Top of the Morning
In a special to the Globe and Mail, Christopher Ragan, professor of economics at McGill University, explains why textbooks are so pricey:
Why does a 500-page textbook in economics or cell biology or calculus cost $150, and sometimes much higher, while similarly sized “trade” books cost only $40 or less?…
First, because professors and students rely on textbooks as authoritative sources of information, they are subjected to an extensive reviewing process. My own textbook gets reviewed by roughly 30 economics professors at various points of the process, and all of them are paid for their services. Most trade books do not have reviewing processes anywhere near as rigorous. This difference costs money.
Second, if you flip through today’s textbooks, you see high-quality paper, sophisticated design in full colour, and complex graphing and photographs. The production values are very high. In contrast, your typical trade book is just simple text on relatively cheap stock. This difference requires much time and effort – and therefore money.
The third reason, according to Ragan, is that publishers compete on quality and features, rather than cost.
On the Homefront
TSX 60 futures are modestly higher ahead of the open after the composite index ended Monday well in the red. A strong U.S. dollar pressured oil and gold, as such, many of the TSX-listed companies that tend to move in tandem with these commodities suffered.
The loonie is relatively flat against the greenback this morning, with USDCAD hovering above 1.097 (1 CAD = 0.9115 USD).
UPDATE: The loonie was substantially lower by the time the market opened, trading around 0.908 relative to the greenback (USDCAD = 1.101).
Housing starts set to moderate. After breaking above 200,000 in July for the first time in 2014, economists are looking for housing starts to dip to a seasonally adjusted and annualized rate of 195,000 in August. However, those estimates came before July’s building permits soared double digits on a monthly basis, defying expectations for a drop of five per cent. The Bank of Canada’s call that activity in the housing sector is stronger than anticipated looks prescient in light of the latest read on permits — and concern about the possibility of an overheated market will only grow if starts continue to linger above the 200,000 mark. “The Canadian housing market, buoyed by continued low interest rates, refuses to give up any significant ground,” writes CIBC economist Nick Exarhos. “The housing market will continue to merit a watchful eye, as average starts are to only drop slightly from their current pace from here to the end of the year.” The Canada Mortgage and Housing Corporation (CMHC) will release August’s figures at 8:15 a.m. (EDT).
UPDATE: Starts fell to 192,400 in August, with a rise in the west partially offsetting a drop in the east.
CMHC said to be mulling a game-changer. The Financial Post‘s Garry Marr reports that the crown corporation is considering forcing banks to pay a deductible on mortgage insurance. Under the current set-up, high loan-to-value borrowers (those with a downpayment less than 20 per cent of the value of the home) are required to purchase mortgage insurance, ultimately, the federal government serves as a backstop for these loans. This change would mean that lenders would incur some losses if a borrower was unable to pay off his or her principal and interest, rather than the mortgage insurer bearing all of the losses. Earlier in the year, Evan Siddall, CEO of CMHC, told the Globe and Mail‘s Boyd Erman and Tara Perkins that a deductible would be a “pretty good idea.” Ben Rabidoux, president of North Cove Advisors, believes this change would be prudent, but doubts it will be enacted. He notes that this move would have disruptive ripple effects, including a negative impact on a bank’s return on equity and higher mortgage rates for consumers.
Encana selling the rest of its stake in PrairieSky. After the close on Monday, natural gas giant Encana (ECA) announced that it will be selling its 60 per cent stake in PrairieSky (PSK) this month in a bought deal that will generate proceeds of $2.6 billion. In late May, Encana spun off these royalty assets in an IPO that was met with high demand from investors, with the stock opening 25 per cent above its IPO price. At $36.50, this secondary offering is priced at a 30 per cent premium to the IPO price of $28, but at a four per cent discount to PrairieSky’s closing price on Monday. Analysts at Canaccord believe Encana will use these proceeds to make a large acquisition.
Canadian miners make acquisitions. After the close on Monday, Agnico Eagle Mines (AEM) revealed its intention to buy Mexican miner Cayden Resources for $205 million in cash and stock (heavily tilted towards the latter). “This acquisition is consistent with our long-term strategy of acquiring promising, early-stage gold projects where we can add value through focused exploration and mine building,” said Agnico President and CEO Sean Boyd. Separately, Taseko Mines (TKO) announced that it will purchase Curis Resources for approximately $80 million in stock, a deal that gives the company access to a large copper play in Arizona after its copper and gold project in British Columbia was rejected by Ottawa in February.
Another poll on the upcoming Scottish referendum shows the Yes and No sides in a dead heat. In a TNS poll that showed a “remarkable shift in voting intentions,” according to the regional head of the research agency, 39 per cent of respondents expressed support for unity and 38 per cent favour autonomy, with the remainder undecided. “Some leaders have started making promises to Scotland if they vote against independence, which just shows the level of panic setting in,” writes IG market strategist Stan Shamu. “Until a concrete plan emerges and we get more clarity of a shift in momentum in the polls, cable [the British pound relative to the U.S. dollar] is likely to remain under pressure.”
A mixed set of data from the United Kingdom was released overnight, with the monthly rise in industrial production beating expectations in July, though the country did report a wider than anticipated trade deficit for the month. In a speech delivered to members of a labour union, Bank of England governor Mark Carney said, “The point at which interest rates also begin to normalize is getting closer,” and hinted that a rate hike was likely to come in the spring.
Japanese consumer confidence unexpectedly dipped to 41.2 in August from 41.5 in the previous reading. In a separate release, tertiary industry activity was unchanged on a monthly basis in July, and revised figures showed that June’s figures were also flat. After an impressive launch, the success of Abenomics appears to have been derailed by raising the sales tax in April, so much so that one of the prime minister’s key advisers has called for the government to postpone an additional sales tax hike scheduled for October 2015.
An updated reading on one of Janet Yellen’s favourite labour market indicators is due out this morning. The Job Openings and Labour Turnover Survey (commonly known as the JOLTS report) is expected to show that job openings rose to 4.7 million in July, a sign that the labour market south of the border continues to firm.
The big iDay has arrived. At 1:00 p.m. (EDT), Apple will host its first major product launch event of the year. The media frenzy will be fierce — and with good reason. Business Insider‘s Steve Kovach has a look at what we can expect Tim Cook to unveil: two new iPhones with larger screens, a mobile payments system (which effectively renders your credit card — or more accurately, the need to carry it around — obsolete), and information about the launch dates for its new operating systems. However, the highlight is expected to be Apple’s foray into the world of wearable tech via an iWatch. This would mark the tech giant’s first notable new product category since the iPad and the passing of Steve Jobs. If the iWatch proves to be half as indispensable as the iPhone, this would be enough to prove that Apple is still able to innovate without its visionary co-founder.