Money world

The Toronto stock market turned in a weak performance today as investors backed out of financial stocks after Royal Bank turned in a quarterly loss.

U.S. markets closed slightly higher as investors tried to reconcile mixed economic signals.

Toronto's S&P/TSX composite index closed down 22.3 points to 10,370.07.

Still, the market had a winning week, up 3.7 per cent, as the spring rally that started March 10 showed no signs of slowing down.

The main index is up a stunning 37 per cent since the lows of March 9 as investors hope that an economic recovery will take place by the end of the year.

But analysts warn this surge has perhaps gone too far and happened too fast.

"We're sort of at a very pivotal point here," said Danielle Park, at Venable Park Investment Counsel in Barrie, Ont.

"Fundamentally, there's a disconnect between what the market is doing and what the data has been doing and I think we're going to get some pullback, probably between now and the fall."

The Canadian dollar was sent surging again today, driven up by the recent run on the stock markets combined with rising oil prices and a weaker U.S. dollar.

The loonie close up 1.9 cents to 91.6 cents U.S. after running up as high as 91.76 cents – adding up to a gain of almost eight cents U.S. during May.

The financial sector was flat after Royal Bank (TSX: RY), the last of the big Canadian banks to report, reported a $50-million second-quarter loss, down from a $928-million profit a year ago.

Excluding one-time items, cash earnings per share beat analyst estimates by six cents but its shares fell $1.80 to $43.70. Elsewhere in the sector, TD Bank (TSX: TD) jumped $1.91 to $55.60.

The TSX Venture Exchange climbed 18.92 points to 1,124.08.

New York's Dow Jones industrial average was up 96.53 points to 8,500 pay day loans no credit check.33 as the U.S. Commerce Department said first-quarter gross domestic product fell by 5.7 per cent. Last month, it estimated GDP declined by 6.1 per cent.

The report "points to recovery," said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc.

"And what you have here is a market that continues to look for recovery."

But the index from Chicago-area purchasing executives showed a larger drop in activity in May than in April. Analysts had anticipated a slightly smaller contraction. The report is viewed as a precursor to the more closely watched national manufacturing index from the Institute for Supply Management, due Monday.

The Nasdaq composite index moved up 22.54 points to 1,774.33 while the S&P 500 index rose 12.31 points to 919.14

The TSX energy sector moved down 0.45 per cent even as the July crude contract in New York rose $1.23 to US$66.31 a barrel, a fresh six month high, on hopes demand will increase. That price is about double the lows reached in March, when crude tumbled below $35 a barrel. EnCana Corp. (TSX: ECA) fell 72 cents to $60 while Suncor Inc. (TSX: SU) lost 51 cents to $38.25.

The base metals sector was ahead 1.75 per cent as Teck Resources (TSX: TCK.B) rose 50 cents to $17.15.

The gold sector was ahead 0.5 per cent as the August bullion contract rose $17.10 to US$980.30.

General Motors Corp., the German government and Canadian auto parts maker Magna International have agreed on the framework of a deal for Magna to take a majority stake in GM's Opel unit, a person briefed on the negotiations said today. Magna shares were up four cents to $36.20.

General Motors is widely expected to file for bankruptcy protection on Monday, the automaker's restructuring deadline. GM shares fell 34 cents to 78 cents U.S.

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New orders for long-lasting U.S. manufactured goods rose more than expected in April, posting their biggest gain in 16 months, according to government data on Thursday that suggested the recession was winding down.

April’s 1.9% increase was the biggest percentage advance since December 2007, when orders rose 4.1%, the Commerce Department said.

However, March orders were revised sharply lower, falling 2.1% from the previously reported 0.8% decline.

Analysts polled by Reuters had expected overall new orders to rise 0.4% in April, and orders excluding transportation to ease 0.3%.

New orders excluding transportation climbed 0 payday loans no faxing.8% in April after declining 2.7% in March, boosted by orders for communications equipment, machinery and fabricated metal products.

However, there were some dark spots in the report. Civilian aircraft and parts tumbled 6.8% after surging 7.5% in March.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5% in April. The prior month was revised to show a 1.4% decline, previously reported as a 0.4% gain. 

