Pendragon Commentary

June 2018 | Trade Wars: Trump, China and Canada

Pendragon

Trade Wars: Trump, China and Canada


We believe that the global economy is closed, that cycles repeat, and that investors are emotional and can make mistakes. This time, it is not different, and history holds clues as to how global financial markets may evolve. In a closed economy, the only way the economy can experience growth is through stealing market share, opening a new market, population growth/demographics, or experiencing the introduction of a new technology innovation. Long periods of chronic, slow, economic growth, that reduces the standard of living of the educated middle class, can lead to the rise of populism. Elections in Italy, demonstrations in Brazil, and the recent election in the province of Ontario provide evidence that this rise in populism is not local, but global in nature. The era of globalization that started after World War II is coming to an end. The sooner investors realize this, the better.


History reveals, that every 80 years or so, the global economy needs a reset. Global imbalances get too large and the rise of populism puts pressure on those in power to take drastic action. Without an internal, rule-based adjustment system (that equalizes the economies that manufacture too much and consume too little, think Germany and China), military force is typically used to solve the problem. The Trump Administration is trying to get the global leaders to realize that the existing trading system can no longer be supported by the American economy. John Maynard Keynes warned of this in 1945 at Bretton Woods. You can’t have a sovereign currency be the medium of exchange of the global economy and the global economy without a Trade Adjustment Mechanism. Countries will enter into currency wars, that devalue their currencies against the U.S. dollar, to make the products they produce more competitive. Furthermore, the World Trade Organization will be ineffective in solving trade disputes. Keynes also warned that eventually the country absorbing the excess capacity of the global economy (the USA) will reach its limits, thus changing its domestic policy to protect its economy. We have reached that point.


The trade deficit of the United States equals the summation of the world’s trade surplus. Since 1945, the USA has gone from a creditor nation to a debtor nation. With the unfunded liabilities growing, and because of its aging population, it must adjust. President Trump correctly states that the USA can no longer be the piggy bank that the rest of world borrows from. We have seen this narrative play out many times in history. In the past, military action has been the policy choice of action to remedy this problem. Let’s hope history does not repeat.


The hollowing out of the manufacturing base, zero interest rates, quantitative easing and austerity has ushered in a period referred to as “The New Normal”, or Secular Stagnation. Secular Stagnation is when chronic slow growth and declining standards of living gave rise to populism in the Western world. As many educated citizens realized that the policies of globalization did not deliver the economic fruits that were promised, voters surprised the elites and elected candidates that promised a new future. Think “Make America Great Again”. This is not so much about Trump as it is about the middle class worker in the Western world wanting change. President Obama promised an era of “Hope and Change” and ironically President Trump is continuing on with this same narrative. The establishment will fight for the status quo, but investors must realize there is no turning back. With the election of Doug Ford as Premier in Ontario, the populist movement now has a strong foot hold in the economic center of the country, investors need to discount the fact that the global economy is going through an adjustment period.


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.

May 2018 | Da Vinci, Newton, Buffett & the Evolution of the Global Economy

Pendragon

Da Vinci, Newton, Buffett & the Evolution of the Global Economy

“If I have seen further, it is by standing on the shoulder of giants.” - Sir Isaac Newton


At the heart of the Blockchain is complex mathematics. Cryptography is what lies at the core of the distributed ledger technology that provides trust, which, in turn, allows transaction to be completed and recorded. To understand cryptography, one needs to have the tools and the ability to understand complex mathematics, which is beyond the scope of the average investor. The inability to navigate this roadblock leads many investors to incorrectly conclude that the Blockchain is nothing more than rat poison to the global economy. Forgetting the theory of mathematics for a moment, we thought it would be helpful to research the core technology of this innovation. Through doing so, it was concluded that the distributed ledger technology is the digital manifestation of double entry bookkeeping accounting. Too few realize that the history and evolution of accounting is tied to the history of global trade and therefore, the history of human progress. Accounting is an extremely important influential innovation that gets taken for granted. Its digitization will have profound effects on the recording, transaction, and record keeping that play a central role in our global economic, legal, and political systems. In addition to the establishment of identity and governing interactions among nations, industries, political organizations, health care institutions, businesses, and individuals, the Blockchain allows the global economy to evolve into its true native digital state. Hardly, rat poison.


Since the 1950’s, the global economy has been slowly evolving from an analogue world (where process is controlled by humans and paper), to a digital world. However, to truly understand how profound this innovation is, shrouded in complex mathematics, we need to go back to the 1400’s and the Italian Renaissance. It has been well documented and researched that the history of human progress can be explained through a narrative, with a focus on global trade and the history of accounting. Commerce connects countries, industries, businesses, and the citizens of the world. This connection, in many cases, has long been facilitated through double entry bookkeeping, accounting and banking.


