The lost cause

HUSBAND MARKER modified

Let’s say you bank at the green one and have $30,000 to save and grow. “The TD High Interest Savings Account (HISA) product aims to provide a premium interest rate,” sez [email protected], quoting the web site as you sit obediently in her cubicle. “For a minimum balance $25,000 we’ll waive the transaction and the rate is calculated on a daily balance.”

Great, you say, your heart racing as she moistens her lips and smooths her skirt. So how much does it pay?

“0.55%,” she says. You crush.

Oh, but can I get more if I lock the money up for, say, a whole year?

“You betcha, stud,” she replies professionally. “The TD Non-Cashable GIC product has an interest rate that is applicable for a 1 year / 12 month term, paying a premium amount.”

Again you are aroused. You stammer out between shallow breaths: how much will you give me?

“0.85%,” she replies, looking up, licking a finger.

Okay, so what if I just leave the money in my daily interest chequing account, but double the amount, like to fifty grand? Surely you have a better return on that amount of cash?

A small smile forms. She looks up. “On balances of $25,000 through $59,999.99,” the words tumble out, “we are prepared to offer a yield of 0.05%.”

And what comes after that? How ’bout if I turn over $600,000 to you?

“Then,” she says. “it will be 0.05%.” You crawl from the branch. Rejected.

Savers, needless to say, are screwed these days. It might get worse. There’s now a one-in-four chance the Bank of Canada will be cutting its key interest rate later this year. The ten-year government bond rate has plunged below 1%. In order to find a savings vehicle whose yield actually exceeds inflation, you must turn your cash over to some rinkydink online trust company, or an unknown credit union which hands out too many mortgages and is backed by the awesome financial muscle of Manitoba.

In Europe, it’s worse. Following the Brexit mistake, the Bank of England is set to chop its key rate next month and German bonds went negative weeks ago. Japanese government bonds return less than zero, and US Treasuries have plunged following the UK vote and in the lead-up to the Presidential election. Thus, if you invest in the safety of bonds – intending to hold them to maturity and clip the coupons – do it soon, since it’ll take a few hundred years for your money to double. And, of course, the interest is 100% taxed at your marginal rate.

All this is sobering for people afraid of risk, or retirees wanting to just sit on whatever they’ve accumulated. If you don’t already have a brimming pot of money, the risk you face is running out of it by playing things safe. The traditional old-guys portfolio of 60% or 70% fixed income could mean years of making absolutely nothing, after inflation and taxes are factored in.

Why have yields on safe stuff collapsed? Demographics is a part of it. The world’s getting a lot older, fast. The demand for non-volatile assets is growing right along with the grey hair, and that continues to push yields lower. Second, we have scary stuff like Trump and Brexit, ISIS and Adele. Investors flee from equities to fixed income after folks do silly things like vote to leave the world’s premier free trade zone, or put an isolationist buffoon on the path to lead the biggest economy and military machine. As demand for bonds increases, prices are inflated and yields depressed.

Already things are rough enough. Once again this year global growth will be anemic, causing central banks to push rates into the ditch in an attempt to stimulate demand, while buying up reams of government bonds. At the same time, an embattled and aging middle class electorate, saddled with low returns and stagnant incomes, poor job prospects and increasing household debt, fuels the rise of right-wing politicians preaching anti-immigration, protectionism and eat-the-rich tax policies. That makes it all worse. Trade barriers, tariffs, walls and taxes always restrict growth and depress national net worth. So rates fall.

What to do?

Not saving would be one option. Buying a bond ETF instead of a bond – where returns are based on bond prices and not yields – would have been a smart move this year. For example, while Canadian government bonds sink, a fund holding them has delivered a 5.04% return so far in 2016.

And investors who shun equities because they perceive volatility fail to understand the world is still growing, while crashing bond yields just drive more money into stocks where dividends are higher. So while deposit accounts and GICs impoverish savers, the TSX so far this year has returned 9.6%. And despite the Brexit turmoil, both the Dow and the S&P have gained more than 4% in the last six months.

The conclusion is pretty simple. Unless you already have millions, you probably need to grow your portfolio in order to finance the rest of your life. Eschewing risk, saving money and throwing yourself into the arms of the bank babe will not cut it. The best defence is a 60/40 balanced and diversified portfolio of low-cost, high-liquidity, tax-efficient ETFs that you build, rebalance once or twice a year, then forget about.

Oh yeah, and never watch BNN. Or read blog comments. They’re all nuts.

164 comments ↓

#1 For those about to flop... on 07.10.16 at 2:49 pm

Today is the Euro 2016 final between France and Portugal.
Also known as Garth ” You guys in Britain made a big mistake”Turner versus Brazil ” You guys don’t know what your missing out on” Expat.

To celebrate the end of this month long tournament I will leave you one last chart of Europe.

This one has Europe sliced up 20 different ways depending on cultural differences amongst other things.

I think France is going to win ,but if a limousine pulls up out the front and two burly guys tell me to get in because Garth Turner has decided to collect his debt of me being his stunt double for a year,a small part of me will be happy with a Portugal win.

I just hope it’s a good game.

The referee of today’s match is British,what could go wrong?

They only make rational decisions,right…

M42BC

https://imgur.com/xhYTPc6

#2 TnT on 07.10.16 at 3:01 pm

Financial Advisor Fees

Garth or Blog Dogs – what would one expect to pay in regards to a Financial Advisor Fees for a portfolio slightly over $300k?

I know 1% is the expected start, but should this go down as the portfolio goes up?

Not until you hit a million. — Garth

#3 Anthony Savino on 07.10.16 at 3:10 pm

A few times on this blog have been saying for years that longer term bonds in the 4% to 5% range were good long term buys because interest rates will keep dropping.

However, many fixed income analysts and other so called experts were clueless and trying to convince to not lock in longer term bonds because they were going higher, 6%+.

One thing is for sure, paper designations and their so called expertise from these so called smart people are now proven to be worthless.

#4 Last of the Boomers on 07.10.16 at 3:20 pm

My balanced and diversified portfolio delivered me a whopping negative 6.6 % last year, while my employment pension plan made 8.7%. I have recovered 5% of the losses in the first half of 2016, (am still down from my original investment). This does shake my faith in investing independent from a employment pension plan.

I wish financial advisors would also include an individual family plan when investing with them. If there is no plan for maximum efficiency laid out it makes me not want to give them any more money to invest. As well, I wish they would take off their commissions and fees when they quote return.

You do not have a 60/40 diversified portfolio. Simple. — Garth

#5 Freedom First on 07.10.16 at 3:20 pm

Yes. Wise advice. I feel smart.

Great photo today. Garth knows the truth. Me too. It is why I always put my Freedom First. Live life out of control. No exception. No one has my best interest at heart but me. Fact. My life is my responsibility. And I not only accept that, it makes life very very easy for me.

Also, I have been called worse things than “nuts”. I’m ok with it. As I still have mine.

#6 Fed-up on 07.10.16 at 3:21 pm

The best defence is a 60/40 balanced and diversified portfolio of low-cost, high-liquidity, tax-efficient ETFs that you build, rebalance once or twice a year, then forget about.

————————————————————————————–

Remove the USD currency effect, and the above formula has lost money 3 of the last 6 years. More interest rate cuts and preferreds will continue to suck wind to boot. It would be nice if the balanced portfolio could soundly outperform a Tangerine savings account. And now 4-5% average long term gains are what we are told to expect.

Awesome.

You obviously do not know how to build a portfolio. — Garth

#7 Metaxa on 07.10.16 at 3:29 pm

Me? I’m tearing out my back concrete stairs and replacing them with stone.

Hooked up with the premier stone guy in this area, he usually does those back yard ponds, streams, etc.

Certainly is putting Cadillac parts onto a Chevrolet house but I use those stairs multiple times a day and I’m going to smile every time I walk up or down them.

I am certain those smiles would not be there if I put the $10K anywhere else.

#8 HoweStreet.com on 07.10.16 at 3:46 pm

Garth discussed Vancouver and BC real estate on This Week in Money.
http://talkdigitalnetwork.com/2016/07/this-week-in-money-54/

#9 Fed-up on 07.10.16 at 3:46 pm

6 Fed-up on 07.10.16 at 3:21 pm

The best defence is a 60/40 balanced and diversified portfolio of low-cost, high-liquidity, tax-efficient ETFs that you build, rebalance once or twice a year, then forget about.

————————————————————————————–

Remove the USD currency effect, and the above formula has lost money 3 of the last 6 years. More interest rate cuts and preferreds will continue to suck wind to boot. It would be nice if the balanced portfolio could soundly outperform a Tangerine savings account. And now 4-5% average long term gains are what we are told to expect.

Awesome.

You obviously do not know how to build a portfolio. — Garth
———————————————————————————

Wrong.

Built by professionals very, very much like you sir.

Cold hard #’s that cannot be refuted.

You lost money in three of the last six years? Get a new advisor. — Garth

#10 Canada RE for citizens only! on 07.10.16 at 3:54 pm

http://www.straitstimes.com/business/new-south-wales-to-slap-4-property-tax-on-foreign-buyers

Should be 100% in YVR

#11 Stan on 07.10.16 at 3:55 pm

Brexit was not a mistake. The EU was the mistake. If things are so good for the EU then why are the bank stocks at 30 year lows? If things are so good then why aren’t bank stocks at 30 year highs?

Because Brexit helped knocked them down. Duh. — Garth

#12 Ray Skunk on 07.10.16 at 4:01 pm

I ditched the green one years ago, they’re absolutely pathetic.

The orange guys offer much better (well, relatively) in their savings account.

If you’re in ON and are prepared to lock-in, Meridian CU is spreading like a cancer, opening branches everywhere. A new branch opening comes with a 90-day GIC @ 3% promo if that sort of thing interests you.

#13 Stan is correct on 07.10.16 at 4:05 pm

https://www.google.ca/finance?q=NYSE%3ABCS&sq=barclays&sp=2&ei=E6qCV9GMAamdiAKUrJgo&hl=en&gl=ca

Sorry Garth but this chart shows Stan may be right. Barclays stock hammered in the last 10 years.

My statement is correct. Without the EU Barclays is a far weaker enterprise, as Britain is a weaker nation. — Garth

#14 ROCK BEATS PAPER on 07.10.16 at 4:11 pm

World growth is anemic, and still despite the litany of negatives mentioned both the S&P and Bonds are at all time highs. Bonds are not up because risk averse investors are selling stocks. All assets are up simultaneously because we are in the everything bubble.

There is one cause, Central banks are flooding the system, printing money and using it to buy bonds forcing yield seekers into ever riskier propositions at just the wrong time. Corporations are taking cheap money and buying back there stock, not investing in capital.

This does not end well for anything debt related, including bonds, stocks and real property.

#15 Cottingham a bargian on 07.10.16 at 4:16 pm

Yup , agree with everything you said Garth. Money will come out of low yielding investments and into stocks.

It will also go into hard assets like gold and heaven forbid, continue into real estate

Not much of that is true. Most people will continue to make the mistakes that have led to their life imbalances. The smart ones will not. — Garth

#16 TurnerNation on 07.10.16 at 4:41 pm

From the article ‘jess’ yesterday posted I learned the brutal Correctional Corp. of America’s stock yields over 6% at current levels. Profit from the misery that is USA. (Why constantly they must be told they are free.)
CXW.US

#17 Cottingham a bargain on 07.10.16 at 4:56 pm

Garths response to me at #15.

I never implied that people would buy assets in balance but simply that asset prices would rise as people made their individual choices toward which assets they would buy.

