Investors Flee to Cash

Image by Getty Images via @daylifeAnd there off, no not the thoroughbreds, but the investors running down the track looking for financial security in cash and away from stocks. North American stock markets had one of their worst days in recent history. Even gold was not immune from this stampede away from equities and into cash.  

Volumes were high, for example the NYSE hit 7.5 billion shares, not quite double this year’s average volume of 4.12 billion, so this sell off could not be attributed to low volume. Rather the very real fear of a global financial crisis sparked this panic sell by investors.

It almost seemed as if worried investors were sitting on the back of a bucking bronco and the only way they could see of staying on the horse was to liquidate as quickly as possible. Some banks are actually considering charging customers for holding their cash.


The next few days will be very interesting in deed. Will buyers step in to pick up undervalued stocks? Will Friday’s job numbers spark a buying spree or will they create further turmoil?

Stay tuned and lets see where the finish line is and which investors steer the right course.

Stay on Track,Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post:ul August 2011

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PH&N Introduces Monthly Income Fund

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Phillips, Hager & North Investment Management Ltd. (PH&N) has introduced their first monthly-pay balanced fund. The fund appropriately named the PH&N Monthly Income Fund, will target a neutral weighting of 50% fixed income and 50% equities.

According to their press release the PH&N Monthly Income Fund is designed to meet the needs of investors seeking a reliable income stream.

The fundamental investment objective of the fund is to provide a relatively high monthly income that may consist of dividend income, interest income, realized capital gains and a return of capital, with the potential for modest capital growth, by investing in a well-diversified balanced portfolio of income producing equity securities, including but not limited to, common shares of Canadian companies that pay dividends and income trusts, and fixed income securities such as preferred shares, government and corporate bonds, debentures and notes. the Fund seeks to offer investors a target annual distribution of 5 per cent but does state that Payout rate may change according to market conditions.

The co-managers are Scott Lamont, head of fixed income at Vancouver-based PH&N, and Scott Lysakowski, a Canadian equity manager who specializes in equity income mandates. Lysakowski, who joined PH&N in 2009 after having previously worked for seven years as a research analyst at RBC AM, will also continue to manage PH&N Canadian Income.

The Management fee for the fund is as follows:

PH&N Monthly Income

Fund - Management Fee
Series D 0.90%
Series C 1.65%
Series F 0.65%

“The PH&N Monthly Income Fund provides a straightforward, quality solution that meets Canadian investors’ demand for dependable income in a low-interest rate environment – whether in retirement or as a supplement to their existing income.” said John Montalbano, head of RBC Global Asset Management. (Both PH&N and RBC AM are wholly owned subsidiaries of Royal Bank of Canada.).

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Jan. 17, 2010
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Calculating Return On Equity (ROE)

From The Hoss's Mouth

Financial analysts differ in their opinions of the value of using Return On Equity calculations to evaluate whether or not to buy shares in a company. Before Money Magazine Hoss gives you the pros on cons of this argument, lets examine the equation for calculating Return On Equity (ROE).

ROE= Net Income/Shareholder Equity

Financial analysts in favour of using ROE as an indication of when to buy stock suggest that you track ROE, and when you see a company with a double digit ROE and which is continually increasing it might be wise to consider buying the stock. You can use one of the many free or pay for service financial web sites available on the Internet for tracking ROE. Note: Not all continue to list ROE, but many do.

Other financial analysts consider ROE to be of little or no value to the potential investor. They point out that Net Income is not always a reliable corporate performance measurement. Why? Because companies use varying accounting procedures when calculating items such as capitalization, depreciation and growth rate, to name a few. Therefore, they conclude the formula for calculating ROE is not always reliable to determine a company’s success or corporate value.

The differing opinions are not unlike those of handicappers selecting a horse to bet on. Some use a horse’s total earnings divided by total races to determine the horse’s potential class. Many handicappers frown on this practice, as it does not take into account other factors such as but not limited to age, sex, distance, and surface.

In summary, the use of ROE by investors as a tool for investment purposes is a matter of personal choice.

Stay on Track,

Money Magazine Hoss

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Shares, What are They?

From The Hoss's Mouth

Today Hoss Cents Free Financial Money Magazine will answer the question, Shares what are they?

