Thursday July 24, 2008
REPORT ON BUSINESS FRONT PAGE 
Bush pins credit mess on 'drunk' Wall Street
Now we know what George W. Bush really thinks happened to his country's economy and financial markets: ''Wall Street got drunk.'' In public, the U.S. President has been subdued in his statements about who is to blame for the mess on the balance sheets of banks and the country's waning growth - preferring bromides to straight-out criticism. But in private - or at least, when he thought it was private - Mr. Bush laid his real view out in folksy yet harsh terms last week. Wall Street overindulged in the ''fancy financial products'' that became the flavour of the bull market, and now faces a hangover, he told supporters in Texas.
Amazon defies spending slump
Someone forgot to tell Amazon.com Inc. about the consumer spending chill sweeping through the United States.The world's largest Internet retailer announced yesterday that its second-quarter profit more than doubled over the same period a year ago, blowing past analysts' expectations while shrugging off a slumping domestic economy as overseas consumers gobbled up video game consoles and other electronics.
The energy up there
The equivalent of 412 billion barrels of crude lies tantalizingly beneath the pack ice and frigid waters of the Arctic, making it the largest source of untapped oil on the planet, according to a new report by the U.S. Geological Service.
Ford unveils dramatic makeover plans
Ford Motor Co., already losing billions of dollars, will bet billions more that Americans have permanently ended their love affair with sport utility vehicles by announcing a major realignment of its U.S. assembly operations today.
INSIDE
TD ends showdownover U.S. outlets' nameTD Bank has ended its pursuit of the name TD Commerce Bank for its U.S. operations after it was contested by 12-outlet Commerce Bank and Trust Co.
The Markets
DOWNSandP/TSX13,512.66-130.53UPDow11,632.28+29.88UPNasdaq2,325.88+21.92DOWNDollar98.98-0.19DOWN
COLUMNISTS
Gas police could use a refresher course on competition
There was a time, not too long ago, when SUV drivers had the gall to complain about the price of gas. Worse, most of the rest of us were complicit enough to sympathize with them.
With wireless spectrum auction over, let the real games begin
For all the games that went into Canada's $4.25-billion wireless spectrum auction - there were a mind-boggling 331 rounds of bidding - the real fun has just begun in telecom.
Commodities losing altitude as bubble continues to leak air
Did anyone hear a ''pop''? Or at least a loud ''hiss''?The alarming leak of air from the wildly inflated commodity market continued yesterday, with the Commodity Research Bureau index of global commodity prices shedding another 1.7 per cent, its seventh decline in the past eight trading sessions. The index is now down 13 per cent from its record high, hit a mere three weeks ago.
Where have all the good buyers gone?
Robert Milton spent his first few months as Air Canada's top executive fending off a hostile advance from a buyout firm. Later on, private-equity money helped him get the airline out of bankruptcy protection.
Manulife shows Mawer the love with promotion of small firm
Insurance giant Manulife Financial just loves the tiny Calgary-based money manager called Mawer Investment Management, and with good reason.Mawer is that rarity in the mutual fund industry, a company that does everything well, whether it be Canadian equity, U.S. and international equity, balanced or bond funds. You've probably never heard of Mawer, but Manulife certainly has. Just recently, it introduced a new lineup of Mawer-managed funds that are sold by Manulife agents.
Holding companies can give rise to double tax problem
Okay, so it's not the nicest table in the world. The fact is, it's been down in a corner of our basement for 10 years. In her haste to purge our home of unwanted things, my wife, Carolyn, donated that table, a perfectly good set of encyclopedias, a mood ring and two nice rug hangings to a charity down the road that was having a garage sale to raise money. Now, I can part with the mood ring, but that table was something I made in high school with my own two hands. I still recall paying $23 for the wood to make it. And now, so many years later, I find myself buying my own table back for $25.
