Debt’s embrace

As we count down to the first US rate reduction in ten years (this is a big deal), we gotta talk about bonds. And safe stuff. Why you need some.

First, what’s a bond?

Simply a hunk of debt. Governments or corps issue bonds to raise money. They give an investor interest until the bond matures, when she gets all the money back. The more secure the issuer (like the Government of Canada) the less risk, so the lower the interest paid.

But nobody buys a bond to get interest any more. Yields have been in the ditch since the GFC, when central banks crashed rates and bond yields followed. In fact there are trillions of dollars in bonds around the world paying negative returns. So, bonds are held to (a) offset fluctuations in stocks, since they tend to move in opposite directions and (b) to stabilize a portfolio, reducing volatility so you stop worrying about things you cannot control and drink less.

Now besides paying interest (or not), bonds have prices. The day a bond matures it’s worth $100 for every $100 you paid. If interest rates in general rise before the bond matures, it will be worth less and the price will go down – to maybe $95 – because investors can get a better deal with a new, improved bond which pays more. So the cheaper price compensates. But if rates fall before the bond matures it will be worth more – maybe $105, since a buyer gets the principal plus a higher-than-market return.

Finally, you should know that bond yields and prices are opposites. As yields go down (like we’re seeing now), bond prices go up – old bonds are worth more. When yields rise, bond prices plop. That happened last winter.

How to buy bonds? In an ETF. Some funds contain a mix of federal government bonds of various “durations” (length of time to maturity), while others contain provincial or corporate bonds (which generally pay more). You can also get “junk bond” ETFs which hold the debt of riskier issuers who pay a whole lot more interest.

These days about 20% of a balanced portfolio (40% fixed income and 60% growth assets) should be in bonds. That includes a little hunk of federal debt, with the rest in provincial and corporate bonds. Add 4-5% in a cash equivalent (we use an ultra-short-term bond fund for a higher return and no risk) plus about 15% in preferreds, and that makes up the 40%. The overall yield on that is around 4.6%, with the prefs delivering a dividend tax credit. Sweet.

Unlike GICs, this delivers (a) a better return, (b) less tax, (c) total liquidity and (d) the potential of capital gains from the bonds if rates fall or from the prefs if rates rise. Also (e) when stocks correct money flows out of equities into safer assets, including bonds. So in a balanced portfolio this gives investors a built-in shock absorber – a comfort since most people are busy living their lives instead of watching the shallow, soul-sucking wolverines on BNN.

Of course, all of the above is lost on those who fixate on preserving capital. They want no risk, a guarantee and think 3% is fabulous, even when inflation’s 2.5% and they’re fully taxed on interest. If you already have enough money to finance the rest of your life, GICs or a high-interest savings account might work. You don’t need growth. But that’s not most people.

So GICs with their high-tax profile, lack of liquidity, inadequate returns and inability to deliver a capital gain are a poor choice. The fact 80% of all TFSA money sits in GICs or cash savings says a lot about financial literacy and how emotion dictates finances. No wonder there’s a retirement crisis about to hit. People need to stop thinking with their pants. But won’t.

Once again, here it is. Stick this on the fridge. The GreaterFool credo: the biggest risk is not losing money, but running out of it. Especially if you’re a woman.

Now, Wednesday. The American central bank rate will drop a quarter point. There may be another one (or even two) after that by the time of the US election at the end of 2020. But this doesn’t mean rates are reversing and heading for zero. In fact, the Bank of Canada won’t even react this year. Maybe not in 2020, either. But the bond market has been pushing yields lower for some time. Canadian 5-year bonds have dropped from almost 2.5% to just 1.4% – a massive tumble. As that’s happened, bond prices have increased (I told you why) and so have the values of the ETFs that hold those bonds.

Given we’re in Year Ten of an economic expansion, it’s highly likely a recession could materialize before growth resumes. That’s a year away. Maybe two. Nobody knows. When it happens you can be certain central banks will pull the trigger on rate cuts, flooding the economy with liquidity and trying to stimulate  borrowing and spending. Bond yields will plop. Bond prices will rise. Bond ETFs will gain in value, likely as equity-based funds lose value. As in 2008-9, this will give balanced portfolios resiliency, a shallower dip and a faster recovery. And it will happen as GIC rates again sink to 1%.

So don’t be comin’ round here dissing bonds. Get some.

90 comments ↓

#1 Yukon Elvis on 07.29.19 at 5:45 pm

The news keeps getting worse when it comes to family finances in B.C.

MNP conducted its latest debt index poll, and it found overall attitudes towards personal financial situations have declined significantly since March. The scariest figure is 44 per cent of people in the province say they are $200 or less away from financial insolvency, which is being unable to pay the amount of money you owe on time. That was the largest increase compared to other provinces.

Making matters even worse is 49 per cent of British Columbians say they would be embarrassed to get help if their financial situation was bad enough to consider bankruptcy, but 85 per cent don’t believe other people should feel that way if they were having major money woes. More than a quarter of respondents are not seeking help because of embarrassment.
https://okanaganedge.net/2019/07/29/bc-insolvency-worries-rise/

#2 Jay on 07.29.19 at 5:52 pm

So lower rates = higher house prices to follow then??

Did I not say no rate drop here? – Garth

#3 SunShowers on 07.29.19 at 5:58 pm

So now we have the Fed cutting, but us staying put.

Guess it’ll be time for cross-border shopping.

#4 Keyboard Smasher on 07.29.19 at 5:59 pm

What if I want to combine all of the worst aspects of a bond and common stock issue?

Would a preferred be suitable?

#5 What happened ... on 07.29.19 at 6:12 pm

to the dog in yesterday’s photo? Did he make out OK?

#6 The Wet One on 07.29.19 at 6:17 pm

That dog.

Yikes!

