randyreynolds

· Roasted pumpkin soup with smoked bacon and gruyere cheese. This savoury version of pumpkin soup was served with home made pumpkin baguette.

· Fish cakes (salmon, shrimp and scallop) with a lobster hollandaise. The flavours of this dish were so mild that even those non-fish eaters who dared to try it were pleasantly surprised.

· Coq au Riesling. Dark chicken smothered in a white wine and mushroom sauce served on a sweet potato pancake – a classic twist on Coq au Vin.

· A lamb and veal meatball served on linguine with a delicate rosé sauce.

· Bison short-ribs braised in port wine. These lean and succulent ribs were full of meaty flavour, leaving just a hint of the sweetness of the port wine lingering on the palate.

· Grilled zucchini and red pepper marinated in cilantro dressing. A very nice, cool palate cleanser before dessert.

· Chocolate tart. Need I describe this classic French sweet pastry and ganache?

• Preheat oven to 400°. Cut pumpkin in half, remove seeds and place cut side down on a baking sheet, lightly greased. Roast for about one hour
• When cool, scoop pumpkin out of shell and set aside in a bowl.
• In a soup pot or medium saucepan, sauté half a pound of finely diced bacon then remove and set aside.
• To the bacon fat, add chopped onions, carrots, celery, and garlic to the pan and sauté until lightly carmelized. (3-4 minutes)
• Add cumin, nutmeg, salt, cayenne pepper and ginger, stirring constantly for one minute.
• Add about 8 cups of chicken stock and the roasted pumpkin to the pan.
• Boil, then reduce to a simmer and cook 15-20 minutes, stirring occasionally, until the vegetables are tender.
• Remove soup from heat and process with an immersion blender
• Add one half litre of cream to the soup and stir to combine.
• Serve with reserved bacon and shredded smoked gruyere cheese sprinkled on top.

Well, September was an unusually busy month at Beaujena’s French Table. Busy for September that is, considering how beautiful the weather was and that a lot of people like to get in those last few week-ends at the cottage. But with us being closed for private caterings a couple of nights, we were essentially running at capacity every other night.

If you were one of those who couldn’t make it to the restaurant, here is what you missed.

·        Elk and wild boar terrine with spinach and cranberry. This was a very meaty terrine and the cranberries were a very nice foil to the slightly salty spinach.

·        Salmon poached in a court bullion, topped with dill and pistachio pistou, served on a bed of wilted spinach and olive oil. The pistou, a variation on pesto, which combines dill weed, a classic accompaniment for salmon, and the nuttiness of pistachios really made this dish. Even non-fish eaters loved it.

·        Tomato basil soup. The secret ingredient was balsamic vinegar.

·        Saffron pasta with red onion, sweet bell peppers and mussels. The subtlety of the saffron was not lost as the vegetables and mussels were very simply tossed in olive oil with little other seasoning.

·        Roast pork tenderloin on potato polenta with a burgundy caper sauce. The sauce, with a red wine and beef boullion base was very similar to green peppercorn sauce but in this case capers provided a salty punch instead of the spicy bite of peppercorns.

·        Salad of Belgian endive, diced beets, blue cheese and toasted walnuts with Dijon vinaigrette. Sweet , salty, crunchy, – an explosion of tastes and textures.

·        Classic lemon tart. If you liked lemon, this dessert was the ultimate.

For the month of October, expect some variations on seasonal themes.

Sell in May and go away. That’s what some people like to do for the summer – turn all of their investments into cash, drive out to the cottage and forget about it. Let the stock markets swoon if they must, it matters not if you’re sitting in cash.

Because stock markets and subsequently equity mutual funds do often go through a period of doldrums over the summer, the strategy at first glance may appear to make some sense, but in reality it’s not likely a very good strategy at all. Unless you’re a day trader and your time horizon is measured in weeks rather than years.

