Archive for the ‘articles you can send’ Category
Tuesday, August 10th, 2010
During the last week there has been a great deal of interesting and unusual but positive commentary about the upturn in the market and the economy.
In our first selections this week, Laszlo Birinyi, who runs an excellent asset management shop, a long-time contributor to Forbes Magazine, and runs Tickersense.com, comments that the market rally is a signal that the economic recovery will be far stronger than forecasters’ consensus estimates. In a follow up article, Birinyi says that waiting for an economy Roubini can believe in means missing rally.
Birinyi Says Stocks Rally Signals Economic Rebound, August 24, 2009, Bloomberg.com
Birinyi said on May 20 that the S&P 500 would climb to a record 1,700 in the next two or three years, a 66 percent gain from its current level. The index has rallied 14 percent since his forecast. The benchmark for U.S. stocks may rise 6 percent to 1,087 within the next three months “if it continues to progress at the rate it’s been progressing,” he said
Waiting for Economy Roubini Can Believe In Means Missing Rally, August 26, 2009, Bloomberg.com
“We’re looking at a bull cycle in phase one,” Laszlo Birinyi said in a telephone interview yesterday. Birinyi was the top-ranked Dow Jones Industrial Average forecaster for most of the 1990s on PBS’s “Wall Street Week with Louis Rukeyser.” “No one wants to come out and say, ‘This is a bull market.’ Everyone’s just dancing around the term,” he said.
John Lipsky, First Deputy Managing Director at the IMF states that there are ‘Clear’ signs of a global rebound under way.
IMF’s Lipsky Sees ‘Clear Signs’ of a Global Rebound, Bloomberg.com, August 24, 2009
The global economy is showing “clear” signs of a rebound and central banks are unlikely to raise borrowing costs for many months, the International Monetary Fund’s No. 2 official said.
“The signs are clear — if still tentative — of renewed growth,” John Lipsky, the IMF’s first deputy managing director, wrote today on its Web site. “With inflation threats distant, there is little doubt that central bankers intend to keep policy interest rates very low for some time to come.”
Kenneth Rogoff, former Chief Economist, IMF and Harvard U Prof says “There is no question the global economy is healing and emerging from recession,” in an Bloomberg TV interview August 21, 2009.
World Economy Emerging From Worst Recession Since World War II, Bloomberg, August 22, 2009
The global economy may be coming out of the worst recession since World War II as record-low interest rates and trillions of dollars in fiscal stimulus spur demand.
Sales of existing U.S. homes jumped in July to the highest level since August 2007, and German service industries expanded this month for the first time in almost a year, reports yesterday showed. The Japanese economy grew for the first time in five quarters, according to a report earlier this week.
Next, and most dear to Canadian investors, there has been excellent news on the retail sales and banking front at home. Stewart Hall, Economist for HSBC Canada says “All in, the month of June is shaping up nicely with manufacturing, wholesale and now retail sales all posting upside surprises and suggesting that the economy is stabilizing and beginning to transition over to the recovery phase.”
Surging retail sales lift hopes for Canada economy, Thomson Reuters, August 24, 2009
Canadian retail sales grew much faster than expected in June, the latest in a series of upbeat economic numbers to raise hopes the economy is pulling out of recession.
Sales jumped 1 percent from May, far surpassing forecasts for a 0.2 percent increase, Statistics Canada said on Monday.
But much of the gain was due to rising prices, especially for gasoline, while the volume of sales inched up by just 0.4 percent.
Sales were down 4.4 percent from a year earlier.
The report points to a recovery in consumer demand during the second quarter, after two straight quarters of sharp declines in spending.
“All in, the month of June is shaping up nicely with manufacturing, wholesale and now retail sales all posting upside surprises and suggesting that the economy is stabilizing and beginning to transition over to the recovery phase,” said Stewart Hall, an economist at HSBC Canada.
Our long standing love affair with our banks stocks have been warranted all along despite last year’s losses. BMO’s report today indicates that loan defaults have peaked, as BMO reported lower than expected loan loss provisions and $1 per share in today’s earnings report.
