The bad with the good

RYANBy Guest Blogger Ryan Lewenza

The market giveth and the market taketh away. As we closed out the month of September, global equity returns were tracking our “good year, not a great year” expectation with global equities up 3.8% on a price basis, largely being driven by the strong US markets with the S&P 500 up 9%. But all this flipped in early October with volatility spiking and the US/global equity markets coming under intense selling pressure with global equities down over 5% in the month of October.

As is typical during these market sell-offs we’re seeing lots of negative headlines (because fear sells) and many concerned investors wondering if this is the beginning of the end of this bull market. We believe it’s way too early to make this bold call and from our perspective, this looks like just a normal correction around the seasonally weak September/October months.

Some of the reasons being attributed to this sell-off include a spike in bond yields driven by strength in the US economy, Trump’s trade war with China and slowing global growth.

While market corrections are always difficult to stomach as we see red across the board and our hard earned savings take a dip, I actually think they can be a good thing. Corrections help to reset investor complacency/overconfidence, they allow the stock market to rebuild “internal energy”, and they remind investors that stocks can be volatile beasts and that you have to be prepared to take the bad with the good if you’re going to invest in the equity markets. As the expression goes, there is no free lunch.

In fact, what we are seeing this year is completely normal. I analyzed the US markets going back to 1960 and found that on average the S&P 500 endures one 10%+ correction and three 5%+ pullbacks per year. Year-to-date we’ve had one 10% correction (early February) and one 8% pullback (current) so far. So based on history, this is normal and should not come as a complete surprise.

Average Pullbacks and Corrections per Year

Source: Bloomberg, Turner Investments

Adding to the recent weakness, which is not getting much attention, are the fast approaching US mid-term elections and the weak seasonal trends for the equity markets in September and October.

Regarding mid-term elections, equities hate uncertainty, and that’s exactly what we have until election day on November 6th. Historically, markets have been volatile ahead of US elections, but then as the election outcome is known, markets stabilize and begin to move higher. In fact, since 1945 there have been 18 US mid-term elections, and in EVERY case, the S&P 500 was higher in the next 12 months by an average of 16.6%. There could, of course, be an exception to this trend but that’s a pretty good batting average if you ask me.

And looking at seasonality, we’re quickly approaching the best six-month seasonal period for the equity markets. Below I chart the average price performance of the S&P 500 and TSX over the calendar year and you can see that November to May, historically, represents the best six month period for the markets.

So, if I’m correct that these factors are contributing to the current market weakness, then it makes sense that these factors should positively influence the equity markets come November, based on these historical tendencies.

Seasonal Factors for the Stock Market Turn Positive in November

Source: Bloomberg, Turner Investments

All that analysis speaks to the shorter-term outlook. Let’s take a step back and look at the long-term. As we like to tell clients, investing is more of a marathon race than a 100-metre dash.

Going back decades, North American stocks have returned roughly 9-10% annually (10% for the S&P 500 and 9% for the TSX). But investing in stocks comes with volatility as captured below. This great chart shows two key things for the TSX. First, it breaks up the historical TSX returns into bull and bear markets. You can clearly see that over time the bull markets last much longer (50 months on average) and return much higher (164% average return) than bear markets which lasts on average 11 months with an average return of -31%. This is why famed Wall Street veteran Bob Farrell was famous for saying that “bull markets are more fun than bear markets” in his top 10 rules for investing. The second thing this chart illustrates is the long-term performance of the TSX (blue line). Yes there are times when it declines (17% of the time), but 87% of the time it’s trending up, and that’s what we try to focus clients on.

Right now with interest rates still so low, bonds and GICs alone are not going to get the job done for investors and grow their savings. Therefore, they need stocks to deliver the rates of return required to grow their savings over time and achieve their long-term financial goals. But as I’ve laid out in this blog post it requires a strong stomach, patience, and the discipline to remain invested through the ups and downs. Equities have, and will continue to, deliver the rates of return most investors need to achieve their long-term goals.

Bull and Bear Markets for the TSX

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

 

90 comments ↓

#1 nonconfidencevote on 10.27.18 at 1:10 pm

Keep calm and carry on.

#2 Hire an Advisor on 10.27.18 at 1:29 pm

Hire an advisor, someone who is good, and get the hell out of their way.

And there ends today’s lesson.

#3 greyhound on 10.27.18 at 1:54 pm

“I analyzed the US markets going back to 1960 and found that on average the S&P 500 endures one 10%+ correction and three 5%+ pullbacks per year. Year-to-date we’ve had one 10% correction (early February) and one 8% pullback (current) so far.”

Yes, but something is different now: world-wide QE has never happened before.
Central banks have created $trillions out of thin air. Those $trillions propped up asset markets; folks who own assets prospered, folks with just a salary didn’t: greatly increased inequality & political division.

Markets went up for 10 years. Now we have QT in the States and soon maybe elsewhere. Financial conditions are tightening. Cash is not trash: it’s not too late to take profits. Maybe this is a time for popcorn and watching the show from the sidelines.

#4 LP on 10.27.18 at 2:21 pm

#151 Russ on 10.27.18 at 12:56 pm
Nonplused on 10.26.18 at 11:50 pm

#82 Ustabe
********************************************

‘National’ and ‘nationalist’ are radically different concepts. Trudeau was not a nationalist. – Garth ******************

Did you mean to say “nationalize” rather than “national”?

#5 technical analysis? on 10.27.18 at 2:21 pm

so… you’ve lost money this year? i remember back in May how you were touting emerging markets (disaster there) . … making the case for the tsx (another disaster) .. telling everyone how fixed and floating prefs were the way to go.. more losses there, hitting 52 week lows, even as rates rise..

apparently you’re a technical analyst… market broke and closed below it’s 200 day MA. first time since 2015. you going to wait until the market collapses further before adjusting your stock positions? or you plan on riding it a bit longer? or you just relying on hope that the market will rebound?

isn’t the point of technical analysis to have an objective means of analyzing and trading markets. rather than relying on subjectivity and hope?

#6 baloney Sandwitch on 10.27.18 at 2:44 pm

I show you the way to free lunch:
Low volatility dividend paying stocks : banks, utilities, pipelines. Not only do you collect a stream of growing dividends but they are tax efficient too.

#7 Proud Dreg on 10.27.18 at 2:52 pm

Globalist banks and Virtue Signalling Censorship Lefty tech stocks have been buying back their own stock “manipulating” the markets for ten years. And now its coming to an end.

#8 Tim on 10.27.18 at 3:01 pm

The fall in preferred shares is a reminder that while they are much less volatile than common shares, they are still correlated with the price direction of common shares. The falling TSX has (so far) exerted a greater negative influence on preferred total returns than the positive influence of rising interest rates.

Thus, preferreds are negative for the year now in terms of total return despite their 4-5% dividend rates, and are now equal to bonds in terms of total return YTD.

On the plus side, the percentage dividend yield for both bonds and preferred shares is going up as unit prices have fallen and the benefit of rising interest rates on dividends for both asset classes starts to be seen.

