Here’s what you need to know about the Federal Government’s assistance to businesses

April 23, 2020 drifinancialLeave a comment

Never Retire Profile of the Week

Margaret Atwood

Poet. Novelist. Essayist. Writer for television, radio and theatre. There isn’t much in the literary world that Margaret Atwood hasn’t done. Born in 1939 in Ottawa, Atwood grew up in northern Ontario, Quebec and Toronto. She attended the University of Toronto and Radcliffe College before launching an illustrious career as a woman of letters. From her earliest published work as a poet in the 1960s, to her ground-breaking 1970 novel The Edible Woman, to the TV phenomenon that The Handmaid’s Tale became, all the way through to 2019’s The Testaments, which won the Booker Prize, it’s an understatement to call Atwood prolific. At 80 years old, she is going strong and has no plans to retire.

As the weeks pass and we all continue to do our part to reduce the transmission of the coronavirus and ease the pressures on our healthcare system, I continue to hold you all in mind and hope you are keeping safe and well.

Though we cannot conduct our business as usual at the Dri Financial Group, we are still fully operational and here for anything you need. While maintaining social distancing, our team continues to work hard to serve you, taking turns in the office and working from home. We are conducting all of our meetings by phone and videoconference, and we hope that you will continue to reach out to us for anything you need – or even just to talk through what’s on your mind.

Despite the challenges of these trying times, our work ethic and outstanding service continue. Know that we are always here for all your financial planning and investment management needs.

With that said, I thought it would be useful to provide an overview of the Canada Emergency Wage Subsidy (CEWS). Visit the Government of Canada website for full details. And, of course, call me if you have any questions.

Here are some details I have pulled out for you.

Wage Subsidy

The objective is help employers keep employees on their payroll and/or return workers to their payroll. If eligible, the subsidy is equal to 75% of the first $58,700 normally earned by employee, for a benefit of up to $847 per week.

As one example: If an employee’s income is $65,000, the benefit is $65,000*.75= $48,750 or $937.50 per week. Since that figure is greater than $847, the subsidy would be capped at $847 per week.

A second example: If an employee’s income is $50,000, the benefit is $50,000*.75=$37,500 or $721.15 per week. Since that figure is below the cap, the subsidy is $721.15 per week.

This applies for employers of all sizes and across all sectors who have suffered a drop in gross revenues of at least 15% in March and 30% in April and May when compared to the same months in 2019. Or, as an alternative approach, the comparison can be March, April and May revenue to average revenue earned in January and February 2020.

The program will be in place for a 12-week period, from March 15 to June 6, 2020, and is divided into three periods:

Period 1: March 15th to April 11th
Period 2: April 12th to May 9th
Period 3: May 10th to June 6th

Once the employer is found eligible for a specific period, the employer will automatically qualify for the next period. However, employers must attest that they are doing everything they can to pay the remaining 25%.

A special rule applies to employees that do not deal at arm’s length with the employer: the subsidy is only available if employed prior to March 15, 2020.

Eligible employees

An eligible employee is an individual who is employed in Canada.

Eligibility for the CEWS of an employee’s remuneration is available to all employees except those who have been without remuneration for 14 or more consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, or from May 10 to June 6.

EI, CPP, QPP and QPIP refund

If the employer has placed an employee on paid leave (because the business is unable to open due to COVID-19) and the employer collects the CEWS for this employee, then the employer may be eligible for 100% refund of the employer portion of the EI, CPP, QPP and QPIP.

In general, an employee is considered to be on leave with pay throughout a week if that employee is remunerated by the employer for that week but does not perform any work for the employer in that week. This refund is not available for eligible employees who are on leave with pay for only a portion of a week.

It’s worth noting that there are heavy fines, penalties or even imprisonment if the subsidy program is abused.

Given the complexity of the revenue calculations and the requirement for employers to attest that their application is complete and accurate, it is recommended that you consult with your professional advisors for assistance.

Canadian Emergency Business Account (CEBA)

To ensure that small businesses have access to the capital they need to see them through the current challenges, the Government of Canada has launched the new Canada Emergency Business Account, which has been implemented by eligible financial institutions in cooperation with Export Development Canada (EDC).

This $25 billion program provides interest-free loans of up to $40,000 to small businesses and not-for- profits to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus.

This will better position them to quickly return to providing services to their communities and creating employment.

Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).

