May 2012 – NORTH AMERICAN & INTERNATIONAL ECONOMIC HIGHLIGHTS

Merkel’s Bluff

by Benjamin Tal

Recent polls from Greece are showing the anti-austerity Syriza party capturing around 22% of popular

support—up by five points from the election tally. And markets are not liking it. The iTraxx Europe Crossover

Index widened to the 740 basis point zone, a level close to that seen in late 2011 when fears about the

Eurozone collapsing under the weight of peripheral countries’ debts were highest. Perhaps as telling, is the fact

that the stock price of the world’s largest commercial currency printer surged by 10% in the past three weeks

to its highest level in more than three years.

If you live in Greece, what do you do after reading the morning paper? You go…no, you run…to your local

bank to withdraw your euro-dominated deposits before they turn into worthless drachma deposits. So the

surprise is not that Greek households and businesses withdrew close to €1.3 billion over the past week. The

surprise is that it was only €1.3 billion.

Maybe part of it is the belief by many in Greece that Syriza can have its cake and eat it too. After all, Syriza’s

dogma of a middle way between austerity and eviction is being encouraged by Europe’s shifting political

mood. In France, Italy, the Netherlands, and to some extent even in Germany, voters and politicians are

increasingly critical of the effects of austerity in a downturn. The party builds on the realization that although

Greece accounts for only 2% of the euro area’s economic output, its exit could disintegrate a system of

monetary union designed to be irreversible.

In many ways, Syriza is trying to call Merkel’s bluff. Their thesis is that the hawkish Chancellor and the

Eurozone as a whole are facing an asymmetrical risk. A Greek exit is a strategy with a degree of risk. No one

has tried breaking up a monetary union before. There is absolutely no way to know in advance whether the

crisis spreading to other countries can be controlled. Such a scenario could trigger a default-inducing surge in

bond yields, capital flight that might spread to other indebted countries and a resultant series of bank runs—

leading to increased capital controls on cash withdrawals and transfers, alongside huge draws on ECB credit to

keep the banks from collapsing.

At the same time, Germany will have to accept significant indirect public claims on Italy and Spain, or simply

admit defeat and kill the euro. Against this gigantic potential cost, the money involved in a “Marshall Plan”

type approach that will buy Greece and the zone some time is a bargain.

And time is key. It is impossible to predict how things will develop after the June 17th election. The betting on

this one comes down to whether one thinks European officials will stick with their principles or act in their own

best interests. While the odds of a Grexit have risen, we are not there yet. Simple math might convince

Germany to close its eyes and buy Greece, Italy and Spain more time—at least until it gets all its ducks in a row

for a more orderly Greek exit. For now, in this game of chicken, Merkel might blink first.

10th Annual Garage Sale Sponsored

By Dave, Cindy, and Amanda Walker

604-889-5004 or 604-531-1111

HomeLife Benchmark Realty and Dominion Lending Centres

Saturday, May 5 at 9:00 AM – Specialty Items Marked Below

Elgin Park: Off 144 Street, turn west onto 30A Avenue

1. 14322 30A Avenue – moving sale

Chantrell Park: Off 140 Street, turn west onto 22 Avenue, then right onto 139A Street,

loop around left to 138A Street

1. 2289 138A Street

– Loop back onto 20A Avenue and follow the road along to 138 Street

1. 2099 138 Street – furniture, sporting goods, children’s toys

Bell Park Subdivision: Off 140 Street head west onto 19A Avenue and simply follow the

addresses looping left around the circle:

1. 13868 19A Avenue – multi family sale, kids items, clothes, books

2. 13839 19A Avenue – toys, patio furniture, stroller, dvds, baby items

3. 13836 19A Avenue – kids items, books, furniture, home decor

4. 13824 19A Avenue

5. 13816 19A Avenue – clothes, shoes, sports items

6. 13669 19A Avenue – snowshoes, armoire

7. 13672 19 Avenue – estate sale including a sofa chair, an exercise bike, and a variety of other odds and sods

