The case for Europe

RYAN  By Guest Blogger Ryan Lewenza

In making “The Case for Europe” I’m not suggesting that readers should experience Paris’s spectacular Louvre museum, or stroll down Florence’s Ponte Vecchio bridge or indulge in “pintxos” in the beautiful seaside Spanish city of San Sebastien (but you should try to do all of these). Rather today’s blog is about the bullish case for European equities and why we believe investors should have some exposure to this region.

It’s been an uphill battle for the European economy in recent years as the region has had to contend with weak economic growth and low inflation, rolling crises from Greece’s near default, banking sector woes, and more recently Brexit, all the while having to grapple with a refugee crisis where an estimated one million refugees flooded into Europe in 2015 alone. It’s been a tough go, but we believe things are looking up.

Europe has seen a nice rebound in economic activity with GDP rising from 1% Y/Y in mid-2014 to 1.9% currently. The manufacturing sector is particularly robust these days with Europe’s PMI Manufacturing Index surging from 51 in early 2016 to 57 as of May. And inflation has started to perk up with headline inflation rising from a low of -0.2% Y/Y in 2016 to 1.4% in May. Europe is benefiting from stronger exports with the lower Euro, accommodative European Central Bank policies, stronger employment trends, improving confidence, and higher sentiment readings. We see this trend continuing in the coming months.

Europe’s Economy is Showing Positive Momentum

Source: Bloomberg, Turner Investments

Another big support for Europe has been the recent positive election outcomes in Netherlands and France. There, populist, anti-EU candidates like Marie Le Pen in France succumbed to more centrist, pro-EU candidates, which we believe is very positive as risks of an EU breakup have significantly diminished. Next up is the German election and we see the steady-hand, Chancellor Angela Merkel, winning her fourth term in September. Essentially, political risks in Europe have significantly diminished, which is captured in Europe’s Policy Uncertainty Index. This index tracks newspaper articles containing terms like “uncertainty” or “economy”, and you can see that it has dropped materially in recent weeks, following the French election. The US Policy Uncertainty Index, in contrast, continues to rise over growing concerns regarding President Trump and the political crisis that is engulfing his administration.

Diminishing Policy Uncertainty Risks in Europe

Source: Bloomberg, Turner Investments

Since the financial crisis low in March 2009, US equities have been the standout winner with total returns of roughly 280% versus European stocks up 160%. As a result, valuations for US stocks have risen significantly with the MSCI US Equity Index trading at 19x forward earnings versus MSCI Europe at 16x. Admittedly, European stocks have historically traded at a discount to US stocks, but this is a particularly wide gap and, given the improving fundamentals, we see this gap narrowing over the next year, resulting in European stocks outperforming US stocks.

European Equities Are Cheap Versus US

Source: Bloomberg, Turner Investments

Now we don’t just rely on fundamentals in determining our investment strategy and portfolio positioning. We incorporate technical analysis into our calls, often using major technical events as the trigger to make a change. Well we got a big “trigger” in recent weeks with European stocks finally breaking out relative to US stocks. So for the first time since 2014, European stocks are finally starting to do better than US stocks. This was an important event, and combined with the positive French election outcome, this has led us to become more constructive on the region.

European Equities Breakout Technically Versus US

Source: Stockcharts.com, Turner Investments

Europe is far from perfect as it still has a number of issues and headwinds to contend with. For example, while the banking sector is looking a lot better it is still riddled with some bad loans and lower capital ratios. Italy’s Banca Monte dei Paschi di Siena is a good example as it remains on life support. Many European nations also have high government debt levels which is a concern. And Europe continues to drag its feet on implementing much needed structural reforms such as labour reforms, making it easier to hire and fire staff, and reducing public sector spending which represents nearly 50% of the European economy.

While these risks remain, we believe there are more positives than negatives, and why we believe European equities are set to outperform over the next 12-18 months. So go pick a French baguette and an espresso, add another Porsche to the car collection, and if we’re right on our call for European equities to outperform, you should have no problem paying for these great European products.

Ryan Lewenza, CFA,CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

121 comments ↓

#1 young & foolish on 06.10.17 at 4:17 pm

“lower Euro”? …. not so against the Loonie!

#2 Gasbag Boomer on 06.10.17 at 4:21 pm

Thanks Ryan, a very informative post.

#3 A box in the Sky on 06.10.17 at 4:58 pm

Ryan

You guys going straight up ETF index funds for the whole region and/or picking individual country ETF’s our individual stock ETF’s?

Euro banks appear to look good (ING, DB, etc) but I don’t see how someone sitting here can have an “edge” picking individual stocks in an overseas market so I just have ETF’s.

Just curious if you guys are picking stocks, sectors or just keeping it simple

#4 The Technical Analyst, CSTA, CPD on 06.10.17 at 5:05 pm

Also if I may Ryan, another reason is ETF inflows into Europe.

Follow the Momentum.

The Trend is Your Friend.

Not to toot my own horn (Garth might be using it), but back at BREXIT, I made a case here for going Long into Europe. I put in several figures and have been 20% so far to date on that call. Defiantly an early call, as there is still years of room left to “get in” from these lows.

Just take a look at the Polish stock market right now. One of the least known areas that has returned 27% this year so far.

Readers might wonder why the FTSE (UK) went up after the UK election. This is because the majority of companies listed on the FTSE are paid in foreign (non-GBP) and that foreign currency is worth more with the GBP dropping.

Ah, so many technicals, so much data.

Gwad, I love my job. I love techincals.

#5 Stan Broock on 06.10.17 at 5:09 pm

There is much more to it for Europe.

It is booming, there is no housing credit bubble, the focus is on investments in high value added sectors of the economy.

Housing in Germany, the economic engine of Europe, much more densely populated than Canada (like 70 times) is 3-4 times more affordable in terms of price to income ratio than Canada.

Minimum 6 weeks vacation, actual retirement is no mission impossible, really affordable health care, free university education, great public transportation, much better and faster internet, no GMO crap food.

No people living in basements, actual brick homes.

where people work to live vs. live to work (the American and recently Canadian reality).

#6 Stan Broock on 06.10.17 at 5:15 pm

And another European lessons:

In order to have a functioning economy normal people need to have sufficient incomes, not rely on excessive debt (i.e. be a debt serfs like in Canada).

The added benefit of having free and prosperous population is a more efficient and productive economy.

I always laugh at the North American perception of ‘socialism in Europe’

#7 Mark on 06.10.17 at 5:30 pm

“Were you a bank, wouldn’t you rush to tighten lending criteria, given the typical Canadian balance sheet?”

Of course. The Canadian population is debt-saturated. There is very little likelihood that a meaningfully greater amount of debt can be shoved down the throats of Canadians. So the next phase in “the cycle” for the lenders (including their intermediaries, the banks), is to tighten the taps of credit, and convert their paper claims to actual assets. Through deflation.

This is why those bank stocks can do enormously well even in a declining to flat RE marketplace. I know certain people like to run around and claim that if the housing market falls, the stock market wouldn’t perform any better. Yet it is precisely because the housing market doesn’t do well, that the stock market can go up — higher bank earnings associated with higher realized spreads on account of higher risk premia applied to existing loans. Particularly the adjustable rate ones. We’ve been seeing this in the post-2013 peak era where retail rates have been climbing in the absence of BoC policy action. The spread between the BoC policy rate and bank “Prime” has widened considerably. All of it going straight to the shareholders’ bottom line.

#8 Yanniel on 06.10.17 at 5:45 pm

Great post Ryan. Thanks.

#9 Andrew Woburn on 06.10.17 at 5:45 pm

Speaking of political uncertainty, this recent article in the Washington Post explains how the Whitewater investigation into the Clinton’s supposed corrupt real estate deal metastasized into a broad investigation of the Clinton White House and how it ruined a number of key players and seriously impeded the administration even though no charges were ever laid against the Clintons. Even WH juniors were dragged in and had to lawyer up.

The obvious implication is this could happen again bigly with the current investigation into Russian influence in the Trump election. While Whitewater had a few colourful characters, the Trump crew is a zoo of dubious beasts that promise an endless stream of subpoenas. Clinton was a shrewd lawyer and Rhodes scholar. Trump tweets.

The subtext is that ambitious Washington political operatives risk being sucked into the whirlpool of career death if they sign on with Trump. Not that his recruiting campaign was working all that well already.

