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This Q&A session was recorded LIVE on Monday March 30th 2020 with Rob and Adam.

Adam Buss is our Wealth & Estate Planning Specialist here at the Tetrault Wealth Advisory Group from CG Wealth Management. He also happens to be a mortgage expert and naturally, he provided some guidance and helpful resources on mortgage options.

Here’s what Rob and Adam talked about:

  • Financial Planning – Will it change?
  • Do I need to make changes in this market environment?
  • Retirement planning – What do I need to know?
  • Mortgage Deferral Options – Does it impact my credit score?
  • Interest is accumulating – How does it actually work?
  • Interest rate changes – What you need to know
  • Good time to review your insurance coverage (given that group policies may not be in place)
  • Recapping a crazy week in the markets – How close are we to the bottom?
  • How are the March 2020 numbers looking to finish?

View Transcript

Rob:

Yes. All right. Okay. We got it. We got it. Technology. It’s such a wondrous, wonderful thing. Wonderful thing. Okay. Adam, tell us what you do here at category Genuity for our clients if you don’t mind again.

Adam:

Okay, so hopefully everybody can hear me this time. I’ve adjusted the microphone volume. I am the wealth and estate planning specialist on the category team. I work with clients to achieve their financial goals, including retirement planning, estate planning, tax strategies, insurance succession strategies for businesses. Pretty much anything that’s a financial goal for a client. We want to help you try to achieve that. I’m also is a mortgage specialist, so we’ll chat about that a little bit further today.

Rob:

All right, so last week, what do you think Adam? Pretty crazy week.

Adam:

Last week was a bit of a crazy week. I wouldn’t say just last week, but in general the last couple of weeks have been a bit crazy. I don’t know how you found that on your end there, Rob. I’m sure it’s been a little bit crazy.

Rob:

Yeah, I mean I found that crazy. I mean we were on Monday and Thursday. And though the one key thing that I, that I thought to make sure to mention today is yesterday was all in all a good week, right? Like it felt like it was so disastrous cause it started Monday we were down, you know, uh, I don’t know how many thousand points on Monday and then a bit of recovery on Tuesday, Wednesday, Thursday. But that’s an understatement. We gained 20, we gained 20% in those three days and those three trading days. And then now Friday was a bit of a down day. But today’s back kind of positive. So we’re getting, we’re getting no longer days of 10, you know, 10% swings one way or another. You know, some of the indices moved quite a bit. Some of the sectors move quite a bit to Adam and it’s not the ones that necessarily I would think.

 

Adam:

So, so what would you say outperformed last week and what underperformed in the most recent times?

Rob:

Well, last week. So typically what we have, what we happen in situations like this is you get a bit of run towards. So the ones that have been beat up the worst typically are the ones who recover the worst. So the strongest performers last a week, I’m talking about last week, utilities were up 18% industrials up 15 real estate, up 15 energy, 12 financials, 12 consumer discretion who 12 tech 11 and the worst performing sectors were communication, consumer, staples and healthcare. They were all up about 8%

Adam:

so Rob, you mentioned energy. Oil’s been all over the news lately about what’s been happening. You know, I keep seeing this WCS, this WTI crude and what the heck is the difference and what does it mean to the actual oil prices? I know I filled up at Costco and gas was super cheap, so I’m quite happy. But obviously there’s more to the story.

Rob:

Yeah. How cheap was gas? Who’s the, who’s got the cheapest gas tank in the last week here? Would it be like 60, 67, 69, what? What would be the cheapest gas? 59, nine 59, nine. That’s like back in the day when I started dating my now wife, girlfriend, I remember paying in the fifties, uh, what, give me a give me a cheapest. It did someone beat Adam’s price for 59, nine and it was regardless. Um, w so crude is the price of the commodity straight up the commodity. WTI is West Texas intermediate. That’s the price of crude out of Texas. WC S is Western Canada select. That is crude oil leaving Western Canada or Alberta if you will. So today I saw crude BOLO. Western Canada select WCS group below $3 for a portion of the day. So it’s trading around three, anywhere between three and four bucks. That is a full blown cataclysmic crash for oil prices in Canada. And it’s pretty significant. So Western WTI traded and I think crude growth both traded below 20 bucks today for a portion of the day. So this is a steep, steep fall. We were at 60, 70 bucks not that long ago. Big, big, big, big drop in oil and gas prices. Adam, it’s a, those stocks are getting beat up real bad.

Adam:

So I know it was a consumer, I’m not complaining because I pay less for fuel costs, but what does this really mean for the oil and gas sector? Especially because Canada is rather reliant on that.

Rob:

Yeah. So what we’re seeing in the stock market is one thing, but what’s going to happen with jobs and stuff is another, what we’re seeing in the stock market is these companies are trading at, you know, five, 10 cents on the dollar that they were, you know, four months ago or even like a year ago. So these stocks are really, really beat up. There is going to be a point, and I don’t know when that is, Adam, where these producers are going to turn off the taps and effectively stop producing oil. If it’s at this price, it’s going to happen. We talked about it on Thursday. The price of oil is a boat, a seven to $9 cost to ship a barrel out of Western Canada. So you’re getting three bucks for it and you’re shipping it out at seven bucks. Um, you know, the does does not add up.

