Global political alignment is rapidly accelerating. Change is not just inevitable, it’s also increasingly difficult to accept. In this webinar we delved into the complexities of the changing world order and how it’s affecting politics, economics and MOST IMPORTANTLY YOUR INVESTMENTS. Key topics discussed include:
- Shifting Relationships & Asset Class Correlations: Uncover why the once-reliable relationships between assets are now in flux, and what it means for your investments
- Unmasking ESG Investing and the opportunities it presents for your portfolio
- Explore the impact of lightning-fast changes in global politics reshaping our world as we know it
- The Rise of the BRICS: Implications of new economic alliances and challenges to $USD hegemony
- Interest Rates & Inflation: Are Central Bankers really in control?
- Three specific investment strategies to protect and grow your purchasing power
(Recorded October 3rd, 2023)
Full Transcript
0:16
Hello everyone. Thank you for joining us. Thanks for being on time. Got a bunch of people piling in the doors right now so we’ll get started here in about two minutes thanks for your patience?
2:29
Hello everyone and welcome to tonight’s webinar. Are you ready for the changing world order. I’m Andrew Ruhland, the founder of integrated Wealth Management in Calgary. I’m the shorter guy on the right and it’s my colleague Sandor there on the left, Sandor does a tremendous, tremendous amount of research and information gathering and formatting for these presentations. So thank you for that. He’s also a playing keyboards, the other side of the office for us tonight, and I’ll be lead guitar and vocals. So this is our new revised website nicely refreshed, we invite you to go visit it at your leisure rather than are spending a lot of time on it here tonight. Most important thing about this screenshot or the screen is your family’s life goals. Basically your values, beliefs, and priorities are the center of everything that we do. And everything that we’re going to talk about tonight is related to how it affects your investments, which of course, relates back to your family’s financial independence. We’ll also let you check out our website for a little bit more of this stuff. But we are very, very devoted to the sovereignty of the individual the western Canadian life and we are reality driven, not narrative driven.
3:44
So definitely investor behavior is key. I mean, over the last four years, they’ve obviously been incredibly challenging for investors, you know, with the COVID crash, the sharper, the sharp recession, caused by lockdowns, supply chain breakdowns and excessive government stimulus that led to the highest inflation in 50 years. It’s still here, the war in Ukraine and the most talked about recession and generation in a generation that hasn’t even shown up yet. Now, nobody watching has ever been in this current situation with the retirement portfolio being subjected to so many challenges. But the world has been in a similar place before. And as Mark Twain said, History doesn’t repeat, but it sure does run. Now the phrase just sit tight and hold on is based on that immutable truth about the need for patience and investing. But it’s been overused by advocates of buy and hold investment strategies. Frankly, it’s also used as a crutch to excuse very lazy investment management that fails to adapt to the changing dynamics of our present and future world rarely are cogent reasons provided as to why just hold on is the smartest course of action.
4:48
So in this webinar, I’m gonna lay out how we see the world changing and hopefully everyone watching will understand what the most intelligent course of action is for their family. IWM is focused on big picture independent thinking and We’re working with experienced independent specialists with the right temperament to implement these ideas in real time. And that’s a big part of why our clients have weathered the storm in the last four years, much better than most investors, active management. We’d be happy to answer any questions that that anyone watching may have, including your clients, of course, just let us know. And the good news is that there are legitimate reasons for optimism, despite the very real headwinds that are out there. So let’s get going with exploring the risks and opportunities of the changing world order.
5:30
So again, why this webinar, understanding the changing political and economic landscape, most importantly, how this affects your investments. And the big theme here really is change creates opportunity. And so we’re gonna talk about some practical strategies to protect and grow your portfolio and don’t fear the change roll with that baby as Steve Linwood likes to sing.
5:53
So today’s topics, we’re gonna talk about the rapid and notable changes, reshaping, geopolitics, the implications of the rise of the BRICS, ESG, investing, inflation and central bankers, some of the changing asset class correlations, and most importantly, investment strategies to protect and grow your purchasing power. So spoiler alert, this is what we’re going to show you, we’re going to talk about dividend growers real stuff, corporate fixed income and protection from government. But we want you to understand the why behind each of these. So that’s why we’re going to take the time to look at the big picture and to lay out our rationale for everything that that we’re doing, and that we see happening in front of us going forward.
6:36
So what do we mean by the changing world order? Well, it’s really shifting from the unipolar world, to a multipolar world and that unipolar world has really been with the USA incharge ever since the end of the Soviet Union. During the Cold War, it was basically two major superpowers. Of course, Soviet Union collapsed under the weight of the the error of communism, will say, particularly on the economic side of things. So what’s happening right now, is what is really emerging is more balanced. So the rules have been stacked much too heavily in the US as favor. You know, a lot of foreign debt has been issued in US dollars, interest rate hikes, have turned the screws in particular, some central bankers in emerging markets have been forced to raise their currencies, raise their interest rates just to defend their currencies, because they’re in the US dollars.
7:33
So again, it’s a big shift from a unipolar world to a multipolar world. We don’t think that’s a bad thing, actually. But one thing is for sure, and I’m kind of paraphrasing Einstein here, the level of thinking that created the world’s problems won’t be the level of thinking that solves them. And of course, we’re 30 years after the end of the last Cold War, and we’re at risk of a new hot war. So there’s a lot on the line here. So big existential question to get a little bit philosophical, do we have to conquer or can we just collaborate? The reality is that the world prospers when we trade, and the world is in chaos and in tatters when we fight. So my hope is that the warmer war makers will start to lose out to the peacemakers. But we need to get a whole lot more leading lights, and bold political leaders, who were actually determined to make peace rather than to make war.
8:32
Now, a lot of the changes going on with the BRICs. And the development of the second are the global south that sometimes referred to second and third world countries, it’s really about raising the floor for the worst off. And if you’re a political leader in any third world, or second world country, of course, you want to raise the standard of living for your population, everybody wins. Now, back in the mid 2010s, the UN actually set out a goal of raising 240 million people or raising as many people as possible out of poverty. And they actually succeeded in less time than they had actually projected. And they raised 240 million people out of abject poverty. And they did that through the introduction of capitalism in third world countries.
