When crisis comes

A decade ago, when the world was ending and people still read books, I wrote one called ‘After the Crash.’ No, it was not about housing. And the crash referred to was the egg Wall Street laid after Lehman collapsed and the credit crisis swept the globe.

To this day I am not sure most people know how serious the event was, nor how near we came to the financial precipice. That was the point of my words then. The book painted various scenarios – recovery, crisis or collapse. Each had investment strategies attached. At that point, in the dying months of 2008, nobody knew what kind of life would emerge. A rerun of the 1930s? A gigantic buying opportunity? Or something in the middle?

My guess was an abrupt recovery, since it was becoming evident governments would simply not allow a reset. The actions that ensued proved this view correct. Central banks slashed rates to nothing. Ottawa took over entire mortgage portfolios. Governments poured trillions into stabilizing the economy. Banks and car companies were bailed out.

And it worked. Cheap rates encouraged people to borrow and spend (especially on real estate) again. Major corporations survived. Central banks and governments aligned their efforts as never before. But investors took a hit. The Toronto market, for example, lost 55% of its value. Volatility on American markets spiked wildly. People with cash who Hoovered up bargains (Canadian bank stocks plunged) profited wildly. Those who sold into the storm were spanked remorselessly. Ten years on, many have yet to recover.

One of them whom I know, Nance, was a sixty-something widow with $400,000 in balanced funds managed by a guy at RBC. (I knew him, too). After Tom died and she’d sold the family house, this was her complete fortune, being carefully managed to provide her with a modest, but adequate monthly income.

On the second-last day of September that year the Dow gave up 774 points in an orgy of selling that pared the index by almost 7%. The news was grim. Nance called. “I’m so scared,” she said. “What should I do? My guy says do nothing, not to sell, but I wanted your opinion.” And I agreed. Nothing. It’s too late to avoid a loss, so wait for the recovery, I said.

That afternoon Nance fired her advisor, sold her funds – crystallizing a loss of more than $100,000 – and put the remainder into a cashable GIC. She never invested again and, naturally ran out of money. At the age of 73 she was forced to declare bankruptcy after digging into her bank Visa for $47,000.

Of course, her investments had sunk along with the markets, hitting bottom about the time she sold. Four days later the $700 billion Emergency Economic Stabilization Act of 2008 passed the US Congress, and the recovery was sparked. A few days later the Dow gained 936 points, or 11%, for its greatest one-day advance ever. The second-largest gain in history came two weeks later, when the index plumped 889 points, or another 11%. Nance truly had picked the bottom, a victim of human emotion who acted against the advice of others, and paid dearly for the remainder of her life. She passed a year ago. Penniless.

I mention this story for two reasons.

First, as markets rise – we are again at record levels – so does the risk of correction. In fact a lot of people are making coin lately scaring investors into so-called ‘safe’ assets and fixed-income portfolios on the simple premise that what goes up has to come down. But they’re wrong. Things are far more complex than that.

Of course corrections will occur – and the next one could be 20% or more – but this ain’t 2008. Nor is a 2008 coming again the lifetime of anyone reading this. Too much has been learned about coordinated fiscal and monetary policy, market regulation, systemically-important banks, government backstops and international financial cooperation. Sure, the world is steeped in debt, but it’s also growing again after a decade of recovery. A low-rate, low-GDP, low-inflation, quasi-deflationary time has turned into one punctuated with rising rates, big corporate profits, job creation, expanding economies and a wage-price pop. There is no crash at hand. Trump or no Trump.

Second, if 2008 taught us anything, it was that a balanced, hands-off approach to investing works. After Nance’s portfolio dropped, it rebounded. She absorbed the losses by selling and benefited nothing from the rebound. In fact a balanced, globally-diversified portfolio of the kind this blog advocates with nauseating regularity (that does not hold individual stocks) did just fine. As I’ve mentioned, the 60/40 model lost 20% in 2008, gained it all back in 2009 and advanced 17% in 2010. So an investor who did nothing made about 5% a year in the midst of the worst financial crisis in 70 years.

That’s what balance does. Protects you when things wither. Grabs the growth when they recover.

Emotion, on the other hand, just destroys you.

About the picture...

“I call him roof dog,” writes blog dog Ian, from urban Toronto. “He is a neighbour of mine! He’s out there all the time. The ramp leads up to a flat roof area where his owner hangs out constantly.”

135 comments ↓

#1 Caleb Landry on 09.13.18 at 4:07 pm

Garth, the thing that really bugs me about finance guys, is that the entire system of managing people’s money at financial institutions is organized around the principal of ‘never sell’, or at the very least, don’t be proactive about risk. Why wouldn’t someone, in the conditions we have today, sell all of their stock in a registered account where there is no tax consequence and then just wait for the next recession to take hold and pick away at things when the shit hits the fan. By any measure, the financial conditions of the last 10 years are and were not normal in any way – recessions happen, often when market commentators are so convinced that it isn’t going to happen any time soon. I think that’s where we are – that literally the financial markets are starting to sniff out a recession coming in the next 12-18 months – the markets will turn before the recession is actually felt by the average person and financial goons just coach everyone to ‘stay the course’. It’s 180 degrees opposite of what you are coaching people to do in their real estate lives. Ie, if you aren’t prepared to buy real estate today, why would you hold it? Same goes for stocks – if you aren’t prepared to plop all of your money down – today, as in, if you are a fresh investor with a cool $1m today to invest today that’s never been in the markets, why wouldn’t you coach that person to wait for the recession. And, if you’d coach that person to do that, why would you suggest to someone that holding $1m currently is an appropriate path – especially if there was no tax consequence to selling? It’s crazy to me to say that a 20% drawdown is just ‘part of the process’ – you have to earn almost 40% in gains to earn that back??? Why aren’t investors coached to systematically take gains off the table as markets rise and then systematically put the money to work as markets start to retreat?? It’s because the brokers, by and large can’t physically do it. The tools they have to manage hundreds of accounts with hundreds of different positions all at once, won’t allow them to take action to do what would actually be in the client’s interest. Like gambling, you should be taking pieces of your gains off the table so as not to risk loosing it all when you hit a bad streak. I think it’s crazy to tell people to just ride it. What am I missing here??? We just went 85% to cash in late August 2018. Now, we wait…

Thank you for the excellent tutorial on how emotional people end up with losing portfolios. By trying to time markets about which you have no real idea, you’re currently making nothing in order to (maybe) temporarily lose nothing. If 90% of fund managers cannot do this professionally, what makes you think you can? (Hubris.) In any case, financial advisors can easily shift the asset mix of clients. The good ones don’t do this, as you have, for one solid reason: it doesn’t work. – Garth

#2 dakkie on 09.13.18 at 4:12 pm

This Seems Like A Huge Drop In Home Prices And No One Is Talking About It

http://www.investmentwatchblog.com/this-seems-like-a-huge-drop-in-home-prices-and-no-one-is-talking-about-it/

#3 Yvrmc on 09.13.18 at 4:18 pm

Words to live by Garth , thanks !

#4 Dusty on 09.13.18 at 4:18 pm

Ian, you should call him woof dog!

#5 Lawnboy on 09.13.18 at 4:33 pm

Pardon me !!!! It should be ” Wooof Dog” !!!!!

#6 Red_falcon on 09.13.18 at 4:34 pm

Woof woof! I mean, second!!

Finance can ruff if you know what I mean. DIY investing is best.

#7 DollerStoreXpat on 09.13.18 at 4:40 pm

20% sounds about right. That’s what DOL got spanked with today. Classic overreaction. Canadians have pigged out on debt and now will pig out in the food aisle at Dollarama. I’m backing up the truck.

#8 young & foolish on 09.13.18 at 4:41 pm

I suspect the 60/40 only etf portfolio only applies to the below 7 figure accounts.

Why? – Garth

#9 P Jones on 09.13.18 at 4:53 pm

I’ve been keeping an eye on Aurora/King City and it looks like every single house is selling under asking (source: https://pinithome.com/city/aurora )!?

Am I crazy or are we in the middle of the downturn and the gap between ask and sell price will keep growing? One can only hope…

#10 Dave on 09.13.18 at 5:02 pm

Inflation and debt have changed everyones personalities, gone are the days of being good to the neighbor. Everyone is in it to take it all.
Everywhere you look a simple thank you is not enough, no good deed is done for simply doing the right thing.
Tips and gift cards are the only tokens of gratitude, otherwise stuff it. Its only going to get alot worse, after all there is no Thank You App.

#11 Kelsey on 09.13.18 at 5:04 pm

Last time the government and Central Banks bailed out the system. This time the US is running ~$1T deficits (at the peak of the market, recession deficits will be much worse) and the Central Bank balance sheet is $4.2B. Who’s going to bail out the governments and Central Banks during the next recession / credit crisis? Meanwhile Fed tightening has been causing an EM blow-up and the 2/10 yield curve is only 21 bps.

