March Newsletter

The Headline of the Day: March 6, 2013

  • Death of a revolutionary (Globe and Mail)
    • Casino: Lobbying role…
  • After Chavez (Toronto Star)
    • TTC questions…

Business Section – Headline of the Day: March 6, 2013

  • Dow Hits a record (Globe and Mail)
  • Fuelled by U.S. optimism Dow hits record high (Toronto Star)

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* All-time record high October 9, 2007 – DOW              14,164.53 *

* All-time NEW record high March 5, 2013 – DOW      14,253.77 *

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These are the facts of the day.  January 1, 2009 Toronto Star – Depression, recession or correction? Toronto stocks suffered their biggest annual percentage drop since 1931.

Where was the call to action – OPPORTUNITY? This begs the question: How are you Selecting Your News?

The good news is the market has recovered.  As we have discussed in our portfolio reviews, our portfolios have recovered.  The bad news is the markets, over the past five years, are flat.  The gain is next to nothing.  The Annual Returns of the S&P 500 Index show how the shocking loss of 2008 was followed by gains in 2009, ’10, ’11 and ’12.  Those investors that were demoralized have fled to the perception of safety in CASH.

Corporate America is sitting on $5 TRILLION in CASH.  This bodes well for the continued recovery. http://www.theatlantic.com/business/archive/2012/07/the-5-trillion-stash-us-corporations-money-hoard-is-bigger-than-the-gdp-of-germany/260006/

Can this continue?

“Today’s valuations consistent with attractive long-term results” from Edgepoint Wealth

Wall Street Journal – October 5, 2012 “Despite Gains, Many Flee Stock Market”

Why flee, I ask?  We heard lots of excuses – Europe, U.S. elections, Fiscal Cliff…valuations are too high.  Here we are five months later and all the same issues are out there, unresolved, and the market valuations are still higher.  Maybe the Great Companies of the World are improving their bottom lines relative to the residence of the economy.

CASH: 2013 Savings rates still below 2% for a 5 year GIC (TD Canada Trust March 6, 2012)

Investors plowed $149 billion into U.S.-based money-market funds between the start of November and Jan. 30, bringing total assets under management to $2.695 trillion, close to the most since mid-2011, according to the Investment Company Institute. http://online.wsj.com/article/SB10001424127887324761004578284241708241464.html

Why, I ask?  The U.S. economy continues to slowly grow, housing starts are up, and unemployment is 7.9%, despite a “weak economy”.  Canada has held interest rates again at 1%.

When will rates go up?  Who knows?  But they will once an economic turnaround is firmly in place.  So where will equity values be then?  Again, who knows, but the choice is the safety of a 1.90% GIC for the next five years or the “opportunity” for growth – US up 15% last year?

Example of a growing European Company – Ryanair Holdings PLC, ADR Monday, 28 Jan 2013 09:30am EST REUTERS:  Ryanair Holdings plc announced that despite the softness in January, the bookings for the first nine months have facilitated a rise in fiscal 2013 profit guidance to a new figure of up to EUR540 million.

Why would anyone invest in an airline, let alone one that resides in Ireland?  With no disrespect to the airline industry and the country of Ireland, which blew up their banking system, trust sluggishly returns to the “market” .http://www.nytimes.com/2013/01/26/business/where-banking-crisis-raged-trust-is-slow-to-return.html?_r=0

In this chart, we can compare the Company Ryanair Holdings with the European Union.  Annual Growth of the company is 14 x’s greater than the EU.

Source Bloomberg and OECD statistics. 2009 2010 2011 2012 ANNUAL GROWTH %
RYANAIR Holdings PLC, ADR 2,988 3,630 4,390 4,813 17.2%
EUROPEAN UNION GDP 13.559,597 13,840,543 14,053,414 14,052,008 1.2%

Classic Peter Lynch quotes:

  • Far more money has been lost by investors preparing for corrections trying to anticipate corrections than has been lost in the corrections themselves. Peter Lynch
  • There’s never been a market timer on it [Forbes Rich list]. If it were truly possible to predict corrections, you’d think somebody would have made billions by doing it. Peter Lynch

Thank you to our clients whom have had a review for 2013. If you would like to meet to discuss your portfolios please contact us: mwm@mayhewwealth.com

Andrew Mayhew, CFP

The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc.  Mutual Funds are available through Sterling Mutuals Inc.  Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the simplified prospectus before investing.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, Financial Planning and Insurance products available through Mayhew Wealth Management Ltd. are not the business of or monitored by Sterling Mutuals Inc.
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Maximize Your RDSP

Frank Di Pietro wrote a wonderful article about RDSP`s that appeared on the Advisor.ca website on March 5, 2012. In the article Mr. Pietro explains the rules behind, and how to maximize, RDSP carry forwards. He explains what government grants and bonds are available and provides an example of how to get the most out of the money you contribute. This article is a beautiful resource for anyone who is thinking about, or already has, an RDSP. The full article can be found on the Advisor.ca website at the following link. Frank Di Pietro | Help Maximize RDSP Carry Forwards