INTERNATIONAL BUSINESS
Brazil sprouts new millionaires
When Fabio Calderaro was a 23-year-old cadet at Brazil's military academy in 2000, he invested a couple of thousand dollars in the stock market.At first, the value of his investment plummeted. But as he grew more market savvy, his fortunes changed - so much so that a few years later Mr. Calderaro quit the military and started living off his gains.
South Africa workers strike over inflation
Thousands of striking South African workers brought mines and businesses to a halt across four provinces and snarled traffic in Johannesburg yesterday to protest against a jump in electricity, food and fuel prices. The one-day walkout is part of a series of rolling strikes being held around the country by labour unions to protest against rising inflation, high interest rates and likely job cuts after a power crisis engulfed the country this year. The Congress of South African Trade Unions plans to hold a national strike on Aug. 6.
BHP Billiton reports record-breaking production
BHP Billiton Ltd. said yesterday its production of seven raw materials, including copper and iron ore, hit record levels in the 12-month period to the end of June. ''Annual production records [were] achieved in petroleum, copper, iron ore, manganese ore and alloy, alumina and molybdenum,'' BHP said in a statement. ''Annual production also increased in crude oil and condensate, uranium, lead, zinc, silver and diamonds.'' Iron ore output for the year rose 13 per cent to 111.3 million tonnes, copper output rose 10 per cent to 1.37 million tonnes and petroleum output was up 13 per cent at 129.5 million barrels of oil equivalent. BHP (Sydney) fell 32 cents to $38.68 Australian ($37.58).
Schaeffler bid rejected; Continental willing to talk
Continental AG yesterday roundly rejected a takeover offer worth more than €11.2-billion ($17.8-billion) from smaller auto parts maker Schaeffler Group, but indicated that it might be interested if Schaeffler ups its offer. Continental said its supervisory and executive boards both dismissed Schaeffler's current offer, made earlier this month, but agreed that an deal of some kind with Schaeffler is ''desirable.'' Schaeffler is offering €70.12 per Continental share, below Continental's current share price after gains last week that followed news of Schaeffler's interest. CON (Frankfurt) fell 42 euro cents to €72.57.
Volkswagen, Citroën, Fiat post strong results
Pilots strike at Lufthansa cancels hundreds of flights
Deutsche Lufthansa AG said it had to cancel more than 500 flights yesterday as a result of a strike by pilots at two subsidiaries. Lufthansa already had cancelled more than 400 flights on Tuesday after pilot union Cockpit called members at the Eurowings and CityLine subsidiaries out on a 36-hour strike in a pay dispute. The strike was slated to end at midnight yesterday. Lufthansa has offered CityLine pilots a 5.5-per-cent pay increase, plus a one-time bonus payment; and Eurowings pilots a 6.5-per-cent increase plus a bonus. Cockpit has declined to say exactly how much more it is seeking, but is holding open the possibility of staging longer strikes if Lufthansa does not up its offers. LHA (Frankfurt) rose 32 euro cents to €15.69 ($24.89).
TD Bank abandons U.S. brand battle
Toronto-Dominion Bank will have to pursue its ambitious U.S. strategy without the help of the Commerce Bancorp name, a respected and quirky brand that had high value in its home market.
Speak2Me on Chinese TV
A Canadian company hopes that an American Idol-style English proficiency contest in China will give a boost to its interactive language teaching website.Toronto-based Lingo Media Corp. says that its subsidiary Speak2Me Inc. will sponsor the 2008 Jiangsu English Star Television Contest.
Down to the wire for Doha round
Key industrialized and developing nations, including China, were locked in ''very intensive'' trade talks at the WTO yesterday in Geneva, with both sides calling for concessions. Major traders including the United States, European Union, Japan, India, Brazil, Australia and China were thrashing out proposals aimed at breaking a deadlock in negotiations here that have so far yielded little headway. The ministers meeting this week are not seeking to clinch a final Doha round agreement, but are striving for the outlines of a deal that trade diplomats would then flesh out. A basic accord on some of the talks' most sensitive issues would be a decisive step forward for the WTO free trade push. Here are the main results to watch out for:
U.S. lawmakers give green light to home-rescue legislation
Rescue legislation sailed through the U.S. House of Representatives yesterday aimed at helping 400,000 strapped homeowners avoid foreclosure and to prevent troubled mortgage giants Fannie Mae and Freddie Mac from collapsing.
