Finance Blog

An interesting article I read on MSN Money, talking about the reality of China’s booming economy.

In the second quarter, China’s gross domestic product grew by an extraordinary 11.3%. That’s a significant speed-up from 9.9% growth in 2005, 10.1% growth in 2004 and 10% growth in 2003.

That’s a problem, because an economy can have too much growth. In China, it has led to massive overinvestment in manufacturing assets in sectors already suffering from oversupply. Investment in fixed assets — everything from steel mills to cement plants to oil refineries to highways — grew by 30% in the first half of 2006.

Let’s look at the broad S&P 500 Index over the past 5 years…

Since the 2002 bear market, it’s had a decent run, jumping 26% in 2003, and slowing down to a respectable 2-3% per year after.

A look at the blue chip Dow Jones industrial average…
Similar story, a bit more volatile, but still doing well at 4-5% for the last two years.

Finally, let’s look at the tech-studded NASDAQ composite index.
The most volatile out of the three broad indices, it had an amazing run in 2003, but the last year it’s tanked, has the tech sector run out of steam?

Finally, let’s take a look at the S&P/TSX Energy Trust Index…
That’s right, a 121% gain since start of this index in 2002.

That’s just the energy income trusts, how about the S&P/TSX Capped Energy Index:
Last year’s growth was near 60%! It’s had 20%+ growth every year since 2003. It’s up 250% since it’s 2001 bottom.

Ofcourse, that’s directly correlated to the oil price…
Not to mention Natural Gas prices…

Continuing on S&P TSX Utilities Index contains both Income Funds and various utilities companies

Contrary to the broad market, it seems like utilities have had a pull-back so far this year. It may be a good opportunity to get in on some high-yielding funds for the income/cashflow.

Just a follow-up to my previous post, here’s how REIT’s have faired over the past years

Is the Canadian Market way to hot right now? Let’s take a look…

I did a little number crunching, for the growth rates of the S&P/TSX Composite Index for the last few years. Here are the numbers:

Notice the double-digit percentage growth for 2003, 2004, 2005. That’s three straight years! And from the very bottom in Oct 2002, the gain is over a whopping 100%, that’s double! So, are we done? Year-to-date shows that it’s cooled off a bit. However, it’s still a 12% growth since same time last year. Now for the chart…

Wow, quite a bull-run. A small drop since beginning of the year, but looks like it’s headed up again?

Now, how about those gems of the Canadian market, the income trusts. Let’s look at the S&P/TSX Income Trust Index…
Similar story, and chart…

Here’s a great article on the income trust outlook — Rethinking Income Trusts. I think he’s got a very good point…

So at this point, my advice is to income trust investors is to lower their sights. If you are sitting on large capital gains, consider taking some of the money off the table. Make future purchase decisions on the basis of yield and cash flow sustainability. Avoid speculation.

In short, choose trusts on the basis of what they are supposed to be: income securities, nothing more, nothing less.

The price of oil surpassed $78 a barrel Friday and leapt 5 percent in the past week after Israeli attacks against Lebanese militants stoked fears of a wider Middle East conflict and possible oil-supply disruption.