Items that may only interest or educate me ….
Canadian CPI and sales stats, US interest rate hike, Global central bank hikes, Credit Suisse, Global banking issues, Another online investing app …
Statistics Canada’s February Consumer Price Index report showed Canada’s annual inflation rate fell to 5.2% in February, down from January’s 5.9%. February’s rate is the lowest it has been since January 2022 and the biggest one-month slowdown in inflation since April 2020. On a monthly basis the inflation rate was 0.4%. Analysts had expected increases of 5.4% annually and 0.5% monthly.
Core CPI (CPI less food and energy) was 4.8% in February on an annual basis, down from January’s 4.9%. On a monthly basis, core CPI rose 0.4%, up from January’s 0.2% increase.
Another Statistics Canada report showed Canadian retail sales rose 1.4% in January from December, beating analysts’ expectations of 0.7%. Core retail sales (excludes gas stations, vehicles, and vehicle parts) rose by 0.5% in January. Doing quick math (confirmed by the report), fuel, vehicle and vehicle parts were the main drivers that drove retail sales higher. The report also said initial data for February showed spending fell by 0.6%, suggesting consumer demand may be starting to recede.
Data showing inflation is falling and retail sales are slowing is good news as far as the Bank of Canada (BoC) is concerned. If inflation keeps trending downward, the BoC is unlikely to raise the benchmark interest rate at their next meeting in April. Hopefully, the next time the BoC changes the rate it will be to lower the rate.
(Have you noticed there seems to be a ‘core’ for every measure)
Prior to two weeks ago when the first tremors of the banking crisis shook Silicon Valley Investment Bank (NASD:SIVB), analysts and investors were fearing a hawkish US Federal Reserve (Fed) would raise interest rates by 0.5%. However, the Fed had their wings clipped as the tremors took down SIVB, then Signature Bank of New York, and put other regional banks under stress. Fear of an aggressive increase were replaced with hopes of a pause, although the smart money remained on a 0.25% increase.
Despite the recent banking sector turmoil, in a unanimous decision, the Fed raised the US benchmark interest rate by 0.25%, crushing investors’ hopes of a pause. After the ninth consecutive increase, the interest rate now sits at 5%. Fed Chair Jerome Powell suggested rate cuts were not in the picture until 2024 but hinted the Fed was getting close to a pause of future increases considering recent turmoil in the financial sector.
The Fed said an additional 0.25% increase might be required by the end of the year, but it was a notable break from previous statements of “ongoing increases.” The US bank crisis itself may act as a brake on the US economy as US banks grow more conservative with their loans and become steadily more reluctant to lend to businesses and households.
The Fed wasn’t the only central bank to raise its rates this past week.
- The European Central Bank made its sixth consecutive increase, this time by 0.5%, bringing the rate to 3%. That is the highest it has been since October 2008.
- The Bank of England raised rates by a further 0.25% despite a recent surge in British inflation.
- The Reserve Bank of New Zealand raised its rate by 0.5% in February, to a 14-year high of 4.75%.
- Reserve Bank of Australia raised its key rate by a 0.25% to 3.6% in March, the highest since May 2012
- Norway’s central bank hiked rates by 0.25% to 3% and signalled future increases were likely.
- Sweden’s Riksbank raised its benchmark rate by 0.5% in February to 3% and hinted additional increases were coming.
- With the Credit Suisse takeover lingering in the background, the Swiss National Bank (SNB) raised its key interest rate 0.5% to 1.5% and hinted future hikes were possible.
The BoC remains the only central bank not to raise its benchmark rate, keeping it at 4.5%. It plans to maintain the 4.5% rate as long as inflation in Canada continues to fall.
Credit Suisse (NYSE: CS), the 167-year-old Swiss bank, has agreed to an emergency takeover by Switzerland’s largest bank UBS (NYSE: UBS). The takeover was engineered by The Swiss National Bank (SNB), Switzerland’s central bank, to calm jitters in global banking, and to protect the Swiss economy.
UBS will pay US$3.3 billion for CS, well below the bank’s market value of US$8 billion as of March 17. UBS also assumed US$5.4 billion of CS’s losses. As recently as the end of 2022 CS had $574 billion in total assets. Part of the deal includes the SNB lending up to US$108 billion, to help facilitate the takeover.