9:17
What a concept should also be stated, though, that laudable goals are often used as cover for increasing centralized power. As an example, a social safety net can go too far, and it turns into a social hammock. We certainly see that in Canada, we certainly see that in the UK, and the the very diverse and beautiful and historic basket case known as Europe. The reality though, is that there’s another type of laudable goals. It’s pushed as a laudable goal that’s spreading democracy at the end of a gun barrel. And that’s something that’s been happening mostly at the hands of the US for a very, very long time. And unfortunately, We’re starting to see some of that ramp up again. And hopefully we can put some political pressure on to stop that. So the other side of the coin with these changes, is risks. So obviously, we had the Russia move into Ukraine on February 24, of 2022. And we’ve seen a Volodymyr Zelensky go from being compared to Churchill, to being finally started to be recognized, I’ll say, as as being the most corrupt leader in the world, which is really saying something. And he’s gone basically from hero to zero in about 19 months. The other reality is that military math works. Those who think that Ukraine can actually repel Russia from the areas that they have reclaimed in Donetsk, Lugansk Zappa, Rosa and her son, and Crimea, which they reclaimed back in 2014. That’s just not going to happen. It’s not going to happen unless there’s a dramatic escalation, which we hope does not happen. And in fact, what we’ve seen happening is, is that the West, particularly the US has actually been draining its own stocks of, of ammunition and older weapons and older military equipment and shipping it over to to the Ukraine. And of course, that ends up resulting in having to restock the restock the shelves and rebuild the armed forces in the US, which of course, just feeds the military complex military industrial complex, and all of the war whore politicians that that fund them are that that, that vote for this stuff? And of course, get lots of donors by donations back. And there’s something else that’s particularly troubling. And that’s the recent narrative shift for the Neo cons. People like Lindsey Graham, yes, that was me sitting there saying that we need to defeat Russia in Ukraine, otherwise, that will embolden China somehow, just absolutely ridiculous. But they’re basically trying to prepare everybody for the next war. And so we’ve got us China relations, that are being brought forward. Are we going to be enemies? Are we going to be friendly competitors? And then there’s the whole question of Taiwan.
12:25
And it’s very interesting, because it’s, it’s a very, very complex set of set of history and, and, and diplomatic realities. But that appears to be the next war that the US neo-cons appear to be intent on fighting. Now, of course, it’s not just military, like hot war, there’s also cybersecurity conflict, there’s AI, and there’s economic conflict, and all of those things can be damaging. But in reality, a lot of these things are part and parcel of why the BRICS was originally formed, I think it was back in 2010, or 2009. And why it has actually been accelerating. So the BRICS, just for a definition, it’s an informal bloc founded to provide a platform for its members to challenge a world order dominated by the United States and its Western allies, that straight off the BRICS website. The focus includes economic cooperation and increasing multilateral trade and development. And if you’re one of those countries, Brazil, Russia, India, China, South Africa, and any of the new nations that will be brought in and 2024. That sounds like a pretty good deal. So what does this mean for the West?
13:40
Well, I think it means that the West is going to have to be more collaborative rather than combative. And it means that the West isn’t going to be able to dictate monetary policy and economic policies through bodies like the World Bank or the Swift payment system. Because frankly, alternatives are being built the BRICS itself, it’s not an alternative to trade with with the West, because the West is still very large, both the West and the BRICS countries still want and need trade with each other. It’s just that the BRICS countries want a better deal. And if you’re one of the one of the citizens in the in the BRICS countries or leader in the BRICS countries or a capitalist, corporate leader, or even just a moderate sized entrepreneur, you want a better deal as well, because you’d like to get a better price for your goods and services.
14:33
So, here’s a great visual to show the expansion of the BRICs. In red, we have the existing members again, Brazil, Russia, India, China and South Africa. And then in blue, you can see the new members that will be coming in in 2024, cludes, Argentina, Saudi Arabia, Egypt, Iran, United Arab Emirates, Ethiopia, and then there’s a whole host of other countries that have applied for membership. So it’s a large group of countries. But you can see just visually here, what an incredibly large portion of the world’s landmass that it involves. And that’s actually really important specifically because of the amount of natural resources that are in those countries. Now, let’s also take a look at the increasing scope and influence of those BRICS countries. So we can see here as a percentage of global GDP, the existing BRICS countries in red are 29, or sorry, with the total new members, the BRICS total with new members will be 29% of world GDP. And on the right side, you see there plus 2%, that’s adding in the countries that have made application but won’t be joining till after 2024 and 46% of the world’s population. And then after those new countries are added, we’re at 52% of the world’s population. Quite possibly the most important element, though, is oil production. With the addition of Saudi Arabia, Iran and the UAE, we’re at 43% of world oil production coming from the BRICS countries, that gives them a lot more power than they had before over global prices. And with the addition of the subsequent applicant members in 2025, or later, that’s going to be 52% of world production. And that’s a really big deal. So frankly, the West better play nice, because we could be in a situation where, where we just don’t have control over production, cutbacks or production increases, and that can dramatically affect the health of our economies. And, of course, of course, the world export percentage 25% and up to 29%, once the new countries are involved, so that is a big deal. Now, it doesn’t mean that it’s the the end of you know, us strength or anything like that, it just means that things are starting to change a little bit, there’s a little bit more balance. So let’s look at some of the implications for investors on the opportunity side, there’s investing directly in the growth of the BRICS members themselves, we can look at investing in companies that are local to those to those countries, because some great companies will are already in those those countries. And as as governance and accounting standards and compliance and credible compliance increases, there will be more capital that will actually flow into those countries. But there’s also global companies that will want to be feeding more and more of their products into these countries. Because as the standard of living increases, those citizens will be able to buy more and more products.
17:53
A great example of that would be apple. They don’t care where they sell their their iPhones, frankly, Samsung’s another another version of that, right. In the in the smartphone market as as examples, there’s also going to be a tremendous, tremendous demand for energy and other commodities, as their infrastructure continues to be built out further and further. We know that in North America, and in many parts of Europe, that the infrastructure is woefully woefully out of date, some of its crumbling and becoming dangerous. And certainly, the lack of new investment in infrastructure has slowed the development and also hampered the competitiveness of North American and Western European countries.
18:41
But these new countries, not these new countries, these expanding countries in the BRICS bloc are going to need more and more of those things. And that’s actually a big hint as to some of the things that we think are going to be good investments going forward. But on the risks, side of things, and these risks are real, I think the biggest risk is that the West views the BRICS countries as enemies to be defeated, as opposed to better organized trading partners. So if the Neo cons get their way, it’s going to be more guns instead of goods. I would like to see the the reverse. I think anybody who’s who’s got any humanity would also like to see that. But it should also be noted that the Chinese as an example, they are there long term thinkers that are far far better long term thinkers. The way that I’ve characterized it in the past is that for the Chinese 50 years is the short term planning cycle. But most of us don’t know what we’re eating for lunch, even after breakfast. So that kind of shows the difference between kind of North America and certainly the Western European kind of culture and ideology in the big picture. Thanks. thing that really doesn’t seem to exist in quite the same way, as it does in China, they play the really long game. Now China is doing a lot, building up its military, particularly right across the streets of Taiwan. And that we think that it, it’s it, I’ve personally think it’s inevitable that there’s going to be some kind of, of a takeover. But whether or not that’s actually the West business to actually interfere. And that is quite another matter. Another risk is, if the West tries to isolate the BRICS, we think it’s going to backfire. And as I showed you in previous slide, the BRICS influence is massive. And frankly, a lot of big countries around the world outside of the West are tired of being pushed around by the US, that’s just a reality. And whether you think that’s a good thing, or you don’t think it’s good thing that the US is, throws its weight around economically and militarily, the reality is, is that a lot of the countries around the world don’t like it, and it’s starting to change. And another risk, of course, is that the US will eventually lose its reserve currency status.
