Wednesday, October 28, 2009
"Enthusiasm definitely seems to have replaced fear with many investors. However after a significant rally over the last few months, we have seen a pretty negative move in the market over the past few days. The next few weeks could easily see a return to some of the volatility of last year. What does this mean to you? It makes sense to rebalance your portfolio after the significant drop of 2008, and rally of 2009. As year end approaches, it would make sense to meet with your advisor, and make sure that your asset allocation makes sense. This means that you may want to be a buyer on weakness if you have too much cash, or a seller of stocks if you have too much equity. The nearer you are to retirement, the more important this is. Last year really damaged many retirement plans, and it makes sense to protect against further damage. If you are looking for a second opinion, why not give me a call."
Monday, October 26, 2009
The HST and Your Investments, part 2
If you caught my show on saturday, you heard me speak on the issue of
mutual fund companies protesting about the impact of the new
Harmonized Sales Tax on fund investors. This issue is valid, but I
think it is a red herring. The fund companies kick up a huge fuss
about the impact of the tax on investors' savings, but do nothing
about the fact that an investor could conceivably pay hundreds of
thousands of dollars in management fees over a lifetime. The HST only
increases the already dramatic impact of the Canadian mutual fund
company management expenses, which are the highest in the world. I
doubt we will see any great movement to see fees come down due to the
tax. It really does support my stance that investors with larger
portfolios should explore their options. Less expensive and more
customized alternatives exist if you have outgrown your mutual funds.
mutual fund companies protesting about the impact of the new
Harmonized Sales Tax on fund investors. This issue is valid, but I
think it is a red herring. The fund companies kick up a huge fuss
about the impact of the tax on investors' savings, but do nothing
about the fact that an investor could conceivably pay hundreds of
thousands of dollars in management fees over a lifetime. The HST only
increases the already dramatic impact of the Canadian mutual fund
company management expenses, which are the highest in the world. I
doubt we will see any great movement to see fees come down due to the
tax. It really does support my stance that investors with larger
portfolios should explore their options. Less expensive and more
customized alternatives exist if you have outgrown your mutual funds.
Friday, October 23, 2009
Wareham Weekly Insights
Market Watch
The big picture
U.S. recovery slow and fragile
Housing and manufacturing are driving the early stages of an economic recovery in the U.S., however the most recent Federal Reserve survey pointed to a slow and fragile turnaround. Some economists fear the fledgling housing revival could be derailed when the first-time home buyers credit expires on November 30. The survey reported that the weakest links in the recovery were consumer spending, which accounts for 70% of economic activity, and commercial real estate.
Prime Minister Stephen Harper said his biggest concern is how the recovery plays out in the U.S., and he cautioned that, despite Canada’s strength, spillover effects could cause a double-dip recession. The Bank of Canada (BoC) announced it would keep its key rate unchanged at a record low of 0.25% and BoC Governor Mark Carney gave his clearest warning yet that he will take steps to stop the dollar’s rise if it continues at the current pace, warning that the strong dollar was hampering Canada’s recovery. Mr. Carney is also monitoring the surge in Canada’s housing market, with average house prices up 13.6% in one year. A top adviser to French President Nicolas Sarkozy complained that the euro’s strength, at US$1.50, was a disaster for European industry, and could lead to printing euros and inflation.
Markets
Ups and downs
Markets were volatile this week as investors reacted to the Fed survey results, Canada’s interest rate announcement and earnings news. The Canadian dollar slid almost two cents when the Bank of Canada announced its key rate would remain at 0.25%. However, on Wednesday, U.S. dollar weakness sent the loonie back up. Oil reached a fresh 2009 high of US$81.36 a barrel as U.S. gasoline inventories fell by 2.3 million barrels last week.
Apple posted record quarterly sales, pushing its stock to all-time highs. Meanwhile, Nokia filed a lawsuit claiming the iPhone infringes 10 of its patents. Research In Motion rolled out an updated BlackBerry Bold and Microsoft launched its new Windows 7 operating system in efforts to fend off Apple’s gains in the cellphone and PC markets. Microsoft announced Bing will search Twitter and Facebook for up-to-the-minute content. Within hours, Google announced a similar deal with Twitter. Caterpillar posted stronger-than-expected earnings and raised its full-year forecast. Hit by the sharpest drop in potash demand on record, Potash Corp. reported its quarterly profit fell 80% from a year ago. Cadbury posted strong sales, fueling speculation that Kraft will have to raise its bid. McDonald's profit climbed almost 6% on the success of its expensive new Angus burger.
Our recommendation
Add cyclical holdings on market pullbacks
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
The big picture
U.S. recovery slow and fragile
Housing and manufacturing are driving the early stages of an economic recovery in the U.S., however the most recent Federal Reserve survey pointed to a slow and fragile turnaround. Some economists fear the fledgling housing revival could be derailed when the first-time home buyers credit expires on November 30. The survey reported that the weakest links in the recovery were consumer spending, which accounts for 70% of economic activity, and commercial real estate.
Prime Minister Stephen Harper said his biggest concern is how the recovery plays out in the U.S., and he cautioned that, despite Canada’s strength, spillover effects could cause a double-dip recession. The Bank of Canada (BoC) announced it would keep its key rate unchanged at a record low of 0.25% and BoC Governor Mark Carney gave his clearest warning yet that he will take steps to stop the dollar’s rise if it continues at the current pace, warning that the strong dollar was hampering Canada’s recovery. Mr. Carney is also monitoring the surge in Canada’s housing market, with average house prices up 13.6% in one year. A top adviser to French President Nicolas Sarkozy complained that the euro’s strength, at US$1.50, was a disaster for European industry, and could lead to printing euros and inflation.
