A Money Coach in Canada

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We all kind of know that the forestry industry is important to B.C., but esp. in Urban Vancouver we lose sight of the fact. Granted, the resource sector is no longer the be all and end all, but it’s still a heavyweight. It’s got some pretty rough times ahead, and I believe we’ll start to feel the effects 6 or 12 months down the road (disclaimer: I’m a money coach, not an economist. This is just my amateur ‘armchair’ take, as I see it!). Here’s the scoop, and why we should care:

Forestry remains B.C.’s #1 export – nearly 40% of all total exports. Interesting Factoid: The industry pays its staff 20% more than all other industries, on average.

It’s been pummelled.

1. The housing crisis in the US = construction slowdown (to say the least) = crash in demand for lumber, and our forestry industry is not really diversified across the globe.

2. Pine Beetle – has destroyed the equivalent of a decade’s worth of timber

3. Our rising dollar is impacting all exports, ie., our goods are less attractive now that they cost more.

4. Rising energy costs.

Why we should care? British Columbian’s relationship to the forestry industry has always been a complicated one… environment/jobs/heavy industry lobby groups etc. But the fact remains, that if a sector that generates 40% of our exports starts to tank, we’re all in trouble.

It’s not precisely economics, but the news of the day is pretty interesting:  a Facebook group takes on HSBC

So apparently HSBC offered graduate students in the UK interest-free lines of credit … then changed their policy, after the students used the loc’s.   Whamo – a bunch of grad students are feeling the pain.  Students + feeling ripped off + Facebook = pr nightmare for HSBC.

3600 students have joined the anti-HSBC group and it’s growing by the hour.
An live protest event is being organized via facebook on Sept. 8th.

This is the first clear story I’ve heard about social networking via FaceBook resulting in challenging a company.

HouseI spoke with Beatrice Scott, a Vancouver mtg. broker with Invis about the whole subprime mess. What is a subprime mortgage? Why did it cause my portfolio to tank? (grrrrrr….). Here’s what I learned.

When a person qualifies for a mortgage, the bank of course looks at the person’s credit, profession, income and downpayment. When a person doesn’t qualify for a mortgage (usually because their credit rating indicates they struggle to make their debt obligation payments) they can sometimes turn to other companies for a sub-prime mortgage.

A sub-prime mortgage is one that charges higher interest rates (sometimes significantly higher) in exchange for taking the risk with the individual. They are usually floating interest rates, that started at 4%, but now with interest rates having risen in the States are at 8%. You can imagine the pain of having your mortgage payments double, in under 5 years!

Note: I (Nancy) personally nearly got sucked into one of these when my mtg was up for renewal. I had just started my new business 4 years ago, and (erroneously) figured a bank wouldn’t be interested in me. I saw a couple very attractive sounding adverts on TV by non-bank mortgage companies who pretty much guaranteed I’d get my mortgage. It sounded reasonable, until (money coach that I am) I read the fine print carefully. OUCH! It was, in my opinion, nearly criminal. There were all kinds of hidden fees and the way the interest was structured would have left things pretty shaky for me. Thankfully, I got a mortgage broker and discovered I would indeed qualify for a terrific mortgage through a bank.

Not everyone was so lucky. In the US 20% of all people who have mortgages had a subprime mortgage as compared to 5% in Canada. There are some significant differences in the US and Canada in terms of qualifying for a subprime mortgage. The differences are the tighter rules in Canada for this type of mortgage.

In the US last year, subprime mortgages accounted for 1 Trillion dollars. These subprime Mortgages were sold to different companies all around the world. Now, those companies are in dire straights because their clients are not able to meet their payments and are defaulting. It also means the US housing market has deflated significantly, and caused a global credit crunch – ie., institutions are less likely to lend out money, since they can’t recoup their previously loans.

Case in point: The US Federal Reserve Board decreased their lending to commercial banks by half a percent.

What is surprising is that the effect on the stock markets world wide isgreater than the actual financial implication. Investor’s emotions have played a key in their reaction to the collapse of the US subprime Mortgages.

An interesting effect here in Canada was the increase in the dollar. We had our biggest gain in the Canadian dollar since June 2006. It increased all the way to 94.22 cents.

Currently Canada’s prime lending rate is at 6.25%. Before the US subprime collapse, Canadian economists were predicting that the Bank of Canada would increase it to 6.50% in September. It is now predicted that we may not see that quarter point increase.

FacebookYou and I think of MySpace and Facebook as the place we keep in contact with people. But behind the scenes, make no mistake, these are business enterprises. Will Facebook put MySpace out of business? They may be catching up, but they’ve got a long ways to go.

MySpace has a unique audience of 61 million; Facebook 19.5 million. Each visitor spent nearly 3 hours on MySpace, but only barely an hour on Facebook.

MySpace was purchased 2 years ago by News Corp for $280 million, and this year will likely earn $800 million in this fiscal year’s advertising revenue. They earn $1.50 per 1000 page hits.

Now that’s business.

The GapThis is juicy financial gossip; the kind I love.

Last week, The Gap tossed their former CEO and scooped up Canadian Glen Murphy. Murphy has been the top of the chain at Shopper’s for the past six years, during which he doubled Shopper’s earnings.

Still, the yahoo finance article referred to him as the ‘little known drugstore drugstore’ leader. Now did they mean he’s little known, or Shopper’s is little known? And while drugs presumably is Shopper’s biggest revenue generator, referring to Shopper’s as a ‘drugstore’ seems…. well… where is Rick Mercer when we need him?

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