Consumer confidence hits a record low

No surprise that the latest measures show consumer confidence in Canada is at the lowest ebb since the recession of 1981-82. According to the Conference Board of Canada, we feel that we are now worse off than we were six months ago. And we expect to be even worse off six months from now.

People cite uncertainty about their employment prospects, which feeds directly into their ability to manage their current debt load and their willingness to spend a nickel that’s not necessary.

But arguably, the political games, the search for scapegoats and the general absence of leadership is exacerbating the lack of confidence.

The fragile political balance, means that compromise and deal-making trump bold action. On the corporate front, multinational ownership and offshore head offices have also heightened the sense of a lack of control. And on top of that, the witch hunting, finger pointing and blaming has begun.

Economists say that lack of confidence will translate into the need for an even bigger government stimulus initiative to kick start the economy. Effective leadership is never cheap, but for once we may actually be able to put a pricetag on it.

Turn and face the future

Interesting article about what makes investors tick from MorningstarAdvisor , a U.S. publication that offers practice management and business building advice to financial advisors.

For months now, people have been abandoning stocks in a kind of slow-motion crash that reveals growing apprehension about what is likely to be a long and deep recession. In short, they’re running scared.

To understand why you have to look at how the “physiology of fear” affects investors, says Deborah Price, founder of the Money Coaching Institute.

The more people listen to the news and replay all the negative information, the more fearful they become. The barrage of bad news triggers the amygdala — that’s the part of the brain that stimulates the fight, flight or freeze response. And that’s where they get into trouble.

People can tolerate this fear, however, if they’re fairly sure the situation is going to end within a specific time frame. That’s how most of us handle roller coasters. We ride them because, on some level, we have a sense of trust and we know the ride is going to end.

Clearly, no one can be sure when this current market situation is going to turn, but we do know that — historically — U.S. recessions have averaged somewhere between eight and 16 months. And we also know that the stock market is a discounting mechanism which historically bottoms well before the end of a recession.

There, feel better?

Giving credit where it’s due – and where it’s not

In keeping with the tone of the times, U.S. regulators have introduced consumer-friendly new rules for credit card issuers: as of July 2010, issuers can only raise interest rates on new cards and future purchases, but can’t jack up the charges on current balances. Furthermore, card holders will get 45 days notice before any changes are made to any of the terms on an account.

Not surprisingly, consumer advocates are now urging the introduction of similar rules for Canada – including one that would compel card issuers to pass along interest rate decreases in a timely way.

That’s a very popular stance to take and this next point is sure to be, well, really unpopular.

It’s just a reminder that people who don’t pay their credit card balances off on a monthly basis are carrying high-risk, unsecured credit – the most rare and expensive form of credit that exists, especially in these illiquid times. If they were corporations, they’d be paying a massive premium for that privilege.

Unlike the old Dire Straits song, you can’t get your money for nothing – or your chicks for free.

Banking on goodwill

One of the biggest challenges for business leaders these days is to stay engaged and closely attuned to what’s going on outside their immediate circle. It’s human instinct, after all, to turn inward during times of trouble and to focus on the urgent matters at hand.

The perils of succumbing to that, however, are splashed all over the front page: chartered banks, which have no shortage of their own concerns, are coming under fire for being self-absorbed. Given the potentially steep cost of grassroots backlash against them, it might be a good idea for the bank chairs to listen up.

First, no one less than the Governor of the Bank of Canada, Mark Carney, is exhorting the chartered banks to help re-float the faltering domestic economy by lending to credit-worthy businesses and individuals at the new, lower rates – instead of hoarding capital as a cushion against bad loans.

The Premier of Ontario, Dalton McGuinty, is also scolding the Big Banks for their call for a provincial corporate tax cut from 14 per cent to 10 per cent. He wasn’t too impressed with their suggestion that if a cut isn’t forthcoming in 2009, there will be job cuts in the Ontario-centric financial services sector.

Taking a careful reading of the general mood – particularly on the political front – it might be a good time to cultivate an image as part of the solution. Not a new source of trouble.

From denial to acceptance: the story of a budget

It’s always fascinating to watch the elaborate process of a government shifting from denial to acceptance. Instead of a simple, “Oops, we goofed,” there’s always lots of chin-stroking, earnest pronouncement and, this time out, a desire to spread the blame by getting collegial and consultative all of a sudden.

Just weeks after saying there wasn’t an economic crisis and that there would be no deficit, the Conservative government is now admitting what we all knew already: Canada is looking at deficits for at least the next four years and most likely this year too – despite the forecast of a $2.3 billion surplus.

As part of the necessary shift, it’s not surprising that Finance Minister Jim Flaherty has formed an 11-member economic advisory committee to help him shape the upcoming January budget. After getting pelted with criticism over his recent economic statement, he clearly wants to spread the responsibility around, and the options of including other people from business and academia, created the perception that the Tories are on top of the file and prepared to dig in for the duration.

By the time this is all over, perhaps they will even succeed in convincing themselves that they always knew things would be this tough.

An Apple a day doesn’t keep rumour away

How much is a human life worth? Well, if you’re Steve Jobs you’re apparently worth about $20 billion in the market capitalization of the company you run.

