CSI Blog & Newsroom

“North Korea continued firing short-range weapons over its own eastern waters today after a weekend of what it called ‘rocket launching tests’ intended to bolster deterrence against enemy attack. South Korean officials were investigating exactly what it was that the North was testing,” an Associated Press article wrote today, republished by CBC.ca. The article continued, “North Korea regularly conducts short-range missile tests. Analysts say the recent launches appear to be weapons tests or an attempt to get U.S. and South Korean attention amid tentative signs of diplomacy after soaring tensions that followed UN sanctions aimed at a North Korean nuclear test in February. The two projectiles fired by North Korea on Monday had similar trajectories as four previous launches over the past two days, according to officials at Seoul’s Defense Ministry and joint chiefs of staff. Officials were analyzing whether the projectiles were missiles or rockets fired from a large-calibre gun North Korea may be developing, the officials said on condition of anonymity, citing department rules.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“Stephen Harper will travel to New York Thursday in yet another bid to sell skeptical Americans on the merits of the Keystone XL pipeline. More than a pipeline is at stake. Halfway though his majority-government mandate, a confluence of events and self-inflicted wounds have left the Prime Minister dangerously unpopular,” John Ibbitson wrote for The Globe and Mail today. The article continued, “The Tories are widely expected to lose the by-election in Labrador on Monday. Former cabinet minister Peter Penashue faces defeat at the hands of the Liberals, which would present an early electoral coup for the new leader, Justin Trudeau. And it’s not just the by-election. Polls suggest that if a general election were held tomorrow, Mr. Harper would lose it. But only the very foolish would predict such a defeat in two years time. Political fortunes are determined by fundamentals and events. Both continue to favour Mr. Harper, despite his present travails. How much trouble is this government in? Let us count the ways.