BMO Shows Credit Storm is Passing, Andrew Willis, Globe and Mail, August 26, 2009
Better-than-expected loan performance at Bank of Montreal is expected to boost all the Canadian banks, as analysts predict individual loan defaults have peaked.
Bank of Montreal (BMO-T) turned in earnings of $1 a share on Tuesday, well above the consensus forecast of 90 cents. Analyst John Aiken at Dundee Securities said: “The big surprise in the quarter was specific provisions of $357-million, well below expectations of above $400-million.”
Finally, a video featuring George Vasic, analyst from UBS:
Dividend Stocks: Get Paid to Wait for a Rebound, George Vasic and Rob Carrick, August 19, 2009
You also get tax benefits and stability, says George Vasic, equity strategist at UBS Securities.
If you have any articles to contribute to our weekly “Articles You Can Send to Clients” feature, please forward them to email@example.com.
Tags: Central Banks, Consensus Estimates, Dow Jones, Economic Rebound, Economic Recovery, Forbes Magazine, Forecasters, Global Economy, Imf, International Monetary Fund, John Lipsky, Laszlo Birinyi, Market Rally, Phase One, Roubini, Telephone Interview, Time Contributor, Upturn, Wall Street Week, Wall Street Week With Louis Rukeyser
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Wednesday, July 14th, 2010
Last week’s post with articles to send nervous clients got a great response.
In light of that, here are more articles from this weekend’s Barron’s , New York Times and Wall Street Journal that might reassure anxious clients.
First, the Chief Investment Officer of Harris Private Bank in Chicago looks at valuation, the economy, liquidity, psychology and momentum to make a strong case for U.S. equities.
And the cover story in today’s Barron’s outlines how the highest quality stocks have lagged in the recent run up – but are positioned to outperform going forward.
A story in Saturday’s Wall Street Journal highlighted the first upturn in manufacturing in nine months – with no signs of accompanying inflation pressures.
An article in last week’s New York Times reported on a positive outlook from the Federal Reserve Board.
BUSINESS / ECONOMY | August 13, 2009
Fed Views Recession as Near an End
And on Friday the New York Times also reported on positive indications for global trade.
BUSINESS / ECONOMY | August 15, 2009
Off the Charts: Hints of a Rebound in Global Trade
For more articles to email clients, every Wednesday Greenlightadvisor.com posts articles from the previous week to their website.
For last Wednesday’s articles, click here:
Tags: August 15, Barron, Board Business, Business Economy, Chief Investment Officer, Email Clients, Federal Reserve, Federal Reserve Board, Global Trade Business, Inflation Pressures, Liquidity, New York Times, Nine Months, Positive Outlook, Private Bank, Quality Stocks, Recession, Upturn, Wall Street Journal, Wsj
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Wednesday, June 30th, 2010
Each Wednesday we are sending you 3 articles you can send to clients to stay in touch and to promote open lines of communication with them. Its especially difficult to be motivational when there is so much skepticism about the economy and the market. When the market was a screaming buy, clients were not exactly beating down your door, and now that the market has had a massive rally, the skepticism turns back to downside concerns.
This is what the legendary investor Jeremy Grantham, founder of Boston-based GMO, referred to as rigor mortis, the immobilization that sets in, and what to do about in his prescient and resonant March 2009 newsletter, “Reinvesting When Terrified.” In late July, Grantham followed up on his views of what to do at this stage of the market’s advance, mostly by discussing what he is doing and why, in “Boring Fair Price!,” and shares his Plan C, What to do if the market overruns:
Plan C: What to do if the Market Overruns
Given our view that we are in for seven lean years in which the market will be looking for an excuse to be cheap, we recommend taking some risk units off the table, including becoming underweight in equities – between 1000 and 1100 on the S&P, if it gets there this year. Around 880 you should continue to move slowly to fair value, twiddle your thumbs, and wait to see what happens. Boring!
Otherwise, it is time to focus on the lesser issues: which types of equities are cheaper or more expensive than the market. This leads us back once again to the bet on quality stocks.
This week I thought it would be interesting to focus on some thought provoking, but positively balanced subjects of discipline and direction. Ideas, that is, that would spur calls to action. This week’s selection is about the importance of Quality in investing, now and timelessly.
