July 31st, 2013 Business and Market Update

This morning we are seeing mixed markets around the world as all are waiting for the US Fed to release the minutes of the meeting concluding today.  The “taper” word will be the key and of course any dates for the action, which I doubt we will get, will set the tone for the markets direction.

Asia and Europe are both quite mixed today also awaiting the Fed decision.  Asia was off about 1.5% overnight.  Europe was mixed with the UK higher and France and Germany lower.

Euro region unemployment dropped for the first time in 2 years however the rate is still at a record 12.1%.

North America is flat going into the Fed meeting, however there is additional economic news this morning.  US GDP for Q2 was released and came in well above estimates at 1.7% vs. 1.0% and just behind Q1 at 1.8%.  Q1 was revised down however to 1.1%.  Bottom line, this is a good number but far off the level the Fed is looking at for real growth in the economy.  We also had Canadian GDP which came in month over month at 0.2% vs. 0.3% and annualized (May) at 1.6% which matches estimates.  The ADP Private Payrolls was also released and beat estimates by 20000 coming in at 200000 vs. 180000.

Markets are slightly lower but seemingly directionless.

The key will be Friday’s Non-Farm Payrolls that will set the tone for the Fed to move.

The problem that we have currently is good news or bad news, the markets are interpreting it as one thing – extreme volatility.  We continue to try and mitigate that volatility as much as possible.

Gold is off 3.00 to 1320, oil is up 50 cents to 103.55, the loonie is down 0.09 to 96.94.  The US 30 year Treasury is off a point, on the positive economic news with the yield moving higher to 3.72%

In earnings news, which I might add has generally been good, but virtually ignored, mandate company Comcast beat on both the top and bottom lines.  Rio Can and First Capital Realty both beat FFO estimates and saw good revenue and cash flow growth in the first half of the year.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


July 29th, 2013 Business & Market Update

A very busy week this week as the earnings reports continue to come at a fast pace, the FOMC meets again Tuesday and Wed with a statement set for release on Wed afternoon and Friday we get the July Employment numbers our of the US.

Overnight in Asia, the Yen was once again stronger and more concern over a slowing Chinese economy caused Japan to drop 3.5% and China 1.75%.

Europe however is higher at midday as Italy has started to recover at a faster pace and should see positive GDP in fiscal 2014.  Markets are trading higher by about a third of a point.

US futures are down about a fifth of a point on no real news as markets wait for the Fed and the employment number later in the week.  Canadian futures are flat this morning.

Gold is trading higher on the weaker dollar this morning up 10.00 to 1337.00, oil is higher by 38 cents to 105.09 and the loonie is flat at 97.33.

On the earnings front, mandate companies, Arc Resources, Air Castle and Eastman Chemical are all announcing results after the market closes this evening.  I will provide the results in tomorrows blog.

A couple of big Canadian companies are in the news today.  The US President stated this weekend that the job creation numbers that have been estimated for the creation and servicing of the Keystone Pipeline project will be about a tenth of what was originally estimated.  Where he got the numbers from has not been divulged, however I am sure there will be much more on this in the days to come.  TransCanada for their part has suggested that a $7.6bn project that spans the continental US would create and sustain more than 20000 jobs which they feel is a conservative estimate.

Lastly, the Hudson’s Bay Company today announced a deal to buy Saks the big US high end retailer for about $2.6bn.  The deal, while accretive is an expensive one for HBC and the financing is being done in a number of different ways through private investment, debt and equity.  The company also announced it will be reducing its dividend by about half to help pay for the deal.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


Friday, July 26 Business and Market Update

News out of Asia today in regard to Japanese prices moving higher.  It would seem that the greatest part of the move was in regard to higher hydro costs with a lesser contribution coming from durable goods.  Also, the Yen has been moving higher the last couple of weeks (along with Gold) as the US dollar has been under pressure due to the constant Fed speak on longer term stimulus plans.  Markets in Japan were off about 3.00 and in China about half a point.

Europe is flat a region, however both the UK and Germany were lower by about a half a point.  Even with better earnings across the board in the region, many are using the recent rally to take profit.

