Who knew our new prime minister would stimulate investments as much as he does females? So just imagine if you’re a chick with a balanced and diversified portfolio. Awesome. Now you can economically justify that new screensaver!
It’s been four days since the red tide washed in, during which time Canadian markets have swollen like a patriotic beaver. The TSX popped, bond yields plumped and all that Trudeau stimulus played a role in keeping the Bank of Canada rate from going flaccid on us again. But fewer things have erupted more than those unloved preferred shares.
As you know, prefs are a hybrid between stocks and bonds. Like stocks, they pay dividends (while bonds pay interest). Like bonds, the payments are fixed. They’re generally less volatile than common stocks, and their dividends are safer, since a company must always pay pref owners before stockholders. Meanwhile the income has been great – currently about 5%, which beats the poop out of a GIC. Plus you can claim the dividend tax credit, which pushes the effective yield even higher.
So preferreds are considered ‘fixed-income’ assets, kinda like sexed-up bonds. They normally form about half of the 40% of safe stuff in a balanced portfolio, and add mightily to the yield investors collect.
Alas, but pre-Trudeau, preferred shares disappointed many people by losing capital value (the dividend stream continued undiminished). One of the most popular exchange-traded funds holding prefs, called CPD, tumbled 10%, then 14% and finally almost 20%. This caused unabated wailing, moaning and blubbering among investors who think every asset they own should go up at the same time, regardless of why they bought it (like collecting sweet income).
Why did this happen?
First, the economy has sucked fairly hard, thanks to the collapse in commodity prices and especially oil. That deflationary push dropped Government of Canada bond yields, particularly on the five-year notes. They form the benchmark for preferred shares, two-thirds of which are now ‘rate reset’ which means their performance is tied to bond yields.
Second, the poodles at the Bank of Canada cut the key national rate twice this year, once in January and again in July, which helped to crater things further, sending preferred values lower. So securities owning prefs, like CPD, took the hit.
This, you might recall, was when I wrote about preferreds, said they were stupid cheap and you might wish to buy some – especially since it’s evident US rates will be rising in the months ahead, and our bond market follows theirs 95% of the time. When rates rise, rate-reset preferreds bloat right along with them.
Well, enter the just-not-ready, nice-hair-though kid with his crazy ideas about spending up a storm, stimulating everything in sight and creating a majority selfie administration. Now look what happened to CPD.
As you can see, anyone smart enough to buy good assets when they’re unwanted has reaped a reward already – a capital gain of over 10% in the last few days, while enjoying a 5.11% annual distribution. Why has this happened and what comes next?
Things are getting better for the economy in general. Positive growth in June and July appears to be continuing into the autumn, meaning that much-publicized recession is history. (Robust consumer sales data out on Thursday was the latest indicator.) Second, there’s been some improvement in commodity prices and the value of a barrel of oil. Crude tumbled through the $40 mark in late August when the Chinese whacked us and has since moved into the $45-50 range. Bond yields have gone along for the ride, up about a quarter of a point (a big deal), fueling the preferred recovery.
Then, as I mentioned, preferred shares got too cheap to ignore. Investors looking for great long-term assets paying handsomely just to own them (some as much as 8%) couldn’t resist. Several financial advisory outlets (including this pathetic blog) shone a light on prefs, and the bottom was suddenly in. Finally, of course, there’s the Justin factor.
The majority Liberal government which arrived Monday night guarantees that Canada is about to enshrine stimulation. Ottawa will be spending at least $10 billion more a year than it takes in, throwing five billion annually at shovel-ready infrastructure projects, showering kid-laden families with money to spend on Netflix and iPhones, and (we’re told) trimming taxes for middle-class families – plus doing everything from restoring CBC funding (and you wondered why Justin got such great coverage) to shoveling cash into health care.
With all that spending, the big bank doesn’t need to goose things with cheaper rates. A lack of goosing, apparently, will be the least of our concerns. What a relief.
So, there ya go. Stand up for Canada.
150 comments ↓
How does one go about applying for stimulation from Justin?
I bought CPD at 11.95…. should I just sell in the $13+ range and take the 10%?
Thanks Garth! I bought CPD last month on your suggestion. Things are looking up.
So why not go overweight Preferreds now? Really turn that dial hard for a sure cap gain & 5%. Or would that be too Risque?
Thanks for the update, Garth. I can’t say I bought a few thousand units of CPD at the bottom, but the income stream is tasty and I’m enjoying the ride back up to profitability. Cheers and take care.
Took your advice today and bought some more preferreds (XPF). Thanks!
“This underscores our view that the highly stimulative impact of lower mortgage rates at the start of this year would wear out by September, October.” – Diana Petramala, TD Economics
At the beginning of 2015, the Canadian housing market was in trouble. House prices in many Canadian cities were softening quickly. Policymakers panicked. Action was taken to stimulate the Canadian economy and boost consumer spending. As predicted, Canadians quickly gorged on even more dangerous, cheap mortgage debt, helping to temporarily stabilize house prices in some cities and boost prices in others.
Two small one quarter percent rate drops by the Bank of Canada turned out to be “highly stimulative”, as Diana Petramala of TD explained.
This is bad news for Canadian mortgage holders. If two small one quarter point rate drops can stimulate the Canadian housing market that much, then the opposite will also be true – two small one quarter point rate increases will cool the housing market by a similar amount.
Each small rate drop by the Bank of Canada means that more (small, market-chilling) rate hikes are in store for Canada as rates inevitably normalize (go back to normal levels). This is bad news for Canadian mortgage holders who gorged on cheap debt to buy at near-peak (bubble) prices.
With house prices 3 times higher than in the 1990s in many Canadian cities, a 1% rate hike today will increase mortgage payments by approximately the same amount as a 3% rate hike would have when houses cost a third of what they do today. And It’s no secret that Canadian families are tapped out.
Housing bubbles have existed for a long time. This chart shows what happens to housing bubbles (second chart). 48 housing cycles from different countries were charted.
This chart doesn’t accurately show that Canada’s housing market was more overvalued than the US at its peak. Also, it was put together 3 years ago, in 2012. Canada’s bubble has inflated even more since then.
Canada’s housing market is currently overvalued by 89% compared to rents and 34% compared to incomes according to The Economist (see chart). Imagine how bad Canada would look now if its information was updated on that chart.
Incomes in the US fell as house prices corrected. That’s not an uncommon thing to happen as a housing bubble deflates. When a housing market is overheated and prices are rising at unsustainable rates, the economy gets a huge lift. It’s also true that, as house prices fall, the economy takes a significant hit and this negatively affects incomes as well.
When house prices fall in Canada the Canadian economy will weaken as a result and incomes will take a hit. This will prevent incomes from catching up to house prices, resulting in a even deeper price correction and preventing any sort of soft landing.
It’s only a matter of time in Canada. House prices will fall significantly (and not slowly) and many Canadian families will be caught in the tornado. Mortgage debt is not good debt. Unfortunately thousands of Canadian families will learn that the hard way.
As I’ve already shown, many housing bubbles have been inflated worldwide over the past number of decades (second chart).
Governments don’t willingly let housing bubbles deflate. The deflation of a housing bubble has dramatic and chilling effects on the economy of a country (and household finances of families) for a number of years until the economy resets (example: the US). Instead, governments generally do everything they can to prevent housing bubbles from deflating (think Canada right now).
Unfortunately for those Canadian mortgage holders who bought at near-peak (bubble) prices, the only possible outcome for Canada is a major, multi-year price correction, despite all that has been done and may be done in the future to prevent it from happening. There is no possibility of a soft landing for Canada’s housing market.
Those who claim that a soft landing is in store for Canada have not been able to point out an example of a housing bubble that deflated in a safe, controlled, soft landing manner anywhere in the world in the past.
Wolf Richter (Wall Street) knows a thing or two about housing bubbles. He explains what happens to them:
“Bubbles don’t land softly. They implode. It’s a brutal process. The longer bubbles are maintained, the more brutal their implosion (think Canada’s housing bubble).”
Years from now, all that has been done to inflate and maintain Canada’s massive housing bubble (and the economy-chilling effects of the bubble’s deflation) will be studied as an example of what not to do.
stimulate investments as much as he does females?
