PWLCapital

With 2009 behind us, it’s the time of year when investors look back to take stock of how their portfolio performed.  The recovery has been swifter and stronger than most expected.  Rob Carrick of the Globe and Mail proves the point in his recent article “Post-traumatic Stress Investing” (Feb. 4, 2010, G&M):

“Rebounding after a catastrophic 2008, the S&P/TSX composite index surged last year by 33 per cent.[…] the polling firm Angus Reid recently delved into the question of how much investors benefited from this rally.  The poll results suggested that around 87 per cent of investors flat out missed it, and 86 per cent weren’t even aware of the extent of the turnaround.” Read the complete article.

For PWL clients, 2009 was a good year. Our portfolios remained invested - if not over-weighted - in equities to capture this rebound.  This has resulted in recovering most of the downside of 2008 without increasing the risk exposure of the portfolios.

The recovery is not over yet.  If you are holding cash on the sidelines or are not satisfied with the service you are receiving elsewhere, Peter and I would be glad to discuss any questions you may have.

On another note, it is also time to consider your 2009 RSP contributions. The amount you can contribute can be found on the bottom of your 2008 Notice of Assessment from the Canada Revenue Agency. Cheques for RSP contributions should be made payable to “TD Waterhouse.”

Don’t hesitate to call if you have any questions.

Best regards,

Tony

The Economic Pulse is back!  In this latest edition, Raymond Kerzérho, PWL’s Director of Research, reviews how Michael Sabia is redirecting Quebec’s Caisse de Dépot for 2010.  Sabia’s objectives reflect what PWL has been doing for a decade:

1.      Avoid negative market surprises by using index funds
2.      Avoid unnecessary risk by focusing on long-term investing
3.      Avoid complex investments with unseen risks
 
Ray is not alone in pointing out that investors can learn from Sabia’s decisions.  The Economist recently ran an article about Norway’s sovereign fund, which is entering into a similar debate about its investment policy.
 
PWL learned these principles years ago and our clients are happy today.  I encourage you to read both of these articles.
 
I also invite you to visit other sections of our website where you can find out more about us, our philosophy and what we can do for you.  Our Broadcast Centre contains articles written by or featuring PWL Advisors as well previous editions of the monthly Economic Pulse, PWL’s bi-annual Perspective Newsletter, and our weekly radio interview Webcasts.
 
Happy reading!
 

Tony
 

I have attach a short article written by Harry Markowitz, the father of Modern Portfolio Theory. This article was recently published in the Financial Analysts Journal, the Chartered Financial Analyst (CFA) group's professional journal. He presents proposals which would help markets and our economy to a speedier recovery.

It is an easy read and I hope you can find the time to peruse it. If you would like to discuss any of the issues, please give me a call.

Have a good weekend.

Tony 

Harry Markowitz - Proposals for Current Financial Crisis

Michael Lewis is a journalist and best-selling author whose notable books include: Liar's Poker, Moneyball and Blind Side: Evolution of a Game. Based on his experiences as former Salomon Brothers bond trader, Michael’s writing provides a fascinating look at Wall Street’s culture, its characters and its history.

Michael was recently interviewed by Big Think (www.bigthink.com) where he shared his thoughts about the mindset he feels an individual investor needs to adopt today. I would encourage you to watch and share his short interview below.

Best regards,

Tony

After a week of big equity market swings and the Canadian banks paying up to 9.5% to raise capital in the income markets, I have attached below an article by John Bogle, founder of Vanguard, to underline lessons of the past. They include:

1. Beware of market forecasts, even by experts.
2. Never underrate the importance of asset allocation.
3. Mutual funds with superior performance records often falter. 
4. Owning the market remains the strategy of choice.
5. Look before you leap into alternative asset classes
6. Beware of financial innovation. 
    

Also, I quote from a recent article by Larry Swedroe who spoke to PWL clients last summer.

“Investment returns are not earned smoothly – returns are not even close to being normally distributed (like a bell curve).  The result is that most of the market’s returns come from short, but powerful, bursts of bull and bear markets.  That is why Warren Buffet concluded:  “Inactivity strikes us as intelligent behavior.”

The second attachment, S&P 500 – 184 Years of % Returns, supports Larry Swedroe’s statement that most market returns come in short powerful bursts.  And, finally, the 2008 corrections have created some very cheap assets.

In closing, I also invite you to peruse our Market Statistics as well as other information that may be of interest to you.  Thank you and best regards,

Tony

John Bogle: Six Lessons for Investors

S&P 500 – 184 Years of % Returns