Jeremy Grantham, a quiet giant in the pantheon of great investors says this week, in Reuters, that the time has come to focus on quality and value, and get rid of junk. Seems like a logical thing to do, but naturally it is not. Getting out of investments that have had a strong run is emotionally very difficult, and then taking the proceeds and putting them to work in high quality assets, but have underperformed the market, is even more difficult. Separating the wheat from the chaff is an idea that is easier said than done.
In short, Grantham says its time to be “long quality, and short junk,” as those stocks and bonds that were most battered in the crisis had the best performance.
Quality in focus after investor binge on cheap assets, Reuters, August 11, 2009
U.S. investor GMO calculates that the 40 stocks in the S&P 500 with prices above $50 rallied 21 percent on average between March and April. The 50 stocks with prices below $5 rallied 115 percent.
Credit markets have seen a similar trend with Bank of America-Merrill Lynch’s once battered global high-yield bond index gaining some 45 percent since March.
Now, however, investors are looking for the cream to rise to the top.
“Long quality (or long quality and short junk) is substantially the most outlying bet available today in all global equities,” GMO Chairman Jeremy Grantham wrote to the firm’s clients.
By the way, Grantham’s new focus is high quality energy and energy transition stocks. This is all covered in “Boring Fair Price!”
It should be obvious from simple arithmetic that population growth is on a direct collision course with increasingly scarce resources. For millennia, food constraints held the world’s population nearly constant. About 12,000 years ago, these constraints were altered signifi cantly with the start of organized agriculture. Then, around 200 years ago, the so-called Agricultural Revolution – the introduction of science to farming – allowed for another doubling in output. All of this was dwarfed, however, by the harnessing of hydrocarbons – the sun’s energy stored over hundreds of millions of years. This remarkable patrimony is now about half gone, and some time in the next 10 to 40 years, half of all of our resources will have been used or, stated another way, one last doubling will remain.
David Rosenberg, Gluskin Sheff’s Chief Market Economist, attests to the overbought nature of low quality stocks in this rally with these facts in his July 27th notes:
• The 50 smallest stocks have rebounded 17.2% from their nearby July 10th lows, outperforming the largest 50 stocks by 750 basis points.
• The 50 most shorted stocks have rallied 17.6%, outperforming the 50 least shorted stocks by 880 basis points (over the same time frame).
• The 50 stocks with the lowest analyst ratings have outperformed the 50 with the highest ratings by 380 basis points.
• 85% of the market has already broken above their 50-day moving averages, which in some sense highlights an overbought market, but the other three factoids still attest to a low-quality rally.
Bloomberg reports that the US economy is defying its most irrefutable skeptics by turning around, that the Obama stimulus is working:
U.S. Enters Recovery as Stimulus Refutes Skeptics (Update1), Bloomberg.com, August 12, 2009
Recovery from the worst recession since the 1930s has begun as President Barack Obama’s fiscal stimulus — derided as insufficient and budget-busting months ago — takes effect, a survey of economists indicated.
The economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in the monthly Bloomberg News survey. Analysts lifted their estimate for the third quarter by 1.2 percentage points compared with July, the biggest such boost in surveys dating from May 2003.
“We’ve averted the worst, and there are clear signs the stimulus is working,” said Kenneth Goldstein, an economist at the Conference Board in New York.
The new projections, following better-than-anticipated reports on manufacturing, employment and home construction, echo gains in investor confidence that have propelled the Standard & Poor’s 500 Stock Index to its high for the year.
Finally, high quality dividend-paying stocks have underperformed the market during the recovery, and while they are never a sure bet, dividends and the ability to maintain one, serve as evidence of a company’s relative strength and quality. Consider wading into dividend-paying stocks or funds as a way to get into the market at a time when focus is shifting towards being “long quality.”
Stock Dividends Make a Difference, Wall Street Journal (via Yahoo, without a sub), August 12, 2009
As the stock market continues to recover, more investors are easing back into the market. While stocks have had a good run, they remain well off their record levels reached in 2007.
