BRIC houses

DOUG By Guest Blogger Doug Rowat

It probably isn’t a surprise to learn that commodity prices remain well below their pre–financial crisis highs. However, what probably is surprising is that commodity prices are actually still almost 15% below their financial-crisis LOWS—this despite many years of robust global economic growth.

A disconnect between commodity prices and global GDP growth

Source: Bloomberg, Bloomberg Commodity Index (orance line) vs global GDP growth (white line). The BCI measures futures prices of a basket of commodities including copper, gasoline, oil, soybeans, cattle, coffee and wheat.

We don’t think this divergence will last and that a commodity ‘catch up’ rally is possible. This is one reason why we increased our clients’ emerging market exposure by 50% in mid-2017. Emerging markets, of course, are highly leveraged to commodity prices. And while certain commodity prices, such as copper, have rallied strongly over the past few years and have contributed to the recovery in emerging market equities, a fuller move in the overall commodity complex could still be brewing.

Despite the recent emerging markets surge, it’s possible that we’re only in the early stages of an extended period of emerging market outperformance as emerging-market out/underperformance tends to be long term. Credit Suisse recently highlighted the following:

Early stages? Global emerging market equities relative to global, USD terms

Source: Credit Suisse

But it’s not just commodity prices that will help emerging markets. Emerging markets benefit much more from technology and digitalization expansion than many investors realize. For example, in India, the number of people connected to the internet will have risen fourfold by the middle of this year to 400 million and the cost of data has fallen ~96% in the past two years. Technology expansion comes easily in these countries and will bring economic improvement with it.

In previous posts, I’ve also detailed other favourable structural shifts occurring within emerging market countries, particularly China. Urbanization will be another key driver of growth as the mass migration from rural to urban centres continues. China often sees as many as 20 million people per year move from the farm to the city, and with well over 500 million people still remaining in rural areas there is plenty of scope for this migration to continue. City workers can make up to three times what a rural worker makes.

And once you’re in the big city and making the big bucks, what’s the first thing you want? A car. Car ownership rates in India and China, which account for about a third of the global population, are only 15 and 53 cars per 1,000 people, respectively, versus an average of 400 cars per 1,000 people in the developed world, according to the World Bank. That’s a lot of Civics and Teslas coming down the pipe. (As an aside, it should come as no surprise that the world’s highest per capita car ownership rates belong to the Germans and Italians.)

Most investors have also been presented with the demographic bull-case for emerging markets, but I still find the age gap between emerging and developed market populations startling. India, for example, has just 6% of its population over age 65. Japan sits at more than 27%. Which country’s economy would you bet on over the next 20 years? Like it or not, young people are more productive than older people.

% population over 65 years

Source: Bloomberg

Now, if we like emerging markets, they benefit from all of the above positives and we increased our weighting, why wouldn’t we adopt a massive overweight? Because risk control is equally important as outlook. We could be wrong with the timing of our forecasts and volatility is a constant feature of emerging market equities. As an example, the emerging market ETF in our model portfolio is 10 times more volatile than our safest bond ETF. An investment is only useful if one can remain invested and if that investment too heavily influences overall portfolio volatility then investors will simply abandon it.

However, emerging markets already represent more than 80% of the world’s population and more than one-third of global GDP. In two years, this will jump to 37% of global GDP and probably reach the 66% level by 2050, according to BMO. And the share of emerging markets as a percentage of the global stock market has risen from only about 7% at the turn of the century to roughly 35% currently.

Long term, BRIC exposure will likely reward you. Just ask the third pig.

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

92 comments ↓

#1 FOUR FINGERS WATSON on 04.07.18 at 1:52 pm

I think you are right. I’ve been wintering in Asia for the past 9 years and I have noticed first hand that the ownership of cars and motorcycles has increased hugely. And everyone seems to connected to the internet now. Even minimum wage workers can now afford high end cellphones and motorcycles. This was not the case 9 years ago. It seems like there is no end in sight for the demand there.

#2 For those about to flop... on 04.07.18 at 2:00 pm

Hey Robax,good post ,something different.

I was watching Fareed Zakaria on his CNN show Gps last Sunday ,and he delved into the Indian internet explosion with some of the mind blowing numbers.

Maybe NoName will find it ,he’s good at that.

Anyway,while I’m posting here is the weekend rewind in howmuch articles…

M43BC

How Much Income You Need to Afford the Average Home in Every State in 2018.

https://howmuch.net/articles/salary-to-afford-the-average-home-in-your-state

Mapping the Most Iconic Job in Every State.

https://howmuch.net/articles/most-iconic-job-in-every-state

#3 Honey Dripper on 04.07.18 at 2:02 pm

Everything drops in a general market correction like we’re currently experiencing. I also use a broad based all country global ETF for BRIC exposure. It gets hammered too.

What To Do When Everything Drops?
https://thestockmarketspeculator.blogspot.ca/2018/03/what-to-do-when-everything-drops.html

#4 Joshua on 04.07.18 at 2:08 pm

Thank for the informative post Doug.

With regards to emerging market there are two ETFs that are readily available to DIY investors; iShares XEC and Vanguard’s VEE.

VEE contains China A-Shares but is a bit more expensive.

What are A-Shares exactly and would they be something to even consider when investing?

Also what are the chances that a Canadian firm will begin to hold emerging market shares directly to shed one layer of foreign withholding tax?

#5 For those about to flop... on 04.07.18 at 2:13 pm

Here, anyone who didn’t see GPS last Sunday watch this quick clip about India’s Smartphone revolution…

M43BC

https://www.cnn.com/videos/tv/2018/04/02/exp-gps-0411-witw-india-mobile-phones.cnn

#6 John Cray on 04.07.18 at 2:17 pm

Thanks for this informative article. What is the weighting of emerging markets in your clients’ portfolios?