The Conservatives bet on President Barack Obama approving the initial Keystone project, and lost. The proposed Northern Gateway alternative that would send oil to Asian markets through British Columbia has been effectively scuttled by native and provincial political opposition. An agreement for a free-trade deal with the European Union is five months behind schedule, and counting. If CETA, as the proposed treaty is called, fails, that would be another major blow to the government’s credibility. On top of that, an audit last week concluded that a Tory senator (plus one former Tory and one Liberal) improperly claimed tens of thousands of dollars in expenses. In the lower house, a gaggle of Conservative MPs is resisting Mr. Harper’s determination not to permit any further debate on abortion. All this, combined with chronic complaints that the Tories are bull-headed on foreign policy and just plain nasty at home, have pushed the Conservatives into second place in a raft of polls, some of which show the party dropping below 30 per cent in support. Put it all together, and you have a damning indictment. But a guilty verdict in 2015 is far from settled. Mr. Harper will reshape his cabinet in a few weeks’ time, giving him a chance to put some friendlier faces in some key portfolios. Look for some combination of Eve Adams, Chris Alexander, Candice Bergen, Rick Dykstra, Shelly Glover, Kellie Leitch, Rob Moore and/or Michelle Rempel to advance into cabinet.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“Margaret Atwood once remarked that if the national mental illness of the United States is megalomania, that of Canada is paranoid schizophrenia. But is paranoia towards the United States justified? Not usually. Take a closer look at reports of a new border-crossing fee that are creating a lot of noise,” Colin Robertson wrote for The Globe and Mail today. Robertson continued, “This is not protectionism. Rather, the across-the-board budget cuts mandated by U.S. laws (the ‘sequester’) have obliged all departments to become more creative in funding. Within the 2014 Department of Homeland Security budget is a recommendation to conduct a study on whether to collect a fee from pedestrians and vehicles crossing between the United States and Canada by land. The new revenue, Secretary Janet Napolitano told Congress, would pay for the hiring of new customs and border officers. There might be something for us in the scheme as without new staff, the chances of getting pre-clearance at Toronto’s Island Airport are slim. But the first call will be to staff the southern border because enforcement will be a key part of any new immigration deal. Unlike budgets in Canada, however, what goes into the congressional legislative process bears little resemblance to what comes out the other end. This is why the U.S. legislative process has famously been compared to sausage-making. The checks and balances inherent in the U.S. system mean that regional and sectoral interests can also be counted on to block such initiatives. A new toll ‘is the absolute last thing we should be doing if we want to grow the economies of Western New York and the U.S.,’ warned Buffalo Congressman Brian Higgins. ‘To slap travellers here with onerous fees is a bad idea,’ argued New York Senator Chuck Schumer. ‘We don’t need a study to tell us that.'” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“The bogus tweet that sent markets plunging yesterday is raising serious questions about the vulnerability of social media and computer-assisted trading,” Michael Babad wrote for The Globe and Mail today. Babad continued, “U.S. authorities are investigating in the wake of the fake tweet from hackers using the Twitter account of The Associated Press yesterday afternoon. A group that calls itself the Syrian Electronic Army – it says it backs Syrian President Bashar al-Assad – claims it hacked the news agency and sent the tweet that falsely reported explosions at the White House had injured President Barack Obama. This group has previously hacked others, such as CBS News. While markets quickly recovered after the initial shock, U.S. stocks lost some $136-billion (U.S.), according to some calculations, commodities such as oil sank, and currencies like the Canadian dollar were briefly rattled.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“Four decades of civil war that took it to the brink of ruin are over. Justin Trudeau will inherit a united Liberal Party. A week of voting lies ahead before the next Liberal leader is revealed Sunday, after a weekend showcase dominated by Trudeau supporters who whooped it up in celebration of his certain victory,” John Ibbitson wrote for The Globe and Mail this morning. Ibbitson continues, “A party famous for factional infighting appeared united, jubilant and renewed. It also appears to have become Mr. Trudeau’s personal political machine. That machine runs without the bile that fueled so many earlier campaigns. Mr. Trudeau’s most senior advisers played little part in the fratricide that plagued Liberals as the party descended from power to official opposition to also-ran. Team Trudeau has recruited tens of thousands of supporters who are loyal only to him, who signed on as supporters simply to vote for him. And the campaign is expected to donate nearly $1-million to party coffers beyond campaign expenses, finally bringing the Liberals into the modern age of political fundraising. A party that appeared bereft of money, of organization, of leadership, is finally renewing itself under the presumptive leadership of a 41-year-old outsider who has banished the old guard and who is bringing the Liberals both generational change and internal peace.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“Three Canadian economists have written a new paper that tries to answer some of the questions around the great skills debate. Is the value of a B.A. really declining and is the value of a trade certificate increasing?” Simona Choise posed the question in a The Globe and Mail article today. Choise continued, “Since 2000, coinciding with the dot-com bust, the demand for highly-skilled workers has declined even as the number of university graduates has increased, they write. Instead, the American economy – and the paper is about the U.S. – has produced more lower-skilled and service jobs. Because employers have had their pick of university graduates, however, they’ve hired above the qualifications of the job while ignoring less qualified workers. The paper, however, is dependent on a hypothesis about employer behaviour: Companies only invest in new technology and the people to make it work up to a point after which they are content to rest on their laurels. But if an economy has lots of university graduates interested in innovation who are starting up businesses or want to work for tech-driven “fast” companies, then companies that want to succeed should be looking for highly-skilled graduates – particularly those in sciences or engineering. Exactly the disciplines that are most in demand in the marketplace.” To find a link to the full study and the original article please visit The Globe and Mail. | Raymond Matt, CFP, CLU, TEP, CHS

“There is an important distinction between good deflation caused by excess supply and bad deflation created by deficient demand. Good deflation is the result of new technologies that power productivity and output as the economy grows rapidly and as supply outpaces demand. The bad kind stems from financial crises and deep recessions, which increase unemployment and depress demand below the level of supply,” A. Gary Shilling wrote in a Bloomberg.com article yesterday. Shilling continued, “The Industrial Revolution began in the late 1700s. But in the U.S. it didn’t achieve sufficient scope to drive the economy until after the Civil War. Value added in manufacturing and mining leaped. As bottle machines replaced glass blowers, the price of a dozen goblets dropped to just 40 cents in 1888, from $3.50 in 1864. At the same time, railroads connected the nation, enhancing productivity and supply. Real gross national product grew 4.5 percent each year from 1870 to 1898, an unrivaled rate for a period that long, and consumption per consumer jumped 2.3 percent a year. Good deflation reigned, with wholesale prices dropping 34 percent, a 1.7 percent annual rate of decline, and consumer prices falling 47 percent, or 2.5 percent annually. Good deflation also prevailed in the 1920s, when the new technologies were electrification of factories and homes and mass-produced automobiles. Electrification contributed to the development of other goods, such as household appliances and radio. Industrial production almost doubled in the 1920s, but prices fell as supply outran robust demand.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

