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ROB Insight

Fresh, focused analysis of today's business news
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Entry archive:

Fed shouldn’t be fazed by reaction to latest statement

KEVIN CARMICHAEL

You are a central bank.

You just have spent a couple of days thoroughly assessing the latest economic evidence. You have decided that the economy you oversee is advancing at a “solid” pace. Job gains are “strong,” and the unemployment rate is falling steadily. A wider set of labour-market indicators shows the “underutilization” of the working population “continues to diminish.” This is important because you had been very worried that too many part-timers were being denied more hours and that the longer-term unemployed were at risk of becoming permanently marginalized.

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There’s only one feasible solution to the Greek drama

CARL MORTISHED

The problem with a sovereign debtor is that the creditors are often too embarrassed to take a look at the assets. While your neighbourhood bank won’t be shy to repossess your home if you default, it’s considered bad taste or a form of lèse-majesté to send bailiffs to collect the presidential limo or ask for the keys to the royal palace when a nation misses a payment deadline. So it is with Greece and the frantic talks among the euro zone member states about the new Greek government’s demand that a large part of a €240-billion ($339-billion) Greek rescue loan should simply be cancelled.

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Oil price collapse creating small winners, bigger losers

GLEN HODGSON

The sharp decline in oil prices are creating winners and losers across different sectors and regions of the Canadian economy. The net result, however, is negative; the Conference Board of Canada now expects that Canada will have a hard time growing by 2 per cent in 2015.

Let’s start the analysis close to the ground, with oil consumers and producers. The largest negative impact will be felt by firms in the Canadian oil industry, their suppliers and their employees. Oil producers have seen their sales price essentially cut in half over less than six months, although a depreciating loonie has helped to mitigate a bit of the impact on business revenues in Canadian dollars. But with revenues way down, producers will move to protect their bottom lines by cutting costs and resizing their operations.

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U.S. durable goods weigh on investor sentiment

IAN McGUGAN

Markets are emotional creatures, and so a disappointing report on durable-goods orders was enough, when combined with a smattering of lousy corporate earnings reports, to propel Wall Street into the slough of despond on Tuesday. But shareholders shouldn’t lose hope just yet.

The S&P 500’s decline was really about the unrealistic hopes for growth that investors had built up. Look beneath the top line figures and the American expansion appears to be trundling along much as it has for several years now – with no great speed, but still fast enough, all things considered, to be the gold medal favourite in the tortoise race among developed-nation economies.

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Balancing the budget would be bad timing by Ottawa

CHRISTOPHER RAGAN

Massive declines in the world oil price are unambiguously bad for the Canadian economy. Such large shocks usually merit policy responses. While the Bank of Canada acted boldly last week to cut its benchmark interest rate, the federal Finance Department hesitates, apparently unsure of both its economic and political calculations.

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Negative debt rates set a course for financial market disruptions

LUKE KAWA

Want proof we’re still living in abnormal times? The bond market is telling us that many advanced economies won’t see much in the way of nominal growth over the next decade.

In the wake of the Swiss National Bank’s decision to ditch its currency floor and move deposit rates further into negative territory, investors actually lined up to pay the government for the privilege of holding on to their money for a period of 10 years.

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Obama’s dislike of Canadian oil threatens U.S. energy security

Brian Lee Crowley

Hydraulic fracturing for oil is strikingly like the Obama presidency. Not understanding the parallels has caused the President and his administration to miscalculate the importance of Canadian oil supplies to the United States.

Here is what fracking and Barack Obama have in common. There is a general pattern to the flow of oil produced over time (the “production curve”) by fracking. At the outset there is a positive gush of oil. For the average well this flow declines by about 75 per cent by the end of the first year, after which the flow stabilizes at a much lower level for a fairly long time. Since we are in the early stages of the fracking revolution, people are dazzled by the big initial surge and project its benefits on a straight line into the future. This is an error.