#12 RISE Canada on 09.13.18 at 5:13 pm

DELETED

#13 Mattl on 09.13.18 at 5:21 pm

“Of course corrections will occur – and the next one could be 20% or more – but this ain’t 2008. Nor is a 2008 coming again the lifetime of anyone reading this. Too much has been learned about coordinated fiscal and monetary policy, market regulation, systemically-important banks, government backstops and international financial cooperation. Sure, the world is steeped in debt, but it’s also growing again after a decade of recovery. A low-rate, low-GDP, low-inflation, quasi-deflationary time has turned into one punctuated with rising rates, big corporate profits, job creation, expanding economies and a wage-price pop. There is no crash at hand. Trump or no Trump.”

With all due respect this seems to be taking a “it’s different this time” stance. I’m sure we learned the lessons of 2008, just like we learned the lessons of 1929, 1968, 73-74, 1987 and 2000. The event that will lead to the next 25-40% is a known unknown IMO – history tells us something like this is sure to happen.

Personally I’m much more concerned about a long period of dead money – 2008 killed a lot of wealth but it created even more, in a very short time frame. Worse case scenario for a guy like me is markets are flat for 7-15 years, which has happened before. If we hit a period like the mid 60s to 80s, or 1999-2012 it would be more devastating than a 2008 style correction.

And this last year hasn’t been gang busters. I’m getting 4.53% net of fee’s on my balanced, ytd, a few years like this with inflation at 2-3% is money doing nothing. How is balanced going to respond to 10 years of flat or down US equity markets? Would a balanced pull 7-9% in an environment like that?

I sure hope so, it would suck to go into your retirement years counting on reasonable returns and barely beating inflation.

Why would markets be flat or decline for ten years unless the global economy went into a protracted recession? Show any evidence that is about to occur. Again, it is emotion talking. It’s not different this time. It’s the same. – Garth

#14 Caleb Landry on 09.13.18 at 5:24 pm

I think you just made my point – if 90% of the fund managers aren’t able to do anything for their clients and the average broker out there literally has a GED and some basic college education (not including your team perhaps because you actually have intelligent people working for you), then the average advisor is going to have almost ZERO ability to avoid crashes when they come – they are literally sock puppets and are salespeople first and foremost – not unlike a realtor – they only get paid if the money is being put to work in a security… NOT sitting in cash… Why does Warren Buffett have billions in cash while brokers coach investors to be fully invested (stocks/bonds) at all times? How are securities any different than other financial assets – if they are at the upper end of their valuations, they should be sold. Guys like Sam Zell in the real estate space always sell on the way up, not on the way down. Seriously, you coach people all day to unload real estate if you have too much of it. Why wouldn’t taking risk off the table be a reasonable approach to investing? It makes no sense to me…

Advisors are not fund managers. And good advisors never try to beat the market. That’s not the goal. This is: (a) don’t lose money and (b) get a reasonable rate of return. For most people that’s something akin to 7%, which a balanced portfolio has delivered consistently over the years. You confuse investing with gambling. BTW, Buffett is massively invested in the economy every minute of his life. – Garth

#15 Smartalox on 09.13.18 at 5:26 pm

What about periodic rebalancing? The Art of selling off the winners and buying more of the losers, to keep those gains and stay ahead of purely passive index funds?

Do you recommend this be done by fund managers? Or by Account managers?

Fee-based advisors will do this automatically as conditions dictate – when funds are added or withdrawn, when cash builds up from interest or dividends, when market conditions alter or the macroeconomic view changes. Rebalancing is an important event, but if a portfolio is performing as it was designed, this is best done with a light hand. – Garth

#16 islander on 09.13.18 at 5:34 pm

https://qz.com/1387353/dogecoins-price-is-soaring-while-the-rest-of-crypto-crumbles/

For you Garth!

#17 Paul Christie on 09.13.18 at 5:41 pm

https://www.businessinsider.com/warren-buffett-berkshire-hathaway-cash-balance-should-worry-investors-2018-8

#18 Reximus on 09.13.18 at 5:46 pm

Offtopic I know, but this flag was new this AM…

https://explore.org/livecams/oceans/frying-pan-cam

#19 bdwy sktrn on 09.13.18 at 5:49 pm

Caleb Landry on 09.13.18 at 4:07 pm
Garth, the thing that really bugs me about finance guys, is that the entire system of managing people’s money at financial institutions is organized around the principal of ‘never sell’, or at the very least, don’t be proactive about risk.

——————
there are cowboys out there too…

David Tepper, manager of $14 billion in assets, is more uncertain about the stock market due to President Donald Trump’s trade war with China.

“If we do the tariffs on China that’s going to make it a little bit tough on the market,” the co-founder of Appaloosa Management said Thursday on CNBC’s “Halftime Report. ”

“It is a little tricky at this point of time. … It’s a late inning game.”

He said stocks could drop 5 percent to 20 percent if trade tensions between the world’s two largest economies increase

The investor said he is now about 25 percent exposed to the stock market. Tepper called the market “fairly valued” if the U.S. doesn’t impose more tariffs on Chinese goods.

“I’ve taken down my exposure [to equities],” he said. “I’m just not sure what’s going to happen with these tariffs. … Our whole book we probably took down 30 percent at some point, the equity part.”

#20 MF on 09.13.18 at 5:56 pm

Garth is right. Most people have no idea how close we came to a repeat of the great depression in 2008.

I know I wasn’t paying any real attention and went about my business. Actually my place of work in the service industry was busier than ever throughout the whole thing. There was a big contrast between what was being broadcast on TV and what I was seeing on the ground. Canada really was spared the effects of the great recession. At least part of that we can thank Harper for.

However, the ramifications of all the stimulus central banks pumped into the system haven’t been felt yet. The real threat comes from a black swan event that requires more stimulus to fight off at a time when less is available. This is why rates absolutely need to rise. They’ve been too low for too long and need to go up and fast.

We aren’t totally out of the woods yet.

MF

#21 Jungle on 09.13.18 at 6:06 pm

What’s even crazier at that time is that housing prices STILL did not crash in the GTA, average detach was at 500k ish that time?

#22 70 Per Cent on 09.13.18 at 6:09 pm

One of the biggest lessons learned from the 2008 market fiasco is that rules and lack of enforcment as well as policing was sorely missing ( ie – if you could fog a mirror you could get a house loan and the packaging of garbage mortgage backed securities) .

Many changes were made there after to make it harder for fraud to occur. However Trump whose ideology seems to be reverse whatever Obama did whether it’s good or bad, recently stated that the stock market is about 70% overregulated and wants to change that. Talk about the FOX (pardon the pun) running the hen house, if he ever tries to deregulate markets to that extent then when the next financial crisis occurs, the 2008 mess could return or even worse. After the US mid terms we’ll find out how much power Trump has left.

#23 Gravy Train on 09.13.18 at 6:13 pm

#1 Caleb Landry on 09.13.18 at 4:07 pm
“[…] It’s crazy to me to say that a 20% drawdown is just ‘part of the process’ – you have to earn almost 40% in gains to earn that back?[….]” Your math is wrong: after a 20% loss, you only have to earn 25% to break even. Do the math!

After the drubbing from Garth, I suppose I shouldn’t kick you when you’re down. :)

#24 Kelsey on 09.13.18 at 6:14 pm

If an advisor made a large allocation to cash a few quarters before a market blow-up, he would lag his peers and benchmark substantially prior to the blow-up, and be fired even though he was right. If an advisor walked straight into a crash with everyone else, he, along with everyone else, could simply claim that no one saw it coming and keep their jobs. The economics for a guy like Warren Buffett are substantially different and far-sighted than this, and it says something that he is overweight cash right now.

Advisors work for clients. You have a very distorted view. – Garth

#25 Reximus on 09.13.18 at 6:19 pm

I remember in the Lehman debacle that almost all the For Sale signs for homes in my hood that were for sale just before the news, came down.

Then 3 weeks later they came back up and were sold as usual. It amazed me how we dodged the same bullet the US markets hadn’t.

Real Estate is local, as they say

#26 A Yank in BC on 09.13.18 at 6:20 pm

Ignoring the headlines and (above all else) remaining fully invested at all times was the best investment advice I ever took to heart. Has worked beautifully.

#27 young & foolish on 09.13.18 at 6:32 pm

I might be wrong, but something tells me people worry a lot more when their financial assets slide in value than their RE holdings.

If you appraised your house everyday it would be different. – Garth

#28 Newguy on 09.13.18 at 6:37 pm

Hi,

I am as my name states. I appreciate the blog and your allowing very diverse points of view in your comments. I read as much, if not more, for the comments (no offense).

One question. You stated:

Why would markets be flat or decline for ten years unless the global economy went into a protracted recession?

=====

What about the boomers retiring and, like your friend Nance, have to sell in order to pay for their retirement?

not first

Housing may suffer from demographics, not financial markets. – Garth

#29 Mattl on 09.13.18 at 6:39 pm

Why would markets be flat or decline for ten years unless the global economy went into a protracted recession? Show any evidence that is about to occur. Again, it is emotion talking. It’s not different this time. It’s the same. – Garth

I don’t have any evidence this is going to occur, I called it an unknown. If your argument is it’s not different this time then I agree, and expect an event similar to 1987, 2000, 2008 to come out of nowhere and crunch the markets. Or 7-10 years of dead money, which has also happened, a few times in the past 40 years. This is not an emotional argument, I’m fully invested, if something happens will stay that way.

#30 Smoking Man on 09.13.18 at 6:44 pm

When death comes.

