Joy

JOY modified

If you ever wonder why contrarians always get the girl, read the comment section of this blog.

The moaning, drooling and quivering on display yesterday was awesome. Moments after I laid out a case for continued growth in the US economy – and solid reasons to be invested in financial stuff – it began. The dissing of America was classic. The belief markets are manipulated, government stats are rigged, governments run by morons and that central bankers can’t Google was endemic.

It’s staggering how many think the world’s going to end. Just as it’s improving. And that brings us to today’s lesson. It’s simple. Get invested. Stay that way. Stop reading blogs. It’ll kill ya.

Here’s what I mean:

CHART2

The above is a 10-year chart of a balanced portfolio, with 40% safe stuff (such as bonds and preferreds) and 60% growth (Canadian, US and international ETFSs, plus REITs). This is not theoretical – it’s real. I know. The portfolio was routinely rebalanced to sell winners and buy losers and keep the weightings in line.

Note this: what was invested in 2004 has more than doubled now. The average return over that period is 7.3%. If you had a hundred grand then, you have two hundred now and enough for a new Kia.

This period of time included (a) the greatest stock market crash since the 1930s, (b) the 2011 debt ceiling crisis in the US, (c) the American real estate bubble and collapse, (d) the aftermath of the dot-com/tech plunge, (e) the Euro debt debacle and (f) everything else the doomers sweat over – debt accumulation, Ebola, Miley Cyrus, central banks, Vlad Putin, the Baltic Dry Index, ISIS, food stamps, Hamas, high-frequency trading and Goldman Sachs.

In other words, all the gnashing and flummoxing was for naught. The market timing failed. Those who freaked, selling in dips (because everything was going to zero) or buying the highs (because they were so smart) were creamed. In contrast, people who understood how to invest quietly multiplied their wealth – even through volatile times populated by fools who know everything.

Here’s another chart. Same portfolio. This time it’s about risk.

60-40 modified

The bottom scale is risk – the further to the right, the greater. The left scale is return. The various dots, with the exception of “60-40” refer to various components of a balanced portfolio – and you can see that emerging markets (EEM) or real estate investment trusts (XRE) are higher risk-higher return than, say, bonds (XBB). The “60-40” is the actual return/risk of the balanced portfolio – averaging 7% over a decade, with considerably less risk than the US stock market (SPY) or Toronto equities (XIU).

This is what a good portfolio should do – give reasonably predictable returns without giant swings, letting you sleep at night and ignore stock market emotion and the bleatings of the nihilist, gold-rubbing losers who pray for pestilence. (By the way, bullion crashed below $1,200 an ounce on Thursday. As expected.)

So here’s the thing: investors with a good, well-built and routinely-maintained portfolio full of boring stuff were able to ignore markets for the last decade, double their money, and get on with their lives. Will this be repeated in the next 10 years? Beats me. But if we have the same events – a boom, several busts, multiple crises, wars, debt, a generational crash and confusion – there’s a decent chance.

In case you missed it, the US economy has just capped the strongest six-month period of growth in more than a decade – the best since 2003. Jobless claims there are now at the lowest level since way back in 2000. Almost 250,000 people were hired last month and the unemployment rate is down to where it was in 2008. Gas prices are set to hit a six-year low, and consumer confidence is increasing. Meanwhile the Fed has stopped its stimulus spending, and the stock market immediately gained 200 points.

So, you can moan and dribble over things you cannot control. Or you can cede life is to be confidently embraced. You only get one.

188 comments ↓

#1 Shawn on 10.30.14 at 4:22 pm

Early today? Thanks

#2 Ex-Cowtown on 10.30.14 at 4:25 pm

Hearing reports of major oil drilling projects getting cancelled. Tough times ahead in the oilpatch. Time to start another company. Start one up when TSHTF, sell it when times are good. Repeat as necessary.

#3 Derek R on 10.30.14 at 4:25 pm

I love it when a plan comes together!

#4 Kenchie on 10.30.14 at 4:25 pm

Lots to learn here about John Maynard Keynes. Most people confuse what he said and what governments actually did. They are not the same…

“Why JMK theories can fix the world economy”

http://www.businessweek.com/articles/2014-10-30/why-john-maynard-keyness-theories-can-fix-the-world-economy#r=read

#5 espressobob on 10.30.14 at 4:44 pm

Thanks for your perspective Garth! Great blog!

#6 Holy Crap Wheres The Tylenol on 10.30.14 at 4:45 pm

#133 devore on 10.30.14 at 1:19 pm
#130 Holy Crap Wheres The Tylenol

Trailer Park Boys is some great Canadian content anyone can get behind.

………………………………………
Well at least some of my taxpayer dollars haven’t been completely wasted!

#7 Mark on 10.30.14 at 4:59 pm

Not sure what exactly the asset allocations were within your 60-40 split. However, most practical investors are significantly overweight their own home country. This is true whether you’re a Canadian and have too much XIU in your portfolio for the tax-preferred dividends. Or live in the US and have a portfolio overweight the S&P500. For these people, real people, they haven’t seen a full after-inflation recovery (assuming inflation = 2%, not some crackpot ‘theory’ of 10% inflation!). And they’ve had their money tied up for what, going on 6 years now into the recession/depression, with, at best, breaking even after-inflation??

The rest of the points, concerning market timing, portfolio allocation, as usual, are quite valid. However, the US economy is still, “on the ground”, a giant mess, with rampant unemployment, new grads not having seen much traction in over a decade employment-prospect-wise. The financial industry’s destructive influence is worse than ever on government and politics. The trade deficit hasn’t meaningfully improved outside of energy imports, and even the shale boom is largely built on unsustainable subprime credit issuance. Obama continues to add nearly a trillion in debt per year, with no end in sight, and an acceleration in such if the policy rate hikes ever arrive. Not sure how this can be spun positively in any sense, even if the Dow did indeed put on 200 points, mostly on the strength of one company, Visa, having good results.

#8 Mike S on 10.30.14 at 5:10 pm

Good call on the TFSA limit a few days ago

The government just found resources to implement income splitting and increasing child benefits, and just in time for the next elections …

I wonder how are they going to manage the finances with slow growth we saw recently, and now with 80$ oil, which is yet to propagate to the bottom line of the tax revenues

#9 John on 10.30.14 at 5:10 pm

This chart is very similar to the Canadian house price chart from 2000 to 2014… Following your logic people should buy houses then and stop reading blog about the doom of real estate.

You have much to learn about charts. — Garth

#10 calgaryPhantom on 10.30.14 at 5:13 pm

Garth,

A question, that i would really appreciate an answer for. In current environment, with high probability of rising yields and lower fixed income prices, what is your opinion on a strategy of 70/30 portfolio. 70% equities ( US,CA, INTL, EME) and 30% cash?

#11 Obvious Truth on 10.30.14 at 5:25 pm

Some people are afraid to make money.

Also not smart or brave enough to do it.

They let other people make their minds up for them. That way they have someone else to blame.

#12 Diversified in Oakville on 10.30.14 at 5:45 pm

Hey #7 Mark,
Are you kidding with your U.S. economic outlook? If this is truly how you feel now, how did you not jump off a cliff in 2008?

The U.S. economy may not be perfect, but compared to what we have in Canada currently, it could be Utopia!

I remain very happy with a diversified portfolio across asset classes AND countries. XEG is soon to be a buying opportunity!

#13 Montellino on 10.30.14 at 5:53 pm

#9 John

House is a 1 asset strategy. Balanced portfolio holds diversified securities. If you bought 1 stock only, well.. hmm

#14 CalgaryRocks on 10.30.14 at 5:57 pm

Note this: what was invested in 2004 has more than doubled now. The average return over that period is 7.3%. If you had a hundred grand then, you have two hundred now and enough for a new Kia.

Seems impressive. But IMO RE did better over this time period.

I wish I had invested 100K in a bungalow in Vancouver in 2004. I would have been paid off by now and most likely worth north of 1M$+.

We did well in Calgary over the same time period by holding on to one and flipping another. (way better than 100K profit) but not as well as we would have done in Van or TO.

God help us if we had been renters during the same time frame.

#15 Future Expatriate on 10.30.14 at 5:58 pm

Sorry. But life before Miley Cyrus was better. No matter how much money anyone has.

No bemoaning or dribbling; just fact.

#16 Millenial on 10.30.14 at 6:06 pm

“(d) the aftermath of the dot-com/tech plunge”

Hey Garth,

After the dot-com bust, the Nasdaq reached it’s lowest point in 2002. Your chart begins in 2004. *scratches head*

I find myself puzzled by some of your recent blog posts. It’s okay though, I still respect your perspective on things, otherwise I’d stop visiting.

Twice I’ve made the mistake of meeting with schmucks who called me from my bank, and I listened to them peddling their bank’s mutual funds/ETFs/etc. Both of them had these neat charts that showed ‘reasons not to invest’ for each year for the past 60 years: JFK assassination, oil embargo, Iraq war, dot-com Nasdaq crash. YET, as you have showed, the overall trend over time is upwards! Amazing!

In my humble opinion (I’m just a lowly dentist btw), interest rates being essentially zero in the US for over HALF A DECADE is unprecedented, and is really screwed up. Debt is piling up: personal, federal, provincial, state, municipal. Entire industries are being formed that are completely fraudulent and only owe their existence to cheap money (shale oil – fracking). I read the other day that bond yields in France/Germany are the lowest they’ve been since the 15th centure. Meanwhile wealth inequality is worsening; a problem that will make us all poorer in the long-run no matter what you job is.

Maybe you’re right Garth, the trend will continue upwards without an insanely severe glitch. You are older than me, and have a better beard. I’ll be quiet now. ;)

#17 Godth on 10.30.14 at 6:10 pm

#9 John

Hahaha. You forgot to put on your Turner glasses. They turn down on Canadian housing and up, up and away on the USA.

#18 JayCeezy on 10.30.14 at 6:23 pm

The US S&P500 hit 1,500 in 2000, again in 2007, and again in 2013. It took 13 years just to get back to even. I appreciate the 10-year snapshot here, but just take it back another 3 years and it is a whole different point being made.

#19 David McDonald on 10.30.14 at 6:24 pm

I remember a time under Clinton when there was a budget surplus so big that people were starting to wonder what traction the Fed would have when all the debt was paid off. Of course 9/11 and Bush’s unnecessary war in Iraq ruined all that but still less than 20 years ago that was the situation.

Garth is probably right that steady growth can gradually pay down the debt and I suppose the Fed can unwind QE without ill effect. We are very lucky to have a guru like Garth who knows the buzz on Bay street and has the wisdom to evaluate it. In any case when he said Reits were on sale I bought and when he said there was nothing to fear in the recent dip I jumped in with both feet. Thanks Garth.

#20 Mark on 10.30.14 at 6:25 pm

“I wonder how are they going to manage the finances with slow growth we saw recently, and now with 80$ oil, which is yet to propagate to the bottom line of the tax revenues”

A much bigger worry isn’t the oil industry (5% of GDP apparently), but the loss of huge tax revenues because of the slowdown of the housing industry (25% of GDP). Which is already well into play.

Throw an acceleration of CMHC subprime mortgage insurance claims into the mix, and the fiscal situation for the government looks to be deteriorating on a significant basis.

#21 Free Headaches Ask For Yours on 10.30.14 at 6:28 pm

My question is how do you determine the appropriate weightings for your circurmastance to begin with?