Markets
Ups and downs
Markets were volatile this week as investors reacted to the Fed survey results, Canada’s interest rate announcement and earnings news. The Canadian dollar slid almost two cents when the Bank of Canada announced its key rate would remain at 0.25%. However, on Wednesday, U.S. dollar weakness sent the loonie back up. Oil reached a fresh 2009 high of US$81.36 a barrel as U.S. gasoline inventories fell by 2.3 million barrels last week.
Apple posted record quarterly sales, pushing its stock to all-time highs. Meanwhile, Nokia filed a lawsuit claiming the iPhone infringes 10 of its patents. Research In Motion rolled out an updated BlackBerry Bold and Microsoft launched its new Windows 7 operating system in efforts to fend off Apple’s gains in the cellphone and PC markets. Microsoft announced Bing will search Twitter and Facebook for up-to-the-minute content. Within hours, Google announced a similar deal with Twitter. Caterpillar posted stronger-than-expected earnings and raised its full-year forecast. Hit by the sharpest drop in potash demand on record, Potash Corp. reported its quarterly profit fell 80% from a year ago. Cadbury posted strong sales, fueling speculation that Kraft will have to raise its bid. McDonald's profit climbed almost 6% on the success of its expensive new Angus burger.
Our recommendation
Add cyclical holdings on market pullbacks
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Carney Warns Low Rates Can't Last
After years of falling interest rates, Bank of Canada governor Mark
Carney warned home owners not to count on continuing record low rates
forever. This seems obvious, especially when you consider that there
really is nowhere to go but up, but we may be a while before we see
significantly higher rates. Our loonie contines to surge, in spite of
both low rates and burgeoning government deficits. As we saw with
Ontario's budget shortfall, corporate taxes have been plummeting this
year. Raising interest rates would put upward pressure on our
currency, and that would have a pretty negative impact on our
manufacturing sector. Throw in increased business lending rates, and
governments have compelling reasons to remain committed to low
interest rates. As an investor, you need to ensure you are taking
advantage of low borrowing rates, and finding alternatives to the
nearly non existent yield from GICs, money markets, and government
bonds. Tune in to Beyond Funds Market Weekly, tomorrow at 9:30 and I
will discuss this issue in more depth.
Carney warned home owners not to count on continuing record low rates
forever. This seems obvious, especially when you consider that there
really is nowhere to go but up, but we may be a while before we see
significantly higher rates. Our loonie contines to surge, in spite of
both low rates and burgeoning government deficits. As we saw with
Ontario's budget shortfall, corporate taxes have been plummeting this
year. Raising interest rates would put upward pressure on our
currency, and that would have a pretty negative impact on our
manufacturing sector. Throw in increased business lending rates, and
governments have compelling reasons to remain committed to low
interest rates. As an investor, you need to ensure you are taking
advantage of low borrowing rates, and finding alternatives to the
nearly non existent yield from GICs, money markets, and government
bonds. Tune in to Beyond Funds Market Weekly, tomorrow at 9:30 and I
will discuss this issue in more depth.
Wednesday, October 21, 2009
Our superstar currency
After years of seeming pathetic, our dollar really is becoming a
global superstar. Yesterday, the Bank of Canada indicated that we
will see a significant drag on our ecocnomic recovery as the loonie
continues to strengthen. This will effect all investment classes;
keeping your bond yields low, reducing the return on your foreign
investments, and affecting our domestic industries. This may sound
negative, but I believe it is a great environment for long term
investors. The biggest challenge , in my opinion, will be finding
yield in an environment with very low interest rates for an extended
period of time. If you are looking for ideas in this market, why not
give me a call.
global superstar. Yesterday, the Bank of Canada indicated that we
will see a significant drag on our ecocnomic recovery as the loonie
continues to strengthen. This will effect all investment classes;
keeping your bond yields low, reducing the return on your foreign
investments, and affecting our domestic industries. This may sound
negative, but I believe it is a great environment for long term
investors. The biggest challenge , in my opinion, will be finding
yield in an environment with very low interest rates for an extended
period of time. If you are looking for ideas in this market, why not
give me a call.
Tuesday, October 20, 2009
A Sobering Statement from the Bank of Canada
Tuesday morning's statement by the Bank of Canada indicated that the Canadian economy was clearly recovering, but painted the troubling spectre of the surging Loonie raining on the parade. Most major bank economists agree that the record low rates will continue, but the powerful dollar appears a looming economic risk. The traditional solution to a surging currency is cutting interest rates...tough to do at a quarter of one percent! It will be interesting to see how the BOC responds to this unique challenge.
Monday, October 19, 2009
A new tax on your savings
As 2010 approaches, another issue is emerging that should cause you to
consider your investment product choices. Canadians already pay the
highest mutual fund management fees in the world. Now, the proposed
Harmonized Sales Tax will be applied to these already lofty fees.