US futures are trending down this morning by about a half a point awaiting yet another round of Fed talks next week.  Earnings have been strong especially the mandate companies, but markets overall are fixated on the Fed and their next move.

Canada is following the US lead this morning and will open down about a tenth of a point.

Gold is off about 10.00 to 1323, oil is down 0.68 to 104.83 and the loonie is flat at 97.30.

Bond yields edged a little over the week with the ten years in both Canada and the US at 2.42% and 2.57% up about 0.05% respectively.

Looking at earnings news, Gilead Sciences came in at estimates but beat on the top line by a big margin.  The stock is moving higher in the pre-market by about 8%.  TransCanada also met estimates on both earnings and revenue.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


July 23rd 2013 Business & Market Update

Overnight the Chinese government reiterated the commitment to a 7% growth rate by providing the stimulus necessary to continue to achieve the goal.  Market in Asia on the news were up with China leading the way up more than 2%.  Japan advanced by about a point.  Australia which does a great amount of trade with China was up about a third of a point.

Europe was also higher on the news as a big trading partner.  Markets in the region were up about a half a point at midday.

In North America,  we are seeing some upside this morning on the China news and further positive earnings reports.  Both US and Canadian futures are up about a quarter point.

Mandate company, Canadian National Railways reported after the close yesterday and beat estimates on both revenue and earnings.  They did however warn of a challenging second half of the year.

Also, Canadian retail sales were released for May and beat estimates by a large margin coming in at 1.9% vs. 0.4% estimated.

Gold is trading down about 7.00 this morning to 1330, oil is off 1.00 to 105.98 and the loonie is up a quarter cent to 96.97.

Lastly, as I am sure all must know by now, the new royal was born yesterday afternoon.  A bouncing baby prince.  Name to be determined, I am betting on James.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


July 17th, 2013 Business & Market Update

Today is the day of central bankers as Mark Carney – BOE Governor, Stephen Poloz – BOC Governor and Ben Bernanke – FOMC Head all are providing guidance on monetary policy for each of their respective countries.  Carney has already made his comments and basically is leaving the current asset buying program and interest rates as is.  Poloz and Bernanke are due to speak later this morning and I would suggest that Poloz will do nothing and Bernanke will continue to put the clarify the tapering program parameters (employment levels, inflation levels etc.).  His testimony to congress starts at 10am EDT however the minutes of the speech have been released.  Highlights of the speech, the US economy is still vulnerable to outside shocks (Europe, China etc.), employment is far from satisfactory and bond purchases are not on a pre-set course.  Markets did not move substantially on the remarks but did move slightly higher.

Staying with the US, Housing Starts and Permits both missed by large margins in June which most of which is attributed to the increase in mortgage rates, the weather and supply issues in the South.

In earnings news, mandate companies Mattel and US Bank reported this morning. Mattel missed in both earnings and revenue while US Bank beat on earnings and missed on revenue.

In Asia overnight markets were mixed with China down about a point and Japan flat.

Canadian markets are poised to open higher by about a half a point anticipating no change to the BOC policy position.

Gold is up a couple of points to 1294, oil is higher by 9 cents to 105.77 and the loonie is flat at 96.30.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


July 12th, 2013 Business & Market Update

It would seem that the Chinese are starting to come to terms with the fact that growth at 8 to 10% a year is just not sustainable over time and a senior official in the finance department has suggested that 6 to 7% is more realistic for the balance of the fiscal year.  That comment caused the markets over there to fall by about a point and a half overnight.  Japan was relatively flat.

In Europe, we are seeing modest gains at midday with markets higher by about a quarter point.  Factory output in May fell for the first time in four months showing that the economy is still fragile in the region.  On the positive side, S&P has upgraded its outlook on Irelands credit rating suggesting the debt may fall faster than anticipated. While other countries in the union seem to be fighting continuously politically as to how to get things done, Ireland’s political parties have put the politics aside and got things done. Pretty rare in the world today but a great example to other countries in financial crisis.

The US markets are set to open slightly higher as JP Morgan and Wells Fargo both beat consensus estimates.  JP Morgan’s loan loss provisions were lower by 78% and both the top and bottom lines were stronger regardless of  higher mortgage interest rates for the quarter.

