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Will interest rates begin their ascent Thursday at 2 pm Eastern?

Beats me. But it’s really a moot point. If not tomorrow, it will be next month. Have no doubt. It’s coming. Pulling the trigger will be the US central bank, known as the Fed. It’s been waiting for months for the right moment when the economy is strong enough to withstand money getting a little more expensive. This may be it.

Now, most importantly, how can you benefit?

Well, not buying a beater house on a crappy street in downtown Toronto or Vancouver would be a fine start. This first rate hike will be one of many (the Fed usually increases about a dozen times during a tightening cycle), so you can count on higher mortgages and lower real estate. As I mentioned earlier this week, there’s a 93% chance Canadian rates will follow those in the US, albeit after a lag. If you want to battle  those odds, knock yourself out.

Beyond that, you should consider loading up on some preferred shares. Two reasons: (a) they’ll benefit from rising rates and (b) they’re cheap. Like Kias, but actually worth buying.

Just so you’re clear – preferreds are kinda like stocks and sorta like bonds. They’re considered ‘fixed income’ like bonds and are far less volatile than common stocks, but they pay dividends instead of interest. That’s great because interest is taxed to the max while dividends come with a tax credit – so the after-tax return is much higher. Also while bonds pay extremely little these days (about as exciting as a savings account with the jam people), preferreds have been returning yields in the 5% range. Sweet.

Also preferreds are called ‘preferred’ because they’re, well, preferred. Special. Companies issuing them must pay the dividends on preferreds before they pay out on common stock, so the income stream is safer. (Not that this matters if you buy the prefs of stable companies like banks, insurers or utilities.)

All good. But, like bonds, the capital value of preferreds is influenced by interest rates. So when the dingalings at the Bank of Canada cut the key rate there in January and again in July, preferred share prices went down along with bond yields. This was despite the fact these puppies keep churning out that 5% tax-advantaged yield. So in terms of valuations, preferreds have sucked in 2015, losing about 17% of their value.

Why would you buy them?

Simple. This cheapness will not last, and preferreds are poised to be among the significant winners as interest rates start the long trip back to normal. A bunch of smart people believe the values of prefs will rise by at least 10% in 2016, possibly more, making them star assets just a year after being dogs.

Most preferred shares are called “rate reset”, which means they’re tied to the five-year Government of Canada bond – the one which our central bank bombed with its rate cuts. Now that the US Fed’s changing the game, and because our market almost always follows theirs, you can expect Canadian bond yields will be plumping for months to come. In fact, yields have already crept higher, with big moves possible after Thursday’s announcement.

Higher bond yields are positive for preferred share prices, so given the fact these cost almost 20% less than a year ago and have big upside it begs the question: why would you not have some? Especially when they pay a 5% return just for owning them and that money’s not sucked off in tax like interest from a dead-end GIC?

Prefs aren’t popular because [email protected] doesn’t sell them at the corner branch. No worries. There are a bunch of good ETFs around that contain a basket of high-quality Canadian preferreds issued by big, stable companies – including the same banks that won’t sell them to you over the counter.

Preferred shares, in short, offer one of the best protections around against rising interest rates – which stand to do serious damage to real estate and may also usher in more equity market gyrations. So, you can moan, cringe and deny like most of the people who come to this pathetic blog to say rates will never, ever go up. Or, you can get ready for reality, and let central banks grow your net worth a little.

Now, how hard was that?

140 comments ↓

#1 Waterloo Resident on 09.16.15 at 5:04 pm

If you are wondering if you should buy either preferred shares or shares in Dollarama, take a look at these 3 year charts and come to your own conclusions:

http://stockcharts.com/h-sc/ui?s=DOL.TO&p=D&yr=3&mn=0&dy=0&id=p95696037966

http://stockcharts.com/h-sc/ui?s=CPD.TO&p=D&yr=3&mn=0&dy=0&id=p95696037966

http://stockcharts.com/h-sc/ui?s=ZPR.TO&p=D&yr=3&mn=0&dy=0&id=p95696037966

#2 JSS on 09.16.15 at 5:07 pm

Any commentary Re. future of REITS based on rising interest rates?

#3 Lost in Space on 09.16.15 at 5:24 pm

Evening blog dogs here is the best of the web and the best of Garth (apologies if the formatting goes funky).

Recommended Websites

Canadian Money Saver Magazine

Canadian Couch Potato

Canadian Money Forum

My Own Advisor

Frugal Woods

Garths’ Investment Posts

Most people, of course, simply don’t understand how they’re taxed or what to do to minimize the impact. They also don’t realize how the tax system is skewed to ensuring the rich stay that way.

RRSP basics

How to structure RSP with SAHM

TFSA basics</a

RESP</a

Taxation</a

Taxation of an RRSP </a

More Taxation of an RRSP</a

Taxes and Income Spliting</a

#4 Lost in Space on 09.16.15 at 5:26 pm

sorry that should be

Frugal Woods

put in wrong link

#5 Stoopid Idiot on 09.16.15 at 5:26 pm

Now, today the Fed is meeting to discuss the question– to raise, or not to raise interest rates? And when I looked at the numbers, I realized something interesting is about to happen.The universal law of bond markets is quite simple: bond prices and interest rates move inversely to one another. In other words, when interest rates go up, bond prices go down. Think about it like this: let’s say the prevailing interest rate in the marketplace is 5%, and I have a bond that pays 5%. Right now if I wanted to sell it, my bond is worth $100. But then tomorrow morning the Fed decides to raise interest rates from 5% to 10%. Yet my bond still pays 5%. Is it still worth $100?No chance! Why would anyone pay me the same price for a 5% bond, when now they can go down the street and get 10%? The only way I can sell my bond is if I drastically slash the price. That’s what happens when interest rates go up– the value of existing bonds goes down. Now think about the Fed. They’re sitting on $4.5 TRILLION worth of existing bonds, most of which they purchased when interest rates were basically zero. So what happens if the Fed raises rates? The market value of their entire bond portfolio will fall. And given the razor-thin capital the Fed has in reserve, they can only afford a tiny 1.3% loss on their bond portfolio before they too become insolvent. So the grand irony of today’s Fed meeting is that by raising interest rates, the Federal Reserve will be creating its own insolvency.

https://www.youtube.com/watch?v=jt377DV2BKs#action=share

http://www.jsmineset.com/

#6 Mr. White on 09.16.15 at 5:28 pm

Will we revert to mean? I put long-term mean discount rates at about 10%, am I wildly wrong?

#7 VH on 09.16.15 at 5:28 pm

Garth asked….again….”Will interest rates begin their ascent Thursday at 2 pm Eastern?”

In a word….No. They can’t raise the rate in order to make T-bills more attractive to investors as the whole US eek-onomy is a debt bubble. Even a rise of a quarter point would be disastrous.

#8 Kreditanstalt on 09.16.15 at 5:33 pm

“(the Fed usually increases about a dozen times during a tightening cycle)”

You act like this is really just yet another cyclical recovery from another cyclical recession.

In an economy with a $4-trillion central bank balance sheet, after 4 episodes of (overt) money -printing and in which real incomes are back to (you choose) 1971, 1977 or 1989 levels, how can anyone guarantee that “economic growth” is even occurring??

Or believe that the problems are anything but SYSTEMIC?

Hint: LABOUR PARTICIPATION RATE.

Not only are central banks impotent and in fact destructive of real capital but they are also BOXED IN.

“Raise rates” (once, maybe!) or not…the real question is WHY we allow them the power to do this in the first place…

#9 Chris in Nanaimo on 09.16.15 at 5:42 pm

A) Yep my preferred ETFs have tanked about 16% in the 5 months I’ve owned them. That means I need around a 20% rise just to get back
to where I started…..sweet….(sarcasm mode off ).

B) “the Jam people”…..sorry not familiar with this Garthism….? Different from the guy in the Orange shorts?

