Archive for August 2011

(Insert Jaws theme music here)   Leave a comment

I’m not going to talk about investment today.

I’m not going to talk about the Alberta economy.

I’m not even going to talk about baseball!

Whiteshark

Gets your attention, doesn’t it?

I was born and raised in Nova Scotia.  I swam in the ocean plenty of times, jumping off the dock in Walton as the tide rolled in.  We used to swim in the quarry as well, but eventually we realized that the beach was the way to go.  Too much slime at the quarry.

I mention all this because a great white shark was caught in the Bay of Fundy earlier this week.  (There were several news articles about this rare find; here’s one, for example.)  Ten feet long, 600 pounds, casually frolicking in Atlantic Canada.  Hey, it’s a great place to be in the summer, I don’t blame him.  I’m not sure how thrilled I’d be to swim alongside him, but hey. that’s my problem, not his.

According to the media, it was discovered by a fisherman near his home in Economy.  Having been away so long, I didn’t know where exactly Economy was, so I went to Google to find out.  It turns out that, as the fish swims, Economy and Walton are only about ten miles apart.  I wish I didn’t learn that.

(As if a white, pasty-looking guy like me has anything to worry about…)

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Posted August 19, 2011 by JasonMacAskill in Uncategorized

The deficit is falling! The deficit is falling!   Leave a comment

Things are getting better, and quicker, in Alberta.  An article in the Calgary Herald today (pasted below, all bolding is mine) painted a cautiously optimistic picture when it comes to the provincial economy, but does stress that this fiscal projection took place before the markets took such a beating in Europe and the United States.

So there is that minor detail to consider.  You know, worldwide economic strife and woe.

Still… it does make western Canada – and Alberta, specifically – look like the place to be right now.  A growing economy.  Employment on the rise.  Immigration back into the province.  An oil and gas industry that is vital and strong.

All points to consider when it comes to looking for work, a home, or a place to invest one’s money.

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Province chops projected deficit by half in fiscal update

Financial officials urge caution as update produced prior to U.S., U.K. fiscal crisis

By Darcy Henton, Calgary Herald / August 17, 2011 11:13 AM

Alberta’s $3.4 billion projected deficit is now expected to be chopped in half and its sustainability fund is now projected to double, according to the province’s 2011-12 first quarter fiscal update released Wednesday.

But Alberta finance officials warn that the province’s financial update was produced in June before the economic crisis in the United States and Europe and they can’t say how recent developments have affected the rosy forecast.

“We must remain cautious and continue to be prudent fiscal managers,” said Finance Minister Lloyd Snelgrove in a release.”Mounting government debt problems in the U.S. and Europe, and fluctuating oil prices and exchange rates demonstrate how volatile and interconnected the global economy is, and Alberta’s prospects are significantly influenced by the global situation.”

The deficit is now projected to be $1.3 billion, down 60 per cent from the budget forecast.

The sustainability fund, from which Alberta draws money to cover its in-year deficits — had been expected to be drained to $4.4 billion, but the fund is now expected to retain nearly $10 billion in assets due to the lower deficit forecast, cash transferred from last year’s higher than forecast results and positive changes in capital and other cash adjustments.

Revenue is now projected to be $38.3 billion — $2.7 billion higher than forecast — due to record land lease sales, higher oil prices and higher than expected investment income, according to the report.

Expense is up $650 million to $39.6 billion, largely as a result of disaster and emergency spending related to forest fires, flooding and pine beetle infestation control efforts.

Premier Ed Stelmach said the province appears to be in good shape as a result of his government’s 2009 recession and recovery action plan.

“We continue to manage spending, have made carefully considered investments in infrastructure and key priority programs, and will use our savings in the sustainability fund to cover the deficit until we return to balance budgets,” he said in a release.

Much of the increased revenue resulted from a June 1 sale of oil and gas leases that generated a record $842 million. The one-day sale involved 270,000 hectares of land in the Cardium oil and gas field in central Alberta, northwest of Edmonton. The land sold at an average of more than $3,000 per ha, up from a previous high of $2,185.

