**December 11th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- JMRD on the road with Mohamed El-Erian and Josh Brown
- JMRD Basket Corner
- 2015 Tax Season Reminders
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
JMRD on the road with Mohamed and Josh
We are beginning this week’s Market Observer commentary from Scottsdale, Arizona where Josh Brown has just finished introducing the opening speaker for our second conference here in the past week. The speaker is none other than Mohamed El-Erian. Mohamed is one of the worlds most sought after financial speakers and is indirectly responsible for the management of over $1 Trillion through Allianz Group and its subsidiary PIMCO in the US. He did not disappoint and provided an amazing start to another full day of information sessions.
Reg and Paul with Mohamed
Last week, Paul and Reg travelled to Arizona for the 2015 IMCA (Investment Management Consultants Association) Conference, an annual outing for the Team to get some continuing education credits and to get up to speed with changes in our business. This was a phenomenal event with amazing speakers and timely presentations.
The most impactful presentation was given by a top US advisor named Ric Edelman. He has been on the Oprah Winfrey show many times and has a large group of clients and advisors working for his firm. His presentation was 700 slides covering many of the technology advances that we can expect to see over the next 20 years. It included dramatic changes to many industries using currently developed technology – technology that simply needs to be commercially implemented. We are working to get the slides from this presentation and hope to have a shorter version available for you in the New Year.
Paul and Reg both have their Certified Investment Management Analyst (CIMA) designation which is offered from IMCA and is a great differentiator for JMRD. It provides us with expertise in manager selection, among other benefits. Below is a description of IMCA and the website (www.imca.org) has more detail.
Investment Management Consultants Association® was established in 1985 to deliver premier investment consulting and wealth management credentials and world-class educational offerings through membership, conferences, research, and publications. IMCA sets the global standards and practices for the investment management consulting profession and provides investment consultants and wealth managers with the credentials and tools required to best serve their clients anywhere in the world.
This week also found Paul and Reg at IMN’s (Information Management Network) 20th Annual Global Indexing and ETF conference. This was our first time attending this event and we were truly impressed. The quality of the speakers and the timeliness of the discussions exceeded all expectations. This is where we heard from Mohamed El-Erian (featured earlier) as well as Josh Brown from Ritholtz Wealth Management in New York. Josh is a well-known advisor in the industry and has a popular blog on the internet. He has a very similar view to our Team in terms of changes in the industry and how to best serve our clients. He is on CNBC regularly as well.
We attended the IMN conference with a few goals in mind:
- To listen to and meet with top investment minds to get various opinions on financial markets. The timing could not be better as volatility has risen and headline risk is elevated. The past few weeks have been volatile and busy for a number of reasons. In our weekly Market Observer (MO), much time has been dedicated to commenting on these daily swings in the financial markets. The market predictions and projections for 2016 are already coming and will ramp up in the weeks ahead.
- To participate in round table discussions focusing on our industry trends. There is incredible change coming on many fronts and JMRD needs to be ahead of the curve to provide the best advice possible for our clients. Improving technology and lower global economic growth rates are the main reasons for this change and it is going to be fast and exciting.
Other areas discussed include:
- Slow global growth.
- Government regulatory changes are on the horizon.
- Enhanced financial planning strategies.
- Cash flow strategies for retirement (more people in retirement using their funds).
- Wisely guiding clients through the aging process and how it affects their finances.
- To get caught up on all things related to Exchange Traded Funds (ETFs). The second conference’s focus was entirely on this topic, where we mingled with some of the largest global ETF providers and were able to see what is new in the industry.
The JMRD Team is focusing on increasing its expertise in the ETF world and feel we are one of the top Teams in Canada providing ETF solutions. Advisors and investors need to be aware of ETFs as the trend is towards an increase in popularity, size and influence.
The JMRD Team launched their ETF Basket in 2003 and already use other various ETF based solutions. 2016 will see the official launch of our JMRD MODEL Portfolios which will also be using ETFs.
JMRD also works with clients to develop customized ETF solutions.
- To spend time out of the office to revise and update our 2016 plan for The JMRD Team and our business.
Day to day, JMRD’s focus is on the markets and client service activities which does not leave much time for business development and strategy. To get out of the office for a few days provides a rare opportunity to review our business and make sure our offering and value proposition is current and ultimately above client expectations. We believe it is but we did see some new tools and concepts that other advisors are using, which we plan to implement in the New Year.
