Emotion

Fear and greed move markets. Emotions stronger than sex. Or blog addiction. Greed made people buy Bitcoin when it approached twenty thousand. That was stupid. Fear made people sell stocks in 2009. Utterly dumb. Greed spurred big sales of ‘investment’ condos that lose money. Fear of missing out propelled houses last spring. Regret now. Lately greedy investors have piled into equity markets because they’re roaring. Others are recoiling for the same reason, fearful of collapse.

On the weekend one of my fancy-pants portfolio manager colleagues said shunning markets simply because they’re high is irrational. Some posters responded by saying we’re on the cusp of 1929. Others pointed out if houses inflate and are now dangerous, why don’t we apply the same logic to financial markets?

Predictions are hard to make, especially when they involve the future. But it’s easy to see the correlation between residential real estate values, household debt and interest rates. Rates go down, debt and prices rise. When rates reverse and begin to normalize, it gets worse – house prices drop but the debt remains. Household budgets squish like a grape.

Stocks benefit from low rates, too. Bonds get more expensive and yields drop. So money flows into equities where returns are far better. Meanwhile cheap money allows companies to borrow to expand, finance takeovers or stock buybacks which inflate equity values. The key difference, however, is that stock markets also – and primarily – reflect the value of real and potential revenue growth. The more companies earn, the more they’re worth. The stock rises in value. Additionally, the more potential investors see for growth and profits, the more they are willing to pay now to get a piece of it. (Talking about you, Tesla…)

Lately central banks have been restoring rates. The Fed has increased four times in about a year. The Bank of Canada will probably jump its rate on Wednesday, the third time in half a year. The experts say we have at least two more years of this ahead of us.

As a result, real estate is being impacted and more wobbles lie ahead. Equities, in contrast, are roaring. The Dow hit 70 new highs last year, increased 25%, and is off to a rabbit start in 2018. To stock investors, rate increases signal economic expansion since central bankers feel they can withdraw the stimulus that’s been in place for almost a decade. The world economy will grow at 4% this year, compared to 0% a few years ago. Unemployment in the US is now full employment. Canada created more jobs in the last 90 days than in any three-month period in decades. Rates are rising in order to moderate growth, contain inflation, temper wage demands and cool price increases. In this world, stocks win and houses lose.

But what of this 1929 buzz? Will equity markets crash just because they are high?

The Dow over the past 100 years.

As my PM bud said, that’s illogical. Over time stocks rise almost 80% of the time, because they pace growth, expansion and prosperity. If economies are in trouble, unemployment is raging and living standards falling, equities will, too. But that’s not today. Or in the foreseeable future. And it certainly is not 1929. Not even 2007. Not even close.

Nonetheless, they’re now using the term “melt-up” to describe what’s happening on Wall Street – a rally made stronger by investors who fear missing further gains. There are estimates that despite a 25% romp last year, 2018 will bring a double-digit advance. The market may even be 30% or more from a top, at which point it will correct, stabilize, then go higher – if history is any guide.

Reasons are clear. Corporate profits are expected to advance 15% this year. That’s huge. The US just cut corporate taxes from 35% to 21% – and the impact is not even yet being felt. American unemployment is at a 40-year low. Commodity prices have rebounded along with demand. Credit markets are robust despite rising rates. Consumer and business confidence are at record levels.

However, are stocks too high relative to profits? The Shiller P/E (price-to-earnings ratio) measure, which many doomers follow, is flashing red. But by using 10 years of earnings to arrive at its level, that index is flawed, since corporate revenues collapsed during the credit crisis. Other measures show stocks at a far less elevated point by historic standards.

Naturally, there are risks. CBs may get it wrong, allow inflation to ramp up then respond with big rate hikes, killing the economy. Rocket man might do the unthinkable. Trump, too. Protectionism, tribalism and the politics of division could derail global growth. Weather events are getting costly and extreme. There is terrorism to worry about, plus Oprah.

Expect corrections. The higher things go the more reversals will be felt. But corrections are not crashes. They don’t last long (the average is 17 weeks) and if you have a balanced portfolio, the safe stuff increases in value when the growth assets decline. People with balance in 2008-9 (who didn’t panic and sell) cruised right through an event of generational proportion.

So be scared if you want. But that would be a waste. There are far better places to channel all that emotion.

137 comments ↓

#1 Mark on 01.14.18 at 3:35 pm

Just sticking a piece of paper up to my screen to draw a straight line on the logarithmic Dow graph indicates that the fair value of the DJIA is closer to 8,000. With downside overshoot to the 3000-4000 level certainly possible.

If you stick the paper up to the peaks, they are linear (as would be expected on a logarithmic chart), but the chart is pretty unequivocal in what happens after the Dow hits a local peak.

#2 Dan on 01.14.18 at 3:47 pm

Thank you for much needed reassuring rational analysis.

#3 Predictor on 01.14.18 at 3:52 pm

My bet is that Poloz doesn’t raise the rate this week. He’s scared and weak.

#4 I’m stupid on 01.14.18 at 3:54 pm

There are far better places to channel all that emotion.

Yes at the cost of mussels and coke!

#5 Lost...but not leased on 01.14.18 at 4:02 pm

Phyyyrrzzzttt

PS Its freezing in this pre -sale line up, and this is Somalia.

#6 I am with stupid on 01.14.18 at 4:29 pm

#1 Mark on 01.14.18 at 3:35 pm

In my mind there is much more logic in DOW 45 k vs. the current house prices in Canada.

But hey, I thought housing is overpriced in 2000 when a house in Vancouver was 350 k and in Toronto 300 k…
as nobody had any money back then as no one has any money now in Canada, just credit.

So I am preparing for realistic DOW 35 – 38 k, significant inflation outpacing rapidly rising rates (yes that is possible), crash of Canadian credit based economy accompanied with strong commodities sector (yes that is also possible, crash of service sector financial, consumer credit driven sectors, boom of commodities)

#7 mark on 01.14.18 at 4:32 pm

However, are stocks too high relative to profits? The Shiller P/E (price-to-earnings ratio), yardstick, which many doomers follow, is flashing red. But by using 10 years of earnings to arrive at its level, that index is flawed

Well if CAPE is flawed whats the CAPE 5 or CAPE 7 numbers this would exclude the financial crisis crash?

Nice post garth, you just calmed a lot of tense investors!

#8 Here you go on 01.14.18 at 4:33 pm

#235 Checkbox on 01.12.18 at 3:15 pm

I would like a checkbox to filter Smoking Man on this website.

[X] Disable all comments from Smoking Man.
=========================

#65 Fortune Faded on 06.15.16 at 10:39 pm
Hey blog dogs,
Should you wish to hide the posts of certain users on this forum, I invite you to download my greasemonkey script from the url below. I have defaulted it to hide posts from Mark and Smoking Man, however you can extend it quite easily to include any posters you find annoying or rude. Enjoy!

github link
https://gist.github.com/anonymous/7d6201256f98010f6bf935e33ee4374e

#9 crowdedelevatorfartz on 01.14.18 at 4:48 pm

I remember a friend who was heavily invested back in Oct ‘ 87 when everything went to sh!t.
I asked him if he was going to cash out, ” Hell No!. I’m in this come hell or high water….”
12 months later he was back to where he started… and the markets kept going up……..

I’m along for the ride…..

#10 Mark on 01.14.18 at 4:58 pm

“So I am preparing for realistic DOW 35 – 38 k, significant inflation outpacing rapidly rising rates”

The 1960s and 1970s are a great case study in why the Dow isn’t a good place to be invested in when inflation is rising significantly. The TSX (Canada) did far better, particularly for its exposure to the resource sector.

Go look at the list of Dow or the S&P500 stocks. You can count the number of mining companies on one hand pretty much. And even US O&G is heavily focused on downstream (ie: consumption) investment, not upstream.

#11 Freddie Macklem on 01.14.18 at 5:16 pm

Plus, if investors are scared they can always add more gold. Still valuable after thousands of years and beyond!

Purely speculative, no income, dismal performance since 2011. – Garth

#12 I am with stupid on 01.14.18 at 5:18 pm

#10 Mark on 01.14.18 at 4:58 pm

You can’t compare the non-comparable.

We are at peak debt, the only solution for which is inflation and the stock market is front-running inflation.

As simple as that.
No analog in history.

As for DOW – don’t forget that:
1. the companies there are global
2. they are leaders in the technology of the future
3. the market is global

our commodities might do well but international commodities might do better.

Our market is small and of limited interest to investors.
You will learn that commodities itself won’t propel TSX too high.

It is the marginal byers that matter,

Precious metals and energy could thrive.
The rest will sink.

I bet that we will see both stock market run and inflation outpacing rates.

#13 Lisa on 01.14.18 at 5:20 pm

You realize, of course the equity markets can drop and stay down for twenty years?

By your logic, Garth, people should continue to buy houses and overpriced condos and just ride out the drop.

I find your analysis here very biased. Just as I would not trust a realtor’s impression of the housing market, why should I trust your opinion of the equity markets? You are a financial advisor/stock broker, correct?

And your oft repeated refrain of a diversified portfolio? The bond market isn’t looking healthy either!

