Too scary

Bear-Babe modified

“What are you afraid of?”

I knew Arjay was getting really uncomfortable. Could hear it in his uneven breathing. After a few moments he coughed it up. “Actually,” he told me, “I guess I’m afraid of losing it.” Just the answer I expected. It’s the anthem of Generation X. Or Y. Or whatever you now call wimps in their thirties.

Increasingly I’m finding young adults to be insanely, morbidly, cripplingly conservative. They squirrel their money into GICs, no matter how pathetic the return. They open TFSAs and jam the money into a savings account. They marry each other but don’t trust enough to have a conjugal chequing account. They crave a total absence of risk. And it’s made them patsies for the real estate industry’s siren song.

I asked a Bay Street veteran why he thought the kids are so spooked. “2008,” he said. That made some sense. It’s been almost six years now since the global financial crisis rolled in and shocked everyone. Lots of these folks were exiting university and assumed the world was ending. Just like the media said.

They saw gyrating stock markets, fumbling politicians and freaked-out parents dumping mutual funds. The experience made a big impression, obviously, to the point of creating a generation now in financial paralysis.

But there’s more. Like ignorance. The thirtysomethings are little different from the 50-year-olds. They confuse investing in solid assets with gambling in stocks. They’ve absolutely no idea how a bond works, what a preferred share or ETF is, or the tax rates on various investments. Nobody teaches this stuff in school – a fact utterly exploited by the banks, who have a vested interest in keeping people scared.

Of course, blame parents. The Boomers turned into helicopters, invading every facet of their children’s lives (I hear many now go to job interviews with them), further sheltering them from experiences – good or bad – which can teach life skills. Like how to handle money. Worse, the wrinklies are the house-horniest humans ever to drool on a piece of granite. They constantly preach the gospel of no-risk, equity-building, sure-thing real estate, and thump the kids into condos and mortgages.

What a disservice. The old farts fail to recognize their housing gains came from decades of inflation, economic growth, demographic push and expanding careers. Galloping prices made mortgages easier to pay while incomes steadily advanced. Today the kids face a stuttering economy, disinflation, salary shrinkage, Boomer decay and a legacy of debt. It’s simply wrong to impose a strategy that worked in 1984 on people trying to find their way in 2014.

As a result, investing among the kids – even those gainfully employed and racking up savings – is statistically non-existent. They fear markets. Fear assets. Fear risk. Fear loss. Ironically, they’ll end up needing a lot more financial sophistication than their hippie parents, now that company pension plans are fading away and public pensions are under attack. It’s a shame so many of today’s 30-year-olds will end up squandering the greatest investment tool of them all – time. As I demonstrated last week with TFSAs, the longer you have money in growth assets, the sweeter the life lying ahead. The longer you delay, the worse.

How could I not mention Royal LePage at this moment?

The real estate marketer is emblematic of an industry which has enjoyed stunning success in warping young minds. The effort never stops. This shiny new year is but a few days old, and already the house-floggers have laid it all out, with the help of their accomplices in the media.

The company just made headlines everywhere saying the real estate has ‘healthy momentum’ and (above all) safety. “We predict continued upward pressure on home prices as we move towards the all-important spring market,” said CEO Phil Soper. “We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.”

Unbelievable, given what logic tells us is coming. But, he’s a marketing guy. To the media he’s a credible source. To the kids, an expert. He reaffirms their parents’ message. He makes confusing into simple. His reassurance is everything the Dow Jones Industrial Index is not. Houses are safe and sexy. But the markets will eat you.

So, I understood Arjay’s anguish. His expensively-educated brain tells him GICs and mortgaged condos are idiocy. His inherited gut tells him I’m too scary.

Let’s see where his troubled heart leads.

218 comments ↓

#1 World According To Garth on 01.09.14 at 9:28 pm

Garth unless you wish to pay me a royalty for that pic of my husband and I – I suggest you remove it.

#2 NuisanceBear on 01.09.14 at 9:29 pm

FIRST of all FIRSTS

#3 the jaguar on 01.09.14 at 9:30 pm

Oh dear….that photo….brace yourselves….

#4 Ralph Cramdown on 01.09.14 at 9:32 pm

Garth,

Please stop telling people that equities aren’t scary. I’m not looking for capital gains, volatility or competition.

Equities are scary. It’s all a ponzi scheme, doomed for imminent collapse. Spread the word.

Where did I suggest diving into stocks? — Garth

#5 Smoking Man on 01.09.14 at 9:33 pm

Arjay spent to much in school.

I’m not against higher schooling but it’s a waste of money and time for 80% of the people that go that, ponzi scheam . Unless you are 95% student, and don’t try that hard don’t do it.

You’re going to blow 60 to 100 k probably go into debt to earn an obedience certificate, that entitles you to the opportunity to be someone’s bitch.

100 k will fill up an ocean container and if you buy right you can triple you’re loot on the first load.

30 years ago there was no Internet, schooling was the only lyrics way, we now have Google, you can learn anything you want absolutely free.

But like a fancy car, a house with granite and stainless you earn bragging rights, look how smart I am. Look at this 100 k paper in the nice frame and look at me in that pic with that ridiculous hat.

But that’s what’s in. We know the herd runs in packs.

Got a great idea, need investors, don’t go to Bay Street, go to AAA meeting, you will find the wealthiest people in the city at those informal brother hood get together.

Even those plush Bay Street jobs will eventually be taken over by machines and algos.

Huge wealth has never been made by trading time for pay check, it’s always been and will always be made by trading things.

In a global market where money and business can relocate at a moments notice, be the trader that makes spread and makes it happen.

Trade damn it.

#6 Derek R on 01.09.14 at 9:34 pm

Not all the youngsters are scared. And those who aren’t will have a big advantage over the others.

#7 not 1st on 01.09.14 at 9:35 pm

Garth, in practical terms, growing a TFSA over 30 yrs to 6 figures isn’t going to mean much. So you grow it into the $300-500k range and then reverse the dividend. Thats only a couple thousand a month. Not really going to make a big difference in your life in 30 years with inflation eating half of it. You won’t starve but you won’t be buying a Bentley either.

Maybe the approach is like the MoneySense challenge and put the tfsa up for some serious risk and try to hit on black. So you lose $30,000. Not going to be the end of you.

Gambling is not investing. BTW, $5K/year in a TFSA for 30 years gives $820K. Three Bentleys. — Garth

#8 shane on 01.09.14 at 9:37 pm

Garth, you should do a blog on the future for small business is canada a good place to buy income producing business.

#9 Sideline Sitter on 01.09.14 at 9:38 pm

“To infinity and beyond” is impossible, but is the Real Estate Cartel’s message. Sad so many believe it.

#10 not 1st on 01.09.14 at 9:40 pm

Garth, have you ever tried putting yourself in the shoes of Gen X or Y?

The seniors are siphoning off huge tax money to care for them, and the boomers are about to do the same, but not before everyone of them stays in the workforce until the absolute last minute so there is no way anybody can take their place cause the job is usually mothballed afterwards.

The see tech obsoleting whole industries every day and degrees that are really worth toilet paper. Then they see the elements of the Canadian or American dream floating so out of reach because gov’ts are stimulating the last remains of a industrial age economy.

I don’t blame them at all for their pessimism.

At least try to see the point: they’re making it worse. — Garth

#11 Jimmy on 01.09.14 at 9:40 pm

Give it up NuisanceBear.
First of all firsts was first on January 1st and you missed it. Ha ha!

#12 World According To Garth on 01.09.14 at 9:42 pm

The proof is in the pudding when the $91,000 a year govt workers are lying their face off about how great and prosperous the economy is. CKNW was so worried about the posting that would take place on these two stories they blocked it. Everyone we know is broke unless they are govt workers and yes that includes taxpayer funded healthcare workers (with bloated bloated admin).

jobs were lost

http://www.cknw.com/2014/01/09/liberals-defend-bc-jobs-plan/

Fleeing the toll bridge does not sound likes great economy. And btw……..how is that 2010 6 BILLION dollar Olympic hangover working out for ya? I got two $3,000,000,000 bridges to sell (toll) you for it.

http://www.cknw.com/2014/01/09/new-port-mann-toll-clogs-new-westminster-roads/

#13 valleyrenter on 01.09.14 at 9:42 pm

“When dealing with people, let us remember we are not dealing with creatures of logic. We are dealing with creatures of emotion, creatures bristling with prejudices and motivated by pride and vanity.”

#14 P-gizzle on 01.09.14 at 9:44 pm

“Unbelievable, given what logic tells us is coming.”

From what I’ve observed over the years, markets often do illogical things. It seems to me that all markets are “faith” based, so as long as you can keep the faith…

#15 Tri-Guy on 01.09.14 at 9:47 pm

I fear my wife’s reaction to all my bad investing if she were to read this blog

Get her a bear. — Garth

#16 lee on 01.09.14 at 9:48 pm

You guys just keep saying the same crappie every night except Saturdays. I’m sick of the comments. From now on I’m only reading Garth’s column, and that’s it. Back to porn.

#17 Smoking Man on 01.09.14 at 9:51 pm

#8 shane on 01.09.14 at 9:37 pm

Garth, you should do a blog on the future for small business is canada a good place to buy income producing business.

………….

Ever think of starting one from scratch. It’s fun. Few years ago the UCC told me that big brother was watching, watching everything. I invented keys me. Not a public key but a private key incryption software. I can’t even spell encryption but sales this year 6.2 million.

3 employees.

You know what big brother is looking for,
1 merger and acquisition
2 patients before they become pattents
3 Banking info
4 Congress men’s thoughts
5 civil decent
6 terrorists

And in that order.

Even out brightest schlores have no idea.

When I gave out of for free bata testing most downloads came from Russia, those people know all about big brother.

#18 PA on 01.09.14 at 9:52 pm

Young adults don’t fear investing. The majority of young adults in their 20s have NO money to invest. All my friends and other young adults around me (who were in school during the gfc) have no jobs and are stuck living at their parents paying OSAP. Although those who do have good paying jobs ($70k+) have little fear investing. The issue stems with the current grim job prospects experienced by recent grads. Until the boomers start retiring, recent grads will continue to suffer and will be priced out of this real estate market unless a 20-30% correction occurs.

#19 sheane wallace on 01.09.14 at 9:57 pm

I am so happy for Phil Soper.

BTW Who really cares about the ‘all-important’ spring market? And why is a ‘strong’ market good?
What is ‘strong’ market? Higher prices and more money for Phil?

This market has nothing to do with the real economy as it is driven by debt.

Best thing: diversify OUT of Canada. Just look at the Ca dollar. Having very funny experience lately when stock market goes down a little bit for a day but the Ca dollar really dives and as a result my portfolio goes up in CA dollars! If not in RRSP/TFSA one would be taxed on capital ‘gains’. Holly macro!

#20 Freedom First on 01.09.14 at 10:01 pm

Nice pic. The house horny virgin kissing the Bear. How apt. The next pic will be of her head in the Bear’s mouth.

Royal LePage…….I am glad to see you getting free coverage on Garth’s free blog. You’ve earned it.

#21 visorman30 on 01.09.14 at 10:02 pm

I’m 31 and I think its more than 2008. I can recall my friend’s dad losing his house in Bre-X, the nosedive of Nortel/RIM etc., tech bubble burst, and on top of that 2008.

Often rational decisions need to feel counterintuitive which is why a lot of wealthy need external advisors to approach investing from a more neutral perspective.

In times like these I like to think of the marshmallow test study, where those who can show some restraint and discipline more often have better end results in the long term.

#22 BullionTastesGood on 01.09.14 at 10:03 pm

“Today the kids face a stuttering economy, disinflation, salary shrinkage, Boomer decay and a legacy of debt. It’s simply wrong to impose a strategy that worked in 1984 on people trying to find their way in 2014.”

Now you’re talking. I feel like on my favorite blog ! Yay!

#23 Simon on 01.09.14 at 10:05 pm

lucky bear…

#24 Son of Ponzi on 01.09.14 at 10:07 pm

The kids will be alright.
Work hard, shun credit to buy toys, drive your car into the ground.
And most of all, don’t trust the snake oil salesmen.

#25 Terry on 01.09.14 at 10:08 pm

“2008” is right on the money! These kids won’t touch pieces of investment paper. Their fear is rooted into believing that they would rather have something substantial and tangible like a physical structure or physical land that they can actually feel, touch and see. When their past investments went down in value they had nothing tangible left……………so if I buy a house and it goes down in value at least I still have the physical property to enjoy. They are all being herded and hoodwinked into one asset class. 2008 has messed up a whole generation and they have yet to learn to stop beating themselves up every time they take a loss. Somehow this generation needs to mature with it’s investing behavior and one way to do that is to make even more mistakes.

#26 Mike on 01.09.14 at 10:11 pm

Truer words have never been spoken. Or written, for that matter. I’m a CFP and work for a bank. Of all the thousands of account managers in the hundreds and hundreds of retail branches we have across Canada, our sales for the entire 2013 calendar year were 99.7% GIC and 0.3% long term funds. Just like James Hetfield says, sad but true. Believe it.

#27 McLovin on 01.09.14 at 10:13 pm

“Canadian or American dream floating so out of reach because gov’ts are stimulating the last remains of a industrial age economy.”

Actually America is experiencing an Industrial renaissance. Manufacturing jobs coming back on shore and an explosion of jobs in the oil and gas sector.

#28 sheane wallace on 01.09.14 at 10:14 pm

the nosedive of Nortel/RIM etc., tech bubble burst, and on top of that 2008.
———————————

Remember the little troll (F) showing ‘proudly’ a BB saying that we don’t need to make shoes any more as far as we make BBs?

The stories of Nortel and BB once pioneers in their fields and world leaders is really the truly Canadian story of the last two decades.

Real lack of vision in the leaders and ability to capitalize on the great asses that this country has in it’s people.

#29 Jamie Czerwinski on 01.09.14 at 10:15 pm

not 1st on 01.09.14 at 9:40 pm
Garth, have you ever tried putting yourself in the shoes of Gen X or Y?