#7 Sask to AB on 07.29.19 at 6:18 pm

Appreciate this post Garth. Thanks again for always trying to educate us.

F56AB

#8 Bytor the Snow Dog on 07.29.19 at 6:19 pm

#27 dirtydebtor on 07.28.19 at 8:01 pm sez:
“Reddit is absolute trash. The threaded comments with voting creates a very effective dopamine hit, and little else.

The quality of the content you voted to the top and placed on your screen is not dependent on quality; but on the timing of the post, the number of uneducated upvotes, various influence from bots with unknown agendas.

it creates subcultures where those with the most populist, loudest, impolite and charged comments dominate the discussion. Alternative ideas are buried. its the online equivalent of all right wingers moving to texas, and liberals moving to colorado. pointless polarization

keep this site the way it is”
————————————————

Exactly. Like that one time on Reddit there was a post about how Beyond Meat Burgers and how they are going to save the planet. The soy eating millennials ate it up. My comments re “prying real burgers and juicy steaks from my cold dead hands” were not well received.

You shoulda seen the downvotes when I said I was a PETA Member.

People Eating Tasty Animals, that is…

#9 Michael on 07.29.19 at 6:28 pm

Doesn’t the stock market move in the opposite direction of interest rates? So rate drop? a stockmarket MELT-UP ?

#10 Helen Dimango on 07.29.19 at 6:43 pm

What we need is everyone to stop playing this game called going to work and accumulating money, property etc.

Just spend it all and when we all have no money we all go on welfare. You won’t post this comment because you know it is true.

#11 Mhm on 07.29.19 at 6:45 pm

Dogs, can anyone give an example of an etf that is a short term bond fund (cash equivalent) that our leader mentioned???

Thanks

#12 Cuious George on 07.29.19 at 6:57 pm

So what are some good Canadian and US dollar bond ETFs to look into. Should shot term or long term bonds be considered better than the other?

#13 Bonhomme Carnaval on 07.29.19 at 6:58 pm

I’m curious about this recession that’s a year or two away…

How will it play itself out in Canada?

In other words, will all provinces be affected equally?

#14 cd on 07.29.19 at 6:59 pm

So does this mean that the dollar will rise a penny or two? Making exports slightly more expensive?

#15 Stan Brooks on 07.29.19 at 7:09 pm

Some long term quality corporate bonds are just fine.

Holding low yielding gov. bonds in retirement portfolios is the main reason for their under-performance. Sure speculators buy it in expectations of further rate cuts. They are also bought when you need guaranteed cash down the road/as deposit insurance is limited.

Buffett’s rule is 90/10, 90 % stocks, 10 % cash and some short term bonds/strictly for liquidity.

Long term trend on interest rates is surely down.

Fed cuts today.

Leveraged long term play on gold (but not in leveraged ETFs, instead in junior miners for example) might outperform bond potential ‘capital gains’.

#16 akashic record on 07.29.19 at 7:10 pm

If you really have at least 10-15 years when you don’t need to touch your investment for retirement and you don’t care about “shallower dip”, then you would be much better off to load up on cheap S&P 500 when recession comes.

#17 Paddy on 07.29.19 at 7:19 pm

Hey Garth
Lastest podcast is still on July 16…what gives? I need my fix man!

#18 Jack Maynard on 07.29.19 at 7:27 pm

The Canadian dollar will be 50 cents to the U.S. dollar in about 2 years. You don’t believe me, the Bank of Canada is going to do that to boost exports and give away our natural resources, goods for 50% off.

They don’t care about inflation because they already say it is 2% but it is not. Canada has become a real loser on the world stage.

#19 yvrguy on 07.29.19 at 7:28 pm

11 Mhm on 07.29.19 at 6:45 pm
Dogs, can anyone give an example of an etf that is a short term bond fund (cash equivalent) that our leader mentioned???

Thanks

————–

SHV is good for USD.

PSA.TO is good for CAD.

#20 Robert B on 07.29.19 at 7:30 pm

Garth
Nothing like free education …thanks

#21 Tbone on 07.29.19 at 7:40 pm

# 10 Helen

Blow all your money and live on welfare ?
I guess that is a plan . Could get a little rough though.
Probably not for everybody .

#22 acdel on 07.29.19 at 7:40 pm

Very good explanation of bonds; thanks.

#23 Spectacle on 07.29.19 at 7:41 pm

” #6 The Wet One on 07.29.19 at 6:17 pm
That dog.

Yikes! ”

—————————oo————
The dogs owners, whoooaa!

Along with the advice provided by the greater fool blog. Quite the arsenal of perfect information.

M

#24 NoName on 07.29.19 at 7:46 pm

@byotor the snow dog \ Reddit

One time on Reddit I comment Ed that best burger are made out of meat as posted a picture, and recieved downvote.

https://imgur.com/a/4gBATvs

What’s up with that. Wait until tell them what is that we have pointy tooths and eyes facing forward, they wrilli probably won’t like to hear that one.

And on a side note, does anyone knows how to fix Bosch next dryer, mechanically looks that is in perfect condition, electrically not so much, I tried all easy stuff already. Iam thing on hitting Reddit but if go there I know I’ll end up telling them how much pesticides is in beyond meet burger, and.they just have to google it if they don’t believe me…

#25 akashic record on 07.29.19 at 7:50 pm

Finally a good dog picture.

#26 joblo on 07.29.19 at 7:55 pm

Whens the Meaning of life post mentioned a while back?

#27 BS on 07.29.19 at 7:59 pm

Forget about bonds. I am putting 20% of my portfolio into Trump Straws. These will be worth a fortune once straws are outlawed.

https://thehill.com/homenews/campaign/455171-trump-campaign-raises-500k-selling-plastic-straws-report

#28 crowdedelevatorfartz on 07.29.19 at 8:06 pm

@#66 Prehensile position

I’m sorry ponzie, I wasnt really listening…..again.

