2019 was a difficult year for many. We all look forward to a better 2020. Fusaki Beach, Ishigaki, Okinawa, Japan. Copyright © 2018. Felix Choo / dingobear photography. Picture available for licensing at Alamy Images. Photo may not be reproduced without permission.
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Hello! This is the 47th update of the Peanut Power Rankings and the first of the New Year; this version takes into account available data current to January 10, 2020. Thank you for continuing to read and support the Canadian Convertible Debentures Project.
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To review and for those new around here, let's do a quick summary of what the Peanut Power Rankings are all about. In a nutshell, the rankings are based on two main considerations: (1) a proprietary quantitative model I developed to help myself determine a theoretical "fair value" of a particular convertible debenture issue and (2) a qualitative judgment (based solely on my own humble opinion) on the particular issue, issuer, economic environment, interest rates, and other factors.
For this version of the Peanut Power Rankings, please click on the table below to read it larger. If you still find it too small to read, please download the PNG file, which then can be zoomed to a size that you prefer. For those who are looking to obtain a PDF or Excel version, please email us for more information; they can be made available for a small fee (let's say $5 but I won't complain if you want to pay more :)
Important!: Like everything else on this website, content here is provided as information and opinions only and not intended to be a provision of investment advice or a recommendation of any investment action in any form. There is no guarantee, warranty, representation, or other assurance whatsoever on any of the information provided. Information and opinions reflect our views as of the date provided, but may (and do!) change without notice. Investments made in convertible debentures are exposed to the risk of financial losses, and as with all disseminated information concerning investments, it is highly recommended that an individual consult with a qualified investment professional before making any investment decisions.
Market Commentary - Quick Points (January 10, 2019)
- Early in 2020, the deluge of news continues unabated and there's geopolitical risk everywhere, but the markets seem desensitized to it all and keep going higher.
- No doubt both stock and fixed income markets have been driven by dovish monetary policy from the world's major central banks - the world is awash in liquidity. But is it needed?
- Maybe, but that's a matter of perspective, I suppose. There sure seems to be a vacuum of leadership in the Western world, and easy money from the central banks seem to be covering up questionable (or downright terrible) decisions of political leaders who seem to put power, greed, and political expediency above advancing the interests of society as a whole.
- In the US, record deficits in the neighbourhood of a trillion(!) dollars provide additional sugar to the market rush. Unemployment is low and GDP growth buoyant, but is it being propped up by all of the stimulus or actual fundamentals?
- It'll be interesting to see what earnings look like when Q4 2019 results start to be reported in a few weeks. Those companies with monopoly-life market power (for example, the Amazons, Apples, and Googles of the world) will probably continue to earn disproportionate profits - interestingly reflecting the imbalances between haves and have nots in society at large. But will there be breadth in earnings growth as the economic expansion continues into its 12th year?
- Depending on how one defines a bull market, this is either the longest or second longest bull market in the last 100 years, and as we all know, bull markets don't last forever. Equity valuation remain elevated as measured by the CAPE ratio, and we remind everyone that it's a US Presidential election year with the most volatile incumbent in recent or distant memory.
- Relative to last summer, recession clouds have lifted a bit thanks to the aforementioned central banks and reported progress on the trade front (though it can be argued that trade issues were self-inflicted to begin with - i.e., create an artificial crisis, solve it, win political points, get re-elected, lather, rinse, and repeat).
- Meanwhile, Australia burns, the climate is changing, and many continue to deny it, not able to bridge the cognitive dissonance between the reality of facts and the alternative reality of alternate facts.
- Recent Middle East tensions with a country that starts with "Ira" suggest it's deja vu all over again, reminiscent of the last two Republican Presidents. Risks of a wider military conflict have been elevated, though the cynical suggest this is only to distract from the impeach-y situation back on the domestic front.
- Clearly, there is a lot of information to sift through here for the average investor - it's enough to make anyone's head spin. So what's a convertible debenture investor to do?
- Well, sorry to be boring, but the advice is still (still!) the same: diversify widely and focus on good credit quality issues. There are plenty of potential pitfalls for investors in 2020, and after more than a decade of positive returns, we think its prudent to be more risk-adverse than risk-seeking.
- Happy investing and good luck with your convertible debentures in 2020.
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