Pendragon Commentary

September 2017 | Blockchain

Blockchain is a digital decentralized system and a transparent distributed ledger, which everyone in a network can see. It facilitates the implementation and recording of transactions significantly reducing transaction costs. Blockchain has been responsible for disrupting what economists refer to as “rents that traditional middlemen get from facilitating traditional analogue transactions” and has contributed to a reduction of both time and money of transaction costs.


Simply put, any transaction in the old economy that requires an intermediary (to complete the transaction) has the potential of disruption. Industries that contain a high number of intermediaries are ripe for upheaval. As more decentralized networks become marketplaces the global economy will be transformed and will create a massive shift in wealth.


In a Blockchain network, it is the network that establishes trust, verifies identity, clears transactions and records transactions in a distributed public ledger that is transparent and secure. It is the notion of a shared digital public ledger that is rewiring the global economy, from analogue (opaque) to digital (transparent) and reducing the time and capital needed to complete basic transactions.


Blockchain enables what we refer to as the “Internet of Value”. What if value could be exchanged as quickly and as cheaply as information? Information moves around the world instantly with a very low transaction cost. The problem for decades has been “How do you transfer value in a digital world?” Early in the internet’s evolution, researchers could not solve what they referred to as the “double payment problem”. Blockchain finally solves this problem. The “double payment problem” solution lies in cryptography, the art of writing or solving mathematical codes for secure communication in the presence of a third party referred to as an adversary.


Through a process referred to as mining, Blockchain ensures that property rights are transferable. When a transfer is made everyone in the network knows about it - including who now owns the property right. The verification process is key, participants in the network are motivated to solve a mathematical problem, the first one to solve the problem is compensated with a portion of cryptocurrency (e.g. Bitcoin).


This is an over simplification of the process, but for our purposes it illustrates that the process of our global economy is slowly beginning to evolve from an analogue world to a digital world. It took farmers over 40 years to replace the horse with the tractor in our economy. With Blockchain we are entering a regime that is substantially larger than the mania we experienced when just the
internet of information was upon us.


Dr. James E. Thorne

Chief Capital Market Strategist & Senior Portfolio Manager


 

Accredited Investors Only

The Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized. Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest. The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund. The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing. Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time. This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: September 15, 2016.

August 2017 | The United States of America: A Banana Republic

The United States of America: A Banana Republic

In 1904, William Sydney Porter, the author known as O. Henry wrote the short story “The Admiral”, which was set in the imaginary country of Achuria, a small maritime country with one export: bananas. Achuria was ruled by the company that controlled the export of bananas to the rest of the world. The foundation of this tropical paradise was no longer policed by the rule of law and it became known as a “Banana Republic”. From this short story the term “Banana Republic” became synonymous with a country were the rule of law no longer applies. Paradoxically, the term is now being applied to describe the current environment pertaining to the financial crisis in the United States.


As Judge Janice Rogers Brown noted on April 15, 2016 in a passage of her dissent that analyzed the government’s treatment of Fannie Mae and Freddie Mac, “when assessing responsibility for the mortgage mess there is, as economist Tom Sowell notes, plenty of blame to be shared. Who was at fault? ‘The borrowers? The lenders? The government? The financial markets? The answer is yes. All were responsible and many were irresponsible. But that does not mean more irresponsibility is the solution’...What might serve in a Banana Republic will not serve in a constitutional [country]”. Meanwhile, during the Republican National Convention (“RNC”) on July 21, 2016, President Trump was focused on portraying a narrative of being the “law and order candidate”.


The Pendragon Fund has been looking for investment opportunities and the aftermath of the Financial Crisis, as well as the climate President Trump has created in Washington, has created potential. Shareholders may have been wronged by government action and our research suggests that the actions taken by the U.S. government putting Fannie Mae and Freddie Mac into conservatorship and then sweeping all of their profits is a case worth investigating.


Homeownership is ingrained in people’s minds as the American Dream. Citizens from Europe came to North America on the hope of eventually being able to own land. Before the Great Depression, mortgages in the U.S. looked very different than they do today. With single family home mortgages only available for a very short-term, (typically 5 years, and featured bullet or balloon payments at the end of the 5-year period mortgages were not pre-payable) refinancing was out of the question. Initial down payments were 50% and home ownership was only at 45%.


During the Great Depression home values fell over 50%, resulting in mass defaults. Defaults on real estate loans reached 25% and foreclosures were as high as 10%. Interest rates were cut but home owners were not allowed to refinance. Many building and loan societies went bankrupt. In 1933, Franklin Roosevelt created the National Housing Act which then created the Federal Housing Administration (“FHA”). The FHA offers to insure lenders against default on long-term mortgages with low down payments. The National Housing Act contained a provision to create a privatively owned National Mortgage Association that would buy the new FHA issued mortgages from lenders. This allowed banks to turn the loans back into cash.