33c tomorrow and gonna hit the Links……

Enjoy Skytrain .. just pray it doesnt break down…..again

#29 Flop... on 07.29.19 at 8:16 pm

#51 Robert Ash on 07.27.19 at 9:53 pm
Going to Cash is not all that easy, in Canada, at least from my latest experience. I learned a lot from this Blog, and made a determination, to consolidate, my holdings, into one major Chartered Bank… And to set up a TFSA…I had never used this useful tool to date…

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

Hey Robert, I meant to write you back the other day but I was forced to pull out some blog bamboo and give a troll a whack.

Above is only an excerpt from your post but I have been dealing with banks and retirement funds in my spare time trying to consolidate everything.

Imagine leaving Australia thinking you are going overseas for two years on a work visa and not going back in the intervening 20 years.

My bank was taken over by a bigger bank, I have an account, no bank card, no internet account.

They want me to fly back and present identification to be allowed this privilege.

My superannuation fund has been taken over three times the last 20 years.

I spent an hour on the phone last night talking to a lady in Melbourne about consolidating my two funds there.

One of the companies I have written several times over the last few months and have never heard back from them.

It was my original plan to switch the money one way but after one of them ignored me but kept taking the direct debit each month and ignored a request to cap it at a particular amount I decided to pull the plug on them.

They can disrespect you all they like, fight for what’s yours with all your might.

You have been fighting for months, as I have, and it will take many more.

I have wanted to chuck in the too hard basket a couple of times but for inspiration I took time to remember I have been putting money in that fund since I was 18 and when all my friends were in college, I was in the third year of my apprenticeship sweating and working hard.

These companies will take your money way easier than they will dispense it.

To them it’s a game.

They hope you give up, don’t give up, keep nagging them until it’s the way you want it.

I’ve got a long way to go, trying to live live with a leg in each country is hard, when you didn’t know this was going to happen, it’s even harder.

I don’t know how you got your money, but I’m willing to bet it wasn’t via a slot machine.

Fight the good fight…

M45BC

#30 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 07.29.19 at 8:34 pm

96 DAYS WITHOUT A LOSS!!!!!

What a streak!

The Make Believes are AWESOMEEEEEE!!!!!!!!!!!

So don’t just buy bonds or ETFs – load up on Leafs tickets and overpriced condos and McMansions in the GTA. What could possibly go wrong!?

Toronto, you are SPECIAL! :)

#31 Ronaldo on 07.29.19 at 8:37 pm

Great lesson on bonds Garth. One of the toughest things for people to understand.

#32 Take the #Dog Pill on 07.29.19 at 8:51 pm

Bonds ain’t kitty litter when that lady in the pic is driving somewhere secluded and getting something fun to do tonight with that pooch while I post here on a blog talking about bonds.

#Take the dog pill!

#33 will on 07.29.19 at 8:59 pm

what about municipal bonds? you didn’t mention munis. what’s wrong with munis? too risky?

#34 Chris Townson on 07.29.19 at 9:05 pm

Bonds are obsolete as will be the current financial system. They will make all our money digit and have expiry dates if you don’t spend it. There is no more moral compass and humanity. It is all lies and fake. I feel sorry for the future generations under the UN slavery model. I’m not confident this post will be posted as it will make people think and that is what they don’t want.

What’s the behind you? – Garth

#35 will on 07.29.19 at 9:06 pm

seems to me i read somewhere that interest paid on municipal bonds is not taxable. might be advantageous for anyone who is looking to buy bonds for the income stream.

Only in the US. And you never buy bonds for income. – Garth

#36 Ustabe on 07.29.19 at 9:27 pm

B.C.’s figure is in line with the national average, which decreased four points to 44%.

I guess Yukon Elvis up there at number 1 missed the above part. Of course you have to go to the source (MNP) for it, the cherry picked article in some newsletter from the Okanagan didn’t bother to get the whole story…so Fake News, Elvis.

Not much to do with BC alone, its a Canada wide issue.

#37 Basil Farty on 07.29.19 at 9:28 pm

Five year bonds at 1.4%, while “official” inflation is running at 2.5% is insane. You are receiving a negative real return. Who in their right mind would pay the borrower, when you lend them money? Its madness!
The principle of a “risk free return” on capital when investing in bonds, or GIC’s, has been replaced by “return free risk”.

#38 Sherry Yang on 07.29.19 at 9:30 pm

I am too worried about the UN and the global socialism that is spreading rapidly around the world. The more everything gets consolidated and concentrated from power to money, laws etc.

The less choices people have means we are in a heap of trouble. It has never been easier in history to keep tabs on everyone. I don’t know when people will reach a limit and start pushing back.

#39 tccontrarian on 07.29.19 at 9:53 pm

The GreaterFool credo: the biggest risk is not losing money, but running out of it. Especially if you’re a woman.
++

My biggest risk is that my money WILL run out (the door)… WITH a woman!!

Right now, given the slaughter in prices, buying high-yielding energy stocks (like Vermillion et al., who are paying >11% divies), is more attractive than buying bonds. But you gotta be able to ride the volatility!

tcc

#40 NoName on 07.29.19 at 10:06 pm

Oh monopoly

UNMUTE !!! And press play.

https://mobile.twitter.com/robbdiazz/status/1155896654391889920

#41 Blue angel on 07.29.19 at 10:15 pm

so if the federal reserve cuts its rates and the Bank of Canada keeps its own where they are, can we hope to see the Canadian dollar pass the 0.80 usd before Christmas?

#42 Paul on 07.29.19 at 10:51 pm

#10 Helen Dimango on 07.29.19 at 6:43 pm
What we need is everyone to stop playing this game called going to work and accumulating money, property etc.

