As we head into year two of the COVID -19 pandemic Financial Planners Rob McClelland and Mike Connon take a look at the accelerated rate of change across the many industries that directly affect our day-to-day lives. While in many cases there have been huge advances that have required companies to pivot their sales and service offerings it has also in some instances come at a cost to the consumer. Join us today as we look at what is happening in the automobile industry, the housing market, the job market and, more.
Transcription
Rob (00:00):
Hello, this is Rob and Mike from The McClelland Financial Group of Assante Capital Management and this is Think Smart with TMFG. Today on Think Smart with TMFG, Mike and I are going to be discussing that COVID has changed everything. Mike, we’re moving into almost our second year in this pandemic. It all started January of 2020 when we started hearing rumblings out of China that there was this virus that was coming our way. I think it might be interesting to just reflect on how much things have changed in the last two years. I thought what are the big things in our life that play a role? And so things like automobiles, and jobs, and housing, and all those things, how have they changed? So let’s explore that a little bit.
Mike (00:59):
It’s not necessarily a bad thing too, is it?
Rob (01:02):
It’s not. We’ve made some huge advances.
Mike (01:04):
Change is an important part of life. And we know that for centuries, there’s always been change. This was just rushed upon us pretty quickly. We’ve had to adapt a bit quicker than usual, but there’s good and there’s bad in all this, so.
Rob (01:18):
So let’s look at automobiles. First off, if you wanted to buy a new car today, there’s no cars on the lot. You’re probably six months to 18 months before you can get your new car.
Mike (01:29):
I think it’s your best way to get a parking spot right now is parking on a used car lot because they’re all vacant, right?
Rob (01:35):
We drove by one recently. There were literally three cars in this giant Ford dealership. It was crazy. Used car prices are up 20 to 50%. So if you’ve got a car that works, you can get real value for that car. Why is that happening? What do you think is going on there?
Mike (01:54):
Well, there’s shortage of available on new cars. So people can can’t get new cars, so they need to replace them. So if you have a car that’s two years old and someone has a 10-year-old car they have to replace, guess what? They’re not going to be able to get new ones, so they’ll buy one that’s two-years-old. So instead of getting those discounts, like we used to see, that were, let’s say, after two or three years to own a vehicle, they’ve dropped a 50% of their price. Now, they’ll be 75% of their price because there’s no new ones available, no new inventory.
Rob (02:22):
So you’ve got no new inventory, you’ve got people wanting to use their car because they don’t want to get on public transport, they don’t want to get on a bus or a subway because of COVID, what else has changed? The move to electric. In fact, North America is behind Europe and Asia in this move to electric. We’re just starting to catch on. That’s going to change everything in the next five years.
Mike (02:45):
My friend’s just rented a Tesla. They went away and they were able to rent a Tesla. And they said, “He has a Tesla at home, so we need a rental,” he’s used to it. And he said, he rent a Tesla, and he said, “It was a great experience.” He went down, I think, it was in Florida. I think it was Hertz or whoever does that. And yeah, he said it was perfect.
Rob (03:04):
So the move to electric is the move away from gas. That’s obviously going to have an impact. So the automobile industry has changed dramatically. And it will be interesting to see who are the leading companies when we move to electric. My guess is there’s going to be some new leaders. We know Tesla’s off to a great start, but Toyota, they’re moving very quickly to be the leader in electric cars.
Mike (03:29):
This change is going to happen way faster than anyone thought. When you start to talk to people in the industry, the auto industry no longer has any interest in putting any research or development into gas cars. So very quickly, gas cars move so much advanced since the ’70s, ’80s, ’90s how great we’ve got to the gas engines. Nothing goes wrong with cars anymore. It’s perfect, but the companies are no longer putting development into it. This is all going to electric. They know where the future is. And if you told them the future, there are 10 years, they say, “Well, why am I going to spend 10 years still developing gas engines?” All of their research is going to go on electric side of things.
Rob (04:03):
Let’s talk about housing. Your house is often the most important thing in your financial life. Let’s call it: “Buying your own home,” and almost two thirds of people in North America own their own home. So it’s a pretty substantial investment for those people. What’s happened to housing prices?
Mike (04:24):
Up huge, continue.
Rob (04:26):
Continue? Year over year, during this pandemic, there was an initial drop. And ever since then, it seems to be going up 10 to 20% a year and it doesn’t appear to be stopping.
Mike (04:36):
Yeah. Bubble’s always established after the fact. We know this is a bubble. It could be, but we might find that Toronto was just underpriced for years and we never realized it.
