MARKET WATCH
Despite some volatile days, most international markets are trading a shade higher than their values of two weeks ago. However, over this period, the spot price of West Texas and Brent crude have fallen roughly 9.5%. Canadian energy producers were battered in kind, though their decline was closer to 6%, as of Thursday morning.
Western Canadian Select (WCS) oil is
selling at a very large discount to most oil on the global market
----- less than 25% of Brent's price! In a continued battle to reduce this bottleneck, a record number was shipped by rail in September, representing a 17% increase over the month prior, and more than double over September 2017. It's likely new records will be reached every month moving forward.
And just yesterday, the Alberta government announced
it will buy rail cars to transport 120,000 barrels of crude per day. Although helpful in the mid-term, the first deliveries won't arrive until the end of 2019. Along with the current rail increase and
Enbridge's Line 3 pipeline expected to open in a year's time, WCS oil should trade much closer to its historical discount in one year to 15 months' time.
With their stock prices so low, companies across the Canadian oil patch are
repurchasing their shares. Company share buybacks,
or repurchases, occur when a company's management believes their shares are trading at valuations lower than warranted. The purpose of buybacks is to reduce the total number of shares to increase the ownership attributed to every remaining share.
For example,
Trican recently bought back 9.8 million shares, equalling 10% of its total. An investor who owned 5% of Tricon shares prior to the buyback (five shares of 100 shares outstanding = 5% ownership) would now own 5.55% of the company afterwards (five shares out of 90 shares = 5.55%).
When the current bottleneck of Canadian oil finally clears, these share repurchases could add significant value to their companies.
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IN THE REVIEW QUEUE
Still Life
by Louise Penny:
I read a lot, but I had never read a proper murder mystery. For my wife, however, it's her genre of choice. After years of patiently indulging my recommendations, she casually mentioned that I might enjoy one of hers. Taking place in a charming village near Montreal, Still Life is the first book in Louise Penny's Chief Inspector Armand Gamache series. It's a page-turning-causing-me-to-be-late-for-a-party-Saturday-night story, built upon intriguing characters, local politics, small-town life, and, of course, a murder. With 14 books in the series, it won't be long before I look into Monsieur Gamache's next investigation.
How This All Happened
by Morgan Housel:
A remarkably straightforward and insightful look at the U.S. economy and income inequality from the end of the First World War to present time.
Hardcore History (Supernova in the East - Part 1)
:
I find the study of human cultures fascinating. Why some cultures lean collectivist versus individualist, or veer towards militarism over pacifism really intrigues me. Top among cultures I'd like to understand better is modern-day Japan. Fortunately for me, Hardcore History has started a series on the Asia-Pacific War (1937-1945) through the eyes of the Japanese. In doing so, it's creator, Dan Carlin, takes the listener back to the Edo Period (1603 - 1868) to help explain the arguably unparalleled determination of Japan's military and citizens during the Second World War.
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THOUGHT-PROVOKING QUOTES
"
Life is change. If you aren't growing and evolving you're standing still, and the rest of the world is surging ahead. Most of these people are very immature. They lead 'still' lives, waiting." - Louise Penny, Still Life
"'His theory is that life is loss,' said Myrna after a moment. 'Loss of parents, loss of loves, loss of jobs. So we have to find a higher meaning in our lives than those things and people. Otherwise we'll lose ourselves.'
'What do you think of that?'
'I think he's right. I was a psychologist in Montreal before coming here a few years ago. Most of the people came through my door because of a crisis in their lives, and most of those crises boiled down to loss. Loss of a marriage or an important relationship. Loss of security. A job, a home, a parent. Something drove them to ask for help and to look deep inside themselves. And the catalyst was often change and loss.'" - Louise Penny, Still Life
"Paul Graham
wrote
in 2016 about what something as simple as there only being three TV stations did to equalize culture:
It's difficult to imagine now, but every night tens of millions of families would sit down together in front of their TV set watching the same show, at the same time, as their next door neighbors. What happens now with the Super Bowl used to happen every night. We were literally in sync.
"This was important. People measure their well being against their peers. And for most of the 1945-1980 period, people had a lot of what looked like peers to compare themselves to. Many people - most people - lived lives that were either equal or at least fathomable to those around them. The idea that people's lives equalized as much as their incomes is an important point of this story we'll come back to." - Morgan Housel, How this all Happened
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GOING VIRAL
- Can you spot the difference between Canadians and Americans on Twitter? An analysis of 37 million tweets by linguistic researchers from McMaster University found that what happens on Twitter appears to reinforce the stereotype of Canadians as friendly and Americans as brash. Yet, the team says there's more to the story.
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The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Raymond James Ltd. Member-Canadian Investor Protection Fund.
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