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Griffiths Energy plans IPO, launches probe (CHARLIE RIEDEL/AP)
Griffiths Energy plans IPO, launches probe (CHARLIE RIEDEL/AP)

The Week

How west was won: Alberta, Sask., to lead for years Add to ...

These are some of the major stories Report on Business followed this week. Get the top business stories on weekdays on BlackBerry or iPhone by our mobile-friendly webpage.

Alberta, Saskatchewan to lead We learned from the census this week that economic and political clout is shifting west, where natural resources are driving provincial economies.

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Economists at Toronto-Dominion Bank went a step further, with economic projections that show Alberta and Saskatchewan will lead Canada in growth for years.

Derek Burleton and Sonya Gulati did their forecasts for 2015-2021, going on the assumption that it will take three to four years to fully recovery from the crisis.

They predict that Alberta will lead the country with average annual economic growth of 2.5 per cent, with Saskatchewan at its heels at 2.3 per cent. Tied for third place are Ontario and British Columbia, at 2.1 per cent, with Quebec and Prince Edward Island at 1.4 per cent, Nova Scotia at 1.2 per cent, and New Brunswick and Newfoundland and Labrador at 1.1 per cent.

"A key takeaway from this exercise is that the balance of economic power will continue to gravitate westward in the future," said Mr. Burleton and Ms. Gulati.

"In theory, lower income regions tend to make up ground on higher income regions in per-capita terms over time - so-called 'convergence,'" they said in their study.

"And in the Canadian context, some progress on this front has been recorded over the past 25 years - especially between the Atlantic region and Ontario. However, our status-quo projections imply that Québec and the Maritime provinces should not make up any ground over the next decade. In fact, they could actually experience some slippage relative to the leaders."

Greece in turmoil If it weren't so tragic, the repetitive nature of the Greek debt crisis might almost be funny.

All we heard throughout the week was how Greece was getting ever closer to a deal with its lenders and its colleagues in the European Union. Until Thursday night, when, it appeared, other countries weren't buying in just yet, taking the steam out of the market's hopes.

Been there, done that, far too many times over the past two years.

Then, at a cabinet meeting Friday, Prime Minister Lucas Papademos sounded a lot like his predecessor when he told his cabinet that a default would be a disaster, sparking chaos and eventually pushing Greece out of the 17-member euro zone.

Seeking to secure more bailout money, Greek politicians had agreed on billions in further austerity measures, including pension reform and a deep cut to the minimum wage. EU finance ministers didn't believe that was enough, demanding that Athens find €325-million more in savings and get the plan through parliament amid mounting opposition.

Today, Greece is in turmoil. Demonstrations against the government are growing, and several ministers have defected. Its economy has already collapsed. Greece is in its fifth year of recession, and its jobless rate is now almost 21 per cent.

Some observers believe a default is inevitable. Regardless, the situation promises to get worse.

"We expect economic news to continue to darken as fiscal restraint bites," said Avery Shenfeld, chief economist at CIBC World Markets.

"We’re sure Greeks noticed the sharp jump that took unemployment above 20 per cent, joining Spain in that territory. So both politically and economically, adherence to austerity and deficit targets will be subject to market doubts in the months ahead."

CP under fire This was Hunter Harrison's week.

Running hard for the job as chief executive officer of Canadian Pacific Railway Ltd. , Mr. Harrison and Bill Ackman, the activist shareholder, brought their campaign for change at CP to downtown Toronto, with a special meeting for stockholders and analysts alike.

As The Globe and Mail's Jacquie McNish and Brent Jang reported, it had the feel of a revival meeting.

“When I tell you I am going to do something I will do it," vowed Mr. Harrison, the former chief of rival Canadian National. "I grew up in the business. I started at the bottom. Nobody appreciates a good business like I do."

CP and its current CEO, Fred Green, have been under the gun since Mr. Ackman's Pershing Square Capital Management acquired a hefty stake in one of Canada's oldest companies and began pushing for a turnaround.

Mr. Green fired back later in the week, citing a list of the railway's accomplishments.