Given the carnage of the past two years, it’s unsurprising that some people are hesitant to invest in the stock market. One strategy to consider when wading back in is to look at dividend-paying stocks. Such stocks, or mutual funds that focus on dividend-paying stocks, often called “equity income” funds, provide you with an income (the dividend) while giving you a chance to benefit from capital appreciation of the stock.
Beyond the dividend income, there are several reasons for investing in dividend-paying stocks. One, companies that can maintain or even increase their dividend payouts in the current environment are proving their strength. Also, in the wake of various accounting scandals, a steady dividend is proof that a company is actually making the money it says it is making. While accountants can fudge lots of numbers in a quarterly financial statement, they can’t conjure up the cash required to make dividend payments.
Update: Globe and Mail’s David Berman asks how much longer this low-quality rally can last? No dividend, low growth: Big returns: But how long can low-quality stocks lead the market?
On a final note, we would love to hear from you with your suggestions and your feedback, as well as article submissions. Please let us know if there are some other areas that we could help you to cover. Thank you!
Tags: Amp, Bet, Discipline, Downside, Excuse, Gmo, Immobilization, Investor, Jeremy Grantham, Lean Years, Massive Rally, Overruns, Pantheon, Quality Quality, Quality Stocks, Quiet Giant, Reuters, Rigor Mortis, Skepticism, Underweight
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Thursday, May 6th, 2010
During the last week, markets have been volatile, and have been accompanied by rising concerns about the sustainability of the rally in the context of earnings and economic growth. On one hand, Merrill Lynch reports fund managers have been buying this rally in a big way, and on the other hand TrimTabs, an independent investment research firm, reports that corporate insiders are selling stakes at levels not seen since June 2004. Its hard to know if the market can sustain the rally or succumb to a profit-taking blow-off of some kind. It may indeed be time to take some money off the table, given the 50% equities run-up we’ve seen since March.
In this week’s selection of articles you can send we highlight Canada’s relative strengths, given that it is the investment focus of your clients. So much of what happens here rests on what happens south of the border, but there are indications that Canada is in a position to pull away from US related woes, because of our stronger fiscal position and banking system, massive commodities base, and the interest in both by large foreign investors, for example China.
Macleans Magazine features “Our Big Chance,” an excellent article about our chance as a country to shine, to pull away from the rest of the western world. Our banking finances, fiscal position are stronger. Housing has stabilized, and our disposable incomes are rising, all this while the rest of the west is floundering under mountains of debt. And, we have what the fastest growing countries of the world need. In fact, for this last reason, we do, perhaps, need to realize as a nation of investors, that we need to protect our greatest assets by funding them and owning them ourselves. I’m not suggesting for one second that we adopt a protectionist stance, but lets stop giving away our best businesses and resources to dragons in return for funding, and start supporting and sponsoring them ourselves. Let’s lead, not follow, foreigners into our markets.
Our big chance, Macleans Magazine, August 27, 2009
For Canada, a country that has spent the better part of 20 years nervously wringing its hands over its perceived inadequacies, the dramatic reversal over the past year has been striking. Our banks were once seen as lacking innovation; now world leaders hail the boring Big Five as being among some of the safest and most profitable banks in the world. We fretted that our economy was overly reliant on commodities; now our rocks, oil and gas are seen as a natural hedge against havoc in the manufacturing sector. We worried that Canada’s strict mortgage rules were a drag on our housing market; now we can brag that we don’t put people into homes they can’t afford. Almost any way you look at it, Canada is uniquely positioned. So as other developed nations struggle, the question is: will we squander this once-in-a-generation opportunity or take advantage of our good fortune to punch above our weight?”
Bloomberg reports that Canadian credit markets, are returning to normal well ahead of the U.S. and U.K.
Canada Loans Rebound as Government Pares Liquidity, Bloomberg, September 1, 2009
The report suggests normal credit markets are returning after the federal government and the Bank of Canada offered emergency cash to pull the country through the worst global credit crisis since the Great Depression. Companies took advantage of “favorable bond rates” and consumers borrowed to buy new homes and cars, the report said.
