Commentary

30 Sep 2011

Once again, a disappointing month and an even worse quarter for capital markets, and particularly our funds, as macro events trumped any semblance of sanity. What was already a tough year, especially for mid to small cap, just got worse as our policy makers and politicians bumbled their way into ineptitude, starting with a budget impasse in the U.S. and to a Euro crisis by the end of September. As such, this correction has called into question the global economy and the bull market we have been experiencing since February 2009.

30 Sep 2011

It is very disconcerting to see the governments bickering in times of trouble. Unfortunately, it’s human nature to take it as close to the wall as possible, before putting measures in place that should have been initiated months beforehand. In many respects, the current market bears a striking resemblance to the 2007-2009 fiasco, in which the factions in the U.S. politics dragged the fiscal and monetary fixes later than the market and the economic world needed. The longer they wait, the greater the stress, and ultimately, the greater the economic scar tissue that’s longer lasting.

30 Sep 2011

Global equity markets suffered dramatically in the third quarter, on the back of the European debt crisis. Fears of a Greek debt default, and the implications for the rest of Europe, sent investors to the sidelines. At the end of the quarter, the stronger members of the ECU were designing ways to create a stabilization (bailout) fund of up to two trillion dollars. Citizens of stronger nations, such as France and Germany, find it politically distasteful to bailout other governments who have lived beyond their means for years. So there are no easy or quick solutions to these problems.

23 Aug 2011

The latest commentary from Steelpath's MLP portfolio management team.

31 Jul 2011

Commodity- related stocks suffered significant declines and small cap stocks suffered large losses as the S&P/TSX Venture Index fell 17.1% for the quarter. The VIX declined for the quarter and credit spreads widened, causing a sell-off in hedged warrant positions and hedged bond positions.

31 Jul 2011

Global Investor sentiment towards the risk trade worsened in the second quarter.  Global equity shares retreated as the euro contagion risks, as well as the U.S. debt ceiling uncertainties dominated most headlines.  While commodities did also retreat, they faired better than equities.  Gold bullion, on the other hand, advanced $70/ounce during Q2, but the gold shares acted like stocks, and retreated in a bad macro environment.

31 Jul 2011

Risk aversion was the key phrase in the latter stages of the last quarter. Markets sold off in reaction to a number of political and financial issues taking place around the world. The noise from government upheavals in the Middle East, the Greek central bank bailout, and U.S. debt problems all sent investors running for the sidelines. We could see this flight to safety...

30 Jun 2011

Not a great month or quarter, especially for risk securities and mid-to-small cap equities. This, despite the underlying commodities remaining reasonably firm. Macro events have weighed heavily on the risk trade.

A global economic slow down and European contagion are the latest concerns in the market. We can also add the debt ceiling impasse in the U.S. as well. Although something we must stay on top of, we think it may be somewhat overblown.

30 Jun 2011

The second quarter began where the first quarter ended, as supply disruptions from March's massive earthquake in Japan and rising commodity prices began to slow global economic growth. It was a difficult quarter for equities as the S&P/TSX lost 5.7 per cent. The Fund lost about 90 basis points over the same period. Gains in fixed-income holdings and health care equities, short positions, and option-premiums received, were offset by price declines in most long equity positions.

31 Mar 2011

Despite the brood of Black Swans that descended on global markets in the first quarter of 2011, equity indices generally finished in positive territory. These Swans, or unexpected events, came in the form of both natural disasters (earthquakes in New Zealand and Japan, cyclones in Australia) and man-made events (the collapse of long-embedded political regimes in Northern Africa).

In Canada, the S&P/TSX Composite Index returned 5% in the quarter while Canadian bond indices, conversely, were virtually flat.

