Distractions

DOUG By Guest Blogger Doug Rowat

There’s a great Murray Head pop song from the 1980s called One Night In Bangkok. It’s actually about a chess tournament, interestingly. But more specifically, it’s about not letting an incredibly distracting city like Bangkok interfere with one’s focus on winning the tournament. And, as the song details, it ain’t easy: “It’s a drag, it’s a bore, it’s really such a pity, to be looking at the board, not looking at the city.”

Investing is similar. Distractions abound, but keeping focused on the financial “game”, particularly over the long term, is the most important task. Think of all the headline events that occurred just last year that could have easily diverted your attention: oil plunging to US$27/barrel, Brexit, Donald Trump, the list goes on. Any one of these events might have prompted you to make a poor move such as exiting the market and going to cash. In other words, short-term distractions would have cost you significant upside gain.

Aside from a tendency to get easily distracted, another interesting truth about investor behaviour is that investors often feel that the world events that they’re encountering right now are the most significant and consequential in all of history. This is pure vanity.

The Cuban missile crisis, the JFK assassination and the escalation of the Vietnam War in the 1960s; the energy crisis, massive US trade deficits and a 10%+ US unemployment rate in the 1970s; a US recession, the attempted assassination of Ronald Reagan and Black Monday in the 1980s; the Gulf War, another US recession, the Asian financial crisis and Y2K in the 1990s; the ‘tech wreck’, 9/11, two more recessions (one massive) and corporate accounting scandals of the 2000s—all of these events weren’t significant? This is to say nothing of the Great Depression, World Wars and atomic bomb drops in even earlier decades. Yet despite all this turmoil, the market advanced and long-term investors made money.

Our current situation is not particularly special. In fact, we’re fortunate that no major countries are at war, capital markets are doing well and the global economy is actually quite stable. While risk is always present, it’s really no more severe than it’s been in the past. We just feel that our brand of uncertainty is the worst that the world has ever seen and we make investment errors as a result. In short, we succumb to the distractions.

I frequently refer clients to the rolling 10-year performance chart of the S&P 500. Rolling returns look at overlapping time periods and give a much better sense of historical performance versus a simple average return or a return over fixed dates. Rolling returns give a useful picture of the likelihood of making a profit over the long term, regardless of when you invest. Indeed, the chart below shows that, with the exception of only six or seven brief periods, you could have invested at almost any moment in modern history and made a theoretical profit if you’d stayed invested for at least 10 years.

I’ve highlighted before—as has Warren Buffett recently—that it could all end one day in a huge ball of fire. But there’s no way to anticipate such a catastrophic event and no portfolio in the world would protect you anyways. Until then, what we’re left to deal with are relatively minor crises—Donald Trump being perhaps history’s most recent example. But these crises don’t derail markets for long. History proves this. Why would you allow yourself to become distracted by the doom-and-gloom highlighted every night on the news and elect not to participate in what is almost certain to be long-term market upside?

S&P 500 Rolling 10-yr returns (%): Odds of Doing Well Long-Term are High

Source: Bloomberg, cumulative returns

But you might say, after gazing at the above chart, “what if I’d bought at one of those unlucky moments and then spent the next 10 years making nothing?” Yeah well, tough. This is capital market investing and sometimes you just don’t get lucky with your timing. But the overwhelming odds support the notion that you’ll make money with equities over the long term and equities are therefore an essential component of a balanced portfolio. Further, what is the likelihood that you would have entered the market with your entire net worth during one of these few unlucky periods and then subsequently contributed nothing else to your portfolio for 10 years? Regular contributions and disciplined rebalancing further reduce the likelihood of a negative historical return.

But if strong positive odds of making a profit aren’t enough for you, then, to paraphrase Murray Head, go back to your bonds, your savings accounts and your GICs because the strategies we use would not excite you.

Ignore distractions and focus on what matters: building and remaining invested in a balanced and globally diversified portfolio. Think sensibly, don’t get emotional. Get your kicks above the waistline, sunshine.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.

 

85 comments ↓

#1 Gasbag Boomer on 06.17.17 at 3:49 pm

Another great one, Doug. Thanks!

#2 TnT on 06.17.17 at 3:50 pm

#146 Mark Sinclair on 06.17.17 at 2:43 pm
TnT, you sound desperately jealous

#147 Mark Sinclair on 06.17.17 at 2:45 pm
Wow he’s the Prime Minister, who spends all day taking selfies and not much else. Pretty much any job takes more intelligence and skill than that.

***

Mark Sinclair, read your “back to back” posts out loud and hear who sounds desperately jealous.

I will generalize for easy consumption.

There is Good and Evil in this world and everyone is capable of both. Every action you do is on this Good / Evil spectrum.

Roger Stone has every opportunity to do “Good” with his talent and time after time he does “Evil”.

