End of financial crisis is in sight, Tal says; U.S. house prices
falling at a diminishing rate
Tuesday, October 7, 2008
Investment Executive
By Megan Harman
The Canadian economy will no doubt experience a downturn going forward,
but signals indicate that the end of the financial turmoil is in sight,
CIBC World Markets senior economist Benjamin Tal said on Tuesday.
The problem at the core of the U.S. financial crisis is house prices,
Tal said in a keynote speech at CIBC World Markets' annual income fund
conference. He showed figures indicating that although house prices
continue to fall, they are falling at a diminishing rate.
"We are starting to see the end of this game," he said.
Since Canada has a much healthier housing market, prices in this country
will not fall nearly as severely as the plunge experienced south of the
border, according to Tal. He expects house prices in this country to
fall between 5% and 10%, with markets in the west experiencing the
biggest drops, since massive growth in those cities have pushed house
prices artificially high in recent years.
The Canadian economy in general will witness a slowdown of its own in
the months to come, though Tal said a healthier housing market will
shield it from some of the turmoil facing the U.S. economy.
The U.S. housing market was a major factor supporting the U.S. economy,
and it fueled what Tal calls the 'housing wealth effect'-- a phenomenon
that drives homeowners to spend more in general when they feel their
house is highly valued. The deterioration of this value has hurt
consumer spending --and the economy -- all around, Tal said.
"The consumer in the U.S. is really struggling," he said.
But Canada's energy-heavy economy won't escape a downturn either,
especially as commodity prices continue to fall. Tal pointed to figures
showing that by the first quarter of this year, Canada's GDP growth rate
had already dropped below that in the United States, despite a seemingly
better economic environment in this country.
"Clearly it's about commodity prices," Tal said. "They are falling big
time."
But it doesn't necessarily mean this is the end of the commodity cycle,
he added. The U.S. comprises just 12% of global GDP growth, whereas
Brazil, Russia, India, China and Middle East oil producing countries
together comprise almost 40% of global growth. He expects demand from
such key emerging markets to fuel a rebound in commodity prices.
"We believe this is a correction within a bull market for the commodity
market," he said.
In fact, by 2010, supply restraints on food and energy will drive up
demand and create another dramatic rise in commodity prices, fueling
widespread new concerns about inflation, Tal said.
"By 2010 or late 2009, the story will not be subprime; the story will be
inflation."
Tuesday, October 14, 2008
Canada Has Biggest Job Increase in at Least 30 Years
By Alexandre Deslongchamps
Oct. 10 (Bloomberg) -- Canada recorded its biggest one-month employment
gain in at least 30 years as voters get ready for the Oct. 14 election,
adding more than 10 times as many jobs as expected in September.
Employers added 106,900 workers, Statistics Canada said today in Ottawa,
following an August gain of 15,200 jobs. The unemployment rate remained
at 6.1 percent as people entered the labor force. Economists forecast
10,000 new jobs and a jobless rate of 6.2 percent, according to the
median of 20 estimates in Bloomberg surveys.
The report may help Conservative Party Prime Minister Stephen Harper,
who has dropped to a virtual dead heat with Liberal opposition leader
Stephane Dion in some polls after leading for most of a campaign.
Harper's effort to depict his party as the best steward of the economy
initially gave him double-digit leads in polls, before the financial
crisis worsened and hurt his popularity.
``This was still much, much better than we would have thought given
what's been happening to the North American economy, and will have
interesting election implications as well,'' Avery Shenfeld, senior
economist at CIBC World Markets Inc. in Toronto, said today in a note to
clients.
A net 40,000 jobs were added in the health-care and social- assistance
industry in September, reversing drops in the previous three months.
Some 19,800 jobs were created in business services, such as maintenance,
and 16,300 positions in transportation and warehousing.
Manufacturers added 19,700 workers, or one percent of their workforce,
erasing their loss for the year. Payrolls are down by 42,600 from a year
earlier.
Part-Time Jobs
Canada added a net 96,600 part-time jobs and 10,300 full- time jobs, the
statistics agency said. The agency says it started using the current
methodology in 1976, making it impossible to compare September's gain to
earlier records.
Support for Harper's party fell to 33 percent on Oct. 8, the lowest
since the start of the campaign, according to Nanos Research, an
Ottawa-based pollster. The Liberals are within 4 percentage points at 29
percent, after trailing by 15 points last month. The margin of error is
2.8 percentage points.
