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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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lol, the 'Biebs' is actually a covert CSIS PSYOPS campaign that was purposely sent into American music culture to distract all the American girls from successfully completing their math homework before they go to bed at night. In brief, they work harder at math than American boys do, and they score higher on state exams, and university entrance exams, but if we can get them to listen to the 'Biebs' they end up failing on test scores which is advantageous to Canadians vying for Ivory Tower placements at US Universities.
Why ruin a good thing?
I KNEW IT! So maybe Taylor Swift was a mistake, then.
But who am I to question your wisdom?
Youuuuu haaaaaave the powwwwwer!
*bows reverently*
It will get worse after Trudeau ratifies TPP, drug prices will make suicide mandatory
It might be free, but you will die before you get treated.
You get what you pay for.. and the funeral costs are still private
CORRECTION
Canada's government offers WAITING for free healthcare, but NO commitments about the effectiveness of what you get or when you will get it.
Free is worth what it costs
Blows away the American "system"
wait....we have a system?
That must be why we were inundated with Canadians in our doctors offices every winter in Florida. They would go home for the required number of months & come right back. The ones I spoke to weren't raving about the Canadian medical care system. Long waits for services. The wealthy Canadians would come to Florida & pay for what they needed.
Waiting 9 hrs to see a doctor when you have a broken arm is not superior
had several broken bones and probably over a 100 stitches done in last 20 years and never once ever waited 4 hours, maybe 2 tops. Just had stiches done in mouth from a puck
went to emergency at 2 am, IN and OUT in under 45 minutes. You wait if there's a crisis or if a flu hits and the young and/or old clog the system otherwise Canada healthcare beats the USSA hands down. I've never heard of anyone dying on the sidewalk outside emerg in Canada because they didn't have insurance.!!
"Just had stiches done in mouth from a puck"
If that isn't Canadian, I don't know what is.
That's called triage. Broken bones don't get worse. This is why Justin wants to legalise it. Keep a J in your first-aid kit for the waiting in emergency rooms.
Still, you can't go bankrupt because of injury or disease (in theory) in Canada. It ain't free (unless you don't make enough to pay taxes - Gupta was wrong) but it ain't a death sentance either.
Canadian healthcare is an alternative to Darwinism. It may not be 'fair,' but it's humane.
On a cost basis, without a doubt. Canads will likely end up at about $5900 per capita this year in health expenditures. In the US, that number will be $9400 and we still have an uninsured population at near 10%. We have much shittier overall access, costs which are nearly double per capita, and outcomes when you really peel back the onion that are much aren't better especially among those 65 and up.
free? LMAO
Yes, Canada is screwed by Obama's war on oil to hurt Russia. A severely inflated housing market will ensure a meltdown in the Canadian economy.
Not to speak of the highest personal debt/income ratio in the western world.
Canada has had it coming for a long time. Some of my country-men need the smug smiles wiped from their faces.
Had to up-vote that one.
I used to spend a lot of time in BC, and always enjoyed listening to the greenies bashing the dirty, evil petroleum, mining and forest products industries.
Dude, that's like the fountainhead of Canadians' food, clothing and shelter.
Still, you've got a Trudeau in charge again now, so it's all rainbows and unicorns from here on oot.
Is that what average Canadian thinks?
As an average Canadian myself, I know we've been through such recessions before. Is this one different? What we don't know is how badly our banks are interlocked with global banking. Its that damn keel that pulled the tail down with the rest of the Titanic. If our "leaders" have the wisdom to allow failures, and the bankers know that, we'll come out of this okay.
I am from states just moved to Canada 2 years ago. Canada economy is based on oil and housing. living in Vancouver, I have to say Canada is fucked in a big way. It's just mater of time before prices will sky rocket, inflation is a bitch.
Vancouver is an awesome city, but ya, big cities are going to be hit hardest. A lot of money coming in from Asia; housing prices so high...
Keep your eyes open and connect with your neighbors.
A bit of research (homeupdates@rew.ca, for example) shows that the Vancouver real estate market has been inflated by offshore money for decades - buyers from Japan in the 1990s, from Hong Kong, and from China now. The buying pressure from offshore has elevated stand-alone house prices in Vancouver and its immediate suburbs to over $1 Million Cdn for 40-year old houses, with new house bulders asking $2 to $2.8 Million in the immediate "burbs". In the pricier neighbourhoods, expect to decimate $2 Million or more for a house.
Condominiums (Strata-titled apartments in apartment blocks) are going from $250,000 for a "studio" or one-bedroom to the $450,000 range for 2-bedrooms. Older houses are being bought for land value only (a building lot in Burnaby, the nearest "burb" to the east of Vancouver, is priced at $800,000 or more now).
If the buyer will settle for a 25-mile commute (taking an hour or more each way), a stand-alone 40-year old house can be found for about $350,000 to $450,000 in Maple Ridge or Haney. Condominium developments have sprung up in droves in the outlying areas (Langley, Abbotsford, Mission, Chilliwack, and even Hope areas) over the last 20 years, with the commuting traffic to Vancouver increasing steadily. Commuting from Chilliwack means about 60 miles each way, and Hope is further. But buying a house or condo in these outlying areas is cheaper by far than buying in the immediate Vancouver area.
Vancouver International Airport sits in Richmond, to the immediate south of Vancouver. Richmond is reputed to have been the favourite of commuting Chinese (referred to as "Astronauts" because they spend so much time in the air coming back and forth between their jobs in Hong Kong and China and their homes and families in Richmond). Richmond is now enjoying a land-rush of buyers from China, and benefiting from the fall of the Canadian dollar. Owners of 40 year old tract houses in Richmond are now asking $1.3 Million.
