Canadian financial system has been strong and 'different' than its big brother: USA. It has been clearly shown in the ongoing financial crisis that not only the Canadian banks have not fallen apart but have been strong and actually looking to strengthen their US franchise and grow in other parts of the world. They have been prudent, conservative and cautious with strong support by the Govt. The budget surplus and high commodity and oil prices have only strengthened the system over the last few years without taking any careless risks. Now, more US companies have reason to invest in Canada given that the Canadian dollar has weakened by 20% over the past 6 months, just like Microsoft (mentioned in the article below) did in 2007 and large US auto manufactures did in other years, more companies may do so in the future.
The latest article from Fareed Zakaria of Newsweek is well written and talks about how the Canadian financial system evolved over the last few decades, both politically and business wise.
The Canadian banking system was declared as the second strongest financial system in the world, after Denmark. With over 33 million citizens and growing by 250,000 every year, Canada is doing just fine.
Worthwhile Canadian Initiative
By Fareed Zakaria
Canadian banks are typically leveraged at 18 to 1--compared with U.S. banks at 26 to 1.
Published Feb 7, 2009
From the magazine issue dated Feb 16, 2009
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Friday, February 27, 2009
Friday, February 20, 2009
Swiss Banking secrecy gets a severe body blow
In continuation of my earlier entry of Feb 3, 2009, here is further update on UBS with details on how the swiss banking is now falling to its knees, partly due to UBS's wrong doings.
UBS has finally agreed under an agreement to pay USD 780 million to US Govt and admitted to evasion of US taxes by actively suggesting to US citizens/clients to 'hide' money in Switzerland over the years. Now, more than 19,000 clients, including Canadian citizens, have been impacted and their names will be disclosed to the US Govt shortly.
Swiss banking, as the article states, was for many centuries clearly the leader in the secretive swiss banking for the rich and famous and of course, the connected and 'in the know'. However, with the financial landscape changing dramatically in 2008, with the demise of Lehman, Bear Stearns, many US and non US banks, Merrill Lynch etc, now it is the turn of European banks to have grave financial problems in 2009. Iceland has had its share, now UK is going through bailouts and assistance from the Govt and leading banks such as Lloyds have been downgraded from their esteemed Aaa status by Moody's. Barclays, RBS and HSBC are under pressure although I rate HSBC to be the least impacted due to their conservative nature and large client base, however, same cannot be said for Barclays and RBS among other smaller banks. HBOS is already gone and various European banks including in France and Eastern Europe are declaring large losses.
Clients are shifting assets from the rapidly falling financial institutions, but the million dollar question is: Which banks are safe?
Banks in Far East, lately with the exception of HK, are safe along with state supported banks in the Middle East, India continues to be a safe haven. In Latin America also the banks that are doing fine.
The banking crisis which is part of the larger financial crisis is kind of restricted to banks and countries that allowed high leveraging without effective regulatory oversight in US UK, Europe only. Most other nations, thus far, do not have had to cope with failing banks since their respective central banks were sitting awake at the switch.
While UBS continues losing its star bankers and its stature along with the lustre of swiss banking secrecy that attracted billions of dollars to its doors. Now Switzerland must act, because Singapore, Dubai and London are the recipients of the money sloshing around.
Can you hear the ching-a-ling of the new financial landscape of 2010 and onwards?
A Swiss Bank Is Set to Open Its Secret Files
By LYNNLEY BROWNING
Published: February 18, 2009
UPDATE:
9.07PM, Dubai
Barely I have penned my thoughts that two different writers, write exactly the same things:
1. that Swiss banking secrecy may come to an end
2. that Singapore has already announced tax incentives for fund houses etc to relocate to Singapore
20 February 2009 - David Bain
UBS has finally agreed under an agreement to pay USD 780 million to US Govt and admitted to evasion of US taxes by actively suggesting to US citizens/clients to 'hide' money in Switzerland over the years. Now, more than 19,000 clients, including Canadian citizens, have been impacted and their names will be disclosed to the US Govt shortly.
