Good morning,

Rita Mammone, my business partner, is back next week from her summer vacation and I’ll be leaving soon for my pilgrimage to Maine.

I thought I’d use this as an excuse to write a few thoughts.

Rita & I manage one of the largest teams in Canada within RBC DS.  We strongly believe in knowing the families we work with. So that means meeting the people important to you. Reviewing your structure, the planning behind it, getting to know your trusted professionals and remembering that you are already successful and don’t need us to augment your risk level, but to grow and protect your existing portfolio.

In other words, keep things simple.

We also believe in a balanced approach, based on time tested investment philosophy (dividend focus, quality, liquidity and proper diversification) and a thoughtful portfolio process (reinvesting the dividends, keeping a sharp eye on valuation, regular rebalancing and dollar-cost averaging new money).

As I shared with all of you, I don’t believe in crystal balls, but I’m often asked my thoughts on the next few months, so these would be my views. Let’s start with the fact that the uncertainties surrounding the economic picture are unusually difficult to fathom.  The dollar, economic growth, interest rates in Canada and the US, to say nothing of the political background, make getting a clear picture a little harder than usual. 

Add to this the fact that asset prices are high and that many investors want to augment their risk profile.  With this in mind, we have to come to the conclusion that future returns will be a little lower than usual. 

We’ve recently sold two long term holdings, Colgate Palmolive and Disney for just that reason.  Prices where high and I didn’t see a clear path for the next 3 years on either name.  Finding quality companies, that are selling at a reasonable valuation (not cheap but reasonable) is getting harder.  I added two such names to my two portfolios and I’m still looking for more.  As a side note, 10 names where responsible for 41.13% of the S&P 500 performance YTD.  That’s 10 stocks on a universe of 500 names.  It’s not a very deep bull market.

Also, I just find that investors in general are more easily persuaded then usual about investments and frankly a lot of them just don’t do their homework, they therefore relax their investment standards. 

How will this end up over a normal 3 to 7 year period ?  Who knows. 

We are probably still a year away for any major bear market (credit and money conditions are still very loose) but with volatility so low ( the VIX was at a 27 year low 2 weeks ago) and markets in general selling for such a high multiple, we have to assume some sort of correction is coming or at the very least a bout of volatility.      

Lastly, the last 10 weeks have been particularly good to the loonie.  We might see a swing in the other direction, which would help the portfolio on a theoretical basis.  In the long run, currency fluctuations tend to cancel each other out.

Enjoy the month of August and we look forward to seeing soon.

Warmest regards,

Charles F. Lasnier, MBA - CIM

Gestionnaire de portefeuille et Vice-président, RBC Gestion de patrimoine | RBC Dominion valeurs mobilières

Portfolio Manager & Vice-President, RBC Wealth management | RBC Dominion Securities

1 Place Ville-Marie, Bureau 300, Montréal, Qc. H3B 4R8 | Tél: (514) 878-5041 / 800 361-5202 / Fax: (514) 878-5108 | www.charleslasnier.com |