Monthly Archives: June 2015

Odette Morin

What does Greece mean to you?


Greece forced a “bank holiday” until July 6th 2015, as the Greek government has announced a referendum on whether the austerity measures demanded by Greece’s creditors in return for continued financial aid should be accepted or not.  Along with the bank closures, daily limits on cash withdrawals have been limited to 60 euros per day, and a halt on foreign transfers of cash have been implemented in an effort to prevent a mass run on Greek assets.

Predictably, the Eurozone equity market dropped by nearly 3% on the open Monday morning.

So, what are they voting on in the referendum?

While the literal wording will address the government acceptance or refusal of creditors’ terms, in reality, the referendum will be a vote on: a) whether the current government remains intact, and b) whether Greece should begin its exit from the Eurozone sooner rather than later.  Recent polls have suggested that the majority of Greek voters would prefer that negotiations continue to avoid departure from the euro, but the wording of the referendum may centre focus on the prerequisite pension reductions and even harsher austerity measures, prompting an emotional “no” which would all but seal Greece’s accelerated departure from the Eurozone.

What happens next?

In the event of a “no” vote, market volatility will certainly increase, pushing quality yields even tighter, and credit spreads wider, particularly among peripheral Eurozone sovereign bonds. The degree to which this happens will be determined by the European Central Bank’s (ECB’s) follow-through on their commitment to mitigate any possible financial market contagion, having adopted a familiar “by any means necessary” stance.

Conversely, a “yes” vote would almost certainly result in a rapid reversal of sentiment and markets in the shorter term, with sustained financial aid keeping the Greek economy afloat for a while longer.  Politically, one would expect some sort of reshuffling of the government, with either resignations, elections, or some other sequence of events that would essentially remove the current majority government.

How could your investment portfolio be affected?

The primary impact of all of this has been the increased volatility felt throughout financial markets.  Economically speaking however, the impact of Greece’s default and Eurozone departure is limited relative to the global economy, and in the medium term may in fact lead to positive sentiment among European investors. In the longer term however, with the precedent of a troubled Eurozone member departing, it may bring into question the possibility of a “domino” effect in the future.

Among the various macroeconomic and geopolitical risks that exist today, Greece remains a minor factor.  It has been well documented that the financial impact of a default is manageable on a larger scale, although companies and smaller emerging European countries with larger exposure to commerce with Greece will certainly be affected.  From a silver lining view, equity markets may in fact welcome a Greek tragedy as it would almost certainly guarantee a continuation of loose monetary policy from the ECB and U.S. Federal Reserve as global financial markets digest the news.  “Lower rates for longer” has been a driving force behind equity returns, and removal of Greek uncertainty should almost certainly be seen as a positive.

Given the uncertainty of the referendum’s outcome and the short timeframe until its conclusion, trying to adjust asset allocation of a global portfolio to capitalize on the results would be pure speculation.   Over a 12 month horizon, fundamentals of Eurozone economies and equities remain attractive.

Ongoing Monitoring

The “noise” related to Greece has been closely monitored over the past several months by managers. As new developments present themselves, we will continue to update you.



Terry Broaders

Weekly Update June 15 2015

“I Praise Loudly, I Blame Softly” -Queen Catherine II


Markets Lower as Greece Stalls

Stock markets on both sides of the Atlantic turned lower Friday on renewed fears over a possible Greek debt default. In Toronto, the S&P/TSX composite index closed down 89.73 points at 14,741.15, with energy and financial issues among the leading decliners as benchmark oil once again fell below US$60 a barrel. The loonie, meanwhile, was off 0.22 of a U.S. cent at 81.25 cents as the American greenback strengthened.

In New York, markets gave back a big chunk of their advance over the previous two sessions, with the Dow Jones industrial average suffering a triple-digit loss, down 140 points at 17,898. The Nasdaq index fell 31 points to 5,051, while the S&P 500 finished 14 points lower at 2,094. The decline, which followed similar setbacks on most European bourses, came after an unexpected decision late Thursday by the International Monetary Fund to walk out of the debt negotiations with Greece. The announcement by the IMF, which cited lack of progress in the talks, heightened concerns that Athens may default on its debts when its 240-billion-euro bailout expires June 30. That in turn could force it out of the euro. Greece said Friday that it would present new proposals over the weekend in an attempt to breathe life into stalled talks, but confirmation didn’t come until after the close of markets in Europe. The main index in Athens suffered the most, down 5.9%, but other indexes were also sharply lower, with Germany’s DAX losing 1.2%, the CAC-40 in France off 1.4% and Britain’s FTSE 100 down 1%.


