December 4th, 2013 Business & Market Update

After the sell off in North America yesterday, Japan following overnight with a 2% decline however, China in contrast was higher by about 1.3% on a stronger currency.

Europe is following suit with declines of about three quarters of a point at midday.

In the US the ADP Private Payrolls for November were released and beat by a large margin coming in at 215000 vs. 170000.  This number is the precursor to the Non-Farm Payrolls that will be released by the US government on Friday morning.  Estimates after last months big beat are averaging 166000 new jobs for November.  Futures are trading lower by about a quarter point.  Bond prices are falling pushing the 10 year yield in US bonds to 2.82% and in Canada to 2.62%.

Canadian futures are also down by about a quarter point after strong earnings from the National Bank.  The bank beat on both bottom and top lines, declared a stock split and a dividend increase.  Today at 10am the BOC will release the latest policy statement in regard to interest rates and the general state of the economy.  Interest rates are not going to move, however, the Governor’s comments will be closely watched.

Gold is trading lower by 4.00 to 1215, oil is up 0.77 to 96.82 and the loonie is off another 0.17 to 93.75.

I would seem the correction is upon us which will provide some solid entry points across the board in equities.  I continue to hedge fixed income positions to take advantage of the slowly rising interest rates while maintaining a strong cash equivalent position that will be available to take advantage of higher rates down the road.

November proved to be another good month in all mandates as the changes that have been made over the past couple of months continue to pay off in regard to performance.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

December 2nd, 2013 Business & Market Update

Some good news out of China overnight as November Manufacturing outpaced estimates, however markets there were off about a half a point.  Japan was flat.

In Europe, at midday markets are mixed with the EuroStoxx Index down about a fifth of a point contrary to positive news out of the UK as manufacturing there was also stronger for November.

US markets are back at full speed today after the extended long weekend and it would seem that while the shopping spree down there was strong sales numbers were lower due to deeper discounts.  Futures however are marginally stronger this morning.  Canada is following suit up slightly over Fridays close.

Gold is off 14.00 to 1237 on the continual strengthening of the US Dollar, oil is up 0.38 to 93.10 and the loonie continues to fall off about 0.14 cents to 94.08 the lowest level in two years.  Bonds are trading lower this morning with the US and Canadian 10 year notes yielding 2.77% and 2.58% respectively.

Tomorrow marks the start of the big Canadian banking oligopoly announcing earnings as BMO is first to report.  National will report Wednesday, CIBC, RBC and TD on Thursday and BNS on Friday.  Generally estimates are suggesting slight beats across the board with the possibility of dividend increases from TD and RBC.

I have added some further insight from the Pimco Due Diligence Conference that I attended recently in regard to the US Housing market which Pimco has done exhaustive research on in regard to their investment in non-agency mortgage backed securities.  While there has been a solid recovery, there is a great deal of room left in many regions of the country for continued growth.  A key takeaway was the fact the residential real estate is a market of houses not a housing market.  The difference is the fact that not all markets are the same (Manhattan vs. south Florida as an example).  A national number indicating housing starts, pricing and permits does not provide a realistic picture regionally of where value lies.  Not surprisingly, when asked about the Canadian market, for the most part the response was that it is overvalued.  Of course the same analysis applies in regard to regions.  I am sure you will find it very interesting.

Lastly, while on the road Thursday and Friday last week I was unpleasantly surprised at the traffic in the town of Peterborough, ON (population 135,000) due to the Canadian version of Black Friday.  I had meetings most of the day in town and it was like driving around in downtown Toronto.  I saw accidents on the road and in parking lots, line-ups at banks, gas stations and malls that were insane.  All to get a deal on something that is probably not needed at the end of the day.  While I understand it is good for the economy that the consumer is out there spending, I wonder at what cost from a debt perspective?  This is one US tradition that I would be happy to export back to them!!

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

November 25th Business & Market Update

With this week being the start of the holiday season in the US, markets will be fairly quiet going into the Thanksgiving holiday on Thursday and while markets will be open Friday volumes will be much lower.  I will be on the road Thursday and Friday in and out of meetings both days, but accessible and will be checking in often.  The Morning Blog will be attachments only Thursday and back to normal Friday.

Overnight in Asia, markets were mixed with Japan up 1.5% and China down about a half a point.  Japan’s rise is on top of analysts suggesting that Abenomics starting to take effect as the deflationary period in the region is coming to an end.  China on the other hand after a 7% move higher in the last week alone was off on profit taking.

Europe is up a about a half a point on solid US markets, the Iran nuclear deal with the US suggesting the country will curb further nuclear development and comments from the ECB that the region will not slip back into a full recession as growth continues to be positive.

The US and Canadian futures markets are higher this morning by about a quarter point on much of the above news along with the fact the dollar is stronger this morning.

The stronger US currency is causing more concern for gold investors as the commodity is off 10.00 to 1234.00, oil on the Iran deal is down 1.20 to 93.563 and the loonie is trading lower by a quarter cent to 94.80.  The US and Canadian 10 year bonds are lower this morning with yields at 2.75% and 2.59% respectively.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

October 25th 2013 Market Update

Asian markets tumbled about 2.5% overnight on the potential for the PBOC to tighten credit and the strength of the Yen against the USD.

In Europe, markets are off slightly at midday as the Asian news and business morale in Germany declining in September.  The loss is about a fifth of a point as the UK economy increased at the fastest pace since 2010 in the last quarter.

US futures are flat this morning regardless of the fact Durable goods (ex transports) for Sept were lower than expected.  Canadian futures are also pointing to a relatively flat opening.

Gold is off this morning about 9.00 to 1340, oil is rebounding up half a point to 97.55 and the loonie is off another 0.25 cents to 95.73.  The US and Canadian 10 year bonds are flat this morning yielding 2.51% and 2.42% respectively.

