Author: Consultant

Canadian home prices fell 0.3 per cent in February from January, as prices dropped in seven of the 11 major markets, Teranet–National Bank National Composite House Price data showed on Friday.

The index, which tracks repeat sales of single-family homes in major Canadian markets, showed that the monthly decline – led by price drops in Toronto and Calgary – was smaller than the 1.1 per cent decrease recorded in January over December.

The prices – which are not seasonally adjusted – rose in four cities including Vancouver and Victoria, both in the western province of British Columbia.

Home prices fell by 4.7 per cent in February compared to February 2022, marking the second consecutive year-over-year decline, National Bank of Canada economist Daren King said in a statement.

The Teranet index tracks closings, so it typically lags realtor sales data by three to five months.

• The Federal Reserve likely will approve a quarter-percentage-point interest rate increase next week, according to market pricing and many Wall Street experts.
• A rate increase would come just over a week after the Fed other regulators rolled out an emergency lending facility to halt a crisis of confidence in the banking industry.
• “This might be one of those times where there’s a difference between what they should do and what I think they will do. They definitely should not tighten policy,” said Mark Zandi, chief economist at Moody’s Analytics.

https://www.cnbc.com/2023/03/17/fed-poised-to-approve-quarter-point-rate-hike-next-week-despite-market-turmoil.html

CNN — 

In the first day after it was unveiled, GPT-4 stunned many users in early tests and a company demo with its ability to draft lawsuits, pass standardized exams and build a working website from a hand-drawn sketch.

On Tuesday, OpenAI announced the next-generation version of the artificial intelligence technology that underpins its viral chatbot tool, ChatGPT. The more powerful GPT-4 promises to blow previous iterations out of the water, potentially changing the way we use the internet to work, play and create. But it could also add to challenging questions around how AI tools can upend professions, enable students to cheat, and shift our relationship with technology.

GPT-4 is an updated version of the company’s large language model, which is trained on vast amounts of online data to generate complex responses to user prompts. It is now available via a waitlist and has already made its way into some third-party products, including Microsoft’s new AI-powered Bing search engine. Some users with early access to the tool are sharing their experiences and highlighting some of its most compelling use cases.

Here’s a closer look at the potential of GPT-4:

Analyzing more than text

At its core, the biggest change to GPT-4 is its ability to work with photos that users upload.

One of the most jaw-dropping use cases so far came from an OpenAI video demo that showed how a drawing could be turned into a functional website within minutes. The demonstrator uploaded the picture into GPT-4 and then pasted the resulting code into a preview that showed how it could be a working website.

In its announcement, OpenAI also showed how GPT-4 was asked to explain a joke from a series of images — which featured a smartphone with the wrong charger — and described why it was funny. While it might sound straightforward, dissecting a joke is more complicated for artificial intelligence tools to pick up on because of needed context.

In another test, The New York Times showed GPT-4 a picture of the interior of a refrigerator and prompted it to come up with a meal based on the ingredients.

The photos feature isn’t live yet, but OpenAI is expected to roll it out in the upcoming weeks.

Coding made even easier

Some early GPT-4 users with very little to no prior coding knowledge have also used it to recreate iconic games such as Pong, Tetris or Snake after following step-by-step instructions provided by the tool on how to do so. Others have made their own original games. (GPT-4 can write code in all major programming languages, according to OpenAI.)

“The powerful language capabilities of GPT-4 will be used for everything from storyboarding, character creation to gaming content creation,” said Arun Chandrasekaran, an analyst at Gartner Research. “This could give rise to more independent gaming providers in the future. But beyond the game itself, GPT-4 and similar models can be used for creating marketing content around game previews, generating news articles and even moderating gaming discussion boards.”

Similar to gaming, GPT-4 could change the way people develop apps. One user on Twitter said they made a simple drawing app in minutes, while another claimed to have coded an app that recommends five new movies every day, along with providing trailers and details on where to watch them.

“Coding is like learning how to drive — as long as the beginner gets some guidance, anyone can code,” said Lian Jye Su, an analyst at ABI Research. “AI can be a good teacher.”

Although OpenAI said the update is “less capable” than humans in many real-world scenarios, it exhibits “human-level performance” on various professional and academic tests. The company said GPT-4 recently passed a simulated law school bar exam with a score around the top 10% of test takers. By contrast, the prior version, GPT-3.5, scored around the bottom 10%. The latest version also performed strongly on the LSAT, GRE, SATs and many AP exams, according to OpenAI.

