Connect with us

Government

Postmortem: Canada is buying too much house

Financial Post’s economics editor Kevin Carmichael unpacks the week in the economy.

Freeland’s ‘guardrails’

June…

Published

on

Financial Post’s economics editor Kevin Carmichael unpacks the week in the economy.

Freeland’s ‘guardrails’

June 4 was Jobs Day in Canada and the United States , when the wonkiest of wonks celebrate the release of the latest monthly hiring data by taking to Twitter to demonstrate their chart-making skills .

Here at FP Economy , we prefer to save Gigi Suhanic’s artwork for our subscribers rather than the mobs that gather on Twitter. There are a few charts that we think best describe the current state of the labour market. Let’s have a look.

We track what the country’s most important policy-makers track. Finance Minister Chrystia Freeland said last year that her extraordinary emergency spending would be guided by “fiscal guardrails,” including total hours worked. That measure had almost returned to pre-pandemic levels, but then the third wave of COVID-19 restrictions forced authorities to tighten social-distancing measures. That setback caused hours worked to drop by four per cent in May from February 2020.

Total hours is an aggregate number. It says a lot about how fast the economic machine is running, but it necessarily obscures a lot of detail. Freeland and her officials at the Finance Department also want to know the details. She wants to make sure that no one is being left behind. That’s why one of her “guardrails” is also long-term unemployment, which has spiked to levels last seen in the first half of the 1990s. Evidence shows that the longer people spend on the sidelines of the economy, the harder it is to get back in. Economists call it “scarring.” Freeland has pledged to spend heavily so the economy heals before such scars become permanent.

Read : Bianca Bharti reports on the factors that could complicate the summer rebound on which everyone is counting.

Bloomberg News : Trudeau government’s generous financial aid has become a key lifeline for the economy.

More from Bloomberg : Higher earners biggest beneficiaries of Trudeau’s pandemic aid.

 

Macklem’s Dashboard

Tiff Macklem completed the first year of his seven-year term on June 3. A year earlier, he oversaw the release of an interest-rate decision on which he played no official part. Last week, he would have been huddled with his deputies, deciding whether their current interest-rate stance needed tweaking ahead of a scheduled update on June 9. Hopefully someone at the central bank thought to mark the occasion. If they didn’t, Macklem still probably went home satisfied on Friday, as a big week of economic data supported his decision to look past the recent spike in inflation and let the economy run hot.

Like Freeland, Macklem says he is watching a “broader set of indicators” than the headline numbers that attract the most attention, such as the national unemployment rate. He’s been coy about what his dashboard looks like, however, so we’re forced to guess.

Since the Bank of Canada itself has flagged the gap between youth unemployment and the jobless rate of workers who are older than 25, we assume that’s an indicator that the governor cares about. It continues to flash red.

The central bank also has made note of how high-wage workers are doing better than those at the lower end of the pay scale. If Macklem intends to do his part to narrow that gap, he will have to leave interest rates low for longer yet, according to Statistics Canada’s latest Labour Force Survey .

From the archives : Bank of Canada governor indicates readiness to let economy run hot to include more people in recovery.

Too much house

You might have heard of fiscal dominance . That happens when the public debt and deficit get so big that the central bank feels compelled to keep borrowing costs low to help the government avoid bankruptcy, rather than let itself be guided by economic conditions. Some think Bank of Canada Tiff Macklem is already being bullied by Prime Minister Justin Trudeau’s deficits. Macklem dismisses those charges, saying policy-makers have learned real-world concerns such as long-term unemployment deserve more attention than theoretical threats that are scarier in textbooks than in real life.

A bigger concern for Canada might be real-estate dominance. Statistics Canada’s latest tally of gross domestic product on June 1 shows that residential investment has rarely been a bigger part of the overall economy. That’s great for real-estate brokers, but bad for competitiveness, because it suggests that houses are becoming a magnet for precious investment dollars that could be put to more productive uses. As Evan Siddall, the former head of Canada Mortgage and Housing Corp., tweeted in April, “Housing is mining our economic future.”

