Really boring post

BORING modified

What were you doing on March 9th, five years ago?

If it involved lots of Tums, followed by an Imodium chaser, you were normal. It was a day from hell. That morning the headline in the Wall Street Journal was ‘How low can stocks go?’ If you listened to the geniuses, it was a lot. A hedge fund manager interviewed in New York said he was telling his rich clients to get a gun because society might be breaking down.

Well, that day saw one of the greatest torrents of selling in our lifetimes. Retail investors stormed the exits in a giant pile of bodies trying to get out. In fact March 9th, 2009, turned out to be notable for two events – massive selling, and the bottom of the market.

But that’s what people do. They sell when prices collapse and all hope’s lost. They also buy when values soar and everyone else is doing it. And not just mutual funds, ETFs, stocks or other financial assets. It’s the same story with almost anything – including real estate.

But logic dictates we should buy when things are cheap and sell when they’re dear – harvesting the gain and building net worth. It’s shocking how few people can pull that off. If they have an asset – like a stock – that’s going up, they almost never exploit the gain. If it starts to fall precipitously, they can’t bear a loss and so hang on, ‘just until it gets back to even.’ It’s a guy thing. If it collapses more, they usually panic in secret and dump it.

Buying when things are in the dumpster is smart. Selling when everyone says you’re an idiot is even smarter. But because most people are humans (I’m not sure about some who post here), Allah invented rebalancing.

The idea is simple. First you start by building a balanced and diversified portfolio of the kind I described last weekend. Forty percent safe stuff and sixty growth assets is a good mix for most people, and most times. I gave you some suggested weightings for various bonds, preferreds, trusts and a variety of equity-based ETFs. I trust you wrote this on your thigh, or possibly considered a tat.

Once you’ve built this portfolio, it cannot be ignored. The sucker will wiggle and squirm, swell and contract and ultimately mess up your weightings, becoming too laden with risk, or too conservative. That makes sense, since the point of a B&D portfolio is that (a) safe assets are not correlated with growth things (bonds usually go up as stocks fall, for example) and (b) diversity means big divergences among assets – small companies may be on a tear, while large caps languish.

So if you planned on having 16% Canadian equity exposure, and it jumps to 20%, you’re suddenly overweight. The natural tendency would be to hang on, or buy more – but the correct action is to trim. Sell, capture the gain, and spread it among those assets which are not doing so hot. That’s right. Think like your brother-in-law, then do the opposite.

Rebalancing, therefore, is simple. The goal is to bring the asset values back in line with the allocation plan you first crafted. That means during a stock market boom you’re forced to take profits. During times when interest rates decline and bond prices jump, you do the same. It means you buy stuff when it’s unloved and cheap. You bail from those very things the media’s in love with. And this way you stay on track, controlling risk.

Of course, outside an RRSP or TFSA, selling the winners could trigger capital gains. So what? This should never be a reason not to sell something, especially because cap gains taxes are cheap – just 15% or so for most people, allowing you to keep 85% of the profit. There could also be transaction costs involved, unless you have a fee-based advisor who does this stuff without additional expense. And rebalancing takes time and effort – you have to carefully track the asset allocation of your portfolio, then make the appropriate trades to get thing back into shape.

How often should this happen?

Professional advisors (the good ones, anyway) rebalance quarterly. For most people, that’s probably way too often. Twice a year would be fine, or even annually. Of course, it there were a major event, like a mini-2008 meltdown, you might want to spring into action sooner, selling off some of the soaring fixed income assets to load up on the bloodied and pummelled equities.

Just remember that, like your spouse, if you ignore your portfolio for too long it’ll get ugly. If your growth assets are allowed to bloat, for example, then a market correction could bring them down hard, making you prone to selling at the bottom. Fail. If your fixed-income component gets too large, you might feel secure but the long-term returns will suffer and you’ll hate yourself when toothless and bald (as if that’s not bad enough).

Or, as an alternative to rebalancing by the calendar, you can do it when the current allocation of an asset strays too far from the target – like 5% or 7%. Another technique is to add or subtract money from your portfolio to bring it into line. That means buying underweighted assets and selling overweighted ones – which also cuts trading costs.

If this is all too much trouble, you can be like the 27% of Canadians who don’t rebalance because they have squat. A new BMO survey found a third of our citizens lack enough money to cover one month’s expenses. The average saved is $2,051.

What was that advice about a gun?

175 comments ↓

#1 Greed is God on 09.09.14 at 6:30 pm

Here’s a tat for you dawgs: http://julianoh.files.wordpress.com/2009/07/jester_money.jpg?w=460

#2 Mark on 09.09.14 at 6:35 pm

“While I am here, any other books your recommend?”

“The Wealthy Barber” And “A Random Walk Down Wall Street”. Warren Buffett’s annual letters are also good reads, although I’d caution against getting too carried away with being a WB disciple.

A new BMO survey found a third of our citizens lack enough money to cover one month’s expenses. The average saved is $2,051.

Wow, so hard to believe, but true, eh? No wonder why most outstanding Canadian mortgage debt, at issuance, was considered to be subprime, hence requiring CMHC subprime mortgage insurance.

#3 Shawn on 09.09.14 at 6:36 pm

A solution for boredom

Go all equities, rebalancing will not apply. Forget the Tums / Imodium, try copious amounts of scotch.

#4 Shawn on 09.09.14 at 6:38 pm

Record Selling on March 9, 2009?

Well, that day saw the greatest torrent of selling in our lifetimes. Retail investors stormed the exits in a giant pile of bodies trying to get out.

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

I trust that is true but every single stock sold was bought by someone. Someone with more going for them than than Truck Nutz.

#5 Frustrated on 09.09.14 at 6:39 pm

Garth,
I keep getting calls from a bank that they have a special for 2 years at 2.34 percent. Different people from this bank called me 3 times. Why would they be pushing 2 year mortgage ?

#6 totalinvestor.com on 09.09.14 at 6:39 pm

So you should save money (pay yourself first), buy when there’s blood in the street, then rebalance quarterly?
Got it.
BTW you need a permit for the gun.

http://postimg.org/image/42g37nrjz/

http://postimg.org/image/ia5svnu6f/

#7 Macrath on 09.09.14 at 6:39 pm

Le premier ?

Global markets are 98% correlated with bonds included.
Nowhere to re-balance to except GIC`s .

#8 harry bergquist on 09.09.14 at 6:40 pm

Garth:

What about non-capitalists? What are we supposed to do about this?

#9 Tudor on 09.09.14 at 6:42 pm

That’s pretty neat advice. Sometimes a typical 60/40 portfolio might not be appropriate for everyone — ideally you want some sort of glide path that gradually de-risks the portfolio to further harvest some gains.

And sometimes a simple glide path won’t do either when stocks are expensive. GMO has a neat dynamically adjusted glide path that takes into account market valuation, etc. (first link here):
http://www.gmo.com/America/

#10 Larry Laffer on 09.09.14 at 6:43 pm

It is true that bonds used to correlate negatively with stocks most of the time, but I wonder how bonds could go any higher should the equity market corrects. Bonds are already overvalued regarding their pitifully low returns and growing risk levels, and interest rests cannot get any much lower. It seems that thanks to the Fed, we are at a time when both stocks and bonds sit at high valuation. Everything is expensive. That’s pretty uncomfortable.

#11 poy on 09.09.14 at 6:44 pm

first!

#12 CA on 09.09.14 at 6:46 pm

First after all.

#13 Kelvin on 09.09.14 at 6:48 pm

First?

#14 Jackofall on 09.09.14 at 6:49 pm

Fixed income was soaring in early ’09? Ok, Garth…

#15 SOMA on 09.09.14 at 6:52 pm

I respectfully disagree with this re-balancing dribble. For a sanity check read “payback time” – Phill Town and STOCKPILE. If you have a good wife, don’t neglect it and buy the services of an ugly trollop !!

#16 bill on 09.09.14 at 6:52 pm

that was a fair and balanced blog today Garth…

#17 Happy Renting on 09.09.14 at 6:54 pm

Just remember that, like your spouse, if you ignore your portfolio for too long it’ll get ugly.

Marriage advice and rebalancing? Very useful post, thank you!

#18 Spectacle on 09.09.14 at 6:56 pm

” Think like your brother-in-law, then do the opposite. ”

***************
Or. Think like your sister-in-law, ( the one who does pu…cat selfies,) and Do the Opposite?

Great contrarian re-balancing metaphor Mr Turner.

#19 too hard on 09.09.14 at 6:57 pm

Who wants to “play” the game? We shouldn’t have to. Tax the rich 80%, tax the corporations MORE than my income tax for a start….

Rebalance the wealth to all citizens more or less equally. Everyone gets free health, some sort of home, reduced food prices, free childcare. And a guaranteed living wage in retirement at 60 years.

#20 Mike out in BC on 09.09.14 at 7:00 pm

Or you just by a decent balanced mutual fund and sit on it.

#21 Smoking Man on 09.09.14 at 7:02 pm

Ha funny you should mention that…

Two of us out thousands in the comments section of the globe and mail… Buy, Buy Buy…. From end of Feb

On record at the globe and mail archives.. Me and Whazz Up I sold a property and took every dime I had and made some huge fully margin bets… It was the camel toe of the century.

That’s where I first met laughingcon

To bad I get to those archives… Even posted what we where buying and how much…

In two years net worth went up 4 times..

Waiting for the batman of this century…

I’ll let you dogs know when I see it.

#22 Finally on 09.09.14 at 7:07 pm

I think I’m finally going to buy a house in North Vancouver w a 900k budget, 30% down. Can’t buy much with that, but max we can afford. I’m tired of waiting for the market to correct. Im married with 2 kids, 1 month and 2 years old. We need room, we need a back yard, need to put up pics, wash my cars in the driveway, mow the lawn and unpack all my boxes in storage. I’ve been renting a duplex for the past 2.5 years after selling 2 of my DT condos. Yes stupid reasons to buy. Probably one of the dumbest financial decision in my 40 years of living, but I can’t wait any longer. I’m old, time to settle down. Pray for me.

#23 PJ on 09.09.14 at 7:08 pm

Gold is in the dumpster. Should we buy?

