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Briefing highlights

  • Studies underscore debt woes
  • Stocks, Canadian dollar, oil at a glance
  • Xerox weighs bid for HP: report
  • Barrick profit climbs
  • SoftBank takes huge hit
  • Ontario fiscal update in spotlight
  • What analysts are saying today
  • Required Reading

Debt woes

Several recent studies and reports make for awfully depressing reading, underscoring the struggles of many Canadians to make ends meet.

It’s not quite O. Henry’s The Gift of the Magi, but one report, from Equifax Canada, shows more 55 per cent of Canadians polled plan to spend less on holiday shopping given their hefty debts.

“These survey results illustrate that many people are feeling the pinch and plan to rein in their holiday purchases this year,” Equifax Canada’s director of consumer advocacy, Julie Kuzmic, said in releasing the group’s study, done by Leger among 1,566 people.

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“If there’s a silver lining here, it’s the fact that most Canadians remain conscious of their debt obligations and want to avoid adding too much debt heading into the new year.”

Being conscious of obligations is one thing. Not being able to pay them is another.

And a major study by Toronto-Dominion Bank sheds light on that, finding that 32 per cent of those surveyed “are unable to pay all of their bills on time.”

Some highlights from TD’s “Financial Health Index,” which, with Ipsos, involved more than 10,000 Canadians:

  • Only 27 per cent of us are deemed “financially healthy”;
  • 54 per cent “spent more than or equal to their income” in the past year;
  • 15 per cent are “financially vulnerable”;
  • Of those financially vulnerable, 41 per cent “have less than one week’s worth of expenses saved”;
  • 31 per cent “say they have more debt than is manageable”.

(There’s much more to the TD study than my snapshot. You can read the entire thing here.)

Then there’s the latest look at insolvencies by the Office of the Superintendent of Bankruptcy Canada.

It showed the number of insolvencies easing 1.8 per cent in August from July but climbing 7.7 per cent from a year earlier.

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Insolvencies break down into two groups, the first being bankruptcies and the second being proposals, by which consumers restructure their debts in agreement with lenders.

Bankruptcies declined 3.1 per cent in August from a year earlier, to 4,492, while proposals rose 16.2 per cent to 6,792.

Separately, Credit Canada and Capital One Canada released a survey this week showing that 32 per cent have higher debts than last year.

That “balloons” to 44 per cent for millennials, they said of the survey of almost 1,600 people by Maru/Blue.

“Of those that have seen an increase in debt since last year, one in three (33 per cent) have seen it rise by more than 20 per cent,” Credit Canada and Capital One Canada said.

“A small but significant number of that population (8 per cent) have increased their debt by more than 50 per cent,” they added.

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“Still, the majority of Canadians remain optimistic. Eighty-three per cent believe they have the tools, knowledge and resources to get out of debt, and 44 per cent say they will be debt-free in one or two years. Despite this, 52 per cent still report their financial realities have not improved year-over-year.”

And here’s an interesting tidbit: “Half of Canadians would feel ashamed to discuss their challenges with sticking to a monthly budget.”

Finally, a Leger poll of 1,593 people released by Rates.ca is interesting in that it shows 73 per cent will probably “make impulse purchases” for holiday gifts, but 40 per cent “don’t have a plan on how to pay for it later.”

Forty-nine per cent said they “overspent” last year because of impulse buying. And of those, 12 per cent went over by at least $500.

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Markets at a glance

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Xerox eyeing HP, report says

Shares of HP Inc. charged higher after the Wall Street Journal reported that Xerox Holdings Corp. is weighing a cash-and-stock bid for the computer maker worth about US$27-billion.

Xerox’s board discussed the possibility of an offer on Tuesday, the news outlet said, citing sources.

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What to watch for today

Key will be Ontario’s fiscal update.

As Bank of Montreal senior economist Robert Kavcic noted, Ontario’s fiscal fortunes have improved compared to what was forecast.

“In the meantime, the Ontario economy has tracked above expectations, with real GDP growth for 2019 and 2020 currently expected at roughly [0.2 to 0.3 of a percentage point] above the province’s budget assumption,” Mr. Kavcic said.

“As such, we continue to believe that the self-inflicted bearish sentiment toward Ontario is overdone,” he added.

“The question now is whether the province will let some better momentum ease the spending restraint, or if they will remain staunch ahead of potential future tax relief.”

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Ticker

Barrick profit climbs

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From Reuters: Barrick Gold Corp.’s quarterly adjusted profit nearly tripled, as the world’s second-largest gold producer benefited from higher gold output and prices. Adjusted profit rose to US$264 million, or 15 US cents a share, in the third quarter ended Sept. 30, from US$89-million or 8 US cents a year earlier. Gold production rose to 1.31 million ounces from 1.15 million ounces.