In mandate earnings news, Eastman Chemical and Microsoft both beat on the top and bottom lines.  In the case of Microsoft it was also announced that the current CEO will be stepping down next year.  Consumer products companies Sherwin Williams and P&G both missed estimates slightly but met or beat on revenues.

Lastly this morning, Twitter announced the terms of the coming IPO and have lowballed both pricing and size.  Lessons learned from the Facebook debacle a couple of years ago.  This deal will be highly subscribed regardless of the fact the company has not been profitable since it began.  We shall watch with some interest but will not be participating in the deal.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

October 7th, 2013 Market Update

With no movement over the weekend on the US budget, markets are continuing to retreat and have again overnight in Asia as market there were off about 1.25%.  Europe at midday is showing declines of 0.75% and US futures are lower by about three quarters of a point.  Canadian futures are about a half a point lower.

It would seem that both side continue to dig in with the right side of the aisle playing a game of chicken with the left.  As the debt ceiling deadline gets closer, we are now getting comments from some of the biggest holders of US debt, namely China at $1.2Trillion and the Euro Union at a little under that number.  The politics of the day are no longer an issue as far as the stake holders are concerned.  The term, get it done seems to be the message that is being broadcast across globe to the Americans.

Gold is trading higher this morning by about 8.00 to 1318, oil is off a buck at 102.87 and the loonie is off a third of a cent to 96.84.  Debt markets are rallying on the budget impasse with the US and Canadian 10 year bonds are yielding 2.61% and 2.55% respectively.

Our US strategist Tony Dwyer makes some interesting points on the current situation which I have included below:

  • The government shutdown and heated debt limit debate should push any possible “tapering” into the first quarter until the Fed is able to forecast the economic impact.
  • The trend of the economic data remains positive with Consumer Confidence, Housing, Employment, and debt service ratios at/near the best levels of cycle. The steepness of the yield curve and historically narrow corporate spreads suggest years of growth ahead.
  • Bank lending standards continue to ease as manufacturing expands, suggesting business spending a long way away from turning negative.
  • Q3/13 EPS reporting season is beginning with consensus expectations of 4.5% growth vs. a year ago. Every reporting season since Q1/09 has seen final results ahead of beginning of season expectations by an average 5.5% (2.8% over past four quarters), suggesting upside to EPS over coming weeks.
  • The valuation expansion that began in November 2011 continues to track the past two non-recession valuation expansions, suggesting our 2014 SPX target of 1,955 may be overly conservative for both time and price. Our target is based on 17x our 2014 estimate of $115. We view both our multiple and EPS assumptions as very conservative. The government shutdown and debt limit debate should push out expectations of Fed “tapering,” which keeps the yield curve steep and long-end near current levels.
  • While absolute corporate credit yields are off the low, as is typical at this point in the cycle, the Investment and Speculative Grade debt-to-UST yield has moved back to the best levels of the current cycle.
  • Corporate credit new issuance continues at a record pace. That is going to fund a lot of buybacks, M&A and other pro-equity moves.
Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

 

October 2nd, 2013 Business and Market Updates

Some decent upside in China overnight on the back of the US markets upside move yesterday.  Japan on the other hand fell about 2% due to the an increase in Sales Tax.

Mario Draghi speaking this morning is suggesting that the Euro recovery is continuing albeit at a slow pace.  He is confident the trend will continue and will do all he can to maintain or increase the current pace.  With all that said he left rates alone at 0.5% which caused some weakness in markets there.  The big index is down about a half a point.  Also, our Italian friends have done another about face today as the coalition members governing the country have now decided to continue on as they were.  On Monday if you recall, the coalition was dissolving which would have led to another election.  It would seem that the Italian people were not having any of that and the government listened.  Hmmmm, make you think of a certain government to the south of us that may take some notice of the peoples demands over their own posturing?

The US futures are off about a half a point on the ADP Employment numbers which came in at 166000 vs. 180000 estimated for September.  Also August was revised lower.  These numbers will play into the Non-Farm Payrolls for September which are scheduled to be released (maybe) Friday.  I say maybe as one of the government agencies that has been shut down is the Bureau of Statistics.  Hopefully the work had been completed before Monday.

Canada is following the US lead and trending down about a half a point.

Gold is up about 14.00 to 1300.00, oil is off 7 cents to 101.63 and the loonie is down 13 bps to 96.69.  Debt markets are rallying into the employment numbers with the US and Canadian 10 year bonds yielding 2.63% and 2.54% respectively.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

 

 

September 10th, 2013 Business & Market Update

Some encouraging news out of the middle east overnight as it would seem the Russians are suggesting that if all chemical weapons are removed from Syria by a third party a military strike would be avoided.  Both the Syrians and Americans at first brush seem to be in agreement.  Nice to see that politicians are actually trying to come to an agreement rather than continually blowing things up costing lives and countless millions of dollars.

The markets have reacted positively to the news with both of Asia and Europe trading higher by more than 1.5%.  US futures are up half a point and Canadian futures are higher by a quarter point.

On the other side of the page, gold is off by more than $22.00 to 1364, oil is retreating by more than 2% to 107.18 and the loonie is higher by 0.25 cents to 96.68.  The 10 year US and Canadian Bond are selling off causing yields to creep higher to 2.94% and 2.79% respectively.

Apple is hosting a big press conference today to announce new product launch’s which many wondering what the next direction is for the big tech company.

Visa , Nike and JP Morgan are being added to the Dow 30 Index today and Bank of America, Alcoa and Hewlett Packard are being dropped.  A pretty big shake-up on the index as there has not been something of this magnitude in some time.  There will be buying action today in the added names and selling pressure on the deleted names.

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca