Fear of heights

DOUG By Guest Blogger Doug Rowat

Last summer, I took my daughter to the top of the CN Tower for the first time. She had her first walk across the glass floor of one of the observation decks. The walk was fear-inducing because the rule, at any age, is that heights are dangerous.

Interestingly, my daughter’s tentative walk across the glass floor reminded me of the countless research reports I’ve read that list stocks at their 52-week highs. Often these reports contain little other information aside from indicating that the stock price is ‘high’. Unfortunately, I’ve seen many brokers trade based on this information alone: stock’s at its 52-week high, time to sell. Why? Because something that’s high must be dangerous.

The Dow Jones Industrial Average (DJIA) actually hit 70 record highs in 2017 and hit FOUR 1,000-point milestones for the first time ever—a record of records, so to speak.

Now that same fear of heights is playing on many of our clients’ psyches. Of course, if you’d sold when the DJIA closed above 20,000 for the first time on January 25, 2017 (a record high!), you’d have sacrificed 26% upside as the DJIA now sits well above 25,000. All told, the DJIA advanced 25.1% last year. So how does the DJIA typically perform after it has had a calendar year with a 25% or more gain? It heads higher. Since 1950, the Dow has advanced 25% or more y-t-d 10 times. It has traded higher the next year eight times and six times has recorded a double-digit gain. The average return has been 12.6%.

So, why is a ‘high market’ not a reliable sell signal? First, markets move higher most of the time anyways, which is one reason why when you simply look at calendar year returns, the DJIA, dating all the way back to 1925, trades higher 77% of the time. Without getting any more complicated than that, those are pretty favourable odds for investors. But secondly, a strongly accelerating market is hard to slow down. Powerful upside momentum often persists—just ask bitcoin and marijuana investors.

Now, you can argue, as many bears do, that it’s different this time. For example, valuations are rich. (My rebuttal would be that valuations almost always exceed long-term averages in bull markets.) However, whether it’s truly different this time or not, is not the point. It’s a mistake to isolate one arbitrary fact as proof of a future outcome: “Markets have done well, time to sell.” This is not a defensible argument. I just proved it by examining the historical performance of the DJIA after spectacular performance years.

The market may indeed correct, but the market-has-moved-strongly-higher argument is insufficient for drawing that conclusion. News headlines proclaiming “record markets” or even a scary-looking uptrending price chart viewed in isolation are also not reasons to hit the panic button. I explained the ‘scary chart problem’ when I examined market bubbles in a previous blog post. For example:

This Must have been The High.

Nope. This was.

Source: Bloomberg; Cart measures Shanghai Composite Index

There’s nothing wrong with declaring that a bull market is over, but gather the evidence and assemble multiple data points with predictive power. In short, build a complete argument.
Don’t just state “it’s high” and panic. If you do this, every harmless obstacle—like the CN Tower’s glass floor—will stop you in your tracks.

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

 

136 comments ↓

#1 technical analysis? on 01.13.18 at 3:47 pm

this bull market in stocks has a long way to go. most world stock markets peaked in 2000 or 2008 and have since been consolidating. they’re just breaking out now…. (examples? tsx, hang seng, ftse, cac, dax… )

#2 crossbordershopper on 01.13.18 at 3:53 pm

most canadian stocks suck, and have no relationship with the dow or s and p etc.
thats the sad part,most people have canadian stocks that have done next to nothing for years, commodity stocks, oil and gas, gold most commodity stocks.
maybe shopify, dolarama, a few others, most have done very little over the past 5 years while the us market rockets.
plus no exposure to airlines, like real airilines, defence stocks, biotech, pharma, etc. huge indurstries that dont exist here.
canada, resource place not much changes, dont buy any ipo in canada either they rarely work out with few exceptions.
the whole canadian investment scene sucks too.

#3 conan on 01.13.18 at 3:59 pm

Good argument. I am confident everyone wants this bull to continue. Could be a good year for oil ( our oil) if there is a sheikh down in the M.E. It is very weird over there now.

Biggest wild card has to be Donald. The last person who gets to talk to Trump decides what the policy is going to be. That’s sad. Almost seems the Americans need to change the Constitution ,just to fit him in. Make him a Super Mayor. That’s it, that’s all. He is too powerful, and frankly, that’s scary.

#4 Screwed Canadian Millenial on 01.13.18 at 4:23 pm

When I was a kid, and that glass floor recently opened at the CN Tower, I wasn’t scared at all. I started jumping up and down on it and my parents yelled at me.

#5 Mark on 01.13.18 at 4:24 pm

The TSX seems to be primed for gains similar to those on the chart as interest rates rise (a reflection of rising global inflation) and speculators who were formerly focused on Canadian housing finally abandon the asset class.

The oil and gas shares are still reflecting oil closer to $50/barrel, not $64. The gold mining shares are enjoying record cashflows and earnings are in the process of exploding as gold prices start to firm up and resume their long-term ascent. Railway CEO’s have publicly stated that their railway networks are “at capacity” which implies that there is very extreme pricing power at the railways and railway assets should continue their ascent to levels well above that of the cost of replacement. Canadian telecom stands to benefit from the death of net neutrality. Banks, they’re eating up monster spreads right now, will be able to shed most of their origination business as the RE downturn accelerates, and should remain excellent dividend players. So much to love right now about the TSX, an index that has spent the past decade consolidating. And with falling RE prices, the BoC will have little choice but to remain mostly on the sidelines.

#6 Whinipegger on 01.13.18 at 4:29 pm

Applying that chart to the residential real estate market would seem to indicate that buying in is better than sitting on the sidelines waiting for a collapse. Assuming there is a relevant correlation.

#7 MPAC on 01.13.18 at 4:33 pm

Hi Garth & Blog dogs,

Question for you all:

My wife and I TFSAs are maxed, where should we
allocate an extra 100K:

1. RRSPs (I’m at a 43% marginal tax rate and my wife’s marginal tax rate is 31%)
2. Non-registered self-directed account

We both have DB plans, 2 kids under 13 (RESP is maxed), and we are in our late 30s.

Yes, we rent :)

Your thoughts are appreciated.

BG.

Non-registered joint account. – Garth

#8 LivinLarge on 01.13.18 at 4:47 pm

“Applying that chart to the residential real estate market would seem to indicate that buying in is better than sitting on the sidelines waiting for a collapse”…on a ling horizon time frame me thinks that’s a fair statement EXCEPT that right this moment there are multiple data points confirming that there is and should be a significant correction in prices so prudence says wait tomsee if there actually is the correction in order to enhance your buy in point.

On a long horizon you should expect to make more by waiting for the corrected buy in but the question really is “how much more is important” to you. It might take 3 years to see an increase over you buy in today but if that’s cool for you personally, go for it.

Pretty much every crap shoot investment decision can come down to that paradigm. “Should I wait three months expecting a dip or buy in now and wait 3 months to see if there is an ultimate bump?”

#9 Penny Henny on 01.13.18 at 4:47 pm

New highs and crazy valuations are no reason to get out. This is what bull markets do. True enough, but I think many people think that the US markets are due for a 10-20% correction for which they are long overdue.
The Dow going up 200 points a day is going to have to give some of that back soon.
Personally I am now about 60% cash.

#10 Prairieboy43 on 01.13.18 at 4:49 pm

Dow to 43,000. Stamp it. Capital has to go somewhere. Not R.E..
PB43

#11 Tony on 01.13.18 at 4:59 pm

The trick is to short very small cap stocks. I’ve been net short since 2009 for the simple fact that the market was overvalued then. Some advice for others is as the stock market or if the stock market becomes even more overvalued start to move from very small cap stocks to short to larger cap stocks to short. Canadian high tech stocks and Canadian listed golf stocks have generally been the best short sales throughout the decades.

#12 Screwed Canadian Millenial on 01.13.18 at 5:00 pm

Plot twist: When Trump said “why are all these immigrants coming from shithole countries”, he was referring to all these Canadians pouring in on TN visas.

#13 Danny on 01.13.18 at 5:02 pm

1. is the gross amount of money invested in the market ever a factor in your consideration of the health? ….i.e. over the last 5 years ?

2. Is very low interest given out by banks, etc…..for the last many years at record lows…..maybe….the main reason many more people are investing in condos and the stock market ?

#14 Entrepreneur on 01.13.18 at 5:08 pm

But one has to have the knowledge when to walk on glass or buy or sell. And that comes with experience and help. Good blog.

