Wednesday January 07, 2009
REPORT ON BUSINESS FRONT PAGE 
Flaherty seeks new ways to get credit going
Finance Minister Jim Flaherty is looking to jump-start the commercial paper market, a move that could involve using the federal treasury if that's what takes to get markets working again.
Worst is yet to come, Fed acknowledges
The world's largest economy now faces an even deeper downturn than previously forecast, with soaring unemployment in 2009 and perhaps years of trillion-dollar deficits.Ben Bernanke and his Federal Reserve Board now expect economic conditions to worsen substantially this year with no hint of recovery until 2010, according to minutes released yesterday of the Fed's Dec. 16 monetary policy meeting.
Apple cuts the digital locks off iTunes
Apple Inc. is dropping the digital copyright locks from most of the songs it sells through iTunes, a move that could prove to be a death blow for the music industry's attempts to control how consumers buy and listen to music.
A bear market mauling cut the TSX in half in 2008, taking it from its peak of 15,154.7 in June to a low of 7,647.11 in November. Quietly, stocks are climbing again on positive momentum, rising more than 20 per cent to hit 9,472.09. Is it a breakout? Or just another fake out?
A new year has breathed new life and new hope into equity markets. But while vital credit conditions have eased and investors are rediscovering their appetite for risk, a wounded bear market remains lurking beneath the surface - and may lash out again unless the recent rally is backed up by sustained economic improvements.
THE MARKETS
UPSandP/TSX9,472.09+186.58UPDJIA9,015.10+62.21UPNasdaq1,652.38+24.35UPDollar84.55+0.52UP
COLUMNISTS
Who to watch: 2009's CEOs of note
People magazine runs its annual list of the sexiest man alive. Here in Report on Business, there's a compilation of the deals of the year coming soon.What if those two lists were married up? What if we paused for a moment to point out a handful of executives on the Street worth watching in the coming year?
Why governments can't stop market crashes
Vernon Smith, the American economist who won a Nobel Prize in 2002 for his laboratory scrutiny of abstract economic theory, demonstrated that you can't end market crashes by imposing more government regulations. Born to a poor Kansas farm family on Jan. 1, 1927, he turned 82 last week. His early life was inextricably shaped by the Great Depression - by hardships that provided an enduring incentive to succeed. (As a child, one of his chores was to keep the woodstove in the kitchen supplied with dried corncobs and dried cow chips.) ''Like many of my generation,'' he says in his unassuming autobiography, posted on Nobelprize.org, ''I am a product of strange circumstances of survival and of successes built on tragedy.''
Duty-free arrivals idea finds no friend in Flaherty
Wisely or not, investors ride wave of optimism and take plunge
Tony Demarin has no idea whether this is a bear market rally or the beginning of a new bull market. But the president of BCV Asset Management in Winnipeg isn't waiting around to find out.
Stimulus spending? Foreigners beware: China's been down this road before
China is counting on planes, trains and automobiles to carry it through the economic hard times. Chinese leaders have indicated that about 45 per cent of their massive stimulus package - at more than $700-billion, the biggest in the world so far - will go toward the building of airports, railways, roads and other infrastructure projects. That will pay for a lot of rail and tarmac. But will it keep the Chinese economy growing? Of even more direct interest to Canada, will it be a boon for overseas infrastructure firms with interests in China? The jury is out on both questions.
INTERNATIONAL BUSINESS
Toyota plans unprecedented output cut
Toyota is suspending production at all 12 of its Japan plants for 11 days over February and March, a stoppage of unprecedented scale for the nation's top auto maker as it grapples with shrinking global demand.
Dubai race course deal cancelled, builders say
Companies building the centrepiece of a prominent Dubai race course said yesterday the original $1.25-billion (U.S.) contract has been cancelled, raising questions about the future site of the Middle East's premier horse race. Developer Meydan LLC blamed a work delay for the decision but vowed to inaugurate the project by the 2010 Dubai World Cup. One of two contractors said yesterday that the project is 55-per-cent complete, and that it stands to take a 1.35 billion dirham ($367.6-million (U.S.) on the decision. Malaysia's WCT Bhd. said it ''views the cancellation as a breach of contract.'' The other company is Dubai-based Arabtec Construction LLC. WCT (Kuala Lumpur) fell 54 sen to 1.29 ringitts (44 cents).
