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


June 25th, 2013 Business Update

The volatility show continues however, yesterday we did see some buying (investors) coming into the game in the defensive sectors that have been grossly oversold over the past month causing markets to finish off the lows of the days and many of the “bond surrogate” stocks actually finish higher.

Overnight in China, the PBOC reiterated that they have and will continue to provide liquidity to banks that require funding to maintain reserves.  That news caused a massive reversal in the capital markets causing the Shanghai index to finish down about three quarters of a point.

Europe on the other hand has rallied at midday up about 1.50% on the positive news out of China and from the ECB suggesting the exit from stimulative monetary policy in the region is a long way away.

In the US, Durable Goods Orders were released and were north of estimates both on a gross basis and stripping out transports.  Also, the Case Shiller Home Index was stronger once again month over month and year over year ahead of estimates.  Of course with these crazy markets does good news economically mean higher markets?  It should, but of course it also means less liquidity (in the future) as the Fed reduces the stimulus.  The bottom line, and the markets have it right this morning, is as the economy improves so should markets and futures are higher this morning by about three quarters of a point.

Canadian futures are also higher by about the same amount.

Bond markets are higher on bargain hunting and to make things even more confusing so are the commodities.  Gold is up 4 bucks to 1280, oil is up 40 cents to 95.59 and the loonie is up slightly to 95.28.

Bottom line folks, don’t get caught up in the daily noise.  Portfolios are in great shape as the recovery continues and other than allocation model balancing and some sector rotation the strategy continues.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


June 6th, 2013 Market Update

After the big hit in North America on the ADP Jobs report yesterday we are seeing a relatively flat opening on the way.  Japan was off a point in sympathy with the North American decline as was China.

In Europe markets are higher by a quarter point at midday on bargain hunting and the fact the BOE and ECB are both leaving the asset purchase programs and interest rates alone basically playing the wait and see game going into the summer.

In the US, Initial Jobless Claims came in down 11000 to 346000 last week which is a good number, but really failing to move markets in that the Non-Farm Payrolls are being released tomorrow morning.  Futures in the US are virtually flat this morning.

The new Bank of Canada Governor Stephen Poloz is giving his inaugural talk to the finance committee this morning and I managed to last about 10 minutes until I started to dose off.  It would seem we have in knack in this country of appointing the most boring, dry bank governors on the planet to the job.  Nothing new is coming out of his mouth and it looks like he is doing the right thing and staying the course for now.

Gold is off slightly to 1400, oil is up 1% to 94.62 and the loonie is down 12 bps to 96.60.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


May 21st, 2013 Market Update

Overnight there was some weakness in the Asian markets as corporate Japan is suggesting the fall in the currency is enough and stability or a slight increase is warranted.  Costs to exporters continue to rise as the currency falls and it would seem that the sweet spot has been by passed according to reports out the country.  Markets in the region are mixed off just slightly from yesterdays close.

Europe is off about a half a point this morning as markets are quiet going into the Bernanke congressional testimony later today.

The US markets are however pointing to a slightly higher open up about a quarter point.

Commodities continue to be under pressure as gold is off another 16.00 to 1368, oil is down a quarter point to 96.67 and the Loonie is down about a half a cent to 97.22.

Lastly, as I am sure most are aware by now there was a severe tornado in Oklahoma yesterday that has devastated a small town and killed many, including several children.  Take a moment and think of those affected today sending positive thoughts.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management


April 24th, 2013 Business and Market Updates

This morning we are seeing some mixed markets with Asia up large overnight (2%) on the rally in Europe and the US.

Europe is higher at midday by about a half a point regardless of Germany’s continued slowing economy.  The players are convinced that the ECB will come to the table with more stimulus (interest rate drop) holding markets there higher by about three quarters of a point.

In the US Durable Goods for March were off 5.7% vs. estimates of 3.0% indicating that big ticket items were in decline for the month.  After a 4.3% increase in February the numbers do show the continued volatility in the sector.  US futures are trending higher this morning up slightly over yesterday’s close.

Apple released their earnings yesterday and beat the street estimates on both the top and bottom line.  However the guidance for the rest of the year was quite cautious.  The company did report a $50bn share buyback and a dividend increase of 15% bringing the yield at the current price to just over 3%.

In other earnings news, mandate companies Metro and CP Rail both released with Metro meeting expectations and CP beating on both the top and bottom line. CP’s operating ratio also improved from the last quarter which is a great measurement of whether managements plan is having success.

Gold is trading higher this morning up 20.00 to 1428.00, oil is higher up 28 cents to 89.46 and the Loonie is flat at 97.44.

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


March 12th, 2013 Market Update

Overnight Asia traded lower on profit taking and some confusion on which way the Chinese government will go in regard to the latest set of economic data that was released Friday.  Markets in the region were off about a half a point on average.

In Europe, the markets are mixed at midday.  Italy’s borrowing rates went up slightly yesterday as a bond auction took place in the wake of the Fitch downgrade.  Markets are virtually flat on average across the region.

In North America, we are seeing a slight downside bias this morning as futures are currently off by about a tenth of a point.  We are seeing some profit taking on the recent new highs in the US.

Paul Ryan (the Republican Vice-Presidential candidate) is set to release a new set of budget reform documents today, which are mostly regurgitated from the election platform, but it does represent an attempt at a compromise, which many will welcome.  I would be very surprised if the proposals went anywhere, but it does give the children in Washington something to argue about today.

Gold is up about $15.00 on a technical rally and oil has rebounded back over $93.00 per barrel or about three quarters of a point.

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

Portfolio Manager & Branch Manager

Independent Wealth Management