Adam:

I was talking to one of my clients and friends yesterday, he’s out in that business in Saskatchewan and he was telling me a kind of, I love asking people on the ground, you know, he typically has, he was operating at about 40% capacity, so he picks up, oil and he brings it to the pipeline, is operating about 40% capacity right now. And I asked him, do you see a situation where they turn the taps off? And he said, maybe not short term. He doesn’t see it happening short term because they have obligations because it’s an extremely expensive process to do, to just straight up do that. But he does think that it will happen at some point if they stay at this, at these stay at this price. So yeah, it’s not pretty out there at him and that that’ll likely lead to, you know, job losses. I mean, if you start getting layoffs in Western Canada, and that’s when Trudeau was kind of announcements, um, you know, we’ll hopefully pick that up.

Rob:

Um, so yeah, go speaking about Trudeau’s announcements. You know, there’s a lot of, you know, fiscal policy, monetary policy, all these things being thrown out there, a lot of stimulus. I believe that that’s being thrown into the economy both on the U S and the Canadian side.

Adam:

right? Maybe what’s going on and what the impact might have.

Rob:

Okay. This is, this can be extremely complicated, Adam. Now you’re a smart, smart guy. But, um, I, I’m going to try to break this down as simply as I can. There’s kind of three things happening. First of all, really it’s to their stimulus, and I talked about this last week, but I just want to make sure we’re on the same page where this stimulus is effectively pumping money into the economy. There’s a bunch of different ways you can do that, but that’s a government decision. It’s done through either, you know, lowering taxes, paying out, checks to individuals, you know, maybe benefits for their children. Tax grants, tax saving, small business tax grants, anything like that, that is effectively leaving money in consumers pockets. That is fiscal stimulus whole bunch of different ways it can be done.

But typically those are the most common, monetary policy is what the bank of Canada does now or the fed in the U S and what they do is they manage the overall supply of money. They control the interest rates and they tried to, develop strategies which will keep money as much as possible in the, in the hands of consumers right now and spur the economy. So, how do they do that? They reduce interest rates. That was the first thing they did. In fact, they did that last week. And more importantly, what we’re going to see now in Canada for the first time ever quantitative easing. Have you heard of that all,

Adam:

you know, I read about it in past studies, but I haven’t paid too much attention to it otherwise.

Rob:

Yeah. Basically quantitative easing is extreme monetary policy where the government goes out and buys bonds or other guaranteed type investments from banks or lenders. Traditionally large Canadian banks, in this case, they’re going to be buying about $5 billion per week of bonds to kind of shore up the liquidity to shore up the market. So remember last week when I talked about what happens to an illiquid market. So if there’s not enough buyers, if there’s not enough buyers in the market, prices go down. Well, they’re going to prop up that artificially by buying some assets every single week to effectively throw money into the financial markets, into the bond market, if you will. And that’s a method that has never been done in Canada and it’s extremely interesting. Um,

Adam:

And you said five Billion. Now where is all this money coming from?

Rob:

They have, they have a bottomless pit at them. Don’t you know, I wish I had a bottomless pit cause I think I know what your question is. You’re saying if they’re going to print all this money, is this going to bite us at some point in the future? I think the answer is, so right now, this stimulus package is about round numbers, 6% of our GDP. remember I talked about this last week, I’m going to say it again. We can go, we can and have in the past gone up to about 30, even North of 30% of the GDP annually and kind of stimulus or printing money or QE in order to survive the economy that was done in the great world Wars. But in this case about 6% of the GDP is what they’ve kind of talked about. And, um, you’re right, we’re going to have to pay for that out, Society as a whole. We’re going to pay for that for the foreseeable future. And I, you know, I don’t want to get into a political debate here at all. I have no interest in doing that, but, you know, they, they saw it fit that it would make sense to keep money in consumer’s pockets spending so that, you know, the entire country doesn’t go bankrupt. You know, who knows if that’s a good move short term. I think it probably was, uh, but you know, who knows what the future holds for that.

Hey Adam, I’m going to switch things up a bit. I’m going to ask you some questions, make sure to ask your questions. Hey, I’m looking here on Facebook. We had a question come in, from email. It’s asked me about, um, financial planning and should I be panicking in a time here? Should I be making any changes to my financial plan when the markets are crashing like this?