 

An international comparison might be helpful. Australia, another small and open economy that relies heavily on commodity exports, often makes a good foil for Canada. The Aussies have also shown a love of housing over the past decade, as Australian cities often show up alongside Canada’s bigger urban centres atop lists of the most expensive real estate on the planet . Australia also published first-quarter GDP figures last week. The chart below shows what investment looks like Down Under compared with what’s happening up here in the North. Australian policy-makers might want to nudge their entrepreneurs and executives to get more excited about intellectual property, a proxy for innovation in the digital economy. But it’s hard to look at those bars and avoid the conclusion that Canada is buying way too much house.

Kevin Carmichael : Disappointing GDP growth offsets worries central bank, governments are overdoing it

Read : Canada’s economy grows 5.6% — but it would have been worse without the housing boom

_____________________________________________________________

 For more great stories sign up for FP Economy Newsletter.

_____________________________________________________________

• Email: kcarmichael@postmedia.com | Twitter:

Read More

Continue Reading

Spread & Containment

COVID-19 may never go away, but practical herd immunity is within reach

It is unlikely that we will reach full herd immunity for COVID-19. However, we are likely to reach a practical kind of herd immunity through vaccination.

The level of immunity needed — either through vaccination or infection — for practical herd immunity is uncertain, but may be quite high. (Shutterstock)

When people say that we won’t reach “herd immunity” to COVID-19, they are usually referring to an ideal of “full” population immunity: when so many people are immune that, most of the time, there is no community transmission.

With full herd immunity, most people will never be exposed to the virus. Even those who are not vaccinated are protected, because an introduction is so unlikely to reach them: it will sputter out, because so many others are immune — as is the case now with diseases like polio and mumps.

The fraction of the population that needs to be immune in order for the population to have “full” herd immunity depends on the transmissibility of the virus in the population, and on the control measures in place.

It is unlikely we’ll reach full herd immunity for COVID-19.

For one thing, it appears that immunity to COVID-19 acquired either by vaccination or infection wanes over time. In addition, SARS-CoV-2 will continue to evolve. Over time, variants that can infect people with immunity (even if this only results in mild disease) will have a selective advantage, just as until now selection has mainly favoured variants with higher transmission potential.

Electron micrograph of a yellow virus particle with green spikes, against a blue background.
The B.1.1.7 variant of the SARS-CoV-2 virus. Over time, variants of concern will likely continue to emerge. NIAID, CC BY

Also, our population is a composition of different communities, workplaces and environments. In some of these, transmission risk might be high enough and/or immunity low enough to allow larger outbreaks to occur, even if overall in the population we have high vaccination and low transmission.

Finally, SARS-CoV-2 can infect other animals. This means that other animal populations may act as a “reservoir,” allowing the virus to be reintroduced to the human population.

Practical herd immunity

Nonetheless, we are likely to reach a practical kind of herd immunity through vaccination. In practical herd immunity, we can reopen to near-normal levels of activity without needing widespread distancing or lockdowns. This would be a profound change from the situation we have been in for the past 18 months.

Practical herd immunity does not mean that we never see any COVID-19. It will likely be with us, just at low enough levels that we will not need to have widespread distancing measures in place to protect the health-care system.


Read more: COVID-19 variants FAQ: How did the U.K., South Africa and Brazil variants emerge? Are they more contagious? How does a virus mutate? Could there be a super-variant that evades vaccines?


What level of immunity (either through vaccination or infection) we need for practical herd immunity is uncertain, but it may be quite high. The original strain of SARS-CoV-2 was highly transmissible and transmission is thought to be higher still for some variants of concern.

Empty vials of Pfizer's COVID-19 vaccine
To achieve two-thirds immunity, 90 per cent of the eligible population would need to be vaccinated or infected naturally. (AP Photo/John Locher)

The amount of immunity we need will also depend on what level of controls we are willing to maintain indefinitely. Continued masking, contact tracing, symptomatic and asymptomatic testing and outbreak control measures will mean we will require less immunity than we would without these in place.

Some estimates suggest that we may need two thirds of the population to be protected either by successful vaccination or natural infection. If 90 per cent of the population is eligible for vaccination, and vaccines are 85 per cent effective against infection, we can obtain this two thirds with about 90 per cent of the eligible population being vaccinated or infected naturally.