#24 West Coast on 09.09.14 at 7:08 pm

House collapse – Toronto neighbourhood – one dead – and they paid how much?

http://www.cbc.ca/player/News/Canada/Toronto/ID/2512948881/
http://www.cbc.ca/news/canada/toronto/bedford-park-house-collapse-leaves-1-dead-1.2760888

#25 TimV on 09.09.14 at 7:15 pm

March 10, 2009? I bought the stock of a beat-up auto parts manufacturer on that day. I guess I missed the bottom by one day.

Shortly after, I think I even borrowed a tiny amount of money to buy more.

Rumours about layoffs were also floating, and I was considering options in case my job was cut.

Ah, good times.

Probably wouldn’t have been as fun if I’d not been a renter. :-)

#26 Geokall on 09.09.14 at 7:17 pm

isn’t everything correlated right now? When rates go up both bonds and all stocks will be affected negatively. What should we do?

#27 Mark on 09.09.14 at 7:21 pm

“I keep getting calls from a bank that they have a special for 2 years at 2.34 percent. Different people from this bank called me 3 times. Why would they be pushing 2 year mortgage ?”

Canadian banks run duration-matched, so they probably have a surplus of funds with 2 years till maturity that they want to lend out.

I wouldn’t read anything more into it.

#28 Blacksheep on 09.09.14 at 7:21 pm

Post boring? Lets wake it up.

Smoking Man / Vlad

This may be previously seen video, but very relevant to today’s report on MH-17. This from international experts, first on site.

https://www.youtube.com/watch?v=76PG9RQStFU
———————————————
Relevant 6:10 to 6:30 min. mark.
———————————————
“We’ve seen evidence of very, very strong machine gun fire”
“left unique marks we haven’t seen anywhere else (in the fuselage?)”
“We were asked if we had seen any examples of missiles, but no, we haven’t”
——————————————–
Relevant from 2:50 to 3:30 min. mark.
———————————————
“Cockpit slammed down to earth, was pretty much intact”
“over the days, we have seen the cockpit spread out”
(does clamshell opening gestures with hands)
“day two I think it was, there was actually men in uniform, hacking into it (cockpit) with a power saw”
“Since then, in the past three days, it’s (cockpit) has been spread out, even more”
———————————————
Why cut the cockpit up and spread it out.
What don’t they want cameras to see?

#29 Son of Ponzi on 09.09.14 at 7:23 pm

#146 Devore
Irrelevant. Canada’s population growth is oscillating around 1% for the last 20+ years. It does not matter whether this population gain is due to immigration, or domestic birth rate.

Population growth is population growth. Outside 3rd world countries, 1% is respectable. But you don’t get to blame this on immigrants. Is that why you are so uncomfortable talking about immigration? I know I’m not.
—————–
If you are implying that population growth of 2 to 3% in Toronto and Vancouver are worthy of a 3rd wold country, then I have to agree with you.

#30 Cici on 09.09.14 at 7:24 pm

I was trying to get out of credit-card-debt hell and wishing I had some free cash to purchase bank stock.

In other news:

Our boys are headed to the Ukraine:
http://www.cbc.ca/news/world/ukraine-peacekeeping-exercise-to-include-13-canadian-soldiers-1.2755247

…and back to Irak:

http://www.theglobeandmail.com/news/politics/harper-facing-pressure-to-explain-decision-to-send-soldiers-to-iraq/article20487806/

#31 Nemesis on 09.09.14 at 7:27 pm

“What was that advice about a gun?” – Hon.GT

http://youtu.be/f2qmYDtshcE

[NoteToSaltierDogz: You can train… but you can’t fix stupid. The pen is far mightier… And, frequently, the camera is funnier… Some things are, after all is said and done, best left to TheProfessionals/Expendables. It’s not like many of them haven’t already ‘OverstayedTheirWelcome’, right? Just think of it as ReBalancing… ExpendablesZen: http://youtu.be/4xD0junWlFc ]

#32 El Barto on 09.09.14 at 7:29 pm

A helpful post as usual Garth. For those that want to rebalance across multiple family accounts, his/her RRSPs, TFSAs, and Taxable accounts, here’s a handy dandy Excel sheet from our good friends at the house of spuds.

http://canadiancouchpotato.com/2012/03/15/a-spreadsheet-to-manage-multiple-accounts/

If you one of the lonely hearts and only have yourself and your cat to rebalance for:

canadiancouchpotato.com/wp-content/…/Rebalancing-spreadsheet.xls

#33 saskatoon on 09.09.14 at 7:31 pm

#19 too hard

ahh yes, early retirement will be so sickly sweet in a land without freedom.

#34 El Barto on 09.09.14 at 7:35 pm

sorry, that was dead hyperlink for the singles out there, here’s a page that has one that works:

http://canadiancouchpotato.com/2011/03/03/how-to-lower-your-rebalancing-costs/

#35 Son of Ponzi on 09.09.14 at 7:36 pm

Rebalancing and marriage advise.
If you spend 60% of your time with your wife and 40% with your mistress than you’re balanced.

#36 Bob on 09.09.14 at 7:36 pm

HELP! How do you talk a gold bug into a diversified portfolio? My friend is getting involved in a multi level marketing scheme involving gold ( kbintro.com ) and offshore MasterCard accounts!

#37 c-los on 09.09.14 at 7:37 pm

Recommendation to newbies on how to build some thing like this on one’s own? Via TDWaterhouse or another similar banking service?

#38 Calamity Jane on 09.09.14 at 7:38 pm

#19 too hard… That was sarcasm, right? If not you’re preaching to the wrong choir. I would try an NDP support group…

I’m fine with paying taxes, but I dont work my ass off so others can get a free ride. I am a fairly low burden for tax payers with no kids and no health issues, why should I pay a disproportionately higher tax rate to fund someone else’s lifestyle? In my lifetime I will pay more than enough taxes to cover the costs I and any potential children would ever incur to taxpayers, and my father has already paid for he a nd my mothers “tax resource consumption” and will do so many times over when we get whacked with an obscene “death tax”. Not to mention that by the time I reach the age where I will need to rely on more government services there will be nothing left. No piddly old age or cpp paymebts to congradulate me for living that long, but Id be willing to bet I will also be paying some sort of fee for use medical care… along with my high taxes I’ll conti ue to pay.
I live simply, I have internet but no cable or fancy tv package, we drive 10 year old but fully paid for mazda and gm cars, and just recently purchased a very modest house (plrase dont scold me Garth, we had 20 % down and relocated for work toa very small town and were unable to find any rentals at all and the total carrying costs are a tiny porton of our incomes).

We do work with non profit housing and a lot are good people, but an alarmingly high number are irresponsible scum who buy things they think theyre entitled to that we plan and save for, and purposely destroy property – either for fun or because they just dont care because there are no consequences for the damage they cause. Every time I enter a unit to evalute the repairs I think if people only knew this is how their tax dollars are spent…

So excuse me but you can bite me if you think Im going to pay more for some asshile to not work, buy whatever toys they want, and destroy the things handed to them by a very generous government funded by you and I.

#39 Lambo on 09.09.14 at 7:41 pm

What does one do if you need to rebalance because everything has decreased by different percentages? Does one:

1. Sell and crystallize the losses;
2. Not sell, try to accumulate more cash and rebalance by buying;
3. Do nothing?

#40 Chaddywack on 09.09.14 at 7:46 pm

Might sound like a silly question, but how do you rebalance when everything you own is in a gain position?

Do you just look at the weightings and sell the ones that have strayed the furthest from your ideal allocation?

Gains can turn into losses. Harvest time. — Garth

#41 Realties.ca » Fairly boring post on 09.09.14 at 7:46 pm

[…] Source: http://www.greaterfool.ca/2014/09/09/fairly-boring-post/ […]

#42 Freedom First on 09.09.14 at 7:51 pm

This post is like music to my ears Garth.

I hate to admit it, but I have reached the place where this post is made even more enjoyable to me knowing the debt levels that Canadians are carrying. Hearing the comments that people make while in my presence concerning their personal finances, and even laughing about their financial insanity/predicament, really makes me grateful to not be them. Don’t get me wrong, I wish no one any hardship, but in my life I have had to let a few people know when they inevitably have their financial bottom come crashing down on them, that it is not my responsibility to bail them out with cash. I will help in other ways, as I wouldn’t let someone in my life go hungry, or feel abandoned.

#43 Randy on 09.09.14 at 7:51 pm

Actually the selling in 2009 was a good thing tax wise. Used the capital losses created to recoup taxes on capital gains taxes paid in 2007.

#44 pinstripe on 09.09.14 at 7:56 pm

Most of the stuff people worry about, ain’t never gonna happen anyway.

#45 Longshorebore on 09.09.14 at 7:56 pm

With all this QE why don’t we get any inflation? They’ve printed billions and nothing? Is it because the money is not being lent or spent but just fuelling this stock bubble?
Is falling monetary velocity just creating more bubbles?
Help me out blog dogs….

#46 AK on 09.09.14 at 8:10 pm

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. “.. Warren Buffett.

#47 Longshorebore on 09.09.14 at 8:12 pm

@ #22 Finally

You are about To walk down the valley of the shadow of death aka North van…..god be with you say hi to the devil for me

#48 Ret on 09.09.14 at 8:15 pm

“But logic dictates we should buy when things are cheap and sell when they’re dear – harvesting the gain and building net worth.” Unfortunately many are led by emotion and ego at the expense of logic.

Owners of properties outside of their principal residence should also consider harvesting some of their RE gains and re-balancing their RE exposure.

This might be just the time to unload punky cottages, decrepit student rentals, mouldy tri-plexes etc. When mortgage rates normalize, the values on these properties will take a serious hit.

Even Tom Vu had it figured out. Buy low, sell high. A new concept for many I am sure, but absolutely brilliant! (Miss the infomercial Renta-Babes Tom but I really loved the boat!)

https://www.google.ca/search?q=tom+vu%2C+buylow+sell+high&oq=tom+vu%2C+buylow+sell+high&aqs=chrome..69i57.13456j0j7&sourceid=chrome&es_sm=93&ie=UTF-8

#49 Setting the Record Straight on 09.09.14 at 8:17 pm

Yesterday
“The original point is Toronto and the GTA are growing faster than anywhere else. It’s not growing because it sucks here. It’s growing because it’s the most sought after place to be in Canada.”

You think these are incompatible views because?

