Not much to report today.

The Bank of Canada (BoC) dropped interest rates by 0.75% to 1.50% (a level not seen since 1958)! This is very dramatic for the Bank of Canada and the Canadian central bank has also officially concluded that Canada is in a recession (with the rest of the developed world).

Yesterday, stocks fell on profit warnings from FedEx in the United States and more capital raising by the Canadian banks, insurance companies (GWL is currently completing a secondary issue at an 8% discount to their closing price yesterday) and others “prompted” investors to sell after gains posted earlier.

There is “unprecedented” demand for the safety of government bonds which signal that “fear” remains a key player in capital in the markets. Markets were “rattled” by an extraordinary sale of U.S. Treasury bills, widely viewed as the world’s safest securities. Investors were so fearful of everything from deflation to the banking system to the auto-bailout that they gave up all their expected return willing to accept an “unprecedented” 0% interest rate. In short, people are paying the government to take their money.

According to the Wall Street Journal, the White House and top Democrats on Capitol Hill reached agreement, in principle, on a sweeping rescue package for the nation’s auto makers, hoping to propel action this week on billions of dollars in aid, a senior administration official and congressional aide said. The legislation would provide billions in loans to the car industry in return for the U.S. government taking a potentially substantial ownership stake and a direct role in the industry’s restructuring, setting the stage for one of the most far-reaching government interventions in American industry in decades.

Rio Tinto is a notable stock market gainer this morning, pushing the metals and mining sector higher after announcing it will eliminate 14,000 jobs by cutting 5,500 employees and 8,500 contractor positions due to “the unprecedented rapidity and severity of the global economic downturn”. This won’t help supply over the long-term as the company is also planning to cut capital spending by more than $7 billion.

Oil prices and U.S. Futures are up this morning. I am also working on a series of ‘charts’ that will provide a good visual picture of what is going on in credit markets, the economy and capital markets which underscore just how unprecedented these times are which I will circulate later today.

Regards,

Wilfred Vos Bcs, CFP, FMA, FCSI, CIM, CFA, MBA, DMS, CBV

SVP & Partner