Meanwhile, Alberta’s Heritage Savings Trust Fund posted a good first quarter result, earning $269 million. The fund had a fair market value of $15.1 billion June 30, but finance officials warned that struggling world equity and financial markets will likely impact the performance of fund assets the remainder of the year.

The province’s 2010 fourth quarter update, released June 29, showed the province was slowly climbing out of the recession. The improving economy reduced the projected 2010 deficit from $4.7 billion to $3.4 billion.

Alberta had forecast five straight years of deficits with a hope of being back in the black by 2012, but later amended its forecast to balance the books in 2013-14.

The dip into the red began with an $852 million deficit in 2008-09 and continued with a $1 billion deficit in 2009-19, and last year’s $3.4 billion deficit. The province has forecast a $681 deficit in 2012-13, but that could change if the economy continues to rebound.

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2011-12 1st Quarter Fiscal Update

Deficit $1.3 billion — down $2.1 billion

Revenue $38.3 billion — up $2.7 billion

Expenses $39.6 billion — up $650 million

Sustainability fund assets $9.7 billion — up $4.4 billion

Operating expenses $34 billion — up $62 million

Oil prices US$/bbl. $97.85 — up $8.45

Posted August 17, 2011 by JasonMacAskill in Uncategorized

Alberta is in good shape, but not bulletproof – a follow-up to yesterday’s post   Leave a comment

Remember what I said yesterday?

That Albertans are more prepared, and economically more resilient, than other folks in the country?  Or for that matter, other parts of the world?

It’s still true, but I wanted to post this article from the Calgary Herald (any bolding is mine) to support the idea.  Yes, Albertans are generally better equipped to get through the socioeconomic turmoil being felt more profoundly in other parts of the world… but continued, stable prosperity isn’t a guarantee.

Nor is it time to panic.

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Alberta Finance Minister Snelgrove says economy in good shape, but not immune

By Jason Fekete / August 9, 2011


CALGARY — Provincial Finance Minister Lloyd Snelgrove expects Alberta will feel some pain from plunging markets and U.S. economic turmoil, but remains optimistic due to “very good” first-quarter fiscal numbers that will trim the projected $3.4-billion deficit.

But the doom-and-gloom economic news has former finance minister and Tory leadership candidate Ted Morton calling for an immediate moratorium on unbudgeted provincial spending, insisting it’s the fiscally prudent thing to do.

As expected, global markets recoiled Monday to Standard & Poor’s downgrading of U.S. debt, as the Toronto Stock Exchange’s benchmark index plummeted nearly 500 points, or four per cent, and the Dow Jones industrial average tanked more than 600 points, or nearly six per cent.

Amid the turmoil, oil prices plunged $5.57 to close at $81.31 US per barrel, while the Canadian dollar dipped more than a cent to $1.01 US.

Snelgrove acknowledged Alberta will absorb some blows from the economic woes and political brinksmanship plaguing the United States — the province’s top trading partner.

But as governments around the globe gird for a possible double-dip recession, he said gyrating oil prices and roller-coaster markets are simply part of a new economic order and shouldn’t cause hysteria.

“We’ve been through this story before. We’ve seen from one quarter to another you can fluctuate a couple of billion dollars,” the minister said about sliding crude prices. “This is not the time to panic.”

Snelgrove stressed that Alberta is faring much better economically than other provinces, fuelled largely by strong job numbers, eye-popping land sales and lofty crude prices so far this fiscal year. The February provincial budget pegged annualized oil prices at $89.40 US per barrel, but crude has averaged more than $100 a barrel so far this fiscal year.

The financial windfall means the first-quarter fiscal update (expected in the next few weeks) will project a deficit lower than the $3.4 billion estimated in the budget, he said.

“They’re looking very good,” he said of the government’s financial numbers. “It (the deficit) would be lower than what was budgeted.”

