Travis Kidson 12/20/23 Travis Kidson 12/20/23

2023 Q4 Newsletter

As we wrap up 2023, we wanted to take a moment to share how fortunate we all are. Our holiday newsletter isn't just about finances, hopefully it helps guide you through the nuances of the season!

Our newsletter will focus on the following topics:

Recent Market Noise
Holiday Party (Beacon Wealth Partner Group Picture)
Homes, Mortgages, and Interest Rates
Tax Time
New Energy Transition
Holiday Recipe and Cocktails

Recent Market Noise

A large amount of investment money is run by what are known as Quantitative Analysts (Quants) who create complex mathematical models to manage investments using inputs such as interest rates. So, they try and peer into the near future to form an opinion on these inputs.

But they don’t seem to be very good listeners. From our standpoint, central banks have been reasonably clear on their outlook that interest rates will not begin to drop until the second half of next year. Like many people, Quants want to be the ones that say “I told you so”. And to us it appears that one day they assume rates will start to fall early next year and the next day believe that they will never fall. Add in other factors such as wages and they generate a lot of intra-day noise and market volatility. A short term focus blinds them to longer term truths.

North American stock markets were weak from August through October. But November was very strong for both the Canadian and US markets. At the time of writing, December markets have also risen, though not to the same extent as November.

Concerns about a deep recession caused by interest rates being increased too quickly seem to be decreasing.

Well run companies whose products or services that are in demand will, over time, grow their sales and thus the value of their shares. Some companies are even able to thrive during recessions. Investors who understand this point are patient and ignore the noise.

The internet allows data to be shared easily, the power of modern computers allows us to search through that data to find companies that are doing well.

Holiday Parties

Recently we were able to get away from the office and attend a holiday party with some colleagues. Hawaiian themed…..if you couldn’t tell.

Homes, Mortgages, and Interest Rates

In November, Canadian home prices experienced their most significant decline in over a year, dropping by 1.1% month-on-month, marking the third consecutive monthly decrease, as per data from the Canadian Real Estate Association.

The average price now stands at $735,500, a level similar to that in May. This decline is attributed to the impact of persistently high borrowing costs, deterring potential buyers. The Bank of Canada did maintain its benchmark rate at 5%, however hinted at potential future rate hikes, keeping pressure on owners facing higher mortgage payments (Canada Home Prices).

Sellers, initially more active earlier in the year, are now adopting a cautious approach, anticipating a potentially more active spring market next year with expected interest rate cuts.

The larger challenge for the housing market will begin next year as an estimated 74% of fixed rate mortgages (Fixed Rates) in Canada still haven’t renewed the rates at higher levels. How would that impact payments, let’s look at a case:

Adam and Jane own a home with a $1,000,000 mortgage set to be paid off in 25 years. The mortgage had a 5-year term at 2.5% that they took out in June 2019. Monthly payments were $4,486.16
At the end of the 5-year term it is estimated they will owe approximately $846,000.00.
New 5-year rates are estimated around 5.75%, which would make the payment in June 2024 $5,939.62.
This difference results in Adam and Jane having to pay an extra $17,500 each year to pay off the mortgage
For many Canadians this isn’t an achievable task. Individuals are going to be forced to either sell the property or will have to extend the mortgage to help lower the payments.
Adam and Jane next year would have 20 years left on the mortgage, however if they extended the loan to be paid off later here is how the payments would change:
- 25 year: $5,322.24
- 30 year: $4,937.03

Time will tell if the Government of Canada reduces rates faster to help alleviate some of the higher costs mortgage holders will face.

Tax Time

With another year almost in the books, we wanted to remind everyone of some important upcoming tax deadlines.

If you own a non-registered account (also known as cash account), please wait to file your taxes closer to the deadline in mid-late April. The deadline for companies to provide iA Private Wealth tax information about your investments is March 31st. By the time we are able to process the information, it may be a week or two before you receive it.

Other year end important details:

You have until December 31st to make charitable contributions which can be claimed against this year’s income. The same deadline applies for RESP contributions to maximize the grant for 2023.
Withdrawals from a TFSA can be reinvested back the following year, without requiring new contribution room.
TFSA contribution room will rise to $7,000 in 2024
Tax loss selling must be made by December 27th so that the trade settles before year end.

The RRSP deadline is on February 29th (yes that is correct – leap year!). Should you have any questions about how this could impact your taxable income please let us know.

New Energy Transition

While central banks are trying to slow inflation, governments are pushing the transition to cleaner sources of energy. While the intention of getting society moving in this direction is good, policies may need to be adjusted overtime. As an example, a recent article in Business in Vancouver (Nov 27- Dec 3) highlighted the BC government’s policy on electric vehicles. In 2025 and 2026, Electric Vehicles (EVs) and Hybrids are to make up 10% and 26% respectively of new car sales. In 2030 it is to be 90% and 100% in 2035 (EV Goals).