Canadian markets have swollen like a patriotic beaver.
stimulus played a role in keeping the Bank of Canada rate from going flaccid.
sexed-up bonds.
the economy has sucked fairly hard,
Now I need a cold shower…
Time to go back up hopefully. Many individual prefs of great companies typically have face values of $25, amazing how beaten up they became….got in a few months ago, maybe a bit early but I kept buying as the yields grew… CPD, HPR and BCE
Cheers !
Stand up for Canada. Yes. I love this country.
Yes. When Garth says it is time to re-balance/buy, it is a good time to listen. His accuracy % over the years is astounding. Sometimes, I even beat his recommendation timeline, like recently with Preferred’s, where I bought only days before he posted the advice. I posted here the days I bought CPD and ZPR. They had been beat up a bit, especially ZPR. Sweet deals. I also went full weight in with REIT ZRE when Garth recommended reits being a good deal. Though Garth recommended XRE. I like both. Nothing wrong with splitting one’s allocation/balance. Bought ZEO at its recent bottom, as I had gone full out of oil/gas last year at the peak, which I wrote about here when I did that. I invest with a 40 year timeline. Right now I am watching VXC, as I went slightly underweight Emerging markets/Europe/U.S. with China faltering. This is a small part of what I own, but Garth and others here are generous with their information, so I have been throwing out some of what I did the last couple of years. I hear the fellow dawgs asking for input, so here I am. I do stay around the 60/40 split of equity/fixed income, with diversity as Garth has laid out in both, although my balance is sometimes not as correlated as Garth’s. The key is, I have always enjoyed doing it, but I am not married to it, as that would make it feel like a job, or having a wife.
#1 Bubbles
You would have to go through his owner. What’s her name?
I took your free advice offered on this pathetic blog and am now over weight on pref’s
I’m OK with that
Thanks
RE:
Personally, I’m going long…… equities.
Of course the US economy is improving, with the recovery continuing. Every major data point is consistently supportive of this. — Garth
Exactly.
With previous GDP estimates being revised higher and more jobs than applicants, the U.S. is on a nice upward trajectory.
I can’t speak for other industries but my peers who work in Cali report a frenzy of hiring as employers compete for engineering and tech talent. Definitely a bonanza for those with relevant degrees.
Unlike Canada.
Ah, everybody loves to be the genius who bought CPD at 11.90. Always the cheery contrarian, I’m happy to reveal that I own 1382 shares of CPD at 15.3023 (numbers obtained right out of my Questrade IQ Edge platform). My average price was even higher before but following Garth’s logic I keep buying more every month and added even more at the bottom. I’m obviously still deep in the red but never for one second thought of selling. Instead, I’ve been reaping a healthy dividend stream every month and plan to hold it for many years.
I wanted to post this for anyone out there despondent at the decline in preferreds and who bought higher. Those of us savvy enough to keep averaging down and holding will have the last laugh, as we usually do.
Garth,
The readers that come to this pathetic blog tend to have more an appetite and disposition for acquiring, accumulating and protecting wealth….yes even your realtor trolls come here to learn and improve their financial IQ. So it should not come as surprise if your Greater Fool poll—no matter how big you boast your poll is—would not be representative of the general public’s sentiment. The majority of Canadians are just not interested in discussions about tax structuring, estate planning and asset allocation strategies (yawn). In this media driven age there are more distractions, titillation, and stimulation than ever before. The people wanted a Prime Minister who is chic, fresh and debonair…..in this case the opposite of the incumbent. Oh well out with old in with the new. Wash, rinse, repeat. You get what you vote for. As things were starting to get really coo coo in Ottawa toward the end of his time in office (as it does with any long standing leader), we thank Mr. Harper for his service to this fair Dominion and acknowledge it is impossible to please 35 million people at the same time. None of the national polls predicted a Liberal government majority. What have we learned? Polls are just another entertainment tool that try to predict the emotions and machinations of millions of vastly different people………………..kinda sounds like the stock market.
“When house prices fall in Canada the Canadian economy will weaken as a result and incomes will take a hit. This will prevent incomes from catching up to house prices, resulting in a even deeper price correction and preventing any sort of soft landing. “
Just want to say, I enjoy your well-written and concise posts.
One point I would add to your argument is that the people who enjoyed the most vibrant income growth during the inflation of the housing bubble, are also the same group of people who are likely to see the least vibrant income growth (if not contraction) during the deflation of the housing bubble.
In such case, think public servants, Realtors, healthcare workers, FIRE workers, construction, etc. A significant price downturn in Canadian RE will inevitably cause a significant hit to the income of these groups on account of the government being forced into austerity to fund CMHC payouts.
The real beneficiaries going forward will be those who weren’t in a position to over-indulge in housing over the past decade on account of inversely correlated income (think: engineers, for example). But whom are likely to enjoy higher income on account of such inverse correlation as investment capital is liberated from the housing sector and towards growth in other sectors of the economy.
Trading against the majority of the population (deeply over-invested in housing) can be an incredibly profitable proposition for the few who have the courage to do so. For everyone else, the balanced portfolio and at least some adherence to Garth’s conceptual “Rule of 90” can limit the severity of the downside.
…Netflix, iphones and also for winter, Cuba, Mexico, Disney…
For that, wja, trz.b seems to be a good buy
USD CAD 1.31 …. and going up, I bet.
if the stock market is all the dogs care about then why all the bellyaching during the campaign period? Justin is singing the stock market’s tune (just like Draghi did today) then surely.. SURELY such minds as the ones here represented should have seen that before today…
?? yes? No?
it’s print forever, don’t you know? print print print!
“Ottawa will be spending at least $10 billion more a year than it takes in…” that is the whole problem. Pretending to be living in a “sunshine and lollipops” world is just a short fix. We will all pay for this fantasy lifestyle in the end. The real problem has not been corrected.
We will see if Trudeau comes in with the promises he made with the First Nations in the North. Hopefully, we will start to see this in about a 100 days. No one should be without drinking water and that has been with the Conservatives, and before them the Liberals.
Should only give a party two years to see what promises they can give, not two terms (eight years).
A special calculator for Preferred Share investors,
http://tinyurl.com/oruqwwu
Victoria Real Estate Update
Those who claim that a soft landing is in store for Canada have not been able to point out an example of a housing bubble that deflated in a safe, controlled, soft landing manner anywhere in the world in the past.
——————————
Not sure who’s predicted a soft landing – maybe some banks?
But not all real estate bubbles, and Canada is truly in the midst of an epic bubble, “implode” as Wolf implies – his sample size is really the GFC – just one bubble.
Indeed many bubbles are defaulted simply by being deflated over several years by values being eroded by inflation.
For example, many major cities in North American (like LA, NYC and WashDC, …..OK and dinky little TO) in the late 1980s gassed up to nasty bubble levels. Then they deflated 15-20% in the early 1990s. But in real terms they continued to deflate another 20-25% to the end of the 1990s. These cities corrected in real terms by 40-50% over the span of a decade.
Most people, not understanding the difference between nominal dollars and real inflation adjusted dollars, did not notice the deflation in housing values in the mid 1990s to 2000. House prices were just “stable” and there was no panic to buy – things would be priced about the same this year as next – a real estate agents worst nightmare.
Same thing happened in London England from 1987 to 1998. After nearly doubling in value in the mid 1980s the real value of London homes returned to their pre bubble level by the late 1990s.
When there are quick and shocking correction like we had in the GFC or during the early 1980s you need a major catalyst that makes people have to sell (and makes buyers not able to pay as much). Of course in the GFC that was massive defaults caused by mortgages fraud, devastating unemployment and worldwide economic panic. In the early 1980s the crash was caused by a quick 6 percentage point increase in mortgages rates as central banks took on double digit inflation.
At this point in time the only plausible catalyst that would cause a housing crash in Canada (and for that matter many other bubbly nations like Australia) would be a sudden and significant rise in interest rates. And a 2% rise over 2 years isn’t going to do it.
More likely we are in line for a long and grinding decade long correction like we saw in the 1990s in Toronto as interest rates slowly ramp up.
Today, Canadians with average income roughly $50,000 a year pay $5,000 a year towards C.P.P. contributions $2,500 from your paychecks, $2,500 from the employer.
Now, in Ontario, ORPP will add another $2,000 a year towards another pension scheme and probability soon C.P.P. for Canadians as well.
We all know that in 40 years we will not get a pension at age 65, more like at age 75.
Knowing this and a 30 year old working today and retirees in their late 60’s or early 70’s, they will of lost about $5,000,000 combined in their RRSP’s.