We know only a few things about stock markets for certain. One is that they go up. Another is that they go down. But over time, at least since we’ve been measuring it, the overall trend has been upward. Take the TSX Composite Index over the last 10 years for example. In July of 1999 it stood at 6984. As of the beginning of July 2009, it is over 10,000. That’s an increase of over 40 per cent. Roughly the same as the gain from the beginning of March to the beginning of June of this year, or as much as you might have achieved with a GIC over the same period of time.

But that’s looking at a ten-year period that included one of the worst stock market melt-downs of the century. What if we go back and look at other ten-year periods in history. How about the ten years ending in 2007? The return then was 8.52 per cent per year. How about 2006? 9.1 per cent annualized. We have to go all the way back to 1978’s 3.27 per cent to find a ten-year period ending with worse performance than the one we just experienced.

When you look at your account statements and want to say, “Hey, I could have done as well with a GIC,” remember two things. First, the interest earned on GICs is taxable at twice the rate of the capital gains earned by an equity fund. And secondly, you may be seeing a completely different scenario by this time next month or next year. Whatever period you want to look at simply represents a snapshot in time. It’s like pressing the pause button on your VCR and judging the whole movie based on what appears on your screen at that particular moment. Obviously there is more to the story.

So you may want to believe that it’s a good decision to sell in May and go away, but only if you’ll need to access the cash value of your investments before the end of September. If your investments are part of a long term strategy, a whole movie versus a couple of frames, what the markets do over the next couple of months isn’t really of much consequence.

On the subject of market timing, which is what the sell in May axiom is all about, Sir John Templeton, a well known investment guru probably summed it up best when he said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell."

WHAT’S COOKING AT BEAUJENA’S FRENCH TABLE THIS MONTH

Bruschetta Pasta. This a really fresh summery pasta dish that you could make at home. Pair it with a nice, light chianti or beaujelais.

1LB spaghetti or linguine or fettuccini

3 large tomatoes chopped

1 cup packed fresh basil chopped or ½ tsp dried basil

1/3 cup shredded Parmigiano Reggiano cheese

1/3 cup finely chopped red onion

¼ cup capers

2 tbsp olive oil

1 tbsp white wine vinegar

2 cloves of garlic minced

Salt and pepper to taste

Cook your pasta in a pot of salted water for about 8 minutes (less if you prefer el dente) and drain, reserving 1/3 cup of cooking liquid. Add tomatoes and basil to pasta. Then add the cooking liquid and the rest of the ingredients. Toss. Top with a little more cheese and serve.

Note: contrary to what one customer at the restaurant who was allergic to fish insisted, capers are not fish. They are the buds of nasturtium flowers pickled in brine.

WHAT DOES THE FUTURE HOLD?

As the stock market appears to have paused slightly after a whopping 40 percent increase over three short months, investors everywhere are asking, “what next?” Will we see another run, bringing valuations back to where they were a year ago (it would take another 35 percent to do that and that would make it an 80 percent total gain in nine months)? Or will we see continued volatility and lack of clear direction for the remainder of the year?

Who knows? I respectfully submit that no one does. And anyone who says he or she does is delusional. And where does that leave us? Exactly where we need to be.

If more investors and investment advisors accepted the fact that they cannot foresee the future, more investment portfolios would be set up the way they should be – according to time horizon, risk tolerance and goals. It’s when we think we know or we try to guess where the economy or the stock market is headed or which sector will outperform next, that we get into real trouble. When we do that, we tend to pile all of our eggs into one basket and if we’re wrong…

Witness the crash we’ve just been through. Or the one in 2001.

Stock markets are not very predictable for one main reason, the people who participate in them. Stocks are most often bought or sold based on emotion (fear and greed) rather than logic. For example, logic tells us that if the price of stocks held within a mutual fund become so high that dividend yields are reduced to less than two percent, they are expensive. Emotion (greed), on the other hand, motivates us to buy the fund because its value has gone up and may continue to do so. On the flip side, a fund with stocks that have fallen in value driving dividend yields over eight percent, is really cheap. But our emotions (fear) prevent us from buying it because we think it may get even cheaper.

