Normal

DOUG By Guest Blogger Doug Rowat

I wrote here recently that the vast majority of the key economic indicators that we follow are not signaling a pending US recession, which tends to be a main cause of bear markets. Here’s a quick recap:

A US recession not indicated

Source: Bloomberg, Turner Investments

However, often our clients focus not on the fundamentals but rather only on near-term market direction. For example, after the brief weakness in the S&P 500 in February and March, some of our clients wanted to throw in the towel and move their portfolios to cash.

Monthly declines in the market are normal. In fact, I would be alarmed if we went a year or more without a monthly decline. Markets need breathers, and pullbacks are part of healthy uptrends. The S&P 500 has now been in bull-market territory for more than nine years, but during this stretch there have been countless negative-return months. In fact, in terms of monthly count, more than half of the year was actually negative for the S&P 500 in 2011, but even this did not derail the bull market. Since the start of the current bull-run in 2009 the S&P 500 has averaged four negative months per year:

S&P 500 negative months breakdown

Source: Bloomberg. Returns do not include dividends

Further, even though we’re in the midst of a strong bull market, as the table indicates investors should expect at least one month per year where the market gets the proverbial stuffing kicked out of it. Generally, each year has that one horrendous month where the market plunges 5–6% or more. But, when economies are solid and companies are profitable, equity markets shrug off these bad months and the bull market continues—full-year returns have averaged 13.2% (not including dividends) since 2009 despite a total of 36 months, or three years, that were negative.

Now, granted, this is a fairly simplistic way of looking at market returns, but when we examine rolling returns, which look at overlapping time periods, giving a better sense of historical performance versus a simple average return or a return over fixed dates, we get an even clearer picture of how little long-term investors need to worry about market fluctuations. When it comes to the likelihood of positive annualized returns, the odds are stacked heavily in their favour. Basically, there are only a handful of times throughout the entire modern history of the US equity market where you wouldn’t have made money by investing over 10 years.

One might argue that this doesn’t help someone who invested during one of those unlucky periods, but 1) this is simply a risk of capital market investing and 2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years? Regular contributions, a balance of other asset classes and disciplined rebalancing further reduce the likelihood of a negative long-term return.

Also, when you examine the chart below, there are really only two particularly bad periods to have invested in US equities: prior to the Great Depression and prior to the Great Recession (our recent global financial crisis). Now, if you have the foresight to know with certainty that these incredibly rare, once-in-a-generation events will repeat themselves in the coming 10 years then, by all means, don’t invest. But for the rest of us poor slobs who lack such insight, maintaining long-term exposure to the US equity market is a prudent financial decision.

Rolling 10-year S&P 500 returns (%): odds strongly favour long-term investors making money

Source: Bloomberg. Returns do not include dividends.

Even looked at on a more straightforward calendar-year basis, the S&P 500 has traded higher 68% of the time over the past 90 years. All things being equal, pretty good odds.

So, don’t allow a bit of short-term market weakness to cause you to make impulsive, emotional decisions regarding your investments.

A bad month is just that—a bad month. Chances are it proves nothing.

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

52 comments ↓

#1 For those about to flop... on 07.14.18 at 3:42 pm

Weekend rewind.

This week in howmuch articles…

M44BC

Visualizing Countries with the Highest Household Wealth.

https://howmuch.net/articles/household-net-financial-wealth-around-the-world

States Investing the Most (and Least) in Higher Education.

https://howmuch.net/articles/states-investing-the-most-in-higher-education

The Multi-Billion Dollar ICO Market in 2018 Captured in One Graph.

https://howmuch.net/articles/ico-market-2018

#2 For those about to flop... on 07.14.18 at 3:43 pm

Pink Lemonade Stand in Vancouver.

This townhome is only borderline Pink Lemonade at this stage but allow me outline why I am going to follow it.

I only live roughly 10 blocks from this complex named Century on Fraser st.

In the mid 2000s on this site stood tired a looking local market,formerly an IGA,my wife informs me,a Polish bakery,hair dresser and tax place.On the backside stood decaying wooden Townhomes.

Ledingham McAllistar swooped in and tried to develop the whole block ,with just a few holdouts on one side.

