One of the byproducts of getting older is perspective.  Gone are the days of being emotionally invested in a professional sports franchise.  What happens on the ice, the court, the diamond or football field will not alter my life one iota. Irrespective of what happens during a game the same responsibilities await me the next morning.  I don’t get worked up over million dollar athletes who get to extend their childhoods by playing a game for a living.  But I must confess that the historical meltdown by the Toronto Maple Leafs Monday night brought back memories for me.  It’s been a long time since I yelled at the TV, wondering if my flat screen TV was going to be functional by the end of the game.

Alas, sanity prevailed.  As soon as the game came to an end I went back to being my dispassionate self as it relates to the local hockey “heroes”.  I’ve long since stopped being an apologist for the Leafs.  Don’t get me wrong, I go to games but I go more so for the experience.  So now when people, usually those who reside in other parts of the country say to me, “Leaf suck”, my answer is, “agreed”. That usually stops the conversation. Now, there was no stopping the conversation about the Leafs colossal collapse Monday night.  Leaf nation is stunned,  numb and frankly I worry about some being suicidal.   Everyone in Toronto is talking about the Leafs blowing a three goal lead with only ten minutes to play in the seventh and deciding game between the Toronto Maple Leafs and Boston Bruins.  The analysis by the sports media is, and will continue to be, unrelenting.  This is way too much fun for them.  One radio station found a creative way torture Leafs fan by interviewing a statistician who calculated the probability of the Leafs winning that game from a historical context.  Kid you not, the stat’s geek looked at every game seven played in the NHL since 1918 to determine the probability of the Leafs winning the game.  For example, when the Leafs made it 3-1, based on history the probability of the Leafs winning was 95%, when the score was 4-1 it was 98%.  I laughed out loud in the car when I heard this.  This exercise was nothing more than plunging the knife a little deeper.  Poor Leaf fans, maybe the team should change the saying The Passion That Unites Us All to The Therapy That Unites Us All.

The only impressive thing about the game was the press conference with Leaf coach Randy Carlyle following the game. To have to face the media and answer questions why he and his team failed so spectacularly cannot be easy.  Like in business a leader’s character is measured by how they deal with adversity.  A hockey coach is the leader of the team.  Most teams take on the coach’s personality, and if that holds true for the Leafs it will serve the players well.  Carlyle made no excuses.  Someone in the media asked if the officiating worked against his team and he refused to be drawn into that debate, he simply said his team ran out of gas.  He was calm, leveled headed and waited until there were no more questions to be answered.  I couldn’t help but admire the dignity and accountability he exhibited under the most trying of circumstances.

So now that the Leafs have gone down in the hockey chocking history, I’ll have to change my TV viewing habits.  Maybe I should start watching Dr. Phil.  I suspect some Leaf fans might be making an appearance on the show.

Until next time

Cheers

“I wonder how you would feel if you received a call from the government saying we would rather you not buy down interest rates.”

Ever run across something that doesn’t sit right.  That nagging doubt that you can’t put your finger on, and it just hangs out there. I experienced that a few days ago after reading an article in the Globe.  I decided to take few days and give the article one more glance to see if my original reaction would still be the same.  Yup, nothing changed.  The article in question appeared in the Globe on Wednesday, March, 20th.  The headline read, “Flaherty Pushes up Lending Rates – Finance Minister called lenders to express displeasure at mortgage competition, raising bankers’ hackles“.

Few will or should care about a bankers disposition, but I think we should all care when big brother over reaches.  I do not how else I can categorize the direct influence over pricing by the government in the private sector. As reported in the Globe, Minister Flaherty contacted Bank of Montreal to chastise them for lowering rates in an attempt to buy market share.  A call also went out to Manulife, but the scolding was delivered by one of the Minister’s underlings.  It’s easy to say who cares if faceless corporations get their wrists slapped.  But any government encroachment of pricing in the private sector should give us all pause.  Imagine you are a mortgage broker who has embarked on a strategy of rate buy-downs.  The merit of such a strategy is irrelevant, what is relevant is that you have the right to earn or lose money based on your competency or incompetency.  We live and work in a free market economy, and the state plays an important role; pricing of products should never be one of them.  I wonder how you would feel if you received a call from the government saying we would rather you not buy down interest rates.  I get it – that would never happen based on the actions of a handful of brokers. But entrepreneurs of all sizes share a common principals, and for it to be different based on the size of the enterprise alone undermines the fundamentals of competition.

