The Big 6

RYAN  By Guest Blogger Ryan Lewenza

Today we’re going to have some fun with numbers. Well, fun may be a stretch since we’re not talking about some crazy Hangover movie-like experience with the “Smoking man” in Las Vegas. This is more nerdy fun like hanging out at Comic-Con dressed up as Chewbacca.

Our industry loves its acronyms (CDS’s, MBS, ROEs etc.) with “FANG” stocks being one of the more recent and popular ones. FANG stocks include Facebook, Amazon, Netflix and Google. When we add in Apple and Microsoft we get a variation of the “Big 6” we are well familiar with here in Canada. These “Big 6” US stocks have done much of the heavy lifting for the S&P 500, with these six stocks contributing roughly 40% of 2017 YTD gains and over 20% of the total gains for the index since 2013. Given how topical this investment theme is these days we thought it would be interesting to compare and contrast the US “Big 6” with our very own “Big 6” banks and see what conclusions can be drawn.

It has been a great run for these six US stocks with their combined market cap up 165% to US$3 trillion since 2012. To put this into perspective this is the equivalent in US dollars of the combined total market cap of Canada’s TSX and Germany’s DAX stock exchange value! So if you had US$3 trillion lying around (or had God as your private banker) you could either purchase 6 (great) US companies or every company listed on both Canada’s and Germany’s stock exchange!

Let’s now compare those six US stocks to the “Big 6” Canadian banks which are pretty sizable banks on a global basis and are highly profitable. The “Big 6” banks include Royal Bank, TD Bank, Bank of Nova Scotia, Bank of Montreal, CIBC and National Bank. Their combined market cap in US dollars is $344 billion or roughly 1/10th of the combined market cap of FB, AMZN, NFLX, GOOGL, AAPL and MSFT.

Here in Canada we view the Canadian banks as larger than life but we’re looking at them through the lens of a small country with just 35 million people. As President Trump would likely say, the “Big 6” US stocks are HUGEEE and our “Big 6” Canadian banks are just a bunch of “Little Marcos”.

Market Cap of the US “Big 6” & the “Big 6” Canadian Banks

Source: Bloomberg, Turner Investments

Where it gets interesting (again assuming you’re a nerd like me who gets worked up over financial stats) is when you compare the profitability of the US “Big 6” stocks with the “Big 6” banks. Looking at trailing 12-month combined earnings of the US stocks, they earned an incredible US$98 billion with Apple delivering half of this.

In contrast, the Canadian banks earned a very impressive US$29 billion over the last 12 months. So comparing the US stocks to the Canadian banks, they make 3.5x more in earning than our banks, but have a combined market cap nearly 9x that of the Canadian banks.

Net Income of the US “Big 6” & the “Big 6” Canadian Banks

Source: Bloomberg, Turner Investments

Therefore the missing piece to this analysis is stock valuations. Currently, the “Big 6” US stocks trade at weighted average P/E ratio of 56x with Amazon and Netflix trading at nosebleed P/E levels of 180x and 206x, respectively. The Canadian banks on the other hand trade at a much more reasonable 12x earnings, and you get some nice divys every few months.

P/Es of the US “Big 6” and the “Big 6” Canadian Banks

Source: Bloomberg, Turner Investments

Ok, so what’s the takeaway here?

* First, buy broad-based index funds since it’s very hard to know which stocks are going to be the big winners in a given year. Many portfolio managers have taken a pass on Amazon, Facebook and the like since they are expensive. Well not owning those stocks likely caused many PMs to underperform the S&P 500
* Canadian banks punch above their weight class delivering massive and steady earnings for investors. And they trade at very reasonable valuations while providing attractive dividends. This is why we believe investors should continue to have some exposure to them in portfolios
* Finally, if you’ve hit a big winner by owning one these US stocks then maybe it’s not a bad time to “ring the register” and take a few chips of table. Especially, if “Smoking man” is sitting at your poker table ordering double JD and cokes.

Ryan Lewenza, CFA,CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

104 comments ↓

#1 TurnerNation on 05.27.17 at 2:30 pm

Attn. new Blog Dogs the following user names are still available:

Mark of the Least
Where are the customers blogs?
The chartist guy in the room
Divestors friend
Old Stock Blog Dog
Dollaramarama
REITa MacNeil
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Natural Fancy Colored Blog Dog
Buster Reeko
Ad-nauseam Ad Infinitum

Reserved: Blog Dog Poloz

#2 Party on Garth on 05.27.17 at 2:32 pm

Household credit for Canada to the end of April, 2017:

http://credit.bankofcanada.ca/householdcredit

Business credit for Canada to the end of April, 2017:

http://credit.bankofcanada.ca/businesscredit

#3 Debtslavecreator on 05.27.17 at 2:45 pm

The Canadian economy is an embarrassment with a massive RE based debt bubble accounting for the bulk of what is an illusion of growth. The unprecedented credit growth, most of it unproductive, temporarily inflated GDP and asset prices. When the credit bubble stalls out and begins its inevitable contraction, GDP / income drops along with the imaginary asset prices but the very real mortgage and other contractual obligations will not be “adjusted” until the inevitable default and write off happens. Rapid job losses and social strife will become even more mainstream as the majority end up with little or nothing to show for decades of work

Canadian bank stocks have been great as one would expect after a historic debt bubble. The group as a whole will likely be a poor performer for at least the next 2-3 years if we in fact have started a RE correction
The typical homeowner should visit Chicago for a picture of what life will be like in the GTA in 3-4 years time
Property taxes and user fees exploding and services declining
Adjusted for inflation Canadian and US RE has peaked and will likely trend downward for the next 5-10 years
There are better sectors for investing
Think biotech majors, large royalty and select healthcare
Blue chip, pristine balance sheets

#4 Jr on 05.27.17 at 3:00 pm

Very interesting, Thanks for the insight Ryan!

Also, really cool that you read Smoking Man’s book.

#5 For those about to flop... on 05.27.17 at 3:02 pm

InfLewezna,thanks for the info.

I still think the boss of this blog should make you and Robax do this at the end of each post…

M42BC

https://m.youtube.com/watch?v=j1a7oVCPWr8

#6 Long-Time Lurker on 05.27.17 at 3:23 pm

First?

From yesteday.

#192 SunShowers on 05.27.17 at 12:44 pm

#137 Long-Time Lurker on 05.27.17 at 12:42 am
Entrepreneurs create businesses and jobs.

No they don’t.
Name a single entrepreneur who can successfully create a job or run a business without a customer base who can afford to buy their products or services.

Interesting argument, SunShowers, now do tell what does a customer purchase when no one has created a product in the first place? Non sequitur.

#197 Livin Large on 05.27.17 at 1:37 pm
I’m going with SunShowers in the job creation. Entrepreneurs only create “jobs” when all else fails. They don’t want to create jobs for other folks. They are, and rightly so, only interested in their own personal wealth accumulation.

They aren’t altruistic saints trying to save mankind. They are just out to make a freakin’ buck.

Let’s stop making it sound like sunshine flows out of their butts. Make a buck, don’t make a buck, I couldn’t care much less than I aleady do but don’t call yourself an entrepreneur when you are simply “business for self”. Hanging out a dry walling shingle because no one wants to put on staff as a drywaller isn’t worthy of much support.

By 2030 it is rumoured that over half the jobs in Canada will be classed as “private contractor” jobs. This slashes employer expenses and slashes employee taxes payable with absolutely zero change in the nature of the work performed. Same work, lower taxes or “freelance welfare”.

Livin Large,

First allow me to define “entrepreneur” from Websters: “one who organizes a business undertaking, assuming the risk for the sake of profit.”

If you will notice the definition has nothing to do with saintliness.

Now then, if you are a person who doesn’t create their own employment then who employed you? The entrepreneur may have acted out of self-interest but then so did the employee and the employee did not create their own employment at that. Now who is the more altruistic?

I look forward to reading your rebuttals.

#7 Andrew Woburn on 05.27.17 at 3:31 pm

This is a great way to start an argument:

-The glum forecasts are wrong again as Canadian kids are making more than their parents did

http://business.financialpost.com/fp-comment/william-watson-the-glum-forecasts-are-wrong-again-as-canadian-kids-are-making-more-than-their-parents-did

#8 Andrew Woburn on 05.27.17 at 3:35 pm

It’s too bad Donald Trump doesn’t really do irony.

