Not seeing the dark clouds

Is the world ending? Not from this perch.

As any long time reader will attest, we are a “glass half full” shop. We never worry about things working out; just about what happens if they don’t. The U.S. unemployment rate came out at 9.5% the other day, dropping 10 bps solely due to half a million Americans dropping out of the workforce.

The recent Canadian private sector jobs report was released earlier this week, and it was sufficiently positive to put the wind back in the sails of the Loonie. This report confirms the satisfactory signs I’m seeing from our corner of the universe.

Within our portfolio, and the new opportunities we see each and every week from both sides of the border, business continues to be done. Private software and hardware firms, in particular, are seeing year-over-year revenue growth rates of between 20 and 30%. Existing Fund III portfolio names, such as Healthscreen (MDU:TSXV) and Biorem (BRM:TSXV), continue to announce new contract wins. Others are raising new capital, such as CriticalControl Solutions (CCZ:TSX) and Nightingale Informatix (NGH:TSXV). Within our world of private names, none of the dark clouds we saw in mid-2008 appear to be on the horizon.

This might relate to our transaction choices, but the financials we see via new opportunities in the pipeline speak to a good first half of 2010 across many a sector of the North American economy.

We’ve all read about the “corporate cash hoarding” going on within the Fortune 500 world. I used to think the lack of new lending was due to stingy banks, and that may in fact be true (see prior post “Bank loans stagnant for 6th straight month” May 26-10). According to the most recent Bank of Canada data, Canadian corporate and commercial bank borrowings are at their lowest point since the financial crisis began: $167.9 billion.

This one month $3 billion drop is significant, but anecdotal evidence suggests this is not entirely the fault of the banking world’s credit officers. It may well also have something to do with the tenuousness that CFOs have about the 2011 economy.

Consumers don’t seem to have any qualms about travelling or spending money. Just try to get a hotel room in New York City this weekend at the Fairmont Plaza for less than $700/night. Even the W, which bills itself as a four star spot, will set you back $450.

There are many reasons to be conscious of what 2011 will bring, but a re-living of The End Of The World As We Know It just isn’t on that list.

MRM
(disclosure – Fund III owns shares/warrants in Biorem, CCZ, Healthscreen and Nightingale)