Make a law where debt is limited even for banks to control this madness we are in. And isn’t this suppose to be about people, citizens, to be productive.

Trump has been under attack from the start and agree with #69 Robert B. take it with a grain of salt. I suspect jealousy as a couple blogs ago Trump has picked up the U.S. economy for the people of his nation.

As for being political correct or not in a board room I would like all party board rooms open to the public especially T2.

And I find Wynne a bully towards businesses. Rich or not, it is a business strategy right to be able to stay within their guide lines to keep their doors open. It is the fact of doing business.

And the spiral to the top continues.

#15 Ian on 01.13.18 at 5:12 pm

It’s high historically, but it’s even worse because the USD has fallen during the whole 2017 rise and continues.

#16 in it for the long term on 01.13.18 at 5:13 pm

on the net you can read experts talking of what will happen next week , next month .

for some reason i can’t help reading it either

and then i remind myself ….. I am investing for the long term

in that sense there is no worry at all

as you say .. markets are mostly up most of the time …

the best ever advice is to do nothing … and snooze ..

and some rebalancing once a year

its really so simple its ridiculous that you need to write this post …

but thanks for the re- assurance anyway

#17 Muttley O'Toole on 01.13.18 at 5:15 pm

SCM – ” I started jumping up and down on it and my parents yelled at me”.

Looks like nothing has changed except that you are also doing the yelling on this blog.
By the way, are we still a kid?

#18 Screwed Canadian Millenial on 01.13.18 at 5:28 pm

#9 Penny Henny on 01.13.18 at 4:47 pm
Personally I am now about 60% cash.

—–

Not a bad idea. What currency though?

#19 OnlyTheBankersLaugh on 01.13.18 at 5:36 pm

Hey Garth, would it not be preferable to open a non-registered margin account in his wife’s name if money can be proved to belong to his wife at a lower tax rate ? Higher taxes spouse pays all bills and lower tax spouse saves and invests? Why give government more in a joint account?

OnlyTheBankersLaugh
—————————————————————-
#7 MPAC on 01.13.18 at 4:33 pm
Hi Garth & Blog dogs,

Question for you all:

My wife and I TFSAs are maxed, where should we
allocate an extra 100K:

1. RRSPs (I’m at a 43% marginal tax rate and my wife’s marginal tax rate is 31%)
2. Non-registered self-directed account

We both have DB plans, 2 kids under 13 (RESP is maxed), and we are in our late 30s.

Yes, we rent :)

Your thoughts are appreciated.

BG.

Non-registered joint account. – Garth

They can split the returns, and because the tax differential is minimal it’s better to have joint ownership for estate purposes. – Garth

#20 Beeswax on 01.13.18 at 5:52 pm

That’s 10 minutes of my life I will never get back

#21 AGuyInVancouver on 01.13.18 at 5:58 pm

With pretty much all of the world’s economies performing well, why wouldn’t the market continue to rise (barring a black swan event)?

#22 For those about to flop... on 01.13.18 at 5:59 pm

Robax,I thought it was a good post.

No too sure why it feels like a morgue in here.

Maybe just because it’s the more subdued weekend crew?

Possibly could get more raucous later on with a few Hop Pops.

I couldn’t think of anything to support your post and so I will just put up two quick-fire posts that I ran during the week from the guys down the hallway at howmuch.

Have a look if you’ve got time…

M43BC

Transaction Speeds: How Do Cryptocurrencies Stack Up To Visa or PayPal?

https://howmuch.net/articles/crypto-transaction-speeds-compared

The Most Valuable Sports Brands in the World.

https://howmuch.net/articles/most-valuable-sports-brands-2017

#23 Doug Rowat on 01.13.18 at 6:11 pm

#13 Danny on 01.13.18 at 5:02 pm

Is very low interest given out by banks, etc…..for the last many years at record lows…..maybe….the main reason many more people are investing in condos and the stock market ?

—-
We can thank central banks for this, in particular the Fed. Quantitative easing was a minor miracle for the stock market. QE repressed bond yields and made riskier assets such as equities comparatively attractive.

—Doug

#24 Penny Henny on 01.13.18 at 6:16 pm

#18 Screwed Canadian Millenial on 01.13.18 at 5:28 pm
#9 Penny Henny on 01.13.18 at 4:47 pm
Personally I am now about 60% cash.

—–

Not a bad idea. What currency though?
////////////////

loonie, unless something changes.

Oh and by the way, get a life outside this blog.

#25 Doug, are you still on 01.13.18 at 6:25 pm

confident with TSX going forward? Decreased weighting of US exposure and increased on TSX last year seems to have been premature. In hindsight, of course

commodity prices rising (USD in free fall since Mar 2017), yet the TSX continues to underperform

#26 Smoking Man on 01.13.18 at 6:25 pm

Jesus Doug, only 23 comments. Shut down the computer. Get on Garths private jet, come to Vegas and let’s do some JD shooters.

I’m Staying at Paris .

#27 n1tro on 01.13.18 at 6:28 pm

LivinLarge on 01.13.18 at 5:04 pm

n1tro: “So when the good senator told the reporter at the washington post who wasn’t in the room about what the president said….that is what again?”…a direct quote.
——————
A direct quote from someone other than the person making the statement in question is still hearsay. Stop embarassing yourself.

#28 Smoking Man on 01.13.18 at 6:29 pm

#12 Screwed Canadian Millenial on 01.13.18 at 5:00 pm
Plot twist: When Trump said “why are all these immigrants coming from shithole countries”, he was referring to all these Canadians pouring in on TN visas.
….

So behind the curve. EB1 Grass hopper. All you got to do is write a book. Green Card on the way.

Screw communism. Me , the wife, the two dogs and about 22 million like it here.

Enjoy Canada command.

#29 crowdedelevatorfartz on 01.13.18 at 6:49 pm

@#20 Beeswax
“That’s 10 minutes of my life I will never get back….”
++++++

If it took you more than 10 minutes to read that post……….. I’m speechless.

#30 Keith on 01.13.18 at 6:49 pm

Old topic, new real world info. Don’t worry about price impact of higher minimum wage. Seems to be minimal, even in the restaurant sector.

http://www.cbc.ca/news/canada/british-columbia/jj-bean-coffee-wage-increase-hike-1.4486070

#31 Jungle on 01.13.18 at 7:07 pm

Media just wants click and bait headlines. No substance, all scare factor gets views.

#32 Frito on 01.13.18 at 7:21 pm

They just want the opportunity for another commission on sale or reinvestment of profits. Turnover is their bread and butter

#33 For those about to flop... on 01.13.18 at 7:38 pm

Recent Sale Report/ Realtor Assistance Needed.

Well ,someone calling themselves “For Flop” bugged a friend to get some realtor info in real time,let’s see if I can find another volunteer.

This house sold in Richmond 14 days ago.

If you study my notes you can see they paid 2 million in August 2016,then after becoming a stale listing tried the shock reduction tactic by lowering it 30% in an attempt to get the competitive juices flowing to no avail.

Were asking 1.99 at the time of sale ,suggesting that they were prepared to eat the expenses for dinner.

Expensive meal…

M43BC

9551 Kirkmond Crescent, Richmond paid 2.0 ass2.04 2016

Paid 2m August 2016

Asking 1.99

https://www.zolo.ca/richmond-real-estate/9551-kirkmond-crescent

https://www.bcassessment.ca/Property/Info/QTAwMDA1WFBYUQ==

Feb 18:$2,288,000

Aug 4: $1,599,000

Change: – 689000.00 -30%

#34 Blacksheep on 01.13.18 at 7:40 pm

Show of hands: Who on this blog is in the market for a 12 million dollar home? How about a 6 million dollar home? A 3 dollar home? 2 million?

OK, OK, how about 1 million bucks, there has gotta be whole bunch of Dogs looking to drop a measly 1 million for the exotic privilege of calling Van home?

Are these large figures above, way out of reach for many blog Dog’s (me) unless they bought RE 15 years ago and enjoy (I don’t) caring large amounts of debt?

I think so.

While it’s easiest to quote the multi million dollar house price drops as proof of an RE correction and may even be accurate for that high price point, It does not represent the real target market for many (most?) potential buyers who simply cannot spend a million for any form of a home in Van.

I think it may be useful to know what the Van / Lower mainland market is doing for any form of residence, ‘under the 1 million dollar price tag’, because that is where my home value sits (barely) and is a likely price ceiling for many on the side lines, waiting for their opportunity to vultch?

But I digress, as I am of course to lazy to do the actual work and find out.

