Rather than the start of a new year, January feels a little like the 13th month of 2020.
That said, there is still much to look forward to for the year ahead. Vaccine distribution, while not perfect, has begun en mass. Joe Biden assuming the U.S. presidency should provide a new direction and a more civil political atmosphere. And numerous investment undercurrents are beginning to shift. Below are a few I’d like to discuss.
Despite economies with superior growth and cheaper valuations, emerging markets (EMs) indexes underperformed for much of the 2010s. However, they had a good year in 2020, performing better than most developed markets. And this year, they’re already 6% higher! Virtually every piece of market research I’m reading these days expects EMs to outperform as the world returns to normal. 

On the other hand, U.S. stocks have defied historical norms, regularly outperforming virtually every global alternative. But with superior performance comes bloated valuations - making those investments vulnerable to corrections and future underperformance. Although there might be many reasons to be excited for a Biden presidency, from an investment point of view, it’s likely he won’t be as bullish for U.S. stocks as Trump. His plans to increase corporate taxes and support wage and labour initiatives will likely make U.S. stocks less attractive as investments. It may also be the impetus for meaningful investment dollars to seek new shores - namely, EMs, but possibly other developed markets like Europe and Japan. In other words, there is reason to believe U.S. stocks will underperform most global markets moving forward. 
There may also be a significant shift within the U.S. market. While “value” investments have performed well over the last century, they have underperformed for the last 13 years. Meanwhile, growth investments, many of which are in the tech sector, have enjoyed significant growth. Perhaps to the point of being severely overvalued. However, since the end of November, the U.S. value index, which includes the energy, banking, and pharmaceutical sectors, has outpaced the growth index. This could be the beginning of a well overdue major cyclical reversal.
Another area to note is inflation and interest rates. Given the current state of the pandemic, most global economies continue to struggle. If vaccine distributions occur as anticipated, we should see meaningful economic growth towards the end of this year. Assuming governments continue elevated levels of spending, this could result in inflationary pressures. Increased inflation is often accompanied by rising interest rates. While it would be bad for most bonds, which have enjoyed declining interest rates for 40 years, it will likely be positive for commodities and gold.
The last potential change is the weakening of the U.S. dollar. As the global reserve currency, it accounts for about 55% of global transactions. Being the reserve currency has allowed the U.S. Federal Reserve to print money at rates that would decapitate most other currencies. However, the mind-boggling amounts of dollars being printed, along with multi-trillion dollar deficits likely to continue, have led the greenback to weaken considerably for the last eight months. Assuming the trend continues, we could see the U.S. dollar fall for some time, which could also be inflationary, especially for the U.S., while being bullish for gold and other commodities priced in dollars.
In regards to our portfolios, we are well-positioned for these changes and have benefited from the recent increase in the price of gold, energy, value stocks, and EMs.

If you’re looking for more timely information on the markets, you can find them on the research section of my website, or on my Twitter, Facebook, and LinkedIn feeds.

The new year brings a good time to start thinking about your TFSA and RRSP contributions. To that end, I’ve updated two previous blog posts. One compares TFSAs and RRSPs, while the other is a more in-depth look into RRSPs that includes some strategies you may find interesting.
You may have also notice a slight reduction in your pay this year. Just a reminder that this is due to an increase in CPP payments, from 5.25% of your pay to 5.45% - a 3.8% increase in total.

As January is often a time of reflection and introspection, I’ve written two new blog posts on ideas and concepts that have helped me become a better thinker, decision-maker and ultimately grow as a person. I hope you enjoy!
The Psychology of Money by Morgan Housel: I’ve yet to come across anyone who can write about money and finance with the clarity and wisdom of Morgan Housel. Not surprisingly, his new book, The Psychology of Money, is brilliant. Although based on his previous posts, many of the chapters build upon them with added insights. I highly recommend this book for anyone wanting to learn more about how money works, affects us, and can improve our lives.

What's Wrong with Social Science and How to Fix It by Alvaro de Menard: After looking through 2,578 social science papers, Alvaro de Menard provides a thorough breakdown on the quality of research throughout the field. Unfortunately, the results aren’t good. He found that much of today’s research either isn’t successfully replicable or has serious issues in methodology, such as sample sizes that are too small to be relevant.
As to be expected, some areas are better than others. Research in fields, like economics, demography, and education seem fairly decent, while others, like criminology, marketing and management, cognitive psychology, and social psychology seem pretty bad to awful.
I have two takeaways from this article: It’s much harder to know whether something is true or not than most of us think; and to be fairly skeptical of most social science (but possibly other fields) research you come across in the media. That is, unless the studies have been successfully replicated by independent parties.

The Epic Battle of Thermopylae Remains One of the Most Stirring Defeats of All Time by Nathaniel Sharping: Great summary of the battle of Thermopylae (better known as the battle from the movie 300).

