Are you available?

 

 

DOUG By Guest Blogger Doug Rowat

I’ve spoken before about recency, or availability, bias on this blog. Recency bias is that pesky little behavioural investing trait that causes us to place far too much importance on recent events. This is one reason why academic research has shown that retail investors have a preference for repurchasing stocks that have had large positive returns the previous day—as if this will be the key factor in determining how they perform long term. But availability bias also takes hold of us when the recent information we receive is negative—in fact, the more shocking and emotionally disturbing this information is, the more likely we are to draw incorrect conclusions.

Availability bias, according to investment firm Vanguard,

…suggests that recently observed or experienced events strongly influence decisions. Researchers found that individuals were likely to overestimate the chances of being in a car crash if they had seen a car crash on a recent journey. The recent memory made the prospect more vivid—available—and therefore more likely.

Based on such biases, convincing an investor to become more defensive during the heart of the 2008–09 financial crisis was an easy sell. Investors were faced with a series of economic ‘car crashes’ on a daily basis and were more predisposed, for instance, to abandon their equities and load up on bonds. However, as is often the case, decisions based on fear are usually incorrect. Indeed, US equities returned 195% on a total return basis five years after the financial-crisis lows versus only a 28% return for US investment-grade bonds.

But it’s not necessarily events as epic as the financial crisis that create availability bias. We see this bias come into play after almost any traumatizing news event. Often our most frightened client calls occur after terrorist attacks. Such attacks are spectacular and indeed horrific, but as I pointed out a few months ago on this blog, they’re relatively miniscule in relation to their actual global economic impact. Compare the approximately 600,000 Americans who die of heart disease every year versus the 5–10 who typically die from terrorist activity. Terrorism, therefore, in terms of its economic toll, becomes a misplaced fear. But the terrorist attacks appear more consequential because they’re more shocking and more recently experienced. Heart disease doesn’t often make the nightly news.

North Korea is another perfect illustration of the effect of availability bias. Many of our clients, for instance, wanted to dramatically change their portfolios after Trump’s recent “fire and fury” statements. We’re not denying that North Korea is unpredictable and presents a real danger to the world, but North Korea has a very primitive nuclear arsenal with perhaps only 30 warheads. Compare this to the US with a very sophisticated arsenal of more than 4,000. Much has also been made of North Korea’s ability to reach Guam with a missile attack, but Guam is still roughly 10,000 km from the California coast. In other words, at this time, North Korea’s ability to reach mainland USA is an incredible long shot. Unsurprisingly, it was North Korea that backed down first, quickly toning down its Guam threat.

I don’t mention this to suggest that you breathe easy and conclude there’s no danger from North Korea. But I do mention it to allow you to keep your fears in perspective. Our clients were fine holding a less defensive portfolio just a few weeks prior to the Trump/North Korea sabre rattling. A few weeks earlier, we were still living in a world where India and Pakistan hated each other (only last year they had a military confrontation along their border), had nuclear arsenals much larger than North Korea’s and could easily reach each other’s major cities with missile attacks. But India and Pakistan weren’t in the news. North Korea was. India and Pakistan have always carried more risk, but our clients didn’t even mention this when they discussed their portfolio changes.

The world is full of danger. We can’t prevent this. However, remember to make sure that your assessment of risk isn’t guided purely by what you saw recently on the nightly news or your Internet newsfeed. Risk must be viewed objectively, not emotionally based on screaming and hyperbolic headlines.

Finally, Ryan and I have taken a lot of heat on this blog for discussing our more optimistic view of the Canadian market. And we recognize that the S&P/TSX Composite has underperformed the S&P 500 this year. However, I’ll leave you with a final chart that compares the price-to-book ratio between both markets. Book value is a reflection of the net worth of a company as if its assets were to be liquidated today. So while a price-to-earnings ratio measures the price you’re paying for earnings growth, P/B is more a measure of what you’re paying for the entire company itself.

The US market does typically trade at a P/B premium to Canada, but currently that premium is almost 3x its historical average! Canada, in our view, is offering compelling value.

S&P 500 vs S&P/TSX Composite P/B Ratio – Spread Almost 3x Historical Average (lower panel)

Source: Bloomberg
Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.

108 comments ↓

#1 Party on Garth on 08.26.17 at 3:17 pm

Latest household credit numbers for Canada (to the end of July, 2017) from the Bank of Canada:

http://credit.bankofcanada.ca/householdcredit

Latest business credit numbers for Canada (to the end of July, 2017) from the Bank of Canada:

http://credit.bankofcanada.ca/businesscredit

#2 Vanguy on 08.26.17 at 3:32 pm

first!!!

#3 For those about to flop... on 08.26.17 at 3:38 pm

CONFIRMED PINK SNOW.

Here is a case that LS in Arbutus helped me with and now the confirmation has come through we will put it up and draw a line under it.

The details…

Paid 1.96 in Feb 2016

Sold for 1.98 in May 2017

So once again the sold was a higher number but not enough roughly a 4% loss with known expenses or roughly 80k.

Could consider themselves lucky or unlucky….only time will tell…

M43BC

5688 Sussex Avenue, Burnaby paid 1.96 February sold on June 1

Feb 23:$2,098,000
May 25: $1,680,000
Change: – 418000.00 – 20%

https://www.zolo.ca/burnaby-real-estate/5688-sussex-avenue

https://evaluebc.bcassessment.ca/property.aspx?_oa=QTAwMDAzV1NKRw==

#4 Stan Broock on 08.26.17 at 3:51 pm

Russian markets look like much better deal, ETFs with P/E ratio of 4-6! And yet nobody is buying… Same for Venezuela.

Let’s be clear here – US markets rally as people with money from all around the world think they/US stockss offer better deal than bonds. Simple as that.

Why Canadian markets did not rally and will more likely tank instead?

– No one here/In Canada has any money to invest.

– The world does not care about our small regional market.

– Soon baby boomers will start selling stocks to fund their retirement.

– At the same time the next generations are up to their eyeball in housing debt.

A simple question: who will buy these stocks that will have to be sold in the future by Baby boomers?
Answer: No one.

This is what happens when you skew and miss-allocate investments and screw savers. There is nothing to invest.

How are those Artificial Intelligence clusters working in the new ‘high-tech Mecca” aka GTA? Not well I guess.

So while appreciating your enthusiasm and patriotism I will simply pass on the opportunity and stay invested elsewhere – Europe, US, China.

#5 Vanguy on 08.26.17 at 3:53 pm

Hey Garth, do you really think houses will drop in Vancouver?

#6 Stan Broock on 08.26.17 at 3:57 pm

BTW the reason that TSX unperformed in the past 10 years was exactly that money when people had them where going to housing. Including new credit.

Now with this game over and raising rates, that require higher percentage of income to serve there would be even less to invest on the stock market.

So who is buying these stocks again?
Poloz? time to purchase stocks by BOC? LMFAO.

#7 Shawn on 08.26.17 at 4:12 pm

What’s interesting is that this theme is present across EM countries also. Those countries with low technology exposure have significantly underperformed those with high technology exposure. Canada is cheap because it lacks technology exposure. This is a technology lead secular bull market. I think Canada will remain “cheap” for some time.

#8 MF on 08.26.17 at 4:22 pm

I am general agreement with the post except for a few things.

-Since 2009, the world’s central banks have embarked on unprecedented stimulus. This is, as one of our weekend guests pointed out in the past, a major reason why the stock markets recovered so well.

The central bankers are now in the process of trying to remove that stimulus. So basically, the next inevitable world shock (economic or not) that results in a stock tumble will not see such a quick recovery. I think people are wise to be afraid of events like North Korea in this context.

In other news,

I usually stay away from the personal finance section of the financial post (I have 3 billion in savings, how will I survive?) but I think this link sums up the state of our country’s finances:

http://business.financialpost.com/personal-finance/couple-must-turn-real-estate-into-income-but-even-then-early-retirement-could-be-a-challenge

Basically some 50 odd boomer couple mulling retirement with all their net worth (1.9 million) in real estate.

All I can think about is if you are over 40 and never owned any real estate you missed the boat big time. If you are 34 like me, where will the next opportunity present itself? Who knows.

MF

#9 MF on 08.26.17 at 4:27 pm

#1 Party on Garth on 08.26.17 at 3:17 pm

Ah yes the BoC.

The one who tells us how “bad personal debt levels are” but then keeps interest rates at “emergency levels” way longer than they should of.

Looks like failed policy to me.

MF

#10 Paracho on 08.26.17 at 4:39 pm

I have been victim to th se bias s in my past . But I slowly but surely learned . We all have to learn from our mistakes.

#11 Shawn on 08.26.17 at 4:47 pm

Investors see Canada & Australia as emerging market like countries – banks and commodities. Commodities outperform during bear markets in consumer cyclical and technology stocks. This occurred between 1968-1982 and 1998-2012.

To make things worse, the market is underpricing Canadian and Australian banks vs US banks largely due to the debt overhang due to their respective housing bubbles and commodity centric economies.

A new bull market for the S&P500 began in 2013.

A new bull market for technology began in early 2016 with the Nasdaq breaking and holding above its 2000 ATH of 5200 points. It’s possible that the present day Nasdaq resembles the 1950 Dow on a historical timeline. We could be in the 2nd inning of a long term trend.

Secular bull markets last a long time and are characterized by high investor pessimism in their early and mid stages (similar to today).

The only way Canadian equity valuations will rise is if a new group of Canadian tech companies move up the ranks of the TSX and dominate the index much like Nortel did in the past. At the current time, the technology weighing in the TSX is at historic lows justifying a low valuation.

#12 InvestorsFriend on 08.26.17 at 4:52 pm

Book Value?

It can be relevant and I always look at it and the fact that the premium on the U.S. market is much wider than normal is worth noting and is indeed a rd flag.

But I would change the following sentence quite a bit:

Book value is a reflection of the net worth of a company [according to its financial statement balance sheet which usually reflects what it paid for its assets and not market value and often will bear absolutely no resemblance to the value that would be achieved] as if its assets were to be liquidated today.