Totally insane. On periscope live there is s dude and his dog on New Topsail inlet. Been telling the guy Peter Prodzenko to get out all day.

So have many others. It’s certain death when storm come on shore.

What is disturbing others have been encouraging him to stay.
Some people are sick..

#31 Shawn Allen on 09.13.18 at 6:45 pm

Berkshire Balance Sheet and Cash

Here is how Berkshire’s assets were allocated recently. It’s 84% in various assets of the economy which agrees with what Garth said and 16% cash.

“Balance Sheet: (Updated for Q3, 2017) 16% of the assets are in cash and equivalent including treasury Bills. 24.5% of assets are in equity investments (of which 2.3 percentage points are Kraft Heinz) and an additional 4% is in fixed income and other investments. 2% is in mortgage loans receivable. Purchased goodwill represents 12% of assets. 23% of assets are in the property plant and equipment of its various businesses with the vast majority of that being in its utility and railroad businesses. The remaining 18.5% is in receivables, inventory and other.”

#32 espressobob on 09.13.18 at 6:47 pm

Fee based advisors are a good option for most. Avoid bank people and commissioned salesclerks- nasty bunch.

DIY investing is not for everyone.

Easier to start a bourbon collection and if you screw up at least one can drink their mistakes.

#33 Timmy on 09.13.18 at 6:47 pm

A 2008 crash is never coming again in our lifetimes? You’re full of it..read the Economist, they’ve basically said that many of the lessons haven’t been learned and there is still known and unknown risks. You didn’t forsee the first one–otherwise you would have taken everything off the table–so how can you say there won’t be another/

#34 Caleb Landry on 09.13.18 at 6:48 pm

Either way it’s dead money – I’d rather have dry powder and miss out on a bit of upside than get clobbered alongside every other minnow swimming around out there.

People with balanced portfolios who ignore short-term corrections do not get ‘clobbered.’ – Garth

#35 Nonplused on 09.13.18 at 7:14 pm

The great financial crash was certainly something. I happened to be in mostly cash when it occurred, which was a lucky thing, but I wouldn’t say it was “timing”. However I didn’t deploy all the funds right after the crash either, so I largely didn’t participate in the upside either. That is mostly corrected now.

What had happened was that I had been experimenting with algos ever since I discovered Excel could scrape stock quotes from the internet. The program eventually tracked about 200 stocks I was interested in and then optimized trading strategies based on technical analysis over night and then made it’s own “trades” so I could see if the algos worked over time. You have to keep track of the trades made in the past because whenever a strategy is re-optimized the past recommendations get taken out if they didn’t work out.

Anyway to make a long story short a few of the strategies worked fairly well from about 2000 to about 2007, and then they stopped working. So there does seem to have been some “prescience” in the market that 2008 was coming. The great trend that was 2000-2007 wasn’t working anymore.

However, a new trend arose after 2008 that is with us to this day. But unfortunately none of the algos could outperform the indexes during this trend so I eventually shut the thing off. I think what’s happened is that there are now so many algos, most of them much better than my little Excel macros could manage, all trading in real time (the high speed trading thing), designed by Ph.D.’s for the banks, that the advantages to be gained from technical analysis are pretty thin. There is so much math being applied that the timing aspect is getting squeezed out. If a bid or an offer goes up that is 5 cents off the market it immediately gets hit by a computer. Every day trader and their dog working out of their basement has the equivalent of a Bloomberg screen available to them doing the technical analysis automatically. If you aren’t familiar with all this just roam around on your brokerage account a bit.

But what it also means is that everyone is looking at the same charts. This raises the potential of a “flash crash” like in May 2010. You need computers to do something that stupid so quickly. But like the crash of 2008 it didn’t last. It went almost as quickly as it came.

https://en.wikipedia.org/wiki/2010_Flash_Crash

#36 45north on 09.13.18 at 7:17 pm

Of course corrections will occur – and the next one could be 20% or more – but this ain’t 2008. Nor is a 2008 coming again in the lifetime of anyone reading this.

The US financial institutions were genuinely surprised at the corrections. The movie The Big Short shows that they just didn’t see it coming. My theory is they resolved not to be caught again. Canadian financial institutions were taking notes. They resolved not to be caught the first time.

Again my theory is that the correction has begun in Canada. The B20 stress test protects the banks from the worst abuses and it gives them a way to modesty boost rates. Individuals who have taken speculative positions are taking the hit but they’re not talking about it.

#37 Guy in Calgary on 09.13.18 at 7:19 pm

Either way it’s dead money – I’d rather have dry powder and miss out on a bit of upside than get clobbered alongside every other minnow swimming around out there.
————————————————————-

If you went to cash in August, how much up side are you willing to miss out on before you jump back in?

#38 45north on 09.13.18 at 7:19 pm

Reximus: this flag was new this morning

I saw the feed a few hours ago. Obviously the storm is getting worse. Could the flag be an analogy for our society? The crashing waves pound the tower but it holds. The wind whips and tears the flag but it still holds.

#39 WUL on 09.13.18 at 7:20 pm

Crowdie,

You have been holding back on your pals here by not telling us that you were on the British Airways flight from Heathrow to Calgary yesterday which diverted to Iqualuit attributed by the pilot to a “fumes event”.

You’ve hit the big leagues having moved from 12 passenger conveyances to 250 passenger vessels. Well done.

#40 hellyeah on 09.13.18 at 7:24 pm

I’m liking the end-of-blog stories about the photo-featured dogs. It’s a bit of a respite from the seemingly harsh news we hear every day of our politicians and our economy.
It’s like a household finance obsessed persons answer to YouTube cat videos.
Thanks, keep it up.

#41 Ex Pat Canuck on 09.13.18 at 7:35 pm

A good moment to grab some Goldcorp (GG) shares. Added to my position today.

#42 Linda on 09.13.18 at 7:38 pm

2008 was a very interesting year in the Chinese sense of the word. We had booked a European trip & were in Italy during the breaking news of the global meltdown. It was fascinating to watch the Italian coverage – those lovely, very well dressed men & women who talked & talked without drawing a visible breath for literal minutes. The women tended to have cleavage so we tended to watch them closely to see if they had to draw a lungful of air. No wonder they produce such great opera singers:)

Eventually we located the Bloomberg News channel in English (our Italian being extremely limited). We were having an excellent vacation & saw no need to rush home or to call our broker in a panic. We figured if our portfolios had tanked we could deal with it when we got home. And yes, our portfolios did drop as was to be expected. Fortunately our financial advisor was very good at talking clients down off a ledge. She arranged a meeting for clients with some of the fund managers whose products made up our portfolios. That plus her own good advice kept us on course. As the markets recovered, so too did our balanced portfolios & within a year they had not only recovered from the losses but were growing in a most comforting way.

The main thing is to not panic. It is pretty much guaranteed that any decision you make in that state of mind will end badly. If it does turn out, you were lucky. Enough said.

#43 Honey Dripper on 09.13.18 at 7:39 pm

My Dad did the same as Nance:(
He won’t tell me but at 88 I’m sure he’s broke now. Just CPP and OAS to live on. Sad AF!

#44 Tony on 09.13.18 at 7:44 pm

Seems like the world was in great shape after the Lehman debacle compared to today. At least we found out the truth almost 10 years later. Everything went downhill the last 10 years. Today communism is the way as the days of a free enterprise economy are just a distant memory.

#45 Pathetic PhD on 09.13.18 at 7:48 pm

Garth, I have been sold on your balanced strategy for some time. But how do I know what ETFs to buy for the bonds + equities? Most look like dog crap.

The easy way is to get an advisor, but I’d like to build my own expertise too. Any reading?

#46 Tony on 09.13.18 at 7:59 pm

Re: #7 DollerStoreXpat on 09.13.18 at 4:40 pm

Sad news when people can’t afford to shop at the dollar store anymore. Yes they did hike their prices. Just the shape of things to come.

#47 Tony on 09.13.18 at 8:03 pm

Re: #9 P Jones on 09.13.18 at 4:53 pm

In Stouffville an entry level resale house and a resale townhouse are now basically the same price. In Edmonton a resale townhouse sells for about one third to one quarter of what a resale house sells for.

#48 HD on 09.13.18 at 8:03 pm

@ #35 Nonplused on 09.13.18 at 7:14 pm

“Anyway to make a long story short a few of the strategies worked fairly well from about 2000 to about 2007, and then they stopped working. So there does seem to have been some “prescience” in the market that 2008 was coming. The great trend that was 2000-2007 wasn’t working anymore.”

Curious. If you found an algo that worked for so long, were you able to capitalize on it? 7 years is enough to make a killing if no one else caught or noticed.

Best,

HD

#49 Dollarama on 09.13.18 at 8:06 pm

#7 DollerStoreXpat on 09.13.18 at 4:40 pm
20% sounds about right. That’s what DOL got spanked with today. Classic overreaction. Canadians have pigged out on debt and now will pig out in the food aisle at Dollarama. I’m backing up the truck.

I backed the truck up today just before close. The earnings report seemed decent, with the exception of the same store sales growth miss. It boggles my mind why it got spanked as hard as it did.

#50 Okla on 09.13.18 at 8:07 pm

The money masters of this world masterminded the 2008 plot. Yes I do believe in conspiracies!

