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Not in my backyard It's funny how some politicians and business executives express their support for, and sympathize with, the "Occupy Wall Street" protesters who have sparked similar demonstrations in other cities and countries. But not in my backyard. Unless, of course, you're hedge fund manager John Paulson, and it truly was your backyard.
This is not to tar everyone with the same brush. Many business leaders, including Pimco's Bill Gross, Citigroup's Vikram Pandit and BlackRock's Larry Fink, have spoken eloquently on the issue in explaining their sympathies. And in Mr. Paulson's case, his was one of the homes at which protesters chose to leave a phony tax refund cheque.
But consider Greece's Prime Minister George Papandreou, who cited the "many anti-Wall Street citizens who rightly protest against the inequalities and injustices of the system," but wants his own people, who are striking against his austerity measures and suffer an unemployment rate of 16 per cent, to "act in the interest" of their country.
Or Finance Minister Jim Flaherty, who said he understands the frustration of the U.S. protesters but believes it's better in Canada because of heightened oversight and a better tax system. Prime Minister Stephen Harper also cited differences in Canada.
"It really is a Wall Street proposal," Mr. Flaherty said this week, as The Globe and Mail's Bill Curry reports.
"In Canada we have a progressive income tax and it favours people with lower incomes who are vulnerable, quite frankly, in Canadian society. Our tax system is clearly progressive. Having said that, I see a point that income distribution is important and that there is a concern that a very, very small group of people have very large incomes."
So what does that mean, exactly? The U.S. protesters call themselves the 99 per cent. Is it somehow less in Canada - say 85 per cent or better - because our banks didn't collapse and our labour market rebounded from the depths of the recession?
Mr. Flaherty, is, of course, correct that Canada is far better off than many other countries. And his government can indeed boast its fiscal standing is strong and that all the jobs lost to the recession have returned.
But the Finance Minister rejects certain things at his peril, particularly as the protests come to Canada this weekend. True, unemployment is nowhere near the 20 per cent of Spain or even the 9 per cent of the United States, but it's still above 7 per cent, and it's not coming down any time soon.
More than 1.3 million people are without work in Canada, and, worse, 14 per cent of our young people can't find jobs. They number more than 400,000, and we should not condemn them. And, as the Conference Board of Canada has reported, the income gap widened here, too, and has done so at a faster pace than in many other countries.
To be fair to Mr. Flaherty, he has said more than once that Canada must create more jobs, and that unemployment is a concern. I believe that he means it, too. But when he says of the protests that "I think there's a reflection of some concern there of a lack of opportunity, which isn't terribly surprising when you see the size of the youth unemployment rate, particularly in the United States," he might just want to look a little closer in his own backyard.
- Occupiers have beef with Wall Street, not Bay Street, Flaherty suggests
- Bank of Canada head calls Occupy protests 'entirely constructive'
- Armine Yalnizyan's Economy Lab: What the Wall Street protests mean in Canada
- Chrystia Freeland: Wall Street protesters need to find their 'sound bite'
- CAW throws support behind growing 'Occupy' movement
- Made-in-Canada 'Occupy' movement makes its way home
- Tavia Grant's Economy Lab: Income inequality rising quickly in Canada
The 'Blackout-Berry' It was almost exactly one year ago that the late Steve Jobs declared war on the BlackBerry, stating in rather uncharacteristic fashion that Apple was "out to win this one" and that "we've now passed RIM, and I don't see them catching up with us in the foreseeable future."
Today, Apple Inc. Apple Inc. is on top of the world, enjoying long lineups Friday for its new iPhone 4S, just as an example, and boasting almost 10 per cent of mobile subscribers in the U.S. and 27 per cent of the market for smart phone operating systems, according to the latest data from comScore Inc.
Research In Motion Ltd. , in turn, has seen its share of the U.S. market fall to 7.1 per cent of subscribers and about 20 per cent in the platform market. Where platforms are concerned, Google Inc. commands the bulk, with its Android system, at just shy of 45 per cent.
RIM is in what charitably might be called a rough patch. Its quarterly results disappointed investors, to put it mildly, the launch of its PlayBook tablet was weak, and there are questions dogging the Waterloo, Ont., group about its management structure.
Then came what Queen's University marketing professor John Pliniussen dubbed the "Blackout-Berry" as RIM reeled for three days this week to get its e-mail, instant message and Internet services back up and running for millions of BlackBerry users around the world.
And the humiliating jokes that came with the outage - "RIM holds three days of silence in honour of Steve Jobs," "Will the BlackBerry blackout of 2011 be credited with spawning new baby boom?" and "Being a RIM fan is like being a Maple Leafs fan" - and questions surrounding compensation.
