The state of private investing

There has been no shortage of public discussion on the state of the world’s public stock markets. Even President Trump himself hasn’t hesitated to boast about the rapid rise of stock indexes during his time in office.

However, as we’ve been constantly preaching on these very pages, the stock markets provide a very shallow and short-term snapshot of the investment environment. Instead, long-term investors should look at other pieces of information, which is what we’ll do presently.

A rising trend continues

For example, according to a report issued by global consulting firm McKinsey & Company, titled McKinsey Global Private Markets Review 2018: The rise and rise of private markets, which was released in February of 2018, although the rise in the public markets was well documented for the period in review, with the S&P rising by about 20 percent, for example, the private markets kept up the pace, too. Specifically, for the period in review, private asset managers raised a total of almost $750 billion globally, which furthers an upward trend that began eight years previously.

On the local front, the Canadian Venture Capital and Private Equity Association (CVCA) in September of 2018 released its review of Canadian private equity and venture capital, and came up with a number of positive findings. Specifically, venture capital investment continues to rise in Canada, with $1.7 billion raised across 308 venture-capital deals for the first half of 2018, which represents a seven-percent increase from the previous year. This continues a five-year positive trend in terms of size and volume.

All’s well on the local front

In addition, the CVCA reported a robust market for private investment for both early-stage and established firms, with the backdrop of a high-growth and low-interest landscape combined with a high level of “dry powder” (highly-liquid marketable securities or large amounts of cash reserves) boding well for the country’s private-investing sector.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


Let’s focus on long-term investing

There has been no shortage recently of commentary on these pages about avoiding the pitfalls of short-term stock-market watching. It’s distracting, short-sighted and susceptible to panic and poor investment decision making. That’s not what investing should be about.

However, instead of simply highlighting the pitfalls of short-term market watching, any observant investment stakeholder also needs to point out what long-term investing should really be about. That’s what I want to do presently.

Avoid distractions and fluctuations

Specifically, long-term investing should be about looking at the long-term. As trite as this might sound, it’s important to keep in mind. That’s because long-term investing really means that you should pay minimal attention to the daily stock-market reports. If you know what you’re doing, you know that a bad labour report doesn’t mean your investment portfolio is in jeopardy.

For example, long-term investing essentially means that you’re literally participating in good investments, whether it’s a company, debt, equity — you name it. If the underlying investment is sound, short-term fluctuations, or other distracting factors, really won’t matter, will they.

Stick to the plan

Indeed, there are various strategies long-term investors can engage in to protect themselves from the volatility of the markets. One, of course, is diversification. Most people know that. But what most people might also not know is that there are various types of diversification. It’s not just about investing in different types of investments, but region is a form of diversification, too, as are other factors.

In addition, every long-term investor should have some sort of game plan, so to speak, that in part anticipates short-term market fluctuations. If you look at just about any long-term chart of investment-market growth, they all go up. That’s in part because good investors stick to their original investment objectives and wait for the returns to come in — over the long term.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


The perils of market watching

The purpose of this article is to warn people about the perils of market watching. In fact, I’m probably guilty of excessive market-watching myself. I have talked about the markets on a regular basis in recent months. But it must be done, for various reasons, while acknowledging the hazards involved.

The reason some market watching must be done is because the phenomenon very much has an impact on all of us. If the markets go down, as they have been in recent weeks and months, the bad news becomes a self-fulfilling prophecy, the markets tumble further, which has a very real impact, not only on current securities valuations, but current outlooks, as well as future investment decisions.

No shortage of bad news

So, if you were to look at the current state of the markets, you might think things are bad, are only going to get worse, and we’re walking right into a recession. That’s why one has to do more than market watch. There are other factors to keep in mind, too.

For example, despite all the recent bad market news — such as Fed interest-rake hikes, bad December stock-market performances, doom-and-gloom economic reports — there is in fact some good news; namely, the U.S. jobs market is still red hot and expected to continue, at least for the near future. A strong jobs market is medicine that can prevent the sickness of a recession. Remember, a recession will occur. We just don’t know when. And it might not be right around the corner, as so many are speculating.

Playing the long game

Which also brings up another point I’ve been trying to emphasize on these pages. The market will go up. It will go down. We will have a recession — at some point — we will have a recovery from a recession — at some point. These are all part of the natural cycle of financial activity and investing.

But we need to keep in mind two things. First, don’t panic. A recession will eventually happen, and nobody knows exactly when. Second, a long-term approach to investing means taking into account multiple recessions over multiple years as part of the natural cycle of the markets. If your long-term approach is sound, then the short-term news cycle is just noise.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


Another day in the markets

The position I’ve taken in relation to the markets is that much of the fear and even panic has been proven overblown. Trump’s trade actions haven’t led to any catastrophes yet. In fact, the U.S., Canada and Mexico just reached an agreement on trade recently.

However, as we approach the end of 2018, a trend in the markets has become noticeable. Specifically, the stock markets may well finish down for the year, and current December levels are precipitously down in comparison to other years.

Fluctuations versus trends

In other words, what’s currently happening can’t be quickly dismissed as an aberration. In a nutshell, the markets are worried, whether anyone thinks it’s justified or not.

Now, there are a few things to look at when analyzing the current state of the markets. First, and as I’ve stated numerous times on these pages, trying to decipher investor sentiment is kind of like trying to read a crystal ball. It’s hard to make any sense of it, unless you know what to look for.

