Delays at Airports, Mean Less for Airlines

29-Dec-2009 | kate | Uncategorized

It is travel season, people all around the worlds are getting on planes to reach their travel destination whether that be your in laws in Regina or an all inclusive in Mexico, the airports are busy, and their even busier this week after a scary incident on Christmas Day. And whether you are getting ready to brave the 3 hour security lines this week or dreading about ever traveling again, the increase security measure cost you more than you think, as the airline stocks took a hit on the TSX.

Driving down the airline industry was the failed bombing incident that has resulted in increase security measures (and ultimately higher prices), cancelations, delays and unhappy passengers.  Tighter travel restrictions such as possible mandatory full body scanners end up being passed on to the airlines, who ultimately pass it on to their  customers, who  are becoming increasingly price conscious. The result is that the airlines are already feeling the squeeze; removing the restriction on checked baggage to three free bags, a policy that was emplace to help increase financial revenue.  Following the 2001 incidents, airline travel dropped dramatically around the world, leading to a billion dollar bleed out from airlines world wide. Earlier this month, “The International Air Transport Association revised its financial outlook for 2010 to an expected US$5.6-billion global net loss, larger than the previously forecast loss of $3.8 billion.”   Interestingly enough, passenger traffic is expected grow by 4.5 per cent in 2010. So why then would we be experiencing larger losses? Increase security costs.

With the increase in security measures, the airline industry took a hit today with three major players hitting a downward draft. Air Canada fell 2.3% to $1.26, WestJet was down to $12.32 and Transat slipped to $21.12. The downward pressure on Airline stocks combined with gold, helped push the TSX down after a four day Christmas break. Tuesdays trading period was a bit of a let down after the TSX came with 25 points of our 2009 high, last week.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Yield Curve Predicts Recovery

23-Dec-2009 | kate | Economy Market Outlook

The yield curve is used to measure the difference between the interest rate on short and long term government debt and has been used successfully to predict economic down turns and expansions. So let’s take a quick look at the current yield curve to see where we could be heading.

Currently, the yield curve is very steep, meaning that rates are significantly higher for long term bonds over short terms, which means in basic economics that a robust recovery should occur since the bond rate reflects the ingredients for recovery: growth, inflation and higher future interest rates.  When interest rates increase in the longer term it usually signals economic expansion, growth and prosperity.

Another interesting use of the yield curve is its ability to predict our future growth rate. We can estimate the amount of growth the economy will see by looking at the yield curve and the spread between 2 and ten year rates, which is currently indicating a growth rate in the United States of about 4% for 2010.

All and all, the yield curve is indicating that the future might be brighter than we have been expecting. However, many analysts are not looking at this year’s yield curve as a ball park indicator since we have unusual circumstances surrounding our economy, such as the fact that banks are focused on rebuilding their reserves instead of lending. But then again, the yield curve predicted 2008-2009 months before it happened, but no one listened then either.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Mortgage Shake Up

21-Dec-2009 | kate | Uncategorized

The water coolers are a buzzing today with the news that Finance Minster Jim Flaherty may tighten mortgage eligibility rules in order to avert possible housing bubble. The news has caused a ripple of discussion ranging from BNN, New Hour News and of course the Retire First office.

CIBC’s senior economist Benjamin Tal worries that the possible mortgage change could results in “overshooting, over responding and basically shutting down or significantly slowing the housing market.” Tal also noted that the housing market is an important contributor the wellbeing of the economy.

Flaherty decision is based on the fact that Canadians are taking on too much debt with the low interest rates and are looking to get into trouble when interest rates rise in the future. The Bank of Canada had recently announced that they are concerned that the record household debt we are carrying is one of the top risks our financial system is facing. Mark Carney repeated this warning last week, announcing that if interest rates rise to normal levels, up to 10% of Canadians would be unable to make their monthly payments.

Well not set in stone yet, Flaherty did say that the minimum down payment will rise from 5% to a higher figure. As well Flaherty announced that they are looking to reduce their amortization period from a maximum of 35% to a lower number.

Currently market players are expecting the government to double the down payment to 10%, but hoping that they will chose 7.5%. With the potential new rules, a buyer looking at a $400,000 should expect their down payment to increase from $20,000 to $40,000.

One Calgary mortgage broker commented that in 30 years he has seen interest rates top 20% and doesn’t except that to happen again, but is concerned for some of his clients if the interest rates where to double.  He has been working on coaching his buyer to consider what will happen when renewal hits, commenting that “Some folks who hold mortgage today, might not be quite ready in a normal interest rate environment. The government view is probably that if they aren’t quite ready, maybe they should be in the market place.”

This isn’t the first time that the government has taken a harder look at down payments and amortization periods, they lowered the amortization from 40 years to 35 and recent cracked down on the 0% down mortgages.  The potential changes to mortgage rules couldn’t damper the hot market today, which was closed up 94 points.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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Santa Claus Rally Coming to Town

21-Dec-2009 | Reggie | Investment Ideas Market Outlook Market Strategies Market Theories

Also known as the December effect, it is a fairly common trend that often occurs near the end of the year after investors are finished their tax loss selling.  With most investors doing the majority of their tax loss selling in November and early December, stocks that were already doing poorly do worse as they face additional selling pressure.  Eventually, selling pressure expires as investors finish their tax loss selling, or run out of time to do so.  The last day for tax-loss selling for 2009 is December 24th.  Once the selling is finished, its likely stocks will rally because of the lack of sellers left in the market and capital being redeployed.

