Posted by Niall McGee on November 28, 2008

Haywood Securities analyst Rob Goff says BCE is an "attractive trade" at $24-a-share. Which is more or less where the share price is right now, by the way.

Here’s the brokerage’s rationale: If the buyout gets done, the share price will go up.  If the buyout fizzles, as many expect it will, the share price should remain around $24.

Haywood says traders who buy shares in BCE at current levels could be getting a stock option thrown in for free.

(BCE holds a minority interest in CTVglobemedia, which owns BNN.)

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Andrew Bell on November 26, 2008

Well, it looks like BCE shareholders WERE warned (in the small print).

The "definitive agreement" (it's on http://www.sedar.com/) to buy out  investors back in June 2007 warned that the pact was subject to "an opinion at the Effective Time from a nationally recognized valuation firm engaged by the purchaser and agreed to by the Company, acting reasonably to the effect that the Company will, subject to certain qualifications, be Solvent as of the Effective Time and immediately after the consummation of the transactions contemplated by the Plan of Arrangement."

And right up at the top of the paperwork was yet another warning sign. "This definitive agreement was negotiated at arm's length to provide contractual protection for the benefit of BCE" and the buyers and "NOT for purposes of disclosure to investors or any other purpose." (our emphasis)

Well-informed Bay Streeter tells us that nobody, but nobody expected the BCE deal to founder on the solvency issue and that inserting the clause in the first place looks like a "colossal" error on the part of the BCE board because they're left with nothing – not even the $1.2-billion "reverse break fee."

The other victims: long-time BCE shareholders who stuck with the stock all the way and thought they were getting a Christmas payoff. And U.S. hedge funds who thought they were on a sure thing – there's chatter in the U.S. today that this will be enough to push some smaller hedge funds over the edge.

Our source tells us, though, that we haven't seen the final chapter because Teachers has put its own executives into Bell. Teachers may well come back with another deal, our informant says, adding that old Bell isn't likely to continue much longer as a public entity.

(BCE holds a minority interest in CTVglobemedia, which owns BNN)

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

 

More »

Posted by Kim Parlee on November 26, 2008

"Ed Clark is probably dancing around the office without his shirt on." - Analyst, who wishes to remain anonymous, on the BCE news. TD agreed to lend $3.3 billion and buy $500 million stock as part of the leveraged buyout of BCE – which now is in doubt.

From trading desks, auditors and various people on Bay Street … spec on what's happening with BCE:

• The "Solvency Issue" is identified by KPMG as a deal stopper.

• The Context: The "solvency clause" was put in the deal by BCE at beginning to win over and protect BCE's original bondholders … (before Teachers levers up company with more debt)

• Because this is part of the original deal where a clause is getting violated (a clause actually put in place by BCE) – we are hearing NO break fee for shareholders (OUCH)

• Why the suddenness of this announcement?  Talking to an ex-auditor – this solvency number is NOT something that KPMG just came up with.  They have probably had this number for a few weeks now  ... and have been bantering it around with BCE ... and BCE, understandably, wasn't too thrilled with it … which is why it was so late/sudden coming

• Key things to watch for: Can BCE renegotiate deal? That depends on whether...

o The deal can be repriced (shareholders would have to vote on it again!! eek!)

o The big issue – can they renegotiate a deal BEFORE the credit syndicate expires to fund the deal (from RBS, Citi, TD, Deutsche bank)

o And in the credit syndicate agreement – does it stipulate that the equity is priced at $42.75??  If it does … that gives the banks another reason to walk away … even if the deal gets repriced. "Bingo," says one analyst – RBS, Deutsche Bank and Citi will be looking for a reason.

o If the deal price is lower – does that change the solvency opinion?  (it might – but it won't be simple and it has to happen quickly)

Finally, from a senior telecom exec:

• This "concern" has been floating around the market for weeks

• Watch breakup fee/shareholder lawsuits … something could still happen

• He says deal will still get done  … but it could be in the $30s.  The low $30s.

