Friday, October 24, 2014

Money Show 2014 - Andrew Busch

Andrew Busch was the sixth speaker at the Opening Remarks section of this Money Show convention. His talk was entitles "Mid-Term Elections: Who Wins and What it Means for the Markets". He is Editor-in-Chief and Publisher of the Busch Update. Andrew Busch used to work for BMO. He has a website.

He says if you get economic growth right, nothing else matters (i.e. social policy). Monetary policy has reached its limits. Mario Draghi must get EU policy right or the EU will not grow.

In 2013 the republicans stopped the government and the people hated them for it. It was bad public relation. Then came Obama care and the republicans are back. Tax Reform is the only policy for economic growth if they get it right. It looks like the republicans can get the senate in the mid-term elections.

President Obama's job approval is at 42.9%. This low level could lead to 10 seats turnover in the senate. If the Democrats win the senate then the status quo will split congress and crush remaining proposal for entitlement reform, Obama will fix EPS regulations which was brought up in the house but shot down in the senate.

If the Republicans win control of the senate then republicans will take control of committees and chairmanships. They will hold hearings on everything from EPA to Dodd-Frank Act to IRS. Things will not get worse. The republicans will attempt to put bills on the president's desk via the budget reconciliation process and lots of legislation from the Job Bill, Ryan Tax reform, energy reform and Obama Care reform.

The US has high tax rates and this is why Burger King bought Tim Horton's. Apple has issued a bond to pay its dividend. It has the cash, but it is offshore. Because of US tax rates you get bizarre behavior from companies.

Lower reparation taxes would help. They are now at 35%. Reagan lowered them to 5 and one half percent one year and a lot of offshore money came into the US. However, to do tax reform you need the president behind it.

In 2016 social Security runs out. The net interest on the US debt is going to expand greatly over the next few years.

Three political takeaways is Tax Reform, Regulations from Energy to Finance and Geopolitics (which currently is unstable.)

The S&P 500 had a support level and 1905 and when it went below that, it crashed further. The is gloomy

Germany does not want QE because then EU countries will not have to do reform, like labor market reforms.

If the market drops 10%, then your portfolio should fall less than 10%.

What does lower oil tell us? It broke support levels of $91.25, then $85.93 and $84.00. US oil demand is down by 2B barrels and the oil supply is up by 2B barrels. So there is a 4B barrel excess.

On my other blog I am today writing about The North West Company (TSX-NWC, OTC-NWTUF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, October 23, 2014

Money Show 2014 - Peter Hodson

The fifth speaker in the Opening Remarks was Peter Hodson who is editor of the Canadian Money Saver Magazine. His talk was entitled "Dividends Rule (and Dividend Rules)".

You do a little bit of work and invest some money and then get money back every 3 months plus get a raise each year. This is dividend investing and it is a miracle.

What is going on currently is a normal market correction. When will the current bull market end? No one knows.

There are chicken farmers and egg farmers. The chicken farmer worries about the price of chickens and the price of eggs. The egg farmer worries about the prices of eggs. If you are an investor in dividend stocks you are like the egg farmer.

Dividend stocks offer safety in down markets especially by dividend growth companies. What you want to do is do your homework before investing. You do not want to invest in a company that will fail and cut their dividends.

One of the best signals for a growing company is that they start to pay a dividend. This tells you that the company is doing fine and plans to be around for a long time. An example is Stantec Inc. (TSX-STN). This company started to pay a dividend after 50 years in business. They are not going to cut the dividend at the first downturn.

What you want are companies that can grow their dividends. Be cautious about any company with a high debt. A company that has lower revenue year after year is also bad. You want a company that grows its revenue. Dividend paying stocks outperform non dividend paying stocks. There are also several Canadian Dividend ETFs to choose from.

One notable dividend stock is Constellation Software (TSX-CSU) which started dividends at $0.15 per share per year in 2007 and is now paying dividends of $4.00 per share per year.

Peter thinks there are 5 reasons that dividend stocks are good. They are:
  • Dividends prevent investors from selling a stock.
  • Dividend paying stocks are more stable.
  • Paying dividends provide management with discipline.
  • Dividend paying stocks get a better market valuation.
  • Dividend paying stocks outperform other stocks.
Management needs to pay dividends out of cash flow and this is what ensures management discipline. You are better off with investing in a company with the discipline of dividends than without the discipline of dividends.

