Toronto Stock Exchange Gets Hammered

Today may hinge on a few economic reports. At 10am the Institute of Supply Management will release its survey of manufacturing executives. The index is forecast by economists to be 53 unchanged from last month, but remember any number over 50 means growth. After that at 10:30am the report on US fuel inventories will be released. Oil was down slightly ahead of the report. Also out today are the September construction spending and Pending Home Sales reports. Any of these reports can spook the markets if the surprise negatively.

Also today Time Warner released earnings two cents above last year but a penny below forecast. The big three automakers are also reporting October sales today.

The NYSE will also be consolidating trading rooms from five to four over the next 18 months as more electronic trading comes online and ceilings for electronic trading are raised. Could this be the beginning of the end of floor trading at the NYSE? The NYSE has always said that some part of the floor will remain and has hung on to its floor brokers and specialists, but that kind of physical presence must come with a high overhead. The cost savings by going electronic must be a huge temptation. After all they do have to compete with the likes of NASDAQ.

The big news in Canada is the announcement by the Finance Minister that he will be taxing income trusts. Income trusts are units that pay all or most of their monthly profits out to shareholders as distributions. Since these distributions are paid out immediately, the income trusts are not subject to tax. Seniors liked them because they could get a higher yield than with dividends and they got a monthly income stream. Soon corporations got a hold of the idea and could make their shares more attractive and reduce their corporate tax. The trouble with that is that the Federal Government starts losing tax revenue and we know they won’t put up with that for long. Well it ended yesterday as the Finance Minister announced that income trusts would be taxed. Also to not upset seniors he announced special tax breaks for them. Now if we could only get him to do something about the stupid pension legislation and locked in accounts.

The TSE opened down 300 points and is trying to come back a little, but don’t count on it.