Will the Federal Reserve begin to taper its monetary stimulus? We'll all find out today
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at firstname.lastname@example.org
by Max Fawcett
Today’s the big day – or, at least, the latest one – when it comes to the ongoing drama surrounding America’s experiment with non-standard monetary policy. After two days of meetings with his colleagues in the Federal Reserve, chairman Ben Bernanke will hold a press conference later today that’s expected to include details of the much-talked about tapering of its $85 billion monthly purchase of assets that are intended to (and have managed to) support the American (and, by extension, the global) economy.
Some, like the Economist, have suggested that he ought not to move too quickly, arguing that “The Fed needs to spell out its priorities and plans much more fully. First, it must leave no doubt that the priority is to support growth; that the pace of bond purchases is being reduced because the economy is ready for it; that the tapering will be cautious; and that if the recovery wanes the bond-buying will be stepped up again. Second, the Fed’s promises about its future plans should eschew mechanistic reliance on one economic indicator. If America’s jobless rate is falling but other measures of the economy’s health are weak, the central bank should explain it will err on the side of keeping policy loose for longer.”
And for those who can’t get enough of monetary policy talk – and, let’s be honest, who can? – Slate’s Matt Yglesias has an excellent wrap up of the other issues facing both Ben Bernanke and investors, which you can read here.
It’ll be the Fed that moves the markets today, but stock pickers who are willing to wade against the tide might want to take a look at Cenovus Energy (TSE:CNV), Crew Energy (TSE:CR) and Birchcliff Energy (TSE:BIR). According to AltaCorp Capital’s daily note, they’re among the only energy companies in the patch who have improved their OPEX expectations on the year but haven’t seen a commensurate increase in their share price. “The names that have shown the greatest decrease in operating costs are up on average 28 per cent YTD versus names who have shown the largest increase are down nine per cent YTD – a difference of nearly 37 per cent.” Yet, strangely, Cenovus – which has posted the biggest improvement in its OPEX forecasts of any company AltaCorp looked at – hasn’t benefitted from that trend. Maybe some mean reversion is in order in the last quarter of 2013.
One company that has benefited from those downward cost estimates (it came in right behind Cenovus in second place) is Tourmaline Oil (TSE:TOU). It’s been on a run so far in 2013, with its shares rising by 33 per cent, and according to FirstEnergy there might be more yet to come. “We continue to be very constructive on the stock and view its latest round of acquisition activity as complementary to a business plan that is rich in organically generated growth via the drill bit,” FirstEnergy analyst Robert Fitzmartyn wrote in a recent note. He has an outperform rating on Tourmaline shares and a $57.50 price target.