Commentary

The Bears Are Running for the Sidelines…
After a near-vertical one year rally in North American stocks one would think the “bears” would be licking their chops. Instead, the would-be short sellers, who seek to profit from falling stocks have moved to the sidelines in many cases.

….commentary continued below:

Market Summaries
S&P/TSX Composite up 0.02% to 12176 (up 3.60% year-to-date)
S&P/TSX Venture Composite up 4.87% to 1680 (up 14.36% ytd)
Dow Jones Industrial Avg up 0.06% to 10997 (up 5.40% ytd)
Nasdaq Composite up 2.16% to 2454 (up 8.06% ytd)
Oil (West Texas Intermediate) up $0.05 $84.92 (up $5.56 ytd)
Gold (Spot USD/oz) up $35.80 to $1161.90 (up $58.65 ytd)

2009 Personal Income Tax Filing

As you are aware April 30, 2010 is the deadline to file your personal income tax return with the Canada Revenue Agency. In April, we receive a number of requests from both clients and accountants with regards to documents required to complete your return.  Please be advised that you should now be in receipt of all pertinent information to file your return. Starting January 1, 2010 you may have received by mail and/or email the following important tax documents:

• 2009 Gain Loss Report
• T5, T3, T5008 and/or T5013
• T4RSP, T4RIF and/or T4A

***Please contact our office prior to April 21, 2010 if you require duplicate copies of any of these documents***

Commentary

The Bears Are Running for the Sidelines…
After a near-vertical one year rally in North American stocks one would think the “bears” would be licking their chops. Instead, the would-be short sellers, who seek to profit from falling stocks have moved to the sidelines in many cases.

In most sectors, those looking to pick “market tops” have been run over by the market’s sustained momentum. In the US, no other bull market dating back to 1962 has been able to match the near 70% move off the bottom that we’re currently experiencing.

According to the Commodity Futures Trading Commission, speculators in S&P 500 futures had a net short position of 72,247 contracts for the week of March 16th. Fast-forward one week and most had packed it in, with just 6204 net short positions remaining.

“I’m not short because for the most part I can’t find ideas that seem to be working and I think other people might be in the same camp,” said Bill Fleckenstein, president of Fleckenstein Capital Inc in Seattle. After being short for 12 years, Fleckenstein closed out short positions last year when he decided the strategy wasn’t working.

But some of the data we are seeing suggests the bears may have a case, with 93% of the S&P 500’s stocks trading above the 50-day moving averages, and momentum indicators suggesting the market has been overbought for a couple of weeks.

Despite these potentially bearish facts, Wall Street’s CBOE Volatility Index or “fear gauge,” is low and optimism over the economic recovery has taken a stranglehold.

– Reuters

Soundbites

• While many are beaming over the prospect of a par dollar with our southern neighbour, a number of businesses are extremely concerned. With the loonie soaring, forestry and tourism will be two of BC’s biggest losers, while firms buying imported machinery and equipment or with debt in US dollars stand to benefit. Other export–reliant industries set to struggle are pulp & paper, lumber, manufacturing, and software development. Attracting US vacationers and business conventions will also become a tougher game as the many of the prior benefits of a cheaper Canadian buck are eliminated and the cost of travelling within the US makes more sense.

• The Mica Dam on the Columbia River is poised to overtake WAC Bennett Dam as the site of the largest hydroelectric facility in BC. Last week the BC environmental assessment office approved BC Hydro’s application to install two additional turbines at Mica, which is situated on the Columbia 135 km’s north of Revelstoke. Mica came into service in 1977 but two of its six turbine bays were left empty on the premise that the power was not needed at the time of its construction.

• In order to find Canada’s largest home, you don’t have to visit Oakville, Point Claire or the shores of West Vancouver, you need to trek 140 km’s north of North Bay, Ontario to Lake Temiskaming. The house is listed at $25,000,000 and apparently “needs a little work.” For the handsome price-tag, the buyer will get 40 acres of property, 65,000 sq feet of living space, a boat house equipped to hold a 40-foot yacht, two elevators, an indoor pool, two 30-foot fireplaces, plumbing for indoor golf greens and many other absurd items. Despite the hefty price, the house is far from finished and has no flooring, wall coverings or finished bathrooms. The monstrosity was once the dream home of forestry tycoon Peter Grant who’s company, Grant Forest Products has since run into bankruptcy protection after being North America’s third-largest OSB producer at one time.

