2023 Q3 Newsletter

Thanksgiving is upon us! Take this weekend to celebrate and enjoy spending time with friends and family.

Our newsletter will focus on the following topics:

Thanksgiving Recipe
Central Banks and Digital Currency
Is that a Real Number?
Immigration and Construction
Polling Data
Privacy

Thanksgiving Recipe

We wanted to include a recipe you could use with some of your thanksgiving leftovers.

Check out our recipe page here: https://www.beaconwealthpartners.ca/recipes

Central Banks and Digital Currency

We have had a few inquiries from clients concerned about central banks exploring the use of digital money. To be clear, at this point, they are researching the idea and the most likely outcome would be to make transfers between the central banks themselves.

One reason that central banks are exploring this is that many individuals within an economy are un-banked and rely on expensive alternatives such as cheque cashing companies. Ideally, central bankers would like to help these people lower costs and a digital currency could be a solution. But that would open up other problems. For instance; if normal users of bank accounts were to switch to a digital currency, banks would not be able to lend as much, which could slow the economy.

Thus, at this point it is more an idea than a policy direction. The Bank of Canada has a good article on this: Click Here

Is that a Real Number?

A client asked; “Is that a real number?” The question was asked because the value shown on a recent statement is different than one several months ago. So which one is right?

Markets fluctuate between optimism and pessimism. The periods of optimism, known as Bull markets, last longer than the pessimistic Bear markets. Optimistic markets look forward and extrapolate companies continuing to grow quickly. Pessimistic markets assume the opposite, that growth will disappear and earnings will fall. In both situations, investors try and determine the present value of a company (or other investment type) based on a number of assumptions. Different investors will come to different conclusions (opinions) on what they are willing to pay or receive as payment for an investment. This applies to all investment types; equities, fixed income, options and real assets.

When you receive your statement, it reflects the last price the investment moved from one investor to another at the close of the markets on that day.

After a long period of a positive market, investors tend to be overly positive and will be willing to pay more than they should at that point in time. During bear markets, investors do not recognize that over time, well run companies will increase sales and profits and will assign a price based on the current, difficult conditions.

In one sense both are right, as they reflect the current thinking of investors. In another sense they are wrong as their opinions are influenced by the psychological biases we all possess. The extreme prices of a market high and then a low are divorced from the reality of how really well run companies operate. Over time they will increase their sales and profits, but the rate at which they do so is different from the opinions of investors.

We believe that ownership of companies will generate the strongest returns over time. We believe clients need to have most of their portfolio owning great companies as the growth they provide is needed to offset the effects of inflation and taxes.

As part of our managed accounts, when we believe that prices become overly optimistic, we will pare back the position. Conversely when a company’s valuation is low, we may want to add more because eventually the market will realize the future potential.

Immigration and Construction

Last year, Canada’s population grew by a record 1.05 million, to 39.5 million people. It is estimated that 96% of that growth was due to immigration. Like many other countries, we rely on immigration to drive economic development and growth. An expanding population base grows capital spending and personal consumption, helping to maintain a robust economy. A growing number of working age people makes it easier for society to care for retirees.

2022 was unique as Canada introduced a special initiative to help people that have been impacted by the war in Ukraine and the instability in Afghanistan.

Canada’s immigration program is built on attracting skilled, talented people, and is envied by many other countries. Inviting these people leads to other challenges that must be solved, such as building homes, schools, hospitals and other vital infrastructure components. Increasing the availability of renewable energy sources in a large, northern country is also challenging.

Many young individuals will struggle to enter the housing market if prices continue to be elevated. Higher interest rates may help bring prices down, but the larger driver will be an increase of supply in the form of new homes. Canada has introduced the First Home Savings Account (FHSA), which will help new buyers use tax free money on down-payments.

Tying this back to Beacon Wealth Partners, our managed models have continued exposure into companies that will benefit from new home builds and modern infrastructure requirements.

Polling Data

Surveys are a common source of knowledge about various aspects of life, including demographics, economics, and politics. However, not everyone participates in surveys, and this can introduce biases in the data. For example, a recent survey in the US, showed a decline in the popularity of American values over the years, but this may not be an accurate reflection of reality. The change in survey methodology, from telephone to online polling, can contribute to such discrepancies.

Differences in how people respond to surveys conducted via phone and the internet can lead to skewed results. For instance, online respondents may be more honest about certain topics due to the anonymity of the internet. As a result, declines in response rates to surveys can affect the accuracy of key economic and demographic indicators, potentially distorting the perception of societal trends. As shown in the chart on the right.

Efforts to address non-response issues include spending more money to interview a broader sample of people and developing new statistical techniques. Nevertheless, some issues may remain undetected until it's too late to make corrections.

We found this information informative as some market indicators describe investor sentiment, for example, which may not be a true reflection of all the data. Just think, how open are you to spend your time answering surveys either through an email or on the phone!

Privacy

Recent government legislation requires companies to explain their process around privacy and request consent if they wish to provide offers from related companies. For that reason you received a letter about privacy and consent from our parent company, iA Financial. We want to assure you that they will not be contacting you with offers. We share a special relationship with iA Financial where they recognize that you have entrusted us to provide wealth management advice.

We wanted to wish everyone a happy thanksgiving and as always, we are available to answer questions or concerns you may have.

Jack Fournier B.Sc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca

Travis Kidson, B.Sc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca

This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.

Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.