Short sellers will be 'undone' by bets against TD: Investment strategist

Daniel Johnson , BNN Bloomberg

TORONTO-DOMINION BANK (TD:CT)

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As short sellers place bets against Toronto-Dominion Bank, one investment strategist said the lender has managed its risks well and Canadian banks have withstood similar short positions in the past.

According to Bloomberg News, an analysis conducted by S3 Partners showed that short sellers have increased their positions against TD Bank in recent weeks.

Philip Petursson, the chief investment strategist at IG Wealth Management, said in an interview with BNN Bloomberg Wednesday that the recent short selling doesn’t surprise him as TD has a large U.S. presence.

“I think it's a play on the TD regional bank exposure that they have. But I wouldn't put as much emphasis or fear on TD’s prospects,” Petursson said. 

“TD is excellent in terms of its risk management. And I think that they've managed their U.S. exposure very well. I think the shorts will be undone by this.” 

Despite the increase in bets against the Toronto-based lender, Petursson said Canadian banks have withstood similar instances in the past. 

“About 10 years ago, we called it the ‘great white short,’ which turned into the ‘widow-maker trade’ because everyone was shorting the Canadian banks thinking that there would be a repeat of what we saw in the U.S. That never materialized and I don't think it will,” he said. 

Indications of liquidity concerns in Canada’s banking sector are scarce, according to Bloomberg News. However, analysts have noted TD’s exposure to a potential housing slowdown in Canada coupled with its presence in U.S. markets, through a stake in Charles Schwab Corp. and its plans to purchase U.S. regional bank First Horizon Corp.

Aimia's largest shareholder to vote against

re-election of board at annual meeting

The Canadian Press

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The largest shareholder of Aimia Inc. says it will vote against the re-election of the company's board of directors at its annual meeting later this month.

Mithaq Capital SPC says it is disappointed with recent events and has lost confidence in Aimia's board and management. 

Toronto-based Aimia responded by saying its corporate strategy is on track and shareholders should approach the development with caution. 

Aimia, which is scheduled to hold its annual meeting on April 18, sold its flagship Aeroplan loyalty program to Air Canada in 2019 and has reinvented itself as an investment holding company. 

Mithaq says its decision to vote against the re-election of the board includes concerns regarding capital allocation decisions related to acquisitions.

The affiliate of Mithaq Holding Company, a family office based in Saudi Arabia, says it holds a 19.9 per cent stake in Aimia.

RBC chief executive defends climate plan as shareholders criticize record

Ian Bickis, The Canadian Press

RBC chief executive Dave McKay defended the bank's climate plan at its annual shareholder meeting Wednesday as numerous attendees criticized it for not doing enough.

Speaking at the event held this year in Saskatoon, McKay emphasized the importance of an orderly net-zero transition since instability in food, energy or security will throw off efforts to rein in climate change.

"Where any of those, one or more of those elements, aren't present, then the focus on this critical climate journey is put aside." 

He also said there needs to be a wider shouldering of the burden of change. 

“We are putting all the pressure in society on the manufacturing supply side to change and make it an easy journey for us as citizens, and so far, for the most part, we've appeared unwilling to change our consumption behaviours or mobility behaviours to lower our footprint.”

His comments come as the bank faces a barrage of criticism from those pushing for shareholder resolutions, especially on stronger and faster climate action but also racial equity, and executive pay, and Indigenous rights. 

Grand chief Stewart Phillip, president of the Union of British Columbia Indian Chiefs, presented a resolution pushing the bank to implement free, prior and informed consent (FPIC) as he raised concerns about the bank's involvement in the Coastal GasLink pipeline. 

"Failures to adequately incorporate FPIC is a material risk that has already caused reputational harm, as well as delays, cost increases and conflict on the land," he said. 

McKay said the bank can't be held responsible for the day-to-day operating issues of the pipeline construction, while consent issues are difficult questions that need collaboration to resolve.  

"Free prior informed consent is a very complex issue that has to be led by Indigenous communities, governments, and those businesses that own and operate the assets and the projects in question."

Several attendees speaking for resolutions, including Wet’suwet’en hereditary chief Na’Moks, also criticized the bank for relegating them to an overflow room at the meeting where they were unable to address bank executives in person.