The administration may become paralyzed or panicky or both. This is far more likely than impeachment, much slower and far worse for the economy. Good job it’s all fake news.

https://www.washingtonpost.com/news/powerpost/paloma/daily-202/2017/06/08/daily-202-trump-white-house-might-learn-more-from-studying-whitewater-than-watergate-as-comey-testifies/59389d51e9b69b2fb981dca7/?utm_term=.d6c2175b87b6

#10 Former Fool on 06.10.17 at 6:06 pm

I always enjoy your analyses, thanks again Ryan.

“Current weightings in the growth portion of the portfolio: Canada 21%, US 16%, International 23%.” -GT on yesterday’s post.

Couple of questions on this allocation:
1) I assume 21% Canada means 5% in a REIT (such as XRE) and 16% in a stock ETF (such as XIU)? This would be consistent with Garth’s previous posts on portfolio allocation.

2) 23% international – I plan to rebalance to this allocation using XEF and XEC. Of the 23% Garth is indicating, what percentage would be directed to emerging markets? I am thinking a split of 18% to XEF and 5% to XEC to get to 23% international.

Thanks in advance for your response!

#11 ALFRED E. NEUMAN on 06.10.17 at 6:09 pm

Great post Ryan.

So, in anticipation of our European equities success, I just posted my Lada ‘for sale’ on Kijiji.

Guess then too, an important agenda item is for us future wealthies is to learn how to pronounce “Porshe”.

(Don’t want to stand out as a nunciation-dunce on the showroom floor as I’m picking out my colour, right?)

https://youtu.be/Im2eYuGdmfY

#12 acdel on 06.10.17 at 6:23 pm

Yep, good post Ryan!

#13 Gasbag Boomer on 06.10.17 at 6:23 pm

Hey Neuman, maybe you want to learn to spell Porsche first?

#14 AK on 06.10.17 at 6:24 pm

“The manufacturing sector is particularly robust these days with Europe’s PMI Manufacturing Index surging from 51 in early 2016 to 57 as of May.”
——————————————————————–
I hold the following Global holdings. And all 3 are up double digits since the beginning of 2016.

MCD
LUX
DEO

#15 I'm not Poloz on 06.10.17 at 6:25 pm

Current forex rates for the CAD/EURO pair is 66 cents EUR.

Poloz is dissatisfied because he wants a 16.66 cent EUR Loonie to boost exports of Canadian man spreading laws to Madrid, Spain.

#16 Hana on 06.10.17 at 6:30 pm

Thanks Ryan for very informative post. I have VE etf for Europe exposure. Is that good one and what percentage would you recommend?

#17 Goldman on 06.10.17 at 6:30 pm

U guys never recommend gold …ok more for me…

#18 Ryan Lewenza on 06.10.17 at 6:58 pm

A box in the Sky “You guys going straight up ETF index funds for the whole region and/or picking individual country ETF’s our individual stock ETF’s?”

Yes we’re just using straight ETFs for our European exposure. The main ones we looked at are VGK and IEV. – Ryan L

#19 Smudgekin on 06.10.17 at 6:59 pm

I thought the Germans were nervous on all that tax money lost to fraud. Spain has high youth unemployment and Catalan independence issues. And like the UK lacks charismatic or effective leadership. The French economy is a basket case. Lomdon and Paris will lose tourist dollars as more attacks continue. Putin could rock the boat.

#20 Shawn on 06.10.17 at 7:01 pm

I disagree. BAML data shows that fund managers have already moved to significantly overweight Europe and underweight US equities. US equities ironically remain the contrarian trade.

In addition, technology has shown to be the clear market leading sector since 2009. This appears to be accelerating. Europe ETFs (ie VGK) have low technology exposure and high financial and consumer staples exposure. Not particularly growth oriented (however, financials are currently leading in Europe as they are in the US – not necessary to buy Europe exposure for financial exposure).

From a long term perspective, Europe has significant demographic headwinds and low labour participation rates. If the goal is an intermediate tactical allocation advantage, perhaps but longer term Europe is quickly becoming the next Japan.

It’s often best to ignore the news and keep things simple. Just buy VFV and forget about it.

#21 Ryan Lewenza on 06.10.17 at 7:01 pm

Former Fool “Couple of questions on this allocation:
1) I assume 21% Canada means 5% in a REIT (such as XRE) and 16% in a stock ETF (such as XIU)? This would be consistent with Garth’s previous posts on portfolio allocation. 2) 23% international – I plan to rebalance to this allocation using XEF and XEC. Of the 23% Garth is indicating, what percentage would be directed to emerging markets?”

Yes for 21% CAD it’s currently broken into 5% REITs and 16% broad TSX exposure. For 23% International we have 6% in Emerging Markets with rest in EAFE. – Ryan L

#22 Ryan Lewenza on 06.10.17 at 7:04 pm

Hana “Thanks Ryan for very informative post. I have VE etf for Europe exposure. Is that good one and what percentage would you recommend?”

Yes that one is good. We like Vanguard ETFs given lower MERs and good liquidity. For weight we have 23% of overall portfolio in International with 6% in EM and rest in Europe and some Japan. Within an overall portfolio I think 10-15% in Europe is good right now. – Ryan L

#23 Yanniel on 06.10.17 at 7:08 pm

I’d love to see the answer to the question formulated by “Former Fool” and/or “Hana”. Thanks.

#24 conan on 06.10.17 at 7:37 pm

I am less optimistic on Europe. So many variables in play.

1) Brexit negotiations go nuclear. Think, large cash penalties for leaving, but Britain won’t pay.

2) Italian banks……..nuff said.

3) Europe has used bank “bail in”, at least twice now. Fool me once, fool me twice, ok, keep fooling me.

4) Security situation could be better

5) Meh

#25 crossbordershopper on 06.10.17 at 7:43 pm

Garth is obsessed with real estate values. and our weekend gig man, the millionaire money manager talks about european exposure. I love that expression, talk to 100 people and ask them about their asset allocation and what their european exposure is, you will get the same answer, are you like religious or something, you trying to sell me something?
i always imagion a tall british guy with a drink in his hand, talking at a small party with his british acceent talking about his exposure. The old white balding guys beside him just nodding with a bit of a frawn and conern on their face.
i currently got turned down for a 1000 cibc credit card, i still dont know who are these canadians will all this debt, where do you get it, i hunt the lady down at the grocery store for a free card, i take their free cookies, and know that i will get turned down ,i always do, i usually eat the cookies before the letter of rejection comes in. i have no cards, no personal loans, no nothing loans, mortgages etc. and still they say my income is too low. like what do you want me to do, pay 30 to 40 percent in tax to just get a loan like really, i got side deals and side jobs.
this canada is about control and regulations

#26 The Technical Analyst, CSTA, CPD on 06.10.17 at 7:44 pm

A box in the Sky “You guys going straight up ETF index funds for the whole region and/or picking individual country ETF’s our individual stock ETF’s?”

Now, this is just me and my risk tolerance, your risk tolerance may differ, but:

1. I prefer to use only ACTIVELY managed funds. ETF’s, you get what you pay for. There is ZERO downside protection*, and depending on the ETF, much less liquidity if you need to sell it in a hurry.

2. If you watch the MER’s on actively managed funds, you can get close to ETF cost without the ETF risk. I really like MAWER funds. See MAW102 and MAW150. MER’s are low 1%. I also recommend ATB Pooled funds, like ATB211 for international.

* Your ETF falls when the market falls, it’s 100% correlated. With Active, a good manager will move into defensive holdings or other sectors or areas or countries within the mandate to lessen downsides.

#27 dakkie on 06.10.17 at 7:45 pm

Is Another Spanish Bank about to Bite the Dust?

http://investmentwatchblog.com/is-another-spanish-bank-about-to-bite-the-dust/

#28 espressobob on 06.10.17 at 7:47 pm

Goldbugs never seem to get it. Commodity plays usually end up in heartache. Some never learn.

Found something interesting for the metalheads.

https://en.wikipedia.org/wiki/Executive_Order_6102

#29 fancy_pants on 06.10.17 at 7:55 pm

what market can’t be done up in lipstick? everything is sunny days, sunny ways until it won’t be.

all the funny money has to find a place to rest. Most markets are bloated. A lethal combination of inflation or high rates will come knocking with a vengeance once it can be hidden and suppressed no longer.

