The Canadian Economy.

I work with some international economists and our take is that the Cdn economy is/will lag about 18 months behind major shocks in the US economy and other major trading partners with the US. It's the lack of perception of the lag, IMHO, that created the myopia among dumb Cdn politicians (Harper, Flaherty) as well as the super stupid national and provincial real estate boards (and their phoney "chief economists" who should all be fired for misleading consumers), that resulted in all sorts of dumb assurances Canada was going to enjoy a soft ride while other's squirmed. And the slow down, as you'all know is really pervasive. It's stocks, real estate, car values, consumer goods, gasoline, employment -- everything is taking a major hit south and creeping up here. My advice to myself is to (i) put my stock portfolio in an envelope and don't look at it for another 3 years, (ii) don't buy any real estate until after 2010 bc its still on its way down, (iii) don't borrow, minimize expenditure and credit card use, and (iv) manage your cash flow to assure sustainability, AND just sit back and try to enjoy life. The big iron will deal with the crinkles in time but not until the cravasses start to heal. Fortunately, I followed some of my own advice by selling my house in Vancouver in Nov. 2007 and placing my bets on investors who's mantra is "cash is king". Nevertheless, I too got stung and am getting stung because the Tsunami is just too pervasive. Good luck to you all and merry christmas!

 

Well said. Particularly item (iii); excessive borrowing is what created the current situation to begin with, helped by marketing hype which seduced too many people to over-extend their financial capacity.

Zero debt is the best way to weather the storm.

 

The issue is 2 fold.....you got people with money, and people who think they have money....and both of them are out to lunch.

These companies that made hugh profits cant handle only 3% growth now, and are freaking out (especially CEOs) that were making 10M, now have to settle for 2M.....cry me a river....suck it up....the banks, and oil companies are another joke....instead of posting record breaking profits, they are now make less, and its a downturn my a$$....its all about greed.

THe second group, all thought they had money cause money was cheap, and now are crying cause once you getting into the nice lifestyle, its hard to go back to your paper bag....these peopel never had a chance anyway, and should also be greatful that they had a chance to even experience the fruits of some pleasures.

The bottom line is simple......as long as man has been walking this green earth (thats about to end too), people never had it so good....the comfort of heating and a/c....shopping, exotic dinners, travelling....in history we have never had that as humans. People need to stop with the greed, and look to the finer things in life that is good for the soul. Such things do not mean having the latest and greatest ipod....and our kids (mine) are no better.....and i try hard not to give them anything, but hard to do when every 8 year old has the Nintendo, xbox and ps3 at home.

As for the economy, people need to live within there means, and stop this crap of working 90 hoour work weeks to try and get ahead....that only gives greif to everyone around.

As for the upside, alot of good deals on the way for people that live a modest life....and even still those people might not buy any of the bargarins cause they never cared for them. For others, its an opportunity. I think instead of worrying about the economy, worry about your health, and happiness with your family and bring back some family time.....thats the upside....cause when your dead whether you have 10M or owe the bank(can we say Ted Rogers...he was in a freezer box 4 days ago).....you rest in the same paper box as everyone else.

Enjoy life....the hell with the economy

 

Long answer from our morning notes.........

COMMODITY PRICES HAVE QUITE LITERALLY COLLAPSED, and it is all areas of the commodity market that have done so, for as the DJ-AIG Index has fallen 3.6% and as the Reuters/Jefferies Index has fallen 3.7%, ever area of the market has plunged. Grains are weak; livestock is weak;the "softs" are weak; energy, most of the base metals, precious metals... all are weak and materially so.

Global recession and the end of the year are weighing heavily upon prices, and we get the sense that pension fund after endowment fund after large hedge fund after small hedge fund are trying to exit the arena
before the year's end as boards of directors in the case of the former two take the stand that the decision made earlier this year or late last year to enter the commodity market arena as an "asset class" for diversification
purposes was an egregious error of judgement and they want out... before the year's end... now! In the case of the latter, the "Redemption Song" is being sung loudly by investors, who like the pension and endowment fund
"associates" want out.

The gold market, of which we are short and of which we are very nervous, we note that support has held for several days a the $766-$768 level, and that it is holding again thus far today in Asian dealing
and in early European dealing. Firstly, before we go into any further detail, we shall bring our stop down on this position from $821 to $791, and once again we'll use our "one hour" qualification on our stop; that is, we shall want
to see spot gold trade upward through and remain above $791 for one hour or so before we exit the trade. Further, we'll add to the position when and only when spot gold falls below $758 and remains below that level for an hour
or so, proving its bearish mettle in so doing.

