Well what a start to the year – dominating the business news:
- Oil falls below $50 a barrel.
- Our Canadian dollar drops below $.80 USD
Oil – History Repeating Itself?
One of the more interesting articles I read was by Gwyn Morgan of the Hamilton Spectator started out quoting this headline from the Los Angeles Times – “Oil Glut, Price Collapse Spreads across World Economies: As Producers squirm other nations rejoice”.
Days later Don Cook from the same Los Angeles times stated “the critical issue is the outright state of economic warfare declared by the Saudi’s”.
Now these hardly seem like earth shattering revelations given that every other news agency is reporting the same story– except these headlines appeared on March 2, 1986 almost 30 years ago!
Mr. Morgan goes on to point out that the last time the Saudi’s got fed-up with diminishing market share in 1986 it took 20 years for oil prices to recover.
From my viewpoint, whether these prices last 20 days, 20 months or 20 years, the fact that the price has dropped nearly 60% in a such a short period of time will return oil to the category of a commodity and not a sure fire investment.
It was only 3-4 years ago that I was having a lively discussion with a colleague of mine who was confidently predicting, as were many other currency analysts, our Canadian dollar at $1.20 to the US$.
As always, where commodities go so goes our dollar. Hang on to your hats it could be a bumpy ride for a while.
In the latter half 2014 your fund managers, sensing that some volatility was in the air, moved our portfolios into a heavier weighting of bonds and conservative foreign equities. In addition they dropped their holdings In the energy sector to under 3% of their invstments.
The end result is that, despite all the volatility, we have continued to realize solid growth in our funds which are up an average of 6% in the first 45 days of 2015.