They built a quality concrete product with retail that includes a No Frills ,Shoppers and Starbucks that the neighborhood had been sadly lacking,mainly the supermarket.

A few other developments have piggy backed off this development and will continue to for the foreseeable future with land assembly the new vogue in the area.

These Townhomes were going in the early 700s at completion in 2011.

Some of these and the condos above the retail have most likely been flipped several times with open houses every weekend regardless of the time of year.

The prices have continued to escalate and I have never bothered to look for Pink Snow in this complex but with a light cool breeze starting to blow on attached projects I am going to follow this one because the numbers suggest it could be the beginning of a plateau in this segment if nothing else.

They paid 1.1 in November 2016 and it has an assessment of 1.2 so they have a bit of wiggle room but the days of unfettered profits on the complex could be slowing down.

I could be wrong on this as always, but to try and show people signs to keep them ahead of the general populace like I did with detached,you have to put yourself out there with the risk of looking silly.

This is still an extremely popular complex and it could easily gor for this number but this is there third price reduction and they haven’t yet been able to get a fish on the line in a place where people were formerly lining up to buy.

I am going down to the No Frills now and will ask them to do a price check on this townhome on the P.A…

M44BC

4523 Prince Albert Street, Vancouver paid 1.1 November 2016ass 1.2

Apr 17:$1,319,000
Jul 13: $1,225,000
Change: – 94000.00 -7%

https://www.zolo.ca/vancouver-real-estate/4523-prince-albert-street

November 2016.

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

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

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#3 dakkie on 07.14.18 at 4:15 pm

Canada ONE STEP CLOSER To Recession! Canadians $200 From Being Completely Broke!

http://www.investmentwatchblog.com/canada-one-step-closer-to-recession-canadians-200-from-being-completely-broke/

#4 kbean on 07.14.18 at 4:41 pm

As usual, great post Doug.

Quick question: The yield curve (10s-2s) is flattening despite healthy growth in the US economy. At this rate, one might expect an inverted yield curve sometime in 2019. I looked up a few articles online and they seems to attribute this to insatiable demand for longer term treasuries by pension funds and insurance companies and argued how the yield curve is no longer a reliable indicator of recessions.

Can you comment on the root cause of this and whether if this worries you.

Many thanks,

#5 Evangeline on 07.14.18 at 4:47 pm

Don’t investment advisors welcome periodic “corrections” of the market going down, and see them as signs of a healthy market, and worry more if it’s just continuous rising which they call “overheating”?

#6 conan on 07.14.18 at 4:56 pm

My POS lap top that can go no higher than XP is now getting an err_ssl on greater fool . Is this the new normal?

We converted to a more secure structure on Friday. – Garth

#7 Penny Henny on 07.14.18 at 5:01 pm

2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years?-Doug
////////////////////////////////////

Maybe when you just sold your house in Etobicoke and bought somewhere cheap like Welland. And, oh yeah, you are recently retired. What’s the plan for that?

#8 Stone on 07.14.18 at 5:05 pm

#3 dakkie on 07.14.18 at 4:15 pm
Canada ONE STEP CLOSER To Recession! Canadians $200 From Being Completely Broke!

http://www.investmentwatchblog.com/canada-one-step-closer-to-recession-canadians-200-from-being-completely-broke/

———-

Normally, I would just laugh off the above however after what Doug had to say about the S&P 500 and making a buck on that index, I am curious to know, discounting inflation from the equation, how many Canadians / Americans were $200 away from bankruptcy over the last 50, 60, 90, etc, years.

Is it just a shock value headline to scare the masses and sell newspapers or their equivalent or has this issue always been there? In my 40 + years in existance, I think this problem has been around the whole time. If that’s the case, who really should give a rats ass about a headline like that? I’m guessing only the losers with $200 or less to their name and the shame and stress it comes with.

After all, increasing what one has in their wallet (in this case, $200 or less), is pretty easy to fix.

#9 AK on 07.14.18 at 5:14 pm

“For example, after the brief weakness in the S&P 500 in February and March, some of our clients wanted to throw in the towel and move their portfolios to cash.”
=====================================
Typical behaviour by the amateur “investor”. The S&P 500 was up 20% in 2017.
It’s very normal for a pause or a correction.