#35 Blacksheep on 01.13.18 at 7:44 pm

3 “million” dollar…

#36 crowdedelevatorfartz on 01.13.18 at 7:55 pm

@#26 Smokey
“come to Vegas ….”
+++++

Why bother when he’s got readers that are “all in” on the markets…. :)

#37 Welcome to Slurrey on 01.13.18 at 7:56 pm

The charts look like the YVR real estate market…….. just saying

#38 Andrewski on 01.13.18 at 7:57 pm

Thank you Doug. When friends & I further our portfolio discussions & decisions, I will print your post to share.

#39 Andrewski on 01.13.18 at 8:01 pm

Re: #4 SCM, so you’re in your 40’s?!?! CN Tower opened in 1976.

#40 I've crossed the Rubiconjob on 01.13.18 at 8:08 pm

#202 ben on 01.13.18 at 5:54 pm
LivinLarge – I provided that link to simply illustrate that it’s a fallacy that banks lend out money from savers. Also it’s a fallacy that they lend out via a “multiplier” of say 15:1 against held savings.

When you go to a bank to borrow 400k they write a contract that becomes worth 400k + interest and hold this as their asset. They then credit your account with 400k as their liability. That is it. Then you spend the 400k on say a house, that goes to the seller as 400k credit and off it goes into the system, which now has 400k more in it. Over time you will have to pay back that 400k plus interest, the original 400k is “destroyed” and the interest comes from additional money created in the interim.

This is why the money supply has to constantly expand, to allow for payment of the interest on freshly created debt.

Or as in the linked article:

> Rather, the key function of banks is the provision of financing, meaning the creation of new monetary purchasing power through loans, for a single agent that is both borrower and depositor. Specifically, whenever a bank makes a new loan to a non-bank customer X, it creates a new loan entry in the name of customer X on the asset side of its balance sheet, and it simultaneously creates a new and equal-sized deposit entry, also in the name of customer X, on the liability side of its balance sheet. The bank therefore creates its own funding, deposits, through lending. It does so through a pure bookkeeping transaction that involves no real resources, and that acquires its economic significance through the fact that bank deposits are any modern economy’s generally accepted medium of exchange.

Now none of this is ever addressed on this blog or in your media. What is the corollary?

Bank lending can soak up an infinite amount of productivity improvements, so land prices will always soak up all productivity gains, leaving workers no better off and shifting gains from workers to the financiers.

—-

The corollary is whoever has the ‘privilege’ of lending at interest will eventually own everything in the world.
That’s the mathematics of the sumerian swindle. That’s
where we are.

#41 For those about to flop... on 01.13.18 at 8:13 pm

Recent Sale Report/ Realtor Assistance Needed.

This house sold 20 days ago.

After that more affordable Richmond option let’s find out what happened to this bread and butter Westside house.

Just like the last one ,this one was asking less than purchased for but with a wider margin.

Picked up for 3.53 in late 2016 ,they had it on the market for 50k less at 3.48.

What did it go for?

Which lifeline would you like to use?

I’d like to phone a friend…

M43BC

2316 w 21st ave ,Vancouver.

Paid 3.53 November 2016 Ass3.57 2016

Asking 3.48

https://www.zolo.ca/vancouver-real-estate/2316-w-21st-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAwME1NQg==

#42 Wrk.dover on 01.13.18 at 8:14 pm

What if Goldman Sachs sent tentacles out into the world of finance and showed Greece, Ireland, Iceland, Spain and Portugal how to cook books beyond payable debt, while pushing derivatives which were wisely shorted to fail, causing crisis that alumnus Paulson of Goldman insisted could only be cured by pegging interest near zero for a decade?

Then for an encore, governments printed money monthly to pump stocks. Especially including alumnus Mario Draghi of the Eurozone proxy bank.

Would then the Dow be the only boat in the world in which to store wealth? Because of all of the incoming capital, could it then reach 27,700 “points”?

Can that have a good ending beyond now?

Was all this really necessary to keep the greenback as the world currency for just another short while?

That’s it?

Ten years back is along time to recall for too many.

#43 crowdedelevatorfartz on 01.13.18 at 8:14 pm

@#39 Andrewski

yer off by 18 years.

http://www.google.ca/url?url=http://www.cntower.ca/en-ca/plan-your-visit/attractions/glass-floor.html&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwirwp_0otbYAhUOHGMKHdOLAecQFggcMAI&usg=AOvVaw1CpfZlAPTg0BvmR5SqDDJI

It opened in 1994

That makes SCM about 30 ish and still angry about livin in momma’s basement

#44 Screwed Canadian Millenial on 01.13.18 at 8:17 pm

#28 Smoking Man on 01.13.18 at 6:29 pm
There’s no way you have a Green Card Smokey. No way you would pass the security check and mental health eval. What are your “extraordinary abilities”? And please for the love of god don’t say herdonomics.

Don’t worry, I apply for the Green Card Diversity lottery every year. We get the results in May. This year is gunna be my year I feel it. Was born in Europe but been stuck in this frozen hellhole pretty much all my life. Canadians can’t apply for it. I’ll get in right before Trump closes the program. If not then it’s Europe for me this year. Canadians can enjoy their -30 hell on earth. What a waste of life this place is. Give me that California sunshine anyday.

#45 Doug Rowat on 01.13.18 at 8:17 pm

#25 Doug, are you still on 01.13.18 at 6:25 pm

confident with TSX going forward? Decreased weighting of US exposure and increased on TSX last year seems to have been premature. In hindsight, of course.

—-

It was. Fortunately, we had a significant weighting to Canadian preferred shares, which nicely outperformed Canadian equities. So, on balance, we did okay with Canada. We also didn’t make the mistake of abandoning the US equity market.

We remain more bullish on Canadian equities again this year for a variety of reasons including the impressive profitability of banks and financials.

Let’s all just agree to forget about last year.

—Doug

#46 Screwed Canadian Millenial on 01.13.18 at 8:17 pm

#39 Andrewski on 01.13.18 at 8:01 pm
Re: #4 SCM, so you’re in your 40’s?!?! CN Tower opened in 1976.

——-

Not the glass floor.

#47 Smoking Man on 01.13.18 at 8:18 pm

#7 MPAC on 01.13.18 at 4:33 pm
Hi Garth & Blog dogs,

Question for you all:

My wife and I TFSAs are maxed, where should we
allocate an extra 100K:

1. RRSPs (I’m at a 43% marginal tax rate and my wife’s marginal tax rate is 31%)
2. Non-registered self-directed account

We both have DB plans, 2 kids under 13 (RESP is maxed), and we are in our late 30s.

Yes, we rent :)

Your thoughts are appreciated.

BG.

Non-registered joint account. – Garth
…..

Forex long USDCAD

Nafta going to die. Just wait two weeks after BOC spikes. Good entry point Feb 2 2018

#48 Trumpocalypse2018 on 01.13.18 at 8:20 pm

Hawaii just got an early taste of what we will all be facing very soon:

Emergency Alert.
BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL.

https://www.thestar.com/news/world/2018/01/13/hamilton-brantford-couples-in-hawaii-prepared-for-the-end.html

Daniel Ellsberg, of the Pentagon papers fame, and a former nuclear war planner, says “it’s 50-50, at least, that we’ll be at war before that..” (by January 19)

https://www.theglobeandmail.com/arts/books-and-media/former-military-analyst-daniel-ellsberg-warns-50-50-chance-of-nuclear-war-in-coming-weeks/article37510393/

If you are not planning for this right now, you truly are a greater fool.

Stock up on all supplies while stores are still open, even in the freezing cold across the country today.

DO IT NOW.

#49 acdel on 01.13.18 at 8:24 pm

As Garth mentioned as well as the weekend blogs, in which I really enjoy, whatever happens, just stay diversified, it has always bounced back and then some.

The world economy has shifted more towards keeping the markets holders happy! Buy and hold for the long term people; others have there own systems that work for them.

#50 Screwed Canadian Millenial on 01.13.18 at 8:27 pm

1 thing to add. Rest assured that I will be voting for Wynne in 2018 and Trudeau in 2019 via proxy.

#51 Smoking Man on 01.13.18 at 8:29 pm

Just loving Vegas right now. Shit load of Edmonton oilers fans. They must be playing Vegas team. We are talking T2. Holly shit. I loath the girl but these people hate him. Want him dead tourcherd . T2 for the sake of you’re kids no town halls in Edmonton.

Note to self. Never vacation in Edmonton unless we Get the green light for energy east pipeline.

