JMRD Market Observer for October 31st, 2014 – Halloween Edition! Louis Vachon Canada’s CEO of the Year!‏

**October 31st Issue of The JMRD Market Observer**


In This Week’s Market Observer…

  • Louis Vachon named Canada’s CEO of the Year!
  • A Geopolitical Update from NBF’s Pierre Fournier
  • NBFM Monthly Equity Monitor – November 2014
  • NBF Forex – U.S. Dollar seems unstoppable
  • JMRD Basket Corner
  • Retirement Corner
  • Week at a Glance
  • Reads of the week
  • Economic Calendar
  • Earnings Reports


Louis Vachon named Canada’s CEO of the Year

MONTREAL, Oct. 28, 2014 /CNW Telbec/ – National Bank’s President and Chief Executive Officer, Louis Vachon, has been named Canada’s CEO of the Year by Canadian Business magazine. This distinction recognizes Mr. Vachon’s achievements as leader of one of the country’s largest companies, and spotlights his major contribution to the business community and to Canada’s economic and social development.

Canadian Business selects the CEO of the Year based on the recommendations of an advisory panel made up ofCanada’s most respected business leaders, as well as the performance of the CEO’s company. “National Bank’s excellent results reflect its strong leadership and the sustained engagement of its employees, year after year. The Bank is well placed to further its growth and to continue proactively meeting its clients’ needs. I would like to congratulate Louis Vachon on this well-deserved recognition as Canada’s CEO of the Year,” said Jean Houde, Chairman of National Bank’s Board of Directors.

In recent years, National Bank has undertaken several promising large-scale projects, such as its One client, one bank transformation, the deployment of numerous initiatives intended to provide all clients with a red carpet experience and the targeted expansion of its activities in various markets. The Bank’s vitality has allowed it to generate significant benefits for its many partners from coast to coast.

National Bank has also continued to make a key contribution to the economic and social development of Quebec and the rest of Canada, as demonstrated by the numerous accolades it has earned in recent months, including:

·         Best Banking Awards in Canada (Ipsos Reid)

·         20 Greenest Banks in the World (Bloomberg Markets)

·         Best Canadian Brands (Interbrand)

·         Canada’s Best Diversity Employers (Mediacorp Canada)

·         Best Employers in Canada (Aon Hewitt)

About National Bank of Canada
With $199 billion in assets as at July 31, 2014, National Bank of Canada (, together with its subsidiaries, forms one of Canada’s leading integrated financial groups. The Bank has more than 20,000 employees and is widely recognized as a top employer. Its securities are listed on the Toronto Stock Exchange (TSX: NA). Follow the Bank’s activities via social media and learn more about its extensive community involvement at


 A Geopolitical Update from NBF’s Pierre Fournier

We had the pleasure of welcoming National Bank Financial Group’s geopolitical analyst to London and area last week to speak with some of our clients. See below for more information on Pierre’s vast experience.

Given the recent newspaper headlines from around the world, there was a spirited discussion on a variety of topics including the Middle East, Europe and the US.  There was also a good discussion on the current and long term prices for commodities, including oil.

The main investment themes Pierre touched on were the following;

1.     On a relative basis, the US (and also North America) are an attractive area for investment due to reasonable demographics, reasonable energy costs and labour costs that are under control.

2.     Europe and Japan are less attractive due to an older demographic profile and higher energy costs among other factors.

3.     The current lower oil price is mostly a result of adequate supplies and a recently revised expectation for lower demand caused by a lower economic growth forecast for some parts of the world.  He believes supply could be interrupted or reduced due to the many geopolitical issues and instability throughout the world.  This will lead to higher prices over the medium and long term.

Pierre has been a geopolitical analyst with National Bank of Canada since November 2008.  Previously, he was Executive Vice-President and Director of Financial Research with National Bank Financial, a position he held since September 1991.  According to annual surveys of institutional investors (Brendan Wood International), the quality of the research at NBF during this period consistently ranked among the top-three in Canada.  From 1975 to 1991, he was Professor of political science and economic policy at the University of Quebec in Montreal.  Mr Fournier holds a B.Comm from McGill University and a PhD in political science from the University of Toronto.

