Ottawa Investment Advisor John Bruce

Time to buy discounts

November 22, 2018

With the markets selling off and giving back all their gains for the year on the Dow Jones in the last two months, and the TSX going back to levels of 2016, I have been looking for a conservative approach to buying into these discounted areas with the use of specific mutual funds that have an excellent assortment of many of the companies that are on sale yet still have strong earnings and a promising future.

I see a strong economy that is not over heated by any inflationary definitions and believe that the recent shakeout and selling is once again a very good opportunity to buy into a discounted market for the longer term.

What people don’t understand is that if you are a long term investor you WANT the market to be down and stay down when you are buying and then when it reverses you can sell bits and pieces as it peaks again. That is what I have done with you and that is why we have been sitting on cash for quite a while.

The market may go lower, it may take off. Who knows? What I do know is that in the long run it always goes higher and when the economy is still strong you want to buy at discounted prices.

I will be sending you one page summaries of the specific mutual funds that I have assembled for you and will call you to discuss allocation of cash to them.

I am also looking at placing many of our holdings that qualify, into a dividend reinvestment plan so we can use the income our stocks pay us to acquire additional shares at these lower prices. This too I will discuss with you when we speak.

Call me if you have any questions at 613-491-3344 or toll free at 1-866-860-4190.

It may be challenging times for the current market, but I for one like to see the companies I want for the long run encounter short term drops so I can get more.

Remember this quote from Warren Buffett- “Price is what you pay, value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

John S. Bruce
Investment Advisor

November 2018 Update

November 2, 2018

I would like to prepare you for what is likely a decline in your accounts from the previous month. This recent sell- off, like most sell- offs, has occurred fast and with an apparent fury that it has created fear with investors. As of today’s date the Dow Jones Industrial Average, the NASDAQ and the S&P 500 have given up all their advance for the year. The TSX has fared worse and gone back to levels achieved two years ago.
The markets are moved by fear and greed and fear has taken hold.
I saw this coming and prepared you for this event with previous letters in July and August and again in October. We took profits when we could and built up our cash. What we have that has gone down has not necessarily gone down because of anything intrinsically bad within the investment. What has happened is that we have more sellers than buyers and that is sending the market lower.
That is the good news in so far as it is giving us a chance to buy the best companies in the market at sale prices.
Many are saying it is the end of the bull market, or it’s 2008 again. It is not 2008 again. We are in a very different set of circumstances than we were in 2008. I have attached a report (click on this underlined area) from Drummond Brodeur, CFA, Senior Vice-President and Global Strategist with Signature Global Asset Management. He is one of a few fund managers that I value and respect.
His perspective is encouraging and factually supported. I invite you to read it.
Please call me if you have any concerns at (866) 860-4190 or direct at (613) 491-3344.
Sincerely,

John S. Bruce
Investment Advisor

Third Quarter 2018

October 18, 2018

During a period characterized largely by trade uncertainty, global asset markets delivered mixed results for the third quarter of 2018, with the U.S. equity market reaching new highs and outpacing many of its global counterparts.

U.S. equities posted strong results, supported by positive economic data, healthy corporate earnings and favorable business conditions that included corporate tax cuts. The S&P 500 Index, a broad measure of U.S. equities, gained 7.7% for the quarter and was up 10.6% for the year-to-date in U.S. dollar terms. Although the Canadian dollar has lost ground relative to its U.S. counterpart over the course of the year, it strengthened moderately in the most recent three-month period, resulting in a 5.9% quarterly return for the index in Canadian dollars and 14.1% for the year-to-date.

The MSCI World Index, which represents large and mid-cap equity performance across 23 developed market countries, also posted positive results for the period, gaining 5.1% for the quarter and 5.9% for the year-to-date in U.S. dollars. However, much of the gains for the global index resulted from the outperformance of U.S. stocks, as several local markets in Europe and Asia posted moderate losses for the quarter. Emerging markets also continued to sell off on rising interest rate concerns, as they have since early in the year.