Rather than trying to predict or guess which way the markets will move next, I suggest investors try to prepare themselves for the best and the worst. In other words it’s better to be approximately right most of the time than it is to be absolutely right sometimes and absolutely wrong the rest of the time.

I suggest that before you invest a single dollar, ask yourself when you will need it back. If it’s a year from now, you should probably not invest in equity mutual funds unless the answer to the second question, how much risk can I tolerate, is a lot. As we have all learned, stock markets go up and stock markets go down. A typical cycle is around five years of growth and six to nine months of pain. The problem is that it’s very hard to know exactly where we are in the cycle and if it happens to be at a peak, then you may have less money a year from now than you started with. If you have five years or more, the chances of losing money are significantly diminished.

You also need to ask yourself how much growth or income you need to achieve with this money. If the answer is a lot, then fixed income investments like bond funds or GICs may not work for you. You may have to adjust your time horizon and your risk tolerance to match the rate of return you expect. The old saying is, “no risk, no return.” But taking a lot of risk doesn’t guarantee a big return.  

It’s not simple but creating an investment portfolio that accurately addresses your time horizon, risk tolerance and goals will help protect you from dramatic market corrections while still providing the potential to out perform GICs over the long term.

If you would like to re-visit your investment strategy or know someone else who might, give me a call and we’ll talk.

ANOTHER COMMENT ON CORPORATE BAIL-OUTS

“Unfortunately the “Too Big to Fail” mentality of leaders in

Washington and Wall Street has slowed the natural readjustment process and more importantly placed a large hole in the principal of moral hazard. Apparently in today’s world, the larger the risk you can assume the more likely it is that the government will bail you out. Thus a perversion has been perpetrated by our leaders. By taking more risk you have actually taken less at the expense of the taxpayer. We must struggle on for some time.” Michael A. Berry, Ph.D

Randy Reynolds is an advisor associated with Wellington West Financial Services Inc. and can be contacted at 925.5899 or rreynolds@wellwest.ca

“On the Money” June 1 09

If I broach the subject of life insurance it’s not often a topic that many people have a great interest in talking about. Saving money, on the other hand, usually piques their interest. So today I’m going to talk about how to save money on insurance. 

Lets start with mortgage insurance. This is a product commonly peddled by banks and credit unions that may be extremely overpriced for what it actually provides. To understand just how expensive, one needs simply to compare it to other available alternatives. The following chart compares the basic differences and illustrates how straight-up life insurance may be a far more cost-effective option. 

 As you can see, paying for mortgage insurance is like renting an iceberg which eventually melts away to nothing while conventional life insurance coverage provides a level benefit and much greater flexibility – a bigger bang for your buck. 

The second way to save on life insurance is to restrict the amount you buy to the amount you actually need. One simple way to make that determination is to consider how much you earn annually and then buy just as much life insurance as it would require to replace it. For example, if you earn $75,000 a year and two thirds of that ($50,000) is allocated to household expenses – children, bills etc. then you may need a lump sum death benefit of approximately $700,000. At a rate of 6% growth on the principal, $700,000 would produce an annual income of $50,000 for 27 years. Too often, I meet with clients who have purchased far more life insurance than they need simply because no one has bothered to make the calculation for them. There are many reasons for buying life insurance other than as income replacement but whatever the case owning the right amount for the intended purpose is the best way to insure against spending too much on it. 

The third way to save is to shop the marketplace for the best available price. You wouldn’t buy a car or a television without shopping around for the best deal, so why wouldn’t you apply the same practice to the purchase of life insurance. That doesn’t mean you should talk to several agents and make them all produce separate quotes but your agent should look at several insurance carriers to be certain you’re getting the best value. There is a wide discrepancy in pricing from one carrier to the next and if you or your agent don’t shop around you may be needlessly throwing money away. 

