The big picture
U.S. deficit looms as recovery takes hold
U.S. President Barack Obama nominated Ben Bernanke for a second term as Federal Reserve (the Fed) Chairman, praising him for leading the Fed through “one of the worst financial crises that this nation and this world has ever faced." The same day, a grim U.S. budget forecast US$9 trillion in additional debt over the next decade, up $2 trillion since the last forecast, because of plunging tax receipts, soaring spending and a sluggish recovery. U.S. consumer confidence rose unexpectedly in August after two consecutive months of declines. Consumer expectations of where the economy will be in six months rose to its highest level since the recession began in December 2007.
In Canada, retail sales jumped 1% from May to June, but remain 4.4% lower than a year ago. The Bank of Canada (the BoC) warned again that it is prepared to intervene to stop the sharp rise of the loonie from derailing the economic recovery. The BoC has not intervened in foreign exchange markets in more than 10 years.
All eyes will be on Japan this Sunday as voters take to the polls. Expectations are for the opposition Democratic Party to oust the ruling conservative Liberal Democratic Party for only the second time in its 54-year history.
Markets
Investors weigh issues
Markets were choppy as U.S. bank concerns undermined improving consumer confidence, jobless and housing data. In Canada, the Royal Bank reported record profits while earnings from the Bank of Montreal, TD Bank and the Bank of Nova Scotia also beat expectations.
As the iPhone prepares for its debut in China – the world’s largest cell phone market – Apple is investigating reports from France of iPhone screens exploding, apparently because of overheated lithium ion batteries. Meanwhile, analysts speculate that Apple is working on a new multimedia tablet that will let people access movies and TV, games, the Internet and books. Toyota will slash production by 580,000 vehicles – 6% of global capacity – despite capturing 19% of the 700,000 U.S. auto sales generated by the “cash for clunkers” program.
Our recommendation
Rebalance portfolios to buy low, sell high
· 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 the market may be overbought in the short term and subject to profit taking, we do not believe markets are overpriced. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Recall that September, on average, is historically the worst month for equity investors.
· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals, neutral on Provincials and Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
· Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
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.
Saturday, August 29, 2009
look at all of your options if you are returning to the market
With August drawing to a close, markets continue to show remarkable resilience. The Dow has been up for eight straight days. Many investors still have a lot of cash on the sidelines, and cash is essentially earning nothing. In this environment, it may be very tempting to wade back in to the equity market. Despite the temptation, it makes sense to look at all of your options if you are returning to the market. Instead of rushing out and simply buying an equity mutual fund, why not consider some other alternatives, like bonds or preferred shares, as a complement to buying stocks. Before you get back in, 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
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, August 26, 2009
Bank of Canada and the Soaring Loonie
Late yesterday, the Bank of Canada indicated it was ready to try to deal with a soaring loonie, which has surged both through the year, and through this decade. This likely means a lengthy period of low interest rates for Canadians. This should benefit both investors and Canadian businesses.. It also highlights one of the key risks to Canadian investors. A strengthening loonie really hurts Canadians who invest globally. When your stocks and bonds are denominated in a foreign currency, a rising loonie costs you money. If you are concerned about protecting your portfolio from a strengthening loonie, 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
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, August 24, 2009
Impact of fund management fees
Mutual funds remain one of the most popular investment vehicles for Canadians. With investors regaining confidence, money is likely to start flowing back into funds. If you have over 100,000 invested, and are considering adding to your mutual funds, remember that Canadians pay the highest fund management fees in the world, It is easy to overlook the impact of fund management fees in a rising market, but these fees have a dramatic impact on your long term investment return. Over the long term, management fees may cost you hundreds of thousands of dollars, and significantly reduce your rate of return. Why not get a second opinion?
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
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, August 21, 2009
Wareham Weekly Insights
The big picture
China key to global recovery
The global economic recovery has begun, but sustaining it will require stepping up U.S. exports
to Asia, says the International Monetary Fund’s chief economist. In an IMF report, Olivier
Blanchard predicted that consumer spending, which accounts for 70% of the U.S. economy,
will not return to pre-crisis strength quickly. He called on China to reduce the trade imbalance
and import more goods from the U.S.
Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. The U.S. housing market showed encouraging signs in July. Although new-home construction and permits fell, single-family-home starts remained strong, rising 1.7% in July after a 17.8% surge in June. Sales of U.S. existing homes rose to their highest level in nearly two years as cheaper prices and the availability of tax credits continued to entice buyers. In Canada, inflation is at a 56-year low, with declines in the price of gas, cars and shelter partly offset by higher food costs. With consumer spending remaining weak, some economists say it could take two years of recovery before companies begin to raise prices.
