Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
A flood of quarterly profit reports were released Thursday morning and most, predictably, should be read through your fingers, horror movie style. Suncor, however, provide a glimmer of optimism, Suncor announced operating earnings of $0.63 per share which is 18 per cent below a year ago. But the company also raised the dividend by a penny and announced a $500 million share buyback program after shoring up its finances through cost cutting initiatives.
"Suncor widens spending cuts on weak oil, hikes dividend" – Jones, Report on Business
Cenovus Energy Inc. went the other way, slashing its dividend by 40 per cent to 16 cents per share. It appears the market was expecting the dividend cut, however, as the stock is trading roughly unchanged in premarket.
Globally Royal Dutch Shell reported a 33 per cent decline in year over year quarterly profits and then piled on the pessimism by predicting that crude prices will remain low for the foreseeable future,
"We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery. We're taking a prudent approach, pulling on powerful financial levers to manage through this downturn."
"Shell plans for 'prolonged downturn' in oil prices" – CNBC
See also: "ConocoPhillips swings to loss amid crude drop" – Fast FT
The ROB's Tamsin McMahon is doing a terrific job with the all-important domestic real estate beat. Ms. McMahon explained the curious goings-on at Home Capital Group Inc. better than I ever could:
"Home Capital, which through its subsidiary, Home Trust, is one of Canada's largest alternative mortgage lenders, said it had hired external investigators last fall after an "external source" alerted the company to problems with some mortgage applications submitted by several brokers. Investigators found evidence that brokers were falsifying the income statements for borrowers."
Investors on both sides of the border have been shorting Home Capital stock hand over fist. According to financial information service Markit, current short interest stands at 28 per cent of the entire float. These short positions will make some money this morning.
"Home Capital cut ties with dozens of mortgage brokers over falsified documents" – McMahon, Report on Business
Bloomberg's Tracy Alloway published a terrific report on corporate bonds, and corporate bond ETFs, that suggests that investors in the sector should take at least some of their profits. Ms Alloway argues that the corporate bond market is "cornered" by large investors and this will have significant consequences,
"Cornering a market is tricky because the more successful you are at doing it, the more you become the market. It moves as you move. As you buy, prices move disproportionately upward. When you sell, prices can fall quickly and dramatically. The Corner is not a problem as long as big investors continue to buy and hold corporate securities. The Corner will become a problem if something—such as an interest rate rise or nervous retail investors—sparks a forced and sudden rush for the exits."
The post is perfectly timed – there are signs of severe stress in corporate debt issues of U.S. and global mining stocks.
"What No One Ever Says About Corporate Bond Market Liquidity" – Alloway, Bloomberg
Canadians have become accustomed to our banking system being ranked as the strongest in the world. But a recent study by Bloomberg Markets found only one domestic bank – CIBC – among the world's strongest.
"Hong Kong's Hang Seng Repeats as World's Strongest Bank" – Bloomberg
Tweet of the Day: "@AmbroseEP Margin debt for stock markets by country. China way out of line. From Credit Suisse latest http://t.co/GJ4tf0eQzE "
Diversion: "13 different ways to make crazy tasty sandwiches from around the world" – Sploid
Scott Barlow