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Dow Jones Crashes 1,000 Points But Warren Buffett Says Don’t Panic – CCN.com

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  • The Dow Jones nosedived Monday, but investors who are willing to take a risk could use this dip to nab value stocks.
  • Warren Buffett reminded investors not to panic over the weekend as coronavirus spread throughout Italy.
  • While the virus is likely to dent global growth, the impact is still likely to be temporary

It seems the U.S. stock market has finally started to panic about the coronavirus after weeks of shrugging off its growing severity. The Dow Jones lost 2% last week and this week looks likely to bring on more of the same after coronavirus cases in Italy skyrocketed over the weekend.

In a bull market that’s been stretching on as long as this one, a sell-off is a terrible thing to waste. At least, that’s what famed investor Warren Buffett alluded to over the weekend.

The Oracle of Omaha has been under-fire for sitting on a $128 billion cash horde through 2019, but we might see his investment company Berkshire Hathaway (NYSE:BRK) start taking up positions. Buffett is known for seeking out valuable companies whose long-term growth stories are being undervalued by the broader market.

Warren Buffett, Berkshire Hathaway
Don’t let the Dow’s decline scare you; according to Warren Buffett, investors should stay the course. | Image: Johannes EISELE / AFP

Over the weekend as Dow futures continued to tumble, Buffett told CNBC that coronavirus isn’t a reason to panic despite its worrying spread:

Has the 10-year or 20-year outlook for American businesses changed in the last 24 or 48 hours? You’ll notice many of the businesses we partially own, American Express, Coca-Cola — those are businesses and you don’t buy or sell your business based on today’s headlines. If it gives you a chance to buy something you like and you can buy it even cheaper then it’s your good luck.

Of course, increasing your stake in equity holdings right now is risky— there’s still no telling exactly how much of an impact the coronavirus is going to have on the global economy. But most agree that as it stands now, the damage will be short-term.

As Federated Investors portfolio manager Steve Chiavarone put it,

We view this as headline risk. Our base case view is that coronavirus continues to represent demand delayed and not demand destroyed.

Dow Jones Industrial Average Dow Jones Industrial Average
The Dow Jones is nose-diving, but that could make for a buying opportunity if you’re brave. |Source: Yahoo Finance

Plus, China appears to be over the worst of the virus as the daily number of new cases has finally dropped below the daily number of recovered patients.

With the Dow starting the week down 3.6%, it seems there’s plenty of good luck to be had. Here’s a look at some of the best bargains to buy as the stock market comes back down to earth.

Energy Stock: Valero Energy (NYSE:VLO)

While the oil and gas sector is likely to see continued volatility over the next year, there’s a compelling argument to start building a position in the industry. Not only can investors find some of the best dividend players on the market in the oil and gas sector, but it looks like coronavirus worries could be rock-bottom for the industry.

Valero makes a great play in the energy space due to it’s willingness to reward shareholders. | Source: Yahoo Finance

Valero makes for a good pick because management’s focus on capital discipline has kept free cash flow healthy. The firm is shareholder friendly with a goal of returning beset 40% and 50% of its operating cash flow to investors. At the end of January management raised Valero stock’s dividend payments and the firm offers a juicy yield of 4.73%.

Tech Stock: Qualcomm (NASDAQ:QCOM)

Another great value play that has seen its share price discounted in the wake of coronavirus is chipmaker Qualcomm. Qualcomm stock has lost 5% over the past week after management warned that coronavirus will likely dent future earnings as demand for smartphones in China wanes.

Coronavirus will likely hurt Qualcomm’s earnings, but that’s already been priced in. | Source: Yahoo Finance

That’s definitely worth considering from a risk standpoint, but the coronavirus impact is likely fully priced in to QCOM shares at this point. Management was cautious in their guidance, meaning they’re probably using a wort-case scenario model.

This could be a great buying opportunity for long-term investors as Qualcomm looks set to capitalize on the shift toward 5G networks. Once coronavirus fears start to subside, investors likely won’t get another opportunity to buy a growth play like Qualcomm at such a deep discount.

