October 30th, 2008 Edition

Good Morning All,

The extremely oversold condition of world markets that existed at the outset of this week is well on its way to a massive self correction. I have suggested more than once in recent days that a great downside crescendo would quickly be followed by a "jaw dropping" (in the words of Art Cashin) upside rally. Well the selling climax was not quite as dramatic or satisfying as we would have preferred, at least not in U.S. markets, but it certainly was in Asia and in Europe. It has also been historically severe in commodities, currencies and much of the Toronto stock exchange. This may also be seen as the pre Obama bounce by some of the more biased observors, a group to which I proudly belong. This rally now appears to be gaining legs and may well project to mid January (bumps along the way) when indexes should well have recovered 50% of their bear market losses. After this point or this date, remembering the rule that you may get one or the other right but never both, we will reconsider but first of all enjoy the ride.

My next career has clearly been set out as last night's speech by Barack was right on the Copp target of "vision talk". McCain was not even mentioned, this was a soppy but brilliant exploitation of America's feel good, feel hope sentiment. Cheers to Obama's staff and to the man himself for running a superb campaign from start to finish. Now if I were a religious person I would be in prayer.

October 29th, 2008 Edition

Good Morning All,

Someone recently asked me when I thought the Dow Jones and TSX would trade back over 10,000, I replied November 5th, an answer that has since led me to wonder, considering yesterday's stunning reversal, whether I was being a touch too conservative. Well let us not get too carried away with the power of the recovery as it is still only one day old in North America and two around the world, after all we have seen this movie play as recently as October 12th and 13th. The positive and longer term take we have out of this action is that base for a greater move upwards is growing and that the breadth of this advance has put in place an extremely important building block. Look for today's rate cut by the FED to solidify markets by week's end after the initial rollercoaster ride it often encourages has subsided. This market may have begun to discount bad news and as a forward looking discounting mechanism...this is what it is supposed to do when it is about to change trend.

The Barack speech tonight does not have to be a game changer, it just has to be a good closer. These next few days are going to be nervous ones for many of us around the world and in America as the fear of a Karl Rove inspired upset interferes with our logic. Yes it should be a Democratic sweep, but if things were things and real was real....Al Gore not George Bush would have been President in 2001 and we would not have to talk about Iraq (someday soon) or deregulation concerns now.

A commodity price recovery has also begun and with it our loonie should return to the 85 cent level before your trips south.

Note: 79 years today since the crash of '29. Just a mean thought, not a serious one, to help start your day.

October 28th, 2008 Edition

Good Morning All,

The late day disappearance of bids in Toronto may not have quite qualified as my projected capitulation but it may have to do because sometimes, as Robert Redford said in the movies, "life doesn't always work out the way you think it will". New York on the other hand was crescendoless as the relatively tiny fallback at day's end was unconvincing. All that being written, it is interesting to note that a "V" shaped market performance over the last pair of days in Asia may have provided us with the fuel required for a sustained rally in Europe and North America. Futures are much higher in New York at this time and promise a memorable opening. To this end I repeat our Art Cashin quote of last week, "when this market turns, the upside will be jaw dropping". No promises yet, but conditional hope that we may have arrived at the pre election rally date.

Barack Obama has reserved 30 minutes of air time tomorrow night and I expect a different type of speech than the standard fare with which we have all become fidgety. His campaign has been a masterfully executed exhibition of political acumen since its outset in Springfield Illinois a century ago, or so it would seem. The no panic serenity shown during the times of crisis with either Hillary, McCain or even during the Palin surge speaks well of both his character and his management skills given the fact that his original team remains in place and on target. So tomorrow night and through the weekend I believe we should look for the "vision thing" as opposed to a trash the opposition one, wherein Barack attempts to raise the bar on expectation, a message not just of change but of hope and the no nonsense actions of what it will take to achieve a better way.

On the other side it appears that the McCain Palin ticket is imploding as the infighting has brought the none too secret personal ambitions of Sarah barracuda to the fore. This is what McSurge gets for putting the campaign first, belieing his slogan to put the "country first". We are now about to see what happens to someone whose reach exceeds their grasp as the real Sarah emerges. I may appear to be out of line in some circles but the candidacy of this ego centric, vindictive witch has posed, and until election day will continue to pose a clear and present danger to both America and the world.

This busy week will end an incredible month. Tomorrow we are likely to top it off with a 50 basis point cut by the Federal Reserve and another rock and roll day. Perspective during times such as these isn't everything, to paraphrase Vince Lombardi, its the only thing.

