Ouch!!!

Canada - Running Out of Luck?

"Economic Superstar" In Trouble
Suddenly the heady rush provided by rising commodity prices and the biggest credit expansion in the country's history is wearing off in Canada. We are reminded by China's slowdown in growth that prices for commodities are, as all prices, determined by marginal demand.
Since contrary to the manufacturing industry, their producers are not "price setters" but must simply take what the market is giving them, the effects of aforesaid marginal demand become noticeable rather quickly. As long as China's demand for industrial raw materials seemed to be growing at very high rates with nary an interruption, commodity producing countries like Canada and Australia experienced an unprecedented boom.

The 2008 crisis then provided a brief warning shot, a reminder that commodities are not a one way bet. Now China's growth is slowing, although it is still fast by developed nation standards (if we can believe the official data, which appear a bit suspicious). However, this slowdown does affect demand at the margin. There is also a danger that the popular Chinese game of hoarding commodities like copper in order to use them as collateral in dodgy financing schemes for real estate speculation may eventually produce a sudden supply overhang that renders all the neat calculations of sell-side analysts about annual supply and demand of industrial commodities moot.

Major commodity producers these days tend to almost behave like warrants on China's growth.

Even the IMF suddenly seems worried that things are no longer going so swimmingly in Canada. This may well be a short term contrary indicator of sorts, but the fact remains that Canada's economy looks rather wobbly lately. The Bank of Canada has also just downgraded its economic outlook.

"Canada's economic growth will be the slowest among Group of 20 countries outside Europe as it grapples with a cooling housing market and as policy makers rein in deficits, according to the International Monetary Fund.

Canada's economy is expanding at the slowest pace since 2009 as the housing boom that helped lift it from recession cools and high household-debt levels constrain demand.

Canadian policy makers, who have sought to stem increases in household borrowing and cut government spending, should be prepared to take growth-supporting measures if the nation's economy continues to weaken

, the IMF said.

That could mean allowing budget deficits to widen and keeping the Bank of Canada's policy interest rate at 1% for longer, it said. The IMF said risks to its forecasts for Canada are "tilted to the downside," citing concerns that the weakness in the U.S. and Europe could hurt the economy, as well as the impact of a decline in commodity prices.

"The main challenge for Canada's policy-makers is to support growth in the short term while reducing the vulnerabilities that may arise from external shocks and domestic imbalances," the body advises. "Although fiscal consolidation is needed to rebuild fiscal space against future shocks, there is room to allow automatic stabilizers to operate fully if growth were to weaken further."

"The IMF also has some advice for the Bank of Canada - don't think about tightening monetary policy until the economy improves.

"The current monetary policy stance is appropriately accommodative," it says, "and the beginning of the monetary tightening cycle should be delayed until growth strengthens again."

Conclusion:

We don't know for certain if the bursting of Canada's credit and housing bubble has indeed begun. Much will probably depend on where commodity prices go from here. The fact is though that the economy and the bubble activities underlying it suddenly look quite shaky. Regardless of the precise timing, there can be no doubt as to how this ends. It is the same everywhere in the West where real estate bubbles haven't burst just yet: they inevitably will, and there will be spectacular contractions and banking crises in the countries concerned.

Link -
http://seekingalpha.com/article/1349211-canada-running-out-of-luck?source=email_...
===============================

Big Country
Big on Commodities
Big Problems

Sound familiar?

Btw, Canada's gross Debt to GDP only rose around 11%, between 2008-, they are already around 75-80%, compared to OZ, which is around 23%.
http://www.tradingeconomics.com/canada/general-government-gross-debt-in-percent-...

That said, there are some similarities and I expect both Canada & OZ will experience some considerable difficulties over the next few years.

http://www.investing.com/indices/us-30

http://www.investing.com/indices/japan-ni225

http://www.investing.com/quotes/us-dollar-index

The US DOW has risen over 100%, since its 2009 low, as has the Japanese Nikkei & the US$ index has risen from 73 to nearly 84, despite the enormous "US money printing" 

World market are now completely disassociated from Economic reality and what drives it, mainly due to the actions of the US & Japanese Central Banks, in printing money like there is no tomorrow.

At some point, REALITY WILL BITE back and it will be a BIG BITE!!!

Sharemarket on alert after horror week

RATTLED investors are on high alert after the stockmarket suffered its worst week in a year and the Australian dollar slid to a 12-month low on fresh concerns about the slowing pace of global economic growth.

Capping a wild week for investors, the S&P/ASX 200 yesterday slumped below the symbolic 5000 point threshold, falling 1.56 per cent to 4983.5, while the broader All Ordinaries gave up 1.52 per cent to 4964.3.

