Matthew Lekushoff |

The last couple of weeks have not been kind to equity markets. Year-to-date most ranged from slightly below even to strongly negative. 

Last week, a particularly negative sentiment grabbed equity markets with both hands and shook hard. Surprisingly, the S&P 500-----  which has previously been avoiding the slump-----  was amongst the largest decliners, falling more than 4% over the five-day period. Most other markets fell as well with the already battered emerging market index also being hit hard. As one would expect, gold was one of the lone bright spots rising almost 3% on the week.

The market rebounded early this week somewhat, but, as of noon on Thursday, sentiment returned to negative with gold continuing its upward path.

As always, it's hard to tell if this is the beginning of something more substantial. If it is, this is a good time to remind everyone that our portfolios have been positioned more conservatively than usual. Should markets move further south, not only will we rebalance as appropriate, we will also trim our conservative positions (bonds, gold, value, and REITs) to take advantage of fallen equities by increasing their percentage within our portfolios.


On the home front, Canada is firmly in negative territory, trading about 4% lower than it did at the end of 2017. Part of this weakness is owed to a story that hasn't garnered the attention it deserves. Western Canadian Select (WCS) crude is selling at a crazy discount  (almost $50 a barrel) relative to Brent and Light crude. Historically, WCS garners a small discount to other crude blends, but this unprecedented reduction stems from a perfect storm of seasonal refinery shutdowns, lack of storage, and inadequate pipeline capacity to ship it to market.
In the short term, the  oil patch is scrambling   to access more railway cars and storage, as some estimates have the discount costing up to $100 million in revenues per day. The situation should improve somewhat once seasonal refinery maintenance in the U.S. finishes. However, a long-term solution of building key pipelines is likely the best hope for Canadian oil producers to ensure the situation improves.
Overall, with the free trade agreement seemingly taken care of, low relative security valuations, and an expected reduction in the WCS discount, I'm hearing more optimistic comments about the TSX moving forward.


The Uses and Abuses of History  by Margaret MacMillan: I read this book about eight years ago and was underwhelmed. When my book club recently chose to read it, I viewed it as an opportunity to see if there was something I missed. Unfortunately, I remain underwhelmed. While it contains the appropriate stories to illustrate the book's themes, MacMillan, known for her great book Paris 1919, delivers an introduction rather than a comprehensive analysis of a potentially fascinating topic. 
That being said, if you are interested in learning about how governments and individuals have manipulated history to their benefit, you likely won't be disappointed.
Gridiron Genius: A Master Class in Winning Championships and Building Dynasties in the NFL   by Michael Lombardi: This book combines some of my favourite topics: football, strategy, the creation of successful cultures, legendary figures, and more football. It's a football geek's dream come true. As a former NFL executive who worked with three giants of the game-----  Al Davis, Bill Walsh, and Bill Belichick-----  Lombardi dishes on what made these eccentric men tick, but more importantly, on how they became the successes they were.
Although it's a must for the football enthusiast, I'd also recommend it to those who aren't. There are so many great stories, suggestions, and strategies for building a successful culture, as well as for the individual-----  I think almost anyone could find something useful for their own lives.
If you would like a small taste of what you'll find in the book,  this short Q & A  with Michael Lombardi on the importance of culture will give you that.  
The Trade Deficit Isn't the Boogeyman  by John Mauldin: I've always considered trade deficits bad for a country. This article hasn't convinced me otherwise, but it's given me reason to reconsider and do further research.
Canso's October Newsletter :   Another great Canso newsletter featuring some important historical interest rate data that may be important to keep in mind moving forward.
The Trust Battery: Farnam Street Interview with Shopify Founder Tobi Lütke :  Ottawa-based Shopify is one of those companies you probably use on a regular basis, but don't know you do. In this podcast, Shopify's founder, Tobi Lütke, has a wide-ranging conversation from the benefits of video games and the three kinds of processes to trust batteries and a lot more. I enjoyed it so much, I'll be reading and taking notes from the transcript in the near future.
$63 Trillion of World Debt in One Visualization   by Visual Capitalist: If you've ever wondered who owes most of the world's debt, this chart will answer that question for you.


"If the study of history does nothing more than teach us humility and skepticism, then it has done something useful.  We must continue to examine our own assumptions and those of others and ask, where's the evidence?  Or, is there another explanation? We should be wary of grand claims in history's name or those who claim to have uncovered the truth once and for all. In the end my only advice is use it, enjoy it, but always handle history with care." - Margaret MacMillan
"To push the game forward, Walsh was constantly looking back through history for guidance." - Michael Lombardi
"Culture can eat strategy for lunch." - Peter Drucker


I try to avoid news that doesn't impact my life, but sometimes a more powerful force weakens my resolve...
Last week, Kanye West visited his new father figure President Donald Trump at the White House. Individually, I'm usually strong enough to ignore them. But together...well, together, Kanye and Trump are weapons grade kryptonite. I especially enjoyed the part of  their meeting  when Kanye talked about  how his MAGA hat makes him feel . You can't make this stuff up, folks.
Of course,  SNL Jimmy Kimmel The Daily Show , and  Jimmy Fallon  couldn't help themselves either.

In completely unrelated news, yesterday Canada become only the second nation (Uruguay was first) in the world to legalize the use of cannabis.  For those of us that live in Canada - or if you're just interested - here is what you need to know. 

Matthew Lekushoff

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