April 3rd 2020 C-19 Update

Want to hear some good news?

 “NO DUH!” you say, kind of rudely.

 Oil is up, some people are saying we could see oil at $50-60 by years end. But what’s that you say? Stop flipping that coin around so much? Why? Not sure you want to see what is on the other side?

 “WELL TOO BAD!!” I reply rudely before apologizing. It’s just been so hard to keep these kids occupied, you guys!

 For every:

 “Oil will be at $x”

 there is a:

“Oil will be at $y”

See, ‘x’ and ‘y’ aren’t the same number, and ‘y’ is probably bad. So, as an Albertan, I would suggest not relying on the price of oil. Ever. Focus on what you can control, focus on what is in front of you right now.

The government of Canada is rolling out measures to aid individuals, businesses and those in need of financial assistance while we sit idle; personally, and economically.

Our accountants, Andre and Travis at Belliveau Thompson have provided a solid primer on the various assistance programs to their clients that they have allowed me to share with ours. I would urge any and all of you to speak with your accountants to ensure you qualify and are able to take full advantage of the assistance being provided by the Feds. We do not know how long this will last. We know there are enough people not taking this seriously that will likely create a lengthened idle period and will also put many at risk.

From an economic standpoint, this won’t be good. From a personal standpoint, it won’t be good. Financially, the longer this lasts, the worse it will get for many, so any help is welcome.

The initial measures will ensure a basic income for many, but ensure you understand the rules first as you can’t double-dip. You either collect EI, or the income from the government from this package.

Businesses in need of assistance paying staff will likely qualify to help keep their people paid up to 75% of their wages. That ain’t bad.

These are things we can control.

This week we received a few emails from clients with some issues about our Dollar Cost Averaging (DCA) concept for investing during this volatile period in our history. Mainly the issue comes from being at or close to retirement and not having the cash-flow to invest on a regular basis, or having the capital on hand to invest into High-Interest savings that we can pull from.
 
Some are unemployed and wish they had the cash-flow to do so.

We understand both of these positions, and also understand that under normal or abnormal circumstances some may not be fortunate enough to take advantage of the buying opportunity that is being presented at the moment.

Luckily, with our shrewd and cunning clientele base, we also know that there are other avenues to find cash-flow.

Here are three:

1.      Illiquid securities that are liquidating in the near future.

2.     For those stuck with them, Carevest retractions

3.     Equity loans

 We believe that some of our private investments will liquidate this year. Some are underway already. We have received news that some others may trigger some distribution events. Earlier this year we saw a distribution event for some investors. This is cash that can be used to invest in the markets using DCA and to take advantage of the scenario we find ourselves in.

Retractions from Carevest that converts to cash can be used to invest in the public market as well. Over the last six years, we have worked tirelessly to ensure this capital is invested and believe we have done a very good job of making it work for those investors that have these investments. We have certainly outperformed Carevest and it’s mortgage-based securities, even doing better than the portfolio in its heyday.

Lastly, and perhaps most misunderstoodedly (not a word), using home or asset equity to borrow against to invest.

We aren’t suggesting anyone overload themselves with debt here just to invest in the markets, but with interest rates so low, perhaps it is time to think about topping up your RRSP and or TFSA. We have great options and as far as I’m concerned one of the best companies to deal with in IA, and two of the best mortgage and debt people working with us at SmartCap mortgage professionals.

Superlative aside, we may not see an opportunity to leverage with rates this low and stocks at a price this attractive again in our lives. Then again, maybe we will. We know full well that this sort of strategy isn’t for everyone. But it exists as an option. So, think about it.

Opportunities will present themselves at any time though. We know this, we have seen it over and over. While we are at home, just like you, we are still out there with our shovels digging up new opportunities and creating new partnerships.

Along with new opportunities, we will be seeking to rid ourselves of asset classes we think won’t recover from the wave of economic ruin C-19 is leaving in its wake. If people and companies can’t pay their rent, REIT’s (Real Estate Income Trusts) are going to have a tough time making any kind of headway in the future. Without having any idea what will happen to the Canadian Dollar, it is impossible to assume REIT’s can actually perform in Canada.

That’s all for today.

Thanks for reading.

Darris Cameron
 President & COO
 Financial Value Inc.