Markets have had a nice rebound this week based on the clarification by the FOMC on the tapering program in regard to asset purchases.  The gains have been across the board as cash and fixed income assets continue to flow into the capital markets.

In Canada we are going to see about a quarter point advance on the open following the US lead.

Commodities are mixed with gold off 7 to 1273, oil up 0.60 to 104.99 and the loonie down a fifth of a cent to 96.29.

Bond yields have retreated this week after the Fed minutes release with the ten year treasury yield falling back to 2.55% from 2.66% last week.  In Canada we got a similar move with 10 year GOC bonds yielding 2.42% down from 2.51% last week.

For now we seem to be in a holding pattern going deeper into earnings season which will tell the story in regard to continued recovery.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


July 9th, 2013 Business & Market Update

Asia rallied once again with markets up about 2% on the positive US markets yesterday.

Euro markets are also stronger by about a point at midday on the strength of the US markets yesterday.

North American futures are moving higher this morning on continued dissemination of the real effects of the FOMC tapering threat and the fact it is not going to occur immediately and will be a process vs. an event.  Futures in both the US and Canada are up about a half a point this morning.

Alcoa, the first Dow 30 company to release earnings each quarter came in slightly ahead of estimates after the close yesterday which also helped in moving futures higher this morning.

Gold has rebounded another 12 dollars this morning to 1247, oil is lower by a half a dollar to 102.48 regardless of continued fighting in Egypt and the loonie is up a half a cent to 95.09 on a weaker US dollar.

In other news this morning Blackberry is holding their annual meeting in Waterloo and will need to reassure shareholders that they are on the right track despite a poor earnings report a week ago.

Our intrepid US Strategist, Tony Dwyer has come out with a good piece this morning on the current confusion that seems to be rocking the markets and puts some clarity to it.  I have attached the highlights of the report below and the entire PDF above.  He is suggesting that the real indicators should provide a continued run in the markets.  He still has a 2014 target on the S&P at 1955 which would represent an approximate upside of 20% from here:

What would turn us more cautious? This is the question we get most often, and the answer is that we would get more defensive if:

  • Core inflation expectations rose enough to cause the Fed to aggressively tighten- the opposite is happening. (page 5)
  • The tightening monetary policy began to discount a pending recession via a sharp flattening of the yield curve- the opposite is happening (page 9)
  • The flatter yield curve caused bank lending standards to tighten- the opposite is happening (page 26)
  • High yield debt to treasury yield spread begins to trend significantly higher- the opposite is happening (page 13)
  • Economic data began trending lower- the opposite is happening (pages 15 & 20)
  • The current uptrend in valuation reversed- the opposite is happening (pages 35-38)

Summary. The increased likelihood of Fed tapering has pushed market-driven interest rates up and generated fear of negative economic effect. We believe the opposite may happen because the yield curve steepened, credit spreads have remained historically tight, and the sharpness of the rise in 10-year yields has been dramatic enough to suggest a decline in long rates over coming weeks. Our fundamental thesis remains firmly in place, and until we get consistently stronger economic numbers OR core inflation expectations begin to rise, we expect the Fed to stay on course and not taper bond purchases through 2013. Bottom line: we continue to urge investors to not fight the Fed or the tape, and with the uptrend in place, the economy in the fundamental sweet spot, and the SPX trading at less than 15x our conservative 2014 estimate of $115, our conviction level for SPX 1955 remains high.

Lastly, with the tragic events in Quebec still unfolding, the debate continues on how to transport crude.  I am of the view we are early on this as there are still people missing, but of course both sides need to make sure the line in the sand is drawn.  The pipeline people suggest that there method is safer, the rail people suggest their method is safer and greener and the green people want neither!  I am quite sure that neither is not an option unless we go back to the horse and buggy era until all of these COST EFFECTIVE alternatives have been made available to all.  The bottom line is we need crude to live at the present time and for the foreseeable future and I would suggest that both methods are going to be required to handle the transport of the commodity efficiently.

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management