Just spend it all and when we all have no money we all go on welfare. You won’t post this comment because you know it is true.

________

Helen, welcome to the forum. :-)

#43 Shawn Allen on 07.29.19 at 11:16 pm

Maybe GICs Don’t Like Investment Houses Either

Interesting that Garth has a little hate on for GICs even as a part of balanced fund.

If I were a little bank I might not want investment institutions like Garth’s to buy my GICs. The reason being that when the GICs matured a whole chunk might be redeemed and not renewed all at once. GIC issuers might prefer retail clients who are less likely to leave all at once even upon maturity of the GICs.

Anyhow, there may be reasons for Turner Investments to not like GICs that may not apply to some retail investors. For example retail investors can be under the $100k deposit insurance limit. And they can hold these in RRSP where tax is not an issue.

I have never owned a GIC but I would not disparage those who do as part of a balanced portfolio. (But, to be sure, I still have many other reasons to disparage people and, I am sure, vice-versa).

#44 Russ on 07.29.19 at 11:30 pm

Bytor the Snow Dog on 07.29.19 at 6:19 pm

Exactly. Like that one time on Reddit there was a post about how Beyond Meat Burgers and how they are going to save the planet. The soy eating millennials ate it up.

>>> My comments re “prying real burgers and juicy steaks from my cold dead hands” were not well received.

You shoulda seen the downvotes when I said I was a PETA Member.

People Eating Tasty Animals, that is…
====================================================

Hey Bytor,

I Like your perspective and wonder why one of our burger giants haven’t launched a campaign…

“IT’S A 100% BEEF BURGER THAT TASTES LIKE KALE!!”

Any takers?

cheers, R

#45 Russ on 07.29.19 at 11:43 pm

Flop… on 07.29.19 at 8:16 pm

#51 Robert Ash on 07.27.19 at 9:53 pm
Going to Cash is not all that easy, in Canada, at least from my latest experience. I learned a lot from this Blog, and made a determination, to consolidate, my holdings, into one major Chartered Bank… And to set up a TFSA…I had never used this useful tool to date…

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

Hey Robert, I meant to write you back the other day but I was forced to pull out some blog bamboo and give a troll a whack.
=========================

Hey Flop,

This came to mind when you said to pull out the Big Bambu. (sic)

I still have the album, a classic.

Cheers, R

https://en.wikipedia.org/wiki/Big_Bambu

#46 Ponzius Pilatus on 07.30.19 at 12:10 am

#73 Jesse on 07.29.19 at 12:39 pm
#72 Ponzius Pilatus on 07.29.19 at 12:22 pm

And that’s probably a good thing, because if we find out that the product of overpopulation is not linear (as assumed in popular science), but exponential, it may be too late to matter.
*******************************

Populations are dropping Ponz, Europe and Japan are dying, as is Canada and the US.
———–
The countries you mentioned have about about 15% of the world’s population.
Take off your blinders and try harder next time.

#47 Linda on 07.30.19 at 12:26 am

Women not only tend to live longer than men, they tend to have lower incomes. Thus it is even more important that women take charge of their financial futures as early as possible, because time is money. StatsCan 2008 figures give an average income of just $24,800 for women aged 65 & older but $38,100 for men aged 65 & older. Hopefully matters have improved over the past decade, because trying to live on $24,800 – presumably before tax – would be more than a little challenging.

#48 Smoking Man on 07.30.19 at 1:37 am

DELETED

#49 Smoking Man on 07.30.19 at 1:52 am

Aliens are here.
https://youtu.be/AsrnGyRS6l4

#50 Half Full on 07.30.19 at 2:22 am

Yesterday’s post: Second, as much as the weenies who flock here like to say, there is no disaster looming. Not even a hint of a US recession.

Today’s post: Given we’re in Year Ten of an economic expansion, it’s highly likely a recession could materialize before growth resumes.

So which is it?

Both, of course. – Garth

#51 Lizard Man on 07.30.19 at 3:41 am

If you want absolute safety, plan on dying tomorrow, otherwise forget today’s news ( which is politicized Trump Hate spew) and invest for the future. If you think you might live another decade or two then be a two fisted buyer across the macro. In twenty years you’ll never remember the time stocks swooned in your fourties.

Rate reversal , great move by Trump to stomp Obamas globalist BS that turned the US into the global socialists piggy bank. Yellen kept rates high so Europe could spend at the expense of American taxpayers. Trump stopped that game.

Lower rates are like crack to stocks, get your pipe out. Buy backs, balance sheet melt ups, consumer discretionaries, bank profits. Literally everything from big chain restaurants to US banks are a screaming but right now. A Trump win in 2020 means another jump in GDP and a DOW at 40,000 and possibly more.

My position, increasing my positions that pay, covered call US Banks for one, 5.8% paid monthly, buy all the growth you can, buy any dips, buy buy buy and order that new Corvette because it’s already looking like a sold out item at $100 USD a pop. Amigos the talk of disaster is all a hopeless thrashing by alt left media who’ve lost gig on the globalist bet. The majority of people are getting rich. What’s really holding you back… fear?

#52 SunDays on 07.30.19 at 5:22 am

The more secure the issuer (like the Government of Canada) the less risk, so the lower the interest paid.

