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Tax Free Savings Account

February 20, 2015 • Print This Article

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

RRSP Deadline March 2

February 19, 2015 • Print This Article

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

Third Quarter 2014

October 1, 2014 • Print This Article

The Markets

Last quarter we discussed a market that was climbing a wall of worry. Although the global situation has not changed dramatically in the quarter, investment sentiment has turned negative. Even a month ago, there were concerns that global growth was running away on the upside and that inflation could be a threat. The general consensus was that interest rates were going to rise sooner than originally anticipated. Accelerated global growth would provide increased demand for raw materials, especially oil, supporting relatively high commodity prices.
Instead, the growing consensus is that global growth may be decelerating.

  • European growth has stalled. Germany is at loggerheads with the rest of Europe over the need for quantitative easing to spur economic growth. The threat of deflation rather than inflation is a concern.
  • Slowing growth in Europe slows growth in China. China also has problems in Hong Kong with pro-democracy protestors leading up to elections.
  • The war in Iraq and Syria is expanding as more countries join the US led coalition against ISIS. However, it is unclear how air power will eliminate ISIS without boots on the ground. The intervention could expand further and continue for many years to come.
  • The ongoing tragedy of Ebola continues in West Africa. Although probably not a direct threat to developed countries, apart from isolated cases among travelers and healthcare workers, the fear of a widespread epidemic mirrors the panic over SARS.

Equity markets, which anticipated accelerating growth, have corrected to reflect the current economic environment. The price of oil and shares of companies dependent upon energy have been heavily sold. Increased production from shale deposits in the US and from Libya has not been met by increased demand. Normally it would have been expected that there would be a decrease in production from other OPEC producing countries. In fact, Saudi Arabia decided to maintain market share rather than maintain pricing by cutting production. Russia, squeezed by sanctions, produced a record volume of oil to buy US Dollars as the value of the Ruble fell.
However, the underpinnings for equity markets remain in place.

  • Economic growth continues in North America
  • Unemployment rates in North America continue to fall.
  • Corporate balance sheets are healthy.
  • Corporate earnings in North America continue to trend higher.
  • Investors are still demanding income in a very low interest rate environment which should be supportive of dividend paying equities.
  • A recognition of weakness in China and Europe and the resulting influx of funds to US Dollars as a safe haven has led to a rapidly escalating valuation for the US Dollar. The higher dollar depresses US inflation allowing the FED to delay raising rates.

Oil prices have reached a point where US shale oil and oil sands production become far less profitable. Saudi Arabia and other OPEC producers require higher prices to placate their people. Russia requires higher prices for their production to be profitable, so production cuts may occur to support prices.

The share price of oil companies, suppliers to oil companies and infrastructure plays in the oil patch have been hit hard. It should be kept in mind that many producers have hedged production out at much higher prices to meet divided and capex requirements. The increased value of the US Dollar has offset some of the decrease in commodity prices for Canadian producers. The differential between WTO and Canadian Select has decreased from over $40.00 per barrel to under $14.00 per barrel. Earnings for many Canadian producers could be little changed if the current pricing environment is not extended.

Strategy

Early indications of third quarter earnings are positive with most companies reporting above consensus earnings. We are of the belief that equity markets are ultimately earnings driven. Changes in sentiment, driven by headlines, could roil markets, but as long as earnings momentum continues on the upside markets will ultimately respond positively. Investors still require sources of income. Yields on money market and investment grade bonds remain at very depressed levels. Dividend paying equities, we believe, will remain in demand by income dependent investors.

  • We maintain a negative bias on bonds. We feel that the long-term capital risk to bonds of higher interest rates does not justify the current interest rate being paid.
  • We maintain a position in equities favouring companies exhibiting superior earnings growth potential, good dividend yields and the ability to increase dividends over time. We believe the North American economy is becoming increasingly integrated and that Canada should benefit from growth in the United States.

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

Second Quarter 2014

July 1, 2014 • Print This Article

The Markets

It is often said that markets climb a wall of worry. If so, markets have much to concern them: Iraq and Libya; escalating problems in Gaza and the ongoing civil war in Ukraine. Sanctions against Russia and counter sanctions against EU and North America could cause economic disruption in Russia, especially in companies dealing with Russia and countries reliant on Russian energy exports.

One would have expected these events to roil markets. Instead they were largely ignored as markets moved higher. Economic expansion in North America appears to be continuing at a sustainable rate. Inflation remains under control and although there are indications that inflation is accelerating, central bankers believe that increases will be short lived. Corporate profits continue to grow driving equity valuations. With no major event on the horizon to derail earnings momentum, P/E multiples are beginning to expand.

