Weekly Wrap

Posted by Jamie Switzer and Marc Latta of Raymond James

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Market Summaries
S&P/TSX Composite down 0.20% to 12211 (up 4.00% year-to-date)
S&P/TSX Venture Composite up 0.01% to 1673 (up 14.31% ytd)
Dow Jones Industrial Avg down 1.70% to 11204 (up 5.60% ytd)
Nasdaq Composite down 2.70% to 2461 (up 8.50% ytd)
Oil (West Texas Intermediate) up $1.73 to $86.15 (up $6.79 ytd)
Gold (Spot USD/oz) up $21.60 to $1179.20 (up $82.25 ytd)

The Importance of Personalizing Your Portfolio
Over the past 10 years retirees have seen more than their fair share of turmoil that has roiled the markets; starting with the tech wreck, then 911, the credit crisis and now the sovereign debt crisis in Greece. No wonder an overwhelming number of retirees have shifted their investments out of stocks and into the perceived safety of GIC’s, bonds and other types of fixed-income investments. However, with interest rates at historically low levels, are they setting themselves up for another financial shock when rates eventually rise? The fact remains that retirees still need a portion of their portfolio in high quality growth investments in order to avoid outliving their portfolios. Growth investments, like stocks, provide the necessary protection against inflation, taxes and current near zero interest rate environment.

At retirement, investors have typically been taught to become more risk averse by reducing their exposure to equities and other growth assets in favour of fixed income securities. One of the commonly used rules of thumb is to allocate your age in bonds. Therefore, at 65 years of age, an investor should hold 65% bonds, and 35% equities. But the problem with this and other types of traditional cookie cutter retirement approaches is that they don’t take into account the individual’s specific objectives, such as; attitude towards risk, net worth, tax bracket, investment knowledge and estate plans.

One can argue that the whole notion of retirement, in the traditional sense, is slowly becoming a thing of the past. People are not only living longer, but they are choosing to remain in the workforce for a whole host of reasons, including the obvious need to supplement income from retirement savings. As a result, that is creating a broad range of financial circumstances for investors that lead to a much more personalized investment program, compared with the largely shared retirement mindset of the past.

Regardless of the fact that stocks should still play a significant investment role for retirees, fixed-income investments are the anchor in any conservatively managed portfolio and help investor’s weather financial storms like the 2008-09 crises. But fixed income does not necessarily mean that retirees have to settle for 1.5% GIC’s. Unfortunately, the financial industry in general does a poor job at educating investors about the range of safe income producing securities. Investors need to become more aware that fixed-income is a much bigger marketplace than just the posted GIC rate lit up in the windows of the banks.

Exploring the wide range of investment options available today can be a daunting task for the majority of investors. Nevertheless, the best thing that retirees can do for themselves is to educate themselves through books and specific material, as well as talking with a financial expert. All too often retirees make the mistake of buying into a product or group of funds that are marketed as retirement income solutions as they promise to pay a fixed percentage shareholders. The problem is that these are produced for the masses, carry hidden costs and can be extremely volatile because they are equities disguised as fixed income. A personalized retirement solution certainly takes more effort and expertise to build, however, there are significant advantages versus watered down mass marketed products.

