Perspective

RYAN By Guest Blogger Ryan Lewenza

Well, this has turned out to be a pretty crappy year for investors! With each Trump tweet and Fed rate hike, volatility returns, pushing stocks, bonds, and basically everything lower. The only thing that seems to be hitting new highs this year is Canadian pot smokers following Trudeau’s legalization.

Take a look at the carnage below where I show the year-to-date price performance of key equity indices, bonds and commodities. See a pattern here?

Stocks have been the hardest hit, particularly international and emerging market equities. They can largely thank Trump’s trade wars for those disappointing results. Brexit hasn’t helped either.

Interestingly, even bonds are down this year as the Fed and Bank of Canada continued to hike rates throughout the year. Normally, bonds catch a bid as equities decline, but this year was an outlier as the Fed and BoC began to normalize rates, following a near decade of record low interest rates.

YTD Price Returns for Various Assets

Source: Bloomberg, Turner Investments. As of December 18, 2018

Here’s an interesting chart that further hits home just how tough of a year it has been to make money. A Deutsche Bank analyst calculates the annual returns of 71 key global asset classes, ranging from stocks, bonds and commodities going back to 1900. Last year a record low 1% of these global assets were negative for the year. This year, a record 90% are in the red. Basically, this chart shows that nobody made any money this year. Add in the fact that Bitcoin is down 75% and the average Canadian home price is down 3% this year, it’s fair to say that most of us have seen a drop in our net worth. What’s behind all this?

Percentage of Global Assets with Annual Negative Total Return in USD

Source: Deutsche Bank, Turner Investments

I believe there have been three key drivers behind this weakness. They include Fed rate hikes, Trump’s trade wars and his Twitter account, and as a corollary to these two factors, a deceleration in the global economy.

On the first issue – Fed rate hikes – we expect the Fed to materially slow its rate hikes in 2019 from this year’s four hikes. In this week’s Fed rate decision they lowered their number of projected rate hikes for 2019 from three to two. I see this more dovish view from the Fed as a positive development heading into 2019.

Without a doubt, a key risk to the economy and stock market heading into 2019 is Trump’s ongoing trade spat with China. Our hope and expectation is some positive movement on this key issue with US and Chinese trade negotiators currently working away on a deal. I would be surprised to see everything hashed out over the 90-day negotiation period, but I’m hoping they can mutually agree on the broad strokes. If correct, this could be a big positive for the markets in 2019.

The last factor is the slowing economy, and I think what happens here will largely dictate whether the markets rebound in 2019, as we currently expect, or continue in this downward trend. I believe the market is being overly pessimistic about the economic outlook for 2019 and is pricing in a major deceleration/recession. I see the US/global economy slowing a bit next year as the US fiscal stimulus (tax cuts and increased spending) falls off and the ongoing trade uncertainties weigh on sentiment and economic activity. But the key point is that we don’t see a recession for 2019 and therefore I believe the market could stabilize in the New Year as this becomes more evident (i.e., a slowdown but no recession).

Given this view we see some good buying opportunities following this recent sell-off. One area that is looking tasty is the Canadian preferred share market.

Below is a chart of the Canadian preferred share market, which has been dropping faster than Prime Minister Justin Trudeau’s approval rating!

With the current risk-off environment, preferred shares have declined alongside equities and other higher risk investments. But the sell-off is a complete over-reaction and not based on the underlying fundamentals. In fact, I believe a lot of this selling is technical in nature with investors selling preferred shares to harvest capital losses. Having analyzed and invested in the preferred share market for nearly two decades I know that in a down year preferreds typically get whacked in December as investors sell them to generate capital losses. Given the increased selling pressure and the illiquid nature of the pref market, it often declines aggressively in December, then bounces back in January and February as the “smart money” comes in to pick up bargains.

With the sell-off the Canadian pref market is now yielding an attractive 4.75% or 280 basis points over the risk-free GoC 5-year yield – the highest spread since mid-2017. Moreover, we see the GoC 5-year yield going higher in 2019 which could push fixed resets (a type of preferred share that benefits from rising interest rates) higher and result in some capital appreciation next year for the preferred share market. And, as I’ve already covered, we could see a quick turnaround in January/February as capital loss selling ends over the next week or two.

Warren Buffett likes to say “the time to buy is when there’s blood in the streets”. I don’t know if I would characterize a 12% decline since October as “blood in the streets” but it sure is looking pretty washed out and attractive. So there’s my holiday gift to you. And if I’m wrong you can just blame Garth as he’s crazy enough to let me write on his blog!

Happy holidays to all you blog dogs, and here’s to a more prosperous 2019!

Pref Sell-off Since October Creating a Buying Opportunity

Source: Stockcharts, 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.

 

103 comments ↓

#1 SmarterSquirrel on 12.22.18 at 2:39 pm

Now is a good time to do some assessing of your favourite dividend stocks and see whether the price they are currently trading at gives you a good chance to buy at a good valuation. Here’s the method I use to assess dividend stocks, https://smartersquirrel.com/invest/dividend%20investing%20lesson%20with%20brookfield%20infrastructure%20partners

#2 Leichendiener on 12.22.18 at 2:46 pm

Better luck next year. Thank you Ryan for another superb post. Seasons greetings.

#3 Hugo Fliessbach on 12.22.18 at 2:57 pm

Gold is about 6% higher in Candollars and about unchanged in US dollars.

#4 crowdedelevatorfartz on 12.22.18 at 3:00 pm

Where’s “Slowly Boiling Frogs” when you need him?

#5 PGer on 12.22.18 at 3:28 pm

I agree, Ryan – a great time to buy preferred etfs. Last time I bought CPD was in 2016, when it was about $11.30. Now, it is back to $12.19 and yields a little less than 5%. Rate resets, which it contains a lot of, will be reset higher. Will be loading up again next week.

The best time to buy these things is when no one wants them (of course, you could say that about almost any investment class right now), but they can provide good tax-advantaged income for life.

#6 Stealth on 12.22.18 at 3:33 pm

Looks like blog came available at 3:30 pm EST, I accidentally refreshed twice.

Do you publish at the same time or is it random ?

#7 To Mr Stan Brooks on 12.22.18 at 3:42 pm

You’re smart but you’re an idiot.
Shut up already, you’re embarrassing your family.

#8 SoggyShorts on 12.22.18 at 3:45 pm

@Ryan

Do you think it is important for a DIY investor to allocate funds in a tax efficient way across RRSP, TFSA, and non-reg?
Details:
RRSP and TFSA are each 15% of the portfolio, and
non-reg the other 70%
5 ETF potatoish portfolio

I feel like for the few points gained it isn’t worth the extra rebalancing effort required and I should just keep the same allocation in each account

Thanks!