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Harper’s surplus pledge undermines Poloz’s efforts to battle new reality

KEVIN CARMICHAEL

First, a thought on the Bank of Canada’s rate cut Wednesday. And then, straight into an argument about how the Stephen Harper government appears intent on making Stephen Poloz’s job more difficult than it has to be.

Observers expressed shock at the Bank of Canada’s decision to cut its benchmark interest rate a quarter point. Fair enough. None of the economists Bloomberg News polled ahead of the decision saw it coming. But if you lost a lot of money Wednesday, then it is your fault. The moment you heard the longest serving member of the Governing Council say the collapse in oil prices was "bad for Canada," you should have hedged your bet that Canada’s benchmark rate would stay at 1 per cent for infinity. The age of extraordinary guidance is over — central bankers, especially Canada’s Stephen Poloz, have been explicit in telling us so. Any suggestion that Mr. Poloz lost credibility Wednesday misses the mark: he warned everyone that a surprise was possible if the situation demanded it. The 55-per-cent plunge in oil prices since June caught everyone off guard. When the the quarterly Business Outlook Survey showed investment intentions collapse with the oil price, Mr. Poloz had a strong incentive to respond with lower borrowing costs. He was doing his part to give Canada’s economy a chance to survive on something other than oil.

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Falling oil price putting pressure on the Canadian prosperity model

CLÉMENT GIGNAC

Over the past decade, Canadian economic prosperity has been anchored upon two factors: elevated commodity prices and a housing boom. It can easily be argued that these two factors are connected and have contributed to attracting qualified labour from around the world to Western Canada, pushing housing prices to ever new highs.

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Forget fairness, here’s why taxing the rich benefits us all

IAN McGUGAN

It’s time to soak the rich, many people say. What isn’t always so clear is why.

In outlining a proposal this past weekend to raise taxes on wealthy Americans, President Barack Obama positioned it in populist rhetoric as a way to aid a sagging middle-class.

Oxfam, for its part, argued that bringing the ultra-rich to heel is a simple matter of fairness. In a report published Monday, the poverty-fighting charity predicted the top 1 per cent of the global population will soon own more than half of the world’s wealth.

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Shale producers have little to fear from Saudis

BRIAN MILNER

By now, it should be obvious that the Saudis and their Gulf allies are playing the long game when it comes to the current oil situation, and that means keeping the taps flowing in the midst of a global glut no matter how low prices go.

The strategy is designed to drive out higher-cost producers of heavy oil and shale, whose rapid development is squeezing Middle East crude out of the huge U.S. market and threatens to eat into its share of other lucrative growth markets. There are other compelling, though unstated, reasons for the Saudi stance, including a desire to make life miserable for feared arch-foe Iran and give the West a helping hand in reining in Russia’s geopolitical ambitions. The Saudis have been eager to stick it to the Kremlin for years over its cozy dealings with Tehran and its decision to renege on a deal to match OPEC production cuts in 2009.

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Miserable markets love gold, but caution advised on its latest rally

IAN McGUGAN

Gold, finally, is enjoying a bit of good news, thanks to general misery and a Swiss surprise.

After the alpine nation shocked markets on Thursday by scrapping its currency ceiling with the euro, the precious metal climbed 2.2 per cent. The latest gains continued the bounce it has been on for the past couple of months, even as other commodities such as oil and iron ore have plunged.

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Desperate Putin, Russia on last gasp, strategist says

BRIAN MILNER

Russia faces a grim future, regardless of what happens to oil prices, Western sanctions or President Vladimir Putin and his cronies. Sooner or later, it will be done in by unfavourable demographics, rising ethnic divisions and a permanently busted economy.

That’s the harsh assessment of geopolitical strategist Peter Zeihan. The veteran Russia watcher has long been pessimistic about the country’s future. Four years ago, he warned that Russia was “in a long, slow twilight. They're going to have a couple of great years while the Europeans are in a mess. And they have relative strength because the Americans are distracted in the Middle East. But they realize that they're on borrowed time.”

