Dollars and Sense
Volume 4, Number 10 │June 2013
Market Update
May 2013
Month in review
Month YTD
3.0%
S&P TSX Index 1.8%
16.7%
Dow Jones Ind. 2.2%
2.3%
15.4%
S&P 500
15.1%
NASDAQ Comp 4.0%
0.1%
11.5%
MSCI World
S&PTSX Materials
0.9%
1.2%
-3.5%
-1.3%
3.2%
5.8%
4.1%
0.4%
28.1%
-20.0%
US Dollar
Euro
British Pound
3.0%
1.7%
0.8%
4.6%
3.0%
-2.2%
Crude Oil (WTI)
Natural Gas
Gold
Copper
Aluminum
Zinc
-1.6%
-8.3%
-6.0%
3.7%
2.5%
3.2%
0.2%
18.9%
-17.2%
-7.9%
-8.0%
-7.4%
S&PTSX Financials
S&PTSX Energy
S&PTSX Utilities
S&PTSX Info Tech
Income
Brookfield Renewable
Energy (BEP.un)
How CEOs Play “Beat The Wall Street Estimate”
Submitted by Lance Roberts of Street Talk Live blog,
Recently, I wrote an article discussing the “Truth About Wall Street Analysts” and the inherent
conflict between Wall Street and individual investors. There is also another group of individuals
who are also just as conflicted – corporate executives. Today, more than ever, corporate
executives are compensated by stock options, and other stock based compensation, which are tied
to rising stock prices. There are billions at stake in many cases and the game of “beat the Wall
Street estimate” is critical in keeping corporate stock prices elevated. Unfortunately, this leads to
a wide variety of gimmicks to boost bottom line profitability which is not necessarily in
the best interest of long term profitability or shareholders. Today we will discuss four tools
that have been at the heart of the surge in profitability since 2009 and why such profitability has
failed to boost the economy.
One of the primary debates that is currently raging is whether, or not, the economy is currently
experiencing a “soft patch” of activity and is set to begin a longer sustained recovery. Such an
economic recovery is critical to support the primary thesis of a new secular bull market beginning in
the stock market. At the core of all of these arguments is corporate profitability. With the stock
market hitting all-time highs in 2013 market valuations have increased considerably. The chart
below shows the forward reported P/E ratio change from January of 2012 to present.
Can-Energy Covered
Call ETF (OXF)
Money Market Rates
Current Highest GIC rates
on the market (June 5th)
1 yr
1.90%
2 yr
2.00%
3 yr
2.06%
4 yr
2.16%
5 yr
2.30%
Fllc.ca - sasdfsasdf
seeasdfasdf
Dollars and Sense
The problem is that the price/valuation increases have come at
the expense of deteriorating corporate profitability. I discussed
this issue earnings at length in my recent report on “Evaluating 3
Bullish Arguments” but importantly was the chart below which
showed the deterioration in earnings.
June 2013
Stock Buybacks Create An Illusion Of Profitability
One of the primary tools used by businesses to increase
profitability has been through the heavy use of stock buy backs.
The chart below shows outstanding shares as compared to the
difference between operating earnings on a per/share basis
before and after buy backs.
The problem with this, of course, is that stock buy backs create
an illusion of profitability. If a company earns $0.90 per share
and has one million shares outstanding – reducing those shares
to 900,000 will increase earnings per share to $1.00. No
additional revenue was created, no more product was sold, it is
simply accounting magic. Such activities do not spur economic
growth or generate real wealth for shareholders.
Since 2009 the reported earnings per share of corporations, the
bottom line of the income statement, have increased by a total of
175% which is the sharpest, post-recession, increase in reported
EPS in history. However, at the same time, reported sales per
share, which is what happens at the top line of the income
statement, has only increased by a marginal 34% during the
same period. This is shown in the chart below.