8. 1874 136A Street

9. 1851 136A Street

10. 1823 136A Street – garden items, furniture

11. 13676 18A Avenue – lamps

12. 13701 18A Avenue

13. 13761 18A Avenue

14. 13768 18A Avenue

15. 13781 18A Avenue – children’s toys and books, tools

16. 13885 18A Avenue – shrubs, perennials, electric lawn mower

17. 1944 139A Street

Bell Park South- Head west on 16 Avenue. Back lane access

1. 13849 16 Avenue – furniture; oak bedroom suite, roll top, chairs, microwave stand, bookcase, love seat.

electronics; 27” sony tv and stand, pvr, bluetooth

Amble Greene Subdivision: Off 16 Avenue, head north on 136 Street. West onto 18th Ave. loop to 17 Avenue

1. 13499 17 Avenue

– Off 136 Street

1. 13508 19 Avenue – baby items, children’s toys, furniture

– Off 20 Avenue and 129 Street

1. 12874 19A Avenue – brand name kitchen appliances, solid oak cabinetry, sinks/taps, studio sized pine harvest

kitchen table/pair of maple windsor arm chairs, pair of coordinating loveseats, metal wall art

Ocean Park Terrace – Off 24 Avenue turn south onto 129B Street

1. 2286 129B Street – kids toys, kids items, furniture

Not intended to solicit anyone under contract. Garage Sale Participants and Buyers are at their own risk. No liability offered

Rob Carrick

Once again: Pay down your debts before rates rise

ROB CARRICK |Columnist profile| E-mail

From Wednesday’s Globe and Mail

Published Tuesday, Apr. 17, 2012 7:53PM EDT

Last updated Monday, Apr. 23, 2012 10:12AM EDT

The decade’s most ignorable piece of financial advice: Pay down your debts before interest rates rise.

You’ve heard this warning a hundred times, you ignored it and rates held steady at historic lows. Now, the Bank of Canada is signalling that borrowing costs could rise if economic conditions keeps improving. Here are 10 reasons not to tune out this time around:

1. Rates will eventually rise – it’s inevitable

Financial stress now seems a permanent feature of the global economy. Will China’s economy stall? Will Europe’s debt problems worsen? Can the United States address its debt problems and get its economy going again? These are all open-ended questions that suggest there’s a chance interest rates will need to stay low for longer. Not forever, though. It could be years until stability rules, but it could also be months.

2. Borrowing means you can’t afford the stuff you’re buying

Borrowing is okay when buying houses and cars because few of us can pay cash for such large expenses. But using a line of credit to finance your lifestyle is like living on other people’s money. Exception: If you use your credit line strategically to acquire things that are paid off quickly without immediately running up your debt again. Question for you: How often are you using your line of credit? If it’s more than a few times a year, you’re likely overspending.

3. Cutting debt gives you a buzz

I paid off a five-year car loan three years early in 2011. What a high. Better than buying the car.

4. Less stress

I can tell from reader e-mails that people are stressed about debt and wondering what to do. Try taking your tax refund and using it to pay down your credit card or line of credit balance. Stop contributing to your registered retirement savings plan or tax-free savings account for one year and use the money to lower your debt. Get rid of that second-car loan.

5. Your next mortgage renewal could be scary

People who bought homes in the past couple of years have benefited from historically low mortgage rates. As recently as last month, you could get a fully discounted, five-year, fixed-rate mortgage for about 3 per cent. That compares with an average of roughly 4.5 per cent over the past decade and a high of about 5.5 per cent.

Use this Globeinvestor.com calculator to look at scenarios showing how much more your mortgage will cost if you renew at higher rates: http://tgam.ca/DKA7 (you’ll need to find out what your balance on renewal is).

And don’t tell me that future pay increases will help you afford larger mortgage payments. Big raises are scarce these days and, when you get one, you’re not going to want to see it eaten up by your mortgage.

6. Your kids need help affording university

One of my pet peeves is that parents are not saving enough in registered education savings plans. Cut debt and you have some free cash flow you can put into a regular monthly RESP contribution plan.

7. You get more control over when you retire

Reduce your debts and you can also increase your retirement savings. The more you save for retirement, the less likely it is that you’ll have to continue working in some capacity after you turn 65 to generate income.

8. You won’t retire with debt

People over the age of 45 are among the biggest debt fiends in the country. What are they thinking? That it would be fun to be on a fixed income while trying to cope with rising borrowing costs on lines of credit or mortgages? It’s hard to believe this even needs to be said, but a financially secure retirement starts with zero debt.