————-

Can someone explain the price action on the 100 year Austrian gov’t bonds (issued in 2017 at 2.1%)? Is this in the “assured gain” category, as opposed to “less risk”?
https://www.boerse-berlin.com/index.php/Bonds?isin=AT0000A1XML2

#53 crowdedelevatorfartz on 07.30.19 at 6:46 am

@#46 Perturbed Pouter
Re; Linear vs Exponential Planetary Population explosion
++++

Ok lets talk about the “big boys” as far as babies go …

China where their decades long “One Child” policy is already beginning to show a population slowdown that will continue for decades…
India is still growing but climate change should take care of that. Since most of the population there are still itinerant farmers living off the land. I seem to recall Indira Ghandi tried implementing forced vasectomies in the 1970’s to “deal” with all those pesky, fertile , farmers to no avail.
Africa?
The Four Horsemen of the Apocalypse have been romping around the continent for a few years
Wars, disease , famine, plague….then you add in corruption and climate change….
Add in North Korean Nukes, Iranian nukes, crumbling dictatorships with nukes(Russia)
I think that covered about 4\5ths of mankind….
All with populations that I (and most experts) expect to decline over the next 50 to 100 years.
Did YOU have a point to make or were you just pointlessly pontificating again?

P.S.
As I previously mentioned , I’m off to go golfing but I decide to comment while drinking coffee this am…thanks for the motivation…. :)-

#54 Tater on 07.30.19 at 7:49 am

16 akashic record on 07.29.19 at 7:10 pm
If you really have at least 10-15 years when you don’t need to touch your investment for retirement and you don’t care about “shallower dip”, then you would be much better off to load up on cheap S&P 500 when recession comes.
———————————

Congratulations, you just invented rebalancing!

#55 dharma bum on 07.30.19 at 8:19 am

Bonds…..James Bonds.

https://www.youtube.com/watch?v=TXxKZkE2MGo

https://www.youtube.com/watch?v=83wO_d4Jp9M

…sorry…

#56 Hamsterwheelie on 07.30.19 at 8:23 am

Ok. You explained bonds….and I still don’t quite get it. Investing makes me feel stupid and that’s why we’ve purchased houses instead. It’s also why there is a big industry created around investing and why I, and many others return over and over to this blog, to learn.
Sure, for many of ya’s the lingo is fully understood, and perhaps you were raised with savvy family, investy friends or went to business school. However, some of us had no financial role models, were even taught that money was the root of all evil and anyone on wall street was a soulless devil.
We’ve carved out some financial security because we lucked into a heavily undervalued market 9 years ago when they gave mortgages to anyone, even a coupla’ self employed gardeners.
Even I could see that bricks and mortar at $160,000 with 10% down in the core of a city close to Toronto would appreciate …and has done so mightily (yes we sold at more than double the purchase price over 7 years) Anyone who is passing good at math care to figure out the return on $16,000?
So – I cometh, I Gartheth, I try to learneth.
Thanks :-)

#57 IHCTD9 on 07.30.19 at 9:30 am

#44 Russ on 07.29.19 at 11:30 pm
Bytor the Snow Dog on 07.29.19 at 6:19 pm

Exactly. Like that one time on Reddit there was a post about how Beyond Meat Burgers and how they are going to save the planet. The soy eating millennials ate it up.

>>> My comments re “prying real burgers and juicy steaks from my cold dead hands” were not well received.

You shoulda seen the downvotes when I said I was a PETA Member.

People Eating Tasty Animals, that is…
====================================================

Hey Bytor,

I Like your perspective and wonder why one of our burger giants haven’t launched a campaign…

“IT’S A 100% BEEF BURGER THAT TASTES LIKE KALE!!”

Any takers?

cheers, R
___

My kids were down in the USA last week. They billeted with a guy who fed them garden veggies and venison, he shot and prepared the deer himself – he was 95 years old.

You don’t get to this level of Manhood without eating the real thing – on both ends of the spectrum.

#58 Jesse on 07.30.19 at 9:54 am

#39 tccontrarian on 07.29.19 at 9:53 pm
The GreaterFool credo: the biggest risk is not losing money, but running out of it. Especially if you’re a woman.
++

My biggest risk is that my money WILL run out (the door)… WITH a woman!!
******************************

I think this is one of the reasons why millennial men aren’t getting married…

#59 Jesse on 07.30.19 at 10:03 am

#46 Ponzius Pilatus on 07.30.19 at 12:10 am
#73 Jesse on 07.29.19 at 12:39 pm
#72 Ponzius Pilatus on 07.29.19 at 12:22 pm

And that’s probably a good thing, because if we find out that the product of overpopulation is not linear (as assumed in popular science), but exponential, it may be too late to matter.
*******************************

Populations are dropping Ponz, Europe and Japan are dying, as is Canada and the US.
———–
The countries you mentioned have about about 15% of the world’s population.
Take off your blinders and try harder next time.
************************

You’re aware China is shrinking too right?

The world is approaching a infertility…

> A strange thing has happened to men over the past few decades: We’ve become increasingly infertile, so much so that within a generation we may lose the ability to reproduce entirely.

https://www.gq.com/story/sperm-count-zero

#60 maxx on 07.30.19 at 10:06 am

@#6

Here’s his cousin:

https://www.youtube.com/watch?v=x13Lw_9iuUY

and @#8

I’m vegetarian and wouldn’t go near any of that “beyond” crap. It’s ultra-processed and needs to be non-GMO as well as organic. The first fast food outlet to go organic and non-GMO, sourcing bulk ingredients competitively will win – big time.

It’s certainly not “green no matter what” in our household.

#61 AB Boxster on 07.30.19 at 10:27 am

So once upon a time, when gov’t bonds paid 5%, were they used for income?

You know, back in the olden days of 2010.

If so, it was a poor choice with inflation at 3% and interest fully taxed. – Garth

#62 n1tro on 07.30.19 at 10:47 am

#44 Russ on 07.29.19 at 11:30 pm
Bytor the Snow Dog on 07.29.19 at 6:19 pm

Exactly. Like that one time on Reddit there was a post about how Beyond Meat Burgers and how they are going to save the planet. The soy eating millennials ate it up.

>>> My comments re “prying real burgers and juicy steaks from my cold dead hands” were not well received.

You shoulda seen the downvotes when I said I was a PETA Member.

