Muppets of fear

NAKED

It’s no coincidence people got house horny in 2009. The stompa into real estate began mere months after mutual fund values tanked. Millions of Canadians sold billions at the bottom, after one bubble burst, so they could buy into the next gasbag. And here we are, awaiting the inevitable.

Emotion rules us. Fear’s the big motivator, of course. It makes us bad investors. We do weird stuff to avoid risk, like selling things after they go down (because they might decline further) or buying them when they get expensive (because everyone else is, so it must be okay).

Lately, if this pathetic blog’s any indicator, fear’s back. It didn’t take much. Stocks fell a little and bond yield rose after central banks hinted they might stop spending so many stimulus dollars. Suddenly the volatility was seen for what it could be (2008 is coming back!) rather than what it was (a return to normal).

The doomers and depressionistas who come here spent all weekend arguing this is the eve of destruction. The US will fail, not recover. Financial markets are ponzis. Corporations lie about profits. Governments fabricate stats. Interest rates will explode, making debt unrepayable. We’re all gonna die. (At least that part works.)

This fear brings irrational behaviour. Like hoarding gold, paying off a cut-rate mortgage or buying a GIC. My experience shows me most people suffer from this in varying degrees, usually reflective of their net worth.

Of course, doomers have been 100% wrong since the last time they stormed the GreaterFool barricades, with their pointy sticks and toxic spitballs, back in the autumn of 2011 when the US flirted with a faux debt crisis. Since then gold has lost 40% of its value, US stocks have gained 48% and a balanced portfolio returned over 8% a year. The American housing market has rebounded sharply, unemployment’s fallen, business profits swelled, the greenback strengthened, vehicle sales popped and consumer confidence shot higher. Canada, in contrast, is going the other way. No surprise there.

This is the future. Get used to it. Better still, get ready for it.

Real estate and gold will suffer. Interest-bearing assets won’t likely pace inflation. Most people will probably be worse off in five years than now – paying higher mortgage rates on homes worth less, while their savings languish and returns are snorfled by taxes. In fact, it’s already the case. Household debt keeps rising, a third of the wrinklies now retire with a mortgage and 28-year-olds live in their parents’ basements. Four in ten families have trouble paying the monthly nut and the savings rate is negative in BC. Worse, 70% of people have most of their net worth in a single asset – which has never been worth more than now. In Toronto, it’s 76%. Among Boomers, 78%. Holy crap.

Anyway, you can change this. What would stop you?

Maybe it would be thinking the 140% stock market advance since 2009 is a fluke, and all the money’s been made.

Irrational, of course. Unless you believe the doomers are correct and we’re living in an illusory economy created by central bank pixie dust. But it you understand the US is actually in recovery, that if we were going to blow up it would have been four years ago and the people running the economy know more than the gold-and-god-&-guns set who pump up the ratings of Honey Boo Boo, then relax. You don’t need to make 14% a year buying stocks. Just aim for half that with a diversified portfolio of ETFs.

Maybe you think that when central banks stop their spending, markets will crash.

Based on what? Your innate understanding of American monetary policy? After spending a few trillion to reflate the economy, shrink unemployment and stimulate capital spending, the last thing the Fed will do is risk retrenchment by turning off the tap too abruptly. The Lay-z-Boy economists assaulting the comments section are vastly misguided. Way too much Internet.

Maybe you get your ‘facts’ in weird places.

Do you read the Zero guy? Gold-pumping sites? Marc Faber? I shall pray for you.

Maybe you have no plan.

The best advice is to understand what your life needs are – retirement, buying a house, your kids’ education – and then work backwards to satisfy them. This is not a contest in which it’s you versus the economy or some idiot financial benchmark. Money is simply a tool for making the most of what you cannot buy, borrow, replace or earn. Time.

If you don’t understand the difference between a TFSA and an RRSP, a preferred and a stock, an ETF and an EFT or how dividends, interest and capital gains are taxed, get some help. The end result here is to have investments which are balanced, diversified and liquid.

Or, maybe you’re smarter than everyone else.

But that’s just a ruse. A cover-up for feeling uncertain and fearful. For being human. There’s no shame in it. However, with each day and month that passes since 2008, overall risk does not augment, it diminishes.

It doesn’t mean you should jump into the stock market, or that 10% returns are normal. There’s always a good case for being cautious and conservative, for trying to protect what you have. But it’s time most people realized there’s no train in the tunnel, no cliff at the end of the road. Markets will ebb and flow, with most fluctuations meaningless. If you don’t appraise your house every month, why do it your investments?

Losing money isn’t the risk. Running out of it is. Especially if you’re female. More on that when I find the courage.

169 comments ↓

#1 William of the North... on 07.07.13 at 7:13 pm

what about houses made from gold?

#2 D.D. Corkum on 07.07.13 at 7:13 pm

“If you don’t appraise your house every month, why do it your investments?”

This one single sentence hits hard like a brick that was dropped from the fifth floor. Media and “doomsters” will cry foul over paper losses on the stock markets even if they last mere hours or days (let alone months). Yet these same people discredit wildly volatile gold prices as “manipulation” or dropping house prices as “impossible”.

Yet history shows that gold is extremely volatile (its an inflation hedge over decades, not over days and months) and real estate often goes in cycles (just like most other asset classes). Sigh.

#3 Randy on 07.07.13 at 7:14 pm

Invest 100% in ED drugs….

#4 clint on 07.07.13 at 7:17 pm

Garth love the way you select time intervals to fit your agenda…But it’s your show and you can do as you wish…

But to your anti-gold groupies: I hope you ladies have reduced your exposure and covered at least some of your shorts in gold and silver…metals as well as stocks ….because things are gonna get very interesting very soon.

#5 neo on 07.07.13 at 7:18 pm

“Based on what? Your innate understanding of American monetary policy? After spending a few trillion to reflate the economy, shrink unemployment and stimulate capital spending, the last thing the Fed will do is risk retrenchment by turning off the tap too abruptly. The Lay-z-Boy economists assaulting the comments section are vastly misguided. Way too much Internet.” – Garth

Oh, so anyone who dares disagree with your omnipotence is a misguided soul being carelessly caressed by the winds of the world wide web of lies. Here he Here he, Sir John Garth Turner, the only corridor of truth.

I feel so much better for you now. — Garth

#6 Sockeyemoon on 07.07.13 at 7:20 pm

Travelling though London – sure its the peak days of summer but almost every business is full. People from all over the world, many Spanish and Italians, seem to be happy spending money on the Thames. Where’s the Euro crisis… Not here, at least not now.

#7 Andrewski on 07.07.13 at 7:30 pm

Great post today Garth. Many people are afraid to take charge of their finances, unfortunately burying their head’s in the sand.

#8 T.O. & GTA bidding wars debunked July 05 -Big price drops in GTA SFHs on 07.07.13 at 7:32 pm

I am now seeing 5-10-12% price drops. I think some people wet their pants last week. Just go and look bank, I don’t remember seeing such high “under asking” discounts

http://recharts.blogspot.ca/2013/07/gta-sfh-bidding-wars-debunked-july-5.html

http://recharts.blogspot.ca/2013/07/to-sfh-bidding-wars-debunked-july-05.html

http://recharts.blogspot.ca/2013/07/gta-condo-damn-lies-july-05.html

I am also seeing elevated discounts for condos … I think that the market is falling apart

#9 east van on 07.07.13 at 7:39 pm

Garth, do you give any credence the theory of Jeff Rubin (and others), that the 2008 crash was caused not by a real estate bubble or Wall Street shenanigans, but rather by oil prices approaching $150 a barrel? They argue that global capitalism can not function with oil at that price.

I see oil is once again rising towards those levels…

#10 Muppets of fear — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer on 07.07.13 at 7:42 pm

[…] via Muppets of fear — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#11 Vincent on 07.07.13 at 7:45 pm

About those 28 years old basement dwellers:
most of the people I know fit in that category, or are a step below… i.e.: just bought a house with Daddy’s down-payment and SO’s salary to pay the monthlies. The sad part is that I’d estimate that 25% of my undergraduate degree acquaintances moved to BC to find work and buy those row houses. Quebec just doesn’t have enough environmental jobs!

In the last month alone, I know of 3 different couples who bought with that kind of scenario. None of them held a job for more than 8 months straight in their entire lives, finished grad school or were able to pay for their own down-payments… In one case, the house was even bought more than 30min driving distance away from work for both people (a 15 minute downgrade from their previous apartments, sans granite counter tops)!

On my end, at 27.5 (close enough) with a graduate degree in engineering + 2.5 years of recent work experience, single, ready to relocate, unemployed (thanks to unemployment insurance I’m not back to the dreaded above-garage room) and I sometimes feel so behind compared to them. Then I remember that I have a few thousands in the bank, no debt, a 1997 car that just refuses to die, a place to live in a nice neighbourhood and good health.

So which is it, am I behind or am I ahead?

#12 Old Man on 07.07.13 at 7:49 pm

I will make my interpretation on this picture as love the Irish pubs, and never flirted with any waitress, but gave them a tip, as they would smile at me. My total concentration was the love of music, and hosting a pint to the lassies about, as they were always the one’s that had an eye for, and made a move for the one that smiled at me the most.

#13 Honey I'm home on 07.07.13 at 7:57 pm

Garth what do you think of gold running from $50 to $200 in the mid 70’s, then pulling back to $100 – 50% correction before it ran to $900. I don’t think gold is done just perhaps taking a breathier like any cyclical market. This could be a transition phase leading to the big bull run say 2015 as some analysts like Martin Armstrong think.
Thouthts?

There is no reason to own gold. — Garth

#14 AK on 07.07.13 at 8:00 pm

Gartman’s ‘Watershed’ Shift on Gold

#15 T.O. & GTA bidding wars debunked July 05 -Big price drops in GTA SFHs on 07.07.13 at 8:02 pm

SFH still in good shape but everything else is going down (-3% average discount) it starts looking more and more like Vancouver outside of GTA.