Hmmm …. We will see.  We will see.

(BCE holds a minority interest in CTVglobemedia, which owns BNN)

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

 

More »

Posted by Michael Kane on November 26, 2008

There's a key concept in the advertising business known as "position." A positioning line is a motto or phrase that lets the consumer know in a precise and usually brief statement the exact nature of the advertiser's business. "Quality is Job One" and "We’re Fresh Obsessed" come to mind.

Toronto radio station 680News became number 1 in the ratings using the positioning line "Be the first to know," which I think is brilliant.

And the brass at Rogers Communications must think it's great, too, judging by the heavy use of the line in its station promos.

Admittedly, another reason I think it's brilliant is that I'm the one who coined the phrase when I worked at the station in its early days.

Here's how that happened:

Most reporters at the time read their reports from scripts they had written. But I ad-libbed my reports, grabbing bits of data crossing the computer screen. (One day, while taking a tour of the newsroom, Ted Rogers himself pulled up a chair and sat at my elbow to watch how this was being done.)

In a single minute, Bloomberg News can transmit an eye-popping 20 or 30 stories and relevant data. It was inevitable that sometimes news would break in the middle of my report.

Since we were so far ahead of everyone else with those stories, we found we had to repeat them for several hours without letting them get stale. To change the lead-in, I would often say, "680News listeners were the first to know that so-and-so issued a profit-warning…," or whatever.

It freshened the story and added a bit of shameless self-promotion, which we really needed at the time.

Later, the station appropriated the phrase and applied it to their overall news coverage.

But guys, I think I’m gonna have to take it back.

Impressive as it is to have your business reports on 6 times an hour, the BNN newsroom where I work now is on the air continuously throughout the day. And I'm still doing reports in the same old way.

And that’s a great "position" to be in.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Niall McGee on November 24, 2008

Are you a Shania Twain fan? Her music is a bit mushy for my taste, although I just found out Shania and I share the same birthday.

One of Shania's greatest hits was Still the One, an ode to her long-term union with Mutt Lange. Today RBC Capital Markets says Canadian National Railway is "still the one." Still the rail stock to own, that is. RBC says CN's strong relative outperformance will result in more limited downside than CP.

RBC has an "outperform" rating on CN and a "sector perform" on CP. While a better bet than CP, RBC isn't exactly a raging bull on CN.

In fact, due to macroeconomic fears, the brokerage cut its 2009 profit forecast and stock targets on both companies.

RBC says its lower profit estimates “reflect a deeper, longer recession.”

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

More »

Posted by Viewer comment on November 24, 2008

Re: Michael Hainsworth's Detroit high-flyers land in Washington.

While it is entertaining to hear about how the auto execs made their way to Washington, the real story here is the millions of jobs that are at stake. We simply should not allow the American auto industry to fail.

From where I sit I believe they have made amazing progress in cutting costs while improving their quality to the point that is as good or better than the foreign competition.

We all owe it to ourselves to at least put a North American vehicle on our shopping list next time around. You just may be very pleasantly surprised.

The biggest critics of North American vehicles are people who haven't even looked at one for 10 years or more!
 
J. Carroll

I find it irritating to watch these arrogant Ivy League senators sitting high atop ivory benches talking down to the auto companies and telling them that they squandered the money provided by their poor trusting peons, poorly managed their trusty positions, and have totally lost track of reality, when in fact these guys are the very decision makers that have done the same thing and plunged America into trillions of dollars of debt and this economic crisis.

R. Statt

 

Let's clear the reporting and offer a level of understanding of this issue which I believe is missing. This is not a bailout, this is a public response to our industrial base that is unprecedented and not comparable to Chrysler under Lee Iacocca.

I get the opinions being voiced about "bailing" out the auto manufacturers, however I think the view is limited to the 20,000-foot level and not enough perspective is being given to the fact that credit, worldwide, has dried up.