#22 Retired Boomer - WI on 10.30.14 at 6:29 pm

Garth-

I must be doing something terribly wrong! Having retired nearly three years ago, and withdrawing nearly 4% a year from my balanced portfolio of 60/40 as you suggest on your blog, why is it I have more money than when I started?

Where is the error in my math?
Should I really buy a new KIA? I don’t really “need” one.

#23 Debtfree on 10.30.14 at 6:30 pm

@7 yah baby who was dumb enough to not buy visa ? Another 52 week high today . And the arbatrage . Thanks Garth you’re one of the best . Good call when we had the high petro dollar . Sell Canada and buy America .

#24 JimH on 10.30.14 at 6:33 pm

Great back-to-back posts, Garth!

Yes, yesterday’s negative and apocalyptic comments were stunning in their myopic and ignorant absurdity. But the same dogs have been spouting the same garbage for the past 5 years.

I swear; many an IQ here would be easily surpassed by
my pop-up toaster!

Keep up the good work!

#25 Roman on 10.30.14 at 6:33 pm

You’re basically saying that its more risky for capital NOT to be invested – however, with S&P AND bonds at the extremes why adding risk at all?

Also, from 2004 SPY is up ~70%, it’s probably up the same 100% if dividends were re-invested.

Another point: in 2008 almost all return was erased. Are you ready for the return to be erased once again?

I personally think that investing right now is even more insane than buying semi in Toronto. Balanced it or not – it’s going to be creamed exactly as it was in 2008 with multi-year returns lost, but probably much uglier for most of people . Given how well and smooth market run for 6 years there is a zero chance to make anything during normalization.

#26 alf g on 10.30.14 at 6:34 pm

Garth- you seem to believe that government interference in the market place is a good thing. Interest rates are fundamental to price “discovery”; governments setting interest rates distort the places and ways that capital flows, creating distortions in the economy. The decline of the Canadian dollar and the strengthening of the US economy were evident a few years ago. It seems though that the global economy is a mess, and the US economy is only better in comparison. The real question is; can the US once again carry the rest of the world. [can their exports compete against falling global currencies; Can they continue to to consume enough to keep their economy growing without creating some future serious economic reckoning].

#27 Waterloo Resident on 10.30.14 at 6:36 pm

My gratitude to you Garth for giving us this wonderful information and trying to help us this way.

You are providing us all with an education that is helpful and FREE at the same time.

THANKS and God bless.

(P.S. my investment just went up another 2% today alone. Who’d of thought.)

#28 Omg the original on 10.30.14 at 6:43 pm

7 Mark

Hey Mark, yep, good points you make about the US being a mess. BUT in the leading economy of the world there is always some shit hitting the fan.

Over the last 30 years there has always been a series of economy killing events/conditions in the US and the US has alway chugged forward.

For a selection of US economic disasters just recall: the 1987 crash, savings and loans, the gulf war, Alan Greenspan, dot.com, the Iraq & Afghanistan wars, the housing bubble, the budget ceiling.

And that’s only the highlights over the last 3 decades.

The US is going through some rough spots but it alway prevails.

BET AGAINST THE USA AT YOUR PERIL

#29 Mr. White on 10.30.14 at 6:44 pm

Been in exchange indexed funds with low fees for a long time now. I could care less what the markets do, I just buy and will not sell until I actually need the money. Give my money guy 10 to 20 percent of my income and never look back. Don’t own a home, rent a million buck one for about 20% of the actual cost to own it. Meanwhile the extra money just keeps growing at about the same rate as your fund Garth.

#30 espressobob on 10.30.14 at 6:46 pm

#7 Mark

Try a world index ETF. Analysis leads to paralysis.

#31 Inglorious Investor on 10.30.14 at 6:48 pm

No offense to the budding Buffets or those who manage their money. But I know people who would scoff at 7% returns because they’re making upwards of 24% total returns (sometimes in only a few months) on sub-prime mortgages. And it’s all legal. Makes the returns in the markets look positively torpid. Proves there’s real money to be made if you know where to look. And if your ethics are perhaps governed by, shall we say, fuzzy logic?

Risk is of greater importance than return to most people. — Garth

#32 Omg the original on 10.30.14 at 6:50 pm

9 John – chart reading is hocus pocus.

The stock market run is back by sound fundamentals not some magic chart indicator.

Canadian housing on the other hand is all about the emotions of bubbles.

BUT ultimately it is all opinion and nobody actually knows the future.

So if you personally think Canadian housing is a good growth investment then go ahead and load up on housing.

#33 Joe2.0 on 10.30.14 at 6:50 pm

Dog days ahead…
Markets broken.
Look at the charts-QE injections = market up.
Nothing’s been fixed it’s like pumping drugs into a junkies arm.. no problem till it stops.
Least home ownership in two decades.
People are now renting homes from the banks that screwed them.
And how about the FEDs buying of stocks.
It’s a joke that’s devalued the price of a dollar.
Scarey Boo!

#34 james on 10.30.14 at 6:51 pm

the US economy is still, “on the ground”, a giant mess, with rampant unemployment, new grads not having seen much traction in over a decade employment-prospect-wise. The financial industry’s destructive influence is worse than ever on government and politics. The trade deficit hasn’t meaningfully improved outside of energy imports, and even the shale boom is largely built on unsustainable subprime credit issuance. Obama continues to add nearly a trillion in debt per year, with no end in sight, and an acceleration in such if the policy rate hikes ever arrive.
—————————————

I can’t really argue with many of these. Yes, the government is addicted to debt and warfare. Yes, the financial industry has NOT been reformed, and the same rot, corruption and moral hazard is present. Yes, unemployment is bad in many states, and the official stats are an underestimate.

However, job creation in the USA beats Canada by far, and things are better here than they were a couple of years ago (albeit on an aggregate level, not for all).

Which country has better prospects in the next five years? My bet is on the USA.

#35 Freedom First on 10.30.14 at 6:54 pm

Great article!

Yes, it is amazing that people world wide(including Canada) recently bought highly leveraged RE at extreme low interest rates ignoring the fundamentally unsustainable exorbitant high pricing. Thus, BOOM!, RE crashes financially destroying millions of families.

The RE example resembles all the bubbles Garth describes on his Blog today, and for years now. Oil hit $80 last week, I thought it was a good time to buy it back, as when I said I re-balanced last Dec/Jan to overweight cash, this was 1 sector I went underweight. Re-balancing is very stress relieving as there is no trying to hit the absolute highs or the absolute lows. This was my second buy in the last 2 months, and I am awaiting another ETF deal that I feel is coming in another sector. There is always highs, and there is always lows, in the indexes world wide. Liquidity and diversity are also golden. Saying that, if a person does like to maintain a 5% holding of PM’s in their portfolio, now may be a good time to buy. All I know, is that $1190 gold an $16 silver is much lower than $1900 gold and $49 silver. 5% in PM’s as insurance for whatever may happen will not hurt you in a properly managed portfolio, debt free for me, of course.

#36 nh on 10.30.14 at 6:57 pm

This chart is very similar to the Canadian house price chart from 2000 to 2014… Following your logic people should buy houses then and stop reading blog about the doom of real estate.

You have much to learn about charts. — Garth

Garth, can you explain this one in more detail?

#37 Nemesis on 10.30.14 at 6:59 pm

#”Evolutionary,MyDear’Watson’…”…

http://youtu.be/WLgvvgcDDm8

#38 Edward on 10.30.14 at 7:01 pm

So is the income splitting for all sources of income including dividends, interest, capital gains…

…or it it just on employment income?

#39 crowdedelevatorfartz on 10.30.14 at 7:03 pm

Excellent topic today Garth.
Getting a little tired of the endless doomsayers.
Judging by the amount of them I should invest in tinfoil.

#40 batt519 on 10.30.14 at 7:16 pm

Again, 32 hours since QE ending announcement and the red carpet is rolling out further and further and the trumpets are getting louder and louder…

#41 Franco on 10.30.14 at 7:19 pm

Excellent blog post.

#42 Kenchie on 10.30.14 at 7:25 pm

“Worst possible case for the worst possible idea, the gold standard”

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/28/the-worst-possible-case-for-the-worst-possible-idea-the-gold-standard/

“The gold standard, though, can’t distinguish between this 1970s-style stagflation and 1930s-style collapse. It’d tell us to raise rates in both cases… And, for all its flaws, the gold standard does have the very limited virtue of keeping the price level stable over the long, but not short, term.”

#43 Arfmooocat on 10.30.14 at 7:25 pm

VISA made up for 70% of today’s market gain

#44 devore on 10.30.14 at 7:26 pm

#4 Kenchie

Lots to learn here about John Maynard Keynes. Most people confuse what he said and what governments actually did. They are not the same…

JMK occupies the same mental space as our CTE. Theories that are great…. in theory, not so great in practice. I have no doubt Keynes model works. As does Cato’s. However, models run into the brick wall of reality. High government spending during “bad” times means that political realities dictate even higher spending during “good” times. Anything else is political suicide.

We’ve been able to implement half of the counter-cyclical policy mandated by Keynes theory. Government spending during lean times, check, refilling the stores and soaking up demand during fat years, wait what? After suffering through a recession, hard working families deserve a break, crank up the spending!

You think you can do better than every government around the world in the last 50 years?

#45 Perspective on 10.30.14 at 7:26 pm

Don’t get perplexed by the bears on this blog Garth. Many people came as they wanted another perspective on Canadian RE as they are cautious, and that caution will also extend to other areas like the US economy because that affects us all.

While you may view caution around the US to be unfounded and prone to ridicule, at the same time predictions of Canadian real estate price drops have simply not materialized in any meaningful form. Looking at returns, any average person who bought a house 7 years ago would have substantially more money than if they put the average down payment in the stock market. Please look to your own record and analysis of manipulation / risk before discounting others so glibly.

Ironically, it will likely be a large US recession that pops our bubble here.

There will be no US Recession, large or otherwise. As for real estate I have never argued against ownership, but have said only fools would own a house as their only asset. Do not misrepresent things. — Garth

#46 not 1st on 10.30.14 at 7:30 pm

Garth, you have misinterpreted the comments.

Sure investing is fine. I doubt anybody is against that.

The question is should an economy be rescued every 5-7 years by applying artificial stimulus in the form which then contributes to the indebtedness of every citizen and at the same time finds itself either stoking inflation or creating extreme wealth inequality. Thats the real reason it survives all those ‘scares’, not because its resilient or even efficient.

#47 Fred on 10.30.14 at 7:41 pm

Best investment advice. Pay your tiths at church, it’ll pay dividends to eternity!

#48 crowdedelevatorfartz on 10.30.14 at 7:42 pm

@xdisciple

Have you ever noticed that you never see Barack Obama and Mike Tyson together……… LISTEN to their voices. They’re the same person. Its soooooo obvious.

#49 the Jaguar on 10.30.14 at 7:43 pm

MLS listing # C3640248 in a prime inner city of Calgary. Three lots must be sold together and include approved development plans for an 11 unit townhouse development in the price. Similar to a another development nearby.
Is the sale a sign that whoever owns it and the plans has decided to sell before the fecal matter hits the osculating rotator? Or am I just indulging in a little schadenfreude…

#50 Trojan House on 10.30.14 at 7:43 pm

#21 Omg the original – “The US is going through some rough spots but it alway prevails. BET AGAINST THE USA AT YOUR PERIL”

They said the same thing about the Roman empire and every other empire since the beginnings of empires.