“(I’ve) never been so insulted in my life,” said Na'Moks to a crowd gathered outside the hotel. 

Some hundred or so demonstrators had gathered before the meeting. Many wore ribbon skirts and some held signs calling RBC the “Oil Bank of Canada” and called for the bank to “stop funding eco-cide.”

Of the eight shareholder proposals that went to a vote, one pushing for the bank to undertake a racial equity audit secured the highest support at about 44 per cent, while the resolution on Indigenous consent garnered 28 per cent support. 

A resolution pushing RBC to set absolution emission reduction targets got 22 per cent support, while one trying to get the bank to stop funding fossil fuel expansion secured about 11 per cent. 

McKay thanked those who had spoken at the meeting, saying that he thinks they agree on the destination and that they disagree only on how to get there.

GENERAL STRIKE!

Canadians turning to savings accounts to cope with high living costs: Survey

Nearly half of Canadian workers (45 per cent) stated they have not received additional compensation from their employer in the past year to help offset the rising costs.

Iva Poshnjari, BNN Bloomberg

The sky-high cost of living is pushing Canadians to draw on their savings accounts, or borrow money, in order to make ends meet, an Angus Reid Institute survey released on Thursday revealed.

Roughly 40 per cent of survey respondents said they’ve had to take out money from accounts they normally wouldn’t touch in order to keep up with inflation, while 35 per cent said they’ve had to defer their RRSP or TFSA contributions to have enough, the report said.

Others have had to go so far as to resort to family and friends (13 per cent), selling their assets (11 per cent) or seeking a bank loan (eight per cent) to cover living costs. 

Respondents also reported that they are continuing to cut back on discretionary spending as two-thirds of Canadians continue to resort to belt-tightening measures – 14 points higher than reported this time last year, the report said.

Despite the federal government announcing some relief plans in its latest budget, which included measures such as a one-time grocery rebate for those eligible, the report stated persistent income challenges remain.

Nearly half of Canadian workers (45 per cent) stated they have not received additional compensation from their employer in the past year to help offset the rising costs.

Methodology: The Angus Reid Institute conducted an online survey from March 30- 31. 2023, among a representative randomized sample of 1,600 Canadian adults who are members of Angus Reid Forum.

CANADA

Economy keeps adding jobs as population grows, despite high interest rates

Nojoud Al Mallees, The Canadian Press

The Canadian economy added 35,000 jobs in March amid strong population growth, keeping the unemployment rate steady at near record lows, even as the economy wrestles with high interest rates.

In its latest labour force survey, Statistics Canada said Thursday the unemployment rate came in at five per cent for the fourth consecutive month.

The job gains were made primarily in the private sector. Employment was up in transportation and warehousing, business, building and other support services, as well as finance, real estate, rental and leasing.

Meanwhile, jobs were lost in construction, other services and natural resources.

Brendon Bernard, a senior economist at Indeed, said the report shows the labour market is still doing well, "despite a lot of economic uncertainty."

But Bernard cautioned that interpreting the job numbers is a bit tricky because Canada is also seeing its population grow rapidly.

Statistics Canada said the population grew by 0.3 per cent last month, while employment rose by 0.2 per cent.

"The report might not be quite as strong as the headline number might suggest," Bernard said. "But at the same time, that five per cent unemployment rate highlights the big-picture story, which is that the job market remains in solid shape."

Over the last six months, the Canadian economy has added nearly 350,000 jobs, surprising economists who are anticipating a slowdown. It's also making it harder to interpret what is going on in the economy and how high interest rates are affecting it. 

RBC assistant chief economist Nathan Janzen said what's happening in the labour market is more than "just a population growth story."

"It's also ... labour demand for workers outpacing available supply," he said. 

The Bank of Canada is concerned that if the labour market stays this strong, wages may continue to grow rapidly, something that would make a return to two per cent inflation more challenging.

The central bank will make its next interest rate decision on April 12. And while this latest job report doesn't show any cooling yet, the Bank of Canada is expected to continue holding its key interest rate steady at 4.5 per cent.

As employers keep their hiring appetite for now, wages continued to grow in March. Average hourly wages rose 5.3 per cent on an annual basis.