In his current role as a geopolitical analyst, he has published detailed reports on more than twenty countries, and on the mega-trends which affect global investing.  He makes frequent presentations to institutional investors and corporations, as well to public forums.

See the attached presentation for more information.

Geopolitical Risk Update – Pierre Fournier

NBF Monthly Equity Monitor




  • Volatility returned to equity markets in October. The VIX index reached levels not seen since June 2012, a time when investors feared a dismantling of the euro zone. Apart from geopolitical and Ebola risks, investors have been focused on a weakening of the global economy. At the worst point of the recent turmoil, the MSCI AC index was down 8.3% from its previous peak. Since that was less than the 10% generally taken to define a correction, the long advance of equities with no correction – 623 trading days at this writing – continues uninterrupted.


  • The U.S. equity market, meanwhile, has been showing a resilience matching the surprising vigour of the U.S. economy. That vigour has been showing up in the Q3 earnings of the S&P 500. In our view, a number of factors suggest that the outlook for U.S. economic growth and earnings remains quite attractive.


  • The Canadian Q3 earnings announcement season has just begun. If analyst expectations are on the mark, the results will be solid. But for investors that forecast will be past history if global growth appears in danger. Oil prices have been hit on two fronts in recent weeks – by worry about the outlook for demand and by worry about excess supply if some OPEC countries flood the market to recapture market share lost to North American production. West Texas Intermediate is now trading at US$82, the lowest since June 2012 and well below the $95 anticipated by analysts in the coming year. In the circumstances, estimates of the 12-month forward earnings of S&P/TSX companies are now being revised down, a reversal of trend. This pessimism seems exaggerated.


  •  Our asset allocation is unchanged this month. We continue to overweight equities relative to our benchmark while slightly underweighting fixed income products. Though economic and monetary uncertainty will continue to foster an environment of heightened volatility, we think the odds still favour economic expansion in the coming quarters. Our year-end targets are reduced to 15,000 for the S&P/TSX (from 15,600) and to 2,020 for the S&P 500 (from 2,070). We are making a few changes to our sector rotation this month to reflect the impact of the depreciating Canadian dollar. We are upgrading Capital Goods and Consumer Durables & Apparel to overweight. On the other hand, Commercial & Professional Services sector is downgraded to underweight.

 (See Monthly Equity Monitor Attachment)

 Monthly Equity Monitor


NBF Forex: U.S. dollar seems unstoppable

  •  With the end of the Fed’s debasement policies, the U.S. dollar now seems unstoppable. While rate hikes are still several months away, markets may not wait that long, more so if U.S. economic data remains strong. Rate expectations should move higher over the coming months, helping maintain the greenback’s momentum, more so with both the euro and the yen under pressure from central bank policies.


  • The European Central Bank’s liquidity injections via purchases of covered bond and asset-backed securities have proven to be too little too late. Monetary policy transmission channels remain blocked as evidenced by still-contracting credit which is putting a damper on investment and consumption spending, and contributing to the stagnation of the Eurozone economy. With deflation knocking at the door, expect the ECB to keep the money taps open for the next few years as it attempts to boost the economy and hence prices. We have made room for further depreciation, expecting EURUSD to drop to 1.15 by the end of next year.


  • Abenomics switched gears in October with the Bank of Japan deciding to increase its asset purchases to the amount of 80 trillion yen per year, i.e. up by 10 trillion/year. Japan’s public pension reserve fund also announced that it will increase its allocation of foreign stocks and bonds. Those measures should maintain pressure on the yen to depreciate, and we have accordingly pushed our end-of-2015 USDJPY forecast to 120.


  •  In light of persistently dovish signals from the central bank, we have pushed to the last quarter of 2015 the timing for when the Bank of Canada will resume rate hikes. The Canadian dollar will therefore be under pressure, more so with the Fed starting to normalize monetary policy next year. We now expect USDCAD to reach as high as 1.17 in 2015, i.e. a loonie worth close to 85 cents U.S.

