On Wednesday, the S&P 500 was down 4.4% and Toronto was down 3.8%
As COVID-19 cases and deaths continue to rise and as the shutdown gets more extensive and looks to last longer, markets could continue to fall. Offsetting that is the impact of the many government programs to assist businesses and consumers as well as potential good news in terms of more rapid and higher volume testing and possible treatments.
For Canada any end to the Russian / Saudi oil price war would provide a boost to the market.
Looking to deploy some cash very slowly, and with the market down, I bought a few more shares in VISA inc. and a small amount of Royal Bank.
Regarding Boston pizza Royalty Income units: I had been watching for an announcement that the distribution would be further reduced or suspended. In fact they made that announcement on March 23, but I only noticed it today. The price did not drop on the news becasue it had already dropped. At a current price of $6.31, the units might be a good investment. But I am not too keen on it. Presumably most of the BP restaurants will return to business before too many months. But some will likely be closed. And the remaining units will likely face lower sales for a long time. Whether the sharply lower price is enough to offset that is not entirely clear. They do have debt but their interest costs have been relatively modest. It’s probably a reasonable one to speculate on but I would get over exposed to it. With zero distribution at this time the price could possibly drop more yet.
The latest rail car loading reports show continued weakness in the U.S. The traffic in Canada has held up better but is declining. Auto and auto part shipments in both countries have plummeted. Oil by rail from Canada is also declining.
I am taking a look at Intact Financial which I think could be a reasonable investment. It has a strong balance sheet. It’s investments are mostly in bonds and so it should not have suffered much on investments. Insurance premiums are still accruing although they will likely face some bad debt. They may also benefit from fewer claims as people are driving less and residential water damage is less likely when homes are occupier 24-7.
There was an interesting development today when U.K. banks were ordered by the regulator to suspend their dividends. It seems unlikely that would happen in Canada where the big banks are strong. But ultimately, bank regulators have a duty to protect bank depositors (including over and above the CDIC limit) and the interests of bank investors would be subordinate to the interests of bank depositors. The point is that while banks are probably going to recover and are unlikely to cut dividends, nothing is impossible with this economic shut down.