How To Guarantee Income In Retirement...

The importance of Yield.

The Equity markets have moved in sync with the high-yield bond markets.

But as you can see in chart number 2, that doesn't mean an investment in each had the same result.

Chart 2 shows the same ETF's but adding dividends and coupon payments for the high-yield.

We are hosting 2 seminars this Fall that warrants attention:

1. Dividends (below)

2. How to Guarantee Income in Retirement. (Above)

Let me know if you would like to discuss these further... Regards.

An important event...

*With our recent acquisition of a company called Genuity, we picked up the number 1 Bank analyst and the number 1 Telecom analyst in Canada.

Call or email me to RSVP: (403) 781-1606

Best Regards.

Eric

Marketable Ideas.....

Well here we are.....

It is volatile months like July that makes one realize the benefits of leaving the "long only" business, and focusing on a more active (directional) mandate.

It seems like we've been at this inflection point forever, with the end of the world one possibility and a new bull market the other. But what is the bull case really built on? Terrible economic numbers and European bank stress tests that failed to consider sovereign bond holdings, this is only the biggest risk to the banks.

Economists, for what it's worth, seem to have all gone negative, but for opposite reasons. The fact that the long bond can be at all-time highs - a deflation worry - while gold is also at all-time highs - an inflation worry - illustrates the unparalleled disparity of views.

FinReg (aka the Volcker Rule) is starting to have an impact on the hedge fund industry. Morgan Stanley is selling down its stake in its successful Front Point Partners and Goldman Sachs has decided to spin out its prop trading business. Major industry changes lie ahead...

While most thinking is still bearish, the resilience of this market to all the negativity makes me unwilling to take on much directional exposure wither way. In other words, I'm looking to protect investors no matter what the market brings.

Best Regards and Safe Investing.

The Shape of Market Bubbles.

In my recent reviews of major worlds markets, I included a chart of the amazing bubble in the Shanghai Composite Index. In this post we’ll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let’s take a long view of the index. Incidentally, the index’s latest close was 2586.21. So a fall to the area Guppy mentioned is about a 10% correction from this point.In my recent reviews of major worlds markets, I included a chart of the amazing bubble in the Shanghai Composite Index. In this post we’ll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let’s take a long view of the index. Incidentally, the index’s latest close was 2586.21. So a fall to the area Guppy mentioned is about a 10% correction from this point.

The next chart centers the Shanghai Composite. The peak is the center of a 3000-market day timeline. Markets are open approximately 250 days per year, so this is a snapshot of a little over eight-and-a-half years with plenty of room left to track the future behavior. The dramatic rise took place over about one year with a dramatic collapse of about the same duration. The symmetry of this these two years is astonishing and, as we’ll see, not necessarily characteristic of bubbles.

Now we’ll add the Nasdaq Tech Bubble. The Nasdaq was a bit less aggressive in the early stages of bubble formation, but the collapses are remarkably similar.

Worst Oil Spills In History

An interesting pictograph of large oil spills throughout history and the one we are experiencing in the Gulf.

I find it fascinating that, through the wonders of media, this spill is being depicted as the worst disaster in history... (A political reaction due to the location being in the good old U.S. of A.)

"Time is better spent building a shelter, than trying to guess which way the storm is coming from."

"Everybody is right sometimes but nobody is right all of the time."

This lesson is most definitely not confined to the investment industry but it clearly portrays itself here. We are bombarded with information every day from newspapers, TV programs, market strategists and analysts. One would think that because this information is provided by people with extensive education and market experience, it would generally illustrate a similar theme or market direction. This is very often not the case and therein lies the beauty of the market. Even if opinions do converge, it does not mean that the masses are right.

For example, a well known "bear' is saying that the last few months of growth is a bull market in a secular downtrend. Investors should take cover because hard time are ahead. Contrary to that opinions is another well known "bull" who urges full investment because the stimulus has worked and we're off to the races. I cannot claim to compete with either of these people on academic achievement, market experience or intellectual capacity, but I do know one thing... One of them is wrong.

Academic theory itself provides guidance and strategy. There is a place for theories such as CAPM and the Efficient Frontier, but in my mind there are too many moving parts in the market to predict results with a degree of certainty. I perceive this information as valuable in the same way that mechanical studies explain why a car behaves the way it does when you drive it. The significant difference is that when you strap yourself into the market, put it in drive and hit the gas, don't always expect it to move forward.

Thus, the outcome is that time is better spent building a shelter than trying to guess which direction the next story is coming from. All of this sounds quite pessimistic. Growth is very important, but capital preservation should be the primary focus. We invest in strong companies capable of enduring harsh economic climates with attractive yields. Capital appreciation of these businesses is expected during better days. Sometimes these stocks fall our of favor with the market, yet nothing is fundamentally wrong with their franchises. We see opportunity here and we "back the truck up". This extensive shift is often an earth-shattering two percent increase in a holding.

It is obviously important to understand the dynamics of an industry, but from an investors point of view, the price you pay for an asset and your ability to protect the downside is paramount. As I've said, nobody is right all of the time, that is why buying companies based on a projection of the future of the economy and industry is fraught with risk. -Courtesy QV's June Comment.