On Tuesday, the S&P 500 was up 1.1% and Toronto was up 1.7%.
Preferred shares were particularly strong.
Melcor bucked the trend and was down 4.8% to $12.36. And the trading volume was a bit higher today at 31,329 shares. It is now at just 44% of book value. So 56% below book value, which seems remarkable. If the financial statements are to be believed then those selling are “selling dollar bills for 44 cents”. And they may be doing this out of fear that soon the going market price for these particular “dollar bills” will be 40 cents or whatever. To my mind, if Melcor is going to run into such serious trouble that half of its book equity is going to be wiped out then Alberta would have to be in extremely dire shape for that to happen. At present the unemployment rate in Alberta is 7%. That is not a dire unemployment rate, nor even close to dire.
Melcor usually reports strong lots sales and profits in Q4 and quite possibly that will not be the case this year as builders will surely be more cautious and lot price s will be down somewhat. But a cyclic earnings decline hardly seems to justify such a fire sale share price.
Regarding Boston Pizza Royalties, I notice that founder George Melville grabbed 10,000 shares yesterday at $17 and just under. As a major owner in Boston Pizza International he receives free Boston Pizza Royalty Trust units for every new restaurant that opens and often sells part of the shares received. I take it as a good sign that he is buying Royalty Trust units in the market.
Regarding the Alberta economy, I have for many years been watching the 90-day mortgage delinquency rates published by the Chadian Bankers Association. Annoyingly, they publish at least three months behind and the latest we have is the August numbers. Even as of August we were about 12 months into lower oil prices. And these delinquency figures for Canada and for Alberta have not budged at all. In fact, for both Canada as a whole and for Alberta, these 90-day montage delinquency rates are down very slightly in the last year. Really, these numbers look too good to be true (roughly, only one in 400 mortgages is at least 90 days late, these numbers were closer to one in 100 in early 2011 and even that did not create any big problems for the banks) I have long wondered if the banks are somehow hiding the delinquencies by allowing customers to skip payments or something. I certainly expect these figures for Alberta to go up somewhat as the layoffs mount and as severance packages run out. But there is no indication whatsoever that these delinquencies will reach problematic levels. I will continue to watch…
Wednesday afternoon should be interesting after the FED decision comes out.