21:18
Now, much has been said about this. And we want to take a look at a few things that are pretty important. Firstly, is the historic element. On the right hand side there you see a graphic that shows the history of the world’s reserve currencies since 1250. So Italy had had a couple, one from Florence, obviously, and another from from Venice, and then the Portuguese rial, then the Spanish rial, and then a little Edie, The Little Engine That Could the country of my ancestry, Holland actually had reserve currency status for a while as the the Dutch guilder, the French lever, the pound sterling, of course, and then starting with Bretton Woods in 1944, was the US dollar. So as we can see world reserve currency changes over time.
22:11
But what do we really mean by the world’s reserve currency? Well, what it really comes down to is that most of the global commodity transactions are conducted at US dollars, that so it’s kind of the currency of record, if you will, or it’s kind of the ultimate unit of unit of account that gets everything gets translated back to, but that’s already starting to change.
22:34
The BRICS countries have announced that they are going to start trading some of the global commodities that we all find so important in our in our world like energy and food. Those are the the biggest, most important ones, of course, those are going to be started to be traded in local currencies. Now, what does it take to actually be the world’s reserve currency? Well, one of the biggest things and Marty talks about this Marty Armstrong talks about this all the time, is that you have to have a massive bond market, that’s the size of the vessel part. So if you’re a foreign country, and you’re receiving US dollars for, for your exports, where do you put what can leave it sitting in US dollar cash, sure. But ultimately, you want to get a little bit of a return on your investments. So you have to have a bond market that’s big.
23:28
And the US, of course, has a huge bond market because they have a ridiculous amount of outstanding federal debt. Another factor to keep in mind is that the US dollar has never been canceled. Few countries can say that. So the US dollar has never been canceled and physical US Dollars are still used worldwide. And really, when it comes to the end of the US dollar reserve status, it is not a matter of if this is going to happen. It’s a matter of when Martin Armstrong puts that timeframe in 20, in the 2027 to 2028 range. And that is contemporary with the time when he sees the United States breaking up into three to five separate regions based on significant political differences. And certainly we’re seeing political tensions rise in the US where even the Republicans can’t agree on a speaker. So Kevin McCarthy has just been just been dumped. He’s been this speaker seat has been vacated, and they’ll probably just replace them with some other useless Rhino from California, like maybe a Steve Scalise or someone like that. But the reality is that the gradual change that we’re seeing coming, it allows us to minimize the risks, right, we can start to diversify outside of US dollars when the time is right. But that time is not yet the US dollar is still king, it’s still King Dollar.
24:58
So we need to keep that in mind. When it comes to how we look at the world from an investment standpoint, so you don’t have to run for the hills because the US dollar is no longer the world’s reserve, or that it’s going to change.
25:12
We also want to talk a little bit about ESG investing. And it’s something that a lot of people have asked us about over the years. And really, we wanted to do a little bit of an unmasking. And certainly after the last couple of years of COVID, protocols, unmasking is very appropriate. So what we’ve been told ESG is, is that its diversity, equity and inclusion, along with climate justice inaction, of course, it’s positioned as a noble goal. Now, if you don’t know anything about what the diversity, equity inclusion, and climate justice agenda are, you might think that is a good thing. It sounds really, really nice, doesn’t it? But the trouble is, is that it’s really just a social credit score for companies.
25:55
And ESG is just a very effective branding and ideological movement that’s been applied to the corporate world. And that ideological movement, the dogma that it’s based on that ideology as post modernism, or Neo Marxism, which is not exactly it’s not exactly consistent with freedom, liberty, and also economic, economic prosperity. And what really, it comes down to is that a lot of the ESG goals are quite utopian, they’re just not practical. Now, that doesn’t mean that there aren’t going to be some good things about it. But we want to make sure that we’re not getting caught with all these laudable goals as a way of centralizing power again, right, just like governments do it. Some companies are trying to do it as well.
26:43
The most essential element of all of this, though, is that ESG is political. It is a political ideology applied to corporations. And you don’t want to avoid investing in companies because of a lowest ESG score. But you also don’t want to invest in companies just because they have a high ESG score. I guess the bottom line is that in investing, you want to keep your politics out of things. So. So we’re going to take a look at an example.
27:14
ESG is environmental, social and governance, of course, we’re going to focus on just one aspect of the environmental side of things, and that’s renewables. So the forest transition to renewables is, on a practical level, it is actually impossible. There are substantial technological limitations. We don’t have enough available resources, if we wanted to have a transition to all electric vehicles by 2035, or whatever year that, that they hope to have that in place, whatever timeframe that is, we would have to mine as much copper between now and then just for those electric vehicles that we have mined in the history of humanity. And I believe copper was probably actually mined for written history. So copper literally is prehistoric. There’s also the fact that we don’t have the infrastructure for for these vehicles. And we don’t have the ability to produce the electricity to generate to fuel all of these electric vehicles. And of course, there’s additional costs. Both the taxpayers and consumers there’s huge subsidies that are that are going out for them.
28:28
Now, does that mean I don’t think that Tesla’s are cool? Hell no. Tesla’s are the bomb. They are. They are. They are psycho fast cars. They’re a bunch of fun to drive. I know several people who own Tesla’s and they absolutely love them. And that’s fantastic if you’re in the type of climate that that Tesla is appropriate for, and probably mostly on the West Coast is in Canada’s where it might actually be suitable, because it does get that cold out there. Most of the rest of the country, those electric vehicles don’t work too well. And then there’s also the recycling challenges that we have, not just with car batteries, and there’s problems getting insurance because of car batteries, particularly down in the US. And what about recycling of solar panels. And Danielle Smith here in Alberta actually recently put a moratorium on building new wind turbines, because of the $700,000 per unit cost to actually recycle a wind turbine at the end of its lifecycle.
29:34
And that’s we don’t really talk about recycling the renewables, right. We talked about recycling a lot of other things. And we talked about the downside, or a lot of people talked about the downside of say fossil fuels, but don’t talk about the advantages. We have to look at both. Now the opportunities on the investment side are in real stuff, because it takes things like copper and cobalt and lithium and steel and aluminum to build Those, those great electric cars. But, again, there’s limitations now that significant demand over time will actually result in prices going up, because supply just is not easy to come by. And there will, there will be inevitable additional technological breakthroughs, those are inevitable. The fact is, is the battery technology has advanced as far as it has, because of the pursuit of these electric vehicles and trying to reduce carbon footprints. I’m not necessarily supporting the reduction of carbon footprints, because I like plants, plants like co2, and they’d like to give us oxygen back. There’s also some related products and services that will come out of some of these new things that’ll create business opportunities for servicing some of these newer technologies. And then there’s also the fact that this pushed to reduce your overall we’ll call it carbon footprint, what it really, really means in real terms, is becoming much more efficient. So there’s a lot of established companies that thanks to this, this push have actually been innovating and improving efficiency, but it drives profits and reduces the footprint. So what’s not to like about increased efficiency? That’s fabulous. Right? So those are some good things that that certainly come out of that.