Dow Stock: Caterpillar (NYSE:CAT)

Caterpillar is the world’s largest construction equipment maker, so the firm tends to be a winner during periods of economic growth. CAT stock has dropped 12% since the start of the year as trade war concerns and coronavirus fears weigh on investor sentiment. Weak EPS guidance for 2020 coupled with worries about economic growth have hit Caterpillar stock hard.

Caterpillar stock has been plunging on recession fears, but if they’re unfounded investors could be in the money. | Source: Yahoo Finance

Still, that could make for a great buying opportunity if you’ve got time to wait out the turbulence. Caterpillar stock’s current slump suggests we could be heading for a recession—something most analysts agree is unlikely. If a recession doesn’t materialize, Caterpillar could deliver gains of around 20% this year.

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities. The above should not be considered trading advice from CCN.com. The opinions expressed in this article do not necessarily reflect the views of CCN.com.

This article was edited by Sam Bourgi.

Last modified: February 24, 2020 9:23 PM UTC

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How Canadians are coping with a correcting housing market – CTV News

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Less than a year after purchasing their four-bedroom townhouse in Surrey, B.C. for $870,000, Aneesh Bhandari and his wife decided to sell their home in early May.

They were both were looking forward to their first open house, Bhandari said, making bets on how many showings the home would get. They later discovered only one person came to view the property.

“It was an eye-opener,” Bhandari told CTVNews.ca in a telephone interview on Thursday. “My realtor didn’t expect that, nobody expected that.”

Bhandari and his wife are planning to move from British Columbia to Ontario to be closer to his employer’s office in Mississauga. But the process of selling their current home and purchasing a new one has been a struggle, the 36-year-old said.

After 30 days on the market, the 167-square-metre home listed for $1.15 million still had not sold, despite being listed for $50,000 below similar homes in the area, said Bhandari. In mid-June, he took the home off the market.

“At that point in time, the sellers were expecting yesterday’s price and buyers were wanting tomorrow’s price,” said Bhandari.

After getting an extension from his employer to work from home until December, Bhandari now plans to re-list his home in October in an effort to sell before the end of the year.

Bhandari is one of several Canadians who wrote to CTVNews.ca about the impact Canada’s housing correction is having on their decisions to buy or sell a home. After a series of interest rate hikes implemented by the Bank of Canada, housing markets are now facing a correction that “runs far and wide” across the country, according to a new report by the Royal Bank of Canada (RBC).

A drop in house prices, combined with less resale activity, shows that housing markets Canada-wide are now cooling down. According to RBC’s forecast, average home prices in Canada are expected to fall throughout the rest of 2022, eventually dropping 12 per cent by the middle of 2023 compared to their peak in February.

“[This] would rank as a very significant correction,” Robert Hogue, assistant chief economist at RBC, told CTVNews.ca in a telephone interview on Wednesday. “We rarely see this type of double-digit price decline on a national basis.”

Rising interest rates have played a key role in correcting some of the extraordinary gains in house prices Canadians saw during the pandemic, said James Laird, co-CEO of Ratehub.ca.

“The last few years were irrational and some rationality in correcting that exuberance is happening at the moment,” Laird told CTVNews.ca in a telephone interview on Wednesday. “Given the red-hot pace of the last two and a half years, it feels logical now that we should be taking a breather.”

After hitting a record high of $816,720 in February, national average home prices have been on a steady decline, data from the Canadian Real Estate Association (CREA) shows. The average price of a home in Canada for the month of June was $665,849, not seasonally adjusted.

The lack of certainty in terms of what to expect from the Bank of Canada regarding further interest hikes may also be encouraging some Canadians to sit on the market sidelines, Laird said.

“With the central bank still in a transition period from the pandemic rate policy … to the post-pandemic inflation rate policy, we don’t know exactly where the bank wants to get to,” Laird said.

In the face of a changing market driven by shrinking house prices, Hogue said current sellers must be pragmatic and recognize the market is much different than it was just a few months ago.

“Prices are likely to continue to decline in the coming months, so the market is unlikely to become friendlier to sellers in the short term,” Hogue said. “Buyers are coming into the market with less of a budget … They have stricter limitations as far as [how much they can afford].”