Even big utilities feel pinch from millions of tiny consumer changes
When the going gets tough, the tough get going and everyone tries to lighten their load. The question that is causing much nail-biting among businesses and investors is which burden is the first to be shed by consumers in straitened times.
CANADIAN BUSINESS
TransCanada closes in on Alaska
TransCanada Corp. is one legislative hurdle away from landing a lucrative Alaskan licence to pursue the most expensive private-sector construction project in North American history, after the company's proposal for a massive natural gas pipeline won a key vote in the state's House of Representatives.
Husky's profit rises 89 per cent
Husky Energy Inc. has kicked off the oil patch's quarterly financial reporting season with a record period, as soaring oil and gas prices drove the company's profit, cash flow and revenues to new records.
Market shrugs, consumers quake at soaring prices
Canada's gas-fuelled inflation rate roared above 3 per cent for the first time in almost three years, fostering concerns that rising prices are becoming a fixture for Canadian consumers.
Livent prosecution witness admits error
The long-running Livent Inc. trial saw a moment of courtroom drama yesterday when defence lawyer Edward Greenspan revealed that a former company employee had incorrectly identified handwriting on an internal accounting document as that of Livent co-founder Garth Drabinsky when it actually belonged to an RCMP officer.
Xantrex in takeover talks
With alternative energy products revitalizing its balance sheet after years of disappointing results, Xantrex Technology Inc. said yesterday it is in takeover talks with an unnamed suitor.The Vancouver-based company manufactures inverters that convert energy gathered by solar panels and wind turbines into a usable form. It also makes battery chargers and power packs, which are used by campers and boaters.
Forestry returns suffer
The Canadian lumber, paper and packaging industry had the worst 2007 financial performance among seven regions ranked in a PricewaterhouseCoopers survey published yesterday.Return on capital employed among Canadian companies was minus 0.1 per cent, down from 2 per cent in 2006, the annual survey found. Other regions, led by Latin America at 7.8 per cent, were much more successful on this financial measure in 2007 because of lower-cost operations and sales to markets such as Asia, where demand is growing. Second on the list was emerging Asia, with a return of 7.3 per cent, while South Africa was at 5.8 per cent and the U.S. was at 5.5 per cent.
Deals sweeten Cookie Jar's cartoon library
Cookie Jar Entertainment Inc. has resolved the legal challenge blocking a deal that would have made it one of the biggest independent players in children's entertainment - by agreeing to buy two lucrative cartoon series at more than double the cost of its original takeover.
Private stations boost ad sales, profits
Pengrowth to acquire junior Accrete Energy
Teachers eyes U.K. site Moneysupermarket.com
Ontario Teachers' Pension Plan revealed yesterday it has made a preliminary takeover approach toward British-based website owner Moneysupermarket.com Group PLC. The company, which offers price comparisons for products including mortgages and travel, has a current market value of $845.7-million. Its shares surged by 22 per cent yesterday after chief executive and majority shareholder Simon Nixon said he had turned down an advance from a suitor he didn't name. ''The unsolicited approach did not contain indicative terms for any offer and has been rejected by Mr. Nixon,'' according to a company news release. Later in the day Teachers disclosed its interest at the request of U.K. regulators. The $108.5-billion pension fund said it has ''no current intention'' of making a formal offer, but ''reserves the right'' to do so. MONY (London) rose & 15.25 to & 84.25 ($170.21).
