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Winter is coming for the North American economy: Don Pittis

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In the sword-and-dragon fantasy Game of Thrones that has captured a huge following of readers and television viewers, characters periodically share the ominous warning, “Winter is coming.” 

As oil plunges to new lows, as the U.S.-China trade war threatens global commerce, as interest rates rise, as Canadian house prices teeter and climate change menaces the world, the North American economy faces a similar feeling of impending doom.

Later this week Canada — with its own actual winter here or on the way — will get a reading on just how gloomy we should be when Statistics Canada releases its latest gross domestic product numbers.

Preparing for a gloomier future 

In George R.R. Martin’s books and TV series you might think that with winter so near everyone would be working together, hunkering down, storing food and fuel and getting prepared for that ominous future. But no.

Instead, the characters are just too busy honing the skills that apparently keep that pseudo-medieval society hopping, namely murdering your nearest neighbours and erstwhile allies and stealing their stuff.

Just as life only imperfectly imitates art, in North America, at least, most of us have not yet got to the murdering and stealing stage.

And while everyone from the OECD to representatives of the Alberta oil sector warn of future risks, for now the North American economy seems strong. Some are wringing their hands, but most of us are just too busy getting the job done to prepare for a gloomier future.

Winter drilling in Alberta. With world fossil fuel prices falling and the made-in-Canada oil price even lower, there are growing fears for the future of the Canadian industry. (Todd Korol/Reuters)

“I think there is a fair bit of hand-wringing out there,” says Mike Moffatt, an economist at Western University’s Ivey School of Business. “I think we are in a time of heightened political risk, between Trump tariffs, Brexit, Trump’s kind of going-to-war with China.”

In Canada just now, the oil price risk is perhaps the biggest threat. It seems such a short time ago that the U.S. was hungry for our oilsands crude and willing to pay dearly for it. But not any more.

While everyone tries to imagine solutions and looks for someone to blame, market signals, including a made-in-Canada price that some say is heading for $10 US a barrel, tell a story of an enormous Canadian industry that a pipeline may not save and that output controls will do nothing to correct.

Global oil demand continues to grow but at any moment the frightening impact of climate change could well alter that.

OPEC’s nightmare 

But quite apart from environmental worries, for Canadian crude, expensive to produce and transport, there is a much greater medium-term threat expected to strike well before a pipeline could possibly arrive. That threat is outlined in a report by Bloomberg’s chief energy correspondent Javier Blas with the headline Texas Is About to Create OPEC’s Worst Nightmare.

If as the story suggests, the Permian Basin is about to challenge the Saudis with vast new output of light sweet crude that can be pumped and sent to the Gulf Coast at a world price of $30 US a barrel, then no wonder investors are wary of Alberta bitumen mined 4,000 kilometres from Gulf refineries.

As Globe and Mail columnist Gary Mason wrote last Friday, Alberta needs a Plan B and it doesn’t have one.

When OECD chief economist Laurence Boone gave her list of risks for the global economy last week, oil prices were just one of many.

“There’s not one risk that worries us, it’s the accumulation of risk,” said Boone in her presentation with the rich-world think-tank’s secretary general, Angel Gurria. “Trade, the impact of higher U.S. interest rates on emerging market economies, China’s imbalances, oil prices, inflated asset prices, politics.”

And risks come in groups, she says.

But with that list of apprehensions, neither Boone, nor Canada’s Finance Minister Bill Morneau, nor Bank of Canada governor Stephen Poloz seems worried about an economic collapse in the new year. 

Bucking the trend

In fact, according to the OECD outlook, while economic growth has peaked in the world as a whole, Canada’s economy is bucking the trend and will see faster growth next year, with GDP in 2019 rising 2.2 per cent following an expected 2.1 per cent growth rate in 2018.

One of the contributors? Legal cannabis, which on its own will boost the economy by two-tenths of one per cent.

As Moffatt reminded me, Canada’s property market is in gentle retreat and, while the U.S. expects slightly slower growth next year as Canada’s rises, the economy should remain robust.