Balanced or not , assets will rise and real estate will continue to lead the pack IMO

#18 Patrick on 07.10.16 at 5:07 pm

@#4, Last of the Boomers
@#6, Fed-up
I don’t know what your investment plan is, or who manages your portfolio for you, but I’ve been managing my own money for the past 4 years instead of paying an advisor. I have a 60/40 portfolio using ETFs, and I’m very satisfied with my rates of return.
2016 YTD = 3.3%
2015 = 6.1%
2014 = 11.6%
2013 = 9.3%
2012 = 6.3%
Since these are index funds, I’m only getting the return of the index, less fees, but my fees are very low. If you aren’t getting the returns the indexes provide, you need to talk to your advisors!

#19 Pembyfest on 07.10.16 at 5:09 pm

Off topic but food for thought.
I have been thinking about the new rules for CREA and how the Gov is going to handle the stats from here on out.

Now on the way up the frankenumber had benefits to used house salesman and the Gov for higher tax/ economic growth. win win.

On the way down the used house salesman benefits from showing a bigger drop in stats thus creating the fear factor causing more sales, however for the Gov this can be disastrous.
My question is don’t you find it ironic that the Gov will now be releasing the frankennumber to paint the picture how they want it, to soften the blow if you will.
I think they know how bad things could get and how much CMHC is on the line if the sheeple the used house salesmans vested interest stats that show a massive correction happening so they put up the cock block.
After all a nod is as good as a wink to a blind man.

#20 boopsie on 07.10.16 at 5:14 pm

It is 6pm in lovely Lunenburg…13 degrees and raining. Heading down to the Salt&Pepper deli for a fish taco and a lobster roll. Homesick yet?
Didn’t realize only 2000 population (more in summer, esp. yesterday. Cheers

#21 Diversified in Oakville on 07.10.16 at 5:16 pm

Agree with Garth 100%.

Balanced and globally diversified (U.S. currency included) portfolio up in 2014, 2015, and 5% YTD 2016.
I changed to a robo advisor in 2014.
Automatic rebalancing every month.

#22 crowdedelevatorfartz on 07.10.16 at 5:32 pm

Thats it.
Apocalypse 2016 was right! We’re doomed.
The only thing for me to do is rent a room in Brazil ExPats 2 bedroom favela in Sao Paulo……if the “offer” still stands Brazexzit? I snore a bit but I change my underwear every day….sometimes twice…….

#23 The Dude on 07.10.16 at 5:33 pm

Hmmm… how does this relate to real estate prices in YVR? Simple, more people willing to become landlords in order to chase growth. As a result, rents in Vancouver continue to rise with home prices. AirBNB rentals are in extremely high demand, adding to the lack of supply for locals. Vacancy rates are so low people are willing to pay ridiculous amounts of money just for shelter.

#24 AK on 07.10.16 at 5:34 pm

“Oh yeah, and never watch BNN.”
=========================
I agree with you. The Brexit crap over the past 2 weeks has been annoying as hell…

They cancelled the Marc Cohodes appearance a week ago in order to cover more Brexit crap…

#25 TnT on 07.10.16 at 5:40 pm

#21 Diversified in Oakville on 07.10.16 at 5:16 pm

I changed to a robo advisor in 2014.
Automatic rebalancing every month.

Has anyone proven that Robo Advisors beat Human Advisors yet?

From what I can see (limited research)
*Robo Advisors are limited in Canada
*Have less products available for Canadians
*In some cases only purchase Canadian ETF’s
*Tax Harvesting missing a lot of cases too

#26 Mr. Frugal on 07.10.16 at 5:44 pm

#18 Patrick on 07.10.16 at 5:07 pm
@#4, Last of the Boomers
@#6, Fed-up
I don’t know what your investment plan is, or who manages your portfolio for you, but I’ve been managing my own money for the past 4 years instead of paying an advisor. I have a 60/40 portfolio using ETFs, and I’m very satisfied with my rates of return.
2016 YTD = 3.3%
2015 = 6.1%
2014 = 11.6%
2013 = 9.3%
2012 = 6.3%
Since these are index funds, I’m only getting the return of the index, less fees, but my fees are very low. If you aren’t getting the returns the indexes provide, you need to talk to your advisors!

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

I would agree with Patrick. I’ve been managing my own money since 2013 and have achieved similar results using a simple portfolio of ETFs. You folks need to read a few books by John Bogle and then fly solo.

#27 Randy on 07.10.16 at 5:50 pm

I actually enjoy getting zero yield on my savings. My tax bill is reduced. Spend your money before it is confiscated or the value evaporates. I’m getting more Government Entitlements this year. Thank You Canada.

#28 Damifino on 07.10.16 at 5:53 pm

#6 Fed-up

“It would be nice if the balanced portfolio could soundly outperform a Tangerine savings account.”
————————–

Mine most assuredly does.

I’m looking at one of my portfolio performance reports right now. My compounded rate of return for the fourteen-year period ending Dec 31, 2015 has been 6.98%. That encompasses the Global Financial Crisis of 2008 from which I recovered long ago.

And you’re right… it is nice.

#29 MF on 07.10.16 at 5:57 pm

brexit mistake? Demographics to blame? Disagree.

Firstly demographics is a lame excuse. 7 billion on the planet is enough. We are already stretched with limited resources. Moreover, demographics in the economic sense means a declining population/market. Maybe its possible economic policies have been so bad that people cannot afford to have 6 kids each while working on a minimum wage Mcjob. Whose fault is that? Plus dont we have immigration to help fill the hole? Are there other parts of the world with ballooning popoulations that cannot be supported? Of course there are. Failed argument (like Zirp or QE).

Next These trends of central bank failures began long before Brexit. The EU has been wobbling for years. Nobody trusts the actions of these supposed economists, certainly not after 2008. Brexit (and Trump) point to the fact that more are becoming aware these central bankers and economists are failures and useless.

Asset bubbles everywhere (real estate is one example of a few), never ending “stimulus” with anemic growth to show for it, and debt to the moon meaning higher taxes.

Demographics? Brexit? Yeah right.

MF

#30 Nero on 07.10.16 at 6:01 pm

It’s not a question of hoping against it….and
Garth is more correct than he wants to admit because negative rates are only a tickle and fart away now.
Governments are going to destroy their pension obligations and debt and this is the way it will happen.
Some folks will do very well, the rest?…same as it ever was.

Pass me my fiddle.

#31 Estrella on 07.10.16 at 6:05 pm

OMG!!!

Viva PORTUGAL! !!

The underdogs win with blood and tears.

#32 Olive on 07.10.16 at 6:07 pm

I heard from a very reliable source that Federal Reserve will be increasing key interest rate in July, 2016. The are moving forward.

#33 JSS on 07.10.16 at 6:10 pm

BMO has a series of low volatility ETFs (Canadian, US, international) that are equity based but performance that acts like a mix of stocks and bonds. Distributions have also typically increased annually.

http://www.bmo.com/gam/ca/advisor/products/etfs

#34 you're richer than you think on 07.10.16 at 6:16 pm

Toronto’s huge slip and slide event has been canceled

debt slaves can not even afford some summer fun now

#35 ROTFL on 07.10.16 at 6:16 pm

A traditional 60/40 pretty much can’t work given current conditions. It seems unlikely that bond prices can continue to rise without the stock market taking a dump. If bond prices stay where they are, that part of your portfolio won’t pull it’s weight because of the incredibly low yields on offer. If bond prices fall, that part of your portfolio will lose an absolute shedload of principal. It’s worth remembering that, even in the dark years of the ’70s, the bond part of your portfolio usually stayed even or made money because, even though rates were rising, they were rising slowly enough and from a high enough starting point that your coupon payments made you whole. That can’t happen at these prices. Many people are substituting things other than high quality rates and credits in the bond side of their portfolio, and may well discover that what they bought acts like a bond most of the time, but it will act differently when they need it most.

So what’s the plan for achieving decent returns out of a 60/40 at current prices? The only way I can see it working out is a long period of range-bound volatility, with most of the returns coming from equity dividends and rebalancing. That’s not how these portfolios have traditionally worked, so expecting a similar level of future performance as has been seen in the past, but from a different source and for different reasons seems a bit of a gamble.

Am I missing something?

Yes. Government bonds make up only 8% of the portfolio and are there for stability. — Garth

#36 WalMark of Sadkatoon on 07.10.16 at 6:23 pm

my US tenants are still paying rent. smashing inflation. its all good

http://www.wsj.com/articles/rising-supply-pressures-urban-rental-boom-1466526395

#37 Sam Ambers on 07.10.16 at 6:26 pm

Do they have robo advisors for our politicians and central bankers. This would be nice.

#38 not 1st on 07.10.16 at 6:26 pm

Any thing out there is a better investment than stupid govt treasuries. 12 trillion dollars of them in negative territory. Who are the fools that choose to lose money to the govt now and be taxed later to make up the difference. Some real brainiacs out there.

#39 Paulo on 07.10.16 at 6:43 pm

some advice for the working folks /smarter fools
1) pay off any debt that costs more than .25%/annul
2)if you live anywhere within 200 km of the GTA or YVR do not even consider entering the real estate ponzi game (actually more accurately Suckers Game) remember the first rule of real estate – buy low sell high- do you really think you will win purchasing at the top of the bubble about to implode?
3) rent and make sure you have protections in your lease insert early termination clauses that make your landlord responsible to compensate you for moving costs and any increase in your rental costs incurred as a result of your landlord turning out to be a speculator for the balance of term.if your prospective landlord wont agree look elsewhere, i have heard many story’s of renters being burned by greedy landlords / speculators flipping houses
4) max out your TFSA account and follow this blog on how to best deploy the funds you have.
5) relax and sleep well knowing that you have not been suckered into the most dangerous ponzi game running
6)in my case well thinking i would like to grab a slightly used AUDI at a preferred price, i think there will be plenty available soon with no buyers………

#40 ronaldo on 07.10.16 at 6:48 pm

viva portugal without ronaldo. remember that. he might be the best player right now…. but hes not the whole portugal team

#41 BOOM! on 07.10.16 at 6:51 pm

I was disappointed to see interest rates drop. I have been disappointed to see the EU’s flawed structure last as long as it has as well.

Well, the Brits decided enough, was enough. Right or wrong vote, that horse left the barn.

Do I believe saving rates are ever to return to ‘normal’?
Probably not in my lifetime. Too any ‘experts’ handling
things in finance, and government.

You may not agree, and that would be understandable.

Will I increase my exposure to equities? Probably not right away, but as dividend paying stocks go on sale, and REITS as well, I will look to investments that will throw of cash, are not heavily indebted, and might grow. I still have long term bonds, intermediate, short term and preferreds.

Interest rates have been stale, or declining for a decade.
This is NOT NEW big news! Yellen’s whopper .25 pt rise in December not withstanding.

Saving the Italian Banks, and the rest of the EU’s sorry ass seems the order of the moment. We shall see how “well” they perform.

Foreign entanglements? Seems our forefathers warned us about that somewhere….

(not a politically correct entry)

M64WI

#42 crowdedelevatorfartz on 07.10.16 at 6:54 pm

Oh God.
Portugal won.
Brazil ExPat will be insufferable.

#43 old gringo on 07.10.16 at 7:37 pm

South of the border the going rate is 4.55% if locked up for a year and guarantied by the bank.

That is without begging and the bank girls are hotties.

#44 Linda on 07.10.16 at 7:49 pm

#29 – Demographics isn’t an excuse. It is a reality to take into account when deciding when & where to invest. It doesn’t matter that there of 7+ billion people on the planet. What matters from a market perspective is what those people are doing. A growing segment of the world population is aging. What they consume will change as they age. This has an effect on the market. If 25% of the population in the country in which you reside ceases to purchase sports equipment & starts purchasing health related services in its place, the smart company scales back on the sports equipment or replaces it with items tailored to meet the demand by the consumer.

