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Can we talk about investing again?

Bernnie Federko

TRIBE Member
Some Bear market analysis from one of the Guys Upstairs... (Not posting the graph, sorry)
TSX Down-Cycle Counts



Duration of a bear market in Canada

Some of you were wondering as to how long bear-markets last in Canada.

First of all, my quick answer would be that our bear is aged (15 months old)…



The following table is our data-series dating back to 1929

· We are measuring the age of the bear (for TSX) from the month of the peak thru to the month of the trough with the 20%+ decline qualifier

· Note that for the purpose of this study we are not using intraday levels, rather, end of day or closing levels.



The following historical bear-market observations show that, on average, a Cdn bear lives for about 19 months – the current bear is roughly 15 months old. In other words, the bear that everyone is talking about is aged.



Best,

SM
 

lobo

TRIBE Member
Not necessarily a question about investing but it does have to do with finances. What are the thoughts or general understandings with regards to running a business from home and what you expense? Is it worth it or does it even really amount to anything when it comes time to file your taxes?

I've been reading up on things and here's an example. I run an IT consulting business from home as a side job. I dedicate a bedroom to function as an office so CRA says that I need to take the area of that space (10x10 = 100sq/ft) and use it as a multiplier of the whole house (2000sq/ft). That works out to be 10%. Expenses for the home like hydro, gas, mortgage interest, etc must use that 10% number. Then it says that if you only work 12 hours a day then that's only half a day which means that the 10% goes down to 5%.

So if it comes down to only being able to expense 5% of your home's expenses, is it worth it? I didn't include things like buying laptops and cell phones cause then the whole "do you use it for personal use and if so how much time" comes into play. Plus, I believe and from what I've read, you're not supposed to expense more than the revenue that you make.

Hope this all makes sense. :)

Lobo
 

the_fornicator

TRIBE Member
Not necessarily a question about investing but it does have to do with finances. What are the thoughts or general understandings with regards to running a business from home and what you expense? Is it worth it or does it even really amount to anything when it comes time to file your taxes?

I've been reading up on things and here's an example. I run an IT consulting business from home as a side job. I dedicate a bedroom to function as an office so CRA says that I need to take the area of that space (10x10 = 100sq/ft) and use it as a multiplier of the whole house (2000sq/ft). That works out to be 10%. Expenses for the home like hydro, gas, mortgage interest, etc must use that 10% number. Then it says that if you only work 12 hours a day then that's only half a day which means that the 10% goes down to 5%.

So if it comes down to only being able to expense 5% of your home's expenses, is it worth it? I didn't include things like buying laptops and cell phones cause then the whole "do you use it for personal use and if so how much time" comes into play. Plus, I believe and from what I've read, you're not supposed to expense more than the revenue that you make.

Hope this all makes sense. :)

Lobo
For me it is, but I can only comment as a full-time consultant.

I'm a bit of an idiot and hand a box off to my accountant at the end of each year and ask him to work his magic for a rather outrageous price. I'm not sure what he does, but I've never paid more than 17.1% of my earnings any given year.

I've asked him to calculate how much I would have paid before expenses (gas -not mileage, % of mortage, bills, marketing & advertising, health, etc.) and he saved me north of $10,000 each year.

It's different for me because all of my income is from consulting so the tax breaks and brackets are significantly lower than someone who is a permanent full time employee / sole proprietor.

My CA is familiar with the threasholds and boundaries you can write things off. If you're curious, speak with a CGA? Ask them to break down fictional numbers to ballpark where you're at. Maybe even provide them a spreadsheet. I would only ask this of an accountant friend otherwise you might have to pay someone to run your numbers to see how much you would actually save.
 

Bernnie Federko

TRIBE Member
Canadian Imperial Bank of Commerce (CM-TSX, C$87.45) - NR
Price Target C$96.00
Robert Sedran, CFA
Q1/F16 First Look -- Ahead Of Expectations On Solid Revenues

CIBC reported Q1/F16 adjusted EPS of $2.42, above both our estimate of $2.39 and consensus of $2.37. Adjusted ROE came in at 18.6%. The CET1 ratio moved down to 10.6% from 10.8%. The dividend was increased (the sixth consecutive quarterly increase) by 3% to $1.18. Our adjusted number includes a $69 million pre-tax increase to the collective allowance, which accounts for $0.13/share and is excluded by management.