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WASHINGTON–The number of problem U.S. banks and thrifts soared to a 15-year high in the first quarter as they faced mounting losses from home mortgages, commercial real estate and consumer credit cards in the recession, regulators report.

The Federal Deposit Insurance Corp. said yesterday the list of troubled banks and savings-and-loans shot up 21 per cent to 305 in the first quarter from 252 in the 2008 fourth quarter, the highest number being carefully watched since 1994.

The FDIC said its deposit insurance fund, used to cover losses when banks fail, fell to the lowest level since 1993. As of March 31, it was down to $13 billion (U.S.) from $17.3 billion at the end of 2008.

"Bank failures continued to mount and they will continue to do so," FDIC chairwoman Sheila Bair told reporters.

Despite bank lobbying efforts, reported by the Wall Street Journal, Bair said U.S. banks will not be allowed to bid on the same loans they offer for sale in the government’s public-private investment program to get hard-to-value loans off banks’ books.

"There should be no confusion. Banks will not be able to bid on their own assets," Bair said. The program, using billions in taxpayer dollars, aims to help attract private investors to buy distressed loans banks want to sell.

Bair said before the program is launched, the Treasury must issue guidance to prevent fraud and collusion in determining asset prices.

The quarterly list of problem banks held combined assets totalling $220 billion on March 31, up from $159 car insurance comparison.4 billion at the end of 2008. The agency does not release names of problem banks; it compiles its list from regulators’ confidential assessments of their capital adequacy, asset quality, management, earnings and liquidity.

U.S. bank failures so far in 2009 stood at 36 last Friday. If that pace continued, more than 100 FDIC-insured banks could fail this year, up from 25 in ‘08 and three in ‘07.

The banking outlook prompted Congress to more than triple the FDIC line of credit with the Treasury to $100 billion as it tries to replenish its insurance fund.

Bair said the agency has no plan to tap the new borrowing authority it views "as a back-up line."

JPMorgan Chase & Co, the second-largest U.S. bank, said it will likely incur $700 million to $750 million in pretax charges related to the new FDIC special assessment of 5 basis points on each bank’s assets to beef up the fund, either this quarter or the next two quarters.

U.S banks had a net profit of $7.6 billion in the first quarter, down 61 per cent from a year ago but a turnaround from the industrywide loss of the last quarter of 2008.

In a sign bank customers are falling behind on payments, noncurrent loans rose to $291 billion in the quarter, more than double the $137 billion of the year-earlier quarter.

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Brown Shoe Co. reported first-quarter results illustrating the roughness of the economy. Sales dropped 2.8 percent to $538.7 million. The Clayton-based parent company of Famous Footwear, Naturalizer, and Dr. Scholl’s posted a loss of $7.6 million or 18 cents per share, compared to $7.2 million (17 cents per share) in the same period a year ago.

"The consumer spending environment remained challenging" in the first quarter, Ron Fromm, Brown Shoe’s chairman and chief executive, said in a statement.

Fromm said the company focused on managing expenses while reducing inventory and debt no credit check pay day loans. The company generated cash and lowered its net borrowings by more than $30 million.

The company said it would keep its number of stores steady, at best, and might actually reduce its stores by 15 this year. Additionally, it plans to cut its store roster by about 30 stores in 2010, and again in 2011.

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Stock markets surged as Bank of Montreal’s earnings beat expectations, while hopes rose for an economic rebound by the end of the year following a much stronger-than-expected reading on U.S. consumer confidence.

Toronto’s S&P/TSX composite index moved 216.4 points higher to 10,285.9.

Bank of Montreal shares were ahead $2.15 to $43.71 after the company said that amounts to cover credit losses helped cut profits by 44 per cent to $358 million during the second quarter. That was despite higher net earnings in its personal banking and capital markets divisions.

CIBC, Scotiabank and TD Bank report tomorrow, while Royal Bank issues earnings on Friday.

Those banks were up at least 5 per cent.

The TSX Venture Exchange was 0.73 of a point higher at 1,097.16.

