My finance view

Canadian businesses are more optimistic about their future sales and employment levels over the next 12 months, while fewer of them are reporting tighter credit conditions than in the spring, according to two surveys released by the Bank of Canada.

The central bank’s closely watched Business Outlook and Senior Loan Officer surveys, released today, provide the latest glimmers of hope that Canada has likely turned a corner on both the credit crunch and recession.

The Business Outlook survey is based on interviews with senior management at about 100 companies. Its findings suggest that about 61 per cent of companies expect their sales volume to increase at a greater rate over the next year. That number stood at just 30 per cent in April.

There was also a marked decrease in the number of firms expecting sales to fall. This time around, some 23 per cent of those surveyed expressed such concerns. About 52 per cent took that view back in the spring.

While businesses remain notably wary about investing in new machinery and equipment, about 39 per cent of those surveyed suggested their payrolls would increase over the coming year, while 17 per cent thought employment levels would be lower. In April, 25 per cent of surveyed companies were optimistic about hiring, while 26 per cent anticipated workforce cuts.

"Hiring intentions have improved in all sectors but continue to be relatively weak in some regions, notably, in Ontario," the Bank of Canada said in its report.

The central bank also found that fewer companies are reporting a "tightening in the terms and conditions" for obtaining credit than earlier this year.

About 33 per cent suggested that credit conditions had "tightened" over the past three months versus the 21 per cent that reported conditions had "eased." In April, those figures stood at 44 per cent and 8 per cent, respectively.

Moreover, the bank’s Senior Loan Officer Survey found that tightening credit conditions was more focused in hard-hit sectors such as autos, forestry products and transportation cashadvance. Previous surveys had indicated the problem was more generalized.

"The two Bank of Canada surveys indicate that the credit tightening continues to ease from both a lender’s and borrower’s perspective. However, a majority of respondents from both perspectives indicate that credit has gotten tighter," said Paul Ferley, assistant chief economist at Royal Bank of Canada, in a note to clients.

"This continuing downside risk to growth that this presents will likely result in interest rates being maintained at current very stimulative levels through the middle of next year though with little prospect of the Bank of Canada widening its range of stimulative measures to include quantitative easing."

The Conference Board of Canada, meanwhile, issued a separate report predicting the national economy would return to "tepid" growth during the second half of 2009. Its forecast sees Canada’s real gross domestic product sinking by 1.9 per cent in 2009, but rebounding to 2.7 per cent growth next year.

The research organization, however, is maintaining a cautionary stance on its projected growth for 2010, noting the anticipated 2.7 per cent economic expansion is "still much weaker than typical post-recession growth." Moreover, the pace of recovery is expected to be slow as Canada tries to shake the economic hangover caused by the larger global recession.

"The current recession is so widespread that its effects are expected to linger for longer than the typical business cycle," said Pedro Antunes, director of national and provincial forecast, in a release.

"Although the U.S. economy is forecast to return to growth in the second half of this year, battered American consumers will be saving more of their incomes in the foreseeable future. As a result, the global recovery will be soft, and Canada is not expected to achieve economic growth significantly above its potential until at least 2011."

Source

On some level, we always knew it: Every company has its price. If someone is willing to pony up enough cash, a reluctant company can be forced to give up and sell.

We knew this.

And yet, it still shocked us a year ago Monday, when Anheuser-Busch’s board of directors — after a month of stiff resistance — yielded to a hostile takeover bid by Belgian brewer InBev.

One year later, St. Louis is still coming to terms with the takeover deal, which became official after shareholders approved the offer last November.

The loss of St. Louis icons wasn’t new. TWA was purchased by American Airlines. Ralston Purina became a unit of Nestl

Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.

Five countries with almost half the world’s population — China, India, Brazil, Mexico and South Africa — challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.

The encounter in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations, led by China, as the worst economic calamity since World War II batters the U.S. and its European allies.

“We have to update and refresh and renew the international institutions that were set up in a different time and place,” President Barack Obama said after the meeting of world leaders ended today. “For us to think we can somehow deal with some of these global challenges in the absence of major powers like China, India and Brazil seems to me wrongheaded.”