Our main takeaways on our industry include:
- Technology is advancing at the fastest pace in history and will only speed up.
- Technology based tools will change the financial landscape and continue to evolve rapidly.
- Get ready for more disruptive technologies: Like Uber (disrupting taxi business), Tesla (Disrupting auto business) and AirBNB (disrupting the hotel and lodging industry).
- Exchange-traded Funds (ETFs) are here to stay and are set to evolve and grow.
- Rules based versions of ETFs will dominate the new offerings.
Our main takeaways on the US economy were;
- Our flights were more expensive than any other year we have come here at this time of year.
- Every plane was full.
- In the 1970’s the Phoenix area had 250 000 people and now has over 3 million.
- There is plenty of new residential development occurring in the Phoenix area.
- There is also plenty of corporate and office building continuing to occur as well as large road and infrastructure projects.
- As many know, this area was one of the centres of the 2008 market pullback but there are signs everywhere here that this area is in growth mode.
- We think that is a reflection of the US economy and allows us to conclude that we will continue to have global growth with a large contribution from the US. It may not be as high a growth rate as many would like but it will still be growth.
Our main takeaways on portfolio management include:
- Return expectations need to be realistic as the forecast is for lower returns to match the low but still rising global economic growth.
- Interest rates will continue to be lower globally.
- The divergence of rates will be disruptive as the US increases rates while elsewhere around the globe they continue to be low.
- The US dollar is likely to remain strong for these same reasons. This does not mean it will continue to rocket higher but it will at least stay strong compared to other world currencies.
- Commodity prices will remain weak in a strong US dollar and slowing China environment.
- Multi-asset class strategies must be used to provide diversification and risk reduction, while still getting access to reasonable returns.
- Volatility and swings in the financial markets will continue and cash holdings in portfolios can be used to dampen some of these swings and allow us to modify portfolios as the volatility occurs.
- There will be opportunities in various commodity areas over time as it is one of the few areas not being supported by central banks in this environment. As well, at some point, the price reflects the most negative circumstances and prices could rise as things are “less bad.”
It was a very busy few days and there is still much to be reviewed from our time away. We were certainly close to information overload but you can expect more comments in the coming weeks and certainly as 2016 arrives.
JMRD Basket Corner
Dollarama (DOL) – Dollarama’s F3Q EPS beat is the company’s 8th-straight, according to Thomson Reuters data. Margins, which climbed to 40%, while same-store sales jumped 6.4%. DOL is benefiting from its higher-than-a-dollar pricing strategy. This quarter, 60% of sales were from merchandise priced above C$1.25, versus 54% a year earlier. The company did offer conservative forward guidance for F2016
All-Cap Growth Basket
Colliers (CIG) – Colliers International Group Inc. announced on Wednesday that its board of directors has declared a semi-annual cash dividend of US$0.04 per Common Share. This dividend is the inaugural dividend to be paid by Colliers since it became an independent public company on June 1, 2015.
Exco Technologies (XTC) – Exco was featured in Thursday’s Globe and Mail as “This little-known dividend stock has growth” (full article attached) Exco
New Flyer (NFI) -New Flyer Industries, the leading manufacturer of heavy-duty transit buses in the United States and Canada, announced on Tuesday that the Metropolitan Council of Minneapolis, exercised options for 30 heavy-duty 60-foot Xcelsior® XD60 clean diesel buses (or 60 equivalent units or “EUs”). The contract, originally signed in March of 2014 was a firm order for 83 XD60 60 foot articulated buses (166 EUs), with options for up to 88 additional XD60 buses (176 EUs).