The Canadian S&P/TSX Composite Index dipped slightly, losing 0.6% for the quarter, but the benchmark remained up about 1.4% for the year-to-date. The Canadian market’s muted performance for 2018 resulted from weakness in the energy and materials sectors, the uncertainty of trade talks with the U.S. and a slight decline in the value of the Canadian dollar versus the U.S. dollar.

Interest rates continued to move upwards over the quarter. The Bank of Canada left its benchmark interest rate steady at 1.5% in September following a 25-basis point hike in July. The U.S. Federal Reserve, meanwhile, responded to the labour market’s strength and the continued growth of economic activity by raising its target rate to 2% to 2.25%, its highest level since April 2008. Ten-year government bond yields in Canada and the U.S. rose throughout the period, with the FTSE Canada Universe Bond Index, which measures government and corporate bonds in Canada, returning -1.0% for the third quarter and about -0.4% for the year-to-date.

Equity markets around the world have made a strong recovery in the more than 10 years since the global financial crisis, and in August the current bull market became, by some measures, the longest in history. Though the economic cycle is entering its later stages, business conditions in many regions remain constructive, and it is impossible to predict when the next downturn will occur. Some studies, in fact, have shown that attempting to “time the market” by selling your investments before a downturn can be counterproductive, as investors often miss out on significant market gains after they have cashed out. Rather, having a personalized long-term investment plan that reflects your objectives – and staying true to that plan through market highs and lows – typically yields better results.

In closing, I would like to thank you for your business and remind you that Brian and I are here to help. If you have any questions about your portfolio, please feel free to contact my office.
Sincerely,

John S. Bruce

Investment Advisor

The Market is on Sale

October 16, 2018

The market went on sale this week!

When you hear that your favorite store is having a big sale, the reaction should be excitement and enthusiasm and then you check your bank account and you see what you can afford to buy. Right?

Not so if it is the stock market on sale. Many people do the opposite. They freak out, get scared and contemplate throwing out all their favorite items, instead of buying more.

This is the market. This is how it goes. Up and down and up and down and sometimes with such volatility that it can make your head spin.

So what do you do?

You treat it as any other store that decides to have a sale. You evaluate what has great value and you buy more.

What should you not do?
Sit and wait for the sale to end then consider buying.

So with this in mind, please call me asap so I can offer suggestions of what companies are on sale and how we can buy good value.

1-866-860-4190 or direct at 613-491-3344
Sincerely,

John Bruce
Investment Advisor

The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

August 2018 Update

August 8, 2018

August 8, 2018

I hope you are well and are enjoying the warmer weather. I wrote to you three weeks ago about the market environment and the risk that is in the markets. I wanted to provide a brief update for you on what is unfolding now that earnings are being released.

There is an expression that states, “Buy on rumour, sell on news”. Earnings period is a practical application of this belief. As earnings are coming out, many companies are being sold -off by investors regardless of whether the news was really good or mediocre. I tend to see this type of action occurring when the market is getting over extended. That is to say, when the stock indexes have done well and have reached new highs.

Interest rates are rising in the U.S. and the 10 year U.S. Bond Yield hit a high of 3.128% in the middle of July. When bond yields rise, many conservative investors will start to shift out of stocks and into bonds, increasing the number of sellers in the stock market. This puts downward pressure on stock prices.
Add to this the escalating trade war between the U.S. and many other countries and you will have a good argument to take profits if valuations get too lofty, build a good value cash position and dividend paying companies–when the prices start to drop.

When will this happen? Who knows? What I do know is that there is a shift building and that is when I want to keep my eyes out for discounts and value when it happens and have the cash to do it.

I will talk to you if we need to make any adjustments to your portfolio with our existing holdings and let you know when I think the time is right to add to our stocks or even buy some good value bonds.

If you have any questions I will be back in the office on Thursday August 16th. In my absence please direct any inquiries to my assistant, Brian Donegan at 1-844-860-7787.

I wish you and your family a safe and pleasant summer.

Sincerely,

John Bruce
Investment Advisor

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