Swiss banking, as the article states, was for many centuries clearly the leader in the secretive swiss banking for the rich and famous and of course, the connected and 'in the know'. However, with the financial landscape changing dramatically in 2008, with the demise of Lehman, Bear Stearns, many US and non US banks, Merrill Lynch etc, now it is the turn of European banks to have grave financial problems in 2009. Iceland has had its share, now UK is going through bailouts and assistance from the Govt and leading banks such as Lloyds have been downgraded from their esteemed Aaa status by Moody's. Barclays, RBS and HSBC are under pressure although I rate HSBC to be the least impacted due to their conservative nature and large client base, however, same cannot be said for Barclays and RBS among other smaller banks. HBOS is already gone and various European banks including in France and Eastern Europe are declaring large losses.
Clients are shifting assets from the rapidly falling financial institutions, but the million dollar question is: Which banks are safe?
Banks in Far East, lately with the exception of HK, are safe along with state supported banks in the Middle East, India continues to be a safe haven. In Latin America also the banks that are doing fine.
The banking crisis which is part of the larger financial crisis is kind of restricted to banks and countries that allowed high leveraging without effective regulatory oversight in US UK, Europe only. Most other nations, thus far, do not have had to cope with failing banks since their respective central banks were sitting awake at the switch.
While UBS continues losing its star bankers and its stature along with the lustre of swiss banking secrecy that attracted billions of dollars to its doors. Now Switzerland must act, because Singapore, Dubai and London are the recipients of the money sloshing around.
Can you hear the ching-a-ling of the new financial landscape of 2010 and onwards?
A Swiss Bank Is Set to Open Its Secret Files
By LYNNLEY BROWNING
Published: February 18, 2009
UPDATE:
9.07PM, Dubai
Barely I have penned my thoughts that two different writers, write exactly the same things:
1. that Swiss banking secrecy may come to an end
2. that Singapore has already announced tax incentives for fund houses etc to relocate to Singapore
20 February 2009 - David Bain
Comment: The end of Swiss banking secrecy?
20 February 2009 - Matt TurnerSingapore offers tax incentive in wealth play
Wednesday, February 4, 2009
UBS brings Swiss banking to its knees
It is common knowledge that wealthy clients from across the world maintain numbered accounts or keep money in named accounts that are quite often not declared in their resident countries for tax purposes. US citizens also fall in this list of clients, and according to UBS, about 19,000 American citizens have had accounts at UBS bank alone that were apparently undeclared and hence taxes were not paid (not including accounts with various other banks in Switzerland or other nations). This is a serious crime in US or anywhere. However, this may be the very first time in the history of banking that any country is making serious investigations on an official level on bank accounts with a bank in another nation.
Few weeks ago we noted that UBS senior executive was reported as absconding. No further news on that just yet.
However, besides the Justice Deptt in USA, now the IRS has started a separate investigation in US on accounts at UBS. this does not bode well for its clients many of whom have had accounts at UBS for a very long time.
Excerpt:
The Internal Revenue Service, which is participating in a broad federal investigation into UBS and its offshore private banking services, is widening its scrutiny to include ordinary accounts owned by Americans who work overseas, according to a person briefed on the issue.
I.R.S. Is Said to Broaden UBS Inquiry
On another note, UBS has been weakened dramatically with many of their top performing bankers leaving them. However, according to the latest article in the New York Post, UBS may be planning to sell its US securities arm with over 10,000 advisers to Wachovia!
BANKS' URGE 2 MERGE
UBS, WACHOVIA UNIT DEAL
UBS has certainly brought the entire Swiss banking system to its knees, almost single handedly!
Few weeks ago we noted that UBS senior executive was reported as absconding. No further news on that just yet.
However, besides the Justice Deptt in USA, now the IRS has started a separate investigation in US on accounts at UBS. this does not bode well for its clients many of whom have had accounts at UBS for a very long time.
Excerpt:
The Internal Revenue Service, which is participating in a broad federal investigation into UBS and its offshore private banking services, is widening its scrutiny to include ordinary accounts owned by Americans who work overseas, according to a person briefed on the issue.
