Jan. 17 (Bloomberg) -- Canada’s dollar approached a 2 1/2 -year high against the greenback as investors awaited tomorrow’s interest-rate announcement by the Bank of Canada.
The so-called loonie appreciated versus 14 of its 16 most- traded counterparts as a government report showed net foreign purchases of Canadian securities in November and Finance Minister Jim Flaherty unveiled changes to mortgage rules aimed at tightening record household borrowing. Governor Mark Carney will leave the key rate unchanged at 1 percent, according to all 32 economists surveyed by Bloomberg. U.S. markets are closed today for the Martin Luther King Jr. holiday.
The loonie appreciated 0.3 percent to 98.75 cents per U.S. dollar at 10:30 a.m. New York time, compared with 98.90 cents on Jan. 14. The currency reached 98.49 cents on Jan. 12, the strongest level since May 2008. One Canadian dollar buys $1.0126. The U.S. dollar has dropped about 0.7 percent against the Canadian dollar in the past five trading days.
“Many players are awaiting the tone of Carney’s comments to better gauge the timing of rate increases,” Firas Askari, head currency trader at Bank of Montreal’s BMO Capital unit, said via e-mail from Toronto. “With New York closed, it’s pretty illiquid today.”
Central bank policymakers announce their decision tomorrow at 9 a.m. in Ottawa. The Bank of Canada has kept rates on hold since September, citing falling exports and slower global growth expectations.
Mortgage Move
The Canadian dollar has climbed more than 6 percent and strengthened beyond parity with the U.S. dollar since Carney raised the key rate from a record low of 0.25 percent on June 1. The U.S. purchases about 70 percent of Canada’s exports, which represent one-third of the world’s 11th-largest economy.
Canada will shorten the maximum amortization period for government-insured mortgages to 30 years from 35 years, and lower the maximum amount homeowners can borrow against the value of their homes to 85 percent from 90 percent, Flaherty said in a statement released today. The changes take effect March 18.
Flaherty and Carney have been urging households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.
Foreigners bought a net C$8.01 billion ($8.11 billion) of Canadian securities in November, almost all of it in bonds, approaching an annual record. Economists predicted a total C$9 billion net purchase of Canadian securities, according to the median of five estimates by Bloomberg News.
Foreign investors bought C$7.05 billion of bonds in November, the 23rd net purchase in a row, including C$3.2 billion of federal government bonds and C$2.4 billion of corporate debt. Non-residents also bought C$836 million of money-market paper and C$115 million of Canadian stocks, Statistics Canada said today in Ottawa.
“Continued foreign inflows will provide the currency with a lift,” David Tulk, senior macro strategist at TD Securities in Toronto, wrote in a note to investors today.
--Editors: Keith Campbell, Matthew Brown.
Monday, January 17, 2011
Canada’s Dollar Appreciates Before Bank of Canada Decision
Tuesday, January 4, 2011
Facebook deal $50 billion valuation
Facebook Deal Offers Freedom From Scrutiny
By MIGUEL HELFTSAN FRANCISCO — In Silicon Valley, going public used to be the ultimate rite of passage for a start-up — a sign it had arrived.
No more.
With its $500 million infusion from Goldman Sachs and other investors, Facebook is now flush with cash, and a market value of about $50 billion, giving it the financial muscle it needs to compete with better-heeled rivals like Google.
And Facebook hopes for an even bigger advantage from the deal, the ability to delay an initial public offering. That would allow it to remain free of government regulation and from the volatility of Wall Street. It would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control over the company he co-founded in a Harvard dorm room in 2004.
This strategy was unthinkable in Silicon Valley just a few years ago, when hundreds of start-ups with scant revenue and no profits, like Pets.com and Webvan, raced to go public, and investors eagerly lined up to buy their shares.
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs — will be able to. On Monday, Goldman e-mailed certain clients, offering them the chance to invest in the company.
That offer is the latest sign of the emergence of active markets in the shares of closely held companies. Those markets are helping successful start-ups like Facebook develop the financial wherewithal to compete in the big leagues of business. They have also become an avenue for venture capitalists and start-up employees to cash in their stock, turning many overworked engineers into instant millionaires.