The post clearly laid out why equity valuations do not = real estate prices. Anyone, regardless of their day job, should see that. – Garth

#14 Dr. Seuss riddles on 01.14.18 at 5:25 pm

What is Poloz going to do on Wedndesday?
Will he hike
or will he cut?
Will we see a 81 cent Loonie?
Or an 18 cent loss?
Dr. Seuss, please answer this for me. I’m holding these green plastic notes depicting an old stiff upper lip Queen of England, and I want to trade them for pictures of Dead Presidents. At least they are REAL MEN.

#15 Rompalooza on 01.14.18 at 5:26 pm

The melt up romp is no different to what we saw in home prices in Vancouver Q1 2016 and Toronto Q1 2017.

A shout out to the Pink Flop guy for being so diligent. You mentioned one loser seller that clocked in at $300k – I think it was on Friday. Many have forgotten just what it takes to earn and save $300k.

First of all, that’s after marginal tax – so let’s say it was closer to $500k pre tax. Now, if one tries to save that amount by stashing away $2k a month after tax with a 7% return, that would take your savvy saver 13 years.

There’s something about many not having much free cash flow, so it’s clear most couldn’t do this (and most wouldn’t anyway). The realization of these big numbers that can turn into losses have yet to hit home. Pun intended. Most home owners will never feel the fabric of such losses because it was funny home money to begin with that they never really touched. Those that are forced to sell will be seriously sorry.

#16 Gregg in Victoria on 01.14.18 at 5:44 pm

“Household budgets squish like a grape….”

Mmmmmmm, wine!

#17 conan on 01.14.18 at 5:44 pm

Who knows what will happen. Everyone has an opinion.

https://www.youtube.com/watch?v=cuJ1AefhWzE

#18 LivinLarge on 01.14.18 at 6:13 pm

“My bet is that Poloz doesn’t raise the rate this week. He’s scared and weak.”….yes indeedy, the scared and weak are the ones who are so predictable.

Yes indeedy as well for the fact that gold has been a lead balloon since ’11 but using the longer time horizon (the point in yesterday’s post) the it has done seriously well.

Starting in 2000 it has had wonderful upward ride ecen with the correction that began when the economies recovered and began to boom in 2011.

If my memory is accurate, from 2000 to today there has been a 400% simple interest growth in 17 years even with the ’11-Today correction. No income yes but certainly better than inflation by a looooonnnnnnggggggg shot and cap gains are still better than other forms of return.

#19 BlogDog123 on 01.14.18 at 6:22 pm

{sarcasm trigger warning}
Kathleen Wynne (Ontariowe Premier) knows what the stock index should be set at.

She knows the right minimum wage, $14 this year, $15 next to solve all inequality problems.
She knows the right price of carbon to rescue the planet and reduce the CO2 in the atmosphere the correct amount to completely eliminate climate change.
She knows the right amount of subsidy to daycare centres to offset the recent 30+% wage hike, magically preventing daycare fees going up even more.
She knows the right number of CPP premiums, future payouts to solve the “pension crisis”.
She also knows the right generous severances to pay all those Ontario Pension Plan employees who should have never been hired in the first place.
She knows the right amount of government money to spend on feel-good ads on TV, Facebook, touting all her social engineering like minimum wage, Ontario 150, diversity, workplace laws/regulations.
She knows the exact message that your electric utility should be forced to print in your hydro bills using words like “Fair Hydro Plan” from January to July, directed by liberal cabinet order.
She knows the right contract to sign with teachers, gov’t workers that just happens to avoid renegotiation near an election.
She knows that all the daycares that used to hire ECEs (teaching all-day kindergarden age 4/5/6) are better to be fired and replaced with unionized OCT-certified university-educated teachers making three times the ECE salary, all paid for by public dollars.
She knows the exact amount of f**k up in electricity rates just happens to *need* a total 25% discount (not 22% or 27% discount) applied just in time for the election cycle.
She knows that 150+ government payroll inspectors now need to be hired to harrass businesses about the minimum wage increase.
She knows the OHIP+ Pharmacare plan needed to be rolled out conventiently 5+ months before an election, forgetting that many under-24’s are already properly covered by their parent’s group benefits.
She knew that transferring the future hydro discount costs to Ontario Power Generation debt (a shell game) with more financial borrowing cost than instead under regular Ontario debt was a more “Fair” way to conceal the true Ontario 2018 deficit. More cost just to fudge the deficit before an election.

We’re being played, ladies and gents. And our own money and future debt burden. And using our own public money to blast us with radio/internet/TV ads touting all this “Do-Goodery” makes me very sick and angry.

My rant for the day…

#20 Another Deckchair on 01.14.18 at 6:29 pm

Hey #8 Here you go!

I’ve been thinking about your script – I can remember it being posted a while ago.

Recently my scanning of the comments has become really quick – the new resident troll (aka “SCM”) has caused things relating to finance and housing to take a (very) back seat, so I only scan for names I know (only two for the past few weeks) and read their comments.

This’ll help me separate the wheat from the chaff so that I get something out of Garths’ kind work again.

Thank you. :-)

#21 For those about to flop... on 01.14.18 at 6:32 pm

Hey Romp,thanks for the shoutout.
I will keep this part short because the rest is long enough already.
The biggest loss last year was close to 1.1 million after expenses.
To the people who have joined the blog in the last few months, yes, people are also losing money on condos.After I proved this was happening multiple times I moved back into detached to see how big the actual and potential losses were.

Run your own version of the numbers below I might have gone too easy on them…

M43BC
///////////////////////
Rompalooza
The melt up romp is no different to what we saw in home prices in Vancouver Q1 2016 and Toronto Q1 2017.

A shout out to the Pink Flop guy for being so diligent. You mentioned one loser seller that clocked in at $300k – I think it was on Friday. Many have forgotten just what it takes to earn and save $300k.

First of all, that’s after marginal tax – so let’s say it was closer to $500k pre tax. Now, if one tries to save that amount by stashing away $2k a month after tax with a 7% return, that would take your savvy saver 13 years.

There’s something about many not having much free cash flow, so it’s clear most couldn’t do this (and most wouldn’t anyway). The realization of these big numbers that can turn into losses have yet to hit home. Pun intended. Most home owners will never feel the fabric of such losses because it was funny home money to begin with that they never really touched. Those that are forced to sell will be seriously sorry.

@@@@@@@@@@@@@@@@@@@

#158 For those about to flop… on 01.13.18 at 9:09 am
For Flop.
#140 For those about to flop… on 01.12.18 at 1:14 am
Recent Sale Report./Realtor Assistance Needed.

This house sold on December 5th 2017.

They paid 4.36 in July 2016 when at the time it was assessed 4.09

Fast forward to now and the latest assessment came in at 3.84 and these guys were asking 4.65 to try and cover most of their costs.

So by now you realtors know how the dance goes.

You can tell us now what they got for it or I will wait three months until the database gets updated and report it.

Book it…

M43BC

https://www.zolo.ca/vancouver-real-estate/1324-w-58th-avenue

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

bugged a friend for this:

sold for 4.36M

$$$$$$$$$$$$$$$$$$$$$$

Thanks for doing this whoever you are,this is the second or third time you have helped me out,I appreciate it.

Let’s run the numbers…

1324 w 58th ave Vancouver

Paid 4.36 July 2016

Sold 4.36 December2017

And so if we keep it nice and simple and do 5% for expenses and 2% for opportunities lost then these guys lost over 300k on this deal.

Compared to the assessment they actually did pretty well getting that much but like a lot of people they simply overpaid in the first place and it cost them.

I will re-visit this case and put it up when it becomes CONFIRMED PINK SNOW…

M43BC

#22 Long Branch Apprentice on 01.14.18 at 6:37 pm

https://www.thestar.com/news/gta/2018/01/14/daycare-fee-sticker-shock-linked-to-minimum-wage-hike.html

Let’s face it, much of Toronto is a [email protected]$thole anyway, tiny condos made from cheap Chinese materials, built by toxic masculinity with a pill problem. Don’t believe me, swing by any high rise construction site. Bring your own tool belt and proof of Fall Arrest.

Poloz won’t go, citing NAFTA uncertainty. He’ll try to sound hawkish but the market will see through it.

SCM, aren’t you moving to Norway?

#23 Keith in Rio on 01.14.18 at 6:38 pm

In the credit card frequent flier points collecting game what is currently happening in the stock markets is what we call “manufactured spending”…………

They needed to dramatically cut corporate taxes in the world’s largest economy to goose company profits, and allow the stock buybacks to continue, in order to keep shares soaring higher, etc, so the entire “pension Ponzi” scam invested in equities can stay afloat.

If the pension ponzi bubble bursts, the entire US economy comes crashing down and a “reign of terror” will ensue when millions of enraged folks with guns come looking for the perpetrators, but more on that in a moment.

The elites who made this mess are not beyond manipulating it to the point to where they keep perpetually kicking the can down the road to save their own necks.

Ever wonder why the socialist propoganda system (aka the fake news industry….CBC, NBC, CBS, ABC MSNBC, REUTERS, BBC, et al) continually rages against the scourge of “populism” which is overtaking Europe and America ?

Democracy “is” about populism…..you know, one person, one vote, we’re the ones who matter, etc, not a bunch of unelected Stalinist bureaucrats in Brussels for example, or, some leftist dipshit community organizer from a “shithole” city (Chicago)…….and yes, I’ve been there a lot.