Who is eligible:

The Borrower is a Canadian operating business in operation as of March 1, 2020.
The Borrower has a federal tax registration.
The Borrower’s total employment income paid in the 2019 calendar year was between $50,000 CAD and $1,000,000 CAD.
The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.
The Borrower acknowledges its intention to continue to operate its business or to resume operations.
The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

The funds from this loan can only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service. Those funds may not be used for any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

So that’s a brief overview of two Federal Government programs aimed at helping businesses during the pandemic. As mentioned, visit the Government of Canada website for full details. And give us a call or send an email if you have any questions we can answer. We’re here to help you and support your business in any way we can.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

<a href=”https://richarddri.ca/”>Get started here.</a>

Call me if you in want to map out how you can Never Retire. You can also subscribe to our <a href=”https://richarddri.ca/” target=”_blank” rel=”noopener”>Never Retire Newsletter</a>, contact us to <a href=”https://richarddri.ca/introduction-to-the-investment-mindset/” target=”_blank” rel=”noopener”>order a complimentary book</a>, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416-355-6370 or email me at <a href=”mailto:richard.dri@scotiawealth.com” target=”_blank” rel=”noopener”>richard.dri@scotiawealth.com</a>.

source https://richarddri.ca/heres-what-you-need-to-know-about-the-federal-governments-assistance-to-businesses/

N.A. Markets Struggle for Traction

April 17, 2020 drifinancialLeave a comment

It’s been an up-and-down week for N.A. markets as investors continue to weigh the latest economic data against the prospect of economies reopening for business in the coming weeks. The Dow and S&P 500 both lost ground Monday as investors began to assess what is certain to be a rough corporate earnings season. According to the Wall Street Journal, almost 300 companies have withdrawn their financial guidance, while roughly 175 have suspended stock buybacks or cut dividends.

On Tuesday, both JPMorgan Chase and Wells Fargo reported steep declines in Q1 profits as they set aside billions for potential loan losses. Meanwhile, oil prices fell to near 18-year lows, even after a weekend agreement by OPEC, Russia and the U.S. to cut supply by as much as 20 million barrels a day. Despite the worrying earnings reports, N.A. stocks surged as optimism that the Trump administration could move to ease lockdowns from the coronavirus lifted investors’ spirits. By Tuesday’s close, the Dow was up 559 points, while the TSX added 182 points.

However, U.S. stocks were down again on Wednesday as fresh data showed that U.S. retail sales fell nearly 9% in March from a month earlier and U.S. industrial production fell 5.4% for March, its biggest monthly drop since 1946.

The news out of Canada was equally stark as Statistics Canada reported that the domestic economy shrank a record 9% in March from February. By Wednesday’s close, the Dow was down nearly 450 points, while the TSX surrendered 300.

U.S. stocks finished slightly higher Thursday, despite new data showing that more than 22 million Americans have now filed for unemployment benefits since mid-March. Meanwhile, Canada lost over 177,000 jobs in March. Weighed down by the energy sector and financials, the TSX struggled again Thursday, shedding 59 points.

What to do if you lose your job

April 9, 2020 drifinancialLeave a comment

Given the impact of the COVID-19 pandemic on all aspects of life these days, Richard has decided that, rather than have a guest today, he will instead outline for listeners the details of the Canadian Government’s Economic Response to the crisis.

Toward this end, today’s episode finds Richard focusing on the Canadian Government’s response for employees which has been designed to help ensure that employees remain economically viable and have the necessary funds to maintain themselves and their families. He reviews and explains the Government’s support plan for individuals, families, seniors, students, and mortgages, and also provides information about the Canada Emergency Response Benefit (CERB).

Download the full transcript here

Podcast highlights:

The Government of Canada’s economic response to the COVID-19 pandemic is divided into two components – one for employees and the other for employers/business owners.
The government has provided a lot of help for employees who are struggling financially due to the pandemic.
The government’s policies are being updated frequently, so checking www.canada.ca often is very important.
The Government’s Economic Response addresses support for individuals, families, seniors, students and mortgages.
The Canada Emergency Response Benefit is the centrepiece of the government’s benefit program and is aimed at those who are currently unemployed due to the pandemic.

Quotes:

“This is a very important time for us to stick together, and to help each other.”

“The most important thing to do here would be to speak to your bank, and to see what type of help or solutions they can bring to your particular situation if you have been affected by the COVID-19 in terms of not being able to work.”

“Of course this may not be the final word from our government about support. This is what I know now, and it is likely to change as our situation continues to evolve.”

