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It started with white knuckles and screams and ended with a scramble for coins dumped from others’ pockets.

The latest roller-coaster week on world stock markets left us thrilled, poorer and still wondering: Will our midway hosts – the American consumers – keep spending their way to happiness?

But some dramatic moves by decision makers in the United States administration to shore up their economy helped Toronto’s S&P/TSX composite index coast back to 12,894.83 points, a shade ahead of where it ended last Friday and where it started 2007.

It had a better week than most other major markets.

Market indices fell by 6.8 per cent in Germany and by 4.2 per cent in France, where embarrassed bank executives at Soci?t? G?n?rale SA attributed more than $7.3 billion in losses to unauthorized trading by a single rogue employee.

U.S. markets finished only a fraction of a percentage point lower, but a weakening of the American dollar resulted in a 2 per cent loss for Canadians invested in the S&P 500 index.

Washington’s central bankers and politicians provided some hope by pulling out their credit cards.

As economists chopped their forecasts for economic growth, America’s decision-makers moved to slash interest costs, cut taxes and raise mortgage insurance limits to include pricier homes.

They proved once again that they would rather put a floor under their slumping home and stock prices than protect the buying power of their tattered dollar, and risk knocking their economy off the rails like Japan did in the 1990s.

Small wonder then it was gold miners and a supplier of fertilizer poised to benefit from the fuel-from-food graspers that led Toronto in a broad-based recovery after the heart-thumping slides of Monday and Wednesday morning.

Gold prices rose as the U.S. dollar dipped, and an index of major Canadian gold stocks rose by 7 per cent over the week. The S&P/TSX composite index finished up 1.24 per cent from the previous week, when falling prices wiped out all of the index’s gains from 2007.

The Toronto Star’s technicial analyst Bill Carrigan predicted the start of a recovery for stocks early Wednesday, before a turnaround by the Toronto market that afternoon. He declared the global selling panic that took Toronto for a quick ride down 4.5 per cent on Monday likely ended the recent period of declines.

But market strategists at BMO Harris Private Banking and others predicted later in the week that stock markets could continue their recent swoons and swoops into the summer, while all eyes remain fixed on the slowing U.S payday advances. economy.

Jack Ablin, chief investment officer at Harris Private Bank in Chicago, told reporters that producer prices are pointing to a slowdown in the U.S., and that home prices there have only fallen a third to half of the 15 per cent decline his group was forecasting more than a year ago.

He said a slowdown will depress U.S. company profits to a gain of perhaps 3 per cent from 2007, and reduce demand and prices for Canada’s natural resources. Meanwhile, investors will be nervous about a spike in mortgage foreclosures and a deterioration in the health of U.S. financial institutions.

Ablin said his group had estimated that U.S. stocks entered 2008 about 10 per cent overvalued if there was to be only slow profit growth. The S&P 500 finished the week down 9.38 per cent at 1,330.61 points.

It will take time for the Federal Reserve Board’s three-quarters of a percentage point reduction in its funding interest rate for deposit banks – and possibly a further half-point cut next week – to pull the U.S. out of its stall.

Meanwhile, the Bank of Canada cut its key rate a quarter percentage point. It later reduced its estimates for economic growth of 1.8 per cent, with a slower start to the year, but not a recession.

Paul Taylor, chief investment officer at BMO Harris Private Banking, said his group is advising clients to lighten their holdings of resource stocks, apart from the miners of gold and potash (an ingredient in fertilizer) in the early part of the year. Resource and material stocks make up 46 per cent of the S&P/TSX composite index, financial services about 30 per cent.

"Our expectation is that the (composite index) could easily trade from around 13,000 now to above 14,000 a year from now," he said. "But we could get further weakness in the next quarter or two. There is no doubt there will be a slowdown at the front end of ‘08, and it may get worse before it gets better."

He said U.S. markets could be 10 per cent higher a year from now, or they could be 10 per cent lower if action by the central bank fails to avert a recession.

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OTTAWA–Blood’s on the floor of the world’s stock exchanges and Canadian investors are nervous about the future, but you wouldn’t know it from those who help run Canada’s construction industry, one of the healthiest economic sectors.

"We’re now doing our forecast for next year and construction is going to be the main driver of the economy," says George Gritziotis, of the Construction Sector Council.