Average hourly wages rose 4.6 percent in September from a year earlier,
trailing an 11-year high of 4.9 percent reached in February. Pay raises
are still outpacing inflation, with the consumer price index advancing
3.5 percent in August from a year earlier, the agency said.
Employers have added 276,800 workers since September 2007, a 1.6 percent
increase, Statistics Canada said.
The Bank of Canada said the economy will grow 1 percent this year, the
slowest since 1992, hobbled by an export slump. The central bank, which
unexpectedly cut its benchmark lending rate by half a percentage point
to 2.5 percent on Oct. 8, has a scheduled rate decision on Oct. 21 and
will revise its economic outlook on Oct. 23.
Oct. 10 (Bloomberg) -- Canada recorded its biggest one-month employment
gain in at least 30 years as voters get ready for the Oct. 14 election,
adding more than 10 times as many jobs as expected in September.
Employers added 106,900 workers, Statistics Canada said today in Ottawa,
following an August gain of 15,200 jobs. The unemployment rate remained
at 6.1 percent as people entered the labor force. Economists forecast
10,000 new jobs and a jobless rate of 6.2 percent, according to the
median of 20 estimates in Bloomberg surveys.
The report may help Conservative Party Prime Minister Stephen Harper,
who has dropped to a virtual dead heat with Liberal opposition leader
Stephane Dion in some polls after leading for most of a campaign.
Harper's effort to depict his party as the best steward of the economy
initially gave him double-digit leads in polls, before the financial
crisis worsened and hurt his popularity.
``This was still much, much better than we would have thought given
what's been happening to the North American economy, and will have
interesting election implications as well,'' Avery Shenfeld, senior
economist at CIBC World Markets Inc. in Toronto, said today in a note to
clients.
A net 40,000 jobs were added in the health-care and social- assistance
industry in September, reversing drops in the previous three months.
Some 19,800 jobs were created in business services, such as maintenance,
and 16,300 positions in transportation and warehousing.
Manufacturers added 19,700 workers, or one percent of their workforce,
erasing their loss for the year. Payrolls are down by 42,600 from a year
earlier.
Part-Time Jobs
Canada added a net 96,600 part-time jobs and 10,300 full- time jobs, the
statistics agency said. The agency says it started using the current
methodology in 1976, making it impossible to compare September's gain to
earlier records.
Support for Harper's party fell to 33 percent on Oct. 8, the lowest
since the start of the campaign, according to Nanos Research, an
Ottawa-based pollster. The Liberals are within 4 percentage points at 29
percent, after trailing by 15 points last month. The margin of error is
2.8 percentage points.
Average hourly wages rose 4.6 percent in September from a year earlier,
trailing an 11-year high of 4.9 percent reached in February. Pay raises
are still outpacing inflation, with the consumer price index advancing
3.5 percent in August from a year earlier, the agency said.
Employers have added 276,800 workers since September 2007, a 1.6 percent
increase, Statistics Canada said.
The Bank of Canada said the economy will grow 1 percent this year, the
slowest since 1992, hobbled by an export slump. The central bank, which
unexpectedly cut its benchmark lending rate by half a percentage point
to 2.5 percent on Oct. 8, has a scheduled rate decision on Oct. 21 and
will revise its economic outlook on Oct. 23.
Rubin is still optimistic for a dramatic 30% turnaround in 2009.
Rubin still optimistic about a turnaround next year; Oil Will Rebound
Eric Lam
Financial Post
10/10/2008
National Post
National
FP6
(c) 2008 National Post . All Rights Reserved.
Despite predicting the benchmark TSX composite index to close out 2008
at 9,500 points, CIBC World Market's Jeff Rubin is still optimistic for
a dramatic 30% turnaround in 2009.
Expecting a big rebound in oil to lead a surge in commodities next year,
CIBC's chief economist projects a 2009 year-end total of 12,000 points
for the TSX.
"If US$90 [per barrel] is the price of oil during what is being
perceived as a deep global recession, what is the price of oil in the
recovery?" he said in a new strategy report released yesterday. "We
continue to believe that oil prices will average US$150/bbl over the
second half of next year on the back of even a modest recovery in global
economic growth."
But in the meantime, massive sell-offs in North American markets as
investors drop assets "tied to a strong economy" will take a big bite
out of the senior index in 2008.
This suggests a very real possibility the TSX will end the year at less
than 10,000 points after closing below the mark for the first time since
July, 2005 on Tuesday.
As well, repeated 800-point drops in the last few weeks have created an
atmosphere of fear for Canadian investors.
"That de-leveraging story is likely to hold sway for the balance of the
year," he said.
