InspectorSTOCK.com

Save the Seals while Tax-Payers are led to the Slaughter

2009-05-27T08:57:00.009-04:00

Governor General Michaëlle Jean is the Inspector's new hero. Wow! That woman is a keeper! The Honorable Michaëlle Jean is in the Inspector’s good books for gutting a freshly slaughtered seal, pulling out its raw heart, and then eating it. Yum!

From the Economist May 16th-22nd 2009:

If the European Parliament were really interested in animal welfare, then it might look rather more closely at the farming industry that the European Union so lavishly rewards with subsidies. But it has more pressing business. On May 5th MEPs, suddenly disgusted by the cruelty of people far away hunting seals, voted to endorse a ban on the trade of seal products, most of which come from Canada. Their hypocritical recommendation, which still has to be approved by the European Commission and Council, isn’t even much good for the seals.

Every year, 300,000 seals meet their end not by mauling from a polar bear, but instantaneously from gunshot or a blow from a club. Four years ago the WWF, an environmental organisation, commissioned an independent vet’s report which concluded that seal clubbing is not cruel if it is properly done by competent and trained professionals. The report judged that the Canadian hunt was professional and highly regulated. And the vets said that popular horror of the seal hunt seemed to be based largely on emotion and on images that are difficult even for experienced observers to interpret.

By the grim standards of Europe’s farrowing sheds, millions of seals enjoy a blissful life fishing and breeding on the Canadian ice. At least Canadian seals have the luxury of being stunned before they die. Compassion in World Farming, a lobby group, says that half the sheep killed in France are conscious when their throats are slit. Such treatment is possible through a loophole that allows for religious slaughter—a loophole that the same champions of animal welfare in the European Parliament voted to avoid closing on May 7th.

A few seals are killed to protect fish, others as a source of blubber or food. Most are indeed killed for their fur. That may not be to everyone’s taste, but it is hardly unEuropean. Europe’s fur farms produce over 30m mink and fox pelts a year. Every four or five days Europe kills more animals for their fur than the entire annual Canadian hunt does in a year. Seal hunting sounds unfair; but Europeans are reluctant to ban the hunting of similarly defenseless game birds, deer or wild boar.

...

ROUGHLY handled, and incompetently stunned, terrified animals may awaken several times before they are slaughtered. Some have their throats slit fully conscious. Europe’s industrial farms dispatch 1m sheep, cattle and pigs every day. You cannot cater to the welfare of a large animal like a pig when the line must kill five in a minute.

In short, because seals are cute, opposing their slaughter is a popular bandwagon to jump on. Not so much for the cows, pigs and sheep. I guess being good looking has its advantages: A bunch of celebrities and political bozos will shed a tear for you if you get clubbed to death. I'm sure watching a cow or pig or sheep get slaughtered is just as horrific as a seal getting killed, but for some reason you don't hear Sir Paul get all worked up over that. Good on you Michaëlle Jean! Eat your heart out Paul!

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Like the cows, pigs and sheep, us tax-paying fools are being led to the slaughter, all the while being made to feel guilty that a few cute animals are about to get clubbed. When you step onto the kill floor and are about to get stunned, chances are you won't feel so guilty. Whether the Industry Minister Tony clement (who refuses to answer my emails btw - give him a try Clement.T@parl.gc.ca ) wants to admit it or not, Canadian tax payers are going to be paying the very generous pensions of retired auto-workers. While the rest of us suckers get fleeced, these pretty seals are crying about getting clubbed. Good for them that they had good jobs. But now the gig is up. Time to re-join reality. For some reason, you and I are expected to pick up the tab for their ridiculous pension. Maybe we should enlist the help of the Tamil Ski Laken protesters who appear to be immune to the law, and thus can help us protest without fear of arrest. Lets block the highways, shutdown the parliment. Women and children in front. C'mon cheif Blair, you panty-wearing bitch: Let's hear your excuses.

Corp bonds; Canadian Bank Equity; POT is HOT

2009-05-14T09:15:00.017-04:00

Stocks rallied hard recently, then a big sell-off ensued. No surprise here. Lots of talk that markets bottomed in March. It’s very likely they have – but expect more horizontal movement. In the meantime, corporate bonds are still a favorite of the Inspector and investors world-wide.

There is still a lot of value to be found in equities, however, there is still a lot of volatility. A safe equity bet can be found with Canadian banks. As usual, average out your buy-in – don’t buy all at once. On the other hand, for a solid but guaranteed return, as mentioned in a previous post, Canadian bank corporate bonds have a nice coupon and are as safe as a Canadian government bond. In short, if you want value and stability, Canadian bank corporate bonds are the way to go. If you prefer to watch a slow tide, Canadian bank stocks may be right for you. Canadian bank stocks in general pay decent dividends, so you are being paid to wait as the tide turns.

For many investors that already have a large equity portfolio and nothing else, you should seriously consider going the fixed income route and pick up some Canadian bank corporate bonds to diversify and minimize risk. Remember, if a company “bites the dust”, bond holders typically get paid first while stock holders get nothing. Also, though corporate bonds trade daily, if you hold them until maturity, the payout is fixed.

On another note …

2009 is all about recouping losses. A familiar stock, Potash, is on the rebound. In general, the Agriculture space is looking good once again. The Inspector is not advocating “selling the farm” and going nuts here. Simply pointing out that an old favorite is starting to shows signs of life again. If you are holding agriculture stocks in your portfolio you are holding a piece of the future. Food is not getting any more plentiful nor is it getting any cheaper. The recent market downturns/recession likely stunted the momentum agriculture stocks were riding. But make no mistake, the ag sector is still a growth story and it is not going away.

DISCLOSURE: Author enjoys a nice burger once in a while, owns shares of Potash, and has no idea what the hell that picture of the large woman is doing in this post. Always do your homework before making an investment decision.

Surfing the Gold

2009-03-28T08:25:00.028-04:00

As a self-described conservative long-term investor, today's topic of discussion is the opposite of conservative or long-term: volatile and short-term. Specifically, the topic is “Horizons BetaPro TSX Global Gold Bull Plus ETF”. This is a Canadian based ETF that trades on the Toronto Stock Exchange (TSX). It acts like an index of two times (200%) the daily performance of the S&P/TSX Global Gold Index. The S&P/TSX Global Gold Index tracks gold producers (as opposed to gold the commodity).

"Horizons BetaPro HBP ETFs are a unique series of alternative exchange traded funds ETFs used by investors and investment professionals to profit when the market is rising or falling, or to reduce risk by hedging their existing market exposure. HBP ETFs offer two types of structures: Bull+/Bear+ leveraged ETFs and single inverse ETFs. The HBP Bull+ ETFs HBP ETFs are designed to offer double the daily performance (inverse daily performance) of their underlying index or benchmark. … All HBP ETFs are denominated in Canadian Dollars.

HGU is the “bull” ETF for gold producers. As a double performance ETF HGU is volatile, as evidenced by the one month chart below ...

