Mock Turtle

From Saturday’s Financial Post:

It was one of those rare coincidences which cause the view to completely change. The same week in early November that the loonie hit a record high of US$1.10, Canada reported a record quarterly drop in its trade surplus — it fell by more than a third to $10.7-billion in the third quarter ended Sept. 30.

Um… is it a coincidence if one event is the cause of the other, or is it a consequence? If it was entirely forseeable that the rise in the Canadian dollar would lead to lower exports, how could it be a coincidence? The only coincidence seems to be the actual timing of the announcement of the trade surplus, and even that seems tenuous, given that these two events happened not on the same day, but rather “in the same week.” If it’s a coincidence, it’s hardly a rare one — more at the level of running into someone you know at a subway station near where they work.

Canadian economists are, understandably, occupied by examining whether the Canadian economy can veer off onto its own path if the US really goes south. TD Bank published an interesting paper on decoupling, concluding that the Canadian economy can and may partially decouple from the US in the event of ongoing weakness there, thanks to our natural bounty:

if commodity prices continued to boom, this would make
the case for strength in the resources sector – offset par-
tially by a presumable depreciation in the U.S. dollar and a
proportionate appreciation in the Canadian dollar.

But beyond the reliably myopic Canadian landscape, both British and American economists are raising serious questions about the ability of any country to decouple from the US. Why?

Well, all decoupling theories are based on the idea that strong exports from Europe, Canada, and other Western nations will flow unimpeded to China, whose appetite for raw materials is insatiable.

However, that appetite is fuelled by factories producing goods to export to, you guessed it, the United States.

Melvyn Krauss of the Hoover Institution wrote a piece on decoupling for the Japan Times. Replace “euro” with “loonie”, and he could be writing about Canada:

As a consequence, the euro is rising not only against the dollar, but also against Asian currencies, whose central banks intervene in foreign exchange markets to fix their currencies’ value against the dollar.

This damages European exports to both the U.S. and Asia.

Reduced European dependence on the U.S. export market can hardly protect Europe from the effects of the U.S. economic slowdown if the euro appreciates as much against the key Asian currencies as it has against the dollar.

The decoupling argument also assumes that recession in America has no effect on Asia. This is nonsense. Asian income certainly will decline if Asians export less to the U.S. — and this, in turn, will reduce Asian imports from Europe.

And before you get excited about the emerging Chinese middle class and domestic demand, bearish economist Nouriel Roubini dampens those hopes:

Some argue that, while a US hard landing may hurt China and Asian economies, there is wide room for domestic demand and non-US demand to maintain the growth of Asia. But this is another myth that has little basis. The role of domestic demand in China’s growth is very modest. You have an economy where exports are 40% of GDP; where investment is 50% of GDP and, leaving aside housing investment, most of such investment is directed towards the productions of more exportable goods; where the current account surplus has gone from $20b in 2002 (2% of GDP) to an expected $300 billion plus this year (12% of GDP). China and Asia strongly depend on trade and on trade to the US.

The strongest argument against decoupling, however, comes from the Chinese government itself:

A global economic slowdown stemming from problems in the US subprime mortgage market and the resulting credit squeeze “will be the biggest challenge to China’s economy next year”, a report from the ministry’s policy research department said.

I’m starting to feel a cold coming on.

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 …I’m guessing yours isn’t the one currently on the website I took it from: 

Jane New spends some time removing the ice build-up on her car before heading out in downtown Toronto on Thursday, Nov. 22, 2007. The forecast calls for up to 10 cm of snow by nightfall.

Or do helicopters come with a special ice-removing feature I’m not aware of?

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There’s usually a lag between economic cycles in the US and in Canada — a year and a half to two years seems to be the accepted lag time for real estate — which is why I’m constantly surprised to see economists committing things like this to paper — exclamation points and all:

While some U.S. executives were muttering that their housing market is in the worst state since the Great Depression, Canadian existing home sales continued to charge ahead in October, in what has clearly become a tale of two very different housing markets. While U.S. existing home sales are down more than 10% y/y so far in 2007, unit sales in Canada’s major markets are up a hearty 8.6% through October, and are on pace to post the strongest year on record! And to rub some salt in the wound, Canada’s major markets are still seeing double-digit price appreciation while U.S. home prices are flagging.

The crowing goes on for some time, but the last line reveals a flash of hesitation (emphasis added):

With Central and Eastern Canada picking up Alberta’s slack, there is nothing yet depressing about the Canadian housing market.

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Wellness dressing??

Originally uploaded by morecoffeeplease.

Yes, it’s true. You may be stressed out by work, living in inadequate housing with inadequate daycare and a car that craps out on you all the time and a violent spouse — at risk of all kinds of chronic diseases — but all you need to do is pour this overpriced dressing on your overpriced organic greens and presto! wellness! Would you like it in peppercorn ranch flavour or perhaps fig balsamic?

