Don’t be distracted

  By Guest Blogger Sinan Terzioglu

More Trump bombast. More market drops. As always, volatility brings the fear of loss. A client recently asked:

“Is this a good time to be investing? My portfolio has dropped in value and I think based on all the news and commentary from analysts on TV the markets are going to drop further especially after the run up we’ve had. The world seems like a mess right now. Maybe I should sell everything and hold cash while we wait for the next recession?”

Depending on the assets you hold, volatility may not equal risk if the probability of suffering a permanent loss of capital over your intended holding period is low. If you plan to use the funds for a significant purchase in the short to medium term, then investing in the stock market would obviously grow risk. But if you are investing towards a long term goal, like funding retirement, history tells us volatility of diversified and productive assets is not risky.

Over long periods of time investing and holding an ETF tracking the S&P 500 index has never – repeat, never – been a losing position. Of course there are no guarantees about the future but based on historical data there’s a 95% probability of a positive return on the S&P 500 over any 10-year period and no losses when expanded over 20 years. By adding bonds the probability of a negative return over a 10-year period drops to 0%.  That’s why Garth promotes balanced and globally diversified portfolios.

Many investors believe they’re managing risk by deviating from a long term plan and temporarily moving to cash. Wrong. This attempt to time the market is one of the riskiest things one can do when investing towards long term goals.

A recent study done by J.P. Morgan analyzed the 20-year period for the S&P 500 index from January 4, 1998 to December 31, 2018.  If you’d invested $10,000 at the beginning of the period and stayed fully invested the account would have grown to $29,845 – an annualized performance of 5.62%.  If missed just the 10 best days over this period the overall return would be cut in half. If you missed the 40 best days the investment would have been worth $4,241 which resulted in an annualized performance of -4.2%. So out of ~5,000 trading days that is less than 1% of the time that is responsible for the difference between a decent profit and a significant loss.

Are you smart enough to pick those few days, and sit in cash the rest? Hardly.

Think about all that’s happened in that 20 year period, from the tech bubble bursting in the early 2000s to the financial crisis of 2008-2009 and the worst December since the Great Depression (2018). The markets have experienced a correction on average once every two years and yet people live in fear of the next one. Former Fidelity fund manager Peter Lynch once said “far more money has been lost by investors preparing for corrections than in corrections themselves.”  Investors significantly increase their odds of investment success over the long term by just staying invested, periodically re-balancing and avoiding expensive distractions. Most important is staying out of their own way and not making emotional decisions based on the last traded price.

Opportunity Cost

A recent RBC poll found that more Canadians now have TFSA accounts over RRSPs, but many are still not using them to their full potential. The survey found 43% are misinformed and think TFSAs are for savings, not growing investments over the long term. 28% of people use them for mutual funds, 19% to hold stocks, 15% for GICs or term deposits and just 7% for ETFS.  Some good news is two out of three TFSA holders said they have not withdrawn money from their account.  Keep in mind that if you do withdraw you don’t lose the contribution room but you can’t re-contribute the withdrawn funds until the following calendar year.

The opportunity cost of not taking advantage of a TFSA for long term compound growth is enormous.  Assuming a 7% compound annual growth rate a 20 year old that starts investing $6,000 a year for 20 years and doesn’t invest again would have over $1,000,000 by the age of 60. Compare that to someone who doesn’t start to invest in a TFSA until the age of 40 at which point they start saving $20,000 a year for 20 years. Assuming the same rate of return their account would be worth $875,000.

Needless to say in an era of record student debt and continually rising living costs this is not realistic for many people just out of school but even those who have the means are missing the opportunity.  I am continually shocked when I hear about people aggressively paying down their mortgages with low interest rates without ever having contributed to a TFSA and missing out the magic of tax free compound growth.

Taking full advantage of a TFSA can help fund a retirement by keeping you in a lower tax bracket as withdrawn funds do not count as income. This can allow investments in registered accounts such as RRSPs and LIRAs to continue growing tax deferred.  For couples who designate one another as a Successor Holder, the surviving spouse gets all the rights related to their partners TFSA with no tax consequences.  Only spouses or Common-law partners can be named as Successor Holders. (At Turner Investments we open all TFSAs for couples with one another designated as Successor Holders).

The miracle of compound growth doesn’t get a lot of attention in a shortsighted market but for those that utilize TFSAs and are able to think long term, stay the course and avoid distractions, they have an incredible opportunity to take advantage of it but it takes time. Over 97% of Warren Buffett’s fortune was earned after the age of 60 because of compound growth.  Over the previous decades if he had let price volatility get to him and he made emotional decisions we never would have heard of him.

Education

The cost of education continues to rise. Annual tuition plus room and board can easily cost over $25,000 a year. But if you start saving early an RESP is another incredible opportunity for contributing sponsors to utilize the power of compounding.

Contributions grow tax free while getting a 20% government grant of up to $500 per year, for contributions of $2,500 each year.  You can contribute up to $50,000 to an RESP but will only receive a grant for the first $2,500. Lower and middle income families are eligible for additional grants.

The lifetime grant limit is $7,200 so by contributing $2,500 a year for 14 years it’s an automatic 20% return on top of the growth of the capital plus dividends and interest that accrue over time.  The earlier contributions start, the better. Contribution room can be carried forward, however you’re only permitted to receive missed grants one year at a time.  So if your child was born in 2017 and you start contributing in 2019 then you can receive up to $1,000 in grants for a $5,000 contribution and catch up on the remaining missed grant the following year.

When money is being withdrawn from an RESP to pay for education, the grants and growth will be taxed as the child’s income but since they most likely will be in the lowest tax bracket total taxes will be low. Like a TFSA, if contributing to an RESP with the intention of using it 15+ years in the future, it is best to invest in diversified equity ETFs with exposure to Canada, the US and foreign markets. $2,500 contributed every year for 14 years while collecting $500 in grants each year will grow to over $80,000 assuming a 7% compound annual growth rate.  So $35,000 in contributions and $45,000 in grants and growth.

Sounds like a pretty sweet deal to me. Unless you’re too scared to grab it.

Sinan Terzioglu, CFA, CIM, is a financial advisor with Turner Investments, Private Client Group, Raymond James Ltd.   

96 comments ↓

#1 Penny Henny on 08.23.19 at 4:16 pm

And by the way, where is VREU with her awesome charts?