Another part of the story I find troublesome is why did this become public?  I suspect the Minister of Finance would be put directly through to the CEO of both Bank of Montreal and Manulife.  For appearance sake alone this arm twisting should have been done in private, and not worn like a badge of honour in public.  The general public already believes that the working relationship between the government and banks is too cozy; these stories don’t help to dispel that notion.

Until next time,

Cheers.

Payment Shock – It’s a term we’re familiar with in the mortgage industry, and it’s in the news again.  But hallelujah, this time it has nothing to do with the mortgage industry.   Nope, payment or bill shock making the news today is about the billing practices of the duopoly which controls all things wireless in Canada.  Here’s the definition of a Duopoly – “situation in which two companies own all or nearly all of the market for a given product or service. A duopoly is the most basic form of oligopoly, a market dominated by a small number of companies.  A duopoly can have the same impact on the market as a monopoly if the two players collude on prices or output. Collusion results in consumers paying higher prices than they would in a truly competitive market”.  

You can decide if the definition fits as it relates to the wireless providers in Canada.  As you’re mulling it over keep this in mind, the OECD (Organization for Economic Co-operation and Development) conducted a survey which concluded that the average Canadian cellphone user is paying among the highest bills in the developed world.  To be exact, the OECD determined that Canada has the third highest wireless rates in the developed world. 

Not surprising neither Rogers nor TELUS agree with the OECD findings; but regulators are causing both companies some indigestion.  Both Rogers and TELUS are regulated by the CRTC (Canadian Radio-Television and Telecommunication Commission) and a new wireless code is being drafted by the CRTC.  The CRTC would like the service providers to automatically suspend certain services once a customer is charged an additional $50 above and beyond their normal monthly plan.  At first blush you may agree with the CRTC position, but keep mind for most of us in the mortgage industry we would exceed the $50 overage by the first Tuesday of every month.  Imagine if you had to call your service providers every time the meter went past $50?  If you think wait times for service is less than satisfactory today, imagine what it would be like if this was implemented?  Rogers and TELUS were summoned to the hill to provide their thoughts and views on the proposed draft.  Suffice to say that neither Rogers nor TELUS said, “we agree with you CRTC, and it’s about damn time you did something about the high cost of wireless fees in Canada.”  They said what you would expect them to say, and why wouldn’t they?  They’re protecting their own turf.   Setting aside the self-interest of the wireless providers in Canada,  the real issue is when regulators want to do right by consumers but the practical application of said efforts may result in even more consumer dissatisfaction.  Regulatory changes or new “codes” being enacted and implemented has a domino effect.  Everyone in the mortgage industry already knows that.

On one hand you can applaud the CRTC for trying to do right by consumers.  Who wouldn’t want to pay less to their wireless provider?  On the other the CRTC’s position is a little bit of a head scratcher as it relates to practicality.  As for the CRTC this might be a case of not seeing the forest from trees.  Instead of expending all this time, energy, money and brain cells on way to protect consumers from price shock, maybe the CRTC is missing the obvious.  Maybe the CRTC should make it easier for new entrants into the Canadian wireless market.  Competition serves consumers well.  Why shouldn’t that apply to the wireless industry in Canada?

Until next time,

Cheers.

Much has been written and said about mortgage debt and affordability recently.  No point in belaboring what has and has not been done to address this issue. I’m sure there will be plenty of that in the future, as well ample hang ringing about the so-called condo bubble, specifically in Vancouver and Toronto.

Manhattan Living...

