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The Next Domino: CANADA
The Federal Reserve has kept its zero interest rate policy (‘ZIRP’) for several years (and much longer than originally anticipated) whilst the European Central Bank seems to be getting serious about doing ‘better’ and has now reduced the deposit rate at the ECB to -0.30%. It’s already remarkable a central bank doesn’t seem to have any problem to reduce interest rates into the negative territory, but now Canada is considering making the same step as well.
Source: tradingeconomics.com
Even though Canada’s benchmark interest rate is still relatively ‘high’ at 0.5%, the governor of the Central Bank of Canada has now hinted at a negative interest rate as well. That’s interesting, but not really surprising when you look at the current situation of the mining sector and the oil and gas sector, which have been important backbones of the Canadian economy for quite a while.
The gold and copper price aren’t really giving mining companies a lot of hope and not only have the corporate tax payments from the sector been reduced, several mines have announced layoffs, reducing the employment rate in Canada. That’s tough luck, but the oil and gas sector might be in an even worse shape, and especially the province of Alberta will be in for a lot of pain in 2016 (and we would honestly be extremely surprised if the GDP in Alberta would increase ). Unfortunately this will create a ripple-effect throughout the entire Canadian economy and the Toronto Stock Exchange has lost 17.5% since April of this year which is more than three times as much as the loss of the Dow Jones Index in the same time frame.
Source: stockcharts.com
Just have a look at the oil and gas price, and it shouldn’t surprise you the majority of the oil and gas producers is ‘underwater’ and won’t generate a profit this year. To make things even worse, some companies won’t even be able to generate a sufficient amount of operating cash flow to fund the sustaining capital expenditures to keep the oil and gas production at a stable level. And the remark made by John Arnold about the US oil and gas sector is also pretty much valid for the Canadian energy sector. Once the ‘good’ hedges will start to unwind, the sector will be in a lot of pain.
Source: stockcharts.com
And what do you think will happen next? Indeed, several oil and gas exploration and production companies will be unable to avoid bankruptcy and this could result in a domino-effect in the Canadian economy. Not only will the GDP decrease, the unemployment rate will increase and more and more people will be unable to make their mortgage payments. The Bank of Canada expects its economy to grow by 2% in 2016, but we are afraid that’s an overly optimistic stance and only based on the weak Canadian Dollar which obviously enhances the export numbers. Just have a look at how the junior oil index is behaving (the next chart is the Junior Oil Index ETF, issued by the Bank of Montreal).
Source: stockcharts.com
Long story short, if the Central Bank of Canada doesn’t do anything (literally ‘anything’), Canada could be in for a shocking 2016 if the oil and gas prices don’t recover. 2015 was alright as the majority of the O&G companies had some decent hedges in place and the weakening Canadian Dollar also helped the sector, but the total amount of hedged volumes as well as the hedge prices will go down from next year on and the entire sector will be in a lot of pain.
So the Canadian central bank very likely won’t have any other option but to reduce the interest rate to at least incentivize banks to not withdraw credit facilities from these oil and gas companies. Should the central bank do nothing, Canada will be in an extremely horrible shape from next year on, and the GDP reductions might actually spiral out of control as a vicious circle cannot be excluded at this point.
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Actually most smart Americans and Canadians go to Mexico for Dental and Health care.Prices are really good.You have to be careful where you go but the best Doctors are trained in the European Union and in the U.S. and also speak Spanish and English.I talk to lots of people that had a lot of dental work done while they were also on holidays that would have cost a fortune anywhere else.Cash is King in Mexico.What the government doesn't know isn't going to hurt them.
A friend of mine has a dental practice in El Paso, Texas. He says about a quarter of his patients see him to repair the damage done by visiting the inexpensive, yet "wrong" Mexican dentists, which is easy enough to do if you don't know who the decent ones are.
On top of the financial mess, Canada has just appointed a Sharia Law supporter as its Junior Foreign Minister. He should get along well with Obama! LOL
http://tsecnetwork.ca/2015/12/03/sharia-law-supporter-omar-alghabra-is-t...
I say we put him with the new defense minister and let the two of them duke it out for king of the hill.
http://www.cbc.ca/news/canada/british-columbia/harjit-sajjan-badass-cana...
