Stay calm

SLEEP modified

The doomer media is now full of warnings we’re on the verge of change, for the worse. That’s half right. Change is coming. Whether it’s good or not depends on you.

Here’s what we know. The first interest rate shock in years is now a few months away. That the Fed would hike by this autumn has been evident for some time. The latest jobs numbers (223,000 more of them last month) and housing data (a 20% surge in US starts) seals it.

We also know this is the bottom for Canadian rates, unless the Bank of Canada boss is lying to us. His speech yesterday was chock full of ponies and moonbeams, saying the economy is on the path to greatness, and we arrive in 2016. “We project it will take 18 months or so to get there.”

That means mortgage rates will be rising. Only the timing and pace are yet to be determined. But the status quo is kaput.

So what does it mean for investors in things other than houses?

A volatile summer seems like a reasonable thing to expect. Stock markets don’t like higher rates, even though they indicate the economy’s creeping ahead. When the cost of money goes up so do loans, and that impacts corporate profits. High rates boost bond yields. So fixed-income assets give a sweeter risk-free return and compete with equities. With stock markets trading near record highs for months, and no correction in the US since way back in 2011, nobody should be surprised to see one happen. In fact, it’s way overdue.

There are three things you need to remember this summer, other than where you put your skin-tight Speedo briefs, and the instructions for safely removing them from wet privates.

First, timing the market is a really bad idea. Most DIY investors, and all doomers don’t get this. In truth, nobody knows what’s coming, so the odds of making a correct call are woeful. Worse, in the age of Googlenomics and authoritative-sounding analysis from complete dorks, it’s easy to be led astray. After all, fear sells. And investors who succumb to their emotions usually regret it.

There’s statistical evidence to prove this, by the way. The chart below plots a sell-when-scared-buy-when-calm strategy compared to a simple buy-and-hold for the exchange-traded fund called SPY (it mimics the S&P 500). If you bailed every time markets fell 5% and then waited for them to stabilize, you made a gain of just over 200% in the last two decades. But if you forgot about volatility and rode the wave, your gain is more than 600% – despite the dot-com bust and the 2008 GFC.

SPY modified

Second, a correction is not a crash, collapse or capitulation. Usually it’s an opportunity. So lighten up, already. A bull market can go on for years (we’re in one now, and it’s far from over) and experience corrections that pull it back 5% or 10%, without changing the long-term direction. That’s exactly what happened in 2011 when US stocks were nailed for a 20% dive thanks to the debt ceiling crisis. The comment section of this blog ran red from every orifice and the doomers were exhorting you to invest in bullion, tuna and toilet paper.

But, it passed. And so will the next one. Here’s more statistical proof: since 1945 only one in 10 corrections has ended up in a bear market – where it predicted larger losses to come. That means the doomers have it wrong 90% of the time. Your Pilates instructor is a better source.

BEARS modified

Third, balance is the best defence. This is why smart people have portfolios with boring, safe, comatose assets in them as well as the sexy, growth stuff. For example, when equity markets fall during a correction, the price of bonds will rise – as money flows to safer havens. If you hold both in a portfolio in the correct weightings, there’s a built-in hedge against chaos.

Fixed income assets also pay you to own them. Like preferreds, currently pumping out a 5% tax-efficient dividend, regardless of what markets do. That stabilizes a portfolio, as opposed to being all juiced up on stocks or equity funds. In fact, about half the overall return on a balanced portfolio should come from the safe stuff – which all the market timers clamour for when they run screaming from Bay Street.

There is no apocalypse coming. No 2008 remix. No bank failures, bail-ins, currency crash, deflation, depression or locusts. But there will be dips and dives – moments when you need reassurance and unconditional love.

That’s easy. Come here. And get a dog.

154 comments ↓

#1 Raging Ranter on 05.19.15 at 7:10 pm

Ottawa home prices down almost 5% on the year. I can’t wait for the rate hike. I prefer cats.

#2 Ray Vasquez on 05.19.15 at 7:13 pm

When is the next recession coming? Usually it happens every 7 years.

Once that happens, interest rates, bond yields will fall again and be lower again.

They have this all planned out on keeping debt service charges, interest that is low. It is in their best interest!

#3 Sebee on 05.19.15 at 7:15 pm

I don’t like dogs. Is that wrong?

Then you’re doomed. — Garth

#4 Gito on 05.19.15 at 7:15 pm

Market in the mid-range home is hot in BcBurbs

#5 the Jaguar on 05.19.15 at 7:17 pm

Bandit really saved you, didn’t he Garth?
I thought there was some rock hard statistic about interest rates being at their lowest in the year leading up to a US election? Or is that folklore?

#6 spaceman on 05.19.15 at 7:19 pm

I love dividends, but I have a question, how do you buy prefered shares? Is there a special designation for them via my direct trading account, or do I have to go to a special broker?

All my stocks now are dividend producing, ok, exept for Berkshire… I did some math and noticed over a long term cycle, the average return of the market, and housing for that matter is only about 6-7%, compounded anually, so why not buy a basket of preferred shares, and hold until retirement, or until my yacht is ready to sail…

#7 Julia on 05.19.15 at 7:23 pm

I don’t have a Pilates instructor but I do have a yoga teacher and she tells me to breath. Taking that advice.

#8 Yogi Bear on 05.19.15 at 7:25 pm

And so it begins:

http://winnipeg.ctvnews.ca/cibc-reports-insolvencies-rising-for-the-first-time-since-the-recession-1.2380940

The number of insolvencies in Manitoba and Saskatchewan rose by almost 11 per cent, while Alberta saw an increase of 6.5 per cent.

The overall increase came as personal bankruptcies fell by 4.7 per cent. However the number of proposals, where consumers negotiate to repay only a portion of their debt, rose by no less than nine per cent.

Then there is this http://www.edmontonjournal.com/losses+could+industry+study+finds/11066369/story.html

Oil and gas job losses could hit 185,000, industry study finds

#9 Rexx Rock on 05.19.15 at 7:26 pm

Long term rates may go up but I doubt it in Canada. The prime rate will staythe same or go down 0.25% or 0.50% so keep the variable rate as long as the cry wolf.Short those etf that have been going up forever.

It appears unlikely Canadian rates will fall. If they do, we are in a hole. — Garth

#10 Larry on 05.19.15 at 7:30 pm

Great post !
Thank you again.

#11 Keith in Calgary on 05.19.15 at 7:35 pm

http://www.zerohedge.com/news/2015-05-19/10-most-expensive-cities-world

An interesting RE study based upon the metric of cost per SF, using $1MM as your capital, and seeing what size of a place it gets you in world class cities.

No Canadian places on this list either……..but having been to a six of these locations, there is no place in Canada that even comes close to what is on this list.

#12 Peter on 05.19.15 at 7:43 pm

“You’re Pilates instructor is a better source”

Well Said!!

#13 Brian Bernacake on 05.19.15 at 7:50 pm

Would it be within the realm of possibility for rates to rise and a small, calculated QE program to begin again in the USA? or do they only use QE as an alternative to lowering rates?

#14 Shawn on 05.19.15 at 7:50 pm

Buy and Hold

It’s a mathematical fact that buy and hold the index must always beat the average trader of stocks in the same index. Does not beat every individual but must always tier the average (since the index is the average) and beat the average after costs since costs are higher for trading.

#15 Shawn on 05.19.15 at 7:56 pm

SPY up about 500% since the lows of March 9, 2009?

That looks a bit high… I believe other sources show it closer to 300%.

Point is though I must agree that selling on a 5% pullback (stop loss strategy) is really a stop gains strategy. So called Technical analysis (Buy high, sell low) is always a bad strategy in the long term.

The chart is 100% accurate, it’s a total return number since inception in 1993 with dividends reinvested. What you are doing (taking 600% (the 2015 level) and subtracting 100% (the 2009 level) is not accurate. The chart is based on 1993 levels. Rebasing at 2009 levels would indeed yield a different result. — Garth

#16 Paul on 05.19.15 at 8:02 pm

Proposals mean you can not make your payments.
You are BANKRUPT!

#17 jess on 05.19.15 at 8:03 pm

“doomers” that proved to be right

Who Are These
Economists, Anyway?
byJamesK.Galbraith

http://www.nea.org/assets/docs/HE/TA09EconomistGalbraith.pdf

As far back as 2002, Baker wrote:
“If housing prices fall back in line with the overall rate price level, as they have always done in the past, it will eliminate more than $2 trillion in paper wealth and
considerably worsen the recession. The collapse of the housing bubble will also jeopardize the survival of Fannie Mae and Freddie Mac and numerous other finan-
cial institutions.”

