Komal Sri-Kumar, president and founder of Sri-Kumar Global Strategies, says the Covid-19 pandemic, the lack of another federal stimulus package and the U.S. presidential election are creating a trifecta of negative forces for markets. Here is a direct video link.
After bouncing 10% between March 20 and September 1, the Canadian dollar continues its allegiance with risk assets, dropping 1% against the US dollar today and rolling over at the 74.50 resistance range, highlighted in my partner Cory Venable’s chart below since 2007. A restest of the March low in the .67 area (pink band below) is likely as recession and an equity bear market continue into 2021.
With global demand faltering afresh, the Bank of Canada is stuck near zero (.25% on overnight rate) and already buying 4 billion in government bonds weekly (which they dialled back from $5 bn). There is no more monetary cavalry to rescue zombie borrowers and highly levered asset holders.
Oil (WTI -6% today), back under $38 a barrel knows it, with another retest in the $18 to $25 range likely ahead (as we noted in our September month-end client letter).
With just five TSX companies in the green today, even index-leader Shopify (-5.8% on the day) can’t catch a bid. The heavy-weight oil and gas sector (now 11.8% of the TSX index) is -55% in 2020, and the widely held Canadian banks are wallowing: -22% since February 20. As shown in Cory’s chart below of the financial index (XFN), a nasty head and shoulders formation beckons Canadian financials (31.6% of the TSX) to give up ill-gotten gains as the fruit of their reckless lending years now rots.
More sustainable business models are needed and, fortunately, they exist.
Lower asset prices are essential in restoring attractive investment opportunities. Waiting for them to materialize can be hard, but not nearly as hard as holding them while they drop.
Cutting unnecessary operating costs is always smart, but being able to do so during a big hit to income can be the difference between survival and bankruptcy.
Like most municipalities, the City of Kitchener spends millions on electricity each year. In 2011, they invested in 2600 solar panels atop their operation facility at the site of the former BF Goodrich tire factory (shown on left).
The city sends the electricity collected back to the power grid for a credit on its overall electricity bill.
Within five years, and faster than expected, the panels paid back their initial investment cost and are now producing enough electricity to power 75 homes from this one installation.
In 2020, the savings is on track to be $350,000 to $450,000.
A technological update also allows streetlights to be dimmed for an additional $1.2 million in savings each year. They are now looking to add more solar installations. See: Solar array adds to Kitchener’s bottom line.
Every government building should be capturing passive energy to reduce taxpayer costs today. No more time and dollars to waste.
You too Alberta! When times are tough, the smart see opportunity, see: Alberta could lead Canada in wind and solar power by 2024.
Cory’s Chart Corner