(OMG, I had to pick up the phone and actually speak to people when the world went dark.)
The hit is a bad one, particularly for a company so renowned for its reliability, and it comes at a bad time, as The Globe and Mail's Omar El Akkad reported this week.
"I think the problems for RIM are just beginning," Neil Bearse, associate director of marketing at the Queen's School of Business, said in a note. "RIM hasn't had much luck lately with their PlayBook and their subscription music service. With the release of Apple's iOS 5 and imminent iPhone 4S release – plus the goodwill sentiment lingering in the air surrounding the death of Apple icon Steve Jobs – RIM faces an uphill battle in convincing customers not to leave the company for Apple or Android."
Personally, I still have faith in RIM, and, while bad, the hit this week will be forgotten in time (unlike the Leafs?). This is a company known for its genius. It has 70 million subscribers, and we've yet to see sales results from the new BlackBerry line, which were available only for a couple of weeks in the second quarter, and thus didn't factor much in those results.
- How RIM's very success can boomerang
- Contrite RIM co-CEOs offer mea culpas
- Global glitch bruises RIM
- RIM's communications breakdown
- From 'CrackBerry' to just another smart phone
- BlackBerry outage hits India hard - and opens door to competitors
- Slough: The dreary U.K. suburb where BlackBerry's problems started
- Giddy fans queue to buy Steve Jobs's last iPhone
- Video: Omar El Akkad's review of the iPhone 4S
- Google beats Street expectations
Fixing the euro crisis: Tomorrow and tomorrow and tomorrow As many observers have noted, the leaders of the euro zone have a knack for kicking the can down the road.
This is not to say they've done nothing to get a grip on their debt crisis - they have, after all, bailed out Greece, Ireland and Portugal, among other measures - but they do an awful lot of talking, promising and pledging of co-operation while bickering among themselves and accomplishing little.
Many market players believe it will come down to a default by Greece, and they wonder why the euro zone hasn't gone that route. Instead, they're close to giving Athens a further €8-billion ($11-billion U.S.) in bailout money, presumably to tide Greece over and just buy some time to shore up the region's banks before an inevitable bankruptcy.
Notable this week was the five-point plan put forth by Jose Manuel Barroso, the chief of the EC, who called for firm action on Greece, moving up the date of a permanent rescue fund by a year, and a unified approach to recapitalizing banks. But there, he said, the banks should try the investment community first before going cap in hand to their governments.
"EC president Barroso's 'decisive' plan for resolving the euro land sovereign debt and banking system crises turned out to be no plan at all, but rather a roadmap for a journey that has yet to begin," said Carl Weinberg, the chief economist at High Frequency Economics.
"His speech included all of the following verb structures, in this order: 'Need to,' 'can be,' 'will be able to,' and 'need to' again. Nowhere in his presentation or the accompanying releases did we see or hear statements with action verbs such as 'we will do this' or 'we have agreed to implement that' or 'funding will be in place by this date.'"
Still, there are hopes among investors. And one thing that did actually happen this week was final ratification by all 17 parliaments of a beefed-up rescue fund, known as the EFSF, though Slovakia at first rejected it, and then approved it. Better late than never?
"On the downside, if the EFSF has illustrated anything, it has, to steal from a popular idiom, seen the barn collapse and the horse long dead before policy makers got around to closing a door that is no longer there," said Stewart Hall, senior fixed income and currency strategist at RBC Dominion Securities in Toronto.
That means a €440-billion fund that can lend governments money or purchase bonds, for example. But, as Mr. Weinberg notes, some of that money is already earmarked, some €109-billion for Greece, €26-billion for Portugal, and €17.7-billion for Ireland.
"And the EFSF may have been the easy part. Now the thornier issues around bank recapitalization come to the fore. Do they raise capital or sell assets? Selling assets - deleveraging - threatens a potential credit crunch for the EU, complicating an already challenged economic environment. Raising capital may prove tricky in an impaired market environment. The clock is ticking with policy makers talking three to six months."
Against this backdrop comes this weekend's meeting of G20 finance ministers and central bankers in Paris. No one expects much to happen, the highlight being another summit of leaders in Cannes early next month. Emerging market countries are reportedly floating a plan to boost the power of the International Monetary Fund, though it's not clear where that might be headed.
"We're in a holding pattern in Europe now until Cannes or in days leading up to," said CMC Markets analyst Michael Hewson.
- Europe crisis dominates G20 Paris meeting
- Europe warned of systemic crisis
- Fearing recession, Harper calls for G20 action on debt crisis
- EC urges Germany, France to take action on debt crisis
- Slovakia approves expanded bailout fund
- Public transport strike brings Athens to a halt
Some economic signs pick up Economic signs picked up in some areas over the past week, though some observers remain troubled by the outlook for China, whose booming economy has helped fuel the global rebound.