#2 Ubul on 08.23.19 at 4:20 pm

How can we not?

In Unprecedented, Shocking Proposal, BOE’s Mark Carney Urges Replacing Dollar With Libra-Like Reserve Currency

#3 expat on 08.23.19 at 4:24 pm

Yeah don’t pay attention as the world implodes
I think that is unwise advice

‘Implosion’? You must have led a life. – Garth

#4 Balanced portfolio on 08.23.19 at 4:26 pm

Rough day

This Trump chap doesn’t appear stable

How’s Gold doing ?

#5 bdwy on 08.23.19 at 4:27 pm

choo choo.

sell now.

this one is going to hurt.

#6 James on 08.23.19 at 4:28 pm

With this piece of Turd running the free world all you can do is keep moving assets around and diversify.
I have them all ETF’s, stocks, bonds, most in TFSA including a tiny bit of shinny metal and land. Not included is the domicile that I reside in. That alone could provide some major cash if I ever decided to bail. At least Trump keeps you on your A game with his daily flip flops.

#7 Andrew on 08.23.19 at 4:28 pm

Mark Carney: buy bitcoin.

Yawn.

#8 Penny Henny on 08.23.19 at 4:30 pm

Mister, are we still in Kansas?
That was quite the storm today.

#9 Axehead on 08.23.19 at 4:32 pm

Only go to cash when you need cash.

#10 UncleRico on 08.23.19 at 4:34 pm

CFA = Cat Fanciers Association. If you don’t believe your Uncle Rico, look it up. Ps – nice post Ryan.

#11 bdwy on 08.23.19 at 4:39 pm

Are you smart enough to pick those few days, and sit in cash the rest?
—————————————–
i like to be out for those few days (big red ones) and sit IN the market the rest. much easier.

still waiting paitently over here for a real good sale (like 20%)

for play money, – gold miners WOW. nearing a double on yri.to and pvg.to since the spring. wish i still held these.

#12 The New Normal on 08.23.19 at 4:46 pm

The hypothetical is correct, and needs to be taken by most people, as soon as, possible. The idea of a fee based advisor is sound. A home is too often overstated, because its just a place to live, and too many are buying debt instead. The problem I have is with the new normal that is not historical, and cannot be judged going forward.

#13 Mississauga Mel on 08.23.19 at 4:53 pm

#11 bdwy on 08.23.19 at 4:39 pm

” – gold miners WOW. nearing a double on yri.to and pvg.to since the spring. wish i still held these.”

I have made an 80% return in the past year with Barrick Gold. On 10,000 shares. The cash register rings every time Donald the Clown does his thing…

#14 Stan Brooks on 08.23.19 at 5:03 pm

#11 bdwy on 08.23.19 at 4:39 pm
……….
for play money, – gold miners WOW. nearing a double on yri.to and pvg.to since the spring. wish i still held these

I said that/about gold/ a few months ago.
Got deleted a few times.
It is evident that US rates will go down, even in negative territory and we will probably never see normal/positive rates again in our lifetime.

Mark Carney is not stupid, current currency wars are indicative of international monetary system crisis.

Inflation at 6-8 % +, rates at zero…. sure. pass the smoke.

Mark is hoping to get the IMF top job but won’t get it.
US and EU are backing someone else.

BTW it seems David Rosenberg would be correct, zero coupon long term treasuries to rise along with gold and gold stocks. Junior minors have a loooooong way to go /up.

#15 Sold Out on 08.23.19 at 5:08 pm

Excellent illustration of how missing just a few days in the market could tank one’s financial future. There’s probably a few stock-picking cowboys in the same boat today. While it’s always interesting to hear different viewpoints, Garth’s absence today does make one wonder if he is currently coaxing clients off their respective ledges. I imagine that the phone lines are burning up between Lunenberg and the rest of the country, thanks to the BOB (Big Orange Baboon).

I heard. Nary a call. Imagine that. – Garth

#16 bdwy on 08.23.19 at 5:13 pm

BOOM!!! (not the guy, the bomb)

trump pulled the pin, tarrifs uppa.

this is war.

#17 Doghouse Dweller on 08.23.19 at 5:16 pm

Well just as I predicted months ago , those crafty Asians are playing Trump like a cheap fiddle.
https://www.youtube.com/watch?v=oJiL1QdgdZY

#18 Sold Out on 08.23.19 at 5:20 pm

#15

I heard. Nary a call. Imagine that.

———-‐–‐——————–‐———–‐—‐———————————

More fearful of an earful than tearful for temporary losses?

#19 Catalyst on 08.23.19 at 5:24 pm

Sorry but you guys are nuts chasing bonds after this 30 yr bull. The only two paths from here in my view is a continued expansion fueled by low rates, QE and tax cuts or some new world order in regards to currency. The scam of paying back debt is over and all countries are printing money while suckers are still willing to take it. Hard to believe I dont hold any gold or crypto but we are in serious unprecedented times in monetary policy and add in the end of global free trade and it’s hard to see the bull case.

People with balanced portfolios are not chasing bonds. They own them. Protection. – Garth

#20 Nonplused on 08.23.19 at 5:35 pm

I have been delaying topping up my TFSA because the funds are going to come from a cash account and some tax will be owing, but this year my tax rate is going to be pretty low so I think it’s time to act. $67,500 all at once.

#21 Linda on 08.23.19 at 5:36 pm

Sinan, is there a rule of thumb to determine what period of time constitutes long term investing? Based on time periods noted in your post it appears that 10, 15 & 20 years fall within the criteria for long term investing across the board. I’m specifically wondering about older investors & whether a 5 year time frame would constitute long term investing for those who are now old enough to collect CPP/OAS.

#22 am I wrong on 08.23.19 at 5:38 pm

“S&P 500 index from January 4, 1998 to December 31, 2018. If you’d invested $10,000 at the beginning of the period and stayed fully invested the account would have grown to $29,845 – an annualized performance of 5.62%. ” -ST

——————————————————————————-
http://www.in2013dollars.com/us/inflation/1988?amount=10000

$10,000 in 1988 → $21,688.17 in 2019

well $29,845 – $21688 = $8157 net
http://www.in2013dollars.com/2019-dollars-in-1988?amount=8157
is $4157 in 1988

10000×1.0167^21= ~4157

so the real return is (1.016) assuming inflation is really declared right in all 21 years

#23 Tony on 08.23.19 at 5:41 pm

Re: #17 Doghouse Dweller on 08.23.19 at 5:16 pm

I mentioned what the outcome would be a day or two ago on this blog. Trump purposely did this to get the biggest rate cut possible this September.