I like to think of it as reflecting what the company itself has invested in its assets, net of liabilities. If some guys started a company ten years ago and now it is highly profitable you cannot expect to buy in at book value.

In Canada, REITS have their assets marked to market so in the case of REITs, book value is very relevant.

In many industries (a gold mine would be a notorious case) book value has very little relevance to actual value. Same for software companies.

#13 Victor V on 08.26.17 at 5:27 pm

Real estate sale being described as a “nightmare” in this twitter exchange:

https://twitter.com/madhurakeskar/status/901488193350062081

#14 Doug Rowat on 08.26.17 at 5:52 pm

#4 Stan Broock on 08.26.17 at 3:51 pm

Why Canadian markets did not rally and will more likely tank instead?…

…So while appreciating your enthusiasm and patriotism I will simply pass on the opportunity and stay invested elsewhere – Europe, US, China.

Is that how you felt last year when Canada smoked the US market? And you may not agree with our favourable view of Canada, but it sounds like you’re abandoning our market completely. This is not wise. Or are you never wrong?

–Doug

#15 Renting sucks, but we're doing it anyway on 08.26.17 at 5:54 pm

Re recent discussions here about how to get wives on board with renting instead of buying: I’m a wife and mother of two elementary-aged kids, and I insist that we keep renting! How did I get to this point? Well, basic math.

Until recently, renting in our area, (Langley BC – an hour east of Vancouver) has been far cheaper than buying. We added up all of the sunk costs of buying (mortgage interest, property taxes, maintenance, opportunity cost), and renting is still significantly less, letting us save the difference.

Also, in 2009, having sold our condo in Abbotsford close to the 2008 peak, and planning to buy a house, we saw the prices start to drop, and that convinced us to wait a while to buy – why buy now when it’ll be cheaper later? We chose a decent rental house, $1800/month. We decided to consider it again in late 2009. So in fall 2009, (while I was pregnant with the second one!), we went shopping. We were not happy at the choices available – nearly $500,000 at the time for a basic 1800-2000 sqft 3br suburban house (i.e. what we were renting for $1800/mo). For what we’d really want, $600-650K. While we could afford to pay that much, we were not happy at the thought of a $400,000 – $500,000 mortgage, as we plan to pay it off! (how quaint of us :-)

So, after giving birth in Feb 2010, we started thinking about it again. But, we started to question why we had more taste than money (or rather, appetite for debt). Over the course of two weeks, my husband and I did a great deal of reading, including Greater Fool (thank you so much, Garth!), VREAA, Ben Rabidoux, and others. We each independently came to the conclusion that current (at that time) prices of 5-6x local median incomes were an anomaly – historically far out of line with the 2-3-4x local incomes that our parents bought in, and that even my sister and BIL bought in 1996 in Langley.

Bingo – prices are in a bubble. So, wait to buy until it collapses again. More reading, about asset bubbles this time. Robert Shiller’s Irrational Exuberance is a good one. The American housing market collapse. The dotcom burst, during which we personally lost a lot of money. Our conclusion – Vancouver area is in a bubble, which can’t possibly last forever, and buying during a bubble is a good way to lose a lot of money (a la our dotcom experience, which we are not keen to ever repeat). All bubbles burst eventually. So, we settled in to rent for the long haul – as long as it takes. We were 5.5 years in that same house, with the rent only going to $1860/mo for the final year.

Of course, we could not imagine that interest rates would stay so low for so long, encouraging foolish people to pile on endless amounts of debt – which we were not willing to do. I’m quite frustrated that the bubble has gone on so insanely long – I think it will be so much more devastating for our economy when it collapses than it would have been 5 years ago.

Had we known it had 7 more years to run, we could have bought back then even though overpriced, and then sold again higher. But, as Hilliard Macbeth notes in After the Bubble Bursts, few people will manage to do all three steps right, to profit (or even not lose) from the market cycle: 1. buy low 2. sell high 3. not buy back in again. We are satisfied with having bought our condo low in 2003, and sold it at nearly double in 2009, and had the cash since then. Managing to do that a second time is unlikely – but we would have appreciated being insulated from rental hassles for those years.

To this day, I’m committed to renting until sanity returns. But, that said, it sucks. As Flop (IIRC) said, renting is crap. We were pushed out of the first rental by the owner selling it (for $550,000 in 2014, a house we almost bought for about $500,000 in 2009. 2016 assessment >$800K. True value supported by incomes: about $300K). We were 2.5 years in the next one (Dec 2014 until this May), at $2000/mo for a nice 2460sqft 3br full basement house. Then, pushed out again – owners moving back here from China.

Then, the big rental increase – we chose a house a block from the school, a beautiful house, but insanely priced at $2800/month. Fortunately, we can afford it, and with our 830+ credit scores and no debt, could easily buy it even, but that’s f*n nuts for rent – a 40% increase from the (slightly discounted) one we rented 2.5 years ago, only 2 km away.

Landlords bought it at the peak of the market for >$900,000 a year ago, over the assessed value – a very risky move for them. Unfortunately, they probably can’t afford to lower the rent, although I tried. It’s likely barely covering the mortgage payments at that, let alone the taxes and maintenance. And, it’s a one year fixed term lease, with us forced to agree to move out at the end of it. (although they say that’s so they can get rid of bad tenants, this clause is also being abused to allow uncontrolled rent increases here which are otherwise capped for ongoing tenancies).

So, we’re preparing for our next move, next April. I’m getting rid of stuff, sorting out junk, and leaving lots of stuff in boxes. In the meantime, we love this rental house, and are having a great summer in the beautiful yard.

We will never buy it though, as we will never pay them the $900K they paid, and they’d never accept the $400K we’d estimate the fair market value to be post-bubble (this would be reversion to 2003 prices, which should be about right). And, no, I don’t feel that a 55% price drop is impossible – that’s the level that local incomes support.

I absolutely loathe renting. We both grew up in houses that our parents owned, and we expected to live in property we owned once we moved back to Canada and had kids. (We were in the US and overseas for 8 years, so were fine with renting in those 4 countries).

We are completely oriented to owning – we have our own lawnmower for pete’s sake! Imagine the difficulty and expense of moving a family of four and the contents of a 2500 sqft house with yard. Annually. And we can’t even own a dog – just try to find a series of rentals that allows one.

I’m very cranky about the housing situation in Canada. I’ve tried multiple times to convince my husband that we should move overseas again for a few years while we wait, or at least to the US. (He works for a US company). But, both of our families are here, including our 4 elderly parents. This last move, we looked up what housing markets in Canada are the most reasonable multiples of local incomes, and the answer was: Lethbridge. I’m sure it’s a great place to live, but I’m a hothouse flower, born and raised near Vancouver, and I won’t move somewhere that cold :-) That said, I see that the rents in Calgary are becoming quite reasonable (<$2000/mo), so perhaps for a year or two…

I refuse to have us buy a house for $900K or $1M, although we could manage it, with a good downpayment even. My husband would consider it, and he's the one with the good income, but there's no way I would let us be on the hook for an $800,000 debt. I truly believe that this bubble will burst at some point, and after we buy I don't plan on moving again for another 20 years, so that means we'd have to actually pay back that debt. I'm not willing for us to commit the bulk of our income until retirement just to pay for an overpriced house. That's insane.

This is delayed gratification – it's part of growing up. At this point, we enjoy life greatly, with my husband in a great job, watching our two kids grow, me able to stay home with them for the last 12 years and about to finish retraining for my next career, no debts at all, lots of savings and investments, downpayment at the ready when the time is right. But we're not holding our breath.

As we moved out of the 5.5 year house, the only home our daughter had ever had, I was pretty gloomy. But, watching the kids race around laughing in the empty rooms, it made me realize that it's just a house. Home is anywhere you're with the people you love. As long as we're together, and we're warm with a roof over our heads, that's all that matters in life.

If other people thought they'd actually have to earn the after-tax dollars to pay back the debts they're taking on, no one would buy at these prices. And, as prices come down some, more and more buyers will get the idea (like we did) that there's no point in buying now when prices will be cheaper later, so price drops will beget more price drops.

#16 Renting sucks - House Rental Tactics on 08.26.17 at 5:58 pm

Re rentals, Rook #83 on 8/24 (Victoria)

This move, I discovered something about the Craigslist rental postings for our area – there’s a great deal of lying about house size! Until recently, house rents in our Langley area were about $1/sqft, i.e. our 2009-2014 rental house was $1800 for 1780 sqft. Our 2014-2017 rental had been vacant for 3 months, so we got it – 2460sqft – for $2000/mo. But now, many nearby houses are priced in the $2600/mo range, for houses that are listed as perhaps 2400-2500 sqft. The kicker is that when you look at BC Assessment’s website, the houses are typically more like 1800-1900 sqft for that price! Any that are actually in the 2400-2500sqft range are asking $2800-3000.

Multiple times, I’ve emailed advertisers to say, “oops, I think there’s a mistake in your ad – isn’t your $2700/mo 2700sqft house actually more like 1900sqft?” (this was the most egregious example!). Oddly, the next day the ad read something like $2600/mo for 2200sqft :-) I’d strongly encourage renters to call the advertisers on this. Always check the house size and sales history on BC Assessment – you can look up the address.

Nearly all of the rental houses advertised in our area have been purchased in the last year, right at the peak of the market, and then are advertised for insanely high rents, amounts not supported by local incomes. But, presumably the buyers/new landlords were told by the realtors, “You can rent it out for $3000/mo! It’s a great investment!” It’s kinda risky to rent one of these properties, but in our case there was only about one out of twenty or more houses that was not a recent purchase, and it wasn’t suitable.

As well as checking BC Assessment (which might not show a recent sale yet), Google the address and you’ll find the sale ad and listing price (and often the same pictures as are on the rental ad :-)

The reality though – many of these rental houses are not finding tenants at the desired rental prices. At one point in mid-March, some basic analysis of perhaps 60 current rental house ads within about a 4km radius showed that fully half were either already vacant, or coming vacant in under two weeks, with no new tenant in sight. (I’m a numbers gal – a former systems analyst/software developer). Clearly asking rents are beyond the limits of many tenants. And, being tenants, they can just move farther out from work where rents are cheaper.

