Business and Finance

The Toronto stock market pulled back following a strong, five-day winning streak as financials stepped back on warnings of turmoil in the U.S. financial sector and investors fretted about the fate of the buyout of telecom giant BCE Inc.

New York indexes moved slightly higher on mixed economic data.

Toronto's S&P/TSX composite index was off 36.04 points to 13,369.74 after a string of advances led by commodity and financial stocks sent the market up about 5 1/2 per cent in five days.

"Today's just a pause day," said Blair Falconer, portfolio manager at HSBC Securities. "When it rockets to the upside that much, you're not going to see that carry on week after week, obviously."

The TSX Venture Exchange was 3.21 points lower to 2,517.88. The Canadian dollar was up 0.21 cent to 98.4 cents US.

On Wall Street, the Dow Jones industrials were up 20.35 points to 12,322.81 after losing two per cent over the past three days.

The Nasdaq composite index gained 8.76 points to 2,289.59, and the S&P 500 index was up 2.39 at 1,328.15.

The U.S. Commerce Department said consumer spending edged up by 0.1 per cent last month, the poorest showing since September 2006 but in line with expectations. At the same time, personal incomes rose more than expected.

The final University of Michigan reading on consumer sentiment for March reinforced that consumers have been increasingly reluctant about spending.

The index fell to 69.5 for March from 70.8 in February.

Another sign of consumer weakness came from department store operator J.C. Penney, which said first-quarter earnings would be about one-third below its previous forecast. Its shares plunged $3.39 to US$37.13.

Oppenheimer & Co. analyst Meredith Whitney delivered another in a series of recent warnings about U.S. banks. She said Citibank, the biggest U.S. bank, will probably cut its dividend for a second time amid "earnings headwinds." Whitney predicted Citigroup would reduce its dividend two months before the bank announced the cut in January.

The Toronto financial sector gave up an early advance to move down 0.8 per cent as Scotiabank (TSX: BNS) declined 88 cents to $46.04.

Bank of Montreal (TSX: BMO) was off 55 cents to $45.38 after it named a risk-management specialist to its board, following a series of trading and investment missteps. New director Don Wilson retired from JPMorgan Chase in 2006 as chief risk officer.

Shares in home-loan provider Xceed Mortgage Corp fast cash now. (TSX: XMC) declined four cents to $1.05 after it cut 74 employees including several executives and said it sees no end to the debt-market drought.

Market doubts continue over whether the country's biggest-ever takeover can be completed in the current tight credit environment and BCE shares were down $1.64 to $35.30. A potential regulatory impediment to the buyout was removed Thursday with CRTC approval of the $52-billion takeover by a group led by the Ontario Teachers' Pension Plan.

In the United States, radio station owner Clear Channel Communications Inc. said the private equity firms trying to buy the company may not be able to close the deal on time because their banks will not provide financing. The US$19.5-billion transaction was intended to close Monday.

Gold prices were in retreat with the April bullion contract in New York down $17 to US$931.80 an ounce, sending the Toronto gold sector down almost one per cent. Kinross Gold (TSX: K) dropped 28 cents to $23.09.

Iamgold Corp. (TSX: IMG) lost 43 cents to $7.52 after it reported an increase in fourth-quarter revenue to US$194.2 million but a decline in net earnings to $8.5 million.

Barrick Gold Corp. (TSX: ABX) shares were 68 cents lower to $45.47. Chief executive officer Greg Wilkins is taking a leave of absence because of an unspecified medical condition. Chairman Peter Munk, 80, becomes interim CEO.

The energy sector was flat as the May crude contract on the New York Mercantile Exchange fell $1.90 to US$105.68 a barrel on word that a key Iraqi oil pipeline will likely be repaired later in the day.

Petro-Canada (TSX: PCA) slipped 50 cents to $44.10.

Trucking heavyweight TransForce Income Fund (TSX: TIF.UN) plans to convert from an income trust to a corporate structure and its units fell 32 cents to $7.47.