This year is shaping up to be a particularly good Santa Claus Rally thanks to how absolutely terrible the stock market was over the past year.  Unfortunately, many people are still left with losing positions that are likely worth more as tax losses than potential money makers down the road.

Market Historian Jim Stack has crunched the numbers over the years to give us a clear idea of just how effective the Santa Claus Rally has been:

The Santa Claus Rally is a widely recognized truism on Wall Street and it’s actually supported by statistics. Prior to 1970 this rally was a 2-week event, commonly occurring during the last week of December and the first week of January.

Over the last 40 years the pattern has changed. These year-end rallies have been stronger and they’ve started earlier.

Perhaps it was a revision in the tax laws that enhanced this yearly occurrence, or maybe the proliferation of mutual funds with their year-end portfolio shuffling, or it might simply be broader anticipation of the event.

Whatever the stimulus, over the last four decades the average gain from November 20 through the end of January has been +4.2%, which would be an extraordinary +23%, annualized. There are several factors that likely contribute to this seasonal strength.

Whatever the reason, in the last 40 years Santa has rarely missed a beat. By looking at  the performance of the S&P 500 from November 20 through January 31 each year, we note:

  • * Excluding bear markets, only four years resulted in a loss for the period. The biggest decline was in 2002-2003, when a retest of the major bear market bottom caused the Index to drop 6.4%.
  • * Considering the entire 80 years of S&P 500 data, only two years saw a decline of greater than 10%. That occurred in the middle of major bear markets in 1931 and 1969.
  • * Conversely, a number of years have seen exceptional gains. Ten Santa Claus Rallies out of the past 80 years have produced gains in excess of 10%. Five of those hefty rallies occurred during the dismal stock market decade of the the 1970s.

This is definitely a year where we should all be very thankful towards the guy in the big red suit and cross our fingers that history holds true.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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A Chequeless Society: Get Ready

17-Dec-2009 | kate | Economy New Announcements The Wise Investor Uncategorized

An interesting development in the financial world unfolded yesterday when the UK announced that they are phasing out the use of cheque by the November 1st, 2018. The theory beind the move is that cheques are expensive to process, vulnerable to fraud and that their usage has dropped due to electronic banking at a staggering 6% a year since 1990.

Cheques are currently the most expensive type of payment that a bank processes; generally costing around the banks around $433 million, and it isn’t just the banks that are hurting. The expense associated with cheques has also been impacting government departments and large corporations, who will benefit from cost savings by switching to alternative forms of payment.

Overall, the chequeless society is making headlines from the economic, technological and environmental impact that the move will create. Will this mean a shift towards a paper less society? What about people who are technologically inept? Will Canada follow?

In my opinion, the move from cheques to wired transaction makes sense and I really do believe that in the future, most countries will follow the UK in phasing out cheques. Like most people, I believe that cheques can be inefficient source of receiving money and is a system that largely relies on trusting the other party. Who hasn’t sold something before and received a cheque only to discover that it bounced? Now imagine that you are a large business selling product to numerous customers and bounced cheques can become an enormous financial liability.

I do understand that they are some people who live to far out of town or in a valley, like my self, that are unable to receive internet service or individuals who do not use a computer, who are very concerned about the switch. It is important to remember that 2018 is still 8 years away giving consumers and technology plenty of time to develop and master new skills.

I also believe that moving away from cheques will result in faster transaction time as well better movement of money. Who hasn’t cleaned out a drawer before to find a stale dated cheque, or miss placed one for a week or two? Electronic transaction will remove the lag time from the postal service and clutter desks, resulting in a more efficient indicator of the movement of money.

And well there are a lot of angry people out there blogging about the transition, I personally think that change is good and that eventually most of the world will follow in the UK’s ground breaking foots steps. So for all you cheque lovers out there trying to find a happy spot in all this, removing cheques will save the banking system over $430 million dollars a year, so maybe they will lower service charges. Okay not likely, but ready or not get ready for a chequeless society its coming to a bank near you.

This blog has been prepared by the Retire First Team. The blog expresses the opinions of the writers and not necessarily those of Retire First Ltd. Statistic and factual data are from sources Retire First believes to be reliable but their accuracy can not be guaranteed. This blog is furnished on the basis and understanding that Retire First is under no liability whatsoever in respect thereof. It is for informational purposes only and is not be construed as an offer or solicitation for the sale or purchase of securities. Retire First Ltd. And its officers, directors, employees and their family may from time to time invest in the securities discussed in this blog. This blog is intended for individuals where Retire First Ltd is registered as a dealer in securities.

Retire First is a member of the Canadian Investors Protection Fund.

Commission, trailing commissions, management fees and expense all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. A recommendation of any of the mentioned investments would only be made after a personal review of individual portfolio. Third Party research has been used in formulating the writer's opinions.

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