More on Canada

Yesterday I mentioned Canada’s housing market, which The Economist worried might be in a bubble. Having looked at the data, I think that it could be, but since there is no sign of it turning around, that is a reason to be long, not short. The Canadian economic growth has been relatively good, presumably because of oil exports and manufacturing strength. The OECD leading indicator has been falling but mostly because of the financial components — the yield curve, equities and M1 — while the economic series point upward. The only negatives I could see were that income growth and the PMI have slowed and that unemployment started to rise in mid-2011, driven by government layoffs. But the PMI remains well in positive territory, income growth is positive, and private employment continues to grow at a good rate. Construction permits and house prices remain strong.

Cocoa Confusion

One thing that I didn’t mention about cocoa, but which has been in the news for a couple of weeks, is the fact that Ivory Coast is auctioning next season’s cocoa crop (i.e. the one that starts being harvested in October 2012) in advance. I have not mentioned this because I had nothing to say about it — I have not seen any analysis. What has been reported has been that the auctions are being rushed, with little information provided to buyers, and that some large industry players have therefore not participated. Bloomberg reports today that the auctions are part of an industry restructuring agreed with the IMF in return for debt relief, which suggests that they are unlikely to be abandoned; but apart from vague speculation about the effect of hedging on the futures markets, I cannot find any analysis of the situation. I have seen nothing to think that these auctions affect my investment thesis, which is that crop damage should increase the price of this season’s crop from multi-year lows.


  • UK BRC retail sales monitor -0.3% YOY Jan.
  • Australia unexpectedly held rates at 4.25%. Stevens says growth is close to trend and inflation is close to target.
  • French trade balance widened MOM, although less than expected.
  • German IP -2.9% d.e. Dec.

Next 24 Hours

  • US consumer credit
  • Japan current account
  • German trade balance