Asian stock markets closed higher, with China's Shanghai composite index rising 4.9 per cent to 3,580.15 – recovering much of Thursday's 5.4 per cent slump which had left the mainland benchmark at an 11-month low, down 44 per cent from its October peak.

The Hang Seng in Hong Kong advanced 2.7 per cent on the day to 23,285.95 and Tokyo's Nikkei index closed up 1.7 per cent at 12,820.47.

London's FTSE 100 index slipped 33.9 points to 5,683.6, Germany's DAX 30 lost 29.57 to 6,548.49 and the Paris CAC 40 eased 30.56 to 4,688.97.

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FRANKFURT–German carrier Air Berlin has ordered 10 Q400 turboprop aircraft from Canadian planemaker Bombardier with a value of $267 million at list prices, the companies said on Wednesday.

The airline expects to receive four of the 76-seater aircraft this year and the remaining six in 2009 as it replaces Fokker 100 jets, Air Berlin said in a statement.

The carrier agreed an option to buy 10 more planes from Bombardier, the companies said. Bombardier had announced the order on Oct. 23 but did not name the customer.

"We intend to use the Q400s mainly on short-haul flights where the passenger volume is not sufficient for us to operate jets," Air Berlin Chief Executive Joachim Hunold said in the statement, adding that they would lead to a "noticeable reduction" in costs and lower CO2 emissions per seat payday loans.

The aircraft would be operated by Air Berlin partner LGW, based in Dortmund, Germany, which currently operates six Dornier 228 aircraft, Air Berlin said.

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MONTREAL–Fairfax Financial Holdings Ltd. is buying into the financial restructuring of AbitibiBowater Inc., agreeing to purchase $350 million (U.S.) worth of convertible debentures.

The involvement of the Toronto-based insurance company, widely respected as an astute investor, prodded AbitibiBowater shares up more than 41 per cent yesterday on the Toronto Stock Exchange.

The transaction, part of AbitibiBowater’s $1.4 billion refinancing effort "is expected to address upcoming debt maturities and general liquidity needs" of its Montreal-based Abitibi-Consolidated Inc. subsidiary, the North American paper and forest products maker said yesterday.

Fairfax is buying the five-year bonds with an 8 per cent interest rate. This interest can be paid in the form of additional debentures at a 10 per cent rate.

The debt issue is convertible into AbitibiBowater common shares at $10 per share, and Fairfax will appoint two directors to the AbitibiBowater board.

If the debentures were fully converted, Fairfax would hold 35 million new shares of AbitibiBowater, which currently has 52.6 million shares outstanding.

The transaction is subject to various conditions including success in the rest of the company’s $1.4 billion financial restructuring.

AbitibiBowater stock leaped 41.4 per cent, or $4.04 (Canadian), to close at $13.79 in Toronto yesterday.

The shares had risen 32 per cent on Thursday on hopes that refinancing would be finalized this week.

The stock, worth $35.85 shortly after being listed last October following the merger of Abitibi-Consolidated and Bowater, traded as low as $4.57 on March 13.

The company, facing liquidity problems that threaten the solvency of the Abitibi-Consolidated subsidiary, confronts a March 31 deadline, but announced on Wednesday that nearly two-thirds of investors holding $496 million (U.S.) of debt endorsed a sweetened plan.

This would provide them with cash and unsecured notes paying 15.5 per cent interest paydayloan. The rest of the restructuring plan involves secured bank debt and $161 million to be realized on the sale of an Arizona newsprint plant.

The Canadian Press

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BEIJING–China’s foreign exchange reserves jumped $57.3 billion (U.S.) in February to $1.6471 trillion, almost matching January’s surprising leap of $61.6 billion, sources familiar with the data said yesterday.

The leap will fan talk of speculative hot money coming into China; the increase is more than three times greater than February’s combined inflows from the trade surplus and foreign direct investment. These totalled $8.6 billion and $6.9 billion, respectively cash advance.

The pace of accumulation in the first two months of this year dwarfs last year’s average monthly increase in China’s reserves of $38.5 billion.

