Is it tougher now than in the past to be a young hottie? Marlene thinks so. Especially when you live on the West Coast, where it rains hormones. “I love your blog and have been reading it every day for the last 2 years,” says the 35-year-old who’s single and makes $120,000. (Her email addy will be raffled off at the end of this post). “Anyway, my question to you is what’s a millennial to do these days?”
Marlene feels caught. Events of the last few days sure haven’t helped. Stock markets laid another egg Monday, spooked by slow growth and slumping oil, just as a new wave of greed was sweeping through the hoods of Vancouver in the wake of FlipGate and revelations speckers there have discovered assignment clauses.
“This is my dilemma,” she says. “I can’t afford a house (don’t want a condo), even an hour and a half into the sticks. Unaffordability has spread well beyond Van and is getting worse daily. Therefore, I have maxed out my TFSAs and contribute a healthy amount to RRSPs, mostly invested in a fairly balanced portfolio. Many of those investments are on a major decline and predicted to fall over 50% from today’s date. Nasdaq being a good example. Should I sell and save the headache? This invested money is also my savings for a downpayment if that day ever comes.
“So to recap, I can’t afford to buy a home and all my investments are losing big time. That’s negative growth in a booming city. What are my options??? Is there any hope for all the millennials in my position? On a side note: If I have lost money in a TFSA and have sold all investments within, can I top it back up?”
First, the side note: no, you can’t. Losses within a TFSA are forever gone. You cannot inject new money into the TFSA to replace them, nor can you deduct them from future gains. However if you removed the assets inside the plan, and they later lost money, you could replace the TFSA withdrawal in its entirety the following calendar year.
Now, what’s goin’ on with markets?
There’s a big sale. Because recent events have not turned out as many people expected, large investors (who move markets, as opposed to you) have been sucking money out of equities and putting it into safe havens, like the US dollar or government bonds. Of course, these guys can afford to do what most of us can’t – which is to sacrifice growth and receive nothing, in return for parking their cash. (Institutional investors don’t have retirements to fund or kids to educate.) Once they sense a bottom is in, they rush back.
Markets are unhappy with slowing global growth, the slide in commodity values, the nutjob running North Korea, uncertainty over the Chinese economy, the course of US interest rates and, in Canada, record debt, oilageddon and house lust.
The question here is whether or not this should worry a 35-year-old. The answer is no. Unless she’s dumb enough to want to convert all her liquid wealth into a single real estate asset in the most over-valued market in North America, just prior to its inevitable correction. In that case, don’t invest. Do not risk any short-term declines. When you buy the house you’ll have all the risk you can stomach.
In contrast, a 35-year-old babe with money to invest in a portfolio has picked a fine moment to do so. Logic tells us the current market plop (even if it’s not finished yet) is overdone. The global economy is still expanding, not contracting. That means the commodity collapse is illogical, with demand for stuff like oil actually rising. Cheaper energy is also, logically, a serious boon for both consumers and consuming countries. People can spend more money buying F-150s, and less on gas, creating and sustaining manufacturing jobs. Besides, the commodity crisis is getting old. There’ll be a significant snapback because (a) the US is still swelling, (b) every week there are more humans yet no more planet and (c) the world still runs on oil and copper, aluminium or grain.
So, Marlene, stop being a wuss. If you have a well-balanced, globally-diversified portfolio there’s only one ingredient you’re missing. Patience. Selling an ETF when it’s low is as irrational as buying a house when it’s high. Emotion, not logic, leads people to fear lower lows and expect higher highs. It rarely turns out that way.
As for BC housing, check out this note Mike sent me Monday:
“There’s a story going around that the realtor Fraser Elliott in Ladner hired a helicopter to fly a woman from China around Ladner to look at 7 houses. Apparently she didn’t look at any of them on the ground, bought all seven and asked to arrange to look at more the next day.”
By the way, this is Ladner, from a copter. Can’t you feel the buzz?
I called Fraser Elliott at his Re/Max office and told him a GreaterFool Investigative Team would be kicking in his front door at any moment, Hoovering his Audi, then interrogating him mercilessly (waterboarding, if necessary) about the helo lady. Or was this just a rumour he’d started?
“That,” he told me. “is just ridiculous. And I wish I had a chopper.”
The fact people believe such tales, and trade them, tells us all we need to know about this market, Marlene. It’s a Millennial death trap.