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© Copyright 2000 Rogers Media. The following article first appeared in the February 2000 edition of
BENEFITS CANADA magazine.
The sky is falling
The sky is falling. The sky is falling.
STOP THAT SNICKERING.
I think it really might be falling this time. Clues that this market is on the wrong side of a long
maturity curve are everywhere. I don't want to sound apocalyptic about this, but there are at least seven
big ugly warning signs. Hold on to your Bloomberg.
First Sign:U.S.-based Charles Schwab & Co., signed up an average 6,400 new accounts every day in
December according to a report in the National Post. Not surprisingly, the phrase "dumb money"
doesn't appear anywhere in Schwab's marketing.
Second Sign: The Toronto Stock Exchange (TSE) reported a 29.72% increase on its TSE 300 composite
index for the year ended Dec. 31, 1999. Check the fine print though. Nortel Networks and BCE, both of which
saw their share prices go through the roof in 1999, represented 16.3% and 11.4% respectively of the index
on Dec. 31, 1999. Who knew Canadian bulls could be this thin?
Third Sign: The almighty Caisse de dépôt et placement du Québec got a whole lot
mightier in 1999, topping $100 billion in total assets under management as of Dec. 31, 1999. That's a
healthy 20.1% increase from $83.3 billion at the end of 1998. Wow.
Fourth Sign: Statistics Canada's help-wanted index, which tracks employment ads, continued a
three-year trend upwards in December. Compared to 1998, the index was up 11.6%. No great surprise, except
that Newfoundland of all places recorded the best increase in Canada. The index there is up 20.9%. The rock
is booming--go kiss some cod.
Fifth Sign: The year's auto sales figures are in. According to The Globe and Mail, 1999 was
the decade's hottest year. The industry sold more than $1.5 million in 1999, representing an 8% increase
over 1998. BMW was up 15.9%, Mercedes sales rose 23.8%, Jaguar saw a 31.5% increase and Porsche rose 7.9%.
Mercedes did even better with its trucks, up 42.1%. My vote for the decade's defining stat: BMW Canada Inc.
posted its ninth consecutive year of record-breaking sales in 1999.
Sixth Sign: A Southam News poll conducted at the end of December found the country in an
uncharacteristically optimistic mood. No less than 82% of respondents think our home and native land
provides a better standard of living than the U.S. Half of the 1,017 polled believe they'll be better off
in this new decade than they were in the 1990s. And I'm told that 984 respondents think the Leafs will win
the Stanley Cup.
Seventh Sign: This is where things get creepy. On Jan. 5, 2000, amidst talk of an interest rate rise
in the U.S., the Dow Jones Industrial Average lost 3.2%--359.58 points. The Nasdaq Stock Market composite
index suffered its single worst day ever, falling 229.46 points (5.5%). In Canada, the TSE 300 dropped
211.15 points (2.5%) the same day. Were Canadian investors (pension plan members among them) shaken? Not in
the least. A rebound was in full effect by week's end. The TSE gained close to 4% on Jan. 7--its best day
since October 1987.
Downright ominous.
--Kevin Press
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