The seniors are siphoning off huge tax money to care for them, and the boomers are about to do the same, but not before everyone of them stays in the workforce until the absolute last minute so there is no way anybody can take their place cause the job is usually mothballed afterwards.

The see tech obsoleting whole industries every day and degrees that are really worth toilet paper. Then they see the elements of the Canadian or American dream floating so out of reach because gov’ts are stimulating the last remains of a industrial age economy.

I don’t blame them at all for their pessimism.

At least try to see the point: they’re making it worse. — Garth

A great point, not1st. A reasonable response, Garth. See, everyone? Don’t be an idiot, Garth won’t belittle you. Pretty simple.

#30 mstgofstr on 01.09.14 at 10:17 pm

Thirty something’s weren’t home owners in the early 90’s when interest rates were falling, and so was the price of houses….they’ve only ever experienced increasing values, that’s why they think it can only go up.

#31 Son of Ponzi on 01.09.14 at 10:22 pm

#5
Traders need little education. How hard is it sitting in front of a monitor and and yell sell or buy all day.
Sad thing they blow all their money on a German luxury car, and when their voice goes kaput, they go on welfare.

#32 Chris L. on 01.09.14 at 10:23 pm

#10 is right Garth.

I got an old lady that calls on me every day to help her warm her car, pull it out, brush it off, walk her out and then bring her groceries in. That’s not when I’m shoveling or doing other favours. She’s old, really old and won’t leave her house and has a government pension to boot. I feel bad, but I really shouldn’t. She just manipulates. A microcosm of the rest of society and boomers.

The world is nuts and the old refuse to pass on the torche. Why should we trust anyone when they are so greedy and won’t share any of the spoils?

I’d rather be frugal than even try to game the system that is severely stacked against us from the word go.

Bad attitude, dude. Will get you nowhere. Maybe she’s planning on leaving you her secret millions. — Garth

#33 timOfTrees on 01.09.14 at 10:24 pm

Man, I see that around me everywhere, and hear it from all sides, up and down.

MIL thinks I should work for the Government – a ‘safe job’. They’ve got every penny squirrelled away in a house… ‘best investment I ever made’ and I’ve been lectured on buying a house (buy a crappy car and a big house, it’ll pay off) …etc.

All my buddies are striving for the Gov jobs, and spend more time playing COD in a day than they put towards investing/business ..etc in a year.

Now, don’t get me wrong. The one’s working for the Gov have it made. DB Pensions, little stress, and they seem to never be at work. However, it is a bit emasculating, really, being some civil servant in some cubicle somewhere.

Not for me.

So, my nickels go back into the business and I pound the pavement and scrape my earnings together and, for all the ups-and-downs of entrepreneurship, I wouldn’t trade it for anything else. Not all Gen Y’s/Millenials are p-ssies.

Who dares wins.

#34 -=jwk=- on 01.09.14 at 10:28 pm

Rather than posting my MBA thoughts at the bottom of yesterday (200 posts!) I’ll stick it here:

If you are going to do an MBA, go to a top school. The only top schools in Canada are in Ontario and there are really only 2 of them, the traditional old school and the newer one. (with 2 more as regional favorites that could also work if you are into gangs or small town life).

If you don’t know what you want an MBA for, you won’t get into a top program. The top programs want grads who will be successful, not students punching a ticket. If you have to ask the internet, you just saved yourself 100k.

Anyone who says an MBA is ‘worthless’ 1) doesn’t have one and 2) doesn’t have the chops to pass one of the top programs anyway.

A top tier MBA will change your career- you will meet the people that can get you the career making roles. You will be taught by the professor who wrote the textbook SM recommends you read. The people (CEO’s mostly) in the examples in the text will guest lecture about their case. You will learn way more than what is in the text.

You will take courses at double speed to get caught up on economics, finance, stats. In your first semester you will do finals, when the rest of the university is doing mid terms. At 2am in November you can’t book a study room at the school because they are all taken. Most of your class is there at 2am already. You will sleep at the school many times. You will do finals again when the rest of the school is doing their first set of finals. Then you will do one more course at the end of the semester when the university is ‘closed’, 8hrs a day for a week after finals and before christmas. You did the bulk of the 3rd and 4th year B.Comm in one semester. You will stumble home on the 23 or 24th exhausted. You vow not to go back. it’s impossible. But you get an email. You passed. You did alright. You are allowed back, some good people won’t be there and you will miss them but you made it. You go back. It is awesome.

I was changing countries and career direction. Worth every effort/penny expended. I am glad I did it, but I would never do it again….

#35 Investment Virgin on 01.09.14 at 10:29 pm

Hi Garth,

A few posts ago, you mentioned you expect the investment market to correct by about 15% in the first quarter (I believe). Should people hold tight and not jump into new ETFs and such until the market mellows out? What’s the best course of action in this situation?

#36 Jeremy on 01.09.14 at 10:29 pm

You can’t blame people for preferring GICs and savings accounts over stocks. Equity index funds (and ETFs) have underperformed GICs and savings accounts since the start of the last two bear markets (2000 and 2007). (Your preference for stocks is the opposite of public sentiment at the end of those bear markets.) Market timing makes such a big difference that perhaps the average person, who doesn’t even follow the markets, is better off in cash than in stocks.

I can’t believe you wrote that. We’re in worse shape than I imagined. — Garth

#37 Canadian Watchdog on 01.09.14 at 10:30 pm

Suppliers brace for more price cuts as grocery fight heats up

A major grocery buying group is warning food suppliers that Loblaw Cos. Inc. will likely follow Sobeys Inc. in demanding price cuts and price freezes from its vendors.

The warning, contained in a letter this week from United Grocers Inc., underlines a wider practice by retailers to demand breaks from their suppliers to help boost the sector’s razor-thin profit margins.

Here comes the next leg up for farm and food supplier prices. Either your grocery bills are going up, or your shopping bags will weigh a lot less in the near future.

Just in:

*CHINA DEC. EXPORTS RISE 4.3% Y/Y; EST. 5%, CHINA DEC. IMPORTS RISE 8.3% Y/Y; EST. 5%

It's going to be a long time before the public realizes someone else is consuming a greater share of global goods and commodities, while the west continues to be paid every week with currency losing purchasing power, sending many middle class families with mega-mortgages into poverty because they thought they were richer then they think.

Research Canadian food and Ag companies. And dump those CP-Lie inflation-linked bonds. Harper didn't cut StatsCan funding for nothing ya know.

#38 NoshveEe in the ditch on 01.09.14 at 10:31 pm

Nothing ventured, nothing gained. The greatest risk is not taking one. That’s what life is for.
*
#5 Smoking Man on 01.09.14 at 9:33 pm — “Even those plush Bay Street jobs will eventually be taken over by machines and algos.” — Whereas newspaper jobs are being Outsourced The Kamloops Daily News finishes Saturday. Any guesses why?

Of note, the Sun’s poles have done a 180 and switched positions. Could this be the cause of the Polar Vortex Express which is flying past now? Apparently so, as NASA says slight changes on the sun’s surface affect the climate. Guess that’s climate change! Frozen Niagara Falls.

Are there any astronauts present? This one’s 4 U — don’t eat baked beans before leaving The Twilight Zone!

#39 HogtownIndebted on 01.09.14 at 10:33 pm

My favourite commentary today on that Royal LePage blast of promotional flatulence:

“They don’t predict things that aren’t true”

(Al Sinclair, speaking tonight on the CP24 ‘Hot Property’ show with Ann Rohmer.)

#40 Uh Oh Canada on 01.09.14 at 10:37 pm

Agree with a previous comment- most Gen Xers and Ys just don’t have money to invest because they’re in a lot of debt. I’m a Gen Xer so I know my demographics well. When I was debt free in my twenties, most of my friends were carrying debts averaging 60k due to their lifestyle. I know very few people who are not in debt, like myself. Most are comfortable in their slavery and fear being free.

#41 Chris L. on 01.09.14 at 10:38 pm

Bad attitude, dude. Will get you nowhere. Maybe she’s planning on leaving you her secret millions. — Garth

No, she doesn’t consider anyone else. She calls repeatedly, early morning, late night….to remind us to bring out her handfuls of trash just so it doesn’t go an extra week in the horror we may forget. I got a voicemail full of messages! When we don’t answer fast enough, she bugs the other guy down the street who cuts the lawn for free, but he’s moving.

She has a full pension, lives in the same house inherited from her parents. Never married, OCD tendencies.

Hoping to be cared for by another is folly. Our generation was raised to care and protect ourselves due to the selfishness around us. No amount of rational can undo that programming.

And both of our set of parents have promised to leave their cash to charity. And we never asked. Go figure.

No wonder we’re jaded and pessimistic.

And that’s the new strategy for surviving in this generation Garth. With no head start, no growth and no help.

#42 I Paid For Weed Now Weeds Paying Me on 01.09.14 at 10:50 pm

In regards to diversification. I get buying various asset classes that track various indexes like the S&P and TSX and getting some bonds, preferreds and REIT action too. Of course balancing them correctly and rebalancing as required. But what about buying highly specific ETF’s that don’t follow a broad traditional index? For example, aquaculture or shipping? I wish they had a marijuana ETF. Is weed even an asset class? Anyway, I wonder if it’s smart to invest in industries or if it’s smarter to invest in a broad index.

#43 Jay on 01.09.14 at 10:55 pm

To be fair, we didn’t just see 2008. We also saw 2000, and the collapses before and after of a lot of other “sure things” turn out to be complete fabrications.

And ostensibly unlike the boomers(I know it is arguably not reality), who in the popular vision were rewarded for taking risks, it is the conservative ones, the ones who made safe decisions and put their nose to the grindstone for some honest hard work and sacrifice, that succeeded today. Much has been said about the huge increase in regulatory burden upon young people, that a job you once got out of high school (if it even exists) is now a job that needs college, and that college costs much more than ever before. Professionally, young people walk a thin line to remain in that world. The housing bubble that enriched people who got in on the bottom floor is now a weight around our neck. Equities seem to fail every few years because the system is rigged by liars. Debt seems to be a ticking time bomb waiting to explode.

It’s no wonder young people are so risk averse. The risks appear to be getting steeper and steeper, and the rewards appear to be getting slimmer and slimmer. And I bet there’s fewer young people in housing than we’d think, because that’s a whole category of risk on it’s own.

#44 Mr. Frugal on 01.09.14 at 10:58 pm

Everything in life is a gamble. You could fall down the stairs or slip in the shower and crack your skull. The only way to get through this life in one piece is to (1) remain calm (2) have faith. If you believe that the sun will rise tomorrow and everything will be okay, then you should save and invest for the future. Investing is all about faith.

#45 mortgagebrokeron on 01.09.14 at 10:58 pm

Let me say I agree with most of what garth has to say, say that Mark Lamb fella is teamed up with a Jawad Rathore. They are aggressively going after mortgage brokerages to have agents/brokers refer people to invest their money with the following. http://fortressrealcapital.com/

Jawad has been a bad boy a few times according to the mfda and osc.

Garth how about you talk you do a column about the risks of a syndicate mortgage??? I think these guys are getting people to invest in “”can’t fail “” condo financing. I know they are pushing mortgage brokers to refer in clients to invest. A bunch of us won’t refer but some won’t be able to help themselves to a nice referral fee

You have a way of telling the story so the common person can understand past financialese talk

#46 David W on 01.09.14 at 10:58 pm

Garth, you’re absolutely right. 20 & 30 somethings are afraid. Who isn’t scared of the unknown, especialy the day to day direction of markets and equities. In this society people are no longer allowed to make mistakes and learn from them. If lose money, you job etc, that’s it. How many 40 somethings write on your blog that they lost their job of 20 years and unable to find something comparable to get back on their feet. This society is a sick meat grinder spitting everyone out.

#47 TheCatFoodLady on 01.09.14 at 10:59 pm

Some are doing well, some are not. I think it’s a combination of personality, upbringing & experience. My oldest has always walked his own path – even if it led towards a fairly conventional career choice, he did it his way. He didn’t get into his chosen field until a month shy of his 27th birthday but it’s what he was meant to do – for now. He’s flexible enough to know that may change in time.

The second one is a stepchild. That one is a stereotypical entitlement attitude slacker. I THINK, now that she’s out on her own that she’s starting to grow out of it – time will tell.

The third doesn’t like what he’s doing but until he figures out what he wants, it pays the bills & he’s actively trying to figure out what he wants. His big handicap? He ‘fell in love’ with the east coast & won’t leave. Pity – he’s ferociously intelligent, social & sociable, can network well… hope he’ll figure it out.

I see everything – poor kids who are frugal by nature, well off kids who blow every cent that comes their way & every combination in between.

Fear IS a common thread – fear of loss, fear of insecurity, just… fear. They won’t move, they won’t travel, they won’t gamble on life, even if the odds favour them. They grew up in families that weren’t stable, with an undertone on economic uncertainty & at the same time were helicoptered to death.

Without risk, without failures & learning how to deal with failure as kids, they’re severely handicapped & yes, they confuse genuine risk with paralysis. Sadly, they haven’t been taught, either at home or in school, sound fiscal principles. Too many of we parents didn’t have them to teach; not the important ones.

#48 not old enough on 01.09.14 at 11:00 pm

I agree with you, but I also think that you are wrong. This is because people who are holding onto money because they don’t know what to do, are not the ones being tricked by the housing market. A very small percentage of my twenty and thirty something co-workers have any money in the housing game. There is no way they could afford to in the first place. This has been the case since well before 2008.

As I read recently, most people are no more able to afford a 1 million dollar house than they can afford a $500k 600sqft condo. At 2.5% interest in a TFSA and no risk of a housing crash that has been coming since 2004, your damn right i will go for low interest and high reliability! as you correctly point out, I have NO expectation of a social safety net (yet pay cpp LARGE every cheque), and thus don’t really want to gamble when a roll of the dice determines whether i starve to death on the street in the next 30 years.

The people who are the most deceived are the ones want to cash out at the high rates and are playing chicken with the train. So that is where I think you are wrong, in a mostly correct post.

