It’s OIL!  Let’s be nostalgic for a moment and think back to the days when every headline screamed “Mortgages are responsible for all things that could go wrong”.  Words such as Bust, Household Debt, Hard Landing, and a multitude of other adjectives that would lead you believe that the four horseman of the apocalypse were on the way .  If I’m not mistaken, I think I read somewhere that the former mayor of Toronto was driven to smoke crack cocaine because he had a mortgage.  Okay, I’m making that up, but I suspect former mayor may be annoyed because that excuse didn’t dawn on him.  In no way am I suggesting that today the word “mortgage” is out of the woods, it’s just that “mortgage” has company now while traipsing through the evil forest.

Get ready; it’s going to be all oil, all the time. Oil, like mortgages, has tentacles that reach far beyond our borders. Mortgages nearly brought down the global economy, see sub-prime crisis of 2008, but the new partner in crime can have devastating consequences as well. OPEC, meaning Saudi Arabia, decided not to cut oil productions. The net result is that there’s a glut of oil today.  Ah, simple economics – supply and demand. Too much supply means a drop in prices. We’ve all seen it at the pumps, and given that Saudi’s said they’re comfortable at $60 a barrel, don’t be surprised to see a liter of oil sell for less than a dollar. I don’t remember the last time I saw a liter of gas for less than a buck. Gosh, it must be 15 or 20 pounds ago. 

The plight of oil today is so juicy, and would make for a good Robert Ludlum novel. There’s speculation that the Saudi’s are targeting the booming U.S. oil market. It’s like they’re saying, “you wanna play?…frack this”. Then there’s the other geopolitical conspiracy theory that the Saudi’s and the U.S. are in cahoots, and they’ve aimed their laser at Russia, in particular Russia’s lovable teddy bear, Putin. Hmm, how are things going in Russia today? Let’s see, the Ruble has plummeted, their foreign cash reserves are being depleted, inflation is on the rise, and they’re on the verge of deep recession. Putin’s wondering eye, neighboring countries to annex, may have cost Russia dearly. 

The political gamesmanship aside, we’re going to feel this at home. The obvious being that projects in the oil sands may be delayed or halted altogether. That impacts jobs. Federal Tories will have their hands full with problems, due to the timing of the oil prices plummeting. We’re not far away from an election, which means the Tories were banking on revenues from oil to build as bigger surplus when they drop their next budget. Wonder if the B.C. Government is regretting not cutting a deal to run pipeline through its province. They weren’t morally opposed to the idea; they just wanted more money by way of fees.  I’m reminded of what a very successful entrepreneur once said to me, “pigs get fat…hogs get slaughtered”. A lesson for all.

Interesting times ahead of us.  The Bank of Canada Governor, Poloz, used stronger than normal language regarding his concern at the amount of household debt this week.  So mortgages will continue to get its fair share of air time. But for those of us in the mortgage industry, we should whisper a thank you to the gas pump the next time will fill up. It’s nice not to be alone. Just thought of something, If you’re looking for a stocking stuffer this Christmas, why not a barrel of oil?  Nah, wait till Boxing Day, it will be a lot cheaper.

Until next time

Cheers

My internment continues, and I’m worried about the psychological impact.  Desperate times call for desperate measures,  I reached out to Amnesty International and asked them to take up my cause.  They hung-up on me! That’s…just…rude.  In my desperation I even contacted Greenpeace, and to my horror they refused to intercede on my behalf.  My plea “look, I get I’m not as cute as a baby seal, but maybe it’s time for guys to start thinking outside the box.  Who knows, it might lead to more donations,” fell on deaf ears.  Is mankind devoid of any compassion? Rhetorical question, based on my experience I think we all know the answer to that one.

I’m thinking of reaching out to all my brothers and sisters in the mortgage industry to support me in my time of need.  As a sign of solidarity, which would lift my spirits immeasurably, it would be nice if everyone wore a yellow ribbon until I was released.  Of course you wouldn’t have to ware it after 4:30pm because that’s when I get to go home.  Frankly, waring a yellow ribbon while I’m at home tonight watching the Leafs versus Penguins or Raptors versus Hawks, on my 65′ flat screen TV, would be, well, silly.