They’re scared folks……TPTB are freaking out.

So go and play the markets. Just know that it is a scam and rigged. Know when to hold ’em and know when to fold ’em. You are gambling, you are not investing. Nothing you do can be based on proper analysis because that concept went out the window in 2008 valuations.

#24 Martin on 01.14.18 at 6:39 pm

No one can see a bubble until , its a bubble

#25 SoggyShorts on 01.14.18 at 6:44 pm

#8 Here you go on 01.14.18 at 4:33 pm
github link
https://gist.github.com/anonymous/7d6201256f98010f6bf935e33ee4374e
—————————-
I’ve been using this since the last time you shared it, and would like to say thanks again, has made my scrolling much more enjoyable, even by only removing posts from 2 blog dogs.

#26 Bobs ur uncle on 01.14.18 at 6:52 pm

Squish like grape – from the (original) karate kid:

https://youtu.be/Y3lQSxNdr3c

#27 steph on 01.14.18 at 7:02 pm

There will be a Tesla on it’s way to Mars in a few days.
Literally.

So yeah, Garth. Time to buy this thing.

#28 For those about to flop... on 01.14.18 at 7:19 pm

Here’s another one I ran yesterday,still waiting for an answer.

People on the blog are wondering why Vancouver detached he’s gone up again.

Well look at this case and the one above.

Well above the average sale price to move the needle back up.

Roughly 8 million dollars worth of real estate sold between the two properties and most likely zero profit.

For the people in Toronto on the blog ,you guys at least have mongohouse and such when they’re not being shut down.

In Vancouver people are losing their shirts and all they have is a Womble from Tasmania to rely on.

Mercy…

M43BC

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Recent Sale Report/ Realtor Assistance Needed.

This house sold 20 days ago.

After that more affordable Richmond option let’s find out what happened to this bread and butter Westside house.

Just like the last one ,this one was asking less than purchased for but with a wider margin.

Picked up for 3.53 in late 2016 ,they had it on the market for 50k less at 3.48.

What did it go for?

Which lifeline would you like to use?

I’d like to phone a friend…

M43BC

2316 w 21st ave ,Vancouver.

Paid 3.53 November 2016 Ass3.57 2016

Asking 3.48

https://www.zolo.ca/vancouver-real-estate/2316-w-21st-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAwME1NQg==

#29 Lonnie Doctor on 01.14.18 at 7:21 pm

The smartest thing I have learned in both investing and medicine is that I am not really smarter than anyone else. A tough pill to swallow for a doctor. No matter how smart you are, you cannot predict the future exactly in regards to timing whether it is a correction in a market or death in terminal disease. You know it will happen, but not when. In either case, it is best to know that it is coming so that you can be emotionally prepared and have your finances in order to weather it in the best way possible. Having a consistent balanced plan made in advance that you stick with (like suggested here over and over) before the emotions take hold is prudent. It also allows you to just live your life and not waste your time worrying about it. The only thing you can predict are fees and taxes which you should plan to minimize. Even then, there is unpredictability since the government can just change the tax rules when it suits them.

#30 Tony on 01.14.18 at 7:37 pm

Re: #14 Dr. Seuss riddles on 01.14.18 at 5:25 pm

We’ll get the exact same line again Wednesday “if the economy merits it” and the Canadian dollar will plunge after hearing Poloz state the exact same line again.

#31 IVoteIndependent on 01.14.18 at 8:17 pm

Mr Turner,
You have a place for REITs in the balanced portfolio. As long as they are not based on residential real estate, then they’re not susceptible to a correction in housing. But should we now rethink REITs that hold commercial space, based on the evolution of shopping from bricks and mortar to clicks and order? Today was Sears’ last day….
IVI

#32 technical analysis? on 01.14.18 at 8:21 pm

you realize you posted a chart of the DOW, ADJUSTED FOR INFLATION, …. ?

Seemed reasonable. – Garth

#33 acdel on 01.14.18 at 8:21 pm

All is not lost with Bitcoin, hey, at least one can buy a bucket of chicken from KFC. Things are looking up!

http://business.financialpost.com/news/retail-marketing/no-joke-kfc-canada-starts-accepting-bitcoin-for-a-bucket-of-chicken-immediately-sells-out

#34 Lost...but not leased on 01.14.18 at 8:40 pm

The private USA corporation called “The FEDERAL RESERVE” is guaranteed an annual “profit” of 6%.

Ponder the implications of THAT before one preaches and prostelytizes…….economics or otherwise.

The economy is skewed and screwed…live with it.

#35 Leo Trollstoy on 01.14.18 at 8:56 pm

USA! USA! USA!

Passing tax reform was brilliant

Enjoying the cheddar

#36 Leo Trollstoy on 01.14.18 at 8:59 pm

I can’t find the 11 grand jury indictments against Mark Lambert on CNN, WaPo, or NYT. After Manafort I thought the MSM liked reporting indictments. No?

ROFL fake news media so funny Lolol

#37 Eby Doing the Digging on 01.14.18 at 9:01 pm

Hi Garth,

Need a big favor here. Could you read what Eby said here, and tell us, in a feature blog, anything worth sharing about housing? It seems the Man is one of the few spending a lot of energy to uncover issues regarding money laundering through housing in B.C. More and more people are talking about him out there, but it seems that he hasn’t caused damage yet. We also don’t hear about his efforts on the East Coast, at least not on the radio or TV. Many because there is no explosion headline, yet.

https://www.straight.com/news/1018756/david-eby-posts-speech-transnational-money-laundering-and-what-hes-doing-address-bc

Thanks

#38 young & foolish on 01.14.18 at 9:19 pm

So may folks arguing the economy is rigged and headed for disaster …. my question, was it ever otherwise?

#39 re., 22 on 01.14.18 at 9:21 pm

Let’s face it, much of Toronto is a [email protected]$thole anyway, tiny condos made from cheap Chinese materials, built by toxic masculinity with a pill problem

………….

hardly, it’s a world class city……ya twit

#40 Smoking Man on 01.14.18 at 9:35 pm

I’m struggling to find the correct pronouns to address the trans community in french now that it’s a crime not to refer to them as boy and girl.

I only took french in grade 7.

This is what I think are the correct pronunes. But I’m not sure.

cas psychiatrique
La koocu..
rétrécissement requis

#41 common sense on 01.14.18 at 9:39 pm

Poloz “will probably” NOT raise Wednesday.

He won’t raise til the USA does next and only when he is told to do so by the powers that be.

#42 TRUMP on 01.14.18 at 9:42 pm

I will destroy OPRAH in the next elections.

#43 Nos deplorables on 01.14.18 at 9:43 pm

#40 Smoking Man on 01.14.18 at 9:35 pm

I’m struggling to find the correct pronouns to address the trans community in french now that it’s a crime not to refer to them as boy and girl.

I only took french in grade 7.

This is what I think are the correct pronunes. But I’m not sure.

cas psychiatrique
La koocu..
rétrécissement requis

You made it to grade 7 .. stunner!

Maudit alien

#44 Mark on 01.14.18 at 9:53 pm

Garth,
At one point you stated that the bond market controls interest rates – at least the mortgage rates.

As we have seen in the last 10 years that was wrong, and you now seem to realize that the Central Banks control interest rates.

Do you now acknowledge that the central banks control the mortgage market? In fact the Government via the central banks control all financial markets.

What do people here say about this theory?

Bond yields affect fixed-rate mortgage costs. CB rates affect the bond market, which is exactly what has happened for the past decade. As stated often. – Garth

#45 LivinLarge on 01.14.18 at 10:04 pm

“But should we now rethink REITs that hold commercial space, based on the evolution of shopping from bricks and mortar to clicks and order?”……why worry about the future of retail and instead just buy into industrial REITS? I can think of one Canadian industrial REIT yielding about 8%.

#46 Leo Trollstoy on 01.14.18 at 10:19 pm

Bond yields affect fixed-rate mortgage costs. CB rates affect the bond market, which is exactly what has happened for the past decade. As stated often. – Garth

[ ] not rekt
[x] rekt
[x] really rekt
[x] tyrannosaurus rekt
[x] parks and rekt
[x] star trekt
[x] school of rekt
[x] catcher in the rekt
[x] great rektspectations
[x] rekt it ralph
[x] the shawshank rektemption
[x] forrekt gump
[x] finding rekt
[x] rektal exam
[x] shrekt
[x] rektium for a dream
[x] The Mummy Rekturns
[x] Pride and Prektudice
[x] erektile dysfunction
[x] rektroom
[x] continental brektfast
[x] Brektzit
[x] rektipe for success

In addition to writing this blog, Garth also drives a bus cuz he just took Mark to school!

#47 Damifino on 01.14.18 at 10:20 pm

#3 Predictor

My bet is that Poloz doesn’t raise the rate this week. He’s scared and weak.
———————————-

And he has no honour. – Lieutenant Commander Worf

#48 re., Leo Trollstoy on 01.14.18 at 10:24 pm

why do you let Mark live rent-free in your head?

#49 For those about to flop... on 01.14.18 at 10:26 pm

Recent Sale Report / Realtor Assistance Needed

This house sold on December 14 2017

Picked up for 1.24 ,the last time I looked they were asking only 1.19.

