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Terry Broaders

Weekly Update March 24 2015

“Pretend Inferiority and Encourage His Arrogance” -Sun Tzu, philosopher & military strategist

 

TSX Climbs On Commodity Prices

Higher commodity prices propelled the Toronto stock market to a solid gain Friday as both the energy and metals sectors finished in positive territory. The S&P/TSX composite index rose 68.48 points to close at 14,942.41, marking a climb of 1.4 per cent over the week. The loonie moved ahead 0.92 of a U.S. cent to 79.50 cents after Canada’s latest inflation figures showed lower gas prices offset higher prices for nearly everything else. In the U.S. the Nasdaq composite index jumped to the highest level in 15 years, nearly wiping out its losses since the end of the dot-com bubble.  The Nasdaq composite advanced 0.7 per cent or 34.04 points to 5,026.42, after coming to within 7 points of its all-time high set in March, 2000.  The loonie moved ahead 0.92 of a U.S. cent to 79.50 cents after Canada’s latest inflation figures showed lower gas prices offset higher prices for nearly everything else. Canada’s annual inflation held steady at 1.0 per cent in February, in line with analyst estimates. Statistics Canada said lower gasoline prices were a major factor and the inflation rate would have been 2.2 per cent if they had been excluded.

 

Europe Recovery Underway

European Central Bank head Mario Draghi says “a sustained recovery is taking hold” in Europe a recovery he says must be used to complete the 19-country euro currency union and fix its problems for good.  Draghi adds that member countries should use the breathing space given them by the central bank’s stimulus efforts to pass tough structural reforms that would make their economies more business-friendly so they can grow and prosper. Eurozone countries must “stand on their own two feet” because the eurozone doesn’t provide for budget transfers from richer countries — the way U.S. states that suffer recessions can depend on tax transfers through the federal government.

 

Market Update As of March 20 2015

The TSX closed at 14942, up 210 points or 1.43% over the past week. YTD the TSX is up 1.27%.

The DOW closed at 18128, up 379 points or 2.14% over the past week. YTD the DOW is up 1.65%.

The S&P closed at 2108, up 55 points or 2.68% over the past week. YTD the S&P is up 2.43%.

The Nasdaq closed at 5026, up 154 points or 3.16% over the past week. YTD the Nasdaq is up 6.33%.

Gold closed at 1183, up 27.00 points or 2.34% over the past week. YTD gold is up 0.94%.

Oil closed at 46.29, up 1.15 points or 2.55% over the past week. YTD oil is down -12.15%.

The USD/CAD closed at 1.256692, down -0.0216 points or -1.69% over the past week. YTD the USD/CAD is up 7.09%.

 

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update March 2 2015

“I Thought I Was Pretty Good Until I Saw Hendrix” -Brian May, Queen Guitarist & Astrophysicist

 

TSX Declines As Oil Prices Rise

The Toronto stock market pulled back slightly Friday amid soft U.S. economic data despite rising resource and financial stocks. The S&P/TSX composite index closed down 6.82 points at 15,234.34. The Canadian dollar gained 0.15 of a U.S. cent to 79.98 cents. New York indexes were also lower following a report that U.S. gross domestic product grew at an annual rate of 2.2% in the fourth quarter, weaker than the 2.6% first estimated. A bigger surprise was a glum reading on the manufacturing sector in the U.S. Midwest, which fell to a 5 1/2 year low and into contraction territory in February. Analysts says they believe there is something unusual in the Chicago Purchasing Managers Index reading and think it will be treated with skepticism by traders. The Dow Jones industrials lost 81.72 points to 18,132.70, while the Nasdaq gave back 24.36 point to 4,963.53. Oil prices gained $1.59 to US$49.76 a barrel.

 

Charitable Canadians

The amount of charitable donations reported by tax filers increased in 2013 over the previous year, while the actual number of donors fell 1.0%. Total donations rose 3.5% to $8.6 billion, with gains in every province and territory except the Northwest Territories, where donations were 2.7% lower. The largest increases were in Prince Edward Island +7.5%, Manitoba +6.0% and Alberta +5.9%.

