Hold My Rate

  • 0 comments/
  • March 20, 2023

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January 29, 2023

Hi, Financial Friend!

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The Big North-American Market Dinos (BMD)

Ramping Up

Source: Google Finance​

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The Toronto (Stock-Exchange): the Centre of the Universe

In a week of volatile trading, Canadian stocks managed to come out on top as the country’s largest stock market index, the S&P/TSX composite, continued its climb upwards. Energy, financials, and tech led the way as the index rallied.

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As many expected, the Bank of Canada (BoC) raised its key interest rate by a quarter of a percentage point on Wednesday, but spun investors right round (Songspiration) when it hinted that it would be putting any further rate hikes on hold for the time being.

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South of the Border

U.S. stocks were lifted higher this week, as all three of the major American indices, the Dow Jones, the S&P 500, gained on the week. It wasn’t all smoke and mirrors either as investors had plenty of good news to take in. For starters, the earnings season is in full swing and we’ve seen lots of good results so far, headlined by EV automaker Tesla (NASDAQ:TSLA), who topped Wall Street’s expectations. Next up was a fourth quarter GDP report that showed GDP rose at a 2.9% annualized pace in the fourth quarter, slightly better than expected. Gross Domestic Product, or GDP in its abbreviated form is what a country produces domestically in terms of products and services that generate revenue. GDP is like the revenue or sales metric for the country and it’s one of the most important indicators of financial health.

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Risky ROI

Crypto

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Source: Google Finance​

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Crypto Craze

It’s starting to look like risk is back on the menu! After a minor setback early in the week, Bitcoin, Ethereum, and the rest of the crypto market continued its climb upwards. Bitcoin has now rallied more than 35% since the start of 2023 and is on pace for its best month since October of 2021.

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Analysts are pointing to the increasingly positive inflation data as to why this risk-on asset has suddenly come back to life. Cryptocurrencies, much like volatile tech stocks, have been known to stumble when presented with hot inflation data, and strive when things are a little cooler. It’s safe to say investors will be keeping a close eye on further inflation reports, but since the release of December’s inflation report a couple of weeks ago, US $1.3 billion worth of short positions on bitcoin have been liquidated, according to crypto derivatives aggregator CoinGlass.

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Energy Acquisition

Small-cap energy stock Saturn OIl & Gas Inc. (TSXV:SOIL) is playing the M & A (mergers and acquisitions) game as the Calgary based company recently struck a deal to acquire privately held Ridgeback Resources Inc. The deal is valued at CAD $525 million, with $475 million of that being cash and the remaining $50 million coming from Saturn shares.

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Saturn CEO John Jeffrey said in a statement that acquiring the light-oil focused producer Ridgeback will help them to “establish material scale” in Alberta and Saskatchewan and grow profits in the coming years. It was also reported that some of the 430,000 acres that Saturn is acquiring in the deal are adjacent to properties that they already own, making the deal even more of a no-brainer.

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Moderate and Mellow Market Methods

Sector Spotlight

Rail

Canada’s largest railway company CN Rail (TSX:CNR) posted some very positive Q4 earnings results this week. While that is good news for investors, you likely won’t be too keen on some of the factors that played a part in producing those results. Before we get into any of that though, here are the numbers:

CN Rail earned $1.42 billion in the three months ended Dec. 31, 2022, up from $1.2 billion in the fourth quarter of 2021.

Its fourth quarter earnings worked out to $2.10 per share, a 23% increase year over year.

They also reported fourth quarter revenues of $4.54 billion, an increase of $789 million or 21%.

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This is all good stuff, but the railroad attributed the increase in revenue to higher fuel surcharge revenue as a result of higher fuel prices, a weaker Canadian dollar, freight rate increases and higher volumes of Canadian grain. It was a strong quarter for the railway, but this is also a good representation of some of the challenges people are facing right now, such as higher prices for just about everything, as well as a weak Canadian dollar.

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Meme Stock Stalkers

Bonkers for Bed Bath

Retail stock Bed Bath & Beyond (Nasdaq:BBBY) continues to dominate the meme stock headlines. Retail traders are buying Bed Bath like it’s going out of style…And that’s because it is! Bed Bath recently warned of a potential bankruptcy and has even bolstered its legal team ahead of a possible filing. While this may be enough to scare off most investors, meme stock traders see the heavily shorted stock as a prime target for another short squeeze. Others who are buying up shares of the struggling retailer are speculating (or hoping) that Bed Bath gets bought out by a bigger fish, meaning they would be compensated for their shares.

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Traders’ optimism faded as later in the week Bed Bath warned it can’t pay down its debts and defaulted on its credit line, leading to the stock falling by more than 20%.

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ESG

OTTP Raises the Bar

One of Canada’s largest investors, Ontario Teachers’ Pension Plan (OTPP), recently took some strides in the S (social) and G (governance) aspects of ESG. As part of OTTP’s 2023 Proxy Voting Guidelines, large-cap companies on developed market indices will be expected to increase their board gender diversity to a minimum of 40% representation of directors identifying as women. This is up from the prior expectation of 30% which was set back in 2013.

“Although we still consider a 30% goal to be meaningful, we’re raising the threshold to challenge public companies in developed markets to keep improving as we strive for truly diverse and representative boards,” said Anna Murray, Senior Managing Director and Global Head of Sustainable Investing at OTTP.

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Financial Jargon Word of the Week:

When you make an investment, you either gain or lose, but that gain or loss is only realized when you sell. Unrealized gains and losses reflect changes in the value of an investment before it is sold.

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In a sentence, please!

I bought some Tesla shares earlier this week before they ticked up following their earnings results. I’m holding onto my shares for now so I’ve got an unrealized gain.

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Finliti Disclaimer

1. Finliti’s newsletter is published as an information service to our subscribers and may contain references to stocks, bonds, mutual funds, ETFs, cryptoassets, etc., but this should not be construed as direct or indirect advice or recommendation to any reader to buy or sell these assets.

2. Finliti believes the sources it quotes to be reliable, but does not guarantee their accuracy or completeness.

3. Finliti is not paid by any company to recommend its stocks.

4. Employees or publishers of Finliti’s newsletter may own the assets discussed in the publication for their own investment purposes.

5. Past results are not necessarily indicative of future performance.

6. The information provided is for general information services to our readers as a convenience the materials are not a substitute for obtaining professional advice vis-a-vis your personal situation.

7. Given the time critical nature of the market, the information in this article may become outdated and Finliti has no obligation to change the article.

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