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source https://richarddri.ca/what-to-do-if-you-lose-your-job-2/

N.A. Markets Gain Ground on Optimism That Pandemic Could Be Slowing

April 9, 2020 drifinancialLeave a comment

It was a strong start to the week as markets rallied Monday on early signs that lockdowns in the U.S. and Europe may be helping slow the coronavirus pandemic, even as the death toll in the U.S. climbs. All three U.S. markets were up roughly 7% in response to a drop in the daily death toll in New York, one of the country’s worst hotspots. By Monday’s close, the Dow was up 1,627 points, while the TSX gained more than 650. However, oil markets struggled to stabilize Monday after an emergency summit to cut global production was pushed back from Monday over continued tensions between the Saudis and Russians.

It was an extremely volatile day for trading in U.S. markets Tuesday, which saw dramatic gains in the morning erased by the day’s close. The market’s gains vanished partly in response to tumbling U.S. crude prices, which fell more than 9%.

Although the Dow was up by more than 900 points in early trading, it closed down 26 points, while the S&P and Nasdaq lost 0.2% and 0.3%, respectively. The TSX ended the day with a slight gain of 0.1%.

Also weighing on markets were warnings about the depth and severity of the U.S. recession. In an interview this week, former Fed Chair Janet Yellen predicted the U.S. economy would decline by at least 30% in Q2.

N.A. stocks rose once again Wednesday, buoyed by new data that the spread of the coronavirus could be waning in U.S. and European hotspots. Investor sentiment has also turned positive over news that Fed measures are helping stabilize markets. In addition to slashing interest rates, the Fed took aggressive action in March, pledging to buy government bonds, corporate-bond funds and municipal debt. This week Fed officials are also expected to provide an additional $2.3 trillion in aid for small and midsize businesses, as well as cities and states.

By Wednesday’s close, the Dow was up 773 points, while the TSX added 312. The TSX’s energy sector jumped more than 4% as oil prices strengthened on hopes that OPEC and its allies will agree to cut production at a summit scheduled for Thursday.

What I’m thinking

April 9, 2020 drifinancialLeave a comment

Never Retire Profile of the Week

Clint Eastwood

Who hasn’t been entertained by Clint Eastwood – either as a star, a director, or both? From the TV series Rawhide to the spaghetti westerns, Dirty Harry movies, Academy-Award winning films Unforgiven and Million Dollar Baby, and more recent work like American Sniper and The Mule, the 89-year-old Eastwood never stops. In you’re curious about what he’s up to today, look for his 2019 film Richard Jewell, a biographical drama about the security guard who found a bomb during the 1996 Summer Olympics, alerted authorities, and was then wrongly accused of having placed it himself. Whether you’re an admirer of his work or not, Eastwood exemplifies the Never Retire philosophy: he keeps doing what he loves without regard to age.

Two weeks ago, I held a conference call and explained the following:

The banks are secure.
Our asset allocations are suitable for clients’ risk and age profile.
Our Canadian tactical model is in cash, increasing our clients’ cash level to higher than normal levels.
Short-term cash flow requirements are safely invested in ladder GICs.
All cash dividends are reinvested in the issuing company, hence lowering cost basis.
The Federal Government is providing large stimulus packages to support the unemployed and some industries.
The virus seems to have been contained in China, Taiwan and South Korea.
I have lived through—and learned from—other crises, such as the tech crash of 1999, the post- 9/11 crash of 2001, and the financial crisis of 2008.
We have divided our team into two sub teams. Two of us work from home and two of us are at the office. This enables us to keep the office open.
When the comeback begins, we will be led by our tactical model, which moves cash back into the market when the market changes direction.

As I write this blog on April 6th , 2020, the highlights mentioned during the conference call are still applicable and have not been altered by new developments occurring afterward.

However, the team and I have been very busy fielding calls from clients and re-evaluating the asset allocations for those who withdraw funds from their RRIF or from a non-registered account. In particular, we are ensuring that clients withdrawing funds have a minimum reserve of three years’ worth of cash flow requirements in guaranteed investments (like GICs), AND we’re discussing with clients whether their guaranteed portion should be expanded to four or five years. If you have not responded to our email/call yet, please do so as soon as possible.

The objective of our assessment is to ensure clients have a cash reserve of three to five years of lifestyle expenses and the ability to refrain from selling stocks before they have an opportunity to recover.

What should we do next?

