By Scott Ronalds

2011 was a great year for bonds and a not-so-great year for stocks. Interest rates declined further (10-year Government of Canada bond yields ended the year below 2% for the first time in a century), leading to strong price gains in government bonds, and to a lesser extent corporate bonds. Debt concerns in Europe and political lollygagging weighed on investor confidence and most stock markets around the world had a poor year. Double-digit losses were common in Europe and Asia, while the Canadian market dropped 9%. The U.S. was a lone exception and eked out a small gain.

In this podcast, we review the performance of our funds and highlight some of the key messages from our Quarterly Report.

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By Scott Ronalds

It was an ugly quarter for stocks, with most major markets suffering double-digit declines. The bond market, on the other hand, had its strongest showing in 15 years (government bond yields now stand at levels not seen since the 1940s).

Our funds declined, but held up better than the market. Their focus on high-quality, non-speculative companies helped dampen negative returns.

In this podcast, we review the quarter in further detail and highlight some of the key takeaways from our Quarterly Report.

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By Scott Ronalds

Wil Wutherich, the manager of our Small-Cap Equity Fund, is in town this week on a research trip. We booked an afternoon of his time to discuss the fund. Since we've covered his investment process in previous sessions and his philosophy is well documented on our site, Tom sat down with him to talk stocks.

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By Scott Ronalds

It was a skittish quarter for stocks. The Canadian market had a rough spring, as commodity-related stocks gave back some of their gains from earlier in the year. The U.S. and Japanese markets were largely unchanged, while Europe was mixed. Bonds, on the other hand, had a strong quarter, as investors embraced safety and yields declined further.

Our funds held up relatively well, given our managers' focus on high-quality companies and lack of exposure to the mining sector.

In this podcast, we review the quarter in further detail and highlight some of the key takeaways from our Quarterly Report.

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By Scott Ronalds

Stock markets pushed forward in the first quarter despite some strong headwinds, including revolutions in North Africa, the earthquake and tsunami in Japan, and lingering sovereign debt issues in Europe. It goes to prove that the linkage between headlines and market returns is anything but precise.

In this podcast, we review the first quarter of 2011 and highlight some of the key messages from our Quarterly Report.

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By Scott Ronalds

Wil Wutherich, the manager of our Small-Cap Equity Fund, is in town this week on a research trip. We booked an afternoon of his time to review the fund and get some further insights on some of the stocks in the portfolio.

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By Scott Ronalds

2010 was a good year for both stocks and bonds. Resource-focused and small-cap stocks saw sharp gains, and both the Canadian and U.S. markets turned in double-digit returns. European stocks struggled in comparison, however, due to the well-publicized headwinds in the region (i.e., debt problems).

Bonds were once again popular, as investors were willing to pay a premium for safety and income, although their shine began to fade late in the year as interest rates began to rise. Our clients with a balanced asset mix experienced returns in the 9-10% range for the year, depending on their mix.

In this podcast, we review the performance of our funds and highlight some of the key messages from our Quarterly Report.

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Small cap stocks were hit particularly hard during the credit crisis of 2008/09.  In this update, Tom talks with Wil Wutherich (the manager of the fund) about the current financial shape of the businesses in the portfolio and how they weathered the storm. Wil also shares a few anecdotes on some of the fund's holdings to bring his investment philosophy to life, and discusses why he's optimistic (and comfortable) about select oil stocks in Colombia.

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"Japan has been bad for so long, it's largely ignored. Just to give you a flavour of that, we had the senior management of Sony in to see us and they told us we were their largest shareholder in Europe. And we're not a large company. It tells you the lack of interest in Japan."
      - Dr. Sandy Nairn, CEO of Edinburgh Partners Limited 

In this update, Tom and Sandy discuss some of the opportunities and dangers in the global markets (Sandy's firm manages our Global Fund). They touch on the outlook for the economy and how it impacts EPL's research efforts, their views on Asia, and the return expectations for the portfolio.

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In this update, Tom discusses the Equity Fund with Ted Ecclestone, a partner at CGOV (the manager of the fund).

The portfolio has an emphasis on high-quality stocks, which have underperformed the broader market over the past several quarters. Ted reviews where CGOV stands today on this positioning. He also discusses some of the recent changes in the fund and addresses a few stock specific glitches (Manulife and Shoppers Drug Mart) and a key win (Potash Corp).