The greatest risk is not losing money. It’s running out of it. You’ll learn. — Garth

#49 Two-thirds on 01.09.14 at 11:02 pm

What is too scary for me is that I have not figured out yet how to set stop-loss orders on Questrade – just rebalanced the portfolio a few days ago so if anyone here has info on how to set auto-sell orders if my ETFs go down by a given percentage, I would really appreciate it!

Nice bear, BTW

#50 D on 01.09.14 at 11:08 pm

My experience is that the 30 somethings have zero clue about 2008, no idea, nada about what happened or why. I mean, no idea whatsoever- not on their radar. They don’t understand, have no interest and no fundamental knowledge to even start to understand. Bay Street vet is wrong. Garth’s got it right – ignorance.

#51 Notta Sheeple on 01.09.14 at 11:09 pm

“……The experience made a big impression, obviously, to the point of creating a generation now in financial paralysis……..”
=========================

Given the track record of moral integrity demonstrated by the American investment banking system up to 2008, can you really blame them? Once bitten, twice shy….

Why would you re-build your home on the banks of Calgary’ Bow River, knowing that being flooded out again in the future is a virtual certainty?

Why would you invest in a stock market, knowing full well, that once American investment banking CEO’s have already tasted the returns from illicit gains without penalty, they’re not already orchestrating their next “Too-big-to-fail, too-connected-to-jail” strategy.

As one moronic past Republican president once (almost) said correctly: “Fool me once, shame on you, fool me twice, shame on me”.

#52 Carpe Diem on 01.09.14 at 11:11 pm

Garth,

Is she one of your Amazon’s?

Wow!

#53 seriouslynorthern on 01.09.14 at 11:14 pm

@#49 Two-Thirds
Pretty simple, log onto the IQ Edge Platform, right click whatever position you want to protect with a stop loss and choose “Create Order”. Decide what price you want to set your stop, then set Order Type to “Stop” set whatever price you want to be stopped out at, then for Duration set it to GTC (good till cancelled). You’re done.
Note that will trigger a market order once the stop price is hit, so you may not get filled at your “Stop” price depending on how wide the bid/ask is.

#54 I'm stupid on 01.09.14 at 11:16 pm

Hi Garth, I’m going to say something ridiculous now. If every man, woman over the age of 18 has the right to contribute into the TFSA should they have the right to sell their contribution room? I think so. They can pay capital gains for selling their TFSA room. I would gladly pay $100 for every $1000 in contribution room I buy. It’s a win win. The gov’t gets extra tax revenue the poor get a couple of bucks in their pocket and I can avoid taxes the rest of my life. No need to find an off shore tax shelter in the future.

#55 not 1st on 01.09.14 at 11:18 pm

Everyone on this blog needs to know that you are going to lose your jobs eventually. Companies are going to plow all those stimulus funds and profits back into tech thats going to obsolete so many professions we won’t even know what happened. It will just like what happened to the loom and print press 100 years ago. A bunch of degrees will be gonzo as well. Your kids will be in a very different world. Every profession and job will be impacted heavily by tech.

You hope they become a teacher? thats nice, but there won’t be a need for as many as all education will go online on demand. Well then how about a doctor or lawyer? Software is already doing 30% of the research work lawyers used to do. And there are a ton of smart devices coming to diagnose you every day in your home and advise. Doctors will make house calls via tech. Think your kid is good at a trade? They will be 3D printing every building in 20 years and won’t need people to tile or drywall. The only safe industries I see are mechanical engineering, CAD/CAM design and resource extraction.

Thats the bad news. The good news is now you know its coming and can prepare for it. Setting aside some funds for your kids to go to typical college won’t cut it anymore. Thats old thinking.

#56 Retired WI Curmudgeon on 01.09.14 at 11:21 pm

#36 Jeremy

I don’t know what you were smoking when you wrote that post, but I sure would like some! You are nearly 100% wrong, full of crapola, and lost as a ball in tall weeds!

Might be an ok dude, but if you drive like you make comments, I gotta believe that car has very rounded corners! Keep investing that way and stay broke for life.
WOW

#57 Andrew Woburn on 01.09.14 at 11:22 pm

#16 lee on 01.09.14 at 9:48 pm
You guys just keep saying the same crappie every night except Saturdays. I’m sick of the comments. From now on I’m only reading Garth’s column, and that’s it. Back to porn.
==========================

So you’ve mastered the art of typing one-handed?

#58 Carpe Diem on 01.09.14 at 11:28 pm

I forget who, but some dog was whining about how hard it was to be and X or Y Gen.

I’m an X. I saw the 80’s and 90’s. I remember the 70’s.

Those days were hard.

What was harder were the 1950’s and 60’s for lots of people.

My dad was born in 1938.

He beat the shit of his schoolmaster when he was 15. Why? Because the schoolmaster did the same to his friend.

Alas … he never graduated.

At 15 he became a logger and then an assistant to Engineers. That was worst … he had to carry fragile equipment in the wild for geological surveys.

He also studied mechanics.

No schooling but intelligence and risk taking made in a lead mech for a large oil corp. Planes, robots and all.

This man worked hard all his life. Paid taxes and never once complained about the government.

Why? Because life is so much better now.

Now … people have it good and can’t get jobs.

Sorry, do not blame anyone but yourself.

My father thought me to work hard. At 12, I had my first venture. At 15, I worked at McD’s because they sure know about optimization, scheduling and HR. My career continued from there during a recession.

I also graduated with top marks in University to get the paper. I also made great contacts.

All this to say, If you want something. DO IT. Don’t bitch and complain. The problem is people think things come easy.

They don’t.

#59 Brendan on 01.09.14 at 11:30 pm

“I hear many now go to job interviews with them”

REALLY????????????????????????????????

#60 Cheese Crackers on 01.09.14 at 11:33 pm

Having lived in this country for 2 years it’s plain for me to see the RE an investment propaganda in the MSM – sickened even more to see the above press release from Royal LePage \ Phil Soper on the MoneySense with absolutely no accompanying editorial insight in to it’s absurdity.

Take a look at this UK solicitor (real estate advertiser but not a “realtor”) – not afraid to speak the truth about RE on their homepage, notice the “how we are paid” link – investment commissions are no longer a legal practice: http://www.blackaddersfs.co.uk/property.php

So many Canadians live in a bubble, granted it is fairly isolated and many parallels are drawn with your southerly neighbour making you look awesome. It’s like being the best looking kid, at fat camp.

The delusion around RE also exists around investments (financial ADVISORS are SALES PEOPLE, the friendly guy in Best Buy is a SALES guy, the waitress in your local sports bar is a SALES girl) STOP asking them for advice!!!!!

#61 Berniebee on 01.09.14 at 11:39 pm

#34 -=JWK=-

And after pocketing your piece of paper, there’s 30 years of outrageous work weeks. But it gets old after the customary divorce and having kids who refer to you as “the asshole”.
It’s then that you realize that If you or your coworkers are using the term “work-life balance” regularly, you don’t have any.

#62 active on 01.09.14 at 11:46 pm

Great post. I’m 29 living in delusional Vancouver. I earn just over $60K per year and am just happy to be employed. Graduated in 2006 from Uni, paid off my student debt in early 2009 and then started saving aggressively afterwards. Luckily the 2008 melt did not affect me. Contribute $1000 monthly to my investments starting this month after contributing $700 per month over the prior 2 years. I have slowly increased my monthly contributions since 2009. Fixed income? Hell no! I am 29, it’s all about growth and as Garth mentions, I have time on my side. 100% equities diversified in CDN, US, Global funds. 5 year compound annualized return just under 13%. No joke. Could of been higher if my Global equity fund performed better, and it has over the past year or so. Net worth just over $110K now, no debt, don’t own any real estate and don’t want to at this time.

See, Garth, there is hope for us twenty-somethings….well, maybe not.

#63 45north on 01.09.14 at 11:54 pm

jwk: You will stumble home on the 23 or 24th exhausted. You vow not to go back. it’s impossible. But you get an email. You passed.

congratulations, 30 years ago I started the process to get an MA then realized I couldn’t. Good decision.

#64 Smoking Man on 01.09.14 at 11:56 pm

#34 -=jwk=- on 01.09.14 at 10:28 pm

Job well done, you make your quest for an MBA sound like lost solder crawling his way though the Vietnam jungle during a napalm strike.

This is what you actual did.

You spent a lot of money filling a garage full of tools, only to discover when your done, your job, change a tire.

One good wrench is all you needed, as time goes by you forget where the tools in the gradge are.

You go to Google to find them. It’s free.

Waste of money.

#65 RayofLight on 01.10.14 at 12:01 am

I am a retired Engineer, and I took an MBA during the nights , part time, because I had a home ,wife and small children to tend to. It turned out to be an endurance contest. In the end I doubt it helped my career much. I had to focus my energies on work and then classes at a time when maybe I could/should have participated more with the kids . The risk/reward equation is different in hindsight. Just saying…

#66 Andrew Woburn on 01.10.14 at 12:05 am

If we train children to avoid risk to the extent they can’t even walk to school, if we teach them that life is fair and that every one gets a ribbon, perhaps we shouldn’t be surprised that they panic and run for cover when they meet real life. If this generation seems conservative now, wait till housing melts.

#67 bentoverpayingtaxes on 01.10.14 at 12:14 am

Hmmm… I may be dating myself….but 1984 was no time to be investing in real estate either……( except maybe in retrospect) the collapse that had begun in late 1981 was cascading into a sublime frenzy of puking. It went from writing offers on the front lawn and fist fights to screaming jelly and jingle mail……oh….the good old days.

“Today the kids face a stuttering economy, disinflation, salary shrinkage, Boomer decay and a legacy of debt. It’s simply wrong to impose a strategy that worked in 1984 on people trying to find their way in 2014.”

It wasn’t until 1986 when Britain handed 7 million Hong Kong souls to the goose stepping PRC that real estate popped…in 1986…..of course HAM is a very unpopular term around here……maybe the initial wave were just ‘piglets’?

Lest we forget….stocks are a forecasting feature of the economy. While we will continue to see rampant unemploynet…and 1600 hundred people show up for a single McJob….that too was the case in the early 80’s when it seemed the world had fallen apart. So…while the marke of stocks is rip roaring now in contradiction to the labour market…..we expect that Mr Market is telling us something….that the macro sights better days ahead.

May I remind you that there is a risk component to everything….in every one of the six functions of a dollar. Nothing is safe…..ever. Avoiding stocks at this point is idiotic. At zero the negative corelation of bonds to rising rates is a disaster for bondholders. In the 80’s it was the opposite….which is why guys like Bill Gross cleaned up……but that has changed….unfortunatley all the text books were written by boomers for boomers life experiances and the schematic of a balanced portfolio is functionally obselete.

The stock market is producing doublers and triples….and more ….because the macro in the distance is signaling a resurgence on the far horizon. I haven’t experianced a better time to stock pick since the early eighties….avoid the stock market at your peril. These are the good old days.

#68 Retired Boomer - WI on 01.10.14 at 12:14 am

After reading some of the posts tonight, got me thinking….a dangerous thing as I can smell the sawdust burning.

Gathering up TAX data for that April 15th thingy coming up. Also ran across a “Net Worth Statement” made in late Dec 2010. We had been doing that since the late 1990’s when we started getting REAL about paying off our debts.

Back then, 2 car payments, a mortgage, the occasional credit card that didn’t quite get paid off… you know your typical 40 something household. We did contribute regularly to our 401K’s and even tried to fund the ROTH’s.
Well, it takes a bit to get stupid cleared up, and to learn HOW best to deploy those investment dollars for balanced growth. Since I had 20 years til retirement thought a 75/25 stock/bond mix was ok. It was til 2000,2001, and repeated largely in 2008 -but I did see that one coming went to bonds in spring 2008, back to balanced in March 2009.

Tonight decided to re-do that “Net Worth Statement” especially after reading Jeremy’s dismal post at #36.
Guess what? Using the same home value at 2010, reducing the cars for depreciation, and the household;d stuff…net worth is now $1,034,018 (conservatively).

Sorry Jeremy, that saving with risk DOES work, but one must not panic and sell out at the bottom. Trust me, I do NOT like to lose money, but it does in fact happen at times. So does illness and death, get used to it.

#69 Andrew Woburn on 01.10.14 at 12:15 am

Vancouverites are used to seeing their city used as a movie stand in for Seattle or LA but Weihai?

http://whispersfromtheedgeoftherainforest.blogspot.ca/

#70 Grantmi on 01.10.14 at 12:20 am

#15 Tri-Guy on 01.09.14 at 9:47 pm

I fear my wife’s reaction to all my bad investing if she were to read this blog

Get her a bear. — Garth

Here you go Tri!

http://bit.ly/JLSepP

#71 AB Boxster on 01.10.14 at 12:24 am

Excellent post today.

I think what we are seeing with youth, is a symptom.
The question though, is what is the disease?

2008 is a good candidate.
A significant number of major banks, investment firms, mortgage lenders, rating agencies etc. perpetrated
some of the biggest frauds and partook in some of the most unethical (if not illegal) behaviors in history.
Many rewarded by massive TARP funds, total bailouts and little accountability. Yet the average citizen who purchased their triple A rated securities (junk – thanks Moody’s) or who lost their jobs in the recession, likely their homes, well “buyer beware, no safety net for you”.

Youth tend to be more idealistic than us older cynics.
Could it be that youth are displeased with the way this system is working and so have little interest in participating?

How about the fact that to create a ‘balanced portfolio’, ask 10 financial advisors and you will get 15 answers, none of which will provide what is required because there is no legal requirement for advisors
to act in your best interest.

Perhaps the fact that younger workers do not have company pensions, or are working in part time or contract jobs that have little income security. Or the fact that with globalization forces at work young people are really unsure what they should be trained or
educated in to achieve some semblance of a career that can last 30+ years.

It’s much easier to take some risk if:

-one believes that the industry is not stacked against

– one can trust that if something illegal is done to you, that there will be consequences to the ones committing the crime and you would actually be compensated for the theft.

– one has a steady income , or income potential, some of which is disposable and can be leveraged in risk to gain higher reward.