Working For Two
In order for profitability to surge, despite rather weak revenue
growth, corporations have resorted to four primary weapons:
wage reduction, productivity increases, labor suppression and
stock buybacks. The problem is that each of these tools create a
mirage of corporate profitability. Furthermore, as I will discuss
below, each have a negative impact on investors and/or the
economy.
As productivity increases the need for employment is reduced.
Automated answering systems have been used to replace
receptionists, automated billing systems, outsourced help desks,
etc. have allowed for lower headcounts for businesses while
increasing output per person. Higher output, and lower costs,
have led to the highest profit per employee in history as shown in
the chart below.
Since the end of the financial crisis corporations have been able
to markedly boost profitability has been through increases in
productivity. In any business the highest single expense is the
cost of labor. Therefore, increases in productivity can reduce the
need for more employees. The first chart below shows
• Page 2 •
Dollars and Sense
June 2013
employment which incurs additional costs of benefits and
healthcare. The expectation is that temporary workers will
eventually become full-time employees, however, with the
impending effects of higher healthcare costs due to the
Affordable Care Act – temporary hires may be the new normal.
The chart below shows full-time employment relative to the
population.
What? You Want A Raise?
While increasing productivity will increase profitability – a large
and available labor pool, which creates competition for existing
jobs, keeps wages suppressed. Suppressed wage growth,
combined with increases in productivity have created massive
profitability for businesses. The chart below shows real
compensation per hour since 2000.
With full-time employment still near the recessionary lows it
shows that businesses remain focused on the cheapest cost of
labor possible. The chart above also shows jobless claims which
have been steadily falling since the peak of the crisis. This is due
to “labor hoarding” where businesses have literally run out of
employees to terminate or fire. However, just because fewer
people are being terminated it does not mean that greater levels
of full time employment are being created which is what is
needed to create sustainable organic economic growth.
Profit Scraping May Have Reached Its Limit
There is no doubt that corporate profitability has surged from the
recessionary lows. However, if I am correct in my assessment,
then the recent downturn in corporate profitability may be more
than just due to an economic “soft patch.” The problem with cost
cutting, wage suppression, labor hoarding and stock buybacks,
along with a myriad of accounting gimmicks, is that there is a
finite limit to their effectiveness. While Goldman Sachs expects
profits to surge in the coming years ahead – history suggests
something different.
The spike in 2012, see inset, is deceiving because the entirety of
the increase came in the 4th quarter as corporations panicked
prior to the “Fiscal Cliff.” That one time effect is now past but
higher tax rates are here to stay. Real compensation has now
fallen back to levels previously seen at the beginning of 2012 but
higher tax rates have reduced the purchasing power of individual
workers. With profitability now under pressure it is unlikely that
we will see any significant increases to compensation in the near
term particularly as real unemployment remains elevated. This
does not support the economic recovery story.
Sorry, We Aren’t Hiring Full-Time
The reason that I state the real unemployment remains elevated
is that despite increases in employment in recent months it has
been a function of population growth rather than a improved
outlooks by businesses. The issue of population growth is ignored
by most analysts and economists when discussing employment.
However, when businesses are geared for a certain level of
demand, increases in population will incrementally increase
demand requiring fractional increases in business productivity
and output. However, in order to keep costs minimized
businesses have resorted to temporary hires rather than full-time
• Page 3 •
Dollars and Sense
I say this because of something my friend Cullen Roche recently
pointed out:
“We’re in the backstretch of the recovery. We’re now into
month 47 of the current economic recovery. The average
expansion in the post-war period has lasted 63 months. That
means we’re probably in the 6th inning of the current expansion
so we’re about to pull our starter and make a call to the bullpen.
The odds say we’re closer to the beginning of a recession than
the beginning of the expansion. That puts the Fed in a really odd
position and not likely one where they’re on the verge of
tightening any time soon.”
This is a very important point. While the Fed’s ongoing
interventions since 2009 have provided the necessary
support to the current economic cycle it will not “repeal”
the business cycle completely. The Fed’s actions work to pull
forward future consumption to support the current economy. This
is turn has boosted corporate profitability as the effectiveness of
corporate profitability tools were most effective.
