When asked about the current climate in the markets:
“My general response is that the secular forces that are creating a weak US dollar and strong oil and gold prices are still in place. However, as you know market movements are never a straight line. As a result, we wouldn’t be surprised if there is a counter trend move in these markets. They all appear to be either stretched on the upside (oil, gold and Canadian dollar) or downside (US dollar, natural gas, financials). Timing is always tricky with counter trend moves.”
- Neil Jacoby (CFA), President & Managing Partner of Aurion Capital Management (Oct. 30, 2007)
Additionally, I also happend to have a short conversation with Keith Summers of Stongate Private Counsel today and our exchange is posted below.
Bio: Based in Toronto, Keith Summers is the Chief Investment Officer of Stonegate Private Counsel LP. With 18 years of investment management experience, he is responsible for the management of all portfolios, as well as regulatory and compliance matters.Prior to joining Stonegate, Keith was a portfolio manager with a large North American wealth management company. Previously, he managed both U.S. equity and global balanced portfolios for a U.S. reinsurance company, as well as Canadian fixed-income portfolio for a specialty insurance company in Ontario.
Recognized as an industry expert, Keith appears regularly on television as a market commentator and has contributed articles to the highly respected industry publication, CFA Magazine.
Q: Mr. Summers, in the face of the recent run up in the price of gold, what are your current views of gold and gold stocks in general and conversely what are your views on the US dollar?
A: Generally speaking, we avoid commenting on specific market sectors. I’d recommend overweighting gold if I expected further significant depreciation of the US dollar, or lots of inflation. I don’t expect either of these.
Q: With the Canadian dollar hitting new multi year highs yesterday, do you think the surge in the value of our currency (in the last 90 days) is a tad overdone?
A: Momentum exists. It doesn’t last, but it exists. The Canadian dollar story is less compelling when compared against the GBP or the EUR.
Q: With oil hitting $93/barrel and natural gas languishing in the $6-7/mcf range (and Premier Stelmach’s newly announced royalty regime), are you of the opinion that natural gas prices are poised to move up or oil prices are poised to move down?
A: I didn’t expect oil to break $90. The royalty regime won’t affect oil prices, though it will affect the future profitability of the oil patch. The factors affecting gas prices are different than the factors affecting oil prices. “Historic” relationships between the two prices are just that – historic. There is no guaranteed arbitrage play here.
Q: If possible can you please highlight one sector among Canadian stocks (eg. it can be financials, energy stocks, technology, consumer staples, etc.) that you believe to be overbought and due for a correction and one sector that you believe to be oversold and due for a bounce and why?
A: I don’t know that there is a specific sector that is either overbought or oversold. My concern with the TSX is that it has become too resource-intensive. There is more value, opportunity and less risk offshore.
Q: Lastly, can you please highlight 1 stock that you think offers the best value moving forward and your reasons for liking it?
A: I’m actually going to recommend a mutual fund, the United Emerging Markets Pool (full disclosure – United Financial is our parent company). These emerging markets are experiencing tremendous growth right now and (contrary to popular opinion) are not overly dependent on exports to the US markets. I often call this the “mission to Mars” portfolio. Imagine that you’re on a mission to Mars. You’ll be gone 3 years and won’t get any mail, so you won’t get any statements showing the high short-term volatility of emerging markets, however when you get back…you’ll be pleasantly surprised with the returns earned.
Thank You Mr. Jacoby and Mr. Summers!
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