The Statistics Canada report showed those who are unemployed were less likely to stay out of work for a long time. The percentage of those who were unemployed in March that had been out of work for 27 weeks or more was 16 per cent, down from 20.3 per cent a year earlier.

However, the labour market tightness isn’t expected to last forever. The Bank of Canada’s aggressive rate hikes since March 2022 are expected to weigh on the economy, with economists forecasting a significant slowdown this year.

Surveys released by the central bank earlier this week showed consumers and businesses are preparing for that slowdown. Consumers said they’re planning to pull back on spending, while businesses are anticipating sales to slow.

That pullback is expected to filter through to the labour market and lead to a rise in unemployment.

And while businesses continued to report labour shortages as a top concern, the surveys showed there are signs that the labour market is easing.

Bernard said job postings on Indeed are still above pre-pandemic levels, but they've fallen by 15 per cent since last year. 

Job vacancies reported by Statistics Canada have also fallen from the record-high levels reached last year. 

Janzen said these "cracks" in the labour market will eventually turn into more modest job reports and a rise in unemployment. 

"I think there are some cracks out there that are still forming, so we still expect the economy to weaken from here," Janzen said. 

"But it's been a pretty strong start to 2023."

Ottawa and Edmonton cement manufacturer sign preliminary deal on carbon capture

The Canadian Press

The federal government has signed a deal to work with an Edmonton cement manufacturer to keep carbon dioxide generated at the plant from entering the atmosphere.

Innovation, Science and Industry Minister Francois-Philippe Champagne has signed a memorandum of understanding with Heidelberg Materials to help with construction of a carbon capture and storage facility.

The deal marks the start of negotiations on a federal role in the $1.4-billion project, which is expected to be operational by 2026.

The company says the facility would make the plant carbon neutral and it would be the first of its kind in North America. 

It says the project would store the equivalent of carbon produced by 300,000 passenger cars a year. 

Cement manufacturing is a significant source of greenhouse gases, responsible for about seven per cent of global carbon dioxide emissions. 

This report by The Canadian Press was first published April 5, 2023

Tokyo Scientists Unveil Solid-State Battery Breakthrough

By Brian Westenhaus - Apr 06, 2023

• Tokyo University of Science researchers have improved the response speed of solid-state batteries by two orders of magnitude.
• 
  
• Researchers used a novel technique to investigate and modulate electric double layer dynamics.
• 
  
• These findings can lead to the commercialization of all-solid-state batteries with diverse applications, particularly electric vehicles.

Tokyo University of Science researchers demonstrated unprecedented control of response speed by over two orders of magnitude in a solid state battery. This is a major steppingstone towards realization of commercial all-solid-state batteries.

Solid-state battery‘s high surface resistance causes these batteries to have low output, limiting their applications. The researchers have employed a novel technique to investigate and modulate electric double layer dynamics at the solid/solid electrolyte interface. The achievement is carrier modulation and improved switching response speed control in these batteries.

The reporting paper detailing their technique was published in Volume 31 of Materials Today Physics.

The search for clean energy and carbon neutrality, all-solid-state lithium-ion batteries (ASS-LIBs) offers considerable promise. ASS-LIBs are expected to be used in a wide range of applications including electric vehicles (EVs). However, commercial application of these batteries is currently facing a bottleneck – their output is reduced owing to their high surface resistance. Moreover, the exact mechanism of this surface resistance has been so far, unknown. Researchers have alluded it to a phenomenon called the “electric double layer” (or EDL) effect seen in colloidal substances (which are microscopic dispersions of one kind of particle in another substance).

The EDL effect occurs when colloidal particles gain negative electric charge by adsorbing the negatively charged ions of the dispersion medium on their surface.

Dr. Tohru Higuchi, Associate Professor at Tokyo University of Science (TUS) explained, “This occurs at the solid/solid electrolyte interface, posing a problem in all-solid-state lithium batteries.”

Dr. Higuchi, along with colleagues Dr. Makoto Takayanagi from TUS, and Dr. Takashi Tsuchiya and Dr. Kazuya Terabe from National Institute for Materials Science in Japan, have devised a novel technique to quantitatively evaluate the EDL effect at the solid/solid electrolyte interface.