The dollar rose 0.45 of a U.S. cent to 89.46 cents (U.S.).

Earlier in the day it touched its loftiest level in more than seven months, spurred by a rise in oil prices and by upbeat U.S. economic data that whetted appetite for risk.

New York’s Dow Jones industrial average jumped 196.17 points to 8,473.49 after the U.S. Conference Board said consumer confidence in May soared to the highest level since last September amid tentative signs that the economy is improving.

The Nasdaq composite index climbed 58.42 points to 1,750.43, while the S&P 500 index was ahead 23 fast cash personal loan.33 points to 910.33.

The TSX energy sector rose 2 per cent as the July crude contract on the New York Mercantile Exchange gained 78 cents (U.S.) to $62.45 a barrel.

Petro-Canada gained $1.48 (Canadian) to $45.65, while EnCana Corp. improved 88 cents to $59.37.

Shares in Ivanhoe Energy were 20 cents higher to $1.77 after the company won the rights to explore an Amazon oil block.

Vancouver-based Ivanhoe will spend $4 billion (U.S.) to develop an area that could contain 4.5 billion barrels of extra-heavy crude, Ecuador’s state oil company said.

The June bullion contract in New York moved down $5.60 to $953.30 an ounce, taking the gold sector down 0.44 per cent.

Barrick Gold Corp. faded $1.60 (Canadian) to $41.19.

The base metals sector shook off early losses to move 1 per cent higher as Ernst & Young predicted a "severe supply constraint" developing in many metals and minerals, causing prices to jump to new highs.

Manulife Financial Corp. shares rose $1.02 to $23.12 after it said Monday that it will raise $350 million in an issue of 14 million Series 1 preferred shares.

The Canadian Press

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Professor Zari Rachev scorns the idea that market cataclysms cannot be forecast. He says his statistical models have predicted them, and his customers agree.

His daughter is now president of New York-based company FinAnalytica, which uses his models to provide investors and risk managers with a risk indicator that takes into account the worst-case scenarios.

As those who have so far survived the financial crisis pick over the wreckage to develop enhanced predictors of market risk, Rachev’s are among the offerings for people who believe statistical models can help.

“This past year was very important for us, because it validated everything that we worked for,” Boryana Racheva-Iotova told Reuters by telephone from Bulgaria.

Her firm’s risk measure, fat-tailed expected tail loss or ETL, gave investors advance notice of a sharp fall in the Dow Jones Industrial Average among other markets: the Dow fell from a life high in November 2007 to a 12-year low in March 2009, sliding sharpest after Lehman Brothers failed in September 2008.

Fat-tailed ETL builds on the statistical phenomenon popularized by former options trader Nassim Nicholas Taleb’s focus on the massively unexpected.

Think of a bell curve on a statistician’s chart that reflects “normal distribution.” It is tall and wide in the middle — where most events fall — and drops and flattens out at the edges, where fewer things happen, making a shape on a graph like a bell. When the edges or tails swell, instead of nearly vanishing, they are called “heavy” or “fat.”

Streams of financial commentators have over the past year reveled in a desire to present the crash as coming out of the blue to math whizzes paid a fortune to study the statistical stars and presage such events easy payday loans.

But Rachev is one of those who say they saw it coming — because his models took the worst possible events into account.

DEPARTING FROM VAR

In the case of the Dow Jones index, his fat-tailed expected tail loss — a measure of the potential daily average loss in the worst 1 percent of scenarios — gave investors notice of rising risk.

Boston-based Henderson Capital Management, which does not disclose its funds under management, said it used FinAnalytica models to help identify investment funds with significant downside risk through 2008.

“Some of these managers subsequently suffered large losses,” Managing Partner Mark Pearl said in a statement for Reuters. One is now closing down, he added, declining to name it.

With the Dow Jones in the three years to late 2006, the fat-tailed ETL was below 2 percent, but it started to rise in 2007 to 4 percent in March, then 8 percent in April 2008 and 10 percent in mid-September 2008.

