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Monthly Archives: October 2011

Terry Broaders

Weekly Update October 28 2011

“Anything That Will Alarm the Public is News” -Louis Dudeck

 

 

Europe Reaches Debt Deal

A great week was enjoyed in the markets as European Leaders finalized a plan Thursday they hope will mark a turning point in the 2 year debt crisis. The strategy unveiled after 10 hours of negotiations hit upon 3 points.  These include a significant reduction of Greece’s debts, a shoring up of the continent’s banks, and a reinforcement of a bailout fund so it can serve as a $1.39 trillion protection to prevent larger economies like Italy and Spain from being dragged into the crisis.  The strategy’s ultimate effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

The most difficult piece of the puzzle was Greece, whose debts would fall to 120% of its GDP by 2020. Under current conditions, they would have risen to 180%. To achieve the reduction, private creditors will be asked to accept 50% losses on the bonds they hold. The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January.  “We can claim that a new day has come for Greece, and not only for Greece but also for Europe,” said Greek Prime Minister George Papandreou, whose country’s troubles touched off the crisis two years ago. “Let’s hope the worst is over.”

With the banks being asked to carry more of the burden, there were concerns they needed more money in their rainy-day funds to cushion their losses. European leaders have asked them to raise $148 billion by June.  The last piece in the plan was to increase the firepower of the continent’s bailout fund to ensure that other countries like Italy and Spain don’t get dragged into the crisis. To that end, the $610 billion European Financial Stability Facility will be used to insure part of the potential losses on the debt of euro zone countries like Italy and Spain. That should have the effect of making those countries’ bonds more attractive investments and thus lowering borrowing costs for their governments.  Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

The TSX closed at 12520, up 571 points or 4.78% over the past week. YTD the TSX is down -6.87%.
The DOW closed at 12231, up 422 points or 3.57% over the past week.YTD the DOW is up 5.64%.
The S&P closed at 1285, up 47 points or 3.80% over the past week.YTD the S&P is up 2.15%.
The Nasdaq closed at 2737, up 100 points or 3.79% over the past week.YTD the Nasdaq is up 3.17%.
Gold closed at 1744, up 104.00 points or 6.34% over the past week.YTD gold is up 22.73%.
Oil closed at 93.47, up 5.78 points or 6.59% over the past week.YTD oil is up 1.92%.
The CAD/USD closed at 1.0082, up 0.0169 points or 1.70% over the past week.YTD the CAD/USD is up 0.56%.  

BLOG LINKS

“You Bought and Held, Is It Time to Bail?”

Sources: Bloomberg, Investment Executive, Advisor

Odette Morin

“You bought and held, is it time to bail”

I have to post this article published in the Globe & Mail, Tuesday October 11, 2011 by Preet Banerjee.  Please click on the link and read the whole article.

http://www.theglobeandmail.com/globe-investor/personal-finance/preet-banerjee/you-bought-and-you-held-is-it-now-time-to-bail/article2197425/

Here are my favorite quotes from this article: “Everytime the market correction occurs, people starts second gessing themselves….While everyone knows they should buy low and sell high, the lower the price drop, the more poeple bail on that strategy, and essentially turn into buy high and sell low investors….The odds of becoming a successful trader are similar to becoming a professional athele…. The likelihood of a regular investor dumping their prudent strategy to try to beat the markets consistently through market timing and trading is about as wise as the average person droping their carreers to take a shot at making the NBA”.

“The truth is a well-diversified portfolio backed by an investment policy statement is going to be the most prudent approach to investing for most people.”

Thank you Preet Banerjee for writing these great common sense articles in our national newspapers.

Terry Broaders

Weekly Update October 21 2011

” I Want To Put a Ding in the Universe” -Steve Jobs

Conference Board Believes No Recession for Canada
The Conference Board of Canada believes that the Canadian and U.S. economies will be able to survive the current world uncertainty and avoid a recession next year assuming that both the European and U.S. policy-makers implement the necessary policies. Board economist Pedro Antunes, said he is still hopeful European leaders will take action to shore up banks exposed to Greek debt and that of other Mediterranean countries, thereby preventing the problems from spreading around the world as happened in the fall of 2008 with the failure of Lehman Brothers. The outlook represents a somewhat rosier picture from what earlier this year was among the most pessimistic of Canada’s major forecasters. The Conference Board said Canada’s economy, which is slowing down to 2.1% growth this year, will pick up some steam next year and advance by 2.4%, before accelerating to 3.3% in 2013.

