Geopolitical concerns – Oil prices

The headlines making the news right now are focused around political unrest in the North Africa region – first Egypt, now Libya.

This has strategic implications with respect to crude oil pricing – Brent Sea crude has traded significantly higher than West Texas Intermediate, which would suggest that North American markets are somewhat more insulated from what is going on across the Atlantic Ocean.

In terms of market implications, it remains to be seen whether this geopolitical unrest is going to flare up into something bigger (and thus interfering with trade more than it has) or whether it will be a blip that will pass by – and the major indexes continue their seven-month uptrend without any significant correction.

Note that I will be taking a little break and will not be posting for the rest of the week.

Watch out for Questrade – Check those statements

(Update, February 18, 2011: David Del Grande from Questrade contacted me via e-mail regarding the issue I mentioned in this post. I will keep this post updated and see if they can resolve this issue.)

(Update, February 28, 2011: So far, Questrade has not responded to my reply.)

(Update, March 30, 2011: Much to my shock, I received a voice mail from Questrade and they have credited the amount in question, plus five commissions, to my account. I checked my account status and indeed they have made the appropriate corrections.)

Questrade recently went through an upgrade, and this has caused some disruption to their service.

I noticed that they have incorrectly processed a transaction on my account concerning a debenture trade – I sold some debentures about a week ago, and normally when you sell debt you receive a cash credit for accrued interest. On the trade history, it shows that there were three trades – two “sell” orders and a “cancel sell” which offset one of the sells. I noticed the interest was given on a sale, and taken back on the canceled sale, but the remaining sale did not have the interest income. This is wrong!

It is not a huge amount of money we are considering (about $80) but this sort of process should be correctly automated – I should not be having to waste my time and their time to contact customer support to get this corrected. Other people likely have issues with Questrade, since when I try accessing their live help (which generally has been a good way to correct issues with them), I get the following message:

You have reached Questrade’s Client Services. You are in priority sequence for the next available Client Services Specialist. Thank you for your patience, the average wait time is ’55’ minutes. Thank you for your patience.

There is no way that I am going to keep the window open for 55 minutes.

I am starting to seriously question why I have my money with this firm – they offer the cheapest trades, by far, for debentures and fixed income products. However, other hassles such as this one, offset any cost savings. Since fixed income opportunities are in very short supply these days, it is unlikely I will be needing to trade those products to the degree that I did back in 2009. The other reason why I stick around is because my other broker is Interactive Brokers, where I do the bulk of my transactions, does not do RRSP or TFSA accounts.

Finally, Questrade forced clients away from their dated “Webtrader” platform and onto their “QuestradeWEB” platform. I personally preferred the Webtrader platform as it was very simple, quick and just seemed to “work”. The QuestraderWEB platform is more heavy and takes more time to navigate. I understand their need to migrate people off of a platform that was coded 7 years ago, but why can’t they design a simple user interface to a stock trading service? A poor user interface costs them money – people will trade less.

When does the gravy train end?

A couple charts: One of the S&P 500 and one of the TSX Composite over the past year:

Over the past half year has been a straight trendline up. Naturally anybody that has invested in anything has seen the winds of the marketplace at their backs. The only question is – when does it end?

The economic recovery is being priced in – in addition to cash being deployed in assets that will yield any sort of return. The only question now is whether this is a rational valuation, or whether these prices have not priced in future unknowns – or perhaps the existing prices have not priced in enough of a recovery and we will continue to see a monster run continue in the indexes.

Encana deal a signal of future natural gas prices

Encana’s deal with PetroChina, where it sold a 50% interest for $5.4 billion dollars in their Cutbank Ridge property is likely a signal that management believes natural gas prices will remain depressed relative to the run-up experienced in the middle of 2008. The management of PetroChina likely disagrees or is trying to rapidly deploy capital even if they have to pay an expensive price in doing so.

Although the exact terms of the deal are not known, an injection of $5.4 billion in cash leaves Encana in a fairly unleveraged financial position – their total debt at the end of December 2010, net of cash is about US$6.5 billion. Encana will also be spending most of its operating cash flows on capital projects in 2011.