This was spot on,by a simple method.It is to identify economic indicators—usually a ratio of two underlying variables—that are departing sharply from their
historical norms, so as to suggest a temporary and unsustainable condition. An example would be the price/earnings ratio in the stock market, say for technology stocks in the late 1990s. More recent analogs include the price/rental ratio in the
housing market, the ratio of housing price changes to inflation, the vacancy rate, and so forth. (The extent of deviation, coupled to the scale of the housing stock,
gives a measure of the scale of the bubble itself something Baker eventually calculated at about eight trillion dollars for housing.)…”

========
http://www.bea.gov/

#18 Sydneysider on 05.19.15 at 8:07 pm

Readers may think prices are bad in Vancouver. But consider this $700K Sydney terrace house on 38 sq m (needs a bit of renovation):

http://www.dailytelegraph.com.au/newslocal/city-east/sydney-real-estate-narrowest-home-on-the-market-expected-to-fetch-upwards-of-700000/story-fngr8h22-1227360122039

#19 Obvious Truth on 05.19.15 at 8:11 pm

There’s no hope if tonight becomes about cats and dogs.

#20 Conrad on 05.19.15 at 8:13 pm

Garth you were so convinced it was going to be June. Now your saying autumn. How many times can people backtrack before they come to the only conclusion that makes sense. rates are not going anywhere for years. If the Fed did move it would quickly backtrack

#21 jerry on 05.19.15 at 8:14 pm

A balanced portfolio is understood. However the weighting mix that reflects retirement versus still actively engaged in the workforce with years of opportunity ahead gets confusing.

So does a retirement portfolio lean towards say 60% bond-income and 40% equities or some other variance to this?

#22 Lotus YVR on 05.19.15 at 8:16 pm

R.W. Emerson Essays: Second Series
Another two quotes…..
“All things swim and glitter. Our life is not so much threatened as our perception. Ghostlike we glide through nature, and should not know our place again.”

” If any of us knew what we were doing, or where we are going, then when we think we best know! We do not know to-day whether we are busy or idle. In times when we thought ourselves indolent, we have afterwards discovered that much was accomplished and much begun in us. “

#23 TCContrarian on 05.19.15 at 8:16 pm

“First, timing the market is a really bad idea. Most DIY investors, and all doomers don’t get this. In truth, nobody knows what’s coming, so the odds of making a correct call are woeful. Worse, in the age of Googlenomics and authoritative-sounding analysis from complete dorks, it’s easy to be led astray. After all, fear sells. And investors who succumb to their emotions usually regret it.”

Too bad there’s no chart showing the average returns of DYI who BUY the FEAR and SELL the complacency (as right now). The VIX has been making higher lows while the S&P 500 at all time highs. I dare to say that I know what’s coming.
I’m now short SPY and QQQ (US ETFs), and long commodities (including Energy).
BUY LOW, SELL HIGH = outsided gains … ALWAYS!

Oh yeah… and I’m listing my house in a week or two in YVR land. Just another version of the SELL HIGH mantra I attempt to employ with ALL my investments.
Garth, I don’t know how you can say “it won’t end well”, re RE in Canada (esp. YVR and GTA) ie. a prediction based on absurd valuations; yet you say you cannot do same with other financial assets. SP500 with P/E ratio ~20, record levels of margin debt reported recently, VIX extremely low: marker that point to an ugly BEAR looming around the corner.

#24 Doug in London on 05.19.15 at 8:24 pm

Well, I’m not a dog person myself, but doubt that means I’m doomed. If a correction comes, it’s a buying opportunity, just like past corrections were. Australia and New Zealand aren’t the only places in the world where Boxing Week sales come during the summer months!

#25 gotta ask the Speedo expert on 05.19.15 at 8:24 pm

I’ve worn my share of Speedos in my life but never had an issue taking them off. Dry or wet.

What is this “peeling” experience you speak off?

You know you’re probably not supposed to wear the Speedo in certain establishments!

FWIW, USD is still a screaming buy here.

#26 Alex G. on 05.19.15 at 8:29 pm

#6 spaceman on 05.19.15 at 7:19 pm

I love dividends, but I have a question, how do you buy prefered shares?
——————

You can either buy some individual preferred shares of blue chip companies (there are many different series for various companies). An example for an RBC preferred series would be stock ticker: RY-B.TO

Better still, buy an ETF that holds preferreds. CPD.TO would be an example of one that holds 197 different positions of Canadian Preferred shares from various industries: http://www.blackrock.com/ca/individual/en/products/239836/ishares-sptsx-canadian-preferred-share-index-fund

or XPF.TO would be another one that holds North American preferreds that holds 506 different positions (some are for CAD hedging): http://www.blackrock.com/ca/individual/en/products/239851/ishares-sptsx-north-american-preferred-stock-index-etf-cadhedged-fund

There are many others but these should provide a decent example what type of other ETFs with preferreds to look for. You can buy all of these and many others through your regular account; the same way you buy any other stock or ETF.

#27 young & foolish on 05.19.15 at 8:30 pm

Good post, thanks Garth. Us young people still need a little re-assurance!

#28 Lotus YVR on 05.19.15 at 8:31 pm

Stay calm……

https://www.youtube.com/watch?v=d-diB65scQU

#29 Ben on 05.19.15 at 8:31 pm

CAD last 5 days: https://ca.finance.yahoo.com/q/bc?s=CADUSD%3DX&t=5d

2% down, not starting this session well either.

Hope all the boomers in their expensive houses are looking forward to dog food being the same price as a steak last week. And all your earning years gone also. Maybe print out your house valuation and eat that instead!

#30 crowdedelevatorfartz on 05.19.15 at 8:48 pm

@#25 gotta ask

No…… I gotta ask

Is this you?

http://www.google.ca/imgres?imgurl=https://davidhsnyder.files.wordpress.com/2014/08/fat-guy-speedo.jpg&imgrefurl=https://davidhsnyder.wordpress.com/page/4/&h=533&w=737&tbnid=TMB2z4p7rZQc4M:&zoom=1&docid=y2oiYnnrHmSPhM&ei=WNlbVf-SA9HSoASM_oKYDg&tbm=isch&ved=0CCcQMygLMAs

There otta be a Law…..

#31 Andrew Woburn on 05.19.15 at 8:53 pm

In some parts of the world, Speedo’s are known as “budgie smugglers”. I assume some people can’t tell the difference between a budgerigar and a cockatoo.

#32 morefromcalgary on 05.19.15 at 8:55 pm

i’m waiting for my insurance settlement payout —likely next year…which is good timing to buy a cheap house, not a $500,000+ of drywall and screws!…and call Garth asking to add me to his list of clients needing a portfolio! (arf!)

#33 Lotus YVR on 05.19.15 at 9:06 pm

And of course we all do need something from the lighter side

https://www.youtube.com/watch?v=d-diB65scQU

https://www.youtube.com/watch?v=V1bFr2SWP1I

https://www.youtube.com/watch?v=mACqcZZwG0k

https://www.youtube.com/watch?v=Oo4OnQpwjkc

#34 Freedom First on 05.19.15 at 9:07 pm

Yes. I remember when mortgage rates hit 20%. People then were buying before rates went higher, and others were taking out 2nd mortgages in the mid twenties to keep/buy their homes. Those were wonderful and very profitable days, for me. Many Boomers went bust at that time. And they still don’t want to talk about it today, but their one asset strategy really destroyed many of them in a lot of different horrific ways.

Today, the same recency, only in the opposite direction, has people believing that, for many crazy assuming reasons, interest rates will never rise. In fact, once again, they have bet the house on it.

Not me. I have always always always, put my Freedom First. Not into slavery. Not to any job, house, or woman. I have been blessed. Girlfriends can come or go, but Freedom is forever.

#35 Ole Doberman on 05.19.15 at 9:08 pm

Gartho – what about the bond market and the heavy government debt? Do you see that cratering?
And what about wars and rumors of wars?

#36 Washed Up Lawyer on 05.19.15 at 9:11 pm

“Get a dog.”
****************************

Months before the 2015 Westminster Kennel Club competition (the 139th), my daughter wanted to buy a Beagle pup. She was researching and contacting breeders throughout BC, AB and SK.

Then Miss P. wins Best in Show and the price of Beagle pups skyrocketed.

Are mongrels the equivalent of a canine ETF?

#37 Lotus YVR on 05.19.15 at 9:12 pm

Well….
Open your mind…

https://www.youtube.com/watch?v=exp6HVNTyZw

https://www.youtube.com/watch?v=d-diB65scQU

#38 crowdedelevatorfartz on 05.19.15 at 9:15 pm

@#112 TurnerNation 5.18.15
Update on thug crime in BC.
The 19 year old stabbed to death in Whistler……..
Three 17 year old youth charged with Manslaughter……

My prediction?
…..and after years in Court…..a slap on the wrist….2 years max…..for taking a life.

#39 devore on 05.19.15 at 9:21 pm

Speaking of doomers, I present: Marc Faber!

2014: Crash will be worse than 1987′s
http://www.cnbc.com/id/101573688

2013: Look out! A 1987-style crash is coming
http://www.cnbc.com/id/100950234

2012: We Could Experience A 1987-Style Crash This Year
http://www.businessinsider.com/marc-faber-1987-crash-2012-5

And right on cue, cause it’s April, Month of Doom(tm):

Signs of an Imminent Market Crash Are Here
https://www.youtube.com/watch?v=U5aMBXLlP0k

#40 DON on 05.19.15 at 9:29 pm

Ray Vasquez on 05.19.15 at 7:13 pm

When is the next recession coming? Usually it happens every 7 years….

