Friday Market Insights – North American Markets up 1% this week to all time highs, with Mike Thiessen and Sue Talbot
This week's questions:
[00:00] : Intro
[00:25] : It looks like we ended up the week positive. And so can you fill us in on what happened this week?
[01:22] : We also made some changes in our equity portfolios this week. So can you fill us in on what happened there?
[02:39] : I’m just wondering what our current view is on cannabis producers and do you see us owning any of these in the near future?
[04:18] : Do you think the cryptocurrency moves will push digital assets further into the mainstream? And do you see other CEOs following suit like Elon Musk and holding some of these currencies on their balance sheet?
[06:10] : So can you explain what SPACs are and why they’ve become so popular?
Sue Talbot: [00:00:04] Hi, everyone, today is Friday, February the 12th. And welcome to the Friday Market Insights video. My name is Sue Talbot and I’m a partner and portfolio manager here at Genus. And with me this week is Mike Thiessen. And Mike is also a partner and he is the director of Sustainable Investments. So, Mike, let’s get right to it. It looks like we ended up the week positive. And so can you fill us in on what happened this week?
Mike Thiessen: [00:00:30] Sure. So this week, the market was up about one percent and basically the positive news this week was all covered related. So there’s continual slowdown in the overall infection rates in the US around covid. Also, there’s the US is slowly reopening some businesses, which is quite positive and of course, has positive knock on effects. And then the US stimulus bill continues to advance. It looks like today that they that they’re advancing a portion of the bill that will give direct payments of about a thousand four hundred dollars to people. And so they’re planning to pass this bill in the House by the end of this month and then it will go on to the Senate. So overall, positive wasn’t a big week, but it was an up week.
Sue Talbot: [00:01:14] Great, I know we’ve been talking about that stimulus bill forever, so let’s let’s hope it finally gets passed or something happens. So I believe we also made some changes in our equity portfolios this week in terms of maybe some sector changes or country allocation changes. So can you fill us in on what happened there?
Mike Thiessen: [00:01:33] Sure, so we didn’t make any big changes this week, but we did do some tilting at our portfolios around sectors, so our models are showing that we should be more neutral when it comes to cyclical sectors. So we did take down industrials and materials in our portfolios. We’re still overweight. Some economic sensitive sectors like financials, like technology, consumer discretionary. And then in terms of countries, we’ve we’re still overweight the US, but we’re what we’re typically lowering that overall weight to be slightly overweight. And then Canada is kind of neutral to slightly overweight and then international markets are still underweight. So some changes there for this week.
Sue Talbot: [00:02:15] Ok, so so let’s talk a little bit more about the TSX, the Canadian stock market. So it’s been on a little bit of a tear. We’ve had eight straight positive sessions in a row and it peaked on Wednesday at all time highs, but have since come off. But a lot of that has been attributed to retail investors investing in the cannabis sector. And I’m just wondering what our current view is on cannabis producers and do you see us owning any of these in the near future?
Mike Thiessen: [00:02:49] So we don’t own any cannabis companies in our portfolios, certainly not in the fossil free portfolios, we see cannabis as being kind of a hybrid between tobacco, alcohol and pharmaceutical companies. So in our fossil free and sustainable portfolios, we don’t hold tobacco or alcohol companies. We’re not going to be holding cannabis companies unless it’s a one hundred percent pharmaceutical company, which we haven’t found any of these pure play cannabis pharmaceutical companies yet. In the more conventional funds, we are open to potentially investing in cannabis. We haven’t done that yet. Cannabis tends to score really poorly in our financial models. So we’re not investing right now, but it is a possibility for the conventional funds in the future.
Sue Talbot: [00:03:34] Ok, so the other big story this week was around Bitcoin and the crypto currencies. On Monday, Elon Musk tweeted that Tesla had invested one point five billion dollars in Bitcoin and they were going to start accepting Bitcoin as a form of payment. And yesterday, Thursday, MasterCard came out and said that it had partnered up with some crypto card providers and they’re going to allow transaction processing on their network. And also, the Bank of New York Mellon also said that they’re going to start holding and issuing Bitcoin for some institutional investors. So appears that cryptocurrency have come a long way. And so I have two questions for you. So do you think these moves will push digital assets further into the mainstream? And do you see other CEOs following suit like Elon Musk and holding some of these currencies on their balance sheet?
Mike Thiessen: [00:04:31] Yes, I think that this certainly does bring cryptocurrency more into the mainstream, and I think if you are a CEO and you have clients that want to transact in Bitcoin or in cryptocurrency, as long as it’s legal and transaction fees are outrageous, then, you know, why wouldn’t you? And that’s the main reason why why Tesla has decided to move forward with cryptocurrency for transactions is because they predict their clients will want to buy cars with cryptocurrency. So and so I think I think a lot of other companies will follow suit, especially with banks, with with MasterCard, MasterCard and other payment systems, making it easier for for customers, for companies to to go that route. And it’s becoming more mainstream altogether. So yesterday, actually, the Canadian regulators approved a Bitcoin ETF that’s going to be the first ETF in North America around around Bitcoin. So that’s a big that’s going to be really big for for Bitcoin. And of course, more people are moving into Bitcoin, seeing it as much more of a safe haven, more of a gold like investment. So I think it’s going to continue to increase in its overall adoption and is going to make CEOs think, why should we transacting Bitcoin?
Sue Talbot: [00:05:46] Ok, so let’s talk about another type of investment that’s gained a lot of momentum in twenty twenty, and these are specs, SPAC, and that stands for Special Purpose Acquisition Company companies. And they raised a lot of money in 2020 billions of dollars. And analysts expect this trend to continue in twenty twenty one, the popularity of these. So can you explain what these are and why they’ve become so popular?
Mike Thiessen: [00:06:15] Yes, yes, those facts have become extremely popular, the so they’re basically shell companies that go public and all they’re holding is cash. And then this shell company has the purpose of buying a private company. So it’s essentially going to be taking a private company public. And so for a private company, if you’re wanting to go public or you wanted to sell your company, this is quite attractive relative to going the IPO route, because if you go the IPO route, it could take up to two years to actually go from start to finish. Whereas if you go this back route, basically you could be bought by a spack and then the overall process could just take months. And you don’t have to go through all of these obstacles. So it is quite attractive. You still as a private company, you can still get your liquidity, you can still raise money in the public market. So you get all of the upside, but not a lot of the downside. But it is becoming more mainstream. But again, similar to the Bitcoin, in a way, regulators are looking into this and regulators could put a stop to this or certainly slow down the horse back phenomenon if they do want to put more rules and regulations around around this whole process. So but if if there isn’t more regulation, I don’t see why the Spaak phenomenon would continue.
Sue Talbot: [00:07:36] Ok, thanks, Mike. That’s a great explanation. So I think we’re going to end it here. Thanks, Mike, for your comments and thanks everyone for watching. And if you have any questions, please reach out to your portfolio manager or you can also reach us via our website. And before we sign off, we want to wish everyone a happy lunar new year and also a great family day on Monday. So thanks again, everyone, for watching. And we’ll see you back here next week. Thanks, Mike.
Mike Thiessen: [00:08:04] Thanks.