Matthew Lekushoff |


Global equity markets have certainly had a nice start to 2019. And, don't look now, but the Canadian index that endured negative returns in both 2017 and 2018, is leading the pack, almost 7% higher on the year. Yet, most markets are hot on its heels. 

As mentioned in the letter two weeks ago, there are reasons to believe 2019 could be a good year for investors; especially given valuations are much lower than they were this time last year. 

However, let's not forget that the first three weeks of 2018 sported some stellar returns, before ending the year negatively. Here's to hoping history doesn't repeat. Although, if it does, we will definitely move our portfolios to a more aggressive stance than has been the case in many years.

With everything I wanted, nay needed, to cover in the last newsletter, I completely forgot to mention TFSAs and RRSPs.
As of January 2019, every adult Canadian resident can now add an additional $6,000 to their TFSAs. Anyone who had been the age of majority or older in 2009 (when the TFSA program began) has a lifetime contribution level of $63,500. In order to find out how much you can contribute, it's best to   login to your CRA account , as the government is more than happy to charge you if you accidentally over-contribute.
For RRSPs, the deadline to contribute in order to qualify for a discount on your 2018 taxes is March 1. If you are unsure of your contribution amount, please refer to your notice of assessment that you received after filing your income taxes last year.
If you have any questions about either your TFSAs or RRSPs, don't hesitate to get in touch.


The Cruelest Month   by Louise Penny: Number of murder mysteries read during the first 45 years of my life: zero. Number of murder mysteries read over the last two months: three. I'm officially hooked on Louise Penny's Inspector Gamache series, and found The Cruelest Month better than the first two. It artfully advances a storyline that's been unfolding since the first book, while still presenting a compelling new murder mystery that needs solving. I'm trying not to read number four in the series to keep some variety in my fiction reading (poor Catch-22 has been patiently waiting since November), but no promises.
Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World  by Michele Gelfand:  Rarely do I come across a book that changes the way I look at a topic or paradigm. This book did that for me. In the past I've considered cultures as: liberal vs. conservative; east vs. west; north vs. south, or collectivist vs. individualist. Rule Makers, Rule Breakers suggests another method may be more effective: analyzing cultures as tight vs. loose.
A tight culture is one where social norms are strictly enforced either by governments or society, but often both. Loose cultures are those where social norms are less important and individuals are relatively free to act according to their desires. Typical tight cultures include Japan, Pakistan and Texas, while Brazil, New Zealand and California are loose.
Tight cultures generally have high populations per square foot, homogeneous ethnic backgrounds, and relatively hostile geographical and/or human environments (like frequent earthquakes or aggressive neighbours). They also tend to be more conscientious, and have higher levels of self-control and social order.  Loose cultures, on the other hand, tend to be more tolerant, creative and adaptable. All this being said, it's important to remember that these are averages
- ----   there will always be exceptions.
Perhaps most surprising were the book's insights on individuals. Where individuals fall on the tight/loose spectrum relative to each other can also shed light on how well they will get along, especially if forced to, as in an office setting or moving to another country.
As you can see, there is quite a lot to Rule Makers, Rule Breakers and I'm looking forward to going through it again.
Canso January Newsletter :   Another great newsletter from Canso. This edition, among other things, points out that when healthy, the U.S. has a real rate (federal interest rate less inflation) of interest of 1%. It currently sits at only 0.3% (Fed rate = 2.5% - CPI = 2.2%). To get back to balance, either rates need to increase (equivalent to three 0.25% increases), inflation needs to decrease by 0.7%, or a bit of both. The catch is that if interest rates increase, it will negatively affect the bond market and potentially hurt the economy. And when CPI falls, it generally means the economy is getting worse. In other words, be careful with your bonds and possibly your U.S. equities.
Confronting the Near Enemy: Is one Emotion Masquerading as Another?   by Giles Hopkins: The Cruelest Month (see above) examined the psychological concept of "the near enemy." This phenomenon occurs when two emotions look the same, but are actually opposites. To quote from the book, "Pity and compassion are the easiest to understand. Compassion involves empathy. You see the stricken person as an equal. Pity doesn't. If you pity someone, you feel superior." This article delves further into the concept while providing the entire passage from the book.
Thread on Seeking Wisdom   by Douglas Craig: Seeking Wisdom is a great book on, well, how to acquire wisdom. Although not a substitute for reading the book, this Twitter thread does a nice job of highlighting many of the big ideas in it.
This is the history of Earth in a 24 hour clock  by How Things Work: A short clip to show how shockingly recent the arrival of humans has been relative to the history of the earth.
Great Lives - Walt Disney   by BBC Radio: A 30-minute podcast about the legendary Walt Disney.
The Jeff Bezos Empire in One Giant Chart  by Visual Capitalist: Jeff Bezos seems to be doing pretty okay for himself.


"The things we see every day are the things we never see at all." 
- G.K. Chesterton
"Beyond our immediate community, tight-loose differences can explain global patterns of conflict, revolution, terrorism, and populism. Around the world, tight-loose operates as a universal fault line, causing cultural cohesion to buckle and rifts to open up. The rifts aren't just blared in headlines; they surface in daily interactions."
- Michele Gelfand

"Our brain is wired to perceive before it thinks - to use emotion before reason. So our first thought is seldom our best thought." 
- Douglas Craig


Last week, Jack Bogle, founder of the Vanguard Group, passed away at the age of 89. Bogle is credited with creating the index fund and perhaps just as importantly, building a company that was obsessed with keeping fees as low as possible.
I've been an admirer of Bogle for some time. To give you a better idea of what made him and Vanguard special,  I wrote about them a little while ago . But, perhaps the best tribute comes from Warren Buffet when he recently said, "Jack did more for American investors as a whole than any individual I've known. A lot of Wall Street is devoted to charging a lot for nothing. He charged nothing to accomplish a huge amount."

Matthew Lekushoff

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