Agcapita - March 5 2012 - Charts that Count

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Weekly collection of charts dealing with current financial and economic issues

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Agcapita - March 5 2012 - Charts that Count

  1. 1. March 5 2012Charts That CountAre We That Certain Canada is Different?The Zero Interest Rate Policies ("ZIRP") being pursued by the Bank of Canada are just as likely to havethe same dramatic results for the Canadian FIRE sectors (Finance, Insurance and Real Estate) as theydid for the US. Does anyone truly believe that real estate operates on different principles in Canada?Will We Add 70 MOBD Production in Next 20 years?Can we find 40 million barrels per day of new conventional oil in the next 20 years and add another 30million barrels per day from other sources - ie the equivalent of almost the entire current production base? IEA 2030 Global Oil Production Forecast
  2. 2. Baby Boomer Equity Market Head-windSimple issue. Baby boomers have a high percentage of their net worth in stocks. As people get olderthey sell stocks, reducing their holdings (Chart 25). The developed world is getting older (Chart 26). Netresult is more sellers than buyers for public equities leading to lower price multiples in the developedworld?ZIRP, Pension Plans and Unintended ConsequencesApparently the Bank of Canada ("BOC") is concerned that low interest rates are bad for pension funds.Isnt the BOC in charge of interest rate policy? The chart below was produced by the BOC and in itswords "aggregate solvency of defined-benefit pension funds in Canada is close to an all-timelow". Perhaps they should reconsider their ZIRP policy?
  3. 3. The BOC is not the only entity sounding the alarm about ZIRP and pension fund liabilities. According toa recent C.D. Howe Institute if public-sector pension plans were forced to determine their liabilities usingcurrent yields in their return assumptions, the unfunded liability would be $227 billion - ``Ottawascalculations do not reflect investment returns available in the real world in fact the return assumptionsused by the federal government ``are well above anything currently available on any asset that matchesthe plans obligations, Of course under-estimating unfunded pension liabilities serves a political purpose- it allows the Federal government to claim a better fiscal position than is reality. For example, accordingto the report the deficit in 2010-2011 would have been $47 billion if the unfunded pension liabilities hadbeen included, and not the $31 billion reported - 50% worse. When practiced by the private sector,accounting practices like this are charitably described as dubious and misleading.Agcapita Farmland Fund IIIIf you are a resident of BC, Alberta, Saskatchewan, Manitoba or Ontario and would like information aboutinvesting in Agcapita Farmland Fund III (including via your RRSP) please CLICK HERE to be contacted.RegardsAgcapita  

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