Hello Friends,
Last year's (2013) Report : Collapse of the Emerging Markets // Advantage America & Canada - sent out on 30-Sep-2013, highlighted the collapse of the Emerging Market Economies & in particular the depreciation of the India Rupee at that time by about 20 - 30%, and how the American Economy & the US Dollar were once again poised to become the dominant player in the World Economy. This was due to six major advantages over developed and developing country competitors, & it came out to be very true & most of the predictions were correct, to the point.
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Significant Events in 2014 & trends for the next year 2015 / My Analysis :
1. Petroleum Industry : Crude Oil Prices have fallen over 40% from over USD$100 a barrel to about $58 today in a matter of only 6 months.
This is a major spoiler for Canada & in particular Alberta, who's economy is largely dependent on the Petroleum industry.
Source: InfoMine.com
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2. Canadian Dollar is down more than 15% since last year vs the US Dollar.
This is a blow to the consumers as a large part of consumer products are imported into the country from either the US or from China.
Almost every product in the Mall or at a store is either fully imported or has been partially processed outside the country, & a declining exchange rate makes those products more expensive for the consumers.
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3. Housing Sector : Even-though the Housing sector has seen tremendous growth over the last 3-4 years, however according to several reports it is now in bubble territory, propped up by foreign money. Several reports indicate the Housing sector is due for a 10 - 30% correction in the near future.
Once interest rates begin to climb up, then there is going to be a lot of pressure on many to sell as they may not be able to afford higher mortgage rates.
This may have a tumble effect & prices may come down sharply over the next 1-2 years.
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4. Stock Market :
The S&P TSX has erased previous gains of this year & 2014 YTD (Year to date) increase is less than 1%.
Most of the underlying participants in the TSX - Canadian Blue chip companies are in no-growth or negative growth territory at this time, due to the falling Oil prices and the bleak economic outlook for the Canadian Manufacturing industries.
Blue chip manufacturing, resource & engineering companies, which have previously been the darling of the markets, have recently reported poor performances in terms of sales & order bookings for the next year.
Bombardier Inc, stock is down almost 10% YTD this year. Bombardier recently lost a bid to supply trains to Boston’s subway system. The winning bid was placed by China CNR Corp., a company that is very keen on breaking into the American market. The $567 million deal gives China CNR its first contract in North America.
SNC-Lavalin Group Inc, the largest engineering company in Canada. Its stock is down almost 15% YTD this year, due to badly performing resources (mining) sector.
Suncor Energy, Canada's largest Petroleum company's stock is down more than 13% YTD.
Husky Energy, another Petroleum Industry giant's stock is down more than 34% YTD.
With these trends, it is difficult to say how the markets will perform next year, but the overall picture is not very rosy.
Those people who could make money staying home & day trading in the stock market, now need to start dusting off their resume, & will have to get a real job to pay their bills.
5. Household Debt & Rate of Interest :
Source: BCA
Take a look at the chart first & then you will begin to understand the big picture.
The only reason the Canadian economy survived the last sub-prime mortgage crash in 2007-08, was that the Canadian Banks were more financially sound than their American counterparts.
Canadian housing debt was secured by sound lending practices & many homeowners had more than 20% equity in their home. There was very little sub-prime lending at that time.
This may not be the same scenario now in 2014 as household debt has sky-rocketed to over 160% of income & is now fast approaching the bubble territory.
Many Canadians are upto their eyeballs in debt, with very little room left to maneuver. Any small change in the prime lending rate of interest may have a cascading effect on many.
Does this chart show you an image of a healthy / robust & growing economy. To me it looks the image of a sick man, barely enough income to support his lavish lifestyle & bills piling up fast.
It seems 2015, will be the break year, when things start breaking down. Canada does not have the benefit of the world's reserve currency as was the case in the US. The US was able to bail itself out of a messy situation by massive Quantitative Easing, Bond Buying Program & financing the mortgage backed securities purchase program to prop up the real estate market. This may not be possible here.
======================================================================
6. Emerging Markets :
Falling prices of resources (Crude Oil, Coal, Iron Ore, Copper, etc), is boosting the manufacturing industry in the emerging markets.
With petrol prices falling, consumers in India & other emerging markets have suddenly received a boost to their consumer spending. Food & other essential items & commodities have suddenly become cheaper 10 - 20% & some items even 30-40%.
This will in times to come create one of the biggest consumer demand in countries such as India & China. FMCG industries will gain tremendously due to the increase in consumer spending over the coming 1-2 years.
Overall : For investors, it may be time to diversify again into the emerging markets as the economic outlook here in Canada may remain bleak over the coming 1-2 years.
======================================================================
Disclosure : This is not investment advice. I'm only providing general information & news items. Do your own due diligence. I hold no responsibility for any losses.