#10 Bob on 07.14.18 at 5:16 pm

Garth why are you against Doug Ford’s decision to scrap Kathleen Wynne’s sex-ed agenda?
Kathleen Wynne enforced four years of neo-feminist and LGBTQPIS2AA tyranny onto us in Ontario. Any parent who dared stand up to Kathleen Wynne or complain that their teacher is naked for sex-ed was labelled a homophobe or police would send trumped up charges to censor the parents. Is this the Ontario you support?

#11 Gordon on 07.14.18 at 5:22 pm

It’s amazing people would direct their financial advisor to liquidate their holdings to cash because the market dipped for a day, week, month or whatever.
They should be buying on the dips, not crying about their chips

#12 Doug Rowat on 07.14.18 at 5:29 pm

#7 Penny Henny on 07.14.18 at 5:01 pm
2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years?-Doug
////////////////////////////////////

Maybe when you just sold your house in Etobicoke and bought somewhere cheap like Welland. And, oh yeah, you are recently retired. What’s the plan for that?

I’m going to solve your personal retirement problems with a blog post?

I just explained how favourable the odds were of earning a profit over the long term. But it’s not a certainty. If you want certainty, don’t invest in capital markets.

–Doug

#13 Sale History Scrubbed on 07.14.18 at 5:37 pm

Darn it.
The one site with sale info has been scrubbed.

Propertyinsight.ca is no more.

Taken over by REW?

Lame!

#14 great entry Doug!! on 07.14.18 at 5:48 pm

enjoyed the historical perspective.

using such data for entry points to add is very useful, i’d imagine

such as, add to every 2% day drop in the s&p or, every 10% drop, or every 5% drop, or to each negative month..etc

any studies to compare this type of a approach vs conventional 1st of the month additions to a portfolio? 2017 was indeed an outlier (with Trump as President no less!!..hahaha)

#15 Doug Rowat on 07.14.18 at 6:06 pm

#4 kbean on 07.14.18 at 4:41 pm
As usual, great post Doug.

Quick question: The yield curve (10s-2s) is flattening despite healthy growth in the US economy. At this rate, one might expect an inverted yield curve sometime in 2019. I looked up a few articles online and they seems to attribute this to insatiable demand for longer term treasuries by pension funds and insurance companies and argued how the yield curve is no longer a reliable indicator of recessions.

Every year, Ovechkin blasts the puck from the top of the left face-off circle. Everyone knows this and every year articles online claim his success won’t last, yet virtually every year he wins the Rocket Richard trophy.

We stick with indicators that have been highly reliable historically and avoid debating their future success. It takes the emotion out of it. But, that being said, we still use several of these indicators to hedge our bets.

–Doug

#16 Penny Henny on 07.14.18 at 6:21 pm

#12 Doug Rowat on 07.14.18 at 5:29 pm
#7 Penny Henny on 07.14.18 at 5:01 pm
2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years?-Doug
////////////////////////////////////

Maybe when you just sold your house in Etobicoke and bought somewhere cheap like Welland. And, oh yeah, you are recently retired. What’s the plan for that?

I’m going to solve your personal retirement problems with a blog post?

I just explained how favourable the odds were of earning a profit over the long term. But it’s not a certainty. If you want certainty, don’t invest in capital markets.

–Doug

#17 Penny Henny on 07.14.18 at 6:25 pm

#12 Doug Rowat on 07.14.18 at 5:29 pm
#7 Penny Henny on 07.14.18 at 5:01 pm
2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years?-Doug
////////////////////////////////////

Maybe when you just sold your house in Etobicoke and bought somewhere cheap like Welland. And, oh yeah, you are recently retired. What’s the plan for that?

I’m going to solve your personal retirement problems with a blog post?

I just explained how favourable the odds were of earning a profit over the long term. But it’s not a certainty. If you want certainty, don’t invest in capital markets.

–Doug
////////////////////////

Sorry but I am a bit confused.
Are you saying that you are going to do a separate post for someone in this situation? Or was your comment meant to say that someone who is not continuing contributions to their retirement fund that they should be doing something a bit different?