He begins to tick off an impressive list of major private and public sector capital projects on stream, from expansion of the Alberta oil sands, to government infrastructure projects such as roads and bridges, oil refinery expansion in New Brunswick, building linked to the Vancouver Olympics, home construction and others.

As an afterthought, he mentions that, in contrast to the U.S. housing debacle, Canada will see between 210,000 and 220,000 new homes erected next year.

"Our biggest challenge is finding the workers to do all that work."

Canada’s construction industry, employs about one million people coast to coast bad credit payday advance. Despite the Bank of Montreal’s gloomy "recalibrating" its growth forecast yesterday down to 1.4 per cent for 2008, from 2.2 per cent, many economists don’t see Canada hitting the skids.

A new survey of 12 economists finds forecasts for 2008 growth from 1.5 per cent to 2.8 per cent. The most optimistic Conference Board of Canada says, with employment at a record high, wages rising, and tax-cut stimulus, Canadians will simply spend their way to a sound economy.

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The U.S. Federal Reserve and other central banks are partly to blame for the financial-market slump that's now threatening to derail the global economy, said investors and former policy makers at the World Economic Forum.

“It's hard to give central banks a very high grade over the last couple of years on recognition of bubbles and actions taken to address them in the policy or regulatory spheres,'' said former U.S. Treasury Secretary Lawrence Summers in a panel in Davos, Switzerland. Billionaire investor George Soros said central banks have “lost control'' of financial markets.

The Fed, which yesterday announced its first emergency rate cut since 2001 as U.S. recession fears rose, has been criticized for paying too much attention to economic growth and not enough to so-called asset price bubbles. By cutting rates to protect growth when bubbles burst, the Fed only encourages investors to take bigger risks in the future, said Morgan Stanley's Stephen Roach.

“It's a dangerous, reckless and irresponsible way to run the world's largest economy,'' said Roach, chairman of Morgan Stanley in Asia, who was also in Davos.

The U.S. central bank yesterday cut its benchmark rate by three quarters of a point to 3.5 percent a day after the MSCI World Index fell 3 percent, the steepest decline since 2002. U.S. stocks dropped for a sixth day today, the longest losing streak since April 2002.

Mortgage Bust

Fed Chairman Ben S. Bernanke is facing the same objections leveled at his predecessor, Alan Greenspan, who was slammed for not doing enough to prevent the Internet stock boom and then cutting rates too low to limit the fallout.

In 2003, the Fed reduced its benchmark to a 45-year low of 1 percent, leading to a house-price boom that turned to bust in 2006. That prompted a collapse in the market for mortgages to risky borrowers. It's now derailing financial markets because so many banks bought derivatives linked to those mortgages faxless payday loan.

“Central banks lost control of the situation when they allowed financial institutions to develop new financial instruments which they themselves didn't understand,'' said Soros.

Too Difficult

Greenspan and Bernanke counter that it's too difficult for central banks to spot bubbles before they emerge and raising rates to curb higher housing or stock prices would risk derailing the rest of the economy.

Nor was the Fed alone in slashing rates at the start of the decade. The ECB cut its benchmark to 2 percent in 2003, the lowest since the aftermath of World War II, and the Bank of England reduced its key rate to a 48-year low.

While house prices surged in the U.K., Spain and Ireland, those booms have now withered as contagion from the subprime collapse spreads.

Some Davos attendees came to the Fed's defense, saying it's difficult to identify bubbles and more attention should be paid to better regulation.

“We could pierce bubbles but we'd pierce a lot of non- bubbles and take a lot out of gross domestic product,'' said John Snow, also a former Treasury Secretary and now chairman of Cerberus Capital Management LP. “We need to reform regulation.''

The ECB nevertheless argues that it may be possible for central banks to “lean against the wind'' by raising rates in the early stage of a bubble to head off future gains.

“It's good for a central bank to ease when the risks are of a crash in the global economy, but that means you have to have a more systematic approach to asset bubbles,'' said Nouriel Roubini, founder of New York-based Roubini Global Economics LLC, in Davos. “If we have a `Greenspan put' or a `Bernanke put,' then we will create over and over again a distortion of excessive debt and leverage.''

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European shares traded mixed Friday, shrugging off a U.S. rally caused by remarks by Federal Reserve Chairman Ben Bernanke that the central bank was prepared to act aggressively to rescue a weakening economy.

