DM Monthly Report – Jan 2019
BUILDING ON STRENGTH IN DM FOREIGN EQUITY – The DM Foreign Equity Portfolio essentially tracked the S&P 500 as it climbed during the first six months of 2018. When things headed south at the beginning of the fourth quarter, however, and many of the market’s most richly valued names took the brunt of the repricing, our focus on quality and fundamentals began to shine through. DM Foreign Equity opened up a significant gap against the broad market during the steep selloff and, by the time the punishing month of December was complete, it had surpassed the S&P by more than 6% for the calendar year.
Click here to read more: DM-Monthly-Report-Jan-19
DM Q4 Portfolio Commentary
On market swings and the behavior of crowds – While taking in a recent NHL hockey game, we got to thinking about the peculiarities of human nature and how group dynamics might be making an outsized contribution to the recent plunge in stock prices.
Around the same time that we were watching the relatively well-heeled jostle for attention in ta t-shirt toss, a run-of-the-mill equity market correction was rapidly taking on a more bearish tone. In the space of just a few weeks, the collective perception of stock valuations and underlying business conditions was upended and measures of investor sentiment shot from mildly positive to deeply pessimistic.
Click here to read more: DM-Portfolio-Commentary-Q4-18
DM Monthly Report – Dec 2018
SHOULD WE BE WORRIED ABOUT OIL’S RAPID DESCENT? After having tracked steadily upward from a sub-$30 valley reached in early 2016, crude oil abruptly reversed course in mid-October, plunging by almost a third in just a few weeks. Because oil and gas remain key inputs to global growth, concerted price moves can sometimes provide clues to underlying economic health, even before changes in course show up in GDP and other key figures. If, for example, price is falling due to a drop-off in demand, it’s not unreasonable to surmise that general business activity has also cooled.
Click here to read more: DM-Monthly-Report-Dec-18
Cardinal Update – December 2018
CANADIAN OIL: WHAT’S THE DIFFERENTIAL? Beginning in August of 2018 the differential between Western Canadian Select (WCS) and West Texas Intermediate (WTI) widened from <US$20/bbl to $50/bbl. In this note we will address why differentials have increased, our rationale for an average $25-$30/bbl differential in 2019, the low $20’s/bbl in 2020, and a longer-term view. In sum, we do not believe that panic is warranted.
The writing has been on the wall that a sub-$20/bbl differential was not sustainable. Utilizing Canadian production forecasts from CAPP and adding up available pipeline capacity, a clear gap between the two was emerging for late 2018/2019. With no pipeline capacity expected to start until late 2019, this production would have to be transported by rail.
Click here to read more: Cardinal Update – December 2018
