Money Sense

[Anonymous]

Is it possible we could finish a week up? The dollar is up, energy stocks are up, crude oil is up. Stay tuned .

[Anonymous]

Scared Canadian investors sitting on estimated $75-billion in extra cash

http://www.theglobeandmail.com/report-on-business/top-business-stories/too-scared-to-invest-canadians-sitting-on-estimated-75-billion-in-cash/article28391921/">http://www.theglobeandmail.com/report-o ... e28391921/">http://www.theglobeandmail.com/report-on-business/top-business-stories/too-scared-to-invest-canadians-sitting-on-estimated-75-billion-in-cash/article28391921/

'Cashing in on fear'



Canadians are holding a record $75-billion in cash amid an "ocean of fear" about investing in the markets, a new study finds.



That means they could miss out on billions in payback, warns the study released today by Canadian Imperial Bank of Commerce economists Benjamin Tal and Royce Mendes.



Extra cash, they said, is being built up at a pace unrivalled in more than four years.

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"The 'short Canada' mentality hasn't been confined to the bond market," the economists said in their study, titled "Cashing in on fear."



"The environment surrounding Canadian stocks is also grim, with domestic equities trading more like those of emerging markets," they added.



"Granted, Canada and emerging market economies have both been adversely affected by the fall in commodity prices. But the correlation between the TSX and MSCI emerging markets index shows that the negative sentiment surrounding Canada is overshooting fundamentals."

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Cash positions, Mr. Tal and Mr. Mendes said, have been climbing since the last recession, so what's happening now is a snowball effect and "we're currently witnessing the creation of personal cash buffers that are larger than at any other time on record."



The two economists came to their conclusions by adjusting for inflation and changes in population. So that $75-billion is "extra," in bank cash deposits and money market mutual funds, compared to where it should be.



And here's a stunning figure from the report: The extra money accounts for about 10 per cent of all personal liquid assets in the country.



This angst isn't new. It obviously came about during the 1987 crash, and again in 2001 and then again during the financial crisis.

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ut Mr. Tal and Mr. Mendes warned that investors frequently miss out by acting in inopportune moments.



"We know from the data on personal deposits that Canadians respond to such spikes in volatility by moving into cash," they said.



"But that rebalancing means that investors are buying high and selling low."

[Anonymous]

The markets ended the week in positive territory. The dollar finished at 71.40, and West Texas Intermediate closed the week at $33.60 on rumours that Saudi Arabia and Russia are considering cuts.

[Anonymous]

Oil prices jumped 6 percent on Wednesday, snapping a two-day rout, after investors took advantage of a weaker U.S. dollar and shrugged off data showing a unexpected large surge in U.S. crude inventories to record highs.



Comments by Russia's Foreign Minister reiterating the major producer's willingness to meet if there was consensus among the OPEC and non-OPEC members, also reignited hopes of a deal to trim output and helped to boost prices as much as 7 percent.



The dollar index .DXY tumbled to an over seven-week low amid growing scepticism that the Federal Reserve would be able to hike U.S. interest rates again this year and after data showed the U.S. services industry grew more slowly than expected last month. [USD/]



Brent futures LCOc1 rose $1.95, or 5.9 percent, to $34.67 a barrel by 1:12 p.m. EST (1812 GMT), after rising as high as $34.93. U.S. crude futures CLc1 rose $1.96, or 6.5 percent, to $31.84, after touching a high of $31.95.



"We're getting the rally in crude oil from the pounding that the dollar is taking," said Robert Yawger, senior vice president of energy futures at Mizuho Securities USA.



"There is a little bit of spec activity involved in that too. The market has a tendency as of late here to draw in spec position when we trade below $30," he added.



In the last year, speculators had racked up the largest short, or bearish, position in crude oil in history and part of the current volatility in the price has come as a result of some of those positions being closed.



The markets shrugged off government data showing U.S. crude and gasoline inventories rose to record levels last week. Crude soared 7.8 million barrels higher, topping analysts' expectations for a rise of 4.8 million barrels, as imports jumped and refiners trimmed throughput. [EIA/S]



"People say 'I think the market has bottomed, there's no place else to go but up from here' - I don't agree with that premise. I think we will make new lows before we start moving up higher - there's just so much oil out there you don't know what to do with it," Sal Umek of the Energy Management Institute in New York said.



"The bears are controlling the market, the bulls are only going to go in and try to get a little bit here and there."

