Bank earnings recap

Another earnings season for Canadian banks has come and gone, and the credit crisis picture doesn't appear to be getting any clearer.

Results were a bit of a mixed bag. Scotia, Royal, BMO, TD and National Bank all saw their profits dip a little, while CIBC squatted down and unloaded yet another $1-billion loss for the quarter. The bank that I own, BMO, didn't exactly knock my socks off, but based on analyst and shareholder reaction, the news was not quite as bad as it could have been (or indeed has been in recent quarters) so I took their numbers as muted good news.

All in all, though, we're not out of the woods yet. When a bank like Royal, which has so far managed to keep its hands pretty clean in the subprime mess, starts announcing hundreds of millions of dollars worth of writedowns, it's clear this isn't over.

Banks are as good a proxy for the economy as a whole as anything, so today's news that the Canadian economy actually contracted during the first quarter shouldn't be much of a surprise.

I have no idea how all of these credit problems are going to play out, but it's clear they haven't worked their way through the system yet.

Housing Reaganomics

There are many different ways of gauging economic health. The stock market. Job numbers.


One of the more interesting ones (to the star-struck voyeur in me, anyway) is to keep tabs on what the wealthy are up to. I'm not sure they're as clairvoyant as, say, the consumer price index is when it comes to how much cash we all tend to have in our pockets at the end of the day, but there's a gaggle of signs around that suggesting that the well-off are spending like there's no tomorrow -- worldwide credit crunch be damned.


Celebrities don't appear to be feeling the pinch. Whether its private jets or gaudy, $50,000 handbags, celebrities are still splashing money around like its going out of style. Sales of racing horses are skyrocketing, both in volume and individual prices. If oil-rich Saudi chiefs are throwing down so feverishly on their money-losing hobby, the good times will surely trickle down to the rest of us, the theory goes. And lately, prices for the ponies have been heading up in a hurry.


Closer to home, the super-rich are seemingly just as confident. REMAX put out a report this week saying that sales of luxury homes are booming. Canada's real estate market has hot and cold pockets across the country, but sales of luxury homes (the definition of what constitututes luxury changes from region to region) have already shattered last year's numbers, and its only September.


So good news all around, then. Your boss's retirement is definitely within reach. Try to remember that when you check how your stock portfolio's done over the last little while.

Mandatory retirement

I’m of two minds about the news that Ontario has moved to ban mandatory retirement of workers at age 65.

On the one hand, I support the move because the leftist in me thinks it’s wrong to discriminate against people for any reason. It’s wrong to deny someone an opportunity they deserve based on their race or gender, so why shouldn’t it be illegal to discriminate against that same person because of their age.

And on a more pragmatic level, I buy into the theory that the over-65 set are blessed with years of experience and knowledge that the Canadian economy can use to get better and more efficient. To an extent, anyway. On that level, forcing sharp-minded people out the door when they arbitrarily hit a certain age doesn’t make sense from an economic point of view.

But part of me doesn’t like this new law. As a young worker myself, I have first-hand experience that a glut of older workers hanging on to high-paying jobs when they’re clearly past their prime is a direct cause of why it’s so hard for a lot of young people to get their start. I think we’ve all worked at places that were top-heavy with older, unfireable workers who were clearly just mailing it in on a daily basis. My university faculty was full of them, for example. The best profs I had were under 40, but they all ended of leaving because the tenured profs above them blocked their access to the upper levels. Leaving aside the injustice of that, I think we all can agree that just as it’s foolish to cast off useful workers solely for age reasons, it’s likewise stupid to not allow innovative new thinkers into the economy.

Maybe this is just a tempest in a tea-pot anyway. The government’s own numbers estimate that only about 4,000 of the 100,000 Canadians who turn 65 every year will take advantage of this new law. I mean, most people I know would rather spend their retirement enjoying themselves than being a wage slave. So hopefully they’ll be more useful seniors who stick around than less productive ones, as most of the pundits are predicting, and the new law will be a net gain for everybody.

My dad, for example, semi-retired when he turned 60 largely for health reasons. He soon got bored with all the free time on his hands, so he now works part-time as a consultant in his industry. His income is about a third of what it was at his peak, but he likes his lifestyle, it keeps him busy for a few days out of every week, and his health is better too.

I don’t think he really did it for the money -- I’d ballpark my parents’ net worth at in excess of a million dollars. But I like his choice. He’s healthy, he enjoys his life, and he apparently still has a skill-set in demand in his industry.

If this new law makes more people like that, I’d guess it’s a good thing. But if it becomes another obstacle to getting healthy turnover in the Canadian economy, we’ll all be worse-off for it. Time will tell I suppose.

As always, I love hearing disagreeing viewpoints in the comments section.