#24 Cici on 08.23.19 at 5:46 pm

I miss Garth!

#25 crowdedelevatorfartz on 08.23.19 at 5:50 pm

@#15 Sold Out
” I imagine that the phone lines are burning up between Lunenberg and the rest of the country….”

*****

Why call when you can babble incessantly on his blog….

#26 leebow on 08.23.19 at 5:56 pm

Trump is a temporary thing. It’s clear to everybody that the future economy of economy is global. One day we will wake up to no more Trump, and you better be invested at that time. In the meanwhile, enjoy the ride and rebalance when you have to.

#27 Flop... on 08.23.19 at 6:13 pm

#22 Cici on 08.23.19 at 5:46 pm
I miss Garth!

/////////

Hey Cici, if you miss Garth the best thing to do is say something stupid.

The other day I put up an article where the headline guy called Gold a currency.

Uncle Garth came round for a visit real quick…

M45BC

#28 Randy on 08.23.19 at 6:14 pm

Trump will win. America will win.

#29 mark on 08.23.19 at 6:21 pm

You might like this, Garth.
https://www.mfg.com.au/blog/optimism-is-the-only-realism/

#30 Shawn Allen on 08.23.19 at 6:22 pm

#22 am I wrong on 08.23.19 at 5:38 pm

You mean other than using 1988 as your inflation starting point versus the 1998 in the article?

But you do have a point. let’s see the numbers with 1998…

#31 Clem Kadiddlehopper on 08.23.19 at 6:45 pm

I love days like this when you can smell the blood flowing freely down the streets. Some really good bargains coming up.

Just bought some floating rate preferreds today (from a safe company) yielding well over 7% – they have been totally slaughtered and the market is obviously pricing in that we are going to zero interest rates in Canuckistan (which I seriously doubt). Trading at 13.30 with par at 25 bucks – what a world!

Keeping some cash ready for more bargoons.

#32 Howard on 08.23.19 at 6:52 pm

No fear. On Monday Trump will tweet that talks between the US and China “going well” and the algos will promptly pump the Dow up 600 points.

#33 Gold Bug Denier on 08.23.19 at 6:54 pm

There are Gold Bugs who are convinced that the US dollar will collapse, WW3 will break out, and nuclear warfare will happen, but we will all buy their gold from their underground bunkers from Puerto Rico (a company that IS NOT based in the Euro-Pacific region, whatever that means), and use Gold as currency, while people riot for food.

#34 Penny Henny on 08.23.19 at 6:58 pm

#20 Nonplused on 08.23.19 at 5:35 pm
I have been delaying topping up my TFSA because the funds are going to come from a cash account and some tax will be owing, but this year my tax rate is going to be pretty low so I think it’s time to act. $67,500 all at once.
////////////////

I believe that max to date is 63,500

#35 Sinan on 08.23.19 at 7:01 pm

# 21 Linda – Everyones circumstances and goals are different so there is no ‘rule of thumb’ about what allocation they should have to stocks and bonds but I will say if you are in the period of collecting government pensions then a 60% weight to growth equities and 40% to fixed income is an optimal balance. Inflation is constantly eating away at our purchasing power so it is important to not let short term fear outweigh long term realties.

#36 Sinan on 08.23.19 at 7:09 pm

#33 God Bug Denier – Trying to make money in a commodities or commodity companies is a ‘price taking’ has historically been a waste of time and a major loss. While one might get lucky this year or next chances are you won’t be one of them. Take a look at the price of Barrick Gold in 1995 compared to now. I don’t know about you but that is a total waste of compounding time to me

#37 Smoking Man on 08.23.19 at 7:20 pm

Balanced Portfolios have merits, boring as Hell.

Now Trading Forex with 400 to 1 margin is like playing Russian Roulette with 5 out of the 6 bullet chambers loaded.

Unless you’re a data scientist who knows how to code and is well versed in AI never try it.

Wife Poo is up to 939,215 K since Mar 19th started with 10k.

She had great month up 384k but today it went against the model, she was looking at a 47k lose this morning. She called me for advice.

Stick with the plan, be patient. by 9:42 am the local time the model had her at 2K up. She liquidated and made a 300 dollar profit. She made 2 more trades netting 4,597 I Figure once she tops 1M

We will go from 100 lot contracts to 1000 lots.

Now this is where it gets interesting.

Now, why don’t I quit my job? My job is not about making money. I work the smartest Ph.D. guru’s in the world. Getting free education…

Not to mention the great weather.

#38 Brian Ripley on 08.23.19 at 7:24 pm

The Trump Fan Boys are quiet today.

Perhaps they have read my post about how Trump fits the profile of a Psychopath, a Sociopathic Narcissist and a Fascist. Details here: http://www.chpc.biz/history-readings/liar-liar

Here is a quote from the post:

A primary source of anxiety that lives within the sociopathic narcissist is a terror of ruinous disillusionment which would ultimately terminate in a catastrophic exposure of what is in essence a fraudulent existence. As the risk of exposure intensifies, be it in a dyad or more macro group structures, their intrapsychic constellation becomes increasing more fragile and their manifest behaviour becomes more erratic. John C. Espy, March 01, 2017

We are indeed seeing Trump’s behaviour becoming more erratic in each passing week.

#39 Yanniel on 08.23.19 at 7:31 pm

“Over long periods of time investing and holding an ETF tracking the S&P 500 index has never – repeat, never – been a losing position. Of course there are no guarantees about the future but based on historical data there’s a 95% probability of a positive return on the S&P 500 over any 10-year period and no losses when expanded over 20 years.”

The S&P 500 has been a darling. I’d like to contrast it with the Nikkei 225. The latter hit an all-time high in 1989; 30 years latter it hasn’t recovered.

“Many investors believe they’re managing risk by deviating from a long term plan and temporarily moving to cash. Wrong. This attempt to time the market is one of the riskiest things one can do when investing towards long term goals.”