The so-called “condo crisis” (oh, how the mere thought of it makes the press salivate) in Vancouver and Toronto came to mind after I read an article in the Wall Street Journal. The article focused on the cost of condos in Manhattan. The current median price of a condo in Manhattan is the lowest it’s has been since 2004. Could Manhattan’s experience be a harbinger of what’s to come for Vancouver and Toronto?  If it is then maybe the 36 people in Toronto who don’t own a condo already should go and get one.

According to the Canadian Real Estate Association, the average home price for the month of December in Toronto was $501,361, and in Vancouver it was $730, 912.  Remember this includes dirt to go along with the walls.  In Manhattan the average condo price in 2012 was $835,000.  However, adjusted for inflation it was the lowest since 2004.  Can you imagine the headlines if Toronto was similar to Manhattan’s reality?  The median price in Manhattan for a 2 bedroom condo was $1.26 million, 3 bedroom was $2.37 million and a 4 bedroom was $4.75 million. Adjusted for inflation these are the lowest prices since 2004. According to the Wall Street Journal article there’s a disconnect between buyers and investment indicators.  Buyers are saying there’s not enough affordable housing and yet when you take inflation into account prices have actually declined.  So is it a good time to buy a condo in Manhattan?  I’m not familiar with the Manhattan’s housing cycle so I’m not sure, but what I can say is this: at an average price of $2.37 million for a 3 bedroom condo in Manhattan, I think Toronto is a good buy.

Some might be aghast that I would compare Manhattan to Toronto.  Well, Toronto is the 4th largest market between the US and Canada.  Therefore, I think it’s valid to look at values on a comparative basis.  That’s exactly what foreign investors did when buying property in Vancouver and Toronto. As absurd as we think our prices may be, the investor from Hong Kong looks at our market and thinks of great value.  As we all know value is driven in large part by consumer perception.  The perception of Vancouver and Toronto is that consumers buying condos are doing so at their own peril.  Yet in Manhattan, home buyers lament the high cost and scarcity, all the while being told now is a good time to buy.  It’s interesting how some things never change.  Here’s a headline that helped shape New Yorkers perception of their condo market, “Great Scarcity in Apartments…Never before has there been such scarcity of apartments on Manhattan Island.”  That headline came from the New York Times, in 1916!

Until Next Time

Cheers

On Monday, February 4, a little piece of Canadiana is no more.  Yesterday was the official date where banks and businesses would no longer receive  pennies.  Yes, that useless little copper coloured currency has gone the way of the Canadian one a two dollar bills – out of circulation.  The difference being that the one and two dollar bills were replaced by coins. Why? Because they were actually worth something.  The penny?  Not so much.

I like money, who doesn’t? But for most people the penny has become a nuisance. For most people it’s been like this for a long time.  How many times have you reached into your pocket to retrieve change and penny drops on the ground.  You look down at and say to yourself, “it’s not worth the effort of bending over and picking it up”. So you just leave it and walk away.  You do this not because you think you’re a baller.  You leave it be because it’s not worth the effort of bending all the way down to get it.  What would total strangers think of you if you we’re to ?  Not going to allow anyone to think poorly of you over a penny.  Nope, that useless, bacteria infested coin just isn’t worth a simple knee bend.

I suspect right now you’re thinking, “Soon the penny will be history, and I wish someone would provide me with some useless information about the penny which might come handy if I ever play Trivial Pursuit again”. Lucky you!  The penny was put into circulation in 1858.  The high cost of copper back in 1920 forced the government to make the penny smaller in size.   The Queens likeness first appeared on the penny in 1965. Shall I go on? No, eh?  What if I was to say, “A penny for your thoughts?”  Just dawned on me that “a penny for your thoughts” really means that you don’t put any kind of value to what the other person is thinking.  Finally! There’s some value in a penny.

 Until next time,

 Cheers.

For some time now, finding positive news about the mortgage industry and the real estate market in general required a Sherpa Guide and a donkey.  “I think I just heard something positive about mortgages…  OOPS, my bad, it’s just Big Foot.”

It hasn’t been easy but over the past couple of weeks there’s been news which leads me to believe the Four Horsemen of the Apocalypse may not be on the way.