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Draghi’s drama: Betting on what QE will look like in the euro zone

ERIC REGULY

The concept of euro zone unity promises to be tested Thursday when the European Central Bank unveils a stimulus program that will almost certainly be tailored to meet Germany’s demands.

The quantitative easing (QE) program, coming years after the United States, Britain and Japan launched their own versions, is expected to see the ECB buy between €500-billion ($693-billion) and €1-trillion of sovereign and corporate bonds in effort to kick-start stalled inflation and help restore economic growth.

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The Saudi oil party is over, and the hangover’s just beginning

ERIC REGULY

King Abdullah, Saudi Arabia’s 90-year-old monarch, has a keen interest in the country’s economy, especially the non-oil bits. A few years ago, when he launched King Abdullah Economic City, the new megacity on the Red Sea anchored by an enormous shipping port, he installed several cameras so he could monitor the construction progress from his palace. To be sure, it must have been dull viewing – the city is no more than 10 per cent built and will take another two decades to complete – but the gesture showed that he was well aware that the kingdom needs a source of income beyond oil.

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Corporate sponsors of the arts missing creative opportunities

TODD HIRSCH

It usually ends up on the back of the theatre program, somewhere in the soupy mess of logos and names of various banks or energy companies. In exchange for a financial donation – tiredly given the “silver, gold and platinum” ranking – corporate largesse is recognized with the company logo slapped alongside those of the other funders.

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India’s central banker comes to Modi’s aid with surprise rate cut

KEVIN CARMICHAEL

Raghuram Rajan on Sunday was named central bank governor of 2014 by the editors of Central Banking journal. On Thursday, he demonstrated why.

Mr. Rajan jolted groggy traders awake by cutting the Reserve Bank of India’s benchmark interest rate by a quarter-point to 7.75 per cent early in the Indian trading day. The decision was a bold one, coming more than two weeks ahead of the central bank’s next scheduled policy meeting on Feb. 3. Local stock markets surged to their highest levels in eight months and the rupee jumped to its highest level against the U.S. dollar since the end of November.

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Copper showing tarnish of a lacklustre commodities market

Ian McGugan

Dr. Copper just called in sick. But don’t panic yet: His ailment may not be quite as serious as it looks.

Copper, often referred to as the metal with a PhD in economics because of its purported ability to predict global growth, tumbled 5.3 per cent on Wednesday, touching its lowest level in five and a half years.

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Natural gas producers next in line to feel the heat

CARL MORTISHED

Now, the screw is turning on the global gas exporters. The price of natural gas in Asia is tumbling; European demand is shrinking and America is floating on a bubble of methane. Natural gas is following oil in a downward spiral and the leading suppliers in Russia and the Middle East who once struggled to meet demand now find themselves fighting for customers.

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Wells Fargo may get more from oil drop than rivals

Daniel Indiviglio

Wells Fargo may get more from the plunging price of oil than rivals. Black gold’s pain – it has fallen some 60 per cent in the past six months – should inflict only minor damage on the largest U.S. lender by market value. Wells’s executives will find producing earnings outperformance will be harder, though.

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Alberta faces gloom, not doom amid oil's price swoon

LUKE KAWA

Even though the price of West Texas intermediate crude oil has more than halved since late June, the doomsday scenario for the Canadian oil sands is still quite a ways off.

That’s the conclusion reached by Peter Ogden, analyst at the Bank of America Merrill Lynch, who found that price of crude would have to drop below $35 (U.S.) a barrel before most of the nation’s eight largest projects, which account for 40 per cent of total production, would turn cash-flow negative.

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Change of course needed to revive Canadian manufacturing

GLEN HODGSON

The future of manufacturing is a recurring question at many economic outlook events where we are invited to speak. People ask, is manufacturing in Canada dying, or at least on life support? No, but it is under constant pressure to adapt and evolve in order to stay competitive.

