September 22, 2016

Thursday was a strong day in the markets as the S&P 500 and Toronto were each up 0.6%.

AutoCanada was up 1.9%.

This morning I had a notice from TD Direct that Capital Power had  a new issue out of a rate reset preferred share paying 6.0%. That sounded good to me although the reason it is higher than the banks pay on rate resets is because Capital Power is considered more risky. I would not have had any time to analyse the company or the risk. With IPOs you pretty well have to decide instantly if you want it. You can sign up with your broker to receive notice of IPOs. I was going to buy some of this Capital Power issue but I had not checked my emails until 8:45 am Mountain time (10:45 eastern) and by then the issue was sold out. This means the market in general found the 6.0% to be attractive.

Statistics Canada reported the number of people collecting Employment Insurance in July. They also warned that comparisons to past months could be misleading because Ottawa extended EI benefits in certain areas that had higher unemployment. So, the increase in Alberta is even higher than it would have been absent the extended benefits. But any way you look at it, Alberta has seen a huge increase. In 2014 the number of people collecting EI was roughly 30,000 each month of the year. Throughout 2015 the number climbed steadily reaching 63,000 by December. In 2016 the steady increase continued and the number reached about 80,000 in May and June. In July there was a sudden jump to 99,000 though the extended benefits may explain much of the jump.

It seems clear that severance packages have run out for many people and they are now turning to EI. Perhaps now we will start to see a bigger impact on consumer spending in Alberta.

I don’t envy the Board members at Wells Fargo at this time. Normally, the company runs smoothly and the role of Board member is a part-time activity which is not too taxing. But now they have to deal with whether of not the CEO should be dismissed or have his pay cut sharply. And they have to decide whether some of the pay of the recently “retired” head of retail banking needs to be clawed back. They need to look into what went wrong with Wells Fargo’s culture. And, oh yes, they are being sued personally by some investors. A few of the Board members have full time jobs as CEOs of other companies (This includes John Chen of Blackberry). Most are retired executives. Most of these Board members would be independently wealthy and so are in a position to act more independently as they are not relying on this Board member job for their living.