GTA Condo damn lies -July 05

Sold under:98
Sold over:3
Sold for asking:17
Average DOM:29
Average discount:-3

T.O. SFH bidding wars debunked -July 05

Sold under:46
Sold over:15
Sold for asking:3
Average DOM:24
Average discount:-1

GTA SFH bidding wars debunked -July 5

Sold under:145
Sold over:13
Sold for asking:16
Average DOM:26
Average discount:-3

#16 peter on 07.07.13 at 8:02 pm

Marc Faber studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. degree in Economics

Then it’s worse than I imagined. — Garth

#17 greyhound on 07.07.13 at 8:03 pm

Interesting post today, great writing.
Garth says,
“Do you read the Zero guy? Gold-pumping sites? Marc Faber? I shall pray for you.”

A knowledgeable friend once remarked that only about 5% of people posting at zerohedge know what they’re doing. I couldn’t have said it better.

As for gold, I was taught to hold 5-8% of my nest egg in gold. Awhile back gold was near US$2000 and my holdings were nearing 9%, so I sold some; now it’s under 5% and I’m buying again. Jim Rogers recently said he expects gold to drop as far as US$900 before what he calls the “mystics” are shaken out of the market, and it’ll start to go back up again.
If that happens, I’ll likely buy more.

Marc Faber has been both right and wrong in the past and he’ll likely be both right and wrong in the future. Selling bonds hasn’t been such a bad 2013 idea; Faber was early, but right. Especially owning junk bonds doesn’t look like such a good idea going forward.

Garth says, “However, with each day and month that passes since 2008, overall risk does not augment, it diminishes.”
One “risk” I hope comes to pass is more tourism this summer from our southern neighbors as the CAD is now US$0.95 and dropping as the US dollar rallies.

#18 Donald Trump on 07.07.13 at 8:05 pm

11 Old Man on 07.07.13 at 7:49 pm

My total concentration was the love of music, and hosting a pint to the lassies about,

==================================

OK …..so you were at a dog show with a DJ……..so ?

#19 Gg on 07.07.13 at 8:22 pm

Fed zero rates. UK confirmed zero rates. Euro double confirmed zero rates. Ummm … Nice recovery.

Umm. Where did I mention Europe? — Garth

#20 Keith in Calgary on 07.07.13 at 8:22 pm

If thing are sooo much better in the US then they should have no problem whatsoever stopping all QE cash printing immediately.

ROTFLMAO !!!!

The point is to taper. Which will start in a few months. — Garth

#21 Dean Mason on 07.07.13 at 8:27 pm

People want to make easy money.They thought buying a house 30 years ago for $150,000 would be worth $2,000,000 today.They thought we don’t need to save and make investments in RRSP’s,TFSA’s,stocks,bonds,GIC’s,MBS,ETF’s,REIT’s etc.

They will just sell their primary residence capital gains tax free and live on easy street.They don’t need discipline of saving say $2,000,$3,000 a month in TFSA’s,RRSP’s and trying to achieve a 4.50%-5.50% rate of return over 25-30 years.

If bond yields normalize ,5.00% to 6.00% rate of return.If life was that easy everyone would have $1,000,000,$2,000,000 etc.A 5.50% rate of return with $11,000 TFSA’s,$15,500 RRSP’s invested for 30 years would amount to $2,025,115.

#22 Gg on 07.07.13 at 8:28 pm

Maybe you think that when central banks stop their spending, markets will crash. Based on what?
……….
Based on the fact the fed had to back peddle like hell last week to say they were not going to end QE anytime soon. LoL. If not the market was going into full melt down. LOL.

An overall decline of 5.8% is a ‘meltdown’? You need to get out more. — Garth

#23 Fisc on 07.07.13 at 8:36 pm

http://nationalforex.com/2013/07/06/pimco-in-serious-trouble-as-investors-prefer-us-stocks-over-bonds-july-6-2013/

#24 Mark W on 07.07.13 at 8:39 pm

http://www.theglobeandmail.com/report-on-business/vancouvers-housing-market/article13054701/?from=13054729

In Vancouver ….

“Oh, East is East and West is West, and never the twain shall meet”

#25 Vangrrl on 07.07.13 at 8:44 pm

Looking forward to your post re: females. I have had a couple of male friends show surprise when I brought up the discussion of investing. I turned one of them on to your site! I have a couple of very money savvy female friends but I think a lot of women wait until it’s too late and/or get distracted by the piles of other crap they think they need to spend money on. I remember reading a stat years ago on the number of single/widowed elderly women in Canada vs men and it was a shocking difference. Fact is many of us will be alone (but not necessarily lonely :) in old age and the best we can do is ensure financial independence.

#26 Victor V on 07.07.13 at 8:55 pm

PRICE DROP #2 – 125 Macpherson Avenue – SUMMERHILL

http://themashcanada.blogspot.ca/2013/07/price-drop-2-125-macpherson-avenue.html

This 2+1 bedroom, 4 bathroom house on an 18.75 x 120 foot lot was first listed in March.

It looks small from the front but it is actually a good sized house (though only 2 bedrooms) with an addition with a wall of windows in the back.

But though it is a great house, it was listed at $2,195,000.

Which was kind of ridiculous especially considering that a 2 bedroom semi at 218 Cottingham Avenue just on the other side of Avenue Road sold for $1,490,000 in June.

So, I wasn’t surprised when this house saw a price drop a month later to $2,095,000.

I mentioned in my first post that I could see someone paying $1,655,000 for this house…maybe even $1,750,000.

But NOT $2.2 or even $2.1.

And the price was been dropped again….

To $1,995,000

Uhhhhm………..over a month ago!!!

Soooo……….we will probably see another price drop soon.

#27 Nemesis on 07.07.13 at 8:56 pm

“We’re all gonna die!” – HonGT

Oddly, that’s exactly what we used to say to each other in MockHorror on that LovableOlde Rustbucket DDE-261 we called home – everytime they scheduled a live fire simulated anti-ALCM/SLCM exercise and we put the 3″/70 and 3″/50 into 80 rounds per barrel per minute mode [which would invariably exhaust the ready use magazines in seconds]…

As it happens, AuldPol… We were right EveryTime.

Did I also tell you that we went to sea with empty torpedo tubes?

Never mind all that. As regards the ineffable GlobalMacro…

Un/Under-Employment is now a LeadingIncator. Not lagging.

Food for thought.

#28 Mortgage Man on 07.07.13 at 8:57 pm

In early 09 the 5 year discounted rate was 3.65%. @ 35 years thats $420 per $100k borrowed. Today its 3.39 @ 25 years thats $493 per $100k. On a $500k mortgage that and extra $263 or a loss of $62k purchasing power.

The last time they reduced it from 35years to 30 years it had NO real effect because the 5 year discount rate decreased .355 to .5%. It resulted in the same carrying cost -2.99% @ 30 years is $420 per $100k borrowed. No change from 2009.

The only change is now you have two household earners deciding to put an extra 15% of their pay towards their mortgage. From my anecdotal notes couples are willing to have less disposable income. No more 35% of pay to towards a home, its 50-60%.

#29 Ralph Cramdown on 07.07.13 at 9:03 pm

Capsule reviews of Little Books, or, benefit from my cottage reading.

The Little Book of Bull Moves, by Peter Schiff — Published mid 2008, updated 2010. Schiff’s a good read but, predictably, has been right about some things and wrong about a lot. Advises you to get your assets out of dollars, out of the US, and to think about getting your ass out of the US.

The Little Book of Common Sense Investing, by John Bogle — Buy broad market index funds with the lowest fees you can find, and wait. This outperforms active management after fees and is likely to outperform any other strategy you might have.

The Little Book of Economics, by Greg Ip — Makes a great intro or refresher for macroeconomics, i.e. all those economic numbers that keep getting breathlessly reported. If you think the government is lying about them, at least you’ll understand exactly what the government is lying about. One of the best in the series, for me.

The Little Book of Emerging Markets, by Mark Mobius — It might seem odd to read a whole book about how, when and why to invest in emerging markets instead of buying an index fund for 5-10% of your portfolio and checking the ‘done’ box, but mark writes a great intro for those who want to spend a little more time on it, or at least mentally track a few of the bigger EM economies rather than just grouping the whole mess into ‘other.’

The Little Book of Market Myths, by Ken Fisher — Fisher is a great writer, and this book is no exception. He tells us that things we thought we knew ain’t always (or sometimes ever) so, and reminds us of the things we sometimes forget.

The Little Book of Trading, by Michael Covel — Covering trend following strategies, primarily in futures trading, this book isn’t so much a how-to as a they-did-and-you-can-too, in the manner of Market Wizards, but with less content. Here’s the six minute crash course: http://www.youtube.com/watch?v=LiE1VgWdcQM

The Little Book of Real Estate Investing in Canada, by Don Campbell — Want to know how Don met his wife? It’s in the book. Want to know some of his favourite bands and music, where he’s lived, his schooling, early jobs and other trivia? All in the book. Want to know how to successfully invest in real estate? Join REIN, you cheap S.O.B., and he’ll tell you all about it! There are some good tips in the book, but they could fit into a pamphlet. At least he stresses that properties should be cash flow positive from day one. There’s a bonus appendix of comments from quotes from RE investors as to why it’s such a good investment. The overwhelming majority just express fear and loathing toward the stock and bond markets.

The Little Book of Valuation, by Aswath Damodaran — Best of the lot for me, and I’ll be buying his bigger stuff. How to value companies from their balance sheets, income and cash flow statements, and comparisons with their peers. Covers early- and late-stage growth companies, mature, declining and distressed companies… Packs a lot of great concepts into 230 small pages.

The Little Book of Value Investing, by Christopher Browne — Good reminders to always buy stocks that are on sale, and how to determine whether they are. This book is no replacement for ‘Security Analysis’ but it doesn’t try to be, and how many people will plow all the way through that, anyway? A good read.

The USA Trilogy, by John Dos Passos — Hey, all work and no play at the cottage? I don’t think so!

P.S. Garth: I didn’t see you in New Liskeard last weekend, not that I looked all that hard.