#9 crossbordershopper on 12.22.18 at 3:47 pm

CPD
ok lets see, jan 1 2015, $16.04
jan 1,2016, $15.39
jan 2017 , $11.67
jan 1 2018, $13.76
dec 23,2018, $12.19
so in 5 years , which is reasonable amount of time. CPD has done what.?
probably 90 % of everyone who owns or has owned the CPD, some diversified preferred shares(which are suppost to be boring, secured kind of senior security)
HAS LOST MONEY.
yes current yield is 4.6% or so with favourable tax stream if in taxable account.
How can you possibly spin this as positive, average CPD is probably down 2 to 3 percent a year offset the 4.6% yield your close to zero.
my point is simple, why even bother, you could make more in a GIC, without carrying about anything. Five Years is not a long weekend, My premise that Canadian investments are lousy and should be avoided almost 90% of the time, few and far between good investments in Canada exist. No one is getting paid for accepting volatility in Canada even in a fixed income security like a diversified pref fund like CPD. even the canadian etf mer fee are too high .49 is high, taking 12% of the yield on a fixed income portfolio is high. should be like .15

#10 ts on 12.22.18 at 3:48 pm

Ryan, great article. Besides Canadian preferred shares, what other buying opportunities would you recommend to a new investor? Are ETF’s or REITS a good investment at this time?

#11 AACI Home-Dog on 12.22.18 at 4:02 pm

Thank You, & Merry Christmas !

#12 Howdi on 12.22.18 at 4:02 pm

You’re a nice guy Ryan but you’re a moron.
You see, the world has changed and old metrics no longer work.
Repricing of assets is necessary because the old valuations were based on QE that is going away.

You see, there, you’re welcome.

#13 Dave on 12.22.18 at 4:04 pm

Everything is going down in the toilet… stock market, real estate, good paying jobs, bitcoin, and no silver lining.
2019 looks to be more doom and gloom – maybe the usa can start another war – get things moving again : (

#14 Merry Minksky on 12.22.18 at 4:05 pm

And to you and yours too, Ryan!

Thank you!

#15 cecil1 on 12.22.18 at 4:20 pm

This is why I don’t like preferred shares.

You get the returns of bonds, with the downside risk of stocks. Some deal.

A 16% decline when the S&P is down <10% YTD is not stability.

For most investors dividends are not better than capital gains, so I don't see the benefit, but we are seeing the risks.

#16 young & foolish on 12.22.18 at 4:22 pm

Scary charts …. are we whistling past the bear cave?

#17 michael guy on 12.22.18 at 4:30 pm

Snide pot shots at our sitting PM, Ryan? Really?

#18 young & foolish on 12.22.18 at 4:39 pm

Enough with Bubble Economics …. time to look after Main Street before we lose the narrative.

#19 Cash on 12.22.18 at 4:45 pm

And Cash 2.25%.

#20 Ryan Lewenza on 12.22.18 at 4:46 pm

SoggyShorts “Do you think it is important for a DIY investor to allocate funds in a tax efficient way across RRSP, TFSA, and non-reg?”

Absolutely you want to do this so your minimize taxes and maximize your after tax return. You first determine your asset mix, then you determine which account you want to hold each investment. We generally put more of the bonds in the RSP as interest is more heavily taxed and we put growth investments in the TFSAs. – Ryan L

#21 Deplorable Dude on 12.22.18 at 4:49 pm

Nice post Ryan….so what’s a balanced portfolio returned this year out of interest?

For those of us who are dividend income growth investors……here’s some nice numbers to look at….dividend increases this year from some nice stable TSX companies…..

TD – 11.6%
AQN – 10%
NA – 8.3%
RY – 7.7%
FTS – 5.9%
CU- 9.8%
ENB – 10%
BCE – 5.2%
T – 7.9%

Yummy….

#22 Dolce Vita on 12.22.18 at 4:49 pm

Nervous Nellie markets. For the reasons you say.

Reality: GDP +, Job Creation +, Unemployment low.

With a single Tweet, Trump can make trade a non-issue.

Not so immediately fixed are RE values going down, and with it the Wealth Effect. Big GDP effect in Canada. Not so big in the US.

Markets have gotten it wrong before. This would not be the first time nor, will it be the last time markets false signaled.

They threw a party and in the end, nobody came. Like the Economists that predicted the last 9 out of 6 recessions…

#23 Ryan Lewenza on 12.22.18 at 4:52 pm

ts “Ryan, great article. Besides Canadian preferred shares, what other buying opportunities would you recommend to a new investor? Are ETF’s or REITS a good investment at this time?”

ETFs are just a type of investment vehicle. We only invest in ETFs as individual stocks are too risky and mutual funds are too expensive and ineffective. You then determine which ETFs you want to invest in based on your asset allocation and strategy. As far as other attractive areas, high quality dividend stocks look attractive as they’ve declined considerably with the increase in bond yields and the recent volatility. There are a number of good dividend ETFs to choose from. – Ryan L

#24 Smoking Man on 12.22.18 at 4:52 pm

Marry Christmas Ryan. Happy holidays is so yesterday.

#25 Ryan Lewenza on 12.22.18 at 4:56 pm

Howdi “You’re a nice guy Ryan but you’re a moron.
You see, the world has changed and old metrics no longer work. Repricing of assets is necessary because the old valuations were based on QE that is going away. You see, there, you’re welcome.”

Wow, thanks for that great advice! I guess I didn’t need to go to business school, complete the rigorous CFA and CMT designations, read hundreds of investments books, and analyze the capital markets for 20+ years. I just needed this pearl of wisdom. I guess I am the moron. – Ryan L

#26 Roman on 12.22.18 at 5:05 pm

If there is a buying opportunity right now, there must have been a great selling opportunity recently, no?

How do threy buy if supposedly staying invested 100% of time? Or investors supposed to lever up?

Markets are normalizing right now, going up in a straight line is what should be scary. There is also a reason why junk/high yield ETFs are paying that high dividend, a wild guess – because it has… risk?! So why taking on more risk just when the world has started deleveraging?

#27 Doug in London on 12.22.18 at 5:07 pm

if you actually want the buy low, sell high method to work for you, then you need to first buy low. NOW is the time to do so while stocks, equity ETFs and especially those DIRT CHEAP preferred share ETFs are on sale. It looks like Santa Claus has been especially good this year to investors wanting to scoop up some real bargains!

#28 acdel on 12.22.18 at 5:12 pm

Ouch! But hey, there is always next year! Thanks.

Merry Christmas and a Happy New Year to you and your loved ones’.

#29 Stan Brooks on 12.22.18 at 5:13 pm

#126 MF on 12.22.18 at 1:09 pm
#71 Stan Brooks on 12.21.18 at 8:49 pm

“My ‘nastiness’ is product of Canadian reality. It is just the cold, hard truth that was never ever appreciated in the big white north. And never will.”

-Blaming the country for your own failures is weak. I see people working hard and succeeding all the time.

Failure should be a motivator.

