JMRD Market Observer for July 18th, 2014: Exchange Traded Fund Basket (ETF) Update!

**July 18th Issue of The JMRD Market Observer**

In This Week’s Market Observer…

  • Exchange Traded Fund Basket Quarterly Update
  • Budget 2014 Ontario: Basically, the same budget re-tabled by majority government
  • JMRD Basket Corner
  • Retirement Corner
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

JMRD Maximum Growth Exchange Traded Fund (ETF) Basket

As many clients know, we have an Exchange-Traded Fund Basket and we will provide a full update on the Basket below.  The ETF Basket is managed by the JMRD Wealth Management Team and is invested solely in exchange traded funds.  This Basket is meant to provide a diversified portfolio that can be used as a long term core holding.

  •  The ETF Basket posted a 9.68% gain for 2013.
  • The first half return was a very respectable 4.74%.

Changes to the Basket:  We willrun a previous ETF Basket note one more time for new clients and holders.

Change #1: A New Name

We changed the name of the Basket from the ETF Basket to the JMRD Maximum Growth Exchanged Traded Fund Basket.  The new name better reflects the risk profile and the current and future asset allocation.

Change #2: New Asset Allocation

It is our belief that interest rates will continue to rise in 2014 and the new trend will be towards tightening.  This ‘tightening’ of financial conditions by the US Federal Reserve will create an environment that is difficult for most fixed income investments to perform as well as they had in the years prior to 2013.  Our belief is that GICs, principal protected notes and individual securities with shorter terms to maturity should be used for the bulk of a client’s fixed income instead of a higher fixed income allocation within the ETF Basket.

The end result is that we will be targeting a higher equity weighting, which translates into a MAXIMUM GROWTH profile.  For some clients who have large ETF Basket positions, we will need to reduce the Basket position and add the stand alone fixed income (GICs, principal protected notes or individual bonds) if the client’s risk profile calls for the adjustment.

Asset Allocation: Target is 10% Fixed Income and 90% Equities

We recently made an overhaul to the ETF Basket and altered the allocation to better reflect our thoughts on the market as we look ahead 6-12 months.  The new asset and geographic allocations are broken down as follows:

 Cash and fixed Income: 12.4% 

  • Cash – 2.7%
  • Laddered Corporate Bond ETF 1-5 Year – 5.0%
  • US High Yield Bonds – 4.7%

Equities: 87.6%

29.7% – Canadian

  • 26.3% – US
  • 26.3% – Foreign
  • 5.4% – Alternative Investments; Consists of an active Seasonal Rotation ETF and a Hedge Strategies ETF

We wanted to point out some milestones for the Basket as of the end of June:

  • Total assets of $31,600,000
  • Number of holders sits at 327
  • The market value of one ETF Basket is currently $18,100.  The minimum purchase is 2 Baskets or ~$36,200.  Subsequent purchases are 0.5 Baskets, or ~$9,050.
  • Dividend yield is 1.92%


The current ETF Basket holdings are listed below.

ETF snapshot


Budget 2014 Ontario: Basically, the same budget re-tabled by majority government

Notable amendments to the budget tabled on May 2 relate to amendments to the Gasoline Tax Act; the Legislative Assembly Act (relating to the MPP salary freeze); the Pension Benefits Act (clarifying spousal entitlements to pre- and post-retirement death benefits, and making changes to help people affected by split pensions); and the Electricity Act (ensuring that Ontario’s Feed-in Tariff program is in line with rulings of the WTO).

Here is our analysis including these changes.


• The Ontario government expects the 2013-14 deficit to come in at $11.3 billion (1.6% of GDP and 9.8% of revenue), $400 million less than was projected in last year’s budget and in the last Fall Economic statement.

• The deficit for the current fiscal year is projected at $12.5 billion (10.5% of revenues), $2.4 billion over last year’s budget. The following two years also show thicker red ink than budgeted last year. Despite these revisions, a balanced budget is still projected for 2017-18.

• Real GDP, estimated to have grown 1.3% in 2013, is expected to grow 2.1% in 2014, 2.5% in 2015 and 2016, and 2.6% in 2017. Nominal GDP growth, estimated at 2.7% in 2013, is projected to grow at 3.5% in 2014, 4.4% in 2015 and 2016 and 4.6% in 2017.

• Increased tax rate on personal incomes exceeding $150,000.

• The tobacco tax rate is increased from 12.35 cents per cigarette to 13.975 cents, effective today.

• The new 10-year infrastructure investments plan amounts to $130 billion, of which $29 billion is for transportation, public transit and other priority projects. • Implementation of the Ontario Retirement Pension Plan scheduled for 2017. • Average annual program expense growth from 2013-14 to 2016-17 capped at 1.1%.

• Net debt-to-GDP ratio estimated at 38.9% at the end of 2013-14, projected to peak at 40.8% in 2015-16, and then to decline to 39.7% in 2017-18. • Long-term public borrowing in 2013-14 was $36 billion; $2.6 billion more than budgeted due to pre-borrowing for 2014-15. Consequently, the borrowing for 2014-15 is reduced to $35 billion.

Budget 2014

JMRD Basket Corner

 All-Cap Basket

 Parkland Fuel (PKI) – “Parkland Fuel: ‘A really good growth story,’ with dividends”

U.S. Growth Basket

Morgan Stanley (MS) – Morgan Stanley reported Q2 results reported its highest pretax profit margin since 2009 with revenue gains from its wealth management and investment-banking business, offset by a trading slump that has affected many Wall Street firms.

Retirement Corner

1)     “Choosing the right place to retire overseas” (Globe and Mail)

2)      “Living in retirement: Ten rules for slowing down and enjoying summer” (Globe and mail)

3)     “What should be in your ‘death’ file?” (Financial Post)

Week at a Glance

Week at a Glance

Reads of the Week

By | 2014-07-21T14:00:48+00:00 July 21st, 2014|JMRD Updates|0 Comments

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