Mr. Rubin argues that this knee-jerk reaction from investors is actually
making a manageable problem worse, even if the most recent economic
figures for the United States and other members of the Organization for
Economic Cooperation and Development (OECD) show a firm recession.
"The recession is neither deep enough nor global enough to warrant the
massive haircut in energy and other resource stock valuations that have
taken place over the last several months," he said.
"While there is little to warrant near-term optimism, investors at the
same time should not lose sight of the fact that many of yesterday's
fundamentals have not changed."
Fuelled by commodities, worldwide economic growth will not slow as much
as nervous investors are expecting.
Mr. Rubin predicts the growth rate will not dip to less than 3.5% in the
rest of 2008 or all of 2009. This rate is a step down from recent years,
but still "a far cry" from figures historically associated with bear
markets, he said.
As for the roots of the U. S. subprime mortgage fiasco, Mr. Rubin
believes there is a light at the end of the tunnel for housing prices.
Within the next six months, he sees a "trough" in U. S. housing prices
and a price decline of an additional 5% at most.
Mr. Rubin's pessimistic readjustment of his 2008 yearend numbers for the
TSX is the latest in a series of downward projections he has made since
boldly predicting a 16,000-point close in December, 2007.
"Our year-end target for 2008, of 16,200 for the composite index,
implies a year of double-digit gains, including the dividend," he said
at the time.
Mr. Rubin also said he did not expect the fallout from the U. S.
subprime lending crisis to lead to a recession, or that it would last as
long as it did.
His most recent predictions, made in September, pegged the TSX to close
at 13,000 points by the end of 2008 and 14,000 at the same time in 2009.
Eric Lam
Financial Post
10/10/2008
National Post
National
FP6
(c) 2008 National Post . All Rights Reserved.
Despite predicting the benchmark TSX composite index to close out 2008
at 9,500 points, CIBC World Market's Jeff Rubin is still optimistic for
a dramatic 30% turnaround in 2009.
Expecting a big rebound in oil to lead a surge in commodities next year,
CIBC's chief economist projects a 2009 year-end total of 12,000 points
for the TSX.
"If US$90 [per barrel] is the price of oil during what is being
perceived as a deep global recession, what is the price of oil in the
recovery?" he said in a new strategy report released yesterday. "We
continue to believe that oil prices will average US$150/bbl over the
second half of next year on the back of even a modest recovery in global
economic growth."
But in the meantime, massive sell-offs in North American markets as
investors drop assets "tied to a strong economy" will take a big bite
out of the senior index in 2008.
This suggests a very real possibility the TSX will end the year at less
than 10,000 points after closing below the mark for the first time since
July, 2005 on Tuesday.
As well, repeated 800-point drops in the last few weeks have created an
atmosphere of fear for Canadian investors.
"That de-leveraging story is likely to hold sway for the balance of the
year," he said.
Mr. Rubin argues that this knee-jerk reaction from investors is actually
making a manageable problem worse, even if the most recent economic
figures for the United States and other members of the Organization for
Economic Cooperation and Development (OECD) show a firm recession.
"The recession is neither deep enough nor global enough to warrant the
massive haircut in energy and other resource stock valuations that have
taken place over the last several months," he said.
"While there is little to warrant near-term optimism, investors at the
same time should not lose sight of the fact that many of yesterday's
fundamentals have not changed."
Fuelled by commodities, worldwide economic growth will not slow as much
as nervous investors are expecting.
Mr. Rubin predicts the growth rate will not dip to less than 3.5% in the
rest of 2008 or all of 2009. This rate is a step down from recent years,
but still "a far cry" from figures historically associated with bear
markets, he said.
As for the roots of the U. S. subprime mortgage fiasco, Mr. Rubin
believes there is a light at the end of the tunnel for housing prices.
Within the next six months, he sees a "trough" in U. S. housing prices
and a price decline of an additional 5% at most.
Mr. Rubin's pessimistic readjustment of his 2008 yearend numbers for the
TSX is the latest in a series of downward projections he has made since
boldly predicting a 16,000-point close in December, 2007.
"Our year-end target for 2008, of 16,200 for the composite index,
implies a year of double-digit gains, including the dividend," he said
at the time.
Mr. Rubin also said he did not expect the fallout from the U. S.
subprime lending crisis to lead to a recession, or that it would last as
long as it did.
His most recent predictions, made in September, pegged the TSX to close
at 13,000 points by the end of 2008 and 14,000 at the same time in 2009.
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