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Foreign Investments | CRA Reporting

With the current economic environment many Canadians now see opportunities to invest outside of Canada. This has led to a small group of people who now own substantial foreign investments. Failure to report these investments (in excess of $100,000) can lead to stiff penalties. Jamie Golombek wrote a very interesting article on February 12, 2013 for Advisor.ca addressing this very issue. He outlines exactly what the penalties are for not filing the T1135 form and touches on two foreign investment court cases that have made recent news headlines. For anyone who owns investments outside of Canada (in excess of $100,000) this article is a must read. The full article can be found on the Advisor.ca website at the following link. Jamie Golombek | Why to report foreign investments

Should you have any questions about properly reporting your foreign investments please contact me or a member of my team.

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Corporation Tax Strategies

People who own corporations can face numerous tax challenges in a number of areas. Borrowing money from the corporation and leaving money to heirs are two common challenges that many corporation owners face. Doug Watt wrote a wonderful article on Advisor.ca addressing these two exact situations. He offers up some “creative tax strategies” from Tim Cestnick that corporations owners are able to take advantage of. The full article can be found on the Advisor.ca website at the following link. Doug Watt | Creative tax strategies for clients with corporations

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Business Owners Checklist

Tim Cestnick wrote a wonderful article about tax-saving strategies that business owners are able to tax advantage of. He offers up six simple tips to think about as a year-end checklist. From paying salaries to family members to taking steps to protect your business assets, this article covers many strategies that all business owners should be aware of. The article was published in the Thursday, November 15, 2012 edition of The Globe and Mail. The full article can be found on The Globe and Mail website at the following link. Tim Cestnick | For buiness owners, six tax-saving strategies for the year-end checklist

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Insurance | Eight Reasons to Listen

Insurance is an important tool that many people do not take advantage of. With the multitude of insurance options and products that are now available on the market it is easy to see why many get overwhelmed. Tim Cestnick wrote an article in the Thursday, October 25, 2012 edition of The Globe and Mail addressing this issue. He offers up eight reasons why insurance might be something to think about if you’re not already taking advantage of it. The full article can be found on the Globe Advisor website at the following link. Tim Cestnick | When the insurance agent calls, here are eight reason to listen

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Buffett Buys Back Own Stock

Warren Buffett made the news again late last year as he decided to buy back a portion of his own stock. He explained that he sees “terrific value” in his company and that with current valuations it was the right move for Berkshire Hathaway Inc. The article was written by David Berman and appeared in The Globe and Mail on Thursday, December 12, 2012. The full article can be found on The Globe and Mail website at the following link. David Berman | Buffett trumpets an investment – in his own company

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February Newsletter

“Oh, the weather outside is frightful…” Today, February 8th is the worst winter storm since 2008. http://www.cp24.com/weather/city-hit-with-biggest-snow-storm-in-five-years-1.1148188 Schools are closed, hundreds of flights cancelled, stay off the roads if you don’t have to. Today just might be a day to stay inside and listen to some music and relax, besides come Monday the temperature will climb to +5°C. No worries.

So why do we worry so when there is inclement weather in our portfolios? “Are you listening to the Music or the Noise?” This is the title of a recent article by Nick Murray where he offers his unique perspective about market volatility. Many of our portfolios have recovered from the worst financial crisis in our lifetime. There will be many more storms in our lifetime. It is how we react to them that is important.

Mortgage Interest rates – interest rates did not rise in 2012. They will go up! When? Who knows, but be prepared – we can help you. Call us to discuss your options.

Should you have any questions about your investments, the outlook for the coming year or would like a copy of the Nick Murray article, please contact me or a member of my team.

The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Mutual Funds are available through Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, Financial Planning and Insurance products available through Mayhew Wealth Management Ltd. are not the business of or monitored by Sterling Mutuals Inc.
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Buffett’s Take on Equities

Early in 2012 CNN Money published an article entitled “Warren Buffett: Why stocks beat gold and bonds”. The article is actually an adaptation of his annual letter to shareholders, where Buffett offers up his unique insights into the market. He explains what the terms investing and risk really mean to him and why he feels that equities are a good choice. The full article can be found on the CNN Money website at the following link. Warren Buffet | Why stock beat gold and bonds

Should you have any questions about this article or your investments please contact me or a member of my team.

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Conquering Debt

Before the end of last year Rob Carrick, a personal finance writer for The Globe and Mail, wrote an interesting article about borrowing, saving and investing and how a few simple tricks can help you get out of debt. In his article he offers 12 tips that will make you think about where your money is going and how you can get it working for you. The full article can be found on The Globe and Mail website at the following link. Rob Carrick | Make 2013 the year for conquering debt

Should you have any questions about debt, your investments, or the outlook for the coming year please contact me or a member of my team.

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