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A View From Here February 2014

January 31, 2014 • Print This Article

In theory there is no difference between theory and practice. In practice there is – Yogi Berra

Your Future is Worth More

I am not much for innocuous artwork hanging in an office and it took me over 20 years to find an inspiring piece at a showcase held every summer at Nathan Phillips Square. It has been said that art represents an inward significance and this merged photograph of King and Bay Street from November 8,1931 and sometime in 2011 (of the tower that houses our Toronto offices) speaks very loudly to me. I cannot begin to tell you how much I stare at it throughout the day.

Knowing that art has a varying effect, I view this piece as a reminder of history, patience and change. It was taken during a notoriously difficult period and despite hardships, people are moving to the future; some can't move fast enough, others casually observing, and as always, there are some trying to go the other way. All the while, the future – represented by the other side of the street is uncrowded, colourful and welcoming. It reinforces a belief that wealth is built over time and reiterates our motto: Your Future is Worth More.

Bay Street has changed so much since 1931 when stock quotes were written on chalkboards and transactions were wired from offices to the exchange floor that is now 'virtual'. In my tenure, we've witnessed a lot of changes and perhaps most significant was deregulation that allowed large financial institutions to purchase independent brokerage firms. They have used their large capital base to market and expand its share of customer's wallets through propriety services such as financial planning, insurance and managed portfolios. Traditional stockbrokers have transformed into professionals focused on asset gathering and product placement, making what we do an anomaly. It has become increasingly difficult to find an independent advisor who builds portfolios for each client on a fee per transaction basis. Most have morphed into financial consultants whose focus is to 'farm out' the investment management to a third party, and charge a flat fee, rather than focus on independent analysis. This is all well and good as long as there is an acceptable rate of return. I have not found this to be the case and believe that most people would have been better off owning short term GICs.

I think that a large part of our success has been a holistic and concentrated approach; procure and construct a relatively small amount of excellent investments over time and 'pay as you go' (a fee for transaction) as opposed to a flat percentage fee. It is a business of scale and advisors spend little time focusing on investment decisions. As a result, they have become more of a relationship manager of portfolios managed by other people. There is an illusion that successful investing is fast paced and requires skill to get in and out of the market on a timely basis, when in reality it's pretty boring. Development takes patience and a profitable outcome usually occurs after a long period of building confidence in a business. Almost all of our prosperous outcomes took years to become overnight successes.

Our goal is to not only build wealth but also create peace of mind in this aspect of your life. Most who have been with us during our travels on Bay Street might not have imagined the long-term growth that has been achieved when the investment accounts were first opened. From a personal and professional standpoint, few things can be more satisfying than being part of this growth and knowing that we have established a track record of success that few outside of 'our world' would believe. I only hope that we can continue to deliver as we enjoy what we do and hold the same investments.

Our Portfolios

Many of our accounts hold large cash positions (invested in Money Market funds or short term Bankers Acceptances) and activity has been restrained while we augment current holdings and look for new investments. Despite the anemic interest earned on cash, it has not diminished from our current growth. We hope to deploy capital as opportunities arise, but believe it is best practice to value the performance from our current investments until inspiration meets with opportunity. The benefit of holding does not incur a fee. That's why I love that Yogi Berra quote so much.

Lastly, the deadline for RRSP contributions is March 3rd, 2014 – I will be reaching out over the next weeks to ensure that we have the opportunity to participate.

Thanks for taking a look,

And,

All Good Things,

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

A View From Here January 2014

January 28, 2014 • Print This Article

For last year's words belong to last year's language and next year's words await another voice - T.S. Eliot

January is a time when many people say goodbye to one year while ringing in another with hope and optimism. Many make resolutions, break resolutions and maybe even review their investments. While January is as good a time as any to evaluate portfolios, financial markets do not follow a calendar and couldn't care less what month it is.

As we bid farewell to 2013, we reflect on a year of excellent growth in our investment accounts and what we hope for in the coming year. We have built significant cash positions (from closing out profitable investments) representing as much as 35% in many accounts and plan to re-invest those funds as opportunities arise. With (what looks to be) an improving economic picture, we are hopeful that existing positions will translate to further growth for our portfolios.

Markets and the Calendar Year

The financial services industry measures performance on an annual basis and we are no exception. However, it is important to recognize that markets move on sentiment in the short-term and fundamentals in the long-term. The economy does not shift directions with changeover in a calendar. 

