Managed Money Reporter Newsletter — Issue 274, May/June 2013


Editors: Carl Spiess & Allan McGlade


Featured Articles



Market and recommended list update

Carl Spiess

By Carl Spiess, CFP, CIM, FMA, FCSI, MBA

Markets have been doing well for the first part of 2013 and the one year performance numbers of funds on our recommended list are nothing short of spectacular since May of 2012. Foreign funds have done particularly well. We expect that there will be some retrenchment in returns as the US Federal Reserve may finally be slowing down on its quantitative easing program. Ultimately, the idea is that the Fed is taking its foot off the gas because the economy is on track. We are hearing from more portfolio managers who are suggesting that the Canadian market may be slowing due to lower global commodity prices and the true opportunities are outside our home turf. We are continuing to recommend having foreign content in client portfolios.

To help you take advantage of changes in the markets, we have updated our recommended list. For full details of the changes and our rationale, please see the link, below. For more on the markets, please visit our market watch page. While the summer time is generally a quieter time for many people, this can be a good time to meet with us for a portfolio review and to update your financial plan. Contact us if you would like to set up a meeting.

More on the Spiess McGlade recommended list

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Spiess McGlade Team Opens TSX with BlackRock iShares ETFs

Spiess McGlade Team Opens TSX
Click to see video

There are now over 240 Exchange Traded Funds (ETFs) listed on the Toronto Stock Exchange. When Blackrock iShares launched 5 new ETFs (XCD, XEC, XEF, XGI and XUS), the Spiess McGlade team was invited to help "ring the bell" and open the exchange.

For information on the new ETFs launched in April, see the press releases:

BlackRock manages approximately $50 billion amongst its 94 ETFs listed on TSX. BlackRock is the largest ETF provider by market capitalization and by number of ETFs listed on Toronto Stock Exchange. For more information visit http://ishares.ca.

We continue to like ETFs for client portfolios where appropriate, especially in "fee-based" accounts where the advice cost is billed separately from the fund investment management fee. For a good summary of how various active and passive Canadian mutual funds and ETFs have performed over the last 5 years, please see our summary comparing the after-fee performance of several long standing ETFs and mutual funds - Summary comparison of after-fee fund performance. Please contact us if you have questions about the pros and cons of adding ETFs to your portfolio.

More on ETFs

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What is Canada Pension Plan Worth?

Here is a skill testing question for those approaching retirement. What is Canada Pension Plan worth? Most people will answer $1,012.50 per month for a 65 year old with a fully Canadian working career with maximum eligible earnings.

But what is that future income stream worth? Or how much would it cost a 65 year old to buy $1,012.50 of monthly income for life with a 2% future inflation adjustment and 60% spousal survivor benefit?

The answer is that an annuity with the exact same income features as CPP would cost (in today's dollars):

  • $279,347 for a 65 year old female, or
  • $267,368 for a 65 year old male.

You can see the details in these annuity quotes:

For more information on annuities and CPP, see these links:

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Due Diligence - Jeremy Siegel - Stocks for the Long Run

Allan & I recently attended a conference for Associate Portfolio Managers (APM) designation holders. (Allan & I both recently received the designation which allows us to run discretionary portfolios for clients.) High on our lists of interests at the conference was seeing Jeremy Siegel, author of Stocks for the Long Run, speak. We had heard presentations from Jeremy in the past, and it was interesting to get an update from him. His theories are tried and true and continue to inform our practice. We were also able to meet Jeremy Siegel and he was kind enough to autograph his famous chart for the Spiess McGlade Team. You may recognize it. We use this chart in many of our presentations:

Here is a summary again of total returns over the last 210 years:

  • Stocks 6.6%
  • Bonds 3.6%
  • Bills 2.7%
  • Gold .7%
  • Dollar -1.4%

We've been following this author now for a decade - so yes, we feel like groupies when we see him speak. Here is our due diligence report about Jeremy Siegel from 2003:

Also, here is his website for more information on his work:

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Go Paperless & Win!

Thank you to the many clients who have switched to paperless statements as part of our Go Green campaign.

Until July 15th, switch to paperless statements on Scotia Online and be entered in a draw to win. Simply log into Scotia Online, select "Manage My Accounts", "Document Preferences" and "Go paperless". (You may still want to keep an annual trading summary on paper for your records.) Click on the "Go paperless" icon, below, for complete details. For more details, see:

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OSBs on Sale Now

You've seen the advertisements:

Ontario Savings Bonds on Sale Now

From now until June 21st, we have Ontario Savings Bonds available.  Like Canada Savings Bonds, these are safe and liquid investments that can be purchased in large quantities and retain a full government guarantee. With variable OSB rates at 1.3%, a 3 year OSB at 1.5%, the step up 5 year OSB maxing out at 2.25% and a 10 year OSB at 3.10%, we may well stick with GICs.

Our highest rate cashable GIC at present is at 1.6%, 1 year at 1.85%, 2 years 2.0%, 3 years 2.05%, 4 years at 2.15% and 5 years at 2.3%.  For most clients this can be a better option. In any case, please contact us if you would like a review of our guaranteed investment options.

Ontario Savings Bonds website

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Team News - Congratulations to Claudia Ochoa

Claudia and Fernando welcomed a first child to their family on Friday May 31st, 2013 at 3:32 a.m. We are all excited to meet their daughter Emma soon!

Also, we welcome Michael Ospina to our team who is helping to cover Claudia's responsibilities over the coming year.

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Recommended Reading - IPQ

Investment Portfolio Quarterly

ScotiaMcLeod's Investment Portfolio Quarterly has been updated for Spring 2013. The latest issue can always be found on our market watch page.

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Recommended Link of the Month

ScotiaMcLeod is pleased to help create a personalized retirement income plan for you. We can illustrate Canada Pension Plan, Old Age Security, RRIF, Annuity and Pension Income in great detail using our proprietary Naviplan software.

If you prefer to run the calculations yourself, CRA has a good retirement calculator. What is interesting is that on the "average annual rate of return" option, one can select from 2% to (get this!) 20%. At least they default the rate of return at a realistic 5%. It can certainly help explain the pros and cons of taking CPP early and other details about government retirement income programs.

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E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

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