Quit Smoking for a PST Tax Credit?
Posted on July 31, 2007
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Ontario is trying to help smokers quit by providing all residents a PST (Provincial Sales Tax) break on smoking cessation aids in two weeks. Beginning August 14, those who wish to quit smoking won’t have to pay the 8 percent sales tax on nicotine replacement therapy products (patches, gums, inhalers, pills…). The credit will be given at point of sale, as per Health Promotions Minister, Jim Watson.
Congratulations to Ontario for taking such a bold step - NOT. Sure we will save $5-million a year, but is that really an incentive for smokers to quit? If the financial costs of smoking itself (about $10 a pack) isn’t enough of an incentive to quit, what makes Mr. Watson believe that cutting costs on therapy products will help? What we can do, is take that $5-million every year and use it to continuously educate the public of the harmful effects of smoking - a proven strategy.
An average of 16,000 people in Ontario die each year from smoking; tobacco-related diseases cost the health care system about $1.6 billion/year.
China economy STILL out of control
Posted on July 30, 2007
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The latest of attempts in keeping the world’s fourth-largest economy from overheating, was today when China’s central bank raised the level of deposit that lenders must hold in reserve (the bank reserve requirement) for the 9th time in thirteen months.
Again this is not a surprising move, as the policy makers have been continuously tightening policy measures to constrain the economy. Today’s step follows an increase in interest rates on July 20, and a reduction in the tax on interest income from bank deposits - an attempt to lower the incentive of individuals looking to bet on the country’s blazing-hot stock markets.
China has already raised this reserve requirement 6 times this year. The country’s central bank has also raised interest rates three times this year so far. We can most likely expect further action; higher reserves, and higher interest rates.
I warn you all once again, this is the time to step out. The bomb’s ticking is getting louder as China’s economy further heats. For those of you who survived the dot-bomb, don’t be too optimistic - you lucked out. But the chances of lucking out with China’s economy blowing, are very slim - no matter which part of the world you are in.
Top 7 Reasons to Invest Beyond our Borders
Posted on July 29, 2007
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Canadians have always been known for their high-risk-taking-culture — NOT. Making foreign investments becomes increasingly important in order to achieve financial success. Limiting yourselves to a domestic Canadian market will reduce many financial opportunities. Here are the Top 7 Reasons to make foreign investments:
1) Canada is a small market. Canada represents only 3.5% of global equities. Restricting yourselves to the S&P/TSX will prevent taking a bite of the world’s highest performing indexes.
2) The Canadian market is dominated by a few major sectors. Energy and financial companies represent 60% of the S&P/TSX Composite Index. Diversification?
3) Some industries are virtually absent from the S&P/TSX. Investors preferring exposure to pharmaceuticals, health care services, defence, and information technology may want to consider some international corporate names.
4) Diversification becomes easier internationally. (This one really sells itself)
5) Canadian markets are highly cyclical. Because the markets are heavily weighted on commodities, they are vulnerable to cyclical swings. We have already seen the effects on the markets from commodity price changes.
6) Emerging markets offer more opportunities and returns. High-risk = High-return = China, India, Japan?
7) Currency risk is in minimal. Appreciation of the Canadian dollar is probably at its peak. Economists believe its depreciation will begin in 2008. This makes the risk of exchange-rate volatility minimal, and in our favour.
Lululemon stock doubles in debut
Posted on July 29, 2007
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Shares of Lululemon Athletica Inc. spiked more than 50 percent on its first day of trading on Friday. The yoga-clothing retailer raised $327.6 million (much more than anticipated) in Canada’s largest initial public offering this year. The company’s stock closed at $29.72 on the TSX (”LLL”), and at $28 on the NASDAQ (”LULU”). The company expected its shares to trade at $10 to $12 a share. It was evident that the public was very interested in the company’s shares.
Lululemon, already an established brand in Canada, only has 17 stores south of the border. Along with those stores, and the 38 located here in Canada, Lululemon tripled its sales in two years. Right now, its growth strategy leans heavily on expansion to the U.S.
Chip Wilson, the company’s founder, started a business selling surf, skate and snowboard equipment in 1980, remaining Westbeach Snowboard Ltd.’s chief executive officer until 1995. He turned to yoga after taking a class in Vancouver on the stretching and breathing exercise based on Hindu philosophy. Wilson founded the company in 1998, and very quickly began its rapid expansion.
