A Proven Track Record | |
Two year reprieve on foreign content limits | |
Why am I doing this? Because Asia is rebounding but it is not going to be over night. Therefore demand for our products there such as Natural Resources will take time to recover.
There is no inflation which has a very big effect on Natural Resources, the high weighting in resources goes a long way towards explaining the relative lackluster performance of Canadian Equity Markets. When you throw in the financial sector that has rebounded that well from last year’s sell off, mainly because of the bank mergers and all the hype around them has come to an end. In fact, the Royal started cutting jobs. Don’t forget that these banks also have Brazilian and other countries’ loans that add to the situation. | |
So when you add these two large sectors together that only leaves around 40-45 percent left, and in a real strong market, for every two stocks going up, one goes down. So when you apply this ratio to the 40-45 percent we have left, now only about 25 percent of our market is doing anything. And you have to earn 4 times as much just to break even.
So when this loophole in foreign content restrictions came to my attention in December 1998, I started to take advantage of it. And it’s working. Just in case you missed my previous article on Segregated Funds, it said: in July 1998, the insurance industry asked the Department of Finance to delay the activation of the limits (foreign content) in order to clarify the rules and to allow enough time to make needed system changes. As a result, insurers now have an extra two years before Segregated Funds must fall under the 20 percent limit. The compliance deadline is now January 1, 2001. So we have two years we can use 100 percent foreign content. | |
