Railways, Industrials Breaking Down Hard, In Canada at Least

Confirmation of a real market correction underway? First we lose Materials, then Energy, now Industrials. Since all cyclical sectors have seen a major trend shift, are we primed to seek resistance levels? which are like ~20% lower, at least for Industrials?

This is a huge buying opportunity for Canadians in energy. I see local conventional oil juniors hitting some of the highest CAD$ netbacks in years, collapsing drilling costs and better access to US markets. Much of this is through depreciation of the Canadian dollar. One of my biggest positions is going to kill it this year and its off 25% from its highs (though still up 50% from a year ago). That said, the tone in town is pretty bleak so I think there is some concern right now over capex slowdowns in the big SAGD and mining ops up north. Nonconventional players will start feeling some squeeze as their costs aren’t as flexible as the juniors. Also with the nonconventionals slowing things down, it lessens the supply glut in the WCSB and CAD$ WCS prices are actually quite acceptable. For the juniors that hedge their sales via WTI, this is pure gold. Things might go lower yet, I’m not calling any bottom. But I’m happy to take an easily sustainable 9.5% dividend yield to the bank today. I’ll let equity prices sort themselves out over the long run. Buying conventional production today is cheap.

i agree to an extent about Energy but still think there is risk for greater market decline in other sectors (and possibly further spillover into Energy). we have been extremely underweight the sector since 2013 and are looking at getting closer to market weight soon. i am definitely seeing plenty of value in mid-cap oil stocks. Energy, at the very least, is extremely oversold in Canada and is probably due for a popback.

saw a stat on market correction awhile back from cornerstone macro where they tracked about 10 different indicators. Out of the 10, oil rising was the best indicator of every correction (it was some ridiculous percentage 90%? maybe). anyways, i know thats not very helpful since it wasnt a stat on oil rising not falling but juss thought everyone would like that lil tidbit.

oil gonna rise after elections no?

Nat gas is getting hammered with oil in USA

LOL…i was listening to bloomberg this morning. They were talking about oil being in a bear market.

^ If oil ever goes into a bear market, Alberta will be a basket case.

^ That’s why I’m all in. No point in going slightly bankrupt, that’s not how the BSDs on Wall Street roll. Risk it all, lever that 5x, and if it doesn’t work, re-enter the game a few years post-bankruptcy. Right? $200 oil or bust! Yeehaw! (I am kidding…)

im in Calgary this weekend and the news today said the provincial governments budget planning price is $90 something a barrel. Yikes when oil falls into the low $80s or further.

^ That’s partially accurate. Their WTI forecast was ~$95 for the year. But their exchange rate forecast was in the mid 90s too. Again, you need to look at Western Canadian Select and not WTI pricing. WCS is actually quite strong right now. I’m not worried. Also keep in mind Alberta has infinite tax room compared to other provinces. Our income and corporate tax rate is 10% flat and we have no PST. If we got into trouble, we could raise taxes in a heartbeat with little consequence. And… The province has a tiny debt. Unlike most places that are near their credit card limit, Alberta could raise enough money to run the province for a decade with zero revenue with little difficulty. This is why despite resource dependence, Alberta is easily the strongest credit out of any Canadian province. By a huge margin. If WCS falls into the $60-70 range, I’d be worried and below $60 would be depressing. But $75? Meh. Might just slow growth to a reasonable pace at some multiple of Ontario or Quebec.

It seems strange some of the selling I’ve seen. I’m still learning the market, but a few midstream I’m following seem like they could buy in the futures market at these prices and still make enough off of their hedges. But they got bent over

Love me some asset based plays. What I find truly remarkable is LYB after the PE exit. Truly remarkable performance (stock price wise).