But will manufacturers be able to meet these targets for a small market like BC? Getting the resources to massively produce EVs will be difficult. First Quantum Minerals is being forced to close it’s large copper mine in Panama and getting new mines approved is a long and complicated process. After two decades of modest mineral prices, there are few mines coming on stream with the metals needed for the conversion to a new energy world.

Recently we also learned that the high-tension power lines were designed to provide a high amount of electricity during the day but a lower amount at night. This allows the cables to cool and maintain their strength. But if everyone is charging their vehicles at night, at some point the cables will begin to fail.

Builders are already being limited to how many super chargers than can install in new developments - residential grids are not set up like industrial areas. The transition away from petroleum to electricity for heating homes may make the issue worse.

Holiday Recipe and Cocktails

As always, we wanted to share some recipes and cocktails we have tried, that we thought you may like. We added 2 holiday cocktails and a Ratatouille Pie!

Check out our recipe page here: Recipes

We hope you can share time and laughter with friends and family over the holidays. As always, please reach out if you have any questions.

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.

Travis Kidson 3/30/22 Travis Kidson 3/30/22

2022 Q1 Newsletter

The start of 2022 has been quite eventful. From easing COVID restrictions, to the SLAP at the Oscars, the winter Olympics, and finally the war between Russia and Ukraine. Our newsletter will focus on the following topics:

Markets and Investor Sentiment
War and Sanctions
Power of Technology
The Good in People

Markets and Investor Sentiment

Investment markets do not move in a smooth manner. One could say that they show manic - depressive behaviour. One day the future is bright and sunny and nothing could be better. The next, they have curled up in a ball and are hiding under a blanket sure that the end is near. Overall, optimism prevails, but it can be difficult for individuals to remember that while we are inundated with news of terrible events.

We can remember previous periods of market or economic stress, but from a distance they don’t seem so bad because we know the outcome - markets recovered. In February we sent out a note illustrating normal market pull backs against calendar year returns (see above). With the invasion of Ukraine, market nervousness understandably increased. Historically, after an invasion or other geopolitical events, most of the time markets have been positive six and twelve months later.

One of our jobs, as your investment advisors, is to be patient students of history and to understand the normal flow of market sentiment. We look to position our clients investments where we see potential and to avoid, what we feel are obvious risks.

One market sector we are hesitant to include in our portfolios is what we call old energy - oil and gas. In 2020, oil prices plummeted due to uncertainty on the effect the COVID pandemic on the economy and thus the demand for energy. As students of markets, we knew that this would be a good opportunity to invest, but we did not. Oil is especially sensitive to global events - from spills to recessions and war. In many ways, oil is to be appreciated as it had allowed the world to move past coal powered trains and ships to a much more connected and technologically advanced world. But we feel better options exist now for our clients.

We see technology as the next major improver of global conditions. Technology and other sectors offer better financial fundamentals, such as return on capital, and fewer risks from mishaps. We have avoided old energy as we believe we can get as good or better returns elsewhere. In our managed portfolios, we believe in having a meaningful exposure to the positions we hold, by selecting quality companies that show strong long-term economic potential.

Upon the invasion of Ukraine the benchmark price of oil in North America spiked upon the fear and uncertainty that war brings, but since then prices have declined. These high prices encourage oil producers to quickly reopen existing wells or begin producing reserves they have mapped out but not yet developed. This can be done within months, causing prices to drop as supply rapidly rises.

The companies we prefer to hold for you are not as subject to the rapid whipsaws of supply and demand and are more aligned for how the world’s economies are evolving.

War and Sanctions

A surprising outcome of the invasion of Ukraine is the cooperation amongst countries of the developed world in agreeing to and implementing economic sanctions. Perhaps the most significant part of this is denying several Russian banks access to the SWIFT network (Society for Worldwide Interbank Financial Telecommunication). This is the system banks use to efficiently message each other and to move money between institutions. Most commodities are priced in US dollars and this has had the effect of isolating the Russian economy from the currency they need to transact with the world. Besides oil and gas, Russia is a major exporter of wheat and fertilizer.

Sanctions have also targeted the reserves of the central bank of Russia. Since a prior round of sanctions were imposed on Russia after the annexation of Crimea, Russia has built up reserves equivalent to $630 billion US. But much of these assets were held at other banks/central banks in places that follow the rule of law. Suddenly Russia has lost access to its holdings of Euros and other strong currencies. Other sanctions prevent the sale of critical components, from microchips to advanced machinery, into Russia.

All of this has caused the Russian Ruble to drop from ~75 to the US dollar before the invasion, to briefly 135/USD to now around 96. In response, the Russian central bank raised the interest rates from 9.5% to 20% to support the currency.

All of this will lead to a smaller Russian economy and a lot of hardship for normal Russians (ie non oligarchs). What real effects this has on the decisions of the Russian President or changing future actions of not only Russia but other countries, is impossible to know. But it does signal the resolve of the developed world to not turn a blind eye to invading another country while avoiding escalating the situation into a much more dangerous and broader war.

Power of Technology

We do not have to look far to see the power and potential of technology than the COVID pandemic.

