Golden Girl Finance
 
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Stock Market

CIBC sees new mortgage rules as a safe bet

October 24th, 2016 by

A trader's take on this week's news about Canada's mortgage changes, Samsung's combustible phones & Wells Fargo's big CEO shake up

 
 

BNN: CIBC head calls federal government's new housing measures prudent

There were new mortgage rules announced last week from Canada’s Minister for Finance and they got warm reception from large Canadian bank CIBC. The new rules aim to bring stability the ever rising housing market in Canada where, except for the Prairies, the only place prices seem to go is up. The new changes will affect foreign cash coming into the market and also it will affect the stress test on the mortgage a buyer must sustain before being allowed to take out a mortgage. A stress tests applies a higher rate to the mortgage than one the person is actually receiving. They must actually “quality for a rate” that requires a payment two to three percent higher than the current one before being granted a mortgage. Rates only have once place to go, up. The stress test is widely seen as a good move. Banks will also be required to hold more of the mortgage risk themselves if it defaults. This is a big change and another necessary one as it means banks have more skin in the game in the mortgages they give. This means they will be much more prudent in those loans and this will mean less loans. Banks that have been making a lot of revenue from mortgages lately will find this change challenging but my guess is they have chosen this path to cool the market over other options. 

CBC: Samsung issues fireproof boxes to return Galaxy Note 7s

The Samsung story has really heated up more this week. The Galaxy Note 7 has bee setting itself on fire for a number of weeks in the hands of consumers. It has been banned from carry on luggage on planes and it now being recalled. One and a half million phones, originals purchased as well as those replaced by new phones, will be returned to Samsung for a refund. The fire hazard is so high Samsung is sending customers fire proof envelops to send the phones in. Samsung is a company navigating rough seas on this one but many actually give the company top marks so far for how they are handling the scandal. Other than not having phones that ignite, they are doing all they can. Many market watchers though are waiting to see if one small things happens…. did they know about the risk of combustion and sell the phones anyway? If that doesn't happen, Samsung will likely be able to win customers back. If it does happen, Samsung might just slowly combust itself. 

CBC: Wells Fargo CEO John Stumpf resigns suddenly

A leadership change out of scandal plagued US Bank Wells Fargo was announced this week. CEO John Stumpf resigned and will also not be chairman of the board, nor receive severance or stock. It's a large financial loss to him personally, but it's also very curious timing. In most cases the leader of a company in chaos stays longer to absorb all the mud slinging and negative accusations before stepping down to allow the company to regain a new footing with a fresh face. Wells Fargo has allegedly been creating fake bank accounts for customers to raise sales. The bank was fined $185 million so far. If Stumpf is not hanging around, I expect something big to happen next and that will cause the new CEO, former COO Tim Sloan, to make a speedy exit also. 

Stock Market

The Bank of Canada holds interest rates steady this fall

September 13th, 2016 by

A trader's take on Canadian market news you need to know

 
 

BNN: Enbridge’s $37B all-stock Spectra Energy offer to create North American pipeline giant

Big merger news out of Alberta this week surprised market watchers just settling back in from the long weekend. Calgary based Enbridge Pipeline is buying Houston based Spectra Energy for $37 billion in an all stock deal. Once combined this company, which will go by just Enbridge will be the 4 largest company in Canada by market cap and have a value around. The deal is expected to close as it is friendly and there is little overlap in assets causing no ripples for US anti-trust rules or Canadian regulators. Both stocks popped on the news as cost savings will great shareholder value across the board. Enbridge closed up over 4 percent to $42.77 and Spectra up 13 percent to $40.89. Enbridge CEO Al Monaco will be the CEO of the new merged company and that fact those details are already in writing makes this deal sound very smooth sailing for all involved. It is expected to close in early 2017.

CBC: Fort McKay First Nation to put $350M into Suncor oilsands tank farm

A forwarding thinking deal with a large First Nation in Northern Alberta was signed this week. Suncor Energy is partnering with Fort McKay Nation to build a $1 billion storage facility. This is not a gift or charity, Fort McKay will pay for a 34 ppercent stake in the project. The long term benefits are important to the community. Many First Nations struggle to receive real long-term economic growth and prosperity despite the activities on and around their lands. This is a full partnership with more potential going forward. The total project in worth $13.5 billion and involves Total, Suncor, E&P, and Teck Resources. The project is expected to be in production in late 2017. This means as it grows, Fort McKay can become a bigger player in their own region on their own terms. It is important this type of economic access and title is rare. Every single resource in development in Canada involves a First Nation, yet how many First Nation-owned resource companies are on the TSX?