Recently, I have spent almost every waking hour (and many of those hours occurred when I should have been sleeping) thinking about the pandemic’s health and economic ramifications (both short and long term). Unfortunately, I can make a strong argument for a positive and a negative ending to our current crisis.

Here is my argument for both sides.

Reasons for being cautiously optimistic:

A vaccine or an antiviral drug could be developed sooner than most expect.
An existing vaccine could prove effective against the COVID-19 strain.
The virus may not be as severe in North America as expected.
Federal governments and central banks around the world are making efforts to protect the economy with subsidies until a vaccine is developed.
The warmer weather may kill off the virus.
We may have already experienced peak infection rates due to the quarantines and other social distancing practices.
A higher percentage of the world’s population may have been infected without symptoms, which could lead to a greater percentage of immune citizens able to return to work than projected.
Based on the fact that stocks have already declined 30-35%, history indicates the worst of the decline may have already occurred.

Reasons for being negative:

The virus could be more severe than expected with North America following the pattern experienced by Italy and Spain.
The virus reappears during the fall and a vaccine is yet to be released.
The Federal Government subsidy packages are slow and insufficient to adequately help citizens, industries and small businesses.
There are mandatory quarantines that shut down the economy for three to six months, causing massive layoffs.
Companies defer dividends in order to protect cash flow.
Key political and corporate leaders test positive for COVID-19 and are hospitalized or die.
Due to a lack of consumer demand, many companies do not reopen but file for bankruptcy, causing a higher number of unemployed.
It may be impossible to equitably provide loans or subsidies to industries (i.e. airlines, hospitality, etc.) without creating winners and losers.

Despite the consuming nature of analyzing the positives and negatives of our current situation, I feel myself in an almost no-win scenario.

If we recommend maintaining the asset allocation as stated in your individual Investment Policy Statement and a vaccine is found very soon (or any of the other possibilities listed above come to pass), the stocks in our models may experience a relief rally, we may recover all or most of our losses, and life would get back to “normal” sooner than expected.

However, if a vaccine is not found for months or years (along with other reasons listed above), our recommended stocks may continue to fall, and corporations may decide to protect their businesses by deferring/reducing dividend payments and other companies may fall into bankruptcy.

My biggest stumbling block is the issue of how and when we restart our closed (or semi-closed) economy.

Here’s my guess on how to restart the economy, but remember it’s a guess and it’s tainted by my personal biases.

I believe we need a test that identifies the infected and the immune group. Through extensive testing, we create a government/employer registry for citizens who are either immune or not infected. This group is permitted to return to work and slowly restart the economy (note: the not-infected group must be tested frequently to ensure they don’t infect the not-immune group). The infected group is isolated and, once recovered; they are added to the immune group and allowed back to work. The workforce gradually grows by the increasing number of citizens who have recovered from the virus, and slowly, larger portions of the economy begin to restart.

This process continues until scientists develop a vaccine or an antiviral drug that offsets the virus and it becomes available to everyone on earth.

Here’s my guess on how long this process may take.

Because mass testing is not available today (and it may be several more months before available), and because social distancing is not strictly followed by everyone, I believe it will take several months before we slowly begin to restart the economy. As well, if we restart too quickly or before we have a handle on the virus, we risk going back to quarantines. My guess is that governments try to restart the economy in July-August.

The longer the restart takes, the more severe the effects on the economy and on our recommended stocks.

Our recommendations

If you are in retirement and your investment portfolio provides some or all of your cash flow needs, we suggest a cash reserve equal to three to five years’ worth of annual expenditures.

If you are five or more years from retirement, especially if you are a millennial, the pandemic may be a once in a lifetime opportunity to buy underpriced stocks. I don’t suggest clients wait until the market hits “bottom” because no one can pick the exact bottom. Instead, buy today and continue buying even if the market falls further.

In short, have a solid cash position and don’t give up on the human spirit. We will find a way through this pandemic and life will gradually improve again. I’m an optimist and have confidence that scientists will find the solution to the pandemic, so I’m not telling you to run for the hills. I don’t want to bet against the unstoppable human spirit.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here.