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With the camera rolling, Tom recently sat down with Warren Stoddart, a Vice President and Managing Partner at Connor, Clark & Lunn, to provide an update on our Income Fund (which CC&L manages).  Topics of discussion included:

• interest rates
  
• inflation
• return expectations
• corporate bonds
• real estate investment trusts (REITs)

By Scott Ronalds

The second quarter of 2010 was a challenging period for equity markets, as investors focused on the European debt problems and the sustainability of the global economic recovery. In this podcast, we review these issues and highlight some of the key messages from our Quarterly Report.

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By Scott Ronalds

Tom met with Edinburgh Partners Limited (EPL) on their home turf last week for an annual update on their firm and global equity portfolio. It was also an opportune time to discuss some of the issues currently impacting Europe and get the CEO’s (Sandy Nairn) thoughts on the debt crisis that is overhanging Greece.

A little jet-lagged and with a hint of an accent, Tom highlights some takeaways from his visit in this podcast, which is a supplementary posting to a blog on the same topic.

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By Scott Ronalds

In this podcast, Tom and I highlight some of the key messages from our Quarterly Report. We also discuss our three-year performance (Steadyhand marked its third anniversary in the quarter) and provide an overview on the advice we are currently providing to clients.

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By Scott Ronalds

Wil Wutherich, the manager of our Small-Cap Fund, was in town last week on a research trip. We snagged a morning of his time to review the fund and get some further insights on some of the stocks in the portfolio.

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By Scott Ronalds

Toward the end of every quarter, we get on the phone with each of our fund managers and review their portfolios (our funds). This is a formal process that we go through with CC&L (the manager of our Savings Fund and Income Fund), CGOV (Equity Fund), Edinburgh Partners (Global Equity Fund) and Wutherich & Company (Small-Cap Equity Fund).

In this podcast, we take you 'behind the scenes' by highlighting some of the issues and topics that we discuss in these sessions, using our recent call with CGOV as an example.

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By Scott Ronalds

Don Cranston, one of the founding partners of CGOV Asset Management (the manager of our Equity Fund) was in town last week enjoying some of our rain. We put Don in front of the microphone and asked him a few of the questions that are at the top of investors’ minds these days:

• How and why does CGOV incorporate foreign holdings into the fund?
  
• What were some of the disappointments in the portfolio last year?
  
• How is the fund currently positioned?

And, as is customary with a visit from one of our managers, we closed with some rapid fire questions to get to know the real Don Cranston. Evidently, he’s not a fan of synchronized swimming.

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By Scott Ronalds

If you’re an income investor, T-Bills and GICs aren’t helping you much these days. And the prospects for government bonds are nothing to get excited about. In order to achieve a more desirable return, you may find yourself reaching for yield, or moving up the risk scale.

While this isn’t necessarily a bad thing, it should be done in a conscious and appropriate way. In this podcast, Tom expands on some of the advice he proposed in his latest Globe and Mail article. He also discusses the outlook and opportunities in our Income Fund.

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By Scott Ronalds

Tom recently sat down with Larry Lunn, the Chairman and founder of Connor, Clark & Lunn (CC&L), to talk shop.

At the front end of the podcast, Larry discusses where we are in the economic recovery and his view on [the hot topic of] inflation. He then addresses some of the strategies that CC&L is pursuing in the Income Fund, and where they are seeing the best value in the bond market.

And we’d be remiss if we didn’t close the podcast by asking the veteran money manager where he sees returns headed over the next 5 or so years, given the extraordinary circumstances we’ve been through over the past 12 months.

If you’ve got 20 minutes to spare, there’s a lot of wisdom to take away. If you’d rather tune in by topic, here’s a breakdown of the conversation:

0 – 2:40.  Introduction.
2:40 – 5:12.  Where we are in the economic recovery.
5:12 – 8:35.  Inflation.
8:35 – 11:35.  Strategies in the Income Fund that have paid off recently.
11:35 – 13:10.  Bank bonds and other areas of opportunity.
13:10 – 14:12.  Corporate bond exposure going forward.
14:12 – 15:15.  The U.S. high yield market.
15:15 – 17:25.  Strategy with respect to income-equities.
17:25 – 19:02.  Medium-term outlook for the markets and the Income Fund.

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By Scott Ronalds

In this podcast, Tom and I review the third quarter of 2009.

It was another strong period for equities. U.S. stocks posted their best quarter in a decade, while the TSX and many overseas markets turned in double-digit returns. A rising loonie negatively impacted foreign returns (for Canadian investors), but overall, it was a bright summer for equity investors.  Fixed income investors also had much to cheer about, as improving liquidity conditions and sentiment led to further declines in corporate bond yields.