#30 Realist on 07.07.13 at 9:04 pm

The gold bug topic is mentioned a lot on the comments and in this forum. Have to realize many commodities especially in TSX related stocks (juniors to seniors/blue chip) are in challenging times at the moment most are at all time lows i.e. 5/10/15 year lows. In the investment community the time frame of 1998-2001 was usually referred to as the nuclear winter for resources, where commodity prices were at very low levels. The prices for copper approx. 1 dollar vs 3 ish presently, oil 10-15 dollars versus 100 ish presently, gold approx. 300 vs 1200 ish presently, uranium less than 10 dollars a pound vs 40 ish presently. So in relative terms most of the commodities are performing similar at this time. Yes, all the commodities including gold could go back to the 2000 time frame price levels – but if gold goes to 300 will oil go back to 15 dollars and copper at .60 cents. Or will they trade separately in comparison. Have to realize when the prices get to too low of a level mines/mills will shut down as companies will not operate at a continual loss. I have vast experience in the forest industry and many forestry mills were shut down right across Canada 2007-2009. Also, only one new mill was built in all of Canada I believe in 2010/11. That being said, gold stocks perform the best in a strong economy. Look at all the majority of gold stocks on the TSX and overall the best performance was 2003-2007. The Canadian economy was firing on all 8 cylinders during this time frame. Gold stocks in my opinion were poor performers during the fallout of the financial crisis considering the price of gold. Also, I don’t know how there can be a gold bubble as physical gold is owned by very few people unlike a house which is owned by 70 percent plus in Canada. I’m a realist and not a gold bug but pointing out the facts. When Canada plus world economy begins to rock again and it will I’m guessing gold will follow suit not in the short term but probably a few years later. Just my 2 cents.

#31 espressobob on 07.07.13 at 9:13 pm

Gold? ‘Au’ on the periodic table. Nineteen times heavier than water. And do the moons eratic pull on earths elements gravitationaly speaking one might conclude this metals demise.

#32 Basement Dweller on 07.07.13 at 9:25 pm

Please stop with the gold debate!! Who cares, this is a housing blog.

The commodity cycle is down its not to say that there won’t be another run up in 5 years but enough already.
Your losing this battle like stocks were losing in 09.
Come back in 5 years.

#33 Mr Happy!! on 07.07.13 at 9:29 pm

“#16 peter on 07.07.13 at 8:02 pm
Marc Faber studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. degree in Economics”

Big deal…. I’m a high school drop out and made my first million at 30, the second by forty and doubled that again by 50 and now am pleasantly retired. Having a fancy degree and being wrong just makes you stupid!

#34 y&d on 07.07.13 at 9:31 pm

Speaking of gold.

I am a newbie to investing and keep seeing this magic number of 5% – that you should have 5% of your portfolio in gold as insurance/protection.

It seems like a lot to have wrapped up in one commodity that seems to do nothing for decades and then run-ups at some random point.

Is the 5% old thinking?

#35 CheeseWeez on 07.07.13 at 9:39 pm

some scary looking home sales charts in Toronto! Almost as bad as during the financial crisis!

#36 JohnL on 07.07.13 at 9:46 pm

perhaps Mr. Poloz can do a little QE as well, $8.5bl per month should do the trick. May it well drive $cdn down as well, would be great for exports and oil companies, oh ya gold as well……in relative terms eh. We’ll just skip over this little rough spot we’re heading into. Think I’ll email my MP to put a little pressure on Stephen, why should we bother waiting for the touble to start?

#37 Bigrider on 07.07.13 at 9:50 pm

Garth , I have noticed a progressive increase in your willingness to predict definitively the direction of asset classes , interest rates fed policy and various increasing minutiae of economic variables.

I think you should cool down a bit as predicting the future for certain is an impossibility. Probable outcomes based on variables at a given time is all any of us really have and not very reliable at all.

You mean like your comments on Vaughan houses? — Garth

#38 raider on 07.07.13 at 9:55 pm

Marc Faber saved my porfolio in 2007-2009. He maybe the most doomerish person on the planet, but putting him in the same camp as the Zerohedge guy is a little bit low. He has a little bias towards gold, but ignoring that his other investment themes are razor sharp.

Mind you in his book that is now in his sixth edition, he firmly reiterates that the golden rule of investing is not to loose money. He also reiterates that the only way to win is being diversified. Unfortunately, those arguments fall mute because they only invite him on Bloomberg when SHTF or something dramatic happens to commodity prices.

Apart from those few more yellow bricks in the basement than you, he is a very nice guy. Quote: “If I were 26 again, I would more likely move to Shanghai, Ho Chi Minh, Yangon or Ulan Bator. I would learn the local language to perfection, live with seven concubines and start a business.”

Here have a look, this book is on my shelf next to Garth’s ones (!), Peter Drucker, Kenichi Ohmae, Alex Doulis, and the timeless series from Alvin Toffler.
http://www.amazon.com/Tomorrows-Gold-Asias-age-discovery/dp/9889894254

#39 s11 on 07.07.13 at 10:00 pm

What are your thoughts on this Garth

They predict still pedal to the metal for QE, even after Bernake leaves.

http://video.cnbc.com/gallery/?video=3000154715&__source=yahoo|headline|quote|video|&par=yahoo

#40 retired Boomer - WI on 07.07.13 at 10:11 pm

Hey Garth-

All I want is a return above inflation of 3-4% on average.
A diversified portfolio has done that, or better over time.

I’m in the “retirement stage” now, not the accumulation stage, of trying to pay off debts, and make sure there were adequate provisions for our later years. Still unsure of that goal as the insurance issue is a moving target here in the states. The rest I think, according to the numbers, we should be ok.

Still, we can’t get giddy stupid and buy what we don’t need because Mr. Jones has one. Hell, never tried to keep up with that flake anyway. He’s bankrupt you know.

Slow and steady does seem top finish the race over the hard runners. They move fast, but get distracted easily.

#41 Deliverator on 07.07.13 at 10:12 pm

Gold will go up for the simple reason that the industry cannot generate a profit at $1250 gold. I sincerely doubt it’s going to $10,000, or whatever Messers Faber and Sprott are saying, but $1,400 or $1,500 is very likely the cards. That’s, what, 10 or 20% from here?

Nothing to get excited about.

#42 Honey I'm home on 07.07.13 at 10:15 pm

#13 Honey I’m home on 07.07.13 at 7:57 pm

Garth what do you think of gold running from $50 to $200 in the mid 70′s, then pulling back to $100 – 50% correction before it ran to $900. I don’t think gold is done just perhaps taking a breathier like any cyclical market. This could be a transition phase leading to the big bull run say 2015 as some analysts like Martin Armstrong think.
Thouthts?

There is no reason to own gold. — Garth
———————————————————-
Well what was the reason to own it when it began it’s run 2001??
Debts are bigger, and if interest rates are rising that will only compound the problem and set up for a systemic failure, no?

#43 Old Man on 07.07.13 at 10:20 pm

#18 Donald Trump – with a name like yours would go into hiding, as you are the dog.

#44 Lies in the condo sales reports for Toronto on 07.07.13 at 10:25 pm

http://img805.imageshack.us/img805/3940/gujs.jpg

#45 Piccaso on 07.07.13 at 10:32 pm

The Truth About the Canadian Housing Market

Good article on Equidia / July 7th

http://campaign.r20.constantcontact.com/render?llr=orkbnrcab&v=001u7_KEUTyvZnPoz_YRqhUm3e9NfRUGn4r8Y0RGGsFHrUv_QlbJrzPou0fJ2gq4bQFWFAxTxl7T12WLwm3XP5v9d2Xw4i-jBXJqH1Z_uqXjzY%3D

#46 Canadian Watchdog on 07.07.13 at 10:33 pm

Will Canadian bond yields rise further? I doubt it. The BoC injected $7.3 billion in reverse repos and special operations last week to make sure of it. "Whatever it takes." — Draghi and the Goldmanites

#47 coastal on 07.07.13 at 10:33 pm

Of course US market won’t crash when the soother is pulled away. Just look at CAT’s chart, the main driver of industrial equipment in the US, it needs to see a vet ASAP.

#48 Rob on 07.07.13 at 10:39 pm

Hey whats with all the Garth bashing, if you dont like what he has to say then dont visit this blog. Besides, it mostly based on Canadian Real Estate and we will soon find out if he is right.

#49 Economy on 07.07.13 at 10:44 pm

I will feel much better once I see the US actually paying off it’s debts. Of the 195K jobs created, most were part time, demonstrated by the jump in the U6 unemployment number which includes ppl who want to work full time. When you look at the number of full time jobs lost, it’s huge. 60% of the jobs from June are low paying service jobs. Also, there was a recent and unprecedented drop in disposable income in the US – far more than even during the great recession – this will likely continue if proper full time jobs are not being created. Virtually zero good jobs were created last months for anyone who cares to actually read the stats instead of headlines.

Part time workers mean more profits for companies. It will come back to hit sales at some point though, as a dropping disposable income is not a good sign. I get it though, the US can only go up, and I’m a hater. Expanding debt, full time jobs losses and low/dropping incomes are irrelevant. Hey – maybe we can reverse the housing crisis here if we just close our eyes hard enough.

#50 Ready for the red pill on 07.07.13 at 10:45 pm

#33 Mr. Happy
Are you willing to be a mentor ?
Looking for a coach who can show me a way out of the rat race.

#51 young & foolish on 07.07.13 at 10:46 pm

The good posts are raining down these days ….

we are fans of your philosophy

#52 John in Mtl on 07.07.13 at 10:47 pm

Uh Oh… the Brits are inflating their housing bubble once more. “…the British Treasury is guaranteeing up to £600,000 of new mortgage debt for anyone who can put up 5 percent of equity into buying a home. …in the confident expectation that a full-scale property boom will begin in 2014.” – Old news but this is supposed to revive the economy and create sustainability? Hehe

Full article with Mark Carney at the helm of BoE: http://blogs.reuters.com/anatole-kaletsky/2013/07/05/who-will-get-credit-for-britains-economic-turnaround/

John

#53 patullo bridge dweller on 07.07.13 at 11:29 pm

I am tired of being a crackhead. I want to be considered as a metal head. Guide me where to buy precious metals e.g gold when it hits below !k an oz. I will keep them secure under my card board box bed. What ever !

#54 Yitzhak Rabin on 07.07.13 at 11:35 pm

Do you have more money than Marc Faber?

#55 Barry Lainof on 07.07.13 at 11:42 pm

“Or, maybe you’re smarter than everyone else.”

Like Kyle Bass, Stanley Druckmiller, most of the CEO’s of US and Canadian companies that are laying off high paid wrinklies to improve their balance sheets,etc.