#45 GsAmazon on 07.10.16 at 7:54 pm

This is really the only civilized way of receiving this kind of news. Pornographically.

#46 common sense on 07.10.16 at 8:03 pm

Why not have all the central bankers just come together and say…

“Well we tried everything and due to demographics, we are pooched…we will NOT be raising interest rates for years. Invest in the stock market, houses and as per the last few years, we will continue printing non stop and back stopping any investments you have until we give you notice and we feel it’s finally ok to raise rates.”

I’d have a lot more respect and am sure many of us here would as well if they just came clean.

#47 acdel on 07.10.16 at 8:11 pm

My statement is correct. Without the EU Barclays is a far weaker enterprise, as Britain is a weaker nation. — Garth

For now Garth; love your blog but sometimes you really disappoint me; you preach democracy; it happened; let us see where is leads. Although I have absolutely no affiliation with the Brits; they are not stupid people; personally I think they made the right choice; you do not, I guess the future will tell who’s right.

I can tell you now. — Garth

#48 SWL1976 on 07.10.16 at 8:14 pm

Had me laughing at the start and summed things up nicely

Great post

#49 cecilhenry on 07.10.16 at 8:19 pm

What do you think of this???

China’s Mojo Was Always Dependent Upon Foreign Investment and Tech Transfer

https://alfinnextlevel.wordpress.com/2016/07/10/chinas-mojo-was-always-dependent-upon-foreign-investment-and-tech-transfer/

#50 Tunker on 07.10.16 at 8:25 pm

ScotiaBank Momentum Savings Account = 1.5%. Pays out every 3 months. Just about covers inflation ;)

Below a $5,000 balance the rate is 0.5%, and no withdrawals are allowed. — Garth

#51 Brazil ex-pat on 07.10.16 at 8:28 pm

#195 crowdedelevatorfartz on 07.10.16 at 11:18 am
@#189 Brazilian SexWax
“i have said many times I could care less about the Olympics.”
*******************************************

Hell Hath Frozen.

We agree on something.

But your crippled economy gets to pay for the Olympics…..unlike the rest of the world.
Whats the security bill up to? 1 Billion? 2?
Just what the Brazilian economy needs right now. More exorbitant bills for “games”

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

How’s that 3 billion dollar bridge working out for you? You know….the one that everyone has to pay for because the BC Got had a two week 2012 Owe Limp Ic party….unless of course you are a millionaire from Whistler….you got your 800 million dollar highway for free.

#52 Doug t on 07.10.16 at 8:30 pm

Gee what’s a person to do – hhhmmmm go with the bank which at least gives a guarantee (although $ blows) or invest it with a salesman with no guarantee except to take a percentage – it’s win win all around these days folks so choose your poison cause either way they win

Solution: find a fee-based advisor who sells nothing and refuses commissions. — Garth

#53 Brazil ex-pat on 07.10.16 at 8:31 pm

#22 crowdedelevatorfartz on 07.10.16 at 5:32 pm
Thats it.
Apocalypse 2016 was right! We’re doomed.
The only thing for me to do is rent a room in Brazil ExPats 2 bedroom favela in Sao Paulo……if the “offer” still stands Brazexzit? I snore a bit but I change my underwear every day….sometimes twice…….

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

I live on the beach in a big house. How is that $2000 a month moldcouver closet with clouds, rain and gloBULL warming working out for you?

#54 Andrew Woburn on 07.10.16 at 8:40 pm

Speaking of demographics:

– As Japan’s population shrinks, bears and boars roam where schools and shrines once thrived

“All across Japan, aging villages such as Hara-izumi have been quietly hollowing out for years, even as urban areas have continued to grow modestly. But like a creaky wooden roller coaster that slows at the top of the climb before plunging into a terrifying, steep descent, Japan’s population crested around 2010 with 128 million people and has since lost about 900,000 residents, last year’s census confirmed.

Now, the country has begun a white-knuckle ride in which it will shed about one-third of its population — 40 million people — by 2060, experts predict. In 30 years, 39% of Japan’s population will be 65 or older.”

http://www.latimes.com/world/asia/la-fg-japan-population-snap-story.html

On the other hand:

“Africa has experienced a marked increase in its population in last few decades. Its current population is five times its size in 1950. And the continent’s rapid population expansion is set to continue, with its inhabitants doubling from 1.2 billion to 2.4 billion between 2015 and 2050, and eventually reaching 4.2 billion by 2100.”

“On current trends, within 35 years, 1 in every 4 people will be African, rising to 4 in 10 people by the end of the century. Back in 1950, only 9 among 100 of the world’s number of inhabitants were African.”

http://www.forbes.com/sites/tobyshapshak/2015/08/25/africas-growing-population-is-biggest-change-of-our-time-with-economic-political-potential/3/#2d9a3143412c

Presumably forward thinking Canadian realtors are already learning Swahili.

Of course, all such demographic bets are off once science develops an effective male-controlled contraceptive. Based on the above info, this will be discovered by an African scientist.

#55 I lol @ you on 07.10.16 at 8:49 pm

Garth you always laugh when people talk about redistributing income and wealth, as if it’s some kind of crazy thing that must never happen, can’t happen, and won’t happen.

But here’s what’s going on.

In today’s post you bemoan the low interest rates that prevail throughout the world. And you bemoan its impact on regular dudes. But its intended effects are targeted at rich dudes like you. Interest rates are dropping to stimulate the economy, mostly by getting rich dudes like you to spend more and save less. Because income and wealth inequality are so great, the consumption patterns of yesteryear can’t hold. Rich people have a higher marginal propensity to save. Central bankers try to reduce that propensity, so that the money gets circulated more. But all that happens is it screws over the regular dudes who by and large put their meager savings in the bank. Rich dudes like you take advantage of low rates to make leveraged bets on the stock market. Between that and stock buybacks, that’s where the stock market gets its high valuations from. If you think real estate is bubbly, I urge you to look at P/E ratios.

This is a party that won’t end well, and it goes well beyond real estate. Most people aren’t sophisticated. Most people don’t want to pay people like you to manage their “portfolios”. Western capitalism got along great for nearly a century without requiring plumbers to have “portfolios” and “advisors” in order to have a secure retirement. Is it any wonder that when the bank charges 20% on credit cards and 5% on lines of credit, while paying out 0.05%, that regular people lose faith in the financial system and opt out, dumping everything they have (and even what they don’t have) into real estate?

Go ahead and be like all the other conservatives and blame the individual people. The problem will only get worse until the perverse incentives are recognized and dealt with. We need taxation and laws to redistribute, because interest rates are only making things worse and widening the gap.

But we live in a world where the lust for money and possessions is so great, where we have even good guys like you rationalizing their greed. You said you own a corporate condo downtown which sits mostly empty. And you don’t think you have a part to play in the housing anxiety of young people in TO. You don’t think the government has a right to tax you more or incentivize you to sell or rent. Because “muh property rights”. This is where the problems stem from, whether you like to admit it or not. You and your corporations own multiple empty homes while others bid up 100+ year old semis with rotting wood. And you have the gall to tell a pregnant 20-something that she needs to give up her nesting instinct that’s as old as humanity, and get used to renting. Yea, that will go over well. Talk about tone deaf.

I rent the condo, do not make leveraged bets on anything, currently employ 20 people and have a personal tax rate of 53%. If you wish to increase my taxes further & redistribute my wealth, you will have to pry this keyboard from my cold, dead fingers. — Garth

#56 Mean Gene on 07.10.16 at 8:50 pm

It still amazes me when you deposit money at the bank the crap rates you get, but if you buy preferred shares in same bank you end up with such a good return on your shekels.

#57 Terry on 07.10.16 at 8:55 pm

“Following the Brexit mistake”

“isolationist buffoon”

Seriously Garth?
Brexit was not a mistake and Trump will be a far better President than crooked, lying Hitlery!

#58 RayofLight on 07.10.16 at 8:56 pm

A financial blog that I have also been following is “Weighing the Week Ahead” (WTWA) by Jeff Miller. As with Garth’s blog, I am looking for a balanced assessment of the financial conditions and of the markets. Mr. Miller is US oriented, but what happens in the US does impact us in Canada. WTWA is a weekly blog, and comments on what has happened the past week and what may happen the week ahead.

http://seekingalpha.com/article/3987309-weighing-week-ahead-will-improving-earnings-expectations-fuel-rally-stocks

#59 TurnerNation on 07.10.16 at 9:05 pm

Re. the link Smoking man posted yesterday. Three fresh example of certain “Types” of people being kept into line by the State.

Gee, half my family escaped from an iron regime whereby “justice” was extracted after a late night knock on the door.
Where shall I go?

I vote all shall be exonerated and paid 6-figures and promoted. Sweet freedom.

http://www.cbc.ca/news/canada/calgary/rcmp-gleichen-christian-duck-chief-excessive-force-1.3521620
http://www.cbc.ca/news/canada/calgary/calgary-police-on-camera-1.3672186
http://www.cbc.ca/news/canada/new-brunswick/nb-bathurst-reading-wharf-1.3672419

#60 acdel on 07.10.16 at 9:08 pm

#47 acdel

I can tell you now. — Garth

————————————

Unless you can see into the future and do not believe that people can control there own destiny; your predictions are the same as mine, 50/50; good-luck to the both of us..

#61 common sense on 07.10.16 at 9:08 pm

Can the US, Europe, Japanese, Chinese governments admit they tried yet haven’t found a solution to trying to pump growth and rates will not be raised for years?

Just keep the bubbles growing and admit another round of QE or helicopter money is coming sooner than later?

#62 F.dover on 07.10.16 at 9:09 pm

I was thinking a lobby group formed to demand interest rates be raised would be a good thing.

Would any Nation, State, Province, City, Municipality, County, Mortgage Holder, Car Loan Holder, Student Debt Holder, Business Owner, Stock Moister out there care to join forces with me to demand higher returns for the people with positive balances?

Nah, I did not think so. Nobody at all.

I turned down a three year fixed rate GIC just before the crash in favour of a one year term because as I told the Bank Zombie at the time, there is a great shortage of money though out the system, the whole thing is about to implode, and there will be such a need for the money that exists, interest will have to go up! Demand over Supply!

But….instead of that, “they” doubled, then tripled the world money supply out of ozone, and now all of the parties that I have listed above, have further borrowed their way out of debt.

My cash and I are F.dover.

#63 Raonic did a Brexit today :( on 07.10.16 at 9:12 pm

Can’t win ’em all.

Now if only my insufferable Portuguese flag-bearing fellow Torontonians would stop honking their horns and slowing traffic, we could have a peaceful Sunday evening.

Bank interest rates these days are kinda like soccer scoring:

Boring and almost non-existent.

Why do people bother with either?

#64 acdel on 07.10.16 at 9:24 pm

This is based on another news letter that I subscribe to; I will not name in respect to your news letter Garth. This is some info I received from it; if you do not wish to post it then I understand but I do find it interesting. By the way all stock recommendations that they suggested in the past two years have made me nothing but profits; my regret is that I did not buy more.

Two quotes: Sorry I bit lengthy.

“…What if I told you that employment actually declined 119,000 in June and has been faltering now for three months in a row? Yes, that is indeed the case.

…Nonfarm payrolls surprised yet again but this time to the upside – surging 287,000 in the best showing since last October…when taking May and June together, they average out to be less than 150,000 versus the twelve-month average of 200,000…so even as the June data pulled a major upside surprise, the overall view that the pace of job creation is moderating remains fully intact.

…Historians will tell you that at turning points in the economy, it is the Household survey that tends to get the story right.