 (See Forex Attachment)

NBF Forex


JMRD Basket Corner

DIG Basket


DH Corp (DH) – DH reported Q3/14 revenue of $289 mln (vs. $278 mln est. & $209 mln in Q3/13), adj. EBITDA of $92.6 mln (vs. $85 mln est. & $64.8 mln last year) and adjusted net income of $0.63/share (vs. $0.55 est. & $0.65 Q3/13). Results were also ahead of the Street’s $288 mln top line and $88 mln EBITDA. The shares traded higher on the week by 9% to a new year-high of $35.80

 (See DH Attachment)

DH Corporation 

All Cap Growth Basket


Constellation Software (CSU) – CSU reported Q3 results last night. Revenue missed but EPS beat due to a number of one-time expense reductions. EBITDA margin looked to be about 1% higher than expected after adjustments which is positive. CSU traded higher by 6% on Friday to a new high of $321.50 after trading as high as $332.50 intra-day. We took partial profits on the position in the Basket last week to take some gains off the table as it was the largest holding.


US Growth Basket

HCA Holdings (HCA) – HCA Holdings Inc. said its third-quarter earnings rose 42% as the hospital operator continued to benefit from a rebound in admissions and benefits from the U.S. health-care policy overhaul. HCA also said its signed a deal to acquire privately held CareNow, which has 24 urgent care centers in the Dallas/Fort Worth area. Financial terms of the deal weren’t disclosed.

Sealed Air (SEE) – Sealed Air topped consensus estimates and raised 2014 bottom-line guidance as the packaging company benefited from higher prices. That despite SEE last quarter dealing with “macro-economic uncertainties, currency headwinds and volume declines in the North American protein market.” SEE traded higher by 8% on the week.



Retirement Corner


1)     Why Canada needs to update its RRIF withdrawal rules” (Globe and Mail) 


2)      “The truth about income splitting: We take what we can get” (Globe and Mail) 



Week at a Glance

 (See Week at a Glance Attachment)

Week At A Glance 

Reads of the Week

  • A great read on the difficulty of timing the market and correctly making ‘big’ market calls: “The Timeless Allure of Stock-Market Timers”(Barron’s) 
  • Morningstar Canadian equity roundtable – A 3 part series focussing on the Canadian Equity market: 

        – Part 1

       –  Part 2

       –  Part 3


Economic Reports

Monday November 3rd – RBC Canadian Manufacturing, U.S. Manufacturing PMI, U.S. ISM Manufacturing, U.S. Construction Spending

Tuesday November 4th – Canadian International Merchandise Trade, U.S. Factory Orders

Wednesday November 5th – U.S. ADP Employment Change, U.S. ISM Non-Manufacturing Composite

Thursday November 6th – Canadian Building Permits, Canadian Ivey Purchasing Managers Index, U.S. Initial Jobless Claims, U.S. Nonfarm Productivity

Friday November 7th – U.S. Change in Nonfarm Payrolls, US Unemployment Change

 Earnings Reports

Monday November 3rd – Agrium, Veresen

Tuesday November 4th – Avigilon, Bellatrix, First Capital Realty, Gibson Energy, Keyera, Newalta, Pembina Pipeline, TransCanada

Wednesday November 5th – Enbridge, Home Capital Group, Magna International, RioCan REIT, Sun Life Financial

Thursday November 6th – AutoCanada, BCE, Canadian Natural Resources, Canyon Services, CCL Industries, Crescent Point Energy, Cominar REIT, Extendicare, Innergex Renewable, Inter Pipeline, Parkland Fuel, Stantec, TELUS

Friday November 7th – Brookfield Asset Management, Emera and Fortis


Have a good weekend and Happy Halloween!

By | 2014-11-06T01:29:11+00:00 November 6th, 2014|JMRD Updates|0 Comments

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