MF

Failure or success is in the eye of a beholder.
Look at Michael Schumacher. He is successful.
I bet he will give all his money for 30 years life as a normal person, even a homeless one.

Don’t try to assume authority or pass judgement, specially on behalf of a whole country, you are not qualified for it both intellectually, professionally or mentally, it is not in your league, stick to what you know or do best.

#30 Nasdaq on 12.22.18 at 5:24 pm

Ryan, I think you dropped a ‘1’ in the Nasdaq Composite number in your chart. It’s down much more than 1.7% this year.

Also curious what your thoughts are on UK stocks. Brexit or not, they’re looking quite cheap to me (FTSE 100 PE < 12, yielding 4.5%). Developed international stocks, for that matter, are puzzling to me. It seems like all of the QE went into blowing up US equities, but have had far less impact on other equity markets, particularly in Europe (though their debt markets are another story entirely). Or are low PEs just a result of a lot of nasty debt under the surface?

#31 Raging Ranter on 12.22.18 at 5:26 pm

My biggest worry? This.

https://www.bnnbloomberg.ca/trump-said-to-discuss-firing-u-s-fed-s-powell-after-latest-rate-hike-1.1187475

Whatever stupid things he’s done so far, this would be the most reckless, most asinine, most destructive. Problem is, Trump’s base is likely full of tinfoil hatters who have read The Creature from Jeckel Island, and would therefore applaud such a move. And Trump knows that.

#32 Nice Posting on 12.22.18 at 5:52 pm

I have been holding off until the 28th because of my capital gains to be carried forward. It now appears I need to take some more gains for the taxation year, and roll that capital into preferred shares sooner than anticipated. This market turmoil caught me by surprise and not too happy about it all.

#33 JSS on 12.22.18 at 6:27 pm

Ryan, thanks for all your valuable insight this year.

Dividend growth blue chip stocks for life!

#34 Interstellar Old Yeller on 12.22.18 at 6:41 pm

Enjoyed your post and analysis, Ryan. Merry Christmas (if you celebrate)!

#35 espressobob on 12.22.18 at 7:03 pm

There are no guarantees for investing. Some years are bumper, some are stinkers. Taking profit on the upside helps to lock in profit and provides ammo when the shit hits the fan.

Cheaper prices equal less risk. Investors don’t always get this.

I’m sure most advisors will enjoy all the abuse they can handle even if it isn’t justified.

#36 Figmund Sreud on 12.22.18 at 7:12 pm

Diversion: ICYMI – just a one minute read, … nobull:

ISTANBUL (Reuters) – Total oil production in the United States will be nearly equal to that of Russia and Saudi Arabia combined by 2025, the head of the International Energy Agency (IEA) said on Friday. …

Best,

F.S. – Calgary, Alberta.

U.S. oil production to be equal to Russia plus Saudi Arabia by 2025: IEA head

https://www.reuters.com/article/us-usa-iea/us-oil-production-to-be-equal-to-russia-plus-saudi-arabia-by-2025-iea-head-idUSKCN1OK0SJ

#37 ts on 12.22.18 at 7:14 pm

@23, Ryan

Thanks so much for the valuable feedback. Merry X-mas and Happy New Year to you and your family.

#38 brydle604 on 12.22.18 at 7:14 pm

Merry Christmas Ryan, Appreciate your writing.

#39 NoName on 12.22.18 at 7:40 pm

Hey craazfox friend of mine sent me this video today, I just played with my numbers, definitely looks like that ill be underclass by 2025, how about you?

20 min long
https://www.youtube.com/watch?v=aUC6lsLr04I

#40 acdel on 12.22.18 at 7:43 pm

#1 SmarterSquirrel

Not sure where you came from, have not noticed your posts before but I must say, another good one, thanks.

Between Garth,Doug and Ryan and posts like yours 2019 will be a heck of alot easier to maneuver around all the obstacles that are coming our way.

#41 millmech on 12.22.18 at 8:03 pm

#27
Be patient, more downside to come yet. we could see another 5%-15% decline.

#42 Drill Baby Drill on 12.22.18 at 8:04 pm

“The only thing that seems to be hitting new highs this year is Canadian pot smokers following Trudeau’s legalization.”

And the problem is?

#43 Drill Baby Drill on 12.22.18 at 8:06 pm

Cheer Up All it will get worse.

#44 VICTORIA TEA PARTY on 12.22.18 at 8:09 pm

QT…QUANTITATIVE TIGHTENING…THE NEW “IN THING”

The US Fed and other KEY central banksters are redesigning our world investment process by cutting back on debt levels.

This work affects every investor and pension planner.

QT is the opposite of QE, where central banks make additional “money” available to the market. QE helped us to dig out of the 2008-09 Great Financial Collapse. The process was accompanied by drastically lowered central bank rates.

QT, THEREFORE is the OPPOSITE, withdrawal of at least some of that lolly. The US Fed is reducing this funding by US$50B a month.

As mentioned above other central banks are also cutting back or at least thinking about it.

The effects are generally to restrict available funding for investors, thereby potentially slowing down stock price appreciation and other effects. This means we may see more stock buy-backs as one example.

Some websites dealing with this topic, and there are many, believe this change has helped cause our current market declines.

If the Fed continues with QT-ing and makes (possibly fewer) rate rises next year, investors will simply have to “digest” this new “medicine” whose job it is to make markets and economies more stable and less debt-bubbly.

I say QT-on there all you CB-ers. Chop away.

The world-wide credit (debt) bubble is at scarey levels. There is no way those debts will ever be paid off but if the rates of debt “increases” can at least be reduced, then we’ll all be better off.

Investors will know they have changed their attitudes to this new way of thinking once the markets start climbing back up.

Just when this will occur is the main and ONLY concern.

Any comments there, Ryan?

#45 millmech on 12.22.18 at 8:10 pm

#35
Another 5% down and I will start deploying the “dry Powder” and will keep doing so for at least another 10%-15% drop, hoping for another 2008 sale on equities.

#46 young & foolish on 12.22.18 at 8:12 pm

I know, market timing is unreliable, but something to consider …. this bull market is one of the longest, so sooner than later …..

If you’ve got cash …. and the bear is close to coming out of hibernation, it might pay to wait. If you are impatient, then at least wait until the momentum turns green. You might miss out on a few points, and you might be buying a dead cat bounce, but hey, you are not willing to wait.

#47 The Great Gazoo on 12.22.18 at 8:16 pm

Thanks Ryan, appreciate your insight and outlook on preferred shares.

Interested in your outlook for oil (WTI) in 2019.

My own view is oil becomes range bound in Q1 from $50-$60 – then grinds higher over the year to average $60 for 2019- give or take. Why?

The 1.2 million bpd cuts by OPEC and non-OPEC (Russia et al) plus Alberta cuts of 0.3 million bpd for a total of 1.5 million. If continued for a full year would reduce global inventories by 550 million bbls.