#7 Cici on 04.07.18 at 2:48 pm

The issue in China is the right to own and drive a vehicle. I know many professionals who make enough money to buy and drive a car, but the chinese government only allows a certain number of licensed vehicles on the road each year, and even at that they have huge problems with congestion and pollution.

#8 SoggyShorts on 04.07.18 at 2:54 pm

#77 Mattl on 04.06.18 at 9:14 pm
#53 Soggy – your dad spent 150k in repairs including 2 roofs and 2 exterior paint jobs in 25 years? I agree he should be a renter. Home ownership isn’t for everyone.

**************************
The kitchen and 2 bathroom renovations were about 70K
The driveway, patio, windows, roofx2, paint, and furnacex2 totalled something like 60K. there’s 20K I can’t remember, but I think a busted waterline was part of it.

Ask around, I don’t think 150K in repairs and upgrades over 25 years is that unreasonable.

#9 Mike on 04.07.18 at 2:55 pm

You’re 6 years ahead of the curve on this one Doug. Commodities won’t start booming until 2024, so positioning now would be a waste of time.

#10 A Yank in BC on 04.07.18 at 2:56 pm

Nicely written article Doug. A compelling argument to have exposure to all the world’s equity markets.

#11 mark on 04.07.18 at 2:56 pm

Thanks for article Doug.
What emerging market etf would you favor?

I think iShares has a emerging market etf that trades in canadian dollars “xec” and holds about 1500 stocks with a small amount of small caps?

Thanks in advance.

Mark.

#12 crowdedelevatorfartz on 04.07.18 at 3:01 pm

Good article Doug.
Now if we could only figure out a way to get the “Big Bad Wolf” to stop huffing and puffing about Trade Wars with China

#13 Fake News Again on 04.07.18 at 3:06 pm

AGuyInVancouver on 04.07.18 at 1:19 pm
#133 Mattl on 04.07.18 at 12:03 pm

…We complain that the average Canadian can’t afford to buy in Van, well the average Spainard can’t afford Madrid and the average Italian can’t afford Rome. Unaffordability for the middle class is not a uniquely anadian problem. The fact that an educated Canadian can find a good job and cheapish housing in other countrys doesn’t tell much of a story.
_ _ _
Both Madrid and Rome are the “first cities” and capitals of their countries. Vancouver is neither, so it is your analogy that is flawed.
______

Not to mention that unlike Vancouver, Madrid and Rome did not have its population’s prospects of home ownership destroyed by foreigners laundering their money which the Govt has done nothing about for 25 years.

#14 NoName on 04.07.18 at 3:14 pm

Car ownership rates in India and China, which account for about a third of the global population, are only 15 and 53 cars per 1,000 people, respectively, versus an average of 400 cars per 1,000 people in the developed world, according to the World Bank. That’s a lot of Civics and Teslas coming down the pipe. -DR

I don’t remember where I read or heard of infrastructure spending and multiplier effect, but what I remember was when they were building interstate hwy way back, if I remember effect was for every dollar invested in it, was generating upward of 5$ of economic activity, so basically 5x vs now of 50c or maybe 1$ for some projects

does enyone know multiplier for EM markets?

#15 Baloney Sandwitch on 04.07.18 at 3:15 pm

With EM investing – its all for the long run. Put a few thousand inside an ETF and forget about it for a decade. You will get 400%+ with a couple of trips to -50% in between. But the potential is undeniable.

#16 espressobob on 04.07.18 at 3:18 pm

Volatility is an investors best friend. love this stuff and this ETF.

https://www.vanguardcanada.ca/individual/indv/en/product.html#/fundDetail/etf/portId=9556/assetCode=equity/?portfolio

#17 Andrew Woburn on 04.07.18 at 3:19 pm

Thanks for this, Doug.

Following your theme:

– The future of retail is happening right now in China

https://qz.com/1231423/the-future-of-retail-is-happening-right-now-in-china/

Longer term investors should also bring themselves up to speed on Africa. Technology is opening up the economies there in mind spinning ways. Solar power is made for Africa. The population growth is phenomenal.

One of the fastest growing economies is Ethiopia. Yes, you read that right.

#18 Andrew Woburn on 04.07.18 at 3:20 pm

Please tell me this is Fake News.

– A Third Of Millennials Aren’t Sure The Earth Is Round, Survey Finds

http://pittsburgh.cbslocal.com/2018/04/05/millennials-flat-earth-survey/

#19 Andrew Woburn on 04.07.18 at 3:22 pm

Anybody remember the Peak Oil scare?

– Energy minnow Bahrain just found 80 billion barrels of oil, as much as Russia’s entire reserve

http://business.financialpost.com/commodities/energy/update-2-bahrain-says-new-discovery-contains-an-estimated-80-bln-barrels-of-tight-oil

#20 Heloguy on 04.07.18 at 3:29 pm

“India, for example, has just 6% of its population over age 65. Japan sits at more than 27%.”

I would suspect this is more of a reflection of life expectancy than anything else, but it brings up a thought. Should we bet against those countries that have a larger unproductive population vice lower?

#21 SoggyShorts on 04.07.18 at 3:29 pm

#77 Mattl on 04.06.18 at 9:14 pm
#53 Soggy – your dad spent 150k in repairs including 2 roofs and 2 exterior paint jobs in 25 years? I agree he should be a renter. Home ownership isn’t for everyone.
**************************
First hit that came up when googling
“average house repairs in 25 years”
http://www.moneysense.ca/spend/real-estate/the-ultimate-home-maintenance-guide/

TL;DR:
3-5% of home value per year
Total annual maintenance cost: $930 – $2,600
Total annual replacement cost: $3,500 – $7,300
The total amount you should budget for home maintenance: $4,500 – $10,000 per year

Almost nothing lasts 25 years. Fence, deck, roof, furnace, plumbing, flooring, appliances the list is crazy long once you really think about it.

