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.