Letting CS fail was not an option. Although a disaster for the global banking system was avoided, for now, it dealt a serious blow to Switzerland’s reputation as a global financial center. With the addition of CS’s wealth management division, UBS now becomes the global leader in wealth management services for the rich. UBS will also take over CS’s domestic bank operations but said it would sell many of CS’s riskier ventures, bringing the new UBS in line with its conservative culture.
Credit Suisse’s downfall wasn’t sudden like Silicon Valley Bank, rather, it was the culmination of years of mismanagement, scandals, and a critical data breach. In 2022, the amount of their deposits fell by 40%, their total assets dropped 30%, and the bank lost roughly $8 billion. The collapse of SIVB was the spark that started the end of CS.
While the global banking system may rest easier thanks to UBS acquiring CS, one group that is not happy are holders of CS Additional Tier-one bonds (AT1). Typically, when a bank reaches the point of “non-viability”, common shareholders of the bank are the first to suffer losses, not bondholders. As part of the deal, CS AT1 bond holders had their US$17 billion worth of bonds wiped out and are now worth $0.
Banking issues continued to rattle the global markets last week. This time it was European banks stealing the spotlight from US regional banks:
- Switzerland’s UBS and Credit Suisse are among the banks under scrutiny by the US Department of Justice to see if they helped Russian oligarchs evade sanctions.
- Germany’s Deutsche Bank (NYSE: DB) became the biggest loser on the European STOXX 600 index thanks to a significant increase in the cost of insuring against the risk of default.
- The European Central Bank is pressuring Austria’s Raiffeisen Bank International to sell its highly profitable Russian operations.
So far, Canada has managed to avoid the banking crisis that has plagued the US, and now Europe. Still, Canada’s big six banks have not escaped unscathed. Together they have lost over C$57 billion in market capitalization.
One reason the Canadian banks have avoided the banking crisis is the Canadian banking industry is more strictly regulated than the US. There is much less risk of a Canadian bank getting into the kind of trouble that caused runs on the cash reserves of American regional banks. Individually, each of the big six Canadian banks – Royal Bank of Canada (TSX: RY), Toronto-Dominion Bank (TSX: TD), Bank of Nova Scotia (TSX: BNS), Bank of Montreal (TSX: BMO), Canadian Imperial Bank of Commerce (TSX: CM), and National Bank of Canada (TSX: NA) – themselves have a broad base of clients that provide diversification, ample liquidity and manageable credit risks. In addition, each bank is geographically diversified, and not highly concentrated in riskier (such as technology) or cyclical (such as oil) industries.
A few weeks ago, I opened a TD Easy Trade account for each of the three Portfolios. Each account comes with 50 free trades (Buy or Sell) per year and there is no cost to transfer cash or shares between TD Easy Trade and TD Direct Investing. Easy Trade had a promotion that if you opened an account by February 28 and had a total of C$500 or more in cash and/or shares in the account by April 30, TD would give you $100.
At this point my experience with Easy Trade has been limited to transferring in cash and shares. You must call Easy Trade to perform these transactions, but they plan to enable do-it-yourself transfers via the TD Easy Trade app in the near future. I’ve spoken with Easy Trade support a few times and its cumbersome to talk to an agent because you have to be manually authenticated, whereas Direct Investing uses the TD smartphone app to automatically authenticate you when you call in. Easy Trade plans to adopt the same authentication process used by Direct Investing in the future.
TD’s Direct Investing platform is still my primary and preferred online trading platform but I’m happy to save the C$9.99 commission each time I make a transaction. As a bonus, TD is paying me C$100 to save those expenses! 😊
Let’s see what happened this past week….
Weekly Market Review
Monday: All four major North American stock indexes ended the day higher after the Swiss bank USB agreed to purchase its Swiss competitor Credit Suisse. The deal calmed the markets, as investors prepared for the Fed’s Federal Open Market Committee’s (FOMC) latest interest rate decision. Oil prices also rose as fears of a financial crises subsided.
In Canada, the Toronto Stock Exchange Composite Index (TSX) was lifted higher by a rebound in Canadian bank shares and a surge in oil prices that rose off a 15-month low. In the Canadian sectors, the Energy and Telecommunications had the biggest gains, while Healthcare, Utilities and Technology were the only sectors to end lower.
In the US, all three American indexes – the S&P 500 Index (S&P), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite Index (Nasdaq) – ended solidly in the green. Stability in the financial system and hopes for a 0.25% hike in the interest rate brought investors back into the markets. In the American markets it was a broad-based rally with all American sectors advancing. Basic Materials (miners and fertilizer companies) and Energy were the biggest winners while Technology and Consumer Cyclicals brought up the rear.