Hope that calms these wild beasts

#52 InvestorsFriend on 01.13.18 at 8:29 pm

RRSP or non-registered account?

#7 MPAC on 01.13.18 at 4:33 pm
Hi Garth & Blog dogs,

Question for you all:

My wife and I TFSAs are maxed, where should we
allocate an extra 100K:

1. RRSPs (I’m at a 43% marginal tax rate and my wife’s marginal tax rate is 31%)
2. Non-registered self-directed account

We both have DB plans, 2 kids under 13 (RESP is maxed), and we are in our late 30s.

Yes, we rent :)

Your thoughts are appreciated.

BG.

Non-registered joint account. – Garth

*************************************
Well, I am sure the joint non-registered account has its merits. Especially if it is invested in various tax-advantaged things.

But the following is some math in favor of the RRSP route. Warning, the results may cause some of your brains to go on tilt in disbelief.

I would say probably don’t do the wife’s RRSP since the refund is only 31%. I am not sure the taxable account will be better than that but clearly your own or a spousal with 43% refund will be better than the wife’s RRSP at 31% refund.

If do your own or a spousal RRSP your net cost per dollar will 57 cents per dollar after refund.

If you have $10,000 to invest you can do $10,000 in a taxable account or (with a short term loan from your Line of credit) $17,544 in the RRSP (assuming room exists) which will cost you net $10,000 after the 43% refund.

But your net worth will increase not a penny since you should count on the government taking back about 43% of the RRSP as tax whenever you take any money out say in retirement. You might face a marginal a little under 43% or a bit over. In your case with DB let’s say your marginal will be 50% in retirement.

Say you earn 7% for 35 years in RRSP. Your $17,544 grows to $187,310. But you lose 50% on each withdrawal (oh the inhumanity) so it is worth only $93,655.

In margin account you likely pay a little tax each year so say you do 5.5% after income tax (average tax rate on your returns is 21.4% in this example). Your $10,000 grows to $65,138.

Guess what? In this example even with the tax rate at withdrawal rising to 50%, the RRSP beats the taxable account hands down and grows to 44% more net spendable money in retirement.

AND, if you can manage to get that money out at lower than 50% and certainly lower than 43% then the RRSP really wins. And in the spousal it might well be lower than 43%, especially considering Garth’s idea of taking it out during maternity leave or other hiatus from employment.

Amazingly, your net share, $10,000 of that $17,544 RRSP actually grows tax free and exactly ties a TFSA if the tax on withdrawal remains at precisely 43%.

Now there are scenarios where a taxable account could beat this RRSP example. I showed you mine, so…

Just how low would the tax rate have to be in the taxable account to tie an RRSP with 43% and 50% tax at withdrawal after 35 years compounding?

I do know what the tax rate on the taxable account has to be to tie any RRSP where the marginal tax rate is precisely the same at contribution and withdrawal time. It has to be Zero. Tough to do.

Is my math wrong? try it and see.

Now if you actually have a $100k you may not have the RRSP room or you may need to spread the contribution over several years so that you contribute it all in high marginal tax (refund) zone.

#53 Nonplused on 01.13.18 at 8:33 pm

A bit of portfolio re-balancing might be in order though.

#54 conan on 01.13.18 at 8:38 pm

#39 Andrewski on 01.13.18 at 8:01 pm

CN Tower glass floor installed 1994.

25-30

#55 Smartalox on 01.13.18 at 8:40 pm

after reading that speech by David Eby, and the spéculation that laundered money is being used to buy BC real estate, I wonder if the BC civil forfeiture office will be used to solve BCs homeless problems?

#56 Smoking Man on 01.13.18 at 8:42 pm

Been drinking since 9am hammered since noon. Where the hell is room..looks like im sleeping on the street tonight.

Wait. I have my wallet. Good old black credit card.
I’m good.

Gambling is so under rated. Last year I went from a net worth of 13 million down too about 1.5. Today 22.5 or so.

When the going gets tough the tough drink. Cross there fingers and hope for the best.

I really should write a biography. No one will beilive it other than Garth.

We chatted in detail back at the general store in 2016 when told him peek real estate spring of 2017.

#57 Smoking Man on 01.13.18 at 8:49 pm

50 Screwed Canadian Millenial on 01.13.18 at 8:27 pm
1 thing to add. Rest assured that I will be voting for Wynne in 2018 and Trudeau in 2019 via proxy.
……

No? Really? I would have never guest.
I will personally teach you how to trade forex. Then watch you chicken out of giving it to the needy once you taste success.

What are the libs paying you? 20 an hour. Ha.
So obvious.

#58 Long-Time Lurker on 01.13.18 at 8:54 pm

Here, Smokey. Another case for your X-File. Watch the top center screen in the background.

Weird Light

KOIN 6
Published on Jan 4, 2018

https://www.youtube.com/watch?v=-GoHuzelByQ&feature=youtu.be

#59 Smoking Man on 01.13.18 at 8:56 pm

SCM bit of advice on your 20 dollar an hour gig. Your worth a hell of a lot more that 20 bucks an hour. Your posts are good.

Screw them, work 1 hour and Bill them for 40. Your that good. They will do it. We are talking bosses with serious mental disorders.

Come to the dark side of beautiful capitalism..

#60 Pepito on 01.13.18 at 8:59 pm

#44 Screwed Canadian Millenial on 01.13.18 at 8:17 pm

If you have a second EU passport, what are you waiting for? Have been living in Spain going on 3 years now. Cost of living is about a third of Van and the Med climate and food is wonderful.

#61 InvestorsFriend on 01.13.18 at 9:01 pm

Banks

Living large took exception to my comment that banking was a commodity business

#188 LivinLarge on 01.13.18 at 2:30 pm
Re: Banks…”This massive return on equity was made in a what is a commodity business.” OMG, you have no idea what you write about but still you write.
Banks are NOT, repeat NOT commodity businesses in even the most crazy, obtuse way. NBanks, at least Canadian Schedule 1 Chartered banks are 99.99999% service businesses. They produce absolutely no, zero, nada commodities of any sort.

*****************************
I refereed to the fact that a dollar borrowed from RBC is identical to a dollar borrowed from TD or Bank of Montreal or a credit union. From the borrowers point of view a loan of dollars is a commodity transaction.

Similarly a dollar of interest on a GIC at one bank is the same as a dollar earned at another. If the amount is within the CDIC coverage or the risk of one bank is similar to another, that is a commodity return.

Similarly when you spend dollars safe-kept by writing a cheque or doing a debit card transaction neither you nor the recipient would likely care which bank was involved, especially among the biggies.

All the big banks offer very similar services. So, those are reasons to say it is a commodity business. Most commodity businesses are low ROE due to price competition.

I would agree with Livin Large’s view that the bank profits would be lower if more U.S. competition were allowed.

I think a huge reason for high profits is that customers find it inconvenient to shop around. Once we get established with one bank it is a bother to switch.

Also I think the banks take advantage and gouge on certain things like the foreign exchange fees and those high interest rate differentials.

At the end of the day as long as Bank profits are high the only logical thing to do is own shares as long as the share price has not already priced in too much of the high profitability. Typically it has not . Canadian Bank shares purchased at 2 and 2.5 times book value or perhaps more have tended to be very good investments.

But there is no guarantee that will continue.

#62 acdel on 01.13.18 at 9:04 pm

#51 Smoking Man

As a Calgarian I have to agree, do not mess with an Edmontian; love Alberta!

Just when you think you have her figured out, she will kick your ass!!

Go Flames Go!

#63 Screwed Canadian Millenial on 01.13.18 at 9:08 pm

#43 crowdedelevatorfartz on 01.13.18 at 8:14 pm
LOL a bit younger but actually I’m angry that I’m renting in this overpriced frozen hellhole. I wish i was living in momma’s basement. All my friends still living at home are far better off financially. This is the way to go in today’s day and age. This ain’t the 60s, boomers.

#64 acdel on 01.13.18 at 9:10 pm

I think I screwed up on my last post; fat fingers; meant to say Edmontonians.. Smoking Man, you stand no chance against them, lol…

Go Flames Go! :)

#65 Tccontrarian on 01.13.18 at 9:19 pm

Ok, but curious…

How have you allocated your own funds?

And how are you prepared for a correction that is more and more likely with every record high?

#66 For those about to flop... on 01.13.18 at 9:19 pm

Recent Sale Report/ Realtor Assistance Needed.

Here’s another one that got a new owner in time for the holidays.

