Q2 was strong, Q3 will be tougher

by Zubin Driver
July 07, 2009

A remarkable second quarter came to a close in a quiet last week prior to the Canada and US Independence Day holidays. Q3 09 promises to be less unidirectional as significant upside off of the bottom has now been realised and any full blown recovery is still shrouded in the distance. American unemployment numbers reported Thursday made a case in point as 100,000 more jobs than expected were lost in June, totaling 467,000. In January, job losses peaked at approximately 750,000 and have fallen every month since. Until June that is, where the US lost about 100,000 more jobs than were shed in May.

Considerable emphasis is placed on the American consumer when it comes to global economic strength. Asset values (stock and property), as well as emerging economies' growth, particularly China's, are highly dependant on the American consumer. Along with employment figures, consumer confidence numbers were also released last week, and they too were down from May. When people are losing jobs and determined to save money, how can they be expected to spend?

Given these uneasy data points it seems reasonable to expect a grinding, rangebound quarter to come. We're now into the heart of the traditional 'summer doldrums' period and volumes should be light. The worst is no longer expected, so over the second half of the year data will have to continue to bear out the case that things have improved; hopefully the Q3 range will consolidate Q2's gains at a level considerably above the lows of March.

Encierro!

Well, many people bought tickets to be in Calgary this week at the stampede, but in Pamplona, Spain, much braver, or crazier, people will be running through town amidst a pack of bulls. In the stock market we are always hearing about bulls and bears, and of course Q2 saw a great bull run, but on July 7th of every year, regardless of consumer sentiment, central bank actions, subprime mortgages or anything else, encierro, translated from Spanish as 'the running of the bulls,' occurs. Back here as the summer doldrums take hold, there may be many an investor wishing for his / her favourite stock to enjoy an 'encierro!' of its own...

Who shut the lights out?

As mentioned above it looks like the true summer doldrums have arrived, and it sure happens fast! Through June there was still plenty going on, but now the companies making good moves and trading volume are fewer by the day, as if a switch was flicked off right after Canada Day. The venture markets are far less liquid than the big boards which trade blue chip stocks; when things go quiet there aren't always a lot of bids around and the resulting drifts in stock prices can be a painful sight. For those of us holding shares in such companies the hope is for a patient shareholder base who sees the company's longer term objectives and is willing to give the company time to reach them. Otherwise, a whole lot of bids will be getting hit!

Best regards,
Zubin

Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com

Canaccord Capital Corporation
Attention: Zubin Driver
P.O. Box 10337 Pacific Centre
2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2

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OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).