Our Investment Philosophy

First and foremost, Euro Pacific Canada wants to provide you with long-term strategies to protect and grow your wealth. Our investment philosophy represents how we think Canadian investors should be positioned in order to attain this goal, given both the current economic climate, and what we anticipate the future to be like.

How We Perceive the Present

Euro Pacific Canada considers monetary policy (that is, the policy of central banks regarding interest rates, etc.) as the principal driver in business cycles. With artificially low interest rates, unjustified borrowing is allowed to take place, which leads to investments in projects deemed unprofitable in normal circumstances. This leads to bubbles in sectors of the economy most sensitive to the availability of credit (for example, housing). If the stimulus was big enough, and combined with bad legislation, the entire economy could become exposed, causing a recession.

As such, Euro Pacific Canada believes that rates have been too low for too long in the United States, and current legislation for increased government spending is more likely to add to the problem. We believe that the U.S. economy—and more specifically, the U.S. dollar—is in for a deep, prolonged bear market at best.

How We Perceive the Future

The future we see is not a pleasant one for the United States. As interest rates must eventually rise, the United States cannot borrow anymore, as the burden of its huge debts will be too much to bear. This will have several long-term ramifications for the American economy:

1. Sharp deductions in domestic consumption and imports;
2. Major devaluation of the US dollar—meaning inflation and higher costs of living;
3. Return to a manufacturing- and export-based economy;

We believe that the road down this path will be a long and painful one for Americans and American investors. At the same time, we anticipate that the global economy will move away from the American economy in the meantime. We anticipate China to be the next world economic powerhouse—and the rise of manufacturing- and (especially) natural-resource-based economies. As such, we expect Canada to weather the storm fairly well.

How We Will Position Our Clients

We have already hinted at the sectors we will be focusing on and looking for growth opportunities—that is, Canadian or non-U.S.-based foreign equities that are relatively disinterested in the performance of the United States economy or the dollar. As well, we will be looking for companies that offer dividends, which will provide a steady income to investors.

This combination of picking good companies that pay dividends in currencies not at risk of high inflation will provide investors with both the maximum opportunities for wealth preservation and appreciation.

Who Should Not Invest with Us

Euro Pacific makes use of a long term, buy-and-hold strategy. While we are convinced that the United States dollar will continue on a negative path for an extended period, it will undoubtedly have the odd bounce back. For investors who wish to play these short-term rallies, the strategy we have outlined here will not suffice.

Who Should Invest with Us

If you are an investor and looking to prosper in these uncertain times, who understands that the United States economy is not as sound as many say it is, and are not interested in the risk of timing the market, then Euro Pacific is right for you.

The old investment mantra was "buy low, sell high". However, during the current crisis, because of obfuscating interventions and legal manipulations of various kinds, most average investors have empirically taken the contrarian view—and have suffered as a result. This is because of the misplaced sense of security many investors had placed on the American economy. But because of several decades of over-spending and mismanagement on behalf of the federal government and the Federal Reserve, Euro Pacific Canada believes that the United States' position as an economic powerhouse and safe-haven is coming to an end—and it will not end well.

Disclaimer

All investment strategies contain various elements of risk. No guarantees, either expressed or implied, are made that the strategy outlined above will perform as it is intended. Investors in foreign stocks can lose principal due to a variety of risk factors, including currency risk, political risk, systemic risk, and company specific risks. Also the economic assumptions inherent in the formation of this strategy may in fact be incorrect, thereby adversely affecting the performance of the recommendations. Furthermore the fact that these strategies have preformed so well in the past does not assure similar results in the future. Clients and prospective clients are advised to carefully consider these risks prior to investing.