This is essentially a tax on savings. This issue is likely to become
highly political. Ultimately, it is one more reason for you to
consider if you are well served by paying these fees, or if you should
much more cost efficient solutions? If you are wondering if you have
outgrown your mutual funds, give me a call.
consider your investment product choices. Canadians already pay the
highest mutual fund management fees in the world. Now, the proposed
Harmonized Sales Tax will be applied to these already lofty fees.
This is essentially a tax on savings. This issue is likely to become
highly political. Ultimately, it is one more reason for you to
consider if you are well served by paying these fees, or if you should
much more cost efficient solutions? If you are wondering if you have
outgrown your mutual funds, give me a call.
Friday, October 16, 2009
Wareham Weekly Insights
Market Watch
The big picture
Canadian economy shows strength
The Canadian dollar neared parity with the U.S. dollar after six straight days of gains, topping 97 cents on Wednesday before pausing ahead of the Bank of Canada's interest rate announcement next week. Prime Minister Stephen Harper warned that too rapid a rise could damage the country's economic recovery, but said some of the Canadian dollar's sharp climb is justified by fundamentals. "We know that Canada's economy is relatively stronger than certainly virtually any other developed country." The central bank has said it would not counteract rises in the dollar due to fundamental factors.
Unemployment in Britain is still rising, but the monthly increase has slowed, signalling the worst may be over. The Bank of Japan held rates while raising its economic assessment for the second month, and refrained from ending its liquidity-boosting measures. U.S. retail sales were better than expected in September - up 0.5% excluding autos. Overall retail sales dropped 1.5%, as auto sales plummeted 10% after the Cash for Clunkers program ended. Federal Reserve policymakers agreed that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Fed Vice Chairman Donald Kohn said that a subdued U.S. economic recovery with sluggish growth would keep inflation at bay.
Markets
Dow breaks 10,000 barrier; oil hits one-year high
The blue-chip Dow index passed the 10,000 mark fuelled by results from Intel and JPMorgan Chase and September retail data that beat expectations. Up 52% from its March low, the Dow remains 29% below its peak in October 2007. The TSX was also fuelled by the energy sector as oil hit a one-year high of US$78 on an unexpected drop in U.S. gasoline inventories. Gold hit a record $1,070 and its popularity has risen to the point where shoppers can now buy gold bars at Harrods department store in London.
In third-quarter earnings announcements, Google shone with net income up 27% over last year; Intel posted results and a fourth-quarter outlook that exceeded Wall Street expectations; Johnson & Johnson saw revenue fall 5% as generic competition caused prescription sales to plunge 14% from a year ago; and railroad operator CSX reported an earnings decline that was not as bad as feared. In the financials sector, JPMorgan reported a ninefold increase in profits over a year ago. Goldman Sachs profits more than tripled and the firm faces criticism for $20 billion in planned year-end bonuses. Citigroup posted a loss, suffering $8 billion of credit losses. In the smartphone wars, Research In Motion released Storm 2 to challenge the iPhone.
Our recommendation
Add cyclical holdings on market pullbacks
* Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
* Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call - below benchmark duration. Sector Call - underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call - generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies - overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
* Portfolio strategy. Vincent Delisle, Scotia Capital's Portfolio Strategist, writes, "On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors."
Privacy Policy and Legal Disclaimer
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
The big picture
Canadian economy shows strength
The Canadian dollar neared parity with the U.S. dollar after six straight days of gains, topping 97 cents on Wednesday before pausing ahead of the Bank of Canada's interest rate announcement next week. Prime Minister Stephen Harper warned that too rapid a rise could damage the country's economic recovery, but said some of the Canadian dollar's sharp climb is justified by fundamentals. "We know that Canada's economy is relatively stronger than certainly virtually any other developed country." The central bank has said it would not counteract rises in the dollar due to fundamental factors.
Unemployment in Britain is still rising, but the monthly increase has slowed, signalling the worst may be over. The Bank of Japan held rates while raising its economic assessment for the second month, and refrained from ending its liquidity-boosting measures. U.S. retail sales were better than expected in September - up 0.5% excluding autos. Overall retail sales dropped 1.5%, as auto sales plummeted 10% after the Cash for Clunkers program ended. Federal Reserve policymakers agreed that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Fed Vice Chairman Donald Kohn said that a subdued U.S. economic recovery with sluggish growth would keep inflation at bay.
Markets
Dow breaks 10,000 barrier; oil hits one-year high
The blue-chip Dow index passed the 10,000 mark fuelled by results from Intel and JPMorgan Chase and September retail data that beat expectations. Up 52% from its March low, the Dow remains 29% below its peak in October 2007. The TSX was also fuelled by the energy sector as oil hit a one-year high of US$78 on an unexpected drop in U.S. gasoline inventories. Gold hit a record $1,070 and its popularity has risen to the point where shoppers can now buy gold bars at Harrods department store in London.
In third-quarter earnings announcements, Google shone with net income up 27% over last year; Intel posted results and a fourth-quarter outlook that exceeded Wall Street expectations; Johnson & Johnson saw revenue fall 5% as generic competition caused prescription sales to plunge 14% from a year ago; and railroad operator CSX reported an earnings decline that was not as bad as feared. In the financials sector, JPMorgan reported a ninefold increase in profits over a year ago. Goldman Sachs profits more than tripled and the firm faces criticism for $20 billion in planned year-end bonuses. Citigroup posted a loss, suffering $8 billion of credit losses. In the smartphone wars, Research In Motion released Storm 2 to challenge the iPhone.