[Anonymous]

Canadian markets bracing for 'dramatic' Bank of Canada action — and a recession



http://www.msn.com/en-ca/money/topstories/%E2%80%98flashing-warning-signs%E2%80%99-canadian-markets-bracing-for-%E2%80%98dramatic%E2%80%99-bank-of-canada-action-%E2%80%94-and-a-recession/ar-BBpjnW3?li=AAggFp5&ocid=mailsignoutmd">http://www.msn.com/en-ca/money/topstori ... lsignoutmd">http://www.msn.com/en-ca/money/topstories/%E2%80%98flashing-warning-signs%E2%80%99-canadian-markets-bracing-for-%E2%80%98dramatic%E2%80%99-bank-of-canada-action-%E2%80%94-and-a-recession/ar-BBpjnW3?li=AAggFp5&ocid=mailsignoutmd

An ominous signal has been cropping up in the past month as corporate bonds and government of Canada bonds have seen their spreads widen, a move that usually precedes a recession. Meanwhile, yields on the five-year Government of Canada bond have begun creeping below the central bank's overnight lending rate of 0.5 per cent. On Tuesday, they traded at roughly five basis points below that mark.



Canadian stocks are another area of weakness, with the S&P/TSX Composite Index once again slumping into a bear market on Tuesday. The TSX closed down 2.02 per cent, or 252.75 points, to 12,282.65, now down more than 20 per cent since the highs of September 2014.



"Looking at all the signals from the financial world there are a number of recession indicators that are flashing warning signs," said Mark Chandler, head of Canadian fixed-income strategy at RBC Dominion Securities.



The last time short-term bond rates inverted this far out along the curve was in the first half of 2015, which ended up turning into a technical recession — defined as two back-to-back quarters of economic contraction.



In a normal bond market, longer-dated bonds have higher yields as investors demand more compensation to lend money for an extended period of time. When multi-year bonds move below the overnight rate — the interest rate the Bank of Canada charges banks to lend to each other for a day — it means investors are expecting the overnight rate to go lower in response to a weakening economy.



Corporate spreads have also been widening in Canada for much of the last 12 months, but for the most part that was due to an increasing number of distressed energy companies. Chandler says that the widening has now spread to non-energy companies as well.



"This is real. There is something going on here," he said. "Usually one of the most powerful indicators is widening of credit spreads, and that's happening not just in the energy sector, but also more broadly."



Canadian banks, among the most exposed companies to the domestic economy, have become one of the big drags on the TSX Composite Index. On Tuesday, the biggest banks, including the Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia, saw their shares dip more than two per cent.



Craig Basinger, chief investment officer at Richardson GMP Limited, notes that some Canadian stocks are now trading at "recession-type" valuations. The banks, for instance, trade in the single digits or close to it, with dividend yields creeping into the four and five per cent range.



Basinger said the pricing suggests investors are seeing more pain on the horizon.



"Yes, we could certainly see a bit of a recession here and yes, oil prices are below $30 a barrel again, but valuations have become compelling," he added. "If we enter a recession, well, the prices are already there."



The warning signs in financial markets come as the Bank of Canada left its overnight lending rate unchanged during its policy announcement last month. Governor Stephen Poloz said that he was waiting to see the scale of stimulus from the federal government before making a move. The budget, which will outline stimulus details, is expected to land sometime in March or April.



The Bank of Canada also noted there are early indications that the non-energy segment of the economy is rebounding as low oil prices and a weak loonie make exports more competitive. Non-energy exports helped close the trade deficit down to $585 million in December, a surprise to economists who had expected the trade deficit to grow from $1.6 billion in November to $2.2 billion.



As well, January's employment report showed that, while oil-dependent provinces such as Alberta, Saskatchewan and Newfoundland and Labrador continue to bleed jobs, non-energy provinces are booming. Ontario has added 100,000 new jobs in the past 12 months, while British Columbia and Quebec have also posted healthy job gains.



"Growth remains positive outside the oil-rich provinces, supported by an upturn in exports and steadier consumer spending and home sales," said Sal Guatieri, senior economist at BMO Capital Markets in the bank's latest economic outlook released Feb. 5.



Still, Guatieri expects that the Bank of Canada will at least move to cut its benchmark rate by 25 basis points to its post-recession low of 0.25 per cent sometime in the spring.



Chandler of RBC said that investors should pay close attention to the bond market in the coming weeks. If short rates move off current lows, then it is likely the Bank of Canada will be less dovish. But an extended period of inverted yields could signal more drastic action.



"I think with such short-term rates — where we have five-year yields now below 50 basis points — in order to justify those for a prolonged period of time, the market is definitely pricing in high possibility of some pretty dramatic action by the central bank," he said. "Whether it's negative interest rates or potential for QE, it's hard to justify the current yields without those expectations."

