To The Pointwith Boris Bozic
Commentary, Opinions, Thoughts and Discussion on Current Events, Politics and The Mortgage Industry

0 Comments An Economic Light At The End Of Tunnel?

Article written by on the 13 Sep 2011 in Canada,Current Events,Uncategorized,US Politics

No…my apologies…it could still be a train.  Just when we start to believe that maybe, just maybe, we can get through a couple of days without some pending crisis, BAM, there’s more talk of a double dip recession.  I know the press subscribes to the adage, “if it bleeds it leads”‘.  The truth is the global economy has taken more bullets than James Caan did in that famous scene in The Godfather, when Sonny was gunned down at a toll booth in New Jersey.  Unlike Sonny in the Godfather, the global economy keeps getting up for more.

Here in Canada we got the news that housing starts are down.  Job creation has been flat now for two consecutive months.  Our unemployment rate inched up to 7.3%.  The uptick was ever so slight, but the fractional increase represents real people without jobs.  Furthermore, CMHC reported that refinances were down by 40% since the new rules came into effect.  When I visit a mortgage broker I always ask them what percentage of their business is refinance versus purchase. One individual stated it was at least a 50/50 split.  If that was reflective of all broker business we would be trending to a 20% decrease on year over basis.  The picture will become clearer when the Q3 numbers are released, but suffice to say no one should be expecting increase on a year over year basis.  As a matter of fact, being flat year over year means you’re gaining share.  The BOC stated, the overnight lending rate would remain at 1% until the middle of 2012.  Some analysts are suggesting there be no changes until 2013.  That’s a clear sign of how fragile our economy is.  When rates increase it will be a clear signal that our GDP numbers are headed in the right direction, more Canadian’s are being employed and the markets have stabilized.

Surely there must be something positive coming out of the U.S. 

President O-Blah-ma was at his oratory best when he spoke to Congress about the new “Jobs Bill”.  It was reminiscent of the speeches he gave on the campaign trail, you remember, “Yes We Can!”.  I think we’ve all come to the realization that means, Yes We Can…talk a lot…and do very little.  The President introduced a “Jobs Bill”, with an omission, how will it be funded?  He’s going to get back to Congress on that in a couple of weeks. No rush, all the time in the world. I see there was a $44 billion trade surplus in the U.S. last month. A lower valued U.S. Dollar helps their exports, but when investors look for a safe haven they still flock to the U.S. Dollar.  This makes it tough for the U.S. to manipulate their currency (not that they would ever do that).  According to the American’s it’s only the Chinese who do that.  Bottom line is the U.S. will remain in a quagmire until they fix their housing crisis.  It’s a drag on their entire economy.

How about Europe?

Some good news is that some austerity measures are taking hold in Ireland, Portugal, Spain and Italy.  They still have plenty of work to do but at least those countries are taking some positives steps.  Greece? It appears that representatives of the Greek Government are still more concerned about holding onto power, rather than introduce real austerity measures which could put them back on the right course.  It’s going to get a lot worse in Europe before it gets better.

Finding silver linings today is a bit of a challenge.  But every once in a while we find that nugget.  Vancouver, Toronto and Calgary made the top 10 cities in the world to live in.  From where I sit Canada is THE best country in the world to live in.  I wouldn’t trade our problems for any other countries problems.  We’ll do our part, but damn it, they got to do theirs.

Until next time


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0 Comments Déjà vu All Over Again – US Economy

Article written by on the 09 Aug 2011 in Canada,Current Events,Economy,Politics,US Politics

That famous line was attributed to Jogi Berra, Hall of Fame New York Yankee baseball player. Besides being a great ball player, Berra was also known for malapropism, mangling the English language. Normally it’s done for comedic relief but in Berra’s case it was his standard way of speaking. I thought of this quote based on what’s been happening to the markets over the last week. It’s starting to feel like 2008 all over again. Back in 2008, the world faced an economic crisis. The news was stunning. How on earth could iconic companies such as Lehman Brothers and Bear Sterns fail? Yet that’s exactly what happened. The U.S. Government forced banks to take T.A.R.P. (Troubled Asset Relief Program) money to ensure that lending would continue. The ministers of the G7 countries rushed to Washington for emergency meetings because there was fear that the markets wouldn’t open. As events unfolded in 2008 we were all left wondering what’s next? It appears the other shoe has dropped.

One of the significant differences, relative to our present day situation, is the fact that back in 2008 nobody questioned America’s credit worthiness. That all changed last Friday when S & P (Standard and Poor’s) downgraded the US from AAA to AA Plus. Not since 1917 has the US been rated lower than AAA. Not surprisingly the Obama administration has come out swinging against S & P. The administration is questioning S & P calculations and motives for the downgrade. Funny how S & P’s motives were never questioned when the US had a AAA rating. I should note that the other two rating agencies, Moody’s and Fitch, have not downgraded the US. So the question is, which rating agency has it right? In time the answer will become clearer but I’ll say this about S & P, the move they made on Friday took a lot of chutzpa. That’s a Yiddish word for tenacity and guts. I suspect shirt collars are feeling a little tight today in the corporate offices at S & P.