Our recommendation
Add cyclical holdings on market pullbacks
* Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward heading into the end of the year despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
* Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call - below benchmark duration. Sector Call - underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call - generally favour the C$ against most majors; however, with the recent weakness in the British pound, it is now expected to outperform the C$ over the next year. Alternative Strategies - overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
* Portfolio strategy. Vincent Delisle, Scotia Capital's Portfolio Strategist, writes, "On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors."
Privacy Policy and Legal Disclaimer
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Investing for the powerful Loonie
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts
for investors outgrowing their mutual funds.
It has been a fascinating week, with the Dow breaking through 10,000,
the Loonie back near par with the US dollar, gold at record highs, and
oil surging. As time goes by, Canadian investors have to consider the
strength of our dollar. First, it has a significant impact on our
domestic industries. Second, global investment returns may be dragged
lower by currency appreciation. This is most obvious with investments
in the US, where most of this year's gains have been lost to Canadian
currency appreciation. If our dollar remains strong, you need to have
a strategy to manage this risk. Tune in to AM 980 tomorrow morning, for
Beyond Funds Market Weekly, as I offer some ideas to protect your
portfolio from the risks posed by the powerful loonie.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
for investors outgrowing their mutual funds.
It has been a fascinating week, with the Dow breaking through 10,000,
the Loonie back near par with the US dollar, gold at record highs, and
oil surging. As time goes by, Canadian investors have to consider the
strength of our dollar. First, it has a significant impact on our
domestic industries. Second, global investment returns may be dragged
lower by currency appreciation. This is most obvious with investments
in the US, where most of this year's gains have been lost to Canadian
currency appreciation. If our dollar remains strong, you need to have
a strategy to manage this risk. Tune in to AM 980 tomorrow morning, for
Beyond Funds Market Weekly, as I offer some ideas to protect your
portfolio from the risks posed by the powerful loonie.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Thursday, October 15, 2009
Surging Loonie
In my continuing theme of the surging Loonie, I read some excellent commentary from commodity guru Dennis Gartman. Gartman sees the Loonie surging well past parity with the greenback, as investors express a preference for our commodities, our financial system, and even our adherence to global trade agreements. With global currency traders bullish on our dollar, and interest rates at all time lows, it may be very difficult for the Bank of Canada to slow down the flight of the Loonie.
This is for information purposes only. Views expressed are those of the author, not Scotia Capital
This is for information purposes only. Views expressed are those of the author, not Scotia Capital
Wednesday, October 14, 2009
The Dow is only back to its levels of 1999...in essence, investors have lost a decade
A few days ago, i mentioned the beginning of US earnings season, and
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Lost Decade
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts
for investors outgrowing their mutual funds.
A few days ago, i mentioned the beginning of US earnings season, and
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
for investors outgrowing their mutual funds.
A few days ago, i mentioned the beginning of US earnings season, and
how important the numbers reported over the next few weeks would be.
So far, both US and global companies have been posting pretty
impressive numbers, and that trend continued overnight, with
spectacular numbers from Intel, from China, and JP Morgan. We may see
the Dow jump over 10,000 today. All of this is great news, but some
perspective is required. The Dow is only back to its levels of
1999...in essence, investors have lost a decade. Tune in this
Saturday for ideas on rebuilding your portfolio after this lost
decade.
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Sunday, October 11, 2009
Canadian fund MERs
On Saturday, I enjoyed Jon Chevreau's article regarding the relative costs of Canadian mutual funds, versus the Vanguard funds in the US. Chevreau points out the massive gulf between typical Canadian and American management expense ratios. Regular listeners will recognize this is a pet peeve of mine. The significant drag on an investor's portfolio caused by management expense ratios should not be forgotten, especially as time passes.
The web site that illustrates this best is www.investored.ca, which has a great calculator, indicating the long term costs of buying traditional retail mutual funds. Alternatively, you canfind the calculator and read my commentary on my blog. Over the long term, an investor could pay more in fees than their inital investment. Spound preposterous? Take your current portfolio, and calculate the fees at 2.5%, over 25 years, using an eight percent return. The results may shock you.
If you are interested in finding out your alternatives, speak with your advisor, or give me a call.
The web site that illustrates this best is www.investored.ca, which has a great calculator, indicating the long term costs of buying traditional retail mutual funds. Alternatively, you canfind the calculator and read my commentary on my blog. Over the long term, an investor could pay more in fees than their inital investment. Spound preposterous? Take your current portfolio, and calculate the fees at 2.5%, over 25 years, using an eight percent return. The results may shock you.
If you are interested in finding out your alternatives, speak with your advisor, or give me a call.
Saturday, October 10, 2009
The Weakening US Dollar
For anyone who listened to my radio show this morning, this blog post reinforces my concern about the massive, debt driven stimulus spending in the US. This thought provoking article from the Financial Post paints a bleak picture, but it is pretty hard to argue with any of the concerns raised by author Edward Hadas.
As I have frequently noted, this may make it tough to invest in US equities over the long term. The Dow is essentially flat over the last decade, so an American invested in her native market has essentially broken even, but the massive revaluation of the US currency leaves a Canadian with a loss of over thirty percent on a currency adjusted basis.
This may not preclude investing in the US market, but it sure makes sense to consider hedging your US denominated positions.