– A Chinese company is offering free training for US coal miners to become wind farmers

‘The news comes from an energy conference in Wyoming, where the American arm of Goldwind, a Chinese wind-turbine manufacturer, announced the free training program. More than a century ago, Carbon County was home to the first coal mine in Wyoming. Soon, it will be the site of a new wind farm with hundreds of Goldwind-supplied turbines.
Goldwind sees the ex-miners as a font of the sort of technical knowledge—mechanical and electrical engineering, on par—with the experience of working in difficult conditions required to run and maintain a wind farm. Adapting coal-mining skills to wind farming seemed a natural fit. “If we can tap into that market and also help out folks that might be experiencing some challenges in the workforce today, I think that it can be a win-win situation,” David Halligan, chief executive of Goldwind Americas, told the New York Times.’

#9 technical analysis? on 05.27.17 at 3:43 pm

what’s actually interesting is your second chart

it shows the big 6 BANK STOCKS trailing net earnings slightly LOWER than they were 3-4 years ago., basically flat and going nowhere.

#10 Stan Broock on 05.27.17 at 3:47 pm

You are comparing the non-comparable.

The Canadian 6 big banks (the past) represent the financial cancer that drains resources from a small country with an insignificant economy of a resource colony.
Basically half- dead host. How much more blood can you drain from it?

The big 6 US companies:

1. Google and Facebook are the internet for all practical intends and purposes.
2. Apple is the king of mobile devices. Together with Netflix – the kings of online streaming.
3. Apple alone has over 250 billion USD in cash reserves.
Microsoft has 126 billion USD in cash reserves.
4. Amazon is the biggest retailer in US, one of the biggest on the world. Together with Microsoft they have the biggest cloud services.

Comparing the old colonial past with the digital future?
I will pick up the latest any time.

If we add Tesla to the equation, one of these 7 companies, most likely several of them at the same time will lead the charge to AI, medical devices of the future.

Making old parasitic ‘Business models’ like the Canadian banks totally obsolete.

Comparing the big US banks with the big Canadian banks makes much more sense and that comparison is not looking good for the Canadian banks.

The represent much larger chunk of a much smaller economy, sustained so far somehow by the ‘miracles’ of a housing supper-bubble and destined to sink into oblivion and inflationary depression.

Only TD has some US exposure and is worth considering.

Hell I would even buy bitcoins at this point, at least that Ponzi is still in it’s initial phase.

As for the dividends I have my opinion on that but can’t express it in any polite way unfortunately (along with my advise on what to do with them).

#11 TCContrarian on 05.27.17 at 3:49 pm

“These “Big 6” US stocks have done much of the heavy lifting for the S&P 500, with these six stocks contributing roughly 40% of 2017 YTD gains …” -RL
***********************************************

Here you go Garth – I posted this same information a few days ago and you mocked it. {Groundless babble. — Garth}

Here it is in its entirety:
———————————————————–

#200 TCContrarian on 05.18.17 at 4:18 pm

“Even with Wednesday’s sell off the technicals remain bullish with the S&P 500 in an uptrend and above its rising 200-day moving average. The market’s just 2% off its highs and is up 5.3% even after today’s decline” -GT
******************************************
Yes but…
“…only ten stocks out of that five hundred are responsible for 46% of the entire 2017 rally in this index” [S&P 500].
http://www.zerohedge.com/news/2017-05-11/just-these-ten-companies-account-half-sps-2017-returns
The indicators I use suggest that the SP 500 is in for a 40-60% decline over the next couple years. Stay the course at your peril. -TCC

Groundless babble. — Garth

TCC
————————————————————-

Anyway, an interesting comparison Ryan, but how do you trade it?
A prudent investor might want to think about shorting some (or all) of the FANG’s, since the P/E’s are so much out of ‘normal’ range. In fact, I started shorting Amazon last week as well as the QQQ ETF (US).

Here’s another bit of relevant information:

“Considering the price-to-sales ratio for the median stock in the S&P 500 is higher than ever before and to a significant degree, you might say investors are taking the greatest amount of risk for the least amount of potential return in history. In other words, if there was ever an example of “reward-free risk”, this is it.”

https://www.thefelderreport.com/2017/05/25/if-there-was-ever-an-example-of-reward-free-risk-this-is-it/

#12 Former Fool on 05.27.17 at 4:05 pm

Ryan, Thank You for the great analysis! Very interesting. I particularly enjoy listening to your thoughts on the weekly calls at Turner Investments.

You are touching upon a criticism that I’ve heard about broad market ETFs and I’d like to know your thoughts. Namely, when an investor buys a broad market ETF with the holdings weighed by market cap, that investor ends up putting a high percentage of their investment dollars into a few select and expensive companies, with less of those dollars going into the cheaper companies that comprise the ETF. So basically, one ends up buying more of the expensive companies and less of the cheaper companies.

As an example, consider VTI. The top ten holdings are Apple, Alphabet, Microsoft, Amazon, Facebook, Exxon, Johnson and Johnson, Berkshire Hathaway, JP Morgan, and GE. Those 10 companies are 16.4% of the total assets of VTI, as of this writing, and the ETF holds 3557 companies. I would think the chances of any of those top 10 holdings doubling in size is small, and that the medium and small cap companies in the index have better chances at doubling. But 16.4% of VTI ends up in the largest cap companies.

So finally my question – with a broad market ETF, isn’t there a danger of putting too much money into more expensive companies, and not enough in the smaller cap compaines? I would love to hear the counterargument. Thanks in advance!

#13 cecilhenry on 05.27.17 at 4:08 pm

Yeah, what I see:

The American stocks are grossly overvalued, with much hype.

The Canadian 6 and been flat to downwards with no progress.

Everybody smile kids, and pretend its okay…..

Looking Forward To The Dot-Com 3.0 Crash And Recession

http://www.amerika.org/politics/looking-forward-to-the-dot-com-3-0-crash-and-recession/

#14 For those about to flop... on 05.27.17 at 4:12 pm

at 2:30 pm
Attn. new Blog Dogs the following user names are still available:

Mark of the Least
Where are the customers blogs?
The chartist guy in the room
Divestors friend
Old Stock Blog Dog
Dollaramarama
REITa MacNeil
Social Justice Worrier
Natural Fancy Colored Blog Dog
Buster Reeko
Ad-nauseam Ad Infinitum

Reserved: Blog Dog Poloz

///////////////////////////////

Although I originally came up with the name Pathetic Confetti as an ice cream name for the boss, I would like to reserve it as my back-up name ,just in case being called Flop becomes too hard on me one day…

M42BC

#15 SoggyShorts on 05.27.17 at 4:14 pm

#155 A Dollar is a Dollar is a Dollar on 05.27.17 at 8:14 am
Tax all dollars equally, end this ridiculous system of insider privilege.
—————————————–
Small, and I mean really small, businesses like mine I think deserve the few breaks we get.

I made zero dollars the first couple years going out on my own, blew through all my savings too. The next couple years my employees each made more take-home pay than I did. (and worked fewer hours too)

Now I’m successful, and later in retirement I hope the capital gains I get from my investments are only taxed at 50% to claw back some of the money I didn’t make during those years.
No sick days, no e.i. (and yes, I paid into e.i. for years before going on my own) No overtime pay. Also my CPP will suck due to non-contributing years. No room added to my RRSP because I chose to take dividends instead of salary.
On top of all that the Very real risk of the company failing and having lost all those years.

If the rules change to make trying your own business even less attractive, people thinking about doing it will need to take a good hard look at whether it’s worth it.

#16 Average P/Es of the US "Big 6" on 05.27.17 at 4:32 pm

Ryan, was the drop in the average P/Es of the US “Big 6” from May 2013 to May 2014 a result of a collapse in prices or a spike in earnings? (Just curious.)

#17 jess on 05.27.17 at 4:37 pm

Banks need to tackle web fraud
Patrick Collinson

https://www.theguardian.com/money/2016/jul/30/online-fraud-crime-theft-bank-account

https://www.theguardian.com/money/2016/mar/04/fraud-scam-email-barclays-lloyds

“Pension liberation” scams

https://www.theguardian.com/money/2017/may/27/pensions-scam-self-storage-serious-fraud-office-warning

#18 Smudgekin on 05.27.17 at 4:50 pm

That’s all Canada is, a protective border for 6 banks. Everything else is pretty much a joke.