…When the Household survey is put on the same comparable footing as the payroll series (the payroll and population-concept adjusted number), employment fell 119,000 in June – again calling into question the veracity of the actual payroll report – and is down 517,000 through this span. The six-month trend has dipped below the zero-line and this has happened but two other times during this seven-year expansion.”

Number 2:

JP Morgan’s “recession indicators” are now at the highest level since the last recession.

The Cass Freight Index, a trusted measure of North American freight volumes and expenditures that provides valuable insight into freight trends as they relate to other economic and supply chain indicators and the overall economy, has been falling on a year-over-year basis for 14 consecutive months.

Total business sales have been declining since August 2014 – that’s nearly two years in a row.

The Fed’s Labor Market Conditions Index has been declining for five months in a row.

The Industrial Production Index, an economic indicator that measures real output for all facilities located in the United States manufacturing, mining, and electric, and gas utilities has been declining since November 2014.

And while last month’s job report blew away analysts, let’s not forget that the employment numbers in the month prior were the worst that we have seen in six years

#65 Happy BDay Tesla on 07.10.16 at 9:25 pm

http://www.iflscience.com/technology/10-fun-facts-you-may-not-have-known-about-nikola-tesla/

Aliens rule.

#66 I lol @ you on 07.10.16 at 9:27 pm

I rent the condo, do not make leveraged bets on anything, currently employ 20 people and have a personal tax rate of 53%. If you wish to increase my taxes further & redistribute my wealth, you will have to pry this keyboard from my cold, dead fingers. — Garth

YOU rent the condo. YOU refrain from making leveraged bets. YOU employ people. YOU pay your taxes without hiding money in Panama or getting super aggressive about skirting the line between avoidance and evasion.

That’s YOU. You’re one of the good guys. But most of the people that work within a mile of your office don’t do what you do. You’re a patriot, and you have feelings. You want to see our country succeed. You spend your time giving advice for free and trying to warn people. How many others on Bay st are like you? How about Wall St? (Because decisions and actions on wall st affect us too)

All I’m doing is showing you that the problem is systemic and requires a systemic fix. Teaching people one by one to avoid the real estate bubble does great good on the individual level but it’s a drop in the ocean. Most people are smart enough to do their day jobs but they can’t even read what you write and understand it.

I apologize if I gave the impression that you personally are the problem. It’s not a criticism of Garth. It’s a criticism of Garth’s analysis as to the cause of economic malaise and therefore the solution. It’s a criticism of the attempt to redistribute via low interest rates forcing spending by those that should spend more. Every time the central banks lower rates they are trying to redistribute via the market by making rich people more apt to spend. Negative rates are a punitive method of trying that. But it doesn’t work.

I’m not saying tax Garth more. I trust you pay your fair share. But many others don’t, and just accumulate and accumulate and accumulate and think it doesn’t affect anyone else. It does. It ruins the economy. Just ask Warren Buffet how much tax he pays. Speaking of which, I doubt you actually pay 53% average tax rate on all your income. Let’s be intellectually honest and make arguments in good faith.

Here’s a perspective you might find interesting. This guy says it better than I ever could.

http://m.youtube.com/watch?v=bBx2Y5HhplI

#67 common sense on 07.10.16 at 9:27 pm

53% Mr T?

yes, that’s enough…. Funny, a friend in Cuba who is allowed to play professional baseball in Japan only has to give 50% to the Cuban gov’t when he returns each year.

He also does not pay tax on the car and goods he returns home with, has a free house in Cuba and pays no tax on his Cuban professional salary…

Which country is communist?

#68 crowdedelevatorfartz on 07.10.16 at 9:39 pm

@#51 & 53 Brazil ExPat
Dear Ex
Well. I can honestly say I have only drivien across the 3 billion dollar monument to govt corruption once since it was built 3 years ago.
As for Whistler, havent been up there either summer or winter since BEFORE the Owe-Limp Icks. Too pretentious por moi.

But I’m hoping beyond hope that you’ll still find it in your capitalist, poo flinging, code monkey blackened heart to sponser me as a roomie. I know the salty winter beach air would be just the thing to fix what “ails” me
I think my sinuses are a tad infected what with living in a 200sq ft $19000/month wolf spider infested illegal in-law suite. I’ve tried not to add to the “humidity” but with my personal “elevator issues” …..its virtually impossible. Apparently I snore but I think my other “emanations” drown out the noise.
Either way I wont use any of your towels because I dont trust the Brazilian authorities assurances that they have eradicated the “super bacteria” in the Fecal Sea aka Atlantic Ocean.
Let me know if you want me to bring any US currency since the “Real” is continuing its slide and A US buck goes so much further if your kidnapped.
Awaiting yourr confirmation…….
Affectionately yours……
Fartzy

#69 Doghouse Dweller on 07.10.16 at 9:42 pm

#62 F.dover

Here is an explanation of what went down.

The Extinction of the Bond Vigilantes
http://www.financialsense.com/contributors/rob-kirby/the-extinction-of-the-bond-vigilantes

“What this all means folks is that the much ballyhooed “flight to quality” and rush to buy U.S. Government bonds is really an elaborate hoax–ENGINEERED in the bowels of the Federal Reserve and executed on the trading desks of their proxies; the likes of Goldman Sachs, J.P. Morgan, B of A, Citibank and Morgan Stanley by creating ARTIFICIAL SCARCITY for U.S. Government debt.”

“So, if any of you are left wondering where the bond vigilantes have gone:

They have all lost their jobs. Long ago, the last of the true bond vigilantes sold bonds YEARS AGO–intuitively correct I would argue–not realizing that Goldman’s, J.P. Morgan’s et al Interest Rate Swap Books were “black holes” of stealth artificial demand. They lost their shirts along with their jobs.

Nowadays bond traders who have chosen to remain employed resemble lap-dogs and play the game the way their masters intend them to.”

~Rob Kirby

#70 crowdedelevatorfartz on 07.10.16 at 9:44 pm

@#67 common cents
“Which country is communist?”
*******************************************
Well if you’re only judging communism by tax rates…tell your friend to try this.
Stand outside the Cuban National Assembly and start yelling for political freedom.
Methinks he wont last more than 60 seconds before he recieves a rifle butt behind the ear and is dragged off to prison.

#71 ROTFL on 07.10.16 at 9:48 pm

#61 common sense — “Can the US, Europe, Japanese, Chinese governments admit they tried yet haven’t found a solution to trying to pump growth and rates will not be raised for years?”

For the most part, they haven’t tried. In 1935, the US government spent 6.7% of GDP on public works to reduce unemployment. Facing high unemployment in the 1930s, Adolf built the Autobahns. Worried about a post-WWII economic slump, and copying the Germans’ better logistics, Ike built the Interstates. Nothing similar has been tried in the west this past decade.

This is long, but insightful:
http://www.boeckler.de/pdf/v_2012_10_25_koo.pdf

#72 WalMark of Sadkatoon on 07.10.16 at 10:10 pm

#43 old gringo on 07.10.16 at 7:37 pm

when you’re old and thirsty theyre all ‘hotties’

lol

#73 BOOM! on 07.10.16 at 10:15 pm

53% Income Tax? Honestly, Garth? Wow, all I can say is that IS confiscatory.

I would not be surprised to see the ‘best & brightest’ of Canada’s young emigrate to whatever country will treat them, and their ideas with a more ‘fair & equitable’ TAX policy.

Strange, I do not like DEBT, as enumerated here numerous times, I am no fan of HIGH TAX rates either.

Sometimes,. people must learn to give up ‘guarantees’ for lower taxes, and indeed more uneven outcomes, which seems to be the rule in the country I reside.

I am fully ‘OK’ with that, believing in the main your results roughly equal your smarts and your input. No system is perfect, nor will they ever be. I do believe however, what we get out of it is roughly proportional to what we have put into it.

Interesting letter from the BIS (Bank of International Settlements) that seems to indicate they would be in favor of seeing interest rates rise to more normal levels.
Could this be a cue to one J. Yellin?

#74 Big Jack on 07.10.16 at 10:18 pm

But Garth, immigration necessitates higher taxes. You didn’t think all those refugees were feeing themselves, did you?
Let the globalism die already, k

#75 Investx on 07.10.16 at 10:19 pm

And you thought rates in Canada couldn’t stay low for an extended period.
It only happens in Japan.

#76 Cloudy on 07.10.16 at 10:27 pm

Garth, are preferred etfs still underpriced? If so, would it be a terrible idea to go with a heavier preferred weighting? My go to preferred etf is XPF because half of its holdings are in Blackrock’s US preferred etf. Is this a good way to get exposure to US and CDN preferreds? Any benefit to holding a preferred traded in USD on the NYSE?

#77 Just say no on 07.10.16 at 10:28 pm

I did not want to say no to the nice lady at the bank when she said let’s put your 30,000.00 from your .55% e-savings and lock it away in a GIC? I know they won’t do anything to wow me. We did a cashable .75% because SHE IS SO NICE……..it was my spending money I kept on hand….now they offered me a 25,000.00 line of credit at 6.69%….They offered it 3 times in the last 2 months saying I qualify. I just don’t and won’t buy anything at all no money no spending. Thanks big powerful bank.

#78 AisA on 07.10.16 at 10:35 pm

Been sayin’ for two years now, rates will not forecast the turn. zzzzzzzz

#79 Capt. Serious on 07.10.16 at 10:42 pm

At this point I’ll take low fixed income returns if it means we’ll avoid outright deflation.
I never thought I’d live to admire a GIC paying 1.75%. Compared to what you can make on short term government bonds, it’s not bad. In absolute terms it still sucks.

#80 Yitzhak Rabin on 07.10.16 at 10:43 pm

Garth and/or his obedient mods will not approve comments related to gold mining stocks and how much they are up this year (and that Garth predicted $800/ounce).

The Brexit comments are also off base. The UK does have a chance of royally screwing things up for themselves with homegrown tyranny. However, it is a lot less likely to be worse than remaining in the undemocratic, hypocritic, bureaucratic nightmare of the EU. Deutsche Bank’s chief economist called for a €150 billion bailout of European banks this weekend. Italy wants a taxpayer funded bailout, in violation of the rules passed by the EU only 2 years ago. “Second rate” citizens of the EU in Greece and Cyprus got the depositer bail-ins and were not big enough to change the rules.

Worthless promises of bankrupt governments (ie. bonds) are rallying on risk-free bond speculation buying, front running the inevitable QE currency creation from central banks as they desparately try to stave off the collapse of the unworkable monetary system.

The dollar and all fiat currencies will continue their descent towards worthlessness. The US dollar was worth 1,504 mg. of gold in 1932. Today it is worth 22.8mg of gold meaning the currency has lost 98.48% of its purchasing power in 84 years.

Yes, let’s compare today – the apex of modern civilization – with the worst year of the deepest depression. You bullion-lickers are great comedy. — Garth

#81 Mark M. on 07.10.16 at 10:45 pm

I can tell you now. — Garth

Sure you can Garth. You’re calls have been well short of prescient of late, perhaps a bit of humility is in order.

Humility is for flawed people. — Garth

#82 MF on 07.10.16 at 10:56 pm

#44 Linda on 07.10.16 at 7:49 pm

Right so if we are ignoring the billions of impoverished in overpopulated third world slums and the threat of disease, starvation, terrorism that can impact us all we are left with demographic trends affecting markets as you say.

-Real estate bubble: Why, when our population is aging, is housing more and more unaffordable? Housing is usually for families…usually younger. Why are families forced to take on huge debt to buy a home? Failed policy.

-bond bubble: part of it is a flight to safety, sure, but don’t forget the billions of bond buying and QE that has distorted this market beyond recognition setting these old poor retirees up for disaster when that bubble pops. Fail.