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

I think we are still in the midst of the last one?

#41 Smoking Man on 05.19.15 at 9:31 pm

Very sad day, kid that played hockey with my older boy was killed by a drunk driver in Hamilton on Saturday.
Beautiful parents, great kid.

My point is. When the god of the random luck generation picks you. Its a deal.

Shala LA LA LA live for today.

It puts everything in perspective. Money means nothing to those parents now.

That was an accident, wars, killings are deliberate, nothing pisses of Nectonites than watching little men. Tiny men wanting to send other peoples kids to fight and die in battles that a phone call and some mutual endearing bullshit would solve.

I’ve contacted the mother ship… No, boss humans are not ready for the gift of interstellar technology.

They’re not ready.

Rest in peace Ryan…

#42 Bill Grable on 05.19.15 at 9:33 pm

There are a coterie that seem to make their daily bread, scaring the pants off us ‘civilians’.
I think today’s post puts a knife in the ribs of scaremongers and worse.

We are all concerned that we have enough for our daily bread, and having Garth keeping us calm and on a steady course is appreciated.

This must be a ton of work – thanks, Garth.

#43 Nemesis on 05.19.15 at 9:33 pm

#SpeedosAreForSissies,Or… #EverSeeADogFishPlayFetch?…

http://youtu.be/g7r2cBgr0rs

#44 Tony on 05.19.15 at 9:41 pm

Re: #23 TCContrarian on 05.19.15 at 8:16 pm

Very rarely do commodities rally when the stock market crashes. In essence you’re betting against yourself with your bet on commodities.

#45 Rowland McDermott on 05.19.15 at 9:49 pm

Garth, Tell me..what DOES end well anyways?

#46 Cash is King on 05.19.15 at 9:50 pm

This is what I fail to understand.

“For example, when equity markets fall during a correction, the price of bonds will rise – as money flows to safer havens”

If we are not supposed to time the market, where does all this money come from that “flows to safer havens?” Sounds like a great many DIY are timing the market or worse, a great many fund managers.

Where does all this money come from?

#47 Shawn on 05.19.15 at 9:53 pm

35 Dommers now and Dommers then

Ole Doberman on 05.19.15 at 9:08 pm

Gartho – what about the bond market and the heavy government debt? Do you see that cratering?
And what about wars and rumors of wars?

***************************************
It’s gotta be what? at least 250 years since the above three questions were first asked. People have worried about these three each and every day for the last 250 years or more. And most of the time the markets marched up in an irregular but sure fashion. And sometimes the fear came true, but eventually the markets rose again.

#48 dogman01 on 05.19.15 at 9:53 pm

The Property Owning Democracy
The Ascent of Money 2008 Episode 5 Safe as Houses

https://www.youtube.com/watch?v=BUywXLdNi1o

Worth a watch if you like history and perspective.

Story of Calgary, first of many more?

http://business.financialpost.com/news/energy/oil-downturn-forcing-alberta-homeowners-into-tough-decisions?__lsa=5605-ac6d

#49 Shawn on 05.19.15 at 9:53 pm

Doomers, that is but dommers is close enough

#50 Hot Albertan Money on 05.19.15 at 9:54 pm

His speech yesterday was chock full of ponies and moonbeams, saying the economy is on the path to greatness, and we arrive in 2016. “We project it will take 18 months or so to get there.”

So does that mean we should be upping our Canadian exposure when the BoC starts raising again?

#51 Andrew Woburn on 05.19.15 at 10:01 pm

17 jess on 05.19.15 at 8:03 pm
=========

Thanks for the great post by James Galbraith. As some of us will remember, his dad was John Kenneth Galbraith, a reknowned Harvard economist who was a key advisor to President John Kennedy. He was an Ontario boy who was a principal architect of “Camelot”. I met him once at a university seminar and realized that the term “towering intellect” counted double for him since, at 6’8”, he could have easily played for the NBA. He was his own ivory tower.

#52 joblo on 05.19.15 at 10:04 pm

“The latest jobs numbers (223,000 more of them last month)”

Similiar to Cuba’s 2 bus drivers?
One drives there the other drives back, presto 2 jobs.

The jobless rate has halved in six years. Sure better than us. — Garth

#53 GTA Observer on 05.19.15 at 10:13 pm

#16 Paul: Proposals mean you can not make your payments. You are BANKRUPT!


Given my own good credit history & perplexity about this debt situation, I had to look up what insolvency means. Insolvency = can’t satisfy debts (liabilities greater than assets – balance sheet insolvency; just don’t have cash on hand – cash flow insolvency; hope I got this right). Bankruptcy = told the court you can’t pay your bills and they give you protection from your creditors. Insolvency can lead to the legal status of bankruptcy, but in pre-bankrupt insolvency, there’s still some hope of a prayer that you can come up with some money to pay those bills (new job, inheritance, lottery, swindle) or work with your creditors on consumer proposals inc. reduced payment schedules, etc.

So there you go. Good thing they abolished debtors’ prison.

#54 LLewelyn on 05.19.15 at 10:13 pm

I would be very careful about trying to predict the future of the Canadian economy. We might have natural resources but we placed these resources in the hands of strangers who are far more concerned with the bottom line of their company than the welfare of Canadian of citizens.

I just returned from a three week visit to Calgary where I was told at least 100 times that oil will bounce back to $100 a barrel by 2016 and that all will be well once again. The confidence of all my friends in Calgary was fueled by dozens of corporate cheerleaders who refused to consider the possibility that Canada in general, and Alberta in particular, might be in serious trouble.

A balanced investment portfolio might make life a little easier for Canadians that don’t rely on employment income but hundeds of thousands of Canadians are facing the very real possibility of unemployment or underemployment if we don’t take control of our destiny.

I realize this is not a social blog but I seems a bit short sighted to keep waving the stock market pom poms in the face of an economic impending crisis.

#55 Nip the gin on 05.19.15 at 10:16 pm

Sounds like teen spirit

#56 Hot Albertan Money on 05.19.15 at 10:18 pm

Garth,

Also about the job numbers. While awesome, they always get revised.

See the bottom of this page…

http://www.bls.gov/news.release/empsit.nr0.htm

Example: March was revised from 126,000 to 85,000…a 41k drop

#57 Shawn on 05.19.15 at 10:25 pm

All’s Well that Never Ends?

#45 Rowland McDermott on 05.19.15 at 9:49 pm

Garth, Tell me… what DOES end well anyways?

*******************************************
Rowland, tell me when it comes to markets and houses what does END anyways?

Last I heard, markets go on forever.

#58 kommykim on 05.19.15 at 10:33 pm

RE: #16 Paul on 05.19.15 at 8:02 pm
Proposals mean you can not make your payments.
You are BANKRUPT!

No it doesn’t. You get to keep your house and “stuff”:
http://www.bankruptcy-canada.ca/what-is-a-consumer-proposal

#59 Herf on 05.19.15 at 10:36 pm

#3 Sebee

“I don’t like dogs. Is that wrong?”

Parroting Foghorn Leghorn:

https://www.youtube.com/watch?v=_UXLWkr5VMM ,

there’s something “yeee-eee” about a person who doesn’t like dogs.

#60 Blackadder on 05.19.15 at 10:40 pm

Nothing but a game of fear and greed on this blog. Over and over again.

#61 Paul on 05.19.15 at 10:45 pm

# 53 GTA Observer
It!s a proposal if they owe you the money, It’s bankruptcy if they owe it tome. Lol

#62 Ontario's Left Coast on 05.19.15 at 11:08 pm

#34 Freedom First

Another blog post and another comment with FF saying exactly the same thing as every other night! We get it… You lead a sad, lonely existence and comfort yourself by repeating how happy and financially secure you are. Guess what? I don’t buy it. If it were true, you wouldn’t have to keep telling everyone the same transparent lie night after night. Stop over-compensating and change the channel, dude.

#63 gut check on 05.19.15 at 11:11 pm

I rarely ever drink anymore, but I did tonight. :) So for fun and only for fun, I’m gonna make some predictions.

At the first Bank of Canada announcement after Stephen Harper illegitimately wins the next election (which will all come out later as it kinda did this time but no one cared anymore) we will see…..

a rate increase.

THAT’s RIGHT!
it’ll happen immediately following the election.
And everyone will sh!t their pants and they’ll all whine and cry that they shouldn’t have voted for him and the “opposition” will yammer on about how they would have done things differently but it’s too late now, isn’t it??? (they’ll be lying so please, don’t kick yourselves no matter who you voted for)

At that point oil will be at lows, too. Not the lowest of the lows, but low.
USD CAD will be around 1.30 and heading for 1.35

And then…..
to save us all….
we’ll go to war.

Not over here, of course – over here we’ll have terrible wet weather and darkness for too many hours per day and we’ll all pray for spring/watch hockey/prayforspring /watchhockeypryfrsprnwtchhckycomplain
and
people’s kids will grow up thinking that this is normal

but it isn’t normal.
it isn’t normal to not have privacy & have no savings & buy GMO carrots that turn spotty black in a week and never really ever know how much heat will cost or what roads will be open that day and which company you’re going to have to fight over unjustified ‘accidental’ fees added to your bill that month or whether or not the bank might send you a note saying they are charging you for your deposits or if the health system is going to delist your dialysis/bonesetting/blood tests just because you’re not over 65 or whatever.