This is for information purposes only. Views expressed are those of the author, not Scotia Capital.
As I have frequently noted, this may make it tough to invest in US equities over the long term. The Dow is essentially flat over the last decade, so an American invested in her native market has essentially broken even, but the massive revaluation of the US currency leaves a Canadian with a loss of over thirty percent on a currency adjusted basis.
This may not preclude investing in the US market, but it sure makes sense to consider hedging your US denominated positions.
This is for information purposes only. Views expressed are those of the author, not Scotia Capital.
Friday, October 9, 2009
Wareham Weekly Insights
Market Watch
The big picture
Australian rate hike sparks optimism
Australia surprised markets Tuesday by increasing interest rates, setting off a wave of optimism about the global economic recovery. The Reserve Bank of Australia raised its benchmark interest rate to 3.25% from 3.00%, becoming the first among the Group of 20 countries to increase borrowing costs since the start of the global financial crisis. In Canada, Prime Minister Stephen Harper reiterated that the global recovery will remain fragile until jobless rates start to fall. Canada’s unemployment rate fell to 8.4% from 8.7% in September, the first monthly decline since the fall of 2008. Employment increased for the second consecutive month, up 31,000. In the U.S., the unemployment rate is at a 26-year high of 9.8% and still climbing.
Americans will have to save more in the future after years of accumulating too much debt, according to U.S. Treasury Secretary Timothy Geithner. He predicts that this change will transform the whole world’s economic reality. “Everyone is going to have to come to terms with the fact that we are going to save more in the United States.” He called on Europeans and Japanese to work at boosting domestic demand, and credited China for being at the forefront of thinking about new ways to reduce the dependence of its economy on U.S. exports and investments.
Markets
Stocks ride wave; wealthy tighten their Gucci belts
Optimism sparked by Australia’s rate hike sent stocks rising around the world on Tuesday. The TSX also was buoyed by strong commodity prices as gold topped $1,050 and oil hit $71. The Canadian dollar surged above 95 cents while U.S. Aluminum producer Alcoa posted a surprise profit and Costco beat analysts’ estimates despite a drop in quarterly profits. In Canada, Jean Coutu reported quarterly revenues up 7.3% versus a year ago, while Canwest sought court protection from its creditors, with $4 billion of debt. As the rich tighten their belts, luxury retailer Neiman Marcus has priced 40% of its new catalogue at just US$250 or less.
In the smartphone wars, Bell and Telus will break Rogers’ monopoly and begin selling iPhones next month as their new iPhone-compatible network comes online. Verizon will offer phones with Google’s Android operating system, while Microsoft unveiled its own new mobile operating system, available on 30 phones. The battery-powered LEAF car will hit British Columbia in 2011, as a result of a partnership between the Renault-Nissan Alliance, the province, the city of Vancouver and BC Hydro. The U.S. government is lending $1 billion to two new green automakers – Tesla Motors and Fisker Automotive.
Our recommendation
Buy the dips, don’t sell the rallies
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call –generally favour the C$ against most majors, however with the recent weakness in the British Pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
The big picture
Australian rate hike sparks optimism
Australia surprised markets Tuesday by increasing interest rates, setting off a wave of optimism about the global economic recovery. The Reserve Bank of Australia raised its benchmark interest rate to 3.25% from 3.00%, becoming the first among the Group of 20 countries to increase borrowing costs since the start of the global financial crisis. In Canada, Prime Minister Stephen Harper reiterated that the global recovery will remain fragile until jobless rates start to fall. Canada’s unemployment rate fell to 8.4% from 8.7% in September, the first monthly decline since the fall of 2008. Employment increased for the second consecutive month, up 31,000. In the U.S., the unemployment rate is at a 26-year high of 9.8% and still climbing.
Americans will have to save more in the future after years of accumulating too much debt, according to U.S. Treasury Secretary Timothy Geithner. He predicts that this change will transform the whole world’s economic reality. “Everyone is going to have to come to terms with the fact that we are going to save more in the United States.” He called on Europeans and Japanese to work at boosting domestic demand, and credited China for being at the forefront of thinking about new ways to reduce the dependence of its economy on U.S. exports and investments.
Markets
Stocks ride wave; wealthy tighten their Gucci belts
Optimism sparked by Australia’s rate hike sent stocks rising around the world on Tuesday. The TSX also was buoyed by strong commodity prices as gold topped $1,050 and oil hit $71. The Canadian dollar surged above 95 cents while U.S. Aluminum producer Alcoa posted a surprise profit and Costco beat analysts’ estimates despite a drop in quarterly profits. In Canada, Jean Coutu reported quarterly revenues up 7.3% versus a year ago, while Canwest sought court protection from its creditors, with $4 billion of debt. As the rich tighten their belts, luxury retailer Neiman Marcus has priced 40% of its new catalogue at just US$250 or less.
In the smartphone wars, Bell and Telus will break Rogers’ monopoly and begin selling iPhones next month as their new iPhone-compatible network comes online. Verizon will offer phones with Google’s Android operating system, while Microsoft unveiled its own new mobile operating system, available on 30 phones. The battery-powered LEAF car will hit British Columbia in 2011, as a result of a partnership between the Renault-Nissan Alliance, the province, the city of Vancouver and BC Hydro. The U.S. government is lending $1 billion to two new green automakers – Tesla Motors and Fisker Automotive.