You’re a good guy, you give some good advice; however let’s be realistic – what your selling is just an opinion. Among many opinions, based on selected statistics to support your view of the economy.

Yes gold has dropped, but it is still higher than in 2009.

Real Estate is much higher than it was in 2009.

Car sales are improving based on BS loans of terms up to 7 years.

House sales are improving in the US due to corporate purchases for the ever contracting rental market, financed by cheap money raised by hedge funds and property managers. Hope all those second home owners don’t have to sell one of their homes to maintain their their retirement or look out below.

Your right though, the world is going back to normal. For centuries there was no “middle class” just the haves and have nots.

The world is going back to normal. For centuries the elite were immune from prosecution for their financial misdeeds and the have nots had to pay for those misdeeds through higher taxes.

Your right, the world is going back to normal. Good luck in knowing what that new normal looks like. Shine that crystal ball Garth.

#56 Steve White on 07.07.13 at 11:48 pm

Great blog post tonight Garth. I wanted to throw 2 interesting numbers out from NYC where we are visting right now. In Upper Manhatten, you can rent a townhouse for $150k a month. In lower Manahtten, there are levels of highrises that sell for $90 million per floor. The reason? High demand and low supply. Toronto and Vancouver are completely the opposite of this city.

#57 saltpony on 07.07.13 at 11:55 pm

Garth, please write about the girls. I dare ya ;)

#58 Basil Fawlty on 07.08.13 at 12:06 am

“There is no reason to own gold. — Garth’

Somebody better tell this to China, as they keep buying by the 100’s of tons and likely do not want to be labelled as “bullion lickers”. After all, they have appearances to keep up.

#59 n1tro on 07.08.13 at 12:14 am

5.8% decline in markets is not a meltdown but then why all the other fed bosses coming out to downplay QE tapering talk?? If everything is going as planned, then let this healthy correction play out and resume upwards. In any rate, last week was a good buying opportunity for anyone brave enough to get in some positions.

#60 souvereigninternational on 07.08.13 at 12:25 am

“We do weird stuff to avoid risk, like selling things after they go down (because they might decline further) or buying them when they get expensive (because everyone else is, so it must be okay).”

Garth, are you talking up PMs? So your advice is to hold on to Gold/Silver/PM stocks?

#61 peter on 07.08.13 at 12:30 am

Marc Faber’s track record over the last decade as recorded by Barron’s annualized over 22%. By the way, Faber also considers Canada’s housing over-priced. Faber’s model portfolio never holds more than 25% in gold in case you think it was a lucky run. Read up on Faber’s work before you throw him under the bus.

#62 Kilby on 07.08.13 at 12:46 am

Good article tonight. One concern is everybody is saying how good auto sales are. If you talk to anybody in the business you will hear from all that they are continually amazed at how people buy cars on credit, trade them in after 4 years and have just covered the interest on the loan but are refinanced for more, all they are concerned with is how much the monthly payment will be…Lots of people with $35,000 cars that owe $49,000 and more in the case of the ones with the “big truck” fetish. Auto sales may be recovering but all this mounting debt is just being kicked down the road and can’t end well..

#63 cbbhappy renter on 07.08.13 at 12:48 am

Garth is right and Max Keiser,Jim Rogers,Peter Schiff,Marc Faber and Rick Santelli are all wrong.Garth has more experience than all these guys put together.

Santelli? The TV guy who helped found the Tea Party? Yes, I am in a different league. — Garth

#64 Ron on 07.08.13 at 1:07 am

The U.S. is recovering but it is a false recovery. QE is basically the largest counterfeiting operation in the history of the world. Short term Garth maybe right but when you live far beyond your means there is eventually a day of reckoning. All levels of government in the U.S. run deficits that work out to approx. $4000 – $5000 per person each year. You can imagine the damage to the US economy is a family of 3 had to pay an additional $12,000 – $15,000 a year in taxes. This is just to keep current and not pay down the accumulated debt. Do you really believe that this ponzu scheme can keep going forever. Like the housing bubble in Canada the US economy will collapse. Sure in the meantime you can make money going long stocks, short bonds and gold. The big problem is when the US finally implodes will you be caught. Human mass psychology is a funny thing as Garth explains over and over. I generally agree with him but I believe he maybe a victim of mass delusion himself. By believing over the longterm that the US is in great shape he is blind to the largest bubble in history…….US national debt and treasury bills.

#65 Ian Jose on 07.08.13 at 1:38 am

US economy in a real recovery? Federal Government has a deficit of 10% of GDP per anum. There is nothing real about the US recovery. When debt levels are growing at the same rate as the economy, we can begin to talk about the recovery being real.

#66 xiyp on 07.08.13 at 2:24 am

Hi Garth,
Just discovered your blog, I think it’s great! Completely onside with renting, preferreds and ETFs. The REITs thing is throwing me, however. Care to walk me through it? Is now really a good time to enter it? How do you see the housing crash influencing commercial real estate?

#67 Ron on 07.08.13 at 3:07 am

Garth: you are the same individual in the late 90’s that wrote several books recommending selling off real estate holdings because of the baby boom generation. I’ve read most of your books and you have usually been very poor in your analysis. However, I have been bearish on real estate for some time as well. I’ve hated gold since 2011 and still hate stocks. I still believe in a fully values US market and will not buy for at least another 2 years. I only see some value in gold stocks but its still too early to buy. You have always been interesting to listen to but seldom have you been right.

Actually my warnings have been consistent: do not put all your eggs in one basket. Real estate ownership is not a financial strategy. You need balance and diversification, as well as lots of liquidity. So far this has worked very well. Sorry to hear you will be waiting for two years to buy any growth assets. What genius made that recommendation? — Garth

#68 Rob aka Captian and Mrs Slow on 07.08.13 at 4:37 am

the basic idea behind rebalancing is that it forces you to buy low and sell high.

For exmaple your 60/40 bonds stocks, one year later your 65/35 so you sell, or add in more capital to bonds to bring it back into line.

Of course the problem is that people are stupid and think that this reblancing is just too easy, What one blogger sell off a bunch of Beating the TSX stocks cause he didn’t like the fundamentals, guess what MFC jumped 60% while his stocks did a dump

Mechanical trading is the only way to go

#69 Michael on 07.08.13 at 7:28 am

great post. Hilarious final paragraph. Good luck to you with that post… tread lightly and have the woman in your life (and her mother) proof-read it first.

#70 Bigrider on 07.08.13 at 7:37 am

#37 -Garth to Bigrider- ” you mean like your comments about Vaughan houses”

Oh boy , reaching there just a little Garth?? Wow if my comment that a house in Richmond hill along the yonge street corridor near hwy7 and 407 is no more vulnerable to a price dip larger than any other in T.O proper than guilty as charged.

You, on the other hand, make so many predictictions on
so many variables it has gotten rather ” omnipotent” of you

#71 Victor V on 07.08.13 at 7:40 am

The Canadian government’s latest moves to prevent a housing bubble may have knocked up to 10 per cent of potential homebuyers out of the market, Bank of Nova Scotia says in a new report that, like others, suggests a soft landing for the industry.

http://www.theglobeandmail.com/report-on-business/top-business-stories/rule-changes-may-have-knocked-10-of-homebuyers-out-of-market/article13059954/

#72 pbrasseur on 07.08.13 at 7:50 am

@ Ian Jose (#66)

“US economy in a real recovery? Federal Government has a deficit of 10% of GDP per anum.”

Check tour facts!

10.1% was the 2009 peak, US deficit has been shrinking since, on track for 4% this year

http://cbo.gov/publication/44172

#73 craig on 07.08.13 at 7:50 am

21 Dean Mason on 07.07.13 at 8:27 pm

Dumbest post I’ve read here in a long time.

Congrats

#74 Bigrider on 07.08.13 at 7:55 am

# 68 shoulda been – excellent comment and a concise response .

Let’s put all our crystal balls away along with the oujji board

#75 T.O. Bubble Boy on 07.08.13 at 8:01 am

Is there a reason to have a Gold Credit Card? How about being Star Alliance Gold? (at least you can board the plane first)

#76 B on 07.08.13 at 8:01 am

Young person here with a few beans to invest – is it possible get an ETF with US exposure into my TFSA? I don’t want to get whacked with a foreign withholding tax on dividends… Thanks very much!

#77 pbrasseur on 07.08.13 at 8:07 am

Garth is right on real estate, right on the US economy.

On investment you could do worse than to follow him.

But you could also do much better.

I know I did. And I own no zero bonds, not much cash and 100% individual stocks, mostly in companies listed in US markets.

Thing is, you want to invest in assets which intrinsic value grows, only great businesses can provide that. Anything else is speculation.

Most people are well-served by owning assets which are more stable, and provide routine income, in addition to having a growth component in their portfolios. Balance is vital to defeating volatility. — Garth

#78 I am in C on 07.08.13 at 9:03 am

I was visiting my parent’s cottage on the norht shore of PEI. More for sale signs in the development this summer than I have seen in the last 30 years combined.

#79 Mr Happy!! on 07.08.13 at 9:04 am

“#50 Ready for the red pill on 07.07.13 at 10:45 pm
#33 Mr. Happy
Are you willing to be a mentor ?
Looking for a coach who can show me a way out of the rat race.”

Sure….but nobody ever listens. How did I do it? Slow and steady, one dollar at a time. Lived WELL within our means and never tried to keep up with the Jones’. My wife asked me once, “all our neighbours drive BMW’s and Mercedes, why do I drive a Toyota?” Since I love that woman dearly, I broke my rule for the first time when I retired and bought her a brand new X5. Me? I still drive an early 90’s Acura.

The golden rules: basically is what Garth is telling you. Personally, I don’t know why he bothers as from personal experience I know that 99% will not listen…

#80 Steven on 07.08.13 at 9:05 am

Garth the market price of the precious metals has nothing to do with any kind of a math based exchange rate. It is all about the opinions and fantasies held by people like you. In other words it is a totally manipulated market and price discovery is a politically correct fiction that benefits neither owners or producers. The elitists,bankers, politicians and their fans for are out of touch!

