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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