April 13, 2015

On Monday the S&P 500 was down 0.5% while Toronto was about unchanged.

The RioCan pref share that I mentioned yesterday was up 3.3%. But that is a bt misleading . Upon checking it was really just a few low traces on Friday that has pushed it down,. It trades quite thinly and that usually leads to extra volatility.

The Q1 earnings reporting season kicks into higher gear tomorrow when Wells Fargo along with J.P. Morgan report. I find it very impressive that they can get their earnings out that fast considering it comes complete with a very lengthy and detailed discussion of the numbers and dozens of tables. The Board of directors have to approve the numbers and the top executives have to discuss them in the conference call and be prepared to take questions. You can be assured that a lot of people have worked a lot of extra hours to get the earnings out that fast. Apparently “the Street” is expecting Wells Fargo to report 98 cents per share down from $1.05 last year due to tighter interest spreads.

Regarding Melcor, I suspect it may have had a good Q1 since housing starts in Alberta have not fallen off according to reports that I recall. On the other hand builders may be cautious about buying additional lots for new starts. Q1 is usually the lowest income quarter for Melcor. Last year its Q1 was particularly weak so possibly it will be easier for Melcor to show an increase this year. Interest rates have been low and that should meant there will be no market value loss on its rental properties (which are marked to market based (indirectly) on interest rates each quarter. In terms of book value it should get a gain in comprehensive income on the value of its U.S. investments due to the lower Canadian dollar. All-in-all there is some reason for optimism. On the other hand if the company reports it is seeing a slow down then that would be a negative.


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