Vancouver Investment Advisor Ritch Wigham

SPEAKING of NUMBERS and the MARKET

By Ritch Wigham

The other day I was talking to a client and he told me that the money market fund that was being suggested to him by another advisor (presumably a mutual fund person) was returning something like .2 or .3%. He said he worked it out and it would take something like 350 YEARS to double his money. BUT IT WAS SAFE!!! I was then talking to a good friend of long standing that also happens to be a broker, he tells me he got a report

from some fund company stating, that if you bought Canadian t-bills and rolled them at current rates that it would take 275 YEARS to double your money. Now I haven’t worked out the numbers myself but I do know that it is an egregiously long time to get any kind of return on your money. Why do I bring this up, you ask? The stock market.

Coming into September if you had listened to all the hype and crap out there you would have sold, been on the sidelines and be waiting for a correction that is not coming right now. Our statisticians and talking heads suggested and reported and slammed down everyone’s throat that September statistically is the worst month of the year! Sell my god you will buy it back cheaper in October. Wrong, wrong and wrong. I cannot predict the rest of the month from here, but my bet is that if there is this long awaited correction it isn’t yet and won’t happen this month. Why do I say this? Read paragraph one again please.

To everyone’s great surprise and the relief (can you hear the collective exhale) of the U.S. government. Bond auctions in the U.S. have had significantly higher coverage than one would have expected with the un-relenting supply of paper from the U.S. treasury.

Simply put “If you print it, we will buy it”. So far the coverage on 3 to 30 year bonds being auctioned every week has been exceptional. Two or even three times coverage for every issue. What this means is that the Federal Reserve doesn’t have to raise rates to attract the buyers needed to fund the U.S. budget deficit. The world is willing to fund these short falls with almost no return on its investment. Why???

1.Fear. Economic uncertainty. The U.S. is still the safe haven for the world.

2.The weak currency.

3.A bet on the U.S. recovery.(technically a currency bet)

4.A place to park money that is safe until you want to deploy it elsewhere

What all of this really means is that we haven’t gotten the huge flood of money into the stock market, that is out there, yet, but we get enough all of the time to keep the whole thing moving forward every time there seems to be enough weakness to offer a buying opportunity.

As I have said before and will re-iterate now.

“Markets like low interest rates and low bond returns. Money needs to make money or you loose over time and duration, and the only place to do this consistently is the stock or commodities markets.”

It would appear that the storehouse of funds is growing in U.S. treasuries. If it continues to be deployed quietly over time as it has been for the last number of months,

Any correction should be bought because, it will be, by the population still on the sidelines.

If it takes literally generations to make a return on your safe money, that money will find a way to make itself a higher return than inflation. Real estate, stocks, gold (commodities) pick your poison, but it will happen.

Yours,

Ritch

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