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Forget China: This Extremely "Developed" Country Just Suffered Its Biggest Money Outflow Ever
While understandably all eyes have been fixed on every monthly capital outflow update from China (even the ones that the Politburo is clearly massaging), few have noticed that one of the biggest total outflows currently in the global developed economy is taking place right in America's own back yard.
According to BofA's Kamal Sharma, Canada’s basic balance - a combination of the capital and the current account: a measure of national accounts that spans everything from trade to financial-market flows - swung from a surplus of 4.2% of GDP to a deficit of 7.9% in the 12 months ending in June. That’s the fastest one-year deterioration among 10 major developed nations.
Citing Sharma's data Bloomberg writes that "money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver." In fact, based on the chart below, the outflow is the fastest on record.
"This is Canadian investors that are pushing money abroad," said Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York. "The policy in Canada the last 10 years has greatly favored investments in energy. Now the drop in oil prices made all that investment unprofitable."
The reasons for the accelerating otflows are familiar, or mostly one reason: the collapse in crude oil, among the nation’s biggest exports, has dropped to half of its 2014 peak. "The slump has derailed projects this year in Canada’s oil sands - one of the world’s most expensive crude-producing regions. Royal Dutch Shell Plc’s decision to put its Carmon Creek drilling project on ice last week lengthened that list to 18, according to ARC Financial Corp."
Worse, there does not appear to be any improvement, despite the recent stabilization in Brent prices:
More recent data on where companies and mutual-fund investors are putting their money show the trend extended into the second half of the year, suggesting demand for the Canadian dollar and the country’s assets is still ebbing. The currency is already down 11 percent this year, after touching an 11-year low against the U.S. dollar in September.
Where is all this capital going? Canadian companies have been looking abroad for acquisitions. Royal Bank of Canada is expected to close its $5.4 billion purchase of Los Angeles-based City National Corp. Monday, its biggest-ever takeover. It’s part of a net outflow of C$73 billion this year for mergers and acquisitions, both completed and announced, according to Credit Suisse data.
Canada's stock market confirms this trend: nine of the 10 best-performing companies on the country’s benchmark stock index in the past two years have favored buying growth abroad rather than expanding at home.
Individuals are following suit.
"While international appetite for Canadian financial securities has held steady this year, domestic mutual-fund investors have pulled money from Canada-focused funds and plowed it into global choices for six straight months, the longest streak in two years, according to Investment Funds Institute of Canada data compiled by Bank of Montreal."
Bloomberg calculates that more weakness for the CAD, and more capital outflows, are on deck as the Canadian dollar has to get cheaper to make Canadian businesses outside of the oil industry competitive enough with foreign peers to make them worth investing in, according to Benjamin Reitzes, an economist at Bank of Montreal.
Canada's economic weakness was recently confirmed when it reported two months ago that it had entered its first recession since the financial crisis.
Earlier today, Canada's manufacturing sector got even more bad news when the latest RBC Canadian Manufacturing PMI survey dropped to a record low in October, with output, new orders and employment all declining since the previous month. Moreover, new export sales dropped for the first time since April, with survey respondents noting that weaker global economic conditions had weighed on new business volumes.
In other words, not even the tumbling loonie is helping boost exports: a bedrock assumption of modern monetary policy.
Meanwhile, input costs rose at a sharp and accelerated pace in October, which placed pressure on operating margins and contributed to a further slight increase in factory gate charges.
Finally, the country is expected to post its 12th straight merchandise trade deficit this week, according to every economist in a Bloomberg survey.
Perhaps it is ironic: a year after we predicted the death of the petrodollar would cripple Emerging Markets around the globe (something which was confirmed in the China devaluation/EM debt crisis of 2015) the nation most impacted by the collapse in oil is neither China, nor - as many had expected - Russia, but what to many is a bedrock of economic stability: the AAA rated Canada.
How long until not Putin but Harper's successor is seen in the White House, begging Obama to put an end to QE so that the US shale sector, thanks to infinite junk bond refills courtesy of the Federal Reserve and "investors" allocating other people's money, will mercifully die and prevent Canada's economy from sliding from recession into an outright depression?
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Isnt Trailer Park Boys based on a true (Canadian) story?
Canada:
Climbing up a shit-rope.
<Cdn more economic trouble Russia
<Cdn more economic trouble Greece
Is this the idiot country that follows US put sanction to Russia?
http://www.international.gc.ca/sanctions/countries-pays/russia-russie.as...
https://www.rt.com/business/270661-russia-canada-economic-sanctions/
Well.. nice to know, you're doing "better" than Russia..
https://www.rt.com/business/320522-russian-manufaturing-growth-october-pmi/
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Bwahahahahahahaha..
how's the tar sands oils doing there in your hell's hole, dude??
https://www.youtube.com/watch?v=PyB_XLZPKd8
"Canadian prime minister-designate Justin Trudeau confirmed his country would end their combat participation in Syria and Iraq."
It takes time to extricate a country from the spider web of deceit and it will NOT be painless. where are you from, kab? If not Iceland, take blame for being stupid as a rock for calling out a nation which just elected a president who may allow the middle class a chance to live.
Ending official COMBAT participation is not the same as ending PARTICIPATION. Obama made a similar announcement when he was elected, to withdraw "combat troops on the ground" and leave "trainers" and "advisors." It's the same BS. There is no "wedge." The game continues.
And no offense, but it's a little late to be identifying the new PM's election platform. "Deficit spending to stimulate the economy?" We aren't stupid.
Canadians are prostituting in America to make a living
Sunny Leone
Almost half the US population are whores. Must be tough competition!
Then they have really hit bottom because Americanos are prostituting all over Asia to make a living. Some "working girls and even boys" are here in Singapore and many in Japan and Thailand to cater to those rich that want Westerners.
Well this is what happens when you blow a debt bubble the size of the one that Canada has presently. In real estate and everything else to boot. It simply doesn't end well. My fellow Canucks will learn what I am talking about very soon. It is called mean reversion and debt implosion. I have been saying this since 2006 and have been mocked rather well. I would rather be wrong on this one but unlike our southern neighbors we can't print our way out of this one and it is far too big. Game over.
Re: "can't print our way out..." <-----That's what's proposed. It's all the rage. I mean, come ON.
In the (Kondratiev) autumn, (maple) leafs are falling. Winter coming up soon...
Just not enough hookers and blow in the great white north to puff up Canada's GDP.
Dont forget the coming storm of ULTRA LIBERAL GOVERNMENT TAKEOVER!! They just elected a nut job!!
https://www.youtube.com/watch?v=Judj_p-9Lis
There will be no HOUSING BUST in Canada for a very simple reason.
Canada is a safe place to buy property.
While the rest of the world is burning people with money are flocking to Canada to buy up housing as investments still even with historically high prices.
Bugger thy neighbour theory in action folks ....
They said ChinCouver would bust and 20+ years later ... still capital inflows are pumping the market ...
CHINA loves Canada !!!