Case Study On Why Preferred Shares are not Bond Substitutes

This month’s topic, in light of a market sell-off, is about sticking to our strategy when faced with adversity. Again we feel Mr. Bruce Lee is spot on in his Zen approach to conflict, which can also be applied to the mental challenge of stock market investing.

Q3 2015 Letter

We have spent the last three quarterly letters saying that not much has changed. Now, almost every corporate bond, stock and asset is being repriced and the rate of change or volatility is up significantly. We believe this environment to be another symptom of low interest rate policies. However, this current sell-off improves our opportunities to invest in quality income-producing securities, which is Avenue’s core investment strategy.

A Case Study On: Bond ETF Illiquidity

That we are even talking about this kind of truly esoteric ‘systemic risk’ shows how far markets have progressed since the 2008 financial crisis. We will do our best to explain what this risk is and why it is a hot topic. But first we will start with a few definitions.

Q2 2015 Letter

The main financial event in the second quarter was the rise of short term interest rates. As a result, the price of bonds fell but this did not result in a stock market selloff. Therefore, not much has changed since we last wrote three months ago and the equity portfolio has been unusually stable. There are two popular concerns that we would like to address in this quarter’s letter: the risk to corporate profit margins and the danger of illiquidity in some markets.

Bloomberg Braces for Fallout

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A Case Study On: The Stability of Stock Market Returns

Warren Buffett has been one of the most successful investors of our time. He is equally good at distilling complicated investment concepts and explaining them in a way that is accessible to everyone. In this year’s Berkshire Hathaway annual report, he presents a clear and simple argument for long term stock investments being more stable and less risky than long term bond investments.

Q1 2015 Letter

There is no dramatic difference between the strength of the US economy and that of a core European economy like Germany. However, ultra-low interest rates are magnifying the subtle differences and we are now seeing a large flow of money from Euros to the US dollar as well as the continued rise of asset prices. Avenue has started to incrementally move investments back to Canada.

Poloz’s Rate Cut the Wrong Move at the Wrong Time

Now that we have absorbed the initial shock of the Bank of Canada rate cut and the subsequent meeting, we can try to begin to understand the logic behind it.

Q4 2014 Letter

We continue to believe that there are few better substitutes for our investable savings than owning quality stocks for growth and certain selective bonds for income and safety. Again, we witnessed two rapid recoveries in the stock market following volatility in October and December. Moreover, corporate share buybacks and acquisitions reinforced the dynamics of the equity bull market. However, potential big risks to North American equity investors are a potential rise in wage inflation and increased geopolitical unrest.