Compound and Carry On - Raymond James
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Feb 2020
Compound and Carry On . . .
2019 concluded with a strength in the approved for share buybacks. Many
market that set investors and analysts companies have been buying their own
aflutter. shares in a strategy to deploy excess
capital that is supportive of shareholders
It appears the market has found its footing.
interest and helpful to the balance sheet.
After months of speculation and uncertainty
This has helped with the price to earnings
– a few key conclusions re: Brexit, interest
multiple for many companies, which in
rate accommodation, and a trade deal
turn supports higher market values. This
between US and China. Even if it is staged
continues to be positive for 2020 market
Bonnie Cyre progress, progress is progress. It’s as if the
valuations.
Financial Advisor markets have let out a collective sigh.
bonnie.cyre@raymondjames.ca 4) Borrowing costs will remain reasonable;
Tuning out opinions and speculation,
Tel: 1.250.752.8184 the expectation of rates remaining steady
some key fundamentals took firm hold
Fax: 1.250.752.8154 is actually bullish for business. CEOs
TF: 1.888.752.8184 in 2019 that differed from year-end 2018
and CFOs can quantify investment or
Cell: 1.604.250.5309 and were key to 2019 outperforming most
business strategy if rates remain steady.
expectations:
Uncertainty will freeze capital from being
1) Inflation continues to be moderate deployed for acquisitions or business
CONTENT: at best. Most OECD countries are development. For the first time in a
reporting benign inflation and there is number of years, the 2020 landscape has
1) General Comments some transparency to assume rates will
no expectation that inflation will rise any
2) 2020 Work Projects time soon to levels that would trigger a be steady for the next 6-12 months. Again,
a. Power of Attorney rethink of central bankers’ perspectives a sense of clarity.
b. Client drift report on rates for 2020. Canada was the only
5) Producer price index has been relatively
central bank that held rates steady in
3) Work Life Balance flat – another sign of price stability. The
2019; the majority have moved to a more
cost of supplies to fill the manufacturer
4) Client Event accommodative stance = business and
warehouses to make goods, etc., has
investment opportunity.
remained at the lower end; again not
2) Earnings for 2019 were positive for the inflationary, some certainty.
most part. 74% of companies reporting
As you are all aware, I turned my focus to
had earnings that met or slightly exceeded
investment outside of Canada in the 2015-
analyst expectations. Some companies
2016 review period. The Canadian market
did caution on revenue growth and had
has struggled on some levels and I expect it
a more muted 2020 expectation. Not a
will do better this year BUT we already own
surprise as the US tax cuts have filtered
a good weighting of investment in Canada
through the 2018-2019 earnings season so
so generally we are covered.
the one time lift in earnings due to less tax
is a done deal. I expect the US to have further economic
growth; hopefully Europe will get out of its
3) Share buybacks may have broken
malaise now that the UK has made a firm
records in 2019; $940 BILLION was
Compound and Carry On . . . Page 2
commitment with a firm date to withdraw from the EU. inflation. Ironically, all of the changes to the payrolls
I believe there is good value in good companies. Hence, of late for small business struggling with increases in
I continue to add to global holdings. Generally positive minimum wage, etc., recent strikes – interestingly it has
long term. not equated to wage inflation, YET. This indicator will get
the IRE of central bankers; I will be watching for this key
What is worth keeping an eye on – DEBT growth. The 2019
point through 2020-2021.
year saw unprecedented growth in term debt for all levels
of governments as well as many companies. Obviously So how and what does all this mean for portfolios:
at these lower levels of interest, it would make sense to I will be recommending weeding out non-performing
borrow as opposed to issuing more shares that lock a investments, especially after this very robust year. If an
company into paying dividend indefinitely. In a perfect investment did not participate in the market performance
world if only comparing numbers was the only concern of 2019 – why not, what held it back because there was
and challenge. something holding it back?
It is key to ensure a company, i.e. public company, is Continuing to be disciplined in rebalancing and not
not building too much debt as the potential to have the allowing even the good performing investments to get
financial metrics change in the market and the general over weighted. An overweight of any one investment
appetite to become cautious is very real. Rates may do actually increases your risk profile and increases the
what they do but there is a cycle of business that has potential volatility in your portfolio, contributing to risk
either an appetite for risk or not. drift.
This will be a theme of my management going forward. I If a single investment has a weighting of 10% or above,
will be watching company balance sheets closely for this that means it can have bigger overall impact and swing
potential weakness. It may not be concerning for 2020 – the valuation of your portfolio, positively or negatively
debt tends to have years added to its life and a company impacting performance. Key to keep disciplined and
has to live with its decisions for years to come and if they review investments, ensuring your personal risk profile
get it wrong, their valuations are hit hard. The ratings isn’t being swayed because an investment has performed
companies have the ability to downgrade a company’s well.
debt rating which ultimately results in higher cost of
borrowing, so it can have a real snowball effect. I will be discussing with each client what is specific to you
and your portfolio balance.
The second theme I will be watching for is balance sheet
management. Given economies are not growing much if
at all, companies will be forced to grow by balance sheet Best regards,
management. We had the first signs of this happen in
November and December. Bank of Montreal announced
they will be reducing their work force by 5% but in the
same news release increased their dividend by 3 cents
Bonnie Cyre
or 6%. Just last week Loblaws announced closure of two
Financial Advisor
distribution centres, impacting 500 jobs. This type of
Independent Financial Service
balance sheet management has a trickle down effect, and
can ultimately have impact on economies.