#18 Shawn Allen on 07.14.18 at 6:29 pm

10 Year and 30 Year Yields.

Mark argues that the fact that 30 bond year yield is only a tiny bit higher than the 10 year yield in both Canada and the U.S. suggests that the buyers of the 30 year bond seem to be expecting or protecting against slower interest rates. And, Mark asked for my help in explaining this. (ooh, catnip…)

The Real Mark on 07.13.18 at 11:26 pm responded to “oncebittentwiceshy”:

“Mark, this is why the institutional investor is flooding the 10yr market. They can’t afford to lose 30 plus percent on the kind of duration that they actually need to provide member benefits or insurance.”

Except that there’s no evidence of institutional investor preference for 10 year versus 30-year debt. The spread is a mere 5-10 bp for the extra 20 years until maturity, which is peanuts compared to the extra interest rate risk taken.

******************************************
Mark, in responding I’d suggest first acknowledging that “oncebittentwiceshy” is 100% right about the higher duration risk on the 30-year. You agree with that so why not start off by agreeing with the parts you can? When you start off with basically. “you’re wrong” you put the person you are responding to on the immediate defense.

Mark’s point and mine I believe is to ask why the yield on the 30 year is barely higher than the 10 year given the much greater interest rate risk that oncebitten also acknowledges.

It can’t be the case that institutional investors are not buying the 30’s They must be gobbling them up with a similar appetite to the 10 years given the similar yields. But why so when the 30’s will fall harder in value if interest rates rise?

If they are buying the 30’s to get a capital gain then that means they are actively betting rates will fall.

More likely they are simply protecting against such a fall. And quite likely they have standard investment policy plans that REQUIRE them to allocate a certain amount of funds to 30 years and 10 years. Pension funds and insurance companies tend to be stodgy that way.

But overall, looking at the total market for 10 years versus 30 years and ALL the market participants, they sure don’t seem to be fearing an interest rate rise. Looks like they fear or at least want to protect against a fall.

Or is there another explanation such as barely any 30s are issued by government? (In Canada as well as the U.S.) Yield is a matter of the intersection of supply and demand of course.

#19 Tony on 07.14.18 at 7:00 pm

There’s always day trading and playing penny stocks. People shouldn’t put money into ponzi’s where they haven’t a clue what they’re even doing. So far since 2009 the stupid people who knew nothing made money and the smart people mostly lost their money shorting stocks. In a world gone up-side-down it’s no wonder all the money is still on the sidelines and will stay there for a long, long time.

#20 Reynolds531 on 07.14.18 at 7:05 pm

#17 penny

What he’s saying is if you can’t stomach risk you have no business in stocks. Unless you can find a fund with a guarantee.

What I’d suggest is that even newly retired most of your money is going to be invested 20 years. Take your 4 percent safe withdrawal every year and don’t worry. If it goes to zero the zombies have taken over. You have bigger issues than money.

#21 Stan Brooks on 07.14.18 at 7:07 pm

Should not finally the f..kng government implement a sustainable retirement system where money won’t be stolen by thieves (BoC, CMHC, CPP Fund, greedy government)?

In Europe/even Greece/ you don’t need to invest in order to retire. What is wrong with this place?

#22 Stone on 07.14.18 at 7:31 pm

However, often our clients focus not on the fundamentals but rather only on near-term market direction. For example, after the brief weakness in the S&P 500 in February and March, some of our clients wanted to throw in the towel and move their portfolios to cash.

———

Not sure I get why that should happen. Don’t they read this blog? Listen to your weekly call? Read your newsletters? All of the above relating to the nature of investing long term versus speculating short term has enlightened me immensely. It sure gave me balls of steel when it comes to holding a balanced and globally diversified portfolio and not flinching.

#23 Fish on 07.14.18 at 8:24 pm

Also please I might add that I would have to wait 10 years to be driven around with these so called robot carsyou expect me to WAIT no I will call my helicopter to take me

#24 dr talc on 07.14.18 at 8:33 pm

someone wrote here about the abusive process in BC for owner builders. It was shocking. It reminded me that after WWII, some returning vets were given a free lot and a house blueprint. Most of those ‘Jerry built’ houses are still standing.