Try reading that article, or any other you find. I’m sure you’ll be surprised at how much it really costs to maintain a home (and hopefully realize that you had no reason to be a condescending prick in your response)

#22 The other Doug, in London on 04.07.18 at 3:32 pm

If Emerging Markets are picking up, it’s only a matter of time before commodities will also pick up and the TSX with it. Just like in the middle of the last decade, rocks (especially those sedimentary rocks that contain oil) and trees will be in the spotlight again. I think I’ll hold on to the XEG-T and USO-NY I scooped up while it was on sale. I’ll give you an inside tip, pipelines that transport oil and gas are also still on sale now.

#23 waiting on the westcoast on 04.07.18 at 3:36 pm

Doug – great post. Do you think the rise is commodities will trigger a significant rally in the CDN$ like it did during the GFC?

#24 Jungle on 04.07.18 at 3:40 pm

The tsx is performing worse than emerging market etf, interesting that second class countries stock market are being rewarded better now then a developed and safe country.

#25 Jungle on 04.07.18 at 3:44 pm

Just wait until the discount on wcs improves, ( it’s already improving, look at oil stocks last week)

15 billion coming back to our economy, this will boost gdp huge and with inflation above boc target, wage growth holding above 3% and employment still growing, ecpect some “catch up” with rate hikes.

#26 Old Stock Canadian on 04.07.18 at 3:44 pm

Is that pic the future of Toronto? Will car insurance skyrocket in relation to house prices because our population will increase to ninety million by 2050? Will Toronto be another Dhakka? I’ve encountered long traffic jams at Steeles Ave (the northernmost tip of Toronto), and it awfully mirrors traffic jams in Beijing. Is this the price we pay for a world class city? Traffic jams, overpopulation and living in closets for $1,500 a month?

#27 Shawn on 04.07.18 at 3:58 pm

You will see 1&1/2 – 2 more years of SPY:EEM outperformance. A bear market in SPY in 2020-21 will be accompanied with EM outperformance. EM outperformance will likely continue until 2025.

You heard it here. Don’t say I didn’t tell you ahead of time.

#28 Mordko on 04.07.18 at 4:18 pm

“And the share of emerging markets as a percentage of the global stock market has risen from only about 7% at the turn of the century to roughly 35% currently.“

By what? Capitalization? This number seems completely wrong, unless you are counting Japan as “emerging”. I can believe 15%, if state share of the capital market is included, but not 37%.

#29 AK on 04.07.18 at 4:38 pm

#12 crowdedelevatorfartz on 04.07.18 at 3:01 pm

“Now if we could only figure out a way to get the “Big Bad Wolf” to stop huffing and puffing about Trade Wars with China”
——————————————————————
Why are you defending China? Don’t you believe that they should play on a level field ??

#30 Newcomer on 04.07.18 at 4:39 pm

Thanks for the post, Doug. You make a strong case for EM exposure, and I am sure that, as a long-term bet, it can’t help but win. In the short term, on the other hand, I could see a lot of volatility.

When buying an ETF, how does one know that the ETF will be good for the long-term? It would suck to put money into EMs through an ETF only to have the fund shut down before the long-term buy and hold strategy bears fruit.

#31 FOUR FINGERS WATSON on 04.07.18 at 4:46 pm

#20 Heloguy on 04.07.18 at 3:29 pm
“India, for example, has just 6% of its population over age 65. Japan sits at more than 27%.”
………………………..

I was talking with a 30 something Japanese guy when I was in Asia and I asked him how it was that Japanese people live so long and have so many 100 year olds there.He laughed and told me it is because their families don’t declare them dead and keep on collecting their pensions. True story.

#32 FOUR FINGERS WATSON on 04.07.18 at 4:54 pm

#7 Cici on 04.07.18 at 2:48 pm
The issue in China is the right to own and drive a vehicle. I know many professionals who make enough money to buy and drive a car, but the chinese government only allows a certain number of licensed vehicles on the road each year, and even at that they have huge problems with congestion and pollution.
……………………..

I was in China last month. Traffic in the cities is unbelievable, if u think Toronto or Vancouver are bad you ain’t seen nuthin’ yet. Most people use motor bikes cuz if you went shopping in a car you would have nowhere to park it. Seriously.

#33 young & foolish on 04.07.18 at 4:56 pm

The view for Sbux:

We’ve had cheap money for years ….. EZ leverage has led to inflated RE and financial asset values. Is the pendulum now swinging back the other way?

#34 Hugo on 04.07.18 at 5:26 pm

Statscanada shows the percentage over the age of 65 as 16%, other sources show 14.5%.

#35 Rargary on 04.07.18 at 5:48 pm

Damn… I had to Google BRIC… time I hop on the DARTH (Garth & Doug…lol) bandwagon! Thx for the information and heads up on markets.. a newby investor like myself can use all the direction I can get from credible sources!

#36 Doug Rowat on 04.07.18 at 5:53 pm

#20 Heloguy on 04.07.18 at 3:29 pm

“India, for example, has just 6% of its population over age 65. Japan sits at more than 27%.”

I would suspect this is more of a reflection of life expectancy than anything else, but it brings up a thought. Should we bet against those countries that have a larger unproductive population vice lower?

No, Japan’s entire population is about to check into the Chartwell, the country has very restrictive immigration policies, a terrible gender equality ranking (witness the woman doctor recently giving life saving CPR inside a sumo ring being ordered out because she was ‘unclean’) and has already had 4 (!) recessions since the financial crisis. Yeah, long term, I’d bet against Japan.

#37 For those about to flop... on 04.07.18 at 6:10 pm

#17 Andrew Woburn on 04.07.18 at 3:19 pm
Thanks for this, Doug.

