Fund Manager
Norm Lamarche
The first quarter of 2009 is likely to go down in history as one of the more significant periods in our collective investing memory as investors grappled with the “recession versus depression” question. Many are wondering if we have reached the end of an investment era. The bulk of the last 25-30 years of investing occurred against the backdrop of the "Reagan/Thatcher" paradigm-free markets, with lower regulation and taxes. When combined with the end of the cold war and the rapid adaptation of free markets, globally, particularly in the emerging nations, this proved to be a profitable environment for the investor. Last year’s financial crisis, however, may indeed have ended this benign era by ushering in the Obama/Pelosi administration in Washington. Higher taxes, increased regulation – even the prospect of protectionism, and in general, a return to a previously discredited era of big government, seem to be the characteristics of the new Obama/Pelosi era.
March was a positive month for capital markets worldwide. In Canada, the S&P/TSX index rose 7.4%. This was the first monthly gain, since August 2008. While financials (+12%) and energy (+8.7%) led the rally, materials also contributed, rising 7.5% for the period. As most segments rose in March with the greater rally of emotion, the materials group also benefitted from the commodity prices.
While the price of gold has been one of the few safe havens during the downturn, other materials have recently bottomed out. Copper and zinc climbed to their highest level in five months, as industrial metals rallied on speculation that demand will rebound soon. China’s open market purchases of metal inventories have kept a firm bid on some of the base metals. Also, the price of crude oil has rallied from its $30/bbl bottom and now trades above $50/bbl, as the OPEC nations put forward meaningful production cuts to stabilize inventories worldwide.
Capital markets seem to be working well in the resource world, as many are able to fund both debt and equity needs. Equity deals continue to confront investors on a daily basis. Market participants, particularly state resource companies, are starting to realize that in many cases, it is cheaper to buy reserves than to build them. The Chinese, Koreans and other State institutions have been particularly aggressive acquirers of energy and metal assets around the globe.
We have been reducing our precious metal positions on strength to fund our purchases of the more cyclical groups. We have recently purchased copper, coal and iron ore holdings, while at the same time, adding to our non-bank financial holdings. Companies continue to trade at deep discount levels to replacement values, as over time, we would expect that this gap to be eliminated. It will certainly be a rough journey, but the reward may be well worth the wait.
Norm Lamarche - Q1 2009 Commentary
Date Published
Related Fund(s)
Fund Manager
The first quarter of 2009 is likely to go down in history as one of the more significant periods in our collective investing memory as investors grappled with the “recession versus depression” question. Many are wondering if we have reached the end of an investment era. The bulk of the last 25-30 years of investing occurred against the backdrop of the "Reagan/Thatcher" paradigm-free markets, with lower regulation and taxes. When combined with the end of the cold war and the rapid adaptation of free markets, globally, particularly in the emerging nations, this proved to be a profitable environment for the investor. Last year’s financial crisis, however, may indeed have ended this benign era by ushering in the Obama/Pelosi administration in Washington. Higher taxes, increased regulation – even the prospect of protectionism, and in general, a return to a previously discredited era of big government, seem to be the characteristics of the new Obama/Pelosi era.
March was a positive month for capital markets worldwide. In Canada, the S&P/TSX index rose 7.4%. This was the first monthly gain, since August 2008. While financials (+12%) and energy (+8.7%) led the rally, materials also contributed, rising 7.5% for the period. As most segments rose in March with the greater rally of emotion, the materials group also benefitted from the commodity prices.
While the price of gold has been one of the few safe havens during the downturn, other materials have recently bottomed out. Copper and zinc climbed to their highest level in five months, as industrial metals rallied on speculation that demand will rebound soon. China’s open market purchases of metal inventories have kept a firm bid on some of the base metals. Also, the price of crude oil has rallied from its $30/bbl bottom and now trades above $50/bbl, as the OPEC nations put forward meaningful production cuts to stabilize inventories worldwide.
Capital markets seem to be working well in the resource world, as many are able to fund both debt and equity needs. Equity deals continue to confront investors on a daily basis. Market participants, particularly state resource companies, are starting to realize that in many cases, it is cheaper to buy reserves than to build them. The Chinese, Koreans and other State institutions have been particularly aggressive acquirers of energy and metal assets around the globe.
We have been reducing our precious metal positions on strength to fund our purchases of the more cyclical groups. We have recently purchased copper, coal and iron ore holdings, while at the same time, adding to our non-bank financial holdings. Companies continue to trade at deep discount levels to replacement values, as over time, we would expect that this gap to be eliminated. It will certainly be a rough journey, but the reward may be well worth the wait.