9. You’re covered for emergencies

People without debts are better able to afford a health or dental emergency, a basement flood, a leaky roof or a major car-repair bill. If you don’t have an emergency fund, pay off a debt and use the monthly payments you were making to build up your savings.

10. There’s no down side

No one has ever told me: “I really regret paying off my debts.” There’s always a use for the money you save, even if it’s to rack up more debt.

Code of Conduct  for Federally Regulated Financial Institutions

Mortgage  Prepayment Information

Purpose

The purpose of the Code is to ensure that federally  regulated financial institutions (“lenders“)  provide enhanced information in respect of credit agreements secured by  mortgages where a prepayment charge could apply (“mortgages“) to assist borrowers in making decisions about  prepayment of their mortgage.

Lenders currently provide substantial amounts  of information relevant to mortgage prepayments to consumers in accordance with  the requirements in the applicable federal regulations, including but not  limited to federal cost of borrowing disclosure regulations and credit business  practices regulations. The information  that will be provided under this Code is in addition to existing information  provided by lenders to borrowers.

Application  and Implementation

  Lenders will implement the policy elements of  the Code with respect to new mortgages no later than six (6) months from date  of adoption of the Code for Element 3 and Element 4; and no later than twelve  (12) months from adoption of the Code for Element 1, Element 2 and Element 5. Lenders will apply the Code to existing  mortgages where it is feasible to do so.  The Code does not apply to mortgages that are entered into for business  purposes or to mortgages entered into by borrowers who are not natural persons.

Compliance  with the Code

  The Financial Consumer Agency of Canada will  monitor and report on compliance with the Code.

Manner  of Presenting Information

Lenders will provide the information in  language, and present it in a manner, that is clear, simple and not misleading.

Policy  Elements

1. Information Provided Annually

Lenders will provide the following mortgage prepayment  information to borrowers annually: 

• Prepayment  privileges that the borrower can use to pay off their mortgage faster without having  to pay a prepayment charge. Examples  include making lump-sum prepayments, increasing the regular payment amount, and  increasing the frequency of the payment to weekly or bi-weekly.
• The dollar  amount of the prepayment that the borrower can make on a yearly basis under the  terms of their mortgage without having to pay a prepayment charge.
• Explanation of how the lender calculates the       prepayment charge for the borrower’s mortgage (for example, a certain       number of months’ interest or the Interest Rate Differential (IRD).
• Description of the factors that could cause       prepayment charges to change over time.
• Customized  information about the mortgage, valid as of the date the information is produced,  for the purposes of the borrower estimating the prepayment charge. The customized information will include,  depending on the type of mortgage product held by the borrower:  
  • The  amount of the loan that the borrower has not yet repaid
  • The  interest rate of the mortgage and other factors (for example, rate discount or  posted interest rate) that the lender uses to calculate the prepayment charge
  • The  remaining term or maturity date of the borrower’s mortgage     For  mortgages where the prepayment charge may be based on the IRD:
  • How the lender  determines the comparison rate to use to calculate the IRD
  • Where the  borrower can find the comparison rate (for example, on the lender’s website)
• Where the  borrower can find the lender’s financial calculators that the borrower can use,  along with the information above, to estimate the prepayment charge.
• Any  other amounts the borrower must pay to the lender if the borrower prepays their  mortgage and how the amounts are calculated.
• How the borrower  can speak with a staff member of their lender who is knowledgeable about mortgage  prepayments. For example, borrowers may  contact a staff member through a toll-free number as described in section 5.

2. Information Provided When the Borrower Is  Paying a Prepayment Charge

  If a prepayment charge applies and the  borrower confirms to the lender that the borrower is prepaying the full or a  specified partial amount owing on their mortgage, the lender will provide the  following information in a written statement to the borrower:

• The applicable  prepayment charge.
• Description  of how the lender calculated the prepayment charge (for example, whether the lender  used a certain number of months’ interest or the IRD).
• If the lender  used the IRD to calculate the prepayment charge, the lender will inform the  borrower of : 
  • the outstanding amount on the mortgage
  • the annual interest rate on the mortgage
  • the comparison rate that was used for the calculation
  • the term remaining on the mortgage that was used for the  calculation
• The  period of time, if any, for which the prepayment charge is valid.
• Description of the factors that could cause the prepayment  charge to change over time.
• Any  other amounts the borrower must pay to the lender when they prepay their mortgage  and how the amounts are calculated.