#19 BS on 05.27.17 at 4:52 pm

In contrast, the Canadian banks earned a very impressive US$29 billion over the last 12 months. So comparing the US stocks to the Canadian banks, they make 3.5x more in earning than our banks, but have a combined market cap nearly 9x that of the Canadian banks.

You could have done the same analysis anytime in the last 10 years and got a similar result. Since 2007 Apple is up 781%, Amazon up 1355% compared to RBC up 66%.

I don’t see how the Canadian banks can do as well in the next 10 years unless the credit bubble continues at the same pace which is highly unlikely. In the next 10 years a 3% dividend is all I would count on at best for the big 6.

Don’t assume big banks are always safe to hold their stock value either. Nobody forecast City Group would still be down over 85% 10 years after the US housing bust. $100K invested in City group in 2007 would be worth 13K today. A $100K invested in Amazon would be $1.35 million or Apple $781K today.

#20 yorkville renter on 05.27.17 at 5:09 pm

double JD and coke is for children… just double JD for me.

#21 espressobob on 05.27.17 at 5:15 pm

Global index investors will always enjoy the upper hand. We are the benchmark. Garth has listed the weightings in the archives.

My quick morning read. No wonder I keep forgetting my online investing site password.

https://www.bloomberg.com/markets/stocks

#22 For those about to flop... on 05.27.17 at 5:21 pm

This one is a little funky smelling as just like that questionable item in the back of your cupboard that you are thinking about cooking up tonight,it has been around for a while.

If someone is hungry enough ,they will feast on it…

M42BC

https://howmuch.net/articles/worth-user-social-tech-companies

#23 David McDonald on 05.27.17 at 5:22 pm

I am paralyzed with fear about high valuations and the possibility of a correction. About the only thing I got right recently is move to the Canadian dollar and that’s an iffy proposition as well. I am leery of buying the Canadian banks just before a real estate crash. I guess my next step is buying a bond etf to get more balanced as Garth suggests.

#24 Darryl on 05.27.17 at 5:37 pm

Good post Ryan

Going back to last nights post from Garth ( just read it )
The liberals will throw us evil business owners a bone and allow us to put our money in the new infrastructure bank instead of a balanced portfolio.

What pisses me off is I didn’t open a corporation for tax benefits but because in the construction industry large companies wont deal with you if your not incorporated .Plus for legal protection .

Our gov just wants a few very big companies and to hell with small business .

#25 Wait There on 05.27.17 at 5:51 pm

HUGEE is a Yuuge spelling error Ryan.

https://www.youtube.com/watch?v=EEA33bAXyNM

#26 Victor V on 05.27.17 at 5:53 pm

Loaded up on VGT at the beginning of the year. It’s my top ETF performer — I’m a believer that US tech stocks will lead the global economy for decades to come, so have resisted taking profits short term.

#27 Tfsabull on 05.27.17 at 5:54 pm

Ryan great job love the post

#28 Ryan Lewenza on 05.27.17 at 5:57 pm

Average PEs of the Big 6 “Ryan, was the drop in the average P/Es of the US “Big 6” from May 2013 to May 2014 a result of a collapse in prices or a spike in earnings? (Just curious.)”

Earnings. All 6 companies have seen their earnings jump over this period but AMZN and FB saw some of the largest increases in earnings which lead to a compression of the P/E. – Ryan L

#29 Tony on 05.27.17 at 6:11 pm

Now you know why the bitcoin is pushing the $3,000 mark. No one rigged the bitcoin. No one wants any part of rigged stock market indexes and the monkey hammering of gold and silver has gotten so bad as can be seen with the flow into the bitcoin. Investors are still scrambling to find alternate investments to stocks.

#30 DYI Investor on 05.27.17 at 6:13 pm

Hi Ryan. Thanks for another interesting post.

I have a question a little off topic and I would appreciate your input.

I got a new job offer. The employer offers a sizeble number of RSU (Restricted Stock Units) as part of the compensation.

I am a DYI investor with a balanced and diversified portfolio. The question is:

Is it a good idea to sell all the RSU’s and reinvest in the ETF balanced and diversified portfolio? Or should I keep the RSU’s or part of it?

The stock in question is Veeva (ticker: VEEV) and it seems to be positively on fire.

Thanks.

#31 TurnerNation on 05.27.17 at 6:13 pm

Re. JD in Smokey’s podcast ‘chairmens lounge’ mid way thru he orders it on the rocks only.

#32 Howard on 05.27.17 at 6:14 pm

#7 Andrew Woburn on 05.27.17 at 3:31 pm
This is a great way to start an argument:

-The glum forecasts are wrong again as Canadian kids are making more than their parents did

http://business.financialpost.com/fp-comment/william-watson-the-glum-forecasts-are-wrong-again-as-canadian-kids-are-making-more-than-their-parents-did

———————————-

Regardless of the merits of this article, I’d love to see the expense side of the equation re: Millennials vs. Boomers or early Gen-X.

#33 waiting on the westcoast on 05.27.17 at 6:17 pm

14 For those about to flop… on 05.27.17 at 4:12 pm
at 2:30 pm says… “Although I originally came up with the name Pathetic Confetti as an ice cream name for the boss, I would like to reserve it as my back-up name ,just in case being called Flop becomes too hard on me one day…”

Shouldn’t the concern be becoming too soft…. ;-)

#34 Ryan Lewenza on 05.27.17 at 6:18 pm

Former Fool “You are touching upon a criticism that I’ve heard about broad market ETFs and I’d like to know your thoughts. Namely, when an investor buys a broad market ETF with the holdings weighed by market cap, that investor ends up putting a high percentage of their investment dollars into a few select and expensive companies, with less of those dollars going into the cheaper companies that comprise the ETF.”

Agreed but this assumes 1) cheaper stocks will deliver superior results going forward, and 2) that you can actively pick stocks that will outperform the index. Studies show that most can’t do this, so we believe its best to just buy the index. Where we try to add value/alpha is figuring out which regions and assets will do the best. – Ryan L

#35 AK on 05.27.17 at 6:29 pm

Speaking of Las Vegas.

MGM Resorts International

March 06, 2009 – Stock price @ $1.81

May 26, 2017 – Stock price @ $31. 82

#36 espressobob on 05.27.17 at 6:51 pm

#23 David Mc Donald

Dude, get some professional advice and have your coin managed accordingly. This subject is not for you. Call Turner.

Nothing worse than watching someone going to the slaughter house.

#37 TurnerNation on 05.27.17 at 7:05 pm

Asking 1.2m for a doll sized house in Toronto. Real worth: $650,000 tops. Some BSD scored a double.
Don’t blame “HAM” – some ‘wasp’ will be all over this one. Shall we say 1.4 out the door?

http://www.137georgest.com/#gallery

#38 A Dollar is a Dollar is a Dollar on 05.27.17 at 7:21 pm

#15 SoggyShorts

“Small, and I mean really small, businesses like mine I think deserve the few breaks we get.”

Sounds like we agree – I assume you actually read my full post as well.

I said:

“By all means, allow small business operators to deduct reasonable costs.”

Deducting business losses and operating costs is not the issue. I’m all for that.

Most capital gains today do not involve risk, only privilege and inherited (usually) wealth.

And it is scientifically proven, there is absolutely ZERO connection between executive pay (often in stocks etc. that are bizarrely taxed at a lower level) and corporate performance.

Zero. It’s all an insider, boy’s club racket of people who have distorted our tax codes to serve special interests.

After operating expenses, TAX ALL DOLLARS EQUALLY.

PERIOD.

#39 Freedom First on 05.27.17 at 7:26 pm

#32 Howard

Well said Howard.

#40 well on 05.27.17 at 7:34 pm

‘Many portfolio managers have taken a pass on Amazon, Facebook and the like since they are expensive. Well not owning those stocks likely caused many PMs to underperform the S&P 500’

……

and on the flip side, some DID have amazon, facebook. If one’s goal is to BEAT the index, then ya gotta pick and chose.

if one is happy with market returns, yeah sure-buy a broad based etf and you’re done. Obviously, PM like yourself that use etf’s are essentially conceding they are happy with market returns less fees .

