The Market Guy: Comeback Special ’08July 18, 2008 12:18 am Uncategorized
Welcome back. The site has undergone a major upgrade, owing much to the pestering and talents of my buddy Ozner. Each time he’d visit the old site, I’d get messages like, “it looks HORRIBLE, you really should do something about it.” I could only take that for so long. The archives are posted to the right, there’s an updated FAQ, and we’ve included search capability. We’ve also added a new method of managing subscriptions. The column can be accessed free via a number of different methods.
If you’d like the column delivered to your inbox, click on the “Subscribe” button at the top of the page or just click here. Existing email subscribers will need to do this in order to maintain their notifications. Or you can be updated via an RSS feed. Just click the RSS button located on the top right of the page. Or you can simply visit the site periodically to see if there’s anything new. With these changes, you can decide for yourself how to access the content. I’ve also incorporated a comments feature so you can leave your suggestions, remarks, musings, counterarguments, or praise that I’ll lap up like a thirsty dog. My buddy Bouch In Embrun referred to the new site as, “a pulsing, throbbing, symbol of Canadian finance.” So it has that going for it…which is nice.
It was a year ago that I decided to watch 13 hours of business television and keep a running diary. Little did I know that I wouldn’t be posting again for over a year. I was about to start the busiest year of my professional life, clearly countering the popular notion that you can relax once you achieve tenure. Simply, my teaching overwhelmed all else and the column had to be put on hiatus. Some days I wasn’t even able to check my investments, demonstrating that I probably didn’t deserve to be called The Market Guy. And guess what happened? In the past year, my portfolio has essentially flat-lined. Money wants to thrive, grow, and spread happiness through your life. In fact, if you put a $20 bill under a high-powered microscope, you can observe its genetic code. You’ll see that money comes pre-programmed to go forth and multiply. If deprived of this opportunity, it fails to thrive and in fact, its very survival may be threatened. I was neglecting my money and it was acting up to get my attention. So if you don’t mind, I’d like to take a few moments to address my money:
I’m sorry money. For the past year I’ve been ignoring you and there’s no excuse. I could give you a song and dance and try to justify my behaviour, but I care too much about you and won’t play insulting games. I’ve made some bad choices, been a bad father and failed to give you what you deserve: a loving home. I appreciate the fact that you’ve been so mature about all of this, because you really could have been nasty and I would have deserved it. I know you don’t trust me right now and that’s OK. Over the past year I’ve done very little to earn that trust and so I have to make amends. I just want you to know that I’m going to try…because you’re worth it.
Thanks for indulging me. I know readers are skeptical as well, but there’s a change to my situation that will allow me to go all-out gaining back my money’s love. One of the greatest perks of academic life is that every seven years you have an opportunity to take a sabbatical. Essentially your employer outlines the following:
Go spend a year doing things that will make you better at your job. We don’t really care what you do, as long as we benefit. Make sure to travel, read, write, research, and plot the next few years. If it’s not too much trouble, we’d like a page outlining what you might do. It’s fine if you pop by the office, but if you do, everyone will ask, “what are you doing here?” When you return, we’d like a few pages summarizing what you did.
Does this sound like a good deal? Thank goodness faculty are generally high in achievement motivation and imposter syndrome or else the whole thing might degenerate into Joel’s parents going away in Risky Business. So what am I going to do? In keeping with the 80s movie references that you expect from this site, we must look to Ferris Bueller: “the question isn’t what are we going to do…It’s what aren’t we going to do?” In amongst a series of teaching projects, I should be in a better position to keep up with the column. Note that I’m still calling this a column. A blog is updated every day or at least every few days. Nobody wants me to post every few days. I’m the peculiar guy you invite over for dinner and it’s great for a couple of hours, but for everyone’s sanity, you want me out of the house by 10:00. So I’ll maintain an irregular schedule, but promise to post more frequently. I’m also going to strive for shorter postings, today’s effort notwithstanding.
In a sense, all of this represents somewhat of a comeback. Will it be a Travoltaesque return a la Pulp Fiction? Or will it be more like Feldman and Haim in The Two Coreys? Only time will tell. In any event, what better way to come back than to address a number of investment issues that have popped up over the past year? So let’s examine the most pressing issues:
1. CNBC and BNN
I’d be remiss if I didn’t recognize one of the most impressive milestones in the history of business television. A few days ago we were fortunate enough to witness the one-millionth utterance of the phrase, “going forward” on CNBC. This breaks the previous record set in 2001 by, “pounding the table” and “it’s different this time.” CNBC: Zeitgeisting since the late 90s. And while we’re here, I’d also like to thank the fine batch of financial journalists in the States who failed to sound an alarm on the US mortgage crisis. Way to keep your eye on the ball, people. We needed a Woodward and Bernstein. Nobody noticed this coming? From my seat, CNBC was too busy with two important projects: 1) wrapping itself in the flag, and 2) assuming its audience has the attention span of my wife in a shoe store (e.g., 6 guests on a 5-minute panel).