“Finance Minister Jim Flaherty intends to freeze or cut spending on programs, defer capital expenditures and eliminate some corporate-tax exemptions to help close the gap on a $2.1-billion shortfall in revenues for 2013, The Globe and Mail has learned,” John Ibbitson wrote for The Globe and Mail today. Ibbitson continued, “The new tax revenues and spending cuts are a fraction of a discretionary spending envelope that was more than $110-billion last year. But they reflect a revision downward of the Harper government’s economic growth forecast for the year ahead, to 1.6 per cent from an earlier estimate of 2 per cent. How the government plans to absorb the latest cuts while protecting spending priorities and eliminating the deficit by 2015 will be revealed Thursday, when Mr. Flaherty brings down this year’s budget. Long-term spending plans remain unaffected, with a reviving U.S. economy improving the fiscal outlook for the last half of the decade, according to several senior government officials who are not authorized to speak publicly. In an effort to focus attention on the most positive aspects of what is essentially an austerity budget, officials emphasized that the shortfall will not affect its major theme: spurring job creation while adjusting programs in order to better match workers to positions employers are trying to fill.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS  

“Cardinals heard a final appeal for unity Tuesday before sequestering themselves in the Sistine Chapel for the conclave to elect the next pope, as they celebrated Mass amid divisions and uncertainty over who will lead the 1.2 billion-strong Catholic Church and tend to its many problems,” Nicole Winfield wrote for the Associated Press, an article republished by the National Post today. Winfield continued, “A Gregorian chant wafting through St. Peter’s Basilica, the 115 cardinal electors filed in wearing bright red vestments, many looking grim as if the burden of the imminent vote was weighing on them. A few hundred people braved thunderstorms and pouring rain to watch the Mass on giant TV screens in St. Peter’s Square. In his homily, Cardinal Angelo Sodano, dean of the College of Cardinals, called for unity within the church, a not-so-veiled appeal to the cardinal electors to put their differences aside for the good of the church and the next pope. ‘Each of us is therefore called to cooperate with the Successor of Peter, the visible foundation of such an ecclesial unity,’ Sodano said. He was interrupted by applause from the pews – not so much from the cardinals – when he referred to the ‘beloved and venerated’ Benedict XVI and his ‘brilliant’ pontificate. Benedict’s surprise resignation – the first in 600 years by a pope – has thrown the church into turmoil and exposed the deep divisions among cardinals who are grappling with whether they need a manager who can clean up the Vatican’s dysfunctional bureaucracy or a pastor who can inspire Catholics at a time of waning faith. ‘Let us pray for the cardinals who are to elect the Roman pontiff,’ read one of the offertory prayers during the Mass. ‘May the Lord fill them with his Holy Spirit with understanding and good counsel, wisdom and discernment.’ Read the full article here.

“U.S. economic data has been improving notably. And the U.S. stock market is near its all time high. However, Goldman economist Jim O’Neill is getting increasingly concerned that the stock market is getting expensive,” Sam Ro wrote in a Financial Post article today. Ro continued, “In the near-term, he thinks momentum could drive stocks higher. But we warns that valuations are getting rich.” The Financial Post business insider later quoting O’Neill’s latest public ‘Viewpoints’ Goldman Sachs Asset Management news letter which stated, “The strength of last week’s US data is leading the consensus to revise upwards their forecasts for 2013 real GDP. Having been notably higher than the consensus since autumn 2012, GSAM is rather pleased about that as a number of investment strategies have prospered from it. Of course, and as I discussed last week and in recent Viewpoints, this is despite the ongoing and sometimes unchosen fiscal tightening in the US, and is a marked contrast to Europe. Not surprisingly, all of the US bond, equity and currency markets are reacting accordingly. I am not that confident about what happens next and as to whether all these trends are going to continue, not least because May is now less than two months away and the infamous ‘Sell in May and go away, come back on St Leger’s Day’ (which I am physically actually going to be doing post retirement, of course!). US equities seem set to strengthen further in the near term, given the momentum in the data, but as page 47 shows, they are hardly bargain basement these days from a CAPE perspective.” The Financial Post article can be found here. | Raymond Matt, CFP, CLU, TEP, CHS