However, such actions leave a void in the future that must be
filled by organic economic growth. The problem comes when such
growth doesn’t appear. With the economy continuing to
“struggle” at an anemic rate of growth the effects of businesses
profitability tools have become much less effective.
This is not a “bearish” prediction of an impending economic crash
but rather just a realization that all economic, and earnings,
forecasts, are subject to the overall business cycle. The problem
with earnings forecasts, such as Goldman Sachs above, or the
CBO’s 10 year economic growth forecast, is that they have failed
to factor in the probability of normal economic recession. This is
a mistake that eventually produces very negative outcomes for
investors.
Canadian Banks: The Next 25 Years
By Tom Bradley, Steadyhand Investment Funds
It’s confirmed. We have the healthiest banks in the
world. They’ve all reported their second quarter earnings
and the numbers are spectacular. Industry leader RBC
had a return on equity of 19%, while CIBC and National
Bank were over 20%. Yes, 20% in a 2% inflation world.
These results are important because Canadian investors
are highly dependent on their banks. Bank stocks
account for 21% of the S&P/TSX Composite Index and
play an even larger role in most investment portfolios
(especially when preferred shares and bonds are taken
into account).
In contrast to other countries, Canadians have made a
potful of money on bank stocks. It’s been a great twentyfive year run in which the Big Six saw their profits grow
from $2 billion a year to almost $8 billion a quarter.
Before I take a peek into the next twenty-five, it’s
informative to look at what’s fueled the growth.
Interest rates have been a significant factor. Rate
declines have meant a steady diet of capital gains and
trading profits on the banks’ bonds and other security
June 2013
holdings. They also led to rising house prices, which has
made the consumer lending business truly hum (in the
second quarter, the return on equity of Scotiabank’s
Canadian consumer business was 35%).
Indeed, favourable real estate markets, along with the
banks’ marketing and product innovation, have helped
facilitate the indebtification of their customers. Since the
late 1980’s, Canadians’ debt to income ratio has doubled
to a world beating 160%.
As for corporate lending, Canadian banks have shown
superb discipline after learning from a series of crippling
losses on third world and energy loans in the 1980’s
(remember the LDC crisis and Dome Pete?).
They’ve also been savvy in buying and developing new
businesses that fit their client base – products and
services that can be promoted through the branch
network. Brokerage and investment banking came in the
late 1980’s, followed by the trust companies a few years
later. Wealth management started to get traction after
the millennium. Each new initiative helped the banks
transition from being service providers to where they are
today, sophisticated sales organizations.
Like I said, it’s been a good run, which begs the question
– What will the next five and twenty-five years look like?
Certainly, some of the tail winds I’ve outlined are going to
shift, or already have.
The banks’ biggest and most stable money maker, the
Canadian retail business, is getting tougher. In
aggregate, Canadians have little room to add debt and
may indeed be forced to de-leverage if house prices
and/or the economy weaken. Competition is sure to
intensify because loans, mortgages and credit cards are
just too profitable to risk losing ground.
In wealth management, the banks have become
dominant players, so market share gains will be harder
to come by. Also, profit margins may have seen their
peak due to lower fixed income returns and higher
regulatory standards for reporting fees and performance.
Other changes are in the wind, including increased
capital requirements, but they’re not all bad. At home, the
Federal Government continues to be accommodative.
It’s put up barriers to foreign competition and hasn’t
pressed too hard on conflicts of interest between the
banks’ business units. In other words, the oligopoly will
be maintained.
Beyond our borders, Canadian banks now have greater
opportunities in international and corporate banking,
areas where the competition is in full-on, ‘post crisis’
retreat. RBC is building a world scale capital markets
and asset management business. TD is already a
prominent player on the eastern seaboard and Scotia
has a stake in the ground in almost every country with
warm weather and a beach.
