Five things to be positive about amidst the market doom and gloom

Peter Hodson Mar 15, 2022
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Your U.S. investments are not down as much as you think, in Canadian-dollar terms

After my last, somewhat depressing column about how hard the market is this year — the start of the year is the second-worst in 122 years, behind only the peak of the financial crisis of 2009 — I thought I would try to be more positive. 

But then the war on Ukraine started, markets plunged further, sending me further into misery. But I dug down deep and managed to come up with five positive talking points despite the doom and gloom everywhere. Some were a bit of a stretch, as you will see. 


The Canadian energy sector is on fire: With a 17-per-cent energy sector weighting, the S&P/TSX composite is one of only a few stock exchanges in the world that is up so far in 2022. It is very common to see some Canadian energy companies up 50 per cent or more, just in 2022 alone. With supply issues, and a (supposedly) strong economic recovery, oil prices are very close to breaking all-time records.

I was born in Calgary and it is good to see the sector and city getting so strong once again. We have great respect for those investors and fund managers (we’re talking to you, Eric Nuttall) who had the fortitude to hang on during the dark days of early 2020 when oil traded at negative prices and most energy stocks fell 50 per cent or more in a matter of weeks.  


Junior gold speculators are finally making bank: Junior gold investors are a funny bunch. They are willing to give capital to companies that, essentially, often consist of nothing more than a couple of geologists, a donkey and some exploration properties. Junior gold companies always need money, and their stocks can languish for years. But then gold goes on a run, and dreams of the motherlode return. 

At times, junior golds can fly, and many are up 50 per cent or more this year as gold hits new highs and everything else, aside from energy, goes into the toilet. I say good for these investors: it is a high risk, high-stakes game, and when the sector languishes, it is very painful. You’ve earned some good times. Enjoy the party, while it lasts.  


The more the market declines, the closer we are to the bottom: Admittedly, somehow turning this into a positive aspect of the market is a very big stretch. But it is mathematically true: the more it declines, the closer it is to the bottom. 

The current market reminds us a bit of early 2009. As noted above, the stock market had its worst-ever start that year. Markets went down so much that investors became immune. I remember thinking, “Oh, the market was only down one per cent today, that’s a pretty good day.” It did seem like markets were going to zero in February 2009. But then, suddenly — BAM! — we went on a 10-year stock market party, just like that. 


Corporations are more confident: Just when things were looking bleakest this week, Intertape Polymer Group Inc. announced it was going private in an all-cash bid from ClearLake Capital Group LP, at $40.50 per share, a $2.6-billion deal at a 70-per-cent premium to the market price.

Corporate deals have saved the markets before. If short-term investors don’t care and drive prices down 65 per cent, long-term thinking corporations start seeing value. The takeover price of Intertape was not above its stock’s all-time price, but it’s higher than any price it has traded at in the past 23 years.  


Your U.S. investments are not down as much as you think, in Canadian-dollar terms: Yes, this is another stretch, but, again, it’s a mathematical fact. But it depends on the day. This year, the Canadian dollar, versus the U.S. dollar, is slightly up. But in recent weeks, the Canadian dollar has been much weaker, despite the surge in oil prices. 

The U.S. dollar is seen as a safe haven in times of turmoil, so it has had a lot of relative strength in currency markets. Your U.S. stocks might be down eight per cent in the past two weeks, but perhaps only seven per cent in Canadian-dollar terms.


Take care,

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Mar 19, 2022
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