These are stories Report on Business is following Tuesday, May 7, 2013.
The Globe and Mail’s Sean Silcoff and Dianne Nice hosted an online chat today with Vijai Mohan, the founder of a small U.S. hedge fund who’s perhaps better known as the man who’s selling Canada short.
The chief of Hyphen Partners LP is betting – as are his investors – that Canada’s housing market (which is cooling) and its banks (a rarity in the world given how they came through the financial crisis) are poised to suffer.
He’s not alone.
Currency speculators, too, are betting against the Canadian dollar, according to the value of short positions, though that has eased somewhat, based on the latest numbers from the U.S. Commodities Futures Trading Commission.
Say what you will, but here are 10 things to keep in mind to prove we’re not losers (Toronto Maple Leafs aside):
1. Yes, the Canadian dollar is down about 1.4 per cent so far this year, but the yen is down 12.6 per cent, Malawi’s kwacha is down 14.2 per cent, and Venezuela’s bolivar is down 14.2 per cent. (And anyway, I thought we wanted a weaker currency.)
2. True, the Toronto Stock Exchange is way underperforming its counterparts in the United States, up just 0.2 per cent so far this year, while the Dow and S&P 500 hit new heights. But, China’s stock market is down 1 per cent, Ukraine’s 11 per cent, and the Cyprus Stock Exchange 15 per cent. (Of course, Cyprus had been ruled by Communists, so presumably they don’t care.)
3. We own lots of stuff around the world, including (just announced today) a piece of the Athens airport.
4. The oil sands are known the world over.
5. Bank of Canada Governor Mark Carney is also known the world over. (And he’ll still be known the world over when he leaves for the Bank of England in a couple of months.)
6. The mining industry is clearly doing so well that it can afford to pay higher taxes to the Quebec government.
7. According to the Economist, Canada has the most overvalued housing market in the world. So we’re No. 1.
8. Google “worst mayor in the world,” and Toronto’s Rob Ford comes up a lot, largely because of comments from U.S. TV pundit Keith Olbermann. We’re No. 1 there too.
9. Several European countries have raised their retirement ages because of the pressure on their support systems. Our Baby Boomers, however, have our kids to rely on.
10. Justin Bieber hasn’t done anything weird in the last 24 hours. At least, not that we know of.
- Read the earlier chat
- Meet the man who’s selling Canada short
- Sean Silcoff in ROB Insight (for subscribers): A bet against Canada is not so far-fetched
RBA cuts key rate
Australia's central bank reacted to slumping conditions today by cutting its benchmark interest rate, citing the end of a resource boom that is key to Canada, as well.
"With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years," Reserve Bank of Australia Governor Glenn Stevens said as the RBA trimmed its cash rate by one-quarter of a percentage point to 2.75 per cent.
Mr. Stevens said the global economy will probably expand by "a little below trend" this year, before rebounding in 2014.
“Over all, we see today’s cut as an effort to strengthen demand from the non-resource sector by reducing the high savings rate, which had lowered the neutral policy rate in recent years,” said Charles St-Arnaud of Nomura Securities.
“The reduction in policy rates also seems aimed at mitigating some of the impact of the non-fundamentals-supported strength of [the Australian dollar] on the economy, in our view,” he added.
- Australia central bank cuts rates quarter point to record low 2.75%
- Boyd Erman's Streetwise (for subscribers): Canaccord tries to adapt amid resource slump
WestJet profit climbs
WestJet Airlines Ltd. today posted a record quarter despite harsh winter weather, The Globe and Mail's Guy Dixon reports. Its stock, however, sank on concerns over expanded capacity.
The airline earned $91-million or 68 cents a share in the first quarter, up from $68.3-million or 49 cents a year earlier, and projected a strong second quarter.
WestJet also announced plans to upgrade its fleet, selling 10 of the older Boeing 737-700 models and replacing them with 737-800s in 2014 and 2015.
PSP buys airports interests
Canada’s Public Sector Pension Investment Board is diversifying further, unveiling a deal to buy into several airports for $1.4-billion (U.S.).
PSP Investments is acquiring the airports business of construction group Hochtief, gaining stakes in airports in Athens, Budapest, Dusseldorf, Hamburg, Sydney and elsewhere, The Globe and Mail’s Bertrand Marotte reports.
Earlier this year, the pension group took a half stake in the TD Canada Trust tower in downtown Toronto.
Streetwise (for subscribers)
- Dimon's role set to dominate JPMorgan annual meeting
- Partners REIT in public spat with its own trustees
- Canaccord tries to adapt amid resource slump
ROB Insight (for subscribers)
- For experienced investors only: how to play a short-covering rally
- Thatcher cabinet minister says U.K. should leave the EU
- Digging for stocks that are cheap on cash flow
- As Calgary's skyscrapers reach higher, the foundations are beginning to crack
- JPMorgan needs independent chairman, new directors: Glass Lewis
- Brazil's Azevedo selected as next WTO director: diplomats
- Molson Coors profit plummets
- Bitcoin virtual currency scrutinized by U.S. derivatives regulator
- George Weston posts 34% profit increase, hikes dividend
- Husky profit sinks 9% on lower oil prices
- Microsoft tries again, plans revamp of maligned Windows 8
- Germany sees surge in immigration from crisis-hit Europe