Call me if you in want to map out how you can Never Retire. You can also subscribe to our Never Retire Newsletter, contact us to order a complimentary book, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416-355-6370 or email me at richard.dri@scotiawealth.com.

source https://richarddri.ca/what-im-thinking/

What to do if you lose your job

April 7, 2020 drifinancialLeave a comment

Never Retire Profile of the Week

Dr. Anthony Fauci

There’s a good chance you’ve heard the name Dr. Anthony Fauci a lot in the past few months. That’s for two good reasons. One, as US Director of the National Institute of Allergy and Infectious Diseases, Fauci has been a lead member of the White House Coronavirus Task Force. His is the voice of experience and reason that Americans and other citizens around the world have come to know and respect. Second, at the age of 79, Fauci has served public health for over 50 years and continues to do so with the same dedication and professionalism. Fauci is another Never Retire individual we’re grateful to have on the job.

Canada’ s COVID-19 Economic Response Plan – Support for Individuals

We are all experiencing a disruption in our daily life, and many of us are also suffering a reduction in employment income because of corporate layoffs or stay at home policies.

As the virus situation changes every day, so does our government’s response in an attempt to support those individuals and businesses most affected by closures, slow downs, and the need for social distancing in order to lessen the spread of COVID-19.

To stay informed of the latest developments, my suggestion is to follow a reputable media source like the CBC, tune in to Prime Minister Trudeau’s daily briefings, and review Canada’s Economic Response plan available here.

In this article, I outline the major programs that have been provided by the Federal Government for individuals (businesses is a separate topic). My objective is to provide a brief summary so you can assess whether you, as an individual, qualify for any of them. A full report is available here. As always, call our office if you have questions or would like further clarification.

Please feel free to share this article with anyone you know who has been economically affected by the pandemic. We are happy to take calls from any readers, including those who aren’t clients. This is a time for all of us to help each other.

Support for individuals and families

Canada Child Benefit

An extra $300 per child through the Canada Child Benefit (CCB) for 2019-20. No need to re-apply; if you are already receiving the CCB, you will get it automatically and the benefits will be paid out as part of the scheduled payments in May.

Goods and Services Tax credit payment

A one-time special payment starting April 9 through the Goods and Service Tax credit for low- to modest-income families, with an average payment of $400 for a qualify individual and $600 for couples. No need to apply; if you are eligible, you will get it automatically.

Extra time to file tax return

The 2019 tax return will be deferred until June 1st , 2020, and any new income tax balances due or instalments will be deferred until August 31st , 2020, without incurring interest or penalties.

Mortgage support

Canadian banks have committed to work with their customers on a case-by-case basis to find solutions to help manage hardships caused by COVID-19. This may include payment deferral, loan re- amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements. Call our office or your bank for more information.

Support for people facing unemployment

Canada Emergency Response Benefit (CERB)

The CERB will provide temporary income support in the form of a taxable benefit of $2,000 a month for up to four months to eligible workers (payments will be backdated from March15th and terminate on October 3, 2020)

Here’s who is eligible: employees, contract workers, or self-employed, whether you qualify for EI or not

AND

Those who have no income due to COVID-19 slowdown for at least 14 consecutive days in a four-week period.
Those who have been laid off temporarily/permanently (or still employed or self-employed but work is not available), or are sick/quarantined, or caring for the sick or caring for children home from school.
You earned at least $5,000 for 2019 or in the 12 months preceding the application date through employment income, self-employment income, or parental leave benefits AND are over the age of 15.

Note, the benefit is not available for employees who quit their jobs.

When to and how to apply

The benefit will be accessible online on April 6th . Make sure you set up an account at “CRA My Account” so you can receive direct deposits. First Payment is expected within 10 days of application. Afterwards, the benefit will be paid every four weeks up to 16 weeks.

In order to control the volume, applications dates will be based on birth month.
Birthdays in January, February, March: apply on Mondays
Birthdays in April, May, June: apply on Tuesdays
Birthdays in July, August and September: apply on Wednesdays
Birthdays in October, November and December: apply on Thursdays
Anyone can apply on Fridays, Saturdays and Sundays.

Employment Insurance

For those who applied for EI benefits after March 15th , 2020, there’s no need to reapply for the CERB, the EI claim will be transferred automatically to the CEBP. It appears that EI is still available for those who remain unemployed after the 16-week period covered by the CEBP has lapsed.

Support for seniors and students

Reduced minimum withdrawals form Registered Retirement Income funds (RRIF)

The government is reducing the required minimum withdrawal from a RRIF by 25% in 2020. If you don’t need the money, reducing your minimum RRIF withdrawals is a great idea because it prevents selling equities during a market decline.

Support for students and recent graduates

Effective March 30th , the government is placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all student borrowers. This means no payments are required and interest doesn’t accrue during the six months.