I’ll be rebalancing next week by selling bonds and buying more of my worst performer of the year to date (iShares XEC emerging market index, down about 14%) and plan to keep buying equities with my regular investment contributions over the next months.

#9 cecil1 on 10.27.18 at 3:11 pm

I sure wouldn’t say the TSX has been in a bull market since 2016.

What do you think of this??

Expect a “Lost Decade”, Stock Market Rout “Only Just a Start”

https://moneymaven.io/mishtalk/economics/expect-a-lost-decade-stock-market-rout-only-just-a-start-44FVOfmLVEG999gIr4ud2Q/

#10 SoggyShorts on 10.27.18 at 3:12 pm

Ryan, does it matter who gets a majority historically?
I think that would be an interesting expansion of your chart.

Returns in the 12 months after a midterm when Dems got the senate vs reps for example

#11 ANON on 10.27.18 at 3:22 pm

Actually it’s more than “made up”, it’s made up promises of more, but pretty close and fitting:
It’s just money.

HTH. :)

#12 Alberta Ed on 10.27.18 at 3:45 pm

#2 “Hire an advisor, someone who is good, and get the hell out of their way. And there ends today’s lesson.”

Amen!

#13 KLNR on 10.27.18 at 4:40 pm

@#7 Proud Dreg on 10.27.18 at 2:52 pm
Globalist banks and Virtue Signalling Censorship Lefty tech stocks have been buying back their own stock “manipulating” the markets for ten years. And now its coming to an end.
________________________

Lefty tech? lol, thats a new one.

#14 KLNR on 10.27.18 at 4:44 pm

@#9 cecil1 on 10.27.18 at 3:11 pm
I sure wouldn’t say the TSX has been in a bull market since 2016.

What do you think of this??

Expect a “Lost Decade”, Stock Market Rout “Only Just a Start”

https://moneymaven.io/mishtalk/economics/expect-a-lost-decade-stock-market-rout-only-just-a-start-44FVOfmLVEG999gIr4ud2Q/
_________________________________

mish shedlock has been saying stuff like this for decades.
His advice is for entertainment purposes only.

#15 Linda on 10.27.18 at 4:53 pm

Hiring a good advisor is excellent advice. However, the truly smart cookie pays attention to what that advisor is doing. That means asking questions, getting educated on what is going on & why. That way should you need to move your affairs you will at least have an idea of what to do with them.

#16 When Will They Raise Rates? on 10.27.18 at 4:53 pm

The double top was apparent 3 weeks ago, smart money has been exiting since January and the S&P just broke its uptrend line that was in place since early 2016.

Take your money off the table and wait until after the US midterms… Then re-evaluate.

#17 Nineteen84 on 10.27.18 at 5:00 pm

“…what we are seeing this year is completely normal. I analyzed the US markets going back to 1960 and found that on average the S&P 500 endures one 10%+ correction and three 5%+ pullbacks per year. Year-to-date we’ve had one 10% correction (early February) and one 8% pullback (current) so far. So based on history, this is normal and should not come as a complete surprise.”
—————————–
I would be curious to see the numbers if your analysis went back to 1900 (to include the roarin 20’s AND the Great Depression).
Also, I don’t think anyone, but a select few (who keep ultra-low profiles), actually has ever seen a bear market coming. So, if this is the beginning of a much greater decline which rivals, say the 2008-9 crash, I don’t expect to be fore-warned by anyone. But I think it’s always prudent to be prepared for something more serious. If I achieve 0% gains for a given year, while everyone else is losing 10-20%, well, I’m good with that.
After 10 years of historic CB intervention (globally), to ‘save’ the existing system with ZIRP and NIRP, I think the consequences haven’t played out yet. My guess is that the next 2-5 years will be very interesting indeed. Lest we forget that 1987 was very close to 1984!

1984

#18 Ryan Lewenza on 10.27.18 at 5:03 pm

technical analysis? “so… you’ve lost money this year? i remember back in May how you were touting emerging markets (disaster there) . … making the case for the tsx (another disaster) .. telling everyone how fixed and floating prefs were the way to go.. more losses there, hitting 52 week lows, even as rates rise..”

Almost every global market is now in the red for the year. Yes our balanced portfolio is down slightly. How could we not be if we have 60% in equities. Let me guess you shorted the S&P 500 and tech stocks last month before the correction started? From a technical perspective the S&P 500 remains in a longterm upward channel supporting our still positive view. Now if it breaks below 2,500 then I change my tune. Lastly, the year is not over and we see the potential for a year end rally so we could see gains coming over the next few months based on the studies I referenced. With respect to EM we got the call right last year with EM up 30%. This year we got it wrong. We make a lot of calls so if your looking for us to get every one right then you don’t understand how the markets work. I get roughly 60% of my calls right which if done consistently will provide clients with the returns they need to grow their savings. – Ryan L

#19 Ryan Lewenza on 10.27.18 at 5:12 pm

Cecil1 “I sure wouldn’t say the TSX has been in a bull market since 2016. What do you think of this?”

The article referenced was laughable in its simplistic analysis. The author only cites the high Schiller PE then just throws out downside numbers with no supporting analysis. Yes the S&P 500 is going to endure a bear market in the coming years but we still believe this is a ways off. – Ryan L

#20 For those about to flop... on 10.27.18 at 5:24 pm

This article has absolutely nothing to do with today’s post.

People will still read it…

M44BC

“Mapping the Most Profitable Industry in Each U.S. State.

Diversification is a broadly accepted investment strategy designed to hedge against risk. If you invest all your money in one company or one industry, you flirt with disaster during an economic downturn. Does the US have a diverse economy? Our new map reveals that the answer is both yes and no.

We found the numbers for our visualization from GoBankingRates, which analyzed 2017 US Census Bureau data to determine the value of each industry’s products. They defined industries using Harmonized System (HS) codes from the World Customs Organization. We color-coded each state based on its most lucrative sector, and we added a nice logo and the dollar amount for easy reference. The output is an intuitive map with a few surprising, and a few predictable, results.

Let’s start by pointing out the industries you might expect to predominate in certain states. Michigan, Ohio, and Indiana significantly benefit from car manufacturing in and around the Motor City. South Carolina and Alabama also stand out as states with a strong automotive presence since they are destinations for in-sourcing as car makers look for cheaper (non-unionized) labor. A few states surrounding Nebraska are major meat producers, which shouldn’t catch anyone by surprise, given the region’s strong agricultural bent. Alaska and Maine likewise benefit from a substantial fishing industry. Nevada is the only state where the most profitable industry involves accommodations and food service. Viva Las Vegas!

There are a number of surprises on our map, too. Who knew that the most profitable industry in Kansas is aerospace ($2.6B)? The same goes for Arkansas, Georgia, and Kentucky. And take a look at all the states colored purple, where machinery and mechanical appliances predominate—who knew that Florida, Idaho, and Illinois have so much in common?