Adam:

I generally would say it’s not a time to make drastic changes. It’s certainly a time to look at it and see, you know, are your plans still on track? Has anything changed in your goals, your objectives? Is there anything change on your timeline? is your retirement still on track? It’s always a good thing to kind of revisit those items and see when we do financial planning, we being me for the most part would be we use conservative assumptions, so we don’t want to try to over promise rates of return or rates. We use a long life expectancy. We want to make sure that your money lasts for your lifetime. So certainly a good thing to revisit that, you know, give you the peace of mind knowing that your goals are on track. Right. Often a dip can happen potentially several times in your retirement. We want to make sure that it’s not going to have a major impact on your lifestyle.

Rob:

Okay. So that’s for planning and now it’s, by the way, people are chiming in all sorts of a 52 cents apparently, at Costco. I wouldn’t know. I, I, I’m say we as far as the way ever my Canada’s Costco. So if you have other prices, please let me know. Now, Adam, we talked a lot about asset allocation. So you talked about financial planning. What about retirement planning changes to asset allocation? Is that something that you as a planner would recommend to clients in this time? Or do you kind of think about maybe just prudence rebalancing?

Adam:

I’d say this certainly a good time to have prudent rebalancing. I mean, you know, take some lower risk investments potentially, you know, re diversify and kind of rebounds your asset allocation. Take advantage of some lower price equities. If that’s the case, I always like seeing income generation into the investment mix as well, you know, are your investment produce and income distributions on a monthly or quarterly basis that that can provide you a good cashflow as well. And if you don’t necessarily need that entire cash flow well that can be reinvested and constantly add into the auto as well.

Rob:

Okay. I’m going to question here online, on the YouTube. Is it now the time is now the time to be putting money into the stock market? It’s a question we get all the time on one of these Facebook’s. I’ll, Facebook live events and YouTube live events. I’m going to address it right now. I’m, and I’ll get back some questions for you because I do want to talk about, the changes that have been asked and implemented with respect to interest rates and interest payments and deferrals. So I want to get to that. But I do want to address this question with respect to putting money in the stock market. I’m gonna say the same thing I said last week. Our views changed a tiny bit because the markets have moved a little bit. Well we believe it’s prudent right now if you have cash on the sideline that can be invested for more than the short term.

We believe if you, you know, if that money is earmarked for the market, pick a number, whatever it is, 50 grand a hundred grand and put, put that in the market in a two tiered approach. I would advise a portion now and I would advise to keep a portion dry in case we do see some renew testing of the lows. We do believe based on technical analysis and based on some, macro analysis that there will be some new retesting of the lows. And just to define that, that means the lows that we had last week on the Dow, on the S and P on the TSX retesting. So the Dow hit 18,000 retesting a little was that, that doesn’t mean we’ll hit 18,000 again. But typically when there are these crashes that are in short order, I believe if you’re a client of mine today, you got a note from me comparing the 87 crash to the, 2020 crash and it’s remarkably eerie to look at that chart.

But anyways, there’s typically a relief rally. I believe we are in the relief rally right now and typically when further bad news comes, there’s more capitulation and typically we see a retesting of the low. So if you want to invest in the market, I absolutely, unequivocally think it’s a good idea.

If it makes sense for you in your, in your asset allocation, your risk tolerance, you should be buying quality with that. Don’t, I would advise not to speculate. There are some really good companies that are paying a high yield, extremely safe companies. You’re going to make your yield, plus you’re going to make capital appreciation. To answer your question, yes, sometimes they do call it the dead cat bounce. Although this is this, this is not a dead cat. Our stock market is not a dead cat.

Adam, I got a question here online with respect to, this is a question I’ve been getting a lot and I got a few people email me this. Tell me about the mortgage deferral options. By the way, everyone before we get too far, Adam is also a mortgage broker, certified mortgage broker with castle mortgage group and he helps our clients as well with all their lending needs, whether it’s mortgages or other lending needs. I guess I could say. And tell me about, tell me about what you’ve seen on the mortgage referral options in your space.

Adam:

Well, this is constantly evolving and most of the lenders are rapidly trying to put out a different solutions in place for their clients and make sure that they’re not facing, not necessarily financial burden. So, so most lenders out there are allowing no up to six months of mortgage payment deferral. So then in that time period they don’t have to worry about making those mortgage payments, especially if you’ve been affected by, you know, reduced employment or, or income as a result of covId 19.

However, you know, things that people don’t often and look after. Sometimes the question is, will this affect my credit rating? And long-term, the answer is it’s not supposed to affect your credit rating long term. However, this is an unprecedented situation.

We haven’t come across this necessarily before where banks are offering six months of payment deferrals on, on the mortgage. But then we want to ask what happens to all that interest? The bank isn’t trading off the interest calculator behind the scenes. You’re still getting charged your 2%, 3%, 4% interest rate on your mortgage throughout this. The bank is eventually going to have to be paid whether it gets tacked onto the mortgage, increase your amortization, you know, your next six months to a year of payments afterwards might be interest only. Just to kind of catch up from that interest as do I in the scenes.

Rob:

Okay. Now you talked about deferrals. Let’s talk about, let’s talk about that. Global asked me this. Global news asked me this, the actual deferrals to your, you’re for sure not going interest free, right?

