THE PIG SAYS THE WEATHER OUTSIDE IS FRIGHTFUL. INTERESTING NEWS RELEASED ON A LONG TERM PIG FAVORITE V.GXS TONIGHT. A SASKATCHEWAN COAL PLAY, THE COMPANY CONTINUES TO INCREASE VALUE TO ITS PROPERTIES AND TONIGHTS NEWS WAS NO HINDRANCE TO THE PROGRESS, TO BE SURE. NOW IF V.AAA COULD GET SOME OF THE SAME KIND OF RESULTS, AND A PROPER PROMO PUSH IS EXERTED, THOSE MULTI DOLLAR VALUES MAY FINALLY START TO APPEAR. EITHER WAY ITS GOING TO BE BOUGHT OUT BY SOMEONE AND FOR MUCH HIGHER LEVELS THAN IT CURRENTLY TRADES.
ON WITH THE SHOW.....
HSX.V...NOT SURE WHAT THE REAL STORY IS BUT TONIGHT THIS PIGGY SCANNED VERY WELL. COMPOSITE MOVING AVERAGES, MOMENTUM AND NET CAPITAL VECTORS ALL POINTING "UP". NOT SURE WHAT THE FIRE BEHIND THE SMOKE IS BUT THE PIG THINKS THERE IS SOMETHING UP. MORE LIQUIDITY AND HE MIGHT BE BUYING.
NIS.V....NO CLEAR STORY ON THIS PIGGY EITHER. JUST SOME DECENT NUMBERS OUT OF THE SCANNER TONIGHT. THE BIGGEST OF WHICH WAS THE SENTIMENT TURNAROUND AND THE NET CAPITAL FLOW REVERSAL VECTORS. DOES SOMEONE KNOW ? THE PIG SAYS A FEW MORE TRADING DAYS AND WE WILL KNOW. WATCH CLOSE, FOR LIQUIDITY AND PRICE INCREMENTS. IF LIQUIDITY CONTINUES AND THE PRICE IS STABLE, YOU KNOW ACCUMULATION IS UNDERWAY.
JRN.V...AGAIN NO CONFIRMED STORY, JUST RUMOUR. THE SCANNER KICKED IT UP A NOTCH OR TWO, AFTER SEVERAL DAYS IN THE TOP 25 SCANS. LOOKS LIKE THE OLD "SOMEONE KNOWS" CAPER. THE PIG SAYS HE LIKES ALMOST THE BEST OF THE THREE TONIGHT. FOR THE TRADERS, SEE WHAT THE OPEN IS AND THE LIQUIDITY DEMAND, AND THEN MAYBE JUMP FOR A FEW. THE NUMBERS ARE THERE, THE PRICE AND POSSIBLY A SHORT TERM DOUBLE. DON'T PAY TOO MUCH BUT CONSIDER A NIBBLE.
Small caps on a roll
Bob Tattersall
07:58 EST Thursday, Apr 08, 2010
Investors in Canadian small cap stocks have clearly decided that there will be no double-dip recession. After an explosive 75 per cent rally in 2009 which took them 40 percentage points ahead of the S&P/TSX Composite, Canadian small caps extended the gain during the first quarter of 2010. According to the BMO Capital Markets Small Cap Index, the sector was up 7.4 per cent in the quarter, well ahead of the 3.1 per cent return reported by the S&P/TSX Composite Index of big cap stocks. The “unweighted” small cap index was up a little more at 8.5 per cent, which tells us that investor enthusiasm has extended down into the smaller names within the sector, many of which would be viewed as microcap by institutional investors.
As a matter of interest, a stock in Canada currently qualifies as small cap if the market capitalization is below $1.5-billion. Companies approaching the top end of that range at present are primarily resource stocks such as Nuvista Energy and FNX Mining, although more familiar names a little above $1-billion include Linamar Corporation, Canada Bread and Laurentian Bank. Unlike last year, when a large part of the small cap surge came from the materials sector, the first quarter of 2010 saw a more even distribution of returns from all sectors. Consumer, energy, interest sensitive and resource stocks as a group delivered returns in the 7-9 per cent range, while the laggard from last year, industrials, came through on top with a gain of 9.9 per cent for the quarter. This is something of a surprise as a strong Canadian dollar historically has been a headwind for Canadian industrial small caps as they face increasing import competition. Also unlike last year, there was very little difference in the first quarter returns from the “blended” index quoted above which includes income trusts, and the “equity only” version of the index. This no doubt reflects the diminishing role played by income trusts in the capital markets and raises the question as whether or not there will even be two versions of the index next year.
We shouldn’t spend too much time congratulating Canadian small cap investors for their courage in getting back into the market, because it appears to be a global phenomenon. The MSCI World Index, which is heavily oriented toward large cap multinationals, was up 3.4 per cent (in US dollar terms) during the quarter, while the small cap version of the same index was up 7.7 per cent. Similarly, in the United States market, the big cap Standard & Poors 500 Index was up 5.4 per cent, well behind the 8.9 per cent gain from the small cap Russell 2000 Index. The relative outperformance of small cap stocks is inexorably shrinking the valuation discount which was as deep as 40 per cent this time last year. In round numbers, we can say that Canadian small caps still trade at a 10 per cent discount in terms of Price-Earnings multiples, a 20 per cent discount in terms of Price to Book ratios and a 30 per cent discount in terms of Price to Sales ratios. With over a thousand small caps stocks to choose from on the main board of the TSX and many more on the venture exchange, it should still be possible to create a diversified portfolio of attractive candidates. Last quarter, I suggested that if individual investors didn’t see value in the market in a slow growth environment, then corporate acquisitors might very well step up to the plate. This continues to be the case and during the quarter Quadra Mining and FNX Mining were prime examples of small cap companies bulking up through a proposed merger.
