**April 15th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer Market
- The Canadian Housing Market
- Paul at the Molson Outdoor Roof Top Hockey Rink in Downtown Toronto
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the Week
- Economic Calendar
- Earnings Reports
The Canadian Housing Market
Economic News – Canada: House prices up 0.8% in March OPINION: For those living in Vancouver, Victoria, Toronto and Hamilton, the housing boom continues. Elsewhere, the long awaited correction of the housing market has already arrived as evidenced by the ninth consecutive month of declining prices (on a year-on-year basis) for the seven remaining regions covered by the Teranet-National Bank Composite House Price Index. While some will keep blaming foreign capital for the housing boom in Vancouver and Toronto, it’s worth noting those cities are also blessed with the strongest labour markets in the country and hence are able to accommodate large migration flows. Another characteristic of those two cities is tight supply. Note that sales growth has outpaced new listings growth in both cities lately. As a result, the number of houses listed for sale fell to their lowest level for a Q1 in at least twelve years. Strong demand coupled with low supply is a recipe for rising home prices in Vancouver, Toronto and nearby cities Victoria and Hamilton respectively. How long can the housing boom last in those four cities? The persistence of low interest rates will keep demand strong as long as the labour market remains buoyant. But there may be some relief for supply later in the year as the strong housing starts reported in BC and Ontario are completed and come to market. (See attached chart)
Paul at the Molson Outdoor Roof Top Hockey Rink in Downtown Toronto
As some of you know, Paul has a long time passion for playing, coaching and watching hockey.
A client was lucky enough to secure some time on the Molson Outdoor Rink this winter and asked Paul to join them.
We bought a “GoPro” camera for the event so that Paul could share the experience.
Here it is but please keep in mind it was our first experience with this type of camera and we were 30 floors up with a wind warning that almost cancelled the fun.
JMRD Basket Corner
Whitecap (WCP) – Funded largely by a 38% reduction to the dividend and driven by an improved corporate return outlook on the back of continued efficiency gains and cost deflations, Whitecap increased its 2016 capital program to $148 million and revised annual average production expectations to 39.5 mboe/d (from $70 million and 38.8 mboe/d previously). While the strategic reallocation of capital does have a marked effect on core business fundamentals in 2016, we expect the event could garner even more positive attention from the Street for the meaningfully improved complexion of 2017 measures (namely growth and sustainability). Full report attached Whitecap Resources Inc.
All-Cap Growth Basket
Innergex Renewable Energy (INE) – Innergex announced that the company has completed the previously announced acquisition of seven operating wind power projects located in France, from German company wpd europe GmbH. The seven wind farms are located in the north and center of France. The aggregated installed capacity of all seven farms is 86.8 MW and the annual long-term average level of electricity production is expected to reach 169,400 MWh. All the electricity produced is sold under power purchase agreements (“PPAs”) at fixed prices, for an initial term of 15 years, with Électricité de France (6 wind farms) and S.I.C.A.E Oise (1 wind farm).
New Flyer (NFI) – Announced that New York City Transit has awarded the company a contract for 139 (278 Equivalent Units) heavy-duty 60-foot Xcelsior clean diesel buses valued at US$109M
U.S. Growth Basket
Altria (MO) – Altria sold off earlier this week along with Reynolds American and Phillip Morris on concern with potential headline risk from the long overdue e-cigarette regulations which are rumored to be released imminently. Regulation of the e-cig/vapor industry is broadly positive for the big tobacco manufacturers since it will increase the barriers to entry and likely entrench them even further. However, the key concern is if the final regulations stifle or restrict innovation which would be an overall negative for the industry and public health.
Starbucks (SBUX) – Deutsche Bank cools on Starbucks, dropping the coffee powerhouse to hold and lowering its price target $6 to $64 with shares having traded sideways the past 6 months and seemingly unable to get through $65. This as “the combination of lofty near-term investors’ expectations, operational changes and a premium valuation creates a less-favorable risk-reward.” Those changes include tweaks to the domestic loyalty program that go into effect today and which Deutsche cautions “could result in modest disruptions to US near-term traffic and sales trends.” And while the bank remains “impressed with Starbucks’ industry-leading SSS growth and solid profit growth…these factors are fully priced into the shares at this time.”
- “This tax season is the last kick at the can for these savings” (Globe and Mail)
Week at a Glance
Full report attached.
Reads of the Week
- “Take Dividends over Buybacks” (Bloomberg)
- “The Most Complicated Stocks” (A Wealth of Common Sense)
- How Cineplex aims to own date night with its VIP strategy (Canadian Business)
- “Performance vs. Outcomes“ (The Motley Fool)
- “Five reasons to love stocks, no matter what the market is doing” (Financial Post)
- “What Does Oil Price Recovery Look Like?” (ARC Financial)
- Hot Charts – Canada: Interprovincial migration is set to reverse course Last week’s release of employment data showed a significant rebound of employment in Alberta driving down the unemployment rate to 7.1% from 7.9%. This is a welcomed development but it is premature to celebrate as LFS data exhibit significant monthly volatility and economic woes continue in that province according to other indicators. Despite this improvement, the unemployment rate in Alberta increased by no less than 2.7 percentage points since November 2014, now matching the national average. As today’s Hot Chart shows, such degradation suggest a net outflow of population with regard to interprovincial migration, a situation not observed in Alberta over the past 20 years. Given that oil prices are likely to remain low for some time, a reversal in migration movements may lead to a significant redistribution of potential economic growth across provinces with British Columbia and Ontario that could benefit the most. (see attached chart) Hot Charts
Monday April 18th – US- Housing Starts
Tuesday April 19th – None
Wednesday April 20th – US- Existing Home Sales
Thursday April 21st – US- Initial Jobless Claims
Friday April 22nd – CAD- Retail Sales, CPI
Monday April 18th – Morgan Stanley, Netflix, Rogers Communications Inc
Tuesday April 19th – Johnson & Johnson, UnitedHealth Group Inc, Yahoo! Inc
Wednesday April 20th – Coca-Cola Co/The Canadian Pacific Railway Ltd, Metro Inc
Thursday April 21st – Alphabet Inc, General Motors Co, Starbucks Corp, Visa Inc
Friday April 22nd – Caterpillar Inc, General Electric Co
Have a good weekend!