Based on what’s happened in the last week, what does this mean for Canada?jim-flaherty-canada-is-not-an-island Firstly, no one can predict with any certainty. We’re in-uncharted waters here. Besides what’s happening in the US, numerous countries are in dire straits financially in Europe. All of these factors will have an impact on us. “Canada is not an island,” Finance Minister Jim Flaherty said late Friday in a statement. “We are a trading nation, with about a third of output generated by exports and deep linkages with the U.S. economy. The global economic recovery remains fragile and this uncertainty may eventually impact Canada”. One of the ways it may impact us is that if borrowing costs increase in the US, due to S & P’s downgrading, there could be further negative impact to the US economy. This impacts us because we export so much of our goods to the US. If the Americans are not spending, we feel it. There’s also predictions that the loonie will go higher relative to the US greenback. That of course makes our goods more expensive in the US and abroad.

Conversely there’s been some positive speculation about Canada. Investors will look for a safe haven. There’s plenty of cash on balance sheets today but given the uncertainty of the market place cash is being hoarded. Eventually corporation will want a return on their capital, and Canada is a safe bet. Based on workforce, commodities, stable financial sector and fiscally responsible government, Canada should benefit. Countries which are AAA rated today will be in demand. S & P rates Germany, Britain, Austria, Denmark, Norway, Netherlands, Australia and Canada AAA. If Europe makes investors nervous, Canada’s a solid option.

Standard & Poor's AAA countries US default

It’s become fashionable in this country to pat ourselves on the back and say, “we’re so much smarter than the Americans”. Frankly, recent history clearly shows that we have managed our affairs far more effectively than our neighbours to the south. But things can change. In 1993, the Canadian Bond Rating Agency downgraded Canada from AAA to AA Plus. In a short period of time the other international rating agencies followed suite. How did we get our AAA rating back? The government attacked the deficit. If you recall back in the 90’s the Liberals, remember them, ran things in Ottawa. Under Finance Minister Paul Martin, programs were slashed, transfer payments reduced, and taxes were increased. This was done all in the name of deficit reduction, and it worked. Here we are in 2011, our deficit is too high and the Harper government will have to do something about it. Harper’s backed himself into a corner by campaigning that our taxes are too high, and increasing taxes is not the answer. He had me at hello. So then the only way to reduce our deficit is to cut spending. Don’t expect him to use a scalpel to cut programs. This may require a hatchet.

Until next time


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0 Comments This and That – Florida, U.S. Default & Broker Volume

Article written by on the 02 Aug 2011 in Current Events,Economy,Mortgage,Personal,US Politics


I’m writing this blog from Florida. Hey, where else does a guy from Toronto go to escape the heat?   Florida, of course.  It’s steamy hot down here as well, but the heat and humidity seem tolerable when you’re in vacation mode.  I have to say that the state of Florida has really grown on me.  I love it down here.  Why? The weather is great all year round.  Secondly, they have all the amenities you can ask for – beaches, great restaurants, fantastic cigar stores, golf courses galore, professional sports franchises.  Thirdly, everything is cheap. The best part about buying anything down here is that you always feel like you got a good deal.   The best deal you can get today is real estate. I think it’s a good time to buy down here.  Distress means great value and flexibility by the home owner, be it the vendor or the bank.  A word of advice, if you decide to explore what’s available you better pick one specific location.  There’s just too much product available to bounce around from one side of the state to the other to check out homes.  Secondly, if you decide to buy, the day after the deal closes forget about values. It’s going to take years before Floridians see any appreciable increase in values. If you’re looking for a second home, a place where the family can go, a place where your parents can go to escape the winter, it’s a great time to buy.  I was speaking to a real estate agent yesterday and he said if it wasn’t for Canadian’s buying up product in his area he wouldn’t be busy.  Great value, and good exchange rates, is attracting a lot of Canadians.   What I don’t like about Florida?  Old farts that drive on I-75 doing 15 miles under the legal speed limit, while in the left hand lane.

The U.S. Avoids Default

Well that was a shock – There was little doubt that an agreement would be hammered out.  The only question is what the agreement would look like.  What I read and hear down here is both the Democrats and Republicans are not happy.  I guess in some ways that makes me believe that it’s an okay deal.  If both sides aren’t happy it means there was give and take.  As details come out about the deal, and is actually passed in Congress and the Senate, we’ll get a better idea if the agreement is a band-aide solution or something that has substance.  My money is on political cover rather than doing what’s best for the country.  Winston Churchill said this about U.S. politicians, “they always get it right but only after failing everything else they try first“.