31:23
Now, on the social side of things, really what ESG is on the social side of things is the rebranding of affirmative action with quotas. Caturra categorised by identity politics. And in some of the most woke companies, particularly in the US, it’s resulted in creating a culture where in thought and free, independent thought and free expression are less important than avoiding micro aggressions, and conforming to groupthink, the result there is self censor censorship within the corporate environment.
31:52
And there’s also been a lot of virtue signaling that manifests in marketing activities. And we can think of a target and, and Budweiser, right, and that’s led to the whole expression, get woke, go broke. And that, of course, is because you’re alienating customers. But ultimately, as well, it means that the employees are actually distracted from being more productive and focusing on what their core job is.
32:20
And on the governance side of things, what we’ve been told it is, is that the governance segment of ESG encompasses corporate board and management structures as well as company policies standards, information disclosures, auditing and compliance issues, dot dot dot, and stakeholders, we actually pull the and stakeholders part from another official definition of it, and stakeholders, of course, stake holder capitalism is part of the World Economic Forum agenda. And it’s really about kowtow into a lot of outside interests, and having less emphasis on what’s important for the company’s success, and actually, again, kind of kowtow into some external forces.
33:04
So the reality is that on the governance side of things is that the environmental and social aspects have leverage over the governance. Now, this has been a trend for the last number of years, but it actually seems like not seems like it’s actually fairly obvious that there’s been I think the zenith of the ESG movement is behind us. Question here. At the top, is it in front or behind us? We actually think that it is behind us. There’s some evidence of that. We know that it’s no longer the flavor of flavor of the day flavor du jour. For example, Suncor has actually said they were going to no longer be operating. So they were divesting themselves of their of their solar operations. And they were just going to focus on their core competency, which is mining and, and processing and, and drilling for hydrocarbons. So that’s one example.
34:07
Now, there’s also a lot of investment firms that are rethinking ESG. And there’s been significant increase in fund closures. And a lot of companies dropping ESG from their fund names and they’re repositioning them. And there’s actually been a number of big firms that have been closing though their ESG funds, BlackRock, State Street, Columbia and Threadneedle. So that’s a big deal. And in the upper right hand corner, you can see that graphic there, which shows the annual ESG fund flows in the billions. Dark blue is the US which has been the smaller one Europe has been pretty cool hog, and then the rest of the world. And you can see that basically the the annual investment in those ESG funds has actually actually peaked about two years ago and it continues to be dropping
34:59
And we’re actually seeing that electric vehicle demand, in particular, is not. It’s actually on the decline. It’s still robust, but it’s on the decline, as some of the limitations that are, that are becoming more obvious with, some of those technologies start to show themselves, particularly in cold places, and those who would like to do things with their electric vehicle like Hall things.
35:27
So let’s shift over to inflation and interest rates, because obviously, inflation is a very big deal. Inflation measured by the rate of the consumer price index, the rate is slowing. That doesn’t mean that prices are going down. That’s disinflation, that means that inflation is going up slower than it was before. But it doesn’t mean prices are deflating yet, unfortunately. So most people are being put in the position where they have to focus back on a session essentials like, like mortgages, paying for food, energy, you know, getting to work and heating their home, etc. There’s also another factor that’s combined with the supply chain disruptions over the last number of years. And that’s looking at the carrying costs. So it used to be that thanks to the the Walmart system of which basically perfected just in time inventory, and with very, very low interest rates, the cost to carry the inventory necessary to maintain a set of walls, well stocked shelves in your stores. And, you know, for customers to not be disappointed because the shelves were empty.
36:40
The cost of doing that has gone up a lot. So we’ve gone from just in time inventory to just in case inventory, plus the cost is doubled, tripled or quadrupled, to carry that, and that flows through in terms of prices. So at both a consumer level, and at a corporate level, we’re seeing lower discretionary spending versus the essentials. And that’s just a reality of inflation.
37:08
Now, we’ll talk a little bit also about the rate path. And by the rate path, we mean, the central bank’s rates in which way they’re going. This has been debated. Ad nauseam continues to be debated as ad nauseam in the in the financial press. What we see happening is that rates are likely to stay higher for longer with some possible minor cuts. But Marty’s latest private blog email, said that there would continue to be a slow rise through November particularly on the 30 year bond. So interest rate rises, bond price drops. But But But of course, year end closing is the most important in his world with his Reversal System. And some of the levels to watch that, that Marty talked about on Money Talks recently. In fact, it was actually on the September 29 Show is the bullish reversal for 10. Year Treasury yields is 5.5%. And if we finish the year, at 5.5% or higher, that leaves room for it to run as high as about 8%. Long term. I know that’s shocking, especially if you know how the math works on long bonds. That is a a tragic situation if you’re holding long bonds. And the bearish reversal is 4.75%. So if we close the year at 4.75%, or lower, then that leaves room for rates to drop a little bit more. And when I was looking at this a little bit earlier today, I didn’t see the closing yield, but the 10 year, Treasury was yielding about 4.78 When I looked at it now the reality is that prices continue to go up a little bit more slowly. Thankfully, in Canada, we don’t have it quite as bad as some other countries. Another reason why we’re really blessed to live here in Canada. So our inflation rate last year at this time was about 7%. You know, the US was a little bit higher, France, slightly lower higher in Germany, the UK, and of course, Argentina and Venezuela. We wanted to show some of those kind of second world countries, second to third world countries. To show you how bad it was over there on some of those places, but even in other developed countries, every other country besides Venezuela and Argentina as a g7 member, that’s five of the seven right? And so it’s not good yet. Our current official inflation rate is 4%. But if we go back to just to the core CPI which which is our core CPI doesn’t actually technically include energy and food anymore, which Quite surprising, considering most of us like to heat our home and eat. But anyways, the official rate is a little bit a little bit lower now.
40:12
So that begs another question because interest rates and inflation are obviously connected, but they’re not the only the only thing involved. And we asked the question a little bit earlier, are central bankers really in control? The reality is that politicians when they get involved, that’s when things get messed up by central bankers, or when central bankers get messed up when we have interference and I don’t care what side of the aisle you’re on, central bankers need to be left alone to actually do their job properly. The trouble is that central bankers, the perception of them is that they’re, they’re omnipotent. You see the graph of the picture on the right hand side, the classic photo of the little man behind the curtain from The Wizard of Oz, and central bank. In fact, the Wizard of Oz was largely about the the creation of the Federal Reserve and how the central bankers were somehow the Almighty, or the all powerful person was pulling levers and could control everything. The truth is that central bankers and I’ll use the example here of the US Federal Reserve, is they can really just control the Fed funds rate. So the overnight rate that is charged to institutions for borrowing or the rate that’s actually paid to them, if they’re putting funds on deposit overnight at the Fed. Their biggest influence besides that is really jawboning. It’s the perceived influence that they have over the economy that actually creates their authority.