Long Beaver traps
The steel ones ,not jewelry
No one has mentioned the debt that E&P companies have to the banks its GIANT. Absolutely GIANT, soon to be in default
no no no no. Canada is in great shape. They have wonderful huge Canadian Healthcare. Just ask Bubba Trump, he loves it
Canadian healthcare is in great shape? Is that why they call it "line up and die"?
Being a Canadian, and having experienced the system first hand , I would say it works well, and have had few, if any delays, and the standard of care is excellent.It might not compare favourably with the very best the US has to offer, but then, it's not going to bankrupt me either.
And with 0bozocare it's "Bend Over and Get Fucked in the Ass"
Legal weed will save us.
yes - weed will help ease the pain of your cognitive dissonance.
keep making that maple syrup
I love all the bashing of Justin Trudeau and in Alberta, the new NDP government.
These folks have just taken over. The mess was made over decades. Also, no level of Canadian government, old or new, tells Saudi Arabia and OPEC what the production rates will be. Knee jerk idealogues that blame the ones out of government, or out of country, when things go bad during times their particular political party is in charge. But then shift all blame to the party in charge, if it is not the one they like. It's politics like religion. My beliefs are always right, even if things are going wrong. It is all the other devils blocking us. Idealogues are idiots. Denying or deflecting whatever facts might conflict with the golden narrow path they blindly trudge. Government has to deal with reality, not ideology. Unfortunately, too many voters think that one size, one plan, fits all. And if it doesn't, it is some kind of sabotage derailing it. Stupid voters get the stupid government they want. Occasionally a government can work around the democratic majority of morons and still keep things running.
Name a single NDP provicial administrtion that has EVER produced a balanced budget.
Take you time, no need to hurry.
Standing by.
Squid
What would a balanced budget accomplish in this scenario/circumstance.
The outcome for Canada would be exactly the same no matter who had been running thing in Canada over the past few decades.
LMAO!....Negative interest rates......Only a government educated moron could even concieve of such a thing....
Yeah, I`m sure corporations and the wealthy will just sit there and be stolen from.....
Just another cockeyed tax the rich pipe dream from the socialist government is god crowd.......
What worries me most is that the bank of Canada has a 0% reserve policy.
The reserve ratio for all banks in Canada is 0% since 1996, thanx john Creatin.
That means if just 1% if depositors come for thier cash...its done.
Bank run...ie. Over.
Squid
This is exactly why we are in an asset bubble.......if you can't hoard cash then you spend it before it's gone.
Not a single ounce of gold at the Bank of Canada.
We can sit and talk a long time about this one. In Canada, the US, and at other banks elsewhere, we read about fractional reserve banking. Having 'substantial' reserves is what is supposed to make a bank safer and more resilient. From a banker's point of view, it's money just sitting there they'd like to gamble with, and from what I see and hear that's pretty much what they do with the reserves anyway. In the US, they put things like credit card debt on the asset side of their balance sheets, because they are a "receivable". But for most people out there, once they spend the credit card money, it's gone. There's no asset left. Like a Bahamas vacation. How does a bank claw that back if the credit card holder defaults? Canada, at 0% (if that's their official policy) is at least being honest about their criminality and Ponzification of their system. The US bankers just put on the dog and pony show until the system gets punched in the face.
Interesting article, for I've been following the Toronto Stock Exchange. I think further weakness in the Canadian economy and stock market is likely.
However, recessions end and bull markets begin again. But I plan to sit out the Toronto Stock Exchange for the next 4 months. Then I will see if my indicators give a buy signal.
Canada's future is one of balkanization and/or being the first 'nation' to openly submit to the neo-UN/ZOGNWO.
I sure like their gold and silver maples :)
Bah, who wants to look at that evil hag when stacking?
I Hope Justin Tries negative interest rates....
that will crush my mother who is living off interest but it will also crush wonder-boy Justin.
A an aside, my Mom voted for Justin's dad back in 1971 and I have NEVER let her forget it.
Canada's demographic is OLD....lots of people living off interest. Go ahead Justin, try negative interest rates...you'll be a one term wonder boy. Liberal constituencies will be dropping by-elections like flies.
Squid
His name is Beavis not Justin. Don't be so disrespectful...
I think his real name is Jethro, but you might want to check on that one. LOL
Living a stone's throw away from the Peace Bridge at the time, I too, followed the asinine career of Pierre.
Trudeau was a complete failure - but the fawning liberal kiss-ass press loved him - and his wife was fuckable, tabloid fodder, and the buck toothed bastard somehow had "sex appeal".