“Canada remains head and shoulders above a number of other markets such as the U.S. and U.K. by way of the functioning of overall financial markets,” said Derek Holt, an economist at Scotia Capital in Toronto, in a note to clients
Finally, here is an indication, that over the longer term, we should take greater interest in what is in our own backyard. The article itself is old news already, but the point here is, of course, that foreigners may see more value in our assets right now than we do. In the case of the Chinese, they are going around the planet and buying up these and our assets indiscriminately. Considering this, Canada is, geo-politically, the safest country on the planet to invest particularly in energy and commodity assets.
Historically, we have a well-noted record for selling some of our key businesses and natural resources to foreigners in return for long term funding. Foreign investors seem to have more faith than Canadians, where long term investment is concerned. It recalls one of my favourite quotes by Don Coxe, several years ago, when discussing the oil and gas company execs who sold out their stakes too early as energy prices were rising.
“The people who know it the best, like it the least.” - Donald Coxe, Coxe Advisors LLC (then BMO Harris Chief Investment Strategist), referring to oil patch executives, though there is a universality to it.
PetroChina Agrees Biggest North America Acquisition, Bloomberg, September 1, 2009.
PetroChina Co. has agreed to pay C$1.9 billion ($1.7 billion) for a stake in a Canadian oil sands project in its biggest North American acquisition, widening the search for energy resources overseas.
China’s largest oil company will buy 60 percent of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects, the Canadian company said in a statement yesterday.
Feel free to take this and modify it to your liking in the event you want to use it.
Have a great month and every success!
Tags: Banking System, Commodities, Corporate Insiders, Countries Of The World, Disposable Incomes, Dragons, Economic Growth, Fiscal Position, Foreign Investors, Foreigners, Fund Managers, Independent Investment Research, Investment Focus, Macleans Magazine, Merrill Lynch, Protectionist Stance, Rally, Relative Strengths, Sustainability, Woes
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Tuesday, March 30th, 2010
Even with the market bounceback in 2009, many clients are still anxious, often stemming from negative media coverage of prospects for the economy and markets.
If you run into this, here are recent articles that might help calm nervous clients.
Emerging markets soar past their doubters
New York Times — Tuesday December 29
Jeremy Siegel on the Undervaluation in US equities
Advisor Perspectives — Tuesday December 29
The best is yet to come — the full benefits of technology are on their way
Wall Street Journal — Monday, December 28
The case for optimism on the economy
Wall Street Journal — Tuesday December 15
Tags: Advertisement, Amp, Benefits Of Technology, Bounceback, December 28, December 29, Economy, Emc, Emerging Markets, Jeremy Siegel, Negative Media Coverage, New York Times, Nytimes, Optimism, Perspectives, Prospects, Recent Articles, Soar, Wall Street, Wall Street Journal, Wsj
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Wednesday, March 10th, 2010
Despite the more positive tone to markets, anxiety is still high among many Canadians.
Here are three articles from this past weekend’s Barron’s, New York Times and Wall Street Journal to reassure nervous clients.
On Saturday, the Wall Street Journal wrote that “the U.S. economy’s natural healing tendencies are asserting themselves and the American economy is poised for a rebound.”
Also on Saturday, an article in the New York Times outlines how a recovery is underway, in large measure due to U.S. actions to forestall a more serious economic decline.
BUSINESS | August 08, 2009
Economic Scene: As Economy Turns, Washington Looks Better
By DAVID LEONHARDT
Finally, today features positive comments in Barron’s from the chief global equity strategist at the Merrill Lynch unit of Bank of America.
As well, here are recent interviews with Wharton finance professors Franklin Allen and Jeremy Siegel offering contrasting reactions to the large second-quarter profits at Goldman Sachs and J.P. Morgan.
Wall Street Report.http://knowledge.wharton.upenn.edu/index.cfm?fa=viewfeature&id=2291
On a different topic, for clients considering taking advantage of beaten down U.S. real estate prices, here’s a useful article from last Friday’s New York Times.
YOUR MONEY | August 08, 2009
Wealth Matters: There’s Value in Real Estate, if You Find Your Florida
By PAUL SULLIVAN
Seek places like the slumping Sunshine State, where a rebound in real estate is more likely when baby boomers eventually begin to retire there.