CAAMP’s Annual State of the Residential Mortgage Market in Canada (love those short titles) was released just prior to Mortgage Forum 2012 in Vancouver.  It’s a must read for everyone in the industry.  All the major media outlets have picked up the report and there’s been a significant amount of coverage based on the report.  One aspect of the report that bodes well for the industry, and should give regulators some degree of comfort, is how responsible Canadian borrowers are.  I found it striking that 32% of borrowers either increased their monthly payments or made principal reductions over the past 12 months.  It is estimated that $3.5 billion in additional monthly payments were made, and a further $20 billion in lump sum payments.  Yes, consumers are taking on more debt but they’re looking at paying off their debt sooner.  When stories are written about consumer debt levels, a word or two should be dedicated to how responsible Canadians are in attempting to eliminate their debt.

Here’s another indication that consumers maybe be smarter than the press give them credit for.  Over the past 12 months there’s been a high level of ARM conversions to 5 year fixed terms, and the product of choice today is 5 year fixed. Maybe, just maybe consumers are smart enough to know that now is not the time to gamble.  They’re looking at five year terms and saying the rate is competitive and it’s worth the peace of mind for the next five years.

As far as I’m concerned, the only stat that matters to our industry is the unemployment rate.  Everything else, where prime is going etc., is secondary.  Our industry, our entire economy will rise and fall with employment numbers.  It’s simple, if borrowers are working and they have access to cheap money, like they do now and will have for the next few years, there’s less reason to dump a property.  A home owner may not get the price they’re looking for but because the home is affordable there is less reason to discount the price.

If a home owner loses their job a completely different set of circumstances arise.  That’s why there’s reason for optimism over the most recent employment numbers.  According to Stat’s Canada, 59 thousand new jobs were created in November. On a year over year basis 294 thousand new jobs have been created, and hours worked have also increased.  These numbers are critical, not only to our industry but to our economy. Anytime we see a reduction in the employment rate it’s a reason for a high five or fist bump.  So turn around and give your work mate a fist bump because our unemployment rate has been reduced to 7.2%.

There’s more good news that will be readily available when the full Maritz survey becomes public in January, another must read.  But even if we only take into account the data available today there’s reason for optimism, and lessons to be learned.  For instance, consumers do not require regulators to legislate responsibility. Consumers are miles ahead on that one.

Until next time,

Cheers.

Even if it took an American movie production company, as well as actor/producer Ben Affleck, to remind us of Ken Taylor’s heroism then so be it. For those of you under the age of 35, Ken Taylor was a true hero. He never played in the NHL nor was a hip-hop artist. Ken Taylor was the Canadian Ambassador to Iran, and I was reminded of his bravery and courage while watching the movie Argo over the weekend. The movie is about six American diplomats who escaped from Iran during the American Embassy hostage crisis in 1979. For those of you old enough to remember the eyes of the world were focused on the crisis and everyone was stunned at the audacity that a super power embassy would be invaded. At the beginning of the crisis Canadian’s, along with the rest of the world, watched the events unfold, but the rest of the world would learn about a Canadian’s bravery and what it means to be an ally.

The Ken Taylor story is an extraordinary one. The movie Argo gives only glimpses of the role Ken Taylor played during the whole ordeal. It’s an American movie; therefore, the Americans have to be the heroes of the movie. No doubt that the CIA came up with an ingenious plot to get the six Americans diplomats out of Iran, and the story behind it was declassified in 1997, by the then President Bill Clinton. In the event you’re not familiar with the story, I won’t give it away, but it is right up there with anything that Clancy, Flynn or Ludlum could come up when writing a novel. Maybe not Ludlum because he’s been dead since 2001, and all his books released after 2001 have been written by ghost writers, most people don’t know that. I digress, no doubt the movie embellished certain aspects of the story for theatrical purposes but that’s Hollywood. Affleck’s movie had no choice but to highlight Ken Taylor and Canada’s willingness to support an ally. If the Iranian authorities had found out that Ken Taylor had supported the CIA efforts, the consequences would have been dire and a good chance those six American Diplomats would be dead today.