• Page 4 •
Dollars and Sense
When all the gusts and swirls are taken into account, it’s
hard to bet against these inherently profitable
companies. The banks’ ability to generate sales, make
acquisitions, pay dividends and buy back stock is
unparalleled. And they still have lots of room to reduce
expenses, something they haven’t yet fully embraced.
We’ll continue to have healthy banks (thank goodness),
but it’s going to be tougher for them to maintain their
torrid pace, especially if their most profitable, reliable
businesses hit the wall.
Will Labor Force Participation
Bounce Back?
by Leila Bengali, Mary Daly, and Rob Valletta
May 2013
The most recent U.S. recession and recovery have been
accompanied by a sharp decline in the labor force
participation rate. The largest declines have occurred in
states with the largest job losses. This suggests that
some of the recent drop in the national labor force
participation rate could be cyclical. Past recoveries show
evidence of a similar cyclical relationship between
changes in employment and participation, which could
portend a moderation or reversal of the participation
decline as the current recovery continues.
Since the beginning of the recession in 2007, the U.S.
labor force participation rate has dropped sharply. Some
of this decline reflects long-term demographic trends and
other factors that helped push down the participation rate
before 2007. But the recent withdrawal of prime-age
workers from the labor market is unprecedented and
may reflect a cyclical component that could reverse as
the labor market recovery solidifies. The return of these
workers to the labor force would partially offset the
longer-term demographic influences and potentially
cause the participation rate to bounce back (Daly et al.
2012, Van Zandweghe 2012). Moreover, the increase in
the number of active jobseekers in the labor force
associated with higher participation could slow the
decline in the unemployment rate.
Assessing the contribution of cyclical factors and the
likelihood of a reversal or slower decline in labor force
participation is difficult based on aggregate labor market
data alone. Such data cannot perfectly distinguish
between long-term trends and shorter-term cyclical
factors, particularly given the severity of the labor market
dislocation during the past recession. To assess the role
of cyclical factors in the current recovery, we examine
state-level variation in the relationship between changes
in the labor force participation rate and changes in
employment over several business cycles.
June 2013
Aggregate labor force participation rate trends
The labor force participation rate is defined as the
percentage of the civilian non institutional population 16
and over working or looking for work. It is largely
determined by demography, most notably the share of
the adult population of prime working age, typically 25 to
54. Younger people often are in school and older people
often are retired, reducing their respective participation
rates. The rate is also determined by long-term
socioeconomic trends, such as wider entry of women
into the labor force starting in the 1960s; changes in
income and wealth; and the availability and generosity of
government benefit programs (Daly and Regev 2007;
Daly, Hobijn, and Kwok 2009).
In addition, the labor force participation rate may reflect
short-term cyclical influences. Research suggests a
weakly pro-cyclical relationship between the aggregate
participation rate and broad economic conditions.
Participation tends to rise a bit during expansions when
jobs are plentiful and edge down in recessions when jobs
are scarce (Van Zandweghe 2012).
Figure 1
Labor force participation rate
Sources: BLS/Haver Analytics.
Note: Gray bars show NBER recession dates.
Figure 1 shows the aggregate U.S. labor force
participation rate since 1948. An upward trend during
most of the post–World War II period appears to have
reversed around 2000 when a downward trend emerged.
That trend intensified during the 2007–09 recession.
Researchers have identified a number of factors that
may account for the shift. They include the baby boom
cohort moving past their prime working-age years; the
stabilization of women’s labor force participation rates;
more younger working-age people enrolling in school;
and increased use of some social benefit programs,
notably disability insurance (Daly and Regev 2007; Daly
et al. 2009; Aaronson, Davis, and Hu 2012).
• Page 5 •
Dollars and Sense
June 2013
Because the downward trend in participation started
around 2000, it is difficult to identify the portion of the
decline since 2007 that is cyclical and likely to be
reversed as the labor market recovery continues.