Speaking of the Market Gal, I really should thank BNN for providing us with an enjoyable moment. It occurred during an evening edition of Market Call. Usually she loathes the show, more so than the heavy contempt she displays for the rest of their programming. So needless to say, whenever I turn to BNN, I am signing up for a dandy dose of complaints, whines, and dirty looks. On this particular night, I’d been watching for several minutes and the shot clock on her first gripe was about to expire. Just then, one of the show’s callers ended his contribution with a series of expletives directed at fund manager Ross Healy. Clearly more than a Sternian “Baba Booey,” this was closer to the business television equivalent of Nipple Gate. Thanks to the magic of our PVR, Market Gal was able to rewind and review the clip multiple times. She thoroughly examined the host’s attempt to control his facial expressions and pretend that nothing happened. She thoughtfully considered Ross Healy’s claim that he didn’t hear the caller. She observed the unscheduled switch to break during which there must have been one heck of a scrum in the studio. It was like watching an episode of CSI, only my wife was playing the part of Gil Grissom, the caller was the perpetrator, and BNN was the dead hooker.
Let’s also thank one of Canada’s big six banks for telling me that I’m richer than I think. I thought my spreadsheet was providing a decent summation of my net worth, but apparently my actual wealth surpasses this number. Excellent!
3. Market Dad
If it were statistically possible, Market Dad would place 115% of his portfolio in the energy sector. Ask him which oil and gas trusts he owns and he’s likely to reply, “all of them.” Suggest that oil could drift from $145 to $85 and he looks like a child being told the truth about Santa Claus and the Easter Bunny. Contrast this with my attempts to be a diversified investor with only a modest number of oil and gas names in the portfolio. Well, about a year ago Market Dad was faced with some decent gains in the patch, so I harassed him into paring back and deploying the profits into other sectors, including financials. He eventually gave in and added an element of diversification to his portfolio. Fast-forward a year and we all know how that worked out. Energy investments continued to be the belles of the ball, while financials became the proverbial turds in the punch bowl. If the past year had been an investing contest between the two of us, I would have finished third. Thanks to Market Dad for taking this so well. In reality, the paring back left his portfolio at 110% energy, so he didn’t miss all that much. Plus, wasn’t it the right thing to do? Anyone? Hello? Here’s how I look at it: Portfolio diversification is like a Feist song. At first you don’t really like it; maybe it even rubs you the wrong way. Then you listen a few more times, maybe even catch the video, and before you know it, you’re a fan.
4. BCE and the Quebec courts
A year ago I made fun of BCE’s auction process and even compared its organization and pace to that of the Canadian government. Well, a year has passed and we’ve been treated to a sideshow of epic proportion. I’m not suggesting the delays, hearings, appeals, negotiations, renegotiations, and seemingly never-ending extravaganza is BCE’s fault. However, if a few years ago I told you that a big Canadian company was being taken over and through the process, regulators, lawyers, courts, pension funds, and bankers would give existing shareholders the equivalent of a 24-hour enema, which company would you think was involved? The list would include Nortel, Bombardier, and BCE. Few shareholder bases have been treated to more abuse, false hope and false starts than this group. And for the record, I have no issues with bondholders tossing up a Hail Mary pass and trying to scuttle the deal. When it comes to money, you have to defend your interests and use all available means. If others think you’re a Ferengi, that’s fine. On the plus side, the whole mess gave us a chance to experience the excitement and hilarity of the Quebec courts! If you like vague judgements, confusion, and saying, “how did this happen?” the Quebec courts are the place to be. I can’t help but wonder what’s on the list of things to do after the Supreme Court provided the obligatory 7-0 bitch slap. Stay tuned.
5. Gold bugs
Yes, over the past year we’ve seen the price of gold shoot through the $900 level, approach $1000, and subsequently settle into a trading range. Oh, what delight must have been experienced by so many of the gold bugs, particularly the well-seasoned, crusty bugs who’ve spent the better part of the past few decades blaming the lack of price appreciation on everything from governmental conspiracies to the dark side of the force. What’s interesting about gold bugs is their unwavering, borderline dogmatic devotion to their metal most precious. If the price of gold is rising, it’s time to buy and if the price is going down, it’s also time to buy. If only the rest of life were so simple. So I’d like to thank the gold bugs for being so gosh-darn entertaining. Keep fighting the good fight, guys. And just to hedge my bets and avoid any bad karma, it’s worth mentioning that gold investors have kicked my butt this year.
6. My portfolio
So what’s happened over the past year? Despite all of the volatility, the portfolio has essentially flat-lined since last summer. Thank goodness for diversification. However, my financials and international holdings have been shot. Both were promptly delivered to the trauma centre, where they continue to reside in intensive care. I maintain a vigil just outside the door, full in the knowledge that it’s only a matter of time before we are all released from the shackles of these dark, dark times.
In other news, I’ve added to my position in TransCanada, put some money to work in the battered REIT space, played the BCE saga for a few dollars, and added to my real-return bonds. However, most of these moves have been modest in scope and represent little more than tinkering. My largest holding continues to be cash, and although I’m seeing some compelling valuations (my watch list is huge), I’m reluctant to make any big moves.
However, what I’m buying is less important than what I’m not selling. I’m not selling financials such as TD, I’m not selling retail stocks such as Reitman’s and I’m not selling any of my other stocks that pay a solid, growing dividend. The goal is to continue focusing on high quality, cash-generating companies with low debt and decent valuations. This will never change and no matter what happens in the markets, I have a philosophy that adds to my confidence and allows me to sleep very well at night. Naturally I’ll keep you posted, but remember that I’m just a putz with a website. If the information presented here influences your investment decision-making, you’re hopelessly deranged.
Well, I promised shorter postings and still managed almost 2400 words. Ack. In any event, I’m still getting used to the upgrade, so there are going to be technical issues from time to time. Don’t hesitate to post comments (exhibiting civility and good web citizenship, of course) or drop me a line at email@example.com. Thanks for your patience and for spending a few moments in this space.