#10 Catalyst on 09.16.15 at 5:43 pm

It stands to reason that in a rising rate environment, net interest margins will be improving and bank profitability along with it. With most of the big banks churning out 4.5-5.5 dividend yield which is in line with preferred yields, why not just buy the bank shares?

Most of the bank shares are off 15-20% from 52 week highs and I am betting on a bounce back year.

#11 me on 09.16.15 at 5:45 pm

these are emergency rates- of course they will go up. thats what stuff does, goes up, then goes down, then goes up, etc.
one thing is always contant and that is change.

#12 Smoking Man on 09.16.15 at 5:48 pm

Batman

https://www.google.ca/finance?q=INDEXTSI%3AOSPTX&ei=SeP5VemBAsSt2AaOq5Bo

#13 not 1st on 09.16.15 at 5:52 pm

Garth, you ignore the fundamentals of Vancouver and continue to make blog posts like you cannot understand it. Go stay in Vancouver for a week and you will understand it.

btw, for a clue, there is a nice big write up in the NP today about mainland chinese buyers coming here and a top realtor’s involvement.

#14 Southern Man on 09.16.15 at 6:00 pm

Straight out of the history books…and under other circumstances you might have been right.

“Canadian rates will follow those in the US, albeit after a lag. ”

But those were the days when Canada was actually functioning on a business cycle and not under the boot of some goofy loon who is only thought is to bash the $C down to where it competes with the Peruvian Sole and the Bolivian Boliviano.

Poloz is a disaster…following no precedent or economic model. His comes from the 1940’s where 90% of Canadians joined their families on the farm and slept out in the rain while logs were cut and iron ore and canned fish was our staple GDP heavy hitters.

Canada is off the rails…so far gone from reality under the current BOC regime of fart catchers that no rationale investor has more than a fingernail left in Canadian equities….there’s just too much currency risk to leave money in the hands of Poloz the Clown. Look at the foreign outflows…billions every month unabated.

So….yes…I agree…under any reasonably normal financial set up the preferreds should recover….but the reason they’re down 17% is Poloz the Clown….and the reason they will stay down is more Poloz the Clown who has been allowed to strangle the Canadian economy…import massive inflation….and starve seniors becuae the civil servants at the top are all indexed and coddled with massive pensions, salaries and perks….and simply don’t give a crap what’s happening to family grocery bills.

There will be no rate increases in Canada….it will interfere with government borrowing for civil service pay rises….and The Poloz Plan to dig iron ore out of the ground cheaper than Tajikistan.

#15 Butch on 09.16.15 at 6:02 pm

If not today than 100% October?

No.

If it’s a foregone conclusion they’re going to raise in October then why not just raise tomorrow? What’s going to change between tomorrow and October?

Because they aren’t raising in October either.

#16 mitzerboy aka queencity kid on 09.16.15 at 6:05 pm

bout time we made some money with our

investments

git borrowin money up around 4-5%

#17 Mister Obvious on 09.16.15 at 6:18 pm

#5 Stoopid Idiot

“Why would anyone pay me the same price for a 5% bond, when now they can go down the street and get 10%? The only way I can sell my bond is if I drastically slash the price.”
———————————-

So, you don’t sell the bond. You hold it to maturity and at least get back the original face value (granted, in inflated dollars). After all, that’s why you bought the bond in the first place. For the 5% coupon value, not for capital gain.

If you want to get the 10% offered by the new bond issue you will need to find and commit some new money. That’s life.

#18 JSS on 09.16.15 at 6:27 pm

#10 Catalyst on 09.16.15 at 5:43 pm


I agree with you 100%. Common shares of Canadian banks are almost as safe as their preferred shares. You’ll get a rising dividend in most cases annually, plus some long term capital gains. Why not buy them instead?

Volatility and a lower yield. — Garth

#19 AB Boxster on 09.16.15 at 6:38 pm

Garth,

Many recent issues of preferred shares are perpetual given the problem with rate resets dropping in base value after the BOC cuts.
Rate resets are a good buy if rates do go up.
Can the same be said for perpetuals?

#20 not me on 09.16.15 at 6:41 pm

I sure hope, though won’t hold my breath, the tides will finally start to change. It’s been wayyyyy too long. Unfortunately it’s most likely too late, too much damage has been done and the unwinding, if any, will take forever. I’m just a realist who can see through the BS of main stream media and the government propaganda. I see what’s going on around me and it’s a sad story.

#21 pathcontrolmonk on 09.16.15 at 6:52 pm

Goldman’s CEO just said the US economic data doesnt support a rate hike, but perhaps it is a Jedi mind trick.

#22 Doug in London on 09.16.15 at 7:10 pm

I won’t be worried one bit if the Fed raises rates, it probably won’t be on my mind at all as I make my way to the Western Fair. As for preferred share ETFs I might spend the money I saved, from scooping up these ETFs while they are cheap, on a few rides out in the midway. Great fun!

#23 DollaRama on 09.16.15 at 7:12 pm

I’d rather have shares in Dollarama. And my 650k house which I spent 280K in Toronto.

Thanks

#24 Retired Boomer - WI on 09.16.15 at 7:15 pm

We shall see, what we shall see. Raise a wee big, or maybe not yet. Maybe later, but who can tell?

Ever think you have seen this movie a time, or three before? You have, it’s sort of like seeing “It’s a Wonderful Life” at Christmas time.

Gives you that warm feeling, something 2 year olds, and geezers sometimes share…

#25 Renter's Revenge! on 09.16.15 at 7:21 pm

@Sheane Wallace:

While I think your comments about the ensuing debt crisis in Canada are well intentioned, they’re wrong. There will be no debt crisis in Canada.

Instead, Canada will become an extremely boring place where most Canadians spend most of their income on basic living necessities, like housing, food, beer and taxes, with little to no money left over to support things like the arts, nice architecture or innovative industries. Sort of the opposite of what’s supposed to happen in a civilized society.

They will continue to live lives of quiet desperation, beholden to the banks, working, working and working some more to pay off their mortgages.

I expect to become very lonely and bored when I retire at the age of 40, with everyone working during the day, and too tired to do anything fun at night.

Maybe I can come visit you in Spain then and we can argue ad nauseum about the future of Canada over sangria :)

#26 Renter's Revenge! on 09.16.15 at 7:25 pm

@JSS and Garth:

“Common shares of Canadian banks are almost as safe as their preferred shares. You’ll get a rising dividend in most cases annually, plus some long term capital gains. Why not buy them instead?

Volatility and a lower yield. — Garth”

Sounds like my cup of tea!

#27 Freedom First on 09.16.15 at 7:27 pm

How hard was that? It was very easy. Passive Income, my favorite.

Here is something that is baffling. In the past year alone, I have had 2 people who are close to me show me the Mutual Funds they own through a bank. Both guys had well into the 6 figures in them, and it was their only asset other than their house. Now, while they were well diversified, their mers for the funds ranged between 2.25-2.75%. When I told them I held only ETF’s for the same diversity with mers of .11-.55%, they both got a pained annoyed look on their face. Neither wants to have anything to do with looking after their money. I can accept that, as I understand people. For myself however, I enjoy it, as I enjoy everything I do in my life.

#28 Rexx Rock on 09.16.15 at 7:30 pm

Zpr looks like a good buy also DFN and LBS with more volitility.UVXY if the market tanks,be catious because its a 3x etf.Buy JNUG if no interest rate or DUST if there is one.

#29 Cici on 09.16.15 at 7:59 pm

Another awesome post.

I would vote Conservative if Garth or someone Garth-like (fiscally responible and smart with long-term vision) was running the party.

#30 Brian Ripley on 09.16.15 at 7:59 pm

To relieve the jitters of waiting until the Fed announcement tomorrow I counted the listings for sale in Vancouver of SFDs starting at $2,000,000… there are 1500 of them. Then I went over to Craigslist to count houses for rent in Vancouver starting at $6000/mo. There are 100 of those

Graphics here: http://www.chpc.biz/history-readings/pockets-of-air

Demographia has an affordability model based on housing and economic data of hundred’s of cities. On their metric, one would need an income of $24,000 per year to rent a $6000/mo house; that’s easily accomplished by one of those imported foreign workers that we subsidize corporations with to flesh out their labour pool. Why export a low wage job when high wage jobs are easier to export and that’s the Canadian will.