The only annoying part of the movie was right at the end of the credits. There was a voice over from Jimmy Carter, the President during the hostage crisis. He stated he really should get the credit but the real story could not be told so the Canadians had to get the credit. I understand Carter wanting to shape the narrative as it relates to his Presidency. His Presidency can be best described as an abject failure, and anything he can say to change historical perceptions works to his benefit. The real political hero here was former Canadian Prime Minister, Joe Clark. I had the pleasure of speaking to the former Prime Minister prior to last year’s CAAMP Mortgage Forum; what a humble and respectful man he his. Unlike Carter, Joe Clark never hungered for glory or credit for his role in getting the six American diplomats out of Iran. He did his job as a leader, and given that Canada has also declassified what happened he should be acknowledged for his courage. In a strange twist of fate the Iranian hostage crisis cost Carter his Presidency and indirectly led to the downfall of the Clark government. That in itself is a very interesting story.

Our role in the escape was a proud Canadian moment.  If you’re looking for something to do with yourself on a Saturday night, because hockey players and owners can’t figure out a way to divvy up $3.3 billion in revenue, you may want to take in the movie Argo.  For those of us old enough to remember, it’s a good reminder.  For those too young to really know, you’ll learn something while being entertained

Until next time,

Cheers.

Ontario, Yours to Discover ….A catchy phrase on all Ontario licensee plates but if the whispers are correct the rest of Canada may discover what Ontario style politics is all about. By now you may have heard that the Premier of Ontario, Dalton McGuinty, tendered his resignation. According to Daddy Dalton, “After 16 years as leader of the Ontario Liberal Party, and after nine years as premier, it’s time for renewal. It’s time for the next Liberal premier, it’s time for the next set of Liberal ideas to guide our province forward”.

The resignation comes as a surprise and it’s especially intriguing given the Premiers ability to brush aside scandal after scandal, most recently the ambulance service and he’s also facing a second contempt motion for canceling two gas plants in Mississauga and Oakville at a cost of hundreds of millions of dollars to taxpayers. Tax dollars flushed away has never bothered the Teflon Premier before so why now? Can it be because he and his party were responsible for record deficits in Ontario? No, that can’t be it. If you can get re-elected three times promising not to raise taxes and you raise them anyway, what’s to fear?

The answer appears to be nothing. It’s being reported McGuinty is planning to throw his hat into the ring for the leadership of the Federal Liberal Party. The Federal Liberals have been looking for an answer to the well oiled Conservative machine. The Conservatives and Liberals know when it comes to Ontario, also comes a majority government. Justin Trudeau may have celebrity status but is that enough to convince the voters of Ontario? Clearly McGuinty’s inner circle doesn’t believe so.

McGuinty is a savvy and shrewd politician. As much as I think the rest of Canada would reject his record, I thought Ontario voters would see the same light.  You have to tip your hat to him. Not for his record but for his ability to survive and overcoming what most politicians would view as insurmountable odds. His act may be coming to the national stage, and as voters in Ontario have learned, his “ah shucks – golly gee act” can be rather effective.

Until next time,

Cheers.

Related Posts:

Ontario Tax Payers Beware

Federal Budget – A penny for your thoughts

Political Uncertainty in Ontario

One doesn’t have to be an expert in the real estate market to grasp that there’s something different in the market today.  Call it what you will, a sense, intuition or just plain old gut feel but there’s little doubt that things are changing.  The only question that remains is the degree of change?

