Genus Weekly In Focus – Addressing COVID-19 Concerns Week-10

Mary Lou Miles: [00:00:00] So welcome to our 10th week of the Genus In Focus, COVID 19 video. We are giving Leslie Cliff, our co-founder of Genus a week off. And my name is Mary Miles and I am the Director of Wealth Management here at Genus. And I’ve been with the firm for just over 15 years. And I came to the firm from a previous firm that I worked at, Maxima Investment Management, that was founded by Dave Muehler and Genus bought in 2005. I’m pleased to say that most of the clients at Maxima, I came to Genus and the majority of them are still here today, including a few of you that are watching this video. So I work with a great team of portfolio managers that focus on servicing our clients, making sure their financial goals are met, and that their investment portfolios reflect their values and their their needs. So we really encourage you to reach out to them and talk to them whenever you’re feeling the need to have questions or anything about, like, for example, this video today. So we’re all passionate about what we do. We’re all working from home. And so that’s that’s making it an interesting venue. But we are available to video chat or email or call. So going to my role today is, of course, to redo was Leslie was doing doing is, you know, put Wayne speak to the file. So Wayne Wachell, our CEO, our Chief Investment Officer, and the architect of our investment process. So, Wayne, it’s used all. Let’s start off with now that the world is opening up, economies of the world are open, including Italy, and of course, we here in B.C. are in phase two. What is the market’s done this week?

Wayne Wachell: [00:01:42] Well, as you mentioned, things are opening up. And that was the big news this week, was that we saw mobility rates go up in in across the world, which was good news. And also a bit of a breakthrough on the drug side in terms of a Moderna has potential immunization products. So good news from that perspective, in spite of all the dark news on the unemployment side. That was the big marginal good news this week. And that got the market up and the winners from the previous month or so, the technology health care took a bit of a break and the cyclical areas that had been beaten up represent some value came back pretty strong this week. The financials, the oil and gas and industrials all did quite well this week. And so it was good to see the change of leadership for the week. So the market was up marginally. It’s been going sideways the past couple of days here. There’s been a lot of questions. I think most popular question I’ve seen all week on on with the talking heads has been why is this market so disconnected from the economy right now? We’ll see, the economy right now is the current and in the market looks into the future, and it’s looking six to nine months down the road and saying with all the money being printed, with all the government spending and with the economies opening up, things are going to improve. And so that’s just been going on and on. The only really association of negative news this week was just the more evidence of Chinese-American Cold War opening up here a bit. There was a bill passed in the Senate which was bipartisan, forcing the Chinese tech companies listed in the US to adhere to U.S. accounting standards. And so there’s a bit of a blowback from that. But we think there’s going to be long term tension between those two countries probably right through the election. But generally a good week in terms of marginal news, in terms of economy, opening up our ability, getting better and hope on the on the drug side as well.

Mary Lou Miles: [00:03:41] Hopes always good. What about the just. On that note. What about the Senate Banking Committee issue on Tuesday with Jay Powell and the head of the central bank and stuff and his testimony in front of the Senate Banking Committee? Were you concerned about that?

Wayne Wachell: [00:03:58] No. I think you know, I think, number one, the banks are in much better shape than they were back in 2008. In 2008, the banks were the problem, and that’s where all the mortgage problems were in the banking system. So they were the big problem. They’re not the problem. The problem right now is it’s a health issue where the economy is two different sports we’ve got to close down and then opened back up again. And so they’re not the problem and the fact they’re trying to help the problem in terms of be the ones that are dispersing some of the moneys from from the government spending. So it’s not that concerned. I don’t think there are some issues around dividend cutting you not to cut their dividends, but we’ll see where that goes. But the banks are in much better shape than they were in 2008 and the economy is strong going into this whole slowdown.

Mary Lou Miles: [00:04:44] Well, speaking of dividends on the Saturday report on Business in the Globe Mail, there was an article on goodbye to Fixed Dividend. So I know we’ve been talking about dividends a lot over the past few weeks. So maybe you could speak to that article.