Third is the key indicator of change: wage inflation. Wage
inflation is one of the key indicators for central banks
to change their stance on interest rates. To date, there
has not been significant wage pressure showing up in
Compound and Carry On . . . Page 3
ADMINISTRATION CORNER
RISK DRIFT - ON GOING
Risk drift is when a portfolio’s risk and weightings of investment drift away from the client’s original
investment objectives.
I regularly review the risk drift for each client. The past two years have provided good growth in the portfolios
which has resulted in a “drift of risk” upwards for some clients as the overall weighting of equities has grown
with market values.
In the coming months, we will be working to update each client that has a drift in their investment risk. This
will allow us to ensure all elements have been rebalanced to your longer-term investment objectives. In
some cases, this will mean an update to your account documentation which can typically be done by email.
2020 PROJECT – POWER OF ATTORNEY
This year I would like to raise your awareness about the importance of having a notarized copy of your power
of attorney (POA) on file with us at Raymond James.
It has come to my attention that any power of attorney not in your file may be at risk of requiring validation
or shall I say an updated confirmation that the POA is still in full force.
If you do not currently have a POA on file with Raymond James, the recommended course of action would be
to provide us with a notarized copy of your original document that has been signed by your attorney.
If your POA document is older than three years, we will also require a letter (which we can provide for you)
confirming that it is still in effect.
In order to have your POA in our files, we will also require additional information about your appointed
attorney – such as address, contact information and verified ID.
As I talk with clients this year, I will be asking if you have a current POA and will encourage you to put it on
file at Raymond James. This will allow myself and my team to support your family and loved ones when they
will need it the most!
Page 4
WORK LIFE BALANCE 2020
Work life balance is my personal theme for 2020! 2019 What I am very excited to share is the introduction
was a year of many changes. After Michelle’s departure to to Shirley Nellist and Gina Hayden. They are my
work closer to home, it freed me to think about balance administration support and will be happy to help you
in life. with all of your needs.
Malcolm, my son, is now working in his chosen field and Shirley and Gina collectively have experience in excess of
landed a full time position at the Capilano Hatchery with 40 years. To say I am excited to have their support is an
the Department of Fisheries; he was on his way to being a understatement! See all contact info below:
fully independent adult! What was next for me . . . ?
Qualicum Beach 1.250.752.8184
In recent years, I have found it both challenging and
Toll Free 1.888.752.8184
exhausting maintaining life and business in Vancouver.
The commuting challenge has definitely taken some of Bonnie’s Cell 604.250.5309
the joy out of living in our beautiful city. I suspect many
Shirley Nellist
have heard me discuss these challenges. Plus I noticed
in the past two to three years it has become clear that Shirley.Nellist@raymondjames.ca
clients prefer NOT to come downtown; even lunch at a
lovely downtown restaurant wasn’t enough to get you to
my office! Gina Hayden
Gina.Hayden2@raymondjames.ca
More and more, I was travelling to your home or middle
meeting spot to make it easier on everyone to meet due
to traffic. As you are all aware, I have always appreciated
you opening your home to me for our meetings, and it
was abundantly clear that clients are more comfortable Bonnie’s website:
in their own homes discussing their financial futures. https://www.raymondjames.ca/bonniecyre/
Hence my decision. I will be splitting my time between
Vancouver and Qualicum Beach. As of March 31,2020, Once I am assured all clients have
updated their contact information, I will be cancelling
I have always loved the island and the quality of life the
my Vancouver number 604.609.6155.
island offers. I am at the stage of life where I seek a work
life balance, and in 2019 I did a trial run. Over the course
of the year, I would work and spend two week intervals;
by the fall, I was clear on my decision and I proceeded
to put some roots down. I have purchased a home in
Qualicum Beach.
With today’s technologies, the fluidity of working is
amazing and the actual location of your advisor is not
key to quality management; I will always be a phone call
or email away. As has always been my schedule, I will
continue to do portfolio reviews in the months of January
and February, July and August and over the balance of
the year, I look forward to meeting with clients either in
their home or at the Raymond James downtown office on
West Georgia.
Page 5
COMMUNITY CORNER
SAVE THE DATE!!!
Client Appreciation – Commodore Ballroom
Motown Meltdown
Saturday, May 2, 2020
Great music for a great cause!
In support of Stream of Dreams - Celebrating 20 years!
www.streamofdreams.org
More details to follow.
Don’t hesitate to call if you want to reserve your spot, this event will certainly fill up fast!
I look forward to sharing a fun evening, while supporting a great organization doing great work in our community!
The views expressed are those of the author, Bonnie Cyre, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be
considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it
is suitable for the investor’s circumstances and risk tolerance before making any investment decision. The information contained in this newsletter was obtained from sources believed to
be reliable, however, we cannot represent that it is accurate or complete. In accordance with privacy legislation, the individuals you are referring must consent to their information being
provided to me. Within the past 12 months, RJL has undertaken an underwriting liability or has provided advice for a fee with respect to the securities of The Toronto Dominion Bank
and Canadian Imperial Bank of Commerce. Securities-related products and services are offered through Raymond James Ltd., Member-Canadian Investor Protection Fund. Insurance
products and services are offered through Raymond James Financial Planning Ltd., which is not a Member-Canadian Investor Protection Fund.You can also read