By contrast, a typical Wall Street indicator that takes into account all cases but the worst 1 percent — known as value at risk (VaR) 99 — was signaling potential daily losses of no more than 2 percent until April 2008 and 5 percent in late-September. 

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Boeing Co. leaders say that the U.S. military’s airlift needs are growing and that a Pentagon proposal to halt future orders for the C-17 Globemaster III cargo plane is premature.

Boeing, whose defense unit is headquartered in St. Louis, is trying to rally support for the C-17 on multiple fronts — arguing that ceasing production would erode the U.S. industrial base, costing thousands of jobs at Boeing plants and those of its main suppliers. But Boeing officials also emphasize the plane’s strategic value.

"Right now, since 9/11, the airplane has been flying at about a 15 percent higher rate than was anticipated," said Donald A. Anderson, Boeing’s C-17 program manager in St. Louis. "In addition, they’re talking about rebasing troops in the United States. They’re talking about an increase in the size of the Marines Corps and the Army.

"So it seems like the airlift requirements are growing. And you need airlifters to meet those needs."
Starting with Secretary of Defense Robert Gates’ announcement in early April and continuing through last week, the Pentagon has said it can get by with the 205 C-17s that are either in service or on order. The Air Force also uses the Lockheed Martin C-5 Galaxy to transport weapon systems, cargo and personnel to overseas locations.

Republican Sen. Christopher "Kit" Bond and Democratic Sen. Claire McCaskill, both of Missouri, have written letters supporting more orders of the C-17, and Machinists Union officials have traveled to Washington to show their support for a program that supports 900 jobs in St. Louis.

"This is high political theater," said analyst Richard Aboulafia of The Teal Group in Fairfax, Va. "The bottom line is I don’t think the line is threatened. But it is up to everybody from Department of Defense to Congress to Boeing to the unions to make it look as though it were."

The Defense Department has not sought funding for the C-17 in the last three years. But Congress has stepped in to add funding for more of the $202 million planes through supplemental defense appropriations bills.

Bond and Boeing officials have asked why Gates would halt C-17 orders while there is a study under way into the military’s future air-mobility needs. The results are expected this fall.

"But yet we’re making that decision now to stop the airplane," Anderson said. "So it seems somewhat premature freecreditscore."

Bond said shutting down production of the C-17 is a "dangerous gamble" and warned that the U.S. can’t afford to "lose the capability to transport safely our troops and equipment to anywhere in the world."

In a letter to President Barack Obama, McCaskill said the U.S. is "literally flying the wings off these planes," and added "this is not the time to end its production, especially in light of projected global mission sets for the U.S. military."

Both legislators also have gone to bat for Boeing’s St. Louis-built F/A-18 Super Hornet, whose future was placed in limbo under the latest Pentagon spending plan.

The C-17 is assembled at a plant in Long Beach, Calif. But the cargo door, cargo ramp, landing-gear pods, nose and engine pylons are built in St. Louis.

A November 2008 report by the Government Accountability Office recommended "careful planning to avoid shutting down the C-17 line prematurely." Both Boeing and the Air Force believe shutting down and restarting production "would not be feasible or cost effective," the report found.

The GAO cited the high costs of hiring and training a new work force, reinstalling equipment to proper working condition and re-establishing a supplier base.

Boeing has delivered the C-17 to other countries, including Australia, Canada and the United Kingdom. The United Arab Emirates has announced its intent to buy four of the planes, and Qatar has ordered two and exercised an option on two additional C-17s.

But Anderson said international sales alone are not enough to sustain the C-17 line. Boeing officials say maintaining C-17 sales to the U.S. Air Force is necessary to keep the price of the planes competitive in the international market.

Defense analyst Loren Thompson of the Lexington Institute in Arlington, Va., said the C-17 is the best strategic airlifter ever built and "a very cogent case" can be made that terminating production at 205 planes would be too early. At the moment, he said, its future will be dictated by Congress.

"Here’s the bottom line to C-17," Thompson said. "If Congress doesn’t add money, there won’t be any more."

