Fall Investment Update

Well…here we go again.  More C-19 cases, more restrictions, a US election and the cold winds of winter moving ever so closer.  We can’t control any of them.  Fun times!

For most clients, it’s “been there – done that” when it comes to uncertain times.  For those younger investors or for a reminder for those who can use some reassurance, simply look at the historical chart below to see what we have all endured over the decades and how much wealth has been created through all kinds of challenging times.  All we can do is control our own actions when faced with uncertainty and amidst challenging times and follow proven strategies.   Often this is when opportunities arise.

Leading health experts say “we all have to do ouFall Investment Updatet part” and that is true in many areas of each of our lives.  Home life, work life and yes, investment life.  We all need to use judgement and do our part to make it work.  When it comes to investing it means “having a sound intellectual framework for investment success and not letting your emotions corrode that framework”.  We instinctively know that banks and the major grocery chains will be around us for a long time – we need them now more than ever.  So why worry about their success.  Any financial setback is simply another pause in the long-term creation of wealth.  There are many oligopoly-like situations in Canada.  Banks, railways, internet/cellular firms, etc.  They are not going out of business any time soon unless its one of them taking over the competition.  Pandemic or elections aside, we all still need to consume.  Food, banking, credit cards, transportation, building products…we all spend money.  Some companies will be larger recipients of this spending than others.  We can all acknowledge airlines are not getting a fair share now nor are the cruise lines – but they will at some point. That’s why we don’t own any of those particular businesses at present for clients.  However, we do own many others that are weathering the storm and can handle periodic economic stress and the associated temporary declines.  There are no linear GIC like returns when it comes to “above average” returns from excellent business ownership. They certainly can fall over the short term and your reward for staying put and enduring this is above average returns that historically follow over the long term.

Consider the alternative?  Government bonds pay less than 1% annually and pay you fully taxable interest.  Even in a registered non-taxable account such as a TFSA or RRSP, a 1% return is well under the inflation rate.  This means you are losing purchasing power month in and month out.  By the time you retire you will find the cost of living has grown at twice the rate your investment did…not a good outcome at all.  Warren Buffett once made a remark that went something like this; “I would rather receive a lumpy 8% annualized than a linear 2%”.  Life is not linear.  It has its ups and downs.  We learn from that and we endure.  It makes us wiser, stronger and more capable of handling future events.  It is the same with investing.  If your time horizon is longer term, don’t get scared out of wonderful investments…many of them paying you a dividend much higher than the above noted bond rates. If your time horizon is shrinking…or a big purchase is coming up that we are unaware of, then communicate that to us and we will review your asset mix and ensure it matches with the objectives you have. 

I have attached two other informative reads which I really hope you find informative, perhaps even interesting.  One is written by Geoff MacDonald, co-founder of Cymbria.  Many clients own Cymbria  which is the parent company of Edgepoint.  Cymbria has been a huge winner since its debut as a stock in the fall of 2008.  Still worth over 4.5 times its IPO price of $10, recently its performance has lagged somewhat since they won’t pay huge multiples to own tech companies that trade at excessive levels.  They prefer to buy a dollar of earning for 70 cents…just like Warren Buffett.  The other article is one featured in our recent newsletter and written by Adam Prittie.  Adam writes about the fundamentals of investment management and how these tie into client objectives.

Should you wish to discuss any of this or anything else with me or any of the team – we are all here to help.  Some of us are splitting our time between home offices and the branch.  We have safe and stringent C-19 protocol in effect at the branch, so if you want to visit, please let us know.  All visitors must first complete a Covid-19 screening questionnaire while advisors and staff must complete a screening form every day upon entering the branch. This is for everyone’s protection.  Zoom interactive meetings are also available.  Other than suspending our on-site seminar series (replaced by ZOOM for now) and the Family Movie Day and Christmas events…everything else remains as before. 

2020 Q3 EdgePoint Commentary
Efficient markets & Portfolio Management

As a reminder we provide as part of our service platform;

• Financial Planning and written plans and projections.  These can be your roadmap to success.
• Full tax planning and in-branch tax preparation to help you keep more of your income for yourself
• Estate and insurance planning solutions to cover off unexpected risks and reduce tax at death.
• Fee based Discretionary/Managed Portfolio’s offering transparency and access to both public and proven private investments. 
• And much more.  For example, planning to purchase a new car?  When you do, we can refer you to  sources who will help find you the lowest cost for the make and model (and options) you want.  If it involves money we can generally assist and have a number of proven professionals we work with who can often solve for your need.

Thank you for reading.  Stay healthy…stay the course.  Better times always lay ahead.

Sincerely, Michael