In the first episode of 2021, Bill Harris and Bryden Teich discuss Avenue’s outlook for the year ahead. Throughout their conversation they highlight the dilemma that investors continue to face in a low interest rate world. Bryden touches on the persistent role that Central Banks are playing with their continued market intervention, while Bill highlights the type of investments that are included in the Avenue portfolio.
In reviewing our newspaper collection of the past year, we wanted to share a few front-page headlines that have stood out to us. These pages illustrate a story of the global stock market in 2020: beginning, middle, and end.
Given what last year brought to investors, we thought it would be worthwhile to highlight the note that we sent out to clients at the depths of the financial panic last March. Although it did not feel good at the time, we knew that the market environment in March was presenting us a great opportunity.
If you had the good fortune last January to take a year-long sabbatical in the South Pacific, cutting yourself off from the world, you would be arriving back on an empty flight, landing into quarantine and economic lockdown. After checking in with your family and friends about their health, you might be emailing or calling Avenue to see how bad a global pandemic is for your investment returns.
After a forty-year bond market rally from a high of 18% in 1982 to the current 0.70% low today, we struggle to get excited about bonds in the short or medium term.
Matt Manara and Bryden Teich discuss the busy month of November for the markets and summarize how the 2020 election result and recent positive vaccine news are impacting different asset classes including stocks, bonds, and gold.
Over the course of 2020, the global economy has been forced to move through the throes of the COVID-19 pandemic. Combined with fears of a contested U.S. presidential election, social justice unrest worldwide and a new work-from-home environment, investor behaviour and the economy at large has been impacted in more ways than one.
If you had the good fortune last January to take a year-long sabbatical in the South Pacific, cutting yourself off from the world, you would be arriving back on an empty flight, landing into quarantine and economic lockdown. After checking in with your family and friends about their health, you might be emailing or calling Avenue to see how bad a global pandemic is for your investment returns.
This pandemic period we are living through has been described as The Great Distortion for financial markets. Central banks are intervening to support the bond market and Government spending is injecting enormous amounts of money into the economy with much of it finding its way into the stock market. We know we must own stocks now more than ever to protect our wealth, given the fragility of the financial system built on too much debt.
In this quarter’s letter we would like to give our assessment of the many contradictions of financial orthodoxy in which we now find ourselves. The economy is in terrible shape and yet the stock market has had a strong rebound from the March 23rd low.
We have lived through an extraordinary few weeks. Across the country Canadians are now bracing for the full impact of the virus. Hopefully all our collective efforts at social distancing will pay off. Currently, we don’t know of anyone within our Avenue network who is ill with the virus, and we truly hope it stays that way. We give our thanks to all of you who are on the frontlines in the medical and support professions as you work tirelessly to keep Canadians safe.
This past year was a year to celebrate Avenue’s unique equity strategy where the foundation of the portfolio is built on limiting the risks we take, instead of trying to ‘beat the stock market’ in any given year. For 16 years we have developed our brand and place in the Canadian investment industry where when you think of Avenue, you think of stability. Investment stability is achieved by diversification of the portfolio, the stability of the underlying investments, and rigorous attention to avoid owning securities that we believe are overvalued.
There are three distinct themes emerging that separate the world of investing and define our times.
We are now in record territory; a full decade of economic growth and stock market expansion has many investors fearful that we are overdue for a correction. In this quarter’s letter we make the case that the investments we hold in Avenue’s portfolios remain compelling, but at the same time we need to actively avoid certain stocks and sectors where there is excess valuation.
After a forty-year bond market rally from a high of 18% in 1982 to the current 0.70% low today, we struggle to get excited about bonds in the short or medium term.
An examination of the valuation of Apple’s shares is an excellent way to demonstrate the extreme divergence that has taken place in the stock market in the last six months. Not much has changed in the underlying profitability of Apple. What has changed is that investors are willing to pay a mania-type multiple not seen since the 2000 dotcom bubble.
The level of US Government debt was an issue before this recent crisis. Now we believe excess debt will come to define financial markets in the coming years.
The case study is where we discuss specific details of our investment process. Today we will tackle stock market multiples and how it relates to risk. I wish I could say we can also make it entertaining, but the subject matter probably precludes this.
Avenue’s stock market investment strategy is to find business that have consistent earnings and trade at a fair price. Technology is difficult to fit into these parameters because technology companies by nature have disruptive business models which don’t always result in consistent earnings. Our topic today is to show just how expensive and erratic many of these technology companies have become. We will examine the influence of Softbank’s Vision Fund and WeWork on tech venture investing.
With Canadian bond yields dropping below 2%, these are dark days to be a bond investor. Gone are the days when one could hope for 5-7 % annual returns from the bond market. With global central bank policy using quantitative measures to lower interest rates close to zero, the global $40 trillion-dollar bond market is searching for a “normal” return.
In Avenue’s equity portfolio, Enbridge is a great example of an investment which demonstrates the current valuation paradox.
In reviewing our newspaper collection of the past year, we wanted to share a few front-page headlines that have stood out to us. These pages illustrate a story of the global stock market in 2020: beginning, middle, and end.
Given what last year brought to investors, we thought it would be worthwhile to highlight the note that we sent out to clients at the depths of the financial panic last March. Although it did not feel good at the time, we knew that the market environment in March was presenting us a great opportunity.
Over the course of 2020, the global economy has been forced to move through the throes of the COVID-19 pandemic. Combined with fears of a contested U.S. presidential election, social justice unrest worldwide and a new work-from-home environment, investor behaviour and the economy at large has been impacted in more ways than one.
We have been getting lots of questions about how our investments are faring in the face of this historic market decline. We have attempted to lay out our comments in a question and answer format.
In the first episode of 2021, Bill Harris and Bryden Teich discuss Avenue’s outlook for the year ahead. Throughout their conversation they highlight the dilemma that investors continue to face in a low interest rate world. Bryden touches on the persistent role that Central Banks are playing with their continued market intervention, while Bill highlights the type of investments that are included in the Avenue portfolio.
Matt Manara and Bryden Teich discuss the busy month of November for the markets and summarize how the 2020 election result and recent positive vaccine news are impacting different asset classes including stocks, bonds, and gold.
In this episode Bryden Teich and Paul Gardner discuss the significant amount of government debt that has been issued thus far in 2020 and what the bond market is telling investors.
In this episode, Bill Harris and Bryden Teich discuss the Avenue Q2 2020 Quarterly Letter and some of the things investors should be thinking about for the second half of 2020.
In Episode 9, Bryden Teich and Matt Manara discuss news from the recent Federal Reserve meeting and the concept of yield curve control. They highlight previous examples of yield curve control and the impact it had on real interest rates and asset prices.
Bryden Teich and Bill Harris discuss the partial recovery in the stock market during May and what has been driving the recent moves. They also discuss why the stock market and the underlying economy have diverged and highlight some of the fiscal and monetary policy responses that are causing this divergence.
They also discuss the debate between Value vs. Growth investing in light of the current market environment.
In Episode 7, Paul Gardner and Bryden Teich give an updated assessment of fixed income markets in April 2020. They talk about the impact that bond ETF’s had during the selloff in March and highlight a few areas where they are finding value in the corporate bond market.