If we don't offer a credit line -- which is what is being asked for, not a "bailout" -- we will lose our industrial base, period. The spin-off is very serious, including tool and dye, electronics, steel, rubber and the design industry, to name a few.

This is very unique and the governments will respond when 15% of their constituents are unemployed, and make-work projects are a terrible trade-off to offering a credit line.

T. McCarten

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Andrew Bell on November 20, 2008

At last… a truly bullish sign for stocks? Fairfax Financial Holdings Ltd. (FFH–T) – the Toronto-based insurer whose investment portfolio has thrived on astute bets against the market – now says "stock prices may have already discounted the worst of the economic decline."

Fairfax CEO Prem Watsa said this morning that the company "has removed the hedge on its equity portfolio investments by covering its S&P and S&P/TSX60 equity index total return swaps.

"As value investors, we are finding an incredible number of investment opportunities across the world. That said, in the short term we recognize that stock markets can continue to fall significantly."

"In effect," Cormark Securities analyst Jeff Fenwick says, "Fairfax believes that we have seen the bottom."

The company has produced fantastic gains with its bearish strategy. In Q3 alone, it earned $652 million in net gains by betting against stocks and another $532 million on credit default swaps.

"Fairfax was early to detect the emerging problems in the U.S. subprime market and positioned its portfolio to benefit from a downturn," Cormark’s Fenwick says.

He calculates that since the company's third quarter ended on Sept. 30, the index swaps may have generated another $900 million as the S&P 500 slid 31% and TSX 60 dropped 27%. Along with gains on swaps on individual equities, "this could be another $1-billion quarter of investment gains for FFH," Fenwick predicts.

Fairfax stock has soared 25% this year to trade at just under $359. Cormark's Fenwick calls the shares a Buy, boosting his target today to $400 from $390.

"The incredible performance out of Fairfax's investment operations" has let the company increase tangible book value by more than 43%, to $260.18 per share, in a year, he says. Meanwhile, "the majority of other global financial services companies have done little but destroy value for shareholders."

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Michael Hainsworth on November 19, 2008

The Detroit 3 want $25 billion from the U.S. government and about $3.5 billion in taxpayer cash from Canada. They say they've been tightening their belts. But for some, it's not enough.

The U.S.-based Citizens Against Government Waste is accusing the CEOs of GM, Ford, and Chrysler of slapping taxpayers in the face. The three amigos arrived in Washington for the two days of testimony on private corporate jets.

GM's Rick Wagoner is asking for as much as $12 billion. Flying in style cost the company $20,000 round-trip. A first class round-trip ticket in business class on any airline is less than a thousand bucks.

Meantime, while GM has been losing money for the past 3 years, Wagoner got a salary increase in 2008.

This spring Ford reported its CEO got $2 million in base salary in 2007. A $4-million bonus and $11 million in stock and options, too.

Ford's Alan Mulally told the committee he's cut expenses, fired workers, and closed 17 plants. But he still has a corporate jet written into his contract. He doesn't even live in Detroit -- he flies to and from Seattle on weekends. And Mulally's jet is just 1 of 8.

Meantime, back on Capitol Hill, the $25-billion bailout bill is expected to include provisions to replace management.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Linda Nazareth on November 19, 2008

The good news is that Canadian interest rates are going lower. And really, that is good news for some people.  If you are employed and intend to borrow money over the next year or so, things are actually working out fairly well for you.

But, there are other things that are not actually working out that well.  The U.S. economic picture is quite dreadful, worse even than those of us with a pessimistic bent had expected. 

Retail sales ground to a halt in October, despite the fact that consumer prices apparently posted the biggest monthly drop since 1949.  Thrift is apparently back in a big way in that country, which may actually be a good thing in what it means for individual families' balance sheets.

Still, virtually every U.S. retailer made its current business plans taking for granted that Americans believed that only losers made budgets. So the macroeconomic picture is a little less pretty.

