Home sales in the Greater Toronto Area plunged 34.9 per cent in February compared to the same month a year ago as buyers adjusted to new mortgage rules and government policy interventions, the Toronto Real Estate Board (TREB) said. Prices tumbled too, with the average sales price for all housing types falling 12.4 per cent…
via Toronto home sales plummet almost 35% in February as new mortgage rules bite — Financial Post
When you combine Trudeau’s Selfie politics with Morneau’s silver spoon trust fund mentality, you get ongoing budget deficits, careless spending on wasted programs and social agenda’s with no economic merit. Couple that with Trump’s war on everybody, and our lack of true leadership, and voila. Stock market downturns, investors pulling out of Canadian projects and infighting between provinces for political gain without consideration for economic fallout.
So what’s a person to do? Well if you’ve invested using time-tested fundamentals you weather the storm. When deploying new capital, go for fixed income instruments that have low volatility and meager returns. Now is not the time to bet the Farm.
Stay Calm and Build your Cash reserves.
Rick Barbosa
Traditionally, the end/beginning of the year sees billions in new cash poured into RRSP’s and TFSA’s. If you’re anything like me you want to put those funds to work right away. Unfortunately there is too much going on right now to warrant a knee-jerk investment. Stocks in general are fully priced or overvalued, and both short-term and long-term bonds are not offering substantial returns. The best advice for those out there looking at deploying capital is to wait it out. The following issues need to work their way through the system:
We at BBT see a negative or Bear Market on the horizon. Once all or a majority of the uncertainty has cleared we believe there will be a good buying opportunity. Good companies will always adjust and thrive in a hyper-competitive marketplace. Our job is to pick the ones that do this consistently and invest when the time is right. And that time is not now.
Rick Barbosa
Full disclosure, I use Royal Bank and own Royal Bank stock.
Recently Royal Bank did something that changed the game for small to medium-sized businesses alike. Very quietly they installed two brand new features that automates the electronic collections process previously only available through standalone software.
The first feature is Interact Collections, yes collections, not just payments. You can now issue requests for payment to registered “payee’s” and have them pay you using the familiar Interact System. It allows room for Invoice numbers and comments to provide detail to the recipient.
The second feature is the introduction of Wave to produce invoices and send them with the built-in option to pay via various means. This is a great tool for mom and pop businesses, allowing them to send professional looking electronic invoices to their customers and get paid. I still would not recommend using Wave to handle your bookkeeping for a few reasons. The main one being that you still need an Accountant to work with you and your business to handle the various remittances, payroll and tax issues that go along with it.
That being said, I have tried both and liked them. There is a free trial period for both options, and available upgrades for various Wave features, but the free version does the job.
Good work Royal.
This is a family run company who’s only raison d’etre is to make themselves wealthier, and provide votes for Quebec friendly politicians. All this is at the expense of the Dumb Canadian Taxpayer. Yes I say dumb because no one ever really cares until it affects them personally.
When something is given to you without you earning it, do you really value it? It’s like finding a $20 bill on the sidewalk. Do rush to the bank to save it , do you use it to pay a bill or do you spend it right away?
We as a country and Quebec as a Province have poured billions into a company that does not care about those outside its class A structure. If it did, it would have made profits and been profitable at any cost. Instead, they know that they will be propped up by different levels of government in the name of saving Canadian Jobs. If you did the math, we could have funded a national drug program or a national daycare program with all the lost funds poured into Bombardier.
Now, because there were no strings attached with our money, they went looking for another Sugar Daddy in Airbus. Airbus is a shrewd company who paid nothing for the deal and got all the Intellectual Property that we as Canadians paid for.
Welfare is something for nothing. You (and we as a Country) get what you pay for. Remember this next time you’re at the voting booth.
Rick Barbosa
Recently, we’ve increased our positions in a few key holdings including CIBC, Genworth Mortgage Insurance and Blackberry. Initially the returns were positive, lately, based on the news cycle or lack thereof, their values have decreased somewhat. Nothing materially has changed for either one of these holdings, including Blackberry, which made an unexpected profit even when you back out the Qualcomm payment.