The researchers employed an all-solid-state hydrogen-terminated diamond (H-diamond)-based EDL transistor (EDLT) to conduct Hall measurements and pulse response measurements that determined EDL charging characteristics. By inserting a nanometer-thick lithium niobate or lithium phosphate interlayer between the H-diamond and lithium solid electrolyte, the team could investigate the electrical response of the EDL effect at the interface between these two layers.

The electrolyte’s composition did, indeed, influence the EDL effect in a small region around the electrode interface. The EDL effect was reduced when a certain electrolyte was introduced as an interlayer between the electrode/solid electrolyte interface. EDL capacitance for the lithium phosphate/H-diamond interface was much higher compared to the lithium niobate/H-diamond interface.

The team’s article also explains how they improved the switching response time for charging ASS-EDLs. Dr. Higuchi noted, “The EDL has been shown to influence switching properties, so we considered that the switching response time for charging ASS-EDLs could be greatly improved by controlling the capacitance of the EDL. We used the non-ion-permeable property of diamond in the electron layer of the field-effect transistor and combined it with various lithium conductors.”

The interlayer accelerated and decelerated the EDL charging speed. The electrical response time of the EDLT was highly variable – it ranged from about 60 milliseconds (low speed switching for lithium phosphate/H-diamond interface) to about 230 microseconds (high speed switching for lithium niobate/H-diamond interface). The team, however, exhibited control over the EDL charging speed for over two orders of magnitude.

To summarize, the researchers were able to achieve carrier modulation in all-solid-state devices and improved their charging characteristics. “These results from our research on the lithium-ion conductive layer are important for improving the interface resistance and may lead to the realization of all solid-state batteries with excellent charge-discharge characteristics in the future,” noted Dr. Higuchi.

All in so far this is a major steppingstone towards controlling the interface resistance of ASS-LIBs that catalyzes their feasibility for many applications. It will also help design better solid-electrolyte-based devices, a class of gadgets which also includes neuromorphic devices.

***

The solid-state design has some very attractive characteristics. For now the architecture design isn’t cooperating. It sounds like this team has revealed that the electrodes cover themselves thus restricting the flow and in turn the power.

It does seem now that the problems and challenges are getting defined thanks to this team’s efforts. Once defined and explained the solutions can be worked out.

Solid-state might not be imminent, but now one has lots more confident they are inevitable.

By Brian Westenhaus via New Energy and Fuel

ANOTHER REASON TO GO RENEWABLE

North Sea Oil Production Could Fall By 80% By 2030

By Felicity Bradstock - Apr 06, 2023

• Offshore companies reduce their spending in the North Sea, leading to a decrease in oil production.
• Without additional funding, the UK may become reliant on foreign fossil fuels to meet its energy demands.
• The introduction of a windfall tax has been blamed for the lack of interest in British waters.

According to the industry body Offshore Energies UK, investments in the North Sea have dipped significantly. This could result in much lower oil production by the end of the decade unless the government can attract greater investment to the sector. While environmental groups are praising the drop in funding, energy experts are concerned about what this means for the U.K.’s energy security, with some suggesting it may have to rely on foreign fossil fuels to meet its needs. 

Offshore Energies found that 90 percent of offshore firms had reduced their spending in the North Sea, amounting to billions in total. It determined that the lower level of investment could result in a decrease in production of 80 percent by 2030, equivalent to 500 million fewer barrels of oil if the government cannot attract more funding to the waters. This could lead the U.K. to rely on imports of oil and natural gas. 

The introduction of a windfall tax has been blamed for the lack of interest in British waters. The government introduced the tax last year as energy companies saw record profits as oil and gas prices rose sharply. This was largely in response to supply shortages and sanctions on Russian gas. Headline tax rates for companies rose from 40 percent to 75 percent, although several companies still posted profits. BP announced it had seen record profits of $22.7 billion in 2022. However, many companies believe it could be cheaper to invest in oil and gas operations in countries where taxes are significantly lower. Others have shifted investments to new ‘low-carbon’ oil operations, in a move away from traditional oil-producing regions. Other reasons for the reduction in investment include high levels of inflation, expensive material costs, and a lack of access to finance. 

