3. The Way We Were
“When I began my business career in 1962, Canada’s
financial services were built on four rickety pillars:
an Archaic Banking System hamstrung by lending rate
ceilings and other statutory impediments; Venerable Trust
Companies providing old-fashioned (even then) fiduciary
and transfer services; “Old School” Investment Dealers
awakening to a life and world beyond bonds; and a
Fortress-like Life Insurance Industry steeped in tradition
and actuarial dogma.”
Michael Graham
Source: “Portfolio First Aid”, p 47.
11. The New Normal!
– Dow Jones Industrial Average,
September 29, 2008
• Return of Big Government
• Bailout, Stimulus, State Ownership, Regulation
• Soaring Debts and Deficits
• Fresh Risks – Inflation?
• V-O-L-A-T-I-L-I-T-Y
• Radically Changed Financial Markets
• Intensified Investor Challenges
Source: Report on Business, Sept. 30, 2008
12. AIG – Arrogance, Incompetence, Greed
– Rampant Everywhere
Acknowledgement: The Economist, March 21, 2009
13. A Subprime Mortgage Crisis Like No Other
– “Made-Off” Adding Fuel to the Fire
• Seduce low-wage workers into
buying unaffordable homes
• No-pay mortgages for 2 years
• Bundle into fancifully-named
“securitized” packages
• Get AAA rating from Moody’s/Standard & Poors
• Sell to banks and pension funds worldwide
• Lucrative fees, leverage, counter-party insurance,
• Everyone on the take (the “I’ll Be Gone” principle)
• Hundreds of billions/trillions of dollars worth
Source: “The Great Unraveling”, Thomas Friedman, Dec. 17, 2008; Maclean’s, March 23, 2009
14. How to Fix Wall Street and Restore Trust?
– A Challenge Taking Time
Acknowledgement: The Economist, Mar. 22, 2008; Fortune, Jan. 19, 2009
15. Depression Scares Are Hardly New
“I don’t remember any time, maybe
even in the Great Depression, when
things went down quite so fast, quite
so uniformly around the world.”
Paul Volcker
–Former Chairman, Federal Reserve
Mr. Volcker is
subsequently Chairman
of President Obama’s
new Economic Advisory
Panel
Acknowledgement: The New York Times, May 3, 2009; National Post, March 3, 2009
17. Leverage – Power, Abuse and Pain
“Give me a lever and I can move the Earth”
Archimedes
Total Investment $1,000 $1,000 $1,000 $1,000
Borrow — 500 — 900
Equity 1,000 100 1,000 100
Gross Profit 100 100 100 -100
Interest at 4% — -36 — -36
Net Profit 100 64 100 -136
Return on Equity 10% 64% -10% -136%
18. A Mandatory New Starting Point
– How Different This Year of the Dragon!
With Different Risks and New Survival Skills
Acknowledgement: The Economist, Aug. 13, 2011
19. A Global Debt Hangover
As the developed world finally awakens to a
serious and difficult-to-shake debt habit.
Acknowledgement: Financial Post, Dec. 31, 2011
Spring 2012
20. Debt – And Its Terrifying Legacy
– A Ticking Time Bomb?
New Year 2011 Acknowledgement: The Economist, June 13, 2009
21. The Mushrooming Retirement Risk
– All the More Reason to Invest
To Provide for Our Own Independent Financial Futures
Acknowledgement: Fortune, January 23, 2006
22. Getting Back To
Earth Again
Restoring Budget
Balance the Hard Way
or
Expediently You know
Copping Out how to
bring this
thing down, Down?
right?
Acknowledgement: Financial Post, January 28, 2009
23. To QE3 or Not QE3?
– The Risks of Still More Quantitative Easing
Acknowledgement: The Economist, July 14, 2012
24. Which Way?
• Slower economic growth • Quantitative easing (QE)
• Draconian cutbacks • Continuing deficits
• Higher (esp. user) taxes • Escalating gov’t. debt
• Deleveraging • Currency debasement
• Savings and investment • Lurking inflation
AUSTERITY but EXPEDIENCY
Without Killing Off Growth
28. The Glory of Globalization
Globalization has arrived
– in all its controversial,
disruptive and historic
Globalization is the new glory.
playing field, the arena in
which the competitive
game from now on will
be played.