Excellent reasons to own none. — Garth

#81 TnT on 07.08.13 at 9:26 am

Chinese buyers flood U.S. housing market

http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html?hpt=hp_t2

#82 Van on 07.08.13 at 9:33 am

#11 Vincent – I’d say you’re ahead because you’re reading this blog…maybe your UD acquaintances should do the same…

#83 Basil Fawlty on 07.08.13 at 9:35 am

Garth you recommended 10-15% in gold a few years ago. What has changed?

It’s not 2008. Stop living in a time warp. — Garth

#84 M. Winters on 07.08.13 at 9:35 am

>>US stocks have gained 48% and a balanced portfolio returned over 8% a year

Um..because of low interest rates, not because the economy is getting better.

You really don’t understand basic economics, do you?

The evidence of economic growth is irrefutable, as is corporate profitability. In any case, people with balanced portfolios are making money. People with gold and GICs are not. I understand that quite well. — Garth

#85 larry on 07.08.13 at 9:38 am

For Garth and all motorcycle riders:
Why did know what to do with their money

The developer of Nintendo’s Brain Training software, Ryuta Kawashima, conducted an experiment on Japanese men in their 40s and 50s who had motorcycle licenses but hadn’t ridden in years. The men were split into two groups–one riding a motorcycle to work every day and one not. The motorcycle riders showed improved cognitive functioning and they also indicated that they made fewer mistakes at work and felt happier.

#86 AK on 07.08.13 at 9:38 am

Chinese buyers bring big money to U.S. housing market

#87 AK on 07.08.13 at 10:00 am

I realize that 90% of the posters on this blog are gloomy as hell, but it’s time to pay attention to Goldman’s latest report.

Yes, Europe. Believe it or not, the recovery is underway.

#88 HogtownIndebted on 07.08.13 at 10:18 am

A View from the Streets of Toronto:

This weekend in Toronto was another one with those street festivals all over town, which actually make for a more fun summer, especially for kids with all the clowns, rides, etc…

So I took the toddlers for our now annual visit to one street festival nearby (beside the C2 and C3 MLS neighbourhoods, supposedly ‘untouchable’ by any RE
melt)

Wow. What a difference a year makes. The street (Dufferin) was virtually deserted both Saturday and Sunday, compared to last year. (This was well before the rains hit Sunday, too)

All the kiddie rides, about ten, were empty and stationary at 12 noon. Not a kid on them. The rides cost about $4.50 a shot for each kid through ticket purchase. Outrageously high. An attendant told me that the merchants along the street were no longer able to subsidize the kiddie rides, their incomes were all down too much this year. So it was user pay, and everyone voted with their feet and said no.

Lots of food in stalls that were packed full, but hardly any buyers. The usual realtor booths with their free balloons and business cards? Gone. Same for the print media booths and subscription hucksters. Nowhere to be found, no business promotions, no freebies, nada, zilch.

Last year the road was packed, and you had to carefully navigate across the streetcar tracks in the crowds. This year, you’re left wondering if they could justify shutting down the TTC to do this again next year.

People staying away in droves from an event like this just metres from their $800,000 family homes? Something is wrong with this picture. People are hurting. The money has dried up.

#89 HogtownIndebted on 07.08.13 at 10:22 am

FYI – my mistake, the lonely street festival was on St Clair W. (at Dufferin)

#90 fancy_pants on 07.08.13 at 10:22 am

#48 Rob on 07.07.13 at 10:39 pm
re Garth: we will soon find out if he is right.

you think so?
don’t hold your breath. Garth has been warning of the demise of RE for 4+ years now. Should of happened 3 years ago but his buddies on the hill pulled some levers.

At least be accurate. I have warned against a correction in housing prices, which will impact those with the bulk of their net worth in a single asset. That is a wise and prudent message. Hope you listened, and acted. — Garth

#91 pbrasseur on 07.08.13 at 10:25 am

“Balance is vital to defeating volatility. — Garth”

Sure but is volatility the true enemy? As you put it yourself the real problem is to run out of money. The best way to avoid that is to make the best investments possible.

Volatility is the price to pay for getting to own great companies such as IBM, Disney or 3M.

And in the long run volatility is meaningless. Investors win nothing by avoiding short term volatility in the stock market, their losses are merely on paper and they still receive their dividends. All balancing does is make receiving monthly statement less traumatic during corrections, in exchange for lowers returns and more transaction and exchange fees.

To “fix” volatility what you need is not balancing, it’s education.

Those who gain most by fighting volatility are banks and other companies which sell trading services.

You may have nerves of steel. Most people do not. Volatility most decidedly is their enemy. — Garth

#92 Evangeline on 07.08.13 at 10:28 am

#49
((When you look at the number of full time jobs lost, it’s huge.))

Some are explaining that as an unintended consequence of the affordable care act (Obamacare). The rules say that employers with over 50 full time employees have to contribute to employee health care costs, so to get around it, many employers have reduced working hours so that their number of fulltime employees is less than 50. Some analysts are saying that explains why the jobs reports shows an increase in part times jobs and decrease in full time jobs. (Obama has just extended the deadline for employers to comply 50-full-time-employee rule until after 2014.)

No evidence this is the case. Stop reading Tea Party websites. — Garth

#93 The American on 07.08.13 at 10:29 am

At #66: Ian Jose, now THAT is some hilarious sh*t! First, you are mistaken that U.S. has a 10% defecit vs. GDP per annum. That number is closer to 4% AND SHRINKING. Nice try, though. Once again, you’re just another Canadian who doesn’t quite “get it.” Sure the numbes *sound* high, but when compared with the U.S. economy and GDP, its NOTHING. Canada, on the other hand, should start looking at it’s own backyard. Do you realize how much worse off this number is for Canada on a percentage basis? If not, I encourage you to do some research and get back with me :-)

#94 Evangeline on 07.08.13 at 10:42 am

P. Brasseur

“All balancing does is make receiving monthly statement less traumatic during corrections, in exchange for lowers returns and more transaction and exchange fees.”

your comment interests me because I’m currently having an argument with someone in real life over whether or not to balance a portfolio. He doesn’t like the idea of rebalancing and I do. The statistics that I’ve seen indicate that rebalancing after some number of years results in quite a bit more money in pocket, not less. But imo there are other positive reasons for rebalancing. There is an old truism that a bird in hand it worth two in the bush, and that seems like wisdom to me. So while the profit is there, take some. Plus the natural cycles of agriculture require harvesting. Not only that, but I think that many mistakes in a portfolio can be corrected and losses minimized through rebalancing. For example, people with gold stocks in 2011 would have gathered their profits when gold was up, and even if they had retained some gold shares, their downside would now be much less than if they’d not sold some off in the rebalancing process.

Greedy people do not rebalance. We know what happens to them. — Garth

#95 bigrider on 07.08.13 at 10:50 am

#91 Hogtownindebted

Well, what you have extrapolated from your observations could be correct although many other answers to the apparent lack of activity at the street fair could also be plausible.

Let me offer one a simpler and more direct one.

Perhaps it was the bad weather..LOL

#96 Jenn on 07.08.13 at 10:54 am

Hi Garth

My daughter is 17 and works part-time. She manages to save about 1,000.00 a month. She asked me the other day about putting her money into an investment vehicle. I am really afraid to give her advice because I don’t want to be responsible for any negative impact on her finances. Do you suggest the same strategy for her age group? Is there some reading material that would be beneficial for her understand?

Thanks.
Mom

#97 David Jensen on 07.08.13 at 10:55 am

http://www.tradingeconomics.com/japan/interest-rate

Japan Benchmark Interest rates

Cut to 0.5% in 1996. Fell to 0% to 1999, rose once back up to 0.5% in early 2008, back to 0% for the last three years.

Almost 20 years of zero, after a property crash, bad demographics and huge public debt built up.

Welcome to Canada’s future.

Anyone who thinks short term rates are going to rise is out to lunch.

Canada owes, about $600 billion. Another $650 billion odd owed by the provinces.

We can’t afford to be paying 6% interest on all that public debt without ALL govt. spending being chopped by 50%.

Neither can Japan. Or Europe. Or the USA.

Garth, you are an unrealistic monetary Hawk.

Its a Dove’s world.

Of course rates will normalize here, as they will in the US. — Garth

#98 AK on 07.08.13 at 10:56 am

#65 Ron on 07.08.13 at 1:07 am
“The U.S. is recovering but it is a false recovery. ”
——————————————————————–
“U.S. auto sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward’s AutoInfoBank.

Analysts expect total sales of around 15.5 million cars and trucks in 2013, which would be 1 million more than in 2012. New cars and trucks sold at an annualized rate of 15.96 million in June, the fastest monthly pace since December 2007.”

Read More

#99 Sebee on 07.08.13 at 11:01 am

HAM attacks US! :-)

http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html?iid=HP_LN

Yellow helicopters – here we come! PUMP IT!

#100 JimH on 07.08.13 at 11:04 am

By any measure, the US economy has moved out of recession and is slowly expanding in the face of global headwinds. US debt as a percentage of GDP is (slowly) shrinking. The US$ has surprised just about everyone with its resiliency and strength. The US markets have yielded tidy returns YTD, and with the striking exception of mining stocks, have demonstrated good market breadth.

These are facts. They are facts that have resulted in clearly defined, obvious, profit-making trends. They are not vague convictions, nor are they simply high hopes.

Some may remain locked into the conviction that all of these facts are illusions, and as a result have kept out of all investments. They have simply missed out on a good opportunity to make profits. The markets will no doubt present them with similar opportunities in the future.

Some may remain locked into the conviction that all of these facts are illusions, and as a result have made some very poor investment decisions; shorting expanding sectors and markets that are in an uptrend or doubling down on their exposure to precious metals as their value declined. Those folks have not just lost out on an opportunity to profit from the trends of the markets; they have seen their capital seriously eroded, and if margin is involved, in some cases destroyed.

It is easy to make up for lost opportunities as they will come again. Replacing lost capital is another matter and is an uphill battle, as we all have learned from bitter experience!

In the end, it really doesn’t matter who is ‘right’ and who is ‘wrong’ in many of the debates going on here.

The trend can be both friend and enemy. It depends on whether your investment decisions are governed only by your fondest convictions, biases and ideology, or your investment decisions are driven by a disciplined study of fundamental and technical facts.

The markets don’t give a rat’s ass about our opinions!

Price is the only thing that pays.