As Rook pointed out, there’s a huge cost to a landlord of leaving a place vacant instead of dropping the price – for every vacant month you refuse to consider a 10% drop, it takes 10 months at the higher rent to make it up. (if a tenant even comes along for the higher rent!)

Renters, be sure to push back on absurd rents, fraudulent square footages, and fixed term leases too if possible. Be prepared to prove you’ll be an excellent tenant, show them your (excellent) credit score, and insist on a discount. If possible, choose places that are already vacant, check the sales history and assessed size, offer to sign a long lease, then make them an offer and be prepared to walk away to try the next rental instead.

(this is a new little hobby for me, as I get time – keeping landlords honest. Troll the rental ads in your area, check the assessments, and force the landlords to advertise the true(ish) size. Other tenants will then get on board with pushing back too, when they see the actual size they’re getting for the price. This will also help push down the rents for next time we need a rental house.)

Thanks to Garth and all here who make this blog so great.

#17 Gravy Train on 08.26.17 at 6:02 pm

#12 InvestorsFriend on 08.26.17 at 4:52 pm

Warren Buffett wrote the following in his 2011 letter to shareholders of Berkshire Hathaway Inc.:

“Last September, we announced that Berkshire would repurchase its shares at a price of up to 110% of book value. We were in the market for only a few days – buying $67 million of stock – before the price advanced beyond our limit. Nonetheless, the general importance of share repurchases suggests I should focus for a bit on the subject.

“Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated….

“At our limit price of 110% of book value, repurchases clearly increase Berkshire’s per-share intrinsic value. And the more and the cheaper we buy, the greater the gain for continuing shareholders. Therefore, if given the opportunity, we will likely repurchase stock aggressively at our price limit or lower….”
http://www.berkshirehathaway.com/2011ar/2011ar.pdf

#18 westcdn on 08.26.17 at 6:04 pm

I was researching USDCDN exchange rates. It looked like my bank wasn’t going to charge me money changing fees but I suspected rightly they were embedded in the rate they offered. Still, 0.75% I can accept at my minnow level. The bank seems to want to get their pound of flesh through higher interest rates on a US$ margin balance.

I found this article on the BOC website and it made me go hmmm. To glean information from a few sentences on an executive summary is an exercise in logical fallacies. E.g. Cats are animals and dogs are animals therefore dogs are cats. I digress which I am want to do.

Per item 1, foreign purchases of CDN Government bonds is strong which leads me to believe the lift under increasing interest rates is inversely reduced. Therefore the CDN$ is not going in the tank anytime soon. If my opinion is right, CDN asset markets have foreign support for the time being.

I found the secondary minute summary more interesting – the potential development of a Canadian Residential Mortgage-Backed securities (RMBS) market was also discussed.
http://www.bankofcanada.ca/wp-content/uploads/2017/07/cfic-meeting-minutes-270617.pdf

It appears to me that CDN banks are not motivated but shadow banking (Home Capital Group et al) are. I guess the MBS bonds would currently need a risk premium which would reduce the net proceeds to the banks. The shadow banking system would be all too happy to transfer risk to a mortgage backed bond purchaser. Is this why Uncle Warren showed on our doorstep? It looks to me that mortgage stress testing is a step to make CDN mortgage backed bonds less risky therefore increase the incentive for CDN banks to sell them and get the CMHC out of the picture.

My conclusion, the BOC suggested interest rate is not going to hit 3.5% and will not rise quickly. Deflation is still a threat.

#19 availability bias on 08.26.17 at 6:25 pm

can help sometimes too

see Nortel

:)

#20 Wrk.dover on 08.26.17 at 6:27 pm

A terror attack killing a dozen pedestrians on a street six time zones to the east of here, has as much to do with the value of the stock of the company that makes breakfast cereal in the heartland, as me skipping breakfast does. But only the former has effect traction.

It is just another setup to buy dips.

Which looks pre-planned from my perch…sell on the breaking news, buy back tomorrow.

Meantime a storm kicks the tar out of Texas killing as many, and markets will rise.

#21 espressobob on 08.26.17 at 7:04 pm

Investors have choices. In the short term anything can happen. Most of us know that. Trying to time market moves over the long term is next to impossible.

Global index investors by market cap don’t have these issues. Isn’t it better to be the benchmark others are trying to outperform? Funny, but this position has been seriously profitable for the last few years.

The TSX will have its day and that will still be reflected in a global portfolio. Still think its better held in a non registered account. Just one mans opinion.

#22 InvestorsFriend on 08.26.17 at 7:52 pm

Warren Buffett and Book Value or something

#17 Gravy Train on 08.26.17 at 6:02 pm
#12 InvestorsFriend on 08.26.17 at 4:52 pm

Warren Buffett wrote the following in his 2011 letter to shareholders of Berkshire Hathaway Inc.:

**************************************
What was your point there? Those quotes were indicating it is wise to repurchase shares when funds are available and the shares trade well below INTRINSIC value. Rarely is intrinsic value very close to book value. In the case of Berkshire, as with most financial companies, it is not too far off.

#23 InvestorsFriend on 08.26.17 at 7:54 pm

Abour Warren Buffett quotes

#17 Gravy Train on 08.26.17 at 6:02 pm quoted Warren Buffett

*************
P.S. congratulations on reading Warren Buffett’s letters. A wise move.

#24 espressobob on 08.26.17 at 8:10 pm

Passive investing, globally speaking is just that. Maintain core positions no matter what direction markets move. Never head for the exits!

For those that have a grip on this subject the next sensible angle is being a contrarian. This is a tough mindset when buying declining assets while the herd is abandoning them, like say during a correction, especially a nasty one.

Crystal balls don’t cut it.

#25 Yanniel on 08.26.17 at 8:20 pm

Hi Doug.

In previous posts you guys explained that in the US case, small/mid caps do better than large caps when coming out of of a recession. Is that the case for Canada as well?

Canada was temporarily in recession in 2015, and it was just recently that the BoC began cheering for our economy. Given this, I would think we are in the early stages of economic expansion and if we are like the US, then this would be a good moment to overweight Canadian small/mid caps. Does this make sense?

Your wisdom is greatly appreciated.

Yanniel.

#26 conan on 08.26.17 at 8:25 pm

Trump’s presidency has not been good for Canada. The current lumber tariff structure is ridiculous. Good for Russia,but bad for Canada, and American home buyers.

The World had picked up on the fact, that Trump was going to bully Canada. Hence our recent past’s market meh-ness.

Trump can do a lot of damage, to everyone. He is not a particularly good business man, or a good negotiator. He is good at inheriting a golden goose NYC real estate business, and doing reality TV shows.

#27 Stan Brooks on 08.26.17 at 8:46 pm

#14 Doug Rowat on 08.26.17 at 5:52 pm

Is that how you felt last year when Canada smoked the US market? And you may not agree with our favourable view of Canada, but it sounds like you’re abandoning our market completely. This is not wise. Or are you never wrong?

–Doug

——————————–
Wrong/right in investing depends on the time interval chosen. One year is not relevant in mine.

Canadian market is too small and irrelevant to justify significant portfolio exposure. It contradicts the very idea of diversification.

Thinking about it: Why would you put 20 % of your portfolio in a country that represents 2 % of world GDP and is not growing?

We are experiencing peak validations of everything in Canada due to retarted policies.

Canadian financial elite and policies are very outdated, extortionist, sometimes outright stupid. Look at the latest finance ministers, BOC and CMHC leadership.

I have absolutely in trust in them. Would I trust my money to economy driven by such ‘leaders’?
Absolutely no.

The only think I can consider is shorting Canadian broad markets in Euro, mid to long term.

——————————–

#15 Renting sucks, but we’re doing it anyway on 08.26.17 at 5:54 pm

You are wasting your time and that of your family, allowing to be ruled and owned by corrupted, stupid and backwards, openly retarded, globally irrelevant local financial elite whose idea of economy is to hook you up to the eyeballs on cheap credit and then beat you up to pay it back.

They have no idea how to encourage innovation, smart investments, they just want to milk the herd that they own without feeding it.

#28 bigtowne on 08.26.17 at 8:48 pm

How do you unleash your inner hero as a Canadian when every cell in our being screams: NO; No; NO….when all you need to do is buy; buy; buy in the moment when the market is cratering like an avalanche out in the Kooteneys we must squelch the inner coward and heel that SJW and binge like there is no tomorrow. As Garth says: grow a set.(He is such a dear).

#29 Doug Rowat on 08.26.17 at 8:58 pm

#25 Yanniel on 08.26.17 at 8:20 pm
Hi Doug.

In previous posts you guys explained that in the US case, small/mid caps do better than large caps when coming out of of a recession. Is that the case for Canada as well?

Canada was temporarily in recession in 2015, and it was just recently that the BoC began cheering for our economy. Given this, I would think we are in the early stages of economic expansion and if we are like the US, then this would be a good moment to overweight Canadian small/mid caps. Does this make sense?

Your wisdom is greatly appreciated.

Yanniel.

This would be the case if we had more traction from the oil price. Stick with broad-based Canada for now. For instance, Canadian banks are very profitable at the moment.

–Doug

#30 John in Mtl on 08.26.17 at 9:11 pm

So here I am, with a good 5-figure nest egg currently just parked in my online brokerage account, making 0… I’ve been on the sidelines since I opened the trading account about 6 months ago, wholly undecided as to when to “jump in” and purchase according to one of the Canadian Portfolio Manager example portfolios (VCN 20%, XUU 20%, XEF 15%, XEC 5%, ZAG 40%).

As an example of why I still haven’t done anything: I’ve been watching the S&P500 and the TSX, all they are doing is bobbing slightly up and down. I figure I wouldn’t have made, nor lost, any money in the last 6 months. Yes, sounds like I’m trying to time the market. When I look at what happened in the past, I clearly see that for many ETF’s, the best time to purchase was around january 2016. Alas, I missed the boat.

So basically my question to you Mr Rowat (and blog Dawgs): is this still a good time to invest, or should I wait around some more? My time horizon is about 10 years, at which time I’ll slowly start winding the whole thing down over another 10-20 years. Currently there are lots of indicators that seem to scream “wait until october-november” because Trump, NAFTA, US Debt ceiling debate, trafficked economic statistics, etc.