Our economic model requires ever increasing exponential debt. unsustainable, eventually it will hit a brick wall that bailouts can no longer fix

#30 Figure it out on 06.10.17 at 7:56 pm

“Europe continues to drag its feet on implementing much needed structural reforms such as labour reforms, making it easier to hire and fire staff, and reducing public sector spending which represents nearly 50% of the European economy.”

That’s going to happen at around the same time that the US tax code gets reformed: The 31st of Never. I’ve been reading about the ‘need’ for these reforms in The Economist since I was a teenager, and, outside of naive non-politicians who read The Economist, nobody who’s been watching for a few decades thinks they’re going to happen, ever. You can add Canadian agricultural supply management to that list. Entrenched interests.

#31 Tony on 06.10.17 at 7:58 pm

I just remember all the past decades and each decade was the same. Every major stock market index moved in the same direction as the American stock indexes except for Hang Seng Index and the Nikkei Index. That’s why I’d never be long Europe today.

#32 mike from mtl on 06.10.17 at 8:37 pm

#25 The Technical Analyst, CSTA, CPD on 06.10.17 at 7:44 pm

1. I prefer to use only ACTIVELY managed funds.

///////////////////////////////////////////////////

I’d gladly pay a 1,5% MER to any active fund that even eeks out slightly better than a simple index over 10+ years (after fees naturally). Been burned enough with mutuals and so called active alpha type funds to be totally skeptical of any ‘management’.

Yea right..

Even with pure passive funds fidgeting with weightings is rearranging deck chairs of titanic. Why not micromanage with individuals… but then that’s silly and totally against being passive in the first place.

#33 Howard on 06.10.17 at 9:01 pm

Former Torontonian living in Paris here.

Would like to come home eventually, but could I give up the 7-week vacations? The exceptional transit infrastructure? The great public healthcare system? Nobody caring how much money other people have? The cheap flights? The wine and cheese?

Sure life here can be expensive, but my salary is about the same as it was in Canada, taxes are similar, and my rent is only slightly higher than it was in my previous apartment in Toronto. I don’t need a car to live here, transit is cheap, and food prices are reasonable including a subsidized cafeteria at work (as most, if not all, large corporations in Paris provide). The French bureaucracy is a nightmare but is Canada’s equivalent really that much better?

I’ve said in other threads that Canada combines the worst of the US model with the worst of the European model, without offering the benefits of either. With a decidedly mediocre and dimwitted PM seemingly in power for the next decade, you can expect Canada to continue its tradition of mediocrity, salaries stuck in the dark ages, brain drain of talent southward, and an ever expanding gap between the pampered public servants and the long-suffering private sector workers.

#34 MF on 06.10.17 at 9:42 pm

#160 A Reply to #137 MF on 06.10.17 at

Look another smarmy liberal know it all with no monicker.

Sorry but it looks like The “rest of you” will be frustrated for another eight years since “the deplorables” won (and are still winning).

By the way, The use of the word deplorable is rich, considering Hillary calling huge swaths of the country that did not partake in the uneven recovery such an insult cost her the election.

Classless and reeks of sour grapes.

MF

#35 crowdedelevatorfartz on 06.10.17 at 9:48 pm

@#29 Figure it out

Total agreement.

On an aside.
You were reading The Economist as a teenager!?!?!?
Excellent publication but holy crap man what did you do for excitement? 4th dimension Calculus?

#36 CV5 on 06.10.17 at 9:56 pm

“is to tighten the taps of credit”

Oh….at first read I thought it said
“is too tighten the traps of credit” LOL

#37 rjrt81 on 06.10.17 at 10:00 pm

#33 MF on 06.10.17 at 9:42 pm
#160 A Reply to #137 MF on 06.10.17 at

Look another smarmy liberal know it all with no monicker.

Sorry but it looks like The “rest of you” will be frustrated for another eight years since “the deplorables” won (and are still winning).

By the way, The use of the word deplorable is rich, considering Hillary calling huge swaths of the country that did not partake in the uneven recovery such an insult cost her the election.

Classless and reeks of sour grapes.

MF
——————————————————————-

The only thing smarmy in here is you MF.

#38 MF on 06.10.17 at 10:02 pm

Not bullish on Europe one bit.

The last paragraph says it all.

Don’t worry the next scheduled economic crisis should be due soon, and with it sentiment will change again (since nothing was solved the last 5 times).

There is also the security issue that will only get worse.

MF

#39 Smoking Man on 06.10.17 at 10:04 pm

Ryan everyone loves a success story. What do you drive?

Got me a ford ranger with roll down windows, a stick, and a broken AC. And more people that love me more than you. But you’re new, sure you have a few celebrity worshipers.

I love reading the posts to Richard Europe Branson on linked in. Celebrity worshippers that have no life and a bad reflection in the mirror.

Why do humans applaud the idiot climbing the mountain when the view and excitement from falling off a cliff is way more interesting.

The World is full of track 6ers, you are new ask Garth what that means.

Free Falling and loving it.

I’m a writer now.

#40 Smoking Man on 06.10.17 at 10:17 pm

Liberalism is a mental disorder.

Up is down and down is up.

Whatever a lefty loon says you are, that’s just them looking in the mirror.

Taxation is theft, and running away from it is smart.

Just signed my lease down in the tropics. obviously, I can’t disclose the real Island, Wynne and T2 have an army of idiots trying to figure out the ending of this fiction novel and my Forex account.

The only one who has a chance is @GMBUTTS he bought my book for ten bucks after I raised the price. Another idiot.

#41 MF on 06.10.17 at 10:19 pm

#32 Howard on 06.10.17 at 9:01 pm

You said it yourself tons of time off and vacations all the time. Gotta ask Who is actually working?

That’s why the EU system is doomed. Too many people sucking the system and not enough contributing. Just a matter of time until she collapsed under her own largesse. And this is without even mentioning the declining security situation in Europe.

(Our PM is crap yes, but most public servants here are on contract making 45k per year.)

MF

#42 Jungle on 06.10.17 at 10:24 pm

When an index becomes a dog for a year or more (say 2-3 years), it usually starts outperforming after. You just have to be patient but don’t try and time or guess the market. Just stay balanced as Garth suggests.

XEF is up 15% YTD>

#43 The Technical Analyst, CSTA, CPD on 06.10.17 at 10:29 pm

#31 mike from mtl “I’d gladly pay a 1,5% MER to any active fund that even eeks out slightly better than a simple index over 10+ years”

ETF’s, on average, are the benchmark and will naturally do better than most active funds on the way up. The issue is DOWNSIDE protection. Ryan can call up numbers as well to show this.

Would you pay 1.5% MER to save 18% of your capital?

Take one example: The SPY, the most active ETF in the world at its worst time:

2008: The SPY ETF lost 44.7%
2008: Average US Equity Mutual Fund (RBC US Equity Fund: RBF263) lost 26.8%

It does give one pause to think if that 1% is worth saving the 18%.

If you work with an advisor you can also buy Class-O shares in active mutual funds, which costs can be as low as 0.15%

#44 Show me the money on 06.10.17 at 10:30 pm

What are your thoughts on XEH?

#45 nobody on 06.10.17 at 10:34 pm

Remember you don’t buy economies you buy companies.
By investing in European ETF’s you are buying VW, Nestle, Roche, Siemens, Airbus, BMW – in Canada you are buying 5 local banks, a failing aircraft maker and a bunch of oil companies with the highest extraction costs in the world.

The actual countries or their people don’t fact in.

#46 Livin Large on 06.10.17 at 10:49 pm

Hi from Morlaix Howard.

You have me confused, your salary is currently about the same as in Canada AND Canadian salaries are stuck in the dark ages??

#47 Smoking Man on 06.10.17 at 10:50 pm

https://youtu.be/It7107ELQvY

A nictonite story

#48 Smoking Man on 06.10.17 at 11:11 pm

He’s with god now.

https://youtu.be/6o6zMPLcXZ8

#49 waiting on the westcoast on 06.10.17 at 11:31 pm

#37 MF on 06.10.17 at 10:02 pm says…
“Don’t worry the next scheduled economic crisis should be due soon, and with it sentiment will change again (since nothing was solved the last 5 times).”

I realize your being sarcastic but the fact that people keep trying to create rules to smooth out cyclical phenomena like economies are why we keep having problems. We need to let both the good and bad happen of their own accord and then things will reset faster both ways. It’s the interference that creates ever larger problems and more expensive solutions.

