Paul's Prose October 2020

Oct 02, 2020 | Paul Monette


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Are we there yet? Nope. In fact, I am not sure we will ever see the true end of Covid-19. Please do not take this to be a devastating negative – there is enough of that out there! It simply means that things will change.

Are we there yet?
Nope.
In fact, I am not sure we will ever see the true end of Covid-19. Please do not take this to be a devastating negative – there is enough of that out there! It simply means that things will change.

Some positives could include:

  • Better controls over our food supply
  • Better care for those in senior’s homes
  • More people staying home when they are sick (apparently many people can work from home)
  • Better hand washing practices – some people drove me crazy with NOT washing their hands before all this!
  • More people working from home means decreased emissions – this is already being felt worldwide.

And the list goes on…….

From an economic standpoint it forces us portfolio managers to take a step back and revisit long standing biases we had about what a “good” balanced/conservative” portfolio should look like.

When I started in this business (back when a phone hung on the kitchen wall) a Canadian portfolio was pretty standard and it was hard to go wrong. You bought a couple of banks, two oil companies, BCE and a pipeline and of course Brascan.

Back then, mention the word technology and your clients would call you a stock jockey cowboy!

Let’s just say times have changed.

Of course, there is still room for some old standards, but if they didn’t keep up with the times then you are heading in the wrong direction. Dividends are only part of an investor’s income. Growth and capital gains cannot be ignored. Sure some banks and telcos are paying 6% in dividends, but what about growth potential?

Apple stock has amazing growth but a measly 0.71% dividend.

A diversified “smart” portfolio must learn to incorporate both of these elements.

We have been doing this for years – perhaps not as aggressively as some would have hoped. Then again, most clients don’t hire me to be too aggressive with their portfolios, but they do pay me to be smart (I hope)

Politics and the Economy

Speaking of smart, Donald Trump is now in the midst of his next election. (I never provide a political or religious opinion in Paul’s Prose – we are all allowed to have our own points of view). Canadians may also soon be going to the polls sooner than we would like.

Despite political and social leanings, it is important for money managers to look beyond personal biases when selecting investments.

As I write this, the morning after the first presidential debate – or whatever that was - the US market is up 400 points. I shake my head and move on.

Many years ago we started providing Socially Responsible Portfolios. While this is often interpreted as a focus on the environment, other elements of social awareness and corporate governance and transparency are often overlooked.

Government cannot ignore the importance of sustainability and the pandemic has helped bring this point to the forefront. It is encouraging to see this actually rewarding socially responsible investors on their bottom line. Specifically many of the more “sustainable” investments outperformed throughout the market drop and their inherent nature of being forward looking provides a level of comfort to investors.

It has always been my policy not to force clients into a socially responsible mandate. With that said, it seems that as time goes on regardless of the mandate, the “smart” money is now following a more sustainable path. Portfolios will begin to be more socially responsible simply because it is the smarter and safer thing to do.

We will continue to vote for all kinds of politicians and that is a wonderful thing. Perhaps we have to hold back a little on the criticisms for a number of years so we can lure some high quality candidates down the road. Who in their right mind wants to get into politics!!

 


Personal Thoughts

Bradley and Paris are engaged ! We are all very excited. Bradley surprised her at Mooney’s Bay – he had a blanket and a dozen roses set up by a friend/photographer who remained hidden. The moment was captured and it was beautiful. Of course, Covid has too much to do with dates and venues but we will see what happens – perhaps by next Paul’s Prose?

Leah is at a crossroads – to continue with academia or get a job? She will have completed her Master’s program by this December through a special fast track program offered through the hospital and Ottawa U. However, after three years in and out of a hospital research lab she is not convinced she wants to continue that for another 30+ years! Regardless, she will be successful no matter which path she chooses – PhD or straight to the workforce??? This is all very exciting and nerve wracking.

As for Rosanna, each passing day she thanks her lucky stars for being a retired teacher! Although they are begging her to go back – she will take a pass. Mind you now that golf is over who knows – likely some volunteer work with children in special circumstances makes more sense.