The overarching takeaway from our map is a little unnerving. We read all the time about how diversification is the best guard against risk. And based on our map, the US economy is diverse in some regions but not very diverse in others. In fact, 27 out of 50 US states are led by only three industries (machinery, aerospace, and mineral products), accounting for just under $1.7T in value. That means that when certain segments undergo technological disruption or economic downturns, it can disproportionately impact sections of the country in ways people don’t expect.”

Click on link for full visualization…

https://howmuch.net/articles/most-profitable-industry-by-state

#21 Lost...but not leased on 10.27.18 at 5:29 pm

NO/Nada/Z-E-R-O Market is safe…

Since Federal Reserve was created, and FDR confiscated US citizens Gold…the other 99.9999% of us are simply subjugated to whims of the Central Banks who with their fiat currency and fractional reserve can pull the rug out at any time and crash any market.

The reason they haven’t YET is for them to know and rest of us to be kept in suspense.

“ALL WARS ARE BANKERS WARS”

Suggest do GOOGLE search and find out what real meaning of “THE WIZARD OF OZ”….(hint: all about the financial system of the day pre 1913 and how the “cowardly lion” represented a US politician who knew what was going on yet too afraid to go the next step).

#22 For those about to flop... on 10.27.18 at 6:20 pm

Recent sale report.

I featured these guys in surprisingly one of my more popular posts called “If”.

Perhaps it was because was a little more personal as I reflected on all the cases I had come across, and this one with its riverfront location and size for two people would probably have been the best choice out of all my cases if I was forced to have to buy one.

A lot of people in Vancouver feel like they were actually forced,they were not,you just had to do what was right for you and block out external pressures.

Let’s have a look at the result.

The details…

1020 Seymour Blvd.North Vancouver.

Paid 1.75 October 2017

Sold 1.70 October 2018

Originally asking 1.88

Assessment 1.68

So after expenses probably close to a 150k mistake in one year.

As I’ve said many a time not everyone is trying to shake everyone down.

These guys with the evidence presented, for reasons only known to them,had a change of heart and tried only to get their money back,plus make the new buyer foot the expenses.

It didn’t work out but no greed looks to be involved and hopefully they shake it off and maybe even learn a lesson about how things have been portrayed in the media since late 2016.

If you are having a a crappy day,click on the link and hopefully you will find a moment of tranquility as I do when I look at this picture because it reminds me of some of the rivers I like to go camping besides in the Pacific Northwest…

M44BC

https://www.zolo.ca/north-vancouver-real-estate/1020-seymour-boulevard

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

Feel free to make a donation.

Flop For Fox Fund…

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

#23 Shehateme on 10.27.18 at 6:21 pm

Tsx trading around 27x pe. Historical around 15 implying 8500ish fair value. Yikes, time to stock up on ammo

#24 The Real Mark on 10.27.18 at 6:41 pm

“#23 Shehateme on 10.27.18 at 6:21 pm
Tsx trading around 27x pe.”

Not even remotely close to being true. The TSX is trading at less than a 15X P/E, has approximately a 3% dividend yield, and is well beneath historical ranges for P/E, P/B, and above average for dividend yield.

The TSX never experienced the upside of QE, lower interest rates, etc., that some might have expected. Despite earnings growth and retained earnings over the past decade that have been relatively robust, all things considered. Hence, it shouldn’t experience anywhere near the same degree of downside that you might see in the US indices. And if anything, the excessive allocation of the TSX to the gold sector, deeply out of favour but likely to come back into favour in a stagflation or stagdeflation scenario is likely to act as a nice tailwind to TSX outperformance.

#25 Newcomer on 10.27.18 at 6:46 pm

#21 Lost…but not leased on 10.27.18 at 5:29 pm

Since Federal Reserve was created, and FDR confiscated US citizens Gold…the other 99.9999% of us are simply subjugated to whims of the Central Banks who with their fiat currency and fractional reserve can pull the rug out at any time and crash any market.

———-

Some people would dismiss this a tinfoil-hat paranoia but I see it as good support for Ryan’s general argument. If even people with views this far removed from reality can make money in the market, it must be a very safe place to be.

#26 Shawn Allen on 10.27.18 at 6:52 pm

Lost … but not leased

Is that merely false or an actual lie?

#21 Lost…but not leased on 10.27.18 at 5:29 pm said:

NO/Nada/Z-E-R-O Market is safe…

Since Federal Reserve was created, and FDR confiscated US citizens Gold

************************************
No gold was “confiscated”, so your statement is false.

Instead (from wikipedias) “Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for $20.67”

If you knew that the gold was required to be exchanged for dollars as opposed to confiscated then you are telling a lie. If you were misled by others calling this confiscation then you are merely repeating a false story.

Soon after the required exchange, the U.S. dollar was devalued against gold such that it took $35 to buy an ounce of gold. So, if people liked holding gold (they were longer allowed to ) they felt they had lost something.

But in terms of dollars they got $20.67 which was full value for the gold prior to the devaluation of the dollar in terms of gold. And they got those dollars in a time of deflation.

Had they then put those dollars into the stock market for the next 20 years or more, the returns would have been far, far larger than if they just kept the gold. Gold was still fixed at about $35 in 1953. Stocks went up bigly from 1933 to 1953 and paid dividends besides. I am pretty sure that even putting the $20.67 in a savings account would have beaten gold by a lot. The only losing scenario would be some 1933 zero hedge doomer type keeping the $20.67 cash under a mattress and therefore losing to inflation.

But the main point is that describing this as a confiscation of gold (implying no compensation) is simply not true.

But then again, this is 2018 when people are entitled to their own facts, right?

#27 Ace Goodheart on 10.27.18 at 7:03 pm

Spent a lot of time as a kid hanging out in junk yards.

They don’t let you do it anymore.

You have to fill out a form. They check for you. Do they have this part or that? You have to trust them.

I climbed amongst the wrecked cars, looking for parts. It wasn’t so much “is that safe” it was more “do you dare”.

I pulled a 5spd tranny out of a 1980 diesel rabbit that was perched on top of three other cars. I had to hang from the cross member of an 80’s Chevy pick up to do it. One hand on the rusted metal pipe, the other working the ratchet. A juvenile spider man, hanging three stories up attached to two generations of rusted Detroit iron.

I expertly dropped my 5spd tranny onto the hood of a late 70s Cadillac hearse. It crumpled the wide steel hood nicely as it fell, landing exactly where I wanted it to. Carefully climbed down and claimed my prize. $75 dollars later, and I could go 75mph on the highway at 3500 rpm. The 5spds were unobtanium. The coveted stick shift Gods of VW. I had one.

One thing you learn in junk yard life is a car is a car.

This is an incontrovertible truth.

Whether your car is a 120k Caddilac escalade or a 15k diesel golf, it ends up in the same place.

You don’t get any more miles for the dollar. If you spend 20k on a car, you will get the same miles as if you spend 200k. It’s all the same.

I lived my child hood in junk yards. I can attest to this fact as the gospel truth. The 150k Mercedes had the same miles on them as the 10k Hyundai.

