Briefly: “Bankruptcies on the rise” and more of Thursday’s news

The slowing economy has led to increased bankruptcies in Canada, according to consumer credit rating agency Equifax Canada. The number of bankruptcies has increased by 9% year-over-year, to 109,068 at the end of November 2008.

“Unfortunately, our latest data illustrates that the weaker economy coupled with high personal debt levels has led to an increasing number of consumers declaring bankruptcy,” said Nadim Abdo, vice-president of Equifax Consulting Solutions.

Not only are more consumers declaring bankruptcy, but the average loss resulting from the filing has increased to $33,000 (excluding mortgage debt) for October and November. In January 2008, the average loss was $31,000.

While all parts of the country are seeing an increase, some are holding up better than others. In the west, the number of bankruptcies increased 4.2% in the first 11 months of 2008. In Ontario, the increase was 10.5%.

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Commodity prices down in December

The price of most commodities continued to fall in December, as the global economic downturn worsened, according to Scotiabank’s commodity price index.

It was the fifth straight month of decline, with the index falling 5.5% month-over-month. The overall index is now down 39% from its peak in July, making this the most rapid shift from boom to bust since Scotiabank started its commodity price index in 1972.

“While commodity prices are not yet at a bottom, the pace of decline is now slowing and the forced, indiscriminate asset selling by funds appears to be subsiding,” says Patricia Mohr, vice-president, economics, and commodity market specialist at Scotiabank. “Many prices are approaching average world cash costs, triggering substantial production cuts, new project deferral and tighter supplies.”

But dragging the overall index down is the energy segment, which fell 10.6% in December. Forestry almost looked good in comparison, with a decline of 5.4%, month-over-month.

The metals and minerals sub-index fell 4% in December, but has seen some improvement in the new year.

Mohr points to a temporary increase in copper and zinc prices in January, suggesting that investment funds have added to their holdings.

“Record investor inflows into gold ETFs have also lifted precious metals, as retail and institutional investors seek a ‘safe haven’ from volatile currency and equity markets,” she says.

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Canadians target debts

Tough economic times have driven Canadians to re-examine their financial situation and their priorities, according to a survey by Desjardins Group. Nearly half have already planned the actions needed to reach their goals.

Seventy percent of respondents said they were planning to draw up a budget and rein in their spending, making this the most popular approach to shoring up their financial positions.

Just over half (57%) said they planned to consult a financial advisor, with an eye toward improving their investment returns. Paying off debt was a priority for 55%, while 53% said they planned to save for retirement.

“These findings are especially encouraging in our current situation,” says Eric Lemieux, vice-president, wealth management of Desjardins Group. “They also demonstrate a true sense of responsibility and a real desire to see into the future and build their financial independence, as well as that of their loved ones.”

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CSA reports on 2008 enforcement

The Canadian Securities Administrators has released its annual report on enforcement activities. Across the country, the assorted securities regulators commenced 215 matters against 416 individuals in 2008.

There were 123 cases closed, involving 322 individuals and companies, resulting in more than $14 million worth of sanctions and orders to pay costs.

“CSA members work to deliver responsive, collaborative and effective enforcement that provides protection to investors and builds confidence in the fairness of the capital markets,” said Jean St-Gelais, CSA chair, and president and CEO of the Autorité des marchés financiers. “This report represents the significant efforts of enforcement staff, as well as commission panels, over the last year in litigating and adjudicating breaches of securities laws across Canada.”

CSA members issued 92 interim orders to restrict trading by 168 individuals and 112 companies, and issued 90 reciprocal orders to prevent companies and individuals who had been sanctioned in one jurisdiction from operating in another province or territory.

In all, six individuals were jailed as a result of CSA member investigations, receiving sentences of between six months and eight-and-a-half years.

(01/29/09)