Rob (04:46):
We can’t build the houses fast enough. It takes time. You got to go through government regulations to get those houses built. So it’s going to take time for supply to match demand. We’ve also seen the change in housing: cottages are way up, farms are way up in value, because people are now realizing they might be able to work permanently from anywhere in the world.
Mike (05:09):
And you can’t just build house without infrastructure. Sometimes, people don’t understand that and we can see how long infrastructure, how long have they been talking about a subway up here? It’s been going on for 20 years, this conversation, right? And it will still be probably another 10 or 20 years before it happens. So these infrastructure changes to support the housing are a long term investment on government’s behalf, and government’s too cheap to make some of these investments too.
Rob (05:33):
Difficult. Jobs. Jobs are in your financial life. Having a job is pretty important if you’re not retired. So how have jobs changed?
Mike (05:43):
Well, there are job shortages everywhere. It’d be very hard if you were willing to work to be unemployed right now. I mean, everyone is looking for good quality people and it’s driving prices up like minimum wage. We used to worry about minimum wage when we say, “Oh, it’s gone 15.” Now, you can barely get someone for 15. Minimum wage is no longer an issue because you have to pay more than minimum wage.
Rob (06:04):
I recently heard McDonald’s had to pay some of their employees $30 an hour to work in McDonald’s. They know they’ve got the demand. They need to get the staff in there to run the thing. And what’s going to change is if they can’t get the staff, eventually, they’re going to figure out how to automate the thing.
Mike (06:23):
Yeah. I mean, inflation’s going to hit that fast food industry pretty heavily. I used to go and eat lunch for 5 or $6. Now, to have a lunch at a McDonald’s or anything, you’re $12 or so to eat.
Rob (06:37):
We hear about people quitting work. Yeah, that may be overstated. Some people are definitely retiring early because they can. Everyone wants to work from home. We’re struggling getting new service team members onto our team, because they’re saying, “Can I work from home for the rest of my life?” And we’re saying, “No, we can’t guarantee that,” and they’re saying, “Well, no, thanks. I don’t want the job then.”
Mike (06:58):
Yeah.
Rob (06:59):
That’s difficult. And maybe you’re going to be able to work from home for your rest of your life. I’m just not sure it applies to our industry yet. The other thing that’s changed is because of the technology today, you can hire people from anywhere. So we used to say, it’s too expensive for us to hire people from Toronto. But now, we’ve got our first employee from Montreal who knows within three years, we may have employees across the country even though we’re still based in Thornhill, Ontario.
Mike (07:31):
The problem they’re going to find is what people don’t realize as they push this work-from-home idea, it’s not something that we’d ever look toward. But when I watch other industries and what goes on is once you’ve established those jobs, it can be done remotely, there’s no use in paying Canadian wages anymore. Canadians want 60, $70,000 a year. Tons of people in India that work for $10,000 a year and live a good life over there. Same skill set. If you no longer need to come into work and you’ve turned this into a remote job, they don’t realize the risk they put their jobs in the future and it’s going to happen.
Rob (08:03):
We’ve already seen it happen with larger companies. Companies like us. It’s a little more difficult to do, but technology will solve that issue too.
Mike (08:11):
Credit card companies, if you call a credit card company, most of the time, you’re not talking to someone from Canada. They’ve already figured out the outsourcing and now, they’ve forced every other company to make that working from offsite available. And once everyone understands that, they’re going to realize they can outsource pretty quickly.
Rob (08:29):
So you mean to say, I could have three service associates at $20,000 each as opposed to one at $60,000, and they speak English, and they’re good on the technology? That becomes a choice at some point.
Mike (08:43):
Yeah. There’s good education systems all over the world.
Rob (08:46):
Restaurants. That’s an industry that I feel so sorry for. I think it’s because it’s so visual for us because, especially in Ontario, which seems to be the shutdown capital of the world, all we see is these things are out of business.
Mike (09:01):
Well, both of us started working in restaurants together, right? This was our start. Busy restaurants that were packed. They’d be COVID nightmare if you look at them today. At the bar, I think there were 10 deep were crawling over each other to get a drink. But nowadays, I don’t know if we’ll ever see that again.
Rob (09:17):
It’s going to be a long time. Restaurants have had to go online. A small little business has had to create an online website, an online food delivery. Food prices have gone way up. They can’t get staff, they can’t hire staff. It’s a tough, tough business. And a lot of them have already gone out of business. A lot of them are going to go out of business. And so, we used to be able to go out to a restaurant on a Friday or Saturday night. No problem. That may become a difficult thing to do in the coming years.