Our recommendation
Buy the dips, don’t sell the rallies
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call –generally favour the C$ against most majors, however with the recent weakness in the British Pound, it is now expected to outperform the C$ over the next year. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “On the equity side, our global bias remains unchanged: Overweight Americas and Emerging markets, underweight Europe and Japan. From a sector standpoint, U.S. Energy, Materials, Discretionary, Financials, and Technology are posting superior relative earnings momentum. Our Sector Strategy continues to be geared towards Cyclical sectors.”
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
review your asset mix, and see if you should rebalance your investments to protect your gains
The recent rally in the equity market has been pretty spectacular. As
the markets rebound, one key problem is reemerging. As stock prices
rise, the relative value in in your portfolio is also surging.
Ultimately, the growth in value in your equity portfolio increases
your risk, and it may be appropriate to review your asset mix, and see
if you should rebalance your investments to protect your gains. If
you are looking to review your situation, give me a call.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
the markets rebound, one key problem is reemerging. As stock prices
rise, the relative value in in your portfolio is also surging.
Ultimately, the growth in value in your equity portfolio increases
your risk, and it may be appropriate to review your asset mix, and see
if you should rebalance your investments to protect your gains. If
you are looking to review your situation, give me a call.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Wednesday, October 7, 2009
this may be one of the most important earnings seasons in years
US earnings season begins today, and we will start to get an idea of
the financial state of many multinational companies. Ultimately,
equity investing is about business ownership, and the next few weeks
should give us a sense if the recent rally in the global market is
actually supported by results. If earnings are strong, then the rally
makes sense, but if we see weakness, the recent rally may be at risk.
Stay tuned through the next few weeks, as this may be one of the most
important earnings seasons in years. If you want to discuss your
portfolio, give me a call.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
the financial state of many multinational companies. Ultimately,
equity investing is about business ownership, and the next few weeks
should give us a sense if the recent rally in the global market is
actually supported by results. If earnings are strong, then the rally
makes sense, but if we see weakness, the recent rally may be at risk.
Stay tuned through the next few weeks, as this may be one of the most
important earnings seasons in years. If you want to discuss your
portfolio, give me a call.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Monday, October 5, 2009
there may be enormous volatility as the
There is certainly more optimism in the market today, but perspective
is important. In spite of the recent rally in global markets, it is
important to realize that we have essentially experienced a lost
decade. The ten year return for the Dow has been negative. History
tells us that such long term bear markets are rare, and frequently
preceed massive rallies...but there may be enormous volatility as the
market recovers. The good news is, there are options today that allow
you to preserve capital, while remaining in the market. If you are
looking for ideas, why not give me a call?
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
is important. In spite of the recent rally in global markets, it is
important to realize that we have essentially experienced a lost
decade. The ten year return for the Dow has been negative. History
tells us that such long term bear markets are rare, and frequently
preceed massive rallies...but there may be enormous volatility as the
market recovers. The good news is, there are options today that allow
you to preserve capital, while remaining in the market. If you are
looking for ideas, why not give me a call?
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
Friday, October 2, 2009
Wareham Weekly Insights
The big picture
Canada’s GDP growth stalls
The latest reports on the Canadian economy unexpectedly showed no GDP growth in July, throwing into question the strength of the country’s recovery. Wednesday’s report from Statistics Canada dashed economists’ expectations of a 0.5% increase, blaming shutdowns at mines, lower oil-and-gas extraction, civic strikes and poor weather. On the bright side, employers added 27,000 jobs in August, and new applications for employment insurance fell. Prime Minister Stephen Harper reported that 90% of the economic stimulus funding has been allocated and that the money will create or support 200,000 jobs over two years by funding 7,500 infrastructure projects, training for 44,000 Canadians, $5.8 billion in added EI benefits and $131 billion in business financing.
Bank of Canada Governor Mark Carney said, “A powerful and sustained restructuring of the global economy has begun, but the efforts required of us will be historic,” as he called on consumers and businesses to spend and hire. Consumer confidence in Canada rose for the seventh month in September, but fell unexpectedly in the U.S. on job security worries. U.S. home prices rose for the third month in July, but still are down 32.6% from their 2006 peak. In Germany, stocks surged as Chancellor Angela Merkel was re-elected and pledged to form a centre-right coalition.
Markets
A bumpy road to recovery
Early gains in the week were erased on Thursday as weak U.S. manufacturing and jobless data sent stocks lower. It was one year ago that the Dow Jones Industrial Average suffered its biggest point drop ever – but also its largest gain soon after. In the fourth quarter of 2008, the S&P 500 moved 3% in one day a stunning 29 times. The extreme market volatility seen last year has abated, but stocks are expected to remain in a volatile environment as the recovery picks up.
On Monday, Bombardier shares surged when its joint venture in China won a US$4-billion contract to build 80 high-speed trains. Apple’s iPhone will go on sale in China in October for about US$700. The iPhone App Store hit 2 billion downloads, with users buying 6 million apps per day. Mergers and acquisitions continued with Xerox buying Affiliated Computer Services, while Abbott Laboratories will acquire a division of Solvay. Meanwhile, British regulators gave Kraft a November 9th deadline to make a formal bid for Cadbury. In the lead-up to the holiday season, Wal-Mart unveiled a list of 100 toys for $10 each, and Toys “R” Us is hiring 35,000 seasonal employees.