Why Small Habits Make a Big Difference by Farnam Street: “When we watch people make small choices, like order a salad at lunch instead of a burger, the difference of a few hundred calories doesn’t seem to matter much. In the moment that’s true. These small decisions don’t matter all that much. However, as days turn to weeks and weeks to months and months to years those tiny repeatable choices compound. Consider another example, saving a little money right now won’t make you a millionaire tomorrow. But starting to save today makes it more likely you will become a millionaire in the future.”
Something of Value by Howard Marks: In his latest letter, Howard Marks discusses his evolving views on what actually constitutes a “value” investment. It’s made me stop to reconsider as well.
U.S. China Balance of Power Part 1 by Confluence: Interesting read on the most important geopolitical relationship in the world. They also provide a good breakdown of each party’s national interests and goals.
Canso Market Observer (January): The Canso’s monthly missive is one of my “must-reads”. As manager of the Lysander Corporate Value Bond Fund, one of our core holdings, Canso exemplifies Warren Buffet’s notion of “being fearful when others are greedy, and greedy when others are fearful.” For several years, as the bond market offered little reward for taking risks, Canso patiently endured modest returns. Last year, however, its restraint paid off. As the pandemic struck, the company was in a prime position to buy some absolute bargains - resulting in returns exceeding 21% on the year. This month’s letter provides Canso’s take on the current state of the markets and economy.
Twitter thread by Geogre Mack: Great synopsis of mental models used by former chess and martial arts champion, Josh Waitszkin.
Imparting the Enquiring Mind of Tyler Cowen by Crazy Good Turns: I’m not the jealous type. Yes, I’d love to be as eloquent as Neil Gaiman. It would also be wonderful to write like Morgan Housel. And it would be something to be in shape like Matthew McConaughey. But the person who really makes me feel inadequate is economist and infovore Tyler Cowen. He not only reads - and apparently remembers - three to five books a day, he teaches several university courses, writes dozens of posts a week on his website, Marginal Revolution, has a regular column for Bloomberg, records a bi-monthly podcast, and has authored numerous books.
All this is to introduce this great interview with him...and perhaps to just get it off my chest.
Michelin restaurants and fabulous wines: Inside the secret team dinners that have built the Spurs' dynasty by Baxter Holmes: If you love learning about successful cultures, sports, or just love great food and wine, you’ll want to read this article.
Saudi Arabia to Build a City in a Straight Line: MBS's Line City by Caroline Delbert: I’m not sure what to think about this, but it’s the most interesting idea in urban design I’ve heard in years.

Kings of Kings (Part 2) by Hardcore History: Imagine you just learned a hostile army was marching on your city or town. When this happened in the ancient world, most men (and sometimes women) were often expected to personally fight the army. This episode discusses the logistical and psychological effects war likely had on ancient societies. It also covers the famous Battle of Marathon and sets the stage for the final segment of this fascinating series.
I’ve said it before, but it bears mentioning again. If you love history, and can stomach graphic descriptions, do yourself a favour and try out Hardcore History. You won’t regret it!
Dolly Parton on Songtelling, Empathy and Shining Our Lights by Brene Brown: I rarely use the word inspiring, but it’s hard not to feel something listening to Dolly Parton describe her life
and work!

The Queen’s Gambit: After hearing so much about this seven-part series, Tanya and I decided to see what the big deal was. We got sucked in pretty fast and quite enjoyed it.
Why Bob Dylan Won The Nobel Prize by Nerd Writer: This eight-minute video breaks down the lyrics from Dylan’s “All Along the Watchtower”, while adding details about his life. If you enjoy this, you may want to check out Nerd Writer’s What the Truman Show Teaches us About Politics or the Understanding Art series. I intend on going through it all.
Charting the Growing Generational Wealth Gap by Visual Capitalist: There has been much discussion on income inequality these past years. However, rarely mentioned is the income gap between age groups is. This infographic addresses that.
The Learning Loop by Farnam Street: Great short video on how to learn.
How Boats Sail Now: I used to rush home from school to watch the America’s Cup. It’s been 30 odd years since last seeing a race - whoa, have things changed. Tanya and I are watching this year’s cup in New Zealand and really enjoying it. If interested, you can find each day of racing on YouTube starting with Day 1 of the qualifying tournament. I’ll also add that something VERY interesting happens on Day 3. You can find race summaries on the America’s Cup YouTube channel if you don’t have the time or inclination to watch a whole telecast.

If you had told me at the beginning of the NFL season the Buffalo would be one win away from playing in the big game, I would have been ecstatic.

Yet, that is where my favourite team was on Sunday, competing against the reigning champs. While, unfortunately, it didn’t go as I would have liked, having recently suffered a stretch of 17 straight seasons without a playoff appearance, I can’t complain.

Speaking of the final game, it should be quite a match-up between Tampa Bay's Tom Brady and Kansas City's Patrick Mahomes. And I should also mention it’s being played at the Raymond James Stadium!

"The most important conversation is the conversation you have with yourself each day."
- James Clear
“If thou wilt make a man happy, add not unto his riches but take away from his desires.”
- Epicurus
“No one wants a lecture. Everyone wants a story."
- Morgan Housel
Matthew Lekushoff

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