October 27th, 2008 Edition

Good Morning All,

The following thoughts may not be music to your ears but bear with the story for a moment because like all past market tales, it has a happy ending. Friday did not prove to be, as we opined, "the mother of all capitulations day" but to be fair we did give it until this week to occur, so let's compare the last two months of market devestation to the first movements of a Mannheim school symphony and today's worldwide declines to the fourth and final crescendo. Or even more heart rendering, how about an old Roy Orbison love song that begins in tears and builds to an echoing throb of victory "as the market turned and walked away with me". Okay so that wasn't quite the line but some literary license is surely allowable during times such as these.

On the positive side Bill Gross, reputedly the smartest bond guy around, said this morning that intervention is working and that he expects 3 month LIBOR to drop below 3% very soon. This is important news because recession or not, it must be seen that the solutions being put in place are having such an effect thereby limiting the potential of the coming economic horror show to something manageable.

As the calendar moves toward November 4th we can look forward to a pre election rally that will front run an Obama victory. It is also possible that markets can turn higher without an American capitulation day but it would be easier for all if such an event, no market how intimidating it looks at the time, would occur. This water drip torture is worse than a final shake out. The process continues.

October 24th Edition

Good Morning All,

Well buckle your seat belts everyone and get ready to witness a major piece of history. World markets are down double digits (percentage wise) and S&P 500 futures are down limit and thereby closed through to the market opening. This scary scene may last part of the day, all day or even through to Tuesday morning but by the time it stops it will have discounted the end of the world. We have spoken of capitulation day before and even seen a few in our market lifetime, October 24 is shaping up to be the mother of such events. The good news is that it will soon be over and that the rebound, to quote floor trader Art Cashin, "will be jaw dropping". None of us can put a number or a time on the real bottom, we will just have to know it when we see it. Remember too that you don't have to catch the absolute low in order to win, nor do you have to be a hero. One week from now let's hope we are wondering what it was all about.

He who panics first, panics best. He who panics last is left holding a small empty bag. This is about markets ...not the economy. This transfer of wealth is not just from the middle class to the already wealthy but from the newly rich to the super rich...and more certainly to the cash rich sovereign funds. Be on the side of those who advantage themselves from such opportunity as this is not just a lifetime event we are witnessing but a centennial one.

Alan Greenspan finally admitted to being wrong yesterday and contritely acceded to complicity in the process. I hope he is not a jumper.

Better days ahead.

October 23, 2008 Edition

Good Morning All,

Yesterday I called for a test of 900 on the S&P 500 and we got that plus some as the index cratered to the 875 level before staging a minor late day recovery. The rumour has it that a massive liquidation by two more failing hedge funds was largely responsible for the no bid low volume market within which this transfer of wealth took place. The real news of the day, month, year, decade remains the coincidental bursting of the easy credit and speculative commodity bubbles that have been ten or more years in the making, all of which plus some took place on Alan Greenspan's watch. Long time readers of this letter have been aware of my disenchantment with this highly overrated former FED chairman for many years beginning with his misplaced fears of inflation in 1994 that engineered the then biggest bond market collapse in history. Greenspan misspeaks again today.

The U.S. dollar strength against the EURO and the commodity currencies has continued to trade out of hand and is also likely related to hedge funds and fears of a EURO collapse. As with everything this is getting extremely overdone. Look for a big bounce through next week on the other side of this trade and a redeployment of U.S. cash hordes into undervalued equities. My favourite floor trader Art Cashin has reiterated that a resolution of markets to the upside is near even though he suggests that an interim rally today may well result in an early (next) week capitulation day. A daily market watch such as this letter has become will soon be unnecessary once things stabilize.....and they will.

So Sarah now believes, and I quote her, that "the election is in God's hands" which leads me to this morning's rant on the sensitive subject of religion. Why can't people just be kind, thoughtful, moral and generous without having to dress in silly costumes, worship mythical dieties, and quote badly documented historical treatises. If I personally had to choose a legend to have faith in it would be Arthur's Camelot and the wish that the spirit and hope generated some 48 years ago by another young President could be once again duplicated and that all those wanting to pray would do so ...for the safety of Barack and the unity of the world.

October 22nd, 2008 Edition

Good Morning All,

Well so much for the quiet week I was hoping for although not promising as markets once again exhibited their recently adopted drama which began with an up Monday and a down Tuesday that willl continue this morning. I suppose all is not lost in our quest to put back to back positive weeks together as the day is young and the sense of fear is palpable. So let us look for a quick trip test down to 900 on the S&P 500 and a bounce from there.

On the good news side of the equation it now appears that credit markets are beginning to "thaw" as LIBOR has once again been set at much lower rates and the commercial paper market is active with lower yields. This is shaping up to be a memorable day.

