Brent woyat q1 2014 pimg commentary may2014

OceanForest Investment Partners
Portfolio Managers Commentary – Q2 2012
Changing of the Guard
“Timidity prompted by past failures causes investors to miss the most important
bull markets.”
– Walter Schloss
The global equity markets paused in March as investors digested several conflicting
developments. Inconsistent economic data, the ongoing crisis in the Ukraine, fears of a
more hawkish Fed, and an accelerating slowdown in China, together with rising risks in the
banking sector, served to keep investors on the sidelines. Offsetting these fears somewhat
was the lack of spillover from the Emerging Market currency volatility of the past couple
months and an overall favorable trend of growth, especially in the developed markets.
Before I go further, let’s review how the markets performed in the first quarter. The
Canadian equity markets lead the way, outperforming all the other global regions with
a gain of 6.2% in the past three months. A declining Canadian Dollar has been a positive
for our economy and also boosted the returns of the U.S. market in terms of Canadian
Dollars. While the US, European and Emerging markets posted strong returns in the
past six and twelve months, Canada is experiencing capital inflows which should lead to
a period of sustained outperformance now that commodity prices are improving.
Market Returns 3 Month 6 Month 1 Year 3 Year 5 Year
S&P 500 Composite TTL RTN CAD 5.90% 20.60% 32.30% 19.70% 18.00%
MSCI Europe CAD 5.60% 17.00% 31.50% 9.60% 10.90%
MSCIEmergingMarketsCAD 3.20% 17.00% 31.50% 9.60% 10.90%
MSCI World CAD 4.80% 16.20% 26.70% 12.60% 12.80%
S&P/TSX Composite TTL RTN CAD 6.20% 13.80% 16.00% 3.60% 13.70%
The resilient U.S. economy and what it means to
your investments
Why do we invest in stocks? It’s a simple question that begs for a simple answer. Stocks
are an important part of a portfolio because they provide the potential for longer-term
capital appreciation, and many companies, especially in today’s low-rate environment,
offer income that is competitive with bonds.
Brent Woyat, CIM, CMT
Portfolio Manager
Raymond James Ltd.
Suite 102 – 2168 Marine Dr.
West Vancouver, BC
V7V 1K3
Tel: 604-921-9222
brent.woyat@raymondjames.ca
www.ofip.ca
* Source: Bloomberg, Raymond James Ltd. 1, 3, and 5 year returns are annualized as of March 31, 2014

Source: Siegel, Jeremy, Future for Investors
Legendary investor Warren Buffett takes a more philosophical approach, basing his pro-stock argument on the strength
and resiliency of the U.S. economy:
My impression is that the American economy, for five years, has been moving at a fairly steady rate, upwards, but
not as fast as people would like. But, I think that absolutely continues now…. If you have 1% population growth
and 2% gain in output, it means that in a generation, you have a 20% gain of output per capita in the country. At
any other time in the history of the world, almost, that would have been Nirvana
Stocks may rise this year, or they may not rise. However, they have moved higher over extended periods. Simply put,
it’s a bet the U.S. economy will expand over time, boosting sales and corporate profits. On the whole, that increases the
odds most firms will boost dividends.
Let’s be clear, we will eventually see another economic downturn, but the economy has recovered from every recession
and then some. Honestly, a wager against the long-term health of the U.S. economy has been a loser’s bet since the
founding of the republic.
The chart below showing 200 years of investment returns for stocks, bonds, bills, gold and the dollar sums it up well:
But, you may ask, what about all the issues the country is dealing with? There is too much debt, the Federal Reserve is
printing too much money, Congress is gridlocked and can’t get anything done, and the U.S. standing in the world isn’t
what it used to be.

True, but the U.S. is also the world’s largest economy. Their capital markets are the deepest and most transparent in the
world. Despite the shenanigans in D.C., they have one of the world’s most stable democracies—probably the most stable.
All of these elements create an environment that attracts foreign capital, especially from those who reside in less stable
parts of the world.
In the meantime, the U.S. continues to lead the world in innovation, and students around the globe still clamor to study
in the U.S. at some of the best universities in the world. American innovation and entrepreneurship have been and will
likely continue to be robust—just look at the corporate giants that were born over the last decade.
All of this is not just a great marketing pitch for the USA, it’s also part of the reason we hold stocks.
A Russian bear, emerging market anxieties, and a blustery winter
There were three major themes that dominated headlines: emerging-market jitters early in the quarter, Russia’s incursion
into Ukraine, and a long and brutal winter. The first two are international issues and for our purposes can be lumped
into the same category.
Despite a January hiccup, most of the major indexes climbed as the quarter wore on, with the broad-based S&P 500
Index claiming new highs in late February and into March. Sure, there was a modest amount of volatility, especially
near the end of January, when jitters in emerging markets created an excellent excuse for some to book profits following
2013’s big run-up in stocks.
Problems in countries like Turkey and Argentina generated eerie reminders of the 1997-98 currency crisis that
rocked emerging markets. But those taking a more sanguine approach, including the International Monetary Fund,
argued that most emerging markets are far less vulnerable than they were in the ‘90s. In the meantime, China, the
800-pound gorilla of developing economies, has been hit by a rash of soft economic data.
The Russian bear growls
Understandably, investors grow concerned when unexpected geopolitical instability like that in the Ukraine creates
unwanted market volatility. Around-the-clock news gladly feeds us a steady diet of disturbing photos that fuel the angst.
But unless there is a significant escalation of tensions, or a harsh round of sanctions against Russia prompts an in-kind
response that impacts the global economy, it seems unlikely we’ll experience any long-lasting turmoil in financial markets.
Cooler heads that typically prevail following a crisis are a reminder that long-term plans crafted to achieve specific goals
shouldn’t be altered or discarded when international waters become choppy.