-Stocks: after 2008 when there was billions “printed” to save our economy from depression, we are so in debt that when the next crisis hits as it always does, the central bankers are out of bullets and will get creamed -along with everyone’s 401k. Rates should have risen slowly over the past 5 years as we “recovered”. Why didnt they? We are vulnerable to losing it all when our aging population needs it most. Fail.

-Some leftists did the usual name calling and called everyone who voted to leave the EU a racist OLDER xenophobe. So these retirees who now need their savings the most are the ones who risked losing it all? Why? Isnt life grand in the EU? Where is this coming from then? A hollowed middle class -that’s where. Fail.

MF

#83 Spectacle on 07.10.16 at 10:58 pm

Re:
“”#7 Metaxa on 07.10.16 at 3:29 pm
Me? I’m tearing out my back concrete stairs and replacing them with stone.

Certainly is putting Cadillac parts onto a Chevrolet house ……………to smile every time I walk up or down them.

I am certain those smiles would not be there if I put the $10K anywhere else.””

***********My Response******
Wow, yes agreed. It’s why we work so hard to earn it, and make such a great effort to,preserve it! Balance entails spending it to enjoy and appreciate this world .
Although personal opinions vary, there is always the essential wine cellar / humidor room! Total life, man cave!

Blue Grouse Wine Cellar
http://www.bluegrousewinecellars.com

Regards:

Ps: Smokey, sincere thoughts with you & your Dad.
pss: thank You Garth Turner.

#84 White Crock BC on 07.10.16 at 11:01 pm

BOOM! on 07.10.16 at 10:15 pm

I would not be surprised to see the ‘best & brightest’ of Canada’s young emigrate to whatever country will treat them, and their ideas with a more ‘fair & equitable’ TAX policy.

——————–

It’s been happening for decades. One million Canadians living in the greater LA area, another 350,000 living in silicon valley.

We stand no chance.

#85 DIY on 07.10.16 at 11:11 pm

Question – I just left my advisor two months ago and I am wondering if I should sell my individual bonds (GIC’s) which are laddered for the next five years and buy a bond ETF to replace them. Or just replace them when they expire each year?

Thanks!

GICs are not bonds. And they may not be cashable. You had an advisor? Yikes. — Garth

#86 Diversified in Oakville on 07.10.16 at 11:20 pm

#25 TnT
Do some research, comments are all wrong.

#87 ertw on 07.10.16 at 11:27 pm

For the 60/40 split, what’s good for the “safe stuff” in that 40%?

CCP recommends VAB for an ETF portfolio, but is piling 40% of one’s investments into a Canadian bond index wise, or diversified enough?

No, of course not. — Garth

#88 The Wet Coast on 07.11.16 at 12:03 am

Spent 9 years in the US. Pretty good. But don’t believe you can have your cake and eat it too. Health care is a total mess. Cost me $10,000 out of my pocket every year and my in network doctor was usually in Alaska.

The they have this little thing called “At Will Employment”. If your boss doesn’t like red heads your gonzo and forget and pay in lieu.

It was great but it asn’t all sunshine and unicorns. There are lots of taxes and fees there too. Take a look at their giant military. Something is paying for it.

#89 Ron on 07.11.16 at 12:34 am

We are in uncharted waters right now. Never have we had all major economies printing virtually unlimited money both paper and digitally. Instead of creating real jobs in manufacturing all our political leaders just ramp up the printing presses. With artificially low interest rates it is forcing conservative and retired people into the stock market and real estate. I believe this is the final act of destroying personal wealth. I had a very intelligent grandfather that told me every generation including mine will have a depression. It is human nature and just like any bubble is dictated and controlled by human emotions and pychology. We should have had a depression to cleans the system 10 to 15 years ago. If our inept leaders would have allowed it to happen we would have recovered fully and be in a wonderful expansion. Instead they kick the can down the road and create an even bigger financial collapse. Unfortunately almost everybody is being sucked in to this final act chasing returns anywhere they can get them. It is very sad that hard working people who have saved and been responsible their whole lives will lose because of the incompetence at the top. We all know that people who don’t remember history are destined to repeat it. It is not different this time……..just like all bubbles.

#90 Ron on 07.11.16 at 12:36 am

We are in uncharted waters right now. Never have we had all major economies printing virtually unlimited money both paper and digitally. Instead of creating real jobs in manufacturing all our political leaders just ramp up the printing presses. With artificially low interest rates it is forcing conservative and retired people into the stock market and real estate. I believe this is the final act of destroying personal wealth. I had a very intelligent grandfather that told me every generation including mine will have a depression. It is human nature and just like any bubble is dictated and controlled by human emotions and pychology. We should have had a depression to cleans the system 10 to 15 years ago. If our inept leaders would have allowed it to happen we would have recovered fully and be in a wonderful expansion. Instead they kick the can down the road and create an even bigger financial collapse. Unfortunately almost everybody is being sucked in to this final act chasing returns anywhere they can get them. It is very sad that hard working people who have saved and been responsible their whole lives will lose because of the incompetence at the top. We all know that people who don’t look at history are destined to repeat it. It is not different this time……..just like all bubbles.

#91 senta on 07.11.16 at 12:36 am

53% Mr T. ? You need a better accountant.

#92 willworkforpickles on 07.11.16 at 12:51 am

Hows it goin eh….you got money and you want to make money with it? Well i pick the holding of first mortgages over all others. A mortgage broker finds you a borrower who doesn’t qualify for a prime loan from the bank . You hold a first mortgage at !0% interest on a sound property that has little risk of loss to you should you one day wind up with the property in the event the borrower defaults. You make a nice return on your money . Has Garth ever posted on this topic… Must have missed it if he has.

#93 Trading Naked on 07.11.16 at 1:07 am

Blog dogs! There’s a black Ford truck driving around North/West Vancouver with vanity plates that say ‘TFSA’. If that’s you, please post a picture of your license plate ’cause it’s awesome. If any blog dogs see this, can you take a picture for the rest of us?

I saw this truck today at Park Royal mall. And no, I don’t have a smartphone. I should have left them a note.

Thanks!

#94 ertw on 07.11.16 at 1:13 am

Thanks Garth – I made the rookie mistake of asking two questions instead of one. Searching prior posts is painting only half a Bob Ross, and I’m short a few happy trees.

For the DIY, what’s the balance that should make up the 40%?

#95 Peter on 07.11.16 at 1:42 am

This is all quite pathetic isn’t it?

Growth is out there however for those bold enough.

All of the gold/silver miners are growing by double digits and my investments into cryptocurrencies have so far yielded around 1200% since late last year.

#96 I'm Stupid. Also. on 07.11.16 at 2:21 am

We get that balanced and diversified is the way to go, but most of us don’t know how to set it up.

I got a pregnant wife pissed off that I sold the house, and if I don’t get the portfolio right, she’s going to murder me.

So, yeah. The Tangerine account looks pretty effn smart, to be honest. GUARANTEED 2.4% for 6 months.

#97 60/40 Skeptic on 07.11.16 at 2:29 am

To clarify, do you view the 60/40 rule as universal? The advisor I signed up for recommended 90/10 due to my insistence that the money is for retirement in 30+ years, and having seen what my parents did in 2008, I know better than to sell when things are down. But do you view this as unwise?

#98 Jimmy Popoff on 07.11.16 at 2:41 am

OK, so I’m a ‘risk on’ guy, I understand it, so no balanced portfolio and no bonds. I became a cash multimillionaire using my methodology. I can see using a balanced approach if you’re a financial illiterate , but you’ll never get rich, but you save.

My call on the bond crash is that it has been engineered by central bankers so that governments, like our Liberals, can switch to fiscal spending now that taxpayers are aware of the massive ‘monetary’ debt that’s been run up. Dorks like Trudeau are just another set of pigs in the trough who want to fill their pockets. Low rates make union workers rich.

So, greed will invite all the savers into equity, wait for the run.

#99 Freedom First on 07.11.16 at 3:07 am

#29MF

MF, your best Post ever!

Freedom First.

#100 Shawn on 07.11.16 at 4:01 am

Bonds versus Bond ETF

Excellent article today but the following is not correct as written.

“Buying a bond ETF instead of a bond – where returns are based on bond prices and not yields – would have been a smart move this year. For example, while Canadian government bonds sink, a fund holding them has delivered a 5.04% return so far in 2016.”

Was this meant to say Canadian government bond YIELDS have sunk? The bonds themselves have increased in value which is exactly why funds holding them gave a positive return.

These funds typically just buy and hold bonds to maturity. Therefore they cannot beat the underlying bonds but rather provide diversification and convenience but they can’t beat the return on the underlying bonds.

A bond TRADING fund could but it could also trail the index and is not what a bond ETF would typically do.

#101 Shawn on 07.11.16 at 4:09 am

Why Interest Rates Are Low

Contrary to popular opinion, it’s because the demand to borrow is low compared to the wealth available to be borrowed.

Money is just an intangible construct that facilitates trade and lending. When you borrow to buy a house, someone has fully paid for that house the moment it is completed. You are in reality borrowing the house which is facilitated by the construct of borrowing money.

There is apparently a surplus of real wealth and a dearth of demand to borrow such real wealth which drove down the cost to borrow.

Unless the laws of supply and demand have been suspended, the above must be true.

Well, this comment should cause a few heads to explode but I can’t help the laws of supply and demand.

Big demand to borrow as in the 70’s when the boomer hoards borrowed led to high rates. Now with demographics the demand to borrow is lower. So rates are lower as there is much supply of wealth and relatively fewer borrowers.

#102 MBG on 07.11.16 at 4:39 am

Take a look at the demographics charts in that $800K listing. Yes, only half of people in the area at native English speakers… but I am talking about the “Household Income” stats. Egads – something is amiss…

#103 Shawn on 07.11.16 at 6:13 am

The dearth of borrowing demand…

Since moisters are borrowing apace as are governments, it may be corporations that are not borrowing as much since in our post-industrial society they may not have as much need for capital.

Also demographically, most boomer have long since become net savers when RRSP, pensions, house wealth and all wealth is counted.

#104 Thanks for the good advice Garth... on 07.11.16 at 6:53 am

Per the subject, thankyou on the ETF advice and other posters about this.

In general Garth, we are 2 peas in a pod in terms of thinking but you have to admit that when < 100 people in Canada earn more than 1/3 of the Cdn. population…things have gotten out of hand.

"…and eat-the-rich tax policies"

should be put in place in Canada. Sorry, but this is where I disagree with you. Unprecedented and a massive misdirection of income to a miniscule segment of the Cdn. population.

Why so many speculators and gamblers in YVR/416 RE…all they want is a small piece of that pie. Of course, that elite will never let them have that larger piece of the pie; hence, why I believe we are headed for a major RE crash in those 2 cities.

#105 Zen Headspace on 07.11.16 at 7:13 am

RE: #29 MF
Demographics to blame? Disagree.
——————————————————————–
Harry S. Dent Jr. – the obnoxious book shilling nut job that has made some surprisingly accurate predictions over the past couple of decades – seems to think otherwise:

What’s ahead now? A “demographic cliff,” according to Dent’s new book…

Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019.

“At Dent Research we have a not-so-secret weapon: demographics,” Dent writes. “It is the ultimate indicator that allows you to see around corners, to predict the most fundamental economic trends not just years but decades in advance.”

Dent spends the bulk of his book arguing that the demographic story has turned against the U.S.

As Boomers retire, it’s not an unfamiliar argument. Dent writes that an aging U.S. will cause deflation that will weaken the economy from 2014-2019.

Here are some of his main points:

Young people cause inflation because they “cost everything and produce nothing.” But young people eventually “begin to pay off when they enter the workforce and become productive new workers (supply) and higher-spending consumers (demand).”