And I won't mention the financial markets. We know what's happening there, so just this once let's not relive it.

Let's get back to why interest rates are almost certainly going to fall.  I'm not just basing that prediction on my sophisticated reading of the economy – I’m quoting from what Bank of Canada governor Mark Carney said today in London.

Speaking to the U.K. Chamber of Commerce, Carney used the oft-repeated phrase that "some further monetary stimulus will likely be needed" in Canada.  That's pretty much what he also said at the time of the Monetary Policy Report a few weeks ago, but times have changed a bit since then and the Bank of Canada certainly knows it. 

In the forecast released at the end of October, it did not officially forecast a technical recession, instead saying that the Canadian economy would contract by 0.4 percent in the fourth quarter of this year and grow by 0.4 percent in the first half of next year.

Not a recession, technically speaking. But, just barely.

Today, Carney says that "the risks to growth and inflation in Canada … appear to have shifted to the downside."

Translation: Canada is headed into recession. Maybe a small one, but a recession anyway.

Honestly, whether it's technically a recession or not barely matters. With typical Canadian caution, consumers have already slashed their spending and companies have put hiring on hold.  Certainly there's a bit of self-fulfilling prophecy about the whole thing.

But in contrast to other recessions, the Bank of Canada apparently gets it. They can see that if they don't cut rates, they are most certainly going to engineer a worse recession, and most likely a deflationary spiral. The central bank's mandate is pretty clear:  it's supposed to keep the Canadian inflation rate (currently 3.4 percent) between 1 and 2 percent.  Without rate cuts, it's likely to go too low.

So mark Dec. 9 on your calendar. That's when we'll get at least a 25-basis-point cut to rates, or maybe even 50-basis-point. Or more. And maybe more after that.

Monetary policy may be a blunt instrument (as Carney also said today) but eventually it tends to work. That means that there is light at the end of the tunnel, and that is going to have to pass for good news for now. 

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Michael Hainsworth on November 14, 2008

Discount airline WestJet says it's not going to offer a baby-free section on its planes for $10 per ticket. The online rumour mill had been churning out that story: don't want to be stuck behind a screaming kid? Shell out 10 bucks more.

The company says segregating children on a flight is something it simply won't consider.

But as a young father who has travelled with a baby, I'm happy to report the idea is just fine by me – and other dads I’ve spoken to.

If you think sitting in front of a baby is stressful, try travelling with one. Anyone who has, knows it's a major source of grey hair.

It's all about logistics. Feed the baby too early and she won't take a bottle on takeoff. Wake her from her nap too late and she won't sleep on the plane.

A separate section is a pretty controversial suggestion, for sure. Why should someone who hasn't made the life decision to have a kid be forced to shell out an extra 10 bucks for peace and quiet? And any parent will tell you that 10 bucks will buy a lot of formula.

But still, I'd pay it. Because as much as you don't want some kid screaming behind you, I don't want my kid disturbing you, either.

If WestJet changes its mind, here's my advice: put us parents at the back of the plane. That's where we'll end up anyway.

During a recent flight back from Los Angeles, I was one of a half dozen dads doing the "baby bounce" next to the lavatories to calm a crying infant.

Oh, and if you're flying with junior: don't take your in-laws' advice and use children's Gravol to knock them out – pediatricians will tell you it just makes most babies tired – and hyper.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Mark Bunting on November 12, 2008

Some people in Russia are so distrustful of the country’s banking system and so concerned about their savings that they’ve taken to carrying around large amounts of cash.

But, this phenomenon has prompted another one: a crime wave.

Moscow police are increasingly answering calls from people who have been robbed. On one recent day alone, there were four separate robberies with the bandits getting away with anywhere from the equivalent of $11, 000 to $110,000.

Police say these crimes are becoming more common. One poor driver was attacked by four people using a hammer and a baseball bat.

Another man was shot and wounded before the theft.