I calculated it many times with lost RRSP income tax refunds not reinvested and RRSP contributions and a modest 4.00% compound annual return plus all the extra increases these pension plans, C.P.P. and ORPP will make over the years. This is pretty much what people lose over their working life.
C.P.P. today pays maximum $12,800 a year and assuming inflation between 2.5% to 3.00%, the most optimistic C.P.P. would pay out $38,000 to $48,000 or combined $76,000 to $96,000 for a 2 spouses or 2 C.P.P. contributors.
However, $5,000,000 in RRSP’s even getting modest 3.5% to 4.0% annual income from investments would generate $175,000 to $200,000 in annual income.
Can you say what a ripoff! This is what the enhanced C.P.P or the new ORPP is. Liberals, federally and provincially for a party with their root word meaning freedom in their name they are just the opposite.
Confusion by design Canadians, wake up!
imagine:
“Who knew our new prime minister would stimulate investments as much as she does males?”
can’t ya just feel the male privilege?
#19, Justin is not singing the stock market’s tune, and as far as Canada’s GDP improving 1% goes, that’s due to the efforts of Harper. If you have NOT BEEN PAYING ATTENTION then the whining is due to expectation of paying YET MORE FRAKING TAXES when our tax burden is already unnecessarily high. Not that I believe you’ll understand anything I’m saying here, what with my using the big words and all.
And why did Harper lose the election? He tried to break the rule of 3. Coaches don’t get listened to after the third year. PMs don’t get re-elected after the third tenure (is tenure the right word?) with only a few exceptions. Break the rule of 3 and you are out. It has nothing to do with policy, or results, or psycopathy (you have to be nuts to want the job in the first place IMHO and just as nuts to deal with the pressures/issues).
And just because the market is improving now does NOT mean it will continue to do so. Justine has sat 0 days so far as Prime Minister, although a shocked US State Department suddenly trying to praise the Canadian troops has to be one of my all time favourite moment of late. What … leave … you can’t leave … what if we give you that pipeline you wanted … wait …
Is it just me or does Garth want us to believe that he did not buy any preferreds until last week. I could always get great returns if I always bought low and sold high. Garth you have been pushing preferreds for a while now. I would like to know what your real return to date is. And yes I to do believe in a balanced portfolio that is rebalanced.
Did I not make it clear you want these assets for yield, not capital gain? Buying cheap just makes it sweeter. — Garth
THE FIRST LIBERAL BETRAYAL
I am certainly amused by all the excitement around the new Liberal government.
Somehow Liberal politicians will be different than all those who came before – no scandals, no pork barreling, no inane projects. Canada will be a utopia – much like the US was to become after Obama was elected.
Here is my bet for the first glimmer of the true nature of these Liberal wolves.
Right now across Canada Liberal fat cats, bag men, and ex-politicians are eyeing up those tasty Senate vacancies.
Justin will be getting all kinds of congratulatory calls from these Liberal insiders who will eventually get around to mentioning they would be up to serving their country as Senators if called upon.
And why not – a lifetime membership in a $220k/yr club (with benefits) with no requirement of actually be present or conscious.
I expect that the JT will use the excuse that Liberal Senators are needed to balance the dominance of the the Conservatives in the Senate.
Mr Trudeau, will exclaim that “he had no choice”.
And it will be done in the first year so we amoeba brained voter have 3 years to forget.
#20 Gut Check..
Yep, just keep printing money USA, CHINA and EUROPE. If XXXX Trillion hasn’t helped, why not more? How about we just give presses to everyone? Make it easier.
Make the markets even more false than they already are.
What’s another 10 Billion from Canada per year? Peanuts..
No wonder I’m depressed.. I should be enjoying this party while it lasts but thinking of the clean up afterwards makes me want to puke.
What a world for my 16 yr old to inherit. What a big JOKE.
Time to buy some preferreds tomm. I’m still ahead in price than when they were suggested here a month or so ago….
Regarding the picture.
I sure hope my wife doesn’t want me to try that manoeuvre in the bedroom .MEDIC!
Lovin’ it Garth :)
I told you before, in Heaven they won’t let me see any porn, but I’ve convinced them your picture-less blog is a kind of spiritual financial entertainment, so Flaherty and I read it everyday.
Hmmmmmmmmmmmmm……..
You probably can’t avoid CPP like we here in the US can’t avoid social security.
That is NOT retirement security. Retirement security comes from your TFSA (ROTH here), or your RRSP (401-K here) especially if your employer offers a match of any kind. Hey, free money compounding for 30 years is still FREE money, FOOL!
Naturally, you will pay income taxes on those RRSP drawdowns, but you may be in a lower tax bracket come geezer time. The TFSA is all yours no taxes -what a great gift!
This is “retirement money” NOT house money, or, we need a new car money. For consumer spending set up a savings account.
I can’t believe the broke geezers I run into every dam day.
Some are younger, some older. Almost all had inadequate savings, or worse panicked when the stock markets puked up a hair-ball and switched to bonds -effectively locking in a loss.
Fear NOT what your new PM can do to you, Fear more what you can do to yourself. I enjoy watching idiots squirm, but not when they’re old, wrinkly, and have no choice, or chance of recovery from stupid. Stay the course.
to all the cons on this blog.
If Trudeau keeps his promise of reforming the election system to a proportional representation, than you should be looking for an exit, unless you are willing to live in a country that will never again elect a majority conservative government.
Canada is chosing style over substance.
Hot condos over diverse portfolios
Hot prime ministers over safe leaders
Spending over saving
As the night goes on, the party is getting better and better – Even Gartho is getting caught up in the feel good of all this.
But all these decisions will have consequences the next morning… Canada is already partying into the sunrise. Our neighbors, the US, already slept most of it off and showed up to work on time, their hangover wearing off fast.
Our hangover is yet to come, but you can be sure its gonna be a bad one…
sold all energy etf/funds about a year ago.
oil was 75 then. 45 now.
been cheap for almost a year, time to start going back up.
bought back in today.
also, i may finally get some of that 5.89% cpd at prices right where i like’em.
Is that yoga or the Kama Sutra?
Thoughts anyone on Valeant pharmaceuticals? Bre-x or misunderstood?
Another great lesson in why smart people don’t buy individual equities. — Garth
Wow – that was a lot of personal potshots with some legitimate information on preferred shares, ending with a lot more personal potshots.
What ‘potshot’? I treat everybody like that. — Garth
Jack Smith
Most people don’t save that’s the problem,too many other things to spend the money on here and now.Forty years is a long time off for an investment window and the delayed gratification is a foreign concept to a lot of people and when you sacrifice to get there everyone envies/hates you now because you have something they don’t /won’t ever have(financial security).
nice photo. makes me regret the vaulted ceiling in my bedrooms !
Business as usual in Ontario:
http://www.theglobeandmail.com/news/national/ontario-did-not-ask-for-receipts-before-paying-25-million-to-teachers-unions/article26934662/
The Ontario government did not see receipts for the expenses of three teachers’ unions before secretly paying them $2.5-million to cover their costs during contract talks.
Education Minister Liz Sandals said on Thursday there are no itemized accounts of exactly what the taxpayers’ $2.5-million financed.
“You’re asking me if I have receipts and invoices. No, I don’t,” Ms. Sandals told reporters when asked if there was any accounting for the expenses.
Ms. Sandals said she was satisfied $2.5-million was reasonable based on her own knowledge of bargaining expenses. The unions had to spend money for their officials to travel to meetings in Toronto, stay in hotels and eat pizza during negotiating sessions, she said.
“We know what hotel rooms cost, we know what meeting rooms cost, we know what the food costs, we know what 100 pizzas cost,” she said. “You don’t need to see every bill when you’re doing an estimate of costs. I don’t ask.”
In Question Period on Thursday, Premier Kathleen Wynne refused to say how much the government paid when asked by Progressive Conservative Leader Patrick Brown.
“Will the Premier answer two simple questions?” Mr. Brown said. “How much money did she pay the unions and their associations for their bargaining costs? Number two: Where did that money come from? A direct question. Please answer.”
Ms. Wynne instead took shots at the PC government of the 1990s.
Congratulations, Canada.
You just elected four years of this at the Federal level.
“More likely we are in line for a long and grinding decade long correction like we saw in the 1990s in Toronto as interest rates slowly ramp up.”
