January 2020 Update

February 3, 2020

I'd like to announce the addition of Rina DiGiannantonio to the office. She will be supporting me from an administrative and trading perspective. Feel free to reach out to her if you have questions as she can usually respond much quicker than I given I'm in appointments most of my days. She can be reached at rdigi@equityassociates.ca or 1-800-752-1850 ext. 1231.

 

February is upon us. As is the RRSP deadline. If you need to make a deposit, discuss or review and we haven't yet spoken please let me know. The deadline is February 29, 2020.

 

There is no deadline for the TFSA but the annual deposit limit will remain the same at $6000. Cumulative limit for anyone age 18 or older in 2009 is $69,500.

 

TFSA LIMITS

 

Tax Free Savings Account

 

2019 Contribution Limit = $6000

2020 Contribution Limit = $6000

Jan 1, 2019, Cumulative Limit = $63,500

Jan 1, 2020 Cumulative Limit = $69,500

No deadline for deposits

 

RRSP LIMITS

 

Registered Retirement Savings Plan

 

2019 Contribution Limit $26,500

2020 Contribution limit $27,230

Deadline for 2019 tax deduction February 29, 2020 (LEAP YEAR!)

 

Courtesy of Renaissance Investments:

 

Global Markets started 2020 exceptionally strong and then the Coronavirus has put into question global growth. Overnight, the Shanghai index down (-7.72%) but remember this index has been closed for the Chinese New year and we are seeing a negative catch-up to what has been occurring in the global markets. When you have millions of people “work from home” in China clearly global growth will be abated but the question is how much?  SARS provides us with some insight into the potential impact and the market appears to be benchmarking this to SARS.  During SARS there were significant hits to GDP growth of affected regions (primarily China, Hong Kong, and Canada) and accommodative policy was introduced to provide some relief. January global indices data below.  

 

Courtesy of Bloomberg:

 

The U.S. benchmark's enterprise value to Ebitda ratio — a broader measure of valuation than price to earnings — recently breached levels last seen before the Internet bubble burst in 2000. While valuation analysis is often (and correctly) scoffed at as an predictor of short-term returns, the analysts are no doubt uneasy, because it has a better track record over the medium to longer-term. (From Bloomberg Jan 9, 2020) 

 

So, is gold good value? The metal doesn’t throw off any income streams, and has very few industrial uses, so it is very hard to come up with a measure of fair value. But the following chart, using data drawn up by Charlie Morris of Catley, Lakewood and May in London, is a heroic attempt to arrive at one. Morris devised a formula for fair value using the consumer price index and the average of 10- and 30-year inflation expectations. This indicator briefly showed that gold was wildly overpriced during the worst of the 2008 crisis, a phenomenon that may have been driven by the illiquid markets of the time, that created an unrealistic inflation forecast. Exclude this incident, and we see a steady bull market for gold from 2005 too 2011, followed by a steady bear market, where it moved to a discount. In the last two years, it looks as though it may have started another bull market. By Morris’ calculations, gold is now about 11% over fair value. 

Gold is still far from the confident prediction of runaway inflation that it briefly produced for a few years after the crisis, even though it is buoyed by safe haven demand at present, along with seasonal interest in gold jewelry, notably from China and the lunar new year and by resumed interest from central banks.

On the supply side, gold-mining groups are merging, creating a reasonable hope of avoiding over-supply in the near future. So, if this move in gold prices is confirmed by a move down in real yields, followed even by an increase in inflation, then this could be part of a bull market to match the one from 2005 to 2011. The critical question is whether the gold market proves to be right this time in its forecast of inflation. 

Like or hate US Politics? Take this quiz to see which Democratic Candidate you would most likely vote for!

 

  

 

US Life Expectancy Rises Again

 

Living longer: Life expectancy for Americans has increased for the first time in four years, the government reported today. After a decline driven by a surge in drug overdoses, the benchmark rose to 78.7 years in 2018.

 

Have a warm and wonderful February!

 

 

james hargan BA EPC | life insurance and investments | equity associates inc. | 416.903.9078

 

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The opinions expressed in this message are those of the writer and do not necessarily reflect those of Equity Associates Inc. Mutual Funds are provided by Equity Associates Inc., registered as a Mutual Fund Dealer and an EMD Dealer in select provinces and offers products and select referrals. Individuals should always read the fund facts before investing.All other products sold other than mutual funds are not supervised or the responsibility of Equity Associates Inc   

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