BNP Paribas estimates that $140 billion has been withdrawn from Russian banks since August. The reasons are many: the credit crisis, falling oil prices, a stock market that seems to be closed more than it's open, and the war with Georgia.

And, the financial situation doesn’t seem to be getting any better. Fitch Ratings and Standard & Poor’s say they might downgrade the country’s debt after Russia drained 20 percent of its currency reserves to shore up financial markets.

The government has also raised interest rates in an effort to stem the flow of capital from the country.

Meanwhile, Russia’s currency, the ruble, has been in free fall and the government has been virtually powerless to stop the downward spiral. RBC Capital Markets says Russia will likely have to devalue the ruble by as much as 20 percent by early 2009.

The analysts don’t see the "deepening negative capital and current account trends reversing any time soon."

That means the crime wave will likely continue unless people find a safer way to get their money from the bank to the mattress.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Andrew Bell on November 11, 2008

Making money in mining is getting tougher and tougher… but when a company has a debt load to consider, investors tend to get extra jumpy.

Blackmont Capital analyst George Topping has cut his rating on uranium titan Cameco Corp. (CCO – TSX) to "Hold" from "Buy" after the release of today’s Q3 numbers.  Cameco stock is down 6% today to trade just under $18.50 (the TSX miners’ index has tanked 10%)

Topping has a $25 price target for CCO but he says that "in light of Cameo’s debt and possible technical challenges, we believe it prudent to move to the sidelines…. Uranium Participation Corp. (U-TSX) is a safer investment vehicle."

Topping reckons that backing out a stock option recovery, Cameco’s Q3 earnings were just 21 cents a share, well shy of the 40-cent consensus. Cash costs jumped 47% to $28 a pound US, while 2008 and 2009 production guidance was cut to 17.7 and 20.6 million pounds, down from 19.6 and 22 million previously.
 
Moreover, water woes continue at the company’s mines.

"On Cigar Lake, management has still not pinpointed the source of the leak. The water inflow at McArthur River was not mentioned, which is surprising, and could mean unfavourable news," he said.

Topping also noted that Cameco's short-term debt is $570 million, meanwhile long-term borrowings are $720 million.  

"While Cameco has $1.4bln in lines of credit, management note that the debt market is 'effectively shut down,'" he said.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Michael Kane on November 7, 2008

Whatever problem you happen to have in your life, I can top it.

I nearly got hit by a fireball from outer space. A real one.

On Wednesday, Oct. 15, 2008, a meteorite fell to earth in an area near my house. The event was captured on all seven cameras operated by the physics and astronomy department at the University of Western Ontario.

I caught an interview on CBC Radio during which I heard Dr. Phil McCausland of the UWO Meteor Group describe this extraordinary event. Because so much data was available from its lengthy descent, researchers were able to narrow the target area with unusual certainty.

My home stands in the proverbial bull's-eye.

Some time after I heard the interview, a flyer appeared in my mailbox. It was from the university, explaining the event and asking for anyone who saw or heard anything that morning to contact researchers. It also suggested we take a look around the property to see if there are any unusual rocks lying around.

It is rare to receive such a clear sign confirming one's lifestyle. I recall making the conscious decision, while in my teens, that I would not let money rule my life. And it was for this precise reason: it could all disappear in a heartbeat.

But, I admit, I didn't see it coming like this.

Click here to see a picture of the meteorite.

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

More »

Posted by Michael Hainsworth on November 5, 2008

The credit crisis is apparently relative.
 
In less than two weeks, credit card giant MasterCard is launching a new piece of plastic. But it's made with more than just petroleum byproducts -- although the petroleum industry gets a lot of credit for the card's existence in the first place.

The card will be called the "Diamond." It has a 0.02-carat diamond embedded in the centre and it's laced with gold. It has a $1,000-a-year fee.

Despite the raised diamond, MasterCard says it's done all the testing it needs to ensure it fits in bank machines and point of sale slots.

MasterCard says the diamond is designed to show your status. It's all about the prestige. Only 1,000 cards will be issued, and only 30 per month starting Nov. 13.

