24 Oct 2011, Posted by Prem Malik in MALIK'S CORNER, No Comments.

The Sept 30th Portfolio Review

In previous Malik’s Corner commentaries I have been keeping you all informed of the market volatility and my reasoning behind these rather aggressive moves in the market indexes around the world. What a year it has been. Starting with the Japanese disaster, the riots in the Mid East, the debt crisis of the US and now the meltdown in Europe and it is not done yet. For these reasons, there is not one stock market in the money year to date.

Client questions:

Why is Europe having a negative impact on Canadian markets?

Investor sentiment is very negative and the continued uncertainty of the safety of the Euro banks and their exposure to our banking system is one key reason. Canadian banks are key components of the Canadian stock exchanges and are down approx 10% year to date. Other companies impacted negatively are the ones who are major exporters to Europe, China and the other emerging economies.

Why are the emerging markets deeply in the red? What about the 200 million people coming through the middle class and their consuming power?

It is becoming quite evident that the emerging market indexes require vibrant global markets. Over the past few months, the emerging markets have sold off and billions of dollars have been bought back to their local currencies by global fund managers. The local economies continue to thrive and the companies continue to show record profits. However, majority of the emerging markets population is not an investor in this ‘emerging’ stock market. They are savers and not investors and have some of the most incredible savings rates in the world. For this reason, these markets will continue to mimic global markets, a bit more aggressively on the upside as well as the downside.

What about Gold? Is has fallen 15% from its high and Europe continues to flounder and the US debt has not been resolved?

A variety of views on this…..India and China slowing down, meteoric rise of gold and profit taking, governments like the safety of the US dollar over gold. I believe all these reasons have had an impact on the price of gold and will continue to do so.

The US dollar?

I am no currency expert but this one does boggle your mind. All I read about the US debt crisis is that it is going from bad to worse and in the past month money has flowed out of gold and to the US dollar. Go figure.

When do you see the stock market turning?

One fact noticed by the business press is the large amounts of dollars sitting in the coffers of major multi nationals, pension funds and other money managers. These funds are earning slightly over zero and for that reason will be finding their way into the over sold global stock markets like we saw in 2009 and 2010.

My two cents:

Let’s look at the big picture. A well diversified retirement portfolio is critical and important. This includes all asset classes, real estate, stocks and mutual funds, GIC’s, cash, gold, insurance policies and government funded pension plans such as CPP and OAS.

Another key component, and which needs to discussed by all families is the transfer of generational wealth. There is a report that there is about a trillion dollars exchanging hands over the next 20 plus years. Good planning is essential to make sure that the transfer is tax effective. I will be writing about a few ideas in my next Malik’s Corner.

As always, thanks for being clients and allowing me into your financial lives. I am honored.



DISCLAIMER: “The information contained herein was obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and Queensbury Securities assumes no responsibility or liability”

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