Indeed, crude prices and the fluctuating dollar have a dramatic impact on Alberta’s bottom line. Every $1 increase in annualized oil prices generates an extra $141 million for the provincial treasury. On the exchange rate — which the government forecast at 98.38 cents US for the fiscal year — every one-cent increase in the value of the loonie over the year costs the government $154 million.

The ongoing struggles south of the border further demonstrate the need for Alberta to diversify its markets into Asia, he said. “We need to make sure we get our eggs in other baskets,” the minister added.

Morton, the government’s former finance minister who quit his post to run in the Tory leadership race, said he’s concerned by the market dive and wants the provincial government to end all discretionary spending for the time being.

“It’s an extremely serious situation. Markets are obviously in free fall and nobody knows where the floor is,” Morton said. “Out of fairness to the next leader and for prudent fiscal management, it would be unwise to have any unbudgeted spending.”

Roger Gibbins, president of the Canada West Foundation, a Calgary-based think-tank, said Alberta is in “pretty good shape” financially partly due to good luck and good planning. But he, too, warned the provincial government must beware the troubling economic signs. “We’ll get bounced around in a global economy. To expect we’ll be immune is unrealistic,” Gibbins said.

Opposition parties are particularly troubled about Alberta’s financial situation, believing the government continues to spend beyond its means at a time the global economy could once again be dipping into recession.

&ldquo
;We have not saved responsibly, we have not provided stability to our basic human programs and therefore we are going to be vulnerable,” argued Liberal Leader David Swann.

The Wildrose party believes the government should immediately eliminate its $2 billion carbon capture and storage program and look to stretch the three-year, $17.6-billion capital plan over four years to alleviate some of the financial pressure.

“Perhaps the finance minister spoke too soon,” said Wildrose finance critic Rob Anderson. “Even when oil is at $100 a barrel, we’re still in deficit. There’s no margin for error.”

Bob Dunbar, president of Calgary oilsands consultancy Strategy West, said current oilsands operations wouldn’t be affected by an oil price that remains just over $80 a barrel, but said future mining projects could be delayed or cancelled if companies, which require prices between $80 and $100 per barrel for the megaprojects, bet on lower prices for the long haul.

Stephen Jarislowsky, the 85-year-old veteran investor who runs Montreal-based Jarislowsky Fraser Ltd., reminded in an interview that the price of oil plunged to some $30 a barrel at one point in 2008. If that precipitous fall were to repeat itself again, oilsands developers might have to shelve plans, he said. “If the oil price really goes down and their revenues aren’t big enough to pay for it without incurring heavy debt and therefore additional risk, I think there will be postponement,” said Jarislowsky.

Posted August 9, 2011 by JasonMacAskill in Uncategorized

The sky isn’t falling in Alberta… but be cautious nonetheless   Leave a comment

Maybe you’ve heard about this U.S. debt fiasco and subsequent global market issues ..?

Is it cause for concern?  Yes, a bit.  Should we riot in the streets?  Not so much, and especially not out here in Alberta.  I pulled this article from the Calgary Herald this morning; several industry experts are fairly optimistic that Albertans will pull through, certainly better than folks in other regions of the world.  Regardless, I’d advise caution, simply because that is my nature – “optimism” isn’t a market condition.  If you’re thinking about spending or investing your money in western Canada, do your research, be prepared to wait it out, and don’t expect a quick payday.  That said, Alberta’s a relatively safe place to be right now.

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Albertans positive about economy despite wider market problems

 

By Dan Healing, Calgary Herald / August 8, 2011 9:11 AM


CALGARY — Last week’s international market mayhem and plunging commodity prices may bruise but likely won’t puncture buoyant consumer and business confidence in Alberta, experts say.

A dramatic 11th-hour deal to avert a debt default by the United States was followed by the biggest stock market plunge on Wall Street since late 2008 as fears of another global economic slowdown swirled.

But on Friday, Statistics Canada reported that Alberta’s July jobless rate improved slightly to 5.5 per cent, second best behind Saskatchewan, as 12,400 new jobs were created.

