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Bank of Canada maintains interest rate, and quantitative easing

Bank of Canada leaves rates unchanged however there is a nuance in the release that opens the door for change based on the faster than expected economic recovery. Note final paragraph in the release (emphasis mine).

Bank of Canada maintains commitment to current level of policy rate, continues program of quantitative easing


Media Relations


Ottawa, Ontario

September 9, 2020

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.

Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.

The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.

In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Bank’s July MPR central scenario. All components of aggregate demand weakened, as expected.

As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July. Economic activity has been supported by government programs to replace incomes and subsidize wages. Core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs. Monetary policy is working to support household spending and business investment by making borrowing more affordable.

Household spending rebounded sharply over the summer, with stronger-than-expected goods consumption and housing activity largely reflecting pent-up demand. There has also been a large but uneven rebound in employment. Exports are recovering in response to strengthening foreign demand, but are still well below pre-pandemic levels. Business confidence and investment remain subdued. While recent data during the reopening phase is encouraging, the Bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.

CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term. Measures of core inflation are between 1.3 percent and 1.9 percent, reflecting the large degree of economic slack, with the core measure most influenced by services prices showing the weakest growth.

As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. To reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at the current pace. This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

Written by Colin Henderson

September 9, 2020 at 10:09

Posted in Uncategorized

Amazon draw a line in the sand on post-pandemic “Work from Home”

Amazon Bets on Office-Based Work With Expansion in Major Cities

The e-commerce giant says it is adding 3,500 employees in six major cities, including 2,000 jobs in New York City

The Wall St Journal has an exclusive piece on Amazon investment in downtown work. This in contrast to the general sense that Information Worker activity is moving away from downtown offices to home which could be suburbs or anywhere at all.

They are adding 3,500 corporate jobs across the US.

Amazon is preparing to add 3,500 corporate jobs across hubs in New York, Phoenix, San Diego, Denver, Detroit and Dallas, the company said Tuesday. The plans include 2,000 jobs at the historic building in Manhattan that once housed the Lord & Taylor flagship department store. Amazon purchased the Fifth Avenue building from work-sharing company WeWork, a subsidiary of We Co., for more than $1 billion, people familiar with the matter said.

The connection to Canada with the inclusion of the WeWork building in New York is interesting. The Canada Minister of Finance resigned last night in connection with a scandal whereby he and his family had a trip to South America paid for by WeWork. None of us in Canada knew WeWork had a billion dollar building in NY. But that is another story and for another day.

Relevance to Bankwatch:

The message here is no surprise in that we really do not know what post Pandemic Work looks like. In fact will there ever be a post-Pandemic world. A more and more likely post world will see a more restrictive world full of personal health risk that is managed differently by different jurisdictions and countries.

There will be constant surprises as companies with cash seek to optimise their future in a world where old growth vectors are no longer available. Consumer growth driving sales of consumer growth will certainly flatten.

Purchase of basics such as groceries, health consumables, education, communication and supporting technology will look for better less touch methods.


My quick speculation for this post would see these examples:

  • Amazon – shopping logistics; back to the original post book Amazon vision of a virtual mall
  • Apple – technology that offers a seamless gateway to the basics noted above while maintaining secure privacy of wallet and communication
  • Shopify – the shopping, payment connection
  • edge outlier suppliers such as Fastly, a cloud provider that is carving out a niche in that fuzziest of spaces
  • Microsoft – less clear for me. Probably education, and enterprise Cloud. In Europe everyone uses Google or Open Office.
  • Google and FaceBook– I have been an advertising hater since forever. I am not speculating on Google or FaceBook. I have no strong sense of future success for those two companies. They are behemoths and will have impact but not in their current form (imho)
  • AI – critical for each space and for us all. It is unclear how this will shape up;
    • Proprietary AI,
    • Shared AI,
    • Enterprise AI,
    • Personal AI,
    • all of those and more … we do know it will be key and especially when it transcends algorithm basis and becomes truly self learning.
  • </speculation>

Written by Colin Henderson

August 27, 2020 at 19:27

Posted in Uncategorized

US Fed and Government out of sync on policy news item Kathy Lien

Today, we saw the Federal Reserve “front-run” Wednesday’s FOMC announcement by extending its $2-trillion+ lending programs another three months to the end of the year. According to the central bank, it was necessary to “provide certainty that the facilities will continue to be available to help the economy recover.” But, in reality, it is worried about the economy and feels more companies will need to tap this lifeline. These actions send a strong signal to investors that come tomorrow, we’ll get a more cautious tone from the Fed. We are not looking for any monetary policy changes, but with extra unemployment benefits expiring and COVID-19 cases rising, the central bank will be forced to look past the improvements in the economy since June.

