Tag Archives: Europe


Our weighted average return in November was -0.36%, bringing our year-to-date return to +15.26%.

Many of our favoured sectors performed poorly in November – emerging market bonds sold off, biotech was weak and base metals miners underperformed. Thankfully, our asset allocations and security selection allowed us to preserve capital in our portfolios.

Earlier in the month, I attended an investment conference in Berlin and was taken aback by the amount of construction going on in the city. My perceptions of the German economic zeitgeist were confirmed later on in the month when I heard of an actual case of a commercial lease in Berlin being renewed at a 40% increase from its previous level. Unsurprisingly, Germany reported impressive GDP growth of 2.8% versus an estimate of 2.3%. Clearly low rates in Europe are having the desired effect in its largest economy. Moreover, the Eurozone manufacturing Purchasing Managers’ Index (PMI) hit a new record high of 60.1, which is consistent with a growth rate of more than 3%. Not so long ago Europe was petrified of deflation and interest rates were below 0%. Now the stage has been set for what could be considerable inflation. It remains to be seen how the ECB will navigate this new environment, but we will be avoiding investment grade, long duration European bonds for the foreseeable future.

read more


Our weighted average return in May was +0.76%, bringing our year-to-date return to +8.2%.

May marks our 16th consecutive month without an average monthly drawdown of over 1.3%. Moreover, during this timeframe, we have only had two months of negative performance (-0.10% in September 2016 and -1.29% in November 2016). This consistency of performance is not attributable to hedging strategies or active volatility management, but to successful asset allocation and choosing good investments.

For quite some time, we have profited greatly from our overweight in technology stocks such as Amazon, Google, Facebook and Netflix. In May, we took profits on many of these positions. As we were in the process of selling, we were quite aware of the fact that we might be selling too early (see our blog). However, there are times that you simply have to say ‘thank you’ and walk away for a while. For many of these stocks nothing has really changed since we were buying them heavily in December, yet all of a sudden, they are now worth 30% more. Recognizing how sentiment can change and to what degree it can propel a stock is a very important component of active investing. Not letting your imagination get away from itself is just as important. It is nice when everyone agrees with you – but it is times like these that you must apply the highest degree of self-critique and suspicion.

read more

German Business Climate is Getting Better and Better

The business climate in Germany continues to improve. This is good for stocks.

Just like the sun warms the ground in spring and lets farmers plant their crops, so too does optimism lead to heightened investment and economic growth. Think of the liquidity provided by the ECB as seeds. Having seeds is great, but you can not make actual use of them if your fields are frozen. It looks like the fields have finally thawed, and the sun (business and consumer confidence) is shining. This is the critical element that the European economy has been lacking.

read more

Global Outlook Improves

As market commentators attempt to deride the “Trump rally”, they are actually missing the broader picture of the multi-faceted economic growth that is going on globally.

Scott Grannis provides some great commentary and charts in the following blog post:
LINK: Global Outlook Improves

Here’s a interesting comparison between US and European stocks and industrial production:

Oh, and by the way, emerging market stocks are doing best of all:

read more

Amsterdam – Thoughts, Impressions, Inspiration

Rembrandt van Rijn – The Militia Company of Captain Frans Banning Cocq (also called: The Night Watch), 1642

Last week I was in Amsterdam for the Citywire Global New Ideas conference.

Since Riga is off the beaten path for most fund management companies, events like this give us the chance to meet with fund managers from all over the world and to get a better feel of the market zeitgeist by talking with our European peers.

From an idea perspective, I find that one out of three presentations actually deliver. Some pitches from mutual fund companies are shockingly bad, others can border on the brilliant.

read more

Mutual Funds -vs- ETFs

Over the past 10 years there has been a massive migration of investor money from mutual funds to ETFs.

Much of this makes sense. The vast majority of ETFs charge smaller fees than managed funds with similar investment mandates, and most fund managers can’t beat their benchmark index net of fees.

What gets forgotten in this argument is that there is still considerable value in choosing the right fund for the right climate.

For example, for the past year or so we have decided to entrust our European equity mandate to a mutual fund rather than an ETF. The decision was based on having met the fund managers and having been very impressed by their acumen and previous ability to have ridden out difficult markets. Another characteristic of the fund was the ability to take on short positions, which theoretically could offer a degree of protection in falling markets. We felt this was important given the ongoing trials and tribulations in Europe. Valuations were attractive, but uncertainty remained. Still, as long term investors it is our job to seek out opportunities that we think will pay off down the road.

read more