The world economy has been hit with a macro problem that requires macro solutions some of which are presently on the table. The workability of these efforts is in process and the jury is still out. The one thing we do know for certain in these uncertain times is that new and intelligent leadership is required in Washington. To this end we do not need campaigners who appeal to America's lowest common denominator but to its highest ideals, none of which include phoney patriotism or bogus claims about Joe the unplumber's tax bill. Think for a moment about who is advising whom. On the McCain side we have Alan Greenspan who will deservedly receive much of the historical blame for the mess we are in, former Senator Phil Gramm a practicing deregulator and a host of supply side hacks left over from the greed school of business management. On the Obama side we have Paul Volker, the best Fed Chairman ever (even so considered by such right wing frantics as Dennis Gartman), Warren Buffett and the Larry Summers/Robert Rubin tandem that served the country so well under Clinton.

So Sarah thinks Barack is a socialist because he wants to "spread the wealth around" and that some parts of the country are more pro American than others. Hmmm sounds to me as if Barack's musings are more along the lines of Robin Hood or Jesus Christ than they are of Karl Marx, but how would I know....I have yet to be born again.

October 21, 2008 Edition

Good Morning All,

Monday's solid market rise will give way to some expected early morning profit taking this morning and then we will see. There is really not too much new to write about in this regard as the market continues in its quest for stability. What we really want to see is not just a solid trading day but an entire week of steady gains and modest losses.

Earnings season remains with us for another few days and as we watch the results, guidance and downgrades we must remind ourselves of how wrong most analysts habitually are in getting things right. As veteran floor trader Art Cashin has been saying of late, "we are close to a resolution in regards to market direction". Trading in Apple after today's poor report, may well be a harbinger for the day and week should it turn around after an early decline. This is a discretionary consumer stock for all intents and purposes. And once again LIBOR is lower and the U.S. dollar is higher ....and this is a good thing.

The oil sector trade proved to be phenonemal as PetroCanada rose from under 23$ Thursday to 32$ yesterday. The levered energy index HEU moved from the low 4's to over 7$ during the same period as the Christmas tree was quickly cleared of gifts. Look for a check back here today and some follow through later in the week.

So the well read Sarah now thinks Barack is a a socialist, this coming from a person who has not only never subscribed to "The Economist" or any other major publication outside of "Field and Stream" but worse .... had never heard of it until her post Katie Couric interview briefing.

The Baghdad flight has been cancelled for the day due to time and space constraints.

October 20, 2008 Edition

Good Morning All,

Markets are off to a good start this morning ,a condition that might last an hour or the entire week. This frothiness is mostly due to lower LIBOR rates and a diminished TED spread. On the international front it appears that China's growth has slowed to a meagre 9% ,although other economic numbers released over the weekend, such as lower inflation and wage growth, have shown improvement. As we should each know by now, Asian economic success is a major key to our own recovery, a tenet particularly applicable to a resource reliant nation such as Canada. The low for the market could well have been put in on the 10th of October and if this proves to be the case the next five to seven years will prove to be a pleasant investing experience. The surviving banks will make out like bandits as will the governments that own equity in them, so make them your priority while you remember that resources are finite and although they too will stage a short term recovery their real strength will be come later in the cycle. This is also a good time to improve the income side of your portfolio by purchasing beaten down income trusts, particularly in the oil and gas sector.

Barring something tragic or manufactured , Barack Obama now seems assured of winning the Presidency which he unfortuneatly will be unable to assume until mid January due to the silliest electoral rules in the modern world. But as often repeated here, markets are discounting mechanisms and they will be busy assessing the future as they quickly stow away the past. Mid cap and small cap stocks always do well under Democrats; and don't forget the stem cells stocks which soared when it appeared that Kerry was going to win in 2004.

Tomorrow we will be off to Iraq, well at least on paper.

The Copp Comment - October 17, 2008 Edition

Good Morning All,

Yet another dull week in markets was typified yesterday by an 800 point afternoon rally in New York. The beaten down TSX, temporarily sleeping, managed only a late recovery measuring half that amount. Ho hum we wonder, what will today bring? More of the same would be a proper guess.

Some of you may have caught the joint appearance of McCain and Obama last night at the Alfred E Smith foundation dinner. It appears that John McCain finally had a victory on both the humour side and strangely on the serious side as well, when his final words at the podium seemed to reflect a more decent view of the campaign than we have become used to of late. It even sounded somewhat like a concession speech. Too bad the election isn't this coming Tuesday and the inauguration the following day because the conclusion to this event will go a long way toward reinvigorating America and reassuring the world whose minions rank among Obama's greatest supporters. Instead, due to an outdated constitutional practice we shall be stuck with George Bush and a lame duck congress until mid January.