Indian exporters group says 10 million jobs in peril
Indian exporters may fire as many as 10 million workers, a lobby group said yesterday, putting pressure on Prime Minister Manmohan Singh to cut taxes and protect the industry from the global recession. The estimate by the Federation of Indian Export Organizations represents about 20 times the Nov. 21 government estimate for job losses. The exporters don't have orders beyond this month, A. Sakthivel, the group's president, said yesterday in New Delhi. ''The year 2009 is going to be the worst year in history'' for exporters, Mr. Sakthivel said. ''Job losses are going to be enormous due to the global slowdown,'' Commerce Ministry spokesman Rajiv Jain said.
Auto sales surge in Brazil on tax breaks, big sales
New car and truck sales in Brazil rose 11.5 per cent in December from November, as government tax breaks and year-end blowout sales wooed consumers, dealers' association Fenabrave said yesterday. For all of 2008, sales climbed 14.15 per cent to a record 4.85 million vehicles. Sales had plunged 25.7 per cent in November as the credit crunch and global financial crisis spilled over into Latin America's largest economy, before rebounding in December. Fiat finished the year as market leader with a 24.6-per-cent share. Volkswagen was second with 21.9 per cent, followed by General Motors with 20.5 per cent.
British house prices sink 15.9 per cent in 2008
House prices in Britain fell by their biggest annual amount in at least 56 years during 2008, as credit seized up and possible buyers stayed out of the market, a leading mortgage lender said yesterday. The Nationwide Building Society said house prices fell 15.9 per cent in December from a year earlier, the biggest annual drop since it started compiling statistics in 1952. Prices fell 2.5 per cent in December from the previous month, the biggest one-month drop since May's 2.6-per-cent drop. Most economists think the downward pressure on house prices will remain. ''We expect house prices to fall by 20 per cent in 2009,'' said Seema Shah, property economist at Capital Economics.
Woolworths chain closes doors for the final time
Bankrupt department store chain Woolworths PLC, a stalwart of British retailing for 100 years, turned out the lights at the final 200 of its 807 shops yesterday. Debt-laden Woolworths filed for bankruptcy protection in November. Administrator Deloitte held a huge liquidation sale and announced last month it would close all Woolworths stores after attempts to find a buyer for the faltering chain failed. About 27,000 jobs are being lost. The stores had been due to close by Monday, but Deloitte allowed an extra day so stores could sell their remaining stock. Deloitte has held talks with other retailers to take on the leases of around 300 Woolworths stores and hopes to sell off the firm's Ladybird children's clothes and Chad Valley toys brands.
German magnate takes own life
In killing himself, German billionaire Adolf Merckle has become the latest casualty of the global financial crisis, his family members saying yesterday he was broken by the struggle to salvage their business empire.
Europeans shiver from Russia-Ukraine dispute
Moscow's decision to cut back on natural gas deliveries to the Ukraine has left some Eastern Europeans without heat in sub-freezing temperatures and renewed Europe's fears about relying on Russia's state-controlled monopoly, OAO Gazprom, to supply a growing share of its energy needs.
Dow targets legal action after Kuwaiti deal fails
Dow Chemical Co. will pursue legal action against a state-owned Kuwaiti company that scuttled a $17.4-billion (U.S.) joint venture just days before the deal was to close, and said yesterday that talks for a similar arrangement with other investors are already under way.
Alcoa to cut 13,500 jobs, trim output, spending
Aluminum producer Alcoa Inc. said yesterday it will cut 13,500 jobs, or 13 per cent of its work force, and slash spending and output to cope with the global economic slowdown.
CANADIAN BUSINESS
Crown rejects claim Livent creators framed
The co-founders of theatre company Livent Inc. have relied on an implausibly complicated conspiracy theory to explain how an accounting fraud occurred at the company for eight years without their knowledge, prosecutors told a Toronto court yesterday.
Air Canada's unhappy holidays
They are memories of a hectic holiday season that Air Canada would rather forget, when the country's largest carrier had to foot the bill for more than 5,000 hotel rooms, issue thousands of meal vouchers and scramble to reduce a mountain of bags at airports.
Canada pumps natural gas, Fed pumps money
The disruption in European natural gas markets makes me wonder if the same thing could happen in Canada. Do we depend on foreign suppliers?In Canada, almost all of our natural gas comes from domestic production, so it is very unlikely that any other country could disrupt our supply.