The Dow Jones Industrial Average and the S&P 500 (the most widely followed indexes of stocks) had a fantastic year in 2013, up 26.5% and 29.6%. The Canadian markets did not fare as well until late in the year. A lot of this is based on weakness in commodities and metals, which represent a large component of the TSX index. Still, it managed a respectable gain of 9.6%. 

Our accounts had a tremendous year, outperforming pretty much any metric that you can throw at it. It is hard to think about how impactful the growth has been in our bottom lines when statements only show a change from the previous month. But to see just how dramatic the growth has been, take a look at previous year-end statements and compare it to the one that you will be receiving shortly. We also archive old statements, so we can do it for you…if you like.

History's Guiding Hand

The stock market is viewed as a leading economic indicator and clearly it is telling us that everything is actually pretty good right now…or at least is going to be. This is not to say everything is perfect, but at the very least, we look to be recovering from a difficult period.

Some will argue that returns this past year have been a mirage caused by extremely accommodative monetary policy of the US Federal Reserve. Many investors seem to think that when the US reverses its "Quantitative Easing", markets will tank and the economy will head back into a recession. I'm not sure I agree. It is very possible that the stock market rally for the past 4 years has had more to do with improving fundamentals than QE. Heading into 2014 there is a good reason for continued optimism on the direction of the economy.

One observation, having now completed my 25th year is that when markets finish a year on strength, it tends to carry over. I found a statistic that supports this thought:

"Since WWII, the S&P 500 has had 18 annual gains of 20% or more and 78% of the years immediately following those great years have been positive" (Zacks Weekly Update – Dec 14, 2013)

Our Year in a Paragraph

We attribute our success of the past year to three things; i) a concentrated portfolio; ii) investments in technology which saw revival from compressed valuations; and iii) avoiding commodities and fallen angels which hurt a lot of investors hoping for a bottom.

If you can, please take a moment to celebrate the great year that just passed. We are hopeful that our good fortune continues. 

But for now…. I say thanks two thousand and thirteen!

All Good Things,

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

A View of Registered Accounts

January 23, 2014 • Print This Article

With the turn of the calendar, many begin to think of their registered accounts. With Government sponsored programs such as RRSP, RESP and TFSA, I thought I would give a brief synopsis for your review:

Registered Retirement Savings Plan (RRSP):

The RRSP allows Canadians 18 and over to set aside funds for retirement. The government provides a tax deduction of 18% of your earned income from the previous year to a limit of $23,820 to be placed in the plan. The funds are allowed to grow without taxation on gains whether they are income (dividends and interest) or capital (increase in value of the investment). When the holder turns 71 they will be required to take a minimum of 7.5% out per year, which will be taxed as if you earned income. Unused contributions from previous years are carried forward and can provide a significant tax deduction when used. For this reason, it is worth talking with an accountant about the benefits you might receive by making an extra-ordinary contribution.

 

I am a huge proponent of the RRSP as it provides both a significant tax deduction from earned income in your working years and gains can grow tax-free. It is in my opinion the ultimate investment account, which provides a long-term opportunity to build wealth. I like to think of it as Life Insurance – money you will use in your life.  

Tax Fee Savings Account (TFSA):

The TFSA allows Canadians over 18 to contribute a limit of $5,500 per year to this account. Unlike an RRSP, you do not receive a tax-deduction but all returns grow tax-free and can be withdrawn without consequence at any time. Further, funds that have been taken out can be replaced after a year. Unused contributions can also be carried forward.  

Like an RRSP, TFSA is another fantastic opportunity to build wealth over time. Since the program's inception in 2008, it has been amazing how many accounts have experienced excellent growth and now have significant value. 

Registered Education Savings Plans (RESP):

This Government sponsored program allows Canadians to put funds aside for their children's post-secondary education. While there is no tax-deduction for contributions, the government pays funds directly into the account and allows the funds to grow tax-free. Further, they place 20% of your contribution directly into the account to a maximum of $500/child for the full contribution of $2,500.

Having seen a number of clients remove funds from this account when their children enter University or College, I cannot stress its importance enough and would recommend that each parent start as early as possible. Time moves particularly fast, so procrastinating creates tremendous limitations. I believe it important to start a 'family' plan as soon as possible.

Conclusion

Financial planning is a funny moniker because life is expensive and the future cannot be determined. However, if we can build wealth in these accounts, I believe that it will have a significant impact on our financial future and provide some hard assets that we can access in as we get older or in retirement…whatever retirement is.  

Have a great weekend,  


  All Good Things,

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

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