“These achievements have set us firmly on track to deliver on our goal of bringing CP’s [operating ratio]down to 70 to 72 per cent for 2014,” he wrote in a letter to staff. “Pershing Square continues to offer no plan or clear timetable for the improvement of CP’s operations.”

Ups and downs Analyst Mike Petrie of CIBC World Markets hiked his price target on shares of Canadian Tire Corp. after the retailer reported earnings, to $76 from $72: "Shrugging off unfavourable weather across most of the country, CTC reported strong Q4 results." Keith Howlett of Desjardins bumped up his to $76 from $74, and Derek Dley of CanaccordGenuity to $75 from $70.

CIBC's Jeff Fetterly bumped up his price target on stock of Precision Drilling Corp. to $14 from $13.50, while Chad Friess of UBS Securities Canada increased his to $13 from $12. "A solid quarter highlighted by margin expansion and operating momentum," Mr. Fetterly said.

Michael Goldberg of Desjardins cut his target on shares of Manulife Financial Corp. to $17 from $18, and Peter Rozenberg and Andrew Kligerman of UBS to $12.50 from $13.. "It is well reserved and well capitalized and has aggressively reduced its sensitivity to market variables it cannot control," Mr. Goldberg said. "The one negative in the latest results is that Manulife was impacted by some noisy headwinds which may persist."

Maher Yaghi of Desjardins trimmed his price target on shares of BCE Inc. to $43 from $44.50, noting from its results that its wireless business is "a solid growth engine but wireline is now a drag on results."

Brian MacArthur of UBS cut his target on stock of Teck Resources Ltd. to $50 from $54: "Financial results were favourably impacted by materially higher coal prices, partially offset by lower sales volumes of zinc and coal. Copper results were also negatively impacted by lower average realized prices. Of note, Q4 coal sales amounted to only 83 per cent of production, highlighting the weaker coal market and depressed demand as steel makers defer met coal purchases."

Ten things 1. Executives and traders have been flooding the Manhattan offices of Dr. Lionel Bissoon, a specialist in treating low testosterone levels, as "more guys want to be on top of their game," he told The Financial Times.

2. "In the end, in the intensity of it, I came to the conclusion that I thought it would be actually indulgent for me to resign and what I ought to do was to draw, if you like, on the reserves of strength I have and try and make RBS a success," Stephen Hester, the CEO of Royal Bank of Scotland, who, amid mounting controversy, decided to forgo a hefty bonus, told the BBC.

3. Samantha Daniels, a modern day matchmaker and former divorce lawyer, doled out 10 tips for women in her How to Date a Wall Street Man this week. Tip #10: "Don't get upset if your plans get scheduled by his assistant."

4. Kit Juckes of Société Générale hit the nail on the head with the language of the day in a research note this week: "Global economic thaw (GET 'cos we do acronyms now), FED ZIRP, ECB LTRO and RSI 80 are the themes. the RSI is worth a mention 'cos EUR/USD, AUD/USD, SPX, and a host of other rsi's are really stretched now."

5. Tweet of the week, from @NicTrades (London trader Nicola Duke): "What, no one is going to pipe up today with Im too negative & a Greek deal really really is 'hours away' :)"

6. Lead on a story this week from The Associated Press: "An Illinois man facing sentencing in Rhode Island for shipping unwanted penis enlargers to diabetes patients as part of a Medicare fraud scheme is asking for a maximum prison term of 1 1/2 years."

7. Illegal cigarette imports now make up 7 per cent to 8 per cent of overall sales in Spain, which is struggling under high unemployment and austerity measures, Bloomberg News reports. That's up from virtually zero a year ago.

8. Debt inspectors heading to Greece, be warned. The Federation of Greek Police said in a letter obtained by Reuters this week that it wants to put out arrest warrants for international officials whose demands have led to the country's harsh austerity programs, accusing them of "covertly abolishing or eroding democracy and national sovereignty."

