Standard Life Canadian Equity Class

A solution
for all market conditions
by Neil Matheson
September 2008. It is a warm evening in Tuscany as the setting sun’s
rays shower the rolling countryside of stunning farmland and hill-top
towns. After a visit to the historic city of Siena, the husband, who is a
professional investor, switches on the T.V. to catch up with the latest
news. There had been rumors swirling about the demise of Lehman
Brothers and he is curious to know if anything has happened.
To his amazement, something has!
¬ The venerable institution, Lehman Brothers,
has filed for bankruptcy
¬ Merrill Lynch has flung itself into the arms of
Bank of America, in desperation
¬ Goldman Sachs and Morgan Stanley
look threatened
¬ Behemoth insurance company AIG is rumored
to be in dire straits
¬ Stock markets around the world are plunging
as the world grimly stares into what appears
to be a very, very black hole
The investor, having witnessed this mayhem,
switches off the T.V. and heads into the kitchen,
where he reaches for a bottle of Vino Nobile de
Montepulciano.
He then scurries out to the
porch with his wife to discuss
their travel itinerary over the
next few days… not back to the
office, but through another part
of the Tuscany landscape.
Although most of his portfolio is held in bank
stocks, which are being hammered in the
market, he is not worried about the effects of the
world turmoil on his investments as his portfolio
is fully hedged by a combination of derivatives,
ETFs, and extremely long-dated U.S.
treasury bonds.
His portfolio goes up in value. This is a
true story.
“ Do you like the Vino Nobile, dear?”
The Quarterly Review 09