The card has a $50,000 limit -- about 30 grand more than the plastic pusher's platinum card. It even comes with a personal card manager who is available around the clock.

Before you rush out with your hedge fund profits to sign up, it's only available at the second-largest bank -- in Kazakhstan.

Borat would be proud.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

More »

Posted by Andrew Bell on November 5, 2008

Investors in mining stocks know how easy it is to slip on some slimy mud at the edge of a pit and end up in a chasm.

But analysts are arguing this morning that base-metal specialist HudBay Minerals Inc. (HBM-T) offers a safety net.

The debt-free company’s stock, which has slid nearly 70% this year to trade at around $6.20, is now changing hands "near working capital of $915-million or $5.98 per share," Wellington West analyst Catherine Gignac says in a note.

Gignac, who has a $9 target on the stock, says HudBay’s decision to defer development of its newly-acquired Fenix nickel project in Guatemala is "positive and could expose the company to takeover."

Meanwhile, that huge cash position means investors are assigning almost no value to HudBay’s existing zinc and copper operations in Manitoba and Saskatchewan, where it has been in business for more than 80 years. These properties include four mines, three concentrators, plus copper smelters and zinc plants. 

Fenix was the company's growth play: Gignac said it was set to account for half of HudBay’s revenues by 2014.
 
"Postponing the construction of Fenix is the right decision and aligns the company's risk profile with that currently desired by investors," Blackmont Capital analyst George Topping says. He has a $12.60 target on the shares.

Topping also says HudBay is a "potential acquisition target," adding that Quadra Mining Ltd. (QUA – T) is rumoured to have acquired a small position in HBM.

Desjardins analyst John Hughes calls HudBay a "top pick," with a target of $9.70. The company "has a track record of discovering and developing deposits" in Manitoba's Flin Flon region and its strong balance sheet is a "key" advantage amid financial turmoil, he says.

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

Posted by Kim Parlee on November 5, 2008

A company called Direxion Funds is planning on launching triple levered ETFs. Yes … that’s what I said.

To be clear these are ETFs that will mimic the indexes they follow – with 3x more volatility.  So wither triple bull ETFs or triple bear ETFs. If an index drops 5%, the triple bear ETFs which follow the index will drop 15%.

Am I the only one who thinks this is a bad idea?

Yes – it’s a brilliant tool for investors – and the logical evolution on levered ETFs, but do we really need more gambling activity in the markets?  Levered ETFs have already sucked up $8 billion in liquidity – and what’s next?  4x levered ETFs?  20x levered?  Heck, let's just create 100x levered ETFs.

The point is these are trading instruments, and valuable trading instruments, but they are probably not the best investing instruments.  And bringing in more instruments like this will just exacerbate the current volatility.

And what effect does the money flowing into ETFs have on the securities and indexes they track?

That will have to wait for another blog...

 

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

 

More »

Posted by Andrew Bell on November 4, 2008

Okay, so here's what you're going to do at 6 p.m. ET… begin preparing Baked Alaska to mark what look likes Sarah Palin's inevitable defeat.

Here’s a recipe from www.recipezaar.com using 4 chocolate chip cookies, 1 pint ice cream, 4 egg whites and ½ cup sugar.

1. Top each cookie with a large scoop of ice cream. Freeze at least 30 minutes.
2. Beat egg whites until foamy. Gradually add sugar, beating until stiff and egg whites are shiny.
3. Spoon meringue into a pastry bag fitted with a large tip.
4. Pipe meringue over cookies and ice cream, making sure cookie and ice cream is completely covered. Run a spatula around edges to seal. Freeze for at least 15 minutes.
5. Preheat oven to 400 degrees F.
6. Bake for 5 minutes or until golden.
7. Serve immediately.

But at 7 p.m., it's time to start paying attention to the network coverage because the U.S. polls will be closing.

Here’s a handy guide to the early results, courtesy of Goldman Sachs. 

