chaff

These ideas did not fit into my February 2009 report. (I call it chaff. Chaff used to stick to me like glue while blowing wheat up into the grainery on a hot August day on the farm near Petrolia Ontario about the time oil was discovered at LeDuc.)

“Stockmarkets may not be the cheapest ever, but they have discounted an awful lot of bad news.” The Economist November 6th 2008, Buttonwood, 'Clare and present danger' about Clare College “borrowing” to buy equities. Clare sold their stocks in 1999. Now they are buying equities back at much lower prices. “Unlike a bank,” The Economist said, Clare “does not have to mark its positions to market.” We don't either, do we. (Buttonwood alone is worth a subscription to The Economist.)

• “recently, falling prices have been taken as a signal to flee, even though shares are much cheaper than they were not so long ago” Economist Jan 24'09
• Life companies - Last year SLF increased its dividend in April from .34 to .36. This year…not yet. IAC's was up twice in 2008, in March and September, 22% increase in total; MFC up in Sept 08 from .24 to .26; GWO up twice in 2008- March and Sept, 11.8% in total. All this data will eventually be found inside this site. It is not there yet.
• DOWN $2.4 TRILLION: If you are feeling badly about the balance of your portfolio, consider these two things: “American mutual-fund assets have declined by $2.4 trillion…since the start of 2008” (Economist December 6 2008) And, “The belief that diversification into alternative assets could prevent investors losing money in bear markets has proved false.”
• John Mauldin: “this could be a longer and deeper recession than anyone younger than 50 can possibly remember” Jan 2 2009
• 1998 YIELD NADIR - Did you notice the nadir of the yields in all the yield charts on page 4: 1998. If that was the peak of our market, we are now ten years into the bear. 1998 was also the year, much to their dismay now, the Americans passed the Gramm-Leach-Billey Financial Services Moderation Act. It allowed investment banking and commercial banking to be united. Canada keeps them separate: our banks are stronger and are weathering 'the storm' better. Two of our banks are even rated AAA.
• Paul Volker's February speech in Toronto: “This is not an ordinary recession.”
• I wondered why the baseball was getting bigger, then it hit me.

Asset Allocation - “My intention is to minimize future regret.” was the way Harry Markowitz described his portfolio diversification to Jason Zweig in a NYT column on January 3 2009…a series called ‘The Intelligent Investor'. Dr. Markowitz shared the 1990 Nobel Prize in Economics for his mathematical explorations of the relationship between risk and return, yet he boiled down his own trade-off between risk and return this way: “I visualize my grief if the stock market went way up and I wasn't in it - or if it went way down and I was completely in it.” I just love it! Markowitz then told Janon Zweig: “I split my contributions 50/50 between bonds and equities.”

In contrast, your writer is 100% dividend growth stocks. Dividend growth common stocks have had the highest historical returns of any asset class. That allocation is really being tested now. I have not changed my mind. You have to decide you own allocation.

QFMA (ADMF), mentioned on page 3 in conjunction with insider trading and Paul Desmarais Sr. buying some more Great West Life last December is Autorite des Marches Financiers or www.lautorite.qc.ca