Their is a Buddhist story of how a person feeling sorry for the deer being eaten by a tiger. They put a collar with a bell on it so the tiger cannot sneak up on the deer. Eventually the tiger dies of starvation and then the deer overpopulate and kill off​ the underbrush and they starve as well…

#50 millmech on 06.10.17 at 11:48 pm

#40 MF
For the govt workers is that net or gross?

#51 Rich Young on 06.11.17 at 12:20 am

FAKE A JOKE A LIE … all of this recovery is bullshit with Central Banks printing like mad and goosing the bond markets forcing money into other assets. If they would allow the markets to be markets and stop manipulating then maybe I could buy a home or invest at fair value. For now, sitting on my hands and waiting for this joke to end. Look at this in Calgary, Listings way up as owners look around and see the stupid prices being paid and list… yet, with the increase in inventory prices remain high. Retardo land.
http://www.creb.com/Housing_Statistics/Daily_Housing_Summary/

I drove by a condo complex in Royal Oak Calgary today and not an inch of space on the front boulevard as real estate signs fill it all. 19 listings in one complex! Check it out on Realtor.ca Royal Oak Calgary

TIME FOR CENTRAL BANKS TO STOP PLAYING GAMES WITH MARKETS so they can return to real values!

#52 Rich Young on 06.11.17 at 12:21 am

FAKE A JOKE A LIE … all of this recovery is bullshit with Central Banks printing like mad and goosing the bond markets forcing money into other assets. If they would allow the markets to be markets and stop manipulating then maybe I could buy a home or invest at fair value. For now, sitting on my hands and waiting for this joke to end. Look at this in Calgary, Listings way up as owners look around and see the stupid prices being paid and list… yet, with the increase in inventory prices remain high. Retardo land.
http://www.creb.com/Housing_Statistics/Daily_Housing_Summary/

I drove by a condo complex in Royal Oak Calgary today and not an inch of space on the front boulevard as real estate signs fill it all. 19 listings in one complex! Check it out on Realtor.ca Royal Oak Calgary

TIME FOR CENTRAL BANKS TO STOP PLAYING GAMES WITH MARKETS so they can return to real values!

#53 Rentin on 06.11.17 at 12:41 am

Am I the only one that looked at the P/E ratios graph after reading how US equities are overvalued right now from boss man’s blog yesterday? Who is to say EU P/E will rise? How about US P/E will fall?

Two ways you can close the gap.

#54 Victor V on 06.11.17 at 1:22 am

#46 Smoking Man on 06.10.17 at 10:50 pm

https://youtu.be/vt1Pwfnh5pc

You can have it all…my empire of dirt.

#55 Ponzius Pilatus on 06.11.17 at 1:36 am

Thanks Ryan,
For supporting with your graphs what I’ve learned over the last 2 years through research and religiously reading Der Spiegel.
The EU is is sound and well, thank you very much.
Mostly due to Merkels tireless work to keep the union intact..
The unintended consequences of an impotent Trump is a stronger Germany.

#56 Ponzius Pilatus on 06.11.17 at 1:52 am

#5 Stan Broock on 06.10.17 at 5:09 pm
There is much more to it for Europe.

It is booming, there is no housing credit bubble, the focus is on investments in high value added sectors of the economy.

Housing in Germany, the economic engine of Europe, much more densely populated than Canada (like 70 times) is 3-4 times more affordable in terms of price to income ratio than Canada.

Minimum 6 weeks vacation, actual retirement is no mission impossible, really affordable health care, free university education, great public transportation, much better and faster internet, no GMO crap food.

No people living in basements, actual brick homes.

where people work to live vs. live to work (the American and recently Canadian reality).
—————–
Thanks for the post .
But Canadians will never buy this.
Because this is the best place on earth.
And we won Hockey Gold at the 2010 Olympics.
World supremacy and Sid Crosby for President.
Pretty myopic, if you ask me.
Oh forgot.
Don Cherry for Chairman.

#57 Too Early to Say Ryan on 06.11.17 at 2:08 am

The same was being said in fall 2015 then back to little growth again. Live in Italy, not feeling the enthusiasm yet. But, I hope you are correct!

BTW those “refugees” are not that at all esp. from N. Africa. < 3% are per lax EU standards & this reported by Italian courts.

This year so far 100,000 of them refuse to document themselves and disappear into the countryside doing lord knows what?

Of course, state run CBC never reports this…maintain T2s world view.

It is wrong because these "economic opportunists" take away the place of legitimate refugees. They pay €1500 each to get ferried over to Italy and then thumb their nose at our laws with impunity.

#58 Sydneysider on 06.11.17 at 3:58 am

#32 Howard

There is only one reason to return to Canada – the wilderness.

#59 Howard on 06.11.17 at 4:53 am

#40 MF on 06.10.17 at 10:19 pm
#32 Howard on 06.10.17 at 9:01 pm

You said it yourself tons of time off and vacations all the time. Gotta ask Who is actually working?

That’s why the EU system is doomed. Too many people sucking the system and not enough contributing. Just a matter of time until she collapsed under her own largesse. And this is without even mentioning the declining security situation in Europe.

(Our PM is crap yes, but most public servants here are on contract making 45k per year.)

MF

———————————

That’s a silly myth (“nobody working”).

I can only speak of my own workplace, but everyone generally works hard. Long hours are common (French offices don’t become ghost towns at 5pm on Friday the way many Canadian offices do), and I find office gossip/politics less prevalent here.

Generous mandated leave time ensures everyone – from job-hopping recent grads to elder Boomers who have been in the same job for 35 years – can benefit from rejuvenation and enjoy life a bit.

#60 Howard on 06.11.17 at 5:09 am

#45 Livin Large on 06.10.17 at 10:49 pm
Hi from Morlaix Howard.

You have me confused, your salary is currently about the same as in Canada AND Canadian salaries are stuck in the dark ages??

—————————————

I was separating my own current personal situation with general Canadian trends. I do believe that my salary will appreciate faster in Paris than it would in Toronto; for the time being, I earn a similar amount. Perhaps I should have stated…..Canadian salaries stuck in the dark ages relative to what you receive for it.

French salaries are not very high compared to the US or parts of the UK, but the trade-off for workers is quite clear, as stated in my previous post : generous vacation, generous pensions, more worker-friendly labour laws, healthcare, transit infrastructure, etc. Paris also has a renting culture; no pressure to buy a house/condo and although the city is expensive, affordable apartments can be found in the suburbs connected to the Metro or an RER line.

My point is that I don’t see what Canadians get in return for relinquishing the high salaries they would achieve in the US, while at the same time paying much higher tax in Canada. In Europe the trade-off is clear. In Canada there seems to be no such trade-off – crappy salaries and crappy everything else. And a housing bubble in Toronto and Vancouver to top it off.

#61 Spanish eyes on 06.11.17 at 5:30 am

Nice post, Ryan. Thank you.

By the way, it’s San Sebastián, or Donostia in the Basque language.

Don’t you be ruffling any feathers… ;)

#62 A Reply to #33 MF on 06.11.17 at 6:50 am

#36 rjrt81 on 06.10.17 at 10:00 pm
#33 MF on 06.10.17 at 9:42 pm
#160 A Reply to #137 MF on 06.10.17 at 4:02 pm

“Look another smarmy liberal know it all with no monicker.”

“The only thing smarmy in here is you MF.”

The word is spelled know-it-all (not know it all), and the more common spelling is moniker (not monicker).

By smarmy, MH, do you mean smug, ingratiating, falsely earnest, or sleazy?

I know you may think I’m being cruel, testing the limits of a deplorable’s vocabulary; but I’m asking the question only out of curiosity, not malice. (I’ll admit to only being smug.)

#63 FreeBird on 06.11.17 at 6:58 am

#21 Ryan

In the past Garth had emerging markets set at 4%. Interesting to see it raised a bit. For many of the points made in your post I’m guessing?

Ryan, maybe you/Garth could comment on Completion ETFs. Not sure if Garth himself or another source wrote on adding them in relation to Int’l equities. Here’s a quote (can’t recall the source) I had in my notes:

“*ETF w/ sml part of TSX’s ~200 stocks (not part of the TSX 60) Akin to small/mid cap overweighting in US stocks (by holding something like VFX on top of VTI)”

Maybe not needed for DIYers?

#64 FreeBird on 06.11.17 at 7:05 am

#32 Howard

We’ll be following one day. Maybe not Paris but out for similar reasons. Bon Appetite!

