Optimism #41 - February 18, 2022

Dear clients and friends,

TC Energy raised its dividend this week by 3.4%.  We received a pay raise without even working. 

Tesla’s price has fallen considerably, from about 1230 in early November to 876 as I type.  It now trades for 188 years worth of current earnings.

To put that in perspective, the Royal Bank trades for less than 13 times earnings.

So… Tesla is 14 times more expensive.  However, Tesla will likely grow faster than a mature business such as RBC.

Will Tesla’s earnings grow by a multiple of 14?  Maybe.  But it still seems like a bit of a stretch.

This is an example of growth versus value. 

The value index outpaced the growth index by 8.4% so far this year.  Our more boring style works well.

The pig farmer article in our last edition stirred up all kinds of interesting comments.

The idea of selling high and buying low cycle after cycle has a wonderful feeling to it, but I have never seen anyone consistently do it well.

I just like the idea of watching the crowds and doing the opposite.

However, if we use big city Canadian real estate as in example, it has had an incredible run.

Had people sold when the mania seemed to start, they would have left a lot of growth on the table.  (and been homeless)

And they would have been subject to massive rent increase pressure.

So, while its tempting to get out when it feels high, my experience is that the best strategy is to try to buy reasonably well and hold forever.

It’s sort of a ‘can’t miss’ way to approach it.

Once a month I see a situation where people are fighting about inheritances.  If only they knew exactly what the parent’s intentions were.

Here is a great book as a reminder.  The moral of the story is get talking about this stuff while you are alive and of sound mind.

I know its uncomfortable, but a good idea.


I am looking for a good analogy for the difference between price and value.

The value of our companies goes in a pretty straight line up over time.

The price bounces all over with the news/noise of the day.

If anyone has any good ideas I am interested.

If we could focus more on the value, the process of investing becomes so so much easier.

There is a great article attached by Fred Vettese.  I rarely agree with his comments but do on this subject.

His point is that your retirement income should be a mix of all of your accounts, as opposed to spending your cash first and the RRSP for example second, like the financial projection software often suggests.

Happy Friday,