Adam:

It’s not interest free. You’re still going to have to pay interest at some point is you’ll accumulate in behind the scenes. Most people, if you look at your mortgage payments today, Oh part half of it is interest and half of it is principal.

Rob:

So do you see them just kind of effectively shuffling the payments down the line or do they spread them out over the life of the mortgage?

Adam:

I’m thinking that at the next time that they have to renew the term, you know, whatever interest is still accrued behind the scenes might get added as a lump sum on refinance. It might just be all your next payments. Once you start making your payments again, are you going to be solid interest until all of that back interest is caught up on, which could mean another six months of mortgage payments might only be interest and not paying down the mortgage whatsoever. Again, this is new. A lot of lenders haven’t ruled out all the fine details quite yet. You’re just there trying to make sure that the clients are looked after. And most people, if you look at your mortgage payments today, well part of it is interesting.

Rob:

So let me ask you about real quick about interest rates because this week we finally saw, well I shouldn’t say finally on Friday, last week we saw, was that the third rate cap? Adam?

Adam:

That bank of Canada has dropped rates by half a percent. Three times in unexpected rate announcements. Not these set quarterly rate reviews.

Rob:

Yeah. So typically how they do this is they’ll have monthly meetings. They don’t meet in the summer. They’re like lawyers. No, I’m kidding. Kidding. But they’re like litigators, let’s say that. Although I was talking to a litigator today and he was telling me that, they’re, they’re gearing up for like litigation season to take them through the summer. Which is kind of kind of odd because, you know, I used to be a litigator. That’s what I used to do in my career. I used to practice law and I used to like, the neat thing about being a litigator is in the summer months, the courts are closed. So you didn’t have to worry about it. But anyways, who knows what will happen there. Typically the bank of Canada meets every month except in the summer and they announced the interest rates at predetermined dates, predetermined meetings. You just mentioned three times in the last month that they’ve announced 50 point cuts.

We are now at 25 basis points. One quarter of a percent. You guys may recall that on Thursday I had a question about interest rates and I said we’re likely to see negative rates in Canada. We’re going to see the story of three, four, 5% overnight rates in my mind. And, lo and behold, the next day they cut rates 50 basis points. Again, I’m not a clairvoyant by any stretch, but I just felt like that had to come. So what did they actually do? So they did three cuts, 50% that 50 beeps and now the overnight rate, is a quarter point quarter point. I want to ask you about the, the prime rates for the banks is a question that’s coming online here from Peter. He’s asking about how come the posted prime rate is still 3.95

Adam:

So every lender sets their own prime rate. They don’t necessarily have to follow what the bank of Canada is doing. Some lenders have dropped their prime to 2.45. Some have dropped it to 2.95. Every lender is a little bit different on that one. Some have dropped their prime rate but reduced the discounts they used to offer off prime. Some lenders used to offer a variable at prime minus 1%. Now it’s maybe just prime and there’s no minus attached to it. So a lot of the banks are reacting differently and I think they’re still trying to figure out where things are going to be going.  Especially when it comes to the fixed rate markets that, you know, a lot of them dropped initially when the rates changed and then subsequently has actually increased their higher than what it was before. All the rate changes. I think it’s maybe some added risk in the marketplace. Maybe they’re worried about bankruptcies or unemployment. So they have kind of adjusted their overall pricing for risk, but they are changing literally daily. So we’re constantly keeping up to date as to what’s changing on the rates and making sure that we get our clients the best overall mortgage off.

Rob:

Yeah. I think a wise person once said, here’s a situation where you want to own the banks, right? Because interest rates have moved, and their spread has not moved. So typically banks make a profit on the spread. So the money that is being placed in the bank and term deposits, the spread of that versus money that they’re lending out. There’s a comment here, a couple, couple of our commenters, Maryland and Peter are saying the big six are taking their costs went down and they’re taking the difference and they’re screwing us is what he’s saying. you know, I, I certainly, I’m not going to comment on that, but on its face, it appears at 150 basis point moving in one way and the rates not moving. You would almost have to believe that that is due to their perception of a higher default rate. I would imagine that,

 

Adam:

yeah, I assume they lowered their, their savings rates on all the products, but they haven’t necessarily dropped over their mortgage rates. So yes, I’m assuming that’s mostly for default risk as to why they’ve adjusted it, but it is constantly changing. The last half or present drop is quite fresh. So a lot of lenders out there haven’t necessarily reacted to it quite yet. So we’re kind of waiting and seeing as to what’s going to happen.