Check out the stock chart on Google Finance

The Inspector is recommending this ETF as a trade (not as an investment). The trick is to buy this and sell a portion of the holding on a regular basis. The concept is to surf the chart’s ups and downs. In a just a few days, this ETF can move 10-20%. It represents a good opportunity to make a little bit of side money, away from core holdings of a portfolio.

Gold companies and the commodity have been on a general up trend. None the less, as mentioned, the chart is choppy. Do not buy this ETF unless you understand the concept fully. In general, gold is a nice hedge to have in an equity portfolio, and the HGU ETF is a nice way to add some dollars to a suffering equity portfolio.

DISCLOSURE: The author buys and sell units of HGU on a regular basis.

As always, do your homework and read between the lines.

News Flash – US Corporate-Owned News Media Is A Joke

2009-03-16T09:26:00.007-04:00

Jon Stewart blames CNBC and Jim Cramer for careless financial news coverage. In a nut-shell, he believes (rightly) that CNBC has betrayed the trust of its viewers. However, the Inspector asks, which corporate-owned US news media does anybody trust? And it’s not just financial news that is untrustworthy, but any corporate-owned US news. A quick examination of coverage during Bush’s reign of “error” should provide ample proof of how ineffective and untrustworthy the US corporate-owned news media is. Talk about lap dogs.

Jon Stewart wants to point the finger at CNBC and Jim Cramer: The public was duped and they are to blame. The entire premise of a functional democracy is having a well informed public. But if the US public descends into mass stupidity, is it the media’s fault? Put another way, do you blame the drug dealer or the drug user? More often than not, junkies are portrayed as victims and the pushers as evil. No matter how sleazy CNBC and the rest of the financial and “regular” US news media may be, nobody is forcing anyone to watch their crap. Just say no.

Canada is blessed in comparison to US corporate-owned news. For the most part, Canadian news coverage is level headed and even handed. Financial news is no exception. Watch the Business News Network (BNN) and you immediately see the difference (check-out BNN.com). Rather than fast cash, crazy money and sensationalist reporting, guests are interviewed at length, topics are covered thoroughly and investment advice is top-notch. And guess what, BNN is available in the US. So Jon, time to change the channel!

That Mr. Stewart is calling out the US financial news is important. What the public needs to do is take matters into their own hands. Change the channel! There is plenty of reliable and thorough news out there. Let’s not forget international news. The BBC for example puts FOX news and CNN to shame. It’s not enough to blame the messenger. Instead, it’s time to shoot the messenger.

One of the central concepts behind Professor Noam Chomsky’s theory of the media is that it serves the insiders that own it, not as a matter of conspiracy, but as a matter of function. It is for that reason that any news source that is owned by the institutions that it is supposed to “keep an eye on” will never give you the real news. That is why you need to read this blog, and the next guy’s blog, why you need to search the world for news, and filter out the crap. Don’t point the finger, use the finger, and give the US news media the finger. You have the internet and with it more access to information than available at any other time in history. Why the f-ck would you bother with CNBC, MSNBC, CNN, Fox News or the rest of these lackeys?

Jon Stewart is one of the most entertaining people on television, but for him to excuse the public for being lazy and for trusting an institution (US financial news media, US news media) so obviously compromised – sorry, doesn’t work for this guy. Jim Cramer, like some of the most brilliant minds in economics (including Alan Greenspan, Warren Buffet) totally underestimated the coming financial meltdown in 2008. Are we mad that people of such intelligence unintentionally or intentionally led us astray? Of course, but who really is to blame? Well, for starters, check this out … from PBS. One of the best examinations of the financial crises out there.

Abandon Hope All Ye Who Enter Here

2009-03-03T14:19:00.003-05:00

Through me you pass into the city of woe:
Through me you pass into eternal pain:
Through me among the people lost for aye.

Justice the founder of my fabric mov'd:
To rear me was the task of power divine,
Supremest wisdom, and primeval love.

Before me things create were none, save things
Eternal, and eternal I endure.
All hope abandon ye who enter here.

Such characters in colour dim I mark'd
Over a portal's lofty arch inscrib'd:
Whereat I thus: Master, these words import.

Dante Alighieri

That pretty much somes up the second half of 2008, and unfortunately, the outlook for 2009. The sky has fallen. The fat lady is out of breath. The sh-t has offically hit the fan. Enron aint got nothing on this.

Hopefully, the small investors can make it through this economic hell, through purgatory and then into financial heaven. The time has come to say "bye-bye" to the NYSE, Nasdaq, TSX and say hello to FIXED INCOME. Corporate bonds are your friend. Stocks are now satan's domain.

Think of the Inspector as Virgil, your guide through the Inferno, through Purgatory, and finally into Paradise.

Step one is to adandon all hope in the stock market. Its done ... its over. 2009 is going to be an absolute blood bath. As comforting as it may be to think that Bernie Madoff has a special place in hell waiting for him, that is not gonna make you any richer. That's where fixed income comes in.

Like most investors, the Inspector's equity portfolio has taken a beating. The value has shrunk. But, the Inspector is a long-term investor and can afford to hold on to his stocks. As a way to regain some value in his portfolio, the Inspector is looking at corporate bonds.

Specifically, in today's post, the Inspector will look at a Canadian Bank, BMO, and a 10 year bond that generates between 8% - 10% annually. The bond is "BMO TIER 1 NTES - SER.A" which has a call date of December 31 2018. It is listed at 10.221% Pretty good. This bond is rated AH/Aa3 by Moodys and DBRS respectively. Investor grade.

The spread between government bonds and corporate bonds in general are at very high levels (so far this year, well above six points). This is a good time for corporate bonds. As far as risk is concerned, the most obvious one is the health of the company and their ability to pay at maturity. Well, if its any consolation, all of Canada's big banks are healthy, especially compared to banks world-wide. In fact, today, March 3, BMO beat analyst expectations . This is no struggling giant. If BMO can make a profit in the current environment, arguably the worst ever (as in the history of the universe), then it shows they are in it for the long haul. As a rule, as long as a bond issuer stays in business, you're likely to get generous payouts regardless of economic conditions.

The ultimate enemy of bonds is inflation, and we are likely due for some of that eventually. None the less, what is the likelihood that the average rate of inflation will be 10% for the next ten years? Also, consider that inflation has never been lower than it is right now. Bottom line: Inflation might end up eating into the 8 - 10% annual return, but it won't erase it.

DISCLOSURE: The author owns units of BMO TIER 1 NTES - SER.A

Do your homework. Eat your veggies. Trust no-one ...especially not the devil.

The Early Bird Catches the Worm– FORTERRA ENVIRONMENTAL CORP

2008-07-30T10:27:00.007-04:00

Times are tough, but as the saying goes, when the going gets tough, the tough gets … tougher … or something like that. With Fannie Mae and Freddie Mac joining the socialist club of America, getting bailed out by the wonderful tax payers of the USA (courtesy of a backroom, undemocratic process - thanks!) well, makes you think: "how can it get worse?" We are in a time when conventional investment strategies such as the infamous buy and hold are not effective. With such insane volatility in the market, it’s really all about the trade. The Inspector’s take is to trade around a long-term position. Do not pass up on all the ample opportunity of crazy ups and downs.