Tuesday: All four indexes continued to rise as ongoing American and European central bank efforts continue to stabilize the global banking system. With the banking crisis looking to be under control, investors expect an increase of 0.25% to the US interest rate at tomorrow’s Fed meeting.
In Canada, financial companies and energy companies continue to rally as investors slowly regain confidence in the global banking system. As well, Canada’s CPI showed inflation fell more than expected in February to 5.2% on an annual basis. The BoC decision to pause interest rate increases is looking good at this point. The top gainers in the Canadian sectors were Energy and Technology, while the defensive sectors Utilities and Consumer Staples fell the most.
In the US, investors lost their fear of bank stocks in a big way as all three US indexes posted solid gains. Leading into the Fed’s next rate announcement, it was another widespread day of advances in the American sectors. Energy and Financials advanced the most, while the defensive Utilities sectors was the only sector to end the day in the red.
Wednesday: All four indexes were flat for most of the day before the Fed’s announcement of a 0.25% increase to the key US interest rate sent all four slightly higher. However, when the head of the US Treasury told Congress she had ruled out blanket protection for all deposits, all four indexes fell sharply into the red.
In Canada, the TSX looked set to post a daily gain until the Fed and Treasury department announcements, then it dropped sharply to end the day in the red. In the Canadian sectors, only the Basic Materials and Consumer Staples advanced while Healthcare and Technology were the big losers on the day.
In the US, the US interest rate is now at 5.0%, its highest point since 2007. Lingering concern about regional banks led to a drop in both regional and large bank shares, pushing the Financials sector lower. With all three indexes falling over 1.6% for the day, its no surprise every American sector ended lower. The Consumer Staples and Telecommunications dropped the least while Financials and Consumer Cyclicals lost the most.
Thursday: A yo-yo day for the four indexes today. A strong start in the morning, followed by a sharp drop into the red in afternoon trading before a late rally saw the three American indexes cross back into the green. Investors were digesting the latest US interest rate hike and concerns about the US banking system persisted. The price of oil dropped after the US Energy Department said it may take years to replenish the US’s Strategic Petroleum Reserve.
In Canada, the TSX ended in the red, dragged down by the US banking crisis even though Canadian banks have very little to do with US regional banks. Energy companies also saw their share prices drop on the oil news out of the US. In trading, of the Canadian sectors, Technology and Basic Materials gained the most while Energy and Utilities fell the most.
In the US, the three American indexes were able to notch gains after the head of the US Treasury walked back yesterday’s statement and reassured Congress that they that will keep depositors’ money safe. On Wall Street, the American Technology and Healthcare sectors led the way higher, while the Energy and Financials sectors dropped the most.
Friday: The markets took a deep dive to start the day, but all four indexes were able claw back into positive territory by the end of the day. Investors were able to overcome banking concerns that continue to rattle the markets, this time with banking issues in Europe. Oil prices continued to drop after comments from the US Department of Energy led investors to believe there will be weaker demand for oil by the US government.
In Canada, the TSX broke into the green late in the afternoon as banking fears took a backseat to investor optimism that the Fed will pause interest rate hikes. In the Canadian sectors, defensive sectors Utilities and Consumer Staples advanced the most, while the growthier Consumer Cyclicals and Technology sectors were the only two sectors to end in the red.
In the US, banking concerns persist but a lot of money is flowing into the mega cap technology companies that are holding lots of cash on their Balance Sheet. The drawback is these big technology companies are overweighted in both the Nasdaq and S&P. They have become the primary drivers of the two indexes. In other words, it is a small number of companies that are pushing these two indexes higher rather than a broad rally. In the market, American defensive sectors Utilities and Consumer Staples posted the biggest gains for the day, while the Consumer Cyclical, Energy and Technology sectors were the only sectors that fell back.
For the week, the TSX broke a two-week losing streak advancing 0.6%, the S&P 500 gained 1.4%, the Dow rose 1.2% and the Nasdaq climbed 1.7%.
Weekly Portfolio Review
As you can see from the chart above, it was a volatile week for the indexes. By the end of the week, the Fed and other central banks were able to calm investors’ fears about a potential liquidity crisis in the banking sector. As investors moved out of banks stocks, one of the places they placed their money was the mega cap technology companies – Alphabet (NASD: GOOGL), Amazon (NASD: AMZN), Apple (NASD: AAPL), Microsoft (NASD: MSFT) and Nvidia (NASD: NVDA). As you can see by the prefix of their trading symbols (NASD), they all trade on the Nasdaq Exchange, and therefore are part of the Nasdaq index. They are also members of the S&P due to their large market capitalization.