Leaders of the G-5, which represents 3 billion people with gross domestic product of $7 trillion, appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.

“What relevance does the G-8 have to set the agenda on anything for the world anymore?” Goldman Sachs Group Inc.’s London-based chief economist Jim O’Neill said in a Bloomberg Television interview today.

Climate Clash

The eight — the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 — unite 880 million people with combined GDP of $32 trillion.

The three-day summit ended with a pledge to spend $20 billion over three years to increase food production in the developing world, with the goal of cutting the number of malnourished people from about 1 billion.

The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.

Economic Morass

The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.

Emerging economies will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent business card templates. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.

China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview July 7. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”

In a statement in L’Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.

After parallel summits July 8 in a region rebuilding from an earthquake in April, the G-8 and G-5 met yesterday to work out a statement to at least paper over the diverging worldviews.

Dollar Dispute

Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.

The G-5 — mainly China — held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.

Chinese State Councilor Dai Bingguo, who filled in for President Hu Jintao, endorsed the idea of a “diversified and rational international reserve currency regime,” according to Foreign Ministry spokesman Ma Zhaoxu.

The call got little traction inside the meeting, with German Chancellor Angela Merkel saying it was “of no practical relevance.” Brazilian and Russian officials said it may come up again at the wider G-20 forum in Pittsburgh in September.

“There has been concern on the dollar, but there hasn’t been a coherent strategy put forth,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We don’t think that’s going to be an issue weighing on the dollar for the balance of this year. It’s a much longer term issue.”

For Russian President Dmitry Medvedev, the monetary future is now. At his closing press conference, Medvedev held up a golden coin bearing the words “united future world currency,” which he said was minted in Belgium and handed to G-8 attendees.

“Even the mints” are thinking about a post-dollar world, Medvedev said. The test coin “means they’re getting ready.”

Source

Boeing Co. will pay $580 million for a plant that makes large sections of its 787 jetliner, an apparent effort to rein in supplier problems that have led to costly delays of the next-generation aircraft and hurt the company’s credibility.

The plant, owned by Vought Aircraft Industries, makes barrel-like sections of the 787’s fuselage that fit between its wings and tail and are composed primarily of lightweight materials.

Deliveries of the 787 have been postponed by nearly two years partly because of problems with components made by suppliers and work that suppliers didn’t complete. Those hang-ups are expected to cost the airplane maker billions of dollars in added expenses and penalties.

Boeing took a new approach to building airplanes when it announced its 787 program in 2004. Instead of building the plane’s parts in the United States, it used suppliers around the world to build sections of the plane that are later assembled at the company’s commercial aircraft plant near Seattle. Ill-fitting parts and other problems have hamstrung production ever since.

Vought, owned by private equity firm Carlyle Group, says financial problems, not production glitches, prompted the sale, expected to close in the third quarter. Under Tuesday’s deal, Boeing will release Vought from obligations to repay money advanced earlier by Boeing.

Vought President and CEO Elmer Doty said that his company’s investment in 787 parts was far greater than expected, and that the financial demands of the program "are clearly growing beyond what a company our size can support."

But Richard Aboulafia, an analyst at Teal Group, an aerospace consultancy in Fairfax, Va., said, "This clearly is more about securing the supply chain and undoing numerous mistakes.

"It’s a good move, it’s a proactive move, it undoes some damage," he said. "But on the other hand, it shows this program still has more than a few challenges to overcome. … I don’t think Carlyle quite knows what to do with this asset, and they might not have been prepared to give it the necessary resources payday loans guaranteed no fax."

Despite those problems, Boeing spokesman Jim Proulx said Tuesday that the company had no plans to change its 787 production plan. "We remain committed to the business model and the global strategy for the 787," he said.

The mid-sized, long-haul 787 will be able to carry 210 to 330 passengers. Its design includes wider seats and aisles, larger windows and a ventilation system that will allow for higher humidity, all of which Boeing says will make the cabin feel more comfortable.