Speaking of volatility, there is a personal favorite stock that the Inspector has been reticent to mention on the blog because it is highly risky. Considering the current environment though, what isn’t? So, without further a due, here is a penny stock worth its weight in worms: FORTERRA ENVIRONMENTAL CORP.

Forterra is a producer and marketer of organic enrichment products, (i.e. fertilizer) specifically for use in the commercial turf, horticulture and specialty agriculture markets. It trades on the Toronto Venture Exchange as FTE. This is a penny stock so the usual caution is advised.

Check out Forterra's website

Forterra makes environment-friendly fertilizer from worm castings. Their biggest cost is worms! It has recently signed many deals for its products and its prospects for growth (no pun intended) are huge. Forterra has a good product that has a great demand: they are in a great sector. Remember, this is a very, very small company, so don’t expect a Potash type world domination story, but it is very lucrative. In fact, what makes this stock attractive is the very fact that it is tiny: nobody knows about it! This stock is very thinly covered. In fact, Forterra just announced that is has retained a Company for Investor and Corporate Relations to improve communications with investor community.

Every cent this stock moves is a huge percentage gain or loss. If you want to get in on this worm story, pick the down days. Do not buy all at once! Again, the Inspector cannot stress this enough – this is a risky investment, but for those with a bit of spare money to spend in their portfolio and a need to speculate a bit, this could be the right pick for you.

Check out Forterra on Google Finance

DISCLOSURE: I own shares of FORTERRA ENVIRONMENTAL CORP. Always do your own research. If in doubt, don’t! For serious investors only!

Remember, tell everybody you know about Inspector Stock .com.

Worms!

Agriculture on Auto-Pilot - Hemisphere GPS

2008-04-08T22:22:00.004-04:00

Agriculture is a re-occurring theme on InspectorSTOCK.com. Back in September the Inspector profiled Hemisphere GPS. It has done well since then. Back when the Inspector profiled HEM, it was trading at $2.19. Today, April 8 2008, it closed at $3.33. Don’t despair, there is still time to get in on this stock. Its going higher.

Hemisphere GPS Inc is engaged in the design, manufacture and sale of global positioning system (GPS) products for guidance and machine control applications mostly used in agriculture, but also for use in marine and mining. A huge part of their business is providing farming vehicles such as tractors with driver assistance or “auto-pilot.” The GPS couples with auto-steering platforms to eliminate overlap. Ultimately the systems eliminate driver fatigue and reduce input costs. On December 20, 2007, HEM acquired all outstanding shares of Beeline Technologies Pty Ltd, which provide “drive by wire” technology and OEM tractor integration.

Below is a link to an absolutely amazing interview with Steven Koles, president and CEO of Hemisphere GPS. Check it out! This interview is very informative and gives you a chance to hear from the CEO directly. If you plan to buy this stock, you must check it out.

Interview with Hemisphere GPS's CEO. Its a few minutes in . . .

Check-out HEM on Google Finance

In short, HEM is a screaming buy.

As the CEO Steven Koles mentions in his interview, GPS/auto-steering is no longer a discretionary product for strip tilling but more and more an essential part of the agriculture business. It reduces input costs and ultimately pays for itself. Agriculture is under tremendous pressure to meet rising demands in an increasingly unpredictable climate. Technology in general helps to maximize yields so farmers can cash in on rising crop prices. In short, farmers have every incentive to invest in technology, so they can sell more of their precious commodities.

DISCLOSURE: I own shares in Hemisphere GPS. You might want some too! Do your own research. For example, watch the interview.

Bunge Jump (I Love Ag)

2008-04-07T15:37:00.008-04:00

Back on March 17 2008, the Inspector re-recommended Bunge. The stock price had just taken a dive, and like a vulture, the Inspector recommended diving in and enjoying the easy pickings – there is nothing quite like fresh road-kill – mmmm. At around $90, it was an easy call. And there was ample time to enjoy this feast. On March 31st the stock saw $86 – tasty indeed! Especially delectable at the peak of $104 today (the stock is/was trading between $101 and $104 on April 7th.) Long story short, 15% in a couple of weeks is always nice.

Check out Bunge's Chart on the Google

The Inspector recommends selling a portion of your position if you have just made over 12% - 15% Re-buy some more on a dip. This is just a suggestion – in reality, you should be good either way. If tomorrow the stock runs up some more, this suggestion is even more relevant, if it trickles back down you may want to hold on.

The agriculture sector is red-hot. Bunge is benefiting from this along with most other stocks in this space. The crazy sell-off of Bunge back in March was the reason behind the Inspector’s high recommendation. It is not necessarily the best Ag play, but was a decent short-term trade, and for you patient investors, remains a decent long-term play. The Inspector’s long-term target for Bunge is in the $105 – $115 range. If/when Bunge pulls back to around $90, do not hesitate, take the jump – dive in for some more.

On the other hand, if you’ve sold off a position in Bunge, you may want to hold on to your remaining Bunge position and pick up some Agrium with the cash you made from selling your Bunge position.

Agrium is a global producer and marketer of agricultural nutrients, industrial products and specialty products. Agrium produces and markets three primary groups of nutrients: nitrogen, potash, and phosphate, as well as controlled-release products and micronutrients.

Check out Agrium on Google Finance

Agrium has recently run up a lot, so best bet is wait for some dog-day afternoons when there is a general market sell-off/panic/pull-back – we are in a volatile market right now and there should be some opportunity for getting in while the getting’s good.

Bottom line, the Inspector recommends both Bunge and Agrium. Of the two, Agrium has more explosive growth potential, where-as under $90, Bunge represents crazy value. Buy these Ag plays on the dips.

DISCLOSURE: I own shares of Bunge and Agrium. Do your own research - don't believe everything you read or hear. Its all about the facts, nothing but the facts. Opinions are worthless (if they are not backed up by facts and hold up under scrutiny).

April Fools! Not Really – Well, Maybe

2008-04-01T22:36:00.014-04:00

It’s never easy to deliver bad-news, but here it goes. The Inspector’s picks to date are down collectively 2.29%. It would be easy to point out that in such a dismal market where many portfolios are down 20%, 2.29% aint bad – but it is. This is no April fool’s joke – these are the facts. The Inspector lives by the facts, good or bad.

In reality, many of the stocks that are down since 1st mention were re-mentioned at later dates with recommendations to buy – these are good stocks that happen to be down. Bunge is a strong buy right now. Royal Bank is a strong buy. Petro-Canada is a buy. GE is a buy. BCE is a buy. Teranet is a buy.

Looking at the spread-sheet below, you will notice that the all-star picks are RIM, Potash and Hemisphere GPS. Kick-ass! If you own these stocks, congrats!