Thank you ;)

#31 Gravy Train on 08.26.17 at 9:15 pm

#22 InvestorsFriend on 08.26.17 at 7:52 pm

“What was your point there?”

There are two points actually:
—that P/B is a useful metric (according to Warren Buffett and Doug Rowat).
—that if the P/B ratio of BHI falls to 1.1 or thereabouts, get in there and start buying BHI stock like there’s no tomorrow; because, if you don’t, BHI will likely reacquire the issued stock as treasury stock! :)

#32 tccontrarian on 08.26.17 at 9:24 pm

Two comments:
FIRST
“We’re not denying that North Korea is unpredictable and presents a real danger to the world, but North Korea has a very primitive nuclear arsenal with perhaps only 30 warheads. Compare this to the US with a very sophisticated arsenal of more than 4,000.”
——————————————-
From this little factoid alone (apart from the real tragedies in Iraq, Libya, Syria, Afganistan, etc), I’d say that the US is a FAR bigger threat to world peace.

SECOND, you say this:
“The US market does typically trade at a P/B premium to Canada, but currently that premium is almost 3x its historical average! Canada, in our view, is offering compelling value.”
——————————————–
I agree whole-heartedly, and I’m loaded up with Energy/commodity related assets (along with being short the US market, mostly the FAANGs).
Which supports the main point and the ONLY way to outperform the market: “timing is everything!” I don’t mean the day-to-day fluctuations – I mean the BIG trends.

TCC

#33 ANON on 08.26.17 at 9:24 pm

#1 Party on Garth on 08.26.17 at 3:17 pm
Latest household credit numbers for Canada (to the end of July, 2017) from the Bank of Canada

Thank you for the links. To sum up, that would be 4 trillions (four thousand billions, i.e. 4,000,000,000,000) and change in total promises (private, cannot be printed as cute IOUs you can swap for tuna cans legally).
Compared to 70 billions (seventy i.e 70,000,000,000) and change in circulation (public, accepted for tuna cans, beans, and stuff). Nothing to worry about, eh?

#34 crowdedelevatorfartz on 08.26.17 at 9:44 pm

@#15 Renting Sucks but……..

Possibly one of the best summations of why people should rent I have read on this blog in years…………..
Well done.

#35 crowdedelevatorfartz on 08.26.17 at 9:54 pm

@#16 Renting Sux, House renting Tactix

You should start a ‘House renting “Flip Flop” Blog like
The Flopster House sales info.

Methinks there’s gonna be a ton of renters in the next few years……and unrented, empty houses, going up in flames a la the early 1980’s

#36 Ace Goodheart on 08.26.17 at 9:57 pm

“Unsurprisingly, it was North Korea that backed down first, quickly toning down its Guam threat.”

Very much so. North Korea is China’s puppy dog. The Chinese let so much off the leash, let North Korea run around a bit, then when it misbehaves, they pull it back to heel.

The Chinese want a global conflict about as much as they want a pandemic. They already control trade in their area and have their fingers in the rest of the world too. They tolerate North Korea because it acts as a buffer (and a very good distraction) between China and the US controlled South Korea. Get rid of North Korea’s nutty unpredictability (controlled of course by the Chinese) and people start noticing all the weird things that China is up to.

Right now we all say “well the Chinese have reigned in North Korea, they are heroes”. That is the way the Chinese want it. Politics of mass distraction. Nothing better than a mostly impotent bogey man to take people’s minds off what matters.

#37 LS in Arbutus on 08.26.17 at 10:13 pm

Heh FLOP. Nice pink snow on the Burnaby place. As nice as it is to make $$ in this market, must be even more not nice to lose $100+. And more to come.

I’ve been tracking all the listings in the following west side ‘hoods, Dunbar, Point Grey, Arbutus and Mackenzie Heights for about a month now.

I can’t tell what’s selling vs. what’s being de-listed, but sometimes I can tell because @Huthcyman posts the sales on Twitter.

Here’s what I see. I see very few sales/delists. So MOI is massive. I also see the only thing actually delisting (and probably selling) are those properties where they are asking approx 85% – 90% of assessed.

Now what are they actually selling for, not sure, but they’re NOT selling over assessed. The few sales I do see are below assessed, many at 90% or so of assessed.

I see a ton of properties in all of the above areas bought within the three years. For Dunbar’s 90 listings

11 listings (12%) bought in 2014
20 listings (22%) bought in 2015
11 listings (12%) bought in 2016
48 listings (54%) sometime before.
90 listings total

So in summary almost 50% of the listings were bought within the last 3 years….. many at risk for a loss and most lucky if they make a bit.

It continues to be a slow melt, until it’s not….. although 10% loss on 2016 sale of $3 million = $300k, + $150k in transx costs = $450k loss. *That’s* gotta hurt.

#38 Gordon Gecko on 08.26.17 at 10:26 pm

I would never invest in Canada. Just my opinion and my opinion only but it’s what I believe. We don’t make anything in Canada other than houses and condos. We dig some dirt in Alberta and kill trees and wild animals in BC and Ontario. canadians are just too dumb or maybe lazy to make anything complex or technological. Sad, really. The PM takes selfies of his bumhole and feet and posts those on Instagram though. That HAS to count for something!

#39 Gordon Gecko on 08.26.17 at 10:37 pm

Nortel, Bombardier (aka corruption crown corp), Valeant, BlackBerry, Home Capital Group are wonderful Canadian gems. I strongly suggest investing in them

#40 Smoking Man on 08.26.17 at 10:40 pm

Jet flight into the night, my home is now out of sight.
The adventures ahead all dreamed in my head.
I have no home but the world I roam.
Will I find what’s missing or just end up kissing.
Something wrong with being strong.
Weak now just like cow.
I must find god to get the nod.
Flying cowboy is such a sad boy.

Poetry has potential my dogs.

Great post Doug.

#41 Long-Time Lurker on 08.26.17 at 10:42 pm

#30 John in Mtl on 08.26.17 at 9:11 pm
So here I am, with a good 5-figure nest egg currently just parked in my online brokerage account, making 0. I’ve been on the sidelines since I opened the trading account about 6 months ago, wholly undecided as to when to “jump in” and purchase according to one of the Canadian Portfolio Manager example portfolios (VCN 20%, XUU 20%, XEF 15%, XEC 5%, ZAG 40%).

As an example of why I still haven’t done anything: I’ve been watching the S&P500 and the TSX, all they are doing is bobbing slightly up and down. I figure I wouldn’t have made, nor lost, any money in the last 6 months. Yes, sounds like I’m trying to time the market. When I look at what happened in the past, I clearly see that for many ETF’s, the best time to purchase was around january 2016. Alas, I missed the boat.

So basically my question to you Mr Rowat (and blog Dawgs): is this still a good time to invest, or should I wait around some more? My time horizon is about 10 years, at which time I’ll slowly start winding the whole thing down over another 10-20 years. Currently there are lots of indicators that seem to scream “wait until october-november” because Trump, NAFTA, US Debt ceiling debate, trafficked economic statistics, etc.

Thank you ;)

You don’t win any games sitting on the sidelines. Look up Garth’s older posts to figure out a good balanced diversified portfolio for the current situation. If you’re not going with a balanced and diversified portfolio you need to do a lot of research before constructing your portfolio. You could easily be taking on too much risk. Read up on Garth’s diversified portfolio posts and Ryan Lewenza’s balanced and diversified portfolio weekend post. Doug’s articles as well when they interest you for financial education.

You’re going to have to adjust the percentages in this list. Turner Investments lightened up on US holdings. Everything is overvalued there, right now.

#138 Jesse Wierz on 03.21.17 at 2:19 pm
Sample Garthfolio?

ZAG 7% (federal bond etf)
ZPL 7% (provincial bond etf)
ZHY 16% (US corporate bond etf)
ZPR 20% (preferred share etf)

VTI 20% (Total market etf in US$)
VCN 15% (Canada equity etf)
VRE 5% (Canada REIT)
VXC 20% (World ex-canada equity etf)

The correct US weighting is about 20%, of which 13% will be the last 500 US corporations.

Yes, Disney is included. — Garth

#27 Martha on 03.23.17 at 7:13 pm
Newbie’s DIY sample Garthfolio. Lookin’ for feedback in all the wrong places. Pleeeeeeeze and thanks.

XIU – 16% Cdn equity
ZRE 5% Cdn REITs
21% Total Cdn Equity

VTI 13% US equity (USD)
VBR 6% US small-cap (USD)
19% Total US Equity

XEF 16% Itn’l Equity
VEE 3% Emerging markets
19% Total Itn’l Equity

ZFS 6% Gov’t bonds
CBO 8% Corp bonds
VSB 9% Short-return bonds
XPF 18% Preferreds
41% Total Fixed Income

I thought I might add that there’s a possible US-Red China trade war starting in the fall as Trump leans on Xi to get wacky Kim in line.

#42 Ian on 08.26.17 at 10:48 pm

Doug, I think it is erroneous to say that because the US v Canada P/B has widened, Canada offers value.

US has had an eight year bull, and now has the same p/e valuation as 1929 pre Great Deprrssion. So all that relative valuation is saying is, US is insanely overvalued and Canada less so.

If US equities start tanking, Canada will follow. Also, our bank stocks will not do well as this housing donkey show continues.

#43 Tony on 08.26.17 at 10:50 pm

Re: #25 Yanniel on 08.26.17 at 8:20 pm

The early stages of contraction so hedge the market and buy utilities.

#44 Smoking Man on 08.26.17 at 11:00 pm

Trying alcoholism to foster creativity is a good thing sometimes, when it’s part time it’s golden.
Never go full time. Just saying.

Just type fast because this bitch destroys your ability to type fast. It’s will over madness and I give no fs any more.

Stay in school learn your pronouns, big banks will welcome you with open arms with shit rates now that tfw are made cool by T2

Jack Daniels and the truth you will all find at the bottom of the bottle. Never share it unless you know how to kill it at forex.

