October 18, 2017

Wednesday was another strong day for U.S. markets with the S&P 500 up 0.1%. The DOW surged 0.7% because IBM was up 9% after reporting better than expected earnings. Toronto was down 0.2%.

It’s worth thinking about which companies on our list would be harmed if NAFTA is canceled and tariffs between the two countries rise. This would hurt exporters and importers.

Many Canadian retailers that import U.S. products including Canadian Tire would be somewhat hurt but given that all competitors would face the same tariffs, Canadian consumers would take most of the harm and the stores would be hurt only to the extent demand fell due to higher prices.

Canadian exporters who face domestic America competition would be badly hurt depending on the tariff levels. Obviously Bombardier comes to mind. And Linamar would likely face some harm on a portion of its business.

Regarding Bombardier, I have not seen anyone ask whether the “sale” of half the C Series project for zero dollars means that Bombardier will have to write down the value of its share of the project to about zero as well. Bombardier has an extremely weak balance sheet. I am starting to think its preferred shares might be too risky. I may sell the remainder of the preferred shares that I have to get this weak company out of my portfolio.

After the close on Wednesday, American Express released a strong earnings report and announced the retirement of their CEO. This certainly seems to be a very smooth and planned transfer of the CEO role to an internal candidate. Meanwhile VISA is increasing its dividend by 18%. The credit card business continues to be a very lucrative business.