Is it any wonder they invest in secure items like GIC’s?
When they are between contracts, or lose their job to ‘Mike in Mumbai’, at least they know 100% that the money is there. Not servicing the debt on their RBC Financial advisors new beamer. Not 20% lost, because their FI was unable to rebalance their portfolio in a timely manner.

So is it any wonder they invest in real estate.
It is real, tangible, can be evaluated independently, can be updated, renovated, touched, felt, lived in, rented out, etc.

Does it make any sense to purchase in this asset as an investment now, at current prices? No way.

But it is a pretty damning indictment of the current economy, the results of the recent financial disaster, and of the financial services industry and the ineffective rules that govern it, if the only thing that seems a reasonable investment right now to so many,
is overpriced real estate.

#72 KommyKim on 01.10.14 at 12:32 am

RE #42 I Paid For Weed Now Weeds Paying Me on 01.09.14 at 10:50 pm
I wish they had a marijuana ETF. Is weed even an asset class?

The closest thing I’ve seen is the VICEX mutual fund. It’s mostly guns, alcohol, tobacco, gaming and defense/aerospace companies. Comes with a MER of 1.5%, but hey, a little vice is gonna cost ya!

#73 John on 01.10.14 at 12:44 am

It’s fascinating how many people on this blog are just so freakin’ amazing. They apparently work harder, are smarter, have the most intelligent kids, and are far wiser than previous generations no matter where they fit in. And of course wealthy, successful investors.
Well done everyone…

#74 Fleabitten Monkey on 01.10.14 at 12:44 am

Hi Garth, what do you think Flaherty thinks when he hears about the spew Soper and company are putting out there all the while knowing very well the economic conditions facing Canada and its citizens? Any sentiments about what, if any, additional measures he may take this year re: housing?

#75 Shawn on 01.10.14 at 12:50 am

Gambling or Investing?

I’d say: They confuse INVESTING in stocks with GAMBLING in stocks. And it’s not just young people.

Someone posted here a few days ago that they understood stocks tend to outperform bonds long term and they accepted the volatility and went all in stocks.

I have pretty much done that since 1989 and only started to hoard some cash when the portfolio out into 500k range some years back. I just had faith that stocks would outperform especially when well-chosen.

Got lucky and only lost 23% in 2008 and overall things have worked out great. Went all in stocks with a bit of leverage in early 2009. Scary though.

#76 longterm on 01.10.14 at 12:55 am

#49 Two-thirds on 01.09.14 at 11:02 pm

Don’t enter automatic stop losses. They are visible to traders who could take advantage of you and you have to constantly re-enter them once they expire.

Far better to use tradestops.com to track your portfolio. It uses trailing stops – you set the % – that automatically follow the price of a security upwards. You get an email and/or text if/when the price drops off the most recent high and hits your stop. You can then login to your brokerage account and execute a sale manually. I track 6 portfolios this way with over 80 securities and I don’t have to constantly enter new stop losses in brockerage accounts. I just set my trailing stops at either 10% or 25% depending on the security and then only act if I get an email alert.

As an example, yesterday I sold my holding of UK supermarket chain Morrisons after my 10% trailing stop [off the most recent high] was hit at the close of markets on Tuesday and I got an email alert. I locked in a capital gain of 14% plus dividends over the past year and a bit. Today Morrisons tanked 7.53% but I had cashed out yesterday by mechanically and religiously following my stops.

#77 learningfromyou on 01.10.14 at 1:05 am

Thank Garth for this post

Below I include reference to the power of words, there is a science behind the persuasion.

http://www.ted.com/talks/rory_sutherland_life_lessons_from_an_ad_man.html

#78 longterm on 01.10.14 at 1:06 am

#62 active on 01.09.14 at 11:46 pm

Nice one mate – well done to you.

I didn’t secure a ‘real’ job until I was 32 after I moved from Vancouver to London. But then over 7 short years I destroyed my debt and then went on to save and grow through investment $296,000 while managing to travel to 43 countries including a 15 month round the world trip.

I didn’t work in banking – merely lowly publishing – but I did live with flatmates for all of my 30s which isn’t for everyone but it was great for the social life and splitting rent and bills 4-ways. The flat was a place to sleep while London was a place to live.

#79 Fortune500 on 01.10.14 at 1:11 am

I’ve always questioned the argument that ‘at least if the housing market tanks I still have a physical house/property’, like that is the end of the story.

If the housing market tanks, and consumers turn further in on themselves and stop spending, what do you think the government will do? Keep in mind that we have become a consumer economy that heavily relies on Canadians buying more and more (mainly via debt). If this stops, the government better hope the oil/gas sector can save us all.

We have made huge commitments to provide services/pensions etc. to aging boomers and the government would need to generate tax dollars somehow. Owning property in Canada means you are making a bit of a gamble in regards to future taxation (property tax, land transfer tax, heating, etc. etc.). Sure this is true of other assets, but its not the 1800s. You don’t pay off a house and ‘own’ it anymore. It owns you. Just try to keep up …

#80 Frustrated Kiwi on 01.10.14 at 1:12 am

I think Garth’s right and attitudes have changed. I wonder if it’s in part because the fear of running out of money is so much less (with government support being the norm). My grandmother was a young adult in the Great Depression, a retired school teacher, and a lot of her retirement income came from dividend paying stocks. It was just what people did (or at least that’s my impression).

#81 Roman on 01.10.14 at 1:13 am

How are those dudes who shorted canada are doing? They gonna show suckers what real investment means.

#82 Son of Ponzi on 01.10.14 at 1:14 am

SM,
Go ahead, google as much as you want.
All you get is washed out facts and research.
Google is killing new ideas.
People get lazy. Original thinking and research is dead.

#83 Tony on 01.10.14 at 1:32 am

Re: #4 Ralph Cramdown on 01.09.14 at 9:32 pm

With lying season slated to start today how is America going to lie their way out of this one? Fourth quarter profits have nosed-dived… what else is new? I suppose this will be great news for Wall Street and it will make new highs. Yes higher P/E ratios make for higher stock prices I guess that will be the caption today. Alcoa Steel will guide forward but Wall Street will rejoice that earnings won’t drop more.

#84 Jon B on 01.10.14 at 1:33 am

Very interesting topic. The younger generation is being lied to like no other in history thanks to the power of mass dissemination of (mis)information.
List of liars:
1.) The banking industry
2.) The real estate marketing industry
3.) The financial products marketing industry
4.) Government

All have a set of objectives that are only realized if the masses are both controlled and exploited.

There’s a big difference between a late night infomercial trying to fool you into buying their product and one of the above attempting to derail your lifestyle for their long term gain.

I’m in gen x and have not been victimized. I worry this world is just getting tougher on young people. Shouldn’t be this way.

#85 D.D. Corkum on 01.10.14 at 1:35 am

As a twenty-something, what scares me is that my efforts to take risks and invest will ultimately be punished by my peers when they finally grow up and start voting.

And that’s assuming I’m not punished sooner by people older than me who presently vote.

#86 Tony on 01.10.14 at 1:44 am

Re: #36 Jeremy on 01.09.14 at 10:29 pm

The late Martin Zweig referred to “market timing” as “strategic switching”. It was he who coined that phrase.

#87 Nodebt on 01.10.14 at 2:01 am

#58 Carpe Diem

Ah men! You couldn’t of said it any
Better!

#88 Derek R on 01.10.14 at 2:04 am

#52 Carpe Diem on 01.09.14 at 11:11 pm asked:
Garth,

Is she one of your Amazon’s?

Wow!

No, she’s just a photogenic showbiz bear. Very friendly though.

#89 juno on 01.10.14 at 2:15 am

Absolutely crazy. A properly licensed Broker or investment advisor and never publish that. If they did, the board will come down on them like flies on dung.

And yet the real estate community has absolutely no regulations backed by a spineless government and financial officers Carney and the Elfie.

God bless Canadians, cause your government is not looking at the best interest of the average Canadian, but is just statisfying the bankers and the special interest lobby groups whom put them in power.

#90 L Lawliet on 01.10.14 at 2:18 am

My sister is dead set against investing. She considers every type of investment either a gamble or scam. She’s been saying for years that if one can invest for yield and retire, then why doesn’t everybody do that? Why do people work past 45 at all? She’s more than happy to work until she dies.

#91 Tony on 01.10.14 at 2:25 am

Re: #42 I Paid For Weed Now Weeds Paying Me on 01.09.14 at 10:50 pm

Too late, sell on the news

http://business.financialpost.com/2014/01/09/marijuana-stocks-soar-as-speculators-see-green/

This has to be the epitome of sheer stupidity bidding up something that people in Colorado can now grow for free. You’ll see these companies or penny shares will go to zero and the ones that survive will lose more than they gained in the past month. Incredible the gullibility of some people.

#92 Christopher Lackey on 01.10.14 at 2:49 am

Boo frickety hoo. When I read stuff like this I am disgusted by what a bunch of whiny pussies me and my fellow 30 year olds have disgracing us in the media day in day out. The people who have made”confused”, “paralyzed”, “disillusioned”, “entitled”, etc the words used to describe our generation. Garth I admire your stoicism in the face of this.

“I don’t want to invest because of 2008 I’m just going to leave my money at 1%” I am learning that its cold comfort leaving these people in the dust and figuring out what 95% of people can’t, and who would rather wallow in ignorance and self-pity in this golden age of investing we have thanks to books, the internet, discount brokerages and Garth. God bless him for trying to educate the masses because I’ve given up

#93 Ozmania on 01.10.14 at 3:15 am

All good here in Oz . . .
http://www.realestate.com.au/property-house-wa-subiaco-115806691

#94 Blacksheep on 01.10.14 at 3:28 am

This is not fear, it’s enlightenment.

I see it in my daughter and her peers. The young are ‘seeing’ the system for what it is. Don’t give your $ to some one else to handle. Start your own business. Something small on the side. You may fail, but you will learn. At least your in control.

Don’t be fodder for the machine.
Don’t be afraid, be empowered.

#95 noodles 79 on 01.10.14 at 4:05 am

I was on break, sitting among 10-12 co-workers. There were a few conversations going.The one that caught my attention was a trio talking about real estate. Two owned property and one didnt.The poor renter was getting a lecture on pride of ownership.l sat and thought ‘bull shit’,but l didnt get involved,l stopped getting involved when the subject of RE is mentioned.I just sat and listend.Anyway, these two land baron, one property geniuses were bombarding this guy with all the standard bs.’its a good time to buy’-‘houses never go down’- ‘your wasting money renting ‘ .Blah,blah blah.I fealt sorry for the poor renter,he looked ashamed for not owning property. His only defense was that he just couldnt afford it. But they kept on bombarding the poor guy.l could literally see him shrinking in his seat. Then the renter looked at me and asked “Do you own a house? ‘ l said ‘no, l dont’. And the same way I saw him shrinkingin his seat a few minutes earlier,l could literally see a sense of relief come over him.He wasnt alone.The conversation ended, it was time to go back to work.l would not have writen today,except, todays experience reminded me of a pyramid scheme.Recruit, recruit, recruit,keep it going. Everyone who ownes a property is guilty of it in a way. When their pitching home ownership, you never hear about the pitfalls, but any other time, all you hear is complaints about the pitfalls,higher maintanence costs, taxes, trades people etc, etc etc..Theres a lot of confused people out their, they dont realise bragging rites costs them money.But they keep recruiting, cause if it stops, they wont have anything to brag about any more,all theyll have are the pitfalls.Anyway,it all reeks of pyramid scheme, and we all know how they end!

#96 Spaceknight on 01.10.14 at 4:10 am

BTW, $5K/year in a TFSA for 30 years gives $820K. Three Bentleys. — Garth

How do you come up with $820???

7% compounded. — Garth

#97 unbalanced on 01.10.14 at 7:18 am

Off topic here. Alot of people hate mutual funds because of their high Mer’s. Mawer Balanced Fund sure has an impressive record What you blog dawgs think.

#98 Obvious Truth on 01.10.14 at 7:56 am

A lot of post on youth and some great observations. Those even younger have less trust in our institutions. They aren’t bound by them. They love digital currency and new ways of doing things. They see fees to banks as lunacy. They are used to free everything on the net. They know how to get an idea funded without banks.

My contrary opinion is that they have more freedom and access to knowledge than we ever did. Zuckerberg and some of his youthful contemporaries are the new leaders that will shape our world. They think different.

It’s similar to Bill Gates revolutionizing the world in the 80’s and creating industries that supplanted the stodgy resource and banking barrons of old.

Kids now see Microsoft that way.

Like Microsoft gave many people purpose a generation ago mobile apps are doing that for our youth now.

Change is happening all over again. Go kids.

#99 World Traveller on 01.10.14 at 8:34 am

#24 Son of Ponzi on 01.09.14 at 10:07 pm
The kids will be alright.
Work hard, shun credit to buy toys, drive your car into the ground.
And most of all, don’t trust the snake oil salesmen.

So True, I remember a few years back I worked for a software company and the president was a young guy with a BMW. I thought he had a lot of money and cash flow. In our satellite office I found a box with opened collection letters from over a dozen companies addressed to him. Needless to say, I started sending out resumes that afternoon.

#100 World Traveller on 01.10.14 at 8:37 am

#95 noodles 79 on 01.10.14 at 4:05 am

Ah, I really long for the days when people minded their own damn business!!!

#101 rosie "moving forward" in the knowledge that, "this won't end well" on 01.10.14 at 8:37 am

I always sensed an aura around the material girl.

http://www.bloomberg.com/news/2014-01-10/madonna-addicted-to-sweat-dance-plugs-toronto-condos-mortgages.html

#102 TurnerNation on 01.10.14 at 8:50 am

Bet he bought Bitcoin. Cause everyone’s doing it and computers are like cool and stuff.

Before the online trading revolution financial markets were a domain of rich and sophisticates. What’s wrong with a return to normal times?

#103 Ronaldo on 01.10.14 at 8:50 am

#95 Noodles 79 – probably the same group that were huddled around the water cooler back in 09 discussing the low interest rates they got from the bank to buy that 850,000 dollar tear down. ‘Geez, I got a prime minus for 1.75% etc, etc’. Now with rates going up, they know they are screwed but they have to keep the momentum up because that illusionary equity that was created by these super low interest rates is about to disappear.