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SoftBank takes big hit

From Reuters: SoftBank reported its first quarterly loss in 14 years on Wednesday, whiplashed by an US$8.9-billion hit at its giant Vision Fund and marking a rare, humbling moment for CEO Masayoshi Son over his backing of troubled startup WeWork. The scale of the loss shows the risks in Mr. Son’s strategy of splashing out big on cash-burning startups. It has also cast a pall on his efforts to raise another massive fund. Over all, the group posted an operating loss of ¥704-billion in the July-September quarter compared to a ¥706-billion profit in the same period a year earlier.

Don’t spend big, German advisers say

From Reuters: There is no need for a full-blown growth-boosting spending program to deal with the German economy’s downswing, the panel of economists advising the government said, adding that automatic stabilizers should be left to do their work. In their report to the finance ministry, the five academic advisers said Germany’s constitutional debt brake, often criticized for limiting Berlin’s fiscal room for flexibility, left space for borrowing to help this happen.

Aramco embraces Petronas

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From Reuters: Saudi Aramco has approached Malaysian state energy company Petronas to participate in Aramco’s initial public offering, Petronas said, as the Middle Eastern oil giant seeks cornerstone investors for the listing. The approach comes as Petronas, officially known as Petroliam Nasional Bhd, nears the start of commercial operations at a US$27-billion refinery and petrochemical project built jointly with Aramco in southern Malaysia.

BMW profit rises

From Reuters: BMW’s third-quarter operating profit rose 33 per cent on stronger sales of sports utility vehicles as well as the absence of one-off factors that had depressed earnings a year earlier, the German luxury car maker said. The Munich-based company said its earnings before interest and taxes rose to €2.29-billion.

Also ...

What analysts are saying today

“The pain continued for Uber yesterday with the shares hitting a new record low after Monday’s Q3 numbers disappointed. The pain could intensify further today when the share lock up expires and 1.7 billion new shares come onto the market,” Michael Hewson, chief analyst, CMC Markets

“You can almost feel the enthusiasm drain away from the equity market. It is probably just some overtiredness, or disappointment at the lack of fresh trade war headlines, but stocks seem unable to keep moving higher. After the gains of the past month, this is hardly surprising, and, as suspected, the Vix is also beginning to move higher. The foundations of some mid-November volatility are being laid, even if this will merely provide a buying opportunity further down the line.” Chris Beauchamp, chief market analyst, IG

“Parliament will be dissolved today, paving the way to the Dec. 12 election and leaving markets to focus on opinion polls and election predictions for the next five weeks. The deadline for candidate nominations is next Monday and it should be clear by then whether the Brexit Party intends to stick to its pledge to stand candidates in around 600 (of 650) constituencies, which could be critical for Conservative performance. Using the bookmakers’ prices as a proxy, market confidence in a strong Conservative government has begun to wane slightly in the last few days, reflecting Labour’s rebound in most opinion polls.” Adam Cole, chief currency strategist, Royal Bank of Canada

“India is the world’s biggest gold buyer, but Indians have less money to buy gold these days. According to the latest data, the Indian demand for gold crashed by a remarkable 32 per cent from July to September amid the global economic slowdown that has taken a toll on Indians’ disposable income.” Ipek Ozkardeskaya, senior market analyst, London Capital Group

“Gold took a left hook to the chin yesterday, plummeting 1.7 per cent, the worst decline since September. Demand for safe havens fell out of style as investors continue to see fresh record highs with U.S. stocks, continued trade optimism, better-than-expected earnings, and rebounding data from Europe. Gold should still be supported by a plethora of geopolitical risks that include tensions in the Middle East, Brexit, and the inevitable conclusion that a phase-two deal [between the U.S. and China] will be much harder to achieve.” Edward Moya, senior market analyst, Oanda

Read more

Required Reading

GFL pulls IPO

GFL Environmental Inc. is pulling its initial public offering after institutional investors pressed the Canadian waste management giant to price its shares below the deal’s marketing range, Tim Kiladze writes.

China lifts ban on Canadian pork, beef

China has reopened its market to imports of Canadian pork and beef after a four-month ban in a move that signals a partial thaw in trade relations and will significantly help Canadian farmers. Steven Chase and Eric Atkins report.

The problem of high car payments

The affordability trick that a lot of new-vehicle buyers are using these days can backfire and result in much higher-than-necessary payments down the line. Personal finance columnist Rob Carrick examines the issue.

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