Unfortunately, the U.S. reached its demographic “peak spending” from 2003-2007 and is headed for the “demographic cliff.” Germany, England, Switzerland are all headed there too. Then China will be the first emerging market to fall off the cliff, albeit in a few decades. The world is getting older.

The U.S. stock market will crash. “Our best long-term and intermediate cycles suggest another slowdown and stock crash. The worst economic trends due to demographics will hit between 2017 and 2019. The U.S. economy is likely to suffer a minor or major crash between late 2017 and late 2019 or early 2020 at the latest.”

“The everyday consumer never came out of the last recession.” The rich are the ones feeling great and spending money, as asset prices (not wages) are aided by monetary stimulus.

The U.S. and Europe are headed in the same direction as Japan, a country still in a “coma economy precisely because it never let its debt bubble deleverage,” Dent argues. “The only way we will not follow in Japan’s footsteps is if the Federal Reserve stops printing new money.”

“The reality is stark, when diers start to outweigh buyers, the market changes.” It all comes down to an aging population, Dent writes. “Fewer spenders, borrowers, and investors will be around to participate in the next boom.”
The U.S. has a crazy amount of debt and “economists and politicians have acted like we can just wave a magic wand of endless monetary injections and bailouts and get over what they see as a short-term crisis.” But the problem, Dent says, is long-term and structural — demographics.

Businesses can “dominate the years to come” by focusing on cash and cash flow, being “lean and mean,” deferring major capital expenditures, selling nonstrategic real estate, and firing weak employees now.

The big four challenges in the years ahead will be 1) private and public debt 2) health care and retirement entitlements 3) authoritarian governance around the globe and 4) environmental pollution that threatens the global economy.

“You need to prepare for that crisis, which will occur between 2017 and 2023, with the worst likely starting in 2017”.

Shizen is a Japanese Zen concept of presenting yourself to the world as you really are, without creating a false image. This implies that one must resist the urge to live beyond one’s means, and only purchase things you can actually afford. No big mortgages. No bloated consumer debt. People should be honest with themselves about how much they can really afford to spend on frivolities like fancy expensive cars, houses they cannot afford, designer handbags, jewelry, and other meaningless nonsense just so they can show off to others. In order to survive and ultimately prosper, we must live within our means, and “save” whatever we can by investing the money (that we do not spend on harmful luxuries) in diversified and balanced financial assets.

#106 BillyBob on 07.11.16 at 7:45 am

Hot today here in Prague, hitting 33C. Not as bad as the ME of course, but still warm.

Just went for lunch with Ms. BillyBob. Even after many visits was still struck by how reasonable the prices are. It’s nice to get a .5l beer for 44CZK (2.35 CAD). Great beer, not swill. She had the smaller size so that was a whopping 29CZK (1.55 CAD). The whole meal with drinks: 15.85 CAD. On a patio. In Prague. (aka “The Factory”, the place where they make beautiful women).

Couldn’t help but contrast that with the Canadian version, where you’ll spend 10 bucks minimum on some crap commercial draft and 40-100 bucks just to have lunch. On one of the two nice weather days of the year. While enduring some passive-aggressive waitperson at a generic Cactus Club or whatever. Ugh.

Sure, sure, it’s all relative and wages are lower here. And Europeans certainly have their economic woes but then so does Canada, hell it’s why I was forced to leave in the first place. (Although the Czech Republic is actually doing quite well at the moment, economically speaking, as they have a strong manufacturing base. EU members yes – Euro users, no. hmmm.)

But the difference in ATTITUDE is the real eye-opener…the sig other’s family live simply and within their means, and has a way better quality of life than average Canadians stretching to purchase their granite-countered palace in some suburban hellhole.

A housing crash in Canada would be painful but ultimately a very good thing. Bring it.

#107 Sheane Wallace on 07.11.16 at 7:58 am

#95 Peter

the 5 % of my portfolio in gold stocks has tripped this year alone.

I said a year ago that putting some money in gold stocks would help one’s retirement plan but my comments were suppressed.

Unfortunately when currency is destructed all assets go up in value and what we witness today and will witness in the future will prove it right again.

UBS just announced price target for gold at $ 1500 USD.

#108 Harbour on 07.11.16 at 8:11 am

Bye-Bye Bonus

http://finance.yahoo.com/news/bye-bye-bonus-brexit-seen-090007515.html

#109 Armando on 07.11.16 at 8:17 am

“Why have yields on safe stuff collapsed?”

Poor Garth! He missed the number one reason that interest rates are so abysmally low: Central Bank manipulation! The Fed and other Central Banks around the world have been manipulating rates and printing money (QE) in an effort to prevent the market from doing from what it needs to do: Efficiently allocate capital. This includes allowing unpayable loans to be written off. Instead, the Fed and friends have enacted a policy of “extend and pretend”, with predictable results (i.e. Bubbles everywhere). If you think that the TSX will be unaffected when Canadian housing crashes, then I have a bridge to nowhere I’d like to sell you…

#110 Harbour on 07.11.16 at 8:17 am

As the stock market hits new highs, Wall Street is getting more skeptical

http://finance.yahoo.com/news/analysts-cut-earnings-growth-expectations-000000296.html

#111 Harbour on 07.11.16 at 8:18 am

Goldman Sachs: Neither stocks nor bonds look good right now

http://finance.yahoo.com/news/goldman-sachs-neither-stocks-nor-073005046.html

#112 NoName on 07.11.16 at 9:08 am

#93 Trading Naked on 07.11.16 at 1:07 am

cant remember when, but not that far ago i sow some guy driving around Burlington with ontario plates RRSP, who knows maybe is a same guy, or not…

#113 Blame it on Brexit on 07.11.16 at 9:08 am

EU Banks Need $166 Billion, Deutsche Bank Economist Tells Welt

http://www.bloomberg.com/news/articles/2016-07-10/eu-banks-need-166-billion-deutsche-bank-economist-tells-welt

#114 westcdn on 07.11.16 at 9:27 am

They pretend to pay me, I pretend to work – old Russian adage.

Incentives explain the world (my words) – Charlie Munger, Berkshire Hathaway.

I heard a rumour that the Japanese government is contemplating monetizing an infrastructure stimulus program. It would own bridges and roads and simply add the cost to the existing pile of government debt. As stupid an idea I think this is, it is possible given zero and negative interest rates. With Japanese interest rates being what they are currently, there is no limit to the amount of debt the government can accumulate. Plus, government pensions can still be paid.

Does this not sound like communism? You know where the government owns everything but productivity goes to squat and the non-elite have a third world standard of living. It is no wonder old Russia collapsed under its head of gold and feet of clay. There a lot of bad things to say about capitalism – blame the players, not the game. It has always been about getting the most with the least amount of effort – incentive. I mean, who in their right mind would want to work twice as hard for half as much.

Speaking of communism gone badly, what happened to Venezuela? http://www.bbc.com/news/world-latin-america-36319877

#115 NoName on 07.11.16 at 9:33 am

#94 ertw on 07.11.16 at 1:13 am

60/40, there is post not to far back more detailed, so start reading post in reverse, eventually you’ll get to it.

#116 Brett in Calgary on 07.11.16 at 9:45 am

One of the saddest (perhaps pathetic) things I’ve read in a while. Both parents work…

“We’ve tried a couple of times but something always comes up that wipes out our savings. I think it would probably take me about five years to save a down payment of $17,500, and with the kids growing so fast, we really need a bigger place with a yard.”

http://www.theglobeandmail.com/real-estate/calgary-and-edmonton/affordable-townhouse-model-draws-lines-of-calgary-home-buyers/article30819551/

#117 b riding dirty on 07.11.16 at 9:45 am

In a one million portfolio how much should be sitting in just cash waiting on the sidelines? Thanks!

#118 Sheane Wallace on 07.11.16 at 10:01 am

#101 Shawn on 07.11.16 at 4:09 am
Why Interest Rates Are Low

Contrary to popular opinion, it’s because the demand to borrow is low compared to the wealth available to be borrowed.

Money is just an intangible construct that facilitates trade and lending. When you borrow to buy a house, someone has fully paid for that house the moment it is

completed. You are in reality borrowing the house which is facilitated by the construct of borrowing money.

There is apparently a surplus of real wealth and a dearth of demand to borrow such real wealth which drove down the cost to borrow.

Unless the laws of supply and demand have been suspended, the above must be true.

Well, this comment should cause a few heads to explode but I can’t help the laws of supply and demand.

Big demand to borrow as in the 70’s when the boomer hoards borrowed led to high rates. Now with demographics the demand to borrow is lower. So rates are lower as

there is much supply of wealth and relatively fewer borrowers.

—————————————————-

It is actually the exact opposite.

The governments generate huge demand for borrowing, just look at how government debt is swelling and growing lately.

As there are no private lenders willing to take the risk and more importantly: as there is no savings to support that huge supply of bonds, central banks go on a buying spree to create market for government bonds, the longer this goes the more central bankers become the main and then the only buyer of bonds. Then they revert to buying stocks, ETFs and private (aka junk) debt. Just look at Japan and Europe.

What we refer to as ‘money’ historically has nothing to do with the credit ‘money’ that we enjoy today emitted at will with no savings behind it. This has nothing to do with gold bugs, gold standards, etc, money is and always has been media of exchange, store of value and unit of measure, but more importantly it is
part deferred labour, part measure for value of productive assets.

What is happening today is destruction of the deferred labour part of money for the benefit of boosting asset values.

This can not go much longer as we have entered now the land of delusions, manifested for example in negative interest rates.

Paying bankrupt countries (e.g the former PIIGS) to sell us bonds at negative interest rates while assuming huge risk is ridiculous and absurd.
Market rates for these countries would be at least 8-10 %. The different in market price and forced by central banks price of money when accounting for the risks

is in effect theft and confiscation of wealth.

While there are idiots holding consistently depreciating cash in GICs with no return this can go for a while but at some point we will hit the wall with 100 miles per hour.

Current trade in bonds is based on:
– Carry trades
– Expectations to further go deeper into negative rates territory (- 3-4 %?) which drives value of bonds at -0.5 % – truly insane trade
– Expectations of future very restrictive capital controls including confiscation of wealth.

Advocating for investment in debt in these conditions – peak dept and negative interest rates (this has never happened in human history!) is lying thinking of
gambling in the casino as a sound retirement plan.

Carry trade will go for a while and then it will crash.

Gold will have it’s day and then will decline. That trade is volatile and risky and not for average investor’s stomach.

Ownership of real and productive assets including paid off real estate, land, defensive stocks will be the best play to be in.

Savers and retirees on fixed income will be crushed.

Central bankers think that as they control the interest rates through assets purchases, they can call the loans, potentially increase the rates and prevent inflation spike but they might be wrong. The yield curve is flattening and in such environment there is no chance for interest rates to rise at all, on the contrary.

Soon we will see some new innovative stimulus program that could really spoke the inflation and then watch out.

The likes of of our old friend – Mark ‘the talk’ Carney fighting the destruction of the British Pound with rate cuts is clear indication and evidence on how delusional and out of touch with reality these people are.

Capital controls will be the real killer.

#119 rockieyet on 07.11.16 at 10:04 am

#53 Brazil ex-pat on 07.10.16 at 8:31 pm
#22 crowdedelevatorfartz on 07.10.16 at 5:32 pm
Thats it.
Apocalypse 2016 was right! We’re doomed.
The only thing for me to do is rent a room in Brazil ExPats 2 bedroom favela in Sao Paulo……if the “offer” still stands Brazexzit? I snore a bit but I change my underwear every day….sometimes twice…….