The largest positive variance to our estimate was in fee-based income at $0.09/share, with strength in a number of lines, particularily in fx other than trading. Expenses were also a positive delta of $0.06/share. Lending net interest income was a positive $0.02 variance with good asset growth of 4% sequentially though a decline in the consolidated margin. Net capital markets related revenues (inclusive of variable compensation) was a $0.03/share positive variance. Strong trading revenue of $322 million was a $0.14/share positive, offset by weaker securities commissions and underwriting fees (a combined negative $0.05/share variance). To the downside, loan loss provisions were below forecast by $0.11, inclusive of the collective allowance (though slightly ahead without that impact). Securities gains were a negative delta of $0.04.

As for the segments, Retail and Business Banking was up 12% Y/Y. Operating leverage was strong in this segment at 3.5%, a function of strong revenue growth. The margin was down three basis points Q/Q. Loan growth was positive sequentially (up 2%) and was up 8% Y/Y. Loan losses remained stable both Q/Q and Y/Y. Wealth Management was down 8% Y/Y on lower transaction revenue and lower annual performance fees. Wholesale Banking was down 7% Y/Y (though up 36% Q/Q) on lower non-trading revenue.

Overall, it was a solid quarter and whether one removes (as the bank does) or leaves in (as we do) the addition to the collective allowance, earnings were ahead of estimates on the strength of good revenue growth in Retail and Business Banking. We of course would not use 12% earnings growth in that segment as a planning scenario, but the strength there is nevertheless encouraging. We will be publishing a more detailed review after the conference call at 8:00am ET (877-405-9213).
 

Bernnie Federko

TRIBE Member
· Toronto - Global investors need to take a chill pill as economic prospects are not as bleak as many fear, finds a new report from Avery Shenfeld, Chief Economist at CIBC.

Mr. Shenfeld notes that even though he's been steadily downgrading his Canadian and global growth outlook since the second half of 2014, market chatter has left him feeling like a rosy-glassed optimist. "The wall of worry isn't that high in consensus economic forecasts," he says. "Instead, it's been heard in the talk on the trading floors of Wall Street and Bay Street, and whatever street the Shanghai market sits on, among the newly cautious Federal Open Market Committee voters, and in the resulting flight to safety rally in U.S. Treasuries.

"Prospects aren't as bleak as some now fear, and rates aren't going negative everywhere. Investors, need to be scanning for signs that the news ahead might be better rather than worse, and there are indeed some forces that might pave the way for at least less-bad news."

He notes that while emerging market recessions, or in China's case, growth disappointments, have been front and centre in the global economic slowdown of the past year, there are some positive signs.

"The analogies that the bond market was relying on to price away almost all U. S. rate hikes in the next two years, and take 10-year rates below 2 per cent, simply ignore too many of the facts on the ground. In recent days, we're seeing what could be the early signs of a reversal of that trend."

He adds that worries of negative interest rates in the U.S. are overblown. "Only weeks after the Fed hiked in December, we were being asked to assess the odds that America's central bank will eventually be pushed into negative rates. Increasingly, the analogy is being drawn to Japan, which had its own real estate and financial market shock way back in the early 1990s, from which it ended up being stuck in a zero rate policy, and now negative policy rates, for what seems like forever.

"We long ago projected that U.S. rates will track much lower than in past cycles but America isn't turning Japanese, not by a long shot. Nor is it sitting with a massive output gap like the one still festering in Europe, wounded by the Eurozone's failure to use fiscal stimulus during the Great Recession."

He does add that the market's assessment of Canada is rightly one of concern for near-term growth prospects. Just as fiscal policy differentiated the Eurozone's post-recession fate from that of the U.S., it will hold the cards for getting the Canadian economy back in gear.

"Monetary policy is a spent force here, given an indebted household sector and an aging housing boom. Look for the federal budget to deliver a larger fiscal boost than was talked about during the campaign as a way to avoid Canada having to turn Japanese in monetary policy ahead.

"Take a chill pill, as things aren't as bad as you're hearing on the street."
 

wickedken

TRIBE Member
Anybody interested in doing a fund contest? Pick a few stocks and track performance between specific dates?
 

Spacepilot

TRIBE Member
Not totally on topic per say, but I figured it might be a good place to get some opinions.

Given the choice of receiving compensation is USD or CAD for a contracting position with a US firm and with today's exchange rate being used to set the bar, I'm curious to hear some opinions from folks who probably understand where the dollar may be headed better than I do.

