Say ‘Goodbye’ to your 2007 TSX gains
Say ‘Goodbye’ to your 2007 gains (if you haven’t already done so, on reading the title of this post). For those of you who seen your mutual fund gains vanish after the China scare earlier this year, and haven’t checked on them ever since, your funds are probably just the way you left them - umm.. that’s bad news. Canada’s stocks fell today, wiping out the country’s main index’s gains for 2007. The reason: Investors worldwide sold raw materials and energy assets on concern a credit crunch may hurt the economic growth and curb demand for oil and metals - a vital part of the Canadian economy.
The S&P/TSX dropped 200.06, or 1.5 percent, to 12,848.70, with a record numbers of trades and volume in Toronto. The benchmark has dropped 12 percent from a record it reached last month on rising commodity prices and record takeovers metals companies.
Canada is just one of a large number of stock markets around the world suffering heavy selloff. Markets all over the world, in Europe and Asia, are facing similar problems. The fear has spread beyond the borders of the United States and its subprime mortgage market. The international fear continues to grow with concern that a global credit crunch will hurt profits and growth. People are starting to be more and more afraid of a possible global slowdown.
Many Canadian firms have already announced difficulties to this massive selloff. Toronto’s Coventree Capital, announced on August 13 and 14, 2007, that it was experiencing market disruption and as a result was unable to meet its repayment obligations until its liquidity providers fund such repayments. Today Vancouver’s Redcorp Ventures Ltd. said that it is awaiting more than $100 million of its unspent cash, frozen in distressed paper issued by Toronto’s Coventree Capital. Redcorp’s share price fell nine cents to 28 cents, and Coventree’s dropped another 20 cents to $3.70 today.
Before you run off and kill whoever made your investments, remember this ‘Goodbye’ isn’t forever. Finance Minister Jim Flaherty, Governor Dodge and the Bank of Canada are all monitoring the global situation, and ready to provide all means to help. The Bank of Canada injected another $370-million in temporary credit into the financial system in its latest bid to help loosen the credit squeeze.
“It’s a shock, but a necessary one for expansion to continue. Financial shocks can create tremendous opportunity, but if you buy at the wrong time you can have your head handed to you.” –Peter Gibson, vice chairman and head of portfolio strategy at Desjardins Securities in Toronto
The situation right now is simple: market correction - getting stocks out of weak, and into stronger hands. Look at your hand now. DO IT! Tell me if you see strength of weakness. If it’s weakness… no comment. If it’s strength, you should also see all the reasons you have to BUY. Look for for both smart Canadian AND international buys.
The following is a list of some of New York’s bellwether stocks. (Courtesy of Capital IQ) Look what’s happened:
| Company | Return Since July 2 | Current P/E | Five-Year Average P/E |
|---|---|---|---|
| JPMorgan (NYSE: JPM) | -12% | 10 | 22 |
| Goldman Sachs (NYSE: GS) | -25% | 8 | 15 |
| Home Depot (NYSE: HD) | -15% | 13 | 19 |
| Kohl’s (NYSE: KSS) | -20% | 16 | 29 |
| Wal-Mart (NYSE: WMT) | -10% | 15 | 26 |
| TD Ameritrade (Nasdaq: AMTD) | -23% | 16 | 31* |
| Texas Instruments (NYSE: TXN) | -15% | 19 | 41* |
… I think you get the picture.
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