#45 Doug Rowat on 08.26.17 at 11:11 pm

#40 Smoking Man on 08.26.17 at 10:40 pm
Jet flight into the night, my home is now out of sight.
The adventures ahead all dreamed in my head.
I have no home but the world I roam.
Will I find what’s missing or just end up kissing.
Something wrong with being strong.
Weak now just like cow.
I must find god to get the nod.
Flying cowboy is such a sad boy.

Poetry has potential my dogs.

Great post Doug.

What a great way to go into the Mayweather / McGregor fight!

–Doug

#46 For those about to flop... on 08.26.17 at 11:14 pm

Hey LS ,the reason I gave you a shout out is because when anyone helps me with a case I write where I got the information from when I catalogue it and give a little credit back when posting the information as I wanted to encourage people to share information on here and not be bystanders.

Anyway , I like how you broke down the Dunbar area ,I do a similar thing when I do a session and call it my Motivated Sellers Index and ever since February it has constantly been above 30% of the reduced listings that were purchased in the last 3 years.

Also on your last point ,I just featured a luxury condo that at first glance the numbers didn’t look so bad but after you factored in expenses it was a 300k loss just because of the price point involved.

Enjoy the rest of your weekend.

That goes for the rest of you guys as well…

M43BC

#47 Mark on 08.26.17 at 11:57 pm

The spread in favour of the S&P500 is even more bizarre by the fact that the Canadian index is chock-full of companies that respond much better to higher interest rates and a rising long-term rate environment, than the US index which absolutely loves falling rates and rising consumer credit.

In other words, the TSX may very well be the buy of the decade, if not the next generation, while the S&P500 is ripe for selling at such premium valuations.

Of course, keep a balanced portfolio as “the market can remain irrational longer than you can remain solvent”, but happer times should be coming to TSX investors soon.

#48 Frank on 08.27.17 at 12:06 am

On #39 Gordon Gecko. You know nothing about Valeant It is selling for 2.5x the cash it produces in a year, the last year it consumed cash was 2009 (only for 1 year), and yes they have a big debt they’ve been paying off.

Our blog wizards, pay the 24K annual fee for the Bloomberg terminal, to tell us that the P/B here is lower than the US. Of course, the two indexes have a vastly different mix of industries. And yes, the US market is mostly overpriced and will come down.

Buying bond or preferred share ETFs is dead money. You lose over 15+ year periods relative to equity portfolios. Its enough of a challenge to stay ahead of taxes and inflation with equities. Value ETFs or selected equities, allow you to avoid the inflated company valuations.

#49 Ponzius Pilatus on 08.27.17 at 12:34 am

Doug,
Are you watching the fight?
Can you keep us up to date.
Apparenltly, PPV is 100 bucks.
Too rich for me.
Thanks

#50 PGer on 08.27.17 at 12:35 am

Great post, Doug. I find that people always talk about timing the markets. They are not true investors. Invest in good companies, do your DD, and you will likely do very well, over the long run.

Or you can be a total chicken$h!t and sit on the sidelines forever. That is a guarantee for failure.

#51 Frank on 08.27.17 at 12:42 am

ETFs of Canadian traded companies will be concentrated in resources, or banking. Banking will be challenged, and oil use is declining long term. The tar sands are the highest cost land based producer, and remote from their market.

There are a few attractive companies, maybe you could find 10 to 15 total mostly small. But buried in any ETF.

#52 Oft deleted much maligned stock picker on 08.27.17 at 12:44 am

Ryan…..as long as we have continued piling on of political uncertainty in Canada it won’t matter a twig what the PB premium is south of the border. Canada is experiencing historic capital flight……this based on hard facts investors are facing….an anti buisness agenda on every level of government. Canada can fall to half or less it’s technical markers and no investor will care when we have a Peter Pan puppet dangling on the fingers of a US sponsored attack on Trump using Canada’s political capital. Gerald Butts and others don’t understand the nature of flattery……Canada is being used by American liberal forces to thwart the Trump agenda in the global media……outliers like Gore, Biden, Obama, Clinton…etc…..who finance the ‘resistance campaign’ …strictly a media event with actors being bussed in for every event….they…don’t give a crap about the employment outcomes in Canada. But…..Trudeau is just a puppy and he’s bowled over with kisses from false friends. How long can Canada fake employment numbers by cutting off unemployment cheques and hiring religious immigrants fast tracked straight to the voting booth. Government work is a drag… a loss….creates no capital……a hornswoggle. Businesses are running….not walking out of Xanadu because of Luddites and socialists …..that can only increase taxation on those that are left….look to the Calgary example of a ghost town crater in downtown trebling taxes on peripheral businesses.

#53 Not be in miss dividends on 08.27.17 at 12:51 am

@John in Mtl
Not being in for 9 months misses 9 months of dividends.
Think of owning an asset that pays you something every month/quarter. Cant beat that.

#54 Mark on 08.27.17 at 12:59 am

“. In the case of Berkshire, as with most financial companies, it is not too far off.”

Berkshire is heavily into insurance and FIRE. These companies should trade at a substantial discount to book going into a rising interest rate environment due to the secular headwinds that such an environment faces.

Warren Buffet may very well buy back shares, but buying back shares in investments that may trade beneath book for a generation and destroy value, in and of itself, can destroy value.

Buffet basically admitted, through his hatred of gold and related equities as investments, that he does not run a balanced portfolio. His form of unbalance has served him well for his era, but its not a given that it will serve him (or his heirs) well going forward.

#55 MF on 08.27.17 at 1:09 am

#30 John in Mtl on 08.26.17 at 9:11 pm

Been there. Done that.

My advice which some might not like is wait until the market corrects to jump in with the balanced strategy. The last year has been rare in the sense that we have not had any volatility, but it will return. It always does.

I jumped in with a balanced portfolio right before the oil collapse and instantly watched my savings/worth go lower and lower. As a new investor this will wear you down. Now I have a hard time buying anything.

MF

#56 BC_Doc on 08.27.17 at 1:44 am

Good column today @Doug.

I find the concept of Reversion to the Mean helpful in tempering my expectations. On average, stocks (US, Canada) historically return 9-9.5% per year including divies over the long-term. US stocks have killed it since March 2009– based on RTM, I’d be surprised if the slope continues up over the next few years. Flat or down-slopey are more likely in the cards. Comparatively, the TSX has kind of sucked (divies OK, capital gains not much happening…). Based on RTM, I won’t be surprised if the TSX makes a nice run up in the next few years. Risks/hazards? TSX is sector heavy/undiversified. That may be where the risk premium comes from.

Cheers,

BC Doc

#57 Chaddywack on 08.27.17 at 2:29 am

@Flop and LS

I think you guys are golden. I mean really, we need these sources of information to confirm the misinformation that is being perpetuated by the main TV networks and news feeds that just regurgitate RE Board franken numbers.

Why doesn’t flop take the East Side and LS take the West Side and start a collaborative gig. It’s nice to see some truth out there.

More and more I’m thinking that this YVR party is over. Now why houses in the worst part of Surrey are selling for over $1M (that I highlighted yesterday) is a mystery that I don’t think we’ll ever solve even with all the wise minds together on this site!

#58 Renting sucks... on 08.27.17 at 2:34 am

Re #34, #35: thanks Crowded!

Then it was worth writing :-)

Cute idea re rental price adjustment blog – some are simply absurd!

#59 bdwy sktrn on 08.27.17 at 3:52 am

hey flop i looked up the one in rmd,and the two in east van.

nothing to see here. apparently not sold.

camelot 4.8 sold

there u go.

#60 Nick on 08.27.17 at 5:38 am

Re: #15 Renting sucks, but we’re doing it anyway

Thank you for the excellent write up, but as I read your posts in their entirety it makes me super thankful for buying my house in 2004, paying it off and buying a bigger one in 2009 (also paying it off).

London is a very different market, with home values historically being reasonable with a modest 3-4% increase. The last 12 months have been nuts, and there were crazy bidding wars (50-125k over asking on 300-800k homes), but things are settling. We are still far from a decline in prices, homes selling within 4-5 days if priced accordingly (albeit still way higher than last year).

Reading your sentiments makes me feel great to own my house having two kids (same age as yours) and not being held hostage by the rental market. I can’t imagine the stress and family instability of constantly living under the gun of someone else’s whim to sell or move back in.

Good luck on your quest of being a SJW for rent fairness and trying to rein in the bitterness of not buying 8 years ago when you had the chance to achieve accommodation stability for your family. Life isn’t only about numbers, peace of mind has a value, and I sleep very well at night not having to fight those fights.

#61 Wrk.dover on 08.27.17 at 7:36 am

One can interpret from the gist of the comments over time that Canadians with actual money are chickening out and investing across borders, while those with higher value currencies are swooping in to buy the fire sale, at an advantage discount.

Nothing new either, been going on since…Mulroney?

Are we serfs yet? Soon.

#62 Wrk.dover on 08.27.17 at 7:42 am

#15 Renting sucks, but we’re doing it anyway on 08.26.17 at 5:54 pm

———————————————

The bane of your existence is middle class accumulation.

Too much stuff. I get the rooms full of kid related plastic and textile, but the rest of it should be culled.

#63 James MF on 08.27.17 at 8:30 am

While the daily issues continue to dwell on real estate I find myself increasingly looking forward to the weekend edition. Another solid instalment, Doug.

As much as I enjoy these discussions on fundamentals, I would love to hear your views on tilting portfolios green/clean in a future post (because I’m a millennial), like through SRI/ESG ETFs or cutting out certain sectors (oil/mining).

#64 Renter's Revenge! on 08.27.17 at 8:43 am

#15 Renting sucks, but we’re doing it anyway on 08.26.17 at 5:54 pm
Re recent discussions here about how to get wives on board with renting instead of buying: I’m a wife and mother of two elementary-aged kids, and I insist that we keep renting! How did I get to this point? Well, basic math.