#50 Dwilly on 09.09.14 at 8:21 pm

Hey Garth, what is the basis for your comment that “for most, quarterly rebalancing is too much”?

Does it have to do with portfolio size, i.e. too-frequent rebalancing not beneficial or cost inefficient for a small portfolio? Or is it based in some other idea, like most investors can’t/won’t take the time, or it’s too difficult psychologically…?

AOTA. — Garth

#51 Smoking Man on 09.09.14 at 8:37 pm

#28 Blacksheep on 09.09.14 at 7:21 pm

It’s obvious what happened to anyone that’s spent 5 minutes researching the subject on line.

My point with relevance to real estate, MSM controls the market, they can corral, and move the herd anyway they want. The way there talking points are, can only mean there some kind of back ground force that controls them.

We can debate Rent vs income. Price vs Income all day long. when the force that moves MSM decides to crush the market it will.

It’s that powerful.

#52 Macrath on 09.09.14 at 8:37 pm

#45 Longshorebore

For inflation to really get rolling you need wage gains and then the stores raise their prices. All we have been getting for a generation are wage losses and less hours worked at part-time or contract jobs. Prices are rising but only because people are supplementing with credit that is reaching a saturation limit. When the credit runs out prices will drop dramatically. A depression is near or already here.

The money printers have managed to distort the price of just about everything. Globally they are buying tons of so called assets (bad loans) to stave off Armageddon.
Sweeping them under the rug with longer and longer maturities. It`s almost lights out for Japan.

Did Garth just say Harvest Time ?

Disclaimer ~ no formal economic training, just a keen interest in preserving my capital.

#53 Retired Boomer - WI on 09.09.14 at 8:52 pm

Early 2008 Bear Stearns is wobbly. Time to get out of all equities and into Gov Bonds. Wait until the low is tested and held. March 2009. Go 80% into stocks leave 20% in bonds. Did that. Wait. Retire $392,000 in 401K goes to $740,000 after living off withdrawals for 2.5 years.
In 2014 sold all my various funds & stocks, went 60/40% into various funds with an advisor to swat my idiot ideas, and rebalance.
Did the Monte Carlo modeling based on what I felt I “needed” to supplement the pension and social security, with an annual cost of living raise of 3%.
Monte Carlo says 100% chance of reaching goals 30 years out. Can goose up my “needs” by $16,000 a year Monte drops to 99%.
We feel good about maintaining our life style, with the occasional gusts to facilitate an improvement in cars, roof,
furnishings, appliances -all that crap.
Trust me, the figure I “needed” was hardly the bare bones budget. I like to eat WELL, buy some toys, and have a bit of fun when the snow howls here.
If the world goes to hell in a basket, well, we might have to re-think things. Until then, Mr. & Mrs. Retired Boomer are not going to get too excited!

Being DEBT Free helps. Old age has its own variables, which have been calculated into the mix as best we could judge. Saving diligently with a careful eye on spending got us to where we don’t need to give “full attention” to the markets, or tomorrow. As long as the markets deliver their history, we will be more than good.

#54 Smoking Man on 09.09.14 at 8:54 pm

Damn it, I have a lose tooth, and here I was, only worrying about the screws in my head…

#55 Chickenlittle on 09.09.14 at 8:55 pm

24 Happy Renting:

Garth wrote about another house collapse earlier this year. That isn’t the first one.

http://www.thestar.com/sports/leafs/2013/05/14/toronto_maple_leafs_collapse_against_boston_bruins_joins_list_of_city_sporting_heartbreaks.html

………..

Here’s what I stay up at night worrying about: So yes, people who have high levels of debt may suffer in the future when the SHTF…but what about regular shmoes like the rest of us who rent, follow Garth’s advice, but still need to pay the bills?

I always read about drowning home owners but when push comes to shove, when jobs disappear, we ALL suffer.

Sorry, I’m just thinking..and worrying too much methinks.

#56 Chickenlittle on 09.09.14 at 8:55 pm

Sorry, wrong collapse. ;)

#57 crossbordershopper on 09.09.14 at 8:56 pm

I see the third of canadians every day that have nothing. kelly couldnt come in the office today because she was down to one bus pass and didnt get money till friday.
and Garth is talking about rebalancing. let me see, i will move nothing to my nothing pile, then take half of nothing and put in my empty box of stuff and make sure i have expsoure so i will open the window in the apartment for some wonderful exposure. cant go through life without your box of nothing being exposed.
Diversified portfolio of nothing. Garth most people have nothing, some absolutely nothing. a third of children in toronto are poor, not flipping million dollar houses with borrowed money.

#58 HD on 09.09.14 at 9:03 pm

#22 Finally on 09.09.14 at 7:07 pm

We need room, we need a back yard, need to put up pics, wash my cars in the driveway, mow the lawn and unpack all my boxes in storage.

Needs or Wants?

Geeeez, wonder how people cope with all those unfulfilled ‘needs’

Best,

HD

#59 Tony on 09.09.14 at 9:10 pm

Re: #7 Macrath on 09.09.14 at 6:39 pm

At the start of this year every variable pointed to oil falling. It took 7 months but finally it fell. Every variable points to a stock market crash of at least 70 percent. It’s taken more than 7 months but I can wait it out.

#60 Setting the Record Straight on 09.09.14 at 9:15 pm

In assessing your ratios of fixed income vs equities,
I think one should count the NPV of your company and government pensions, or at least CPP. Counting OAS might be more problematic.

This could alter your investment decisions.

#61 Flawed on 09.09.14 at 9:19 pm

#57 crossbordershopper on 09.09.14 at 8:56 pm
I see the third of canadians every day that have nothing. kelly couldnt come in the office today because she was down to one bus pass and didnt get money till friday.
and Garth is talking about rebalancing. let me see, i will move nothing to my nothing pile, then take half of nothing and put in my empty box of stuff and make sure i have expsoure so i will open the window in the apartment for some wonderful exposure. cant go through life without your box of nothing being exposed.
Diversified portfolio of nothing. Garth most people have nothing, some absolutely nothing. a third of children in toronto are poor, not flipping million dollar houses with borrowed money.

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

And being as how 25% of the workforce are public sector workers, it shows how what little money people have all gets transferred to the most useless part of society. The govt. They make nothing. They tax everything and are the biggest reason everyone is broke. 60% taxes in BC for the “average” working family.

But let’s talk “re balance” to the “entitled” sector of society. RE can’t end well? How about the Class Warfare period we are entering can’t end well.

#62 NostyVlad the Snugglebombed on 09.09.14 at 9:23 pm

#28 Blacksheep on 09.09.14 at 7:21 pm — “Why cut the cockpit up and spread it out. What don’t they want cameras to see?”
— and —
#51 Smoking Man on 09.09.14 at 8:37 pm — “It’s obvious what happened to anyone that’s spent 5 minutes researching the subject on line.”

I would guess that the m$m doesn’t want sheeple to realize that most, if not all Boeings, can be flown remotely, without humans in the cockpit. Pilots are no longer needed, at least not in the big birds.

#63 Nomad on 09.09.14 at 9:25 pm

My coworker sends me a 1.2 million detached house listing around that sad Lansdowne and Bloor area. I send him back links to charts of Home Capital, Genworth, Atrium, and MKP.

Since I didn’t take a mortage yet, I gradually bought 70 stocks plus 10 ETFs. I feel safer than owning old walls.

Paycheck in 4 days. Yummy yummy what what stock or ETF should I buy now? Perhaps an inverse ETF for Toronto 1 bedroom condo prices?

#64 JO on 09.09.14 at 9:26 pm

#19 Too Hard- hoping your comment was a good bit of sarcasm. If you want to see the results of socialism, go to France, Belgium, Spain, Greece, Portugal and Italy, etc.
Obviously your online name tells us all we need to know about the nonsense you wrote.
Using political code words like “equality’ and ” rebalancing” does not cover up the real intent of robbing a productive person to help yourself to a unearned goody. It is extortion plain and simple. The good news is socialism or ” progressive” politics as it is disguised under is dying a steady slow death. Governments will shrink and most if the handouts will get cut, no matter the amount if kicking and screaming from the state and its zombies.

#65 Kenchie on 09.09.14 at 9:38 pm

#5 Frustrated on 09.09.14 at 6:39 pm
“Garth,
I keep getting calls from a bank that they have a special for 2 years at 2.34 percent. Different people from this bank called me 3 times. Why would they be pushing 2 year mortgage ?”

Just throwing this out there, but it would be so you are forced to refinance at higher rates in 2 years.

In other words, it could be the Canadian version of “Teaser rates”. Just done in a way that is well-documented and legal.

#66 Tony on 09.09.14 at 9:40 pm

Re: #7 Macrath on 09.09.14 at 6:39 pm

Some GIC’s aren’t even safe. Many credit unions in British Columbia will go bankrupt as will Hubert Financial which pays the highest 5 year rate. Will the parent company even survive? The housing crash will put many of these credit unions out of business and you’ll find out if you really get anything back. Insurance promises don’t mean much and how fast can you cash in those cashable GIC’s? Everything will probably be frozen for years.

#67 Macrath on 09.09.14 at 9:45 pm

#59 Tony
Patience is a virtue. I never had much but I`m learning with age.

http://jugglingdynamite.com/wp-content/uploads/2014/09/SP-bubbles-Hussman.png

#68 Kenchie on 09.09.14 at 9:45 pm

#8 harry bergquist on 09.09.14 at 6:40 pm
“Garth:

What about non-capitalists? What are we supposed to do about this?”

What does this even mean? If you’re a non-capitalist (in the sense you don’t buy financial or real assets), it’s your loss, buddy. Even my longshoreman (super union types) friends are not foolish enough to be “non-capitalists”.

#69 Kenchie on 09.09.14 at 9:57 pm

#15 SOMA on 09.09.14 at 6:52 pm
“I respectfully disagree with this re-balancing dribble. For a sanity check read “payback time” – Phill Town and STOCKPILE.”

Gee, another writer incentivized to sell their opinions to people with preordained biases.

Sorry, but since you disagree with Garth’s easy-does-it “dribble”, you are the one at risk of needing a “sanity check”.

#70 Snowboid on 09.09.14 at 10:05 pm

#53 Retired Boomer – WI on 09.09.14 at 8:52 pm…

“…Being DEBT Free helps…”

Sage words of wisdom for all retirees!