TORONTO, VANCOUVER AREAS MORE BALANCED

According to the RBC report, large housing markets across Ontario and British Columbia are expected to see some of the heaviest corrections compared to other regions in Canada. The reason for this lies in the sky-high house prices that have characterized these areas during most of the COVID-19 pandemic. Hogue said these areas are therefore more sensitive to interest rate hikes.

According to data compiled by the CREA, average home prices in Ontario and British Columbia peaked in February at $1,086,493 and $1,104,098, respectively. Both figures are not seasonally adjusted.

Since then, activity has plunged to its slowest pace in more than 13 years — excluding pandemic lockdowns. This leaves room for more negotiations between buyers and sellers as the market balances out, said Frank Clayton, an economist and senior research fellow at Toronto Metropolitan University.

“[Buyers] should keep their eye open because … there’s always people that have to sell,” he told CTVNews.ca in a telephone interview on Wednesday. “Some people aren’t going to want to wait six or eight weeks and hope their house is going to sell, they may want the cash right away.”

While it may not be a buyer’s market in parts of Southern Ontario just yet, Clayton said, markets are appearing more balanced. This is also the case in the Greater Vancouver area, according to RBC’s report. Housing activity in the region has decreased 40 per cent over the last four months, and home prices for all home types have also dropped 4.5 per cent since April.

It’s also important to understand some areas of these regions will feel the effects of a correction differently than others, Laird said.

“[Prices in] the suburbs and more rural properties went up the most during the two years of pandemic exuberance … and those are the places [where] the prices are correcting the most,” said Laird. “[But] the urban cores did not go up nearly as much as the surrounding suburbs [so] they’re also not correcting as much.”

HOUSES STILL ‘LESS AFFORABLE,’ SAYS REAL ESTATE EXPERT

A real estate outlook from Desjardins also points to New Brunswick, Nova Scotia and Prince Edward Island as facing significant corrections, after home prices ballooned during the pandemic.

Parts of Alberta, however, are expected to be more resilient. Despite seeing price declines, the correction in this part of Canada is expected to be milder in comparison to others, Hogue said.

While average home prices may have been dropping on a national basis, this doesn’t mean houses have become more affordable for Canadians, Laird said.

Lower house prices have been driven by higher interest rates, which force homeowners to pay more interest on their mortgages. With a higher borrowing cost, those looking to buy a home are likely to qualify for less of a mortgage as a result, Hogue said. This makes it especially tough for homebuyers looking to get into the housing market for the first time.

Taylor Wright and her fiancé are currently renting a one-bedroom apartment as they search for a new home. Looking to purchase in either Ajax, Ont. or Whitby, Ont., with a budget of $800,000, Wright said she and her fiancé remain priced out of the market.

“Every house we go look at is still going for close to $100,000 over the asking price, and we are not willing to get into a bidding war and overpaying for a home,” Wright wrote in an email to CTVNews.ca on Thursday.

Having kept an eye on the province’s housing market since the beginning of the pandemic, Wright said she saw home prices “climb further and further out of reach.” Still, she said rising interest rates and cooling prices are giving her hope that in six months’ time, she may be able to buy a home.

Diordan Svelander and his wife are looking to purchase a home in the Greater Vancouver area. With sky-high house prices, he said they could not afford a down payment on a home despite working two full-time jobs.

Svelander said he and his family tried looking north of the city, in the municipality of Chetwynd, B.C. The couple had their eyes on one house, but as interest rates climbed throughout the year, they could no longer afford it.

“The money we had saved was not enough to withstand the stress tests, and we had exhausted all of our options trying to buy,” Svelander wrote in an email to CTVNews.ca on Wednesday.

As a result, the couple is now renting a two-bedroom unit with their two young children and pets, Svelander said.

A recent report by Ratehub.ca assessed the income required to purchase an average home in different Canadian cities. So far, financial losses from higher interest rates have not been offset by gains from lower home prices, Laird said. In all Canadian cities included in the report, residents required more income, on average, to afford a typical home.

“You had a better chance of buying a home a year ago with those elevated prices but with lower mortgage rates … than you do with the more modest home prices but higher mortgage rates,” Laird said. “It actually means that everything is less affordable than it’s ever been.”