However, I do agree – the U.S. is the only place to bet on these days. But it is not because of all the employment stats, consumer confidence, etc, etc. Figure it out and you’ll do alright.

#51 Suede on 10.30.14 at 7:45 pm

I love charts.

Especially colourful ones not created on Excel.

#52 Millennial Maestro on 10.30.14 at 7:48 pm

#132 Millenial Maestro on 10.30.14 at 12:50 pm

I was deep in the market when you were cruising the birth canal. Glad you know everything. — Garth
——————————————————————-
I did sound like a pompous know-it-all in my comment to your previous post, didn’t I? My bad, I was just super excited, that’s all.

That doesn’t negate my bearish arguments though, nor does it necessarily make my beliefs about what happens next invalid. For now, still thinking of buying HVU if we don’t push past S&P 2014.50 by Tuesday’s close.

Who cares if I’m wrong? I’ll just jump back on the train and continue sucking on the ZIRP tit like I’ve done for the last 5 and a half years till that gig ends. It’s just that your strategy is a lot more risk averse, probably because you have a lot more to lose than I do, and therefore potentially less rewarding.

The fact that you’ve been trading longer than I’ve been alive isn’t necessarily to your advantage. You’ve been in the “markets” through 1987, 1997, 2000, and probably 1974, and you think that the current situation is the same as then. It isn’t.

That’s it for today, gtg celebrate now. See ya at S&P 2014.50!

#53 Kenchie on 10.30.14 at 7:48 pm

“The moaning, drooling and quivering on display yesterday was awesome. Moments after I laid out a case for continued growth in the US economy – and solid reasons to be invested in financial stuff – it began. The dissing of America was classic. The belief markets are manipulated, government stats are rigged, governments run by morons and that central bankers can’t Google was endemic.

It’s staggering how many think the world’s going to end. Just as it’s improving. And that brings us to today’s lesson. It’s simple. Get invested. Stay that way. Stop reading blogs. It’ll kill ya.”

Garth,

Thanks for speaking about the ridiculous doomerness in the comments section most nights. It reminded me of a chapter in the book “48 Laws of Power”. Here is the chapter’s preamble:

Chapter 10

“Infection: Avoid The Unhappy and Unlucky: You can die from someone else’s misery – emotional states are as infectious as diseases. You may feel you are helping the drowning man but you are only precipitating your own disaster. The unfortunate sometimes draw misfortune on themselves; they will also draw it on you. Associate with the happy and fortunate instead.”

#54 Jonathan on 10.30.14 at 7:49 pm

Well put Garth. The case for a balanced portfolio and patience is clear.

What worries me is the hollowing out of the middle class and the declining participation in such markets. Good jobs lost and more part-time and contingent workers struggling to pay the rent or mortgage – forget about room for investing.

Here’s an example where this is spun to seem very positive i.e. “wow, look at all the successful freeelancers”

https://www.elance-odesk.com/press/53-million-americans-now-freelance-new-study-finds

It is amazing that 34% of workers are now “freelancers” in the U.S.

But how many would prefer just to have one stable job?

#55 mitzerboy on 10.30.14 at 7:55 pm

my old lab mix rides in the truck with me like garth’s picture tonite …its a true feeling with him …something special for me……..60/40 is nice too

#56 mark on 10.30.14 at 7:58 pm

That Mark guy ruins my good name.

A freaking excuse and doom scenario for everything. Jesus man, get a ProQuest login. You’ll find The world was ending 10 years ago too. And 10 years before that.

#57 Kenchie on 10.30.14 at 7:59 pm

The curse of irresponsibly low taxes:

“Texas highways deadliest as anti-tax state curbs roadwork”

http://www.bloomberg.com/news/2014-10-14/death-roils-texas-as-state-leads-u-s-in-road-fatalities.html

#58 Kenchie on 10.30.14 at 8:01 pm

Curse of over-reliance on commodity extraction:

“What a commodity bust would mean for Canada’s economy”

http://www.macleans.ca/economy/economicanalysis/what-the-commodity-bust-means-for-canadas-economy/

#59 Mithan on 10.30.14 at 8:06 pm

Garth is wrong.

The end is nigh.

Zerohedge says so, and they know stuff, cause they have pretty graphs!

;)

#60 Victoria Real Estate Update on 10.30.14 at 8:07 pm

. . . . . . .Price Increase/Decrease. . . . . . .
. . . . . . . . . Since June 2008 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+36%. . . . . . . . . . . . . . . . . . . . . .x . . .
+34%. . . . . . . . . . . . . . . . . . . . . . . . . .
+32%. . . . . . . . . . . . . . . . . . . . . . . . . .
+30%. . . . . . . . . . . . . . . . . . . . . . . . . .
+28%. . . . . . . . . . . . . . . . . . . . . . . . . .
+26%. . . . . . . . . . . . . . . . . . . . . . . . . .
+24%. . . . . . . . . . . . . . . . . . . . . . . . . .
+22%. . . . . . . . . . . . . . . . . . . . . . . . . .
+20%. . . . . . . . . . . . . . . . . . . . . . . . . .
+18%. . . . . . . . . . . . . . . . . . . . . . . . . .
+16%. . . . . . . . . . . . . . . . . . . . . . . . . .
+14%. . . . . . . . . . x . . . . . . . . . . . . . . .
+12%. . . . . . . . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . . . . . . . .
+8%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+6%. . . . . . . . . . . *. . . . . . . . . . . . . . .
+4%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+2%. . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . . .x *. . . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .*. . .
———————————————————————–
. . . . . . .June . . . .June. . . . . . . . . .Sept
. . . . . . .2008. . . .2010 . . . . . . . . . 2014

Winnipeg = x
Victoria = *

(source: Brookfield’s index)
(link)

From June 2008 to September 2014 house prices in Winnipeg shot higher by 35% while prices in Victoria declined by 6%. Victoria’s housing market is the weakest in Canada.

The above chart shows that:

* Winnipeg’s housing market has seriously outperformed Victoria’s market since 2008.
* Compared to Canadian cities with colder winter weather (example: Winnipeg), Victoria’s warmer winter weather has had no positive effect on house prices since 2008. In fact, all evidence points to the opposite being true.
* House prices in Victoria have been falling since 2010 even though 5-year mortgage rates have also been falling.

That house prices in Victoria have been declining since 2010 in a heavily stimulated environment of historically low (emergency) interest rates points to a substantially weakened local economy.

Mortgage rates will rise, there is simply no way around it. Even if rates remained constant (they won’t), prices in Victoria would continue to decline.

Let’s take a look at the performance of the warmest and bubbliest American housing markets (think Victoria) of the 2006 US housing bubble (Las Vegas, Los Angeles, Miami, Phoenix, San Diego, San Francisco and Tampa).

* From peak to bottom, house prices in these 7 cities declined, on average, by 50%.
* On average, prices in these cities are still 27% below peak levels.

Canada’s price correction may be deeper than the US correction for the following reasons:

* Canada’s housing bubble is much larger than the 2006 US bubble. The bigger the bubble, the bigger the potential price correction.
* Not long after house prices across the US began to fall, interest rates were slashed from near-normal levels to (current) historically low (emergency) levels. This limited the amount that house prices corrected in the US. Interest rates in Canada are currently at historically low levels so it will be impossible to do the same thing with interest rates to reduce or limit Canada’s price correction, once it begins.

House prices in Victoria and across Canada skyrocketed as a result of lax lending standards (beginning in 2000). Price gains were not matched by gains in rents or incomes. Stagnating incomes in Victoria have provided no additional buying power for home buyers for several years (14th chart).

Victoria’s housing market remains extremely overvalued even though prices are lower now than in 2010.

Let’s take a look at current house prices in several US cities:

$218 K, Las Vegas, NV (5 beds, 3 baths, 3,200 sq. ft. built in 2006, attached 3 car garage)

$174 K, Maricopa (Phoenix) AZ (6 beds, 4 baths, 3,428 sq. ft., built in 2005, attached 3-car garage)

$220 K, Jacksonville, FL (5 beds, 3 baths, 3,599 sq. ft., built in 2006, 2.31 acre lot, attached 3 car garage)

$180 K, Auburn (Atlanta), GA (5 beds, 4 baths, 3,377 sq. ft., built in 2005, attached double garage)

Girls and guys, house prices in Victoria are extremely overvalued. The biggest part of Victoria’s price correction will happen when prices across the rest of Canada are in decline and when Canada’s debt-to-income ratio is in decline.

If you buy a house now in Victoria you will be forced to deal with the extreme financial problems associated with buying near the peak of a major housing bubble. Don’t put your family in that position.

Until next time – Cheers!

#61 bubu on 10.30.14 at 8:10 pm

#2 Ex-Cowtown – you didn’t hear right:)

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/suncor-profit-falls-on-lower-prices-currency-swings/article21377802/

Alberta is and will be ok…

#62 Linda on 10.30.14 at 8:11 pm

Garth is correct when it comes to balancing the portfolio. When the GFC hit in 2008, our nicely balanced portfolio dropped by 20% at the low point & has since rebounded nicely, thanks to our stellar financial advisor who not only talked us down from the ledge, but persuaded us to hold the course. Others of our acquaintance dropped as much as 60% or more, panicked, bailed, sealed their immediate losses & are still trying to get back to where they were prior to ‘the big dip’. Point here is, how bad you were hit in the GFC really reflected the strengths (if balanced) & weaknesses (if risk was your mantra) of your portfolio.

As for the doomers, you can’t ignore history. Take 1929. It took decades for markets to recover but they did eventually recover. Also, while lots of people lost their shirt (& quite a few people really did jump off a ledge, too) others made out like bandits. It was like the ultimate Boxing Day sale for those who realized the opportunity & had the ability to take advantage of it. Point I’m trying to make is, there will always be various reasons why it would be ‘risky’ to buy. Trick is to figure out how much risk you can tolerate & to accept that you are not going to ‘win’ 100% of the time.

#63 RealistvsExtremist on 10.30.14 at 8:12 pm

That chart is absolutely correct. Anyone who has invested in a diversified portfolio is up up up.

It’s too bad that chart does not tell you the truth. Which is normal for charts. And that would be that the money making is based on cuts, firings, layoffs, low low low low trade volumes, out sourcing, you get the idea.

But for those who “had money” to invest, you are definitely up. How long can that continue? Dunno. How long can companies keep cutting and how long can countries keep printing money? The future will tell.

Over 1.4 million new US jobs this year. Sorry. — Garth

#64 ptbobman on 10.30.14 at 8:15 pm

Vancouver pathetic compared to Seattle
http://www.biv.com/article/2014/10/seattle-soars-land-costs-stall-vancouver-growth/?utm_source=BIV+Newsletters&utm_campaign=d98462aa04-Real_Estate_Weekly_October_29_201410_29_2014&utm_medium=email&utm_term=0_6d3015fdef-d98462aa04-210822397

#65 RealistvsExtremist on 10.30.14 at 8:15 pm

#43 Arfmooocat on 10.30.14 at 7:25 pm
VISA made up for 70% of today’s market gain

+++++++++++++++++++++++

I rest my case.