Although we aren’t lottery winners, it sure feels like it every time we check our earnings and account balances!

Most of our success is due to the wise advice of the esteemed professor, we are so grateful for this blog, the books and the (re)balancing act!

#71 Blacksheep on 09.09.14 at 10:07 pm

Smoking Man # 51,

Agreed.

Trouble is the Cattle are distracted with the latest I phone 6 and don’t consider spending 5 minutes to learn what’s really happening to the world.

Fear is a fantastic motivator.

So we get the system scaring the ignorant herd with fake be-headings like a barracuda chasing a school of fish.

I don’t want people to listen to me, I wan’t them to start thinking for themselves.

#72 devore on 09.09.14 at 10:10 pm

#2 Mark

Wow, so hard to believe, but true, eh? No wonder why most outstanding Canadian mortgage debt, at issuance, was considered to be subprime, hence requiring CMHC subprime mortgage insurance.

There was that story of a BC teacher with $6 in her bank account. I found it surprising that someone would be basically broke after missing 1 paycheck, but most people commenting thought this was just totally normal, apparently.

#73 omg on 09.09.14 at 10:14 pm

If you have balls of steel and a long time frame (30 years) just average into a broad based equity ETF and never rebalance.

Beats the crap out of bonds over the long run.

Problem is most people do not have the balls to keep putting money in or leave it in when the world goes to hell.

#74 mikek on 09.09.14 at 10:15 pm

Do you actually have to sell to rebalance? I’ve been contributing monthly to my tfsa (com-free ETFs), and use a spreadsheet to rebalance by buying. I know at some point the pot will large enough that I’ll need to sell to rebalance, but so far can do so by buying.

#75 Nemesis on 09.09.14 at 10:16 pm

#LongStanding… #EgregiousErrors… #’OOmission… #ThisIsJustFor… #HommeDuTabagisme… #”TheFormativeYears”

http://youtu.be/rgbi9OhtON0

[NoteToSM: No shit. MeToo. I got better, though. Skinnier, too. TeeHEE!]

#76 espressobob on 09.09.14 at 10:17 pm

#23 PJ

Gold is in the dumpster. Should we buy?

………………………………….

If your portfolio is diversified then you already own the miners. Why would you care about commodity prices? An ETF like the example below holds that sector.

http://www.blackrock.com/ca/individual/en/products/239832/ishares-sptsx-60-index-etf

#77 ham on 09.09.14 at 10:19 pm

That’s right Garth. Buy gold miners and coal producers. They’ve been kicked to the ground like no tomorrow. Everything else is expensive.

#78 Retired Boomer - WI on 09.09.14 at 10:20 pm

#70 Snowboid

Could not agree more.

Garth’s very sage advice will help anyone -who will listen!!

One needs to listen, then act!

Where else can you find thought provoking financial advice, delivered nearly daily, with just the right touch of humor? Oh, and don’t forget the latest installments on the incredible developments in Canadian RE.

#79 Mike Used to be in Leaside on 09.09.14 at 10:21 pm

I’ll answer the question Garth. Within a day or 2 of March 9, 2009 we bought about $30,000 of assorted stocks in my wife’s LIRA account (RBC and others). Within 6 months they were up 80% and we sold.

Then the feds relaxed the rules and we were allowed to take out a percentage that was formerly locked in, including those gains. In November 2009 we signed a deal for a large duplex in Chaplin Estates. We used 5% down and closed that deal on exactly March 9, 2010. At this point our equity is up approximately $500k. It may not all be safe in the future, but we’re not planning to look back.

(Some credit by the way goes to Bill Carrigan and his Getting Technical blog for anticipating the bottom of the 2008 crash)

#80 Setting the Record Straight on 09.09.14 at 10:22 pm

I am skeptical of the usefulness of the 60/40 ratio for determining portfolio allocations between fixed income and equity, given interest rate levels.

Shawn may be correct in arguing for 100 percent equity.
Another contributor suggested we needed to buy businesses that will survive very difficult conditions.

#81 Snowboid on 09.09.14 at 10:25 pm

In case all this balancing and re-balancing is too much for you or your advisor, our favourite RE whiz from the Okanagan can make you a millionaire in 7 years…

http://www.castanet.net/news/Investment-Real-Estate/121055/Become-a-millionaire-in-7-years-this-time

Math not a strong point in this analysis, however!

#82 AACI Home-dog on 09.09.14 at 10:28 pm

#3 shawn…
bang on ! And let some of your dividend income build up for a killing in the bloodbath, when the herd sells. Cheers.

#83 Macrath on 09.09.14 at 10:31 pm

#66 Tony

Most of southern Ontario from Windsor to Niagara has already had 10 years of crashing real estate. You can get nice properties at really good prices if you shop diligently. The large credit unions like Meridian are doing fine.
You have to get closer to Toronto to find the real delusional RE players and they are mostly bank customers backed by CMHC (the hapless taxpayer) .

#84 Doug in London on 09.09.14 at 10:33 pm

I don’t know exactly what I was doing on March 9, 2009. However, I do know that I was moving money out of cash, money market, and bond funds into equity funds and stocks from December 2008 to March 2009 when they were on sale. I would have bought far more if I had a margin account. Hey, equities were ON SALE back then in a once in a lifetime Black Friday and Boxing Week blowoff extravaganza sale that lasted all winter. Why would anyone want to sell rather than buy during this event? Seems like a no brainer to me.

#85 Guy on 09.09.14 at 10:35 pm

Thank you for the good advice Garth. Buy low, sell high, it worked for Simon Oppenheimer. Nothing has changed in the market place for more than a few hundred years.

The percentage of risk in a portfolio depends on a persons personal risk tolerance. It is the overall performance of the portfolio that is important.

What about the DDM?

#86 Kenchie on 09.09.14 at 10:39 pm

#36 Bob on 09.09.14 at 7:36 pm
“HELP! How do you talk a gold bug into a diversified portfolio? My friend is getting involved in a multi level marketing scheme involving gold ( kbintro.com ) and offshore MasterCard accounts!”

Only way for him to learn is if he loses his shirt. If he’s going to be thick-skulled, the only way to learn is from his own mistakes. Biases are a powerful force. It’s very hard to get someone to change their way of thinking.

Just look at all the wannabe-Austrian economists on this blog (you know who you are). They think they understand modern economics because of they believe what the founders of ASOE professed about during a much different economic structure in Europe. But the reality is they are using a hammer to screw in a bolt on a new iphone6. In other words, their lessons on “hard-currency” are made for a different bygone era. Von Mises and Hayek never would have expected such dramatic shifts in the global economy compared to the times they were alive.

That said, modern keynesians (like Krugman) aren’t any better.

Sorry for the tangent.

#87 Smoking Man on 09.09.14 at 10:42 pm

#71 Blacksheep on 09.09.14 at 10:07 pmFear is a fantastic motivator.

So we get the system scaring the ignorant herd with fake be-headings like a barracuda chasing a school of fish.

I don’t want people to listen to me, I wan’t them to start
thinking for themselves.
…..

Why, so much easier to pick their pockets.

The machine gave us fools, opportunity, that word in grade 7 on the black board 1000 times, cause I could not speel it.

I still can’t spell it, but I understand it

#88 devore on 09.09.14 at 10:45 pm

#4 Shawn

I trust that is true but every single stock sold was bought by someone. Someone with more going for them than than Truck Nutz.

Prices were plummeting, so there was selling pressure, not a buying frenzy.

#89 Kenchie on 09.09.14 at 10:46 pm

#38 Calamity Jane on 09.09.14 at 7:38 pm
“#19 too hard… That was sarcasm, right? If not you’re preaching to the wrong choir. I would try an NDP support group…

So excuse me but you can bite me if you think Im going to pay more for some asshile to not work, buy whatever toys they want, and destroy the things handed to them by a very generous government funded by you and I.”

Here, Here! Calamity Jane for Mayor of Toronto!

#90 devore on 09.09.14 at 11:00 pm

#5 Frustrated

Why would they be pushing 2 year mortgage ?

Monthly payment, supply and demand. 2 year mortgage has lower rate and thus lower monthly payment, so more people qualify than for an equivalent loan at 5 year rate.

I think you should be asking why they’re calling you :p

#91 Tommydouglas on 09.09.14 at 11:03 pm

A couple questions re: rebalancing

1) how is holding cash a ‘defensive asset’? So I can buy if something drops?

2) if I am using these splits for balancing, does it matter if I buy a hedged vs. non hedged foreign equity fund?

Thanks

#92 Kenchie on 09.09.14 at 11:05 pm

#45 Longshorebore on 09.09.14 at 7:56 pm
“With all this QE why don’t we get any inflation? They’ve printed billions and nothing? Is it because the money is not being lent or spent but just fuelling this stock bubble?”

The common form of inflation, CPI, isn’t representing inflation well enough, in my opinion, because housing makes up for circa 25% of the Canada basket (27.3% and 27.6% for ON and BC, respectively). But standard housing is not replicable for the masses, in the sense that not everyone has the same house, same rental rate, interest rate, etc. which makes things not comparable for use in CPI calculations.

Also: “Shrinkflation”, coming to a supermarket near you.

http://www.bloomberg.com/news/2014-09-03/from-chocolate-to-beer-shrinkflation-is-unseen-pressure.html

#93 Catalyst on 09.09.14 at 11:19 pm

I know it is common to regurgitate the 60/40 model, but I feel today when fixed income pays so little (real loss after inflation) that it is too conservative for today’s age. I prefer 80/20 which leaves room to take advantage of buying opportunities and take profits.

#94 Kenchie on 09.09.14 at 11:21 pm

#51 Smoking Man on 09.09.14 at 8:37 pm

“#28 Blacksheep on 09.09.14 at 7:21 pm

It’s obvious what happened to anyone that’s spent 5 minutes researching the subject on line.

My point with relevance to real estate, MSM controls the market, they can corral, and move the herd anyway they want. The way there talking points are, can only mean there some kind of back ground force that controls them.”

MSM is, generally-speaking, always reactionary to the market. Or, in other words, always behind the ball.

They aren’t as powerful as one might think. In the past week or two, there have been headlines suggesting prices are weakening as much as there have been positive “articles” (i.e. sponsored posts).