And on the same Demographia scale one only needs $666,666 in annual income to buy a $2,000,000 house – that’s only 28 of those imported foreign workers banding together in joint ownership. That’s only a half dozen or so workers per bedroom. I bet the refugee swarm scaling the new walls of Europe would easily do that if given the chance.

Oh ya, I forgot we are afraid of terrorists, but not so much of the peer pressure and institutional mountebankers that have exposed so many Canadians to so much risk in only a decade.

#31 Tony on 09.16.15 at 8:00 pm

Higher interest rates mean Canadian Bank shares will fall. The preferred reflects the share value of the common shares. Both should fall in value but the preferred to a lesser extent. Money will flow out of both common and preferred bank shares and into interest bearing vehicles as rates rise. But rates won’t rise tomorrow or for a long, long time. I think America will run negative interest rates for quite a long time in the near future. Only after many, many years of negative interest rates will America ever see an interest rate increase.

#32 zee on 09.16.15 at 8:04 pm

Hey Garth

Why is money not flowing out of Canada and going to US causing the yields to rise on govt bonds here. If you can explain this that would be helpful.

#33 will on 09.16.15 at 8:08 pm

Yup. Bought more Loblaw pfds the other day. Don’t think they are rate resets though. Yield is well above 6%. Redeemable in 2020. Company is on much stronger footing now than 5 yrs ago. Not worried about getting my money back.

#34 espressobob on 09.16.15 at 8:29 pm

zpr could be a superstar. Most won’t get it.

#35 Cici on 09.16.15 at 8:30 pm

#3 Lost in Space

Thanks for the links…although Frugal Woods is a bit of a joke. It’s all blah, blah, blah “frugality,” yet every story seems to be about how she’s buying this or that (chest freezer, Costco toilet paper or whatnot) to “save” money. I see nice clothes, fancy appliances, a new home, modern furniture, granite or granite-like countertops, new kitchen cabinetry, big dogs and a baby on the way…but because she managed to score some free yoga classes and hand-me-down baby clothes, they’re so frugal? OK, I guess if they’re both doctors and lawyers and only spend a fraction of their income…but I didn’t get that far because I found the blog too nauseating, self-centered and boring.

But I do like the other picks!

#36 Joe2.0 on 09.16.15 at 8:34 pm

China has 7 million millionaires and is growing at a pace of almost 2 million a year.

#37 Guy Willoughby on 09.16.15 at 8:39 pm

Good day Garth:

Wow, that you for the good advice. I have two questions.

1. How is the values going to handle large amounts of debt taken on in leveraged stock buybacks that a lot of companies did with the Fed’s easy money policy?

2. Are the Wall Street cronies going to kick up a fuss and cause stock prices to fall to an even more desirable price?

#38 I am the Babblemaster on 09.16.15 at 8:43 pm

“As I mentioned earlier this week, there’s a 93% chance Canadian rates will follow those in the US, albeit after a lag.” – Garth

————————————————

That 93% probability is based on historical data. Fine and dandy, but does it make sense to use that figure when the economic situation is so different between the two countries as compared to the past?

Right. History is bunk. — Garth

#39 Sheane Wallace on 09.16.15 at 8:48 pm

#25 Renter’s Revenge!

Regarding Spain: Absolutely.

As for Canada: I hope for you to be proven correct, giving it a chance of around 1 %. Possible (everything is possible) but not likely at all.

#40 Sheane Wallace on 09.16.15 at 8:52 pm

Right. History is bunk. — Garth

I don’t recall Canada ever having the total debt to GDP ratio as of now (federal + provincial + personal + corporate+municipal+ …) So this time it is really different.

I don’t see them increasing rates in many years to come unless inflation goes north of 10 % and people grab the pitchforks

#41 Daisy Mae on 09.16.15 at 9:02 pm

#8: “the Jam people”…..sorry not familiar with this Garthism….? Different from the guy in the Orange shorts?

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

Well, a tangerine is an orange…so maybe, the ‘jam’ people represent marmalade? ;-)

#42 Ralph Cramdown on 09.16.15 at 9:04 pm

The two noises you’ll hear out of preferred shareholders in an environment of rising rates:

“Well, my perpetuals are paying the same dividend as when I bought them, and they haven’t been downgraded. I’m in it for the long haul, so I just keep all my unopened monthly brokerage statements in that drawer over there.”

“Goody! Rates are higher. In only four and a half years, the dividends on my rate-resets will get a bump and I’ll get to participate! The net present value of anticipation is incalculable!”

Not that we’ll be hearing these noises in Canada any time soon. El Predicto says the economy will limp along in first gear, doing just well enough for dividend increases among the usual suspects, but not enough for Canadian bond prices to fall. Bank economists will keep talking about a manufacturing renaissance long after most everyone else has realized that train ain’t coming back.

You will also hear RR preferred owners talking about the increased capital value of their shares. It’s a shame so many here do not understand the asset. Oh well. I’m done explaining. — Garth

#43 Capt. Obvious on 09.16.15 at 9:04 pm

I’m loving the unbelievers in the steerage section tonight. Party on and do not pay attention to Janet over there by the punch bowl.

#44 Randy Randerson on 09.16.15 at 9:06 pm

People arguing on here whether the Fed will raise rate tomorrow or in Oct are all dumb idiots pretending to be armchair economists. Let’s just all admit that none of us have a clue what will happen tomorrow (otherwise we would all be billionaires), and just sit back and see how it unfolds.

It’s like watching people arguing whether Jesus or Muhammad is the real prophet, or whether Paleo or Vegan diet is good for the body; both are completely useless endeavors.

#45 Daisy Mae on 09.16.15 at 9:12 pm

#20: “I see what’s going on around me and it’s a sad story.”

***********

Many of us are getting cynical. And why not? Plenty of reason.

#46 bigtown on 09.16.15 at 9:12 pm

There is no choice for me in the federal election as my moral compass allows only one option…the TFSA highest allowable jackpot. Yes, money rules. Like Suze Orman says” People first; then money; then things.

I was on the real estate site for Americans: realtor.com and you can actually see PREVIOUSLY SOLD PRICES…gosh darn those silly Americanos with all that honesty. What’s with all this hide all the shameful facts from the nosy varments attitude up in Caneder …eh?

Yeppers, I’m an uninhibited sleazebag looking for cash. I’m voting my conscience.

#47 No Hike on 09.16.15 at 9:15 pm

My name says it all.

#48 juno on 09.16.15 at 9:19 pm

man this bickering is the same as the QE debate.

Once they stopped QE, nothing happened, the US only got stronger, No, shock to the system etc.

This interest rate increase will not hurt the USA, it will only stabilize it, and stop the uncertainty. We know it has to happen.

But you get the doom and gloom squad protesting its going to hurt and make the market crash and burn. Its been month since this thing has been going back and forth, I believe the changes are all priced in now.

Anyways if it does go south they can cut the rate back to resync.

Like nike says “Just do it!”

But I feel they will do it after the Canadian election, because if they do start, god help the freakin debt addicts, because I think they are toast.

#49 No Hike on 09.16.15 at 9:20 pm

And no hike this year. Obama won’t allow it.

And don’t tell me that there is distance between the FED and politicians.

#50 PeterfromCalgary on 09.16.15 at 9:24 pm

Garth I followed you advice and bought US. Should I wait tell after our election to invest in a Canadian preferred share ETF?

It seems any investment in Canada has significant political risk attached to it.

#51 Smoking Man on 09.16.15 at 9:25 pm

#48 No Hike on 09.16.15 at 9:20 pm
And no hike this year. Obama won’t allow it.

And don’t tell me that there is distance between the FED and politicians.
……

Play the players, not the cards.

