FED Blinks, Pivots, Twiches, Rolls Over and CopulatesAdded as now filled fifteen (15) BA-N @ $207.51 to now hold 15/15 inventory allocation.
Blondie's Bluff
"The yield on Canada’s 10-year government bond fell to below the 2.8% mark, approaching the five-month low of 2.72% touched on January 18th after the Bank of Canada signaled the end of its tightening campaign. The Bank raised its key rate by a slower 25bps in its January policy decision and stated that it will hold borrowing costs constant to assess the impact of the cumulative rate increases in the Canadian economy. The move followed 425bps in interest rate hikes since March 2022 to curb inflation that peaked at 8.1% in June, before lower fuel prices and tighter monetary conditions slowed annual price growth to 6.3% in December. " Wondering why the largest market, the Bond Market, shows such disregard and outright distain for the hymm sheet mouthpieces of the unelected FMOC Board of Governors and BOC's similiar constant jaw-boning? 5.25% end point you say... but Mr. Market chuckles because they don't think so, its even outright betting so right in your face with a two handle. So in order to show who is boss, Powelless must exude some near term confidence and insert some fact credibility and hike up, 50bps up and away to show us lemmings the way forward. If not, toothless dual mandate member speeches lie ahead for many more skipped luncheons.
A soft landing runway in sight they say for now todays' lower rates of borrowing. Well after hearing FOMC voting and non-voting members threatening runaway higher rates for longer, it can now be seen that the falling bond yields, as reflected through market ETF's like IEF and TLT, are no longer investments that are stuck in the mud.
Notice the 450 bps by the BOC over twelve months has resuled in only a 2.72% effective 10yr CAD bond yield at print time. Not exactly what many observers have expected. Not very recessionary with borrowing at 2.72% and inflation running into the 6's with fixed 5 year mortgages at 4.9%.
Would a 6% borrowing cost result in a 2.72% inflation rate? Many would argue yes to that premise, but that's not a likely outcome since we are all, collectively, the other way around at present with debt at the highest levels ever. But things do eventually change, and then what?
Muddy Waters is where the Lunkers' lurk.
The Gmen printed more over the last three years than ever printed in history so they created the runaway-reflation trade and that motion is being bashed back down by these voting members and those of the WEF's Corporate media puppets. Protocols in place to announce non-material job cuts. If you don't announce, you will have issues in the future says WEF. So you announce trivial natural attrition on hopes of appeasing the Board.
But the M1 money supply has gone vertical and still has far too much velocity, overflowing the till. Circulation paths and speed of motion (V) velocity are the only controls left for the authorities to monitor and try to control. That horse has left the barn and is now far away and heading over the hill yonder. Beware of divergent crocodiles' jaws that snap close for outsized gains. Year-over-year and now month-over-month comparisons will easily deal with the first part of dropping the inflation metrics from 8's & 9's to 4's & 5's. Add to that, more fiscal spending coming to an end and the easy part is already done. It's now about getting down to the terminal target rate of 2% for inflation and my bet is it will not happen as quickly as promised. In fact, some guess inflation will not return to a sub 2% rate for a decade.
<iframe src='https://d3fy651gv2fhd3.cloudfront.net/embed/?s=canadamonsupm1&v=202301211004V20220312&d1=19230219&h=300&w=600' height='300' width='600' frameborder='0' scrolling='no'></iframe><br />source: <a href='https://tradingeconomics.com/canada/money-supply-m1'>tradingeconomics.com</a>
Stock Buy-Backs
Remember when rates were so low there was no place to put money to work? CEO's proclaimed the best investment was reducing the outstanding share counts of equity stakeholders and boosting earnings per share. Now with interest risk free rates pushing 3%, is that still a valid arguement? What does a steady float count now mean for forward EPS calculations that previously benefitted from a favorable divisor number for many reporting years. Did you notice that a few of the Cdn banks expanded the divisor part with bought stock issuance recently.
Debt Dance
Do we really think the goverment shutdown matters? Debt ceiling is a ponzi scheme charade. Never to be intentionally exposed by those in Kontrol. CONTROL + PRINT is the only game left as the amount of debt has been ever-expanded to now result in certain destruction of all investable wealth if not fed.
The stock market usually surges higher every debt ceiling dance, although this time might be different only after a month or two of government shutdowns and Treasury's of other mitigation techniques - so prepare for a swan song and then a dance afterwards upon a deal approval.
