My Report Card For 2001

THE BULL PHASE
FIRST PRIORITY OF INVESTING IS TO NEVER LOSE MONEY,
SECOND PRIORITY IS TO MAKE CONSISTENT ABOVE AVERAGE RETURNS.

MY REPORT CARD FOR 2001

The year 2001 has been one of volatility, turbulence and disappointment for the vast majority of mutual fund investors. The average Canadian equity fund investor is much below water for 2001. The stock market indexes in the US with the exception of the DJIA -7.1%, are down substantially. The S&P 500 -13%, the Nasdaq -21.1% being the worst performer.

European indexes are all down on the year and losses in European equity funds are also considerable (Great Britain -16.2%, France -22%, Germany - 19.8%, Italy -26.2%, Switzerland -21.1%). Our own TSE 300 was -13.9% for the year and most Canadian equity funds and balanced funds were in the minus column. The strongest performing Canadian sector: Gold!

The Far East and Japan did not fare better, witness Hong Kong -24.5%, Japan -23.5%. Going south, Mexico was the out-performer + 12.7%.

Most analysts and prognosticators had it all wrong at the beginning of 2001. Few of these highly paid professionals had it right. Their credibility has sunk to an all time low. Good technical analysts and economists are far and few between perhaps with the exception of a small number. Alan Newman of HDBrous & Co. Of New York, Bill Fleckenstein of Seattle, Ed Bugos of Vancouver are the few outstanding names to remember who had it spot-on. Other investment-intelligence comes from David Tice, Marshall Auerback and Doug Noland, all associated with the Prudent Bear Funds in Dallas, Texas. Part of my successful investment strategy is based on the contacts I have with these “intelligent” seers.

My report card for 2001 I believe is “impressive” in that my clients have experienced superior performance in all but one category. The category, which under-performed in 2001 was the Japan sector. I was too early to commit to this sector and it also has suffered from a very weak Yen. That will eventually change for the better.

The mutual funds in clients’ portfolios which outperformed substantially were:

Universal Precious Metals UP 44.42%
Dynamic Precious Metals UP 42%
AGF Precious Metals UP 24.44%
Mackenzie Maxxum Dividend Growth Fund UP 13%
Mackenzie Growth Fund UP 29%
Mackenzie Universal Canadian Resources Fund UP 27%
AIM Trimark Resources UP 30%
CI Canadian Resources UP 13%
Canadian Government Bond Funds delivered superb interest returns and an average growth return of about 8%.

There are others of course, too many to mention in this Report.

Going forward I expect 2002 to be a very difficult year when mutual fund investors finally realize that the dogmatic ideology of “Buy & Hold” will not work. I expect the equity markets, which are generally much overvalued by historical standards, to under-perform substantially. Average losses of 25% come to my mind. Everything depends on a robust recovery of the failing US and global economy and I believe that this is not in the cards as yet. It will pay handsome results when one is invested in the sectors, which are friendly to the underlying fundamentals. I will cover this on a more detailed basis in my next Report to you. In the meantime I shall continue managing clients’ monies in a disciplined and prudent manner as I have done for the past 40 years.

Past performance is no guarantee of future results. All 2001 percentage returns provided by GlobeFund.com