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It’s too early to determine whether the recession is hurting the summer concert season, which starts rolling out in coming days, but music industry insiders say artists and promoters across North America are making all kinds of economy-related concessions to help music fans get the biggest bang possible for their hard-earned bucks and to ensure venues are filled to the brim.

Some major acts are offering "extreme deals" to the general public and in fan club and VIP pre-sale packages, said Sean Pate, head of corporate communications at the world’s largest Internet ticket re-selling operation, Stubhub, based in San Francisco.

"U2 is selling all their seats for an average $55 this summer, and Bruce Springsteen is letting some seats go for as little as $1."

Country superstar Keith Urban is making sure that some of the best seats for his summer tour are available for $20.

"After the economy tanked in November and a traditional pre-summer lull, the volume (of ticket sales) is stepping up," Gary Bongiovanni, editor-in-chief of the concert industry trade publication Pollstar, told the Toronto Star.

"In-demand artists are not having trouble selling out," he said, citing upcoming packaged acts such as Aerosmith with ZZ Top, Nine Inch Nails with Jane’s Addiction, Def Leppard with Poison and Cheap Trick, Elton John with Billy Joel, and Kenny Chesney with Sugarland.

But even those groups and others are opting to boost their "must-see" status by banding together. "We’re looking at a flood of acts in the summer who are touring in recession-proof packages," said Bongiovanni.

But some artists without "must-see" status may find touring difficult this summer, or be forced to make extra concessions. The economy is forcing fans to make choices about how they spend their music money, Riley O’Connor, chairman of concert promotions company Live Nation Canada, said.

In the U.S., concert promoter Live Nation is planning to ramp up beer, food and merchandise sales to compensate for lower ticket revenue, and is considering lowering the price of cheap seats, or dividing them into more than the usual two or three price levels.

"We have to manage our costs, and you have to be responsible for what you do, and make sure any chances you take are not being too crazy," O’Connor said.

In the past decade, when radio airplay and record retail revenue – formerly the biggest sources of income for musicians – have all but disappeared due to Internet downloading and the iPod revolution, music acts have come to rely almost solely on live performances for their livelihood, Bongiovanni said guaranteed cash advance loan.

That has created a robust and competitive marketplace for big-name acts and others with past radio hits, and a year-round feast of live music for fans, culminating in high-priced summer blockbusters.

Demand for live music has prompted a steep rise in the price of concert tickets and on-site merchandise, which have doubled since 2000, Bongiovanni said.

"The trend has been that the best seats are becoming more and more expensive, while general admission tickets have dropped in price."

But in 2009, many top-name acts are putting a much lower cap on the best seats, or offering one-price tickets across the board to combat the effects of the global economic downturn, and to ensure they’re playing to full houses, said Pate.

"Keeping ticket prices down means acts may be playing in big markets for less, maybe 15 or 20 smaller markets will open up for them because of affordable seats."

There have already been casualties. The July 11 event on Toronto’s Olympic Island, announced six weeks ago, featuring Broken Social Scene, Explosions in the Sky, Thunderheist, Beach House, Apostle of Hustle and Rattlesnake Choir, was cancelled last week, apparently due to poor ticket sales.

The 37-year-old JVC Jazz Festival, one of New York City’s landmark cultural events, will not take place this year due to lack of corporate sponsorship money and the poor economy.

To stave off disaster, some acts are coming up with novel ideas. Hip-hop artist k-os recently concluded a 10-date tour which allowed concertgoers to pay what they wanted for his shows. They received a free CD as well. (See story on E2)

California rock band No Doubt is making available a digital download of their entire catalogue with the purchase of a premium ticket ($42.50 before taxes and fees), while Coldplay ticket buyers will receive a free live album.

However, apparently oblivious to the recession, British impresario Richard Branson is moving full steam ahead with his fourth series of two-day Virgin festivals in Canada, with events planned this summer in Ontario, Alberta, and British Columbia, and, for the first time, Quebec and Nova Scotia.

The Virgin festivals kick off in Montreal June 19 and 20 with Black Eyed Peas, Simple Plan, Hedley, The New Cities, Eva Avila, New Kids on the Block, Akon, Live, Lights and Divine Brown.