Several environmental groups are suggesting the investments bound for the North Sea could be better used in renewable energy projects. This would both help the U.K. to ensure its energy security as well as accelerate the green transition by cutting fossil fuel use and carbon emissions. However, several industry experts see fossil fuels as playing a huge part in the U.K.’s mid-term energy security. Ross Dornan from Offshore Energies stated, “By the mid-2030s, according to the Climate Change Committee, oil and gas will still provide half our energy needs.” Therefore, "We should be aiming to get as much as possible of that energy from our own resources - meaning the North Sea,” Dornan explained. Dornan highlighted the need for the U.K. to attract investment in the sector or become reliant on other countries for its oil supply. 

Earlier in the year, Amjad Bseisu, CEO of the North Sea company EnQuest, stated that the U.K. is fiscally unstable, which has led the government to indulge in “short-termism” by introducing windfall taxes to the detriment of its oil and gas industry. In response to the rise in taxes, Bseisu said that Asia had become the company’s biggest growth area, instead of the U.K. or Europe. Although the windfall tax responds to 2022’s rising consumer energy bills and high oil and gas profits, it is expected to remain at the increased rate until 2028, which could deter energy companies from investing further in British oil and gas operations. 

Bseisu and other industry leaders believe it is vital for the U.K. to make the North Sea attractive to investors and maintain its oil and gas activities to bring in the revenues needed to fund the green transition. Without money from oil and gas, the government may not have the funds it needs to accelerate the rollout of renewable energy and related technologies. Further, it may need to spend more on oil and gas imports if its domestic production falls short of the country’s rising energy demand. 

Other countries, such as the U.S., have avoided introducing a windfall tax, having instead concentrated on boosting national production to ensure energy security. Revenues from the oil industry are expected to support the rollout of President Biden’s ambitious 2022 climate policy, the Inflation Reduction Act. The joint aim of accelerating the development of the U.S.’s green energy capacity while also decarbonising through carbon capture and storage technologies and other schemes will help the country to continue producing oil and gas as it speeds up its green transition. However, this too has been criticised, as many environmental groups believe Biden is offering too much support for oil and gas in contradiction to his climate pledges. 

Countries around the globe appear to be finding it hard to manage their energy security, needing to decrease consumer costs, move away from oil and gas, and increase their green energy production. The U.K.’s windfall tax has been blamed for deterring greater investment in North Sea oil and gas operations, which could negatively affect the country’s energy security. But at the same time, environmental organisations are suggesting the money could be better used in renewable energy projects. And other approaches, such as U.S. President Biden’s backing of domestic fossil fuel production, have received similar criticism. So, it seems that striking the right balance between mid-term fossil fuel production to ensure energy security and a long-term green transition is more complex than some originally thought. 

By Felicity Bradstock for Oilprice.com 

Mexico To Buy 13 Power Plants From Spanish Energy Major

By Charles Kennedy - Apr 05, 2023

Mexico is set to buy 13 power plants currently operated by Spain’s utility major Iberdrola in a deal worth some $6 billion.

The purchase, Reuters reports, is part of the Lopez Obrador government’s ambition to return control over Mexico’s electricity market to government hands.

In a video, President Andres Manuel Lopez Obrador said the deal will give state-owned utility Comision Federal de Electricidad majority control over the Mexican electricity 

Mexico’s government has been on the nationalization path since coming into office. This has led to growing tensions with the United States, which has repeatedly warned its southern neighbor to open up its market instead of closing it to private businesses. 

What the Lopez Obrador government has been doing is essentially reversing as many policies introduced by the previous government as possible. This has naturally caused an outcry in international business circles as their access to potentially lucrative projects in Mexico, including oil and gas but also wind and solar, as well as power plant operation, has shrunk.

This has created uncertainty and the potential for an acceleration in the outflow of investment. International law firm White & Case last year wrote in a report that electricity and mining are among the most vulnerable industries to stringer government control.

“The Mexican energy sector is roiled by an environment of uncertainty and regulatory brakes to execute new and ongoing investments. Potential damage to existing foreign investments in the electricity and mining sectors could result from the amendments to the Electricity Law, the Lithium Mining Reform, and secondary regulations,” the report said.

No wonder then that Iberdrola has considered it wise to reduce its exposure to the Mexican market with the power plant deal, which is expected to be finalized in five months.