Markets
Stocks tumble, then rebound
World markets rallied following steep losses on Monday, when fresh concerns about a U.S.
economic recovery sent indexes around the world tumbling. Stocks rose after a rebound in Chinese equities and an uptick in U.S. manufacturing offset a disappointing weekly jobs report.
Canada is not likely to block sale of Nortel, says the Globe and Mail, since the government is
only required to review foreign takeovers for businesses over $312 million – Nortel’s balance
sheet assets are $149 million. Oil is on track for a strong gain this week as the price per barrel approaches the highest levels since October 2008 when it closed at $75.22. The $US 3 billion
cash-for-clunkers program will shut down on Monday, the government said Thursday. As of Thursday, the program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates. Meanwhile, Hyundai Canada will offer up to $1,000 on clunkers traded in for new
vehicles. Ten months after its initial rescue deal with UBS, Switzerland sold its 9% stake in its
largest bank for US$5.1 billion, making a profit of US$ 1.1 billion on its investment.
Our recommendation
Rebalance portfolios to buy low, sell high
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. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking also would not be unexpected; recall that September, on average, is historically the worst month for equity investors.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommen-dations as follows: Term Call – below benchmark duration.
Sector Call – underweight Canadas, overweight Municiaps, neutral on Provincials and
Corporates. Currency Call – favour the C$, as well as the A$, which is expected to
outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets
Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
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.
China key to global recovery
The global economic recovery has begun, but sustaining it will require stepping up U.S. exports
to Asia, says the International Monetary Fund’s chief economist. In an IMF report, Olivier
Blanchard predicted that consumer spending, which accounts for 70% of the U.S. economy,
will not return to pre-crisis strength quickly. He called on China to reduce the trade imbalance
and import more goods from the U.S.
Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. The U.S. housing market showed encouraging signs in July. Although new-home construction and permits fell, single-family-home starts remained strong, rising 1.7% in July after a 17.8% surge in June. Sales of U.S. existing homes rose to their highest level in nearly two years as cheaper prices and the availability of tax credits continued to entice buyers. In Canada, inflation is at a 56-year low, with declines in the price of gas, cars and shelter partly offset by higher food costs. With consumer spending remaining weak, some economists say it could take two years of recovery before companies begin to raise prices.
Markets
Stocks tumble, then rebound
World markets rallied following steep losses on Monday, when fresh concerns about a U.S.
economic recovery sent indexes around the world tumbling. Stocks rose after a rebound in Chinese equities and an uptick in U.S. manufacturing offset a disappointing weekly jobs report.
Canada is not likely to block sale of Nortel, says the Globe and Mail, since the government is
only required to review foreign takeovers for businesses over $312 million – Nortel’s balance
sheet assets are $149 million. Oil is on track for a strong gain this week as the price per barrel approaches the highest levels since October 2008 when it closed at $75.22. The $US 3 billion
cash-for-clunkers program will shut down on Monday, the government said Thursday. As of Thursday, the program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates. Meanwhile, Hyundai Canada will offer up to $1,000 on clunkers traded in for new
vehicles. Ten months after its initial rescue deal with UBS, Switzerland sold its 9% stake in its
largest bank for US$5.1 billion, making a profit of US$ 1.1 billion on its investment.
Our recommendation
Rebalance portfolios to buy low, sell high
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. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking also would not be unexpected; recall that September, on average, is historically the worst month for equity investors.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommen-dations as follows: Term Call – below benchmark duration.
Sector Call – underweight Canadas, overweight Municiaps, neutral on Provincials and
Corporates. Currency Call – favour the C$, as well as the A$, which is expected to
outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets
Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
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.
September & October = difficult months for the market
I dont want to be the bearer of bad news, but summer vacation season is quickly coming to an end. Traditionally, September and october are very difficult months for the market. Significant volatility is common during these months, even during normal years. With the dramatic movement of the market over the past few months, I believe that it could be a challenging period. On the positive side, it is a great time to revamp your portfolio, and protect it from further market volatility. If you have been considering a change with your portfolio, or you are looking for a second opinion, 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
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, August 20, 2009
you need to be prepared for strong fiscal policy response if deflation continues
Yesterday morning, Statistics Canada reported that we still see signs of deflation. If deflation remains an issue, it will definitely affect investors, as it has a negative impact on consumer behaviour, and therefore on most stock prices. On the positive side, it makes it likely that the Bank of Canada will remain committed to low interest rates, in the interest of spurring growth. Regardless, deflation is much more problematic for global central banks than mild inflation, so you need to be prepared for strong fiscal policy response if deflation continues. If you are unsure if your portfolio is prepared for a deflationary environment, perhaps it is time for a second opinion
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
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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