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Gluskin Sheff’s David Rosenberg sounds positively bullish on Canada

These are stories Report on Business is following Thursday, March 28, 2013.

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Rosenberg on Canada
Canada's economy may be just limping along for now, but David Rosenberg sounds positively bullish today.

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The chief economist of Gluskin Sheff + Associates was actually writing about the Canadian dollar in his daily research note, commenting on the currency's recent gains and reminding his readers that the Bank of Canada has said it won't engage in competitive devaluation.

"How many other countries are pushing for a hard currency policy right now?" Mr. Rosenberg said.

"All we have on our hands is a mercantilist global currency war which Canada does not want to be a part of."

As for the Canadian economy overall, here are his points:

1. "The Canadian federal budget last week attacked tax expenditures as a means to ensure a move to budget balance in coming years. This remains a pipe dream south of the border."

2. Only 11 major economies now boast a triple-A rating from the world's three big credit rating agencies, Canada among them.

3. Canada's economy is showing some signs of picking up, and there are indications that the weakening of the housing market is "in its mature stages." While condos are still in "oversupply" territory, the key single-home category is not.

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4. Inflation is just above 1 per cent, compared to 2 per cent in the United States. When you use the same type of measure, Canada's unemployment rate is 6.5 per cent, compared to America's 7.7 per cent. "The only way that Canada can have both a lower unemployment rate and a lower inflation rate – by roughtly a full percentage point apiece – is by value of experiencing an upturn in its potential GDP growth rate at a time of secular decline stateside."

5. The "bitumen bubble," as Alberta Premier Alison Redford puts it, is easing as the discount for western Canadian oil to the U.S. benchmark narrows to $16. "This narrowing of the spread has obvious positive implications for capital investment, exports, production and fiscal finances."

6. If you're bullish on the U.S. auto sector, note that auto and parts exports account for 15 per cent of Canadian exports. Ditto on being bullish on U.S. real estate: "If you are, then this is actually even more bullish for the Canadian economy which is much more sensitive to shifts in wood product prices – once again, a huge positive terms-of-trade shock in the form of firmer lumber prices."

Mr. Rosenberg's comments came as Statistics Canada's latest report on the economy showed gross domestic product inching up by 0.2 per cent in January, reversing December's decline.

At the same time, the Organization for Co-operation and Development projected Canada's economy will expand by 1.1 per cent in the current quarter, and by 1.9 per cent in the second.

All of this points to an economy still struggling to find more solid ground, but doing that slowly.

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RIM returns to profit
Research In Motion Ltd. rebounded to a surprising fourth-quarter profit of $98-million (U.S.) as revenue slumped by 36 per cent.

Today's report also included the first look at sales of its new BlackBerry 10 devices, one million of which were shipped in its global launch. That excludes sales in the United States, however.

Over all, RIM shipped six million devices in the quarter, while its subscriber base narrowed to 76 million, The Globe and Mail's Iain Marlow reports.

RIM posted a profit of 19 cents a share, turning around from a loss of $125-million or 24 cents a year earlier and surprising analysts who had forecast a loss.

Revenue of $2.7-billion fell 2 per cent from the third quarter, and a sharp 36 per cent from a year earlier.

The company also announced that co-founder Mike Lazaridis, who ran the company until he and Jim Balsillie stepped down as co-CEOs, is also leaving as co-chairman and quitting as a director.

"We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the company returning to profitability in the fourth quarter," said chief executive officer Thorsten Heins.

"With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers."

Total to take Voyageur hit
The French energy giant that had partnered with Suncor Energy Inc. in the Voyageur upgrader is taking a hit of $1.65-billion (U.S.) as the project dies.

As The Globe and Mail's Brent Jang reports, Suncor announced late yesterday it was cancelling the project and taking a writedown of $140-million (Canadian) in its first quarter, having already taken a $1.5-billion hit.

It also paid France's Total SA $515-million for its stake in the project's assets.

Today, Total said it would suffer a loss of $1.65-billion (U.S.) on the project in its first quarter, but will save more than $5-billion over the next five years by getting out.

"The oil market environment in … North America has changed significantly," Total said.

"The emergence of an abundance of light oil and condensates produced in the region will increase tremendously the supply of diluents for mining projects and consequently impact upgrader projects in the area," it added in a statement.

"Following a thorough revenue of its assets shared with Suncor Energy Inc. in Canada, Total concluded that the investment in the Voyageur project was no longer justified from a strategic and economic point of view."

Cypriot banks reopen
Cypriot banks are open again today for the first time in about two weeks, though amid strict controls aimed at stopping cash from fleeing the embattled country.

As our European correspondent Eric Reguly reports, there was no apparent panic or fuss.

The capital controls, which affect withdrawals and purchases of foreign goods by credit card, are, for now, to be kept in place for seven days.

"Morning images of armed Cypriot police stationed outside banks to prevent civilians from withdrawing their own money stands as a vivid metaphor for how far the euro zone has fallen, and will no doubt focus the minds of equity investors," said Matt Basi of CMC Markets in London.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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