The table below shows broad-based improvements in the U.S. economy since the last Fed meeting. Had virus cases stabilized with no significant upticks over the past month, the Fed would be talking about the improving recovery and how the worst is over. Unfortunately, that’s not the case right now and instead, the two greatest threats to the U.S. economy are things the Federal Reserve has no control over – the rapid spread of coronavirus in the U.S. and the government’s fiscal response.

A few weeks ago, Chairman Jerome Powell warned law-makers not to become complacent as the U.S. economy remains extraordinarily uncertain. Since then, the outlook worsened, extra unemployment benefits expired and the packages that Congress are discussing could fail to impress. For all these reasons, we expect nothing but ongoing dovishness from the Fed along with a pledge to keep monetary policy accommodative for the foreseeable future. Last month, they said rates will remain at zero through 2022.

The U.S. dollar has fallen extensively ahead of the rate decision. Treasury yields also moved sharply lower, which tells us that investors are positioning for dovishness. How the greenback trades tomorrow will depend on Powell’s tone. Back in June, he said a second-half recovery is likely, but with virus cases rising rapidly, his outlook will certainly change. Considering that the market expects cautiousness, we may not see a big dollar move post FOMC – unless the central bank mentions that negative rates are back on the table, which could unleash a fresh round of U.S. dollar selling.

Written by Colin Henderson

July 28, 2020 at 13:35

Posted in Uncategorized

While European Markets Slip Ahead Of The ECB, China has the answer

China has a simple formula for addressing market concerns when the market goes the wrong way. Simply change the message and viola!

See the bold quote below (bolding mine).

… and yes we have land in Florida to sell to you.

by CMC Marketsuk.investing.comJuly 16, 2020 09:34 AM

While US markets finished higher for the fourth day in a row, markets in Asia have come under pressure after the latest economic data out of China painted a rather mixed picture of the economic outlook in the world’s second biggest economy.

China Q2 GDP showed a 11.5% rebound, more than reversing the -10% fall in output seen in Q1, suggesting a nice v-shaped recovery in economic activity. The annualised number recovered to 3.2% from -6.8%.

If you had any doubts about the accuracy of China’s GDP numbers before this morning’s announcement, these figures only serve to reinforce that scepticism, as they appear to completely diverge from most of the data that has come out of China since April. In terms of the trade data, both imports and exports have been weak, while retail sales have also struggled.

Retail sales have declined in every month, by -7.5%, -2.8% and -1.8% in June, and with the Chinese consumer now making up around half of China’s economic output, I would suggest these numbers in no way reflect the real picture regarding China’s economy at this moment.

Written by Colin Henderson

July 16, 2020 at 07:48

Posted in Uncategorized

Bank of Canada sees economy shrinking 7.8% this year; holds rates steady


Bank of Canada sees economy shrinking 7.8% this year; holds rates steady

The Bank of Canada projected that the Canadian economy will shrink by 7.8 per cent this year, as it crawls its way out of the deep hole of the COVID-19 crisis.

The forecast, the central bank’s first in six months, came as the bank announced its latest policy decision, holding its key interest rate steady at a record-low 0.25 per cent and leaving its large-scale bond-purchase programs unchanged. The bank reinforced that it intends to keep both policies in place far into the economic recovery.

“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 per cent inflation target is sustainably achieved,” it said. “In addition, to reinforce this commitment and keep interest rates low across the yield curve, the bank is continuing its large-scale asset purchase program at a pace of at least $5-billion per week of Government of Canada bonds.”

In its quarterly Monetary Policy Report (MPR) Wednesday, the central bank estimated that the Canadian economy lost “about 15 per cent” of its economic activity in the second quarter compared with end-of-2019 levels, as containment measures for the pandemic were at their height. However, it noted encouraging signs of a rebound now under way, with economies reopening in Canada and many other parts of the world.

The bank estimated that real gross domestic product plunged 13.1 per cent in the second quarter, on top of a 2.1-per-cent contraction in the first quarter. It said it expects a bounceback of 7.1 per cent in the third quarter, reflecting the rapid return of activity as containment restrictions continue to be lifted. The forecast assumes that “about 40 per cent” of the drop in output in the first half of the year will be recouped in the third quarter.

However, it cautioned, this early rebound “is expected to give way to a recuperation phase during which the pace of the recovery will moderate, as the pandemic continues to affect confidence and the economy undergoes widespread adjustments, including in the energy sector,” it said.

“As a result, Canada’s economic output will likely take some time to return to its pre-COVID-19 level. Many workers and businesses can expect to face an extended period of difficulty.”

The bank estimated that the inflation rate – a key measure for the central bank, which relies on an inflation target of 2 per cent to guide its interest-rate policy – fell to -0.1 per cent in the second quarter. The bank forecast that even as the economy recovers, inflation would be a thin 0.4 per cent in the third quarter, and just 0.6 per cent for the year as a whole, before picking up modestly to 1.2 per cent in 2021.

Normally, the bank updates its forecasts every quarter in the MPR, but it opted against issuing specific projections in the April report, which came out at the height of the crisis, citing deep uncertainties. Then-governor of the bank, Stephen Poloz, whose term expired in early June, said at the time that providing specific forecasts would provide “false precision” for a highly unpredictable situation.

Tiff Macklem, who took over from Mr. Poloz six weeks ago, will hold a news conference Wednesday to discuss the report and its economic outlook. In his short time on the job, Mr. Macklem has generally struck a more cautious tone than Mr. Poloz, who had been relatively optimistic about the potential for a strong post-COVID recovery.

The bank referred to its new outlook as a “central scenario,” rather than a projection, emphasizing its continued heightened uncertainty surrounding the numbers. The central scenario assumes that there is no widespread second wave of COVID-19, either within Canada or globally, and assumes that the pandemic will have run its course by mid-2022.

Under this scenario, the bank sees the Canadian and world economies rebounding on the second half of 2020 as virus containment measures ease. However, it assumes that continued physical distancing and uncertainty will “continue to restrain economic activity” through 2022.

“Uncertainty around this scenario is considerable,” the bank said. “There are a multitude of scenarios both stronger and weaker than the central one presented here. Yet overall, the risks appear to be tilted to the downside, largely because of the potential for a second wave of the virus.”

Official consumer price index data released by Statistics Canada showed that the year-over-year inflation slumped to -0.2 per cent in April and -0.4 per cent in May, as prices plunged for some products, such as gasoline and travel services, amid a dearth of demand at the height of the economic shutdown. But the Bank of Canada believed the data overstated true consumer prices, as the lockdowns had resulted in dramatic shifts in buying patterns. It noted that a new joint analysis from Statscan and the Bank of Canada released earlier this week, which produced an “adjusted” price index to account for these consumer shifts, put the inflation rate near zero for both months.

“Statistics Canada and the bank will continue to update this new index to calculate an adjusted CPI inflation measure through the recovery period. The difference between the two measures of inflation may dissipate if the changes in consumption patterns reverse,” it said.

Nevertheless, the bank expects inflation pressures to be highly muted for a long time, amid weakened demand. It said that at least so far, there is only “limited evidence” of firms raising prices to reflect increased costs of doing business under the pandemic.

“The path for CPI inflation over the next year largely reflects the influence of energy prices. The dramatic decline in these prices in March and April will hold inflation down until early 2021. After that, the inflation outlook depends primarily on the speed and strength at which demand and supply recover,” the bank said. “Firms report that capacity could return quickly as the economy reopens and containment measures are lifted. They expect the recovery in demand to be more muted, especially in the services and energy sectors.”