The reserves, the world’s largest, have ballooned because the central People’s Bank of China, in order to hold down the yuan, buys most of the dollars that flow into China.

Reuters News Agency

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The financial news is bad and getting worse every day.

How do you stay calm and hang on to your investments? How do you resist the urge to panic?

"I don’t pay any attention to how I’m doing. I only open my investment statements once a year," says Dan Richards, president of Strategic Imperatives Corp., who helps train financial advisers.

He files his statements and opens them in December, when he meets with his own financial adviser. That’s when they review his investments and tweak them for the coming year.

This would be a strategy that best applies to long-term investors holding diversified mutual or exchange-traded funds, as opposed to individual stocks.

Ask him how much his portfolio has dropped this year and he can honestly say he doesn’t know.

"My solution is that I just don’t think about it. I haven’t looked at my account online or on paper since the beginning of January."

Richards has a portfolio that would immediately reflect the 5.03 per cent drop in the S&P/TSX composite index since the start of the year and the 9.37 per cent decline in the S&P 500 index.

He has all his savings in equities, with nothing in bonds or fixed-income investments and he’s underweighted in Canadian equities versus U.S. and international stocks.

"I tend to believe that the only guide we have – and it’s not a perfect guide – is what happened in the very long term in the past."

He refers to U.S. stock market data (from Ibbotson Associates) going back to 1926, showing that stocks have outperformed bonds in almost all 10-year periods.

And while stocks are volatile, the level of volatility goes down the longer you stay invested.

 

"The good news is that the longer your holding period, the less you have to worry," Richards says. "I’m 57 and I have a 20-year time horizon for the vast majority of my savings."

Dan Hallett, president of his own investment research firm in Windsor, agrees you can suffer if you pay too much attention to your investments.

He has stopped subscribing to a service that sent him several emails a day detailing the ups and downs of the Dow Jones industrial average.

"You should get enough news to know what’s going on http://easy-quick-payday-loans.com. But checking your portfolio once a day is not healthy."

Patrick McKeough, publisher of The Successful Investor newsletter, advises holding onto good investments and avoiding fads.

"The industry keeps coming up with new wrinkles, but I think you’re better off with plain vanilla stocks and bonds," he says.

"Downplay stuff that’s in the broker/media limelight. The quality of securities you own is the key to success, rather than trying to outguess the market."

Warren MacKenzie, president of Second Opinion Investor Services Inc., a fee-based consulting firm, believes in diversification.

After analyzing about 200 portfolios, he has found that investors take more risk than necessary and keep too much of their savings in stocks.

You should keep at least 40 per cent of your money in stocks, in his view, to limit the risk of inflation cutting your buying power to shreds.

But don’t go overboard on stocks. Make sure you have a properly diversified portfolio.

"You need bonds to keep your powder dry, so you can buy more stocks when they’re cheap," he says.

Are stocks cheap now? The advice-givers I spoke to don’t think so.

The market hasn’t reached the point of maximum pessimism, where the bargains are compelling – not yet, anyway.

Ellen Roseman’s column appears Wednesday, Saturday and Sunday. You can reach her by writing care of Business, the Toronto Star, 1 Yonge St., Toronto M5E 1E6; by phone at 416-945-8687; by fax at 416-865-3630; or by email at eroseman@thestar.ca.

 

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OTTAWA – Sales of new motor vehicles began 2008 with the strongest month-to-month growth in 2 1/2 years.

Statistics Canada reports that 153,231 new vehicles were sold in January, up 8.2 per cent from December and the largest monthly growth since June 2005.

January's rise in new-vehicle sales comes on the heels of a 5.1 per cent increase in December and marks a turnaround after six drops in seven months.

The agency says preliminary industry data for February suggest that some of January's gains will be lost, due mainly to a decline in truck sales.

January's growth was almost entirely due to an increase in passenger car sales, which rose 16.2 per cent to 80,754 as dealers offered rebates, better pricing and better financing, along with a one percentage point reduction in the goods and services tax.