And so a young mogul like Mr. Zuckerberg, the world’s youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. Other hot technology companies like Twitter, Zynga and Groupon are also tapping secondary markets to keep stock market investors at bay. They are in no rush to go public and no longer need the bragging rights that a stock offering used to bestow.
“This is a topsy-turvy world,” said Scott Dettmer, a founding partner of Gunderson Dettmer, a law firm that has advised venture capitalists, start-ups and entrepreneurs since the 1980s. He added that even a few years ago, “there were all sorts of business reasons to go public, but for entrepreneurs it was also a badge of honor.”
Perhaps more than any company founder, Mr. Zuckerberg, who declined to comment for this article, has frequently expressed his disinterest in Wall Street, though Facebook is clearly not above taking its cash. He passed on opportunities to make a killing, for example, when, at age 22, he rejected billion-dollar offers for Facebook.
“Mark would absolutely prefer not have an I.P.O. until he absolutely has to,” said David Kirkpatrick, the author of “The Facebook Effect.” “He absolutely doesn’t want to sacrifice control because he believes that his vision is necessary to keep powering the company forward.”
Mr. Zuckerberg’s quest to keep Facebook private, though, will not last forever. Federal regulations require companies with 500 or more investors to disclose their financial results, eliminating one of the principal advantages of staying private.
The Goldman Sachs investment, for a stake of less than 1 percent in the company, is formulated in part to skirt those rules. But it may help for only a limited amount of time. The Securities and Exchange Commission is investigating private company trades in secondary markets, and regulators may decide that what is good for Facebook is not necessarily good for the investing public.
Still, the huge cash infusion is a coup both for Mr. Zuckerberg, who is said to own about a quarter of the company, and Facebook. The deal gives the company cash to hire employees or build data centers.
It also puts Facebook, which makes most of its money through advertising, on a path to surpass Google, by some measures, as the most successful Internet company to come out of Silicon Valley. Facebook is on track to bring in as much as $2 billion in revenue this year.
The deal with Goldman values Facebook at nearly twice the $27 billion that Google was worth after its first day as a public company in August 2004. Google did not cross the $50 billion mark until about six months later.
The two companies have become enemies, but their founders share a deep suspicion of Wall Street, born in part from witnessing the devastation that followed the dot-com bubble. Like Mr. Zuckerberg, the founders of Google, Larry Page and Sergey Brin, set up two classes of shares, which kept them in control after the public offering. They also vowed not to be beholden to short-term investors.
Mr. Zuckerberg is exhibiting many of the same misgivings about the stock market. Mr. Zuckerberg has frequently demurred when asked about an eventual public offering. One of Facebook’s earliest investors said recently that the company would not go public before 2012.
But Mr. Zuckerberg is benefiting from the fast-growing market for trading in the shares of privately held tech companies, which the Google founders did not have. Through private exchanges like Secondmarket and Sharespost, and through direct transactions between investors, closely held companies, their investors and their employees have been able to sell their shares to others. For start-ups today, that has opened new options to going public.
“Companies have financing alternatives that they didn’t have,” said Marc Bodnick, a managing partner at Elevation Partners, which invested in Facebook in the last year.
Those alternatives have become more attractive for companies, in part because of the increased regulations imposed on public companies but also because of the rise in short-term trading, which leaves some executives feeling they have lost control of their companies.
Ben Horowitz, a partner with Andreessen Horowitz, a venture capital firm, said the cost of being a public company had risen to about $5 million a year, from about $1 million a year. Mr. Horowitz, an early employee of Netscape, said that such costs would have eaten into the meager profits of the pioneering Internet company when it went public in 1995. Additionally, accounting and legal requirements have become distractions for many start-ups, said Mr. Horowitz, whose firm is an investor in Facebook.
Those distractions are bothersome for strong-willed entrepreneurs like Mr. Zuckerberg.
