The energy transition from fossil fuels to green alternatives like wind, solar and nuclear was a hot topic over the holidays. We have put together a few charts that help to demonstrate the scale of the global challenge. From an investment perspective it is important to be realistic about what is possible and not to be confused by aspirational rhetoric.
At Avenue we believe we have entered into a period of scarcity like we have not experienced for some time. We face scarcity of capital, energy, food and labour. While this will be a challenge for all investors, we believe there is an opportunity to invest in what we think of as resilient quality businesses that can take advantage of scarce resources while also avoiding businesses where profits may decline.
In this episode Bill Harris and Bryden Teich discuss the state of the market heading into the final weeks of 2022.
The economic and financial era of lower inflation and lower interest rates may be coming to an end. Given this major shift, it is important to understand that there is no quick fix for the current financial situation. This framework will then help us determine where we want to invest and what price we would like to pay. A weak stock market presents us with opportunity but given the scenario where lower interests rates are not yet on the horizon, it really matters what we buy.
The saying, ‘stay the course’ has a long military history but it is Ronald Reagan who repurposed ‘stay the course’ as a catch phrase for resetting the economy post 1970s inflation. At Avenue, we have a strategy that incorporates bad markets as well as good and we plan to come through this current weak period stronger than when we started.
We will get through this financial market weakness remembering that the last few years have been a positive environment for investors. But right now, it seems like all prices need to find a new level. While we anticipated that 2022 would be a year of financial market headwinds, investors are faced with almost too many problems all at the same time.
In our last podcast of 2021, Paul Gardner and Matt Manara give a recap of the year in the bond market and discuss why despite low interest rates bonds can still be an important investment for investors.
At Avenue we believe we have entered into a period of scarcity like we have not experienced for some time. We face scarcity of capital, energy, food and labour. While this will be a challenge for all investors, we believe there is an opportunity to invest in what we think of as resilient quality businesses that can take advantage of scarce resources while also avoiding businesses where profits may decline.
The saying, ‘stay the course’ has a long military history but it is Ronald Reagan who repurposed ‘stay the course’ as a catch phrase for resetting the economy post 1970s inflation. At Avenue, we have a strategy that incorporates bad markets as well as good and we plan to come through this current weak period stronger than when we started.
We will get through this financial market weakness remembering that the last few years have been a positive environment for investors. But right now, it seems like all prices need to find a new level. While we anticipated that 2022 would be a year of financial market headwinds, investors are faced with almost too many problems all at the same time.
“The key is not to predict the future but to prepare for it.”
– Pericles, 494 to 429 BC, Athens
This famous quote from Pericles was made in the context of readying the Athenian people for the unpredictability of war. During the last two months we are witnessing what seems like a throwback to a past where despots were intent on brutal conquest. This behaviour seems completely irrational within our globally integrated world of business and finance.
In our Q4 Letter, we will start by giving our view on how financial markets are interpreting the possibility that the Omicron variant will evolve to being endemic. This past year, 2021, was the second year where the virus drove central banks and governments to dramatically increase liquidity, resulting in consumer price inflation. We will discuss our view that regardless of inflation, longer term interest rates can only go up so much. The big theme for 2022 is the deceleration of liquidity as central banks tighten and governments no longer hand out cheques. Liquidity has been the main driver of the financial markets so pricing of all assets will be affected. This is why we have worked hard over the past quarter to build resiliency into Avenue’s equity portfolio.
We will start this quarter’s letter with our view on how the lingering pandemic is having a significant effect on the operations of all corporations. The economy and the stock market are changing at a fast pace, and we have seen our equity portfolio turnover increase this year. As well, we have made an incremental shift back to Canadian companies for the time being because we are finding better opportunities here. We will also discuss the bond portfolio and how we have protected it against the uptick in Consumer Price Inflation (CPI).
In this quarterly letter we would first like to discuss Avenue’s view of inflation, which has quickly become the main topic for investors. Leading from our view on inflation is our broader thinking about how nothing is normal in our current financial world. But we believe we need to get used to it; we are living in a new normal. Our conclusion continues to be that we have to stay invested, but more than ever it matters what we own and it certainly will always matter how much we pay for our investments. Lastly, we would like to give an update on the Avenue Tail Hedge portfolio now that we have been incorporating this strategy for a full year.
The energy transition from fossil fuels to green alternatives like wind, solar and nuclear was a hot topic over the holidays. We have put together a few charts that help to demonstrate the scale of the global challenge. From an investment perspective it is important to be realistic about what is possible and not to be confused by aspirational rhetoric.
The economic and financial era of lower inflation and lower interest rates may be coming to an end. Given this major shift, it is important to understand that there is no quick fix for the current financial situation. This framework will then help us determine where we want to invest and what price we would like to pay. A weak stock market presents us with opportunity but given the scenario where lower interests rates are not yet on the horizon, it really matters what we buy.
The words ‘this time is different’ are often referred to as the four most fatal words in investing. What seems new and fresh may lead many to conclude that different rules should apply.
The historical example of a mania that is often sited is the Dutch tulip bulb frenzy of the 1630s. The tulip craze became popularized as a cautionary tale for investors in the 1841 book by Charles Mackay called Extraordinary Popular Delusions and the Madness of Crowds. Excessively easy monetary policy accompanied by a strong economy led to one of the oddest, speculative, price increases ever.
China’s economy appears to be slowing. This is a big deal in itself but how will we be affected as Canadian investors? Our honest answer is we don’t know, but we should be thinking about it. China is now of a size where it has a major impact on the global economy and financial markets.
The question many investors are asking is, given this increase in money supply, is a period of higher inflation upon us? While we at Avenue believe higher inflation is likely this year, we will soon revert back to an economy with low growth and low consumer price inflation.
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.
By definition, a tail hedge strategy is designed to protect investors and their portfolio from the risk of a significant stock market crash. What is a “tail” event? A “tail” event is often described as a large unexpected decline in the stock market. Some memorable examples include the start of the COVID-19 pandemic in March […]
Our financial savings are one of our most prized possessions. It represents all of the years of hard work we put in and our commitment to a secure financial future. It’s how we maintain our desired lifestyle and the means to which we can take care of ourselves and our families.
Trust, transparency and financial expertise are just a few important qualities an investor should look for when searching for the right individual to manage their wealth. In today’s marketplace, there is a significant difference among financial professionals that many investors are not aware of. There are those who have a fiduciary responsibility and those who do not.
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 this episode Bill Harris and Bryden Teich discuss the state of the market heading into the final weeks of 2022.
In our last podcast of 2021, Paul Gardner and Matt Manara give a recap of the year in the bond market and discuss why despite low interest rates bonds can still be an important investment for investors.
In our last podcast of 2021, Paul Gardner and Matt Manara give a recap of the year in the bond market and discuss why despite low interest rates bonds can still be an important investment for investors.
In this quarter’s podcast, Bill Harris and Matt Manara discuss the investment outlook for Q4.
In this quarter’s podcast, Bill Harris and Bryden Teich discuss the inflation debate and whether or not the inflation we have seen thus far in 2021 is likely to persist.
In this episode, Bill Harris and Bryden Teich have an in-depth discussion about the relationship between inflation and the velocity of a money.
In the latest Avenue podcast Bill Harris and Bryden Teich provide a summary of the first quarter of 2021 and highlight some important take-a-ways from the most recent Avenue quarterly letter.
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