Now, for the ugly picks. These are the dogs that should taken out back and given the Old Yeller treatment: Nova Chemicals and Transgaming. BANG!, BANG! As the late Hunter S Thompson would say, "Die you filthy animals!"

Another disappointment, though by no means a rabid dog, is Anatolia. There is still faint hope for Anatolia, but really there are better places to put your money. The Inspector recommends selling this puppy.

Another pair of questionable animals are Cameco and Thomson - they have been disappointing though their performance is not entirely unexpected. There is more up than down on these suckers.

Now for the Indian Tiger. Despite making head-lines for a $2500 car and buying Land Rover and Jaguar, Tata Motors has been somewhat of a flat-liner. If you own this, I would hold on to it.

A nice pick has been good old TAP. Molson Coors has done very nicely and is still a buy. Nothing like hitting the bottle after you shoot the rapid dogs - just kidding, drink responsibly (then kill the rabid dogs).

Well, now for some grand-fatherly advice from the Inspector. Make sure you have your exit strategies ready with any stock – especially in these crazy times. Markets are hugely volatile right now. Stocks seem to run up modestly on good news, while any bad news simply destroys them. It is tempting to buy into so-called value plays, but be careful - some of the stock declines are justified, while others are not. And sometimes, even when the research looks good and the numbers point to a healthy business, the stock drops anyway.

Below is an updated spread-sheet that tracks the Inspector Stock picks. It represents a very pessimistic view so that readers will know that the Inspector is not hiding anything or sugar-coating the negative news.

Here's a link to the spread-sheet for all you email subscribers that can't see the embedded object - shame on you for not visiting the site!

Do not have faith! There is no such thing as hope in the stock market. That will lose you more money than handing your wallet to a crack-addict. Stick to the facts – good or bad. If you question owning a stock when it is down then you should not own that stock. You must be comfortable owning a stock even when it is down. This is true of Bunge, PCA and GE. (BCE also belongs in this category, though it is a calculated bet with favorable odds – its downside relatively small compared to the upside).

A very safe bet right now is CN Rail. This is a long-term buy and hold stock, rare in the current volitile market.

Potash is a screamer and so is RIM – despite high PE ratios – solid.

HEM Hemisphere GPS is at a very attractive entry point right now. So is AG Growth Income Fund. Canadian Hydro developers is a great buying opportunity – way undervalued stock. Boralex is not bad.

Want to sleep at night? Teranet and CML Healthcare.

Do your own research!

Bang!

End the Hurt - Pick up some Bunge

2008-03-17T10:54:00.013-04:00

Times are tough. Investors need to be tougher. Here’s a stock pick for these crazy times: Bunge (NYSE:BG).

Check out Bunge on Google Finance

The inspector has profiled Bunge before. This is part of the red-hot agriculture sector. Share prices recently dropped severely on a cancelled senior note offering. Since that precipitous drop, the stock price has rebounded a bit. Its still trading at an attractive price. In a world of hurt, agriculture still has some positive growth and earning potential.

One of the best stock picks made by the Inspector has been Potash. Investors who feel they have missed the boat on that incredible run up might do well to invest in Bunge (Potash is up over 50% since October and is holding up during this general melt-down).

DISCLOSURE: I own shares of Bunge. As always, do your own investment research. There is no such thing as a risk-free investment. Relative to the instability of financials, agriculture is a sector that can offer some stability and growth.

A NICE Opportunity

2008-02-22T16:15:00.006-05:00

Nice Systems is an Isrealli tech company that provides both multi-media recording solutions used primarilly for call centers and telephony applications as well as security solutions for private and public sectors. Nice has been a personal favorite stock of the Inspector's for the last four years. Recently, it has touched lows not seen for a very long time. It is the Inspector's sincere belief that NICE is suffering from "guilt by association." NICE is heavily associated with financial institutions, since they are their main customers. However, as pointed out recently by UBS analyst Darren Shaw, there is a lot of growth left for this stock.

UBS analyst Darren Shaw upgraded NICE to "Buy" from "Neutral" and said investors may be overlooking the company's merits by taking a "non-selective" view of its sector. NICE serves businesses such as call centers, financial and government institutions and air-traffic control sites.

Investors have been concerned about technology companies selling to large corporations, especially in the financial-services sector.
Shaw estimates that about 30 percent to 40 percent of NICE's revenue is from financial institutions of some kind. But he noted that this includes "credit card issuers, collection agencies, retail banks and other entities not directly linked to subprime issues."
The analyst said NICE is also seeing growing demand for its security products, "and is becoming increasingly involved in large-scale deployments."
"We believe these early stage markets offer significant scope for growth in the coming years," Shaw added. And with $400 million in cash, the company will also likely to make at least one acquisition this year in the security market."

Check out NICE on Google

The appetite for call centers and therefore call center technology is unrelenting. A recession in the US will not change that. The explosion of call centers around the globe continues to expand. Secondly, the penetration of call center technology into previously unsophisticated operations now made affordable by open standards most explicitly demonstrated by Voice over IP and VXML has made call recording and video/desktop capture more pervasive.

Lastly, the plight of both public and private sector in regards to security bodes well for NICE. As sad as it is to admit, September 11 was a boon to business. Homeland security budgets grew massive and a lot of that money went into the kind of tech that NICE provides. The point is, that need is not going away. The growth may not be as dramatic 7 years after September 11, but it is still a priority for all governments. In short, the need for what NICE provides is not going away anytime soon.

At the current prices, NICE is looking NICE.

DISCLOSURE: I own shares of NICE ADR. Always do your homework. Say no to drugs. Eat your veggies. Be NICE to your MOM!

ALL ABOARD! CN RAIL

2008-01-25T14:17:00.000-05:00

The conservative stock recommendation for this week is . . . drum roll . . . Canadian National Railway (CNR trades on TSX). Yes, this is the stock Bill Gates owns in huge quantity. Yes, this is the sector Mr. Warren Buffet is invested in as well. Think you are smarter than those two? CN Rail slid in latter part of 07, but recently bounced on good forth quarter earnings and an announced 10% dividend increase. The future is bright for this stock.

UBS analyst Fadi Chamoun said in a note to clients Wednesday that earnings are likely to pop in the coming years. “The current recession in the housing market and the rapid appreciation of the Canadian dollar have masked CN Rail’s earnings power in the past 12 months,” Mr. Chamoun said in a note to clients. “We believe that CN Rail’s continued investment in productivity, ongoing share buyback and projected ramp-up of some of its revenue initiatives... build a solid base for recovering earnings power in the next two years”

Check out CNR’s chart on Google Finance

2008 has already proven to be volatile and looks to be a very tricky year for investors. The most minute good or bad news sends massive ripples through the market. The Inspector recommends sticking with a solid stock, through good and bad. CN is such a stock. Buy it on the dips.

