Tempus fugit 

"Sed fugit interea fugit irreparabile tempus, singula dum capti circumvectamur amore." - Virgil  (Roman poet)

 Translation: "But meanwhile it flees: time flees irretrievably, while we wander around, prisoners of our love of detail."

Everyone has heard of the expression "time flies" or as the ancient Romans say, tempus fugit but the expression coined from the ancient Roman poet appears to have a much deeper meaning than just the observation that "time moves quickly".

The second anniversary of the market crash has come and gone, and it has been 2½ years since the U.S. sub-prime crisis of 2008.  It was on March 9th, 2009 that the benchmark stock market index (S&P 500) hit the lows of 676.53. Today[1] it is over 1300, almost 100% higher. 

Some top notch media analysts are now wondering if perhaps the stock markets might be recovering at last.

Tempus fugit indeed.

[1] March 1, 2011

Stronger economy  =  stronger interest rates?

Despite ongoing tensions in the Middle East, consumer confidence and the economic recovery in the U.S appears to be accelerating.

Here in Canada the economic news turns out to be far better than expected as the Bank of Canada's growth forecast numbers for the Canadian economy turned out to be far too low. Real GDP was up 3.3% in Q4, far exceeding the Bank of Canada forecast of 2.3%. Even Q3 of last year was revised upward to 1.8% from 1%.[2]

According to their March 1, 2011 economic commentary, National Bank Financial is forecasting that a rate hike is in the cards soon.

"... pending no major geopolitical event, there is a compelling case to be made for higher interest rates in Canada since excess supply is closing faster than previously anticipated by the Bank...We remain of the opinion that the next rate hike will occur at the May 31 interest-rate setting meeting."

Therefore, if you have investments (like bonds) that are vulnerable to rising interest rates, caution is exercised as bond prices generally decline in a rapidly rising interest rate environment.

In the short term, stock markets often correct to the downside especially after a very long rally. Investors who have not participated in the recent market rally may want to consider adding or reestablishing their positions on any significant pullbacks.

[2] Q1, Q2, Q3, Q4, H1, H2 - what's with the alphabet soup of symbols? Q1, Q2, etc refers to the calendar quarter (3 month intervals). Q2 for example, refers to the 2nd quarter which is April 1 - June 30. H1 and H2 refers to the halves in the year. H1 means the first half of the year. H2 is the second half of the year.

Madness of Crowds

In the annual letter (see excerpt below) to the Trimark Select Growth Fund unit holders, Invesco Trimark indicates that they are happy with the current makeup of the portfolio but in reading between the lines, suggest that the performance of the fund last year did not quite meet investor's heightened expectations in 2010.

We know that Canada’s “red hot” stock market has been largely driven by steeply rising prices of gold, oil and metals. The Trimark Select Growth Fund’s mandate is to invest in international stocks. If we wish to have a diversified portfolio, we should not invest in one thing only.  Do you remember the “blow-up” of the tech craze a decade ago? Hopefully we have learned the lessons of not having a diversified portfolio.

However, Canada's commodity boom continues and the inclination of the majority is to follow where the money is going. This may not be a good thing.

Oddly, many investors especially during critical market junctures do the exact opposite to what we should be doing. Everyone says to buy low and sell high. Easy to say - extraordinarily difficult to do.

The real secret of investing is Persistence and Patience. Keep Diversified. Avoid the fads and fashions of investing.

Therefore as in my previous mutual fund recommendations, Trimark Select Growth Fund remains a solid BUY.

"When investing, it usually pays to beat an untrodden path to the most exceptional, overlooked and misunderstood opportunities... In essence, what seems obvious is now obscure."

- Invesco Trimark letter to unitholders of the Trimark Select Growth Fund, December 31, 2010