Although this has been a particularly grinding week, better times lie shortly ahead as it must always be remembered that the markets are discounting mechanisms. I was reminded too of yet another market axiom last night during an enlightening interview with Jim Kinnear, the CEO of Pengrowth, on the Scully show seen on Vermont PBS, when he alluded to the two tenets of great companies and potential acquisitions...."cash and cash flow". There will be much such looking around in the mergers and acquistions world during the coming weeks and months.

The Copp Comment - October 16, 2008 Edition

Good Morning All,

The market giveth and the market taketh away or so said the lord of volatility. In our letter of yesterday it was suggested that some profit taking off the early week's sudden and sizeable rise would be both normal and by definition...healthy. What was not expected was the breadth and depth of the decline as disintegrating hedge funds advantaged themselves of perceived market strength to get ahead the next spate of redemptions. To wit, the bottoming process is rarely a one day event and in circumstances as unusual as this, much to..ing and fro..ing is inevitable. I believe, for whatever it is worth, that the bottom-bottom is in and the tests of its validity will end before October does. Remember that anti biotics take more than a day to work.

The Canadian dollar has been extraordinarily weak this past month as its petro base appears to have disintegrated with the falling commodity prices. It may be time to convert any spare U.S. dollars you may have into buying Canadian banks and the incredibly oversold oil sector thereby benefiting from a rise in both. We repeat, PetroCanada is trading at 3 times earnings and yielding 3% effectively discounting its oil, gas, cash and real estate holdings to nothing. Others such as Encana and Imperial Oil are in similar straits. Aecon, an infrastructure play now 7$, has been irrationally beaten down likely due to mutual fund redemptions, remember how popular these thin market plays were a year or so ago.

Even though Asia encountered a train wreck overnight and Europe has been nervous, I would look for a serious rally to end the week, taking markets up to a positive finish.

If anyone seriously thinks that John McCain would make a better President than Barack Obama, they just aren't listening. More on politics tomorrow. Thank you all for your input, it is always welcome.

The Copp Comment - October 15th 2008 Edition

Good Morning All,

Our wish list for the week appears to have been fulfilled and its only Wednesday as New York and Toronto markets respectively gained 950 and 1700 at their best Monday,Tuesday levels, not quite matching our plus 1000 and 2000 predictions of Monday morning but close enough considering the fact that we were likely alone in the world in suggesting such an explosion. These rises were naturally met with serious profit taking as both markets gave up some of their gains as the day wore on, a condition that will predominate today's trading as well. Although we also won our political wish as the Canadian electorate in its infinite wisdom prevented a Harper majority, I was still left to wonder how a plurality of my fellow citizens could vote for a bunch of Bush apologists who have likely become converted "Palinistas".

Initial reaction aside, the market judgement of the restoration package will be withheld for the near term as major investors watch LIBOR and the TED spread in order to monitor its "on the ground" effect. You need not pay too close attention to such intricacies as the indexes will quickly explain any good or bad news. The numbers will speak.

An article appearing in yesterday's New York Times by Tommy McCall described the performance of stock markets under Republican and Democrat administrations beginning in 1929. If you do not include the crash incumbent Herbert Hoover the business friendly Republicans had a plus 4.7% record versus a positive 8.9% for the "socialist pinko" Dems. If Hoover's 4 years are included the free enterprising GOP slips to a marginally positive 0.4 %. Don't bother working out the compounding effect of the comparison just google the chart.

Tonight's debate will likely be as dull as the others, barring a crash and burn performance by either candidate. Maybe its just because I am so strongly pro Barack that I have such a melancholic foreboding of these final campaign weeks or maybe I am justifiably fearful of nasty Republican tactics and redneck Joe Six Packs armed to the teeth and smitten by Sarah.

If any of you wish to opt out of this letter please advise, I shall try to remain unhurt by your choice.

The Copp Comment - October 14 Edition

Good Morning All,

When it became evident over the weekend that the U.S. free marketers led by Hank Paulson were going to be dragged kicking and screaming into a quasi socialist solution to the banking crisis, stock markets in America joined their European counterparts in celebration of the revised plan. As discussed in yesterday's blog this Swedish inspired, U.K. generated solution is considered to be one that addresses the core of the problem rather than its excesses, the base of the inverted pyramid instead of its incomprehensible overhang. Gordon Brown, the British P.M. has been reborn.