Rob:

Okay. I want to ask you about, you and I, you know, we can sometimes and caps on and try to figure out what the next step might be for the bank of Canada. I mean, I know it’s been tough to predict. So they’re now at a quarter point. The effect of lower bound is now a quarter point but conceited that theoretically the overnight rate could be lowered to minus half a point. This was in a comment that was made on Friday, I believe. He also added that given the lack of success that negative rates have had, the bank of can is not contemplating negative rates yet. Although, you know, they’re, they’re out of options. They’re out of AML, right? They do not have any bullets left in that, in that, you know, stimulus gun if you will, to lower rates any further. But they do remain in the toolkit. So, you know, do you think, I mean this is purely speculative, but I mean for me, I think the next steps are likely to be more stimulus in the forms of cash back in the hands of consumers and less, less monetary policy adjustments through the interest rates. Would you agree with that?

Adam:

I personally can’t see that a further interest changes would have much effect on the overall economy. I mean, you see that most lenders don’t even adjust their rates when the bank of Canada has, has dropped them. So suddenly, so the bank of Canada changes rates further. Is it really going to have an impact as to what everybody’s actually doing in the marketplace? Again, I’m not an economist, but that would just be my opinion.

Rob:

No, but you know what, you’re on my show here at him today. I can say whatever I want them. Well now let’s, let’s remember compliance, Adam, let’s remember compliance. Anyways, I do think that,  they’re effectively, if the idea was to leave more dollars in consumer’s pockets by reducing the interest rates. I mean, I know there’s more than that. I know there’s the idea that companies and corporations and they have less expenses, but if that’s the idea and the banks didn’t move their rates, that’s a bit of a backfire, right? Cause then the consumers, the end consumer does not have more dollars in his pocket, which is why I think the next steps will likely be, you know, either more quantitative easing, so more purchasing of bonds, more purchasing of bank bonds. And they do this by a reverse auction.

And if you want me to get really complicated and lose all of you real quick, I can explain. I can explain a reverse auction, but I won’t, or they might just do, you know, just a reduced rates for increased liquidity in the overnight market. I don’t know, but I think that that is coming and I think that, we’re gonna find out a lot more in the near future. What do we know about that? They announced a, there’s still details to becoming yet to about Trudeau’s stimulus package, right? The, the 75% up to 55,000 or something. What’s the latest on that? Do we know what’s going on there at him?

Adam:

No, I haven’t heard the latest on that one. I was looking online this morning to see when the budget was going to come out and that’s been pushing back, I think till April, sometime when the cabinet can meet again. But yeah, there’s constantly new programs and new information getting rolled out, so it’s kinda, it’s good to keep up to date as all the changes and they are changing very frequent.

Rob:

And we’ll make sure to update you guys here. So stay tuned to, we’re gonna have to think of a name for the show. Adam, I dunno the investment guy talks. But by the way, do you guys have names? Interesting names, ideas for names for this show? Twice a week. Mondays and Thursdays, 3:00 PM after the market close. I’m going to do, I’m going to talk to you guys, I’m going to walk you guys through this crash over the next month, two months, three months, whatever it takes. If you guys have an idea for the name of the show, remember I like to be clever and I like to be funny, so I’m typically not funny, but at least I like to have funny ideas and I could steal funny ideas from other people. So if you have an idea for the name of the show, please make sure to share with us.

Adam:

There’s, there’s a, a, a question that came on here about a question that came on, about insurance coverage. Adam, you’re also insurance licensed. I’m insurance licensed. I’ve noticed a ton of people in the last week or two have been asking me about insurance coverage. I’m guessing that’s partly, you know, this covid is kind of reminding us all that, you know, we’re not going to be here forever. What about, first of all, your thoughts on that, Adam, second of all, your thoughts on, crew policies and people that are either laid off or not working. Maybe start with the first part. Tell me about the first part. Sorry.

Adam:

Certainly, I mean, when, when things like this happen in the world, or if there’s any, you know, health impacts within the family itself that often spurs the need for or reviewing their, somebody whose insurance, determine if they have enough covered and if they have the right type of coverage in place. Also people are maybe working from home or have some additional time off work and actually have time to look at these things that maybe have been on the back burner for a little while and maybe not the most exciting topic for most people, but it’s certainly important to look at. As for the, the group insurance side of things, if your employment is in question, if you’re, if you’ve lost your employment or had to cut back, you know, maybe you’ve lost some group benefits, maybe your only insurance coverage was the group insurance coverage that was provided from your employer. So if that employment is lost, now what happens to an insurance got covered. Certainly a believer of having the bulk of your insurance coverage, it was a policy that you own that you control. So if you change employer or if you change lending institution, you own the policy, it’s not gonna change on you. You have full control on it.

Rob:

Much like a, a policy on, on mortgage insurance, I would imagine.

Adam:

Exactly. I mean, if you want to change from one lender to another lender, you know, you have to reapply for that coverage. Or if you want to refinance and add more money to the mortgage, well now you’ve got to refinance you gotta you gotta change the insurance policy and requalify based on current health conditions. You know, you had a policy that you own directly. A, the coverage is not going to go down every single time you make a mortgage payment, the coverage is going to be level. It certainly, again, a lot better bang for your buck on the insurance side of things. We’ll ask you to own the policy, right?