Following your theme:

– The future of retail is happening right now in China

https://qz.com/1231423/the-future-of-retail-is-happening-right-now-in-china/

Longer term investors should also bring themselves up to speed on Africa. Technology is opening up the economies there in mind spinning ways. Solar power is made for Africa. The population growth is phenomenal.

One of the fastest growing economies is Ethiopia. Yes, you read that right.

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

Hey WOEY,I have put this map up a few times when the discussion has been emerging markets.

It shows what the CID projects to be annual growth over the next decade.( It was written in January 2016)

I just looked back at what they said about that region.

“The CID believes that the countries with the greatest potential for growth are located mainly in South Asia and East Africa.”

India topped the projections at nearly 7%

Ethiopia came in at 4.4

A couple of its neighbours,Uganda and Kenya came in north of 6%

Take a quick peek…

M43BC

This World Map Shows the Economic Growth Over the Coming Decade

https://howmuch.net/articles/atlas-of-economic-growth

#38 Stan Brooks on 04.07.18 at 6:13 pm

AGuyInVancouver on 04.07.18 at 1:19 pm
#133 Mattl on 04.07.18 at 12:03 pm

…We complain that the average Canadian can’t afford to buy in Van, well the average Spainard can’t afford Madrid and the average Italian can’t afford Rome. Unaffordability for the middle class is not a uniquely anadian problem. The fact that an educated Canadian can find a good job and cheapish housing in other countrys doesn’t tell much of a story.
_ _ _
Both Madrid and Rome are the “first cities” and capitals of their countries. Vancouver is neither, so it is your analogy that is flawed.

———————————-

That is stupid.

Majority of the middle class in Italy and Spain who live in Madrid and Rome own their homes.

In Italy mostly without mortgages.

Do not try to excuse Canadian stupidity, comparing with countries you know nothing about.

#39 NoName on 04.07.18 at 6:18 pm

@27 Shawn on 04.07.18 at 3:58 pm
You will see 1&1/2 – 2 more years of SPY:EEM outperformance. A bear market in SPY in 2020-21 will be accompanied with EM outperformance. EM outperformance will likely continue until 2025.

You heard it here. Don’t say I didn’t tell you ahead of time.


You a bit late. Look at a chat spy vs eem. Increased interes in em goes back for far as year maybe year a half ago, if there was no trupm victory and announcement of big corporate tax in us, em.vould me on a tare now. tax cuts slow ed things a bit, but hi pe in us stock will eventually push flow out of us soon. I know you sad same thing in different words. Chart is interesting.

https://twitter.com/TihoBrkan/status/982562788454252544?s=20

#40 Victor V on 04.07.18 at 6:23 pm

Vaughan condo cancelled, leaving 1,100 buyers in limbo

https://www.theglobeandmail.com/canada/toronto/article-vaughan-condo-cancelled-leaving-1100-buyers-in-limbo/

#41 Doug Rowat on 04.07.18 at 6:31 pm

#30 Newcomer on 04.07.18 at 4:39 pm.

When buying an ETF, how does one know that the ETF will be good for the long-term? It would suck to put money into EMs through an ETF only to have the fund shut down before the long-term buy and hold strategy bears fruit.

It could happen, but it’s mainly the niche and leveraged ETFs that don’t last. I wrote about this issue here:

http://www.greaterfool.ca/2017/12/02/the-shutdown/

–Doug

#42 crowdedelevatorfartz on 04.07.18 at 6:33 pm

@#29 AK47
“Why are you defending China? Don’t you believe that they should play on a level field ??”
++++++

Because most financial experts think a tariff Trade war is idiotic?

#43 Life in the burbs on 04.07.18 at 6:52 pm

Victor V
https://www.theglobeandmail.com/canada/toronto/article-vaughan-condo-cancelled-leaving-1100-buyers-in-limbo/

What I believe is happening here is a credit event. It is no mystery that credit and liquidity is drying up at all institutions. The sub par lenders such as Laurentian and National Bank usually financed these kinds of projects.To much risk with the big five. Vaughan is not a core area and has seen massive drops in SFD prices and sales. Ma and Pa rookie investor in the area will more than likely wont have the means to close which was never the intention for most of them. I think that we are now seeing the bottom fall out of the condo market as we have seen with the SFD market with the burbs taking the initial blows. These buyers should be thanking their lucky stars the developer pulled the plug. Two years from now it will be the height of the condo shit storm.

#44 Hana on 04.07.18 at 6:57 pm

Thank you Doug!
What percentage of portfolio do you recommend to keep in EM?
My portfolio currently holds 5%. Is this enough?

#45 Lost...but not leased on 04.07.18 at 7:39 pm

Emerging markets?

Big Deal…simply baiting the next ponzi scheme for suckers.

When automation kicks in…most of these 3rd world economies will collapse in a heartbeat or less.

Once manpower and subsidized cost of doing business become moot points…they have nothing to offer otherwise.

#46 tccontrarian on 04.07.18 at 7:40 pm

“We could be wrong with the timing of our forecasts and volatility is a constant feature of emerging market equities.” D.R.
———————————————————

Me? I’m never ‘wrong’ – but I’m often early! :)

Have owned several EM ETFs in the past but none presently. But yeah, I’m inclined to start thinking about some exposure.
I have direct exposure with commodity ETFs however…and they tend to be even more volatile.

TCC

#47 Zapstrap on 04.07.18 at 7:41 pm

Anyone from Humboldt … deepest sympathy …

#48 NoName on 04.07.18 at 7:46 pm

interest read

https://www.nytimes.com/2018/04/07/technology/india-id-aadhaar.html

what happens what you lose a tumb…

#49 Kaganovich on 04.07.18 at 8:10 pm

Andrew

Energy minnow Bahrain just found 80 billion barrels of oil, as much as Russia’s entire reserve

We won’t be able to burn much more of it regardless. It’s unreasonable to keep looking for reserves in the context of carbon budgets and mitigating the harm we’ve already done to the biosphere. Any chance of keeping the warming below 1.5 degrees would necessitate an almost immediate stop to use of petrol today.