I hope the above summary helps you navigate through all the existing and new programs that are available from the Federal Government. Of course, this may not be the final word from our government about supports. This is what we know now, and it’s likely to change as our situation continues to evolve. Check a reputable news outlet, our PM’s briefings, and the government website that provides complete information.

And as always, I am here – via phone or email – to help as much as I can.

Let’s do everything we can to help our country get through this crisis: stay informed, stay in touch with each other, and stay home unless absolutely necessary.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here.

source https://richarddri.ca/what-to-do-if-you-lose-your-job/

Bear necessities: strategies that can help you weather market volatility

April 7, 2020 drifinancialLeave a comment

The spike in equity market volatility has resulted in renewed anxiety for many investors. March 23, 2020 marked the most significant 30-day decline in the history of the S&P 500 since 1940. While it may be difficult to maintain composure during periods of market declines, making reactive, emotionally-driven decisions may be more detrimental to your long- term financial success than the drawdown itself. History shows that periods of turmoil and steep market declines have subsequently been among the best times to invest. Longer-term perspective can help you manage through the market turbulence and ensure you are positioned for a rebound, which is inevitable too.

Dramatic market swings can be unsettling, but with uncertainty present at all times, they have always been a part of the investing environment. Periods of heightened volatility can take a toll on investors but as the chart in Figure 1 shows, the S&P 500 Total Return Index has delivered a cumulative return of over 1000% since 1990 despite experiencing two recessions, an average intra-year decline of 14%, 7 bear markets (including the current one), and 15 corrections. Investors that have stayed the course have been rewarded, and a $100,000 investment at the start of 1990 would have grown to over $1,000,000 – increasing tenfold – by the end of February 2020.

Staying the course in periods of extreme market volatility may be difficult, but making drastic changes to your investment strategy based on short-term events can be detrimental to your long-term financial success. Notably, it is when asset prices decline that their future long-term expected returns typically increase. History has shown that markets move in cycles, and drawdowns have been followed by powerful rallies. If you sell and remain on the sidelines during a recovery, the impact on your wealth can be material, even if you only miss a few of the best days in the market.

6 Things to Know and Do In These Turbulent Times

April 2, 2020 drifinancialLeave a comment

Never Retire Profile of the Week

Bill Gates

If anyone could retire at this time in his life, it’s Microsoft co-founder Bill Gates. He has, in fact, been reducing his role at Microsoft, and he recently stepped down from the company’s board. And with an estimated personal worth of almost $100 billion USD, it’s not like the man has to work to support himself in his retirement years. It’s more like he has too much going on, and far too many interests, to even consider retiring. At the age of 64, Gates wants to devote more of his time to the Bill and Melinda Gates Foundation, which is the world’s largest philanthropic organization. With its focus on global health, development, education, climate change and infectious disease, now, in the time of this pandemic, is the best time for Gates to never retire.

It is hard to overstate the unpredictability and chaos of the times we are living through. As we all navigate these circumstances that are unlike anything we have seen in our lives, I’m focused on the adage about controlling what we can control.

We can’t control the presence of this virus in our lives. We can’t control how others are managing their days. We can’t control the past or the future. But we can be informed about what is happening around us today. And we can make choices that impact us in a positive way.

So, to offer my devoted readers a weekly blog, here are six topics to consider: a mix of things to know and things to do that can make a difference in our lives.

1. New Flyer Industries (NFI)

This week, NFI reported a temporary reduction of their dividend by 50%. They also idled most of their projects and announced that more than two thirds of their workforce will be laid off until they restart their operations.

On March 22nd, the Richard Dri Dividend Model flashed a sell signal for the company, and at the time of writing, we are preparing to sell the stock.

I hate to sell the stock because of the capital loss it will generate, but I know how essential it is to follow the evidence – especially in these times of high emotion. Our model indicates that there are other stocks with a higher probability of recouping losses.

2. Are more dividends cuts coming?

Many clients have asked if more companies will reduce their dividends during the pandemic and how this may impact our recommendations.

These are very good questions. However, we don’t know the answers because we have not experienced weeks or months of an almost complete shutdown. So for once, I am offering here a guess not based on evidence but also, of course, not generated out of pure emotion.

I expect that other companies will decide to a) hold their dividends at current level (as many did during the financial crisis), or b) reduce their dividends and conserve cash.