“If you’re 30 years old and you think you’re building a business that’s going to be a 100-year-old business, what year you’re public doesn’t really matter,” Mr. Bodnick said. “But if you think the steps you’re taking are laying the groundwork to long-term strategic growth, it’s good to be quiet, it’s good to be out of the light.”
Still, some experts say that the option to remain private is a luxury that only few start-ups will be able to enjoy.
“Things have changed dramatically for the 2 percent of companies that stand out from the pack like Facebook,” said Lise Buyer, the principal of the Class V Group, which advises private companies about going public. Ms. Buyer, a former Google executive who was involved in its public offering, added: “If you are a semiconductor, or a biotech company, or an enterprise software company, you are not going to have investors throwing money at you without any disclosure.”
Claire Cain Miller contributed reporting.
Thursday, December 23, 2010
Oil hits 2year high
December 22, 2010 NEW YORK — Oil prices jumped above $90 (U.S.) a barrel Wednesday to settle at that level for the first time in 26 months as a third straight weekly drop in U.S. crude inventories and cold weather on both sides of the Atlantic spurred pre-holiday buying. U.S. crude stockpiles fell 5.3 million barrels last week, bringing the past three weeks’ declines to 19 million barrels, roughly equivalent to one day of U.S. fuel consumption. It was the biggest three-week drop since 1998. Companies have drawn down inventories for year-end accounting purposes, analysts said. Also, U.S. data showed the American economy picked up in the third quarter, signaling a more solid pace of recovery and an improving appetite for oil. A Reuters poll released Wednesday showed a surge in fuel demand in the fourth quarter sent 2010 demand growth to near record levels, adding support to prices in recent weeks, with further increases expected in 2011 as the global economy improves. U.S. economic data released Wednesday came in mixed, with gross domestic product growth revised upward to an annualized rate of 2.6 per cent from 2.5 per cent, below economists’ expectations and reflecting higher than previously estimated inventory accumulation. Data also showed sales of previously owned U.S. homes rose in November. U.S. crude for February delivery settled 66 cents higher at $90.48 (U.S.) a barrel, the highest closing price since Oct. 3, 2008. It earlier touched $90.80. Analysts now think crude oil’s next target price is $93.05. In London, ICE February Brent crude gained 41 cents to $93.61 (U.S.) a barrel. “With two days to go until Christmas Eve risk markets have ignited the afterburner, reinforcing one more time the all-pervasive mantra throughout 2010, ‘What crisis?,”’ JP Morgan analysts said in a note. A Reuters poll of more than 70 economists this month forecast U.S. GDP to rise 2.7 per cent in 2011, up sharply from 2.3 per cent in a November poll. With 2010 demand showing the biggest gains since 2004 and expectations of a modest increase in 2011, the Organization of the Petroleum Exporting Countries could be pressured to open the taps next year, another Reuters poll showed. The poll of 12 top oil-tracking analysts showed that oil demand this year had recovered far faster than anyone predicted early in 2010 and, while growth is expected to slow in 2011, it will still reach a new all-time high. This year “turned out to be a year of recovery, with economic and oil demand growth clearly beating expectations,” David Wech at JBC Energy in Vienna said. barrels per day next year, OPEC could have to increase output by 800,000 barrels per day to keep pace with demand, the poll showed. OPEC met this month and agreed to hold oil output at current levels, even as prices move to the top of the preferred range flagged by many members. While kingpin Saudi Arabia said it favoured a price range of $70 to $80 (U.S.) a barrel, other members, such as Kuwait, pegged $90 as a preferred top. Ministers from the Organization of Arab Petroleum Exporting Countries, which includes OPEC members such as Saudi Arabia, Algeria and Kuwait, will meet for two days starting on Friday. Oil found support from forecasts for cold weather in northern Europe and the United States, with U.S. heating oil demand expected to average 4.6 per cent above normal this week. “Probably what’s been the bigger factor with price has been the weather. It’s cold in Europe. It’s cold in China. And that’s pushing spot demand,” said Mark Kellstrom, an analyst at Strategic Energy Research and Capital LLC in New Jersey. AccuWeather.com expects temperatures in the U.S. Northeast, the world’s largest heating oil market, to average mostly below normal for the next week, with slightly milder readings late this month. In Europe, fresh snow forecasts threatened to prolong chaos caused by a cold snap, with airlines and rail networks struggling to restore normal services.Oil prices jump to 2-year-high
Wednesday, December 22, 2010
Pescod Plus The Little Book of Commodity Investing
John Stephenson, author of The Little Book of Commodity Investing and a portfolio manager with First Asset Investment Management in Toronto, to tell us why commodities are booming and what investors should do about it.