It is after that that the OECD says countries must be prepared to step in to sustain their economies with new fiscal spending. In other words, they should not spend now but must prepare for winter.

In some ways that’s contrary to what the finance minister did last week, letting the deficit rise to help charge up GDP by cutting taxes on corporate capital spending.

According to Sonya Scott, a professor at Toronto’s York University who writes about economic history, GDP has failed to capture the majority of what Canadians have done to make the country stronger.

“When we look at things like GDP, it does tell us a story, but it doesn’t tell us about the sum total of economic activity, it doesn’t necessarily tell us about well-being,” says Scott.

And while giving tax money to companies may be one way to help keep them investing in Canada, a more powerful way may be to spend that money creating a highly skilled workforce that will make corporations come here.

As the OECD’s Gurria said last week, skills are the currency of the 21st century.

Follow Don on Twitter @don_pittis

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Couple from Toronto buys dream home in Mushaboom

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MUSHABOOM – A couple who lived and raised a family in downtown Toronto developed a five-year plan in 2015 to purchase their dream home.

In September they moved into the home – located on Malagash Island in Mushaboom on Nova Scotia’s stunning Eastern Shore – that met and exceeded their best dreams for their retirement.

The Camerons, Bruce and Tanya, decided in 2019 they would explore the Maritimes to see what real estate was available to become their potential retirement home. In the spring of 2020, during a global pandemic, the real estate boom hit their city, and they were hearing the same for Nova Scotia. Our province was their first-choice for attaining their desire for an entirely different lifestyle – away from the busyness of the city.

“We had $300,000 to $350,000 as a home value in mind to buy. Our semi-detached located off Danforth in Toronto was priced at $850,000. We wanted to come out ahead, so we would be secure in retirement,” Tanya said.

Their century-old home had prime location near the subway and GO Transit Line for a great 13-minute commute downtown.

“We enjoyed our community,” explains Bruce “… we had great neighbours, young children around and street parties – lots of social activity.”

Bruce says, “Our agent suggested a starting quote of $899,000. We did not do any renovations and only some staging. Fifty couples went through and we received four significant offers. Six days later we sold – with zero conditions – and a price of over a million dollars. We just requested a closing of September 2020 to get the kids off to school – which we got.”

The couple got more than they had anticipated.

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Rabobank Announces Leadership Changes in U.S., Canadian Offices

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NEW YORK, Dec. 16, 2020 /PRNewswire/ — Rabobank, the leading global food and agribusiness bank, has appointed two of its top executives, Tamira Treffers-Herrera and Robert Sinescu, to become Co-Heads of North American Client Coverage, positioning the Bank for future growth in the region.

Treffers-Herrera has also assumed the role of Vice Chairperson and Head of the Atlanta office, where she additionally oversees Rabobank Mexico, which is led by Eduardo Palacios. Sinescu is the Head of the Chicago office, and also oversees Rabobank Canada, led by Marc Drouin, who was recently appointed as Canada’s General Manager.

Treffers-Herrera and Sinescu report to David Bassett, Head of Wholesale Banking North America, the Bank’s corporate and investment banking business for the region based in New York.

“Both Tamira and Robert have a demonstrated history of strong leadership, operational excellence and passion for our clients,” Bassett said. “Their broad experience and deep sector expertise will be invaluable in delivering dynamic results for clients while accelerating our growth trajectory in North America.”

Each office will have an even greater focus on key Food & Agribusiness sectors and clients: The Chicago office will drive growth in sectors including Dairy, Farm Inputs and Grains & Oilseeds, which are also key areas of focus for the Canada office. The Atlanta office will focus heavily on sectors such as Animal Protein, Beverages, Sugar, and Supply Chains, which are important sectors in Mexico as well.

“Rabobank is fully committed to our clients throughout North America, and we believe our new sector-focused coverage will improve our ability to provide knowledge-based, value-added solutions that benefit our clients,” Bassett said.

