The Canadian recession is over
In classic non-speak, on July 23rd, the Bank of Canada, hinted that the Canadian recession was over as of the end of Q2 (second quarter ending June 30, 2009).
Although they might have danced around the words, a closer view of their official report projects positive economic growth for the next several quarters starting in Q3 (July 1, 2009 – September 30, 2009) 1
In the United States, the definition of a recession is markedly different than Canada’s. In the U.S. a recession is considered to be a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales2. The current U.S. recession was said to have started in December 2007 but the National Bureau of Economic Research (NBER) made the call 12 months later in December 2008.
Therefore we may have to wait considerably longer for a similar declaration that the U.S recession is over (or not).
Canadian interest rates remain at lows
Back in Canada, interest rates on savings accounts and term deposits continued to decline during the summer months. Investors are realizing that most chequing and savings accounts are earning close to 0% in interest.
The Bank of Canada disappointed many depositors by reiterating that they intend to keep interest rates at current levels until mid-2010.
A survey of TD-Canada Trust, Royal Bank, CIBC, Scotiabank and Bank of Montreal indicated that these “Big Five” banks were offering only 0.40% to 0.45% for a 1 year term deposit. The highest rate was for a 5 year fixed term of 2.1%3
Survey says!
According to a recent Franklin Templeton survey conducted by Angus Reid Strategies, Canadians remain skeptical when it comes to investing, yet are largely unaware of the recent market recovery.
Of the 1,003 adult Canadians polled4 on July 2nd and July 3rd of this year, 50% had no idea how Canada's leading stock market index performed over the past five months - a period that has seen a 31% increase in the value of the S&P/TSX Composite Index.
Only 9% of respondents were aware that the S&P/TSX index had returned more than 20 per cent in value since March. In fact, 11% of investors erroneously believed the market had fallen in value since March.
According to Don Reed, CEO of Franklin Templeton Investments Corp. "Franklin Templeton's research shows that Canadians are looking for strategies and solutions to take advantage of recovering markets," Mr. Reed said. "I encourage investors to speak to their financial advisor today."
News for AIC investors
The AIC Group of Funds have been taken over by Manulife Securities. Many of the main funds will continue to be sub-advised by AIC. All investors will receive further communication by mail regarding the merger.
Book review
We didn’t break any temperature records during our too short vacation in July but I did have the chance to catch up on some summer reading.
The title of the book I read was indeed eye catching; “Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization”.
The book was written by Jeff Rubin, former Chief Economist at CIBC World Markets. (He retired to launch his book)
Jeff is well known in the investment community some years ago for his predictions of $200 per barrel oil. Oil of course, never got to $200 but it got to $147. Perhaps Jeff’s predictions may not be so farfetched after all.
The book’s thesis is that the world is rapidly running out of oil and oil production has peaked. He goes into great detail where and why oilfields are depleting and postulates that $200 oil means that soon, distance will cost money – a whole lot of money; ergo the title of his book ...world about to get a whole lot smaller.
Shipping from China will get too expensive for instance and that North American factory production might actually become competitive once again. The removal of duties and tariffs, i.e. globalization, meant that North America and Europe have gradually become more and more uncompetitive. The solution is carbon taxes!
I won’t give away the rest of the book. The book is an interesting read that took only a few afternoons to digest. And no, you do not have to have a PhD in Economics to read it. Recommended.
Charts and more charts
Our favorite chartist – Doug Short5 describes himself as a retired first wave boomer with an interest in economics. He has an intense interest in stock market trends, moving averages and charts of all sorts.
Doug reports that the 12 month simple moving average has crossed the S&P 500 index line at the end of July 2009 which might signal a “buy” on the markets, however he cautions that since 1950 that this “signal” is accurate only about 2/3rds of the time.
http://dshort.com/charts/SP500-market-timing.html?SP500-monthly-12MA-since-1995
New web site
I have been looking for a new domain name for the past few months.
My current web site is www.glenns.ca however; I wanted to find a web site name that more closely reflects what I do for a living.
Recently I noticed the Globe and Mail newspaper has been spelling the word "advisor" as "adviser".
This gave me an idea and as luck would have it www.wealthadviser.ca was available. I grabbed it immediately. It will be the new name of my financial web site in the next month or so pending approval.
1 Bank of Canada Monetary Policy Report, July 2009, page 22
2National Bureau of Economic Research: www.nber.org
3 Rates supplied by Deposit Broker Services – August 19, 2009
4 Source: CNW Group newswire – July 14, 2009
5 Doug Short web site: www.dshort.com
