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The first absolute must-read of the global COVID-19 crisis has been written by Columbia University history professor Adam Tooze. “How coronavirus almost brought down the global financial system” is essential reading for all investors.

The central thrust of the extended feature is that in March of this year, while the world was just coming to grips with the pandemic, the global financial system came as close to complete collapse as at any time during the financial crisis.

Mr. Tooze first establishes the importance of credit as fuel that keeps the global economy functioning. “Business runs on credit. The bits of the economy that do continue to function – the warehouses, the mobile phone providers and internet firms – all need credit. Wage bills for those still working are financed through credit.”

The author then relates how this credit flow was threatened in early March, up to and including the worlds’ deepest, important market – U.S. Treasuries. By March 9, the only asset any global investor wanted to hold was cash, particularly U.S. dollars.

Portfolio managers in all other asset classes were forced to raise cash as investors redeemed their funds. Faced with rapidly dropping prices and low liquidity in most asset classes, these managers began to sell U.S. government bonds. The selling was so intense that the price of Treasury bonds – usually viewed as the safest of safe havens – began dropping almost as fast as equities.

At this point all credit markets were falling hard, raising borrowing costs for businesses, households, and governments. The Federal Reserve had to step in as the stakes were extraordinarily high. Mr. Tooze explains that when credit markets are in freefall, “you face a self-reinforcing cycle of collapsing confidence, contracting credit [availability], unemployment and bankruptcy, which spreads a poison cloud of pessimism.”

Where government bond yields were concerned, markets were moving towards “a situation in which, on top of the pain of the lockdown and the hellish scenes in hospital wards, we also face calls for austerity because the government cannot safely finance extra spending.”

This feature column is long but not long enough. The author goes on to explain that while central banks managed to save the day, the danger to the developed world financial system has not fully passed, and severe stress remains in the emerging markets. All of the details are worthwhile for Canadian investors.

-- Scott Barlow, Globe and Mail market strategist

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The Rundown

My Growth Portfolio has held steady through the extreme market turbulence

There are times when breaking even looks pretty good. This is one of them. Gordon Pape’s Growth Portfolio has performed very well over the years, but he expected to see a sharp decline in the wake of the market crash. That did not happen. Read about his portfolio here.

2020 is not 2009, and Canadians should invest accordingly

2020 is not 2009, warns CIBC World Markets, and investors should not expect a lucrative, V-shaped recovery when the pandemic ends. In a short but compelling research report published Tuesday, CIBC interest rate strategist Ian Pollick cautioned clients that the Canadian economy – and the domestic consumer in particular – is in a much weaker position now relative to 2009 and this will limit any post-virus rebound. Scott Barlow tells us more.

Oddly, gold and stocks are surging at the same time. Investors should be wary

An odd phenomenon has unfolded in recent weeks: Both gold and stocks have surged higher. Prices for bullion hit a seven-year high on Tuesday, while major stock indexes continued their dramatic rally from their steep losses of last month. This combination suggests at least one group of investors will be disappointed. Gold investors, in particular, may want to check their assumptions. Ian McGugan tells us more.

How safe are deposits in those high rate savings accounts offered by Manitoba credit unions?

Some of the best rates on savings are available from online banks operated by credit unions based in Manitoba, not banks. That’s significant if the economic turmoil caused by the pandemic has you concerned about the safety of your deposits. Bank deposits are protected by Canada Deposit Insurance Corp. (CDIC), which has the backing of the federal government. Credit unions have deposit insurance through provincial plans that may or may not have government backing. Rob Carrick looks at just how safe Manitoba credit unions are.

More predictions on what life will look like after the pandemic (and the stocks that will benefit)

Last week, Gordon Pape looked at some of the changes he expects to see after the pandemic is over. They included more people working from home, significantly greater use of e-commerce and an acceleration in the use of robotics. Here are more of the differences he envisages for the post COVID-19 world, and the stocks that should do well.

Others (for subscribers)

Short sales on the TSX: What bearish investors are betting against

Wednesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: Executive chair invests over $2-million in this small-cap stock

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: CEO invests nearly $5-million in this REIT yielding 11%

TSX stocks that have cut dividends since the start of the coronavirus crisis

Troll no more: Energy Twitter group’s big short on shale comes good

Number Cruncher: Five Canadian energy companies set to succeed despite low oil prices

Number Cruncher: Fourteen Canadian value stocks well positioned for a market upturn

Others (for everyone)

Projecting a potential market recovery - when U is also V

Strength of U.S. consumer staples stocks shows cracks as market recovers

Dividend futures bounce indicates despair lifting

Fund managers find a way with words in coronavirus chronicles

How low can we go? Analysts slash base metals forecasts

Dash for cash as most investors expect drawn-out recovery: survey

Health, tech, staples could shine through U.S. earnings gloom

Globe Advisor

Liquor companies have ‘compelling’ valuations as demand rises

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Ask Globe Investor

Question: I see that Bank of Montreal (BMO) has announced a 2-per-cent discount on shares purchased through its dividend reinvestment plan. What is the reason for this?

Answer: It’s not the first time BMO has done this. According to Scotiabank analyst Sumit Malhotra, BMO has offered a 2-per-cent DRIP discount five times since 2009.

In a press release, BMO said it is “supporting its customers in these challenging times in a variety of ways, including through new loans, which the dividend discount will help support.”

By offering a discount, BMO is presumably hoping to attract more shareholders to its DRIP, which is a tool for the bank to raise capital. Every time an investor uses his or her dividend to purchase stock from BMO’s treasury, it’s like a share offering – except on a much smaller scale.

But all those small DRIP purchases add up. In the past when BMO offered a 2-per-cent discount, participation in the DRIP averaged 34 per cent, Mr. Malhotra said. Assuming a similar participation rate this time, BMO would issue more than $900-million in common equity through its DRIP over the next year, he said.

Given the economic disruption caused by the coronavirus and the fact that BMO has the highest weighting of any bank to business lending, “it is reasonable to question whether the bank has opted to bolster capital before the operating backdrop makes it a necessity,” Mr. Malhotra said in a note.

--John Heinzl

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What’s up in the days ahead

Will we be revisiting the March lows in the market? Jennifer Dowty will provide her opinion, and has a couple stock picks for the current environment.

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

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Compiled by Globe Investor Staff