#66 Mark on 10.30.14 at 8:32 pm

“Over 1.4 million new US jobs this year. Sorry”

“Jobs” aren’t generically “jobs”. In the wake of Obamacare introduced this year, a lot of employers moved to reduce employees’ hours to beneath the eligibility threshold. So I wouldn’t read too much into overall “numbers” of jobs, but rather, the quality of them. Which, by most indications, the “job creation” has been extremely dismal.

#67 ozy - you goota be kiddding me on 10.30.14 at 8:32 pm

you gotta be kidding me. Even crappy houses in TO doubled since 2004. Some hoods almost doubled in 5 years…

inflation, man! as I’ve said it. no one’s merit….

hyperinflation, hyperinflation, la-la-la-la-la -singing

of course unless you buy at lowest places aka lower quality foods -no worries, you’ll pay the difference at the DOCTOR, lol

#68 Mark on 10.30.14 at 8:33 pm

“A freaking excuse and doom scenario for everything. Jesus man, get a ProQuest login. You’ll find The world was ending 10 years ago too. And 10 years before that.”

A growing and vibrant economy doesn’t have ZIRP or a population afraid to death of investing in the stock market.

#69 ozy - to #45 Perspective on 10.30.14 at 8:41 pm

Regarding:
====================
As for real estate I have never argued against ownership, but have said only fools would own a house as their only asset. Do not misrepresent things. — Garth

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

ozy: I am glad we all AGREE, human being need to have a house… if they want one, should actually be a right (no, I’m not socialist, just humanist) and sure, some SPARE $$$ for black days….

#70 Grasshopper 604 on 10.30.14 at 8:41 pm

Thank you, Garth, for all your lessons! I was introduced to the blog a couple of months ago and I appreciate all you offer here. I’m working hard to save for retirement and it’s going pretty well, but I still have plenty to learn (and maybe I’ll call you sometime soon). I was also noting the plethora of negativism to yesterday’s post – it seemed out of proportion, even for the blog dogs.

#71 crowdedelevatorfartz on 10.30.14 at 8:46 pm

@#57 Kenchie
I dont mind paying taxes.
As long as the money isnt urinated against the wall…..

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&cad=rja&uact=8&ved=0CCQQFjAB&url=http%3A%2F%2Fwww.macleans.ca%2Fnews%2Fcanada%2F99-stupid-things-the-government-did-with-your-money-part-i%2F&ei=BdtSVJ_IBs21oQTc_4K4Dw&usg=AFQjCNEX9UbU4m2xhj9QF3b8M832xhDpfQ

#72 Blacksheep on 10.30.14 at 8:54 pm

Godth # 17,

“They live”

Good flick

#73 El Barto on 10.30.14 at 8:55 pm

In my own personal experience, real estate investing was kind. I bought a house in 2004 from a FSBO for $153,000, rented it out with an average CAP rate of 8%, then sold it in 2013 for $350,000 (after Realtor fees and capital gains). In the same time period I had a ‘balanced’ BeeMo product called Match Maker which was a 50/50 Equity/Bond Mutual fund product that had a 1.6% MER, that averaged out a 2.8% yield over the same period. I can only judge from my own experience and in the same basic time period, the Rental Unit seemed to be a little better investment for me. Going forward, who knows, but with the gains from the Rental Unit I’m giving the balanced thinger majigger a whirl. I’m tilted more toward cash flow than capital gains at this point in my life, so I’m heavier on REIT ETFs, Preferred ETFs(US and Canada), Utilities ETFs, Real Return Bonds, and so forth, and so have averaged about a 4.5% yield in the last couple of years.

#74 Happy Renting on 10.30.14 at 9:04 pm

Nice data to respond to all the emotion in yesterday’s comments. On the ground it may feel like things haven’t gotten much better since the GFC, but the numbers show that for the calm and prudent, they really have. Everyone just remembers the pain of the last crash and the fear of it happening again.

#75 Joe2.0 on 10.30.14 at 9:08 pm

Kenchie
Wiki Stockholm Syndrome.
Nothing has been fixed its been prolonged.
The QE injections have devalued everyone’s assets.
The US has the lowest home ownership in 2 decades, 20 years .
It’s because they can’t meet lending requirements which
boils down to $ or lack of.

#76 Randol on 10.30.14 at 9:12 pm

Godth, Mark, Inglorious Investor (and Ponzi whatevers too)
Fools, the lot of you.

Afmoocat, I see a lot of green on my portfolio today and I don’t hold Visa. Not sure of your gauge, but I assume you have neither. Shame.

#77 sideline sitter on 10.30.14 at 9:13 pm

@#49

Not necessarily… some developers raise property values on paper by getting the plans made, and have no intention of ever building.

Getting everything ready on paper means profits without building headaches

#78 Blacksheep on 10.30.14 at 9:15 pm

Silver @ 16.50, single digits here we come!

#79 say it aint so on 10.30.14 at 9:16 pm

your portfolio lost nearly all its gains in 2008/9
what a horrible performance.

you could have benefited from some gold and silver that year. which more than doubled between 2004-11.
heck, you’d have made 15%pa those year being a bullion licker.

that’s more than twice your returns for those years.

sigh. but you won’t admit that. i’m sure

You mean the yellow stuff that just lost 35%? — Garth

#80 not 1st on 10.30.14 at 9:21 pm

#62 Linda on 10.30.14 at 8:11 pm

In 2000 my mutual fund advisor did the same thing. He kept sending me happy little statements ever month with his own hadwritten notes in the corner saying trust me, it will all come back. Except it never did.

Fortunately I was impatient and took the measly $30k I had in there and bought farmland which has increased in value 5 fold and provides a 20% ROC. I’m not into 3.5% returns because after fees and inflation that return is zero.

#81 Gettin' By on 10.30.14 at 9:21 pm

Everyone talks about the need to have your “growth” stuff spread across Canada, US, and international. But I see very little info on the web about the wisdom of buying US or international bond ETFs. Considering the relative strengths of the US and Canadian economies, does it make sense to have geographical diversification in the fixed income portion of your RRSP or RIF?

#82 Don on 10.30.14 at 9:27 pm

As a former broker and student of the markets for over 35 years, i find it a little misleading to start your chart in 2004..it was a low point on the charts…why not show back to the 90’s? or show what would it be like if you started in 2000 or 2007
btw..I like reading your blog daily

A decade seems a fair starting point. — Garth

#83 raveenahandraman singh on 10.30.14 at 9:32 pm

You mean the yellow stuff that just lost 35%? — Gartht

#78 Blacksheep on 10.30.14 at 9:15 pm
Silver @ 16.50, single digits here we come!

It will go down more. Once in a lifetime opportunity to buy.

Where have I heard that before? — Garth

#84 Suede on 10.30.14 at 9:34 pm

I smell a blog post/rant..

#incomesplitting
#happystayathomemoms
#hashtag
#poundsign

#85 kg on 10.30.14 at 9:38 pm

well said Linda.

#86 mishuko on 10.30.14 at 9:39 pm

@22
His reference to a ‘kia’ is more an analogy (or whatever English term you wish to use) to something more material.

#87 Retired Boomer - WI on 10.30.14 at 9:40 pm

#57 Kenchie

re: Texas Highways are a state wide form of population control.

TX has the highest speed limits in the nation. 80 mph on some roads.

TX has lower gas taxes than 43 other states.

TX has no state income tax.

TX has the 11th highest death by road per vehicle miles
traveled.

TX citizens are getting exactly what they are paying for!

Leave them alone, they voted for it, they are NOT paying for it, and it IS Texas after all. An illustration of what NOT to do for the rest of us.

#88 gladiator on 10.30.14 at 9:40 pm

But Garth,

a balanced portfolio is sooooo boring!
No picking up how stocks, no waking up early in the morning to see what Asian and European markets did to try to predict what your portfolio and wisely picked stocks will do, no drinking champagne on a good day and no biting nails on a bad one. No emotional highs and lows. What should a balanced investor do in between rebalancing? Play outside with the kids/grandkids? Garden? BBQ? Go to work on weekdays and meet with friends on weekends? I guess it’s an alternative, but those green and red flashing lights on the screen are so irresistible to take your eyes away from them… And there’s that hot stock tip from BIL about that penny stock that for sure is going to 100$. You know, play the mah-ket for a couple of years and retire with 10 colossal ones in your account. Steady returns at 7% a year while sleeping soundly every night? Phew!
sarc off.
I am in the investments industry and an avid reader of its history. As time goes by, your strategy makes more and more sense to me. Good thing I am young enough to afford (timewise) to implement it.

#89 gmc on 10.30.14 at 9:46 pm

Hey Can you believe what Greenspan just said !!!!!!!
He said gold is going up , and up much higher, wow.
Hey garth how about doing a gold article.
Scared
you were wrong about the timing for the housing crash, what’s your call on gold.
True protection of your wealth, means having some gold exposure, the saying is, ( from my grandpa) put 10% of your saving in precious metals, and if SHTF, you will maintain your wealth.
WHY NOT GARTH, why not cover this topic, you do everything else.

Amazing what bullion does to brains. — Garth

#90 Dean on 10.30.14 at 9:46 pm

Garth,

Thanks for the blog and all the insight attached.

Also thanks for the comments section which is keeping hundreds of crazy people off the street while they type…….really, really appreciate that.

#91 Dwilly on 10.30.14 at 9:47 pm

Hey Garth. Outside of tax advantages (say your entire portfolio fits in your RRSP and TFSA), is there any real reason to use preferred shares? Your own chart says historically they are less desirable than bonds (higher volatility and basically no more return). And I don’t understand them to be notably uncorrelated with either stocks or bonds. So if you don’t need them for tax purposes are they still worth holding a position rather than just using all bonds?

Prefs can be very stable, pay more than bonds and do it in tax-efficient dividends. — Garth

#92 pravchaw on 10.30.14 at 9:49 pm

To the folks complaining about market returns – remember these are unleveraged returns. Houses are bought with leverage. If you add a little leverage to your portfolio it really rocks (plus you can deduct the interest from your income tax).

You can leverage anything if you swallow the risk. — Garth

#93 Don on 10.30.14 at 9:53 pm

Garth. with all due respect, post the same portfolio going back to 1980….what are you afraid of? If your premise is true it should stand the test of time…a decade is a very short period of time in the financial markets…I have a chart of the s&p 500 going back to early 90’s…there have been great times and tougher times….the is a reason why the Case-Shiller CAPE uses a 10 yr moving average of earnings….I don’t disagree with your investment ideas…just give the full story…keep up the good work!

Why not 1880? — Garth

#94 Housepotato on 10.30.14 at 9:53 pm

You have much to learn about charts. — Garth

Really ? How about this –

I purchased a house in Brampton (2004) 320K (80 K) down built a basement for another 20K have been receiving rent (average 850/pm) with accelerated payment house will be paid off Oct 2015 And I can sell it tomorrow if I want for 550K

Now go and read your twisted Charts Mr wisecrack !

#95 timeisnotonourside on 10.30.14 at 10:08 pm

The problem with these long term charts is that they always presume that someone “timed” the market and bought exactly at the starting point and is still in at the latest high point. Garth, I though you said not to try and time the market! The reality is many entered/exited somewhere along the curve and either made way less of a return, or even a loss. Also investors all have different timeline perspectives depending on age, which may be shorter or longer than that show.
The markets are now at all time highs….Garth should provide a future graph forecast for the next 30 years.