In 2013, 21.9% of all tax filers claimed charitable donations, compared with 22.4% in 2012. Manitoba 25.3%, Prince Edward Island 24.1% and Saskatchewan 23.4% had the highest percentage of tax filers declaring a donation. Nationally, the median donation was $280 in 2013, meaning that half of those claiming a donation gave more than $280, while the other half gave less than $280.  Although Nunavut had proportionately fewer donors than other provinces and territories, it had the highest median charitable donation of $500 among tax filers claiming charitable donations. In descending order here are the median donation amounts for each province and territory: Nunavut $500; Alberta $420; British Columbia $400; Prince Edward Island $400: Manitoba $390; Yukon $390; Saskatchewan $380; Newfoundland & Labrador $350; Northwest Territories $350; Ontario $340; Nova Scotia $320; New Brunswick $310; Quebec $130.

 

Market Update As Of February 27 2015

The TSX closed at 15234, up 63 points or 0.42% over the past week. YTD the TSX is up 3.25%.

The DOW closed at 18133, down -7 points or -0.04% over the past week. YTD the DOW is up 1.68%.

The S&P closed at 2105, down -5 points or -0.24% over the past week. YTD the S&P is up 2.28%.

The Nasdaq closed at 4964, up 8 points or 0.16% over the past week. YTD the Nasdaq is up 5.01%.

Gold closed at 1215, up 14.00 points or 1.17% over the past week. YTD gold is up 3.67%.

Oil closed at 49.33, down -1.59 points or -3.12% over the past week. YTD oil is down -6.38%.

The USD/CAD closed at 1.251377, down -0.0024 points or -0.19% over the past week. YTD the USD/CAD is up 6.63%.

 

 

Sources: Bloomberg; Investment Executive; advisor.ca

Odette Morin

Large Drops in the Canadian Market lead by the Drop of Oil – What is causing this?

oil drop

 

 

 

 

 

 

 

Energy markets have been in turmoil since the OPEC announcement Wednesday last week that the group would not be cutting production. Although it was widely expected that OPEC would not take any production cuts at the meeting, the markets’ reaction to the actual announcement was drastic with oil prices declining 7% that day and continuing to slide to the now below $60. The tone of the market has shifted dramatically and there are talks about the possibility of $60-70ish oil for the next 6-9 months if not longer. The fundamental issue is that the oil market is oversupplied.

The vast majority of Energy sector experts’ comments this week indicate that OPEC will likely revisit its stance on production cuts over the next 6-9 months. “For many OPEC members, including Libya, Iraq, Algeria, and Venezuela, $60-70 oil poses a huge problem. The majority of OPEC countries need $90+ Brent oil prices in order to fund their social programs and are at high risk of social instability if these programs are cut. Even Saudi Arabia, which has significant foreign currency reserves to cover any shortfall in revenues has a huge population to support and high committed program costs which would eat through those reserves quickly at current oil prices (according to the IMF). “ wrote the BMO Energy sector team this week. (1)

“We continue to believe that the marginal cost of the majority of new oil production (full-cycle) is north of $80. Oil is a depleting resource and, over time, oil prices must migrate back to the marginal cost of supply in order to support new production. However, that does not mean that oil cannot trade below marginal cost for a period of time. We would expect that supply/demand fundamentals will improve through the back half of 2015 and become more balanced as we move into 2016. However, the oil market is complex and highly unpredictable and conditions can change very quickly. The imbalance in the market is not huge and history has taught us that supply disruptions are common. “ (1)

The Franklin Templeton Energy Sector team wrote a similar analysis this week. They too believe that low oil prices are not here to stay for the long term. “The marginal barrel-of-oil production growth cannot be profitably brought to market in the current oil price environment by private industry, nor can OPEC members balance their budgets, in our view necessitating higher prices in the future. In the short term, we may see various energy companies contend with low oil prices through a combination of reduced capital spending, asset dispositions and adjustments to dividend levels as necessary. “ (2)

To put things into perspective, from December 2nd to December 9th, 2014, the TSX has dropped 2.9%; while for the same period our average client account has dropped 0.9% or less. So highly diversified managed funds are doing better now of course.  Even if the Canadian Market took a big hit, your portfolios would not.

