For a look at the week ahead check out my column in the Globe and Mail.
Here are five things to know today:
Me? Scared?: Futures are soaring and gold is advancing to new records above $3,800 for the first time. Equities are bouncing back after the S&P 500 fell last week for the first time in four weeks while the TSX notched a modest weekly loss after seven weeks in a row of gains. Gold’s rally perhaps is reflective of the risk of a US government shutdown. As of this writing there is no deal to fund the government past tomorrow. However many economists do not believe it will have a major impact on the economy as long as it remains short lived. It could affect markets near-term especially because we are expecting jobs data on Friday. The data vacuum would come at a time when valuations continue to be a lingering concern. A lot of chatter this morning about the “Buffett indicator” flashing warning signs. In 2001 he wrote that when the aggregate market cap as a percentage of GDP hits 200% “you are playing with fire.” Today it stands at 217% – a record. What about the TSX? Scotia’s strategist says it is not as cheap as it used to be, but “still has room to expand.” “…The (forward PE) ratio remains below the one standard deviation level from its long-run average, suggesting valuation is high, but not overly stretched either,” wrote Scotia’s Hugo Ste-Marie.
Something in the water: Watch Barrick Mining after the company announced long-time CEO and industry veteran Mark Bristow is “stepping down.” No reason was given for his sudden departure. The company has appointed Mark Hill as the interim CEO effective immediately. Hill has been with the company since 2006. Bristow has been at the helm of Barrick for seven years, since the merger with Randgold. The sudden management change doesn’t come with a profit warning, the company said they expect to deliver in line with their expectations. The company says they are searching for a permanent successor to Bristow. TD’s Steven Green says investors will have mixed emotions about this “highly unexpected” departure. “(Bristow’s) tenure was marked by portfolio rationalization, meaningful balance sheet improvement, and the recent emergence of the Fourmile discovery. However, there have been challenges; with operational issues, missing guidance a couple of times in recent years, and public disagreements with Chairman John Thornton over M&A strategy,” Green wrote in a note to clients. In an odd coincidence, Newmont Mining also announced a CEO change. Tom Palmer will resign at the end of the year as CEO and the current Chief Operating Officer, Natascha Viljoen will become new CEO. Unlike Barrick’s announcement, Newmont says this is part of long-term leadership succession planning. A field dominated by men, Viljoen becomes the company’s first female CEO in its over 100 year history as she takes lead of the most valuable gold company in the world.
Higher: Cannabis stocks are ripping in the pre-market after US President Donald Trump posted a video yesterday about the medical benefits of “hemp derived CBD” for seniors. Shares of US cannabis ETF, MSOS, are soaring 18% in the pre-market. Tilray (+18%), Cronos (+9%) and Canopy Growth (+12%) are also pumping. Trump said that covering CBD in Medicare would be the most important senior health initiative of the century.
Levered to the gills: Electronic Arts is popping 5% this morning after announcing it will be sold to a group of private equity investors for $55 billion making it the largest leveraged buyout on record according to Bloomberg data. News of the deal leaked Friday and the stock soared 14%. A consortium of investors including Silver Lake, Saudi’s Public Investment Fund and Jared Kushner’s Affinity Partners will take Electronic Arts private at $210/share (an all-time high for the stock). The video game maker has struggled as video game sales have slumped since the pandemic. Despite this, there seems to be a lot of interest in the sector. Recall, Microsoft bought Call of Duty maker Activision Blizzard two years ago.
Buy the dip: Scotia is upgrading Ivanhoe Mining after a site visit to a mine in the Democratic Republic of Congo that experienced flooding in May. “Although geopolitical risk is elevated and near-term performance is likely to be weak, our upgrade is based on an attractive relative…and a strong 2027+ growth outlook,” wrote Scotia’s Orest Wowkodaw in the upgrade, “Given the dearth of investable (copper) assets, we believe (Ivanhoe) shares are poised for a meaningful re-rating ahead.” For more copper plays, Rick Rule was on the podcast last week and named his favourites.
Don’t miss our next episode with the man leading a 700% rally in Opendoor Technologies!