Canada Revenue Agency Warns of Scams

The Canada Revenue Agency (CRA) is warning taxpayers about an apparent increase in telephone scams, using increasingly aggressive tactics.  There has been an increase in scams involving telephone calls where the caller claims to be from the CRA, but is not, the agency reports. These calls are fraudulent and could result in identity theft, or financial losses, it warns. “Some recent telephone scams involve threatening taxpayers or using aggressive and forceful language to scare them into paying fictitious debt to the CRA,” the agency says. In these scams, the perpetrator claiming to work for the CRA tells prospective victims that they owe taxes, and they request immediate payment by credit card, or convince the victims to purchase a prepaid credit card and to call back immediately with the information. “The taxpayer is often threatened with court charges, jail or deportation,” the CRA says. Taxpayers should be beware of these sorts of calls, the agency says, and report them to the Canadian Anti-Fraud Centre.
The CRA never requests prepaid credit cards, never asks for information about passports, health cards, or driver’s licences, and never leaves personal information on an answering machine, or asks taxpayers to leave a message containing personal information, the agency stresses.


Market Update as of June 12 2015

The TSX closed at 14741, down -216 points or -1.44% over the past week. YTD the TSX is down -0.09%.
The DOW closed at 17899, up 49 points or 0.27% over the past week.YTD the DOW is up 0.37%.
The S&P closed at 2094, up 1 points or 0.05% over the past week.YTD the S&P is up 1.75%.
The Nasdaq closed at 5051, down -18 points or -0.36% over the past week.YTD the Nasdaq is up 6.85%.
Gold closed at 1181, up 10.00 points or 0.85% over the past week.YTD gold is up 0.77%.
Oil closed at 59.97, up 1.09 points or 1.85% over the past week.YTD oil is up 13.82%.
The USD/CAD closed at 1.231102, down -0.0123 points or -0.99% over the past week.YTD the USD/CAD is up 4.90%.


Sources: Bloomberg; Investment Executive;

Terry Broaders

Weekly Update June 9 2015


“I Am Looking For An Honest Man” -Diogenes


TSX End Lower In a Broad Decline

Canadian stocks fell Friday for a second day, ending at a two-month low, after gold miners slumped as the dollar surged amid better-than-forecast hiring gains in the U.S. and Canada. The Standard & Poor’s/TSX Composite Index slipped 62.23 points, or 0.4 per cent, to 14,957.16 in Toronto. The gauge dropped 0.4 per cent for the week. Canada added six times as many jobs in May as economists predicted, with the job market proving robust even as the economy recovers from the effects of plunging crude-oil prices. Nine of 10 industries in the S&P/TSX declined Friday on trading volume 10 per cent lower than the 30-day average. The loonie was up 0.42 of a U.S. cent to 80.39 cents.

The Dow and S&P 500 eased on Friday as increasing expectations the Federal Reserve could raise rates as soon as September offset optimism over a recovery in the U.S. labour market. Stronger-than-expected jobs data for May and a pickup in wages were the latest signs of better momentum in the economy. Wall Street’s top banks said they expect the Fed to begin raising interest rates in September, followed by another increase before the end of the year, according to a Reuters poll. The Dow Jones industrial average fell 56.12 points, or 0.31 per cent, to 17,849.46, the S&P 500 lost 3.01 points, or 0.14 per cent, to 2,092.83 and the Nasdaq Composite added 9.33 points, or 0.18 per cent, to 5,068.46. For the week, the S&P 500 fell 0.7 per cent, its second straight week of losses, the Dow was down 0.9 per cent and the Nasdaq was down 0.03 per cent.


Canada Adds 59,000 Jobs in May

Canada’s economy added 59,000 jobs last month, but the jobless rate stayed the same at 6.8 % because more people were looking for work. Statistics Canada reported Friday that employment increased in Ontario, British Columbia and Nova Scotia, while it declined in Newfoundland and Labrador, Manitoba and New Brunswick. The rest of the country’s labour force was just about unchanged. Most of the jobs were in the private sector, fairly evenly distributed between full-time and part-time jobs. Two sectors; manufacturing and health care; were responsible for most of the gains, with 22,000 jobs added in the former and 21,000 in the latter. “With the U.S. economy showing clear signs of improvement, this is perhaps a sign that the Canadian non-energy economy is finally beginning to shift into a higher gear, aided by the lower Canadian dollar,” said David Madani, an economist with Capital Economics in Toronto. “We still think that the worst effects of this aren’t over, and still expect the economy to grow at a fairly unspectacular pace over the rest of the year,” he said. The 59,000 figure is much stronger than the 10,000 new jobs expected by a consensus of economists polled by Bloomberg.


