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Five almost guarantees in the investing world other than boring GICs – Financial Post

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Peter Hodson: A tax-loss sell is a guaranteed win

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Guaranteed investment certificates (GICs) are amongst the only real guarantees in the investment world today. If you invest $100,000 or less, your money is fully guaranteed by the Canada Deposit Insurance Corp. — of course, you might lose purchasing power to inflation, but that’s a topic for another day.

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But don’t worry, we’re not going to talk about boring old GICs. Frankly, we would rather take a chance on the stock market than be bored to death with fixed-income investments. But that’s just us. Others clearly disagree since GICs are suddenly becoming very popular as rates rise and markets fall.

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Instead, we are going to talk about other guarantees, or pseudo-guarantees, in the investment world. They may not be guarantees in the defined sense of the word, but they nonetheless happen with enough regularity to be considered as such.

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A tax-loss sell is a guaranteed win (through tax savings): Suppose you have lost $10,000 on a stock this year and are in a 50-per-cent tax bracket. Sure, the loss hurts, but if you sell that stock before year-end, you can write off the loss this year against other gains. The loss can be carried back three years, or carried forward forever. Yes, you have lost $10,000, but you have picked up $2,500 in tax savings, as long as you have some prior — or future — gains.

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Most investors are extremely reluctant to sell stocks for a loss. After all, it’s a final admission of defeat. But we encourage it. The tax saving is a guaranteed win created from a bad situation. Depending on your situation, if you have losses in prior years, you could even get a tax refund from claiming a loss. This can certainly help the pain of the bear market.

Headlines will be very bad at the bottom: Many investors right now are waiting for the market to bottom out. There is lots of cash on the sidelines, investors hate everything and the doom and gloom, despite a few weeks of normalcy in the market, remains prevalent. Sorry, we can’t tell you when the bottom will be. As they say, no one rings a bell at the bottom. But we can guarantee you this: the news will be very bad when the market bottoms.

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Headlines will scream recession, war, lower earnings, inflation, interest rates or whatever. But all the news will be bad on the day the market stops falling. This I can guarantee you. I remember March 2009 well. After a devastating financial crisis, I couldn’t really find a decent piece of news anywhere. I couldn’t find a bullish investor at any conference I attended, or among anyone I spoke to. The world — at least for investors — truly looked to be ending. But then it didn’t.

Declining stocks will get downgrades and lowered targets: I don’t like picking on Bay Street and Wall Street analysts so much, but this is simply too easy: after a company has problems, or its stock declines, analysts will fall all over themselves trying to downgrade the stock — again, after the fact. We see this so much it is almost comical. A stock falls 45 per cent and then the analysts drop their target prices.

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Let’s look at poor Meta Platforms Inc. Less than a year ago, the average analyst target price was US$405 per share. Now, after a 71 per cent plunge in the stock, the average target price is US$146. After weak results last week, nearly every analyst lowered their targets — again. We get that companies sometimes surprise investors with bad results. But analysts moving their targets lower as stocks decline practically guarantees investors will miss the turn when it occurs. Like the bad news theme above, it usually spells opportunity when everyone hates a stock.

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A lower share price guarantees dilution: A declining stock price for some small companies can be a death spiral. Why? Because the amount of capital a company needs does not change depending on its stock price. Suppose a company needs $10 million to execute its business plan, and its stock is $10 per share. No problem, it needs to sell one million shares to meet its goals. But what happens, in a year like 2022, if its stock declines to $1 per share? It still needs $10 million, so now it needs to sell 10 million shares. More share dilution is guaranteed if the company really needs to raise money.

As a result, many small-cap stocks, once they start dropping, keep dropping. Investors get worried about more and more shares being issued, and some will sell as they anticipate a financing round. This is why looking at a company’s balance sheet and cash flow is so important for investors. Don’t get yourself into a situation where a company needs money at the wrong time, such as when its stock is way down.

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Small caps lead the market higher: We will end on a positive note. This is not quite as strong a guarantee as the four points above, but history is definitely on our side here. In the past 10 recessions, small-cap stocks have led the market out of its slump, outperforming all other categories in the first year following recessions. Ten for 10. We have no doubt this will occur again. That’s because small-cap stocks were hit very hard, very early, in the downturn. Many stocks are down 80 per cent in a year. Yet relative to large-cap stocks, small caps are both cheaper and growing faster.