Rob:

Yeah. There’s a lot of chatter here online about the, the banks taking the spread and I guess that spurred some commentary here on the YouTube page, but, the banks did lower their rates, like that’s happening. They lowered their rate and they’ve, they’ve not reduced the rate that we are borrowing at, so they’re spread effectively out larger. So, people are asking me to explain that it’s as simple as it could be. The spread, the spread has not been born by the banks at this board or in fact the spread has increased at this point is what we’re seeing. Who knows? That might change in the future, but for now that’s what we’re seeing likely due to increased, uh, likelihood of defaults.

Adam, I want to ask you about, some other, some other, anything other on the interest? Sorry. On the insurance side, that discussion that’s come up in the last, last month or so that didn’t use to come up now that people are thinking about this.

Adam:

Yeah. And that’s good. I see it as anything else exciting. I mean certainly a good time to look at, you know, whole life insurance policies and it was part of a diversification tool for maybe a non-registered investment portfolio is, is a, is a sleeve perhaps of your fixed income components. All kinds of neat and interesting things that we can do on the insurance front. You know, as exciting as insurance itself can get. You know, there’s certainly a lot that we can look at and stuff that we want to make sure that we, look at it on the planning side of things for clients.

Rob:

Okay. Adam, I’m going to just take you guys through a bit of last week and some year to date numbers as well here. So as a reminder, I’m Rob Tetrault, Robtetrault.com. I’m here live with Adam bus. We’re both at Canaccord Genuity wealth management. Adam is also a mortgage specialist, castle mortgage group. You know what they do on radio. I don’t know if you guys ever watch a radio. If they’re doing an interview, they always kind of come back and they remind the viewers, the listeners what the score is, who they’re talking to, who they’re on. That’s what I just did. I’m like, I’m trying to be a pro here. If you have, if you guys want to have any idea how much we’re down year to date, this is as, as Friday closes as a Friday closes. We were down a year to date on energy. We’re down 41%, a 31% in consumers, 36 in healthcare.

The ones that weren’t down as much year to date in Canada, it, utilities and materials. Those are the three sectors that are down about 10% or less. The ones that are the most beat up our healthcare energy, and consumer discretionary. So, now weekly, the ones that are down the most typically move the most as well. Right on the commodity front. Crude oil is obviously down the most. It’s down. You know, year to date it’s down 64%. Natural gas on 25 silver is down 18, copper’s down 22 lumbers down 26 lumber obviously is as a result of, you know, people maybe putting their expansion projects on hold, I would imagine. And then gold is up about 8% year to date. We had talked to Adam about, or I guess we hadn’t talked, but we have talked on this show about, you know, what sectors we think might bounce back, what sectors might have the best benefit on a go forward.

And I have, I’ve added some people to, to make, asked me to make predictions for one thing we’re not going to do is make predictions. And another thing we’re not going to do on this show is discuss, you know, what’s actually happening day to day, week to week with respect to infections or cures or anything. However, someone asked me, us, send me a note online about, these pharmaceutical companies that are hitting all-time highs or, or they’re rallying quite a bit. And most of these are on the heels of announcements that they are working on a virus. So there’s a question here asking about, you know, I’m not going to mention the specific stock, but some stocks that are working on vaccines or that I’m announced treatment for Covid and those guys are rallying, should I buy those docs? Is the question I would just caution you, if you are buying those stocks, uh, typically you’re doing the reverse.

Typically the market is wrong on these purchases. I hate to tell you guys this, typically the market is wrong. The stuff that is being sold is typically the stuff that you want to be buying. And the stuff that is being bought is typically where you want to go last. So if you’re, if you’re if you’re buying into stocks that are hitting all time highs right now, really have to ask yourself and with do you know more than the market and are we going to get to the point where these stocks are going to go back, they’re going to regress to the mean and they’re going to go back to the valuation that they had before Covid happened. And if that is the case, you’re going to have lost in two ways. One, you’re going to have bought a hot stock at a high that has fallen and two, you’re going to have missed out buying a stock like a financial company or I know anything that is 30%, 35% down that has rallied. So I’d be very cautious about that and make sure to talk to your advisor. To me, that is a risky trade. That is a risky trade to go and buy a high flyer, small cap, you know, pharmaceutical company that’s working on a virus or working on a vaccine or working on a cure for covid. I would much rather buy something that’s corrected. 30%, 40%. That’s quality that you think will pick back up.

 

Question here. Volatility. Um, what is this vix I hear about and how does that relate to what we might see in the market? Yes. So the VIX is the volatility index for short. The volatility index is how much the, in this case, the markets. So the, the American markets are moving on a day to day, week to week, month to month basis. And it’s measured live. So it uses derivatives. So how much change in the curve of the different stocks? So both positive and negative are changes to the slope of the curve. If you remember math, if you took some advanced math courses in university, you would have taken a look at derivatives and second derivatives. So change of change, if you will. And it measures that, um, it measures on a number. So the highest we’ve ever seen, we hit the highest Vix, I want to say ever last week or the week before.