Volumes Decrease

Over the last few weeks we’ve been hearing that volumes for Q2 are down year over year in the broker world.  We know for a fact that submissions are down as of the end market-share-does-not-mean-share-marketof June.  How that translates to actual volumes will become clearer when D + H publishes their market share report for Q2 in the second week of August.  The market share report will probably validate what I’ve been hearing from brokers in the last 90 days, it’s slower and banks are still very aggressive.  If the Ministry of Finance wanted to cool things down from a borrowing perspective, with the changes they made in April, mission accomplished.  The only question is did the broker world take a bigger hit than the direct to bank world?  We’ll find out soon enough.

Until next time,

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2 Comments What if a Country Defaults on Their Loans?

Article written by on the 19 Jul 2011 in Current Events,US Politics

We’ve all seen or heard the media reports about the possibility of countries defaulting on their loans.  Most recently the U.S. has come under fire about their obligations and ability to pay.  Rating agencies are threatening to downgrade the U.S., which would have dire consequences for the US economy.  Frankly, I don’t believe that will ever happen.  The threat of a downgrade was intended to be exactly that, a threat.  In other words, this was a public shot at the U.S. government, an attempt to exert public pressure for the U.S. to get their act together.

Where this is real and happening today is in Greece.  So what happens if Greece doesn’t pay?  Do they file for bankruptcy? Does that mean their bankruptcy will appear on their countries credit bureau report for the next 7 years?  Does it mean that no one in Greece will be able to get a mortgage until their country has been discharged for 2 years?  I ask these questions with tongue firmly planted in cheek.  The answer is that the countries debt doesn’t go away.  It means that Greece has not met its financial obligation for that particular month.  The creditors will demand payment, but unlike consumer debt there’s nothing to repossess.  It’s not as if the lenders can foreclose on Athens.

The reality is that the Greek currency will go into the toilet because they’ll be printing money like mad.  They may opt out of the Euro currency for some period, possibly two years, and go back to the Drachma, Greece’s currency prior to entering the EU.  This will lead to hyperinflation, and there will be zero demand for their currency or more importantly trust in their currency.  This reminds me of the 80′s when I visited countries in the Balkans.  I would go into the bank, exchange $100 Canadian for the local currency, and I would need a wheelbarrow to carry my cash around.  A devalued currency will mean that all imports will be extremely expensive, and this will have a direct effect on the standard of living in Greece.  Then there’s the obvious, borrowing in the future may become next to impossible for Greece.  To be clear this isn’t just Greece’s problem, there’s concern for Spain, Ireland and Portugal as well.  They may be next.

Back to the U.S. – One of the funniest solutions I have heard recently about their debt came from comedian Dennis Miller.  On his most recent HBO special he talked about the US debt.  He said, and I’m paraphrasing, “I don’t understand this debt issue.  The numbers are way above my head.  But if I was in the White House I would say bleep’em, we’re not paying.  We got nukes”.

Until next time,


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0 Comments Our Poor Friends to the South

Article written by on the 14 Jul 2011 in Canada,Current Events,US Politics

One thing you should never underestimate is America’s resolve. As a country, America has been on the brink on a number of occasions, and yet it has always managed to find it’s way back. From a historical standpoint, America has faced it’s share of crisis; The War of Independence, The Civil War, WW 1 and 2, The Great Depression, The Korean War, Vietnam War, The Bay of Pigs, The Cuban Missile Crisis, the Assassination of John F Kennedy, Robert Kennedy, Martin Luther King, the impeachment and resignation of Richard Nixon, the attempted Assassination of Ronald Reagan, 9/11 and the aftermath. This illustrates the U.S. isn’t squeamish about getting blood on their hands in the name of national interest, and they’re certainly willing and able to fight. Yet I can’t help but wonder where has America’s resolve gone? I’m referring to the economic plight America faces today. It’s stunning to watch the US muddle through this recession. The US has faced many deep recessions in the past, however, the present day recession has reduced this great nation to look for handouts, debt owed to China, and facing the fact that today America has zero leadership. It’s shameful that the Obama Administration, as well as the Republicans, are playing politics at this crucial moment in their history. The US is so devoid of any leadership one can’t help but be worried for our neighbours to the South.

Why does this matter to us? Canada is a branch plant economy. We export 70% of our goods to the U.S.  America is a consumer based economy, and we need a healthy and vibrant U.S. economy so we can sell our goods to them. The situation in the U.S. makes the Canadian government nervous. This is why the Conservative Government is pressing full steam ahead to negotiate free trade agreements with Europe, and South East Asia. Our reliance on the U.S. puts our economy at risk, and our government is attempting to mitigate this risk by negotiating new free trade agreements. But that will take time, maybe years. So in the short-term we’re stuck, and all we can do is keep our fingers crossed that the leaders in the US will put petty politics aside and finally lead.

In last week’s National Post there was an article about the unemployment situation in the U.S. Statistically things don’t look good (National Post – “U. S. Job Growth in June Falls Far Short of Expectations“). Their unemployment rate is inching towards 10%, and that figure does not include those people that have stopped looking for work, and in some cases fallen through the cracks.

If their economy, and their unemployment rate doesn’t improve before the 2012 Presidential Election, Obama may well end up being a one trick pony. The voters in the US will look to punish someone.

Until next time,


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