Here are the facts as we know it:

• Home sales have dropped month over month by 5.8%, which is the biggest monthly drop in two years
• Number of newly listed homes is down 1.7% month over month
• Greater Vancouver Real Estate Board states that re-sales were down 30.7% as compared to August 2011.
• Toronto Real Estate Board states re-sales were down 12.5% as compared to August 2011
• According to the August 2012 CMHC quarterly report, second quarter insured mortgages unit volumes were down 25%

Indeed, things are different today.  The data speaks for itself, and the debate today has been reduced to correction versus bust.  I think it is far too early to come to come to any final conclusion but that will not stop stakeholders and the press from jumping into the debate. This issue is way too sexy to resist, and there’s a lot on the line for our economy and policy makers.  I came across an interesting quote from Wayne Moen, President of CREA., “August’s sales figures will no doubt provide comfort to policymakers, providing the first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended”. Very eloquent but policymakers may find the end result as comfortable a slipping into a pair of size 34 jeans, when you’re a size 38!  Policymakers insisted the most recent changes to mortgage rules targeted the tail end of the credit curve; therefore, the overall impact to the market would be marginal.   Nothing about the statistics indicates marginal, and I suspect home owners in Vancouver and those in the mortgage industry would agree.

 Look for the Vancouver market place to garner special attention in the coming months.   As an example, “the housing market correction appears to be under way, driven by the sharp downturn in Vancouver”, according to TD’s Chief Economist, Craig Alexander.  He went on to say, “we expect the slowdown will become broader based following a fourth round of mortgage insurance regulation tightening by the federal government”.  The way I interpret this is what goes for Vancouver, also goes for the entire country.  And then there’s the obvious, if it all goes bad, you know who to blame. 

Until next time,

Cheers.

Leave it to bureaucrats to come up with an acronym which acts as camouflage for the truth.  QE3, Quantitative Easing Part Three, is code for bail-out.  Politicians and bureaucrats are loath to use that term for fear of negative press and political ramifications.  If it looks like a duck, and it quacks like one, it’s a duck!  US Federal Reserve Charmin, Ben Bernanke, announced a couple of weeks ago that the Fed would inject $40 billion a month through purchases of mortgage back securities.  This move by the Fed is viewed as being dramatic in that it is a two pronged approach.  Firstly, there’s no defined time limit and they will not deviate from this policy until they succeed.  What does Fed deem to be success?  Full employment.

Rarely has the Fed exercised its authority and flexed its muscles in a such a manner.  This is a sign that the Fed has little confidence that the Whitehouse, Congress and Senate, will put their bickering and their campaign posturing aside to do what’s right.  This move has put Bernanke into the Republican crosshairs, we can use that reference in Canada because we Canadians wouldn’t take that term literally.  Being so close to the US presidential election, it’s odd that the Fed would make this move now.  Say what you will about Bernanke, he’s injected himself into this political campaign.  I believe his motivation was not political but of necessity.  Managing the economy has not been president Obama’s stronger suite, and the Republicans wouldn’t agree to anything today that Dem’s might suggest.  Fixing the US economy has been put on hold for over a year now because of the length and nature of  presidential campaigning.  Maybe Bernanke was willing to roll the dice because he has nothing to lose.   His tern as Chair expires in 2014.  The Republicans are questioning the need for a Federal Reserve Chairman, and maybe Bernanke has already decided that if asked he will not accept reappointment.  If he does step aside it would be a challenge for whoever replaces him as Chair, given no defined end date for QE3.  It is always easier to make bold decisions about the future knowing that you may not be subject to the consequences of that decision in the future.

The reverberations of QE3 will be felt here in Canada.  Bernanke has stated that the Fed is committed to leaving its target interest rate close to zero until 2015.  A few short months ago the prediction for a rate increase was 2014.  Clearly the Fed believes interest rates are too high in the US to encourage investment and mortgage borrowing.  I am not sure how enamored the Bank of Canada is with this decision.  Up until now the Bank of Canada has been in lock step with the US Fed.  Will they deviate from that?  I highly doubt it.  So, an overnight lending rate increase may have been pushed out for another 12 months in Canada.  That’s good news for consumers, especially for borrowers renewing their mortgages over the next 24 months.  The not so good news is that if you’re a first time home buyer, don’t expect the government to reverse the most recent changes to mortgage rules anytime soon. 