But also people will start to understand that the TPP and other BIG CORPORATE shenanigans truly ARE horrifically bad for real people and that hey, maybe ‘corporate personhood’ is just a phrase but that the REAL people behind the paper might actually need to go to jail. Real jail. and they’ll suddenly understand the ultimate truth that no one seems to be sussing at the moment:

productivity is anti-human.
It wasn’t, back in the day.
But today it is. And tomorrow it will be moreso.
Shareholders will demand it… right up until they demand the opposite.

yeah. goodnight.
things are weird

#64 Retired Boomer - WI on 05.19.15 at 11:38 pm

#63 GUT CHECK

Rather interesting post. You might well be correct in all of it!

#65 omg the original on 05.19.15 at 11:44 pm

If you bailed every time markets fell 5% and then waited for them to stabilize, you made a gain of just over 200% in the last two decades.
—————————–

Of course people that followed this “strategy” would not be disciplined – they would wait to long to get out and not get back in until most of the gains had been made. Likely they would actually be net down.

Plus every time they are in and out they are paying capital gains taxes, unless all they have are RRSPs and TFSA.

(and if they do not have enough net worth to have money outside RRSPs and TFSA then they should not be “trading” at all)

#66 A. Hitomi on 05.19.15 at 11:51 pm

1.Fidelity found that clients with the best performance are the ones who completely forgot their account. 2. From 1970s to now, a portfolio with US stocks, global stocks, commodities, REITS, Gov Bonds, the worst drawdown was about 40%.

It is proven that Buy & Hold and Vanguard style is a good strategy for average investor, If you are a long term investor > 15 years.

We know that the stock market avg yearly returns have been 10% in the last thirty years. However, the average investor only get 3% a year due to their chasing returns and crab mentality. It means buy high sell low…. psychology and stick to your plan are the key things ….. allocations are somewhat less important in long term as long as your portfolio is diversified.

#67 omg the original on 05.19.15 at 11:53 pm

THE FACE OF COWTOWN

Was talking to my nephew’s girlfriend at the family BBQ on Monday.

She is a professional with a big oil/gas producer in Calgary. 5 years experience. Just bought a nice house last year.

Got laid off in March with an OK severance package. Figures she has enough to last 6 months without work. (says she never would collect Pogey – the foolish pride of youth)

Of the people she went to university with that stayed in Calgary, she figures 1/2 have been laid off.

She says its pretty much hopeless right now to find a job in Calgary in the oil/gas industry – any vacancies are being cut or filled from within.

#68 omg the original on 05.20.15 at 12:04 am

Hot Albertan Money on 05.19.15 at 10:18 pm

Also about the job numbers. While awesome, they always get revised.

Example: March was revised from 126,000 to 85,000…a 41k drop
————————-

So you are right that they ALWAYS GET REVISED – all government macro numbers get revised – but not always DOWN, as you seem to imply.

For example if you were to check December’s report you would see that October and November were REVISED UP a total of 50,000.

http://www.bls.gov/news.release/archives/empsit_01092015.pdf

I would guess that over the course of a year it likely balances out.

#69 omg the original on 05.20.15 at 12:13 am

INTEREST RATES ON THE RISE

Lets not get too worked up about rising interest rates. From where we are now a 1 percent increase will just get us back to “ridiculously ultra-super low” rates as opposed to “ridiculous-super-ultra-super low” rates.

To get back to where rates were in 2006 we will need about 5 years of moderate quarterly rate increases.

Of course, if inflation or the economy gets steamrolling “moderate” may go out the door. But chances of that happening anytime soon are low.

#70 Cici on 05.20.15 at 12:28 am

Cutest photo and blog ever!

#71 Cici on 05.20.15 at 12:34 am

#63 gut check

You just made me laugh and cry almost simultaneously.

Time to get some zzzzzzzzzzzzs.

#72 cramar on 05.20.15 at 12:40 am

#36 Washed Up Lawyer on 05.19.15 at 9:11 pm
“Get a dog.”
****************************

Months before the 2015 Westminster Kennel Club competition (the 139th), my daughter wanted to buy a Beagle pup. She was researching and contacting breeders throughout BC, AB and SK.

Then Miss P. wins Best in Show and the price of Beagle pups skyrocketed.

Are mongrels the equivalent of a canine ETF?

—————–

It seems that many people we’ve met have gotten rescue dogs and never regretted it. That goes for us to. Just go to an animal shelter, humane society, dog pound, and the right dog will chose you. You will know that you found your pet-friend for life. Beats pure-bred every time!

#73 Batt519 on 05.20.15 at 12:42 am

What happened to the June US rate hike? I will repeat again like I did a few months ago: There will be a new QE before there is an American rate hike.
#54HAM-spot on.
#63GC IF Canadian rates were to rise while American rates remain unchanged the C$ will not fall against US$ Drinking is bad for you.
HVU is my next long target.

#74 kommykim on 05.20.15 at 12:57 am

RE: #65 omg the original on 05.19.15 at 11:44 pm
Likely they would actually be net down.
Plus every time they are in and out they are paying capital gains taxes, unless all they have are RRSPs and TFSA.

Not unless they were REALLY bad at doing their taxes for their taxable account. The capital losses should offset any gains if they are net losers.

#75 Godth on 05.20.15 at 1:15 am

#60 Blackadder on 05.19.15 at 10:40 pm

Welcome to the game of hyper homo economis, or as others have observed – you’re on your own to be a neo-liberal agent. Compete with everyone, trust no one. You’re numero uno.
https://www.youtube.com/watch?v=xET-OMTYlcI

#76 nonplused on 05.20.15 at 1:22 am

I think we get locusts.

And skip the Speedos, go buff. Especially if your wife has her girlfriend over. Just to be a dork.

#77 prices still rising in Toronto... on 05.20.15 at 1:22 am

prices still rising in Toronto… where are soooo many buyers coming from, and no offence, lots of pregnant women and strollers at the showings…..

have we multiplicated overnight this winter, and I wasn’t briefed or WHAT!!

Who has stats….??? GEN-X :) could you please go back twitting, facebooking or playing some fun of the little devices until at least we can find a house under 1.2 mil….

PLEASE…?

#78 Kreditanstalt on 05.20.15 at 1:32 am

“In truth, nobody knows what’s coming”

Well, the “doomers” DO know what’s coming. It’s baked in the cake. Ponzis inevitably crash and burn. Debtors fry. Frugality and perspicacity get rewarded.

They just don’t have the timing of it, having underestimated the lengths, the extend-and-pretend desperation, of governments.

But…GRAVITY. It’s a bugger.

#79 #41 Smoking Man - let me say on 05.20.15 at 1:32 am

#41 Smoking Man – let me say:

1. we should all commit to never drive impaired. you know it. clearly. there’s no blurred line here. capital sentence????

2. we as parents try to minimize at maximum the time children have to be in cars…. I mean, come-on, leave them home… take them to the closest parks, rebuild the neighbourhoods spirit, well of course – unless you’re heading to wasaga beach…. say a prayer

3. if anyone has any other ideas…. like life-in-prison at 1st offence for drunk +
OR aggressive drivers???? and capital punishment if they kill

4. Of course, the ones obstructing the traffic should be fined into bankruptcy as well. Road for QUALIFIED drivers. Anybody else, get off.

5. suggestions?

#80 Percy on 05.20.15 at 1:38 am

I’m thinking of buying a $50,000 dollar house and renting it out for $6-700 a month. Is this a good investment?

#81 Suede on 05.20.15 at 1:56 am

Bloomberg terminals say US rate hike Jan 2016.

I can’t even picture a canadian rate hike. It will send Vancouver RE in the area further than the stratosphere.

#82 Vangrrl on 05.20.15 at 2:00 am

‘That’s easy. Come here. And get a dog.’
:)
Life with a dog makes it all so much better.

#83 Entrepreneur on 05.20.15 at 2:32 am

“But politics is about getting elected, not getting it right.” Does not sit well with me and this should be changed. If “about getting elected” is the main focus then the system is wrong. It needs correcting to at least try to make “it right.” We might be on a better path.

As for #36 Detalmis…sounds like a young person…a little (or more) insensitive but opened up another topic, assisted suicide (not a nice topic). My mom had an aging ailment and believe me, I do not want to go through it. We both agreed on no tubes. People having no money, savings, how are they going to pay the expense. They can’t. Instead of banning him, make him explain or apologize.

R.I.P. to all the moms and dads.

#84 Hh on 05.20.15 at 2:46 am

Ignore the GDP q1 and q2 print if bad however. But if good … Include in discussion.

#85 Freedom First on 05.20.15 at 2:53 am

#62 Ontario’s Left Coast

Yes, maybe you’re right. It’s lonely at the top.

People like you are why I keep a low profile in my life. Miserable people like you just bleed envy and jealousy over where I am at in my life. I learned that years ago. Live and let live.

