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Bombardier's Government "Bailout" Hurting Shareholders Preface It comes to no surprise that once again the Canadian "too big to fail" manufacturing giant, Bombardier, is suffering against competition due to a low inventory turnover ratio and a CSeries line of Jets that just isn't selling. In their last quarterly report Bombardier made no recognition in the notes to the financial statements of the fact that they were behind on production. A quick inventory turnover ratio analysis suggests otherwise but the highlight this week is the failing CSeries Jets and the Quebec government's so called "Bailout" strategy for the program. Breakdown - The Quebec government invested US$1 billion (CA$1.3) for 49.5% of Bombardier's CSeries and 200m warrants for BBD.B. - The government is not in for the money, but to solve a confidence crisis. The CSeries is not expected to deliver free cash flow until 2020. - Bombardier's CSeries is in a Catch-22. The CSeries program can't survive without orders, and there's won’t be orders unless the CSeries program survives. The Bailout Bombardier Inc. is primarily traded on the Toronto Stock Exchange under the tickers BBD.B and BBD.A. Class A has ten votes per share, and Class B has one vote per share. The Beaudoin-Bombardier family has 54.35% of all the voting rights. BBD.B is the most commonly traded ticker.Investissement Québec, the government's investment arm, announced a partnership with Bombardier that would regroup the asset liabilities of the CSeries project. For US$1 billion (CA$1.3b) and warrants to purchase 200 million shares of BBD.B for $2.21 each, Investissement Québec will own 49.5% of the partnership. The exercise price of the warrants is 58% higher than the current stock price of $1.40, and if exercised, it would make the government the largest owner of Class B shares. In exchange, BBD promised to keep its headquarters in Quebec for the next twenty years and CSeries-related activities. BBD will get US$500m on April 1, 2016 and another US$500m on June 30, 2016. By the way, it's noteworthy to mention that this is not the company's first instance of governmental aid. Different levels of government have backed Bombardier time and again over the decades. How Does This Hurt Shareholders Governmental aid has proven in the past to ruin the overall trust and reputation of share prices persuading investors to think of Bombardier as a unstructured company using taxpayer funds to operate. Shareholders equity margins have decreased substantially over the past couple of months highlighting that Bombardier's return on equity as under performing. By simply reading the Management Discussion section in their annual report investors greatly shy away causing bearish runs and short lived positive divergences. Lastly the 200M warrants held by the Government discourage future investors from going "Long" on the Class B shares (BBD-B.TO) with fear of the warrants being exercised beore expiry and possibly hurting the share price.
TSX:BBD.B
by Machiavelli
Talk about rejection! Oil destined for $42.00Talk about rejection! Today we saw some crazy dollar strength. As of 3pm, the dollar had made a 100% retracement or 214 bps round-trip from this morning's ECI drop. The market gave a clear signal that it believes - or rather, more likely, wants , a Fed rate hike. That's all that matters, folks. Oil is heading lower. What's more, the technicals strongly support the move. This week we saw a two day counter-trend rally move oil up 6%. With today's price action, we have a firm rejection of the counter-trend rally, which means the downtrend is still intact and the move lower can proceed. Today, we also saw the futures break below the lows set prior to the counter-trend rally, a level that also corresponded with the 76.4% fib retracement of March's rally to 2015 highs. 100% is the next fib retracement level at 42.00, which falls within range of a fib extension zone b/w 41.55 and 43.25. The pace of the current downtrend from late June predicts 42.00 within 13 days. Keeping in mind the absolute and relative low levels of oil volatility (versus other asset classes) could cause that move to come much faster. A long vol, bearish options strategy might be a useful way to play the move. Next week I plan to take some profits in my 45 puts and roll into shorting the futures directly. Also, keep the Mexican Peso on your watch list. My macro thoughts are OIL --> CAD --> MXN.