Marketwatch – A Look at the Week’s Newsmakers

Fairmont Raffles Hotels Intl (Private) – has agreed to sell 40% worth of new shares in the company to Cayman Islands-based Voyager Partners Ltd in a strategic move to align itself with cash-rich investors in the hotel property sector. The company, which is emerging from a particularly bad slump in the luxury hotel business, is recapitalizing to repay some of its debt and is seeking to build its brand by adding new management contracts. Fairmont has long been divesting itself of its iconic portfolio of real estate holdings, including the Royal York in Toronto, and the Banff Springs Hotel in Alberta. Of the 100 properties it now manages, Fairmont has only retained investments in four of them. The deal with Voyager has diluted the ownership of Saudi Arabian investment firm, Kingdom Holding Co, which sees its stake fall from 58% to 35%. Kingdom is 95%-owned by billionaire Saudi Prince Alwaleed bin Talal.

Canadian Tire Corp (CTC.A) – executives are trying to get back to basics by putting the focus back on tires, autoparts and housewares. The company announced a new strategic plan at an investor conference and outlined its financial targets for the next three to five years, including earnings-per-share growth of 8-10% and retail growth of 3-5% per year. Over the past 10 years, Canadian Tire stores have matched growing square footage with expanded product lines and many haven’t worked out. This renewed focus on its core businesses will see an end to continued expansion and a commitment to what has made the franchise successful over the past 88 years. The company also operates a financial services division, a petroleum division, and the apparel chain, Mark’s Work Warehouse.

Endeavour Financial Corp (EDV) – a good old fashioned donnybrook is developing between mining heavyweights on opposite sides of the globe. Russian steel giant OAO Severstal is in a battle with Endeavour Financial, which is led by mining heavyweight Frank Giustra, over control of Vancouver-based Crew Gold Corp. The conflict goes back to late January, when EDV acquired 37.9% of Crew, and in the process adding three to the board – including Giustra. Shortly after, Severstal built up a 26.6% stake in Crew, before attempting to take out the entire company. Severstal is now trying to reverse the board appointments and replace them with choices of their own – a move which obviously doesn’t sit well with Endeavour. Stay tuned…

Palm Inc (PALM) – despite disappointing sales, intense competition and a history of missteps by management, it appears that Palm may have a few suitors. Shares flew early last week on early speculation that Lenovo Group Ltd could be a bidder, only to get pushed even higher Friday after talk that HTC Corp may also be interested.

TransGlobe Apartment REIT (private) – plans to raise $250 million in an IPO to buy rental apartments across Canada. TransGlobe intends to sell trust units for $10 per share, according to documents filed last week by the Mississauga, Ontario-based firm. The REIT was formed to indirectly buy 65 rental properties with approximately 8200 units, principally located in Alberta, Ontario, Quebec, New Brunswick and Nova Scotia.

“Quote of the Day”
“The most erroneous stories are those we think we know best – and therefore never scrutinize or question.” – Stephen Jay Gould (1941 – 2002)

This newsletter expresses the opinions of the writers, Marc Latta and Jamie Switzer, and not necessarily those of Raymond James Ltd. (RJL)  Statistics and factual data and other information are from sources believed to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.  It is not meant to provide legal, taxation, or account advice; as each situation is different, please seek advice based on your specific circumstance. RJL and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Within the last 12 months, Raymond James Ltd. has undertaken an underwriting liability or has provided advice for a fee with respect to the securities of the Royal Bank of Canada. Raymond James Ltd is a member of the Canadian Investor Protection Fund.

JAMIE SWITZER | Raymond James Ltd.
Senior Vice President, Financial Advisor
North Vancouver IAS
PH: 604.981.3355 | FAX: 604.981.3376
jamie.switzer@raymondjames.ca