Optimism #56 - October 6, 2022

Dear clients and friends,

Fortis increased its dividend on September 29th.  6% as promised a year ago.

Emera raised as well from $2.65 to $2.76 per share, an increase of 4.2%.

Our portfolio values are down, but the income they generate is up.  Let’s keep our eyes on the income.  Share prices will recover.

Insiders have been buying at Allied Properties REIT, Total Energy,  with special mention of Board Chairman Aaron Regent buying nearly 2 million worth of Scotiabank shares.  He is the retired CEO of Barrick gold. Interesting that a gold guy sees more opportunity in bank shares.  No surprise there.  And Calin Rovinescu bought a little over $200,000 worth of Scotia as well. Wasn’t he the CEO of Air Canada?

Much of my last week was spent at my once a year get together, the R.F.P. conference, with my 200 or so colleagues and learned of some trends.  The event was in Ottawa so the speaker quality was fantastic.  Here are some highlights:

  1. We are living longer so kids waiting for inheritances will have to wait much longer.
  1. We have to invest more aggressively and accept more volatility to achieve the growth necessary so that we don’t outlive our money.
  1. Ari Brojde told a story of being an executor.  Filling out countless forms, the same information on each form, one after the other.  It’s a huge waste of time. And which forms do you need to file?  It’s challenging to figure out.  This software, Estateably for Executors & Executrixes – 199$ one time fee. Will help immensely.  Apparently most of their customers are lawyers.  https://www.youtube.com/channel/UCRXQCl7C1i0XfUsBy1UNxYg
  1. I am not saying its better than a lawyer drafting it, but an online version is likely better than no Will at all.  Good for simple, straightforward situations.  Any complexity will be rejected.  Useful I think for the younger generation who have assets but haven’t gotten around to these detaails.  To be legal it must be printed and signed & witnessed in pen.  www.EpilogueWills.com  
  1. Doug Runchey, the CPP expert spoke. It’s even more complicated than I thought, but my view has not changed on when to commence payments. If you have any really detailed CPP questions he can be reached at drpensions@shaw.ca and has a blog called Retire Happyhttps://retirehappy.ca/author/dougrunchey/
  1. Alec a Portfolio Manager did a presentation on the Dutch Tulip Bulb Mania of 1636.  People irrationally paid higher and higher prices for such bulbs, until it eventually crashed February 3rd, 1637.  It reminds me of some wealth stores that are popular today like Rolex watches, Air Jordan sneakers and cryptocurrencies.  History says that at the peak, a tulip bulb traded for 2500 Dutch Florins, about $85,000 in today’s Canadian dollars.  That money could have bought a funny list of luxuries of the era such as a bed, a silver drinking cup, 1000 pounds of cheese, 4 tonnes of beer, bushels of wheat and many farm animals.  We humans are susceptible to such illusions of wealth and need to be careful. Tulip bulbs today are around 99 cents I am told, so we can see how price and value can vary dramatically but eventually they realign.
  1. Ben Roubidoux of edgeanalytics.ca gave the best presentation about Canadian real estate that I have ever seen, called When Housing Cannibalizes Our Economy.  I wish I could share the slides with you.  He feels Alberta is undervalued but the rest of the country is adjusting downwards.
  1. Elder abuse is rampant and statistically 91% is caused by a relative.  John Johnson, the retired Estate Lawyer and now advocate says ‘Its always about the money’.  If you know of a situation, there is protection but communication is the first step.  The Public Guardian can help.
  1. Pierre Cleroux, Chief Economist from the BDC Bank feels there will not be a recession.  He feels that rising interest rates are doing their job, cooling the economy.
See attached a super article from the Globe last week about how the economy is similar to the 1970’s, and that’s a good thing for us dividend investors.

Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it earns it; he who doesn't, pays it”.

Derek Moran