#3 vreaa on 06.17.17 at 4:06 pm

“Nuthin’ That A Good Ol’ 75%+ Price Crash Won’t Fix…” – BOC Governor Stephen Poloz *

https://vreaa.wordpress.com/2017/06/17/nuthin-that-a-good-ol-75-price-crash-wont-solve-boc-governor-stephen-poloz/

(* The author has exercised their right to poetic license in the writing of the title of this post.)
But, seriously now folks, notice how none of the mainstream players and commentators consider the option of a price crash as a solution to most of Vancouver’s housing problems.
A price crash, a real price crash, would flush out all speculators and all appetite for speculation for about two decades, perhaps even three. The price of accommodation in our fair city would drop to fair fundamental values (perhaps lower for a brief period). All housing would be used, as there would be no pie-in-the-sky jackpot for those who wanted to hold ‘units’ like poker chips. Lending would tighten to the point that one would have to be able to support a purchase with demonstrated income (novel idea!).
Sure, people would get hurt, but people are hurtin’ now, and who is to say who should be hurtin’ and who shouldn’t?
Real estate and related activity would drop from, what?.. its current inflated 30% of the economy to a more historically normal less than 10%. Kids would go to classes rather than smoking weed while tacking cheap shingles to roofs without harnesses. We’d be able to talk about things other than RE at BBQs (I know this may be difficult, but we can do it!). Our minds (and behaviours) would stop being blown and distorted by stories of professionals making more money via their modest house than that saved and invested from an entire 40 year career of honest earnings.
Homes would become homes again.
Vancouver would never be cheap, or ‘free’.. nobody’s expecting that. But ‘honest’ prices, determined by those who actually want to use properties and are prepared to fund them from their own actual funds, would be a very good thing for the longer term health of the city.
– vreaa

#4 NoName on 06.17.17 at 4:21 pm

Now that chess is mentioned, nyc chess hustler trying to hustle chess grandmaster Maurice Ashley.

https://www.youtube.com/watch?v=U5vnpOp0U_g

#5 Kool Aid on 06.17.17 at 4:43 pm

Markets will sway and swing downwards for the next few months, lowest volatility in decades is the “signal” to raise cash.

#6 TurnerNation on 06.17.17 at 4:47 pm

It’s fun watching the computers control the Dow +/- 50 points each day and VIX +/- 1 points.
Price discovery is switched off for now.

This weblog used to strain under the weight of our forum host’s heroic if not manly ventures. Regaling us with tales and tails (and sometimes ‘tail’).

These days everyone is wrapped in Smoking man’s live broadcasts – ex post facto. Good medicine. Not waiting till one’s death bead to spill secrets and exercise skeletons.

Video killed the media star.

#7 good post and.... on 06.17.17 at 4:56 pm

quiet the noise the roll the dice with the pros;

xic.to
ytd- +0.69%
10 yr average- +3.54%

mawer canadian
ytd- + 2.72%
10 yr average- + 7.33%

:)

#8 lol on 06.17.17 at 4:58 pm

But you might say, after gazing at the above chart, “what if I’d bought at one of those unlucky moments and then spent the next 10 years making nothing?” Yeah well, tough

…………

shit out of luck……they probably made a fortune in real estate

#9 Al Sinclair on 06.17.17 at 5:02 pm

Al Sinclair here. Real Estate extraordinaire.

Short term distractions or Long term destruction, stocks, and etf’s are recipe’s for disaster.

Take your cash, GIC’s and HISA’s, and invest in brick and mortar. The market is still performing and your only ticket to freedom is real estate. I just came back from a busy afternoon of open houses for my clients and it was unbelievable! I had buyers tripping over each other. The market is back and it is moving forward into one of the best performing summer’s ever.

I have to go now, just rec’d multiple offers on 331 Yellowbrick Road in a young, hip, promising, upcoming and grand area of the GTA.

When you need honesty call Al because I’m you Pal.

And remember, Snake Oil is my game, what’s yours?

#10 Monterey Jack on 06.17.17 at 5:11 pm

I love that song!!

And this is an excellent article which I’ll show to my 75 yr old mother to see if it’ll convince her to invest in something other than her beloved savings bonds!

#11 mitzerboy aka queencitykidd on 06.17.17 at 5:12 pm

sunshine oh sweet sunshine

#12 Andrewski on 06.17.17 at 5:25 pm

Thanks Doug. Further reaffirms the saying that, time in the market is more important than timing the market.

#13 Jimmy on 06.17.17 at 5:36 pm

Absolutely love that song.
Lyrics are still fresh in my mind after all these years.

#14 Smudgekin on 06.17.17 at 5:41 pm

Say Doug what’s on Bay street got going in EV or charging infrastructure related funds? Garth if you’re there – start reading-up on electric motorbike.

#15 Renter's Revenge! on 06.17.17 at 5:57 pm

Awesome song, awesome post, awesome references!

#16 Entrepreneur on 06.17.17 at 5:58 pm

“Yeah well, tough.” DR. And for every “tough” situation is a learning curve.

We all have that good/evil in our minds. Most people are good minded and that is how we live/govern. Some people are so bad that laws are in place. But we have to be careful of the ones who are bad but pretend to do good. And with twisted words, EVIL.