Historically, small caps are always more expensive than large caps on a price-to-earnings basis, because of their faster growth. But small caps are now back to 2008 levels, at least in terms of relative cheapness to large caps. As scared investors flocked to the so-called safety of large caps, they have left the small companies behind. This can create big opportunities. One day in the future, investors might look back on the small-cap sector and say, “Wow, they were so cheap, why didn’t we buy them?”

Peter Hodson, CFA, is founder and head of Research at 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals. He is also portfolio manager for the i2i Long/Short U.S. Equity Fund. (5i Research staff do not own Canadian stocks. i2i Long/Short Fund may own non-Canadian stocks mentioned.)

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The new rules of investment – The Economist

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High inflation, amid warnings of a global recession, is forcing investors to tear up the rule book. Since the financial crisis, bonds have been seen as a safe bet—even if they did not promise much of a return. Equity markets, led by soaring tech stocks, were where fortunes were made. Both have plunged this year.

In a world where rising interest rates have left governments worrying about how to afford their debts, and companies will struggle to raise cash, investors need new strategies.

On this week’s podcast, hosts Alice Fulwood, Soumaya Keynes and Mike Bird ask what those new rules of investing look like. Wei Li, global chief investment strategist for the world’s biggest investor, BlackRock, argues this new macroeconomic era is here to stay. And Mohamed El-Erian, chief economic adviser to Allianz, says investors need to focus on picking winners within stocks and bonds. Runtime: 39 min

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Sign up for our new weekly newsletter dissecting the big themes in markets, business and the economy at www.economist.com/moneytalks

For full access to print, digital and audio editions, subscribe to The Economist at www.economist.com/podcastoffer

Listen on: Apple Podcasts | Spotify | Google | Stitcher | TuneIn

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Proposed sovereignty act could scare off investment: Calgary chamber – Calgary Sun

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‘We still don’t see how an act like this contributes to economic growth,’ said chamber President and CEO Deborah Yedlin

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The Alberta Sovereignty within a United Canada Act, tabled by Premier Danielle Smith on Tuesday, could drive investment out of the province, the Calgary Chamber of Commerce warns.

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Chamber president and CEO Deborah Yedlin said the bill, which would allow cabinet to issue directives to disregard federal initiatives, would not help businesses attract investment or employees should it pass the legislature.

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“We still don’t see how an act like this contributes to economic growth,” said Yedlin, adding that Alberta competes around the world for labour and capital, and that any hints of uncompetitiveness or uncertainty could cause the province to be seen as an unfavourable jurisdiction to invest in.

The act was the keystone policy of Smith’s leadership campaign this summer. If passed, Bill 1 would allow ministers to bring motions forward to the Alberta legislature to debate whether a federal initiative is unconstitutional or harmful to Alberta. If the initiative is deemed as such, the legislature could pass a resolution that would direct cabinet to take action, which could include issuing directives to public entities to not enforce the federal policy.

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Government documents argue the bill would not do anything to harm Alberta’s economy. The premier’s office did not return requests for comment Wednesday.

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Speaking Tuesday, Smith said the bill is intended to put Ottawa on notice about provincial jurisdiction and ensure they are equal partners within Canada’s Constitution.

Yedlin argued the act does not allow for constructive conversations with the federal government and that all levels of government need to collaborate to make Alberta an attractive place to invest and to work, stating the province has to compete with jurisdictions from all corners of the globe.

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“This could cause us problems within Canada with other provinces, as well as with Ottawa. That’s not what we need right now,” said Yedlin. “We have worked with Ottawa in the past, perhaps not to Premier Smith’s satisfaction, but I would argue that, you know, let’s dial back.”

Yedlin said Quebec lost investment when that province grappled with the idea of separation. She said that while Smith’s bill makes it clear it is not about separating, just the idea of uncertainty could cause investors to look elsewhere.

Calgary Chamber CEO Deborah Yedlin.
Calgary Chamber CEO Deborah Yedlin. Azin Ghaffari/Postmedia

Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, said they are taking time to review the bill with their members. She said they are concerned about any policy that has the potential to create uncertainty for investors.

