Fund Manager
Norm Lamarche
Both equity and fixed income markets continued to exhibit positive results in the third quarter of 2009, on growing evidence of a broadening economic recovery. Underpinned initially by Central Bank and fiscal policies, the economic recovery is now being accentuated by the improving business, consumer and investor sentiment. Credit spreads continue to narrow on the gradual return towards normalization.
Corporate earnings for the Q2 and Q3 2009 reporting seasons are surprising investors, to the upside. The Banking Sector in particular, continues to reap the rewards of fatter lending spreads, as they work down their bad debt exposures. We would expect greater evidence of the banking sector liquidity flowing into the real economy into next year.
While credit remains tight by historical standards, the incremental change from the previous quarters is very large. This is very positive for markets but more importantly, it will become very positive for the “real” economy. Investors have taken their cues and have started to bid up those companies that are positioned to benefit from economically sensitive sectors.
The recovering global economy, along with the realization that the industrialization of the emerging economies is intact, is lifting commodity prices. While commodity inventory levels are high in a world with current excess capacity, we remain fixated on the end game as the world economy transitions toward normalcy and into eventual growth. Corporate valuations are moving back up toward replacement values (the cost of building new production). That valuation gap is the proverbial “Pot of Gold” worth waiting for. Our confidence in the financial system grows; we reduced our more defensive positions (golds) and redeployed them into the more cyclical energy, base metal opportunities and financials. While the energy sector remains a big weighting, we are largely invested in oil, as we believe more natural gas pains are looming given very high storage levels, before we see a turn for the better.
The mergers and acquisitions cycle that we referred to in our Q2 commentary has started, lead by Sovereign Wealth Funds and by the well financed, state resource companies of the Emerging Nations (China, Korea, India). They are viewing the Basic Materials as assets of national interest. Many assets are being acquired for less than replacement cost. This is a trend that we expect to continue in the future.
We remain fully invested.
Norm Lamarche
Norm Lamarche - Q3 2009 Commentary
Date Published
Related Fund(s)
Fund Manager
Both equity and fixed income markets continued to exhibit positive results in the third quarter of 2009, on growing evidence of a broadening economic recovery. Underpinned initially by Central Bank and fiscal policies, the economic recovery is now being accentuated by the improving business, consumer and investor sentiment. Credit spreads continue to narrow on the gradual return towards normalization.
Corporate earnings for the Q2 and Q3 2009 reporting seasons are surprising investors, to the upside. The Banking Sector in particular, continues to reap the rewards of fatter lending spreads, as they work down their bad debt exposures. We would expect greater evidence of the banking sector liquidity flowing into the real economy into next year.
While credit remains tight by historical standards, the incremental change from the previous quarters is very large. This is very positive for markets but more importantly, it will become very positive for the “real” economy. Investors have taken their cues and have started to bid up those companies that are positioned to benefit from economically sensitive sectors.
The recovering global economy, along with the realization that the industrialization of the emerging economies is intact, is lifting commodity prices. While commodity inventory levels are high in a world with current excess capacity, we remain fixated on the end game as the world economy transitions toward normalcy and into eventual growth. Corporate valuations are moving back up toward replacement values (the cost of building new production). That valuation gap is the proverbial “Pot of Gold” worth waiting for. Our confidence in the financial system grows; we reduced our more defensive positions (golds) and redeployed them into the more cyclical energy, base metal opportunities and financials. While the energy sector remains a big weighting, we are largely invested in oil, as we believe more natural gas pains are looming given very high storage levels, before we see a turn for the better.
The mergers and acquisitions cycle that we referred to in our Q2 commentary has started, lead by Sovereign Wealth Funds and by the well financed, state resource companies of the Emerging Nations (China, Korea, India). They are viewing the Basic Materials as assets of national interest. Many assets are being acquired for less than replacement cost. This is a trend that we expect to continue in the future.
We remain fully invested.
Norm Lamarche