There’s substantial research into momentum strategies that in my opinion says otherwise. Momentum won’t try to guess the tops and bottoms; but it will allow you to avoid selling your winners too soon or holding to your losers too long.

“If missed just the 10 best days over this period the overall return would be cut in half. If you missed the 40 best days the investment would have been worth $4,241 which resulted in an annualized performance of -4.2%. So out of ~5,000 trading days that is less than 1% of the time that is responsible for the difference between a decent profit and a significant loss.”

This only looks at one side of the story. You can make money in the markets in the long run by avoiding the bloodbath that comes with those bear markets that bottom over several months (or years). The typical bear market needs some time to get to the bottom (the 1987 is one exception). A momentum strategy would allow you to avoid such drawdowns and at the same time would allow you to redeploy your “cash” early. One does not need to be smart to follow a momentum strategy. One does not need to guess the tops and bottoms. One has to be disciplined, but that goes for all kinds of investors.

I personally find the momentum strategies easier to deal with from the behavioral point of view, because you would rarely get to the point of suffering a 30% drawdown. The best strategy is one you can stick to.

Two words about “periodically re-balancing”:

1 – In trending markets is harmful. You can argue risk is being reduced; but what if risk could be reduced some other way?

2 – There’s a lot of luck involved with re-balancing. Imagining 253 portfolios (one per each trading day in the year) which are exactly the same and the only difference is that you pick a different day for an annual re- balancing. The dispersion of returns is significant across all this portfolios. With infinite time this would not be as significant, but what’s the typical accumulation phase of investor?

#40 $? on 08.23.19 at 7:33 pm

Well, it was coming sooner or later…
1944 Bretton Woods
1971 The Nixon free float
202? The Global currency

https://www.bnnbloomberg.ca/technology/video/carney-proposes-libra-like-reserve-currency-to-end-dominance-of-dollar~1763526

#41 Easy money! Dividends rule. on 08.23.19 at 7:33 pm

No panic with a terrif war, I just sit back and collect more money. Rates going down my acquities holding strong and gaining ground. Dividend income preferred tax treatment and stead gains. What’s not to like? ….. BCE, TRP, AQN, ENB, EMA, FTS, H, NPI, SU, CNQ, CTR.UN, T, TD, ZMI. CU. CP. Buy things people need……trade wars don’t effect every asset class mind you there down today
because of the usual weekly manipulation. Life’s good!

#42 MF on 08.23.19 at 7:33 pm

33 Gold Bug Denier on 08.23.19 at 6:54

Nailed it.

“The world is ending. Financial systems will collapse……except for the one related to my investments.”

A speculative play at best. Modern day Y2K bunker at worst.

MF

#43 Danny Boy on 08.23.19 at 7:35 pm

I have found that in life when they call it one thing it really means the opposite. Libra means freedom in Latin but the more electronic money becomes it is more freedom for them and not the holders not controllers little people like us.

You better hope the U.S. does not go down because you will be run by socialists and financial disasterous consequences.

Yeah, people already believe bankers and central banks that got us in this mess from EU to the Euro currency etc. They want to get rid of any option from gold to interest and live in their slavery of digits and chips. People have no more brain cells left.

#44 Flop... on 08.23.19 at 7:44 pm

Well,with the news that the supposed 11th richest person in the world in David Koch has passed its only natural that I am having another Paul Allen flashback.

As I stood on the grounds of his French Villa overlooking the Mediterranean with what was supposed the largest biggest personal boat in the worldly I. The distance, it was hard not be jealous and think these guys had it all.

Paul Allen had at least two battles with cancer to my knowledge, dead at 64.

Seemed to enjoy wining and dining the rich and famous, and watching his beloved Seahawks, apparently he had a mean musical instrument collection including guitars given to him by the Rolling Stones.

My father-in-law on the other hand spent a large part of his working life as a porter handling people’s luggage at the airport.

His main hobby appears to be playing around with the recycling bin.

He will be 79 next time he blows out the candles, the same age as Koch.

Who wins in this game of life?

Dunno, probably all three men felt blessed and would have said they had fulfilling lives.

I always say to my wife, her Dad would be just as happy walking around the jungles of Fiji with only a loincloth on…

M45BC

#45 Catalyst on 08.23.19 at 7:44 pm

Re:#19 “People with balanced portfolios are not chasing bonds. They own them. Protection. – Garth”

I understand and respect your usage of them, I just prefer GIC’s for right now for that part of a diversified portfolio. I believe you guys also focus on shorter term so that is probably safe, but long bonds are very dangerous in my opinion.

GICs force you to pay tax on income not yet received. They lack liquidity. The returns are substandard. There is no potential for capital gain and no inverse correlation to equities. Therefore they are not part of a balanced portfolio. – Garth

#46 Bytor the Snow Dog on 08.23.19 at 7:59 pm

Um, excuse me. A guest column on a Friday? Is Garth becoming a slacker?

#47 oh bouy on 08.23.19 at 8:03 pm

@#44 Flop… on 08.23.19 at 7:44 pm
Well,with the news that the supposed 11th richest person in the world in David Koch has passed its only natural that I am having another Paul Allen flashback.

As I stood on the grounds of his French Villa overlooking the Mediterranean with what was supposed the largest biggest personal boat in the worldly I. The distance, it was hard not be jealous and think these guys had it all.

Paul Allen had at least two battles with cancer to my knowledge, dead at 64…
___________________________

words to live by.

“You could leave life right now. Let that determine what you do and say and think.”
-Marcus Aurelius

#48 Shawn Allen on 08.23.19 at 8:05 pm

GICs and Income Tax

Garth has pointed out on more than one occasion that “GICs force you to pay tax on income not yet received.”

I’v never owned a GIC. Is the statement true in all or most cases? Does a five year GIC not usually pay interest at least annually? Do some pay all the interest at the end?

How much lag is there between paying the tax and receiving the interest?

Can some others who have owned GICs and paid taxes elaborate on the tax treatment and when the interest is received? (Warning, apparently you may be ridiculed for admitting to owning GICs in a taxable account, or at all.)

I thought GICs were taxed the same as bond interest. I stand to be educated on this please.