41:52
So it’s really kind of a confidence game. And the truth is that central bankers really are just cleanup artists for reckless politicians. So who’s really in control, then if it’s not the central bankers? Well, we actually think it’s the bond market. And that’s because the bond market prices and the perceived risks and opportunities over various timeframes in the fixed income market, largely based on government policies, and so the politicians that are overspending are really the problem to be solved. You know, central bankers have to have to help with monetizing debt that that overspending politicians throw their way. And then there’s foreign policies. Now, what is that related to? Well, as Marty likes to say, the single biggest cause of inflation is actually war. And that is related directly back to foreign policy. So you can see how, what I was talking about a little bit earlier with the emergence of the BRICS, and tensions between NATO, which is really just the US, and then Russia, and China, how that can actually affect inflation. So we have this overall rise in government debt that we have documented ad nauseam. And it’s because it’s such an incredibly important issue. But we also have rising servicing costs. So in the US by 2030, if not sooner, 30% of the current US federal budget, will actually be just interest servicing costs. Think about that. 30%. So if you think of that as a household, if you’re just running your household, not on a mortgage, but on a line of credit, if you still have debt outstanding against your principal residence, 30, if 30% of your overall family budget is just going to the interest. How disastrous is that? Because you’re not paying down the principal. And that leaves very little for a lot of other essential things. So the result of all of this, of course, is a declining confidence in government, as they quite aptly deserve. And that’s actually connected to a couple of the the recommendations that we’ll be making here.
44:13
We also want to talk a little bit about changing correlations. So there’s some perceptions out there, that there are correlations, negative correlations, usually, that that always hold true like the US dollar is up and gold is down. Well, that’s not always true. It’s currently true because the US dollar has been strong and gold as as has been weakened, but it’s not true longer term. And another example is the US dollar up, oil goes down or oil down US dollar up, while the recent over the last three months we’ve seen the US dollar go on go on a tear, and so has the price of West Texas and even Brent crude. Another one is that you know stocks go down and bonds are up and bonds go up and stocks go down while 2022 disabused anyone of of that notion because things can go down at the same time doesn’t happen often. But it can happen.
45:13
Now, it’s also important to remember that none of these relationships, and I’ll get to the last one in a moment, none of these relationships are correlations. They’re not permanent. They’re not symmetrical. And that doesn’t mean that they’re gone forever, it just means that they’re not always going to be true. And sometimes there’ll be more true or less true than each other. So we can’t rely on them as a simple if A then B, or if c, then d. And the last one on there is really important. And that is something that we hear in the financial media all the time. Excuse me, that is just patently false. And that interest rates mean that stocks will go down long term. That’s just not true. In the short term, it is very definitely true, because dividend yields have to basically as interest rates go up on bonds, investors start to look at okay, well, where do I want to have my money?
46:14
Well, so what ends up happening is that stocks actually, the dividend yields on stocks have to compete with rising interest rates on bonds in the short term that actually does result in stocks going down. But as we can see here, this graph from Ned Davis research shows a graph of how stocks perform after rate hikes begin. Now it’s different for different types of stocks. So if we have non dividend paying stocks, here, you can see that they they go up over time, over three years after they start, the Fed starts raising rates. But initially, everything goes down. But what wins out over the long term, are dividend payers. Even without changes, and dividend growers, and that’s the key here is dividend growers and initiators here, which is a great segue into the investment strategies that we wanted to talk about.
47:17
So we’re gonna talk about dividend growers, real stuff, corporate fixed income, and cash and upcoming trading opportunity that looks to be a rising and protection from government, again, a fairly consistent theme that we’ve had here over time. So we’re going to show you some evidence. We talked about the fact that over time, the great companies of the world raise their dividends faster than than inflation. And that results in there being the one of the best places to be in an inflationary environment. So that’s true, but it’s not just any dividend paying companies. So here we have a comparison of the Dow Jones, us select dividend index, and you can see certainly going back all the way to 2005. So we’ve got, you know, 18, almost 19 years of history here, certainly they do well, but the dividend aristocrats index is actually the dividend growers. So those companies that have a history of consistently raising their dividends, and again, faster than inflation, they outperform by a wide margin, you can see a very significant difference over this timeframe. And again, we’ve often said that, you know, dividend paying stocks and dividend grower stocks have the highest quartile of long term performance, and they have the lowest quartile of long term volatility. And again, this piece from Ned Davis research shows very, very clearly, that’s the case over long periods of time. So you’ve got all dividend paying stocks here, very low volatility, relatively speaking. And yet, the lowest volatility and the highest long term return is again, dividend growers and initiators. And so, going back to what I said at the opening, a lot of people like to talk about that, oh, well, don’t do anything, just the buy and hold strategy, but they never say why. Well, we don’t actually believe in buying hold, we believe in active management, and that includes a rotation to the strongest dividend growers. But we just wanted to show you the evidence behind what we’re saying. We don’t just say, Yeah, you should, you should do nothing. Because, in fact, there’s a lot going on in the portfolio. And again, there’s the outperformance that happens from dividend growers in both a falling rate environment. So you can see that in a falling rate environment. Yeah, dividend paying stocks do well, but dividend grower stocks do even better. And in a rising rate environment, the dividend growers still outpace the some kind of a flat dividend payers even if it’s a high flat dividend, and overall significant rates of return differential overall.
50:11
Again, a 12% versus a 9%. So a very, very significant difference. And again, in the short term, yes, stocks go down when interest rates go up. But as we showed you a moment ago, that doesn’t hold true over the long term. That’s just not true. Unfortunately, it’s one of those things that people in the financial media continue to repeat. And so people actually think that it’s true. And what this really does come back to is the fact that the biggest problem with dividend paying stocks from the investor perspective is that they grow impatient. So this, again, comes back to an investor behavior issue, not a sound investment strategy issue. I’ve also mentioned at the opening, and we’ve said this before, that in an environment such that we’re in right now, there’s a great analog back to that. And that is during the 1970s, where we had rising interest rates, we had significant commodity inflation. Some of you might remember that some of you may have had a mortgage at the tail end of that. But some of the younger folks, your parents were probably in that situation, that’s certainly the case for me, because that was born in 67. Over time, in a stagflationary environment, dividend growers are still a great investment.
