Market Insight

Behaving Irrationally

The essence of money management can be encapsulated in searching for investments that are trading below their intrinsic value. Buying these companies low, and as the market comes around to realize their intrinsic value, the price moves higher. This is the activity of price discovery and makes for a healthy market as participants buy and sell in the attempt to profit from the return to intrinsic value. But there is a new big player in the market that doesn’t care about price discovery, the Exchange Traded Fund (ETF) or other passive index investment strategies. A passive ETF is price agnostic. They need to buy the shares of the underlying basket of stocks that comprise the index, regardless of the price of those stocks. Their mandate is not to buy low, sell high; it is to buy quickly, minimizing tracking error, giving investors the exact exposure they are looking for. Most indices are based on market weight, and do not discriminate for liquidity.

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Market Insight

Unhedged

While we have written a few times of late on currency, given the continued moves in the USD/CAD and a recent unwind of our currency hedge, we are back talking currency again. In this edition we share our view on the USD/CAD, how we are positioned shorter term plus our longer term view from a portfolio construction perspective.

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Market Insight

Herd Behavior

Behavioral biases, driven by human emotion, often negatively impact investor returns. In this week’s Market Ethos we share our views and work on Herd Behavior. While it would appear it is more comfortable to go along with the consensus, it may be more profitable to bet against the herd.

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Market Insight

The Consumer Part 2: Changing Behaviours

The way we spend our time and money has been changing. Selfies are a new form of ‘art’ work, more communication is done with emojis and worser grammar than ever before and shopping continues to move out of the mall to your phone. The only certainty is that change will continue. Your favorite activities, brands and social networks are unlikely to be the same in ten years as they are today. Some of these changes have accelerated in recent years with the proliferation of broadband technology, connectivity and digitization. Companies that were early adapters to change have stolen share from slower or less successful adapters. However, we do not think the current winners such as Amazon, Facebook, Apple, Netflix, Alibaba will be the only companies standing when the dust settles. New players will emerge and many laggards will battle back.

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Market Insight

The Consumer

Unemployment is low, wages are rising, and confidence is high, despite ‘perfect storm’ conditions, retail sales remain somewhat subdued. In this Ethos installment we examine the health of the U.S. consumer, and look into which industries are benefiting from spending. Consumer credit is still growing, but we’re starting to see some cracks. The days of big ticket purchases may be behind us, with the focus now more on experience. This is the first of a two-part series on the U.S. consumer.

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