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MEMBER: Investment Industry Regulatory Organization of Canada Canadian Investor Protection Fund Participating Organization: TSX 21 King Street West, Suite 1100 Hamilton, ON L8P 4W7 (T) 905.528.6505 (F) 905.528.3540 www.bbsl.ca James Di Cenzo’s MARKET UPDATE Taking a ‘Macro’ Perspective With investors contending with a potential EU Banking Crisis, political combat in Washington, and numerous uprisings across the Middle East, we can quickly see that this is not the typical investment environment commonplace only a decade ago. Unlike the 1980s or 90s, given the predominant increase in global dramas, it has becoming increasingly apparent that investors should start considering ‘macro’ events as a highly important variable when measuring market risk. Given our experience with the US financial crisis, global markets can quickly be captured and exposed to the mercy of ‘macro’ developments faster than a poor earnings report or dividend cut. Macro events, depending on their severity, can cloud economic outlook and drive fear into stock exchanges. As noted earlier this year, natural disasters, geopolitical shocks, civil insurrection or the occasional systemic economic failure are fairly recent and real examples of macro events.1 Taking a more comparative approach, during the 2001 tech sector collapse, investors were mostly insulated from the collapse of companies such as Nortel if they held a basket of stable Canadian dividend paying industrial, energy and financial stocks. In contrast, during the 2008 crisis in the US, the ensuing panic and liquidity problems had an impact on every sector, including normally safer asset classes such corporate bonds and preferred shares. According to Jason Zweig, analysts view macro developments as uncertainties rather than possibilities, largely because they are so difficult to predict. How can we prepare ourselves if we have entered a new ‘macro’ age? Simply stated; we can start managing our cash reserves more wisely. If events such as these are mostly driven by fear and panic, then cash can be a very powerful offset, not just to reduce the impact on the portfolio, but also to allow investors to ‘shop’ for undervalued stocks, particularly during periods of panic. Secondly, it also underscores the vital importance of portfolio dividends and cashflow in the portfolio. By having a steady stream of income inside your portfolio, even during the most volatile bouts, dividend paying securities normally withstand market pressures better than non-dividend paying securities. Furthermore, by having a stream of cash paid into the account on a regular basis, investors can quickly use cash reserves to take advantage of periods of historically poor sentiment. 1 http://online.wsj.com/article/SB10001424053111904103404576556633057148922.html MEMBER OF THE CANADIAN INVESTORS PROTECTION FUND (CIPF) MEMBER OF THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA (IIROC) This article is solely the work of the author for the private information of clients. Although the author is a registered investment advisor at Burgeonvest Bick Securities Limited. (“BBSL”), this is not an official publication of BBSL and the author is not a BBSL analyst. The views (including any recommendations) expressed in this article are those of the author alone, and are not necessarily those of BBSL. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or BBSL assume any liability. This information is given as of the date appearing on this article, and neither the author nor BBSL assume any obligation to update the information or advise on further developments relating to the information provided herein. This article is intended for distribution in those jurisdictions where both the author and BBSL are registered to do business in securities. Any distribution or dissemination of this article in any other jurisdiction is strictly prohibited. The holdings of the author, BBSL, its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this article. * Please note that insurance products are distributed through the related firm Burgeonvest Insurance Corporation