By that time, Canada’s unemployment may reach as low as 6.3%, the group’s economists say, a level not seen since early 2008, before the onset of the global recession. Meanwhile the economy in the United States is likely to rebound to levels similar to its northern neighbour. The board’s call for next year is about half a point stronger than expectations from some of Canada’s banks, particularly Scotiabank and the Bank of Montreal. For Canadian workers, the best news is that the Conference Board sees unemployment on a steady downward track to 6.3% by the end 2013. It currently sits at 7.3%.

“This summer’s weakness in private sector employment is expected to be temporary,” the report argues. “Despite a decline in infrastructure spending, construction employment will be bolstered by strong investment in the resource sector and in commercial and industrial buildings. Service sector employment will also do well.” The big drag for both the economy and employment comes from government restraint, said Antunes. He said governments will be taking about $12 billion out of infrastructure spending next year as the last projects of the stimulus spending introduced in 2009 to combat the recession wind down.  He notes that next year’s growth is still modest by traditional standards, but given continued weakness in the U.S., it may be the best Canadians can expect.

The TSX closed at 11949, down -133 points or -1.10% over the past week. YTD the TSX is down -11.11%.
The DOW closed at 11809, up 165 points or 1.42% over the past week.YTD the DOW is up 2.00%.
The S&P closed at 1238, up 13 points or 1.06% over the past week.YTD the S&P is down -1.59%.
The Nasdaq closed at 2637, down -31 points or -1.16% over the past week.YTD the Nasdaq is down -0.60%.
Gold closed at 1640, down -41.00 points or -2.44% over the past week.YTD gold is up 15.41%.
Oil closed at 87.69, up 0.37 points or 0.42% over the past week.YTD oil is down -4.38%.
The CAD/USD closed at 0.9913, up 0.0020 points or 0.20% over the past week.YTD the CAD/USD is down -1.13%.

Sources: Bloomberg, Investment Executive, Conference Board of Canada

Odette Morin

Moving in with your boyfriend or girlfriend or getting married? You may want to get a co-habitation agreement or marriage contract done.

1) What is a domestic contract?

Under most Canadian provincial/territorial legislation (check your province) a domestic contract is a contract between two parties that will determine how their affairs will be settled in the event of:

  • The breakdown of a marriage (marriage contract or Prenuptial Agreement)
  • The breakdown of a non-marriage relationship (cohabitation agreement)
  • Separation of the couple (separation agreement)

What these three agreements have in common is that they must be in writing, signed by the parties and witnessed.

2) Should legal advice be sought when considering a domestic contract or Prenuptial Agreement?

Definitely. Although we can make some general statements about Prenuptial Agreements, the legal issues can be complex and federal and provincial/territorial laws need to be consulted and understood. Both parties should be seeking independent legal advice. In fact, the legislation of some provinces requires it. 

3) What is a marriage contract?

A marriage contract is a contract between two parties made either while married or in contemplation of marriage (a Prenuptial Agreement or ‘Prenup’) that details how their respective affairs will be settled in the event of:

  • Divorce
  • Separation
  • Annulment
  • Death

The issues dealt with in a marriage contract can be:

  • Division of property
  • Support obligations
  • Any other issues

Depending on the province/territory, marriage contracts may be prevented from:

  • Dealing with child support/custody arrangements
  • Limiting access of either party to the matrimonial home in contradiction to law

4) What is a cohabitation agreement?A cohabitation agreement is a contract entered into by two parties who are either living together or contemplating living together. It may deal with issues such as spousal support and the distribution of assets should the relationship end and perhaps child support. However, some provinces explicitly prohibit the issue of child custody in a cohabitation agreement. As with marriage contracts, the agreement must comply with federal/provincial law, particularly in the case of child support, and the courts reserve the right to amend or cancel the agreement if it is determined that it goes against legislation. 

5) Will a domestic contract be legally enforceable?

Perhaps. Family law issues can be very complex and as a provincial/territorial concern, there will be variations across the country. As mentioned above, this is why competent legal counsel should be sought when considering a domestic contract. The courts reserve the right to overturn or amend domestic contracts if the terms appear to be ‘unconscionable’ for one of the parties or particularly if any dependent children are not being taken care of adequately.

These arrangements are especially important for second marriages.  Don’t delay.  Make arrangements early in the relationship.  It is best to be clear and agree for all parties concerned.

 

Odette Morin

If You Never read my Financial Brief, You Will Want to Read This One.

Why?  Because I am going to plain talk sense here.  There is so much noise out there that it is hard to remain rational.  Please read on for some good old common sense perspective on what is happening with your money today.