Here is a list I compiled in about 2 minutes:

http://business.financialpost.com/2014/09/09/canada-housing-starts-cool-in-august-seen-slowing-further/
http://business.financialpost.com/2014/09/07/thinking-about-a-move-up-buy-forget-it-new-study-says-you-cant-afford-it/
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/gen-ys-financial-woes-are-now-everyones-problem/article20482243/
http://www.theglobeandmail.com/globe-investor/personal-finance/is-it-time-to-downsize-your-home/article20334556/
http://business.financialpost.com/2014/08/13/canada-condos-risk/
http://business.financialpost.com/2014/07/28/cmhc-turns-up-scrutiny-of-condo-investors-as-concerns-of-overheated-market-grow/
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/downsize-your-home-worksheet/article20320032/
http://business.financialpost.com/2014/09/07/thinking-about-a-move-up-buy-forget-it-new-study-says-you-cant-afford-it/
http://business.financialpost.com/2014/08/29/canada-house-prices-expected-to-rise-further-fuelling-fears-of-meltdown/

Bit older, but relevant:
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/say-goodbye-to-the-family-cottage-before-its-too-late/article19248055/

And now pushing stocks on Gen Y (multiple stories):
http://www.theglobeandmail.com/globe-investor/investment-ideas/portfolio-building-for-the-rookie-investor/article20175716/#dashboard/follows/

Conclusion: NP is more bearish than G&M.
Alternate conclusion: G&M makes more money from RE adverts.

#95 espressobob on 09.09.14 at 11:24 pm

#73 omg

The problem with ‘aggressive’ portfolios has to do with volatility. A 60/40 split along with rebalancing provides more consistency year after year. Many investors forget the silent law of compounding. Just ‘let’ it happen.

#96 Mark on 09.09.14 at 11:33 pm

“But standard housing is not replicable for the masses, in the sense that not everyone has the same house, same rental rate, interest rate, etc. which makes things not comparable for use in CPI calculations. “

I suggest you research the topic of “owners equivalent rent”. Which, due to all the capacity brought into the RE marketplace over the past decade, has been relatively stable. From my vantage point, inflation is non-existent at a consumer level.

As house prices continue to fall, owners equivalent rent may very well start to rise as new supply to the market is constrained. But we’re a long ways from that happening, as it is still enormously profitable to deliver new housing to market.

#97 Kenchie on 09.09.14 at 11:37 pm

#72 devore on 09.09.14 at 10:10 pm

“There was that story of a BC teacher with $6 in her bank account. I found it surprising that someone would be basically broke after missing 1 paycheck, but most people commenting thought this was just totally normal, apparently.”

It’s normal for (many) teachers. Banks make a killing off of them during the summer because they don’t know how to budget, yet know how to plan a class schedule for a full academic year. Go figure..

#98 Mark on 09.09.14 at 11:38 pm

“1) how is holding cash a ‘defensive asset’? So I can buy if something drops?”

Cash, by definition, and if measured against cash, has minimal to no volatility. Hence, if it is part of your rebalancing plan, allows you to pick up volatile assets hopefully when they’re cheap. As a FP, Garth likely has some rules of thumb in terms of the FI/equity split a portfolio “should” have as a function of age (much like he has a ‘rule of thumb’ about the housing to other asset split). Perhaps he will enlighten us with a future blog post on his beliefs.


2) if I am using these splits for balancing, does it matter if I buy a hedged vs. non hedged foreign equity fund?

The purpose of having a balanced portfolio, and of rebalancing, is to take advantage of negative cross-correlation of assets to achieve a slightly superior return (as a rebalanced portfolio, theoretically, will outperform, over the long term, the weighted average calculated return without rebalancing.).

The purpose of hedging and hedged ETFs is to increase correlation.

Hence, if you use hedged ETFs, you are effectively undermining the effectiveness of a rebalancing and asset allocation strategy. And increasing your fees, expenses, and often taxes while you’re at it.

#99 Larry1 on 09.09.14 at 11:40 pm

Garth, I’m aligned with your housing and capital mis-allocation prognosis but not your anti-common stock view. Sure if one’s not interested in reading and researching businesses, then buy broad market ETFs. I get that.

Say someone learns fundamental analysis, identifies wide economic moats, buys stock in 40-50 businesses for the long term. They keep cash/margin on hand to be greedy when others are fearful. Under such philosophy, keeping winners can make sense. Imagine selling MSFT or BRK.b in their early days of growth just because they doubled in one year.

#100 Happy Renting on 09.09.14 at 11:44 pm

#55 Chickenlittle on 09.09.14 at 8:55 pm

The #24 link was West Coast’s, but I did see that article, plus the one about the collapsed semi a few months ago. I was watching the Leaf’s playoff collapse, too… Basically, at this point I never expect any different and so am seldom disappointed in this regard. :(

—————–

Yes, when the economy does poorly, there’s pain all around, just not distributed proportionally. For the smart regular schmoes, I think the strategy is to claw your way (as much as possible) into the “rich” realm. Pay off all your debt and build up your base of financial assets (what’s a $25k portfolio? $25k more than what most people have – uber-rich blog dogs excepted.) I really believe Garth’s comment from a few days ago: whatever happens, in the short-to-medium term rich people (those with financial assets) are just going to get richer (reap income and capital gains from those assets.) Many of the poor are still living relatively comfortably on credit, so the pitchforks aren’t coming out for a while. No revolution yet.

For the necessary micro-subjects of how to spend less, save more, and/or earn more, I found Mr. Money Mustache and Jacob at Early Retirement Extreme to be useful reads. Even if you’re frugal, these guys will probably show you a place or two where you can cut your expenditures. Forget the mainstream 10%, if you can save and invest 50%+ of your income your pile adds up, fast.

Within the next few years, either 1) TSHTF and even if unemployed you’ll have some dividend/interest income coming in and be used to a frugal lifestyle, or 2) things will be fine and you’ll be substantially richer than you are today.

The financial worries you have when you have money aren’t desperate like the financial worries you have when you’re broke. Smart regular schmoes can put a plan together and be A-OK.

#101 torontorocks on 09.09.14 at 11:47 pm

Im now overweight equities but to rebalance into bonds knowing rates are to rise and the fact that thebonds have actually fallen in valueare high feels like dumping the gains. Ive got a 1_5 year etf for corp bonds and they havent returned. Am i rebalancing into a slump or do i go cash short term till rates rise.

#102 Mark on 09.09.14 at 11:48 pm

“Hey, equities were ON SALE back then in a once in a lifetime Black Friday and Boxing Week blowoff extravaganza sale that lasted all winter. Why would anyone want to sell rather than buy during this event? Seems like a no brainer to me.”

They still are ‘on sale’. If you take 8000 as a depressed level of the TSX, and add 7 years worth of retained earnings (roughly 2/3rd of the TSX’s earnings are retained), and add inflation at a modest 2%/annum, roughly 15,000 today is the equivalent of TSX = 8000 back in 2008.

Why has the TSX been on sale for the past 6-7 years? Because most investor enthusiasm has been with the housing bubble. Its similar to the late 1990s when quality “old economy” stocks could barely fetch a bid because everyone was infatuated with the so-called “new economy” tech stocks.

#103 Lurcher on 09.09.14 at 11:58 pm

Million dollar parking spots in NYC. Now that’s world class.

http://www.news1130.com/2014/09/09/new-york-city-condo-building-to-offer-1-million-parking-spots-thats-6666-per-square-foot/

#104 Casual Observer on 09.10.14 at 12:08 am

isn’t everything correlated right now? When rates go up both bonds and all stocks will be affected negatively. What should we do?

The problem with historical correlations is that they change over time, depending on economic conditions.

Historical correlation between US Stocks and US Long -term Bonds:
1972-1979 = 0.51
1980-1989 = 0.32
1990-1999 = 0.54
2000-2009 = -0.84

Correlation of +1.0 means both move in the same direction.
Correlation of -1.0 means they move in opposite directions.

For most of the last 40 years, stocks and bonds had a medium positive correlation (they moved moderately in the same direction). Only during the most recent decade have correlations gone decisively negative.

What to do? That is the question.

The only asset class that is not going to be negatively affected by rapidly rising rates is cash, but it’s also not going to give you any growth.

Unfortunately, there is no easy answer. Probably not what you wanted to hear.

#105 nonplused on 09.10.14 at 12:26 am

Rebalancing is good advice Garth, and I appreciate it. But I have a suggestion. If those dopes in Washington and Moscow don’t sort things out really we only have a year or so to go. And if they sort things out and Japan doesn’t stop the poisoning of the Pacific then 5 years to go. So the portfolio has to be looked at in a different light:

10% whiskey
10% sporting equipment and lift passes
20% cool toys like Harleys
30% cash (for entertaining the ladies)
A hot tub, whatever the percentage
We’re having steak for dinner, not turkey!
Maybe 10% more whiskey
Enough solar panels to run the kids game counsel and TV
10% in kick ass firepower. Not that it will help after drinking all that whiskey. But it’s fun to practice.
Squirrel traps.

That might not add up to 100% but you can borrow money, you won’t have to pay any of it back once the nukes go off.

This is short term investing at it’s finest.

#106 Vicpaul on 09.10.14 at 12:58 am

#72. Devore

I am a teacher in BC ( grade one).
We have not had a paycheck since June 15th
– it will be three MONTHS with no income in another
Few days. Edify yourselves.
http://blogs.theprovince.com/2014/08/25/alex-tsakumis-b-c-liberals-are-hoping-to-bankrupt-the-bctf/#comment-68738

#107 Christopher Lackey on 09.10.14 at 1:04 am

what if one year ago you bought, 20% asset allocation each

XSP (US) XIC (CANADA) CWO (Emerg Markets) and XBB (Bonds) and XRE (REITs)

OR

VUN (US) XIU (CANADA) VEE (EmergMarkets) CAB (Bonds) and ZRE (reits)

My point is all of them have gone up. Not a bad place to be, but I guess you sell and buy whatever you need to return to your target allocation?