This program reduced the risk that banks would face in originating mortgages. Down payments were reduced from 50% to 20%, interest rates were fixed, the life of the loan was 30-years and the amortized schedule was set so that at the end of 30-years the loan was paid off. Today, these features are taken for granted, but in the period after the Great Depression, Roosevelt’s plan meant that middle class families could own a home. This program also allowed the middle class the ability to use leverage to create wealth. Forced savings allowed low income citizens to accumulate wealth and home ownership became the foundation of the American Dream.


The mortgage acts as the nucleus of financial products. A 30-year loan has significant interest rate risk, prepayment risk, and credit risk. Roosevelt’s plan could not generate any interest from the private capital markets of banks and he was forced to set up a government entity, the Federal National Mortgage Association (“Fannie Mae”) to fill the critical role. Simply put, the 30-year fixed rate mortgage would not exist if the government did not create Fannie Mae.


In the 1960’s, Fannie Mae was transformed by President Lyndon Johnson under the recommendation of the Budgetary Commission into a private company whose stock could be bought and sold. If Fannie Mae was to remain a government entity, then the debt it guaranteed should have been put on the government books as debt which would increase the budgetary deficit. In 1968, President Johnson signed the Housing and Urban Development Act. Fannie Mae was given special status and the Treasury Department could buy its debt, signaling an implicit government guarantee. Fannie Mae could borrow money at rates offered to the government, an advantage that ensured a functioning mortgage market. In the early 1970’s, Wall Street introduced a new product based on the securitization of loans. This new product allowed Fannie Mae the opportunity to package all the mortgages it purchased into a single product, known as mortgage backed securities or “MBS”. MBS over time became a staple of the global fixed income market. MBS, issued by Fannie Mae, were implicitly backed by the U.S. government, international pension funds and financial institutions. Foreign governments purchased billions, if not trillions, of these securities. MBS offered a 30-year fixed rate mortgage to help workers achieve the American Dream, and evolved into a major part of global finance sold as securities with an implicit government guarantee. Simply put, the mortgage market evolved from a dependency on local banks to absorb all the risk in lending to homeowners, to a system that was implicitly guaranteed by the U.S. government and financially supported by global capital. Homeownership increased to 65%. The American Dream was achieved. Fannie Mae and Freddie Mac were the backbone of global financing in the U.S. housing market. What could go wrong?


During the Global Financial Crisis in 2008, Fannie Mae and Freddie Mac were put into conservatorship by the Bush Administration. Secretary of Treasury Hank Paulson’s thesis was these two companies needed a temporary time-out to help them rebuild capital. The assumption was that all of the mortgages that Fannie Mae and Freddie Mac guaranteed would default. The cost of protection from the government was that all of the cash flow from these entities would go to the treasury, forever. The shareholders lost everything. The government found cash flows that could finance programs that congress would not appropriate funds for. At the same time, the backbone of the U.S. housing market and the global mortgage backed security market were unable to build up any capital buffer.


The accounting of these assets proved to be extremely conservative. As the dust settled, it was found that bankruptcy rates during the period after the crisis were well within the assumptions modeled by the firms. Fannie Mae and Freddie Mac were not in a death spiral as suggested by many in the government. Shareholders who saw their rights violated sued.

 

The Biggest Bail Out in U.S. History

Source: Financial Services Committee

 

On July 19, 2017, Judge Margaret Sweeney unsealed court documents produced in discovery for the lawsuit brought by Fairholme Funds in the U.S. Federal Claims Court. This lawsuit brought into question the government narrative that the companies were in a “death spiral”. The Treasury and the Federal Housing Financial Agency (“FHFA”) were fully aware that Fannie and Freddie were about to experience a surge in profitability well before the net worth sweep was announced. In addition, a study done by BlackRock suggests that “long-term solvency does not appear endangered, [and that BlackRock does not] expect Freddie Mac to breach capital levels even in a stress case”. Treasury Secretary Paulson forced the company into a conservatorship, a time out, while not satisfying any of the 12 requisites for that action as set out in the housing and economic recovery act, meaning the companies should not have been put into conservatorship. Through the use of write downs of deferred tax assets, it was made to appear that the companies were in a death spiral, but after two years and the accounting procedure was about to be reversed, the Obama Administration changed the rules of the game, now collecting all the net worth of the companies forever. By coincidence, this was at the same time that the Affordable Care Act and Obamacare desperately needed money. The once conspiracy theory now has documentation to support its thesis. Will the plaintiff win in court? If we live in a world where the rule of law is the basis for our society, then yes. However, we could be living in a world where we are evolving into a “Banana Republic”.