#41 For those about to flop... on 05.27.17 at 7:39 pm

Hey TN ,did you catch this one the other day…

M42BC

/////////////////////////////

For those about to flop… on 05.26.17 at 2:28 pm
Pink Pollen falling in Vancouver.

I’m not sure even any of the realtors on here will have the audacity to state that these guys made a wise decision to fork out 5.15m for this 90 y.o house in April of last year.

Oh ,the value is in the land?

Well , that only comes in a little over 4 and the whole assessment comes in at 4.24 ,bloated as it is.

They need a miracle or a long timeline to break even as sales in this price range have collapsed.

Of all the Crealievers I have seen, these guys might be at the front of the line and went back for seconds…

M42BC

4049 W 13th Avenue, Vancouver

Mar 1:$5,880,000
May 25: $4,680,000
Change: – 1200000.00 -20%

https://www.zolo.ca/index.php?sarea=4049%20W%2013th%20Avenue,%20Vancouver&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAwMDJWQQ==

#42 The Technical Analyst, CSTA, CPD on 05.27.17 at 7:42 pm

Not bad analysis Ryan, not bad at all.

Points to add:

1. The entire Canadian stock market is just 3% of the Global stock market pie.

2. The Volatility Index of the S&P500 (VIX, VVIX) is below 10, that is in “incredibility complacent” territory. Also it is historically low. The VIX and S&P500 are inversely correlated.

3. I’m glad you pointed out the P/E ratios of Amazon and Netflix. The forward earnings of these would be interesting to compare to say, Nortel or ENRON.

4. Index stocks, while diverse, have to downward protection other than diversification. Liquidity of ETF’s can be in question in a “fire” situation (thus, other than SPY, any investor should look at their ETF size/liquidity).

Best of luck in trading.

#43 Room for Growth on 05.27.17 at 7:45 pm

Ryan,

You left out the reason why CAN banks are cheaper.
Unlike US tech giants, none of our banks are likely to see big growth in earnings.

If Amazon would increase its prices by two percent, its earnings will go ballistic.
In a lesser manner, Netflix can similarly increase earnings.
Those companies have low earnings because they only want one thing: growth.
When Amazon finally flips the switch, the profits will rain down on that company.

Our banks? They are unlikely to see large growth in revenue.
Nor can they afford to jack up pricing.
So earnings are steady, and will not double anytime soon.

In my stock screener I don’t even look at P/E any more.
Instead I look to price-to-sales to see if a stock is cheap or expensive.

A company doing massive revenue is valuable, even if its earnings are zero.
If that company is market leader (or monopoly) then this is doubly so.

#44 Freedom First on 05.27.17 at 7:58 pm

I am never afraid to buy or sell anything when the price is right. Without using debt, of course.

First things first. Start with as big a cash flow as possible.
Keep it big and follow sound financial principles.

And always, always, always, never forget I am #1 and to enjoy every day of my life. Which is wonderful.

Girlfriends have told me that spending time with me is like being on holidays. It’s the way I roll.

Freedom First
Master of Freedomonics

#45 Smoking Man on 05.27.17 at 8:01 pm

#31 TurnerNation on 05.27.17 at 6:13 pm
Re. JD in Smokey’s podcast ‘chairmens lounge’ mid way thru he orders it on the rocks only.
….

You saw that? Man I was looped last night even chirped DM on linked in. No bay street job for me. If there was any hope. I just tossed it out the window.

I’ve deleted all the podcasts.

This is were the danger lies. We’re back here tonight. My wife wants to give back her 4500 win.

It’s not going too good she’s up another 2k.

Another wasted night.

Any way I’m launching my free invoice business next Friday.

I’m trying really hard not to drink tonight. Wish me luck.

We’re in the penthouse on a Sat night. That’s hard to get on a Tuesday.

Guess Seneca wants there money back.

#46 Rich Young on 05.27.17 at 8:09 pm

LIFE IS SO SIMPLE. make a monthly contribution SHORT any of these great spaces:
1. Car Lease Bubble
2. Housing Bubble
3. Tech Bubble
4. Stock Market Bubble
5. Bank Sub-Prime Loan Bubble

and the bubbles go on. take your pick and open up a short account and jam $1000 a month into them evenly as Garth suggests diversification all the time. I’m sure you will come out a big winner at some point. A few states are about to declare bankruptcy. A country just did and I would not doubt a few Canadian provinces will too.

This world is in a giant debt fuelled bubble. How much of the stock market gains are created by people borrowing cheap money and investing? This is another bubble called Margin Bubble and that is the biggest bubble of all. When this thing pops Margin Calls will make the declines quicken.

Happy Times,

Rich

#47 Pepito on 05.27.17 at 8:15 pm

Studies show that most can’t do this, so we believe its best to just buy the index. Where we try to add value/alpha is figuring out which regions and assets will do the best. – Ryan L
____________
If you can’t actively pick stocks that beat the index, why would your research be any better at picking regions and assets?

Seems to me that picking the latter would involve considerably more guesswork.

#48 Etf's on 05.27.17 at 8:19 pm

Are often hardly ‘broad based’

XIC- is 50% weighted in two sectors : financials and energy

Gee, more than a few Canadian equity mutual funds have greater diversity . Gotta look under the hood of many of these ‘broad based’ etfs

#49 Millennial Realist on 05.27.17 at 8:26 pm

Well Garth, thanks for nothing :(

Since you did not choose to run in the Conservative leadership campaign, they have now voted in the
out-of-touch paleo-conservatard Andrew Scheer.

Thus guaranteeing another two mandates for Justin, and probably his kids as well, before another conservative is voted PM.

Too bad for the right.

For the rest of us, not bad at all…

The next generations are not conservative, by any stretch.

Goodbye Tories, forever.

#50 Irene on 05.27.17 at 8:52 pm

I have no idea who “smoking man” is.

How refreshing. — Garth

#51 CanadianOne on 05.27.17 at 8:54 pm

Good evening blogdogs,

interesting data. probably rhymes with today’s theme. Reinforcing broad market diversification. May even add global diversification as the “growth” (and hence sustaining) side of wealth/savings is having a hard time in the developed economies.

http://www.morningstar.in/posts/40627/do-stocks-really-outperform-debt.aspx

M39AB

#52 Free Bird on 05.27.17 at 9:07 pm

#15 Soggyshorts
Great comment. I left mine on Garth’s prev post before reading yours but looks like we came to same conclusion.
As co-owners of a small business my partner/ spouse and I look forward to selling and what we save on taxes including capital gains will be the bulk of our self made pension fund. We employee 20 (most long term) staff who were carefully chosen and valued. After the 2008 crash we went through a very tight period but we had good credit with our bank and suppliers…and yes our staff albeit much smaller at then. We worked out a deal that gave us some time to increase cash flow and keep our staff. Owning a business is not for everyone but I agree they new rules may put of some who want to try.

#53 Free Bird on 05.27.17 at 9:16 pm

#24 Darryl
We’re not in construction but inc for similar reasons very early on. It paid in some ways cost in others in terms of add’l paper flow and taxes. Everything’s a trade off.

#54 AK on 05.27.17 at 9:32 pm

#50 Irene on 05.27.17 at 8:52 pm
“I have no idea who “smoking man” is.”
—————————————————————-

Smoking Man

#55 mike from mtl on 05.27.17 at 9:36 pm

#48 Etf’s on 05.27.17 at 8:19 pm
Are often hardly ‘broad based’

XIC- is 50% weighted in two sectors : financials and energy
/////////////////////////////////////////////////////

No offence but duh, that’s an index ETF modelled after TSE index which is, guess, mostly banks and energy. Check TSE60…

Honestly in maple index Banks mostly are the only ones worth holding. We’re a VERY undiversified country and our trading index shows – wood and rocks type. In the 90s Nortel was basically /the/ index and we all know how that ended.

Any housing bust will be completely brutal on any maple TSE ETF plus preferreds and any sort of ‘dividend fund’ which are also basically banks and energy comps still.

Bond funds are cool as actually our rates have been dropping in recent months and for some reason still have a very respectable international credit rating. No real risk of bond yields jumping at all in the foreseeable future.

Garth was correct in 2016 to lower maple exposure.

