**April 1st Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- Reg Jackson: A look back at the past 20 years
- Tax documents reminder
- NBFM Monthly Equity Monitor – April 2016
- NBFM Monthly Fixed Income Monitor – April 2016
- NBFM Forex (April 2016) – Fed turns dovish
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance- Attached
- Reads of the week
- Economic Calendar
- Earnings Reports
Reg Jackson: A look back at the past 20 years
It was twenty years ago today………..
A great deal has happened in the past few months, including my 45th birthday. For those of you my age, it seems strange that there are so many anniversaries going on, including, in my case, an invitation to my 20th anniversary from graduating from the Western Business School (now Richard Ivey School of Business). Hard to believe that 20 years have already gone by as a so called adult. I have to encourage my classmates to visit the new Ivey building at UWO if they have not had the chance as it is truly spectacular and the school will most certainly continue to produce some of Canada’s future business leaders.
The most surprising 20th anniversary is April 1st of this year and I truly wish this was an April fools. This date is my official twenty year mark in the financial services industry. Not sure if this makes me a veteran but if it does, I can tell you that I am still learning on a near daily basis. The financial market moves this year alone have left some of the industry’s best minds scratching their heads. If nothing else, the financial world is always changing which brings me to the point of this note.
I borrowed a line from the Beatles for the title of this piece and as a reference for each of you reading this to think back twenty years. What were you doing? Where were you? What were your dreams? What was your favourite app? (20 years ago an app was a Caesar salad or bowl of seafood chowder!)
Now, think about this: How were you doing things?
I have spent hours thinking back to 1996 and how things were done in the financial services industry and how they are done today. This is not a story about walking twenty kilometres to the office (uphill) and how much harder it was ‘back then’ but rather an opportunity to reflect.
Here are a few things that have changed in my industry. Send along some things that have changed in yours and we will include them in up-coming Market Observers.
Here are some:
1) In 1996, the internet was only just becoming a tool for us to use in business. We did not have on-line order entry which would have been quite useful as one of the main functions of the brokerage business is the actual buying and selling of securities. Instead, we had blue paper tickets (buy) and pink paper tickets (sell) that were filled out manually. Once filled out correctly, we would sprint to the ‘cage’ where these ‘blue’ and ‘pink’ orders were entered by another person who was sending the instructions to ‘floor traders’ or a ‘trading desk’ in Toronto or New York. Needless to say there were a few near misses as multiple people are running up and down the halls.
I do not remember who the first firm to get on-line order entry was but I do remember wanting it badly. A simple order could be changed several times before finally being filled. This was painfully time consuming and inefficient. The execution of trades today is completely automated and beyond efficient. If anything, trading today is too efficient and somewhat confusing – think day trading and computerized programs that do nothing other than buy and sell repeatedly to collect small amounts of change in prices.
2) Our industry is getting set for the launch of something called CRM2 (Client Relationship Model #2) which is a set of new disclosure requirements that aim to bring things such as full transparency of fees and risks to all investors.
In addition to these changes, the account set-up process is also becoming more and more onerous. Compliance is front and centre in the new technology age which is a huge difference from 1996.
I can remember having a person phone into the office looking to buy a stock without having an account. In situations like this, the branch manager would send the call to one of the hungry ‘rookies’. The ensuing conversation could go like this…..
- ‘Hello, I am interested in buying 1000 shares of BCE’
- ‘No problem Mr. I don’t know who you are’
- ‘What is it trading at?’
- ‘Last trade was $40’
- ‘Ok, go ahead.’
At this point I would sprint to the infamous cage where a binder with account numbers was waiting. I would pick an account number and that was all that was required to make this transaction. When complete, I would advise my ‘new’ client and hope that they would come in to make things official and drop off a cheque.
To say the least, things are much different today which is somewhat counter-intuitive in the new age of technology. Not sure where the industry is going with compliance and various new rules but we are all in favour of full disclosure on all fronts and feel we do a good job keeping clients informed.
3) GPS – My grandfather, circa 1995, gave me directions like this: ‘Reg, go south on Richmond and the bank is on the north corner just before Dundas. If you hit Oxford, you have gone too far.’
For those who know me well, this type of information is useless in terms of successfully getting to my final destination. Worse for me is that early meetings in my career with prospective clients were at their homes in rural south western Ontario. Armed with a map (a physical map) and plenty of extra time were the tools of the day to ensure punctuality.