As always, never buy or sell all at once. Average out your price by buying or selling in increments, usually in about two or three different transactions. Too many people seem to think that buying all at once is cheaper, since it incurs lower transaction fees. Think about how little a stock price needs to move to pay out that transaction fee.

Another piece of advice: keep your eye on your target. For CN, the Inspector’s target is to buy and hold, barring any catastrophes. The Inspector plans to add to the position on dips, or in the case of a substantial run-up, sell a portion. It is good to remain flexible.

DISCLOSURE: I own shares in CN Rail. It’s a good company and a good sector to be in. However, don’t take the Inspector’s word for it – always do your own research!

Greed is NOT Good!

2008-01-21T11:57:00.000-05:00

You don’t need the Inspector to tell you that the markets are in trouble. The Toronto Stock Exchange plunged more than 500 points in early trading Monday, following steep declines in the European and Asian stock markets amid investor pessimism over the U.S. government's stimulus plan to prevent a recession. Precious OIL is down below $90. The key point of all of this, besides the pain and bloodshed, is that the US Fed WANTS commodities to take a hit. They want oil prices to weaken. What this means to investors is that right now commodity stocks are on sale. However, this does not mean all stocks have bottomed.

Best advice the Inspector has is to limit your exposure to over-valued stocks. For example, Potash recently crashed back to earth. Back in December the Inspector profiled Potash a second time, after a huge run up. I sold a significant portion of my holding and hopefully you followed suit if you were in a similar circumstance. Within a few weeks after selling a significant portion of my holding, Potash ran up even further. Rather than kick myself for missing $146, I was happy to have locked in a profit and now that is has come crashing down I can arrogantly say “told you so.” Never get too greedy! When you have a chance to take 15% off the table, especially with a volatile stock in a volatile market, do not hesitate!

The Inspector’s new year’s resolution is to be extremely vigilant about the investment advise published. 2007 was a good year, but 2008 looks to be a very tricky year and nothing can be taken lightly. One of the improvements for the InspectorSTOCK.com blog will be more frequent updates on all stocks mentioned. Often times a stock is profiled and not revisited once circumstances change – the Inspector does not want to mislead. For this reason, the Inspector will regularly update all stocks mentioned. None the less, the onus is always on you the reader, to research fully any investment advice presented. Don’t trust anyone! Certainly not me! Trust the facts!

SELL! In case you did not read the 2007 Inspector STOCK re-cap, several stocks have fallen out of favour with the Inspector since profiling them. They include Canadian Tire and KRY. This was communicated January 1st 2008. The Inspector now adds to the sell list, Rogers Communications.

BUY! Petro-Canada is a good value. Be prepared for ups and downs – long-term though, this stock will gain modestly and allow you to sleep at night.

In the next blog entry, the Inspector will profile a company not covered before that will allow further restful nights. A conservative stock that you can count on during a very perilous investment climate. Have no fear, the Inspector is here!

DISLCOUSRE: I own shares in Petro-Canada, Potash, Rogers and CRYSTALLEX. Chavez is a commie bastard!

Read My Lips - BCE DEAL IS GOING TO GO THROUGH!

2008-01-18T21:52:00.000-05:00

Back in August, this site profiled BCE and the proposed leveraged buy-out by the Ontario Teacher’s Pension Fund - if it goes through it will be the largest LBO ever. The take-out price is set at $42.75 and the deal is now due to close in the 2nd quarter of this year. Back in August, BCE was trading around $39. The deal was thought to be pretty close to a sure thing.

With the recent market turmoil and investor anxiety, BCE has gone down further. BCE closed today, January 18 2008, at $36.37.

Well, the good news is that the Inspector still thinks this deal will close and recommends BCE as a buy.

Understand the risks – if the deal does not go through, the stock price will drop like a stone to around $24. However, even this worst-case scenario should be temporary, as BCE has assets many other suitors covet. In the unlikely event that the Ontario Teacher's Pension Plan deal does not go through, BCE would likely be able to garner other offers. This would be a very painful and bumpy road, but good to understand. The biggest stumbling block for the deal to close is banks coughing up the money for this leveraged buy-out. We all know about the credit squeeze taking place, and this is largely the reason why BCE is trading down. Investors are worried sick.

Well, as is often cited by the Inspector, other people's panic can be to your advantage. The panic bodes well for investors with strong stomachs. With BCE trading at $36 and change, there is an opportunity to make more than 15% in about 6 months. Nothing is certain in life except death and taxes (and even those are and have been challenged! Witness Wesley Snipes fighting the IRS and Dr Ron Paul running for the Republican nomination on a platform that includes abolishing the IRS! As for death, well, that’s still frozen in time, so to speak.)

In any case, the Inspector won’t promise you immorality or end taxes (though if you live in the US, you might do well to get behind Ron Paul and get the word out!). What the Inspector will do is provide you with sound investment advice. In a really nasty market such as the one we are in, BCE is a nice opportunity to make some cash.

DISCLOSURE: I own shares of BCE. Always do your homework.

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PEACE!

The Inspector Stock 2007 Re-cap - Happy New Year!

2007-12-31T15:20:00.000-05:00

2007 - The year of the sub-prime credit crunch, sky-rocketing OIL and the soaring Canadian dollar. Tough times for some. Not for the Inspector.

Had you bought every single stock mentioned in the Inspector's blog in equal amounts, at the time of posting, you would be up more than 19% today. Since inception in late June 2007, all the stocks profiled until the last day of 2007, have collectively increased in value approximately 19%. This includes a stock that was not recommended at the time of writing (Cameco CCO) and which negatively impacts the over-all result. This was left in so that even the most pessimistic analysis of the picks will hold up under extreme scrutiny. The results are the proof. Do not trust the Inspector: Trust the facts. Also not included in percentage are distributions payed-out by the various income trusts mentioned or divid-ends, which also negatively impacts the over-all result. In short, it was a decent year for the stocks mentioned.

Best performings stocks picked by yours truly: Hemisphere GPS Inc HEM; RIM; Potash; AG Growth Income fund and Google. Several nice conservative gainers in the mix: CML Health Care, Molson Coors, Tata Motors, Bunge. The biggest dog by far was KRY and should be sold - Chavez is a commie bastard. Canadian Tire is now also a sell. Several of the picks made in 2007 are down, but are still "buys" or, in the case of Cameco, is just now rated a "buy" by the your humble narrator: BCE, Boralex, GE, CCO, Petro Canada, Thomson, Royal Bank, Anatolia.

Below is the complete list (EDIT: REFORMATTED)

Feel the Effects of the 52 Week High - POT

2007-12-03T16:41:00.000-05:00

As recently as October 29th, I have been recommending Potash. Well, today the stock hit its 52 week-high and well, its quite a buzz. The high was caused by speculation of a takeover. Well, I never buy on speculation, but I sure as hell sell when I can lock in some bubble profit - I sold a good portion of my holdings today at 136 and change.