31 Mar 2011

Markets

The S&P/TSX, Dow Jones, and S&P 500 were up 5.6%, 7.0%, and 5.9%, respectively for the quarter. Improving fundamentals and civil unrest in the middle east/north Africa caused oil prices to spike, resulting in an increase of 16.8% for the quarter. During the same period, copper remained over $4, gold was flat, closing at $1439/ounce, while silver was up 22%, to close at $37.91/ounce.

Commentary

31 Mar 2011

Have the green shoots been plowed under?

One of our key tag-lines following the financial crisis has been “the green shoots in the economy are beginning to reappear”. These green shoots, of course, represented the early stages of growth following the economic winter of Fall 2008.

31 Mar 2011

All things considered, the markets are taking a number of events in stride. Although we may see some further near-term weakness, we do not anticipate a substantive correction.

31 Mar 2011

The year started off well, as markets, focusing on improving economic data, were pointing towards a global economic recovery.

30 Mar 2011

The commentary for the second quarter of 2011 ended with the question "is buying safe yield beginning to look like a risky proposition?" The third quarter showed us the answer: not yet. The S&P/TSX fell over 12 per cent in reaction to the deluge of bad news. The credit rating of the United States was cut to AA from AAA. Europe's game of kick the can down the road, as it relates to its sovereign debt problems, finally began to run out of road, as talk of preventing a Greek default changed to protecting banks in that continent.

31 Dec 2010

During 2010, the S&P/TSX Composite, S&P 500, and Dow Jones were up 17.3%, 14.8% and 13.8%, respectively. Commodities performed well with oil closing the year above $90 per barrel, up nearly 15%. Driven by both a recovering global economy and a devaluation of global currencies using quantitative easing, base metals and precious metals had strong gains, with copper up 31%, nickel up 34%, gold up 28%, and silver up 82%.

31 Dec 2010

The year 2010 brought investors along on a roller-coaster ride. While the full-year results for the U.S. S&P 500 and the Cdn S&P/TSX indices were seemingly average looking, the markets did rally out of the gate, sell off in the spring & summer as a result of the Euro Sovereign Debt fears, only to rally again in the fall-winter on better economic prospects.

31 Dec 2010

Review
A strong December capped off a solid 2010 for North American stocks. Despite all the negative prognostications, equities outperformed fixed-income markets for the year and will continue to do so as the global economies begin to recover. The signs point to better economic growth and low real interest rates in the medium term.

31 Dec 2010

Equity markets posted a strong fourth quarter as the U.S. Federal Reserve’s quantitative easing (QE2) program – the purchase of treasury securities by the reserve bank – once again put investors in a risk-taking mood. In Canada, the leading stocks of the fourth quarter were once again resource related, be they precious or base metals miners, and to a lesser extent, energy related.

31 Dec 2010

As greater confidence in a global recovery took hold in the fourth quarter, stock markets climbed sharply higher. Resource-based economies, in particular, performed quite well, with the Toronto Stock Exchange up 8.7% this quarter alone. Two of the best performing sectors were Materials and Energy, which were up 14% and 13% respectively. Continued restocking in China and other emerging markets, as well as modest economic growth in North America, has fueled this continued demand for commodities.

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Disclaimer:

The opinions expressed herein reflect those of the individual portfolio manager. These opinions are subject to change at any time based on market or other conditions, and Front Street Capital disclaims any responsibility to update such views. These opinions may differ from those of other portfolio managers or of Front Street Capital as a whole.

These views are for informational purposes only and are not intended to be a forecast of future events, a guarantee of future results or investment advice. All data referenced herein are from sources deemed to be reliable but cannot be guaranteed.

These views may not be relied upon as investment advice and, because investment decisions are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of Front Street Capital. Any discussion of any of the funds’ holdings are as of the podcast interview date, and are subject to change.

If specific securities are referenced, they have been selected by the portfolio manager on an objective basis to illustrate the views expressed herein. Such references do not include all material information about such securities, including risks, and are not intended to be recommendations to take any action with respect to such securities. Referenced securities may not be representative of the portfolio manager's current or future investments and are subject to change at any time.