#17 Freedumb on 06.17.17 at 6:00 pm

You are the best Dug I have ever known. I love you man!

#18 Tony on 06.17.17 at 6:02 pm

Long term investing for me is at most a couple of weeks. With no markets or none that resemble those of the past I day trade because I can’t see anything else. The only thing I’d be holding long term is physical gold.

#19 n1tro on 06.17.17 at 6:25 pm

DELETED

#20 Penny Henny on 06.17.17 at 6:34 pm

Todays pic reminds me of that song ‘Sailing’.
“sailing takes me away”

#21 Penny Henny on 06.17.17 at 6:38 pm

Further, what is the likelihood that you would have entered the market with your entire net worth during one of these few unlucky periods and then subsequently contributed nothing else to your portfolio for 10 years? -DR
//////////////////////////////

Not uncommon at all if you just sold your residence and are putting it in the market (and are retired)

#22 Andrew Woburn on 06.17.17 at 6:38 pm

investors often feel that the world events that they’re encountering right now are the most significant and consequential in all of history. This is pure vanity.
=====================

Too true. Now in my seventies, I can tell you there is almost nothing happening right now that I would call a crisis.

I think it is partly the relentless media competition for eyeballs that makes everything sound like the end of the world. The internet conspiracy theories make Millennials in particular love the vanity feel that they have the inside track over Dad’s boring old cable news.

It’s worth remembering that the media can only sell you what you will watch. You are just advertising fodder. If you would watch hard, thoughtful and accurate news, you would get it. If all you want is blood, crisis and Trump, you get it. If la derriere de Kardashian gets more clicks, don’t blame the MSM.

A leading Globe financial writer says the best way to make sure hardly anyone reads his column to include the words “China” or “Federal Reserve” in the headline even though both are vastly more important to our financial health than today’s house price in Etobicoke.

#23 Andrew Woburn on 06.17.17 at 6:42 pm

Amazon’s Move Signals End of Line for Many Cashiers –

https://www.nytimes.com/2017/06/17/upshot/amazons-move-signals-end-of-line-for-many-cashiers.html

#24 no offense... but on 06.17.17 at 6:46 pm

no offense, but, that return chart will SPIKE higher this year and next simply because of the 2007/8 market collapse.

the best returns have already been made.

#25 Setting the Record Straight on 06.17.17 at 6:50 pm

Gary yee on 06.16.17 at 10:57 pm
“But, hey, anything’s possible. Trump is president, after all.”

And in communist Canada a former substitute drama teacher is prime Minister. Yay.

He was an MP for eight years. Is your resume better? — Garth

+++++++
Gary was just trying to present the PM in the best light possible. Mentioning only his accomplishments. And he still doesn’t measure up.

Of course we could talk about how he made extra money as an MP— by giving speeches.

#26 Balmuto on 06.17.17 at 6:58 pm

Nice chart Doug. Are those price returns or total returns (dividends reinvested)? Thanks.

#27 Smoking Man on 06.17.17 at 7:27 pm

#6 TurnerNation on 06.17.17 at 4:47 pm

Clips are going to get better after my departure from Canistan. Even with the bravery of many gulps of liquid courage broadcasting live is a bit scary. It kills your nervousness but up goes the risk of unpredictablity.

I think that was the last one. After I finished off a few JD night caps. Lucky for me the phone died just as I started filming.

#28 TCContrarian on 06.17.17 at 7:33 pm

“While risk is always present, it’s really no more severe than it’s been in the past. ” -DR

——————————————————————
What??? OMG!

The concept of: ‘risk’.

A couple of thoughts to rain on your thesis Doug (sorry):

“Risk” is meaningless in a vacuum.

The proper (and more useful) way to think of it is:

A) ‘downside-risk’ vs
B) ‘upside potential’;

So, in the current state of the markets (the ‘everything bubble’), the upside potential is minimal vs the huge risk that exists for the downside.
With just about any metric, stocks have almost never been more expensive (SP500).

The risk/reward favours being short – and I am.

TCC

#29 Doug Rowat on 06.17.17 at 7:53 pm

#7 good post and…. on 06.17.17 at 4:56 pm
quiet the noise the roll the dice with the pros;

xic.to
ytd- +0.69%
10 yr average- +3.54%

mawer canadian
ytd- + 2.72%
10 yr average- + 7.33%

:)

Did Chuck Mawer put you on the payroll?

–Doug

#30 Doug Rowat on 06.17.17 at 8:03 pm

#13 Jimmy on 06.17.17 at 5:36 pm

Absolutely love that song.
Lyrics are still fresh in my mind after all these years.

There will never be a song that references Yul Brynner, the Tirolean spa and Somerset Maugham as long as we live.

–Doug

#31 Doug Rowat on 06.17.17 at 8:11 pm

#26 Balmuto on 06.17.17 at 6:58 pm

Nice chart Doug. Are those price returns or total returns (dividends reinvested)? Thanks.