Mike (09:51):
I was up in Huntsville this year and I went to go to the Boston Pizza up there and they said, “We don’t have staff,” a sign on the door that says, “We’re sorry, we just don’t have staff.
Rob (09:59):
And that’s a big chain that can afford to pay reasonable amount of money.
Mike (10:03):
Yep.
Rob (10:04):
Delivery. Delivery has completely changed. Now, my wife or she heard me say this, she would probably… I don’t know what she would do, but there was a package when I went out this morning to look for the newspaper and the newspaper wasn’t there because of the snow, but there was a delivery package and it was really small. It was in an envelope. So I picked it up and it said for Ingrid. So I gave it to her. I said, “What’s that?” And she goes, “Oh, I ordered some vitamins.” That’s how far delivery has come. So you can order vitamins and they arrive at your house within less than 24 hours. Now, I don’t know whether that’s a good thing or a bad thing with global warming and all that, but certainly, we didn’t have to get into our car and drive around.
Mike (10:45):
In Canada, people can order marijuana and the government would deliver it to you in the next day. It’s funny where this stuff has moved. I mean, we have alcohol deliveries, we have all of this stuff, because people aren’t going out as much, but this has become a new norm. I mean, Uber Eats, the kids. I found it stupid what they order. Kids will order… they’ll pay $10 to have a $5 burger delivered to them. But that’s where the world has moved now.
Rob (11:11):
The industry leaders used to be UPS and FedEx. Amazon is now the leader. They have set the new bar in delivery. We all have different expectations. I get so frustrated with UPS, and FedEx, and DHL making me pay these payments. I got to pay them at the door. They won’t deliver unless someone’s there. It’s endless frustration. And yet, companies like DoorDash, Uber Eats, you can get your clothing, your groceries, your beer, as you said, your marijuana.
Mike (11:40):
Remember when we got to see the guy who started Zappos? I think it was a shoe company originally. They do shoe deliveries. I thought it was a bit of an insane idea, right? Even when you go back to Netflix, the idea of Netflix started off where they’d mail you a video and you’d mail it back. The insanity of thinking that this would happen and what it’s grown into, just because of the delivery. Zappos’s just amazing. You order a pair of shoes. And I always thought it was weird because you always like to try on shoes, but I’ve taken a size eight all my life. I’ve never taken a nine. I’ve never taken a seven. So the reality is if I like a shoe, it’s going to be a size eight, right?
Rob (12:20):
I used to be one of the naysayers. I used to say, “Oh no, people need to go into the shopping malls and try stuff on,” and all that. I order a ton of my clothes today online. I find brands I like, the sizing works, they launch new stuff all the time, I get a notice and I click. Two days later, I’ve got it in the house.
Mike (12:37):
Well, remember we got hooked on this a long time ago with Maxwell’s Clothiers. Every time you see us this in the office, our shirts between Carlo, or Rob, myself, everyone in the office, we use this company called Maxwell’s Clothiers. And they’re made over in Hong Kong, the shirts, custom fit, great quality better than anything I’ve ever found in Canada. The delivery used to take a while, it used to take two months, but they were all custom made shirts at a cheaper price than you buy in Canada. It’s just getting easier to do.
Rob (13:07):
Healthcare. That’s one that I would say has gone a little backwards, but maybe it’s good. You don’t need to drive down to your doctor’s office all the time. Now, a lot of the doctors are still on the phone. They haven’t moved to things like Zoom that would make doctor appointments much easier. I know some have, I know mine hasn’t. I’m endlessly frustrated that we’re either have to drive down to see him or we have a phone call. A phone call is pretty useless.
Mike (13:32):
Yeah. I’ve been pretty lucky just with our experience and we’ve dealt with Princess Margaret and stuff like that. It’s been Zoom appointments from doctors. It used to be when we used to have to go… my wife’s always been going through the stuff when we used to go down to Princess Margaret. We’d have an appointment to get blood drawn at 8:00 in the morning and we’d leave the house at 6:00 in the morning to get there at 8:00. And then at 1:00, they’d have an appointment by the time they had blood work done to see your doctor. They were very slow and it’s understandable because the hospital’s busy, but it would take between one. Usually, it would be 3:30 before they saw you. And by the time you get out of the hospital was five o’clock at night. And we used to get home after downtown traffic at 7:00. So I was leaving at 6:00 in the morning to get home at 7:00 night. It was just one of my hell days. It was a terrible day. Nowadays, we go in, we get the blood in the morning, we drive back home. And amongst the doctor’s convenience, they’ll give us a call over that date. It’s a Zoom call and it works very well. It saved us a ton of aggravation and a ton of time.
