October 7, 2008
Don't rock boat, Capt. Ed
Here's hoping preem's team guides Alberta through whirlpool of financial markets
By NEIL WAUGH
On a day when the Toronto Stock Exchange crashed 1,200 points - or rebounded 572 ticks depending on what kind of a market mammal you are - Premier Ed Stelmach issued the following words of wisdom:
"We're holding firm," the premier vowed as the bears and the bulls were battling it out on the worst trading day since the computer-driven madness of Black Thursday.
"We'll be OK," he added.
And a quick glance at the first quarter budget update that Finance Minister Iris Evans released on Aug. 26 only adds to Stelmach's "why worry be happy" frame of mind.
In it she predicted that resource revenues will be an incredible $7.1 billion more than her spring guesstimate. Oil royalties - which were hardly going to beat the VLT take this year - were expected to jump $3.5 billion based on a new oil price assumption of $119US a barrel.
So big was the bonanza that the premier announced plans to scoop $4 billion out of the revenue fund to subsidize oil company carbon sequestration schemes and build rail transit in cities.
Of course, the stockies weren't the only ones feeling the heat yesterday.
In the commodity pits, oil traded as low as $87.81US yesterday, which is getting dangerously close to the $78 that the original budget was built on.
Although, natural gas and bitumen from the oilsands are now Alberta's most important natural resource revenue getters.
Now there's word that Evans has been huddling with her finance department money-crats.
The legislature smart guys tell me a third version of her 2008-09 budget may be in the works, especially when she held firm on her net Heritage Trust Fund income at $774 million.
This is based on a "fair value" of $17.1 billion as of June 30.
I wonder what it's worth these days?
As of now, Stelmach's much-delayed royalty reforms are still in the works and will be included in the legislative lineup when Government House leader Dave Hancock releases his list as early as Thursday.
But you can almost guarantee a last-minute push back from Big Oil to delay implementation of the "fair-share" law until the economic dust settles.
That may take a while after Auditor General Fred Dunn issued a warning to Alberta's financial sector last week, taking specific aim at the province's new superfund AIMCo over its real estate evaluations.
When you have $5 billion worth of property on the books, they better get it right.
Dunn also took a shot at ATB brass and the government bank's cabinet-appointed board of Tory good old boys and girls, after getting caught with $1.1 billion in the "asset-backed commercial paper" (ABCP) boondoggle and forced to take a $253 million provision for loss.
The patronage-appointment boards of the University of Alberta and University of Calgary also had ABCP losses of $41 million and $16 million.
Yesterday the Bank of Canada rode to the rescue with a $4-billion emergency bail-out package, allowing banks to use their all-but-worthless ABCP as an "eligible security" on what the B of C statement calls a "temporary basis."
Meanwhile ATB CEO Dave Mowatt goes on the legislature barbecue tomorrow morning - thanks to the excellent work of Edmonton Liberal MLA Hugh MacDonld who revealed that Stelmach's bizarre bank board showered Mowatt with $1.2 million in perks, performance bonuses and benefits above his already-hefty $406,000-a-year salary at a time when ATB was losing millions on the dodgy ABCP market.
"It's not limited to ATB Financial," Dunn warned. "It's all financial institutions who are dealing with real estate where there is high leverage."
Last week the Edmonton Real Estate Board issued its September stats.
Since last May's peak of $426,028, Edmonton's single family dwelling average has dumped $63,931 or 15% of value.
The equity hemorrhage on the Calgary Real Estate Board since the July, 2007 SFD high of $505,920 is $61,872 or 12.2%.
"Alberta is well prepared to ride out any difficulties in the markets," Stelmach reassured. Here's hoping.