Every crisis is planned years and years in advance and the next one will be caused by something different but the same remains….the little guys get shammed!

Gawd, we just finished with the Nine Eleven tinfoilers. Don’t start. – Garth

#51 eightlock on 09.13.18 at 8:09 pm

Canada did not avoid the financial crisis, it just delayed it with monetary and fiscal policy. BoC left the overnight rate at basically 0 for a decade and Ottawa did everything it could to encourage people to borrow money. 40 year amortization with 0 down. Oh my.

As the value of homes drop people will be to burdened by debt to take out any new loans and there will be a huge subtraction in demand. The economy is toast. Poloz knows it, Morneau knows it and Harper knew it when he was PM.

A depression is coming and there is nothing the BoC or Ottawa can do to save the economy or over leveraged property speculators. A lot of people bet huge amounts of borrowed money on real estate rising until the end of time. Have fun dealing with the bank when they decide they want their money back.

There is no depression coming. Drama queen. – Garth

#52 IHCTD9 on 09.13.18 at 8:12 pm

Maybe I’m rare, I hardly even looked at my investments for the first 20 years outside the reports that came in the mail. Been at it since the mid 90’s, so the old portfolio has seen every financial/economic blow up since then. We never sold a dime for any reason, never even slowed up on the monthly cash injections no matter what happened.

So you can believe what Mr. T says about not trying to time things, or selling out in fear. You can roll the dice, but you increase your risk by doing so.

Ms. IH and I will likely be retiring with a nice 7 figure nest egg if things carry on for the next 20 as they have for the the last 20 years. Grinning and bearing it through choppy waters works just fine.

#53 FOUR FINGERS WATSON on 09.13.18 at 8:13 pm

Housing may suffer from demographics, not financial markets. – Garth
…………………

Ahh yes, housing demographics…. Three generations will soon be sharing a family home. People who can’t afford to retire and kids who can’t move out of the basement will soon be the new norm. The grandparents will be the babysitters and the kids will be the breadwinners. It is already thus in much of the world that most of us know nothing about.

#54 jess on 09.13.18 at 8:20 pm

disasters are never cheap!

….”worst crash in history, losing 90 percent of its value over the next three years. It would not regain the level it had set in 1929 until 25 years later. The Pecora Senate hearings on the crash pegged Mitchell as one of the most vile actors in the leadup to the crash, speculating in his own bank securities, making illegal trades and engaging in income tax evasion. One of the key Senators involved in the investigation, Senator Carter Glass, said of him: “Mitchell more than any 50 men is responsible for this stock crash.”

http://wallstreetonparade.com/2018/09/for-over-a-century-the-new-york-times-has-praised-big-bank-consolidation/

#55 jess on 09.13.18 at 8:26 pm

when crisis comes…

no worries the fed will buy !~ 4t. chicken feed jump it to 8

https://www.marketwatch.com/story/fed-told-it-should-buy-stocks-if-there-is-another-steep-recession-2018-09-10?siteid=rss&rss=1

#56 Happy Housing Crash Everyone! on 09.13.18 at 8:41 pm

FOUR FINGERS WATSON on 09.13.18 at 8:13 pm
Housing may suffer from demographics, not financial markets. – Garth
…………………

Ahh yes, housing demographics…. Three generations will soon be sharing a family home. People who can’t afford to retire and kids who can’t move out of the basement will soon be the new norm. The grandparents will be the babysitters and the kids will be the breadwinners. It is already thus in much of the world that most of us know nothing about.

You are such a delusional SHYSTER. You sound so stupid its not even funny. No way you graduated from Elementary school. High school would be a pipedream for you.Going to be fun when the real numbers are allowed to flow. When CRA and CMHC start sharing info , RE prices are going to plunge so hard its not even funny. No more fraudulent mortgages, B20 , real data to expose the SHYSTER lies and everyone will know you are a useless SHYSTER with demented fake stories.

#57 Danny on 09.13.18 at 8:46 pm

Garth……..I like your positive attitude about……”Too much has been learned about coordinated fiscal and monetary policy, market regulation, systemically-important banks, government backstops and international financial cooperation. ”

But where I come for Centuries they believed that when a crime is committed people need to go to jail for a long time so that others will shy away from committing a similar crime.

1.So do you think a crime was committed to drive the market down to levels that frightened the older women you mentioned?

2. And do you think that justice was served to avoid something similar happening?

#58 Karl on 09.13.18 at 8:53 pm

Garth, I invest in a balanced portfolio with index funds and bonds. I’ve been noticing a lot of flack coming from big institutional investors regarding ETFs.

They say the huge amount of passive investing today is not good for markets. Are they just fear mongering because they want to continue pillaging the regular Joe, or is there something to it?

#59 Dee on 09.13.18 at 9:03 pm

Garth called the top in 2008 (with his book) and he also called the bottom – to the exact day. I was here. I think it was march 9 2009. For those who ever want to criticize Garth, always remember this. Very few called it like he did & that’s why I”ll always give him the benefit of the doubt

#60 AGuyInVancouver on 09.13.18 at 9:06 pm

So you’re saying I shouldn’t be getting out of Emerging Market funds right now, despite Turkey and Argentina?

#61 akashic record on 09.13.18 at 9:29 pm

#43 Honey Dripper on 09.13.18 at 7:39 pm

My Dad did the same as Nance:(
He won’t tell me but at 88 I’m sure he’s broke now. Just CPP and OAS to live on. Sad AF!

You don’t have to hear from him if he is broke or not. You can always help him regardless. Giving creates even more happiness then receiving. The best reason to harvest wealth is to give for those who don’t have this ability. Whether it is someone who cared for you or a complete stranger.

#62 Gravy Train on 09.13.18 at 9:33 pm

#31 Shawn Allen on 09.13.18 at 6:45 pm
“Here is how Berkshire’s assets were allocated recently. It’s 84% in various assets of the economy which agrees with what Garth said and 16% cash.[…]”

Far more pertinent is a review of the liquid assets on the balance sheet so as to arrive at Buffett’s asset allocation (see the latest filings [2018 Q2] in the attachment below).

Cash and cash equivalents are $64.6 billion (21.3%), short-term investments in U.S. Treasury bills are $46.5 billion (15.3%), investments in fixed-maturities securities are $18.5 billion (6.1%), and investments in equity securities are $174.0 billion (57.3%).

Interestingly, Buffett’s asset mix is very close to Garth’s 60/40 split. :)
http://www.berkshirehathaway.com/qtrly/2ndqtr18.pdf

#63 FOUR FINGERS WATSON on 09.13.18 at 9:33 pm

#56 Happy Housing Crash Everyone! on 09.13.18 at 8:41 pm

FOUR FINGERS WATSON on 09.13.18 at 8:13 pm
Housing may suffer from demographics, not financial markets. – Garth
…………………
Ahh yes, housing demographics…. Three generations will soon be sharing a family home. People who can’t afford to retire and kids who can’t move out of the basement will soon be the new norm. The grandparents will be the babysitters and the kids will be the breadwinners. It is already thus in much of the world that most of us know nothing about.
…………………….
You are such a delusional SHYSTER. You sound so stupid its not even funny. No way you graduated from Elementary school. High school would be a pipedream for you.Going to be fun when the real numbers are allowed to flow. When CRA and CMHC start sharing info , RE prices are going to plunge so hard its not even funny. No more fraudulent mortgages, B20 , real data to expose the SHYSTER lies and everyone will know you are a useless SHYSTER with demented fake stories.
…………………………………….
Hahaha. Yer a booby ! I am travelling in Asia at the moment till about February and i see it here every day. Ask Garth for my ip address…….as our affluence in the West declines we will adopt survival strategies that billions of people in the rest of the world are using : Multi generational family housing. Maybe git yer ass out of Beaver City and have a look around.

#64 BS on 09.13.18 at 9:38 pm

#1 Caleb Landry on 09.13.18 at 4:07 pm

Why wouldn’t someone, in the conditions we have today, sell all of their stock in a registered account where there is no tax consequence and then just wait for the next recession to take hold and pick away at things when the shit hits the fan.

That is what the Royal Bank of Scotland Chief for European Economics told their clients in January 2016.

Since then the S&P 500 is up 50%. If there was a crash tomorrow it would have to go down 35% just to get RBS clients back to even.

January 2016:

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis

The bank’s credit team said markets are flashing stress alerts akin to the turbulent months before the Lehman crisis in 2008. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.

https://www.telegraph.co.uk/business/2016/02/11/rbs-cries-sell-everything-as-deflationary-crisis-nears/

The market climbs a wall of worry. History has proven it is bullish when people to be bearish.

#65 Wrk.dover on 09.13.18 at 9:46 pm

This:

https://roofhound.ca/

#66 When the Whip Comes Down on 09.13.18 at 9:50 pm

Didn’t jp Morgan just come out calling the next global recession expected arrival in 2020? According to their model anyway….

#67 Interstellar Old Yeller on 09.13.18 at 9:58 pm

You’ve written about Nance before, sad how her story ends with no recovery or person that lifts her back up.

I also like the photos supplied by blog dogs and the back stories. #65 Wrk.dover – great find. :)

#68 Look it up on 09.13.18 at 10:03 pm

Central banks slashed rates to nothing. Ottawa took over entire mortgage portfolios. Governments poured trillions into stabilizing the economy. Banks and car companies were bailed out.

