A friend of mine who is not familiar with the stock market, much less what the acronyms stand for, like DOW, S&P 500, TSX etc., asked me “what is going on with the markets?” He was aware of something not being right but couldn’t quite figure it out. I don’t know that much more about it, but was able to sight the usual symptoms of what market investors call a “correction”.
I told him, there seems to be a number of reasons. Nothing is wrong with the companies that lost billions in value last week. In many cases these corporations were overpriced. In other words, the value of their stock did not reflect the company’s worth, or capitalization. Another reason is the fear of inflation, now real at nearly 5% and the anxiety it will bring, higher interest rates, expected shortly. And investors, institutional and retail, who increased stock value by the billions during the pandemic, are now selling, cashing in. An example is Netflix down 20%, Amazon down 10%, Peloton down 24% (likely because it’s reported it would pause production of its hot selling exercise machines). SHOPIFY, Canada’s great e-commerce enterprise was valued at more than the Royal Bank earlier this month. It lost its title as Canada’s biggest publicly traded company plunging from a high of $2189.32 a share a month ago, to a low of approximately $1100.00 at the TSX (Toronto Stock Exchange) close last Friday. That’s a drop of nearly 50%. Will it come back to its glorious highs, like other stocks that have dropped? Likely, in time, because Shopify and other companies that have lost value this month, are doing nothing wrong.
It’s the nature of the market, but a very scary event, especially for seniors who use to rely on high pay outs from Canada Savings bonds and GIC’s. In the glory days of the 1990’s with mortgage rates at 15%, these savings instruments paid out a handsome 16% to 20% interest, with no risk attached. But today, with returns on savings at less than 1%, the stock market is where to invest to stay ahead, if not afloat. So are cryptocurrencies, that are also taking a dive. If they are not into real estate, and revenue properties, to supplement their income (renting and dealing with tenants is not for everyone) then they are left with little choice but to pay a financial advisor to buy them mutual funds. They have often chosen to invest themselves, without the added expense of ‘the middle man’, through self-directed investment accounts, and other online brokerage and self-management firms, that charge little or no trade commissions or management fees. No matter who or what investment method is used, last week especially, everyone suffered.
The crash of 2008 took four years to recover. In 2015, it took over a year. So as history has taught us, we will resurface, and see company valuations slowly but surely regain prominence, only sometimes in another economic sector, and in varying periods. After suffering losses, for some it’s the end, and never again will they invest in the stock market. Others see it as just another “buying opportunity”.
I read something unusual recently. New Zealand criticized Canada and sided with the United States. In fact, the headline in the Financial Post read “New Zealand cheers Canada’s loss in the dairy dispute”. I did too. Not our loss, but our win. Canada’s overly protected dairy farmers, with the “supply management system that has historically used high tariffs on imports to shield the domestic dairy producers from competition” from the U.S. and Europe, results in Canadians paying much, much more for milk, cheese and all other dairy products. Canada circumvented the North American free trade agreement by passing on the quotas to Canadian dairy companies who have little interest in rivalry, at our expense. And our Prime Minister is just fine with that, always in support of the Quebec vote and the powerful Quebec dairy lobby. Finding Canada in the wrong will hopefully lead to more competitive prices for milk and dairy products and help in lowering our atrociously inflated grocery bills.
While the Trudeau liberals say they are “protecting Canadians with more stringent gun laws”, that same government is eliminating mandatory minimum sentences for criminals who use guns in the commission of an offence. That makes so much sense, doesn’t it? Meanwhile Canada’s homicide rate is up 7% from a year ago. (Statistics Canada).
Why are politicians and especially our health officials failing to mention that a strong immune system is also a great fighter against COVID? In Britain, they are giving out vitamin D, free! Seniors are receiving a fourmonth supply of the vitamin that health officials agree, “optimizing the immune response to mitigate clinical illness for any given viral load”. If only our leading medical teams had the wisdom to help out our seniors stuck indoors, with no sunlight, in March of 2020. Stay healthy. Walk, eat well, keep smiling.
That’s what I’m thinking.
Robert Vairo
robert@newsfirst.ca
