Weekend Reading – Supply Chain Issues

Weekend Reading – Supply Chain Issues

Welcome to some new Weekend Reading: my supply chain issues edition.

You can check out some recent Weekend Reading editions below:

Is paying off your mortgage a mistake?

I believe some financial dividend raises are coming…

I believe cash flow is king.

Supply Chain Issues Abound

Wow, where do we start with supply chain issues…

First, let’s look at the positive. Thanks to the rollout of coronavirus vaccines, the global economy is slowly starting to emerge from the pandemic.

But there are some negatives…and issues are compounding…

The pandemic has left one very concerning issue exposed and unresolved for many manufacturers and small businesses: a very vulnerable global supply chain.

The rapid spread of the COVID-19 virus in early 2020 prompted shutdowns of industries around the world. Rightly so. We needed to get a handle on this thing. Now, nearing 2022, supply chains continue to struggle. There are international border controls and restrictions, and manufacturers and distributors of goods and services who are laying off workers through various vaccine policies (which I agree with by the way) – are compounding goods and services shortages.

Then, our climate crisis. More on that in a bit. 

The pandemic has only highlighted what I’ve know all along in my line of work: how highly interconnected but also highly sensitive global supply chains really are.

Yes, I suppose in some good ways, reliance on global supply chains is a good thing. They lower costs for many businesses – but this is often due to reduced labour costs. I think what many manufacturers and services providers are now fully realizing through the pandemic: any minor disruption in the system can have a massive domino effect. If that disruption happens, costs mount and issues compound far more than the labour costs in the first place.

I’m personally not convinced most manufacturing outsourcing has ever been worth it. Trade is always great – to a point. Businesses can and should try and thrive at home too. 

On a related topic, I know some readers of this site are not fans of any “climate change” language. I get that. But personally, I feel our collective well-being is well into a “climate crisis” situation – a situation that we’re not likely to recover from long-term. Dark words I know. 

Supply Chain edition

Source: Reddit Canada – recent BC flooding disaster November 2021.

Whether you believe in the science behind this crisis is really up to you and the impacts it continues to have on our supply chains, human health and mobility, I can’t say for you. I know where I stand. I will continue to do my part. Here are some examples of our changes with more on the way:

  • We’ll continue to walk to get groceries as much as we can, leaving the car at home. I might drive a few thousand km per year now. 
  • We’ve downsized our home in recent years, as a lifestyle decision but also related to a footprint decision. Our condo/home is now ½ of what it used to be. That includes our utility bills.
  • We try and avoid buying new plastics. We don’t adore the latest iPhones. 
  • We shop at a local zero-waste grocery store often. 
  • We shop local and buy in-season vegetables and fruits for local markets where possible.
  • We recycle our metals.
  • We take advantage of green-waste services in our building. 
  • If we even decide to buy another vehicle, in 2-3 years (?), our hope is it will be either a hybrid SUV or an electric vehicle (should our condo be able to accommodate the latter) – to reduce our footprint even further.

We are far from perfect.

I don’t pretend to have a pure sustainability mindset nor behaviour. But we are making changes for the better. We’re trying. I hope you are doing your part too.

I’m not sure where you might sit on the sustainability spectrum, and I don’t know if you believe we are slowly killing our planet either. The point I am trying to make is: I think we all have a role to look out for each other, care for each other, and leave whatever you are doing today to the next generation in a slightly better place.

I’ll leave your decisions up to you.

More positive Weekend Reading!

OK, if your financial goal is to help your personal finances or your family’s personal wealth-building journey, I have some simple suggestions from dozens of articles available from the Archives:

Step 1 – automate your savings for investing. There is a better way to budget.

Step 2 – live your life and enjoy it. Life moves fast… 

Step 3 – if you ever get a raise, a promotion, or even some money provided as a gift – bank it and see #1 again.

That’s it. That’s all you ever need to do.

From the insightful Nick Maggiulli, Chief Operating Officer for Ritholtz Wealth Management LLC – here is his fear and loathing in cryptoland.

