Every year brings a calamity or two that may strike fear into investment markets and news media. I have lists going back 50 and 100 years. With the new coronavirus you’ve taken this in stride, as an opportunity to invest more and hold strong during these few weeks. Remember too that as values rose quickly in 2019 we acted proactively to reduce risk assets and concentrate prime assets for growth and stability. Who could know what 2020 could bring? As a result, where markets have fallen 9% to 15% in recent days (some sectors down 20% to 35%) our accounts slid modestly between 3-5% since year-end, expanding their yield and keeping focused on next steps forward. We can quote Carrick from Saturday’s Globe and Mail, “Looking back, my single biggest regret in all the market declines … is not investing more money at those low points”, and he adds, “I have never wished I panicked more.” Repeat that thought.
Last spring, summer, autumn, we were reviewing your goals and the way money will serve your future. 2019 was a magnificent year so we were aware that choppy times can follow. Seniors and most anyone drawing monthly income had more money at year-end than when 2019 had begun, so we reviewed and amended portfolios to avoid unnecessary risk and sustain a safe journey ahead. Where appropriate we increased your position in fixed-income and tightened assets to represent less debt and continue growth. Without a crystal ball to know what exactly would come, we knew 2020 could spawn an event or two that would beat markets down by 10% or more for awhile. As a result we are on the safe side of this. Also our portfolio managers have used the C-19 crisis to increase prime assets at a discount and thus prosper our future returns.
IMAGINE THE ASSETS YOU OWN.
Commercial Property and Infrastructure Assets: vital contributions to Lifelong Income.
Imagine reviewing your portfolio you see the Paris Airport Authority including a hub of three airports serving France and Europe. This is a valuable, prime, long term asset that you cannot pick up on a whim; it takes time and focus to build a position here, and as with all types of infrastructure assets (airports, railways, toll bridges and highways, pipelines, ports and telecommunications), you benefit with consistent and growing income. Regardless what calamity may arise we never sell off global infrastructure and the high income it keeps paying. (See Global Infrastructure)
Imagine in your portfolio you find land on which our major banks, insurance companies, and manufacturing giants sit in Canadian cities and around the world. These are valuable long term assets that take years to accumulate and once you have them you get to enjoy consistent and increasing income-yield over the years ahead. Like infrastructure, real estate this too is a permanent holding we own for comparative safety and rich income. (More on Global Real Estate)
Look also at the Dividend focus in your portfolio, with banks and other firms featuring strongly because of their record earnings and habit of boosting dividends each year or so. While these assets may have fallen 6% or more with Covid-19 news this hardly dents the long term business model of this diversified group of businesses, Canadian and Global, all aiming to sustain and build income along with future growth in your portfolio. (See Global Dividends)
Then too we have narrowly focused funds which in a universe of over 15,000 possible choices they hold only 30 or 40 unique companies. Some Canadian, also U.S. and Global firms, typically small/ mid-sized, with unique characteristics for growth, low-debt, massive prospect for earnings, and highly ranked for ESG (environmental sustainability and governance). These hold strong-drivers and future-leaders. No big surprise, these firms kept their value in recent days better than whole markets have done. And where values receded at all, our fund managers have increased the holding at a bargain.
Each time you and I meet we review your personal goals and circumstances, the journey to continued success, and how these paragraphs relate to your assets and progress. Whether markets rise or fall, our focus is always YOU. Every day changes valuation of dividends and other equities, govt/corporate bonds and commercial loans, but what we keep discussing as Life Income Mandates or LIM+ is what moderates risk, sustains your income, and propels future growth. Thus we are aligning your wealth to the targets and goals you hold dear through all of life’s seasons. (LIM)
PART 2: TRAJECTORY OF A VIRUS.
Adding to last month’s “epidemic markets” … I’m grateful for your replies. Wuhan continues as the Covid-19 epicenter while diagnoses are declining daily (one-sixth of the peak compared to a few weeks ago) and more people each day are being cleared than being infected by it. In Japan the Diamond Princess became a main feature of daily news. Further waves have hit South Korea, Iran, Italy, and we realize the wave will continue worldwide to some degree. Some areas can mandate tighter quarantines. Some have more advanced health care systems. Canada gained vital knowledge at the forefront of SARS. There are vast regions in the world with less developed health care, and some where famine &/or war have weakened populations and resources.
I preface my next remark by recalling the 300,000 to 500,000 deaths each year from regular strains of flu, and whether it seems fair or not, investment markets have ignored this. Measles kills 140,000 people annually, surging again now here in North America which astonishes me as it was so common in my childhood and I thought vaccinations had nearly cleared it. So too with other infectious diseases causing a toll that never reaches the headlines. With C-19 we are told 40-80% of the world population may be touched, with a death rate perhaps 0.4% to the best of our current understanding. Most youth and working populations will experience minor effects while people with heart or lung disease need highest caution.
Two lessons here: (i) take every measure to protect ourselves and everyone else in our various surroundings, especially for all over age 65; (ii) realize that while C-19 may cause ½% drop in 2020 economic productivity, especially concentrated over a few months, our manufacturing and supply lines will get back up to speed and rising investment markets will leave this season as a blip on the screen. Heartless perhaps, yet true: we have never seen a virus cause permanent destruction to the world’s wealth or growth.
Four horsemen (a reference to wars, famines, epidemics, death) are already and forever active in this world. Nevertheless we continue each year and season, aligning Life and Wealth to safeguard your goals whatever the times may bring.
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Reach me with any questions, and connect us with anyone who needs help to secure financial goals, lifelong comfort, and a rewarding retirement. Share this letter with anyone who can benefit.
Yours in Financial Security for LIFE!
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Brian@SovereignWealth.ca
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.