June 25, 2018

Monday was a down day in the markets with the S&P 500 falling 1.4% and Toronto down 1.6%.

Most stocks were down on the day. This was blamed on Trump’s escalating trade wars.

Walmart was an exception and rose 1.9%. I suppose higher prices for Chinese and other imports that Walmart sells could actually raise its same-store sales. It would still be the low-cost retailer in many cases. I have never quite agreed with too much emphasis on same-store sales increases. Surely a sales increase driven by price increases is not as strong of a sign (or even a good thing) compares to a sales increase driven by volume of goods sold.

U.S. treasury bond yields are down a little from recent highs. But not that much. It’s a bit distressing to think that Trump’s trade wars will lead to lower interest rates in a flight to quality.

What Trump may find is a lot of unintended consequences. Like Harley Davidson moving production to Europe to avoid retaliatory European tariffs.

Vanguard Canada has introduced four new ultra-low fee mutual funds for Canadians. Two of these are global, one is a U.S. dividend fund. One covers growth stocks outside of Canada and the U.S.  Mutual funds have taken a lot of abuse over the years in regard to high management and high trailer fees and related issues. I have never been one to “bash” the whole category of mutual funds. They (including their trailer fees) have their place especially for investors just getting started. These new funds are nicely suited to do-it-yourself investors.

However, according to the Globe and Mail: “Currently, self-directed investors can purchase the funds on two discount brokeragers: Questrade and Qtrade Investor.” I would hope that the likes of TD Direct and RBC Direct will soon offer these. Of course, do it yourself investors already have access to numerous low-fee ETFs. These low-fee funds are not available to most mutual fund investors. That’s because they don’t pay any trailer fee and after-all the business model of most mutual fund sales offices relies totally on trailer fees.

A low fee balanced ETF or balanced mutual fund could offer a formidable competitor to fee-based advisers who tend to basically build balanced portfolios from ETFs but charge around 1% plus the underlying ETF fees to do so. (In fairness they usually provide other services and advice.) I mentioned the idea of investing in just one balanced / global low-fee ETF in a recent article. Now we have something similar in a mutual fund.

American Express was up 1.35% after the U.S. supreme court ruled in a very close 5-4 decision that AMEX could continue to impose rules that prevent merchants from suggesting that customer use a card with a lower cost to the merchant. I think American Express gets a bit of sympathy for at least offering some competition to the two giants (Visa and MasterCard). But there is always a risk that laws and regulations will change to allow merchants to steer customers to cheaper cards.

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