#50 Dogs can type. on 04.07.18 at 8:10 pm

So is the opposite true then? baby boomers will hold us back?

#51 Dr. Talc on 04.07.18 at 8:17 pm

3 Fake News Again on 04.07.18 at 3:06 pm
AGuyInVancouver on 04.07.18 at 1:19 pm
#133 Mattl on 04.07.18 at 12:03 pm

…We complain that the average Canadian can’t afford to buy in Van, well the average Spainard can’t afford Madrid and the average Italian can’t afford Rome. Unaffordability for the middle class is not a uniquely anadian problem. The fact that an educated Canadian can find a good job and cheapish housing in other countrys doesn’t tell much of a story.
_ _ _
Both Madrid and Rome are the “first cities” and capitals of their countries. Vancouver is neither, so it is your analogy that is flawed.
______

Not to mention that unlike Vancouver, Madrid and Rome did not have its population’s prospects of home ownership destroyed by foreigners laundering their money which the Govt has done nothing about for 25 years.

They created FINTRAC

#52 I Know, U Know on 04.07.18 at 8:25 pm

#44 Hana on 04.07.18 at 6:57 pm
Thank you Doug!
What percentage of portfolio do you recommend to keep in EM?
My portfolio currently holds 5%. Is this enough?
################################

Such a stupid question! You must work in manufacturing.

#53 akashic record on 04.07.18 at 8:33 pm

#26 Old Stock Canadian on 04.07.18 at 3:44 pm
Is that pic the future of Toronto? Will car insurance skyrocket in relation to house prices because our population will increase to ninety million by 2050? Will Toronto be another Dhakka? I’ve encountered long traffic jams at Steeles Ave (the northernmost tip of Toronto), and it awfully mirrors traffic jams in Beijing. Is this the price we pay for a world class city? Traffic jams, overpopulation and living in closets for $1,500 a month?

Pretty much.

Life as a whole becomes more and more screwed, but your investment goes up the more overpopulated we get.

The entire current economic model is based on producing and selling more shizzle to more people.

Decreasing population is the biggest fear of all, suggesting it is blasphemy and capital crime at the Church of Unlimited Growth.

#54 Catmandeux on 04.07.18 at 8:36 pm

Just ask the third pig.

I like that.

#55 Tony on 04.07.18 at 9:25 pm

For anyone who even cares I’m buying back all the shares of Teck Corporation I’m short this Monday and I’m buying TLT long. The way I see it all the hard and soft data out of America will “magically” come in weak over the next couple of months to offset the effect of tariffs that is a higher dollar and higher interest rates.

#56 Barb on 04.07.18 at 9:33 pm

Did a double take on seeing today’s post header.
As an old B.C.’er, I still have my BRIC shares certificate.

A priceless relic.
A worthless investment.

#57 Tim on 04.07.18 at 9:48 pm

“As an aside, it should come as no surprise that the world’s highest per capita car ownership rates belong to the Germans and Italians.”

Actually, that should come as an enormous surprise, given that those countries have not completely given their cities over to highways and parking lots like some have.

As it happens, it’s also incorrect…. on the list of motor vehicles per capita by country, Italy (579 vehicles/cap) and Germany (572 vehicles/cap) are are tenth and twentieth respectively, well behind the United States (#3, 795 vehicles/cap), New Zealand (#4, 774 vehicles/cap) and Australia (#7, 740 vehicles/cap.)

Sorry, Doug! I love the blog, especially the weekend posts by you and Ryan. But sometimes a howler creeps in there…

#58 NoName on 04.07.18 at 10:02 pm

#45 Lost…but not leased on 04.07.18 at 7:39 pm
Emerging markets?

Big Deal…simply baiting the next ponzi scheme for suckers.

When automation kicks in…most of these 3rd world economies will collapse in a heartbeat or less.

Once manpower and subsidized cost of doing business become moot points…they have nothing to offer otherwise.

You didnt think that one true, if universal income evercomes online, very profitable place to have manufacturing will be one that does not have one. so they will have lot more to offer, than just subsidies, and blind eye to pollution.

#59 Lee on 04.07.18 at 10:16 pm

Where is your empirical evidence that young workers are more productive?

#60 Gravy Train on 04.07.18 at 10:22 pm

#12 crowdedelevator on 04.07.18 at 3:01 pm
“Good article Doug. Now if we could only figure out a way to get the ‘Big Bad Wolf’ to stop huffing and puffing about Trade Wars with China.”

#29 AK on 04.07.18 at 4:38 pm
“Why are you defending China? Don’t you believe that they should play on a level field??”

#42 crowdedelevator on 04.07.18 at 6:33 pm
“Because most financial experts think a tariff Trade war is idiotic?”

But then doesn’t that mean Donald Trump is an idiot? Sorry, AK—and Smokey, Protea, and Big Kahuna, for that matter—for bursting your bubble! :)

#61 Diharv on 04.07.18 at 10:32 pm

And it should be no surprise that while the commodities prices are low , gasoline prices are are approaching or at their pre financial crisis /ppb peak highs . When crude prices rise as everyone it seems is crying for , the prices at the pumps will rise too , and more often than not , disproportionately. They will go so high that all the pain felt when crude was at $147 per barrel will be repeated and will possibly plunge the world into recession again . That is how I see this base price reset . That is how I see it , so those wishing for commodity prices to rise better be careful what they wish for .