Getting places today is so easy with GPS that comes as a standard feature in new vehicles. Even if your vehicle does not have GPS, most everyone in the car will have a smart phone with Google maps or one of dozens of other apps to assist in getting you to your appointments on time.
NOTE: I was recently made aware that the CD player is now an option in new vehicles – how the times have changed!
4) Social media……….
Nope, it didn’t exist in 1996!
So, that wraps up the past 20 years. I can’t begin to fathom what this industry will look like in 2036 but I do know it will be different and technology will play an even larger role.
Just remember, twenty years ago none of these companies were publicly traded and most did not actually exist:
To wrap up, I wanted to thank the JMRD Wealth Management Team (past / present and future) as they make it an absolute pleasure to come to work every day.
And to you, our valued clients, thank you for choosing JMRD to assist in managing your various financial affairs. The Team takes this responsibility very seriously and we appreciate your on-going support.
Other Team members have milestone anniversaries coming up that we will be sharing.
All the best
Co-Ceo JMRD Wealth Management Team
(P.S. a special shout out to the Commander who has been here for the entire trip.)
Reminder – Tax Documents
For everyone that has elected to receive electronic tax slips, please remember to login into your secure NBF client access website.
Online Documents Service has a target date of March 30, 2016 to have all tax slips prepared. Amended tax slips, internally produced tax slips and those tax slips issued directly by some underlying securities will not be available through Online Documents Service and will be mailed out to clients directly.
If you need any assistance logging in or navigating through your NBF client access website, please feel free to contact NBF technical support at 1 888 751 1220. As well, we are here for any additional tax inquiries.
NBFM Monthly Equity Monitor – April 2016
- We are relieved that Beijing has veered away from currency devaluation in its effort to spur growth. The authorities announced a fiscal deficit of 3% of GDP for 2016, up from 2.5% last year. In our opinion, fear of Chinese recession with massive capital outflows is no longer warranted.
- The Federal Reserve surprised markets with a dovish statement and projections that halved the number of rate hikes anticipated in 2016. In doing so the FOMC opened the door to USD weakness.
- The S&P/TSX has climbed more than 12% from its January 20 low, the biggest rebound in more than seven years in such a short period. Oil prices have played an unusually large role in buoying Canadian equities. Bank stocks have become an oil play in the eyes of investors because of fear of contagion from the oil patch to the rest of the economy. We see such fear as exaggerated.
- Our asset allocation is unchanged this month. We are maintaining our recommendation to overweight equities relative to our benchmark. A slow-moving Fed, combined with fiscal stimulus in China and accommodative global monetary policies, keeps us optimistic about the world economy. Given our outlook of continued USD softness, we continue to see some lift for commodity prices in the coming months. Our target for the S&P/TSX is 14,700, for the S&P 500 2,200.
Full report attached.
NBFM Monthly Fixed Income Monitor – April 2016
- We expect the FOMC to tighten twice in 2016. June and December seem the more likely months. Consequently we continue to see a target fed funds range of 0.75% to 1.0% by year end, with 10-year Treasuries trading in the upper half of a 2.12%–2.30% range in Q4, higher than the 2.02% implied for that period by the forward curve.
- We still think the BoC will remain on the sidelines in coming quarters. We see 2-year Canadas trading at 0.55% and 10-years at around 1.66% by year end, a view unchanged from last month.
Full report attached.
NBFM Forex (April 2016) – Fed turns dovish
- The Fed finally acknowledged at its meeting in March that markets were right all along to expect a much less aggressive path of interest rate hikes than it had been peddling for the last several years. The FOMC is concerned about downside risks to the US economy brought by global economic and financial developments and now expects to raise interest rates just twice this year. While we expect the trade-weighted greenback to trend down, one can never rule out bursts of strength on occasional stronger-than-expected data (such as March’s non-farm payrolls and manufacturing ISM) that would raise odds of Fed rate hikes.
- The euro showed resilience despite additional stimulus from the European Central Bank. ECB President Draghi’s acknowledgement that the central bank was running out of room to cut interest rates helped the common currency. With the USD facing headwinds, we expect the euro to hold its ground against the greenback. The yen is also showing strength amidst market uncertainty which has resulted in hot money flowing back home. But the currency could come under pressure if, as we expect, the Bank of Japan decides to provide more stimulus to combat the apparent deterioration in domestic conditions and renewed threats of deflation.