That having been said, and done, gold's weakness is derived not only from the weakness of energy prices, grain prices et al, but is of course further derived from the strength of the US dollar. So long as the US dollar
remains reasonably strong, demand for gold shall remain reasonably weak. In that light, rather than watching the EUR or the Yen closely, we would suggest watching the Brazilian Real/US dollar rate, for clearly the dollar has
been strong and has been getting stronger. The fact that the Real/dollar rate is now above 2.5050 suggests to us that the dollar's reign is not only well entrenched, but it is getting more and more powerful, not less so.
We do indeed understand the arguments put forth by the inflationists amongst us regarding the massive expansion of the Fed's balance sheet and the supposed inflationary implications to be drawn therefrom. We understand that
and we reject it, for the frightened inflationists fail to understand that unless and until these added reserves are put to use the inflationary implications to be drawn are wrongly implied. It is money supply x velocity that is
important, and in the current case, money supply is indeed rising, but velocity is non-existent. The Federal Reserve Bank, and the other monetary authorities around the world are indeed creating high powered money that eventually shall be put to use, but for now that high powered money is sitting idle.

The foot may be upon the monetary gas pedal, but the fuel line is broken and the engine is getting only air, not fuel.

Short answer in plain english..........

Canadas economy is in deep trouble, jobless rates will go higher and i think everyone needs to cut wayyyyy back on spending, save 6 months of cash, avoid the temptation of trying to buy into the mkt ( look up the mkt in 1933, where the real damage was done to investors post 1929 crash)

We are cutting salaries and a few jobs, doing more advisory work as deals falter and building a cash position. I feel bad for anyone in the manufacturer space, especially automotive.

Very grim outlook, even if oil ticks down to $25 as Merrill Lynch predicted last night ( a sign of huge issues in China)

Cheers

P.S. The jobless numbers just came out, much much worse then expected...a lagging indicator of the economy, but significant.

 

States lost 533,000 jobs last month Canada 70,000 jobs, those numbers say it all.[ no job=no spending]

 

Engineering isn't faring too well either; many projects are either canceled or being put on "hold". My colleagues at major firms (SNC-Lavalin, Hatch and others) are all telling me the same thing: Could be a long winter / sad Christmas season for lots of people. Two of my colleagues have the unpleasant job of cutting back by about 30 engineers each before the end of the year, and just a few months ago they were looking for people as far away as South America!

 

Well, the change has started for my line of work. I'm quoting very few houses for hardwood, the market has turned to rentals again. Rental apartments that were empty in the summer are starting to see action and the Property managers are starting to fix up the units. One company I do business with has been dead for over a year...now I'm working in those units all the time.

BIG RED is in the house I see!

 

As much as I would like to contribute a positive story alas I cannot. My Father and I built from the ground up a manufacturing company serving the automotive OEM's (Detroit 3). Today after 22 years of hard work and risk I am sitting in an empty plant that used to employ 300+ CAW employees and have sales of $100M+. Only two short years ago we refinanced and put $9M of our own money raised from the equity in our real estate back into the company to keep our business alive and save the jobs of our employees. In hindsight we should have closed our doors then and we would have been $9M ahead. We did not ask for a bailout! We did ask our customers (Ford & GM) to work with over the summer to allow us to weather the storm during the worst possible time of the season for a part manufacturer (summer shut down). The day after meeting with key people in Detroit from both Ford and GM they sent trucks to our plant demanding their tools back. Luckily we did not cave in and insisted that they pay their outstanding bills in full before we would even considered allowing them to take their tools. We ended up getting all of our money owed to us from Ford and GM, paid our bank out in full (who had decided they did not want to support manufacturing anymore)and file for CCAA in order to protect ourselves from the Detroit 3. I am not asking for any pity, as we will survive and go forward to create another business (not manufacturing).

On the positive side my week was better than Ted Rogers' (RIP),

 

The wife and I are totally debt free, as we saw it coming and resisted temptation..........while it seems that all those around us whom we know are buried under piles of debt and underwater mortgages.

Serves them right for telling us we were fools not to jump on the real estate bandweagon and buy a house with zero down over 40 years. We must have been told that a dozen times last year alone at various parties when the conversation came up.

"You guys are stupid, why don't you buy a house ?? I've just made $100K on my condo in the last 6 months and am gonna take out a second mortgage to pay off my c/c debt and buy a new pick up truck loaded to the nuts. You should buy a condo and you can do the same thing in 6-12 months......"(it's a true quote.....just one of many).

Heh.

Since there are hundreds of thousands of "greater fools" as Garth Turner so correctly refers to them, I doubt the good news you yearn for Vasco will not be forthcoming for a decade at a minimum.