You Pay but You don't Get
Taxes are being paid at the highest levels for all budget line items but is not widely available for your personal use. Transit, health care, education, elderly care, childhood learning, personal safety and security, dental and eye care, knee & hip surgery, immigration & borders, travel airports all are Federal juristictions and are all not widely available for our use or enjoyment for some reason. But we still pay.
Thanking you for nothing - may I please have another nothing burger with my taxes?
CPPIB - Institutional Trading Like Retail Robinhoods
Without Canada's financial system backstop of having every Canadian worker contribute approximately $1000 a month into the market, this money inflow really adds up and substantially provides a backstop to the capital markets in Canada. Without hundreds of millions added by legislation into the Fund, who knows what the Cdn banks are really worth.
CPP Plan's Top Public Equity Holdings (mark to market)
GOOGL
MSFT
MA
NVDA
Premium Brands
vs.
CPP Plan's Top Private Equity Holdings (Marked to Make-Believe)
Location: United States
Investment: US$1.6 billion acquisition enterprise value
Date of investment: 2012
Location: Belgium
Date of investment: 2017
Location: France
Date of investment: 2016
Location: United States
Date of investment: 2017
Location: United States
Date of investment: 2007
Location: United States
Total investments: US$500 million
Date of investment: December 2018
Location: United States
Date of investment: 2018
Location: Canada
Date of investment: 2016
Location: United States
Date of investment: 2018
Location: United States
Date of investment: 2017
Location: Germany
Date of investment: 2007
Location: Spain
CPP Investments ownership: 39%
Date of investment: 2013
Location: United States
Date of investment: 2015
Location: United States
Date of investment: 2016
Location: United States
Date of investment: 2015
Location: Germany
Date of investment: 2014
Location: Spain
Date of investment: 2016
Location: United Kingdom
Investment: US$6.0 billion transaction value (25% ownership)
Date of investment: 2019
Location: United States
Date of investment: 2016
Location: Poole, UK
Total enterprise value: £5.9 billion
Date of investment: November 2019
Location: United States
Date of investment: 2016
Location: United States
Date of investment: 2022
Location: Netherlands
Date of investment: September 2018
Location: United Kingdom
Date of investment: 2017
Location: United Kingdom
Date of investment: 2017
Location: United States
Date of investment: 2017
Location: United States
Date of investment: July 2018
Location: United States
Date of investment: 2016
Location: Germany
Date of investment: 2017
Location: United States
Date of initial investment: 2020
Location: United States
Investment: US$11 billion Transaction
Value
Date of investment: 2019
Location: United States
Date of investment: 2017
Location: United States
Date of investment: 2018
Location: United States
Date of investment: 2019
Location: United States
CPP Investments ownership: 100% (incl. management)
Date of investment: 2014
Location: United States
Date of investment: 2022
Location: Spain
Date of investment: 2018
Location: United States
Date of investment: August 2018
Location: United Kingdom
CPP Investments ownership: 100% (incl. management)
Date of investment: 2016
Location: Germany
Total investments: €696 million
Date of investment: 2019
Location: United Kingdom
CPP Investments ownership: 30%
Date of investment: 2018
Location: United States
Date of investment: 2013
Location: United States
Date of investment: 2021
Location: Germany
Total investments: €800 million
Date of investment: March 2022
Location: United States
Date of investment: 2016
Location: United States
Date of investment: 2021
Location: Germany
Date of investment: 2015
Location: United States
Investment: US$400 million
Date of investment: 2017
Location: United States
Date of investment: 2013
Location: France
Date of investment: 2020
Location: United Kingdom
Total investments: US$1.1 billion
Date of investment: 2022
Location: United States
Investment: US$5.3 billion transaction value
Date of investment: 2015
Location: United Kingdom
Date of investment: 2017
Location: United States
Date of initial investment: 2020
Location: United States
Date of investment: 2016
Location: Germany
Date of investment: 2014
Location: United States & United Kingdom
Date of investment: 2022
Location: Portugal
Date of investment: 2018
Location: United States
Investment: US$4.6 billion transaction value
Date of investment: 2016
Location: Belgium
Date of investment: 2017
Location: United States
Date of investment: 2016
Location: United States
Investment: US$20 billion acquisition enterprise value
Date of investment: September 2018
Location: Switzerland
Investment: EUR$2.1 billion acquisition enterprise value
Date of investment: October 2018
Location: Germany
Date of investment: 2019
Location: Germany
Date of investment: July 2018
Location: United States
Date of investment: 2019
Location: Norway
Date of investment: 2019
Location: United States
Date of investment: 2020
Location: United States
Date of investment: 2017
Location: United States
Date of investment: 2020