Jobs Data? and our Japan Trip
We present Figure 1 again, the monthly change in payrolls in the US for August. The green line is the 3-month average of total new jobs created each month, and the blue line is jobs that come from the private sector. As we noted previously, job creation has been weak recently. A more typical number for a functioning economy is about 200k new jobs per month. The big question given the recent weakness is what happened in September? Normally we would have received the data this morning, but because the US government has been shut down, this report, along with many other functions and services in the US, is not available. While the shut down certainly takes headlines, furloughed or laid-off government workers will not materially impact the economy. We are more curious about how the Federal Open Market Committee (FOMC) will manage its coming interest rate decision(s) with less visibility from their data services.
Figure 2 presents the valuation differential for US and Japanese stocks. We are just on our way back from meeting companies in Japan and wanted to note for you the difference between US and Asian (Japan in particular) equities. Our meetings focused on technology and industrial companies along the semi-conductor and industrial automation value chains. There are many great companies in Japan that are contributing globally to these critical businesses. In some cases, Japan is the only place where the technology is available and there are multiple firms within the country that dominate the global market. Over the past year and a half, given the valuation differential and the improving shareholder focused corporate governance, we have found many investment opportunities for our International Fund. Next month we are also traveling to China for a similar round of company interviews, and we will update you on our Asia positioning towards the end of the year, after we make our adjustments.
“This means that” we, like everyone else, will have to look to non-government sources to gauge the US economy while the politicians sort out their differences, but nothing else has changed with respect to the analysis of companies.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.