I came across the following chart showing the behavior of the typical mutual fund investor:
Click to enlarge
Source: Behavioural Finance and Mutual Fund Flows An International Study, Deutsche Asset & Wealth Management
Obviously the essence of the chart is applicable to stock and ETF investors as well.
Related:
Why We Buy in a Marked-Up Market, Jan 13, 2014, NY Times
The withholding tax rates for interest, dividends, royalties and pensions/annuities earned held by foreigners from Canadian companies are listed in the attached document below. These applicable amounts based on the tax rates are withheld by the Canadian government. These rates are defined in the tax treaties in effect between Canada and the specific country. So if you are a British citizen and invested in a Canadian company you can use the table below to determine the appropriate rates.
Click on image to download (in pdf)
Source: KPMG
The Canadian withholding tax rate for dividends for individuals of most countries is 15% although there are exceptions. For instance, citizens of Turkey are charged a higher rate of 20%. Canada does not withhold taxes on dividends received by U.S. residents in qualified retirement accounts.
The standard Canadian withholding taxes on dividends is 25%. But due to the tax treaty between the Canada and U.S. , U.S. residents are charged a reduced rate of 15% by Canada.
Debt levels remain high across the world especially in the developed countries.However debt levels vary by type and country as shown in the following chart:
Click to enlarge
Source:Vanguard’s economic and investment outlook, Jan 2014, Vanguard
Debt held by the Federal government, households, non-financial and financial firms in the U.S. and Germany is moderate(between 50% and 100%) as a percentage of GDP. The UK is similar shape except the financial institutions there are still in a mess. While the U.S. took swift action after the financial crisis and financial firms especially the banks cleaned up their books and raised capital, British banks failed to take proper actions. The painfully slow British political and regulatory system did not help to speed things up either.In Japan households are in much better shape than corporations and the federal government in terms of debt levels. Similarly Chinese households have low debt levels.
Vanguard predicts the global economic recovery to be modest over the next compared to the previous two decades.The chart below shows the potential growth rates for the world’s major economies:
The long-run economic growth potential of BRIC countries is higher than that of the developed countries including the U.S. However it should be noted that high economic growth does not necessarily mean higher equity market returns.
Related ETFs:
Disclosure: No Positions
Spain was one of the hardest hit economies during the global financial crisis and the following European sovereign debt crises. Before the crises the Spanish economy grew rapidly over many years attracting international investors. As a result of the crises, the economy tanked primarily due to the bursting of the once red-hot real estate industry.The country was saturated with “white ghost” infrastructure projects like massive airports with no flights, unsold residential apartments and condos, etc. Not surprisingly investors fled Spanish stocks.
After years of low growth the Spanish economy finally seemed to have turned a corner. Last year the benchmark IBEX index rose over 21%. It is up by 3.80% year-to-date, the best among major European indices. On the other hand the S&P 500 is mostly flat YTD.
From a recent Reuters article on Spanish equities:
By contrast, Spain’s service sector registered its fastest pace of growth in six-and-a-half years in December, fuelling optimism the economy could expand more than expected in 2014.
Spain and Italy – another economy dubbed as a “peripheral” European market compared to the “core” of Germany and France – are slowly recovering from the euro zone’s sovereign debt crisis, and the rise in the IBEX also lifted Milan’s FTSE MIB stock market by 0.6 percent.
Some traders and investors feel there is more value in those “peripheral” markets than the likes of France or Germany, with the German DAX equity index having already hit record highs.
“There’s a real swing in momentum towards economies such as Spain,” said Scott Meech, co-head of European equities at Union Bancaire Privee (UBP).
Meech’s favoured Spanish stocks include Spanish bank Bankinter, insurer Mapfre and media company Mediaset.
Source: Spanish stock market outperforms weak European bourses, Reuters
The following chart shows the 5-year performance of the STOXX Spain 20 Index which is comprised of the 20 largest blue-chip Spanish firms:
Click to enlarge
Note: The returns shown are in US dollar(price) terms.
Source: STOXX
It is interesting that while in the past five years the STOXX Spain 20 Index is up by about 27% in the past one year alone it has increased 27%. The chart is showing an upward trend since 2012.
From an investment standpoint, Spanish stocks are looking attractive now given the improving economic situation and the changing perception of global investors. Though stock prices were much cheaper last year it is still not to late to buy them at these prices. Spanish stocks currently have a dividend yield of 3.9% and a P/E ratio of 19.8 relative to US stocks’ yield of 1.9% and P/E of 19.7 according to the latest FT market data.
Five Spanish firms trading on the US markets are listed below with their current dividend yields:
1.Company: Banco Santander SA (SAN)
Current Dividend Yield: 8.80%
Sector: Banking
2.Company: Telefonica SA (TEF)
Current Dividend Yield: 2.29%
Sector: Telecom
3.Company: Iberdrola SA (IBDRY)
Current Dividend Yield: 0.61%
Sector: Electric Utilities
4.Company: Gas Natural SDG SA(GASNY)
Current Dividend Yield:
Sector: Natural gas and electric utilities
5.Company: Repsol SA (REPYY)
Current Dividend Yield: 3.14%
Sector: Oil, Gas & Consumable Fuels
Note: Dividend yields noted above are as of Jan 10, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.
The iShares MSCI Spain Capped ETF(EWP) gives exposure to top Spanish companies.There are 24 firms in the portfolio with the top 10 accounting for about 72% of the fund.Over 44% of the fund is invested in Banco Santander(SAN), Banco Bilbao Vizcaya Argentaria(BBVA) and Telefonica (TEF).The ETF has about $982 million in assets and the 12-month yield is 2.86%.
Disclosure: Long SAN, BBVA
Canada and Australia are two of the commodity-based developed economies. Canada depends heavily on the U.S., its top trading partner while the Australian economy is more tied to Asia especially resource-hungry China. Hence the economic growth of these two countries depend on the U.S. and China respectively. In terms of equity returns, how did Canadian equities perform relative to their Australian peers?
The following chart shows the performance of the iShares Canada ETF against the Australia ETF over the past 5 years:
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The following chart shows the performance of the iShares Canada ETF against the Australia ETF over the long-term:
Source: Yahoo Finance
In 5 years Australia has outperformed Canada (EWC).But in the long-term Canada beat Australia (EWA). It is interesting to note that Canadian and Australian stocks followed almost followed each other for the most part.
Related ETFs:
Disclosure: No Positions