Price. In other words, the likelihood of actually recording a loss after any 10-year period is even lower than the chart indicates.

S&P 500 total return indices only have data going back to the 1950s.

–Doug

#32 Spiltbongwater on 06.17.17 at 8:12 pm

DELETED

#33 Gasbag Boomer on 06.17.17 at 8:32 pm

Geez, Doug or maybe Garth, that picture really sucks. I wouldn’t wish that for anyone….

#34 Excel PhD on 06.17.17 at 8:39 pm

That graph had me confused for a minute. The green line is the average. Not the break-even line. It would be helpful if the x-axis line (return=0) was thicker to indicate the y-axis starts at a negative number. Just a suggestion.

Keep up the good work!

#35 WUL on 06.17.17 at 8:39 pm

Doug:

Speaking of crisis de jour, this is close to being on topic.

Want cheap or perhaps free houses? Simply bide your time. In southern Alberta the anti-vaxxers will prevail and wipe out the locals.

I’ll avoid the subject of religion

http://www.cbc.ca/news/canada/calgary/whooping-cough-exponential-outbreak-ab-1.4165942

#36 DON on 06.17.17 at 9:05 pm

#22 Andrew Woburn on 06.17.17 at 6:38 pm

investors often feel that the world events that they’re encountering right now are the most significant and consequential in all of history. This is pure vanity.
=====================

Too true. Now in my seventies, I can tell you there is almost nothing happening right now that I would call a crisis.

I think it is partly the relentless media competition for eyeballs that makes everything sound like the end of the world. The internet conspiracy theories make Millennials in particular love the vanity feel that they have the inside track over Dad’s boring old cable news.

It’s worth remembering that the media can only sell you what you will watch. You are just advertising fodder. If you would watch hard, thoughtful and accurate news, you would get it. If all you want is blood, crisis and Trump, you get it. If la derriere de Kardashian gets more clicks, don’t blame the MSM.

A leading Globe financial writer says the best way to make sure hardly anyone reads his column to include the words “China” or “Federal Reserve” in the headline even though both are vastly more important to our financial health than today’s house price in Etobicoke.
**********

Nicely said – thank you for sharing your insight!

Storming up you way? – Chilly outside in Mill Bay.

#37 Wrk.dover on 06.17.17 at 9:21 pm

Sell my GICs now, and buy bank shares at $95.00 or wait for the bail in and get them handed to me for 95 cents? My choice is….100X more shares.

#38 DON on 06.17.17 at 9:22 pm

#32 Spiltbongwater on 06.17.17 at 8:12 pm

DELETED
************
A little more weed, then post again!

Doug: Thank you for the perspective, cheers!

#39 Randy on 06.17.17 at 10:07 pm

The musical was about the Cold War. Didn’t the Soviet Union Collapse a few years later ?

#40 Robbie on 06.17.17 at 10:12 pm

“Get your kicks above the waistline, sunshine”….sounds like you’re “channeling” Garth. Are you sure that’s a good idea? You might end up selling the Porsche and buying a Harley! :-)

#41 Mark on 06.17.17 at 10:16 pm

“Sell my GICs now, and buy bank shares at $95.00 or wait for the bail in and get them handed to me for 95 cents? My choice is….100X more shares.”

I find a more likely scenario is that as housing deflates, the Canadian economy slows down, and the Bank of Canada cuts to 0% or even less to keep the Canadian dollar from shooting too high in response. When you go to renew your GICs, you’ll maybe get 0.5% on them. Meanwhile, bank shareholders will be feasting on leveraged homeowners who are stuck paying higher spreads (risk premiums) against depreciating assets. With most defaults taken care of by the CMHC.

Last big housing downturn in Canada, in the 1990s, the bank stocks actually quadrupled. This time around, both homeowners and GIC owners are likely to be decimated. Once again, it will be a good thing to be a middleman, ie: a Canadian bank.

Having said that, Canadian bank outperformance isn’t indefinitely sustainable, so make sure you do follow Garth et al’s advice of being diversified.

#42 Pete from St. Cesaire on 06.17.17 at 10:19 pm

no major countries are at war
—————————————————-
At direct war with each other, you mean.

#43 Where's The Money Guido? on 06.17.17 at 10:28 pm

Looking at that chart and using Smoking Man’s bat-head analysis has got me stumped. Your graph stops at 2012, but the 1st graph I have that goes to 2014 and shows a little more:
http://www.businessinsider.com/sp-500-rolling-10-year-returns-2013-11
Then you look at this one up to to the current time and you go “hmmmm”:http://www.macrotrends.net/2488/sp500-10-year-daily-chart
I guess if you take the last one as legit then it seems it’s “Going to the moon, Alice”……
What’s the bias % we give these charts and who do we believe.
The the million dollar question….