#101 Mike on 07.08.13 at 11:05 am

Garth,

Thank you for taking time to answer my questions and the daily articles; it seems people who visit this blog are becoming more unappreciative of the free assistance you provide. I have another question; If you own an ETF that has mostly capital gains and few dividends, would there be a capital gains tax bill every year due to turnover, or would it be like holding any other stock, with capital gains being triggered when sold?

Gains that are not crystallized are untaxed. — Garth

#102 Dom on 07.08.13 at 11:42 am

Sockeyemoon on 07.07.13 at 7:20 pm Travelling though London – sure its the peak days of summer but almost every business is full. People from all over the world, many Spanish and Italians, seem to be happy spending money on the Thames. Where’s the Euro crisis… Not here, at least not now.
———————————————————-

Goto Italy, Spain or Greece to name a few where the people are hurting bad. Yes people with cash will travel and spend money but that is not a reality for everyone.

#103 David Jensen on 07.08.13 at 11:59 am

“Of course rates will normalize here, as they will in the US. — Garth”

Sure Garth,

Rates will normalize, about the time public debt levels normalize back to historic levels.

And oil will normalize back to $18 a barrel, and movies will normalize back to 50 cents a picture.

Believe what you wish. Reap the consequences. — Garth

#104 Dom on 07.08.13 at 12:00 pm

HogtownIndebted on 07.08.13 at 10:18 am A View from the Streets of Toronto:

This weekend in Toronto was another one with those street festivals all over town, which actually make for a more fun summer, especially for kids with all the clowns, rides, etc…

So I took the toddlers for our now annual visit to one street festival nearby (beside the C2 and C3 MLS neighbourhoods, supposedly ‘untouchable’ by any RE
melt)

Wow. What a difference a year makes. The street (Dufferin) was virtually deserted both Saturday and Sunday, compared to last year. (This was well before the rains hit Sunday, too)

All the kiddie rides, about ten, were empty and stationary at 12 noon. Not a kid on them. The rides cost about $4.50 a shot for each kid through ticket purchase. Outrageously high. An attendant told me that the merchants along the street were no longer able to subsidize the kiddie rides, their incomes were all down too much this year. So it was user pay, and everyone voted with their feet and said no.

Lots of food in stalls that were packed full, but hardly any buyers. The usual realtor booths with their free balloons and business cards? Gone. Same for the print media booths and subscription hucksters. Nowhere to be found, no business promotions, no freebies, nada, zilch.

Last year the road was packed, and you had to carefully navigate across the streetcar tracks in the crowds. This year, you’re left wondering if they could justify shutting down the TTC to do this again next year.

People staying away in droves from an event like this just metres from their $800,000 family homes? Something is wrong with this picture. People are hurting. The money has dried up.
———————————————————-

I was there Saturday and surprised how the festival was more or less empty compared to last year. Those vendors didn’t make very much money. People must be financially hurting as I noticed businesses are not busy like last year. Went out Saturday night to the same popular restaurant for SIL B-day like we’ve done for the past few years and we were all wondering why is was so empty when it’s always full. You see it at malls where the parking lot is full but people are walking around with a drink in their hands not spending money. The food court is busy but the stores are empty.

#105 pbrasseur on 07.08.13 at 12:08 pm

Evangeline

Rebalancing between asset types is good if you speculate, which is what most “investors” do.

If you buy great businesses not attached to any cyclical asset (such as commodities) you don’t have to. If your companies grow by 10% a year then their prices (this could take time) will eventually follow. It is really that simple.

It does require patience and some nerve, I’ll grant you that. (going through the financial crisis was very difficult for me, I admit it, but I stuck to my strategy and the payoff is finally here and it’s amazing)

The important thing is I repeat to buy asset which intrinsics value grows, not the case for real estate, commodities.

It’s not greed, just common sense. But most people treat the stock market as a casino, they deserve to lose (and they do) and in any case they are better of rebalancing.

#106 Canadian Watchdog on 07.08.13 at 12:22 pm

#94 pbrasseur

All balancing does is make receiving monthly statement less traumatic during corrections, in exchange for lowers returns and more transaction and exchange fees.

At least someone on this blog gets it.

More correctly, two of you don’t. For almost all investors, no rebalancing means emotional decisions and losses. — Garth

#107 retired Boomer - WI on 07.08.13 at 12:28 pm

THE AMERICAN RECOVERY……

Some posters on here think the US recovery is “fake” or “Phony” who am I to say? Yes, dollars are fiat money so are Loonies, Pounds, and the Euro. So what? They represent stores of value.

In America we have a more of a TAX problem, than a spending problem by or Federal Government.

The top marginal tax rate is nearly 41% below it’s 100 year average. We did not stop there. Our Capital gains tax rate at the current 15% is a mere 44% of it’s 100 year average of 29.6% Top marginal dividend rate of 25% is nearly one QUARTER of the 91 year average.

We are attempting to have our $16 TRILLION dollar economy operate on essentially 50% of the 100 year average tax rate.

Are we broke? Indeed we are. And we have clearly chosen to be.

We have elected leaders who have promised much, yet delivered little. We have increased our National Debt from $907 Billion in 1980 to $3 Trillion in 1990, to $5 Trillion in 2000, to $10 2008, and now $16 Trillion and growing…

Recovery? Well, I CAN do math. To stop the red ink one needs to raise revenue, AND decrease spending. Therein lies the biggest problem for any elected public servant.

How does one kick your ass, rob your wallet, make you happy, and still get reelected? No Answer there, except to ignore the real issues.

We are on the cusp of having the largest generation reach retirement, financially ill prepared and not knowing it, or maybe not even caring.

Costa Rica seems like a very inviting place right about now…

#108 NIAGARA FALLS ROCKS on 07.08.13 at 12:32 pm

Garth, even people in Niagara Falls started believe that real estate is infallible! When you will finally yield to the facts?

#109 Steven on 07.08.13 at 12:36 pm

Now for an optimistic report from someone who does not hate gold and silver.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/7/6_Dr._Stephen_Leeb_files/Stephen%20Leeb%207%36%3A2013.mp3

#110 bigrider on 07.08.13 at 1:00 pm

#111- Naigarafalls rocks.

Niagara falls ?? Good grief. RE prices have gone nowhere over there for 30 years now a small bump up and it rocks??

I guess the derelicts over there are taking advantage of easy money for anyone from the banks.

Why does it rock? The Cheesy tourist attractions or is it the Sundowner, which actually does rock..LOL

#111 Jimshuswap on 07.08.13 at 1:01 pm

The American economic renaissance…

There’s a reason they call it the American Dream, because you have to be asleep to believe it.

#112 Jimshuswap on 07.08.13 at 1:05 pm

Garth, any advisor worth any salt has a plan B.

In the event your perspective, which is based on sound monetary policy, turns sour, what is your plan B?

What risks to your perspective are there, what are you watching?

A balanced portfolio with lots of diversity and non-correlated assets has a built-in Plan B. — Garth

#113 pbrasseur on 07.08.13 at 1:06 pm

I guess this is my day to contradict Garth :-)

In terms of investing I believe in mainly two things: 1) Mind the intrinsic value and 2) Buy quality.

That second point contradicts Garth other rule (beside rebalancing), that is his “don’t buy individual stocks” rule, in fact you should buy mostly individual stocks and avoid ETFs or worse mutual funds.

That’s the only way to ensure you own quality companies and exclude bad ones.

Index ETFs obviously don’t make the difference and most mutual funds don’t either and on top will likely charge you outrageous fees for owning crap. For example a big Canadian equity fund will most likely own some Bombardier and all the banks, not to mention gold related stocks (the TSX index in extremely heavy towards commodity and metal stocks, any non ressource related fund can’t avoid the other big players)

And in the end quality is all that matters. If you (or the person you hire) can put your hands on a group of established companies (world wide but most are in the US) which grow 15% a year then this is likely what you’ll make providing you stick with you strategy long enough.

That’s how you invest prudently in the stock market, to be the owner of great businesses, any other way is speculating.

#114 Squatter on 07.08.13 at 1:18 pm

#108 – pbrasseur:
Rebalancing between asset types is good if you speculate, which is what most “investors” do.

If you buy great businesses not attached to any cyclical asset (such as commodities) you don’t have to.
——————————————–
Let’s say your portfolio has only great businesses (as per your evaluation)
Let’s say stocks A and B in your portfolio have the following changes in 2013:
stock A: + 40%
stock B: – 40%
Doesn’t it make sense to you to sell at least some of stock A and buy some of stock B at the end of the year?

#115 craig on 07.08.13 at 1:48 pm

DELETED

#116 Ray Skunk on 07.08.13 at 2:18 pm

#79
Young person here with a few beans to invest – is it possible get an ETF with US exposure into my TFSA? I don’t want to get whacked with a foreign withholding tax on dividends… Thanks very much!
—————————————————

ZDY

#117 Toop on 07.08.13 at 2:18 pm

Modern portfolio theory died since about 2011.

The correlations, VIX, risk, monetary reality, etc. don’t support it anymore.

Throwaway comment. Human nature has not changed. — Garth

#118 Medic on 07.08.13 at 2:21 pm

I think this has been covered before but can anybody answer the following question(s):
1) When the term (say, 5 year) of a collateral mortgage expires, can the bank use the punitive transfer fees to offer you a much greater-than-market rate for your next term? And tell you to take it or leave it.
2) If the answer is yes, what are the chances that they would do that, assuming you have always made the payments on time?
I understand there are other issues with collateral mortgages, but the above issue is the one I am most interested in.
Thanks.

#119 pbrasseur on 07.08.13 at 2:55 pm

#Squatter

“Doesn’t it make sense to you to sell at least some of stock A and buy some of stock B at the end of the year?”

Sure if you think B is a great business selling at bargain price.

Suggested read: François Rochon in The Gazette.

#120 Subversive on 07.08.13 at 3:20 pm

The best advice is to understand what your life needs are – retirement, buying a house, your kids’ education – and then work backwards to satisfy them. This is not a contest in which it’s you versus the economy or some idiot financial benchmark. Money is simply a tool for making the most of what you cannot buy, borrow, replace or earn. Time.

Best thing ever posted on this blog. Sums up everything.