9. I get many corporate news releases on any given day. But here's one that landed in my inbox this week: "We have received your request to join the ladygaga_official group hosted by Yahoo! Groups, a free, easy-to-use community service ... If you did not request, or do not want, a membership in the ladygaga_official group, please accept our apologies and ignore this message." Mum mum mum mah ... I don't think so.

10. The Twitter universe had a lot of fun Friday with love, sex and ... the Federal Reserve. Here are just some of the examples making the rounds under #FedValentines:

  • I'd like to borrow you overnight and then hold you to maturity.
  • I'll be your lover of last resort.
  • When I see you, I have irrational exhuberance.
  • My love for you is not nominal. It's real.
  • You keep my spirits at exceptionally high levels for extended periods.
  • As a woman, a great Valentine's gift would be a maturity extension program.
  • You are both my favourtes. I have a dual mandate.
  • You're my gold standard.
  • My interest is growing over time.
  • I can be highly accommodative (this one was mine).

Even the Federal Reserve Bank of San Francisco (hey, it's San Francisco, after all) got in on the act: "My love is elastic, my commitment too big to fail."

Required reading this week Abandoning the idea of a national securities regulator would be the easy way out, Barrie McKenna writes.

Amid growing concerns that a rising boom will bring cost problems and worker shortages, oil sands companies are preparing for a massive expansion of the camps used to house workers, Nathan VanderKlippe writes.

Just as the auto industry recovery kicks into higher gear in Ontario, billions in new investment in southern North America and a shift to smaller vehicles are threatening the long-term health of the province’s economic engine, Greg Keenan writes.

Redbox is bringing its popular vending-machine DVD business to Canada’s billion-dollar movie-rental market, aiming to fill a void created by the failure of Blockbuster Corp. and other traditional video stores, Steve Ladurantaye reports.

British natural gas giant BG Group PLC has joined the rush of companies swarming Canada’s West Coast in hopes of exporting energy to Asia, Nathan VanderKlippe reports.

What to watch for next week Expect to see little change when Statistics Canada reports on January's inflation readings Friday morning. Economists largely expect to learn that consumer prices rose 0.3 per cent from December, and that the annual pace held steady at 2.3 per cent. So-called core prices, which exclude volatile items and help guide the Bank of Canada, may have edged up, but only just.

"Although headline inflation may prove sticky through January and February, we still expect base year effects to drive a sharp drop in inflation by the end of Q1," said Emanuella Enenajor of CIBC World Markets.

"The BoC expects as much, and, like us, sees inflation climbing again by mid-year. With core inflation set to remain relatively stable over the period, we expect the BoC to look through the dynamics in theall-items measure, and focus closely on growth-oriented indicators."

Economists are also looking for a better showing than December when the U.S. government reports retail sales for January Tuesday morning.

"The holiday season ended with a thud, but consumers started the New Year with a bang, fuelled by rising employment and equity markets," said senior economist Sal Guatieri of BMO Nesbitt Burns.

"Retail sales likely rose 0.7 per cent in January, with unit auto sales jumping 5 per cent to their best level in nearly four years. Excluding autos, sales probably rose a solid 0.5 per cent based on decent chain-store figures."

Several major companies report quarterly results this week, including Onex Corp., Avon Products, TransCanada Corp., Abercrombie & Fitch Co., Cenovus Energy Inc., Goldcorp Inc., Kinross Gold Corp., Sun Life Financial Inc., Talisman Energy Inc., Vale SA, Barrick Gold Corp., CI Financial Corp., Fairfax Financial Holdings Ltd., General Motors Co., Molson Coors Brewing Co., Nexen Inc., Enbridge Inc. and Encana Corp.

"The Q4 earnings season continues to play out relatively quietly, largely because the results have not been overly hot or cold," said Robert Kavcic of BMO Nesbitt Burns.

"To date, about 70 per cent of S&P 500 companies have beaten earnings expectations, a slightly lower share than has been typical in the past year. Meantime, while it’s still early in the Canadian reporting season, 63 per cent have beaten the mark - that’s actually tracking better than recent norms. The overall picture continues to be one of cooling earnings growth."

Follow on Twitter: @michaelbabad

 

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