Parts maker's financial woes spark standoff
The financial troubles of a 70-year-old auto parts supplier have prompted a dispute between the Canadian Auto Workers and General Motors Corp. that includes a union blockade of one of the parts maker's plants.
Forecast predicts housing 'correction'
Average Canadian house prices will fall by another 3 per cent in 2009, but the drop will add up to a ''correction,'' not the sort of ''crash'' that has crushed the U.S. market, real estate brokerage Royal LePage Real Estate Services said yesterday.
Rogers hit as iPhone numbers disappoint
The sheen may be coming off the iPhone, as harsh economic conditions steer some consumers away from the premium wireless device that has enraptured everyone from the trendy to the nerdy for the past 18 months.
Bell joins NHL team, takes shot at wireless hockey
It's time for hockey night on cellphones.Bell Mobility Inc. and the National Hockey League announced a new joint venture yesterday that will give the telecom giant's cellular subscribers access to live television broadcasts of hockey games on their cellphones and smart phones.
Why Bennetts loves its government 'connectors'
Early last month, Bennett Jones LLP chief Hugh MacKinnon sat down in Toronto's Royal York Hotel to make a pitch that a federal mandarin did not want to hear. The big name had been courted unsuccessfully for six months by the firm's Ottawa rainmaker, Eddie Goldenberg. Undaunted by the rejection, Mr. MacKinnon swept in with his own pitch.
Interpreting the nuances of top court's BCE ruling
The Supreme Court of Canada's release last month of its written decision on the BCE Inc. case was not the stirring read that legal experts and boardroom advisers had hoped it might be. Part of the disappointment reflects the ignominious death of a $32-billion deal that was fatally tripped up by a solvency clause. But another factor is the court's apparent reluctance to draw a brighter line for the legal duties of directors faced with a takeover or change of control.
Western Canadian Coal to cut operations, jobs
IPOs dry up on TSX in second half of 2008
There were no initial public offerings on the Toronto Stock Exchange in the last six months of 2008, making last year the worst in at least a decade for Canadian IPOs, according to an annual survey. PricewaterhouseCoopers, which has conducted the survey since 1998, said there were just 10 initial public offerings on Canada's main stock market in all of 2008 - in contrast to 36 the previous year. Counting all Canadian stock exchanges, including the TSX Venture Exchange for junior issuers, the number of IPOs last year fell to 57 from 100 in 2007. The value of all issues on Canadian markets in 2008 was $682-million, down 80 per cent from $3.4-billion in 2007, the survey showed. The value of all issues on the TSX in 2008 was $547-million, off from $3-billion in 2007.
Prices of raw materials, products post record drops
As oil prices plummeted in November, the prices manufacturers got for products leaving the factory gate dropped by a record amount, as did the cost of raw materials. According to Statistics Canada, the November industrial product price index fell 2.6 per cent and raw materials price indexes 13.4 per cent. The November drop in industrial prices was the largest of three consecutive monthly declines, the agency said, and was the steepest decrease since the series was created in 1956.Prices for petroleum and coal products dropped for a second straight month, down 18.9 per cent compared with a drop of 13.8 per cent in October. Raw materials prices were down for the fourth month in a row, falling about the same amount as they did in October, marking the two largest monthly declines since 1977.
Fairfax raises payout from $5 to $8 a share
Fairfax Financial Holdings Ltd. has continued its series of dividend increases, raising the annual payout to $8 (U.S.) a share from $5. The dividend announced yesterday represents a yield of 2.5 per cent at current exchange rates and yesterday's closing price on the TSX of $383.89 (Canadian), up $20.86. The $8 (U.S.) dividend is up from $2.75 two years ago and $1.40 the year before that. Prem Watsa, Fairfax's founder, chairman and chief executive officer, reaps $14.9-million in dividends payable Jan. 27 on his shareholdings, as listed in the company's latest proxy circular. Since 2000, he has been paid $600,000 annually in cash, with no bonus, stock-option plan, pension or other benefits.