From March of 2020, scientists were able to sequence the genetic code of the virus, develop possible vaccines in 5 months using supercomputers running Artificial Intelligence algorithms (which otherwise would have taken 5 years to develop), run clinical trials and then build manufacturing capacity to enable 10 billion vaccines to be produced and injected by early this year.

Vertical Farms: Across North America in highly populated cities, ‘vertical farms’ are starting to become more popular. The main two advantages are they help reduce the amount of square feet needed to plant a crop as vegetables are stacked on top of each other – allowing for a far higher density of growth. There is also no soil as crops are grown either aeroponically (misting of roots) or hydroponically (roots sit in water). This helps reduce the amount of water usage and almost eliminates weeds and microbes/insects which require soil for their life cycle. By having complete control of the nutrient rich water crops are fed, there is also no fertilizer runoff into waterways that could affect lake and ocean wildlife. Currently the biggest drawback to the technology is the lack of sunlight within the warehouses used as farms. The solutions are computer controlled temperature control systems and lights tuned to the particular plant species to enhance growth. Modern LED technology allows that frequency tuning while also operating at much lower costs than older lighting systems.

Overall, this technology will allow for the growth of vegetables regardless of the season and enabling it to be sourced locally so it will be fresh and reduce transportation costs and emissions. Berries are the next item researchers are trying to incorporate. Currently this technology is being added in the UAE, Switzerland, and in Shanghai China as well.

New Type of Camera: Conventional cameras focus light onto a recording medium to preserve an image as a field of tiny dots, know as a frame camera. However, a team at The Robotics and Perception Group at the University of Zurich in Switzerland has created an event camera, where a dot only shows when the nature of the incoming light changes. Since the changing light is a consequence of movement (in most cases) the cameras often record events rather than objects. This can become particularly helpful if the camera itself is also moving, as nearby objects change positions more rapidly than distant ones. Uses for this technology can be applied to robots, drones, and driver-less cars.

For example, if a driver-less car approaches a stop sign and a truck has stopped first in front of it, the closer the driver-less car gets to the truck, the larger it will appear within the field of the camera. By analyzing the changes in the image, the AI (artificial intelligence) system will be better able to determine where to stop. In this case behind the truck, not close to the stop sign!

Robots and Jobs: The use of robots within factories or warehouses isn’t new technology. People do not enjoy doing menial repetitive tasks, which can now be done more effectively by robots. Amazon for example currently uses over 350,000 robots within the warehouses bringing shelves of items to people for them to pick and pack. However, during the busiest times of the year in November and December, extra sets of hands are needed. Currently the hardest things to automate are picking specific items and packing them to ship, an advancement that would revolutionize the warehousing industry.

Many people are concerned about the effect of these robots on the availability of work. If you look back to the 1960’s there used to be 1,000’s of people working the telephone switchboard operators, however all whom lost their job when it could be automated. The number of jobs in the telecoms industry have soared since then as advances in the sector have created many new/alternative jobs.

As logistics get more efficient through greater automation, and online businesses grow, the overall level of employment in e-commerce should still increase. It is not difficult to think of many job functions that have come and gone, (like the television repair man) but computer programmers and even social influencers are examples of new opportunities. People are creative, always finding new ways to do things and to help others. And as an example of that:

Good in People

Our thoughts go out to the people of Ukraine. We have clients with families that have been affected by this ongoing tragedy, as we are sure many of you know family and/or friends in this situation. Seeing the news and headlines on this topic is hard as people are suffering.

Social media certainly has its pros and cons, however people have found creative methods to help campaign and advertise ways to funnel money to besieged Ukrainians who need direct financial assistance.

One of campaigns suggested the use of Airbnb. People around the world were booking places in Ukraine, with no intentions of ever showing up. Effectively helping to directly donate to Ukrainian citizens in desperate need of the aid. Once the news of this tactic gathered steam, Airbnb also stepped up and waived all service fees for these bookings.

Our hope is this conflict can be resolved as quickly as possible.

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

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

Travis Kidson 6/29/21 Travis Kidson 6/29/21

2021 Q2 Newsletter

We can’t speak for all of Canada, however out in the West Coast we have been experiencing quite the heat wave in the last couple of days. AC units are sold out everywhere and the heat is quite exhausting. As Canada Day weekend approaches, we are saddened by the recent news surrounding the residential schools and need to reflect on our history to realize we need to be better.

Our newsletter will focus on the following topics:

Goldilocks & Inflation
Artificial Intelligence, Ultra-White Paint, and Drones
Eggs, Baskets and Diversification
Client Portal: New Feature
Fleurs de Villes: Vancouver

Goldilocks and Inflation

There have been numerous headlines about inflation lately. Some of this is due to supply chains needing to rapidly adjust to an opening western economy. As an example, production of new cars has been delayed waiting for computer chips. This has caused the demand for used cars to spike upwards, forcing their price to increase (reportedly about 1/3 of the increase in core inflation is due to used cars). Stimulus cheques that have been mailed out in the US are also a large factor in the rapid rise in demand, causing companies to change their forecasts to try and catch production up to demand.