#108 Son of Ponzi on 09.10.14 at 1:26 am

#27 Mark on 09.09.14 at 7:21 pm
“I keep getting calls from a bank that they have a special for 2 years at 2.34 percent. Different people from this bank called me 3 times. Why would they be pushing 2 year mortgage ?”
Canadian banks run duration-matched, so they probably have a surplus of funds with 2 years till maturity that they want to lend out.
——————
Mark, I think you finally getting the hang of what duration matching means.
However, keep in mind that a mortgage has a lower duration than a deposit of the same term.
I.e. a 2 year mortgage has a duration of about 1.8 due to prepayments and payments made on a declining balance.

#109 Barry on 09.10.14 at 1:26 am

Here’s what I did – dumped all my mutual funds in January, 2009 and over the next two months bought all the dividend paying stock I could get my hands on.

Missed the very bottom by about 2 weeks but so what. It was a gift!

I see no reason to sell TD, Enbridge, Fortis, CN Rail, TransCanada and other dividend growth stalwarts. Looking back to ’09 I should have bought 100% dividend growth equities. Never need to touch my capital if I have a growing TAX EFFICIENT income.

#110 Don Sanderson on 09.10.14 at 3:03 am

My uncle and aunt have a business that brings in $300,000 a year net profit after income taxes.

They live quite nicely but manage to put away $225,000 every year after income taxes.

All they do with this money is buy 5 year GIC’s and provincial zero coupon bonds. All they care is getting 3.50% average per year.

Their rational is they have $1,000,000 in REIT’s, dividend paying ETF’s, own a building worth $1,000,000, a business that can be sold for about $2,000,000 and 4 rental units that bring in net $55,000 a year worth $1,000,000.

They want to build more future financial investments but have less in physical real estate and their business.

Their goal is to have at least $2,500,000 more financial investments in 10 years.

#111 Harry Wilson on 09.10.14 at 4:20 am

Some questions for the wiser dogs, from a smaller dog:

For someone who only rebalances once or twice a year, are there certain times of year that are better than others?

I’m thinking that from December to February, many people are contributing to their RRSP, and beginning in January, people are taking advantage of their new TFSA contribution room. Does this influx of cash into ETFs, mutual funds, and the like mean that there is more stock-buying activity, putting upward pressure on prices, resulting in a seller’s market? Is it enough of a blip in prices to make it worth waiting until year’s end to sell?

Conversely, after harvesting the gains on your winners, should one wait until spring to buy, when prices may normalize, or should both ends of the rebalancing be done at the same time?

I need to know this stuff for when I win the 6/49.

(This hypothesis goes out the window if my theory of a year-end shopping spree isn’t true. Let me know, gently, if I’m completely wrong on this.)

—————————————

P.S: re #50 Dwilly; what the what is AOTA? All I can find is ‘Anglo & Overseas’ on the London Stock Exchange, and ‘American Occupational Therapy Association’.

#112 Emile on 09.10.14 at 5:49 am

My rebalancing ‘plan’ is predicated on this post (http://www.michaeljamesonmoney.com/2014/02/how-often-should-you-buy-stocks-with.html) ; and works out almost as often as the calendar method. My savings are “lumpy”

buy more threshold ≈ √(2mc÷r)

m is the savings rate per year; c is the commission to rebalance; and r is difference in cash vs stock expected returns. In my case; with my aggressive savings and re-invested dividends I rebalance about three times a year; minimizing transaction costs.

#113 TnT on 09.10.14 at 6:50 am

AOTA = All of the above

#114 pbrasseur on 09.10.14 at 7:27 am

As I said before rebalancing doesn’t make you money, it merely protects you from short term volatility, and it does so at the expense of better long term performance.

If you’re in it for the long run and your objective is to have enough when you need it then rebalancing will do more harm than good.

What really matters is to invest smartly, selectively in quality equities which intrisic value grows.

That may work for a person with a seven-figure portfolio and flinty emotions, but it fails for most. –Garth

#115 GAME CHANGER on 09.10.14 at 7:50 am

http://business.financialpost.com/2014/09/08/cmhc-could-force-banks-to-pay-deductibles-on-mortgage-insurance/

#116 Waterloo Resident on 09.10.14 at 7:58 am

I don’t know about you (or Garth), but my signals all point to stocks falling for the next few weeks, so I’m selling and going to sit on the sidelines until things signal that they are going to start going up again.

(of course, I could be wrong.)

#117 dumbledoom on 09.10.14 at 8:11 am

“I trust you wrote this on your thigh, or possibly considered a tat.”
Awesome advice for us greater fools!!!
BTW what did you do on Mar 9th 2009 – were you able to stay sane and make it count:)

#118 NeoPhythe on 09.10.14 at 8:40 am

Is it possible to invest in an ETF of “accréditives” shares ?

#119 Kenchie on 09.10.14 at 8:46 am

Go Canada go…

http://www.ctvnews.ca/business/majority-of-canadian-workers-living-paycheque-to-paycheque-survey-1.1999947

#120 BillyBob on 09.10.14 at 8:50 am

I would guess that the m$m doesn’t want sheeple to realize that most, if not all Boeings, can be flown remotely, without humans in the cockpit. Pilots are no longer needed, at least not in the big birds.

=====================================
Shhh! As one of the drivers of those big Boeings, don’t tell anyone this! ;-)

Technically, any machine can be operated remotely – drone technology has been around since the 50’s. But the idea that a Boeing can be “hacked” and flown remotely, without being modified heavily and very noticeably, is just silly. Life isn’t really like “24”.

As to no longer being “needed”…if you knew what most pilots are actually paid you’d realize pretty quick that it’s still far cheaper to pay a couple of meatsacks to warm the seats. The only real money in flying is overseas in tax-free jurisdictions, and only represents a very small part of the cost of a flight. Both Air Canada and WestJet have abysmal pay at Rouge and Encore. And if you knew how many many small decisions – and occasionally, large ones – are made in the course of any flight to ensure it ends happily, you’d realize that AI isn’t quite where it needs to be to take over autonomously.

So, you pay pilots on the ground, or you pay them in the air. Except that to do it remotely, you have to build a fantastic amount of incredibly costly infrastructure. A telemetry system robust and redundant enough to be safe would be astronomically expensive. I have no doubt there have been many cost/benefit analyses already done. And still two warm bodies in the machine.

And then of course, you have to convince passengers who are afraid of flying, who got stranded on the Skytrain when the computers went down, that a machine moving far faster, in three axes, is safe without a driver…

The obstacles to pilotless flight aren’t technological, they’re economic and psychological. If it were cheaper or practical they’d already being doing it. Of course it will come one day, but it has unique challenges not present in ground or sea travel.

#121 pbrasseur on 09.10.14 at 9:04 am

That may work for a person with a seven-figure portfolio and flinty emotions, but it fails for most. Garth

I disagree you don’t need to be a millionaire to invest smartly, for example I have a TFSA now worth around 45K with only 5 or 6 very good common stocks in it. Good, profitable, financialy sound companies that are growing are the best insurance against bad surprises, not dilution nor rebalancing.

It is true that many fail at this, and it is because they get caugth up in emotions, they end up selling low in panic and rejoin the market after it has recovered (as it invariably does). But if people can learn the benefits or rebalancing they should also be able to learn to invest intelligently and the difference between investing and gambling.

They should all eat sensibly and sit up straight, too. — Garth

#122 thebarold on 09.10.14 at 9:06 am

What about people continuously contributing? Would you recommend using those contributions to ‘rebalance’ your portfolio rather than trying to buy a basket of equities and bonds at every contribution?

#123 Kenchie on 09.10.14 at 9:07 am

#96 Mark on 09.09.14 at 11:33 pm

“I suggest you research the topic of “owners equivalent rent”. Which, due to all the capacity brought into the RE marketplace over the past decade, has been relatively stable. From my vantage point, inflation is non-existent at a consumer level.

As house prices continue to fall, owners equivalent rent may very well start to rise as new supply to the market is constrained. But we’re a long ways from that happening, as it is still enormously profitable to deliver new housing to market.”

Mark, you’re missing my point. Owners’ equivalent rent is an easy concept to understand, and should be used when deciding between owning and renting. But it doesn’t easily translate into the CPI calculation.

My point is: my friend’s owners’ equivalent rent in his DT Vancouver condo depends on the price he paid for it (2009). While the new guy next door could have paid, say, 35% more (2014). Therefore, the neighbour’s owners’ equivalent rent is not going to be comparable to my friend’s OER, despite the units being very similar. He will be forced to charge higher rents to cover his costs, which will make him uncompetitive. Therefore, what’s the true OER of this type of condo? Is it an average of the two? Is it the new OER, despite the older OER still being applicable and relevant?

There are too many micro variables for it to work for the macro: LTV, price paid, differences in location, house horniness of the bidders, deep pockets of the investors, motivations of the investors, etc.

On another note, should CPI weight shelter as only 25%, or should it be higher (more realistic for many folks)?

#124 Shawn on 09.10.14 at 9:12 am

Over Diversified?

Larry1 at 99 asked:

Say someone learns fundamental analysis, identifies wide economic moats, buys stock in 40-50 businesses for the long term. They keep cash/margin on hand to be greedy when others are fearful. Under such philosophy, keeping winners can make sense. Imagine selling MSFT or BRK.b in their early days of growth just because they doubled in one year.

*****************************************
Buffett would suggest closer to 4 to 5 stocks you are REALLY confident in rather than 40 – 50. Certainly you don’t need more than a dozen.

You can be are either a true stock picker or a closet indexer, which will it be?

Don’t bother to try to get Garth or anyone in the industry to agree. They pretty much have to cater to the masses not to people who really want to out perform. They can’t accept the risk of suggesting anything too far outside the index. The law protects them if they stick near the index.

Better to fail as a group than ever risk failing alone (even if expected rewards are great). Just ask Franklin (he of the expedition). As Buffett has said, lemmings as a group have a poor reputation, but no individual lemming has ever gotten bad press.

#125 crowdedelevatorfartz on 09.10.14 at 9:16 am

@#119 Kenchie

Well if my 4 co workers are any indication. Stats can should have another survey on the “negative income” morons.
1 saves money.
2 live pay cheque to pay cheque
1 spends more than he earns and was looking at financing a 60 inch 3D tv last weekend ( “the picture is awesome!”).

He’s in his mid 40’s has 3 kids , a wife at home,smokes a pack a day( as does his wife) and barely makes his rent……… welfare should be paying for them soon enough…..when repo man takes the financed car……but HEY!
The tv is awesome maaaaaan.