"I can't remember the last time we revised up our U.S. growth estimates," said Sal Guatieri of BMO Nesbitt Burns, citing indicators, such as retail sales, that put a bounce into September. "Ignoring all the grim talk of recession, the economy has quietly stepped back from the edge."
Be that as it may, Mr. Guatieri noted that growth is still expected to slow, and that, in the United States, the jobless rate could hold stubborly above 9 per cent "well into next year."
He's not alone on the better signs.
"Both Canada and the United States appear to have retained positive forward momentum heading into the fall, providing some cushion in the face of increasing global economic and financial headwinds," said Gorica Djeric and Adrienne Warren of Scotia Capital.
"Based on available data, we estimate annualized output growth in the July-to-September period will come in around 1.5 per cent for Canada and 2.5 per cent for the United States, a moderate pickup from their disappointing second-quarter results."
All eyes were on China, though, as it reported weaker trade numbers and an inflation rate that showed the pace of consumer price increases easing only slightly, suggesting the People's Bank of China won't be moving any time soon to ease policy.
"Chinese officials have given little sign they are worried that the euro zone crisis will hurt China's economy, preferring instead to keep their focus on tackling inflation," Mark Williams, the chief China economist at Capital Economics, said the day the numbers were released.
"Today's trade figures showing one of the biggest monthly falls in exports to Europe in years would justify a rethink of that stance."
BMO Nesbitt Burns, however, notes that while export growth slowed, imports remained strong, a good sign for exporting countries that rely on demand from China.
Mr. Williams also believes that inflation will ease much further, allowing Beijing to open the taps if it chooses, though there are no signs of that.
RBC's chief U.S. economist, Tom Porcelli, has a particularly interesting take on the U.S. outlook, and Friday's strong retail report - sales climbed 1.1 per cent in September - highlighted what he's saying.
Referring to weak August readings on several fronts, Mr. Porcelli questioned in a recent report whether the U.S. experienced a "flash recession" in August. And he raised the possibility of more going forward.
"We believe the current sentiment-driven backdrop will be prone to fits and starts where economic activity could come to a near standstill one month, followed by a modest bounce-back the next month," he said. "Call it a flash recession. Call it whatever you want. The bottom line is we are growing increasingly convinced that if we remain in a highly sensitive sentiment-driven backdrop, flash recessions will dot the landscape and the risk of a traditional recession will continue to grow."
- China inflation dips, but remains high
- Canada to feel bite of Chinese trade slowdown
- China's trade growth slows, surplus narrows
- Boyd Erman's Streetwise: China is in credit market crosshairs
- China joins credibility-deficit club
- U.S. retail sales see largest gain in 7 months
- Canadian factory sales at highest level in 3 years
- Rita Trichur's Economy Lab: Global jitters put Canadian businesses on the defensive
In the markets Stock markets closed out the week in fine fashion, buoyed by Google's strong earnings and hope that Europe is on the mend.
The Dow Jones industrial average climbed 1.5 per cent, and into the positive for the year, the S&P 500 gained 1.7 per cent, and Toronto's benchmark S&P/TSX composite 1.4 per cent. On the week, the DJIA was up almost 5 per cent, the S&P 500 6 per cent, and the TSX 4.3 per cent.
"The third-quarter earnings season kicked off this week to the usual fanfare, and while it's still too early to cement any major themes, we got a taste from the few bellwethers that did report," said Robert Kavcic of BMO Nesbitt Burns.
"Alcoa missed expectations but said that it continues to see growth in markets outside of Europe, 'though at a slower rate than in the first half, as confidence in the global recovery faded.' Don't be surprised to hear more of the same from the industrial sector. Meantime, JPMorgan posted a 4-per-cent year-over-year profit decline amid a weak investment banking and trading environment, its first year-over-year decline since the depths of the financial crisis. Finally, Pepsi said it is planning to raise prices to offset higher commodity costs, an ongoing theme, while Google's consensus-bashing results could set the tone for technology, which continued to see strong corporate demand in the prior quarter."
A roundup on the lighter side this week 1. The women of the small Colombian town of Barbacoas have won their sex strike, and will soon have a paved 57-kilometre road to the provincial capital, The Associated Press reports. It's not known just how many women actually withheld sex from their partners since June 22 in their protest for the road, but at least it's one strike that Lisa Raitt didn't legislate an end to.