The Federal Reserve and winter
Much of the country has just experienced a very rough winter, something the Federal Reserve acknowledged at its March
meeting signaling that interest rates could remain low for quite some time. Fed officials did not provide any explicit
reasoning as to why they may continue to hold rates below what might be considered normal. However it may be that
it’s something as simple as thinking the economy can’t bear normal interest rates because of the deep wounds inflicted
by the steep recession and the 2008 financial crisis.
Bottom line on rates
All of this has major ramifications for short-term, interest-bearing investments that many families and retirees came
to depend on prior to the Great Recession. While the Fed can set the fed funds rate, giving it an enormous amount of
influence over short-term interest rates, it can only hope to create an environment that will hold down longer-term rates,
which it believes will encourage economic activity and hiring.
Since the economic recovery officially began in the second half of 2009, the Fed has done a good job of keeping longer-
term bond yields at low levels. That is a major reason we’ve adjusted the rudder, navigating into waters that have boosted
yields to compensate.
What does all of this mean for you?
1. Stick with the plan
I touched on this earlier, but I want to repeat it for emphasis. Decisions made in haste are rarely beneficial. Markets
were a little rocky early in the quarter, thanks in large part to some profit-taking that was inspired by anxieties in the
developing economies. But remember, stocks never rise in a straight line. A sell-off that amounted to barely more than
5% for the S&P 500 Index would simply be considered “noise” by most analysts.
The same could be said of the one-day sell-off tied to the early uncertainties over the Russia/Ukraine situation. Our
team has crafted your diversified portfolio with your financial goals and tolerance for risk in mind.
2. Diversification Works
A balanced portfolio that included a healthy division of stocks and bonds would have been hard pressed to keep up with
“the running of the bulls” last year. But the major market averages are 100% stocks, period. For most folks, that’s far
too aggressive.
Let me state this as clearly as I can. We recommend you include asset categories with investment returns that move up
and down under different market conditions within a portfolio since it helps to reduce the odds of significant losses.
Historically, the returns on stocks, bonds, and cash have not moved up and down at the same time. Market conditions
that cause one asset category to do well often cause another asset category to have average or poor returns.

The model account performance reflects returns, net of fees, and it is historical, including compounding and reinvestment of distributions. The performance calculation for the models may
be different than that of the index/markets used as a reference point for comparison. Individual client account performance is likely not to be exactly the same as the model account due
to several factors, including timing of contributions, date invested in the model and redemptions, etc. Performance data represents past performance and is not necessarily indicative of
future performance; that there is no guarantee of performance. The index rates of return do not take into account sales, redemptions, distributions or optional charges or income taxes
payable; whereas the model performance takes into account the respective charges and fees. Investors should read the available disclosure documents before investing.
The information contained in this report was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. This report is provided as a general
source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views expressed are those of the author and not necessarily
those of Raymond James Ltd. The performance numbers are based on the underlying “model” client account in Dataphile, and that the source of the performance is Dataphile, which
generates on “dollar weighted” returns. Raymond James Ltd. is a Member-Canadian Investor Protection Fund.
Market indices return data in this table is from sources believed to be reliable, but accuracy cannot be guaranteed.
A more balanced approach will reduce the volatility risk and your portfolio’s overall investment returns will have a
smoother ride. It may reduce the upside but managing risk is a critical component of any investment portfolio.
I hope that you have found this summary to be both educational and helpful. My goal is to communicate market events
and help you keep up to date on the decision-making process that goes into your portfolio.
If you have any questions, please feel free to reach out and give me a call.
As always, I am honored and humbled that you have entrusted me with your finances. I truly appreciate the opportunity
to serve as your financial advisor.
Brent Woyat, CIM, CMT
Portfolio Manager
P.S. - I don’t often ask for referrals, but during these unsettling times you might have a friend, relative, or co-worker who is in need of
level-headed counsel on investing. Give me a call if you think I can help.

Brent woyat q1 2014 pimg commentary may2014

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