Banks Rally the Market - Your Money October 15th 2021

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It’s just a guess but given the marquee names reporting earnings next week, I imagine Wall and Bay Street will be ignoring most of the economic stats hitting the street next week. The only caveat might be “existing home sales and housing starts” but even they will likely be shuffled off to the “also ran” stories for the week. Ten year bond yields seem to be ranged bound between 1.5% and 1.6% and barring any major upside scares, I don’t see any real hiccups on the horizon…Black Swan events excluded.

However, if you want the best measure of speculative fever, one just has to glance at the price of Bitcoins. They are on a runaway freight train as speculation builds over regulators approving more derivative products to seduce even more investors into the crypto currency game of chance. Personally, I tend to side with Jamie Dimon, the CEO of JP Morgan (arguably one of the best managed banks in the world) who called cryptos like bitcoin “worthless”. Clearly speculators don’t believe his prognostication that as soon as governments regulate and tax them, their value will go to zero. Mind you shortly after his announcement, Bitcoin prices took off breaking back above $60,000. Not bad for electronic monopoly money.

Back on Wall Street, sometimes you just can’t win. Speaking of JP Morgan, the bank reported 11.7 Billion or $3.74 in earnings for the third quarter and investors all but sneered at the numbers sending the stock down a couple of bucks on the day. Fortunately over the next two days, analysts pounded the table and likely the foreheads of their institutional sales people and said “these are great numbers” and finally the stock rallied. Luckily by Friday, the earnings junkies got out of their bearish funk so when Goldman Sachs released their numbers, the stock rallied almost $15 to $405. Having said that, it is still only trading at less than 8 times forward earnings. Go figure.

As for Canadian stocks, we hit record highs this week thanks to very frothy commodity prices. It seems China wants to secure every energy source they can get their hands on, and Canada just happens to have oil, gas, coal and uranium. We have a lot of wind too but most of that is in Ottawa and seeing has how they have all but thwarted Alberta’s ability to export their commodities. I imagine they are looking at ways of trading or exporting them to China for free.

Still our stocks had a great week and if the earnings party on Wall Street spills over the border, I am guessing we should have a decent week here too…with one note of caution. Some of the bell weathers reporting next week are currently priced to perfection and any miss on those high fliers (Tesla) and we could see a pull back on the rest. Mind you with over 300 companies reporting it might be too hard to call.

Stay safe and Happy Trading.

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Steve Bokor

Steve Bokor

Portfolio Manager