Why this Dragon is 'out' of govt bonds
Fans of Canadian federal, provincial and municipal bonds, cover your ears. Entrepreneur and TV personality Kevin O’Leary is laying out his case for why any and all of those investments will let down your clients and why, perhaps, you should consider giving them a wide berth. WP reports.
Video transcript below:
Reporter, Wealth Professional TV
Reporter: Entrepreneur and TV personality Kevin O’Leary has taken a contrary position on Government Debt. Although Government bonds have long been considered among the safest of investments and agencies believe Canada’s are among the best, O’Leary has dumped all sovereign and provincial debt. He explains why be believes one of the few remaining AAA sovereigns isn’t worth holding on WP.
Kevin O’Leary: I don’t have a crystal ball, but I will tell the way I am positioning my money. I am making the assumption that between 2014 and 2017, we will have 200 basis points of rate increase in that period and all of my portfolios are being adjusted accordingly. So I have reduced the duration of my fixed income assets, down from 9 years to under 5, because they will affect it least. I have sold all of my Government debt, I have sold all my provincial debt, I have no sovereign debt, I wouldn’t buy Ontario bonds today or Quebec bonds or Alberta bonds, these are completely mismanaged provinces in terms of their fiscal discipline and so they have to get their financial health in order, I am anticipating another bond downgrade in Ontario. The government is in chaos as far I can tell you. So you have this remarkable transition where the sovereigns which used to be safe money, are no longer the safe money. They are getting downgraded. It’s the corporations operating in the sovereigns like in Ontario, that have AAA debt. So I would rather invest in the balance sheet of a well managed company than the chaos of a Government that’s running a province. And that is a real shame for Canadians because we need to get our Government in order. It’s whether you look federally or provincially or municipally, Ontario is a great example, all three of those, it’s chaos.