3. Enhancing Borrower Awareness

To assist borrowers in better understanding  the consequences of prepaying a mortgage, lenders will make available to consumers  information on the following topics:

• Differences  between: 
  • Fixed-rate  mortgages and variable-rate mortgages
  • Open mortgages  and closed mortgages
  • Long-term  mortgages and short-term mortgages
• Ways in  which a borrower can pay off a mortgage faster without having to pay a  prepayment charge. Examples include  making lump-sum prepayments, increasing the regular payment amount, and  increasing the frequency of the payment to weekly or bi-weekly.
• Ways to  avoid prepayment charges (for example, by porting a mortgage).
• How  prepayment charges are calculated, with examples of the prepayment charges that  would apply in specific circumstances.
• Actions  by a borrower that may result in the borrower having to pay a prepayment  charge, such as the following actions: 
  • partially  prepaying amounts higher than allowed by the borrower’s mortgage
  • refinancing  their mortgage
  • transferring  their mortgage to another lender

Lenders may make this information available  on their publicly accessible Canadian website where products or services are  offered and upon request by consumers at the lender’s places of business in  Canada, including when consumers are pre-approved for a mortgage. Â In addition, each lender will provide on its  publicly accessible Canadian website links to information on mortgages provided  on the website of the Financial Consumer Agency of Canada.

4. Financial Calculators

  Each lender will post calculators on its publicly  accessible website for borrowers, and provide guidance to borrowers on how to  use the calculators to obtain the mortgage prepayment information they want. Borrowers will be able to enter information  about their mortgage into the calculator to get an estimate of the current prepayment  charge. Borrowers will also be able to  change the information they enter, such as the amount of the mortgage that has  not yet been repaid or the remaining term, so that they can see how the payment  choices they make affect the prepayment charge.

5. Borrower Access to Actual Prepayment Charge

Each lender will make available a toll-free  telephone line through which borrowers can access staff members who are knowledgeable  about mortgage prepayments. These staff  members will be able to orally provide a borrower with the actual prepayment charge  that would apply to the borrower’s mortgage at that point in time. These staff members will also be able to provide  to a borrower, on request, a written statement of their prepayment charge,  accurate as at the time the statement is produced. A lender will not proceed to take steps to  pay out a mortgage until the borrower has confirmed that the borrower’s  intention is to pay out the mortgage.

Article by Benjamin Tal

 After bleeding workers in recent months, Canadian factories boosted headcount in December, helping employment register its first positive reading after two straight losses. Canadian jobs edged up by 17,500, led by hiring in the manufacturing sector.

However, we don’t expect a renewed pickup in manufacturing hiring as that sector continues to struggle with the pain of an elevated Canadian dollar that’s inflating the wages of manufacturing workers relative to global competitors.

 In the US, employment gains are putting more money in household pockets, but we expect only a slightly stronger-than-consensus retail report for December. All told, not enough here to change the prevailing view that America’s economic engines were in somewhat better shape as 2011 came to a close. December’s pace of hiring in Canada, taken together with the last few months’ employment reports, still suggests a weak deceleration in job creation and economic growth. That’s consistent with our view that Canada’s fourth quarter Gross Domestic Product (the size of our economy with inflation factored in) scaled down to around a 2% annual pace. In December, we forecast that the Bank of Canada would likely continue to hold interest rates steady through to the end of 2013. Governor Mark Carney’s “flexible” targeting approach gives the Bank some latitude in responding to inflation. Notwithstanding the risks created by payroll tax wrangling in the US, we’re sticking with that rate forecast.

Fraser Valley Real Estate Board

Contact

Laurie Dawson, Communications Coordinator laurie.dawson@fvreb.bc.ca

Fraser Valley Real Estate Board Telephone 604.930.7657

Fax 604.930.7623

www.fvreb.bc.ca

For Immediate Release: Feb. 6, 2012

2012 kicks off with new home price measurement; and, a

sluggish start to sales

SURREY, BC – The Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) processed 799 sales in January, a

decrease of 4 per cent compared to the 834 sales in January last year and 10 per cent fewer than were processed in

December. In the last decade, January 2012 was second only to 2009 for lowest volume.