Wayne Wachell: [00:04:57] Well, I guess the argument that the premise of the article is that. Companies should let their dividends go up and down with their earnings. I don’t think that’s going to happen. The dividend policy is really a signal signaling mechanism between management and and  end shareholders. And it gives the managements long term perspective. It’s going to raise or cut their dividends. So I think it’ll remain in place as a signaling device. And however, I’d say some of the cyclical areas, like a mining company, for example, that earns go up and get blown out during during the recession, maybe those companies should let their dividends go up and down with their earnings. But I think for the majority of companies that are stable, growing earnings, they’re going to keep their fixed dividend policy.

Mary Lou Miles: [00:05:43] That’s great. I’ve attended the International CFA Institute Virtual Conference Annual Conference this week, and one of the questions that came up for for in one of the sessions was, will companies that are going to be facing, you know, lower revenues and having to cut costs, will they address, maybe stop or reduce some of their environmental, social and governance initiatives that they started?

Wayne Wachell: [00:06:08] I would say generally if a company has severe solvency problems, they will cut to the bone. Everything will be cut. But in general, I think if companies have a bit of a downturn in earnings, they will not give up their ESG. Is like saying, because our earnings are trending down, we’re gonna stop our good governance. Governance is part of keeping you in business and part of your you make your basic function. So that also a lot of the ESG requirements that firms are focusing on are to do their marketplace demands it of them, so the customer is demanding of them. And so I think they are dear to those. They’ll be probably cut back as per their budget. But I think in general, companies will adhere to their ESG policies or strategies unless they’re in dire shapes where they’ll cut to the bone.

Mary Lou Miles: [00:06:59] Hopefully that’s true. Next, the last question I’m going to ask Wayne the question I got from number of clients and had ads come up on the video, too. How is Genus doing during this panic? We as a firm?

Wayne Wachell: [00:07:12] Well, you know, there’s two aspects. The number one is the operational and the financial side as well. The operational side, you know, I’m very proud of our team. We haven’t missed a beat. We actually we actually raised our game, I think, during this whole process in terms of money management, in terms of how we’re interfacing with our clients. So I’m really proud of the whole team and we’ve done there. Everybody is working from home. I think longer term, we’ll have maybe a quarter of our team will work from home. Technology or technology folks will get to work from home, I think longer term and probably even more so. You know, it’s operationally we’re doing really well. And the team, I think we skipped a beat. Financially, of course, our revenues go up and down with our client and with our clients performance. And so if the markets are down just this quarter, our revenues are down a bit. But on the other hand, we’re saving money by having the office closed. We’re doing less entertaining, less traveling, for instance. I’m doing a shortlist tomorrow. And normally I’d be on a plane flying to Toronto for that but it’s going to be a Zoom meeting. So we’re saving money on that side and less entertainment in terms of entertainment, usually every July, we have a reception for our guests on a rooftop back at the office. That’s not going to happen this year because of what’s going on, obviously, with COVID 19. So we’re going to make a donation of twenty five thousand to the greater Vancouver Food Bank and move that because we know we feel fortunate in terms of how we’ve been doing and how the firm is working and and how we’ve made out financially. So it’s time for us to give up and say.

Mary Lou Miles: [00:08:45] That’s great Wayne, I know that that donation we’re making to the great bank or the bank is being it. Every dollar you make there is it’s matched to three to three times, so, that donation, that’s actually up to 75000. So that’s a great thing that Genus is doing. So I have to say, I heard this great number of times over the past few weeks and it basically thing that we are all in the storm, but we’re in different boats. And I think that really resonates with me. And I think that’s really true of our clients. And that’s why I really encourage you to call your portfolio manager and talk about your circumstances then what we can do for you and make those connections and keep those conversations going. It’s really important. I know that I personally this weekend. Am I, First of all, I am looking forward to getting a haircut. Secondly, I am also looking forward to spending the weekend. We are having our grand new grandson over Oscar, for brunch this weekend. And he hasn’t been in our house the beginning of March. So I am really excited about expanding the bubble and hoping I know that a number of us that are looking also forward to when a few weeks from now and hopefully we can see some of our older relatives at closer up. So I wish we wish you all a fantastic. Thank you for listening. Make sure that you do reach out to us. I look forward to hearing your comments about today’s video. And please stay safe,  healthy and and keep resilient. And we’ll see you next week.