Reports of manufacturing’s demise have been greatly exaggerated. After dropping from nearly 16 per cent of gross domestic product in 2000, Canadian manufacturing output has stabilized since 2009 at about 10.6 per cent of GDP. This decline and then stabilization largely reflected China’s emergence as an economic powerhouse and its role as the assembly workshop to the world; the rapid rise in commodity prices and the related soaring of the loonie; the 2008-09 financial crisis and recession; and the tepid global and U.S. recovery.

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Blame Germany for Europe’s economic nightmare

CHRISTOPHER RAGAN

Germany is usually blamed for the two wars that devastated much of Europe during the first half of the 20th century. And those wars were an important motivation for the European Union, a grand project to bind together many countries, both economically and politically. Future wars in Europe may now be unthinkable, but Berlin is nonetheless wreaking havoc on its neighbours – this time through its belligerent stance on economic policies.

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IMF credibility has reached a crossroads

KEVIN CARMICHAEL

Finance ministers from the Group of 20 are scheduled to gather for the first time in 2015 early next month in Istanbul. It will be an important meeting for them. They will be showing the world whether they should be taken seriously.

In November, the G20 gave Washington an ultimatum: ratify the four-year-old agreement to overhaul the International Monetary Fund or else. Washington ignored the threat. It is unclear if the new Republican-led Congress has any interest in the issue. IMF reform could be dead unless someone displays an extraordinary commitment to revive it. Major changes at the IMF require the support of members controlling 85 per cent the votes. As the largest shareholder, the U.S. commands more than 17 per cent, an effective veto. Washington literally is an anchor on the desire of the rest of the world to move forward.

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Tech isn’t steering car makers’ bottom lines higher

ANTONY CURRIE and OLAF STORBECK

Car makers are on something of a roll as they convene in Detroit. In the years to come, however, technology could make the ride rougher.

As the North American International Auto Show kicked off on Monday, shares of leading manufacturers were getting little, if any, credit for profit growth. BMW, Ford, General Motors, Honda, Nissan, Toyota and Volkswagen all fetch between eight and 10 times this year’s expected earnings, according to Thomson Reuters data. Daimler and Fiat Chrysler come in a bit higher.

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Provinces making bad bets with resource-based budgets

BRIAN LEE CROWLEY

You can’t say you weren’t warned.

That’s a message that should be posted on billboards opposite the premier’s office in Edmonton, St. John’s and various other provincial capitals where falling energy prices have devastated government budgets.

Those of us who care about such things have been repeating for years the wisdom best summed up by former Alberta treasurer Jim Dinning: “Non-renewable natural resource revenues are non-reliable revenues.”

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Gone to pot: PayPal co-founder gets in on ground floor of legal marijuana

BRIAN MILNER

Peter Thiel knows how to spot a potentially lucrative business when he sees one in its nascent stage. The celebrated Silicon Valley venture capitalist co-founded PayPal and was the first outsider to invest in Facebook, with an early infusion of $500,000 (U.S.). That gamble would ultimately deliver a return in excess of $1-billion.

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Merkel unleashes risky tough love on Greece

Olaf Storbeck

There should be no doubt that Angela Merkel wants to keep the euro zone intact. Her played-up indifference to the possibility that Greece might leave if it doesn’t find a deal with its creditor partners is part of that long game. The German Chancellor just wants to send an advance warning to Alexis Tsipras, the leader of the left-wing Syriza party who may emerge as the winner of the Greek parliamentary election on Jan. 25.

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Hoarded corporate cash keeping economies in doldrums

CARL MORTISHED

Please sir, would you spend a bit more? Governments are behaving like upside down Oliver Twists, urging consumers to max out their credit cards in the hope that a shopping frenzy might banish the deflationary ghouls that are stalking global markets. It’s a bit desperate because consumers still don’t feel rich; wages are stagnant and householders are mortgaged up to the eyeballs. Instead of targeting consumer wallets, governments need to look at corporate cash piles; the money is still piling up and it needs to be invested.