#121 Unpoovvio on 07.08.13 at 3:21 pm

Let’s say your portfolio has only great businesses (as per your evaluation)
Let’s say stocks A and B in your portfolio have the following changes in 2013:
stock A: + 40%
stock B: – 40%
Doesn’t it make sense to you to sell at least some of stock A and buy some of stock B at the end of the year?
============================

As long as you don’t do it blindly. Stock B’s impairment could continue indefinitely or never recover, so you’d be throwing good money into a black hole.

#122 Unpoovvio on 07.08.13 at 3:28 pm

That second point contradicts Garth other rule (beside rebalancing), that is his “don’t buy individual stocks” rule, in fact you should buy mostly individual stocks and avoid ETFs or worse mutual funds.
===========================

I will tell you personally that I’ve made my money on individual stocks (4-digit % return), but it is easy to do when you’re dealing with a few $1,000 or $10,000. Very difficult to do when you’re talking about hundreds of $1,000s+. What person with a dayjob or even a p/t job can constantly keep track of and research all these individual companies. Not to mention the constant draw to check out the newsflow/ticker.

#123 economictsunami on 07.08.13 at 3:28 pm

GT:

When yo become totally dismissive of ZeroHedge, there is a broad range of economic/ financial contributors you tend to paint with the same brush.

As you well know, getting news and numbers from the MSM, with their vested interests and agendas has been exposed for what it truly is.

I will admit though, ZH’s comment section can get more then a bit bizarre; as can yours.

What alternative economic/ financial sites or experts do you read?…

I read everything. My conclusions are published here daily. — Garth

#124 Old Man on 07.08.13 at 3:33 pm

#116 pbrasseur – I needed a good laugh today, and you gave it to me in spades.

#125 Bargains everywhere on 07.08.13 at 3:40 pm

#109 Canadian Watchdog on 07.08.13 at 12:22 pm

More correctly, two of you don’t. For almost all investors, no rebalancing means emotional decisions and losses. — Garth

The operative words are ‘almost all investors’. I have to agree with Canadian Watchdog and pbrasseur. There are some people who can be dispassionate when it comes to investing and regular rebalancing on a set schedule is not required. I will take profits (or losses) on a stock when I believe it is the right time, not because it is June 30th. There are stocks I’ve only held for a couple of months before selling and a few stocks that I still hold after 15 years. It depends on many factors.

Also, ETFs are not ‘one size fits all’. Sometimes I look at the stocks that make up the ETF and there are companies I don’t like. I would much rather buy a few of the best companies within it rather than the whole basket. It takes research to do this but it is more worthwhile in the long run, otherwise you are owning the weak with the strong. However, I will agree that ETFs are excellent for obtaining foreign market exposure.

Garth, I agree with much of what you say but sometimes you seem to utterly dismiss some of the clearly more sophisticated investors here as if they are idiots. Just because someone doesn’t do it your way doesn’t make him wrong. There are many different ways to make money in the market.

For the average person just starting out, ETFs with regular rebalancing is the right way to go but it’s not necessarily the best way for everyone.

One another note — As a woman, I am looking forward to your comments on female investors. I’m sure I’ll have a few comments of my own in response. : )

This comment: “I will take profits (or losses) on a stock when I believe it is the right time, not because it is June 30th,” shows you do not know what proper rebalancing is. Nothing to do with the calendar. When an asset class becomes overweight, you rebalance to re-establish weightings, selling off the gains and redistributing them among the under-performing assets. This is an excellent path to non-emotional and sustained long-term portfolio progress. Being a woman, this is even more crucial. ;-) — Garth

#126 Squatter on 07.08.13 at 3:59 pm

#116 pbrasseur:

Squatter:
“Doesn’t it make sense to you to sell at least some of stock A and buy some of stock B at the end of the year?”

Sure if you think B is a great business selling at bargain price.
——————————–
It looks like you do re-balancing!
Bonne journée!

#127 say it ain't so on 07.08.13 at 4:13 pm

A balanced portfolio with lots of diversity and non-correlated assets has a built-in Plan B. — Garth
_______________________________________

with precious metals being the most non-correlated to other assets, it’s a must in a diversified portfolio.

look at that beating REITS are taking again today. absolutely no follow through buying.

You misunderstand. A Plan B protects you from the Plan A failures. Like a 40% drop in gold. — Garth

#128 jan on 07.08.13 at 4:41 pm

Breaking news
Government assistance does not apply to secondary homes in flooded Alberta…..HaHa – another nail in the real estate ponzi coffin – feel good to renting

#129 say it ain't so on 07.08.13 at 4:44 pm

You misunderstand. A Plan B protects you from the Plan A failures. Like a 40% drop in gold. — Garth
______________________________________

what was your plan B in 2008, when REITS got murdered, Preferred tanked and Stocks got crushed and credit froze?

In 2008 everything went down and smart people waited. It worked. Fortunately no 2008 is coming again. A rogue asteroid is of more concern. — Garth

#130 Doug in London on 07.08.13 at 4:50 pm

@say it aint so, post #131:
Oh, don’t be such a pessimist about REITs. Yes, they are down again today but not as much as 2 weeks ago when I celebrated St. Jean Baptiste Day (and I’m not even French!) by scooping up CAR.UN at the fire sale price of 21 bucks even. If you don’t have any REITs yet, NOW is the time to scoop them up while they are still on sale. If you already have some because you scooped them up cheap then sit back, relax and let the dividends roll in! Speaking of CAR.UN, did you know they raised the dividend last month? It makes you wonder why the price ever dropped last month in the first place! It seems to me the price should go up, not down, when the dividend increases.

#131 Old Man on 07.08.13 at 4:51 pm

#128 Bargains everywhere – I am calling bs on this all, as lost $100,000 trading with emotion, and crazy type of decisions that involved investing in the dot com bubble, as got hooped in the frenzy of it all to make me some fast money, and crapped out. :(

#132 Philski on 07.08.13 at 4:51 pm

Well the US looks good from far but is far from good. Checkout the true long term employment #s. 46% can only get part time jobs. The US buck is lipstick on a pig. With Europe cratering, bank runs money has to go too the most liquid place. Its all smoke and mirrors. When real estate is viewed once again not a store of wealth or an investment we will be back a depreciating asset then things are back to normal. We are a long way from that but its coming. There only one way for rates to go the next 10-20ys. That takes out the corrupt leverage in everything. HE WHO IS LEVERAGED WILL BE DESTROYED in time. Every uptick reduces your houses value (buying power diminishes) as most don’t own their houses and could even afford a small move up…Cash and maybe Gold will be king. Oh ya in the 30s Depression the US buck moved up big and so did gold…Why, Europe blew up back then too. Its a flight to safety and PMs have no counter party…Will history repeat?!

#133 JUNO on 07.08.13 at 4:58 pm

have you notice almost all the new builds in vancouver east end are now listed under a million.

Also the tear me down which was listed about 750 are now in the low 600. Now that how you can figure whats happening in the market.

#134 Canadian Watchdog on 07.08.13 at 4:59 pm

Or Stock A's overcrowded trade sells-off and rotates back to Stock B, so you'd be throwing overbought assets into an oversold asset. Ummm ya, let me think about that.

US ETP Equity Assets Held by Global Investors (Actual market data)

April: $1.553T__%Δ of Assets 73.5%

June: $1.528T __Net $ -$25.2B__% Change -1.6%__%Δ of Assets 75.1%

Gold ETP Assets Held by Global Investors

April: $105B__%Δ of Assets 5.0%

June: $79B__Net $ -$26bn__% Change -25%__%Δ of Assets 3.9%

Now remember this term I mentioned recently and learn what it means: Negative GOFO

"This inconvenience relates to the higher cost of storing gold relative to cash and gold’s inferior liquidity. On those rare occasions when GOFO has gone negative – for instance October 1999 – banks have temporarily treated gold’s conveniences superior to cash and, as a result, have been willing to pay a premium to own it."

Today must be one of those rare occasions because LBMA's 1M-3M GOFO rate just went negative for the first time since 1999. If this persists and investors pick up on it, oh boy…those all-time record gold shorts will be annihilated like nothing you've ever seen before.

Keep your popcorn ready on the side. This could be historic.

#135 Donald Trump on 07.08.13 at 5:06 pm

#43 Old Man on 07.07.13 at 10:20 pm

#18 Donald Trump – with a name like yours would go into hiding, as you are the dog.
======================================

If you are going to try ” tit- for -tat ” cheap shots, please get a spelling/grammar checker.

#136 Smoking Man on 07.08.13 at 5:17 pm

Bit of a bond rally today..

In other news, big prof from University of Toronto, busted…. Ha, Catherine Wines Right hand man on schooling…

Tonight, behaviour science explained smoking man style, what chics dig…

#137 Devore on 07.08.13 at 5:20 pm

In case Vancouverites are wondering where the HAM and their suitcases of cash went to:

http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/

Nearly 80% of all EB-5 visas (immigrant investor) went to Chinese nationals in 2012, according to the government.

#138 Bargains everywhere on 07.08.13 at 5:25 pm

This comment: “I will take profits (or losses) on a stock when I believe it is the right time, not because it is June 30th,” shows you do not know what proper rebalancing is…. Garth

There you go again. Because it doesn’t fit your definition of rebalancing then I must be incorrect. Many financial planners do rebalancing of a client’s portfolio quarterly, semi-annually or annually. Not sure what your point is. I rebalance when needed.

Of course calendar-balanced rebalancing doesn’t work. Why would it? — Garth

#139 Old Man on 07.08.13 at 5:37 pm

#138 Donald Trump – I need no checkers at my age, so go to Tims, as the women are waiting for you, so open your wallet and spring for a coffee and a donut, and you might get lucky.

#140 espressobob on 07.08.13 at 5:43 pm

Rebalancing is key to consistent growth in ones portfolio. Understanding the concept takes serious study! DIY investing is a lot tougher than most will admit. The homework, the homework.

Spec plays and market timing are pretty much a waste of time and money. Again few will admit it. Some never learn the destructive nature of greed.

It must seem boring sqeezing out a 6 to 7% return each year, but here’s the kicker, that growth over the long haul is exponential! Figure it out!