As well as calming words from the Fed, investors are optimistic that the Fed will pause their interest rate hikes given the banking crisis. The newfound optimism contributed to a late surge by each of the indexes, as can be seen in the chart above.
As for the Portfolios shown below, it was good to see two of the three portfolios advance this tumultuous past week. Portfolio 1 benefitted from owning four of the above mega cap technology companies, pushing well ahead of the other two portfolios. Portfolio 2 owns Microsoft but that was not enough to offset its larger proportion of Canadian banks. Portfolio 2 has a bigger percentage of bank companies than the other two portfolios. I am guessing the bank companies functioned as a drag on the portfolio and will continue to until the banking crisis fades away. As for Portfolio 3, Microsoft and Shopify (TSX: SHOP) had good weeks and easily offset the drag of the bank stocks in the portfolio.
Companies on the Radar
No new companies came on my radar this past week. That is somewhat of a relief as the list below is getting to be bigger than I would like. On a side note, the share price of Supremex (TSX: SXP) has fallen 32% since the company came on my radar. Sometimes procrastination is OK. 😊
- Intact Financial (TSX: IFC): A Canadian mid size insurance company supplying home, car and business insurance in Canada, the US, and the UK.
- Hammond Power Solutions (TSX: HPS.A): A small cap Canadian company manufacturing transformers used throughout the world in a wide variety of industries.
- Supremex: A small cap company selling packing solutions throughout Canada and the USA.
- Vale (NYSE: VALE): A global mining company that extracts various metals and rare earth elements such as nickel, cobalt, gold, copper, that are used in electric vehicles.
- Smartcentres Real Estate Investment Trust (TSX: SRU.UN): Owns and manages a number of income producing malls and retails spaces throughout Canada.
- Airbnb (NASD: ABNB): An online platform allowing people to book private residences for short term stays.
- Ero Copper Corp. (TSX: ERO): A small cap Canadian copper mining company with mines in Brazil.
The Radar Check was last updated March 24, 2022.
Portfolio Update
Portfolio 1
Portfolio 1 for the week ended March 24, 2023: UP 
- Amazon announced another 9,000 employees will be let go, bringing the total of jobs eliminated to 27,000. This time the Amazon Web Services, human resources, advertising, and the Twitch livestreaming service divisions will bear the brunt of the layoffs. Amazon said uncertain economic times led them to trim costs and their headcount.
- International Petroleum Corp (TSX: IPCO) gave the greenlight to phase 1 of its 30,000 barrel-per-day (bpd) Blackrod thermal project in northern Alberta. IPCO became the first foreign oil company to start a new project in more than a decade.
- Copperleaf Technologies (TSX: CPLF) was selected by Abbott Products Operations to help improve its investment planning process. The Copperleaf solution provides a streamlined approach that considers long term strategic planning when prioritizing its capital and production assets.
- Like most every technology service, Nvidia is going to make artificial intelligence (AI) systems available via the cloud. It is hoped customers will flock to Nvidia’s AI cloud to incorporate AI into their businesses and help Nvidia continue to dominate the AI frontier.
- Alphabet’s has opened their ChatGPT competitor Bard to the public. Currently the service is only available in the US and the United Kingdom (I can confirm its not available in Canada as of this writing). Will Bard be enough to lure back ChatGPT users?
- Lattice Semiconductor (NASD: LSCC) announced it had won two Artificial Intelligence Excellence Awards from The Business Intelligence Group. The Awards go to organizations, products, and people who implement AI to solve real world problems.
- Apple announced they plan to spend US$1 Billion per year to create movies that will be shown in theatres. I assume Apple is doing this to raise its profile and create content for its AppleTV streaming service.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Pulse Seismic Inc (TSX: PSD)
US $
Home Depot (NYSE: HD)
Skyworks Solutions Inc (NASD: SWKS)
Quarterly Reports
WELL Health Technologies Corp.
All currency listed in thousands of Canadian dollars.
Selected highlights from their fourth quarter 2022 financial results on March 21, 2023
- Revenue of $156,513 for the three months ended December 31, compared to $115,680 for the same period in 2021. An increase of over 35%.
- Net income of $611 for the three months ended December 31, compared to net loss of $4,446 in the same period in 2021.