The problem with believing that Canada’s RE correction, now into its 3rd year, will be a slow grinding affair is that in the 1990s there was still room for interest rates to fall significantly.
http://www.bankofcanada.ca/wp-content/uploads/2010/09/selected_historical_v122486.pdf
The 5-year GoC bond fell from 10% at the beginning of the 1990s to roughly 6% by the end of the 1990s. Hence, the 1990s decline in Canadian housing was attenuated by a 4% drop in 5-year term interest rates.
Such a drop in rates is highly improbable for the next decade as we are already at sub-2% rates for 5-year GoC bonds and probably cannot drop severely into negative territory (as people would simply hoard cash instead of lending at negative interest as Garth reminded us earlier!). This time around, demographics are decidedly against growth in housing prices as the 65-year old future sellers.
What’s another 10 Billion from Canada per year? Peanuts..
Just to clarify, Trudeau’s election promise was for $10B/year in deficits for the first 3 years of his administration, and balanced budgets thereafter. Debt under Harper grew by roughly $259B (2005 to 2015, see my post yesterday). Trudeau and (especially) Mulcair, labelled as ‘big spenders’ by the Tories, ironically were running on promises of deficit targets far more austere than the Tories actually implemented in practice. And the Tory deficits are likely worse as contingent liabilities at the CMHC relating to subprime mortgage guarantees turn into actual on-balance-sheet liabilities.
So in light of such, I’m not sure why Garth continues to insist that the government is about to unleash a torrent of incremental stimulative spending over and above what the Tories did in practice. Unless the belief is that the Liberal platform was dishonest or poorly researched.
Another great lesson in why smart people don’t buy individual equities. — Garth
I have to disagree with you Garth. If you want to be “above average” you have to buy individual equities.
That worked out well, didn’t it? — Garth
#16 Ogopogo on 10.22.15 at 7:18 pm
Well said and congratulations!
Yield well deserved.
“This time around, demographics are decidedly against growth in housing prices as the over 65-year old future sellers outnumber the under-18-year old future buyers”.
Sorry everyone… Corrected my statement as above.
Had the opportunity to listen to BMO Chief economist Doug Porter tonight in Windsor as he presented to the high end BMO / Nesbitt Burns wrinklies (invited guest, not wrinkly and no BMO)
Mr. Porter is in agreement that there will be a small economic boost over the next three years with the infrastructure spending. Also in agreement that the US will raise rates by 1% but stated Mr. Poloz would not increase Canada’s rates until 2017 but believes the dollar has reached the bottom.
He disagrees that the country has a housing bubble/issue/overpriced market which should surprise nobody coming from a person who is paid by a bank.
Hates the idea of a returning to the TFSA to $5,500 and stated that Canada never entered into a recession. Yes two consecutive quarters of no growth but not a recession. “Best Recession Ever” was his quote.
95% of the wrinklies in attendance had the deer in the headlights look about 10 minutes into his presentation.
#33 Millmech
Exactly why I keep a low profile.
Failed to include that Mr. Porter believes that the US economy is nowhere near burning out. “At least” 5 solid years of growth left.
Anyone see the new US Debt ceiling number by chance?
Only $19,600,000,000,000.
What’s an extra 20,000,000,000 if QE4 is needed?
Yes that’s 20 TRILLION….
“Although the news was rather sad, I just had to laugh..”
“I used to be disgusted, now I’m just amused..”
Dance me to the end of love…
Another great lesson in why smart people don’t buy individual equities. — Garth
But I HAVE to buy it. “He who sells what isn’t his’n, must buy it back or go to pris’n.”
There’s a big difference between not buying stocks at all and not buying stocks with opaque accounting and P/Es of 90. Best quote, from a hurriedly revised Deutsche Bank analysis: “The bull case in the past had been tied in large part to the thematic appeal of the story […]” Indeed, the classic arc of the Greek tragedy.
Conservative Votes 2011 vs 2015
2011 5,832,401 (Wikipedia)
2015 5,600,496 (Elections Canada)
Difference of only 232,401, so most of Liberal win from somewhere else.
#16 Ogopogo on 10.22.15 at 7:18 pm
I appreciate your comment. My CPD holdings are similar to yours. While they’re for the dividend income it will still be fun to watch the value recover.
Garth, thanks for your posts and comments about preferreds these past few months. I benefited a lot from the education and reassurance.
P.S.
Is there a Garth screensaver available?
While we are looking at Ontario teachers, maybe some of those OPP, correctional officer, MOE etc. contracts need a look-see to see if they got a little grease too.
Any politicians, individuals or groups involved need to be outed but that won’t happen.
Kathleen will be trying to get an investigation going ASAP in a pathetic attempt to shut down the details and flow of info. on this file.
A formal investigation will deep six any details about involvement by the unions or the Liberals for at least 18-24 months.
“I can’t comment until the report by the _______ looking into this matter has been completed.”
Swollen beaver…
That doesn’t sound patriotic or in any other positive way.
Eeeeeewwwww.
#41..
Excuse me..only BILLION not TRILLION.
After all it’s only a letter..
Sorry math slightly off….for those with calculators…..231905
I reiterate advice I offered to young women and young men in one of my earlier comments.
Follow Garth’s advice. Flat out simple.
It is too late for me. My skull is too thick for it to have sunk in anyway. Plus concussions and early onset.
The daughter (20 years old) is a poli sci student, leans left, works very hard and has a TFSA. Absolutely refuses to accept money from me. Independent as hell. She’ll make it. Reminds me of the saying that “Children succeed in spite of their parents, not because of them.” She did not come with an owner’s manual.
Oh well, I will investigate emigration to Costa Rica.
Perhaps in my impoverished dotage, I can convince Nora Lenderby to pay me to walk her Corgis and groom her Thoroughbreds. ($7.50 per hour). My back will not allow me to trim feet or hot shoe. : )
Man I’m exusted.
Been staring at the screen for hours trying to type something original and entertaining for my 53 fans.
Drawing a blank…..
New gig killing me, Ive read the same 500 pages of the manual three times now and nothing is sticking.
Tied and true, click , type, experement the only option for me .
Making some progress…at times Dyslexia is a bitch.
On a side note, A head honcho in IT at my old tax farm, just got up and split weeks before bonus.
Something is up….
…..give or take….
Shit.
Don’t bug me.
SM – well claiming that you now have 53 fans is original and entertaining… ;-)
Mark – following up on our discussion on the last post – while it may be noble for us to raise min wage and “expect” higher productivity… the reality is that people are paid a combination of what they are worth and what they believe they are worth relative to the pool available. Employers will pay more… but they need to demonstrate that value add or create the impression of the value add (ie, watch SM here).
Globalization is altering our way of life but there are so many technologies that are raising the quality of our lives that even the “poor” of Canada (unless in a family with drug/gambling/alcohol related issues) are generally living at a far higher standard. Even better than the middle class from many societies in the past (and unfortunately, present).
Societies that have resisted globalization have done far worse than the countries that have embraced it. We need to be optimistic and try, try again to be the best in order to reap the most/best. If not, there are many others who are willing to work harder/smarter to have the lifestyles of even our poorest.
#29 common sense
#20 Gut Check..
Yep, just keep printing money USA, CHINA and EUROPE. If XXXX Trillion hasn’t helped, why not more? How about we just give presses to everyone? Make it easier.
Make the markets even more false than they already are.
What’s another 10 Billion from Canada per year? Peanuts..
No wonder I’m depressed.. I should be enjoying this party while it lasts but thinking of the clean up afterwards makes me want to puke.
What a world for my 16 yr old to inherit. What a big JOKE.
Time to buy some preferreds tomm. I’m still ahead in price than when they were suggested here a month or so ago….
————————-
I totally get where both of you are coming from and completely understand the truth behind the lies.
I’ve spent too many years swimming against the current and have found it only tires you out. I have learned that swimming with the current will still get you where you want to go. Just don’t loose sight of where you want to be.
That’s why I keep more than just my small portfolio diversified
Balance is what this world needs, and if we fail to find balance amongst us…
Nature will do the final balancing act for us
Bought about twenty K of cpd and zpr about two months ago and plan to keep it forever. Now gonna go listen to GNR.
#18 Mark on 10.22.15 at 7:26 pm
“The real beneficiaries going forward will be those who weren’t in a position to over-indulge in housing over the past decade on account of inversely correlated income (think: engineers, for example). But whom are likely to enjoy higher income on account of such inverse correlation as investment capital is liberated from the housing sector and towards growth in other sectors of the economy.”