#49 Sinan on 08.23.19 at 8:09 pm

#39 Yanniel – Needless to say equity markets have been long term winners but obviously not all are created equal. The TSX has over 30% of its index in resources (oil, metals, etc). The S&P 500 has a much smaller weight in commodities. You pointed out the Nikkie in Japan. While the market there was on fire in the late 80’s in has been total garbage since. The main reason is because the debt bubble blew up and earnings growth has sucked. We preach the same about Canada in terms of the ridiculous amounts of debt here. Bottom line is earnings growth moves markets and while all the Trump bullshit will put resistance and fear it will all pass as all storms do.

#50 Deplorable Dude on 08.23.19 at 8:10 pm

Media start of the week….”Trump has caved…he’s gone soft on the Chinese….”

Media end of the week…..”Trump is being a big meanie to the Chinese’

Meanwhile Obama obviously doesn’t consider global warming/sea level rises a problem….having just dropped $15M on a waterfront Marthas Vineyard mansion….

#51 Tammy Simms on 08.23.19 at 8:14 pm

GIC’s exist can pay annual interest or compound interest which is an option when a person gets a GIC or GIC’s so that is not true that you pay tax on income you never receive in non-registered accounts.

Also, GIC’s are more appropriate for tax sheltered and taxfree accounts like RRSP’s, RESP’s, RDSP’s, LIRA’s, TFSA’s etc. to minimize and spread taxes over many years if planned ahead.

GIC’s are being manipulated to be kept down as never in history and this is not by accident, it is by design because it is the easiest and simplest way for anyone to accumulate money. If you can say that low to negative interest rates if not a coupe on the middle class to have significant assets and compound interest then how much more clear do they have to make it.

As for capital gains, they could set up a market to trade GIC’s like bonds to create a potential of capital gains but that would compete with bonds which banks and others have a monopoly which they don’t want to give up.

The banking industry made GIC market linked to equities but they can’t have GIC’s act like bonds. They do only what they want to be allowed. They also could make them longer term up to 30 years like bonds which Trudeau said a CDIC change to allow this but they could of done this years ago when interest rates were much higher and chose not too. It is all set by design to keep small depositors and fixed interest investors to be kept with the limited choices and kept really down like the unrelenting attack on interest rates for the last 10 years now.

#52 Flop... on 08.23.19 at 8:28 pm

I did my Father-In-Law a huge disservice by stating that playing around with the recycling bin is his only noticeable hobby.

This is untrue.

He also likes to drive around checking out gas prices.

Can’t work the Internet, so Gas Buddy Dot Com will never happen.

Maybe he keeps things simple because having me as a Son-In Law is stressful enough…

M45BC

#53 Nonplused on 08.23.19 at 8:35 pm

#34 thanks!

#54 Mike on 08.23.19 at 8:37 pm

Great post Sinan. Really shows that we just need to stay the course and make contributions when we can just in case we get those very few lucky days!

#55 Nonplused on 08.23.19 at 8:40 pm

Maybe Trump would be interested in purchasing Alberta if Greenland isn’t for sale?

#56 Rargary on 08.23.19 at 8:41 pm

$37 Smoking Man: …Now Trading Forex with 400 to 1 margin is like playing Russian Roulette with 5 out of the 6 bullet chambers loaded.

Unless you’re a data scientist who knows how to code and is well versed in AI never try it.

Wife Poo is up to 939,215 K since Mar 19th started with 10k.

She had great month up 384k but today it went against the model, she was looking at a 47k lose this morning. She called me for advice.

Stick with the plan, be patient. by 9:42 am the local time the model had her at 2K up. She liquidated and made a 300 dollar profit. She made 2 more trades netting 4,597 I Figure once she tops 1M…
—————–

[email protected]!!! How many years of investment of $10,000 b4 she had a million??? What the heck is she investing in???

#57 Gulf Breeze on 08.23.19 at 8:42 pm

I’m out of the precious metal fund I bought a couple of years ago — as of today. Watching the Amazon burn and feeling anguish and grief at what is happening to the planet, how can I justify holding precious metals? These mines are really nasty, environmentally.

So money market fund until I find a decent and truly environmentally friendly alternative. I can’t do this anymore.

I bought it as a hedge against cash so now that it’s sold I just have to trust doing the right thing will be the safe thing for me as well.

It’s hard. There’s never been a time where we are faced daily with making choices like this, if we move through life with our eyes open.

#58 Yanniel on 08.23.19 at 9:08 pm

#49 Sinan on 08.23.19 at 8:09 pm

Thanks for touching on the reasons behind Nikkei’s rout. I can honestly say I did not know the reasons.

#59 Trumpaholics R US on 08.23.19 at 10:01 pm

#37 Smoking Man on 08.23.19 at 7:20 pm

Balanced Portfolios have merits, boring as Hell.

Now Trading Forex with 400 to 1 margin is like playing Russian Roulette with 5 out of the 6 bullet chambers loaded.

Unless you’re a data scientist who knows how to code and is well versed in AI never try it.

Wife Poo is up to 939,215 K since Mar 19th started with 10k.

She had great month up 384k but today it went against the model, she was looking at a 47k lose this morning. She called me for advice.

Stick with the plan, be patient. by 9:42 am the local time the model had her at 2K up. She liquidated and made a 300 dollar profit. She made 2 more trades netting 4,597 I Figure once she tops 1M

We will go from 100 lot contracts to 1000 lots.

Now this is where it gets interesting.

Now, why don’t I quit my job? My job is not about making money. I work the smartest Ph.D. guru’s in the world. Getting free education…

Not to mention the great weather.

Awesomeness…………. We need a guest post from Mrs Smoking Man

Does she just stuff it all into a slot machine after?… Does she drink as much as you?

Maybe you should fund trump’s wall!

#60 Phylis on 08.23.19 at 10:09 pm

#57 need a tissue? Does anyone have a tissue for #57?

#61 fishman on 08.23.19 at 10:44 pm

DELETED

#62 Ponzius Pilatus on 08.23.19 at 10:57 pm

While you pathetic losers worry about your pathetic portfolios’ the Amazon is burning.
“how can you sleep, while your bed is burning”
On the bright side, Koch has departed.

#63 Tired on 08.23.19 at 11:02 pm

It’s incredibly frustrating to see your net worth getting crushed again and again by some angry narcis tweets.
After year and a half I have (as if today) BD portfolio worth 399k. Total invested 395k. I have yet to experience the growth often mentioned here.
Maybe one day…

#64 Bobby Sherman on 08.23.19 at 11:35 pm

Why is Turner Investments trying to make President Trump look the the bad guy? He’s standing up for America and protecting it’s most vulnerable citizens. China has been ripping off the US for years. I would never buy anything that is made in China and if it wasn’t for the USA we’d all be living in mud huts. Trump 2020.