Take a look at the recent results of different sectors. This clearly shows the benefit of diversification.

see the chart here

(1)BMO Energy Sector team Commentary Dec 7, 2014

(2)Franklin Templeton Bissett Energy Sector team Commentary Dec 10, 2014

Terry Broaders

Weekly Update December 1, 2014

Aah-eeh-ah-eeh-aaaaaah-eeh-ah-eeh-aaaaah! -Tarzan of The Apes

 

TSX  Down After Six Straight Weeks of Gains

On a day when Canada’s GDP figures showed better than expected growth for the economy the Toronto Stock Exchange should have been surging but energy stocks are once again under pressure. Statistics Canada reported that third-quarter gross domestic product ran ahead at an annualized pace of 2.8%. That was much higher than the 2.1% rise that economists had expected. Despite this otherwise great news the S&P/TSX composite index dropped 177.69 points to 14,744.75 after OPEC left its daily output unchanged despite a global glut in supplies rather than cut production to put a floor under prices that have fallen 35 per cent since mid-summer  because of a higher U.S. dollar, lower demand and most particularly, a glut of global supply.

U.S. indexes were little changed at the end of a shortened session, benefiting from lighter exposure to resource companies versus the TSX. The Dow Jones industrials gained 0.49 of a point to 17,828.24, the Nasdaq added 4.31 points to 4,791.63 while the S&P 500 index faded 5.27 points to 2,067.56.

 

Bank of Canada To Raise Rates In May Says OECD

The Organisation for Economic Co-operation and Development ECD forecasts the Bank of Canada will begin hiking its key interest rate in May 2015;  months ahead of what economists have been predicting. In its latest Economic Outlook, the Paris-based group says the central bank will eventually need to raise the currently low 1% to “counter inflationary pressures,” with the rate to rise steadily afterwards.

“Monetary policy has been highly accommodative for some time,” says the 236-page report. “Given the uncertainty surrounding the amount of economic slack, the Bank of Canada should maintain its current policy stance for the time being. But it will have to start to withdraw stimulus as remaining slack is progressively taken up.”  Most economists have been predicting the BoC won’t make a move on interest rates until at least late 2015. The bank has maintained its trend-setting rate at 1% for more than four years. The OECD also projects that Canada’s economy will grow by 2.6% next year, and 2.4% in 2016, largely driven by export demand from the U.S. economy.

 

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Beware of Black Friday

 

Market Update as of November 28 2014

The TSX closed at 14745, down -363 points or -2.40% over the past week. YTD the TSX is up 8.24%.

The DOW closed at 17828, up 18 points or 0.10% over the past week. YTD the DOW is up 7.55%.

The S&P closed at 2068, up 4 points or 0.19% over the past week. YTD the S&P is up 11.90%.

The Nasdaq closed at 4792, up 79 points or 1.68% over the past week. YTD the Nasdaq is up 14.72%.

Gold closed at 1176, down -24.00 points or -2.00% over the past week. YTD gold is down -2.33%.

Oil closed at 66.26, down -10.27 points or -13.42% over the past week. YTD oil is down -32.81%.

The USD/CAD closed at 1.142601, up 0.0188 points or 1.67% over the past week. YTD the USD/CAD is up 7.47%.

 

Sources: Bloomberg; Investment Executive; advisor.ca; Statistics Canada

Odette Morin

Markets rebound last week

Signs that major pillars of the global economy may be in better shape than thought along with strong earnings reports, sent North American stock markets sharply higher last week.

But analysts have warned there is no assurance that markets have reached bottom in the course of this correction and volatility will be a factor for a while yet.