51:38
Now, we showed this before, but it bears repetition. So we use the calculator. I think this is I think this was our last webinar, but it might have been one previous to that. But we pick the single best January 1, to start investing in the s&p 500. And then the best December 31. So here, it’s December 1, sorry, January 1 1975. And selling at the end of 1986. And including dividend reinvestment, the outpacing of inflation, not just the return the outpacing of inflation during that period was 9.85%. And that was the best situation. However, it’s rare that we would pick the very best time to to get in and the very best time to get out. If we happened with the benefit of hindsight, picked the worst time to get in, which was December or January 1 of 1973. And December 31 of 1987. After the crash in October, we still would have seen a 58 and a half percent a 50.54%. gross return over that period. On an inflation adjusted basis, sorry, the gross return was 305%, as you see in the middle, on the right here where my cursor is, but it still outpaced inflation by 3.12%. So if it’s 9% in the best situation 3% In the worst situation, split the difference at six or even call it 5% outpacing inflation, that is what happens, because over the long term, the great companies of the world raise their dividends faster than inflation.
53:25
So we take that dividend grower framework, and there are some sectors of particular interest. And I just I got a kick out of this, this picture that I saw this afternoon that Sandor found, I didn’t actually know that turtles or tortoises actually carried they’re not just the house on their back, but they carried their young with their house on their back. It’s pretty cool. Anyways, so we have some particular sectors of interest from our portfolio managers in Canada, the energy majors for sure, perhaps a little bit of a pause in the offing right now. But certainly, we’ve got probably some runway to the upside on the oil side continuing. There’s some very interesting opportunities in financials and utilities and even in telecoms. And in the US, the financials, industrials, and healthcare are looking a whole lot more interesting. And there’s some good solid yields in them, but not just good yields in the five to 7% range, but with companies that have a history of raising those dividends, and that’s the important element.
54:29
Second component of our investment strategies that we see as being a great opportunity, even today is the real stuff, commodities, things that we need. So on the energy side, oil, gas, uranium, base metals, this again, whether you’re making weapons for war, or you’re building out infrastructure, you need some of these basics you might even put in some other basics like like concrete like cement. So limestone but there’s also the exotic metals like the lithium and the cobalt and the rare earths. Again, the build out of a lot of these kind of renewable based energy sources, it’s slowing, but it’s not going away. And there’s still a solid, there’s still a lot of demand for those things. And then, of course, on the food side of things, select opportunities got to pick your timing correctly. And I know less about the individual food, commodities, and probably any other thing on here on this slide. So I’m not going to speak directly to which ones, I think are probably the best opportunities. But we saw this back. And this goes back to something I mentioned on the most recent interview I did with with Mike on the Money Talks podcast is that leading directly from the February 2021, world outlook financial conference where Mike and Victor and a lot of their their regular analysts and special mainstage speakers, said,
56:03
Yes, we’re in the beginning of a commodity supercycle six weeks later, we had our first trade on. And so we saw this early, we jumped on it, the year to date results, pretty good, especially compared to what’s going on in the broader investment markets at about 11.7%. The one year result as of September 30. Of so just this past weekend, 21%. Since inception, 17.1% compound. Now, we sat at the World Outlook conference that I spoke at this past February, that we thought that the the easy low volatility money was, had already been made in these areas. And certainly that’s been true. But they continue to outpace a lot of the other investment markets, especially if you look at everything outside of the Magnificent Seven. So that’s a sleeve of the of the investments that that we have for, for our clients, within one of our portfolio managers, but all of our portfolio managers are actually investing in these things on a selective basis.
56:03
So we think that’s going to continue on the corporate fixed income side of things. Of course, we have, as I said a little bit earlier, we have the path of monetary policy rates, that’s continue continuing on a slow upward trajectory, which means downward pressure pressure on bond prices. But sometime perhaps in the first or second quarter, when rates start to flatten out, there could be a trading opportunity that emerges there, our fixed income managers are looking very closely at that. And in the meantime, sitting in corporate short term corporate bonds, typically in the kind of two to five year duration, with nice yields, yield to maturity in the five and a half to six and a half, sometimes up to the 7% neighborhood, depending on credit, quality, and, and obviously, duration. So that’s a great opportunity. And the important thing here, though, is that just like stocks, corporate, fixed income, fixed income generally needs to be actively managed. And so we like using corporate fixed income, because it basically retains the flexibility that we’re looking for, on the fixed income side of things. And we’d like to look at that over time as a substitute or instead of GICs, which I’ll show you here more in a moment.
58:39
So you can see the graph here on the right shows the footsie Canadian universe Bond Index, which is a mix of corporate and and government bonds, going all the way back to 1986. And you can see that, that bonds, even that blend of corporate and government bonds have outpaced inflation. And the average one year GIC by a very handy amount. Now, that’s over the long term, but it doesn’t happen every year. So bonds beat GICs most of the time, but not all of the time. So we’ve talked about a little bit about this before so we can see some previous periods where in the green, where the the bond index actually underperformed the one year GIC. We saw it again here in kind of the 99 time region in 2013, as well, and here we are in 2021. And in 2022 bonds actually underperformed and, of course, GICs until very recently, were very flat, but there’s the significant underperformance that we see there. But you can see how short those periods are in the scope of the last 40 plus 40 years. Right very, very short periods and And those periods tend not to extend very long. And of course, one of the most basic rules in philosophy is that if we think of something as an exception, and it’s obviously an exception to the rule that actually proves the rule. So this is why we prefer short term corporate bonds and money market, because we can get, you know, five and a half, six and a half, maybe up to 7%. But we retain the nimbleness. So we don’t get ourselves locked down. And we’re not in a position where we can’t take advantage of opportunities. And of course, our portfolio managers are always making adjustments within the Investment Policy Statement guidelines, so that they’re maximizing the return in the given situation.
1:00:45
And the last category here is protection from government. Also just love this, this photo that, that, that Sandor found, and in many ways, it’s kind of how we look at what we do doing our best to protect families, portfolios from from government, I guess you can think about that photo and a lot of different ways. But that’s how I kind of see it. So the biggest thing is to avoid government bonds, certainly anything beyond a year, treasury bills, probably pretty safe just because of the short term to maturity and not as much variability. Frankly, why not have a high quality corporate bond, that’s probably going to pay a little bit more, and there’s actual physical security behind it. The other element here is in the precious metals sector, and the precious metals. Producers are an important part of our core and explore strategy, we just bought gold producers in the first week. And then the second tranche, in the third week of August, we were up four or 5%, I think we’re down four or 5% were six or 7%. Above our stop out level. Something similar happened last year where we bought in August, and we almost got stopped out in September, October and November. And then things moved up quite nicely. And we sold in late January for about a 23 or 24% gain in that element in that part of the portfolio. Now something that Marty’s talked about, is the fact that in the last two and a half years or so, gold has has gone up on an intraday basis above $2,000.03 times, but it’s failed, failed to exceed that $2,000. Ceiling. And as Marty made specific reference to, you know, it always breaks through on the fourth attempt. And when is that going to be? Marty hinted that perhaps it might be something that coincides the introduction of central bank digital currencies, where there’s a complete loss of faith in government, because they’re trying to control us with a central bank digital currency could also correlate with potentially an expansion of war. Probably Probably in Ukraine, if they drag it out that long, could also be in in the Pacific. Not really sure. But it could also be something that might be triggered by a recession. If oil makes another run above, above 100 bucks, something I didn’t mention earlier by that I should have in the cor and explore the commodity stuff, the real stuff section is that if oil closes above 9950 us at the end of this year, then there’s room for it to run 250 bucks. If that happens, then that probably would trigger a recession. And that might also be something that actually triggers a run above 2000 in in gold and you know, similar related levels in silver.