We also predicted yesterday that a 1000 point up Dow day would evolve this week and that it would be accompanied by a 2000 point surge on the TSX. We got part one early and catch up in Toronto, after yesterday's Canadian holiday, may make this idea a morning "fait accompli". Japan also made history overnight as it too came off a market closure with a 14% rise. European indexes are up strongly for the second day in a row and New york futures are very powerful in the pre market. The natural rule here would be to sell into strength as the euphoria of the early going presumably turns back into malaise. We will have to watch how this plays out but I believe that a true bottom has been made and that our previous forecast of a 50% retracement of the one year losses is a minimum target by mid January. It could be somewhat greater as the ride back up will be led by banks and techs, sectors which have lately taken losses of huge magnitude. In Canada, the once overowned but now vastly oversold oil, gas and mining sectors should enjoy a major and immediate resurgence from recent lows but they will not be the lasting leaders of the "new" market, at least not until much later in 2009.

The choice for the Canadian electorate today is between tweedledum and tweedledee. It is our hope that the vote leaves us much the same as we were before this ridiculous election was called.In America the choice is of a far different nature and holds the promise for a renewed and better country.

The Copp Comment - October 13, 2008 Edition

Good Morning All,

In Friday morning's letter I promised a positive end to a day that would start out with a depressing tone। A casual observor, or one locked solely into Canadian Markets may have thought that the promise was left undelivered....it was not, as a late day rally in New York took the Dow Jones from minus 500 to plus 300 in less than a Sarah Palin blink। Admittedly it did give up much of its new found trading momentum just a couple of "betchas" later but by then the saving grace nature of the activity had been gratefully established.

Europe, led by a U।K. solution based on a 1990's Swedish model whereby the various governments would guarantee interbank lending as well as deposits in exchange for equity effectively brought an end to 1980's Thatcherism and quite possibly the present crisis. The Swedish experience, although obviously based on a much smaller model, employed four per cent of that country's GDP most of which was recovered within ten years. America is still working out the structure of its recovery package with the appointment of a Neel Kashkari and his team of experts. A tough job indeed for this self styled free market Republican but a good deal more encouraging than the lunatic fringe led by Lou Dobbs who don't want Wall Streeters involved; one would suppose that unemployed grocery clerks and retired autoworkers should take up the baton and solve both the economic and the hyped immigration problems at the same time. Either way it will be very difficult for American "free marketers" to consider serious government equity participation but guess what...they will. Preferred shares and warrants a la Warren Buffett are the recipe.

What a day for credit markets to be closed in the U.S., while open in Europe. Canadian and Japanese stock and bond markets are also closed. This could lead to a major catch up day tomorrow if present price gains in Europe hold and U.S. stock markets keep or expand on the huge gains that futures are indicating. I believe that a 1000 point up day on the Dow is possible this week and a 2000 point one day TSX advance automatic if this should occur. We may not be out of the woods yet but when the leaves fall you can always get a better look at the forest.

Sorry, I cannot get enthused about our Canadian election as too much important stuff is going on elsewhere but I am all for minority government at this stage. In America John McCain is facing an important personal dilemma; he can either lose or win with his honour intact or he can endanger the future of America by allowing if not encouraging his minions to indulge in the politics of division.

The Copp Comment‏ - October 9, 2008 Edition

Good Morning All,

Welcome to the Reagan legacy, you must remember now, how the free market would provide wealth and jobs for everyone if it could only be liberated from the bonds of REGULATION, how the eighties became known as the greed decade wherein business schools, then and since, placed their emphasis on courses about balance sheet alchemy in lieu of economic history and ethics. These are those years folks (as Sarah would say) but stop worrying about them because they will soon be over, the pendulum is swinging back toward a more sane world and we are truly headed toward positive change.We are also witnessing the end of the "oil Presidency" but even as we do oil stocks have overdiscounted the next week, let alone decade. I leave you one example; Petrocanada will trade at less than 3 times earnings this morning and that is a current balance sheet number that does not include its oil and gas reserves or any other assets. It is one among many. As someone said this morning , "if the market went down as it did yesterday for another 10 days it would be worth ZERO".Look for a two to five hundred down opening followed by a mid morning turnaround that runs to a positive close....hopefully on huge volume.

If any of you caught the McCain Wisconsin rally on CNN you might have thought you had been taken back to the 1950's, except in color. The tone and tenor of the right wing talk show hosts has long bordered on lunacy but when it is encouraged by a major party candidate it becomes scary as hell. The racist rant is rising and when combined with the McCarthyist "guilt by association" program that has typified recent Sarah speeches we must be truly frightened for Obama's safety. This campaign is fast becoming one in which the party of hope is fighting the party of hate.

Bobby Kennedy was fond of saying that "20% of the people will be against everything all of the time", the problem in America is that 20% is heavily armed. There will be an ugly start to a day that will end on a very positive note.