#104 Mr. Frugal on 01.10.14 at 8:58 am

#34 -=jwk=- on 01.09.14 at 10:28 pm
======================================

You are aware that an MBA is old news. Alot of companies paid to have senior executives take the executive MBA program for the sole purpose of providing them with a nice certificate to justify their positions. This has diluted the value of an MBA. Garth is right – nobody cares. If you really want to make some dough, learn a trade – like plumbing.

#105 Ralph Cramdown on 01.10.14 at 9:01 am

#83 Tony — “With lying season slated to start today how is America going to lie their way out of this one?”

Same way they always do. The media will breathlessly report which companies “beat” and which ones “missed,” as if it was company profits that missed analysts’ estimates rather than analysts getting it wrong. Few will bother to compare this quarter’s earnings with those of a year ago, Zeroedge will discover a few stinkers and extrapolate the apocalypse from it, and we’ll do it all over again in three months.

Here’s something you never hear: “The weather disappointed today. Temperatures were in line with predictions, but meteorologists were expecting a beat.”

Profits are expected to see an 8% growth in Q4. — Garth

#106 World Traveller on 01.10.14 at 9:04 am

Any advise on how to invest with the falling Canadian Dollar?

#107 yorel on 01.10.14 at 9:21 am

In us US, university students are showing up in the professor’s office to demand an “A”, accompanied by their parents and a lawyer.

#108 yorel on 01.10.14 at 9:22 am

Correction:

In the US, university students are showing up in the professor’s office to demand an “A”, accompanied by their parents and a lawyer.

#109 Julia on 01.10.14 at 9:36 am

Oooooh the smell of desperation mixed with the smell of Madonna’s sweat. http://www.bloomberg.com/news/2014-01-10/madonna-addicted-to-sweat-dance-plugs-toronto-condos-mortgages.html

#110 Dual Citizen in Canada on 01.10.14 at 9:38 am

Garth’s blog should be mandatory reading the first week of any MBA program, then watch the drop out rate as students finally, “get it”, meaning real world testimonials and experiences. What is taught in schools is old and archaic. Invite everyone you know to read this blog to become economically immunized to any environment. Book sense will not cut it in this new world, it’s all about practicality; the do’ers vs the talkers

#111 economictsunami on 01.10.14 at 9:42 am

Look at Canadian labor data – much much worse than expected – -45.9K vs +14.1K expected…

Canada’s job market is leaving younger workers behind:

http://www2.macleans.ca/2014/01/03/canadas-job-market-is-leaving-younger-workers-behind/

As for the US jobs number:

74k on a consensus of 197k.

2/3rds of jobs in the jobless rate due to workers falling out of labor force.

The corker: jobless rate dives to 6.7%!!!…

#112 live within your means on 01.10.14 at 9:47 am

#55 not 1st on 01.09.14 at 11:18 pm

The only safe industries I see are mechanical engineering, CAD/CAM design and resource extraction.
…………………….

Hubby took CAD/CAM 26+ years ago. Loved it, but couldn’t find a local job at the time. Eventually found one but year later co. moved to the US. So he
worked in hydraulics for a few years (his old trade). Got fed up with co. then took a year’s IT course & found good work in it. Has been an IT tech spvr. for several years.

When he moved here 28 years ago, to be with me, he spoke 3 words in English so took 6 mo. ESL training. He took whatever jobs he could find immediately after – no job was beneath him. Tho he wasn’t a mechanical engineer, he helped out a couple of engineering students.

#113 live within your means on 01.10.14 at 10:00 am

Did anyone watch Lang & O’Leary last night? They were talking about RE & TFSA’s. O’Leary said as soon as his last child moves out, he’ll sell his big home, even if he loses money on it, & rent a condo instead of buying one.

They both agreed how stupid it was to invest in GIC’s & Lang was upset with the bankers’ advice re TFSA’s. So what’s new.

I know we have made some bad financial decisions in the past, e.g. investing in mutual funds.

#114 IM in C on 01.10.14 at 10:04 am

#34 JWK
Education you acquire after age 25 will have little impact on your career ***unless someone else is paying for it !!***
Otherwise, what you are most likely doing is putting a 50 dollar saddle on a 10 dollar horse, which is what universities today are in the business of.

#115 IM in C on 01.10.14 at 10:06 am

Garth
I have been wondering.. if it isn’t different here, why didn’t the Canadian house market collapse in lockstep with the American market?

#116 gmc on 01.10.14 at 10:08 am

Why not gold stocks at this point, like Allied Neveda at $3 in my TFSA. or NOVO which could be the next Witwaterrans Basin type deposit in Australia.!!! at 30 cents /share
What the world has witnessed in the past calendar year with gold flowing from the West to the East is truly unprecedented and historic. This has never happened before in history, and more importantly, this gold is not coming back. Importantly, this gold will not be available for the Western central banks to lease again. This gold has gone into a million private hands in the East and it is going to say there.”

Gee, Mikey took his pants off outside. Let’s all do it. — Garth

#117 Toronto_CA on 01.10.14 at 10:09 am

Too scary? The job numbers. Ouch. 60,000 full time jobs lost in a month. I usually multiply by 10 for US figures, and if the US had lost 600,000 full time positions in a month they’d be alarm bells going off like nutso. Of course the US jobless rate fell to 6.7%, while ours rose up to 7.2%.

This ain’t looking good.

#118 Ralph Cramdown on 01.10.14 at 10:17 am

#102 TurnerNation — “Before the online trading revolution financial markets were a domain of rich and sophisticates.”

Hardly. There was a time when every mass-market urban broadsheet in Canada printed the stock quotes five days a week — all of Toronto’s and most all of Vancouver’s, with popular bonds listed on Mondays. Even the tabloids printed the top stocks and mutual funds. The Northern Miner was stocked at most newsstands. Depending on where you lived, the newsy local radio station would report, hourly, the prices from the grains trading pits in Winnipeg or Chicago, or oil or gold prices.

#119 JM on 01.10.14 at 10:21 am

Wow, look at the US ecomony roaring out of the gates!!! **sense the sarcasm**

http://www.bloomberg.com/news/2014-01-10/payrolls-in-u-s-rise-less-than-forecast-jobless-rate-at-6-7-.html

Can’t even create jobs during the busy holiday season and yet the unemployment rate goes does. Maybe the BLS has some former CREA staff doing their numbers.
We’ll see how Ms. Yellen takes all of this and how long the QE taper continues.

Corporate profitbility will continue, as well US stock advances. I think you should worry more about jobs and houses here. — Garth

#120 Obvious Truth on 01.10.14 at 10:22 am

Nice number in canada. The societal impacts of the housing wreck will be tragic.

It’s already here.

For those that think the ant will pay. You are wrong. When things go south they will do everything possible to encourage investment. Any we have the money.

Hope we don’t have to read too many gold entries today.

#121 live within your means on 01.10.14 at 10:24 am

Canada lost 45,900 jobs in December

http://www.nationalnewswatch.com/2014/01/10/statistics-canada-says-45900-jobs-lost-in-december-unemployment-rate-rises/#.Us_56fRDvDU

With ageing boomers looks like a profession in health care is a good future bet.

#122 Jobs Numbers are Brutal (but RE is ok right?) on 01.10.14 at 10:27 am

Scary employment numbers….but hey we’re different here so why shouldn’t the average 416 detached go for $800k ? LOL

http://www.theglobeandmail.com/report-on-business/economy/canadian-jobs-december/article16277977/

#123 JM on 01.10.14 at 10:29 am

Corporate profitbility will continue, as well US stock advances. I think you should worry more about jobs and houses here. — Garth

Garth, I agree, Canada’s economy is NOT doing well, however, with the US being our largest trading partner, that is a reflection of them not doing well.
You are such a politician. Because a fudged BLS is getting better, the DJIA is going up and corporate profits are at all time highs, the economy is doing well.
Is that all that factors into the equation?

The US is in slow recovery, we are in slow decline. How is that not evident? — Garth

#124 MikeM on 01.10.14 at 10:39 am

This is a great description of me Garth.

I’m a Gen Y and I have no idea what to do with my money. I have cash sitting in my RRSPs rotting away with the Loonie prices and my Canadian ETF TFSA investments digging deeper in the red. With the Stock market up 15%, what do I invest in? Everyone has mixed results. An advisor I know has been shorting equities and actually was sued for not doing his due diligence, yet he continues to believe that the USD will disintigrate into the next Mark .

#125 Smoking Man on 01.10.14 at 10:39 am

Usdcad on fire
CANADA BONDS being gobbled up. Driving down yields
Crap job numbers non farm

Nothing to see move along

#126 boob on 01.10.14 at 10:42 am

Of COURSE we’re scared because of 2008!!! All of these “captains of industry” types royally flushed away what we did have invested so they could decorate their freakin offices!!!

Ya, sure, I’m still in the market but that doesn’t mean I trust it. It just means I haven’t figured out a better way to ensure my (and soon to be offspring’s) future yet.

Start hauling the pirates off to prison (NOT just Madoff, there’s alot more of them!) and do something to curb the rampant greed the markets bring and maybe I’ll trust again.

This blog is beyond disturbing today. — Garth

#127 Bob Rice on 01.10.14 at 10:47 am

Garth, for those 20 and 30-somethings starting out in investing, do you think that a simple index fund or two would be a good place to start if investing only $5000-$10,000? ETFs, Preferreds, etc… all sound tempting, but may be too much (i hear ETFs are best for larger portfolios – over $50K for tax efficiency reasons). The simplicity of an index fund (US, CDN, Intl) seems like a good place to start for the first few years…

This is what I’ve told others just starting out…

Thoughts anyone?

#128 Dogman01 on 01.10.14 at 10:56 am

#97 Unbalanced
I have few MF but the two I have are Mawer.
Mawer New Canada from before Garth enlightened me. But keep what works!
The Global Small cap as I figure professional guidance has value in picking & research in that arena.

I read a pretty good book “What’s good bad and downright awful in Canadian Investing”
Had some interesting things to saw about the Finance Industry

#129 Big Brother on 01.10.14 at 11:01 am

#17 Smoking Man on 01.09.14 at 9:51 pm
#8 shane on 01.09.14 at 9:37 pm
Garth, you should do a blog on the future for small business is canada a good place to buy income producing business
Ever think of starting one from scratch. It’s fun. Few years ago the UCC told me that big brother was watching, watching everything. I invented keysme. Not a public key but a private key incryption software. I can’t even spell encryption but sales this year 6.2 million.
3 employees.
You know what big brother is looking for,
1 merger and acquisition
2 patients before they become pattents
3 Banking info
4 Congress men’s thoughts
5 civil decent
6 terrorists
And in that order.
Even out brightest schlores have no idea.
When I gave out of for free bata testing most downloads came from Russia, those people know all about big brother.
——————————————————

MKULTRA says Big Brother is not looking for these things at all Smoking Man. We are looking for and examining methods of influencing and controlling the mind, and of enhancing their ability to extract information from resistant subjects during interrogation. We have made a huge mistake with you however; your dysfunctional spelling is making it harder for us to control you. We now have to deliberately miss-spell our directions to you via the UCC to achieve our commands. We will be watching you at the Casino all weekend, just look above your head into the cameras, yes that’s us watching your every move. We are everywhere.

#130 JM on 01.10.14 at 11:03 am

The US is in slow recovery, we are in slow decline. How is that not evident? — Garth

Some might argue that US is in no recovery. Take a look at the big picture and don’t cherry pick facts that support the point you are making.

Every major indicator is consistent. The US recovery is ongoing. Not so much with us. — Garth

#131 Victor V on 01.10.14 at 11:03 am

http://www.theglobeandmail.com/report-on-business/economy/canadian-jobs-december/article16277977/

The Canadian economy unexpectedly shed 45,900 jobs last month as employers cut full-time positions.

The country’s jobless rate rose to 7.2 per cent in December from 6.9 per cent as more people looked for work, Statistics Canada said Friday.

Canada’s job growth slowed by year’s end as a string of companies, from Sears Canada to Potash Corp. and BlackBerry, announced job cuts while a wave of manufacturers, particularly in Central Canada, said they plan to close plants. Through 2013, job gains in Canada averaged 8,500 a month, a sharp drop from the average of 25,900 new positions per month in 2012.

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

This will not end well.

#132 Chris L. on 01.10.14 at 11:15 am

You need a new mantra for gen x and y. Because our biggest risk is not “running out of money” – that’s for geezers.

We have our health and can always “make money.” Our problem is trying to pry enough resources from the over-consuming elderly to have a decent shot at the middle class.

A dollar saved is one that can not be confiscated from us from a geezer!

Wrong. The biggest risk you face, with an adversarial, anti-investing and fear-laden attitude, is in fact running out of money. When you realize I’m right, guess what? Screwed. — Garth

#133 Bottoms_Up on 01.10.14 at 11:19 am

Another great post Garth, half a decade of blogging without missing a beat. Did you know that ants never sleep? A tidbit that fits nicely with your previous post….and your work ethic.

#134 G on 01.10.14 at 11:19 am

Young people increasingly do not understand nor trust equity market performance. And much of this understandable. The U.S. economy has still not recovered from the great recession, interest rates are at all-time lows, yet the S&P 500 returned 30% last year! Is the average person able to explain why this happened?

Global markets generally feel too connected and most people probably feel that equity markets are just too unpredictable. Although 2008 was 6 years ago, it was only about two years ago that equity indexes were showing record extreme day to day volatility. Until people see a recovery in the “real” economy, they will likely remain spooked by equity markets.

That’s no excuse to invest in nothing at all. It’s not GICs or stocks. Have you learned nothing here? — Garth

#135 heineken on 01.10.14 at 11:25 am

Lessons learned from 2013:

the markets are rigged and manipulated.
and nothing works better to redistribute wealth than the system of central banking introduced to us 100 years ago.

Words penned by a person who blames others for his own mistake. — Garth

#136 Ralph Cramdown on 01.10.14 at 11:32 am

#116 gmc — “Why not gold stocks at this point, like Allied Neveda […]”

Looking at Allied Nevada in particular, it’s down 90% in 2 1/2 years and has never paid a dividend. It specializes in mining a commodity whose price is declining.