A dividend increase followed by a big market decline is a good sign. Here yield goes up but the risks decline. For example, Surge Energy Inc. (TSX-SGY) had a dividend increase on June 16 just prior to the sector decline of the past 3 months. The dividend yield is now 9%. Here the yield is up but the market is down and nothing has changed with this company. Also, for pipeline stocks nothing has changed but the market has gone down on these shares.

What are good dividend signs?
  • A company starts to pay the first dividend ever.
  • Dividend payments are made on small and mid-cap stocks.
  • The dividends do not start too high.
  • There is management ownership and they are paying themselves with dividends rather than salary.
Another good sign is consistent dividend increases. Fortis Inc. (TSX-FTS) has increased its dividend each year for the past 41 years. Slow and steady dividend increases are the best. You need to watch dividend payout ratios. Look at the payout ratios for cash flow not earnings. One problem would be for REITs where they are paying out more than 60% of cash flow. Use caution here.

Some companies increased their dividends during the last recession. Home Capital Group's (TSX-HCG) dividend went from $0.055 per share quarterly to $0.08 in the last recession. Telus Corp's (TSX-T) dividend increased from $0.1875 per share quarterly to $0.2375 between 2007 and 2009.

A strong balance sheet and cash on hand makes a dividend more secure. Wi-Lan Inc. (TSX-WIN) has lots of cash on hand. At the last financial statement year there was $1.44 cash on hand for each share which was some 32% of the stock price.

A bad sign is a dividend payout ratio of 80 to 90% of the cash flow. This leaves little in the way of cushioning. Cyclical companies should have lower payout ratios. Also companies with debt should have lower payout ratios.

DRIP's are not always good. Some companies add DRIPs to conserve cash. They may not have enough cash to pay their dividends. You need to include the DRIP dividend when calculating payout ratios. This is because DRIPs can be cancelled at any time by investors.

Watch out for companies that increase dividends in the face of earnings decline. He calls this the Fake Out. The company is trying to prop up a stock. An example of this is Horizon North Logistics (TSX-HNL). They raised their dividend in the face of an earnings decline. This is bad.

What also is bad and bears repeating is when a stock goes down but the whole market does not. When a company has a high yield almost always this is a significant sign. The exception is when there is a major market decline which will raise all dividend yields.

Examples of high yields being bad are Data Group Ltd. (TSX-DGI) and Twin Butte Energy Ltd. (TSX-TBE). Data Group Ltd had a yield of 20% and now the stock is down 70%. Twin Butte Energy has a yield of 13% and high debt and operational concerns. A 3% dividend yield will not make up for a 60% capital loss.

There is almost never just one dividend cut. Ignore what the management says. Atlantic Power (TSX-ATP) cut the dividend twice. Management does try to control stock price declines.

Dividend growth stocks beat high dividend yield stocks. Dividend ETFs have lot of stocks and if one or two cut their dividends, the ETF will do fine. However, if an investor has a few stocks and one or two cut their dividends, this can be a real problem.

In building a portfolio you need to diversify by
  • Sector
  • Geography
  • Market cap
  • Style of Management
  • Dividend payment cycles
  • Add some high payers
  • Add dividend growth stocks
Exchange Traded Funds (ETF) to consider are Vanguard Dividend Appreciation (NYSE-VIG); iShares S&P/TSX CDN Dividend Aristocrats (TSX-CDZ); Vanguard US Div. Appreciation (NYSE-VGG) and iShares US High Dividend Equity (TSX-XHD).

On my other blog I am today writing about The North West Company (TSX-NWC, OTC-NWTUF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, October 22, 2014

Money Show 2014 - Camila Sutton

Camila Sutton was the fourth speaker at the Opening Remarks for the World Money Show at Toronto. She is Chief Currency Strategist and Managing Director at Scotia iTrade. Her talk is entitled "The Future Impact of The Canadian Dollar on Your Investments".

She says that the US economy is recovering and she expects the Fed to hike interest rates in quarter two of 2015. The Canadian economy is uneven, but it is recovering and the Bank of Canada will hike rates in the second half of 2015. Emerging Markets growth is disappointing and uneven.