#86 Davy Dogs on 05.20.15 at 3:04 am

I buy stocks every month , 12 months a year , every year, regardless of the market. I have dividend cash flow I can’t spend and must be placed. When I have a big winner I don’t sell, I just buy more of the stocks that haven’t popped yet and pay good divvies .

I don’t index I don’t balance. I figure I don’t want to own the dogs in an ETF. I don’t want dead money, and no matter what the market is doing the dividend income keeps coming in. I buy only the best companies in the five major sectors. I own a max of 50 stocks. Only buy a new one when a take over occurs, like Tims did recently. I bought the acquirer. See the best stocks in the headlines consistently, those are the ones I own.

Down markets are a great time to make out like a bandit. I don’t care if TD Bank keeps going up over time I keep buying. I have built a multi million dollar portfolio this way over 25 years and no longer work except to watch the divvies flowing in and reinvesting in the companies I already own..so sweet and simple it gives the advisors nightmares. .

#87 Julia on 05.20.15 at 6:02 am

#58 kommykim

RE: #16 Paul on 05.19.15 at 8:02 pm
“Proposals mean you can not make your payments.
You are BANKRUPT!

No it doesn’t. You get to keep your house and “stuff”:
http://www.bankruptcy-canada.ca/what-is-a-consumer-proposal

You can make a proposal to your creditors, usually a portion of your debt on a payment plan. A portion of the debt only, so creditors a compromised, because you cannot pay in full.
If that proposal is voted down by the creditors, you are bankrupt. If it is approved and you fail to make you payments and meet the conditions, you are bankrupt.
If you successfully complete the payments and meet all the conditions, you will be discharged after a period of time and you can start all over again.

You can keep your house, provided you can make the payments. It is very unlikely that you will be forced to sell your house, especially if you have a family.

#88 ANON on 05.20.15 at 6:54 am

Keep calm and no Big D?
We must be getting really close to change.

#89 pBrasseur on 05.20.15 at 7:06 am

«Your Pilates instructor is a better source.»

Lovely line!

To learn how to behave regarding investement you could do much worse than Warren Buffet

For getting a sense of where the economy is going I found that this guy (a real economist) is pretty good:

http://scottgrannis.blogspot.ca/

At least he helped me getting through the GFC without panicking.

#90 pBrasseur on 05.20.15 at 7:19 am

Rising rates are good for stocks when they indicate improving economic conditions. They are bad if they precede a recession.

Presently the former condition apply.

Sure there will be volatility along the way, but it’s no big deal, it’s the speculators scrambling to adjust their positions. If you’re one of them good luck, otherwise ignore them.

Value investing is the only true way of investing, anything else is based on assumptions of what other people will like to buy (or sell), it’s called speculation.

#91 pBrasseur on 05.20.15 at 7:28 am

@Davy Dogs

«Down markets are a great time to make out like a bandit.»

True. But even if you are not buying during such times if you own great companies they will be doing the buying for you. Case in point: Wells Fargo snached Wachovia during the GFC.

https://www.wellsfargo.com/about/corporate/wachovia

#92 Deb on 05.20.15 at 7:28 am

If I have a small lump sum of cash to invest, sometimes I think of those who invested heavily in equities the day before Black Monday, 1987. The result was not a calming one.

I try to take emotion out of the picture by making a short-term plan and sticking to it, no matter what happens in the markets. I divide my lump sum in half, or thirds, and invest on predetermined dates, such as the first of, or the middle of the month. This way, I can spread out the risk over a reasonable period of time. I do not allow market activity or news events to influence my plan. This is known to most people as dollar-cost-averaging, and in my case, I have found it to be helpful in controlling the influence of emotions on short-term investment decision-making.

The fact Black Monday has not reoccurred for almost 30 years makes this a rather bizarre fear. In any case, markets rebounded very quickly meaning those who did not sell and snoozed their way through lost nothing. — Garth

#93 earthboundmisfit on 05.20.15 at 7:42 am

@32 morefromcalgary
Hope you’ve factored in the 40% your lawyer is going to keep for him/herself.

#94 Sebee on 05.20.15 at 7:49 am

#59 Herf 

I have reasons. I don’t like the drool and looking at their butts. My littlest one saw a Pug and yelled out, Daddy that doggy has only one eye! I chuckle whenever I see the face people make when their bagged wrapped hand touches a warm pile of doodoo, but I respect their commitment. There are dog owners who don’t scoop and leave it all over parks where people play – and I don’t like them too. I can see myself getting a vizsla into my older years maybe, but I think Louis CK is right. It’s only going to die before you do and bumb you out.

#95 Linda on 05.20.15 at 8:00 am

Regarding interest rates rising – in Canada, I predict no significant rate rise whatsoever until AFTER the federal election. Make no mistake, the Harper government is going to do everything it can to ensure the voters check off that PC box come the election. Once the election is over, a significant rate increase will follow unless the rates in the USA have not increased enough to warrant the BoC following suit.

#96 fancy_pants on 05.20.15 at 8:02 am

Rate hike warnings have been “just on the horizon” for half a decade now. If you haven’t figured out by now it is just a mirage, sorry on you. They cried wolf long enough so that only the sideline desperate hopefuls and fear mongers listen. a quarter to half a percent between friends doesn’t count.

If you think we will ever see the early 80’s again, sorry on you again. QE is the closest thing to a reset button, and that game rewards debtors.

#97 Ret on 05.20.15 at 8:34 am

#67
Can you collect pogey and get a severance? Probably not.

Pay off all bills and prepay some of the municipal taxes and utilities with severance. Immediately apply for welfare. She has to do what she has to do. We don’t judge here.

Union workers often apply for welfare the minute they go on strike if they are single or the wife does not work.

#98 Investorz on 05.20.15 at 8:49 am

We often say that houses are expensive and they are, no doubt, but to be fair…

TSX valuation is 17.5x earnings.
SP500 is 19.5x earnings.

Not cheap. So even if I invest, I don’t exactly tell the world the stock market is a deal relative to a house. Some stocks seem to be, at 12x earnings and dividends of 3% plus, but the average, not so much.

I wouldn’t be surprise stocks ‘correct’ faster and harder than house prices, even house prices in the most hot markets. You have to be ok with that, and have the stomach to hold on if that happens. Then, stop worrying.

(a) A balanced portfolio does not equal the stock market. In fact US or Canadian large cap stocks are a minority of it. (b) Look at this chart. Relax. — Garth

#99 fleabitten monkey on 05.20.15 at 8:53 am

saw philip cross from the fraser institute on bnn this morning talking about how household debt levels in canada are overblown. He said in canada today if you want to buy a house the bank requires 20 pct downpayment??!!! Where does he get this from? Was it just too early for me or did I take this out of context. how can they broadcast something like this?

#100 r on 05.20.15 at 8:54 am

Very few comments ? What going on with Blog Dogs?

#101 Toronto_CA on 05.20.15 at 8:57 am

I know what Garth says is totally true…but part of me so badly wants to “sell in May and go away” this year. I guess it also would be bad to lower my equity exposures by about 25% with a change of asset mix? Yeah, I thought as much.

#102 Rational Optimist on 05.20.15 at 9:57 am

95 Linda on 05.20.15 at 8:00 am

“Regarding interest rates rising – in Canada, I predict no significant rate rise whatsoever until AFTER the federal election. Make no mistake, the Harper government is going to do everything it can to ensure the voters check off that PC box come the election.”

That seems like an extremely safe prediction given that the federal election is less than five months away, and there are only three rate announcements scheduled for between now and then. Unless you maybe would have counted a quarter point as significant. The reason rates won’t rise “significantly” between now and October has nothing to do with political interference with the Bank of Canada, though.

By the way, the PC party has not existed federally for some time (at least, not the one you are thinking of).

#103 saskatoon on 05.20.15 at 10:29 am

garth,

what about FULL-TIME u.s. employment positions LOST in april?

hmmmmm?

yeah, that’s what i thought.

#104 april on 05.20.15 at 10:45 am

Bob Rennie wants more density in Vancouver, and more laneway houses to have enough supply for all the people moving to Van. I take whatever he says with a grain of salt since he’s a real estate marketer.

#105 MF on 05.20.15 at 11:00 am

#86 Davy Dogs

This is awesome and is where I want to be when I am older.

Can I pick your brain a bit (if you don’t mind)?

What do you look at when buying stocks? I am in the same position as you in that I have money left over every month to invest.

However, everything I have read so far says index investing out performs individual stocks. As a result I constructed my two month old portfolio that way. All etf’s. I understand you are supposed to rebalance once a year or so but I feel the money I have sitting around every month is idle. Like right now I have a couple thousand ready to be invested but I am not sure what to do with it. Last time I checked my portfolio it was down a thousand after a month, making it seem too early to tell where the winners are as of yet.

Also, do you have any safe stuff in your portfolio to hedge against market volitility at all?

Gotta learn from the experienced.

MF

#106 Mister Obvious on 05.20.15 at 11:05 am

#104 april

“Bob Rennie wants more density in Vancouver…”
————————–

We folks is powerful dense as it stands.