#96 takla on 10.30.14 at 10:11 pm

re #78 blacksheep..silver @16.50
Don’t hold your breath for single digits.Its below cost of production @ this level and producers are threatening cutting production.
Supply and demand action will correct these bottom prices…we will see if 1180.00 holds a 4th time,if you were in early enough and it breaks take profit..just as last week on the stock correction,buy the dips

#97 OttawaMike on 10.30.14 at 10:19 pm

Do you have room down at the investment office for a mail room clerk with a criminal record?

Dean the Maestro will be fittingly turfed on Halloween when he is convicted:

http://o.canada.com/news/dean-del-mastro-will-lose-seat-in-house-if-he-is-convicted-friday

#98 Kreditanstalt on 10.30.14 at 10:27 pm

“Jobless claims there are now at the lowest level since way back in 2000. Almost 250,000 people were hired last month and the unemployment rate is down to where it was in 2008.”

Flip them burgers.

But don’t count on “buying” a house, starting a family, retiring or – God forbid! – opening a business on that salary…

#99 Don on 10.30.14 at 10:27 pm

RE 1880? I would have expected a much different response from the markets guy that you are. I see this all the time where people market or post the most favorable time horizons that support their investment ideas. I never thought that someone of your stature and being a really smart guy would not be completely transparent and show the whole story. I rest my case, and will wake up tomorrow and read your blog with interest. After all…it is your blog :)

Yup, it is. And an ETF-based portfolio backtested to before those assets existed is as useless as your comment. — Garth

#100 nonplused on 10.30.14 at 10:27 pm

Wait a minute… $200 grand for a new Kia?

#101 twixt on 10.30.14 at 10:29 pm

#48 crowdedelevatorfartz on 10.30.14 at 7:42 pm
@xdisciple

wow, major headrush…..was just wrapping my head around the swapping of the husband character half way thru the Bewitched series, and now this…..back to therapy…..

#102 David W on 10.30.14 at 10:30 pm

Garth, you say we should buy more on dips, why not the same for gold and silver? What about oil? Any one else have thoughts on this?

Owning an ETF holding the TSX is more than enough PM exposure. — Garth

#103 ozy - materials 5% down in a DAAAY???? on 10.30.14 at 10:31 pm

materials 5% down in a DAAAY????

holy-disaster, folks – If you own lots of stocks don’t open this link :)

http://www.financialpost.com/markets/sectors/index.html

I think it’s time to sell the BANKS….since morgages are POO-POO (if we listen to Garth) and miners and oil companies, sure have no need for more funds… they’ll probably shutting down operation orderly – hopefully

Your comment is awaiting moderation.

#104 pointing out on 10.30.14 at 10:38 pm

a well balanced portfolio is up 130% over the past 10 years which is good. now , I’m not a gold bug in any way , but one should point out that gold is up 300% over the same period and that includes todays close below 1200.

on another note…. people are excited more than ever to “win” a bid on a 30 foot lot with a tear down on it for 1.2 to 1.5 million here in lotus land. it is shocking and completely insane.

#105 Basil Fawlty on 10.30.14 at 10:49 pm

Greenspan tells the Council on Foreign Relations that QE has not been good for the real economy. Another America hater, I guess.

“In a speech at the Council on Foreign Relations, “The Maestro” said he fears potential “turmoil” in the economy as the Fed halts QE. “I don’t think it’s possible” for a smooth exit, he said, implying that rampant inflation and bursting asset bubbles could result. QE has failed to jump-start the real economy, he said.”

Greenspan would be best to fade. Now further embarrassing himself, if that’s possible. — Garth

#106 Van Isle Renter on 10.30.14 at 10:54 pm

#54 Jonathan on 10.30.14 at 7:49 pm

It is amazing that 34% of workers are now “freelancers” in the U.S.

But how many would prefer just to have one stable job?
+++++++++++++++++++++++++++++++++++++

I’m a big fan of multiple sources of income. A balanced and diversified employment/income strategy is key.

I’ve always had a reasonably well paying part time consulting jobs to put bread on the table and while I made investments in private and public companies. I never made a lot off my employment, but I’ve always done modestly well on my companies.

It’s somewhat disorienting when I sell a company though, I feel out of sorts until I get another project going.

I’ve yet to be an employee; I haven’t had what I would consider a “real job” since 1983. Nothing wrong with being a freelancer, you just have to know that you need to have other irons in the fire.

#107 Nemesis on 10.30.14 at 11:09 pm

#@MillennialDentists… #”IsItSafe?” #Answer:”It’sNeverSafe.”… #ThatSaid,OlderDentistsAreGenerallyCrueller… #&Yet,FateIsFrequentlyFarFarKinder… #It’sAJustAParable… #OneDay,ISimplyMust!TellYouAbout… #MetroTown’sNotorious’Dr.’Ow… #UntilThen:

http://youtu.be/kzw1_2b-I7A

#108 Doug in London on 10.30.14 at 11:10 pm

@Mark, post #20:
The fiscal situation for the government looks to be deteriorating on a significant basis.
———————————————————–
Not to worry, haven’t you heard the latest news? The benevolent government is giving out more generous tax breaks next year. Can they really afford it? Who really cares about increasing the deficit a few billion more dollars?

#109 Spectacle on 10.30.14 at 11:17 pm

#86 mishuko on 10.30.14 at 9:39 pm
@22
His reference to a ‘kia’ is more an analogy (or whatever English term you wish to use) to something more material.
******************
In response, Mishuko, in general all references to Kia , on or off of this blog usually refer to a vastly inferior product, a waste of a purchase , or is used to indicate the unsuitability or troubled future of an investment.

Can I use it in a sentence:
I was in the Hummer with Garth, going to the investment meeting. The deseased was in the other vehicle, driving a Kia. : )

Friends don’t let friends buy gold, or Kias…….

#110 Snowboid on 10.30.14 at 11:17 pm

#14 CalgaryRocks on 10.30.14 at 5:57 pm…

Looking at the Vancouver REB statistics, it doesn’t appear RE did any better in the last ten years.

Sure it doubled, but didn’t do better than the stated investments.

When you add in the costs associated with flipping, such as sales costs and capital gains it’s even less – whereas these costs are minimized using the professors’ investment strategies.

#111 Doug in London on 10.30.14 at 11:22 pm

On a related topic I heard today that the wealthiest people in the world have gotten much wealthier since the 2008-09 financial crisis. Is it due to some evil, pernicious element in the highly rigged economic system? There are many reasons but a most likely one is that during the crisis when stocks were on sale and a lot of panic stricken fools were selling, wise people like Warren Buffett were scooping them up at fire sale prices. Now that prices have recovered fully, it’s easy to see how that’s affected their net worth.

#112 kommykim on 10.30.14 at 11:49 pm

RE #35 Freedom First on 10.30.14 at 6:54 pm
All I know, is that $1190 gold an $16 silver is much lower than $1900 gold and $49 silver.

Yes but, $900 gold and $12 silver is lower than $1190 gold an $16 silver.

The market is telling us something today:
Losers Change Mkt Cap
Yamana Gold Inc. -16.97% 4.40B
Centerra Gold Inc. -14.29% 1.11B
Goldcorp Inc. -13.31% 16.97B
Agnico Eagle Mines Ltd-11.65% 5.82B
Tahoe Resources Inc -11.55% 2.97B

PMs are dead end investments now that QE is over. Once interest rates start creeping up, look out below!

#113 Don on 10.31.14 at 12:24 am

You said: Yup, it is. And an ETF-based portfolio backtested to before those assets existed is as useless as your comment. — Garth

Ok..Its your blog… but you are saying that the balanced portfolio did not exist prior to 2004?

An ETF as you know is just a basket of assets that have been around since Buttonwood made a market in NY.
Garth, I have been fair and respectful to you. Why is my comment useless? You owe it to your good readers and smart people who read this to have an honest debate…what is wrong with that? As a fellow Raymond James advisor (me being former), I would have thought you would welcome a proper debate?

#114 JimH on 10.31.14 at 12:33 am

Some folks are letting fly with some abominable advice on the precious metals! “Buy the dips!” Or, “At current prices a great buying opportunity”.

I would suggest that buying the dips in any asset class where price is clearly in a downtrend of lower highs and lower lows is just plain stupid gambling! A rookie move and an example of extremely poor risk management!

Alan Greenspan? Please! Not only did this a$$hat fail to predict the GFC of 2008, he was primarily responsible for setting the forces in motion that caused it. But, by all means; take the advice of the goose that crapped on the carpet and then criticizes the clean-up crew!

One of the many stupid mistakes I made as a rookie trader back in the 1990’s was to think I could foretell what the markets “should” or “should not” do.

We have a joker on here who will remain unnamed (Mark) who thinks he is smart enough to forecast market performance a decade out! To think yourself so wise, yet be so abysmally stupid is to be truly challenged.

Markets do what they will do, and it is up to the nimble and situationally aware trader to spot and follow trends. Picking tops and bottoms is fine for fools and gamblers, but they won’t last long in this game!

Yes, the USA will not hold its privileged position as the producer (rather than consumer) of the global economy’s reserve currency forever; but for the present time, realism and just plain pragmatism demonstrate that no other serious contender is in play. Those silly enough to wish for change in that regard would do well to seriously consider the alternatives.

Scary? You bet it is. That will no doubt change, but not in my lifetime.

As for the blatant and abhorrent anti-Americanism displayed by several regular Canadian posters on this blog; have you ever… even for moment, considered how very different a country you would be living in today if you had a different neighbor (neighbour) to the south? Say… North Korea… Or the old USSR… Or, (God forbid) China… ?

I’m lucky enough to be a dual citizen of both Canada and the United States; proudly born and raised in Canada, but in mid-life found the opportunities beckoning south of the 49th irrisistible. I owe both Countries an enormous debt, and am grateful to both.

This won’t stop some from continuing their taking cheap shots at the the U.S., but I do hope that it may cause some to pause and adopt a more realistic viewpoint.

#115 John on 10.31.14 at 12:44 am

The present economy is broken.
We are in the midst of a massive reset / shift.
We cannot grow forever.

#116 Linda on 10.31.14 at 12:46 am

#108 Doug: yep, an election is coming & as usual the current rulers are flinging some $ towards those who they hope will vote for them. I don’t know if I gag more over the fact that they are bribing us with our own tax dollars or over the result that yes, people do vote for those who do this. And even if the current group is voted out, the replacement group does the same thing once the next election draws nigh.

#117 JimH on 10.31.14 at 12:50 am

Oh; the U.S. debt? Well, yes, it is a consideration; but since when are debts considered without any consideration of assets?

Some time ago, I estimated the financial assets of the U.S. government in terms of royalties, federally denominated resources, Federal lands, parks, buildings and properties and others to be in excess of $250 trillion (US). Perhaps this explains the lack of general panic?

#118 lurker on 10.31.14 at 1:28 am

This chart might explain the cause of the chart Garth presented:

http://www.global-rates.com/interest-rates/central-banks/central-bank-america/fed-interest-rate.aspx

interest rate is dead for about 5 years now… and counting…. each and every dollar you are saving is slowly dying…. so where do you really put it? Stocks, bonds… it’s all speculation now.

US rates will start to rise, as expected, in 2015. — Garth

#119 Free Headaches Ask For Yours on 10.31.14 at 2:54 am

“Where is the error in my math?
Should I really buy a new KIA? I don’t really “need” one.”