Many advisors have got a positive response to articles such as these emailed to clients. For advisors looking for a regular source of articles to email clients, every Wednesday Greenlightadvisor.com posts articles from the previous week to their website.
For last Wednesday’s articles, click here:
And if you’re looking for even more evidence that the worst is behind us, here are two more stories from Saturday’s New York Times:
BUSINESS / ECONOMY | August 08, 2009
Job Losses Slow, Signaling Momentum for a Recovery
By LOUIS UCHITELLE and JACK HEALY
The most heartening employment report since last summer suggested on Friday that a recovery is under way despite the reluctance of the nation’s businesses to resume hiring or even stop shedding jobs.
BUSINESS | August 08, 2009
Stocks and Bonds: Bulls Send Markets to Heights Last Seen in 2008
By JACK HEALY
An unexpected drop in the jobless rate and a profit at A.I.G. sent investors into a frenzy of buying.
Tags: American Economy, Baby Boomers, Bank Of America, Bidding Farewell, David Leonhardt, Economic Decline, Economic Scene, Email Clients, Finance Professors, Franklin Allen, Global Equity, Goldman Sachs, Jeremy Siegel, Merrill Lynch, Paul Sullivan, Positive Tone, Quarter Profits, S Real Estate, Sunshine State, Wall Street Journal
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Wednesday, March 10th, 2010
This last week has been marked with the continuation of the great melt-up in the markets, with more confirmation coming from the markets in the form of tried and true rules of thumb passing a stamp of approval, such as Dow Theory Letters calling of the bull market. In addition, their has been renewed strength coming from the commodities sector with oil prices creeping still higher, a reason for many Canadian investors to be happy. On the economic front, the Case Shiller Housing Index registered what some are saying is a bottom, and that was taken as very positive news. Whether this is a secular or cyclical “bull,” there are still reasons to believe that we are far from the end of this rally, at least for now.
Here are today’s articles you can send clients. Our selection articles focuses on investing fundamentals, confirmation of the commodities complex play from Nouriel Roubini, and the new values required for “Buy and Hold” Investors.
Investing fundamentals are an important area of focus, as it turns out that often the very best advice is the classical advice, from none other than Benjamin Graham, on how important it is that you pay the right price, the best price for equities and other assets, no matter the conditions of the market.
Pricinples of Value Investing Still Hold True, by Dan Richards, August 4, 2009
At a recent lunch with a group of financial industry insiders, a debate arose over the top investor of all time.
Some of the names put forward were obvious: Warren Buffett, Peter Lynch, John Templeton and George Soros; one contrarian made the case for J.P. Morgan or the Rothschilds. Personally, I was with the contrarian.
But when conversation shifted to the most influential investor, the one person whose beliefs most transformed the investment profession, there was universal agreement on Benjamin Graham, considered the father of value investing, yet a name unknown to the average investor.
Nouriel Roubini, the heralded perma-bear professor, and economist from NYU and RGE Monitor, confirms that commodity prices may rise in 2010:
Roubini says Commodities May Rise in 2010, Rebecca Keenan, Bloomberg
Commodity prices may extend their rally in 2010 as the global recession abates, said Nouriel Roubini, the New York University economist who predicted the financial crisis.
“As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. “There is now potentially light at the end of the tunnel.”
FT.com published an excellent article about how “Buy and Hold” investors may have to adjust their mindset to this market, and provides the point of view of several of the markets foremost strategists:
Buy and Hold investors need to learn a new set of values, David Stevenson
“Buy and hold” investing – to capture the long-term outperformance of western equity markets over other asset classes – is now being called into question by a number of leading analysts, who suggest that a new approach to “value investing” will deliver better returns.
In a challenge to the received wisdom of holding stock market investments for 20 years or more, to smooth out short-term volatility, some suggest that measures of cheapness can be used to make buying decisions and enhance performance.
These new approaches have emerged from a series of FT Money interviews with investment strategists, economists and academics – now available as a two-part audio documentary at www.ft.com/moneyshow.
