories’ budget bill also expands direct cabinet oversight over wage negotiations to Canada Post and Via Rail, among other Crown corporations.

The budget bill would give the Tories the power to have a Treasury Board official sit in on collective bargaining between Crown corporation management and unions, as well as a say in pay packages for non-union employees.

Liberal Party Leader Justin Trudeau described the changes as “very troubling,” the Globe reported.

“The fact that this government is so heavy-handed in its approach to unions, to collective bargaining means that I think this is a recipe for political interference in what should be arm’s length agencies and it is a concern to me,” he said.

Parliamentary Secretary Pierre Poilievre defended the Harper government’s move, saying he isn’t “here to take marching orders from union bosses.”

Poilievre said the move was meant to help the government rein in spending at Crown corporations that receive taxpayer funds.

“Frankly, taxpayers expect us to keep costs under control so that we can keep taxes down,” he told media.

But Marc-Philippe Laurin, the Canadian Media Guild’s president at the CBC, was having none of that.

“Make no mistake, this is not about the money,” he said in a statement. “The Conservative government is effectively modifying the Broadcasting Act to inject itself into decisions such as staffing that have a major impact on everything that’s done at the CBC.”

Treasury Board President Tony Clement told the Globe earlier this week the move was about “aligning public-service compensation and benefits to private-sector norms and expectations.”

Poilievre said the plan was part of the government’s push to balance the budget.

“Any liabilities from a Crown corporation are passed on to taxpayers. We are the representatives of Canada’s taxpayers and we have a responsibility to ensure that those Crown corporations live within their means and that the costs are kept affordable to Canadian taxpayers,” Poilievre said. ]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-29T16:06:53-04:00 2013-04-29T16:30:26-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
A report Monday in The Financial Post indicates that a near-record amount of money is being placed against Canada’s major banks.

The length of time it would require investors shorting Canadian banks to cover their debts if the stock went up is now at 10.3 days, compared to just 1.3 days for U.S. banks. Any ratio above five suggests investors are pessimistic.

That follows a report last week that the Canadian dollar has become the second-most shorted major global currency, after the Japanese yen, suggesting investors widely expect the Canadian dollar to keep sliding.

Several trends appear to be behind the negative sentiment, including a weakening housing market and falling prices for commodities such as oil and gold. Both of these trends could impact the country’s economy, given Canada’s well-known reliance on commodities, and given that housing now supports a greater percentage of Canadian jobs than it has in recent history.

A hedge fund in California is going “all in” against Canada’s economy, The Globe and Mail reports. San Francisco-based Hyphen Partners LP is putting 95 per cent of its clients’ assets into bets against Canada’s housing market and banks.

“Canada faces two risks,” Hyphen Partners head Vijai Mohan told the Globe, referring to housing and banks. “Very few people are looking at those risks simultaneously. That collectively presents a lot of opportunity” for those who wish to make money off the Canadian’s economy’s expected decline.

So far, Canadian banks’ earnings have held up but recent data suggest there is a slowdown in the credit market, which in turn could have a negative effect on bank earnings.

House prices in Canada suffered six straight months of declines before leveling off in April, according to Teranet. But sales volumes have dropped sharply over the past year — down 15.3 per cent from a year earlier, according to the latest numbers — and the supply of homes available on the market is growing relative to the number of buyers -- a bad sign for future prices. (House prices in Canada remain 62 per cent above U.S. prices, on average.)

While many Canadian banks and real estate groups predict a soft landing for the housing market, the international community is less convinced, with Capital Markets predicting a 25-per-cent drop in house prices, and The Economist indicating Canada has one of the most overvalued housing markets in the world.

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Sliding commodity prices pose another risk to Canada’s economy. The price of gold suffered a mini-crash last week, even as Toronto-based Barrick Gold, the world’s largest gold producer, reported an 18-per-cent drop in profit. (A shareholders’ revolt followed, with investors rejecting the company’s executive pay plan.)

Canada’s S&P/TSX index has performed considerably worse this year than stock exchanges around the world, largely the result of the fact Canada’s stock markets are heavy on commodity companies. As of Monday afternoon, the U.S. key S&P 500 index was up 11.89 per cent on the year, and sitting in record-high territory. The Canadian S&P/TSX index was up a paltry 0.12 per cent for the same period.

Analysts at Citibank and elsewhere have declared “the end of the commodities super-cycle,” meaning they expect the long run of rising commodity prices over the past decade to end, to be followed by a long period of price declines.

If that were to happen, Canada’s economy could suffer from sluggish growth for years to come, dependent as it is on natural resources. Canada is the seventh-largest producer of gold in the world, and the sixth-largest producer of oil.