Did they get them up to 1.4 to keep the wolves at bay?

Beats me ,but we’re gonna find out ,come hell or high water…

M43BC

11231 64a Avenue, Delta paid 1.24 asking 1.19

Oct 15:$1,368,000
May 14: $1,299,000
Change: – 69000.00 – 5%

https://www.zolo.ca/delta-real-estate/11231-64a-avenue

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA1VkJVUg==

#50 weiners on 01.14.18 at 10:37 pm

The second scariest part of that graph (1929 aside) is the part between about 1965 and 1995 when the Dow, adjusted for inflation, went from 8000 to about 2500. This was a period of generational upheaval, inflation, and with it rising interest rates. This period was preceded by 20 years of stable interest rates and great gains in the Dow (1945 to 1965) ….. kind of like we’ve had since 2008. Don’t give up but tread lightly.

#51 domain on 01.14.18 at 10:39 pm

“Plus, if investors are scared they can always add more gold. Still valuable after thousands of years and beyond!

Purely speculative, no income, dismal performance since 2011. – Garth”

I know this isn’t a gold miner or gold bug thread Garth, but your dismissal of gold as an asset is short sighted.

Yes it hit an interim peak in 2011, but the bull market has resumed since 2016. Furthermore, when priced in CAD, gold has been rising since the middle of Dec 2013, so it has performed well in our currency.

Dismal since 2011, robust since 2016, and fantastic since 2001 – one can use any time-frame to match the point they wish to make. But calling a high-quality, highly-liquid asset that lacks counter-party risk ‘speculative’ is incorrect.

The point is, if you really want a balanced portfolio, don’t go all-in on gold, but don’t go without it either.

Owning the TSX means plenty enough metals exposure. – Garth

#52 A123 on 01.14.18 at 11:03 pm

Re.,22
Let’s face it, much of Toronto is a [email protected]$thole anyway, tiny condos made from cheap Chinese materials, built by toxic masculinity with a pill problem

………….

hardly, it’s a world class city……ya twit
————————————-
Sorry to disagree. Toronto is not a world class city. I was born here, but I am happy to get out.
It is going downhill. I used to be proud of the city, but there are too many ghettos now.
Humm… Perhaps that makes it world class??

#53 some dude on 01.14.18 at 11:08 pm

hi doggos, i’ve created portfolio, but was curious which Bonds (Corporate, Government, REIT) and at what ratio(if mix) to get considering current market situation. This is ~20% of 60/40 protfolio(40 part). much appreciate the advise.

#54 Screwed Canadian Millenial on 01.14.18 at 11:10 pm

Owning the TSX means plenty enough metals exposure. – Garth

——

Like Bre-X! LOL. Don’t kill me Garth. I like the physical stuff. A year from now you will see why.

Were you born then? – Garth

#55 Doug in London on 01.14.18 at 11:11 pm

So how should you react to these record setting stock market indices? You should already be fully invested, having scooped up stocks, REITs, and ETFs during those times they were on sale and now just sit back, relax, and let the dividends roll in. Don’t forget to cash in some of those winners every now and then and increase your exposure to bond funds as they go on sale.

#56 Screwed Canadian Millenial on 01.14.18 at 11:14 pm

#22 Long Branch Apprentice on 01.14.18 at 6:37 pm
SCM, aren’t you moving to Norway?

———

No, sending me to Norway was Garth’s idea. Speaking of which, Garth, what is my one way ticket fund up to?

Norway is the best country in the world, the most well run and is the gold standard of nations. But I’ve had enough winter for 1 lifetime.

#57 Lee on 01.14.18 at 11:22 pm

One thing that chart tells me is you might have to endure a fifteen-year period one day where the market falls before it takes almost as long to recover. Most investors would fold in such a scenario and cash out all of their equities.

#58 BCWally on 01.14.18 at 11:24 pm

Hi Garth and team, great weekend posts as usual. I just finished reading a book by Michael Lewis called “Panic” which I highly recommend to all blog readers and contributors. The last chapters of that book are devoted to articles written by people who were intimately involved with the US housing collapse in 2005 – 2007 and the factors that caused it. You might learn a great deal and I suspect feel terrified when you recognize what is happening here at home.
The OSFI has just recently made it clear to the major Canadian banks they want the capital requirements of the Basel III agreement to be met by the end of the year, and they are in a hurry. They also clearly indicated they were willing to exceed those standards as required by the domestic market. This should tell us quite a bit if you read between the lines.
It is no accident that I wished to post this here on this blog as it is easily the most widely read financial publication by the average Canadian. I am hoping Garth and your team that you could do a blog topic to clarify how the banks will deal with refinancing regarding HELOC’s and mortgages.
HELOC’s as stated in this blog are margin, or call loans. Obviously those calls will come in if the underlying asset (the house) is worth less than the loan amount but I am wondering how the outstanding mortgage debt factors in to that margin call on a quickly depreciating asset like a housing price correction. Is there a formula for that? Would it be a double hit as on a mortgage renewal the owner would be liable for any amount above the assessed value anyway?
I’m thinking people should have this information to make good decisions on what probably is little time left before what I think will be a major credit squeeze.
Another perhaps more sinister reason is going back to the OSFI requirement, what a great way to raise the capital required to meet the year end goal than margin call a portion of all those HELOC loans, particularly the people that haven’t even made a payment.

#59 Smoking Man on 01.14.18 at 11:47 pm

#56 Screwed Canadian Millenial on 01.14.18 at 11:14 pm
#22 Long Branch Apprentice on 01.14.18 at 6:37 pm
SCM, aren’t you moving to Norway?

———

No, sending me to Norway was Garth’s idea. Speaking of which, Garth, what is my one way ticket fund up to?

Norway is the best country in the world, the most well run and is the gold standard of nations. But I’ve had enough winter for 1 lifetime.
..

So do something about it. Find a warm climate with like mind people. May I suggest Venezuela or Cuba.

#60 Smoking Man on 01.14.18 at 11:48 pm

Playing video poker at the bar by the stage

#61 Lost in Translation on 01.15.18 at 12:04 am

To Smoking Man (post 40)
I think what you are looking for is ‘iel’ a mix between ‘il’ and ‘elle’.
G

#62 Lost in Translation on 01.15.18 at 12:06 am

To Smokin Man (post 40)
I think what you are looking for is ‘iel’ (a combination of ‘il’ and ‘elle’.
Glad to help a great writer…

F71Qc

#63 Smoking Man on 01.15.18 at 12:07 am

Let’s give my last post some clarification

Wife texts me. Asking where I was. The post was my answer, truth is. I’m doing research for the next book deplorables 2 I’m really at Larry Flints Huseler club.

Observing old basterds salivate over young hotties. No kids here. Snap chat killed that market. Connect with a free bee. No charge. Now that’s progressive..

Young woman giving it up for free. Not realizing the power they had before the fat envovious competition. The lesbonightrs took over the school system.

#64 jas on 01.15.18 at 12:18 am

100 year graph of any stock market index is as irrelevant as for 10 years. Both time scales are totally disconnected from human life span. One should look at 25 years to 35 years time frame and see what is the average performance over this time period.

#65 Ronaldo on 01.15.18 at 12:28 am

#54 Screwed Canadian Millenial on 01.14.18 at 11:10 pm

Like Bre-X! LOL. Don’t kill me Garth. I like the physical stuff. A year from now you will see why.
————————————————————–
I’ll tell you a little story concerning BreX and the physical stuff. It was about the summer of 96 (you were in kindergarten then). BreX was the story of the day and it was hitting hits high (split adusted) at around $280 per share. A couple guys (brothers) that I’d met at Timmie’s on one of my regular visits approached me one day and asked if I was still interested in buying silver. I said sure and they proceeded to tell me that they had inherited a large amount of silver and half dollars that their father had saved when he owned a corner store in the city that I was living in at the time. So we made a deal and I took them off their hands for twice face value. They told me that they were going to invest their entire funds in BreX. The following year the stock turned out to be a fraud and they lost everything. Guess who made the better deal? Still have them.

#66 Screwed Canadian Millenial on 01.15.18 at 12:35 am

#59 Smoking Man on 01.14.18 at 11:47 pm
So do something about it. Find a warm climate with like mind people. May I suggest Venezuela or Cuba.

————-

You misspelled California.

#67 Karlhungus on 01.15.18 at 12:43 am

Strawman Canadian millenial, you realize Norway is a capitalistic country right?

#68 Smoking Man on 01.15.18 at 12:47 am

Pick a team. Bet on them.

I’m with the Vikings and Trump.

Team T2 and his band of insanity not so much. You neefd to be insane to see it .

A designation that I’m proud of.

#69 Big Juicy Daddy on 01.15.18 at 12:48 am

Picking up cheap USD in Asia these days……currencies like the Thai Baht are strong. $C I believe is being bought by the Canadian govt as cover for Trudeaus falling polls. $C rarely trades here….no buyers. But buying USD on sale…yes…..never bet against the empire. I took a good position in VWO before Xmas…..up a smart 15% in these few weeks.

