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.
Amazon.com delivers, shares jump
Posted on July 24, 2007
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Amazon.com Inc. reported quarterly net profit today, which rose an astonishing 250 percent, as sales in its home market jumped. Consequently, shares were sent up nearly 13 percent. It was indeed an amazing performance.
Net income in the second quarter rose to $78 million, or 19 cents per share, compared with $22 million, or 5 cents a share, a year earlier. Revenue rose 35 percent to $2.89 billion in the second quarter, which is seasonally the slowest. In North America, net sales rose 38 percent, Amazon said. These numbers have all surpassed previous estimates. Amazon also raised its full-year forecasts.
The dot-com company did surprisingly well, and looks very brightly at the future. Sure Amazon had its share in tough times, but right now the company is valued well above both major Internet players and brick-and-mortar retailers.
Vancouver strike may affect 2010 Olympics
Posted on July 24, 2007
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Vancouver’s civic strike of 1,800 outside workers escalated Monday. At about 8 a.m., 2,500 inside workers (CUPE 15 members) took to the picket lines across 124 city sites. Later in the day, almost 800 librarians also poised to walk off the job.
The strike revokes the ability to run city fitness centers, pools, rinks, day camps, golf courses, and as well as new permit applications and building inspection applications. Uncollected garbage remains on the streets since Friday morning, when Vancouver’s outside workers’ union, CUPE 1004 (including garbage collectors), began full strike action. If librarians walk off the job, it will be their first strike in history.
Union leaders are refusing to cooperate with City of Vancouver negotiators on a 39-month contract, that would run out March 10, 2010, nine days after the games conclude. If a different length term be offered, as union leaders request, the city faces the danger of being shut down while two billion people from around the world are watching. Definately not a small issue at hand. Perhaps the federal government needs to focus a tiny bit of attention to the issue as well, considering this poses a threat not only to Vancouver the city, but the entire country.
Other strikes, currently near or already underway (apparently its “Strike Season”): Alberta’s oilsand workers, B.C.’s coastal workers, and Canadian Auto Workers.
Former DND bureaucrat guilty of fraud
Posted on July 24, 2007
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Canada’s Department of National Defense hit the news Monday as accused Paul Champagne pleaded guilty to fraud and breach of trust. During his term as bureaucrat, a course of nearly a decade, Champagne had funneled more than $100 million into his controlled bank accounts.
Champagne’s scheme was complicated, and it built over time. He supposedly saved the DND lots of money by reorganizing the department’s computer maintenance system. He eventually built enough goodwill and trust to manage the order of goods and services (that were never delivered). Champagne owned multi-million dollar homes, spent millions on private jets, vacations, and luxury autos - all on his $60,000 salary.
“I am accepting responsibility for my actions,” Champagne confessed Monday. I am more worried about why this wasn’t detected earlier. It is now much to late to retrieve the lost money. Who knows where Champagne has his money invested. This tough task can only be nearly accomplished if we Canadians give this issue more importance - after all this was our money. More importantly, we need to be assured that these socially irresponsible won’t occur in the future - especially within our government departments.
American Airlines shares rocket on takeover talk
Posted on July 24, 2007
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Shares of AMR Corp., parent company of American Airlines, rose more than 7 percent Monday on the basis of possible, but persistent takeover of the company.
American was among several US airlines, earlier this year, said to have been looking for merger partners. There were also speculations of major airlines like American, to be potential targets for private equity firms. Furthermore, Goldman Sachs analyst also raised his earnings estimate for AMR shares on presumtion that the price of jet fuel will fall relative tot he price of crude oil in the fourth quarter of 2007 and all of 2008.
So is AMR really being bought? Totally depends on the validity of the chatter across multiple sources. Whatever the case may be, this is just another prime example of takeover talks resulting in unusual bullish behavior in the markets. Last week I mentioned Canadian Pacific Railway’s takeover rumors were probably overreacted to (which they were by the way); this may be just another example of the “spread takeover rumors and let stocks rise”-trend.
India’s first female prime minister
Posted on July 21, 2007
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Pratibha Patil, 72,  will become India’s first female PM. She won almost two-thirds the votes by state assemblies and the country’s parliament. Patil will be sworn in as president for a five-year term on July 25. Patil’s victory is more iconic, and a boost to all Indian women, who still today confront widespread discrimination.
