Optimism #79 - November 20, 2024
Dear clients and friends,Portfolios have performed well and people are happy.
I am getting a few questions about taking gains off the table, which Carol explained “… like when my $20 at the blackjack table grows to $40, I take the $20 I won and put it in my pocket. It’s a valid comment. She is nearing retirement and does not want the growth to disappear.
My answer was that owning high quality companies is not the same as blackjack. Our likelihood of loss at the casino is considerably higher. At the expense of volatility, owning quality companies has always been an excellent long-term way to grow wealth, even if you take the good days with the bad.
In the short term, getting out of stocks to avoid losses is a 50/50 decision. Carol could be right that now is the time. The high likelihood that we are at some near-term peak is very possible. However, there is an illusion of simplicity. I have never met anyone who has proven to be good at repeatedly timing major changes in market directions. Eventually the market will correct and she will be right, but as long as her time horizon is more than five years, holding is likely the best option. John Bogle, the founder of Vanguard ETFs comes to mind. He said, “… my advice is to buy only stocks and don’t open your statements until your 70th birthday. You won’t believe how much money you have.”
We do know that the end of November and early December is always volatile so buckle up. Tax loss selling is the cause, where asset managers sell losers to offset capital gains, so clients pay less tax. Companies that have had a tough year will fall, at least temporarily. Names like Telus, Bell, and Rogers come to mind.
December, historically, is the best month of the year for gains. Then we have the January effect, where money that waited for the new year to be invested causes markets to rise. Think TFSAs, RESPs, etc. The momentum usually continues in February with RRSP contributions. In spite of all of this predictable behavior, I still have no idea if it would be a good time for Carol to make her portfolio more conservative.
Here is a terrific article in the Globe about owning stocks versus bonds in retirement. I am surprised the example uses such few stocks (3 in this case), but the 25-year time horizon makes a clear message.
Rob Carrick at the Globe mentioned this retirement planning software. It looks excellent. I don’t believe in doing long term projections because it’s too misleading. After doing thousands, all I know is that they are all wrong.
As a result, I don’t use this stuff anymore, but it’s interesting nonetheless. If you are seeking projection software, this looks like an excellent choice.
Here is a useful article from the always astute Jamie Golombek at CIBC, regarding CRA’s position on deducting interest.
Insiders are buying at North American Construction, Tourmaline, Total Energy, Erdene Resources, Andean Precious Metals.
We have recent dividend increases from the following companies:
TFI International Inc. (TSE:TFII): 12.5% Dividend Increase [Dividend Streak: 13 years, Yield: 1.3%]
Waste Connections Inc. (TSE:WCN): 10.5% Dividend Increase [Dividend Streak: 14 years, Yield: 0.7%]
Canadian Natural Resources (TSE:CNQ): 7.1% Dividend Increase [Dividend Streak: 23 years, Yield: 4.8%]
First National Financial Corp (TSE:FN): 2.0% Dividend Increase [Dividend Streak: 12 years, Yield: 6.2%]
Emera Inc. (TSE:EMA): 1.0% Dividend Increase [Dividend Streak: 17 years, Yield: 5.5%]
StorageVault Canada Inc. (TSE:SVI): 0.5% Dividend Increase [Dividend Streak: 8 years, Yield: 0.3%]
My colleague Julia Chung has a great quote this week. “Good portfolio management does not make up for bad financial planning.”
And one from X, “Preparation always beats planning. Planning is based around the expectation of order. Preparation is based on the expectation of chaos. Plan for order and you will be destroyed by chaos. Prepare for chaos and you’ll thrive in any condition.” Maybe I should call myself a ‘financial preparer’? Food for thought.
Have a super week.
Derek Moran