#65 Doug in Londinium on 08.23.19 at 11:36 pm

So the Dow Jones dropped something like 600 points today? Nothing to see here, move on everyone, just another tempest in a tea pot.

#66 Sail Away on 08.24.19 at 12:16 am

#38 Brian Ripley on 08.23.19 at 7:24 pm

The Trump Fan Boys are quiet today.

Perhaps they have read my post about how Trump fits the profile of a Psychopath, a Sociopathic Narcissist and a Fascist.

——————————————-

Don’t get too self-congratulatory. Every time you create a narrative about the way someone’s persona will lead them to act a certain way, they will surprise you.

#67 Vampire Studies (doctoral thesis) on 08.24.19 at 12:22 am

1 Penny – I gave VREU a pretty involved assignment compiling the RE stats for this last spring in Vic. I had hoped to hear by now.

#68 Mark who on 08.24.19 at 1:22 am

Remember Mark, used to be governor of Bank of Canada
Now test your knowledge skills, he’s now head of what bank? Hmm
What did he say yesterday it’s time for a world currency
I wonder what that would entail?
Mother Earth dollars, I wonder if it will be printed or exist electronically?
Interesting.

#69 Tony on 08.24.19 at 1:35 am

Did the market go down today? Big deal. Sounds like a good time to buy.

#70 Smoking Man on 08.24.19 at 1:54 am

It sucks being a teacher these days.

Since the 60s generation after generation of teachers going more radical left. They all want lear jet but never gambled..

They never put a dime in a slot machine, their existence was funded by risk takers. They call them evil capitalist.

They teach the children communism hoping for an antifa revolution to steal money from risk takers

When a risk-taker smells it air they leave. Take all there loot
and relocate.

That’s Me and a shit load of other job creatureS.

Then you are left with a Venesula outcome.

The over schooled can spell. But they truly idiots..

Dr Smoking Man
PhD Herdonomics.

#71 Dolce Vita on 08.24.19 at 2:19 am

Retail Trade Sales May –> June 2019.

DECLINED and historically to be EXPECTED.

—————————–

By North American Industry Classification System (NAICS):

https://i.imgur.com/lWAwb5V.jpg

– Motor vehicle and parts dealers took the brunt of the decline.

—————————–

By Geography (Province, Territory, long image, scroll):

https://i.imgur.com/4iGhiVX.jpg

-Blame PQ, ON, AB and BC for the majority of the decline.

—————————–

Historically, there is ALWAYS a decline from May to June (chart going back to April 2014):

https://i.imgur.com/EUu9kFG.png

-thus “n’est panicker pas” (Franglais).
-Note why I use the raw, actual data collected “Unadjusted” so a person can clearly see if a decline or increase is historical or not. If you were to try and peruse the “Seasonally Adjusted” for that, good luck.

—————————–

In the “OOPS, I DID IT AGAIN” Department, they lowered the May numbers originally posted in the May 2019 Report in the June 2019 Report; thus, making the May to June decline slightly WORSE.

May 2019 Numbers from the May Report (Retail Trade ALL, $ x1,000):

Unadjusted = 57,867,037
Seasonally Adjusted = 51,459,226

May 2019 Numbers from the June Report (Retail Trade ALL, $ x1,000, % difference in brackets):

Unadjusted = 57,836,921 (-0.05%)
Seasonally Adjusted = 51,353,431 (-0.21%)

Yes, yes, peanut changes BUT it’s the PRINCIPLE of the thing…they do not mention the change at all in their Report. They gerrymander numbers (which is now becoming a habit it seems at StatCan) at will, presuming they will not get caught.

—————————–

To verify the above for yourselves, slice and dice the StatCan data at:

https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=2010000801

—————————————————

Buongiorno e Ciao from politically rudderless Italia.

#72 Morty on 08.24.19 at 7:29 am

#62 Ponzius Pilatus on 08.23.19 at 10:57 pm

“…On the bright side, Koch has departed.”

Yep, it is a better world today without Mr. Koch. Good riddance!

David Koch donated hundreds of millions to medical research. He gave equal amounts to public institutions from the Museum for Modern Art to the Smithonian and MIT. He employed thousands. And you, who stand in judgement, have done what, exactly? – Garth

#73 In Garth We Trust on 08.24.19 at 7:33 am

#46 Bytor the Snow Dog on 08.23.19 at 7:59 pm

“Um, excuse me. A guest column on a Friday? Is Garth becoming a slacker?”

It appears that our fearless bearded leader is becoming a bona fide bum! Taking Fridays off! Sheesh!

#74 Bytor the Snow Dog on 08.24.19 at 7:47 am

#38 Brian Ripley on 08.23.19 at 7:24 pm sez:
“The Trump Fan Boys are quiet today.

Perhaps they have read my post about how Trump fits the profile of a Psychopath, a Sociopathic Narcissist and a Fascist. Details here: http://www.chpc.biz/history-readings/liar-liar

Here is a quote from the post:

A primary source of anxiety that lives within the sociopathic narcissist is a terror of ruinous disillusionment which would ultimately terminate in a catastrophic exposure of what is in essence a fraudulent existence. As the risk of exposure intensifies, be it in a dyad or more macro group structures, their intrapsychic constellation becomes increasing more fragile and their manifest behaviour becomes more erratic. John C. Espy, March 01, 2017

We are indeed seeing Trump’s behaviour becoming more erratic in each passing week.”
—————————————————
Speaking of erratic, aren’t you the same guy who proposed giving mothers proxy votes in elections for their children?

#75 maxx on 08.24.19 at 8:43 am

@ #44

Good one, Flop.

My FIL died in January at 96 after living a simple and frugal, yet very rich life. Nothing was more important to him than family.

I’d never met anyone so grateful for every little thing that came his way. He accepted a cup of tea as though it was the first one he ever tasted. He taught me so much about how easy it is to enjoy life. He came closest to what I consider to be the human expression of joy. Isn’t that what life is all about?

How does joy not contribute to longevity?

