Matthew Lekushoff |

It's a little late, but I'd like to wish everyone a very happy New Year!
I used my time off over the holidays to do one of my favourite things-----  read. As a result, I've added more recommendations than usual to this letter.
Hope you enjoy and look forward to hearing from you in 2019.


While 2018 wasn't a good year for global stock markets, looking ahead, I am more optimistic than I have been for some time.

At the beginning of 2019, valuations in the emerging markets are historically low, the Canadian market-----  having fallen two years in a row-----  is due for a rebound, and valuations are close to historical norms for most global stock markets. While not robust, and with some things to worry about, the global economy is not looking terrible.

Last quarter, I highlighted the Canadian energy sector and the price of Western Canadian Select (WCS) oil. With the extreme glut of WCS, due to a lack of transport capacity, the prices fell into the low teens-----   an unprecedented discount to Brent and WTI crude. With Alberta forcing producers to pump 8.3% less oil starting January 1, and the increase of shipments by rail to a record 281,000 barrels a day the week of December 28, WCS prices have increased over 250% from their recent lows.

Should rail shipments continue to rise as expected, and the current pipeline remain on schedule, there is reason to believe Canadian energy producers will have a much better year.

Although negatively hit in 2018, our conservatively positioned portfolios did much better than most stock markets, especially in the last few months of the year. Positions of note were Canadian REITs (which fell, but less than most indexes), and our bond and gold positions (which actually rose in value).

Moving forward, there is reason to be less conservative. Unless markets rise suddenly, we will moderately increase the risk of our portfolios, and keep rebalancing. Should markets continue to fall, we will become more aggressive.

To paraphrase Warren Buffet: I like to be fearful when others are greedy and greedy when others are fearful.


Big Debt Crises  by Ray Dalio: Ray Dalio's The Big Debt Crisis is an exploration into the 48 big debt crises of the last century. The book's first section (I have only read thus far) provides a macro analysis of the patterns and lessons we should learn from them. 
The biggest takeaway from what I've read-----  and there are many-----is that every debt crisis usually leads to either a deflationary debt cycle, or an inflationary debt cycle: the determinant being currency. If a country borrows in its own currency, a crisis is usually deflationary. Countries that borrow predominantly in a foreign currency generally experience inflationary cycles when their debt gets out of hand. 
If you'd like to look through the book, but aren't ready to buy it, Dalio has graciously provided a digital download for those who  enter their name and email address here .
Dead Cold  by Louise Penny: Last November, I mentioned that  Still Life by Louise Penny was the first murder mystery I'd ever read, and that it likely wouldn't be long before I read another. Well. Over the holidays, I finished Dead Cold, the second book of the Chief Inspector Gamache series. It, too, was a page-turner, and I've just started the third book. This may become an issue...
Confluence's December 17 Geopolitical Report  does a really nice job of examining what they feel will be 2019's most important geopolitical issues, namely, China, European politics, rising Western populism, and the Saudi succession.
The Knowledge Project - Win-Winning at the Great Game with Adam Robinson (Part 1)  & ( Part 2 ) by Farnam Street: A long and far-ranging conversation with author, educator, and hedge fund advisor, Adam Robinson. I'd never heard of Robinson before, but after listening to the podcast, I now follow  him on Twitter  and will look for other content he's produced. Although I learned a lot from this conversation, if I ever hear, "I'm using air quotes now" again, I may develop a nervous twitch! 
For those not willing to jump into the four-hour conversation, I recently found a website that summarizes what they feel are the best parts of various podcasts. Luckily,  Part 1  and  Part 2  of this podcast were among them.
Let Me Convince You To Save Money  by Morgan Housel: The predominant message from financial media usually revolves around how to make more money. Morgan Housel argues, as only he can, that being able to save money is just as important, perhaps even more so.
The Spacing Effect: How to Improve Learning and Maximize Retention  by Farnam Street: In university, it was common to cram and pull all-nighters to prepare for exams. As it turns out (shocking, I know), cramming is not a particularly smart way to learn.

GDP Predictions are Reliable Only in the Short Term  by The Economist: In an article that shouldn't surprise many of us, long-term GDP predictions aren't very good.
Twitter Thread on High Agency  by George Mack: George Mack asks: " When you're told that something is impossible, is that the end of the conversation, or does that start a second dialogue in your mind, how to get around whoever it is that's just told you that you can't do something?" This thread discusses high and low agency through this lens while providing interesting examples of both .
The News Events That Most Engrossed Audiences in 2018  by The Economist: The Economist lists the stories that got the most attention in 2018.

The Story of Indra from the Brahmavar Upanishad  by Joseph Campbell: A great story for the New Year to remind us how many have come before and will come after us.
Jim & Andy: The Great Beyond :  Years ago, I watched and loved Man on the Moon, a movie about the late comedian Andy Kaufman, played by Jim Carrey. Jim and Andy is a documentary about the making of that movie and the extreme lengths Carey went to stay in character. I don't think you need to see Man on the Moon to enjoy this documentary, but if you did and liked it, this is worth your time. Here is the  trailer  to give you a feel for the film.
Coco :  I love animated movies, especially those made by Pixar. So it was with great anticipation that I watch Coco. It didn't disappoint. Here is the  trailer  in case you are interested.


"Past a certain level of income, what you need is just what sits below your ego. Everyone needs the basics, and once the basics are covered there's another level of comfortable basics, and past that there's basics that are both comfortable, entertaining, and enlightening. But spending past a pretty low level of materialism is mostly a reflection of ego approaching income, a way to spend money to show people that you have (or had) money. Think of it this way, and one of the most powerful ways to increase your savings isn't to raise your income, but your humility."
Morgan Housel
"11/  @Schwarzenegger  high agency was noted by Bill Burr: 1. Gets famous for lifting weights 2. Becomes the world's biggest movie star despite nobody being able to understand him 3. Marries into the American royal family 4. Becomes governor of a state he can't even pronounce."
"You can fail at what you don't want, so you might as well take a chance on doing what you love." -  Jim Carey

  • 'Tis the season for New Year's resolution-making...and, breaking? This Fast Company article presents an interesting argument for why you should start your New Year's resolutions on March 4.

Matthew Lekushoff

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