To me, good news is that banks are pulling back on lending, VISA/MC/AMEX are cutting trillions in credit lines, and credit granting standards are returning to normal. Without a major retrenchment on a broad scale......it's all over, and all you will be able to use a fistfull of dollars for, is to go to the bathroom.

 

The positive side is we do have money in the bank and can fund a new business. Just what the business will be is difficult to say right now as every industry seems to be in the dumps right now. I love cars, but would not want to be in the retail or supply side now. Any thoughts?

 

Cool..........but you'll have to learn some Portuguese first.

 

NOt to sound like a jerk or anything, or to fuel any fires, but I believe KDS called this about four to five months ago with calgary's real estate market.
Yet everyone said he was nuts.

Would those proclaiming he was nuts, and this could never happen, please speak up???

I am fortunate that my job is 100% recession proof.

BTW - oil at $40 bucks a barrel and German are saying $25 by then of calender year. Just for comparison Pepto Bismol is $7 for 250ml or $28 per litre, let alone barrel

I don't know about calgary or the rest of canada, but I am seeing a lot of toys for sale on the sides of roads...but more alarming is no on is buying them.

 

Heh........you liked that eh Vasco ?

I sometimes find myself watching "Gente TV" which is an Azores expat community TV show broadcast from Toronto, and seem to be OK with their language of the time, but during some parts I'm lost too, seems it's usually when the blond milf who is the apresentadora is wearing her low cut dresses. There is an even a difference between Brasilians, depending on where they are from inside the country..............

 

LOL..........Carai!

I have a bit of Azorean in me too!

Viva Nove Ilhas!!

 

Hint: Invest in a Senior's residence. Big business, with the baby boomers approaching that stage! I should know - my wife just sold her Nursing Home (deal was finalised end of October). She had a line-up of buyers (literally) without ever announcing (other than by word of mouth) that she planned on selling it.

The new owner had no prior experienec, and he doesn't need it...the place is run by a nurse and a supervisor.

We were lucky, too: We purchased a new house in June, without first selling the old one. In 5 months, we got just one offer (it's a custom designed 2000 sft Bungalow with only 2 bedrooms), and the guy didn't (couldn't) follow through. Thankfully, with part of the proceeds of the business sale we were able to pay in full for the new home (the old one was paid off in 8 years!).

I am now trying to find out if we can put the old house up for rent (until the market improves) without losing the capital gains tax exemption once we sell it. Right now, a relative lives in it, and she's paying the utilities and the taxes, so no extra burden...

Despite what some people say about real estate, I still believe it is a good investment, certainly better than some "document wealth" that can evaporate overnight...

 

Senior's residence. Interesting, that is a business we have discussed looking into. I have also been advised by several doctors that cosmetic surgery centres are very profitable. Although I am not an MD I do have the means to be a business partner and fund state of the art equipment and facility. I talked to a contact in the food industry and he is as bitter about that as I am about automotive. I even contacted Tim Hortons about buying 4 or 5 franchises (pay cash) and got the brush off which was ok because on second thought I do not want to make donuts for a living and from what I am told you would need to own at least that many to make the kind of income I expect.

Unfortunately now is not the time to invest in my favourite pastimes; cars and boats. I know first hand how to lose money on both. If anyone has a ligitimate opportunity please feel free to pm me with the details. I am not soliciting business and I am not a broker. This is strictly a personal quest for a new venture. I do not want any crazy investment schemes or investment opportunities in failing businesses. And yes, I would hope whatever my new venture is it will buy me a Ferrari!

 

This may sound silly, but opening or starting a Sandwhich Franchise is looking like a great deal right now. Many of the small lunch places are very busy; overhead is low, and profit is high. Oh yeah, and I forgot to mention that it is all ca$h money involved!

Many of these owners are the guys buying 360's and 430's right now.........seems funny that selling a lunch and dinner for $9 can make you a millionaire.

 

I think that goes for any new business.

 

Think your money is worth something and our banks are safe ?

Think again.........Garth Turner, former "Minister of National Revenue"........a long serving MP.........and a top selling financial author and speaker.........comments on the Bank of Canada's undermining of our financial system.

http://www.greaterfool.ca/2008/12/06/toxic-cash/

What ? No bailout of our banks here boy........we have the best banking system in the world......harumph !! This is just the start. We have job losses unlike those we have seen in 50 years, commodity prices as well as others are deflating rapidly, provincial and federal government revenues are shrinking, homeowners are defaulting and the mortgage walk aways are starting, bankruptcies are up 25-50% across the country........etc........etc.......

This is just one of the reasons why I have very little of my money in Canada..........