Extreme Greed Vs Fear What Is The Markets Status Today?

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.