I think Poloz will defer to Trudeau Liberal sham economy …otherwise Trudeaus Bills with steamroll plans for more spending…..essentially they can’t pay their bills now…..and propping up $C with billions to shorts…..can’t end well. Why? Because Trudeau needs at least the 900,000 new dependant immigrants slated to land in order to shift weak liberal polls into a minority. Prediction….a T1 style jerrymandering of epic proportions before 2019. Another Trudeau mandate will crater the $C but by then the national debt will have doubled and unemployed millenials will be begging for free handouts to make ends meet…..the perfect lay for a liberal.

Buy for ’18…..USD…..Gold…..( gold goes up when dollar goes down)Emerging Market ETF…..Asian currencies….US market across the
board…..short Canadian dollar ….very selective CDN issues that pocket at least 60% from US exposure…..zero bonds……the thirty year run is dead and done…no safety just more losses……never bet against the empire. Big correction coming by summer…so cash up……don’t liquidate but buy the dip with feverish hands…years end US market up 30%. God Bless MAGA-MAN

#70 Sash on 01.15.18 at 1:15 am

Sometimes I think that the ‘economy’ is some sort of a perpetual Ponzi scheme.
We need the endless growth to service the endlessly perpetuating debt.
This is not necessarily a bad thing. It forces to us always innovate, improve, becoming more efficient…

#71 Widening Gyre on 01.15.18 at 1:21 am

For those about to flop…

I always enjoy your posts, so here’s a little something for you….

https://www.youtube.com/watch?v=VIxkqoNi8I4

#72 Karma on 01.15.18 at 2:00 am

#3 Predictor on 01.14.18 at 3:52 pm
“My bet is that Poloz doesn’t raise the rate this week. He’s scared and weak.”

Sounds like you should change your name to “Projector” because it’s far more likely you are projecting yourself onto someone you don’t know much about.

#73 down_boy on 01.15.18 at 2:45 am

Owning the TSX means plenty enough metals exposure. – Garth

Not if you like to roll around in it.

#74 NoName on 01.15.18 at 3:22 am

Interesting read

Collective Manias, bubbles I didn’t get to hallucinations part yet, maybe it’s in the middle somewhere.

http://www.dtc.umn.edu/~odlyzko/doc/hallucinations.pdf

#75 FOUR FINGERS WATSON on 01.15.18 at 4:08 am

#60 Smoking Man on 01.14.18 at 11:48 pm
Playing video poker at the bar by the stage
…………………………..

Dude. That was a bummer when they refused your last credit card. How much did you get for your wife’s wedding ring at the pawn shop ?

#76 Howard on 01.15.18 at 4:36 am

#52 A123 on 01.14.18 at 11:03 pm

Re.,22
Let’s face it, much of Toronto is a [email protected]$thole anyway, tiny condos made from cheap Chinese materials, built by toxic masculinity with a pill problem

………….

hardly, it’s a world class city……ya twit
————————————-
Sorry to disagree. Toronto is not a world class city. I was born here, but I am happy to get out.
It is going downhill. I used to be proud of the city, but there are too many ghettos now.
Humm… Perhaps that makes it world class??

—————————————-

I wonder how much of Toronto will resemble St. Jamestown in 20 years?

#77 Steven Rowlandson on 01.15.18 at 5:25 am

“On the weekend one of my fancy-pants portfolio manager colleagues said shunning markets simply because they’re high is irrational.”

One might suspect that he fears minimization of his income if investors avoided buying high and selling low and ultimately throwing in the towel due to chronic to total loss of capital.

Avoiding capital loss by not buying at the top is quite rational. Your portfolio manager buddies might want to focus more on finding good value investments that are currently under priced for investors. Buy low so that later investors can sell high to the real greater fools.

#78 Richard Murphy on 01.15.18 at 5:48 am

That is the most beautiful dog I’ve ever seen

#79 Steven Rowlandson on 01.15.18 at 5:53 am

Response to #11

Purely speculative, no income, dismal performance since 2011. – Garth

It may be the peculiar situation I am in but over 24 years my yellow rock collection gained an average of 6% per annum in capital appreciation in a totally manipulated market. Next to savings and GIC accounts that is not too shabby plus there is the possibility of capital appreciation or preservation. What I did was an example of buying low of an unloved asset that had intrinsic value. My average cost was in the low to mid $600 dollars Canadian. Buying anything of value that is trading at depressed prices takes foresight, guts and it should give you buck fever while you are doing it.

#80 Victor V on 01.15.18 at 7:37 am

One in three Canadians can’t cover bills amid ‘debt trap’: Survey

https://www.bnn.ca/one-in-three-canadians-can-t-cover-bills-amid-debt-trap-survey-1.968182

One third of Canadians have stretched themselves so thin that they can no longer cover monthly bills and debt payments, according to a survey released Monday that paints a disconcerting picture of household finances in this country ahead of the Bank of Canada’s next interest rate decision.

Thirty-three per cent of respondents to the MNP survey, conducted by Ipsos, admitted to being stretched beyond their means on a monthly basis, marking an eight-point increase since MNP’s last survey in September.

Meanwhile, almost half (48 per cent) of respondents said they only have a $200-buffer to cover their obligations.
Canadians’ increasingly-strained pocketbooks is giving rise to self-reflection, as almost four in 10 respondents to the survey admitted they regret the amount of deb

#81 Rooster on 01.15.18 at 8:05 am

The Dow did well in 2017 (25%), but the TSX (6%) was meagre in comparison. In fact, 28 of 43 world markets advanced by > 10% (The Economist – Xmas issue, pg.119). Que pasa?

Are Canucks too prudent to overinflate their assets?
yukyuk.

Has the rising cost of shelter drained the pool for investment?
The sellers made out like bandits.

Are global investors taking a pass?
The loonie has been OK, but Fort Mac has gone from biggest asset to foulest sinkhole. Memories are long for Bre-Ex, Nortel, SinoForest, Valeant, the entire VSE. Our banks and telcos are sound-ish, but future growth will be limited (see – blood from a stone).

Much of our growth is in financial services, but didn’t science prove that leeching hurt the patient? (I’m not looking directly at you, Garth). Diversity may be the answer, but not Binance. If we can’t win at euchre (are we due?), then maybe mahjong, or sugoruko, or pin the tail on the donkey, but definitely don’t play FTSE (long term chart looks like crooked teeth). Point is, nobody knows – only play with what you can afford to lose, short or long-term. When were you born?

#82 Victor V on 01.15.18 at 8:45 am

U.K.’s Carillion files for liquidation, putting more than 6,000 Canadian jobs at risk

https://www.bnn.ca/u-k-s-carillion-files-for-liquidation-putting-more-than-6-000-canadian-jobs-at-risk-1.968266

#83 LivinLarge on 01.15.18 at 9:25 am

“100 year graph of any stock market index is as irrelevant as for 10 years. Both time scales are totally disconnected from human life span.”…well, yes but so what?

The market as represented by the index, is a really decent demonstrater of the continuity of human nature over a long horizon (history)

1965-80 the US was in the Viet Nam war and although wars always goose production they also take a large chumk of the traders out of the equation.

#84 Penny Henny on 01.15.18 at 10:06 am

It appears from your chart that if you bought the Dow in approx 1965 it would have taken about 30 years to break even again. Adjusted for inflation of course as if your chart.

#85 Deplorable Space Dust on 01.15.18 at 10:19 am

#63 Smoking Man on 01.15.18 at 12:07 am

Let’s give my last post some clarification

Wife texts me. Asking where I was. The post was my answer, truth is. I’m doing research for the next book deplorables 2 I’m really at Larry Flints Huseler club.

Observing old basterds salivate over young hotties. No kids here. Snap chat killed that market. Connect with a free bee. No charge. Now that’s progressive..

Young woman giving it up for free. Not realizing the power they had before the fat envovious competition. The lesbonightrs took over the school system.
..
Flynt offered up $10 million for info leading to your hero Trump’s impeachment

Endorsed Hillary too

#86 IHCTD9 on 01.15.18 at 10:24 am

#80 Victor V on 01.15.18 at 7:37 am

One in three Canadians can’t cover bills amid ‘debt trap’: Survey
__________________________________________

I shudder to think what things will be like in Ontario about 10 years from now.

Hydro at .35-.40 +/KWH all in – rural bills average 350.00/month.

Another 100+K FT unionized good paying manufacturing jobs lost. Manufacturing now a minor player.

“good paying” Private Sector jobs and Minimum Wage paying jobs are within a buck or two.

Private sector Unions will be just about done, Public sector Unions will tell Politicians what to do.

Interest payments on debt are solidly #2 and getting close to health care costs for the #1 slot.

The Province struggles to raise revenues no matter what they do. De Facto black market economy doubles in size compared to today.

Everyone knows at least 1 person who is dealing with a negative equity situation, Private residence or otherwise.

Gasoline at 2-2.25/l – mostly taxes.

Solid Fuel burning for heat is banned. Propane and NG doubles in price, heating bills average 200.00+/month.

I won’t be too wrong on most of the above if folks like Wynne keep getting voted in. Even if Brown gets in, he’ll also take the easy road and accumulate debt to solve problems just like Wynne. We don’t have an option to get spending and debt under control.