“In fact I see far too many parallels between the DotCom bubble and crypto. There is so much outrageous behavior in these markets that it is hard for me not to see it this way. On the other hand, I also say this as a partial compliment.”

Family Money Saver highlighted their October 2021 update. Wow:

“October was a big rebound month after a bad September, with $23,783 in savings. We added some extra paycheques and cut some expenses this past month.”

Bradford DeLong is Professor of Economics at the University of California, Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations – just told everyone not to worry about inflation.

“The US is not currently in a situation where too much money is chasing too few goods, which would result in a surfeit of demand for labor and likely trigger an inflationary spiral.”

Do you believe him?

Speaking of inflation, and more, check our post on Cashflows & Portfolios about inflation, deflation and what we hope won’t really happen again – stagflation. 

Incredible work. Really. Check out The Sunday Investor and these newsletters. I have no idea where he finds the time. 

“If you’re a Canadian-focused investor looking to catch up on the latest market news of the past week, sign up to receive my free newsletter!”

I do.

My friend Dividend Growth Investor wrote about the power of conviction.

While good, he writes:

The first way that I manage risks is refusing to risk more than a certain percentage of total portfolio value on a given position. I believe in diversification, which means not putting all my eggs in one basket. I also do not believe in concentrating my portfolio in my best ideas, because I do not know which of my ideas today would turn out to be best ideas in 2031. I have a rough estimate, but I also want to assume that I may make mistakes, that the world is uncertain and more difficult to understand than previously believed. This is how I come up with a list of 30 – 50 companies at the very minimum. This means that I shouldn’t really have more than 2% – 3% allocated in a given company. “

I have a 5% rule: no one stock or asset much more than 5% of the overall portfolio. Unless that’s low-cost U.S. ETF VTI or QQQ or course. I’d be happy to see either ETF closer to 10-15% of my overall portfolio value. 

Always interesting when you try and make sense of the markets.

Thanks to Gen Y Money for including some of my articles in her recent round-up – follow her if not already done to be more money savvy!

Sam is flying and snowballing his dividend income. Incredible work:

“For the month of October 2021, we have received $4,090.98 of dividend income and $593.37 of income from writing options.  The total passive income for the month of October 2021 was $4,684.35.  This passive income included both incomes from dividends and option calls.”

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More FREE My Own Advisor content:

How I invest in dividend paying stocks is always found here. 

I keep dozens of free Retirement essays and case studies here.

This includes how these millennials can FIRE at 50.

You can read up about low-cost ETF investing, including how I invest in some ETFs, here. 

Looking for free calculators, tools, or even my support? Check out my Helpful Sites page.

A reminder you can hire me! I also run a site with my partner called Cashflows & Portfolios, a site dedicated to free content for any age but also low-cost services about how to drawdown your retirement portfolio and provide personal, tailored answers to these time-tested questions:

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Reader question of the week (adapted slightly for the site):

Hi Mark,

Hope all is well – and you’re dividends are coming in nice!! I can’t wait for these banks to raise their dividends – it will be like a big fat raise!

OK, this might be great to post on your blog: why not just own ATCO.X and not CU stock? I own both and I probably can’t go wrong long-term owning both but curious about your thoughts and comments on this. I know you get a lot of questions but thought I’d ask!

Thanks so much Mark!

Thanks for your question.

Yeah, I can’t wait for some big-6 bank dividend increases as well. I’ve owned all 6 major banks, collectively, for almost 10 years now. My very first individual stock purchase years and years ago was Enbridge. Then I bought Bank of Montreal, Bank of Nova Scotia and Royal Bank very soon after. 

Personally, I think most big banks are going to show dividend increases in the 10-15% range. That would be quite epic for my portfolio alone. I figure anything higher will be a significant bonus!

Your question was really about owning ATCO.X vs. CU stock. Personally, if I was going to own just one and had to own just one (I don’t own either) I would likely gravitate to the former. The ATCO Group of Companies includes Canadian Utilities (CU) as one of many subsidiaries. I like that “the parent” is involved in all of the following for diversification:

  • Structures & Logistics — including disaster and emergency management services.
  • Utilities — electricity and natural gas transmission and distribution, and international electricity operations.
  • Energy Infrastructure — electricity generation, energy storage and industrial water solutions.
  • Retail Energy — electricity and natural gas retail sales.
  • Transportation — ports and transportation logistics.
  • Land and Development.