Sold on December 22nd 2017.

I guess it was appropriate that it sold at Christmas time.

Noel, Noel ,Noel Noel,how much did this house go for…

M43BC

3041 Noel Dr,Burnaby. Paid 1.18 ass 1.13 2016

Jun 2:$1,348,000
Oct 8: $1,248,000
Change: – 100000.00 -7%

https://www.zolo.ca/burnaby-real-estate/3041-noel-drive
https://www.zolo.ca/index.php?sarea=3041%20Noel%20Drive,%20Burnaby&filter=1
https://evaluebc.bcassessment.ca/property.aspx?_oa=QTAwMDAzWDRaRA==

#67 Alberta Guy on 01.13.18 at 9:26 pm

Hey Smokes, how long in vegas..
in PHX, maybe start a blog dog snowbird meetup?

#68 Cloudy on 01.13.18 at 9:47 pm

Doug, I know you don’t try to time markets but I also know you like to think about the direction markets will be moving to adjust weights. What would you watch for to indicate bull markets are ending and corrections are coming? Or is it usually unforeseen event(s) that make it happen? Do US, CDN, and developed markets generally fall into and out of Bull markets together?

Garth, can you confirm or deny any of Smoking Man’s wild claims? I saw the picture of you two together and am curious how much of his stories are loosely based on fact. I lurk on twitter once every couple days but he mostly just retweets MAGA content. An amusing character no doubt.

#69 Ace Goodheart on 01.13.18 at 9:50 pm

Have all you oil Bulls seen this nonsense:

https://www.theguardian.com/us-news/2018/jan/10/new-york-city-plans-to-divest-5bn-from-fossil-fuels-and-sue-oil-companies

When little island countries got flooded with sea water, everyone said well I guess those people will have to move somewhere else (maybe they thought their little island countries were just ocean sh*tholes).

Now New York and Florida, and much of the Eastern US Seaboard are going to get slowly flooded away.

But they are suing the oil companies over this? What did oil companies do?

Will big oil go down the same road as big tobacco, mired in law suits as the world slowly sinks underneath the ocean? Only time will tell. In the meantime, go buy a high powered computer and start your own crypto. Try to give it a cool sounding name (like Einsteinium, for example-which is BTW already taken).

#70 IHCTD9 on 01.13.18 at 10:18 pm

#50 Screwed Canadian Millenial on 01.13.18 at 8:27 pm
1 thing to add. Rest assured that I will be voting for Wynne in 2018 and Trudeau in 2019 via proxy.
———-

I’ll be doing the same, but my calloused neocon arse will be doing it right here in Ontario Canada.

Good luck in the EU, you’ll be needing it.

#71 SWL1976 on 01.13.18 at 10:23 pm

@ SCM

I’ll get in right before Trump closes the program. If not then it’s Europe for me this year. Canadians can enjoy their -30 hell on earth. What a waste of life this place is. Give me that California sunshine anyday.

======

No matter where you go, there you are. Something tells me there won’t be much change of your ilk

As I suggested a few days ago why not move to your socialist paradise of Cuba? You could see first hand what things are really like and you would do is all a favor by not being able to babble on with your incessant postings here as an internet connections come at a premium

Do let us know how things go for you when you get there. Something tells me the locals will not be so primed on socialism as you are though

PS – Just landed back on the best coast after being stranded at Pearson for a day

No complaints here – other than SJW like SCM whinning and trying to take this country over via mob rule and cheering their own demise

#72 IHCTD9 on 01.13.18 at 10:29 pm

#59 Pepito on 01.13.18 at 8:59 pm
#44 Screwed Canadian Millenial on 01.13.18 at 8:17 pm

If you have a second EU passport, what are you waiting for? Have been living in Spain going on 3 years now. Cost of living is about a third of Van and the Med climate and food is wonderful
———-

…and the country is broke. Hope you are retired with an income not derived from Spain’s economy. Once they exit the €, a Big Mac will cost a thousand pesetas.

#73 Loonie Doctor on 01.13.18 at 10:37 pm

#19 Onlythebankerslaugh

My wife and I do what you are suggesting. My wife has here own accounts where her income goes and I pay our taxes and costs of living. She invests with her money in a taxable account and also has a low interest investment loan from me that she pays the interest on from that account.

We do it because I am in the highest marginal rate and she is much much lower. We really ramped up that aspect of our plan when T2 got elected because we figured the attack on business income splitting would follow and now her income tax bracket will be very very low. Glad that we did. It is only one plank of our plan which also includes RESPs, RRSPs, TFSAs, and corporate accounts.

Her taxable account will be important for us as we plan on semi-retiring at 50 when we evict our kids and probably fully retiring at 55. We’ll need relatively even revenue streams between us until we hit 65 and income splitting becomes easy again. For people with relatively even incomes or not planning on drawing from their accounts before age 65, it may not matter as much.

We use a financial advisor, but I picked up this aspect of our strategy on this blog. Thanks Garth. Finance seems a lot like medicine – there is an art aspect to the science and not all advisors or doctors approach things the same. It pays to be an informed client/patient.
-LD

#74 Smoking Man on 01.13.18 at 10:40 pm

DELETED

#75 Smoking Man on 01.13.18 at 10:58 pm

You guys all notice no rebutals when I call out SCM as a paid troll

Dr Smoking Man
PhD Herdonomics

#76 Lost...but not leased on 01.13.18 at 11:01 pm

Personally speaking, I think its great that S.M. has reconciled with son G.T. and also embraced grandson S.C.M.

#77 Ronaldo on 01.13.18 at 11:05 pm

39 Andrewski on 01.13.18 at 8:01 pm

Re: #4 SCM, so you’re in your 40’s?!?! CN Tower opened in 1976.
—————————————————————
But the glass floors were installed in June 1994. My guess is that he/she is around 33-35, a millennial alright. Still acting up. But he sure gets your attention doesn’t he? Keeps this blog active to say the least. At least for those who take him seriously. This is why Garth puts up with him/her. Keep up the good work SCM. We’d be lost without you.

#78 Ian on 01.13.18 at 11:16 pm

#68 Ace

What about Garthium Coin? I’ll get the network guys at my client to connect all the blogdog readers’ computers together and we can start mining.

Freely exchangeable with one Dogcoin.

I swear to heavens humanity will look back at cryptos as being even more retarded than that company in the UK around the time of the South Sea Bubble that IPOd and said ‘we can’t even tell you what our business is it’s so good’ and it was oversubscribed.

Smoking Man I have met and he is not only smart about forex, he knows his VBA.

Time to bust out the Nexus card given that tall blonde Norwegian women will be settling in Buffalo soon apparently.

#79 Ian on 01.13.18 at 11:21 pm

#76 Ace

That oil news is kind of freaky. I guess was bound to happen though. Might see some momentum there.

I’m surprised CALPERS hasn’t done something like that yet.

#80 Ronaldo on 01.13.18 at 11:24 pm

#62 Screwed Canadian Millenial on 01.13.18 at 9:08 pm

#43 crowdedelevatorfartz on 01.13.18 at 8:14 pm
LOL a bit younger but actually I’m angry that I’m renting in this overpriced frozen hellhole. I wish i was living in momma’s basement. All my friends still living at home are far better off financially. This is the way to go in today’s day and age. This ain’t the 60s, boomers.
—————————————————————–
So when did they actually kick you out of the basement. Us older boomers hit the road at 18 and 19. Often married at 21. The equivalent today is 30 and 31. At your age or younger I was 12 years into a career and managing a railway terminal. You millennials were still out riding your dirt bikes and living in momma’s basement sponging off your parents too lazy to get out and work. You guys have had it so tough. lol

#81 rule 1 on 01.13.18 at 11:35 pm

rule 1: don’t truncate your Y axis.

#82 stage1dave on 01.13.18 at 11:41 pm

Timely observations, Mr. Rowan. ..the wife and I are getting more aggressive about our “normie” investments this year (as opposed to our long practiced “contrairian” investment strategy haha) and I’ve been wondering for several months whether to stick with Loonies or Greenbacks. Or hedge my bets…

Anyway, good to see there’s still a few other Flames’ fans out there; and we are not suffering as much as in the past! Guess a few prayers got answered when consistent goaltending was signed; so world peace must be just around the corner…

#40 I’ve crossed the Rubicon: great analysis; this subject has come up a couple times in years past but seems to disappear just as quick. Kinda like Eisenhower’s commerce secretary in 1959 when he was almost as forthright about how banks truly “create” money for loans, rather than using savings.