People Eating Tasty Animals, that is…
———————–
I tried a beyond meat product at Tim’s on one of my regular no meat days. It costed more than the same product with meat and it tasted like crap. I am a PETA as defined above. I don’t eat meat 10 days each month for a healthy balance.

People who don’t eat meat while looking down at PETAs, who are you trying to kid with your fake meat?

#63 Sheena DiSantis on 07.30.19 at 10:52 am

AB Boxster, it is all a scam. They don’t want to pay interest anymore now because back when my parents came in the 60’s and 70’s Canada and U.S,. were building up the country. They raised rates so people would go to work and save their money in the bank.

Now, they are in the process of destroying western countries and Japan was the first test project to see how it would pan out. It is the UN and globalism with old time socialism. This is done on purpose and it is a well crafted plan. Most people are so distracted with their phones, family situations and vacations etc.

#64 Shawn Allen on 07.30.19 at 11:15 am

Response From Canadian Bankers Association:

Good morning Shawn,

Thank you for contacting the Canadian Bankers Association.

We apologize for the delay. The Canadian Mortgage Arrears information will be updated in the next 2 weeks to include February 2019. However, the March and April data has not been finalized yet, as we are still missing data.

Regards,

CBA Information Team.

*******************
I responded that they need to “put the wood” to the banks. Like the banks don’t know their June 90 day delinquencies by now? They are going to give us February data? Seriously? This is a regulated industry.

#65 Shawn Allen on 07.30.19 at 11:47 am

Long Term Bond Price Gains

#52 SunDays on 07.30.19 at 5:22 am asked:

Can someone explain the price action on the 100 year Austrian gov’t bonds (issued in 2017 at 2.1%)? Is this in the “assured gain” category, as opposed to “less risk”?
https://www.boerse-berlin.com/index.php/Bonds?isin=AT0000A1XML2

*******************
The links shows that a 100 year 2.1% Austrian government bond has gone up in value from 100 euros to over 160 euros . The bond will mature in 98 years.

The 160 price indicates that the market yield on 100 year Austrian government bonds is now well under 2.1%.

Well that is not the kind of (much shorter term) bond that Garth buys via ETFs.

But the story supports his claim that bonds are not bought for income.

This one is not really adding stability to the portfolio (Up 60% in two years).

It would add diversification.

As Garth pointed out this bond will mature at 100 euros though that is 98 years away.

It appears that this particular extremely long-term bond is likely bought to speculate on interest rate declines.

Some buyers might be buying based on the price momentum and confirmation bias. It went up a lot already so they think it will go more.

Buyers today even at 160 may expect to sell at a higher price. But someone has to own this over its whole life and it will mature at 100 euros. Presumably, few buyers, even pension funds or intergenerational family funds are buying to hold until maturity.

Bottom line this looks like something to buy to speculate on interest rates dropping even closer to zero for long term bonds. Not an investment, a speculation.

And ask yourself why the Austrian people would want their government to ever pay off the national debt if they can instead borrow at something less than 2.1% annually.

The old rules of paying off debt fall apart when borrowing is almost free.

#66 IHCTD9 on 07.30.19 at 11:49 am

The population decline is definitely not restricted to the West. Struggling high population countries like China and India also have other demographic problems too – on top.

India and China have way too many Men, a result of throwing their female offspring into a river for too many years.

The result today is picky females who, spoiled for choice; resist commitment. Thanks to the internet, these ladies don’t have to settle for local Indian and Chinese Men. In fact, if they really got it going on; they can choose Men from anywhere.

They are doing it too – Chinese Women especially seem to be able to attract Western Men who are comparatively wealthy when stacked against the local options, and also hold the ticket to a Western lifestyle for her and her kids. Maybe even her parents too.

Several Slavic Countries are in the same boat – but for different reasons. Big sex gap, Men are unemployed, develop bad habits, take big risks and die young. They are poor choices for raising a family. Guess what their Women are up to? They’re looking for a good Western Man too.

So these ladies are choosing to reproduce less – and they are also choosing to take off with foreign Men on top of it all. It’s going to take a couple generations to fix unless they suddenly take a shine to immigration (but who would even want to go?).

The more I read about these international pairings, the more sense they make. It’s retro a couple hundred years in the sense that these unions are more pragmatic than romantic. I just can’t find any real problem with that though. This stuff will only increase in the future as traditional relationships in the West continue to die off.

Western Millennial Men should be checking these options out. It may not be true love in the Western sense, but that doesn’t mean you won’t be a happy hubby with one of these foreign ladies.

There are tons of countries where the Women are happy to try on a Western guy for size. Just don’t be one of those weirdos who is 65 and thinks he can hook up with a 25 year old “girlfriend” (unless you can just admit you’re going to pay a good chunk of money to her family, and that it’s a business deal more than a marriage ).

Anyway – India, and especially China had better get on this problem before it becomes normalized, and even mainstream in the West to shop internationally for spouses.

#67 JB on 07.30.19 at 12:43 pm

#66 IHCTD9 on 07.30.19 at 11:49 am

The population decline is definitely not restricted to the West. Struggling high population countries like China and India also have other demographic problems too – on top.

India and China have way too many Men, a result of throwing their female offspring into a river for too many years.

The result today is picky females who, spoiled for choice; resist commitment. Thanks to the internet, these ladies don’t have to settle for local Indian and Chinese Men. In fact, if they really got it going on; they can choose Men from anywhere.

They are doing it too – Chinese Women especially seem to be able to attract Western Men who are comparatively wealthy when stacked against the local options, and also hold the ticket to a Western lifestyle for her and her kids. Maybe even her parents too.

Several Slavic Countries are in the same boat – but for different reasons. Big sex gap, Men are unemployed, develop bad habits, take big risks and die young. They are poor choices for raising a family. Guess what their Women are up to? They’re looking for a good Western Man too.