“The market now is trying to settle at the new normal,” said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company. And the new normal is one where valuations are not deeply discounted, they’re fairly valued and the new normal is one where there will be month-to-month volatility.”

A major reason for the decline on stock markets in September and October was worry about the state of the global economy and, more particularly, fears that the euro zone was about to slip back into recession.

As far as we are concerned, as long as we have a Balanced portfolio and own Quality, we can all weather this correction.

Terry Broaders

Weekly Update October 21 2014

“Don’t Find Fault, Find A Remedy” -Henry Ford

 

 

TSX Ends Higher Friday On U.S. Data, Oil Prices

Canada’s main stock index reached its highest level in a week on Friday as positive U.S. economic data and a rise in oil prices boosted the energy sector. The TSX jumped 174.71 points to 14,227.68, as traders bought up stocks badly beaten down over the course of a string of market jolts. There was also speculation that the U.S. Federal Reserve might extend a key stimulus program.

Data showing that U.S. housing starts and permits rose in September signaled the economic recovery might be on track. Upbeat quarterly earnings from major U.S. banks fueled the positive sentiment further. Stock markets have been in a corrective phase over the past month, weighed on by worries over global economic growth, oil demand and the direction of U.S. Federal Reserve policy.

U.S. stocks climbed more than 1% on Friday, with the S&P 500 posting its biggest gain in over a week as earnings offset concerns about the impact of weak global demand on corporate America. The Dow Jones industrial average rose 263.1 points, or 1.63%, to 16,380.34, the S&P 500 gained 23.98 points, or 1.29%, to 1,886.74 and the Nasdaq Composite added 41.05 points, or 0.97%, to 4,258.44.

 

Canadians Are Paying Down Mortgages At a Fast Rate

Canadians are paying down their mortgages at a record rate, significantly lowering the risk of default should interest rates rise, finds a new report from CIBC World Markets. “Canadian households did not only resist the temptation of low rates, they used those low rates to pay down debt at a pace not seen before,” says Benjamin Tal, Deputy Chief Economist, CIBC. “Despite a lethargic labour market and an unemployment rate that is still too high for the Bank of Canada’s liking, debt service performance in Canada has almost never been better.”
Homeowners are taking advantage of prolonged low interest rates to pay off their mortgages by accelerating their principal payments. In effect, they are voluntarily shortening their amortization periods. As a result, Mr. Tal estimates the average amortization period in the Canadian mortgage market is now closer to 20 years rather than the implicit assumption of 25 years the Bank of Canada uses in its calculations. Instead of spending their disposable income, Canadians are making sacrifices, choosing to make extra payments on their mortgage to get out of debt faster. This ultimately makes Canada’s mortgage market more stable because in the event of a rate hike, homeowners would simply return to their regular amortization period, he says.
“Canadian households are paying back an additional $11 billion a year in principal that’s not being officially recognized,” says Mr. Tal. “That extra cushion is sufficient to absorb the first 100 basis point increase in the effective mortgage rate, with households simply re-amortizing to offset the payment increase.”

 

Market Update As of October 17 2014

The TSX closed at 14228, up 1 points or 0.01% over the past week. YTD the TSX is up 4.45%.

The DOW closed at 16380, down -164 points or -0.99% over the past week. YTD the DOW is down -1.19%.

The S&P closed at 1887, down -19 points or -1.00% over the past week. YTD the S&P is up 2.11%.

The Nasdaq closed at 4258, down -18 points or -0.42% over the past week. YTD the Nasdaq is up 1.94%.

Gold closed at 1239, up 16.00 points or 1.31% over the past week. YTD gold is up 2.91%.

Oil closed at 82.96, down -2.57 points or -3.00% over the past week. YTD oil is down -15.87%.

The USD/CAD closed at 1.127825, up 0.0067 points or 0.60% over the past week. YTD the USD/CAD is up 6.08%.

 

Sources: Bloomberg; CIBC; Investment Executive; advisor.ca