There have also been reports of wage pressures on inflation as companies try to fill job openings. There are likely two components to this, it takes time to go through applications to find the right person and also the lingering concerns for some people over COVID. In the short term, some companies have offered bonuses or are increasing pay. This may dissipate as more people become comfortable returning to work.

When markets are truly concerned about long term inflation, bond yields rise. Instead we have seen yields fall (bond prices have risen) over the last few months, so current expectation is that inflation will not rise to current headline grabbing levels. Inflation may end up being modestly above 2% (whereas before 2020 it had been hovering just below), but if this also results in higher wages, that is supportive of economic growth. This could be the “Goldilocks” solution, not too hot and not too cold where incomes and economies are able to rise in a sustainable manner.

Artificial Intelligence (AI), Ultra-White Paint, and Drones

The pandemic normalized work from home (WFH) and accelerated the adoption of new technologies such as automation, e-commerce platforms, cloud computing, video conferencing and artificial intelligence (AI). In past market recoveries from recessions, we tend to see years of weak productivity growth as companies and governments depress capital spending. However, the opposite appears to be happening and should translate into a meaningful boost for GDP and market growth.

It always amazes us how innovative humans and companies have become to help propel the world into a more efficient landscape.

Source: NVIDIA

Nvidia, a fortune 500 company in the US, specializes in designing graphical processing chips, which are also used for AI research. Their chip technology assisted scientists to predict the 3D protein structure of COVID-19 to accurately detect infection and behavior of the virus. Scientists were then able to run millions of automated experiments to test the efficacy of potential drug candidates. Nvidia’s advancement in AI technology has revolutionized the way vaccines will be created in the future, cutting the time from years to months.

Scientists, at Purdue University, think they have created an ultra-white paint which could negate the use of air conditioning if used on a mass scale. This paint can reflect up to 98% of sunlight, which would help cool buildings and reduce carbon emissions. As you can see from the image: the left side is what the human eye sees, and the right side is a thermo image showing the reflective nature of the paint (black is cold and bright colours are hot). More on this can be found here: https://edition.cnn.com/style/article/ultra-white-paint-scli-intl-scn/index.html?utm_medium=social&utm_content=2021-04-18T03%3A01%3A00&utm_source=twCNN&utm_term=link

In April, a top video streaming app in Shanghai called Bilibili produced a giant Quick Response (QR) Code formed by drones in the sky. For those new to this technology, a QR code is a link that your smartphone can read when a picture is taken, which will then direct you to a website or app.

Hundreds of millions of people in China use QR codes in their everyday lives, often for payment using apps made by tech giants such as Alibaba.

Is this the future of marketing and advertising, time will tell?! More on this story here: https://supchina.com/2021/04/23/the-future-of-advertising-is-here-and-its-a-giant-qr-code-formed-by-drones-flying-over-shanghai/

Eggs, Baskets and Diversification

You are familiar with the old saying, “Don’t put your eggs all in one basket”. We have been hearing about this from some people as they think about their future and thought we would share our perspective on this.

Let us start with the “basket”; in an investment account, the firm (the basket) holds the individual investments in trust for the client. Some people worry that should the firm through which they hold their investments fail, they would lose money. However, rules in Canada protect clients by separating those investments from the firm’s operations, and as such their accounts can simply be moved to another firm. (Note by investments we are excluding bank accounts and GICs, which are used by a bank and are protected, to limits, by the Canadian Deposit Insurance Company.)

The “eggs” in this case, are the investments. Diversification is a key principle in managing an investment portfolio and in reducing risk. Mutual funds and Exchange Traded funds contain a collection of individual investments, whether they be shares of companies or bonds, for this very reason. In larger portfolios, we also include shares of individual companies, but ensure these are not overly concentrated to manage volatility.

The purpose of diversification is to limit potential losses.

If clients have investments at multiple firms, they are likely to duplicate exposure to the same types of investments; holding the same eggs in multiple baskets does not improve diversification. Generally, it is simpler to have all your investments at one place so that it has a unified investment strategy. This is also easier for the investor to monitor. This becomes especially true as we enter retirement and need a strategy to manage income withdrawals and taxes.

Perhaps the saying needs to be updated to “hold many eggs in one basket and watch that basket closely”.

We often explain our investment philosophy and process with a sports analogy. We view the money that we manage for clients as being serious money that must last their life. Thus, our investment style is to hit singles and doubles (investing in companies showing growth and fundamental strength) and avoid striking out (reducing exposure to companies during recessions). If we can do that over long periods of time, client returns will then be very good.

Client Portal: Uploading Documents

On the theme of technology, we thought it would be helpful to let clients know a new feature of the online portal. Documents can now be uploaded in a secure and safe manner without having to email them to us.

Simply click on the documents tab and then the send a document + tab to upload it. This can be helpful if you wanted to send statements, ID’s or a void cheque. We are also able to share documents with you on the same system.