2018 prices crashed in large part due to Trump convincing OPEC + to increase production significantly on the basis that US sanctions on Iran would reduce their exports to zero – then pulled the rug out from under OPEC by issuing waviers to a number of countries at the last minute. Doubt they will be fooled again.

#48 Ryan Lewenza on 12.22.18 at 8:21 pm

Roman “How do threy buy if supposedly staying invested 100% of time? Or investors supposed to lever up?”

That’s what rebalancing is for. By trimming bonds, which have outperformed stocks and bonds, and adding to beaten up prefs, we take advantage of this price decline. – Ryan L

#49 Ryan Lewenza on 12.22.18 at 8:28 pm

Nasdaq “Ryan, I think you dropped a ‘1’ in the Nasdaq Composite number in your chart. It’s down much more than 1.7% this year.”

No that’s correct. From the peak of 8,000 in October, the Nasdaq is down roughly 20%, but since Jan 1, the Nasdaq was down just 2% as of Dec 18th, the day I ran the numbers. – Ryan L

#50 Barb on 12.22.18 at 8:47 pm

Curious why we think 2019 may be better when Trump’s presumably going to be around until 2020. Heaven forbid longer than that.

Especially since most of this is his doing.
The man flat-out loves chaos.

Your current Porsche will have to last another 20-24 mos.

Merry Christmas to you and yours.

#51 For those about to flop... on 12.22.18 at 8:54 pm

Pink Snow falling in West Vancouver.

These guys are seemingly headed for a 500k loss after doing a big reduction just in time for the reindeers.

The details…

2290 Haywood Ave,West Vancouver.

Paid 3.59 April 2017

Originally asking 3.35

Now asking 3.18

Assessment 3.35

So they just took 180k off and it was already listed below what they paid for it a year after the detached peak.

Should they be mad?

Probably.

What’s the best course of action?

Dunno, go to the boxing gym and blow off some steam by throwing haymakers…

M44BC

https://www.zolo.ca/west-vancouver-real-estate/2290-haywood-avenue

#52 Stan Brooks is a Kook on 12.22.18 at 9:10 pm

#71 Stan Brooks on 12.21.18 at 8:49 pm

“My ‘nastiness’ is product of Canadian reality. It is just the cold, hard truth that was never ever appreciated in the big white north. And never will.”

Your insanity Stanley is the result of REALITY period. Not Canadian reality which is better than almost any nation on this earth, but REALITY itself. You are a pathetic loser moaning about living in a country the United Nations voted the best country to live in for 7 years running in the 90s and no we haven’t gone to hell in a hand basket since then. You can’t handle reality and hence why you are the pathetic loser in life that you are. Go crawl back under the bridge you call home you moron. Reality doesn’t care what your demented mind thinks of it…

#53 Ace Goodheart on 12.22.18 at 9:18 pm

Ryan is spot on. What is happening right now in preferred and equities markets is nothing more than a really big screaming buying opportunity.

So back up the trucks folks. It’s all on sale…

#54 When Will They Raise Rates? on 12.22.18 at 9:24 pm

#49 Ryan Lewenza on 12.22.18 at 8:28 pm

Nasdaq “Ryan, I think you dropped a ‘1’ in the Nasdaq Composite number in your chart. It’s down much more than 1.7% this year.”

No that’s correct. From the peak of 8,000 in October, the Nasdaq is down roughly 20%, but since Jan 1, the Nasdaq was down just 2% as of Dec 18th, the day I ran the numbers. – Ryan L

Lol at cherry picking the starting points. The Nasdaq is off over 20% from the all time high… It’s officially in a bear market. Nice try.

#55 NoName on 12.22.18 at 9:36 pm

Long video about driverless cars.
1.5 hrs

https://www.youtube.com/watch?v=0BWJcpesr6A

#56 bdwysktrn on 12.22.18 at 9:48 pm

current YTD on the nasdaq composite is -8.72%

or -21.9% from high of 8109.

#57 Ustabe on 12.22.18 at 10:00 pm

Thin line between confidence and arrogance. Needs constant observation and evaluation not to cross too far over. Some never come back.

Anyway, I, like most of you, am taking the same beating in the market…recall I sold a string of property rentals in Calgary just prior to the oil melt so my beating is approaching legendary.

But I’ve always been from the make more than you spend mind set, not the spend less than you make.

Here is what we’ve been doing this past year and a bit:

Made an investment in the waste disposal sector of the marijuana industry. They have been bought out and I have been paid back with enough profit there it caused my accountant to grimace.

Most importantly we (yes I have partners) have bought and converted three homes to adult care homes. Staffed 24 hours by trained, certified home care aides, LPN on staff who rotates as needed, not everyone wants to be in those adult communities or warehoused in government facilities. Five bedrooms seems to be the sweet spot. We have a wait list of 30-40 per site.

I was confident about the waste thing but am bordering on arrogant on the home care stuff. Not everything needs to be based on the stock market.

5 bedrooms x $4,000 per month x 3 units x 12 months a year. Do the math.

After us its either full time hospital or a funeral service so fairly regular vacancies available at current market rates.

Haven’t had any employee churn…none, zero. We pay well, provide full medical, dental and vision and offer a positive work environment. We hire the type of person who want our jobs, to be the boss. And then we get out of their way. We have a wait list of employment applications almost as large as the client one.

Clients love us. Real food, real compassionate care.
Neighbours love us too…our garden/property management firm keeps things lovely for both clients and neighbours, funny how that works.

We have two more that are in the process. Its much more than a renovation…you have to meet various regulations, sprinklers, meds have to be kept safe, size of passageways, doors, fire/smoke/CO2 alarms, ramps and etc. Then the local health board inspection…

Anyway, just go and do something. Forget about the market, Trump and Trudeau. Even if you are tied to the cubicle recall my years ago advice…buy a laundromat. They are cheap still and if you have half a brain and don’t mind rolling loonies you can make a surprising amount of money.

#58 Westside on 12.22.18 at 10:01 pm

Interesting…have you ever looked at the DOW Jones average from 1965 to 1982….well you should, because for 17 years the Dow Jones average went down.

We have been in a Bull market, but no longer are and whose to say that we don’t start going down year after year for the next 5-10-15 years?

Look at the gains investors have made over the last 10 years…what goes up can’t keep going up!!

We are now in a down trend of a bear market!

#59 Our PM Needed A Break on 12.22.18 at 10:02 pm

He flew to Mali for 16 hours to say hello to our peacekeepers in Africa. He dressed up for the occasion, and where to next? He is polluting the air with lots of additional CO2 emissions and we need to carbon tax him eh!

#60 Ronaldo on 12.22.18 at 10:10 pm

#46 young and foolish

If you’ve got cash …. and the bear is close to coming out of hibernation, it might pay to wait. If you are impatient, then at least wait until the momentum turns green. You might miss out on a few points, and you might be buying a dead cat bounce, but hey, you are not willing to wait.
————————————————————–
Why wait. Invest in the sectors that have tanked. Tonnes of bargains out there right now. Tax loss selling is almost done and has created lots of bargains.