#65 Ryan Lewenza on 06.11.17 at 7:33 am

Show me the money “What are your thoughts on XEH?”

Like it. This is similar to our ZDM which we use in client portfolios. – Ryan L

#66 ALFRED E. NEUMAN on 06.11.17 at 7:57 am

#13 Gasbag Boomer on 06.10.17 at 6:23 pm

Way to go GB ..!!.. was wondering who’d spot that.

And now that I can both pronounce AND spell it, I’ve come from being a ‘Greater Fool’ to just ‘A Fool’.

My final step is to buy the Porsche like a pro, and be ‘Nobody’s Fool’:

https://youtu.be/ao-brQ3_ao8

#67 Livin Large on 06.11.17 at 9:01 am

I was just messing with you Howard because I had free time after a day at the beach.

I bought my summer home in Finisterre rather than across the channel because house prices were so much lower than across the channel in Devon and Cornwall and the lifestyle benefits are soooo much greater in rural France compared to SWO.

#68 unintended consequences on 06.11.17 at 9:19 am

#53 Ponzius Pilatus

Mostly due to Merkels tireless work to keep the union intact..
The unintended consequences of an impotent Trump is a stronger Germany.

===

Except when Merkel made the decision to open the borders without any consultation and consensus of any other member states, without having logistics and regulations in place to handle the situation. Not to mention any long-term, unintended consequences, including major disagreement between some EU members..

The short-term consequences were Brexit and Trump getting into power.

Merkel’s “tireless work” did not keep the union intact – just the opposite.

#69 jess on 06.11.17 at 9:23 am

#50 Rich Young on 06.11.17 at 12:20 am
blamed central banks playing with markets? rlly

19th November 2015

In an important speech given at the Finance Watch conference in Brussels on Tuesday, Robert Jenkins — a former member of the Bank of England’s financial policy committee —

An ethics-free zone?

But before considering what’s to be done let us recall the magnitude of what financiers did. The charge sheet of misdeeds – both acknowledged and alleged is lengthy. Here is a partial list:

 Mis-selling of payment protection insurance

 Mis-selling interest rate swaps

 Mis-selling credit card theft insurance

 Mis-selling of mortgage-backed securities

 Mis-selling of municipal bond investment strategies

 Mis-selling of structured deposit investments

 Mis-selling of foreign exchange products

 Fraud related to the packaging and selling of mortgage-backed securities that institutions knew to be “toxic waste”

 Misleading statements to investors involving capital raising rights issue

 Misleading investors in the sale of collateralised debt obligations

 Abusive small business lending practices

 Predatory mortgage practices

 Abusive or in inappropriate foreclosure practices

 Aiding and abetting tax evasion

 Aiding and abetting money laundering for violent drug cartels

 Violations of rogue-regime sanctions

 Manipulation of Euribor

 Manipulation of FX markets

 Manipulation of gold fixing (London)

 Manipulation of commodity markets via metals warehousing practices

 Manipulation of electricity markets (California/JPMorgan)

 Manipulation of the swaps market benchmark index (ISDAfix)

 Collusion relating to credit default swap market dealing in violation of US anti-trust laws

 Filing false statements with the SEC (“London Whale”, JPMorgan)

 Keeping false books and records (“London Whale”, JP Morgan and others)

 Reporting failures relating to Madoff

 Withholding of critical information from Italian regulators

 Bribing civil service employees in Japan

 Mis-reporting related to Barclays emergency capital raising

 Stealing confidential regulatory information by a banker

 Collusion with Greek authorities to mislead EU policy makers on meeting Euro criteria (Goldman Sachs)

 Financial engineering with the aim of moving Italian debt off-balance sheet

 Manipulation of risk models with the aim of minimizing reported RWA / capital requirements

 Manipulation of precious metals markets (gold/silver/platinum/palladium – Switzerland)

 Manipulation / collusion of the US Treasury Market auction/client sales

 Manipulation of energy markets

 Short changing clients a second time in not paying settlements in full

 Violations connected with emergency fund raisings

 Electronic FX trading related market manipulation (NY DFS investigation)

 Falsifying customer data and records (RBS and others)

 Misleading clients over dark pools (Barclays and others)

 Misleading shareholders ahead of RBS rights issue

 Misleading shareholder information with respect to Lloyds takeover of HBOS and RBS’s rights issues

 Conspiracy to force small businesses into bankruptcy to the benefit of the lender (RBS, Lloyds and others)

 Insertion of illegal rate floors in Spanish mortgage lending

 Faking customer files to justify predatory foreclosure practices

 Misleading profit and capital statements based on questionable accounting practices

https://www.ianfraser.org/why-well-all-end-up-paying-for-the-feeble-response-to-the-banking-crisis/

#70 NoName on 06.11.17 at 9:35 am

europe

When i came to Canada in 98, i was young enough to learn english fearly quick, bot to old not to loose an accent. While i is back home in short time that i travel and spend some time in germany and italy, in a short period of time we manged to find “all” the bestest cheapest bed and breakfasts, hostels to stay in, so we could get “same” experience with 1/2 of the money.

One thing that i always say is you are only 4 hours away from diferent country, and “now” that everyone is paid in euros all over the place there is even less barrier to travel, train, car, plane doesnt mater.

what we pay here for for airplain ticket for one person, can cover family weekend away, add generous vac. time and access to same services that we have here, in my opinion quality of living is better over there.

Europeans buy our standard are eating very unhealthy food, but somehow they manage to live healthier and longer lifes, i wonder why is that.

Out of more of less 220 students in my high school majority (75-80% of them) managed to finish univercity and they live somwhere eu, mainly austria, germany, some in france and some in scandinavian countries.

And i dont here any of them bitchin and complain that they cant aford to live in there “own” city, and how central bank is %$@% a people with low interest rates…

but again what do i know, i buy free software.

#71 MF on 06.11.17 at 10:02 am

#49 millmech on 06.10.17 at 11:48 pm

Gross. A close family member of mine is a public servant. She is on contract, and is always worried that her current 2 month contract will not be renewed, for whatever reason. Her gross is about 45k but hours vary.

Here take a look:

https://www.jobbank.gc.ca/jobsearch/jobsearch?fsrc=4&wid=bf&sort=D

Aside from directors, or high up managers, the vast majority make about 45k and have zero security.

You know what she says most people say at her place of employment? “The pay is better in the private sector”.

MF

#72 Daughter of Ponzi on 06.11.17 at 10:03 am

#32 Howard on 06.10.17 at 9:01 pm
Former Torontonian living in Paris here.

Would like to come home eventually, but could I give up the 7-week vacations?
———————————————–
Plenty of 6-7 week vacation jobs in Canada, mostly in public sector though. It’s a big club but your obviously not a memember.

#73 MF on 06.11.17 at 10:06 am

#48 waiting on the westcoast on 06.10.17 at 11:31 pm

I like the analogy and I agree.

We are in this housing predicament largely because of government meddling in the housing market through CMHC, low interest rates etc.

Back in 2010/2011 when the worst days of the great recession had passed, we should have started to normalize interest rates. Now, when the bubble is that much bigger, we are stuck because normalization will hurt that much more.

Our deer population is massive!

MF

#74 MF on 06.11.17 at 10:15 am

#56 Sydneysider on 06.11.17 at 3:58 am

How about political stability?

You know, the thing that causes massive wars, starvation and violence if lacking?

MF

#75 crowdedelevatorfartz on 06.11.17 at 10:25 am

@#38 Smoking Man
“Got me a ford ranger with roll down windows, a stick, and a broken AC……”
*******

You left out, ” a truck that reeks of cigarettes, a full ash tray, a liver the size of Spain, sore teeth, and male pattern baldness…..”

Just trying to keep you honest…..its not all rainbows and lollipops in Smokieville where rubber booted men are men and sheep are nervous…..
Send us a post card from Antigua

#76 crowdedelevatorfartz on 06.11.17 at 10:32 am

@#58 Howard.

Im sure that living and working in Paris is exciting and you will look back on it many years from now with fondness.
You however have left out Muslim attacks, police and soldiers with guns, riots in the Ghettos filled with refugees, the high unemployment for youth, ridiculous labour laws that cause the high youth unemplyment, Laws that Macron will attempt ( and fail) to change…..and the worst part of the beautiful, historic city of Paris?
Surly Parisians.