In January, ChatGPT made headlines for its ability to pass prestigious graduate-level exams, such as one from University of Pennsylvania’s Wharton School of Business, but not with particularly high marks. The company said it spent months using lessons from its testing program and ChatGPT to improve the system’s accuracy and ability to stay on topic.

Providing more precise responses

Compared to the prior version, GPT-4 is able to produce longer, more detailed and more reliable written responses, according to the company.

The latest version can now give responses up to 25,000 words, up from about 4,000 previously, and can provide detailed instructions for even the most unique scenarios, ranging from how to clean a piranha’s fish tank to extracting the DNA of a strawberry. One early user said it provided in-depth suggestions for pickup lines based on a question listed on a dating profile.

Streamlining work across various industries

Joshua Browder, CEO of legal services chatbot DoNotPay, said his company is already working on using the tool to generate “one click lawsuits” to sue robocallers, in an early indication of the vast potential for GPT-4 to change how people work across industries.

“Imagine receiving a call, clicking a button, [the] call is transcribed and 1,000 word lawsuit is generated. GPT-3.5 was not good enough, but GPT-4 handles the job extremely well,” Browder tweeted.

Meanwhile, Jake Kozloski, CEO of dating site Keeper, said his company is using the tool to better match its users.

According to Su at ABI Research, it’s possible we’ll also see major advancements in “connected car [dashboards], remote diagnosis in healthcare, and other AI applications that were previously not possible.”

A work in progress

Although the company has made vast improvements to its AI model, GPT-4 has similar limitations to previous versions. OpenAI said the technology lacks knowledge of events that occurred before its data set cuts off (September 2021) and does not learn from its experience. It can also make “simple reasoning errors” or be “overly gullible in accepting obvious false statements from a user,” and not double-check work, the company said.

Gartner’s Chandrasekaran said this is also reflective of many AI models today. “Let us not forget that these AI models aren’t perfect,” Chandrasekaran said. “They can produce inaccurate information from time to time and can be black-box in nature.”

For now, OpenAI said GPT-4 users should exercise caution and use “great care” particularly “in high-stakes contexts.”

PUBLISHED WED, MAR 15 20239:16 AM EDT

• Samsung Electronics said Wednesday it plans to invest 300 trillion Korean won ($228 billion) in a new semiconductor complex in South Korea.
• The move is part of a broader push by the South Korean government to boost its prowess in areas including chips, displays, batteries and electric vehicles.
• Samsung’s new facility will be part of a “semiconductor cluster” which the government says will be the largest in the world.

https://www.cnbc.com/2023/03/15/samsung-to-spend-228-billion-on-the-worlds-largest-chip-facility.html

The Canadian economy faces a challenging path forward, as the impact of higher interest rates is poised to weigh further on a highly leveraged consumer and an overextended housing market. In addition, with global recessionary pressures on the rise, Canada’s export dependency makes it vulnerable to external demand shocks.

But there are also some reasons to be positive: The Bank of Canada’s rate hikes are now on hold, and inflation is showing more signs of going off the boil. Furthermore, the Canadian dollar is cheap by historical standards (leading to improved international competitiveness), and strong immigration flows will serve as a tailwind to long-term growth prospects.

Therefore, while we expect equities to see continued selling pressure due to tighter financial conditions and rising recession odds, we believe long-term investors could use future periods of weakness to add to Canadian stocks, given their attractive valuations. That’s especially so for exporters and companies with high international exposure that stand to benefit from a weak currency.

In addition, in an environment of slowing growth and inflation – as well as a central bank that has moved to the sidelines – we believe long-dated government bonds are an attractive option.

The principal risk for the Canadian economy stems from just how vulnerable it is to higher interest rates. Unlike U.S. consumers, who deleveraged in the aftermath of the Great Recession, Canadians added to their debt load significantly. This dynamic is evident in the respective household debt-to-disposable income ratios: While it sits at 96.4 per cent in the U.S., down from a peak of 129.4 per cent in the recession, it is hovering near an all-time high in Canada, at 168.1 per cent.

Clearly, given this massive debt load, as well as the increase in interest rates, servicing this debt is becoming more of a challenge. The household debt service ratio is back to 14.3 per cent, up from a low of 12.5 per cent in the aftermath of the pandemic. With debt payments taking up an increasingly large chunk of incomes, this means less money available for consumer spending (especially discretionary expenditures).