Many commodities have had huge gains already. Isn’t it too late to jump in?
The average length of a commodity cycle is 20 years and, even accounting for the rise in commodities at the start of 2000, we are at most four innings into the rally. The average mine takes the better part of a decade and more than $1-billion to bring into service, which is why the cycle is so long. What’s more, when commodity prices are high, manufacturers have difficulty passing on these raw material increases in their finished products, so their margins and stock prices tend to suffer. Since rising raw material prices are inflationary and higher interest rates tend to follow higher inflation, bonds suffer when commodities zoom. Commodities zig when bonds and stocks zag, so if you're not considering commodities, why not?
What’s the biggest factor driving prices higher?
In the long term, all that matters for commodity prices is supply and demand. To understand demand is to understand China, which is the engine of demand growth. After more than two decades of underinvestment in commodity production and [then] the global financial crisis, supply is nowhere to be found. Copper inventories on the London Metal Exchange represent just eight days of global consumption – a very tight market.
During the 1960s and 1970s, around 75 million people entered the global middle class in Europe, Japan and North America. This time around, hundreds of millions of people in Asia are entering the global middle class while the supply situation is way worse. Prices will go higher and stay higher for longer than anyone suspects. Eventually, supply will adjust and demand will be satisfied and the bull market in commodities will be over – it just won't be any time soon.
What’s your favourite commodity?
Oil. It's a miracle fuel that powers your car, buses, airplanes and is used to make perfumes, plastics and other everyday items and it's cheaper than orange juice on a volumetric basis.
Least favourite?
Natural gas. We have way too much of it in North America and U.S. producers are drilling not because it makes economic sense, but to retain their land base. With no producer discipline, prices are likely to remain in the basement for the foreseeable future.
What’s an appropriate portfolio weighting in commodities?
During the 1980s and 1990s, the average investor would have held a zero weight toward commodities. Today, an appropriate weight would be much higher, closer to 40 per cent or more. Of course, your age, risk tolerance and level of investment sophistication will figure prominently in this decision and may cause this weighting to fall.
What’s the cheapest way to get exposure to commodities?
The cheapest way is through exchange-traded funds that are backed by physical commodities. That way, investors get low fees, and the price tracks the price in the here and now as investors would expect.
What sort of allocation do you recommend between the various commodity classes?
Of your total portfolio, including the non-commodities portion, gold should represent 10 to 15 per cent. Of the commodities portion, energy should be 30 to 35 per cent, base metals 25 per cent, agricultural should be 25 per cent and bulk commodities, such as coal and iron ore, around 20 per cent.
So you think gold still has room to run. What about all those poor folks who bought gold back in 1980 at $850 (U.S.) an ounce, only to watch the price collapse?
The U.S. has in the past used the printing press to flood the money supply with more dollars and, in essence, debase the dollar. They did it after the Second World War and they did it after the Vietnam War, and those were both times that gold started to soar. That’s why with QE2 [a second round of quantitative easing] being floated there’s a lot of concern that’s what the U.S. intends to do – inflate away their problems. You want to hold gold if that scenario unfolds. If there’s any time to buy gold, it would be now.
What’s in your personal portfolio?
All of the things I say. I have about a 15 per cent weighting in gold, mainly gold producers but I also have the SPDR Gold ETF [GLD-N], which is probably the most common. And I have well over half my portfolio in commodity-oriented stocks. I also have some dividend stocks, too, a few bond funds and some cash for buying opportunities down the road.