Thoughts?
 

Puma

TRIBE Member
Its very difficult for anyone to 100% conclusively predict what direction will the USD go and for how long and when.

Fundamentals would dictate that in some point in the near future the USD will go down in price. However in today's market fundamentals matter very little but once they do it will not be good for the USD.

With that said. It would be better if you get compensated in USD since the USD - CAD exchange rate will fluctuate and you have no control over that. The only time you would be "loosing" money is if the CAD is higher then the USD. As long as USD is higher then CAD you are making money on your conversion.
 

Karim

TRIBE Member
The CAD rate seemed to have followed Oil Prices down. Oil prices hit a low of $26 a barrel in February. If Oil recovers significantly, you can expect the CAD to go back up. It's not guaranteed but there's been a correlation.

If you think Oil will recover, you gotta look at the macroeconomic factors affecting the price. Demand for oil is still very high, however supply has gone out of control.

Since the US government lifted sanctions on Iran, Iran has been pumping oil like crazy in an effort to regain market share in the global market. Saudi Arabia, an enemy of Iran, has been pumping oil like crazy too to try to put a stop to an Iranian market takeover. Additionally, the Shale Gas industry took off in 2014, and now is in dire trouble because of cheap oil and is another motivating factor for the oil producers to pump hard.

Gulf oil is light sweet crude mostly and cheaper to refine than Canadian Oil Sands crude. That being said, operations have almost stopped in the oil sands when the price dipped to its low. Some producers are still making a tiny profit at current prices but many are not. This has really hit the Canadian oil economy pretty hard. Since then, oil has recovered from 26 to ~$43 a barrel and as such, the CAD has crept up a bit slightly.

Back to Saudi, they are currently running the country at a deficit when they had enjoyed a surplus for many years. They can't keep pumping oil like crazy forever otherwise they'd go broke. They've been taking some desperate measures at raising capital to sustain this glut such as selling off a portion of the state owned oil company (which is expected to be the largest IPO in history). The Oil minister (of 30+ years) was ousted for objecting to the current policy, likely pissing off the king and getting canned as a result. The pressure on them is starting to mount but they could in theory sustain this for many more years. The question is will they?

As a result, oil rigs all over the world and the USA are dropping out of operation. Global production as a whole may turn soon and start to decrease which will increase the price of oil. An increased price is good for the Canadian oil industry.

Many have called the bottom of oil. This has been going on since early 2014. I personally am a little bullish on oil and have taken a few positions that should pay off with a price recovery. I feel the gulf countries, Russia, etc. might make a deal to cut production in the next year or 2 and bring oil back up to ~$60-70. I think the CAD has bottomed and may eventually recover. I'm wary of investing in USD equities these days because of the threat of a CAD recovery impacting my gains.

But another thing to keep in mind, is that the markets have been enjoying a relatively strong rally since 2008. We're probably due for a correction, and the cause of which will make it very uncertain. Canadian personal debt levels are scary high right now from sustained low interest rates, and the real estate market in major cities like Toronto and Vancouver have gone up way faster than wages fuelling concerns that the rise in prices only adds more average debt for families and not equity. If oil recovers, a large market correction may soon follow and there's no telling where the currency exchange is gonna be then.

TL;DR: I would take CAD based on today's exchange. But it's not an easy decision.
 

Puma

TRIBE Member
Spacepilot If you are saying that the company will pay you under a set conversion rate that is set to today's price and does not change every pay period then Karim is right the CAD is a better bet.

But if they pay you each time based on that days conversion rate then the USD might be better.
 

praktik

TRIBE Member
Tomgram: Michael Klare, The Coming World of "Peak Oil Demand," Not "Peak Oil" | TomDispatch

"Until very recently, it was assumed that the demand for oil would continue to expand indefinitely, creating space for multiple producers to enter the market, and for ones already in it to increase their output. Even when supply outran demand and drove prices down, as has periodically occurred, producers could always take solace in the knowledge that, as in the past, demand would eventually rebound, jacking prices up again. Under such circumstances and at such a moment, it was just good sense for individual producers to cooperate in lowering output, knowing that everyone would benefit sooner or later from the inevitable price increase.

But what happens if confidence in the eventual resurgence of demand begins to wither? Then the incentives to cooperate begin to evaporate, too, and it’s every producer for itself in a mad scramble to protect market share. This new reality -- a world in which “peak oil demand,” rather than “peak oil,” will shape the consciousness of major players -- is what the Doha catastrophe foreshadowed."