I.R.S. Is Said to Broaden UBS Inquiry
On another note, UBS has been weakened dramatically with many of their top performing bankers leaving them. However, according to the latest article in the New York Post, UBS may be planning to sell its US securities arm with over 10,000 advisers to Wachovia!
BANKS' URGE 2 MERGE
UBS, WACHOVIA UNIT DEAL
UBS has certainly brought the entire Swiss banking system to its knees, almost single handedly!
Tuesday, February 3, 2009
Dubai Property Prices continue their fall: Research from Landmark Properties
Dubai Property Prices May Fall Up to 50 Per Cent: Research
Finally, there is some research that seems quite on the spot. Read this article here from Khaleej Times, a local English newspaper based on a research report from Landmark Properties.
There is actually fear in the market with many job losses (estimated between 8-10,000 within Dec and Jan 2009), lack of project as well as mortgage finance, almost no retail level sales except in well developed areas, very low new employment visas, currency fluctuations in UK, Europe, India, Russia and elsewhere, real estate & stock downturns in all countries, slowing international trade, lower margins, falling tourism etc. Many new projects have been put on hold which was obviously expected.
People who have lost jobs are forced to sell their furniture, cars and homes since they need to leave Dubai within 30 days. The Govt is working on a resolution to this strict rule. Additionally, Dubai Govt has increased budgeted spending for 2009 by 42%. Across GCC, over USD 2 trillion will be spent on various infrastructure projects in the coming 5 years as per published research reports. While, continued saving from oil revenues of various Gulf states continue to remain invested in the Gulf region and provide some buffer from the downturn.
However, people who are able to re-enter or stay in the country even without a residence visa, for example, from US, UK, European countries etc who are allowed 60 days visit visa upon arrival at the airport, are also in a very tough situation due to lack of job opportunities and extremely high cost of living which is unable to support their lavish lifestyles.
Most people due to their high earnings, not only turned into speculators but spent most of their incomes on flashy cars, flashy bars and flashy apartments filled with consumer items. With no new entrants to the labour market and many people losing jobs, the retail sales in the malls have also dropped considerably. With 3 major malls opening in the past 4 months, it has been harded than ever to survive for the retail stores too. Dubai Mall opened in Nov, followed by The Walk in Jumeirah Beach Residence and Marina Mall in Dec. With so many new stores at extremely high rents, it is quite challenging for all the stores since most stores just duplicate their presence and have same stores in almost all malls across Dubai.
I believe banks, who are the largest employer in the region and the city, similar to Govt, will have lower revenues and profits during 2009, Govt will see revenues declining from customs, airport fees due to declining international trade and slow tourism growth. Other entities will have to rethink their growth strategies and forced to reduce salary and other fixed costs by removing employees.
Some of the benefits will be lower cost of living, lower traffic congestion (combined with new metro opening in Sep 2009), better customer service in retail stores, hotels, restaurants, malls etc.
Unfortunately, for the speculators, the real estate prices will continue to decline and reduce their wealth to the extent leveraged and invested in the, thus far, booming real estate market.
The speculators, unlike real users, made lots of money due to their 'connections' in the property sector, developers happily played along, but in the current scenario both the speculator and developer are under tremendous pressure and many of them will lose lots of money just the way they made lots of money previously because leverage works both ways. I am sure many developers must be thinking why they did not sell most of their properties to end users who would have stabilised the market, but alas, it is now too late to think that way! The chickens have already come home to roost!
An interesting Youtube video is here from CBS news of USA
02 February 2009
DUBAI - Prices of residential and commercial property in Dubai are predicted to plunge this year by up to 50 per cent and 40 per cent respectively as the real estate market reels under pressures of a correction sparked by weak demand, findings by a new market research show.
Residential rents of both apartments and villas are also forecast to drop by 25 per cent while commercial rents are poised "to fare even worse," according to the report by Landmark Advisory, the research wing of a Dubai-based property company.