Obviously you must buy a black K900 post haste my American friend.

#120 };-) aka Devil's Advocate on 10.31.14 at 4:21 am

#159 Snowboid on 10.30.14 at 8:07 pm

My folks took them (real estate) to court, after $ 60K in legal fees and three years they lost. Plus they lost about $ 150K on their home sale.


Obvious I am bitter about what happened with my folks, maybe this is why I pursue the false ‘god’ of Okanagan real estate with a vengeance – for his blatant and repetitive BS.

Bring it on Snowboy. Clearly we (the real estate community) have the law on our side and you are fighting a Don Quixote’s battle.

In case you missed it, the US economy has just capped the strongest six-month period of growth in more than a decade – the best since 2003. Jobless claims there are now at the lowest level since way back in 2000. Almost 250,000 people were hired last month and the unemployment rate is down to where it was in 2008. Gas prices are set to hit a six-year low, and consumer confidence is increasing. Meanwhile the Fed has stopped its stimulus spending, and the stock market immediately gained 200 points. – Garth

And as does the U.S. so does Canada follow.

So, you can moan and dribble over things you cannot control. Or you can cede life is to be confidently embraced. You only get one. – Garth

Abso-F##king-Lutely! Just what I keep trying to tell your Blog Dawgs.

#121 };-) aka Devil's Advocate on 10.31.14 at 4:30 am

You could sub real estate for financial markets in Garths editorial de jour and much the same would hold true.

Fact is such is true of anyone’s life. Embrace “life”, both the highs and the lows for they are what life is. For every uphill grind there is a downhill coast and for every fall there is opportunity to pick one’s self up again. Over the long haul a life well lived has no regrets.

At the end of the day you’re not likely to say “I wish I’d saved more” or “worked harder” or “played less”.

, you can moan and dribble over things you cannot control. Or you can cede life is to be confidently embraced. You only get one. – Garth

#122 neo on 10.31.14 at 6:37 am

Garth,

What have we here. US QE ends. Japan takes the baton, QE ramps up and Nikkie was up as high as 1,000 and US pre-markets way up. Pure fundamentals going on here. No manipulation of asset classes here right Garth?

#123 Charles Ponzi on 10.31.14 at 6:40 am

The evaporation of liquidity in general could lead to another bout of selling across global markets. QE is all about providing confidence. Liquidity is synonymous with confidence. Take it away and you’ll see the mood of the market change.

Foolish words. Liquidity has been systematically withdrawn for a year. No reaction. — Garth

#124 Winston Smith on 10.31.14 at 7:31 am

Investors shouldn’t be complacent that the market upheavals of just a weeks ago can’t return.

Of course. But they were totally digestible. People with balanced portfolios barely noticed the turmoil. I gather that was not you. BTW, why are you making so many posts under different names this morning? I just trashed eight others, Mr. Ponzi. — Garth

#125 Adam Apple on 10.31.14 at 7:38 am

The status of holding the world’s reserve currency comes with responsibilities. That the US has abused the system with ongoing lazy economic management and foreign policy blunders — failed in its responsibilities — is clear. Less clear is how the changes currently underway will play out. The financial system is already unravelling — currency wars are fought, uncertainty is high and the developing economies are starting to build their own institutions — the China-backed Asian Infrastructure Investment Bank for instance.

#126 Charles Ponzi on 10.31.14 at 7:42 am

When the Fed began asset purchases in late 2008 the premise was simple: unleash a tidal wave of liquidity to force nervous investors to move out of safe investments and into riskier assets.

And those with a balanced portfolio have enjoyed relatively stability, less risk and good returns. — Garth

#127 Angry Saver on 10.31.14 at 7:43 am

Can you solve a crisis of too much indebtedness by increasing debt and suppressing interest rates?

The toxic combination of more credit creation and global financial repression will merely make the ultimate endgame that much more spectacular.

#128 Angry Saver on 10.31.14 at 7:45 am

When the US markets fails again then then Fed Reserve will continue their QE policy until the US currency is burnt hard into the ground.

Just remember unemployment is low but participation rate is even lower and falling.

QE has only made the wealthy more wealthier.

#129 Roman on 10.31.14 at 7:59 am

Withdrawn liquidity, ha.
There is news from manufacturing island overnight. Samurais just took over the control panel of printing press. Not even ONE days passed without QE. This is definitely for Europe.

The only explanation I can think about to such retarded action is that samurais were left in disgrace with nikkei down 3% this year. So they decided to rump it up to +3%!

All these just doesn’t make sense. Central bankers act more desperately then in 2009-2010, while markets and economy is roaring. Something is wrong here.

#130 Chickenlittle on 10.31.14 at 8:31 am

Garth is right. Money doesn’t always keep its value.

My eastern European in laws had the equivalent of 100 k in the bank at the time communism wad falling. They did nothing with it and their currency dropped in 10 years to next to nothing. They lost everything they saved.

Even Solomon the “richest, wisest man ever” believed in diversification.

“Share what you have
    with seven or eight others,
because you never know
    when disaster may strike.
3 Rain clouds always bring rain;
trees always stay
    wherever they fall.
4 If you worry about the weather
and don’t plant seeds,
    you won’t harvest a crop.”

Ecclesiadtes 11

#131 crowdedelevatorfartz on 10.31.14 at 8:47 am

@#107 Nemesis

Ghomeshi was a dentist in another life?

#132 };-) aka Devil's Advocate on 10.31.14 at 9:09 am

#114 JimH on 10.31.14 at 12:33 am

Great post! I totally agree with you and especially so on your comment regarding the” blatant and abhorrent anti-Americanism” displayed by so many. There is indeed much gratitude we do owe for our good fortune to have such good neighbours. No, they are not perfect but we are a particularly lucky nation to have them as neighbours in light of the alternatives.

#115 John on 10.31.14 at 12:44 am
The present economy is broken.
We are in the midst of a massive reset / shift.
We cannot grow forever.

Ahhh, a disciple. Welcome my friend. Yes SHIFT happens. And no, this economy is entirely and utterly unsustainable.

A Great SHIFT is inevitable. But it will not happen in your or my lifetime and likely not even in the lifetime of our grandchildren. It is closing in on us though and with increasing speed.

SHIFT happens. Learn to ride the tide.

#133 Kevin on 10.31.14 at 9:10 am

@Mark (#20):

Throw an acceleration of CMHC subprime mortgage insurance claims into the mix, and the fiscal situation for the government looks to be deteriorating on a significant basis.

#1: Why would there be an acceleration of CMHC insurance claims; and

#2: Why would that affect the government’s finances?

CMHC’s insurance payouts in 2013 were down 18% from 2012. The arrears rate (a scant 0.34%) was also down year-over-year. In the past decade, CMHC has added $18 billion to the government’s coffers. It has over $17 billion in reserve cash it could use for payouts if necessary (in 2013, it paid out less than 3% of its reserves).

Payout claims would have to increase by 3400% before the government would have to step in and actually start using taxpayer money to backstop underwater mortgage defaults. I don’t think that’s very likely.

#134 Daisy Mae on 10.31.14 at 9:18 am

“The dissing of America was classic. The belief markets are manipulated, government stats are rigged, governments run by morons and that central bankers can’t Google was endemic.”

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

People love to contradict just ’cause they can….

#135 James in Kitchener on 10.31.14 at 9:25 am

To add to the comments, I don’t believe I saw anything about monthly contributions to smoothen the risk. For example if you want to invest $5,500 in a tax free account, if you invest all at once, your portfolio might have lost money (for example in September)
To lower the risk over time you can invest a monthly amount $458 and over the course of a year you would have eased the peaks and troughs.
Just my nickel to the conversation of debate.

#136 James in Kitchener on 10.31.14 at 9:29 am

Taxes
While I am not a tax expert, I will make a comment based on my own example of what happened today for income splitting
Here is what Canadians pay in taxes, watch the percentages (dollars are rounded)
Under 39,305 (fed 15%) Ontario Provincial (9.68%)
39,000 to 43,000 Ontario Provincial increases to (14.82%) or 5% increase
43,000 to 49,000 Federal increases to 22% or 7% increase
49,000 to 87,000 Provincial increase to 16.52% OR 2% increase
Over 87,000 Federal increases to 26% or 4%

Now you do the math if one spouse is earning 110,000 and the other spouse 21,000 to reduce the taxes you need to move $23,000 from highest to lowest.
The top earner now save 4% and the lowest earner, now pays almost 12% more in taxes on the $23,000.
I realize this is only one example, but I wonder how many people will fall into this trap. if you are a tax accountant, feel free to provide feedback.

#137 TorontoBull on 10.31.14 at 9:36 am

US rates will start to rise, as expected, in 2015. — Garth
Garth, I am willing to make a bet with you on that one – say 100 bucks donated to a charity – that the Fed(or BOC) will not touch rates in 2015!

The Fed will move, The BoC may not, if we continue to sink (see today’s report). — Garth

#138 Macrath on 10.31.14 at 9:41 am

why are you making so many posts under different names this morning? I just trashed eight others, Mr. Ponzi. — Garth
————————————————-

Mr. Ponzi has been constantly plagiarizing theautomaticearth.com verbatim. I don`t agree with the American sunshine lollipops , and honest caring bankers scenario either but try to form my own opinions and strategies.
For this retiree it`s good low beta global dividend payers, REITs , Prefferds that barely tread water but pay well so I hang on reluctantly , a variety of bonds, a paid off bunker with a warm fireplace and lots of cash for a good nights sleep.

#139 Daisy Mae on 10.31.14 at 9:44 am

#62 Linda: “…dropped by 20% at the low point & has since rebounded nicely…”

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

My portfolio with Investors Group did not recover…but I DID get a sympathetic hug from my advisor! Made SUCH a world of difference….

However, I’m on the right track now, thanks to Garth.

#140 Dave in KW on 10.31.14 at 9:47 am

Gold lickers or gold insurance
I buy gold as an insurance, just like I buy house insurance and car insurance.
If I have a $50,000 car my car insurance is $1.000 annually, I have not had an accident in 40 years of driving so I lost $40,000
if I have a $450,000 house my insurance is $500 annually, Never made a claim, I lost $20,000
I have $200,000 in investments, how do I insure this?
I am comfortable with gold. I have $10,000 in gold
But I still have it after 40 years, even if its zero its insurance
Do I believe in the end of the money system, no,
but there is always just in case, that’s why you buy insurance
Lets ask another question
How many of you have generators? why? do you think that the power grid is going to collapse? Its insurance

How many of you store water, food. I bet if you live in Florida you have an emergency preparedness kit. Why? do you believe in the end of the world? Its insurance
How many of you buy a diamond ring for you soon to be wife? Do you think if she does not get one she will leave you? or is it insurance? immediate lost $2,000 depends on the rock of course, I saw one the other day I bet it was $5,000, love is priceless?
How do you put a value on insurance and comfort levels
So gold is about comfort level end of rant.

Generators make power. Gold makes nothing. — Garth

#141 rosie "moving forward" in the knowledge that, "this won't end well" on 10.31.14 at 10:00 am

For the doomer crowd worried about government debt. Time takes care of everything.

http://www.bbc.com/news/business-29844961

#142 Inglorious Investor on 10.31.14 at 10:20 am

I find human nature fascinating (if utterly predictable), and that’s one reason I like this blog so much.