Precision sees rising need for drill rigs into 2009
High oil and natural gas prices are fuelling stronger demand for drilling and service rigs in Canada, creating a robust environment for oil field services companies that could last into 2009, Precision Drilling Trust said yesterday. Demand for the services of Canadian drillers was weak last winter, but Precision, Canada's largest oil field services company, now expects high commodity prices to spur producers to invest more in Canadian exploration during the rest of 2008 and into next year. ''We're already seeing an upturn in demand,'' Precision chief executive officer Kevin Neveu said in a conference call. Precision continues to pursue Houston-based gas services firm Grey Wolf Inc. In its second quarter, Precision reported profit of $22-million on revenue of $139-million, down from $26-million on revenue of $122-million a year ago. PD.UN (TSX) fell $1.97 to $21.61.
Investors sue CIBC over subprime exposure
A group of investors has become the first to launch a class-action lawsuit against Canadian Imperial Bank of Commerce, alleging misrepresentations about the bank's exposure to the American subprime mortgage market. The claim alleges that the bank misrepresented its total exposure to U.S. subprime loans by saying it ''was ''not a major issue' when, in fact, the bank had exposure to billions of dollars of losses.'' The suit was filed with the Ontario Superior Court by Toronto's Rochon Genova LLP. Lawyer Joel Rochon said that CIBC ''ignored its legally required disclosure obligations to the detriment of the investing public.'' CIBC denied the allegations. ''CIBC is confident that, at all times, its conduct was appropriate and that its disclosure met applicable requirements,'' spokesman Rob McLeod wrote in an e-mail. CM (TSX) rose $3.17 to $63.29. CP
Birch Mountain seeks to sell itself after default
Birch Mountain Resources Ltd., a Calgary-based quarry, limestone, sand and gravel producer, says it is seeking an immediate sale of the company, which has defaulted on its loan agreement with its main banker. Birch Mountain said yesterday that a special committee of independent directors and the board ''have determined that it is imperative to pursue an immediate sale of the company to unlock maximum value for its shareholders. The company believes that the current lack of liquidity has compressed Birch Mountain's share price to a level significantly below its underlying value.'' The company also said it has signed a $4.8-million agreement with the East Athabasca Highway Proponents led by major oilsands operator Suncor Energy Ltd., to build the South Haul Road in northern Alberta. BMD (TSX) rose 7 cents to 33.5 cents.
Crescent affected by SemCanada bankruptcy
Crescent Point Energy Trust, a Calgary-based oil and natural gas trust, says it has a potential exposure of $30-million to SemCanada Crude Co., a Canadian subsidiary of SemGroup L.P., a U.S. energy marketer that has filed for bankruptcy protection in the United States and Canada. SemGroup had a contract to sell a portion of the trust's crude oil and liquids production, Crescent Point said yesterday. That deal has been terminated and does not present any continuing exposure for the trust, it said. Crescent Point is the second major trust to report losses from the financial troubles at SemGroup. Late Tuesday, ARC Resources Ltd., a subsidiary of ARC Energy Trust , said it is owed $26.2-million for oil sales to SemCanada. CPG.UN (TSX) fell $1.10 to $33.52.
Mecachrome cuts jobs, shifts production
Aircraft and automotive parts manufacturer Mecachrome International Inc. is cutting 41 jobs in Canada and shifting some production from France as it tries to adjust to lower demand for its aerospace and Formula 1 products. The Montreal-based company said yesterday that the job cuts in Canada, along with another 150 in France, will be completed by the end of September. Mecachrome is also transferring work on Airbus and Embraer from Amboise, France, to Mirabel, north of Montreal, to help fill excess capacity caused by production delays on the Boeing 787. Mecachrome has also hired advisers to help review its operations. MCH (TSX) rose 9 cents to $1.97.
GENERAL BUSINESS
ET CETERA
We are dealing with the consequences of bad decisions and inaction and malfeasance from years before.Barney Frank, a Massachusetts Democrat, on a U.S. move to help 400,000 homeowners avoid foreclosure and to prevent troubled mortgage giants Fannie Mae and Freddie Mac from collapsing. Page 9
GLOBE INVESTOR
Manulife shows Mawer the love with promotion of small firm
Insurance giant Manulife Financial just loves the tiny Calgary-based money manager called Mawer Investment Management, and with good reason.Mawer is that rarity in the mutual fund industry, a company that does everything well, whether it be Canadian equity, U.S. and international equity, balanced or bond funds. You've probably never heard of Mawer, but Manulife certainly has. Just recently, it introduced a new lineup of Mawer-managed funds that are sold by Manulife agents.