Regardless of whether one subscribes to the “commodities super-cycle” theory or not, evidence of hard times for Canada’s commodity companies is already appearing.

Imperial Oil, owner of the Esso brand, saw profit fall 21 per cent in its earnings report released last week. Cenovus, the fourth-largest oil producer in Canada, saw its profit fall by more than half in the first quarter of this year. And TransCanada, builder of the Keystone XL pipeline, saw higher profits but missed analysts’ estimates all the same.

With all this going on, “speculators have ganged up on the Canadian dollar by shorting the currency like there was no tomorrow,” National Bank Financial chief economist Stefane Marion told The Financial Post. “Falling commodity prices, disappointing economic data and a major downgrade by the Bank of Canada to its 2013 growth outlook have all contributed in altering perceptions about the loonie.”

But while the Canadian dollar is subject to the same ups and downs as all major currencies, the bets against Canada’s banks are harder to understand for some analysts.

Granted, the banks are exposed to a housing slowdown, but the banks continue to be rated as among the strongest in the world.

“The idea there will be a banking crisis in Canada is ludicrous,” Rob Wessel, managing partner of Toronto-based Hamilton Capital, told the Globe.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-26T06:09:00-04:00 2013-04-26T13:33:47-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
Clement, who was recently appointed the federal government’s point man on Northern Ontario development, said the giant mining project — which faces delays and opposition from some First Nations groups — would eventually expand to be worth $120 billion, when taking into account all the economic activity the planned mine and smelter would generate.

Clement made the comments at an editorial board meeting at The Huffington Post Canada on Thursday, during which he also discussed the controversy over the temporary foreign worker program, the Conservatives’ negative ads and what it means to be a politician in the age of social media (see below).

But it was his comments on the Ring of Fire — the name given to a massive planned chromite mining project some 400 kilometres north of Thunder Bay — that caught many at the meeting by surprise.

“You’re looking at $120 billion, right in line with the oil sands or some of these other major developments,” Clement said of the project, noting that other minerals besides chromite (an ingredient in stainless steel) have been found in the area, including nickel and copper.

“It has the potential to transform what was hitherto a very poor, underdeveloped area of Ontario and give people who live there, particularly First Nations people, a chance for a decent life,” Clement said.

But the project’s developer — Cleveland-based Cliffs Natural Resources — recently delayed its target date to have the mine operational by a year, to 2016, and may delay the project further. The company said it was due to problems deciding on a location for the processing plant, but it may have had as much to do with weakening commodity prices.

Some First Nations groups have criticized the government and Cliffs for what they say is inadequate consultation with them, and activist groups have challenged what they call the government’s “bare-boned” environmental review of the project.

“The only way this project is going to work is if First Nations people are included as partners,” Clement said, promising the government would consult with the local communities and develop plans that will allow them to “participate in the economic activity that this project is going to generate.”

3 OTHER THINGS TONY CLEMENT TOLD US

1. Negative Ads Are How It’s Supposed To Work

When it comes to the controversy over the Tories’ recent negative ads attacking Liberal Leader Justin Trudeau, Clement says it’s just how things work.

“It is common for political parties to extol the virtues of their own leadership and their own policies and contrast those of their political opponents,” he told The Huffington Post.

“Some people say that our job is to get along with all of the opposition parties. That’s what they expect the government to do. But that’s not really how it works. We all were elected because we had certain values and principles. ... We can’t just jettison our principles.”

Clement said he wanted to see more civility in Parliament, but that does not mean there is no place for negative ads.

“There is going to be some heat generated in the free market of ideas. And we are going to extol the virtues of our leadership and contrast that with what we see as the failings of our political opponents.”

2. The Temporary Foreign Worker Program Wasn’t Meant For Tim Hortons

Clement says Canada needs a temporary foreign worker program to fill gaps in the job market created by the country’s labour shortage, but he concedes the program may have expanded beyond its original intent.

While there some businesses have legitimate needs for foreign workers, “what’s happened more recently is it’s expanded beyond that, to Tim Hortons and Royal Bank of Canada or what have you. That’s where we have to re-examine the program to make sure it’s actually achieving the objectives that Canadians expect.”

Clement described Canada’s labour shortage as “an inherent problem in our economy right now” that “seems endemic.”

“That’s why we put so much emphasis on the job grant program (in the budget),” he said.

But the notion that Canada is suffering from a labour shortage is in dispute. Some analyses have recently found that Canada’s labour shortage is less acute now than the average of the past several decades.

3. Politics Is Becoming #Politics

Tony Clement says his fellow politicians need to stop being afraid of social media.

