September 21, 2016

On Wednesday, the S&P 500 rose 1.1% and Toronto rose 1.3%.

The FED kept its target interest rate unchanged.

FedEx was up an impressive 6.9% after releasing a strong earnings report.

Wells Fargo was down 1.6% as the fallout over its account opening practices continues. I think its CEO may have to go. Warren Buffett has written that CEOs should be candid in their reporting. It is now revealed that the retail banking executive who “retired” recently was actually forced to do so. The CEO was not candid about that. And, he does not seem credible in indicating that he knew nothing of the account opening problems until recently. And if he did not know then it may be because he put in place a culture that kept bad news away from him. Warren Buffett has said he is not making any comments on this or the election or anything else until after the election.

I listened to the FED chair’s question and answer session today. My impression is that Janet Yellen is sincere and candid in here assessment of the situation. She explained that the decision to raise rates is not an easy one based on the data. She also gave every indication that the rate will most likely be increased by the end of this year. Many will disagree with her and question her motives. But I believe she is sincere.

Statistics Canada reported the investment in new housing as of July. While investment or spending on new house construction increased for Canada as a whole, it was down in Alberta. For single-family homes the decline was 31% versus July of last year and 44% versus July of 2014. Melcor is obviously going to continue to have weak sales of residential building lots. However, Melcor will weather the storm and is not likely to experience any financial difficulty. Melcor is also unlikely to experience an operating loss. However, it could experience an accounting loss as much of its assets are subject to mark-to-market rules. So far, market prices of building lots and commercial property do not appear to have declined very much.