As the BOC action today shows

it is good to avoid spurious talk of ‘normalizing monetary policy’ when we are living in a paradigm of wage stagnation, precarious employment, household indebtedness, rising inequality, and job losses from off shoring and technological change.

Monetary policy is supposed to be the elixir to fix this?

My disagreement on Twitter from last January…


Bank of Canada’s surprise rate cut seen hurting Canadian banks’ profits

Expect the squeeze on Net Interest Margins and the deterioration of loan books to signal lower profitability and (eventually) job cuts.

Financial Post

The surprise rate cut by the Bank of Canada on Wednesday is expected to contribute to a dampening profit picture for Canada’s banks, according to an analyst at Moody’s Investors Service.

“Persistently low rates create profitability headwinds which combined with lower consumer credit growth will dampen the profit picture for Canadian banks in 2015,” said David Beattie, senior vice-president in the financial services group at Moody’s.

He said low rates would compress the closely watched net interest margin, which measures the difference between interest income earned by the banks and the amount of interest paid out to their customers including depositors, relative to the amount of their interest earning assets. As for the banks’ cost of capital, the rate cut “will not move the dial,” Mr. Beattie said.

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The central bank shocked markets Wednesday morning by cutting the overnight rate to 0.75% from 1%, the first movement in…

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The busiest infographic you will see today

This Marketing Technoclocy Landscape Supergraphic is by Scott Brinker over at While not exhaustive it must come close and once you discern the various sections: Marketing Experiences. Marketing Operations, Marketing Environment from Infrastructure, Backbone Platforms, and Middleware, you can drill down into sub categories and see his list of companies that exist and compete in those spaces. With the fluid nature of technological change we will no doubt see many more entrants into each category with many failing but the shake out over the coming decade will change the face of how marketing is done from the back end to the front line and every touch point in between.

Marketing Technolocy Landscape

You can download the pdf marketing_technology_jan2015.

Brinker’s four takeaways for readers are:

  1. Marketing has unquestionably become a technology-powered discipline.
  2. The quantity of martech ventures is a barometer of how much marketing is evolving.
  3. The marketing technology field is heterogenous, with a very broad range of products.
  4. To thrive in this environment, marketing should steadily develop its technical talent.

Read the rest of his post.

Everything you were Taught About Risk is Wrong

They way we are taught to think about risk is wrong as this post illustrates in its MPT takedown. How about articulating ‘regret’?

Wall Street and Beyond

In my experience, “Risk” is the single most misunderstood concept in finance. Volatility, risk and uncertainty are all terms that are used interchangeably on Wall Street. The confusion is in no small part due to the strong influence of “Modern Portfolio Theory”, which continues to live on despite the fact that it makes no sense. At the core of MPT is the (flawed) idea that risk is equivalent to price volatility. It’s remarkable to me that so much complex math has been built on the back of such a dumb assumption.

Risk = Volatility?

The willingness of the financial community to accept this assumption is astounding. Any reasonably intelligent person who stops to think about this for 5 minutes will realize how nonsensical it is:

  1. Volatility measures the extent to which a stock price has fluctuated historically, both upward and downward over an arbitrary time period (e.g. a month). Risk

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Why Canadians can expect low interest rates for longer — much longer: Morgan Stanley

Should be of no surprise to anyone who follows real people working in the real economy where our growth has been a mirage rather than those who think it acts as a metronome and can be propelled by over reliance on the resource sector and household indebtedness.

Financial Post

Don’t look for another interest rate hike for two more years; in fact, there is a one in three chance the Bank of Canada will actually cut rates before the end of this year, Morgan Stanley predicts.

The latest forecaster to take a stab at the impact of plunging oil prices on Canada’s economy, the American bank stands out for its bearish take.

The bank not only pushed its forecast for the first rate hike to 2017, it predicted others would soon follow suit.

“The fall in oil is undisputedly negative for Canada’s economy,” the bank wrote in its report Wednesday “Canada Outlook: Sands through the hourglass.”

“Rate differentials should continue to move against Canada, if, as we expect, the market pushes out expectations for tightening from the Bank of Canada into 2017, reflecting a later closing of the output gap.”

Until Tuesday, most economists have expected a rate increase…

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Do we need Business Innovation – or Common Innovation? By Peter Swann

From Peter Swann’s post:
Many business-enhancing innovations are organisational innovations, outsourcing innovations, restructuring innovations or financial innovations. They are very valuable to the innovator, and the financial services industry, but do little or nothing of value to the end-user.

The advent of globalisation meant that many towns dependent on a traditional manufacturing industry saw their income and employment decline as production was relocated to lower-wage economies. This led to many social and economic problems in depressed towns.

ElgarBlog from Edward Elgar Publishing


What is the best way to create and share prosperity in a society? Professor Peter Swann argues that common innovation is about ordinary people creating the wealth of nations, and that business has no monopoly over innovation or wealth creation.

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BOC: Easing bias before a rate cut

Nice table here from Pension Partners (via @MktOutperform )

The Race to Negative Yields (%)

And here is the Canada 10 year Government Bond (from Trading Economics)

Canada10 Year Bond (2009-2015 YTD)

On January 21, 2014 I argued that the Bank of Canada’s policy rate would continue to flat-line for the year despite market optimism to the contrary. I also disclosed that I had added long bond exposure to my personal portfolio with the view that 2014 would be a bounce back year for sovereign long bonds, specifically Canadian. Little has changed to deter the portfolio choice as the global landscape worsens.

At home, in an era of what I believe are low rates for a very long time, financial repression is killing the spending capacity of retirees. A not so small point is that the front end of Canada’s baby boom generation began retiring last year. That is a trickle; a flood of retirees will follow. Central banks are relying on reduced interest rates to spark credit creation (and in turn a greater stock of private debt) to spark consumption. The price of real estate remains at a high in nominal terms in major cities like Toronto and Vancouver and household debt to income ratios remain high as well. To keep the not so virtuous cycle of consumption going will require the central bank to more encourage credit creation and asset price inflation to spur the industry that is growing –real estate development– however with the federal government attempting to balance its budget the output gap that the BOC calculates as a guide (but necessarily a final decision making metric for policy) is likely to expand rather than contract. With slack only increasing and knock on effects from oil’s price decline yet to be felt in the numbers that drive markets, 2015 will be another year of easy monetary policy. Absent increases in real wages of working and middle class workers there will be no spike in effective demand within the Canadian economy that will be sustainable. If anything, the case is now being made by Ted Carmichael and others for a policy rate cut. I agree with this view. While a rate cut on January 21 is unlikely the language leaning toward an easing bias may occur in the coming months. Reading the tea leaves of monetary policy statements is more art than science. If the BOC’s dovish language is enough then it will stand pat as long as it can but as the data flow increases and core inflation falls we will see a rate cut this year.

The scheduled announcement dates for BOC policy rates in 2015 are:

Wednesday 21 January
Wednesday 4 March
Wednesday 15 April
Wednesday 27 May
Wednesday 15 July
Wednesday 9 September
Wednesday 21 October
Wednesday 2 December