I love Canada - but God their politics are fucked up bad. So is their fucked up health care effluvium - holy shit.
Canada will be in a lot of trouble very soon. Already suicide rates in Alberta are beginning to spike. Canada could easily find her way out by reinstating the BOC as the public bank it was ordained as, and could theoretically wipe out most or all of all levels of govt. debt in short order if the fed govt wasn't in the pockets of the banksters. The new govt. has been given the task of wrecking Canada's social construct-contract and heading as quickly down the same road as Greece as possible without the people becom,ing too resistant...Canada still has a large portion of unionized labour, but without any political representation or political power so it could get very messy if the labour leaders haven't been bought off.
Oh boy....
"Canada will be in a lot of trouble very soon."
Canada has been in alot of trouble since 1970.
"Already suicide rates in Alberta are beginning to spike. "
You believe the CBC?
"Canada could easily find her way out by reinstating the BOC as the public bank it was ordained as,"
Parliament owns the Bank of Canada. WTF are you talking about?
"and could theoretically wipe out most or all of all levels of govt. debt in short order if the fed govt wasn't in the pockets of the banksters. "
Where to begin.....Do you know, Miss Frankely Scarlet, who owns the BULK of Canadian federal debt? Its not the banks miss missile scientist, its pension funds. Yes, all your retired uncles and aunties, that's where their pension money comes from. And you're going to default on the bonds? Just make sure you tell them whose idea it was missey.
"The new govt. has been given the task of wrecking Canada's social construct-contract and heading as quickly down the same road as Greece as possible without the people becom,ing too resistant"
What social contract? What are you talking about?
"Canada still has a large portion of unionized labour, but without any political representation or political power so it could get very messy if the labour leaders haven't been bought off."
I guess university is out for the term. This is first year poly-sci gibberish.
Sorry I even answered....90 seconds of my life wasted.
Live and learn.
Squid
Canada has been in alot of trouble since 1970...and since coming off the Gold Standard the Federal Reserve has done similar damage to every Country by exporting it's rampant inflation
Parliament owns the Bank of Canada? WTF are YOU talking about? The BOC is 1/2 owned by the British Monarchy, whose representative is the Governor of Canada. All public debt is issued by Private banks, not the BOC. This is a huge problem
Besides your head......whats your point?......
Never mind the gibberish.......Canada will print, just like everybody else.....
Just like in The U.S.....everybody will get their social security check.....The printing press will see to that...Of course your government subsistence check might not buy a can of beans, after all that printing.....But, you will still get your check......
You are correct, you will still get your cheque.
WHat it will buy? Well, not much by then.
Squid
Never fear. Prince Justin is taking the lead on promoting new growth industries for Canada. Debt and Islam.
Check out the new Junior Foreign Minister. He is a Sharia Law supporter.
http://tsecnetwork.ca/2015/12/03/sharia-law-supporter-omar-alghabra-is-t...
Niall, shaom.a little miffed that your favorite Zio lapdog harper is goe?
Canada has to stop all imports of foreign oil and gasoline. That will help a bit. Next, raise the internal price of oil and gas to a level that will help support our oil and gas industries weather the storm a bit better. But, do not let that increase the gouge factor that is already being charged for gasoline for instance. As part of the planned infrastructure boost, build new processing for petroleum based finished products. Stop exporting so much raw crude. Get as much employment and return on every drop of fossil fuel. Get totally self sufficient. Get unemployed fossil fuel industry people into retraining. Get them into infrastructure improvement jobs. Hell, just divert the unemployment insurance that would be paid to idle workers and pay that to have them clean up the land and retention pools/lakes that the oil sands companies haven't been keeping up with. If things are idling, now is the time to catch up on that. There are better ways than just paying people to sit idle and let industry members collapse.
I see your socialist leanings have you suggesting more defecit spending and manipulation of markets will help the situation, bravo!
LMAO!.......That is a thoughtful, cogent, well thought out response.....Right up to the point that you suggest the government perform all those complex tasks.......And then your idea just became laughing stock.....Maybe they will do all that as well as they do Canadian healthcare.......
Yeah, some of the oil and gas workers can become fishermen in the Maritimes. Oh, wait...
the Liberals have said they will go deficit in order to repair and expand infrastructure. So there can be some good work available. A lot of those ex fishermen came to Alberta and Saskatchewan for oil work. There is a lot of work that needs to be done on the infrastructure. We have to go deficit to get it done, because we haven't had realistic tax rates and investment in it for too long. We put it off. Now is a good time to get it done.
