Back in March, the Bank of Canada (BoC) statement announcing a 50-basis-point interest-rate cut told of “clear signs that the US economy is likely to experience a deeper and more prolonged slowdown than had been projected in January.”

As of Tuesday morning, according to BoC Gov. Mark Carney, it’s all happening. The BoC “is now projecting a deeper and more protracted slowdown in the US economy” and has responded with another 50-basis-point cut to Canada’s benchmark interest rate. The BoC’s target rate went from 4 percent to 3.5 percent in March and now sits at 3 percent.

It’s difficult to make a word-choice change from “is likely to experience” to “is now projecting” sound exciting. Where decades ago we relied on financial gurus known as fed watchers, who monitored system repurchases and reserve projections for signs of Federal Open Market Committee monetary policy feeling, guys like us now simply reach for a thesaurus.

What was once opaque is now (at least in aspiration) transparent–in the big picture as well as the here-and-now. The BoC warned Tuesday of the impact on Canada of global economic weakening caused by the US slowdown and “ongoing dislocations in global financial markets.”

The BoC’s view on the direction of the US economy hasn’t actually changed since March. It’s turning down and will be a drag for Canada. The BoC forecast 1.4 percent growth for 2008, 2.4 percent for 2009 and 3.3 percent for 2010.

The BoC’s express mission is to keep inflation within a tight band: “The cornerstone of the Bank’s monetary policy framework is its inflation-control system, the goal of which is to keep inflation near 2 percent–the mid-point of a 1 to 3 percent target range.” Right now, that’s a back-burner issue.

In its statement Tuesday, the BoC said, “While both total and core CPI inflation were running at about 1.5 percent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 percent, consistent with an economy that was operating just above its production capacity.”

The BoC pointedly referenced its 150 basis points’ worth of cuts since December, and said the timing of further stimulus will depend on the “evolution of the global economy and domestic demand, and their impact on inflation in Canada.” The BoC said in its statement that risks to its inflation outlook were “balanced,” whereas last time it said they were “clearly to the downside.” As well, the bank said that “some further monetary stimulus will likely be required.”

The Canadian central bank also added the word “some” to its phrase “some further monetary stimulus will likely be required to achieve the inflation target over the medium term” and dropped the words “near term.” The money quote in its March statement read, “Further monetary stimulus is likely to be required in the near term.”

The BoC doesn’t seem too excited about further rate cuts; it’s safe to say, if anything happens, only 25 basis points will come off in June. Informing Carney’s outlook on Canada’s position relative to the US and the global economy is the underlying fundamental strength of the domestic economy: “Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy.”

For investors in interest-sensitive equities such as income trusts, those lower regulated rates must translate into changes in the yield on 10-year government bond before affecting share prices.

The cut of consequence to the market is Canada’s prime rate, which influences the short end of the yield curve. To the extent the rate cuts move the long end of the curve, it’s positive for interest-rate sensitive investments. (The yield on the 10-year Canadian government bond has declined to 3.66 percent from 4.61 percent in mid-June 2007.)

The BoC will publish its next Monetary Policy Report April 24. The next scheduled rate announcement is June 10.  

Its hedging activity left Fording Canadian Coal on the wrong side of a leveling loonie, and transport problems hampered its ability to get its metallurgical coal to customers. The first of the “big” Canadian income trusts to report first quarter results, Fording’s numbers left many investors wondering about management and its operational issues. 

Fording reported cash available for distribution of CAD56 million, down from CAD77 million a year ago. Operating income declined to CAD20 million from CAD95 million in the first quarter of 2007 because US coal prices for the 2007 coal year, which commenced April 1, 2007, and extended through the first quarter of 2008, were down.

A stronger Canadian dollar also impacted results. Higher sales volumes offset those impacts to a degree, but net income came in at CAD500,000, off from CAD77 million in the first quarter of 2007, reflecting foreign exchange losses resulting from the weakening of the Canadian dollar since Dec. 31.

Net income from continuing operations before unusual items, future income taxes and unrealized gains or losses on foreign exchange forward contracts was CAD39 million compared with CAD71 million in the first quarter of 2007 and reflects the realized effects of the foreign exchange forward contracts that matured during the quarter.