Modern banking is over 700 years old. It was invented in the early Italian Renaissance, first modelled by the “Medici Bank” in Florence, Italy. In 1474, a Franciscan Monk named Fra Luca Bartolomeo de Pacioli (the tutor of Leonardo da Vinci) published the first major work on double entry bookkeeping accounting. With his findings, the recording of transactions was introduced into the world of commerce and trade, thus becoming a core business process. From the 1400’s until today, the recording of transactions and transferring of property rights has been done with an analogue process. Simply put, the process has not evolved. This fact has slowed the evolution of the global economy and society from an analogue world to a world in its true native digital state.


Our thesis is the combination of mathematics, economic incentives, and digital ledger technology (to solve the double spend problem), which creates the innovation necessary to replace the analogue aspects of accounting theory that has been hindering the evolution of the global economy. History reveals the power of an innovation mostly ignored by society. There could be no double entry bookkeeping accounting without the invention of the number zero. Without accounting, there would be no corporations, financial markets, global trade, and no financial theory, everything used by those who refer to this new technology as rat poison (Mr. Buffett). To get to this conclusion, one must leave behind the basics of mathematics, have an open mind, and ask the question: “What would the world be like if transactions took place in a pure digital state, where the databases were decentralized, security was ensured and no human intervention was needed?” The answer? An economy with lower transaction cost, less friction, and less fraud, where individuals control their identities - an economy in its true native digital state. For many, the complex mathematics at the foundation of the Blockchain will deter investment. Others realize that the technology is a digital advancement to a process started in the Italian Renaissance and a method by which the global economy can evolve. To paraphrase Sir Isaac Newton, we are able to see further by standing on the shoulder of the giants that came before 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.

April 2018 | Entropy: The Degree of Disorder or Randomness in the System

Pendragon

Entropy: The Degree of Disorder or Randomness in the System

When a high level of entropy exists, people tend to just shut down. When events occur too frequently, chaos develops, volatility increases to extreme levels and risk aversion ensues. With President Trump, through the desire to implement trade policy through the unconventional means of social media, the level of entropy has hit an extreme high. In reality, the trade war was actually lost decades ago. The key issue is the fact that in China’s 2025 economic strategy high tech industries are the main focus, and this is the battle ground.


The reality is that this is not so much about trade wars but trade theatre. With mid-term elections coming in the fall, the President needs to be seen fulfilling his election promises. A deal on intellectual property rights will be made and it may take some time. In the end President Trump’s bark is bigger then his bite.


The United States can on longer absorb the excess capacity generated by Germany and China. John Maynard Keynes warned that this bridge would eventually be crossed during the negotiations at Bretton Woods in 1944. He rightly predicted that the World Trade Organization was not strong enough to deal with the inherent problems created by a closed economy. Countries that manufacture trade surpluses are reticent to back up or create conditions to consume more internally. This is known, and will be dealt with through negotiations.


While economic conditions point to a period of strong company earnings, the heightened political risk, caused by concern regarding an impending trade war, has caused extreme volatility in the financial markets. Prudence suggests investors reduce exposure, and we have with the Pendragon Fund. While earnings will be strong, we expect the market to be volatile in the short-term and a deal will be made before the mid-term election season starts. When this happens, fundamentals will again take center stage. Until then, a high level of entropy will exist in the markets.


This does not mean the evolutionary process and the global economy has stopped. If the politicians and regulators step aside, the financial markets and the global economy will continue to grow and the new data driven economy will continue to evolve at a rapid pace.


Investors should look at this period as the pause that refreshes.


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.

March 2018 | The World’s Evolution To Its True “Native Digital State”

Pendragon

The World’s Evolution To Its True “Native Digital State”

“See, the world is full of things more powerful than us. But if you know how to catch a ride, you can go places,”
- Neal Stephenson, Snow Crash


The world continually changes and evolves. This has always been true and those that fail to innovate and adapt will be left behind. The evolution of the global economy is a force more powerful then us. The ride today is provided by the innovation called the Blockchain, and yes, if you catch this ride it will take you places. Do we know who the long-term winners will be with certainty? No. But we must recognize that the status quo is being attacked by very strong disruptive forces. Simply put, data is the new oil. Decentralization is upon us and the world is evolving very quickly from its analogue foundations, which were developed in the 1800’s, into its true native digital form. This is the ride that Pendragon is catching.