Treasury Secretary Steven Mnuchin has stated that there is a goal to privatize Fannie Mae and Freddie Mac, however, privatization would require private capital to be successful. Our simple thesis is that no new private capital will invest in these entities until the existing shareholders are compensated for the past 10 years. If President Trump is truly a “law and order” President, then the past wrong will be righted. Investment in the common shares of Fannie Mae and Freddie Mac offers a compelling risk reward opportunity.


In a report released by the RNC on September 14, 2017, it was stated that “the RNC recognizes the sanctity of property rights in America, and acknowledges the need to resolve the outstanding claims of Fannie Mae and Freddie Mac shareholders in a manner than honours and respects the rule of law governing the rights of corporate stock owners”.

 

< Back to Pendragon

Accredited Investors Only

The Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized. Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest. The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund. The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing. Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time. This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: September 15, 2016.

July 2017 | The Past is Prologue

The Past is Prologue

William Shakespeare, in his play The Tempest, uses the statement “The Past is Prologue” to suggest that all the events that have happened before have presented us with the opportunity we now face. Simply put, history sets the context for the present. Yet, in this world of instant gratification, few investors anchor their expectations using history as a guide.


What is the fair value of the Canadian dollar? Why would policy makers of an export led economy desire a stronger currency? With private debt to Gross Domestic Product (“GDP”) close to 180%, won’t higher interest rates hurt economic growth? Will policy makers be able to generate a soft landing in the real estate market? Meaning, the real estate bubble will pop without generating a significant decline in housing prices. We are entering a new phase in the commodity super cycle. All of the above questions communicated by many pundits over the past few weeks implicitly assume that the basic laws of economics don’t apply to the Canadian economy. We beg to differ.


Remember last year, the global economy was dealing with the crash of prices in the commodity complex. In Canada, wild fires in Alberta added to the problem by forcing a shut down of oil production. The fires in Fort McMurray were a major international story. Yet today, few anchor their expectations about the future on this fact.

The Canadian dollar has rallied over the past few months. The Bank of Canada is claiming victory from the appreciation of the Canadian dollar, caused by the recent interest rate hike. The Canadian dollar has now reached a point where one of the world’s most efficient railroads, the Canadian National Railway (“CN”), stated in its quarterly report that the strength of the Canadian dollar is now a headwind for economic growth. As the economy enters into a period where data gets normalized, those bullish expectations will subside. Looking at the Citigroup Economic Surprise Index, we can see that investors have extremely bullish expectations about the Canadian economy, while having extremely bearish views about the U.S. economy. Mathematics suggests that those expectations should reverse as we get into the fall.


The Bank of Canada has a single mandate: to target inflation. Data released in July 2017 revealed that inflation was at a 20-month low. Fundamentals suggest that the Canadian economy is lapping very easy comparisons, meaning growth looks better than it actually is in Canada, an additional point that CN makes in its quarterly report. Furthermore, basic economic theory suggests that an appreciating dollar is deflationary. So while all the cheerleaders are happy about the strong Canadian dollar, international investors most likely see Canada in a more objective light. The Canadian economy has had the benefit of two super cycles, one in commodities and other in real estate. To many observers, it looks like the Bank of Canada is targeting the real estate bubble. Popping the real estate bubble will not come without consequences, a decline in real estate prices will have a negative effect on economic growth. Some may suggest that the housing bubble can be popped without a decline in housing prices, however we do not see any evidence to support this. In theory, it could happen, but practically speaking, assuming an economy with private debt to GDP of 180% will not see a significant decline in economic growth in light of a decline in housing prices is a very dangerous position to hold.


The Bank of Canada raised interest rates. Was it justified? Were they targeting the real estate market? Is an appreciating currency good for an export led economy? Why are the rest of the world’s central bankers concerned about being below their inflation targets? The Bank of Canada is sure that the long shadow of the global financial crisis and secular stagnation has been defeated. Retail sales (not including the automotive sector) that were reported in July 2017 were negative. Job growth in Ontario was negative. Yet, the Governor of the Bank of Canada, Stephen Poloz, and his team are claiming victory. The Bank of Canada may just be taking back the two emergency cuts they did when oil crashed. Governor Poloz acted as Governor John Crow did to pop the housing bubble in the early 1990’s. Real estate prices declined by 50% at that time and Canada went into a recession. Instead of acting as cheerleaders, many pundits should be sounding the alarm bells. A major policy mistake is at hand. Canada is no longer competitive in manufacturing on a cost basis with the southern United States and Mexico. Canada has just experienced the benefits of two super cycles, commodity and real estate. A strong Canadian dollar is the last thing the Canadian economy needs at this juncture.


