Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I broke an important rule yesterday – don't write about any stock without checking if they're reporting earnings in next few days – but thankfully, in CIBC's case, it worked out.
CIBC's earnings supported my bullish column on Canadian banks with blowout profits and an increase in the dividend. Dividend increases are important to investors beyond the obvious in that they signal management optimism on the future,
"Net income for the period ended Jan. 31 climbed 43 per cent to $1.41 billion ($1.07 billion U.S.) or $3.50 a share, from $982 million, or $2.43, a year earlier, the Toronto-based firm said Thursday in a statement. Profit excluding some items was $2.89 a share, beating the $2.57 average estimate of 15 analysts surveyed by Bloomberg … The firm raised its quarterly dividend 2.4 percent to C$1.27 a share."
The only downside to the report, and it's minor, is that the results were driven by capital markets revenue which can be a 'lumpy' , inconsistent growth engine.
"CIBC Lifts Dividend After Profit Increase Beats Estimates" – Bloomberg
"CIBC kicks off big bank results with profit boost, dividend hike" – Report on Business
"Canadian bank stocks may be positioned to play catch-up" – Barlow, Inside the Market
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A Reuters poll of economists suggests little change to Canada/U.S. trade rules,
"All but four of the 23 respondents who answered an extra question said that the eventual tweaks [to NAFTA] won't be significant. Three analysts said they will be significant and one expected no changes at all. The tweaks could include alterations to the dispute settlement mechanism and rules of origin criteria and cover the dairy and lumber industries. 'We don't have the details yet. But our assumption is that trade flows continue as normal, hoping that common sense prevails among policymakers because protectionist policies will hurt businesses on both sides of the border,' said Krishen Rangasamy, senior economist at National Bank of Canada."
"No major changes to Canada-U.S. trade forecast by economists: Poll" – Reuters
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Canada continues to be an astoundingly good seller of its resource assets, accepting foreign investment near peak values and leaving non-domestic firms holding the bag when profitability declines. The latest example has Exxon-Mobil and Conocophillips (and also StatOil ASA previously) struggling to make money from oil sands acquisitions,
"Exxon Mobil Corp. slashed proved reserves the most in its modern history after removing the entire $16 billion, 3.5-billion-barrel Kearl oil-sands project from its books on Wednesday. That followed ConocoPhillips' announcement a day earlier that erasing 1.15 billion oil-sands barrels plunged its reserves to a 15-year low."
I never questioned prime minister Harper's decision to block the sale of Potash Corp., but that would have been another example of 'selling the top' to foreign buyers.
"Oil Sands Batter Major Explorers' Reserves as Rout Sinks Value" – Bloomberg
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Gadfly argues that the Chinese economy has a "wealth management time bomb,"
"Asset-management products, mostly held off-balance sheet, totaled about 60 trillion yuan ($8.7 trillion) as of June 30, equal to more than three-quarters of China's 2016 gross domestic product. Wealth-management products, a shorter-duration subset sold mostly by banks, jumped 30 percent to more than 26 trillion yuan last year…Proceeds of the products have increasingly been invested in lower-rated bonds sold by risky borrowers and in property projects.'
"China's Wealth-Management Time Bomb" – Gadfly (Bloomberg)
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Tweet of the Day: "[the Snap IPO] @IvanTheK has more red flags than a Beijing parade." – Twitter
Diversion: Noriel Roubini notes that human beings are a footnote in the history of the planet. "Evidence of a New Economic Revolution - Nouriel Roubini" – Youtube
Scott Barlow