According to BMO analyst Mark Steele, "a recent 'abnormal' move in the company's credit default swap spread (which reflects the perceived risk of owning a company's debt), may mean that the world's biggest maker of fertilizer will be taken over or is in negotiations to merge with another company." To me this is a win/win situation. Sell part of your position and lock in profit. Now, if the supposed take-over actually happens, the rest of your shares will accumulate more profit. If the crystal ball is wrong, and the take-over does not go through, eventually the price will drop down to an attractive price, and you can re-buy.

In these dark days of credit crunch panic, its nice to get a little early Christmas present. Thanks Santa.

I am still long on fertilizer and agriculture in general. Stay tuned!

DISCLOSURE: I own shares of Potash Corporation of Saskatchewan Inc. Always do your own research before buying a stock or any other investment. Most important, read my blog!

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Hey, I do this for free - help a brother out.

JUST SAY NO TO DRUGS

Where Have All The Good Times Gone?

2007-11-24T10:47:00.001-05:00

I read an article recently about Mr Satyajit Das. Mr Satyajit Das predicted a credit crash in a series of speeches last year, thus correctly predicting the global credit mess sparked by the subprime market meltdown we find ourselves affected by. According to Das, “a diet of cheap and excessive debt has created a bloated financial system.” He now predicts that a slow burn will take place, similar to the 70s, where inflation halved portfolio values over a period of 5 to 7 years.

According to Mr. Das, inflation is going to go way up. Thus, commodities and blue-chips is where your money should be. “Owning debt of a bank or sovereign debt like U.S. Treasuries – in other words, assets with fixed returns – may not be very bright.”

Again, stocks in companies with real cash flows and sustainable business are good in high-inflation environments because they maintain relative value, as opposed to fixed securities.

Inflation or not, conservative is definitely the key word. This has been a tenet of Inspector Stock’s investment strategy from the beginning. It just so happens the market turmoil right now is ever more relevant to my strategy.

For all you Canadians, right now is a great time to pick up US blue-chips such as GE. Canadian dollar is strong and thus buying units in US dollars is to your advantage. I have profiled GE in the past, and I love them “long-time”, as the saying goes.

In general, the idea here is modesty. Too many investors are blinded by the prospect of quick money, and in the process lose their shirts. Don’t think of this as gambling, but as gardening. You need to plant the seeds, tend to the garden, and care for your money plants as they grow. Keep on top of the geo-political weather patterns. And be prepared to cut and run, which kind of breaks the gardening analogy, but none-the-less – be prepared for the worst. As the kung-fu master would say, patience, young grasshopper, patience.

And patience is a whole lot easier to swallow when you are confident in the sectors you are invested in and the specific companies within that sector. As well, when your portfolio is sufficiently diversified.

For example, oil, gold and agriculture – I feel damn confident in all three. A day to day dip, sell-off and rise, does not alarm me. I expect it and believe long-term I’m golden (black gold, golden crops, bling bling). In fact, buying on dips can be part of your strategy. Or, if you are a gambling person with disposable income, you could chose to trade on the volatility. I do the former.

So, keep up the good fight – there is always money to be made, even in the tough times.

DISCLOSURE: I own shares in GE. Always do your homework. Don't believe the hype. Be good. Be bad. Don't get caught!

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Have I emphasized this enough? INSPECTORSTOCK.com.

Specimens and Medical Imaging – CML Healthcare

2007-11-05T14:04:00.000-05:00

Looking for a safe place to park some money and generate steady returns? Back in June, I profiled and recommended CML Healthcare Income Fund. Since then, it has risen about 6% and paid monthly distributions of about 8 cents a unit (adding an additional 3% ontop of the 6% unit price increase for a decent six month increase of about 9%). CML Healthcare Income Fund is still a good investment today.

Check-out CML on Google Finance

CML recently reported revenue of $78.1 million, beating most expectations. RBC maintains their outperform rating "based on management's continued execution and ability to make accretive acquisitions." As pointed out by RBC, the current payout ratio (Income Trusts do not invest cash but rather pay it out to unit-holders in regularly scheduled distributions) is about 84% and the company has indicated it has a long-term goal of paying out in the low 90% range. This likely means higher distributions for unit holders in the future.

RBC has a price target of $17.50.

The market for Specimens and Medical Imaging is not going away – if anything, there is strong commitment from Provincial government in Ontario to decrease wait-times for medical imaging, and thus this means more business for CML.

Bottom line is that this is an ultra-safe investment with a decent return.

DISCLOSURE: I own units of CML Healthcare Income Trust. No matter how safe this investment is, there is always risk involved. Like crossing the street, keep your eyes and ears open.

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Still Smoking - Buy Some Pot!

2007-10-29T15:03:00.000-04:00

Since writing my last profile and recommending the stock, Potash Corporation of Saskatchewan Inc reported good earnings and the stock has risen nicely. The stock price has also risen due to a recent event that may drive prices for potash even further. On October 26, Silvinit announced that it may have to suspend potash shipments due to the sinkhole created by last year's flooding of Uralkali's Berezniki #1 potash mine. This could cause a significant increase in potash prices. Good news for POT! In fact, POT moved over 9% last week on the TSX. That’s a pretty good buzz for investors.

Check-out Potash on Google Finance

Based on past agronomic studies in the U.S. Cornbelt region, failure to apply potash can have significant negative impacts on corn yields for soil regions deficient in potassium. Corn futures prices for the 2008/2009 crop year are above $4.00 per bushel - corn farmers have significant incentives to maximize crop yields. According to a Royal Bank of Canada (RBC) analysys, at current fertilizer prices, potash represents about 3% of a farmer's cost of growing a corn crop following a previous crop of soybeans. There is significant room for potash prices to move higher.

The expected rise in potash prices prompted RBC to boost their target price for POT from US$115 to US$145. RBC cites higher than historical futures prices for other major crops as well as corn and that all bodes well for the fertilizer business.

Put that in your pipe and smoke it!

DISCLOSURE: I own shares of Potash Corporation of Saskatchewan Inc. Always do your homework before buying a stock. Say no to drugs!

Open your mouth and say " Inspector STOCK .com "

Send all feedback, questions, concerns to: feedback@inspectorstock.com.

Reap what you sow - with Potash

2007-10-18T19:02:00.000-04:00

Well, as the saying goes, you reap what you sow. And the harvest this year has been good for farmers and is looking great for farming supply companies. As such, I’ve already dedicated two blog entries to playing the agriculture supply business. I recently profiled Bunge Ltd and back in September I covered a couple others, Ag Growth Income and Hemisphere GPS Inc, inspired by a newspaper article covering an agricultural investment conference. Recently, the legend himself (love him or hate him), Mr. Jim Cramer has also jumped on the agriculture bandwagon and recommend Bunge. Great minds think alike.

As stated before, the driving forces behind this play are: rising demand for grains in the developing world; use of crops for Ethanol and other bio-fuels; rising world population; unpredictable weather making the farming industry more dependent on technology and chemistry; and finally, less farming land making farming more dependent on technology and chemistry for greater yields. In short, a classic case of rising demand and a decreasing supply.