#87 IHCTD9 on 01.15.18 at 10:38 am

#82 Victor V on 01.15.18 at 8:45 am

U.K.’s Carillion files for liquidation, putting more than 6,000 Canadian jobs at risk

https://www.bnn.ca/u-k-s-carillion-files-for-liquidation-putting-more-than-6-000-canadian-jobs-at-risk-1.968266
___________________________________

“…public private partnership projects”

These PPP’s are the great hope of Ontario ever again getting any big projects off the ground.

Be interesting to see how these “partnerships” play out.

Just imagine a decade going by as one General after another bails out, goes bankrupt, fights the Contract, etc… The bigwigs leave the mired project as millionaires, nothing gets done, no one goes to jail.

I’m losing count of the number of excellent reasons everyone should be looking to reduce their tax load.

#88 Keith in Rio on 01.15.18 at 10:52 am

https://www.zerohedge.com/news/2018-01-15/uk-construction-giant-43000-employees-collapses

Coming to a city near you…………..Carillion…………a large UK based construction firm has gone mammaries skyward.

43,000 people worldwide are soon to be out of their jobs, and 10,000 of those are apparenty in Canada.

#89 aa5 on 01.15.18 at 11:03 am

In the 1970’s bear market the economy was very different than today. There were these huge regulated monopoly or regulated oligopoly corporations, with powerful unions.

There was next to no productivity improvements, because monopolies aren’t know for their efficiency. Unions were openly opposed to new technology as it would mean less jobs, and they did national negotiations with the oligopolies to stop new technologies.

As these monopolies bureaucracies grew, and as the powerful unions demanded wage increases.. the growing costs for the same level of production, of course this led to inflation.

One would at least hope investors in monopoly corporations would see good returns. But what happens in practice is the management grows to such an extent that they take all of the profits.

So you had high inflation, high interest rates to try to control inflation, next to no productivity improvements, and low profits.

The play then was clearly to lock in high interest rate bonds.

#90 Prairieboy43 on 01.15.18 at 11:13 am

@IHCTD9, your Ten year forecast looks bleak. However I agree with many points. Dow will go to 43,000 @2028. Stamp it!
IHCTD9 on 01.15.18 at 10:24 am
#80 Victor V on 01.15.18 at 7:37 am

One in three Canadians can’t cover bills amid ‘debt trap’: Survey
__________________________________________

I shudder to think what things will be like in Ontario about 10 years from now.

Hydro at .35-.40 +/KWH all in – rural bills average 350.00/month.

Another 100+K FT unionized good paying manufacturing jobs lost. Manufacturing now a minor player.

“good paying” Private Sector jobs and Minimum Wage paying jobs are within a buck or two.

Private sector Unions will be just about done, Public sector Unions will tell Politicians what to do.

Interest payments on debt are solidly #2 and getting close to health care costs for the #1 slot.

The Province struggles to raise revenues no matter what they do. De Facto black market economy doubles in size compared to today.

Everyone knows at least 1 person who is dealing with a negative equity situation, Private residence or otherwise.

Gasoline at 2-2.25/l – mostly taxes.

Solid Fuel burning for heat is banned. Propane and NG doubles in price, heating bills average 200.00+/month.

I won’t be too wrong on most of the above if folks like Wynne keep getting voted in. Even if Brown gets in, he’ll also take the easy road and accumulate debt to solve problems just like Wynne. We don’t have an option to get spending and debt under control.

PB43

#91 For those about to flop... on 01.15.18 at 11:25 am

Shine bright like a diamond…

M43BC

“This Map Shows Which Countries are Buying Most of the World’s Diamonds.

A widely accepted symbol of status and love, diamonds are very valuable and highly tradeable. While they can’t compare with oil or machinery imports, worldwide diamond imports totaled $117.4B in the last year. That’s big business. We wanted to know how big, so we created this visualization to show you where all the diamonds are going.

As with most industries, the top players command a huge majority of the wealth. The world’s top 15 diamond importers represent over 96% of global imports.

Top 10 Diamond Importers
1. United States: $24.4 billion (20.8%)

2. India: $19 billion (16.2%)

3. Hong Kong: $18.9 billion (16.1%)

4. Belgium: $15.4 billion (13.1%)

5. United Arab Emirates: $9.2 billion (7.8%)

6. China: $7.8 billion (6.6%)

7. Israel: $7.1 billion (6%)

8. Switzerland: $2.5 billion (2.1%)

9. United Kingdom: $2.2 billion (1.9%)

10. Singapore: $1.7 billion (1.5%)

Among top 15 importers, there are no countries from Oceania or South America. Australia appears #18 and Brazil at #52, with $7.6M, or just 0.01%, of the world’s diamond imports.

Small-scale Diamond Importers
The 34 countries from the bottom of the list import less than $1.5M totals. Some of these countries import so few diamonds that the entire value may be the result of purchases made by a private individual.

Nigeria, for instance, had total diamond imports of just $1,000. Many other countries in Africa, South and Central Americas, and central Asia also have fewer than $100,000 in diamond imports.

Why Some Countries Import and Export
Most understand diamonds this way: poor countries, like those in Western Africa, mine diamonds and rich countries, like the U.S. and the U.K., buy them. This narrative became especially popular in the 1990s and early 2000s, as a result of journalism covering blood diamonds.

In reality, the market is more complex than that. Countries don’t exclusively buy or sell diamonds. Several (the U.S., India, and China, for instance) are importing and exporting diamonds in huge quantities. The reason for this often has to do with quality and preference. For instance, a rich country may export cheap diamonds and import expensive ones.

The Import/Export Discrepancy
The worldwide total for diamond imports in 2016 was $117.4B, but we checked the export total that same year and discovered that it was $127.6B. So what happened to the other ten billion?

According to the IMF, “The principal reasons for inconsistent statistics on destination and origin for a given shipment are differences in 1) classification concepts and detail, 2) time of recording, 3) valuation, and 4) coverage, as well as 5) processing errors.” Turns out that $10B is just the cost of doing business in the diamond industry.

Diamond Market Trends
Someone without awareness of nation-by-nation economic trends might be surprised to know where the diamond import markets are growing and shrinking. Namibia, Singapore, and Italy – three nations on different continents with wildly different cultures – represent the three fastest growing markets. Namibia and Singapore each skyrocketed, growing over 100%. The U.K., the U.A.E., Botswana, and even Belgium (the world’s historic diamond capital) all represent shrinking markets. But why?

In the U.K., diamond imports dropped nearly 75% since 2012. Part of this drop in demand could be a result of the trend toward other gemstones in bridal jewelry. In other places, like Dubai (the diamond bazaar of U.A.E.), may just be on the back end of a boom.

The Future of Diamond Imports
The diamond industry has a history of success based in cheap labor, high demand, tightly monitored supply, and incredible marketing. Although the artificial diamonds and market forces are changing the industry, there’s no reason to think that diamonds are going anywhere.

In fact, a new supply of valuable ocean diamonds will begin hitting the market in the next few years, and may cause a new “wave” of diamond imports.”

https://howmuch.net/articles/world-map-of-diamond-imports

#92 Ronaldo on 01.15.18 at 11:35 am

#73 down_boy on 01.15.18 at 2:45 am

Owning the TSX means plenty enough metals exposure. – Garth

Not if you like to roll around in it.
————————————————————-
You mean like this guy.

https://www.youtube.com/watch?v=aPX5mRSQ3pw

#93 oncebittwiceshy on 01.15.18 at 11:45 am

…. and just to confirm that sales in the last part of December were part of the death rattle of real estate across the country.

So many people fighting to be part of that “over their heads” group of indebted.

https://www.msn.com/en-ca/money/homeandproperty/home-sales-rise-45percent-in-december-crea/ar-AAuJgoY
“Six-in-ten per local markets also saw a surge in activity in December with the Greater Toronto Area, Edmonton, Calgary, the Fraser Valley, Vancouver Island, Hamilton-Burlington and Winnipeg leading the country.”

#94 maxx on 01.15.18 at 12:00 pm

#15 Rompalooza on 01.14.18 at 5:26 pm

Excellent post.

Most who never save, much, especially anything anywhere near those sums don’t have the respect for cash essential for avoiding financial suicide when rates go stupid low.

Typical of these dufuses is engaging in the (previously) ubiquitous bidding war, a behavioural hallmark of intellects inferior to room temperature.

#95 Bob Dog on 01.15.18 at 12:01 pm

“Predictions are hard to make, especially when they involve the future. ”

Wiser words have never been set to page or blog.

#96 Doug in London on 01.15.18 at 12:07 pm

Further to my above comment #55, a lot of dividends (from stocks and ETFs I bought when they were on sale) were paid to my account today. I’ll probably reinvest it in other stocks or bond ETFs that are on sale.

#97 ANON on 01.15.18 at 12:21 pm

From the “not particularly inflationary if-you-think-about-it” Dept.:
https://www.bnn.ca/one-in-three-canadians-can-t-cover-bills-amid-debt-trap-survey-1.968182

#98 I am with stupid on 01.15.18 at 12:23 pm

Something very scary is going on behind the curtains.

It seems Fed is seeing tsunami of inflation showing finally in the official CPIs after the humongous ‘unofficial’ inflation in education/ tuition/ drugs/ housing/ assets that outpaces official CPI by far.