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

I live on the beach in a big house. How is that $2000 a month moldcouver closet with clouds, rain and gloBULL warming working out for you?”

What’s the postal code in Rocinha, dude?

#120 Sheane Wallace on 07.11.16 at 10:15 am

BTW real estate in Toronto can go further up by another good 30-50-70% from here, let’s not forget that it is measured in increasingly worthless currency.

Nobody (in terms of regulators) will do anything, as not to be accused of pricking the bubble, they will just point out to the problem, but will do nothing to address it. They can’t and don’t want to.

They do not even recognize their responsibility to deal with it, everyone is just noting it in order to wash their hand later on.

Whether a brick in a shack house in To/Van is ‘worth’ 200 or 300 ‘loonies’ is irrelevant for quite a while now.

#121 Hot Albertan Money on 07.11.16 at 10:16 am

#8 HoweStreet.com on 07.10.16 at 3:46 pm

Garth discussed Vancouver and BC real estate on This Week in Money.
http://talkdigitalnetwork.com/2016/07/this-week-in-money-54/

Gartho, come on man. Can you please put up a calendar or something to let us know when you’re doing media?

#122 Ole Doberman on 07.11.16 at 10:25 am

Sounds like the end is nigh for Europe:

“This is why the euro CANNOT SURVIVE. You have sovereign states with their own crisis and that demand measures separate and distinct from other members. This is how the euro system will break. It is extremely urgent that you understand the crisis ahead. This is what will send capital fleeing into the dollar. True, some will buy gold. That is generally retail investors. Pension funds and institutional investors will buy US government bonds, dollars and park them at the Fed, or jump in with both feet into the US stock market.

By the time this mess comes unraveled, we will see the world completely change. We are probably looking at a major world monetary reform come as early as 2018. The speed with which this is unfolding is rather incredible”

https://www.armstrongeconomics.com/international-news/europes-current-economy/the-euro-on-the-brink-of-disaster/

#123 Victor V on 07.11.16 at 10:55 am

S&P 500 rises to all-time high on growth optimism and bets for more central bank stimulus

http://business.financialpost.com/investing/market-moves/sp-500-rises-to-all-time-high-on-growth-optimism-bets-for-more-stimulus?__lsa=ee31-69e7

U.S. stocks climbed, pushing the benchmark S&P 500 Index to an all-time high, amid renewed optimism in the strength of the world’s largest economy.

The S&P 500 rose 0.3 per cent to 2,135.71 at 9:31 a.m. in New York, surpassing the prior intraday record set in May 2015. The gains extended a rally from Friday after a better-than-forecast jobs report brightened the economic outlook without fueling expectations that the Federal Reserve will raise interest rates sooner. The Dow Jones Industrial Average rose 59 points, or 0.3 per cent, to 18,206.15 today.

#124 WelcometoSlurrey on 07.11.16 at 11:30 am

#4 Not sure what you mean by your comment Garth. A balanced portfolio did lose 6 % last year, I am confident it will come back up as a balanced portfolio should but even with a fee based advisor it was still a losing year.

Fully-invested 60/40 was slightly + on the year, while TSX lost double-digits. — Garth

#125 ROTFL on 07.11.16 at 11:32 am

#29 MF — “These trends of central bank failures began long before Brexit. The EU has been wobbling for years. Nobody trusts the actions of these supposed economists, certainly not after 2008. Brexit (and Trump) point to the fact that more are becoming aware these central bankers and economists are failures and useless.”

This is a symptom of a truly bizarre modern malady — fiscalitis. The most common symptom is blaming central bankers for everything wrong with the economy, while studiously ignoring the politicians who create fiscal suicide pacts (the US “sequester”), can’t even pass annual budgets (the US, again) won’t resolve banking crises (EU) and insist on crippling fiscal austerity for some members (EU again).

But sure, blame central bankers. They should be able to take up all the slack while politicians stand around with their hands in their pockets through eight years of the worst global slump in almost a century, right?

#126 LL on 07.11.16 at 11:32 am

http://www.journaldemontreal.com/2016/07/10/un-pere-de-famille-etrangle-par-les-dettes-fonce-sur-un-viaduc

For those able to read French.

For other, it’s a sad story of a guy full of debt (Visa, borrowed 60k to his parents to build a house, bought brand new fournitures) who wants to kill himself by hitting a wall at high speed (life insurance will clear his debts). But he is not dead.

Couple earning 80k – 2 kids.

Usually those borrowing have just enough rope left to not hang themself..but this one did not have any rope left!

#127 Snoopy on 07.11.16 at 11:35 am

Garth,

I can hardly believe a a 10 year government of Canada bond yields 0.99%. If I got this right, if I lend Ottawa $10,000 for ten years, each year, I get $99. After taxes, per month, that’s $5.

Unless the government gives an extra $200/month to retirees, either:

– you don’t retire
– you eat Cheerios for breakfast and lunch
– you have 3M investment in bonds (you are a doctor)
– you buy dividend stocks

I think dividend stocks are about to get much more expensive.

#128 Moron Face on 07.11.16 at 11:46 am

Will this be the 1st time in history Canada is left behind in the reflationary trade? The world is awash in oil and that’s all we’ve got to offer…

#129 Say What? on 07.11.16 at 11:56 am

#14 ROCK BEATS PAPER on 07.10.16 at 4:11 pm

This does not end well for anything debt related, including bonds, stocks and real property.

———————————————————

Yes, but when does it end badly? Central bankers are prepared to continue this free-wheeling-easy-money charade for as long as possible. Even until the system collapses.

#130 Noel on 07.11.16 at 11:56 am

Only a month ago you were warning of the inevitable and immediate normalization of interest rates… Now not a peep about rates rising. Is the world fundamentally different than it was 30 days ago? Or is it actually different this time?

No. — Garth

#131 not 1st on 07.11.16 at 11:58 am

Welcome to our new economy – banks print up money, float it into the economy somehow and try to pay for it with artificial inflation. All while denying you a return on your “investments”

There is no fundamentals anymore. Its plate spinning.

#132 Doug in London on 07.11.16 at 12:03 pm

Rather than invest in high interest savings accounts or GICs, the best option would have been to invest in stocks or equity ETFs late last year or earlier this year when they were on sale.

#133 Moron Face on 07.11.16 at 12:09 pm

One has to wonder if Friday was the final top in long govt bonds. TLT. Hmmmmm

#134 Godth on 07.11.16 at 12:10 pm

Professor Steve Keen A Real Media Interview
https://www.youtube.com/watch?v=l1Gg1RGAO6k

#135 TurnerNation on 07.11.16 at 12:49 pm

Billybob great post I’ve made the same points about Toronto being a bunghole.

Essentially, Kanada is a tax slave farm for the “Firm” – the Crown which owns all of our land.
Paying 50-60% of our income in direct, indirect taxation and cartel pricing that wows even El Chapo, is the game of ‘economic violence’ that’s played.
What, you think their ugly mugs got onto our money and coinage for free?
Same old same old. All the King’s horses and all the King’s men.

Ladies and gents meet the latest Long Branch millionaire.

1.1 to live among sht bungs and fellow, albeit snaggle-toothed ballers:

https://www.realtor.ca/Residential/Single-Family/17163594/155A-GAMMA-ST-Toronto-Ontario-M8W4G3-Alderwood

#136 Moron Face on 07.11.16 at 12:58 pm

Yeah, Friday may have been the top in the bond market.

#137 Moron Face on 07.11.16 at 12:59 pm

International stocks are an extreme buy. VPL, VGK.

#138 Moron Face on 07.11.16 at 1:00 pm

Small & mid caps to lead the S&P 500 in the US.

#139 Nick on 07.11.16 at 1:03 pm

Hi Mr. Turner. In a previous post you recommended locking in a 5 year mortgage. I am currently at 2% variable and have the option to lock in at 2.39 for 5 years. Would it be wise to wait it out at the lower rate for a while more or lock in today?
Thank you.

#140 MF on 07.11.16 at 1:11 pm

#125 ROTFL on 07.11.16 at 11:32 am

Yup. Part of Trump’s appeal is that he is (on the surface) a different type of politician.

I agree with your statement.

MF

#141 ROTFL on 07.11.16 at 1:22 pm

Gosh, a free trade agreement with Ukraine! Now we’ll be able to ship even more coal briquettes back and forth between us.

http://atlas.cid.harvard.edu/explore/tree_map/import/ukr/can/show/2014/
http://atlas.cid.harvard.edu/explore/tree_map/export/ukr/can/show/2014/

Anyone got a plausible explanation for this bizarre trade partnership that doesn’t involve kleptocracy, money laundering or both?

P.S. Total annual trade with Ukraine in 2014 was about 1/2 day’s worth of trade over the Ambassador Bridge. Uppa, uppa, uppa!

#142 BREAKING NEWS! on 07.11.16 at 1:24 pm

Leaked data implies that QE is coming!

QE 4/5 coming folks! Stocks have broken into record territory!

Buy any asset you can get your hands on. Real estate, Stocks, Bonds, all at record high prices! Commodities soon join the rally record books.

Buy, Buy, Buy assets. This one printing is not going to stop. Interest rates will hit zero and stay there for the foreseeable future.

#143 BOOM! on 07.11.16 at 1:25 pm

Reading the blog, plus our hosts’ sage advice “Never watch BNN, or read blog posts because they’re all nuts” as a defining guide helped my understanding tonight.

Gold might be up a bit, but it pays no dividends, and therefore an unworthy hold.

The EU is rather rudderless, and therefore not a wise place for serious money investment, presently. Maybe nibble at a few stocks badly beaten down, but only nibble.

The future is essentially unknowable, outside of broad trends. Boomers are aging out, but hardly ‘gone’ they will need things, but not the Harleys of yore, nor a bigger house. Depends, healthcare, long term facilities yes.
Also, sufficient resources to cay them through to the undertakers. Many will not enjoy the last years, because they fail to see the future has, indeed, arrived -today!.

Gen X, and there millenialls are the new driving forces in the economy. They will not consume in the manner the Boomers did, yet they will want and need some of the same things. They will have them, now at Boomer’s prices, later at their prices.

Place your Buy, Sell, Hold ideas accordingly, and depending who reads their children, and grandchildren and their friends best shall win. Notice, what the central bankers decry has no direct bearing on the outcome.

Whether Trump., Hillary., or an as yet unknown in the White House in November affects things, a bit, largely, or not at all. The future is unknowable isn’t it?

Who would have guessed this is where we would be in 2016???

Where did I leave that crystal ball?…

#144 Moron Face on 07.11.16 at 1:48 pm

Long term government bonds are a short. Expecially in Europe.

#145 WelcometoSlurrey on 07.11.16 at 1:58 pm

Started investing with a fee based advisor in April of last year. April to December gave a -6.4% return. Am I wrong? I will re iterate that I think the portfolio will fair better this year.

#146 DisgustMadeMePost on 07.11.16 at 2:05 pm

Sorry Garth, forgot where I was reading, posted in wrong spot…

Not sure where the truth lies.

I recently had a conversation with an employee of one of the big banks. He deals with mortgages at a vancouver west branch. His comment was that 90% of mortgages they were doing were to foreign buyers. 35% down and absolutely no need to prove income. He also commented that real estate agents are blamed but in truth, it’s the regulations at fault. Of course, regulations aren’t going to change if the current governing party stays in power.

He felt that the ‘pipeline’ of money, as he called it, may slow in the next year or two as the Chinese authorities clamp down on those trying to get their money out of the country and the businesses that facilitate the process.

The guy was stressed. We also talked about buying a place in vancouver… And he could not.

Please don’t tell me I’m crazy, or making this up… I’m just relaying our conversation.