#52 S.Bby on 09.16.15 at 9:29 pm

Have not ever heard of this lady, but it makes for a good story…

http://www.theprovince.com/business/inside+world+realtor+deep+pool+mainland+chinese+buyers/11365879/story.html

#53 SWL1976 on 09.16.15 at 9:29 pm

#8 Kreditanstalt

Not only are central banks impotent and in fact destructive of real capital but they are also BOXED IN.

“Raise rates” (once, maybe!) or not…the real question is WHY we allow them the power to do this in the first place…

I AGREE

The system is set up to fail leaving the common people (us) holding the bag.

Done deal.

Prepare accordingly.

The Pope is in town next week to address congress for the first time in history. Perhaps he will sort things out.

#54 Sheane Wallace on 09.16.15 at 9:33 pm

There will be a hike tomorrow.

#55 I'm slow so please explain on 09.16.15 at 9:38 pm

You say pref. share prices fell when BOC cut rate a few months back even though they “keep chrunind 5% dividends”
If thats the case wouldnt their capital value have inverse relationship with interest rates? I want a product that pays 5% even more when rates fall but if rates go up maybe i dump some prefs for bonds, no?

On the other hand u say most prefs and pref etfs are rate reset – meaning their dividends go up and down with int. rates? If so then i get the direct relationship with int rates.

If your statement that they kept churning 5% was just hyperbole and they actually dropped a bit with the boc cut, then the rest of your thesis makes sense to me.

It would be nice to know, i bought a pref share etf about a month ago cuz you kept nattering about how cheap they were :-)

#56 investzoo on 09.16.15 at 9:41 pm

#44 Randy Randerson

People arguing on here whether the Fed will raise rate tomorrow or in Oct are all dumb idiots pretending to be armchair economists. Let’s just all admit that none of us have a clue what will happen tomorrow (otherwise we would all be billionaires), and just sit back and see how it unfolds.

It’s like watching people arguing whether Jesus or Muhammad is the real prophet, or whether Paleo or Vegan diet is good for the body; both are completely useless endeavors.

===

Exactly!

The cutest ones are the complete suck-ups, closely followed by the “you have been warned” clowns.

Extra boneless banana for the self-declared, above the steerage section upper crust fruit cakes, declaring wisdoms of vital importance for the plebs.

Thanks god, the dogs and SM saves the zoo.

#57 Investorz on 09.16.15 at 9:53 pm

ZPR preferred shares ETF pays you monthly.
Nice.

I put in some money each month in it. Now it pays for my Netflix and cell phone bills.

#58 Ralph Cramdown on 09.16.15 at 9:56 pm

Rate resets are a complicated asset. I doubt many home investors have a pricing model that takes into account the five year rate reset, the option of the holder to convert to a floater, the option of the issuer to retract it (and if interest rates pop around reset time, that’s what the issuer will do) and the varying discount rate that the market assigns these things.

Further, given that many of these issues only trade a few thousand shares on an average day, woe betide the retail investor who foolishly puts in a market order — you can show your kid the big wiggle in the daily chart, and say “Look, daddy did that!” Or you can buy an ETF, which will help itself to 10% of your dividends.

And finally, you’re being paid short term rates to take on long term credit risk. It bears reminding that most of these issues were born out of desperation in the aftermath of the financial crisis, when nobody was going to buy straight perpetuals at the interest rates that issuers wanted to pay. The Faustian bargain that investors would accept low yield for the first five years and then get a bump has turned for some issues, by a quirk of the calendar and a hiccup in the economy, into low rates for ten years and then (maybe?) a bump. Think the buyers of the new issues five years ago priced that in? Oh well, today’s buyers are undoubtedly smarter, or perhaps more experienced.

There’s a place for these in some portfolios, but probably not for the type of person who doesn’t enjoy reading a prospectus.

I’m with some of the other posters here: Unless things go completely to crap, the winning move is probably buying the common of anything good enough that you’d want to hold the prefs, anyway. A few years of dividend reinvestment and growth for the banks’ common will almost certainly have an investor receiving a yield-on-cost equal to what their prefs are paying now. I myself backed up the truck a few weeks ago when TD was yielding over 4% — the only other time it’s been that cheap in the last ten years was for about fifteen months around the financial crisis.

#59 Snowy on 09.16.15 at 9:57 pm

Amongst the slew of Canadian Preferred ETFs, which one to choose?
It’s not always quite clear which hold the most rate reset (not perpetual) preferreds.
Recommendations?

#60 Bottoms_Up on 09.16.15 at 10:07 pm

#23 DollaRama on 09.16.15 at 7:12 pm
———————————–
Would you buy your own house today for $650k?

#61 Victor V on 09.16.15 at 10:09 pm

Inside the world of B.C.’s top realtor: A deep pool of buyers, a dead fraudster and a forfeited licence

http://news.nationalpost.com/news/canada/inside-the-world-of-b-c-s-top-realtor-a-deep-pool-of-buyers-a-dead-fraudster-and-a-forfeited-licence

#62 John in Mtl on 09.16.15 at 10:10 pm

Pretty much sums it up: Its all about image and credibility now.

“It’s highly amusing to read all the ‘expert’ theories on a Federal Reserve hike or no hike tomorrow, but it’s also obvious that nobody really has a clue.”
… “No rate hike is therefore an enormous potential threat to Fed credibility. And that’s a factor it may well find much more important than a bunch of numbers.” …

…”The Fed may have noble mandates to help the real economy, but it will in the end always decide to do what’s best for Wall Street banks. And these banks could well make a huge killing off a rate hike. ”

Full article here: http://www.theautomaticearth.com/2015/09/will-the-fed-pick-a-winning-combination/

#63 tundra pete on 09.16.15 at 10:11 pm

This comment section is a true barometer of rate rise. It’s easy to tell a blog dawg’s night sweats or lack thereof. Of course rates are going up. Only a fool would believe otherwise.

Wait till the bank runs start. That will be when all the no minds in over their heads run to the bank to beg for forgiveness or simply try to make a larger payment.

All the liar loan, subprime, brokers will soon be just that. Broker. Just remember the campaign promise nobody is talking about. CMHC bailout. Yes it will be coming to your neighborhood and you will be paying. For years to come.

#64 Investx on 09.16.15 at 10:19 pm

#18 JSS on 09.16.15 at 6:27 pm
#10 Catalyst on 09.16.15 at 5:43 pm

I agree with you 100%. Common shares of Canadian banks are almost as safe as their preferred shares. You’ll get a rising dividend in most cases annually, plus some long term capital gains. Why not buy them instead?

Volatility and a lower yield. — Garth
—————

Yet preferreds proved to be volatile with the recent price drop.

And why would you be concerned with volatility if you’re invested long term?

#65 Parsonage on 09.16.15 at 10:25 pm

#42 #44

http://archive.lewrockwell.com/orig3/nock3b.html

#66 Cory on 09.16.15 at 10:25 pm

You will also hear RR preferred owners talking about the increased capital value of their shares. It’s a shame so many here do not understand the asset. Oh well. I’m done explaining. — Garth

——————————–

No need to explain anymore, you’ve explained them in great detail. Some people listen to your words. I bought CPD on this preferred drop. DId not catch the bottom and wasn’t trying to but still on the right side of the move. Thanks for that.

#67 Elmer on 09.16.15 at 10:31 pm

What about if I’m about to get a mortgage? Should I lock in a 5 yr rate at 2.5% or go with a VRM?

#68 Concessionman on 09.16.15 at 10:44 pm

Decided a year ago to rebalance my portfolio with some “safe” stuff as suggested, since then my Preferreds ETF ZPR is down 24%, the biggest dog (and loss) in my portfolio…so much for safe…

Not the best ETF choice, but nonetheless you have been collecting a 5.22% yield and, as I explained, there is a high probability of price appreciation. Stop whining. — Garth

#69 Armando on 09.16.15 at 10:58 pm

I didn’t know that most Canadian preferred shares have the “rate reset” option. Those shares without the reset feature would NOT be good options in an environment of increasing rates, as they are essentially instruments with very long duration and would be decimated in an environment of raising rates and/or inflation.