Market Update as of June 5 2015

The TSX closed at 14957, down -77 points or -0.51% over the past week. YTD the TSX is up 1.38%.

The DOW closed at 17850, down -161 points or -0.89% over the past week. YTD the DOW is up 0.10%.

The S&P closed at 2093, down -14 points or -0.66% over the past week. YTD the S&P is up 1.70%.

The Nasdaq closed at 5069, down -1 points or -0.02% over the past week. YTD the Nasdaq is up 7.24%.

Gold closed at 1171, down -19.00 points or -1.60% over the past week. YTD gold is down -0.09%.

Oil closed at 58.88, down -1.54 points or -2.55% over the past week. YTD oil is up 11.75%.

The USD/CAD closed at 1.243424, down -0.0008 points or -0.07% over the past week. YTD the USD/CAD is up 5.95%.


Sources: Bloomberg; Investment Executive;

Terry Broaders

Weekly Update June 2 2015


“We Do Not Remember Days, We Remember Moments” -Cesare Pavese


Markets Pull Back on GDP Data

North American stock markets closed in the red in a decline that followed the release of disappointing economic growth figures on both sides of the border. The S&P/TSX composite index finished the last trading day of May down 92.91 points at 15,014.09, with the energy sector helping to limit the damage as oil prices turned sharply higher. The loonie lost 0.01 of a U.S. cent to 80.41 cents. Statistics Canada says the economy contracted at an annual pace of 0.6 per cent in the first three months of the year as weaker oil prices had a more severe impact than economists expected. It is the first time real GDP growth has dipped below zero since the fourth quarter of 2011 and the biggest slide into negative growth since the second quarter of 2009.

The U.S. economy also contracted in the first quarter with gross domestic product weakening 0.7 per cent, far worse than the government’s initial estimate of growth of 0.2 per cent. The Dow Jones industrial average closed down 115.44 points at 18,010.68, while the Nasdaq fell 27.95 points to 5,070.03 and the S&P 500 declined 13.40 points to 2,107.39. In commodities, oil prices got a boost after data showed U.S. crude oil inventories declined more than anticipated. The July crude contract rose $2.62 to US$60.30 a barrel and the energy sector rose 0.60 per cent. Meanwhile, August gold gained $1 to US$1,189.80 an ounce.


10% Plan To Max Out TFSAs

Ten percent of Canadians surveyed in a new poll say they typically contribute the maximum amount to their TFSA and will now invest $10,000. The poll done for CIBC found an additional 17% said they will try to increase their contributions above $5,500. The federal government increased the annual contribution limit to $10,000 as part of the budget this year. The increase in the TFSA contribution limits was promised by the Tories in the last election. As part of the increase, however, the limit will no longer increase with inflation. The poll also found that roughly 34% of respondents said they either didn’t have the money to take advantage of the new $10,000 limit or had other investment plans. Breaking the figure down, 18% of those surveyed said they would probably contribute less than the old limit of $5,500, while 12% said they would not have enough savings this year to make a contribution. Four% said they would contribute to other saving plans.

Twenty percent of those responding did not have a TFSA account and had no plans to open one, while 7% said they were now looking into opening one. Another 10% said they didn’t know, while 2% were categorized as other. The online survey was conducted between April 30 and May 4, less two weeks after the federal budget announcement. It included 3,011 Canadian adults who are Angus Reid Forum panelists.


Market Update as of May 29 2015

The TSX closed at 15034, down -167 points or -1.10% over the past week. YTD the TSX is up 1.90%.

The DOW closed at 18011, down -221 points or -1.21% over the past week. YTD the DOW is up 1.00%.

The S&P closed at 2107, down -19 points or -0.89% over the past week. YTD the S&P is up 2.38%.

The Nasdaq closed at 5070, down -19 points or -0.37% over the past week. YTD the Nasdaq is up 7.26%.

Gold closed at 1190, down -14.00 points or -1.16% over the past week. YTD gold is up 1.54%.

Oil closed at 60.42, up 0.70 points or 1.17% over the past week. YTD oil is up 14.67%.

The USD/CAD closed at 1.244265, up 0.0157 points or 1.28% over the past week. YTD the USD/CAD is up 6.03%.

Sources: Bloomberg, CIBC,, Investment Executive