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Written by Colin Henderson

July 15, 2020 at 11:08

Posted in Uncategorized

Barclays Future Themes

Written by Colin Henderson

July 15, 2020 at 08:00

Posted in Uncategorized

BBC- Fertility rate- ‘Jaw-dropping’ global crash in children

This graphic from the report can be summarized that the world population is dropping everywhere except Africa and Middle East.

Here is the UN report behind the headline. Real wonk stuff with tons of statistics.

Written by Colin Henderson

July 15, 2020 at 07:46

Posted in Uncategorized

Facebook suspended by all Canadian Banks

in a move that happens to highlight the ‘Canadian way”, Canadas banks collectively suspended use of Facebook in July.

Canadian lenders Royal Bank of Canada (TO:RY), Toronto-Dominion Bank (TO:TD), Bank of Nova Scotia (TO:BNS), Bank of Montreal (TO:BMO), National Bank of Canada (TO:NA) and Canadian Imperial Bank of Commerce (TO:CM) all said they will pause advertising on Facebook platforms in July.
Desjardins Group, Canada’s largest federation of credit unions, also said on its website on Thursday it will pause advertising on Facebook and Instagram for the month “barring any exceptional situations where we need to communicate with our members or clients.”
Most cited their commitments to inclusion and diversity.

Reuters Canada

By Nichola Saminather
TORONTO (Reuters) – Canada’s biggest lenders confirmed on Friday they had joined a widespread boycott of Facebook Inc (O:FB) begun by U.S. civil rights groups seeking to pressure the world’s largest social media platform to take concrete steps to block hate speech.

More than 400 brands have pulled advertising on Facebook in response to the “Stop Hate for Profit” campaign, begun after the death of George Floyd, a Black man who died in police custody in Minneapolis on May 25.

Canadian lenders Royal Bank of Canada (TO:RY), Toronto-Dominion Bank (TO:TD), Bank of Nova Scotia (TO:BNS), Bank of Montreal (TO:BMO), National Bank of Canada (TO:NA) and Canadian Imperial Bank of Commerce (TO:CM) all said they will pause advertising on Facebook platforms in July.

Desjardins Group, Canada’s largest federation of credit unions, also said on its website on Thursday it will pause advertising on Facebook and Instagram for the month “barring any exceptional situations where we need to communicate with our members or clients.”

Most cited their commitments to inclusion and diversity.
Facebook has opened itself up to a civil rights audit and has banned 250 white supremacist organizations from Facebook and Instagram, a spokesman said by email. Its investments in artificial intelligence mean it finds nearly 90% of hate speech it takes action on before users report it, he added.
BMO said it is continuing its “ongoing dialogue with Facebook on changes they can make to their platforms to reduce the spread of hate speech.”

RBC said one way to help clients and communities is to stand against “misinformation and hate speech, which only make systemic racism more pervasive.”

Written by Colin Henderson

July 3, 2020 at 14:15

Posted in Uncategorized

A Crisis Like No Other

An Uncertain Recovery

Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 61⁄2 percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.

As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices. 

For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity. Moreover, the forecast assumes that financial conditions—which have eased following the release of the April 2020 WEO—will remain broadly at current levels. Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving. 

The extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects—as the June 2020 Global Financial Stability Report (GFSR) Update discusses—raising the possibility that financial conditions may tighten more than assumed in the baseline.

Written by Colin Henderson

July 1, 2020 at 13:43

Posted in Uncategorized

Shopify- simple for people and keeping the complexity hidden


New Data Shows Shopify Was A Godsend For Mom And Pop During Coronavirus – Forbes

68-year-old Jan Buerge was days away from losing everything. For 35 years, she has run World’s Window in Kansas City, a store that sells artisanal items from around the world. In March, she was forced to close her doors because of coronavirus.

But she didn’t give up. She just needed a plan, and fast. She snapped pictures of her remaining items. And quickly got them online with the help of her husband and nephew. Within three days, business was booming. Buerge was shipping baskets made from South African telephone wires and metal plaques made in Haiti to customers around the nation.

