Business
US bear market deepens: What that means for you
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United States stocks slumped further this week as investors navigated a barrage of bad news.
Central banks around the world have been scrambling to fight soaring high inflation by increasing the cost of borrowing without hurting long-term growth prospects. Adding to the uncertainty and fear are rising tensions between the West and Russia following Moscow’s invasion of Ukraine.
In the US, the S&P 500 – a proxy for the health of retirement and college savings accounts – this week fell to its lowest level in almost two years and was set for a monthly decline of nearly 8 percent.
The tech-heavy Nasdaq 100 has dropped nearly 33 percent so far in 2022, the Dow Jones Industrial Average lost more than 20 percent while the world’s best-known cryptocurrency, Bitcoin, shed nearly 60 percent of its value. Home prices are also dropping as interest rates soar, making loans for potential buyers more expensive.
The Federal Reserve, the country’s central bank, is tasked with fighting the highest inflation in decades and has been doing that by raising interest rates. But can it increase the cost of capital to reduce demand and moderate prices without plunging the economy into a deep recession?
“It’s really a no-win situation at this point. Largely because of the number of shocks policymakers have had to deal with,” Cristian deRitis, leading economist at Moody’s, a research firm based in New York, explained to Al Jazeera.
How much further down can stocks go? What is a bear market exactly? And is there a light at the end of the tunnel?
Here’s the short answer.
I keep hearing that the US is in a bear market. What is that exactly?
A bear market occurs when a broad market index dips more than 20 percent from recent highs.
Why is the US currently in a bear market?
“Persisting concerns over inflation and the Fed’s ability to tame prices without a hard landing,” is how Peter Essele, head of portfolio management at Commonwealth Financial Network, a Massachusetts-based firm, explained it.
What’s the reason behind the high inflation and why are prices out of control?
Kenneth McLaughlin, professor of economics at Hunter College in New York, told Al Jazeera that one of the reasons is the federal government “injecting $5 trillion into the economy including through stimulus checks during the pandemic with kind of good intentions but with no plans to pay for it.”
In other words?
Think back to early 2020 when businesses shuttered and economies came to a standstill to curb the spread of the coronavirus. Millions of Americans found themselves under lockdown with nowhere to go and spend the fresh-off-the-press stimulus checks. That caused equity prices, be it stocks, Bitcoin and home prices across the US, to skyrocket. It also caused a surge in demand for goods and that, as we see now, has led to the highest rise in the cost of living seen in decades.
How does this cause the stock market to go down?
As the Fed raises rates, which is essentially increasing the cost of borrowing in order to bring down the price of goods and services, people start to fear a slowdown in the economy. This pushes down the price of stocks and other investments.
Are the current economic conditions really just the consequence of what happened in the last 2 years?
The last two years have been unprecedented in many aspects. But what we are seeing today can also be attributed to the extremely low interest rates of the last decade when, following the financial crisis of 2007-2008, the government made it cheaper for Americans to borrow, Essele told Al Jazeera.
Didn’t the markets just have a rally?
Stocks did experience a rally in August. Things were looking up when petrol prices, which had soared in earlier months, dropped sharply. Investors held on to the hope that perhaps the Fed would ease on the interest rate hikes if the inflation numbers for August showed that consumer prices had cooled. But despite cheaper petrol, food and other essential goods, prices remained high – surging 8.3 percent in August compared with a year earlier.
Where are we now?
“Inflation is becoming more structural and investors are now concerned about stagflation,” Essele explained to Al Jazeera, suggesting that price hikes may be here to stay for the long haul. Stagflation is a mashup of the words “inflation” and “stagnation” and refers to a situation when inflation is high even as the rate of economic growth slows down.
So what does the future hold? And how long will this bear market last?
Expect above-average price pressures. The war in Ukraine and growing tensions between the West and Russia add to the uncertainty and will continue to spook investors and roil markets.
“But we are likely in three-quarters of the way through the bear market,” Essele predicted.
I don’t own any stocks, why should I care about a bear market?
While stock investors are the ones most directly affected by a US bear market, there are spillover effects to the rest of the economy primarily due to the “wealth effect”. That is, as households see the value of their retirement and stock portfolios decline, they will pull back on their spending.
“Given how dependent the US economy is on consumer spending, this impact can be significant and widespread,” Moody’s deRitis told Al Jazeera. “Discretionary sectors such as travel, leisure, and hospitality may feel the most immediate effect but other industries such as housing and retail trade will experience reduced demand as households grow cautious.”