– Marc & Jamie


  • Despite fears that the rising interest rates may cool off the housing sector, recent sales of luxury homes in Vancouver are telling a different story. Through the first quarter, Vancouver boasts the country’s largest sale ($10.06 million on the Westside), while the city’s most expensive listing sits at a whopping $22 million in Shaughnessy. The condo market is sizzling as well on the high-end, with one sale being done at $5.69 million. Realtors attribute the flurry of buying to speculators from Mainland China, driving up the volume of luxury home buying by 184% over ‘09’s first quarter. Vancouver leads the country with “entry-level” luxury homes starting at $2 million followed by Toronto and Montreal Island (both at $1.5 million).
  • The US Coast Guard is warning that the Gulf of Mexico oil rig disaster will develop into one of the worst spills in US history if the leaking well is not sealed. BP, which leases the Deepwater Horizon platform, is in the process of operating four robotic subs nearly 5000 feet below in an effort to cap two leaks in the pipe that connected the rig to the wellhead. Despite these efforts, oil continues to leak and a giant slick with a 1000-km circumference is now within 30 kms of the ecologically fragile Louisiana coast. Coast Guard Rear Admiral Mary Landry addressed a news conference in New Orleans saying, “I am going to say right up front: The BP efforts to secure the blowout have not yet been successful.” The rig, which BP leases from Houston-based contractor Transocean, collapsed last Thursday after a Tuesday afternoon explosion that killed 11 workers. Aside from the submarines, a fleet of 49 skimmers, tugs, barges and recovery boats have been deployed by BP in an effort to limit the damage.
  • The banker at the centre of the Goldman Sachs Group Inc fraud allegations staunchly denied any wrongdoing at the Senate hearings held last week. Fabrice Tourre attended the meeting with a number of colleagues and as a group fielded numerous questions from lawmakers at the Capitol Hill hearing. “I am saddened and humbled by what happened in the market in 2007 and 2008,” said Tourre, “but I believe my conduct was proper.” Despite the denials of the Goldman group throughout the hearing, lawmakers routinely pointed to emails and other documents in a binder showing how the company engaged in unethical behaviour by betting against various products they were peddling to their own investors. “Goldman’s actions demonstrate that it often saw its clients not as valuable customers, but as objects for their own profit,” said Senator Carl Levin, who is overseeing the investigation. “This matters because instead of doing well when its clients did well, Goldman Sachs did well when its clients lost money. Its conduct brings into question the whole function of Wall Street.”

Marketwatch – A Look at the Week’s Newsmakers
Research In Motion Ltd (RIM) – gathered analyst and industry heavyweights in Florida to provide a sneak peek at its new and improved OS 6.0 operating system, designed to go head-to-head with its competitors. Apple’s iPhone and Motorola’s Droid have been increasingly cutting into RIM’s marketshare and the company is under pressure to match some of the recent progress their competition has made. The more touch-friendly operating system and display was being championed by analyst at RIM’s annual Wireless Enterprise Symposium in Orlando, with one analyst referring to the mood in the room as “shock and awe.”  
Greystar Resources Ltd (GSL) – shares were clobbered in Monday’s session, falling almost 50% after the company was notified by the Columbian government that it must conform to new mining laws. The Ministry of the Environment, Housing and Territorial Development (MAVDT) has requested a new Environmental Impact Assessment (EIA) for its Angostura property, which is home to one of the world’s largest undeveloped gold & silver deposits. Incoming CEO Steve Kesler was shocked by the ruling and added that the company was under the impression Angostura would be “grandfathered” and avoid any changes to the mining code. The new rules essentially ban mining in Columbia’s Paramo ecosystem and once again raises the question as to whether Columbia truly is “open for business” as they have stated many times in recent months. This news also spooked investors in Ventana Gold and Galway Resources which are also situated in Columbia.
Barrick Gold Corp (ABX) – the world’s biggest gold miner is enjoying the fruits of finally shedding its monstrous hedge book, reporting record profits Wednesday. Barrick earned $758 million USD for the quarter, well above the $371 million it reported a year ago. Revenue nearly doubled to $1.8 billion and operating cash flow tripled to $1.05 billion. Gold production shot up 19%, bring total output to 2.08 million ounces alongside strong copper output of 100 million pounds (up 5.20%). In a period of rising costs, Barrick has also been able to improve its net cost per ounce of gold from $404 an ounce to $342. Clearly, this company known more for consistent disappointments is moving in the right direction.

“Quote of the Day”
The trouble with America is that there are far too many wide-open spaces surrounded by teeth.” – Charles Luckman


JAMIE SWITZER | Raymond James Ltd.
Senior Vice President, Financial Advisor
North Vancouver IAS
PH: 604.981.3355 | FAX: 604.981.3376

MARC LATTA | Raymond James Ltd.
Senior Vice President, Financial Advisor
PH:604-981-3366 | FAX: 604.981.3376

Suite 480, 171 West Esplanade
North Vancouver, British Columbia

This newsletter expresses the opinions of the writers, Marc Latta and Jamie Switzer, and not necessarily those of Raymond James Ltd. (RJL)  Statistics and factual data and other information are from sources believed to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.  It is not meant to provide legal, taxation, or account advice; as each situation is different, please seek advice based on your specific circumstance. RJL and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. It is intended for distribution only in those jurisdictions where RJL is registered as a dealer in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. This newsletter is not intended for nor should it be distributed to any person residing in the USA. Within the last 12 months, Raymond James Ltd. has undertaken an underwriting liability or has provided advice for a fee with respect to the securities of the Royal Bank of Canada. Raymond James Ltd is a member of the Canadian Investor Protection Fund.