#141 Mikey the Realtor on 07.08.13 at 5:46 pm

I’m going to change my course a little here and talk about the robmarkets and re-balancing…

I want to see 20%+ yoy gains in order for me to believe that re-balancing works, making 7% a year while re-balancing is no feat considering preferreds were paying 6%.

Paying cap gain taxes and timing the market is another reason why re-balancing sucks. As I always say, buy tangible assets like RE and land, they are the only true investment going, the rest is noise and fakery.

#142 Bargains everywhere on 07.08.13 at 5:50 pm

#135 Old Man on 07.08.13 at 4:51 pm

Several studies seem to indicate that women are generally better investors than men. Typically we are more cautious and not looking for ‘the big score’. Slow and steady wins out over the long term.

I didn’t get involved with the whole tech craze because it didn’t make any sense to me. Yes, I missed the run up on Nortel, but I also missed the crash on the way down. I did almost buy some Bre-X though, but then thought be better of it. My first stocks were bank stocks and I still own them. With increasing dividends over the years I’ve never had any reason to sell them. When they go down in price (like now) I just buy more.

#143 jess on 07.08.13 at 6:10 pm

history for muppets

The Economist has an article in its current edition about the birth of Eurobonds in 1963, which in many respects summarises the Treasure Islands chapter on the subject entitled “Eurodollar: the Bigger Bang.”

Eurobonds: the 50th anniversary of an opaque, tax-evading capital market

http://treasureislands.org/eurobonds-the-50th-anniversary/

#144 Robert on 07.08.13 at 6:16 pm

# 112 Steve. What a joke. you actually post a link to KingWorld News. They have been calling gold a great buy for the last 8 months. Steven Leeb is one of the worst.

#145 Devore on 07.08.13 at 6:19 pm

#80 pbrasseur

Thing is, you want to invest in assets which intrinsic value grows, only great businesses can provide that. Anything else is speculation.

The vast majority of retail investors (and nearly all financial advisers too) do not have the skills or resources to properly analyze dozens of companies (and then do regular followups) in order to invest in them individually.

I wonder how you pick them?

#146 Donald Trump on 07.08.13 at 6:30 pm

#142 Old Man on 07.08.13 at 5:37 pm

#138 Donald Trump – I need no checkers at my age, so go to Tims, as the women are waiting for you, so open your wallet and spring for a coffee and a donut, and you might get lucky.

==================================

Maybe go down drugstore aisle, near adult Depends/enema section…that’s where you’d get lucky

Collin O’scopy is not an Irishman

#147 TurnerNation on 07.08.13 at 6:34 pm

Well if someone is manipulating the weather for devastation in Canada’s largest cities…downtown Toronto is presently shut down – power, transit, flooded.
What was that about Full Specturm Dominance, Owning the Battlefield? Those Powerpoints.

#148 jess on 07.08.13 at 6:36 pm

When Fears and paranoia are reasonable
…remember when some scientists warned people about this water aquifer . They were considered paranoic and leftist.

…as deep aquifer depletes, Waukesha is drawing radium in higher concentrations — sometimes more than 15 parts per million, or three times the U.S. limit.

needs to divert o 9 million (imperial) gallons /day from Lake Michigan.

http://www.thestar.com/news/world/2013/07/08/why_waukeshas_thirst_for_great_lakes_water_is_raising_alarms_on_both_sides_of_the_border.html

#149 Old Man on 07.08.13 at 6:49 pm

#145 Bargains everywhere – in my walk in life have the upmost respect for the women, as most of the money that I ever made in life was with them. The female can smell a con if they have money, and all they want is so simple. They just want the cards put on the table with no bs for a binding of trust, and do what is right for them in a very intelligent and logical way, and if you cross them it will be hell on earth.

#150 bill on 07.08.13 at 7:05 pm

mikey said:
like RE and land?
could you explain the difference?

#151 Canadian Watchdog on 07.08.13 at 7:05 pm

#143 espressobob

It must seem boring sqeezing out a 6 to 7% return each year, but here’s the kicker, that growth over the long haul is exponential! Figure it out!

Indeed. And if your real cost of living was growing by 8-10% annually and you're portfolio returned 6-7% annually, on a long enough timeline, you'd go broke.

#152 Chris L. on 07.08.13 at 7:18 pm

#152 Old Man. Have you seen what some women do on their spare time? I think you’re a bit out of touch with the modern women.

#153 Westcdn on 07.08.13 at 7:19 pm

I found this short video (2 mins after skipping ad) that explains why I like to drink when confronted with so many different financial opinions. (I do not condone excessive consumption)
Your Brain on Drugs: Alcohol – YouTube
I was joking before but maybe there really is a sociopath pill.
In my Calgary neighbourhood, I can’t get a good fix on real estate prices because of the mixture of $100,000 plus renovations against “unimproved” homes. It appears prices are rising and approaching the 2008 peak. This is a SF home neighbourhood so I know little about attached and condo prices. My guess is that a ½% rise in mortgage rates will only taper real price growth for 2013 in Calgary as employment is still solid. The recovery from flood damage is a wildcard. Also, due to the recent increases in property taxes, they are now a significant budgetary item of mine. I don’t see any relief on this front.
I read an opinion that the current European Union game plan is to get Merkel re-elected and then reverse the German austerity programs in favour of stimulus programs. More bonds for the plebs to buy or pay. September could be more interesting than usual. The state of global trade has caught my attention. Apparently it is declining and will continue to do so as emerging countries’ economies are under stress. This does not bode well for international American companies as much of their income comes from overseas. Then add in the effects of a rising currency and the Sequester. I suggest that overall earnings growth on the S&P will also noticeably decline in the September time frame. Personally, I think some cash would be a good idea going into September.
I was reading an article about the efficiency of a democracy against a dictatorship. The thesis was the fewer people involved in a decision makes the process faster and cheaper, therefore a preferred method of management. The author used this diagram to illustrate how managers can view the problem of getting consensus. It does stereotype the female shopper and is old school sexism but I thought it was harmless, particularly in the context that is was used. I will post late so few people will read my musings today- ps: I am divorced. http://pinterest.com/pin/228768856042869595/

#154 Westcdn on 07.08.13 at 7:27 pm

Oops, here is the dropped link re: alcohol.
http://www.youtube.com/watch?v=vkpz7xFTWJo

#155 Jimbo on 07.08.13 at 7:45 pm

Your best post yet.

#156 Dan from Richmond Hill on 07.08.13 at 8:07 pm

#154 Canadian Watchdog on 07.08.13 at 7:05 pm

Indeed. And if your real cost of living was growing by 8-10% annually and you’re portfolio returned 6-7% annually, on a long enough timeline, you’d go broke.

What other alternatives would you recommend?

#157 AK on 07.08.13 at 8:10 pm

#144 Mikey the Realtor on 07.08.13 at 5:46 pm
“Paying cap gain taxes and timing the market is another reason why re-balancing sucks.”
——————————————————————–
Geez. I had to do a double take there.

You actually posted something that makes sense. :-)

#158 Daisy Mae on 07.08.13 at 8:37 pm

#65 cbbhappyrenter: “Garth has more experience than all these guys put together.”

**************************

Right! I love Garths’ comebacks! :-)

#159 D.D. Corkum on 07.08.13 at 8:40 pm

#9 east van on 07.07.13 at 7:39 pm

[Paraphrasing] Was the 2008 crisis due to oil prices reaching $150? Are oil prices a threat again?

————–

Personally I think it is fair to say that $150/barrel oil is bad for the global economy, but that doesn’t mean we need to panick. Brent crude has been floating around $100ish for a couple years and WTI has been playing catch-up over this time.

Barring a major disaster or geopolitical event, the world has plenty of time to adapt before oil prices go back to the $150 level.

#160 Daisy Mae on 07.08.13 at 8:42 pm

#69 Ron: “You have always been interesting to listen to but seldom have you been right.”

****************

Then why are you here?

#161 Smoking Man on 07.08.13 at 8:44 pm

Post is going to have to wait, no power 1 present left on phone,, drinking beer in my truck, so red neck :)

#162 Smoking Man on 07.08.13 at 8:46 pm

Broadcasting live from Lake longbranch

#163 Marginal on 07.08.13 at 8:46 pm

When it comes to money, there are apparently fewer differences between men and women than one would think
http://goldengirlfinance.com/inspiration/?post_id=1537

Perhaps many differences in investing style are related to the http://en.wikipedia.org/wiki/Random_walk
mostly based on self-congratulatory, random, gratuitous timing.

#164 Daisy Mae on 07.08.13 at 9:05 pm

#104 Mike: “…it seems people who visit this blog are becoming more unappreciative of the free assistance you provide.”

*****************

Could be they’re scared. They’re angry. Garth can see past this.

#165 Daisy Mae on 07.08.13 at 9:21 pm

“Being a woman, this is even more crucial. ;-) — Garth”

****************

Hey!

#166 tatsuke on 07.09.13 at 2:30 pm

>”but rather by oil prices approaching $150 a barrel? They argue that global capitalism can not function with oil at that price.

I see oil is once again rising towards those levels…”

It’s correlation, not causation. As the business cycle fluctuates and we reach boom times, oil prices get bid up, putting pressure on the economy. Eventually, the cycle turns down, we have recession, oil prices crash etc. Then it starts over again.

So, yes, oil prices will one day be that high, and will be part of the mechanism that causes the downturn in the business cycle.

#167 tatsuke on 07.09.13 at 2:32 pm

>”because things are gonna get very interesting very soon.”

“Bad things are coming!” ™

The calling card of the doomers.

#168 tatsuke on 07.09.13 at 2:41 pm

>”Selling bonds hasn’t been such a bad 2013 idea; Faber was early, but right. Especially owning junk bonds doesn’t look like such a good idea going forward.”

The US economy has been (slowly) recovering for years, indicating an eventual QE exit and hence rising rates. Bonds, including junk, have historically low yields. So calling to sell bonds in 2013 isn’t what I would describe as “early”.

#169 tatsuke on 07.09.13 at 2:48 pm

>”Gold will go up for the simple reason that the industry cannot generate a profit at $1250 gold.”

You have the relationship backwards: gold prices determine what gets mined. Just like high oil prices drive investment to hard-to-get-at fields like the oil sands.

So when miners can’t produce ore profitably, they close down expensive mines, and voila, the average cost of production is reduced.