“Politicians come to me and say, ‘I don’t really want to be on Twitter, I’m going to come under review and attack.’ I say, ‘Well, welcome to your world.’”

Facing up to public criticism is “part of the mantle of political leadership in any country,” he told The Huffington Post editorial board, and it’s no reason to shy away from social media.

“Social media to me is now a critical component for any politician who wants in the modern age to be engaging,” he said, adding that it affords the opportunity “to have a dialogue with citizens, to radically break down the barrier between what used to be the governing elite and the governed.”

Clement also noted that, for him, social media is a way to show the public that “I have passions outside of politics.”

He cited his penchant for the Habs and alternative rock as “things that are part of my humanity that maybe people weren’t aware of. All of a sudden, I can talk about those things.”]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-25T13:32:07-04:00 2013-04-25T13:32:29-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/ recent announcement by wireless carrier Telus that it’s raising fees for texting to the U.S. will be just the beginning of price hikes if Canada’s large wireless companies are allowed to swallow up the small players, a consumer watchdog group says.

“This is only the beginning,” OpenMedia said in a statement this week. “Big Telecom conglomerates often mimic each others’ price-gouging, so we can expect providers to add new fees across the board if we don’t speak up.”

Starting May 1, Telus is changing its plans that include unlimited texting by adding an additional 40-cent fee for text messages sent to the U.S.. Customers can still opt for unlimited texting to the U.S., but it will cost an additional $10 a month.

OpenMedia describes this as “price-gouging,” pointing to estimates that if text messages were charged at the same rate as other wireless data, they would cost eight-tenths of a cent.

But Telus spokesperson Shawn Hall said the cost of text messages involves much more than just the cost of transferring a small amount of data.

“We're making this change because only a small, but growing, number of customers send texts outside Canada, which is more expensive for us to provide because we have to pay the international carrier to connect the text,” he said in an email to The Huffington Post Canada.

“There are substantial costs involved to operate our text messaging network — billions of dollars — not just the cost of transmission, but of the extensive infrastructure and work by team members involved,” he added.

Telus is reportedly in talks to buy Mobilicity, one of Canada’s small wireless entrants.

The other two small wireless players — Public Mobile and Wind Mobile — have also put themselves for sale, a fact that has raised concerns among consumers’ advocates that fledgling competition in Canada’s wireless market will be stifled.

“We see the big three (Bell, Rogers and Telus) pushing more and more to maintain their control by influencing regulatory decisions,” OpenMedia executive director Steve Anderson told HuffPost in an email.

Anderson cited Rogers Communications’ efforts to buy wireless spectrum controlled by Shaw as further evidence the big three are trying to crowd out other potential players.

Shaw was awarded a band of wireless spectrum in 2008 under rules meant to allot spectrum to small players. The company had planned to become a wireless carrier, but backed out.

OpenMedia points out that the Rogers buyout is a contravention of a federal rule that sets aside wireless spectrum for small players. The rule expires in 2014.

Anderson suggested Rogers’ buyout of the Shaw spectrum may have been at least part of what convinced the small players to give up the ghost and put themselves on sale.

“I believe the indie providers were waiting to buy up this spectrum and having it appropriated by Rogers now puts them at a major disadvantage. They need more spectrum to reach customers and Rogers (who has enough already) is going to limit that access,” Anderson wrote.

A takeover of the smaller wireless players by the big three would be problematic. The federal government has pushed for greater competition in the wireless market in recent years, and regulators would likely balk at approving such acquisitions.

— With files from CBC
]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-23T13:25:43-04:00 2013-04-23T16:07:41-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
According to an analysis from BMO Capital Markets economist Doug Porter, Canadians now pay 62 per cent more for housing than Americans.

“A 62 per cent gap is simply not sustainable for long,” Porter wrote in a note to clients.

Until about 2006, Canadian and U.S. house prices tracked each other closely for at least 25 years, Porter wrote, but that all changed with the bursting of the U.S.’s housing bubble. House prices in the two markets have been moving in opposite directions for much of the past six years.



That’s a much higher price gap than for most goods. Depending on which estimates you believe, prices in Canada run between 11 per cent and 23 per cent higher than prices in the U.S., largely due to the strength of the loonie in recent years.

But the house price gap isn’t the result of shifting currencies — it’s the result of two very divergent housing markets.

U.S. house prices peaked and began to fall in 2006, while the Canadian market remained stable and continued to grow, expanding even faster when the Bank of Canada dropped rates to rock-bottom levels in early 2009, as the financial crisis unfolded.