The CDN$ has near term weakness pressured by a strong US$. In the mid-term the CDN$ will hold its own. In 2014 year to date, the CDN$ has weakness and lost 5.4%, but it increases your US based returns. If the CDN$ goes up this will lower your US returns. The CDN$/US$ range is currently huge and is at 11% for this year. She thinks that CDN$ will be at $0.91 by the end of this year.

There is positive US recovery, but negative global growth. The CDN$ is linked into global growth. The CDN$ is pro-cyclical and global growth is a long term driver of CDN$. Growth could fade again and there is a risk of a recession especially in the EU.

The outlook for Canada is good. The repeating pattern of downward revision of GDP growth of US is seen by the market to be a problem. ISM Manufacturing and non-manufacturing show strong growth The labour momentum is improving. Canadian is tied to the US economy at the hip. The improving US economy will help Canada. For Canada there is an uptick of growth in exports of which 70% go to the US.

In Canada financial stability is a risk. Household debt to income is too high. The housing prices are still rising. This combination equals a sign of financial stability risk. A crisis could hit Canada hard.

As far as interest rates go, the US has put off raising them until the second quarter of 2015. Any hike will be slow and cautious. There is a lot of divergent opinion amount the Fed members over interest rates and ranges from 0.5% to 4% by the end of 2016.

The Bank of Canada Governor Stephen Poloz favors a weak CDN$. When the Fed leads the Bank of Canada re interest rates the CDN$ tends to rally. Oil prices are collapsing and the spread between Canada and the rest of the worth is going lower.

FX managers are buying non-major currencies like AUS$ and CDN$ and this limits the fall of the CDN$. The CDN$ will weaken in the short term, but then will stabilize. FX managers have big diversions in what they think will happen to the CDN$.

The CDN$ will strengthen against the EU and Japanese Yen and even over the AUS$ but it will weaken compared to the US$. We import oil at higher prices than we export oil. We import in the East and export in the West. The Fed will lead the Bank of Canada in interest rate hikes. The Bank of Canada is sensitive to a strengthening CDN$ and is risk adverse. A risk in Canada is the Real Estate market and high household debt.

The outlook for China is stable but at risk.

On my other blog I am today writing about Equitable Group Inc. (TSX-EQB, OTC-EQGPF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Money Show 2014 - Peter Schiff

Peter Schiff is CEO of Euro Pacific Capital Inc. His portion of the Opening Remarks is called "When Is a Recovery Not a Recovery?" (His talk was all doom and gloom.)

Peter Schiff starts off by saying the conventional wisdom is often wrong and never so than now. Most people did not see the disaster of 2008 coming. We have an even bigger disaster coming. People are saying that the US is recovering and that the Fed's policy is working. However, the Fed cannot raise interest rates and they cannot reverse the QE.

Who are going to buy the US Bonds held by the Fed? The US economy seems to be growing because of the Fed, but really the Fed is inflating a bubble. In the 1990's individuals invested in stocks. In 2000 individuals were invested in Real Estate. We now have a problem with institutions like Hedge Funds.

Unemployment is down because people are leaving the workforce. UI is stopping so people are taking low paying jobs. Retirees are taking part time jobs to meet their financial needs. Under Obama care, full time employees get Health Care, but part-time employees do not. So people are being hired for part-time work and more are being hired because you need more part-time employees than full-time employees.

The problem with QE is that you cannot get off QE. QE 3 is not the end. There will be a QE 4. The Fed cannot raise rates because the US economy will go into a recession and bear market. The US$ is going up.

QE cannot end because it did not work, not because it did. The US has much more debt today than before. Our corporations are heavily into debt. That is because corporations are doing Buy Backs financed by debt.

If the stimulus is taken away, thinks will implode. Usually we have a recession every 5 years. It has been 5 years since the last recession. But interest rates are still so low. Usually the Fed raises interest rates between recessions. That has not happened this time. There has been no GDP growth even with QE. So take it away and what will happen?

Real Estate may drop again 10 to 20% next year. The stock market is falling now. The Fed is like a drug addict that has been on heroin so long that he thinks he can stopped taking it and he will still stay high. This is not going to happen. QE is the same. There is no way out of QE. We are so broke we cannot even afford 1% interest rates. There is no exit strategy. QE cannot end. When we realize this there will be a big crash.

