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(November 28, 2007) Scotiabank’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, jumped by 4.4% month over month in October, to finish only 1.4% below May’s record high.

Scotiabank says this year has turned out to be a favourable one for resource producers, with overall commodity prices up 17.1% year over year in October and 10.6% year to date.

The Oil and Gas Index led the advance in October, growing 10.7% month over month. West Texas Intermediate (WTI) oil prices vaulted from $79.63 US per barrel in September to $85.66 US in October and have climbed to more than $95 US so far in November — amounting to a $23 US increase since August.

“While ‘peak oil’ theories are unduly alarmist, the CEOs of a number of major oil companies have recently cast doubt on the ability of world supplies to keep pace with demand growth over the longer term, limited by engineering staff and capital cost escalation,” says Patricia Mohr, vice-president of economics and commodity market specialist at Scotiabank. “We are again revising our WTI oil price forecast for 2008 to an average of $86 US [$85–90 US], compared with $72.50 US in 2007.”

Mohr says prices are expected to hover at these levels because non-OPEC supply developments in 2008 appear to be shaping up in a similar fashion to those of 2006 and 2007. New field development could boost non-OPEC supplies by 1.1 million barrels per day, centred in the Alberta oil sands, Russia and the Caspian Sea area, and Brazil, but technical and political challenges could easily cut this output.

Also, the $90 US-plus oil has slowed U.S. petroleum consumption, but energy usage in a large part of “emerging Asia” and the Middle East has not been affected by the record prices because of the level of government subsidies there.

The Metal and Mineral Index also surged in October, with potash and sulphur prices at the Port of Vancouver leading the way. Sulphur, much of which is being created as a byproduct of Western Canada’s oil and gas production, rose 45% due to strong international demand for phosphate fertilizers and tight supplies.

Spot potash prices climbed from $237.50 US per tonne in September to a new record high of $252.50 US in October, an increase of 44% year over year.

The Agricultural Index was another advancer in October, as strength in grains and oilseeds offset weaker hog and cattle prices.

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Falling greenback good for U.S. markets?

(November, 28, 2007) Plunging interest rates helped by a lower U.S. dollar are about to rescue the U.S. housing and stock market, according to Mike McDonald, president of U.S.-based Dollar Crisis and Recovery Partners.

McDonald notes that since June, one-year U.S. Treasury bill rates have fallen from 5% to 3%, while 10-year Treasury rates, which 30-year mortgages are indexed to, have declined from 5.2% to 4%. McDonald says most of that decline has happened in the last month.

“The doomsday scenario painted by Wall Street over sub-prime mortgages and housing is suddenly way overblown,” McDonald says. “With much lower interest rates, many people with variable mortgages will find they can afford the new reset payments after all. Foreclosures should drop dramatically, the housing glut should level off, and housing prices will then rise.”

McDonald says this recovery should extend to the capital markets, where large banks like Citigroup and Merrill Lynch have announced multi-billion-dollar write-downs due to sub-prime exposure.

“It’s not as bad as they say. Many companies — such as HSBC, GM, Merrill Lynch and Citigroup — used default assumptions based on higher interest rates to calculate cash flow yields and wrote off billions in mortgage-backed CDO assets,” he says. “This could be way off the mark. These CDOs now look like bargains to me, and cash flows from CDOs should come in much higher than expected.”

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Mavrix scraps TSX Venture Graduation Fund

(November 28, 2007) Mavrix Fund Management has withdrawn the Mavrix TSX Venture Graduation Fund, citing a lack of interest in the fund due to investor uncertainty.

Mavrix notes the fund had favourable valuations, but with poor investor interest, it could not proceed with an offering because it would result in operating expenses being too high on a per unit basis.

The Mavrix suggests its Small Companies Fund as an available alternative with some exposure to the same sectors of the market as the withdrawn fund.

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HSBC appoints new investment advisor

(November 28, 2007) HSBC Investments (Canada) has appointed Winslow Capital Management Inc. as investment advisor to the HSBC MM U.S. Growth Equity Pooled Fund. Winslow will replace current investment advisor Marvin & Palmer Associates effective December 31, 2007.

Winslow is a Minneapolis-based investment manager who specializes in U.S. growth equities and has been active in investment management since 1992. As of September 2007, Winslow had $3.1 billion US in assets under management.

The HSBC MM U.S. Growth Equity Pooled Fund is available to Canadian investors through the Portfolio Advantage and Private Investment Management services offered by HSBC Investments, as well as the Ruby Portfolio offered by HSBC Securities.

“The appointment of Winslow follows a thorough review as part of the ongoing analysis conducted by the multi-manager team at HSBC Investments Limited. Winslow’s rigorous investment process, philosophy and strong risk management procedures make them a valuable addition to our roster of leading investment management firms,” says Marc Cevey, CEO of HSBC Investments (Canada).

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OSFI names new assistant superintendent

(November 28, 2007) The superintendent of financial institutions, Julie Dickson, has announced the appointment of Coleen Volk as assistant superintendent for the corporate services sector within the Office of the Superintendent of Financial Institutions.

Volk will oversee the corporate services sector’s nine divisions, which include areas such as finance and corporate planning, human resources and administration, security services, communications and public affairs, project management and information management, and information technology services.

Most recently, Volk was assistant deputy minister of the Department of Finance. While there, she directed corporate services for Finance Canada and the Treasury Board Secretariat and served on the executive management committees of both departments. In the past Volk has also held positions with the Canada Mortgage and Housing Corporation (CMHC), as well as two major banks in Toronto.

Volk joins Dickson and the other two members of OSFI’s executive team, Ted Price, assistant superintendent, supervision sector, and Bob Hanna, assistant superintendent, regulation sector.

(11/28/07)