1:04:10
Another area where you can get some protection from the long reach of government is in real assets. That can include raw land, but of course, you need typically most people need their investment to produce some kind of a yield. So when it comes to real assets, we tend we tend to favor multifamily rental. We tend to avoid high cost regions say like Vancouver or the Greater Toronto Area, the East Coast and you know, areas like the Bay Area and Los Angeles that have ridiculously high, high costs. We also of course need to pay attention to human capital flows, so that we know where things are If you want to know where the best states are to live, people will tell you, because they’ll move from a state that they don’t like to a state that they do like. And of course, there’s been a huge shift of human capital, out of the high cost red states into a lot of lower costs, lower tax, or sorry, out of the blue states into the lower cost, lower taxation, red states, and we see that continuing, eventually we’ll run it up, we will run out of people that want to make that move. But the move is still on, we’re seeing a little bit of that here, as well in Canada, where we’ve had a tremendous inflow of people from, from the Lower Mainland, and the GTA, because we have lower costs here. And we have a robust economy that has lots of jobs for educated people. And frankly, for people who don’t have a lot of post secondary education, or even any, but are willing to work hard. That’s certainly what the oil patch offers as an opportunity. But overall, we want to invest in private enterprise, not self serving politicians. Because ultimately, private enterprise is where we have real innovation, accountability, and reward. And ultimately, it’s really just kind of one of the last areas where we actually have a meritocracy.
1:06:21
Now, all of these things that I’ve been talking about, we actually have in our forward thinking portfolios. So this is a structure, I talked about core and explore as kind of a commodities element. But really, it’s kind of a theme that runs throughout the way all of our portfolios are structured. So we have the stable income generation with private alternatives and corporate bonds, we have the income and growth stuff, which is we call stocks you can tolerate which is the dividend growers sector. And then ultimately, we have the opportunity seeking stuff, which is kind of a growth year strategy. And small caps and cyclicals now, that’s the structure that we use, and it works rather well. So, in summary, our outlook and current positioning overall on our client portfolios. Now, I should emphasize that our portfolios are in a constant state of review, and adjustments are made seamlessly across all accounts on an ongoing basis.
1:07:23
So when, you know, when we go through reviews, and clients say, so should I be doing anything and it’s like, unless something in your situation has changed, you don’t need to because we’re actually making changes on an ongoing basis within the ranges of the investment policy statement. So on the equity side, we have a cautious outlook, it’s not all doom and gloom, world isn’t ending. And if it is, you won’t care about your stocks anyway, you’ll be worried about firewood and drinking water. But the end of the world has been predicted an awful lot of times, and we’re still here, there, of course has to be a greater emphasis on sector and company selection. And overall, Canada is really well positioned. Largely because we’ve got real stuff.
1:08:08
On the fixed income side and money market or cash, the focus, again, is on risk and reward with an emphasis on credit quality. And again, there’s a possible short term trade, Oh, my bad trading opportunity, not a training opportunity. In q1 or q2 of of next year, I finally made Sandor laugh. And I don’t know if that was his miss or mind. But anyways, so there you go, we’re not perfect. And the broader positioning is that we’re at the lower end of equity allocations. And the emphasis is on short term corporate bonds and money market.
1:08:45
And with our private alternatives, we’re maintaining them and maintaining the allocations and monitoring closely. And the emphasis there is moving a little bit more from private credit more into the multifamily residential real estate where there’s a lot more demand. So that’s kind of a summary of how things are. And of course, all of this stuff has to come back to what does it mean to you. And if you’re one of our clients already, we’re already doing everything that we’ve talked about here. But if if you’re not, and you want some progress, you have to be willing to change. And of course, some things that prevent folks from wanting to change or cling to some of those outdated investment strategies like buy and hold or some of those correlations that asset class correlations that don’t hold anymore. Sticking with an advisor just because you like them not because it’s working, and perhaps not even having a comprehensive financial plan. So oh, that’s a picture from our, our new website, our homepage, not just a beautiful place. I’m guessing Sandor that that’s that’s got to be like Vancouver Island. It looks like to me Hey, I’d like to know where that photo comes from. I got that photo a few years ago, and I just fell in love with it and kept it. And yeah, that’s why it’s on the homepage of our website. So if you’re interested in finding out what, what it is we do and ultimately, we’d like to entertain a change, we make that easy. Of course, we’ll do a complimentary consult, discuss your situation, review your portfolio, and come up with some ideas to improve your financial secure your financial security. Sometimes that doesn’t mean actually making a switch. But if that’s in your best interest, we’ll show you why. And of course, as you’re leaving the webinar, tonight, there will be an exit interview, and you can answer the exit interview such that the exit surveys such that you would like us to contact you and Senator will be in touch with you soon. And of course, you can contact us through our website, and you can email Sandor directly. One of the things I forgot to mention as I blew through the the, the first couple of slides is I forgot to mention that we’ll do some q&a, which we’ll do here in a moment. When you visit our website, you can also you can also sign up for our video and webinar library, you can follow us on Facebook and LinkedIn as long as we’re allowed on there for saying things that are uncomfortable truths. And we will of course, send you a follow up email with a recording to this webinar, and even to a financial Readiness Assessment, which is a great way for you to give yourself a report card and see how you’re doing how you feel about what what you’re currently doing in your investment portfolio. And you can decide from there if you’d like to contact us. So I’m going to take a breath for a moment as I gaze at the lovely home country that is up on the east bench overlooking beso Lake looking south, that is the Indian head. That’s Gallagher are started Gallagher Lake Bluff is right over here. And my lovely hometown of Oliver right in there. So I’m going to take a quick moment to get a glass of water and actually to breathe. And Sandra is going to bring in some of the questions that he has.
1:13:29
All right, welcome back. Let’s start with a couple of questions here first, where do your managers focus their equity investments? Is it on growth? Or is it on dividend stocks? In the vast majority of our of our client portfolios, it’s going to be anywhere between kind of 55 and 75, maybe even up to 100%. In dividend growth stocks. The growth element is a little bit bumpier, it’s a great offset to to dividend stocks, which are you know, they’re they’re the tortoise, the growth stocks are more like the hair. But of course the hair bounces around a lot and gets tired from time to time. It’s good to have a blend. If clients had 100% of one or the other. It is more likely to be 100% in the dividend grower stocks. But typically it’s again it’s like that 60 to 75% range would be in the dividend growers.