And it worked.

It did? This is crony capitalism. In a capitilist society things are suppossed to able to fail. You bail them out, it changes everything.

Now, as per Ray Dalio, we are going to be hit with a Debt crisis that is going to make 2008 look like a tea party compared to what is coming.

The beauty about home owners in Canada, is that the banks can force them to crystallize the loss. This applies to people in debt.

And this is the problem with debt. But make no mistake about it – it is all planned by the people running the money game and making a killing off of this.

Negative interest rates are criminal.

#69 Remembrancer on 09.13.18 at 10:16 pm

#38 45north on 09.13.18 at 7:19 pm
Could the flag be an analogy for our society?
—————————————————————-
Enduring iconic symbols of made of such…

Or it could be an object lesson in not sending nylon to do canvas’ job…

#70 Remembrancer on 09.13.18 at 10:26 pm

#49 Dollarama on 09.13.18 at 8:06 pm
The earnings report seemed decent, with the exception of the same store sales growth miss. It boggles my mind why it got spanked as hard as it did.
——————————————————————-

Don’t follow them myself but usually that’s a big no no for any retailer, i.e. are their customers moving upmarket or is this a seasonal thing? If you are picking individual stocks, what are the fundamentals for these guys?

#71 will on 09.13.18 at 10:35 pm

i remember it. i wanted to buy the bank stocks. but i was fully invested. no cash and i don’t use margin. had to pass it up. as i recall td was the only bank that stated it had no exposure to the bad stuff.

#72 Jimers on 09.13.18 at 10:54 pm

Bill Maher was quoted as saying they need to crash the markets to get rid of Trump. The Left seems desperate, on the verge of violence, and are the richest people in the world, so I would not rule out a major market crash, especially in the next 6 1/2 years.

#73 Stan Brooks on 09.13.18 at 11:01 pm

Listen to T2, be honest and do not forget to declare use of pot when entering US. One wonders how he enters US as he openly admitted of using pot. Did he declare that at the US border? I guess he probably cried, lied and apologized as usual.

U.S. official: Canadian marijuana users, workers and investors risk lifetime border ban

https://www.politico.com/story/2018/09/13/canada-weed-pot-border-783260

#74 PARKSVILLE SENIOR on 09.13.18 at 11:10 pm

Garth, you give the orange one too much credit. The Bourbon Repubs have learned nothing—-deficit financing, loose bank regulation and now he is against any raising of the central bank rate—-a repeat of the Bush years in 2008 when they had emptied their quiver and had not a solitary arrow left to protect the economy with.

The salt-water economists were able to wrest control from the supply side cranks from Chicago and rescue the nation under Obama.

There ain’t no way the repubs will let the economy be rescued a second time—–man the life boats, women and children first and go down with the ship!

#75 MF on 09.13.18 at 11:21 pm

#63 FOUR FINGERS WATSON on 09.13.18 at 9:33 pm

Actually the opposite is occurring here: more and more singles living in condos alone.

MF

#76 Stan Brooks on 09.13.18 at 11:42 pm

#68 Look it up on 09.13.18 at 10:03 pm

Now, as per Ray Dalio, we are going to be hit with a Debt crisis that is going to make 2008 look like a tea party compared to what is coming.

Ray said that USD could lose up to 30 % in purchasing power in the next 2-3 years.

https://www.bloomberg.com/view/articles/2018-09-12/ray-dalio-spells-out-america-s-worst-nightmare


In an interview with Bloomberg TV on Wednesday, Dalio expressed his concern about two years from now, when, in his view, the economic recovery is likely to sputter out. It won’t just be a debt problem this time around, he said, but rather a story about unfunded pension and health-care obligations. To address that looming crisis, the U.S. will need to ramp up issuance of U.S. Treasuries.

And that’s where it all unravels.

“We have to sell a lot of Treasury bonds, and we as Americans won’t be able to buy all those Treasury bonds,” Dalio said. That means foreign investors will have to step up. And they probably would, as long as the dollar remains strong. Otherwise, Treasury’s dollar-denominated interest payments to buyers in China, Europe and Japan will be worth less and less.

But, to Dalio, that’s not going to happen.

“The Federal Reserve at that point will have to print more money to make up for the deficit, have to monetize more and that’ll cause a depreciation in the value of the dollar,” he said. Pressed by interviewer Erik Schatzker, he said, “You easily could have a 30 percent depreciation in the dollar through that period of time.” For context, the Bloomberg Dollar Spot Index fell 8.5 percent in 2017, and that was considered massive.

Now combine that with expected dive in the loonie in the sub 0.70-es as we need to keep exporting to US with NAFTA and potentially sub 0.60 if we do not have NAFTA (the most likely case) and we could be facing some inflation storm of 40-50 % in the next 2-3 year, potentially 12 % – 15 % + annually.

Combine that with 1.5 % BoC rate. I am sure ‘official’ CPI will show sub 3 % (the adjusted Boc ‘target’ on some core inflation measures or whatever that crap means)

Now we can understand the reddish face that Poloz is showing lately.

Or imagine BoC having to raise rates to 8 % +, or maybe 12 % + to protect bank profits/value of ‘money’?

Fun times ahead. Buy that sub 2 % bond and tell me how it worked out for ya.

#77 Oft deleted much maligned stock.picker on 09.13.18 at 11:42 pm

Real estate doesn’t even come close to stock picking as an investment……and sorry but balanced portfolios don’t keep up with inflation.

https://www.businessinsider.com/real-estate-vs-stock-market-investment-2018-9

All you need is balls, common sense and time in to reap the rewards. Neither safety or fear will make you rich….but stock picking…..as scary as it’s made to sound is proof positive the path to investment riches. Buy companies that have paid a dividend for decades….add more every chance you get…..buy equal numbers of stocks in the give pillar sectors of the economy…..never sell your winners……rebalance by using dividends to by more underperformers……set it and forget it.

And …….never vote Liberal.

#78 Wrk.dover on 09.14.18 at 1:34 am

I’m losing sleep on this one!

I assume Nance bought for the dividends to eat.

Nance bought the Dow at 10 and bailed at 6. Now it is at 26.

Maybe Nance lost nothing because the companies she bought owe her something for what THEY lost of hers.
Yeah she bailed, bonused businessmen were eating her supper. Hind sight says she should have held, unlike in ’29 when recovery of what was not totally lost altogether took two generations.

Paulson et al did get bonuses that year, correct? But none for Nance when Geitner and Bernanke Tarped over the Goldman end of the grand scam. And left the panic’d masses of stop loss sellers to eat memories.

If I buy a ten year old Kia for a million, the rest of the old Kias are not worth a million, are they? So why are the rest of shares worth more, when Warren or someone bids ONE of them up?

Maybe, when the world almost stopped turning because of debt, doubling the debt while no longer paying interest on any of the existing or new debt for a decade and counting, while rewarding the people who are in the most debt, is not recovery, but is a Ponzi.

As long as interest on a million dollars is only enough for a McHappy meal/day, while a million dollars doubles in value every year invested in Amazon in shares, though their dividend on a million dollars pays even less than a McHappy meal/day, I am not on side with this all is well mantra.

Hewers of wood and drawers of water get no value in return for their trading of their lives for industrial disease, while the men in suits make paper hand over fist, playing with paper.

So, he died on the cross for what?

( and no, I am not religious, but the men in suits do purport to be…)

Sure I am naive as hell, but the system is still as wrong as hell too as it now stands, forcing me to invest and own shares at risk, rather than loan and lien on collateral with my savings, after I earned those savings by borrowing and paying 14% collateralized with tangible assets I had created/built with actual labour input, not with sleight of paper as big business wants to do with my assets.

You are well positioned Garth, but I am Wrk.dover, spelled with an F.

Some recovery! For some, but not many.

#79 Myra Andrews on 09.14.18 at 1:42 am

Stats for Greater Vancouver from realtor Paul Boenisch

Sept 13 New 225 Sold 58 TI: 13,240
Sept 12 New 268 Sold 90 TI: 13,147
Sept 11 New 325 Sold 77 TI: 13,057
Sept 10 New 487 Sold 87 TI: 12,916

Sept 7 New 197 Sold 87 TI: 12,681
Sept 5-6 New 609 Sold 195 TI: 12,653
Sept 4 New 498 Sold 53 TI: 12,439

Inventory at the end of August was 12,510

#80 Smoking Man on 09.14.18 at 2:12 am

The dog hero who started it all.

https://youtu.be/PsfcUZBMSSg

#81 JWD on 09.14.18 at 2:14 am

Warren Buffett is the 1000 lbs gorilla. Behind the scenes he was instrumental in saving the markets. Of course, he benefited as well. I bought B shares many years ago and wished I’d just kept on buying…. when his name comes up when talking to any advisors they get very quiet or change the subject. You can’t come close to beating Berkshire Hath.

That said, he personally recommends buying the S & P in ETFs. Buy and hold. Don’t panic just keep buying regularly.

#82 Smoking Man on 09.14.18 at 2:38 am

With no words.

https://youtu.be/0qanF-91aJo

#83 Howard on 09.14.18 at 4:13 am

Mark Carney has identified the most pressing issue surrounding Brexit….house prices!