It’s Boeing’s first all-new aircraft since the 777 and the first commercial jet made mostly of carbon-fiber composites instead of aluminum. Boeing says it will be about 20 percent more fuel efficient than other planes of comparable size.

Boeing, based in Chicago, has booked orders for a record 850 of the planes, but some 60 have been canceled so far this year, including the cancellation of 15 and the delayed delivery of another 15 by Qantas Airways last month.

Adam Pilarski, an aviation economist with consulting firm Avitas, based in Washington, said Boeing might want the Vought plant, in North Charleston, S.C., as part of a plan to start a second 787 production line. The added capacity is in response to strong demand for the plane.

"Boeing made it very clear that they need a second line," he said. "They need it more now than they did before because they are behind."

It remains unclear when Boeing will conduct the first test flight of the 787, previously scheduled for the second quarter of this year.

Vought will continue to run other plants that work on different 787 components as well as parts for Boeing’s 737s, 747, 767, 777, C-17 and V-22 aircraft.

Source

After a modest spring comeback for consumer stocks, there’s a reluctance to make any big new bets on the resilience of the American consumer, according to some fund managers with strong recent track records.

Many managers are trimming their consumer stock holdings, believing any broad U.S. recovery will be driven by business spending, with consumers staying on the sidelines and away from malls and restaurants. This recession has been so far-reaching and has changed spending habits so fundamentally that the tight grip we’ve had on our wallets may not loosen anytime soon.

"The American consumer that the global economy loved for the last few decades is going to be substantially different for at least the next five years, and maybe even longer," said Randall Greer, manager of the First Focus Core Equity Fund.

Greer’s large-value category fund holds less than 6 percent of its $81 million in assets in consumer discretionary stocks, below that category’s nearly 9 percent weighting in the fund’s S&P 500’s benchmark. With its modest consumer holdings, the fund has posted a 4 percent year-to-date return, outpacing the S&P 500 and the average large-value fund.

Greer and other consumer comeback pessimists weren’t surprised this week when the Consumer Confidence Index showed a June drop that most analysts hadn’t expected. The index had been rising steadily from a historic low in February. But after June’s decline, it remains well below a level that’s considered healthy.

Despite consumers’ continuing anxiety and slow retail sales, consumer stocks have recently revived. Consumer goods stocks rose nearly 23 percent in the second quarter, and consumer services stocks were up nearly 20 percent, according to Morningstar. That compares with a 15 percent jump in the S&P 500.

Some say retailers face a long road back to profitability.

Absent inflation — now around zero — this recession has virtually all the elements needed to induce pain in the pocketbook. Unemployment is at a 26-year high approaching 10 percent, leaving even those with jobs afraid and spending-averse. Plunging markets have eroded retirement nest eggs. The housing slump has deprived Americans of much of the home equity that they had relied on coming out of the 2001 recession, when home prices held up despite troubles across the rest of the economy.

Consumer debt remains high, and most forms of credit are still pricey and hard to come by. And although $4-a-gallon gas hasn’t set in this year, fuel prices have lately been on the rise, with last year’s spike still a fresh memory.

Americans have responded by taking the uncharacteristic step of saving, which doesn’t help consumer-dependent retailers and restaurants first cash advance. The personal savings rate now stands at a 15-year high of 6.9 percent. The latest monthly jump marked a sharp turn toward frugality after annual savings rates had been below 1 percent from 2005 through 2007.

Ron Muhlenkamp figures the trend is long-term, and is keeping less than his usual consumer stock weighting in his $621 million Muhlenkamp Fund.

"My suspicion is that now that people have cut back, they’re finding out their new spending level isn’t all that bad, and they might just stay there," said Muhlenkamp, whose large-value fund has rebounded from underperformance the past three years to an 8 percent return year-to-date, topping the S&P 500, which is now almost exactly where it started the year.

The consumer stocks that Muhlenkamp, Greer and Turner Investment Partners’ Jason Schrotberger are sticking with these days are uniquely positioned to survive the recession, the managers say.

