Renowned short-seller Steve Eisman laughed off his skeptics (saying bank bulls dismissed his thesis "incredibly dismissively") and doubled down on his argument in an interview yesterday afternoon on BNN Bloomberg. Saying his conviction has shot up to nine out of 10, he pointed to "exceptionally poor" earnings quality in the quarter than just wrapped up. Specifically, he has his eye on a downturn in commercial credit quality at CIBC. "You can't play these games forever," he said about what he views as earnings management by the banks. What he didn’t mention is some important disclosure by CIBC associated with the jump in impaired loans. We’ll discuss that and chase reaction.
NEW TRANSAT TAKEOVER PROPOSAL
A rival bid has surfaced for Transat AT. Group Mach, a Quebec-based real estate developer, is proposing to buy the airline for $14 per share. Air Canada is currently in exclusive negotiations for a takeover at $13 per share. Group Mach is pointing to potential synergies between its real estate expertise and Transat’s international tourism model as an impetus for its competing proposal. There are a whole lot of strings attached, including Mach securing $120 million in financing from the Quebec government.
$100-MILLION DONOR SOUNDS OFF ON GOVERNMENT
Fresh off unveiling a record $100-million gift to Toronto’s Hospital for Sick Children, Mattamy Homes Founder Peter Gilgan warned on government overreach that could impede philanthropy by wealthy Canadians. “Government is a great middleman up to a point, but I’m not at all an advocate of a sort of socialist society where everything goes into one pot and then some folks in the back room decide what could be done with it all,” he told BNN Bloomberg's Greg Bonnell on The Real Economy. And, in the same space as Eisman’s comments, Gilgan said Canadian banks “do a wonderful job” making sure consumers don’t get in over their heads with mortgage debt. See the full interview here.
OSFI BOOSTS BUFFER
Wouldn’t you know it, the day after Steve Eisman renewed his case against Canada’s banks, this country’s banking regulator just raised the domestic stability buffer to two per cent of risk-weighted assets, meaning the required capital that has to be set aside as a shock absorber is going up for domestic systemically important institutions.
LIVE ON LOCATION
Finance pros will get sweaty for a good cause today at Capitalize for Kids’ Bay Street Games in Toronto. More than $200,000 has already been raised, with proceeds earmarked for children’s mental health initiatives. Donations, which can help generate bonus points for teams competing in events like Weak in the Knees and Anatomical Meltdown, can be made here. BNN Bloomberg's Catherine Murray will be on location at the Mattamy Centre to speak with some participants. Watch for those conversations this afternoon live on BNN Bloomberg.
THE CASE FOR CUTTING RATES
It’s not just economists and market participants speculating about a potential rate cut by the U.S. central bank. St. Louis Federal Reserve President James Bullard, a voting member of the FOMC, yesterday said a cut could soon be warranted as an insurance policy against fallout from trade tension and to nudge up inflation. Implied probability of the Fed lowering rates in July is now almost 60 per cent. Meanwhile, it should be noted the Reserve Bank of Australia went ahead with a rate cut today. The basis for that decision is here.
OTHER NOTABLE STORIES
-Home sales across Metro Vancouver fell 6.9 per cent year-over-year in May -- a far more modest decline than what we've seen in recent months (including the 29.1 per cent plunge in April). Sequentially, sales jumped 44.2 per cent from April. Meanwhile, the composite benchmark price dipped to $1,006,400.
-A pair of major forestry companies are taking matters into their own hands to manage difficult market conditions. Canfor announced late yesterday it will close its Vavenby sawmill in B.C., citing supply constraints; it will sell some related assets to Interfor for $60 million. Meanwhile, West Fraser Timber said it will curtail output at five sawmills in the province for one week.
-Shares of Facebook and Alphabet are stable this morning after falling more than six per cent yesterday on antitrust fears.
-Box shares are down almost 20 per cent in pre-market trading on the Nasdaq after the cloud play trimmed its revenue forecast.
NOTABLE RELEASES/EVENTS
-Notable earnings: Tiffany & Co.
-Notable data: U.S. factory orders
-8:00 a.m. ET: CN Rail holds investor day meeting in Toronto
-8:45 a.m. ET: U.S. President Donald Trump and U.K. Prime Minister Theresa May hold news conference in London
-11:45 a.m. ET: Prime Minister Justin Trudeau holds media avail in Vancouver
-12:00 p.m. ET: Former Prime Minister Brian Mulroney delivers remarks, receives lifetime achievement award at Canadian Club ceremony in Toronto
-12:00 p.m. ET: Bay Street Games at Mattamy Centre in Toronto
-Eight Capital holds cannabis forum in Toronto
-U.S. Federal Reserve begins two-day conference in Chicago on monetary policy strategy, tools and communication practices
-Apple Worldwide Developers Conference in San Jose (runs to Friday)
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
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