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July Update, 2009

To say that I’ve been busy over the past month would be an understatement.

Markets:

Between hectic shifts at work, days off filled with landscaping/getting our new home in order and enjoying the first bit of good weather we’ve had here in South-western Ontario this summer I’m glad that the markets have been uneventful because to be quite honest, “this market stinks.”

The incredible buying opportunities that had me salivating from September to March seemed to have completely disappeared and the market appears to possess a split personality. I’m no technical analysis guru, but from my point of view we’ve hit a bit of a rut in the markets. The numbers of bulls and bears appears to have drawn even and everyone has an opinion on where the market will go next. I’ll add one more to the growing number of investors speculating on where we head next: nowhere.

The bottom line is this: stocks are no longer “cheap” by the standards I use when I examine the economic landscape and with unemployment (even as a lagging indicator) rising closer to 10% I don’t see a whole lot of reason for optimism going into 2010. I think the rest of this year and next will provide a range bound market until a more precise economic picture becomes clear.

The reason is pretty simple from my perspective. De-leveraging takes time and no amount of money thrown by governments will solve the problem in a hurry. Stimulus is one thing when there is obvious economic contraction but this contraction has been bigger than others and we need to put reality into perspective. I believe Canada is one of a few (if any) remaining countries who has not experienced a considerable decline in housing prices (and I’m not talking about 4-5%). Consumer debt levels remain high, incomes will not be rising to meet the higher demands of borrowing rates and high unemployment just paint a simple picture of grey for the optimistic economic guidance being given for 2010. That’s not to say that I don’t expect opportunities of value to present themselves; but the rosy economic picture being painted at this time doesn’t jive with the economic reality of a massive bubble of credit that burst when everyone knew for years that it simply wasn’t sustainable.

SAML:

I’ve decided to make a few changes to the Stock Analysis Mailing List (SAML) on the site for a few reasons. I still plan to offer the service to all existing free members, but I will no longer be offering a yearly subscription for a fee. I’ve had much more success selling individual analyses to date and holding myself to a minimum number of stocks to analyze didn’t make much sense if the demand wasn’t there. I still plan on publishing Taking Stock in Bank of Nova Scotia (BNS) before the end of September so I thank readers for being patient.

Vacation:

As many long time readers know August is a month of importance for me as I usually spend the majority of the month at the family cottage with my parents, siblings and our significant others. This year is no different and I will be away for likely the remainder of the month starting August 8th. I haven’t scheduled in any new or guest posts so feel free to email questions or comments and I will reply when I return.

I’ve promised Claire no Blackberry this year or internet although I will have my laptop with me as I plan to start writing the qualitative component of Taking Stock in Bank of Nova Scotia (BNS) and read/review a book by Sramana Mitra’s titled, Bootstrapping: Weapon of Mass Reconstruction.

Portfolios:

Although July didn’t provide a lot of excitement in the equity markets I did do some rebalancing to my main portfolios to adjust for some aggressive buying I did earlier in the year. Taking profits at this point in the markets and re-investing those gains into lagging positions seems like a prudent and effective use of resources.

In my Dividend Growth Portfolio (DivG) I sold a portion of my holdings in Manulife Financial (MFC) and Royal Bank (RY) after they each grew to over 5.25% of the portfolio. 5.25% is the threshold I have for how large any individual position can grow to before I consider trimming it down. Ideally I like to keep all position within the portfolio between 3-5%. With the proceeds and numerous dividends I received from existing positions I added in small amounts to Canadian Pacific (CP), Shaw Communications (SJR.B), Thomson-Reuters (TRI), Metro (MRU.A) and Rogers Communications (RCI.B) to bring their weightings above 3%. Financials now only comprise 32% of the portfolio overall including all common equity and preferred shares I have in various banks, insurance and wealth management companies. Moving forward into August and September I’m looking to add to my positions in Empire (EMP.A) and Atco (ACO.X) and one other preferred share series to bring their allocations above 3.25%.

In my RSP I bought shares in Heinz (HNZ) and Kraft (KFT) and I’m currently waiting to add to my positions in TEVA Pharmaceuticals (TEVA), Proctor & Gamble (PG) and two ETF’s I hold (ADRE & VGK).

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{ 3 comments… add one }
  • Steve C August 4, 2009, 6:51 pm

    Good update.

    I'm also looking at triming my position in MFC. They are reporting on Thursday. There's a good chance that they might cut their dividend by about 25%-50%.

    Please update your top ten holdings in the DivG portfolio when you get a chance. Thx.

  • Steve C August 6, 2009, 9:32 pm

    And the Dividend gets cut 50% !!!!!

  • Steve C August 6, 2009, 9:34 pm

    P.S. Thanks for updating the DivG Portfolio and adding the RSP Top 10.

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