Fleurs de Villes: Vancouver

In Vancouver, we just had a 10 day event around the city from Fleurs de Villes. They travel around the world each month to a different city showcasing top local florists, designers, growers and nurseries. More can be found here: https://www.fleursdevilles.com

Tracy took these pictures around the city, showcasing the artwork:

Conclusion

Hopefully, everyone can enjoy the summer and the back half of 2021. As always, if you have any questions, please feel free to reach out.

Finally, we wanted to thank everyone for the introductions we have been receiving to individuals who are looking for financial advice.

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

Travis Kidson 3/31/21 Travis Kidson 3/31/21

2021 Q1 Newsletter

The start of 2021 has gone by quickly and we hope everyone is doing well. BC has just announced new restrictions, but we are hopeful the vaccine roll our will continue to improve nationwide, and we can all get back to normal. We hope you enjoy our Q1 newsletter!

Topics:

Roaring 20’s?!
Moving Forward
Portfolio Models and Process
Real Estate Prices
Local Travel

Roaring 20’s?!

Since the start of the pandemic in 2020, many Canadians have experienced an increase in their saving capacity. A good part of this will be due to the lack of activities to spend on as well as the stimulus cheques released by the government. The chart from The Economist highlights this trend with Canada being the country with the most excess savings.

When we look back in time, we may see similarities to the rest of this decade to the Roaring Twenties. That decade followed World War 1’s devastation and the Spanish Flu to then see individuals embrace the good life and literally kick their heels up (shall we see the Charleston back in vogue?). The periods after the Great Depression and the Second World War saw governments invest heavily in infrastructure, in efforts to stimulate economies and get people back to work.

Governments of many developed nations have identified infrastructure as being out of date, decaying and in need of serious upgrading. Recent events involving the Ever Given in the Suez Canal highlight the never ending battle to keep up to date. This Canal is one of the most important waterways in the world for global trade. It provides the fastest route, by water, between European and Asian counties. By the numbers, almost 1/3 of global container ship traffic flows through it each day. In 2015, Egypt spent billions on the Canal to create a second lane to allow ships to simultaneously pass through. However on March 23rd, strong winds twisted the Ever Given, a massive ship equal to the height of the Empire State Building, across the Canal, blocking billions of dollars of goods from transiting.

More on this story: https://www.visualcapitalist.com/suez-canal-critical-waterway-comes-to-halt/

The need to upgrade is being driven by multiple factors, the importance of technology, trade frictions driving “reshoring”, environmental concerns and of course, getting people back to work. Will governments invest as needed? Time will tell.

Moving Forward

In the last half of 2020, we were frequently asked why markets were recovering even though we were still facing restrictions due to the Covid pandemic. Our response was markets are forward looking.

The chart below (from Dynamic Funds) provides an illustration. After a 6-week market drop beginning the middle of February, markets began to recover. We had entered the Hope stage, where optimism pushes up stock prices before we see the growth in company earnings driven by a recovering economy. This year we have likely entered the Growth phase, where market returns are more modest even though the economy continues to improve. This is the catch up phase, stock prices continue to rise but the valuation (the Price to Earnings ratio) of companies are brought back to more reasonable levels.

Chart Below:

P/E: price of an individual share divided by the companies earnings per share
EPS: companies earning divided by the number of shares outstanding

Portfolio Models and Process

We thought this was a good time to review the investment process we take when building portfolios for clients and examine some of the constituent parts.

Traditionally, portfolios were composed of shares of companies (equities) and fixed income (bonds or debts of governments and companies).

Fixed income investments provided a good income, were less volatile (their prices did not change as much as) than equities and tended to go up in value when stock markets were dropping. Regular rebalancing of the portfolio back to its target weight of the two classes was the preferred way to manage risk.

Conditions have changed as interest rates are at historic lows, meaning returns generated from fixed income assets are also low. Interest rates will most likely rise in the future, subsequently pushing fixed income prices down. Along with those concerns, we also need to plan for people living longer. Thus, a modified approach to managing risk for our clients was required.

Our portfolios have 4 main groups (excluding cash):

Fixed Income
Core Equity
Real and Alternative Assets
Tactical Equity

As our portfolios have a more modest allocation to fixed income assets, than was historically traditional, we add income generating assets in the real and alternative asset group. Portfolios over a certain threshold also include investments with increased methods to reduce volatility.

The core equity is exactly that, designed to provide broad exposure to the equity markets.

The largest part in most of our portfolios is the tactical equity component. For this part of the portfolio, we screen individual stocks for prevailing trends (where the best opportunities lie) and for fundamental strength.

The Fixed Income and Core Equity components are held through all market conditions. In the other two groups (Real and Alternative Assets and Tactical Equity), we have a process to identify weakness and move to investments better able to preserve value or potentially grow when stock markets are in a prolonged dip. This will help stabilize the portfolio, limiting losses compared to the broader market. When conditions begin to change for the better, our resources and tools help guide us as to the best places to allocate money back into equity markets.