Throughout history, when a major innovation has been introduced, it tends to absorbed into the economy in two distinct steps. Step one, the technology is initially introduced, the 80’s and the 90’s introduced the computer and the internet to the world. Step two, the economy absorbs the technology to the point where it dramatically changes the world we live in. Today the Internet of Things, Alternative Intelligence, Machine Learning, and the Blockchain, are now dramatically changing the way we live and do business. Academics label the former Gilded Age, while the latter is labeled the Golden Age. The Blockchain, a data base innovation which applies cryptography, is front and centre catching the imaginations of many. To some, this new data model may be as significant as the printing press or double entry book keeping accounting. To others, it’s referred to as a tulip bulb. To be sure no one knows what the future holds, but it would be folly to assume that the status quo will be maintained.


In the past, civilizations were organized and settled in a centralized manner. The introduction of the internet into our society started the pendulum to swing back towards a decentralization. The Blockchain allows data bases to be secure, transparent and decentralized. The introduction of a decentralized accounting ledger, that you can only add information to and cannot be hacked, releases profound forces of disruption into the economy. Just imagine a tamper proof ledger of transactions (cannot be hacked) that exists in multiple (decentralized) locations for everyone to see. The joint forces of the internet and the Blockchain will now accelerate the rate upon which society decentralizes, and digitizes.


Many will be unhappy with this occurrence and will fight to maintain the status quo. Education is key to understanding the opportunities that lie ahead.


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.

February 2018 | Decentralization is No Tulip

Pendragon

Decentralization is No Tulip

"Those who fail to learn from history are doomed to repeat it." - Sir Winston Churchill, 1948

With all the noise created by many pundits concerning the innovation called the Blockchain and cryptocurrency, we found it very helpful to go back to first principles and analyze the genesis and evolution of the internet and the data set. Our thinking is that the global economy is at the intersection of three major themes: the Internet of Things, Artificial Intelligence, and the Blockchain. Together, these three concepts are important components of a theme we refer to as Web 3.0 or Decentralization.


As our society evolved from one based upon barter, to one based upon markets and manufacturing, a need to prove trust became necessary. Who was going to make sure that citizens or market participants could trust each other so that property rights could be transferred? In the analogue world, institutions, governments, and professions evolved to ensure that trust and property rights could be transferred. Thus our countries, cities, industries, and organizations were built to have a centralized benevolent dictator determine what was right and what was wrong. Our society has now reached a fork in the road. The rise of populism has put pressure on the existing institutions and social conventions. We are entering into a new regime, one characterized by the forces of “decentralization”. For investors, it is critical to recognize these evolutionary forces will be accelerated by three sub themes, the Internet of Things, Artificial Intelligence, and the Blockchain.


As the global economy continues to evolve from one that is centralized and built in an analogue world (with paper and humans at the center) to a decentralized digital world, one must accept the fact that the status quo will be under attack. Putting a computer chip into a machine, connecting the machine to the internet, having machines communicate to each other without human interference, while all the time learning, will have profound effects on society. Furthermore, the ability for machines to exchange value in a transparent, permanent, immutable, reliable and decentralized process, only begins to foreshadow the disruption ahead of us.


So while many in the media point to the Blockchain and cryptocurrencies as a bubble similar to tulips, our research suggests that when computer scientists solved the Byzantine Generals Problem, a problem which outlines how difficult unanimous trust is to coordinate, a critical research triumph was achieved. This accomplishment will now allow the global economy, to evolve at a faster pace into its true native digital decentralized form. So yes, we think it’s folly to suggest that Web 3.0, as some refer to it, is analogous to the tulips bulb mania. We also think this regime we have just entered into, might be the most transformative of our generation.


A brief review of history: In the 1950’s, the internet was designed to be free and decentralized. It was born out of the concern, during the cold war, that the United States needed a back up communication system in the event the Soviet Union attacked the telephone lines. This evolved into the world wide web. Unfortunately, the only way that companies could make money was to aggregate or centralize data, a far cry from the libertarian aspirations put forth by the founders of Facebook and Google. The Blockchain is the critical technology that will allow our society to evolve into its true native digital form. To prove trust in the Blockchain we need computers solving mathematical questions, proof of their work, and then their reward is a token that can be use in the network or exchanged for fiat currency. This is hardly a tulip.


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.