There are various factors why investors are becoming a bit bearish on the markets. Trump will always be a factor in this. He’s doing things differently, and many people just aren’t sure how it will play out. Although I’ve been rather consistent in arguing that Trump’s actions haven’t been as panic-worthy as some might think. China needs the American market. Trump knows this. China knows this. They both don’t want to blow things up.

Avoid stock-market psychology

Yet, broadly speaking, investors tend to be creatures of habit. Yes, Trump is a habit they haven’t gotten used to yet. But habit also suggests that when markets have increased for a period of time, they’re bound to decrease, too. And so now observers are expecting a decrease and, as I’ve stated before, investing often becomes a self-fulfilling prophecy. If people expect bad things to happen, they’ll try to make bad things happen.

Nevertheless, even with these expectations of a downturn, and even a recession, there are a couple of things to keep in mind. America’s central bank, the Federal Reserve, is expected to raise interest rates yet again, which means one of the world’s most important financial institutions still sees growth in some important sectors, including employment.

Also, in the end, it doesn’t matter if the markets go up or down in the short term. They generally always go up in the long-term. And, if you’re a knowledgeable investor who looks for opportunities regardless of short-term worry or panic, you will find returns that match or exceed your investment objectives. That has always been the case and will continue to be so in the foreseeable future. Just call it a hunch, or historical reality. Take your pick.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


As the investment world turns

There has been no shortage of discussion on these pages about the short-term fluctuating nature of the financial markets, especially in the Trump era. Well, it’s happening again, only this time, well, take a look for yourself:

Now, much of the discussion here has been about how events usually get overblown and the market and economy keep growing. However, in this case, some of the negative sentiment appears to be somewhat more persistent than usual.

Another look at the numbers

Since October 3, the Dow Jones Industrial Average has gone from a high of almost 27,000 to a current level of about 24,600, which is a drop of about 8.2%.

So, things are looking pretty bad, right?

Maybe not so much.

First, let’s take a look at the three month chart. If you notice, even though the last two months have seen some precipitous drops in the Dow average, they have also been accompanied by some steep rises, too.

Now, let’s take a look at the one-year chart. Notice something? There’s been a consistent up and down to the stock market all year. This is not new.

Let’s take a look at the three-year chart. Guess what? All the fluctuations we’ve been seeing in the last two months, and even the last year, come at the tail end of three years of growth. So, even with all the recent turbulence, we’re still way ahead of where we were at the beginning of this ride, aren’t we.

Fluctuations come and go

Finally, let’s look at today’s chart as I’m writing this. Despite the headline you see above, current trading is much higher than opening trading, even though a huge dip occurred near noon, and then bounced right back.


So, the lesson? Again, it’s about taking a deep breath and looking at long-term trends. Traders are currently panicking because they’re unsure about Trump’s “truce” with China and because conventional wisdom says a recession has to come at some point.

But, here’s the thing. We don’t know when. Nobody does. And, in the meantime, short-term fluctuations shouldn’t distract investors from long-term fundamentals that deliver capital growth over time.

UPDATE: Here’s the same one-day trading chart, except after closing. The index closed well up from opening trading, and only slightly down from the previous day’s closing level. Thus, proving, once again, that when the market goes down, it goes back up again. Drudge had to change his headline a few times this afternoon.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


A recession is coming! A recession is coming!

Do you want to know if an economic recession is coming? Well, if you want to have some fun, and do what many people do to get an answer to the question, try this: Go to Google (or Bing or your favourite search engine) and type in: is a recession coming.

You want to know what the answers tends to be? Well, it tends to be that, yes, a recession is coming. Do you want to know what the problem is with drawing the conclusion that a recession is coming? Two things. First, as has been mentioned on this website before, economic and investing experts are not mind readers or crystal-ball experts. So, they can’t predict the future. No one can.

Second, of course a recession is coming. Recessions happen from time to time. The problem is that we don’t know when, and anyone who tells you for certain when one will come should be greeted with some caution.

Avoiding the herd

herd mentality

Investor psychology is something any investor should take into account when making investment decisions. In a nutshell, investors, or anyone associated with the world of investing, love to engage in a herd-type mentality. When something looks like it’s happening, such as a recession, or a stock plunge, everyone expects it to happen, and rushes to confirm it. That’s why investment decisions should never be made based on this type of herd mentality.

If you want an example of everyone expecting something to happen, and it has yet to happen, just take a look at our own housing sector here in Canada. For years now, everyone has been predicting a bursting of the apparent housing bubble. There’s only one problem, however. It has yet to happen. Yes, government measures have considerably slowed down the market in Vancouver, but we have yet to experience a burst in the way many have predicted.

Always expect the unexpected

So, what does this all mean when it comes to analyzing the global economy and making wise investment decisions as a result? Well, it means what we’ve been preaching all along. A good approach to investing means looking at the long game, not the short game.

John Templeton, the famous investor and fund manager, took a value-based approach to investing that involved long-term returns that survived short-term stresses. In fact, there are graphs that show the huge long-term success of this kind of approach to investing.

Does this mean you have to be a value-based investor? No. But it does mean that recessions, or any other financial stresses, should always be part of an investment strategy. That’s because no one can predict when they come. But, when they do, wise investors will be ready.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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