#107 Herb on 05.20.15 at 11:17 am

#99 fleabitten monkey,

if you think of the Fraser Institute as a Conservative spin tank rather than a think tank, you’ll have fewer problems with its pronouncements.

#108 Nemesis on 05.20.15 at 11:22 am

#YouCan’tWriteThisStuff,Or… #It’sBetterInBC… #No,Really!…

#No,No,PleaseNo!… #Don’tSlapMyWristsAgain!…

[PentictonHerals] – Penticton lawyer Charles Albas, father of local CPC MP Dan Albas, disciplined for writing himself, wife into client’s wills

http://www.pentictonherald.ca/news/article_68ea3c5c-fe7f-11e4-8a67-4b1aa41b8d93.html

[CBC] – Victoria Realtor faces suspension for helping mentally ill woman buy leaky condo

…The Realtor claims a tent will be the only property he can afford if he loses his appeal of one of the longest suspensions ever ordered by the real estate council: five years for conduct unbecoming.

The 69-year-old allegedly let a mentally ill client waive a property inspection to buy a leaky condo. The condo was listed by Parsons’s son.

It’s not as bad as it sounds, he says.”…

http://www.cbc.ca/news/canada/british-columbia/james-sidney-parsons-victoria-realtor-accused-of-conduct-unbecoming-1.3079354

[NoteToGT: Strictly between the two of us, I’d simply love to be in the room the next time Stockwell Day’s protege Albas Jr. attends the Parliamentary Standing Committee on Justice and Human Rights.]

#109 Vamanos Pest on 05.20.15 at 11:36 am

Having taken Garth’s advice years ago I can say a few things about it:
1-It’s boring. You don’t have anything to cheer for on BNN because you’re diversified. You don’t need to look at technicals or pay attention to GDP, because you don’t time the market.
2-It frees up time. There’s no point in looking at a companies financials, or doing technical analysis on the Hang Seng, and you’ll not give two craps about the Peso. So you’ll do things like exercise, or have a glass of wine with your wife, or read a Lee Child book, or whatever your thing is.
3-You make a $h!t-ton of money. Ok, I jumped into this about 2 years into a long term bull market (just after 2011 debt ceiling thing). I actually giggle at how much growth I see every time I open a statement (I actually still get mailed paper statements just for that experience).
4-You get to read comments on this blog from a new perspective. I read people disagreeing with Garth and shake my head, because I know that this is not some abstract theoretical -“we’ll never really know”- type of thing. It’s an empiric fact.

And I have the investment account to prove it.

#110 Mike T. on 05.20.15 at 11:37 am

For the second time in 2 years the condo I rent is foreclosed on. (Okanagan Central)

I was in a post last year because of this!

Here I am again!

Condos, at least in my experiences, are not a good investment.

They should not be called investments at all.

#111 Nemesis on 05.20.15 at 11:40 am

#BonusFun,Or… #TheGreatDrainRobbery… #ItWasThePlumberWotDoneIt…

[Telegraph] – Plumber with pilot’s licence arrested over Hatton Garden heist – Hatton Garden raid: Hugh Doyle, a 48-year-old plumber from Enfield, is among the nine men held

…” She said: “Everyone knows him. The local pub knows him very well. He was not a bad man, he was a helpful person always willing to lend a hand…

…Another neighbour, who gave her name as Theresa added: “We had him here in the house to do a plumbing job up in the loft. But it wasn’t very well done. The water started coming through.”…

http://www.telegraph.co.uk/news/uknews/crime/11617620/Plumber-with-pilots-licence-arrested-over-Hatton-Garden-heist.html

#112 Armando on 05.20.15 at 11:53 am

It is generally true as Garth claims that the average investor should not try to time the market, as they typically do a very poor job of it. Particularly because they don’t use objective back tested rules to enter and exit – instead they use subjective “analysis” of either their own making or taken from some bogus website. However, it is not true that timing “doesn’t work”. As Meb Faber (http://mebfaber.com/timing-model) and others have pointed out, using something as simple as a 10 or 12 month Moving Average to time the market would have outperformed Buy & Hold over full market cycles, if not on an absolute return basis, then certainly on a Risk Adjusted Basis. Now obviously we can’t all time the market successfully, as someone has to hold stocks at all times – even when they are tanking. Market Timing also takes patience and steadfastness, both of which are in short supply among the typical investor – which is probably why simple Trend Following approaches such Faber’s continue to work….

#113 None on 05.20.15 at 12:29 pm

#34 Freedom First on 05.19.15 at 9:07 pm:

Man, your posts always read like this:

“I have done so awesome! Everyone is stupid but me! I make so much money on my investments! Relationships are for suckers, women are simply objects to use and toss aside! I ALWAYS put my FREEDOM FIRST YYYYEEEAAAHHH!”

Repeat as needed.

#114 TurnerNation on 05.20.15 at 12:51 pm

XRE and ZRE are getting options listed on them. If one is into hedging.

#115 Westcdn on 05.20.15 at 1:14 pm

My musings today. I decided to leave the OAS stalking horse alone – it was nearly beaten to death earlier.

I was encouraged by a couple of articles that maybe the US will back down from trying to beat Russia into submission. The first link is the Russian source and the second is the American source.
http://thesaker.is/yet-another-huge-diplomatic-victory-for-russia/

http://davidstockmanscontracorner.com/the-adults-are-back-kerry-throws-in-the-towel-on-ukraine/
Hopefully the confrontation can start to wind down and diplomacy rather than nukes will settle differences. Interestingly, a few weeks earlier, Chretien met Putin – coincidence? http://www.macleans.ca/politics/worldpolitics/chretien-meets-putin-in-moscow-in-face-of-harper-isolation-report/ Harper may some serious backtracking to do.

It looks to me Harper wants to follow Mulroney’s footsteps and secure some juicy stateside Board of Director appointments. He is certainly trying to be thought of warmly in Washington, DC. Now he is going to join Obama’s green crusade with the announcement of a greenhouse gas emission reduction initiative.

Poor Alberta, I can feel the noose tightening. It is a major emitter, our 3 largest provinces have carbon cap & trade policies and the Liberals will likely form a minority government. Now let me think. Who has the largest carbon credits to sell to Alberta under a national carbon cap & trade system? I don’t like the picture. Furthermore, since I think crude is going to oversupplied (for years?), I predict the Oilsand producers will be see production fall in 2016 as the capex cutbacks and negative cashflows begin to bite. I expect droves of executive retirements and they won’t be missed for long.

I see Canada won a meat labeling World Trade Organization ruling. I guess the Americans were concerned about mad cow disease. That will teach them not to mess with us and play fair. Our fearless leaders want retaliatory tariffs as compensation. Great, my cost of living just went up. It is getting tougher to be an Albertan taxpayer.

#116 waiting on the westcoast on 05.20.15 at 1:16 pm

(a) A balanced portfolio does not equal the stock market. In fact US or Canadian large cap stocks are a minority of it. (b) Look at this chart. Relax. — Garth

Wow – live the S&P peak on May 2009 at ~123x due to earnings being so low in the GFC…. If you based it strictly on the number, you should sell (even as the process fell with those earnings). Of course, being patient and letting your balanced portfolio do is thing, earnings eventually rose as did stock prices…

#117 HD on 05.20.15 at 1:18 pm

#105 MF on 05.20.15 at 11:00 am

Awwww young Jedi….the future looks so promising for you. But, ready you are not yet to be a Master Jedi ;)

Allow me to throw in my 2 cents for what it is worth.

Individual stocks investing is very tempting but this strategy is much more hands on. You have to be prudent. Sure, blue chips are usually a safe bet but it is still risky. If the couch potato approach is already causing some ‘stress’, I would consider carefully if I were you.

You rightly point out that index investing will most likely be a better option for a retail investor. That is good to keep in mind.

I personally keep 90% of my portfolio ‘couch potato’ and 10% of it is individual stocks (buy and hold strategy). That is working well for me.

Or you can use Garth’s rule of thumb: Never buy individual stocks unless you have a 7 figure portfolio. Reasonable advice.

As for you cash ‘sitting around’ problem. Have you ever thought about adding a margin account? Not sure if your holdings are all in registered accounts but if they are not, that could be a good option. Just borrow enough to match your cash flow.

Example: If you have 2k sitting around and you know that in 2-3 months you ll be able to save another 2K. Just make a lump sum investment of 4K using the margin account and let the cash flow refund the account. Sure you pay a little interest (tax deductible) but the benefits of being invested right away offsets it especially if you refund the account quickly. Your cash will never sit idle.

2nd option if you don’t have a margin account. Use a line of credit.

2 key points: Borrow just enough to match the anticipate cash flow, no more. And refund the account as quickly as possible. Wash, rinse, repeat.

Admittedly, that requires discipline but you should be fine, you are a Master Jedi in training.

Just a whisper, I hear it in my Ghost.

Best,

HD

#118 Holy Crap Wheres The Tylenol on 05.20.15 at 1:21 pm

There is no apocalypse coming. No 2008 remix. No bank failures, bail-ins, currency crash, deflation, depression or locusts. But there will be dips and dives – moments when you need reassurance and unconditional love.