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Computers, jobs and rising income inequality

ANDREW JACKSON

Economists take a benign view of the impact of technological change on jobs, dismissing the “Luddite” view that technical progress can be a significant cause of unemployment. The core argument is that higher productivity (output per hour worked) drives increases in incomes so that demand rises, creating new jobs as old ones are destroyed.

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Sony studio damage assessment misses big picture

Robert Cyran

A claim by Sony chief executive Kazuo Hirai that The Interview-linked cyberattack won’t hurt the company financially may be funnier than the movie itself. Repeated and successful breaches keep damaging Sony’s brand. It’s a vicious circle that makes more hacks likely.

Speaking at the Consumer Electronics Show in Las Vegas this week, Mr. Hirai pointed to U.S. Federal Bureau of Investigation estimates that 90 per cent of large companies would be similarly vulnerable. Fair enough. Good computer security makes it difficult to break into a system, but can’t thwart attacks entirely. Experienced hackers, especially well-funded groups backed by states such as North Korea – which the FBI blames for the Sony attack – are apt to find an entry point if they look long and hard enough.

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Is a kinder, gentler activist investor emerging?

BRIAN MILNER

With all the headlines about the successful meddling and big scores reaped by a handful of board-rattling activist investors, you might be tempted to think this whole class of hedge funds raked in fat profits last year. But you would be wrong.

The five dozen or so activist funds tracked by hedge fund monitor HFR posted a gain of just under 3.5 per cent through the first 11 months of 2014. That was by no means one of the weaker categories. Funds haplessly devoted to energy and basic materials plunged nearly 5.3 per cent and others playing the short side of the market certainly took their lumps.

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Snapchat’s value run up by MAUs chase

ROBERT CYRAN

A MAUs chase is puffing up Snapchat’s valuation. The disappearing-message service has more than 100 million monthly active users (MAUs)and is growing fast. And it now has $486-million (U.S.) to play with after 23 investors joined in its latest funding round.

That leaves Snapchat worth more than $10-billion, thanks to the idea that social networks with large numbers of monthly active users are inherently precious and should have no problem reaping cash from ads and apps. Those are big assumptions propping up valuations across Silicon Valley.

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Falling yields signal growing fears about growth

IAN McGUGAN

Some economists believe the world’s most advanced countries are locked in what is known as secular stagnation, a long period of low growth. The bond market appears to agree.

Over the past three months, yields on government bonds have ticked downward across the developed world. On Tuesday, yields on 10-year German and Japanese bonds hit their lowest points in history, while the 10-year U.S. Treasury yield sank to its stingiest level since May, 2013.

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Greek debt compromise would avoid calamity

NEIL UNMACK

The possibility that a new Greek government could restructure its debt is testing a nervous market. Yet Greece and Germany, along with other international backers, will want to avoid a clash that could lead to a disorderly “Grexit” from the euro. If agreement can be reached on a reform package, financial engineering could help disguise debt reduction and save face for all.

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The time is right for a carbon tax that works

GLEN HODGSON

In our previous Globe and Mail commentary (“Provinces need to act now to fix their ailing finances”, Dec. 17), we described the unrelenting fiscal squeeze facing most Canadian provinces, and the options for mitigating the pressure. The collapse of global oil prices has created a window of opportunity for Canadian governments (not to mention others around the world) to tap into new fiscal revenue, while simultaneously adjusting prices for consumption of hydrocarbon-based fuels in order to reflect the environmental damage they cause.

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Canada’s monetary authority lacks American commitment to transparency

KEVIN CARMICHAEL

If Canada were the United States, and the Bank of Canada were the Federal Reserve, those of us who take an interest in monetary policy would be looking forward to some interesting reading in 2015. Alas, Canada’s monetary authority is among the least transparent of the world’s major central banks and few of the people it serves appear to care.

