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A spat in the music industry combined with Citi’s view that interest rates will remain low for the foreseeable future is creating the interesting possibility that virtually everything of broad societal value will be turned into a stream of dividends for aging investors.

The music industry animosity concerns Taylor Swift, arguably the most dominant force in pop music today. Ms. Swift is deeply unhappy that the rights to a large portion of her back catalogue are now owned by someone she doesn’t like.

The details of the dispute are (deeply) uninteresting to me but in discussing the issue Jamie Powell, a writer for the Financial Times’ (free to read with registration) Alphaville blog, wrote, “Thanks to the smooth cash flows provided by streaming, mechanical music rights are becoming increasingly appealing financial assets. In the UK, for instance, an investment trust called Hipgnosis has raised £356m with the aim of offering “pure-play exposure to songs and associated musical intellectual property rights.”

It’s the reference to digital music streaming services like Spotify that gives the issue broader importance. The internet has revolutionized countless industries beyond music. Netflix has transformed television programming (to the point where that phrase might already be an anachronism), is displacing malls, and video games are making the jump from CD distribution for consoles to online.

Technology is replacing trucks for distribution and this creates near-limitless opportunities for holders of intellectual property right to create cash streams that can be sold to investors desperate for steady income. A service that, for instance, allows consumers to display a perfect resolution copy of the Mona Lisa in their living room for a fee can’t be far off.

The demand for income will only get more acute if Citi credit Matt King’s forecast is correct. In a June 27 report called The Power of Doves, Mr. King wrote, “secular stagnation is a real phenomenon … the bursting of [asset] bubbles has caused the last few recessions, but in each case the bubble was ultimately resolved by the taking on of still more debt. That each bubble ultimately proved vulnerable at successively lower levels of real interest rates is therefore not a bug, but a feature. .. it seems highly likely that the next recession will also be caused by a sell-off in asset prices, conceivably at an even lower level of interest rates still – and probably long before inflation has risen to reach [developed market] central banks’ targets.”

The low productivity growth inherent in secular stagnation, along with occasional asset bubbles and low inflation, is a recipe for lower and lower interest rates as North American populations age and need reliable cash flows.

The more-than US$12-trillion in negative yielding global government bonds already indicates that the supply of safe income exceeds investors’ demand. The longer this goes on, the more of what society considers valuable will be transmuted into steady dividends or income and investors will be willing to pay exorbitantly to participate.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Dream Industrial Real Estate Investment Trust (DIR.UN-T) The Trust is covered by eight analysts with a unanimous buy recommendation. Jennifer Dowty profiles the REIT.

The Rundown

This is the worst bond alternative ever

Low interest rates - and they could get lower - are a big problem in investing today. Investors are reluctant to put much of their portfolio in bonds or guaranteed investment certificates, and they’re considering alternatives. The worst bond alternative by far is preferred shares, explains Rob Carrick.

Mid-year report card: Tracking BMO’s top 24 stock picks for 2019

In January, BMO Nesbiit Burns’ equity research department released its top 24 Canadian stock picks for 2019. Year-to-date, 12 of the 24 stocks have realized double-digit price returns. Eight stocks (or 33 per cent) have reported modest to neutral price returns, while four stocks (or just over 16 per cent) have delivered negative price returns. Analysts remain bullish on all of their stock picks. Jennifer Dowty reviews how their stock picks have performed.

RBC fund manager Hanif Mamdani shares how he’s navigating uncertainty in the bond market

The $4.1-billion PH&N High Yield Bond Fund, a heavyweight in the fixed income category, is now open to new investors for the first time since 2016. The opportunity arrives at an interesting time: Yields on government bonds are falling amid concerns about slowing global economic activity, which could weigh on returns. Yet with a 6.5-per-cent average annual return since its inception two decades ago, the fund has seen its share of cycles. The Globe and Mail’s David Berman spoke with Hanif Mamdani, the fund’s long-time lead manager, to find out how he’s navigating the current uncertainty.

Five things to know about markets at the half-year mark

That may have been the stock market’s best first-half performance in a decade, but it didn’t really feel like it, reports Tim Shufelt. While the S&P/TSX Composite Index posted nearly a 16 per cent total return, much of the upside was driven by a simple rebound from last fall’s correction, which itself was widely seen as an overreaction. Meanwhile, the economic fallout from the U.S.’s multifaceted trade war cast a pall over the first half and continues to darken the outlook through the rest of the year.

Everyone is scrambling for a safe haven in the stock market, but do they even exist?

What do investors want these days? Oh, nothing much. Just an asset that can maintain its value if the global economy gets the heaves, but can also bounce higher if conditions turn out to be better than expected. Unfortunately, this magical no-downside-all-upside investment doesn’t exist. But people haven’t stopped looking for it, reports Ian McGugan.

Wall Street looks to earnings after strongest June in decades

On the heels of the S&P 500’s best June performance in more than six decades, investors are anxious to see whether earnings can justify further gains as the largest U.S. companies open their books in the coming weeks. The profit picture for 2019 has been weakening since the start of the year as the U.S.-China trade war has dragged on, increasing worries about its potential impact on corporate profit margins. Analysts expect almost no profit growth for the second quarter in comparison with a year ago, versus a forecast of 6.5-per-cent growth at the start of the year. In addition, they expect a gain of just 0.7% in the third quarter, according to IBES data from Refinitiv. Caroline Valetkevitch of Reuters reports.

TD fund manager of billions is turning cautious on markets. Here’s what he’s buying and selling

A much-anticipated agreement by the United States and China to resume trade talks has not changed TD Asset Management portfolio manager Michael O’Brien’s cautious outlook on the markets. Over all, Mr. O’Brien believes the best of times have come and gone for the markets this year. The Globe spoke more to Mr. O’Brien about his investing strategy and recent portfolio moves.

Others (for subscribers)

Yield Hog: John Heinzl’s model dividend growth portfolio as of June 30, 2019

Wednesday’s Insider Report: Executive invests over $500,000 in this stock that surged 5% on Tuesday

Tuesday’s Insider Report: CEO accumulates shares in this dividend stock

Ask Globe Investor

Question: I need suggestions as to how best to proceed. A little about my situation so you are able to best make recommendations. I will be 64 in September, net income per month is $2,000, will be debt free, no RRSPs, and an inheritance which will leave me (after paying off debt) $50,000. So, the basic question, which you have been asked thousands of times is: How best to proceed? – Ray N.

Answer: You say you have no RRSPs, so I assume you do not have a TFSA either. That means you could put the full $50,000 from the inheritance into a TFSA and I suggest you do that. As of Jan. 1, the lifetime contribution limit for anyone 18 or older in 2009 and has not had a plan is $63,500.

These plans work well for low-income people because the money is not taxed when it comes out. That means any withdrawals won’t affect your eligibility for the Guaranteed Income Supplement, which you should apply for when you become eligible for Old Age Security at 65.

When you set up the TFSA, you have to decide how much risk you want to take with the money. A very conservative route would be to keep it all in a high-interest savings account and/or guaranteed investment certificates. You won’t receive much in the way of interest but anything you do earn will be tax free. Alternatively, you might consider a portfolio of mutual funds or ETFs, which would offer more return potential but with higher risk. Given your age I would suggest a 50-50 split between bond funds and equity funds.

--Gordon Pape

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

It’s fortunate that equity markets have the support of loosening financial conditions because the global economic growth backdrop is deteriorating in a hurry, threatening corporate profit growth and asset prices. Scott Barlow will provide an analysis.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Gillian Livingston

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