I hope you’re right on this one. I still spend time looking for jobs in the US though. There’s so many more and the money is better.
“He disagrees that the country has a housing bubble/issue/overpriced market which should surprise nobody coming from a person who is paid by a bank. “
Yeah that’s what bubbles end up accomplishing. Otherwise highly intelligent people commonly end up completely deluded as to the future course of the economy and the price/viability of an asset class. As these people can be often be very influential (if not vocal), ironically, at least for a while, they can even influence the outcome. Making the nay-sayers look like complete idiots.
“On a side note, A head honcho in IT at my old tax farm, just got up and split weeks before bonus.
Something is up….
“
Forced out by management? With such a severe glut of IT talent on the market these days at all levels, its not inconceivable.
“So, there ya go. Stand up for Canada.” – HonGT
#HeLikesTheNightLife… #HeLikesToBoogie… #ButWoodyPickedTheWrongFarmer’sDaughter…
https://youtu.be/a1O5xWG8lM0
I noticed that since ’11 the divi on CPD has fallen 19%, and 10% in just the last few months, while the value has dived. I really don’t think there are many good yielding investments for the long term with everything pumped to the sky.
Hey NORA!
That WASHED UP LAWYER is offering to walk your Corgis and groom your thoroughbreds for $7.50/hr
NORA! I’ll do it for $5.50/hr
And I’m younger and better lookin’.
Downright handsome, actually.
– jes remembered Humphrey Bogart (the stable boy) and Bette Davis in “Dark Victory” . . .
And I’m better lookin’ than Humphrey Bogart.
But you can call me Humphrey if you want.
********************************************
Yo GARTHO!
If yer gonna get your knickers all in a knot over JT blowin’ $10B Loonies a year, why didn’t ya vote for the NDP and their balanced budgets?
(HAHAHAHAHAHAHAHAHAHAHA)
********************************************
RALPH CRAMDOWN:
How’s yer “monkeys” and the “War of the Month” party doin’ in the House?
Evidently the Treasury’s gittin nervous.
Not that we haven’t seen this “The Crushing Descent of the Deadly Debt Ceiling” movie before – but you gotta love that Tea Party and The Freedom Caucus, all draggin’ sacks chock full of little monkey wrenches to throw into the machine.
Garth
How do you know this isn’t a dead cat bounce on the preferreds?
Isn’t investing supposed to be long term, so why all the chutzpah over a short-term blip?
The recovery in capital value is a bonus to the tax-efficient income. Expect more as rates restore. This is clearly explained. Clean your glasses. — Garth
#28 omg the original on 10.22.15 at 8:05 pm
I believe your information is outdated…
(1) Senators serve only until they are 75, not for life
(2) Sometime in the last year or so, Mr Trudeau cut off all formerly “Liberal” senators which freed them up to act independently of the party. Now whether or not they do is entirely another matter and I’m in no position to say one way or the other.
Thank you, Garth for the tips and explanation about preferreds. Also it was probably your same advice that I followed : if they’re still churning out dividends and you’re not planning to sell, why worry? Even better if they’re on a DRIP. Playing the long game and earning 5%-8% virtually tax free. I’m only SOL if I have to sell, but it’s not like they’re my whole portfolio, and I certainly don’t have to sell them. It’s not like I’m buying real estate any time soon!
Anniversary , shooting in ottawa.
Vickers a no show, the four RCMP officers first on sceen not envited to the party.
Shit we got to do to be safe.
Bill C51
Hunter S Thompson lives.
The
Dyslexic Smoking Man
Just-in time is GREAT for gold. I love him already :)
For blowing the housing bubble even more…JUST LOVE IT for I have to gain on implosion.
Playboy PM for playboy nation.
I love it !!!!!
Looking up preferred ETF’s. What’s the difference between CPD (Ishares S&P TSX Canadian Preferred shares Comm), and CPD Ishares S&P TSX Canadian Preferred shares Adv ? Slight difference in price. Is one “better” than the other, or would either do? Anyone?
Too late to buy in?
Why am I reminded of this while reading these comments?
http://youtu.be/5dd-Un22DzA
Reading past blogs, from what I can see – Garth A+ on the preferred share and most economics subject.
Reading your past blog entries. OMG.
Recommending people to vote Conservative so people who can afford 10K TSFAs and elect a corrupt government. Seriously?
The conservatives are not the PCs our dads voted for. They are corrupt, oil men. Period.
Garth, stay out of politics. You obviously suck at it.
As a financial advisor and blogger seems like your thing. Advising who to vote for.
Not.
Assiduously, I did not recommend voting for any party, and found them all wanting. By the way, I may have more political experience and insight than you. Just a hunch. — Garth
Victoria Real Estate: Governments don’t willingly let housing bubbles deflate.
Stephen Harper was the beneficiary of lower interest rates and high oil prices. Speaking of high oil prices , they’re gone now.
It’s funny to think that you could reword Justin Trudeau’s election promise “and if elected I promise to push up the price of preferred shares”. A man of the people.
#68 LP –
”(1) Senators serve only until they are 75, not for life”
For a lot of people 75 is life. Are you saying they have to die on the job to be considered ‘for life’. What exactly do you mean by ”for life”. Just curious.
RE:
The Adv (Advisor class) is designed to kick back extra commissions to a broker through a service fee. Buy plain old CPD instead.
Several posts today still referencing QE as “money printing”.
Please. QE involves as asset swap pure and simple. Bonds swapped for increased reserves.
But, I guess ignorance is bliss. Especially for those having a monopoly on “truth”.
As for the USA, they’re not going broke. When obsessing over debts, pause long enough to calculate assets. The total assets of the US Government amount to about 20× the debt.
Morgan Stanley had a good analysis on this topic last night.
The only true correlation driving Prefs that Garth correctly pointed out is the 5 year yield. It has not moved much for a couple of months. The rest is just narrative made up after the fact to explain a move in prefs that is likely just a short covering rally given it was a dramatic couple of days move up.
Garth is correct that when rates move up the rate reset prefs will move up with them, but are not likely to get back to $25 because of the newer issued prefs that have a floor. It would be better to pick up the actively managed pref ETFs rather than CPD.
On the other hand zero bound is no longer the theoretical bottom as 3 FED officials have already floated Negative Interest Rates (NIRP)
Garth,
Thank you for educating us, love your humor. could u please advise in layman term where would one invest to take advantage of upcoming changes due to new Government 30B$ spending?di u recommend pot stocks/etf?
Ignorance is bliss Jim. Enjoy it
Last I checked the USA is broke. Or should I say 19 trillion in debt
If that doesn’t define broke, please enlighten us as to what does?
#20 gut check on 10.22.15 at 7:30 pm…
“…USD CAD 1.31 …. and going up, I bet….”
That may be why some of our Canadian neighbours in Phoenix are thinking of selling.
Those who purchased in 2010 (including us) are seeing current values in CAD of about 2.5 times their original purchase price.
We aren’t too worried about the opposite, spending our converted CAD, when prices are so ridiculously low here. Regular gas at our local station is down to .69 CAD a litre as of today.
A quick comparison of our grocery junket this week shows the Canadian dollar would have to drop to about .60 before we would think about cutting back on the beef and beer.
Even our local power company is issuing rebates for the next few months because their costs have gone down. I can’t remember the last time that happened in Canada.
Cars aren’t much of a deal anymore though, so BJ Scottsdale won’t be that much fun this time.
If the USD hits $ 1.40 or 1.50 CAD putting the hacienda on the market would be very tempting, even though we wanted to keep it for another 5-10 years.
33 John – and justin wouldnt have his majority either
John 33 – a little historical info
https://www.sfu.ca/~aheard/elections/1867-present.html
Several posts today still referencing QE as “money printing”.
Please. QE involves as asset swap pure and simple. Bonds swapped for increased reserves.
I hear you.
So many believe that it’s “money printing” that it’s impossible to combat that tsunami of ignorance.
Just let it be.
On a side note, A head honcho in IT at my old tax farm, just got up and split weeks before bonus
If in Toronto or Vancouver, probably got a better offer.
Tech is booming like crazy right now.
http://business.financialpost.com/news/property-post/how-the-boom-in-technology-jobs-is-transforming-toronto-and-vancouvers-office-markets
So much conflicting views regarding oil… A main pillar of this economy. It will either be $20 a barrel or $70 this time next year.
