Posted by John Woodfield on February 6, 2012 | No Comments
John Woodfield 250-979-2744/604-654-1502
Off to a Good Start
The combination of low global interest rates together with an aggressive policy response (especially in Europe) has been almost universally positive for risky assets since the lows of last October. Fears of a collapse of the Eurozone together with a full-fledged global banking crisis have not materialised, nor have projections of a sharp contraction in Chinese economic growth. While some risks remain with these issues, we feel that the major doomsday scenarios have been taken off the table.
Just before Christmas, the ECB implemented a series of programs designed to dramatically lower the probability of a meltdown in the region’s financial system. Among the measures provided were:
Three Year Loans to Banks. This strategy has not only helped reduce funding strain at the banks but has also allowed banks and the ECB to purchase sovereign debt, thereby reducing pressure in government debt markets.
Loosened Collateral Requirements. By allowing exceptionally generous terms in collateral on bonds that the banks lend to the ECB, this has effectively increased the money supply in the region.
Mutualisation of Debt. By allowing the transfer of questionable sovereign debt from bank balance sheets to the balance sheet of the ECB, this amounts to transferring risk from specific hotspots (e.g., Italian banks or French banks) to the region as a whole. In effect this is very similar to issuing Eurobonds.
Greek Debt. Greece looks close to finally settling terms on its debt restructuring, thus avoiding a messy default.
Weakening Euro. The above steps have also led to depreciation in the Euro. This should help exports and growth opportunities in the region. Next month, the ECB is set to do more of the same with another €1 trillion injection into the financial system.
China, as well, has been a much discussed source of possible risk to the global economy. Recent evidence suggests that this concern is overblown and that China can engineer a soft landing. In fact, the slowdown in China over the past several quarters has been largely a result of the People’s Bank of China’s efforts to cool an overheating economy as inflation pushed against the upper end of their comfort range. Recently, manufacturing data has revealed a bounce in activity and exports, while down to Europe, are still holding for the U.S. and other regions. At the same time, inflation has cooled, even in the food sector. These developments, we feel, will allow the Chinese authorities greater latitude in adjusting monetary policy. Having said this, we acknowledge that there are risks in China, particularly in the housing market and among select financial structures, but that the potential impact of these risks will be moderated in an accommodative monetary atmosphere.
Posted by John Woodfield on January 13, 2012 | No Comments
John Woodfield, B.Comm, CFP, FMA, FCSI│Raymond James Ltd.
Senior Investment Advisor
john.woodfield@raymondjames.ca │www.raymondjames.ca 250-979-2744
In last week’s missive we discussed our outlook for 2012. Central to our view is that two of the biggest risks, Euro breakup and Chinese hard landing, had been overly discounted by the market. This, in our view, has created an opportunity for risk-tolerant, Growth oriented investors to rotate back into risky assets.
This is not a new view on our part; in fact it was a key reason why we adopted such an aggressive asset allocation recommendation last November when we rolled out our Raymond James Ltd. recommended asset allocation. As a reminder, that allocation stands at 25% Bonds, 65% Equity, 10% Alternative (mostly gold), and 0% Cash for Growth-oriented investors.
This heavy allocation towards equities (65% vs. a maximum allocation of 70%) rested on a number of factors including: Bond vs. Equity Performance, Equity Valuations, Earnings Momentum, Interest Rate Policy, Market Technicals, Policy Initiatives in Europe, and Chinese Growth.
Since November many of these indicators (interest rate policy, market technical, and Euro policy, and the outlook for China) have continued to improve.
www.raymondjames.ca/rjl_marketing/Library/FA%20Website%20Toolkit/F/F2/WeeklyTrends.pdf
Posted by John Woodfield on January 6, 2012 | No Comments
John Woodfield, B.Comm, CFP, FMA, FCSI│Raymond James Ltd.
Financial Advisor
Suite 500 – 1726 Dolphin Ave., Kelowna, B.C., V1Y 9R9, Phone (250)979-2744
Markets to Improve as Year Unfolds
As we look ahead to 2012 the global economic backdrop remains uncertain, at least over the short term. The on‐going sovereign debt / banking crisis in Europe and fears that these events will drag down the global economy will continue to weigh on markets. But offsetting these concerns is mounting evidence that any economic slowdown will be contained to Europe with both the North American and the global emerging market economies showing signs of rebounding, though with tepid growth. Meanwhile monetary policy around the globe remains extraordinarily accommodative with interest rates hovering around historic low levels. On top of this corporate profitability remains strong with near record levels of cash flow.
While equity valuations are above cyclical trough levels they are attractive considering both the levels of profitability and interest rates. Provided the economic gloom emanating from Europe can be contained we remain positive on the outlook for equities for 2012. While volatility may remain elevated over the coming months as markets contend with European events we continue to favour stocks over bonds or cash at this stage of the economic cycle.