Our recommendation
Buy the dips, don’t sell the rallies
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
· Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”
The month in review
September: One year later, recovery intact but fragile
September 15th marked one year since Lehman Brothers declared bankruptcy, setting off the worst financial crisis since the Great Depression. Canada’s economy is recovering faster than previously thought. Nonetheless, the Bank of Canada kept its lending rate at an all-time low of 0.25%, and renewed its pledge to hold rates until mid-2010. Canada’s banks were ranked the soundest in the world for the second year in a row by the World Economic Forum, while U.S. banks were ranked 108th. Prime Minister Stephen Harper cautioned that while the recession technically may be over, the recovery is extremely fragile. Finance Minister Jim Flaherty insists that it would be a major mistake for developed economies not to continue stimulus.
Federal Reserve Chairman Ben Bernanke said the U.S. recession is technically over, with growth expected to show in the third quarter. The Federal Reserve kept interest rates unchanged at 0.25%, while giving its most upbeat assessment of the U.S. economy in 18 months and voting to end its US$1.45-trillion program for buying mortgage debt three months early.
G20 leads economic cooperation
At London’s G20 meeting, finance ministers agreed the world economy is stabilizing, but recovery is not established enough to start unwinding stimulus programs. Bankers’ pay is at the centre of discussions; Britain’s finance minister says “the party is over” for bankers who were at the heart of “this almighty car crash.” Bank of England Governor Mervyn King revealed that the Royal Bank of Scotland and HBOS had been just hours away from collapsing last October.
Loonie shows strength; gold tops US$1,000
As the Canadian dollar approached 94 cents U.S., the Bank of Canada repeated warnings that economic recovery may be hampered by the strength of the currency, but said it would ignore short-term volatility in its exchange rate. Gold climbed above US$1,000 an ounce as investors sought a hedge against a falling U.S. currency.
Canadian stocks regain October 2008 levels
Markets advanced in September, reaching levels last seen in October 2008. The TSX has gained 50% since its March 2009 low.
Mergers and acquisitions marry superheroes with princesses
Disney will buy Marvel Entertainment for $4 billion in its biggest deal since buying Pixar in 2006, T-Mobile and Orange will merge to create the U.K.’s biggest wireless operator, and Swedish sports car maker Koenigsegg has teamed up with a Chinese company to buy Saab from General Motors. Magna plans to buy a stake in Opel, GM’s European car division, but risks alienating customers VW and BMW. Canada’s biggest IT services player, CGI, surged on takeover speculation after Dell bid US$3.9 billion for Perot Systems, a 68% premium.
Smart phone wars
In technology news, new hardware and an alliance with Facebook could see Nokia catching up with rivals such as Apple and Research In Motion. Apple unveiled an updated line of iPods this month, while RIM’s quarterly profit and outlook fell short of analyst expectations, sending its shares down sharply. Google’s new Internet phone service, Google Voice, is expected to draw scrutiny from regulators.
Alternative energy: changing the tide
Nova Scotia was given the green light to test turbines in the Bay of Fundy. If viable, sea power could meet 10% of the province’s energy needs. First Solar struck a 10-year deal with the Chinese government to build the world’s largest solar field. Solar panels will blanket a desert area larger than Manhattan and generate enough energy to light 3 million homes. A123 Systems, a U.S.-based battery maker for electric cars, jumped 43% in one day after raising US$380 million through an initial public offering.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Canada’s GDP growth stalls
The latest reports on the Canadian economy unexpectedly showed no GDP growth in July, throwing into question the strength of the country’s recovery. Wednesday’s report from Statistics Canada dashed economists’ expectations of a 0.5% increase, blaming shutdowns at mines, lower oil-and-gas extraction, civic strikes and poor weather. On the bright side, employers added 27,000 jobs in August, and new applications for employment insurance fell. Prime Minister Stephen Harper reported that 90% of the economic stimulus funding has been allocated and that the money will create or support 200,000 jobs over two years by funding 7,500 infrastructure projects, training for 44,000 Canadians, $5.8 billion in added EI benefits and $131 billion in business financing.
Bank of Canada Governor Mark Carney said, “A powerful and sustained restructuring of the global economy has begun, but the efforts required of us will be historic,” as he called on consumers and businesses to spend and hire. Consumer confidence in Canada rose for the seventh month in September, but fell unexpectedly in the U.S. on job security worries. U.S. home prices rose for the third month in July, but still are down 32.6% from their 2006 peak. In Germany, stocks surged as Chancellor Angela Merkel was re-elected and pledged to form a centre-right coalition.
Markets
A bumpy road to recovery
Early gains in the week were erased on Thursday as weak U.S. manufacturing and jobless data sent stocks lower. It was one year ago that the Dow Jones Industrial Average suffered its biggest point drop ever – but also its largest gain soon after. In the fourth quarter of 2008, the S&P 500 moved 3% in one day a stunning 29 times. The extreme market volatility seen last year has abated, but stocks are expected to remain in a volatile environment as the recovery picks up.
On Monday, Bombardier shares surged when its joint venture in China won a US$4-billion contract to build 80 high-speed trains. Apple’s iPhone will go on sale in China in October for about US$700. The iPhone App Store hit 2 billion downloads, with users buying 6 million apps per day. Mergers and acquisitions continued with Xerox buying Affiliated Computer Services, while Abbott Laboratories will acquire a division of Solvay. Meanwhile, British regulators gave Kraft a November 9th deadline to make a formal bid for Cadbury. In the lead-up to the holiday season, Wal-Mart unveiled a list of 100 toys for $10 each, and Toys “R” Us is hiring 35,000 seasonal employees.