#56 CanadianOne on 05.27.17 at 9:48 pm

Will try this again,

Blogdogs,

Some interesting data to see how much of the stock market actually performs well. 1926-2015. Reinforcing the theme of broad market (perhaps even global) diversification.

http://www.morningstar.in/posts/40627/do-stocks-really-outperform-debt.aspx

M39AB

#57 M on 05.27.17 at 9:48 pm

I have big deep shorts on all 6 of them here and south of the border.
Our stock market popped already (yes I call it over tza top) and southern gringos will go bust sometimes in the 3rd quarter.
The crash of HCG (and its eventual demise) , the falling of banks stocks confirmed the soundness of the approach.

This week I expect a big jolt in CDN market following the realization of the fact that RE hit wall.

#58 Smoking Man on 05.27.17 at 10:48 pm

Ha just read your bit Ryan.

Chewbacca? Ha

I guess that’s when someone with hair let’s thier hair down.

And garth …..
“50 Irene on 05.27.17 at 8:52 pm
I have no idea who “smoking man” is.
How refreshing. — Garth”

Don’t you have a broom to work on the weekends at the general store. You really suck at delegation.

I think your addiction to this blog is way worce than mine if that’s even posable.

#59 akashic record on 05.27.17 at 10:59 pm

Tax recognition is needed for certain professions that require extra investment in time, money and provide essential services for society, like doctors.

The current solution is not a proper answer to address the issue.

First, the way it operates sounds like exploiting a loophole, instead of spelling out what the tax treatment is for.

More importantly, it is available and used by businesses which are not owned and operated by owners, who made similar investment.

This is why so many people even on this blog feels that it is an unfair loophole.

In short: real issue is treated with a wrong solution.

#60 to wit.. on 05.27.17 at 11:00 pm

No offence but duh, that’s an index ETF modelled after TSE index which is, guess, mostly banks and energy. Check TSE60…

Honestly in maple index Banks mostly are the only ones worth holding. We’re a VERY undiversified country and our trading index shows – wood and rocks type. In the 90s Nortel was basically /the/ index and we all know how that ended.

Any housing bust will be completely brutal on any maple TSE ETF plus preferreds and any sort of ‘dividend fund’ which are also basically banks and energy comps still.

Bond funds are cool as actually our rates have been dropping in recent months and for some reason still have a very respectable international credit rating. No real risk of bond yields jumping at all in the foreseeable future.

Garth was correct in 2016 to lower maple exposure.\

……….

That’s my point. there is no way i’d hold a canadian etf. No thanks. Just piling mostly banks and energy.

i’d roll the dice on brains instead. Mawer Canadian. Been working.

now, for all the etf lovers, mkc.to is a real attempt at diversification.

and I agree, a housing meltdowm would hit Canadian dividend etf’s hard as well. They can only buy Canadian companies. Get more freedom leeway in a Canadian Dividend Equity MF (many have as much as 20% exposure to USA).

#61 akashic record on 05.27.17 at 11:33 pm

#6 Long-Time Lurker

If you are a person who doesn’t create their own employment then who employed you? The entrepreneur may have acted out of self-interest but then so did the employee and the employee did not create their own employment at that. Now who is the more altruistic?

There is no altruism on any side.

A business that needs extra labor beyond their owners, buys labor, the same way as any other goods and services. Buying labor is exactly the same act.

A business does not create electricity, internet, truck, computers, plastic, etc. by purchasing those products and services from other parties.

It creates demands for those goods and services, but the economic transaction is symbiotic supply/demand relationship, there is no altruistic element in it.

The “job creation” as “altruistic act” is a political misrepresentation of a simple, normal economic transaction.

The political misrepresentation has two beneficiaries: businesses and political organizations.

Businesses use the “job creation” argument to get preferential tax treatment from the government, operated by politicians.

Politicians use the “job creation” argument to gain political capital, converted to votes at elections, plus to justify granting preferential tax treatment to businesses, once in power.

In reality, buying labor is exactly the same economic transaction as buying anything else a business needs to operate.

#62 crowdedelevatorfartz on 05.27.17 at 11:48 pm

I’ve seen a few housing “busts” in my day and I think the true “barometer” for the housing “meltdown” is …ironically…..arson.

Lets see how many houses start to spontaniously combust over the next few months……nothing like financial ruin and a gas can to motivate a greaterfool

#63 Long-Time Lurker on 05.28.17 at 12:10 am

#56 CanadianOne on 05.27.17 at 9:48 pm
Will try this again,

Blogdogs,

Some interesting data to see how much of the stock market actually performs well. 1926-2015. Reinforcing the theme of broad market (perhaps even global) diversification.

http://www.morningstar.in/posts/40627/do-stocks-really-outperform-debt.aspx

I read the article. It is interesting. Garth is always recommending being balanced, diversified and liquid so we’re all familiar with that here.

Now how to beat the market? Let a guy like Buffett do the fundamental analysis for you.

Going long on T-Bills worked when interest rates weren’t at zero. Now you’re locking up your capital for decades to barely meet inflation.

By the way, Flop, I do read your posts out of curiosity. It’s interesting getting the data on how the Vancouver market is moving.

#64 Howard on 05.28.17 at 12:10 am

#49 Millennial Realist on 05.27.17 at 8:26 pm
Well Garth, thanks for nothing :(

Since you did not choose to run in the Conservative leadership campaign, they have now voted in the
out-of-touch paleo-conservatard Andrew Scheer.

Thus guaranteeing another two mandates for Justin, and probably his kids as well, before another conservative is voted PM.

Too bad for the right.

For the rest of us, not bad at all…

The next generations are not conservative, by any stretch.

Goodbye Tories, forever.

———————————

I’m glad you seem to know everything about everyone in the “next generations”. Might I suggest venturing outside of downtown Toronto more than once a decade?

Granted I’m not personally enamoured with many social conservative ideas, but I will take a moderately social conservative politician over an obnoxious illiberal progressive SJW nutbar any day.

#65 AACI Homedog on 05.28.17 at 12:10 am

Damn….it’s Saturday night. My brain needs a rest.

#66 Smoking Man on 05.28.17 at 12:51 am

When you find it.

https://youtu.be/tAGnKpE4NCI

#67 Smoking Man on 05.28.17 at 1:08 am

The wife is a bit fat.

Kids.

https://youtu.be/EYyarcp5LtU

#68 chapter 9 on 05.28.17 at 1:13 am

#200 A REPLY TO #178 chapter 9

Where did I get my figures–see line 4 of original post

Guantanamo Bay– Not happening, convicted jihadists serve time in Florence Colorado, Terre Haute Indiana, Marion Illinois, Hazelton West Virginia, Brooklyn New York, Terminal Island port of L.A.

Saudia Arabia on travel ban— President Obama developed the list on Trump’s travel ban/executive order
Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015 countries on list Syria, Iran, Sudan, in 2016 Homeland Security added Libya, Somolia and Yemen. Follow through legislation by Trump

Trump has enacted the McCarren Walters Act it is the best way to preserve national security and the national interest.

#69 Joe2.0 on 05.28.17 at 2:21 am

Tonight I hit a cool little cafe in Roberts Creek on the Sunshine Coast.
Their venue was a talented jazz artist with a great band.
It sat about 50 people, good music, cold drinks and great food.
A venue that continues to entertain because the land hasn’t been bought up in the RE craze.
Expensine RE terminates funky eclectic venues.
Great beaches no traffic, very little crime.
I’m so happy I moved out of the traffic conjested can’t talk about anything else but realestate Vancouver.
Velvet cage.

#70 A box in the sky on 05.28.17 at 2:24 am

I feel like the navel gazing over a few stocks driving the index is a waste of energy.

It’s always been this way – the whole point is “picking winners” is super hard and this year’s top 5 won’t necessarily be next year’s top 5. Different market conditions have different sectors leading the way.

Most people don’t realize this but the S&P is really a trend following/ momentum index. So it’s kind of achive on its own … good luck to any PM who is going to charge 2% MER and try to beat a trend following index.

On another note, poor Max. Scheer is a joke, same S different pile.

#71 Stockpicker on 05.28.17 at 2:59 am

If Trump tax reform takes effect the Fang stocks could easily double from here. If not they could halve their value. Our banks will fall in sympathy but nowhere near as much. Valuations in the US are stretched beyond earnings and an adjustment in US markets would be healthy. As pointed out CDN banks trade at very reasonable values in the 12/13 PE area….and pay good sustainable dividends that increase regularly. Going forward the only headwind that is pulling Canada backwards is Trudeau Uncertainty. Oil will rise and with it the dollar, the new PM will fire Poloz and ditch Liberals backward notions. I believe Canada will outperform the US market as soon as Trudeau and Poloz are gone….and take Wynne with the for the sake of all Ontario rate payers.