And earlier in the week, the Canadian Federation of Independent Business’s July barometer showed confidence of small and medium-sized business owners was up two points nationally, with Albertans registering the highest scores in the land.

The latest confidence survey from PwC and Leger Marketing, compiled from interviews in mid-July and provided exclusively to the Herald, confirms that Alberta consumers and businesses are confident about the economy.

In fact, the survey suggests that the chief worry among business people and consumers alike concerns the costs of potential labour shortages in Wild Rose Country.

“I’m sure if we ran that business confidence survey today, it would be a bit lower — on the consumer side also,” said Reynold Tetzlaff, a partner with PwC in Calgary, on Friday.

“But even with the downtrend, there are still a lot of employers looking for workers and I don’t think that is going to change because there is such a shortage.

The survey found that 59 per cent of business leaders believe a labour shortage will affect their businesses, creating higher work pressure on existing staff, higher attrition rates, increasing labour costs and a compromise in the quality of recruitment.

Vince Parrotta, owner of Amico Stone Supply Ltd. in Calgary, said he expects his sales volumes to double annually over the next few years, a confident prediction for a high-end materials business that has been open only since last August.

The company has six staff, but he is interviewing to add a seventh soon.

“It’s been very good. We started last year, we did so much. This year it has already doubled,” Parrotta said, adding he plans to deal with the labour shortage by treating his staff so well they never want to leave.

He said contractors and landscapers are eager to buy the natural stone products he’s bringing in from Eastern Canada and Europe for their well-heeled customers.

Douglas Porter, deputy chief economist with BMO Capital Markets, said Friday it’s too early to say for sure how much damage last week’s events will do to confidence in Alberta and the rest of the country.

“I think the weakness we’ve seen in equity markets is at the very least going to take a bite out of business and consumer confidence and does put the economy at risk over the next few months,” said Porter.

He said Alberta will likely still grow at a rate of more than three per cent this year but the bank may reduce its prediction of a nation-leading 3.5 per cent growth for 2011.

The PwC survey shows that although 56 per cent of consumers believe the recent economic upturn is a good thing, more than a third (36 per cent) say they don’t think a boom will directly benefit them or their families.

They said that whi
le their homes may increase in value and there may be higher wages or more employment opportunities, there will also likely be a scarcity of tradespeople for home services and a deterioration of quality for restaurant, grocery and other retail services.

The survey’s consumer confidence index for July was 108 (above 100 indicates positive sentiment), a number that has hardly varied in the four surveys so far this year.

On the business side, all the numbers were positive, some more so than others.

“The current business condition index has always been below the future business condition index (since 2007), but it’s actually above now, which tells me people think we’re now finally in the boom and they are less thinking the boom is coming,” said Tetzlaff.

Businesses with 50 to 499 employees and businesses with more than 500 are more likely to predict being affected by the impending labour shortage than small businesses, the survey found.

For large businesses, the main concern is attrition, while medium-sized businesses are more worried about increased workload for existing staff, the survey showed.

The survey is based on interviews with 266 members of the Edmonton and Calgary chambers of commerce and on a telephone sampling of 900 Alberta consumers.

Posted August 8, 2011 by JasonMacAskill in Uncategorized

Surviving the American debt crisis in the Canadian west   Leave a comment

Ever hear the expression, “Don’t ruin it for the rest of us?”

The Americans have a bit of a debt problem right now.  Their debt ceiling is high, and their credit rating could be downgraded.  And as much as we like beating them in hockey, Canadians generally like and tolerate our southern neighbors.  (I stress the word “generally”.  Your mileage may vary.)

We share a border with them, we exchange billions of dollars of goods with them on an annual basis, we work in each other’s countries, we’ve been allies for decades… heck, we’re peanut butter and jelly.  From a purely business sense, if things are running smoothly down there, we’ll be happy campers up here – and the global economy benefits as well.