With wireless spectrum auction over, let the real games begin
For all the games that went into Canada's $4.25-billion wireless spectrum auction - there were a mind-boggling 331 rounds of bidding - the real fun has just begun in telecom.
Investors wise to view rally with skepticism
Since U.S. equities markets bounced off the July 15 lows, they have delivered in just six sessions a return that in less turbulent times investors would be happy to earn over six months or more. That raises the question of whether the rally is for real.
Holding companies can give rise to double tax problem
Okay, so it's not the nicest table in the world. The fact is, it's been down in a corner of our basement for 10 years. In her haste to purge our home of unwanted things, my wife, Carolyn, donated that table, a perfectly good set of encyclopedias, a mood ring and two nice rug hangings to a charity down the road that was having a garage sale to raise money. Now, I can part with the mood ring, but that table was something I made in high school with my own two hands. I still recall paying $23 for the wood to make it. And now, so many years later, I find myself buying my own table back for $25.
'We do not fall in love with stocks'
WHAT ARE WE LOOKING FOR?Checking out the top stocks in a mutual fund with impressive returns can be a useful strategy to get stock tips.But it might backfire on you if you look at funds whose managers are active traders. If you are not familiar with their investment strategy, it pays to do some homework by checking their websites.
Commodities losing altitude as bubble continues to leak air
Did anyone hear a ''pop''? Or at least a loud ''hiss''?The alarming leak of air from the wildly inflated commodity market continued yesterday, with the Commodity Research Bureau index of global commodity prices shedding another 1.7 per cent, its seventh decline in the past eight trading sessions. The index is now down 13 per cent from its record high, hit a mere three weeks ago.
EYE ON EQUITIES: STOCKS THAT SHOULD BE ON YOUR RADAR SCREEN
ROGERS COMMUNICATIONS INC.(RCIA-TSX)Yesterday's close$42.79, down $1.19The shares of Rogers Communications Inc. have slumped as investors worry about new entrants into the Canadian wireless market, but ''Rogers can still excel as new entrants target niche markets,'' said Jeffrey Fan, an analyst with UBS Securities Canada.
Markets brace for earnings
Some of Canada's largest companies are scheduled to report their second-quarter results today as earnings season picks up pace, and some good results would be welcome news for investors.
WEDNESDAY'S MARKETS: WHAT HAPPENED
DOWNGold, energy stocks a drag on SandP/TSX compositeLower gold and energy prices hammered once-hot Canadian commodity producers, sending the SandP/TSX composite index down 1 per cent for a triple-digit tumble. Suncor Energy Inc. fell 2.1 per cent, EnCana Corp. fell 5.1 per cent, Barrick Gold Corp. fell 7.9 per cent and Potash Corp. of Saskatchewan Inc. fell 7.1 per cent.
COMMODITIES
Commodities extended their slide as crude oil fell, dragging down gold, soybeans, wheat and other hard assets as traders shifted money into equities. Precious metals posted some of the day's most dramatic falls on expectations the U.S. central bank might raise interest rates.
TIP SHEET
North American financial stocks have been moving more or less in lockstep these days as investors take rescue packages from the U.S. Administration for what they are: a sign that taking a few risks isn't such a bad thing after all.
BONDS
Canadian government bond prices ended lower in response to higher-than-expected inflation readings and a more positive tone for world equity markets that has deprived bonds of previous safe-haven flows.***
FOREIGN EXCHANGE CROSS RATES
The dollar ended modestly lower against U.S. currency as early gains on stronger-than-expected Canadian headline inflation data for June proved fleeting as the greenback gained ground against the euro and the yen, and oil prices retreated. The U.S. dollar fell against the pound.
