Tattva, keen student of the Canadian economic, property and loan/mortgage scene, writes

Over the coming weeks Tattva would like to share his perspective on Canada - provided of course the great and wise RJH (you gotta humour him) allows me to. In which case it’s a case of “dearly beloved we are gathered here today to join RJH and Tattva in holy blogship”. [Editor: I must be a soft touch to put up with this].

Why would anyone care about, as Homer Simpson puts it, “America Junior”? Although Canada represents only 3% of the world’s stock market capitalization and does 87% of its trade with the US, it does have some huge attractions. [Editor: Pamela Anderson gag censored in the interests of good taste. But I did like it.] But seriously, it is one of the few countries running budget surpluses, has relatively cheap real estate and, as noted previously in Capital Chronicle, good growth prospects in wireless telecommunications. And that's but a few of the country's current attractions - there's also the politicians with a sense of humour to consider.

Interest Rising
RJH, amongst other things, asked for my views on the Canadian interest rate cycle. Are rates rising or falling? Did the Federal Government surplus imply downward pressure? Is the property sector generating decent yields? Take a deep breath, RJH, and calm down! Even my partner lets me get a word in edgewise. Well, sometimes anyway.

My definitive answer is yes and no [Editor: definitive? Imagine working with him]. Barring unexpected 9/11 type shocks the only way is up for interest rates. And no, I don’t believe the surplus will trigger interest rates reductions. There's also the pressure on the minority government to think about - they will be drawn more and more to bribing the electorate (sorry, please read "fulfilling promises") by increasing health and education spending and through tax cuts. This with the probable intent of calling a general election sometime in the next 24 months.

So ultimately these factors mean the debate really rests on when and by how much rates will rise. There are also the wildcards of Alan Greenspan’s interest rate decisions; the impact of oil prices; the strength of Canadian dollar; and the nation's economic growth.

[Editor: Don't know about everyone else, but I'm looking forward to Tattva's "definitive" guidance on the current attractions of the Canadian property sector.]

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