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Good morning. My car is likely in the shop as you’re reading this for some long-overdue repairs. It wasn’t my laxity this time, but rather Mazda’s inability to get the necessary parts on a timely basis. A muffler took two weeks to arrive while a windshield-washer pump took eight weeks, chiefly because Mazda no longer makes that part so one had to be sourced from Ford Motor Co. in the United States. Perhaps delays like that are one reason some Canadians aren’t fixing their cars. Almost half of us are making cost-saving changes to our transportation routines, including the six per cent who are putting off unnecessary auto repairs, according to a Ratesdotca survey.
A few of those car owners live on my street judging by the noisy mufflers I hear every morning, but if you have to wait weeks — and pay upfront — for parts that may never arrive, it seems logical to put off any repairs until absolutely necessary. You won’t save in the long run, since you’ll have to get your car fixed eventually, but it helps in the short term. We’re also trying to save money by avoiding unnecessary trips, changing our primary mode of transportation and buying electric vehicles. I’m walking more often to stores and taking public transit less often to save money — and my well-being in the case of travelling on Toronto’s violence-plagued system.
Our natural instinct when costs rise is to cut spending where possible, or what a report by Empathy Inc. refers to as flight. “Canadians who feel precarious about their finances are more likely to reduce spending across all essential categories, such as food, health care and clothing, compared to those who feel financially comfortable,” the report said. Almost nine in 10 people surveyed are looking for cheaper products and services, with 79 per cent most price conscious about food, the price of which is now rising again at your local grocery store after the industry’s holiday price freeze ended.
Loblaw Cos. Ltd. may not want to be the face of food inflation, but as the largest grocer, and the one who made a marketing campaign around a standard industry practice, it has little choice. We can all expect more stories about $15 lettuce and $37 chicken, though let’s keep in mind the poor farmers — especially those not part of a supply management system that guarantees them a certain price — who are dealing with cost increases for inputs across the board, from the corn and soy they buy to make feed and wages to fuel prices and even cardboard boxes for shipping.
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All this anxiety about prices seems to be affecting our sleep as much as our wallets, as almost 45 per cent of Canadians are dreaming about fear and insecurities, most often represented by dreams about snakes, according to a study by rental housing platform Rentola.ca. Death, teeth and falling fill out the top four dreams, which doesn’t sound like a restful time.
But one way to combat high prices is to own the companies inflicting them on you. Loblaw’s stock may have dropped 3.7 per cent on Wednesday, a day after it protested its innocence, but it’s up 72.8 per cent since Feb. 28, 2020, when COVID-19 was about to kickstart the eventual inflation boom. Empire Co. Ltd., which owns Sobeys, Safeway and others, is up 23.5 per cent in the same time frame while Metro Inc. is up 32.9 per cent. Better yet, all three grocers have been raising their dividends, a seemingly lost consideration of investors during the go-go Big Tech days, thereby putting money in your pocket to help pay for their inflated prices. Better yet, the stage is set for a “market that grinds higher, led by large, profitable, dividend-paying companies,” says investment adviser Taylor Burns.
Other sectors are increasing their dividends, too, most notably energy. The top 25 North American oil and gas companies by market cap posted a combined profit of US$70 billion for the quarter ended Sept. 30, which was 186.3 per cent higher than a year earlier. A lot of that money is being returned to shareholders in the form of higher dividends and share buybacks.
Recent Canadian hikers include: Canadian Natural Resources Ltd., which increased its quarterly dividend by 13 per cent to 85 cents per share; Imperial Oil Ltd., which raised its quarterly dividend by 29 per cent to 44 cents per share and announced a $1.5-billion share buyback program; and Tourmaline Oil Corp., which announced a special dividend of $2.25 per share, and raised its quarterly dividend by 11 per cent to 25 cents per share. That will help pay for a few trips to the grocery store or maybe a new muffler.
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Andy Holloway, editor of the FPI and Financial Post Magazine, and senior features editor of the Financial Post. If you have any quips, queries or comments, get in touch at [email protected].
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Three important investing terms that confuse investors to their detriment
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Diversification, volatility and fees are three things that seem to confuse many investors whether their advisers explain them or not. But that’s not going to stop Financial Post columnist Tom Bradley from shedding some light on what they mean and why they’re so important, so now’s the time to pay attention.
WORD UP
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How investors can change their approach to tackling challenging market conditions
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You may not have heard of Naval Ravikant, a successful Indian-American entrepreneur, investor and co-founder of AngelList, but portfolio manager Martin Pelletier has taken some of his mantras to heart and applied them to how we can change our philosophies and approaches when investing.
CLEAR YOUR MIND TO SEE THE TRUTH
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ChatGPT unleashes stock trader stampede for everything AI
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A variety of stocks are benefiting from the buzz now swirling around artificial intelligence as a result of the massive popularity of OpenAI LLC’s ChatGPT tool, which is reminding veteran market professionals of previous crazes such as the one in 2017 sparked by blockchain technology. “As far as everyone who’s betting on names and tickers, it will be a wild ride for them,” says market strategist Michael O’Rourke. “If you’re speculating, you’re not investing.”