Reduced deductibles on car insurance and extended warranties on minor appliances are another area where the cost may outweigh the benefits. The extra premium required to reduce a deductable from $500 down to $200 can be made up for with roughly three or four years of claim-free driving. What is your driving record? Do you have accidents more often than once every four years? If not, then why pay the extra money? 

Insurance, like anything else simply requires that you think before you buy and that you make sure you’re getting what you pay for.

Randy Reynolds is an advisor at Wellington West Financial Services Inc. in Winnipeg. Contact him at rreynolds@wellwest.ca or phone 204 925-5899

Whether you believe that stock markets are in recovery mode or not, probably depends more on whether or not you are a “glass half full” or a “glass half empty” kind of person. Which ever, if you look hard enough there is plenty of evidence to support your position because as an old friend of mine once said, “you always find what you’re looking for.” The real question is why are you looking for it? 

To answer, I might suggest that our reasons for viewing the world the way we do, may have more to do with our basic emotional “wiring” than with any rational, objective or analytical methodology. In other words, we start out with a point of view and then search for evidence to verify it rather than starting with an open mind and objectively drawing conclusions based on the face value of the evidence we find. Our behaviour or predisposition is determined by this intuitively based view point and hence it often becomes a sort of self-fulfilling prophesy. 

Take journalists for example. If you have spent any time reading the newspaper or watching television over the last eight months you have witnessed first-hand the relentless barrage of headlines and loud-mouthed talking heads pitching their version of gloom and doom – all armed with appropriate reports, charts and data to back up their contentions. The evidence, they insist is all-pervading and incontrovertible. The occasional naysayer unwilling to conform to the consensus that the economy and capitalism itself has fallen off a cliff condemning the word to eternal darkness, has been shouted down and dismissed as misguided at best. 

The media, needing a story to run with, have leaped upon the horse named recession (or depression) and ridden it nearly to death. Common folks, the guy on the street, Joe the plumber and anyone else who has paid any attention at all, could hardly help being swept along in the hysteria. Polls tell us consumer confidence is at an all time low. No wonder. If you believe it (in spite what you may see when you look around you), your behaviour will reflect it and it will become reality. 

Stock prices have dropped dramatically as good companies have been sold off in a panic, consumers have kept their money in their pockets and consequently job losses have worsened and so on. 

But again I ask, why are we so willing to believe it. Does bad news confirm those fears implanted in our psyches in childhood, the belief that nothing comes without a price. And if we have experienced anything good then certainly we must pay for it with an equal amount of suffering? If so, then the capital market carnage we experienced between September and March has clearly made up for the good times of the previous four years. Retirement savings, after growing quite nicely for a few years, have been eroded to the tune of forty or fifty percent in some cases.  

But if it’s true that pain must follow as a consequence of joy, then too perhaps, a new season of satisfaction shall follow the sorrowful spell which we hope came to a merciful end in early March. And as one who tends to believe the glass is at least half full and searches out evidence to prove it, I submit the last two months and the thirty percent jump in stock prices as proof. Proof that contrary to President Bush Sr. who said “it’s the economy, stupid,” it’s not. It’s what is in people’s minds that matters most. It’s not the belief that the economy is in rough shape, it’s the belief that our economic system will prevail and that good businesses will endure as surely as bad ones will fail. It’s the belief that our forefathers have gone to war to preserve a way of life that will not come to an end because a few banks in the United States have failed. It’s the belief that as cold and miserable as it may be in January, spring will inevitably arrive bringing green shoots of hope with it, and then will come summer and fall and the seasons shall go round and round.  

I do not apologise for believing that hard work will be rewarded and that those willing to invest and risk those same rewards will be rewarded further still. I don’t suggest that ours is a perfect system for it has many flaws and inequities as Sir Winston Churchill described it, “Capitalism is the worst of all possible economic systems, with the exception of all the others.”  