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“It is important for governments at all levels to work together with the industry in order to attract investment back into Canada,” said Baiton.

Finance Minister Travis Toews was critical of the sovereignty act while he ran against Smith in the leadership contest. At the time, he argued the bill would bring “economic chaos” to Alberta.

On Wednesday, he acknowledged he had legitimate concerns during the summer but said he has since had full opportunity to participate in the development of the bill along with his caucus colleagues, and that it addresses his previous concerns.

For me to support this bill it has to be constitutional, support the rule of law and not create business uncertainty. This bill, as proposed, addresses these concerns,” Toews said in a statement.

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Alberta Finance Minister Travis Toews, file photo.
Alberta Finance Minister Travis Toews, file photo. Darren Makowichuk/Postmedia

Meanwhile, several groups that could fall under the “public entity” definition of the act and could be subject to ministerial directives said they need to read the bill further before providing comment.

University of Calgary representatives said the school was reviewing the bill and will seek clarity on its application if passed. Mount Royal University representatives said they, too, are reviewing the bill and will work with the province on how it applies to post-secondary institutions.

The Rural Municipalities of Alberta declined to provide comment. While speaking at an unrelated news conference, Leduc Mayor Bob Young said they hadn’t had a chance to look at the bill and how it would affect municipalities.

Alberta Municipalities said they are reviewing the bill and that it appears to allow the cabinet to direct municipalities to not enforce federal laws. They said they may have more to say once their analysts have fully reviewed the legislation.

dshort@postmedia.com

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Clinton Orr, Canaccord Genuity, earns Canada’s Top Wealth Advisor award

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Clinton Orr is a Senior Portfolio Manager and Senior Wealth Advisor, CFP, CIM, DMA, DMS, with Canaccord Genuity Wealth Management. Recently, he was recognized as one of Canada’s Top Wealth Advisors in the province. The recognition is based on an independent affirmation of his ongoing commitment to his clients and their financial success.

This prestigious award is given based on a number of factors, including client service and best practices, industry experience, and growth. This has established Orr and his firm as a leader in the wealth management industry.

Canada’s Top Wealth Advisors ranking is developed and distributed by SHOOK Research, and is based on in-person, virtual, and telephone due diligence meetings and ranking algorithms. This algorithm factors in client retention, industry experience, review of compliance records, and firm nominations.

Quantitative criteria include assets that are under management as well as revenue generated for their firms. Investment performance is not considered criteria, because client objectives and risk tolerances vary, and advisors often don’t have audited performance reports.

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Who is Clinton Orr?

Clinton Orr is a financial services professional who earned his start in the industry in 2003. He is a founding member of Becker Orr Wealth Management, a branch of Canaccord Wealth Management, and is a Senior Wealth Advisor and Senior Portfolio Manager with Canaccord Genuity.

Clinton Orr has been able to successfully establish relationships with his clients, who consist of business owners, retirees and professionals. His success in the wealth management space has been achieved through dedication, hard work, a love for the profession, and genuine compassion and caring for his clients.

Orr has been able to set himself apart by developing a strong team and utilizing a unique process called Financial Architecture, which allows him and his team to build customized financial plans that address all of their clients’ needs.

Orr earned a Bachelor’s of Commerce degree and has earned professional designations in financial planning, investment management, and derivatives markets. He has previously been recognized for his efforts in 2021, winning the Wealth Management Advisor of the Year for Canada, as a part of Finance Monthly’s Global Awards. He was also the central region winner of the Client Dedication Award presented by Canaccord Genuity.

Orr is a regular contributor to the Clipper Weekly, providing his professional insights in a regular column that is published monthly. He also makes regular appearances on Global News Winnipeg.

Orr lives with his wife, Jodi, in rural Manitoba where they operate their own charitable initiative, the Pet Life Animal Fund. Both are passionate dog lovers who enjoy giving back.

When Clinton Orr isn’t working, he trains in Jiu-Jitsu and currently holds a blue belt. He and his wife also enjoy spending plenty of time together watching the Winnipeg Jets and the Winnipeg Blue Bombers.

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