I’m sure that walking onto your private yacht (would love to travel the South Pacific in one!) on a sunny day confers a sense of pride and accomplishment, but it’s not joy.

No thing is joy. Rest in peace dad.

#76 maxx on 08.24.19 at 9:10 am

@ #48

“(Warning, apparently you may be ridiculed for admitting to owning GICs in a taxable account, or at all.)”

I truly don’t give a rat’s behind what anyone thinks about GIC ownership. I own them and get paid monthly, like a pension income stream. If your pile is large enough, you won’t be penalized on the interest rate for the monthly payout. The interest gets added to your total income for the year, much as a salary.

GICs IMHO, are part of a healthy and diversified income stream, including pensions (2 foreign, which currency hedge), fully-funded RSP’s (not ’till 71) and TFSAs (which are sacrosanct and only for future medical/emergency requirements) and a great business which we can run from anywhere.

I like to sleep at night. I also like not to have to worry (too much) about the flakes running the world’s economy.

I believe that Garth’s approach is an excellent one, however at my point in life, I much prefer reviled GICs and government pension approach.

#77 Blackdog on 08.24.19 at 9:31 am

@ Morty #72 re:
“Yep, it is a better world today without Mr. Koch. Good riddance!”

“David Koch donated hundreds of millions to medical research. He gave equal amounts to public institutions from the Museum for Modern Art to the Smithonian and MIT. He employed thousands. And you, who stand in judgement, have done what, exactly? – Garth”

I tend to think it’s not just what you’ve done but what you didn’t do that is important. Net net, is Koch in the red?

Bill Maher seems to agree. “On Friday night’s “Real Time,” he said he’s “glad” billionaire conservative David Koch is dead, and he hopes “the end was painful.” Maher’s harsh comments come following Thursday’s announcement of the death of Koch, who had spent most of his life financing conservative causes, like climate-change denial, a hot topic around the world this week as the rain forest in Brazil spreads.”
https://www.thewrap.com/bill-maher-im-glad-david-koch-is-dead-and-i-hope-the-end-was-painful/

#78 dharma bum on 08.24.19 at 10:18 am

#73 In Garth We Trust

It appears that our fearless bearded leader is becoming a bona fide bum!
——————————————————————–

He’w hangin’ out with me!

#79 Sail Away on 08.24.19 at 10:30 am

#62 Ponzius Pilatus on 08.23.19 at 10:57 pm

On the bright side, Koch has departed.

——————————————–

That is a small and unworthy comment

#80 Jed Clampet on 08.24.19 at 11:10 am

The non existent “recession” is being promoted by a coordinated last gasp of globalist Trump hate. They’re freaking because he’s winning. Globalists are spending billions on what amounts to propaganda. Spending on globalist nonsense is boiling. Apparently we’re all going to die if Trudeau isn’t reelected and Trump does. What nonsense. As every analyst has confirmed, the numbers in the US economy ate fantastic.

EU and China are so far in debt that if it can’t be washed with global taxes rising faster than inflation they’ll sink, hence “the war on Trump”.

Check out China without the bad boy bluster, broke and whimpering like it’s 1934 and Chinese people are happy to get back into the fields and eat bugs, yeah right.

https://www.cnbc.com/2019/08/23/chinas-debt-levels-amid-its-slowing-economy.html

Chinese people are resolved to live modern lives, the Communist Party is likely going to burn, and about time those bloody butchers are set slight.

The EU plutocrats are just lazy and stupid. Buy this dip incrementally and don’t fear the media. Since when have the goons down at CBC headquarters ever given you good guidance? The meltup is here, stocks aren’t sinking, they’re on sale.

#81 Flop... on 08.24.19 at 11:15 am

#75 maxx on 08.24.19 at 8:43 am
@ #44

Good one, Flop.

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

Thanks Maxx, ditto.

One paragraph in that post my iPad absolutely mangled was supposed to read as this…

“As I stood on the grounds of his French Villa overlooking the Mediterranean, with what was supposedly the largest personal boat in the world at the time off in the distance, it was hard not be jealous and think these guys had it all.”

I think my writing has improved a little bit since my time on here.

My iPad likes to keep me humble…

M45BC

#82 Ponzius Pilatus on 08.24.19 at 11:29 am

Happiness is not counted by your money in the bank, but by the number of dopamines in your brain.

#83 NoName on 08.24.19 at 11:40 am

Ok here is an interesting read but 40 yrs at play with worst possible market timer, but luckily dude is not chicken.

Mosral of the story is youl make a money even if you are bad cowboy, but how long you are not chicken.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

@ flop

Which bastige that i know is tellng on me and giving you an insights what i do as a “regular” me? that come close. I showd video to coworker.

me:
hey ____ is there any similarities of me and this dude?
cw:
didnt you do just that 10 min ago, while you were argung with ____.
me:
siriously
cw:
do you want me to tell you a truth or what you want me to tell what you like hear.
me:
silence…

https://youtu.be/Ij0FrhyWWW8

#84 Ponzius Pilatus on 08.24.19 at 11:46 am

DELETED

#85 Trumpocalypse2019 on 08.24.19 at 11:47 am

The calm before the storm.

The Amazon is burning, now a true global crisis, and the fire season doesn’t even really begin until Sept/Oct.

https://www.nytimes.com/2019/08/23/world/americas/brazil-military-amazon-fire.html

The Amazon contributes over 20% of the world’s oxygen supply. Now it’s pumping out CO2.

Do the math.

The G7 will unravel into complete chaos in the days ahead.

Wild cards like Brazil, Iran, NK and more countries than you suspect will contribute to a blow-up in weeks.

PREPARE

#86 NoName on 08.24.19 at 12:05 pm

#82 Ponzius Pilatus on 08.24.19 at 11:29 am
Happiness is not counted by your money in the bank, but by the number of dopamines in your brain.

When you low on dopamine because of weater is changing, take an oreo cookie or two or chips works well also, that’ll do. Or if you are in bind with a time just have a spoon or two of sugar.

Works for me all the time.

https://www.healthline.com/nutrition/10-similarities-between-junk-foods-and-drugs#section1

#87 Ponzius Pilatus on 08.24.19 at 12:06 pm

#84 Ponzius Pilatus on 08.24.19 at 11:46 am
DELETED
———–
I just copied that from Wiki.