God forbid they became less inflated.

https://www.bbc.com/news/business-45516678

If anyone is wondering how London prices have trended over the past 20 years : https://www.home.co.uk/guides/house_prices_report.htm?location=london&all=1

#84 Happy Housing Stabilization Everyone! on 09.14.18 at 6:23 am

#56 Happy Housing Crash Everyone! on 09.13.18 at 8:41 pm

You are such a delusional SHYSTER. You sound so stupid its not even funny. No way you graduated from Elementary school. High school would be a pipedream for you.Going to be fun when the real numbers are allowed to flow. When CRA and CMHC start sharing info , RE prices are going to plunge so hard its not even funny. No more fraudulent mortgages, B20 , real data to expose the SHYSTER lies and everyone will know you are a useless SHYSTER with demented fake stories.

——————————————-

The only one who sounds stupid is you, filthy lying DOOMER. Pipe dream is two words, not one, but I guess Grade 5 was too much for you and the other dazed and confused DOOMERS. DOOMERS walking around crying about this and that while they see people build wealth in real estate. They say the big crash is coming every year and it never does so they try to scare everyone. GTA will always have big demand and is growing. If you can’t afford the big city, move somewhere else. If you can’t afford that, rent. If you can’t afford that, pitch a tent in the woods. DOOMERS ARE THE REAL SHYSTERS.

Happy Housing Stabilization Everyone!

#85 Evangeline on 09.14.18 at 7:48 am

… very sad story in today’s NP

The fight to save the McIntosh — Canada’s apple

Is this how it ends for the mighty Mac? Birthplace of Canada’s most famous apple gone to seed [location: DUNDELA Ontario]

https://nationalpost.com/news/canada/is-this-how-it-ends-for-the-mighty-mac-birthplace-of-canadas-most-famous-apple-gone-to-seed

“It would be nice if the property where the first Macintosh apple tree was could be something,” she says. “Some day, some guy is going to come through with a bulldozer and the whole place, the whole thing, is going to disappear into history.”

….

Area locals expressed surprise upon learning the National Post had been invited onto the land, spawning a theory, among some, that Skof [CURRENT OWNER] must have had ulterior motives. Chiefly: free publicity for a dilapidated place he has been looking to unload, on and off, for more than 20 years and recently listed for $875,000 on Kijiji. (A 2016 tax assessment puts the property’s value at $249,000.)

#86 Jimers on 09.14.18 at 8:06 am

https://www.cbsnews.com/news/10-years-after-lehman-is-another-crisis-brewing/

Do not look to the MSM for investing advice, unless you do the opposite. – Garth

#87 Penny Henny on 09.14.18 at 8:08 am

Re Toronto real estate value, or in this case I should probably say Toronto land value (50×161 ft lot).
This house is in Etobicoke and within walking distance to the Kipling subway station. I know the area very well as I used to live next door. Back in 2006 I sold to a builder for $450,000.
Well in June of 2014 this place changed hands for $800,000 ($70,000 over ask) and yesterday it resold for $1,230,500.
Absolutely nothing has been updated in the last 20 years.
At peak market (March 2017) this place might have sold for $1.3M. So it has not dropped much, if at all, in price.
It is interesting though that even with a newly built 3000 sq ft home on this lot in this area you would be hard pressed to get more than $2.1M.
It doesn’t make sense for a builder to come in and speculate on this lot. Is it an end user?
Here is a google street view.

https://www.google.ca/maps/place/91+Mervyn+Ave,+Etobicoke,+ON+M9B+1N6/@43.6417567,-79.5456115,3a,75y,159.35h,90t/data=!3m7!1e1!3m5!1ssb1WbzD2MY4qi8exq0P5hg!2e0!6s%2F%2Fgeo3.ggpht.com%2Fcbk%3Fpanoid%3Dsb1WbzD2MY4qi8exq0P5hg%26output%3Dthumbnail%26cb_client%3Dsearch.TACTILE.gps%26thumb%3D2%26w%3D86%26h%3D86%26yaw%3D159.34686%26pitch%3D0%26thumbfov%3D100!7i13312!8i6656!4m5!3m4!1s0x882b37916dc24293:0x54f3d6e17fdb722e!8m2!3d43.6415055!4d-79.545482

#88 Tater on 09.14.18 at 8:14 am

I knew things were going to get bad in the GFC, when management was spending time hanging around the money market desk. Normally a backwater, but in August of 2007 really senior people were over there every day.

#89 TurnerNation on 09.14.18 at 8:21 am

Dollarama stock price on sale here – 20% off after stellar earnings. Dropped by, still seeing massive price hikes on there items. 30-50% since my last visit.

But where else can a classy guy like me pick up four steak knives for only $2? (was 1.50). I’ll be back.

#90 Tater on 09.14.18 at 8:22 am

34 Caleb Landry on 09.13.18 at 6:48 pm
Either way it’s dead money – I’d rather have dry powder and miss out on a bit of upside than get clobbered alongside every other minnow swimming around out there.

—————————————————————–
I’m guessing you haven’t been investing very long, but on the off chance I’m wrong, can you tell me your 10 year money-weighted CAGR and Sharpe and Sortino ratios?

Here’s a tip: if you don’t know these numbers, let alone how to calculate them, market timing is beyond you.

#91 Ian on 09.14.18 at 8:23 am

I’m glad you guys loved the roof dog pic! Thanks Garth. The Roofhound Ale Company is classic. Great find.

I think the crookedness of the roof and the graffiti is some solid symbolism of the decay around me in downtown Toronto, and the crookedness of institutions like TREB who don’t want the truth to be known, the realtor-CP24-2nd and 3rd mortgage lender industrial complex that keeps telling everyone everything’s fine with real estate, and the banks who are the ultimate crooks for continuing to lend indiscriminately to consumers. The dog is calm and sedate in all this storm.

I’m still hoping the condo being developed beside my building goes all Rachel Carson and all the machinery goes silent one morning, when the buyers pre construction have a Mattamy Fairness moment and realise they are underwater.

You all will be the first to know when it does!

#92 Tater on 09.14.18 at 8:26 am

As for the next crisis, it wont look like the last one. Crises come when the market learns that something it thought was true, turns out to be false.

2008: US home prices can’t decline at the same time through out the country
1999: The internet has changed the rules of business
1987: By following a particular trading model, you can remove downside risk

I suspect the roots of the next crisis will be: that bonds and equities are negatively correlated.

Nope. Crises start with fundamentals, usually economic. Markets reflect economies. They do not form them. – Garth

#93 Dave Ahem on 09.14.18 at 8:44 am

Why people succeed in real estate investing:
– They have no clue what it’s worth moment to moment.
– They use leverage to buy it so they can acquire a large amount right away.
– It costs a lot to sell so there’s a deterrent from doing so at all times.
Why people fail at stock market investing:
– They know what their portfolio is worth every 7 seconds. There’s total transparency.
– With discount brokers now, your entire portfolio can be sold in seconds for less than $100.

If we invested in equities the way we invest in real estate, we’d all be a lot better off.

#94 Tater on 09.14.18 at 8:52 am

#92 Tater on 09.14.18 at 8:26 am
As for the next crisis, it wont look like the last one. Crises come when the market learns that something it thought was true, turns out to be false.

2008: US home prices can’t decline at the same time through out the country
1999: The internet has changed the rules of business
1987: By following a particular trading model, you can remove downside risk

I suspect the roots of the next crisis will be: that bonds and equities are negatively correlated.

Nope. Crises start with fundamentals, usually economic. Markets reflect economies. They do not form them. – Garth

—————————————————————

Should have been clear that I was talking about financial market crises.

#95 M. Towne on 09.14.18 at 8:55 am

Okay, the numbers don’t lie about what’s happened in the past. I see the value in your overall approach. But I’m curious about what you say to the following (these are either actual concerns, or devil’s advocate; not sure which.)

2008 was very different from today in that the U.S. government was led by a much more stable person (first W then O) who had some degree of respect for actual experts. When we talk about how near we came to everything blowing up, the reason that didn’t happen is because people with power chose to do the more or less right things. The current occupant is not that kind of guy; he was chosen, and empowered, by the same kind of emotional, irrational rage that we’re very fortunate did NOT carry the day ten years ago. If there is a 2008-level crisis, we will not see the same kind of response, and if there’s a smaller crisis his actions may well make things much worse.

#96 Ponzius Pilatus on 09.14.18 at 9:23 am

S.2155
https://en.m.wikipedia.org/wiki/Economic_Growth,_Regulatory_Relief_and_Consumer_Protection_Act
———-
Here we go again

#97 Capt. Serious on 09.14.18 at 9:29 am

From many of these comments, it’s pretty evident most people do not understand the concept of expected return and standard deviation. If you don’t understand that you only get higher returns from an asset class because it is riskier, back to the books for you. If you don’t understand that the long haul is 10+ years, back to the books for you. If you don’t understand that the return you get from an asset class in a given time period does not necessarily equal the expected return, back to the books for you. Everything Garth is saying makes perfect sense: diversity, balance, stay the course. Listen to him.