The result is that, by early 2013, the mean U.S. house price had fallen to $233,000, while the average house price in Canada had grown to $378,000. Too bad you can’t cross-border shop for a home. (Or can you?)

Porter says the housing price gap won’t last forever.

“The good news is that we believe that most of this yawning gap will be closed by a rebound in U.S. home prices,” he writes. “After all, it’s U.S. affordability that’s off the charts now.”

That U.S. bounce-back has already begun: The mean house price in the U.S. grew nearly 10 per cent in the year to March, 2013, to $233,000, and housing starts have seen a strong rebound in recent months.

But if you believe some of the more bearish voices in Canada’s housing market, the gap could also be closed by falling house prices north of the border.

Will Dunning, the economist for mortgage industry group CAAMP, predicts we will start seeing falling house prices in the data starting sometime this spring. He estimates the country will lose about 180,000 construction jobs as a result of the slowdown in home building.

Housing analyst Ben Rabidoux recently told an audience in Vancouver that he expects Canada’s housing market is in for something worse than a soft landing. He predicted 250,000 job losses as a result of the housing slowdown.

Either way, though, this is one price gap that is likely to shrink soon.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-19T13:33:29-04:00 2013-04-19T13:33:32-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
Canada’s net worth has reached 648 per cent of GDP, research consultancy Capital Economics said in a new report, while U.S. net worth stands at 550 per cent of GDP.

The report backs up other recent data indicating Canadians have pulled away from their southern neighbours when it comes to wealth.

Data from the IMF shows Canada’s per capita GDP pulled ahead of that of the U.S. in 2012, while an Environics Study from last year pegged Canadian net worth as being $40,000 greater than U.S. net worth ($363,000, compared to $320,000).

But Capital Economics says Canadians’ new-found wealth is the result of record-high Canadian house prices in recent years, during the same period that the U.S. saw the collapse of its housing market. Houses make up the largest part of most households’ net worth (which is defined as assets minus debt).

According to the Canadian Real Estate Association, the average house price in Canada is $378,532. In The U.S, the average house sells for $173,000, according to the National Association of Realtors.

“The problem is that the advantage Canada enjoys is largely due to the run-up in residential property values. As a result, there is a good chance that the wealth gap between the two countries will narrow sharply over the next few years,” the report stated.

Capital Economics estimates that the U.S.’s housing market is about 20 per cent undervalued, while Canada’s is 30 per cent overvalued. If these markets adjust back to their long-term trends, Canadians’ wealth advantage would disappear.

“[W]hile Canada has the bragging rights for now, things could be very different in a few more years,” the report said.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-18T15:52:52-04:00 2013-04-18T17:04:14-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/ warned on Thursday the bank could raise interest rates if the growth in household debt doesn’t slow.

It was a blunt statement meant — at least in part — to show that Canada’s central bank chief, who heads to the U.K. later this spring to take the same job at the Bank of England, is prepared to act to curb Canadian consumers’ mushrooming debt levels.

But some analysts argue the warnings are little more than just talk. After all, Carney has kept the bank’s interest rate around one per cent for four years, which some observers say has led to the large house price increases of recent years, which in turn has forced Canadians to take on more debt.

Granted, there was good reason for those low rates — the financial crisis, and the slow growth that followed. Pretty much all the world's central banks dropped their interest rates to rock bottom, and Carney simply followed suit. But did Carney follow too far, and allow Canadians to become too heavily indebted?

With evidence building that Canada’s economy is slowing (Carney himself downgraded the country’s economic outlook on Wednesday), some analysts are blaming Carney for record Canadian debt levels.

In a note to clients earlier this week, Brown Brothers Harriman chief currency analyst Marc Chandler declared that Carney “is leaving Canada as the proverbial bloom is coming off the rose.”

“The economy is under-performing [and] excesses are evident in the housing market and households,” the analyst wrote.

Besides suggesting that Carney is leaving just as his legacy is about to take a hit, Chandler also seemed to be suggesting that Canada is in for a reckoning over sky high household debt levels.

As evidence, he pointed to a chart from JPMorgan that shows Canadians are taking on more debt even as consumers in other countries are paring down theirs. Canadian household debt hit a record high of 165 per cent of average household income last month, according to Statistics Canada, and Canadians are now among the most indebted people in the world.



That makes Canadians particularly vulnerable to an economic slowdown; if you’re already spending every last penny you have covering bills and debts, any reduction in income is going to have a real impact, especially when interest rates inevitably rise.

Last month’s abysmal jobs report, which showed the economy lost some 55,000 jobs in March, combined with weak exports and falling commodity prices, make the country a strong candidate for economic problems this year. The IMF recently projected that Canada would be among the worst performing of the major economies in 2013.

