Portfolio Manager’s Weekly Commentary

Daryl Cooper

July 29, 2016

Setting up for the stretch run in 2016    

With July 2016 almost in the books we take a quick look at what might lie ahead of us into the final stretch of 2016.  While there are many macroeconomic events worldwide scaring people away from the market (aren’t there always?), the market setup is still providing a strong bullish pattern which may see us breaking out to the upside after summer malaise is through.

The seasonally weak period for the stock market has been extremely resilient in light of what seems to be one bad news story after another.  Within the U.S. we have seen both U.S. bonds and U.S. equities post positive moves after the shakeout of Brexit. The Canadian broad market continues to teeter -totter on the price of gold and oil, with financials rounding out the Big 3 sectors.  International and Emerging markets have also shown signs of life giving investors decent returns over bonds.

Much of the growth in the markets may not make sense given record low interest rates and slow economic growth worldwide. If we allowed fear and emotion to make decisions we would be hiding in a cave with enough food and ammunition to keep us alive until the world comes to an end. Obviously this isn’t happening as the Central bankers worldwide have seen fit to stoke the furnaces and keep the economies churning. This all started in earnest by the USA during the Financial Crisis of 2008 and has spread worldwide. Don’t expect to abate anytime soon.

Risk Management is what differentiates our management style from the Buy and Hold crowd. You have to have processes in place to protect from major events and at the same time, those same processes have to detect the top sectors to invest into when the markets are going up.  In the meantime; we won’t sit around worrying about things that may happen in the future. We invest when the coast is clear and going forward, 2016 looks positive. We will remain overweight in the best securities and underweight or avoid the non-performers.

Our indicators pick up intermediate trends (six to eight months). We appreciate that in the short term, (weeks to months) that volatility is inevitable and in the long term, (12 months and further out) too much change can occur. Long term calls are simply forecasting and forecasting is like predicting the weather.  We much prefer trends.

The aim is to make money, not to be right.
– Ned Davis

We are suggesting using any pull backs as an opportunity to invest into our portfolios which are humming along quite nicely. This is appears to be the safest time this year in which to deploy cash to the market.

In equities we sell the losers and ride the winners. We have a strong conviction to our proven process that has helped make our clients wealthier. Like the theory of supply and demand, we own whose prices are pushed higher by strong buying pressure. I like to say we rent stocks, not own them. We will make as many trades as needed to make money.

We have recently taken a position in precious metals as the trend remains favourable. We chose to buy a precious metals fund where you actually own the physical bullion itself. The fund carries a mix of Gold, Silver and Platinum, mining companies. Gold bullion is only up around 20% in 2016 while the Gold mining companies are up well over 90%. Silver is also undervalued compared to gold and we are bullish on some of the industrial uses such as China’s plans of building gigantic photovoltaic (Link: https://www.google.ca/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=photovoltaic+power) power stations this year.  Bullion, in our minds, has some catching up to do.

We continue to keep under contract four fixed income/bond managers to take care of the onerous task of protecting capital and delivering returns in excess of GICs.  Collectively we have seen about a 3.5% return year to date and about a 5% return over a five year market cycle, far superior than GICs.

We fully realize we are in the eighth inning for this bond market rally and as such we are extra vigilant with our sub advisors which include Manulife Strategic, iShares Conservative, First Trust Global and BMO Tactical. Over $12 trillion of the $30 trillion worldwide debt is paying negative interest rates. The long term outcome of this will be a movie we will all witness one day and the ending is far from clear.  Our sub-advisors follow strict rules of investing and all are sporting positive returns. Having concluded our semi-annual due diligence calls we are comfortable knowing that should we experience any international debt crisis these managers have processes in place to protect.

New Service from Cooper Schneider Financial

Colleen and I are always looking for a way to enhance our service offering.  We have found that so many people are apprehensive about their financial future given the relentless negative news stories.  We decided we want to turn apprehension into anticipation for not just our clients but also their friends and family.

We are excited to announce that effective immediately we are offering a unique service we call “A2A4U and Yours” or A2A for short.  A2A stands for Apprehension to Anticipation and it is for you and your family, your colleagues and your friends. It is a service that you will be hearing a lot about when we speak to you next. A2A is about us giving back to an industry that has served us so well.

Why did we do it?
We found many clients talking about their friends and how worried they are about their investments. We decided that it would be nice to be able to have an introduction where we schedule a 20 minute telephone conversation to answer any questions they have regarding the markets and financial planning. And they don’t have to become a client. Realizing how blessed we are to have such great clients was the inspiration behind this move and a way to somehow return the favour.

The introduction process is simple:
1. Call or email Colleen or Daryl
2. Give is the individuals phone number
3. We make the initial contact and have a conversation.
4. Nothing is being sold, just a sharing of our expertise.

Have a great long weekend and enjoy the beautiful Saskatchewan sun.

Daryl Cooper
Portfolio Manager


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