[Anonymous]

After a dismal week, the markets closed on a positive note.  The benchmark S&P/TSX composite index jumped 294 points, or 2.4 per cent, to close at 12,381.



That ends, at least for now, five consecutive losing sessions that had seen the index shed almost 760 points.



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NEW YORK (Reuters) - Global oil prices surged as much as 12 percent on Friday after a report once again suggested OPEC might finally agree to cut production to reduce the world glut, while a bounce in stock markets fed appetite for risk.



Despite the strong daily gain, oil prices were poised to end the week down as much as 5 percent.



The United Arab Emirates' energy minister said the Organization of the Petroleum Exporting Countries was willing to cooperate on an output cut, the Wall Street Journal reported on Thursday after crude futures settled in U.S. trade.



Many traders were sceptical at first about the report, noting that Venezuela and Russia had tried in vain earlier in the week to stir Saudi Arabia and other major producers into agreeing to output cuts.



But after a 75 percent price slump since mid-2014 that has taken crude prices to more than 12-year lows, many were inclined to believe that a rebound was due sooner or later if production tightens or demand picks up.



"We expect declining U.S. oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year," Frankfurt-based Commerzbank said in a note.



U.S. crude contracts over the next five years were trading under $50 a barrel on Friday, rising above that level only from November 2021 onwards.



U.S. crude's front-month settled up $3.23, or 12.3 percent, at $29.44 per barrel, reaching a session high of $29.66. It hit a 12-year low of $26.05 the previous day. For the week, it lost 4.7 percent.



Brent's front-month closed up $3.30 at $33.36 a barrel, having slid below $30 on Thursday. Weekly losses were pared to 2 percent.



Prices extended gains after data showed an eighth straight weekly drop in the number of U.S. rigs drilling for oil. Oil also got a boost from the rally in global equity markets.



Some cited Monday's Presidents Day holiday in the United States, saying fewer players wanted a short position in oil ahead of the longer weekend break for the New York crude market.



But others, like Tyche Capital Advisors' Tariq Zahir, were hoping to profit again from bearish bets once the rally peaks. "It gives me great opportunity to put out new shorts in crude spreads," he said.



Many expected wilder price swings in coming weeks.



"It's not a one-way price movement anymore," said ABN AMRO's senior energy economist Hans van Cleef. "We will see a period of high volatility."

[Anonymous]

I recommend buy.



Canadian Tire Corp boosts earnings despite sliding revenue



Revenue slid 7.5 per cent at Canadian Tire in the fourth quarter, but the retailer of auto parts and outdoor goods managed to boost earnings and same-store sales at its core retail business despite an uncharacteristically warm winter.



The Toronto-based retailer and owner of the Sport Chek and Mark's chains said revenue in the period ended Jan. 2 slid $273.6 million to $3.38 billion, down from $3.65 billion a year ago, as sales slid in apparel and sporting goods and gas prices fell.



Net earnings in the period climbed to $241.5 million, or $3.01 per share, up from 206.6-million ($2.44) in last year's fourth quarter. Shares surged 6 per cent in morning trading on the news.



In the fourth quarter, sales at Canadian Tire's retail stores fell 2.6 per cent due to warm weather but same-store-sales, an important measure which strips out the impact of square footage changes, rose two per cent compared with the same period of 2014.



Retail segment income before income taxes was up 6.6%, or $15.7 million, to $250.2 million, in the fourth quarter of 2015 compared to 2014.



At sporting division FGL Sports, retail sales slid 5.7 per cent and same-store sales were down 0.4 per cent, but same-store sales at Sport Chek stores climbed 1.6 per cent. At Mark's, retail sales fell 10.2 per cent and same-store sales fell 5.2 per cent, due to mild weather conditions and a spending downturn in Alberta.



Annual 2015 revenue was $12.3-billion, down from $12.46-billion in 2014.

[Anonymous]

The Canadian market edged higher Friday, ending a topsy turvy week with a decent performance from energy and financial stocks.

The S&P/TSX Composite Index rose 44.19 points, or 0.35 percent, to 12,797.79.

Banks trimmed weekly losses as traders reacted positively to yesterday's upbeat earnings from CIBC and TD Bank.



Energy stocks were up 1 percent as crude oil briefly touched a multi-week high above $34 before pulling back.

Analysts say bargain hunters are finding good value among beaten down big names in the energy sector.

April West Texas Intermediate crude fell 29 cents, or 0.9%, to settle at $32.78 a barrel on the New York Mercantile Exchange.

Still, prices were up 3 percent for the week, bolstered by talk of a deal between Saudi Arabia and other major producers to freeze oil output at January levels.

