COMMENTARIES ARCHIVE

Lessons

June 14, 2019

I recently had the opportunity to impart some of my investing knowledge to my daughter, who participated in a savings competition with her grade 9 classmates. Finally remembering what her mother did for a living, she asked me for five stock recommendations.

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Patience

January 18, 2019

Following a tumultuous three months in the stock markets, with the US and Canadian indices down 13.5% (USD) and 10.1% (CAD), respectively, a common question is whether this correction presents a buying opportunity.

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Summer Activity

September 07, 2018

Like many Canadians, I enjoy spending the summers exploring our great country and this often involves a lot of driving. As I travelled the highways in BC, Alberta, and Saskatchewan this summer, I noticed more traffic and a lot more trucks hauling cargo than in previous years.

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Mind the Gap

May 04, 2018

On April 24th, the 10-year US Treasury bond yield reached 3.0%. The last time the 10-year government bond traded at that level was in January, 2014.

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Q & A

September 29, 2017

As we end the third quarter of 2017, we thought it would be timely to highlight a few common questions we have been asked over the past few months. Those questions, and our responses, are as follows:

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Striking a Balance

June 16, 2017

In setting our asset mix for our balanced strategies, we consider many different factors that influence our target weights for bonds and equities. We consider the state of the Canadian and global economies, and the policies that may affect their trajectory.

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The debt overhang

February 10, 2017

The US equity market in local currency terms advanced again in January. Investors have continued to give the new US President’s pro-business policies the benefit of the doubt.

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De-risking our economy

October 21, 2016

The rapid rise of home prices in Canada since the financial crisis, coupled with the record high level of Canadian household indebtedness, is often cited as the biggest threat to the Canadian economy.

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Summer Diversions

August 05, 2016

The Olympic Games open today in Rio de Janeiro, Brazil. Like many, I look forward to the diversion offered by the feats of Olympians over what currently dominates the news headlines.

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Managing Through the Tough Times

May 13, 2016

As we near the end of the first quarter corporate reporting season, we note some of the major themes emerging from the earnings releases.

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The Race to Negative

February 05, 2016

The spectre of a competitive currency war is looming following the Bank of Japan’s surprise decision to cut their overnight lending rate below zero on January 29th. Japan now joins the Euro region, Switzerland, Denmark and Sweden in adopting negative interest rates.

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Only Time Will Tell

November 13, 2015

The political and economic tides have most decidedly turned in Canada over the past twelve months. Our once G7 leading economy is now teetering on recession, and within that context, two long serving governments touting austerity are no longer in power.

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"Low rates begets lower rates"

August 21, 2015

The most recent move in July by the Bank of Canada to cut their policy rate to 0.50% was met with praise by some, and frustration by others. I must allow that I was in the latter camp.

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Bonds...not so boring after all

June 05, 2015

There has been a lot of talk recently about bonds in the news media. The CBC ran a headline news article on its website featuring actor Daniel Craig portraying the film character James Bond, and the headline, “The potential bond crisis no one has heard of”.

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It is all relative

March 13, 2015

As noted in our QV Update on January 30th, we recently lowered our target equity commitment

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Reality Check

October 24, 2014

Our thoughts and prayers go out to the individuals and family members directly affected by the events in Ottawa and in Quebec this week. The sense of peace and security we enjoy as Canadians was seemingly altered in one day.

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Living with Neutral

July 18, 2014

The term “neutral” has been cited frequently in recent months in describing the current policy environment.  PIMCO, the famed global bond manager, recently referred to their new investment strategy framework as “The New Neutral”, a slight alteration from their previous strategy, “The New Normal”.  The premise of “New Neutral” is that the Federal Reserve Bank’s neutral policy rate is closer to 0%, lower than the widely accepted 2.0%.  In this context, neutral implies low real policy rates for the foreseeable future.

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Reducing Risk

June 06, 2014

Relative yield comparisons provide the context for which we assess the opportunity between bonds and equities. This is an important consideration in determining the appropriate asset mix in our Canadian Balanced Fund and our global balanced mandates. Relative yields between government and corporate bonds, small cap stocks and large cap, and Canadian versus global equities are also evaluated in setting the appropriate investment allocation within each class. Relative yield comparisons may signal an opportunity in the higher yield class.  They may also signal rising valuation risks.

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The Loonie: Are the glory days over?

April 11, 2014

As many returning snowbirds are keenly aware, the Canadian dollar has lost some of its lustre over the past year.  The Loonie's decline began early in 2013 in conjunction with weaker commodity markets. The decline accelerated in the latter half of 2013 with the US Central Bank's tapering announcement, coinciding with Bank of Canada Governor Steven Poloz's more cautious outlook on the Canadian economy.  As we write today, the Canadian dollar in US dollar terms is valued at $0.91, down from $0.94 in January, 2014, and $1.00 (parity) at the start of 2013.

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Warren's Lessons

March 07, 2014

Each year, one of the most eagerly anticipated events at QV is the release of the Berkshire Hathaway annual report. The Chairman's Letter, written by legendary investor Warren Buffett, is usually filled with great investing insights interspersed with candid remarks about the various businesses that drive Berkshire's results. Warren's letter to shareholders often provides a crucial reminder about the importance of a long term investment horizon, patience, and a value-driven investment philosophy.  This year was no exception.