Lions Gate buys TV Guide assets from Macrovision
Film studio Lions Gate Entertainment Corp. is making its first foray into U.S. cable channels by picking up TV Guide Network and TVGuide.com for $255-million (U.S.) from Macrovision Corp. The deal quashes an agreement announced last month that would have seen the TV Guide properties go to Allen Shapiro and JPMorgan's One Equity Partners for the same amount. Macrovision chief executive officer Fred Amoroso said late Monday that the new agreement ''represents an improvement for us.'' Macrovision paid $2.8-billion in cash and stock for television listings provider Gemstar-TV Guide International Inc. in 2007. That deal
FORECAST: GLOOMIER DAYS AHEAD
Auto forecasting firm IHS Global Insight issued one of the gloomiest outlooks yet for North American vehicle production in 2009.''We remain unconvinced that the light-vehicle sales rate has hit its bottom,'' IHS Global said after major auto makers reported declines as high as 53 per cent in December sales in the U.S. market and 41 per cent in Canada.
Average house price falls by $19,000 in Edmonton
The price of an average residential dwelling in Edmonton fell by $19,000 in 2008 to $310,974 on Dec. 31 as the local market softened, according to the Realtors Association of Edmonton. Total residential sales were down 15 per cent from 2007 because of higher prices in the first half of the year, and economic uncertainty in later months. ''We have seen the [price] peak and the market is settling in at this new level, although there will be the usual seasonal fluctuations,'' said Realtors Association of Edmonton president Marc Perras. House prices in Edmonton are seen as a leader for the Canadian market; prices in the city peaked in 2007 before falling away as new houses and apartment blocks were completed.
RBC selling $200-million in preferred shares
Royal Bank of Canada agreed to sell $200-million of preferred shares, the third Canadian lender in 24 hours to boost capital. RBC will issue eight million shares at $25 each, with an initial annual dividend of 6.25 per cent, the Toronto-based bank said yesterday. Canadian banks have raised about $6.5-billion since November by selling common and preferred stock to shore up regulatory capital. In April, 2007, the bank's preferred stock was sold at a 4.5-per-cent dividend yield. RY (TSX) rose 83 cents to $38.04.
Dorel expands in Brazil with joint venture
Dorel Industries Inc. is looking to expand into the growing South American market by entering a joint venture in Brazil to manufacture and sell juvenile products, including car seats. Dorel Juvenile Group president Camillo Lisio said Brazil holds tremendous promise that warrants the less than $4-million investment. Retail expert Rafael Anjos Camarano will head the new joint venture as president. Dorel will be the majority shareholder in the venture. Mr. Camarano's firm will retain 30 per cent. DII.B (TSX) fell 33 cents to $27.00.
GENERAL BUSINESS
'Friendly banter'? Or too much information?
The workplace can be a minefield of dilemmas, ranging from lapses in ethical behaviour to fretting over whether to go for a promotion. The Cubicle Jungle is your chance to weigh in on the issue at hand. Responses might be edited for clarity and concision. Please submit a 100-word-or-less response to:
Finding your footing in shaky times
Many employees did not greet the start of 2009 with the same optimism with which they've ushered in previous years.Instead, the economy has wrought widespread feelings of fear, anxiety and hopelessness. These emotions will be reflected in how people feel and act at work, with serious repercussions on morale and performance.
Finding your footing in shaky times
If ever a year of uncertainty was unfolding, this is it.The economic turmoil has swept aside many of the assumptions that employers and employees could count on in the past, career pros say. And that means a thorough reassessment of how to survive and thrive in turbulent times.
Ruthless climb to the top can be rueful
HIGH ALTITUDE LEADERSHIPBy Chris Warnerand Don SchminckeJossey-Bass, 210 pages, $30.95It's known as the death zone: The top altitude of the planet's tallest mountains, above 26,000 feet, where survival for a long time is impossible because of the lack of oxygen. Make a mistake, and it's fatal.
Joining the crowd ... on the street
THE SCENARIOI am being laid off from a company in an industry that has experienced widespread job cuts. There will be many people out there with similar experience and qualifications looking for work. How can I stand out from the crowd to other employers?
The weekly web poll
LAST WEEK'S QUESTION:Do you pay attention to economic forecasts?Yes: 69%No: 31%Total votes: 6,074THIS WEEK'S QUESTION:Do you feel secure in your job for this year?
CORRECTION
The SandP/TSX composite index fell 3 per cent in December, while the index was down 35 per cent for 2008. Incorrect information provided by Globefund was published yesterday.
