As we near April, spring has sprung. The vernal or spring equinox signals the start of a new season. It is a time of renewal as earth springs to life with plants and animals waking from winter dormancy. Here in Vancouver, we note snow capped peaks and bursts of cherry blossoms overhanging oddly quiet sidewalks. “The Great Pause” has provided us with a rare glimpse at two phenomena. With more time to reflect than usual, we are noticing the beauty around us as we “stop to smell the roses”. Nature is creeping back into our cities to replace the typical bustling traffic. While unfortunately dolphins did not actually return to the canals of Venice (that viral post was from Sardinia), we have noticed more animals than usual (although this may just be a function of us actually taking the time to look). The planet seems to have taken a deep breath as an improvement in air and water quality is observed from Asia to Europe.
We continue to work diligently from home and recommend social distancing during any errands that bring you outside. This week requires especially heightened diligence as over 1 million Canadians and permanent residents were repatriated from overseas between March 14-20th. With containment measures increasingly being enforced, we look forward to seeing our local cases start to diminish in the coming weeks.
This is a long bulletin, but there is a lot of information that we wanted to bring your attention to. First, a few encouraging signs from the past few days:
- Italy is showing signs of containment as their case growth rate shrinks from it's March 21 high.
- A 103-year-old in China and a 95-year-old in Italy have both recovered from CoViD-19.
- Workers in Wuhan, the first city to be quarantined, are returning to work.
- Scientists around the world continue to make great strides in the development of effective treatments and vaccines.
ALERT: Scammers are also working-from-home!
Criminals tend to be most active in times of crisis and this outbreak has not been any different. We have seen a marked increase in the number of attempted scam and phishing emails and would recommend caution when clicking on any links from emails that are unexpected. Be very careful when providing any personal details over the internet and verify that the address bar is the exact address of the entity you are trying to visit. Many scams create fake websites that look nearly identical to the real sites. If you question the authenticity of any of your emails, verify the sender by a phone call, text or other form of communication from information that isn’t in that email. There is currently a text scam relating to the new CERB benefits. Be on the lookout for anything out of the ordinary!
Here is a recent CBC article outlining some of the current scams. <- it is OK to click on this one!
Stay safe out there! Many of us are surfing the internet more than usual. While avoiding viruses ourselves, it is important that we help our computers do the same.
Stress Tests: Literal and Otherwise
Stress tests have grown in importance over the last few weeks. We have been testing our model investment portfolio, analyzing how the post-pandemic paradigm will affect the businesses we own. We examine our companies in scenarios of reduced earnings and tightening credit markets: a corporate stress test so to speak. We have been busy reviewing the balance sheet and debt characteristics of our equity positions to hunt for value-at-risk of an earnings downturn over the next 3-6 months. Given the current information, we are confident in the financial positioning of our holdings. We compare the relative valuation of these equities against other companies we like to look for opportunities that may come to light in the coming weeks. If you have any questions on some of the factors we are testing and looking for, please give us a call.
This is not the only stress we are currently measuring for. Periods of self-isolation and social distancing can take their toll on our mental health, especially when combined with an atmosphere of fear and uncertainty. For many, these past few weeks have been the most stressful period in recent memory. If you or anyone you know would like help finding resources to assist with the stress, please see this Globe and Mail summary of available services in Canada. We will emerge from this stronger and more aware, both in our social and personal capacity for stress. While our healthcare system and even our internet servers have been put to the test, we are shaping up for excellent results on our report card at the end of this!
BC's resource page specifically for CoViD-19 related anxiety: http://heretohelp.bc.ca/infosheet/covid-19-and-anxiety
Website Updates: Tax-Loss Selling & Additional Resources
We have updated our website with several new resources:
- CoViD-19 Business Support Resource Centre
- Tax updates you should be aware of for the coming tax season
- Tax-loss selling in the current market environment
Talk of tax-loss selling is usually limited to December as we look back on the year and try to find ways of being efficient with the gains we’ve made. Excess capital losses from one taxation year can be applied against capital gains in the previous three years, or against capital gains in any future year. In partnership with your accountants, we would recommend that you think about your tax strategy and consider if tax-loss selling is beneficial for you. There are certain restrictions that may apply, and the strategy is not appropriate for all circumstances. For further details please review the tax-loss selling page on our website, an audio podcast is also available at the bottom of the page. If you have any questions, please let us know.
We will try to keep our website updated as new resources are announced, check back regularly at:
America Invests in Itself
All eyes are watching the US government, not because of a particularly strange tweet, but because they are about to spend $2 trillion USD, the largest stimulus bill in United States history. While it took longer than we expected to get the legislation done, we see this as a very positive first step towards an economic recovery. The impact of ‘shelter-in-place’ policy will be felt for many months to come and we expect additional support to follow as necessary. Being an election year, we anticipate that both parties will be eager to show their support for citizens, their businesses and the broader economy.
The bill, designed to offer relief to individuals, the health-care system and even an entire corporate sector that is taking a pause. Some highlights of the bill include:
- Give one-time direct payments of up to $1,200 for individuals and $500 added for every child for Americans with a previous annual income below $100,000.
- Boost unemployment insurance, adding $600 per week for up to four months on top of what beneficiaries normally receive from states. It expands eligibility to self-employed people and independent contractors.
- Create a $500 billion pool of taxpayer money to make loans, loan guarantees or investments to or in businesses, states and municipalities damaged by the crisis.
- Give $350 billion in loans for small businesses to cover salary, wages and benefits, worth 250% of an employer’s monthly payroll, with a maximum loan of $10 million.
There are too many aspects of the bill for us to fully list here, for more information on the US stimulus package you can visit this summary posted on CNBC.
Canada’s Stimulus Plan
The federal benefits for Canadians have also been increased to $107 billion as the support was expanded in scope and streamlined for efficiency. With applications opening in early April, the Canada Emergency Response Benefit (CERB) will offer support payments of $2,000 per month for four months to those who lose pay because of the pandemic. Many businesses will have access to salary support and credit facilities. Taxes have been pushed back until the end of august providing $5 billion in deferred funds that can be used to help bridge the gap. The provinces have pledged additional support and we anticipate there will be more announcements in the days to come.
For more information about CERB you can click on the government’s link below:
Our Thoughts on the Markets
To call it volatility seems almost like a euphemism. These last few weeks have seen some of the fastest market moves in history, in both directions. These moves are accelerated by a world that has near instantaneous access to information (both real and fake) and financial markets that are increasingly intertwined. The US dollar remains the king of cash which has highlighted several global liquidity issues over the past few weeks causing the federal reserve to step into its role as the de facto global central bank. The prevalence of passive ETFs seemed to exacerbate the down days with some of the most exaggerated and indiscriminate selling we’ve ever seen in our careers. The last few days have proven to be a bit more rational, but we are cautious of becoming overly optimistic at this time. There are many unknowns about the length of the economic pause the and effect it will have on corporate earnings. We continue to look for good value in companies that will survive and thrive in a post-pandemic world. There will be no shortage of opportunities after the global engine starts firing on at least a few cylinders once again.
As always, please contact us if you have any questions. Despite our social distancing, we are here for you and looking forward to sharing more positive news stories with you soon.
Nevin, Tom, Jack, Rob & Karen
Chernick & Associates Wealth Management Group
Richardson GMP Limited
1055 West Hastings Street, Suite 2200
Vancouver, BC V6E 2E9
Toll Free: 1.866.640.0400