Today the Toronto Stock Exchange Index (TSX) hit 15,000 points, its highest number ever.
Even though 15,000 is purely a nominal number, skewed heavily by a small number of companies granted heavy weightings by the indexing formula, now is as good a time as any to reflect on the past 10 years. Read more
I wish this wasn’t true. I wish there was a nicer way of saying this. Alas, there is not.
Canadian consumers are suckers, willing to buy at any price.
How else can one explain the record quarter for new auto sales during the first quarter of 2008. Sales that had their biggest increase since 1998. That’s a freaking decade, people!
Sales of new passenger cars were up 17.8%, the largest increase since 1976. That’s more than three freaking decades!
I don’t get it.
Canadian cars are expensive. No, that’s too nice, they’re a rip-off. Auto manufacturers are scamming the Canadians and they seem more than happy to go along with it.
How else can one explain these sales numbers?
The Canadian dollar has been near or above par with the US for over a year. Yet Canadian car prices are still more than 10, 20, even 30 percent more expensive than identical models south of the border. The only leverage Canadian consumers have to reduce this discrepancy is to buy used cars, or simply not buy at all.
However, going out like lemmings and buying new cars just because the dealer’s marketing campaign uses slogans like “Canadian Pricing” while giving you a 3% discount on price is just stupid.
Boo on you Canada, Boo on you.
A couple of quickies on Bell Canada Enterprises this morning:
-BCE Reported “steady” earrings for the first quarter. Net profit came in at 258M compared to 499M a year earlier. Adjusted EPS (earnings per share) at $0.57 actually topped Thomson’s analyst poll of $0.54. Translation: We took no risks and didn’t mess up.
- -Investment Bank Genuity Capital is predicting the BCE takeover is will close. No surprises there as this has been the market’s view since the courts gave the bond holders the big heave ho. [via Seeking Alpha, CBC]
So much for that decoupling theory where Canada would not be affected as much as its American neighbors during this economic downturn. Canada posted a 0.2% negative growth GDP statistic for the month of February. Today, the US announced a small positive gain in GDP for their first quarter. Looks like the old adage that when the US economy sneezes, Canada catches a cold is true this time around.
All is not lost. This data reflects the state of the economy a couple of months ago, and the Bank of Canada has made a couple of big cuts since then. We’ll be keeping a close eye on Canada’s GDP to see if the trend continues, or if February was just a blip.
Rogers announced along with their quarterly earnings that they will be bringing the iPhone to Canada later this year after more than a year of speculation. Yippie? No.
The reason Rogers is so late to the iPhone game is that they run a monopoly on GSM (the cell technology the iPhone uses) and were able to play the waiting game until Apple would come to terms on an agreement. Apple has been very aggressive in its demands with other service providers and used the popularity of the device as leverage to get a cut o subscription revenues. I expect a similar deal was reached with Rogers, and the timing of this deal is rather curious.
There are rumors that a new version of the iPhone is going to be released in June. Don’t be surprised that as US consumers line up to get iPhone 2, Canadians are offered the old one as a substitute. Just be happy you have an iPhone, Rogers will say.
Then there’s the monthly fees.
AT&T offers plans with unlimited data usage starting at $59.99. Rogers is nowhere near as competitive and it wouldn’t be unexpected if they don’t package the iPhone with a reasonable plan. They have no competition and no incentive to offer one.
So even though many Apple fans in Canada are jumping up and down with joy, don’t be surprised to be given a big ol’ smack to the head, courtesy of Rogers, when the details are announced.
Canada has long been a fiscally conservative nation. The strong banking sector has steered consumers in a responsible direction under their watchful risk averting eyes. There is no sub prime mess in Canada because the banks would never lend funds out to such high risk consumers. However, this Globe article has me starting to think otherwise.
I recently purchased purchased some property. At the bank I gave my income and financial info to the banker and their computer system spat out my maximum purchase price, which could be increased if necessary. They can increase the number by increasing the term of the mortgage. 25 years, which a generation ago was considered the max mortgage is now the standard. 30, 35 and 40 year mortgages are becoming more popular. One bank is even running billboards advertising a 0 down mortgage. With 0 down and 40 years of payments, almost anyone can afford a little place with today’s interest rates. But what about tomorrow? What happens if Joe with 0 down and 40 years to pay loses his job in 2 years? He’ll quickly discover that he has not built any equity because almost 100% of his payments for those 2 years were interest.
Joe will default.
The same goes for interest rates. If rates spike up, Joe might not be able to afford his payments.
The end result? Not a meltdown like the US, but a serious dent in the real estate market.
Via Reuters:
” OTTAWA, April 22 (Reuters) – The Bank of Canada cut its benchmark interest rate on Tuesday by a half-percentage point to 3 percent, as expected, and signaled that further easing was required but suggested it might pause before cutting again.
In a statement which projected a steeper U.S. economic downturn that would dampen Canadian growth, the bank said “further monetary stimulus will likely be required,” but dropped a previous reference to the need for more cuts in the “near term.”