On a regular basis, we review all the investments within the components and screen against other options within their group.

We feel our process will allow us to react to changing conditions within security markets, preserve your wealth, and assist you in achieving your goals.

Real Estate Prices

Residential real estate has been a hot commodity in the last 3 months. We have had multiple clients tell us the difficulty in purchasing property while getting very positive feedback from individuals who just sold. Transactions are starting to increase and properties on the market seem to go quickly. The rapid rise in housing prices are most likely due to two factors: Canadians having more to spend and an all time low for borrowing rates. As the vaccine roll out continues and economies start to reopen, we would expect to see discretionary spending increase rapidly. At some point, central banks will begin to raise interest rates to slow economic growth and manage inflation.

Every year a report is created detailing the 10 least affordable cities in the world. To our surprise Canada had 2 show up on list. Hong Kong has been number 1 for ten years in a row.

Local Travel

Most of the world has got the itch to travel and get out of the house. With the summer fast approaching, finding the ideal travel location seems to be high on many family’s radar. Travis and his wife noticed this firsthand a few weeks ago when trying to book a couple of nights within the province to either the interior or the local islands. Most places are booked and there is a noticeable hike in nightly costs. For those still thinking of planning a local trip – start now!

We hope everyone has a safe and enjoyable long weekend - Happy Easter.

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

Travis Kidson 12/16/20 Travis Kidson 12/16/20

2020 Q4 Newsletter

Looking Ahead
Data as the New Oil
Optimism and Fatigue
Looking Back
Holiday Spirit
Recipes

Looking Ahead

Market pundits draw on historical behaviour to make estimates of future behaviour. This works reasonably well during “normal” markets, but you don’t need us to tell you that 2020 was not normal. When the virus began to spread early this year, we did not know what the rate of infection was or how deadly it would be. We did not know how we would cope and how long it would take to learn how to treat and to develop a vaccine. Fear was prevalent and markets dipped rapidly.

You know what happened next: Human ingenuity.

Companies were already incorporating more and more technological solutions, the pandemic has accelerated that process.

Expectations for 2021 include an extension of government programs for a few more months to help those the most affected, continuing low interest rates and low inflation. Vaccination will become widely available over the coming months, allowing a return towards normalcy and a reduction of those government efforts. A new US administration should also ease trade and other policy uncertainties. As this happens, economic activity will broaden and businesses able to innovate and become more efficient/productive will benefit. (More on this below.)

Data as the New Oil

In May of 2017 The Economist ran an article: “Fuel of the future, data is giving rise to a new economy”. The argument it made was that “Data are to this century what oil was to the last one: a driver of growth and change.”

An article this month “Reasons to be cheerful: The pandemic could give way to an era of rapid productivity growth” discusses why there has been a lag in seeing improved productivity numbers (and growth) from the use of data.

While collecting the flood of data has been the first challenge for businesses, the major one has been creating the tools (algorithms) to benefit from this data (an analogy from Google is that algorithms are the recipe to the ingredients of data). Artificial intelligence is the broad term used to describe using this data effectively. Economists label AI as a general purpose technology that, like electricity did, has the ability to boost productivity across many industries. But it takes time and experiments to do so. One study suggest the results follow a J curve, with an initial drop in productivity and growth as companies struggle to incorporate solutions, but at some point it all comes together and growth rapidly increases.

The argument in the recent article suggests the pandemic has forced companies to adapt quicker, make better use of digitization, automation and better use existing resources. Old analogue habits can no longer be relied on to struggle forward (see the chart above). Businesses will change and new opportunities will be found. Which is another reason to be optimistic for markets in 2021.

Optimism and Fatigue

We are all getting tired of this - not being able to see friends and family in person, go to events or travel.

On a positive note, our government has started working with many different companies on vaccines to ensure we have access once they became approved, though perhaps not all the options will be viable. We are all aware of the rapid rise in infection rates since September, the graph below illustrates our (much lower) infection rate compared to the US and Europe.

The Pfizer/BioNTech vaccine has begun to arrive in Canada, but even with all the pre-orders from many different providers, it is going to be several months before a significant number of us are able to be vaccinated.

A useful analogy to the fatigue we are all feeling is the “wall” marathoners have to push through. This wall (often referred to as the halfway point) occurs around mile 20 of the 26 mile marathon, as the last 6 miles can take as long to run as the first 20. We are probably at this point in pandemic, the end is almost in sight but it will become increasingly hard on all of us to get through to the other side.

Christmas will be a challenge this year in many ways. Over the last few years, our year end newsletter would list some things to do over the holidays, for 2020 the list has been whittled down to grocery shopping and walking at midnight to maintain a safe bubble!

Highlights will be driving through Granville Island or by the Legislature in Victoria to look at the lights.