The big name in Canadian agriculture supply, especially fertilizer, is Potash, based out of Saskatchewan. I have been waiting to pull the trigger on this one for a while now, and just yesterday bought it at its lowest dip. I am willing to ride this one through-out the winter, and pick more up if it drops. As I stated before, this sector has got a bull-run going. So, like Bunge, buy this baby on the dips.
As mentioned before, farming companies are now flush with harvest dollars due to a great year featuring record crop prices (think corn!) and have money to spend on equipment and supplies. The next quarter for Potash and Bunge should reflect a bit of that. Good long-term upside. Plant those investment seeds and watch the dollars grow!

Check out Potash on Google Finance

FYI: Potash can easilly move up or down 3-5% in day - time your buy if you decide to pick some-up.

DISCLOSURE: I own shares in Bunge Ltd and Potash. As always, do your own research before buying a stock.

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Its All About Growth - Bunge Ltd

2007-10-09T19:01:00.000-04:00

Back in September, I wrote about investing in agriculture supply companies. To paraphrase a quote from my earlier blog entry, some of the reasons that agriculture is booming are the demand for food products based on rising income levels in developing countries prompting an increase in the consumption of protein, the need for more grains to generate ethanol and worldwide population growth. "At the same time, the amount of arable land is shrinking, water supplies are under duress, weather is less predictable and yield improvements are slowing." In short, higher demand, less supply.

A company that will reap the rewards of this economic equation is Bunge Limited. To quote Google Finance:

Bunge Limited (Bunge) is a Bermuda-based holding company. Through its subsidiaries, the Company operates as an integrated, global agribusiness and food company operating in the farm-to-consumer food chain. It operates through three divisions: agribusiness, fertilizer and food products. These divisions include four segments: agribusiness, fertilizer, edible oil products and milling products.

Check out Bunge on Google Finance

Bunge's stock has run up recently, but there is still room to grow (no pun intended). Buy it on the dips! Big time! Orders for fertilizer accross this sector are massive going into the next several years. As farmers sell their crops at record price levels, they are flush with money. And they need ever greater crop yeilds. Buying into agri-business suppliers is a good investment. Bunge is a great company with great upside.

DISCLOSURE: I own shares of Bunge. Always do your research before you buy. Half a stock's worth is the sector its in.

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All About the Bling - Gold - Anatolia Minerals

2007-10-03T11:41:00.000-04:00

Its been a while since my last posting – but I’m not gone. The Inspector is in this for the long run.

After a six-week run-up, gold has pulled back a bit. However, long-term the future looks good. As the US dollar climbed for a second day against the euro, gold prices dropped. The six-week rise of gold really was on the back of a weakened US dollar in the first place.

This morning (October 3), RBC Dominion Securities bumped up its gold price forecasts for 2008 and 2009 and added a forecast for 2010.

RBC Dominion Securities gold price forecasts:

Gold (US$/oz)

Estimate for 2007 = $670

Estimate for 2008 = $730

Estimate for 2009 = $760

Estimate for 2010 = $790

RBC Dominion Securities also bumped up their price target for three major gold stocks, and increased the rating for one:

Goldcorp (G) - US$30.24 - Price Target Increased

Outperform, Average Risk, Price Target: US$38.00 (was US$30.00)

Kinross Gold (K) - US$14.10 - Upgrading to Outperform

Outperform, Average Risk, Price Target: US$21.00 (was US$15.00)

Barrick Gold (ABX) - US$39.25 - Increased Price Target

Sector Perform, Average Risk, Price Target: US$44.00 (was US$32.00)

And now for a speculative stock, courtesy of RBC. Anatolia Minerals, which RBC rates top pick with a price target of $9.00.

Check –out Anatolia on Google Finance

RBC adjusted its price target to reflect the approaching construction phase. ANO shares are in a holding pattern as the company awaits the issuance of environmental permits that would allow construction of the Copler gold mine in Turkey to commence. Investors are likely also awaiting the outcome of legal proceedings in Turkey related to environmental permits for Eldorado Gold's Kisladag mine.

DISCLOSURE: I own shares in Goldcorp and Anatolia. I do not own shares in Barrick or Kinross. Always do your own research before buying a stock.

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Banking on Agriculture

2007-09-11T15:02:00.000-04:00

Well, I've sounded like a broken record lately, praising Canadian banks repeatedly, especially Royal Bank of Canada. In an article today in the Globe, Toronto-Dominion Bank's Ed Clark is quoted as saying "the current turmoil in credit markets is 'a very good thing.'

He said Canadian banks are “in very good shape” as the U.S. subprime mortgage market crisis plays out.

However, in the wider world “it's going to be quite ugly in the next few months,” Mr. Clark said.

He noted that the housing slump concentrated in seven U.S. states has already hit banks as far afield as Australia and Germany, and “I think people haven't gone to confession yet.”

Meanwhile, investors “are dumping quality assets because they have to” in order to cover losses on low-quality debt.

Still, “This is good, because if people do stupid things and don't pay a price for it, you don't run a good market system — and you've got to cleanse this out.”

Asked how long the cleanout will take, Mr. Clark replied: “I'm sort of hoping that by next March, we're through this.”

The key to playing the subprime mortgage market crisis is picking up those quality assets. Some of those quality assets are the big Canadian banks themselves. Accross the board, the future looks good for them.

But enough about Canadian financials and the credit crunch for now - lets look at something different.

I read an article the other day that looked at the boom in agricultural markets - partly prompted by fast expansion in the biofuel business. As the aticle states, this has opened up a world of potential opportunities for adventurous investors. The article high-lights three main companies.

As luck would have it, today, the stock price of one of the companies mentioned that I wanted to profile since reading the article four days ago, has shot up.

Check out Ag Growth Income Fund on Google Finance

Ag Growth Income Fund ... is a Winnipeg-based firm that sells grain handling equipment, such as conveyors and storage bins, across North America. It has benefited from the explosion in corn production that has followed the ethanol boom, chief executive officer Rob Stenson said yesterday, mainly because corn growers store the grain on their farms for just-in-time delivery to the ethanol plants.

The stock has gone up $2 since the article was published - coincidence or not?

Hemisphere GPS Inc. is another company mentioned in the article that "sells an entirely different product to farmers: Global positioning systems that help them precisely plant or harvest their fields, sometimes even automatically controlling the steering on their tractors." At an agricultural investment conference that he organized in Toronto, Mr. Winslow said that "Hemisphere's prospects are good because this fall's harvest will likely give farmers lots of discretionary income to buy the products. He rates the company a 'strong buy.' "

All in all, the point of the article and the agricultural investment conference was that a wide range of companies that service the farming sector is poised to do well.

Mr. Winslow predicts that demand for food products will steadily rise as higher income levels in Asia prompt increases in consumption of protein, more grains are used to generate ethanol and the worldwide population grows.