#44 World debt on 06.17.17 at 10:32 pm

I agree that history is full of crisis and wars and black swans, and yes the markets go up. And I agree to make money you need Long term horizon. My only concern now is the world is facing too much debt and too much pension obligations and so forth. I would like to be positive, but we cannot continue on is path. As Mr. Turner has repeatedly said, when housing corrects whether it’s 10,20 30 or more percent, thousands of people will be underwater. So why then is world debt any different? And no governments cannot tax forever.
If debt is not an issue why to you keep talking about t2 and all the deficits. Makes you wonder where all the money will come from. I am not a gold licker or doomsayer, but it makes one pause and think this mountain of debt cannot be paid so what will happen?

#45 TurnerNation on 06.17.17 at 10:38 pm

Now WUL is under employed, I look forward to his nicotine soaked live stream broadcasts from his local casino or gambling emporium.
What else would he do?! Tip well and often.

#46 Rich Young on 06.17.17 at 10:57 pm

Price correction every 7 years has been the norm. We are now past that point as Central Banks have goosed the system making prices of everything FAKE… I’m 100% Cash at this time and will wait for the next smack down.

#47 Ponzius Pilatus on 06.17.17 at 11:11 pm

#141 Vanno on 06.17.17 at 1:52 pm
What is a biggie about not having cash right away from your local credit union? Give them a 1 week notice and there your cash go. They have insurance on a certain amount of cash at a branch that they can’t exceed. I myself work for a CU in Vancouver. Very conservative in terms of loans and mortgages.
——————
Good example why they hire naive employees at VanCity.
Good post, boy. Here’s your bone.

#48 Ponzius Pilatus on 06.17.17 at 11:16 pm

Hello Garth, Ryan and Doug.
I think, by now even the most stupid blog dog should get it:
Diversify and stay calm in stormy weather!
Not rocket science.
Can we move on to something else.

#49 WUL on 06.17.17 at 11:27 pm

#45 TurnerNation

Now WUL is under employed, I look forward to his nicotine soaked live stream broadcasts from his local casino or gambling emporium.

writ.writ.writ…

Speaking of forward looking, don’t. Borders on libellous. I’ll see you in Court. Or a tavern. Your choice. Maybe in Southside Johnny’s with Lord Justice S.M. Nectonite presiding. “All rise.”

#50 acdel on 06.18.17 at 12:05 am

Doug, I usually really enjoy the weekend financial blogs.

This quote by you: This is pure vanity, I feel that it is so irresponsible to post by you. This is not about the past; we are about to endure the greatest shift of technology, robotics, paradigm, as well ( as many many experts have predicted) the greatest stock market crash one has ever experienced. Sure, let’s ignore debt and many bright minds out there.

There has been so many links posted just in the past few months on this blog that Garth’s team seen to totally disregard.

Ok, Just answer me this question hypothetically, if you knew that the greatest stock market crash was going to happen; please tell all of us what would you do?

Cannot wait for this reply if it actually is replied to honestly, not some other sales job. Actually I am going to ask all of the knowledgeable one’s out there that have never posted or have a different opinion about the future.

Sure I know, it is a hallucination, well worth a try!

#51 James MF on 06.18.17 at 3:28 am

A good article, and a timely reminder about sticking to asset allocation plans.

I won’t confirm that I’ve been thrown off a bike in the same way as that young lady, but I do think sewer grates like that (and similar grating used on some bridges) should be outlawed.

#52 Stock Picker on 06.18.17 at 3:52 am

True enough Ryan, it’s a skill set that demands focus on the signal and ignoring the noise. BTW, Warren Buffets “value investing” lost 15% over the past 10 years. His skillful sucking up to Obama and obtaining billions in subsidies to build out dark systems of useless green energy projects are all that kept him from showing the losses. He admitted publicly that he uses the subsidies to ‘smooth out’ the losers with tax payer funded payola. Warrens ‘green windmills’ kill so many millions of migrating birds and bats every year Obamas EPA had to issue a special waiver.

Re: Distracted Bangkok….. an urban myth perpetuated by a horrible movie franchise regurgitating stereotypes and a sub set of tourists no different than any city anywhere. Imagine going to the sleaziest corner in your city and booking a room for the weekend…..it’s the same in BKK. I live here and have been to the red lights once….20 or more years ago…..Thai people will tell you the same. It’s a city of 15 million, yes there are hookers, but no more by the numbers than Toronto or Montreal. The tragedy is the same though in that none of the women are Thai, they are indigenous women from the poorest states along the Laos / Cambodia border….much like the poor girls from Prince Rupert who t their trade on the streets of the downtown east Hastings street market in Vancouver. Only pathetic losers are seen in Bangkoks bars, it’s been that way for at least two decades, but myths die hard and herpes lasts forever.

#53 Toronto Dweller on 06.18.17 at 4:35 am

No the world is not in crisis but as our host has repeatedly repeated ad nauseum we are pickled in debt.
The way governments operate based on those conditions is by starting the money making presses and lowering the interests rates flooding the market with money thus debasing the currency and wiping out the savings. It’s been done in the past and it’s been done now and usually leads to a lower standard of living. The best way to counter in my opinion is to keep your head cool and diversify your assets as Garth suggest but have a little more in PM’s and cash.