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Defense in a "Quality Bubble"

November 01, 2013

There have been many references to a “bubble” emerging in equity markets as of late.  Recently Laurence Fink, the CEO of the world’s largest money manager BlackRock, expressed concern about the “bubble-like” markets at a panel discussion in Chicago:  “We’ve had a huge increase in the equity market.  We’ve seen corporate-debt spreads narrow dramatically…it’s imperative that the Fed begins to taper.”

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Summer Reflections

August 23, 2013

As I return to my desk following a brief summer respite from the world of investing, catching up on the news that moved the markets can be a harrowing experience.  During my absence, gold stocks found new life despite write-offs in excess of $25 billion.  Long-term bond yields continued their march higher even though central bank rate hikes seem a distant reality.  Now popular market strategists are garnering press declaring the end to the secular bull market in bonds. Wow…I was only away for two weeks!

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A Change in Leadership

May 31, 2013

Governor Mark Carney presided over his last Bank of Canada monetary policy meeting this week before taking up his new post as Governor of the Bank of England. His final communiqué did not contain any material policy changes or any changes to their macro view.  Canada’s overnight rate remains at 1.0%, inflation remains subdued, and global economic activity is expected to grow “modestly” this year.  The language regarding the future direction of interest rates remains the same: “…after a period of time, some modest withdrawal of monetary stimulus will likely be required consistent with achieving the 2% inflation target.”   Translation: the next rate move is higher, we are just not sure when.

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A Wish List for 2013

January 11, 2013

In keeping with the spirit of the New Year, and our natural affinity for making resolutions, we offer our own wish list for 2013.  Unlike resolutions where we have some control over the outcome, we cannot control these outcomes. It never hurts to hope that our wishes may eventually come true.

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At a Standstill

November 02, 2012

The US equity markets were at a standstill this week as Hurricane Sandy caused the longest weather related shut down in more than a century.  The financial toll is estimated to be in the billions, a cost to be borne by already stretched local and state governments.

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Canada - a safe haven?

September 07, 2012

While debt woes and political uncertainty are common headlines as of late when discussing the state of affairs in Europe and the United States, they are not necessarily common in reference to Canada.  However, this was the case over the past few weeks, as ballooning budget deficits, debt warnings and political discontent dominated the news. 
Moody’s is the latest firm to warn about Canadian consumers’ growing debt problem. As our debt to income ratios move to record highs (152% is the latest figure), they warned of the impact on the country’s ability to whether another economic downturn.

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A Sustainable Growth Model

July 13, 2012

We will be soon entering our fourth year of the low interest rate policies implemented by the world’s central banks in 2008.  In an attempt to ward off the deflationary effects of the collapse of the US housing bubble, and with it the near collapse of the global financial system, interest rates fell to near zero in the developed world, and other fiscal and monetary stimulus policies were enacted to ward off the crisis.

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Austerity? Pas pour nous!

May 11, 2012

With the election on Sunday of Socialist Party leader François Hollande as France’s new President, the French populace quickly changed the tone of the markets, and the direction of European fiscal policies.

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Balancing Yield and Risk

January 20, 2012

Another week, another round of bad news headlines:  “France loses their coveted AAA rating after a downgrade by Standard and Poor’s.”  “Greek default is inevitable after negotiations with lenders breakdown.”  “Euro Woes to temper growth:  Bank of Canada.”  All the more reason to hold 10-year Canadian government bonds priced to yield 1.9%?

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A panacea or desperation?

September 23, 2011

On Monday, former US Central Bank Governor, Paul Volker, wrote a short opinion piece in the NY Times.  The central theme of the article was a warning to policy-makers on the dangers of a little inflation. “My point is not that we are on the edge today of serious inflation…but the danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems – our economic imbalances, sluggish productivity and excessive leverage – we would soon find that a little inflation doesn’t work.”  A clear message directed at the current Fed Governor on enacting potentially dangerous inflationary policies.

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Consequences of a Slowing World

June 10, 2011

“Austerity” is defined in the Oxford English Dictionary as a state of severe simplicity.  In the world of economics, the word is used to describe a policy of deficit-cutting and lower spending.  No matter how you frame it, defining government policy with a word like “austere” or “severe” does not illicit comfort to those that rely on government programmes.  It does, however, provide assurance to lenders that government fiscal policy will be focused on reducing deficits to meet their debt obligations.  Absent significant private sector investment, austerity programmes may also produce a slowdown in growth.

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A change in tone...

April 23, 2010

The main tool for Central Banks to effect changes in monetary policy is by changing the target for the overnight rate. This is the rate at which banks borrow and lend funds among themselves. Lending and deposit rates are then set at specific spreads over this rate, depending on term to maturity and credit quality. The Bank of Canada set the target for the overnight rate in April 2009 at 0.25%, the lowest on record. The Bank of Canada argued at the time that the global recession was deeper than anticipated and the unprecedented easing stance was required to stimulate economic growth. The Bank committed further to keeping their overnight rate at 0.25% until the end of the second quarter, 2010. This commitment was conditional on the Bank's outlook for inflation.

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Update on RBC Dexia

September 30, 2008

To our Valued Clients,

Market volatility and uncertainty over the state of global financial institutions has resulted in many people questioning the solvency of their own financial institutions which hold their assets. As most of you know, RBC Dexia provides custodial, record keeping and valuation services for QV Investors pooled funds. The money you invest in our pooled funds is therefore held in safekeeping for you at RBC Dexia. RBC Dexia is jointly owned by the Royal Bank of Canada and Dexia SA of Luxembourg. RBC Dexia, formerly known as the Royal Trust for Canadians, was formed in 2006 through a joint venture between these two institutions.

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