At the same time, the amount of arable land is shrinking, water supplies are under duress, weather is less predictable and yield improvements are slowing, he said.

That combination likely means "we are in the early to mid-stages of a multiyear secular uptrend in the global agricultural economy," Mr. Winslow said yesterday at an agricultural investment conference he organized in Toronto.

I'll be keeping my eyes on this sector over the coming months.

DISCLOSURE: I have no units of Ag Growth Income Fund, or shares of Hemisphere GPS Inc or Royal Bank.

Tell your friends and the enemies of your enemies about Inspector Stock . . .

Still Not Tired of Canadian Tire

2007-09-05T16:54:00.000-04:00

A couple of weeks ago, I profiled Canadian Tire and recommended CTC.A as a good value stock pick - its share price has gone down this past month along with everybody else's. However, as I wrote then, Canadian Tire is still a great company.

Beyond the bricks and mortar retail strength, I mentioned Canadian Tire’s strong online presence in Canada as a reason I like CTC.A - compare Canadiantire.ca with Walmart.ca and you will see the difference between a fully integrated online presence and a half-assed, sorry excuse for a website. CanadianTire.ca sets the benchmark in Canada for how to do online retail. CanadianTire.ca offers 100% of what it offers at its physical stores and includes useful features such as inventory checks of all of its items at each of its stores. By contrast, Walmart.ca seems to offer about 1% of its bricks and mortar equivalent, and despite head-quarters having the most efficient real-time inventory system in the world , has no inventory feature online on its Canadian website. And this has been the case for years!

The other major business area that I mentioned in my previous post that I liked, and still do, is Canadian Tire’s credit card. Last year, 30% of Canadian Tire's profit before taxes and other costs was generated by its financial services arm. Canadian Tire now boasts more than four million credit card customers (keep in mind Canada’s population is around 32 million).

With the success of its credit card business, Canadian Tire has recently announced plans to offer combined mortgage/checking/savings accounts to customers in three markets – London, Ontario; Kitchener-Waterloo, Ontario; Calgary, Alberta. In an article in today’s Globe and Mail, the strategy for Canadian Tire’s announcement was outlined as being based on the booming housing market in Canada. Yes, the US real-estate market bubble may have burst, but Canada’s real-estate market is built on solid ground – and CT hopes this continues to hold true. The total mortgage debt is expected to hit $808-billion this year, and Canadian Tire wants a piece of the action.

The expansion into mortgages could pay off for the retailer as the Canadian housing market continues to boom, analysts said.

That's in stark contrast to the housing sector in the United States, which has been hit hard by credit issues flowing from the U.S. subprime mortgage industry.

In Canada, the mortgage market has grown by 8 to 10 per cent annually over the past few years, despite warnings of a slowdown, said Mario Mendonca, an analyst at Genuity Capital Markets. And the mortgage market poses few risks because "there are very, very few mortgage arrears of defaults in Canada.

"That's been true for years. Could that end? Sure. At some point we're going to see some kind of mortgage weakness. But so far no signs."

Still, competition to nab mortgage business is "remarkably intense," he added, and some of the big banks have been losing market share.

As stated in the article, the risk is that the housing market in Canada could slow down, resulting in fewer mortgages and a softening economy could mean more defaults. True, but in my opinion, housing prices will not go down significantly, even if the housing market cools off. Thus, banks should be able to recoup most of their money in the event of foreclosures. As for defaults, well, that’s the credit game in a nut-shell – risk versus reward. Definitely, a softening of the economy affects people’s ability to pay-off credit.

All said and done, the fed is going to fight off the effects of the credit crunch to save the economy from tanking – hopefully they are successful. Hopefully, we see an interest-rate cut and all their talk about inflation ends. In any case, Canadian Tire is a nice safe blue-chip and though it has run up a bit lately, is still attractively priced. Buy it on the dips.

Check out CTC.A on Google Finance

DISCLOSURE: I do not own CTC.A but I wish I had had the cash back when it was trading around 76 and I recommended it. Oh well, with these topsy-turvy days, hopefully we'll get some more buying opportunities.

RY? - Because - That's Why!

2007-08-25T14:48:00.000-04:00

There are lots of things happening in the markets - the recent run-up in North American markets have led me to suspect that we will see a few dips in the following days. Lots of value is still available, despite recent run-ups and regardless of whether I am right or wrong. As I have said so many times, opinions are worthless - its all about the facts, jack. Having said that, based on evidence and current conditions, I recommend every stock that I have mentioned so far in my blog - every single one is still a buy - many are available at attractive prices.

This week, my favorite Canadian bank reported earnings above expectations, but still managed to drop in share price. It is indeed a very strange world we live in. RBC profit jumped 19%, they hiked their dividend, and shares dropped. Makes perfect sense.

Capitalizing on market irrationality is one of my favorite investment strategies and any time a company beats expectations and raises their dividend and shares drop, your antennae should perk up. Look for the reason why. In the case of RBC, "market expectations for the bank's earnings rose on Thursday after Toronto-Dominion's profits blew past analyst expectations." Apparently, because TD blew beyond market expectations, Royal was expected too as well. Shares for Royal shot up Thursday, and went back down Friday after the earnings report, slightly higher than what they were trading at Wednesday at closing.

Check out Royal on Google Finance

I recently profiled Royal on this blog – inspectorSTOCK.com. As I said then, I like Royal because it is a boring and conservative Canadian bank and they consistently raise their dividend. Generally speaking, Canadian banks are all very safe places to invest. Canadian real-estate continues to be red-hot, unlike in the US, and thus the mortgage business is still doing well, though some of Canada's biggest subprime mortgage lenders are cutting back due to the asset-backed commercial paper market drying up. The recent US subprime crunch has left the Canadian banks largely unscathed, including Royal, which cites “minimal” exposure to U.S. subprime residential mortgage-backed securities and collateralized debt obligations. RBC chief executive Gord Nixon also cited "nominal" exposure to the previously-mentioned asset backed commercial paper market which has recently dried up in Canada.

Another reason I like the big-five Canadian banks has to do with the effect the US sub-prime crunch is going to have on the Fed's future decisions and the bond-market, and therefore, the interest rate that borrowers need to pay for their loans and mortgages. Essentially, nobody is expecting any rate hikes any time soon and some are calling for rate cuts - this ultimately leads to low interest rates. And, since alternative mortgage lending will be more and more difficult, this bodes well for the big five, as they will surely continue to dominate in the traditional mortgage market. Of course, everything could derail if credit dries up too much, but the Fed and central banks will unlikely allow this to happen without a significant battle. This is good news for the housing market in Canada. Barring any major global market disasters that has the force to ruin everybody's economy, Canada's fundamentals are solid. So, as the saying goes, shake your money-maker!

DISCLOSURE: I do not own shares of Royal Bank yet. By the time you read this though, I very well may have picked some up. Always do your own research before buying a stock. As always, tell your friends (and the enemies of your enemies) about InspectorSTOCK.com !