"Apartment prices will fall on an average by 20 per cent, with individual declines ranging between 10 and 50 per cent depending on the development. Average villa prices are likely to remain relatively stable with up to 10 per cent average drop with lower quality units bearing the brunt of these declines," the report said. Villa rents are expected to fall on average by 25 per cent with low quality units hardest hit.
According to the report, residential prices peaked in October 2008, fell through to December, and continue to fall. "Assuming that the current downturn will affect prices in line with historical average of 35.5 per cent, then Dubai's average price floor will fall from a peak Dh1,556 to Dh1,000 per square foot."
Office sale prices are predicted to drop 35-40 per cent due to corporate downsizing as companies consolidate their offices to reduce overhead, the report said. Land prices that fell significantly in 2008 will fall by up to 50 per cent. While warehouse prices are likely to increase 30-40 per cent due to undersupply and untapped leasing potential, rents will rise by 10 per cent."
Another steep fall, the report said, will be in the case of labour camps. Prices will fall by 30-40 per cent while rents are head for up to 35 per cent fall as construction contract volumes plummet by 75 per cent.
Landmark's forecast is in line with those made by Global Investment House. Noting that properties in the secondary market have fallen as deep as 40 per cent, Global said: "Looking ahead in 2009, we expect to see further price correction for freehold properties in the range of 15-30 per cent, however, and rents to decline by 15-25 per cent in 2009 due the lack of demand in line with the economic slowdown which forced many Dubai firms to downsize or halt their expansion plans which will likely result in a decline in the number of expatriates in Dubai.
The Landmark report notes that during the transition from a supply-driven property market to a demand-driven one, prices are no longer dictated by developers. "In the year ahead, consumer preferences, access to capital, and income levels will reshape demand patterns and redefine the market. As new supply encounters slowing demand, the market will reward developers who deliver quality and punish who do not."
The report said the average income levels in Dubai were likely to stagnate due to redundancies and lower salaries. "The financial crisis has slowed demand: personal incomes, job security, and confidence are declining. An improvement of confidence among banks and investors will be the critical first step towards the recovery of the property market. Despite special access to government funds, banks have reverted to austere lending practices that restrict the availability of much-needed capital. The availability of financing will be critical factor for boosting the economy and rehabilitating real estate transaction volumes. Until the recovery of the property market, developers, investors, and landlords must adapt flexible and innovative approach to survive," it said.
By Issac John
© Khaleej Times 2009
Finally, there is some research that seems quite on the spot. Read this article here from Khaleej Times, a local English newspaper based on a research report from Landmark Properties.
There is actually fear in the market with many job losses (estimated between 8-10,000 within Dec and Jan 2009), lack of project as well as mortgage finance, almost no retail level sales except in well developed areas, very low new employment visas, currency fluctuations in UK, Europe, India, Russia and elsewhere, real estate & stock downturns in all countries, slowing international trade, lower margins, falling tourism etc. Many new projects have been put on hold which was obviously expected.
People who have lost jobs are forced to sell their furniture, cars and homes since they need to leave Dubai within 30 days. The Govt is working on a resolution to this strict rule. Additionally, Dubai Govt has increased budgeted spending for 2009 by 42%. Across GCC, over USD 2 trillion will be spent on various infrastructure projects in the coming 5 years as per published research reports. While, continued saving from oil revenues of various Gulf states continue to remain invested in the Gulf region and provide some buffer from the downturn.
However, people who are able to re-enter or stay in the country even without a residence visa, for example, from US, UK, European countries etc who are allowed 60 days visit visa upon arrival at the airport, are also in a very tough situation due to lack of job opportunities and extremely high cost of living which is unable to support their lavish lifestyles.
Most people due to their high earnings, not only turned into speculators but spent most of their incomes on flashy cars, flashy bars and flashy apartments filled with consumer items. With no new entrants to the labour market and many people losing jobs, the retail sales in the malls have also dropped considerably. With 3 major malls opening in the past 4 months, it has been harded than ever to survive for the retail stores too. Dubai Mall opened in Nov, followed by The Walk in Jumeirah Beach Residence and Marina Mall in Dec. With so many new stores at extremely high rents, it is quite challenging for all the stores since most stores just duplicate their presence and have same stores in almost all malls across Dubai.
