Winning Streak Extended

The Week in Review

Winning Streak Extended

North American equities were up again this week as investors increased bets that the Federal Reserve may pivot from raising rates to a more dovish stance and the possibility of more aggressive rate cuts in 2024 start to become more realistic. Virtually nobody expects rate cuts for the next couple of Fed meetings, but the odds are now at 28% that a cut will come as early as March 2024, with 47.8% odds of a cut in May.

The top performing major North American market this past week was right here at home, with the S&P TSX index gaining 2.65%. This rise was followed by the S&P500 up 2.24%, the Nasdaq 100 up 1.99% and the Dow Jones Industrial Average gaining 1.94%. In summary, a great week for all.

Sam Altman Fired

I didn't see this one coming. The board of directors at OpenAI announced Friday that Sam Altman has been fired as the company's CEO.

The announcement stated that the board had found that Altman was "not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities." At this early stage, details beyond this statement are scarce.

Altman's ousting comes after a major outage on the platform early in the week, with disagreement on whether the failures were due to increased demand, as Altman has initially said, or whether the outage was due to a DDoS attack.

The board also announced that OpenAI president Greg Brockman would be stepping down as chairman of the board but will remain in his role at the company and will report to the new CEO Mira Murati, who has been assigned to the position on an interim basis.

Since the departure, there has been a lot of back and forth on the X platform, as is the normal practice in these days of social media. As the dust settles from this blockbuster announcement, no doubt more details will emerge.

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Mass X-odus

The number of companies that have been added to the list of those that have suspended advertising on the social media platform X continues to grow.

After owner Elon Musk posted on X that he agreed with a post that accused Jewish Communities of pushing hatred against whites, the response from advertisers has been swift and decisive. Major corporations such as Disney, Apple, Warner Bros Discovery, Paramount Global and Lions Gate Entertainment have all suspended campaigns.

In addition, IBM has halted its online ad campaigns on X, as have Bravo, Oracle and Infinity.

X has been struggling since Musk took the company over and the controversy surrounding the social media giant has been substantial. These recent moves by Musk will surely only make this more difficult. That said, apparently Musk isn't worried about the loss of revenue and the money his company will lose by controversies like this. Back in May, he downplayed concerns during an interview with David Faber on CNBC.

“I’ll say what I want, and if the consequence of that is losing money, so be it,” Musk said. You'd imagine that at some point the bleeding of billions of dollars will influence Musk's thoughts, but for the time being it appears, it's business as usual.

Inflation Cools

The annual inflation rate in the U.S. came in at 3.2% for the month of October, cooling from 3.7% for both August and September. This new data will no doubt have a material influence on the Federal Reserve as it contemplates its next rate decision.

Lower energy costs contributed to the drop, with a 4.5% decrease during the month, led by gasoline declining 5%, utility gas service falling 15.8% and fuel oil dropping 21.4%

Food prices grew at a slower pace as well, thankfully, coming in at 3.3% for the month.

Huge Coal Deal

Teck Resources announced Tuesday that Glencore, the Swiss commodities giant, has agreed to buy a majority stake in its steel making coal business for US$6.9 billion for a 77% stake in the business. As part of this overall transaction, it will sell the rest of this division to Nippon Steel of Japan and South Korea’s Posco. The total transaction value will be $8.9 billion US.

Deputy prime Minister Chrystia Freeland says that this deal will be closely scrutinized by the federal government, with a particular emphasis on protecting Canadian jobs, maintaining a Canadian headquarters, and a review of environmental concerns and rights of the indigenous people. The government basically wants to make sure that the deal is a net benefit to Canada at the end of the day, and whether it passes a national security test. On either of these two main factors, the government has the right to reject the transaction.

While Teck says that it is confident of ultimately obtaining approval, it does acknowledge the lengthy review that needs to be completed. It's expecting that the transaction won't close until the third quarter of 2024.

Scammers Gonna Scheme

As I reported in this newsletter a month ago, the Province of BC has introduced some pretty strong regulation that’s designed to crack down on Airbnb and other short-term rental companies, with the goal of opening up more housing units to the general population. Well, it didn’t take long for some Airbnb business owners to start fighting back.

BC Minister of Housing Ravi Kahlon showed a screenshot of a Vancouver-based rental company that’s offering $500 to people who are willing to break the law and fraudulently change the address on their driver’s license to an address that the rental management company selects, and then apply for an Airbnb approval, attesting that the address is their primary residence.

Kahlon says anyone considering the offer needs to understand that the scheme is illegal, and those taking part would find themselves in “a lot of trouble for really no gain.”

The heart of the legislation takes effect in May 2024, but local markets in BC have already seen an uptick in more listings that have previously been used for short-term rentals being put up for sale.

It’s somewhat unsure whether the fake addresses on driver's licenses would be effective because part of the new legislation is that the platforms will have to share data with the province. Local governments will then be given the information and try to ensure that all listings have the proper licenses issued by the province.

Weekly Winners & Losers

Winners

There were some very strong gainers this past week, with Target leading the way. Also, I couldn't help but notice the gains in the travel & tourism sector. Here are some of the more notable winners.

The Top Gainers were:

Target (TGT), up 19.90%
Enphase Energy (ENPH), up 19.08%
Carnival Corp (CCL), up 15.91%
Expedia Group (EXPE), up 14.91%
Norwegian Cruise Lines (NCLH), up 13.28%
Shopify (SHOP), up 11.41%
Brookfield Renewable (BEPC), up 10.34%
Royal Caribbean (RCL), up 11.20%

Losers

With the markets being so strong, the list of losers was short this week. No major blowouts. Here's a look at the worst performing stock for the week.

Notable Big Losers were:

Cisco Systems (CSCO), down 9.19%
Walmart (WMT), down 6.52%
Vertex Pharma (VRTX), down 6.20%
First Quantum Minerals (FM), down 5.96%
Metro Inc. (MRU), down 5.86%
Bath & Body Works (BBWI), down 5.41%

💰 The federal Ethics Commissioner in Canada is taking a closer look at some potential shading dealings by Annette Verschuren, the chair of the board at Sustainable Development Technology Canada. The investigation looks into potential conflict-of-interest breaches.

🛒 Hot off a week of surging stock price, Target is bucking the trend of reducing self-checkout options by testing a new policy at a handful of its locations. There has been a lot of pushback against the automated tellers recently, so this decision is definitely an industry outlier.

☕ Starbucks workers are protesting work conditions by walking off the job in many U.S. locations, but so far Canadian outlets have been spared.