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| Adrian Mastracci, president of KCM Wealth Management, says “In my humble opinion, the mighty consumers take top honours by a wide margin. Their stamina has been unflappable." |
For Immediate Release
Vancouver, BC (December 31, 2004): The business headlines are wrapping up for 2004. Now for the closing ceremonies to honour those that made an impact and stood out from the pack.
Adrian Mastracci, “fee-only” investment counsel at Vancouver based KCM Wealth Management says, “There were many a business story that would easily qualify for the top four contenders. From my perspective, I’ve chosen four top picks that contribute heavily to investment portfolios. Here goes.”
1. The mighty consumers
In my humble opinion, the mighty consumers take top honours by a wide margin. Their stamina has been unflappable. I hasten to add that all investors hope it continues well into the future. Consumers have been buying at all costs, and accumulating debts, to support two thirds of the US and Canadian economies.
So, please join me in extending one huge note of thanks to all consumers. To put it in some perspective, the typical US household has now incurred about $20,000 of consumer related debt, before mortgages. Further, this holiday spending season that began in November has seen a rise of more than 15% in transaction volumes for Visa cards and 17% for MasterCard in the US. I hazard to guess that not all of these increased transactions are being fully paid from cash resources as the invoices come due.
Actually, the consumer has been spending a lot of money they don't have since the early 1990s. Albeit, during a declining interest rate climate. It's been said more than once that it is quite foolish to bet against the consumer, especially the American consumer. Once again, thanks to all consumers.
2. The bull markets
Yes, we are now into the third year of a bull market from the lows reached in October 2002. The mighty consumes have played an important role in rallying the markets. Practically all North American markets, along with their cousins in Europe and Asia, have made strides in the bull market area.
As an example, the S&P/TSX Composite rose 24.3% in 2003 followed by more than 12% in 2004. Even the ugly ducklings, commonly referred to as bonds, have made progress in 2004.
However, too many investors are still heavily committed to equities, typically in the 70% to 90% area, whether they know it or not. Rising markets bring out more and more money from the sidelines to be invested in individual stocks and a whole variety of mutual funds. It's very easy to overlook prudent asset mix and rebalancing strategies when equities are rising.
3. Oil prices
Oil prices began the year at US $32.52 per barrel, rose to nearly $56 and closed at $43.45. Quite a roller coaster ride for the year. The affects of oil prices are felt every time each of us ventures into a gas station and every other store known to mankind. Practically all goods and services that we purchase have an oil component somewhere in the process.
One could easily say that volatility was the operative word in oil prices during 2004. A number of businesses, such as those in transportation, have difficulty in passing price increases unto their customers.
4. US Government deficit
The US government has a voracious appetite for spending money they don't have. Just like the consumers. For the fiscal year ended September 30, 2004 the US required more than $400 billion of borrowed money to cover the deficit. For the next two months ending November 30, 2004, they already consumed more than $100 billion.
These large numbers have repercussions on many other areas such the strength of the US currency and interest rates. A concern is whether those foreign investors will waiver in continued purchases of US debt offerings for their investment portfolios. The US has been attracting nearly 80% of foreign savings to finance their government deficit and trade gap. Imagine almost 3 billion dollars per day looking for an investment home in the US.
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