If the pandemic causes a “sharp, short recession” followed by a “fairly quick rebound” (former US Federal Reserve Chairman Ben Bernanke¹ March 25th 2020, CNBC), dividends growth should resume when the economy gets back to its “new normal.”

And if our models work as well as it has historically, we will be holding the stocks that recover quickly and the companies that resume their dividend growth patterns.

3. Tax harvesting

I hate losses but in long-term investing, we must accept that some short-term losses are part of the price for long-term returns.

Last year, we triggered significant capital gains from rebalancing portfolios and trimming overweighed positions. And many of our clients were justifiably upset for a higher than usual tax bill caused by the capital gains.

We stand by those recommendations, but in 2020, I expect we will have capital losses. The tax code² allows us to offset capital losses against the capital gains of the past three years or forward capital gains indefinitely.

Bottom line, for every one dollar in capital losses, you should be able to recover 25 cents of previously paid tax on taxable capital gains (assuming a 50% marginal tax rate and sufficient capital gains in the past three years).

4. US fiscal stimulus

At the time of writing, the US Senate has agreed to pass a stimulus package of approximately $2 trillion. Yes, that’s a huge number.

According to Ray Dalio (CIO of Bridgewater Associates and one of my mentors), when interest rates are almost 0%, monetary policy alone is no longer effective. The best approach is to coordinate expansionary monetary policy with a stimulus fiscal policy.

So the Federal Reserve (and the Bank of Canada) has already stated it will provide a highly expansionary monetary program. If we get the US Senate (and, for that matter, all federal governments around the world) to provide a big fiscal stimulus, the two together will give the world time to find a vaccine for the virus, so we can begin returning to work.

Will the US (and Canadian) fiscal stimulus be sufficient, and will it be directed at the right people and companies? I don’t know, and I’m afraid no one else does.

5. Has life changed forever?

This is another great question posed by one of my clients. My answer is, “I don’t know.”

When will we feel comfortable to fly again? When will we be allowed to watch a live hockey game? When will we start enjoying our favourite restaurants? How many employees will continue working from home? Will traffic congestion no longer be a problem? Will Amazon and Walmart kill off all their competitors? Will Canada still accept 250,000+ immigrants yearly?

There are so many questions and so few answers. So why include this in a “things to know and do” blog? It is because it is important to share what’s on our minds. It is important to reach out and connect, and to take the time to listen to each other. We may not know the answers to all the questions, but we know that we’re in this together.

6. Time to conserve cash and build a bigger cushion

Here are a few ideas that may help reduce expenses and increase your cash reserve.

Defer major expenditures. Speak with your lenders and negotiate a lowered interest rate or a deferral of payments. Cancel unnecessary and pesky monthly subscriptions. Apply for a line of credit (just in case). Apply for government emergency support payments (if you qualify). Spend deliberately and intentionally. Note that our fees are also dropping because they are not a fixed dollar amount; they are a percentage of the portfolio value. So if the portfolio declines, our fees decline, saving you money. On behalf of my team and me, we hope you and your family stay healthy and safe. Remember, we are open for business, so if you have questions or would like to talk to someone about life, please call me or anyone else on my team. We will try our best to help out.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here.

¹https://www.cnbc.com/2020/03/25/former-fed-chairman-ben-bernanke-sees-very-sharp-recession-followed-by-fairly-quick-rebound.html
²https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-127-capital-gains/capital-losses-deductions.html

source https://richarddri.ca/6-things-to-know-and-do-in-these-turbulent-times/

Falling into Entrepreneurship: Creating a Business by Recognizing a Problem and Solving It with Josephine Kwan

April 1, 2020 drifinancialLeave a comment

Josephine Kwan is the Founder and CEO of Flow 2 Freedom, an e-commerce apparel company that specializes in activewear that can absorb up to 2 tampons worth of liquid so that women can focus on their workouts without having to worry about leakage from incontinence or menstruation becoming visible. With a background in kinesiology and fitness training, Josephine found herself early on working in real estate until a pivotal event in her life enabled her to realize that she wanted to do something more for society and, after a lot of hard work and drawing upon her own knowledge and experiences, she single-handedly created Flow 2 Freedom.

In this interview, Josephine shares the steps she followed, the barriers she faces, the marketing she employs, and perhaps most importantly of all, the main reason why she chose to create her product and company and is so passionate about it. She also offers her advice for fellow entrepreneurs and business owners and her money lesson for all of us which revolves around her mindset, and by extension, her relationship with money and wealth.