There hasn’t been a significant correction in North American equity markets for well over two years. Technically markets appear to be over extended. There are concerns that sustained and artificially low interest rates over time will form asset bubbles. Low interest rates and relatively easy credit have driven real estate valuations in major cities across Canada, and to some extent in the US and Europe. Consumer debt levels remain relatively high. Investors, burned by the market meltdown in 2008/2009 are still nervous and have yet to become fully invested. There still appears to be plenty of cash on the sidelines. There are some signs in recent market activity that retail investors are beginning to reenter the equity market. The retail investor will probably drive the equity markets higher in the later stages of this Bull Market. History indicates that individuals will likely become fully committed before the next Bear Market will begin.

Strategy

There is an old saying that "you can’t beat the tape". Equity markets appear to have higher targets. There are no storm clouds on the immediate horizon that appear to have the ability to derail the North American equity markets. That said, the current advance appears to be long in the tooth and a pause or correction occurring in the near term cannot be discounted. Any pull back in equity valuations, we believe, will be a correction, not the beginning of a Bear Market. We are not market timers and we tend to hold the course during short term market turbulence. We are of the belief that retail investors will be forced into equities to obtain income not available from bonds, GICs or Money market vehicles. It appears that the retail investor is still sitting on cash and has yet to capitulate. The memories of 2008-2009 are still too fresh.

Bonds have been a big performance surprise. Interest rates have been persistently low driving bond valuations higher. Eventually, as stimulus continues to be removed, interest rates should begin to rise and bond prices fall. As long as interest rate increases are not too rapid or severe, dividend paying equities with potential for dividend hikes could remain in favour.

As a result, we remain relatively underweight and at the short end of the bond market and long equities. We believe that as in the past dividends will make up much of the ultimate return of equity markets and will mitigate any inevitable market declines.

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

First Quarter 2014

March 1, 2014 • Print This Article

The Markets

Markets continued to advance in spite of reasons for investor concern in both Canada and the United States. Volatility increased over the quarter as markets became fixated by each new data point.

Positives:

It appears that economic recovery and growth in North America is becoming entrenched. Although GDP growth has moderated, inflation and interest rate pressure appears to be contained. Sabre rattling in Europe is constructive for energy prices. The inclement weather in the 1st quarter of 2014 drained natural gas inventories. The resulting higher pricing environment is supportive to oil and gas exploration and development companies. The cold weather also contained economic activity (housing, auto sales, consumer spending). GDP is predicted to have grown modestly during this period indicating a more robust underlying economy. It is anticipated demand and economic growth should pick up in the second quarter. Although unemployment is falling, there does not appear to be conditions consistent with wage push inflation. As more people find work, it should be supportive of housing prices and consumer spending.

There still appears to be considerable cash sitting on the sidelines in money market and short-term bond funds. Although there seems to have been some rotation away from fixed income into equities, there are many institutional and individual investors waiting for a correction to invest. This mindset has sidelined cash and could be the reason why the equity markets seem so well supported. Events, like the annexation of Crimea by Russia, should have created far more turmoil in equity markets.

Looking past the headlines, it appears that there is a firm base for equity valuations. Central banks may continue to reduce stimulus, tighten money supply and regulations. However, tightening is targeted, gradual and appears to be able to be absorbed with only brief market turbulence.

The low interest rate environment is gradually causing investors to look beyond bonds and money market funds in a search for yield. We believe that this rotation is still very tentative. The recent outperformance of utilities could be an early indication of this investment shift. Financial services are in a sweet spot with interest rates low enough to constrain default levels in a moderating housing price environment.

Concerns:

China, the growth engine that helped keep markets afloat during the dark days of the financial crisis, has an economy that appears to be cooling. Growth rates have been dropping toward 7% from over 10% a couple of years ago. China appears to be tightening its money supply and putting restrictions on lending practices to contain growth and to avoid a lending bubble and credit collapse. As previously stated, the Chinese economy is in transition to a consumer driven economy as the growing middle class becomes entrenched. The slowing Chinese economy could signal headwinds for commodity prices, especially base metals.

The incursion by Russia into the Ukraine is potentially destabilizing if it points to a resurgence of soviet style imperialism. Europe is dependent upon natural gas which flows through the Ukraine. Europe will likely not support meaningful sanctions and/or a military response for fear of having gas supplies interrupted. Any significant disruption of gas could possibly throw Europe back into recession. Russia is very codependent on gas sales. Any disruption would also have a devastating impact on the Russian economy, likely leading to a stalemate and de-escalation. Although equity valuations on both sides of the border appear reasonable, they are no longer depressed. In addition, there has not been a meaningful correction in several years. Second tier and concept stocks are attracting investor attention. There have been many high flying technology stocks that have used their inflated capital values to make acquisitions of companies that have little or no revenue. Each earnings announcement results in sharp market moves as bets are placed. The market is beginning to act as if it is top heavy and in need of a correction.

Strategy

The investment bias toward dividend paying equities remains in place. Interest rates remain artificially low. Central bankers on both sides of the Border have indicated that rates will remain low for an extended period. Funds sitting on the sidelines should continue to be attracted to equities in a search for yield. Although there appears to be some investor interest in lower cap equities, we anticipate a strong case can still be made for high dividend paying senior equity holdings.

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

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