Business
Wildfire sparked by TC Energy pipeline rupture under control – Yahoo Canada Finance
CALGARY — A wildfire in west-central Alberta that was sparked by a natural gas pipeline rupture is under control, but an investigation into what caused the pipeline to break could take months or even years.
As of Wednesday morning, there was very little fire activity left in Yellowhead County, where a 10-hectare fire burned on Tuesday about 40 kilometres northwest of Edson.
“But for it to be considered extinguished, we’re going to have to hot spot,” said Caroline Charbonneau, area information co-ordinator with Alberta Forestry and Parks.
“That means we’ll have to dig into the ground, look and feel for hot spots, and then douse it with water. And that could take several days.”
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The fire on Tuesday, which occurred as much of Alberta is dealing with extremely dry early spring conditions, was sparked when a natural gas pipeline owned by TC Energy Corp. ruptured.
There were no injuries, and the fire was never a threat to any surrounding communities. The affected pipeline segment was isolated and shut in and there is no more gas leaking from the pipeline.
The Canada Energy Regulator had inspectors on site Wednesday to monitor the company’s response and the Transportation Safety Board is investigating the incident.
According to CER, there have been 12 natural gas pipeline ruptures in Canada since 2008, and Tuesday’s incident near Edson was the first rupture on that particular pipeline within that time period.
The 36-inch diameter pipe that ruptured is part of TC Energy’s NGTL pipeline system, which transports natural gas from Alberta and northeast B.C. to domestic and export markets. The system spans 24,631 kilometres and connects with TC Energy’s Canadian Mainline system, Foothills system and other third-party pipelines.
The NGTL pipeline system is like a web made up of different lines that have been developed in stages.
In 2022, there was a rupture on a separate part of the system that resulted in an explosion and fire near Fox Creek, Alta. There were no injuries.
A TSB investigation into that incident took more than 14 months, and concluded that the pipeline ruptured due to reduced pipe wall strength caused by external corrosion.
While the primary risk of a crude oil pipeline leak is an oil spill that harms the local ecosystem, natural gas pipeline ruptures can and do result in fires or explosions, said Bill Caram, executive director of the Pipeline Safety Trust, a U.S.-based non-profit organization.
“The chances are extremely high that a molecule of natural gas that enters a pipeline will go through that pipeline without a failure. Pipelines are quite safe, and when you look at incident rates compared to other modes of transportation like rail or truck, they are much less likely to have a failure,” Caram said.
“But what you don’t get a sense of by looking at the risks of pipelines in that way is how catastrophic a failure can be when it does happen.”
According to the TSB, there were 19 recorded incidences of fires related to pipelines in Canada between 2012 and 2022.
The TSB’s most recent report on pipeline transportation safety in Canada states that in 2022 there were 100 companies transporting either oil or gas or both in the federally regulated pipeline system, which includes approximately 19,950 km of oil pipelines and approximately 48,700 km of natural gas pipelines.
That year, there were 67 pipeline transportation accidents and incidents on federally regulated pipeline systems, according to the report.
That number was well below the 10-year average of 112 occurrences, and was also the lowest number of occurrences since 2019, when 52 pipeline accidents or incidents were recorded by the TSB.
The TSB defines a pipeline “accident” as an incident that results in a person being injured or killed, a fire or explosion, or significant damage to the pipeline affecting its operation.
Less severe pipeline events that involve the uncontrolled release of a commodity or a precautionary or emergency shutdown are classified by the TSB as “incidents.”
There have been no fatal accidents directly resulting from the operation of a federally regulated pipeline system since the inception of the TSB in 1990.
This report by The Canadian Press was first published April 17, 2024.
Companies in this story: (TSX:TRP)
Amanda Stephenson, The Canadian Press
Business
Pearson airport gold heist: Police announce 9 arrests – CTV News Toronto
Police say one former and one current employee of Air Canada are among the nine suspects that are facing charges in connection with the gold heist at Pearson International Airport last year.
At a news conference Wednesday on the one-year anniversary of the heist, police confirmed that five suspects were arrested and four others are facing charges in connection with the largest gold theft in Canadian history.
Police said the suspects face a total of 19 charges and Canada-wide warrants have been issued for the arrest of three of the suspects who have not yet been apprehended. All of the suspects arrested in connection with the heist have been released on bail, police confirmed in a news release issued Wednesday.
