I had the privledge the other day to have breakfast with vetran fixed income investor Dan Bastasic. Dan has recently moved to IA Clarington from Mackenzie Financial. He now manages a corporate bond, equity income, and strategic income mandate. Dan has a great history of performance and risk management.
Here are some of Dans comments and points I took away from the breakfast;
- Right now the risk is the Fiscal Cliff. We are already feeling it. We will likely see a mini cliff.
- Housing in the US is growing to a million startups.
- Government bonds are expensive and offer little yield, but it is very hard to just leave them.
- Dan has outperformed the TSX by 8% over the last 6 months with 50% of the risk.
- Dans funds are always top decile and right now is 5th out of 500 funds.
- Dan is proactive in managing money stating - "I wan't to know what will go wrong, and how it will effect my investment thesis"
- "We cant just buy cheap stuff and hope they go up anymore. The next 5 - 10 years are going to be extremely rocky."
- China's economy is no longer growing at 8%.
- "The US growing at 1.7% is a bad number but they are in relatively good shape. Manufacturing is moving back, housing is improving, the auto sector is improving, and consumers are reloading."
- China is still a risk, we are still concerned. We don't look at goverments particularly, we look at things like electricity, automobile, and steel consumption.
- "Are high yield bonds in a bubble?...I don't think so. Yields are as low as ever. Real inflation is upwards of 8%. stocks may get you 9% but you have twice the risk and goverment bonds are negative. We see high yields have one of the best upside, with least amount of downside potential."
- Our Team: "We are stock and bond people and we get to know our companies really well. Part of our success has been buying stock in a companies bond we used to own or buying bonds in a companies stock we used to own."
- What we like: "Energy, we have been playing natural gas for the last 7 months. Companies like Enbridge and Trans Canada are clearly expensive but I get a 4%-5% dividend, 4% growth and these are still pretty solid companies. We think 80% of REITs are overvalued. We like auto companies like Magna and Bayner. We expect stocks to return around 7-8% next year and high yields to give us 8%. I still dont think we should get out of our high quality dividend paying stocks."
- "Goverment bonds are as overvalued as they have ever been and very risky."
- "Interest rates will not go up quickly. 200 years of data in government bonds tells us that it takes 15 years to go from peak to trough or vise versa"
- 50% of the S&P has a dividend yield higher than goverment bonds and the S&P 500 is the most diversified index globally.
To see the funds Dan currently manages click here
To watch videos produced by Dan about how he manages money and the funds he manages click here
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