Spring/Summer 2021 Newsletter
Christine Fortin - May 17, 2021
Spoiler Alert: The biggest economic risk is the one that no one is talking about...And are stocks too risky? We also talk bitcoin & taxes.
The biggest economic risk is the one that no one is talking about. Christine created a quick video to talk about why our clients were bullet proof in 2020 and the risk in investing that other investors should be employing. Click here to watch the video.
Each time the stock market hits a new all time high (which are frequent over the course of Christine’s 28 year career) we still hear rumblings of someone who “lost money” or feel it is “too risky”. Read more on musings as to why investment failure is not caused by the equity market.
Let’s start with what seemingly could be a dirty 4-letter word: RISK. Risk = volatility. The more “risk” there is, the more “volatility” there is. Somehow it gets forgotten that volatility is in both directions: up *and* down. Which means, if we want to build wealth in a way that will provide us with a respectful retirement with the same quality of life as we have while working, then we *need* volatility because volatility is what provides for higher values.
Because it has gotten some press – we wanted to put our personal opinion stamp on this. If you want to save reading the full comment, let me say the literal bottom line of the essay that we are linking below from Johns Hopkins economist Steven Hanke “Bitcoin’s fundamental value is zero. It’s almost all speculative.” Click here to read the WSJ article “Bitcoin’s Value Is All in the Eye of the ‘Bitholder’.”
We are not advocating for cryptos to be included in client portfolios at this point. This is not because they are not viable as investment in our view but rather because we don’t have any degree of comfort around their current valuations. We tend to view Bitcoin and Ether through the lens of digital precious metals and we feel they parallel very well Gold and Silver respectively. All four of these investments don’t appear to be viable means of exchange, resulting in them being used solely as stores of value (gold and bitcoin) or stores of value with some real world application (silver [industrial applications] and ether [smart contracts, ICOs etc]). To that end we expect both to perform similarly with Bitcoin acting as an inflation hedge for younger and predominantly retail investors. While bitcoin has gained momentum and notoriety it still lacks major adoption by institutions and central banks. This influx of hot money and lack of large institutional holdings makes us prefer gold over bitcoin at this time as gold has underperformed and performs a similar function and has more natural demand than bitcoin. The downside scenario for us on this is if we see more widespread adoption of bitcoin by institutions or even merchants (beyond TSLA). Our views on why I prefer silver over Ether are similar but we think the investment case is closer. Silver has historically not been as good of a safe haven currency largely due to its industrial applications being tied to the economy. As economic activity falls silver demand also falls causing its price to be less resilient in corrections. We would anticipate Ether to have similar issue as ether is used for NFT exchange, ICOs etc which may slow if blockchain hype or the economy slows down the transaction volume falls alongside. That said we don’t believe Ether is going anywhere from a transactional perspective and many of the things it is used for are more “new economy” oriented which should have relatively strong staying power.
Click here to view the 2021 top combined Federal and provincial/territorial marginal personal tax rates. The rates apply to taxable incomes over $216,511 in all jurisdictions, with the exception of the following thresholds: $200,000 in Ontario; $222,420 in BC; $314,928 in Alberta; and $500,000 in Yukon.
As always we love to update you with personal and professional updates about our team...we are each in the office one day a week to access items needed or print documents or send cards but other than that we, as are most, fully functional remotely. We have re-created our offices with multiples screens and fast hardware and Christine is going to be piloting Softphones starting February 2021 for the firm.