Peel Regional Police Chief Nishan Duraiappah said the heist was “carefully planned” by a “well-organized group of criminals.”
“This story is a sensational one and one which probably, we jokingly say, belongs in a Netflix series,” he said.
Police said 6,600 gold bars were stolen from Air Canada’s cargo facility on the evening of April 17, 2023 by a suspect who arrived at the warehouse in a five-tonne delivery truck.
The gold, along with about $2.5 million in foreign currency, had been shipped to Toronto from Zurich in the hull of an Air Canada plane and was offloaded to an Air Canada cargo facility shortly after the flight landed at Pearson Airport that afternoon.
Police allege that the suspect came into possession of the stolen gold and bank notes after presenting Air Canada personnel with a fraudulent airway bill.
“The airway bill was for a legitimate shipment of seafood that was picked up the day before,” Det.-Sgt. Mike Mavity, the major case manager for the joint investigation, dubbed Project 24K, told reporters on Wednesday.
“This duplicate airway bill was printed off from a printer within Air Canada cargo.”
Brinks Canada, which was hired to provide security and logistics services for the transportation of the shipment, showed up at the facility a few hours later to pick up the items, police said.
According to investigators, when Air Canada employees tried to locate the container, they realized it was missing and quickly launched an internal investigation. Police were notified about the stolen goods shortly before 3 a.m. the following day, Mavity said.
Air Canada launches probe
An exhaustive investigation followed, police said, with officers reviewing video surveillance footage from 225 businesses and residences in an effort to track the path of the truck, which has since been recovered.
Mavity said that last summer, they identified 25-year-old Durante King-McLean as the driver of the truck but were unable to locate him.
In September 2023, Mavity said King-McLean was stopped in rental vehicle by Pennsylvania State Police near Chambersburg, Pennsylvania.
“After a brief foot chase, he was detained and troopers located 65 illegal firearms in the vehicle,” Mavity said Wednesday.
According to Mavity, investigators believe that the stolen gold was melted down and sold and the proceeds were used to purchase illegal guns for a firearms trafficking operation.
He said members of Project 24K have been liaising with the U.S. Alcohol, Tobacco, and Firearms Bureau (ATF) with respect to this aspect of the investigation.
Speaking at the news conference on Wednesday, a representative from the ATF said the law enforcement agency believes the 65 guns seized during the arrest of King-McLean were bound for Canada.
While King-McLean is currently in custody in the United States, he is now wanted on multiple charges in connection with the gold theft.
“We are alleging that some individuals who participated in this gold theft are also involved in aspects of this firearms trafficking,” Mavity added.
Two “debt lists” were found by investigators at separate locations during the investigation, police said.
“A common term in drug trafficking investigations, we believe these lists actually show where the money was distributed when the gold was sold by the suspects,” Mavity said.
He said the names on both lists are “consistent” and police are trying to identify all of those identified.
‘They needed people inside Air Canada’
Police said one current Air Canada employee, identified as 54-year-old Brampton resident Parmpal Sidhu, has been charged with theft over $5,000 and conspiracy to commit an indictable offence. A Canada-wide warrant has been issued 31-year-old Simran Preet Panesar, who police said resigned from his position as a manager at Air Canada back in the summer.
“He has been known to us since early on in the investigation. He actually led a tour for Peel Regional Police before we knew his involvement,” Mavity said Wednesday.
He added that police have an idea where Panesar may be but did not elaborate on a possible location.
Mavity said he believes the suspects needed employees on the inside to carry out the heist.
“Because of their position within Air Canada, in my opinion, yeah they needed people inside Air Canada to facilitate this theft,” he said.
Business
Gas prices expected to rise 14 cents on Thursday
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Drivers are bracing for a double-digit spike at the gas pumps on Thursday, as the price is expected to rise 14 cents at midnight.
Roger McKnight, chief petroleum analyst withEn-Pro International Inc., tells CityNews the price at gas pumps is set to rise to 178.9 cents/litre at local stations. The price as of Wednesday is 164.9 cents/litre.
The last time gas prices were this high was back in August 2022.
McKnight says the spike is due to price increases for wholesale gas and only applies to gasoline. He adds the price for diesel will increase by 0.4 cents.
Earlier this month, the price rose to its highest levels in six months following the implementation of the federal carbon price, also referred to as the carbon tax.
That saw the carbon tax on gasoline go up by 3.3 cents per litre, while diesel increased by 4.1 cents per litre.
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