#126 V-strom rider on 09.10.14 at 9:19 am

The whole idea of “harvesting your gains” is gambling, not investing. I sold TSLA at $31 to harvest my gains, how do you think I feel now? I sold IPL.un at $19. I can provide many more examples. I’ve learned my lesson. The smart thing to do is to buy good stocks and hold them forever. If they skyrocket, resist the urge to sell. You are not smart enough to predict if they’ve peaked or will continue to go up.

Rebalancing does not mean liquidating a position, but keeping it properly weighted. You made a typical DIY mistake. — Garth

#127 Holy Crap Wheres The Tylenol on 09.10.14 at 9:35 am

#87 Smoking Man on 09.09.14 at 10:42 pm
#71 Blacksheep on 09.09.14 at 10:07 pmFear is a fantastic motivator.
So we get the system scaring the ignorant herd with fake be-headings like a barracuda chasing a school of fish.
I don’t want people to listen to me, I wan’t them to start thinking for themselves.
…..

Why, so much easier to pick their pockets.
The machine gave us fools, opportunity, that word in grade 7 on the black board 1000 times, cause I could not speel it.
I still can’t spell it, but I understand it
___________________________________________
Smoking Man be consistent you just spelled the word”speel” then in the same sentence “spell.”
Please pick one side to stay on, you either spell correctly or you speel. By the way what exactly is speeling?
As for MH17 this is the place I come to get away from such a devastating tragedy. Can’t comment as I really breaks my heart for all of the innocent ones, just saw on TV the last photo of a little girl with her family, all died. Perhaps you should start a blog dedicated to this insanity that prevails.
You could do it!

#128 Sue on 09.10.14 at 9:45 am

#106 vicpaul
Wouldn’t that be 3 WEEKS without a cheque?
If you worked the summer you may have gotten a little sympathy.
Talk about entitled.
Kinda nice to see the bc gov have a little backbone.

#129 pbrasseur on 09.10.14 at 9:48 am

The S&P 500 lost almost 20% in august 2011, who remembers?

Maybe some of the 1% does, for the 99% the expression “blissfully unaware” comes to mind!

The point is if you had rebalanced int the month preceeding to that drop, you indeed would have cut some losses but you would also have missed out on the following rally.

In other words for rebalancing to beat the market you have to time it perfectly, which I hope you realize is impossible.

#130 Holy Crap Wheres The Tylenol on 09.10.14 at 9:48 am

My old guys investment group watched the event yesterday. Apple (AAPL, Tech30) shares rallied almost 5% Tuesday afternoon as Apple unveiled the iPhone 6 and iPhone 6 Plus, a mobile wallet service called Apple Pay and an Apple Watch. But those gains evaporated in the final hour of trading. The stock finished the day slightly lower. So it was a big nothing although industry experts say we should expect sales in the millions of products. I think a wait and see position would be best to adopt! I have to say the new products were cool!

#131 };-) aka Devil's Advocate on 09.10.14 at 10:01 am

Good advice which is equally applicable to real estate. People are love crowds – ever notice how many show up for them? So too is the case in market speculation and the pigs get slaughtered. It’s all so predictable

As Warren Buffett says “Buy when everyone else is selling” and Don’t buy when everyone else is buying (“Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance”

But the Buffett advice I like best is “Understand what you own”. I understand real estate and that is why it is my primary investment strategy.

SHIFT happens, learn to ride the tide.

#132 Holy Crap Wheres The Tylenol on 09.10.14 at 10:12 am

Just remember that, like your spouse, if you ignore your portfolio for too long it’ll get ugly.
___________________________________________
My wife let her inheritance stocks from her father languish on for decades before she even remembered about them. He bought the classic IBM, Western Electric, Northern Electric types of stocks in the 1950’s. He actually had given her and her sisters all small stock portfolios as children. When he passed away she received the balance of his stocks he had invested. When she finally cashed them in IBM was the only big winner and netted her a little over $240K. It wasn’t ugly but I don’t let her forget about stock investments anymore, you have to be on top of them all the time!

#133 Rational Optimist on 09.10.14 at 10:26 am

106 Vicpaul on 09.10.14 at 12:58 am

“I am a teacher in BC ( grade one).
We have not had a paycheck since June 15th
– it will be three MONTHS with no income in another
Few days. Edify yourselves.”

“Edify yourselves.” Classic! If three months without employment income causes you trouble, you were in trouble already. Someone the other day “edified” us by providing information suggesting that teachers starting out “only” earn a bit more than the average Canadian worker. Do you teach your students that it’s okay to depend on others, no need to keep cash on hand in case you get laid off or feel the need to defend a political opinion by walking off the job?

#134 Rational Optimist on 09.10.14 at 10:28 am

127 Holy Crap Wheres The Tylenol on 09.10.14 at 9:35 am

“Please pick one side to stay on, you either spell correctly or you speel. By the way what exactly is speeling?”

You have it wrong. “Speel” is not a mis-spelling of “spell,” it is a mis-spelling of “spiel.” You know what spieling is, and he does it well.

#135 rosie "moving forward" in the knowledge that, "this won't end well" on 09.10.14 at 10:54 am

#57 crossbordershopper

Your name explains your predicament nicely.

#136 Doug in London on 09.10.14 at 11:02 am

@Mark, post #102:
While equities on the TSX were on sale in 2009 and 2011, for the most part they are not on sale now having had a good run up. There are a select few that are still on sale, like HNY, but most others are pricey. The last round of good sales was in the last quarter of 2013 when REITs, preferred shares, and electric utility stocks like CSE were on sale. My crystal ball doesn’t work so I won’t give any predictions, but sooner or later the stock market or certain sectors of it will go on sale again.

#137 Daisy Mae on 09.10.14 at 11:12 am

#113 TnT: Thanks. Now Garths reply makes sense….

“Web definitions — The American Occupational Therapy Association is the national professional association established in 1917 to represent the interests and concerns of occupational therapy….”

I was looking deeper and, Garth, quit shaking your head!

#138 Mike in Toronto on 09.10.14 at 11:21 am

126 V-strom rider

You’re missing the point of rebalancing. It’s not to harvest gains, it’s to adjust your risk exposure.

If in 2010, you had $100k and invested $10k in TSLA, $90k in XIU, and didn’t rebalance…

Today you would have $120k in XIU and $130k in TSLA. You’re now >50% invested in a single stock. Your portfolio is very high risk.

Unless you changed your risk profile, you should sell off the TSLA and rebalace to your 90%/10% relationship.

If your risk profile was suicidal, then you should have just bought $100k worth of TSLA. Today, you would have $1.3M in TSLA! It can only go up right!?

#139 Mister Obvious on 09.10.14 at 11:25 am

#124 Shawn

“Don’t bother to try to get Garth or anyone in the industry to agree. They pretty much have to cater to the masses not to people who really want to out perform. They can’t accept the risk of suggesting anything too far outside the index.”
—————————

Beg to differ. The investor assumes all risk. Period. It is up to the advisor to determine the specific level of risk an investor wishes to take and proceed accordingly. That’s key. An advisor must learn the nature and needs of the person for whom they work.

Advisors know how to gamble if that’s what a client wants. When an investor signs an agreement stating they are willing to take a high risk in search of high return (or loss) then the advisor will make it so.

Naturally, most advisors will council against excessive risk and may be unwilling to take a gambler as a client.

But that’s no problem since most gamblers feel they are too smart and invincible to need the help of another party to steer them towards profit (or losses).

If you want to gamble you can probably find an advisor somewhere to work with. But I guarantee you it won’t be Garth.

#140 Holy Crap Wheres The Tylenol on 09.10.14 at 11:29 am

#128 Rational Optimist on 09.10.14 at 10:28 am
Agreed, however you better explain to him what spieling means!
____________________________________________

Now down to brass tacks, Thomson and Soknaki are out, That leaves Ford, Chow and Tory.
Oops I almost forgot Carlie Ritch Also known as ‘Mizz Barbie Bitch’ Ritch is a dominatrix who wants to “whip Toronto into shape.”
Smoking Man that’s your Que!
How come your name is not on the Mayoral race?
This isn’t going to end well.

#141 Mixed Bag on 09.10.14 at 11:42 am

Timing. Caught the end of this episode of Consuelo Mack – Wealthtrack on PBS, with Tom Gardner from Motley Fool. http://wealthtrack.com/recent-programs/gardner-entertaining-investing/

She noted at the very end, and my numbers are from memory, that since 2002 and rebalancing, Tom’s investents were ahead 130%, but if the Tom had left his investments alone, he’d be further ahead at 162%. I found this interesting. (Again, my numbers may be off, but the non touche pas strategy would have had him further ahead).

He commented that a stock he liked at the moment was Starbucks. American market pretty much saturated, but global growth was expected to be large. Wish I had some play money. Don’t have the brass nuts like some of our esteemed readers.

#142 Luc on 09.10.14 at 11:53 am

Canadians living pay-check to paycheck. Unbelievable…
http://www.ctvnews.ca/business/majority-of-canadian-workers-living-paycheque-to-paycheque-survey-1.1999947

#143 The Found Vagabond on 09.10.14 at 11:59 am

I rebalance once a year in January, mainly because that is when contribution room opens up for my registered accounts like TFSAs and RESPs. When rebalancing to your chosen percentages, you also have to consider the tax implications of holding different investments in different accounts, and put them into the account when they are most efficient (for example, interest earning investments in a registered account). This can get a little complicated, so it adds another dimension to the rebalancing activity.

I also do a small rebalancing when I receive my yearly Notice of Assessment from the CRA which shows how much additional room I have created in my RSP account.

#144 Ogopogo on 09.10.14 at 12:09 pm

#81 Snowboid on 09.09.14 at 10:25 pm
In case all this balancing and re-balancing is too much for you or your advisor, our favourite RE whiz from the Okanagan can make you a millionaire in 7 years…

http://www.castanet.net/news/Investment-Real-Estate/121055/Become-a-millionaire-in-7-years-this-time

Math not a strong point in this analysis, however!

Good one, Snowboid. The greasy shill is likely oblivious to the irony in posting a pic of Monopoly beside his infomercial disguised as “news”.

