I hear a lot from clients, analysts and the news media that “we are living in uncertain times,” and I think to myself, when aren’t we living in uncertain times?
Yes, there are a number of issues that make us feel anxious these days. NAFTA and US President Trump’s looming threat of trade tariffs, a provincial pipeline spat that is sparking talk of a trade war between Alberta and BC, market and currency volatility, rising interest rates, and a correcting real estate market are a few of the concerns that come to mind.
One of my younger clients reached out to me recently and said: “Stephen, I love your newsletter, but it’s not telling me how to invest. Should I buy a house? What about bitcoin? Is it a good or a bad idea?” Another client called me to say: “My portfolio was down six percent, but then up four percent a few days later. Should I be worried?” Both of these clients are reflecting the fear they feel based on what they perceive is going on in the world around them.
We are living in uncertain times. Of course we are. Death, divorce, accidents, injury, illnesses, unexpected forces of nature, catastrophic events and other circumstances beyond our control appear out of nowhere or sit just out of sight every day of our lives. We cannot make decisions from a position of fear.
I have to say, from my perspective, things are not as bad as others see it. Yes, interest rates are rising, but they are doing so slowly. Governor of the Bank of Canada, Stephen Poloz, announced this week that he was holding rates steady for the time being to see how things south of the border and our housing market play out. Yet, even if that sounds uncertain, it’s important to remember that interest rates remain at historic lows. For borrowers, we live in a time of extreme privilege—if the borrowing is done in moderation.
Market volatility? Yes, there’s uncertainty in that too. But unless you’re selling equities, it doesn’t matter. What matters is the strength of the balance sheets of the companies in which you’re invested, and the dividends they’re issuing. All six of Canada’s big banks recently reported strong earnings and increases in their dividends.
Yes, there’s been a correction in the housing market. The measures that the various levels of government have implemented are doing what they were meant to do—cool an overheated market. That’s a good thing for both buyers and sellers. And again, it only matters if you’re planning on either buying or selling in the near future.
My thought in this “period of uncertainty” is that we should be mindful of the issues swirling in the world around us without being fearful, invest for the long term without worrying about what happens in the day-to-day, and make informed decisions about the future based on what we know now. So, if you want to buy a house and you have crunched the numbers and think you can afford it, and you plan on living in it for a long time, make a decision based on those criteria and not worry about what the market is going to do tomorrow or next week.
Dips can offer extraordinary opportunities…if…
If you don’t believe me, I encourage you to read Warren Buffett’s letter to shareholders on behalf of Berkshire Hathaway. In it, he reinforces the wisdom of long-term investing. He says that for more than half a century Berkshire Hathaway has built value by reinvesting its earnings and letting compound interest improve the bottom line. However, it’s not been without bumps in the road. And that you can never predict when they will happen. But when they do, he says that “they offer extraordinary opportunities to those who are not handicapped by debt. That’s the time to heed the lines from Rudyard Kipling’s If:
‘If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you...
Yours is the Earth and everything that’s in it.’”
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