#77 jess on 06.11.17 at 10:37 am

Andrew Woburn on 06.10.17 at 5:45 pm

Who is Trump’s new FBI guy ? http://wallstreetonparade.com/

Kenneth McCallion, a former federal prosecutor, writes the following at USA Today:

“The most troubling issue that Wray may face is the fact that his law firm — King & Spalding — represents Rosneft and Gazprom, two of Russia’s largest state-controlled oil companies.

“Rosneft was prominently mentioned in the now infamous 35-page dossier prepared by former British MI6 agent Christopher Steele. The dossier claims that the CEO of Rosneft, Igor Sechin, offered candidate Donald Trump, through Trump’s campaign manager Carter Page, a 19% stake in the company in exchange for lifting U.S. sanctions on Russia. The dossier claims that the offer was made in July while Page was in Moscow.”

” Wall Street On Parade reported on May 30 that some of the biggest names on Wall Street are sitting with hundreds of millions of dollars of that sanctioned Russian bank’s bonds and notes in their mutual fund portfolios. Yesterday, the New York Times reported that when Gorkov came to Manhattan to meet with Kushner in December, he also “met with bankers at JPMorgan Chase, Citigroup and another, unidentified American financial institution.” The article notes that “Goldman Sachs bankers also tried to arrange a meeting but ultimately had a scheduling conflict.”

#78 CJBob on 06.11.17 at 10:55 am

#25 The Technical Analyst, CSTA, CPD on 06.10.17 at 7:44 pm
1. I prefer to use only ACTIVELY managed funds. ETF’s, you get what you pay for. There is ZERO downside protection*, and depending on the ETF, much less liquidity if you need to sell it in a hurry.

* Your ETF falls when the market falls, it’s 100% correlated. With Active, a good manager will move into defensive holdings or other sectors or areas or countries within the mandate to lessen downsides.
_____________________
There is a lot of junk posted here which doesn’t even warrant commenting. In this case, though, you are a smart guy so I’ll attempt to clear up a few things for others (I suspect you’ll not be convinced but other readers will). Active funds do not outperform in down markets and this has been proven over and over again using real data. A simple google search will find examples of this including a great example at the sofa guy’s site.

Logically it doesn’t hold water either. ETF’s outperform 95% of mutual funds, but you want us to believe actively managed funds which can’t out perform during bull markets are suddenly smarter and can do it in bear markets? How do they then know when to pull out and when to get back in? How did they suddenly get smart?

Some ETF’s are not widely traded, but there are plenty which are very liquid and to suggest otherwise is disingenuous and shows that you don’t have much of an argument at all.

If you like active investing yourself that’s awesome. Enjoy and maybe you really are part of the 5%. But don’t cloud the waters with these dis proven myths which could send the average investor searching performance they will never achieve.

#79 Daughter of Ponzi on 06.11.17 at 11:09 am

DELETED

#80 Wrk.dover on 06.11.17 at 11:11 am

Jess has all of the cool links, all of the time.

#81 TurnerNation on 06.11.17 at 11:24 am

We can learn from Europe.

Canada’s govt talking up armed drones this week.
USA wants a wall.
Someone pointed out…are these border methods keeping us in or the ‘other’ out, or both?

History says…Iron Curtain. Berlin Wall.
And people never change. Our elite rulers and their bloody land grabs. See: Syria.

Well I always eye US Steel ETF – SLX.US

#82 Livin Large on 06.11.17 at 11:56 am

It’s almost comical the number of people with such negative opinions and misconceptions about living in the EU and especially living in France.

Riots in the outer arrondisments??? Nope, no more concerning than riots in Welland. Youth unemployment, sure it’s a bit of a concern but really only if you’re a youth. Police and military on the street with guns? Again, nope or at least no more concerning than the sidearms on the hips of every Canadian cop. It’s just a part of life and even strangly reassuring.

When I landed in Amsterdam in 1972 at the tender age of 17, there were pairs of cops everywhere with dobermans and assault rifles. I found that a tad odd in ’72.

My point? Fear and loathing gets old very quickly in the EU. They’ve lived through worse and they get on with life.

For me, a sea view, great food, far superior climate and a 3.5 hr TGV ride to the cultural capital of the world and almost as easy access to the UK make for a lovely almost 6 months per year. I have a far greater chance of falling in the channel and drowning while I’m fishing or diving than I have of being killed in a terrorist attack.

Before you whine and belittle the EU lifestyle maybe you should try it.

#83 Daughter of Ponzi on 06.11.17 at 12:21 pm

#69 NoName on 06.11.17 at 9:35 am

Out of more of less 220 students in my high school majority (75-80% of them) managed to finish univercity and they live somwhere eu, mainly austria, germany, some in france and some in scandinavian countries.
—————————————————————
You must be romanian. You guys just love your germanic masters.

#84 Daughter of Ponzi on 06.11.17 at 12:29 pm

#81 Livin Large on 06.11.17 at 11:56 am
————————————————-
You are completely out of touch with reality. Typical boomer mentality. You all carry on like that, until what you deserve, finally hits you in the face.

#85 Gasbag Boomer on 06.11.17 at 12:30 pm

#55 Alfred E. Neuman

What, me worry? :-)

#86 James MF on 06.11.17 at 12:32 pm

@ #25 The Technical Analyst, CSTA, CPD

“If you watch the MER’s on actively managed funds, you can get close to ETF cost without the ETF risk. I really like MAWER funds. See MAW102 and MAW150. MER’s are low 1%.”

You’re off by a factor of 10 on the MER proximity. By holding fixed income ETFs (“safe stuff”), and cash, along with equity ETFs, you’re holding the contents of mutual funds and saving on fees by rebalancing yourself. DIY isn’t for everyone but you’re misrepresenting both fees and what constitutes risk in your post.

#87 conan on 06.11.17 at 12:44 pm

#80 TurnerNation on 06.11.17 at 11:24 am

We are 10 years away from military drones that can fly at mach 7 +,and perform aerial maneuvers, that human pilots can not do. Fighter jets flown by humans, will go the way of the Sony Trinitron TV.

The technology is a drone, capable of achieving the velocities needed, to kick in a scramjet engine.
This is the fun part, scramjet engines are about as complicated to construct as a can of Coke, and did I say cheap to make?

Lots of military doctrine is now obsolete, and everyone who has rocketry, is going to be able to build them. Kim is building them.

So, what to do?

#88 Tim on 06.11.17 at 12:46 pm

re: #42 The Technical Analyst, CSTA, CPD

>2008: The SPY ETF lost 44.7%
>2008: Average US Equity Mutual Fund (RBC US Equity Fund: RBF263) lost 26.8%

Are you sure about these numbers? First, in 2008, the Morningstar SPY page says its 2008 NAV performance was -36.97%. Morningstar reports -26.8% for RBF263 as you mention.

Second, RBF263 reports returns in Canadian dollars and in 2008, the Canadian dollar lost 24% of its value compared to the US dollar. So most/all of the difference between these two results is the effect of the CAD/USD exchange, not inherently superior performance in RBF263.

#89 Victor V on 06.11.17 at 12:57 pm

Lake Ontario flooding seeps into downtown Toronto condo buildings

https://beta.theglobeandmail.com/news/toronto/lake-ontario-flooding-seeps-into-downtown-toronto-condo-buildings/article35270018

#90 BS on 06.11.17 at 1:00 pm

3 The Technical Analyst, CSTA, CPD on 06.10.17 at 10:29 pm

ETF’s, on average, are the benchmark and will naturally do better than most active funds on the way up. The issue is DOWNSIDE protection. Ryan can call up numbers as well to show this.

Would you pay 1.5% MER to save 18% of your capital?

It does give one pause to think if that 1% is worth saving the 18%.

The problem with your saving 18% theory is nobody can predict when markets are going to move up or down or when there are tops or bottoms. If the fund gets it wrong, as most do, it is near impossible to recover going forward. For each time an active fund saves 18% on the downside there ten others that do worse. The fund that saved that 18% probably missed the bottom and then under performed over the next 9 year bull market. With a passive index, if you stay invested, you never miss the bottom or a rally which is more important than missing the corrections. Corrections are temporary. When markets move up, and you miss the move up, often you never get a chance to buy at that level again.

#91 NoName on 06.11.17 at 1:07 pm

#82 Daughter of Ponzi on 06.11.17 at 12:21 pm

#69 NoName on 06.11.17 at 9:35 am

Out of more of less 220 students in my high school majority (75-80% of them) managed to finish univercity and they live somwhere eu, mainly austria, germany, some in france and some in scandinavian countries.
—————————————————————
You must be romanian. You guys just love your germanic masters.