#70 kommykim on 09.16.15 at 11:02 pm

RE: #58 Snowy on 09.16.15 at 9:57 pm
Amongst the slew of Canadian Preferred ETFs, which one to choose?
It’s not always quite clear which hold the most rate reset (not perpetual) preferreds.
Recommendations?

ZPR is all Canadian resets.
http://www.etfs.bmo.com/bmo-etfs/glance?fundId=92496

#71 About to go indebt on 09.16.15 at 11:04 pm

I have the exact same question as Elmer:

“What about if I’m about to get a mortgage? Should I lock in a 5 yr rate at 2.5% or go with a VRM?”

#72 FormerTaxGuy on 09.16.15 at 11:25 pm

Preferred shares? Hmmm…there used to be a bit of a time bomb lurking inside many preferred share issues. The paid-up capital (PUC) amount was way, way below the fair market value, meaning that if the share got retracted (redeemed) by the issuer, the shareholder was whacked with a significant tax liability. Lots of amateur investors who thought they were being smart got caught out by this in the 1980s. The lesson then was: make sure you know the PUC of the pref shares, and the terms of redemption/retraction. I don’t know if such Stone Age concepts still have traction, but a cautious investor might want to look into it.

Not an issue with ETFs. — Garth

#73 Chris on 09.16.15 at 11:34 pm

Am afraid renter’s revenge is right. Middle class Canadians would be living in quiet desperation if they are not already.

#74 Incorrect Info on 09.17.15 at 12:07 am

#44 Randy Randerson

Its like watching people argue if Jesus or Muhammad is the real prophet..,

—-
Your point is understood but your analogy is incorrect – Muslims believe BOTH Jesus and Muhammad (Peace Be Upon Them Both) are Prophets of God.

#75 OXI in GREECE !! on 09.17.15 at 12:08 am

Yeah so………its only been 9 years since they raised rates. Plus everyone saying they will “raise rates next year” for the last 4 years. Tomorrow will be a snoozefest.

#76 M on 09.17.15 at 12:22 am

“Will interest rates begin their ascent Thursday at 2 pm Eastern?”

…awww Gartho baby, you silly nasty boy … :)

the answer is a suave ” NO!”

:)

..I drink Grey Goose baby. Feel free to pay your respects that I so much deserve :)

#77 Leo Trollstoy on 09.17.15 at 12:52 am

#57 Ralph Cramdown on 09.16.15 at 9:56 pm

Well said.

I would have to agree.

#78 Randy Randerson on 09.17.15 at 1:05 am

#25 Renter’s Revenge! on 09.16.15 at 7:21 pm

Quoting Henry David Thoreau now, are we? I’m kidding, I love this quote, it succinctly summarizes the lives of the lemming class that is the 99%. I will not allow that to happen to my life, so I’m building up my FU money so that I can live my life on my own term, and not follow what The Man says.

#79 Leo Trollstoy on 09.17.15 at 1:36 am

Tens of thousands of IT jobs available. A plethora of jobs.

The fact that today’s supposedly educated engineering graduates aren’t considered viable candidates speaks more about the candidate than the availability of high paying tech work.

The labour market is in amazing shape for those who aren’t idiots.

http://www.cbc.ca/m/news/business/54-000-canadian-it-jobs-unfilled-idc-estimates-1.3230733

#80 Leo Trollstoy on 09.17.15 at 1:39 am

Knowing a few engineers, both successful and less so; and knowing a few recruiters in the industry… The consensus is that the ones who do well in their career are well rounded as well as intelligent.

The ones who are paid a pittance are also intelligent but are morons with no social awareness. Unfortunately the latter is more common.

#81 Great Canadian Bubble Co. on 09.17.15 at 2:37 am

Will they, won’t they? Who needs Reality TV when we have the Fed rate decision!

Hoping Yellen will just get this thing started, but I am betting I will be disappointed.

#82 Great Canadian Bubble Co. on 09.17.15 at 4:03 am

Wow! Some interesting insights from our Finance Minister on his personal experiences and thinking when it comes to real estate. Joe Oliver explains to the Toronto Star:

“I took out a floating-rate loan because I did not have the money for a down payment and bought the house. Within six months rates, started skyrocketing and my monthly payment rose with it. So, I turned the loan into a mortgage.
“So, it wasn’t a good financial decision, though it was a superb real estate decision.
“I’m not suggesting that people borrow the full amount of their homes, but it was precisely the right thing to do for me. Real estate prices were rising and I was two years into a career where I was fortunate to see my income rise. So it became affordable. It comes back to risk. I took a chance and it was right. What’s critical is that it was affordable for me. It may have been uncomfortable, but it was affordable.”

http://www.thestar.com/business/personal_finance/2015/09/16/6-pieces-of-advice-from-canadas-finance-minister-mayers.html

#83 davikk on 09.17.15 at 6:36 am

Soaring Household Debt – And Suddenly, Delinquencies! Time Bomb under Canada’s Housing Bubble Makes a Loud Tick

http://investmentwatchblog.com/soaring-household-debt-and-suddenly-delinquencies-time-bomb-under-canadas-housing-bubble-makes-a-loud-tick/

#84 Victor V on 09.17.15 at 7:00 am

http://www.theglobeandmail.com/news/we-asked-10-canadian-economics-experts-onequestion/article26384723/

David K. Foot

Professor emeritus of economics at the University of Toronto

The government should support moderate increases in interest rates. Saving for retirement is essential in aging populations. Higher interest rates would encourage more retirement savings, improve retirement incomes for many and contribute to the security of all pension plans by improving yields and reducing discounted future liabilities. In addition, since interest rates and exchange rates move in tandem, higher interest and exchange rates are necessary to ensure that a low Canadian dollar does not precipitate a fire sale of Canadian companies, especially in the resource sector and what is left of Canadian manufacturing. Recent historically-low interest rates have not increased investment, productivity or economic growth, but instead have increased personal debt, house prices and future uncertainty. In Canada’s aging population, slower economic growth is inevitable and not necessarily bad. The environment will benefit. Also, per capita incomes can still increase because population growth is slower. It is time to recognize that the downsides of low interest and exchange rates now outweigh the upsides, and adjust economic policy accordingly. The government should recognize this as should the Bank of Canada.

#85 TurnerNation on 09.17.15 at 7:09 am

#1 Waterloo Resident nonsense reasoning.

You need both growth and income in portfolio.

In recent ‘flash crash’ DOL dropped $10 at once which would have triggered many stop orders or panic. CPD less.
DOL has tiny dividend, CPD has large.

#86 landlessinvan on 09.17.15 at 7:16 am

Sure, US recovery, but only for the top tier:
http://www.bloomberg.com/news/articles/2015-09-16/the-richest-americans-are-winning-the-economy-recovery

#87 Londoner on 09.17.15 at 7:33 am

#80 Great Canadian Bubble Co.

The quote you took was from a section called “Learn from your mistakes”. I don’t think he’s suggesting anyone do the same.

#88 A Nobody on 09.17.15 at 7:58 am

#9 Chris in Nanaimo on 09.16.15 at 5:42 pm
A) Yep my preferred ETFs have tanked about 16% in the 5 months I’ve owned them. That means I need around a 20% rise just to get back
to where I started…..sweet….(sarcasm mode off ).

B) “the Jam people”…..sorry not familiar with this Garthism….? Different from the guy in the Orange shorts?Q
—–

I am still waiting for the day when someone like you posts the same sort of thing about a real estate property they bought in the GTA.

Ya maybe in another lifetime

#89 pbrasseur on 09.17.15 at 8:06 am

#54 Sheane Wallace

There will be a hike tomorrow.

The case for a hike is compelling indeed, low unemployment leading to shortages in some sectors, inflation running near 2% (once you take the one time effect of oil), housing starts up 25% in the past years, etc…

Plus there are all the perverse effects of low rates you wish to avoid (as we see so well in Canada).