Acknowledgement:
Financial Post,
July 21, 2007
29. Globalization in Practice
Profound Economic
and
Investment Potential
Acknowledgement: Financial Times, April 27, 2012; Daily Telegraph, April 30, 2012
30. Brother, Can You Spare
A Trillion?
– Never Mind the Repayment
Acknowledgement: Canadian Business Feb. 16, 2009
Spring 2009
32. Historical Bear Markets – U.S.
– As Measured by Standard & Poor’s 500 Index
Duration No. S&P 500 % Rec.
Peak Trough of Mos. High Low Decr. ?
Sep 29 Jun 32 33 32 4 86 R
Jul 33 Mar 35 20 12 8 34 R
Mar 37 Mar 38 13 19 9 54
Nov 38 Apr 42 42 14 7 46
May 46 Jun 49 36 19 14 30
Aug 56 Oct 57 15 50 39 22 R
Dec 61 Jun 62 7 73 52 28
Feb 66 Oct 66 8 94 73 22
Nov 68 May 70 18 108 69 36 R
Jan 73 Oct 74 21 120 62 48 R
Sep 76 Mar 78 18 108 69 36
Nov 80 Aug 82 20 141 102 27 R
Aug 87 Dec 87 3 336 224 34
Jul 90 Oct 90 3 369 295 20 R
Jul 98 Aug 98 2 1187 957 19
Mar 00 Oct 02 31 1527 777 49 R
Oct 07 Mar 09 17 1576 666 58% R
AVGE. 14 35
Source: TD Newcrest
Sept. 14, 2012 Recent 1472; Still 7% Below Oct. ‘07 Peak
33. Canadian Bear Markets
– As Measured by S&P/TSX Composite Index
Duration No. % Rec.
Peak Trough of Mos. Decr. ?
Jul 56 Dec 57 17 30 R
Jul 59 Jul 60 12 18 R
Jan 66 Sep 66 8 17 –
May 69 Jun 70 13 28 R
Oct 73 Sep 74 11 37 R
Nov 80 Jun 82 19 43 R
Aug 89 Oct 90 14 23 R
Sep 00 Sep 02 24 40 R
Jun 08 Mar 09 9 51% R
(15,155) (7,480)
AVGE. 14 40
Source: BMO Capital Markets
Sept. 14, 2012
Recent 12,500; Still 18% below June ‘08 Peak
37. Canada
Circa 2012-13
World’s Soundest Banking System
Oil/Energy Potential
Broadening Trade Reach
Relative Fiscal Strength
Strong (and Undervalued) Currency
GLOBAL - INTERNATIONAL
In Every Direction
Autumn 2012
39. Canada: A Global Energy Superpower
– Across the Entire Spectrum
Oil – Alberta’s Oilsands, Offshore East Coast
Natural Gas – Conventional, Unconventional (Shale), LNG
Coal – Coking, Thermal Oil Reserves
In billions of barrels
Uranium – World Leader
Saudi Arabia 264
CANADA 178
Iran 136
Hydro – Big dams, run-of-river
Iraq 115
Kuwait 102
Venezuela 99
Renewable – Wind, Waves, Solar Abu Dhabi 92
Russia 60
Bio-mass – Ethanol Libya
Nigeria
44
36
Kazakhstan 30
U.S. 21
The Globe & Mail
Source: Consumer Energy Alliance
Autumn 2012
41. Canada, The World Natural Gas Leader
– Reserves, Technology, LNG, et al.
Acknowledgement: The Economist, July 14, 2012
42. What’s Not Happening in Canada
– How Boring By Comparison
• There is no housing crisis
• There is no banking crisis
• There is no unemployment crisis
• There is no sovereign debt crisis
• There is no fiscal crisis
and
• There is no political crisis
Autumn 2012
43. Canada’s Imperative Challenge
– To Move Up the Global Competitiveness Ladder
Productivity Enhancement
Through Investment
Acknowledgement: Globe & Mail ROB, Sept. 8, 2011: measured by authoritative sources
44. The World That Information Built
– No Borders, No Limits, Never-ending Possibilities
Thomson builds the information
that helps the people
who administer the law,
who search for cures and develop better medicine,
who streamline the mechanisms of the market,
and who create new ways of educating the people
who become the citizens of the world
that information built.