Tags: Benjamin Graham, Canadian Investors, Case Shiller Housing Index, Commodities, Confirmation, Continuation, Dow Theory Letters, Economic Front, George Soros, Industry Insiders, J P Morgan, John Templeton, New Values, Nouriel Roubini, Oil Prices, Perma, Peter Lynch, Positive News, Rally, Rothschilds, Rules Of Thumb, Stamp Of Approval, Universal Agreement, Warren Buffett
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Thursday, January 21st, 2010
This week’s ‘articles you can send’ focus on 3 themes. First, Canada’s strength, particularly in the banking sector, and secondly, arguments for why a strong Loonie isn’t such a bad thing. Last week we featured David Rosenberg’s upbeat commentary on the dollar; there have been others, BMO’s Sherry Cooper has made strong arguments in support of the strong dollar. Finally, whether you believe we are in a bull market or bear market rally, we feature the Buffett acquisition of Burlington Northern, and the Dan Chung profile from Barron’s magazine, This Bull Isn’t Done.
Please do send us your article submissions too. We would love to feature your picks as well on a weekly basis.
By Dimitra Defotis
Barron’s Magazine, October 31, 2009
Yes, the shares of banks in the Great White North were badly bruised during last year’s global meltdown, but they deserved better. Thanks to strict regulation, Canada’s banks don’t make subprime loans, and a typical mortgage term is only five years, greatly moderating balance-sheet risk. The largest banks have a virtual monopoly, controlling their regional markets for residential mortgages, credit cards, retail deposits and brokerage services. With their stout balance sheets and conservative bent, Canada’s banks look healthy. Indeed, a recent World Economic Forum report rated the Canadian banking system as the world’s soundest. In comparison, Switzerland was No. 16. The U.S. limped in at No. 40, just behind Germany (at No. 39) and ahead of the U.K. (at No. 44).
By Frederic Tomesco and Chris Fournier
Bloomberg, November 2, 2009
“A weak dollar such as the one we had for several years was a tax on productivity,” Gignac, former chief economist at National Bank Financial, a part of Canada’s sixth-largest bank, told reporters today in Montreal. It cost companies up to 50 percent more to upgrade equipment to boost productivity, he said. “Now that we are getting closer to par, companies no longer have this tax.”
By Sean B. Pasternak
Bloomberg, November 2, 2009
Bank of Nova Scotia Chief Executive Officer Richard Waugh said the rising Canadian dollar is helping companies attract top employees abroad. “We have a strong Canadian dollar, so just like our hockey teams, we can afford better talent,” said Waugh, speaking to reporters following a speech at the Canadian Club of Toronto today. Employers can provide “good visibility of a long and successful career. The brain drain is over,” he said.
By Leslie Norton,
Barron’s Magazine, November 2, 2009
DAN CHUNG IS BULLISH — AND, DEEP into third-quarter earnings season, the numbers bear him out. Many of his favorite companies are beating Wall Street forecasts, buttressing his belief that the stock market still has room to run.
“We’ll see more fundamental upside [earnings] surprises in the third and fourth quarters, and the wall of cash on the sidelines” that’s fetching “terrible” yields will eventually spur investors back into the market, says the amiable, animated Chung, 47 years old. “A 5% reallocation from cash and short-term bonds could drive a 17% appreciation in the stock market,” he adds.
By Andrew Frye
Bloomberg, November 3, 2009
Berkshire has been building a stake in the Fort Worth, Texas-based railroad since 2006 as Buffett looked for what he called an “elephant”-sized acquisition allowing him to deploy his company’s cash hoard, which was more than $24 billion at the end of June. Trains stand to become more competitive against trucks with fuel prices high, he has said.
“It is Warren being Warren, taking advantage of a market that is soft at a time when the possibility for competitive bids is relatively low,” said Tom Russo, a partner at Gardner Russo & Gardner, which holds Berkshire shares. “He looks at this as a business that has advantages against other forms of transportation.”
Thursday, December 3rd, 2009
This weeks selection is a thematic group of articles which focus on the Canada/Emerging Markets theme.