Interesting times
 

wickedken

TRIBE Member
Don't discount the utility of holding USD... Many accounts now allow this although interest is not favorable. If you're getting paid regularly might also make sense to invest in USD denominated products as no one now wants do do it with CAD due to FX.
 

Bernnie Federko

TRIBE Member
Soak the rich’ federal budget could be coming soon, says Rosenberg



JOSH O’KANE

13:34 EST Thursday, Feb 16, 2017



Gluskin Sheff + Associates chief economist David Rosenberg says he has been hearing whispers that the federal Liberals will table a “soak the rich” budget in the weeks ahead – one that includes a steep hike in the tax rate on capital gains.



Mr. Rosenberg said in his morning note that the capital-gains inclusion rate could rise to 75 per cent from the current 50 per cent, which has been the rate since 2000. Returning the rate to that level, combined with the most recent uptick in the top marginal personal income tax rate, would mean that Ontario investors would pay as much as 40 per cent tax on capital gains.



Such a move by the Trudeau government to draw more revenue into federal coffers would take Canada in the opposite direction as the United States, Mr. Rosenberg said, noting that “the implications for the Canadian dollar is decisively negative, not to mention the deflating effect on asset values.”



He continued: “It is a classic move to make everyone poorer, cloaked under the veil of redressing income inequality.”



Earlier this month, Bank of Montreal chief economist Douglas Porter said in a research note that his team is “fielding plenty of questions” about an increased capital-gains rate.



“We have no specific indication or information that Ottawa is seriously considering such a change ... other than to note that [the Department of Finance] is casting about for revenues, they are taking a long look at all so-called tax expenditures, and this government seems to have few qualms about taxing the ‘rich’.”



Mr. Porter offered a similar stance to Mr. Rosenberg: “Don’t do it,” he wrote.
 

wickedken

TRIBE Member
yep capital gains is where most of that money was made. definitely not wage income as that's actually declined. so putting in these tax increases like what praktik likes actually decreases the inflation-level income for everybody... unless of course you had a capital gain you were able to dispose of. and that's the key: dispose of.
 

Bernnie Federko

TRIBE Member
TORONTO (Reuters) - Canadian Imperial Bank of Commerce (CM.TO:Quote), Canada's fifth-biggest lender, on Thursday reported a 13 percent rise in quarterly earnings, beating market forecasts, helped by growth in its retail and capital markets businesses.

Adjusted net income for the first quarter to Jan. 31 rose to C$1.17 billion ($889 million), or C$2.89 per share, after excluding one-off items such as restructuring charges and gains on the sale and leaseback of retail properties.

That surpassed the average analyst forecast of C$2.59 per share, according to Thomson Reuters I/B/E/S.

"CIBC delivered strong performance across retail and business banking, wealth management and capital markets," Chief Executive Victor Dodig said in a statement.

The bank said its retail and business banking division earned adjusted net income of C$709 million, up from C$686 million a year earlier, while its capital markets business reported adjusted net income of C$371 million, up from C$244 million.

Total revenue was C$4.2 billion, compared with C$3.6 billion a year ago.

The bank also said it would increase its quarterly dividend by C$0.03 per share to C$1.27 per share, the ninth time in the last 10 quarters it has increased its dividend.

CIBC's core tier 1 capital, a key measure of its financial strength, rose by 60 basis points from the previous quarter to 11.9 percent, the highest of any major Canadian bank.

"We view Q1 results positively as revenues, efficiency and loan losses were all better than our forecast," said RBC banking analyst Darko Mihelic. He added that the bank's capital was strong, and the quarterly dividend increase announcement was unexpected.

CIBC did not provide an update on its C$3.8 billion offer for Chicago-based PrivateBancorp PVTB.O. A shareholder vote on the takeover was delayed in December after some PrivateBancorp shareholders said they would reject the proposal.
 

Karim

TRIBE Member
We're in the second longest bull market since 1947. I'm normally quite bullish in the market but lately I've been extremely bearish. I find it interesting that HBC seems to be merging with and buying up these high end retailers at what seems to be an economic peak. You wouldn't be able to tell by shopping at Yorkdale or the Eaton Centre that department stores have been struggling, but they can't compete with online retailers, even when people are spending more liberally. A recession will make these companies worth even less. It'll be interesting to see how these brick & mortar retailer moves play out...
 
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