#98 Toronto_CA on 09.14.18 at 9:39 am

Well…to be fair, I think it’s not a bad goal to die broke. I mean, I don’t want to live a long period of time with no money, especially in early retirement when I am still mobile and healthy. But dying broke seems better than dying with a shit load of money left for your heirs to fight over. You can’t take it with you, right? Poor Nance.

#99 Ponzius Pilatus on 09.14.18 at 9:42 am

Median income in Port Moody is 93k.
In Vancouver West it is 64k.
Barely above minimum wage.
How come the people in Port Moody don’t drive Ferraris?
Or own 5 million dollar homes
The answer, my friend is blowing in the wind.
https://theprovince.com/news/local-news/severe-gap-between-income-and-house-prices-in-all-metro-vancouver-markets-report/wcm/bd69340b-8b44-46ff-8e23-8a0a873268ac

#100 Renter's Revenge! on 09.14.18 at 9:48 am

#93 Dave Ahem on 09.14.18 at 8:44 am

You should change your name to “Dave Amen” :)

#101 Ponzius Pilatus on 09.14.18 at 9:50 am

#89 TurnerNation on 09.14.18 at 8:21 am
Dollarama stock price on sale here – 20% off after stellar earnings. Dropped by, still seeing massive price hikes on there items. 30-50% since my last visit.

But where else can a classy guy like me pick up four steak knives for only $2? (was 1.50). I’ll be back.
—————-
The price of steak knives is not the issue.
The price of steak is.
Also, don’t need a knife to eat a hamburger.

#102 Jim Lahey on 09.14.18 at 10:25 am

#87 Penny Henny

“It doesn’t make sense for a builder to come in and speculate on this lot. Is it an end user?”

It may be a builder because the lot is 50 ft and can be split in two. 600k per lot plus building costs….

#103 ImGonnaBeSick on 09.14.18 at 10:26 am

Mr. Garth, with the US Border stating that even if you invest in MJ Companies they can deny entry – do you think this would apply to ETFs like ZCN which hold all stocks listed on the TSX, including Canopy, Aurora, and Aphria? Should we be moving over to ETFs that don’t hold these stocks, like ZLB instead? Seems like Trudeau, again, didn’t consider the repercussions of his actions…

https://www.thestar.com/news/cannabis/2018/09/13/canadians-who-smoke-marijuana-legally-or-work-or-invest-in-the-industry-will-be-barred-from-the-us-customs-and-border-protection-official.html

#104 BillyBob on 09.14.18 at 10:36 am

#63 FOUR FINGERS WATSON on 09.13.18 at 9:33 pm

Hahaha. Yer a booby ! I am travelling in Asia at the moment till about February and i see it here every day. Ask Garth for my ip address…….as our affluence in the West declines we will adopt survival strategies that billions of people in the rest of the world are using : Multi generational family housing. Maybe git yer ass out of Beaver City and have a look around.

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

The problem with your observations is they fail to acknowledge that most in multi-family cultures aspire to the Western model of having more space and autonomy. It is not the other way around.

True, there’s already the tired trope of Millennials living with their parents longer than in the past due to economic necessity. But as pointed out by MF, increasing, not decreasing, numbers of people are living single and alone.

Is this a GOOD thing? A different debate. But your anecdotes from Asia are totally irrelevant. And yeah, that happens to be one of the places I lived for several years.

#105 dharma bum on 09.14.18 at 10:44 am

Anyhoooooo….

So the counter offer I made on the counter offer I received by the potential buyers on my old ma’s house was rejected.

Once again, crickets.

Chirp. Chirp. Chirp.

Hello? Is anybody out there?

Timing is everything in the stupid real estate market.

#106 BS on 09.14.18 at 10:57 am

#95 M. Towne on 09.14.18 at 8:55 am

2008 was very different from today in that the U.S. government was led by a much more stable person (first W then O) who had some degree of respect for actual experts.

Yes and those experts got us into the 2008 financial crisis, then the Iraq war, allowed North Korea to amass a nuclear arsenal with intercontinental missiles and the slowest financial recover in history with Obama being the only president in US history to never achieve a year at or over 3% GDP growth.

Without the experts we now have the longest bull market in history, GDP growth of 4% (which the experts said was impossible) and North Korea denuclearizing.

#107 crowdedelevatorfartz on 09.14.18 at 11:08 am

@#39 WUL

Damn! Busted!

#108 akashic record on 09.14.18 at 11:10 am

Do not look to the MSM for investing advice, unless you do the opposite. – Garth

Wow… sounds like crossing into tinfoil territory…

Why would MSM misinform the public so viciously in such a crucial part of people’s life?

MSM headlines invariably do not accurately reflect economic, financial, or market conditions. If you base investing decisions upon that (as Nance did) you may be unhappy. – Garth

#109 crowdedelevatorfartz on 09.14.18 at 11:15 am

@#84 Unstablization

Ahhh yes.
Blaming Boomers for the run up in ridiculous housing prices….not the greaterfools stupid enough to leverage themselves to the max because housing always goes uppa uppa uppa and interest rates cant increase because Millenial debt is too high……..

Riiiiiiiiiiiight

One question.

Are you a Realtor?

#110 Penny Henny on 09.14.18 at 11:29 am

Hey Rental Property Math,
this isn’t your place is it?

https://www.thestar.com/news/canada/2018/09/14/late-discovered-corpse-leaves-hamilton-city-tenant-in-distress.html

I guess his rent payments were on direct deposit.

#111 Penny Henny on 09.14.18 at 11:35 am

#102 Jim Lahey on 09.14.18 at 10:25 am
#87 Penny Henny

“It doesn’t make sense for a builder to come in and speculate on this lot. Is it an end user?”

It may be a builder because the lot is 50 ft and can be split in two. 600k per lot plus building costs….
??????????????????

Possibly, but there are no semis in the area and minimum lot width around there is 38-40 ft.
Let me put it this way, it would be the first in the neighbourhood and I don’t know if it would pass zoning.

#112 Luc on 09.14.18 at 11:38 am

two articles on the coming crisis, one in French…

Howard Gold (don’t know him but a great name for promoting gold ;-) at msn money …
https://www.msn.com/en-ca/money/topstories/opinion-these-4-called-the-last-financial-crisis-heres-what-they-see-causing-the-next-one/ar-BBNk8bj?ocid=spartanntp

Michel Girard at La Presse…
https://www.journaldemontreal.com/2018/09/14/grave-crise-a-lhorizon

#113 SimplyPut7 on 09.14.18 at 12:07 pm

#7 DollerStoreXpat on 09.13.18 at 4:40 pm
#49 Dollarama on 09.13.18 at 8:06 pm
#89 TurnerNation on 09.14.18 at 8:21 am

People are worried the missed profit were due to consumers going to their new competitor Miniso. They are a Chinese company that make products that look Japanese.

It has 1800 stores worldwide with plans to open 500 in Canada and hopes to have 6000 stores worldwide by 2020.

They are a problem for Dollarama for products greater than $3, because Miniso prices start at $2.99.

Do I think long-term they are a problem for Dollarama? Maybe. But once you take away the nice packaging, their products are cheap like other dollar store products, convincing consumers to spend more for poor quality products will be hard.

Also, understanding what Canadians want will be hard, not every Canadian likes the specific look of Japanese products, it will take sometime for them to get that right. If they expand to fast without understanding the Canadian consumer they could disappear like Target.

I’m surprised Canada allowed a direct from China company into the country, they usually don’t like foreign investments (from any country) that don’t have connection or partnership with a Canadian company.

#114 SimplyPut7 on 09.14.18 at 12:26 pm

Maxime Bernier names new party:

The People’s Party of Canada

This is an awful name for the party, the name sounds like it belongs to a developing nation with an authoritarian government.

https://www.cbc.ca/news/politics/bernier-peoples-party-canada-1.4823647

#115 IHCTD9 on 09.14.18 at 12:31 pm

“In the face of mounting pressure to wrap up NAFTA negotiations by the end of the month, a senior source suggests Canada is comfortable with missing that deadline.”

https://www.cbc.ca/news/politics/canada-us-mexico-threat-deadline-1.4823219

Sounds like a great idea. Let’s miss the deadline. I can’t even count how many good results this idea would produce because there are so many.

#116 T on 09.14.18 at 12:49 pm

#84 Happy Housing Stabilization Everyone! on 09.14.18 at 6:23 am

Now this is pathetic.

Angry much? Too much time on your hands these days?

I am concerned for our host’s safety when posts like this start coming in. Obviously a realtor in distress and looking to lash out wherever possible.

A question to you HHSE – what data do you use to corroborate your claims of stabilization in the housing markets? Please provide actual data and not a list of assumptions and beliefs. Until you provide data, go away. Q

#117 KLNR on 09.14.18 at 1:07 pm

@#116 T on 09.14.18 at 12:49 pm
#84 Happy Housing Stabilization Everyone! on 09.14.18 at 6:23 am

Now this is pathetic.

Angry much? Too much time on your hands these days?

I am concerned for our host’s safety when posts like this start coming in. Obviously a realtor in distress and looking to lash out wherever possible.

A question to you HHSE – what data do you use to corroborate your claims of stabilization in the housing markets? Please provide actual data and not a list of assumptions and beliefs. Until you provide data, go away. Q
__________________
you miss the point of his troll.