TECHNOLOGIES CHANGE, PEOPLE DON’T
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Crypto ETFs roar into life with eye-popping 2023 returns
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Last year’s “crypto winter” has reversed course to start 2023, illustrating this niche sector’s ability to bounce back because of its inherent volatility. “This is why people invest in crypto,” says fund analyst Kenneth Lamont. “For many of the investors who invest in crypto, it’s effectively high-stakes gambling. It’s high risk and potentially high reward.”
RAISING THE ANTE
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FP 500 — The most authoritative survey of corporate Canada: The 2022 FP 500 is the only national ranking of the country’s public, private and Crown corporations, making it an indispensable research tool with vital data on Canada’s top companies across all sectors. Order your copy here.
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Central banks have been in the spotlight for the past few years, first for quantitative-easing efforts during the pandemic and now for their inflation-fighting posture. Greg Taylor, chief investment officer at Purpose Investments Inc., tells the Financial Post’s Larysa Harapyn that the hard lifting on getting inflation down to two per cent is still to come. “This is going to be an incredibly volatile year,” he says. “It feels like as we move through 2023 we’re going to get away from just focusing on central banks and get back to looking at what companies are doing and how they’re reacting and what sectors are benefiting.” Where should investors be looking?
WATCH THE VIDEO
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Collectibles can be fun investments but don’t let passion blind you to the risks
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Your passion for art, wine, jewelry or other collectibles could be a factor in your overall wealth-management strategy if you decide to turn a fun hobby into a potential moneymaker. Portfolio manager and wealth adviser Diana Orlic says alternative assets such as these — as well as themes such precious and base metals, energy, infrastructure and real estate — may offer a useful hedge in volatile markets, but there are some pitfalls.
HOBBY WORLD
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What are REITs and how do they fit into a balanced portfolio?
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Most investors probably already own a real estate investment trust or two if they have a classic portfolio stock weighting of 60 per cent. But if you’re looking for more exposure to companies that own or finance income-producing real estate — or any other themed investment such as oil, tech, bitcoin, etc. — certified financial planner Allan Norman gives you some things to think about first.
GET THE ANSWER
If you have an investing or personal finance question, hit us up at [email protected].
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Most economists say inflation is easing, but Nobel laureate Paul Krugman is more skeptical. He’s concerned investors have put inflation risk in the rear-view mirror too soon, and that easing financial conditions could spark it again. Energy costs have fallen, but food prices remain high and the cost of services is rising as wages rise, making a clear-cut reading on inflation tough. “If financial markets ease a lot based on the perception that the inflation threat is behind, that could actually to some extent reignite inflation,” the economist says.
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‘Nonsensical’: CRA denies taxpayer’s headhunter fees, but judge sees things differently
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Plenty of work-from-home expenses can be deducted, but the Canada Revenue Agency may challenge your claim if a particular expense is unusual, large or not on its list of traditional employment expenses. That’s what happened in a recent tax case involving a Quebec wealth-management adviser who paid a headhunter to find her some help. Tax expert Jamie Golombek has the details of the case.
JUDGE TAKES A SCALP
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Good news if you own Shell PLC stock: The energy giant on Thursday added its name to the list of companies giving more back to shareholders by announcing it’s raising its dividend payout by 15 per cent and buying back US$4-billion worth of shares.
Bad news if you own Canada Goose Holdings Inc. stock: The Canadian clothing maker had been on a roll, rising 36 per cent in 2023, until Thursday, when it cut its full-year earnings outlook, primarily because of economic issues in China and North America. Its stock slumped 23.7 per cent.
Good news if you have a home bias: Add Bank of America Corp. to the list of those that expect Canadian stocks to beat their peers in the United States again this year because it’s easier to find stocks that generate and return cash to shareholders north of the border.
Bad news if you’re an Exxon Mobil Corp. shareholder: The energy giant on Tuesday announced a record US$59-billion profit for 2022, 157 per cent above 2021’s total, but its stock fell because the company’s statement lacked any announcement to funnel more of that windfall into additional share buybacks.
Good news for all of us: The International Monetary Fund is projecting world economic growth to fall from 3.4 per cent in 2022 to just 2.9 per cent in 2023, which is 0.2 percentage points better than it previously expected, as China reopens and other parts of the world show some economic resilience.
Bad news if you own TC Pipelines LP: Its shares fell as much as 7.5 per cent on Wednesday after the price tag on its 670-kilometre Coastal GasLink pipeline project rose once again. The pipeline is now expected to cost around $14.5 billion, up from the revised $11.2 billion estimate last July, which was up from a prior estimate of $6.6 billion.
Good news if you’re a Meta Platforms Inc. shareholder: Investors boosted the social-media giant’s shares by 23.2 per cent on Thursday after chief executive Mark Zuckerberg announced plans to make the company leaner, more efficient and more decisive. Announcing a US$40-billion stock buyback plan on Wednesday helped, too, no doubt. The stock is still down about 50 per cent from its high in September 2021.
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