#61 Ronaldo on 12.22.18 at 10:20 pm

#27 Doug in London on 12.22.18 at 5:07 pm
if you actually want the buy low, sell high method to work for you, then you need to first buy low. NOW is the time to do so while stocks, equity ETFs and especially those DIRT CHEAP preferred share ETFs are on sale. It looks like Santa Claus has been especially good this year to investors wanting to scoop up some real bargains!
————————————————————
Absolutely Doug but most people would rather buy after they have moved back up for some reason. Some very good bargains in financials, energy and materials right now. Banks took a beating this year.

#62 Bdwy sktrn on 12.22.18 at 10:22 pm

Tax loss selling is almost done and has created lots of bargains.
………
I’d say that tax loss selling had very close to zero impact on today’s bargains.
And there is a good chance the real bargains are 15% lower from here.

#63 NoName on 12.22.18 at 10:37 pm

#57 Ustabe on 12.22.18 at 10:00 pm

Ustabe on 12.22.18 at 10:00 pm

5 bedrooms x $4,000 per month x 3 units x 12 months a year.

isnt that bit expensive, some assisted living places (nice one) are charging that musch and some less for 1 bedroom with house keeping, shuttle to _____, nurse and additional stuff 24/7 and doc office next door. I think you should teach me how to sell stuff.

#64 Ronaldo on 12.22.18 at 11:08 pm

You have to believe there are some good bargains out there when you see the TSX back to May 8/07 levels. Looking at RBC ytd, it would have to gain 19.3% to get back to its 52 week high. Energy stocks scraping the bottom of the barrel. Commodities at screaming low prices. What a gift to start out the new year. Anyone who bailed out of the Canadian market to jump into the U.S. market will be some sorry.

#65 NoName on 12.22.18 at 11:31 pm

Interesting read

https://techcrunch.com/2018/12/21/the-gps-wars-have-begun/

China is not just putting satellites into orbit though, but demanding that local smartphone manufacturers include Beidou positioning chips in their devices. Today, devices from a number of major manufacturers, including Huawei and Xiaomi, use the system, along with GPS and Russia’s GLONASS as well.

That puts American smartphone leaders like Alphabet and particularly Apple in a bind. For Apple, which prides itself on providing one unified iPhone device worldwide, the disintegration of the monopoly around GPS presents a quandary: Does it offer a unique device for the Chinese market capable of handling Beidou, or does it add Beidou chips to its phones worldwide and run into trouble with U.S. national security authorities?

#66 Not So New guy on 12.23.18 at 1:09 am

I drove through a police roadblock last night. The officer asked me his new standard question:

Have you had anything to drink *or smoke* tonight?

Uhhh, no, sir.

New era indeed

#67 For those about to flop... on 12.23.18 at 1:14 am

#129 NoName on 12.22.18 at 1:59 pm
hey flop check those guys out, I somewhat often play their music… here is a schedule, where they are playing while your be over there.

http://tubaskinny.com/schedule/

and here is music
https://www.youtube.com/playlist?list=PL1165459554588E77

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

O.k NoName, I listened and I gotta admit it’s not my favourite type of music, but I will give it a try when I’m down there.

Thanks to The Turner Cultural Exchange Institute I can perhaps get you to listen to this one.

It’s normally about as far as I go that way.

https://m.youtube.com/watch?v=WGIpieuW62s

I will go anywhere twice.

Even if the second time is to apologize…

M44BC

#68 Jay Currie on 12.23.18 at 1:43 am

I spend my days writing about junior resource stocks. While everything else is a bubble, precious metals explorers and developers are lying on the mat gasping for air.

No question that the major asset classes have tanked and may well continue tanking. But the junior resource market – in which Canada is world leader – is on life support.

Bargains.

Here are five which are on the ground but ready to get up. V.VIT ready to pour gold in the Yukon in 2019. $0.37 V.GPY. Just poured 20% of its bulk sample into a million dollar bar. $024.5 V.BHS will have its first silver from an Oregon mine in a couple of weeks. $0.10 V.WGO just had an intersection of .5 meters of a pound of gold a ton in the Yukon. $1.50. V.MOZ 2.7 million ounces of gold in a pit in Newfoundland.

My bet for 2019 is that as the bubbles collapse – pot, bitcoin, RE – it will dawn on investors that there is value in junior resource stocks.

Not to bet the farm, rather to make Canadian juniors part of a diversified portfolio. You need a bit of sizzle with all those potatoes. Make’s em crispy!

#69 MaxBerniersShorts on 12.23.18 at 2:29 am

#59 OurPMNeededABreak
At least Trudeau had the stones and respect to visit troops in a war zone when they’re far from home on the holidays. Unlike President Dump who is too big of a coward to do the same for American troops.

#70 Stan Brooks on 12.23.18 at 2:42 am

#52 Stan Brooks is a Kook on 12.22.18 at 9:10 pm

Thank you for validating my point.

Canada was a great place to live in the mid 90-es, sure, no question about that. So was Venezuela before Chavez. Whether it was number 1 or 2 or even 5 it is irrelevant, In my mind Switzerland was always number 1 in the last 3 decades, but back to the point: it was a great country to live in at the time. period.

But Canada from today has very little, if nothing to do with Canada from 25 years ago.

Living with memories from the past is dangerous. You might go out in shorts in the middle of the winter because you remember how hot the summer was.

If you do a survey, an overwhelming majority of Canadians will agree that the 90-es were much better times. Why? Because standard of living has deteriorated significantly since then.

It is time to take out your head from your behind, look at the world around that you live in and figure out what is wrong and fix it so we can go back to the standard of living from much, much better times.

As for statistics:

Toronto and Vancouver consistently score at the top of the most livable cities while people there are the one that are the most unhappy according to a survey published recently.
Go figure.

Without any offence: the current standard of living in Canada is probably equal with some eastern European former communist/former developing countries, but they don’t have our debt.

And the direction of development is different: they go up we go down.

We can keep living with memories from more glorious times or change something like booting the idiot liberals from power for a starter.

Can we return to the point of being again Canada from the 90-es? I surely hope so. But we have some amount of brainwashed individuals to deal with first.

Smokey is spot on on our education system.

It produces bunch of short sighted brainwashed individuals thought to be conformist and unable to survive on their own without supervision and trust in ‘authorities’ of all shapes and forms.

And when authorities fail (as now) see what happens.

And the worse part is that we keep thinking that we are superior to others (because this is what we are told on a daily bases, how lucky and privileged we are to live in here, so please pay some more for that privilege as taxes, housing, insurance, groceries, gas,…) and look down on many much better places to live in which is frankly pathetic, this is what the true definition of a looser is.