Rob (14:34):
Definitely. At some point, you’ll be able to go somewhere else and get the blood work done and they’ll be delivered to them. You might just be able to go down to your corner LifeLabs and it gets sent, uploaded right away.
Mike (14:44):
Yeah.
Rob (14:45):
Travel. Travel’s been hit hard. Like the restaurant industry, you have to take COVID tests, you have to upload and download all these different apps, and so on. Cancellations, you’re on a flight and suddenly, you get a notice the day before that the flight’s now been canceled or it’s moved three hours. Restrictions, you name it. Travel is difficult to do. I’m still doing it. I still will do it, but it’s like that change when we went through 9-11.
Mike (15:13):
Yeah.
Rob (15:14):
We had to go through that security line. There’s a whole new element of travel that makes it difficult.
Mike (15:19):
I’m going to throw you one thing that wasn’t even in our list: sports. Think of the change in sports that we go through now. From hockey games, last night’s Leaf game was postponed and you’re trying to figure out when you’re actually going to be able to see a Leaf game. I don’t know when we’re going to be able to go to a Raptor game. But it’s funny, you watch this whole sports unit. They’ve managed to continue to keep the seasons going. They’re pretty open in the US, but even in Canada, they’ve managed to keep everything moving. Football seems to be as popular as everybody hasn’t slowed them down at all.
Rob (15:49):
No.
Mike (15:50):
But they’ve changed around in Canada. We’ve just changed the spectators and the rules around everything.
Rob (15:55):
And then the field we’re used to: investing. A lot has moved online. People are now accessing their accounts online. I was talking to a 84-year-old client today. He goes online once a week to check on his accounts. He tells me he’s antiquated on the cell phone. He still uses a flip phone, but he realizes he may need to make a change on that as well. You’ve got companies like Robinhood in the States that have made a big dent in young investors. Questrade, we keep hearing about Questrade and how great they are and their prices are 30% lower. I actually think that’s gone backwards. Questrade started as a company that was really providing a good service to investors and diversified portfolios. And now, it’s become nothing but a trading platform so people can buy individual stocks. You’ve got crypto, Ethereum, and all of those crypto currencies that are out there. So the investing world has been impacted a bit. What about government, Mike? How’s that changed?
Mike (16:57):
Well, we’ve seen interest rates go to record lows and they’re probably going to start to move up. I mean, governments have had to make adjustments along the way. We’ve seen government handouts come out. And again, we know those have to come to a stop along the way. We’ve seen CERB. The governments have done a decent job at emergency relief. I don’t usually give the government credit for a ton, but I think they’ve done a good job at making sure money was available and this didn’t turn into… it could have been a real mess. If the government just ignored everything, everything said, “We’ll just let everyone go on their own,” there could have been a lot of problems. I think the money that was made available helped us get through this pandemic.
Mike (17:32):
I think at a certain point, it has to stop and they have to wean people off it, but I do believe they did a good job at creating very quick support to help people out. A small business support was also big. They create loans and things for people who are running small businesses. They’ve tried to help the restaurants in areas like that, that have been hurt. So they’re trying to keep everything afloat. They’re trying to make sure… I don’t know if they’ve done a ton for landlords. I know for tenants, they’ve done a ton to make sure tenants can get by. I guess, the landlords have had a good few years, so they’re going to take the brunt of it, but the tenants have had good protection in the last two years.
Rob (18:07):
The landlords probably have suffered a little bit on the income side, but they’ve certainly made it up on the capital gain side and the growth of the value of their investments except maybe office towers downtown.
Mike (18:18):
Yeah.
Rob (18:18):
But that’s another story. That brings us to the end of another week. Thank you for joining us. This is Rob and Mike with Think Smart from The McClelland Financial Group of Assante Capital Management, reminding you to live the life that makes you happy.
Assante Capital Management (18:55):
You’ve been listening to The McClelland Financial Group of Assante Capital Management Limited. The Assante Capital Management Limited is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Insurance products and services are provided through Assante Estate and Insurance Services Incorporated. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources. However, no warranty can be made as to its accuracy or completeness. Before acting on any of the previous information, please make sure to see a professional advisor for individual financial advice based on your personal circumstances. The opinions expressed are those of the authors and not necessarily those of Assante Capital Management Limited.
