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Petch: The New "GOLDilocks" Economy
by David Petch
November 11, 2007

This article was originally published for the benefit of subscribers on November 4, 2007.

The story of "Goldilocks and the Three Bears" initially began with a cute little girl having golden hair curiously walking into the house of the three bears and being scared out after a rude awakening. The new and revised economic version of "GOLDilocks and the Three Bears" is somewhat different. The modern version goes something like this: GOLDilocks (AKA gold) walks into the lair of the three bears (AKA Nasdaq, DOW and S&P 500 Indices in a bear market, yes, the pun is severely intended) and scares them out. The things that GOLDilocks "did" to metaphorically make them leave their lair are discussed below. The traditional view of the Goldilocks economy is being rewritten during these times.

The big news last weekend was CitiGroup temporarily withholding dividend payments and having an emergency meeting to determine how to correct or "cover up" any derivative problems. Up here in Canada, we might think we are immune to the derivative scandal, but the Ontario Teachers Pension Fund, the Quebec Pension fund (others I have not been able to find much more information about) and some Canadian banks such as BMO have some involvement in the bad credit many US banks spread around the globe. BMO is reported to have the largest exposure to the US SIV market than any other Canadian bank. Apparently, BMO raised 22 billion in August to strengthen their balance sheet in the event that any "problem" may arise. It appears that Canadian banks are much more conservative than the US banks south of the border that would grant loans to immigrant workers who lied about their income. Granted, there will be some pain, but the solvency of banks up here in the Great White North are likely to be well ahead of the curve with respect to many US banks that are set to implode.

More...http://www.safehaven.com/article-8801.htm