Looking Back

What were people thinking about over this last year? It is easy to forget everything that has happened, and we enjoyed the following list of top Google searches from CTV: https://www.ctvnews.ca/lifestyle/these-were-canadians-top-google-searches-in-2020-1.5223360

Holiday Spirit

We found the following commercial from Tim Hortons as an uplifting reminder of the holidays in Canada and we hope you enjoy it too: https://www.youtube.com/watch?v=QUzOcCIcPYI

Recipes

We wanted to include a couple of ideas for Christmas, one simple downsized idea for turkey and one decadent choice to spoil yourselves.

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

We wish you health, happiness and tranquility over the holiday season.

Travis Kidson, B.Sc., CFP®
Investment Advisor
HollisWealth, a division of IA Securities Inc.
Insurance Advisor
Hollis Insurance Agency
Tel: 604 895 3486 / 1-800-665-2030
travis.kidson@holliswealth.com

Jack Fournier, B.Sc., FMA
Investment Advisor
HollisWealth, a division of IA Securities Inc.
Insurance Advisor
Hollis Insurance Agency
Tel: 604 895 3348 / 1-800-665-2030
jack.fournier@holliswealth.com

This information has been prepared by Jack Fournier and Travis Kidson, who are Investment Advisors for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. 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 Investment Advisor can open accounts only in the provinces in which they are registered.

*Insurance products are provided through Hollis Insurance Agency. Only services offered through HollisWealth®, a division of Industrial Alliance Securities Inc. are covered by the Canadian Investor Protection Fund.

Travis Kidson 10/1/20 Travis Kidson 10/1/20

Q3 2020 Newsletter

2020 Q3 Newsletter

October 1st 2020

It is hard to believe that we are heading into October, in one sense time slowed down during the lock down, in another it seems we missed summer completely.

We were each able to get away for the odd weekend trip on either the Island or the interior, which helped recharge the batteries after a few stressful months. But Covid still seems to dominate conversations and news on TV. Numbers are starting to creep up again throughout the world, and Canada is no exception. With restrictions loosening and the capacity to increase the number of daily tests, this could be an expected result. However, we are still hopeful that everyone is staying safe and taking the necessary precautions.

As we start to adapt to the new normal it is encouraging to see some of the advancements in ideas. The sporting world is a great example with the NBA and NHL each having success in the environmental ‘bubble’ they have created. It is weird watching games with no fans (or virtual) however we are grateful sports are back on.

We don’t need to tell you that all eyes are on the upcoming US election and the fight over a new Supreme Court nominee. The New York Times report on Trump’s taxes makes us wonder what the prosecutors in The Southern District of New York have uncovered so far. These new revelations are unlikely to sway his supporters, but may be one more factor for those who are undecided. More on this below.

Advisor Conference: Upcoming Changes

Last week we attended our advisor conference. Quite a change from last year as everything was done digitally and although we missed the social interaction of speaking with other teams, we sure enjoyed the flexibility of being able to watch it in the office.

There are a couple of changes being made that we wanted to share with you:

The company is in the process of launching a new online client portal to view your investment accounts, access performance data, get tax documents and other information. Our Digital Solutions team are very focused on making it easy for you to enroll and gain access. We will be in touch shortly about what to do. These changes are coming into effect before the end of 2020.
The firm is in the process of creating a mobile app for the client portal. Estimates are it will be complete at some point towards the back end of 2021.

Overall, we were incredibly pleased and excited with the direction the firm is heading. Over the last few years, they did an excellent job at taking advisor feed back on various topics and have implemented changes that should benefit everyone.

Annually the conference always selects a charity to support, and this year it was the Food Bank of Canada. A charity that helps underprivileged families have access to healthy foods. This initiative was on most of our minds as COVID has really affected lower income families. Collectively, both the advisors and firm, we were able to raise just under $40,000.00. Should you choose to donate please visit the site here: https://www.foodbankscanada.ca/

Market Trends and Updates:

Over the last number of weeks, we have heard from several different pension/fund managers and economists that the pandemic has accelerated the adoption of a number of trends. The take up of both e-commerce and tele-health will be greater now than if the pandemic had not occurred. Our ability to use these services is due to the digital transformation of global businesses and governments, which will depend on Cloud data centers and increasing the ability of “data mining”. What was expected to take 7 to 8 years at the end of 2019 will likely now be achieved in 4 to 5 years. It does make us wonder why some improvements were not implemented earlier: as an example, Jack had to renew his driver’s license, an appointment was made online and he completed his renewal at the ICBC office within 10 minutes.

In a presentation at our conference, one manager highlighted that this is the first year since 1900 where we have experienced all four of the following in the same year: major environmental issues, a pandemic, social unrest, and a highly divisive contested US Presidential election. Thus, feeling a little overwhelmed seems a natural reaction!

July and August picked up from where we left off in June with markets having strong rallies and at times looking unphased by the global pandemic. September volatility brought us back to reality, and markets have attained more reasonable levels. This may have been caused in part by profit taking and a global resurgence in rates of new COVID cases. Central banks around the world are going to continue to keep interest rates low for quite some time which indicates the impact this virus is having on global economic activity.

