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Educational Segment: Long-Term Investing. This is on geopolitical and global macro, because a lot of global hedge funds macro views and look for themes in markets. This week, Canada has their budget. Global investors look at things like this and look for what is diverging and what is different, and is it good or bad compared to others. The US is cutting taxes, both corporate and personal, while Canada is raising taxes. Global money follows the flow of funds. Canada has net outflows on capital account, net outflows on current account, so we run trade deficits. There is less money coming into Canada so the global investors see that Canada is vulnerable and if they Short Canada as well as the currency, will the Bank of Canada raise rates? Investing in Canada has a lot to do with oil, and as oil goes, so goes the TSX.
If the budget is as bad as he thinks it is going to be, in terms of taxing capital and savings, you use inverse ETF’s. HBP 60 Inverse ETF (HIX-T) is an inverse play on the TSX 60. While Canada is somewhat cheap this year, it is only going to grow at 1.5% a year over the next 5 years, and only because they are borrowing money.
Larry Berman CFA, CMT, CTA
Chief Investment Officer, Partner, ETF Capital Management Inc. http://www.etfcm.com