#25 Brian Ripley on 07.14.18 at 8:43 pm

A US recession not indicated… Doug Rowat

Hi Doug, re: your table of U.S. Recession Indicators in this post. My Canadian data plots are not as bullish:

Inverted Yield Curve
10yr less 2yr spread now 14 bps to inversion
chart http://www.chpc.biz/yield-curve.html

Housing Starts (markets are local)
Vancouver -8% Y/Y
BC -10% Y/Y
AB -11% Y/Y
chart http://www.chpc.biz/housing-starts.html

Unemployment Rate (another local market)
Yes unemployment is down Y/Y across major cities but employment is down Y/Y in Toronto, Vancouver and BC. The chart on employment in Toronto shows a steady decline in Toronto and Ontario well before the 2008 crash whereas in Vancouver and BC, employment has been growing since 2015.
chart http://www.chpc.biz/earnings-employment.html

And of course with real estate its difficult to put in a sell stop. According to Better Dwelling, April 2018, “This Week’s Top Stories: Nearly Half Of Toronto Condo Investors Have Negative Cash Flow, And Canadian Prices Are Making Recession Like Moves”
Article https://betterdwelling.com/this-weeks-top-stories-nearly-half-of-toronto-condo-investors-have-negative-cash-flow-and-canadian-prices-are-making-recession-like-moves/

Some people are looking at a wall of worry while others recoil from the wisdom of crowds.

#26 the Jaguar on 07.14.18 at 8:46 pm

Mercy, Doug Rowat looks clean cut. Freshly scrubbed they call it or something. I bet he can wiggle his ears in serious boardroom discussions and make the other one laugh. As for clouds on the horizon, don’t believe it. Trump says he will run for a second term. That everyone wants him to do it. What will we do for entertainment if he changes his mind. He seems to have contributed in some way to things turning around down south, if only by the power of suggestion.
I don’t know anything about all those charts, yield curves and whatnot. But my intuition as I scour the landscape tells me we will continue to be on a ‘roll’.
We were too long at the bottom and have gotten used to the sun on our faces again. Analysis from the Jag.

#27 S.Bby on 07.14.18 at 9:19 pm

after the brief weakness in the S&P 500 in February and March, some of our clients wanted to throw in the towel and move their portfolios to cash.

What happens when they request that? Did you do it?

#28 mid on 07.14.18 at 9:23 pm

Question, off-topic. What is the difference between a client account and a nominee account. I have a variety of investments (including some self-directed stuff) and my mutual funds guy wants me to change to a nominee account. What are the risks, if any, with a nominee account?

Mid

#29 Susan on 07.14.18 at 9:36 pm

DELETED

#30 Doug Rowat on 07.14.18 at 9:58 pm

#27 S.Bby on 07.14.18 at 9:19 pm
after the brief weakness in the S&P 500 in February and March, some of our clients wanted to throw in the towel and move their portfolios to cash.

What happens when they request that? Did you do it?

Cash earns nothing. And our experience suggests that once the decision is made to move to cash it persists, sometimes for many, many months, usually costing clients substantial upside. So, we advise against it.

But, of course, if the client insists that this is what they want then we respect their wishes.

–Doug

#31 Alan Breck on 07.14.18 at 10:07 pm

#21 Stan Brooks on 07.14.18 at 7:07 pm

Should not finally the f..kng government implement a sustainable retirement system where money won’t be stolen by thieves (BoC, CMHC, CPP Fund, greedy government)?

In Europe/even Greece/ you don’t need to invest in order to retire. What is wrong with this place?

Whats the old saying? If you want something done right… do it yourself.

If I had a choice I would take every CPP contribution I ever payed to the govt and invest it myself for my own retirement. If only we had the option to opt out and invest it into a private directed retirement plan. They could even record it via a registered RRSP or TFSA to verify us commoners have invested it instead of spending on toys. It would be great! (Hint, hint, any listening politicians out there?)

Where in the world did we ever get the idea that the government should be responsible for our retirement?
Their propensity to piddle away the public’s money is unrivaled.

I pay about $200 CPP every paycheck. Do I think I will ever see that money back in full, with realized investment appreciation? Not in my lifetime.

#32 crowdedelevatorfartz on 07.14.18 at 10:33 pm

@#24 Stan Brooks
“In Europe/even Greece/ you don’t need to invest in order to retire. What is wrong with this place?”