Sales of new trucks – that's minivans, sport-utility vehicles, light and heavy trucks, vans and buses – edged up 0.5 per cent in January to 72,476.

A sizable rise in the number of new motor vehicle sales in Quebec, up 16.1 per cent to 39,953, contributed the most to the Canadian increase, while Ontario rose 6.9 per cent to 54,558 credit report.

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LONDON–Queen Elizabeth opened Heathrow Airport’s gleaming new Terminal 5 yesterday in a first step toward reviving the dingy, overcrowded facilities at the world’s busiest international airport.

The Queen and Prince Philip toured the light-filled structure, which will begin operating March 27 with the arrival of a British Airways flight from Hong Kong.

"Looking around this bright and airy space, with its clean, efficient layout, I am sure that many millions of travellers will have reason to be appreciative of the thought and care that has gone into the design, construction and ongoing maintenance of this significant new terminal," the Queen said.

The new facility promises a much-improved experience for travellers who have endured frequent delays at the four other Heathrow terminals, which have been operating at far above their intended capacity for years.

The airport had been designed to handle 45 million passengers per year and has struggled with record passenger numbers that have risen to 68 million per year. Combined with the added security procedures of recent years, moving around in the airport has become a slow and unpleasant process.

British Airways, which will have exclusive use of the new terminal, said passengers will be able to clear security within 10 minutes of walking into the building.

The old terminals are generally viewed as drab, cramped spaces with little natural light free credit report and score. The new facility is designed to be "flooded" with light, officials said, and also to offer an open view of the airfield and the countryside beyond.

Transportation Secretary Ruth Kelly said the new building would improve London’s image with travellers worldwide.

"It is destined to become one of London’s most iconic transport buildings," she said at the opening ceremony. "Terminal 5 is a bold statement of intent for Heathrow’s future."

 

She said airport operator BAA plans to follow Terminal 5 with a multi-billion-dollar investment in the replacement and refurbishment of the airport’s other four terminals. BAA is owned by Spanish construction Grupo Ferrovial SA.

The construction faces stiff opposition from environmental groups and politicians representing London boroughs near the airport who complain it will lead to more flights and pollution at Heathrow.

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NEW YORK–Gulfstream Aerospace Corp Thursday launched the new G650 business jet, its biggest, fastest, longest-range plane to date, as it looks to take advantage of the continuing boom in private plane sales and the trend toward larger aircraft.

The G650 is expected to have a range of 7,000 nautical miles (about 12,950 km) at a speed of 0.85 Mach, which means it would be able to fly non-stop from Los Angeles to London.

It will have a maximum cabin headroom of about 6 feet 5 inches (about 1.96 meters) and larger, oval windows. Gulfstream gave no indication of price, but it will likely cost more than $60 million.

Gulfstream, a unit of defense contractor General Dynamics Corp, caters to the upper end of the business jet market, but has recently seen potential customers opt for versions of larger commercial planes made by Boeing Co and Airbus.

Last year Saudi billionaire Prince Alwaleed bin Talal became the first individual to buy an Airbus A380, the largest commercial plane in production. Boeing has sold nine of its new 787 Dreamliners to superwealthy private customers.

Gulfstream's new G650 jet, the designs of which were unveiled at a ceremony at Gulfstream's plant at Savannah, Georgia, Thursday, wouldn't compete directly with those larger airliners, but is designed to dominate the top end of the business jet market.

The plane is set for first test flight late next year and first delivery in 2012.

The business jet market tends to follow corporate profits and general economic trends, but it shows no signs so far of slowing down, despite evidence of a broad downturn in the United States, the biggest market for private jets.

Last year, Gulfstream and other plane makers delivered a record 1,138 business jets, up 28 percent from the year before cash til payday loan. It was the first year the industry delivered more than 1,000 jets.

Gulfstream, founded in 1958, is one of the world's biggest business jet makers, competing against Canada's Bombardier Inc , France's Dassault Aviation and U.S. plane maker Cessna Aircraft Co, a unit of Textron Inc.

