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My Smith Manoeuvre – June Update

Ouch! Another month went by but it was not as good as April and May! In fact, the last couple of days saw the Canadian market taking a slap in the face with some good drops. Since my whole Smith Manoeuvre portfolio is invested in Canadian Equities, I took the hit as everybody else. In fact, the Canadian market is getting more and more susceptible of entering in a bear market.

I don’t want to become one of those financial prophets who tell whoever wants to listen to them that the apocalypse is near. However, I must open my eyes and look at Canadian stocks the way it should be. The commodity stocks are dominating the market and are the only reason why the S&P/TSX was beating the American and other international markets [1] since the beginning of 2008. We are at a stage where those sectors (oil, metals and other resources) are representing about 50% of the TSX. If anything goes bad on that side, needless to say that the whole market is going to plunge.

My portfolio is still showing positive returns with a 5.9% annualized rate since Feb 2007. I am quite far away than my 14% from last month [2]! Sprott Canadian Equity is the part of my portfolio that took the biggest hit from a price of $50.03 to a price of $47.32 as of July 5th.

However, I am quite happy to realize that I have now $8,100 of my mortgage that is tax deductible [3]! At the same time that I increase my liquid assets, I am paying fewer taxes. That is giving me more flexibility in my overall finance which is always good news.

In order to avoid getting cut with all my money invested in a bear market, I am opening up my horizon for next month. In fact, I divided my systematic investments in order to get $200 in the National Bank dividend bond and another $200 in the Omega International Consensus [4] managed by Validea Capital. It won’t make a big different right away, but I don’t want to get rid of what I bought so far. I still think that the dividend fund and the Sprott Canadian Equity will do well in the long run.

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