On the subject of small cap value, I recently attended a session on behavioral finance hosted by the Toronto CFA Society. During the course of his presentation, the speaker threw out the statistic that small cap value stocks outperformed the index over 90 per cent of the time according to his study of a series of overlapping 20 year periods. This isn’t supposed to happen if the market is efficient as it would be easy to capture this excess return, so, not surprisingly, he had a behavioral explanation: In order for a stock to become small cap and value, the recent investor experience has to be disappointing if not downright disastrous. As a result, these tend to be low-expectation stocks where even the absence of bad news can be construed as good news and a reason for the stock price to recover. He did concede that you won’t be the centre of attention at a cocktail party with your collection of low-expectation stocks, but that’s not the purpose of investing.
Greece staggers deeper into crisis
Jeremy Torobin
20:15 EST Thursday, Apr 08, 2010
Ottawa — Greece is sinking deeper by the day into what has become an unprecedented crisis for Europe's young currency union, its troubles spreading from the government to the financial sector and pushing the country ever closer to seeking emergency aid. The repeated pounding by international investors, which illustrates how a promised support package from the European Union and International Monetary Fund has failed to calm markets, threatens to force Greece to reluctantly accept outside help to meet its funding needs and may add to fears about unmanageable government debt loads elsewhere in Europe and around the world.
The Greek tragedy roiling markets is casting a cloud over the global recovery and analysts say it may only be averted by Europe's leaders ceding responsibility for resolving the crisis to the IMF. Such a move would probably do more to calm investors, because of the IMF's track record in turning troubled economies around. But it is a politically sensitive step European and Greek officials have been at pains to avoid. European Central Bank president Jean-Claude Trichet tried to calm the waters Thursday, succeeding somewhat. He asserted that Greece would not default on its debt and that Prime Minister George Papandreou's deficit-cutting plan would be implemented “rigorously.”
Still, the debt-burdened country needs to borrow about $15.5-billion by the end of next month, and the premium investors are demanding to hold Greek 10-year bonds spiked Thursday to the steepest in the history of the euro. Worse, what has so far largely been a government-centred debt issue spread to the country's major banks, their stocks falling sharply after a government announcement on Wednesday that Greek banks will tap funds remaining in a stimulus program to boost their capital levels amid fears they're losing access to financing. The government's funding problems would only heighten if Greece's banks lost access to funding from the markets and run short of the collateral they would need for a ECB loan.
“Another day, another blowout in Greek bond spreads,” David Watt, a currency strategist at RBC Dominion Securities Inc. in Toronto, wrote in a note to clients. He was referring to the near 500-basis-point difference between the premium to hold Greek debt versus German bonds, which serve as the region's benchmark.
Greece's problems selling debt are largely due to a lack of confidence in the vague European plan that Germany and France, along with the IMF, drew up to provide loans to Greece if needed.
All nations in the euro zone would have to approve a rescue, an unlikely prospect given intense opposition among voters in Germany. Plus, Greece could be charged market rates for the emergency loans, raising the possibility that the cure just adds to the disease, and the plan doesn't spell out exactly what role the IMF would play – always a politically dicey topic in a region at pains to be seen as capable of solving its own problems. “Investors are waking up to the fact that this is not really an agreement, it's like smoke and mirrors,” Nariman Behravesh, chief economist with IHS Global Insight of Lexington, Mass., one of the world's largest forecasting firms, said in an interview. “It's a way of Germany trying to appease Greece and some of its European allies without in any way upsetting its own electorate that is not interested in bailing Greece out.” The ECB's Mr. Trichet has said loans to Greece would not be subsidized, but on Thursday he suggested to reporters that their interest rates could be a function of the refinancing costs of the issuer, rather than Greece's current market rates.
Greece may manage to plug along for a while without emergency aid, but some time within the next three to six months the country will need some help, Mr. Behravesh said. Greek officials have repeatedly insisted that they don't need outside aid, while also acknowledging that the country can't keep borrowing at the current high rates for much longer. Deputy finance ministers from the EU and central bank officials are meeting this week in Brussels and that will include some discussion of possible loan terms. Yesterday, Mr. Trichet told reporters the existing package is a ``workable framework,” and denied suggestions he had opposed IMF involvement. But because it's questionable whether the existing plan would work, the EU may need to let the IMF, which has rescued economies from Iceland to Pakistan, come in and take the lead in rescuing one of Europe's own. “There is a way out, and that is that they swallow their pride and let the IMF come in and do the dirty work,” Mr. Behravesh said. “You will see at some point some emergency meeting of the European leaders in which the Germans will get the others to agree to let the IMF be the lead. The sooner they get to that, the better.” The largesse and proven track record of the IMF in executing successful, if unpopular, measures to get troubled countries back in shape could help restore confidence that the crisis won't get worse. And a light at the end of the tunnel for the Greek mess could be essential to keeping worries about mounting debt loads elsewhere in the world, mainly in richer countries, from spinning out of control. Credit Derivatives Research said this week that its Government Risk Index – made up of credit default swaps on seven of the largest sovereign debt issuers: France, Germany, Italy, Japan, Spain, the U.K. and the U.S. – jumped almost 40 per cent in the past month to the highest level since February.
With files from Boyd Erman in Toronto, Bloomberg and Reuters
No comments:
Post a Comment