So these ladies are choosing to reproduce less – and they are also choosing to take off with foreign Men on top of it all. It’s going to take a couple generations to fix unless they suddenly take a shine to immigration (but who would even want to go?).

The more I read about these international pairings, the more sense they make. It’s retro a couple hundred years in the sense that these unions are more pragmatic than romantic. I just can’t find any real problem with that though. This stuff will only increase in the future as traditional relationships in the West continue to die off.

Western Millennial Men should be checking these options out. It may not be true love in the Western sense, but that doesn’t mean you won’t be a happy hubby with one of these foreign ladies.

There are tons of countries where the Women are happy to try on a Western guy for size. Just don’t be one of those weirdos who is 65 and thinks he can hook up with a 25 year old “girlfriend” (unless you can just admit you’re going to pay a good chunk of money to her family, and that it’s a business deal more than a marriage ).

Anyway – India, and especially China had better get on this problem before it becomes normalized, and even mainstream in the West to shop internationally for spouses
__________________________________________
A old buddy of mine went the route of a foreign girlfriend / wife on a backpacking trip through the across Croatia on the Adriatic coast. She was from some crappy village in Serbia, somehow hooked up with her, brought her over to Canada after a quick marriage sponsorship crap, the whole routine. The next thing he knew he was sponsoring her sister, brother and two parents. All was well until years later after they established themselves as landed immigrants that the wheels fell off his marriage. Thank god they had no children. They used him as a platform to get here. She cheated on him with an old boyfriend from Serbia that she helped to get into Canada. It didn’t work out though as she got caught and he was deported for trying to get work here under her SIN. She was as he puts it another “Jodi Arias” waiting to off him at the right moment. Now divorced and safe, met a nice Canadian girl and living with her.

#68 Sail away on 07.30.19 at 1:26 pm

#56 Hamsterwheelie on 07.30.19 at 8:23 am

Even I could see that bricks and mortar at $160,000 with 10% down in the core of a city close to Toronto would appreciate …and has done so mightily (yes we sold at more than double the purchase price over 7 years) Anyone who is passing good at math care to figure out the return on $16,000?

———————————————

Over 7 years, you probably cleared somewhere between $120,000 to $140,000. More if you rented it. Not bad.

If rented, all the gains would be subject to capital gains tax. – Garth

#69 Darren Smith on 07.30.19 at 1:31 pm

They said the Dow Jones would be 30,000 by 2000 and now in 2019 with all this money printing, FED buying up U.S. government bonds and cutting interest rates to almost 0% and still they could not pump it up.

I guess only Arnold could pump you up!

A 16.5% gain this year not good enough for you? – Garth

#70 IHCTD9 on 07.30.19 at 1:31 pm

#67 JB on 07.30.19 at 12:43 pm
___

Yep, definitely a risk there, lots of stories like that where a Western spouse is unwittingly used solely for immigration purposes.

Lots of stories about guys getting hosed by nice Canadian girls too.

Caveat Emptor…

#71 n1tro on 07.30.19 at 1:32 pm

#66 IHCTD9 on 07.30.19 at 11:49 am

Just don’t be one of those weirdos who is 65 and thinks he can hook up with a 25 year old “girlfriend” (unless you can just admit you’re going to pay a good chunk of money to her family, and that it’s a business deal more than a marriage ).
————————-
You just described my plans after I retire. :)

#72 Steven Rowlandson on 07.30.19 at 1:41 pm

The capital value of bonds is only good if you buy low and sell high and the profit has buying power and has not been bailed in by banks or excessively taxed by government. A big if factor IMHO.

What bail-in? Taxation is based on your marginal rate. – Garth

#73 Shawn Allen on 07.30.19 at 2:15 pm

Home Business Idea

A young trades guy was at my house yesterday. Talking about business he mentioned that his wife was thinking of getting into options trading as a business to make some money.

Naturally, I told him to stay away from that and explained that options are a zero sum game while investing is a positive-sum game with money flowing from the customers of businesses to investors/owners.

It sounded like his wife was stay-at-home so I said open a childcare day home. That would be reliable income.

#74 Shawn Allen on 07.30.19 at 2:18 pm

#56 Hamsterwheelie on 07.30.19 at 8:23 am

Even I could see that bricks and mortar at $160,000 with 10% down in the core of a city close to Toronto would appreciate …and has done so mightily (yes we sold at more than double the purchase price over 7 years) Anyone who is passing good at math care to figure out the return on $16,000?

********************************
Very well done. Ignore any sour grapes type comments suggesting you could have done better with other investments or you had to pay tax or there was inflation. Whatever, some people will always be negative.

#75 NoName on 07.30.19 at 2:30 pm

#66 IHCTD9 on 07.30.19 at 11:49 am

Just don’t be one of those weirdos who is 65 and thinks he can hook up with a 25 year old “girlfriend”

I’ve heard that “rule” is your_age/2+7, if you divinate from it it’s definitely disaster.

#76 IHCTD9 on 07.30.19 at 3:10 pm

#71 n1tro on 07.30.19 at 1:32 pm
#66 IHCTD9 on 07.30.19 at 11:49 am

Just don’t be one of those weirdos who is 65 and thinks he can hook up with a 25 year old “girlfriend” (unless you can just admit you’re going to pay a good chunk of money to her family, and that it’s a business deal more than a marriage ).
————————-
You just described my plans after I retire. :)
___

There’s a dog here in the comments section who has already done it – you can get the finer details from him.

Me? I’m gonna wait it out in Canada for legalized polygamy :^D

#77 Danny Boy on 07.30.19 at 3:10 pm

Let’s get real. Bonds suck right now at 1.44%, 1.49% or 1.74% on the 5, 10 and 30 year Canada bonds.