—-

very close, but miss. I am Croatian. but funny thing is next two weeks, my “team” at work will be 1-German, 1-Romanian, and 1-Croatian, how’s that for funny.

#92 The Technical Analyst, CSTA, CPD on 06.11.17 at 1:28 pm

#85 James MF on 06.11.17 at 12:32 pm ”
You’re off by a factor of 10 on the MER proximity; misrepresenting both fees and what constitutes risk in your post”

That example of .15% MER for an active equity fund was straight off my books. MAW202 is .25, MAW206 is .25. If you are paying more, well. What can I say? Ask your advisor.

The #1 biggest loss/hit to performance in any portfolio is the rebalancing investor themselves.

If anything I’m in fact highlighting the complacency risk and downside risk of ETF’s. If you are comfortable with these risks and the risks of rebalancing to save 1% your good.

#77 CJBob “There is a lot of junk posted here which doesn’t even warrant commenting. In this case, though, you are a smart guy. (1) You want us to believe actively managed funds which can’t out perform during bull markets are suddenly smarter (than ETFs) and can do it in bear markets? (2) How do they then know when to pull out and when to get back in? How did they suddenly get smart?

I am glad you asked CJBob and thank you for the complement!

I’d love to have a good long conversion with you about this, but I’ll keep it condensed for the blog.

(1): Yes. It boils down to a simple point. Positioning. The example I gave above does prove it. But why? Is RBF263 special? No. The SPY *must* hold all S&P500 stocks. RBF263 doesn’t. So like the Titanic, if the ship is going down, RBF263 can seal up flooded areas. SPY cannot. (hopefully that’s an “ah ha” moment.

2008: The SPY ETF lost 44.7%
2008: Average US Equity Mutual Fund (RBC US Equity Fund: RBF263) lost 26.8%

(2): See (1) plus it is part of the MER fees. You pay for fundamental, technical, research analysis’ to apply their expertise. Yes, it is a bit of “faith” these experts do their job well, but questioning that is like did Boeing build the plan I’m flying on well? You have to have trust.

(3) Some ETF’s are not widely traded, but there are plenty which are very liquid and to suggest otherwise is disingenuous and shows that you don’t have much of an argument at all.

I strongly believe in Financial Literacy. I teach, I mentor, I trade, I pay it forward. ETF’s are great, but they have strong limitations (and so to Active funds), neither are perfect.

For ETF liquidity, it is a complex subject. Which ETF’s? There are 6,240 (Apr ’16) ETFs with $7 Billion in deposits. Some are small, a few are huge (ie. SPY, TLT, IVV), an individual investor needs to review ALL products (MF or ETF) before purchasing. The question you should be asking: Q: What % of investors actually FULLY read the funds prospectus?

I always say in my teachings “As you dig deeper into the investment word, you find what you think you know is only on the surface. Once you go deeper, there is no turning back.”

#93 Keith in Calgary on 06.11.17 at 1:38 pm

#81 Living large……..

Since you asked for it.

I grew up in West Germany as an army brat from 1962-1972. Been to every single country back then, and most of them recently.

It’s should no longer be called Europe…….Eurabia would be more accurate and appropriate. What the Moors could not accomplish, George Soros did.

Liberals are the pallbearer of society.

#94 Pete from St. Cesaire on 06.11.17 at 2:18 pm

#28 espressobob on 06.10.17 at 7:47 pm
Found something interesting for the metalheads.
https://en.wikipedia.org/wiki/Executive_Order_6102
————————————————————
Remember this when ‘they’ try to tell you that GOLD is just a barbaric relic and that it’s not money, and that only a fool would invest in it. No wonder some say that lead & brass are more valuable.

#95 Daughter of Ponzi on 06.11.17 at 2:27 pm

#90 NoName on 06.11.17 at 1:07 pm
#82 Daughter of Ponzi on 06.11.17 at 12:21 pm

#69 NoName on 06.11.17 at 9:35 am

Out of more of less 220 students in my high school majority (75-80% of them) managed to finish univercity and they live somwhere eu, mainly austria, germany, some in france and some in scandinavian countries.
—————————————————————
You must be romanian. You guys just love your germanic masters.

—-

very close, but miss. I am Croatian. but funny thing is next two weeks, my “team” at work will be 1-German, 1-Romanian, and 1-Croatian, how’s that for funny.
———————————————————-
That’s just peachy. Stalingrad is calling you again boys.

#96 AK on 06.11.17 at 2:49 pm

Macron’s party tops first round of France’s legislative elections

#97 crowdedelevatorfartz on 06.11.17 at 2:50 pm

@#81 Living Large

I guess the odd riot in a banlieu, random stabbings , nightclub attacks and truck massacres across Paris and France are typical events and part of everyday life….
Awesome, cant wait to visit…….

But you do agree that Parisians are surly…… :)

#98 Stock picker on 06.11.17 at 3:04 pm

Three weeks ago I threw the dogs a bone with Ford……for a nice pop of 9% since…any of you 6% followers bite? More to come IMHO

#99 Millmech on 06.11.17 at 3:08 pm

#70MF
I thought so,I had a job offer for that amount with the federal govt and laughed at the offer.Great pension and benifits,big deal,I couldn’t stand to make a minimum wage for 30yrs just so I could qualify for a low pension(in my opinion).Private pay for what I do is about $42-50 hr plus pensions of $60-$100 per year of service,my old apprentice gets a lowly metal production bonus of $396 per cheque,was showing me in the heyday his pay stubs with a metal bonus of $1500 per pay period(he also gets just over $50 hr and his pension is $100 for every year of service).
I could never understand the allure of govt jobs.

#100 NoName on 06.11.17 at 3:40 pm

#94 Daughter of Ponzi on 06.11.17 at 2:27 pm

#90 NoName on 06.11.17 at 1:07 pm
#82 Daughter of Ponzi on 06.11.17 at 12:21 pm

#69 NoName on 06.11.17 at 9:35 am

Out of more of less 220 students in my high school majority (75-80% of them) managed to finish univercity and they live somwhere eu, mainly austria, germany, some in france and some in scandinavian countries.
—————————————————————
You must be romanian. You guys just love your germanic masters.

—-

very close, but miss. I am Croatian. but funny thing is next two weeks, my “team” at work will be 1-German, 1-Romanian, and 1-Croatian, how’s that for funny.
———————————————————-
That’s just peachy. Stalingrad is calling you again boys.

we are more like Oscar than adolf.

#101 Shawn on 06.11.17 at 3:50 pm

Another reason I would stay away from Europe is the EUR.

Speculators are more long the EUR now than they were prior to the big decline in 2014. USD could rally hard against it and hurt ETFs like VGK, IEV or EFA. I think the secular bull market in USD has just begun.

But the main reason I would avoid is fundamentals. Most European ETFs have a ~5% technology weighing. US ETFs generally have 18%+. ETFs like QQQ are mostly technology. This a must own sector. After 17 long years of consolidation the Nasdaq has broken to new ATHs. This is extremely bullish long term. Contrary to what the media would suggest, we could be in only the 2nd inning of secular bull market.

Selling US equities (ie reducing technology exposure) and trading it for European exposure is essentially deworsifying at the worst time.

There is a strong urge for asset managers to over own too much of the market and over diversify across countries, currencies and sectors. Studies show that tactical allocation is often done at the worst time. It’s best to keep things simple. Buy the S&P500 and that’s pretty much it.

“Buy right and hold tight.”. “It was my sitting that made me big money, not my thinking. Got that? My sitting tight.”.

#102 MF on 06.11.17 at 3:59 pm

A Reply to #33 MF on 06.11.17 at 6:50

All of the above: smarmy.

I usually respond to messages on here using my phone with the iPhone transcriber. It’s good technology but not perfect. I work 7 days a week with two jobs, so I don’t have time to sit and spell an essay for you.

Good enough reason? What are you insinuating? Trump supporters are all uneducated?

Don’t worry I have my university obedience degree.

MF

#103 Stan Broock on 06.11.17 at 4:06 pm

You must be romanian. You guys just love your germanic masters.
——————————————
It is funny you mentioned it, I was in Eastern Europe including Romania on Business trip few years ago, when contracting for a major management consulting company.

I was just amazed at how many high tech and financial companies are present in Bucharest/Romanian capital.
The place is literally booming. Hint: our jobs go there.