O for the day we return to eating real food without crap nutritional claims on it and without absurd names…

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I was going to write something snarky earlier today about how Lululemon was taking its approach to countering reports that its clothing might not carry the health benefits advertised from four-year-olds:

Mr. Meers said that to create the special fibre for Lululemon’s T-shirts, SeaCell is combined with a cellulose and spun into special SeaCell fibre. He said specialized testing is required to detect the SeaCell.

See, it’s not that there’s no seaweed in the clothing — it’s just that you can only detect the SeaCell if you have specialized testing special powers.

But then I noticed that prosaic adult rules have already, as they so often do, prevailed:

Lululemon Athletica Inc. has agreed to remove all claims alleging healthful benefits from its VitaSea line of clothing products that contain seaweed, Canada’s Competition Bureau says.

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Yoga clothes maker Lululemon’s shares swooned yesterday after independent tests called into question the claims it makes about one of its products:

According to product tags, one of its lines of shirts, called VitaSea, is made with a fabric that is 24 per cent seaweed. The company says the fabric releases “marine amino acids, minerals and vitamins into the skin upon contact with moisture.” It says the VitaSea clothing eases stress and provides anti-inflammatory, antibacterial hydrating and detoxifying benefits.

But guess what? A lab hired by a U.S. investor found nothing special about the shirts:

“All we know is seaweed has known vitamins and minerals, that’s what we looked for,” said Ms. Otten who works for Chemir Analytical Services in Missouri. “We didn’t find anything out of the ordinary that wasn’t seen in a normal cotton shirt.”

Not having seaweed traces in my clothing strikes me as a good thing. Have none of these people ever been along a shore? And while eating seaweed may, in fact, bring all kinds of “anti-inflammatory, antibacterial hydrating and detoxifying benefits,” I fail to understand how something that skims the hairs on my arms could be expected to deliver the same. I’m not sure I need “bamboo, silver, or coconut” in my clothes either.

There’s another reason not to choose Lululemon, and that’s its association with the litigious, cult-like, brainwashing pyramid scheme empowerment organization Landmark Education:

Chip Wilson, the smooth operator who founded Lululemon back in 1998 and built it into a national retailing powerhouse now valued at more than $225 million, is a devoted Landmark convert.
….
Wilson so heartily believes in the Landmark approach that it has been made mandatory for management staff to participate in the training. Lululemon picks up the tab on the $495 tuition. Legally, companies like Lululemon have the right to ask this of their employees. If employees do not want to attend, they can be terminated as long as severance is offered.

Having worked with a number of Landmark devotees, I’m wary of any company that would insist on this kind of psychological pressuring for its employees.

Besides, I hear Lululemon’s clothes can’t actually reduce my stress — unless I actually go to a yoga class, too. What’s special about that?

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Toronto City Council is still admirably focused on carving out savings and weeding out inefficiencies where they can. Councillor Howard Moscoe, for example, sees an opportunity in enforcing the superiority of the mighty loonie:

“There’s a glut of U.S. coins being dumped in the economy,” Moscoe (Ward 15, Eglinton-Lawrence) said yesterday.

“The city’s going to lose millions if it continues to accept them,” he added.

Wow, milions? Really?

Well, let’s see.

Let’s assume 20,000,000 million US nickels are inserted into Toronto meters in the brief time the C$ stays above the US$.

That’s US$1,000,000, worth at this morning’s exchange rate about C$968,800 (C$1.0322/US$1). So on what should be $1,000,000, the city incurs a loss of C$31,200. To incur a loss of even C$1 million, there would need to be $32 million in revenue from US nickels, or 641,025,641 US nickels inserted into Toronto parking meters. To get to millions of dollars in losses, you multiply that.

The Toronto Parking Authority‘s revenue for all of 2006? $97.2 million.

I’m not worried.

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An otherwise gloomy Report on Business article on the Canadian economy searches hard, and finds a silver lining:

The bright spot is that companies are diversifying away from the U.S. Three-quarters of Canadian exports go to the U.S., down from 81 per cent five years ago.

Bright indeed. Diversification has its proponents. Where is Canada growing its share? The emerging superpowers of India and China, perhaps? Or:

Canadian trade with Russia has more than doubled in the past decade and exports to new markets such as Slovakia, Oman and Zambia are surging this year.

Yes, that’s right. Trade with Zambia, for example, has jumped from $13.8 million in the first nine months of 2006 to $50.4 million in 2007. Or — because it looks much more impressive when you ignore the dollar figure — soared by 264%!

To put it into a slightly more meaningful context — trade with the US declined by 0.2% in the first nine months of 2007 vs. 2006 — or half a billion dollars.

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Firm to use cellphone data to map traffic in real time

One the one hand — cool and very useful way to avoid traffic jams. Good excuse to buy an iPhone so you have a screen large enough to make sense of whatever data map becomes available.

On the other — why are so many people driving and talking on the phone at the same time? Eek. And the ability for someone to sign up to track their kids (or, more accurately, their kids’ cellphones) and/or spouse (‘s cellphone) is a bit much.

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