You find human nature ‘vociferously’ expressed via comments on this blog, particularly the obvious biases that manifest whenever someone challenges the opinions or worldview of another. Some people get defensive, annoyed, belligerent, and sometimes downright nasty. Some people think that ad hominem attacks will somehow make their own opinion more valid. Others think in very simplistic binary terms and cannot grasp (or purposely ignore) the nuance and complexity that accompanies a given argument or set of metrics. And then there are those who seem to lack the ability to think at all, and simply latch onto which ever authority figure they feel best represents their interests, like a pup latching onto a teat.

Confirmation bias. Cognitive dissonance. Social identity bias. It’s all here. And more.

Sometimes I make a comment, based on observation and/or research, that may be critical of some aspect of some idea. For example, I’ve often commented on how one can use timing bias, and other forms of data spin, in stock charts to ‘prove’ that an investor would have made huge returns, OR lost a lot of money. If the argument is for huge returns, some people who are not invested in stocks will attack the comment in various ways––either with counter-factual data, or, sadly, all too often by name calling. If the argument is for losses, those invested in stocks will respond in much the same way.

In either case, the assumption too often being made is that I love/hate stocks. If I remark on gold, then I must love/hate gold. Real estate? Same thing. Binary thinking. By the way, Garth is the biggest victim when it comes to this.

The truth is, I don’t love or hate any type of investment or asset. I am agnostic. Because my own identity or sense of self worth is not tied to some thesis or authority figure, I can see the positive and negative aspects of various asset classes, and I am open to the opportunities and risks associated with each one under various socioeconomic circumstances. But above all, in my own limited ways, I seek the truth, wherever it may lead, and act accordingly. I do not defend stocks or gold or real estate because I own them (which I do). I try to look at them objectively, and then decide if I should own them or not. If the data I have shows I may be been mistaken, I adjust accordingly. It’s not my ego that I’m protecting; it’s my money.

Garth shows a ten year chart of total returns in a balance.d portfolio. Great returns. What does it mean to me? Or you? Maybe everything. Maybe nothing. Why? Because all that really matters is the returns achieved during YOUR investment cycle, whatever that is. That is partly why I say, “Timing is everything.”

So, Greenspan comes out and says QE was a waste of money or whatever and apparently recommends gold. Those who don’t like this message deride him as old, out of touch, and the cause of the last financial crisis. Interesting. Because I remember a time when Greenspan was on the cover of Time magazine being lauded as “The Maestro” and a member of “The Committee to Save The World” after the Asian financial crisis. Now, the current criticisms of Greenspan may be perfectly valid. But just keep that in mind when today there are equally strong insults and plaudits being hurled at and heaped upon people like Bernanke and Yellen… and Garth Turner. Are they right?

That said, it’s nice to hear that Mr. Turner has apparently heretofore banished recessions from occurring ever again. If I didn’t think for myself, or if I didn’t consider the context in which he penned those words, I’d find them very comforting indeed.

My advice: THINK FOR YOURSELF. Be OBJECTIVE. And always remember, investing is about your net worth, not your self worth.

Not that it matters to your self-defence, but the purpose of a balanced portfolio is to perform in a workman-like fashion during any economic cycle, as I demonstrated. Recessions will come and go, but an astute investor will survive if they have balance and diversity. And Greenspan has lost it. Happens. — Garth

#143 Jim B on 10.31.14 at 10:32 am

Everything you say regarding a balanced portfolio is right on the mark, Garth, however as a couple of others commenters have pointed out, it’s a wee bit misleading to only provide figures for the last ten years, insofar as in late-2004 stock markets were just coming off their lows following the tech-driven crash early in the century. For example, a decade ago the S&P 500 was in the 1,150 range, while five years earlier it was surging past 1,400). So sure, someone who in 2004 suddenly came up with $100k to plunk down into a (hopefully) balanced portfolio would have doubled their money, but if that same person had done the same thing five years earlier, not so much. Just sayin’.

Sayin’ what, exactly? The last decade provides an excellent example of boom-bust-whimper. What better environment to test the mettle of a portfolio model? — Garth

#144 Fortune500 on 10.31.14 at 11:29 am

Garth couldn’t have timed this post better

http://www.nasdaq.com/article/market-snapshot-us-stocks-sp-500-dow-hit-record-levels-20141031-00560

#145 AB Boxster on 10.31.14 at 11:40 am

Yeah,

The markets aren’t influenced at all by quantitative easing…

Uh Huh.

“U.S. stocks hit record highs on surprise Japan stimulus”

href=”http://www.theglobeandmail.com/globe-investor/inside-the-market/market-updates/at-the-open-dow-hits-record-high-on-surprise-japan-stimulus/article21398122/”

A more liquid Japanese economy means enhanced US corporate profits. Duh. — Garth

#146 Mike S on 10.31.14 at 11:55 am

“A much bigger worry isn’t the oil industry (5% of GDP apparently), but the loss of huge tax revenues because of the slowdown of the housing industry (25% of GDP). Which is already well into play.”

The government really shoot itself in the leg here. If the housing is going to slow you loose significant amount of tax revenues. If the housing stays at high levels, real economy is going to hurt as more and more people dedicate increasing percentage of disposable income to housing sector.

I think we can already witness both happening (marginally for now), as can be seen from consumer spending, employment numbers, GDP numbers etc

The whole resource sector (which is bigger than just the oil and gas) happens to slow down exactly at the most inconvenient moment, when households are already strained to keep with housing expenses, and instead of softening the slow down, it may well be a catalyst for even bigger declines

#147 Basil Fawlty on 10.31.14 at 11:58 am

“Gold makes nothing. — Garth”

So, why does it have any value at all? Why would Russia and China be buying at record levels, or have they lost it like your opinion of Greenspan?

Secondly, why do you continually cherry pick the US unemployment statistics, by never presenting the labour force participation rate, which actually backs up Greenspans claim that QE has not done anything for the real economy?

Enjoy being morose. How’s it worked out for you so far? — Garth

#148 not 1st on 10.31.14 at 12:04 pm

A more liquid Japanese economy means enhanced US corporate profits. Duh. — Garth

So the liquidity injection has somehow magically opened the japanese market up for american goods? I mean thats how companies make money isn’t it – by selling their products to more consumers?

More likely extra money sloshing around that will just find itself on the yen-greenback spec trade. This is just voodoo now.

No magic. Markets are leading indicators, and move on expectations. Surely you get that. — Garth

#149 Herb on 10.31.14 at 12:07 pm

I know that you will not stoop so low as to rejoice at Del Mastro’s verdict, so I’m doing it for you.

Whenever I saw Dino do his thing in the media, I always thought that the expression monstrum in fronte, monstrum in animo fit him perfectly. Hope that he gets an appropriate prison sentence for his “crimes”, especially for having been a fine specimen of the Harper Party, the perfect political hypocrite.

#150 Mike S on 10.31.14 at 12:13 pm

“5% in PM’s as insurance for whatever may happen will not hurt you in a properly managed portfolio, debt free for me, of course”

I wonder how do you see it?
No reason to hold PM etf, as it generates no income and it is “paper” anyhow. The only reason to do that would be only if you try to do some volatility harvesting

For the insurance part. you want physical metal right? a quick calculation based on the average net worth of this blog followers shows you one would need about 1 KG of gold and 60-70 KG of silver. Cool how are you going to store that?

#151 Kenchie on 10.31.14 at 12:25 pm

Happy halloween. Scary charts:

http://qz.com/289390/for-halloween-the-10-scariest-economic-charts-in-the-world/

#152 AB Boxster on 10.31.14 at 12:31 pm

Garth,

A more liquid Japanese economy means enhanced US corporate profits. Duh
____________________________________

Great!
So more enhanced corporate profits as a direct result of massive government intervention through stimulus spending using money created out of thin air.

Exactly how the capitalist free market was intended to work.

Duh!

I’m enjoying it. — Garth

#153 rosie "moving forward" in the knowledge that, "this won't end well" on 10.31.14 at 12:46 pm

It’ll be pot lights and stainless next. Better call in the boys for an update.

http://dishwashers.reviewed.com/features/goodbye-granite-the-6-hottest-countertop-finishes?utm_source=taboola&utm_medium=USAT%20Recirc

#154 Mike S on 10.31.14 at 12:50 pm

“RE 1880? I would have expected a much different response from the markets guy that you are. I see this all the time where people market or post the most favorable time horizons that support their investment ideas.”

The Canadian Couch Potato guy did that analysis (for similar portfolios) for 20 years period. If etfs weren’t available yet, he did some calculations based on underlying asset values. Go ahead and look it up

One can extrapolate even further, but nominal return wouldn’t get you good enough indication, as growth/inflation rates and volatility changes over the decades

#155 Mike S on 10.31.14 at 1:01 pm

“The Fed will move, The BoC may not, if we continue to sink (see today’s report). — Garth”

This will kill the CAD then?

That’s hardly an accurate verb. — Garth

#156 AB Boxster on 10.31.14 at 1:06 pm

Garth,

I’m enjoying it.

——————————
I understand this perspective.
I’ve benefitted from the run up in the markets, the inflated values of homes, artificially low rates.

Corporations benefit from QEII, and bailouts, etc.
Economies are lifted by extreme low rates, and massive injections of more and more money.

There are a lot of winners.
Stock market is up.
Sold my house at 200% gain.

But is this approach really the what must be done for capitalism to work in the 21 century and is it sustainable?

Massive government debt.
Housing prices go through the roof.
Stock markets rally, crash, rally , crash….
Corporations hoard cash and don’t invest or employ real jobs.

It’s clear that this blog’s position is that high housing prices are a problem, but they are just another symptom of the mess we are in.
And actions taken today by the Japanese just continue to dig us into a deeper hole.

But hey, as long as you’re enjoying it….

You can, too. The future has a weird way of working out. Don’t sweat what you cannot alter, — Garth

#157 Keith in Calgary on 10.31.14 at 1:14 pm

Draw a line on the charts that Garth provides in this post with the date QE started.

Enough said.

Be sure to mark when it started to end, and did complete. — Garth

#158 Blacksheep on 10.31.14 at 1:32 pm

Takla # 96,

“re #78 blacksheep..silver @16.50
Don’t hold your breath for single digits. Its below cost of production @ this level and producers are threatening cutting production.”
————————————–
Seen this movie before.

No breath held, but no buying either, unless Silver gets dirt cheap as it’s just to volatile. It’s an industrial metal first and the world is slowing, US aside. Producers and their supply, did not disappear in 08 when silver hit single digits and it won’t this time.

The psychological impact of QE ending (in the US) has the herd, exiting paper metals. The downside inertia could be substantial. Don’t get me wrong, I love the shiny precious, but have learned to put reason before emotion.

#159 RealistvsExtremist on 10.31.14 at 1:50 pm

Over 1.4 million new US jobs this year. Sorry. — Garth

+++++++++++++++++++++++++

1. 11.4 million people “left” the workforce since Obozo came to power. Who is paying for them?

2. It’s no secret that many of these 1.4 million jobs are “McJobs and Govt jobs” which do not help the economy in any meaningful way. The Govt jobs actually hurt the NO recovery by increasing taxes and debt.

#160 screwed on 10.31.14 at 2:02 pm

Did you see this doubling down BoJ intervention coming?

China will follow suit and Canada’s main real estate markets are going to go gangbusters even more when the Japanese are coming back to buy RE in Canada.