Very diversified as a holding company per se. Canadian Utilities Limited, an ATCO company, is comprised of rate-regulated utility operations in natural gas and electricity transmission and distribution – so a bit more focused.

Both stocks yield about the same, mid-to-higher 4% range but equally both stocks have gone nowhere price-wise in about 5-years even though the Canadian market definitely has. 

Not advice of course but I would think renewable companies and large infrastructure companies like Algonquin Power (AQN) and Brookfield Renewable Partners (BEPC) might benefit from more growth going forward. (Disclosure: I own a bunch of AQN and BEPC in my portfolio.)

Thanks for your readership and keep these reader questions coming!

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All my best,

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

26 Responses to "Weekend Reading – Supply Chain Issues"

  1. Personal opinion is that supply chain issues are partially an offshoot of JIT.
    As was explained to me many moons ago, accountants don’t like seesaw inventory levels where a months supply is ordered and drawn down over the following month after delivery. Hence order more often to maintain a lower inventory and therefor less of a dead cash position. High inventory is money that sleeps until the product is sold and it also occupies warehouse floor space which has a certain dollar value as well – warehouse doesn’t have to be as big.
    However if there is a chink in the chain at some point then a store can run out of stock much faster especially on high turnover items. As is, stores are receiving stock every day to replace sold product. miss a day or two and the shelf is empty.
    So accountants are happy because there is less money sitting on the warehouse floor and the warehouse is smaller. Doesn’t apply to all products but to quite a few.
    A personal example is your freezer. You can keep a fair amount of food in there to tide you over store deficiencies and as well make preserves. If you don’t have a freezer because you do not have the necessary floorspace (warehouse) then you can not take advantage of some sales to save money and live on a closer of day to day (JIT) purchases. Nothing at the store? Well no freezer to thaw out those leftovers.
    Living day to day by purchasing on the way home may be better for freshness but there had better not be a chink in the supply chain.

    RICARDO

    Reply
    1. I would agree with your freezer analogy for sure Ricardo. JIT is far cheaper and warehousing is expensive. Too many companies got used to JIT and not enough though about “what if”.

      Reply
  2. There are definitely a lot of supply chain realities hitting home and more specifically how reliant on others we are in general.

    Over the summer, the fires closed the roads out of the Vancouver lower mainland and now with the flood it’s the same. Without the roads, it’s pretty much a closed island when the borders are closed.

    Reply
      1. I think we need a think thank strategy. The pandemic vaccination and the supply chain should be thought out again. We globalized everything and we just saw what happens when the arteries are cut.

        I am not sure if the politicians are thinking like that.

        Reply
          1. For those that haven’t already setup a pantry/water supply for the likely earthquake that’s over due. The recent rain event should highlight the need. Best to be pragmatic about things, as the zombies are here and they are us.

            Owning a fee simple title to a box in the sky, meh. Small home/row house with a yard for a garden, better. Again, fee simple title, as private property ownership isn’t a thing in Canada, sadly.

            For those interested have a listen to Dr Jordan Peterson’s interview on the Rubin Report.

            https://podcasts.apple.com/ca/podcast/do-i-believe-in-god-covid-totalitarianism-the-climate/id1052842770?i=1000541746248

            We are thriving on the Island, and watch the unfolding crisis, not over yet by a long shot.

            Yes on the politicians doing what it takes to get re-elected, lets see how the leadership leads in this very real event.

            David

            Reply
            1. Glad to hear you are doing OK David – wild days.

              Yes, great point: “lets see how the leadership leads in this very real event.”

