July 2018 Update

The broad investment themes supporting our companies are playing out as expected. Low supply is driving up the cost of energy resources, inflation is starting to wake up precious metals and food prices, and global economic deceleration is pushing high quality bond prices higher. When appearing in concert as they do today, these elements point to a late stage in the economic cycle. Remember that the best economic news comes at the top of the cycle, while the worst economic news comes at the bottom.

Whereas exciting “growth” stocks have outperformed boring “value” stocks over the last decade, the reverse is more likely to be true going forward. Sentiment is shifting to favour the real economy over the digital, and higher short term interest rates are pinching lofty valuations. Our portfolios are heavily aligned to benefit from this emerging trend towards value and the return of real asset and resource investing. I anticipate significant upside ahead for our holdings.

Interesting links
Some investors says an “inverted yield curve” will predict the next recession. Not so. https://www.variantperception.com/2018/06/13/will-there-be-a-yield-curve-inversion-before-the-next-recession/
Economic news is best at the top http://www.kesslercompanies.com/last-time-unemployment-3-8/
Peeling back the layers of Canada’s subprime lending https://betterdwelling.com/canada-has-a-subprime-real-estate-problem-you-just-dont-know-it/
Deeper dive on the economy https://vintagevalueinvesting.com/is-the-economy-overheating/
Perception and placebos http://slatestarcodex.com/2018/01/31/powerless-placebos/

Cordially,

Ben W. Kizemchuk
Portfolio Manager & Investment Advisor