I noticed the high miles cars. They were not expensive cars. The two that stood out were the diesel golf and rabbit and the Chevy Chevette. Both could be had at the time for under 10k. Both lasted longer than a 150k Mercedes.

Moral of the story? Don’t buy expensive cars.

They don’t last any longer. They might last less long than the cheap cars. And they cost more to maintain.

Cars: disposable units of transportation.

Buy a cheap one

#28 Bottoms_Up on 10.27.18 at 7:11 pm

Cool and insightful analyses, thanks for sharing. A couple things come to mind–for people looking to lump sum invest, vs. averaging down, good advice may be to average down given the 5-10% declines that occur every year.

Also, the recent bull market looks like peanuts compared to the past.

#29 The Real Mark on 10.27.18 at 7:29 pm

“If you knew that the gold was required to be exchanged for dollars as opposed to confiscated then you are telling a lie. “

The definition of ownership is one’s ability to possess and use an item to the exclusion of others. Confiscation with compensation by an asset that could have proven to be inferior ($20.67 USD$) is something that could only be performed by fiat, ie: the Executive Order.

Merely stating that the inferior asset, exchanged into another asset (ie: business ownership, or credit to a borrower) later went on to outperform is not justification for the use of fiat for government to forcibly convert an asset class, gold, that they most certainly could not acquire in the open market at $20.67/ounce (otherwise the government would’ve merely done that instead!). In essence, the power of fiat was used to convert the asset of the gold owners to the ownership of the US government at beneath actual market value.

No accused thief or fraudster is allowed to use, in court, negative opportunity costs to answer to the accusation that they deprived an owner of their property through their dishonest conduct. Had Garth Drabinsky, in his fraud trial, claimed that investors would’ve lost all their money in Nortel or Bre-X had they not invested in Livent, he would have been laughed right out of the courtroom.

So the claim that gold confiscation wasn’t confiscation is really, really stretching the facts. If it looks like a duck, sounds like a duck, and quacks like a duck…..

#30 Shawn Allen on 10.27.18 at 7:50 pm

The Myth of Gold Confiscation

“The myth of gold confiscation is a fear-based story that unscrupulous entities in the gold world use to talk people into buying old gold coins at a high markup, instead of modern day bullion.”

https://www.providentmetals.com/knowledge-center/precious-metals-resources/gold-confiscation-myth.html

#31 Ace Goodheart on 10.27.18 at 7:54 pm

I’m starting a web site.

Completely sick of how people make decisions that put themselves into debt.

I’m going to do something about it.

Stay tuned..

I didn’t get from 17 year old street kid to 45 year old semi retired multi millionaire by chance.

It is becoming obvious to me that people need help.

#32 yvr_lurker on 10.27.18 at 8:00 pm

The steep decline like we have seen for the past 3 weeks in the TSX is really problematic when you have an RESP for your kind that you know you will need in August 2022. We have no problem with the discipline needed to save $$ for him, but when a conservative balanced portfolio is down 3.5% for the year it really pisses me off. I will wait until the market recovers somewhat (hopefully by early next year) and will then put all his 65K (and counting) into the best 3 year GIC I can find. It will be taxable in his hands when he withdraws from it, and I won’t have to worry about some bullshit X factor that tanks the equity market 10% in a 3-week period just when he needs the cash. Was bitten that way big-time in 2002 when we watched a chunk of our downpayment for our house evaporate in a very short time period. It ain’t happening again, and I have little faith that anyone has a clue of what the market will do… it is stochastic, downward trends go super-fast owing to technology of everyone selling quickkly, and there are big players that
seem to orchestrate the whole deal…. Must admit I have much more faith in saving, working, and being disciplined with expenses than being a pawn in the market….

#33 Tony on 10.27.18 at 8:05 pm

Re: #29 The Real Mark on 10.27.18 at 7:29 pm

I knew Garth way back when he started Cineplex with 16 mm projectors. The stories I could tell could fill a book about Cineplex and how that company was ran from the start. I knew everyone in that company from day one.

#34 For those about to flop... on 10.27.18 at 8:22 pm

Hey WULLY,you seemed upset at your beloved Calgary Flames getting torched by Sid the Senior and the rest of the Penguins.

I’ll try to cheer you up.

Could be worse, you could be a Flyers fan.

Once again our defence is leaking like a sieve and we have shipped a league leading 46 goals already.

Here’s how my sports teams are currently performing.

Philadelphia Flyers….Flopping.

Manchester United…Flopping

Carlton Football Club…Finished last season in last place…..Flopping

Kansas City Chiefs….On fire

The Chiefs are the one bright spot and the rest need to buck up.

The best thing about The Flyers this season is their hilarious new mascot.

Try looking at this guy and not laughing.

Ticket sales might suck but he could be the surprise choice this Halloween to make up some lost revenue.

When things ain’t pretty…you gotta get gritty…

M44BC

https://m.youtube.com/watch?v=TERXrqhp6v8

#35 stage1dave on 10.27.18 at 8:33 pm

#27 Ace Goodheart

Haha, that brought back some great memories; tho’ I never dropped a trans directly onto a hood! I don’t get to many yards anymore; too bloody depressing cause half the vehicles I see shouldnt even be in there…

After spending a few of my formative years spending volumnous dollars on restifying/restoring/racing a lot of muscle (kept a couple, but sure couldn’t afford to buy ’em now) and buying several new, I completely switched gears 15 years ago and stopped spending stupid money on transportation.

2 years ago, the latest Pontiac Sunbird cost me $280, plus the $70 for a front end found in WY…these 3.1 V6s run forever (I’ve had 540K on one) and it pulled 41mpg back n forth to Claresholm last weekend. And the insurance is a whopping $385/year.

It don’t look too pretty (neither do I, btw) but we both earn our keep by what we can do, not how we look!

Actually, the interior in this car is pretty sweet…

#36 Lost...but not leased on 10.27.18 at 8:53 pm

#26 Shawn Allen

Do you work for Gov’t ?

Maybe I shouldn’t have said “confiscation”..as the Gov’t didn’t actually send in the army to each and every US citizens residence…but was a bit lazy and threatened its own citizens in the “greatest democracy in history” (aka USA) with major fines and long jail sentences for non compliance. Same end result..capisce?

FDR (who was a communist) let his wealthy cronies in on the gold voluntary “surrendering” scam (aka immunity) after the fact and they increased their fortunes once the price rose.

Money effectively became worthless after Federal Reserve was created in 1913….even more so when gold was “confiscated”. In addition..after Nixon de-linked gold from USD, we entered era of major inflation

If you really do your homework(won’t hold breath) the USA was bankrupted by FDR and transitioned jnto another legal entity.

Now go back to your sandbox….

#37 FOUR FINGERS WATSON on 10.27.18 at 8:56 pm

Four of the Big Six are on sale right now….. P/E ratios under 12, 4.13-4.85% div., payout ratios under 50%. Back up the truck.
https://www.dividendyields.org/tsx60-best-dividend-stocks/

#38 reynolds531 on 10.27.18 at 9:04 pm

#27 ace

Yes but do the cheap cars run longer out of necessity? Or is my dream of a magnum pi Ferrari to restore a foolish purchase?