Btw, what the hell is goin on with the Oilers?

#83 stage1dave on 01.13.18 at 11:44 pm

Ooops, should have read Mr Rowat…damned autocorrect! Very seldom post from my phone…

#84 conan on 01.13.18 at 11:52 pm

But they are suing the oil companies over this? What did oil companies do?

Any reasonable industry would have accepted the overwhelming scientific evidence, and changed their ways back in the early 1970’s. Instead, oil pulled a trick from the tobacco industry, hire senior scientists, and pay them big dollars to slant research papers away from the truth.

Tobacco lost that legal fight. The same thing is coming oil’s way. Except the damages will be much larger.

Paying to pump out NYC every year = cha ching

The insurance industry is going to be all over your industry. Sucking dollars, like some vampire.

#85 Fake News Again on 01.13.18 at 11:56 pm

Just like two weeks ago…..being as how “most” Canadians are living paycheck to paycheck and its only “Govt Workers” with benefits and pensions that have any money…..Ryans Saturday column….is for those who work for the Govt or have Govt contracts like the monopoly that SNC Lavlin has.

#86 Smoking Man on 01.14.18 at 12:06 am

I have zero frends to impress. Thats freedom bitches.

A bit lonely but I’ll live.

Dr Smoking Man
PhD Herdonomics

#87 PastThePeak on 01.14.18 at 12:16 am

Looks like the markets will grow for the foreseeable future then. Dow just crossed 25k and likely will hit 26k this coming week. With synchronized global growth, what is to stop it hitting 30k before the quarter is out, and possibly 40k by end of year (that’s assuming a couple of minor pullbacks)?

Even with Fed increases rates will still be very low, and inflation is barely showing. The US tax cuts will juice everything. Momentum picks up pace and can drive even higher. Why not Dow at 50k in 2019, and 75k in 2020? If not higher. This puppy has legs for years!

#88 Screwed Canadian Millenial on 01.14.18 at 12:40 am

#74 Smoking Man on 01.13.18 at 10:58 pm
You guys all notice no rebutals when I call out SCM as a paid troll

———–

Smokey you’re crazy man. You haven’t thought this through. How can I be a paid Liberal troll when I’m actually the white male leader of the lesbionic cult out to destroy your life.

#89 Retired Canadian Millenial on 01.14.18 at 7:11 am

Good Quick Reminder Post Doug
Trying to pick a top of a market can be just as dangerous as trying to pick a bottom. If you invest that way, you may as well liquidate your portfolio and join Smoking Man at the roulette table.

#90 I’m stupid on 01.14.18 at 7:57 am

If everyone ignores SCM he’ll go away. I completely stopped reading his comments.

On another note:
I really like the comment section of this blog when Doug and Ryan post.

Are you suggesting I’m a bad influence? – Garth

#91 Doug Rowat on 01.14.18 at 7:58 am

#64 Tccontrarian on 01.13.18 at 9:19 pm
Ok, but curious…

How have you allocated your own funds?

And how are you prepared for a correction that is more and more likely with every record high?

—-

Corrections are distinct from bear markets and are common. And as I tell my clients, I have no ability to accurately time corrections. Any broker who tells you otherwise is almost certainly lying to you.

But if you hold a balanced and globally diversified portfolio you won’t care much about corrections. They’ll amount to an aggravation, nothing more.

—Doug

#92 dharma bum on 01.14.18 at 8:18 am

Yah….anyway….speaking of high:

https://www.youtube.com/watch?v=8i3iEcgPo6A

https://www.youtube.com/watch?v=JTSk5cbaZso

#93 Bezengy on 01.14.18 at 9:07 am

CBC’s top story 50 weeks in a row is?… what exactly happened on the US comedy channel last night. I guess a billion dollars doesn’t buy that much these days. Harper tried to cut their budget, but unfortunately that didn’t work out as planned. What a waste of taxpayers money, except for T2 and company of course.

#94 crowdedelevatorfartz on 01.14.18 at 9:11 am

@#87 Screwed Canadian Millenial

ahahahahah, now it all makes sense.

As for IHCTD9’s suggestion.
Forget Cuba…thats for Boomers in hijacked planes.
Might I suggest Venzeuala for endless warm weather and that “workers paradise” your so desperately seek?

#95 I’m stupid on 01.14.18 at 10:21 am

Sticker shock..

Went for dinner last night with my wife. Our bill was $150 plus tip with no alcohol. While both my wife and I enjoy going for dinner once a week we can’t justify the prices. Its not about affordability, it’s about bang for your buck. I think we’re going to cut back because the goods and services received are not worth it. I get why the prices are higher; increased min wage, restaurants aren’t generally b

Our meal break down to give you prospective:

Branzino whole fish with salad
Mussels in a tomato sauce
Rack of 4 lamb with mixed veg and side penne pasta in tomato sauce
1 coke
1 ginger ale

The new min wage is really going to hurt the restaurant business.

Mussels and Coke? – Garth

#96 MF on 01.14.18 at 10:28 am

#44 Screwed Canadian Millenial on 01.13.18 at 8:17 pm

Please go to Europe. Can only imagine the wailing we will hear when the EU collapses and your Euro’s are worthless.

MF

#97 I’m stupid on 01.14.18 at 10:31 am

Gererally busy from Monday to Wednesday. So everything needs to be paid with money made during Thursday-Sunday.

Phone is acting strange posted comment before I finished.

#98 MF on 01.14.18 at 10:32 am

#90 I’m stupid on 01.14.18 at 7:57 am

Agreed.

One of the worst trolls (if not the worst) we have had here. Endless garbage posts slamming Canada, with a weird support of socialism mixed with xenophobia? Embarrassing to the rest of we millennials.

I scroll past most the crap too but there is just so much of it.

MF

#99 LivinLarge on 01.14.18 at 10:38 am

This “But if you hold a balanced and globally diversified portfolio you won’t care much about corrections. They’ll amount to an aggravation, nothing more.” is the heart of the real issue.

I’m hoping everyone here appreciates the fundament difference between speculating and investing (not certain at times). Nothing about this blog has ever advocated speculation of any kind yet the commentors very regularly drone on about speculative scenarios.

Anyone can get lucky with a speculative play but so what. The sole purpose of informed investing is to net out with more in the future than you have now and this blog is about informed investing i.e. minimizing loss potential while still growing net net net personal wealth.

It’s tiring sorting through the garbage “look, I know better than Fearless Leader et al” comments from folks who almost certainly don’t. Good research, broad and deep analytical skills and lots and lots of experience is what make an advisor a value to any investor. Like practically every decision in life, knowing what not to do with investments is far more important than knowing what to do. And it is this “what not to do” that Larry, Curly and Moe at TI provide in spades. Everyone knows the “what to do” part…”buy something that you expect to go up in value faster than inflation” even the [email protected] can usually essentially deliver that. Maybe not by much though.

So? Debating Larry, Curly or Moe is an absolute waste of your bandwidth because they come to the table with a hell of a lot more bullets in their guns than any of us do. Well unless one of the blog dogs ismactually Mark Carney and in that case, listen to that blog dog too.

#100 MF on 01.14.18 at 10:44 am

My take on the current Dow/S and P is that it is in nosebleed territory.

The reason why is 1% corporate profits, 1% tax reform, 1% low unemployment, 1% no big geopolitical tensions, and, 1% no infection/disease. The remaining 95% is from straight manipulation.

QE distorted everything. The CB’s buying trillions of bonds reduced yields to zero and increased the price of bonds. The natural flow of money from stock – bonds and vice versa was completely disrupted. Money then went into stocks. Now, with the CB’s reversing their policy (so they say), bonds are dangerous as their prices will fall but yields rise. Money will still end up in stocks.

Yes it will collapse circa 1929. We just don’t know when. This is coming from a Trump supporter btw. He has zero minimal to zero impact on the dow/s and p in my opinion, but there will be a “price” to pay for all the QE market distortion.

MF

There is no 1929 on the horizon. Just because markets are high, they will crash? Good thing you’re not a portfolio manager. – Garth

#101 Spock on 01.14.18 at 10:53 am

Garth: Probably intention was to get some alcohol but after the sticker shock of the pricing – must have switched to Coke. :-)

#95 I’m stupid on 01.14.18 at 10:21 am
Sticker shock..

