Internet Intercedes in the Market

The last month has been marked with worries that the stock market is about to (finally) have a correction and drop some 10% or more.  While it is impossible to tell if, or when, this might happen; a few numbers may explain some of the recent action. Stocks were seized with a bit of mania for growth and the internet which over-shadowed other parts of the market.  The Dow Jones Internet Index peaked at the beginning of March after climbing almost 70% from the start of 2013. Then it turned down and Read more [...]

What’s the Canadian Preferred Market Made Of?

Shift in the Makeup of the Preferred Market As we noted in an earlier post, the Canadian preferred share market has undergone a significant expansion over the past five years, approximately doubling in market size.  In addition to the growth of the market, the Canadian preferred market has seen a shift from most outstanding preferreds being fixed-dividend to a majority being rate-resets.  The proliferation of fixed-rate-reset preferreds and their unique distribution characteristics make it possible Read more [...]

Right Conclusion (maybe), Wrong Reason (definitely)

This morning's Wall Street Journal joined (actually, re-enlisted in) the chorus of those arguing that 2014 would be a time for stock pickers to "shine."  The lynchpin of the Journal's case will be familiar to advocates of a "stock-picker's market."  That argument is that since correlations in the U.S. equity market are declining (perhaps as a consequence of the Federal Reserve tapering its support of the Treasury market), stock selection strategies will perform better than in a more macro-driven Read more [...]

Retail Sales Hop Before the Easter Weekend

Treasuries closed the week returning 1.02% as measured by the S&P/BGCantor Current 10 Year U.S. Treasury Bond Index.  Last week’s return was the strongest weekly return since the flight to safety trade driven by Ukraine / Russia news from the week of March 14th, which remains the largest weekly gain for the year. This week started with a hop in Retail Sales, as reported numbers were stronger than expected and are at levels that have not been seen since September, 2012.  Treasuries sold Read more [...]

Introduction to Preferred Shares in Canada

What are Preferreds? Preferred shares are hybrid equity securities, with characteristics that lie between the traditional fixed income and equity asset classes.  Like common shares, preferred shares represent ownership in a company and are listed as equity on the balance sheet; the ownership isn’t entirely the same though.  Preferreds have preferential rights to dividend payments before common shares, which is thanks to their seniority in the capital structure.  On the other hand, common shares Read more [...]

S&P 5-YEAR DIVIDEND SNAPSHOT (and know when your paycheck comes in)

March marked the fifth anniversary from the Bear market low. Dividends have not only recovered from their bottom, but are setting new records. Yields are less, but relative to other instruments they remain competitive, and have a much lower tax rate. Two observations that became apparent are the risk-reward trade off and the yields. For the S&P indices, the large-cap market has more issues which pay a dividend and more issues which increase year-after-year. On a risk-reward note, the S&P Read more [...]

U.S. Domestic Dividends Set Record Increases

Data is for U.S. Domestic Common Stock, not just the S&P 500 U.S. domestic common issues set a first quarter record for dividend increases, as the 'shareholder' return theme continued. Increases have been made easier by record earnings and record cash holdings. Additionally, many issues (especially large-caps) have heard the knocking at the boardroom door – from activists. I expect strong dividend growth to continue in 2014, as ‘shareholder return’ continues to be the battle cry from boardrooms, Read more [...]

What Is So Super About Chinese Demand?

We have heard for many years now about the Chinese super-cycle that supported commodity prices since 1999 and we have also heard many debates about whether it has ended.  So if it has ended what now? How huge is the impact on commodity prices? That all depends on the level of inventories that result from the combination of supply and demand. Theoretically if there were no inventories or supply, it wouldn't matter how much Chinese demand fell. They could demand all they wanted but there would Read more [...]

Food Drives March

Commodities continue their comeback as supply shocks prevail over demand growth concerns from China. The backwardation (indicative of shortage), measured by roll yield or the excess return minus the spot return, has not only persisted from February into March but increased.  March’s roll yield of 26 basis points more than doubled February’s roll yield of 10 basis points, bringing a MTD gain of 14 basis points to increase the S&P GSCI YTD return to 2.9%.  While we have seen some backwardation Read more [...]

March On

TAKEAWAYS & FYIs (commentary): U.S.-Russian relations continued to decline, but markets didn’t see it as major issue; European markets have been more concerned about oil and gas sales from Russia, as Russia needs the currency and Europe needs the products The Fed moved the conversation from stimulus ending to increasing interest rates, but after an initial negative impact the market accepted this (rate increases are at least a year away), just as it accepted the end of QE4-ever Interest Read more [...]