FX:USOILShort
by simonsays452
1
USDCAD: Daily Gartley PatternUSDCAD VIDEO (www.youtube.com) Obviously I'll be playing the sidelines today due to the Non-Farm release, but for you longer term traders, we've broken past our B leg which means it's time to pay attention to the bearish Gartley. This particular pattern comes in at a very nice level of structure (looking left) where price consolidated in the past before a markdown. This doesn't mean that the level will hold again, we never know in trading, but it does show that the market has respected this level in the past, and as a pattern trader all you should be looking for is a brief pull back. Good luck for anyone getting involved in this one. Akil Stokes Chief Currency Analyst at www.TradeEmpowered.com Akil@Tradeempowered.com /@AkilStokesRTM / Forex Weekend Review Videos (Every Thursday): www.youtube.com
Short
by Akil_Stokes
37
GBPCAD 4 HOUR LONGPRICE AT AN IMPORTANT KEY LEVEL AND JUST BOUNCED OFF THE RESISTANCE TURNED SUPPORT FORMING A DOUBLE BOTTOM. ALSO THIS KEY LEVEL IS IN CONFLUENCE WITH THE 0.5 FIB LEVEL. GBP AVERAGE HOURLY EARNINGS IS EXPECTED TO COME OUT BETTER AT 2.2% AND THE REASON WHY THIS IS IMPORTANT IS BECAUSE THE BOE (BANK OF ENGLAND) SAID THEY'LL BE MONITORING HOURLY EARNINGS DATA. IF THIS DATA DOES COME OUT GOOD WE SHOULD SEE SOME DECENT STRENGTH IN THE POUND. A BREAK OF THE COUNTER TRENDLINE WE COULD EASILY REACH TO THE SWING HIGHS AS I BELIEVE THE UPTREND IS STILL VERY MUCH IN TACT.
Long
by remelthomas
Potential Bullish Flag Breakout Into A Bearish BatA lot of news coming out this week for both CAD and AUD but on the technical side of things what I see is a bullish flag pattern forming within the C to D leg of a potential bearish bat pattern. I don't trade flags the same way i trade advanced patterns but I do like when they come back into previous structure as in this case so it's something I will certainly be keeping my eyes on to see if I will get a chance to be involved. If so you can look to ride price action up to the potential bearish bat and then stop and reverse putting yourself short the advanced pattern. Not that this means much as I don't have that much of a bearish bias, but the Bat completion would also give us a valid C leg of a much bigger Gartley pattern located on the daily. If you want to get a better idea of how I trade please check out my YouTube page where I have over 100 FREE trading videos posted. www.youtube.com Also for day to day insights of what I did in the markets and what lessons were learned from it check out my blog at ratiotradingmentor.com
Long
by Akil_Stokes
19
Bullish trade on GBPCAD for 2015The GBPCAD cross looks like it's been consolidating with a flag-like movement since the start of 2014, and this may lead to an eventual bullish leg to fresh multi-annual highs in 2015. Fundamentally, I like being short the Loonie dollar as crude oil's plunge this year should lead to disinflationary pressures in Canada with a possibility of seeing the Bank of Canada revise it's inflation forecasts downward for the next year or so. Meanwhile, while the BoE maintains a cautious approach with regards to a rate hike, that lead to the bullish GBPCAD breakout in 2013, I believe that the British Pound will remain stable next year. This will likely lead to further gains for the GBPCAD cross, and I will be looking for a monthly break above 1.84 to start anticipating an acceleration to fresh highs above 1.8670 (Feb. 2014 highs). If this happens, I think we could see 1.92/93 CAD hit within a couple of months following a break above 1.8670.
Long
by ABRAK75
3
Heavy volatility affecting the CAD in the coming hours and days.There will be some important announcements coming affecting the CAD/USD. It would be hard to make a prediction at this point but a buy stop or sell stop on either side could be a good idea. Time (April 16th) Country Event Importance 2 am (9 pm ET time) China GDP q/y High 2 am China Industrial Production y/y High 2 am China Fixed Asset Investment ytd Medium 12:30 pm US Building Permits High 12:30 pm Canada Foreign Securities Purchases Medium 12:30 pm US Housing Starts Medium 1:15 pm US Capacity Utilization Rate Medium 1:15 pm US Industrial Production Medium 2 pm Canada Bank of Canada Policy Report High 2 pm Canada Overnight rate High 2 pm Canada Rate Statement High 2:30 pm Oil Oil Inventories Medium 3:15 pm Canada BOC Press conferece High 4:15 pm US Fed Chair Yellen Speaks High 6 pm US Beige Book Medium April 17th 12:30 pm Canada CPI (inflation) High 12:30 pm US Unemployment Claims High 2 pm US Philly Fed Manufacturing Index High April 18th Easter Holidays! High
by maccabean