March 27th 2020 Covid update
Ok, this has been and will continue to be tough. Covid-2019 cases are likely far from peaking, and we have many people sharing hashtags while they have playdates and go on group hikes and generally put others at risk with little to no care for what they are doing, and who is affected.
It is going to be a while, so I am glad to be able to share up to date information from our partners at IA and beyond with you. Speaking of, check out this week’s Economic Overview from Clement Gignac and Co. It is a good listen and worth your time.
Something that is often asked of us when things are going well is:
“shouldn’t we take these profits and move them to cash?”
which is interesting considering the first thought people have when the markets waver is:
“I think it is time to sell, lets bail.”
These comments are the same, there is no difference as they are both comments made out of fear. Whether it be fear of the present or future, there is no difference in their outcome.
As you now know, should have known for some time and will continue to learn, our outlook is to stay the course. But why do we do this? Why do we choose to not make the moves and consistently to tell investors to buy? Markets up? Buy. Markets Down? Buy. Why?
From a micro perspective, one we don’t share often because our clients are asking for our advice, not the advice of someone else; we let the managers buy and sell. We trust them to ensure they are in the right positions as time moves ahead.
For instance, the balance of the Dynamic Global Dividend fund is in cash already. This fund and the Dynamic US fund (Also a dividend growth fund) were already heavily weighted in cash in January, far ahead of the curve. We trust David (Fingold) to have us in the best position possible going forward.
The fact is, from a second micro standpoint, is that we have sold. We sold Europe. We sold Canada. We sold Emerging Markets. We sold massive funds worth tens of billions of dollars to be in more nimble positions and to buy what we thought would be long term winners, and to help diversify the portfolio from a macro perspective.
The 3 Circles model accounts for selling and buying by ensuring that we are consistently evolving the portfolio, adding and subtracting over time and buying with profits whenever possible.
From October of 2019 to Mid-February 2020 we were moving profits, the ~20% we made in 2019 into infrastructure and more dividend growth style funds. We did the same in the first quarter of 2019 as well.
The real question we have now for managers who are holding dividend-paying stocks is: Where are you putting the dividends?
I think it would be simple to answer were we in some sort of known position. Buy low. They’re good enough positions to hold in the first place, why wouldn’t you buy more of them at a discount? Right?
Perhaps not…
I get the feeling these guys know something they aren’t sharing. I think they know what the average person doesn’t. I think that while the majority of the world is waiting for the day to day notices from the indexes like the S&P, TSX, Dow, NASDAQ etc around the world, these guys and gals are sitting on cash because this isn’t the beginning of the end, but rather, the end of the beginning.
Speculation ahead: Be Warned, this is an opinion.
It is one thing to be positive and do our best to put a positive spin on things. It is completely another to be blind to the fact that COVID-2019 is not going away any time soon. Or probably ever. It will come back, we won’t be prepared, and we will live through this scenario at least once more… probably in this year.
Personally, and not to be pessimistic, but I believe we haven’t seen the worst of this virus. But at least we know what it is.
What we don’t know, what is nearly unfathomable… without fathom (sorry, watched Megamind a few times with the kiddos.) is $2,000,000,000,000 being supplied as stimulus which will almost certainly be overwhelmingly be given to large corporations with a matching $2,000,000,000,000 from the US Federal Reserve (Fed) to support bond purchases and currency management and liquidity in US markets (debt and/ or equity).
FOUR TRILLION DOLLARS!
I literally don’t know what that means. For the moment the markets like that the US Senate passed a bill for the house of representatives to vote on, but I just can’t imagine what that looks like or if it will be enough to stave off a second round of state-sponsored isolation.
Dad and I stand by our commitment to continue buying. We believe the best way to accomplish this will be to invest in short term high-interest savings accounts and take monthly deductions from that account and buy our stable of Segregated Funds over the next year.
Now is the time to be making RRSP and TFSA deposits.
Now is the time to be filling your Universal Life accounts with tax-sheltered capital.
Markets will likely fluctuate, but our focus is getting back above the highs we set earlier this year. If by the time we do reach those, what seem now like Olympian, heights; we may have a decision to make about where to go next.
For now, though, let’s keep things simple and cross this first bridge together. More will appear as this journey goes on and we will cross them as a team.
We are taking phone meetings at the moment. Video would be nice, but not everyone has the capability and we don’t feel it to be necessary, not yet. We will see how lonely we get.
We would like and appreciate hearing from all of you.
Please leave comments below as well, would love to see some positive conversation in these posts.
In lieu of a dinner or two, we will continue to compile information and post things on this blog.
Please stay tuned and stay involved.
Thank you for reading and for commenting!
Darris Cameron,
President & COO
Financial Value Inc.