With today’s new that the founding CEO of Apple will not make his annual speech at the upcoming MacWorld event, persistent rumours about Mr. Jobs’ health have re-surfaced. Apple’s stock was down about five per cent even before the rumours began swirling again when someone noticed that he wasn’t a confirmed speaker on the agenda.

Apple is as notorious for its internal cult of secrecy as Mr. Jobs is for his controlling ways. When speculation about the cause of his gaunt appearance first began, his top spokesperson even publicly lied to shareholders at his instruction. Something for which neither she nor Mr. Jobs expressed regret.

You’d think that a company as savvy and leading edge as Apple might understand better than most, just how hard it is to keep things on the down-low in a wired world. A world they helped create.

News you can no longer afford to ignore

Time was we could all afford to yawn or change the topic when we heard such news as the federal finance minister is meeting with his provincial counterparts in Saskatoon.

The economy being what it is, however, we no longer have the luxury of plugging our ears and humming: these are pre-budget consultations which have a direct and immediate bearing on our respective bottom lines – not to mention the political and economic consequences that hang in the balance.

The provinces are in dire need and are pushing for the federal government – which most of them were actively dissing up until a couple of months ago – to push forward with big-ticket infrastructure projects to kickstart the economy. That’s supposed to be the golden bullet that will create jobs and, of course, get tax revenues rolling into government coffers once again. The catch is that many of these projects were supposed to be public-private sector partnerships (known as Three Ps in certain circles) and the private money isn’t really there anymore.

On the political front, if Finance Minister Jim Flaherty doesn’t get it right, the Opposition will defeat his January budget and send us all back into political purgatory – wasting even more time at such a critical juncture.

So stay tuned: who knew Saskatoon could be such a hot spot in December?

A Facebook friend you may not want?

Trust the Aussies to set a precedent as new adaptors: an Australian court has ruled that it is acceptable to use social media – specifically, in this case, Facebook – to serve legal notice.

This is a move that’s going to be tracked in quite a few jurisdictions because to date, there’s been considerable ambivalence about how to treat this newfangled technology. Many companies and most levels of government in Canada have prohibited or strictly limited access in the workplace. The underlying belief is that employees will spend all day poking each other instead of working and productivity will suffer.

That conviction, however, can come at a cost. Social media are an important way to keep in touch with what others are saying, doing, thinking. It’s an importantĀ if non-traditional, window into emerging trends and the collective unconscious.

And, as they’ve discovered in Australia, it’s a highly efficient to reach out and super poke someone who isn’t necessarily eager to be found by creditors or other authorities. Which is just the beginning of an inevitable attitudinal shift.

Who’s in net?

It’s a little bit like the lyrics to the current Katy Perry song: You’re hot, then you’re cold, You’re yes then you’re no, You’re in then you’re out, You’re up then you’re down.

We are referring here to the CRTC and the issue of internet speed for small service providers who buy pipe from large players like Bell, Telus and Rogers.

A few weeks ago, the federal telecom and broadcast regulator said that it would not intervene in allegations that certain companies moved some data at slower speeds than others. It did, however, agree to hold hearings into the regulation of the internet next summer.

Now, however, it has issued a new decision that orders Big Telco to offer the same net speeds to small wholesale customers that they sell to their own retail customers In doing that, the CRTC rejects the argument that having to do that will discourage investment in new, higher-speed infrastructure.

That argument tends to get trotted out whenever a new source of competition surfaces for incumbent market players – it was last heard in the bitter squabble over who should be allowed to bid in the last auction of wireless spectrum. (The government ultimately allowed special terms for new entrants to help them enter the market.)

Before it gets too much further down this road, the CRTC doesn’t ask too many questions for which it doesn’t already have answers. This is a very swampy area of policy with an exceptionally high emotional quotient. There is a significant contingent of people who passionately believe the internet represents a form of pure, unsullied access to communication for all. And they are pitted against those who believe it’s just another business.

In other words, it’s a looming smackdown between unicorns and butterflies, bears and bulls.

Smart Cookie 101

When a friend told me that 2009 was the year she was determined to get a handle on her finances, I sympathized.

I, too, am trying to save more and spend my money more wisely.

At a potluck dinner I hosted at my apartment last night, the same friend asked if I got around to reading The Smart Cookies’ Guide to Making More Dough, a book about five young Canadian women who banded together and swapped strategies in an effort to erase their debt and obtain their financial goals. The Smart Cookies have appeared on Oprah, have a television show and released a book. My copy was collecting dusk on my bookshelf.

I was embarrassed to admit that I hadn’t read the book.

The conversation with my six girlfriends quickly turned to money as we discussed the Smart Cookies and skimmed the book jacket.

And then I realized that all of us are at a point in our lives where we could benefit from some Smart Cookie advice.

A few years into our careers and on starting salaries, there usually isn’t much left over at the end of the month.

One friend just bought a condo and is saving for a wedding next fall. Another is about to live on her own and will have to shoulder all of the rent after living with a roommate. Yet another is weighing the pros and cons The of renting versus buying, while one more already owns but is dreading the $6,000 she needs to shell out for a new boiler.

We all agreed that we should start our own money group. I guess my first step is to crack the book.…