On Monday, the S&P 500 fell 1.9% and Toronto was down 1.4%.
This is really a minor pull back and should come as no surprise given the worsening pandemic and the U.S. election risk.
The biggest decline in the stocks I follow was Toll Brothers, down 5.1%. It has been gyrating lately but the trend has been down.
Cenovus declined on its takeover news. The Husky shareholders will own 39% of the combined company (I had estimated 45%) The Husky rate reset preferred share was up 9.2% to $12.50. Now down “only” 50% from its issue price. The analysts are fixated on the 21% price premium for Husky. What they maybe should focus on is what is the true value of Husky. Why is its share price on a certain day so important when that share price is quite volatile?
There was some news from Canadian Western Bank last week. Their move to a more sophisticated method of calculating risk-weighted assets has been delayed by the regulator. The new system will allow them to leverage the equity even more. I am not sure why they would really want to add to leverage at this time. I don’t know if it is related but they are also raising some added debt capital in a complicated manner. It appears only institutional investors can buy the bonds. It is a type of floating rate subordinated debt that will float every five years with the changing yield on the 5 year government of Canada bond. It initially pays 6%. It will mature in 60 years (which seems a bit hilarious). They can buy back this debt at par every five years. Through the wonders of the way banking works they can pay 6% on this debt because it will allow them to leverage that at least 10 times and lend out depositor money (that they pay very little on) at rates lower than 6% mostly. None of this looks like material news for CWB.
Brookfield is buying out Genworth Mortgage insurer. Presumably they do not see a huge spike in mortgage defaults coming.