BY DREW FINERTY
I hope this letter finds everyone healthy and safe. I am committed to sending out bi-weekly email updates to help weather this storm and calm your nerves…We’re still deep in this pandemic, that is a once in a lifetime public health emergency. In the investing world this is called a ‘Black Swan’, something you thought was impossible, until you see one. Stock markets (humans) have acted as we’d expect, negatively. The stock market is a story, the story changes, the prices change. Now the story is very negative, when the story changes the prices will change again. The stock market overreacts in both directions. This is because the markets feed off two powerful human emotions, that of greed and fear. We don’t know with foresight when the market will ‘turn’, anyone who tells you they do, it’s not an untruth, it’s a lie. You already have a perfectly diversified portfolio, ideally suited to your objectives and long term goals. It is built to cope with the temporary declines we’re experiencing now. Interesting Fact: YTD the US markets are down about 22% and the Canadian 25%....in 2019, they did positive 29% & 20% respectively. The headlines are sometimes more sensational than real.
The nature of risk is that you don’t see it coming. Now for some good news. Going into this crisis we could not have been in a better position economically, a decade plus of prosperity, unemployment at historical lows, businesses with more cash than they’ve ever had and the corporate balance sheets are very strong. There’s never a ‘good time’ for a pandemic, but if we could have chosen a point in time, this would likely have been it. We also have a globally connected world and have all the utilities & resources to address this head-on. The stimulus packages the Governments have initiated is unprecedented and will help to cushion the stress. The current programs in the US are reaching 20% of GDP (Gross Domestic Product ~ or otherwise known as a Country’s “income”)…typically, recessions or other downturns require about 8%-10% to fight the issues. The US has said they are prepared to go as high as 30%-40% if needed…of course, this could cause inflation in the future, but that is something that can be dealt with, while these extraordinary times need action now.
When the stock market rises you don’t ‘win’ money, just like when it declines you don’t ‘lose’ money. You only lose money when you commit the worst financial action an investor can make, selling a portfolio in a declining market. This is the action reserved for the DIY investor and the financially failed investor. If you’re investing every month (which many of you are) this is a deep temporary market sale, which is good news for your automatic monthly investment premium.
As Warren Buffett says: "The stock market is a device for transferring money from the impatient to the patient." Successful investors are patient, failed investors are impatient.
If you wish to discuss anything please call me, as always, I’m here for you or if you are interested, some of you may have had experience with ZOOM lately. For those of you that haven't, ZOOM is a Video Conference app that allows us to have a face-to-face meeting without “buffering” or “talk-lag” issues like FaceTime and can be as easy as clicking on a link in an email from me…so if you would like to arrange our next meeting via ZOOM, let me know and I will set us up….this may be a very helpful tool for the short term as we have no idea when we will be able to open our office again, but it could be a while.
Keep safe, keep positive and know humanity is a powerful force you don’t wish to vote against. Cheers!