+++++++

We dont riot in the streets and burn stuff down when the govt cuts pensions and raise taxes……… yet.
*******************************************

@#31 Alan Breck
“I pay about $200 CPP every paycheck.”
+++++++
and your employer matches it……….

#33 MF on 07.14.18 at 10:47 pm

#31 Alan Breck on 07.14.18 at 10:07 pm

“Where in the world did we ever get the idea that the government should be responsible for our retirement?
Their propensity to piddle away the public’s money is unrivaled.”

-Look at the personal finances of a lot of people. They depend on government pensions and benefits to survive. This is not just a Canadian thing, it’s the entire western world. People in the third world often don’t have to worry about “retirement” because they don’t live long enough.

Blame lies with us, the populace…not “government”.

MF

#34 islander on 07.14.18 at 10:52 pm

https://www.vanguardcanada.ca/documents/product-guide-en.pdf

Hey all – Interested in learning more about ETFs and model portfolios? 80 pages of useful info. from Vanguard.

#35 MF on 07.14.18 at 10:53 pm

#21 Stan Brooks on 07.14.18 at 7:07 pm

Greece is due for its 3-5 year insolvency/debt crisis soon.

The reason: too many people retired and taking, not enough payment into the system.

Bad example. Really bad.

MF

#36 knowitallbob on 07.14.18 at 11:29 pm

Doug – employment numbers are a lagging economic indicator, not leading. That’s pretty basic stuff, and I’m not a financial guy..

#37 A Yank in BC on 07.15.18 at 1:15 am

Much wisdom in Mr. Rowat’s advice. Never ever attempt to time markets. A fool’s errand.

#38 Ronaldo on 07.15.18 at 1:21 am

#21 Stan Brooks on 07.14.18 at 7:07 pm

Should not finally the f..kng government implement a sustainable retirement system where money won’t be stolen by thieves (BoC, CMHC, CPP Fund, greedy government)?

In Europe/even Greece/ you don’t need to invest in order to retire. What is wrong with this place?
—————————————————————
And the reason these countries are going belly up. If it is left to the people to save for retirement it won’t happen. If the government increases the amount paid into CPP that will only harm those on lower incomes whose GIS will be clawed back. No incentive for this group to save. One of the greatest retirement tools that was intended for the lower income earners, the TFSA, is not being used by those that need to most. The ones that need these tools the most usually don’t have the money to invest. They are having a hard enough time making ends meet as it is. As a result, these programs are being taken advantage of by those that need them the least. Good for them.

#39 Stan Brooks on 07.15.18 at 2:39 am

#31 Alan Breck on 07.14.18 at 10:07 pm
#32 crowdedelevatorfartz on 07.14.18 at 10:33 pm

What I meant it that if you have relatively decent government contributing more to public fund that is managed well (see Norway here) then you will have both:
– lower inflation as there will be less money for the stupid to spent,
– less old people on the street begging or searching through garbage bins (increasingly relevant for the ‘world class’ city Toronto these days)
– chance of some decent pension.

Of course if you government is corrupted, then you have:
– theft of EI – 50 billions +
– more money for the stupid to spend so higher inflation/tax on the responsible
– even more money for the stupid to spend through sky high credit where creditor is not on the hook (thanks to CHMC, MBS backed by government that ‘magically’ do not add to the public debt even though if the individuals can not pay, an increasingly likely event due to rising rates, the feds are on the hook

– theft of CPP by indexing pensions by 1-2 % with true inflation/cost of living increasing at 8 % +….

So then, yes, if you have a corrupted government, you are much better off by not contributing anything as you most surely will get close to nothing in return.

So on that note I agree, 40 years x 5 k contribution without counting the growth, with the growth is close to 500 k at time of retirement should easily yield 20 k yearly (double max CPP) without depleting the principle.

And yes, you can get that money by revoking your citizenship. But they will give you the contributions without the growth.

So keep growing that RRSP folks, learn investing.
I am sure somebody down the road will have some ideas about it….

#40 Keith on 07.15.18 at 4:15 am

#21 and #31

The CPP investment board gets an average return of over 7%, with costs in the 0.35% range. It is a well managed fund, with access to private investments that wage earners cannot even dream of accessing.