And what of amortization periods? One of the “tools” that the liberals may use to “make housing more affordable” will probably be to bring back 30-40 year mortgages (driving monthlys down but overall prices through the roof)
So if oil is in the dumps just as bad or worse we can expect another BOC rate cut, a worthless dollar below 70 cents and more and more house lust which means even higher house prices.
Tough to get too optimistic too fast. One step forward and three steps back.
I came very, very close to buying a bunch of Valeant shares in mid-summer when it was surging ahead. Then I got hold of my senses, realized it was way overvalued, and with a great deal of self-restraint, decided not to buy. Wow! Now I look like a freakin’ genius!
Garth is right. Buying individual stocks is too risky. Valeant is a perfect example. Better off buying ETFs from now on.
Thanks for the great investing advice, Garth (most of the time). And thanks for explaining about preferreds.
Boomer, well put.
If everyone could run their portfolio, there would be no need for government intervention.
Imagine, everyone, save the mentally disabled, could have a one’s own balanced portfolio and fund one’s one retirement–even better with TFSA!
I don’t need nor want any politician or bureaucrat messing with my affairs.
Love, from the beach in Vietnam!
#32 Retired WI Boomer on 10.22.15 at 8:21 pm
You probably can’t avoid CPP like we here in the US can’t avoid social security.
That is NOT retirement security. Retirement security comes from your TFSA (ROTH here), or your RRSP (401-K here) especially if your employer offers a match of any kind. Hey, free money compounding for 30 years is still FREE money, FOOL!
Naturally, you will pay income taxes on those RRSP drawdowns, but you may be in a lower tax bracket come geezer time. The TFSA is all yours no taxes -what a great gift!
This is “retirement money” NOT house money, or, we need a new car money. For consumer spending set up a savings account.
I can’t believe the broke geezers I run into every dam day.
Some are younger, some older. Almost all had inadequate savings, or worse panicked when the stock markets puked up a hair-ball and switched to bonds -effectively locking in a loss.
Fear NOT what your new PM can do to you, Fear more what you can do to yourself. I enjoy watching idiots squirm, but not when they’re old, wrinkly, and have no choice, or chance of recovery from stupid. Stay the course.
The Conservatives got out of Alberta just in time. Unfortunately the NDP will go down in history as presiding over one of the biggest waves of unemployment the province has ever seen.
http://calgaryherald.com/business/local-business/employment-insurance-claims-soar-in-calgary-region
Nothing is more uplifting than coming back from the booth, having a cold one, knowing the troubles are over, the guy in charge is going to take care of it.
We should do this more often.
#78, JimH….I appreciate your post. I am not sure who suggested that the US is going broke but the issue may be more around whether they can raise rates? They have $20 T in debt, and QE has been successful provided someone is there to buy their Treasuries no? With QE they printed money to buy those Treasuries and on the balance sheet there is an asset and corresponding liability. So balance sheet is just much bigger. However, with GDP still sub 3% it is virtually impossible for the Fed to raise rates in a slow and steady climb as Garth suggests. There is a global growth problem which is leading to a global debt problem. I never understand why Garth is so myopic in focusing on Canada housing? It is a symptom of a much bigger problem. He blindly acknowledges that the longer that the US holds off raising rates the more clear that it is that it is signaling exactly that.
China just announced interest rate cuts. Garth, I think you can put all that talk of a US rate rise in the drawer for the foreseeable future. This along with EU QE coming in December pretty much put the last nail in that coffin.
Garth: “Ottawa will be spending at least $10 billion more a year than it takes in…”
Of course we won’t know the final number until next year, but the promise was to spend UP TO $10B more if the economy needed it, not AT LEAST.
Yeah, right. — Garth
The majority Liberal government which arrived Monday night guarantees that Canada is about to enshrine stimulation – Garth
Yes they will.
Provinces are in financial trouble, households are drowning in debt, the BoC can’t be too aggressive without further sinking the CAD. The relatively healthy financial situation of the federal government is the last place where there’s a bit of margin left, increasing federal borrowing and spending is the last tool politicians have to kick the proverbial can a little further down the road. Of course they were going to go there at some point, now is the time it seems.
Now will it work?
Kick starting the economy as Trudeau and his Keynesian buddies put is implies there’s an economic engine somewhere that can be kick started. Only problem there isn’t, the bear market in energy and commodities is likely just beginning and consumption, the other growth engine in Canada, is running on fumes.
http://www.msn.com/en-us/money/markets/oils-big-slump-looks-like-the-1980s-lost-decade/ar-BBmkBA6
We otherwise have a serious productivity problem in this country that can IMHO only be solved through a deep correction which would force the economy to restructure itself. Trying to mask this problem by yet another debt driven spending spree is only going to make it worse, at best it will delay the inevitable outcome by delaying the correction needed to restructure the economy while eating at the only remaining margin we have to alleviate the pain associated with a correction.
#78 JimH on 10.22.15 at 11:51 pm
Several posts today still referencing QE as “money printing”.
Please. QE involves as asset swap pure and simple. Bonds swapped for increased reserves.
_____________________________________
The Fed uses “Assets” to swap (purchase) the bonds held by investors.
What “assets” these CBs have to swap with investors’ bonds? Where these “assets” come from?
Please enlighten us?
Be careful with buying CPD. The bank could cut again. Maybe put down 50% of what you want to buy and wait 6 months.
Bank of Nova Scotia is laying off canadians. Well payed jobs in finance dissapearing. Where will they work. Probably many own houses. How about those mortgages?
Banks lay off routinely as conditions warrant, which is why they make billions consistently. No economic consequences. As for the BoC cutting again? Read the article. Deficit government spending is unlikely to be combined with easier monetary policy. In any case, buy prefs for income, or don’t buy at all. — Garth
http://www.theglobeandmail.com/globe-investor/investor-education/why-you-cant-trust-the-yields-on-preferred-etfs/article26231003/
Are preferreds in troube? Any in particular we should be looking to?
Here is a poll taken on the street in Toronto. You want to see some clueless people, watch this. Totally embarrassing to our country.
https://www.facebook.com/everythingmtl/videos/1061443130541460/
White Crock BC, correct, about 45 million Americans are using SNAP or living in poverty. About 1 in 7. Statistically, the same goes for Canada too, only in your country you don’t even provide SNAP (food stamps) programs for these people. See for yourself. Also, it’s only getting worse in Canada, and will definitely worsen as your economy continues to go down the shitter. In the U.S. there is a clear line that SNAP program users are on the decline. Enjoy. Oh how pride cometh before your fall.
http://www.cwp-csp.ca/poverty/just-the-facts/
#32 Retired WI Boomer on 10.22.15 at 8:21 pm
“Retirement security comes from your TFSA (ROTH here), or your RRSP (401-K here) especially if your employer offers a match of any kind. Hey, free money compounding for 30 years is still FREE money, FOOL!
Fear NOT what your new PM can do to you, Fear more what you can do to yourself.”
Perfectly put. Self-reliance is so underrated and rarely undertaken.
#76 Ronaldo on 10.22.15 at 11:43 pm
What exactly do you mean by ”for life”. Just curious.
British House of Lords. If members can drag themselves into the place they get paid. Unseemly prospect of nonagenarian tortoises* creeping about the gaff.
Definitely not a useful part of a legislature.
*Not that I have anything against elderly reptiles. Some of my best friends are snakes :-)
#39 AACI Home-Dog on 10.22.15 at 8:51 pm
nice photo. makes me regret the vaulted ceiling in my bedrooms !
You could get a higher bed. If so, I recommend extra disability insurance – accidents can happen when cornering on satin sheets :-)
#40 Ray Skunk on 10.22.15 at 8:54 pm
“Ms. Wynne instead took shots at the PC government of the 1990s.”
Congratulations, Canada.You just elected four years of this at the Federal level.
And who shall we blame for either of these? A party that insists on bringing in (or keeping leaders) who scare off centrist voters?
But what do I know? I’m just a bitter old lady :-)
Garth,
What is going on with the banks? it seems that some movement to restructure is going on? Any predictions for the near future?