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Lithuania keeps the euro’s little flame alive

Pierre Briançon

Its high inflation rate doomed Lithuania’s application to join the euro in 2007. Eight years on, a great recession and a euro zone crisis later, the small Baltic republic is about to become the 19th member of the monetary union. For the beleaguered single currency, Vilnius’ determination offers a feeble flame of hope in a sea of self-doubt. No euro-skepticism here: nearly two-thirds of the population support the euro adhesion.

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Greece’s political upheaval shows voters’ frustration with austerity

IAN McGUGAN

Haven’t we seen this movie before? Greek politicians bicker, Greek shares plunge, yields on Greek debt jump.

It all sounds eerily reminiscent of everyone’s favourite financial horror show from four years ago. However, this sequel is likely to feature surprising plot twists not seen in the first version.

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The sensible middle in the climate change debate

CHRISTOPHER RAGAN

An overwhelming scientific consensus holds that the rising atmospheric concentration of greenhouse gases is changing the global climate and presenting humanity with enormous challenges. This consensus also holds that climate change is largely driven by human actions, especially the burning of fossil fuels. Yet among the majority of the population who takes this consensus seriously, there is a highly polarized debate.

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While low oil prices fuel U.S. surge, Russia is on the brink of disaster

ERIC REGULY

On the week before Christmas, Saudi oil minister Ali al-Naimi made it absolutely clear he was not playing games. Saudi Arabia, the world’s largest oil exporter, would not trim output to support prices and could actually export more if prices dared to rise. He said, “it is not in the interest of OPEC producers to cut their production. Whether [the price] goes down to $20 a barrel, $40 a barrel, $50 a barrel, $60 a barrel, it is irrelevant.”

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Alibaba in 2016: an imagined letter from Jack Ma to investors

John Foley

Breakingviews imagines the letter Jack Ma, founder of Alibaba Group, might pen to investors in the Chinese e-commerce empire a year from now.

Dear shareholder,

Our first full year as a U.S.-listed company brought growth and change for Alibaba Group. As I prepare to step down as executive chairman, I want to warmly thank you for making our success possible.

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Saskatchewan evolving as a powerhouse of Canada

BRIAN LEE CROWLEY

For the first third of the twentieth century, which was the third-largest province in Canada by population after Ontario and Quebec? B.C.? No. Alberta? No. If you correctly guessed Saskatchewan, you’ll probably also know that the province is again setting the pace as the place to be in Canada.

If when you think Saskatchewan, you still envision dust bowls and the sound of paint peeling off ancient grain elevators, you probably still have rabbit ears on your black and white television. Brad Wall, the best premier in the country, is leading the most dynamic province in the Dominion.

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BlackBerry’s patents are a gold mine – if they ditch handsets

SEAN SILCOFF

A huge patent sale involving BlackBerry Ltd. raises several questions about the value of its intellectual property stash. The answers might not be what investors would expect.

Three years ago, a consortium including BlackBerry Ltd., Apple Inc. and Microsoft Corp. bought a portfolio of 6,000 Nortel Networks patents for $4.5-billion (U.S.). On Tuesday, the Wall Street Journal reported the group, Rockstar Consortium Inc., sold 4,000 of the patents to holding company RPX Corp. for $900-million.

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GM’s Mary Barra to get a second first year at the wheel

Kevin Allison

Mary Barra will have a second chance to make a first impression at the wheel of General Motors in 2015. The car maker’s ignition-switch fiasco crashed her first year as chief executive. The crisis may, though, have speeded up much-needed changes.

The tale of millions of faulty ignition switches, which broke just two weeks after Barra took the driver’s seat, revealed just how sclerotic the Motown manufacturer had become, with corner-cutting and buck-passing rife.

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Workers need a New Year’s raise

ANDREW JACKSON

Wages in Canada and the other advanced economies are about as flat as leftover champagne in the glass on New Year’s Day. This poses a major threat to a sustained economic recovery.

During the four years from 2009 through 2013, average hourly wages adjusted for inflation rose by a grand total of just 2.3 per cent, or by about one half of 1 per cent a year. Real wages rose by a total of only 0.9 per cent in Ontario and 1.1 per cent in Quebec over those four years, although by a healthier but still unimpressive 4.8 per cent in Alberta.