Until next time

Cheers

The dog days of summer are over and now it’s back to normal.  The kids are back to school; you can always tell because the traffic is bigger mess than usual driving to and from work.  The distractions that come along with summer will be in the review mirror and reality will soon hit us in the face like a cold glass of water.

 For many who have tuned out over the last few months there’s a significant election taking place today in Quebec and depending on the results we could all end up feeling the aftershocks.  If the polls are correct the Parti Québécois, led by Pauline Marois, could control the leavers of power.  Just like the movie Groundhog Day, we’ve all seen this before.  Ms. Marois has made it clear that if her party is successful their demands will be clearly articulated in short order, with the ultimate objective being sovereignty.  Could this mean another referendum in Quebec? Possibly. Even if a referendum does not come to pass the mere threat of one will have an impact on the economy.  Canada is viewed as safe haven to invest and one of the main reasons for that is our political stability.  A referendum debate is a sure fire way to shake investor confidence. 

Another election looming is in B.C. The Provincial Liberals are being savaged in the polls.  Caucus members are fleeing for the exits with such speed that Usain Bolt would have to take notice.  Premier Christie Clark is taking much of the heat for the exodus and for the state of her party.  I find it interesting that B.C. has been the envy for many in our country, yet locals have grown restless.  Change is in the air and the polls indicate the NDP will once again rule.  I actually resided in Vancouver when the NDP were last in power, I can honestly say my memory of them has faded somewhat.  What I do remember is that the leaders of that party were either convicted of a crime or came under RCMP investigation. The past has a way of repeating itself, and if it does in B.C., hello headlines and uncertainty.

Here in Ontario the Premier is talking tough and taking to all the special interest groups that the Liberals have catered too to get elected.  Massive debt, unemployment levels higher than the national average are at the forefront for Ontario.  The question for the Provincial Liberal is how long will their cousins to the left prop them up. As usual in politics the polls will determine when the Liberals fall, meaning yet another election in Ontario.  So, there’s political uncertainty in Quebec, BC and Ontario.  Three key provinces will be in the news with regularity.  Like or not we’ll have no choice but to pay attention.  Summer is over and the political silly season is about to commence.  Depending what happens we could all be in for a bumpy ride.

Until next time,

Cheers.

Nice to see another topic making headlines rather than the same old evil which threatens to bring down the Canadian economy, mortgages.  The topic dejour today is the strength of the Canadian one dollar coin.  There’s a fair bit of hand wringing over the fact the Canadian dollar is today is worth $1.01 U.S.  Individuals who pull the leavers of power in this country often remind us that a strong Canadian dollar negatively impacts our economy.  Interesting position to take when one considers the reason why investors are flocking to the Canadian dollar.  Factors like, government debt which is manageable, stable employment numbers and a sound banking system.  Oh yeah, and free market economy. 

There are those who are suggesting the Bank of Canada should intervene by easing monetary policy by lowering the overnight lending rate.  Those who work in the mortgage industry know that will not happen for a while.  There has to be clear evidence that housing market has cooled before the Bank of Canada would consider lowering the overnight rate.  Besides, it’s estimated that if the Bank of Canada was to lower the overnight lending rate to zero, the net effect would be the Canadian dollar would be worth 98 cents U.S. 

Given that the Canadian dollar will remain strong for the foreseeable future the press and government should turn their attention to a far more pressing issue, like our productivity.  Canada spends approximately 1 per cent of GDP on research and development.  That is approximately half of what the U.S. spends. The gap in productivity between our two countries is widening, and if we were on par with U.S. productivity the strength of the Canadian dollar would not be as worrisome. 

Innovation drives productivity. Every industry will have to make significant investments in research and development if we want to compete with the giants.  It’s not just about doing things faster and cheaper.  We will have to compete on value, service and produce products which are unique.  What drives productivity is a skilled workforce and this is an issue we all have to deal with.  We now have to compete in a global economy which is knowledge based.  Fundamental  structural change is required in Canada if we all want to maintain our standard of living in the future.  Government and industries both play a key role in this debate.  It’s time to actually have one.

 Until next time,

 Cheers.