Quick and cheerful updates on Jacques Clément and Don Barwick both of whom are sounding much stronger, in better health and spirits, were followed by a highly condensed photographic and verbal account of Ron & Nancy’s (Not the Reagans) recent tour of Argentina, Uruguay, the Falkland Islands and the great Falls of Iguaçu.
The economy & markets
Chil Heward
has recently returned from his annual fact-gathering trip to the U.K., with special emphasis this year on finding experts to counsel the McGill Pension Plan on Southeast Asian and emerging markets. Armed with his usual formidable array of facts, figures, opinions and invaluable ’scrapbook’, he presented his analysis of the state of the economy, with, as usual, a unique perspective from London
Whether we are at a crucial point in a forty-year cycle, in the fallout of the folly of predictable Federal Reserve decisions, the victims of the greed of both investors and lenders in the U.S. real estate scandal, or other possible causes, the ripple effect of the meltdown in the U.S. is being felt around the world.The U.S. appears to be heading to a 2% interest rate. With this and rapidly rising commodity prices, Bank of Canada prudently reduced interest rates in order to prevent the Canadian dollar from soaring even further. He and other experts track the parallels in the price of oil and the Canadian dollar – they are soaring in tandem.
Largely due to the demand for our natural resources, the T.S.X has been doing exceptionally well with the exception of the banking sector, which, because it occupies such a prominent spot in the index, has tempered the otherwise relative strength of the market. What happens in the U.S., however will ultimately affect the world. A deeper recession in 2009 is highly likely with a profile similar to 1990-91 when some of the banks went under. Some experts are forecasting that over the next year and a half, we will again see banks going bust and requiring a major bailout from the Feds. This will force rates down to 2%.
There is especially great concern over the emerging market banks [ADRs in Focus: Emerging Markets Banks “The Bank of New York Emerging Markets ADR (American Depositary Receipt) Index _ which includes shares of companies based in China, Mexico, Brazil and more _ lost 8.1 points, or 2.4 percent, to 332.87.]
Canadian banks have been doing poorly including the Banks of Montreal [Canada Stocks Fall on Credit Concern, Led by Bank of Montreal] and Nova Scotia. It is believed that Bank of Montreal and some others are walking away from the restructuring plan known as the Montreal Proposal and headed by Purdy Crawford. Will the Bank of Canada will be forced to bail out the banks’ customers, many of whom are in dire straits Uncertainty gathers over ABCP fix
It is likely that the volatility will continue over the next six or seven months as we head into the U.S. election in November. Many are worried about NAFTA and can only hope that in the face of threats from the Democratic candidates, the Canadian government reminds the U.S. that renegotiation of NAFTA could mean renegotiation of their oil supply.
As often noted on Wednesday Night, a bright alternative to the vagaries of the North American economies is the emerging markets, countries like India and China that are experiencing remarkable growth.
There continue to be reservations about is the future of China - is there a China bubble? - and its current huge program of infrastructure construction some of which Gerald Ratzer documented last year. There is concern that the winter has been severe leading to a large increase in gas and coal, construction and high food prices. This, in addition to the disparity in income between wealthy and poor, causes some concern about the possibility of social unrest in that country in the post-Olympic period.
Market technical research indicates that 2008 will be a good year, despite problems. There is a 40-year cycle; resources move about every 40 years and the U.S. market has a peak about every 40 years. Looking back to the 1968-70 period, it is apparent that investors must be very selective now. Gold continues to be a good buy, as demand in the populous emerging markets, China and India, continues to grow. Overall, technical analysis and a more fundamental approach agree that resource and metal companies are recommended, along with companies that will benefit from the demand for renewal of infrastructure. The technical analyst also looks for stocks that have been languishing for some time and are ready for a break-out, while the fundamentalists will often agree because the company shows a good balance sheet.
Canada’s commodities
Alberta and Saskatchewan have certainly profited from the world thirst for petroleum, and with the rising concerns over the environmental degradation caused by the tar sands, there are interesting investments in technology designed to cope with the environmental problems. Much of Quebec’s subterranean wealth has yet to come into its own because much of it lies buried under the soil of the yet-to-be-developed North. With rapidly increasing construction of roads and infrastructure over then next ten years, Québec will join in the prosperity of the west.
Great disparities continue to exist in Canada. The rise in commodity prices is not accompanied by general well-being of Canadians (current estimates are that 1/3 of Canadian households are living below the poverty line, 24% of those who seek jobs cannot find one, etc.), our infrastructure is in tatters and the government imposes no requirements that foreign owners maintain a value-adding operation to Canadian holdings.
Beryl’s excellent adventure
Before describing his new venture Beryl Wajsman shared a curious coincidence - his discovery of and contact with a French cousin, Patrick Wajsman, the founder and director of Politique internationale, a French political affairs journal, dedicated in particular to international relations. Their respective careers and political thought have been strangely parallel, although Beryl readily admits that he has more than met his match in Patrick’s ability to self-promote.
Following his success in turning The Suburban into a regional paper with a solid advertising base, Beryl approached the owners with an offer to purchase, as it became evident that they did not share his vision of the paper as a Village Voice of the Right. When the negotiations failed to advance, he set out with a group of investors to start a new bilingual Montreal bi-weekly, the MetropolitaIn. The project which is dedicated to news analysis, opinion, editorials on the arts, social and political affairs, business BUT NO SPORTS , has attracted some 2000 contributors of a caliber not seen since Cité Libre and will change the discourse in Québec and thus Canada. Articles (there are already more than 60 in inventory) will not be translated, but published in the language they are written in. It will be launched in April, but Beryl will keep us advised of developments in the interim.
Note
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QUOTES of the EVENING from recent Wednesday Nights
It’s not a Bush problem, it’s an American problem. He is playing double or nothing. He is trying to shift the responsibility from the Coalition to the Iraqis
New York City has more police officers than Iraq has troops
Monday, March 10 Sun has set on banks' golden age, firm says
25 years of unprecedented prosperity. Financial sector faces much leaner times, Montreal's Bank Credit Analyst predicts ..."The blow-up in the markets for subprime paper and other structured products represents a watershed event in the financial markets," said Martin Barnes , managing editor of Bank Credit Analyst. "Financial shares will likely lead the next equity market upleg, but any outperformance will be fleeting. The financial sector's share of corporate profits and market capitalization is set to shrink significantly in the coming years."
Andy Nulman 
BBC
 "Louise des Trois Maisons")
 "click for Diana T. Nicholson")
Wed1357 invite 
Wed1358
Bloomberg
get player