Analysts are paid to overreact, we do not. These businesses are sound, make money, and will make more money.
Our Criteria for investing is simple:
The true mark of an investor versus a trader is how long they can sit still when things are not going in their favour at the moment. If you panic and “limit your losses” you are a trader, if you believe in your analysis and see these swings as temporary, then you are an investor. Limiting your losses also means wiping out future returns.
Stay Calm and Carry on.
Rick Barbosa
Believe it or not, the manner in which you can build your nest egg hasn’t changed since the dawn of the 20th century. The tools may have improved but these foundational pillars still exist.
Contact us to learn how to use these tools and start building your wealth.
Rick Barbosa
Our clients enjoyed a 10 day window to buy up depressed stocks from our client update on May 12th. See the Barclays post below:
BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook
BUZZ-Barclays upgrades 5 Canadian banks on valuation, outlook** Barclays raised its outlook on 5 Canadian banks due to low valuations following Q1 results
** Analyst John Aiken writes depressed valuation also attributable to housing market worries arising from non-bank lender Home Capital Group’s rapid decline in deposit accounts
** Cites upcoming switch to 2018 valuation year as painting rosier earnings growth outlook
** Among ‘big 6,’ raises Bank of Montreal to equal weight from under weight, PT to $98 from $95
** Lifts Bank of Nova Scotia to overweight from equal weight, PT to $84 from $78
** Upgrades National Bank of Canada to overweight from equal weight, PT unchanged at $59
** Boosts TD Bank Group to equal weight from under weight, PT to $69 from $64
** Also raises regional bank Laurentian to equal weight from under weight, though trims PT to $58 from $59
** In last 12 months, banks have outperformed the broader Canadian equities market, with the Thomson Reuters Canada Banks Index up 14.9 pct vs. the TSX Composite (up 11.1 pct)
Even with the BMO earnings today, we see a buying opportunity.
Our Call 05/24/17
We predict that enough republicans will vote for impeachment before US Thanksgiving, leading to further depressed values for banks in the US. Canadian Banks should see continued strength as safe havens. Oil will bounce higher despite incremental supply. Overall infrastructure spending will boost oil demand over the next 2 years so hold on or add to your energy stocks.
Rick Barbosa
The recent Home Capital transparency issue, and now the downgrade from Moody’s on Canadian Banks has supressed valuations recently. We personally have GIC’s with Home Trust that are coming due. Although we don’t envision investing in the Company, (once trust is an issue) we do anticipate adding to our CIBC and Genworth positions. Canadian Banks and non-sub prime lenders do a great job of valuing risk, even in this environment. Canadian banks do not write risky loans, you’d know if you’ve ever tried to borrow from them. Hence we see this as a buying opportunity.
Tip Sheet
CIBC (CM) Close 107.29
P/E Ratio 9.1
Book Value 1.8
Debt to Capital 4%
Dividend 4.73%
Genworth Mortgage Insurance (MIC) Close 33.48
P/E Ratio 7.1
Book Value .8
Debt to capital 10.3%
Dividend 5.26%
For more portfolio advice, Look up Rick’s Pick’s Page
For individual portfolio management contact our office.
Lately, there has been increasing pressure for government intervention in establishing rent controls on newer purpose-built rental properties. The current market fuelled by low-interest rates and just plain stupidity, is causing unsustainable demand. When this happens greed steps in. Unfortunately, some people will get hurt when greed rears its head. Trying to intervene by legislation will mean that developers and landlords will adapt. They will either cut back on maintenance, stop building new projects, or add other fees to make up the difference. Whenever we intervene in a market we are picking sides, meaning that one side gets disadvantaged. There are repercussions. Historically Governments have done more damage when they pick winners than if the market does. I could list several examples but that would take too long.
We need to let nature take its course. No one has long-term memories anymore. But those of us who study history know better. This market will crash and the problems that have come with it will correct themselves, albeit in a dramatic fashion. You need to let people fail so that they learn from their mistakes. If there was no idiotic demand and speculation, prices and rents could not be met.
Keep the market free… and remember, those who fail to remember history are doomed to repeat it.
Rick Barbosa
bbtfinancial.ca 