The United Kingdom has already exceeded these rates in some age groups. Higher rates are even better, because there is still uncertainty about the level of transmissibility and vaccine efficacy against infection (although research shows they are very good against severe disease). We don’t want to discover that we do not have enough immunity through vaccination and have another serious wave of infection.

Emerging variants

A sticker reading 'I'm COVID-19 vaccinated' from Vancouver Coastal Health
Booster vaccinations will hopefully allow us to maintain long-term practical herd immunity against future variants of COVID-19. THE CANADIAN PRESS/Jonathan Hayward

Higher vaccine uptake will mean there are fewer infections before we reach practical herd immunity. The remaining unvaccinated individuals will be safer, protected indirectly by the immunity of those around them. Outbreaks will be smaller and rarer, and there will be fewer opportunities for vaccine escape variants to arise and spread.

That said, variants of SARS-CoV-2 will continue to emerge, and selection will favour variants that escape our immunity. Vaccine developers will continue to broaden the spectrum of the vaccines that are available, and boosters will hopefully allow us to maintain long-term practical herd immunity.

It’s possible that an immune escape variant will emerge that is severe enough, and transmissible enough, that it will cause a new pandemic for which we do not have even practical herd immunity. But barring that, while we may not be free of COVID-19, we can be confident that in the not-too-distant future it will be manageable when we return to near-normal life.

Caroline Colijn's research group receives funding from the Natural Sciences and Engineering Research Council of Canada, Genome British Columbia, the Michael Smith Foundation for Health Research, the Public Health Agency of Canada and Canada 150 Research Chair program of the Federal Government of Canada.

Paul Tupper's research group receives funding from the Natural Sciences and Engineering Research Council of Canada.

Read More

Continue Reading

Stocks

Citadel Settles Suit Alleging Former Senior Trader Shared Its Algorithmic “Secret Sauce”

Citadel Settles Suit Alleging Former Senior Trader Shared Its Algorithmic "Secret Sauce"

Citadel has reached a settlement with the British hedge fund it accused of trying to plunder one of its senior traders in an effort to get to its algorit

Published

on

Citadel Settles Suit Alleging Former Senior Trader Shared Its Algorithmic "Secret Sauce"

Citadel has reached a settlement with the British hedge fund it accused of trying to plunder one of its senior traders in an effort to get to its algorithmic "secret sauce".

GSA Capital Partners LLC and Citadel announced the settlement late last week after Citadel accused the fund of obtaining "closely guarded" trading strategies when it hired the employee in question, Vedat Cologlu, according to Bloomberg. 

GSA said of the settlement that the two firms “recognize and respect the importance and value of the other’s rights over their confidential information and intellectual property.”

We first documented that Citadel was suing British hedge fund GSA Capital in January of 2020, after GSA attempted to hire Cologlu, allegedly in hopes of accessing the quant secrets at the core of Citadel's "ABC" automated trading strategy. 

Recall, we wrote back in November of 2020 that Citadel was seeking around $40 million over claims that GSA was able to obtain information on the strategy via texts and WhatsApp.

Citadel argued late last year that GSA "can't unsee" and can't forget the information that was taken from Citadel's secret algorithm. Citadel is also moving to try and block GSA from using their trading model. GSA has argued that they found no "secret sauce" from a high-level description of the structure of a trading algorithm. 

David Craig, a lawyer for Citadel Securities, said in late 2020: “GSA’s most senior managers now know where and how Citadel makes hundreds of millions of dollars in annual revenues. They cannot forget that information, or put it out of their minds.”

He noted that only 15 of Citadel's 3,000 employees ever had access to the "strategic logic" of the strategy. One of those employees was Cologlu, a 2007 Wharton grad and self-described "stat arb trader", who helped operate and administer the models whose "returns were notably high given the low level of risk it took on."

Citadel has claimed its "ABC" quant strategy cost more than $100 million to develop. In its lawsuit, Citadel alleged that the UK fund wanted Cologlu to hand over confidential information about the strategy:

GSA asked for sensitive information on his equity-trading including his profits and the speed of the trades. And then Cologlu handed over a plan that Citadel argues was based on its own confidential model, including the way the algorithm made predictions.