The problem is there is too much government and central bank interference. They have overstepped their roles as stabilizers and are now legal thieves. Most people in Canada have no idea that a central bank is part of the Communist Manifesto by Karl Marx and Friedrich Engels.

#78 jess on 07.30.19 at 3:11 pm

Rats with 2 legs

a high probability that many females on the planet are poor and end up being exploited and working off “debt” lured by a so called “job”
——————–

https://www.baltimoresun.com/politics/bs-md-pol-kushner-trump-housing-20190729-iip3g7f4ajfdpeqyv4ebcoqase-story.html

Trump points to Opportunity Zones initiative to show how he’s helped cities like Baltimore. How has it worked?

TIF’s
by the numbers who benefits?
largest tax-increment financing deal in Baltimore history and among the largest in the country.
https://data.baltimoresun.com/news/port-covington/

“The tax shelter is one that is really very susceptible for abuse, for providing subsidies not so much for the ostensible purpose … to provide capital to distressed neighborhoods, but for the purpose of providing lucrative tax benefits to wealthy investors,” said Barbara Samuels, managing attorney for the ACLU of Maryland’s Fair Housing Project.

“It was never really about investment of capital in poor neighborhoods, and the fact that not much is going to trickle down to the neighborhoods is a feature, not a bug” of the incentive, which passed as part of the Republicans’ 2017 tax overhaul, Samuels said.

https://www.baltimoresun.com/business/bs-bz-opportunity-zones-20190730-3b3koim5wfcovhnp6t32ja2h4m-story.html

https://data.baltimoresun.com/news/port-covington/

#79 jess on 07.30.19 at 3:16 pm

Baltimore has been hemorrhaging residents for a long time. In 1950, it was America’s sixth most populous city, a manufacturing dynamo with nearly a million residents, many employed by Bethlehem Steel. Over decades, with factories closed and “white flight” in the 1960s and ’70s followed by waves of “black flight,” it’s since shrunk to the country’s 30th largest.

Census data released Thursday suggests the city’s population is now just over 600,000 people. The population of the metropolis nicknamed “Charm City” stood at roughly 730,000 in 1920.

Andrew Fenelon, associate director of the Maryland Population Research Center, said Baltimore has seen a roughly 3% population decline since 2015.
https://nypost.com/2019/04/19/census-estimates-show-baltimores-population-continues-to-plummet/

#80 MF on 07.30.19 at 3:27 pm

66 IHCTD9 on 07.30.19 at 11:49 am

-Tons of local women here of all stripes. Usually it’s the type of guy who is a total failure here at home who searches internationally for a woman. They will blame everyone else but themselves though.

MF

#81 Jesse on 07.30.19 at 4:02 pm

#80 MF on 07.30.19 at 3:27 pm
66 IHCTD9 on 07.30.19 at 11:49 am

-Tons of local women here of all stripes. Usually it’s the type of guy who is a total failure here at home who searches internationally for a woman. They will blame everyone else but themselves though.

MF
************************************
I think it’s fair to say that both genders are more lost and estranged today than ever before.

#82 Craig Stokes on 07.30.19 at 4:04 pm

Ever watch the show Roc. Watch it and that show says it all. High crime, drugs, poverty and gangs. During Obama’s time in office Baltimore got $1.8 billion in funds from the U.S. government, where did that money go? It is all about corruption and lining their pockets full.

#83 AprilJ. on 07.30.19 at 4:27 pm

This photo makes me so happy. Thank you. :)

#84 SunDays on 07.30.19 at 4:40 pm

#65 Shawn Allen on 07.30.19 at 11:47 am
Long Term Bond Price Gains

But the story supports his claim that bonds are not bought for income.

————

In today’s upside down financial world, I do not see the case for holding any bonds. I buy equities for income, and keep cash for stability. Jim Grant summarizes my feelings towards bonds the best in the Barron’s article found below:
“The trouble with bonds, as an asset class, is that they offer no real participation in the upside—you receive principal and interest, as contracted, that and no more, if all goes according to plan. You do, however, participate liberally in the downside—in default, repudiation, inflation.”

https://www.barrons.com/articles/jim-grant-the-trouble-with-austrian-centuries-51562354708

#85 40% Return on 07.30.19 at 4:41 pm

#56

If you invested $16,000 in house of $160,000 and made $160,000 after 7 years of holding it – your investment rate of return is 40% on condition that you do not take in account agent commission, purchase tax, and opportunity loss on initial $16,000.

Garth, I am little confused – should maintenance cost also be deducted to calculate the rate of return? Because if he lived in the house he would have the maintenance cost in any case.

$16,000 x 1.40^7 = $168,661

#86 Tom McLeod on 07.30.19 at 9:44 pm

Another fixed income asset, albeit with a little more risk, are convertible debentures. With a solid company you can get a 5+% yield while having the right to convert to the company’s common shares if they appreciate. Usually a 5 year term. An example is Algoma Central 5.25s

#87 Leo K. on 07.30.19 at 11:30 pm

I have my ETF portfolio setup with 70/30 using VAB for my bonds.
But then I wonder if I should be diversifying my bonds like I did for my equities… maybe mix in something like some VBU and VBG.

Thoughts?

#88 Smoking Man on 07.31.19 at 2:00 am

Go

https://youtu.be/o-0ygW-B_gI

#89 David Halloway on 07.31.19 at 4:06 pm

So if some couple has $3 million earning 2.5%+ a year it does not matter it is in savings accounts, GIC’s? The income required is only $2,500 a month for their lifestyle as they are debt free, no mortgage, no car loans, no lines of credit, nothing to owe.

#90 Jonathan on 07.31.19 at 5:29 pm

Very helpful summary. I’m in the process of rebalancing as I’m way too heavy into equity. Does anyone have any suggestions for pref share ETFs?