Boeing and Airbus, a unit of Europe's EADS, also offer custom versions of their commercial planes, which are growing in popularity among heads of state and rich business people.

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PARIS–Police arrested an employee from the trading room of Societe Generale on Wednesday as part of their investigation into an alleged rogue trading scandal at the French bank, Europe 1 radio reported.

In January, SocGen unveiled 4.9 billion euros ($7.53 billion) of losses which the bank blamed on rogue deals carried out by Jerome Kerviel, a 31-year old junior trader at the bank. The losses have made SocGen a possible bid target.

Europe 1 said police on Wednesday morning arrested a former colleague of Kerviel. Europe 1 did not identify the individual.

"A former colleague of Jerome Kerviel was arrested this morning," the radio station reported.

A spokeswoman for Societe Generale said that police had searched the bank's trading room on Wednesday and added that one person was being held for questioning.

Kerviel has been placed under formal investigation for breach of trust, computer abuse and falsification payday advances. He is currently being held in a Paris prison.

Europe 1 radio added the person held was among one of Kerviel's friends listed on the Facebook Internet social networking site.

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What job delivered the biggest opportunity growth in the years 2001-06? If you answered "retail sales clerk" you would have been right. For both men and women, retail sales had by far the strongest growth in jobs over that period.

While this reflects strong consumer spending in Canada, it also raises a more worrisome question on whether we are employing more and more people to sell products and services made elsewhere.

It used to be that there were far more Canadians employed in manufacturing than in retail sales. In 2001, there were 379,000 more people employed in manufacturing than in retail sales. But by 2006 the gap had narrowed to just 81,400, according to 2006 census data from Statistics Canada.

The Harper government says we needn’t worry because we are shifting away from manufacturing to resource industries, notably development of the Alberta oil sands. But despite the fast growth in oil and gas industry jobs, the mining and oil and gas industries accounted for just 1.4 per cent of all Canadian jobs in 2006, with manufacturing accounting for 11.8 per cent.

The paradox is that despite falling employment, manufacturing faces a skilled labour shortage. And this could damage the future of manufacturing in Canada because the world is in a global skills race and investment will go to where the skilled workers can be found. Moreover, Canada’s manufacturing future depends on a high-skill workforce because, to survive and grow, Canadian companies have to be high-value manufacturers.

There are several reasons for this shortage, as Andrew Sharpe, who heads the Centre for the Study of Living Standards, explained in a recent report, "Apprenticeship Issues and Challenges Facing Canadian Manufacturing Industries."

One problem, Sharpe said, is that the manufacturing companies have to compete with the resource and construction industries for many skilled trades payday loans. While the resource and construction industries have been enjoying robust and profitable growth, manufacturers have been squeezed by the high dollar and tougher market conditions.

This means manufacturers find it hard to compete for or retain skilled workers since they don’t have the same flexibility to pay workers more. "Reported skilled labour shortages in manufacturing are no mirage," Sharpe said.

Sharpe argues that manufacturers, governments, unions and colleges have to become much more concerned with training. For example, apprenticeship programs, which matter for many skilled jobs in manufacturing, should include more time in college so that young Canadians get both a college diploma and trades certificate. More provinces could also follow Ontario’s Youth Apprenticeship Program, which allows high school students to start learning the basics of trades while still in high school.

In fact, the need for much greater attention to education and training cuts across many areas of our economy. Statistics Canada says we rely heavily on immigrants for skills.

In 2001-2006, some 51 per cent of immigrants aged 25 to 64 had a university degree, compared to 20 per cent of Canadians. Some 25 per cent of recent immigrants had a degree in engineering, compared to just 6 per cent of Canadian-born degree holders. And 6 per cent of recent immigrants had studied computer and information sciences, compared to 2 per cent of Canadian graduates.

If we are going to be more than a nation of shopkeepers, we had better pay much more attention to producing products and services we can sell to the rest of the world. The place to start is with ensuring our people have the highest quality education and skills found anywhere in the world.

crane@interlog.com

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