How the average Canadian could afford such prices is a mystery. If offshore buying pressure falls significantly, prices must surely take a deep dive.
The news our of Alberta, Canada's oil patch, is of CapEx death, vacant office blocks in Calgary and Edmonton, and swooning house prices. Boom and Bust is well known in Alberta's history.
Canada depends overwhelmingly upon exports to the US for its economic wellbeing. As the US economy gets a cold, Canada's comes down with double pneumonia. Canada is rich in oil, gas, water, wood, and other natural resources, but environmental activists and unsettled Aboriginal land claims issues are standing in the way of efforts to build pipelines and other infrastructure to allow Canada to export its natural resources, and the domestic market is too small to support major industrial development. Canada's whole population is hardly larger than California's alone. The cratering of world prices for commodities is not helping either, and Canada seems to be living in denial over the dilemma this presents, just like Australia.
Gasoline prices in Vancouver are astronomical by American standards. In spite of the low price of crude, Vancouver motorists are paying $1.20 per litre for regular unleaded gas. Across the US border in Blaine, Washington, gas is $2.59 per US Gallon (3.7 litres). 3.7 litres in Vancouver costs $4.44 Cdn, or $3.33 US. The extra gouge in Cdn gas prices comes from fuel taxes, levies to support buses and commuter trains, carbon tax, sales taxes (plural) and the lack of market competition among the oil companies. A few mile south of Blaine, the prices drop by about 20 cents a gallon, reflecting the drop in buying pressure from Canadians popping across the border to fill up with gas.
The Canadian dollar has fallen significantly over the last couple of years, from over $1.00 US to about 75 cents US now, and appears destined to continue its fall. 55 cents US is not an unreasonable target over the next couple of years, IMHO.
You did a pretty good job of covering all the bases.
Actually, regular gas where I live in Massachusetts is about $2.20 a gallon. Last month I got a fill up at $1.99 a gallon. The local economy is on a slow gradual decline for the past 5 years. Discretionary and necessity spending is down. It seems like everything government does contributes to chaos, failure and higher costs (except for the more recent commodities decline).
The prices will fall but if they do not stop the Loot flooding in from China, India, Pakisatn, etc... then the plunge will be somewhat softened.
But there's no doubt the average Canadain will be priced out of the market unless the Canadians copy the Mozillo NINJA loans--- no down payment, no doc no job check.
Of course having the Soros' Tides Foundation backing a barking mad trust fundian like little Terry Twodoor into office didn't help Canada's bond ratings either. Watch him and his trying to get "Green" energy going to line his buddies pockets.
If you desire to move to Canada learn either Mandarin or Russian. Arabic will be in style for a while until the drones finish the Musims off.
… That’s ALL we need!
Now we’re gonna have illegal immigrants
from CANADA looking for work!
/s ; )
at least we'll look for work eh?
be on the lookout for anyone who ends a sentence with "eh"
Don't make me come down there and smack you upside your head, America, I'm not in the mood, eh.
Training video: https://www.youtube.com/watch?v=EXgDQz6bmiI
Can't WAIT for ALL the Dominos to FALL!
America will be a new world in 5 months, imho.
Nonsense, Canada is back under a caring, (very) liberal government and the new PM can pull rabbits out of his ass......
"...new PM can pull rabbits out of his ass..."
His father privatized money creation in Canada and increased national debt by 9x during his mandate(s.)
At that rate, the Canadian national debt would have been the same as the US nat debt by now.
JT ain't no monetary messiah. He's a spoiled twat who wants to bring about world government.
He has been involved in the UNPA and pushes its agenda every chance he gets.
http://en.unpacampaign.org/
"The Campaign for the Establishment of a United Nations Parliamentary Assembly is a global network of parliamentarians and non-governmental organizations advocating for citizens' representation at the United Nations."
"A United Nations Parliamentary Assembly (UNPA) would be the first parliamentary body directly representing the world's citizens in the United Nations. It is envisaged as first practical step towards the long-term goal of a world parliament."
The people's voice will be replaced by that of NGOs on a stage of unelected officials.
Obama is to Bush as Trudeau is to Harper.
We're in sync.
JT is tied to the Rothschild cabal via his links to the Desmarais clan (of Power Corporation "fame"). One doesn't get chosen (notice I didn't say elected) PM of Canada without the blessing of the true power holder in Canuckistan, pun intended. Here, power is as Power reveals.
And the rabbits' fur will be white, in spite of where they came from.
Didn't the Jefferson Airplane have a song about white rabbits and mind-altering substances?
you are smoking weeds that JPJT promised?
… true, but will it be a BETTER world?
If we can get rid of the tribe I think the average person's living standards would indeed improve.
Your spot on, spot on. It will be bad at first but it will get rid of the tribe. Because there is no way their media can gloss over the implosion of the economy and they will be blamed. They have done alot of damage to us.
Since when has the Tribe ever been blamed for ANYTHING??? Oh, that's right - Hitler tried to blame them, but they they sure made an example out of him! Anybody else want to point the finger of blame in the appropriate direction?
*crickets*
.
There is no way to get rid of the tribe.
It's too late, they have too much control.
"The Audacity of Falling Dominoes" will be Barry's next book.
Transalta (TA) is the stock to watch... :O
love the 0.00 EPS outlook for TAC..
http://globalnews.ca/news/1887724/canadian-home-prices-to-fall-40-50-per...
I bet they'd still be overpriced.
How does it go? First stocks then housing.