A gentlemen from the jury pool approached me this morning to introduce himself.  For the purposes of this blog I’ll call him George, because that’s his name.  A mutual acquaintance forwarded my Jury Pool – Day 1 blog to him, assuming he was in in the same jury poll, and suggested that he looks out for me.  So he did.  We laughed, we cried and we both stared out the window, green with envy at all those who are free to go about their day.  I said to George, “I will never take my freedom for granted again”. He said, “Boris, we brake for lunch in 45 minutes”.  George, is my rock.

11:28am – Do my ears deceive me?  Someone from the courts is making an announcement to the entire jury pool. He just said we’re free to go for the day.  But wait, there’s more. This guy is milking it, wouldn’t be surprised if he said, “I’m here till next Tuesday, try the veal”.  Praise Jesus, he just said our services are no longer required, period.  We don’t have to come back, and we won’t be called to serve for at least three years.  Of course we have to hang on to our summons in the event the government screws up – what are the chances of that happening? – and sends us another summons to appear before the three years are up.  The original summons will act as my get out of jail card.  My jury journey has come end.

A heart felt thank you to all the staff at MERIX. You were there for me in my darkest hours.  I will never forget the marching band that you arranged to have greet me at the foot of the court house stairs, and escort me on the long 750 meter walk back to my office. I Never Stopped Believing -

Until next time,

Cheers.

The shackles of civic duty is becoming more difficult to bare with each passing moment.  I’m alone with my thoughts, actually there’s another 150 people in the room but I don’t care about them because all they do is get in the way of a good story.  Back to me, oh the inhumanity of it all.  Being forced to sit around, do nothing, and just wait. I want my freedom, and I just made a decision to go on a hunger strike until I’m freed. I will only eat if If one of two things happen, and in no particular order.  Firstly, I am dismissed or chosen to be on a jury, which will then permit me to leave so that I can go back to making the world a better place.  Two, we break for lunch.  

12:08pm..Hunger Strike Ends.  My compliments to the chef at Burger King.  The Double Whopper Combo was magnificent.  The recommended beverage pairing? Diet Coke.  Simply superb.  I have been working on my girlish figure some six months now so I have to be mindful of the calorie intake.

A dear sweet elderly lady in jury pool has become the unofficial liaison between the court and the entire jury pool. Her updates are frequent and poignant. She notified us that none of the trials on the court docket this morning required a jury.  So we sit and wait, and then we wait some more.

3:45pm, new update from the unofficial liaison.  She informed us we could be going home shortly. Less than five minutes later the court announced we could leave for the day, but must return tomorrow by no later than 9:30am. Damn, she’s really plugged in.

Until next time,
Cheers.

In theory I think everyone agrees that jury duty is a time honoured civic responsibility. Jury duty accords citizens to have direct involvement in the justice system. Being a juror is an enormous responsibility, and if selected to serve you are legally bound to do so. There’s no excuse for not serving, unless of course you receive a summons requiring that you to take part, which may result in you actually sitting on a jury. Well, that’s exactly what happened to me, and my initial thought was probably not unlike most people’s, “how do I get out of this?”

Once the initial thought passes, but it never really completely goes away, you start to deal with practical matters rather than theoretical. Example, the timing. I was summoned to appear on Monday, November 24th. Not optimal given that it was day one of the CAAMP Mortgage Forum in Montreal. I was in Montreal for the weekend festivities, but come Monday morning I was on a flight from Montreal at 5:30am, and in the courthouse in Toronto by 8:45am. I arrived tired, but what I soon found out made me cranky, really cranky.

Jury Pool – Day 1

There I was in a room with 150 other perspective jurors. Before long, a gentleman working for the courts, enlightened us on procedures and what to expect. He asked us if we read the entire summons? Of course I didn’t read the entire summons. Upon receiving the summons I was aggravated, and I just looked for the date that I had to appear. Well, if I had read the entire summons I would have learned that I have a legal obligation to be part of the jury pool for five days. Unless I was chosen or excused, I could be there from Monday through Friday, 9:30am to 4:30pm, with no per-diem! Once the shock wore off there was only one thing to do. Search google for how to get out of jury duty. I came across an interesting article in the Huffington Post, by Peter Worthington, co-founder of the Toronto Sun. If you would like read the entire article here’s the link. To capsulize, he told the Sheriffs Office that he knew serial killers, and stayed in touch with them for years after he reported and covered their crimes. He was summarily dismissed from the jury pool. Okay, here’s my problem, I don’t know any serial killers and I have never corresponded with any. I know what you’re thinking, that’s odd. So I’m going to have to be creative. If the Judge asks me if there’s any reason I couldn’t sit on a Jury, I’m thinking of responding as follows; “well your honour, eight out of the ten voices in my head say don’t shoot…I’m sure we’re going to be okay.” Or if he asks me if I could convict someone knowing they could spend the remainder of their life in prison, my answer might be; “hell yeah. As matter of fact your honour if you want to be bring back capital punishment I say getter done. You kill someone in Toronto, I say we kill them right back”. Just spit-balling.

