Some of you may be wondering about the effect of the Greece, Spain, Portugal and potentially soon Italy crisis on your investments. Luckily, you will recall that we have dramatically reduced your portfolio exposure to Europe last time we met. We expected volatility in that region including the UK for several months now.
Without minimizing the situation, Europe will likely have little effect on the World capitalization. It is unlikely to affect your investment in a big way over the mid or long-term. Canada will likely not be affected much at all other than through currency fluctuations. In times of uncertainty, people go back to the US dollar. That is why our dollar has dropped a little in recent days. Remember that a lower Canadian dollar is a good thing for us being an exporting country.
Also, our resources are in big demand from the expanding economies of Asia and Emerging Markets. That is really where the growth will come from going forward. Greece & Spain are a drop in the bucket compared to that.
Also important to remember, here is a quote from Chuk Wong, Dynamic Manager on this issue:
“Macro headlines encourage misjudgement and fear creates opportunity. A company’s operating fundamentals are ultimately what matters and fear-driven valuation discounts are the best friend to long-term value-oriented investors like us”.
Again, I don’t want to minimize the crisis, because it is not that black and white but given the overall global outlook, the fact that we have lowered your exposure to Europe and the US and increased Canada and Emerging Markets, I would not be overly concerned.
If we survived the near apocalypse year we just went through, we can and will eventually survive Europe’s troubles!
You may be interested in reading this articles on the subject of Greece common Tax Evasion. An improvement in the Greek Tax collection system will go a long way towards invigorating investor confidence in the region.