#71 PastThePeak on 12.23.18 at 3:27 am

#31 Raging Ranter on 12.22.18 at 5:26 pm
My biggest worry? This.

https://www.bnnbloomberg.ca/trump-said-to-discuss-firing-u-s-fed-s-powell-after-latest-rate-hike-1.1187475

Whatever stupid things he’s done so far, this would be the most reckless, most asinine, most destructive. Problem is, Trump’s base is likely full of tinfoil hatters who have read The Creature from Jeckel Island, and would therefore applaud such a move. And Trump knows that.
++++++++++++++++++++++++++++++

The US president has no authority to remove a Fed chair. The executive branch can only nominate the appointment, but once confirmed, the prez can’t remove.

I am glad Powell has the balls to stand up to the orange orang-utan.

#72 PastThePeak on 12.23.18 at 3:40 am

Merry Christmas Garth, Ryan and Doug! Thanks as always for your insight and knowledge sharing.

A welcome article, and I certainly agree. Most of what I have been investing in for the last month is Canadian preferred shares, seeing as how they have been so beaten down. You can get quality names from tier 1 companies yielding over 6%, with prices that would still yield well if BoC yields are much lower in a few years. And well protected with upside if any calls, and assuming a return to mean, some capital gains if you choose to sell.

For the blog dogs – this selloff in preferred only happens every few years, so if you are following Garth’s advice on a balanced portfolio, now is the time to enter into this asset class.

The point of preferreds is to have an asset class that provides a reliable dividend stream, through good times and bad, so you are always having some positive return in that manner. Basically, if you are buying the preferreds at a discount, and with quality names, then absent the company having extreme hardship, the dividend should be secure. The dividends from preferreds can be used to fund your “growthier” stuff.

For those considering something international, the largest US preferred etf (PFF) is yielding well over 6% right now (and in real dollars:). The last time it took a decline like this was back in the great recession (where it went much lower though).

#73 Buy? Curious? on 12.23.18 at 4:32 am

Ryan “I Love Charts” Lewenza, have a great holiday and I hope that job hoarder, like other Boomers, brings a fancy, new chart maker! Happy New Year! Year of Cops.

#74 When Will They Raise Rates? on 12.23.18 at 7:10 am

#55 NoName on 12.22.18 at 9:36 pm

Long video about driverless cars.
1.5 hrs

https://www.youtube.com/watch?v=0BWJcpesr6A
—————————-

Communists will love it!

#75 When Will They Raise Rates? on 12.23.18 at 7:35 am

#60 Ronaldo on 12.22.18 at 10:10 pm

Why wait. Invest in the sectors that have tanked. Tonnes of bargains out there right now. Tax loss selling is almost done and has created lots of bargains.
#61 Ronaldo on 12.22.18 at 10:20 pm

#27 Doug in London on 12.22.18 at 5:07 pm
if you actually want the buy low, sell high method to work for you, then you need to first buy low. NOW is the time to do so while stocks, equity ETFs and especially those DIRT CHEAP preferred share ETFs are on sale. It looks like Santa Claus has been especially good this year to investors wanting to scoop up some real bargains!
————————————————————
Absolutely Doug but most people would rather buy after they have moved back up for some reason. Some very good bargains in financials, energy and materials right now. Banks took a beating this year.

Are you people retarded? The market is in free-fall.

#76 Stan Brooks is a Kook on 12.23.18 at 8:30 am

70 Stan Brooks on 12.23.18 at 2:42 am

“…and look down on many much better places to live in which is frankly pathetic, this is what the true definition of a looser is.”

Did you mean loser Stanley? Are you Smoking Man posting under another name with your spelling?

What is pathetic is your deranged view of reality.
Here is the actual reality of where Canada stands in the world.

https://globalnews.ca/news/3983045/canada-no-2-best-countries/

2nd best in 2018 only to Swtizerland. I have travelled extensively for business and would not change our fair land for any other. You are simply a pathetic loser if you think this land is still not one of the best in the world to live in. I have farmer relatives in Europe who came to visit in 2018 and were jaw dropped at the farming operations I brought them to in Southern Ontario. Total robotic operations, owners worth north of $20 million Canadian. The humble Canadian farmer…

You see, your logic is limited to your deranged view of reality. Is Canada harder to live in than the 90s? Yes, but, so is every other country on this planet you moron. We still, despite being harder to live in, rank 2nd in the world. It is you that has his butt firmly shoved up his arse and whose deranged view of the world and Canada produces only mindless blather on this blog. To boot, and only fittingly, you concur with the other whack job, Smoking Man on points. Go back to your rubber room Stanley…

#77 Capt. Serious on 12.23.18 at 9:00 am

A few people commented Pref shares are more risky than bonds, and this is true, they are not bonds. But as a source of better taxed income, they have a role. Don’t think so black and white folks.
The P/E on emerging markets equity index has dropped to below 12 and P/B somewhere around 1.6. If you’re in this for decades, you could do worse.

#78 Hugh Jassel on 12.23.18 at 9:15 am

Amazing how few people understand (this blog included) that when you pull the QE support away from a market inflated by it, the house of cards will fall. This isn’t about fundamentals, it’s been distorted for 10 years.

QE4 is around the corner when the Powell out is finally enacted ….bye bye US dollar.

QE was one factor. More significant was a general economic recovery. Despite ten rate increases, it continues unabated. So much for your argument. – Garth

#79 NoName on 12.23.18 at 9:30 am

@flop

you’ll like it, here is more recent video, that girl/woman on trumpet give or take year or two and she very will could become female version of Luis Armstrong in my opinion.

https://youtu.be/pZ7mg9Kl-RU?t=30m31s

#80 Rob on 12.23.18 at 9:53 am

No need to buy anything just yet…central bank printing made all assets overvalued for years. Reversal of that means a long way down until fair value….lower if we are in a recession. Selling just getting started even if we get a short term technical dead cat bounce.
Rob

#81 Ryan Lewenza on 12.23.18 at 10:00 am

VICTORIA TEA PARTY “QT is the opposite of QE, where central banks make additional “money” available to the market. QE helped us to dig out of the 2008-09 Great Financial Collapse. The process was accompanied by drastically lowered central bank rates.

QT, THEREFORE is the OPPOSITE, withdrawal of at least some of that lolly. The US Fed is reducing this funding by US$50B a month.”

We knew QT was inevitable and it could be contributing to the market weakness. But I don’t think it’s the main factor driving the markets and that were doomed. Don’t forget the Fed has been doing QT for a few years now and it didn’t impact stocks in 2016 and 2017. Now the ECB will be joining QT in the new year so we’re definitely seeing liquidity being withdraw from the global markets, which is a negative. But ask yourself why is it happening. It’s happening because the US/global economy is strong enough that it no longer needs all that stimulus. It’s a sign that the global economy has recovered from the worst economic downturn in nearly a 100 years. I think it’s a good thing that the global central banks are doing this in the long-term. – Ryan L

#82 Ryan Lewenza on 12.23.18 at 10:13 am

Capt. Serious “A few people commented Pref shares are more risky than bonds, and this is true, they are not bonds. But as a source of better taxed income, they have a role. Don’t think so black and white folks.
The P/E on emerging markets equity index has dropped to below 12 and P/B somewhere around 1.6. If you’re in this for decades, you could do worse.”