It was close to 90, 90, 95, 85, somewhere around there. 90, I want to say on the VIX, even in a weight we didn’t hit 90. The difference between now in a weight is that we had a crazy immediate spike, which is a large change in minute to minute, hour to hour volatility, which is reflected in the VIX. So the VIX is basically volatility. How much are stocks moving on a day to day basis? I checked it earlier today, it was in the forties, which normally it would be really, really high. But right now relative to the numbers we saw, I remember Adam when every day you and I would sit down and we’d have a 10% one way or another thousand points this way, a thousand points the other way. Well, at least we’re, it feels like we’re somewhat out of that for now. We’ve had three or four consecutive days now where the markets are not moving a thousand points. So you know, that’s positive for the VIX. The VIX falls to 40. It measures volatility. Additionally, if you’re trading options, and I’m not thinking you are, but if you are trading options, uh, there’s the more volatile, the more where your options are going to cost you and the more you’re going to likely going to see on a spread on options. Now, I don’t think we’re talking about options today, but, you know, that’s, that’s something to be extremely careful about.

I’m just looking at some more comments here online asking about spread some ideas for our show, how not to crash with Rob, how not to crash with Rob and friends. I like that. Oh, not to crash. That’s not bad, Christine. Thanks for that. The Canadian pros show pros show it’s not bad. We could kind of make a, a word, a play on that. One investment guy talking to a camera. That’s not bad. Not a bad name. I don’t really like that one as much. Let’s go on to here. Another question here. Uh, there’s a question about spread and day trading. There’s a question here about day trading.  Peter, I respectfully disagree. I appreciate your comments, but I respectfully disagree. The only way to play those types of stocks or day trading. Ask me about day trading. Listen, if you’re at home and you’re doing this on your own and you’re trying to day trade good on you, it’s not for the weak of heart, it’s not for the faint of heart.

What happens with day trading is you’re going to make money most of the time in up markets because historically stocks go up. If you’re going to sell something, you’re going to buy something, you’re going to set another target, it’ll hit that target and you just keep doing that. What happens is in a mass panic sell off, like the one we saw, everyone loses all your positions end up losing. So as much as you think your technical skills are better than anyone else, I would advise against it. That’s my professional opinion. I respect that. Some people want to try it. You’re going to get cleaned up because right now it’s impossible to know if the stock’s going to be up or down in a minute or two or five.

Short term is the only thing we don’t know. Short term is the only thing that we don’t know what will happen medium term. I know roughly where these stocks are going to treat at and longterm. I know roughly where these stocks are going to trade at, but medium term we don’t know. Therefore you agreeing to trade on a day to day, week to day to day or minute to minute or hour to hour, is extremely imprudent I would say. And I would certainly advise against it. To answer your question.

 

Question about FOMO. Adam, please describe to our wonderful viewers what FOMO is. I heard my dad say it the other day for the first time.

 

Adam:

I knew what that was a fear of missing out. Right? You’re missing out that you’re going to miss that fantastic opportunity in the market. And again, that is a bit of timing. I would, I would think that that’s generally when people are buying in at the wrong time. They’re buying on the, on the, on the peak because they’re free to eat. Missing the upside of things.

Rob:

Yeah. And we talked about this last week, the FOMO factor, um, was the Tuesday, Wednesday, Thursday rally. So on Monday, I was on the show a week ago today and I said, there will be a time where people are gonna start buying and you’re going to see a move. 10% 12% in a day is not out of, you know, it’s not out of the ordinary in these crazy market crashes, positive movements. The best days in the history ever of the stock market have always happened during periods of intense downward pressure, intense stock market crashes, the breed positive gains. Because what happens is the FOMO factor happens on Tuesday up 12%. People see the evening news, they were out of the market. Maybe they sold everything and then on Wednesday they see, Oh, I want to be part of that. I want to invest. I don’t want to miss the party. So they start buying, they start buying and that starts you relief rally.

 

The FOMO factor is one that is incredibly important to consider if you’re trying to day trade, if you’re trying to be in and out of the market. So instead of being in and out of the market, to answer another question that we had earlier, instead of doing that, we would advise either prudent rebalancing where you are selling assets that have kept their value. You’re selling either a bond or you’re selling an alternative and you are replacing it with an asset that has fallen quite a bit. So you get to sell a dollar and you get to buy something that’s 70 cents. Now that is prudent rebalancing to me and that is much, much better than day trading or trying to time the market and then you don’t have to deal with the formal factor out of it. You could be full mold free,

 

Adam:

almost free. So that comes down to time in the market versus timing in the market, correct?