The FED in running out of excuses to procrastinate.

#90 Jas on 09.17.15 at 8:19 am

For insights about Canada’s economic health, look at household debt.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/trying-to-understand-canadas-fiscal-state-debt-doesnt-lie/article26387699/

#91 fancy_pants on 09.17.15 at 8:38 am

#1 Waterloo Resident on 09.16.15 at 5:04 pm

should or should have? for the latter, the charts certainly tell a story.

IMO historical price charts are not overly useful for forecasting. About as useful to me as any present or former BofC governor finger wagging while warning over imminent rate increases. just a boy crying wolf

hope I am wrong but got tired of holding my breath.

If rates do take off in the US, as Garth mentions, it will not fare well for RE here. The BofC hand will be forced to raise rates to curb even greater import inflation (unless oil recovers, that could be the saving grace)

#92 Adam on 09.17.15 at 8:45 am

“A bunch of smart people believe the values of prefs will rise by at least 10% in 2016″

Garth, I didn’t think you made market predictions…? Also preferred shares trade capital gains for dividends. Capital gains from Cdn sources have a similar tax break. Why the obsession with preferred shares?

No prediction from me – just passing along a commonly-held belief on Bay Street. As for the tax-efficiency of dividends vs capital gains, investors with balanced and diversified profiles harvest both. If you paid more attention, you’d know a reasonable target for preferreds is 15-18% of a balanced portfolio. — Garth

#93 Llewelyn on 09.17.15 at 9:26 am

What a great world we live in.

When equities are going up it’s a great time to buy. The world will only get better.

When equities are going down it’s a great time to buy. The world will only get better.

According to the cheerleaders as long as you put a diversified selection of eggs in your basket you are all but guaranteed a 6 or 7% return on your investment as long as you are patient.

It would appear that while the collective value of equities may fluctuate wildly in the short term the collective value over the long term always, yes always, appreciates at a rate greater than inflation.

Millions have chosen to invest on the premise that diversity and patience will be rewarded. I sincerely hope their confidence is rewarded.

From my perspective however equities are dancing to the tune of far to many variables that the cheerleaders have no control over. My faith that past history of positive growth can be assured in such an unpredictable environment has been seriously shaken.

In my world stability, predictability and the avoidance of unnecessary stress are valued far more than promises based on an environment where no one has a clue what may happen tomorrow, let alone over the next 25 years.

Do you have financial wealth? If so, where is it? — Garth

#94 Dominoes Lining Up on 09.17.15 at 9:42 am

“Debt doesn’t lie”

The headline says it all about what we are heading into.

Good points here about seniors in debt and intergenerational lending.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/trying-to-understand-canadas-fiscal-state-debt-doesnt-lie/article26387699/

#95 Kryton619 on 09.17.15 at 9:50 am

The Federal Reserve like any corporation will do what they feel is best for their shareholders, not what is best for the US taxpayer.

Personally, I think the US economy has not had any recovery. Any jobs that have been created are low paying service sector type jobs. Labour participation is at record lows. The stock market is moved by HFT algos buying and selling based on JPY/USD.

The Fed reports to Congress. Its constituents are the taxpayers. — Garth

#96 A Nobody on 09.17.15 at 10:18 am

Llewelyn at 9:26 am
What a great world we live in.

When equities are going up it’s a great time to buy. The world will only get better.

When equities are going down it’s a great time to buy. The world will only get better.

According to the cheerleaders as long as you put a diversified selection of eggs in your basket you are all but guaranteed a 6 or 7% return on your investment as long as you are patient.

It would appear that while the collective value of equities may fluctuate wildly in the short term the collective value over the long term always, yes always, appreciates at a rate greater than inflation.

Millions have chosen to invest on the premise that diversity and patience will be rewarded. I sincerely hope their confidence is rewarded.

From my perspective however equities are dancing to the tune of far to many variables that the cheerleaders have no control over. My faith that past history of positive growth can be assured in such an unpredictable environment has been seriously shaken.

In my world stability, predictability and the avoidance of unnecessary stress are valued far more than promises based on an environment where no one has a clue what may happen tomorrow, let alone over the next 25 years.

Do you have financial wealth? If so, where is it? — Garth

—–

Well said Llewelyn and if I can respond to Garth’s question , my wealth is in bricks and mortar since as much as the many variables in the future are so unknown the one constant is the need and want of so many for a roof over their heads

No I am not a realtor I am a realist.

Did I ask you? — Garth

#97 No Hike 2 on 09.17.15 at 10:20 am

See my name above.

Rising rates ? Yes, long term rates will go higher from here.

#98 Grantmi on 09.17.15 at 10:20 am

#7 VH on 09.16.15 at 5:28 pm

Garth asked….again….”Will interest rates begin their ascent Thursday at 2 pm Eastern?”

In a word….No. They can’t raise the rate in order to make T-bills more attractive to investors as the whole US eek-onomy is a debt bubble. Even a rise of a quarter point would be disastrous.

They’re moving because they have to move. It’s time.

Also…Janet’s rep is on the line… and I don’t think she wants to be known as – Yellow Yellen!!

#99 john duffy on 09.17.15 at 10:25 am

How to make dog poo into diamonds!

Fed Audit Shocker: They Come from Planet Klepto
https://www.youtube.com/watch?t=1189&v=jt377DV2BKs

#100 T on 09.17.15 at 10:41 am

Garth,

How can you classify preferred shares as fixed income?

In a bankruptcy secured creditors get paid first (issuers of property mortgages, equipment leases, etc.), then unsecured creditors (credit card bills, unpaid insurance premiums, unsecured loans, and bondholders), THEN shareholders (first preferred’s, then common).

Sure they’re “special” but hardly ahead in line if a company defaults.

In addition, the URL shows a chart of how preferred’s faired against short and long term bonds for the last 8 years. Clearly there is much greater risk and volatility than actual fixed income – bonds.

Investors expect fixed income to be safer than equities and dampen volatility; which preferred’s clearly aren’t doing. I don’t think it’s wise for investors to substitute bonds for preferred’s in a balanced portfolio which your post seems to imply.

It implies no such thing. In a 40% fixed income portfolio portion half should be in a variety of bonds and half in a variety of preferreds. Prefs are definitely ‘fixed income’ with a set dividend. — Garth

#101 A Nobody on 09.17.15 at 10:56 am

Well said Llewelyn and if I can respond to Garth’s question , my wealth is in bricks and mortar since as much as the many variables in the future are so unknown the one constant is the need and want of so many for a roof over their heads

No I am not a realtor I am a realist.

Did I ask you? — Garth
—–
No you didn’t . I volunteered an answer out of turn.

I really do think that you believe that a financial asset portfolio will be a better tool for securing a financial future for the average Canadian. I believe that you do because you believe that the average Canadian will be able to inform and educate himself enough such that he will be able to divorce himself from his emotions that will inevitably interfere with any long term plans he sets in motion, when financial markets ” misbehave” as they have done for the better part of the turn of the century.

I think otherwise.

In fact I choose to pander and cater to those same emotions that drive same canadian to believe that “so long as you have a roof over your head that’s owned” you are doing alright.

Different strokes for different folks I guess.

#102 Llewelyn on 09.17.15 at 10:56 am

Garth

In answer to your question I have a modest nest egg consisting of bonds, money market funds and GIC’s.

From time to time I top up my savings account to cover the cost of travel and improvements to my humble dwelling. Being 68 and single without children I am less interested in growth and more interested in portfolio preservation.

I am not suggesting that equities are not a sound investment option only that some Canadians might have different priorities and might be uncomfortable with the uncertainty within our current environment.

No need for me to comment further on personal preferences. Please continue providing balanced advice for those with other priorities.

