A LOOK AHEAD TO 2010:

The next 12 months will be full of surprises due to the continued global economic uncertainty. The year ahead will not be nearly as consistently positive as this year. We are not likely to see the same double digit returns of 2009. The global economic recovery is not as robust as many have forecast. Global growth is not being driven by the North American consumer as has been the case for the past couple of decades. The lack of consumer growth will make this expansion much slower than those seen historically.


The only reason the economy is growing at all is due to the enormous stimulus spending by Government and this can not continue at the current pace for all that much longer. Government debt levels are growing at a record pace causing some Countries such as Greece to implement draconian economic measures in an effort to bring the fiscal hemorrhaging under control. North America is not immune to this escalation in debt which is causing extreme pressure in other regions.



Global central banks are going to be under pressure to keep money flowing freely, but the reality is that this cannot continue and when the taps are being turned down it will be a very unpleasant economic environment for the vast majority of people in the industrialize world. The pain will be nearly as disruptive as the financial meltdown was.



The excesses have been far too extreme for the next stage to be anything but a slow painful climb out of the current situation.



Uncertainty tends to breed contempt and I am certain there will be a substantial amount of contempt as both the central banks and governments change course. Be prepared for very uncertain and unpredictable markets later in 2010. The uncertainty will be centered in North America and Europe, with the only glimmer of economic growth showing up in Asia.



Areas of opportunity are likely to be seen in precious metals as investor’s hedge turmoil, base metals as the Asian economies move forward and the agricultural sector as the emerging economies continue to expand the middle class creating increased demand for a more diversified diet.



Have a safe and profitable New Year, but be careful out there.

Bank bonuses hard to justify!!

An announcement by the major Canadian Banks regarding bonus payouts should come as no surprise. The bonuses this year are expected to set a new record for the industry totalling $8.3 BILLION. This after these same institutions who came crying to the government a little over a year ago that they needed to be bailed out to the tune of $25 billion in order to stay competitive. This is nothing short of thumbing your nose at the Canadian Taxpayer and rubbing in the fact, that the entire industry is manipulating the Politicians with talk of all the dire consequences if they are not appeased. Tax payers globally should be out raged by the arrogance of the management in this industry.




The banking industry in Canada is one of the most stable globally but it has very little to do with the industry itself but everything to do with the protective environment they operate in. There is very little competition due to legislated restrictions on foreign operations in the country. This has insulated the Canadian financial services sector from the turmoil seen in other countries. These legislated restrictions have an inordinate positive impact on the profitability of Canadian financial institutions. By the same token Canadian companies trying to raise capital are limited by this legislation as well.



The lack of foreign competition in Canadian Capital markets has allowed for a very stable and profitable financial services industry to develop. For shareholders to allow bank management to take all the credit and pay themselves as though they alone were the reason for the dramatic turn around in profitability seems to me to be a bit far fetched and stretches the credibility of the industry.

Rates stay low

The Bank of Canada has sent a bold message to the global financial markets by leaving the bank rate at 0.25% and indicating a commitment to keeping rates at or near zero for a considerable time in to the future.




The lack of consumer confidence is keeping the Bank of Canada on hold much longer than expected. This low interest rate environment could be in place till well into next year.



My concern going forward is that the real estate market could become substantially over valued due to historically low interest rates. If low rates are available over a long period of time it becomes ingrained in the price and creates a false pricing model that will have to be deflated at some time. The Bank of Canada has to walk a very fine line and be ready to act quickly in order to avoid a made in Canada real estate collapse.



The relatively low Government budget deficits will give the Bank of Canada slightly more flexibility relative to other central banks. Deficits at all levels of Government in Canada are low when compared to other industrialized nations offering more economic resilience going forward.



Now is not the time to be making bold investment moves as the global economy is still not showing consistent signs of growth. Central Banks are offering accommodating economic policy but the financial services companies globally are not following through with access to capital. This lack of cooperation by the major banks is going to delay a strong economic recovery and puts all of the stimulus measures at risk of failure.



This near term economic uncertainty will be supportive of gold and will keep currency markets volatile over the coming weeks or possibly months.