With files from The Canadian Press

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WASHINGTON–Canada’s strong policy framework and proactive response has put it in a better position to deal with the global financial crisis than most countries, but it still faces a challenging near-term economic outlook, the IMF said Friday.

"The near-term economic outlook will be challenging in light of the sharp deterioration in the global environment and Canada’s strong international linkages," the International Monetary Fund said in its annual review of Canada’s economy free health insurance quotes.

The fund saw risks, including from macro-financial linkages, as tilted to the downside, and urged continued vigilance and readiness to act.

It also said Canada was well placed to participate in a further, internationally coordinated stimulus effort, if warranted, noting that this would not put debt sustainability at risk.

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Finance Minister Jim Flaherty unveiled regulations today to force the credit-card industry to overhaul disclosure practices on fees and give consumers more time to avoid sky-high interest rates.

The measures include a minimum 21-day "interest-free" grace period on all new purchases when consumers pay their balance in full by the due date.

Speaking to reporters at a downtown Toronto hotel, Flaherty said the changes are meant to provide relief to families who rely on credit as they struggle through the recession.

"The last thing these families need is a surprise on a credit card statement," he said. "With better information Canadians will be able to make better decisions."

But the minister was adamant that Ottawa would not impose a limit or cap on credit card interest rates.

"There are dozens and dozens of choices for consumers," Flaherty said. "Our obligation is to make sure consumers have the information they need and where we see practices that are unfair . . . that we move to fix that."

He added the financial institutions initially resisted the 21-day grace period, a change that will cost them "tens of millions of dollars."

New Democrat Party leader Jack Layton called the changes inadequate.

"The rates of interest have not been brought down. Instead, the font size has been brought up so people will know how much they’re being gouged," he told reporters. "This isn’t going to help Canadians to pay the bills."

Among the measures, Ottawa will require a "summary box" on all credit-card contracts and applications clearly outlining information about interest rates, minimum payments, annual fees and other applicable costs.

In particular, account statements will be required to show how long it will take consumers to pay off a credit card balance if they make only the minimum payment each month.

Banks and other issuers will also have to spell out if their interest rates vary for new purchases, cash advances and balance transfers.

Additionally, financial institutions must specify the parameters of any introductory or "teaser" interest rates to help consumers become better informed about their obligations.

Consumers currently must fish for that information in densely worded cardholder agreements that often use small print and complicated language payday advance low fees.

Flaherty has been facing pressure to regulate Canada’s multi-billion-dollar payments industry.

Currently, the interest-free period varies from bank to bank, and some financial institutions have shortened the purchase-to-payment buffer in recent months – a move deemed "insidious" by the Consumers’ Association of Canada.

The new rules around grace periods will help consumers who don’t pay off their entire balance in a given month.

Under the old system, a consumer who has a $500 credit-card bill in April and only pays $450, would carry over $50 on their May statement.

However, that person could suddenly find there is no grace period on new purchases made in May.

Under the new rules, if a consumer carries over part of their bill from the previous month, the 21-day grace period would still apply to new purchases as long as that person pays off the entire balance during that month.

While it is estimated that about 70 per cent of Canadian households pay off their entire credit-card balance each month, there is growing concern about rising defaults because of the recession, according to the Canadian Bankers’ Association.

Flaherty acknowledged that Canadian families are facing increased financial "pressures" at a time when the national unemployment rate is at a seven-year high, while consumer bankruptcies are skyrocketing.

Flaherty also outlined other measures that were first disclosed in the federal budget. Those proposals include a new task force on financial literacy and a requirement for banks to provide consumers with "clear and timely advance notice" of rate and fee changes along with potential changes to debt collection.

The credit-card regulations have been months in the making and opposition critics previously dismissed the measures as an "information campaign" that will do little to protect debt-laden consumers amid a painful recession.

Critics say Flaherty is failing Canadians by not introducing an outright cap on interest rates and fees.

The NDP is advocating that a cap on credit-card interest rates be set at five percentage points above the commercial banks’ prime rates.

Click here for Political Decoder - Flaherty’s credit card changes: A reason for big banks to celebrate

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