That’s easy. Come here. And get a dog.
_____________________________________
Hell Garth you’ve spoiled my whole year! I was building a bomb shelter. Well I’m still ready if the Zombie Apocalypse is coming.

Wise. I did not mention zombies. — Garth

#119 Holy Crap Wheres The Tylenol on 05.20.15 at 1:25 pm

Diversification is the best way of spreading your investments out. Its old school, slow and steady but you are correct. Some guys are all in poker style. Some win big and most lose big!

#120 Retired Boomer - WI on 05.20.15 at 1:25 pm

#109 Vamanos Pest

You are completely correct. I also have the same wonderful experiences.

#34 FREEDOM FIRST

You have told them how to live, showed them what to do.
Idiots mock, the smart are changing their ways to a better future.

As stated by others, you really can’t fix stupid, as long as stupid wishes to remain so.

The longest journey still start with a single step.

Some of us have taken that step, whether yesterday, last year, or last century.

#121 Alberta is FINISHED on 05.20.15 at 1:26 pm

When you vote CONservatives you vote for economic ruin. Alberta you got what you voted. Sure Alberta should have a TRILLION Dollars for a rainy day but CONservatives spent, wasted and stole Alberta future away.

http://www.cbc.ca/news/canada/calgary/oilpatch-could-lose-185-000-jobs-says-report-1.3080427

#122 Rational Optimist on 05.20.15 at 1:27 pm

109 Vamanos Pest on 05.20.15 at 11:36 am

“You make a $h!t-ton of money. Ok, I jumped into this about 2 years into a long term bull market (just after 2011 debt ceiling thing). I actually giggle at how much growth I see every time I open a statement (I actually still get mailed paper statements just for that experience).”

This is concerning to me, because I’m in a similar situation: my contributions to my savings started to speed up three or four years ago, so most of the money I have contributed has been into the bull market. I don’t check monthly, but when I do check I expect to- and do- see growth from whenever I last checked. It’s elating, obviously. But for those of us who are excited about having made a “shit ton of money” in two or three years, how can we know for sure we will not be overcome when we stop seeing that for a while? How can we be sure we won’t make stupid decisions when the giggly experiences are much fewer and further between?

#123 Davy Dogs on 05.20.15 at 1:29 pm

#105 MF

“However, everything I have read so far says index investing out performs individual stocks. As a result I constructed my two month old portfolio that way. All etf’s. I understand you are supposed to rebalance once a year or so but I feel the money I have sitting around every month is idle. Like right now I have a couple thousand ready to be invested but I am not sure what to do with it. Last time I checked my portfolio it was down a thousand after a month, making it seem too early to tell where the winners are as of yet. ”

* Don’t make the rookie mistake of turning into a day trader if what you want is to invest your money for long term growth and collecting dividends to reinvest. Every stock will have a ‘beta’…expect even good companies to fluctuate in the short term. Don’t watch the tape every day. The talking heads get paid to entertain….none actually invest the stocks they talk about. Politicians and fanatics are temporary. People are forever.

* It’s BS that Index investing beats stock picking over time…pure advertising. Index investing has only shown to perform as well as the index it’s weighed against.

* I never rebalance…another fallacy….let your winners run…use your dividends to buy shares of companies that haven’t caught up…build a critical mass based on cash flow monthly , quarterly, semi annually and annually.

* Buy the best in class and forget about shotgunning the international market. 28% of issues in the TSX continually outperform passive investors.

* Never buy bonds…that’s real dead money. Down markets are great opportunities to invest…not hide.

* Buy consistently…dollar cost average works. DRIP your issues that qualify.

* Buy issues that represent the best of their sectors…there are five sectors.

* Market timing doesn’t always work..but sometimes opportunity forces itself on you and you buy when the talking heads are screaming ‘sell’.

Good luck man…it’s all about time in the market and knowing that the world is not coming to an end in your lifetime.

#91 PBrass

Exactly..buy great companies that are serious about their business.

I’m glad you’re just a cowboy and not an advisor. — Garth

#124 Holy Crap Wheres The Tylenol on 05.20.15 at 1:32 pm

41 Smoking Man on 05.19.15 at 9:31 pm
Very sad day, kid that played hockey with my older boy was killed by a drunk driver in Hamilton on Saturday. Beautiful parents, great kid. My point is. When the god of the random luck generation picks you. Its a deal.
Shala LA LA LA live for today.
It puts everything in perspective. Money means nothing to those parents now. That was an accident, wars, killings are deliberate, nothing pisses of Nectonites than watching little men. Tiny men wanting to send other peoples kids to fight and die in battles that a phone call and some mutual endearing bullshit would solve.
I’ve contacted the mother ship… No, boss humans are not ready for the gift of interstellar technology.
They’re not ready.
Rest in peace Ryan…
___________________________________________
Sorry to hear of your sons friend. I was stuck in the traffic for that accident wondering what happened. This was tragic, drunk driving is criminal! This was a deliberate and intent death caused by the drunk driver! He has just ruined two families lives forever. Nail them to the crosses and let them suffer a slow death. Take a taxi for gods sake.
This song was a mantra for my generation!
https://www.youtube.com/watch?v=hnFZsrs32Co

#125 MF on 05.20.15 at 1:37 pm

#117 HD

Always great responses from you HD. I really appreciate it. This young Jedi is still diligently trying to learn the craft from the masters such as yourself and Garth.

Although tempting, I know Garth does not recommend individual stocks because it is a very risky strategy unless you have a very large portfolio.

I have my TFSA maxed out and there is about 12 k sitting in an unregistered account but still invested in ETF’s. The portfolio is 60/40.

The margin account and line of credit idea is very interesting and something I haven’t heard of yet. It sounds very appealing, almost as if you are using mini amounts of leverage to juice gains?

Do you go about applying for the two of them at your bank branch?

MF

#126 Julia on 05.20.15 at 2:00 pm

#117 HD

“Or you can use Garth’s rule of thumb: Never buy individual stocks unless you have a 7 figure portfolio. Reasonable advice. ”

I also believe that if you have some small amount of money you are willing to risk enough to lose it all, go ahead and experiment with individual stocks. It can be a good learning experience.
I always a small sum to do just that. Did well with Tim Horton’s – bought at IPO, sold when they merged. Doing ok with Tesla, doing badly with Bombardier. All learning.

#127 TurnerNation on 05.20.15 at 2:04 pm

No hike anytime soon.

#Herdonomics

#128 Vamanos Pest on 05.20.15 at 2:09 pm

#122 Rational Optimist

Good question. I focus on the following:

-like you, I still save and invest more capital regularly. So when the value of my portfolio goes down, I see it as a “sale”. I’m getting the same stuff I would be buying anyway, the price is just cheaper.

-it always recovers (when has it ever not?)

-it’s only a loss if you sell (granted, it’s only a gain if you sell, so maybe I should stop giggling)

-I know myself. I don’t make emotional decisions in other areas of my life, I doubt I’d start when it comes to riding out a down cycle in the portfolio.

#129 Freedom First on 05.20.15 at 2:18 pm

#113 None

You’re half right. But, unlike you, I try to practice the Golden Rule and respect all people. Live and let live. You will become happy, like I am.

#130 jess on 05.20.15 at 2:19 pm

24 minutes of Hong Kong trading erased $18.6 billion of market value

http://www.bloomberg.com/news/articles/2015-05-20/hanergy-thin-film-power-suspends-trading-after-stock-plunges-47-
========================

#131 Blair on 05.20.15 at 2:30 pm

Thanks for the article.

Had my TFSA topup sitting around in cash waiting for the perfect opp to buy – read this article , screw timing the market, BOUGHT

#132 HD on 05.20.15 at 2:30 pm

#123 Davy Dogs on 05.20.15 at 1:29 pm

Hello! I thought I’d stop by and provide some empirical data for the claims made by the above poster…

Draw your own conclusion.

Best,

HD

“* It’s BS that Index investing beats stock picking over time…pure advertising. Index investing has only shown to perform as well as the index it’s weighed against.”

http://www.theglobeandmail.com/globe-investor/investor-community/trading-shots/index-or-dividend-investing-which-way-to-go/article13676369/

“* I never rebalance…another fallacy….let your winners run…use your dividends to buy shares of companies that haven’t caught up…build a critical mass based on cash flow monthly , quarterly, semi annually and annually.”

http://canadiancouchpotato.com/2011/02/22/why-rebalance-your-portfolio/

“* Never buy bonds…that’s real dead money. Down markets are great opportunities to invest…not hide.”

http://canadiancouchpotato.com/2013/05/28/ask-the-spud-should-i-buy-in-now/

“* Buy consistently…dollar cost average works. DRIP your issues that qualify”

http://canadiancouchpotato.com/2013/04/08/why-you-should-avoid-drips-in-taxable-accounts/

http://canadiancouchpotato.com/2013/05/31/does-dollar-cost-averaging-work/

#133 HD on 05.20.15 at 2:34 pm

Sorry, wrong link for this one:

“* Never buy bonds…that’s real dead money. Down markets are great opportunities to invest…not hide.”

http://canadiancouchpotato.com/2010/09/05/why-every-portfolio-needs-bonds/

Best,

HD

#134 jess on 05.20.15 at 2:35 pm

worms are in the bad apple

Arbizu: Argentinians have $400 billion stashed abroad

Banks are secretly conspiring to help citizens evade taxes. That is one of the more inflammatory allegations to come out of the commission to examine HSBC’s role in facilitating tax evasion in Argentina.