#145 Ogopogo on 09.10.14 at 12:13 pm

Garth & co. I’m sure you’ve all seen this already in today’s G & M, but here it is for those who haven’t (paywall-free link):

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20140910/RBCDFINANCESFINAL

Savings dwindle as incomes stagnate and debt piles up.

Revealing quotes:

“Subdued real wage growth and muted hiring have kept a lid on earnings. Meanwhile, house prices continue to climb and inflation has ticked above the 2-per-cent mark for four months in a row.”

“[The BoC’s] financial system review showed the chief risks are in the housing market – with the threat of a sharp correction in house prices – along with household indebtedness, which leaves people vulnerable to a sudden job loss, or a sharp rise in interest rates.”

Now, ask a realtor if it’s a good time to buy. A lollipop for anyone who can get an honest answer.

#146 416 Hipster on 09.10.14 at 12:29 pm

First?

#147 A Yank in BC on 09.10.14 at 12:39 pm

All great advice, but my feeling is that people are human and won’t remember to rebalance any more than they remember to back-up their hard drives. If it’s any harder than flipping a switch, they just won’t do it. As has already been said.. a modestly priced balanced fund with a good track-record is probably a good solution for most. A dirt-cheap “indexed” balanced fund being the best solution of all.

#148 Blacksheep on 09.10.14 at 12:47 pm

Smoking Man # 87,

“Why, so much easier to pick their pockets.”

“The machine gave us fools, opportunity”
—————————————————–
Most of my customers are business owners, that already
have an acute sense of what’s happening anyway.

A little enlightenment of the herd is OK with me.

#149 Mark on 09.10.14 at 1:05 pm

“My point is: my friend’s owners’ equivalent rent in his DT Vancouver condo depends on the price he paid for it (2009). “

Nope. You don’t understand the concept of OER then. OER is based on what an equivalent unit would rent (or could be rented) for. Not on what was actually paid for the unit, financing costs, etc.

What your friend paid for a unit, or the terms of his financing is rather irrelevant.

#150 Harry Wilson on 09.10.14 at 1:05 pm

re #113 TnT

“AOTA = All of the above”

Thanks, TnT; I should have figured that out. In my defence, it was 2am here when I submitted my original comment.

#151 Mark on 09.10.14 at 1:07 pm

“Mark, I think you finally getting the hang of what duration matching means.”

I’ve always known what duration matching means.


However, keep in mind that a mortgage has a lower duration than a deposit of the same term.

Depends upon the repayment schedule for both, if you want to get all fancy about it.

#152 Mark on 09.10.14 at 1:10 pm

“While equities on the TSX were on sale in 2009 and 2011, for the most part they are not on sale now having had a good run up. “

I disagree. There are still significant numbers of TSX constituents >$1B market cap which trade at significantly below book value, and even a realistic replacement cost of their assets. Plenty of firms are still “on sale”, as is the broader index.

Run-up? We’re only back to 2008 levels, and that’s with no adjustment for inflation or earnings growth.

#153 Mark on 09.10.14 at 1:13 pm

“Now, ask a realtor if it’s a good time to buy. A lollipop for anyone who can get an honest answer.”

It would be nice if you could get an honest answer from the G&M. They talk as though a housing correction hasn’t even begun. Even though evidence of such having been in progress for more than a year now is quite abundant.

#154 Blacksheep on 09.10.14 at 1:26 pm

Vicpaul # 106,

“I am a teacher in BC ( grade one).
We have not had a paycheck since June 15th
– it will be three MONTHS with no income in another
Few days. Edify yourselves.”
——————————————————–
Did I miss something. Your collective took a vote and decided to strike…yes? Are you locked out and unable to return to your jobs?

Peak everything is killing incomes and affordability in the west for many, but publicly funded teachers (glorified day care workers) believe their above any downward adjustment cause they indoctrinate our little darlings for the system.

You can almost hear them screaming,
“but we had a deal”!

#155 Blacksheep on 09.10.14 at 1:34 pm

They’re, not their. May get it trouble from the teacher.

#156 Ray Skunk on 09.10.14 at 1:43 pm

Here we are. Homeowners living paycheque to paycheque while sacrificing themselves to the cult of RE. Buying the maximum possible home they can while stretching themselves razor thin, leaving nothing for their future.

These financial halfwits will welcome with open arms White Knight Wynne’s ORPP, thinking this will salvage their retirement.

Of course they have no idea about how much it will take out of their already failing-to-meet-their-needs paycheque and how the payout is utterly miserly.

#157 devore on 09.10.14 at 1:56 pm

#106 Vicpaul

I am a teacher in BC ( grade one).
We have not had a paycheck since June 15th
– it will be three MONTHS with no income in another
Few days. Edify yourselves.

The teacher in question is paid 10 months a year, so only 1 missed month so far. I understand after a few years teachers can opt for regular monthly pay, which is probably a bad idea, as the strikes happen predictably every few years during summer months. Learn from history, maybe?

I am quite edified myself, thank you very much. I also have the same thesaurus you have.

#158 Mike S on 09.10.14 at 1:58 pm

“As I said before rebalancing doesn’t make you money, it merely protects you from short term volatility, and it does so at the expense of better long term performance.”

It does. Read about volatility harvesting

#159 Building on 09.10.14 at 2:19 pm

Thanks for the advice Garth. The balanced portfolio is a great long term strategy, but what would you advise for a short term horizon? i.e. 1-2 years only where a significant sum needs to be protected and liquid (to access for building a house, for example)?

#160 Mark on 09.10.14 at 2:34 pm

“i.e. 1-2 years only where a significant sum needs to be protected and liquid (to access for building a house, for example)?”

In that specific case, I think you’re pretty much stuck with the “high interest” savings accounts, short-term GICs, etc. if you truly have no discretion over when the funds are going to be used (ie: during a construction project, where you’re paying for personnel, materials, etc.).

But if it were, for instance, a housing downpayment, where there is some discretion in timing, then I’d personally suggest the typical balanced portfolios. Why such, and not 100% cash? Well if one isn’t comfortable with the risk of a balanced portfolio, then one sure as heck shouldn’t be comfortable with the risk of a highly leveraged housing purchase!

#161 Nuke on 09.10.14 at 2:55 pm

Remember Spring 2009 well. I rolled a vested MPP ~$65k from cash into a balanced fund with the pension holder. It has just sat there but has almost doubled in value $125k. Other than reading the pension statements each year, pretty much a no brainer.

#162 Mixed Bag on 09.10.14 at 3:05 pm

#161 Nuke on 09.10.14 at 2:55 pm

“I rolled a vested MPP”

I imagine a Member of Provincial Parliament, wearing a vest, being rolled down a hill.

#163 rosie "moving forward" in the knowledge that, "this won't end well" on 09.10.14 at 3:06 pm

Some bargains in Niagara, hipsters. Got Starbucks and really close for cross-border bargain hunting.

http://niagararealtysource.wordpress.com/2014/09/07/august-market-update-niagara-housing-sales-up-9-6/

#164 Smoking Man on 09.10.14 at 3:12 pm

#106 Vicpaul on 09.10.14 at 12:58 am#72. Devore

I am a teacher in BC ( grade one).
We have not had a paycheck since June 15th
– it will be three MONTHS with no income in another
Few days. Edify yourselves.
http://blogs.theprovince.com/2014/08/25/alex-tsakumis-b-c-liberals-are-hoping-to-bankrupt-the-bctf/#comment-68738

………

Teacher, hold out, don’t let the buggers push you around… As long as it takes…

Might I suggest in the mean time door to door sales…
You will actually learn and get a real education.. In the mean time your students can go on line and know more than you in a matter of days.

Everyone wins..

#165 Italians love real eatate on 09.10.14 at 3:35 pm

What could have possibly been wrong about my post referencing richmond hill, yonge and 407 north to majormackenzie being an excellent RE investment opportunity if you are in walking distance to yonge because of the soon to be LRT?

I mean you may not agree but certainly nothing offensive in my point of view. Why the deletion?

#166 Funny that on 09.10.14 at 3:55 pm

Hey Garth, when is Mark officially taking over your blog?

#167 David Lee on 09.10.14 at 4:00 pm

2nd attempt @ #153 Mark:

“They talk as though a housing correction hasn’t even begun. Even though evidence of such having been in progress for more than a year now is quite abundant”.

Again: not a challenge, just looking for some help.

Please point (e.g. by providing links) to where you are getting your data from such that you can say that evidence is quite abundant.

Any help would be appreciated.

Thanks,

#168 Doug in London on 09.10.14 at 4:06 pm

@Mark, post #152:
You may be right that there are many companies on the TSX which are still on sale. However, I think I’ll wait for the next big sale before making any major purchases as I’m heavily invested now from buying equities during sales. Patience is definitely a virtue in the business of investing.

#169 NoName on 09.10.14 at 4:10 pm

Am radio bjlamb cohost, all about rebalancing. Radio guy just addressed him yourhignes. wow

#170 Italians love real estate on 09.10.14 at 4:29 pm

DELETED

#171 Mike T. on 09.10.14 at 4:46 pm

‘I don’t want people to listen to me, I want them to start thinking for themselves.’

this will happen for the person when they are ready – lots of souls really want the blinders on the whole time – Earth is school for the soul, like skipping grades though

it took me about 2 years to identify and understand the codes being sent to me at night, but it’s amazing when you lift yourself out of the matrix and learn about the hidden stuff…

#172 Nomad on 09.10.14 at 5:22 pm

Bad news for Canada today:

– Bombardier laying off 300 temp workers and 90 permanent workers.

– Oil is down. OPEC says there’s less demand. Doesn’t sound temporary.

#173 Snowboid on 09.10.14 at 7:38 pm

#144 Ogopogo on 09.10.14 at 12:09 pm…

The investment advice provided by this company has been the subject or previous posts, but yet the strategy must be working out for them.

They recently moved to new digs by the lake (The Manhattan) with an official opening including local politicians.

Maybe our resident golden god of Okanagan/Shuswap real estate can improve his RE investment odds by joining forces with them!

#174 Italians love real estate on 09.10.14 at 8:31 pm

DELETED

#175 Cici on 09.10.14 at 9:17 pm

#27 Cash-Hater

Here’s the link:

http://business.financialpost.com/2014/09/08/cmhc-could-force-banks-to-pay-deductibles-on-mortgage-insurance/