Politicians want inflation so that they can pay off the debt through inflation because they cannot pay it the debt off honestly. Only inflation can bring the QE to an end. This will occur in a time of crisis. The US borrows to pay for imports. Other countries have to support the US's massive trade deficit. Today we are in a bigger bubble and heading for a bigger crash than 2008.

On my other blog I am today writing about Equitable Group Inc. (TSX-EQB, OTC-EQGPF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, October 21, 2014

Money Show 2014 - Jim Jubak

Jim Jubak was also speaking in the Opening Remarks section of this show. He first mentioned that he has a website that is free. He asked the question of whether a strong US dollar is a threat or a menace.

So far in October the S&P500 has corrected 10%. What we do not know is if it will go further. There are worries. China is faking numbers more than usual. Ebola is a global worry. People are losing faith in global central banks and this is a big problem.

The US$ Index is going up and has increased by 10% recently. The index compares the US$ to 6 other currencies. In the future the EU and Yen will weaken. For this index see Market Watch. The comparative currencies are EUR (European), JPY (Japanese), GBP (British), CAD (Canadian), CHF (Swiss) and SEK (Swedish).

Another big thing is that the US$ is rising against Developing Economies currencies such as Brazil, Indonesia and Turkey. The Brazilian currency is down by 17%, the Indonesian currency is down by 14% and the Turkish currency is down by 22% against the US$.

The reason for the strong US$ is that the Fed will raise rates. However the ECB and the Bank of Japan are cutting rates. They are hoping that a lower currency will lead to strong growth. The US is tolerating this for now. However, there are real doubts this will work because the US economy is not big enough to absorb everyone's exports without slowing itself.

There is a problem in corporation debt. Corporations have tapped international borrowing markets for the bulk of their debt which is in US$. Now they need to pay loans and interest back in US$. Their costs will soar as the US$ climbs. This process is still unfolding, but companies are getting worried about their debts in US$.

Imagine a country (like Brazil) getting caught in a low growth patch. What can the government do? It can raise interest rates to support the currency or cut the value of their currency to raise growth. They can intervene in the currency market by spending their reserves. There is a threat of big corporations defaulting and roiling the financial markets and hitting the banks.

He can see the US interest rates going up but this will be done very slowly. And, to say something about Canada, he said that are banks are not problem as they are strong.

On my other blog I am today writing about Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Money Show 2014 - Kim Githler

Kim Githler started off the show in the Opening Remarks. She said that we are into another secular bull market. She said we should avoid cash because it will lose its value. We need to invest in real things. There is currently an upward trend in inflation and that this will continue.

Stocks increase more than the rate of inflation and there is higher rate of return from common stocks. A global portfolio is the best for returns and low risk. We should look at the big picture and look at macro-trends. She said we should be in real assets. Capital preservation is difficult as capital takes longer to recover than lose.

She ended with a quote from Keynes about investing is looking at yield over the life of an assets and speculation is looking at the psychology of the market

On my other blog I am today writing about Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF) ... continue ...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, October 20, 2014

World Money Show Review

I spent Thursday, Friday and Saturday of last week at the World Money Show. I quite enjoyed myself and learned quite a lot. I want to briefly talk about the good, bad and interesting of this convention.

First I would talk about the good. The Money Saver Magazine had most of Saturday booked for a number of different presentations. I went to 5 of their 6 presentations. They were all excellent and informative. Two of the presenters gave out books they had written. I will be blogging about these presentations later.

An interesting thing I noticed was in presentations about resources. I was in a presentation on resources given by a bunch of old guys and they were talking about solar energy replacing coal and oil. I went to a presentation on resources given by a bunch of young guys and they were talking about coal staying around for quite a while still. They did not seem to think it would start to be replaced until at least 2030.

Now I shall talk about the worse presentation. This was one was called "The Globe and Mail's view of the Economy and Markets". The presenter Paul Waldie talked vaguely on how well the Globe and Mail was doing with trying to get people to subscribe online for about 10 minutes and then opened the presentation up for a Q&A. I will not be blogging about this presentation later because there is really nothing to blog about. This was in high and very sharp contrast to the presentation at the end by David Wyss who gave a fascinating talk at the end of the show on the same subject. I realize that Paul Waldie is not an economist, but really?

On my other blog I am today writing about Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF) ... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.