CP loses the battle but may win the rail war - Your Money May 21st 2021

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May is all but over next week but still we will get some important Economic Stats as well as Corporate Earnings. Canadian Banks are front and center and we will finally get to see just how bad the Canadian Government’s near disastrous vaccine rollout has hammered retailers. However, with stock markets toying with weekly highs, trading profits and fees from their wealth management divisions could provide significant year over year earnings. With inflation bubbling in the background from a myriad of supply shortages and a speculative housing boom in places like Vancouver and Toronto, the Bank of Canada is preparing to tighten loan requirements for borrowers to meet more stringent income levels. Ironically, if the Bank of Canada forces mortgage rates up, Canadian Bank profits will likely go up not down.

As for other companies, keep an eye on earnings from Dell, Costco, Dollartree, Salesforce.com and Nvidia (which by the way is splitting its stock 4 for 1) next week .

Meanwhile, I watched “bobble head after bobble head” supporter of crypto currency experts applaud the recent drop in prices, saying volatility is healthy for markets. As you know I am personally not a big believer in electronic “currencies” that can be created out of thin air, unsupported by central banks or governments but continue to gain recognition by a section of capital markets. I cannot help but be reminded by the rise of subprime mortgages during the first 8 years of the millennium which led to leveraged futures and options on real estate backed products. There is no doubt in my mind that the double ledger based block chain technology will become common place by businesses globally.  But, who will want a crypto currency when G20 Nations launch their own electronic currencies that are actually backed by the assets of those countries? On the plus side, at least we are finally seeing some common sense in the energy patch. For too long, oil companies have been permitted to flare natural gas until the pressure comes down enough for them to access the oil underneath. Bitcoin miners have figured out a near zero cost to generate energy to run their computers. They can power their generators with the natural gas. It still produces CO2 but theoretically some economic good may  come of it.

In other news, Epic Games and Apple are battling it out in court over the 30% commission Apple charges for app makers to post their product on their server. Plus I read a note suggesting the US Government is considering establishing a minimum 15% tax for multinational corporations that choose to funnel assets through low or no tax jurisdictions to keep their profits up.

Finally as we take a three day long weekend we pray the ceasefire in the Middle East leads to constructive peace talks. We are supposed to get a beautiful weekend and we are thankful we are not living in hurricane alley as the season gets underway in the US Gulf.

Happy Trading and Stay Safe.

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Steve Bokor

Steve Bokor

Portfolio Manager