Researchers have used several approaches to tease out
the cyclical component. These include comparisons
across demographic groups; across different categories
of unemployed workers and people out of the labor force
who want work; and of actual outcomes versus
hypothetical outcomes based on adjusting demographic
information (Aaronson et al. 2012; Daly et al. 2012; Van
Zandweghe 2012; Hotchkiss and Rios-Avila 2013).
These studies have found a potentially large cyclical
component in the recent participation decline.
accurately measuring the estimated relationship between
payroll growth and participation. When we weight all
states equally, correlations are weaker.
Figure 2
State employment, participation rates during recession
Changes from January 2008 to February 2010
State-level evidence
We assess cyclical fluctuations in the national labor force
participation rate by examining differences in cyclical
labor market conditions and labor force participation
rates across states (see also Erceg and Levin 2013).
Any correlations between changes in labor market
conditions and participation rates at the state level are
likely to be mirrored at the national level as well. This
assumption is not directly testable, but the approach is
potentially useful as an alternative to other methods.
Sources: BLS/Haver Analytics and authors’ calculations.
We use state-level payroll employment growth to
measure cross-state differences in labor market
conditions. Payroll growth is preferable to state
unemployment rates because it is measured separately
from the state’s labor force participation rate. Since the
unemployment rate varies with the participation rate,
cross-state analysis of the relationship between
unemployment and participation could be contaminated.
The payroll data are from the U.S. Bureau of Labor
Statistics (BLS) monthly survey of employers, while
participation rates are from the BLS monthly household
survey.
Note: Line weighted by state’s fraction of total labor force
over period.
Table 1
Correlation between changes in employment and
participation rates
Our analysis is based on state-level changes in payroll
employment and labor force participation during the
downturn and recovery periods of the recessions of
1981–82, 1990–91, 2001, and 2007–09. We define a
downturn as the period between the peak and trough in
national payroll employment. These periods are similar to
official recession dates identified by the National Bureau
of Economic Research (NBER), but they can differ. For
example, we identify the most recent downturn as
occurring from January 2008 to February 2010, while
NBER dates the overall recession from December 2007
to June 2009. The recovery is defined as dating from the
end of the national recession. The data for the 1990–91
and 2007–09 recession and recovery periods were
adjusted to minimize the effects of population estimate
revisions and the 2010 surge in hiring of census workers.
All calculations are weighted by the relative size of each
state’s labor force. This places greater weight on more
populous states, capturing the greater precision of their
employment and labor force estimates, and more
Figure 2 displays the relationship between the
percentage changes in state-level labor force
participation rates and payroll employment in the most
recent downturn. The figure shows wide cross-state
variation in the extent of job loss and changes in
participation. The upward-sloping blue line shows that
changes in employment and participation are positively
related across states. Larger declines in employment are
associated with larger declines in labor force participation
rates. This systematic relationship at the state level
between the severity of employment losses and the
decline in participation suggests that the drop in the
national participation rate may also have an important
cyclical component. Our results reinforce the findings of
• Page 6 •
Dollars and Sense
June 2013
other researchers who have found evidence of cyclicality
in the labor force participation rate.
Conclusion
Table 1 shows the results of an analysis of the
correlation between changes in payroll employment and
labor force participation in the past four recessions and
recoveries. The degrees of correlation measured by this
statistical analysis broadly confirm the results illustrated
by the upward sloping line in Figure 2. The positive
relationship in the most recent downturn shown in Figure
2 is generally, but not invariably, evident in past
downturns and recoveries. The main exception is the
2001 recession. Our analysis finds little or no systematic
cross-state relationship between changes in employment
and participation in that episode. The 2001 recession
may have been different from the other recessions in that
it was brief and mild, and its impact was concentrated in
a few sectors and states.
Although the 2007–09 downturn exhibits a strong
positive relationship between state-level changes in
employment and participation, the recovery so far does
not. This calls into question our interpretation that much
of the recent participation decline is cyclical and likely to
reverse. However, the current weak correlation between
changes in employment and labor force participation
could reflect employment’s relatively modest recovery to
date. The economy has been expanding for a sustained
period. But, as of March 2013, we have recovered only
67% of total jobs lost during the downturn. Thirty-seven
months after the employment trough in past recoveries,
employment greatly exceeded the pre-recession peak.