Went for dinner last night with my wife. Our bill was $150 plus tip with no alcohol. While both my wife and I enjoy going for dinner once a week we can’t justify the prices. Its not about affordability, it’s about bang for your buck. I think we’re going to cut back because the goods and services received are not worth it. I get why the prices are higher; increased min wage, restaurants aren’t generally b

Our meal break down to give you prospective:

Branzino whole fish with salad
Mussels in a tomato sauce
Rack of 4 lamb with mixed veg and side penne pasta in tomato sauce
1 coke
1 ginger ale

The new min wage is really going to hurt the restaurant business.

Mussels and Coke? – Garth

#102 MF on 01.14.18 at 11:00 am

There is no 1929 on the horizon. Just because markets are high, they will crash? Good thing you’re not a portfolio manager. – Garth

Everyone, experts and novices alike, agree that QE of the magnitude seen was something that had never been attempted before. It was an experiment, and the results are still to be determined.

Ask a surgeon how to cure a broken ankle and he will say surgery. A physiotherapist will say exercise and a psychiatrist will say drugs. Of course most portfolio managers will say they don’t see a large collapse like 1929 on the horizon.

MF

QE worked. Global growth has restored and economies are expanding in a non-inflationary fashion, with corporate profits and labour markets reflecting that. You spew groundless fear. Nobody is making you invest, so don’t. — Garth

#103 KLNR on 01.14.18 at 11:04 am

@#90 I’m stupid on 01.14.18 at 7:57 am
If everyone ignores SCM he’ll go away. I completely stopped reading his comments.
_________________________

unlike your comments, SCM’s are at least somewhat entertaining.

#104 Spock on 01.14.18 at 11:21 am

SCM seems to comment more when Garth writes. Like moth to a fire.

#90 I’m stupid on 01.14.18 at 7:57 am
If everyone ignores SCM he’ll go away. I completely stopped reading his comments.

On another note:
I really like the comment section of this blog when Doug and Ryan post.

Are you suggesting I’m a bad influence? – Garth

#105 Spock on 01.14.18 at 11:22 am

It is sad to see the desperation to seek entertainment for free ;-)

#103 KLNR on 01.14.18 at 11:04 am
@#90 I’m stupid on 01.14.18 at 7:57 am
If everyone ignores SCM he’ll go away. I completely stopped reading his comments.
_________________________

unlike your comments, SCM’s are at least somewhat entertaining.

#106 Spock on 01.14.18 at 11:24 am

Garth: any comments on selling puts in these market conditions.

I have been doing selling puts for 20 years and have never gone through a stretch where most of the puts expire worthless (keeping the premium is good enough).

Obligatory suck up tomorrow.

#107 I’m stupid on 01.14.18 at 11:37 am

Wife is pregnant and I never liked alcohol. So yes mussels and coke.

#108 foggy on 01.14.18 at 11:45 am

12 Screwed Canadian Millenial on 01.13.18 at 5:00 pm
Plot twist: When Trump said “why are all these immigrants coming from shithole countries”, he was referring to all these Canadians pouring in on TN visas.

—————————————————————-

Worked in Michigan for 14 years on a TN. Crossed the border from Windsor every day. Made a mistake one day when I went to renew, told the guy at the US border I needed to go in and renew my TN Visa. I got a 5 minute lecture about how it’s a TN ‘work permit’ and I’m taking a job away from an American!

If Trump cancels Nafta, should be interesting to see what happens with all the TN’s.

https://globalnews.ca/news/3819407/canadians-working-us-tn-visa-nafta/

#109 InvestorsFriend on 01.14.18 at 11:52 am

RRSP versus Taxable account

My comment at 52 responding to #7 MPAC about suggesting a spousal RRSP might easily beat a taxable account got delayed in the moderation process and only showed up this morning. Anyone interested in the math of RRSPs might want to check out my comment at 52.

It’s a different way to look at how RRSPs really do turn after-tax money back into taxable money, as Garth has said. But since it can turn $10,000 after tax back into $17,544 taxable (assumes MPAC’s 43% marginal tax rate) things usually still work out very well indeed unless the marginal tax rate at retirement is quite a bit higher than at the time of contribution.

Surprisingly, an RRSP gives precisely the same after tax return as a TFSA if the marginal tax rate is the same at contribution and withdrawal time. Ergo, the true tax on the RRSP growth must have been zero.

An RRSP is FAR more than a tax deferral device. It can save a huge amount of taxes compared to a taxable investing account.

Or it can be a tax trap in retirement. Depends entirely on individual circumstances, which is why I delayed posting your first comment. It barely passes the smell test of responsibility since you are offering blanket advice without regard to the immense differences between families. – Garth

#110 ThesecondcomingofJohnGalt on 01.14.18 at 12:07 pm

I’ve crossed the Rubiconjob on 01.13.18 at 8:08

Couldn’t have said it any better myself, re;(your explanation of how bank credit/money comes into existence), but as I’ve posted here before, what tenet/facet of capitalism suggests a social contract in the first place? On the other hand you could argue that capitalism is the foundation of every progressive society on the planet, the problem is “growth”, which is extracted from real world( which last time I checked was finite) has to be sustained in order for capitalism to function.

#111 ANON on 01.14.18 at 12:12 pm

FOH vs FOMO:
Exibit A.
Chart is log scaled, so the lines are actual exponents in linear mode.

Exibit B.

#112 ben on 01.14.18 at 12:21 pm

All these minimum wage comments. Guess what one of the main expenses is for restaurants, which all need footfall?

Rent.

Guess what’s gone up far, far more than wages over the past decade.

Rent.

You think the landlords can’t afford a meal out? Think the bankers who also benefit from rising land prices via usury can’t afford a meal out.

Think again, suckers.

#113 MF on 01.14.18 at 12:30 pm

QE worked. Global growth has restored and economies are expanding in a non-inflationary fashion, with corporate profits and labour markets reflecting that. You spew groundless fear. Nobody is making you invest, so don’t. — Garth

Are the effects of QE over yet? Aren’t we just beginning the unwind? How can we conclude it worked already? Sounds premature.

And There is a difference between fear and realism. Nothing goes up forever. Not even the stock market.

You are right. No one is forcing me to invest. Some people made money in 1929. Lots of people lost it all. I would rather be in the former group.

MF

The 1929 comparison makes you sound like a fool. Best drop it. – Garth

#114 LivingLarge on 01.14.18 at 12:31 pm

“Mussels and Coke? – Garth”…actually, a vintage, small estate, single producer, bio produced, boutique ginger ale.

#115 conan on 01.14.18 at 12:33 pm

“Btw, what the hell is goin on with the Oilers?” stage1dave

I am in Ottawa so don’t follow them ,or have any emotional investment in them.

So these are all guesses:

1) They need another first round over all pick.
2) Bowling day got cancelled.
3) Somebody slept with someone else’s wife/ girlfriend.
4) Organisation has no concept of who the good players are in regards to leadership, keeping the team focused, and caring about what this team does on the ice.
5) Monday “Mussels and Coke day” was a bad idea, no one likes it.

#116 MF on 01.14.18 at 1:09 pm

The 1929 comparison makes you sound like a fool. Best drop it. – Garth

You are right. There is no risk of a market collapse. Everything is rosy from here on out. Stocks will only go up with only slight blips here and there. Might as well go 100% equities then. Bombs away.

Of course we don’t do that. We stay balanced because we (even you) don’t know when the next collapse will be. Bet you there were thousands of “experts” saying 1929 would never happen again in 2007.

MF

It didn’t. – Garth

#117 Doug Rowat on 01.14.18 at 1:13 pm

#82 stage1dave on 01.13.18 at 11:41 pm

Timely observations, Mr. Rowan. ..

Btw, what the hell is goin on with the Oilers?

—-

Lucic should be traded. 9 goals in 46 games? The days of the 250 lb winger are over.

Btw, PSA Gem Mint Young Guns Upper Deck Connor McDavid rookies offer the best market value at the moment. Full disclosure: I’m long McDavid rookies.

Good portfolio managers can offer all kinds of investment ideas.

—Doug

#118 BS on 01.14.18 at 1:18 pm

“Markets have done well, time to sell.”

I remember someone telling me that in 1995 when I was transferring a company RRSP into my own RRSP account after leaving the company. There had been a bull market for more than 13 years already at that point. Markets had already more than tripled.

Too bad I took that advice. The market tripled again over the next 5 years. For anyone sitting this market out are you ready to watch on the sidelines as the market doubles or triples? It will be painful.

