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(September 18, 2007) The U.S. Federal Reserve lowered interest rates for the first time in four years, reducing the benchmark rate by 50 basis points from 5.25% to 4.75%.

Economic growth in the U.S. has been minimal as a result of continued problems with credit markets and the U.S. subprime mortgage market. The Fed’s rate cut is intended to forestall a recession in the U.S., which many economists, including the Fed’s former chairman Alan Greenspan, say could be developing.

In Canada the story is quite different. Inflation continues to rise due to strong commodity prices, particularly in energy, which in turn has been driving the value of the Canadian dollar higher.

With the fed’s cute, the loonie becomes even more attractive to foreign buyers. The Canadian dollar surged on the news of the fed cut, increasing in value to more than 98 cents US for the first time since January 1977.

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Coventree axes employees in wake of ABCP mess

(September 18, 2007) Coventree announced it is implementing cost-reduction measures, including a 30% reduction in its workforce, in response to the continuing disruption in the Canadian asset-backed commercial paper market.

The job cuts are the main cost-cutting measure, which over the short-term will require the company to pay about $1 million in severance and other costs. These write-downs will be reported in its fourth-quarter statements ending September 31, 2007.

Coventree will also close its U.S. office in Denver, Colorado, and will reduce the size of its office in Toronto. The company says, in both cases, the office space is under long-term lease, but it will explore options to reduce and, if possible, eliminate future costs associated with these office leases.

Coventree says it stands firmly behind the “Montreal Proposal” announced on August 16 to stabilize the Canadian ABCP market, and it doesn’t expect the cost reductions to affect its ability to contribute to such a solution.

The company warned that if ABCP liquidity problems continue, it might have to write down other assets. These potentially include $8.7 million in intangible assets associated with the acquisition of all outstanding shares of Nereus Financial and up to $3.5 million in outstanding loans owed to it by ABCP conduits.

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Counsel Wealth Management names new CIO

(September 18, 2007) Counsel Wealth Management has appointed Corrado Tiralongo as its new chief investment officer and the lead portfolio manager of IPC Portfolio Management Ltd.

Tiralongo will oversee Counsel’s investment policies and portfolio monitoring programs, including research, investment planning, ongoing due diligence and risk management functions.

Tiralongo was most recently a senior portfolio manager with a bank-owned dealer, overseeing the management of $16 billion in assets under management and the ongoing due diligence process for over 25 external portfolio managers. Prior to that, he was part of the team that created a wrap program for a bank-owned asset manager.

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Institutions stay cautious: State Street

(September 18, 2007) Institutional investor confidence around the globe has dropped noticeably in September according to State Street Global Markets’ Investor Confidence Index.

The Investor Confidence Index fell by 7.5 points from 99.6 to 92.1. Much of this downward trend was driven by North American institutional investors, whose confidence declined from 117.1 to 106.0. European investors also saw their confidence drop from 86.6 to 82.3.

The downward trend was slightly offset by Asian institutions. Their confidence rose by 1.6 points to 86.5.

The index, developed by Harvard University professor Ken Froot and State Street associates director Paul O’Connell, measures investor confidence on a quantitative basis by analyzing the buying and selling patterns of institutional investors.

Froot says many institutional investors have moved to more normal investment patterns after a very volatile month of August.

“In the latter part of July and the early part of August, institutions accumulated equities globally as their risk appetite became relatively strong compared with other market participants who were selling aggressively,” Froot says. “This accumulation by institutions proved worthwhile, as markets rallied steadily from August 16 onwards. In September, institutions [are] more selective in their purchases.”

(09/18/07)