              I’m watching too!
              Mark

              Reply
        1. Politicians, of any party, only have a four year thinking space. And two of those are tied up with thinking about getting re-elected.
          Don’t think any of them can think farther than two years ahead. And a minority government is even worst.
          If they would get down to administering the monies given to them by the Canadian taxpayers rather than thinking about how to spend it we might be in a better position.
          One would think that a minority government would be better as they all have to put their heads together to govern. Maybe that is not what they are really interested in

          RICARDO

          Reply
          1. Totally agree and always in favour of a minority government for the reasons you cited. Let’s hope this is at least a decent Liberal term. I won’t hold my breath.

            Reply
  3. Good stuff Mark,
    As for the climate crises I am on board with what you are talking about as far as doing your part. I was also happy to see you are not beating the drum about the stupidity of our government’s fetish with carbon tax. Fossil fuels are not going anywhere in the forseeable future and having a government that would rather import blood oil from Saudi Arabia and ignore our own massive reserves is ludicrous. Why are we messing up our own economy just to look good on the world stage? Our Canadian oilsands are producing cleaner product all the time. Ignoring the massive improvements they are making and the fact that we still the product is ludicrous. Trying to reduce our usage is fine but if you live in the rural part of our country electric vehicles are not the answer yet.
    Just my opinion
    Keep up the good work

    Reply
    1. Thanks Gary.

      Correct, fossil fuels are not going anywhere in my lifetime I don’t believe but for the sake of the planet, I do want us to transition away from fossil fuels in the coming decades. Just more sustainable and better for all 🙂
      Mark

      Reply
  4. Hi Mark,
    excellent post especially touching on the global warming issue , this time it touched near home again after having a super heated summer when the temp reached 46C on a day in June here we are in winter with floods, but like you said each one of us have some resonsibility and each one have to do their part no matter how small it is.

    Reply
    1. Nice to hear from you Gus on this subject. I think regardless of what Canadians believe on the climate crisis, I would hope we all want to leave the world in a better place!

      Reply
  5. Climate crisis topic sounds irrelevant to investment but actually all investors need to be more concerned. Since we invest, we need to know HOW companies make money socially responsible so that their stakeholders including investors not affected by their business behaviors. I used to love Nestle’s company but left them after learning their productions having impact on a few first nations communities in Northern Ontario.
    All change must start from each individual. For us, we purchase what we need not what we want so that we can have more money to invest:)). We don’t need to own much to be happy. Thanks for the post. Have a great weekend! Kim

    Reply
  6. As a reader from BC, supply chain is a big issue for us. And unfortunately it is exacerbated by the bad behavioral moves such as hoarding from this society. There are so many empty shelves in grocery stores right now and many gas stations are completely out. I feel like climate change mindset is got to be part of the FI equation now. We know all the fees & interests incurred from keep buying cars or houses are killers to our net worth, but what if you are forced to sell/ renovate your house due to flooding or forest fires? People in the FI community have no problem buying a used car, in cash, and drive until its wheel fall off (me too), but what if that car can’t stand the more frequent flooding/snow storm and you are forced to get a more expensive 4WD SUV that costs more on both vehicle price and gas? Retire in a more “climate-proof” community is probably something to think about.

    Reply
    1. Ye, I can only imagine how wild things are in BC now.

      I have always believed that a sustainability mindset is an enabler to FI.

      I would be curious to know what you believe is a “climate-proof” community? – I’m not sure any major city in Canada will be immune to what is going to happen to our planet in the coming decades. Could be very dire.

      Reply
      1. Hi Mark, agreed that there is no perfect Canadian city that is immune to climate change, but I believe there are communities inside certain cities that will work better than the other. For instance, avoid neighborhoods that are right by shorelines/have extensive history of flooding (sea level rises); too close to dense second-growth forests (forest fires); access is dependent on single highway etc.

        Reply
  7. Thanks! Wow I had not seen those pictures of the highways. They are limiting gas now to 30L here.

    Great list of ways you are going to help with climate change- very inspiring. I’m going to go for more meatless meals for the family among other things to reduce the footprint.

    Reply
    1. Insane and I suspect it might get worse in the coming weeks before things get better…going to take some time. That damage is severe!

      Stay well GYM!

      Mark

      Reply

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