February markets continued the recovery from Q4 2018. US housing data continued to dissapoint and manufacturing continued to slide. On the bright side the labour market in the US continued to be robust and GDP growth beat expectations.
Chinese manufacturing has recovered a bit and foreign direct investment was healthy with vehicle sales remaining weak.
Canada saw weak manufacturing, inflation, vehicle sales and employment seemed lumpy.
German retail sales and inflation recovered with employment remaining strong while GDP and manufacturing remained soft.
Bond yields increased in the US, UK and Germany while Canada’s bond rates in Canada decreased.
Commodities saw copper and oil continue to advance.
This to me shows a mixed picture of weak manufacturing with a strong consumer. The backdrop of high debt levels in Canada still cause me to avoid Canadian investments with a strong focus on the US with an increased allocation to Germany. Further with commodities and interest rates rising I am stick a focus away from interest rate sensitive assets.
On the wealth side there are always two questions that every client gets asked:
- How much cash are you going to need and
- When are you going to need those cash flow(s)
Even if someone is in retirement they likely will not draw all their cash when they retire. Usually it is a series of cash flows set out over decades. These cash flows can be matched off with a fixed income investment that matures on those dates. Outside of that, the growth will come from the equity side of the portfolio.
It is a simple formula and the portfolios that I construct often seem simplistic. Having said that, why should you pay for complication? Shouldn’t you pay for simplicity and sophistication?
Finding out how much you will have in retirement, how much money you can generate off of that nest egg and how to manage the cash flows is a simple and painless process when a portfolio manager like ourselves keep it simple.
Insurance wise we helped a number of families protect their assets as many people are unaware that once a person on a mortgage dies that the bank will require the remaining mortgagers to qualify for the mortgage on just their incomes which many families will not.
A simple and inexpensive solution is to protect the liability with life insurance. A recent example we did was looking at life insurance on a mortgage through the mortgage company and the cost was $150 per month. Purchasing an independent and fully underwritten policy was priced to be $50 per month.
The advantage of a life insurance policy compared to a credit insurance on the mortgage is:
- It can be cheaper for compartive insurance
- The life insurance policy stays with you regardless if you sell your house
- Credit insurance will look at reasons not to pay upon death whereas a life insurance policy will payout unless fraud occured
Point number 3 means that credit insurance on your mortgage may not pay out after having paid the premiums for years if they find a reason that is inconsistent with the application. A life insurance policy does this work upfront rather than at the end of the policy.
Until next month.
Trevor Dale, CFA
This report is provided by TK Dale Wealth Management Inc. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic, investment and market analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. TK Dale Wealth Management Inc. is not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.