#103 Canadian on 09.17.15 at 10:59 am

#91 Llewelyn on 09.17.15 at 9:26 am

I agree. Investors by nature are investing in the future progress of humanity, whether at the market high at the time or the low. A whole world index ETF is basically betting “the world won’t end” no surprises the assorted losers and doomers of the world are so critical of it. They are fundamentally misanthropes.

In a thousand years humanity might be exploring the stars, and the doomers of the day will still be saying the collapse is imminent.

#104 A Canadian Abroad on 09.17.15 at 11:08 am

#91 Llewelyn – “When equities are going up it’s a great time to buy. The world will only get better. When equities are going down it’s a great time to buy. The world will only get better. ”

If I may add, when equities go up, it’s a great time to shave off some profit and diversify those gains. Wait for a dip and when the market drops, put that profit to work.

With Real Estate we only have a “sell 100% or nothing”, IF you can sell. Wouldn’t it be wonderful to sell X% of your house at these levels and put that into another asset?

For rate expectations: From what Mr. Market (DOW/S&P) said, it’s been bullish for the past 5/7 days so it’s expecting a RATE HOLD. Will it be? Anyone’s guess.

#105 Ralph Cramdown on 09.17.15 at 11:10 am

#91 Llewelyn — “From my perspective however equities are dancing to the tune of far to many variables that the cheerleaders have no control over. My faith that past history of positive growth can be assured in such an unpredictable environment has been seriously shaken.”

If you’re having trouble predicting the variables you’re trying to predict, either research more and try harder, or… TRY TO PREDICT SIMPLER THINGS.

All those people you see stroking their smartphones on the sidewalk, in the malls and at red lights in their cars? It’s a slam dunk to predict that nearly all will pay their phone bills this month, and buy a new phone in the next few years. People driving cars are going to put more fuel in them before they run out. All the people you see drinking coffee today are going to drink it again tomorrow. They’re going to pay their mortgages, buy their pills, do their grocery shopping, watch the blowhards on TV tell them everything’s going to crap, brush their teeth and go to bed.

This sounds trite, but I’m serious. You do not need to outguess Wall Street about the Federal Reserve’s actions to successfully invest in ‘equities.’ The time when everyone agrees it’s sunny and the economy is doing great is usually the WORST time to buy stocks. When everyone’s complaining about the crap sandwich they’re eating AND that the portion is too small… usually a great time to buy.

Read some history, and discover that it’s always been a terrible and uncertain time. Cuban missile crisis, Vietnam, energy crisis, stagflation, 80’s banking crisis, emerging market debt crisis, 9/11, SARS, global financial crisis, China!

#106 mnpr on 09.17.15 at 11:11 am

Hi Garth. I know you don’t often answer questions directly but I’d appreciate getting your opinion on a particular situation.

I’ve owned ZPR for over a year now in my unreg account. Sold something else for a nice capital gain. Thinking of selling some ZPR now to generate a capital loss to offset the capital gain. And then to immediately buy another pref ETF such as CPD to stay invested in prefs. But I understand that you cannot buy back an asset within 30 days or the cap loss is not allowed. As ZPR and CPD are similar assets is there a chance rev Canada will disallow my cap loss claim if I do this?

Appreciate yours or others opinions.

#107 Ralph Cramdown on 09.17.15 at 11:19 am

#100 Llewelyn — “Being 68 […]”

My apologies. You sounded younger. You’ve lived through more decades of global collapse than I have.

When did the world collapse? What decades were those? — Garth

#108 Nagraj on 09.17.15 at 11:24 am

#91 LLEWELYN and #94 NOBODY and GT’s tangentially testy replies . . . make for a very interesting discussion.

The vast majority of people don’t have a stake in the stock mkt (pension funds aside) and couldn’t care less – if you tell ’em you made money in the mkt they’ll tell you it’s cuz yas got lucky, and if you tell ’em you lost money, it’s cuz yer stupid.
GT’s investment advice requires a nice little kitty, a long time horizon, discipline and patience. (I readily admit to having zero discipline and zero patience.)

For all of the attempts by MSM to present the stock mkt as a proxy for the economy – most people think of it as a rich man’s casino.
What matters to them – good jobs, housing affordability, a bright future for the kids . . . will elect Mulcair.

[By the way and for the record, Todd Harrison held that the first move in stocks right after a rate announcement is – usually – the wrong move which gets corrected the same day.]

#109 saskatoon on 09.17.15 at 11:26 am

any thoughts as to what will happen to retail space as the property bubble unwinds?

#110 Rational Optimist on 09.17.15 at 11:33 am

I have nearly always read that the main (and significant) benefit of preferred shares were their tax advantages, and that one should hold them only in a non-registered account. In registered accounts, they offer benefits over bonds, but with added risk.

So, what about us losers who only manage to max out our TFSA and RRSP accounts, and hold everything in registered accounts? Is it really necessary to add preferreds to our bond holdings?

#111 Holy Crap Wheres The Tylenol on 09.17.15 at 11:37 am

#197 Smoking Man on 09.16.15 at 2:54 pm

#155 Holy Crap Wheres The Tylenol on 09.16.15 at 9:18 am
Holy shit smoking Man you really rang the LGBT bell on this one. Better start waving your rainbow colors and dancing naked on the next float along Wellsley. That is one subject you should leave alone, personally I don’t give a shit what you do with your life as long as you don’t hurt anyone or create terror. Let em be homosexual, bi-sexual or transgender. However Wynne is an affront to his/her community by playing out the I’m gay card. What his/her party has done and will do to this province is criminal. Straight or whatever criminal is criminal.
………………………………………………………
I dont think I wrote anything offensive..
If so, just posted my mug shot on my blog. Come get me.
Just beautiful on the water today.
Finally talked the wife into going to usa
Woo Hoo
____________________________________________
Like I said I don’t give a shit if you want to live your life that way, for all intents and purposes hell if your a normal, transgender, gay, bisexual and you want to marry a freaking doberman go ahead. Just let them live that way they want to, weird or not, what ever turns them on man!
By the way make sure you pick a good state to move to some are worse off than living here in Canada. Good luck with wify poo, perhaps you could move to Las Vegas or Atlantic City? You work your butt off and she gambles all day. Good deal for her, bad deal for you :(

#112 Ralph Cramdown on 09.17.15 at 11:55 am

When did the world collapse? What decades were those?

Every last one of ’em from the perspective of an investor thinking “now isn’t the right time to invest in stocks because…”

It wasn’t my generation digging backyard bomb shelters, watching the urban riots on TV, or lining up at King and Bay to buy gold because Soviet armoured divisions were coming through the Khyber Pass.

#113 OXI in GREECE !! on 09.17.15 at 12:03 pm

#95 Kryton619 on 09.17.15 at 9:50 am
The Federal Reserve like any corporation will do what they feel is best for their shareholders, not what is best for the US taxpayer.

Personally, I think the US economy has not had any recovery. Any jobs that have been created are low paying service sector type jobs. Labour participation is at record lows. The stock market is moved by HFT algos buying and selling based on JPY/USD.

The Fed reports to Congress. Its constituents are the taxpayers. — Garth
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Here is the Fed reporting to congress: "will you tell us to whom you lent 2 trillion dollars to?" Bernanke "No"

Yup….they are reportable to congress all right….

https://www.youtube.com/watch?v=id04EMU6OIw

(two trillion invented out of nothing by the way)

#114 Lea on 09.17.15 at 12:09 pm

NYTimes says: 25.3% chance of a Fed raise today, 77% by March:

http://www.nytimes.com/interactive/2015/business/economy/fed-interest-rates.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

#115 cocerned tax payer on 09.17.15 at 12:20 pm

I’m surprised we haven’t heard more about the Leap Manifesto that that many prominent NDP members (including Stephen Lewis) have recently come out to support. It is a radical idea to change our government, economy, and society. It calls for all fossil fuel production in Canada to be stopped in 2 decades. This has the potential to derail the entire NDP election campaign, especially in Alberta.

#116 pwn3d on 09.17.15 at 12:38 pm

#79 Leo Trollstoy on 09.17.15 at 1:36 am
Tens of thousands of IT jobs available. A plethora of jobs.

