Today, Larry Berman CFA, CMT, CTA and Josef Schachter commented about whether SDX-LN, GTE-T, PGF-T, SU-T, TOU-T, TVE-T, CNQ-T, CPG-T, ERF-T, CASH, SGY-T, PGF-T, BIR-T, PPL-T, POU-T, VET-T, OBE-T, HSE-T, WZR-X, MG-T, NXPI-Q, ICE-N, GILD-Q, ZPW-T are stocks to buy or sell.
It is not CAD$ hedged. BMO has filed perspective on a bunch of new ETFs and there should be one available in the next month that is the CAD$ hedged version of this. They net about 10% premium on the puts. About 3% is lost due to puts being exercised so you get an extra 7% over the performance of the stocks within the ETF. It is not risky and is exposure to the US market. (Your exposure should net a long position, if it ever got executed).
Educational Segment. How to play the market if you are risk adverse in 2017. Are Trump policies coming in or not? Over the last 10 years the marginal tax rate for corporations has come down from 50% in 1955 to 35% recently. Analysts expect 22% earnings growth from the S&P. The PE of the S&P is 21 times. It is a 23% world GDP economy. The banks have been the big leader since the election. It’s going to take a lot of interest rate hike to get the banks back to where they should be with interest rate spreads. There is a new president, first term, new party. The average pattern has half a percent gain. We have already exceeded that. The inauguration is pretty much the high point for the year. Get into options late in the market cycle.
Markets. He expects oil to go below $40 this year. OPEC is successfully getting compliance for reduced production; the problem is that the numbers don’t work. In a chart showing past cheating by OPEC to 1995, there were three cuts that occurred before the numbers started working before OPEC got compliance. This first compliance cut is not enough. Libya is increasing production, and Iran/Iraq are raising production and so are non-OPEC countries like Russia. The way to get around OPEC quotas is to call everything ‘condensate’. When everyone realizes that compliance is not there and that cutbacks by non-OPEC companies is not happening, everyone is talking rising production in 2017 over 2016 and he thinks we will bust $40 in Q2. How low we got is dependent on how big the build is in inventories.
It is a cheap stock right here. They are sitting on 1.2 billion of cash. The basic problem is that production has been declining because they had been selling off assets. He give management lots of credit for cutting costs. They have lots of projects. Longer term it is a name you might want to own. You may be able to buy this below $13 if the oil price comes down $10-$20 during 2017.
It has done very well this year. It was below $20 and went to over $60. They have done well because they get pricing in Europe for a lot of their products. Their cash flow in Q4 will probably be the strongest for the year, but if we do see oil prices back off after winter is over, then it will back off, maybe to the low $40s. Long term it is a great name for investors.
They have done exceedingly well. Mid-streamers have been able to concentrate, interprovincial. They all took on the assets of the majors and this takes the assets into their rate base and then they raise dividends. If interest rates go higher then the discount factor on their dividend will go up. It is a name for conservative income investors.
He is a big fan. The stock did exceedingly well from the first quarter of last year. They are a modular growth player so there is growth built in every few years. The stock is backing off with the decline of natural gas. They are a very low cost operator. It is a core name for investors once we get through a little bit of a shakeup.
Markets. He is calling for a correction after the Trump rally. Statistically, most times from the beginning of the year until some point later, you can buy the market cheaper than when the year first started (80% of the time). US Earnings season gets ticking this Friday. There has been a huge move in some of the banks since the election, looking at higher interest rates and deregulation. The reality may be much different than the market is looking for. Net interest margins will not be meaningfully impacted yet. A year from now we will see the impact of interest rate increases. Hopefully now banks will have freer use of their capital. Are autos looking at trade wars – it has not come out except in the twittisphere. Oil poked above $50 and shale producer rig count rose in the US. Over the next 6 months it will go up to $56 and then will remain constant for 4 or 5 years. It remains questionable whether OPEC can execute on their deal. We have not seen the impact of Brexit and won’t for a year or two. There will be a hard line on both sides as to what that looks like.