January 21, 2016 noon eastern time

Statistics Canada reports tthat residential construction in Canada was up 2.2% in November compared to the prior year. But single family construction was down 9.6%.

In Alberta, residential construction was down 15.7% but there was no break-down between single-family and multi-family construction. A decrease of that magnitude in single family would not be problematic for Melcor. However, it seems likely that single family construction will slow considerably. Still, it’s not likely to fall to zero even by 50% unless the low(er) oil prices persist into 2017. I expect Melcor to report a profitable Q4 (unless there is a large market value loss on its rental properties). Their outlook for 2016 will be extremely important. The stock, it seems,┬áhas already priced in a very pessimistic scenario.

Statistics Canada also reported that Unemployment Insurance claims in Alberta were double that of last year at 61,300. I understand that this is still lower than the 2008 or 2009 level but it certainly indicates the slower economy in Alberta.

In the U.S. the first-time jobless claims were a little higher than expected but still remained low at under 300,000.

The news of the Potash mine closure in New Brunswick is troubling for several reasons. One, is that Potash appears to have significant market power and even belongs to a price-fixing cartel called CANPOTEX. Potash may be favoring its Saskatchewan operations and I wonder why one company was allowed to have so much market power. Second, this New Brunswick mine is very new and Potash invested $2.2 billion in it and who knows what government assistance was provided. Meanwhile, executives were no doubt paid millions to make the decision to invest in that mine. Presumably they were caught off guard by the commodity price decline. No one can be expected to accurately predict the future. Nevertheless, it appears a huge mistake was made here. New Brunswick and the employees will suffer greatly. Shareholder money has been wasted. But what price will the executives pay?



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