Finally around 3:30pm we were notified that we could go home. Reminded that we all to be back the following day, by no lather than 9:30am. So, the experience continues.

Until next time,

Cheers.

Just lifted off for a quick trip to Fort McMurray, Alberta.  What takes me to Fort McMurray? Well, like everyone else on this plane, opportunity.  My fellow passengers are all predominately male, big lads, and there’s no doubt there off to do some heavy work.  I suspect when the beverage cart comes out no one will be ordering brie with a white wine spritzer.  I was just thinking the last time I was in Fort McMurray was, well, never.  I may have visited some 15 years ago, but it’s all blur now for me so I’ll go with never.  My knowledge of Fort McMurray is fairly limited but here’s what I know; oil and natural gas has created a boom town.  Salaries are well above average, and the work is hard, and home prices would be more suited in the Vancouver market place.  I was also surprised to find out that Air Canada has two direct flights from Toronto to Fort McMurray, daily.  That’s not to accommodate investment bankers but rather the men and women who do the real work, and a good number of them come from Eastern Canada.  It’s a long commute to work.

The natural resource sector makes a significant contribution to our economy, and not unlike the real estate industry in Canada, disruptions would adversely affect our economic growth. Bank of Canada Governor Stephen Poloz stated that plunging prices for crude oil could reduce our economic growth by a quarter percent.   Anything below $90 a barrel could cause job loss in the oil sector, and ultimately impact the real estate market.  So clearly the oil and gas sector is important to all of us.  We will always mumble and grumble when filling up.  Not unlike mortgages.  Everyone hates debt, but some debt helps to create personal wealth and is a job creator.

I really wish I understood what causes oil prices to fluctuate. I get why interests rates go up and down.  But the price of oil seems to be a market on to its own.  Setting aside the oil industries P.R. explanation of why prices are where they are, what’s the real reason?  The price for a barrel of oil today has hit a two and half year low.  Why?  Has the insatiable urge for crude by emerging markets waned? Don’t recall reading anywhere that China and India have said, “we got enough oil…we’re good”.  Have we changed our personal habits to such an extent that it would cause the price of oil to fall?  Has fracking in North America dramatically affected the price of oil in such a short period of time?  Everything I read is that there’s a glut of oil on the market today, supply outpaces demand, and logic would dictate that if oil industry slowed down the supply eventually the price would go up.  But the supply has not slowed down, so the question is why?

Today’s Oil Supply

I came across an interesting theory, and if it’s true, today’s oil supply has nothing to do with economics but rather geopolitical reasons. In short, here’s the theory.  Russia cast its wondering eye to the Ukraine, and annexed a portion of another sovereign nations land.  NATO wasn’t prepared come to Ukraine’s defense but steps had to be taken to ensure Putin thinks twice about expanding his reach elsewhere.  It’s been well documented that the price of oil helps to sustain Russia. Close to 50% of Russia’s budget depends on oil being priced at $100 a barrel.   So how does the west punish Russia for it’s illegal occupation of the Ukraine? You glut the market with oil.  Does the U.S. still have enough influence over oil producing countries to manipulate the market?  Who knows for sure – but what is known is it happened once before.  The fall of communism was credited to Ronald Reagan, the Pope, Lech Walesa and Gorbachev.  All key players, but was not widely reported was that the U.S. convinced Saudi Arabia to glut the market with oil at that time. This played a key role in almost bankrupting Russia, and forcing them to say “we surrender, communism nyet“.  What did Saudi Arabia get in return? A promise from the U.S. that they would always have their back, and they would never have reason to fear their neighbors.   

What does this all mean for us? The U.S. and Canadian Central Banks continue to say exactly what they’ve been saying for what seems like forever.  Overnight lending rate will not increase until data unequivocally supports full economic recovery.  Key data with the price of oil, and its impact to the Canadian economy. Same old-same old. Interest rates are not going up in the foreseeable future. Oh, and one more thing…we’re all pawns in a geopolitical game of chess.

Until next time

Cheers.