The U.S. labor force participation rate has declined
sharply since 2007, intensifying a downward trend that
has been evident since about 2000. Distinguishing
between long-term influences on the participation rate,
such as demographics, and short-term cyclical effects is
important because it helps us understand and predict the
future path of macroeconomic variables such as the
unemployment rate. Using state-level evidence on the
relationship between changes in employment and labor
force participation across recessions and recoveries, we
find evidence, reinforcing other research, that the recent
decline in participation likely has a substantial cyclical
component. States that saw larger declines in
employment generally saw larger declines in
participation. A similar positive relationship was evident
in past recessions and recoveries. In the current
recovery, it will probably take a few years before cyclical
components put significant upward pressure on the
participation rate because payroll employment is still well
below its pre-recession peak.
To put the current and past recoveries on more equal
footing, we calculated correlations between changes in
payroll employment and participation rates for the past
four recoveries over the periods it took for 67% of jobs to
be regained. The last column in Table 1, labeled partial
recovery, shows the results. For the 1981–82 and 1990–
91 recessions, the partial recovery correlations are much
smaller than those for the full recovery and are not
statistically significant. Thus, we may not be deep
enough into the current recovery for the typical positive
relationship between participation and employment
growth to emerge.
In the recoveries from the 1981–82 and 1990–91
recessions, the positive relationship did not emerge until
the economy had passed the previous employment peak
by a substantial margin. These results are not definitive,
but they reinforce other research that finds labor force
participation at the state and national levels may bounce
back or decline less rapidly as the current recovery gains
strength. If exceeding the pre-recession employment
peak is a prerequisite for the correlation to become
significant, it may take several years before the
relationship is evident.
• Page 7 •
Dollars and Sense
June 2013
Chart of the Month
Here's What 515 Interest Rate Cuts And
$12 Trillion Will Do To The Global Credit
Markets
"Aggressive central bank actions in response to the bursting of one
asset bubble often contribute to the creation of a new bubble," writes
Michael Hartnett at Bank of America.
"In the past 6 years, central banks around the world have cut interest
rates 515 times, increased global liquidity by $12 trillion and crushed
bond yields to the point that almost 50% of all global government bond
market cap currently trades below 1%.
The stunning collapse in interest rates across debt markets in recent
years is shown in Chart 3. For example, yields have dropped from
23% (Dec’08) to 5.6% today in High Yield Corporates, from 12%
(Dec’08) to 4.5% today for EM $- denominated bonds and from 6%
(Jun’07) to 2.6% today for Mortgage Backed Securities."
Hartnett's referring to the Asian financial crisis, which begot the
dotcom boom, which begot the recent housing and credit bubble.
The recent financial crisis has prompted aggressive actions on the part
of global central banks. And this has played out in surging bond prices
and a collapsing yield.
• Page 8 •
Dollars and Sense
Company Snapshot –
June 2013
June 2013
Freeport McMoran Copper & Gold
(FCX)
FCX - (June 6th) $31.03/share
Summary –
Freeport-McMoRan Copper & Gold Inc. (FCX) is an
international mining company. FCX is one of the copper,
gold and molybdenum mining companies in terms of
reserves and production. Its portfolio of assets includes
the Grasberg minerals district in Indonesia, mining
operations in North and South America, and the Tenke
Fungurume (Tenke) minerals district in the Democratic
Republic of Congo (DRC). The Grasberg minerals
district contains the recoverable copper reserve and the
gold reserve. It also operates Atlantic Copper, its wholly
owned copper smelting and refining unit in Spain. FCX
has its operations into five primary divisions: North
America copper mines, South America mining, Indonesia
mining, Africa mining and Molybdenum operations. In
May 2013, the Company completes acquisition of Plains
Exploration & Production Company. In June 2013, FCX
acquired the remaining 64% interest in McMoRan
Exploration Co.
