Optimism #58 - December 9, 2022

Dear clients and friends,

It’s been another excellent period for dividend increases.
Canadian Western Bank up 3.7%, Royal Bank up 3%, CIBC up 2.4%, TD up 8%, BMO up 3%, National Bank up 5%, Alimentation Couche Tard +27.3%,
This is the second increase for most Banks in 2022.

Insiders continue to buy which is always optimistic.
Next Gen Energy, Maple Leaf Foods, Steppe Gold, Nutrien
Tom Jenkins at Open Text, an Ottawa based tech firm, bought 8 million worth of shares.

Here is a super article about the softer issues of retirement.
I’m struggling with the new-found freedom that retirement brings

I’m a bit paranoid about the inverted yield curve.  To my defense, Andy Grove, the founder of Intel, a maker of computer chips, said ‘only the paranoid survive’.
I will explain.  Usually, five year GICs pay more than 1 year ones, and five year mortgages cost more than 1 year ones.  The longer the lock in period, the more you pay or receive.  The bond market is the same.  Again ‘usually’, bonds that mature in thirty years pay higher interest than ones that are due in five or ten years. 

Today that’s not so.  This inversion is often a sign of trouble ahead and happened before the recessions of 1973-74, 1979 to 82 and 2000 to 2001.
What to do? I don’t know. Most Portfolio Managers are holding a bit more cash than normal, hoping to buy if there is a further dip.
In 2020, when stock prices dropped with Covid, the bond market was signalling that it would get worse before it got better.  It was wrong and those of us who bought were richly rewarded.
My plan is to hold, ride it out and buy more if it gets really low.  Our top quality companies will survive and continue to pay & increase our beloved dividends.

Good news, ‘DSC’ or deferred sales charges on Segregated mutual funds, sold by the insurance industry, are going to be banned.
Fees within are horrifically high so we don’t buy, recommend or sell them, but its still good news for the public.

Although many quietly do excellent work, Investment Advisors don’t often get good press.  This article is noteworthy.
Saying no to cryptocurrency was a glorious moment for Canada’s investment advisers - The Globe and Mail

I am currently reading Peter Thiel’s book Zero to One.  He says ‘Successful people find value in unexpected places’.  His tax-free investment account in the US, similar to our TFSAs, is reported to have over five billion dollars in it.  My guess is we can learn from this guy.

I’m also reading Ray Dalio’s book Big Debt Crises about empires and why they eventually fail.  The Romans, then Dutch, British, now American and maybe Chinese in the future. 
One quote sticks out to me.  ‘The business owners survive the transitions better than the rest’.  As investors, we are business owners.

Money saves those who save it.  (D. Muthukrishnan)

Have a wonderful Christmas and Happy Friday.
Derek Moran