CBC: Bank of Canada says economic conditions don't warrant rate change

The Bank of Canada released their benchmark interest rate decision on Wednesday of this week. The rate will hold steady at 0.5 percent, a move that surprised very few. The anticipation is not for a rate move lately, but more so market watchers are looking forward to hearing the comments from the Bank Governor regarding the economy and if there are indications of the next rate move. The Canadian economy was decidedly negative in the second quarter, shrinking 1.6 percent, but is expected to round significantly in the third quarter, as it was the tragic fire in Fort McMurray that caused the immediate drop in economic activity. This pushes out further any potential increases to the rate. An analyst quoted feels that if the rate moves anywhere in the next year it will be lower and not higher.

 

Stock Market

American Express raises the stakes with lower rates

August 19th, 2016 by ,    photos by

A trader's take on AMEX setting a new credit industry standard, plus more Canadian market news

 
 

BNN: American Express introduces low-rate 8.99% credit card, says it's not just a promotion

An interesting shakeup is coming to Canada’s credit card industry. American Express is launching a new credit card with an annual interest rate of 8.99%. That is 10 -15% lower than most cards available. The new product has little to do with competing cards from other firms and a lot more to do with the general industry. New payment technologies like Apple Pay and other ones on the horizon are really shaking up an industry that had become set in their ways. Credit cards need transactions to make money and if people are physically paying for purchases in other ways, the industry has a large headwind. Credit card companies used to focus on points or bonuses to get people to use their card over another, often at the expense of the merchant who was left with higher fees to cover the costs. This card could solve a big problem for credit card company which is in an industry that is quickly moving from old and stable to innovate or die.

CBC: Performance Sports reveals SEC also investigating in wake of delayed audit

Rumours and a few loose facts caused a sporting goods company take a tumble this week in the markets. Performance Sports is not a well-known name in households, but the company owns very recognizable Baur hockey equipment, a legend in dressing rooms across Canada. The big problem began Monday when it was announced that Performance Sports would not be able to file its audited financial results on time and that its board has launched an internal investigation. Performance came out on Wednesday and confirmed it was under investigation by both US and Canadian securities regulators (The company is listed on both the TSX and the NYSE). The stock is down almost a whopping 50% since Friday, closing at $2.30 Wednesday. What has yet to be released is why there is a probe. It is not a good sign as it eithers shows investors that the company has no idea what happened or it is not in position to explain how they plan to fix it. Neither is positive for share price. Add on to this a big sales problem the company has had, and the company’s value is down 88% in the past year.

CBC: Alimentation Couche-Tard won't confirm reports it's on verge of acquiring rival

Canadian success story, Alimentation Couche-Tard appears to want to continue on the acquisition trail this year. Market chatter and trading activity was high enough on trading floors Wednesday regarding a possible big deal in the works to cause market surveillance at the TSX to request comment from the firm. The convenience store chain then commented that no formal agreement had be reached but that alone confirmed to traders the rumour has some facts behind it. ACT has over 6800 stores across Canada and the US and across multiple brand names from Mac’s to Circle K. The rumours are that they will buy Texas bases CST Brands, a big rival, at a deal around $3.4 billion.  A rumour like this usually causes the target company’s stock to go up, and the buyers to go down. ACT actually traded up along with CST, closing up at $62.00, a boost of $1.89. If the deal does come together I recommend watching the US business channels. It will get a lot of press and watching American’s try to say Couche-Tard is a favorite activity of mine.

 

 

Stock Market

Meet Whistler's new American owners

August 11th, 2016 by

A trader's take on this week's news of Whistler Blackcomb's takeover, Big Pharma drama & Delta's 6,000 technical difficulties

 
 

CBC: Vail Resorts makes friendly $1.4B takeover offer for Whistler Blackcomb

A friendly takeover deal of a Canadian landmark was announced on Monday this week. US-owned Vale Resorts is buying Whistler Blackcomb for $1.4 billion, a 32 percent premium on closing value of the company on Friday. Whistler shareholders will get a combination of cash and stock in the deal. The announcement caused shares to trade up $11.49 to $36.63 on the deal. There are no hurdles expected to delay the closing of the deal. Whistler is well-known, well-positioned and full of opportunity, but it has not been making money and needs money to grow and restructure. The fit between the two will likely be positive. This is what Vail Resorts does and does well, owning nine other ski resorts. Whistler Blackcomb has had a series of owners and ownership structures over the years. This one seems like the best long-term solution as Vale is able to fix the cash flow and debt structure challenges in the short term and bring long term stability to the Canadian resort.

