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Quarterly Investment Review Letter 2014 Q4

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This past December, the Shanghai Composite Index had its largest single-day fall since 2009. This was following a recent surge that made Shanghai the world’s top-performing major index in 2014. This ‘surge’ was fueled by retail investors using massive borrowing to leverage their bet. Volatility may be imminently ahead as analysts widely expect economic growth to slow in China to a 24-year-low of 7.4% this year. Beijing has said it will tolerate slower growth for the next year; government think tanks have called for lowering growth to 7%. Is this the reality of an Asian tiger aging into a slow grow economy and settling in after three decades of high intensity growth?

For most Americans, this year’s sudden collapse of oil prices appears to be unqualified good news. Oil prices have dropped 45% since June, amid surging output from U.S. shale fields, strong Saudi Arabian production and weak demand from Asia and elsewhere. The barrel price dropped 12.2% in a single week in December, closing at $57.81 a barrel and $53.64 as at the end of December. Analysts at Credit Suisse and other banks say it will take years before oil prices return to $100-a-barrel levels. Is this another sign of slow growth effecting energy and the supply/price ratio?

The International Monetary Fund (IMF) in October 2014 cut its current-year growth forecasts for the ninth time in the last three years. It has consistently overestimated how quickly richer countries would be able to pull free from high debt and unemployment in the wake of the 2007-2009 global financial crisis. Might this be another indication of growth that is not happening as hoped for?

Aside from this perfect economic global storm, the Value Style investment teams at Manulife Financial and Cardinal Capital continue to outperform. Their consistency of income and preservation of capital achieved with only moderate levels of volatility/risk have produced yet another positive investment report.

Emerging and developed markets in Asia and Europe have been ineffective and have been in trouble for quite a while. They need to get their houses in order. No one expects this to happen any time soon. However, the Value Style remains significantly on course apart from the storm.

The Manulife and Cardinal performance numbers speak clearly. The specifics within your personal report attached bear true witness to the consistency of Value Style investing.

Your comments are welcomed at, Facebook: Richard McKenster Financial Planning, Twitter: @RMFPcanada , LinkedIn and 1-877-423-2152.