Fording President Boyd Payne was “generally pleased” with first quarter results but expressed concern about the amount of coal the company was able to move to port. Rail shipments thus far in 2008 have fallen short of requirements.

Speculation about ongoing contract negotiations between major producers of coking coal and the fuel’s major consumers, Asian steelmakers, has driven the unit price to its current lofty heights in mid-60s.

“The acute shortage of supply has enabled us to settle a majority of our contracts for all grades of our coal at pricing in line with our major Australian competitors,” said Boyd. Elk Valley Coal, Fording’s 60 percent ownership of which provides its cash flow, has completed negotiations for about two-thirds of its anticipated sales for the 2008 coal year with its highest quality coal products being priced at or above USD300 per ton.

If remaining contracts are settled on similar terms, Fording anticipates an average coal price for the 2008 calendar year in the range of USD195 to USD205 per ton.

The price reached in 2008 coal year negotiations will in large part determine what Fording’s royalty stream will be for the next few years and, hence, what distribution it will pay. But Fording is basically a momentum stock with no real appeal for income investors; you can speculate on coal pricing trends–coal markets have tightened this year on weather-related mine closings and the Asian economies have shown some resilience–but it’s yielding less than 4 percent.

Fording management was cautious during its first quarter earnings call on the rail transport issue. Rail shipments are increasing, keeping pace with production; as of now, the company is still about 40 percent below its “comfortable target” of 1 million tons at port. And it could be left using second quarter production to satisfy 2007 contract price shipments. Management described the carryover tonnage situation as “fluid.”

The price reached in 2008 coal year negotiations will in large part determine what Fording’s royalty stream will be for the next few years and, hence, what distribution it will pay. But Fording is basically a momentum stock with no real appeal for income investors; you can speculate on coal pricing trends–coal markets have tightened this year on weather-related mine closings and the Asian economies have shown some resilience–but it’s yielding less than 4 percent.

Westshore Terminals Income Fund, which handles Fording’s coal for shipment to Asia at its Vancouver, British Columbia, facility–the largest coal terminal on the west coast of North America–may be a better alternative for income-oriented investors looking to play the coal trend. It’s yielding more than 6 percent and has in place a realistic plan to expand capacity to meet rising global coal demand.

The Court of Appeal for British Columbia recently ruled in Westshore’s favor on an appeal of an arbitration decision stemming from a dispute with Elk Valley Coal on rate adjustments to a contract in force since 2000 for coal shipments from the Elkview Mine.  The arbitrator determined in 2006 that there was no basis on which to order a revision in the rates. The formula for determining the loading rate will continue for the remaining term of the contract to 2010.

A statement from the chair of the NABE’s statistics committee, Haver Analytics President Maurine Haver, asserted that “just when reliable and timely indicators are needed most, resources devoted to their production at our federal statistical agencies have been cut, requiring the termination of data series or a reduction in sample sizes used to produce the data.”

According to the National Association of Business Economics (NABE), the Bureau of Labor Statistics (BLS) has been forced to terminate all hours and earnings data reported for local areas, as well as payroll employment for 65 small metro areas.

The cuts are contained in the 2009 budget the Bush Administration submitted to congress in February. In addition to wiping out some local data, the budget proposal ignores a request for funding to update samples for the housing portion of the consumer price index (CPI).

Housing represents about 40 percent of the CPI, which, among other things, is used to determine the annual cost of living increase for Social Security recipients. BLS, which compiles CPI, uses a housing sample based on the 1990 census and has been and will be unable to update its sample due to budgetary constraints. 

The NABE may ask its members to write letters to representatives “in support of agency budgets as the subcommittees meet to review fiscal 2009 funding.” Perhaps you, too, can contact your Congressional representative and argue in favor of transparency.  

It’s time: Vegas, baby! Neil, Elliott and I will head to the desert paradise May 12-15, 2008, for the Las Vegas Money Show at Mandalay Bay. Go to www.lasvegasmoneyshow.com or call 800-970-4355 and refer to priority code 010583 to do the “what happens here stays here” thing as my guest.