#62 NoName on 04.07.18 at 10:58 pm

now i know why my social skills suck… its my unibrow!

https://www.youtube.com/watch?v=MvnumV1izOE

#63 Doug Rowat on 04.07.18 at 11:08 pm

#57 Tim on 04.07.18 at 9:48 pm

“As an aside, it should come as no surprise that the world’s highest per capita car ownership rates belong to the Germans and Italians.”

Actually, that should come as an enormous surprise, given that those countries have not completely given their cities over to highways and parking lots like some have.

As it happens, it’s also incorrect….

Sorry, Doug! I love the blog, especially the weekend posts by you and Ryan. But sometimes a howler creeps in there…

As it happens, it’s entirely correct. I clearly state I’m referencing cars (you even quote me) and I cite my source as the World Bank. You don’t provide a source, but I suspect did a Google search, which took you straight to Wikipedia. The Wikipedia data includes “vans, buses, freight and other trucks”.

–Doug

#64 Doug Rowat on 04.07.18 at 11:09 pm

#59 Lee on 04.07.18 at 10:16 pm

Where is your empirical evidence that young workers are more productive?

Watching my old man climb the stairs.

–Doug

#65 soost on 04.07.18 at 11:38 pm

Can someone name me a good BRIC ETF to go along with this BRIC post?

#66 Lost...but not leased on 04.07.18 at 11:41 pm

#58 Name…

I’d like to respond…..but I don’t have a frikking clue what you are trying to say….

PS: Maybe get yer Mumbai translator to sharpen their keyboard?

#67 Ronaldo on 04.08.18 at 1:27 am

#55 Tony on 04.07.18 at 9:25 pm

For anyone who even cares I’m buying back all the shares of Teck Corporation I’m short this Monday and I’m buying TLT long. The way I see it all the hard and soft data out of America will “magically” come in weak over the next couple of months to offset the effect of tariffs that is a higher dollar and higher interest rates.
—————————————————————I
I seem to recall that you were going to sell Teck short end of Sept. 2016 at $23.65 and buying them back at $5.00 end of January or start of Feb. 2017. How did that work out for you?

#68 Tony on 04.08.18 at 4:06 am

Re: #60 Gravy Train on 04.07.18 at 10:22 pm

They’ve been trying to create inflation in America since the Lehman debacle. Nothing so far has worked. Tariffs will work but it will take time. In the short term all the “fabricated” hard and soft data out of America will come in weak to offset the effects of tariffs that is to push the value of the U.S. dollar downward and push the 10 year treasury note yield downward. The CPI will come in weak this Wednesday in America as will everything after that. It just took me a while to latch on to all the under the table tricks since Trump was elected. Day trading was much easier under Obama.

#69 akashic record on 04.08.18 at 8:10 am

#64 Doug Rowat on 04.07.18 at 11:09 pm

#59 Lee on 04.07.18 at 10:16 pm

Where is your empirical evidence that young workers are more productive?

Watching my old man climb the stairs.

–Doug

It makes you wonder… Doug vs Garth

CEOs, head of states, lawmakers, etc. of Garth+ age or Doug- age.

Unless this applies to climbing the stairs only.

#70 akashic record on 04.08.18 at 8:17 am

#65 soost on 04.07.18 at 11:38 pm

Can someone name me a good BRIC ETF to go along with this BRIC post?

That’s the fine line between blogging about investing and investment advisory. Maybe someone with no dog in the fight will throw you a bone.

#71 akashic record on 04.08.18 at 8:41 am

#42 crowdedelevatorfartz on 04.07.18 at 6:33 pm

@#29 AK47
“Why are you defending China? Don’t you believe that they should play on a level field ??”
++++++

Because most financial experts think a tariff Trade war is idiotic?

Most experts predicted that opening up the trade with China and giving her the trade perks of developing countries would lead to the end of the Communist totalitarian regime. That’s how the US government of the day sold the deal to the public.

Exactly the opposite happened, with the potential consequences that the majority of experts don’t feel comfortable to even think about.

#72 AK on 04.08.18 at 9:33 am

#71 akashic record on 04.08.18 at 8:41 am
#42 crowdedelevatorfartz on 04.07.18 at 6:33 pm
@#29 AK47
“Why are you defending China? Don’t you believe that they should play on a level field ??”
++++++
Because most financial experts think a tariff Trade war is idiotic?

“Most experts predicted that opening up the trade with China and giving her the trade perks of developing countries would lead to the end of the Communist totalitarian regime. That’s how the US government of the day sold the deal to the public.
Exactly the opposite happened, with the potential consequences that the majority of experts don’t feel comfortable to even think about.”
—————————————————————
Totally agree.

We finally have an Administration that is trying to fix the problems. Let’s hope they succeed.

#73 NoName on 04.08.18 at 9:49 am

@toni and inflation

https://imgur.com/a/2gGFI

#74 MF on 04.08.18 at 9:59 am

#67 Ronaldo on 04.08.18 at 1:27 am

I love how every time Tony mentions “America”, you can feel the cynicism/distrust.

Fictitious Tony post example:

“On Wednesday, the data out of America will be revised downward so they can reduce the cpi and magically allow the dollar to fall and stoke artificial inflation.”

In some regards he is actually correct. The market’s behaviour under Trump in the last few months is actually how a normal stock market should behave (ie go down every once in a while). No question the Obama era stock market was manipulated though.

MF

#75 crowdedelevatorfartz on 04.08.18 at 10:10 am

@#71 Akashic Record.

Ok.
Then lets lower our 1st world wages to 3rd world(Vietnam? since Chinese factories seem to now be moving there because…..its cheaper….).
Rip up all our environmental laws(too expensive!)

We already have corrupt politicians and the illusion of “equal rights for all) so no need to do anything there.

All done switching over?
Good . Now we dont need a tariff war.
But boy are those IPhones still ridiculously expensive.