More generally, gold miners: They mine a speculative commodity whose price is declining and whose investors are showing no signs of capitulation. Myself, I’m going to wait until six months go by without any goldbugs popping up on this blog. Then I’m going to wait another five years. Then I’ll buy some gold, maybe. I reserve the right to short it occasionally between now and then.

On miners generally: You have to understand how analysts value a mine. They figure the likely size and concentration of the ore body, the cost of building a mill and concentrator and running the mine until it runs out, and they heavily discount those future cash flows according to all of the risks (political, commodity price, labour cost, flooding…) that miners face. The assumption is that the owners get to keep the profits. That’s why back in the old days, the saying “this business is a gold mine!” meant it would produce large profits for the owners. These days mining execs use the cash to fly around the world first class telling everyone how great they are at digging holes, to dig more holes, and to buy other companies that also dig holes. They have proven themselves very adept at overestimating their project management capability and underestimating costs, irritating governments, paying way to much to buy assets, and dumping shareholder value down the mineshaft by the ton.

If you’re going to invest in a mining company knowing that the profits will be reinvested in other mining ventures rather than paid to you, you should use a MUCH higher discount rate that the analyst who valued the mine did. It’s like going to the casino with $100 and a promise to yourself that you’ll keep betting, win or lose.

#137 ☢ ☢ ☢ on 01.10.14 at 11:32 am

#122 Jobs Numbers are Brutal (but RE is ok right?) on 01.10.14 at 10:27 am
Scary employment numbers….but hey we’re different here so why shouldn’t the average 416 detached go for $800k ? LOL

http://www.theglobeandmail.com/report-on-business/economy/canadian-jobs-december/article16277977/

There was a smart guy around here saying that the government managed to bridge over the recession that other countries experienced on the account of the RE sector. Then these numbers must be wrong, we just bridged over it, how the heck can these numbers be true?

PS: the americans did not bridge it but their numbers sucks. Some call that a recovery/success too!

#138 Capt. Obvious on 01.10.14 at 11:36 am

@#124 Mike

Read William Bernstein’s The Four Pillars of Investing.
It is the best introduction to investing I have ever come across, and Bernstein has an engaging writing style. It’s a bit US centric, but those differences should be obvious. Helpfully it also includes an excellent reading list to follow up with.

#139 Capitalist Driver on 01.10.14 at 11:38 am

“….MIL thinks I should work for the Government – a ‘safe job’. They’ve got every penny squirrelled away in a house… ‘best investment I ever made’ and I’ve been lectured on buying a house (buy a crappy car and a big house, it’ll pay off) …etc.

All my buddies are striving for the Gov jobs, and spend more time playing COD in a day than they put towards investing/business ..etc in a year

Now, don’t get me wrong. The one’s working for the Gov have it made. DB Pensions, little stress, and they seem to never be at work. However, it is a bit emasculating, really, being some civil servant in some cubicle somewhere……”
==================================

OMFG…..

I left the private sector for a gov’t position a while back. After a year I could not find the door fast enough….

What a bunch of lazy people! Just waiting for a hand out. The way those losers would bitch and moan, bunch of pathetic losers…

Coffee breaks from 9:15-10:30am were nice though…

I remember once a co-worker showed a cheque he received after TWO years of union [email protected]! He was so proud, it was for just under two grand. Dumbass, I make that in a day now!

Some had retirement countdown clocks on their screens! Dude, just go home and swallow a bullet!

Sorry, but the Capitalist in me just thinks back to that year and I throw up in my mouth a little….

Garth has it figured out… I am glad the 99% don’t. Somebody will have to serve me my drinks and work at Walmart!

Govt jobs….ya right… Anybody been seeing the cuts Harper has been making? Those jobs are getting scarce, get your knee pads out!

Reminds me of a joke… What’s the difference between an @sskisser and a brown noser? Depth perception!

#140 Herb on 01.10.14 at 11:42 am

TSX up 81 points at 10:25. Are investors considering the job losses to be cost-cutting improvements?

Nothing like a good disconnect from reality to fuel a market.

#141 Detalumis on 01.10.14 at 11:50 am

#10 and #32 I’m amazed how the topic always goes around to boomers, your elder neighbour who you were stupid enough to enable by constantly helping her, that’s boomers as well. The unemployment problem is caused by a 54 year old refusing to retire 13 years before they can collect OAS.

The peak of boomers are under 55, their retirement age is 67 but they are told to move over, you are holding all the jobs so they alone have created the unemployment situation for the entire country. This rule I guess will change on a dime overnight for people that were born in 1965 and not 1964, they are a different generation so can work until 75 without anybody telling them to move over.

I hope all you guys “die young and stay pretty” because you certainly don’t think that you will ever be older than 50 yourselves. 50 ain’t 90.

Every column is blaming boomers, if you replaced that with Jews or blacks or Chinese or women you would be called to the carpet for your bias.

#142 Buy? Curious? on 01.10.14 at 11:52 am

What’s with you and all the animal pictures?

Animals are honest. — Garth

#143 Dual Citizen in Canada on 01.10.14 at 12:07 pm

Garth, please include sheep in your photos. I think the word, “sheeple”, should be added to the Oxford Dictionary.

#144 45north on 01.10.14 at 12:09 pm

noodles 79: Then the renter looked at me and asked Do you own a house? l said no, l dont. it was time to go back to work.

good story

Im in C: why didn’t the Canadian house market collapse in lockstep with the American market?

the American market is in fact many markets: Florida, New York, California, Texas They didn’t collapse in lockstep. First Florida, a year later California and then another year New York. New York wasn’t anything like Florida. Texas never collapsed at all. Canada is a different country.

There are however similarities like the ratio of debt to income. Like the ratio of purchase price to rent. Like the ratio of purchase price to income. Like the unemployment index. Things are not looking good in Canada. Not good at all.

What happened in the US is not a secret. You can look up what happened. At whatever level of detail you want.

This is going to rock our country. Prepare as best you can.

#145 heineken on 01.10.14 at 12:13 pm

Garth
Assest purchases by the Fed, has not slowed down a muscle.
They haven’t sold a single thing.
The purchasing rate has remained the same.
Treasury bond assests and mortgage backed securities continues with a flurry.
Let me help you find out where the information can be had (google H41 release).

I’ll worry about things that matter. You can fret about that. — Garth

#146 AndrewAb on 01.10.14 at 12:13 pm

Check out this recent Edmonton Journal “article” on a local property:

The realtor superspin is impressive as she tries to explain away the reduction from 18 mil to 12.5 mil (after 4 years on the market) and the 2.8 mil city tax assessment…

http://www.edmontonjournal.com/business/real-estate/Whitemud+Road+home+Edmonton+market+million/9348399/story.html

#147 TurnerNation on 01.10.14 at 12:18 pm

Guess I’m with Cramdown on this one.

Gentlemen, adjust your cravats and cigars and let’s broker some shares!

Nothing so raw as trade.

#148 Ronaldo on 01.10.14 at 12:27 pm

#111 EconomicTtsunami – possibly this will help you understand how the U.S. gov determines the unemployment rate.

http://www.colony14.net/id674.html

#149 SaneVoice on 01.10.14 at 12:32 pm

“That made some sense. It’s been almost six years now since the global financial crisis rolled in and shocked everyone.”

Shocked everyone ? that has to be the understatement of the year ! – Some Financial sector stocks lost 90%, Sir!

Just to make it clear – One Day you have a Dollar – poof – Next day 10 cents – Ha Ha

No amount of Real estate “correction” will do that to you.

End Of Argument.

Insane. A balanced portfolio dropped 19% in 2008 and gained 23% in 2009. What a bunch of unschooled wusses on this blog today. — Garth

#150 Dean Mason on 01.10.14 at 12:34 pm

To Spaceknight #96

Actually Spaceknight it is not $820,000 but it is $505,365 in 30 years.

This is calculated by using contributing $5,000 per year at the start of the year for 30 years earning a 7.00% annual rate of return compounded annually.

Even at $5,500 a year, it is $555,902 in 30 years.

In order for someone to get $820,000 in 30 years, they would need to contribute $5,000 yearly to their TFSA at the start of each year earning a much higher 9.503% rate of return compounded annually.

Even a person contributing $5,500 each year at the start of each year would still need a much higher 9.02% rate of return compounded annually for 30 years.

Check the numbers yourself, anyone.

I wrote a post on this. I stated that $5,500 invested in a TFSA annually for 35 years at 7% compounded yields $820K. And it does. Tax-free, equivalent to an RRSP of $1.1 million. — Garth

#151 Son of Ponzi on 01.10.14 at 12:41 pm

#44
investing is all about faith.
———–
Exactly, that’s why I don’t invest at all.
Also, that’s why it is a mistake to close the Faculty of Theology at UBC, replacing it with Economics.

#152 Canadian Watchdog on 01.10.14 at 12:43 pm

As expected and reported here, a major development for gold has arrived:

Shanghai Gold Exchange eyes launch of international board

Jan 10 (Reuters) – The Shanghai Gold Exchange plans to launch an international board in the city's pilot free trade zone in the first half of this year to attract overseas capital to invest in China's gold market, local media reported on Friday.

"We are pushing for the international board to be launched during the first half," Song Yuqin, deputy general manager of the Shanghai bourse, was quoted as saying in the Shanghai Daily.

"It will definitely be launched within the year," Song said, adding that the contracts on the international board will be priced in yuan instead of foreign currencies.

The bourse is now looking for a site for a bonded warehouse in the zone, he said.

The Shanghai free trade zone, launched in September, is intended to test profound reforms to the country's economic and financial system, including liberalisation of China's currency regime and interest rates

The Shanghai Gold Exchange is the world's biggest physical gold exchange. All buying and selling of spot bullion in China has to happen through the exchange.

It will take a while before western investors understand what China's interbank gold market quoted in RMB means for USD prices. What I will say is prices will eventually move higher and, more importantly, less volatile once reforms are in place.

[self-inserted] Gold is down from it's peak of $1900. This is dead money. —Garth

#153 Kilby on 01.10.14 at 12:47 pm

74 Fleabitten Monkey on 01.10.14 at 12:44 am
Hi Garth, what do you think Flaherty thinks when he hears about the spew Soper and company are putting out there all the while knowing very well the economic conditions facing Canada and its citizens? Any sentiments about what, if any, additional measures he may take this year re: housing?
___________________________________________

It’s pretty much accepted that stress at work can affect ones health. F always looks worried and stressed, even his smiles looked forced. I wonder if he ever thinks “I can afford to retire and enjoy life” I’m sure he could afford to….

#154 Ronaldo on 01.10.14 at 12:50 pm

#115 IM in C – this might help you to understand.

http://en.wikipedia.org/wiki/United_States_housing_bubble

U.S. housing market topped in early 06/07…sub prime rates, resetting at higher interest rates, foreclosures, Fanny & Freddie going broke, jingle mail, etc.

In Canada, government via CMHC backstopping billions in mortgages and the lowering of interest rates from over 4.75 or so to .25 by April of 09. Keep in mind that from as far back as 05, banks were lending for mortgages at prime and up to minus 2% when prime was near 5% so people were getting mortgages at 3% or less even back then although the 5 year rates were around 6% or so. We were in the subprime business too but people could not just hand in their keys to the bank as they did in the U.S. when the shtf. The gov with the assistance of F and C kept the party going. Still going.

#155 Son of Ponzi on 01.10.14 at 12:50 pm

Remember,
It’s never how much you make. It’s how much you spend.

#156 Ralph Cramdown on 01.10.14 at 12:56 pm

#149 Canadian Watchdog — “It will take a while before western investors understand what China’s interbank gold market quoted in RMB means for USD prices.”

C’mon Watchdog, pretty us up a chart showing how Canadian broadcasters’ switching from Fahrenheit to Celsius in the weather reports affected the temperature.

#157 Victor V on 01.10.14 at 1:07 pm

Globe’s Rob Carrick has linked to Garth’s blog from yesterday:

http://www.theglobeandmail.com/globe-investor/personal-finance/carrick-on-money/carrick-on-money-in-a-sweat-about-debt/article16253781/

#158 TorontoBull on 01.10.14 at 1:15 pm

@SM
notice the lack of press release regarding today’s city of Toronto employment #s…

#159 Son of Ponzi on 01.10.14 at 1:15 pm

# 146.
adjust your cravats
————–
So funny.

#160 Happy Renting on 01.10.14 at 1:16 pm

Thanks, Garth, for calling us out as wimps. It’s true and we deserve it, but as #46 (and Cat Food Lady) explains, we come by it honestly.

A few days ago you referenced 50-something middle managers who got sent home and likely won’t work again. We fear becoming them. Though not optimal, it’s reassuring to hug the cash under your mattress at night. An economic recovery might leave us permanently behind someday but we think we won’t starve if we still have all our GIC money. We fear we won’t recover from setbacks, the way some didn’t after 2008.

I wonder if the GFC wasn’t bad enough to really teach us about life. We never got desperate enough to move anywhere for a job, jettison our pride and do whatever honest work there was to stay fed, clothed, housed. No waiting in bread lines like the Great Depression. We 20/30-somethings still aspire to a comfortable, middle class lifestyle. There were still enough jobs (regardless of level of pay), credit, and parents with money and credit that we could afford to live, sign a three-year contract on a new smartphone, stay put and tread water without lowering our expectations too much. We needed to be scared AND desperate to really smarten us up, and we only got the scared part, kept making bad financial moves because it was easy and we could.

Getting our financial house fully in order in 2014. Thanks for a good and relevant post.

#161 Realtor # 1 on 01.10.14 at 1:16 pm

getting interesting – job numbers sucked.

however – bond yields are dropping. Low interest rates for a long time.

#162 Son of Ponzi on 01.10.14 at 1:21 pm

Is 7% the magic number that remains constant throughout the universe.
My friends from the Middle Kingdom consider the number 7 unlucky.
Maybe we should pick 8%, as not to lose clients.