In my mind combined real inflation is at least 6-8 % with leading indicators everything excluded from CPI –
all asset classes, education, health care, including energy.

Official CPU was muted due to the fact that it measures nothing – inflation excluding inflation.

Now imagine official CPI showing 6-8 % accompanied by skyrocketing food prices and see what happens with currencies.

It is very likely that we will be in for very aggressive series of interest rate hikes, maybe even 1.25-1.5 % increase per year to levels of at least 6-7 % BASE rates, around 10 % mortgages rates.

Imagine what will happen with the Canadian economy if we follow with the rate increases.

It will crash and burn half way to these levels.

Now imagine what will happen if we don’t follow.
Loonie will get absolutely creamed.

Or we could have both with chicken little/aka governor of BOC delaying the increases, then rushing into it pushed by markets and $ 12 cauliflowers only to chicken out again.

There is something brewing in the bind market and it won’t be pretty.

If USD tanks big time and inflation overshoots gold might skyrocket to 2.5 k with miners probably increasing 10 fold.

Stock market will still keep going up though as I said probably to 35-38 k, maybe even 45 k.

A coffee at Starbucks for $ 5?
Give it a few years.

#99 Renter's Revenge! on 01.15.18 at 12:33 pm

In the picture of Poloz on the Financial Post website today, he has this quizzical look on his face, as if he’s asking, “U mad bro?”

I wonder if he reads this blog.

#100 field on 01.15.18 at 12:39 pm

“Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard.”

— Warren Buffett

#101 IHCTD9 on 01.15.18 at 12:40 pm

DELETED

#102 paul on 01.15.18 at 12:43 pm

Those darn kids what will they come with next.

http://www.cbc.ca/beta/news/canada/toronto/scarborough-hijab-attack-1.4487716

#103 ANON on 01.15.18 at 12:46 pm

#82 Victor V on 01.15.18 at 8:45 am

Score another one for the “not so inflationary” Dept.

#104 SimplyPut7 on 01.15.18 at 12:50 pm

Can someone please tell flippers, you can’t knock down an old home, build a new one in its place and list it for twice the price ($1.6 million); when other flippers buy a home on the same street, renovate it without tearing it down and struggle to sell it for half the price ($799,800).

$1.599 million
https://www.realtor.ca/Residential/Single-Family/18988972/3-HONEY-DR-Toronto-Ontario-M1R3S3-Wexford-Maryvale

$799,800
https://www.realtor.ca/Residential/Single-Family/18931567/23-HONEY-DR-Toronto-Ontario-M1R3S3-Wexford-Maryvale

Toronto is not Vancouver. B-20, rising interest rates and Home Capital killed this idea March 2017.

Stop living in denial and get rid of these properties before you lose any more money.

#105 InvestorsFriend on 01.15.18 at 12:54 pm

The DOW chart….

Is logaritmic… which is the ONLY proper way to view the historic trend on a very long term growing asset.

Is inflation adjusted (which was not obvious) but is the best way to think about investment results.

Excludes dividends… (which also was not obvious) and which has led some people to reach false conclusions (number 50?). In thinking about how investors did, it might be better to look at a total return index. Things look far better on that basis.

Always be cautious about jumping to conclusions. We all tend to see evidence for whatever our existing view is. We miss evidence to the contrary.

#106 IHCTD9 on 01.15.18 at 1:08 pm

#90 Prairieboy43 on 01.15.18 at 11:13 am

@IHCTD9, your Ten year forecast looks bleak. However I agree with many points. Dow will go to 43,000 @2028. Stamp it!
_______________________________

I hope you’re right! I’ve been in it to win it since the mid 90’s and have never sold off in a panic even once.

IMHO, it is totally possible to watch my home Province melt into a unrecognizable slop – even as I make decent returns in the market, sit at home debt free, pay squat for taxes, and live minimally with a big sh!t eating grin on my face.

I’d love to be totally wrong, but that’s just not going to happen. Ontario voters have lost their minds, they are nowhere near ready for a government with the southern brass required to slam on the brakes.

Every party we have to choose from is now left wing, and that is because they all know it too.

If you run on fiscal responsibility in this Province – your political career is over.

#107 I am with stupid on 01.15.18 at 1:20 pm

I thought people living in a G7 country are supposed to be rich.

Canada Debt Survey: A Third Of Canadians Can’t Make Their Monthly Payments

https://ca.finance.yahoo.com/news/canada-debt-survey-third-canadians-131500350.html

#108 Mr Buyer on 01.15.18 at 1:41 pm

Heading back to Canada in a few months. Wife unsure, kids loving it. 50 years old and starting over after 15 years of self employment in Japan. High School Science teacher by trade but have done many things. Gotta land on my feet as unemployment is about the only way a guy can find himself being divorced by a Japanese wife. Where to go and what to do all big question marks. Please tell me Canada has not been entirely over run by neo-marxists in my absence.

#109 n1tro on 01.15.18 at 1:48 pm

#102 paul on 01.15.18 at 12:43 pm

Those darn kids what will they come with next.
http://www.cbc.ca/beta/news/canada/toronto/scarborough-hijab-attack-1.4487716
————–
Best not to point out the obviously less ye be deemed an islamaphobe. I bet liberal SJWs were preparing to march before this inconvenient truth came up.

I miss the old days when you would make up an attempted assault or kidnapping to get out of final exams.

#110 I am with stupid on 01.15.18 at 1:48 pm

The guy seems delusional on the picture.

http://business.financialpost.com/news/economy/household-debt-and-fed-rates-are-front-and-center-for-poloz

#111 Penny Henny on 01.15.18 at 2:18 pm

#104 SimplyPut7 on 01.15.18 at 12:50 pm
Can someone please tell flippers, you can’t knock down an old home, build a new one in its place and list it for twice the price ($1.6 million); when other flippers buy a home on the same street, renovate it without tearing it down and struggle to sell it for half the price ($799,800).

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

Hey Flop, for a second I thought he was referring to you.
Flipper…..that’s got a ring to it.

#112 jess on 01.15.18 at 2:20 pm

What about survivorship bias,

https://www.investopedia.com/terms/s/survivorshipbias.asp

https://www.investopedia.com/articles/investing/061815/top-reasons-stock-indices-could-be-biased.asp

or

What is the difference between GAAP and IFRS?
In the United States, financial reporting practices are set forth by the Financial Accounting Standards Board, or FASB, and organized within the framework of the generally accepted accounting principles, or GAAP. … Perhaps the most notable specific difference between GAAP and IFRS involves their inventory treatments.

What is the difference between GAAP and IFRS?
https://www.investopedia.com/ask/answers/011315/what-difference-between-gaap-and-ifrs.asp

=======
colonial bank

http://retheauditors.com/2018/01/07/an-update-on-the-case-of-pricewaterhousecoopers-and-colonial-bank/

#113 Penny Henny on 01.15.18 at 2:20 pm

#104 SimplyPut7 on 01.15.18 at 12:50 pm
Can someone please tell flippers, you can’t knock down an old home, build a new one in its place and list it for twice the price ($1.6 million); when other flippers buy a home on the same street, renovate it without tearing it down and struggle to sell it for half the price ($799,800).
/////////////////

A cheap new kitchen is not a reno and that 1.6M house is easily twice the size

#114 robert james on 01.15.18 at 2:27 pm

# 102 Paul So,, the humans rights person was saddened because the girl was not attacked.. Yeah,OK.. ……………. …Amira Elghawaby, a human rights advocate based in Ottawa, said she was saddened to learn that the girl’s story was not true, adding it will likely only serve to embolden “those who do hold discriminatory views of Muslims.”

#115 jess on 01.15.18 at 2:34 pm

phantom mortgage securitizations.

PwC’s failure to spot Colonial fraud spells trouble for auditors

https://www.ft.com/content/c2cc45d6-f1f6-11e7-b220-857e26d1aca4

https://www.reuters.com/article/us-otc-fdic/at-heart-of-fdics-win-v-pwc-an-unsettled-theory-idUSKBN1ER1U1

#116 jess on 01.15.18 at 2:39 pm

Carillion collapsed on Monday when its banks pulled the plug, triggering Britain’s biggest corporate failure in a decade and forcing the government to step in to guarantee public services from school meals to roadworks.

#117 chapter 9 on 01.15.18 at 2:44 pm

I got an update from my MP about the sock boy developing new building code regulations.
Quote” The Trudeau liberal government is developing new building code regulations that will require costly “mandatory” energy efficiency renovations which will cause Canadians to potentially shell out tens of thousands of dollars, when building, selling, or renovating their homes”. Garth,have you heard anything about this?

#118 PastThePeak on 01.15.18 at 2:45 pm

Dow is up over another 200 points, and getting within spitting distance of 26,000. It only crossed 25,000 about 8 trading days ago. Should be the fastest 1000 point rise in history (more records – yay).

With this momentum I guess that means it should hit 30,000 within this quarter. Maybe a little 5-10% pullback, but that would still be higher than today. Easily Dow 50k by 2020.

I guess we really are in the goldilocks equities market. Global growth hitting new highs, interest rates overall quite low and rising only slowly, (official) inflation still contained, US tax cuts on the way, corp profitability up. The knowledge that the central banks will cut rates and QE the shit out of things whenever there are signs of trouble, and the gov’t is there to bail out any large too-big-to-fail company.