As for “ending totalitarian regimes’. Some poltical wags believe that when telephone penetration reaches more than75% of the population you cant hire enough
“listeners” to keep “ideas” at bay…..
Mind you that hypothesis was created before we had A.I. that can listen to everyone, everywhere, all the time…….just ask Homeland Security.

#76 Elcheapo on 04.08.18 at 10:16 am

#17- Andrew- geez that article was an advertorial written by Alibaba. Come on, do better.

#77 Tim on 04.08.18 at 10:25 am

#63 Doug Rowat “As an aside, it should come as no surprise that the world’s highest per capita car ownership rates belong to the Germans and Italians.”

As it happens, it’s also incorrect….”

As it happens, it’s entirely correct. I clearly state I’m referencing cars (you even quote me) and I cite my source as the World Bank. You don’t provide a source, but I suspect did a Google search, which took you straight to Wikipedia. The Wikipedia data includes “vans, buses, freight and other trucks”.

Okay, looking back on what I wrote, it sounds a bit trollish. I apologize for that. And I stand corrected.

Well, actually, half-corrected: you’re still wrong about the “It should come as no surprise” part. It’s actually mind-blowing, given what we see of the landscape of various countries. As a non-driver, my experience of the U.S. and much of Canada is of places that seem deliberately designed to punish pedestrians; by contrast Germany (I’ve never been to Italy) provides an easy and frictionless surface for pedestrians and transit users.

The fact (and it appears to be a fact) that they actually have more passenger vehicles per capita than either Canada or the US is EXTREMELY surprising.

Huh.

#78 NoName on 04.08.18 at 10:28 am

@ #30 Newcomer on 04.07.18 at 4:39 pm
Thanks for the post, Doug. You make a strong case for EM exposure, and I am sure that, as a long-term bet, it can’t help but win. In the short term, on the other hand, I could see a lot of volatility.
When buying an ETF, how does one know that the ETF will be good for the long-term? It would suck to put money into EMs through an ETF only to have the fund shut down before the long-term buy and hold strategy bears fruit.

“they” are all here. chose visly.

http://etfdb.com/type/region/emerging-markets/#etfs__returns&sort_name=assets_under_management&sort_order=desc&page=1

#79 Westcdn on 04.08.18 at 10:46 am

I am not a fan of ETF’s and less of mutual funds. When it comes to emerging markets, I don’t have much choice except to hold my nose and buy the one(s) I think suits my objectives. It is complicated given allocations to regions and related industries notwithstanding currency adjustments. It is an act of faith for me to believe a custodian of hundreds of foreign companies will put my interest ahead of their own. I could just buy precious metals instead if I can’t find a worthy return.

This is a good article on the construct of an ETF and the warning they have yet to be tested by a severe market correction (the known unknown). Of interest is that equity ETF’s exceed the value of bond ETF’s by a wide margin. In the real world, the value of bonds (smart money) exceeds the value of equities, by my recollection, to a factor of ten. That gives me pause. EFT Construct

In my opinion, leverage is going to work against you for years, mainly through the cost of debt. I would bargain hard not to pay too much for a non-productive asset like real estate without dirt or gold. When I parsed the new 32,300 jobs touted as created last Friday, I see the net was 19,800 were public servants and essentially 12,500 self-employed in construction. These kinds of numbers do not make me confident.
News Release on employment

If you think tax rates and interest rates won’t be higher down the road plus a national trade deficit, I want whatever you are smoking. Without luck, providing for your future depends on a plan and commitment. I am not kindly disposed to patronage, nepotism, empty suits or useful idiots.

I know I have less money each year to spend on myself from the same money I get. Each year I am forced to earn more or spend less on myself. I was not born on third base and I am not alone.

#prayersforhumboldt – it hurts more the closer it hits to home.

#80 Westcdn on 04.08.18 at 10:50 am

Lets try those links again. I forgot you have to do the hyper link within the HTML.

EFT Construct
https://blackswanalert.com/2018/04/07/our-clients-are-growing-worried-that-etfs-will-fuel-the-next-disorderly-market-crash/

News Release on employment
https://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=TB88001

#81 Senta on 04.08.18 at 11:20 am

I fail to see why you would post a picture of a slum in India to perpetuate a stereotype of a dirt poor third world country. India is a diverse country with lots of great places and people. Here is a sterotypical picture you can post instead.
https://instagram.com/p/4207WCB-EZ/?utm_source=ig_embed

Didn’t look like a slum to me. – Garth

#82 Ian on 04.08.18 at 12:18 pm

I remembered hearing Andorra had the most vehicles per person, turns out Finland is ahead of them by one spot.

https://www.weforum.org/agenda/2015/10/these-are-the-countries-with-the-most-vehicles-per-person/

Italy 3 and Germany not in top 10. But that’s vehicles not cars, and obviously big population size differences matter.

#83 For those about to flop... on 04.08.18 at 12:35 pm

Recent Sale Report/ Realtor Assistance Needed.

This relatively affordable option in Coquitlam was on the market for less than purchased for ,and sold 17 days ago.

Could be a good one to see how the market is going in General…

M43BC

1285 Sherman Street, Coquitlam paid 1.08 May 2017 ass 1.12 asking 998

Oct 16:$1,230,000
Mar 14: $998,000
Change: – 232000.00 -19%

https://www.zolo.ca/coquitlam-real-estate/1285-sherman-street

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

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#84 For those about to flop... on 04.08.18 at 1:03 pm

Recent Sale Report/ Realtor Assistance Needed.

Here is a house that a poster who goes by “It burns” ,who has helped me out a couple of times brought to my attention ,it just sold 21 days ago.

As you can see by the short message below,they had it back on the market for the same amount they picked it up for in 2016, despite being one of the cheaper detached options in Vancouver.

Some people seem to think the NDP have opened Pandora’s box…

M43BC

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

It burns.
Another one for your flop file in case you haven’t seen it.

