Sept. 20, 2013

FEDERAL RESERVE MEETING – SEPT 18, 2013

  • In a surprise move the Federal Reserve announced that it will continue to invest $40 billion per month into mortgage backed securities and $45 billion per month into Treasury bonds.
  • In the Federal Reserves’ words, “they have to follow the data”. The unemployment rate remains too high (target 6.5%), inflation (currently 1.5%) is well below their target of 2%, and this summer the US housing industry started showing signs of weakness as mortgage rates increased. Lastly, US fiscal policy is detrimental to the growth of the US GDP.
  • Warren Buffet discussed the meaning of ‘fiscal policy’ in his interview with CNBC. He said it is “pretty damn dumb” to approve the spending but then not approve the funding of the debt ceiling. He went on to say that “the market is not gonna fall apart, because [investors] expect Washington will only act irrationally for a certain length of time.”

STEPHEN POLOZ, GOVERNOR OF THE BANK OF CANADA (BOC) – SEPTEMBER 18, 2013

  • Canadian confidence about global demand is reaching a “tipping point” where business investment takes over from “tired” consumers.
  • Evidence suggests that the trend of low capital spending in industries outside of resources is reversing and this improved confidence is fostering new capacity and capital spending.
  • BOC is projecting a “solid pace” of export growth that will lead to a “broadly based” increase in investment and provide incentives for new business to form.

DOUG HORNER: CHARTING A NEW COURSE – A VISION FOR PUBLIC SECTOR PENSION REFORM

  • The Honourable Doug Horner, Alberta’s Finance Minister noted that lower investment returns, early retirements and increased life expectancies have made it difficult for the plans’ funds to catch up to their commitments.
  • The 4 major public sector pension plans in Alberta (representing 200,000 active members and 120,000 retirees) are currently showing an unfunded liability of $7.4 billion.
  • And the Province is no longer convinced that it has the right benefits at the right price to attract and retain its future workforce.
  • The situation is not a crisis, but it could become one unless action is taken to set these pension plans on the right course.

TIDBITS

  • Russia’s President Vladimir Putin says he may seek re-election in 2018.
  • Blackberry10 has sold poorly in many key markets potentially causing write-downs in next week’s earnings.
  • US Shipbuilding is the highest in almost 20 years due to the surge in shale energy.
  • France called on the EU to agree to a more ambitious target to cut greenhouse gas emissions by 40% by 2030 compared to 1990 levels.
  • France’s Senate has banned beauty pageants for children under 16, in an effort to protect girls from being sexualized too early.