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By Scott Ronalds

In this podcast, Tom expands on his latest Globe and Mail column, which focuses on the traits that he looks for in a money manager.  More specifically, he highlights two things that he watches for and studies very intently: 1) the temperament of the manager, and 2) their investment process (is it repeatable and does it stand up in times of stress?).

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We've published this posting in both text and video form. Click the play button below to watch the video.

A lot of thought has been going into the lessons learned from the recession. That's prompted me to think about what has come out of the turmoil in the capital markets. It didn't take long to come up with a list. Here are my top five lessons learned, or should I say relearned: When it comes to markets and cycles, investors are not very good students. We seem to make the same mistakes over and over.

Leverage is a two-way street. During the years leading up to the summer of 2007, credit was available to any person, organization or investment firm that wanted it. The signs all said one way and there were no stop lights. But when debt is introduced to the mix, the range of possibilities is increased. The worst-case scenario should determine how much leverage is tolerable, but with low interest rates and a strong economy, that option wasn't being considered.

As an asset manager, it was also frustrating to see that investment returns created by leverage (and other forms of financial engineering) were being treated as equal to those based on corporate profits. While trying to temper clients' expectations, we found ourselves competing against levered products offering “potential” returns. Don't they know debt works both ways?

Don't get carried away on one theme and stray from your long-term strategy. The investors that had all their money with Bernie Madoff were extreme cases, but long cycles and past success do tend to lead people away from their long-term asset mix. Whether it was the Nifty Fifty in the 1970s, technology in the '90s or resources this time around, we're prone to getting carried away. And not just the amateurs, the pros do it too. Everyone on the buy side was watching the Ivy League schools – Harvard, Yale and Princeton – to see how they were generating such high returns, but this cycle they went overboard on illiquid investments (real estate, private equity and commodities) and got caught in a cash squeeze. I was guilty of letting my (and our clients') exposure to corporate bonds creep up after many years of good returns.

Don't assume liquidity will be there when you need it. When there is plenty of money flowing, investors start to believe it will always be there. “There is a wall of liquidity out there, the market can't go down,” was a common refrain in 2006 and 2007 when the pockets of hedge fund and private equity managers were bulging.

As I've said before, don't ever base an investment strategy on capital flows. The money tap can turn off in an instant – and without warning – which is what happened in the summer of 2007. Whether it's an individual needing money from his/her portfolio, a corporation refinancing its loans, or a structured product rolling over short-term financing, it should never be assumed that markets will be favourable, or even available, at the moment of need.

When I was a young sell-side analyst in the 1980s, I once admonished the chief financial officer of Canadian Pacific Ltd. for doing an equity issue when it didn't appear the company needed the capital. He stared at this nervy, naive punk and said, “I took it because it was there.” I didn't get his point at the time, but it eventually sunk in.

Risk management systems work until they don't. And they don't when circumstances extend beyond the range of expected outcomes. Sophisticated formulas assume that correlations are stable and distribution curves are normal. But correlations are as erratic as a driver on a cellphone and we don't need to be protected until abnormal times.

And yet, the elegance of the models is hard to resist. As managers, we get sucked into micro-managing unimportant stuff (tracking error versus the benchmark, style factors and cross-correlations) and fail to use common sense on the big stuff.

Finally, it's not different this time. It's just another episode of the same show. The economic and market cycle has not been repealed, even though former president George W. Bush and former U.S. Federal Reserve chairman Alan Greenspan tried their darnedest. Booms lead to busts, and extreme booms lead to what we have now. Therefore, price is always important, no matter how much capital is available or how compelling the story behind the investment is. And it's always better to sell when people around you are greedy and buy when they are fearful.

Not long ago we were thinking that we'd never have a recession because of “Chindia.” Now we are questioning the potential for a recovery. This is no different than any other cycle. Individuals and organizations adapt to a new set of circumstances. Inventories will be reduced, uneconomic production taken out of service, debtors delevered, and lo-and-behold, growth will reappear, from a lower, more sustainable base.

In an interview with Barron's magazine last fall, Jeremy Grantham, chairman of GMO in Boston, was asked if we will learn anything from the crisis. He answered, “We will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent.”

Unfortunately he's right. But let's at least commit to remembering these five lessons. Repeat after me…

In this podcast, Tom and Scott review the second quarter of 2009.