#119 Michael on 01.14.18 at 1:22 pm

“QE worked. Global growth has restored and economies are expanding in a non-inflationary fashion, with corporate profits and labour markets reflecting that. You spew groundless fear. Nobody is making you invest, so don’t. — Garth”

Yes but what happens when they actually pull the lever from ‘blow’ to ‘suck’.

What happens when market sentiment catches on that the money pump is going in reverse and not backstopping this exhuberance?

Everything is usually all rosy until it suddenly ain’t.

#120 Bankish on 01.14.18 at 1:42 pm

Good post Doug Rowat
The thing I like this type of article is that you are arming people with more knowledge and resources to make better financial and life decisions. Haters will keep hating and blaming others for their lot in life, but those that choose to increase their knowledge and scope can change behaviors and thought processes to succeed.

#121 TurnerNation on 01.14.18 at 1:54 pm

Dunno I’d like to move into a thriving country with a dominant majority other than my own culture.
I’d spend my time berating their ‘lack of diversity’ and that only their own ‘privilege’ accords their success.
Sounds like a plan eh?

#122 MF on 01.14.18 at 2:05 pm

It didn’t. – Garth

Bit of a circular argument but only because of central bank manipulation. Take away that stimulus and outrageous bailouts and we have a much different outcome. Even Doug and Ryan have mentioned the markets rebounded so well only because of the unprecedented stimulus.

The next time won’t be the same since the central banks are out of ammo. Even if they try to respond with more stimulus it won’t be enough since markets are now numb to it.

Just like in war, the generals that fight a conflict with the tactics of the last one always lose. Our cb’s are out of options entirely.

MF

More naivete. Central bankers have massive options to modify market and economic behaviour. Rates are but one tool. Time you stopped now. – Garth

#123 Doug Rowat on 01.14.18 at 2:08 pm

#119 Michael on 01.14.18 at 1:22 pm

Yes but what happens when they actually pull the lever from ‘blow’ to ‘suck’.

What happens when market sentiment catches on that the money pump is going in reverse and not backstopping this exhuberance?

—-

I said the Dow moved higher 77% of the time, not 100%. It’s capital market investing. There’s no free lunch.

—Doug

#124 TurnerNation on 01.14.18 at 2:09 pm

Kanada’s new One Child Policy:

Middle class fairness yada yada children are our future etc etc You’ve come a long way baby.

https://www.reddit.com/r/toronto/comments/7qca4z/daycare_fee_sticker_shock_linked_to_minimum_wage/

#125 Shawn on 01.14.18 at 2:41 pm

As long as views like MF’s are fresh in the minds of the lay person this bull market is going to keep going. It will take another decade or two for this to be forgotten.

#126 Ronaldo on 01.14.18 at 2:44 pm

Or it can be a tax trap in retirement. Depends entirely on individual circumstances, which is why I delayed posting your first comment. It barely passes the smell test of responsibility since you are offering blanket advice without regard to the immense differences between families. – Garth
—————————————————————–
That is absolutely true. There are just too many variables involved when it comes to advising on RRSP’s and people especially those in the banks ([email protected]) need to be careful when promoting their products to people who really shouldn’t be buying them. It is not a one size fits all thing and is why you need to speak to a responsible and knowledgeable financial advisor in this regard and not funds sales people pretending to be financial advisors. I say this because of my own experience with these things. And for certain they can become a tax trap for especially low income individuals and high income earners as well. Clawbacks of other means and non-means tested benefits are considerations as well. There is a lot of information on the internet in this regard. Just google and educate yourselves before falling into the trap as many have.

#127 Shawn on 01.14.18 at 2:45 pm

PS, I told you the S&P500 was the contrarian trade for 2017…

The Nasdaq 100 is the modern Dow.

TSLA is also a buy.

#128 InvestorsFriend on 01.14.18 at 2:54 pm

RRSP can be tax Trap

From 109 above:

Or it can be a tax trap in retirement. Depends entirely on individual circumstances, which is why I delayed posting your first comment. It barely passes the smell test of responsibility since you are offering blanket advice without regard to the immense differences between families. – Garth

*****************************************
Thank you, I do appreciate you posting my comment despite some concern.

I agree the RRSP could be a tax trap in some cases. For example, making contributions when your marginal tax rate is quite low and then getting hit with a much higher rate in retirement due to higher income or Clawback or loss of GIS or other government entitlements.

I did not mean to suggest RRSP was best in all cases.

When the TFSA came out, I was surprised to learn that the RRSP could exactly match it when the marginal tax rate is unchanged.

I had a wrong view of RRSP math for years where I thought the refund was adding to my net worth. I no longer think that. It is the decades-long tax free compounding of my net cost of the RRSP contribution (after deducting the refund) that is the benefit. I now see the refund as being an approximate 40% share of “my” RRSP that also grows to cover the tax bill on withdrawal assuming I stay at 40% marginal tax rate.

In my own (extended) family RRSP investing has worked out very well and that is despite marginal tax rates of over 50% in one case with Clawback.

I believe that the actual math of RRSPs is not well known or understood.

I have presented math above that looks favorable to RRSP investing. If my math is wrong, I am sure someone here will be eager to point it out.

I thank you for providing this forum for discussion and for tolerating different views.

#129 day care on 01.14.18 at 3:15 pm

#124 TurnerNation

I call bull on that.

Here in Vancouver, day care runs at $90 a day or so.
Let me tell you that a small part of that is wages, as ratio teacher/kid is typically 1:4 or so.

The bulk of the cost is related to the building and franchise, not the labour.

Rent increases have far more effect on the fee, than the wage increases.

#130 conan on 01.14.18 at 3:24 pm

“For anyone sitting this market out are you ready to watch on the sidelines as the market doubles or triples? It will be painful.” -Irrational Exuberance

Someone entering the market right now, with a big deposit , would be wise to look at all the investment options, because it is not impossible for the market to experience an “ouch event.”

This is especially true for investors who are counting on an immediate income from that money. Like people who have just retired.

As far as some people staying on the side line, its because they have already made good money on their investments. Their adviser has them way ahead of what was “forecast.”

For whatever reason, cough Donald Trump cough, they want a little bit of caution in their investments. A bit more in bonds, with the proviso, that these funds reenter the market after any mid- high correction.

Many ways to invest, its a big money world out there.
Everything depends on what the client really, really wants. Advisers need to understand their clients in the same way that the client’s closest friends do.

#131 stage1dave on 01.14.18 at 3:39 pm

#117 Doug Rowat;

I’m with ya on McDavid, but have been putting him away raw…psa 10’s too bloody expensive! I like the “pedigree” of a graded card for investment, but still remember that pile of Lindros RCs in the 90s…live n learn.

I’ve probably got too much invested in graded 71 opc and 54 topps hockey, but these 2 sets are iconic and I can’t see the demand sliding in the future.

Gonna watch a few Oilers games this week too…

#132 LivinLarge on 01.14.18 at 5:21 pm

“There are just too many variables involved when it comes to advising on RRSP’s and people especially those in the banks ([email protected]) need to be careful when promoting their products to people who really shouldn’t be buying them. “………soooooo true. And this is precisely why Fearless Leader and fhe rest of the band of 3 do not make specific investment suggestions.

There’s either a written or unwritten rule “Now Your Client” that professional advisors adhere to.

#133 westcdn on 01.15.18 at 3:44 am

I have lucked out again. Pure Industrial (aar.un) is being bought out. Now I have to find another company or take the cash – I don’t like debt despite it earns.

I am looking at erf because it looks I was wrong about crude prices. I also am looking at cwl because I like their prospects under Trump economics. Sometimes I win, other times I lose but I will not give up.

#134 LivinLarge on 01.15.18 at 12:02 pm

“Now I have to find another company or take the cash – I don’t like debt despite it earns.”….so stay with another Canadian Industrial REIT. Much better yields are still available than Pure Industrial delivers.

Hell, if you want dead nuts guaranteed safety then buy Canadian banks with 3%+ yields (and no ACB concerns) and good US exposure to take advantage of the new corp tax bump. A couple are even trading above $100 right now and smelling like a split is in the offing.

#135 LivinLarge on 01.15.18 at 1:45 pm

Before anyone correctly points out that there is no such thing as “dead nuts guaranteed” anything in investing.

Yes, bank shares are in no way guaranteed on the capital side but history has demonstrated 2 things for the lsst 150+ years. A. Cdn Banks have never reduced a dividend and over time cspital investment fluxuates but rises.

’08-1/ was brutal for bank DP but they have now recovered and made up the loss.

#136 keny Singh on 01.15.18 at 3:36 pm

good one Doug.