- A better outlook for oil prices ─ we now see WTI ending this year at $45/barrel (previous forecast $40) ─ and new fiscal stimulus presented by the Trudeau government lead us to raise our GDP growth forecast for Canada to 1.3% this year. The Bank of Canada is likely to also show upgrades in the upcoming Monetary Policy Report, something that will significantly reduce odds of further monetary easing by the central bank. That’s not to say the Canadian dollar only has upside. Fed rate hikes can indeed result in periodic lapses for the loonie. So, while acknowledging the potential for the loonie to strengthen, we continue to expect USDCAD to trade in the 1.30-1.40 range for most of the year.
Full report attached.
JMRD Basket Corner
Dollarama (DOL) – Canadian dollar-store operator Dollarama increased its dividend, reported better-than-expected fourth-quarter earnings and sales and said Neil Rossy, now chief merchandising officer, will succeed company founder Larry Rossy as president and chief executive on May 1. Larry Rossy will remain as executive chairman. DOL was up 12% this week. See attached report. Dollarama Inc.
U.S. Growth Basket
Facebook (FB) – Are Young People Leaving Facebook? Not Even Close
Six Flags Entertainment (SIX) – Virtual reality could give amusement-park operator Six Flags (SIX) an added lift, says FBR as it upgrades the company to outperform and adds its price target $6 to $64. SIX, “which already had “very solid momentum,” may get “an unexpected, financially material and thematically helpful first-mover Ebitda and attendance lift from its industry-leading effort to implement new virtual-reality technology.” There will be Oculus goggles with Samsung smartphones on roller coasters at 9 of its 18 parks this season. The investment bank says “if VR’s popularity is comparable to a new coaster,” the rollout could boost attendance 2% and Ebitda at least 5%. SIX traded higher by 3.5% on Friday to a new year-high of $57.50
- “What to do with that Florida condo” (fromyouradvisor.com)
- “Why it’s important to make intentions clear when estate planning” (Globe and Mail)
- “What to do when your adult children are ruining your retirement” (Globe and Mail)
Week at a Glance
Full Report Attached.
Reads of the Week
- NBF Hot Charts – Canada: Reckless households? News continue to abound about the “recklessness” of Canadian households who just can’t stop buying homes in Toronto and Vancouver. Despite a collapse in oil prices in 2015, home prices in these two metropolitan areas baffled expectations with another year of strong increases. For some pundits, this is a sure sign of speculation. Strangely enough, the alarmists fail to mention that the working age population is growing about 70% faster than the national average in Vancouver and Toronto on the back of strong inflows of highly educated immigrants who can more easily integrate the job market (employment surged 5.5% in Toronto and 4.4% in Vancouver in 2015). The underlying force for housing demand is household formation. If your population aged 20-44 is growing, you have it. If it’s not, home price inflation is not sustainable. Canada had one the fastest increase in household formation in the OECD in recent years and fortunately, the outlook remains constructive. As today’s Hot Charts show, whereas population aged 20-44 is expected to decline 3.5% in the developed economies over the next five years, Canada’s is expected to increase 2.8%. As for the extent of overpricing in the Canadian housing market, it is interesting to note that current price-to-income ratios for 90 square meter downtown apartments in Canada’s three biggest cities is certainly not out of line with ratios observed elsewhere around the world. (charts attached) Hot Charts
- “The 5 Most Important Money Lessons To Teach Your Kids” (Forbes) Some good lessons to teach kids at every age level.
- “Congratulations! You just witnessed one of the greatest comebacks in stock market history” (Business Insider)
- “Things I’m Pretty Sure About” (Motley Fool)
- “What are the chances of a recession” (Washington Post)
- “Want to pick a winning stock?” (Financial Post)
Monday April 4th – None
Tuesday April 5th – None
Wednesday April 6th – U.S. Fed Releases Minutes from March 15-16 FOMC
Thursday April 7th – Initial Jobless Claims (US)
Friday April 8th – Housing Starts (CAD) Unemployment Rate (CAD)
Monday April 4th – Hudson’s Bay Co
Tuesday April 5th – None
Wednesday April 6th – None
Thursday April 7th – None
Friday April 8th – None
Have a good weekend!