Greer likes stocks such as Procter & Gamble Co. and Pepsico Inc. with large international markets. He figures growing middle-class populations in countries such as Brazil and India offer more opportunity than the U.S. market.

Schrotberger, who covers consumer stocks at Turner and co-manages some of the firm’s funds, is focusing on retailers such as department store operator Kohl’s Corp. that began cutting costs and inventory soon after signs of an economic slowdown emerged, rather than waiting.

"Those companies will be able to come out of this stronger, with more market share," Schrotberger said.

And Kohl’s, the No. 5 overall holding at Turner’s family of funds, has traded around $42 recently — about the same price the stock was a year ago, before last fall’s market swoon.

As for Muhlenkamp, his favorite consumer pick is Goodyear Tire & Rubber Co., whose shares are down sharply from a couple years ago, but have tripled from an early March low of $3.17 to about $11.50 a share now.

Muhlenkamp notes that tire manufacturers make a bigger profit from selling replacements than from tires that come on new cars. And consumers these days are more likely to buy replacement tires for an old car than they are to get a new car.

"People," Muhlenkamp says, "will be cautious spenders for quite a while."

Source

After slumping for the past year, real estate prices perked up recently, according to research by Century 21 Canada. The price of an average existing Canadian home fell 3.2 per cent in April, but certain areas bucked the trend, recording solid gains. The Top 10 neighbourhoods in Canada that showed big gains were:

1

Etobicoke

Hottest neighbourhood in the country (and Toronto) over the past year included the Centennial Park area of Etobicoke, bounded east and west by Highway 427 and Etobicoke Creek, and north and south by Eglinton Avenue and Queen Elizabeth Way. Average price here was $302,052 in April 2009, up 17 per cent from $257,907 last April.

2

Langley, B.C.

The Township of Langley is 30 kilometres east of Vancouver up the Fraser Valley and directly south of the Trans-Canada Highway, north of 62nd and 56th Avenues, west of 248th Street and east of 196th Street. The average price was $490,354 in April, up 12 per cent from the average of $437,041 a year ago.

3

Halifax

Hottest neighbourhood in Halifax borders on the northeast shores of Halifax Harbour and Morris Lake where the average price was $222,756 in April, up 11 per cent from $200,041 in April 2008.

4

Toronto

The city’s other hot neighbourhood includes High Park, bounded north and east by CP and CN tracks, and on the south and west by Bloor Street and Runnymede Road. Average price was $505,063 in April, up 7 per cent from $473,392 the year-ago month.

5

Pickering

Brock, in the eastern suburb of Pickering, bordered on the north and south by Finch Avenue and Highway 401, is where the average price was $334,216 in April, 7 per cent higher than $311,372 in April 2008 paydayloan.

6

Oshawa

Central Oshawa is bordered on the south and east by Lake Ontario and Oshawa Creek, on the north by Conlin Road and on the west by the Oshawa-Whitby town line. The average price was $230,320 in April, up 4 per cent from $196,357 the same month a year ago.

7

Ottawa

Hot spot in the nation’s capital is the central area of Greenboro, bounded by Conroy Road and the CN/CP right of way. In this neighbourhood, the average price was $277,434 in April, up 3 per cent from $268,028 a year earlier.

8

Richmond, B.C.

On the Greater Vancouver/Lower Mainland, the hot neighbourhood is Richmond, bounded north and south by the Fraser River and Westminster Highway, and east and west by Number 5 Road and Vancouver International Airport. There the average price was $448,469 in April, up 3 per cent from $433,605 a year earlier.

9

Winnipeg

North Kildonan is bounded on the north, south and east by Glenway and Knowles Avenues, Oakland and McLeod Avenues and Day Street respectively. In this city neighbourhood, the average price was $225,111 in April, up 2 per cent from $220,416 the year-ago period.

10

Vancouver

Hottest spot in B.C.’s biggest city is the downtown West Side/Coal Harbour area, bordering English Bay on the south, Hastings Street on the north, Burrard Street on the east and Broughton Street on the west. Here the average price was $561,198 in April, up 0.3 per cent from $559,314 in April 2008.

Source