We just returned from a 3 day investment conference.  We listened to several portfolio managers, some with 30+ years experience.  They have seen it all.  Here are some of the random notes I took:

• Business fundamentals are strong but it’s the noise that is the problem.

• US Business owners say we are frustrated with Washington, there is no clarity or leadership but our sales are strong.

• The US raised the debt ceiling 78 times in the past.  The issue this time was political.  Nothing more.

• The World is changing: the Richest Man is in Mexico, The Tallest building is in Dubai, the Biggest Factory is in China, the Biggest Casino is in Macau and the biggest box office ticket sales are in India. The world is a bigger place now and does not revolve around the US or Greece.

• We ask ourselves daily, from the information that we have, where can we make money from it.

• We get really excited when we look at the valuations that we see today after the correction we had these past few weeks.  Stocks are cheap, pay high dividend yields and have high earnings growth.

• The best companies do business globally.

• Confidence is key.  It is not a Greece problem, it is a banking problem. We need a clear mandate from Europe to fix the banking system. 

• Expect markets to rally when confidence is restored, when markets recognize how strong the business fundamentals are.

• Where will your money be when that happens?  Staying the course is the only safe way.

“It’s an extraordinary opportunity now; this is one of those magic points in investing, once in a life time/generation opportunity.” Larry Sarbit September 29th 2011

“You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing.'” Warren Buffett Chairman, Berkshire

Now is the time to invest and get rich.” That’s what Warren Buffett told Forbes Magazine in late 1974 and again in 2008.  Look below at how right he was.

“I prefer to be approximately right than exactly wrong” ~ Warren Buffett about investing when nobody does and staying invested. (Warren Buffett has invested $4 Billion cash in the past quarter)

If you are in your savings years: Be celebrating!  You are buying cheap equity.  This is precisely what you should be doing.  Try to add to the portfolio now and even consider a small investment loan.

If you are retired and drawing an income:  Keep on enjoying your retirement!  There is no need to worry.  Your portfolio is earning a lot of income and the fund you take your cash flow withdrawals from has been selected to protect against high volatility.

Recent Time Magazine covers? Look again.  No it is NOT different this time and we will get through this, just as we did time and time again always bringing markets to higher levels than before the drop. See the 50 year historical chart below.   Notice the 70s.  It was called then the “Lost decade” just like the 2000s are now called.  Now, look at what happened in the 80s & 90s, the biggest bull market ever seen, rewarded the patient and rational.

 

Anthony Sabti

Another Volatile Week for Markets

It was another turbulent week for stock markets, which saw major indexes hit new lows before rebounding. The S&P 500 finished 2.2 per cent higher; the S&P/TSX composite index fell 0.3 per cent.

Here were some of the key economic and financial headlines this past week:

  • Stock markets rose sharply over the past couple of days amid mounting hopes that European policymakers are preparing a plan to shore up the banking sector in the event of a Greek debt default.
  • The European Central Bank offered new emergency loans to banks on Thursday to help steady them through the government debt crisis.
  • Fitch Ratings downgraded the credit ratings for Spain and Italy by one notch, noting the euro zone crisis as a particular threat.
  • The U.S. Labour Department said that the economy added 103,000 jobs last month while the jobless rate held steady at 9.1 per cent.
  • The Canadian dollar moved higher Friday in the wake of a solid job creation report from Statistics Canada that blew past expectations. The dollar rose 0.75 of a cent to 97.11 cents US.
  • In case you didn’t hear it, Apple co-founder and long-time CEO Steve Jobs passed away at the age of 56 on Wednesday. He had faced several chronic health problems over the past few years, including a rare form of pancreatic cancer.

 

Weekly Market Wrap-Up (as of October 7, 2011)

The TSX closed at 11588, down -36 points or -0.31% over the past week. YTD the TSX is down -13.80%.

The DOW closed at 11103, up 190 points or 1.74% over the past week.YTD the DOW is down -4.10%.

The S&P closed at 1155, up 24 points or 2.12% over the past week.YTD the S&P is down -8.19%.

The Nasdaq closed at 2479, up 64 points or 2.65% over the past week.YTD the Nasdaq is down -6.56%.

Gold closed at 1636, up 18.00 points or 1.11% over the past week.YTD gold is up 15.13%.

Oil closed at 82.85, up 4.13 points or 5.25% over the past week.YTD oil is down -9.66%.

The CAD/USD closed at 0.962, up 0.0081 points or 0.85% over the past week.YTD the CAD/USD is down -4.05%.