#39 Ace Goodheart on 10.27.18 at 9:13 pm

What is it with the open bathroom stuff?

I have had two friends now move into houses where not only does the bathroom fronting the master bedroom not have a door, the shower and bathtub also directly front onto the bedroom, with no door at all, and there is a big window where someone on the toilet can look out to the various windows on the other side of the alley, and someone in the shower can shake their dangly bits at the audience in about five or six residential windows directly opposite.

Is this a thing?

I can’t believe that people might think someone wants to watch this.

No matter how buff you think you are.

This is just weird.

What is the thing with open bathrooms? I.don’t get this

#40 Diminishing returns on 10.27.18 at 9:20 pm

Easy to see from the last chart that stock market returns are getting smaller and smaller over the decades.

Diminishing returns, more volatility, not a very appealing asset class for investors.

#41 acdel on 10.27.18 at 9:45 pm

#27 Ace Goodheart

Best post that I have read in a long time; you get it, thanks!

#42 Riley Goodheart on 10.27.18 at 10:08 pm

Ryan, would you expect a sell the news type of event on or after Nov 6th where the market takes a dip, then moves up thereafter?

#43 Kilt on 10.27.18 at 10:08 pm

Draw a line from 1990 or 1998 straight down to 2014 on your midterm election chart and that trend will probably be a better prediction of where things are in 12 months.
Dow is overpriced. A 20% correction from here would not surprise me.
TSX has nothing going for it. Companies took on too much debt.
Kilt.

#44 KLNR on 10.27.18 at 10:18 pm

@#34 For those about to flop… on 10.27.18 at 8:22 pm
Hey WULLY,you seemed upset at your beloved Calgary Flames getting torched by Sid the Senior and the rest of the Penguins.

I’ll try to cheer you up.

Could be worse, you could be a Flyers fan.

Once again our defence is leaking like a sieve and we have shipped a league leading 46 goals already.

Here’s how my sports teams are currently performing.

Philadelphia Flyers….Flopping.

__________________________

flyers seem to be a goalie graveyard for the past 20yrs
maybe they can get bobrovsky back :)

#45 Ponzius Pilatus on 10.27.18 at 10:22 pm

The only reason why I come to this blog is for the dog pictures.
Thank you Garth, Ryan and Doug.

#46 Spectacle on 10.27.18 at 10:33 pm

#20 for those about to Flop.

So my friend, this just in::

This property was just Dropped $1,000,000.
That is One Million…….

1809 South west marine drive, vancouver .

It Is different this time. Fun to follow the price points from here. No doubt that as tonight’s epic post host has provided us a measure of where All Markets are going?

#47 Doug in London on 10.27.18 at 10:44 pm

@baloney Sandwitch, post #6:
Works for me, especially when those dividend payers are on sale, like right now.

#48 Bottoms_Up on 10.27.18 at 10:47 pm

Dogs, if you had to buy 1 stock (not etf) on Monday, what would it be and why?

#49 kathryn on 10.27.18 at 11:49 pm

Thank-you Ryan for all of the hard work that you did to put this together. I very much appreciate both your and Garth’s efforts in trying to educate us. This has been my go-to blog for many years.

#50 Fish on 10.28.18 at 12:43 am

Yahoo to pay $50M and give free credit monitoring to victims of 2016 hack

Court approves settlement for digital breach of 200 million accounts
The Associated Press · Posted: Oct 23, 2018 4:16 PM ET | Last Updated: October 23

https://www.cbc.ca/news/business/yahoo-hack-settlement-1.4875164

#51 For those about to flop... on 10.28.18 at 12:55 am

Pink Pumpkins being carved in Vancouver.

These guys in Point Grey have a problem as the market is running out of Ziggy Stardust.

If they get their money back they will be Dancing in the streets yelling Let’s Dance.

People tried to be Heroes and went after fortune and Fame after the Jean Genie was let out of the bottle.

Some people blamed the Young Americans or the little China Girl for the Changes in the market as they tried to be Rebel,rebels and find a new way to get ahead for their Golden Years.

To be in Fashion the younger generation has formed a Modern Love with glass and granite condos but still struggles with this Space Oddity.

Some people cashed in and some people’s money is now Ashes to Ashes.

This is not America,we never took our medicine and learned our lesson and as a result a whole lot of people are Under Pressure…

M44BC

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

4469 W 7TH AVENUE,Vancouver.paid 3.9 May 2016

Originally asking 4.18

Now asking 3.62

https://www.zolo.ca/vancouver-real-estate/4469-west-7th-avenue

This has obviously been a Bowie inspired post after I found a Pink Pumpkin carved with his image.To find it on my blog ask Siri “Where do people go after Garth Turner goes to bed?”

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

Feel free to make a donation.

Flop For Fox Fund…

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

#52 will on 10.28.18 at 1:05 am

thanks for the pep-talk Ryan. good stuff and nice charts.

#53 Fortune500 on 10.28.18 at 1:29 am

#3 greyhound makes a good point. Don’t get me wrong, I agree overall with your sentiment that investors should never panic sell, and that if we hold long, long, long term things will work out, but it does frustrate me that so few economists or analysists address the completely new (yes this part is different this time) situation where we have had a decade of manipulated low interest rates and tons of QE.

How does that not factor in to this analysis?

#54 Smoking Man on 10.28.18 at 2:06 am

Had to broom my linked in account.

James you are a despicable bad person.

#55 crowdedelevatorfartz on 10.28.18 at 2:17 am

@#36 Lost but not found

Hitting the bottle on a Full Moon?
Is that wise?

#56 Smoking Man on 10.28.18 at 2:28 am

All you try and do is bring some comedy into a world that needs it badly. You get really evil ass holes who can’t take a joke.
Crazy un happy shit heads who because of there lack of creativity.
Want to destroy creative people.

I’m done here. And every other social media account. . You want to hear my old white man alien wisdom, there will be fee.

Good bye dogs. In done.

Hero Janes can take all the credit.

#57 Nobel Laureate on 10.28.18 at 3:45 am

Takes a while to get there but:

“CO2 is the most important nutrient for all life on earth.”

Also,

When we stared emitting CO2 it was about 260 ppm and it’s gone up to 400 ppm. If it had gone down by the same amount as it has gone up, plants would have started dying, because they start dying at around 150 ppm.”

It’s a long watch. But if you don’t watch it you don’t really know anything about the CO2 argument.

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

This is Patrick Moore, co-founder and former president of Greenpeace.

Sorry Garth you are not able to argue with this guy. You are a very well accomplished individual with great accomplishments in your field and you have enormously helped a lot of people, but you didn’t stop above ground nuclear detonations, save the whales, or make the seal slaughter sustainable. You have to at least hear Patrick Moore before you go on about climate change.

You must watch this presentation and provide a rebuttal before you do anymore fear mongering. Ya, you saved retirement for a lot of us. But this guy stopped above ground nuclear testing and saved the whales. He saved the frickin’ whales!