There is no better reflection of the effectiveness of our economic system than the stock market itself. Its rising and falling perfectly illustrates the ebb and flow of human emotion from greed to fear and from pessimism to hope. Right now as always I am hopeful. My glass is not half full it is filled to the brim and as Li Po said, “Oh, you who sit over your full cup and do not drink, tell me, for whom are you still waiting?"

Randy Reynolds is an advisor at Wellington West Financial Services Inc. in Winnipeg. Contact him at rreynolds@wellwest.ca or phone 204 925-5899

Brighter Days Lie Ahead

Ah, spring! A time of hope. Hope for brighter days, greener grass and better prospects. And the weather is not the only thing looking up. Economic and market news has begun to look a little brighter too. The TSX is nearing 9000, the Canadian dollar is on the rise, gold is up, oil is up and none of the major car makers has gone out of business yet. Not that we couldn’t still get a storm or two but it appears that winter may have finally come to a close.

Part of the reason for this renewed optimism is the US Federal Reserve’s announcement on March 18^th that it plans to buy up to US$300 billion in long-term government bonds during the next six months. They’re calling it a quantitative measure to pump liquidity into the economy. Hence interest rates may be driven even lower than they already are, expectations for expansion are fuelled and commodities which are in large part, the building blocks of global growth, have been given a major boost.

So what does this mean to Canadian investors? I admitted years ago that I can’t predict the future but if the situation continues as it has in recent the past, those who will profit the most are likely to be the ones that invest in boring, dividend paying, Old Guard businesses that “move or make the things that if dropped on our foot shall hurt.” Things like steel, and copper, and coal, and railroads, and natural resources.

As investment guru Dennis Gartman recently said, “ We do not understand high-tech and we shall likely never understand big pharma but we can, however, understand demand for copper as basic to industrial activity. We can understand the need for steel in infrastructure; we can understand the roll of trucks, tractors and the like in the building of roads as infrastructure becomes the watchword of the era… and above all, we can understand the importance of time tested dividends. We’ll focus upon tonnes of coal or copper mined; upon tonnes of steel produced; upon miles of hopper cars filled with grain; upon pipelines and tankers of crude oil, et al.”

All of which is well and good but how does the average investor find access to investments in coal and steel et al? Through mutual funds of course. And among the best bets to give you exposure to the commodity sector are Natural Resource funds and believe it or not, Dividend funds.

There are currently a lot of these funds to choose from but among those that I like are the AGF Canadian Large-cap Dividend Fund, The CI Harbour Fund and the TD Dividend Growth Fund. All have significant exposure to financial companies (banks and insurance), energy (oil and gas) and base metals (copper, zinc etc.). And all have performed quite well over the last month or so since the TSX hit its last bottom on February 22.

Let’s take a look at the Harbour Fund first. It has been absolutely pounded in the last year ending February 28^th, dropping 31% of its unit value, proving that one bad year can really drag down the long term average annual compound return numbers – minus 6.76% for three years 2.8% for five and 7.1% per year for the last ten. Just keep in mind that in the last 30 days ending March 25^th it has gained 12.5%.

The AGF Canadian Large-cap Dividend Fund has been brutalized even worse over the past twelve months dropping 37%. Its three, five and ten-year numbers are minus 9.4%, .65% and 3.5% respectively. But the last thirty days ending March 25^th show a rebound of 12.5%.

The TD Dividend Growth Fund shows one, three, five and ten year performance of minus 35%, minus 11%, .2% and 6.2% but its last 30 days ending March 25^th  show a whopping gain of 15%.

What these funds all have in common is that they own boring, Old Guard, dividend paying companies like banks, big oil companies, pipelines and natural resources. Stocks that have been beaten down by negative economic news and market hysteria driving investors to panic and dump everything financial or commodity related. A lot of babies have been thrown out with the bathwater and even after a big thirty day jump in unit values, these funds, I believe, are still undervalued and may present investors with an opportunity to outperform when a solid recovery takes place. But lest I forget to mention, past performance is no guarantee of future performance and they ARE mutual funds so their values will fluctuate.