Is this a bull market?

The chase by Frances Horodelski:

When doves cry and musicians die. According to theconversation.com, in a study of 11,054 musician deaths since 1950, 2.3% died at 56. Mathematically, not surprisingly, the average age of death of musicians has been rising (as it has been in the general population) from 50ish in the 50s, to late-50s/60s in this decade – 20 years below the average age of death in the general population. 12.2% (more than 2x the general population) die from an accident, 4.6% from suicide and 4.9% from homicide - the latter stat more than 5x the average population. Finally, hip-hop, metal, punk and rap musicians on average die earlier (the more recent nature of the genre likely a factor here) at around the 30-year mark, while blues, jazz, country, gospel musicians are more clustered around 60 years of age.

Overnight news

Yen drops on negative rates discussion, Nikkei bounces big on the same discussion, markets are tepidly higher in New York, higher in Asia and mixed in Europe (PMI data in line to weaker). Oil softish, gold up. Canadian dollar will focus on today’s economics calendar including retail sales and CPI. Note that the economic surprise index, which had soared from -90 (an increasingly negative number indicates economic data coming in at levels below expectations) to a recent high of 64.90 and more recently 39 – suggesting expectations had come up closer to actual fact. A disappointment or two could take the bloom off the Canadian rose.

Loving Canada?

“But we’re more upbeat on the great white north than we’ve been in a while”. (Steadyhand); “Therefore the TSX has the potential to be one of the best equity markets in the world come 2017.” (Bill Strazzullo, Bell Curve Trading.); Appreciation potential to S&P 500 target for 2016=0%. Potential for TSX to 15,300 target=10%. (Brian Belski, BMO Capital)

Is this a bull market?

Not by mutual fund statistics. According to the latest data from ICI.org, U.S. domestic equity flows have been negative every month since March 2015 with total withdrawals of $217.3 billion. Where has the money been going? International equities mostly (and ETFs too), but there has been a net draw down in total equity and in total bonds in the mutual fund space. Hmmm.

Earnings

Last night had a trifecta of misses – Starbucks, Microsoft and Google with the shares down 3.8%, 4.5% and 5.3%, respectively. This morning we’ve had some beats (Honeywell and General Electric). So far this earnings season, the blended earnings growth rate is -7.2% (according to Thomson Reuters) with 77% reporting above earnings estimates but only 57% have a beat on the revenue line. It is still very early on the Canadian earnings calendar, but according to a National Bank report the earnings set-up is for the TSX profits to fall 10.5% in the quarter versus the first quarter of 2015. However, excluding financials, the reports will show a 28.4% decline (depicting how important financials are to the TSX both in weight and profit) and excluding financials and energy, the index profits would be up 6.7%.

Concordia

Some might say “that’s convenient”. One week before the annual general meeting where the company is asking for approval from shareholders to create a new form of “blank cheque” preferreds and the fourth largest holder of the company has come out against the company’s executive compensation as well as a skyrocketing short position (which is now at the extreme of its ability to borrow according to Markit data), Concordia issues a statement about a Special Committee being formed to review options and rumours swirl about a possible Blackstone bid. BNN confirmed that the company has held discussions, but “there can be no assurance that any transaction will occur”. The stock soared yesterday closing 25% higher and another 5% in the pre-market. The company has $3.3 billion in debt, $3.96 billion in intangible assets, $1.15 billion in equity, revenue of $990 million and ebitda of $600 million. Relevant metrics include debt:ebitda 5x and ev/ebidta 7.8x.

Analysts Actions

Lots of interesting items. CIBC initiates coverage on big miners with Cameco, Teck and First Quantum getting the outperform nod ($22, $16, $10, respectively as targets). A company I made a lot of money on about a decade or more ago, Rigel Pharmaceuticals is a new buy at JP Morgan with a $5 target. It is still, it seems, a clinical stage development company with late stage products for immune thrombocytopenia and amenia. UBS upgrades Norfolk Southern to buy while Advanced Micro is a new buy at MKM Partners.

There is much more to say – but that’s why you want to join us all day long at BNN. Have a good weekend.