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In the oil patch, it’s life by a thousand cuts

JEFFREY JONES

Making money investing in oil stocks should be a breeze these days.

All you have to do is look for the companies that are ready to announce that they will spend a whole lot less next year on things such as drilling for oil. The deeper they cut, the higher their stocks leap. If they slash 2015 budgets for a second time, it’s another windfall. Dividend cut? Hallelujah.

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The ‘new normal’ takes shape as China’s demand profile evolves

CARL MORTISHED

The world’s greatest oil exporter has become the industry’s biggest bear. Ali al-Naimi, the Saudi Arabian oil minister reckons the world may never see $100 (U.S.) oil again.

The prediction, made in an interview recently, came as he gave warning that the Kingdom would continue pumping crude at full throttle even if the price fell to $20 per barrel. Canadian oil investors and industry lobbyists will be tempted to dismiss this talk as bluff from a seasoned poker player. The Saudis have every interest in frightening weaker players into quitting the game but Mr. Al-Naimi is not just a gambler with a lot of chips on the table; he has other reasons to be bearish. He may be looking at China and what he sees is likely to make life very difficult for the oil exporters for years to come.

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How committed is India to fiscal prudence?

KEVIN CARMICHAEL

It is difficult to overstate global investors’ enthusiasm for India’s Narendra Modi.

“For the first time in 67 years, this country has a prime minister who is pro-business,” Canada’s Prem Watsa said after meeting Mr. Modi in November. Brian Moynihan, the chief executive of Bank of America Corp., said a short conversation with India’s leader earlier this month was all he needed to “see why people see the optimism.” Masayoshi Son, founder of Japan’s Softbank Corp., met Mr. Modi in Tokyo in September and a month later came to India to announce investments of more than $800-million (U.S.). “He gave us more confidence that India is going to be more transparent and deregulated with a lot of focus and passion to improve India as the environment for investment,” Mr. Son told the Economic Times in an interview.

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Saudi Arabia gives free marketers a dose of their own medicine

Edward Hadas

Attention all oil producers: Saudi Arabia wants to tell you something. If a truly free market sets the price, it will be far too low for comfort. Ali al-Naimi, the Kingdom’s Oil Minister, wants others to share the discipline needed for a healthy cartel.

Al-Naimi told the Middle East Economic Survey that “it is not in the interest of OPEC producers to cut their production, whatever the price is.” Disappointingly for conspiracy theorists that see a Saudi-Western plot to weaken undesirable regimes via depressed oil prices, he said his motivation was driven by economics, not politics. Free-riders should pay a little for the privilege of high profits.

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More fizz coming as investors crank up Coke, Pepsi challenges

KEVIN ALLISON

PepsiCo used to run advertisements in which it asked consumers to take a blind taste test comparing its cola to Coca-Cola’s. It was called the Pepsi Challenge. The world’s biggest soda makers find themselves similarly challenged as stagnant sales have made them ripe, $300-billion-plus targets for agitators. Pepsi risks a proxy fight in 2015 over billionaire Nelson Peltz’s plan to break up the company. Coke, too, may face a radical shakeup.

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Double blow at Roche ratchets up pressure for deals

NEIL UNMACK

Roche’s double drug blow will increase pressure on management to do deals. The Swiss pharmaceuticals group has suffered two big trial failures. A setback over a proposed remedy for Alzheimer’s disease is no shock – the disease has been a money loser for big pharma. A second knock to so-called “Marianne” tests, in Roche’s core cancer franchise, hurts more.

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A 2034 news dispatch: Alberta's economy surges despite plunging oil

TODD HIRSCH

Christmas is a time for making wishes, so here goes:

Dec. 19, 2034 – Calgary

Oil prices took another nasty spill this week, closing at a six-year low of $126 (U.S.) a barrel. In past eras, Alberta’s economy was inextricably linked to petroleum prices. Every time oil tumbled, it brought down the province with it.