Asian markets were sharply lower in the afternoon session as investors sold down shares after report in the New York Times that Merrill Lynch could suffer $15 billion in losses from soured mortgage investments, almost twice its original estimate. Japan shed almost 2 percent and South Korea finished 2.3 percent lower.

Uncertainty in the financial sector continued in Europe, where Swiss bank UBS said in a letter to shareholders that it cannot predict the final impact of the U.S. residential mortgage crisis on its subprime mortgage related securities, but expects its capital position to remain strong.

UBS shares opened flat.

“There is a high level of suspicion in the European market today guaranteed approval cash advance loans. They won’t have the enthusiasm that you were seeing in America,” Justin Urquhart Stewart at 7 Investment Management told Reuters. “The level of cynicism in Europe is high because we are concerned about more losses coming through from the banks.”

In the UK, aero-engine maker Rolls-Royce said it plans to cut 2,300 jobs to help offset rising costs and the effect of the weak dollar, adding that the move would not affect 2007 results.

The takeover battle for Scottish & Newcastle continues, with the Heineken CEO telling a Dutch newspaper that he could not exclude a higher bid, after S&N rejected the 780 pence a share, or 7.6 billion pounds ($14.9 billion), offer it made together with Carlsberg.

And British buy-to-let mortgage lender Paragon announced a deeply-discounted, fully underwritten rights issue on Friday to raise 287 million pounds ($560 million).
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It’s the stuff of western dramas where rugged men went looking for it in the mountains. It’s the glittering metal used in fancy jewelry, the highest honors for sports and the bars tucked away in heavily secured safes.

And these days, gold’s appeal as a safe-haven investment has carried it to record prices.

Gold futures surged above $ 880 Tuesday to their highest level ever, not accounting for inflation, propelled higher by rising oil prices and a weak U. S. dollar. An ounce of gold for February delivery climbed as high as $ 884 on the New York Mercantile Exchange, topping by almost $ 10 its previous record of $ 875 set in 1980, and later settled at $ 880. 30, up $ 18. 30.

Market analysts who have watched gold’s ascent weren’t surprised that gold had reached a new high.

“I’m telling my friends,” said Ashraf Laidi, an analyst at CMC Markets. “I’ve told them for the past three years to invest in gold.” Still, when adjusted for inflation, gold remains far short of the jaw-dropping levels of 28 years ago. An ounce of gold at $ 875 in 1980 would be worth $ 2, 115 to $ 2, 200 today.

Gold that cost $ 650 an ounce in January 2007 has soared during the past year on rising prices for oil and other commodities and also by the falling U. S. dollar. Those trends have increased the metal’s appeal as a hedge against inflation; gold is also seen as a safe investment in times of political and economic uncertainty around the world.

Hedge and pension funds, along with other long-term investors, also flocked to gold as the mortgage and credit crisis in the U. S. intensified.

Few signs have appeared of the frenzy that surrounded the metal’s last record-setting foray, but today’s jewelry prices do reflect the sharp run-up in precious metals prices over the past few months guaranteed cash advance loan. As Valentine’s Day approaches, shoppers might not be so sweet on rising price tags, and choose to settle for a smaller or lighter pair of gold earrings.

Dealers in Manhattan’s midtown Diamond District, however, said they’ve seen worse.

Michael Pacicco runs his family-founded Pacicco & Pacicco Inc. from a windowless, secondfloor shop on West 47 th Street, its display cases filled with custom-made gold pieces from crosses to bracelets.

A few hours after gold topped at $ 879. 40 an ounce, he said a rush to sell gold jewelry in the Diamond District was “nonexistent” — compared to the long lines of people winding around the block to Fifth Avenue hawking their jewels in 1980, when gold hit $ 875 an ounce. Some even brought their gold fillings.

“I don’t think people have as much gold now as they did then,” he said, explaining that when the precious metal sold for $ 100 or $ 200 per ounce, it was easier to buy a bracelet or a ring than in recent times, with the economy heading for a crunch.

Down the street, jeweler Ken Coban of Two Tone Jewelry Mfg. Co., who’s been in the business 36 years, had a slightly different take on gold sales.

He agreed that there’s no run on selling gold jewelry, but “a lot of people are selling their old stuff to buy new stuff.” Coban’s customers are doling out $ 300 for a delicate 14-karat gold bracelet — about double from about a decade ago.

“In 1980, people were shocked by the price. But they’ve gotten used to it now,” Coban said.
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