THE THOMSON CORPORATION
Acknowledgement: The Thomson Corporation Annual Report 2008
45. Attraction Over the Broadest Range
Acknowledgement: Canadian Business, Feb. 2011
46. Canada Calling
Disciplined, Energized,
Fiscally Sound, Investable
MICHAEL R. GRAHAM, PH.D.
MICHAEL GRAHAM INVESTMENT SERVICES INC.
Fall 2012
47. Canada – Growth AND Safe Passage
A Welcoming Place From Coast to Coast to Coast
Fall 2012 Acknowledgement: Globe & Mail, ROB, June 15, 2009
48. C A N A D A CIRCA 2012-13
STANDOUT ECONOMIC ATTRACTION
+
STRATEGIC GLOBAL LOCATION
+
AN ENERGY-LED INVESTMENT BOOM
+
WORLD’S SOUNDEST BANKING SYSTEM
+
RELATIVE FISCAL STRENGTH
+
FUNDAMENTALLY SOUND CURRENCY
+
WORLD-CLASS CORPORATIONS (ALL TYPES)
+
CONTINUING PROFIT (& DIVIDEND) GROWTH
=
A COMPELLING INVESTMENT COMBINATION
Fall 2012
49. Commiserations!
– With Thanks to Louis Rukeyser
What an uncertain economy. Productivity keeps rising in
defiance of virtually all predictors. The private sector is at its
most competitive in human history. Corporate earnings are
recovering in both quantity and quality. The stock markets
are vibrant, inflation remains so dormant that even the
central banks can’t detect it. Labour costs are low and
declining. The benefits of capitalism are blessing more
homes worldwide every year, leading the way to an
unprecedented century of human freedom. What a
miserable time to be alive.
Acknowledgement: Louis Rukeyser’s Wall Street, March 2000
50. What A Challenge
– In a World of Extraordinary Opportunity
And what a time to own rather than loan.
Fall 2012
Acknowledgement: Association for Investment Management and Research
51. Trends ...
When you get your
hands on trends like
these …THIS TRAIN
IS STILL JUST
LEAVING THE
STATION!
52. Wrap Ourselves in The Canadian Flag
– Why Not Also as Investors?
Source: Globe & Mail, July 13, 2011
53. The Michael Graham Creed
– With a Heavy Canadian Bias
• Look beyond the negatives
• Adapt to a changing 21st century world
• Be suitably invested – and portfolio weighted
• Be flexible – make necessary adjustments
• Stay balanced – keep sectors and holdings in line
• Lean back – run the risks, remember the rewards
• Let the surprises play out
and
Happy, Rewarding C N DI N Investing
54. DISCLAIMER
This presentation contains forward-looking statements, which are generally identified by words such
as “may”, “believes”, “expects”, “estimates” and similar expressions. Forward-looking statements are
subject to a number of known and unknown uncertainties that could cause actual results to differ
materially from those expressed in the statements.
Our discussions of corporations and assertions as to their attributes may be presented in definitive-
sounding statements which are generally indicated by words such as “is”, “has”, and similar
expressions; however, investors should recognize that our understanding of the corporations discussed
may be incomplete and our opinions and ratings may be wrong. We use reasonable efforts to obtain
information which we believe is reliable but we cannot research authoritatively all facts relating to
markets or companies and, to some degree, markets are unpredictable. Therefore, we must make
investment decisions based on information that is often incomplete. We use a diversified portfolio
investment approach to try to offset instances where the information and opinions we hold on
individual investments prove to be erroneous. We do not guarantee results and cannot be held
responsible for investments made or losses suffered by investors relying on information contained in
this presentation.
Michael Graham may own shares in all of the companies displayed in this presentation. Michael
Graham may also be in the process of buying or selling any of the mentioned securities.
Michael Graham Investment Services Inc.
141 Adelaide Street West, Suite 1001
Toronto, ON M5H 3L5 Canada
(Tel.) 416-360-7538 (e) michael@grahamis.ca
michaelgrahamis.com
