November 14, 2016

Monday was a bit of a mixed day in the markets as some stocks had notable increases while others had notable decreases. The S&P 500 was flat on the day while Toronto was up 0.3%.

Canadian Western Bank was up 4.0%. I did not see any news to explain that. After the close CWB announced that it would redeem at par its $105 million of Trust Capital Securities which had been paying 6.2% since 2006. These securities apparently had previously been of some advantage in terms of calculating its capital for regulatory purposes but the rules have changed. The interest rate had been set to decline to bankers acceptance plus 2.55%. These securities had been privately held by institutional investors and did not trade on any exchange. This appears to be a positive development in that CWB is redeeming what was a relatively high cost funding source.

Bank of America was up 5.6% to $20.08. My last update of the company had rated it a (higher) Buy at $15.38 only six weeks ago. Given this sudden rise I sold what amounted to 40% of my position at $19.86. The remaining shares still represent about 6% of my equity position. I was up about 80% in U.S. dollars on the shares sold (which I had held for several years).

Wells Fargo was up another 2.9% to $53.22.Ten days ago this stock had closed at $44.60. And in early October it got as low as $43.55. That is a remarkable turn around fueled solely by the Trump effect.

I would think that this Trump rally must now fizzle and possibly reverse. That is perhaps anyone’s guess but I feel good about having sort of leaned against the rally by selling down some positions which has now given me a cash position in excess of 10% whereas I had been near 0% for quite some time. I don’t necessarily want to rush to completely sell down these winners but certainly some reduction was prudent.

Visa Inc. was down 4.3% to $78.38. I did not see a reason for this but I am sure the analysts have come up with some negative scenario. Certainly VISA’s foreign earnings will be hurt by the higher U.S. dollar. In any case my last rating on it was lukewarm at best as I called it a Weak Buy at $78.94 in late July.

Constellation Software was down 3.3%.

The Canadian dollar is down to 73.8 cents. At this point I am definitely tempted to begin moving some cash back into Canadian dollars. Unfortunately, most of my investments are in RRSP accounts where I am captive to high exchange fees of about 1.4% in each direction. I could try the Norbert Gambit but I have found it to be inconvenient in the past and TD also extracts a high trading fee to do it.