Why Being Old Means I’m Not Upset by the Plunging Canadian Dollar, the Stock Market Meltdown or the Crude Oil Price Crisis

The waves of negative reporting on the state of Canada’s economy and even the world’s economy this week have been relentlessly pounding away at the walls of my financial sense of security. So far, however, they haven’t eroded my sense of calm: Because I’m old, I’m not particularly worried by the drop in the Canadian dollar, the stock markets pullbacks, or the ever-declining price for a barrel of crude.

Shouldn’t the Low Canadian Dollar Upset Me?

Actually, I kind of like it when the Canadian dollar declines against the US dollar. I often sell to the US and when I get paid in US dollars, I make a larger profit in Canadian terms for my work. I also have many relatives involved in producing goods that are exported to the US who also benefit from this. And other friends who work in the tourism industry who benefit when Americans decide to vacation “up here” to get an extra 25% or more for their dollar. (Don’t tell them that our rack rates for hotel rooms are often 50% higher than for a similar room in the US, so they won’t be saving much, ok?)

I am old enough to remember all the wailing and gnashing of teeth when the dollar rose to parity with the US dollar. It would spell doom and disaster for all of Canada’s “Branch Plant” operations. And unfortunately, in fact, it did in many cases.

The dollar is significantly down against the US dollar compared with a year ago but it’s been this low, and lower, within my children’s lifetimes. To me, with the hindsight of older age, I can see that it’s a cycle and that it will continue to change over the next 20 years too. I will try to buy things produced in Canada or in places where our exchange rate is reasonable. I will not travel to the US or to destinations that price based on the US dollar, but then I rarely did anyway. I will suffer through paying more for imported food, books and so on. But I am not particularly upset about it.

Am I Going to Sell All of My Stocks Since the TSX, the NYSE, the Dow Jones and Every Other Index Seems to be In Decline?

The markets have also been dropping steadily for what seems like forever. Some pundits are even screaming that everyone should retreat to cash now, before it’s “too late.”

Yawn.

There is nothing I can do personally about the stock market indices. I own some XIC and I will look at its market value and its book value and feel gloomy for a minute or two. But I won’t sell it. I didn’t invest in it to make a quick buck. I don’t need the cash from it now or anytime soon. Based on all of the news so far, I see no reason to think it will stop paying its small annual distribution of 2-3%. That’s the same or better than I can get for cash deposits. So I’ll just leave it alone.

When I bought my first index-mirroring mutual fund in the 1990s, it did very badly some years too. But over 20 years, it returned about 7%. Leaving it alone worked. I’ll try the strategy again here. And at least this time my fees are much lower!

Much of my other equity investment dollars is in individual shares in companies. I’ve looked through my holdings and don’t see any reason to make changes. They seem to be in reasonable financial shape. They still are making products, selling orders and generating revenue. They have not announced any dividend cuts. In most cases, their market values are also still above what I paid for them, even compensating for the time value of the money I invested. So no worries. I don’t want a bunch more cash. I’d like to get the dividend income if they can keep generating it. So I’ll hold and hope.

What Gives a Deeper Sense of Security During This Downturn?

My extremely conservative approach to investing is also helping me through this rough patch. We have a huge amount of our portfolio in fixed income, especially in GICs and high interest savings accounts. While this money generally is just breaking even with inflation, it is also still there ready to spend if needed. Its “principal” value has not declined.

If we want to, we could re-allocate some of this cash to equities. I won’t yet because I have no idea what is going on with the markets. So I’ll stick to our planned asset allocation. New money might be invested in equities, though, to keep our asset allocation on target as the market value of our existing equities drops. We’ll see.

How Low Can the Price of Crude Oil Go?

Well, I remember working when the price of crude oil fell to $7 a barrel for WTI. So that’s my personal benchmark. I’ll be surprised if it drops below $7 but I won’t be surprised otherwise. If the Saudis decide to really open their taps, they could drop it to that price quite easily.

When I worked in Calgary, we used to joke that instead of pins commemorating another 5 years of service, you should get a bar for each layoff and downsizing you survived. So you’d have a little medal saying “I survived” where you could add new bars below it: the Purge of ’XX; the Diagonal Slice of ’YY; the Right Sizing of ‘ZZ” etc.

Oil prices have NEVER been even remotely influenced by anything Canada does. I can’t see why they ever would be. So again, you have to shrug it off and keep walking forward. There’s really nothing else you can do. (Ok, maybe get a few extra gasoline storage tanks and fill up while the price is low.)

Alfred E. Neuman and I have the same approach to all these negative news stories. There’s still work to be done, housework to be done, birthdays to be celebrated, sidewalks to be shoveled and people who need hands-on support. I’ll save my worrying for those real issues.


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