U.S. Growth Basket
Global Payments (GPN) – Global Payments, a transactions processor, is in talks to buy smaller rival Heartland Payment Systems Inc. (HPY), Bloomberg News reported Thursday on its website, citing people familiar with the matter. A deal announcement could come this month, although the people told Bloomberg that no decision had been made
Home Depot (HD) – Home Depot reaffirmed its full-year guidance after the close Tuesday and introduced some new, longer-term financial targets. The company said it is aiming for sales of about $101 billion in fiscal 2018, and a compounded annual sales growth rate from the end of fiscal 2015 of about 4.7%. Home Depot also set fiscal 2018 targets of operating margin of about 14.5% and return on invested capital of about 35%. For the current fiscal year, Home Depot said it sales to increase about 5.7% with same-store sales up 4.9%. It expects earnings per share to grow about 14% to $5.36. That includes the benefit of repurchasing an additional $2 billion of shares in the fourth quarter, bringing total fiscal 2015 share repurchases to $7 billion
ETF transparency helps investors overcome the risks of home country bias – Reg Jackson discussing investor’s challenges with home country bias
2015 Tax Season Reminders
As we recently turned the page on another month and are now getting closer to the end of 2015, we thought it would be a good idea to get everybody thinking about TAXES again. You will find below some key dates and figures to have in the back of your mind when preparing for the upcoming tax season. Like last year, we will also feature a special “Tax Edition” email in the New Year which will include tax slip information as well as other helpful tax tips.
- Last day for Tax Loss selling of Canadian Equities – Thursday, December 24th, 2015 (Canadian Markets are closed December 28th in lieu of Boxing Day)
- Last day for Tax Loss selling of U.S. Equities – Monday, December 28th,2015
- 2015 RSP contribution deadline – Monday, February 29, 2016. The 2015 maximum RRSP contribution limit is 18% of “earned income” in 2014, to an annual maximum $24,930. The 2016 contribution limit is a maximum of $25,370.
- 2015 TFSA contribution deadline – Thursday December 31, 2015 – contribution limit $10,000.00
- Note, if you are planning a TFSA withdrawal in early 2016, consider withdrawing the funds by December 31, 2015. The advantage is that you will not have to wait until 2017 to re-contribute that amount.
- The last date to make an RESP contribution is Thursday December 31, 2015.
- As a reminder, in order to benefit from the entire government grant, the contribution per child per year is $2,500. If by chance, there are unused grants from the past, $5,000 can be contributed and still receive the full 20% grant. If your child turns, or already turned 17 in 2015, this will be your last year to receive the government grant, which makes the December 31st deadline all the more important for you.
- “If you have kids, you’d better not miss these year-end tax tips” (Financial Post)
- “Give the gift of money smarts to your kids this year” (Globe and Mail)
Week At a Glance
See Week At a Glance report.
Reads of the Week
- “Peter Lynch, 25 Years Later: It’s Not Just ‘Invest in What You Know”: The onetime mutual-fund rock star says the famous advice isn’t quite so simple (Wall Street Journal)
- “The S&P 500 Hot Hand Fallacy” (A Wealth of Common Sense) Investors probably place too much emphasis on month-end, quarter-end and year-end time frames when judging themselves or the markets in terms of performance. These are really just arbitrary periods that we’ve all agreed to pay attention to because it makes it easier to compartmentalize things.
- “How a Mutual Fund Can Win but Its Investors Still Lose” (Wall Street Journal)
- REIT Roundtable: Allied Properties CEO & RioCan REIT CEO Michael Emory, President & Chief Executive Officer of Allied Properties REIT and Edward Sonshine, Chief Executive Officer of RioCan REIT join Bloomberg TV Canada’s Pamela Ritchie for a look at the current state of Canada’s real estate – and look at how the two REITs are taking in the slowdown in Calgary’s real estate market and the health of Toronto’s real estate market.
- “The most important Canadian charts to watch in 2016” From employment and trade to energy and deficits, here are 50 charts picked by Canada’s brightest minds to help you understand the economy in the year ahead
- Who’s the Bear Driving Up the Price of U.S. Stock Options? Banks (Bloomberg Business)
- How an F Student Became America’s Most Prolific Inventor (Bloomberg Business)
Monday December 14th – None
Tuesday December 15th – Canadian Manufacturing Sales, Canadian Existing Home Sales, U.S. CPI
Wednesday December 16th – U.S. Housing Starts, U.S. Building Permits, U.S. Industrial Production, FOMC Rate Decision
Thursday December 17th – U.S. Initial Jobless Claims, U.S. Current Account Balanced, U.S. Leading Index
Friday December 18th – Canadian CPI, Canadian Wholesale Trade Sales
Monday December 14th – None
Tuesday December 15th – None
Wednesday December 16th – FedEx Corp, Oracle Corp
Thursday December 17th – None
Friday December 18th – Blackberry
Have a good weekend!