Wow! Ask and ye shall receive, eh? That was quite the post! But that’s all men really want from women: basic math skills instead of emotional arguments and insults. It sounds like you’re really trying to do the best thing for your family, and I applaud that. Unfortunately the market is staying irrational longer than you expected, and despite your best efforts, things are not working out the way you planned. But by making rational decisions, you are securing your family’s financial future. Don’t get discouraged, and don’t be so hard on yourself. You need to stay positive. Fight fire with fire. Think of it this way. The rent you’re paying on those houses is probably less than upkeep (all costs excluding the mortgage)! Take the money you’re saving by not buying and invest it in things of higher value (i.e. higher expected future returns). Eventually you will own a house, and probably sooner than people who are taking out mortgages at current, inflated prices. The other thing I would suggest is renting from professional landlords in places with rent control so you aren’t subject to the whims of amateur “investors”. Good job and thanks for the post!

#65 Livin Large on 08.27.17 at 8:45 am

Doug, isn’t your reaction to the US premium P/B ratio just recency bias as well?

The historically high 3x variance suggests to me that the US market is excessively goosed rather than indicating any reason for faith in the CDN markets. What does that ratio look like for other markets? Are those other markets also showing historically high P/B ratios to the Canadian ratio?

So, should the US market exposure be reduced in favor of other global markets rather than increasing CDN exposure?

Also, is the current CDN P/B ratio historically high or average?

#66 Shawn on 08.27.17 at 8:53 am

The current narrative is that the S&P500 is “expensive” relative to developed international and emerging markets. In 2007 the US was undervalued relative to those markets. While most investors see valuation as a lagging indicator and is the result of a prior price move, it is actually a leading indicator and is forecasting future economic events / expansion.

The current valuation leadership in the S&P500 is likely signaling the beginning of a long term uptrend in global equity markets with continued US leadership.

#67 BillyBob on 08.27.17 at 8:56 am

#60 Nick on 08.27.17 at 5:38 am
Re: #15 Renting sucks, but we’re doing it anyway

Thank you for the excellent write up, but as I read your posts in their entirety it makes me super thankful for buying my house in 2004, paying it off and buying a bigger one in 2009 (also paying it off).

London is a very different market, with home values historically being reasonable with a modest 3-4% increase. The last 12 months have been nuts, and there were crazy bidding wars (50-125k over asking on 300-800k homes), but things are settling. We are still far from a decline in prices, homes selling within 4-5 days if priced accordingly (albeit still way higher than last year).

Reading your sentiments makes me feel great to own my house having two kids (same age as yours) and not being held hostage by the rental market. I can’t imagine the stress and family instability of constantly living under the gun of someone else’s whim to sell or move back in.

Good luck on your quest of being a SJW for rent fairness and trying to rein in the bitterness of not buying 8 years ago when you had the chance to achieve accommodation stability for your family. Life isn’t only about numbers, peace of mind has a value, and I sleep very well at night not having to fight those fights.

===================================

Ahhhh…the Canadian dream. To avoid risk at all costs in order to achieve a life of mediocrity.

Then congratulate themselves about it publicly.

lol

#68 Shawn on 08.27.17 at 9:10 am

The market has assigned a low valuation for the TSX because it is forecasting longer term future underperformance relative to the S&P500. Underperformance may not occur every year, however it’s likely for the long term duration of the current secular bull market that could run into the 2030s.

#69 Shawn on 08.27.17 at 9:21 am

If you want to know where the global economy is going, follow the Nasdaq. It is the global leading index. The tech crash in 2000 forcasted a new secular bear market for global equities. The Nasdaq leadership since 2009 marked a major low for global equities last observed in 1975. 2016 was further confirmation of a global secular bull market. When the Nasdaq turns down and enters a bear market, the next recession will occur.

#70 what is historical? on 08.27.17 at 9:22 am

ya.. what #65 said.. and your chart is only from 2008 period. why not go back historically for the last 40 years to compare? your claim is based only on the last few years.
not much proof at all.

#71 Shawn on 08.27.17 at 9:35 am

Valuation is an indicator for indexes much the same way it is for individual securities. AMZN has been overvalued by conventional metrics for a over a decade yet has outperformed the index dramatically during this time period. GOOGL, FB, TSLA, AAPL, NFLX, PYPL, PCLN, CRM and AVGO were all considered to be “overvalued” prior to their biggest price moves.

Overvaluation by conventional metrics is what has kept most investors out of leading stocks and indexes and in lagging or “safer” stocks and indexes. Canadian banks are “cheap” currently because the market is forecasting weaker earnings ahead. The TSX is cheap currently because the market is forecasting a weaker earnings relative to the S&P500.

#72 Gravy Train on 08.27.17 at 9:47 am

#55 MF on 08.27.17 at 1:09 am

“I jumped in with a balanced portfolio right before the oil collapse and instantly watched my savings/worth go lower and lower.”

Did you stay invested? Or did you sell off at or near the bottom of the market? You’d have doubled your money over the last five years had you invested in any U.S. index fund! Hindsight’s 20/20, eh? :)
http://funds.rbcgam.com/pdf/fund-pages/monthly/rbf557_e.pdf

#73 Reality 1 on 08.27.17 at 9:55 am

to #55 MF

Your self stated stated sub-optimal investment performance reveals some faulty / bad analysis on your part, does it not ?

Perhaps it is time to revisit / rethink your analysis of the Canadian real estate market in view of your past financial mistakes / miscalculations.

There is no crime in being wrong, but it’s in staying wrong that the real crime occurs – usually stealing from your wealth !

Good investors reassess when new information comes to light or the investment context changes materially. They are always willing to revisit their investment thesis and often do.

#74 re., Renter's Revenge! on 08.27.17 at 9:58 am

you obsessed?

some people like to own a home. Done. They pay the bank at the end of the month. You pay the home owner.

it’s all good

#75 Doug Rowat on 08.27.17 at 10:01 am

#65 Livin Large on 08.27.17 at 8:45 am

Doug, isn’t your reaction to the US premium P/B ratio just recency bias as well?

The historically high 3x variance suggests to me that the US market is excessively goosed rather than indicating any reason for faith in the CDN markets.

The full case for Canada has been made in other blog posts. P/B is one of many factors. Trudeau’s devilish handsomeness would be another.

–Doug

#76 Doug Rowat on 08.27.17 at 10:11 am

#70 what is historical? on 08.27.17 at 9:22 am

ya.. what #65 said.. and your chart is only from 2008 period. why not go back historically for the last 40 years to compare? your claim is based only on the last few years.
not much proof at all.

Or you could research the past 40 years yourself and prove me wrong. Put some effort into it.

–Doug

#77 Ponzius Pilatus on 08.27.17 at 10:16 am

#69 Shawn on 08.27.17 at 9:21 am
If you want to know where the global economy is going, follow the Nasdaq. It is the global leading index. The tech crash in 2000 forcasted a new secular bear market for global equities. The Nasdaq leadership since 2009 marked a major low for global equities last observed in 1975. 2016 was further confirmation of a global secular bull market. When the Nasdaq turns down and enters a bear market, the next recession will occur.
————–
Kinda makes sense.

#78 For those about to flop... on 08.27.17 at 10:24 am

am
hey flop i looked up the one in rmd,and the two in east van.

nothing to see here. apparently not sold.

camelot 4.8 sold

there u go.

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

Hey Broadway,what did you think of the fight?
Worth coming back to town for?
I betrayed Thor Turner and “watched ” it unfold on the Sports Illustrated blog ,hopefully he will take me back.

Anyway,I am surprised no price for the Richmond house as it is still coming up as sold on the zolo link.

https://www.zolo.ca/richmond-real-estate/9551-palmer-road

As far as the two in your hood , they are in tough,especially the one on Venables been trying to get just what they paid for it for months and months and still no takers.

The one that you did manage to get a price for called Camelot,they paid 4.6 and got 4.8 and so another one where the sold is higher but they might have lost 40/50k or so depending on unknown expenses.

I think they done pretty well still as I said in the original post not many deals are getting done in this price bracket and buyers have plenty of choice to try to lowball someone who got carried away in 2016.

If you are sticking to your plan and going back to the island,then have a good time.

I think you are a fool for not wanting to spend as much quality time with all the pissed off people in Vancouver…

M43BC

#79 canadian investing on 08.27.17 at 10:38 am

thanks for the read Doug

Personally my % of portfolio in Canada is way way lower than that of the average Canadian. No home bias for me.

The amount I do have is largely in our non registered account. Our govt provides tax advantages to invest in our country, so i do

Just don’t see the rationale to plug 20-30% of our portfolio in a country who’s index is largely banks/commodities.

#80 NoName on 08.27.17 at 10:43 am

@ Flop

Yesterday i was it my uncle place in buffalo, played song few time on cell couldn’t recall it, probably R3COH was interfering with memory, could recall it.
But i recall wife grumbling about roaming charges, now that memory is somewhat restored i do remember video and song watching on mtv at my friend’s cable, cable and running water was to hi tech for place i lived in…

#81 };-) on 08.27.17 at 11:00 am

#65 rock paper scissors on 08.25.17 at 8:02 pm

No major currencies are backed by rocks. — Garth

They are backed by paper. And scissors. To make more paper to keep on rocking. Most recently all virtualized.

They are backed by the state’s absolute power to tax. — Garth

They are backed by debt financing – bonds. When their credit sucks their ability to borrow (sell bonds) is diminished and interest rates must rise to reflect the risk. It’s a global fiscal Ponzi scheme. Economics is the backstory of all history – our paradigm. We departed the gold standard because it inhibited our ability to manipulate this ultimately unsustainable Ponzi scheme.

#82 Spectacle on 08.27.17 at 11:07 am

#62 Wrk.dover on 08.27.17 at 7:42 am
#15 Renting sucks, but we’re doing it anyway on 08.26.17 at 5:54 pm

———————————————

The bane of your existence is middle class accumulation.

Too much stuff. I get the rooms full of kid related plastic and textile, but the rest of it should be culled.
————————– : ) ————————–
Hey new poster ( loved the novel you write here ). Both of your comments are what I’m living now to a degree. Anybody want to buy a coffe maker? Yes, I probably have it…ugh….stuff. Too much stuff , got an amazing toddler much late in life. Buckets of plastic trucks etc.