Bone thrown…..Ford….11xs…5.3 div. Dog fight for AV will be a mainstream auto co., not a FANG or MUSK.

#72 Mark on 05.28.17 at 3:17 am

“1. Google and Facebook are the internet for all practical intends and purposes.”

Nonsense. Both companies could disappear or be turned off, and most people wouldn’t know the difference. New firms would take their places. The Internet might actually move to a more sustainable funding model rather than advertising.


3. Apple alone has over 250 billion USD in cash reserves.
Microsoft has 126 billion USD in cash reserves.

Pre-tax, so discount by 20-40%.


4. Amazon is the biggest retailer in US, one of the biggest on the world. Together with Microsoft they have the biggest cloud services.”

But Amazon barely makes any money.

Any housing bust will be completely brutal on any maple TSE ETF

That wasn’t the experience in the 1990s where, within a decade, the Canadian stock market indices (ie: the TSE Composite at the time) tripled. Banks are well positioned for falling housing prices and credit tightening. The banks did just as well as the indices in the 1990s. Obviously BCE and Nortel did better, but the resource sector (with the exception of the Bre-X-induced gold bubble circa 1996-1998) was in quite a depression.

Given how “cheap” the TSX is at this point, theres a pretty good argument to be made that a lot of funds that previously have speculated in real estate will shift over. Besides, Canadian near-retirees have minimal non-housing retirement assets, and they will likely be saving valiantly and buying stock (and CAD$) as the housing bubble pops the delusion of housing being a safe retirement asset. Stocks, IMHO, are severely under-owned amongst Canadians.

You left out the reason why CAN banks are cheaper.
Unlike US tech giants, none of our banks are likely to see big growth in earnings.

Canadian banks are quite likely to grow their earnings considerably in the future due to spread expansion. As housing prices fall, loans become riskier. A riskier loan base drives spreads higher. Being a creditor during a mild to moderate deflation, rather than a debtor, is a wonderful thing. The BoC will also be further obliged, in response to the comatose and moderately contracting economy, to run ZIRP/NIRP.

The tech sector, OTOH, is just a race to the bottom. Advertising as a business model falls apart in a post-consumerism world. And the Koreans/Chinese will eventually eat Apple for lunch.

#73 stock vs debt on 05.28.17 at 7:55 am

#56 CanadianOne

That’s quite an eye opener.
My first reaction was that the researcher only considered capital gains, not dividend distribution.
But this is not the case.

The vast majority of stocks are a bad investment?
Who would have thought.

Although: Another possible gaffe would be to consider all delisted stock symbols as bankrupt. They may have been delisted while still valuable. (takeover, or delist for low volume reasons.)

There is a good reason most investors should never buy individual equities. — Garth

#74 A Reply to #68 chapter 9 on 05.28.17 at 8:56 am

“Where did I get my figures–see line 4 of original post.”

Provide a link to your sources, please.

“Saudia Arabia on travel ban— President Obama developed the list on Trump’s travel ban/executive order Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015 countries on list Syria, Iran, Sudan, in 2016 Homeland Security added Libya, Somolia and Yemen. Follow through legislation by Trump.”

The Visa Waiver Program (VWP) is not a travel ban, genius. Read all about it at the official website of the Department of Homeland Security at the following link (unless of course you now think that your beloved Donny Trump is providing fake news).

https://www.cbp.gov/travel/international-visitors/visa-waiver-program/visa-waiver-program-improvement-and-terrorist-travel-prevention-act-faq

“Trump has enacted the McCarren Walters Act it is the best way to preserve national security and the national interest.”

Trump did not enact the McCarren-Walter Act, genius. The Immigration and Nationality Act of 1952, also known as the McCarran–Walter Act, has been in effect since June 27, 1952. Trump was born in 1946. In Jan. 2017, president Donald Trump’s Executive Order 13769 made reference to the “Immigration and Nationality Act.”

https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1952

Trump is now pinning his hopes on the Supreme Court to pass his travel ban. (We’ll see.)

#75 akashic record on 05.28.17 at 9:36 am

“1. Google and Facebook are the internet for all practical intends and purposes.”

Nonsense. Both companies could disappear or be turned off…”

====

These 2 companies have become the most extensive global intelligence resource, collecting information on the population around the world, fed by the monitored public, free of charge for governments.

They are hardly to go anywhere.

Instead, Google executive Schmidt secretly joined the Hillary campaign, Zuckerberg from Facebook has started to be groomed as a potential US presidential candidate.

On top of collecting information, both companies are now also filtering information with the newly created political role of “fake news detection, reporting, censoring”.

#76 Surf the gravity waves on 05.28.17 at 9:52 am

#67 Smoking Man on 05.28.17 at 1:08 am

The wife is a bit fat.

Kids.

https://youtu.be/EYyarcp5LtU
..
Well you are bald, fat and toothless.. a match made in heaven!!
What’s your excuse?

#77 Wrong Hole! on 05.28.17 at 10:14 am

Thinking that the banks will always be low growth is pretty short sighted. Banks are investing billions with the hopes of transforming into Canada’s next tech company. I am no talking about enhancing online banking with new fonts, but analytics. You don’t see it now, but the transformation will be revolutionary. If everything goes as planned, banking will still be core, but not the only business they will be in. If successful, banks should be able to break out of they 10-12 p/e range once people recognize the growth prospects. The two banks in the front are Scotiabank and RBC. Very little harm in buying some now as this could be the ground floor. You get paid to wait and they have the resources to see this through.

#78 MF on 05.28.17 at 10:17 am

Lucky you, but it’s only a matter of time.

Here in Toronto, a couple years ago we lost a nightclub icon: The Guvernment.

The place was sort of a right a passage for young people, and the premier place for big name dj’s and performers when they came to Canada/Toronto. It was here for decades before it was closed, and the land marked for another worthless condo.

MF

#79 crowdedelevatorfartz on 05.28.17 at 10:41 am

@#67 Smoking Man
Getting a little maudlin at 1am were we Smokey?

That would explain the sentimental syrupy song by those well known love balladeers………The Scorpions

#80 Ryan Lewenza on 05.28.17 at 10:58 am

DYI Investor “Is it a good idea to sell all the RSU’s and reinvest in the ETF balanced and diversified portfolio? Or should I keep the RSU’s or part of it?”

Do the RSUs for sure since the company is possibly matching and it’s forced savings (chart of VEEV looks pretty good as well). But then periodically sell the RSUs and add those proceeds to a balanced portfolio. We don’t invest in stocks and we definitely don’t believe in having concentrated positions in stocks so every once and while sell and add to a diversified portfolio. Ryan L

#81 Ryan Lewenza on 05.28.17 at 11:08 am

Pepito “If you can’t actively pick stocks that beat the index, why would your research be any better at picking regions and assets?”

Fair point but 1) this has been my area of specialization for most of my career being an investment strategist, and 2) we’re not making big bets as we stay fairly close to our 60/40 balanced approach, just tweaking around the edges. For example we might have more corporate bonds versus government bonds in a rising interest rate environment, or switch US equity exposure to Europe if we see better value and earnings growth. These are the types of bets we make which will keep us around 6-7% market returns, but maybe get us closer to 8% if we get these smaller calls right. – Ryan L

#82 Smoking Man on 05.28.17 at 11:15 am

WTF Andrew Scherr never saw that coming.

Go get T2 Andrew

#83 Figmund Sreud on 05.28.17 at 11:24 am

FANG stocks include Facebook, Amazon, Netflix and Google. …
_______________________

Well, … following is germane, I think: The future is unsurmoutable to fortell, as witnessed by this buy-and-hold portfolio of sure-fire winners – back at the turn of the century:

10 Stocks to Last the Decade
https://www.gurufocus.com/news/523718/10-stocks-to-last-the-decade

Significant snip:

In August 2000, Fortune ran an article titled “10 Stocks to Last the Decade.” The author’s intention was clear, as captured in a short description preceding the article: “A few major trends will likely shape the next 10 years. Here’s a buy-and-forget portfolio to capitalize on them.”

