SmallCapPower Interview – The ceasing of quantitative easing is really hinting at the fact that the underlying economies are getting strong enough to stand on their own.
Sprung Investment Management CEO Michael Sprung provides his thoughts on Quantitative Easing and the gold price, Canadian bank stocks, and offers up his outlook for U.S. and Canadian equity markets. He also outlines his criteria for choosing stocks and mentions one company he thinks is a “very good buy at today’s levels.”
Mark Thorburn: Sprung Investment Management helps clients moderate swings in market volatility through a value investing approach aimed at preserving wealth and providing a real rate of return after fees and inflation. They are known for employing philosophies that frequently run contrary to current investment trends.
Welcome back Michael. Please remind viewers once again about your firm and your role there.
Michael Sprung: I’d be pleased to. Sprung Investment Management is an investment boutique. We primarily cater to individuals, families, endowments, foundations and so on. It just so happens that the bulk of the money we manage is in family trusts. As such, one of our key objectives is really is the preservation of capital and beyond that some growth beyond our fees and inflation. So it tends to be fairly conservative money. We’re value investors. We invest for the long-term and so we tend to look more at the micro-economic issues that affect individual companies and their valuation parameters than we do spend time on the marco-economic environment.
MT: What affect will the ceasing of quantitative easing have on the gold price?
MS: Well, in the long-term I would suspect that it will be positive. The ceasing of quantitative easing is really hinting at the fact that the underlying economies, particularly in the US are getting strong enough to stand on their own. They don’t need the stimulus that was necessary after the financial crisis. With that should come some inflationary tendency. As the economy grows we will eventually see wage and price inflation pressure come into the picture. As such, gold should react positively in that environment.
MT: So what is your outlook for the Canadian and US equity markets during the next one to two years?
MS: Yes, we have had quite a ride this year. The year started out quite well for both economies. But since then the Canadian market has been hit particularly by the decline in commodity prices, whereas the US market which did take a temporary hit, it has now recovered somewhat. Overall, it really appears that the US is carrying the weight of the world on its shoulders at the moment. It’s the one economy that can see relatively good positive growth in GDP. On the other hand, commodities have been hurt, particularly by the slowdown we see in the emerging economies, especially China, the stagnation that is apparent in Europe, particularly with the slowdown of expectations in Germany and as a result the commodity prices have been hurt quite a bit. We expect that it is going to be a period of sustained volatility until the economies get back into sync. That could take some time, whether it’s six months or a year I don’t know.
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