Entries from October 2019 ↓


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One more sleep to the big vote. But let’s ignore that. Enough is enough. We’ll get the country we deserve.

But will we get the blog we deserve? That’s the question.

Truth be told, you haven’t impressed me lately. At least the 1% of visitors who leave a comment. Over the last few days, they have sucked. The IQ of this site seems to erode every time the testosterone level rises. That usually happens when we talk about investing.

Most have a profoundly unhealthy relationship with money. It destroys relationships. It turns us ugly and competitive. It flips prudence into risk. People let it define them – how much they earn, possess or how smart they are with it. Investing becomes a contest to be won. Amateurs believe performance is the sole measure of success. Some learn the truth. Many fail first.

In recent days this blog has offered advice, backed by research and history on proven ways to organize, keep and grow wealth. That included contributions by me and two of my colleagues – one a career Bay Street analyst and pro portfolio manager, the other a former v-p with two major banks, including RBC’s capital markets unit on Wall Street. With success, they look after families across the nation. In response, a bunch of DIY cowboys showed up here to insult them.

Makes me wonder. Why do we bother?

You’re familiar with your own accounts or maybe what you BIL owns. In contrast, I see and analyze hundreds of portfolios a year, plus interview the people behind them. I do not manage millions of dollars. Or tens of millions. People have entrusted me with hundreds of millions. And they all have the same two goals. Don’t lose money. Make a reasonable return. Unspoken but understood is the third goal: take care of me.

The wisdom and training I and my colleagues have garnered is distilled and presented to you, gratis. Seven days a week. At least for now.

There’s a reason I preach balance, diversification and liquidity. For almost everyone, it works. It’s the only thing that works, consistently, decade after decade – because people are not algos. They allow a myriad of factors to influence how they deal with money. Most of those are unhelpful.

Why do people fail?

They make emotional decisions. A marriage. Job loss. A baby. Divorce. All these things flood the brain with emotion and lead to kneejerk decisions.

People fail because they consistently acquire assets out of greed (because they’re going up, like houses or gold), and they bail out on fear (like stocks going down). Buy high and sell low is the norm.

We fail because of where we get information. From family or parents – people with zero training, unable to admit mistakes. Or, worse, Mr. Google. The online world teems with sites full of self-serving, sales-oriented, attention-seeking crap.

People fail when they trust [email protected] or a 22-year-old ‘advisor’ with a mutual fund license to give them life or retirement advice. These folks are salespeople.

Failure also comes because of recency bias. The comment section swims in it. People think recent events dictate all events to come, like interest rates will never rise again or real estate values never fall. History is littered with the bones of such believers.

Most people don’t know how they’re taxed, or how to minimize it. Interest, dividends, rent, capital gains, employment income – they are treated unequally. Registered and non-registered accounts. Self-employment cash flow. Income-splitting between spouses or in a family. Commuted pensions. Return of capital retirement income. Trusts. Deductible interest. Probate. IPPs or what kind of insurance to buy.

We fail because we think short-term. Yearly performance is the cowboy preoccupation, instead of achieving life goals – a house, schooling kids or retiring securely. We exaggerate current events, believing we live in a time of unusual turmoil or unprecedented conditions. But we don’t. It’s not different this time. Your life isn’t that special.

Investing is not gambling. Genius isn’t measured in 12-month performance. Reaching for outsized performance involves unwarranted risk. Most people fail when they base decisions on feelings, perceptions and wants. We’ve allowed money to become so personal and defining that husbands and wives will share a bed and offspring and yet not an investment account. Despite being an economic unit, they work at utter cross-purposes.

Wealth’s greatest gift is to enhance time. Erase stress. Grant security. Let you savour each day.

That is the goal. Visiting a blog to brag and fight is, well, sad.

The year of living dangerously


DOUG  By Guest Blogger Doug Rowat

Buckle up.

Don’t look now, but we’re down to only a little more than one year remaining before the next US presidential election. Three hundred and eighty-one days to be exact (but who’s counting).

And we’re likely heading into what will be one of the wildest rides in US political history. Joe Biden, who at one point seemed like a lock to take the Democratic nomination, is now basically tied in a head-to-head slugfest with Elizabeth Warren. The sitting president meanwhile is the subject of a US House impeachment inquiry and seems hell-bent on creating as many controversial distractions as possible even if it means losing the support of the GOP and, gasp, Fox News. I wouldn’t want to be a Kurdish fighter right now, but, hey, that’s politics.

And, here’s what influential Republican senator Lindsey Graham—who earlier this year warned Republican politicians to “stand behind this president [or] we’re not going to stand behind you”—had to say last week about Trump’s northern Syria decision:

Source: Twitter

Up is down and down is up. And we haven’t even gotten to the presidential debates yet. Close your eyes for a moment and picture the surreal scene of Warren in a debate with Trump—Pocahontas versus Cheeto Jesus, winner take all. Their two visions of America couldn’t be more diametrically opposed and the debate rhetoric on both sides is likely to take viewers deep into the Twilight Zone. As Morgan Freeman helpfully advised Brad Pitt in “Seven” as the two prepared to confront the diabolical Kevin Spacey: “If John Doe’s head should split open and a UFO fly out, I want you to have expected it.” So, you’ve been warned.

However, as I’ve noted several times on this blog, people like to think that they’re special and living in the most consequential and turbulent times in history. Sure, this coming political year will probably be pretty crazy, but will it be more tumultuous and significant than the elections and election campaigns held during and after World War II, after the Kennedy assassination, during the 1970s energy crisis or during the heart of the 2008 financial crisis with the US mired in its worst recession since the Great Depression with massive US financial institutions routinely going bankrupt? Probably not. However, we’re all basically hard-wired to feel self-important and assume that OUR time—and only OUR time—is historic. But it’s probably not, at least not any more historic and important than other key periods in US history.

For the record, below are the US equity market performance numbers in the year prior to every single presidential election going back to 1940. As you can see, the split between Democratic and Republican presidential winners has been dead even—10 each—and markets have traded higher almost every year, typically generating strong, double-digit returns. Regardless of who’s in power or more likely to win, markets go about their business. Political campaigns create noise and occasional market volatility, but they’re generally ignored by investors. Markets focus far more on corporate profitability, economic strength, consumer health, central bank policy and so on. And, in our view, most of these factors remain favourable for equities.

Three down, one to go. Here’s how the market historically performs the year before US presidential elections.

Source: Bloomberg, Turner Investments

So, it’s no doubt going to be a noisy political year, one filled with mind-bending controversy, wacky debates and back-and-forth lead changes in the polls.

But, politics be damned, history tell us that markets will probably do what they most often do ahead of a presidential election—move higher.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.