Five Questions for Bill Richardson Part 2

Hello everyone. Hope you are keeping well. Below is my second installment of Five Questions for Bill Richardson…questions that I have received over the past couple weeks from clients and advisors alike. Feel free to pass it on and give us a shout if you have any questions.




Five Questions for Bill June 10th


1. Although equities tend to get most of the attention, most portfolios are a blend of equities and fixed income or bonds.  With interest rates at historically low levels, how are you investing the fixed income portion of portfolios?

As many of our clients are Baby Boomers, it seems as though this demographic group has been on the right side of growth in stocks and real estate prices but always on the wrong side of interest rates.  When Boomers were young, buying houses and raising families, interest and mortgage rates were high and the cost to service borrowed money was high.  Now that many Boomers are retired and looking to generate income from their investments, interest rates are low.

In a portfolio, bonds have traditionally played an important role as they are “negatively-correlated” to stocks.  That is, when stocks go up, bond prices often go lower (interest rates go higher) but more importantly, when stocks drop bond prices rise as rates drop.  It’s a bit complicated but government bonds are “negatively correlated” but corporate bonds are not as they tend to trade more closely with stock prices.

With rates at historically low levels, we have been forced to find an alternative to generate return. We have been using a product called Rockridge Private Debt.  Rockridge is a multi-manager approach, which we think is important as we want to be very diversified.  It invests primarily in private mortgages and loans to private corporations.  Yields, after fees, have been in the 6% range and the group of managers have provided very stable returns, even during the COVID-19 crisis. In fact, the portfolio has not had a negative month since inception (28 months positive, 0 negative months). 


2. Looking back to equities, energy prices have been very volatile.  What is your view on energy stocks?

Energy prices have been very volatile, dropping from $65 per barrel at the beginning of the year to a panic low, where prices dropped below zero.  Since then, they have recovered to just over $40 over the past week. 

In my view, energy stocks are much too difficult to predict.  The price has been declining since 2008 and prices were trading sideways since 2016 before COVID-19.  To make money in energy stocks, you often need to time the market and decide when to get in and when to get out. As we all know, timing the market is a difficult if not impossible task especially when you have to be right twice.  It is much easier to invest in companies that have consistent and predictable earnings growth and are in positive price trends. Having said that, we did make a value purchase in Parkland Corporation, a Canadian company that distributes and markets fuels in many of the gas stations throughout North American and in the Caribbean. The stock has performed quite well for us. We also held a position in an energy etf that we recently sold for a sizeable gain. While we may have left some money on the table if energy prices continue to climb, we are happy to move on from the volatile sector with some profits.    


3. It seems as though the Canadian Dollar has been tracking energy prices.  It had a big dip when stocks dropped and seems to have recovered recently.  What are you seeing there?

The Canadian Dollar has been on a rollercoaster ride in 2020.  It started the year in the 77-cent range and dropped to 68 cents during the COVID panic.  It has since recovered to 74 cents.

The Canadian Dollar is actually a good “parachute” for Canadian portfolios as most portfolios hold large US Dollar positions – stocks like Apple and Microsoft.  When stocks drop, there is a “rush to safety” which often results in selling Canadian Dollars to buy US Dollars. This serves to reduce stock market losses for Canadian investors.

As stock and energy prices have recovered, the Canadian Dollar has risen. This serves as a headwind to performance. The Canadian Dollar has moved up a fair bit in a short amount of time recently so it wouldn’t be surprising to see some weakness in our Dollar in the near term.  


4. The recovery in equities has been very strong.  The economy is just starting to reopen, and companies will be reporting big losses.  How is this going to impact earnings over the next three to six months?

When we look at a wide range of companies, some stocks have performed very well since the panic lows.  Stocks like Amazon have done well as people have been forced to turn to online retailers.  Stocks like Zoom have done very well as companies and individuals have turned to online vs. in-person meetings.  Energy stocks, as discussed earlier, have recovered but not as quickly and even some long-term strong stocks like the Canadian banks, have been slower to recover.

What is going to happen in the future?  I won’t even pretend to try.  We didn’t predict the pandemic or the strength of the recovery.  Instead, we focus on buying and holding great companies with strong balance sheets and earnings growth that are trading at reasonable prices.  We watch charts to help us identify strong trends and make changes as our rules are challenged.  


5. What sectors have tended to be the leaders in this recovery?

Not surprisingly, two sectors have led the way over the past year – Technology and Healthcare.  I say “not surprisingly” as they have been the leaders over the past 10 years.  Healthcare swooned a couple of years ago but has recovered well.  With 88 million Millennials in the US between 15 and 35, consumer stocks have been strong as well. 


Thanks for reading this version of “5 Questions for Bill Richardson”.  If you enjoyed reading it and would like to share your thoughts with Bill, give him a call at 705-797-4950 or by email at  If you know anybody who might benefit from this article, please forward it to them.