Lululemon offers a unique and differentiated brand - one that spells out success. Whether Lululemon lives up to expectations, we are yet to see. With society’s healthy living concerns today, and Lululemon’s alignment with that trend, I bet my money on its success.
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Brief Company Overview:
Lululemon Athletica Inc.; Close: $29.72 (Cdn.), up 73¢
Niche:Â Trendy yoga gear for the yummy mummy set.
History:Â The first store opened in Vancouver’s Kitsilano district in 2000. The concept was to create a community hub where people could learn and discuss healthy living, from yoga and diet to running and cycling.
Stores:Â 38 in Canada, 17 in the United States, 2 in Australia and 3 joint ventures in Japan
Stock symbol:Â LLL (TSX), LULU (Nasdaq)
Offering price:Â 18 (U.S.), up from an initial target range of $10-$12
Intraday high:Â $28.64
Closing price:Â $28, up $10 on the day
Strategy:Â The company wants to add 25 stores in North America this year, 35 in 2008.
Details:Â Lululemon had planned to raise about $200-million in the offering, with new investors having a 26-per-cent stake. The company had mulled reducing the size of its IPO but this week decided to keep the offering at 18.2 million shares.
2006 financials:Â The company reported annual revenue of $149-million (U.S.) for the fiscal year ended Jan. 31, up from $84.1-million (U.S.) in revenue the previous year.
2007 Q1 financials:Â The company reported first-quarter revenue of $44.8-million (U.S.) on April 30, compared with $28.2-million (U.S.) for the same period last year.
Top 5 Cities - Parking Costs
Posted on July 27, 2007
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I always though parking in Toronto was too costly - of which I was right. But I just found out it isn’t nearly as bad as Calgary - Canada’s most costly parking city. Canada’s parking market is on fire.
A new study by real estate services company Colliers International says daily rates rost 7.4% across he country over the past year to $14.22. The national median monthly rate was up 8.1%, to $205.70. Here are the Top 5:
1) Calgary — $350.00 per month
2) Toronto — $302.00 per month
3) Montreal — $262.00 per month
4) Vancouver — $209.00 per month
5) Ottawa — $195.00 per month
These rising rates are a factor for many companies considering moving to the suburbs. There is just no shortage of demand, especially in the downtown core. Parking costs also continue to have a significant effect on a tenant’s decision-making process as well. I guess tenants need to deal with high parking rates, if deciding to locate near downtown.
Regina and Saskatoon were among those cities with the lowest costs of parking (at about $125). But those smaller cities are going to catch up to the market later this year, as Colliers expects parking rates to continue to climb nationally.
P.S.: Before judging Canada’s rates, it’s only fair to look at the rest of the world, where Canada ranks lowly - in London, an unreserved spot in the city core is $1,198 USD (the most expensive parking in the world!)
Apple profits push stock up, on a rainy day
Posted on July 26, 2007
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It was another rainy day on the North American stock markets today, with triple digit losses. Somebody screamed ‘FIRE’, on increasing concerns about the mortgage and corporate lending markets in the United States. Anxiety built up after the U.S. Commerce Department reported sales of new homes down 6.6 percent last month. Eventually we had investors running all over the place for exits. It was a wild see-saw ride on Toronto’s S&P/TSX composite index. The index lost as much as 400 points before closing down 260.72 points, or 1.85 percent. In New York, the Dow Jones industrial average fell 2.26 percent.
Amidst the rainy day, Apple Inc’s investors had one luxurious umbrella, as the company’s stock shined the brightest today. Apple reported third-quarter profit rose 73 percent, much higher than analysts predicted. Apple shares leaped $8.29, or 6 percent, to $145.55 in extended trading after the report. Apple’s success was due to its latest and innovative technology products - its well-renowned iPod, its new iPhone, and its Macintosh computers. Shares of Apple have jumped a whopping 62 percent this year when CEO Steve Jobs unveiled the iPhone.
IMF raises global economic growth forecast
Posted on July 26, 2007
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The International Monetary Fund raised its global economic growth forecasts on Wednesday. In its forecast, the IMF mentioned increased expansion in China, India, and Russia; and also some stability in the United States despite the risks it still faces in its housing market The IMF updated its global growth forecast to 5.2 percent for both 2007 and 2008 (up from a forecast of 4.9 percent).
China’s 2007 growth projection was also raised to 11.2 percent (from a previous forecast of 10 percent). IMF’s research department reported strong growth in exports and investments, along with some growth in its domestic consumption (a positive sign that China’s economy may finally be starting to shift from excessive reliance on exports). Together, China, India, and Russia account for more than half the year’s 5.2 percent growth projection.