#56 Washed Up Lawyer on 10.22.15 at 9:34 pm
Perhaps in my impoverished dotage, I can convince Nora Lenderby to pay me to walk her Corgis and groom her Thoroughbreds. ($7.50 per hour). My back will not allow me to trim feet or hot shoe. : )
Your price is reasonable. However in these days of yacht haulout the job description would include holding lines, cleaning bilges, and standing around in the cold complaining. You will be expected to have your own long underwear as mine will not be big enough.
My dear Mother used to have corgis, but now she has a brace of miniature dachshunds from the Dachshund Underground Railway. Unaccountably their names are Winston and Salem. I think some Americans must have a different sense of propriety?
#81 SWL1976 on 10.23.15 at 12:03 am
———————————————-
Don’t be silly. Saying that the USA is broke is like telling someone with a $200,000 yearly income that has a $200,000 mortgage (where they only need to make mortgage interest payments in perpetuity, never needing to pay down principle) is broke.
@Ogopogo, post #16:
I also have been averaging down buying preferred share ETFs during this early Black Friday/Boxing Week sale that’s been going on until the recent rally. I didn’t buy right at the bottom, but quite close, namely $12.00 for CPD and $17.02 for XPF. Buy low, it’s so ridiculously simple that even an idiot like me who failed a college financial course can understand it.
ALL PUBLIC SERVANTS SHOULD TAKE A WAGE FREEZE FOR THE NEXT TWO YEARS. GOVERNMENTS AND MUNICIPALITIES SHOULD REALLY DRILL DOWN TO EFFECT COST SAVINGS
AND MAYBE WE SHOULD EVEN GO SO FAR A “PRICE CONTROLS” WE SHOULD NOT COUNT ON SPENDING TO GET OUT OF THIS MESS. We should all learn to “LIVE WITHIN OUR MEANS”
Nice screen saver, but I’ll keep the ones I already have of travel pictures. How do I pay for this travel? With dividends and distributions from investments I bought while they were on sale, like REITs were 2 years ago. I expect future travels will be paid for with dividends from preferred share ETFs, also bought when on sale.
Sign the petition to retain our TFSA limit:
https://www.change.org/p/justin-trudeau-keep-the-annual-tfsa-contribution-limit-at-10-000?recruiter=false&utm_source=share_petition&utm_medium=copylink
#106 Nora Lenderby — “My dear Mother used to have corgis, but now she has a brace of miniature dachshunds from the Dachshund Underground Railway. Unaccountably their names are Winston and Salem. I think some Americans must have a different sense of propriety?”
After the city perhaps, rather than the eponymous cigarettes? That whole region has a stunted sense of humour. I’ve a cousin in Virginia who named her daughter Georgia. She wasn’t amused when I suggested calling her new son Sherman.
#66 Nagraj on 10.22.15 at 10:52 pm
NORA! I’ll do it for $5.50/hr
And I’m younger and better lookin’.Downright handsome, actually. – jes remembered Humphrey Bogart (the stable boy) and Bette Davis in “Dark Victory” . . .And I’m better lookin’ than Humphrey Bogart. But you can call me Humphrey if you want.
Ah Mr. N! There may be room for even the lower paid workers chez Lenderby.
However, perhaps you need to rethink the sex appeal of Mr. Bogart? Handsome* is just wallpaper after a while is it not?
Mr. Bogart was a very smart man, according to the memoirs of Ms. Lauren Bacall. It is said that the brain is a man’s biggest sex organ :-)
*The same does apply to women. People who select mates on the basis of looks are often disappointed (practically the whole of human life summed up right there, fwiw).
#109 CHERRY BLOSSOM on 10.23.15 at 11:19 am
We should all learn to “LIVE WITHIN OUR MEANS”
While I laud your efforts (and your lungs), I see this is a cry for help.
The Caps Lock key is there, on the left of your keyboard, just above the Shift key (which you already know how to use :-)
#99 Ronaldo
You devastate my American view of Canada as being the northern example of good education and such.
When we moved here, my kids were thrilled that they only had to memorize 10 provinces and 3 territories instead of 50 states. I do love the story that the campaign to rename the Northwest Territories included the name Bob. Yukon, Nunavut and, well, Bob.
I’d like to add that preferred shares are not necessary to have a well-diversified portfolio. I have some CPD.TO myself but there are others who advocate a very simple 3 fund portfolio.. Canadian Equity, World Equity and Bonds.. the added diversification of REITs and preferreds certainly make it more confusing for the average joe, but if you can rebalance dispassionately then go for it.
Rates staying low yet again. Feeling more like Japan here.
Oh, and China has just cut their rates.
Garth I think todays pic is a sign that David Price is stand on his head in tonights game.
#112 Ralph Cramdown on 10.23.15 at 11:32 am
I’ve a cousin in Virginia who named her daughter Georgia. She wasn’t amused when I suggested calling her new son Sherman.
***********************
Our first child is named Matthew. When the second baby came along, the day after my 12 year old youngest brother had been through “the talk” in health class, he suggested we call the babe (a girl, by the way) “Aftermath”.
hey broadway skytrain. just two weeks ago any discussion on CPD was off limits. funny that!
Discussion is fine. Moaning is pointless. — Garth
#113 Nora Lenderby
Without a doubt, the most multifaceted, intricately cut diamond of a comment on here in a LONG while.
Salute`
#107 Bottoms_Up
#81 SWL1976
———————————————-
Don’t be silly. Saying that the USA is broke is like telling someone with a $200,000 yearly income that has a $200,000 mortgage (where they only need to make mortgage interest payments in perpetuity, never needing to pay down principle) is broke.
——————–
Yeah rock on with minimum payments. We all know who those are designed to favor
I would consider myself broke if I had to call my credit card company to raise my credit limit (debt ceiling) every few years while only making my minimum payments.
I know this because I have been broke
The financial mess of the US is going to take much more than a printing press to clean up
#99 Ronaldo on 10.23.15 at 10:25 am
Here is a poll taken on the street in Toronto. You want to see some clueless people, watch this. Totally embarrassing to our country.
https://www.facebook.com/everythingmtl/videos/1061443130541460/
_____________________________________________
God help us these people are all certified god dam idiots. Everyone of them was an eligible voter as well. No wonder we are so screwed when it comes to voting in people. Please tell me that these segments were not coalesced together sieving out the smart ones from the dumb asses on this clip. Oh my god we are just as bad as the good old USA. Jesus I grew up and was educated in the US and even I know all these answers. Hell I knew who the hell PET was when I was living in SoCal back in 1969. Hell my twelve year old grandson can answer most of the questions correctly. Garth I officially give up on these idiots, wow what happened to education?
There wont be many deviations from Harper’s policies over the next four years.
There is an interesting court case coming up regarding the Bank of Canada which might make for some compelling viewing on CPAC.
http://www.globalresearch.ca/committee-for-monetary-and-economic-reform-comer-sues-the-bank-of-canada-canadians-fight-to-restore-their-national-public-bank/5483435
#106 Nora Lenderby on 10.23.15 at 11:12 am
well Sadie Hawkins Dance. Don’t that beat all. My father Levi remembers them dashing dachshunds like it was yesterday.
Now he is not a man of excess dialogue but his face lit up and stories came forth like streams of water on a parched tongue when I told him of your news.
They were a real dapper pair with fine coats, yet resilient rascals that wouldn’t stand down to even the most cantankerous man. He is overjoyed to hear of the well being of said pooches and gives his utmost regards.
#115 Lea on 10.23.15 at 12:15 pm
#99 Ronaldo
You devastate my American view of Canada as being the northern example of good education and such.
When we moved here, my kids were thrilled that they only had to memorize 10 provinces and 3 territories instead of 50 states. I do love the story that the campaign to rename the Northwest Territories included the name Bob. Yukon, Nunavut and, well, Bob.
____________________________________________
Canada is now officially dumb-ed down and stupid. Welcome to the new Gum Ridge Mississippi. Its in Jefferson county in case you didn’t know!
BTW Capitol of Mississippi……..Jackson. Named after a Johnny Cash and June Carter song. Yep, right?
#50 Observer…google “2015 Canada election map results” or similar to see the overall picture of the election.
#109 Cherry Blossom…I agree that “All Public Servants Should Take A Wage Freeze…” because right now that is what I call overspending in my books. Wages cannot possibly keep going up, up and up. I think the greed of “give me” has had it’s time. Keep your comments coming, Cherry Blossom.
#41 Mark…”and (especially) Mulcair, labelled as “big spenders” labelled by the Tories”…the B.C. Liberal party has a deficit so huge that it is called “the worst deficit in history.” The three evils but which one was the least evil?