The dive marked the fourth straight session in the red and took the S&P/ASX 200's decline for the week to 3.8 per cent as profit warnings pick up ahead of the upcoming reporting season.

The market started the month at 5191 points, suggesting the adage "sell in May and go away" may again weigh in coming months.

While mining services firms have been pole-axed by the hastened pullback in mining investment, fears are growing of broader weakness across the economy in retail and building materials.

Markets were mixed across Asia as global investors reacted to hints from Fed chairman Ben Bernanke this week he may wind down $US85 billion ($87.8bn) a month of money-printing earlier than expected, with the Japanese market recovering some of Thursday's more than 7 per cent fall and Hong Kong down just 0.23 per cent.

A sharper than expected fall in Chinese manufacturing this month into contractionary territory, as measured by HSBC's flash PMI, also continued to weigh on sentiment, pushing shares in Rio Tinto and BHP Billiton down more than 1 per cent.

But high-yielding stocks such as the banks and Telstra continued to drive the sell-off after recently hitting record highs and as overseas bond rates rallied. ANZ slumped 8.5 per cent in the week, as Citi analysts highlighted the risks that could cause the "so-called bubble" to burst.

"I think it just shows some of the rallies we've seen in the last couple of months in those yields stocks and sectors was really just hot money going into a momentum trade and it's just used the excuse of Bernanke's comments, the Chinese PMI and Japanese bond yields to correct an over-bought position," said Anton Tagliaferro, investment director at Investors Mutual.

"But I think it will settle down, to be honest, in the next couple of weeks.

At the end of the day world growth is going to remain slow and investors are still going to want income."

Mr Tagliaferro added the fall in the banks had made their yields look "a bit more attractive than a couple of weeks ago".

UBS sales trader Rob Taubman said the falls in the banks pointed to "structural issues" causing offshore investors to assess their positions, such as the fall in the dollar and the rise in

US bond yields, reducing the appeal of the local market's dividend yield.

"The problem is, if you're going to benchmark Australian stocks relative to US stocks you're going to find Australian prices are expensive on a valuation basis," he added. "I think we continue to be at risk of earnings downgrades coming through. That will be the pattern through into the reporting season, so this has got a little bit of time to run."

Late yesterday, the Australian dollar was trading at about 12-month lows of US96.64c, after falling as low as US95.93c in early trade, far from its value of $US1.0357 at the start of the month. A raft of banks, including UBS and HSBC, have taken the knife to forecasts for the Australian dollar, with Credit Suisse predicting it would fall to US92c in three months and US85c in 12 months. Traders are also increasingly recommending shorting the Australian dollar to be on the right side of the widely expected decline as commodity prices cool and flows from offshore ease.

"The global currency war is escalating, the central banks are winning and the US dollar bull market is gaining momentum," said HSBC.

After car company Ford this week withdrew from manufacturing in Australia, Macquarie economists yesterday warned that a "weaker currency won't immediately restore growth".

Investors will turn their attention to the March-quarter private capital expenditure data out on Thursday for an insight into the extent the non-mining economy is moving in to replace the peak in mining investment, as the Reserve Bank is trying to achieve.

But a sustained depreciation of the Australian dollar is likely to cause inflation to rise and lessen the scope for the Australian central bank to cut official interest rates further, Merrill Lynch economists said yesterday.

Link -
http://www.theaustralian.com.au/business/markets/sharemarket-on-alert-after-horr...
=============================

At the end of the day world growth is going to continue slowing and investors don't always get what they want!"

Computer glitch over Perce?

At last something worth reading on OzPolitic.

It's all panning out as predicted I see. One day they're printing more.....boom!!! next day they're not....doom!!! gotta laugh at the stupidity of it all.

Ex Dame Pansi wrote on May 30^th, 2013 at 5:25pm:


Not quite over, BUT at least I can now do MOST things!
I'm not sure about the stupidity, although I am sure there is some, but there's probably a large dose of desperation coming to play, as well!

That said, there have been a few major reasons, other than the new computer, which have seen me attending here a lot less, recently.

Our daughter & son-in-law have been put some major additions onto their house & we have been helping out a couple of days a week, for some time now. It will deliver another 200 square metres of living space onto what was a relatively small house, so they will have a good size place, when it is finished.
It's just about to have the last section of roofing put in place, probably over the next couple of weeks & then windows & doors will follow shortly after, to make it reach lock up stage.

All this is because their daughter is now just over 2 years old AND our daughter just had a baby boy late last week, so they need more living space!

Ex Dame Pansi wrote on Jun 1^st, 2013 at 6:21am:




That would seem to be true!