Overall the biggest risk for 2012 is the politicking amongst European policy makers. Efforts to stem the crisis have yet to provide the comprehensive solution markets seem to be clamouring for. Delays and half measures will likely push the region into recession in the early part of 2012. And a lack of clarity on how bailout funds will be allocated or to what extent and how active the European Central Bank will be will likely result in continued volatility in both the bond and equity markets. Having said this though we think the steps taken in Europe of late to combat the crisis are a step in the right direction. The expansion of the European Financial Stability Facility (plus other measures) to at least 10% of the region’s GDP together with measures to support the European banks should serve to alleviate the major risks in the region.
At the same time moves towards greater fiscal integration offer a solution to the long term sources of imbalances within the region. The biggest problem will be the delay between policy implementation and expected benefits. In the meantime markets will be focused on two issues: the ability of countries in the region (especially Spain and Italy) to refinance debt coming due this year at reasonable interest rates and the efforts of banks to access capital to shore up their balance sheets. Our view then is that we can expect volatility from the region to continue for the next several months but the risks of a major financial meltdown have been substantially reduced. We feel that for the most part these risks have been discounted by the markets and that the lows put in place last October will hold barring anything but a major policy misstep.
Posted by John Woodfield on December 30, 2011 | No Comments
John Woodfield, B.Comm, CFP, FMA, FCSI│Raymond James Ltd., Financial Advisor, 250.979.2744
Special event with Matt Wood of VertexOne Asset Management – making you investments grow in 2012
January 26th, 2012
Raymond James Ltd. Suite 500 – 1726 Dolphin Avenue (Landmark #1)
Kelowna BC
1:30 and 4:15PM (two separate sessions)
Please phone or email john.woodfield@raymondjames.ca to RSVP
This event features Mr. Matthew Wood. He will focus on how to make your investments grow in 2012 and the positioning of the funds Vertex manages. Vertex has consistently been among the very few management companies that consistently outperform the indexes. The Vertex Fund has been performing at over 18% per annum for the past 13 years.
Matthew Wood, Portfolio Manager
Mr. Matthew Wood is a founding partner and director of Vertex One Asset Management. Mr. Wood has overall responsibility for the investment and trading decisions affecting the Vertex Managed Value Portfolio, Vertex Value Fund and Vertex Enhanced Income Fund. He has operated as the lead manager of the Managed Value Portfolio since its inception on April 3, 1998. Mr. Wood has over 20 years experience investing in equities, fixed income and derivatives. His career began as an analyst, later becoming a Financial Advisor, with Royal Trust. He was a Portfolio Manager with HSBC Asset Management before co-founding Vertex One Asset Management. Mr. Wood holds the professional designation of Chartered Financial Analyst (CFA) and is a member of the Institute of Chartered Financial Analysts.
Posted by Shaida on September 21, 2011 | No Comments
I read the most intersting article today in Castanet about the US housing market.
http://www.castanet.net/news/World/64933/A-bipolar-housing-market In the good ol’ motorcity, Detroit Michigan, the rich are standing in line to purchase high end waterfront mansions while 15 minutes away, a single family home with 3 beds sold for $6000.00 Apparently there are 2 housing markets, one for the wealthy and one for everyone else! Almost a quarter of the US owes more then their home is worth, another quarter has less then 20% equity in their home and this is stagering, almost half couldn’t get a mortgage today! While wondering through the Detroit airport the writing on the wall as well as the PA system is now in Chinese well as English. Looks like the auto industry is regaining some lost footing! Hopefully the housing market for Joe and Susie Public will follow suit.
Posted by Shaida on August 26, 2011 | No Comments
I read an encouraging article on Castanet yesterday about housing starts in Kelowna. CMHC expects housing construction to increase 30% in 2012 which is great news for the economy based on the employment and population growth.
http://www.castanet.net/news/Kelowna/64019/Kelowna-housing-starts-up-for-2012
The buyers have shifted from invement purchases to local families and seniors. BC is seeing growth through employment and demand for housing.
It looks like it will be a great weekend with lots of sunshine. Get out and enjoy all our fair city has to offer this weekend!
Posted by Shaida on August 24, 2011 | No Comments
I was reading an article from Wine Access magazine http://www.wineaccess.ca/articles/item/ivwa-2011-top-25-killer-values about their top 25 killer value international wines. I must agree there are some fantastic wines on their list! They release a new recommendation everyday. Check out the article and see if you agree and stock up your cellar on their top picks! They release a new recommendation everyday. I know I will. Happy shopping!
Posted by Shaida on August 12, 2011 | No Comments
I read a great article about the increase of home sales in July in BC. Follow the link,
http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20110811/bc_real_estate_110811/20110811?hub=BritishColumbiaHome#.TkReHrb2auA.email
Hope your having a great summer and enjoying the sunshine!
Posted by Shaida on June 16, 2011 | No Comments
The average home price in Vancouver has risen by 25.7 per cent to $831,555 making the area the most expensive in the country and pushing the prices elsewhere up by 8.6% according to the Canadian Real Estate Market.
Posted by Shaida on June 8, 2011 | No Comments
Watch out for revolving postal strikes! Vernon is on the picket lines at 11:30 pm tonight for 24 hours. Make sure you call all your utility and credit card companies. They are not forgiving and still expect interest and penalties. Business can be done on-line so set up your accounts so you can pay on-line so you don’t incur extra charges.
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