October 2017 | Blockchain, South Park, Keynes & Friedman

Pendragon

Blockchain, South Park, Keynes & Friedman

The creators of South Park, Trey Parker and Matt Stone, called it “Space Cash”, we call it Bitcoin. Bitcoin has been addressed in the mainstream media, and while it is true that Bitcoin may have reached a high in popularity, a quick review of history suggests that at its core, Bitcoin or something like it has been expected for some time. Technology needed to advance in order for cryptocurrencies to evolve. In 1999, Milton Friedman predicted that the evolution of the internet would have profound ramifications on our society. He also saw a role for a digital currency, as quoted below:


“I think that the Internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing, but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B, without A knowing B or B knowing A. The way I can take a $20 bill hand it over to you and then there’s no record of where it came from.”


Bitcoin is a digital currency whose value is based upon two things: the first is the use of the payment system, or how many people buy into the story, and the second is the volume and velocity of payments running through the ledger. Many people are confused about where the value in Bitcoin comes from; Bitcoin currency does not have some arbitrary value that people are trading. Bitcoin is valuable because it is frictionless and people can exchange it with no fraud and very low, or no, transaction costs.


Bitcoin at its most fundamental level is a breakthrough in computer science. It is the first practical solution to the “double payment problem”. This longstanding problem in computer science is not new, and was originally derived from what many call the “Byzantine Generals Problem”, where a group of Generals of the Byzantine army camped with their troops around an enemy city. The troops were communicating only by messenger and the Generals needed to agree on a coordinated battle plan. Since the Generals did not trust each other, they were faced with finding a method to reach a common agreement. How can one build a network with a secure consensus with parties that don’t trust each other? The answer lies in combining cryptography and economic incentives, the foundations of a network that builds consensus in a secure fashion, or Blockchain.


This is far from the calls of a fad or Ponzi scheme. Could the value of Bitcoin go to zero? Yes! Will it be a bubble? Yes! However, the technology derived from solving the above problem is about to profoundly effect the way our society operates. Keeping an open mind is key.


The practical consequence of solving the “Byzantine Generals Problem” is that Bitcoin gives us a way for one internet user to transfer property rights to another user. The transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and no one can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.


As the Second World War was ending, economic experts of the Allies met in a New Hampshire resort to hammer out an international monetary system that would help prevent a recurrence of the Great Depression. The ensuing debate centered around two main proposals. John Maynard Keynes, the greatest economist of the 20th century, presented the British case while Harry Dexter White, one of Franklin D. Roosevelt’s key economic advisors, presented the American one. Keynes’ point was not to repeat the past. The global economy is closed and it needs a global currency and a fixed adjustment process to force the economy to deal with trade imbalances in real time, while having incentives for countries to adjust.


Keynes lost on most key points and the result was the Bretton Woods system, named after the small town in which the conference was held. As part of the agreement, it also created what would later become the International Monetary Fund and the World Bank. This served as the system of managing international trade and currencies for nearly three decades. The die was cast and it was predicted that the global economy would have another major structural adjustment in approximately 80 years, that period is upon us now.


Keynes suggested that a global medium of exchange, called Bancor, be introduced. Bancor was country agnostic. The Americans wanting the U.S. dollar to replace the Pound Sterling as the global medium of exchange refused. Keynes foresaw that the U.S. would slowly evolve from a creditor nation to a debtor nation. He also predicted that the U.S. economy would no longer be able to absorb the excess capacity that the global economy was producing and the rise of populism was going to be a certainty.


The basic problem with international trade is that imbalances can develop, with big winners and big losers. Some countries get big export surpluses, while others develop major trade deficits since the world cannot be in surplus or deficit with itself. The global economy has found it very difficult, if not impossible, to go through any needed structural adjustment without breaking out in war.


President Trump ran his election campaign on a populist agenda. Many question the ability of a centralized authority to focus on the common good of society and the desire for decentralized systems is now becoming a global phenomenon.


Bretton Woods was disassembled in 1971 when President Richard Nixon suspended the convertibility of the dollar into gold. The introduction of a digital currency, in a perverse way provides a solution that Keynes would have preferred in 1945. Bitcoin may not last, but the technology behind it will. The consequences of solving this important computer science question cannot be underestimated.


No one knows who will be the winners during this new phase of evolution, but we do know this new regime will be life changing for many. The global economy continues to evolve from a world based on analog to an economy based on its true native digital state. We can be sure that too much capital will be allocated and a bubble will be created, just as it happened during the internet of information in 1999, as well as the building of the railroads throughout the 19th century. That is the normal part of the evolutionary process. This time it is not different.


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.

September 2017 | Blockchain

Pendragon

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.