#163 Ronaldo on 01.10.14 at 1:24 pm

#140 Detalumis on 01.10.14 at 11:50 am

If you recall back in the 80′ and 90’s the financial institutions (mutual fund companies and banks) continuously preaching “Freedom 55” to get us boomers to throw more and more money at them. For a very few people that was a possibility.

I retired at 54 but that was because I poured the max into RSP’s from age 38 but not many could have done that. For most people “Freedom 55” was a myth created by the financial industry.

When I started stashing into RSP’s interest rates were high and it was expected that you could get a 10% return with ease. In early 90’s interest rates started to come down quickly so that myth all of a sudden disappeared. People who had retired saw their incomes drop in half. Those that were reliant on interest income. It got worse from there.

Part of the reason for people running out of money today. Add in two stock market crashes after that. Disaster for a lot of people. Those with company pensions doing fine but most don’t have them. I was fortunate.

#164 SaneVoice on 01.10.14 at 1:27 pm

“Insane. A balanced portfolio dropped 19% in 2008 and gained 23% in 2009. What a bunch of unschooled wusses on this blog today. — Garth”

Get your facts straight – as per Globe and mail research
average balanced portfolio dropped 24% (not 19%)

http://goo.gl/WSNbFU

I think we can all agree that it is far easier to pick the right ‘hood’ from a stability perspective than a ‘safe stock’

My own balanced portfolio did exactly as I declared. — Garth

#165 blase on 01.10.14 at 1:31 pm

#138: Funniest post I’ve read in a while!

#166 unbalanced on 01.10.14 at 1:32 pm

To # 128 Dogman 01…. Thanks for your reply

#167 Flamed out in Kitchener on 01.10.14 at 1:32 pm

If we only taught one basic and powerful principle in school, … compounding, … maybe kids would start to think differently about money, investing, and their future.

Whenever I explain it to people, I use this example:

I ask; would you take a crappy, not much fun, temp job, working 10 hour days for a solid month (31 days) paying only .01 (yes, one cent) for the entire first day? but you’d get a 100% increase each day from the previous day for all 31 days. Most people think for a minute and say … are you nuts, that’s like a couple of thousand bucks tops!!

Many don’t believe me when I tell them they’d earn over $20 million in the 31 days … then I have to prove it in a spreadsheet … I love it when their eyes pop as they see the numbers. It really makes people think in a different way about returns on investments.

#168 Montellino on 01.10.14 at 1:35 pm

Whoever asked why Canadian RE market didn’t crash in lockstep with the US market..

It’s because government pledged crazy amounts of taxpayers’ money to CHMC and mandated them to insure mortgages banks issue to Canadians… this was crucial once the global financial crisis occured in ’08..stimulus comes into play and mortgages become affordable.. despite the contrary belief, banks dont question enough whom they lend to, and why should they when they have government guarantees..

so little johnny netting 1.5 grand a month selling snowboards at Sport Check buys a $400K shoebox along with his girlfriend on a 30 year mortgage

Well if thats why things are the way they are, what then caused the crash in the US one might ask? Answer is in the paragraph above… except Johnny from the States was picking strawberries for $8/hr but had a 3 car garage.. Canadians are always a step behind it seems :)

#169 Dean Mason on 01.10.14 at 1:41 pm

A $5,500 TFSA contribution annually for 35 years compounding at a 7.00% rate of return is $813,524.

It is pretty close to $820,000. So $500 more a year and 5 more years to invest.

Now makes sense and the numbers workout.

#170 Dean Mason on 01.10.14 at 1:47 pm

The example of a 30 year old investing until their 65 years old earning 7.00% would still have $819,000.

It is in the blog post titled Stunned, January-3-2014.

#171 Suede on 01.10.14 at 1:47 pm

Wow, so many people here are not just risk-averse but have no cojones. How are you supposed to land a hot woman with a GIC?

Being full of Hopium and wanting housing to drop 30% so you can leverage to the teets and buy one shouldn’t be the reason you read this (sym)pathetic drivel every day. You’re getting some solid free advice.

Ok you blog dogs, i need a programmer or two for an app. I will pay and maybe you can contribute some cash to a TFSA.

#172 Shawn on 01.10.14 at 1:50 pm

35 Years to $820k

I wrote a post on this. I stated that $5,500 invested in a TFSA annually for 35 years at 7% compounded yields $820K. And it does. Tax-free, equivalent to an RRSP of $1.1 million. — Garth

****************************************
And just to note that the cost to get to that $1.1 million RRSP (which assumes a certain tax rate) would be the self-same net $5500 per year as the net cost to you after the RRSP tax refund (assuming the same tax rate used to arrive at the $1.1 million equivalency).

i.e. TFSA’s rock and so do RRSPs except if your total marginal tax (including calwback and impacts on other benefits) is higher in retirement (which it will be for some but not for all).

Max ’em both out if you can…

#173 Holy Crap Wheres The Tylenol on 01.10.14 at 1:51 pm

#125 Smoking Man on 01.10.14 at 10:39 am
Usdcad on fire
CANADA BONDS being gobbled up. Driving down yields
Crap job numbers non farm

Nothing to see move along

Greatest show on earth and you want us to move along.
Where have I heard that before?

http://www.youtube.com/watch?v=C_zo0FiNheI

#174 landlord on 01.10.14 at 2:02 pm

i have a couple of middle class/high income earners who are renting my 2 bdrom units.
i was worried that they would be leaving.
so i started up some small talk and they told me that they follow the markets closely and subscribe to this site.
well after reading the posts for the last couple of weeks, i dont have to be concerned any longer.
i think im going to buy my wife a new diamond ring and for myself, the new vette will look really great in my driveway.
thanks tenants. your making me feel a lot richer.

That is the phoniest veiled-realtor cmment of the year. Congratulations. — Garth

#175 Pounding sand in Peachland on 01.10.14 at 2:09 pm

1984 was a bad year

#176 economictsunami on 01.10.14 at 2:10 pm

Much like Stats Can the BLS has been tweaking their models and formulas for years.

A chart, as part of the ongoing debate over the LPR or forced retirement boomers causing a dip in the participation rate…

Actual unemployment rate vs. UE rate with 30 yr. average participation rate:

https://twitter.com/reinman_mt/status/421649754016059392/photo/1

#177 fixie guy on 01.10.14 at 2:11 pm

#10 not 1st “Garth, have you ever tried putting yourself in the shoes of Gen X or Y?

The seniors are siphoning off huge tax money to care for them, and the boomers are about to do the same….”

Same offer as always. Boomers are a large demographic at the peak of their life earnings. The simple math is they’re the largest contributors to tax revenue. Why not do the noble Gen X thing and demand the money go to covering their old age future instead continuing to suckle at their tax teat? Social obligations don’t stop when it’s your turn.
I had to laugh at the blame hurdled around at Boomers for not ‘training’ their offspring. No generation preceding them in all human history approached the access to information Xers enjoyed from youth and they still blame their per-caculator parents. The Greatest Generation didn’t nurture Boomers on the intricacies of finances and nothing changed with Gen X. Except manning up to personal responsibility of course.

#178 Victor V on 01.10.14 at 2:19 pm

Canadians’ RRSP contributions seen dropping this year as debt payments leave less for saving, bank polls show

http://business.financialpost.com/2014/01/10/canada-rrsp-deadline-poll/

#179 bentoverpayingtaxes on 01.10.14 at 2:25 pm

Just like the global warming collapse…so has the gold market turned onto its head proving that other forces control the universe…not the pundits. In the last days of the run up to the gold price collapse it was the ETF bullion play that ran while all the miners withered on the vine…..now however it is exactly the opposite. Gold miners are booming while gold bullion languishes…this has been going on since Nov…..leaving a lot of sheeple behind. Todays performance numbers are an example.

“NovaGold Resources IncNG 3.03 +7.07%
Osisko Mining CorpOSK 5.22 +6.75%
Silver Standard Resources IncSSO 8.16 +6.39%
AuRico Gold IncAUQ 4.19 +6.08%
Detour Gold CorpDGC 5.31 +5.99%
Torex Gold Resources IncTXG 1.07 +5.94%
Semafo IncSMF 3.08 +5.48%
Air CanadaAC.B 8.36 +5.16%
OceanaGold CorpOGC 1.64 +5.13%
B2Gold CorpBTO 2.33 +4.95%”

Some of you who might follow the daily grind of stock picking might have picked up on this. In fact the platinum market has been raging….not many understand this…… so you won’t see it in the G&M ‘business section’.

A wise old man once said….”I don’t work the stock market… I work a market of stocks”…learn the difference and prosper pilgrim. Keep in mind the above numbers are todays performance…..not YTD. Being a good stock picker is how you get rich enough to avoid the CDN winter.

#180 -=jwk=- on 01.10.14 at 2:29 pm

@148
Shocked everyone ? that has to be the understatement of the year ! – Some Financial sector stocks lost 90%, Sir!

Just to make it clear – One Day you have a Dollar – poof – Next day 10 cents – Ha Ha

No amount of Real estate “correction” will do that to you.

You right, it can be much worse than a 90% drop…

http://www.realtor.com/realestateandhomes-detail/11200-Kenmoor-St_Detroit_MI_48205_M45625-76932?row=1

http://www.realtor.com/realestateandhomes-detail/17570-Heyden-St_Detroit_MI_48219_M43877-86364?row=5

etc,etc

#181 Second Hand Smoke on 01.10.14 at 2:39 pm

That is precisely why I am leveraged up in blue chip US stocks.

Yes, I am taking on a great degree of risk, but being in my early 30s, in the grand scheme of the next 40 years, I can afford to take risk.

This strategy, if you can call it that, isn’t for everyone, and I might get burned in the short term, but when I compare myself to my peers leveraging up 20x buying real estate with shoddy construction in marginal areas, I wonder if they’re the crazy ones. I sleep a lot better knowing that Warren Buffett (BRK.B) is allocating capital on my behalf than I would knowing that I own some shack.

But hey, that’s just me.

#182 -=jwk=- on 01.10.14 at 2:40 pm


#34 JWK
Education you acquire after age 25 will have little impact on your career ***unless someone else is paying for it !!***
Otherwise, what you are most likely doing is putting a 50 dollar saddle on a 10 dollar horse, which is what universities today are in the business of.

The irony here is that the skill you need to make the proper decision is one of the things you would learn at a good MBA program.

Even the simplest model of “payback period” for me was 3 years. That is, 3 years after graduation I had made up all the lost income and paid the loans off.

#183 HD on 01.10.14 at 2:41 pm

@ #62 active on 01.09.14 at 11:46 pm

Good job, keep up the good work.

In a very similar situation myself:

29
In Vancouver
Graduated in 2007
Wasn’t affected by the 2008 melt
Portfolio sits at 103K – No debt

Best,

HD

#184 calgary on 01.10.14 at 2:46 pm

same as Arjay perhaps. all cash all the time. tho do save much more than average joe. wont buy the house at these prices. preferreds seem the best option for now. make me do it god.

#185 happity on 01.10.14 at 2:47 pm

Oh boy, in the USA less jobs created in ’2013 compared to 2013 and people not in the labour force rises to a new record.

53% of families earn $30k or less.

Wait until Obama care rates double.

All hail the USA economic renaissance

#186 TSL on 01.10.14 at 3:17 pm

Too much generalizing about Boomer helicopter parents. I do NOT think “many” attend their children’s job interviews. I think a couple of trues stories (ah…the internet) morphed into supposed trends.

Blunt reality: most citizens cannot and never will be able to manage investment portfolios. They are too busy cleaning the floor or getting the car fixed or bringing their job home at night or freelancing for extra income. For the majority of Canadians they need financial security through non-investment mechanisms, so blaming generational and educational ignorance is still premised on the need or communal desire to create that mythical “investment class”. Years ago blue collar and lower-skill white collar would invest their intellectual efforts in collective union organization to reallocate capital. They were peers of like capacity. Broken. Now we expect those same people to suddenly become worldwide, savvy market analysts and investors awash in a sea of information (not all of the good stuff is contained in this blog, BTW).

Garth, how about the intellectual challenge of a society with fewer citizens coerced into this “investor class” philosophy and use your wisdom to find alternatives.

#187 Vamanos Pest on 01.10.14 at 3:17 pm

#173 landlord

It’s nothing short of hilarious that you think that way. You think you’re getting the best of your tenants, while in fact you are subsidizing their lifestyle. I know because my landlord thinks the same way. Meanwhile he nets less than 3% on the money invested in the house, while I make 7% in a balanced and diversified securities portfolio.

Keep deluding yourselves landlords, us tenants love it.

BTW-diamond rings for her-check. Fancy cars-check (we went with Bimmers, one each, corvettes are so vulgar). But you forgot the rolexes, compliments the diamonds nicely.

#188 Basement Dweller on 01.10.14 at 3:17 pm

Job numbers show third straight month of construction job losses.

It appears that for the first time in 8 years you have 3-4 months of job losses in that sector for Ontario. Something to keep on eye on as more condos finish it appears more construction jobs are disappearing and are not being replaced. It should accelerate by summer. I’m speaking specifically about the Ontario area

#189 Dwilly on 01.10.14 at 3:19 pm

Hi Garth,

Posted this yesterday but it didn’t make it – missed I guess? I think you have made your views on gold clear, however based on my menial knowledge, I cannot help but believe that it can play an important place as part of a balanced portfolio. I am not a gold bug – I own none, and I do own balanced baskets of ETFs, exactly as you prescribe. So I am not one of the “crazies”. But I can legitimately see a place for some small allocation to gold in a balanced portfolio and would like to know your thoughts.