How is his experience so different from the ‘data’?

#147 Chaddywack on 07.11.16 at 2:26 pm

BC has just announced it will allow Vancouver to have legislative authority to implement a vacant home tax! Legislature is being recalled as of July 25th.

People in Vancouver may soon be able to report their absent foreign investor neighbours as they would any other by-law infraction.

#148 Balmuto on 07.11.16 at 2:32 pm

#127 Snoopy on 07.11.16 at 11:35 am
Garth,

I can hardly believe a a 10 year government of Canada bond yields 0.99%. If I got this right, if I lend Ottawa $10,000 for ten years, each year, I get $99. After taxes, per month, that’s $5.

Unless the government gives an extra $200/month to retirees, either:

– you don’t retire
– you eat Cheerios for breakfast and lunch
– you have 3M investment in bonds (you are a doctor)
– you buy dividend stocks

I think dividend stocks are about to get much more expensive.
—————————————————————–
This comment from Dennis Gartman caught my eye today. Not endorsing him in any way, but this comment of his I did find very interesting:

“As one or two off the wittier and wiser “Wags” commenting upon how the markets are moving have said, we are witnessing a stunning shift in the fundamental view of how capital is to be allocated: that is, money is moving into equities for the yield and is moving into the bond markets for the capital gains. This is breaking centuries of capital market allocation theory and it is putting that theory upon its head, because for centuries “serious” money went into the bond market for yield and went into the equity markets for capital gains. Now it is wholly and completely otherwise.”

He just hit the nail on the head with what is wrong with the current investment environment. It’s an upside-down world when you buy stocks for yield and bonds for capital gains. But as bond yields continue to grind lower, you’re absolutely right – dividend stocks are only going to get more expensive. Eventually perhaps we get to a point where nothing yields anything anymore? And maybe then the insanity stops and there is a great reset? Hard to see how we get out of the current investment regime painlessly.

#149 Fed-up on 07.11.16 at 2:39 pm

#124 WelcometoSlurrey on 07.11.16 at 11:30 am

#4 Not sure what you mean by your comment Garth. A balanced portfolio did lose 6 % last year, I am confident it will come back up as a balanced portfolio should but even with a fee based advisor it was still a losing year.

Fully-invested 60/40 was slightly + on the year, while TSX lost double-digits. — Garth
—————————————————————————-

It was down Garth. Converting the USD component to CAD does not count, and is manipulating the numbers, and we all know how much this blog jumps all over that when CREA cherry picks. What if we converted these accounts from CAD to USD? How did they do then? More of the same or completely flat so far this year too.

Let’s hope they do MUCH better in the next few years but not so sure.

#150 Smartalox on 07.11.16 at 2:44 pm

Vancouver gets permission to tax Vacant properties.

(I wonder how much the space between Gregor’s ears will earn)

http://www.theglobeandmail.com/real-estate/vancouver/bc-announces-changes-to-real-estate-market/article30852588/

#151 Self Directed on 07.11.16 at 3:21 pm

#139 Nick on 07.11.16 at 1:03 pm

Hi Mr. Turner. In a previous post you recommended locking in a 5 year mortgage. I am currently at 2% variable and have the option to lock in at 2.39 for 5 years. Would it be wise to wait it out at the lower rate for a while more or lock in today?
Thank you.
——————————
Nick. Garth did not answer you on purpose because he gets the same question all the time.

The answer is “Lock” it, if you’re worried. Garth would say.. don’t quibble over a 10-30 basis points when the bottom is already here.

2.39, 2.49… 3.09? It’s still considered almost free money.

Over 50% of your mortgage payment should will be towards principal. But you should also be doing annual lump sum payments, if you really want to make a difference.

The goal is to reduce your principal amount as much as possible, before your term expires.

The best investment strategy is to pay off all outstanding debt. This includes your mortgage. The expensive ones first (Credit card, personal loans, then mortgage)… there is NO BETTER RETURN OUT THERE TODAY… IMO.

#152 Ronaldo on 07.11.16 at 3:24 pm

#143 Boom

”Gold might be up a bit, but it pays no dividends, and therefore an unworthy hold.”

Gold itself may not pay dividends but the companies that mine it do. HEP (my only etf) which I bought in Sept. and was paying 11% is now up 101% and dividend is still near 5%. My RBC precious metals fund purchased in January is up 111% January. This is the 7% of my balanced portfolio. I own roughly .7 oz of gold between a 1/10 oz. coin I received from my sons on my 65th birthday (golden years), a 1967 20 dollar gold coin, and my gold crown. That is all the gold I plan to hold. Silver, that is another matter.

#153 Globalist on 07.11.16 at 3:45 pm

I always kind of liked the 60/40 Bogle concept.
But in today’s world, especially in the Eurozone, the bond part of the portfolio (say one or two broad bond market ETFs) is just sitting razor-thin ahead of a guaranteed negative return, when adding the ETF to the very low yield.
The rational thing to do would be to sell the 40% bond part of the portfolio and put it in a 0% yield savings account – it will be the best risk-adjusted return and absolute return by far vs. bond ETFs in the Eurozone (if you are not too keen on FX risk and not willing to buy bonds denominated in something else than your home currency).

#154 Raincouver on 07.11.16 at 4:37 pm

http://omnyapp.com/shows/lynda-steele-show/vancouver-real-estate-w-marc-cohodes-the-lynda-ste

#155 TurnerNation on 07.11.16 at 5:08 pm

What rarified ground we walk upon.
2 mill for a semi in Little Uppa area of Toronto:

(All this for 2nd World infrastructure and corrupted cartel pricing.)

http://www.theglobeandmail.com/real-estate/toronto/bully-bid-for-little-italy-semi-avoids-a-price-war/article30767016/

#156 Dan Duran on 07.11.16 at 5:35 pm

I’m with you as far as Adele is concerned, but the other stuff doesn’t scare me much. I don’t see much of a difference between getting 3% when inflation runs at 4, or 0 when inflation runs at 1%. Provided, of course, you buy the official numbers..err basket of goods. If, unlike me, you live in your car and eat Paleo (ie next to nothing), you’re OK on the inflation front. The big difference is you have to adjust your retirement plans accordingly and stop fooling yourself that your money can grow in a savings account. It never did and never will.

#157 Brazil ex-pat on 07.11.16 at 5:37 pm

#119 rockieyet on 07.11.16 at 10:04 am
#53 Brazil ex-pat on 07.10.16 at 8:31 pm
#22 crowdedelevatorfartz on 07.10.16 at 5:32 pm
Thats it.
Apocalypse 2016 was right! We’re doomed.
The only thing for me to do is rent a room in Brazil ExPats 2 bedroom favela in Sao Paulo……if the “offer” still stands Brazexzit? I snore a bit but I change my underwear every day….sometimes twice…….

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

I live on the beach in a big house. How is that $2000 a month moldcouver closet with clouds, rain and gloBULL warming working out for you?”

What’s the postal code in Rocinha, dude?

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

I don’t live anywhere near Rio.

#158 robert james on 07.11.16 at 6:41 pm

http://www.scmp.com/property/international/article/1987371/asian-real-estate-conference-ridicules-canadian-governments#

#159 Raincouver on 07.11.16 at 7:22 pm

A Canadian provincial government statement that only three per cent of BC, Canada residential sales are made to foreign buyers and that Chinese nationals represent just 2.5 per cent of Metro Vancouver home buyers drew rolling eyeballs and laughter at the packed Asia Real Estate Association of America (AREAA) conference in downtown Vancouver.
“No. Absolutely not,” said an incredulous Byron Burley, Shanghai-based vice-president of Chinese-language juwaii.com, China’s largest foreign residential real estate search engine. “It is way, way higher than that.” Burley noted that millions of Chinese nationals use his site, which has from 3,000 to 5,000 residential listings from BC at any time.
“My intuition says it has to be much higher [than three per cent]” said Michael North of the Asia Pacific Network Foundation, “just based on the number of people and the number of deals being done at this conference.”
North, COO of Hawaii-based Pacific Royalties, which specializes in linking North American real estate with Asian buyers, had just finished telling the conference that “a next wave of Chinese buyers” was about to crash into the Vancouver market.
“The rollout is accelerating,” North said, citing the recent expansion of China’s Qualified Domestic Institutional Investor program that encourages wealthy residents of China to invest in foreign real estate and stock markets.
“I would like to know where the BC government is getting their statistics,” said North, who estimated “at least 10 per cent” of Metro Vancouver home buyers are foreign nationals.
Finance Minister Mike De Jong said the information was based on residential sales during a near three-week period in June, which began as the province began tracking the addresses of all buyers for the first time.
According to De Jong, there were 10,148 transactions between June 10 and 29 throughout BC, half of which were in the Lower Mainland. Only 337 of those sales – 3.3 per cent – involved foreign nationals.
“That is a very small sample,” said Tina Mak, a Vancouver real estate agent and president of AREAA Vancouver. “That is the problem. No one has hard data.”
Mak said she suspects that foreign buyers, particularly from Asia, represent a higher percentage in Metro Vancouver than the government data suggests. “But no one really knows.”
Vancouver real estate agents were less cautious in their response to the government data. “I would say 50 per cent of house buyers, maybe 60 per cent [are foreigners],” said Eve Chuang of Macdonald Realty.
Chuang and other agents at the AREAA conference said it is not the nationality of the buyer but the source of the capital that is important. Money from China, the real estate agents said, can be transferred to a relative with an address in Vancouver, who then acts as the buyer.
North added that, on larger transactions such as multi-family buildings, a Chinese national can open a Vancouver office.
“Name the company Maple Leaf Enterprise and hire Joan Smith to head it. Suddenly you’re a Canadian investor. Actually, that would be a good way to go if you’re a long-term investor.”
Burley agreed that is common for Chinese nationals to use local residents or companies as proxies when purchasing foreign real estate. But how many? “I have no idea,” Burley said, “I don’t think anyone does.”

#160 sure is hot in 416 on 07.11.16 at 8:23 pm

we are in mid July, summer vacations, people pull listings and wait for fall market

check yesterday TunerNation post 499 grace. all you need to know about 416. half a million dollar bullies,
that means there are a dozen waiting for the next 1.5 semi.

#161 brett on 07.12.16 at 1:26 am

We are in Vancouver often. Last month my wife saw an apartment/condo that she liked. I did not nibble on that bait. I pretended not to hear, opened the car windows and turned up the tunes. Nyet.

Still have not bought in Calgary. Market seems tad better but nothing to scream about. Looking at perhaps a Jan/Feb timeframe buy if the right deal comes up. Garth, what is your read on that market?

Cheers

#162 Rebs on 07.12.16 at 11:17 am

Everything is backwards. It used to be that saving was the smart thing to do; now we’re penalized.

At least I received this notice logging into my account this morning: New deposits of up to $500,000 to your Tangerine Savings Account(s) from Jul 05, 2016 to Sep 30, 2016 will earn 2.37% interest* until Sep 30, 2016. This rate will also apply to Tax-Free Savings Accounts.

I haven’t paid a penny in banking (or credit card) fees in about 3 years. I’m not wealthy but at least I can keep what little I have to myself.

I do wonder though: at what point does it make sense to start with the ETF/fee-based adviser stuff? Like when you have $30K or more, or before that? Until that time, we need to keep it in a regular savings account right OR is there other options?

#163 acdel on 07.12.16 at 3:32 pm

Garth, if they do not listen to what you have to say in this current blog then what else can you do. Take solace that some have listened and will enjoy a comfortable retirement.
Good advice!
Be smart people; the real numbers (overall) are not looking good.

#164 mmm on 07.13.16 at 6:28 pm

What… like stop watching that wink-tart?
That’s a tall order…