Outlook for September 2018

Summer is almost over, and things are getting very interesting in the global financial markets. The talk of town is the start of EM currency crisis. August saw the spectacular fall of Turkish Lira and with it, the Turkish markets. While the media played it as a local event that would not effect the global markets, that tone shifted very quickly, as other EM currencies started falling — Argentinian Pesos, Indian Rupees, South African Rand, Brazilian Real all took a pounding in the last few weeks of summer. Not only the EM contagion is starting to play out, but also developed markets look precarious — with Euro trending down, British pound heading down; Aussie dollar and Canadian dollar are starting to show weakness too thanks to the housing bubbles — anyone and everyone you talk to, advises running to the safety of the almighty US dollar. With everyone piling on one side of the trade, it doesn’t take much of an imagination to figure out what happens after this crisis plays out…

Add to the fact the ongoing tariff war crusade initiated by the US administration. While the initial winner seems to be the US (and the US$) most international trading partners, including its closest allies, have indicated being treated unjustly and looking for alternatives. If history teaches us anything, tariff wars almost always never turn out as originally intended, so it will be interesting to see how the bureaucrats maneuver the upcoming minefield.

So, in just matter of months, we have gone from a narrative of “coordinated global growth” to “EM crisis/global contraction”.

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Recent Buy – IPL

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A quick update on a a recent purchase in my portfolio to close out the month of August.

I had put in a low-ball offer a few weeks/months ago, which got executed just before the market closed last Friday. In this purchase, I added 100 shares of Inter Pipeline Ltd (IPL.TO) @ $24.00. IPL is a pipeline company that I have been a shareholder in for a long time and continue to build my position over the years. I have doubled my position since the start of 2018 with these purchases. IPL now makes a substantial position in my portfolio and will possibly look at limiting any more build-up since I do not want to own too much portfolio concentration in a single stock. With a current yield of 7%, this purchase adds CAD$168 to my forward dividend income.

Full Disclosure: Long IPL.TO. Our full list of holdings is available here.