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Brand new words, same old guidance from the Fed

KEVIN CARMICHAEL

The United States Federal Reserve confirmed its Olympian power Wednesday, defying the laws of physics by moving forward while standing still.

America’s central bankers said in a statement that they would be “patient” in waiting for the right moment to raise its benchmark interest rate from zero. This was new language, suggesting the highly anticipated shift from previous guidance has begun. Not so fast. In the very next sentence, the Federal Open Market Committee said this new guidance is “consistent with its previous statement” that the benchmark interest rate will remain unchanged for a “considerable time.”

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Why the Swiss central bank is making savers pay

EDWARD HADAS

There are some unlikely ideas in both mathematics and finance. For example, the square root of negative numbers and negative interest rates both look impossible. To make sense of them, it is necessary to understand numbers and money in a new way. The Swiss National Bank (SNB) has put the deeper monetary theory into practice, by cutting its overnight policy rate to minus-0.25 per cent on Dec. 18.

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The forgotten victim of $60 oil: Newfoundland’s budget

DAVID PARKINSON

As the world watches Russia’s oil-stained economic turmoil with growing trepidation, it may not have noticed that Canada has its own little Russia within its borders. And I don’t mean Alberta.

Newfoundland and Labrador Finance Minister Ross Wiseman projected Tuesday that oil’s plunge will add $378-million to the province’s expected budget deficit for fiscal 2014-15, increasing it to $916-million.

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Dépatie to face familiar challenge at helm of St-Hubert

NICOLAS VAN PRAET

Less than seven months after he left Quebecor Inc. citing unspecified health issues, former chief executive Robert Dépatie is joining Quebec restaurant chain Groupe St-Hubert as CEO.

Forget the possible punchlines about someone concerned with his waistline being recruited by a french fries and rotisserie chicken chain. Instead, we’ll just note that this will be the second time Mr. Dépatie, a seasoned Quebec business executive, replaces the son of a company founder as boss. And that’s never as easy as it sounds.

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Oil slump may be sign of sea change for commodity economies

CARL MORTISHED

Are you filling up the tank or are you buying just enough fuel to get you through the next few days? Are you betting that by the weekend the gas price will have tumbled again? If you are, like me, watching meanly and clutching your wallet as the oil price slides, you are contributing to the deflationary anxiety that is gripping the markets.

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See you in court: European companies take cue from America

REYNOLDS HOLDING

Europe’s companies could edge past Uncle Sam’s in the race to the courthouse. New rules and bank scandals are boosting fraud and class-action filings in Britain. Patent combatants are flocking to German judges. And spats over failed investments are clogging courts across the EU.

The United States won’t easily relinquish its title as the world’s litigation capital. Brits, for instance, file about a third fewer complaints per person than Americans, a 2010 Harvard Law School study found. And most big U.S. businesses spend more than ever on lawsuits.

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Partnership? Yes, but chairman and CEO need to keep their distance, too

CHRIS HUGHES

WPP may have found a much-needed counterweight to Martin Sorrell. The ad group’s chief executive is getting a new chairman in the form of industrialist Roberto Quarta. Mr. Sorrell says Mr. Quarta will help deliver WPP’s strategy, which includes a drive for greater “horizontality” – WPP-speak for operational seamlessness. But the new chairman needs to make it clear early on that his location relative to Mr. Sorrell is more vertical than horizontal.

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Provinces need to act now to fix their ailing finances

GLEN HODGSON

Running a provincial government is never easy. Most Canadians expect their governments to deliver core services like health and education, but also to rebalance the budget following the deficits induced by the 2008-09 recession. All provinces have stated that they want to meet that goal, and Saskatchewan and British Columbia are already there. However, a variety of pressures are making it hard to build a sustainable fiscal plan, and these pressures are not going away. In short, there is no Santa Claus; real action will be needed.

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Presenting a selection of exclusive analysis from Report on Business and Reuters Breakingviews.


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