I believe banks, who are the largest employer in the region and the city, similar to Govt, will have lower revenues and profits during 2009, Govt will see revenues declining from customs, airport fees due to declining international trade and slow tourism growth. Other entities will have to rethink their growth strategies and forced to reduce salary and other fixed costs by removing employees.
Some of the benefits will be lower cost of living, lower traffic congestion (combined with new metro opening in Sep 2009), better customer service in retail stores, hotels, restaurants, malls etc.
Unfortunately, for the speculators, the real estate prices will continue to decline and reduce their wealth to the extent leveraged and invested in the, thus far, booming real estate market.
The speculators, unlike real users, made lots of money due to their 'connections' in the property sector, developers happily played along, but in the current scenario both the speculator and developer are under tremendous pressure and many of them will lose lots of money just the way they made lots of money previously because leverage works both ways. I am sure many developers must be thinking why they did not sell most of their properties to end users who would have stabilised the market, but alas, it is now too late to think that way! The chickens have already come home to roost!
An interesting Youtube video is here from CBS news of USA
02 February 2009
DUBAI - Prices of residential and commercial property in Dubai are predicted to plunge this year by up to 50 per cent and 40 per cent respectively as the real estate market reels under pressures of a correction sparked by weak demand, findings by a new market research show.
Residential rents of both apartments and villas are also forecast to drop by 25 per cent while commercial rents are poised "to fare even worse," according to the report by Landmark Advisory, the research wing of a Dubai-based property company.
"Apartment prices will fall on an average by 20 per cent, with individual declines ranging between 10 and 50 per cent depending on the development. Average villa prices are likely to remain relatively stable with up to 10 per cent average drop with lower quality units bearing the brunt of these declines," the report said. Villa rents are expected to fall on average by 25 per cent with low quality units hardest hit.
According to the report, residential prices peaked in October 2008, fell through to December, and continue to fall. "Assuming that the current downturn will affect prices in line with historical average of 35.5 per cent, then Dubai's average price floor will fall from a peak Dh1,556 to Dh1,000 per square foot."
Office sale prices are predicted to drop 35-40 per cent due to corporate downsizing as companies consolidate their offices to reduce overhead, the report said. Land prices that fell significantly in 2008 will fall by up to 50 per cent. While warehouse prices are likely to increase 30-40 per cent due to undersupply and untapped leasing potential, rents will rise by 10 per cent."
Another steep fall, the report said, will be in the case of labour camps. Prices will fall by 30-40 per cent while rents are head for up to 35 per cent fall as construction contract volumes plummet by 75 per cent.
Landmark's forecast is in line with those made by Global Investment House. Noting that properties in the secondary market have fallen as deep as 40 per cent, Global said: "Looking ahead in 2009, we expect to see further price correction for freehold properties in the range of 15-30 per cent, however, and rents to decline by 15-25 per cent in 2009 due the lack of demand in line with the economic slowdown which forced many Dubai firms to downsize or halt their expansion plans which will likely result in a decline in the number of expatriates in Dubai.
The Landmark report notes that during the transition from a supply-driven property market to a demand-driven one, prices are no longer dictated by developers. "In the year ahead, consumer preferences, access to capital, and income levels will reshape demand patterns and redefine the market. As new supply encounters slowing demand, the market will reward developers who deliver quality and punish who do not."
The report said the average income levels in Dubai were likely to stagnate due to redundancies and lower salaries. "The financial crisis has slowed demand: personal incomes, job security, and confidence are declining. An improvement of confidence among banks and investors will be the critical first step towards the recovery of the property market. Despite special access to government funds, banks have reverted to austere lending practices that restrict the availability of much-needed capital. The availability of financing will be critical factor for boosting the economy and rehabilitating real estate transaction volumes. Until the recovery of the property market, developers, investors, and landlords must adapt flexible and innovative approach to survive," it said.
By Issac John
© Khaleej Times 2009
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