JMRD Market Observer for June 16th, 2017

June 16, 2017

In This Week’s JMRD Market Observer

 

 

  • Veresen/Pembina Pipelines Announcement

  • Time for a more hawkish Bank of Canada

  • Fed: One more hike and start of balance sheet normalization in 2017

  • Sprott Energy Fund – 7 minute BNN interview on the state of the oil market

  • JMRD Basket Corner

  • Retirement Corner

  • Reads of the Week

  • Economic Calendar

  • Earnings Reports

 

 

Veresen/Pembina Pipelines Announcement

 

As mentioned in the May 5th, 2017 edition of the Market Observer, we indicated that Veresen was being acquired by Pembina Pipelines. You may have received some Proxy Literature in the mail in regards to this transaction. We believe that this deal should be viewed in a positive light as two good companies are combining to become a more significant player in the industry.  We expect the deal will be completed and there is no need to return the proxy material.  At this time, we plan to continue holding Pembina shares when the deal closes.  Please do not hesitate to call if you have any further questions.              

 

 

Time for a more hawkish Bank of Canada

 

In early 2015, Bank of Canada governor Stephen Poloz said it was appropriate to take out some insurance, in the form of a lower policy rate, to cushion the impact of the drop in oil prices and facilitate the economy’s sectoral adjustment to the new circumstances. Two and a half years later, the time to remove this 50-basis-point insurance policy, returning the overnight rate to 1%, is at hand. Monday’s comments by Mrs. Wilkins are consistent with this view. We now expect the Bank of Canada to raise the overnight rate 25 basis points in October, three months earlier than previously assumed. 

 

See the full article

 

 

Fed: One more hike and start of balance sheet normalization in 2017

 

Bottom line: The Fed expects to deliver one more rate hike this year (a forecast that we share) and to start reducing the size of its balance sheet. However, the FOMC’s plans rest on the economy performing well and on its confidence that inflation will rise towards its 2% target over the medium term. The continuing downward revisions of forecasts for the jobless rate just highlights the Fed’s struggles in estimating the non-accelerating inflation rate of unemployment (NAIRU), which explains why wage inflation and hence overall inflation have been much weaker than it expected. Should inflation remain stubbornly weak or unexpected shocks arise, the FOMC is likely to delay further tightening of monetary Policy.

 

See the full article

 

 

Sprott Energy Fund – 7 minute BNN interview on the state of the oil market

 

Below is a link to a 7 minute interview that Sprott’s Energy Fund Manager, Eric Nuttall did on BNN this week.  In Eric’s view, panic is in the air as energy names are getting liquidated into a complete buyers strike.  As he says, “we’ve been here before.  Our ability to stay invested (85% invested now with Fund beta of 130%) when we thought there was a dislocation between fundamentals and the market allowed us to rebound by 143% when things turned.  We expect history to repeat itself.” Whether an investor is bullish or bearish on energy, Eric presents a timely update on what’s pressuring the sector today and his current outlook.

 

See the full interview

 

 

JMRD Basket Corner

 

DIG Basket

 

Capital Power (CPX) – Capital Power adds nearly 1,000 megawatts of contracted generation

 

Restaurant Brands (QSR) – Whopper and Timbits Don’t Mesh, Says Burger King Chief

 

TransCanada (TRP) – TRP announced plans to expand its ~12 bcf/d NGTL system to satisfy an incremental ~2.6 bcf/d of firm receipt and delivery contracts stemming from the Montney, Deep Basin and Duvernay formations. Construction will begin in early 2019 with various stages coming online late 2019 through Q2/21. Of note, the expansion follows an oversubscribed open season with 381 mmcf/d subscribed for the Alberta/B.C delivery point, connecting Western Canadian markets to the Western U.S. markets through the south western Foothills delivery point – i.e., potentially boosting GTN flows by another ~0.4 bcf/d towards max capacity of 2.9 bcf/d. See the full article

 

All-Cap Growth Basket

 

CCL Industries (CCL.b) Last Friday, after the close, it was announced that CCL Industries would be added to the TSX 60 Index, after this quarter’s rebalancing update.

 

Sleep Country (ZZZ) – Sleep Country Canada Opens State of the Art Distribution Facility in Richmond, B.C.report attached on the potential positive impact for Sleep Country as a result of Sears Canada’s news this week to remain as a ‘going concern’. See the full article

 

U.S. Growth Basket

 

Arista Networks (ANET) – Arista Will Take Share as Move to 100G Hits ‘Inflection,’ Says Needham

 

Visa (V) – Visa Deserves Credit for Being a Tech Company

 

 

Retirement Corner

 

 

 

Reads of the week

 

 

 

 

 

 

 

 

 

 

Economic Reports

 

Monday June 19th – None

Tuesday June 20th – None

Wednesday June 21stExisting home sales May USA

Thursday June 22ndInitial jobless claims June 17 USA, Retail Sales CAD

Friday June 23rdNew Home Sales May USA

 

 

Earnings Reports

 

Monday June 19th – None

Tuesday June 20th – Arizona Mining Inc.

Wednesday June 21stNone

Thursday June 22ndNone

Friday June 23rdBlackberry LTD

 

 

Have a good weekend!

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