December 15, 2015 - Bank of Canada Updates Key Risks

Posted by Patrick Ceresna on Dec 15, 2015 8:42:33 PM

Bank of Canada released its Semi-Annual Financial System Review today.  Interestingly it continues to be concerned about growing levels of household indebtedness and the potential impact it may have on the real estate markets.  When looking  at its risk chart, it is interesting how it has changed from the summer.  It has removed the risks of  a European crisis and risks of a sharp rise in long-term interest rates, and replaced them with -

1. An abrupt increase in global risk premium
(he can't be talking about the high yield bond crisis south of the boarder, can he?)

2. A prolonged weakness in commodity prices.

I do agree with the fact that they associate a higher probability with the risks of a China and Emerging market crisis and prolonged weakness in commodities as the two go hand and hand.  The one thing that the graph fails to illustrate is the fact that all 4 risks are interconnected and the risk that as one worsens, it will have a contagion effect on all the others, making the probability of one, materially increase the risk of the others occurring.  The macroeconomic conditions of 2016 will be more important then ever.


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December 9, 2015 - Negative Interest Rates in Canada Just Became Reality!

Posted by Patrick Ceresna on Dec 9, 2015 12:54:32 PM

Excerpt of the CNBC article:  Speaking in Toronto, Bank of Canada (BoC) Governor Stephen Poloz said the odds that the bank could drop its benchmark interest rate below zero have increased since 2009 — back when it originally said it couldn't see rates lower than 0.25 percent.
The BoC already cut its benchmark rate twice this year, first from 1 percent to 0.75 percent in January, and then to 0.5 percent in July.
Now, rates as low as minus 0.5 percent may be considered to help reach the bank's 2 percent inflation target, Poloz explained. The annual inflation rate was last recorded at 1 percent in October, holding steady from a month earlier.

Click to read

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December 2, 2015 - Are The Bears Going To Ruin Christmas?

Posted by Patrick Ceresna on Dec 2, 2015 4:48:44 PM

Amazingly the S&P500 has tested the 2100 overhead resistance on 8 separate occasions over the last year and failed.  The market again this week is finding it challenging at the well defined highs of the year.  With the ECB and the jobs numbers lined up this week, there will be no shortage of tension.   Technically for us, the 2040-2050 area on the S&P500 will be an import price point as any technical breakdown below there would indicate the bulls would have once again dropped the ball.


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December 1, 2015 - Is The Next Wave of the Canadian Recession Beginning?

Posted by Patrick Ceresna on Dec 1, 2015 8:57:07 PM

The Canadian GDP (Gross Domestic Product) came in at -0.5%, substantially worse than the 0.01 consensus.  This is the biggest drop since 2008! We are very curious if this drives Stephen Poloz to take a more doveish monetary stance in tomorrow's (Wednesday, December 2) Bank of Canada Rate Statement.

CanGDPDec1.jpgChart source: 

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