Well, we have more than 15 years behind us. Let’s look back and see how the picks held up over time.

And those picks were:

• Nokia (Nokia shares have declined by about 80% since 2000)

• Nortel Networks (Nortel filed for bankruptcy in January 2009)

• Enron (So much for “exceptional management.”)

• Oracle (Oracle still trades nearly 50% lower than it did in August 2000)

• Broadcom (Avago Technologies acquired Broadcom in 2016 for ~$55 a share. When article was written, Broadcom traded for ~$160 a share)

• Viacom (Investors probably made $100 a share from their investment of $69 a share)

• Univision (Kind of complicated, but no home run)

• Charles Schwab (The stock is only up marginally since 2000)

• Morgan Stanley Dean Witter (Down ~50% since 2000)

• Genetech (150% higher: shareholders were paid $95 a share for their $38 a share investment)

… so, what’s take a way from above?

Buying the S&P 500 ETF, et al, should be much more of a no-brainer when it’s cheap – especially when it’s cheap! – than when it’s pricey, as it most likely is now.

But than again, if you have time on your side, … say, you are prepared to buy-and-forget for decades then it makes more sense – a S&P 500 index fund, et al. – than if your time horizon is, … say, five years.)

Ski-doo with utmost care, eh!

F.S. – Comox, BC.

#84 Damifino on 05.28.17 at 11:25 am

#72 Mark

Advertising as a business model falls apart in a post-consumerism world.
——————————————-

I would agree with that statement, except…

I wonder, when will this post-consumer world be upon us? I don’t see much sign of it here in Vancouver.

There’s rabid, frothing-at-the-mouth consumptive greed evident on every corner.

The Ferrari’s and Maserati’s are flying off the showroom floors, high end restaurants are packed to the gunnels,

Lululemon just built a new store on Fourth Avenue (where a muffler shop used to be) because the demand for ridiculously expensive casual and sports wear is just as strong as ever.

The Apple Store at Oakridge Mall is overflowing on any day of the week and the dozens of cruise ships docking at the Pan Pacific Hotel this year will each leave three million bucks behind before sailing away.

#85 Damifino on 05.28.17 at 11:37 am

So… Bernier’s out and Scheer’s in.

The pundits say he’s Harper with a friendly face.

I’m calling him Joe Clark without the charisma.

#86 For those about to flop... on 05.28.17 at 12:03 pm

#63 Long-Time Lurker on 05.28.17 at 12:10 am

By the way, Flop, I do read your posts out of curiosity. It’s interesting getting the data on how the Vancouver market is moving.

///////////////////////////

Hey Lurker,this is my latest snapshot from a couple of days ago to see how the speculators from last year did.

As you can see 3 did really well ,3 lost money – 2 outright- one after expenses.

Perhaps surprisingly to a lot of people,the one that took the biggest loss was a condo.

They are not alone,although rare,I find condo owners taking a loss even though the media pumps them up and with the way pre-sales are going any sort of stagnation is going to leave a lot of people with a tough decision to make.

The rest probably would say that it wasn’t worth their time or the risk and wouldn’t have made that much after expenses.

No doubt,some will roll the dice again and some will take up lawn bowls…

M42BC

11231 64a Ave Delta ….paid 1.24…asking 1.29
-Listing Terminated
5746 Lancaster St. Van …paid 2.21…asking 2.09
-Just sold $2.37 million plus 7.2%
3208 e 53rd Ave Van…paid 1.59 …asking 1.69
-Listing is “cancel protected”
3855 Brandon St Burnaby….paid 1.46 asking ….1.49
-Just Sold $1.7 million plus 16%
1237 e 64th Ave Van…paid 1.45 …asking 1.34
-Just sold $1.435 million minus 1.4%
808 e 28th Ave Van …paid 2.0 ….asking 2.08
-sold $2.05 million plus 2.5%
3471 Rosamond Ave Richmond paid 1.65 asking 1.68
-sold $1.75 million plus 6%
9267 154 st. Surrey…paid 850 …asking 898
-? wrong address
9247 138 st. Surrey…paid 803… asking 799
-sold $926K plus 15.31
5833 Cove Link Rd. Delta paid…1.39 ….asking 1.49
-listing terminated
1346 Crestlawn Dr. Burnaby..paid 1.56 asking 1.48
-listing terminated
13523 79 Ave Surrey..paid 900 asking 999
-sold $980K plus 8.88%
8933 149 st. Surrey…paid 800 ….asking 869
-sold $860K plus 7.5%
4798 Killarney St. Van paid 985 asking 999
-sold $1.17 million plus 18.78%
3140 Springfield Dr. Richmond paid 1.85 asking 1.99
-relisted $2.238 million (they weren’t asking enough)
10680 Housman st. Richmond…1.6 asking 1.72
-sold $1.72 million plus 7.5%
10619 137a st. Surrey…paid 672….,asking 690
-listing expired
21-6878 Southpoint Dr. Burnaby paid 645 …asking 580
-sold $605K minus 6.2%
1805 Eighth Ave New Westminster paid 1.12 …asking 1.18
-sold $1.180million plus 5.3%
Thanks to Adam for the help…

#87 Sultan of Sudbury on 05.28.17 at 12:12 pm

Ryan – Thanks for sharing this interesting piece.

Would it not be fair to handicap the earnings / growth models of the Canadian Big 6. Isn’t the forward lending environment going to have more headwinds, or at least operate substantially different than the recent past decade?

Garth seems to support the view that rates have reached rock bottom. Pair that with the implosion of unsustainable lending practices (HCG de jour), and potential risk sharing on the horizon.

I believe lending to the marginal Canadian borrower, who according to StatsCan is becoming too old to sustainably borrow, or is young and already over leveraged, will become more difficult.

Understanding the spreads grow in an increase rate environment but that hurts future volume written, it also imperils those refinancing. Are there analogous situations to look at in other countries, or other Canadian time periods that can help us understand how the dollars shake out?

The only way this looks +ve to me is with “pulled pork” interest rates in Canada… low and slow…

#88 Corn In My Soup on 05.28.17 at 12:31 pm

Re: Comment #7, Andrew Woburn…

No argument is needed as the facts speak for themselves. Where it is stated that the kids may be making more than their parents did (gross), one has to consider present-day high(er) taxes, the prices of food, fuel and consumer items all being higher. When those are factored in, the kids aren’t any further ahead.

#89 Time to pack my bags on 05.28.17 at 12:57 pm

As a lifelong conservative voter and self-employed professional, I am just appalled at what the Conservatives have done to themselves, yet again.

Andrew Scheer is an alt-right moister idiot who will drag the party into unwinnable ideological debates – he will have no choice thanks to his key supporters – that the party will lose.

This is Canada, not Alabama. Duhhh.

We need the return of Progressive Conservatives to have any hope of governing now and for the future.

Instead, Trudeau just got a free pass for 2019. Scheer will be so easy to target, it’s unbelievable.

And the new T2 measures Garth speaks of lately here, higher taxation and more, are now on rails at high speed.

I’ll be packing my bags soon. I can work easily in the USA and make much more in states that are close at hand.

When will the cons ever learn?

#90 Ryan Lewenza on 05.28.17 at 1:41 pm

Sultan of Sudbury “Would it not be fair to handicap the earnings / growth models of the Canadian Big 6. Isn’t the forward lending environment going to have more headwinds, or at least operate substantially different than the recent past decade?”

I was just making a broad comparison between those two groups of stocks looking at earnings, market caps and valuations. And I think this simple analysis highlights the banks attractive aspects including their high earnings, dividends and low valuations. But I agree with you that the next decade will not be as supportive for the banks and I see their earnings growth slowing from double digits to single digit earnings growth. If correct then CAD banks should provide returns around 10% annually over next decade versus the 15%+ they’ve returned in recent decades. No argument here. – Ryan L

#91 Yesterday's post on 05.28.17 at 1:56 pm

“Many doctors and medical professionals, for example, earn money through corporations which means they have no pensions, no benefits and start their careers at a later age, with huge student loans. Income-splitting with a spouse allows for some relief, and also means docs cost the system $250,000 a year instead of $500,000. (They can always go south…)”


This paragraph is so wrong on so many levels. First, we have been told here that no pensions will exist on the future so we better prepare ourselves. So what if doctors don’t have pensions then?