The most important thing to know is what you actually don’t know, which is practically everything. Most of what you think you know, just isn’t so.

Oh and if you are really worried about global warming caused by CO2, put the Harley in a museum, turn off the computer and stop blogging, and get rid of the Hummer. Oh and turn off the lights and turn down the heat. Like all the way down or off. Not even a wood stove. No heat. If you want to preach about CO2, go zero, although that means no blog.

#58 Kool Aid on 10.28.18 at 6:31 am

Not enough dollars available to pay interest.

Corps buybacks a form of financial engineering.

Liabilities continue to grow, unsustainable.

Rates rise, risks elevates.

New US TAX CODE rocket fuel for interest rates.

Good luck.

#59 Johnny on 10.28.18 at 8:54 am

This is an excellent article backed by facts and charts. Thank you.

#60 Ryan Lewenza on 10.28.18 at 8:55 am

Kilt “Draw a line from 1990 or 1998 straight down to 2014 on your midterm election chart and that trend will probably be a better prediction of where things are in 12 months. Dow is overpriced. A 20% correction from here would not surprise me. TSX has nothing going for it. Companies took on too much debt.”

We agree that the Dow and other markets are going to drop 20%, just not in the immediate future. Bear markets are largely caused by recessions, and we don’t see a recession over the next 9-12 months. As such we see this as another buying opportunity. When the yield curve inverts, the unemployment rate starts to hook up, ISM manufacturing index starts to rollover and the S&P 500 breaks critical support levels then we’ll likely have a recession and bear market. For the TSX it has lagged performance and very cheap valuations going for it. Yes it’s underperformed over the last decade, but I see a stronger decade coming on higher commodity prices. – Ryan L

#61 Ryan Lewenza on 10.28.18 at 9:00 am

Riley Goodheart “Ryan, would you expect a sell the news type of event on or after Nov 6th where the market takes a dip, then moves up thereafter?”

Yes that’s possible, especially if Dems win both the House and Senate (unlikely in my view), but my base case view is that markets stabilize then move higher in November as the election uncertainty is removed. – Ryan L

#62 Roman on 10.28.18 at 9:17 am

What happens if you ready to retire with a nicely grown investment and then suddenly a bear market… and portfolio loses 40%?

Also, those averages are after inflation, fees, and all expenses, divs re-invested?

And those green bars are becoming smaller and smaller :)

#63 technical analysis? on 10.28.18 at 9:17 am

#18 Ryan Lewenza on 10.27.18 at 5:03 pm
________________________________________

is that supposed to be a trick question Ryan? you know professional traders don’t short the strongest markets. (or go long the weakest ones). of course i was not short nor claimed to be short the SPX. short gold stocks in the summer. ya. short emerging markets in the summer, and still short. ya. shorting canadian financial stocks, oh ya! (that’s one of the nicest h/s tops i’ve ever seen, with a wedge to complete the right shoulder.) you’re looking at a potentially serious decline.

as for how markets work.. lol.. you try and figure them out. maybe you have Gypsy blood in your background to predict the future. i rely on reality. trend. tight stops. limited risk. and proven set ups based on.. you guessed it, technical analysis.

but i understand your position. you’re not a trader. you need money under management and have a simple strategy of buy, hold and adjust. make your clients a decent return, with lower risk, and they are happy. exiting stocks en masse isn’t an option for you.

#64 Ryan Lewenza on 10.28.18 at 9:38 am

Roman “What happens if you ready to retire with a nicely grown investment and then suddenly a bear market… and portfolio loses 40%? Also, those averages are after inflation, fees, and all expenses, divs re-invested?”

In this circumstance we would recommend having a higher cash weight than normal to fund a full year of retirement expenses so that you don’t have to sell securities in a downturn. Bear markets last on average 11 months hence having at least one year of cash on hand. – Ryan L

#65 Victor V on 10.28.18 at 9:41 am

#48 Bottoms_Up on 10.27.18 at 10:47 pm

Dogs, if you had to buy 1 stock (not etf) on Monday, what would it be and why?

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

My portfolio is in ETFs, however, on occasion I do like to dabble in speculative plays.

For this year, I’ve taken a position with Hill Street Beverage: BEER.V. They are emerging leaders in the country selling non-alcoholic beverages and, importantly, will be looking to infuse the drinks with cannabis next year when edibles become legalized. I believe edibles/ingestibles will be the ‘next thing’ for this sector as evidenced in part by the billion $ investment from Constellation into Canopy.

Strong management team (including no insider selling to-date), award winning products (important differentiator for this industry), and growing distribution of stores selling their products are some of the pluses. Of note, since they only went public this past summer, there hasn’t been a lot of attention on the stock, so significant gains I believe are in the cards as they continue delivering on their business plans while attracting interest to the stock.

Here is a short investor video that provides a synopsis: https://youtu.be/t5R9kuLr3Nc

#66 KLNR on 10.28.18 at 9:50 am

@#56 Smoking Man on 10.28.18 at 2:28 am
All you try and do is bring some comedy into a world that needs it badly. You get really evil ass holes who can’t take a joke.
Crazy un happy shit heads who because of there lack of creativity.
Want to destroy creative people.

I’m done here. And every other social media account. . You want to hear my old white man alien wisdom, there will be fee.

Good bye dogs. In done.

Hero Janes can take all the credit.
____________________

good riddance

#67 Victor V on 10.28.18 at 9:50 am

#56 Smoking Man on 10.28.18 at 2:28 am
All you try and do is bring some comedy into a world that needs it badly. You get really evil ass holes who can’t take a joke.
Crazy un happy shit heads who because of there lack of creativity.
Want to destroy creative people.

I’m done here. And every other social media account. . You want to hear my old white man alien wisdom, there will be fee.

Good bye dogs. In done.

Hero Janes can take all the credit.

=====
=====

Don’t let James win. There are many level headed folks here that enjoy debate and hearing different views, including yours.

Reconsider. Please stay.

#68 dharma bum on 10.28.18 at 9:51 am

#56 Smoking Man

I’m done here. And every other social media account. . You want to hear my old white man alien wisdom, there will be fee.
——————————————————————–

Please don’t go…say it ain’t so!

Whatever the fee is, I’ll pay.

Smoking man humour is PRICELESS!

From one old white male to another.

#69 russell on 10.28.18 at 10:11 am

So since 1960 3 x 5 a 1 x 10… this year 1 x 8 and 1 x 10 and all is good and running normal… So folks the markets are normal no bubble hear… liquidity normal… bond market normal… credit market normal… yield curve normal, BOC says all is normal and stable in real estate market… consumer debt levels normal, pension fund liabilities normal, oil running at $20 B for Canadian crude… pot sales high and Ryan here must be a good customer so his post is???

So folks leverage your dwindling home equity and go in strong and buy the market dip because Ryan here is seemingly bullish… is this normal???