The collapse in the price of gold this week could prove to be even more trouble for Canada, which is the world’s seventh-largest gold producer. Moody’s ratings agency this week said it’s reviewing Toronto-based Barrick Gold, the world’s largest gold miner, for a possible downgrade.

Carney is seeing the same trends, and on Wednesday reduced the forecast for Canada’s growth to 1.5 per cent from two per cent for 2013. But that only subjected him more criticism.

Carney “gets a bad grade for forecasting,” the Globe and Mail declared Thursday.

“It’s true that [the Bank of Canada has] been a little bit more optimistic than the consensus [of private sector forecasters], and they continue to be very optimistic, at least for 2014,” National Bank of Canada economist Krishen Rangasamy told the Globe. “Governor Carney is probably not going to be remembered for his forecasts.”

Carney was supposed to be remembered as Canada’s “superstar” central banker, the man who kept the country out of the global financial crisis (a credit he may not deserve).

But now it appears he may also end up taking the blame for years of excessive borrowing and potential asset bubbles in our economy. If so, his departure to the U.K. may be something he actually timed perfectly.]]> tag:www.huffingtonpost.com,2012:/theblog// 2013-04-17T15:11:09-04:00 2013-04-17T15:11:15-04:00

Daniel Tencer http://www.huffingtonpost.com/daniel-tencer/
Ms. Carney, who heads the progressive think tank Canada2020, made her comments in a report released ahead of a forum to be held in Ottawa today on “how to sell carbon pricing to Canadians.”

“Unfortunately, constructive dialogue on [reducing carbon emissions] has ceased, and name-calling has taken its place,” Carney wrote in the report. “Carbon pricing of any type is characterized as a ‘tax on everything’. This serves neither the goals of the government nor the well-being of Canadians, particularly since it is far from clear that the targets to which we are committed are adequate for the long term.”

Prime Minister Stephen Harper and his cabinet ministers have repeatedly referred to carbon taxes as a “tax on everything” and commonly refer to it as the “job-killing carbon tax.” The Conservative Party previously supported a cap-and-trade scheme to help reduce carbon emissions, but officially came out against cap-and-trade in the 2011 election.

“Since that time [Harper] has entirely turned his back on carbon pricing and deliberately obfuscated by conflating the federal NDP’s call for a cap and trade system with carbon taxation (‘a tax on everything’),” Carney wrote.

Carney argued that “all federal parties have played a role in getting us to where we are,” noting that the Liberal government of Prime Minister Jean Chretien committed Canada to the Kyoto protocol in 1997 but did nothing to ensure the country would meet its commitments. The Harper government withdrew Canada from Kyoto in 2011, but remains committed to a 17-per-cent reduction in emissions from 2005 levels by 2020.

Carney said there was no way for Canada to meet that target if government policies don’t change. Her report estimates that Canada will be able to reduce emissions by only three per cent by 2020 under the current environmental regime.

“No government could be proud of such ‘achievement’,” Carney wrote.

“In the meantime, peer nations and regions such as Australia (2012), California (2013) and Ireland (2010) have all introduced carbon taxes in the past three years,” she wrote. “This puts Canada at a moral — and potentially long-run economic — disadvantage.”

There has been plenty of evidence to suggest that the Carneys aren’t political allies of the current government in Ottawa, not least of which was the controversy surrounding reports that Liberal Party insiders had tried to recruit Mark Carney for the Liberal leadership race.

The Bank of Canada governor has at times aired opinions that seemed at odds with the political leanings of the Conservatives, such as his declaration that the Occupy Wall Street movement was “constructive” and his public frustration with Canadian companies that have been hoarding cash in recent years instead of investing or hiring.

The Canada2020 forum on the carbon tax brings together a number of people who are pushing for Canada to move forward on the policy, including an unlikely South Carolina Republican who stands out in his party for his position on carbon pricing.

Bob Inglis, whose stance on the environment cost him his seat as a U.S. congressman from South Carolina in the 2010 election, has suggested that U.S. and Canadian conservatives could be convinced to support a carbon tax if it is implemented along with tax cuts in other areas.

“All we’re talking about is accounting for the true cost of the fuels we use,” he told the Washington Post. “And I should mention that we’re not talking about apocalyptic visions of climate change. What we’re talking about is reasonable risk avoidance, the kind that our friends in the insurance industry are now taking cognizance of.”

Diana Carney’s report acknowledges that implementing a carbon tax could have a negative short-term impact on the economy. But the report argues there could be an economic price to pay if other countries move forward with a carbon pricing regime and Canada is left behind.]]>