Bloomberg: Valeant Said to Be in Criminal Probe Over Philidor, WSJ Says

More legal and regulatory troubles came to light this week for pharmaceutical giant Valeant. It was announced that the firm is officially the focus of criminal investigation by US federal prosecutors pertaining to a former partnership with a mail order pharmacy. At first Valeant denied any wrongdoing but the eventually cut ties. Valeant is now saying they can’t comment on “third party investigations”. Valeant has had more public relations issues, allegations and internal struggles than market watchers can keep track of. From very high levels of company debt, to these outright criminal troubles, they are not a company focused on innovation or profitability; they are just bouncing from one serious scandal to another. The only advantage they have right now is that there are many barriers to entry into their industry, which keep the value of their assets high. If the troubles keep up, shareholders could get restless and stand demanding a major management change - or even a sale to the highest bidder.

CBC: Delta struggles through third day of computer problems

US airline Delta has been stranding passengers all over the place this week and making headlines for all the wrong reasons. Many wondered if it was a hack, but the company is saying it was just a three-day system failure that has caused the delay and cancellation of over 2,000 flights. This news caused shareholder to focus in quickly. The cost to provide accommodation, food and “we are sorry” vouchers really add up across so many flights. The longer-term problem is in the technology itself. Software systems and their functions are the logistics funnel of all airlines. They maintain everything from booking to security to seat assignments. If they fail, the process of safely moving 6,000 planes of people around in a day becomes very difficult. For Delta to move past this, they need to show not just their short-term plan to navigate the customer service nightmare, but the long-term plan of how to prevent this from ever happening again. This could be a far more expensive problem than we currently know.

Stock Market

Tesla expands its 'range' with a $5 billion new home

July 30th, 2016 by

A trader's take on Tesla's expansion, Facebook's surprising earnings & Twitter's lack thereof

 
 

CBC: Tesla opens $5B car battery 'gigafactory'

Tesla, the famous/infamous electric car marker from California, announced the opening of a large $5 billion factory to build their batteries. The car company does have a lot of technology success and lists of presales for the new lower-priced electric car models to be released at some point in the future. The cost of the investment in the factory is still staggering, however. The challenge is that Tesla has been around about 13 years and has never made a profit. They have revenue, a great product and massive brand value but to keep this company going, profit needs to become the light at the end of some tunnel at some point. Five billion dollars is not chump change. It is a physical asset that costs a lot of money and turns the company from a fast moving tech firm to a large steam ship that will now take even more money and time to pivot if they make a mistake. Very few people questions Tesla’s technology but many are starting to question their business pathways through a more thorough lens. Just because the company currently has access to billions of dollars from investors, partner firms and government does not mean the supply of capital is limitless.

BNN: Facebook's Q2 revenue jumps 59% on blistering ad sales growth

Market watchers got a surprise to the upside this Wednesday with the release of Facebook’s second quarter earnings. The numbers blew away the estimates from analysts and the stock shot up almost 7 percent in after-hours trading, to over $130 per share. The surprise came in both overall sales growth as well as profitability. The company reported earnings of 97 cents per share when 82 cents was expected. Total advertising revenue increased an incredible 63 percent to $6.24 billion for the quarter. The social media giant also reported that mobile advertising is now 84% of revenue. The user volume also increased to 1.7 billion users… a staggeringly large percentage of the world has a Facebook account. That is why the mobile number is so important. The bulk of people who are now accessing the Internet are doing it through their phones, as that is their only point of connectivity.

CBC: Twitter still struggling to grow as rivals race ahead

More tough times at social media staple Twitter. The 140-character company has reported another quarterly loss despite adding 9 million more users and increasing revenue 20 percent from this time last year to $602 million. The company has invested heavily in new features like “moments” to try to lure people away from Snapchat and Facebook. Snapchat is a new company with about 150 million daily users, while Twitter only has about 140 million. Twitter is losing ground and fast.. Twitter reported losses of $107 million for the second quarter of the year. That is better than the loss of $137 last year but Twitter has been around 10 years and it is still losing money - every year. Tough for the average investor to understand but Twitter has never actually made money and shareholders will get restless soon, demanding another major shake up of management or for the company to just be sold to the highest bidder.