ET CETERA
Potentially we've got trillion-dollar deficits for years to come. U.S. president-elect Barack Obama. Page 1
GLOBE INVESTOR
The nuts and bolts of new tax-free accounts
Every year about this time, people's thoughts turn to the same nagging question. Should I pay down the mortgage or contribute to an RRSP?This year there's a new claim on your savings, the tax-free savings account or TFSA. Starting Jan. 1, Canadians aged 18 and older can contribute up to $5,000 a year to an account in which income - whether from interest, dividends or capital gains - can grow tax free. TFSAs are being lauded by financial institutions, and some financial advisers, as the most important tax break since RRSPs, regardless of your age or circumstances.
Who to watch: 2009's CEOs of note
People magazine runs its annual list of the sexiest man alive. Here in Report on Business, there's a compilation of the deals of the year coming soon.What if those two lists were married up? What if we paused for a moment to point out a handful of executives on the Street worth watching in the coming year?
A bit more risk equals a better return with these bond options
The credit markets are frozen and that could well make it an opportune time for retail investors interested in fixed-income investments to step out on the ice and take some risk in order to enhance their returns.
Wisely or not, investors ride wave of optimism and take plunge
Tony Demarin has no idea whether this is a bear market rally or the beginning of a new bull market. But the president of BCV Asset Management in Winnipeg isn't waiting around to find out.
A diversified approach to dividend investing
WHAT ARE WE LOOKING FOR?Let's take a look at UBS's Canadian dividend portfolio of 12 stocks. MORE ABOUT THE PORTFOLIOLast September, UBS created a portfolio of stocks that had an established dividend growth record over the past five years and were rated ''buys'' by UBS. The dividend stocks had to pass a couple of more tests.
CNSX slashes fees to attract listings
The Canadian National Stock Exchange, a challenger to TMX Group Inc.'s near-monopoly on stock trading, is slashing listing fees in a bid to woo companies to switch. CNSX Markets Inc., which runs the exchange, said yesterday that it will chop the price of listing to $2,000 from $10,000 for companies that apply before the end of March. The exchange is hoping that cut, along with what it says are lower continuing costs, will lure companies from the TSX and TSX Venture exchanges, which are owned by TMX Group.
Help ahead for U.S. housing?
Keep an eye on U.S. mortgage rates because they are low and likely headed lower, which will help consumer spending and eventually the dismal housing market.WHAT ARE THE EXPECTATIONS?
EYE ON EQUITIES: STOCKS THAT SHOULD BE ON YOUR RADAR SCREEN
SNC-LAVALIN GROUP: (SNC-TSX)Yesterday's close$38.60, down 40centsSNC-Lavalin Group Inc. shares are up in price even though the commodities business is likely to weaken, while its exposure to the U.S. infrastructure market is minimal, said Paul Lechem, an analyst with CIBC World Markets.
COMMODITIES
A broad swath of commodities from copper to grains to gold were lifted yesterday in a wave of buying by managed pools of money as major commodity indexes geared up to reshuffle their portfolios for the year. Oil rose above $50 (U.S.) a barrel before ending with a small loss.CLOSING PRICES (SPOT)
TIP SHEET
It is easy to understand the connection between a global recession and, say, declining car sales. But does a slowing economy also affect mozzarella and cheddar? Early evidence suggests that it does - and that's bad news for cheese companies like Saputo Inc.
TUESDAY'S MARKETS: WHAT HAPPENED
(Up)Bay Street extends winning streak to six sessionsCanadian stocks advanced for a sixth consecutive day, led by financial and materials companies, after Royal Bank of Canada sold $200-million of preferred shares and industrial metals prices rose. The SandP/TSX composite index added 2 per cent.
BONDS
Canadian bonds ended mostly lower yesterday as the market tookdirection from the struggling U.S. Treasury market in the absence of any strong domestic stimuli. CANADA CouponYieldChg2 Year3.7501.03+0.0085 Year3.5001.84-0.02810 Year4.2502.89-0.00530 Year5.0003.66+0.022
FOREIGN EXCHANGE CROSS RATES
The euro continued its retreat against the U.S. dollar and the U.K. pound as investors speculated about a rate cut from the European Central Bank next week. The Canadian dollar hit a two-month high versus the greenback before retracing somewhat later in the day