Download the full transcript here

Podcast highlights:

While she loved working in real estate, Josephine also felt a calling to do something more for society.
When Josephine discovered that she was not the only woman to suffer heavy periods, she began looking at the few period underwear products available and found that they created visible panty lines.
Instead of using poll marketing, Josephine went for the push marketing and started looking more at social media because she was offering a solution that nobody really knew a lot about.
She believes it’s really important as the owner that you at least know what the basics of all aspects of your company are so you know how to hire properly.
The current obstacle to further growth for her company is the marketing component and creating exposure.
Another barrier to growth is finding an influencer who is openly willing to talk about periods or incontinence issues.
Josephine’s advice to other entrepreneurs is to work hard, be and stay curious, be patient, and don’t be afraid to ask for help or resources.
She tries to live more in ‘abundance’, realizing that if she’s going to make money, it doesn’t mean she’s taking away from someone else – there’s enough for everybody.
Susie Orman’s concept of ‘people first, then money, then things’ has helped Josephine over the years.

Quotes:

“If people don’t know that there’s a solution, nobody’s actually going to go online to search for it.”
“Hey, you know what? You can’t hide anymore, you need to get yourself out there and really be able to promote your product, and to be able to do that you need to be able to tell your story through the social media platforms.”
“I think you start that at the very beginning, you touch every position within the company and then eventually you start allocating certain jobs that you don’t like or you’re not good at.”
“There’s a different level of stress that comes with the hard work because you know you’re in control of how successful you can be.”
“Usually I like to take a bigger vision and think I always put myself in the client’s shoes or the customer’s shoes and then work backwards.”
“I see money as energy and if you respect money, money will respect you back.”
“It’s not about the resources that you have, it’s how resourceful are you.”
“I think we live in a world where we’re so used to instant gratification that we sometimes forget creating something good that is long-lasting takes a long time.”

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source https://richarddri.ca/falling-into-entrepreneurship-creating-a-business-by-recognizing-a-problem-and-solving-it-with-josephine-kwan/

Massive Stimulus Packages Help Stabilize Markets; Dow Enters New Bull Market

March 30, 2020 drifinancialLeave a comment

It’s been yet another historic week for global financial markets, which continue to experience extreme volatility in the face of a global pandemic. On Monday, U.S. stocks dropped in another wild session as the House and Senate failed for a second day to pass a rescue package to ease the impact from the coronavirus. While Senate Democrats and Republicans remained at an impasse over a proposed stimulus bill, the U.S. Federal Reserve continued its bold action, by extending loans and purchasing hundreds of billions of dollars in government debt. By Monday’s close, the Dow was down nearly 600 points, while the TSX surrendered 623 points—more than 5%–as the energy sector continued to struggle.

In a miraculous turnaround Tuesday, the Dow surged more than 11%, its biggest one-day gain since 1933, on news that Congress was finalizing a deal on a $1.6-trillion stimulus package (although the final numbers remain unclear). In Canada, the TSX staged an epic rally as well, rebounding from an eight-year low the day before. By Tuesday’s close, the TSX was up more than 1,300 points, while the Dow recovered more than 2,100 points.

News of the U.S. stimulus bill helped fuel upward moves in markets around the globe. German stocks surged 11%, and U.K. blue chips climbed nearly 10%–their best sessions since the global financial crisis in 2008. Meanwhile, South Korea’s market was up nearly 9% after the government announced its own rescue package of $80 billion.

In Canada, the TSX climbed more than 500 points on Wednesday after Parliament approved an $82-billion aid package– including $27 billion to help people and businesses deal with the pandemic and an additional $55-billion in tax deferrals. In the U.S., it was a frantic day of trading once again as the Dow and S&P notched their first back-to-back gains since February, while the Nasdaq was down slightly. Although the Dow ended in the green, it was another day of wild swings, with much of the day’s gains surrendered in the final 15 minutes of trading.

U.S. stocks continued their climb Thursday–even after data revealed a record 3.28 million new jobless claims filed for the week ending March 21. Many investors continue to remain hopeful that a $2-trillion stimulus package can help save the country’s faltering economy. By Thursday’s close, the Dow was up more than 6%, remarkably entering a new bull market.

While all three U.S. markets were up significantly, the TSX struggled to keep pace, as Brent crude dropped 2.7%.
Nevertheless, Canada’s main index finished the day with a gain of 232 points.