I’d like to add a layman interpretation to the concept of P/B Price to Book. What is the falling value of something: the price of used cars, or furniture. Notice that IKEA is holding sales events or Offers as incentives.

Also so many cars begging for lease takeovers , to say nothing about the amazing vintage collector cars coming onto the market at amazing prices. Try vintage trucks craigslist vancouver: show drivers, at cost of paint and the drivetrain! Seriously ouch!

Would not want to be in the furniture biz now, nobody can afford to fill their “box” with new attire. The economic market wants its toys back.

If tipping is good, that’s my tip of the day Dogs. Price to Book on “stuff” is getting slashed . Including Homes. Really have a Great deal currently on a condo rent, but would like to “move up” in market ( bigger stuff) , while paying less than “current rental book value” for it down the road as baby needs space & appropriate school.
Big long blog post ; ).

#83 InvestorsFriend on 08.27.17 at 11:31 am

Doug, Please Confirm His Bias

#63 James MF on 08.27.17 at 8:30 am said / asked:

As much as I enjoy these discussions on fundamentals, I would love to hear your views on tilting portfolios green/clean in a future post (because I’m a millennial), like through SRI/ESG ETFs or cutting out certain sectors (oil/mining).

******************************
A nice illustration of how almost everyone loves to read things that agree with their current positions. James already favors the green approach to investing and would love Doug to bless his existing approach.

We all tend to suffer from confirmation bias and even lash out against counter views. Trump and “fake news” and “main stream media” are notorious examples.

Once in a while we all need to consider the other side of an argument. We don’t have time to do that on most occasions, but once in a while…

#84 joblo on 08.27.17 at 11:59 am

#4 Stan Broock on 08.26.17 at 3:51 pm

A simple question: who will buy these stocks that will have to be sold in the future by Baby boomers?
Answer: No one.

Old Stock will sell to New Canadians.

#85 crowdedelevatorfartz on 08.27.17 at 12:16 pm

@#67 BillyBoob
“Ahhhh…the Canadian dream. To avoid risk at all costs in order to achieve a life of mediocrity.
Then congratulate themselves about it publicly.
lol”

*******
Dear Billy Bob, Please regale us with your sumptuous lifestyle devoid of medocrity.
One can only imagine days filled with intellectually stimulating endeavours like frog hunts, catfishin’, razorback hawg huntin and all them there other such stuff. ( insert obligatory inane laughter here) lol lol lol

Rednecks.
Proof that inbreeding isn’t just a problem for show dog kennels.

#86 Smoking Man on 08.27.17 at 12:19 pm

Black listed on bay street, and wall street. My crime openly supporting trump and exposing globalist thugs.

My lulu rank is 8000 which is pretty damn good considering most copies bought on Amazon, Lulu has millions apon millions of book titles for sale.

Between selling afew books, office automation services for small business and a bit of forex I’m going to make it.

The icing on the cake, I don’t have to keep my mouth shut for fear of losing a job. It’s freedom.

Remarkable feet in this world of madness. T2 I know you’re coming for me. I’m almost ready. One more road trip.

The big road trip starts on Thursday. I’ll be live parascoping the interesting parts of the trip. I’ll try and do one sobar so my fans can see I’m not as crazy as Jack makes me.

Happy Sunday everyone. Again great info on your post Doug like how you pointed out the CAD equities vs US.

#87 Art on 08.27.17 at 12:20 pm

Hello Blog Dogs,

My portfolio has vcn, can, vxc and vun. As it gets bigger I am having a hard time rebalancing or even understanding if my initial % were correct in the first place.

I have fun in unregistered, vxc and see in TFSA, vin in RRSP and it’s american variant in USD in my LIRA.

The more I read about the different options the Moten I realize how clueless I am. Do I envest more in tsx? Less? In what container?

Considering contacting me Turner and his pack of snarling bloodhounds – does anyone have any experience getting your portfolio looked at by them?

#88 Wrk.dover on 08.27.17 at 12:29 pm

#82 Spectacle on 08.27.17 at 11:07 am

All you ever needed to make coffee with was the basket that holds the paper filter above your mug.

A lot of homes contents, are not worth the price of the content insurance, if those contents were all out at the side of the road in a yard sale.

Furniture business has been hooped for decades. That was my forte.

Old cars and Harley’s are for old boomers. When the boomers are gone, the value of the cars and HD’s will be gone. Glad my fleet of old cars and vans are just top shape low value drivers to begin with. I have no money tied up in the desirability factor. Except for one global cult car.

#89 Dissident on 08.27.17 at 12:44 pm

#67 BillyBob on 08.27.17 at 8:56 am

LOL ain’t that the truth tho? My sister was defending herself the other day saying, “I don’t care what people think. I’m average, and I’m loving it!”

Mind you, I have to give her credit where credit is due; she’s a better saver than I have ever been and stretches her dollar and now owns a house (bought in 2015, before it went nuts) thanks to a nice profit margin made from a 3-bedroom preconstruction condo (aka a unicorn) bought in 2007, occupied in 2010, that sold for just under twice the paper value.

What I’ve learned, being a two-time purchaser, is that real estate is a game where you gotta price in your profit margins, the time it takes to acquire or sell something, and the best ‘path’ upwards. People who realize this path, and realize that sometimes it takes numerous, incremental, unconventional moves to get where you want to be, will probably get there. And that may include selling and getting out of the game entirely until the play conditions are better. Or it will involve time. And all that just to be ‘average’. I know, it baffles my mind too.

#90 rock paper scissors on 08.27.17 at 12:44 pm

#81 };-) on 08.27.17 at 11:00 am

#65 rock paper scissors on 08.25.17 at 8:02 pm

No major currencies are backed by rocks. — Garth

They are backed by paper. And scissors. To make more paper to keep on rocking. Most recently all virtualized.

They are backed by the state’s absolute power to tax. — Garth

They are backed by debt financing – bonds. When their credit sucks their ability to borrow (sell bonds) is diminished and interest rates must rise to reflect the risk. It’s a global fiscal Ponzi scheme. Economics is the backstory of all history – our paradigm. We departed the gold standard because it inhibited our ability to manipulate this ultimately unsustainable Ponzi scheme.

========

Bingo.

#91 Renter's Revenge! on 08.27.17 at 12:53 pm

#74 re., Renter’s Revenge! on 08.27.17 at 9:58 am
“you obsessed?

some people like to own a home. Done. They pay the bank at the end of the month. You pay the home owner.

it’s all good”

I know. First world problems, right?

You are right about me though. I am obsessed. It’s part of my personality to get hopelessly obsessed about things.

But where else can you go to talk about owning vs renting and investing and people respond with more than just blank stares? Lol

#92 Fed-up on 08.27.17 at 1:38 pm

38 Gordon Gecko on 08.26.17 at 10:26 pm
I would never invest in Canada. Just my opinion and my opinion only but it’s what I believe. We don’t make anything in Canada other than houses and condos. We dig some dirt in Alberta and kill trees and wild animals in BC and Ontario. canadians are just too dumb or maybe lazy to make anything complex or technological. Sad, really. The PM takes selfies of his bumhole and feet and posts those on Instagram though. That HAS to count for something!

#39 Gordon Gecko on 08.26.17 at 10:37 pm
Nortel, Bombardier (aka corruption crown corp), Valeant, BlackBerry, Home Capital Group are wonderful Canadian gems. I strongly suggest investing in them.

—————————————————–

Very well said Mr Gecko, love your movies.

We should also point out that Canada’s economy comprises 3.5% of the world’s GDP. Why would you 600% more than that in your portfolio???

#93 Stan Broock on 08.27.17 at 1:54 pm

#92 Fed-up on 08.27.17 at 1:38 pm

We should also point out that Canada’s economy comprises 3.5% of the world’s GDP. Why would you 600% more than that in your portfolio???

This number is grossly overstated.

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

It is around 1.6 % of GDP in nominal terms, 0.7 % in purchasing power (my estimate).

Any allocation above that to a local market that nobody cares about is not logical.

Global markets are US, Eu, UK, Japan, China.
we are noting.

#94 For those about to flop... on 08.27.17 at 1:55 pm

Pink Lemonade in Richmond.

This is another one where all the paperwork doesn’t match up but up she goes because it is back on the market and the assessment site has a recent sale on the books.

Sold in May this year for 2.83 with a soon to be updated assessment that comes in at 2.58.

It looks as if the people before these guys had a bit of trouble getting rid of it but ultimately got a great number and now it is the current owners problem.

These guys will be hoping to avoid the second wave of the Coventry Blitz…

M43BC

4260 Coventry Drive, Richmond

Feb 21:$3,180,000
Aug 23: $3,060,000
Change: – 120000.00 -4%

https://www.zolo.ca/index.php?sarea=4260%20Coventry%20Drive,%20Richmond&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA1WExSQQ==

#95 Stan Broock on 08.27.17 at 2:04 pm

BTW there is very interesting information on the BOC web site.

Very interesting. Look for their Wholesale/non retailer deposits statistics for the big banks in Canada.

Apparently all this credit boom, since 2004, was due to international/mostly US money purchasing the variety of MBSs from Canadian banks backed by government through CMHC.

In the last 10-12 years there is negligible increase in retail deposits at Canadian banks, i.e. Canadian savings

But there is additional 1.2 trillions borrowed from abroad mostly in USD and backed by government, used to finance the credit orgy (non-productive consumption).

Repeat with me:
100 billion + yearly, twice the official national debt in 12 year/i.e. shadow debt, borrowed from abroad to subside consumption. Backed by banks and government (mostly) and you as a taxpayer.

The interest on this alone will be soon 40 + billions yearly. How is that 30 + billion budget deficit looking now? Like crubms.

To pay this back we need trade surplus with US to the tune of 30-40 billions yearly for 30-40 years. We have none of that.

#96 Stan Broock on 08.27.17 at 2:14 pm

Check this out:

http://risk.econ.queensu.ca/wp-content/uploads/2013/10/McKeown-Canadian-Banks-Summary-2016.pdf

Page 40, section Liabilities:
———
Wholesale deposits
1997 2006 2015 2017 estimated (by me)
272.4 677.9 1635.9 1900

This is where you mortgage and other consumer credit (600 billions + ) is coming from, financing from abroad, not Canadian savings.

