Winter Woes

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  • March 20, 2023

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February 24, 2023

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The Big North-American Market Dinos (BMD)

February Falloff

Source: Google Finance​

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

In a shortened week of trading thanks to the Family Day long weekend in Ontario, Canadian stocks slumped as the S&P/TSX composite fell early on and was unable to claw back those losses down the stretch. The energy sector showed some glimpse of strength, but it wasn’t enough as losses in technology, healthcare, and financials led the index lower.

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The losses were a bit of a head scratcher for Canadian investors as they got some positive inflation news early in the week. The Canadian consumer price index rose 5.9% from a year ago, a smaller increase than the 6.1% that was expected. It also showed a slowdown in price increases from the 6.3% increase that we saw for December 2022.

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South of the Border

U.S. stocks followed a similar path to their Canadian counterparts early on as they fell sharply out of the gate on Tuesday after President’s Day. They went their own way (Songspiration) later in the week, climbing upwards on Thursday in a volatile session of trading. Despite the late week comeback, the big three American indices, the Dow Jones, the S&P 500, and the Nasdaq composite closed lower for the week.

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The U.S. Federal Reserve rate hike path going forward continues to be a focal point for investors, with much of the recent losses being attributed to fears that the Fed still has a lot of work to do in terms of reining in inflation.

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Risky ROI

Crypto

Source: Google Finance​

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What’s Going On?

After last week’s gains, the crypto market went quiet with the world’s largest cryptocurrency, Bitcoin, leveling out just north of US $24,000. While we didn’t see much price movement, we all know there’s no such thing as a quiet week in crypto…Here are some of the headlines from this week:

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The Canadian Securities Administrators published new guidelines for the local crypto industry, including a warning for crypto exchanges and platforms that they would have to abide by “enhanced investor protection commitments.” Some of the new rules include a ban on margin or other leveraged investing methods, along with a ban on selling stablecoins without the CSA’s permission.

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Investors of the popular altcoin Polygon got a scare this week after PolygonScan, a tool for tracking activity on the Polygon Blockchain, didn’t update for over an hour, leading many to believe that the Polygon blockchain itself was malfunctioning.

​Coinbase( NASDAQ:COIN), one of the world’s largest crypto platforms, reported a mixed bag of earnings results this week. The crypto exchange beat analysts’ expectations for revenue and earnings, but reported a decline in usage. Coinbase climbed in after hours trading following the news, but still finished down on the week.

Canna-Biz In Canada

Despite more than 100 retail cannabis store closures over the past year, there are some who remain optimistic on the pot market in Ontario. The head of Ontario’s Crown-owned cannabis business, Ontario Cannabis Retail Corporation, surprised investors with some positive comments this week. CEO David Lobo said ““The market is still growing, I think that’s the important factor here,” adding that “Overall, it’s a very competitive space and we still have some municipalities that haven’t opted in so there may be more stores as those municipalities opt in over time.” Even with all the store closures,Ontarians purchased more than CAD $1.8 billion worth of legal cannabis products last year, for a 38% increase from 2021.

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Moderate and Mellow Market Methods

Sector Spotlight

DIY Downswing

Last year, as we eased out of the pandemic and people returned to the office, DIY home projects saw a decline. Now, DIY sales continue to slump as consumers feel the continued effects of inflation and increased interest rates. This could mean that the bathroom you were planning on redoing, or the deck that you were planning on building is on hold for the foreseeable future. Home improvement retailer Home Depot (NYSE:HD) is feeling the effects as its stock fell this week, following its forecast of a fiscal-year profit decline, along with plans for a US $1 billion wage investment for hourly workers.

Home-improvement executives have preached that higher home borrowing costs would prevent people from moving and encourage them to invest in renos, but that hasn’t necessarily been the case as consumers continue to feel the pressure of inflation. Retailers are taking these factors into account when forecasting the year ahead, including retail giant, Walmart (NYSE:WMT), where shares slid following a disappointing forecast.

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Meme Stock Stalkers

Not so Fast

Meme stock AMC (NYSE:AMC) found itself in hot waters with investors this week as shareholders filed a lawsuit in Delaware accusing the movie theater chain of bypassing them in a bid to increase the number of shares. This comes just a few weeks after AMC announced it is looking to increase its share count tenfold, but instead of putting this to shareholders in a standalone vote for approval, it has bundled it with a separate proposal to convert its deeply discounted preferred stock into common stock.

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The issue here is that this is a great deal for owners of AMC’s preferred shares, but not so great for owners of AMC’s common stock. Allegheny County Employees’ Retirement System said in the proposed class action filed on Monday that the company and several of its directors violated state law to “eviscerate” the voting power of common stockholders, who had not supported issuing new shares. They’re not wrong either as there are 1.8 preferred shares for every common share of AMC, meaning that owners of the preferred stock can easily overpower owners of the common stock. The shareholder vote is slated to go down in March, but this lawsuit may put the proposed plan on hold for the time being.

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ESG

All Aboard the Energy Transition Train

Stocks with a focus on energy transition are all the rage according to the latest edition of the TSX Venture 50 list, a yearly ranking done by the TMX Group which highlights 50 upcoming companies on the TSX Venture Exchange. Everything from lithium to hydrogen to solar power has a presence on the list of top performers on Canada’s main venture exchange in 2022, which was released by the Toronto Stock Exchange on Tuesday.

“As the world’s really thinking about and grappling with energy transition, critical minerals – things like copper, lithium — are obviously increasingly important,” said Loui Anastasopoulos, CEO of the Toronto Stock Exchange, in an interview. Anastasopoulos added that “things like electric vehicle batteries, to solar and wind power installations – the demand continues to grow. And I think you’re seeing that in some of the performance here.” The companies are ranked by their 2022 performance using three key measures: market capitalization growth, share price appreciation, and trading volume.

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Financial Jargon Word of the Week:

Channel Stuffing is a shady business tactic used by a company to inflate its sales by purposely sending retailers in its distribution channel more products than they will be able to sell. The key part of this strategy is that the company then records these shipped products as sales figures for the quarter. It often happens right before the end of the quarter or fiscal year end in an effort to prop up results. Companies who do this can be prosecuted for securities fraud, accounting fraud and even for tax fraud. This is an area of expertise for forensic accountants! New crime show possibilities, anyone?

In a sentence, please!

I will never invest or trust that company after they got caught channel stuffing.

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