Recap: Week Ending September 27, 2013

September 29, 2013

US stocks finished lower on the week following hitting all time highs in weeks prior. All three major indices closed in the red, with the S&P 500 opening Monday on its high of the week and falling from there. A similar story was seen in the Dow Jones Industrials, where selling started early in the week, and continued pushing the index to close for the week near its lows. Meanwhile, the NASDAQ 100 Index barely slipped into the red on the week following a weak push to the upside. Despite downside seen in both the Dow and S&P, the NASDAQ appears to be resilient continuing to push further up. It appears that the lack of correlation between US equities is muting any move to the upside. The Toronto Stock Exchange, TSX, closed slightly in the positive on the week. The lack of movement in the TSX this week comes after what appears to be 9 weeks of consolidation trade. The TSX continues to sit around all time high for the year, making another attempt at breaking it this past week. At these levels, the TSX is roughly down 10% from its 2011 highs off 15.25% of its all time highs made in 2008. It must be noted that the TSX is hugely lagging behind both the S&P 500 and Dow Jones which have recently tested and broke their all time highs. Even though these indices are made up of different constitutions for the most part, the TSX has lacked the fire power and luster following the 2008 crash. Many believe the main cause for the lag in the TSX is because of the quantitative easing program in the United States which Canada has not put into place. This may lead some to believe that US equities are overbought, or on the other hand, Canadian equities trading below value to their US counterparts. The investor must also note that the TSX is heavily commodity based and as gold has taken a hit recently, the effects on the TSX are not positive.

In Europe both the FTSE and Frankfurt DAX Index closed negative on the week following worse than expected GDP data out of the UK and a weaker consumer price index in Germany. Despite the inverse correlation between the JPY and the Tokyo Nikkei, both closed higher on the week.

This week FairFax Financial, a Toronto based insurance company, placed a tentative $4.7 billion buyout of the smartphone maker BlackBerry. The takeover values shares at $9. Currently FairFax is the largest shareholder of BlackBerry, holding a reported 10% of outstanding shares. BlackBerry currently has roughly $2.8 billion in cash and other equivalents, valuing the company at $1.9 billion. It must be noted that FairFax is seeking financing for the majority of the takeover, making several skeptical on the deal. Currently, it appears the market does not have much confidence in the deal as BlackBerry on the NADSAQ is trading below the takeover bid at $8.03 and $8.27 on the TSX. At one point in the BlackBerry was valued at over $83 billion, making it one of the highest valued at its time. Today, the current takeover valuation marks BlackBery as one of the lowest in North America. BlackBerry has just less than 6 weeks to seek other bids if possible.

DeGroote on Facebook DeGroote on Twitter WMA LinkedIn