Our RBC Monthly Morning Coffee”

“Our RBC Monthly Morning Coffee”

‘It's not whether you get knocked down; it's whether you get up’. – Vince Lombardi

In my efforts to assist in maintaining your Netflix ‘war chest’ of selections for those cold & rainy days, I will preface this next idea with the fact that I am a huge fan of slapstick humour (hence, my affinity for movie productions such as ‘Caddy Shack’ and Slap Shot’!)…

Well, Ron Howard’s award-winning ‘Arrested Development’ has introduced a second series of new episodes to complete its fifth season … pretty funny stuff, and the writing is extremely creative.

For any sports fans, I would also suggest checking out ‘Sunderland ‘Til I Die’, a documentary about Sunderland F.C., an English football club that faces relegation during a turbulent 2017-2018 season.

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‘Let’s Play Ball….!’

So this is the first time in 8 years where I will not be a Toronto Blue Jays seasons ticket holder in order to avoid any more pain from this re-build phase the franchise is going through…

Hey, don’t get me wrong here - I will still support the squad, but I’d rather not use my own hard- earned funds to help them take one step backwards before taking two steps forwards. The team is stocked with some very attractive young talent, but with rivals & financial ‘behemoths’ like Boston and the New York Yankees in the same division, I will be pleasantly surprised if Toronto finishes above the .500 mark.

By the way, the Jays will be paying the following large sums to these players during the upcoming 2019 season; Russell Martin ($20M), Troy Tulowitzki ($22M) and Kendrys Morales ($9M). The problem however is that each player will be playing for another major league team… not the Jays!

(As a former finance student, I do not recall learning this model in business school…)

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Recession & the ‘Inverted’ Yield Curve – What’s the Deal?!!!

We have seen that rates have quietly come down since the levels seen back in October. Now the market is dealing with this thing called an inverted yield curve, which essentially means that short- term rates (2-year bonds) are yielding higher returns than longer-termed rates (10-year bonds). This has historically been an indicator that an economic recession may not be far away…. here is where the problem could lie…

Financial intermediaries like banks generally make part of their money (known as the ‘spread’) from borrowing short and lending long. This could be viewed as a bank offering a 3-year GIC @ 2.5% and a 30-year mortgage rate at 4.75%.

If this mathematical equation becomes impractical if/when short-term rates become higher than long-term rates, it tends to put strain on the availability of credit and over time, a strain on financial conditions. As most business owners know, available credit is imperative to the general efficiency of a company’s day-to-day operations.

Regardless, I am choosing not to alter my current investment mix, as I feel most of this recession talk is little more than ‘fear mongering’ amongst the media folks…

I see first-hand that the consumer is still spending in many areas - I look at the bills that I am paying to the following positions I own for clients; these include items such as my monthly Bell internet bill, my Enbridge gas bill, my Apple iCloud bill, my concession bill at my local Circle K store (c/o Couche Tarde), and my Rogers bill for my Sopranos fix c/o ‘HBO on Demand’. I also had a client tell me how much he paid for a 2-day family pass to Disney during his FLA trip the March break…. I almost choked, then bought more DIS shares.

These everyday expenses many consumers are faced with are not getting any smaller (as is evident on my personal balance sheet), and I see that corporate revenues are still growing, if not quite at

the rate some expected this time last year. Based on this, I still think a basket of sensibly-priced equity securities still looks like the more attractive asset to own for a longer-termed investor.

I am happy to chat further re: this so please feel free to give me a call.

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A Deeper Look at These Questrade Commercials…

‘Retire 30% Richer…’

No doubt you’ve been looking at some of these Questrade commercials and wondering if there is truth behind the firm’s claim that they can add another 30% to your returns through lower fees. Well, a colleague of mine who works directly with a Canadian mutual fund firm I deal with decided to do up a comparison to touch base on their numbers and claims. I thought the results were very interesting and should be shared…

For your background, Questrade is a discounted brokerage firm that puts together portfolios using ETFs (Exchange-traded funds). These portfolios are certainly low cost, as the approximate amount of fees charged works out to 0.42%.

Now being in the industry, I have come to understand that the basis of their advertising is a claim where clients may ‘retire 30% wealthier’ through the use of their models; this is based on the yearly savings between their cost of 0.42% and the average cost of a mutual fund of 2.17%, compounded over many years.

Please keep in mind that the giant assumption here is that the Questrade portfolio and the mutual fund comparison have exactly the same returns .

To run a comparison, my colleague put together a mutual fund portfolio with the EXACT same geographic weightings as the Questrade portfolio for an accurate comparison. Here are the performance figures from that head-to-head comparison:

2018 2017 2016 1 Year 3 Year Questrade Aggressive Growth -7.82 13.51 10.76 -3.67% 8.97% Mutual Fund Corp Comparable 5.24 19.19 12.03 8.05% 11.11%

This rudimentary chart (above) shows the actual difference in returns over the past 3 years: The mutual fund portfolio had a combined return 23.9% higher than the comparable Q-trade portfolio.

In addition, please keep in mind that these return figures don’t include the impact of your advisor (that would be me!), providing ongoing advice on tax advice, estate management, seasoned guidance through tough markets and everything else where we provide value.

The bottom line is this; I feel that contrary to what these Questrade commercials are telling us, personalized advice and active money management matters greatly to a retirement plan.

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‘Of Sound Mind & Body’

Men’s Health magazine is claiming that owners of households with a dog were 30% less likely to die within a 12-year period than their canine-free peers.

(That’s one for the dog owners… now if I could only get mine to stop chasing cars!)

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Finally…

I rarely read the Toronto Sun, but this article punched me in the face last week…

The name Grant Jameson meant nothing to me prior to this morning, but he was apparently a former lawyer that was appointed by former premier Kathleen Wynne in April, 2017. His position was a role called ‘Fairness Commissioner’…. please don’t ask me what that role entails, but I’m pretty sure part if it requires the monitoring of integrity throughout the various channels of provincial government.

Well, rather than move from his Ottawa home to where his six-figure salary job was located in Toronto, good old Grant would apparently fly down, stay at nice hotels and bill you & I, the taxpayer. The Canadian Taxpayers Federation have tabled expense reports showing that between April of 2017 and December of 2018, this fellow had the audacity to bill us $88,721 for his commuting expenses alone.

… I am pretty sure that if I tried those types of maneuvers here at RBC, my tail would be scraping the ground on the way out pretty quickly!

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For anyone tuning into the March Madness college hoops action, there have been some unbelievable finishes over the last two weeks.

Speaking personally, I was officially eliminated from contention in our ongoing office pool, as my brackets showed both Duke and North Carolina advancing to the final game. Both schools were eliminated this past week-end, and my entry has been decimated – this pool cannot finish soon enough!

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That’s it from me.

- Ian

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