In my humble opinion, no matter how funny it might sound, Eastern Europe is overtaking Canada very fast in terms of standard of living and already looking in the rear view mirror at us. I am absolutely serious.
No seniors searching the garbage bins as in Toronto.
No drug addicts on the street as in Vancouver.

I had a chance to board a tour ship in the Danube delta, the most amazing trip in the wilderness in my life.

We really need to rethink our view of the world.

#104 Livin Large on 06.11.17 at 4:09 pm

Actually Fartz, no, I don’t find them surly in the least. Intolerant of rudeness and folks with a sense of superior entitlement, absolutely.

There are still prople across France who remember 1st hand what it was like as an occupied people and the incredible privation during and after the last war.

As for riots and random stabbings??? Hell, not even close to a Saturday in Detroit. And then there are the green hornets out each night powerwashing the streets of Paris. It isn’t even remotely as dirty as a couple of decades ago and surprisingly less dirty and smelly as downtown TO.

Like I said, you really need to spend some time in Paris or Lyon to appreciate just how welcoming the locals can be if you just don’t act like ugly N. Americans.

In my little corner of France, I feel safer than Toronto after dark, practically zero crime and people who look out for my wellbeing because I have made an effort to become a part of the community.

#105 Stan Broock on 06.11.17 at 4:12 pm

As for Croatia, the Adriatic coast is absolutely amazing.
Croatia and Slovenia are beautiful countries with very, very nice people, in my humble opinion better to live in than Italy.

#106 Re., Mike from mtl on 06.11.17 at 4:45 pm

Wow , those r some deep scars you have . Sorry about your previous experience with active management

Just remember , everyone ‘actively’ manages , just different shades . And yes ,even the guys that use etfs. Just read Ryan’s post today – ‘tactically’ managed , lol

#107 A Reply to #101 MF on 06.11.17 at 4:56 pm

“Don’t worry I have my university obedience degree.”

Did you graduate from Trump University? Did you manage to get any of your money back from that sham, bogus confidence game? Trump settled the two class-action lawsuits against him for $25 million.

https://www.forbes.com/sites/robertwood/2017/04/03/trump-university-settlement-nets-25m-write-off-for-trump-taxes-for-students/#431c1b8e7298

#108 att on 06.11.17 at 5:53 pm

Just a few questions: where do you keep your crystal ball? Have you heard the study where a monkey picking stocks did better than half of all financial advisors? the dog picture at the top of the post is supposed to be clever and related to the content of the post somehow. what’s your favourite ice cream?

#109 maxx on 06.11.17 at 6:39 pm

#150 Tony on 06.10.17 at 1:15 pm

“Re: #141 maxx on 06.10.17 at 12:24 pm

5 year GIC rates haven’t gone up one iota. Those 3 percent 5 year rates are the posted rates at Home Trust and Home Bank both owned by Home Capital Corporation. The future of Home Trust and Home Bank are unknown at this time.”

CDIC,CDIC,CDIC….

#110 not me.. on 06.11.17 at 6:53 pm

In my little corner of France, I feel safer than Toronto after dark, practically zero crime and people who look out for my wellbeing because I have made an effort to become a part of the community.
………..

not a chance

#111 what's all this France talk? on 06.11.17 at 6:56 pm

France:

unemployment- 9.5% (not a misprint)

unemployment under 25 yrs old- 21.7%

slaves to Brussels.

#112 crowdedelevatorfartz on 06.11.17 at 7:06 pm

@#103 L. L.
“Intolerant of rudeness and folks with a sense of superior entitlement, ….”
********

We are talking about Paris France right? Not Paris North Dakota?
My god man . I’ve yet to meet a Frenchman that wasnt arrogant with a misguided sense of superiority.
And since you want to go there about their memories of “privations” surely your not including Vichy France in that statement…..
As a Brit once commented about Frances rapid surrender in WWII,” I understand why the French flag has white in it but whats the Red and Blue for…..?
Or a Quebec amis who once commented, “The national symbol of France is a Rooster….the only bird that will stand in its own sh*t and sing ”
I’m thinking you’ve lived there too long . Their arrogant attitude has rubbed off.
If it wasnt for those boorish North Americans they’d be speaking German right now
Nice gloss over the massacres in the nightclubs and medditeranean promenades…..almost like those 100’s of dead innocents didnt exist.
Comparing Paris with Detroit or Toronto? Yeesh
One is a has been sh^thole where the population is dropping faster than a hammer wielding lunatic at the Louvre.
The other is just terminally boring boxcutter city with the perpetual loser Maple Leafs (unless your a pizza dough wielding SWL1976 entrepreneur on holidays…..then it would seem like the Big City)

Either way. I aint buying what yer sellin’.

#113 rjrt81 on 06.11.17 at 7:15 pm

#101 MF on 06.11.17 at 3:59 pm
A Reply to #33 MF on 06.11.17 at 6:50

All of the above: smarmy.

I usually respond to messages on here using my phone with the iPhone transcriber. It’s good technology but not perfect. I work 7 days a week with two jobs, so I don’t have time to sit and spell an essay for you.

Good enough reason? What are you insinuating? Trump supporters are all uneducated?

Don’t worry I have my university obedience degree.

MF
——————————————————————–

damn. now i actually feel bad for you. but it all makes sense why you come on a blog to air your perceived grievances of the world. life’s to short to work 7 days a week. you could die tomorrow and have done nothing but work. work to live. not live to work.

#114 Livin Large on 06.11.17 at 7:48 pm

You’re funny Fartz, a xenophobic lunatic but funny none the less. I am indeed pleased you intend to stay on this side of the pond.

The clubs are full, the bars are full, the Louvre and d’Orsay are full and you’re in the great white north hating folks you’ve never sat down with. I love it.

#115 Daughter of Ponzi on 06.11.17 at 8:30 pm

#102 Stan Broock on 06.11.17 at 4:06 pm

You have no idea what you are talking about. These countries are colonies and smart people living there (not your idiots at the banks/offices) resent their colonial masters. Crony capitalism, corruption and consumerism at its worst. But you are right about people and the places, they are nice.

#116 Daughter of Ponzi on 06.11.17 at 8:41 pm

#113 Livin Large on 06.11.17 at 7:48 pm

The clubs are full, the bars are full, the Louvre and d’Orsay are full and you’re in the great white north hating folks you’ve never sat down with. I love it.
—————————————————–
Clubs??? Bars??? You are an old geezer, what would you do in a club. And the museums are full with crowds because the crowds don’t know better. They are crowds, consumers, brainwashed herd, they have to visit because they are told they should. There is nothing more to say about the French after they elected that bizarre creature Macron. That country is a write-off.

#117 crowdedelevatorfartz on 06.11.17 at 8:56 pm

@#113 L.L.( Livin Loco)

Nah.
Regardless of your assumptions I dont “hate” the French.
Nothing more fun than communicating with “body language” when you cant speak the linga franca
Just dont believe your “peaches and creme de la creme” description of the endless summer of love in The City of Light.
We’ll see how the new President with Oedipus tendancies makes out( “makes out”……… get it?) dealing with the entrenched unions, socialists and full time employees that will protect their “status” with blockades, marches and turnip tossing vehemence.
France has a large number of people that voted for Marine LePencil…..anti immigrant, anti EU, anti business, anti progress……. So much for enlightenment.
Give it time.
Macron will achieve nothing unless he’s willing to go down in flames in the next election.
A one term wonder that tried to change the status quo.
But at least the Foreign Legion still has troops willing to fight because….their foreign.

#118 Shawn on 06.11.17 at 10:28 pm

Vanguard’s Bogle Says Ignore the Crowd, Stick to U.S. Securities
https://bloom.bg/2rP0GgX

#119 Willy2 on 06.12.17 at 10:02 am

– Buy Europe ? You’ve got to be kidding.

#120 sue on 06.12.17 at 1:46 pm

@KeithinCalgary

AGREED

SOROS is pure human filth (along with the rest of the ruling class-Rockefeller/Rothschild) The current chaos in Europe is their doing. Great documentary “JFK to 9/11-Everything is a rich man’s trick” on youtube.

I would never go to Europe. (except for maybe Prague or Budapest) No longer safe.

#121 Harold on 06.12.17 at 2:39 pm

True active managers (meaning with an active share above 90) should perform better on the downside as they focus on quality names. ETf’s are passive, you are holding the good, the bad and the ugly. Case closed