Not quite sure who this guy is, other than an enterprising real estate agent with a dashcam in bubblicious Van.
Ten offers on a West Van condo, in a city where average prices exceed the national average by 50%. Where 70% of net income is required to carry a SFD, where leaky condos destroyed the financial lives of thousands of people, and where pre-Olympic activity just about guarantees the last ones in will be the first ones munched.
Still, I like this guy.
If you’re going to lead ‘em to slaughter, at least have panache.
Banks are like cockroaches. Especially here. We’ve made the decision to allow them to vertically integrate through the entire economy – deposits, insurance, brokerages, car loans, retirement, real estate finance, commercial and institutional banking. There is no way any of them will not survive. Like roaches coming out after a nuke, our banks will endure through any economic reversal. They are now backed by the central bank, the federal government and, ergo, the power to tax.
This is why those people shorting BMO on Tuesday were such gamblers. By buying puts on the options market, they were betting the price of the bank’s stock would tank. The put holder pays a premium for the right to sell a stock in the future (like tomorrow) at a price lower than today. If the price of the stock falls, the value of the put rises – and money is made without a single share of bank stock changing hands. Instead, the puts (like calls) derive value from the underlying stock – which is why they are called ‘derivatives.’
Still with me?
The point here is (a) you’ll do better investing in the bank than depositing money there, (b) hot stock tips are usually toxic, but (c) over the next five years equity markets will far outpace housing. There are a slew of reasons for this, but little doubt this will happen. Too bad most of us have put our wealth in the wrong places.
Like Lynn’s about to:
Hi Garth, I’m an avid reader of your Greater Fool blog. As I fight the emotional urge to buy back into the real estate market, it is so refreshing to hear your common sense take on the real estate situation in our country, let alone in this silly little town I live in. ;-)
I live in Kelowna, owned a house and sold the summer of 2008, currently rent, have a good job, am single no dependants, have paid off all of my debt and have a nice chunk of cash left over. So I feel I’m on the right track in waiting this bubble out.
My dilemma is what or where do I put my cash. Currently it is sitting in a so called “high interest savings account” which has dropped considerable over the last year and now only earns .75%. I’ve met with a couple of investment advisors but my lack of knowledge in this area is causing me to hesitate when it comes to investing. I’m leaning towards a portfolio that consists of 83.5% in Canadian bonds and 6.8% Canadian stocks with the remainder in Cash, US stocks, International stocks, and Foreign bonds. Based on your knowledge and experience does this sound like a reliable strategy? Your thoughts or ideas on how I can feel more comfortable in handing over my nest egg?
I currently have a lira account consisting of $30,000, RRSP’s $10,000, TFSA $5000, my present employment also includes a pension and I am 38 years old.
Well, Lynn, I am not an investment advisor, just a guy with an opinion. But you asked.
First, the bonds. If you plan on buying bonds which you’ll hold to maturity, and are happy with the coupon rate, go ahead. But hard to see how you could even stay ahead of inflation over the next five years. If you’re after the bonds for their yield to maturity, then you need an advisor or broker to seek issues you can purchase at a discount. If you’re buying bonds for capital gains, you probably don’t understand that bond prices fall as interest rates rise – and rates have only one direction in which to travel. Bad idea there.
Besides, what kind of bonds? Canadas – long or short? Corporates, and of what quality? Strips, or zero-coupon bonds purchased at a discount to face value?
And why 83.5%? In fact, why would a 38-year-old woman, with a life expectancy of six more decades put four-fifths of her cash into an asset which will give capital losses and a negative real after-tax yield? I’d say you should reverse this, and have 80% of your liquid wealth in growth assets like stocks and funds, including ETFs, and 20% in fixed income.
You made the right decision bailing out of the K real estate market. Don’t blow it now by trying to avoid risk.
The greatest risk any almost-40 woman faces is outliving her money.
