Whew! The holiday season is winding down, the whirlwind of festive parties is drawing to a close, the Christmas tree is losing its needles - and we’re looking toward the New Year! Frankly, it’s hard not to wonder where all the time went. Has it really been a year already?
Well, yes, it has, and we’ve combed through a year’s worth of financial news to prove it. It’s been said that you can’t know where you’re going until you know where you’ve been, and we think there are a few lessons to be found in the top financial stories from the past year. So let’s take a look at what happened in the world of money in 2012 …
1) Canadians take on even more debt
Last year, we reported that Canadian personal debt levels hit the six-figure mark for the first time ever. We hoped you’d pay that down, we really did, but the problem with debt is that once it gets to a certain size, reducing it again can be a bit like trying to shove yourself back into your skinny jeans the morning of the new year (we all need a little wiggle room…). Indeed, Canadians’ personal debt inched up a bit each quarter in 2012, landing at a record of 164.6 percent of income in the third quarter of 2012. Experts say that while the pace of borrowing has slowed, this level of debt is over the top and could have real risks for future Canadian economic growth – not to mention personal economic growth. If you have a lot of debt, now’s the time to resolve to make it smaller in the coming year – for once, and for all. Seriously, people. This is one headline we’re getting really tired of writing about!
2) Fiscal cliff diving
We Canadians like to think that if the U.S. jumps off a bridge, we’re smart enough to wave politely from a distance. Unfortunately, if our rowdy southern neighbors step off the fiscal cliff, our economy may topple right along with theirs. This so-called “cliff” refers to the December 31st deadline in the United States at which time a number of important tax cuts expire and several government spending cuts go into effect. The problem this will produce isn’t so much a cliff as a gap between federal spending and federal revenue.
Sounds like government business as usual, right? In a way, it is. But we can probably all agree that if revenue and expenses aren’t matching up, something’s gotta give. The problem is that the “solutions” to the fiscal cliff have become a tug-of-war in the U.S. Congress, largely because they fall squarely between “deepen the recession” and “increase the federal debt.” And according to Canadian Finance Minister Jim Flaherty, that’s bad news for Canadians. As much as we like to think of ourselves as the “true North strong and free,” the reality is that when the American economy takes a hit, we end up sharing the pain.
3) RIM to the rescue
In some better news, recent reports about Blackberry maker Research in Motion (TSX:RIM.TO - News) suggest it could be on track to becoming the market’s version of “Miracle on 34th Street.” We can hardly believe it ourselves, but that once-successful tech company we’ve been rooting for may still have a few tricks up its sleeve. Don’t get us wrong: RIM has been losing market share in a mass exodus kind of way – 68 percent of it since 2010, according to Gartner. Even so, its subscriber base increased by 2 million in the third quarter, bolstering the one source of revenue that’s essentially keeping the company afloat. Plus, as a result of its announcement of the release of its much anticipated BB10 operating system, RIM shares were bumped up toward a 52-week high by mid December. These small positives are working to buy RIM some time; if BB10 - which is to be released early in the New Year - turns out to be the bomb, it might just keep this company from blowing up.
4) U.S. redraws world oil map
For years, the U.S. has been looking to reduce its dependence on foreign oil, while Canada jockeys to build more pipelines to prevent fuel famine. But while it looks like the U.S. may get its wish – and soon – Canada may not be the one pumping it out of the ground. In 2012, the U.S. struck black gold in a big way thanks to technological advances that have allowed crude to be tapped in new places, such as North Dakota, Colorado and even Florida. These reserves are believed to be so vast, they swamp all the supply of OPEC. According to U.S. energy analysis firm Bentek, this means that the U.S. could see its oil production rise by nearly 75 percent over the next 10 years. And sadly, the laws of supply and demand suggest that this could leave Canada struggling against a tide of U.S. oil in order to sell its own crude, both in the U.S. and abroad.
5) Canada tightens lending requirements, housing market cools
If you didn’t apply for a mortgage this year (and perhaps even if you did), you might not have noticed that the federal government announced new mortgage rules over the summer in an effort to cool down the housing market. For many homebuyers, these changes won’t even pinch, but they will make it harder for Canadians to overextend themselves by shortening the maximum length of mortgage amortization to 25 years, increasing the minimum down payment on homes that cost more than $1 million, and reducing the maximum amount of a home equity loan to 80 percent of property value, compared to 85 percent.
Yes, more rules mean fewer people can qualify for a mortgage, but we’d venture to say that while having a home of your own can be priceless, that only rings true when you can really afford to pay for it.
6) Canadian Olympians start funding drive for 2016
If there was one big news event in 2012, it had to be the 2012 Summer Olympics in London – and the reigniting of the debate surrounding Canadian Olympic funding. Canadian Olympians brought home 18 medals, and only one Canadian athlete – trampoline gymnast Rosannagh MacLennan – brought home the gold. And as proud as we were of these victories, many of us couldn’t help but feel a little disappointed that there weren’t more wins to celebrate.
Why is this a financial story, you might ask? Because a significant portion of the money Olympic athletes use to train and improve their skills comes from the federal government. In fact, taxpayers are the main financial supporters of Olympic and Paralympic athletes. According to Canada’s sport minister Bal Gosal, the federal government spends about $200 million each year on sport.
In 2016, the Olympic Games will be held in Rio de Janeiro. So, rather than waiting to complain about the presence of Canadian athletes at the podium (or lack thereof) in Brazil, start thinking about this now: How much is a gold medal worth to you? Don’t our athletes deserve more? And how much are you willing to pay for it?!
7) The Bay launches a comeback
Canada’s oldest company has largely faded from the news in recent years, but in 2012, the old fur trading company proved that it’s still kicking. In October, the Hudson’s Bay Company announced its latest attempt at a comeback by filing a preliminary prospectus for an initial public offering of its shares. It’ll be the first time the stock has traded publicly since 2006, when The Bay was taken private by U.S. businessman Jerry Zucker. But while the company is looking to grow its brand – and profits – into the future, it isn’t throwing away its fur trading roots; part of the company’s plans include building out its HBC signature line, known for the iconic Hudson’s Bay stripes.
What can we learn from it all?
A year in financial news can sometimes feel like your standard action movie: There are ups and downs, but at the end of it, it’s hard to say what the point of it all was. Overall, Canada still sits in a better financial position than the United States, and is certainly faring better than many ailing countries in Europe. That’s something to be grateful for, but that doesn’t mean it’s time to get complacent. Some of the warning signs of financial problems are still on the horizon, which suggests that 2013 may be a good time for Canadians to clean up their acts when it comes to spending. Indeed, if the problems in other countries have taught us anything, it’s that the good times can’t last forever; when the tide of good fortune goes out, those who failed to prepare will be left high and dry - and waiting for rescue.
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