If you are an avid reader or listener to market news, I’m sure you have now heard of the phrase V or U shaped recovery. This is a term used to describe the direction of markets over the last 8 months, with a sharp decline followed by a sharp incline. One fund manager suggested a better way to think of this recovery as being K shaped, with certain sectors doing well and others doing poorly. As mentioned before, technology has been the major driver in the stock market recovery, it continues to improve our personal and professional live. Sectors such as commercial real estate, banking, tourism/travel, industrials, and utilities have lagged. These sectors likely will not start to turn around until we have more certainty on the containment of the virus and unemployment numbers start to reduce back to pre-COVID levels.

US Elections

We find this question so common whenever a US election is approaching. From an investment perspective we are not overly concerned on who wins. If President Trump is re-elected most of his policies have already been implemented and therefore would not have any major impact on companies. Biden on the other hand is a centrist, known for working on both sides of the aisle to come up with solutions. His main fiscal platform currently discusses increasing the tax on very wealthy individuals, and to adjust corporate tax rates, but keep them lower than before 2017. With any politician, a primary goal is to keep the party electable and this won’t happen with drastic 180-degree policy shifts. Changes in power may result in short pockets of volatility, however over longer periods of time most North American governments do not have a huge impact on markets.

Historically the US market has performed better in times when Democrats are in power.

Unlimited Paid Vacation?!:

Technology companies continue to push boundaries with innovative ideas and solutions. Some are now changing the traditional way employees are awarded paid vacation. Netflix offers their employees unlimited paid vacation. There rationale is simply that unlike in the industrial economy (like factories) where people are measured by how long they work on the job, such as 9 to 5, the technological economy is more focused on ideas and inspiration. If someone does this in 8 or 4 hours a day is irrelevant to the company. Therefore, why should they measure if someone works 50 or 48 weeks of the year.

Interestingly enough, Netflix said on average people take 18 business days off per year.

This video can be seen here: https://www.bloomberg.com/news/videos/2020-09-09/why-netflix-offers-workers-unlimited-vacation-video

Thanksgiving Recipe:

Glazed Root Vegetable Tarte Tatin:

2 medium carrots, peeled
2 medium parsnips, peeled
2 small sweet potatoes, peeled
2 turnips, peeled
1/4 cup olive oil
sea salt and cracked pepper
1/3 cup of water
1 cup of sugar
1 TBLS of red wine vinegar
100g of parmesan cheese sliced or grated
4 sheets of frozen butter pull pastry, thawed
1 bunch thyme

Preheat oven to 425 F. Slice carrots, parsnips, sweet potatoes and turnips into 1 cm thick rounds. Divide between 2 oven trays and drizzle with olive oil and sprinkle with salt and pepper. Cook for 30 minutes turning half way through.

While vegetables are roasting, place water and sugar in medium sauce pan over medium heat. Cook until sugar has dissolved. Increase heat to high for 6-8 minutes, stirring as you go, until light caramel in colour. Remove from heat and carefully add red wine vinegar, stirring to combine. Immediately after, pour caramel into a large roasting pan. Arrange vegetables on top of the caramel and top with cheese. Then place 4 sheets of pasty over the top of the vegetables allowing 1 inch to overhang around the edge on pan. Press pastry to seal and tuck in the overhanging edges.

Reduce oven to 400 F and place tart on an oven tray to catch spills. Bake for 20 minutes. Then reduce oven temperature to 350 F and bake for another 20 minutes. Remove from over and let stand for 5 minutes before inverting onto a board.

Top with thyme and cut into squares to serve. Serves 8-10.

In Conclusion:

It has been an unusual and stressful year for everyone and while there are hopeful signs, we still do not know when life will return to some semblance of normality. We hope you are able to keep close to your friends and family and we wish you a Happy Thanksgiving.

2023 Q4 Newsletter

Recent Market Noise

Holiday Parties

Homes, Mortgages, and Interest Rates

Tax Time

New Energy Transition

Holiday Recipe and Cocktails

2022 Q1 Newsletter

Markets and Investor SentimentWar and SanctionsPower of TechnologyThe Good in People

Markets and Investor Sentiment

War and Sanctions

Power of Technology

Good in People

2021 Q2 Newsletter

Goldilocks and Inflation

Artificial Intelligence (AI), Ultra-White Paint, and Drones

Eggs, Baskets and Diversification

Client Portal: Uploading Documents

Fleurs de Villes: Vancouver

Conclusion

2021 Q1 Newsletter

2021 Q1 Newsletter

Topics:

Roaring 20’s?!

Moving Forward

Portfolio Models and Process

Real Estate Prices

Local Travel

2020 Q4 Newsletter

2020 Q4 Newsletter

Looking Ahead Data as the New Oil Optimism and Fatigue Looking Back Holiday Spirit Recipes

Q3 2020 Newsletter

2020 Q3 Newsletter

October 1st 2020

Markets and Investor Sentiment
War and Sanctions
Power of Technology
The Good in People

Looking Ahead
Data as the New Oil
Optimism and Fatigue
Looking Back
Holiday Spirit
Recipes