The equity markets rebounded sharply in the quarter, with many stocks posting strong gains.  The corporate bond market also enjoyed a long-awaited recovery, as yields declined and the credit environment improved.  Our funds bounced back to varying degrees, with the Global and Income funds posting notable advances and the Small-Cap fund turning in a more modest gain. 

Listen now (the file many take a minute or two to download), or subscribe to our podcasts via iTunes or RSS.

By Scott Ronalds

Christine Montgomery from Edinburgh Partners, the manager of our Global Equity Fund, has been traveling in North America this week meeting with companies (research) and clients (hand-holding). We dragged her out of the San Francisco fog and welcomed her to our sunny (partly) headquarters yesterday, where we reviewed the portfolio and talked shop.

In the attached podcast, Tom and Christine discuss a number of issues, including:

• The recovery in the global equity markets
  
• The on-going shift in the portfolio from defense to offense – health care, telecom and cash positions have been reduced, while exposure to cyclically exposed growth businesses and emerging market stocks has been increased
  
• The fund’s exposure to Asia and the types of companies that represent compelling investments in the region
  
• The attributes that Edinburgh Partners looks for in technology stocks, which have seen their weight in the portfolio double over the past year, from 13% to 26%
  
• An update on the fund’s holdings in the financial sector

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By Scott Ronalds

Stock markets have rebounded 25-35% since the lows reached in March.  Feeling uneasy about the recent bounce?  In this podcast, Tom expands on his recent Globe and Mail column and provides some advice to investors who are unsure what to do at this point.

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By Scott Ronalds

Many studies on active vs. passive management draw the conclusion that the latter strategy (more commonly known as ‘indexing’) is superior because it generates higher returns. Notwithstanding the ‘sloppiness’ of some of these comparisons, it is true that many active managers underperform their benchmark. But it doesn’t have to be this way. Most active managers aren’t given a fighting chance. They are burdened by impediments such as high fees, tight constraints and a focus on short-term performance. When these issues are addressed, it’s a different ball game.

In this podcast, Tom expands on the active vs. passive debate. In doing so, he sheds some light on his Globe and Mail article from last weekend, and points to a recent piece on the topic published by Morningstar.

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By Scott Ronalds

In this podcast, we review the first quarter of 2009 and discuss how our funds have fared in the current market environment.

While it was another ugly quarter for equities in general, there were some bright spots, with some stocks posting strong gains.  On the fixed income side, the bond market continues to provide positive returns for investors, but with government bonds yielding under 3%, the best opportunities remain in the corporate sector.

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS. 

In this, our last posting on the topic (we promise), Tom explains what draws him to Buffett and why he commends his calmness, candidness and common sense approach toward investing. He also expands on Buffett's view that the investment world has gone from underpricing risk to overpricing it, among other observations.

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In this podcast, Tom chats with Wil Wutherich, the manager of the Small-Cap Fund, about the fund's performance in 2008, the current opportunities in the market, and some of the fund's larger holdings.

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS. 

In this podcast, we review the fourth quarter and provide our thoughts on the markets going forward.

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Investors need to put some perspective on the dire headlines.  At some point, stocks and corporate bonds stop going down on negative news.  They begin to look forward to better times ahead.  It’s time to start preparing for the other side of the valley.

Listen now (the file may take a minute or two to download).

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS.

In Jay's words, the current environment is challenging, yet full of opportunity.  Listen now to find out why. Or, subscribe to our podcasts via iTunes or RSS.  

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS.

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS.

Listen now (the file may take a minute or two to download), or subscribe to our podcasts via iTunes or RSS.

In our first video blog, Tom discusses why investors should steer clear of principal-protected products. He notes that professional investors would never touch these products because the odds are clearly stacked against them. Click the play button below to watch the video.

In this podcast, we review the fourth quarter, touch on some of the highlights of our Quarterly Report, and take a closer look at how our funds are positioned for 2008 and beyond. The session was fuelled by Nibs (Steadyhand’s licorice of choice) for those wondering about the obscure reference toward the end.

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On a personal note, we discover that EP’s insurance analyst is a fan of Led Zeppelin, bypasses Burberry, and prefers St. Andrews over Carnoustie.

Listen now to learn more about the fund and its management team, or subscribe to our podcasts via iTunes or RSS. Please note that the podcast may take a minute or two to download.

The podcast may take a minute or two to download. Also note that the conversation took place via telephone, so the recording is slightly more faint than our prior podcasts, despite the best efforts of our vast team of sound engineers.

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