And there's good reason for the information to be coveted. Citadel Securities has been wildly profitable: the company posted a record $6.7 billion in revenue in 2020. This was almost double the previous high in 2018. The blockbuster result came after some of its traders moved from Chicago and New York to set up shop in a Palm Beach hotel in late March 2020 as the pandemic upended lives and markets across the globe. The results of the privately-held company were released in presentation to investors as part of a $2.5 billion loan Citadel Securities was seeking.

The Citadel securities trading arm started as a high-frequency market-maker in options before pushing into equities. Today, the firm dominates that realm and has had a very close relationship with the likes of the millennials' favorite trading platform, Robinhood. We documented back in September 2020 that Citadel now controls 41% of all retail trading. 

GSA was spun out of Deutsche Bank AG in 2005 and manages around $7.5 billion. Citadel’s legal filing names GSA founder and majority owner Jonathan Hiscox as a defendant, alongside other officials including the chief technology officer.

Back in January 2020, we noted the full details of Citadel's lawsuit. 

Tyler Durden Sat, 06/12/2021 - 14:00

Read More

Continue Reading

Spread & Containment

UK Government Adviser Says Mask Mandates Should Continue “Forever”

UK Government Adviser Says Mask Mandates Should Continue "Forever"

Authored by Paul Joseph Watson via Summit News,

A UK government adviser and former Communist Party member Susan Michie says that mask mandates and social distancing should…

Published

on

UK Government Adviser Says Mask Mandates Should Continue "Forever"

Authored by Paul Joseph Watson via Summit News,

A UK government adviser and former Communist Party member Susan Michie says that mask mandates and social distancing should continue “forever” and that people should adopt such behaviour just as they did with wearing seatbelts.

Michie, who is a Professor of Health Psychology at UCL and a leading member of SAGE, said such control measures should become part of people’s “normal” routine behaviour.

"Vaccines are a really important part of pandemic control but it is only one part. [A] test, trace and isolate system, [as well as] border controls, are really essential. And the third thing is people’s behaviour. That is, the behaviour of social distancing, of… making sure there’s good ventilation [when you’re indoors], or if there’s not, wearing face masks, and [keeping up] hand and surface hygiene."

"We will need to keep these going in the long term, and that will be good not only for Covid but also to reduce other [diseases] at a time when the NHS is [struggling]… I think forever, to some extent…"

"I think there’s lots of different behaviours that we have changed in our lives. We now routinely wear seatbelts – we didn’t use to. We now routinely pick up dog poo in the parks – we didn’t use to. When people see that there is a threat and there is something they can do to reduce that [to protect] themselves, their loved ones and their communities, what we have seen over this last year is that people do that."

Michie’s comments once again emphasize how many scientific advisers have become drunk on COVID-19 power and never want to relinquish it.

“Unsurprisingly, Channel 5 News made absolutely no effort to scrutinise these claims. The programme’s presenter raised no objection to the idea that mask-wearing and social distancing could continue “forever”, resorting only to friendly laughter,” writes Michael Curzon.

“Professor Michie’s co-panellist, a fellow scientist at UCL, Dr Shikta Das, said:

“I think Susan has made a very good point here,” adding that the vaccine roll-out has created a “false sense of security”.

She concluded:

“I don’t think we are yet ready to unlock.”

How’s all that for balance!

Perhaps unsurprisingly, Michie is known to be a long-time Communist hardliner and was so zealous in her beliefs she garnered the nickname “Stalin’s nanny.”

Her sentiment echoes that of fellow government adviser Professor Neil Ferguson, who once acknowledged that he was surprised authorities were able to “get away with” the same draconian measures that Communist China imposed at the start of the pandemic.

“[China] is a communist one-party state, we said. We couldn’t get away with [lockdown] in Europe, we thought… and then Italy did it. And we realised we could,” said Ferguson.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

*  *  *

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, I urgently need your financial support here.

Tyler Durden Sat, 06/12/2021 - 11:30

Read More

Continue Reading

Trending