Fundamental Analysis
Market Cap
Distribution
Yield
P/E ratio
Price/BV
$29.4 billion
$1.24
4.03%
10x
1.6x
Technical Analysis
Longer term – quadrant 1 – Buy
Intermediate term – quadrant 1 - Buy
• Page 9 •
Dollars and Sense
June 2013
FLLC Portfolio Tracker
Current
Company
Symbol
52 Week
Initially
Added
Recent
Price
P/E
Yield
Sell
Brookfield
Intrastructure
Partners LP
BIP.un
Hi
19.50
Low
15.50
Date
Feb 26, 2010
Sell date
Apr 20, 2011
Price
17.30
SELL
Gold Participation
and Income Fund
GPF.un
12.25
10.12
10.75
12.65
Sold
6.4%
Sell
PMT
5.90
3.31
5.03
2.84
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8.7%
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Perpetual Energy
(formerly Paramount
Energy Resources)
New Flyer
NFI.un
11.76
7.32
9.65
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Labrador Iron Ore
LIF.un
55.80
30.03
41.60
64.25
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MFI
12.06
8.47
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UIL Holdings Corp
UIL
30.33
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25.90
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5.6%
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3.98
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Sell
Black Pearl
(speculative stock with
high growth potential,
NOT Blue chip)
AGF Management Ltd
Mar 26, 2010
Sell date
Nov 3, 2010
April 27, 2010
Sell date
Aug 24, 2011
May 31, 2010
Sell date
Nov 3, 2010
June 29, 2010
Sell date
Nov 3, 2010
July 30, 2010
Sell date
Mar 5, 2011
Aug. 30, 2010
Sell date
Feb. 5, 2011
Oct 7, 2010
Sell date
Aug 24, 2011
AGF.b
19.25
13.36
16.45
11.63
Sold
12x
5.68%
SELL
Canadian Oil Sands
COS.un
33.05
24.24
26.69
31.78
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8.07%
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Pfizer
PFE
20.36
14
16.70
26.89
Sold
22X
4.25%
Home Equity Bank
HEQ
8.33
6.12
Oct 28, 2010
Sell date
Jan 30, 2013
Oct 28, 2010
Sell date
Mar 5, 2011
Dec 3, 2010
Sell date
Jan 12, 2013
Jan 3, 2011
6.55
China Security and
Surveillance
CSR
8.89
4.09
Feb 3, 2011
4.90
SELL
Proshares Ultrashort
Euro
EUO
26.40
17.64
17.45
SELL
Nuvista Energy
NVA
12.51
8.55
Apr 6, 2011
Sell date
Sept 12, 2011
May 6, 2011
9.50
Taken
over
6.50
Taken
over
18.87
Sold
9.30
6.01
Sold
SELL
Crescent Point Energy
CPG
48.61
35.30
June 8, 2011
45.03
43.30
Sold
28x
6.28%
SELL
Westshore Terminals
WTE.un
25.85
17.57
July 28, 2011
22
24.75
SOLD
16x
5.9%
*current buyout offer of $6.50
• Page 10 •
22.05
Sold
19x
5.3%
4.27%
6.5x
Dollars and Sense
Buy
Capital Power
Current
Company
June 2013
CPX
Symbol
28
22.26
52 Week
Buy
France Telecom
double up on shares
FTE
Hi
24.60
Low
17.21
SELL
Proshares Ultrashort
20+ year treasuries
TBT
41.54
21.86
Sell
Duke Energy
DUK
71.13
50.61
SELL
WisdomTree Europe
SmallCap dividend
DFE
48.15
31.04
Buy
Canadian Oil Sands
COS
33.94
Buy
Telefonica SA
TEF
Buy
Canadian Natural
Resources
SELL
July 28, 2011
23.85
Initially
Added
22.39
Recent
Price
22x
P/E
5.1%
Yield
Date
Aug 26, 2011
Apr 5, 2013
$14.23 avg. cost
Sept 12, 2011
Price
18.50
9.95
22.10
19.50
SOLD
57.75
64.85
SOLD
33.90
37.55
SOLD
18.17
Oct 6, 2011
Sell date
Nov 5, 2012
Nov 10, 2011
Sell date
Nov 5, 2012
Dec 14, 2011
20.75
19.88
7x
5.62%
27.31
16.53
Feb 7, 2012
17.40
14.69
8.5x
7.5%
CNQ
50.50
27.25
Mar 7, 2012
34.70
29.63
15x
1.0%
Repsol
REPYY
34.84
14.41
15.50
19.90
SOLD
9.5x
6.8%
SELL
Eni
E
49.65
32.44
39.50
45.30
SOLD
8.0x
4.6%
Buy
Phoenix
PHX
11.70
7.75
7.85
10.10
SOLD
9.9
9.14%
Sell
CME Group Inc
CME
60.92
44.94
55.10
60.42
SOLD
12.1
3.10%
Buy
TOT S.A.