Rob:

Yeah, go bingo. Nice. That’s a, that’s a great, that’s a great segue Adam. I will say this, us here at the Tetrault group, we will not, all right. We will not park their money and let it sit and hope for the best. That is not what we do. All right. We are extremely, we’re here every day. We’re extreme. We have conversations every single day. I’m pounding my table right now. If Johnny were here, it’d be like do not pound the table Rob the camera shakes.  But I will figure it out. We pound the table and we are here. We are active, we’re on the phone every single day. We are rebalancing, we are making trades, we’re taking advantage of assets that have kept their value. We are not, the guys and gals are going to be sitting on the sideline talking to you in six months in a year and saying, huh, there you go.

It came back. No, we want to take advantage of these unprecedented generational opportunities to take advantage of prices have corrected a ton. That is why you guys are paying us, right? You have an advisor, you’re dealing with an advisor. We are going to take care of you during this time. We’re going to make trades. We’re looking at it everyday and we’re, we want to take advantage of that for you. I’d be an extreme hypocrite if I’ve been saying for the last year. So I’ve been saying for one year on BNN on my shows to anyone who would listen to me and my client meetings. You Adam, I’ve been saying it’s time to be defensive. The stock market is starting to get stretch. I’ve been saying that for over a year now. Well how much am I hypocrite? Would I be if we call that right? And then we didn’t act on it when the market corrected.

Right? So we are active managers. We are a portfolio management team here and that’s what we’re going to do. We are not going to leave you high and dry clients so you can rest assured that we’re working for you for that. And there will be no FOMO factor. You guys are going to be FOMO free if you deal with us. Um, got another comment here for our TV show. Uh, Rob’s market mastery. I like it. It’s, it’s alliterative, it’s alliterative. Let’s see if we have, another question here. Another.

Do you feel strongly that we will see another big leg down to form the w recovery? I’ve mentioned this before, I’m going to mention it again. We believe that we are in phase two of three. We believe we’re in the relief phase of the crash. The first phase is the panic sell or the market falls dramatically.

The second phase is the relief recovery where you start to see one big day or two big or three big days and then a sideways period for a while. And then you typically retest those lows with what we call either, you know, desperation or capitulation, or the bottom if you will, which we don’t believe we’ve gotten to yet. So to answer your question, if we have, if, if we have alternatives or something that we can sell and we believe makes sense, we might sell that and pick up something here on the bottom. And the other thing that has happened over the last month, my clients, you know, hats off to them. They’re incredibly smart and incredibly sophisticated. They’ve been calling me Rob, I got some savings. Rob, I got five 10 50 grand. Rob, I’ve got a hundred grand, put this to work, put this to work and what we’re doing with that money, we are legging it in.

So we’re legging it in. We tried to leg in about, you know, a third to a half depending in the last week, ish, week or two. We tried to leg in a portion. So a leg in means kind of feathering it into the markets or we’re buying as the market falls and we want to have some powder dry to be able to buy if and when we do see the capitulation, if we don’t see a capitulation, if we see a sideways period for an extended period of time, we will feather that last piece of cash into the market here as the market is moving. And again, that’s why you’re paying us to do our job. Right.

So hopefully that answers your question. Um, that was Bob, I think who asked that question? I was asking a lot of questions today. Bob’s in a good mood. Bob says that the VIX needs to be back to 12.

Before we’re back to a sort of normal, Adam, before we wrap up here just in about five minutes, I just want to, I just want to thank you for taking the time and I do want to mention, if there’s anything else that you would like to add with respect to planning. So some of the stuff you do, estate planning, insurance planning, you talked about that mortgage lending, you talked about that. And you do this for our clients guys. If you are a client, you don’t have to write a check or send a send a separate payment to Adam. It’s included as part of your services with the Tetrault wealth advisory group here at Canaccord Genuity wealth management. So Adam, you’re a, you’re a pleasure to work with. I’m so glad that you’re on our team. Our clients have benefit from having you immensely. Hats off to you. Thanks for joining us today from the, what does that spin out of the end? The provocative bridge?

 

Adam:

Yeah, that’s correct. From, from the comfort of my own home. Yes. Yeah, it’s a tricky technology, but thanks for having me wrong. It’s great to, you know, join the show that’s to be named, in the future. But, Rob Tetrault show live at the moment. So thanks for having me. I hope to come back at some point in the future again,

 

Rob:

And if you are a client and you’d like to review your plan or anything with Adam or with me, please reach out to us. We’re happy to, happy to walk you through it and out. You are likely not that impacted by this, by this covert crisis. Guys, thanks so much for tuning in. A reminder, my views here are not, I don’t know what you guys own. My views are not those of accord. They’re, those of me personally, do not take this as investment advice. I’m not giving you investment advice. I don’t know your personal situation. If you’re a client, come see us. We’re happy to chat about that. If you’re not a client and you want us to review, please go to www.speaktorob.com. Book a no obligation consultation. We’d love to hear from you. Subscribe to the YouTube channel. Please subscribe to the channel. We put out a ton of content and we’d love for you to be a subscriber, I guess. Thanks everyone for tuning in today and we will see you Thursday at 3:00 PM from the yet to be named show. Thanks guys.

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