#70 crowdedelevatorfartz on 10.28.18 at 10:18 am

@#27 & 31 Ace Goodheart
“Junkyard treasures”
+++++

About 20 years ago I was down on Annacis Island at a Import Car junkyard. I needed the Dash assembly for my 1980 Honda Civic ( that had 400k on the original eng.)
So I laid all my tools out on the roof and started ripping out the dash. I was on my back. Under the dash with my legs sticking out the drivers door and I notice a pair legs standing next to mine…? I here my tools being put back in my tool box. I scramble to my feet and there was a young kid stealing my tools. WTF? ‘What are you doing with MY tools!” “Oh, I thought these were junk.”
Two seconds later the tools hit the ground after i grabbed him by the throat. Unbelievable gall.
Junk yards are a great score sometimes but even they are getting expensive.
As for cars and their “value”. Could agree more.
They get you from “A” to “B” …thats it. Some are a more comfortable ride.

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

“I’m starting a web site.
Completely sick of how people make decisions that put themselves into debt.’
++++
Good idea.
people help him out with a Blog Title.

“Idiots and their Money”
“Wants vs Needs”
Goodheart’s Greatest Ideas”

#71 Last of the Boomers on 10.28.18 at 10:19 am

Are any of you blog dogs and Ryan watching or investing in RNX? I understand that the PE ratio for this stock is around 1 and they are cash flow positive. Does anyone out there follow small cap mining stocks and what is your view short term and longer term for this stock? Would gold mining stocks with such huge finds not be a good investment in this current climate? Martin Armmstrong did a short piece on this stock several weeks ago.

#72 akashic record on 10.28.18 at 10:48 am

#56 Smoking Man

What happened, James?

#73 crowdedelevatorfartz on 10.28.18 at 10:50 am

Totally off subject.
(Whats good for the Flopster is good enough for me.)

Brazil’s runoff Presidential election is about to democratically elect its first “dictator”?
A man who has openly mused about mass arrests, Police crack downs, non judicial jailings…?

And WHY would Brazilian voters want such a leader?
Rampant crime, unemployment, inflation and 12 years of Socialist govts that squandered their mandate with vast corruption, lies and deceit ( I guess Socialists can be just as lazy, corrupt and bad as Capitalists when they have the keys to power…who knew.
All have voters screaming “enough”.

Soon to be President Bolsonaro .
A man who has openly mocked anyone who disagrees with him.
Has encouraged his supporters to attack journalists who critisize him.
Donald Trump has encouraged a new generation of populist “leaders” who are vicious, dangerous and ultimately self serving.
But, we only have to look at the pathetic voting alternatives to understand why the voters choose another , populist way.

Interesting times.

https://ca.reuters.com/article/topNews/idCAKCN1N203K-OCATP

#74 For those about to flop... on 10.28.18 at 10:54 am

CONFIRMED PINK SNOW.

This one has a bit of a crust on it, but someone with the initials A.B was good enough to point it out to me and this was supposed to be a grassroots effort to try and circumvent a dated, secretive system and so it’s gets a run out.

The details…

103 17th ave Vancouver

Paid 2.99 March 2017

Sold 2.8 May 2018

So after expenses they probably burned close to 350k in less than 14 months.

The person who helped point it out also offered to buy me a Vegemite sandwich and pick my brain.

It would be a short lunch as I eat super fast and there isn’t much brain matter to pick.

I am a b-grade construction worker that gets by in life by being half decent at my trade and spending less than I earn.

I doubt I could lecture anyone on something they already didn’t know.

What you can do with a bit of heart,well, that’s a different conversation…

M44BC

https://www.zolo.ca/vancouver-real-estate/103-w-17th-avenue

#75 Renter's Revenge! on 10.28.18 at 11:04 am

#32 yvr_lurker on 10.27.18 at 8:00 pm

I understand your frustration and think you have a good plan. You made a bunch of good points, except for the conspiracy theory about big players controlling the market. I don’t really believe that part.

I think stocks are only appropriate investments for some situations, usually when you have a long time horizon, don’t need all the money at a specific time in the future, or will only be taking out a small amount at a time.

Example 1: you are planning to buy a house at some point in the future, but don’t care when, just when you have enough money. So you sell your stocks when the market is up and you buy the house at whatever price you can get. As an aside, selling your stocks and buying a house when the stock market is up and the housing market is down is obviously a unicorn event and may work out for some people, but probably not everyone who tries to do it.

Example 2: You’re retiring, but you expect to live for another 30-40 years. Obviously you don’t need all the money at once and only plan to take out a little at a time. Your sales and withdrawals through the ups and downs of the market will average out over time, so no need to worry about downturns.

If you’re saving for something in the near future, and you need all the money at once, then cash in a savings account makes sense. Given the difference between the average annual returns of the stock market and savings accounts, you’re not really missing out on much, inflation is not a big concern in the short run, and you’re taking way less risk.

#76 Fish on 10.28.18 at 12:38 pm

O. Reg. 580/05: CODE OF ETHICS

https://www.ontario.ca/laws/regulation/050580

Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sched. C

https://www.ontario.ca/laws/statute/02r30

http://www.trebwire.com/index.php/2018/01/11/treb-consults-members-extensively-major-review-real-estate-business-brokers-act/

December 15, 2017
By Jeremy Chaput

Yesterday, Bill 166, Strengthening Protection for Ontario Consumers Act, 2017, passed third reading and received Royal Assent. To help Ontario’s REALTORS® better understand the legislation, OREA has drafted some Frequently Asked Questions (FAQ)

https://www.oreablog.com/index.php/bill-166-strengthening-protection-for-ontario-consumers-act-2017-qa/

Province’s review of rules governing real estate agents welcomed by realtor association, regulator

Practice of ‘double-ending’ – agents working for buyer and seller – to be examined

Philip Lee-Shanok – CBC News

April 22, 2017

https://www.cbc.ca/amp/1.4080485

#77 Lost...but not leased on 10.28.18 at 12:40 pm

#55 crowdedotisfartz:

Is that all you got?
Olde booze and full moon retorts ?

Regardless, you war stories are endless…maybe go off and write a book….take your time…PLEASE.

#78 yvr_lurker on 10.28.18 at 12:47 pm

#75 Thanks for your response. I know I need to up my meds when I get into conspiracy mode about what really drives these sudden collapses…

Your comment is indeed as I see it. For my kid there is about a 3 1/2 year time horizon, so after scrimping and saving for him for the past 14 years I do not need to experience another X-factor moment where the market collapses just when we need to use the cash. This is what happened with part of my house downpayment in 2002. I am perfectly fine with getting the best GIC once this market recovers a bit and “holding”. The GIC is taxable for him and not me (so will be zilch) and I can continue to save over the next 3 years. I need some certainty of what will be there for him….. basically taking all my chips off the table

There has been no market ‘collapse’ since 2008-9, when a balanced portfolio lost 20%, while the stock market gave back 55%. The balanced portfolio recovered everything in one year – and that was the worst experience in eight decades. The current volatile year may end up with a balanced portfolio yielding a GIC-type return, after a 20% gain over the last two years (which it retained). Your whining about a “sudden collapse” and “X-factor moment when the market collapses” make you sound like an emotional basket case. Perhaps someone with your disposition should never invest. – Garth

#79 crowdedelevatorfartz on 10.28.18 at 12:53 pm

@# 77 Lost in Translation
Yes I have much much more in the “war story chest” but I feel it would be….”Lost?”….. on such an inferior intellect such as yours….AND I have things to do today.
Unlike you.