Beyond the economy’s high sensitivity to interest rates via consumer spending, residential investment (the segment of the economy with the greatest response to changes in monetary policy) is still two standard deviations above its long-term average. From our standpoint, this suggests the housing market will continue to act as a headwind for growth – especially as mortgages are renewed at much higher rates (the typical mortgage term in Canada is five years, compared with 30 in the U.S.). The full impact of this is still to be felt.

Canada’s export dependency is also a clear negative in an environment where the risk of a global recession is very high and rising. Exports account for 34 per cent of GDP in Canada – roughly three times the percentage in the U.S. Therefore, this country is far more susceptible to global developments, so a worldwide economic downturn will be felt more acutely.

But inflation is showing clear signs of rolling over – and at a much quicker pace than is the case in the United States. Indeed, over the past three months, Canadian CPI – excluding food and energy – has grown at an annualized rate of 3.1 per cent, slowing from a peak of 7.7 per cent in May of last year; by way of comparison, over the same period, U.S. core CPI has grown at an annualized pace of 4.6 per cent.

The marked deceleration in Canadian inflation has gone a long way toward validating the Bank of Canada’s recent pause. Alongside a more dovish central bank – vis-à-vis the U.S. Federal Reserve – interest rate differentials have widened. This dynamic has weighed on the Canadian dollar, taking it to one standard deviation below its long-term average against the greenback. A weaker currency will improve Canada’s international competitiveness and serve as a key source of support for the country’s manufacturers and exporters. There are also likely to be positive long-term growth implications (via capital deepening) from a larger and more competitive manufacturing sector.

Finally, with Canada dramatically boosting its immigration levels – to offset declining fertility rates – the country is likely to see stronger labour force growth than the United States. By 2025, the annual immigration rate in Canada will be 12.5 per 1,000 residents, quadruple what the U.S. expects. This is another long-term positive for economic growth in Canada, although not without its share of challenges (housing affordability, which is already dire, is likely to become even more of a challenge). Consequently, the extent of the positive growth boost remains to be seen – and will ultimately depend a lot on policy solutions to deal with this population surge (increasing housing supply, etc.).

Bottom line: There are good reasons to be negative on the Canadian economy at the current time.But it isn’t all bad news: Inflation has rolled over sharply, allowing the Bank of Canada to move to the sidelines. This has resulted in widening interest rate differentials with the U.S., taking the Canadian dollar well below its long-term average.

Against this backdrop, notwithstanding the challenges facing the Canadian economy, we believe there are still good opportunities for investors. For starters, the easing of inflationary pressures and slowdown in economic activity – as well as the pause from the BoC – make long-dated government bonds very appealing.

Furthermore, for equity investors, the fact of the matter is there is already a lot of “bad news” embedded in current prices. After all, the TSX Composite Index trades at just 13 times forward earnings versus 18 times for the S&P 500 (whereas they have traded much more in line historically).

As a result, although we believe equities are likely to see continued downside (on tighter financial conditions/growing recession risks), we think the Canadian equity market has decent value for long-term investors.

However, in light of the weakness in the Canadian dollar, and the softness in domestic demand, we would be inclined to screen for companies that derive a high share of their revenues internationally.

David Rosenberg is founder of Rosenberg Research, 

Renewed unease gripped world markets on Wednesday as news that Credit Suisse’s largest investor said it could not provide the Swiss bank with more financial assistance sent its shares and broader European shares sliding once more.

Signs of calm and stability in banking stocks, that have tanked in the past week, following the collapse of Silicon Valley Bank (SVB), soon paved way for renewed selling as Credit Suisse shares fell to fresh record lows.

European shares were last down almost 2 per cent, European bank stock tumbled 2.5 per cent and U.S. stock futures fell 1 per cent.

Investors rushed back into safe-havens, with two-year German bond yields down 21 basis points at 2.71 per cent.

“The Credit Suisse share price is falling and government bonds are rallying on the back of that. Still very much driven by the perceived health of the banking sector, but this time in Europe,” said Antoine Bouvet, senior rates strategist at ING.

The European Central Bank is still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, given high inflation, a source close to its Governing Council told Reuters.

Asian equities rose, tracking Tuesday’s relief rally on Wall Street after U.S. inflation data delivered no nasty surprises, reinforcing hopes the Federal Reserve will go for a smaller rate hike when it meets next week.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 per cent, having slid 1.7 per cent on Tuesday. Japan’s Nikkei index was flat while an index of Japanese banks, which has slid 8 per cent this week, jumped over 3 per cent. In Hong Kong, the Hang Seng Index climbed 1.52 per cent.