It has to be returned with interest, folks, it has to be returned with interest….

#97 Victor V on 08.27.17 at 2:28 pm

#13 Victor V on 08.26.17 at 5:27 pm
Real estate sale being described as a “nightmare” in this twitter exchange:

https://twitter.com/madhurakeskar/status/901488193350062081

========================

Looks like they deleted their tweet. Here’s part of the conversation:

https://twitter.com/JohnPasalis/status/901534591391027201

#98 conan on 08.27.17 at 2:37 pm

I am guessing here, but oil should go for a mini bull run, if Houston is out of commission for any length of time.

#99 For those about to flop... on 08.27.17 at 2:38 pm

Pink Lemonade stand in Vancouver.

This one is technically a Possible Pinkie ,but I will give you a run down of the details and we will see if you agree with my decision to include them as a Pink Post at this stage of proceedings.

The person that flipped it to them must still have the grin on their face.

Paid 2.85 in Sept 2016 dwarfing the assessment that comes in at 1.89 or roughly a million below what they paid for a condo built in 1999 when all they had to worry about y2k.

These guys have to worry about how2pay…

M43BC

3201 1331 Alberni Street, Vancouver

Aug 3:$3,688,000
Aug 23: $3,388,000
Change: – 300000.00 -8%

https://www.zolo.ca/vancouver-real-estate/1331-alberni-street/3201

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAwM1BSQw==

#100 Dominoes Lining Up on 08.27.17 at 2:43 pm

While I am not an alt-right conspiracy nut, it is intriguing to see the evidence of why so much distrust of the MSM on display today.

Go check out the websites of the Globe and National Post right now.

Both feature EXACTLY the same front page headline, right down to the punctuation!

“Water ‘is swallowing us up’: Catastrophic floods hit Houston”

http://nationalpost.com/

https://www.theglobeandmail.com/

No time to be original, too few staff, downsizing, no journalistic investigation work, such is the reality of MSM today.

No wonder print and other media have to slant their coverage to encourage real estate ads so often….

#101 Blacksheep on 08.27.17 at 3:22 pm

Renting sucks # 15,

“We will never buy it though, as we will never pay them the $900K they paid, and they’d never accept the $400K we’d estimate the fair market value to be post-bubble (this would be reversion to 2003 prices, which should be about right). And, no, I don’t feel that a 55% price drop is impossible – that’s the level that local incomes support.

I absolutely loathe renting. We both grew up in houses that our parents owned, and we expected to live in property we owned once we moved back to Canada and had kids. (We were in the US and overseas for 8 years, so were fine with renting in those 4 countries).

We are completely oriented to owning – we have our own lawnmower for pete’s sake! Imagine the difficulty and expense of moving a family of four and the contents of a 2500 sqft house with yard. Annually. And we can’t even own a dog – just try to find a series of rentals that allows one.

I’m very cranky about the housing situation in Canada. I’ve tried multiple times to convince my husband that we should move overseas again for a few years while we wait, or at least to the US. (He works for a US company).”
—————————–
This is my opinion and it runs 180 to the group think here but here its is:

We sold our Langley house in spring 2008 because we also thought the RE market was in a bubble based on the US correction and local fundamentals (3x local income) We rented a farm house / acreage for $1350 month for 5.5 years until buying back in Jan/2014.

Why is this relevant to your sich? Because we, just like you and hubby, misread Van’s RE situation and here is why (only my opinion):

1) Vancouver promoted / sold itself to the world, with Expo 86 and then again in 2010 with the Olympics.

2) The assumption on this blog (generalizing) is that the system (Gov) is ‘incompetent’ for the way it has let our housing get crazy expensive, for multiple reasons.

3) Does anyone really believe, the system simply could not, in anyway foresee the out comes of their actions, before they actually occurred? Of course they could.

4) And if the outcomes were not turning out the way the system wanted / planned for, why would it / they not curb RE’s rapid price escalation before its got this elevated? They control the levers and I bet there is a dozen ways to do it.

5) I realized in about 2013, that this is not an out of control situation for the system (Gov). In 2009 I watched as the system jump started RE buying, to stop the deflationary action that had began. (still a visible down leg on RE charts today).

6) The plan I arrived at is simple. Don’t fight the system (like the Fed). Period.

When the system gets serious and starts heavily taxing or eliminating foreign buying or similar actions in Canada, I will see that as a serious attempt at controlling RE values and reassess my personal ownership.

Until then, the system is just letting her rip, only giving lip service (talking down) for the appearance of action (OFSI B-20) to appease the minority 30% who missed the run up and are now unable to buy.

REMEMBER: This is only my opinion, I was wrong in 08 selling my house, so we will see how well this plan works out.

Thanks for being honest with your real life experiences.

#102 Dominoes Lining Up on 08.27.17 at 3:41 pm

While I am not an alt-right conspiracy nut, it is intriguing to see the evidence of why so much distrust of the MSM on display today.

Go check out the websites of the Globe and National Post right now.

Both feature EXACTLY the same front page headline, right down to the punctuation!

“Water ‘is swallowing us up’: Catastrophic floods hit Houston”

http://nationalpost.com/

https://www.theglobeandmail.com/

No time to be original, too few staff, downsizing, no journalistic investigation work, such is the reality of MSM today.

No wonder print and other media have to slant their coverage to encourage real estate ads so often….

———————————————————–

I also just saw the same story, exactly the same headline on the Toronto Star website.

They are all cutting and pasting the same AP wire story as if their own.

Just like they have done pro-real estate stories for years.

#103 rainclouds on 08.27.17 at 4:04 pm

#101 Blacksheep

I believe all your points are “its different here”

It isn’t

#104 Myra Andrews on 08.27.17 at 4:24 pm

Re: Renting Sucks posts #15 and #16

Thank you for posting. Thoroughly enjoyed reading them. Please continue to post.

#105 Perspective on 08.27.17 at 4:33 pm

#101 Blacksheep

I agree 100% with your comments as my wife, and we are now in the same situation. Unfortunately, my wife refuses to live in the US post-Trump and so I am making do for now.
It is clear to anyone that lives here the extreme RE conditions in Vancouver was driven by a duplicity of cheap and off shore money. Locals were able to compete with off shore money up to the point that cheap money would allow them too. Some locals used the opportunity to speculate, and some have done very well. But like everything, it seems greed took over, and some folks are badly over extended. There is little doubt that some folks are resorting to creative financing to support their house lust. I believe many folks are on the edge and modest rate hikes are going to hurt. My in-laws do secondary lending, and they tell me stories how some folks finances look, think not an extra nickel. Frankly, I am not surprised, as I saw this in the US and 2008 many folks were hurt.
So Garth’s position is both right and wrong. He is spot on regarding locals getting carried away and gorging on debt, and it is likely they will regret this for the rest of their lives as things normalize. But money from China has been a huge factor in Vancouver, as it has been in many desirable cities across the western world. So Garth has it wrong concerning Vancouver, and anyone that lives here knows that. It is pointless to argue with him as he has his mind made up. Chinese immigration is good, as the Chinese coming here will become Canadians and make a positive impact on the social fabric of BC, and since they tend to be conservative and hardworking by nature, the political landscape will likely improve over time as well. Also, BC will become much less reliant on the US or the rest of Canada for trade, which is also a good thing.
But, the winds of change are at work. The Chinese are finding it very difficult to get money out, and it seems that new arduous controls are implemented monthly by the communist Chinese government. It has also become much more difficult to secure a mortgage from a Canadian bank. The high-end resale properties are just sitting as local incomes cannot support the price expectations. I see price reductions in 100s of thousands of dollars on these properties, and they still do not sell. If the Chinese money is gone, look for the GVRD RE collapse to start at the top. I do see some new high-end custom builds completing and I presume these are the sales showing up in the stats. But the high end resale market is dead.
So if the tap from China does not get turned back on, and soon ots of folks will be hurt. I guess The Happy Housing Crash guy will be happy. But I recall folks living in flea bag hotels and the seeing the school buses stopping to pick up kids in 2009. I had hoped never to see that again, guess I won’t be that lucky.

#106 Blacksheep on 08.27.17 at 7:08 pm

Rain # 103,

“I believe all your points are “its different here””
————————–
Not at all…

I never said we are in anyway ‘different’ and thus ‘special’. I tried opposing the system and it did not work out well for me, so know I’m aligning my goals with theirs and we will see what happens.

Not recommending any one else do what I am, just sharing my perspective for those that want to hear it.

#107 Fed-up on 08.27.17 at 8:24 pm

#93 Stan Broock on 08.27.17 at 1:54 pm
#92 Fed-up on 08.27.17 at 1:38 pm

We should also point out that Canada’s economy comprises 3.5% of the world’s GDP. Why would you 600% more than that in your portfolio???

This number is grossly overstated.

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

It is around 1.6 % of GDP in nominal terms, 0.7 % in purchasing power (my estimate).

Any allocation above that to a local market that nobody cares about is not logical.

Global markets are US, Eu, UK, Japan, China.
we are noting.

—————————————————-

Thanks for the clarification but we are obviously on the same page. There is no point in having so much of your money invested in a globally insignificant Market.

#108 Silver on 08.27.17 at 9:12 pm

employees…., laid off.
lawsuit risk to high.
no point in investing effort in this corporation.
the thugs….
or snowflake (entitled government employees) are stealing it all your effort so they can f..k around for a good part of the year figuring out how to steal the rest.
They will have you violently assaulted using the police to take the earnings of your hard work for their lazy self centered sense of entitlement and 8 hour so called work day.

not a chance i will continue doing buisness in the corporation of canada.
yes canada is a corporation.
it is not a country.

this is war on real buisness…
and people who actually pay beneficial tax’s.
unlike government employees.
who just steal, by creating fake fees, and threatening you with a violent assault by the police if you do not pay their extortion and tax’s…
so they can spend it on their frivolous snowflake desires.

welcome to socialist national canada.
we are toast for certain now.

living in the smoking hole that was the corporation of canada.
silver