#54 FLHTK on 06.18.17 at 5:30 am

ETF’s have seen 500B in the last 12 months…..i’ d say people are catching on to this balanced diversified type of investing.

#55 Chris R. Tokyo on 06.18.17 at 6:02 am

There is another song from the 80s called “Turning Japanese” which seems more applicable to the global economy. In which case smug buy and hold investors can look forward to an eye watering 30 year bear market.

#56 Toronto vs. Edmonton on 06.18.17 at 6:36 am

Median household income (2014): Toronto, $75,270; Edmonton, $101,470.

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm

Average home price (May 2017): Toronto, $863,910; Edmonton, $379,018.

http://www.crea.ca/housing-market-stats/national-average-price-map/

Please explain!

#57 Trumpnanigans on 06.18.17 at 7:10 am

Russia Renewed Unused Trump Trademarks in 2016

https://www.nytimes.com/2017/06/18/us/politics/russia-trump-trademarks.html

Report: Trump White House is pushing to weaken Russia sanctions bill

https://www.aol.com/article/news/2017/06/17/trump-white-house-is-pushing-to-weaken-russia-sanctions-bill/22432327/

#58 Cheekmonster on 06.18.17 at 7:50 am

Great article!

I started investing 5 years ago and so many times I almost cashed-out and glad I didn’t as every time my portfolio bounced way back. These days I’m better at ignoring the noise. I know one of these days a bigger correction might come but I doubt it will outweigh recent gains and so I’ll wait again for it to all comeback.

Just think the night Trump won the election the futures plummeted. How many people panicked that next morning and sold. 6 months later 20-30% gains across the board despite all the noice and Trump.

#59 Ponzius Pilatus on 06.18.17 at 7:58 am

#51 James MF on 06.18.17 at 3:28 am
A good article, and a timely reminder about sticking to asset allocation plans.

I won’t confirm that I’ve been thrown off a bike in the same way as that young lady, but I do think sewer grates like that (and similar grating used on some bridges) should be outlawed.
———–
Simple solution.
Use tires with wider rims.
Next problem.

#60 Doug Rowat on 06.18.17 at 8:19 am

#43 Where’s The Money Guido? on 06.17.17 at 10:28 pm

Looking at that chart and using Smoking Man’s bat-head analysis has got me stumped. Your graph stops at 2012…

No, it is entirely current. Look more carefully.

–Doug

#61 Doug Rowat on 06.18.17 at 8:39 am

#50 acdel on 06.18.17 at 12:05 am

Ok, Just answer me this question hypothetically, if you knew that the greatest stock market crash was going to happen; please tell all of us what would you do?

I’d short the market, become fabulously wealthy and hang out with 2Chainz.

http://www.mtv.com/news/2127106/2-chainz-diplo-most-expensive-water/

What are your plans?

–Doug

#62 Pepito on 06.18.17 at 8:42 am

#55 Chris R. Tokyo on 06.18.17 at 6:02 am
There is another song from the 80s called “Turning Japanese” which seems more applicable to the global economy. In which case smug buy and hold investors can look forward to an eye watering 30 year bear market.
__________________________

Having lived in Japan for a good chunk of those lost decades, I tend to agree. Over the last 28 years if you bought the Nikkei at the peak, the average return to date has been dismal.

Looking at the debt levels and economic ills of major economies, the Japan comparison is not unreasonable.

In respect to the mind set that the market will always go up over time, I see little difference between how finance and real estate professionals hawk their goods.

#63 Pepito on 06.18.17 at 9:40 am

#50 acdel on 06.18.17 at 12:05 am

“….. hypothetically, if you knew that the greatest stock market crash was going to happen; please tell all of us what would you do?”
___________________

I do not claim to be knowledgeable, but I would buy Canadian government bonds. Since starting investing, I have seen at least 3 serious downturns/crashes, each arguably worse than the one before. Throughout that time and going into what I fear will be a pogressively more uncertain and volatile future with potentially huge, unrecoverable market losses, I have remained invested in mid to long term government bonds that have gone from 6-7% to 3-4% returns over the course of the last 25 years. For an expat like me, this has worked well and even over the course of the last decade of considerably lower bond yieds, this strategy has provided acceptable steady returns with minimal risk, low management cost, and, notably, no taxation. Not for everybody, but for risk averse non residents it is a bullet proof, low maintenance strategy that let’s you live your life without financial worry. Albeit, you would need either a decent size portfolio or a modest lifestyle to make it work these days.

#64 akashic record on 06.18.17 at 10:02 am

An outstanding article about the context of the endless Russia-Trump “investigations”.

http://www.zerohedge.com/news/2017-06-17/its-russia-stupid

The short synopsis:

There is a real symbiosis between the anti-Russian imperative in American foreign policy and support for radical Islamic elements. It did not end when the Soviet Union and communism collapsed but rather was intensified. This is why Moscow’s constant calls for a common front against terrorism are always rebuffed. Such cooperation doesn’t make any sense for a nomenklatura whose number one goal is hostility to Moscow and for whom jihadists are at worst «frienemies» – people who may be troublesome but useful.