Our recommendation
Buy the dips, don’t sell the rallies
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. The market is not overpriced, just overbought in the short term; we would be adding weight in cyclical holdings on any market pullback.
· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the following recommendations: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals and Provincials, neutral on Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.
· Portfolio strategy. Vincent Delisle, Scotia Capital’s Portfolio Strategist, writes, “we are in a higher-highs/higher-lows environment and recommend buying the dips, not selling the rallies. Our longer term stance remains positive and we expect equities and corporate bonds to outperform Treasuries over the next 12-18 months.”
The month in review
September: One year later, recovery intact but fragile
September 15th marked one year since Lehman Brothers declared bankruptcy, setting off the worst financial crisis since the Great Depression. Canada’s economy is recovering faster than previously thought. Nonetheless, the Bank of Canada kept its lending rate at an all-time low of 0.25%, and renewed its pledge to hold rates until mid-2010. Canada’s banks were ranked the soundest in the world for the second year in a row by the World Economic Forum, while U.S. banks were ranked 108th. Prime Minister Stephen Harper cautioned that while the recession technically may be over, the recovery is extremely fragile. Finance Minister Jim Flaherty insists that it would be a major mistake for developed economies not to continue stimulus.
Federal Reserve Chairman Ben Bernanke said the U.S. recession is technically over, with growth expected to show in the third quarter. The Federal Reserve kept interest rates unchanged at 0.25%, while giving its most upbeat assessment of the U.S. economy in 18 months and voting to end its US$1.45-trillion program for buying mortgage debt three months early.
G20 leads economic cooperation
At London’s G20 meeting, finance ministers agreed the world economy is stabilizing, but recovery is not established enough to start unwinding stimulus programs. Bankers’ pay is at the centre of discussions; Britain’s finance minister says “the party is over” for bankers who were at the heart of “this almighty car crash.” Bank of England Governor Mervyn King revealed that the Royal Bank of Scotland and HBOS had been just hours away from collapsing last October.
Loonie shows strength; gold tops US$1,000
As the Canadian dollar approached 94 cents U.S., the Bank of Canada repeated warnings that economic recovery may be hampered by the strength of the currency, but said it would ignore short-term volatility in its exchange rate. Gold climbed above US$1,000 an ounce as investors sought a hedge against a falling U.S. currency.
Canadian stocks regain October 2008 levels
Markets advanced in September, reaching levels last seen in October 2008. The TSX has gained 50% since its March 2009 low.
Mergers and acquisitions marry superheroes with princesses
Disney will buy Marvel Entertainment for $4 billion in its biggest deal since buying Pixar in 2006, T-Mobile and Orange will merge to create the U.K.’s biggest wireless operator, and Swedish sports car maker Koenigsegg has teamed up with a Chinese company to buy Saab from General Motors. Magna plans to buy a stake in Opel, GM’s European car division, but risks alienating customers VW and BMW. Canada’s biggest IT services player, CGI, surged on takeover speculation after Dell bid US$3.9 billion for Perot Systems, a 68% premium.
Smart phone wars
In technology news, new hardware and an alliance with Facebook could see Nokia catching up with rivals such as Apple and Research In Motion. Apple unveiled an updated line of iPods this month, while RIM’s quarterly profit and outlook fell short of analyst expectations, sending its shares down sharply. Google’s new Internet phone service, Google Voice, is expected to draw scrutiny from regulators.
Alternative energy: changing the tide
Nova Scotia was given the green light to test turbines in the Bay of Fundy. If viable, sea power could meet 10% of the province’s energy needs. First Solar struck a 10-year deal with the Chinese government to build the world’s largest solar field. Solar panels will blanket a desert area larger than Manhattan and generate enough energy to light 3 million homes. A123 Systems, a U.S.-based battery maker for electric cars, jumped 43% in one day after raising US$380 million through an initial public offering.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
October got off to a rough start
October got off to a rough start yesterday, with a significant sell
off. This should not be surprising after the dramatic rally we have
seen over the past few months. The possibility of a significant
downward move in the market has been widely expected, but it has not
happened yet. Many investors have been sitting on the sidelines,
waiting for a chance to get back in the market. In fact, this cash on
the sidelines may be the reason any downward move may not be too
dramatic. Rather than rush back in all at once, I believe investors
should plan their strategy. If you are looking at getting back into
the market, why not get a second opinion before you make your move.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
off. This should not be surprising after the dramatic rally we have
seen over the past few months. The possibility of a significant
downward move in the market has been widely expected, but it has not
happened yet. Many investors have been sitting on the sidelines,
waiting for a chance to get back in the market. In fact, this cash on
the sidelines may be the reason any downward move may not be too
dramatic. Rather than rush back in all at once, I believe investors
should plan their strategy. If you are looking at getting back into
the market, why not get a second opinion before you make your move.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit,
www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This
program is for information purposes only. Fees, management fees and
commissions may be associated with mutual fund investing. Investors
should consult their prospectus before investing. Views expressed are
those of the author, not Scotia Capital. ScotiaMcLeod is a division of
Scotia Capital, member CIPF
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