1:14:32
Second question here. Ah who is Marty? Oh, it’s Marty Martin Armstrong, frequent guest on Money Talks. Honestly, the most objective and historically accurate forecaster and it’s actually not him. It’s his computer named Socrates. Yeah. And Oh, interesting. Thank you for that question Bill will we’ll be in contact,
1:15:08
what’s the minimum dollar amount required to use your service? It does depend on your age, typically, it’s a half million. But there are exceptions for younger investors or people who are in a situation where they’re just about to inherit some funds or downsize a real estate property or, you know, that that sort of thing. But we’re more interested in helping people that are on the right path, more than having a hard and fast absolute minimum.
1:15:41
Next question here, says we’re moving into a likely recession or soft landing, what are some areas to avoid? And where do you see the best opportunities in the next six to 12 months. The areas that, that our managers are avoiding, are actually going to be on the discretion, kind of the mid range discretionary stocks, like the really high end, discretionary stocks, the luxury stocks, those are for the basically the permanently affluent market. And Rich people are pretty much always going to have funds available to be able to buy their discretionary goods. And so it’s kind of on the mid market stuff. Restaurants are one of the areas that are really getting hit longer term, because people are having trouble putting food in their own table, nevermind having a server put food on the table for them in a restaurant at three and a half to four times the price because restaurants have to pay people and actually make a profit, right. So I would avoid those.
1:16:41
And where do we see the best opportunities in the next six to 12 months? In the stocks? It’s it’s likely to be actually on the the energy and the commodity side of things. And I think also on the precious metal side of things. That’s why we just, that’s why we just bought bought into the the precious metals markets. Yeah, so and also, honestly, we think that there’s a risk reward basis, short term fixed income, is actually a pretty good, pretty good bet over the next little while here with a good yield, good stability of principle, because of the short duration, as well as the fact that there’s likely to be a trading opportunity. If we do actually move into a recession, and the Fed moves rates even marginally lower, we’re going to have a capital gain opportunity from rising bond prices.
1:17:38
What percentages of portfolios are typically in corporate bonds or fixed income? I’m not a lawyer. But the answer for that one is typical. A typical lawyer answer would be it depends. So the range is completely dependent on the client’s risk tolerance level, their life stage, their need for liquidity, you know, time until retirement, and it’s a combination of their financial ability to withstand risk, but also their psychological ability. So they’re, you know, kind of asleep test. But there’s also the pocket book tests so that it’s a pretty broad range, it could be as low as five to 10, or as high as 25. We’re now at the higher end of most ranges within the Investment Policy Statement for for most clients, just because on a risk reward basis, that makes the most sense. That’s the ongoing active management that that we talked about.
1:18:45
And should I be concerned about Central Bank digital currencies anytime soon? The answer is, I think we should all be concerned about them. I don’t know that there is an ability to actually stop them because it’s something that the powers that ought not to be want to actually foist upon us and implement on us. Martin Armstrong has talked about CBDCs being introduced as early as late first early second quarter next year. So, you know, that might also correspond with the peak in the US economy, which Socrates puts at, I think it’s May 7, or eighth of 2024. So I’m not I’m not really sure. I think the CBDCs are absolutely evil, because they will. They will give the central bankers a level of control and a level of disclosure on everything that you do. And I think that they are, they are absolutely anathema to a free and democratic society. But I don’t know that we’re gonna be able to stop them. But the more we talk about them the better opportunity, we might have to stop them.
1:20:21
Oh, for opportunities, you talked about it ESG sec, in the ESG section like new technologies, those seem to be more early stage or small cap stocks, do we invest in those? We don’t invest directly in those because frankly, there’s too much risk. It’s, it’s an area that that that we’ve looked at, but on a risk reward basis. There’s just too much downside potential. And we tend to, we tend to we work with clients serious money, not the fun money. And so our emphasis is all is always on. Our emphasis is always on downside risk management.
1:21:08
And now the question here, do you use option strategies, actually, our managers do use option strategies in their equity portfolios. They tend to use protective put options more frequently than writing covered calls. And that’s just because they’re more interested in, in reducing the downside, when things get pretty choppy, and the stock picking side is pretty, is something that they’re awfully good at. Sometimes they’ll write covered calls to increase the income off of stocks, if they’re happy to sell at the at the call price anyway. But it tends to pretends to be used most options are typically mostly a risk management strategy as opposed to an income enhancement strategy.
1:22:02
Ah, question here from Doug, who are your managers? We actually don’t disclose that until clients decide if they want to work with us, we’ll show you a lot of characteristics about them. That would be part of our secret sauce. And the other hedging strategies, Bill asked the question. So besides the options strategy, do we use other hedging strategies? Typically, in the equity portfolios, when risk gets high, there will be a rotation into lower beta stocks, as well as actually buying a typically US dollar. Cash to to hedge just because typically the US dollar goes up when stocks go down. So that’s it. That’s the kind of a normal course of action with with that, and says, Can you please post your three portfolio page? Again, I’m not sure. What is the three portfolio page if Bill if you can, if you can, let us know what you mean by the three portfolio page. Do you mean the Forward Thinking portfolios, I can certainly go back to that. So those are the three elements you can see on the screen. Those are the three elements of our portfolios. So stable income generation from private alternatives and corporate bonds. And right now, that includes also some short term money market stuff, income and growth and the opportunity seeking, is that what you were referring to? Least? I hope so.
1:23:46
And a question here from Tom, do you short sell? No, our portfolio managers don’t short sell? The reason they don’t? Is that technically when you have with Oh, thanks, Bill. So that was the right page robber he was looking for. So we don’t our managers don’t short sell because you technically have unlimited loss potential when you short sell, and that’s outside of the boundaries of prudent risk management for for most portfolio managers, unless they are explicitly a long short manager. And that’s that’s why our managers tend to use option strategies protective put options, and currency hedging to manage downside risk.
1:24:29
So on a comment here from from Ken Public Square is a platform for non well companies saying go woke and go broke is the aspect being reviewed. Yes, I think that’s that’s true. It’s interesting to see some of that stuff starting to emerge. And that’s great to see in terms of a a market responding to a desire to have to deal with people whose values are aligned with yours, and in fact, that is actually one of the things that actually draws a lot of clients to us, not only because we deliver a really high quality service and a comprehensive service, but we tend to see the world through a fairly similar lens, not always identical doesn’t need to be, but on the basic things, you know, when it comes to the sovereignty of the individual, our western Canadian way of life, and the basics of personal liberty, and hard work and meritocracy, those are very definitely important things to see. To see through the same lens. Alright, so it looks like that’s, that’s it for our questions. Thank you, everybody who has attended and stayed on with us very much appreciate it. And we look forward to interacting with you. You can contact us of course through the various methods that we showed a little bit earlier, and we look forward to connecting with you soon. Bye for now.
Transcribed by https://otter.ai