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Major Toronto power outage caused by sea crane snapping hydro lines – CP24

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Tens of thousands of hydro customers in downtown Toronto have their power back after a massive outage on Thursday that forced some businesses to close and caused headaches for drivers.

Power was restored just before 8 p.m., nearly eight hours since the outage began.

“Safety is always our top priority. We know this power outage has made today exceptionally difficult for many of you, and we appreciate your patience,” David Lebeter, the chief operating officer of Hydro One, said in a statement on Thursday evening.

“We had all available resources helping to restore power as quickly and safely as possible. I want to thank all of those affected by this outage for their patience and Toronto Fire and Toronto Hydro for their collaboration.”

Hydro One said a crane in an upright position that was on a barge travelling in the Port Lands’ Ship Channel around 12:30 p.m. ran into three high-voltage transmission lines, causing further downstream damage to equipment at its power station near The Esplanade and resulting in power being lost throughout of the downtown core.

Outage

At its peak, an estimated 10,000 customers were left in the dark.

For several hours, the outage knocked out power to parts of the Hospital for Sick Children’s campus. It also darkened a portion of the Eaton Centre, forcing the closure of hundreds of stores. The mall, however, reopened at around 3:30 p.m. after power was slowly being restored.

Many large advertising screens at Yonge-Dundas Square also went dark. Traffic lights were down in some downtown intersections, prompting police to remind drivers to treat them as four-way stops. It led to some thoroughfares jamming up.

CTV News Political analyst Scott Reid was driving downtown when the lights went out.

He said navigating the city’s streets was a bit “hairy” as several traffic lights are out in the downtown core.

Reid said police officers were directing traffic at some major intersections, but not all.

 Power outage

The outage did not impact subways, but the TTC said there were significant streetcar delays due to traffic lights being out in parts of the downtown core. Meanwhile, Metrolinx said its PRESTO, GO Transit, and UP Express services were all running. It added that Union Station never lost power.

Several people were also trapped in elevators due to the outage. Toronto Fire said crews responded to a number of elevator rescues.

No injuries have been reported at this point in connection to the outage.

“(It was) definitely a unique situation,” Hydro One spokesperson Tiziana Baccega Rosa said.

She noted that an investigation is ongoing into the circumstances of how that barge was moving with a crane in an upright position and not adhering to the safety protocols.

Hydro One said crews will continue to work in the coming days to fix the damage caused by the crane.

Outage

City launches investigation

In a statement, the city said that a subcontractor to Southland-Astaldi Joint Venture (SAJV), which is involved in the Ashbridges Bay Treatment Plant outfall project, may have caused the outage.

“The city has launched a full investigation and has requested a full report from SAJV to understand what happened and what needs to be done to ensure this does not happen again,” the statement read.

Toronto Mayor John Tory said in a separate statement that the outage caused tremendous disruption in the downtown area and that it should not have happened.

“I want to thank the team from Hydro One who worked with our Toronto Hydro team to restore power to those affected as quickly as possible,” Tory said.

The mayor said city staff and all relevant parties will be reviewing the incident to ensure that it will not be repeated.

“I have been clear to city officials that I support them doing everything possible to get to the bottom of this and ensure full and complete accountability,” Tory said.

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Is global inflation nearing a peak? – Al Jazeera English

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Calling the top of the current wave of inflation has been a painful exercise for economists and central bankers, who have been proven wrong time and again during the past year.

But data on Wednesday, which showed that some measures of inflation had cooled in the world’s two largest economies, was likely to rekindle a debate about whether the worst might be over after a year of torrid price growth.

United States consumer prices did not rise in July compared with June due to a sharp drop in the cost of petrol, delivering much-needed relief to American consumers on edge after steady prices climbs during the past two years.

And China’s factory-gate inflation slowed to a 17-month low on an annual basis while consumer prices rose less than expected.

After wrongly predicting last year that high inflation would be transitory, most central bankers, including the US Federal Reserve, have stopped trying to put an exact date on when they expect current price growth to peak.

US central bank officials see inflation decelerating through the second half of the year, the European Central Bank puts the peak in the third quarter and the Bank of England sees it in October.

