Power And Dollar

Canada Unemployment Data and $$

Ignore the Arbor story.  Ignore the NAFTA leak probe story.  They may provide some content for talk shows, but they matter not to anyone’s pocket money.  

On 2008.03.05, Toronto Real Estate Board published the sales record for 2008.02.  The result is “respectable”.  Today, StatsCan published the employment/unemployment figures, +43k jobs, higher than the +3k jobs from Bloomberg’s pooled 21 economists.  Immigration policy continues to favour home building industry.  Reading these 2 news would lead anyone to think that Canadian housing market should continue to do well.  Therefore, buy more builders’ stocks. 

You may want to read the news more carefully before you hit the confirm button.  Ontario is the leader of the pack.  Some losses are in manufacturing, but still a positive for Ontario.  A lot of white collar jobs to offset the manufacturing jobs.  And the majority of the growth comes from home building jobs.  And this is where my caution is. 

Does Canada truly have the domestic demand for the housing sales?  Canada is having a decade long housing boom, especially Toronto.  Canadian economy is heavily dependent on US.  The Canadian balance sheet is risk averse to US that everything, including Canadian elections depends on US trade.  

The job growth in building industry is a time lagged data.  A lot is purchased.  Then a building permit, blue print, etc.  This is a long time.  While the sales is slowed, the building process has to continue.  It may slow down, but it has to continue because the cost of stop is worse (the builder still has to pay for interests).  However, sales may be low or even at a loss, at least the builder can minimize the loss when compared to costs of inaction.  Furthermore, a builder can control supply: they can simply sell 2 units at a time.  Note that this is a luxury that only the supply side can afford and is denied to the demand side.

In the short term, meaning within a half a day trading period, or 1 day trading period.  Stocks will of course do well in TSE.  However, institutions will go over the figures.  A retail investor like you may not be able to afford that kind of work.  So, be very careful.  Do not jump on this opportunity to buy.  If you wish to sell, well, you can get a few extra % of gain based on today’s rally sentiment.  

This affects the Flaherty vs McGuity feud a little bit.  It makes McGuity the argument that “Ontario is trouble” weak.  However, McGuity can find reasons to say what provincial policies made it work and to discredit “lowering corporate tax” becomes a no-use medicine.  Anyway, this is immaterial until election time.  Sit back.

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March 7, 2008 - Posted by | canada, canada economics, canada politics, Current Affairs, economics

2 Comments »

  1. I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.

    Stacey Derbinshire

    Comment by Stacey Derbinshire | March 7, 2008 | Reply

  2. Canadian dollars lost 77 bp vs. USD by EOD on 2008.03.07. This proves the point.

    Comment by royho | March 10, 2008 | Reply


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