2. High income earners? Marijuana Inc. said the U.S. listing regulator, the Financial Industry Regulatory Authority, has approved HEMP as its over-the-counter ticker symbol. That coincides with the company's plans to unveil its business plan and market models, which will be tied to "huge peripheral businessess" spawned by the growing medical pot and hemp industries. "Marijuana Inc. will not be involved at the current time in growing, transporting or marketing medical marijuana itself - however it will be creating an infrastructure to do parts of this upon the company's expected legalization federally in all 50 states (pending any federal licensing or other requirements that may be enacted after marijuana prohibition ends)," the company said.
3. A Carlton Cards birthday greeting I saw at a Target store in upstate New York asks on the cover: "Do you know what a card is in a recession?" Inside: "A gift. Happy Birthday."
4. "I am not your mother. I don't have to be obeyed. But today I am here to urge you to consider something that will be good for you. I want you to consider public service as part of your career path." No, Finance Minister Jim Flaherty was not speaking to grade school pupils. He was speaking to students at the University of Western Ontario's Ivey School of Business.
5. Britain's Prime Minsiter David Cameron believes princesses should have the same rights as princes when it comes to ascending the throne. He went so far as to write letters to the prime ministers of several ex-colonies - he called them realms - to promote gender equality in this area where it's an "anomaly," meaning sons wouldn't automatically have precedence over daughters. Under Mr. Cameron's proposal, a daughter of the Duke and Duchess of Cambridge would also have precedence over a kid brother. I hope it's a girl. I agree with Mr. Cameron that the laws of royal succession are ridiculously outdated, but, then, so is the concept of kings and queens. Here's a side note: Women account for just 14.2 per cent of directors in FTSE 100 companies, though that's up from 12.56 per cent two years ago.
6. The Federal Reserve Bank of Atlanta, one of the regional Feds, is urging teachers to go beyond the "standard textbook" with non-fiction works on economics that give students real-life applications for economic theories. The Atlanta Fed today lists 10 books. It's not clear what level of education the list aims for, but I sure hope it's university because a couple of the descriptions won't get past the PTA. For example, for Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, the bank says that "chapter titles range from 'Why Do Drug Dealers Still Live with Their Moms?' to "How is the Ku Klux Klan Like a Group of Real-Estate Agents?'" And then there's the simple title of Super Freakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance.
7. "It looks pretty bad if people spend their time in a debate looking at papers that aren't anything to do with it. I think it looks even less connected with the debate if people spend all their time playing around with bits of electronic machinery." Simon Hughes, Britain's deputy leader of the Liberal Democrats, didn't like the idea of MPs playing around with wireless gadgets and services like Twitter in the Commons. But MPs overwhelmingly voted to reject a formal ban.
Required reading from Report on Business this week Raj Rajaratnam pleaded for leniency, but in an era of mounting public anger against Wall Street excess and seemingly unrepentant self-dealing in corporate America, the disgraced billionaire found no sympathizers in the U.S. justice system. Grant Robertson reports.
Canada's stronger economy is becoming a magnet for Americans hunting for work. Tavia Grant reports.
Richard Baker has put plans to take Hudson's Bay Co. public on hold, putting pressure on the retailer's blueprint to refurbish its faded department-store chain. Marina Strauss reports.
From the Arctic to B.C.'s huge natural gas deposits to Calgary's small-cap oil explorers, Asian investors are demonstrating a growing appetite for the breadth of Canada's energy wealth. Nathan VanderKlippe reports.
Candy marketers are seeing silliness as a seriously winning route to success, Simon Houpt reports in Adhocracy.
What to watch for next week The Bank of Canada releases its business outlook and senior loan officers surveys Monday morning. "The Bank of Canada's quarterly business outlook survey will almost certainly sound more cautious than the surprisingly perky readings in prior quarters. The Q3 survey was conducted between mid-August and mid-September, and will capture much of the financial market volatility arising from concerns over Europe and the U.S. economy," said deputy chief economist Douglas Porter of BMO Nesbitt Burns.
Canadian and U.S. inflation readings for September are on tap, Wednesday for the U.S. and Friday for Canada. Economists believe the annual rate eased slightly in Canada to 3 per cent and remained at 3.8 per cent in the U.S. "Consumers in Canada have taken a beating from all sides lately, as slow wage growth, decelerating employment, and elevated inflation have all weighed on sentiment, said Emanuella Enenajor of CIBC World Markets. August was no exception, with that month's rise in the price of autos and food pushing all-items inflation up to a hot 3.1-per-cent pace. September shouldn't be much solace."
Third-quarter earnings season picks up with results from several major companies, including Citigroup Inc. on Monday, Apple Inc. and Goldman Sachs Group Inc. on Tuesday, Morgan Stanley on Wednesday, Encana Corp. and Microsoft Corp. on Thursday, and General Electric and Precision Drilling on Friday.