This is a pretty fair assessment of where we are in Canada right now, however, it is important to remember a few thngs. One, we have a balanced federal budget. Two, our banks, which collectively have over 5 Trillion in assets have only 100B of exposure to the oil and gas sector, and three, we have huge reserves at the Bank of Canada and all of our accounts are paid in full. If we didn't earn another penny of foreign income, we could last for 28 months with current reserves. Europe, the US, China, Russia and Brazil would love to be in our position right now.
"One, we have a balanced federal budget. "
You HAD a balanced federal buget. Yust elected wonderboy and he's said flat out he's going to bankrupt his own children.
"Two, our banks, which collectively have over 5 Trillion in assets have only 100B of exposure to the oil and gas sector"
Assets? Marketed to market or marked to fantasy?
Canada, at teh Feneral level, it paying 33 cents of every tax dollar in interest. If you balance the budget you STILL pay 33 cents in interest, until the end of time. If you want to pay it down you have to produce something called a SURPLUS. You pay all your expenses PLUS interests PLUS principle. There is no plan to do that. The only plan is the print, print, pirnt, print.....
Lovely.
Squid
I'm Canadian too, and this comment is perfrctly indicative of just how delusional Canadians are. Dark Daze and millions more in Canada are in for a nasty surprise come 2016.
I'm Canadian, but I am not in Canada, and I'm old enough to have seen multiple cycles of truly insane financial engineering not the least of which were 22% mortgages in 1980 that were going to destroy our economy. At the end of the day, we have a fully funded pension plan, a fully protected mortgage market, banks with the highest levels of Tier 1 capital in the world, resources, an educated population that isn't running for their lives from the government of the police who want to shoot them down like dogs and we are the only country in the world with not one, but two Yuan trading hubs. You are deluding yourself about the strategic importance of Canada.
" At the end of the day, we have a fully funded pension plan"
Oh shit, did I laugh when I read that. Believe what you want buddy.
here is a fully funded pension plan:
1. You have an account number that is your pension,
2. You can put up to 40% of your income in that account which comes right off the top of your taxable income,
3. You can draw down this account after you are 65 but you may NOT draw it to below zero,
4. During your working life you can use the funds to purchase real-estate, up to 10% of it into gold, or approved blue chip stocks,
5. If you should die before you have collected any or all of it, you bequeath the remainder of what is left to you heirs.
my Dad passes 18 months ago and Canada pension was ecstatic,,,,they get to keep anything that is left (of course there isn't anything left, Justin's Daddy spent that all in the seventies, but I digress).
If the money was actually there, you get to will it off. You can't be cause there is no money there, it comes out of general revenues.
if you leave your pension to the state, prepare to get screwed.
Squid
I regret to burst one's bubble; unfortunately, fully funded pensions, fully protected mortgage markets, banks with Tier 1 capital, and resources can all be stripped and looted in a relatively short amount of time.
Think back to the USA ca. 1980, when it had a supposedly fully funded social security (pension plan), and even other private pension plans had no reason to even dream of any problems until ZIRP, and then the prospect of NIRP came about.
The USA in ca. 1980 also was the largest creditor, now it is the largest debtor.
The USA once was the largest oil producer, miner, and industrial nation, and so on.
Also, the RCMP / police are really no better than the police in the US.
http://rabble.ca/blogs/bloggers/michael-laxer/2014/12/time-has-come-to-s...
http://www.cracked.com/blog/5-stories-that-prove-police-are-just-as-terr...
http://www.huffingtonpost.ca/news/police-brutality-canada/
Two, our banks, which collectively have over 5 Trillion in assets have only 100B of exposure to the oil and gas sector
lmfao. The collective Canadian Banks' exposure to the main sector of the Canadian economy is 1/50 (2%) of their assets?
Total bullshit statement dude.
Yes, I'd say given the stats, the banking sector relies upon at least 20% of it's economy on pure oil/gas/manufacturing and their main sector, housing is dependent upon the afore mentioned sectors. This is about 30% of the economy, the rest of the economy is dependent upon that 30%. And the banks are dependent on the public sector, wich in turn is dependent upon the banks.
Rock and a hard place.