Gold stocks tumbled 3.4 percent as bullion prices eased on decreased safe haven appetite.

The day's big winner was car parts maker Magna International. Shares rose 7.5 percent after upbeat earnings. Magna increased the dividend by 14 percent to $0.25 per share.

Goldcorp Inc. (G.TO) suffered a big loss in the fourth quarter and slashed its dividend. Shares plunged 13 percent.

Husky Energy Inc. (HSE.TO) released earnings for fourth quarter that decreased 44 percent from last year. Shares rose 4.2 percent.

[Anonymous]

I should add that "paper oil" could reach about $38 a barrel. But it will be short lived and drop again as it reflects the fact that the market is over supplied. I expect oil could reach the $42-44 rage by the end of this year. Expensive American shale oil production should drop about 400,000 barrels a day by the end of this year. Further reduction in supply would come in 2017.

[Anonymous]

The Toronto Stock Exchange closed above 13,000 points on Wednesday, coming within a hair of reversing the losses it has sustained since the beginning of the year.



The Toronto index closed at 13,017, a rise of 35 points and just below the 13,098 close of Dec. 31, 2015.



Trading was propelled by the rising price of metals, especially gold, which is now at $1,241.60 an ounce, and by the continued rise in oil prices.



Gold has been appreciating for the last month as investors seek out a safe haven.



The Canadian dollar dipped one tenth of a cent to 74.41 cents US.



West Texas Intermediate oil, the benchmark North American oil contract, rose 49 cents to $34.90 US a barrel.



The TSX has added 1,300 points since mid-January, when falling oil prices and a waning loonie seemed to augur a poor year for investors.



It's still well off the high of 15,524 set in April of last year before China's slowdown and the deteriorating price of commodities sent markets into turmoil. The TSX finished 2015 down 11 per cent.

[Anonymous]

February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, as prices at their lowest in more than a decade drove buying from a group of new importers and state and commercial stockpiling.



The world's second-largest oil consumer imported 31.80 million tonnes of crude last month, or a record 8.0 million barrels per day (bpd), data from China's General Administration of Customs showed on Tuesday. C-CNIMP-PRM



China's robust crude demand has been supported by independent refiners, also known as teapots, that have been receiving import quotas from Beijing over the past nine months.



"This is the teapot effect," said Virendra Chauhan, an analyst at Energy Aspects in Singapore.



"Higher teapot demand and stronger refining margins which encouraged higher refinery throughputs have contributed to increased imports," he said.



On a daily basis, February's imports also jumped roughly 27 percent from 6.29 million bpd in January.



Last week, Beijing-based consultancy SIA Energy said it expects China's 2016 crude imports to rise by 860,000 bpd, or nearly 13 percent, boosted by storage needs, robust gasoline demand and fuel exports.

[Anonymous]

As was predicted, we are seeing a retreat on April contract "paper oil". West Texas Intermediate is off nearly two dollars from last week. It is reflected in our dollar losing ground.

[Anonymous]

The Canadian dollar cracked the 77-cent mark today, carrying on the dramatic run from the Fed-induced weakness of the U.S. currency yesterday.



The loonie is now up by about 9 cents from its January depths, at a five-month high, having been driven up over the past several weeks by more stable oil prices and the outlook for monetary policy in Canada and the United States.



Where the U.S. is concerned, that outlook hit home yesterday, slamming the greenback as Federal Reserve officials still pointed to further interest rate hikes but at a slower pace.



So the move in the loonie yesterday and today is pretty much driven by the fortunes of the U.S. dollar, said Charles St-Arnaud of the Nomura economics department, though commodity prices are also higher for the same reason.



"Janet Yellen sneaked into the dovish camp and let the U.S. dollar cheapen across the board," said London Capital Group market analyst Ipek Ozkardeskaya.



"The cheapening [U.S. dollar] clearly helped to push the loonie higher this morning," she added.



"Combined with the stronger conviction that the current recovery in oil prices could be sustainable, the Canadian dollar has all the good reasons to rise and shine today."



The loonie has touched a low of 76.2 cents today and a high of 77.2 cents, having closed out yesterday at just shy of 76.5 cents.



As for what happens next, Royal Bank of Canada strategist Adam Cole believes this is all "a bit of an overreaction" to the Fed, and fortunes will change.



Ms. Ozkardeskaya said a further move in the loonie toward the 80-cent mark "could well be justified" given the outlook for oil prices, though it's now moving toward the "overbought territory" against the U.S. dollar.

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[cc]

WHOA True Dough



Did you see what Trudeau slipped into the federal budget?



OK - This sounds serious -