Horses come in a variety of colors brown, black, chestnut and grey to name a few. Equities also come in various varieties. Common shares, Restricted voting share, Preferred share, Flow-through share and rights and warrants. Equities just like horses perform differently, some come with voting rights, some don't, some pay dividends, some don't, some allow share holders to elect directors, some don't. In all cases you usually have to pay a commission when you buy and/or sell shares. The only exception being rights and warrants not listed on a stock exchange for which there is no fee for their issue or exercise.

The Hoss has listed below various types of equities and a summary of each.

Common Share: Common shares come with the right to elect directors and in some cases vote on major corporate decisions. Depending on the companies performance and long term goals they may or may not pay a dividend. In the event of dissolution the common shareholders rank behind tax authorities, employees, creditors and preferred shareholders. You can make money in two ways; with the dividends you receive and if you sell the shares for more than what you paid for them(capital gain). You can also lose money by selling for less than you paid (capital loss). Risk is considered medium to high.

Restricted Voting Share: The same as a common shares except for voting rights.

Preferred Share: Check to see if still available. Preferred shares pay a fixed dividend. However, these fixed dividends may be reduced or suspended if the company falls on hard times or for some reason wants to preserve its capital. The price of a preferred share may decrease if other investment types become more profitable or if the company plans to reduce dividends. Preferred share prices usually do not fluctuate as much as common shares. Preferred shareholders may have the right to convert to common shares for a certain price or at certain times redeem their shares. Usually there is no voting rights. In the event of dissolution preferred shareholders rank behind tax authorities, employees and creditors but ahead of common shareholders. You profit through dividends and/or capital gains. Risk is considered medium to high.

Flow-through share: Oil and gas or mineral exploration firms issue these special types of common shares that allow certain tax deductions for qualifying exploration, development and property outflows to "flow through" to shareholders from the company. These are high risk and the tax legislation qualification requirements are very strict.

Rights and Warrants: You have the right to purchase additional securities from the company within a specific period of time for a specific price. Stock exchanges do list some rights but generally they are issued in proportion to the number of shares held by the shareholder. In some cases there may be restrictions on the exercising or resale of these rights. Warrants permit shareholders to acquire other securities of the company. The risk associated with Rights and Warrants ranges from very high to very low.

You or you and your advisor should do considerable research before purchasing any stock and even then there is no guarantee you will make money.

The Hoss can hear the dinner bell ringing so until next time,

Stay on track,

The Hoss

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Equities

From The Hoss's Mouth

Equities or stocks as they are more commonly known are shares in a business and are today's topic in Hoss Cents Free Financial Money Magazine. The purchase of an equity (stock) entitles you become a part owner in that business albeit sometimes a very, very small part. Depending on the type of equity purchased you may have a right to vote at shareholders meetings and to collect dividends. Dividends are that part of the company's profit that is shared with the stockholders. Not all profits are divided amongst the owners. There is any number of ways a company will use some of the profits for improving the business. Not unlike a consortium that owns a race horse, if they show a profit they may choose to buy another horse or horses or they may purchase a new barn to house their growing stable.

Stock exchanges are the place was stocks (equities) are normally bought and sold. They can be purchased through over the counter markets or alternative trading systems. You can also purchase them over the internet but you have to have an account with a brokerage company.

Investing in equities can produce a large return but it can also cost you a lot of money and in some cases you can lose most or all of what you have invested. You incur high risk for the possibility of a high rate of return.

You make money when a stock (equity) increases in value or if and when dividends are paid. When you sell a stock for more than what you paid for it you have a capital gain. If you sell for less, you have a capital loss. In each case you must report this on your tax return.

There is no guarantee that you will ever make money. Stock values often fluctuate and sometimes by huge amounts (can you spell Enron). Many factors determine what a stock is worth. The overall performance of the company, its size, economic conditions, competition and financial stability are but a few of these factors. If you are one of those people whose risk tolerance assessment shows you do not take kindly to these types of fluctuations in value The Hoss suggests you stay with Fixed Income Investments.

It's time for The Hoss to enjoy the company of Mrs. Hoss, so till next time,

Stay on track,

The Hoss

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