Are you enjoying your campaign against a dead guy? Disgusting. – Garth

#88 Axehead on 08.24.19 at 12:54 pm

#85. Wrong. Ocean plankton produces up tp 80% of the world’s oxygen. Stop with overblown “sky is falling” overhype sensationalism.

#89 Dogman01 on 08.24.19 at 1:13 pm

#50 Deplorable Dude on 08.23.19 at 8:10 pm

Meanwhile Obama obviously doesn’t consider global warming/sea level rises a problem….having just dropped $15M on a waterfront Marthas Vineyard mansion….

—————————————————

“I’ll believe that it’s a crisis when the people who claim it’s a crisis start acting like it’s a crisis.” -Glenn Reynolds (on Climate Change)

We are being played on this Climate Change thing.

#90 Spectacle on 08.24.19 at 1:15 pm

#72 Morty on 08.24.19 at 7:29 am
#62 Ponzius Pilatus on 08.23.19 at 10:57 pm

“…On the — —-, Koch has departed.”

Yep, it is a better world today without Mr. Koch. —- ——!

David Koch donated hundreds of millions to medical research. He gave equal amounts to public institutions from the Museum for Modern Art to the Smithonian and MIT. He employed thousands. And you, who stand in judgement, have done what, exactly? – Garth

And has Championed the processing of Canadian rubbish Oil industry product for all Canadian benefit for last 15 plus years.

Strength and Peace to You Garth , for being a beacon and daily putting up with these Internet Haters , and the Social Media Junk Storm in our society. Ugh !

#91 Dogman01 on 08.24.19 at 1:52 pm

#80 Jed Clampet on 08.24.19 at 11:10 am

RE Globalism

Yes: Globalism does appear in retreat.

In the big picture , considering Nuclear Weapons, anything binding us together is positive.

But….

How this move to Globalism was handled has been a disaster for the West, and as a card carrying western society member I have to look out for my society’s interest.

Globalism has benefited a global wealth elite, they got richer and richer.
Globalism has benefited many in the poorer parts of the world; they got economic growth and technological progress (not so much social progress as many are under authoritarian rule still)
Globalism has enabled a terrible – terrible world power, the PRC, become a serious threat to western security and the post WWII world order.

But in the West it has been a disaster for the majority; we imported the worlds unemployment and made our job market fiercely competitive creating Education inflation, wage stagnation, it looks like a generation of economic precariat’s whom cannot start families. A general stagnation of our mean Standard of living and social security.

Globalism moved the means of producting to the lowest cost location with no consideration of social impact.

Trump knows, China is exploitative in the economic relationship. (IP theft is an epidemic these guys are bandits). US needs to lower the dollar to be competitive.

25 years old, but obvious as heck then: https://www.youtube.com/watch?v=4PQrz8F0dBI

#92 Linda on 08.24.19 at 1:53 pm

Thanks Sinan. I do have my portfolio balanced as you suggest for the older investor. Fortunately I do not require income from those funds at this point in my life so it is easy for me to stay invested.

#93 AB Boxster on 08.24.19 at 1:57 pm

#31 Clem Kadiddlehopper on 08.23.19 at 6:45 pm

Just bought some floating rate preferreds today (from a safe company) yielding well over 7%
———————————————–
Yes, there is blood in the streets for preferred shares right now.

When you can buy an Enbridge preferred share that does not reset until 2023, and if bought today will pay you over 8% until then, well then there is some really negative sentiment going on right now.

You can even find Brookfield Asset (DBRS Rating: Pfd-2L) preferred shares the will give you over 7% until 2023.

That’s just nuts.

It looks like the carnage of 2016, where preferred shares were killed because low BOC rates resulted in very low reset returns.

Where at one time a perpetual preferred share paying 4% forever, would act much like a bond, and rise in value when interest rates went down, suddenly these new instruments were resetting at much lower rates, and investors dropped them like hot potatoes.

So as a fixed income part of your portfolio, where they once acted like bonds, rising in value when rates fell, in the new world of these rate-resets, this can easily fail to hold true.

Yes, for most investors buying the etf is easier and more liquid. And yes, collecting the dividend is really the point.

But when an etf like XPF, has lost over 11% over the year (Sept 2018-2019) , while the TSX and DOW have remained flat and rates are now falling, there is something going on in these preferred etfs that makes no sense.

Is the general model for preferred shares broken, now that most of these securities are not perpetual anymore?

Given that the FED and BOC are all over the place for raising rates, lowering rates, etc, is it now impossible to make a generalization for this group of investments, given that their reset values and reset dates are all over the place as well.

Depenging on many variables, one share may reset at very attractive rate, whereas 2 years later, the same share could reset at a fairly unattractive rate.

As the FED and the BOC are lowering rates due to frequent economic shocks (such as trade wars, energy killing policies, climate change policy madness) it almost makes it impossible to predict how this asset class as a whole, should react.

Is there any down side, other than liquidity, to buying a preferred for 8% yield for 4 years, knowing that if the BOC rate in 4 years is 0% that this security will reset at 4.2%?

This seems more predictable than buying the etf, and trying to figure out why, as rates continue to fall, that these thing are falling as well

Buy preferreds for the dividend and hold them for income (which is quadruple what a bond pays). Rates will rise again and prefs will increase in value. Confusing them with an equity holding (ie – for a capital gain) is the mistake you made initially. – Garth

#94 Ocean Plankton on 08.24.19 at 2:21 pm

#88 Axehead – The Pacific Ocean is dead, and the plankton becomes suspect. This is why millions of seafoods are washing up on shore dead too.

#95 am I wrong on 08.24.19 at 2:56 pm

#30 Shawn Allen on 08.23.19 at 6:22 pm

Thanks for spotting , using the correct year for inflaction calc=’1998′ the result would be ;

$10,000 in 1998 → $15,740.55 in 2019
$29845-$15,740 = $14105 net gain in 21 yrs
$14,105 in 2019 → $8,960.93 in 1998 => 18.9K

10000*1.03^21= ~18.9K
The real return is ~%3

#96 crowdedelevatorfartz on 08.24.19 at 3:59 pm

@#94 Ocean Plankton
“The Pacific Ocean is dead….”
++++

Please send a memo to the whales I see almost on a weekly basis during ferry crossings.
Make sure you plasticize the memo so the ink doesn’t run…..