Have another drink, its noon somewhere.

#80 Shawn Allen on 10.28.18 at 12:56 pm

Ryan, so what is the TSX P/E and other value ratios?

Ryan said: “For the TSX it has lagged performance and very cheap valuations going for it.”

*************************************
ishares shows the trailing TSX ETF index P/E at 14.55 using the weighted harmonic mean of the P/Es of all the individual stocks in the index.

ishares shows TSX index yield at a fairly juicy 3.53% and price to book at a relatively modest 1.73

https://www.blackrock.com/ca/individual/en/products/239837/ishares-sptsx-capped-composite-index-etf

What do other sources say? and what do they say about the forward P/E.?

#81 Stone on 10.28.18 at 2:21 pm

Considering the 27% downturn that appears to have occured around 1997, had you invested just before the 27% drop, your compounded annual return would be about 6.15%. Had you invested that same $1 at the bottom of that 27% downturn till today, your compounded annual return would be around e7.75%.

And that’s without rebalancing. Interesting.

Balanced portfolios did not drop 27% in 1997. – Garth

#82 AB Boxster on 10.28.18 at 2:22 pm

#78 yvr_lurker on 10.28.18 at 12:47 pm

There has been no market ‘collapse’ since 2008-9, when a balanced portfolio lost 20%, while the stock market gave back 55%. The balanced portfolio recovered everything in one year – and that was the worst experience in eight decades. -Garth

———————
Garth is right of course.

But as mentioned above in comments, some funds should not be invested in the same way you might invest your main portfolio.

RESP’s are a good example.

GIC’s and gov bonds are safe investments if you do not like the volatility right now.

A 5 year GIC or gov bond will pay you annual interest, and you are assured to get your investment back.

You do not get the potential benefit of better returns from other investments, but you eliminate the volatility risk of today.

Today’s investments are in tough because of rising rates (which are killing fixed investment EFTs) and global economic factors that are affecting most other equity asset classes.

As has been seen, even bond ETF’s have lost money over the past 2-3 years with rising interest rates.
And as rates are likely to increase still, why would this trend change?

They may/should recover in time, for when you need to start withdrawing from the RESP, but they may not.
For a kids education fund why take that risk?

One mainly sets up the RESP to get the government grants in the first place, and if you have done this you are way ahead of most families.

Take the risk in your own personal portfolio and if it does well and recovers, you can use these gains to top up your kids university expenses anyways.

IMHO core RESP investments should be invested in uber-safe stuff, and in today’s volatile investing climate, that means individual govt. bonds, GIC’s etc.

Wrong. RESPs are typically invested for 15-20 years. Stuffing the money in a GIC is doing your kids no favour. – Garth

#83 yvr_lurker on 10.28.18 at 2:28 pm

#75 Understood what I was saying, but Garth completely missed the point in #78. If one needs to be sure that a sizeable chunk of cash is available on August 30th, 2022 from an RESP, it seems far safer in taking your chips off the table at this stage, putting it into a GIC (with no tax worry) rather than experience the X-factor moment of the market suddenly going down 8% in the month preceeding when you need to have it. The market has shown that 8% can be lost for no apparent good reason (not like 2008) in a stunningly short time period.

For long term indeed one has to expose themselves to the market, and I am not worried about the dips to my pension as it has done decently over the past decade. My general mistrust of driving forces of the market is there however….

Your time horizon is four years. You have lots of potential growth ahead so a one-month decline would be meaningless. Besides, a B&D portfolio did not drop eight points in 30 days. Stop being a drama queen. – Garth

#84 Stone on 10.28.18 at 2:53 pm

#81 Stone on 10.28.18 at 2:21 pm
Considering the 27% downturn that appears to have occured around 1997, had you invested just before the 27% drop, your compounded annual return would be about 6.15%. Had you invested that same $1 at the bottom of that 27% downturn till today, your compounded annual return would be around e7.75%.

And that’s without rebalancing. Interesting.

Balanced portfolios did not drop 27% in 1997. – Garth

———

I agree. I was commenting on the chart of the TSX Ryan had added. My thought was that by doing absolutely nothing, you can still do well on the TSX given a long enough time horizon.

#85 Fish on 10.28.18 at 3:11 pm

Fragmented bus service market emerges as Greyhound exits Western Canada Oct. 31

Mix of government-subsidized services, Indigenous-owned bus lines, startups and ride shares to fill the gap
Dan Healing · The Canadian Press · Posted: Oct 28, 2018 9:10 AM MT | Last Updated: 3 hours ago

https://www.cbc.ca/news/canada/calgary/greyhound-bus-replacements-1.4881639

#86 Gravy Train on 10.28.18 at 3:21 pm

#82 AB Boxster on 10.28.18 at 2:22 pm
[…] IMHO core RESP investments should be invested in uber-safe stuff, and in today’s volatile investing climate, that means individual govt. bonds, GIC’s etc.

Wrong. RESPs are typically invested for 15-20 years. Stuffing the money in a GIC is doing your kids no favour. – Garth

Gosh, you’re a brave man, Garth! Expect a pummeling and some name-calling! :)

#87 Keith in Rio on 10.28.18 at 6:32 pm

Jair Bolsonaro is the new president of Brasil.

95% of polling stations are clised and he has 56% of the vote to 44% for the losing communist.

#88 KLNR on 10.28.18 at 7:36 pm

@#87 Keith in Rio on 10.28.18 at 6:32 pm
Jair Bolsonaro is the new president of Brasil.

95% of polling stations are clised and he has 56% of the vote to 44% for the losing communist.
__________________________________

lol, that guy makes trump look normal.
Maybe thats the type of guy they need to get the insane violence there under control.

#89 Doug in London on 10.29.18 at 10:59 am

Damn, I’m upset! Stocks are going up again and it looks like the dirt cheap sales are over. Made for a lousy start to my day.

#90 neo on 10.29.18 at 4:45 pm

Hi Ryan,

A couple of thoughts.

1.) You seemed to have glossed over the impact of QE the past 10 years in your fancy charts from the 60’s. That the equivalent of ignoring the steroid era in baseball and still comparing home run stats to Babe Ruth and Hank Aaron. And quite frankly, that is what QE amounted too.

2.) You mentioned your level on the S&P 500 is under 2,500 for you to start fretting. I’ll have to disagree with you. Bulls are going to defend that 2,600 level. S&P will rally ever time it gets close to that until it doesn’t. We’ve seen that already recently. Once 2,600 fails Bulls will lose some of that conviction and this will be an extended bear market period and that rally into the end of teh year you think is happening isn’t going to materially happen.