We can only imagine how completely different the world would be if the U.S. were to recognize that Russia is a country that in many respects is not that different from the United States or Europe and that we had common interests. But for the U.S. Deep State, that would amount to switching sides in a global conflict, where we see jihadists essentially as «freedom fighters» against a geopolitical adversary. These same clueless «elites» are then puzzled when their carefully nurtured, cuddly, «moderate» jihad terrorists attack us back here at home.

Those behind this attempted coup think we can continue to treat Russia as though it were a minor power of the magnitude of Serbia, Iraq, Libya, or Syria, or even Iran. They think if we just keep pushing, pushing, pushing, either the Russians will collapse or back down. They will do everything possible to box Trump in and prevent him from pursuing any path other than the disastrous course laid out by Bill Clinton, George Bush, and Barack Obama. They can see no other outcome than removing Putin and returning Russia to the condition of a Yeltsin-era vassal state – a term Putin used in the Stone interview – or, better yet, its territorial breakup along the lines suggested by the late Zbigniew Brzezinski.

#65 GTA ponzi scheme on 06.18.17 at 10:18 am

Toronto vs. Edmonton on 06.18.17 at 6:36 am
Median household income (2014): Toronto, $75,270; Edmonton, $101,470.

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm

Average home price (May 2017): Toronto, $863,910; Edmonton, $379,018.

http://www.crea.ca/housing-market-stats/national-average-price-map/

Please explain!

up until now people needed to borrow large sums of money inorder to get a property which allowed them to borrow large sums of money to enjoy life on(HELOC/LOC). Everyone is just gambling and living it up with no way to pay off the debt but they have no intentions of doing so. If they can’t sell for break even they will go bankrupt. Now every gambler is desperately trying to get out of this ponzi scheme with either a profit or breakeven (Need to cover Heloc/LOC/credit cards). If you noticed many people don’t work anymore. They just gamble with money they don’t have, which they have gotten thanks to mortgage fraud.

#66 Livin Large on 06.18.17 at 10:19 am

Monterey J, your mother isn’t investing…she’s saving.

So, your first step isn’t to change her investment choice, it’s to convince her to invest in themfirsy place.

My mother was all in for GICs because that’s all my father taught her about. It took a while but I convinced her to actually invest by repeatedly showing her when the savings returns would no longer cover day to day expenses without using principal (the other “never” from my father).

Day to day cost inflation of consumables is usually easy for the elderly to grasp. Their greatest fear is running out of money to live comfortably…not making a killing.

#67 crowdedelevatorfartz on 06.18.17 at 10:36 am

@ #55 Chris Tokyo
“buy and hold investors can look forward to an eye watering 30 year bear market.”
+++++++

Yep. Quite a few people remember about 25-30 years ago when japanese companies were buying up everything in sight.
Rememebr when property in Tokyo was the most expensive in the world? The land the Emperors Palace sat on was estimated to be worth more than the State of Calfornia……..poof.
And then the worm turned…..
The Nikkei 225 market peaked in 1990 at 40,960 and has has been struggling to return to those heady days ever since………
But if you invested in the Nikkei in 2010 and sat until now you would have done very well (doubled to about 20,000)
Hindsight makes for a jealous mistress.

#68 A Reply to #52 Stock Picker on 06.18.17 at 10:56 am

“… Warren Buffet[t]s ‘value investing’ lost 15% over the past 10 years….”

Your statement above is false; Buffett’s portfolio had a compound annual growth rate (CAGR) of 8.29% over the past 10 years (see below for calculations).

The following annual growth rates can be found on p. 2 of the Berkshire Hathaway 2016 annual report at the following link:

http://www.berkshirehathaway.com/2016ar/2016ar.pdf
2007: 28.7%. 2008: (31.8%)*. 2009: 2.7%. 2010: 21.4%. 2011: (4.7%)*. 2012: 16.8%. 2013: 32.7%. 2014: 27.0%. 2015: (12.5%)*. 2016: 23.4%.

*Figures shown in parentheses are negative.

CAGR (2007-2016) = [(1.287 x 0.682 x 1.027 x 1.214 x 0.953 x 1.168 x 1.327 x 1.27 x 0.875 x 1.234) ^ (1/10 or 0.1)] – 1 = [2.2165911 ^ 0.1] – 1 = 1.0829 – 1 = 8.29%.

http://www.investopedia.com/articles/investing/071113/breaking-down-geometric-mean.asp

https://en.m.wikipedia.org/wiki/Geometric_mean

I leave it to the readers to decide if the rest of your comment about Buffett can be trusted.

#69 The Technical Analyst, CSTA, CPD on 06.18.17 at 11:31 am

#46 Rich Young “I’m 100% Cash at this time and will wait for the next smack down.”