Treffers-Herrera was most recently based in London as CEO of Rabobank’s European Region from 2016-2020, where she took the organization through Brexit. Prior to that, she worked in the Atlanta office from 2002-2016. During her tenure in Atlanta, Treffers-Herrera served as Global Sector Head – Consumer Food & Beverages, and prior to that she was a senior banker for a portfolio of large beverage and consumer foods clients. She holds a Bachelor of Arts degree from the University of Kentucky, a Master of Arts from the Patterson School of Diplomacy and International Commerce and has studied at The University of Chicago Booth School of Business and Harvard Business School.

Sinescu has been with Rabobank for over 21 years and was previously General Manager of Rabobank Canada, where he oversaw all operations, business development, commercial strategy and relationships with regulators. In addition, he continues to serve as CEO of Rabo Securities Canada Inc. Prior to Canada, he was a senior banker, Head of Corporate Banking, European Sector Head for Sugar, and a member of the Management Team for Rabobank France. He holds a Bachelor of Science in Business from the Bucharest School of Business, a Master of Business Administration & Management and a Master of Science in Banking and Corporate Finance from Sorbonne University in Paris, and has studied at Brown University.

Drouin has worked with Rabobank’s Canadian team for more than nine years and most recently served as a senior banker, Head of Rabobank Canada’s AgVendor Program and a member of Rabobank Canada’s Management Team. He brings extensive wholesale banking experience within the Dairy, G&O, CPG and Supply Chain sectors. Drouin holds a Bachelor of Arts degree from McGill University and a Master of Business Administration in International Finance, Marketing and Management from the Schulich School of Business at York University.

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Real Estate

Greybrook Realty Partners & Marlin Spring Brand Jointly Owned Asset Manager – Greyspring Apartments

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TORONTO, Dec. 14, 2020 (GLOBE NEWSWIRE) — Greybrook Realty Partners and Marlin Spring are pleased to announce the new branding of their jointly owned investment and asset management firm, Greyspring Apartments. With a portfolio of more than 2,000 units and CAD$375 million in assets under management, Greyspring Apartments is focused on the acquisition and repositioning of multi-family assets throughout Canada.

The new name and branding is an important step in Greyspring’s evolution as an independent operating business. Formed in 2018 by long standing-partners Marlin Spring and Greybrook Realty Partners, Greyspring Apartments was established with the goal of building a leading asset management firm with a robust portfolio of residential rental real estate assets in primary and secondary markets across Canada.

Greyspring’s talented team of real estate, asset management and finance professionals is overseen and guided by the Management Board, whose members include Benjamin Bakst, CEO, Marlin Spring; Elliot Kazarnovksy, CFO, Marlin Spring; Sasha Cucuz, CEO, Greybrook Securities Inc.; Peter Politis, CEO, Greybrook Realty Partners; Chris Salapoutis, President & COO, Greybrook Realty Partners; Ashi Mathur, President, Marlin Spring; and Karl Brady. In addition to his role on the Management Board, Karl Brady leads Greyspring Apartments as its President. 

“We are pleased to announce the official name and branding of a business we formed with our partners at Marlin Spring a few years ago,” said Peter Politis, CEO, Greybrook Realty Partners. “Greyspring has been diligently focused on the execution of strategic value-add programs across its portfolio that are improving the quality of housing for tenants and overall asset values. For Greybrook investors, expanding from our core business in real estate development to the value-add space through Greyspring, has allowed us to provide our clients with investment opportunities that diversify their real estate investment portfolios.”

“Marlin Spring and Greybrook have partnered on many residential real estate projects in recent years,” said Benjamin Bakst, CEO and Cofounder, Marlin Spring. “To a great extent, Greyspring illustrates our approach to partnerships. We believe in, and strive for, responsible growth through deepening our relationships with our trusted partners. With Greyspring, we’ve formalized our focus on providing better and more affordable living experiences for Canadians. This vision aligns with our mission to deliver exceptional real estate value to all our stakeholders with an uncompromising adherence to our core values.”

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