Specifically, posts like this intrigue me. Gold as an asset class is among (if not THE) least correlated with other asset classes (at least it has been for the last 100yrs), which is the very definition of why you’d want to hold some in a balanced portfolio. Mebane Faber’s work above shows that, of all portfolios, the Permanent Portfolio (25% gold allocation) suffers by far the lowest drawdown levels of those tested (12% vs 30-40% at worst case). Now, I know those 30-40% drawdowns in the other portfolios are once-in-a-generation events. And I realize that the PP also demonstrated the lowest return of all other portfolios (by about a %). But given that an investor’s worst enemy is usually his own psychology, is there not at least some measureable benefit here (at least for the weak minded, who can’t ride out a 40% drawdown)? And as for the lower return – well – lower is lower. I like high returns as much as the next guy, but whether I earn 8% or 9% is not likely to make the difference between retiring happily or in the gutter.

http://mebfaber.com/2013/07/31/asset-allocation-strategies-2/

What do you think? As I said, I’m not a gold bug (I don’t own any now). I’m not advocating for 50% or even 25% as in the PP. I know it earns no return (normally), doesn’t pay dividends, and much of the time is dead money. But it seems to me as though it does have a tendency to spike and provide negative/inverse correlation at precisely the time other assets tank (2008), and so doesn’t that lend some credence to the idea of a small, say 5-10%, allocation?

Same answer as yesterday. No. — Garth

#190 Smoking Man on 01.10.14 at 3:25 pm

Would it not be amazing my call last Oct that BOC will be dropping the overnight rate in Dec or Jan.

With those job numbers, I may just become the Oracle of Oracle’s.

If the CAD starts to get any bit of traction by BOC day.

Everyone’s heloc and vrm will. 25 cheaper.

#191 chickenlittle on 01.10.14 at 3:31 pm

Garth, can you please do a post on why flipping houses is a terrible idea?
One of my relatives is trying to talk my husband into it, but neither of us want to.
They want to sell them FSBO to save on RE fees.
Also, they want to flip in Brantford which to me makes even less sense.
I am a firm believer that relatives make terrible business partners.

#192 Canadian Watchdog on 01.10.14 at 3:39 pm

Obama nominates Stanley Fischer as Fed vice chairman

Barack Obama, the US President, has nominated former Bank of Israel Governor Stanley Fischer as vice chairman of the Federal Reserve.

He will take over from Janet Yellen, who becomes the first female chairman of the central bank when Ben Bernanke's term finishes at the end of the month.

The appointment comes as the central bank starts to withdraw its historic stimulus.

What stimulus withdrawal? The biggest QE equity bull just walked into the party.

Israel to Begin Investing Reserves in U.S Equities Today

Mar 1, 2012: The Bank of Israel will begin today a pilot program to invest a portion of its foreign currency reserves in U.S. equities.

The investment, which in the initial phase will amount to 2 percent of the $77 billion reserves, or about $1.5 billion, will be made through UBS AG and BlackRock Inc. (BLK), Bank of Israel spokesman Yossi Saadon said in a telephone interview today. At a later stage, the investment is expected to increase to 10 percent of the reserves.

A small number of central banks have started investing part of their reserves in equities. About 9 percent of the foreign- exchange reserves of Switzerland’s central bank were invested in shares at the end of the third quarter, the Swiss bank said on its website.

The investment will be made in equity index trackers and will include between 1,500 to 2,000 shares, among them stocks like Apple Inc. (AAPL), Saadon said.

The central bank decided to add equities to its investment portfolio in order to diversify, reduce risk and give better performance, Barry Topf, senior adviser to Governor Stanley Fischer, said in a Dec. 1 interview.

Stocks to the moon! And taxes, services, rent, home prices, gas, food, etc.. Hey, but at least iPads, flat panel TVs and autos will still be cheap.

#193 Capt. Obvious on 01.10.14 at 4:12 pm

@185 TSL

The great lie is that investing is complicated. It’s actually really simple when you understand what actually drives long term investment returns and volatility of different asset classes. I spend only a few hours a year on managing my portfolio. We live in fortunate times where a few index funds (or ETFs) provide diversified exposure to the asset classes needed to build a portfolio.
Finally, nobody will care more about your financial future than yourself. Supposed grown-ups who are unwilling to assume responsibility are being children.

“Years ago blue collar and lower-skill white collar would invest their intellectual efforts in collective union organization to reallocate capital. ”
Meaning? If you get more in current pay, you still have to save it. If you negotiate for a pension plan, you are subject to the vagaries of whether a company can remain a going concern for your entire life. No free lunches.

#194 goldbug on 01.10.14 at 4:17 pm

the statement “the top canadian personal finance blog” is a joke.
did you get that award from the Cracker Jacks!

as a true financial blog, gold has to be discussed.
since you like to play God, you have no creditability as a adviser. your a fraud and a comic with one line jokes.
apply to yuk yuks, yu have a better future there.

Amazing what licking bullion will do to a brain. — Garth

#195 Sebee on 01.10.14 at 4:31 pm

http://money.cnn.com/2014/01/10/real_estate/mortgage-rules/index.html?iid=HP_LN

New rules in US. Still no minimum downpayment % however.

#196 Doug in London on 01.10.14 at 4:38 pm

@visorman30, post #21:
Keep in mind that these people you described put all their eggs in one basket, mistake #1, and bought investments after they had a big run up in value, mistake #2. I am 53 years old now, but turned 31 in late 1991. In the late 1980s I had some money in conservative interest paying investments (but at a much higher interest rate than now) and patiently waited for the next stock market correction. There were signs of an economy peaking back then. In the spring of 1990 when stock markets were going downhill I started putting money into equity funds, at all of 29 years, 6 months old. You see? Being 30 years old shouldn’t stop you from investing. Now the punch line, I failed a college economics course and still saw that opportunity.

@Jeremy, post #36:
Well OF COURSE stocks performed poorly during bear markets, what were you expecting to happen? Those bear markets were when stocks were ON SALE, just like store merchandise was during Boxing Week or on Black Friday. Anyone who bought during those sales was generously rewarded in the recovery and bull market that followed.

#197 espressobob on 01.10.14 at 4:44 pm

#178 bentoverpayingtaxes

The energy bulls from the pre crash (08-09) era already know this one little thing? Goldbugs are starting to understand the concept. Its called ‘diversification’.

#198 chapter 9 on 01.10.14 at 4:44 pm

#184 Happity
Check out the Trans-Pacific Partnership kinda like NAFTA on steroids. A trade agreement made up of 12 countries including Canada negotiated in total secrecy except for the 600 corporations that are behind it. Just another scheme to destroy the middle class!!

#199 gladiator on 01.10.14 at 5:08 pm

@173 landlord:

buy the biggest diamond you can afford and a new Vette.

Just don’t read this: http://www.theatlantic.com/past/issues/82feb/8202diamond1.htm

#200 BCD (D for Doomer) on 01.10.14 at 5:13 pm

#73 John on 01.10.14 at 12:44 am
It’s fascinating how many people on this blog are just so freakin’ amazing. They apparently work harder, are smarter, have the most intelligent kids, and are far wiser than previous generations no matter where they fit in. And of course wealthy, successful investors.
Well done everyone…
_______________________________________

LOL to this. . .and yet everyone on the street and all the people you meet are broke and working at Walmart. If Garth knew the crowd for whom he wrote he would make like the Pied Piper and march everyone off a cliff.

Then he would start a blog exalting the state of real estate in Vancouver and normal people would actually show up read it! lol.

#201 PPan on 01.10.14 at 5:51 pm

I was just at a mortgage brokers office and all the buzz was about 2.99% 5 year fixed mortgages again to be released soon. They said that the bond yield crashed or something.

I thought that we were never going to see that rate again.confused.

You socialize with you mortgage broker? — Garth

#202 VT on 01.10.14 at 5:54 pm

#189 Smoking Man

A lowered VRM won’t help the virgins who’ve been locking themselves up in fixed rates (ie: most new mortgages in 2013).

It will help investors who are borrowing to invest on margin or via LOC.

#203 father on 01.10.14 at 6:04 pm

more good news in the states, Obama makes fischer #2 with the fed

#204 VT on 01.10.14 at 6:09 pm

#191 Canadian Watchdog

You say stocks to the moon as if this were a pejorative. I’m fully invested in US/CAD equities and have been doing just fine while the doomers keep worrying about the sky falling.

Starting investing and make some dough. You won’t enjoy being on the sidelines this year.

#205 Junius on 01.10.14 at 6:11 pm

#197 Chapter 9,

You said, “Just another scheme to destroy the middle class!!”

It will destroy everyone except the executives of the largest corporations. TPP is not a trade agreement but simply a “lowest common denominator” arrangement to avoid any regulation.

You think it is crazy that a US company can sue the Government of Quebec for lost profits from anti-fracking regulations? Just wait until you see the insanity proposed by the TPP.

It now looks like the Democrats in Congress have caught on and will stop it – at least the fast tracking. However it has plenty of support including – of course – our wingnut so called Conservative government.

#206 Mike T. on 01.10.14 at 6:58 pm

#193 goldbug

if you don’t like the host, his credibility or credentials….make a simple move and remove yourself from the equation

this is not a shot….I don’t go to Tim’s anymore because no amount of frustration is going to make them work any faster…I am gone from the equation, problem solved!!

you like gold, Mr. Turner does not…..see where this is going?

happy weekend

#207 Dwight Schrute on 01.10.14 at 7:13 pm

Smoking Man, what do you have against paper and paper products? If your idea pans out, Dunder Mifflin will be in trouble!

#208 Devore on 01.10.14 at 7:23 pm

Amazing what licking bullion will do to a brain. — Garth

I thought licking gold was good for you. Or was that silver?

#209 Jeremy on 01.10.14 at 7:47 pm

@Doug in London, post #195:
Stocks outperform cash only if bought at the right time. I don’t need to convince you that if bought at the wrong time, stocks underperform cash. The average person cannot be expected to buy stocks at the right time, or to have capital to buy more when stocks are on sale.

What is this dumb cash-vs-stocks debate? Most people should never own a single stock, but they should certainly be invested. — Garth

#210 Chopper on 01.10.14 at 7:57 pm

Did you see the job numbers and the effect it has on the loonie?, it is all coming together slowly. You cannot play with fire and not get burned.

I see a day coming like Garth has been telling us we will have to face the music. This debt binge will cause a bad and long hangover that many are in denial over.

Some of us will heed Garth’s advice and be victorious after the collapse and some will give it to the urge to splurge and pay the price.

Heed the warnings people, see the signs and avoid the mistakes of the pack.

#211 Son of Ponzi on 01.10.14 at 7:59 pm

Gold bars are actually gold plated lead bars.
I thought that was common knowledge.

#212 Macrath on 01.10.14 at 8:13 pm

Wuss Hap’nin’ ? My take is there is just too much freaking corruption and not one SOB behind bars. 2% S&P dividend for so called company owners while the CEO`s empty the company vault. Every 10 years there is a manufactured epic crash sending the herd over a cliff and into to shell shock rehab for life babbling “GIC, GIC,GIC……….”

Yesterday Mr. Armoyan said of Sherritt International

“There’s no proper Canadian corporate governance standard that these guys meet. Nothing,” he said.

I think the same can be said of most of the TSX. Don`t invest what you can`t afford to lose !

#213 AB Boxster on 01.10.14 at 8:45 pm

#192 Capt Obvious

If your portfolio is wholly made up of a few ETF index funds that you spend a few hours a year on then investing certainly is simple.

Whether it is possible to create a truly diversified and balanced portfolio using a few ETF’s is the real issue.

Time will tell.

#214 allweneedismortgage on 01.10.14 at 8:51 pm

imfomative and entertaining:
http://www.youtube.com/watch?v=mpJmk7Q_vw4&feature=em-subs_digest

#215 save. spend. splurge. on 01.10.14 at 10:15 pm

Not this 30-year old.

I invested my money in index funds at the start of 2012 and I’m up quite a chunk of money in my net worth from a year ago even after…

1) spending about $38,000 this year in expenses
2) not working the entire year

#216 noodles 79 on 01.11.14 at 12:49 am

Your right 45north, we are going to be rocked. Im not much of a fact man but I appriciate the facts youve stated.My only source of knowledge comes from personal experience, and I dont like what l see, anybody with common sense should be concerned, but common sense went out the window at about the same time low interest rates came in,and unfortunately it stayed out so long, low interest rates took over and has created a bunch of senseless idiots. But I still care for them cause half our economy relies on them.
I am concerned, all kidding aside. 1985-1990 a five year period that brought me extreme highs and then extream lows, unfortunately the lows lasted much longer than the high.I owned property at the time and yesterday as l sat listening to the two property owners bombarding the renter, l could hear myself uttering the same words years ago. I had my figures worked out too, but my timing was off, weeks may have saved me.Timing is everything in real estate,but l didnt know that at the time, l screwed up, l didnt see the signs, l was to busy caught up in the media hype and my own hype. Thats what I see happening today, everyone is so obsorbed in their good fortune, they dont see, or dont want to see the consequences of theses extreme house prices.From my experience, when the guy holding the plug decides to pull the plug, it happens fast, lots if people will caught off guard,caught in a vortext of misery, a whole generations savings wiped out almost instantly.It took me years to climb back up to zero, at todays prices, there will be people handing down mortgages to their great, great, great, grandchildren, eternal indebtedness.If my experience is repeated, there are going to be a lot of miserable people around.
Anyway, enough of the past, something is going on right now, my mutual funds and rsp’s are rocking, and have been for months, big bucks are flooding the market,l wonder if the pyramid is being dismantled.Take care!

#217 Mr. Frugal on 01.11.14 at 9:45 am

#34 JWK
Education you acquire after age 25 will have little impact on your career ***unless someone else is paying for it !!***
Otherwise, what you are most likely doing is putting a 50 dollar saddle on a 10 dollar horse, which is what universities today are in the business of.

The irony here is that the skill you need to make the proper decision is one of the things you would learn at a good MBA program.

Even the simplest model of “payback period” for me was 3 years. That is, 3 years after graduation I had made up all the lost income and paid the loans off.

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

Very funny! They used to teach the time value of money (i.e. present value, future value, amortization, annuities) in Grade 13 math. But if I say that, I’m dating myself. I’m glad to here that your $100K education provided you with the tools for decision making. You do realize how funny that says when you say it out loud.

#218 IndyGuy on 01.11.14 at 2:36 pm

#34 -=jwk=- on 01.09.14 at 10:28 pm
*******************************

Out of curiosity, what are these top 2+2 MBA programs in Canada that are the only ones worth going to ?