The allegation has been made by a former Vice President of JP Morgan, Hernan Arbizu, although there are questions as to why he is giving this testimony.

Hernan is wanted in the United States where JP Morgan have accused him of fraud for forging a client’s signature. He agreed to give testimony to the commission in order to avoid extradition. After being accused of fraud he handed the Argentine authorities a list of clients at banks he used to work for that he says have undeclared assets abroad.”

http://www.taxjustice.net/2015/05/19/the-offshore-wrapper-a-week-in-tax-justice-60/

#135 Moller on 05.20.15 at 2:45 pm

I’ll just leave this here…

Household debt is under control in Canada, Fraser Institute says
http://www.cbc.ca/news/business/household-debt-is-under-control-in-canada-fraser-institute-says-1.3080638

“I’m not worried about higher interest rates because central banks have made it clear that when they do get around to raising interest rates … they’ll do it in a very measured manner,” Cross said.

#136 devore on 05.20.15 at 2:50 pm

#126 Julia

I don’t think there is a problem buying individual stocks, in small quantities, as opportunities present themselves, which may not be available through an ETF. It is of course more risky. Even for those who only buy “solid proven blue chip dividend payers”, there are ETFs for that too, they’re probably still cheaper and more efficient when you factor in trading fees.

#137 cd on 05.20.15 at 3:04 pm

Davy Dogs… I have a similar strategy. I’m a bit younger/poorer so I can only make enough divs to buy 3-4 times a year. Hopefully I can get to your level eventually.

#138 Shawn on 05.20.15 at 3:06 pm

Ashes to Ashes, Dust to Dust

#130 jess on 05.20.15 at 2:19 pm

24 minutes of Hong Kong trading erased $18.6 billion of market value

http://www.bloomberg.com/news/articles/2015-05-20/hanergy-thin-film-power-suspends-trading-after-stock-plunges-47-

**************************************
Big deal. No one ever seems to complain when a stock rockets up and creates $18 billion or whatever of new wealth from thin air. (It happens.)

Most of the time losses like this are just wealth returning to whence it came, thin air. The loss of original money raised from investors by the company selling shares to investors is usually tiny.

Sometimes wealth created from thin air is real and represents future profits that will materialize. Often it represents just hype and a hope and a prayer and in those cases can easily vaporize.

It means little, except to those unlucky enough to hold the vapor ware shares at the point they vaporizes.

#139 Smoking Man on 05.20.15 at 3:27 pm

#127 TurnerNation on 05.20.15 at 2:04 pm
No hike anytime soon.

#Herdonomics
……

When am I ever wrong…

#140 Smoking Man on 05.20.15 at 3:29 pm

Garth and you though F was bad.

Joe Oliver to Realtor’s Ottawa will stay out of housing market because no bubble seen..

Oh boy..its election time.

#141 HD on 05.20.15 at 3:39 pm

@ #125 MF on 05.20.15 at 1:37 pm

You are most welcome : )
——————
The margin account and line of credit idea is very interesting and something I haven’t heard of yet. It sounds very appealing, almost as if you are using mini amounts of leverage to juice gains?

Do you go about applying for the two of them at your bank branch?

MF
——————
You could say that….but the real goal is to avoid having cash sitting around. Leverage is usually for long term so I guess “mini-leverage” could describe this strategy. Juicing gains in the sense that cash is not idle earning nothing, yes.

You are with BMO investorline if I remember correctly. Just go on their website and apply to upgrade your cash account to a margin account. The process is simple and straightforward. Print off the documents, sign them, and fax them to investorline (or drop them off at your BMO branch).

They will review your application and give you an answer in a few business days.

Best,

HD

#142 Dont split the vote on 05.20.15 at 3:50 pm

You will see many headlines like these. Don’t waste vote on NDP and Greens. Vote either Cons or Libs.

Corporate media and pollsters behind this.

http://www.cbc.ca/news/politics/ndp-jumps-into-3-way-race-with-conservatives-liberals-1.3079391

#143 None on 05.20.15 at 4:01 pm

#129 Freedom First on 05.20.15 at 2:18 pm

I’d actually argue you are doing a poor job of living the Golden Rule. You smugly repeat the same thing over and over, pointing out how much smarter you are than everyone else. Your repetitive posts come across as conceited. I’m not jealous of you, not at all, hey good for you in fact, but my pointing out that smugness does not imply envy on my part.

#144 rosie "moving forward" in the knowledge that, "this won't end well" on 05.20.15 at 4:12 pm

Whiney millennial update. Time for a rally.

http://www.vancourier.com/opinion/millennials-shouldn-t-lower-expectations-1.1940413

#145 cramar on 05.20.15 at 4:30 pm

Americans earning more than $75k/year eating (literally) into their savings. Probably not too different in Canada.

http://www.marketwatch.com/story/survey-says-wed-rather-eat-out-than-save-money-2015-05-14/print

Most interesting part is that almost 1/3 live paycheck to paycheck.

#146 Davy Dogs on 05.20.15 at 4:32 pm

“I’m glad you’re just a cowboy and not an advisor. — Garth”

Reply- 17.5% average annual return over 20 years ….Yippee-O-Kay-Yay. Sure it’s been bumpy….but the proof is in the pudding. Yes I admit…I own three cowboy hats and I swear I didn’t kill the ostriches that went to cover my boots.

#132 HD…Couchy Pot is for suckers who aim at 4-6% and end up with negative returns after factoring in inflation and taxes. Thats advice skewed for people who like eating Alpo.

C’mon guys..stop the hatin’….bought TD @ $14 ..AGU @ $58 to $132…THI at $14 to $95….GIB.A at $15 to $52….CP @ $78 to $230 ….etc etc etc …where’s the love?

And there are plenty of stocks that are going up far more this month than a balanced portfolio will make in 5 years. RBA for ex. The market is a beast…not a social worker. Ride the Beast…or get left in the Alpo aisle.

#147 MF on 05.20.15 at 4:38 pm

#123 Davy Dogs

Thanks a ton for the thorough response!

Currently reading through yours and HD’s post. Will report back in a bit.

MF

#148 Nagraj on 05.20.15 at 4:44 pm

signs of fear

“AutoCanada sees Alberta as ‘strongest’ market despite oil crash”
praise the lord

“US Fed officials see June rate hike as unlikely”
double praise the lord

“Household debt is under control in Canada: Fraser Inst.”
of course

“There is no housing bubble in Canada: Finance Minister Joe O.”
so there

“Air Canada turning into a ‘quality’ stock”
a hundred million miracles are happening every day

“Three reasons why Canadian Tire belongs in every portfolio”
there are no hardware stores in America

to top it off “Why subprime lending isn’t a major danger to Canada’s housing market”

The quotes are from BNN, G&M, et alia. I guess the boys on Bay Street is more worried than I thought.

On the other hand, The Star had a damning piece on execs stock options, and another one on scrimping to feed the kids.

NY today did NOT read the FMOC as unwilling to hike, but Bay Street’s troubles go beyond an inability to keep on buying back shares, hiking yields and spinning off REITs. Like the Canadian consumer is in the same shape as the dead Maria Vetsera being walked from Mayerling to the train station by two undercover agents who shoved a broomstick up her dress to keep the cadaver erect.

#149 Made in BC on 05.20.15 at 4:54 pm

Stay calm as the market goes up all by itself…..

http://www.bloomberg.com/news/articles/2015-05-20/six-banks-pay-5-8-billion-five-plead-guilty-to-market-rigging

WHOOPS !!!

#150 espressobob on 05.20.15 at 5:18 pm

Investors have no control over the indices period. Diversification gives us opportunities to take profit (rebalance) and buy up on quality (underperformers).

It’s yield & growth over time & compounding that loads those accounts awash in cash.

The emotional crowd suffer. That presents a choice?

#151 Freedom First on 05.20.15 at 6:13 pm

#143 None

You must be a woman.

#152 PM on 05.20.15 at 6:21 pm

#146 Davy Dogs

If you can average 14% over 20 years why the hell are you here? You’re a capitalist god who should have a shrine on wall street and you’re posting on a blog? Oh wait, you wouldn’t be lying would you?

#153 espressobob on 05.20.15 at 9:38 pm

#146 Davy Dogs

Dude, don’t you have a learning curve????

#154 Davy Dogs on 05.21.15 at 1:01 pm

#153 …Esp…been there…done that…..sittin’ on my butt….enjoying life….buying stocks beside the pool…what about you? Ask G why he does what he does….retirement is only for unionista’s with withering senility.

And no…I’m not alone…..many firms do as well and better. Look up the Odlum Brown model portfolio track record…..or Cannacords…among others. Bottom line..you coulda been rich if you hadn’t shriveled up under the couch. Do you think the pro’s take home 4%?