Indiana lies in two time zones, central and eastern, so some of its polls will close at 6 p.m. and some at 7 p.m. McCain leads by 1.4%, but Goldman says that if  "Obama wins Indiana or loses very narrowly, it may well indicate he is on his way to winning the election decisively."

Kentucky polls also close at 6 p.m. and 7 p.m. Very important Senate race, in which the Democrats are trying to oust Senate Republican Minority Leader Mitch McConnell. Democrats are pursuing 60 seats in the Senate to give them a free hand to pass sweeping legislation. 
 
Florida polls close at 7 p.m. and 8 p.m. Goldman says it's the largest "toss-up" state.  Polls show Obama with a small lead but it's basically a tie right now.

Virginia polls close at 7 p.m.  Goldman says an Obama loss here "would be a major setback for Democrats, since in addition to denying 13 electoral votes, it would have negative implications for his chances in other states with similarly close margins, such as Florida, North Carolina, and Ohio… a loss here would signal a much tighter than expected election."

Georgia polls also close at 7 p.m. "If there is one Senate seat to watch as an indicator of whether the Democrats will get to 60 votes in the Senate, it is this one," Goldman says. Republican incumbent Senator Saxby Chambliss holds a 3% lead, down from 20% less than two months ago. 

Ohio, where polls close at 7:30 p.m., has backed the winning presidential candidate in every election since 1960. Obama leads by 3.6% and if he wins the state, Goldman says "it will be difficult for McCain to pull together enough electoral votes to win the election."

OK, now it's time to try the Baked Alaska.

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »

 

More »

Posted by Frances Horodelski on November 4, 2008

Today is election day in the United States.  While there will likely be many political and social implications for the changes that will occur in the White House post-Nov. 4, we're most interested in how stock markets may react.  Looking at history may give some clues.

While the two years following elections usually offer the lowest returns of the four-year presidential cycle as the new administration tackles the problems left by the old, a shorter-term view is much more positive.  Indeed, according to the Stock Trader's Almanac, the month of November does much better when the incumbent party is ousted.  Looking back over the 26 election year Novembers to 1904 provides some interesting data:

• There have been 12 Democrat and 14 Republican wins over the last 104 years.

• Over this period, the Dow Jones industrial average has had negative performance in November only eight times (and five of those were before 1940).  The performance was evenly split between Republicans and Democrats as winners

• Of the 18 positive Novembers, 10 were when the Republicans won or maintained the White House and eight were when Democrats won or maintained the White House. 

• The best November was 1904 (+14.27%) when Teddy Roosevelt was elected president in a split in the Republican party.  The worst performance in a November was 1972 (-14.04%) when Richard Nixon won for his second term.

• With the exception of 1968 (Nixon's first term election), the market has always been up in November when the party in the White House has changed (there have been 10 party changes during the period).

• During the more recent past, since 1976, according to the data provided by the Stock Trader's Almanac, every November in an election year has been positive, including 2000 during the contested Gore-Bush election.  November saw an 8.56% gain for the Dow that year.

• Looking at the entire period and the performance of the Dow in each year of the 27 cycles to date, markets seem to do best during a Democratic White House.  There have been 15 Republican administrations.  If this year’s performance is included, the market has been positive 60% of the years during these Republican terms (40% negative).  On the other hand, there have been only 12 periods when a Democrat has occupied the White House but two-thirds of the time the market has been in the green. 

• And lastly, the Stock Trader's Almanac says election year bear markets are not rare (2000, 1984, 1980, 1976, 1968, 1960, etc.).  So November can be a beacon in an otherwise miserable stock market environment.  Whoever wins the White House today, however, they will have a lot of work to do to revive what looks to be a tough economy in 2009.  As for the stock market, let’s hope it is soon ready to discount the next recovery.

If you have a comment on this or any other blog, please write to us at blogcomments@BNN.ca We may print your comment and reserve the right to edit.

More »