Buerge didn’t do it alone. As I’ll show you, a once “hated” stock has been a savior for millions of mom-and-pop shops across America. It handles all the “plumbing” of online selling… Like payments, shipping, and marketing… and it’s poised to rocket higher in the years ahead…

I’m Talking About Shopify (SHOP)

Shopify helps entrepreneurs create and manage their own online stores. Its easy-to-use website rescued tens of millions of these small businesses, just like Buerge’s.

In fact, merchants with Shopify stores recouped 94% of lost in-person sales with online orders. So for every dollar lost to coronavirus, these businesses recovered 94c thanks to Shopify.

And have you checked out Shopify’s stock recently? It’s soared around 90% since the lockdowns started, as you can see here:

Source: RiskHedge Source: RiskHedge

Today Shopify Is a Wall Street Darling

But a couple of years ago, it was totally hated. Think about what Shopify was trying to achieve… run an online marketplace where smaller businesses could sell their goods. That’s stepping into Amazon’s (AMZN) territory. And how could a tiny startup compete with an 800lb. gorilla like Amazon?

Most investors thought Shopify would be out of business in a year or two. But here’s the thing: folks who bought Shopify in 2016, when it was out-of-favor, are sitting on 3,500% gains today. It was the perfect “hated” stock play.

Source: RiskHedge Source: RiskHedge

How did Shopify Compete with Amazon?

Selling goods online is a tough business. You have to build the website, rent servers to handle all the internet traffic, and collect payments. You have to ship your products, accept returns, and run marketing campaigns. Just setting up an online store is a full-time job and will set you back thousands of dollars at a bare minimum.

So most small businesses looking to sell online chose to partner with Amazon. In fact, roughly two-thirds of goods sold on Amazon come from independent sellers.

Amazon handles all the not-so-fun parts of selling online… but it comes at a cost. Selling on Amazon is like placing your products on another retailer’s shelves. It’s almost impossible to build your brand, and the online gorilla takes a chunk of your sales.

Shopify is the anti-Amazon. It gives businesses the tools to build their own online store. Think of Shopify like an invisible partner that allows you to build your own brands.

You wouldn’t know it from looking at their websites, but The Economist, Penguin Books, Unilever, Red Bull, Heinz, Budweiser, Pepsi, and Nestle are all examples of online stores powered by Shopify.

And Now Shopify Runs Websites for Over One Million Mom-and-Pop Shops

Here’s how it works: The company offers a simple tool that helps anyone set up a custom online store for as little as $29/month. Shopify can even fulfill your orders, which means it holds your inventory at its warehouses and ships your products. You don’t have to maintain software or servers. You don’t need to hire expensive programmers or be into coding yourself. You don’t have to bother with shipping.

In minutes, you can have a full-fledged online store that’s running on autopilot under your business name, just like Amazon. It’s like getting a fully furnished retail store with trained sales clerks all for a few bucks. You just put your products on the shelves, hang a storefront sign, lean back, and watch sales come in.

And Shopify’s business is booming. In 2012, it had just 42,000 merchants. Today, more than 1,000,000 businesses around the globe have set up an online store with Shopify. Businesses sold $60 billion worth of goods through its platform last year. For perspective, that’s a 600% jump in sales since it was “hated” back in 2015.

And get this: Shopify is now the world’s 15th largest retailer—online or offline. It sits just behind DIY superstore Lowe’s.

Shopify Is Opening Up the World for Entrepreneurs

Take Jan Buerge and her artisanal store for example. Only folks living in Kansas can visit her store. But with her Shopify-powered store, now she can sell to folks all over America. By handling all the “plumbing” of online selling like… payments, shipping, and marketing, it leaves Jan free to focus on finding unique artisans around the world.

Shopify is the world’s most disruptive retailer that most investors aren’t paying attention to. This is a stock to own for the long term as it cements itself as the “anti-Amazon.”

Get my report “The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money”. These stocks will hand you 100% gains as they disrupt whole industries. Get your free copy here.

Shopify inks partnership with Walmart as it prepares to battle – Yahoo Canada Finance

Written by Colin Henderson

June 24, 2020 at 09:12

Posted in Uncategorized

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