Nothing can derail this puppy. It truly is different this time…

#119 Lillooet, BC on 01.15.18 at 3:03 pm

#105 InvestorsFriend on 01.15.18 at 12:54 pm

***********

Hi InvestorsFriend: how are your crh and czo?

#120 Loser on 01.15.18 at 3:08 pm

DELETED

#121 Lillooet, BC on 01.15.18 at 3:09 pm

Hi Garth: do you approve of such an investment plan that puts 80% to 90% in balanced and diversified portfolio and 20% to 10% in risky but high potential stuff?

#122 Michael on 01.15.18 at 3:19 pm

How’s this for a unexpected sh!tstorm.

ETFs are relatively new, if an etf closes for whatever reason it liquidates and remits current market value to clients.

Big crash; big etf losses or an issuer hits black ice, one of the funds closes this crystallizing losses. ETF holding etfs chain reaction and tumble. People freak out trying to get out the door, etfs amplifying the effects.

Hahaha, I’m staying invested but damn.

Why would an ETF holding an index fail? – Garth

#123 Ian on 01.15.18 at 3:34 pm

Of course gold has done poorly the last few years, because we’ve had a risk-on environment balloon financed on cheap credit.

How are high quality gold equities speculative when they’re trading at single digits to cash flow and revenue and cash flow growing at great rates? Check out Kirkland Lake. And that’s just with gold at current prices.

#124 InvestorsFriend on 01.15.18 at 3:35 pm

#119 Lillooet, BC on 01.15.18 at 3:03 pm
#105 InvestorsFriend on 01.15.18 at 12:54 pm

Hi InvestorsFriend: how are your crh and czo?

***********************************
Not sure the meaning of your question given that you can check the price history easily. From experience I think you are asking a legitimate question, but what is it?

Are you asking if I personally made money or lost on these two investments?

#125 IHCTD9 on 01.15.18 at 3:38 pm

#108 Mr Buyer on 01.15.18 at 1:41 pm
Heading back to Canada in a few months. Wife unsure, kids loving it. 50 years old and starting over after 15 years of self employment in Japan. High School Science teacher by trade but have done many things. Gotta land on my feet as unemployment is about the only way a guy can find himself being divorced by a Japanese wife. Where to go and what to do all big question marks. Please tell me Canada has not been entirely over run by neo-marxists in my absence.
______________________________

Head on over to small town Ontario. If you don’t find a decent job, the wife and you could still live decently working at Timmies once Wynnie is voted back in and puts the MW up to 15.00 HR. I am assuming you must be bringing a good chunk of cash with you.

Forget about getting a teaching gig Ontario though.

#126 Ian on 01.15.18 at 3:48 pm

XGD five month high today! With US closed!

#127 I am with stupid on 01.15.18 at 3:54 pm

#108 Mr Buyer on 01.15.18 at 1:41 pm

I would stick to Japan. It is a beautiful place with very nice people, truly developed country, not a resource colony and frozen labour camp.

—————————————–

#117 chapter 9 on 01.15.18 at 2:44 pm
I got an update from my MP about the sock boy developing new building code regulations.
Quote” The Trudeau liberal government is developing new building code regulations that will require costly “mandatory” energy efficiency renovations which will cause Canadians to potentially shell out tens of thousands of dollars, when building, selling, or renovating their homes”. Garth,have you heard anything about this?

——

I have seen this movie. First they let you build glass condo and cardboard house and then they force you to make it energy efficient.

Take a note:
For a new glass condo to be PARTIALLY energy efficient you are talking about special assessment to the tunes of 50-100k just to replace the external glass walls with energy efficient/argon gas/modern windows.

You can not remove the glass walls and replace them with brick walls/insulation as the condo building can not handle that weight.

So you will spend 50-100 k and you will not make that condo energy fully efficient.

So prepare to pay some penalty in additional carbon taxes.

A friend of mine spend over 60 k to replace all windows and doors and put additional insulation on his house just to see his hydro and heating bills increase substantially!

Don’t get me wrong, this is not schadenfreude, but hey, that is some hard core screwing going on by the liberals f..ng hard the home owners.

On second thought as Canadians are so rich to pay such house prices, land transfer tax etc, why not tax them more?

It is very logical.

Ouch, I forgot, it was all on credit!

Pass the lubricant.

#128 jess on 01.15.18 at 3:58 pm

Paradise Papers revealed ‘commoditisation’ of tax avoidance

Australian Taxation Office says investigation of data leak has identified 731 individuals and 344 corporate entities so far

The Paradise Papers have helped to reveal a global industry of tax avoidance packages that are offered to wealthy individuals much like holiday packages, the Australian tax authorities say.

The Paradise Papers have also revealed how offshore tax providers have expanded dramatically since the financial crisis, growing super-sized networks of accountants, lawyers and tax specialists that dwarf similar networks from a decade ago.

https://www.theguardian.com/news/2018/jan/15/paradise-papers-revealed-commoditisation-of-tax-evasion-australia

#129 jess on 01.15.18 at 4:03 pm

“We get data releases quite regularly. In between the Panama Papers and the Paradise Papers, I think we’ve had about 13 different data releases from around the world.

“We’re trying to get that message out to people: if you’re relying on secrecy you can’t rely on secrecy,” he said.

Konza said another thing to emerge from investigations of the Panama Papers and Paradise Papers was the growing demand for so-called aged companies.

“There’s a real market in companies that have been incorporated for some time, which are then used to make an arrangement appear to be long-standing, or appear to pre-date certain tax changes” he said.
Guardian to fight legal action over Paradise Papers
Read more

“So you could get a 20-year old Singaporean corporation, it will cost you twenty or thirty thousand dollars … no reflection on the Singaporeans, it’s just a company that’s been registered, there’d be aged Australian companies as well that you could probably buy.

“The oldest company that we’ve seen for sale is a 1902 Nevada corporation from the US, which was almost US$200,000.

He said these revelations were helping revenue authorities.

#130 Newcomer on 01.15.18 at 4:13 pm

#80 Victor V on 01.15.18 at 7:37 am
One in three Canadians can’t cover bills amid ‘debt trap’: Survey
——–

I used to be more concerned by these surveys until I remembered that one in three Canadians is poor. That’s just what it’s like to be poor. There is nothing particularly new here.

#131 jess on 01.15.18 at 4:15 pm

Toronto police have disputed an 11-year-old girl’s claim that her hijab was cut by a man wielding scissors as she walked to school last week.

A Toronto police spokesman, Mark Pugash, said on Monday that an extensive investigation had been conducted and police had concluded it did not happen.

#132 SimplyPut7 on 01.15.18 at 4:32 pm

#113 Penny Henny on 01.15.18 at 2:20 pm

Toronto had a crazy run-up in housing prices before April 2017, but no buyer in their right mind is going to pay $800,000 more for a house on the same street that is a 1 minute walk from the house selling for $800,000 less.

Detached houses in the area are selling for $650,000 – $850,000. The larger house should try to sell for less or tell their bank/private lender/non-bank that the flip was a failure and move on before the losses pile up.

The city is littered with vacant homes for sale, those ‘knock down the smaller house build a mansion’ flips are everywhere, they haven’t been selling. They just sit vacant.

What if the lender asks for the money back one day and the investors doesn’t have it?

#133 Penny Henny on 01.15.18 at 5:00 pm

Hello Garth,
is this anything to be concerned about?
“There are no future dividends presently declared for “ZPR” as of 01/13/2018. The declaration and payment of dividends are at the discretion of the Company. There is no guarantee that a Company will maintain its dividend program and the dividend policy of a Company is subject to change at any time.”

https://web.tmxmoney.com/dividends.php?qm_symbol=ZPR

#134 Penny Henny on 01.15.18 at 5:30 pm

#132 SimplyPut7 on 01.15.18 at 4:32 pm
#113 Penny Henny on 01.15.18 at 2:20 pm

Toronto had a crazy run-up in housing prices before April 2017, but no buyer in their right mind is going to pay $800,000 more for a house on the same street that is a 1 minute walk from the house selling for $800,000 less.
//////////////////

As much as you would like to believe your statement it is not always the case. I used to live around Kipling and Bloor area. Lots were selling for 900,000 and the finished new build (2 or 3 times the size ) were easily going for 2 mill

#135 maxx on 01.15.18 at 5:32 pm

#19 BlogDog123 on 01.14.18 at 6:22 pm

“She knows the OHIP+ Pharmacare plan needed to be rolled out conventiently 5+ months before an election, forgetting that many under-24’s are already properly covered by their parent’s group benefits.”

And check out the red tape some poor souls will be enduring:

http://www.iheartradio.ca/580-cfra/ottawa-dad-raising-red-flag-about-ohip-1.3555877

#136 StandardDeviation on 01.15.18 at 10:17 pm

It is stunning to think we are surprised by these stats?
Wait until the retail shoe drops given the lack of disposable income.
Yet our institutions continue to spew statistical data that is reflective of political shibboleths.
Here we are celebrating the law of large numbers whilst blindly following the directions of the pied piper that imitates Zoolander. Sad!

#137 M on 01.16.18 at 12:13 am

LOL !