Top of the morning

Ed Clark, former president and CEO of TD Bank, delivered the keynote address at an Economic Club of Canada event on Wednesday. The philanthropist took this opportunity to urge citizens to increase their charitable giving and comment on the role governments can play in aiding not-for-profits:

But realistically governments find it difficult to be innovative in social spaces. Why? Because we — the citizens — are outraged at failure. But innovation requires failure. Indeed in the Silicon Valley they celebrate it because that is how they learn.

So we philanthropists must not only be willing to fund social issues but also be willing to put some of that money into different models …

Today we are in a position to give the government the facts and outline what needs to be done and how the government can help us as partners. But we must recognize governments’ capacity to act is limited in our age of austerity.

There was a time when politicians saw their job as using the state to make the world better, more fair, more equal – and they seemed to have the resources to do it. Many of our own expectations of government were shaped during these times. And, in fact, many still hold on to the outdated notion that the state should take care of all our social ills.

But now politicians must manage in a world of scarcity with many constraints; while dealing with forces that can make society less fair – not more fair. And so governments must confront a growing divide between what they can afford to do and what they have promised to do.

So where does this leave us?

Don’t expect our politicians to take the lead on each and every social issue – not unless you are prepared to provide them with more money to do so. We have wonderful not-for-profit organizations – we need to back them.

On the homefront

The TSX went nowhere on Wednesday as strength in the defensive consumer staples sector was offset by big losses from the gold miners. Bullion fell $20 in as many minutes yesterday morning, but pared most of those losses overnight. TSX 60 futures are falling ahead of the open.

 

The Canadian dollar is moving higher against the greenback this morning to trade at 0.883 USD.

 

Australia’s free trade deal with China will leave some Canadian companies at a competitive disadvantage. “For Canada, one of the single most important changes will be the deletion for Australia of a recently imposed three per cent tariff on metallurgical coal, a major Canadian export to China,” writes the Globe and Mail’s Nathan VanderKlippe, who highlights Teck Resources (TCK.B) as a company that might be adversely affected.

 

BlackBerry squished. The former tech powerhouse fell 5.3 per cent on the Nasdaq on Wednesday amid a downgrade from Morgan Stanley that sparked a flurry of negative headlines. BlackBerry (BBRY) CEO John Chen is aiming to double software revenues in the next fiscal year; analyst James Faucette is “skeptical” that the company will attain this lofty goal. “The market is now too willing to give the company the benefit of the doubt that BBRY will successfully be able to sell its new software and messaging offerings,” the analyst wrote.

 

Pipeline company plans to ship more dividends to shareholders. At its annual investor day, TransCanada (TRP) announced plans to boost its dividend by an average of eight per cent per year through 2017, a notable uptick from the pace its quarterly payout has expanded at over the past five years. CEO Russ Girling indicated that annual dividend growth could hit 10 per cent if the company has more visibility on the progress of its order book, which some observers have interpreted to mean, “if Keystone XL is approved.” Shares of the pipeline company rose 2.7 per cent on the TSX.

 

A national crisis. Faced with higher input costs, Tim Hortons (THI) is hiking prices for coffee and its breakfast sandwiches by a dime. This price change reflects the average across the nation and will differ by province. Ontarians will avoid part of this: the price of breakfast sandwiches isn’t going up in Canada’s most populous province, according to the Canadian Press.

 

Another ultra-long debt offering in the offing? On Wednesday, the Department of Finance indicated that it was considering issuing more ultra-long, 50-year bonds. In April and July, when Finance sold a cumulative $2.5 billion in ultra-long debt, these releases suggesting that policy-makers were “considering” this matter were quickly followed by the announcement of a sale. Since interest rates are incredibly low, these issuances enable the government to secure long-term financing at a very attractive price. As an aside, whenever someone contends that a government’s and a household’s budgetary process is more or less the same, ask them this: do you know any household that can borrow billions for 50 years at sub-three rates?

Daily dispatches

More Chinese stimulus needed to prop up the economy? The latest survey of Chinese manufacturers came in at 50 in November, a level that suggests the sector neither expanded nor contracted. The HSBC Flash Manufacturing PMI was expected to be two-tenths of a point higher; this reading brings it to a six-month low. The details of the report were rather discouraging, as output decreased and new export order growth continued to slow. “We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed,” writes Hongbin Qu, chief economist, China and co-head of Asian economic research at HSBC.

 

The eurozone Q3 GDP readings were mildly positive as a whole, and so was the flash estimate for November’s PMI. Beyond that, there aren’t many good things to say. The composite output index dipped to a 16-month low, though it still remains in expansionary territory at 51.4. France’s Manufacturing PMI remained in negative territory for its seventh consecutive reading, while Germany, the sputtering engine of economic growth, saw its print come in at the neutral 50-level. “The single currency area is struggling to eke out any growth, with the PMI indicating that GDP is likely to have risen by just 0.1 to 0.2 per cent in the fourth quarter,” writes Chris Williamson, chief economist at Markit. “A drop in new orders for the first time in almost one-and-a-half years, albeit only very marginal, suggests growth could slow further in December.”

 

The key takeaway from these manufacturing surveys is that the global economy remains quite fragile. Mercifully, Canada’s strong ties with the United States, which looks to be gaining traction and is somewhat isolated from a slowing China and stagnant Europe, puts us on a relatively solid path for a transition to export-led (followed by business investment-led) growth. The United States’ Flash Manufacturing PMI report is due out at 9:45 a.m. (EST).