Interest rates are dead as a door nail. The FED won’t make a move and neither will the BoC now.

#161 Mike S on 10.31.14 at 2:16 pm

“That’s hardly an accurate verb. — Garth”

CAD will continue to decline then, until Bank of Canada would be forced to increase interest rate?

#162 Mike S on 10.31.14 at 2:19 pm

“And actions taken today by the Japanese just continue to dig us into a deeper hole.”

I’m glad Japan is ahead of us in this game, because whatever happens we will be lucky enough to learn from their experience/mistakes

#163 Debtfree on 10.31.14 at 2:30 pm

@ 159 RVE .. Did you know that there are now more people employed in the solar power industry in the states than there are in the gas and coal industry .
And yes this has happened on Obamas watch . And the coal lobby in Australia have just gutted their solar industry and we really don’t have one . Harper and abbot , what a bromance . Both are one trick petro ponies . That’s not how one runs a country . Even the Saudis understand one plans and works to diversify before the end of fossil fuel era . Steve’s not very good at forward thinking or planing . First you put on a bee suit , then and only then does one hassle the bees .

#164 China Syndrome on 10.31.14 at 2:44 pm

http://www.repmag.ca/news/chinas-dirty-money-inflating-canadas-property-prices-185077.aspx

#165 jess on 10.31.14 at 2:45 pm

the “perpetual” war

UK bonds that financed first world war to be redeemed 100 years later
Treasury’s redemption scheme stretches all the way back to Napoleonic and Crimean wars and Irish potato famine

Julia Kollewe and Sean Farrell
The Guardian, Friday 31 October 2014 10.53 GMT

http://www.theguardian.com/business/2014/oct/31/uk-first-world-war-bonds-redeemed

#166 calgaryPhantom on 10.31.14 at 2:52 pm

“Stocks inch upwards because of BoJ”.

Why did they bother putting that “o” in BoJ.

#167 Mark on 10.31.14 at 3:06 pm

“For the insurance part. you want physical metal right? a quick calculation based on the average net worth of this blog followers shows you one would need about 1 KG of gold and 60-70 KG of silver. Cool how are you going to store that?”

Trivial. Such amounts fit into a volume far less than a cubic foot. You can buy suitable enclosures at Costco, with a lock, for a couple hundred bucks. Or throw ’em in where you store your guns under lock and key. Big deal.

#168 Mark on 10.31.14 at 3:10 pm

“China will follow suit and Canada’s main real estate markets are going to go gangbusters even more when the Japanese are coming back to buy RE in Canada”

Wow, you think we’ll actually see overseas buying of Canadian RE? That might actually be helpful, since there sure as heck hasn’t been much of any for the past decade.

But more realistically, Chinese QE won’t direct even so much of a dime into RE, but, just like in the USA, will only be used to re-liquefy and relieve banks of insolvency. Meaning that there won’t be anything to actually bring to Canada. Not that Canada was actually a destination for Chinese money anyways.

#169 Mark on 10.31.14 at 3:14 pm

“This will kill the CAD then?”

No, higher interest rates are actually damaging for a currency, as they imply higher inflation, and loss of real purchasing power. Low rates tend to be better for a currency as the implication is that of price stability.

Countries with double-digit “interest rates” tend to be those chronically plagued with monetary instability. While the Japan has run ZIRP for many, many years and due to the nature of their economy, has experienced extraordinary price stability and a strengthening currency.

The BoC’s next move is likely a cut, and such a cut will serve to similarily strengthen the Canadian dollar. While the US Fed will eventually be forced to raise due to the spectre of higher inflation.

Mark, do you just make this stuff up? Higher rates attract capital and bolster currencies. — Garth

#170 Debtfree on 10.31.14 at 3:26 pm

# 166 I guess they are just not as crass as you .

#171 Suede on 10.31.14 at 3:29 pm

Mark,

Rate cut will cheapen the CAD.

#172 Kenchie on 10.31.14 at 3:42 pm

Europeans save significantly more than North Americans. That’s part of the problem too…

http://www.telegraph.co.uk/finance/personalfinance/savings/11202098/British-savers-are-worst-in-Europe.html

#173 Mike S on 10.31.14 at 4:01 pm

“Higher rates attract capital and bolster currencies. — Garth”

Mark, I have to agree with Garth on this
Japan had and still has a very high productivity, even with aging population. we have very high stakes in housing and resources, and one day we will find it doesn’t serve us well, because former is just borrowing from the future, and later is very cyclical

The good news, is that eventually we might have a manufacturing rebound

#174 Basil Fawlty on 10.31.14 at 4:15 pm

Enjoy being morose. How’s it worked out for you so far? — Garth

Pretty good thanks. My cherry picking problem is 99% cured.

#175 devore on 10.31.14 at 4:19 pm

#152 AB Boxster

Exactly how the capitalist free market was intended to work.

What capitalist free market?

#176 Russ L on 10.31.14 at 4:32 pm

In the chart, the European ETF reward doesn’t seem good enough for the risk.
Does this indicate the ETF is “on sale”?
Since in a rebalance you need to buy some more as it is underperforming…

#177 Mark on 10.31.14 at 4:36 pm

“Higher rates attract capital and bolster currencies. — Garth”

I disagree. Higher rates are a desperate attempt of a weakening country/currency to attract capital, but it usually backfires. Higher rates are the compensation that investors demand for the perceived loss in purchasing power or perceived otherwise poor return on their investment.

Higher rates can, in some cases, lead to improved capital allocation discipline, and economic reform. But this usually takes a crisis or some concerted effort at economic reform. ie: Paul Martin in the 1990s engaging in significant economic reform. The election of Ronald Reagan and the solidification of control in the Middle East by the USA. Etc.

Want proof? Go look at the Argentinas, the Mexicos, the Indias and the various other economies out there that have experienced periods of high rates. High rates didn’t “save” them from dramatic currency depreciation. Additionally, a simple calculation with the after-tax real rate of return even for a Canadian investor will tell you that investing in fixed income is more favourable in a low-rate environment than a high rate environment:

ie: 10% interest, 8% inflation, 40% tax = 10%-4%-8% = -4% real after-tax rate of return.

4% interest, 2% inflation, 40% tax = 4% – 0.8% – 2% = +1.2% real after-tax rate of return.

Obviously the latter, the lower rate, is more favourable, and increases the desirability to invest in a given currency/country. Currencies that “have to pay interest” are weakening ones, bar none.

Forex traders don’t care about desperate policy-makers or long-term systemic inflation. They make money on spreads. And Canada ain’t Argentina or India. Bad examples. Just admit you typed before thinking. — Garth

#178 Russ L on 10.31.14 at 4:48 pm

Mark on 10.31.14 at 4:36 pm
Want proof? Go look at the Argentinas, the Mexicos, the Indias and the various other economies out there that have experienced periods of high rates.
——————————–

When did Argentina, Mexico & India each split into multiple countries?
Get a grip Mark, we’re not talking sports here.

#179 Retired Boomer - WI on 10.31.14 at 5:00 pm

PM might just be on my radar if they continue to fall further as there is always a place for ‘speculation’ not investment.

When the herd begins to shun something in earnest, it is usually time to put a cheap toe in the water.

Conversely, almost time to take profits on the recent stock run up. Woo-Hoo!!

#180 David W on 10.31.14 at 5:27 pm

Garth,

Thank you for responding to my posts. Took your advice and plunged into the market. Every purchase from here forward will be that much easier.

Keep up your posts, this world needs you and your sound advice.

#181 frank on 10.31.14 at 5:42 pm

#142

through society’s lenses one’s net worth = self worth.

#182 Retired Boomer - WI on 10.31.14 at 5:53 pm

Today saw want ads for welders, electricians, and assembly workers for our largest local (union) employer.

FIRST time in over 7 years! Mc Jobs? My Ass! Get hired at high teens (assemblers) more for skilled trades, and electricians. Then more in 90 days. Our son has worked there for 8 years. A sign “good things” are coming America’s way.

#183 Trojan House on 10.31.14 at 6:02 pm

#4 Kenchie on 10.30.14 at 4:25 pm

Even Keynes admitted before he died that he was wrong and that you can’t manipulate/control the economy.

Hence governments/central banks have no idea what to do. They try things (QE) not realizing if you pull one string, it affects another.

Next argument.

#184 The Man From Nantucket on 10.31.14 at 6:13 pm

#31 Inglorious Investor on 10.30.14 at 6:48 pm

Big returns from sub-prime mortgages?

OK, brother, convince me…

I’d like to know why I should invest in someone who is risky enough that they cannot borrow from the banksters at three to four points, so, needs to come to me to borrow it at twelve, or fifteen, or????

Do I get to break his thumbs if he’s a day late in servicing his debt?

#185 };-) aka Devil's Advocate on 10.31.14 at 6:59 pm

#156 AB Boxster on 10.31.14 at 1:06 pm

I have never been quite so much in agreement with Garth as I find myself today. Markets go up, markets come down… but overall, due to this economic paradigm we adhere to, overall they just keep going up the saw blade of escalation.

It’s absurd but it is what it is. It’s unsustainable but we’ll keep Band-Aiding it together for as long as we can. We depend on escalating values. we are hooked on the growth drug.

I agree too with the comments you make AB Boxter. The world economy has never been more absurd than it is now and it’s getting more and more so faster and faster. But it is what it is and we can’t stop it as each generation seems to be more and more hell bent on the materialistic gains temporarily provided at the expense of our futures. Not so much ours as theirs and not so much their as those to come.

It’s an unsustainable economic model and it is too far over the edge to turn back now. Just hold on and make the best of it you can. Fact is, you might as well be a part of the problem as be a part of the solution as we (the human race) don’t tend to fix what don’t appear to be broken until it breaks. By hoping on board and being a part of the problem you advance the breakage when all realize we need to do something about this.

As Garth says ”You can, too. The future has a weird way of working out. Don’t sweat what you cannot alter.”

In the meantimeSHIFT happens, learn to ride the tide

#186 Millenial on 10.31.14 at 7:09 pm

#122 neo on 10.31.14 at 6:37 am

Garth,

What have we here. US QE ends. Japan takes the baton, QE ramps up and Nikkie was up as high as 1,000 and US pre-markets way up. Pure fundamentals going on here. No manipulation of asset classes here right Garth?

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

:)
LOL.

#187 Kenchie on 10.31.14 at 7:45 pm

#44 devore on 10.30.14 at 7:26 pm

“However, models run into the brick wall of reality. High government spending during “bad” times means that political realities dictate even higher spending during “good” times. Anything else is political suicide.”

Precisely why I said what governments have done and what JMK prescribes are two different things. Did you even read the article?

Gov’ts can’t be called Keynesian if they don’t pay down debt and rein in spending during “good times”. So technically, very few governments in the history of the world have been “Keynesian” over a long period of time. Maybe for a few years here, and a few years there. But not consistently.

#188 Nomad on 11.01.14 at 11:22 am

I stick to my forecast (aka. guess) that interest rates will be below 3.5% in the first half of 2016. If you disagree, you’ll like validating your forecast with this Bloomberg view:

“history suggests that monetary policy has gotten so out of sync with the labor market that once the Fed does move, it may tighten further and faster than anyone currently expects.”

http://www.bloombergview.com/articles/2014-10-31/half-a-century-of-evidence-to-fear-the-fed