What an unusual, unhappy year. The global economy slumped, and just as it was showing faint signs of life, it was sideswiped by the Sept. 11 attacks. That was followed by the terror of anthrax and by the threat in Afghanistan, an unlikely combination if ever there was one. The financial markets continued to swoon, and the Canadian dollar was so relentlessly weak that at least one major economist, Sherry Cooper of BMO Nesbitt Burns, "finally threw in the towel'' and endorsed the concept of a common currency with the U.S.
Canada's bellwether technology stock, Nortel, slid even further, from $59 at the beginning of the year to the $13 range, as the once revered and now (in some quarters) reviled CEO John Roth departed with millions (he raked in $100 million [U.S.]in 2000 alone). Energy trading powerhouse Enron, which once had a market value of $80 billion, vaporized; CEO Ken Lay took home $88 million over the past year as a reward for his dubious efforts. One wonders when the corporate world will catch on to the fact that investors are happy to see executives share reasonably in the rewards of success as long as they also partake in the pains of failure.
It was a dismal year for initial public offerings, so there were few new corporate names in Canada. Many familiar names disappeared to U.S. acquirers, particularly in the energy sector: Westcoast Energy, Gulf Canada, Anderson Exploration and Chieftain International. And what could be more delicious than the fact that Merrill Lynch, which advises others for hefty fees on how to invest their money, brilliantly sold Merrill Lynch Canada for about half what it paid to buy it only three years earlier. (Memo to Merrill: Try to get this straight--it's buy low and sell high.)
A final piece of idiocy, though a sad one: If Enron employees thought they had hit bottom when they lost their jobs, they were mistaken. It turns out that 62% of their pension plans were in Enron securities. One might also ask what the fine folks at Arthur Andersen were thinking when they audited Enron's books.
The year 2001 might have been unpredictable, but that won't prevent me from indulging in the parlour game of predicting what we are likely to see in 2002:
1. The recession will end sooner than most observers think. The average recession since 1945 has lasted 11 months. Since this slowdown began last March, it should be over by February, aided by the lowest interest rates in decades.
2. "Events, data make situation look far worse than it really is,'' was the headline on one of a series of columns I wrote for The Globe and Mail immediately after the events of Sept. 11. And indeed, the markets did extremely well in the weeks following the attacks. I believe that they will continue to do reasonably well in 2002, despite plenty of volatility.
First, the markets will continue to anticipate an economic turnaround. Second, it would be very unusual for the markets, after two bad years (something that hasn't happened since 1973-74), to do poorly again. Investors will have to get used to the fact that returns for much of the 1990s were unusually high, and prepare to revisit average historical returns of 7% to 12%. With inflation so low, that's still pretty good.
3. The price of oil will stabilize around the $20-a-barrel (U.S.) level, as global demand remains restrained. Russia's newfound ability to pump seven million barrels a day, and its hesitation to play ball with OPEC, will help to keep prices low.
4. Canadian sovereignty will be quietly undermined by pressure from the U.S. to agree on immigration and border policies. While the debate over free trade went on for years, there has been almost no debate over these equally important developments.
5. No credible alternative to Air Canada will emerge. Canada's national carrier, whose monopoly position is a creation of federal policy, will limp along. Ottawa will not have the vision to question whether or not a small country like Canada needs its own national carrier.
It would be hard to envisage a more elegant setting: three tables for 10 people each on the second floor of Tiffany & Co., the jewellery store, for a Canadian Foundation for AIDS Research charity dinner. Imagine, then, the effect of the arrival of the hosts of our table, Jasmine Herlt, CANFAR's former executive director, and her husband, Doug Steiner of Venturion Group. Doug, the only (still employed) Bay Street player who can get away with going to Leafs games dressed as Colonel Sanders and to the Brazilian Ball with a gorilla mask, appeared decked out in a baby-blue tux with lapels the size of boxcars and a large, floppy bow tie.
"What did you do, shoot a chesterfield?'' asked Barbara Hackett, the very amusing wife of Rogers Cable guru John Tory (who was kept busy fielding complaints from Rogers' on-line customers). It turned out that Doug had bought the outfit at a secondhand store for $125. While it might be, as one diner quipped, that "Every day is Halloween for Doug Steiner,'' we all had a great time, and the dinner (and others like it along Bloor Street) raised $320,000 for AIDS research.
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