Benjamin Tal - Where in the world are we

“The Committee remains concerned about the risk of a continuing gap between the growth of demand and potential supply at a time when the utilization of the pool of available workers rem

WHERE IN THE WORLD ARE

WE?

Benjamin Tal Senior Economist

Economics & StrategyJune 2007

“The Committee remains concerned about the risk

of a continuing gap between the growth of demand and potential supply at a time when the utilization

of the pool of available workers remains at an

unusually high level…… the Committee believes the risks continue to be weighted mainly toward conditions that may generate heightened inflation

pressures in the foreseeable future”

Fed’s FOMC Meeting October 13, 2000

Cutting Rates in the Face of

Fed funds rate (L)

C ore inflation (R)

The 2000-01 Example

0 1 2 3 4 5 6 7 8

Fed funds rate (L)

C ore inflation (R)

Subprime Shock Relatively

Little Impact on US Corporate

Spreads …

0 100

Telecom Airline Defaults DowngradesAuto

10-yr A Corporate 10-yr BB/BB- Corporate

spread to US Treasuries (bps)

Subprime Meltdown

Falling Prices Shut the Door on

US Resale Housing Prices

y/y % chg

North America Is Slowing…

…But Strongest Global Growth in

Decades

0 1 2 3 4 5 6 7 8

71 74 77 80 83 86 89 92 95 98 01 04 07

World Real GDP avg 3-yr growth rate (%)

1971-73 5.6%

2004-06 5.0%

Source: IMF historical data & forecast

Surging Domestic Demand Will Shield China from US

Slowdown

0 5 10 15 20 25 30

Fixed Asset Investment Retail Sales

Breakdown of 2005 GDP

Commodity Currencies Have Led

the Pack

NZ $ C$

Sw Kr

S Afr Rand

A$

Euro Nrw ay Kr

Br Pound

Sw iss Fr Jpn Yen

one-month % ch vs US$

TSX Tracks Global Growth

0 0.1 0.2 0.3 0.4 0.5 0.6

Cdn Real

1986 - 2006 Correlation with TSX

S&P TSX (L) World Real GDP (R)

Y/Y % chg Y/Y % chg

(Avg of Monthly Closes)

Two Different Demand Curves for

Oil

-2 0 2 4 6 8

95 97 99 01 03 05 07 09

% change

Forecast

Almost 60% of Investable

Reserves in Canada

US 7%

Nigeria 11%

Canada 56%

Other Open 20%

"Investable" oil reserves=those

not off limits due to restrictive

foreign investment policies

Also excludes Iraq.

Source: Oil & Gas Journal, CIBC WM

Norway 3%

Kazakhstan 3%

GHG Emissions Growth by Country

Change, 1990-2004 (%)

* Have not ratified the Kyoto Protocol Source: UNFCCC (2005)

Spain Portugal Greece Ireland Canada Australia*

Austria United States*

Japan Italy Norway Belgium Switzerland

EC France Sweden Iceland United Kingdom

Germany Czech Republic

Hungary Poland Russian Federation

Romania Bulgaria Lithuania

0

Canada

* Australia

* United States

Emission Intensity by Province

0 50

Uranium Prices Have Outpaced Oil

-100 100 300 500 700 900 1100 1300 1500

Jan-01 Sep-02 May-04 Jan-06

Uranium price W est Texas crude oil price

$69/bbl (2007 avg.)

$100/lb

reindexed, Jan 2001=100

Dec-07

Forecast

Looming Supply Gap Down the

Road

Mine Production

Diluted Military Stockpiles

Other Secondary Supply

20 40 60 80

Falling Excess Water Supply

Annual Excess Global

Water Utilization Rate*

%

* Actual Withdrawal as a % of Total Renewable Water Supply Source: FAO, CIBCWM

2006 International Water Cost

France

Netherla

Italy Finland

US Water Index Easily Outperformed S&P500

Div idend Yield (Oct 06)

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

S&P500 Water

Index

0 50

Source: Bloomberg US Water Index, CIBCWM

The Rise of the Infrastructure

Total Gov't Spending

Rising Funding Gap for Infrastructure

Projects

0 10 20 30 40 50 60 70

$Bn

Sources: Statistics Canada, Infrastructure Canada, CCPPP, CIBCWM

Investing in Infrastructure

0 5 10 15 20 25 30

Annual Return

Dividends STDEV

Global Infrastructure Global Equities

Core Pressures in Services, Not

Goods

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Jan-05 May-05 Sep-05 Jan-06 May-06

C ore Goods

C ore Services

C ore C PI

%

Cdn Dollar Becoming a

00

01

02

03

04

05

06

07

Dec-55 60 65 70 75 80 85 90 95

C rude Oil Price (L) C dn Dollar (R )

Fcst

When The US Sneezes…

Debt To Income Ratio

US C anada

%

Share of Real Estate in Household

Assets

12 16 20 24 28 32 36

95 96 97 98 99 00 01 02 03 04 05 06

%

Interest-Only Mortgages (US)

0 5 10

Sub-Prime Share of Mortgage

Fixed-Term GICs vs Prime Rate

-5

0 5 10

15

2 3 4 5 6 7

Fixed-Term GIC s Prime Rate

Increase In Cash Not Evenly

Distributed

Cumulative % Increase In Chequing

& Demand Deposits

-10 0 10 20 30

<35K

55K

35K- 70K

55K- 100K 100K+

70K-% -0.2

The People With The Cash Are Not The Same People With the Debt

Distribution of Growth

in Liquidity (2002-2005)

<Age 54

Age 55+

Debt To Asset Ratio