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mts
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The TSX was up 228 to close at 13,311.95

 

The DOW was up 186.74 to close at 12,767.57

 

 

 

Opening thoughts

 

There was all kinds of talk on the budget this week. One of the good things about having a minority government is that every budget is an election budget. The other really good thing is that we have a budget surplus at the federal level right now. Why does this matter? First of all it means lower taxes but it also affects RRSP decisions. If your income is the same this year as it was last year you will get more of a tax break by making an RRSP contribution for last year. If you were not quite sure about making a RRSP contribution this is a bit more motivation to take out that RRSP loan to get the break on last years taxes. Call and we can help you make the decision.

 

 

Last week

    There is talk of GM and Chrysler merging. At first blush one drowning person grabbing another drowning person does not seem like news, or even sound like a good idea but the truth is in the details. There are many people with long memories who have witnessed the multiple deaths of the US car manufacturers. Out of every crises there is an opportunity, and all these assets are on sale cheap. This is the time when smart leaders with vision make money for shareholders. This is not the total disaster some make it out to be, there is gold in them companies.
    The 2,800 conductors at CN Rail who are currently on strike are beginning to be noticed. Rail traffic affects much of our economy and can really crimp our style if it is not run well. Look for federal intervention of some description if this lasts into next week. I suspect there will be little patience for this unionized group as major employers and manufacturers begin to shut down.
    China is proving that it is taking this whole economy thing seriously. They announced this week that they are raising the required reserves for their banks next week. This is a direct affect on the amount of money available for lending. Their economy grew over 10% last year and their trade surplus is up over 70% over last year. While they may not be making everyone in the world happy they have certainly demonstrated a competency in nation building, so far anyway.
    There were charges laid last week against a senior official in the finance department over a leak on the income trust taxation change. It appears that information on upcoming changes were leaked and some people took advantage. This is good news that they have been charged, hopefully this will clean up some of this kind of activity. There is a huge problem with leaks of this nature, it is very good to see someone get charged. One for the good guys.
US housing sales have dropped to levels not seen since 1997. There is debate over where is bottom of this cycle. Only history will be the judge. It is possible that we have already lived through much of the downside.

 

 

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The TSX was up 31.58 to close at 13,343.53

 

The DOW was down 130.09 to close at 12,647.48

 

 

 

Opening thoughts

 

 

 

Thursday is the deadline for RRSP’s. Deposits made by then can be carried back for your 2006 taxes. Things are pretty busy here at RRSP headquarters so if you have any questions or issues now would be a great time to step forward. We are awful busy but we can still find a way to help if you call us Monday. If you have paperwork we are waiting for, Monday would be a great time to get that in as well. If you want to see what a tired Colin looks like drop in Thursday, of course I make no warranties as to my disposition.

 

 

 

Last week

 

 

 

* In a shocking case of “about time” the CN rail strike is over. On Monday a few members of the union were feeling the heat and went back to work. By Tuesday the government was talking back to work legislation. By Friday they were back to work and this weekend they announced a deal. When your job puts millions of other jobs at risk your option of striking is not that usable.

* More real good news on the tax front. There is $7.3 billion federal government surplus after the first 9 months of the year. This puts us on pace to have another surplus over $10 billion for the whole year. I do not know about you, but my job requires a smaller margin of error than plus or minus $10 billion. The Conservatives vowed to stop underestimating budgets to provide a more honest picture to Canadians. There appears to be some work left to do. The issue appears to be that we are paying way too much income tax, even more than the government expected. This money will primarily be used to pay off the debt our parents left for us, the interest savings will go to reduce taxes.

* For the fifth year in a row the rate of corporate bankruptcies has fallen. There were 10.3% fewer bankruptcies last year and personal bankruptcies were down 6.4%. There is caution that this trend cannot continue forever but this does help explain the rosy future of Canadian banks. This number could be distorted next year if the factory situation in Southern Ontario continues to be influenced by the strong loonie and the weak US auto outlook.

* Earnings numbers this year have come in strong on both sides of the border, but there appears to be a bit less enthusiasm going forward. The expectation is that the earnings growth will flatten out from here and that the equity market will struggle to grow further. There appears to be little downside growth but the overall market appears to be going for a linger on the quiet side. Stock selection will be key to delivering equity growth over he next few years.

 

 

 

Next Week:

 

 

 

* Earnings and bank Annual General Meetings dominate the week. The bank AGM’s are actually useful in predicting the tone of the shareholder activists. There are pesky people out there trying to advance the cause of the shareholders. They are likely to make some news at one or more of the bank AGM’s

* While there is still some inconsistency in the economic data it looks like we are settling into a calm patch. The data this week may confirm this..

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E-Rant for the Week ending March 2, 2007

 

 

 

The TSX was down 480.26 to close at 12,863.27

 

The DOW was down 533.38 to close at 12,114.10

 

 

 

Opening thoughts

 

 

 

RRSP’s are finished for 2006, make monthly contributions and next year will be easier. Now on to other things. The market took us on a ride this week. After hitting an all time high on Monday the Chinese market sold off a little less than 10% on Tuesday. That stock market has doubled in value over the last year so this 10% drop is of questionable noteworthiness, except that it is China. The world is glued to any news Chinese. The Shanghai exchange is only 15 years old so it does not have a fraction of the safeguards required to protect investors. Company fundamentals in China are irrelevant as government policy will decide what companies or sectors will be profitable. This market is pure speculation. The anxiety started with the Chinese market dropping 10% and then the world interpreted that as the Chinese economy is slowing. There is a tenuous link here at best, but there is the long standing fear that the Chinese economy may falter and shake the world economies. This was not the Chinese economy slowing, it was their stock market. Be thankful, this is exactly the kind of situation where your mutual fund manager can make you money.

 

 

 

Last week

 

 

 

* If I have $10 and lose $1 that is 10% of what I has and probably significant. If I have $1,000 dollars and lose $1 not as important. When the media reports how many points the market is down that normally means as a percentage it is not as scary, or even relevant. While the point moves are bigger today the index is a bigger number. They are not the dramatic percentage moves in the market we have seen in the last 10 years.

* Nortel is restating historical numbers again. I did not even bother to read why. Is anyone looking at these financials?

* Royal Bank set another record for profit for a Canadian company. What can I say? If you think your relationship with the Royal is profitable one, well so do they.

* Top line GDP numbers in Canada dropped below 2% for the first quarter signaling a slowdown, maybe. It appears that we just used up some inventory we had laying around, that was the only reason we were not producing stuff. On other economic fronts we are now net savers again with a 1.5% savings rate, (compared to a negative number earlier last year) consumer spending was up 3% and exports are up 4.8%. All steak, light on the sizzle, just the way I like it.

* There is hope for people. This February marked the largest sales in Mutual funds since 1998. This was in spite of that little correction last week. I choose to draw the conclusion that people are now overlooking those little bumps and getting on with good investing.

* Both oil and the Loonie were a little weak on the China news this week. There was not as much weakness in oil as some had expected. This is a pretty major factor that tells me this market decline does not really have any legs left. If we were going into an Asian tailspin oil would be dropping like a rock. The Loonie was off about a cent this week. For those traveling south for March break it just got 1% more expensive.

* Warren Buffet has just gone public with a search for a replacement. He is replacing himself with two people. He has one, but he is missing an investment guy. I have thought about giving him my resume, but I do not want to move to Omaha.

 

 

 

Next Week:

 

 

 

* The Bank of Canada rate should not change this week but the language surrounding the decision will be the interesting part. This should affect the Loonie.

* Housing numbers both sides of the border will give more information on the slowdown / crash / recovery of the building market.

 

 

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