The first three articles are focused on a discussion of strong Canadian fundamentals, and led by pro-Canada, pro-commodities arguments from David Rosenberg, Chief Markets Economist, Gluskin Sheff. The subsequent three articles provide strong indications of demand from emerging markets, particularly China, whose savings are unequalled anywhere in the world, where more cars are now sold than in the US, and an outlook from Merrill’s Francisco Blanch that oil could reach $100 in the next year.
This is where Canadian strength relative to the United States comes into play — nearly 45 per cent of the TSX composite index is in resources; almost triple the share in the United States. Almost 60 per cent of Canada’s exports are linked to the commodity sector, roughly double the U.S. exposure.
This explains how it is that the Canadian equity market has managed to outperform the S&P 500 this year by a cool 2,000 basis points (in this sense, Canada is basically a low-beta way to play the emerging markets via commodity exposure).
Moreover, considering that the Canadian dollar enjoys a 65-per-cent correlation with the CRB index, the added boost from the appreciation in the loonie means that an American investor putting money in Canada would have garnered a 28-per-cent gain on a currency-adjusted basis (versus a 4.0-per-cent gain from the S&P 500).
The Canadian stock market has been the star of the show over the past decade. With the help of a strong currency, the S&P/TSX composite index has beat the S&P 500 in eight of the past 10 years (in Canadian dollar terms), and nine out of 11 when 2009 is included. And there are persuasive arguments why this will continue.
A report by Scotia Capital entitled “Why you want to own Canada” nicely summarizes them. It points out that Canada’s main attributes are: 1) emerging-market exposure with lower volatility; 2) cheaper valuations relative to the MSCI World Index; 3) stronger domestic fundamentals; 4) Canadian dollar strength relative to the U.S. dollar and British pound; 5) proximity to the U.S. economy; and 6) above-average market capitalization companies in financials, materials, technology and industrials.
In a recent Globe column, David Rosenberg referred to Canada as a “low beta [less volatile] way to play the emerging markets via commodity exposure.” He went so far as to say, “this period when the Canadian market outperforms its southern peers is barely halfway done.”
If there is one thing that Canadians are never happy with (in addition to their local hockey team) it is the Canadian dollar. When it was flirting near that record low of 62 cents nearly a decade ago, everyone lamented the future of the loonie. It was too expensive to buy anything that was imported, it was too costly to make that annual trip to Florida, and tickets on Broadway were prohibitively expensive. We felt poorer. We must have been doing something wrong.
If Americans have been the world’s greatest consumers, the Chinese have been its greatest savers
It is testimony to the resilience and resourcefulness of the Chinese people that, so soon after these terrible times, their country is positioned to lay claim to the paramount role in a new world order of the 21st century. Only 15 years ago, China’s manufacturing output was only one-fifth that of the United States. Now, it is about two-thirds and rising; IMF data show a dramatic rise of annual per capita income to $3,180 (U.S.) in 2008 from only $350 in 1990, lifting more than one-third of a billion people into China’s standard of middle class.
CHINA’S car market has overtaken America’s in sales volume for the first time, several years earlier than analysts had predicted before the financial crisis. Plummeting demand in the West is to blame. Earlier this year, as the American government was buying 61% of General Motors and 8% of Chrysler to prevent them from collapsing, the two manufacturers’ sales in China were rocketing. GM’s sales in China in August more than doubled on a year earlier. For 2009 as a whole the company predicted a 40% rise. Sales of all car brands in China in August were up by about 90%, helped by a cut in the purchase tax on smaller, more fuel-efficient cars. There is also huge pent-up demand as a new middle class takes to the road.
October 26 2009 19:40 | Last updated: October 26 2009 19:40Crude oil prices could push above $100 a barrel heading into 2011 due to a combination of a cyclical improvement in demand, the rapid weakening in the US dollar and strong global liquidity growth, says Francisco Blanch, head of global commodities research at Bank of America-Merrill Lynch.
Tags: Adjusted Basis, American Investor, Basis Points, Canadian Dollar, Canadian Equity, Canadian Stock Market, Commodities, Commodity Sector, Crb Index, David Rosenberg, Dollar Terms, Emerging Markets, Globe Investor, Gluskin Sheff, Investment Ideas, Investor Investment, Loonie, Star Of The Show, Thematic Group, Tsx Composite Index
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