I agree with both of these statements. Since prefs pay dividends they are much more tax advantaged than interest income. Currently the pref market is yielding 4.75%, which equates to an interest equivalent yield of 6.7% (1.40 multiplier to put in interest terms). Compare that to GICs at 2-3% and bonds around 3%. But with this higher yield you have to deal with these bouts of volatility. And held long enough most prefs will return back to their par value. On EM we see tremendous value and good upside over the next 3-5 years. EM stocks are also volatile but I think the risk/reward is pretty good for them given their dirt cheap valuations. – Ryan L

#83 Slowly Boiling Frogs on 12.23.18 at 10:14 am

#4 crowdedelevatorfartz on 12.22.18 at 3:00 pm

Where’s “Slowly Boiling Frogs” when you need him?
——————————————————
Shopping for cheap, but healthy REITs, Royalty Trusts and Dividend payers with huge yields in this insane sell off.

I have decent low bids in on lots of things that have sold off enough to produce yields of at leat 9% that I already own and want more of in my TFSA and regular account.

#84 Ryan Lewenza on 12.23.18 at 10:19 am

When Will They Raise Rates? “Lol at cherry picking the starting points. The Nasdaq is off over 20% from the all time high… It’s officially in a bear market. Nice try.”

I was providing year-to-date returns to illustrate how tough THIS year has been for investors. Nasdaq investors saw huge gains into October and lost it all back in Q4. I’m not cherry picking anything. Give your head a shake. – Ryan L

#85 NoName on 12.23.18 at 10:41 am

long very but interesting study, started reading it last night, gave up than continued this morning, maybe I finish reading before this year ends…

Mikko Jalas

Busy, wise and idle time a
study of the temporalities of consumption in the
environmental debate

http://epub.lib.aalto.fi/pdf/diss/a275.pdf

#86 TRUMP on 12.23.18 at 10:47 am

THERE’s BLOOD…

ALL OVER THE STREET of the OIL SECTOR.

STOCK GO DOWN DIVIDENDS GO UP……..

#87 Ronaldo on 12.23.18 at 10:52 am

#75 When Will They Raise Rates? on 12.23.18 at 7:35 am

Are you people retarded? The market is in free-fall.
—————————————————————–

Keep selling. We need people like you. Its how we get rich. LOL

#88 NoName on 12.23.18 at 10:52 am

interesting ted talk
definitely press play!

A reality check on renewables – David MacKay
https://www.youtube.com/watch?v=E0W1ZZYIV8o

#89 Ronaldo on 12.23.18 at 11:00 am

#68 Jay Currie

Not to bet the farm, rather to make Canadian juniors part of a diversified portfolio. You need a bit of sizzle with all those potatoes. Make’s em crispy!
—————————————————————–
Yes indeed. Resource stocks are getting ready to sizzle again along with PM stocks. Feels a lot like December of 2015 again.

#90 not so liquid in calgary on 12.23.18 at 11:01 am

@ Figmund Sreud on 12.22.18 at 7:12 pm

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

While this calculation may be correct, there is something else to consider. American shale oil producers are already selling their product at a discount in order to acquire pipeline space. Just imagine what this will do to oil/petrol prices… I guess Alberta is not the only jurisdiction with pipeline problems.

#91 Stan Brooks on 12.23.18 at 11:42 am

#76 Stan Brooks is a Kook on 12.23.18 at 8:30 am

I meant looser, not loser (that is so american). When your behind mussels are loose/relaxed and stuff leaks out.. so you need an adult pad, you know.

Your extensive Business travel must have been outside of Europe, South Asia, Japan, South Korea, California, hell even OAE, Turkey. One wonders what a real estate professional would do in such places. You are so transparent in your pumping, calling a large farmer operation (over 20 million in net worth) a humble farmer? And what exactly was automated there that is not done elsewhere in modern farming?

You have to enlighten me what exactly was robotized in that farm operations, and where is exactly that farm located in Southern Ontario as I have spent some time travelling around and know exactly what is the state of these farms and what they produce.

If you think that automated irrigation, milking of the cows or use of tractors is cutting age robotization you need a reality check.

I know people who call produce, apples or peaches from those farms ‘organic’ so I had to literally show them the tricks with liquid Ammonium nitrate used as fertilizer. Do you know that you can’t sell that stuff in Europe, you know those places that are inferior to us in your statistics? Can you guess why?

#92 Doug in London on 12.23.18 at 11:43 am

@When Will They Raise Rates?, post #75:
What you said shows why most people miss good buying opportunities. Yes, the markets could go down more, but are now at good prices none the less. I’ve been investing since 1990 and have seen stocks, REITs, and other assets go on sale many, many, many, many times. I also read the business section of papers like The Globe and mail, National Post, and occasionally the Toronto Star and whenever there is a good buying opportunity do the headlines say, in bright orange capital letters something like STOCKS ARE ON SALE NOW? No the don’t, in fact most articles are all about doom and gloom and how bad things are. That signals a buying opportunity. Isn’t that right, Mr. Buffett?

Speaking of which, I find the best gauge of a good a buying opportunity is the number of negative comments here in the steerage section of this blog. For example, remember all the doom and gloom here about the future of REITs when they went on sale in 2013? I’ll continue my buying spree until prices start going up again, as they inevitably will. Again, thank you Santa Claus!

#93 Stan Brooks on 12.23.18 at 12:11 pm

QT will be only temporary. In this world that is drowning in debt there is no enough existing money to subsidize deficits through purchase of bonds at market rates. Period.

It will go for some times and yes, markets can tank.
As GT and associates tell you, be diversified, sit thigh and do not sell.

What is the alternative, sit on Poloz’s loonies and wait for what, the arrival of Godot?

The problem is that we are on the opposite side, we used the low rates to accumulate further debt, to over-leverage while the world was deleveraging and now will be caught in a giant monetary squeeze forced to further QE/just announced by BoC with purchase of bonds and MBS.

A consumption based economy that ‘grows’ at 2 % while leveraging, while the world grows at 3.7 while deleveraging, that is at peak private debt, runs deficits while rates are very low is not healthy.

I appreciate the upbeat news but all indications are of huge inflation wave that is just unwinding.

People I speak to in Ontario tell me of 15-30 % increase in groceries, services, rents even alcohol due to minimum wage increase this year alone.