Originally listed to 1.599 now down to 1.398 what they paid for back in 2016.

2891 Pandora Street, Vancouver

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

https://www.zolo.ca/vancouver-real-estate/2891-pandora-street

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#85 Keith in Rio on 04.08.18 at 1:05 pm

Trade with communist Red China must be stopped all together by any means necessary. This country needs to be crushed economically, as the political situation there is extremely fragile, and the only way to bring about regime change and democracy is to fold up the house of cards that is their economy.

Every day millions of Chinese look cross to Taiwan that has a thriving and stable economy and democratic system, something they have never had on the mainland. Why do you think the Red Chinese want to take it over ?

The goal of every single right wing political leader in the world should be to wipe communism, socialism, progressivism, etc, from the face of the planet in the same way that de-nazification took place in Europe after WWII.

Once the human trash are gone, we can sort out the remaining mess. But until they are, it’s going to be a long row to hoe. There is a terminal sickness in the world and it is left wing thought.

Witness Brasil, where Lula the former leftist president is now starting the 12 year jail sentence he received for money laundering and taking bribes. He told the millions of poor there he was their champion, while he was stealing money for his multi-million dollar 3 story beach front condo. The Brasilians are waking up now and can see on a daily basis the tens of thousands of Venezuelans who are streaming across their northern borders as refugees from Maduro’s “socialism”. They have finally started to realise the fraud that is left wing politics.

The “B” in Brics has a future again. It’s all about politics……..”populism” is the future, and politicians had better start to realise that the king only rules at the leisure of the people, and the people are pissed.

#86 For those about to flop... on 04.08.18 at 1:18 pm

Recent Sale Report/Realtor Assistance Needed.

Some value might come out of knowing what happened to this one as it is a relatively new build that was purchased a year ago ,and was on the market less than purchased for.

It sold a month ago,hopefully someone will verify the sales prices of these recent sales…

M43BC

6008 6th st ,Burnaby.

Paid 2.42 Feb 2017 asking 2.58 now 2.38

https://www.zolo.ca/burnaby-real-estate/6008-6th-street

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

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#87 Doug Rowat on 04.08.18 at 1:31 pm

#77 Tim on 04.08.18 at 10:25 am

Okay, looking back on what I wrote, it sounds a bit trollish. I apologize for that. And I stand corrected.

Well, actually, half-corrected: you’re still wrong about the “It should come as no surprise” part.

I was only implying that they make nice cars. Ryan alone has 5 Porsches–one for every business day. You should see his ‘Monday’ 911.

–Doug

#88 NoName on 04.08.18 at 1:37 pm

#74 MF on 04.08.18 at 9:59 am
#67 Ronaldo on 04.08.18 at 1:27 am
I love how every time Tony mentions “America”, you can feel the cynicism/distrust.
Fictitious Tony post example:
“On Wednesday, the data out of America will be revised downward so they can reduce the cpi and magically allow the dollar to fall and stoke artificial inflation.”
In some regards he is actually correct. The market’s behaviour under Trump in the last few months is actually how a normal stock market should behave (ie go down every once in a while). No question the Obama era stock market was manipulated though.
MF

How ca you say that, same “players” are in a market now as they were during Obama, if they manipulated back then what is there to say they are not manipulating it now.

If someone is a crook he/she wont change just because some shift in policy it will adapt. Beauti of market is that money can be made on a way down just as “easy” as on a way up.

But one thing I do agree with you, is that of you don’t make “rich” accountable and make them feel a burn for their actions, regardless how much you lift poor dynamics will stay a same.
Get a book skin in the game, by taleb. nime paper back just came in other day. You might like it.

#89 salted on 04.08.18 at 1:37 pm

Netflix – the China Hustle.
Interesting watch.

#90 crowdedelevatorfartz on 04.08.18 at 1:39 pm

@#85 Keith in Rio
“Once the human trash are gone, we can sort out the remaining mess…..”
++++++

And here I thought the stories of Hitler and nazi gold fleeing to Brazil was just a rumour………..

#91 For those about to flop... on 04.08.18 at 1:42 pm

Recent Sale Report/Realtor Assistance Needed.

This house in Vancouver sold 6 days ago.

They had it on for 2.39 ,which was less than what they paid for it in November 2015 at 2.41 ,which I am also hoping someone can verify as it is no longer on bc assessment.

Another thing I noticed this morning is that inventory in Vancouver proper had crashed through the 3000 unit barrier…

M43BC

https://www.zolo.ca/vancouver-real-estate/trends

2831 Venables st. Vancouver paid 2.41 November 2015 asking 2.39

2017-01-02 : $2,488,000
2017-09-26 : $2,888,000
2017-11-09 : $2,698,000

https://www.zolo.ca/vancouver-real-estate/2831-venables-street

https://www.bcassessment.ca/Property/Info/RDAwMDE0RUVSUQ==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#92 Oft deleted much maligned stock.picker on 04.09.18 at 11:10 am

Hilarious…..Trudeau is shutting down Canada while amajor xpansion is happening around the world. Here in Thailand people are enjoying huge momentum in lifestyle opportunity…..in Canada , people are increasingly impoverished…..insane. The $C has fallen 15% against the Thai Baht in 24 months……

So….I’m talking to my doctor….a specialist …..my hospital is like a five star hotel….compared to Thailand …Canada is more like India in med-tech. Anyway….the middle class and professionals make way more money that counterparts in Canada…..in an economy where cost of living is a quarter of Canada. So he’s crying…..just paid his taxes…..10%…..can you imagine. Wonder why Asians are coming to Canada with suitcases full of cash?

And…..these people take EU vacations….not cheapo bucketshop flights to the killing floors like Mexico.

Canada has reversed course and is becoming a third world country.