Looking at their problems with a somewhat selfish eye, should Albertans be concerned?  Long story short: not really.  But, if you want the long story (courtesy of the Calgary Herald), here it is – any bolding is mine.

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Alberta could escape effects of U.S. debt crisis unscathed, experts say

By Clara Ho, Calgary Herald / July 30, 2011

Alberta’s economy is expected to come out unscathed as the U.S. debt ceiling decision goes down to the wire, say local experts.

But in the unlikely case that the U.S. defaults, there could be huge implications for the energy sector – a major driver for Alberta’s economy.

“Unless a worst-case scenario emerges, the debt crisis is not going to make the U.S. economy recovery falter in any meaningful sense,” said Frank Atkins, professor of economics at the University of Calgary.

“There might be some small ripples, but the probability of this whole U.S. thing profoundly affecting the Alberta economy is very small.”

The debt ceiling currently sits at $14.29 trillion, with American legislators facing an Aug. 2 deadline on whether to raise the limit and by how much.

Atkins said he expects an “eleventh hour of compromise” on Monday. But if the U.S. were to default, that automatically raises their borrowing costs, which could effectively snuff out their economic recovery, he said.

If that were to happen, oil prices would fall off dramatically, said Peter Linder, an oil and gas analyst for DeltaOne Capital Partners.

“It would be devastating for the U.S. and European economies and, therefore, affecting world energy demand, world oil demand, and the price of oil would fall from $95 today to maybe even $60 a barrel very quickly,” he said. “But the probability of that is like one per cent.”

The most immediate and obvious impacts would be through financial markets, said Dan Sumner, economist with ATB Financial.

“We can expect to see the Canadian dollar become really volatile and will either rise or fall. Oil prices, gas prices, those will become volatile and probably would fall,” he said.

Credit spreads around the world would widen and interest rates would likely rise, leading to volatility in the exchange rate, Sumner added.

“The exchange rate is part of most oil companies’ financial decisions. With the exchange rate bouncing around, it’s tougher to plan projects,” he said.

Kari-Ann Kuperis, spokeswoman with Alberta Finance and Enterprise, declined to get into the specifics of how the province would be affected by U.S. default.

“There are so many factors that we couldn’t speculate,” she said. “But as they are our largest trading partner, we certainly hope they are able to resolve the situation and get their fiscal house in order.”

She maintained the province is in “solid economic shape” and continues to follow its plan for tight spending.

The province is recovering from the recession, the economy is recovering and jobs are growing, she said.

Plus the rainy-day Sustainability Fund is there to help cover off the province’s deficit, she added.

But no matter what is decided with the debt ceiling, the U.S. still has a huge debt situation on its hands, according to Glen Hodgson, chief economist of the Conference Board of Canada.

And in a piece he coauthored in the Financial Post on Tuesday, he said: “Canadians have a lot riding on the outcome of the current debate, due to our deeply integrated economies.”

“If you think this is bad, wait until they actually have to deal with their public debt problem,” he told the Herald on Friday.

“The debt ceiling is just the opening skirmish. It’s going to get tougher and tougher. You cannot slash your way to prosperity. So, they’re going to have to redesign all the spending programs.”

He said Canadians have to get their own fiscal house in order and do everything possible to “buffer” themselves from the Americans.

“Clearly, we have to diversify away from the United States as our sole, dominant export market.”

Michael Tims, chairman of Peters & Co. energy investment dealer, said local investors should not be worried about this specific debt ceiling deal.

“The brinksmanship is difficult to watch though, and it’s creating uncertainty. It’s doing damage because it shakes confidence, in the longer run, in the ability of the U.S. to deal with what is still the main problem, which is the size of deficits and debts,” he said.

Tims agreed that the situation underlines basic principles for investors to be well diversified.

“It’s important to have a mix of assets of different kinds and to make sure that you have a certain amount of liquidity available for unforeseen circumstances, whenever you see these kinds of events arise.”

Posted August 2, 2011 by JasonMacAskill in Uncategorized