It seems that many in Canada don't think that cycles repeat, fundamentals do matter and policy mistakes can happen. Shakespeare was right, The Past is Prologue, but only for those that take a moment and reflect.

Accredited Investors Only

The Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized. Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest. The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund. The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing. Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time. This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: September 15, 2016.

June 2017 | Are Investors Asking the Right Questions?

Are Investors Asking the Right Questions?

 

“Money Ball: The Art of Winning an Unfair Game” is a book by Michael Lewis that was made into a movie starring Brad Pitt. Pitt plays Billy Beane, the General Manager of the Oakland A’s, a major league baseball team, with a very small budget to compete against the likes of the New York Yankees and the Boston Red Sox. One day, Beane has an epiphany that the conventional wisdom of baseball was wrong. Using a system developed by Yale educated Peter Brand, the Oakland A’s went on to change the way players were evaluated and teams were built.

 

The system was based on a simple but profound thought – maybe the General Managers of professional baseball teams were asking the wrong questions. The art of the question, asking the right question, allows you to get to the root cause of the problem. This is a very important step in the investment process. Today, we can apply this rule to the current negotiations between the Eurogroup, the International Monetary Fund (“IMF”), the European Central Bank (“ECB”) and Greece.

 

Is Greece’s debt sustainable? We believe the answer is yes, if we use international accounting standards. No, if we use check book accounting.

 

We believe the question not being asked by many investors is “What is the net present value of Greece’s Net Debt to GDP, using International Public Sector Accounting Standards (“IPSAS”) or accrual accounting?” In a May 9, 2016 Bloomberg article, “The IMF Is Right About Greece”, Vincent Truglia, retired head of Moody’s Sovereign Risk Unit, states “I would argue strongly that Greece adopt IPSAS-based accounting, the gold-plate of recognized accounting standards to measure not only the Greek government’s debt, but should be used to determine budget decisions going forward”. If Greece did adopt IPSAS-based accounting standards, the reported net present value of net debt to GDP would be substantially below the 94% net debt to GDP that Canada has. Suffice to say, many investors have taken up the task.

 

The media and many in the official sector quote the future face value of debt as defined in the Maastricht Treaty which focuses on the contract value of debt due at maturity (cash accounting). The IPSAS is the public version of International Financial Reporting Standards (“IFRS”) that companies are required to follow. IPSAS is a full set of 32 accrual standards which countries such as Canada, the United States, New Zealand, France, and Sweden, to name a few, follow. The standards add transparency as well as introduce the concept of the time value of money, a key consideration when one is making major policy changes or monitoring the sustainability of debt levels. Greece still follows the rules of cash accounting. If any of its debt has been restructured, the reduction of interest rates and the extension of maturity would not be taken into account. It’s the Greek government’s responsibility to report their finances in a manner that captures the true economic value. There are significant market consequences for this lack of strong financial management. As the Greek government looks towards the IMF, the Eurogroup, and the ECB to provide a vote of confidence, all that is really needed is the implementation of sound financial accounting standards and procedures. Then the Greek government could show the global financial markets the true state of the country’s finances.

 

For some reason we are again witnessing the fight to maintain the status quo. Vested interests refuse to acknowledge that they have all agreed to support international accounting standards to measure debt. This required a country to report their debt in a manner that represents a true and fair value view of economic reality. This has been missed by the World Bank, IMF, ECB, EU and the Rating Agencies. Why don’t they follow the standards that they set and agreed upon? I personally have no clue…However, these are the same institutions that missed the risk in the run up to the global financial crisis. This time it’s not different and cycles do repeat. The numbers presented in IPSAS would lower the cost of capital, attract foreign capital, and stimulate economic growth.

 

Speaking of economic growth, China has been investing in Greece and see it as part of its foundation is implementing its belt road initative. From investing in ports, to promoting Chinese tourists to vacation in Greece, the economic integration between these two economies has yet to make the front pages of main stream media. To be sure, the smart money has noticed. We have positioned Pendragon to benefit from these two significant forces that will make Greece a very attractive destination for foreign capital.

 

Accredited Investors Only

The Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized. Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest. The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund. The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing. Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time. This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: September 15, 2016.

May 2017 | Pendragon Commentary

FAKE NEWS?!