Energy Star tax credit for Ontario
Posted on July 20, 2007
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A temporary retail tax exemption begins today for Ontario residents who purchase certain Energy Star household products (refrigerators, dishwashers, washing machines, freezers, etc.). The Ontario provincial sales tax will be waived on products purchased, rented, or leased before July 20, 2008.
This one-year tax break is expected to save us, consumers, a total of $51-milion dollars. I think it’s a great program, both saving us money and helping the environment. Two thumbs up for Finance Minister Greg Sorbara! The products will be consuming less energy and helping us fight a challenging battle against global warming.
China’s economic growth unsustainable
Posted on July 20, 2007
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The People’s Bank of China, China’s central bank, raised interest rates once again today in their continous attempt to keep inflation under control, and prevent one of the largest economies in the world from busting. The Chinese government yesterday reported annual growth at 11.9 percent in the second quarter. The hike was much anticipated by the market.
 There really is not much to be surprised about China raising its interest rates, considering it has now already raised interest rates five times since April 27, 2006. I would rather be more surprised if China’s economy did not move.  The attempts by Chinese government and central bank are clearly not sufficient to deal with the economic expansion they are facing.
I don’t believe this interest rate hike will do much to cool down the booming economy, and we can expect more hikes on the way. I don’t hear the sound of confidence when Chinese officials speak. What I do hear is a ticking time bomb, getting louder and louder. It sounds very familiar to the one we heard years ago from Japan. The challenge is now controlling our greed and pulling out before we hear BOOM..
Conrad Black still out on bail
Posted on July 19, 2007
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Prosecutors’ requests to have Conrad Black’s bail privileges revoked, has been denied today by a Chicago judge. Lord Black was convicted three counts of fraud and one count of obstruction of justice - crimes that will probably result in a sentence of 30 years. I think Black forced himself to a dead end on this one, and sees Canada as his only exit.
Conrad Black, a Canadian native, is now making attempts to cross the border to Canada. He says he will surrender his passport to Canada Border Agency as soon as he crosses. Prosecutors argue he is a flight risk (give me a break). I think its ridiculous to classify Black as a flight risk, but rather the Judge (Judge Amy St. Eve) needs to consider his behaviour and conduct throughout the trial. I say the major concern is not Lord Black being a flight risk, or him hiding in Canada, but rather the possiblity of him resisting to go back to the US. We have to keep in mind, we are dealing with white collar crime here - nothing else.
There is nothing in Canadian law, that suggests an extradition waiver entered into before a foreign court has any binding effect here. While Judge St. Eve can restrict Black’s movements in the United States, there is very little she can implement in Canada or its borders. As Black had previously given up his citizenship, the ultimate decision is upto border and immigration officials, whether to allow Black to enter as a visitor.
Because of the growing number of white collar crimes, I suggest a serious message ought to be sent out - Black be put in jail until the end of his trial (as he has failed to comply to his previous bail conditions). Like I’ve said, Canada is now Black’s only exit, and just as much as we shouldn’t be a safe haven for terrorists, we shouldn’t be one for white collar criminals.
Canadian Pacific Railway takeover bid rumors most likely false
Posted on July 18, 2007
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Canadian stocks jumped their highest since January on speculations of a Canadian Pacific Railway Ltd. takeover, as the company confirmed it received a bid earlier this year from Brookfield Asset Managment Inc. (one of Canada’s largest investment companies). Brookfield, along with American investment bank Goldman Sachs and Quebec’s Caisse de Depot pension fund, is in process of preparing a takeover offer (The Globe and Mail). CPR, the railway that helped create modern Canada, witnessed its shares (TSX:CP) surge more than 16 percent after a day of heavy trading on the TSX. The S&P/TSX Composite Index itself 201.65, or 1.4 percent, to a record 14,583.66.
This is probably just another one of those examples of market stupidity displayed in Canada. Investors simply overreacted over the news today. I think the huge number of takeovers we have had recently are just urging investors to look for what’s next. They were just overexcited that it might just be one of the largest leveraged buyouts in Canadian history. CPR’s Board of Directors themselves said they recieve inquiries from time to time, but are not in any negotiations at the moment. CPR commented on the rumour as a “highly conditional inquiry”.
I think the last comment speaks for itself. Well at least the speculation created a great day for Canadian markets..
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