#94 xaucad on 12.23.18 at 12:24 pm

gold is UP about 5-6% this year in Canadian dollars. saying it is down in usd isn’t being entirely honest and doeant represent what a canadian would see when they use their canafian dollars to buy food. alwaus quote gold in cad unless you save in usd or another currency.

have thpse quotes rates of return been properly converted into canafian dollars? our dollar has gotten weaker. therefore the rates of return may not be so bad when convertrd to cad.

Where can you buy food with gold? – Garth

#95 NoName on 12.23.18 at 12:52 pm

#74 When Will They Raise Rates? on 12.23.18 at 7:10 am
#55 NoName on 12.22.18 at 9:36 pm

Long video about driverless cars.
1.5 hrs

https://www.youtube.com/watch?v=0BWJcpesr6A
—————————-

Communists will love it!

Funny thing you sad that, dude have nothing negative to say about it.

It was a nice touch when he says people in poor communities and ability to comute and fimd job…

Reality is poor people pay primuim for every thing… Soon i can se ride sharing servicez charging danger fee for certain areas of the city.

Il share small part what i wrote to my friend last night as a comment on that electric car adaprion curve video. Even with all spelling and grammar mistakes worth reading. Little bit of chensorship just for communisan sake.

Ok it will be out on open after you read all picture, i do suffer from savire case of ODD…

https://imgur.com/a/EzJfYJc

#96 Rexx Rock on 12.23.18 at 12:53 pm

Stan Brooks seems like a smart and honest guy.He’s just wants to help out the brain washed Canadians that still think everything is ok.Good work Stan.

#97 Joshua on 12.23.18 at 1:22 pm

I’m always super curious about the need for preferred shares in a portfolio.

I’m guessing for those that haven’t maxed out their registered accounts they are not needed?

Also for young people who do not require income would a heavier weighting towards equities with the potential of capital appreciation make more sense?

#98 mark on 12.23.18 at 1:30 pm

I don’t know why you don’t admit, including garth about how crappy preferred shares are, and quit recommending them, they have LOST money since there inception(ZPR).
Investing in dividends is a illusion as broad market etf are much better and get same or better returns with some growth over time, you know this $hit ryan!?
There are many studies on this including Larry Swedroe saying the same thing about dividend investing.

#99 SmarterSquirrel on 12.23.18 at 1:39 pm

#40 acdel

Thanks for the kind words… I see a lot of people around me struggling as they get closer to retirement, and I’m no expert, but I wanted to share what I’ve figured out over my years to try to help people struggle a little less with finances as they near retirement.

I’ve been reading Garth’s blog for a long time, and I’ve learned a lot from reading his blog (and am amazed he can get a great article out almost every day), so I figured I’d try to do for others as he’s done for me, by writing a blog of my own. Glad it’s been helpful for you!

#100 Shawn Allen on 12.23.18 at 1:58 pm

Peak Debt etc?

Our man Stan said:

A consumption based economy that ‘grows’ at 2 % while leveraging, while the world grows at 3.7 while deleveraging, that is at peak private debt, runs deficits while rates are very low is not healthy.

*******************************
There may be valid warnings there but I would counter:

“Consumer Based Economy” is taken as a bad thing. Well the only other components of GDP besides Personal consumption are government consumption, Business investments, government investments, and net exports. (plus for some reason a very tiny amount for non-profit consumption that can be ignored).

Now, I ask what is the very purpose of an economy but to provide for personal consumption and needed government services?

Investment is great but the ultimate reason to invest in machinery and buildings and everything real is to provide for more consumption in future.

And exporting is needed to the extent a country wants to import. But why would a country’s people want to be net exporters meaning others enjoy the fruits of their production? Balanced trade is fine, no need to be net exporters. The earth as a whole exports nothing and gets on just fine.

So being a consumer based economy is not a bad thing at all.

As for 2% “growth”. GDP is measured as real growth such as 4% nominal minus 2% for inflation. It’s not a bad rate. Stan does not believe the official inflation but it’s the best number we have.

As for peak private debt. Debt in dollars will always rise and never decline for any long period. With the financealization of the economy and lower interest rates it also rose as a percent of GDP. Do not count on much if any deleveraging happening.

As for world deleveraging. I highly doubt it. At best there may be a slower increase in world debt but probably no decline either in dollars or as a percent of world GDP.

The earth as a whole of course owes not a penny in the net.

#101 Flamen Lupanares on 12.23.18 at 2:13 pm

Re #94 xaucad

Are you tracking gold in fiat money? Horrendous. You should brag about gold gains in toilet paper rolls.

#102 neo on 12.23.18 at 2:43 pm

We knew QT was inevitable and it could be contributing to the market weakness. But I don’t think it’s the main factor driving the markets and that were doomed. Don’t forget the Fed has been doing QT for a few years now and it didn’t impact stocks in 2016 and 2017. Now the ECB will be joining QT in the new year so we’re definitely seeing liquidity being withdraw from the global markets, which is a negative. But ask yourself why is it happening. It’s happening because the US/global economy is strong enough that it no longer needs all that stimulus. It’s a sign that the global economy has recovered from the worst economic downturn in nearly a 100 years. I think it’s a good thing that the global central banks are doing this in the long-term. – Ryan L

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

Ryan,

You are actually not correct. The Fed stopped expanding their balance sheet a few years ago around 2015 but QT didn’t start until about a year ago in Sept. 2017 at $10 billion a month but will ramp up to $50 billion it is at now. There are definite cracks showing up in the credit market. They may not have surfaced right away but a year later they did in conjunction with the rate cuts. If anything, this latest leg down had more to do with the market concerned that the Fed will continue QT more the interest rate policy.

It was never reasonable to think that after expanding their balance sheet from $500 billion to $4.5 trillion it would distort assets on the way up but not cause a disorderly correction when they started to unwind this position. QE3 was what made this exercise the most difficult for the Fed to thread the needle. All these corporate buybacks will created an unnatural air pocket down as credit conditions continue to worsen.

https://www.investopedia.com/insights/how-will-fed-reduce-balance-sheet/

#103 xaucad on 12.23.18 at 7:09 pm

garth, here is how you ‘eat’ by using gold, or any other stock or gic. btw… you cant eat the gic, stock, bond, etf, or gold but you can CONVERT it to the currency of your liking, and then buy the food. those instruments are designed to allow you to eventuallly eat more or hold your ability to purchase food. let me illustrate. you can substitute any financial instrument, other than your local currency, in the place of gold btw.

buy gold
hold it
sell it for your local currency, or where you will be eating.
buy food with the local currency after converting it.

you can convert it at a coim shop, bullion dealer, or some rich individual.

your etf needs to be converted. you cant eat an etf. that happens at your brokerage. you cannot eat 1’s and 0’s in a database until they are converted to yoir local currency.

you cant eat gold. no nutritional value. i would rather use it for its monetary value. you must convert. if the farmer is smart, they can accept ounces in exchange for food and cut out the bullion dealer.