If we have learned one thing in our firm’s combined 35+ years’ experience, it’s that the best we can do is source out calm, rational Money Managers and take their advice, no matter our emotions or how counter-intuitive their recommendation may appear. We currently use five such Investment Counsellors and receive information from another five. When all of these managers are saying the same thing it provides great confidence for us. Especially when the managers we have selected in years past have proven themselves by “getting it right” in 1987, 1990, 2000, 2008 and more recently in 2011. “Getting it right” means their results were remarkably better than their peers and the market benchmarks as a whole. We are currently in one of those periods of time where these Investment Counsellors are all saying the same thing. A summary of their thoughts are listed below:
Yesterday saw the Canadian and US market down 2% on fears of Greece’s exit from the Euro. We have seen much of the same thing in 2011, however what’s different this time is that the broader European economy is improving, the US markets are recovering, the European Central Bank is in a healthy position to help support the Euro zone, and this might be exactly what is needed to allow the rest of the Euro zone to get back to normal again. Greece makes up such a small part of European GDP at only 2%.
We cannot forget that the motivation of the media is to get us worked up and worried such that we feel compelled to stay tuned to their message. When we hear “the market is down dramatically” we need to carefully consider the full impact this has on the sorts of portfolio’s we hold. Our portfolio managers employ a conservative investment philosophy focused on large, stable, dividend-paying companies invested in utilities, consumer staples, telecomms, banks, railways, etc. which tend to be more defensive sectors by nature. What is more, is many of our accounts have monthly cash contributions or quarterly dividends which create an opportunity when prices decline. Portfolio managers can take advantage of the depressed prices and profit when stock prices rise again.
Unfortunately things may get worse, specifically in Europe, before they get better. We have been here before and must be prepared for this volatility and remind ourselves of the core fundamentals.
As always we are available to discuss the particulars of your portfolio should you have questions.