The early decades of CPP were characterized by serious underfunding. In the nineties, my grandfather was getting his total contributions back every six months, and he paid employer and employee portions as a self employed person. CPP is now stable, but the payout is modest, survivor benefits are a joke, and the penalties for not contributing the max rate for forty years are severe.

Like so many government programs, it isn’t that they are a bad idea, they lack good execution. The contribution rate should have been 15% from employee and employer from the start. There would be a realistic pension with money for flexibility.

If you think more than 10% of the working population can do better than CPP, you’re dreaming in technicolor. The track record of the average investor, even with an advisor is abysmal. Fees are high and performance is terrible for the typical person.

CPP and OAS and tax credits will keep you out of poverty as a senior, if they remain in place with an aging population. Sadly the private sector investment industry serves itself first, the investor last. More and more Canadians have no private pension, little in the way of RRSP’s, TFSA’s or savings, and have been shut out of the real estate market. It’s a two tier society, more and more.

#41 Oft deleted much maligned stock.picker on 07.15.18 at 5:47 am

The earnings, tax breaks and repatriation of foreign profits we’re a sure sign that things will continue to sizzle. This would have been a really stupid year to “sell in may and go away”….which by the way is such a date issue that anyone with half a brain should know that it’s no longer valid…..just the efficient market theory…..totally archaic and out dated. But WOW…..what a bummer….no swoon….just a booooooom !!

I would have cried…..maybe hurtyself bawling if id missed the runs on my favorite superstores….

Sell in May and go away was a thing you did with mining stocks…..it was because the ground unfroze and you couldn’t drill , dig or survey anymore….like daylight savings and summer holiday kept kids busy on the farm.

We don’t do that anymore….so why would you abandon the market

Look…Trudeau McGroper might want to cancel the internet so that information and criticism can be controlled through one funnel…like in the 50’s….but the market is now international and can’t be stifled..one short pop in a superstock can mean missing a year’s worth of capital gain…..you gotta stay in…

#42 NoName on 07.15.18 at 8:18 am

@that CPP dude

If you are paying 200cad per pay and you are paid weekly it takes 13 weeks for CPP to be paid of, 26 if pay is every second week, or if you are paid “random” it will take you until you reach 56k cad.

What will be interesting to hear you when CPP is increased to can’t remember number but I think it’s around 80k, soon you will be paying 270-ish cad per week, and you will say that 200 wasn’t as bad as thought… Go to gargler and sirch for bill c-26 I you believe me not.

#43 Doug Rowat on 07.15.18 at 9:48 am

#36 knowitallbob on 07.14.18 at 11:29 pm

Doug – employment numbers are a lagging economic indicator, not leading. That’s pretty basic stuff, and I’m not a financial guy..

Apparently not. See page 3 of below. But regardless, hardly the point of my post.

http://www.turnerinvestments.ca/pdfs/Recessions-and-Bears-MAY-2015.pdf

–Doug

#44 crowdedelevatorfartz on 07.15.18 at 10:46 am

@#39 Stan Brooks
“if you have relatively decent government contributing more to public fund that is managed well (see Norway here)…..”
**************

True enough.
I think the various govts had (have) a tendancy to put all revenue in a slush fund that they can draw from which may (or may not) not be the case with CPP.
OR when a govt uses a popular “vote grabber” by promising to raise CPP payments or lower the eligability age.
It’s not their money to play with! Its the taxpayers!
When are these self serving A-holes going to figure THAT out?

As for the average person not saving enough (or anything) for retirement ….. total agreement. The average person is an idiot when it comes to money …….and savings? Very low on a financial illiterates priority list.

That being said, Norways extremely well funded Petro fund( created in 1996) has been combined with the country’s pension fund….to create the richest pension fund in the world.
Its amazing what happens when politicians arent allowed to squander taxpayer dollars…..

Here’s a site that lists pensions worldwide and the systems set up to collect and pay.
Canada rely’s too much on individual’s personal contributions to save for the future….epic fail for the majority….

http://www.pensionfundsonline.co.uk/

#45 oncebittwiceshy on 07.15.18 at 1:25 pm

Alan Breck: “I pay about $200 CPP every paycheck. Do I think I will ever see that money back in full, with realized investment appreciation? Not in my lifetime.”
<<<<<<<<<<<<<<<<<<<<<<<<<

Alan, go to "my service account" GoC website and take a look at how much you've actually contributed.