Read my Blog: Rahul's Café Canadian
Thanks & Regards,
Last year's (2013) Report : Collapse of the Emerging Markets // Advantage America & Canada - sent out on 30-Sep-2013, highlighted the collapse of the Emerging Market Economies & in particular the depreciation of the India Rupee at that time by about 20 - 30%, and how the American Economy & the US Dollar were once again poised to become the dominant player in the World Economy. This was due to six major advantages over developed and developing country competitors, & it came out to be very true & most of the predictions were correct, to the point.
=======================================================================
Significant Events in 2014 & trends for the next year 2015 / My Analysis :
1. Petroleum Industry : Crude Oil Prices have fallen over 40% from over USD$100 a barrel to about $58 today in a matter of only 6 months.
This is a major spoiler for Canada & in particular Alberta, who's economy is largely dependent on the Petroleum industry.
====================================================================
2. Canadian Dollar is down more than 15% since last year vs the US Dollar.
This is a blow to the consumers as a large part of consumer products are imported into the country from either the US or from China.
Almost every product in the Mall or at a store is either fully imported or has been partially processed outside the country, & a declining exchange rate makes those products more expensive for the consumers.
======================================================================
3. Housing Sector : Even-though the Housing sector has seen tremendous growth over the last 3-4 years, however according to several reports it is now in bubble territory, propped up by foreign money. Several reports indicate the Housing sector is due for a 10 - 30% correction in the near future.
Once interest rates begin to climb up, then there is going to be a lot of pressure on many to sell as they may not be able to afford higher mortgage rates.
This may have a tumble effect & prices may come down sharply over the next 1-2 years.
======================================================================
4. Stock Market :
The S&P TSX has erased previous gains of this year & 2014 YTD (Year to date) increase is less than 1%.
Most of the underlying participants in the TSX - Canadian Blue chip companies are in no-growth or negative growth territory at this time, due to the falling Oil prices and the bleak economic outlook for the Canadian Manufacturing industries.
Blue chip manufacturing, resource & engineering companies, which have previously been the darling of the markets, have recently reported poor performances in terms of sales & order bookings for the next year.
Bombardier Inc, stock is down almost 10% YTD this year. Bombardier recently lost a bid to supply trains to Boston’s subway system. The winning bid was placed by China CNR Corp., a company that is very keen on breaking into the American market. The $567 million deal gives China CNR its first contract in North America.
SNC-Lavalin Group Inc, the largest engineering company in Canada. Its stock is down almost 15% YTD this year, due to badly performing resources (mining) sector.
Suncor Energy, Canada's largest Petroleum company's stock is down more than 13% YTD.
Husky Energy, another Petroleum Industry giant's stock is down more than 34% YTD.
With these trends, it is difficult to say how the markets will perform next year, but the overall picture is not very rosy.
Those people who could make money staying home & day trading in the stock market, now need to start dusting off their resume, & will have to get a real job to pay their bills.
Source: Google
======================================================================5. Household Debt & Rate of Interest :
Take a look at the chart first & then you will begin to understand the big picture.
The only reason the Canadian economy survived the last sub-prime mortgage crash in 2007-08, was that the Canadian Banks were more financially sound than their American counterparts.
Canadian housing debt was secured by sound lending practices & many homeowners had more than 20% equity in their home. There was very little sub-prime lending at that time.
This may not be the same scenario now in 2014 as household debt has sky-rocketed to over 160% of income & is now fast approaching the bubble territory.
Many Canadians are upto their eyeballs in debt, with very little room left to maneuver. Any small change in the prime lending rate of interest may have a cascading effect on many.
Does this chart show you an image of a healthy / robust & growing economy. To me it looks the image of a sick man, barely enough income to support his lavish lifestyle & bills piling up fast.
It seems 2015, will be the break year, when things start breaking down. Canada does not have the benefit of the world's reserve currency as was the case in the US. The US was able to bail itself out of a messy situation by massive Quantitative Easing, Bond Buying Program & financing the mortgage backed securities purchase program to prop up the real estate market. This may not be possible here.
======================================================================
6. Emerging Markets :
Falling prices of resources (Crude Oil, Coal, Iron Ore, Copper, etc), is boosting the manufacturing industry in the emerging markets.
With petrol prices falling, consumers in India & other emerging markets have suddenly received a boost to their consumer spending. Food & other essential items & commodities have suddenly become cheaper 10 - 20% & some items even 30-40%.
This will in times to come create one of the biggest consumer demand in countries such as India & China. FMCG industries will gain tremendously due to the increase in consumer spending over the coming 1-2 years.
Overall : For investors, it may be time to diversify again into the emerging markets as the economic outlook here in Canada may remain bleak over the coming 1-2 years.
======================================================================
Disclosure : This is not investment advice. I'm only providing general information & news items. Do your own due diligence. I hold no responsibility for any losses.
Read my Blog: Rahul's Café Canadian
Thanks & Regards,
--
Rahul
Vashisht