Here are some of the key data shaping the inflation debate:

Raw materials are getting cheaper…

The main culprit for the surge in consumer prices last winter – energy and other raw materials – may be the harbinger of lower inflation this time around.

Prices of critical commodities such as oil, wheat and copper have fallen in recent months after spiking earlier this year. Oil and food items soared after Russia invaded Ukraine.

Shoppers inside a grocery store in San Francisco, California, U.S
Shoppers inside a grocery store in San Francisco, California, United States [File: Bloomberg]

The fall in prices came amid weaker global demand and economic slowdowns in China, the US and Europe, where consumers are dealing with high prices.

Some indices of inflation are already being affected: fewer firms are reporting increased input costs, and wholesale price rise is decreasing in many parts of the world

…But European energy bills won’t

With winter approaching on the continent, European households are unlikely to see their energy bills come down anytime soon. Recently, there have been talks of rationing in eurozone countries, including in Germany.

This is because gas prices in Europe – which, for years, has relied on Russia for a large portion of its imports – are still four times higher now than a year ago and close to record highs. There has been much uncertainty surrounding gas flow via the Nord Stream pipeline.

Even in the United Kingdom, which has its own gas but very little storage capacity, consumers are set to see their power bills jump in October when the current price cap expires.

Increased petrol and diesel prices are seen on a display board at a filling station, in London, Britain
Increased petrol and diesel prices are seen on a display board at a filling station, in London, United Kingdom [File: Peter Nicholls/Reuters]

There is bad news for German drivers, too, who will see a subsidy at the petrol pump expire at the end of August.

Expectations are (mostly) under control

Some central bankers can take comfort in the fact that investors have not lost faith in them.

Market-based measures of inflation expectations in the US and the eurozone are only just above the central banks’ 2 percent target, while they remain uncomfortably high in the UK.

After the Federal Reserve’s meeting last month, the central bank’s Chair Jerome Powell stressed that the Fed is ready to use all of its tools “to bring demand into better balance with supply in order to bring inflation back down to our 2 percent goal”.

Consumers in the US, eurozone and UK, expect to see inflation stay above the 2 percent target for years to come.

According to a survey conducted by the Reuters news agency, a vast majority of the economists polled said that inflation would stay elevated for at least another year before receding significantly. About 39 percent of economists asked said that they expect inflation to stay high past 2023.

Core prices may be trending down…

Core inflation, the number that measures inflation while excluding the price of volatile components like food and fuel, has started to cool in the US and UK. Some economists predict Japan and the eurozone will follow suit.

Nevertheless, core inflation remains higher than most central banks’ comfort zone both in developed and developing economies. That means that central banks will continue to increase borrowing costs. The US Federal Reserve last month raised rates by 75 basis points for the second consecutive time. The bank meets again in September to consider further tightening.

A waiter walks holding a tray in a restaurant in Lisbon, Portugal
A waiter walks holding a tray in a restaurant in Lisbon, Portugal [File: Pedro Nunes/Reuters]

Wednesday’s US data hows recent interest rate hikes may already be having some effects.

And an artificial intelligence model used by Oxford Economics suggests core inflation will also peak in Japan and the eurozone in the second half of the year.

The Long Short-Term Memory network, originally developed to help machines learn human languages, parses detailed inflation data to spot patterns that helps it predict the Consumer Price Index in the future.

…But wages are pointing up

Workers’ wages have increased in the last year due to a tight labour market but not as fast as inflation.

The US Employment Cost Index also recently revealed that higher wages also resulted in a significant increase in US labour expenses in the second quarter of 2022.

According to figures released earlier this week, the cost of labour per unit of production increased by about 10 percent for non-farm firms in the US in the second quarter of this year.

One of the main factors influencing pricing over the long term is wages, and if they climb too quickly, a spiral of price rises may start.

“If that happens, we end up with an almost self-fulfilling type prophecy, where firms will start to push price increases onto their customers,” Brent Meyer, policy adviser and economist at Atlanta’s Federal Reserve, recently told Al Jazeera.

Outside of the US, the economic recovery has been more muted, and the impending recession may make it harder for labour to negotiate lower wages.

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