I just recently retired and took my CPP at 60. Huge penalty but I also contributed for 41 yrs and 38 of those years were maximum contributions.

The interesting fact is my total contributions were $44,106.41. Obviously, the employer matched that as well over the years.

I'm receiving $723/month which is $8676/yr.

It will take just over 10 yrs to pay back those contributions. The next (hopeful) 20 yrs will be based on their returns over the years.

People really need to take a look at how much they are actually contributing to their retirement before making rash decisions.

#46 SoggyShorts on 07.15.18 at 1:49 pm

#45 oncebittwiceshy on 07.15.18 at 1:25 pm

Alan, go to “my service account” GoC website and take a look at how much you’ve actually contributed.

I just recently retired and took my CPP at 60. Huge penalty but I also contributed for 41 yrs and 38 of those years were maximum contributions.

The interesting fact is my total contributions were $44,106.41. Obviously, the employer matched that as well over the years.
************************
If you put in 40K in 40 years, and so did your employer, that adds up to $ 400,000 with 7% returns.

I hope you live to be at least 110 years old.

https://www.calculator.net/investment-calculator.html?ctype=endamount&ctargetamountv=1000000&cstartingprinciplev=0&cyearsv=40&cinterestratev=7&ccontributeamountv=2000&ciadditionat1=annually&printit=0&x=107&y=21

#47 SoggyShorts on 07.15.18 at 1:54 pm

To add to my above post- that 400K nestegg that is your CPP pile should be kicking off a lot more than the 8K per year you are getting.

#48 TurnerNation on 07.15.18 at 1:56 pm

Is today’s blogger old enough to shave even?
50th?

Again a stark warning do not buy a house in major cities. About to be overrun with drug dealers and police will not come when you call. If you dare touch them..you’ll lose everything. Govern yourself. Or not.
Welcome to UN Agenda zombie h-ll. Drug dealers are to be protected and nurtured. Of course they will be armed.

Laws are BAD cause you know they target “poor marginalized vunerable communities”.

“Whatever potential harms there are associated with drugs, they’re always worsened if they have to purchase and consume drugs illegally,” she said.

https://www.cp24.com/news/toronto-s-medical-officer-of-health-wants-feds-to-decriminalize-all-drugs-for-personal-use-1.4013961

#49 conan on 07.15.18 at 2:04 pm

Was an enjoyable World Cup!
Big meeting tomorrow between Putin and Trump.

The Quneitra region is on the menu. Israel heating up, and there could be war.

#50 Stan Brooks on 07.15.18 at 2:42 pm

#45 oncebittwiceshy on 07.15.18 at 1:25 pm

That ‘pension’ of $723 a month won’t last you for a week in a mayor city in Canada. Or in a small city.

The ‘good’ news is that 8 % + increase in cost of living annually and 1.5-2 % indexing of your CPP you most likely will experience real cut in purchasing power in half in 12 years and another one in half in another 12, so if you live to 84 which is average/modest age that ‘pension’ will be reduced to less than $200 in current Poloz’s pesos aka as ‘loonies’, which won’t last you for 2 days at that time.

Now find me another country in the world where average government ‘pensions’ lasts you 2 days or a week.

If you believe that somebody will subsidize you in these years, you are deadly mistaken.

The cherry in the pie will be when they come for your RRSP in one form or another.

#51 DeVante on 07.15.18 at 9:46 pm

Great post! Thanks

#52 Same here on 07.17.18 at 5:02 am

#7 Penny Henny on 07.14.18 at 5:01 pm
2) what is the likelihood that you would have entered the market with your entire net worth during one of these periods and then subsequently contributed nothing else to your portfolio for 10 years?-Doug
////////////////////////////////////

Maybe when you just sold your house in Etobicoke and bought somewhere cheap like Welland. And, oh yeah, you are recently retired. What’s the plan for that?

—————————————————————-
Or when you sold your self-employed business in 2007 after 12 long years. And you now had paid off the house and all other debts , with a shiny new HELOC to show for it. :) …so you average in over the next year To be cautious, with some leverage on top.