- Diluted loss per ordinary share of $0.02 for the three months ended December 31, compared to a $0.05 loss per share for the same period in 2021.
- Revenue of $7569,136 for the year ended December 31, compared to $302,324 for the same period in 2021. An increase of over 88%.
- Net earnings of $18,675 for the year ended December 31, compared to net loss of $31,287 in the same period in 2021.
- Diluted earnings per ordinary share of $0.00 for the year ended December 31, compared to a $0.23 earning per share for the same period in 2021.
Copperleaf Technologies Inc.
All currency listed in thousands of Canadian dollars.
Selected highlights from their fourth quarter 2022 financial results on March 21, 2023
- Revenue of $73,385 for the year ended December 31, compared to $69,283 for the same period in 2021. An increase of almost 6%.
- Net loss of $28,202 for the year ended December 31, compared to a net loss of $6,524 in the same period in 2021.
- Diluted loss per ordinary share of $0.41 for the year ended December 31, compared to a $0.24 loss per share for the same period in 2021.
Boston Omaha
All currency listed in US dollars.
Selected highlights from their fourth quarter 2022 financial results on March 21, 2023
- Revenue of $81,234,194 for the year ended December 31, compared to $56,971,811 for the same period in 2021. An increase of over 88%.
- Net earnings of $7,139,548 for the year ended December 31, compared to net earnings of $52,748,177 in the same period in 2021.
- Diluted earnings per ordinary share of $0.24 for the year ended December 31, compared to a $1.82 earning per share for the same period in 2021.
Portfolio 2
Portfolio 2 for the week ended March 24, 2023: DOWN 
- Telus (TSX: T) announced President and CEO Darren Entwistle purchased 150,400 additional Telus shares and now holds a total of 556,904 Telus common shares. Its always a good sign when the CEO invests his own money in the company.
- Guardant Health (NASD: GH) is working with Ohio State University Cancer Center in a project to evaluate patient compliance with a blood-based test for colorectal cancer (CRC) screening. The study will enroll roughly 300 people 45 years and older from minority and underserved populations who need colorectal cancer screening via mobile health clinics. Guardant hopes to show its by making it easy for individuals to perform the Shield test for colorectal cancer, more people will complete the screening test.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
Canadian $
Dream Industrial Real Estate Investment Trust (TSX: DIR.UN) DRIP
US $
No US$ dividends this past week.
Quarterly Reports
No quarterly reports this past week.
Portfolio 3
Portfolio 3 for the week ended March 24, 2023: UP
- Alvopetro Energy (TSXV: ALV) raised their quarterly dividend by 17% to US$0.14 per common share after reporting tremendous organic growth that saw their net income growth by 467%.
- Recent data has shown that Microsoft’s (AI infused Bing search engine has caused a 15% surge in traffic to the Bing search page. The growth has come at the expense of Alphabet’s Google, the overwhelming market leader, which has seen a 1% decline in visits.
Microsoft’s initial offer to ward off European Union antitrust concerns was rejected by four smaller European cloud rivals. The complainants allege Microsoft abuses it dominant market position by bundling its cloud storage offering with its Windows operating system.
The United Kingdom’s competition regulator ruled Microsoft’s $69 billion purchase of Activision Blizzard (NASD: ATVI) would not harm competition in the gaming industry. This removes a major hurdle in the path of Microsoft’s acquisition of the gaming company.
Activity
No significant activity to report this week.
Dividends
Dividends Received this week for the following companies:
Companies followed by DRIP (Dividend Re-Investment Plan) indicate additional shares were purchased with the dividend. Any cash leftover was added to the cash balance.
No dividends this past week.
Quarterly Reports
Alvopetro Energy Ltd.
All currency listed in thousands of US dollars.
Selected highlights from their fourth quarter 2022 financial results on March 21, 2023
- Revenue of $17,077 for the three months ended December 31, compared to $9,896 for the same period in 2021. An increase of almost 73%.
- Net income of $5,191 for the three months ended December 31, compared to net income of $2,778 in the same period in 2021.
- Diluted earnings per ordinary share of $0.14 for the three months ended December 31, compared to $0.08 earning per share for the same period in 2021.
- Revenue of $63,508 for the year ended December 31, compared to $31,980 for the same period in 2021. An increase of almost 82%.
- Net earnings of $31,372 for the year ended December 31, compared to net earnings of $5,595 in the same period in 2021.
- Diluted earnings per ordinary share of $0.86 for the year ended December 31, compared to $0.16 earning per share for the same period in 2021.