The U.S. economic performance will still be pulled back by its housing downturn. Nevertheless, business investment is recovering, and consumer demand seems to be holding up, the IMF added.
As for Canada, economic growth will be stronger than expected this year, but weaker in 2008. Those forecasts probably came in wake of consumer spending in Canada being much stronger than expected. The news that also sent the loonie flying past 96 U.S. cents, and raised expectations of further interest rate increases, which in turn took the stock markets for a dive.
All in all, from the IMF report, it is evident that Canadian’s aren’t the only ones facing the possibility of higher interest rates. With the rest of the world’s (mainly China, India, and Russia) strong growth, and supply constraints, inflation poses a much greater risk globally - especially with high energy prices, rising commodities and food prices, and more pressure in labour markets. It is likely that most central banks, including the Bank of Canada, will need to further tighten monetary policy.
Canada CRTC deregulates phone markets
Posted on July 25, 2007
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A government ruling today will allow Canada’s biggest phone companies to be free from regulations in the some marketplaces. This opens the door to more competition and lower home telephone bills (finally).
The Canadian Radio-television and Telecommunications Commission (CRTC), the government agency currently regulating the markets, made the announcement today that home phone rates will be deregulated first in Halifax, Fort McMurray, Alta., and some Maritime cities such as Fredericton and Charlottetown.
The ruling is probably the first of a series, opening the way to deregulation in major Canadian cities over the next few months. The CRTC has placed certain restrictions preventing Telus and Bell Aliant from raising prices in the newly deregulated areas - a great initiative by the government to protect the consumers.
Though a price war is not guaranteed, consumers in the deregulated markets will benefit from increased competition between local telephone service providers. Though the CRTC has stepped away a bit from the scene, it still faces the challenge of promoting fair competition, and preventing collaborative pricing. Canada is still a long way from having fierce competition in its telecommunications industry versus other industrialized states, but this is definitely a first step.
Facebook lawsuit threatens shutdown
Posted on July 25, 2007
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The owners of a rival social networking website, ConnectU, are trying to shut down Facebook on charges that Mark Zuckerber, founder of Facebook, stole their ideas while they were students at Harvard.
The three founders of ConnectU, Zuckerberg’s classmates, claim that they were working together on ConnectU while Zuckerberg repeatedly stalled and eventually created Facebook using their ideas. The charges against Zuckerberg include fraud, copyright infringement, and misappropriation of trade secrets. The lawsuit also asks the court to give control of Facebook (and its assets) to ConnectU’s founders.
Facebook did hit the web 3 months before ConnectU. The lawsuit claims that by beating ConnectU to the market, Facebook gained a “huge advantage”.
Haha… Sorry I can’t help but laugh on this one.
Dollar soars to 30-year high, TSX plummets
Posted on July 24, 2007
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The Canadian dollar continues to experience record highs as retail sales were reported strong today. The loonie was pushed up 0.88 of a cent to 96.39 US cents today. The dollar has risen 10.8 percent this year, and is currently at its highest levels since May 1977.
The strong dollar, a blowout May retail sales report, and last but not least, weaker commodity prices caused the Toronto Stock Exchange to plummet. The S&P/TSX composite index dropped 400.17 points, or about 2.8%, to 14,068.16. This was the benchmark index’s steepest one-day fall since the burst of the tech bubble in 2001. Canada’s two largest railways also contributed to the downfall today. Canadian National Railway stock fell 5.5 percent after lowering its full-year outlook; Canadian Pacific Railway, the No. 2 railway, slip 3.6 percent after it reported its quarterly profit dropped more than 30 percent. The TSX index hit a record peak last week, but retreated 3.8 percent in the last three sessions.
Regardless, I would say growth prospects for Canada remain strong over the next few months. The Canadian dollar may or may not hit parity with the struggling US dollar by the end of the year. The loonie will probably weaken later this year with lower commodity prices. The economy is also at risk of reactions to the strong national currency. A lot is also dependent on how the shaky U.S. economy does. The Canadian economy is still on track to grow to an excess demand position - we can expect the Bank of Canada to raise interest rates again (maybe even upto 5 percent). Though the Canadian economy can face some challenges in the near future, it is still in a very strong long-term position. All long-term threats to the Canadian economy are external - the global economy.
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