TOT
57.06
41.75
June 5, 2012
Sell date
Nov 5, 2012
June 29, 2012
Sell date
Nov 5, 2012
Aug 7, 2012
Sell date
June 6, 2013
Sept 5, 2012
Sell date
Mar 3, 2013
Oct 10, 2012
48
50.65
8.01
5.91%
Buy
Cliffs Natural
Resources
CLF
78.85
28.05
Dec 4, 2012
29.40
21.44
5.8
7.1%
Buy
Fiat SPA
FIATY
6.47
4.19
5.19
8.07
SOLD
24
1.6%
Buy
Goldcorp
G
50.17
32.34
36.07
31.04
SOLD
17x
1.65%
Buy
Intel
INTC
29.27
19.23
21.30
24.60
SOLD
10x
4.25%
Buy
Corning
GLW
14.58
10.62
Jan 4, 2013
Sell date
June 6, 2013
Feb 8, 2013
Sell date
June 6, 2013
Mar 8, 2013
Sell date
June 6, 2013
Apr 5, 2013
13.05
14.88
11x
2.7%
Buy
BHP Billiton
BHP
80.54
59.87
May 2, 2013
65.80
65.80
11.6x
3.4%
• Page 11 •
10.65
7.6
9.0%
12x
5.2%
5.58%
Dollars and Sense
Buy
Freeport McMoran
Copper & Gold
June 2013
FCX
43.65
27.24
June 6, 2013
31.03
31.03
10x
4.03%
These stocks are chosen using the same techniques
as taught in the CIC course.
FLLC is not an investment advisor and is not setting any target prices or financial projections. Never invest based on anything FLLC says. Always do
your own research and make your own investment decisions. FLLC never recommends to buy or sell any stock. This email is not a solicitation or
recommendation to buy, sell, or hold securities. This email is meant for informational and educational purposes only and does not provide investment
advice.
• Page 12 •
Dollars and Sense
June 2013
Technical Analytic View
Date:
June 5, 2013
TSX 60:
Long Term:
(6-18 mths)

MidTerm:
(5-10 wks)

Comments:
• long term BUY signal has occurred, use the next intermediate
correction this summer to buy
Dow Jones Industrials:


• rally may begin to correct here
90 Day Interest
Rates:


• governments determined to keep short term rates low for now
• some symbolic increases (0.5% to 1.0%)
5 Yr Interest
Rates:
30 Yr Interest
Rates
Gold:


• rates have flattened


• rates should trade sideways for a long time




• longer term trend may have formed
• bottom may be forming this summer / fall
• Cdn $ seems to be range bound between $0.95 to 1.05 US
Canadian
Dollar:
LEGEND

bottom forming

buy

top forming

Sell
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- Tuesdays
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- Saturdays
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- Thursdays
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www.fllc.ca
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(FLLC) nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed
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agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof.
• Page 13 •