Canadian economist gloomy, but "sunshine and lollipops" compared to Marc Faber

"My presentation is sunshine and lollipops compared to [Marc Faber's]," said Patricia Croft, chief economist, Philips Hagar & North Investment Management, a Canadian firm. Both spoke at the Refining Wealth Management Conference in Edmonton, Alberta, on April 24. (Read my comments on Faber's presentation). Croft's focus was "Outlook 2008/09--Life in the Aftermath of the Great Global Credit Crisis."

One of Croft's key points: the Canadian dollar is overvalued, so the U.S. dollar will head up.

Over the next nine months to one year, the Canadian dollar is likely to trade vs. the U.S. dollar in the range of 95 cents to $1.10, said Croft. But, "longer-term, the Canadian dollar at parity is significantly overvalued." Based on the OECD's purchasing power statistics, 85 cents to the dollar is more realistic.

Croft expects the U.S. dollar to end 2008 stronger than it is today. Why? It's like the accounting concept of FIFO, "first-in, first-out." The U.S., which was the first to enter recession, will be the first out, she said. She also reckons that an Obama presidency could boost the U.S.

Other observations:

• The Canadian housing market isn't likely to follow the U.S. example because Canada's mortgage market is more conservative (less than 5% of mortgages are subprime) and Canada is one of only two undervalued real estate markets (the other is Austria).
• Food price inflation has staying power
• We're near a major inflection pont for inflation and real interest rates will also rise
• Good buying opportunities for Canadian investors include Canadian financial debt, Canadian bank stocks, and U.S. stocks

You can view a webcast of Croft's outlook for the second quarter of 2008.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

Buy farmland, not NYC real estate, says Marc Faber

Buy farm land, said Marc Faber on April 24 in his presentation to the Refining Wealth Management Conference sponsored by the CFA Society of Edmonton. For one thing, as investment managers, the audience members should diversify out of financial assets. Plus, if war breaks out over scarce commodities, where’s a more likely target—Wall Street or a far away farm in Canada where you can grow your own food?

The farm land suggestion was just one tiny part of a presentation on "Will the first synchronised global economic boom in the 200-year old history of capitalism also lead to a synchronised bust?" by Faber, the publisher of The Gloom, Boom & Doom Report. Faber said "a colossal bust" is likely.

Faber was quite critical of Ben Bernanke and the Fed. "Expansionary monetary policies, which caused the current credit crisis in the first place, are the wrong medicine to solve the current problems.... But what options does the Fed have with debt to GDP at 350%?"

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

HSBC economist Stephen King says "Goodbye to all that"

The world that we took for granted is gone. No more rapid global growth. No more easy investment opportunities. No more excess liquidity.

That was the starting point for "Goodbye to all that," a Feb. 25 presentation to the Boston Security Analysts Society by Stephen King, chief economist and global head of economics for HSBC Group.

King, who's based in the U.K., brought a global perspective to the current housing and credit crunch in the U.S. "The U.S. housing crisis has become a transatlantic lenders' problem," he said. Why? Because in their quest for higher yields, institutional investors in the U.K and the eurozone became heavy investors in U.S. corporate bonds. By corporate bonds, he meant asset-backed securities, especially mortgage-backed securities. U.K. banks that have gotten burned are tightening their lending standards just like their U.S. counterparts.

King predicted that 2008's biggest negative surprise for financial markets might come from outside the U.S.: the sudden loss of momentum in the U.K. and elsewhere. In fact, he suggested that the U.S. dollar may appreciate in 2008 because economic risks are priced into the U.S. market, but not in Europe.

On the emerging market front, King said that those economies have decoupled from the U.S. "Slower G7 domestic demand growth may not be an emerging market disaster," according to him. But while some strategists stress the upside of emerging market demand for the U.S., King emphasized the downside. A slowly growing U.S. that's cutting interest rates will boost capital flows into emerging markets, where too much domestic demand will fuel inflation in fuel and food costs. That inflation will deliver another blow to the economies of developed nations.

________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

"Will the U.S. Sub-Prime Crisis Be as Bad as History Suggests?"

"If history is a good guide, the U.S. economy will stay in the doldrums much longer than we’d like—a minimum of two years. That’s the scary implication of 'Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison' by Carmen M. Reinhart of the University of Maryland and the National Bureau of Economic Research (NBER) and Kenneth S. Rogoff, Harvard University and NBER."

Read more of my article about Reinhart and Rogoff's research and what advisors say about its implications. This article appeared in the Feb. 26 issue of Advisor Perspectives.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.