Just signed an agreement with “Climate Welcome” and everyone should read from beginning to end.
Your comprehensive yet depressing Friday afternoon reading (free, reg. req’d):
http://ftalphaville.ft.com/2015/10/23/2142800/how-is-canada-doing-these-days/
#95 pbrasseur
Provinces are in financial trouble, households are drowning in debt, the BoC can’t be too aggressive without further sinking the CAD. The relatively healthy financial situation of the federal government is the last place where there’s a bit of margin left, increasing federal borrowing and spending is the last tool politicians have to kick the proverbial can a little further down the road.
Yes, that’s the way it is now, good insight, but those politicians are doing what many people want. To paraphrase the joke about corruption in Louisiana, Canadians don’t just tolerate maxing out the credit card, they demand it.
#121 SWL1976 on 10.23.15 at 1:27 pm
——————————————–
You’re not factoring that countries/governments live on essentially forever. Thus, in 100 years, the current debt of 19 trillion will look like tiddly winks. They only need to service the debt; it does not need to be paid back. Unless you disagree with Garth on this?
Is it too late to join the party on those prefs?
#40 Ray Skunk on 10.22.15 at 8:54 pm
the bubble in charter schools seems to be coming to an end…talk about no accountability! EGREGIOUS
“ghost schools”
http://www.prwatch.org/charter-school-black-hole
=
Reign of Error, explaining, “In 2009, New York Charter School Association successfully sued to prevent the state comptroller from auditing the finances of charter schools, even though they receive public funding. The association contended that charter school’s are not government agencies but ‘non-profit educational corporations carrying out a public purpose.’” The New York State Court of Appeals agreed with the organization in a 7 to 0 vote. It took an act of legislation from the state—specifically designed to allow the comptroller to audit charter schools—for this to change.
Ravitch also writes of a similar instance in North Carolina in which the state, urged on by lobbying giant ALEC (American Legislative Exchange Council), proposed the creation of a special commission, composed entirely of charter school advocates, as a way for charter schools to bypass the oversight of the State Board of Education or the local school boards. Ravitch writes, “The charters would not be required to hire certified teachers. Charter school staff would not be required to pass criminal background checks. The proposed law would not require any checks for conflicts of interest—not for commission members or for the charter schools.” In other words, it isn’t the Gülen movement that makes Gülen charter schools so secretive. It’s the charter school movement itself.”
As for the other candidate in the running, Charter Schools USA, a report from the Florida League of Women Voters produced earlier this year found that charter operation running a real estate racket that diverts taxpayer money for education to private pockets. In Hillsborough County alone, schools owned by Charter Schools USA collaborated with a construction company in Minneapolis, M.N. and a real estate partner called Red Apple Development Company in a scheme to lock in big profits for their operations and saddle county taxpayers with millions of dollars in lease fees every year.
In one example, cited by education historian Diane Ravitch, Charter USA’s construction company bought a former Verizon call center for $3,750,000, made no discernible exterior changes except removal of the front door and adding a $7,000 canopy, and sold the building as Woodmont Charter School to Red Apple Development for $9,700,000 six months later. Lease fees for the last two years were $1,009,800 and $1,029,996.”
salon.com/2014/10/02/the_great_charter_school_rip_off_finally_the_truth_catches_up_to_education_reform_phonies/
http://www.cleveland.com/metro/index.ssf/2015/06/ohio_ignores_online_school_fs_as_it_evaluates_charter_school_overseers.html
http://www.sun-sentinel.com/local/broward/fl-charter-schools-financial-audit-20150626-story.html
Another great lesson in why smart people don’t buy individual equities. — Garth
Me: I have to disagree with you Garth. If you want to be “above average” you have to buy individual equities.
That worked out well, didn’t it? — Garth
Me: It did. Started in 1999. Till yesterday 7.2% CAGR (ex. dividends) vs. 2.78% CAGR for S&P. WB routinely gets over 20% CAGR. I agree indexing is best for 95% of the public who “no nothings”. However for people who can analyze stocks – stock picking works – just ask Warren Buffett or Peter Lynch.
Bought biovail at $8 for the 10% yield in 2007. Sold half my position in VRX at $250. Still holding on to half position.
Can’t make up a better story, even if you tried
http://www.cbc.ca/news/canada/new-brunswick/justin-trudeau-24-sussex-drive-1.3285314
Another great lesson in why smart people don’t buy individual equities. — Garth
The exception is unless you are VERY smart, and have ballz!
I was on a technical analysis blog years ago and one fellow said he put ALL his retirement funds into ONE stock! Everything! Apple stock bottomed at under $7/share in 2003. He threw all into AAPL and went for broke. Don’t know how many shares he had, but he said it was his entire retirement fund. Lost track of him years later when he still was holding everything for retirement, and AAPL was heeding towards $400. He talked about holding for $700 based on technical charts. Often wonder when he did sell, and if he had the patience to wait for $700. I’m sure he is having one sweet retirement regardless.
#130 – Not at all. It will come at a higher cost, of course, but only a dollar more than where it’s been for the last year or so. The yield will still fall within the 5% range, unless we go back to pre-rate cut (like the graph GT shows in the article) where yields were a little over 6%.
10 million reno=
1 mill- general contractor
2 mill- interior designers
2 mill- decorators
2 mill- lanscape architect
1 mill- heritage architecture consultant
2 mill- permits, labour, materials for complete gut reno
=10 million
It would make a nice reality show on hgtv
@Broke Dick, post #119:
Why would any discussion on CPD be off limits when it was ON SALE? I figure everyone would be chattering about the DIRT CHEAP prices of CPD (or XPF, or other preferred share ETFs) when they weren’t frantically putting in buy orders! I know I mentioned CPD many times in my postings over the last month or more.
#131 jess
When I was looking at charter schools for my kids in Los Angeles, I was astonished to see that several had multiple administrators with the same unique last name(s). It gave me enough pause to send my kids to public school. It just screamed unprofessional at best, corrupt at worst.
Unfortunately, the article don’t surprise me. Not to mention many of the successful charter schools cherry pick the best students.
Yea, that whole “stupid Canadian/American” thingy goes both ways.
https://www.youtube.com/watch?v=7ZE0TuKTpo4
It would appear the education system in N America (apologies to Mexico) has some “rocket scientists” in waiting………….
Re: #130 SeeB on 10.23.15 at 3:19 pm
ZIRP will soon become NIRP so probably a bad idea.
Re: #111 JJ on 10.23.15 at 11:31 am
Help promote the art of day trading or for the fortunate the ones with inside information.
With a population of 5.4 million people, Colorado is on pace to take in $125m in tax revenue from the cannabis industry. That’s about $23 dollars per person.
If Canada with a population of 35.7 million does anything similar, we could make almost an extra billion in tax dollars per year, not to mention the reduction in costs spent incarcerating people for it.
There’s 1/10 of the money needed to pay his deficit spending.
It’s funny how some brag in hindsight with regards to “individual stocks”. This investor will stick with diversification! Why play a game of chance?
http://www.bmo.com/gam/ca/advisor/products/etfs/product?fundId=92495#holdings
#124 fancy_pants on 10.23.15 at 1:45 pm
well Sadie Hawkins Dance. Don’t that beat all. My father Levi remembers them dashing dachshunds like it was yesterday.
If you’re trolling me, you’ll get badgered to death and no dachshunds will save you :-)
Weird timing for this post. I bought some CPD on Tuesday. This blog and you saying “too cheap to ignore” were in my head the whole time.
Thanks Garth!
While Garth’s call on preferreds was clearly good from a trading standpoint, at one point CPD was down 25% in an extremely short period of time, and with no real crisis to speak of. Imagine what will happen if we ever see a revisit of 2007-2008 style meltdown! Looks like a lot of correlation with stocks to me (especially considering this is supposed to be my “safe stuff”).
Zero reason to expect another 2008. I explained why prefs fell, and the equity correlation was not causual. — Garth
“two-thirds of which are now ‘rate reset’ which means their performance is tied to bond yields”
Garth, could you please elaborate on this? Why would pref. shares be tied to bond yields?
Maybe reading this will assist you. — Garth
“Maybe reading this will assist you. — Garth”
Thank you so much! I have read it and did additional research on the subject and learned much.
Sincerely appreciate your response. Thanks.