Friday, October 30, 2009

Growing economy, more jobs and other lies

Why is it that every contraction in GDP called 'unexpected'? Or every decline in jobs seen through the eyes of economist who never saw it coming?Why do all these economics have to constantly bullish projections? I think I know the answer-they are the cheerleaders for their respective sell side institutions, including the central banks. Here's the headline from Globe and Mail:

Economy contracted slightly in August as gross domestic product fell 0.1 per cent, following flat reading in July, but economists still believe recession over.

Why should anyone listen to these moronic 'economists' when they didn't even see it coming. Some time in future they will all claim that they never saw the housing bust coming.

Two very sobering releases from Stats Can- the Payroll report and the GDP report.
The GDP number takes us back all the way to the fall of 2005 with a total output of around $1170 billion or so. So much for 4 years of growth and the new era of prosperity brought in by the dirty oil and natural gas speculators. The growth is occurring in the same sectors-construction and public sector. One paid by tax payers now and for the other the bill will be coming pretty soon in the form of tax payer supported bailouts.
Too bad, Canada didn't spend anything on stimulus plan. Oops...they did spend around $50 billion, but that wasn't enough to still get us out of recession. Next on agenda-more spending backed by the strength of the Canadian tax payers.

The payroll report is even more sobering -guess why nobody in mainstream media talked about it. More than 110,000 non farm payroll jobs lost in August. If you look at the payroll graphs you'll see that the employment numbers are back to 2007 levels only. But the GDP is back to 2005 levels. So the economy will most likely shed more jobs to produce the same extent of output and maintain similar level of productivity. Or may be most of the employment was generated by the public sector requiring no productivity.

This is all happening when the commodities have not been routed at all-they have merely come down a bit from their all time high prices. What will Canada and Alberta be like, when the commodities do enter their secular bear market? Is there a plan B here, other than continually expanding the balance sheet of CMHC?

Have a good weekend everyone.

Friday, October 16, 2009

And the secret recipe for continued housing strength is...

CMHC. Or secruitization and mortgages backed by us, the poor Canadian tax payers. CMHC has been given the go ahead to increase its mortgage cap limit to $600 billion by the Federal government. The government has full commitment to just one thing-ensuring that assets bubble don't deflate, no matter what the cost. For stupid $2 to $5 million items and expense items much smaller than that, there's a lot of debate, discussion, media attention and bickering. Yet hundreds of billions are implicitly guaranteed without anyone asking a single question anywhere. Such is the power bankers yield in this day and age.
Just for perspective, this limit is roughly half of our GDP. And when things go south, as they most likely will, what would it do to the Canadian sovereign rating? And deficits? the Loonie? Most of the people would ignore this, as they generally do until it's too late. We are following the footsteps of US just too closely.
The question is-will be lucky and see the bubble pop when the guarantees are mere $600 billion or will we have to wait till we hit a sweet trillion dollars or more?
At least the illusions of the strength of the Canadian banking system and the robustness of our lending practices are intact.

Tuesday, October 13, 2009

More on Natural Gas

Our province's economy depends significantly on natural gas prices. More specifically, a strong Alberta economy depends on strong natural gas prices. In the past, many have speculated the ramifications for Alberta if the prices were to enter a sustained downturn.
The recent shale natural gas discoveries are getting noticeable coverage in the mainstream media and many are even speculating that this will solve the perennial US dependence on foreign energy resources.
What do you think?

Wednesday, October 7, 2009

Deja Vu all over again

It's getting harder and harder to be a bear. It is as if the laws of common sense have all been rewritten. Less is more, debt is good, you buy houses when you don't have a job and prices rise in recession. The real demand is down, price cuts are rampant and yet inflationary fears are exacerbated by attempts to ward off almost certain deflation. It's harder to actually think rationally about finance, economics and market any more. Natural gas prices go up and down by more than 25 per cent in a single session. US Dollar keeps on falling on account of increasing deficits and loose monetary policy, yet most of the currencies it's declining against (CAD, Euro, INR, JPY etc) are just as fiscally profligate. Decoupling which had barely been buried solidly six feet in the ground just a few months ago is back with a vengeance.
We are closer to an 'economic black hole' perhaps, now that none of the 'old laws' of economics have stopped working any more.
Real estate wars are heating up all over the world. From Delhi to San Diego, it seems a solid resurgence in real estate has taken place. It seems the world is buccaneering again on the dosage of easy availability of money. No lessons from past mistakes have been learned nor any punishments served on those who brought about the pain to the masses. And here we are ready to repeat the show.
Real demand for finished products is down worldwide, yet China is building more capacity to export. China is stockpiling more of commodities, boosting Australia's economy. And this brings back decoupling back into vogue.
Multiple bids were common in 2005, 2005 and 2007. And they are back in the summer and fall of 2009.
What's the end game from this? The central bankers and pretty much all governments have only one faith and ambition- to somehow in someway refuel one global bubble. So far they are having some success.
What do you all think?
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