In the 1960’s the Baby Boomer Generation started to become of age. For many, the free music concert in the summer of 1969, Woodstock, defined the generation. The “Pleasure Principle” began elevating over puritan ethics of work and community. Doing your own thing was more important than being a good citizen. A point of view at that time was driven by the work of Saul Alinsky in “Rules for Radicals” and Cloward & Piven in their article “The Weight of the Poor, a Strategy to End Poverty”. They put forth a political strategy that many in today’s alt-right media use as the basis of their conspiracy theory that the world is out to get President Trump. This strategy is simple, create a crisis from within the government that is supported by the media to change society. Friedrich Nietzsche stated, “there are no facts, only interpretations”. As investors, our job is to interpret the facts, and build portfolios. Easy to say, hard to do, in the new world of “fake news”. We must be agnostic politically.


Our job as investors is to read the tea leaves, and to use the emotional environment created by the media to identify opportunities for our clients. Given the increase in the political uncertainty around President Trump’s government, we have made the assumption that the Trump agenda will not be implemented immediately. The dysfunction within the Republican Party coupled with too many rookie mistakes by the Trump Team suggests that all the winning that was promised during the campaign might just be pushed off until early 2018.


We have also taken into consideration that the President seems to take a harder line in negotiations with America’s traditional allies. This is not good for Canada. Add to this the fact that commodities will at best trade sideways, and the risk that the economy has to make a correction in the real-estate market increasingly suggests storm clouds may be on the horizon for Canadian assets. Canadians for the most part are worldly citizens, yet we tend to invest in a provincial fashion, with most of our assets invested in Canada. In contrast, Americans tend to be much more provincial in their world view but they have no problem in having a large portion of their assets invested globally.


In the United States, they have reached a point where the question of “what is fake news?” is top of mind. Intolerance has reached a point where even free speech on University campuses is being questioned. The term liberty comes from the Latin word libertas, which means “unbounded, unrestricted or released from constraint”. The so called political left, or the liberals, seem to miss this point, which just adds fuel to the fire of the alt-right’s conspiracy theory put forth by internet news sites such as Breitbart or Infowars.


The current ongoing war in the journalism profession between old media (cable TV) and new media (the internet) highlights the power that fake news can have on investors’ physique and emotions.


As for the American Main Stream Media (MSM), a recent report from Harvard University does support the thesis that the MSM may be trying a touch to hard in questioning the President’s actions. This coverage may be clouding investors’ perceptions, and may generate opportunities in the future. All of this noise can’t be beneficial to anyone, but it can generate opportunities for those investors that can ignore the noise created by the civil war currently taking place in the media, for the minds of the U.S. and Global citizens.




Reference

Patterson, Thomas E. “News Coverage of Donald Trump’s First 100 Days.” Shorenstein Center on Media, Politics and Public Policy. Harvard Kennedy School, 18 May 2017. Web.

Accredited Investors Only

The Fund is available on a private placement basis only to residents of Canada who are qualified “Accredited Investors” as defined under National Instrument 45-106 Prospectus Exemptions and who are resident in Canada. This material is for information purposes only and does not constitute an offering memorandum or an offer or solicitation in any jurisdiction in which an offer or solicitation is not authorized. Please read the Fund’s Offering Memorandum before investing. Prospective investors should rely solely on the Offering Memorandum which outlines the risk factors in making a decision to invest. The indicated rates of return are historical annual compounded total returns net of fees and expenses paid by the Fund, including changes in unit value and reinvestment of all distributions, but do not take into account sales charges or income taxes payable by any security holder that would have reduced returns. Investments in the Fund are not guaranteed, their values change frequently and past performance may not be repeated. Investment losses do and may occur, and investors could lose some or all of their investment in the Fund. The information herein does not consider the specific investment objectives, financial situation or particular needs of any prospective investor. No assurance can be given that the Fund’s investment objective will be achieved or that investors will meet their investment goals. Prospective investors should consult their appropriate advisors prior to investing. Information presented herein is obtained from sources we believe reliable, but we assume no responsibility for information provided to us from third parties. Caldwell Securities Ltd. and Caldwell Investment Management Ltd. are wholly-owned subsidiaries of Caldwell Financial Ltd. Officers, directors and employees of Caldwell Financial Ltd. and its subsidiaries may have positions in the securities mentioned herein and may make purchases and/or sales from time to time. This information may not be reproduced for any purpose or provided to others in whole or in part without the prior written permission of Caldwell Investment Management Ltd. All information and opinions indicated herein are subject to change without notice. Inception date: September 15, 2016.

April 2017 | Pendragon Commentary

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February 2017 | Pendragon Commentary

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January 2017 | Pendragon Commentary

 

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