Also, the doctors can’t simply ‘go South’. They can go but can’t start their own business there. They will have to be salaried and that’s that and work for someone else.

#92 A box in the Sky on 05.28.17 at 2:02 pm

#78 MF on 05.28.17 at 10:17 am

Lucky you, but it’s only a matter of time.

Here in Toronto, a couple years ago we lost a nightclub icon: The Guvernment.

The place was sort of a right a passage for young people, and the premier place for big name dj’s and performers when they came to Canada/Toronto. It was here for decades before it was closed, and the land marked for another worthless condo.

MF
——————————————————-

Yeah, sadly this is normal now. The Koolhaus beside it was also one of the best concert venues for ~ 2000 person shows. Everyone has played that venue. A bunch of other small music venues have also closed for condos.

We’re going to reach a point, probably not too far from now where we’ll hit a critical mass of condos + the same 5 storefronts – bank/Shoppers/nail salon/dry cleaners/fast food franchise

https://nowtoronto.com/music/torontos-vanishing-music-venues/

#93 Bobby13 on 05.28.17 at 2:13 pm

Bitcoin looks like it’s here to stay it will erode the con fidence in the big name banks as it is superior. I don’t like what the banks stand for and I will not invest in them. They will be obsoleted eventually one way or another. Buying indexes only limit your gains as do dividend paying companies. Banks are nothing but a middleman backed by governments all trying to collect fees from producers. Governments will eventually go the way of the banks we can only hope sooner rather than later.

#94 Tony on 05.28.17 at 2:22 pm

Re: #62 crowdedelevatorfartz on 05.27.17 at 11:48 pm

Exactly correct witness the present day arsons in Fort MacMurray, Alberta and Woodbridge, Ontario way back in the last housing bust of the late 1980’s.

#95 Long-Time Lurker on 05.28.17 at 2:29 pm

#61 akashic record on 05.27.17 at 11:33 pm
#6 Long-Time Lurker

There is no altruism on any side.

I agree with your statement. The market has no mercy but people can.

#86 For those about to flop…

Thanks, Flop. If I’m reading your posts then other people must be as well.

Just reflecting on how I ended up posting on the comments: I read Garth’s blog for years without posting. When Garth started feeling like axing the blog I started writing to encourage him to keep going. Then I helped The Limited Sage for a bit. Now I’m writing somewhat often. Ahhhh!!!!!!

#96 what's in your bag? on 05.28.17 at 3:12 pm

#89 Time to pack my bags

Andrew Scheer is an alt-right moister idiot.

Care to elaborate?

#97 crowdedelevatorfartz on 05.28.17 at 3:17 pm

@#87 Damfino
“I’m calling him Joe Clark without the charisma.”

*******

Joe Who?

#98 Legal Question on 05.28.17 at 3:32 pm

“Gianforte was cited for misdemeanor assault on Wednesday after a reporter said he was “body-slammed” by Gianforte while the reporter tried to ask him a question about the Congressional Budget Office’s rating of the American Health Care Act.”

http://www.businessinsider.com/can-greg-gianforte-serve-montana-house-of-representatives-if-hes-convicted-2017-5

Could a lawyer reading this blog explain to me why Gianforte was not charged with felony assault?

#99 Robert White on 05.28.17 at 3:36 pm

CANADA’s Chartered Banks look like risk free investments when one neglects to factor in the risk exposure they currently face with respect to mortgages for home loans given that the subprime mortgage loan industry is currently slowing due to
MBS risk on bank books in a current market situation.
If sales continue to slump in accordance to slowing demand of irrational animal spirits that have run out of irrational exuberance, we can expect a takeaway of increasing risk for banks, and a concomitant decrease in risk for cohorts of potential buyers that have opted to sit on the sidelines waiting for the next shoe to drop on the housing market. Bottom line is that the above analysis neglected to factor in risk to banks via issuance of loans to maintain the illusion of an inflated market, and growth overall upstream & downstream of a new batch of liar loans on the bank books.

Who, or what cartel of bankers, bailed out Home Capital Group so they did not fold?

RW

#100 waiting on the westcoast on 05.28.17 at 3:41 pm

#61 akashic record on 05.27.17 at 11:33 pm says “Businesses use the “job creation” argument to get preferential tax treatment from the government, operated by politicians.

Politicians use the “job creation” argument to gain political capital, converted to votes at elections, plus to justify granting preferential tax treatment to businesses, once in power.

In reality, buying labor is exactly the same economic transaction as buying anything else a business needs to operate.tment from the government, operated by politicians.”

In theory, I agree. However, in practice, various jurisdictions are competing for creating those jobs at a local level. Having a tax regime that is overly costly will cause businesses to invest elsewhere. Even in relative homogenous places like the US, there is significant competition for relocating businesses through tax relaxation at the state and county level.

#101 Mark on 05.28.17 at 4:42 pm

“But I agree with you that the next decade will not be as supportive for the banks and I see their earnings growth slowing from double digits to single digit earnings growth. If correct then CAD banks should provide returns around 10% annually over next decade versus the 15%+ they’ve returned in recent decades. No argument here. “

The banks are already trading at P/E ratios of 10-12 for implied no-earnings-growth returns of 8-10%. If earnings growth slows to, say, even 5%, the banks can still produce 13-15%/annum returns. Even if bank earnings growth completely flatlines and goes to zero, banks can return 8-10% annually.

It would take significant P/E multiple compression, and/or extremely slow, if not non-existent earnings growth to put the banks in a position of “only” returning 10%/year. A fare more likely scenario is that the banks, in response to the RE asset deflation, increase their realized spreads significantly on diminished creditworthiness of Canadian residential RE-backed-borrowers. And experience earnings growth. The 1990s taught us that RE stagnation/declines can be extremely profitable for the banks. Banks providing a quadrupling of investment in the 1990s, plus dividends.

#102 akashic record on 05.28.17 at 6:44 pm

#100 waiting on the westcoast on 05.28.17 at 3:41 pm

#61 akashic record on 05.27.17 at 11:33 pm says “Businesses use the “job creation” argument to get preferential tax treatment from the government, operated by politicians.

Politicians use the “job creation” argument to gain political capital, converted to votes at elections, plus to justify granting preferential tax treatment to businesses, once in power.

In reality, buying labor is exactly the same economic transaction as buying anything else a business needs to operate.tment from the government, operated by politicians.”

In theory, I agree. However, in practice, various jurisdictions are competing for creating those jobs at a local level. Having a tax regime that is overly costly will cause businesses to invest elsewhere. Even in relative homogenous places like the US, there is significant competition for relocating businesses through tax relaxation at the state and county level.

In such cases governments are simply artificially interfering with the market with various monetary incentives to influence where the labour will be purchased for an existing demand.

That’s all what happens, not “job creation”.

#103 NoName on 05.28.17 at 6:46 pm

Hey Flop

Just heer me out before you tell me that you are not interested.

i had some free time time i was playing with google forms and exporting them in google sheets, so i enterd some info from your post from above just to try how will look and works fine.

below are pics of form and sheet export looks ok, not as good that Smoking Man would make because VBA spredsheat “tatamata”, but i found it simpul to make and use, and spread sheet is ok-ish.

more data point more acurate will get. so you cold share link with people that you would trust that will eneter korekt numbers.

So what i am saying here you are alrady doing what are you doing, if you get a flop google acc and use a gdrive and google doc to make similar form and kepp doing what you do in no time will be able to plot and get an idea of “scientific” proof which way thing are going, and if you share spread sheet, for futur disecting of numbers would be great.

what say you Flop?

http://imgur.com/a/p7Pa7

#104 marketpundit on 05.29.17 at 9:50 am

IT has started NO DOUBT!

Brampton: W3818204 (88 Zelda Rd)

“Absolutely Stunning & Spacious Less Than 2 Years Old Detached In High Demand Area”

April 18, 2017: $799,990 (“Let’s have multiple offers price”); (no sale = listing terminated).

April 26, 2017: $879,900 (“We will settle for this price”); (no sale = listing terminated).

May 5, 2017: $859,990 (“Priced to sell”); (no sale = listing terminated)

May 26, 2017: $748,888 (“Someone, PLEASE, buy!” (notice LUCKY “8’s” in the price)). (on the market. will monitor).

Pass me that popcorn. :)