#118 KLNR on 09.14.18 at 1:13 pm

@#111 Penny Henny on 09.14.18 at 11:35 am
#102 Jim Lahey on 09.14.18 at 10:25 am
#87 Penny Henny

“It doesn’t make sense for a builder to come in and speculate on this lot. Is it an end user?”

It may be a builder because the lot is 50 ft and can be split in two. 600k per lot plus building costs….
??????????????????

Possibly, but there are no semis in the area and minimum lot width around there is 38-40 ft.
Let me put it this way, it would be the first in the neighbourhood and I don’t know if it would pass zoning.
__________________

2.1 mil can net a builder 200k maybe a bit more.

#119 akashic record on 09.14.18 at 1:34 pm

#108 akashic record on 09.14.18 at 11:10 am

Do not look to the MSM for investing advice, unless you do the opposite. – Garth

Wow… sounds like crossing into tinfoil territory…

Why would MSM misinform the public so viciously in such a crucial part of people’s life?

MSM headlines invariably do not accurately reflect economic, financial, or market conditions. If you base investing decisions upon that (as Nance did) you may be unhappy. – Garth

I can’t dispute that.

It makes you wonder though, if you can trust MSM ability to accurately reflect conditions in their headlines in other areas. Would you end up making regrettable decisions, beyond investing?

Exactly. You might envy the Kardashians. Or buy a cat. – Garth

#120 Happy Housing Stabilization Everyone! on 09.14.18 at 1:35 pm

#116 T on 09.14.18 at 12:49 pm
#84 Happy Housing Stabilization Everyone! on 09.14.18 at 6:23 am

Now this is pathetic.

Angry much? Too much time on your hands these days?

I am concerned for our host’s safety when posts like this start coming in. Obviously a realtor in distress and looking to lash out wherever possible.

A question to you HHSE – what data do you use to corroborate your claims of stabilization in the housing markets? Please provide actual data and not a list of assumptions and beliefs. Until you provide data, go away.

———————————

You ever read your buddy Happy Housing Crash Everyone’s posts? I guess he’s fine because his rants fit your negative RE narrative?

Thanks for making my point while I used this stupid name of this stupid charade.

Yours truly,

Irwin R. Shyster

P.S. – August Sales up 8.5% YOY & Prices up 4.7% YOY (TORONTO)

#121 Jim Lahey on 09.14.18 at 1:38 pm

#111 Penny Henny

The rage in south Etobicoke is to split a 50ft lot and build two separate homes on 25ft lots. We are not talking semis here. I know on the street where I have my rental off the Queensway, east of Royal York there are no less than 4 former lots that have been split in two in the past 20 years. On a street with no more than 20 homes….

#122 Penny Henny on 09.14.18 at 2:04 pm

#119 Jim Lahey on 09.14.18 at 1:38 pm
#111 Penny Henny

The rage in south Etobicoke is to split a 50ft lot and build two separate homes on 25ft lots. We are not talking semis here. I know on the street where I have my rental off the Queensway, east of Royal York there are no less than 4 former lots that have been split in two in the past 20 years. On a street with no more than 20 homes….

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

You may be absolutely correct but 25 ft lots would be the first in this neighbourhood

#123 Richard Patterson on 09.14.18 at 2:10 pm

My brother is an accountant by trade. Him and his wife own their own accounting firm and are very conservative with their money. They laddered GIC’s and term deposits, cashable GIC’s for 3.5 years of living expenses, taxes etc.

The bottom line is they just buys long term government bonds with 85% of their money and 15% in GIC’s at several times of rate peaks a year and just let’s those build and compound. I guess it works for them because they are both 58 with $950,000 RRSP’s, $133,000 TFSA’s and $2,200,000 in non-registered accounts.

They also have $1,500,000 in2045 life term insurance and a $750,000 paid off house. They have been debt free since 1990. They never needed to invest in stocks or any of the equity or equity, related markets.

They just don’t need to be worrying about money and not sleeping at night.

Given the average income of accountants I am calling a big BS on this comment. – Garth

#124 Damifino on 09.14.18 at 2:15 pm

#114 SimplyPut7

Re: Maxime Bernier’s new party name (Monty Python)

https://www.youtube.com/watch?v=WboggjN_G-4

#125 Renter's Revenge! on 09.14.18 at 2:57 pm

Given the average income of accountants I am calling a big BS on this comment. – Garth

I confused as to why you don’t call BS on all this guy’s comments. It’s obviously one person commenting under a different name each time. How do I know? Call it forensic blogging.

It’s the same [normal sounding first name] [normal sounding last name], talk about a person or couple that puts money in GICs or bonds, how much in rounded dollar amounts they have in each of their accounts, same writing style, same voice, same simplistic world view, nothing interesting to say, boring af comment, every, single, time. Why they do it, I don’t understand, but it’s really weird.

#126 T on 09.14.18 at 3:02 pm

#120 Happy Housing Stabilization Everyone! on 09.14.18 at 1:35 pm

You ever read your buddy Happy Housing Crash Everyone’s posts? I guess he’s fine because his rants fit your negative RE narrative?

Thanks for making my point while I used this stupid name of this stupid charade.

——

HHCE posts for comedy and has referenced relevant data in many of his posts. Plus, as a group real estate professionals are not all that ‘professional’.

You are posting out of spite and hatred, offended by the comedy of HHCE. Lashing out at one single person.

There is a difference.

#127 Blacksheep on 09.14.18 at 3:06 pm

T # 116,

“Now this is pathetic.

Angry much? Too much time on your hands these days?

I am concerned for our host’s safety when posts like this start coming in. Obviously a realtor in distress and looking to lash out wherever possible.

A question to you HHSE – what data do you use to corroborate your claims of stabilization in the housing markets? Please provide actual data and not a list of assumptions and beliefs. Until you provide data, go away. Q”
———————————–
Give me a friggen brake.

I have actually been amazed at Garth’s tolerance of the RAGE, spewing from HHCE.

So let er rip HHSE, the boss don’t mind, why should we….

#128 millmech on 09.14.18 at 3:10 pm

It is good to see Costco selling energy efficient grow light fixtures that will accommodate four small “tomato” plants. Next will be the nutrients and then your in business and all for a very low price point too.
Saw lots in the buggies and was wondering how the JT Government and these multi billion dollar companies are going to compete against Costco brand grow-ops.

#129 Re., hhs on 09.14.18 at 3:56 pm

YOY in hogtown housing sales are up ?!? But but but windy happened to the crash ?!?

Wow . You’re going to really upset people at this place …

#130 Blacksheep on 09.14.18 at 4:17 pm

millmech # 128,

“It is good to see Costco selling energy efficient grow light fixtures that will accommodate four small “tomato” plants. Next will be the nutrients and then your in business and all for a very low price point too.”

“Saw lots in the buggies and was wondering how the JT Government and these multi billion dollar companies are going to compete against Costco brand grow-ops.”
———————————————–
No such thing as energy efficient indoor growing, as your trying to simulate the sun and that takes a lot of power.

The reason the Liberals “green lighted : )” the personal 4 unit production is those with experience, told the Gov. that 90% of these home setups will produce pure crap and end up reverting back to buying commercial / black market supplied product after wasting $ 100’s to $ 1000’s of dollars trying to grow at home.

#131 T on 09.14.18 at 5:01 pm

#127 Blacksheep on 09.14.18 at 3:06 pm

I’ve always taken HHCE as a comedy act. If people are so sensitive the routine offends them, perhaps the routine should end.

The HHSE ‘doomer’ bit is just nonsense. A real estate correction is far from ‘doom’. At least come with a good debate. What we have now is the equivalent of a drunk heckler at a bad comedy show.

#132 Jim Lahey on 09.14.18 at 7:03 pm

#122 Penny Henny

Keep us posted on what happens. I can’t see why the splitting of 50 ft lots wouldn’t start happening there. Someone even posted on this blog that a home owner in Etobicoke severenced his 50ft lot and offered to sell the new lots separately at 750k per lot.

#133 Risktopia on 09.14.18 at 10:44 pm

Even if you were the worst market timer in the world and invested the day before Lehman collapsed, a buy-and-hold strategy ultimately worked.

http://www.risktopia.com/2018/09/what-if-you-invested-on-lehman-eve.html

If you don’t have the time or patience to wait it out for a few years you probably shouldn’t be investing in stocks in the first place.

#134 LL on 09.17.18 at 10:48 am

…”A low-rate, low-GDP, low-inflation, quasi-deflationary time has turned”….

Low inflation?????? Where do you live???

#135 peruchocanuck on 09.17.18 at 1:48 pm

@ Comment 1, Garth you reply “By trying to time markets about which you have no real idea, you’re currently making nothing in order to (maybe) temporarily lose nothing.”
But 4 years ago you also said “Fourth, wait a little. We’re at a time when most financial assets are too expensive. Normally stock and bond prices move in the opposite direction (called ‘non-correlation’) but these days everything has been goosed (just like houses). Strikes me a good buying point for equity-based investments (ETFs holding all the companies in the TSX 60 or the S&P 500, for example) would be 10-15% below current levels.” (https://www.greaterfool.ca/2014/05/15/the-millennial-portfolio/). Did you change your mind now?

Revisit the context. It was written for scardy moisters. – Garth