On the flip side, compared to other starts during the last 10 years, the Board received one of its highest influxes of new

listings for January – 2,753 – 5 per cent more than January 2011 and 143 per cent more than December the month before.

The increase in new inventory raised the volume of active properties in Fraser Valley to 8,320 by the end of January.

Sukh Sidhu is the Board’s president. “For spring house hunters this is great news. For buying power you can’t beat the

combination of greater selection, the continuation of extremely low interest rates and stable prices.”

The Board’s new MLS® Home Price Index (MLS® HPI), launched today, reveals that residential home prices in Fraser Valley

have decreased gradually over the last six months, while still showing increases year

‐over‐

year.

In January, the benchmark price of a detached home in the Fraser Valley was $567,700, an increase of 7.6 per cent

compared to $527,500 in January 2011 and an increase of 0.1 per cent compared to December.

For townhouses, the benchmark price in January was $314,200, an increase of 2.4 per cent compared to the same month last

year when it was $306,800 and down 1.1 per cent compared to December. The benchmark price of apartments in January was

$199,600, a decrease of 0.1 per cent compared to January 2011 when it was $199,800 and an increase of 0.3 per cent

compared to December.

The MLS® Home Price Index (HPI), replacing the Lower Mainland’s MLSLink® Housing Price Index, is a new measure of price for

residential properties in five major markets across Canada. It includes Greater Vancouver, Fraser Valley, Calgary, Toronto, and

Montreal, with more markets to be added. It was pioneered by six founding partners: the real estate boards of Calgary, Fraser

Valley, Greater Montreal, Greater Vancouver, and Greater Toronto and the Canadian Real Estate Association.

Sukh Sidhu says the new MLS® HPI will be very helpful to REALTORS® in guiding homeowners. “It’s a bigger, better tool to

measure the change in home prices in the Fraser Valley and now we can more accurately compare our market to other major

cities in Canada.” Learn more at

www.homepriceindex.ca

.

—30 —

The Fraser Valley Real Estate Board is an association of 2,894 real estate professionals who live

and work in the BC communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.

The FVREB

HIGHLIGHTS OF THE WEEK

United States

*    The Federal Reserve committed to keep rates on hold through the end of 2014 this week, while today’s Q4 GDP released underscored the fragility of the economic recovery. Unfortunately, further monetary easing isn’t what is going to provide the jolt the economy needs.

*    What’s holding the economy back right now isn’t the price of credit; it’s the lack of quality borrowers. The pool of potential borrowers willing and able to take advantage of lower interest rates is limited. And as long as aggregate demand remains depressed, businesses will continue to put off investing until the economic outlook improves.

*    What the economy needs right now is more effective fiscal policy solutions. However, fiscal policy so far has tended to undermine the recovery rather than aid it.

Canada

*    With the U.S. Federal Reserve on hold until 2014, we expect the Bank of Canada to leave its key overnight rate unchanged until mid-2013.  In addition to this delayed start, we now forecast that the return to the neutral interest rate will take place over a longer period of time.

*    The revised interest rate outlook led the loonie to break through parity versus the greenback for the first time since November.  Canadian bond yields also fell across the curve.

*    The lower-for-longer interest rate profile implies an upward risk to our near-term domestic economic outlook.  At the same time, households are already heavily indebted and the national real estate market is overvalued by roughly 10-15%.  If both measures continue to ramp up in the presence of low interest rates, they will become heightened downside risks to the medium-term economic outlook.

Webcasts:

Canada:  https://www.brainshark.com/tdeconomics/vu?pi=zIazmYiZsz1sQYz0

United States:  https://www.brainshark.com/tdeconomics/vu?pi=zGlz15w9G0z1sQYz0

TD Financing Services and TD Broker Services sales teams have merged! Ask me about Prime OR Non prime deals!

Lorie Martin I Regional Sales Manager BC I Broker Services I TD Canada Trust | 604 346 5976 or 1 877 273 7498 x 2501