Apple could be a $150 stock

CP Rail scraps Norfolk Southern takeover
The chase by Frances Horodelski:

The world was “spiethless” watching the Masters. As my husband said Jordan “looked like me there for a few moments.” – Danny Willett wins the green jacket.
BNN
Canadian Pacific Railway is walking away from its pursuit of U.S. railway Norfolk Southern about six months after launching the US$28-billion bid. And it’s the second time in less than two years that CP is abandoning a major takeover attempt. BNN will have tons of reaction to the news. Another focus today will be on housing as Bill Morneau told BNN “the government won’t shy away from taking action again.” We’ll follow up Amber Kanwar’s story from Friday with respect to Pacific Exploration (which has now postponed its board meeting); we’ll follow TransCanada (and its Keystone leak) and Pembina Pipeline which holds its investors day today; we’ll look at the charts with JC Parets (who favours Canada over the U.S., technology over financials and Twitter over Facebook); we’ll preview the rails (where the companies have seen 1-2 per cent per month headcount reductions since June 2015); we’ll take a look at the earnings calendar; and generally keep you on track. It will be busy.
Calendar
Lots to wait for. The start of earnings week (Alcoa today, big rail, CSX tomorrow and big banks – JP Morgan on Wednesday and Bank of America and Wells Fargo on Thursday). Many Fed heads talking (again) including Dudley today, Williams and Lacker on Tuesday, Beige Book on Wednesday, Powell and Lockhart on Thursday and Charles Evan on Friday. Of those, only Powell and Dudley are voting members. The IMF is also on the docket with its World Economic Outlook tomorrow ahead of Spring meetings of the IMF and the World Bank that start Friday. On April 17^th, the world awaits the OPEC/Non-OPEC meeting and the potential for an oil production freeze. In Canada, the big story will be the Bank of Canada on Wednesday where recent economic data points to no change and potentially an even more optimistic tone on the Canadian economic outlook. April 18^th is the IRS tax filing date (three more days than usual).
Barron’s
Apple could be a $150 stock; Toll Bros has 40% upside; rates must rise (Bill Gross); commodities are the cheapest asset class and widely under owned (Jim Paulsen); insiders are again bearish with sales showing up at Apple, Gilead, Facebook, Tiffany, Ford, Coke, Amaya and General Mills.; bond investors are very bullish (81% by Market Vane’s calculation); Venezuela on the verge of financial collapse; Argentina begins a roadshow to sell about $12 billion in debt, the first offering since 2001.
Earnings
With Q1 kicking off today, there will be lots of discussion on the U.S. profits recession. Depending upon who you read, earnings have either been flat or in actual decline for four quarters in a row (including Q1 2016) and revenue down for five quarters. This quarter will be weighed down by the losses in the energy space and the declines in materials (-23%), financials (-11%) and industrials (-9%). With the exception of healthcare and discretionary, in the U.S. all sectors will show year over year declines. During the earnings calls watch 1) earnings relative to very low expectations; 2) outlooks; 3) GAAP vs non-GAAP (how big is the spread); 4) tax rates and buyback benefits.
Weekend chart watching
My conclusions from most of the chart watcher reading is that their conclusions are largest on the short side, although some admit the evidence isn’t conclusive. Here’s just one comment: “The risk vs reward is very much in favour of the bears here.” – JC Parets, allstarcharts.com.
Canadian dollar
In the last many weeks, the shorts on the Canadian dollar have plummeted to now being flat as, not surprisingly, the CAD has rallied, they have covered and are modestly net long for the first time since May 2015. Its further improvement will depend upon Mr. Poloz, the Fed and Doha. As CIBC’s Jeremy Stretch noted, “it seems unlikely that the BoC will signal excessive displeasure in relation to the CAD’s valuation, at least just yet.” And with GDP looking to have virtually stood still in Q1 in the U.S. (and a calendar problem for a Fed increase in June due to Brexit), economic relief for the U.S. dollar seems far away (although I wouldn’t be surprised for a surprise on the U.S. buck). Sunday’s Doha meeting – anyone’s guess.
Stuff
Yahoo to be in early talks with UK’s The Daily Mail; Boss beats Batman at the box office; Street forecasts for Canadian dollar by quarter looks for the currency to hang around these levels (76 cents) while oil is expected to rise to $45 by Q1 2017. The Japanese yen is hanging around 108 while the Nikkei closed down. Markets generally around the world are higher though with oil flat and gold up as the street awaits a reason to break out of the range.
Analysts
RBC upgrades Restaurant Brands to outperform ($48 new target up from $38); Alphabet is a new buy at Pivotal Research: Goldcorp downgraded at RBC to underweight with a higher $16.50 target; Toromont cut to hold at TD. The most loved stocks on the TSX right now are Milestone apartment REIT, Kinaxis, Intertape Polymer, DH Corp., Prometic Life, Algonquin Power, Mitel, Torc Oil, Secure Energy, New Flyer, Intertain Group, Enghouse, Brookfield Properties, Western Forest, Element Financial, Quebecor, Alaris Royalty, Seven Generations and Tricon – where every analyst that follows these companies rates them a BUY.