The fact that today’s supposedly educated engineering graduates aren’t considered viable candidates speaks more about the candidate than the availability of high paying tech work.

The labour market is in amazing shape for those who aren’t idiots.

http://www.cbc.ca/m/news/business/54-000-canadian-it-jobs-unfilled-idc-estimates-1.3230733
——————-
I thought things were looking up for Mark until you added that last line.

#117 lee on 09.17.15 at 12:39 pm

David Rosenberg says nothing to worry about when it comes to Canadian housing market. There you have it from yet another expert. Stop waiting for a crash. You’ll be old and gray by the time it happens, especially in Toronto.

#118 Julia on 09.17.15 at 12:41 pm

#100 T

Even worse in reality, secured creditors are much further down the list than #1. They come after the Government, salaries, pension liability (although this is still a hot issue) and many others. Secured creditors are lucky to get most of their money back, more often than not they get pennies on the dollar. Everyone else is s.o.l.

#119 RayofLight on 09.17.15 at 12:41 pm

#34 espressobob on 09.16.15 at 8:29 pm
zpr could be a superstar. Most won’t get it.
———————————-
I think you are right. Most people won’t get it. It has steadily lost over 30% of it’s value in the last 18 months. Me, I like to invest in equities that gain in value over time. I guess that calls me a ”gainer”.

#120 Holy Crap Wheres The Tylenol on 09.17.15 at 12:51 pm

2:00 PM and ticking down until boom! Tick, tick, tick, tick…………………………
http://www.marketwatch.com/story/when-is-the-fed-decision-2015-09-15

#121 Smoking Man on 09.17.15 at 12:52 pm

#197 Smoking Man on 09.16.15 at 2:54 pm

#155 Holy Crap Wheres The Tylenol on 09.16.15 at 9:18 am
Holy shit smoking Man you really rang the LGBT bell on this one. Better start waving your rainbow colors and dancing naked on the next float along Wellsley. That is one subject you should leave alone, personally I don’t give a shit what you do with your life as long as you don’t hurt anyone or create terror. Let em be homosexual, bi-sexual or transgender. However Wynne is an affront to his/her community by playing out the I’m gay card. What his/her party has done and will do to this province is criminal. Straight or whatever criminal is criminal.
………………………………………………………
I dont think I wrote anything offensive..
If so, just posted my mug shot on my blog. Come get me.
Just beautiful on the water today.
Finally talked the wife into going to usa
Woo Hoo
____________________________________________
Like I said I don’t give a shit if you want to live your life that way, for all intents and purposes hell if your a normal, transgender, gay, bisexual and you want to marry a freaking doberman go ahead. Just let them live that way they want to, weird or not, what ever turns them on man!
By the way make sure you pick a good state to move to some are worse off than living here in Canada. Good luck with wify poo, perhaps you could move to Las Vegas or Atlantic City? You work your butt off and she gambles all day. Good deal for her, bad deal for you :(
……..

Good Entertainment is expensive.

Boston? any good, never been.

Damn counting down till 2pm.
I so need a spike….. waiting is killing me.

I feel like I’m at the track, my pony is in second place on the final stretch. I’m screaming GO YELLIN GO GO !!!!!

I’m betting on her to do the wrong think…

#122 Ponzius Pilatus on 09.17.15 at 1:38 pm

Smoking Man says : Play the player not the cards.
——–
Pretty old fashioned. That’s the old school thinking in Hockey.
Now it’s : Play the puck not the player.

#123 bdy sktn on 09.17.15 at 1:49 pm

No hike.
Someone knows.
Mkts up for a reason.

#124 Retired Boomer - WI on 09.17.15 at 2:00 pm

I still believe the market will be higher in years to come, than it is currently. The road is a curvy hilly old path as it has ALWAYS been.

Those Fixed income things, bonds & preferrred’s help smooth out the ride, like a nice luxury car. Yeah, your rear end is going over the bumps all right, you just don’t notice them as much.

So, will Yellen be jellin’ or back off? Who knows, who really cares -it is meaningless noise.

Unchanged – long live Chicken Yellen!!

#125 Smoking Man on 09.17.15 at 2:01 pm

Damn…

#126 TRT on 09.17.15 at 2:03 pm

So much for the hike.

Now markets pricing in less than a 50% hike this year. And by the time next year rolls around, the economy will be slowing.

They can’t raise rates. Reread that. Witness what’s happening.

#127 Ralph Cramdown on 09.17.15 at 2:03 pm

Only Lacker voted to hike.

#128 Gonkman on 09.17.15 at 2:04 pm

Bah…. Yellin is Yellow…

No Hike…

#129 Derek R on 09.17.15 at 2:06 pm

So. No rate rise. Excellent! Well done, Janet!

#130 Grantmi on 09.17.15 at 2:12 pm

Now the FED is to worry about GLOBAL CONCERNS!!!
Where is that in the FED’s mandate???

We’re screwed forever!!!!

#131 The real Kip on 09.17.15 at 2:30 pm

Did you feel the earth shake? Neither did I. Janet is just a talking head.

#132 Ralph Cramdown on 09.17.15 at 2:33 pm

Oh, look. The computers are trading with each other. Aren’t they cute?

#133 Rishu on 09.17.15 at 2:37 pm

Oh yea! The addiction to cheap money continues! Long live low rate! Long live Janet Yellen!

USA! USA! USA!

Now to vote for NDP…

#134 Pump and Dump on 09.17.15 at 3:12 pm

#125 Smoking Man

First Yellow, then BBD and now a little old lady.

Who knew aliens could be wrong so often?

#135 Dual Citizen In Canada on 09.17.15 at 3:50 pm

So who let the cat out of the bag? Clarence Beeks? The markets were rallying way before the announcement.

#136 IHCTD9 on 09.17.15 at 3:54 pm

#115 cocerned tax payer on 09.17.15 at 12:20 pm
I’m surprised we haven’t heard more about the Leap Manifesto that that many prominent NDP members (including Stephen Lewis) have recently come out to support. It is a radical idea to change our government, economy, and society. It calls for all fossil fuel production in Canada to be stopped in 2 decades. This has the potential to derail the entire NDP election campaign, especially in Alberta.
____________________________________________

This LM looks great, but stops short of perfection. I suggest they also ban all fossil fuel burning vehicles, and heating devices as well. That would really clean up the air, and clean air cranks up the economy almost as much as respect and dignity for others does. Those pop stars know best!

Perhaps they could also supply us all a government approved shovel to dig a hole to live in.

#137 Holy Crap Wheres The Tylenol on 09.17.15 at 4:28 pm

Smoking Man, Beantown is OK great place a little pricey.
The red brick Freedom Trail runs through Boston, home of Paul Revere tea party originals. Learn how to pronounce everything such as CAR is a CAAER, Park is Pauk

#138 Bottoms_Up on 09.17.15 at 5:42 pm

Garth, let’s forget about fixed rates. Let’s forget about the BoC following the BoA 90% of the time. What are tangible factors to look for in Canada that would signal an impending (variable) rate increase?

#139 Yanniel on 09.18.15 at 9:46 am

Garth, could your drop a line explaining how preferreds will benefit from rising rates?

I understand one of the features shared by preferred shares and corporate bonds is sensitivity to interest rates. When rates increase, the prices of both preferred shares and bonds decline, and vice-versa.

Thanks.

#140 Doug in London on 09.18.15 at 5:32 pm

@lee, post #117 and RayofLight, post #119:
I don’t get it. Housing, especially in Toronto and Vancouver, is at an all time high and there’s this idea prevalent that it will continue to go higher and higher for ever and ever. Meanwhile, preferred share ETFs have fallen, 30% in the case of ZPR, and a lot of people are afraid to buy them even though they are ON SALE and there is far more upward potential than downward. Shouldn’t the opposite be true? Shouldn’t there be extreme fear of overpriced housing, and endless optimism about these dirt cheap preferred share ETFs?