But U.S. equity futures fell sharply as European banking stocks tumbled in an ominous sign for the Wall Street open.

Bruised U.S. bank stocks regained some ground on Tuesday aided by news that private equity and buyout giants were looking to scoop up some of SVB’s assets. That left investors hopeful that efforts to shore up confidence would avert a wider financial crisis.

Data on Tuesday showed U.S. consumer prices rose 0.4 per cent, with a year-on-year gain of 6 per cent – in line with analyst expectations. There had been worries that stronger-than-expected data might lead the Fed to go for jumbo-sized hikes to battle inflation.

As recently as last week, markets were braced for the return of large Fed interest rate rises but the swift collapse of SVB has changed those expectations, with markets pricing in an 80 per cent chance of a 25 basis point hike next week.

Also helping boost sentiment was data showing China’s economic activity picked up in the first two months of the year, driven by consumption and infrastructure investment, and signs the beleaguered property sector is starting to recover.

In Europe, where markets had also rapidly dialled back ECB rate-hike bets at the start of the week, traders were betting again on a big increase in euro zone borrowing costs on Thursday.

According to a Reuters report, a source close to the ECB Governing Council said the central bank was unlikely to ditch plans for a big rate move this week because that would damage its credibility.

“The ECB is behind (the U.S. Federal Reserve) in terms of a tightening cycle and has a lot to do,” said Jorge Garayo, senior rates and inflation strategist at Societe Generale.

“Core inflation,” he added, “is still at very, very elevated levels. So we will be very surprised to not see 50 basis points delivered by the ECB.”

Short-term bond yields, which typically move in step with interest rate expectations, were mixed on Wednesday.

Germany’s two-year yield was down 3 bps at 2.89 per cent, having fallen to as low as 2.43 per cent briefly on Tuesday.

The two-year U.S. Treasury yield was up 10 bps at 4.33 per cent, well off Tuesday’s six-month low of 3.83 per cent.

In currency markets, the dollar index, which measures the U.S. currency against six rivals, was flat at 103.74, with the euro also mostly steady at $1.0735.

Oil prices rebounded more than 1 per cent, coming back from three-month lows the previous session, due to a stronger OPEC outlook on China’s demand. Brent crude futures climbed 1.6 per cent to US$78.68 a barrel. U.S. West Texas Intermediate crude futures (WTI) gained 1.6 per cent to US$72.48.

– Reuters

• The consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations.
• A drop in energy prices helped keep inflation in check, while shelter costs increased sharply.
• The probability that the Fed would raise benchmark interest rates a quarter percentage point next week increased following the report.

https://www.cnbc.com/2023/03/14/cpi-inflation-february-2023-.html

CNN
—
On March 13, the Biden administration approved the controversial Willow Project in Alaska.

ConocoPhillips’ massive Willow oil drilling project on Alaska’s North Slope moved through the administration’s approval process for months, galvanizing a sudden uprising of online activism against it, including more than one million letters written to the White House in protest of the project and a Change.org petition more than 3 million signatures.

Here’s what to know about the Willow Project.

What is the Willow Project?
ConocoPhillips’ Willow Project is a massive and decadeslong oil drilling venture on Alaska’s North Slope in the National Petroleum Reserve, which is owned by the federal government.

The area where the project is planned holds up to 600 million barrels of oil. That oil would take years to reach the market since the project has yet to be constructed.

Who started the Willow Project and when?
ConocoPhillips is a Houston-based energy company that has been exploring and drilling for oil in Alaska for years. The company is the only one that currently has oil drilling operations in Alaska’s National Petroleum Reserve, though its two operating projects are smaller than Willow would be.

https://edition.cnn.com/2023/03/14/politics/willow-project-oil-alaska-explained-climate/index.html

This a CNN posting – Beware of bias!

• Canada has one of the largest deposits of minerals that are essential to manufacture of electric cars.
• “We see today that, for example, China produces 98% of Europe’s supplies of rare earths,” European Commission President Ursula von der Leyen said earlier this month.
• The G-7 group of advanced economy announced in December a plan to ramp up the production of these minerals.

https://www.cnbc.com/2023/03/14/canada-is-aiming-to-beat-china-in-the-critical-race-for-rare-earth-metals-.html