Here is something to consider. Rather than a getting 1-2% in a high rate savings account or GIC, why not put it to work in a conservative fund?

ATB101 (or ATB201) Year to Date: +2.93%, 1 year: 6.01%

Even if you take out the fund fees, you are well over 2-3x what you would make on a HISA and downside is incredibly well protected. (2008 crash it lost 5.04%, a year later 2009 it gained 13.76%).

Food for thought to any who are just holding cash waiting.

#70 The Technical Analyst, CSTA, CPD on 06.18.17 at 11:32 am

link: http://www.compassportfolios.com/Performance/Pages/Compareportfolios.aspx

#71 TrumpForTheAges on 06.18.17 at 11:51 am

Ryan….curious to understand your assessment on why certain things in today’s economic environment are distractions and not more structural (and serious)? For example….why are you not concerned that all developed economies cannot kickstart growth. We see in the US and Europe that they have to spend more than $2 to generate $1 of growth. As a result, government debt is ballooning and normalizing interest rates will only increase the pressure to tangibly improve growth otherwise risking significant social unrest?

The US had Q1 GDP growth of 0.6% and Q2 is forecasted at 2.5%, so clearly not strong enough to support further rate hikes? Doesn’t something have to give here?

#72 Doug Rowat on 06.18.17 at 12:24 pm

#71 TrumpForTheAges on 06.18.17 at 11:51 am

Ryan….curious to understand your assessment on why certain things in today’s economic environment are distractions and not more structural (and serious)? For example….why are you not concerned that all developed economies cannot kickstart growth. We see in the US and Europe that they have to spend more than $2 to generate $1 of growth. As a result, government debt is ballooning and normalizing interest rates will only increase the pressure to tangibly improve growth otherwise risking significant social unrest?

The US had Q1 GDP growth of 0.6% and Q2 is forecasted at 2.5%, so clearly not strong enough to support further rate hikes? Doesn’t something have to give here?

Why don’t you ask Ryan next week. Until then, go outside and enjoy your Sunday afternoon (speaking of tangible).

–Doug

#73 InvestorsFriend on 06.18.17 at 12:24 pm

The S&P 500 has performed well over almost all 10 year periods.

Great chart and great article.

But as the comments indicate, many people are not to be confused by mere facts. People generally have their minds made up for or against investing in the big indexes like the S&P 500. Once people have made up their minds it is VERY difficult to change their thinking.

I mean some people are so fact-challenged as to disparage Warren Buffett’s investment record!

#74 Damifino on 06.18.17 at 12:27 pm

#6 TurnerNation

These days everyone is wrapped in Smoking man’s live broadcasts
————————————-

Not everyone.

#75 Dan.t on 06.18.17 at 12:53 pm

DELETED

#76 Ponzius Pilatus on 06.18.17 at 1:15 pm

Somehow, Ryan, sorry Doug brings out the cynics.
Nothing wrong with that.
You learn more from the distractors than from mindless on your lip hangers.

#77 Jessica on 06.18.17 at 1:29 pm

Good photo but pretty sure it is staged… they parked the bike and the woman did an acrobatic leap while her friend snapped the photo.

Don’t have enough to worry about. do you? — Garth

#78 Space dust on 06.18.17 at 1:37 pm

#74 Damifino on 06.18.17 at 12:27 pm
#6 TurnerNation

These days everyone is wrapped in Smoking man’s live broadcasts
————————————-

Not everyone.

Actually no one.

#79 A Reply to #65 GTA ponzi scheme on 06.18.17 at 2:59 pm

I think you missed my point, which is simply this: Why live in Toronto if on average household incomes are much higher and houses are much cheaper in Edmonton? Duh!

So much of the discussion in the Comments section every day is about Rent vs. Buy in Toronto or Vancouver without even considering the other obvious and clearly better choice: Leave!

#80 conan on 06.18.17 at 3:20 pm

speaking of tangible…..

I am not a Doctor, but that person in the photo is about to get severely hurt. If it was grass, the pic would be funny.

Could a Hollywood stuntwomen could roll out of that? Nope.

#81 EmmEmm on 06.18.17 at 7:48 pm

I so love reading this blog and most importantly the comments. Some people who are writing them are exceptionally witty and can even give Garth run for his money.

btw, the pic seems photoshopp’ed !!

#82 Stock Picker on 06.18.17 at 9:14 pm

#68…..reply to stock Picker…….read the global investor, financial post….Bloomberg June 12, 2017.

As I said Buffet uses tax subsidies to smooth out his losers……

#83 acdel on 06.18.17 at 11:29 pm

#63 Pepito

Thanks very much for your insight; I think that your response is going to help many out there.

#84 acdel on 06.18.17 at 11:39 pm

#61 Doug Rowat

Too funny! Ok, touche, good for you, but seriously what lousy advice.

#85 former hippy living on a gulf island on 06.19.17 at 12:27 am

Hi Doug

Keep it up. I am a long time follower of Garth, and you are a great addition to the program.